-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DzR95f53QKPcn7MzQ4rGApcg/WHMseE0LeOet9GCwKtbMOJmzscN6bktFdBVLA2a kZnQqHyA+thonRgjJ/O14A== 0000950152-99-002207.txt : 19990325 0000950152-99-002207.hdr.sgml : 19990325 ACCESSION NUMBER: 0000950152-99-002207 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 53 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990322 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLDCALL CORP CENTRAL INDEX KEY: 0000712803 STANDARD INDUSTRIAL CLASSIFICATION: STEAM & AIR CONDITIONING SUPPLY [4961] IRS NUMBER: 840897771 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14873 FILM NUMBER: 99570179 BUSINESS ADDRESS: STREET 1: 321 W. LAKE LANSING ROAD STREET 2: ASHER COURT, SUITE 100 CITY: E. LANSING STATE: MI ZIP: 48823 BUSINESS PHONE: 5173335277 MAIL ADDRESS: STREET 1: 1000 BIBLE EAY STREET 2: SUITE 40 CITY: RENO STATE: NV ZIP: 89502 FORMER COMPANY: FORMER CONFORMED NAME: POWERTEL USA INC DATE OF NAME CHANGE: 19970401 FORMER COMPANY: FORMER CONFORMED NAME: NEVADA ENERGY COMPANY INC DATE OF NAME CHANGE: 19960515 10QSB 1 WORLDCALL CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the quarterly period ended November 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _________________. WORLDCALL CORPORATION ------------------------------------------------ (Name of small business issuer in its charter) Delaware 0-14873 84-0897771 (State of incorporation) (Commission (I.R.S. Employer File Number) Identification No.) Address of principal executive offices: 321 W. Lake Lansing Road Asher Court, Suite 100 E. Lansing, MI 48823 Issuer's telephone number: (517) 333-5277 Former names: PowerTel USA, Inc. Nevada Energy Company, Inc. Munson Geothermal, Inc. Former addresses: 510 Castillo Street Santa Barbara, CA 93101 2 Phone (805) 884-8350; Fax (805) 884-9221 77-564 B Country Club Drive, Suite 340 Palm Dessert, CA 92260 Phone (619) 772-3100; Fax (619) 772-3132 1000 Bible Way, Suite 40 Reno, Nevada 89502 Phone (702) 324-0922 and (702) 324-5064 989 Bible Way Reno, NV 89502 Phone (702) 786-7979; Fax (702) 786-7989 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No X --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 9,573,487 Transitional Small Business Disclosure Format (check one): Yes _________ No___________ Securities registered under Section 12(b) of the Act: NONE 3 TABLE OF CONTENTS -----------------
Page ---- PART I - FINANCIAL INFORMATION.....................................................................................1 Item 1. Financial Statements............................................................................24 Item 2. Management's discussion and analysis of financial condition and results of operation....................................................................................24 RISK FACTORS......................................................................................................24 LIQUIDITY AND CAPITAL RESOURCES...................................................................................25 RESULTS OF OPERATIONS.............................................................................................26 GENERAL COMMENTS..................................................................................................26 PART II - Other Information.......................................................................................26 FORWARD LOOKING STATEMENTS........................................................................................26 Item 1. Legal Proceedings...............................................................................26 Item 2. Changes in Securities and Use of Proceeds.......................................................29 Item 3. Defaults Upon Senior Securities.................................................................33 Item 4. Submission of Matters to a Vote of Security Holders.............................................33 Item 5. Other Information...............................................................................34 Risk Factors......................................................................................................39 Description of Business...........................................................................................40 COMPANY HISTORY...................................................................................................41 Brady Hot Springs Geothermal Associates..................................................................42 Brady Geo Park Power Partners 1996.......................................................................42 Brady Power Partners.....................................................................................43 Nevada Geothermal Power Partners.........................................................................44 Nevada Energy Partners I L.P.............................................................................44 San Jacinto Power Company................................................................................44 Combustion Energy Company................................................................................45 Oreana Power Partners....................................................................................45 CHANGE IN CONTROL.................................................................................................46 FORMATION OF NEW SUBSIDIARIES.....................................................................................47 San Jacinto Energy Corporation...........................................................................47 Central Communications Corporation.......................................................................47 MANAGEMENT CHANGES................................................................................................49 INVOLUNTARY BANKRUPTCY............................................................................................50 INTERVENING EVENTS................................................................................................50 CORPORATE OBJECTIVES..............................................................................................51 POWER MARKETS.....................................................................................................52 COMPETITION.......................................................................................................52 GOVERNMENT REGULATION.............................................................................................53
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Page ---- FEDERAL ENERGY REGULATORY COMMISSION ("FERC") LAW.................................................................53 POWER CONTRACT REGULATIONS........................................................................................53 EXEMPTIONS FROM FEDERAL AND STATE REGULATIONS.....................................................................53 TELECOMMUNICATIONS MARKET, COMPETITION AND GOVERNMENT REGULATION................................................................................54 RESEARCH AND DEVELOPMENT..........................................................................................54 EMPLOYEES.........................................................................................................55 DESCRIPTION OF PROPERTY...........................................................................................55 ELECTRIC POWER GENERATING EQUIPMENT......................................................................55 BINARY-CYCLE POWER PLANTS................................................................................55 RAFT RIVER POWER PLANT...................................................................................55 LEGAL PROCEEDINGS.................................................................................................55 MUNSON LAWSUIT...........................................................................................55 ANTISDEL LITIGATION......................................................................................56 CASCARILLA LITIGATION....................................................................................56 SMITH, KATZENSTEIN LITIGATION............................................................................56 HARTMAN, KASSOUFF, MODESITT LITIGATION...................................................................56 NEVADA ENERGY PARTNERS 1-LP LITIGATION...................................................................57 SHAREHOLDER DERIVATIVE SUIT.......................................................................................58 SANTA BARBARA OFFICE SPACE...............................................................................58 JUDGMENT AGAINST WATERFORD TRUST AND GOLDEN CHANCE, LTD..................................................59 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................................59 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................................................................................60 MARKET INFORMATION................................................................................................60 HOLDERS..................................................................................................62 DIVIDENDS................................................................................................62 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS........................................................63 PLAN OF OPERATIONS................................................................................................63 RISK FACTORS......................................................................................................63 LIQUIDITY AND CAPITAL RESOURCES...................................................................................65 DEBT .........................................................................................................65 RESULTS OF OPERATIONS.............................................................................................66 GENERAL COMMENTS..................................................................................................66 REVENUES AND EXPENSES.............................................................................................66 COSTS AND EXPENSES COMPARISON OF 1997 AND 1996....................................................................66 INCOME TAXES......................................................................................................67 NET INCOME (LOSS).................................................................................................67 FINANCIAL STATEMENTS..............................................................................................68 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................................................68 CHANGES IN ACCOUNTANTS............................................................................................87 DIRECTORS.........................................................................................................89
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Page ---- EXECUTIVE OFFICERS................................................................................................90 REPORTS UNDER SECTION 16(a) OF THE EXCHANGE ACT...................................................................91 EXECUTIVE COMPENSATION............................................................................................91 DIRECTOR COMPENSATION.............................................................................................91 CHANGE-IN-CONTROL ARRANGEMENTS, EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ......................................................92 PART II - EXHIBIT LIST............................................................................................94
iii 6 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. --------------------- In February, 1997, an involuntary Petition for Reorganization was filed pursuant to Section 1103 of the United States Bankruptcy Code. The following unaudited Financial Statements reflect the financial condition of the company for the nine months ended November 30, 1998. The Company is unable to provide comparable financial statements for the nine months ended November 30, 1997, due to the pendency of the Chapter 11 proceeding and the absence of accurate and, complete books and records for the period May 1, 1996 through February, 1997. The Company is in the process of attempting to reconstruct these records and intends, to the extent feasible, to amend this quarterly report in the near future in order to include comparable financial statements for the nine months ended November 30, 1997. While the following financial statements are, in the opinion of management, a reasonable compilation of the financial condition of the Company as at November 30, 1998, these financial statements are derived, in part, from books and records maintained by the Company prior to February, 1998. In this context, during the period May, 1996 through January, 1997, there were substantial operational and financial problems with the Company (see discussion below and in the Debtor's Second Amended Disclosure Statement as filed in the Bankruptcy proceeding, a copy of which is enclosed as EXHIBIT (2)A). The Company does not have access to all of its books and records for that period and is in the process of attempting to reconstruct financial events which took place during that time frame. Accordingly, the following financial statements are subject to revision and modification on the basis of information ascertained by management during the course of its reconstruction. In addition, on or about September 15, 1998, the United States Bankruptcy Court confirmed a Plan of Reorganization ("Plan of Reorganization" or "Plan") pursuant to which the claims of creditors of the Company will be compromised and/or discharged pursuant to the terms of the Plan on various dates through the first quarter of 1999. In addition, pursuant to the terms of the Plan, there will be substantial changes with respect to the number of shares of Class A Common Stock which are issued and outstanding. These revisions are discussed below in more detail. Accordingly, while the following financial statements represent management's best effort to present the financial condition of the Company as at November 30, 1998, it is anticipated that there will be substantial modifications to the Company's balance sheet and to its shareholders' capitalization prior to the close of its fiscal year on February 28, 1999. For the nine months ended November 30, 1998, the Company's only operating unit consisted of Herth Printing and Business Supply, a Division of Combustion Energy Company, a wholly owned subsidiary of the Company. Following the Company's unaudited financial statements (consolidated) as at November 30, 1998, the Company is submitting a compilation of the assets and liabilities of Herth Printing and Business Supply and the related statements of revenue and expenses and cash flows for this operation as at November 30, 1997 and as at November 30, 1998. 1 7 WORLDCALL CORPORATION CONSOLIDATED BALANCE SHEETS AT NOVEMBER 30, 1998 (UNAUDITED) ASSETS ------ November 30, 1998 -----------------
CURRENT ASSETS: Cash $ 94,156 Receivables 206,357 Inventory 12,010 Deposits and prepaid expenses 15,254 ---------- Total Current Assets 327,777 ========== PROPERTY AND EQUIPMENT, at cost (Notes 1 & 2) Furniture, equipment and vehicles 478,071 Building 253,156 Power generation equipment -0- Idle power generation equipment (Net of obsolescence 5,700,000 of $2,532,472) Land 70,000 ---------- 6,501,227 Less - Accumulated depreciation and amortization (379,800) ---------- Net Property and Equipment 6,121,427 ========== OTHER ASSETS (Note 2): Investments in partnerships -0- Investments in subsidiaries (14,500) Deposits (Note 4) -0- Power Purchase Agreements, net of Amortization -0- Organization Expense, net of amortization -0- ---------- (14,500) TOTAL ASSETS $6,434,700
2 8 WORLDCALL CORPORATION CONSOLIDATED BALANCE SHEETS AT NOVEMBER 30, 1998 (UNAUDITED) LIABILITIES AND SHAREHOLDERS EQUITY -----------------------------------
November 30, 1998 ----------------- CURRENT LIABILITIES: Accounts Payable $ 275,485 Current Portion - Long Term Debt 31,033 Payable to related party 4,000 Accrued payroll 903 Other liabilities 42,948 Liabilities subject to compromise (Note 1) -0- Accounts Payable - Post-Chapter 11 647,000 ----------- Total Current Liabilities $ 1,001,369 =========== NON-CURRENT LIABILITIES: Long Term Debt (Note 3) $ 183,775 ----------- Total Non-Current Liabilities $ 183,775 =========== COMMITMENTS AND CONTINGENT LIABILITIES (Note 3) -0- ----------- Total Liabilities $ 1,185,144 =========== MINORITY INTEREST IN SUBSIDIARY (Note 2) -0- SHAREHOLDERS' EQUITY (Notes 1, 4, 5, 6, 7 and 8): Preferred stock, $.001 Par Value, Authorized 2,000,000 shares; ) Issued and outstanding - ) Series A - 0 shares at Nov. 30, 1998, 1,960,745 at February 28, 1998 ) Class A Common Stock, $.001 par value, Authorized 25,000,000 shares: ) Issued pursuant to the Plan of Reorganization and outstanding 9,573,487 ) shares at Nov. 30, 1998, 8,808,485 shares at February 29, 1996 ) Class B Common Stock, $.001 par value, Authorized 25,000,000 shares: ) 5,756,962 Issued pursuant to the Plan of Reorganization and outstanding 12,568,465 ) shares at Nov. 30, 1998, (Note 10) and 4,437,473 shares at ) February 28, 1998 ) Additional paid-in capital ) Series A - note receivable Accumulated deficit Treasury stock - Class A, 16,785 shares at Nov. 30, 1998 and ) (498,301) 16,785 shares at February 28, 1998 ) (9,101) Total Shareholders' Equity $ 5,249,560 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,434,704 ===========
3 9 WORLDCALL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS FOR NOVEMBER 30, 1998 (UNAUDITED)
November 30, 1998 ----------------- REVENUES: Energy Sales -0- Printing and Business Supply Sales $ 640,562 Total Revenues 640,562 COSTS AND EXPENSES: Costs of Sales 461,683 Costs of Operations -0- Depreciation and Amortization (Note 1) 51,938 Provision for Obsolescence (Note 1) -0- Professional Fees 289,938 General and Administrative 159,364 --------- Total Costs and Expenses 962,923 ========= OTHER INCOME AND (EXPENSES): Interest Income -0- Other Income -0- Gain on disposition of assets (Note 2) -0- Interest Expense (16,585) Minority Interests (Notes 1 and 2) -0- --------- Total other income and (expenses) (16,585) LOSS BEFORE TAXES AND EXTRAORDINARY ITEM $(338,946) ========= PROVISION FOR INCOME TAXES (Note 9) -0- --------- NET INCOME (LOSS) $(338,946) ========= NET INCOME (LOSS) PER SHARE (Notes 1 and 6) (.04) =========
4 10 WORLDCALL CORPORATION STATEMENTS OF CASH FLOW FOR NOVEMBER 30, 1998 (UNAUDITED)
November 30, 1998 ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: $ 338,946 Net Income (Loss) Adjustments to reconcile net income (loss) -0- to net cash used in operating activities 51,938 Depreciation and Amortization (Note 1) -0- Provision for Obsolescence (Note 1) -0- Minority Interest in Subsidiary Profit (Loss) -0- Stock issued to Directors/Officers/Employees -0- Changes in assets and liabilities Decrease (Increase) in Receivables 4,324 Decrease (Increase) in Receivables from related party -0- Decrease (Increase) in Inventories 712 Decrease (Increase) in Deposits and Prepaids -0- Increase (Decrease) in Accounts Payable 237,551 Increase (Decrease) in Payable to related party -0- Increase (Decrease) in Other Liabilities 7,254 Increase (Decrease) in Liabilities subject to compromise -0- --------- Net cash used in operating activities (37,167) ========= CASH FLOW FROM INVESTING ACTIVITIES: Deposit on print equipment -0- Investment in Subsidiaries 14,500 (Advances) to and Repayments from Partnerships -0- --------- Net cash provided by investing activities 14,500 ========= CASH FLOW FROM FINANCING ACTIVITIES: Loans from Shareholders 4,000 Principal repayments on financing -0- Net proceeds from cash sales of common and preferred stock -0- Repayment of Long-Term Debt (21,375) Minority Interest -0- --------- Net cash used in financing activities (17,375) ========= NET INCREASE (DECREASE) IN CASH (40,042) CASH AT BEGINNING OR PERIOD 134,198 CASH AT END OF PERIOD 94,156 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (Note 1) Cash expenditures during the nine months for - Interest Taxes, including taxes paid through payments on liabilities subject to compromise of approximately $26,000 in 1997 and $16,015 in 1996 and $13,386 in 1995
(The accompanying notes are an integral part of these statements) 5 11 NOTE 1 - Organization and Summary of Significant Accounting Policies: PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Combustion Energy Company, Inc., a Nevada corporation and Yerington Acquisition Company. ORGANIZATION AND OPERATIONS: PowerTel USA, Inc. ("the Company") was organized on December 2, 1982, and incorporated under the laws of Delaware on December 20, 1982, under the name Munson Geothermal, Inc. Pursuant to an action of the Board of Directors, the Company's name was changed to Nevada Energy Company, Inc. on December 3, 1990. Subsequently, the Company's name was changed to PowerTel USA, Inc. on January 21, 1997. The Company filed Chapter 11 bankruptcy on February 13, 1997, and was approved to operate as debtor-in-possession on September 24, 1997. The Company's Plan of Reorganization was approved by the Court on September 15, 1998. (SEE, PLAN OF RE-ORGANIZATION) IDLE POWER GENERATION EQUIPMENT: Idle power generation equipment includes ten Ormat power plants capable of producing up to an estimated maximum 3,700 KW average output and the relocated Raft River Power Plant with an estimated capacity of up to 7,200 KW of output. Total net book value of these assets is $5,700,000. A May 1996 appraisal of these assets determined the fair market value to be approximately $5,700,000. DEPRECIATION AND AMORTIZATION: The Company provides for depreciation of furniture and office equipment utilizing straight-line and accelerated methods over the useful lives of three to seven years beginning when assets are placed in service. Idle geothermal power generation equipment was adjusted to the lower of cost or appraisal value at February 29, 1992. Subsequently, provisions for obsolescence have been provided based on the remaining economic life estimated to be 18 years at that time. Based on the May 1996 appraisal, an additional $83,288 of obsolescence was provided on the Ormat power plants reducing their net book value to the then appraisal value of approximately $5,700,000. NET INCOME (LOSS) PER COMMON SHARE: The net income (loss) per common share is computed based upon the weighted average number of shares of Class A Common Stock outstanding during each period. Shares issued as 6 12 dividends (Note 6) have been treated as issued at February 28, 1993. Weighted average shares of Class A Common Stock outstanding were 8,808,485 in the year ended November 30, 1998 and 1,463,451 in the year ended February 29, 1996. Shares issuable upon exercise of warrants or options are excluded from the computation since the effect of their inclusion would be antidilutive. Shares of Class B Common Stock are excluded from the computation since Class B shareholders did not historically participate in the earnings of the Company and this class of stock was extinguished under the plan. RECAPITALIZATION Pursuant to the Plan of Reorganization as approved by the Bankruptcy Court, there will be a significant change with respect to the shareholder capitalization of the Company. See Note 7. NOTE 2 - Business Segment Information COMBUSTION ENERGY COMPANY The Company formed a wholly-owned subsidiary, Combustion Energy Company, Inc. ("CEC"), a Nevada corporation, on February 12, 1993 for the purpose of being a general partner of Oreana Power Partners ("OPP") (See OREANA POWER PARTNERS below). The Company is also a limited partner in OPP. On November 30, 1994, the Company caused CEC to merge with Herth Printing and Business Supplies, Inc. ("Herth"), in exchange for Class A Common Stock of the Company. The Company, through its ownership of CEC, owned 100% of the post-merger business and consolidated the financial results of CEC in its reported results. In an agreement entered into on September 1, 1996, the Company exchanged its interest in CEC, and thereby Herth, in a transaction which included the reacquisition of all right, title and interest in the Company's then outstanding Class B Common shares, which was later the subject of a settlement agreement between NEP, NEPC and the Company which modified the substance of the NEP September 1996 Settlement Agreement. (See EXHIBIT (10) A). SAN JACINTO POWER CORPORATION San Jacinto Power Corporation, a Nevada Corporation, ("SJPC") was formed on December 15, 1993.The Company contributed 222,267 shares of its Class A Common Stock, valued at $222,267, based on 50% of market price at the time of issue due to resale restrictions imposed pursuant to Rule 144, and total cash of $275,055 in exchange for its 50.01% ownership interest in SJPC. The New World Power Corporation ("New World") contributed 48,000 shares of its Common Stock, with market value of $516,000 at time of issue, to SJPC. On February 10, 1994, New World contributed cash of $149,970 to SJPC and delivered a balance of cash of $124,975 on March 8, 1994. New World's contribution of Common Stock and cash of $274,945 to SJPC were in exchange for its 49.99% ownership interest in SJPC. The Company and New World subsequently engaged in negotiations to acquire, and did acquire, the operating assets of Smith Wind Energy Company and six affiliated limited partnerships known collectively as Triad. The purchase price of $1,038,029 was equal to the agreed value of the shares plus assumed liabilities totaling approximately $293,957 for long-term secured debt and certain delinquent property taxes. 7 13 The total cost was allocated based on managements estimate of fair market value of assets acquired, except for prepaid BLM rent which was valued at cost, as follows: Field Equipment $ 21,177 Prepaid BLM Rent 46,892 Power Sales Contract 52,500 Power Generation Equipment 917,460 ---------- Total $1,038,029 ----------
The Company managed the operations of San Jacinto Power Corporation and the wind farm until June 27, 1997. On June 27, 1997 the sale of the Company's 50.01% interest in its consolidated subsidiary, San Jacinto Power Corporation, was completed by the court appointed bankruptcy trustee. The Company's interest, represented by 50,010 shares of common stock, was sold at bid for $200,000 cash. The successful bidder, SeaWest Corporation of San Diego, CA also agreed to pay all outstanding debts of San Jacinto Power Corporation, estimated in excess of $175,000. In its most recently filed financial report, the 10-QSB for the quarter ended November 30, 1996, the Company had reported consolidated San Jacinto Power Corporation assets of approximately $1,105,986, consolidated liabilities of approximately $159,287 and minority interest of $632,720. The transaction will result in a reported net loss of approximately $113,979. At the time of the sale, San Jacinto Power Corporation was one of two operating properties held by the Company. This Company is not included in the current financial statements. MT. APO CORPORATION Mount Apo Corporation, a Nevada corporation ("MAC") was formed on May 9, 1994. MAC is a joint venture of NEC and Geothermal Development Associates and was formed for the purpose of submitting a competitive bid on a 40 MWe geothermal project in the Philippines. The bid was unsuccessful. The Company's investment in MAC is carried at cost of $590. BRADY GEO PARK POWER PROJECT, 1986, LTD. The Company's investment in Brady Geo Park Power Project, 1986, Ltd., ("BGPPP") including note and related interest receivable and advances for property taxes were written down to a combined book value substantially equal to the appraised value of the Ormat energy converter interests held by the partnership. Except for the residual partnership interest, the Company transferred all of its interest in the assets of BGPPP to its wholly owned subsidiary effective December 1, 1995. (See Note 2, Yerington Acquisition Company.) The Company has classified this asset as Idle Power Generation Equipment in the accompanying consolidated balance sheet. 8 14 NEVADA ENERGY PARTNERS - I In February 1991, the Company received a 60% interest as a limited partner in Nevada Energy Partners I, a Nevada limited partnership (NEP-I LP), which holds a 31.66% interest in the equity of Nevada Geothermal Power Partners ("NGPP"). NGPP is a Nevada limited partnership whose general partners are Hot Springs Power Company and NEP-I LP. The Company issued a total of 3,476,875 shares of Class B common shares for this interest. The shares were valued at par of $0.001 per share as there is no market for these shares and there was no other basis for valuing the interest acquired. An additional 548,043 shares were issued to NEP-I LP in conjunction with the Company's 5% stock dividends made in July and October 1994 and January 1995. Class B common shares have full voting rights, but have no cash dividend participation. In a transaction completed on September 1, 1996, the Company exchanged its interest in NEP-I LP together with its interest in Combustion Energy Company, Inc. (a previously wholly owned subsidiary) for all right, title and interest in the Company's Class B common shares held by NEP-I LP. Pursuant to a settlement agreement entered into December 1, 1997, the September 1996 Agreement was rescinded and modified to, among other things, allocate 99% of all NEP gains resulting from the sale of NGPP's interests in BPP from 1995 to date to the Company, together with all outstanding Class B Common Stock and Class B Common Stock rights to future issuances, in consideration of the Company's issuance of new common shares pursuant to the Company's Plan of Reorganization. (See EXHIBIT (10)A). The Company's interest in NEP-I LP was valued at $3,080 based on the par value of the shares issued, less amounts recorded as treasury stock due to the Company's then effective ownership of 60% of the Class B shares held by NEP-I LP, plus subsequent cash investments, less estimated partnership losses. As a general partner of NGPP, NEP-I LP had been entitled to a share in NGPP's distributable cash flow. As a general partner in Brady Power Partners ("BPP"), NGPP held a fifty percent (50%) ownership interest in the completed Brady project and was also entitled to receive project development fees and a share of BPP's distributable cash flow. BPP was a Nevada general partnership whose general partners were NGPP and ESIBH Limited Partnership, a Delaware limited partnership. The Company had been entitled to receive sixty percent (60%) of NEP-I LP's distributable cash flow. There has been no cash available for distribution through February 28, 1997. On May 8, 1995, NGPP sold its 50% interest in the Brady Power Project for approximately $5.5 million dollars. NGPP has received net cash distributions of approximately $4.3 million dollars. The Company received $508,018 in July 1995 as its share of the distribution of these proceeds. The balance due of $77,493 was recorded as a receivable. However, the receivable has subsequently been charged to bad debts as it is believed to be uncollectible. As a result of the Settlement Agreement with NEP, the Company has adjusted its gain upwards to reflect the assumption of 99% of all gains from NEP from January 1, 1995 to the present. 9 15 OREANA POWER PARTNERS Oreana Power Partner ("OPP") is a limited partnership which was formed in February 1993 for the purpose of developing and financing gas turbine electricity generating facilities to provide power to Sierra Pacific Power Company ("Sierra") pursuant to power sales contracts to be obtained. The Company is a limited partner and its interest is valued at $46 based on its initial cash investment, less expenses and returned capital. The general partners of OPP are Energy Development Associates ("EDA", a Nevada corporation and a wholly-owned subsidiary of Geothermal Development Associates) and CEC, a wholly-owned subsidiary of the Company. EDA is the Managing General Partner and CEC is the Financial General Partner. Geothermal Development Associates is a privately owned Nevada company, not related to the Company. There was no activity with respect to development in the year ending February 29, 1996. OPP was subsequently dissolved. YERINGTON ACQUISITION COMPANY, INC. Yerington Acquisition Company, Inc., a Nevada corporation ("YAC") was formed on December 8, 1994 for the purpose of acquiring the assets of Tad's Geothermal, a non-related owner/operator of a geothermal power generating facility located near Yerington, Nevada. The acquisition was not completed. In December 1995, the Company transferred all of its right, title and interest in 10 Ormat power generating units (classified as idle power generating equipment in the financial statements) to YAC. In April 1995, the Company entered into an agreement through a non-binding letter of intent, to transfer, through merger with YAC, to Pollution Controls, International, all of its right, title and interest in the 10 Ormat units together with any remaining interest in acquiring the assets of Tad's. Aggregate consideration to be received by the Company, in the form of convertible preferred stock and convertible debt would have exceeded the net book value of the assets. CENTRAL COMMUNICATIONS CORPORATION Central Communications Corporation, a Nevada corporation ("CCC"), was formed for the purpose of acquiring interests in the telecommunications business. On May 21, 1996, the Company announced that it had signed a binding letter of intent to acquire, through CCC, all of the outstanding shares of Telecom Technologies, Inc. an Oregon corporation ("TTI"), and certain other related assets. The terms of the acquisition provided for the payment of $500,000 in cash and issuance of 2,000,000 Class A common shares. The Company advanced to CCC $492,000 in cash in the quarter ended August 31, 1996 in anticipation of the completion of the acquisition. The acquisition was completed on June 21, 1996, however, it was subsequently reversed. The cash payment and stock issued were never returned. Certain shareholders have filed an action in Delaware in an attempt to recover some or all of the Company's investment. (See Item 1. Legal Proceedings) There is no assurance that such recovery will occur. 10 16 NOTE 3 - Commitments and Contingencies: The Company's wholly owned subsidiary CCC, entered into a long-term lease for office space in Santa Barbara, California. The Company occupied the space for approximately three months in the fiscal year ended February 28, 1997. The space has been vacated and the landlord filed suit for recovery of earned rents of $64,687, interest thereon, costs and damages. Estimated payments on the original terms of the lease as of February 28, 1997 are as follows: 1997 $ 228,408 1998 228,408 1999 228,408 2000 228,408 2001 152,272 ----------- Total $1,065,904 ===========
The claim for payment by the lessor against the Company was withdrawn in its entirety. Accordingly, this commitment is no longer an obligation of the Company. NOTE 4 - Short-Term Borrowings and Mortgage Payable: There is no short-term borrowing at November 30, 1998. The Company's subsidiary, Combustion Energy Company, which operates Herth Printing and Business Supply, has a long term debt (8 years) on the purchase of a printing press in May, 1996. Monthly payments are $4,218 with interest at 9.75%. NOTE 5 - Related Transactions: During the fiscal year ended February 28, 1998, the Company sold its 50.01% interest in San Jacinto Power Corporation (then the Company's majority owned consolidated subsidiary) sold its interest of 50.01% for $200,000.00 plus assumption of debt in excess of $175,000.00 NOTE 6 - Preferred Stock: The Court approved Plan of Reorganization provides that all existing Series A and Series C preferred stock shall be extinguished promptly after the Confirmation Date of September 15, 1998. The five (5) Series B shares held by the prior directors were repurchased by the Corporation for 100,000 new Class A common shares, per B share for a total of 500,000 shares. The repurchase was approved by the Court and the shares were issued pre-split. All preferred shares have been extinguished. The Plan further provided for the authorization of seven (7) shares of "Special Stock." Three shares have been issued, one to each of the current directors. These shares have no cash value, will not receive dividends and are for the sole purchase of electing two (2) directors to the Board. 11 17 NOTE 7 - Class A and Class B Common Stock: The Plan of Reorganization as confirmed and ratified by the United States Bankruptcy Court effects substantial changes with respect to the Company's capitalization. In summary, the Plan of Reorganization provides that the Company will repurchase 100% of the issued and outstanding Series B Preferred Stock. Thereafter, the Company will amend its Articles of Incorporation in order to extinguish the Series A, Series B and Series C Preferred Stock. The Class B Common Stock will be converted into Class A Common Stock pursuant to the terms of an Amended and Restated Settlement and Release Agreement entered into by and among the Company, Nevada Energy Partners II, a Nevada Limited Partnership, Nevada Energy Corporation and sixteen Bahamian corporations (See EXHIBIT (10)A). In addition, pursuant to the Plan, certain creditors holding claims totaling $64,000.00 will be converted into Class A Common Stock totaling 512,000 shares. Class A Common Stock has also been issued to Members of the Board of Directors. The Plan further provides that all holders of Class A Common Stock will be reinstated to the exact same share ownership which existed as of May 3, 1996 plus shareholders who (1) are a bona fide purchaser for value, and (2) filed a Proof of Interest on or before November 10, 1997 with evidence of consideration paid, and (3) is not contested by the Corporation. All other shares purchased after May 3, 1996 are deemed to be void ab initio. As of May 3, 1996 there were 8,808,487 Class A Shares issued and outstanding. The allowed equity holders filing claims that were not contested by the Corporation is 2,483,008; however, these shares are to be issued at a later date. The only Class A Common Shares issued as of November 30, 1998 consists of (i) 500,000 Class A Common for the repurchase of the Class B Preferred and an additional (ii) 265,000 Class A Common to the directors for services rendered prior to September 15, 1998, and (iii) 8,808,475 issued and outstanding as of May 3, 1996. In addition, pursuant to the Plan of Reorganization, an Agreement has been reached with Mr. Jeffrey Antisdel, the former President of the Company, to issue a promissory note in the amount of $239,000, which is convertible into 1,500,000 shares of Class A Common Stock. Also pursuant to the Plan of Reorganization, the Company may issue Class A Common Stock to Mr. David Wallace in an amount not to exceed 35.0% of the Class A Common Stock of the Company. Subsequent to November 15, 1998, the Company's Board of Directors, pursuant to the Plan of Reorganization, adopted a resolution to affect a 1:15 reverse stock split which will be effective as of the resumption of trading, which is expected to resume in March, 1999. NOTE 8 - Stock Option Plans: All stock options plans in existence prior to Confirmation on September 15, 1998 have been extinguished. The Corporation's repurchase of the five (5) Series B preferred shares also included a twenty-four (24) month option to purchase an additional 100,000 shares, per Series B share held, of Class A Common Stock at an exercise price of $ .10 per share. The options are effective December 8, 1998. The Series B Preferred shares were held by Richard A. Cascarilla (2), Michael R. Kassouff (1), Jeffrey L. Hartman (1) and Jeffrey Modesitt, Sr. (1). The options are not transferrable other than by will or the laws of descent and distribution. Copies of the Stock Option are attached and marked as Exhibit 4(A-D). The Plan of Reorganization also provided that three current and former directors, Richard A. Cascarilla and Michael R. Kassouff (current directors) and H. Lawrence Herth, a former director, shall be entitled to compensation for service rendered to the Corporation prior to Confirmation on September 15, 1998. The options allow each director to purchase 5,000 shares of Class A Common Stock per month at $.10 per share. Mr. Cascarilla and Mr. Herth's option rights commenced on May 19, 1997. Mr. Kassouff's option rights commenced on January 1, 1997. The options shall be exercisable for a twenty four (24) month period effective December 10, 1998. The options are not transferrable except by will or the laws of descent and distribution. Copies of the Stock Option are attached as Exhibit 4(H-J). The Plan of Reorganization also provided that the current directors of the Corporation, Richard A. Cascarilla, Michael R. Kassouff and Jeffrey L. Hartman are to be given stock options to purchase 2,500 shares of Class A Common Stock, per director, per quarter, at $.10 per share. These 12 18 options are effective December 10, 1998 and are exercisable for a period of twenty-four (24) months. The options are not transferrable except by will or the laws of descent and distribution. Copies of the Stock Options are attached as Exhibit 4(E-F). NOTE 9 - Income Taxes: The Company has adopted FASB 109 in the fiscal year 1994. Due to uncertainty of realization in light of the Company's continuing operating losses, no deferred tax asset has been recorded in the financial statements because the Company has assessed a valuation account to the full extent of its potential deferred tax asset. The following is a summary of the potential deferred tax asset and the valuation allowance: Property and equipment due to differences in depreciation and reserve for obsolescence $ 809,795 Net operating loss carry forward $ 2,637,611 Energy credit carry forward - ----------- Total deferred tax asset $ 3,443,406 Valuation allowance $(3,443,406) ----------- Net deferred tax asset $ - ===========
No provision for Federal income taxes was recorded during the years ended February 28, 1997 and February 29, 1996 due to the net losses of the Company. As of February 28, 1998 the Company has potential federal income tax loss carry forwards available to offset future taxable income for income tax purposes of $6,140,428 which expire in 2006 through 2010. The Company has no energy credit carry forwards as of February 28, 1998. There is no assurance or guaranty that the net operating loss carry forward has not been adversely affected by the Plan of Reorganization, the issuance of Class A Common Stock, or other developments. Pursuant to the Settlement Agreement of December 1997, by and among the Company, NEP, NEPC and others, the Company has reallocated 99% of the profits of NEP retroactive to 1995, which may result in a taxable event to the Company. NOTE 10 - CLASS B STOCK As of November 30, 1998, a total of 12,568,495 shares of Class B Common Stock were issued and outstanding. Pursuant to the Plan of Reorganization, these shares are to be converted into Class A Common Stock in an amount equal to 50.0% of the issued and outstanding Class A Common Stock subsequent to implementation of the Plan of Reorganization. This conversion had not occurred as of November 30, 1998. 13 19 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1998 (UNAUDITED) ASSETS CURRENT ASSETS CASH $ 91,717 ACCOUNTS RECEIVABLE 112,357 INVENTORY 12,010 PREPAID EXPENSES 12,500 -------- TOTAL CURRENT ASSETS 228,584 OTHER ASSETS DEPOSITS 2,754 -------- PROPERTY AND EQUIPMENT FURNITURE AND FIXTURES 17,433 MACHINERY AND EQUIPMENT 455,938 VEHICLES 4,700 BUILDING 253,156 LAND 70,000 -------- 801,227 LESS ACCUMULATED DEPRECIATION 379,800 -------- TOTAL PROPERTY AND EQUIPMENT 421,427 -------- $652,765 ========
14 20 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1998 (UNAUDITED) LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES ACCOUNTS PAYABLE $ 10,927 CUSTOMER DEPOSITS 18,343 CONTRACT - CURRENT PORTION 31,033 ACCRUED PAYROLL COSTS 903 ACCRUED PROFESSIONAL FEES 22,000 ACCRUED SALES TAX 2,547 -------- TOTAL CURRENT LIABILITIES 85,753 -------- LONG TERM DEBT NET OF CURRENT PORTION 183,775 -------- HOME OFFICE EQUITY 384,220 CURRENT PERIOD REVENUE OVER EXPENSES 12,017 -------- 383,237 $652,765 ========
15 21 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF REVENUES AND EXPENSES ONE MONTH AND NINE MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
(IN $) (IN $) CURRENT YEAR TO MONTH PERCENT DATE PERCENT ---------------------------------------------------------------- SALES SALES-OFFICE SUPPLIES 783 1.29 70,594 11.02 SALES-PRINTING 59,936 98.69 573,585 89.54 SALES RETURNS AND ALLOW (120) 0.20 (4,096) 0.64 OTHER INCOME 133 0.22 479 0.07 ------ ------ ------- ------ 60,732 100.00 640,562 100.00 ------ ------ ------- ------ COST OF SALES BEGINNING INVENTORY 2,164 12,722 PURCHASES 19,828 235,733 LABOR SALARIES 11,833 113,972 SALES SALARIES 10,549 105,495 SUPPLIES & FREIGHT 28 5,771 DEPRECIATION 5,748 51,741 ENDING INVENTORY (12,010) (12,010) ------ ------- 48,140 79.27 513,424 80.15 ------ ------ ------- ------ GROSS PROFIT 12,592 20.73 127,138 19.85 ------ ------ ------- ------ OPERATING EXPENSES ADVERTISING 0 0.00 32 0.00 AUTOMOBILE 101 0.17 641 0.10 CASH VARIANCE 0 0.00 161 0.03 DEPRECIATION 22 0.04 197 0.03 DUES AND SUBSCRIPTIONS 0 0.00 266 0.04
16 22 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF REVENUES AND EXPENSES ONE MONTH AND NINE MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
(IN $) (IN $) CURRENT YEAR TO MONTH PERCENT DATE PERCENT -------------------------------------------------- OPERATING EXPENSES (CONTINUED) FREIGHT OUT 122 0.20 5,182 0.81 INSURANCE 956 1.57 8,476 1.32 INTEREST 0 0.00 16,585 2.59 JANITORIAL 0 0.00 180 0.03 LAUNDRY AND LINEN 177 0.29 1,508 0.24 LEGAL AND ACCOUNTING 500 0.82 9,815 1.53 MAINTENANCE AND REPAIR 59 0.10 10,418 1.63 OFFICE EXPENSE 59 0.10 3,112 0.49 OFFICE AND ADMINISTRATIVE 1,812 2.98 17,426 2.72 SECURITY 0 0.00 365 0.06 SUPPLIES 0 0.00 7 0.00 TAXES AND LICENSES 3,754 6.18 4,224 0.66 TAXES-PAYROLL 2,173 3.58 26,872 4.20 TELEPHONE 290 0.48 2,032 0.32 UTILITIES 1,012 1.67 7,622 1.19 ------ ----- ------- ----- 11,037 18.17 115,121 17.97 EXPENSES OVER REVENUES 1,555 2.56 12,017 1.88 ====== ===== ======= =====
17 23 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF CASH FLOWS ONE MONTH AND NINE MONTHS ENDED NOVEMBER 30, 1998 (UNAUDITED)
CURRENT YEAR TO MONTH DATE -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 1,555 $ 12,017 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES DEPRECIATION 5,770 51,938 (INCREASE) IN RECEIVABLES (496) (8,676) DECREASE IN INVENTORY 154 712 INCREASE (DECREASE) IN ACCOUNTS PAYABLE 2,008 (17,006) (DECREASE) IN ACCRUED LIABILITIES (5,973) (8,235) INCREASE IN CUSTOMER DEPOSITS 0 17,968 -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES 3,018 48,718 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES PAYMENTS ON LONG TERM DEBT 0 (21,375) -------- -------- NET CASH (USED) BY FINANCING ACTIVITIES 0 (21,375) -------- -------- NET INCREASE IN CASH & EQUIVALENTS 3,018 27,343 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 88,699 64,374 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 91,717 $ 91,717 ======== ========
18 24 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1997 (UNAUDITED) ASSETS
CURRENT ASSETS CASH $ 40,547 ACCOUNTS RECEIVABLE 147,350 INVENTORY 23,168 PREPAID EXPENSES 12,500 -------- TOTAL CURRENT ASSETS 223,565 -------- OTHER ASSETS DEPOSITS 2,734 -------- PROPERTY AND EQUIPMENT FURNITURE AND FIXTURES 17,433 MACHINERY AND EQUIPMENT 455,078 VEHICLES 4,700 BUILDING 253,156 LAND 70,000 -------- 800,367 LESS ACCUMULATED DEPRECIATION 304,551 -------- TOTAL PROPERTY AND EQUIPMENT 495,816 -------- $722,135 ========
19 25 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1997 (UNAUDITED) LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES ACCOUNTS PAYABLE $ 14,144 CUSTOMER DEPOSITS 375 CONTRACT - CURRENT PORTION 28,162 ACCRUED PAYROLL COSTS 554 ACCRUED PROFESSIONAL FEES 22,000 ACCRUED SALES TAX 3,307 -------- TOTAL CURRENT LIABILITIES 68,542 ======== LONG TERM DEBT NET OF CURRENT PORTION 214,807 -------- HOME OFFICE EQUITY 435,897 CURRENT PERIOD REVENUE OVER EXPENSES 2,889 -------- 438,786 ======== $722,135 ========
20 26 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF REVENUES AND EXPENSES NOVEMBER 30, 1997 (UNAUDITED)
CURRENT YEAR TO MONTH DATE (IN $) PERCENT (IN $) PERCENT ----- ------- ---- ------- SALES SALES-OFFICE SUPPLIES 2,650 3.95 35,078 4.62 SALES-PRINTING 64,471 96.02 724,456 95.36 SALES RETURNS & ALLOW 0 0.00 (271) 0.04 OTHER INCOME 23 0.03 436 0.05 ------- ----- ------- ----- 67,144 100.00 759,699 100.00 COST OF SALES BEGINNING INVENTORY 22,945 31,516 PURCHASES 14,988 291,050 LABOR SALARIES 12,467 126,500 SALES SALARIES 6,674 69,877 SUPPLIES & FREIGHT 3,163 27,397 DEPRECIATION 7,670 67,249 OUTSIDE SERVICES 0 12,848 ENDING INVENTORY (23,168) (23,168) ------- ------- 44,739 66.63 603,269 79.41 ------- ----- ------- ----- GROSS PROFIT 22,405 33.37 156,430 20.59 ------- ----- ------- ----- OPERATING EXPENSES ADVERTISING 0 0.00 45 0.01 AUTOMOBILE 193 0.29 1,482 0.20 BAD DEBTS 0 0.00 919 0.12 CONTRIBUTIONS 0 0.00 60 0.01 DEPRECIATION 43 0.06 389 0.05 DUES AND SUBSCRIPTIONS 0 0.00 341 0.04
21 27 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF REVENUES AND EXPENSES NOVEMBER 30, 1997 (UNAUDITED)
CURRENT YEAR TO MONTH DATE (IN $) PERCENT (IN $) PERCENT ----- ------- ---- ------- OPERATING EXPENSES (CONTINUED) EQUIPMENT RENTAL 264 0.39 2,376 0.31 FREIGHT OUT 337 0.50 2,341 0.31 INSURANCE 1,100 1.64 4,440 0.59 INTEREST 1,992 2.97 19,091 2.51 JANITORIAL 0 0.00 609 0.08 LAUNDRY AND LINEN 181 0.27 1,621 0.21 LEGAL AND ACCOUNTING 475 0.71 5,659 0.74 MAINTENANCE & REPAIR 25 0.04 5,703 0.75 OFFICE EXPENSE 45 0.07 1,657 0.22 OFFICE & ADMINISTRATIVE 6,346 9.45 59,703 7.86 SECURITY 0 0.00 477 0.06 SUPPLIES 0 0.00 178 0.02 TAXES AND LICENSES 0 0.00 4,347 0.57 TAXES-PAYROLL 2,383 3.55 30,187 3.97 TELEPHONE 260 0.39 1,967 0.26 TRAVEL-LODGING 0 0.00 370 0.05 UTILITIES 1,071 1.60 9,571 1.26 ------ ----- ------- ----- 14,715 21.92 153,541 20.21 ------ ===== ======= ===== REVENUES OVER EXPENSES 7,690 11.45 2,889 0.38 ====== ===== ======= =====
22 28 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF CASH FLOWS NOVEMBER 30, 1997 (UNAUDITED)
CURRENT YEAR TO MONTH DATE ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $7,690 $ 2,889 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES DEPRECIATION 7,713 67,638 DECREASE IN RECEIVABLES 5,696 1,183 (INCREASE) DECREASE IN INVENTORY (224) 8,346 (INCREASE) IN PREPAID EXPENSES 0 (12,500) (DECREASE) IN ACCOUNTS PAYABLE (12,942) (19,579) ------- ------- (DECREASE) IN ACCRUED LIABILITIES (5,837) (6,712) ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 2,096 41,267 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES PURCHASES OF MACHINERY AND EQUIPMENT 0 (19,268) ------- ------- NET CASH (USED) BY INVESTING ACTIVITIES 0 (19,268) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES PAYMENTS ON LONG TERM DEBT (2,226) (35,085) ------- ------- NET CASH (USED) BY FINANCING ACTIVITIES (2,226) (35,085) ------- ------- NET (DECREASE) IN CASH & EQUIVALENTS (130) (13,086) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 40,677 53,633 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $40,547 $40,547 ======= =======
23 29 Item 2. Management's discussion and analysis of financial condition ----------------------------------------------------------- and results of operation. - ------------------------- The Company has an asset base which includes several electric power generating units (currently not in service and with a net book value as of November, 1998 of $5,700,000)(which does not include obsolescence from May, 1996) unencumbered by debt, from which the Company plans to develop revenues and earnings. Management hopes to deploy all of its idle power generating assets in one or more projects which are currently under review. If the Company is unable to sell or deploy these generating units, there may be a material negative impact on the financial position of the Company (See "RISK FACTORS"). During the period June 1997 to date, financial liquidity for on-going operations was provided primarily from the sale of the Company's 50.01% interest in San Jacinto Power Corporation ("SJPC") on June 27, 1997 by the Court appointed Trustee. The Company received $200,000 in cash (See Item 5, Description of Business). Dividends from the operation of its wholly owned subsidiary, Combustion Energy Company d/b/a Herth Printing and Business Supply Company, were also utilized. The Company's current monthly operating expenses are less than $10,000. Under the Court approved Plan of Reorganization (See EXHIBIT (2)B), payments to the allowed unsecured creditors will not commence until September 16, 1999. The monthly payments to these creditors will be approximately $5,700 for sixty (60) months. This debt is in addition to normal operating expenses. The Company also has allowed administrative claims of approximately $250,000 which are due on the Effective Date unless otherwise agreed between the parties. The allowed Class 6 creditors total $30,000 and are also due on the Effective Date unless other agreements are reached. The allowed Class 3 Priority Tax claim is less than $27,000 (See the Debtor's First Amended Plan of Reorganization and Disclosure Statement, EXHIBITS (2)A and (2)B). The Company is negotiating with one creditor (Mr. Jeffrey Antisdel) whose claim of $239,000 may be liquidated by the issuance of a promissory note that would be convertible into Class A Common Stock. If this occurs, the Company will incur additional debt in the amount of $239,000. RISK FACTORS The Company has historically been unable to finance operations from revenues and cash flow. In the past, the Company has been financing operations from the sale of its Class A common stock, asset sales, litigation recoveries and management fees. If such financing should not be available, for any reason, there would be a material adverse effect on the 12 month operations of the Company. If the new business plan is successfully implemented, the Company believes it will be able to pay normal operating expenses from the revenue generated. There is no guarantee that the Company will be successful. (See RISK FACTORS and Section XI of the Disclosure Statement, EXHIBIT (2)A). 24 30 Since the Company maintains a holding company structure, the Company does not intend to enter into direct purchases of capital equipment at the parent company level in order to complete the deployment of its idle power equipment in any proposed project. However, any capital expenditures required for project development will be completed at the subsidiary level and will most likely require equity, debt or project financing for which the Company will need to seek additional funding. The Company intends to evaluate, from time to time, prospective acquisitions in the telecommunication industry. If such an acquisition were to occur and the Company were to suffer a material negative event, the Company's financial performance could be adversely and materially impacted. Significant acquisitions outside the Company's primary energy business may have the effect of reducing or eliminating certain tax benefits associated with prior net operating losses, as well as negative financial impacts associated with possible accruals of goodwill and potential increased depreciation charges against earnings. Presently, there are no plans for product research and development at the parent company level over the coming twelve (12) months. LIQUIDITY AND CAPITAL RESOURCES Due to working capital constraints encountered during the course of the fiscal year, the Company has not yet met its goal of covering all of its operational costs with internally generated cash flows. To date, the Company's ownership stake in Nevada Energy Partners, a Nevada limited partnership ("NEP") had provided no recurring equity returns, primarily due to costs associated with certain credit enhancements and loan guarantee costs provided by ESI Energy, Inc. and NEP's continuing litigation with HSP. During the year ending February 29, 1996, the Company had received through NEP $508,018 in cash from the sale of NEP's interest in the Brady Power Project (held by NEP through its 50% interest in NGPP), plus an additional gain of $77,493 from NEP as a result of the above referenced sale, and additional gains of $508,018 resulting from the settlement agreement between NEP, NEPC and the Company. However, the $77,493 has subsequently been charged to bad debts as it is believed to be uncollectible. (See Nevada Energy Partners I L.P. for detailed summary.) The Company expects no further income from NEP and effective September 1, 1996, the Company had disposed of its interest in NEP through a reacquisition of the general partners interest in the Class B common shares held by NEP. As a result of the difficulties caused by the change in control which was initiated on May 1, 1996, the Company had not timely met its debt obligations during the year ending February 28, 1997. As a result, its creditors initiated an involuntary Chapter 11 proceeding on February 13, 1997. The Company operated as debtor in possession from September 24, 1997 until the Court approved its Plan of Reorganization on September 15, 1998. 25 31 Currently, the majority of the Company's ongoing expenses are for auditing fees, legal fees, trustee fees and consulting services. RESULTS OF OPERATIONS General Comments The Company has, during fiscal year 1998 undergone a severe financial crisis as a result of the now aborted change in control which took place early in the fiscal year. As a result the Company was unable to look for and bid upon opportunities to deploy its current core of idle power generating equipment. The Company had previously sought to deploy the power generation plants and equipment where little resource development risk was present. Development opportunities in the Philippines, the Caribbean and Central America had been evaluated from the standpoint of seeking least risk opportunities. More specifically, the Company had sought to either acquire a fully developed geothermal resource or a fully developed geothermal plant to which its assets could be deployed with reduced risk. These efforts were set aside this period. New management expects to re-explore these opportunities with new vigor and resolve. PART II - Other Information FORWARD LOOKING STATEMENTS This Form 10-QSB contains certain forward-looking statements. All statements, other than statements of historical fact, included in this Form 10-QSB are Forward-Looking Statements. Although the Company believes that the expectations reflected in the Forward-Looking Statements are reasonable, there is no assurance that those expectations will be achieved. Item 1. Legal Proceedings ----------------- On February 13, 1997, three of the Company's creditors filed a petition for involuntary bankruptcy pursuant to Chapter 11 of the United States Bankruptcy Code. The case was filed in the United States Bankruptcy Court situated in Reno, Nevada and is styled In Re PowerTel USA, Inc., Case No. BK-97-30265-BMG. The Creditors who filed the petition were Richard A. Cascarilla (who has subsequently been elected to the Company's Board of Directors and functions as its president, see discussion below), Geothermal Development Associates, Inc. and UniShippers, Inc. The involuntary petition was supported by affidavits from Mr. Jeffrey Antisdel, former president and director of the Company, and Mr. Kenton Bowers, former controller and chief financial officer of the Company. The Creditors were represented a Jeffrey L. Hartman, Esq., a former and current Director of the Company. A preliminary hearing was held in Reno, Nevada on March 3, 1997, and the Court appointed Mr. Barry L. Solomon as Trustee ("Trustee"). A formal order confirming the bankruptcy was issued on April 7, 1997. 26 32 On or about September 24, 1997, the Trustee consented to a petition filed by the Company to resume operations functioning as Debtor-in-Possession pursuant to Section 1107 of the United States Bankruptcy Code. The Court approved that petition on September 24, 1997. On or about June 29, 1998, the Company filed with the Bankruptcy Court a proposed Disclosure Statement containing detailed information regarding the proposed plan. Thereafter, the Bankruptcy Court entered an order finding that the Disclosure Statement complied with the provisions of Section 11 USC Section 1125 of the United States Bankruptcy Code and authorized the Disclosure Statement to be transmitted to all creditors and shareholders of record for the purpose of soliciting votes in favor of or against the proposed Plan of Reorganization. On or about August 25, 1998, a hearing was held in the United States Bankruptcy Court for the District of Nevada (Reno Division) in which the company reported that the Plan had been approved by both shareholders and Creditors in conformance with the terms and provisions of the United States Bankruptcy Code. On September 15, 1998, the United States Bankruptcy Court entered an order confirming the proposed Plan of Reorganization. (See discussion below). Prior to the commencement of the Chapter 11 proceeding, on December 12, 1996, the Company was named as a nominal Defendant in a Shareholder Derivative Action filed in the Court of Chancery of the State of Delaware in and for New Castle County, Docket No. 15421-NC. The Plaintiffs were Richard A. Cascarilla and Michael R. Kassouff, both former and current directors of the Company. Named as Defendants in that proceeding were Charles A. Cain, Peter J. Cannell, Stefan Tevis and John C. Goold (all former members of the Company's Board of Directors). The Complaint sought damages on the basis of alleged breach of fiduciary duty, usurping corporate opportunity, misappropriation, conversion and breach of the duty of loyalty. The Complaint alleged, in pertinent part, that the Defendants diverted corporate funds to non-corporate purposes and that the Defendants breached their duty of loyalty by failing to take action against Waterford Trust Company and Golden Chance Limited arising out of defaults with respect to a $5,000,000 note issued in May, 1996 by Golden Chance guaranteed by Waterford in connection with the purchase of Series A preferred shares by Golden Chance. This transaction is discussed in detail in the Company's quarterly report for the three months ended May 30, 1996 as reported on Form 10-QSB. Subsequent to confirmation of the Plan of Reorganization, the Company has entered into a Settlement and Release Agreement with Messrs. Charles Cain and Peter J. Cannell. Pursuant to the terms of this Settlement Agreement, the terms of which are confidential, the settling Defendants have agreed to continue to fully cooperate with the Company. The litigation remains pending with respect to claims against Defendants Tevis and Goold. Also prior to the filing of the Chapter 11 proceeding, five additional lawsuits had been initiated against the Company. In one proceeding, Mary Kay Robinson, Trustee, sued Central Communications Company and Nevada Energy Company for alleged breach of a lease to occupy a building situated in Santa Barbara, California. The Plaintiff alleged damages of $1,200,000. The proceeding was initiated in Superior Court, Santa Barbara, California (Docket No. 216651). 27 33 During the Chapter 11 case, the Plaintiff withdrew the Proof of Claim which had been filed, thereby waiving this cause of action. In another proceeding, Mr. Jeffery Antisdel, the former President of the Company, sued the Company in the County of Washoe, Nevada alleging breach of contract and seeking damages of approximately $380,000. This action was settled for $239,000 without interest with Mr. Antisdel to be a general unsecured creditor for purposes of the Plan of Reorganization. The third case was initiated by Jeffrey L. Hartman, Michael Kassouff and Jeffrey Modesitt in the County of Washoe, Nevada alleging breach of contract and seeking damages of approximately $13,200 per individual. During the Chapter 11 proceeding, these matters were settled for $13,200 per claim with interest and Messrs. Hartman, Kassouff and Modesitt were deemed to be general unsecured creditors for purposes of Plan of Reorganization. In a transaction entered into on September 1, 1996 between Nevada Energy Partners I, Limited Partnership, a Nevada limited partnership ("NEP") and the Company, the Company exchanged its 60% limited partnership interests in NEP and CEC, plus the promise to deliver Class A Common stock in exchange for all of the right, title and interest to 100% of its outstanding Class B Common shares, plus the rights to future share issuances owing to NEP, which were held by NEP and its general partner, Nevada Electric Power Company. The agreement was the subject of litigation between NEP and the Company, which has since been resolved. Nevada Energy Partners, a Nevada Limited Partnership, sued the Company (then known as Nevada Energy Company) in the County of Washoe, Nevada (Docket No. CV 96-07487) alleging breach of contract, specific performance and damages in excess of $6,000,000 arising out of an agreement entered into on or about August 16, 1996. During the Chapter 11 case, the Company negotiated a resolution and settlement of this lawsuit. In summary, the August 16, 1996 agreement was deemed to be null and void and all assets transferred to Nevada Energy Partners as a result of that document were reconveyed to the parties from whom such assets were transferred. In addition, the Nevada Energy Partners Partnership Agreement was amended to reallocate profits and losses between the General Partner and Limited Partner. (The settlement is discussed in detail under Sections VIII and X Settlement of Claims and Interest in the Disclosure Statement. A copy of the Settlement Agreement is attached as EXHIBIT (10)A). Smith Katzenstein & Furlow sued Nevada Energy Company in the Superior Court, County of New Castle, Delaware (Docket No. 96-12-004-JEB) alleging a delinquent account payable in seeking damages in the amount of $78,731. This matter has been settled with a Stipulated Judgment for $78,731 plus interest. As of the Plan of Reorganization, Smith Katzenstein & Furlow was deemed to be a general unsecured creditor and its claim has been settled. In addition, the Company was the Plaintiff in a civil matter filed against Nevada Energy Partners in Superior Court, Santa Barbara, California (Docket No. 216568) in which the Company alleged that the August 16, 1996 28 34 Agreement referenced above should be declared null and void. The Company's claims were compromised and settled as of a comprehensive agreement entered into with Nevada Energy Partners as summarized above. The Company also sued Waterford Trust Company and Golden Chance Limited in Superior Court, New Castle County, Delaware (Case No. 96C-12-150) alleging breach of contract arising out of the purchase in May, 1996 of a Series A preferred shares by Golden Chance, Ltd. The Company obtained a default judgment for approximately $5,000,000 and is in the process of seeking to collect on that judgment. As part of its Plan of Reorganization, the Company identified claims and potential claims which it had against numerous individuals and entities arising out of activities of the Company, its officers and directors and third parties during the period May, 1996 through February, 1997. These claims are discussed in detail on pages 37 through 39 of the Company's Disclosure Statement. On December 16, 1998, PowerTel USA, Inc., now WorldCall Corporation, filed a civil claim in the United States District Court for the District of Nevada alleging violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO") and common law conversion and fraud. Defendants include Mr. Pattison Hayton; Mr. Roderick R. McCloy, individually and practicing law as Roderick R. McCloy, P.C. and Jones, McCloy, Peterson, affiliated law practices; Mr. Kevin Quinn; Golden Chance Limited, an Isle of Man Private Company Limited by Shares; Waterford Trust Company, an Irish corporation; and Mortlake Venture Capital Fund, a California corporation. The complaint requests damages in excess of $1,000,000 and alleges that the defendants participated in a scheme of taking over small publicly-traded companies, illegally looting them for their own profit, and then leaving them on the verge of bankruptcy. Item 2. Changes in Securities and Use of Proceeds. ------------------------------------------ As part of the Plan of Reorganization confirmed by the United States Bankruptcy Court, all securities issued by the Company from and after May 3, 1996 have been declared null and void with certain limited exceptions as follows: The Plan of Reorganization specifically reinstates the shareholder ledger in effect as of May 3, 1996, with the exception that any shareholder who purchased Class A common shares subsequent to May 3, 1996 will be permitted to retain such shares if (1) a Proof of Interest is filed with the United States Bankruptcy Court on or before November 10, 1997, (2) the shareholder is a bona fide purchaser for value and (3) the Company does not contest or otherwise object to the validity of the proof of interest. Approximately 170 shareholders filed a Proof of Interest representing about 2,200,000 shares of Class A Common Stock. In or about January, 1997, the then Board of Directors for the Company attempted to affect a 1:6 reverse stock split, increase authorized shares and create a new class of common equity. The Plan of Reorganization specifically rescinds and voids that reverse stock split. The Company's trading symbol was changed to PWLUA. As part of the Plan of Reorganization, there were significant changes with respect to the capitalization of the Company. In summary, as of a 29 35 compromise settlement and release agreement entered into by and among Nevada Energy Partners, Mr. Jeffery Antisdel, the Company and 16 Bahamian Corporations (the "Corporations"), the Company agreed to recognize a conveyance of interest affected subsequent to August 16, 1996 between Nevada Energy Partners, Mr. Jeffery Antisdel and the Corporations. As a result of recognizing this conveyance, the Company in the Plan of Reorganization, stipulated and consented that the Corporations would be issued restricted Class A Common Stock such that they collectively would own 50% of the issued and outstanding Class A Common Stock as of the date computed to be 10 days after the effective date of the Plan of Reorganization. In addition, during the course of the Bankruptcy Proceeding, the Company entered into an Agreement to acquire 100% of the issued and outstanding common stock of Diego Telecommunications, Inc. ("DiegoTel"), a Nevada Corporation, from Mr. David Wallace. Under the terms of this transaction, Mr. Wallace will receive Class A Common Stock based upon a formula which takes into consideration the revenue generated by DiegoTel in its telecommunications business (See Amended and Restated Agreement for Exchange of Stock VivaTel Agreement), which is attached as Exhibit 10(C), over a period of 30 months. Under the terms of the acquisition agreement, Mr. Wallace may receive Class A Common Shares in an amount not to exceed 35% of the issued and outstanding common stock computed on the effective date of the Plan of Reorganization taking into consideration the shares to be issued to the Corporations. As a result the two events summarized above, there will be significant dilution with respect to the shareholders of record as of May 3, 1996. In addition to these two transactions, pursuant to the Plan of Reorganization, the Company has committed to issue Class A Common Stock to certain general unsecured creditors who, at their election, may receive Class A Common Stock in lieu of cash payments. The Plan of Reorganization also provides that the Company intends to affect a reverse stock split at least 20 days prior to the Effective Date of the Plan of Reorganization. On the Effective Date of the Plan, the Company will issue Class A Common Shares to certain creditors who have elected to accept Class A Common Shares in lieu of cash or deferred cash payments, will issue Class A Common Shares to the Corporations and will issue new Class A Common Shares to the shareholders of record as of May 3, 1996 together with those allowed shareholders who have filed an appropriate proof of interest. On the Effective Date, the Company will also reserve a sufficient number of treasury shares equal to 35% of the issued and outstanding Common Stock for potential issuance to Mr. Wallace as earned pursuant to the DiegoTel Acquisition Agreement. Finally, 10 days after the Effective Date, the Company will recompute the number of shares issued to the Corporations such that they will own, on a pro rata basis, an amount to 50% of the issued and outstanding Class A Common Stock of the Company. The following table sets forth the anticipated capitalization of the Company computed as pursuant to the Plan of Reorganization. 30 36 Pro Forma Capitalization ------------------------ Class A Common Stock Issued and Outstanding Held by Shareholders of Record on May 3, 1996 8,808,487 35.04% Issued to Allowed Equity Claimants 2,483,008 9.88% Issued to Directors 265,000 1.05% Issued to Repurchase Series B 500,000 1.99% Issued to Creditors pursuant to Plan of Reorganization (N. 1) 512,000 .04% Subtotal 12,568,495 12,568,495 50.00% Issued to the 16 Bahamian Corporations 12,568,495 50.00% Subtotal 12,568,495 50.00% Total Issued and Outstanding 25,136,990 100.00%
31 37 Assuming that Mr. Wallace were to receive 29,338,119 shares of Class A Common Stock, the following would occur:
Issued and Outstanding Held by Shareholders of Record on May 3, 1996 8,808,487 10.51% Issued to Allowed Equity Claimants 2,483,008 2.96% Issued to Directors 265,000 0.32% Issued to Repurchase Series B 500,000 0.60% Issued to Mr. Wallace 29,338,119 35.00% Issued to Creditors pursuant to Plan of Reorganization (N. 1) 512,000 0.61% Subtotal 41,906,614 49.99% Issued to the 16 Bahamian Corporations 41,911,599 50.00% Subtotal 41,911,599 50.00% Total Issued and Outstanding 83,823,198 100.00%
The Company has issued Options to its Directors as compensation for services rendered. As at January 18, 1999, options were issued which authorize the three Directors to purchase a total of 7,500 shares per Director per quarter of Class A Common Stock at $.10 per share. (See Note 8 to the unaudited financial statements of the Company for the nine months ended November 30, 1998. Pursuant to the Plan of Reorganization, the Company is authorized to effect a reverse stock split prior to the issuance of Class A Common Stock to creditors or the Corporations, and the Board of Directors adopted a resolution to effect a 1:15 reverse stock split at a date to be established, currently predicted to be in March 1999.
Assuming a 1:15 stock split, the results would be as follows: Issued and Outstanding Held by Shareholders of Record on May 3, 1996 587,232 10.37% Issued to Allowed Equity Claimants 180,000 3.18% Issued to Directors 17,667 0.31% Issued to Repurchase Series B 33,333 0.59% Issued to Mr. Antidel (N. 2) 0 0.00% Issued to Creditors pursuant to Plan of Reorganization (N. 1) 2,012,000 35.54% Subtotal 2,830,232 50.00% Issued to the 16 Bahamian Corporations 2,830,232 50.00%
32 38 Subtotal 2,830,232 50.00% Total Issued and Outstanding 5,660,465 100.00%
Assuming that (1) Mr. Wallace were to be issued the maximum number of shares possible pursuant to the Plan of Reorganization, (i.e. 29,338,119), and (2) the Company effects a 1:15 reverse stock split, the results would be as follows:
Issued and Outstanding Held by Shareholders of Record on May 3, 1996 587,232 6.69% Issued to Allowed Equity Claimants 165,534 1.89% Issued to Directors 17,667 0.20% Issued to Repurchase Series B 33,333 0.38% Issued to Mr. Antisdel (N. 2) 0 0.00% Issued to Mr. Wallace 3,070,000 35.0% Issued to Creditors pursuant to Plan of Reorganization (N. 1) 512,000 5.84% Subtotal 4,385,766 50.00% Issued to the 16 Bahamian Corporations 4,385,766 50.00% Subtotal 4,385,766 50.00% Total Issued and Outstanding 18,728,199 100.00%
Note 1: The Creditors holding claims totaling $64,000 have agreed to accept Class A Common Stock valued at a price of $.25 per share pursuant to a formula approved by the Court as part of the Plan of Reorganization. As of January 18, 1999, trading in Class A Common Stock had been suspended at the Company's request. The last trade was at $.06 per share. One shareholder will receive warrants. In addition, Mr. Jeffrey Antisdel, the former President of the Company has agreed to accept a promissory note in the principal amount of $239,000 to be paid over a 60 month term without interest. The Company has the right to prepay this note at any time without penalty. The note is convertible into 1,500,000 of Class A Common Stock, pursuant to the Plan of Reorganization. The Company has agreed upon meeting certain conditions to issue Class A Common Stock to Mr. David Wallace as part of the consideration for the acquisition of two corporations. (See EXHIBIT 10(C)). The amount of Class A Common Stock to be issued to Mr. Wallace will be computed on the basis of a formula approved by the Bankruptcy Court as part of the Plan of Reorganization. Mr. Wallace could receive up to 35.0% of the issued and outstanding Class A Common Stock. Based upon the table set forth above, Mr. Wallace could receive up to 32,514,590 shares of Class A Common Stock. In the event that Class A Common Stock is issued to Mr. Wallace, the 16 Bahamian Corporations are entitled to receive additional shares of Class A Common Stock such that they continue to own 50.0% of the issued and outstanding Class A Common Stock. The nondilution clause of the 16 Bahamian Corporations does not apply in the event that the Company issues Class A Common Stock to any person or entity other than Mr. Wallace or Mr. Antisdel. Note 2: Mr. Antisdel owns additional shares of Class A Common Stock which he acquired subsequent to the commencement of the Chapter 11 proceeding, which shares are included in the 8,808,487 shares of Class A Common Stock issued and outstanding as of May 3, 1996. The Company, pursuant to the Plan of Reorganization, has also granted stock options to the Directors, as follows: 2,500 per Director, per quarter @ $.10 per share for total issued to date of 7,500. Item 3. Defaults Upon Senior Securities. -------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- On August 16, 1996, the Company held its annual meeting of Shareholders. At that time, various matters were submitted for a vote of the 33 39 Shareholders. The Company's Certificate of Incorporation in effect as of that date provided that certain matters required the affirmative vote of shareholders of record entitled to vote at least 80% of the Class A Common Stock. For purposes of this requirement, the Class B Common Stock at all times had equal voting rights and was deemed to be converted into Class A Common Stock with equal voting privileges. Subsequent to the annual meeting, the Company reported that the shareholders had approved various actions. In or about January 1997, the then Board of Directors approved a filing with the Secretary of State for the State of Delaware in which the Directors voided the "supermajority" provision requirement set forth in the Company's Articles of Incorporation had not been validly adopted and, therefore, a majority of the issued and outstanding Class A Common Stock was sufficient to amend the Articles of Incorporation and initiate certain actions. In reliance upon this position, the then Board of Directors authorized the Company to prepare and file various documents with the Secretary of State for the State of Delaware increasing authorized number of shares and taking other corporate action. The Plan of Reorganization specifically provides that the action taken for the Board of Directors in January, 1997 was inaccurate, illegal and rescinds all such filings. The Plan of Reorganization, as confirmed by the United States Bankruptcy Court, authorized the Company to file Amended Articles of Incorporation which, among other things, established a new class of stock, to be known as "Special Shares." The Amended Articles of Incorporation authorize the issuance of seven shares of Special Stock, of which, three have been issued. The Shareholders owning the Special Stock are entitled to elect two members to the Board of Directors, the remaining Directors to be elected by the Class A Shareholders. The three shares of Special Stock elected Messrs. Richard Cascarilla and Jeff Hartman as members of the Company's Board of Directors. The remaining Director, was elected by the owners of the Class B Common Stock, pursuant to certain preferential voting rights, which have since been rescinded. Pursuant to the Amended Articles of Incorporation, the Board of Directors, which is currently fixed at three, can be increased to no more than seven members. The number of Directors can be increased only by the affirmative vote of the Board of Directors. The rights of the "Special Stock" can be modified only by consent of the majority of the Directors. Item 5. Other Information. ------------------ The Company's last filing with the Securities and Exchange Commission was its quarterly report for the nine months ended November 30, 1996 on Form 10-QSB. As noted above, on February 13, 1997 an involuntary petition for reorganization was filed pursuant to Section 1103 of the United States Bankruptcy Code and a Trustee was appointed. Subsequent to the commencement of the bankruptcy proceeding, no filings have been made with the Securities and Exchange Commission. The Company is delinquent with respect to the filing of two 34 40 annual reports (Form 10-KSB) for the fiscal years ended February 28, 1997 and February 28, 1998 together with several quarterly reports (Form 10-QSB) for the three, six and nine month periods ending May 30, August 30 and November 30, 1997 and for the three and six months ending May 30 and August 30, 1998. The Company is in the process of preparing these reports and intends to file them prior to the filing of its annual report for the fiscal year ending February 28, 1999 on Form 10-KSB. In the interim, accompanying this quarterly report as Exhibits are the monthly operating statements filed by the Company with the United States Bankruptcy Court for the period February, 1997 to date. The Company's management and Board of Directors are incurring substantial difficulties in the preparation of the required SEC reports. As disclosed in the Company's Quarterly Report for the three months ended May 30, 1996 on Form 10-QSB, on or about May 1, 1996 there was a change of control with respect to the Company. The change of control occurred because the company sold Series A Preferred Shares to Golden Chance, Limited, an Isle of Mann company limited by shares, which served as nominee for Waterford Trust Company, an Irish Corporation. As of that transaction, Golden Chance issued to the Company a promissory note in the principal amount of approximately $5,000,000 ("the Golden Chance Note") which was guaranteed by Waterford. As of that transaction, there was a change in the Company's Board of Directors by which all of the directors resigned and were replaced by three representatives of Golden Chance, consisting of Messrs. Charles Cain, Peter J. Cannell and John Goold. On September 26, 1996, Mr. Goold resigned as a director and was replaced by Mr. Stefan Tevis. The Golden Chance Note called for certain minimum payments commencing in July, 1996. The directors appointed by Waterford took the position that payments had been made by Golden Chance on a timely basis and, therefore, released from escrow approximately 762,000 shares of Series A preferred stock, which were immediately converted into more than 5,500,000 shares of Class A Common Stock. The then President and Secretary of the Company (Messrs. Jeffery Antisdel and Richard Cascarilla, respectively) did not concur with the position taken by the Golden Chance board. It was their position that a substantial portion of the funds distributed by Golden Chance had not been received by the Company and, therefore, Golden Chance was delinquent with respect to its payment obligations pursuant to the Golden Chance Note. On September 13, 1996, Messrs. Antisdel and Cascarilla tendered written notice to Golden Chance and Waterford of their default on payments due to the Company pursuant to the Golden Chance Note. Neither Waterford nor Golden Chance responded to the Notices of Default; however, the Company's Board of Directors terminated Messrs. Antisdel and Cascarilla on September 26, 1996 without cause and solely because they filed a Notice of Default with the Securities and Exchange Commission. During the period September 26, 1996 through December 4, 1996 there were continual confrontations among and between the then Board of Directors of 35 41 the Company and Antisdel and Cascarilla, former officers of the Company who continued to assert that Golden Chance was in default. On December 4, 1996, the Series B Preferred Shareholders tendered a written notice of default and invoked their right to elect a representative, Michael Kassouff, to the Company's Board of Directors. At or about the same time, a Shareholders derivative action was initiated (See discussion below) and litigation was commenced on behalf of the Company against both Waterford and Golden Chance. On or about January 23, 1997, by majority vote of the Board of Directors, Mr. Stefan Tevis was relieved as President of the Company. He retained his position as a director pending negotiating agreement for his resignation. Mr. Pattison Hayton, III commenced to act as President effective January 23, 1997. Mr. Hayton had served as a consultant to the Company since May 3, 1996 and was also an advisor to the Company's Board of Directors, to Waterford Trust Company, to Golden Chance Limited, and others. During the course of the bankruptcy proceeding, the Company conducted an investigation into the activities of Mr. Hayton and others. As a result of this investigation, the Company has announced its intent to pursue the claims against Mr. Hayton an others arising out of conduct which transpired during the period May, 1996 through February 1997. (See Item 1. Legal Proceedings.) During the Bankruptcy proceeding on or about May 9, 1997, Mr. Peter Cannell and Charles Cain tendered resignations from their position on the Board of Directors, which resignations were accepted by the sole remaining director, Mr. Michael R. Kassouff. Immediately thereafter, Mr. Kassouff terminated Mr. Pattison Hayton as President of the Company and Mr. Quinn as Secretary, replacing him with Mr. Richard A. Cascarilla (as a Director and President) and Mr. L. Herth (as Director and Corporate Secretary). Mr. Cascarilla had been Secretary and Treasurer to the Company from November 20, 1990 until he was terminated by the Board of Directors in September, 1996. Mr. Herth was the founder and manager of Herth Printing and Business Supply in Reno, Nevada, which had previously been acquired by the Company and was owned by the Company's former subsidiary, Combustion Energy Company. Mr. Michael Kassouff remained as a Director and Chairman of the Board. Subsequent to confirmation of the Plan of Reorganization, Mr. Herth resigned from the Board of Directors and was replaced by Mr. Jeffrey Hartman, a former Director. During the pendency of the bankruptcy, the Company's newly elected Board of Directors evaluated the Company's activities and adopted a new business strategy for the Company, as discussed in Section VI, The Reorganized Debtor's Business Plan, at EXHIBIT (2)A of the Disclosure Statement. In summary, during the period May 1990 through May 1996 the debtor functioned as a non-regulated utility holding company primarily engaged in the development, financing, construction and operation of geothermal, wind and biomass energy resources used primarily to generate electric power. In 1994, the Company (through one of its then subsidiaries) acquired by merger Herth Printing and Business Supply, Inc., a custom printing and catalog based retail office supply business. 36 42 In general, the Company's operations, were conducted through a variety of joint ventures, partnerships and subsidiaries. During the course of the Chapter 11 proceeding, the new Board of Directors reevaluated the Company's previous business plan and determined it was in the best interest of the Company to adopt a new business plan to consist of three segments: #1.) Functioning as a non-regulated utility holding company, the Company will seek to identify and develop an application for its energy co-generation units in the operation of geothermal, wind and biomass energy projects, primarily through joint ventures and partnerships with third parties. At this time, no specific project has been identified. #2.) The development of its current printing and business supply operation situated in Reno, Nevada, conducted under the name "Herth Printing and Business Supply." The Company may consider a sale of this business if it is determined that it is not consistent with the Company's overall business plan. #3.) The creation, development and implementation of an international long distance telecommunication business initially focusing exclusively upon the sale of international long distance services from the United States on a wholesale basis. With respect to the development of an energy cogeneration business, the Company is anticipated to have substantial physical resources, consisting of its energy cogeneration units. Management believes that the Company will be successful in negotiating joint venture or partnership relationships in which the Company will contribute its energy cogeneration equipment, but it is also likely that the Company will require additional working capital in order to implement that line of business. In the event that management is not successful in identifying an application for its currently idle energy cogeneration equipment, the Board of Directors may determine that it is in the best interest of the company to liquidate those assets and to reapply the net sale proceeds into other business ventures. With respect to its printing and business supply operation, management anticipates that the Company will continue to function largely as it has done in the past. However, the Company will be mindful of opportunities to expand the business and printing supply operation, perhaps through the acquisition of other companies or operations. At this time, no such acquisition has been identified or is under consideration. In the event the Board of Directors determines that continued operation of the printing and supply business is not consistent with the long-term objectives of the Company, consideration will be given to the sale or disposition of that portion of the Company's business. At this time, the Company has entered into negotiations with Mr. Lawrence Herth, a former director and the founder of Herth Printing and Business Supply, in order to determine whether a sale of that business segment to Mr. Herth is appropriate. 37 43 With respect to its entry into the long distance telecommunication market, the Company has done so through the acquisition of 100% of the issued and outstanding stock of Viva Telecommunications, Inc. ("Viva Tel") and Diego Telecommunications, Inc. ("Diego Tel"), as discussed in more detail in Section VI, The Reorganized Debtor's Business Plan of the Disclosure Statement at EXHIBIT (2)A. When acquired by the Company, VivaTel and DiegoTel had no revenue, modest assets, no operating history and minimal debt. Each company owned, or had rights to, a license issued by the Federal Communication Commission pursuant to Section 214 of the Federal Communications Act. A Section 214 authority permits the holder to market and sell long distance telecommunication services in the United States on condition that the ultimate destination of the long distance call is to a country which is outside the United States. At this time, a Section 214 license permits long distance telephone calls to over 100 countries. To the best of management's knowledge, no additional license or permit is required in order to conduct such business within the United States; however, licenses or permits may be required and depending upon the country to which the long distance telephone call will be made. In addition, DiegoTel has leased or otherwise acquired fiber optic cables suitable for the transmission of long distance telecommunication services to its point of presence in California. In addition, according to Mr. Wallace, former president of DiegoTel, the Company has purchased or leased appropriate equipment in order that DiegoTel can function as aggregator of long distance telecommunication services. Finally, DiegoTel has entered into a five-year agreement with a Mexican carrier to provide services into Mexico. The Directors of DiegoTel are Richard A. Cascarilla, Esq. and Michael Kassouff. Mr. Cascarill also serves in the capacity of President and Mr. Kassouff serves as President. The Mexican carrier (Servicios, S. de R.L. de CV, a corporation of the State of Baha, California, Mexico) ("VSS"). VSS is owned or controlled by Mr. Wallace. Under the terms of the agreement entered into between DiegoTel and VSS, VSS is to receive approximately 80% of the gross revenue of all telecommunication services sold by DiegoTel. In addition, depending upon the gross revenue generated by the Company, Mr. Wallace is to receive Class A common stock in an amount not in excess of 35% of the issued and outstanding common stock of the Company following the Effective Date. The Plan of Reorganization, as approved by the Court, has established various classes for the claims of secured and unsecured creditors of the Company. The certain classes of general unsecured creditors are entitled to receive, at the election of each individual creditor, Class A common stock in lieu of a cash payment. The following table summarizes the allowed claims and the disposition of such claims by class. 38 44
Class Amount Status ----- ------ ------ Class 1: Administrative Claims $250,000.00 45,000 paid in Dec. 1998 - Balance still due Class 2: Allowed Wage Claim $ -0- -0- ----------- Class 3: Allowed Munson Priority Tax Claims $ 26,000.00 Pending ----------- Class 4: Allowed Priority Tax Claims $ -0- -0- ------------ Class 5: Allowed Secured Creditors $ -0- -0- ------------ Class 6: Unsecured Claims of less than $1,200.00 $ 30,000.00 Pending ----------- Class 7: Unsecured Claims in $64,000 in claims excess of $1,200.00 $607,876.95 choose all stock payment option and/or note ----------- Class 8: NEP Claim $6,000,000.00 Settled ----------- Class 9: Disputed Claim $ -0- - ------------ Class 10: Claims of Equity Interest 11,291,495 Claims recognized for Number of shares of Class A approximately 170 Common Stock shareholders owning 2,700,000 shares of Class A Common Stock
- ----------------------- The Plan of Reorganization will have a significant impact upon the Company, its financial statements and his future business operations. Accordingly, interested shareholders are encouraged to read and review the Plan of Reorganization together with the Disclosure Statement which discusses that Plan. A copy of the Plan of Reorganization and Disclosure Statement is enclosed. Risk Factors - ------------ There are substantial risks associated with the business plan as adopted by the new Board of Directors. These risk factors are discussed in detail in the Disclosure Statement on pages 80-96, and 39 45 shareholders are encouraged to review these pages carefully, which are hereby incorporated by reference. The Company has not been successful in fully implementing its Plan of Reorganization as approved by the Court. Unexpected delays were incurred with respect to installation of telecommunications cabling, lines and equipment. At this time, however, management reports that: - The Mexican carrier has reported the successful implementation of all equipment needed to function as a telecommunications carrier, with dial tone available at its principal point of contact, - The Mexican carrier has received the appropriate license to conduct business in Mexico, - DiegoTel has ordered and paid for five T-1 telecommunication lines which have been installed into a California facility, - The Company has entered into a lease agreement for a DS-3 cable which will give the Company access to 672 telephone lines, - In January, 1999, the system was tested for the purpose of confirming that the equipment installed in the United States has functional capability to communicate long distance messages to Mexico. The test was successfully completed. In addition, DiegoTel has entered into negotiations to sell 1,500,000 minutes per month to a single user situated in California. In the event that no further unanticipated delays occur, the Company anticipates that it will be able to generate revenue from these telecommunication services in the near future. As noted above, the Company has not filed all of the periodic reports required to be made pursuant to applicable provisions of the Federal Securities Laws. The Company intends to bring these filings current in the near future. In an attempt to provide updated information with respect to the affairs of the Company, the following supplemental information is being provided. February, 1996 - January, 1999 As noted above, the Company's last annual report was submitted for the fiscal year ended February 28, 1996, as reported in Form 10KSB as filed with the Securities and Exchange Commission. The following information is being submitted as supplemental information. In order to discuss events which have transpired subsequent to February 28, 1996. 40 46 Description of Business - ----------------------- PowerTel USA, Inc. n.k.a. WorldCall Corporation, a Delaware corporation, (the "Company") has been an independent, non-regulated utility holding company which had acquired and operated electric power facilities and other non-related business enterprises. The Company is not encumbered by internal rate of return regulation as are traditional retail electric utility companies. The Company has historically focused on developing environmentally sound electric power facilities which utilize geothermal energy and wind energy resources as the primary source of fuel for such facilities. Prior to October, 1996, the Company had been located in Reno, Nevada In October, 1996 it was moved to Santa Barbara, California. Subsequently, the Company relocated to Palm Desert, California, which was its location at the time of the involuntary commencement of the Chapter 11 proceedings. The Company's operations were placed under the control of a Court appointed Trustee in March of 1997. The Trustee took actions to liquidate assets to fund the operation of the Company. On June 27,1997 the Trustee completed the sale of the Company's 50.01% ownership interest in one of it's subsidiary, San Jacinto Power Corporation ("SJPC"), a Nevada corporation, in consideration of payment by a third party of $200,000 in cash, plus the assumption of debts estimated to exceed $175,000. On September 4, 1997, the Court approved an order allowing the Company to operate as a "Debtor in Possession" ("DIP"). The Company owns idle geothermal power generating assets which include 10.7 MW of power generating plants, fixtures and equipment. As a component element of the Company's Plan, the Company intends to deploy, sell, lease or liquidate these currently idle binary cycle power generating assets as a of its Reorganization Plan. These assets were originally acquired by the Company in 1984-85 for the purpose of developing the geothermal resources then controlled by the Company at Brady's Hot Springs. They are currently stored in Fernley, Nevada In addition to the Company's energy related business assets, the Company owns a non-energy related business known as Combustion Energy Corporation ("CEC") which conducts its business as Herth Printing and Business Supply, Inc. ("Herth"). Herth was acquired on November 30, 1994, by merger (see Combustion Energy Company below). Herth, was established in 1983 in Reno, Nevada and has historically averaged annual gross sales of approximately $1.0 million dollars. Herth is located in its own warehouse/office space on approximately .67 acres of land near downtown Reno. The Company had engaged the former proprietor to continue managing the business under a two year employment agreement which has currently expired. The merger was accounted for as a pooling of interests. In addition to the Company's core assets, the Company has acquired the business interests of two developmental international long distance carriers, DiegoTel and VivaTel (see Managements Discussion and Analysis). DiegoTel and VivaTel are the holders of a Section 214 authorization from the FCC which allows it to sell international long distance services out of the United States. Finally, the Company maintains extensive litigation rights against certain individuals and professional firms, as well as a judgment in the principal amount of $5,000,000 against Golden 41 47 Chance Limited, an Isle of Man corporation limited by shares, and Waterford Trust Company Limited, an Irish corporation. There can be no assurance that any monetary recovery may will be obtained from the above mentioned judgments parties (See Litigation). COMPANY HISTORY The Company was originally organized on December 2, 1982 under the laws of the State of Delaware as "Munson Geothermal, Inc." ("Munson"). The Company changed its name to Nevada Energy Company, Inc. on November 20, 1990. On January 21, 1997, the Company subsequently changed its name to PowerTel USA, Inc. (See Disclosure Statement). Historically, the Company had sought to develop geothermal power projects. To accomplish this objective, the Company first acquired a known geothermal resource area ("KGRA") approximately 60 miles east of Reno, Nevada known as Brady's Hot Springs ("Brady") in 1983. The Brady site consisted of leaseholds from Southern Pacific Land Company (now Catellus Development) and the United States Dement of the Interior, Bureau of Land Management ("BLM"). The leases were for long-term development with minimum annual lease payments and production royalties. After acquiring the Brady leases, the Company expended substantial funds to determine the potential of the resources on the Brady leases in order to initiate their development. Subsequent to initial development efforts, the Company secured several long term contracts to sell electrical energy produced to Sierra Pacific Power Company, a subsidiary of Sierra Pacific Resources and embarked upon a plan to secure debt and equity financing sufficient to establish recurring revenue from Brady. The Company invested significant capital investment in the development of the Brady resources, however, the Company did not secure adequate project development funding sufficient to establish recurring revenues from Brady. Brady Hot Springs Geothermal Associates --------------------------------------- In 1984, the Company identified a power project under development by the United States Dement of Energy ("USDOE") at Raft River, Idaho. The site included a binary cycle power plant with a generator nameplate rating of 7,200 kilowatts or 7.2 MW (the "Raft River Plant"). The project was sold at auction by the USDOE. The Company was selected by the purchaser, a subsidiary of Niagra Mohawk Power known as HydraCo Associates ("HydraCo") to move the Raft River Plant to the Brady Hot Springs site. On September 30,1985, the Company entered into a partnership agreement with a group led by HydraCo whereby the Company became the partner of a single purpose development entity known as Brady Hot Springs Geothermal Associates, Ltd. ("BHSGA"). The Company executed and delivered to BHSGA an assignment of a 6.6 MW Power Purchase Agreement ("PPA") with Sierra, (which was owned by the Company), together with a sublease of geothermal resources which had an agreed value of $1,400,000. BHSGA assumed responsibility for relocating the Raft River Plant to the Brady Hot Springs property. On December 18, 1986, the Company entered into a 42 48 second agreement with BHSGA to acquire the Raft River Plant, related equipment and other tangible and intangible assets. In July 1991 the Company completed the acquisition of the Raft River Plant which is currently idle and located in Fernley, Nevada. Brady Geo Park Power Partners 1996 ---------------------------------- In 1986, the Company formed a Nevada Limited Partnership known as Brady Geo Park Power Partners 1996 ("BGPPP") for the purpose of developing a small scale power plant operation at the Brady site. As a component of forming BGPPP, the Company sold 3.38 Ormat power plants to BGPPP in exchange for cash and a non-recourse note in the amount of $584,000, which accrued interest at 9% per annum (accelerating to 18% on default). BGPPP successfully initiated limited operations of the power project but later discontinued operations in 1987. To date, BGPPP has not made payment of principal or interest to the Company and is in default of its promissory note to the Company, plus is in arrears on moving fees and storage fees exceeding, in the aggregate, $1,000,000. BGPPP's interest is to be terminated because of their default provided for in the Plan. The Company had previously notified the owners of BGPPP of the need for reimbursement and noticed payment for the non-recourse note. No response was received. Since the note has been in default, the Company has recorded its interest as though the equipment was owned. At present, the BGPPP Ormat power generating plants in which BGPPP has an interest in are idle and are in storage at Fernley, Nevada (at the Company's cost) with other Company power generating assets. In December 1995, the Company transferred all of its right title and interest, except the limited and general partnership interests, in BGPPP, together with its other idle power generating assets, to its wholly owned subsidiary Yerington Acquisition Company, Inc. ("YAC") in exchange for shares of YAC's no par Common stock (See Yerington Acquisition Company). Brady Power Partners -------------------- Brady Power Partners ("BPP"), a Nevada general partnership, was formed by Nevada Geothermal Power Partners, Limited Partnership, ("NGPP") a Nevada Limited Partnership, (see NEVADA GEOTHERMAL POWER PARTNERS) and ESI BH Limited Partnership ("ESI-BH") in July, 1991, for purposes of developing the Brady KGRA. In July, 1991, BPP agreed to purchase the assets of BHSGA, including rights to a 6.6 MW Power Purchase Agreement with Sierra, and assume the Company's debts with BHSGA. BPP and the Company thereafter entered into an agreement ("BPP Agreement") whereby the Company sold to BPP certain geothermal power assets in exchange for BPP's payment of $2,000,000 to the Company, a Gross Revenue Interest in the completed project assigned to creditors of the Company and forgiveness of the claims BHSGA had against the Company. The BPP Agreement provided the Company the means to complete financial reorganization of the Company in 1991. 43 49 Beginning on July 19, 1991, BPP developed, financed, constructed and now operates the Brady Hot Springs Power Plant and services power purchase agreements for 20.5 MW of power with Sierra. On August 1991, the Company received cash consideration totaling $2,000,000 and project construction commenced and BPP transferred a Gross Revenue Interest ("GRI") in the Brady Hot Springs Power Plant Project to pay certain indebtedness of the Company. The revenues generated by the GRI are utilized to satisfy certain debts payable prior to reorganization, until paid in full or until there is no further revenue payable under the GRI. To date, the GRI services the indebtedness previously accrued by the Company in accordance with the BPP Agreement. Nevada Geothermal Power Partners -------------------------------- Nevada Geothermal Power Partners ("NGPP") is a Nevada limited partnership whose general partners are Hot Springs Power Company ("HSP") and Nevada Energy Partners-I, LP ("NEP") and whose limited partners are certain cash investors and contractors. NGPP previously owned a 50% interest in BPP until May 1995, when NGPP interests in BPP were sold. NEP owned 31% of NGPP, and the Company owned 60% of NEP (see Nevada Energy Partners-I, LP below). Nevada Energy Partners-I, LP ---------------------------- Nevada Energy Partners I, Limited Partnership ("NEP") is a Nevada limited partnership whose general partner is Nevada Electric Power Company, Inc. ("NEPC") (40% interest) and whose limited partner (60% interest) was the Company. NEPC is a Nevada corporation wholly owned by Jeffrey E. Antisdel, the Company's former president and chief executive officer. The Company obtained its limited partnership interest in NEP through its issuance of 4,437,473 shares of the Company's Class B Common Stock (representing 100% of all Class B Common Stock issued and outstanding). As a result, NEP previously owned a fully diluted ownership interest in Brady Power Partners project totaling 9%. Through the sale by NGPP of its 50% interest in BPP in May 1995, NEP's interest in BPP was liquidated. The Company realized a net gain of $585,511 in May 1995 as a result of its interest in NEP. Cash in the amount of $508,018 was received in July 1995. The remaining $77,493 receivable has been charged as uncollectible. Pursuant to the terms of a settlement agreement entered into between NEP, NEPC and the Company in 1998, and ratified by the Bankruptcy Court as part of the Plan or Reorganization, net gains resulting from the sale of BPP were reallocated to the Company. As a limited partner of NEP, the Company was entitled to sixty percent (60%) of NEP's net distributable cash flow. Pursuant to the terms of the settlement agreement between NEP, NEPC and the Company, the 60% allocation of gain was reallocated to increase the gains to 99%. The Company 44 50 received no cash flow from recurring revenues from its interest in NEP. Distributable cash flow from NEP to the Company consisted of non-recurring developer fees, cost reimbursements, litigation recoveries and proceeds resulting from liquidation of NEP's BPP interest. San Jacinto Power Corporation ----------------------------- The Company formed San Jacinto Power Corporation, a Nevada Corporation, ("SJPC") on December 15, 1993. SJPC was formed for the purpose of acquiring, holding and operating the Assets to be acquired from Smith and Triad. On December 15, 1993, the Company contributed 222,267 shares of Class A Common Stock and cash of $275,055 in exchange for its 50.01% Common Stock ownership interest in SJPC. On December 15, 1993, The New World Power Corporation ("New World") contributed 48,000 shares of its Common Stock to SJPC. On February 10, 1994, New World contributed cash of $149,970 to SJPC and contributed additional cash of $124,975 on March 8, 1994. New World owns a 49.99% ownership interest in SJPC. SJPC acquired in July, 1994 the operating assets of Smith Wind Energy Company ("Smith") and six affiliated limited partnerships operated by Smith which are known as the Triad Partnerships (collectively "Triad"). As a result of the acquisition, SJPC operated a wind turbine energy park in North Palm Springs, California. Energy sales were pursuant to a contract with Southern California Edison Company that had approximately 20 years remaining. A total of 64 wind turbines were available for operation, together with associated infrastructure, additional turbine sites, turbine towers, parts and service equipment and a long-term land lease with the BLM. In its last filed financial report, the Form 10-QSB for the nine months ended November 30, 1996, the Company had reported consolidated San Jacinto Power Corporation assets of approximately $1,105,986, consolidated liabilities of approximately $159,287 and minority interest of $632,720. The transaction resulted in a reported net loss of approximately $113,979. At the time of the sale, San Jacinto Power Corporation was one of two operating properties held by the Company. Results of SJPC operations have been removed from the reported results in the accompanying financial reports. Combustion Energy Company ------------------------- The Company formed a wholly-owned subsidiary, Combustion Energy Company, Inc. ("CEC"), a Nevada corporation, on February 12, 1993 for the purpose of being a general partner of Oreana Power Partners ("OPP") (See Oreana Power Partners below). The Company is also a limited partner in OPP. On November 30, 1994, the Company caused CEC to merge with Herth, in exchange for Class A Common Stock of the Company. The Company, through its ownership of CEC, owned 100% of the post-merger business and consolidated the financial results of CEC in its reported results. In an agreement entered into on September 1, 1996, the Company exchanged its interest in CEC, and thereby Herth, in a transaction which included the 45 51 reacquisition of all right, title and interest in the Company's then outstanding Class B Common shares, which was later the subject of a settlement agreement between NEP, NEPC and the Company (See NEP Settlement Agreement at EXHIBIT (10)A). Oreana Power Partners --------------------- On February 12, 1993, the Company formed a Nevada limited partnership known as Oreana Power Partners ("OPP"). The partnership is currently equally owned by CEC and Geothermal Development Associates ("GDA") subsidiary, Energy Development Associates ("EDA"). OPP was formed for the purpose of developing, financing and constructing a gas turbine electric generating facility to provide power to Sierra pursuant to power sales contracts to be obtained. OPP's primary development site is near Sierra's Oreana substation and electric transmission lines. OPP has been dissolved. CHANGE IN CONTROL On February 29, 1996 the Company executed a binding letter of intent (the "Waterford Agreement") with Waterford Trust Company, Limited, an Irish corporation ("Waterford"), in which the Company agreed to sell to Waterford or its nominee approximately 2,000,000 shares of Series A preferred shares. On May 1, 1996 the Company announced the completion of this transaction in which Waterford's nominee, Golden Chance, Limited ("Golden Chance"), an Isle of Man private company limited by shares, agreed to purchase 1,960,795 shares of Series A Preferred stock at $2.50 per share and 152,381 shares of Class A common stock at $0.643125 per share. The Company received a cash payment for the Class A common shares in the amount of $100,000 and a $4,900,000 promissory note was executed and delivered by Golden Chance. The promissory note was secured by the corporate guarantee of Waterford Trust Company. The Series A Preferred shares acquired by Golden Chance were held in escrow for the benefit of the registrant. The promissory note was payable in monthly installments. The first installment was payable July 1, 1996 in the amount of $400,000. Subsequent installments of $500,000 were payable every thirty days thereafter until paid in full. The total principal amount of the promissory note was due and payable on April 1, 1997. Upon payment of each installment under the promissory note, a portion of the Series A Preferred shares were to be converted to the registrants class A common stock pursuant to the Certificate of Designation of the Series A Preferred shares. The converted shares would then be released from escrow. On or about May 3, 1996, the Company received a cash payment in the amount of $100,000 for the first conversion of the Class A preferred common stock which resulted in the issuance of 152,381 shares on May 7, 1996. Additional monies were paid into a bank account in Palm Desert, California opened in the Company's name; however, this account was never under the control of the corporation or its officers. Under the direction and approval of the Waterford Board of Directors, the Company improperly acknowledged receipt of as much as $1,242,000 in additional funds, however, the Company never received these funds. The Waterford Board authorized the issuance of approximately 9,327,844 additional shares of Class A common stock in conversion of the Series A 46 52 Preferred shares as more fully set forth below. The current Board of Directors disputes the validity of all of the above share issuances and receipt of the note payments. The rejection is based on the fact that the Company never had control of the funds, which were directed to bank accounts not under the control or care of Company officers. In addition, the substantial majority of the funds were used for non-corporate purposes. Monies distributed from the Palm Desert account were directed to persons and entities who had not performed services or provided valid consideration to the benefit of the Company. On or about October 1, 1996, Class A shares totaling 1,061,729 were issued under an S-3 registration which had been originally filed in July 1996 and amended in August 1996. As a result, the shares were issued without restrictive legend even though the original agreement with Waterford Trust required that all shares carry a restrictive legend. On July 30, 1996 a legal opinion pursuant to Regulation "S" of the Securities Act of 1933, as amended, ("Reg S") was provided by Kevin J. Quinn. The opinion was issued on behalf of Golden Chance Limited ("Golden Chance") and resulted in the Company's transfer agent issuing 2,543,734 free trading shares of Class A common stock. Mr. Quinn's license to practice law was suspended by the State of California on April 17,1993 and he was subsequently disbarred on April 25, 1997. On or about January 24, 1997, Mr. Quinn prepared and issued to the Company's stock transfer agent a Form S-8 Registration Statement which resulted in the issuance of 1,330,000 shares of free trading Class A common stock on February 3, 1997 and an additional 600,000 shares on February 18, 1997. The shares were distributed to various attorneys, law firms, affiliates of the Waterford Board and related parties. Mr. Quinn issued a legal opinion dated December 17, 1996 representing that the shares to be issued under the S-8 were legally and validly issued, fully paid and nonassessable. The current board has disputed the validity of all shares issued to Golden Chance and those resulting from legal opinions issued by Mr. Quinn for the reason he was not a licensed attorney and the shares were not issued for valid legal consideration. On January 31, 1997, Mr. Quinn issued another "Reg S" opinion on behalf of the Company authorizing the issuance of 2,508,040 free trading shares of Class A common stock. The shares were issued on February 6, 1997 and returned to the Company on February 13, 1997 when the Bankruptcy was filed. In connection with the Waterford Agreement, pursuant to a letter agreement ("Letter of Intent") dated February 29, 1996, and conditional to the sale of Series A Preferred Shares, the former control group Chairman, Jeffrey Antisdel, and Director, Richard Cascarilla, voluntarily resigned their respective Board of Director positions, with nominee Directors, Charles Cain and Peter Cannell becoming elected to the Board of Directors. The remaining former members of the Board subsequently resigned and John Goold was nominated to the Board. The active size of the Board was reduced from five directorships to three directorships. 47 53 FORMATION OF NEW SUBSIDIARIES Under the Waterford Board, the Company announced the formation of two wholly owned subsidiaries for purposes of increasing Company growth through strategic acquisitions. San Jacinto Energy Corporation - ------------------------------ On May 9, 1996, the Board of Directors initiated the formation of San Jacinto Energy Corporation ("SJEC") for purposes of controlling applicable shareholdings, debt instruments, partnership interests and power generating assets of the Company. SJEC was also formed for purposes of completing mergers and acquisitions within the geothermal and wind energy sectors with the intent of acquiring additional energy reserves. Central Communications Corporation - ---------------------------------- On May 9, 1996, the Board of Directors initiated the formation of wholly owned subsidiary Central Communications Corporation ("CCC"). CCC was formed for purposes of controlling applicable rights, shareholdings, debt instruments, partnership interests and technologies to be acquired by the Company. CCC was also formed for purposes of pursuing mergers and acquisitions of telecommunication companies and business operating in related sectors. On May 21, 1996, the Waterford Board announced that it had signed a binding letter of intent to acquire, through CCC, all the outstanding shares of Telecom Technologies, Inc. ("TTI," an Oregon corporation) and certain other related assets. The agreement was with Telecom (AE), Limited ("TAE"), a subsidiary of Wina Associates, an Isle of Man company limited by shares ("Wina"). TTI was a telephone service provider which operated twenty (20) retail communications centers known as "Casetas." Casetas cater to the Latin American community and provide customers the means to purchase telephone service debit cards, complete money transfers, send and receive telecopier transmissions and complete local and long distance telephone calls. The agreement provided for payment of $500,000 cash and issuance of 2,000,000 shares of Class A common stock through CCC to TAE. The consideration was paid and the transaction was reported as completed on May 21, 1996. Subsequently, it was learned that the shares in TTI, held by TAE/Wina, were previously purchased from the founders of TTI and had not been fully paid for by TAE and Wina. In addition, it was learned that the only payment which had been made was $45,000 from Company funds under the control of persons retained and authorized by the Waterford Board which consisted of Charles A. Cain, Peter J. Cannell and John C. Goold. The other related assets were not owned or controlled by TTI, as was represented to the Company's officers. 48 54 After receiving a qualified audit opinion review of the TTI acquisition, the reported acquisition was incorrectly reported as reversed in the Company's Form 10-QSB filed for the nine months ending November 30, 1996. Also, in reports filed with the Securities and Exchange Commission, it was incorrectly reported that the TTI acquisition had been rescinded. The transaction consideration was not returned to the Company and the transaction was therefore not voided. The TTI acquisition was subsequently recorded and reported as a total loss. Company shareholders filed a derivative lawsuit in Delaware against former officers and directors in an effort to recover the Company's losses. (See Item 1. Legal Proceedings.) MANAGEMENT CHANGES Subsequent to the change in control which occurred on May 1, 1996, a series of management changes followed. Mr. John C. Goold resigned as director on August 16, 1996 and was replaced by Mr. Stefan Tevis. Mr. Tevis was appointed by the two remaining directors Charles Cain and Peter Cannell. Mr. Tevis had previously been employed in the specialty magazine publishing business. On September 26, 1996, directors Cain and Cannell authorized the termination of the President, Mr. Jeffrey Antisdel and the secretary/treasurer, Mr. Richard Cascarilla. Mr. Antisdel and Mr. Cascarilla had previously resigned as directors in May of 1996. Mr. Antisdel and Mr. Cascarilla were in the process of filing notices of default for non-payment of the note by Golden Chance (see Change of Control, above) and were terminated without cause. Mr. Tevis was appointed President and Mr. Kenton Bowers, was appointed secretary. In December 1996, Mr. Michael R. Kassouff was appointed director pursuant to the Certificate of Designations of the Series B Preferred stock. This stock had no voting rights except in the event that Golden Chance failed to pay $500,000 of the principal due under the Note issued in the change of control transactions by Golden Chance and its Guarantor, Waterford Trust. In the event of a Default the holders of a majority of the outstanding shares of Series B Preferred stock then have the power and authority to elect, either at a meeting or by written consent, one director to the Company's board of directors (the "Series B Director"), to serve for so long as a Default exists. On December 18, 1996, Mr. Kassouff authorized, on behalf of the Company, the filing of a Complaint in the Superior Court of the State of Delaware In and For New Castle County, C.A. No. 96C-12-150-JEB, against Golden Chance and Waterford Trust Company. (See the Legal Proceedings section for specific details.) In December 1996, Mr. Bowers resigned as secretary, retaining his position as controller. Mr. Kevin Quinn, then acting as legal and securities counsel to the Company, was appointed secretary. On January 23, 1997, Mr. Stefan Tevis was terminated as President of the Company. He retained his position as Director pending a negotiated settlement agreement. 49 55 Mr. Pattison Hayton commenced acting as President effective January 23, 1997. Mr. Pattison Hayton had essentially been managing the Company since May 1, 1996 with the full approval of the Waterford Board in his capacity as advisor to Waterford Trust Company and its Directors. On February 3, 1997, pursuant to the terms of an "Agreement for Settlement and General Mutual Release" of even date, Mr. Stefan Tevis resigned as a director of the Company. The Company is unsure whether the Agreement was ever finalized due to the lack of corporate records. The agreement allegedly provided for: 1. Issuance of 41,666 post split Class A shares in settlement of his employment agreement. 2. Indemnification of Mr. Tevis from claims by any third parties asserted against Mr. Tevis, in connection with, or arising from, Mr. Tevis' tenure as President and/or Director of the Company, including pending lawsuits against the Company in which Mr. Tevis had been named as a defendant. 3. Assumption of the remaining liability for Mr. Tevis' residential lease by the Company's majority owned subsidiary, San Jacinto Power Corporation and guaranteed by Mr. Pattison Hayton. 4. Payment of a finders fee to Mr. Tevis in event of completion of the "Theme" acquisition. 5. Severance payment of $33,600 to $50,000 in the event that the "Theme" acquisition was not completed. 6. Non-interference agreement by Mr. Tevis. On February 7, 1997 Mr. Bowers was terminated due to allegations that he was working with creditors and others to place the Company in involuntary bankruptcy. On May 9, 1997 Mr. Charles Cain and Mr. Peter Cannell resigned as directors of the Company. On May 19, 1997, Mr. Richard A. Cascarilla and H. Lawrence Herth were appointed as Directors of the Company by Mr. Michael Kassouff. On May 19,1997 Mr. Pattison Hayton, President and Mr. Kevin J. Quinn, Secretary, were terminated from their respective positions by Mr. Michael R. Kassouff in his capacity as director and on behalf of the board of directors of the Company. 50 56 INVOLUNTARY BANKRUPTCY On February 13, 1997, three of the Company's creditors filed a petition for involuntary bankruptcy under Chapter 11 in Federal Bankruptcy Court in Reno, Nevada. The creditors were supported by affidavits filed by Mr. Jeffrey E. Antisdel, former director, chairman and CEO of the Company and Mr. Kenton H. Bowers, former controller. The creditors were represented by Mr. Jeffrey L. Hartman, former and current director of the Company. INTERVENING EVENTS During the period May 1, 1996 to May 9, 1997, under the management which controlled the Company as a result of the change of control which took place on May 1, 1996, a series of events transpired which led to the Company's current circumstance. These include, among others; (1) failure of Golden Chance/Waterford to make payments on the notes issued in the transaction,(2) issuance of shares under direction of Directors, even though there was no evidence that payments had been made, (3) sale of such shares in the open market in contravention of the terms of the May 1, 1996 agreements and applicable law, (4) the attempted issuance of Class B Common Shares for no valid consideration, (5) payments to affiliates for non corporate debts, (6) failure to pay legitimate creditors, (7) amendment to the certificate of incorporation on the basis of alleged missing documents (later found to exist), (8) use of fraudulent legal opinions by an unlicensed lawyer, (9) issuance of unrestricted shares without proper registration, (10) subsequent sale in the market of those shares, and (11) issuance of false or misleading news releases. CORPORATE OBJECTIVES The Company is in the process of restructuring itself as an independent, non-regulated utility holding company. To be engaged in the development, financing, construction and operation of electric power facilities which generate electricity for sale to regulated utilities. As an independent electric power producer serving the utility industry, the Company hopes to specialize in the acquisition, development, financing, construction and operation of electric power generating facilities which utilize renewable energy resources such as geothermal, biomass or wind energy resources. In addition to the Company's expertise in geothermal and wind energy development, the Company continues to actively seek the merger, acquisition, development, financing and operation of various telecommunication companies and related businesses for purposes of better positioning the Company for accelerated growth. The corporate objectives of the Company are to: 51 57 (1) Acquire, develop, finance, construct and operate electric power generating facilities and deploy Company owned power generating assets where risks are lowest; (2) Seek to expand Company owned print communications business; (3) Seek litigation recoveries; and, (4) Acquire telecommunication companies and related business operations which offer the Company increased growth opportunities. The Company must be considered a development stage company subject to all risks inherent in the establishment of new lines of business which are financed through equity financing, debt financing, partnership distributions, asset sales, litigation recoveries and management fees. In the past the Company has been unable to finance operations from cash flow from operating revenues. The Company's only cash generating operating activity is Herth Printing, however, management anticipates that the telecommunications operations will commence operating in the near future. Depending upon the extent of its operations, the Company may be required to sell equity to finance operations, or, the Company may seek to raise additional capital through debt financing(s) sufficient to satisfy its operational needs over the next fiscal year. However, there can be no assurance that such financing will be available on terms acceptable to the Company during the coming twelve months of operation. POWER MARKETS Led by the California Public Utility Commission, over twenty (20) utilities commissions and the Federal Energy Regulatory Commission are considering the proposed restructuring and deregulation of electric power production and deliveries of electric power to utility customers. Today, electricity generation is no longer a monopoly in which the cheapest power is generated by the most capital intensive plants. Moreover, smaller, more fuel efficient technologies such as gas-fired combustion turbines and wind turbines have effectively reduced the traditional barriers to entry into markets dominated by coal fired and nuclear power production. In addition, legislators, regulators and individual states are increasing economic competition with adjacent states due to their realization of the overall importance which electricity prices have in creating, or destroying, regional competitive business advantages. Secondary to these issues, are increasingly environmentally conscious customers supporting "green power" options such as geothermal, wind, biomass or solar energy producers otherwise legally known as Qualifying Facilities ("QF"). Presently, regulated electric utilities must purchase all power produced by qualifying renewable energy producers which are essentially 52 58 wholesale utilities, known as "Qualifying Facilities" or "QFs" (See "Government Regulation"). These utilities must buy all power produced from renewable energy sources at the retail utilities' highest incremental power cost, known as "avoided costs." These are the costs retail utilities would have to pay for the next future increment of power to go on-line. The avoided costs are those not incurred or costs "avoided" by the utilities because of plants constructed by renewable energy developers. The retail utilities avoid the costs of building new power plants while reselling the power to their normal customers at markups allowed by state regulatory agencies. COMPETITION Competitors of the Company include major oil companies, independent oil and gas concerns, other independent power companies and power marketers. Most of the major competitors are much larger and better capitalized than the Company and have been in business from ten to fifteen years longer than the Company. Competition for long-term power sales contracts has increased due to the implementation of competitive bidding processes at most retail utilities. GOVERNMENT REGULATION The following is a summary of the regulatory requirements, permits and approvals the Company must obtain, and other requirements that are relevant to the operation of the Company's business. FEDERAL ENERGY REGULATORY COMMISSION ("FERC") LAW FERC legislation is enforced nationally, specifically to cause a shift from retail utility reliance upon polluting forms of non-renewable fossil fuels to more desirable domestic sources of clean power from renewable energy. This legislation was enacted to reduce the previous trend toward ever larger, centralized fossil and nuclear power plants and increasing reliance on foreign energy sources. FERC also recognized that utility system overall reliability may be increased by fuel and plant diversification of smaller size up to a desired system-specific mix of small and large plants. POWER CONTRACT REGULATIONS The operations of the Company's developments will be directly affected by federal and state statutes, regulations and rules relating to the ownership of electrical generating facilities and the production and sale of electric power. The primary federal law determining the extent to which the current and future power plant projects will be subject to federal energy regulation is the Public Utilities Regulatory Policies Act of 1978 ("PURPA"). If an electrical power generating facility is a QF within the meaning of the regulations promulgated pursuant to PURPA by the FERC, and within the meaning of rules promulgated pursuant to both PURPA and the NPSC, then such facility and its owners will be able to take advantage of provisions designed to encourage alternative sources of electric power production. A facility will meet existing standards for a QF if it produces electricity primarily from a "renewable resource," such as geothermal, does not use oil, natural gas and coal for more than 25% of its energy input, and is not owned more than 50% by an electric 53 59 utility or electric utility holding company. Section 210 of PURPA provides the framework for the promulgation of federal and state regulations, which would exempt a QF from existing state and federal regulation, and would require an electric utility to interconnect with a QF to purchase its power at a prescribed rate. EXEMPTIONS FROM FEDERAL AND STATE REGULATIONS Regulations issued by FERC exempt (with certain exceptions) any QF using geothermal energy as a primary source under the Federal Power Act from the provisions of the Public Utility Holding Company Act of 1935 relating to electric utilities and from state laws regulating electric utility rates and financial organization. While the FERC regulations provide that FERC may limit the applicability of this broad exemption from state laws, upon request of a state regulatory authority or non-regulated electric utility, the NPSC has not requested FERC to limit the applicability of the exemption. While PURPA exempts certain QFs from federal and state laws regulating electric utilities, such QFs are not exempt from environmental laws and must comply with all applicable federal, state and local zoning, air and other environmental quality laws. In addition, PURPA's exemption from state regulation for QFs does not extend to exemption from state laws or regulations enacted to implement the FERC rules on Co-generation and Small Power Production, such as the SPP Rules provisions described above. TELECOMMUNICATIONS MARKET, COMPETITION AND GOVERNMENT REGULATION The Company has no experience in the telecommunications marketplace but has acquired two companies (DiegoTel and VivaTel) and is presently engaged in evaluating several business opportunities related to the proposed merger and/or acquisition of telecommunication companies and related businesses. The telecommunication markets are competitive, with companies such as AT&T, MCI and Sprint dominating the communications marketplace. However, the Company is currently focused upon acquiring and developing smaller "niche" companies engaged in providing specialty communications services and/or technologies associated with long distance services, switching, telephone debit card sales, retail service centers, and other related marketing services from the United States to other countries. Government regulation by the Federal Communications Commission and regional Public Service Commissions regulate various facets of such communications business. However, the Company is presently unable to fully quantify the extent of regulation to which it will ultimately be subject until such time operations as are established. 54 60 RESEARCH AND DEVELOPMENT The Company has not incurred any expense for research and development activities in the last two fiscal years. The Company has focused its efforts on the development of additional business opportunities. EMPLOYEES There are currently 12 employees working at the Herth printing business in Reno, Nevada under Combustion Energy Company ("CEC"), its consolidated subsidiary. The Company currently has two employees, Mr. Richard A. Cascarilla and Mr. Michael R. Kassouff. DESCRIPTION OF PROPERTY ELECTRIC POWER GENERATING EQUIPMENT ----------------------------------- BINARY-CYCLE POWER PLANTS - ------------------------- In the mid-1980's, the Company acquired a total of ten Ormat power plants with a gross nameplate rating of 3.7 MW. The Company owns six of these binary-cycle power plants and holds a secured interest in the other four plants (for financial statement purposes all ten units are treated as Company owned). These units can be utilized with lower temperature geothermal or waste heat energy sources. The Company has focused upon the profitable sale or deployment of these currently idle power plants in geothermal, biomass or heat recovery projects. These plants are presently located at Fernley, Nevada, awaiting sale or field deployment. (See Brady Geo Park Power Partners above.) RAFT RIVER POWER PLANT - ---------------------- In the mid 1980's the Company acquired a 7.2 MW electric power generator together with its associated geothermal turbine, gear box, generator, fluid storage vessels, heat exchange vessels, pumps and other essential accessories which are identified herein as the Raft River Power Plant. This currently idle Raft River Power Plant is presently located at Fernley, Nevada, awaiting sale or field deployment. (See Brady Hot Springs Geothermal Associates above). LEGAL PROCEEDINGS MUNSON LAWSUIT On October 5, 1992, the Company, as plaintiff, initiated litigation in the Chancery Court of New Castle County, Delaware, (the "Munson Lawsuit"), against former officers and directors of the Company. The Defendants are Stephen Munson, Leland Mink, Walter MacKenzie, Frank Carigula and Donald Selfridge, (the "Defendants"). The allegations against the Defendants include numerous breaches of fiduciary duty, invalid issuance of Company shares, 55 61 breaches of fiduciary duty arising out of improper issuance of Company stock, and failure to value the services for which stock was awarded. (See page 28). On October 13, 1992, a sequestrator was appointed and the shares of the Company standing in the names of Leland Mink, Walter MacKenzie, Donald Selfridge and Frank Carigula were seized by the Company until further order of the Court. On or about June 9, 1994, the Delaware Court assessed sanctions against Stephen Munson for his failure to attend for his deposition. A default judgment against Frank Carigula has since been obtained in the amount of approximately $59,000. The Company executed garnishments and attachments to satisfy the judgment. The trial of the case against the remaining defendants Munson, Selfridge and MacKenzie was completed in September of 1996. Post-trial briefs were to be submitted to the Court by both parties on legal issues raised during the trial. An advisor to the Waterford Board, Mr. Pattison Hayton, negotiated with all the defendants. A settlement agreement was reached and dismissal documents were filed with the Court. The Company is unaware of the settlement terms due to the missing documents retained by the Waterford Board. During this period, enforcement of the judgment against Carigula was suspended. The agreement may have never been finalized. In the intervening period the Company lost its opportunity to obtain a judgment against Munson, Selfridge and MacKenzie. The legal disposition of the case is currently under review by the Company. It is probable that legal time limits have expired and significant litigation rights previously existing under the case may have been lost by the Company as a result of these actions. ANTISDEL LITIGATION On October 28, 1996, Jeffrey E. Antisdel, former president of Nevada Energy Company, filed suit in Washoe County, Nevada. The suit relates to various matters of compensation, including the Company's default on a two year employment agreement which was to take effect after Mr. Antisdel's termination on September 26, 1996. The plaintiff obtained a default judgment which the Company has set aside. Plaintiff filed a lien on the Company's idle geothermal assets, which was later voluntarily removed. CASCARILLA LITIGATION On October 23,1996, Richard A. Cascarilla, former secretary, treasurer and general counsel of Nevada Energy Company, filed suit in the Ingham County Circuit Court, Case No. 96-84695-CK in Lansing, Michigan. The suit alleged breach of contract based on a two year employment agreement which was to take effect after Mr. Cascarilla's termination on September 26, 1996. The Company failed to defend the suit and a default judgment was entered on November 21, 1996 in the amount of $143,078.39 plus statutory accrued interest until paid. The Company never retained counsel in this matter. The Plaintiff filed a lien on the Company's idle geothermal assets, which was later voluntarily removed. 56 62 SMITH, KATZENSTEIN LITIGATION On December 2, 1996, the Company's former Delaware law firm of Smith, Katzenstein & Furlow, filed suit in New Castle County, Delaware against the Company and Mr. Pattison Hayton alleging non-payment of fees in the approximate amount of $70,000, breach of contract, fraud and tortious interference with contractual relationship. The Plaintiff has obtained a default judgement. The Company and Mr. Hayton failed to retain an attorney or take any steps, to date, to set aside the judgment. HARTMAN, KASSOUFF, MODESITT LITIGATION On November 15, 1996, three former directors of the Company, Messrs. Jeffrey L. Hartman, Michael R. Kassouff and Jeffrey E. Modesitt, filed suit in Washoe County, Nevada alleging non-payment of directors' fees and accrued interest under promissory notes in the amount of $10,000 each dated May 1, 1996. The notes bear interest at the rate of 18% per annum. The Company has settled this litigation. NEVADA ENERGY PARTNERS I, LIMITED PARTNERSHIP LITIGATION On August 16, 1996, Nevada Energy Company, Inc., ("NEC") executed an agreement ("Agreement") with Nevada Energy Partners I, Limited Partnership, a Nevada Limited Partnership, ("NEP") and Nevada Electric Power Company ("NEPC"), a Nevada corporation. NEP is controlled by its General Partner, NEPC. NEPC is a corporation wholly owned by NEC's president, Jeffrey E. Antisdel. Principals utilized in determining the amount and type of consideration for the Agreement were based upon an arms-length negotiation between members of NEC's Board of Directors and legal counsel representing NEPC. The effective date ("Effective Date") of the transaction(s) contemplated under the Agreement was scheduled for September 1, 1996, with the Agreement and all related documentation to be held in escrow pending completion of post-closing events. Terms of the Agreement provide that NEC and NEP will exchange, in a non-cash transaction(s), an exchange of common stock, assets and rights. The Agreement is summarized as follows: (i) NEC shall withdraw as a limited partner from NEP and waive all present and future rights to all assets, litigation rights or other attributes of NEP, (ii) NEC will transfer to NEP all rights and ownership to Combustion Energy Corporation ("CEC"), a Nevada corporation and wholly owned subsidiary of NEC, and (iii) NEC will redeem all 4,437,473 Class B Common Shares owned by NEP, in exchange for an equal number of Class A Common Shares of NEC. Items described in items (i), (ii), and (iii) above, are to be delivered in consideration of NEP and NEPC's release of all ownership in 4,437,473 Class B Common Shares and, NEP and NEPC's release of all present rights for the issuance of 8,865,774 additional Class B Common Shares, and NEP and NEPC's release of all future Class B Common Share issuances resulting from future Class A Common Stock issued. In addition, NEP and NEPC agree to indemnify NEC for any present or future litigation expenses, obligations or damages resulting from litigation in which NEP is the plaintiff and counter defendant in the Second District Court in Washoe County, State of Nevada, in Case No. CV92-04609, Department 1. NEP is controlled by its General Partner, NEPC, a 57 63 corporation wholly owned by NEC's former president, Jeffrey E. Antisdel. NEP is a limited partnership in which its primary assets are NEC Class B Common Stock, rights to future Class B Share issuances, and NEP's litigation (Case No. CV92-04609) rights set forth above. The Company's wholly owned subsidiary, CEC, conducts its business under the name of Herth Printing and Business Supplies, a company engaged in the manufacture and sale of printed materials. A copy of the Agreement is attached as Exhibit 10A. Pursuant to this Agreement, on September 1, 1996, the Company's interest in its wholly owned consolidated subsidiary, Combustion Energy Company, Inc., dba Herth Printing and Business Supplies, together with a 60% limited partnership interest in Nevada Energy Partners I, Limited Partnership ("NEP"), a Nevada limited partnership, were transferred to NEP, an entity under the control of Jeffrey E. Antisdel, former president and Chairman of the Company. The Agreement was executed by a majority of the Company's Board of Directors including then Chairman, Charles A. Cain and Director Peter J. Cannell. On November 19, 1996, Nevada Energy Partners I-Limited Partnership ("NEP") filed suit against the Company to seek enforcement of the Agreement entered into on August 16, 1996. The Company engaged counsel to defend its position. Preliminary briefs and discovery were initiated. The case was currently stayed due to the filing of the involuntary Bankruptcy Petition on February 13, 1996. SHAREHOLDER DERIVATIVE SUIT The Company was nominally named in a shareholder derivative action filed on December 12, 1996 in Delaware Chancery Court, Docket No.15421-NC. The primary defendants are Stefan Tevis, John Goold, Charles Cain and Peter Cannell. The lawsuit alleges Usurpation of Corporate Opportunities by defendants Cannell, Cain and Goold; Misappropriation, Conversion and Breach of Duty of Loyalty against defendants Tevis, Cannell, Cain and Goold. The plaintiffs were Richard A. Cascarilla and Michael R. Kassouff, both former directors of the Company. The litigation specifically alleges and requests in Count 1, that judgements be entered against defendants Cannell, Cain and Goold for usurpation of corporate opportunity in taking for themselves (through Telecom Limited and Wina Associates, in which they had an ownership interest), a valuable corporate opportunity. Specifically, the opportunity to acquire TTI and later selling TTI to the Company at a vastly higher price; Count 2, damages for misappropriation, conversion and breach of duty of loyalty against defendants, Tevis, Cannell, Cain and Goold for the diversion of approximately $1,242,000 in Company funds to non-corporate purposes, and Count 3, damages for breach of duty of loyalty against defendants Tevis, Cannell and Cain for failure to take action against Waterford and Golden Chance Limited with respect to their breaches of contractual agreements to make payments to the Company under notes, subscription agreements and other transaction documents relating the a change in control of the Company on May 1, 1996. The Company reached a settlement with Defendants Cain and Cannell. The terms are confidential. The settling Defendants agreed to cooperate with the Company in its continuing investigation and litigation. The case against Defendants Goold and Tevis is still pending. 58 64 SANTA BARBARA OFFICE SPACE The Company's wholly owned subsidiary, Central Communications Company ("CCC") entered into a five year lease for an office space in Santa Barbara, California which provided for monthly payments of $19,034, plus taxes. The Company was compelled to vacate the property after a couple months when its initial entry into telecommunications became unsuccessful. The landlord filed suit in Santa Barbara County, California seeking compliance with the agreement. The Company asserts that it had no legal obligations under the lease as a guarantor and therefore no provision was made in the lease accounts, and the claim relating to this lease was later withdrawn in its entirety by the lessor. The case was ultimately dismissed without payment by the Company. JUDGMENT AGAINST WATERFORD TRUST AND GOLDEN CHANCE, LTD. The Company filed an action on December 18, 1996 in Delaware Chancery Court, Docket No. 96C-12-150-JEB against Waterford Trust Company and its nominee Golden Chance Limited seeking to recover moneys due the Company under a change of control agreement, related notes and subscription agreements which had been entered into in February 1996 and implemented on May 1, 1996. A default judgment in the amount of $5,075,450.28 was entered on January 21, 1997. The defendants have not contested the lawsuit to date. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On January 21, 1997 the Company notified its Shareholders, by mail, pursuant to Section 228(d) of the Delaware General Corporation Law of certain actions allegedly taken by written consent of the majority of the Shareholders of the Company. The notice stated that: On January 21, 1997 by majority consent of the Shareholders, the Shareholders of the Corporation approved a Restated Certificate of Incorporation, which restated and amended the Certificate of Incorporation of the Corporation. A copy of such Restated Certificate of Incorporation, which will be filed with the Office of the Secretary of State of Delaware shortly, is enclosed with this letter A copy of the Restated Certificate of Incorporation of PowerTel USA, Inc. is attached. The significant changes were: 1. Change of the corporate name from Nevada Energy Company, Inc. to PowerTel USA, Inc. 59 65 2. Restatement of certificate to eliminate previous super-majority vote requirement for certain amendments to the Certificate of Incorporation, including super-majority vote requirement for approval to changes in capital, including stock splits. 3. Added Class C Common Stock. 4. Added provision of Series A Convertible Preferred Stock, including conversion details and terms of Certificate of Designations related thereto. 5. Added provisions of Series B Convertible Preferred Stock including conversion details and terms of Certificate of Designations related thereto. 6. Incorporation of a one-for-six reverse split of shares of all classes outstanding upon the date of filing of the restated certificate. The basis of the filing was a decision by the Waterford Board, that the previous requirement for a super-majority vote of shareholders to make all of the above changes had not been properly approved. All items, except No.2 had been voted upon at the annual shareholder meeting held in Santa Barbara on August 16, 1996 and had received majority approval, but not the then required 80% super-majority approval. The Restated Certificate of Incorporation was used as a basis for implementing a one-for-six reverse split of shares outstanding as of January 21, 1997. Subsequently, 2,508,040 Class A Common Shares were Registered for issuance (on a post-reverse split basis) pursuant to the terms of an S-8 registration statement filed on or about December 17, 1996 without applying the reverse split. This action, if completed in its entirety, would have significantly diluted the interest of pre-split shareholders. The current Board of Directors disputed the validity of these issuances on the grounds that the Company never received the funds, that any funds were directed to non-corporate uses by persons under the direction of or reporting to the Directors and that payments were directed to persons who had not performed services to the benefit of the Company. These shares were returned to the Company on February 13, 1998. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Company's Class A Common Shares, thereafter listed under the symbol PTUSA, were delisted from "The Nasdaq SmallCap Market" system on March 5, 1997. Delisting was initiated as a result of Nasdaq's belief that the Company failed to meet voting rights requirements as set forth in Rule 4310(c)(21), other NASDAQ staff concerns raised in accordance with Rules 4330(a)(3) and 4330(f), and the Company's failure to pay current annual fees. Rule 4310(c)(21) sets forth the following voting rights criteria: 60 66 "(21) Voting Rights -Voting rights of existing shareholders of publicly traded common stock registered under Section 12 of the Act cannot be disparately reduced or restricted through any corporate action or issuance. Examples of such corporate action or issuance include, but are not limited to, the adoption of time-phased voting plans, the adoption of capped voting rights plans, the issuance of super-voting stock, or the issuance of stock with voting rights less than the per share voting rights of the existing common stock through an exchange offer." Rule 4330(a)(3) sets forth the following suspension or termination of inclusion criteria: "(a) The Association (NASDAQ) may, in accordance with Rule 9000 Series, deny inclusion or apply additional or more stringent criteria for the initial or continued inclusion of particular securities or suspend or terminate the inclusion of an otherwise qualified security if: (3) the Association deems it necessary to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, or to protect investors and the public interest." Rule 4330(f) sets forth the following suspension or termination of inclusion criteria: "(f) Securities issued in connection with the merger, consolidation, or other type of acquisition of at least one issuer of qualifying securities shall be promptly included in Nasdaq, provided that the conditions of Rule 4310(c) or Rule 4320(e) for securities that have already been included are satisfied. The Association shall require a Nasdaq SmallCap Market issuer to comply with all applicable requirements for initial inclusion under this Rule 4330 Series and shall require a Nasdaq National Market issuer to comply with all applicable requirements for initial inclusion under the Rule 4300 Series and Rule 4400 Series in the event that such issuer enters into a merger, consolidation, or other type of acquisition with a non-Nasdaq entity (including domestic and foreign corporations and limited partnerships), which results in a change of control and either a change in business or change in the financial structure of the Nasdaq SmallCap Market or Nasdaq National Market issuer." The concerns raised by Nasdaq Market Listing Qualification staff resulted largely from information provided by the Waterford Board and its appointed officers, Stefan Tevis and Kenton Bowers. Information provided included concerns relating to improper issuance of unrestricted shares and extreme dilution of existing shareholders' interests under Delaware corporate law, and subsequent issuance of shares on an unsplit basis. In addition, shares which had been acquired for investment purposes and were to be held for a two year period were being sold in alleged violation of state and Federal securities laws, resulting in artificially depressed prices. It was also believed that shares were being issued without required financial consideration. An oral hearing was scheduled for February 13, 1997 at Nasdaq offices in Washington, DC. Current management has no knowledge as to the results of that hearing or whether any of the then 61 67 management group of Pattison Hayton and Kevin Quinn actually attended such meeting. It is known that the Company retained Mr. Joseph S. Allerhand of the New York City law firm of Weil, Gotshal & Manges LLP. A response to the issues raised by NASDAQ was addressed on the company's behalf in a letter dated February 13, 1997. The Company's listing had been effective from September 1, 1992. There was, and remains, no established public trading market for the Company's Common Stock, Series A Preferred stock or Series B Preferred stock. The range of high and low bid information for the Company's Class A Common Stock (adjusted for the one-for-six reverse split effective January 21, 1997) is set forth in the following table:
HIGH BID LOW BID 1996 First Quarter 1.062 0.25 Second Quarter 2.75 0.6875 Third Quarter 1.875 0.4375 Fourth Quarter .5625 0.125 1997 First Quarter 1.25 0.062 Second Quarter .15 0.062 Third Quarter .062 0.062 Fourth Quarter .10 0.062 1998 First Quarter .10 0.062 Second Quarter .02 0.062 Third Quarter .05 0.062 Fourth Quarter .01 0.062
The above trading data is provided on a calendar basis. In or about December, 1998, the Company requested that trading in its Class A Common Stock be suspended pending implementation of certain components of its Plan of Reorganization. Management anticipates that trading will resume in February, 1999. HOLDERS There were 970 holders of record of the Company's Class A Common Stock as of February 28,1997, excluding holders in street name. Estimated shareholders in street name as of February 28, 1997 are 1,300. There was one holder of the Company's Class B Common Stock. In addition, there was one holder of the Company's Series A Preferred Stock and 4 holders of the Company's Series B 62 68 Preferred stock. The Series A Preferred, Class B Common and Series B Preferred were all extinguished pursuant to the Plan. The Plan of Reorganization materially changes the Company's capitalization. See EXHIBIT (2)B. DIVIDENDS The Company has never paid cash dividends on any class of stock and has no plans to do so in the foreseeable future. The payment of cash dividends by the Company on the Company's Common Stock will continue to be restricted and otherwise limited due to the Company's need to finance its on-going operations and future growth. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS PLAN OF OPERATIONS The Company has an asset base which includes several electric power generating units (currently not in service and with a net book value of $5,700,000), unencumbered by debt, from which the Company plans to develop revenues and earnings. Management plans to deploy all of its idle power generating assets in one or more projects which are currently under review. If the Company is unable to sell or deploy these generating units there may be a material negative impact on the financial position of the Company (See "Risk Factors"). During the year ended February 28, 1997, financial liquidity for on-going operations was provided primarily from the sale of Preferred Stock and Class A Common Stock. Management fees received from San Jacinto Power Company and cash liquidity resulting from the operation of Herth Printing and Business Supply. During the year ended February 29, 1996, financial liquidity for on-going operations was provided primarily from sale of the Company's interest in the Brady Power Project, sales of Class A Common Stock through private placement and cash distributions and management fees received from San Jacinto Power Company. Additionally, an increase in cash liquidity resulted from the acquisition by merger of Herth Printing and Business Supplies, Inc. Cash used in operating activities in the fiscal year ended February 28, 1997 was $2,727,396. Cash used in operating activities in the fiscal year ended February 29, 1996 was $501,757. The after-tax loss from operations was $628,638, which included $66,375 of non-cash charges for depreciation and amortization and $462,527 in non-cash provisions for obsolescence on idle power generation equipment. Investing activities used $1,325,907 in cash in fiscal year ending February 28, 1997. 63 69 Investing activities provided $504,944 in cash in fiscal year ending February 29, 1996, including asset sale proceeds of $585,512, proceeds of $25,000 forfeited by a purchaser of certain wind power generating equipment from SJPC and net of purchases of new equipment of $35,130 and advances to and investments in partnerships. Cash flow from financing activities in fiscal year ending February 28, 1997 provided net cash of $4,031,682. Cash flow from financing activities in fiscal year ending February 29, 1996 provided net cash of $91,171, with receipts from cash sales of stock totaling $149,752. Net proceeds from new financing borrowings were $41,182 and related to insurance premium financing. Repayments on financing debt totaled $99,763. Investing activities provided $67,554 in cash in fiscal year ending February 28, 1996, including asset purchases of $156,398 and asset sales proceeds of $232,656. As a result of the settlement with Nevada Energy Partners, the allocation of taxable gains and losses was allocated 99% to the Company (as general partner) and 1% to the limited partner, however, cash distributions were allocated 60% to the General Partner and 40% to the limited partner. When tax returns are filed, it is anticipated that the Company will incur taxable income for calendar years 1995, 1996, 1997. It is management's opinion that the Company's net operating losses will offset or reduce the tax impact of the Nevada Energy Partners partnership. There is no assurance or guarantee that the net operating losses remain valid or have not been adversely affected as a result of the Internal Revenue Code. RISK FACTORS Historically, the Company has been unable to finance operations from revenues and cash flow. The Company has been financing operations from the sale of its Class A Common Stock, asset sales, litigation recoveries and management fees. If such financing should not be available, for any reason, there would be a material adverse effect on the 12 month operations of the Company. Since the Company maintains a holding company structure, the Company does not intend to enter into direct purchases of capital equipment at the parent company level in order to complete the deployment of its idle power equipment in any proposed project. However, any capital expenditures required for project development will be completed at the subsidiary level and will most likely require equity, debt or project financing for which the Company will need to seek additional funding. The Company seeks to evaluate, from time to time, prospective acquisitions in the telecommunication industry. If such an acquisition were to occur and the Company were to suffer a material negative event, the Company's financial performance could be adversely and materially impacted. Significant acquisitions outside the Company's primary energy business may have the effect of reducing or eliminating certain tax benefits associated with prior net operating losses, as well 64 70 as negative financial impacts associated with possible accruals of goodwill and potential increased depreciation charges against earnings. Presently, there are no plans for product research and development at the parent company level over the coming twelve (12) months. The Company maintains offices at 321 W. Lake Lansing Rd., Asher Court, Suite 100, E. Lansing, MI 48823. The telephone number is (517) 333-5277 and the fax number is (517) 333-9869. LIQUIDITY AND CAPITAL RESOURCES Due to working capital constraints encountered during the course of the fiscal year ended 1997, the Company has not yet met its goal of covering all of its operational costs with internally generated cash flows. As of February 28, 1997, the Company had $557,062 in current assets. Cash was $110,622 and trade receivables of approximately $407,000 were available for ongoing operations. Prepaids were $2,072. To date, the Company's ownership stake in NEP had provided no recurring equity returns, primarily due to costs associated with certain credit enhancements and loan guarantee costs provided by ESI Energy, Inc. and NEP's continuing litigation with HSP. During the year ending February 29, 1996, the Company had received through NEP $508,018 in cash from the sale of NEP's interest in the Brady Power Project (held by NEP through its 50% interest in NGPP), plus an additional gain of $77,493 from NEP as a result of the above referenced sale, and additional gains resulting from the settlement agreement between NEP, NEPC and the Company. The Company expects no further income from NEP and effective September 1, 1996, the Company disposed of its interest in NEP through a reacquisition of the general partners interest in the Class B Common Shares held by NEP. The August 16, 1996 Agreement was rescinded pursuant to a settlement reached and deemed effective on December 1, 1997. (For the detailed discussion see the Legal Proceedings Section, Nevada Energy Partners I - LP Litigation.) As a result of the difficulties caused by the change in control which was initiated on May 1, 1996, the Company has not timely met its debt obligations during the year ending February 28, 1997. As a result, its creditors initiated an involuntary Chapter 11 proceeding under which the Company is now operating. Currently, the majority of the Company's ongoing expenses are for auditing fees, legal fees, trustee fees and consulting services. 65 71 DEBT At fiscal year end February 28, 1997, the Company's total actual liabilities were $6,766,321.47. The liabilities subject to compromise represent the long-term settlement amount for withholding taxes, related penalties and interest due to the Internal Revenue Service, less payments made to date and other amounts due creditors upon which settlement has not been agreed. RESULTS OF OPERATIONS GENERAL COMMENTS - ---------------- The Company has, during fiscal year 1997 undergone a severe financial crisis as a result of the now aborted change in control which took place early in the fiscal year. As a result the Company was unable to look for and bid upon opportunities to deploy its current core of idle power generating equipment. The Company had previously sought to deploy the power generation plants and equipment where little resource development risk was Present. Development opportunities in the Philippines, the Caribbean and Central America had been evaluated from the standpoint of seeking least risk opportunities. More specifically, the Company had sought to either acquire a fully developed geothermal resource or a fully developed geothermal plant to which its assets could be deployed with reduced risk. These efforts were set aside this period. New management expects to re-explore these opportunities with new vigor and resolve. REVENUES AND EXPENSES As a result of the disposition of one of its two operating assets, the print and office supply businesses held by Combustion Energy Company, the Company's reported revenues for 1997 have been adjusted to eliminate the previously reported power sales. The Company had interest income of $8,198.00 and interest expense of $19,767.00 for the fiscal year ending February 29, 1996. Other income in the year ended February 29, 1996 included $585,299 received from Nevada Energy Partners I, Limited Partnership ("NEP") as a result of the sale of its interest in the Brady Power Project and $25,000 from a non-refundable deposit retained by SJPC in connection with the proposed sale of some of its wind power generating equipment. Interest income was $8,198, representing earnings on funds invested in money market accounts. Other income was principally from scrap sales. Loss from partnership interests of $46,015 resulted from advances to NEP primarily to fund NEP's litigation with HSP, NGPP's managing partner, relating to internal NGPP partnership disputes interest expense of $19,767 related to insurance premium financing, the Herth mortgage note and the settlement proceeds payable to the IRS. 66 72 COSTS AND EXPENSES COMPARISON OF 1997 AND 1996 Costs and expenses of operations for fiscal year 1997 were $2,789,229 compared to $2,897,988 in fiscal year 1996. Depreciation expense was $112,913 in 1997, versus $65,929 in fiscal year 1996. Fiscal year 1996 included provisions for obsolescence on idle company electric power generation equipment. These assets are carried at the lower of cost, net of accumulated obsolescence charges, of $2.7 million, or estimated appraised value as of February 28, 1997. An independent appraisal completed in May of 1996 placed a value of $5,700,000 on these assets and the obsolescence charges for 1997 included $83,288 of additional charges to adjust the net value of the Ormat units to the fair market appraisal value. Professional fees for fiscal year 1997 included $409,914 for general legal expenses, accounting and audit fees of $40,501.75. Professional fees for fiscal year 1996 were $372,148 (including $109,426 for general legal expenses), accounting and audit fees of $67,995, financial consulting services of $180,000 (principally related to a non-competition agreement with the former owner of Smith Wind), other outside professional services of $14,723 (including professional appraisal costs of $9,500), engineering fees related to project development of $5,223, public relations consulting fees of $21,000 and $25,722 in various other services. General and administrative expenses for fiscal year ending February 29, 1996 were $758,015. This included $361,245 in salaries, wages and related payroll taxes, $117,644 for public and shareholder relations, $182,521 in general office expenses, $85,602 in directors fees and expenses, $23,313 in travel and related expenses, a credit of $12,866 for various taxes and fees and $555 for miscellaneous office expenses. INCOME TAXES The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes", which requires tax computations different from those currently used by the Company. The Company adopted this Statement in fiscal year 1994. The Company believes that the adoption of this Statement will not have an impact on future financial statements. As of February 28, 1997, the Company had Federal income tax loss carryforwards available to offset future taxable income for financial reporting and tax purposes of $5,006,777 expiring in 2006 through 2010. There is no assurance that the issue tax carryforwards have not been adversely affected due to the Internal Revenue Code. The Company has no remaining energy credit carryforwards as of February 28, 1997. 67 73 There can be no assurance that the available tax loss carryforwards will be utilized by the Company or that such tax loss carryforwards will be allowed by the Internal Revenue Service. NET INCOME (LOSS) The total operating loss for fiscal year 1997 was $1,335,049. The operating loss for fiscal year 1996 was $628,638. FINANCIAL STATEMENTS FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements are filed to provide financial information for the fiscal years ending February 29, 1996 and February 28, 1997. Consolidated Balance Sheets as of February 28, 1997. Consolidated Statements of Operations for the Years ended February 28, 1997, and February 29, 1996. Consolidated Statements of Cash Flows for the Years ended February 28, 1997, and February 29, 1996. Consolidated Statements of Shareholders' Equity for the Years ended February 28, 1997, and February 29, 1996. Notes To Consolidated Financial Statements. The financial statements for the fiscal year ending February 29, 1996 have been audited. The financial statements for the fiscal year ending February 28, 1997 are unaudited. 68 74 WORLDCALL CORPORATION CONSOLIDATED BALANCE SHEET February 28, 1997 (UNAUDITED) ASSETS CURRENT ASSETS Cash $ 110,622 Receivables (net of allowance for doubtful accounts of $0) 407,291 Inventory Deposits and prepaid expenses 37,077 Total Current Assets 577,062 PROPERTY AND EQUIPMENT, at cost - Note 1 Net Property and Equipment 6,740,365 OTHER ASSETS - Note 2 Investments in partnerships 2,975 Investments in subsidiaries 1,077,203 Other assets 1,080,178 ---------- Total Assets $8,377,605 ==========
The accompanying notes are an integral of these consolidated statements. 69 75 WORLDCALL CORPORATION February 28, 1997 LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)
CURRENT LIABILITIES Accounts payable $ 808,673 Short-term borrowing - Note 3 $ 278,053 Payable to related - Note 4 - Accrued payroll - Other liabilities $ 61,848 ------------ Total Current Liabilities $ 1,148,574 ------------ NON-CURRENT LIABILITIES Mortgage payable - Note 3 $ 27,000 ------------ Total Non-Current Liabilities $ 27,000 ------------ COMMITMENTS AND CONTINGENT LIABILITIES - Note 10 and Note 11 ------------ Total Liabilities $ 1,175,574 ------------ MINORITY INTEREST IN SUBSIDIARY - Note 2 $ 673,073 ------------ SHAREHOLDERS' EQUITY - Notes 1, 5, 6, and 7 Preferred stock, $.001 par value; authorized 2,000,000 shares, issued and outstanding February 28, 1997, Series A,1,198,281 shares - Series B, 5 shares - Class A common stock, $.001 par value; authorized 50,000,000 shares, issued and outstanding 15,808,710 shares at February 28, 1997 Class B common stock, $.001 par value; authorized 50,000,000 shares, issued and outstanding 4,437,473 shares at February 28, 1997 4,071 Class C common stock, $.001 par value; authorized 50,000,000 shares, issued and outstanding at February 28, 1997, none - Additional paid-in capital $ 15,408,967 Accumulated deficit ($8,883,900) Treasury stock, Class A,16,785 shares at February 28, 1997; Class B, 16,785 shares at February 28,1997 (9,101) ------------ Total Shareholders' Equity $ 6,528,958 ------------ Total Liabilities and Shareholders' Equity $ 8,377,605 ------------
70 76 POWERTEL USA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED February 28, 1997 and February 29, 1996 (UNAUDITED)
FEBRUARY 28, FEBRUARY 29, 1997 1996 ----------- ----------- REVENUES $ 1,452,867 $ 1,697,258 COSTS AND EXPENSES - Note 11 Cost of operations $ 1,009,163 543,149 Depreciation and amortization $ 112,913 - Note 1 66,375 Provision for obsolescence - Note 1 - 462,527 Professional fees 372,148 General and administrative $ 1,652,052 758,015 ----------- ----------- Total Costs and Expenses $ 2,774,128 2,897,988 ----------- ----------- OTHER INCOME AND (EXPENSES) Interest income $ 1,313 8,198 Other income - 24,130 Gain on disposition of assets (1,783,300) 610,299 Loss from partnership interests - (46,015) Interest expense (26,584) (19,767) ----------- ----------- Total Other Income and (Expenses) (1,808,571) 576,845 ----------- ----------- (Loss) before Taxes (3,129,832) - Provision for Income Taxes - Note 8 0 933 ----------- ----------- Net (Loss) $(3,129,832) $(1,770,654) =========== =========== Net (Loss) Per Share-Notes 1 and 6 $ (0.07) $ (0.03) =========== ===========
The accompanying notes are an integral of these consolidated statements. 71 77 POWERTEL USA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED February 28, 1997 AND February 29, 1996 (UNAUDITED)
FEBRUARY 28, FEBRUARY 29, 1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) $(3,129,832) $ (628,638) Adjustments to reconcile: Depreciation and amortization 115,410 66,375 Reserve for obsolescence - 462,527 (Gain) on disposition of Assets, net - (610,299) Equity in loss from partnership interests - 46,015 Stock issued to directors/officers/employee - 18,362 Stock issued for services - 50,000 Minority interest in subsidiary's earnings and (losses) (32,357) (67,802) Changes in assets and liabilities: (Increase) decrease in receivables (270,017) 111,126 Decrease in receivables from related - 37,500 (Increase) decrease in inventory (1,702) (10,312) (Increase) decrease in deposits and prepaids $ 114,549 6,437 Decrease in other assets - 10,035 Increase in accounts payable $ 621,218 42,314 Increase (decrease) in accounts payable to related (37,965) (20,156) Increase (decrease) in other liabilities (63,493) 26,532 (Decrease) in liabilities subject to compromise (43,207) (41,773) ----------- ----------- Net Cash Provided (Used) in Operating Activities $(2,727,396) $ (501,757) ----------- -----------
72 78
FEBRUARY 28, FEBRUARY 29, 1997 1996 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of property and equipment - 585,512 Forfeited non-refundable deposit on offer - 25,000 Purchase of property and equipment (323,149) (35,130) Advances to and investments in partnerships (2,731) (70,438) -------- -------- Net Cash Provided (Used) in Investing Activities (325,880) 504,944 -------- --------
73 79 POWERTEL USA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED February 28, 1997 AND February 29, 1996
FEBRUARY 28, FEBRUARY 29, 1997 1996 ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on financing (99,763) Proceeds from new financing 247,324 41,182 Proceeds from cash sales of common stock 3,777,358 149,752 Contribution from (payment to) minority interest 7,000 - Cash dividends - Note 10 - - ----------- ----------- Net Cash Provided (Used) in Financing Activities 4,031,682 91,171 ----------- ----------- Net Increase (Decrease) in Cash (21,621) 94,358 CASH, Beginning of Year 132,243 37,885 ----------- ----------- CASH, End of Year $ 110,622 $ 132,243 ----------- ----------- ----------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid - Note 12 $(unknown) $ 19,737 ----------- ----------- ----------- ----------- Taxes paid through payments on liabilities subject to compromise - Note 12 $(unknown) $ 41,773 ----------- ----------- ----------- -----------
The accompanying notes are an integral of these consolidated statements. 74 80 POWERTEL USA, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED February 28, 1997 AND February 29, 1996
CLASS A COMMON CLASS B COMMON PREFERRED STOCK ----------------------------------- -------------------- ----------------------- NUMBER NUMBER NUMBER OF OF OF SHARES AMOUNT SUBSCRIBED SHARES AMOUNT SHARES AMOUNT ----------- -------- ---------- ---------- ------- --------- ------- BALANCES, February 28, 1995 5,558,798 $ 5,559 $ - 3,476,875 $3,477 - $ - Shares issued for cash - Note 6 442,867 443 - - - - - Shares issued for services - Note 6 612,573 612 - - - - - Shares issued for asset acquisition - Notes 2 and 6 - - - - - - - Stock dividends at market value - Note 6 895,243 895 - 548,043 548 - - Transfer of surplus for stock dividend - - - - - - - Stock subscribed - Note 6 - - 250,000 - - - - Cash dividend - Note 10 - - - - - - - Net (loss) for the year ended February 29, 1996 - - - - - - - --------- ------- -------- --------- ------ -------- ------ BALANCES, February 29, 1996 7,509,481 7,509 250,000 4,024,918 4,025 - - Shares issued for cash - Note 6 333,333 333 (250,000) - - - - Shares issued for services - Note 6 145,842 146 - - - - - Stock dividends at market value - Note 6 819,829 820 - 412,555 412 - - Transfer of surplus for stock dividend - - - - - - - Net (loss) for the year ended February 28, 1997 - - - - - - - --------- ------- -------- --------- ------ -------- ------ 8,808,485 $ 8,808 $ - 4,437,473 $4,437 - $ - --------- ------- -------- --------- ------ -------- ------ --------- ------- -------- --------- ------ -------- ------
75 81
ADDITIONAL TOTAL PAID-IN ACCUMULATED TREASURY SHAREHOLDERS' CAPITAL DEFICIT STOCK EQUITY ----------- ------------ ---------- ------------- BALANCES, February 28, 1995 $10,060,347 $(3,252,174) $(230,789) $6,586,420 Shares issued for cash - Note 6 273,930 - - 274,373 Shares issued for services - Note 6 971,818 - - 972,430 Shares issued for asset acquisition - Notes 2 and 6 - - 222,267 222,267 Stock dividends at market value - Note 6 1,057,940 (1,059,383) (331) (331) Transfer of surplus for stock dividend (1,059,383) 1,059,383 - - Stock subscribed - Note 6 - - - 250,000 Cash dividend - Note 10 (90,213) - - (90,213) Net (loss) for the year ended February 29, 1996 - (1,770,654) - (1,770,654) ------------- ------------ --------- ------------ BALANCES, February 29, 1996 11,214,439 (5,022,828) (8,853) 6,444,292 Shares issued for cash - Note 6 247,331 - - (2,336) Shares issued for services - Note 6 68,216 - - 68,362 Stock dividends at market value - Note 6 802,321 (803,553) (248) (248) Transfer of surplus for stock dividend (803,553) 803,553 - - Net (loss) for the year ended February 28, 1997 - (628,638) - (628,638) ------------- ------------ --------- ------------ $11,528,754 $(5,651,466) $ (9,101) $5,881,432 ------------- ------------ --------- ------------ ------------- ------------ --------- ------------
The accompanying notes are an integral of these consolidated statements. 76 82 PowerTel USA, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS February 28, 1997 AND February 29, 1996 NOTE 1 - Organization and Summary of Significant Accounting Policies: PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary Yerington Acquisition Company, Inc., a Nevada corporation and Combustion Energy Company, a Nevada company. ORGANIZATION AND OPERATIONS: PowerTel USA, Inc. ("the Company") was organized on December 2, 1982, and incorporated under the laws of Delaware on December 20, 1982, under the name Munson Geothermal, Inc. Pursuant to an action of the Board of Directors, the Company's name was changed to Nevada Energy Company, Inc. on December 3, 1990. Subsequently, the Company's name was changed to PowerTel USA, Inc. on January 21, 1997. The Company is currently in Chapter 11 bankruptcy, operating under an order for debtor-in-possession. The Company is preparing a plan of re-organization. (SEE, PLAN OF RE-ORGANIZATION) IDLE POWER GENERATION EQUIPMENT: Idle power generation equipment includes ten Ormat power plants capable of producing up to an estimated maximum 3,700 KW average output and the relocated Raft River Power Plant with an estimated capacity of up to 7,200 KW of output. Total net book value of these assets is $5,226,063. A May 1996 appraisal of these assets determined the fair market value to be $5.7 million. DEPRECIATION AND AMORTIZATION: The Company provides for depreciation of furniture and office equipment utilizing straight-line and accelerated methods over the useful lives of three to seven years beginning when assets are placed in service. Idle geothermal power generation equipment was adjusted to the lower of cost or appraisal value at February 29, 1992. Subsequently, provisions for obsolescence have been provided based on the remaining economic life estimated to be eighteen years at that time. Based on the May 1996 appraisal, an additional $83,288 of obsolescence was provided on the Ormat power plants reducing their net book value to the then appraisal value of $2,700,000. 77 83 NET INCOME (LOSS) PER COMMON SHARE: The net income (loss) per common share is computed based upon the weighted average number of shares of Class A Common Stock outstanding during each period. Shares issued as dividends (Notes 6 and 12) have been treated as issued at February 28, 1993. Weighted average shares of Class A Common Stock outstanding were 8,808,485 in the year ended February 28, 1997 and 1,463,451 in the year ended February 29, 1996. Shares issuable upon exercise of warrants or options are excluded from the computation since the effect of their inclusion would be antidilutive. Shares of Class B Common Stock are excluded from the computation since Class B shareholders do not participate in the earnings of the Company. BUSINESS SEGMENT INFORMATION COMBUSTION ENERGY COMPANY The Company formed a wholly-owned subsidiary, Combustion Energy Company, Inc. ("CEC"), a Nevada corporation, on February 12, 1993 for the purpose of being a general partner of Oreana Power Partners ("OPP") (See OREANA POWER PARTNERS below). The Company is also a limited partner in OPP. On November 30, 1994, the Company caused CEC to merge with Herth Printing and Business Supplies, Inc. ("Herth"), in exchange for Class A Common Stock of the Company. The Company, through its ownership of CEC, owned 100% of the post-merger business and consolidated the financial results of CEC in its reported results. In an agreement entered into on September 1, 1996, the Company exchanged its interest in CEC, and thereby Herth, in a transaction which included the reacquisition of all right, title and interest in the Company's then outstanding Class B Common shares, which was later the subject of a settlement agreement between NEP, NEPC and the Company (see NEP Settlement Agreement). SAN JACINTO POWER CORPORATION San Jacinto Power Corporation, a Nevada Corporation, ("SJPC") was formed on December 15, 1993. The Company contributed 222,267 shares of its Class A Common Stock, valued at $222,267, based on 50% of market price at the time of issue due to resale restrictions imposed pursuant to Rule 144, and total cash of $275,055 in exchange for its 50.01% ownership interest in SJPC. The New World Power Corporation ("New World") contributed 48,000 shares of its Common Stock, with market value of $516,000 at time of issue, to SJPC. On February 10, 1994, New World contributed cash of $149,970 to SJPC and delivered a balance of cash of $124,975 on March 8, 1994. New World's contribution of Common Stock and cash of $274,945 to SJPC were in exchange for its 49.99% ownership interest in SJPC. The Company and New World subsequently engaged in negotiations to acquire, and did acquire, the operating assets of Smith Wind Energy Company and six affiliated limited partnerships know collectively as Triad. The purchase 78 84 price of $1,038,029 was equal to the agreed value of the shares plus assumed liabilities totaling approximately $293,957 for long-term secured debt and certain delinquent property taxes. The total cost was allocated based on managements estimate of fair market value of assets acquired, except for prepaid BLM rent which was valued at cost, as follows: Field Equipment $ 21,177 Prepaid BLM Rent 46,892 Power Sales Contract 52,500 Power Generation Equipment 917,460 ---------- Total $1,038,029 ----------
The Company managed the operations of San Jacinto Power Corporation and the wind farm until June 27, 1997. On June 27, 1997 the sale of the Company's 50.01% interest in its consolidated subsidiary, San Jacinto Power Corporation, was completed by the court appointed bankruptcy trustee. The Company's interest, represented by 50,010 shares of common stock, was sold at bid for $200,000 cash. The successful bidder, SeaWest Corporation of San Diego, CA also agreed to pay all outstanding debts of San Jacinto Power Corporation, estimated in excess of $175,000. In its most recently filed financial report, the 10-QSB for the quarter ended November 30, 1996, the Company had reported consolidated San Jacinto Power Company assets of approximately $1,105,986, consolidated liabilities of approximately $159,287 and minority interest of $632,720. The transaction will result in a reported net loss of approximately $113,979. At the time of the sale, San Jacinto Power Corporation ("SJPC") was one of two operating properties held by the Company. SJPC is not included in the current financial statements. MT. APO CORPORATION Mount Apo Corporation, a Nevada corporation ("MAC") was formed on May 9, 1994. MAC is a joint venture of NEC and Geothermal Development Associates and was formed for the purpose of submitting a competitive bid on a 40 MWe geothermal project in the Philippines. The bid was unsuccessful. The Company's investment in MAC is carried at cost of $590. BRADY GEO PARK POWER PROJECT, 1986, LTD. The Company's investment in Brady Geo Park Power Project, 1986, Ltd., ("BGPPP") including note and related interest receivable and advances for property taxes were written down to a combined book value substantially equal to the appraised value of the Ormat energy converter interests held by the partnership. Except for the residual partnership interest, the Company transferred all of its interest in the assets of BGPPP to its wholly owned 79 85 subsidiary effective December 1, 1995. (See Note 2, YERINGTON ACQUISITION COMPANY.) The Company has classified this asset as Idle Power Generation Equipment in the accompanying consolidated balance sheet. NEVADA ENERGY PARTNERS - I In February 1991, the Company received a 60% interest as a limited partner in Nevada Energy Partners 1, a Nevada limited partnership (NEP-I, LP), which holds a 31.66% interest in the equity of Nevada Geothermal Power Partners ("NGPP"). NGPP is a Nevada limited partnership whose general partners are Hot Springs Power Company and NEP-I LP. The Company issued a total of 3,476,875 shares of Class B Common Shares for this interest. The shares were valued at par of $0.001 per share as there is no market for these shares and there was no other basis for valuing the interest acquired. An additional 548,043 shares were issued to NEP-I LP in conjunction with the Company's 5% stock dividends made in July and October 1994 and January 1995. Class B Common Shares have full voting rights, but have no cash dividend participation. In a transaction completed on September 1, 1996, the Company exchanged its interest in NEP-I LP together with its interest in Combustion Energy Company, Inc. (a previously wholly owned subsidiary) for all right title and interest in the Company's Class B Common Shares held by NEP-I, LP. Pursuant to a settlement agreement entered into December 1, 1997, the 99% of all NEP gains resulting from the sale of NGPP's interests in BPP from 1995 to date were allocated to the Company, together with all outstanding Class B Common Stock and Class B Common Stock rights to future issuances, in consideration of the Company's issuance of new common shares pursuant to the Company's Plan of Reorganization. The Company's interest in NEP-I LP was valued at $3,080 based on the par value of the shares issued, less amounts recorded as treasury stock due to the Company's then effective ownership of 60% of the Class B Shares held by NEP-I LP, plus subsequent cash investments, less estimated partnership losses. As a general partner of NGPP, NEP-I LP had been entitled to a share in NGPP's distributable cash flow. As a general partner in Brady Power Partners ("BPP"), NGPP held a fifty percent (50%) ownership interest in the completed Brady project and was also entitled to receive project development fees and a share of BPP's distributable cash flow. BPP was a Nevada general partnership whose general partners were NGPP and ESIBH Limited Partnership, a Delaware limited partnership. The Company had been entitled to receive sixty percent (60%) of NEP-I LP's distributable cash flow. There has been no cash available for distribution through February 28, 1997. On May 8, 1995, NGPP sold its 50% interest in the Brady Power Project for approximately $5.5 million dollars. NGPP has received net cash distributions of approximately $4.3 million dollars. The Company received $508,018 in July 1995 as a return of its share of the distribution of theses proceeds. The balance due of $77,493 was recorded as a receivable. However, the receivable has subsequently been charged to bad debts as it is believed to be uncollectible. As a result of the Settlement Agreement with NEP, the Company has adjusted its gains upward to reflect the assumption of 99% of all gains from NEP, from January 1, 1995 to the present. 80 86 OREANA POWER PARTNERS Oreana Power Partner ("OPP") is a limited partnership which was formed in February 1993 for the purpose of developing and financing gas turbine electricity generating facilities to provide power to Sierra Pacific Power Company ("Sierra") pursuant to power sales contracts to be obtained. The Company is a limited partner and its interest is valued at $46 based on its initial cash investment, less expenses and returned capital. The general partners of OPP are Energy Development Associates ("EDA", a Nevada corporation and a wholly-owned subsidiary of Geothermal Development Associates) and CEC, a wholly-owned subsidiary of the Company. EDA is the Managing General Partner and CEC is the Financial General Partner. Geothermal Development Associates is a privately owned Nevada company, not related to the Company. This company has been dissolved. YERINGTON ACQUISITION COMPANY, INC. Yerington Acquisition Company, Inc. ("YAC"), a Nevada corporation was formed on December 8, 1994 for the purpose of acquiring the assets of Tad's Geothermal, a non-related owner/operator of a geothermal power generating facility located near Yerington, Nevada. The acquisition was not completed. In December 1995, the Company transferred all of its right title and interest in 10 Ormat power generating units (classified as idle power generating equipment in the financial statements) to YAC. In April 1995, the Company entered into an agreement through a non-binding letter of intent, to transfer, through merger with YAC, to Pollution Controls International, all of its right title and interest in the 10 Ormat units together with any remaining interest in acquiring the assets of Tad's. Aggregate consideration to be received by the Company, in the form of convertible preferred stock and convertible debt would exceed the net book value of the assets. CENTRAL COMMUNICATIONS CORPORATION Central Communications Corporation ("CCC"), a Nevada corporation, was formed for the purpose of acquiring interests in the telecommunications business. On May 21, 1996, the Company announced that it had signed a binding letter of intent to acquire, through CCC, all of the outstanding shares of Telecom Technologies, Inc. ("TTI"), an Oregon corporation, and certain other related assets. The terms of the acquisition provided for the payment of $500,000 in cash and issuance of 2,000,000 Class A Common Shares. The Company advanced to CCC $492,000 in cash in the quarter ended August 31, 1996 in anticipation of the completion of the acquisition. The acquisition was completed on June 21, 1996, however, it was subsequently reversed. Certain shareholders have filed an action in Delaware in an attempt to recover some or all of the Company's investment. There is no assurance that such recovery will occur. NOTE 3 - Short-Term Borrowings and Mortgage Payable: There is no short-term borrowing as of February 28, 1997. The Company's subsidiary, Combustion Energy Company, which operates as Herth Printing and Business Supply, has long term 81 87 debt (8 years) on the purchase of a printing press in May, 1996. Monthly payments are $4,218 with an interest rate of 9.75%. NOTE 4 - Related Transactions: During the year ended February 29, 1996, San Jacinto Power Corporation (then the Company's majority owned consolidated subsidiary) received services under a maintenance agreement from The New World Grid Power Company. The New World Grid Power Company is a wholly owned subsidiary of The New World Power Company, the minority owner of San Jacinto Power Corporation. Services provided included repair and maintenance, refurbishment and on-site operations oversight and were valued at approximately $296,511. A balance of $37,965 was payable to the New World Grid Power Company for the services as of February 28, 1997. NOTE 5 - Preferred Stock: On December 14, 1985, the stockholders of the Company authorized the creation of 2,000,000 shares of $1.00 par value preferred stock. The Board of Directors has the authority to issue the stock in series and to determine all terms and preferences for each individual series. At the annual meeting, the Company's shareholders approved an amendment of the Company's Certificate of Incorporation reducing the par value of the preferred stock to $.001 per share. On May 1, 1996, the Company entered into an agreement providing for the issuance of 1,960,745 Series A Preferred Shares at $2.50 per share to Golden Chance Limited ("Golden Chance"), an Isle of Man private company limited by shares. The terms of the Series A Preferred Shares provide that no dividends of any kind or nature shall be paid or declared. Series A Preferred Shares have a right to convert to the Company's Class A Common Shares. Liquidation preference rights of Series A Preferred Shares are limited to the par value of $.001 per outstanding share. Voting rights for each Series A Preferred Share are equal to all classes of common stock. The Company accepted a note in the amount of $4,899,988 payable over a one year period as consideration for issuance of the Series A Preferred Shares. The present value of this note has been offset against paid-in equity in the accompanying financial statements. The Series A Preferred Shares are to be held in escrow until payment is received. Golden Chance retains the right to vote the escrowed shares. On May 1, 1996, the Company also entered into an agreement providing for the issuance of 5 Series B Preferred Shares at $2.50 per share to four of the five directors of the Company. Terms of the Series B Preferred Shares provide that no dividends of any kind or nature shall be paid or declared. Series B Preferred Shares have a right to convert to the Company's class A Common Shares. Liquidation preference rights of Series B Preferred Shares are limited to the par value of $.001 per outstanding share. Holders of Series B Preferred Shares have the right to appoint a temporary director in the event that Golden Chance defaults in the payment of the first $500,000 on its purchase of Series A Preferred Shares. Alleged payments totaling $1,320,745, net of related expenses for the Series A Preferred Shares, had been received as of February 28, 1997 and under the terms of the agreement 762,464 preferred shares had been converted to 82 88 4,847,844 Class A Common Shares. The balance of the shares were converted to Class A Common Stock on the instruction of the Board of Directors. The payment of the $1,960,745 is alleged to have been fraudulent. At February 28, 1997, there were 16,058,715 Series A and 5 Series B Preferred Shares issued and outstanding. NOTE 6 - Class A and Class B Common Stock: The Company issued 222,267 shares of Class A Common Stock to its subsidiary San Jacinto Power Corporation to be used by San Jacinto in the acquisition of certain Assets (see Note 2). The shares were valued at $222,267 and were recorded as treasury shares at February 28, 1994 as the proposed acquisition had not been consummated at that time. Upon consummation of the acquisition in June 1994, the shares were removed from treasury and issued. In the year ended February 28, 1997, 333,333 shares of Class A Common Stock were issued for cash in the amount of $250,000, and 145,842 shares of Class A Common Stock were issued for services valued at $68,216, including 106,670 shares issued to directors in lieu of cash for annual fees and 39,172 shares issued to officers and an employee as bonuses. In the year ended February 29, 1996, 442,867 shares of Class A Common Stock were issued for cash in the amount of $274,373, and 612,573 shares of Class A Common Stock were issued for services valued at $972,430, including 27,500 shares issued to directors in lieu of cash for annual fees and 18,230 shares issued to officers and an employee as bonuses. Included in the shares issued for services on December 27, 1994, the Company issued 500,000 shares of its Class A Common Stock registered under the Form S-8 filed August 2, 1994, and having Registration No. 33-82318. The shares were valued at $1.75 per share based upon the closing NASDAQ price of the Company's common stock on June 24, 1994. These shares were for services provided under an agreement dated June 27, 1994, and were later substantially voided pursuant to the order of the Federal Bankruptcy Court entered September 15,1998. In conjunction with its acquisition of Herth Printing and Business Supply, the Company issued 641,784 shares of its Class A Common Stock during the year ending February 29, 1996, in exchange for all of the outstanding shares of HPBS. The Company's shares were valued at $.6582 per share based on the value of the net assets acquired. These shares were treated as if issued on February 28, 1993. The Company subsequently disposed of its interest in Herth Printing and Business Supply in a transaction completed on September 1, 1996. On February 16, 1995, the Company entered into an agreement for the sale of 333,333 shares of restricted Class A Common Stock at a price of $0.75 per share for a total sale price of $250,000. Payment of $100,000 was received prior to February 29, 1996, with the balance being received subsequent to that date (Note 12). 83 89 On December 20, 1994, the Company entered into two (2) irrevocable subscription agreements for the sale of 500,000 Class A Common shares at a purchase price of $2.00 per share. The agreements, which provided for payment within 60 days of the execution, were extended to September 20, 1995. The subscribers subsequently failed to fulfill their obligation under the agreement. In the year ending February 28, 1995, stock dividends of 5% on Class A and Class B Common Stock were declared for shareholders of record as of July 11, 1994, October 3, 1994, and January 20, 1995. The aggregate shares issued are 895,243 Class A and 548,043 Class B, respectively. The Company filed an S-3 (SEC File No. 333-7513) for the registration of 9,194,282 shares of Class A Common Stock on July 26, 1996. The purpose of the registration was for shares that had been previously purchased under private placements over the preceding two years and to cover shares to be issued in conjunction with the acquisition of TTI (Note 1, Central Communications Corporation) and shares to be issued in conversion of Series A Preferred Shares to be acquired by Golden Chance (Note 5, Preferred Stock). A total of 7,152,381 net new shares were issued under this registration. The Company filed an S-8 registration (Number 333-18621) with the Securities and Exchange Commission on December 23, 1996, which provided for the issuance of up to 3,000,000 shares of Class A Common Stock pursuant to the Company's informal consulting/compensation plan. Subsequently, at the instruction of the Board of Directors, and after the implementation of the one-for-six reverse split applied to shares outstanding at January 21, 1997, the full number of shares were issued on an unrestricted basis. In the year ending February 29, 1996, stock dividends of 5% on Class A and Class B Common Stock were declared for shareholders of record as of April 20, 1995 and July 31, 1995. The aggregate shares issued are 819,829 Class A and 411,555 Class B, respectively. Each share of Class B Common Stock is entitled to all of the rights and privileges pertaining to Class A Common Stock without any limitations, prohibitions, restrictions or qualifications except that each share of such Class B Common Stock shall not be entitled to receive any cash dividends declared and paid by the corporation and shall be entitled to share in the distribution of assets of the corporation upon liquidation or dissolution, either partial or final. NOTE 7 - Stock Option Plans: On December 29, 1993, the Company adopted the 1993 Directors' Stock Option Plan for the Company's directors. Under the terms of this stock option plan, each of the five directors of the Company was granted an option to purchase 25,000 shares of the Company's Class A Common Stock or a total of 125,000 shares at a price of $2 per share, equal to the market price of the stock at the date of grant. The option is exercisable until December 31, 2001. No options have been exercised through February 28, 1995. 84 90 On June 27, 1994, the Company adopted the 1994 Directors' Stock Option Plan for the Company's directors. Under the terms of this stock option plan, each of the five directors of the Company was granted an option to purchase 12,500 shares of the Company's Class A Common Stock or a total of 62,500 shares at a price of $1.625 per share, equal to the market price of the stock at the date of grant. The option is exercisable until May 31, 2002. No options have been exercised through February 29, 1996. On January 14, 1995, the Company adopted an additional 1994 Directors' Stock Option Plan for the Company's directors. Under the terms of this stock option plan, each of the five directors of the Company was granted an option to purchase 17,500 shares of the Company's Class A Common Stock or a total of 87,500 shares at a price of $0.9375 per share, equal to the market price of the stock at the date of grant. The option is exercisable until December 31, 2002. No options have been exercised through February 28, 1995. On December 31, 1995, the Company adopted an additional 1994 Directors' Stock Option Plan for the Company's directors. Under the terms of this stock option plan, each of the five directors of the Company was granted an option to purchase 30,000 shares of the Company's Class A Common Stock or a total of 150,000 shares at a price of $0.3125 per share, equal to the market price of the stock at the date of grant. The option is exercisable until December 31, 2003. No options have been exercised through February 28, 1997. On June 28, 1994, the Company's Board of Directors adopted an Employee and Consultant Stock Option Plan (the "Plan") and registered the shares available under the Plan on Form S-8 in accordance with the Securities Act of 1933 filed August 2, 1994, having Registration No. 33-82318. The purpose of the Plan is to provide compensation for services rendered to the Company and to promote the success of the Company by providing "Eligible participants" (employees and consultants) with incentives for performance on behalf of the Company. The Plan is accomplished by providing for the granting of options to purchase Class A Common Stock to eligible participants. The Board of Directors may suspend or terminate the Plan at any time, but no such action shall adversely affect the rights of any person granted an option under the Plan prior to that date of suspension or termination. The maximum number of shares available for option under the Plan are 1,125,000 Class A Common, subject to adjustment by reason of reorganization, merger, consolidation, recapitalization, dividends, stock split, changes in par value and the like occurring or effective while any such shares of Class A Common Stock are subject to the options under the Plan. During 1995, 500,000 shares were exercised at a price of $1.75 per share. There were no options outstanding as of February 29, 1996 under this Plan. This plan was voided pursuant to the order of the Federal Bankruptcy Court entered September 15, 1998. NOTE 8 - Income Taxes: The Company adopted FASB 109 in the fiscal year 1994. Due to uncertainty of realization in light of the Company's continuing operating losses, no deferred tax asset has been recorded in the financial statements because the Company has assessed a valuation account to the full 85 91 extent of its potential deferred tax asset. The following is a summary of the potential deferred tax asset and the valuation allowance: Property and equipment due to differences in depreciation and reserve for obsolescence $ 809,795 Net operating loss carry forward 2,637,611 Energy credit carry forward - ----------- Total deferred tax asset 3,443,406 Valuation allowance (3,443,406) ----------- Net deferred tax asset $ - ===========
During the year ended February 28, 1997, the Company's potential deferred tax asset has increased by $890,665 and the valuation account has been increased accordingly. No provision for Federal income taxes was recorded during the years ended February 28, 1997 and February 29, 1996 due to the net losses of the Company. As of February 28, 1997, the Company had Federal income tax loss carryforwards available to offset future taxable income for income tax purposes of $6,140,428 which expire in 2006 through 2010. The Company has no energy credit carryforwards as of February 28, 1997. NOTE 9 - Supplemental Noncash Investing and Financing Activities: During the year ended February 29, 1996, 145,842 shares of Class A Common Stock were issued for compensation of $68,216 to certain officers, directors and an employee. NOTE 10 - Commitments and Contingencies: The Company's wholly owned subsidiary CCC, has entered into a long-term lease for office space in Santa Barbara, California. The Company occupied the space for approximately three months in the fiscal year ended February 28,1997.The space has been vacated and the landlord had filed suit for recovery of earned rents of $64,687, interest thereon, costs and damages. Estimated payments on the original terms of the lease as of February 28, 1997 are as follows: 86 92 1997 $ 228,408 1998 228,408 1999 228,408 2000 228,408 2001 152,272 ----------- Total $1,065,904 ===========
The claim for payment by the lessor against the Company has been withdrawn in its entirety. NOTE 11 - Chapter 11 Proceeding On February 13, 1997, creditors of the Company, petitioned the Federal Bankruptcy court to have the Company placed in involuntary Bankruptcy under Chapter 11 of Federal Bankruptcy Law. Immediate injunctive relief was granted. A preliminary hearing was held in Reno on March 3, 1997 and the court appointed Mr. Barry L. Solomon as Trustee, which effectively transferred formal control of the Company from the then management to the Trustee. A formal order confirming the bankruptcy was issued on April 7, 1996. Thereafter, the Company's Board of Directors was reconstituted and new officers were reinstituted. A petition for Debtor-in-Possession was filed. The hearing was held on September 4, 1997, and the court approved the petition. The Company has been operating since that date as a Debtor-in-Possession and in preparing a plan of reorganization. CHANGES IN ACCOUNTANTS The Company's accountants, Deloitte & Touche ("Deloitte") resigned on March 23, 1994, and were replaced by Certified Public Accountants Kafoury Armstrong & Company. The change of independent auditors and the resignation of Deloitte & Touche was not the result of any disagreements between the Company and the former accountants on any matter of accounting principles or practices, financial disclosures or auditing scope or procedures, and there have been no such disagreements within the past two (2) fiscal years and any prior or subsequent period. The audit opinions of Deloitte & Touche for fiscal years 1992 and 1993 did not contain any adverse opinion or disclaimer of opinion, and their opinion was not qualified or modified as to uncertainty, audit or accounting principles. The Company has been advised that neither Kafoury, Armstrong & Company, nor any of its partners hold any direct or indirect financial interest in the securities of the Company, or its subsidiaries, nor have they had any connection with the Company or its subsidiaries during the past three years. 87 93 NOTE 12 - Incomplete Records The Company's Board of Directors appointed new independent accountants on April 22, 1994, as follows: Kafoury, Armstrong & Company 6140 Plumas Street Reno, NV 89509 (702) 689-9100 Kafoury, Armstrong & Company is the largest statewide independent accounting firm operating in the state of Nevada and is qualified under the requirements of the SEC Practice Section Division of firms of the American Institute of Certified Public Accountants. The appointment of Kafoury, Armstrong & Company as auditors was subsequently ratified by vote of the shareholders in 1994 and 1995 and 1996. On February 20, 1997, the Company was notified by its auditors, Kafoury, Armstrong and Company of Reno, NV that they were withdrawing as the Company's independent auditors, a relationship which they had enjoyed since April 1994. They simultaneously withdrew their consent to inclusion of their audit report in the Company's financial statements as of and for the period ended February 29, 1996, and in the S-8 Registration filed with the Securities and Exchange Commission on December 23, 1996. Their resignation expressed concern over pending litigations against the Company as set forth in its quarterly report (10KSB November 30,1996) the Company's apparent inability or unwillingness to meet its obligations to Kafoury, and the Company's failure to pay its outstanding obligations to Kafoury, including making good on a dishonored check in the amount of $23,850. There were no disputes over accounting matters. The Company has not appointed new auditors at this time. The Company is unable to provide comparable financial information regarding the amount of interest and taxes paid for years ended February 28, 1997, and February 29, 1996, due to the pendency of the Chapter 11 proceeding and the absence of accurate and complete books and records for the period May 1, 1996, through February, 1997. 88 94 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS The current Directors of the Company as of November 30, 1998, are as follows. Richard A. Cascarilla Director since May, 1997 Age 46 Jeffrey L. Hartman Director since September 15, 1998 Age 45 Michael R. Kassouff Director since December, 1996 Age 41 The Directors of the Company as of February 28, 1997, are listed below. - -------------------------------------------------------------------------------- Name, Principal Occupation During the Last Five Years and Additional Information - -------------------------------------------------------------------------------- Michael R. Kassouff Director Chairman of the Board Age 41 Director since 12/96 Mr. Kassouff is a former director of the Company having served from July 1991 to May 1996. Mr. Kassouff is currently one of the owners of Guaranteed Builders Co. in Houston, Texas. - -------------------------------------------------------------------------------- Peter Cannell, BA Director Director and Secretary of Directors Director since 5/96 Resigned 5/9/97 Mr. Cannell is a graduate of the University of Glasgow and an Associate of the Institute of Chartered Secretaries & Administrators. 89 95 - -------------------------------------------------------------------------------- Charles Cain Director Director since 5/96 Resigned 5/9/97 MA-ACIB, is a graduate of Cambridge University and was the founder of the corporate and management trust firm formerly known as Charles Cain & Company. Mr. Cain is an affiliate of the American Bar Association, member of the American Tax Institute in Europe and member of the Offshore Institute. - -------------------------------------------------------------------------------- John C. Goold Director Director since 5/96 Resigned 9/26/96 Mr. Goold is a private investor specializing in research and development with energy companies, computer technology and telecommunications in Asian, European and United States capital markets. The Company's Certificate of Incorporation was amended in 1990 to provide that the number of directors will be no less than three (3) and no more than seven (7), with a board size of five(5)until that number is changed by the board of directors. EXECUTIVE OFFICERS Presented below are the names, ages and positions held during the past five years of the Company's executive officers as of November 30,1998. - -------------------------------------------------------------------------------- Name Age Position - -------------------------------------------------------------------------------- Richard A. Cascarilla, Esq. 46 Secretary and Treasurer 11/20/90 to 9/26/96 5/19/97 to Present President Michael Kassouff 41 Secretary 9/24/97 to Present Jeffrey E. Antisdel 42 President 11/20/90 to 9/26/96 Stefan Tevis 44 President 9/26/96 to 1/23/97 90 96 Kenton Bowers 57 Secretary 9/26/96 to 12/18/96 Pattison Hayton III 46 President 1/23/97 to 5/19/97 Kevin Quinn 51 Secretary 12/18 to 5/19/97 - -------------------------------------------------------------------------------- REPORTS UNDER SECTION 16(a) OF THE EXCHANGE ACT Section 16(a) of the Exchange Act requires directors, officers and persons who are beneficial owners of more than 10% of the Company's Common Stock to file with the Securities and Exchange Commission (the "Commission") reports of their ownership of the Company's securities and change in that ownership. To the Company's knowledge, based upon review of the copies of reports filed with the Commission with respect to the fiscal year ended February 28, 1997, all reports required to be filed under Section 16(a) by the Company's directors, officers and persons who are beneficial owners of more than 10% of the Company's Common Stock have been timely filed. EXECUTIVE COMPENSATION DIRECTOR COMPENSATION Directors are entitled to receive annual compensation of $10,000 paid quarterly and $500 for each Board of Directors meeting attended in person, plus related travel expenses to meetings. On January 14, 1995, the Company adopted an additional 1994 Directors' Stock Option Plan for the Company's directors. Under the terms of this stock option plan, each of the five directors of the Company was granted an option to purchase 17,500 shares of the Company's Class A Common Stock or a total of 87,500 shares at a price of $0.9375 per share, equal to the market price of the stock at the date of grant. The option is exercisable until December 31, 2002, and no options have been exercised through February 29, 1996. On December 31, 1995, the Company adopted an additional 1994 Directors' Stock Option Plan for the Company's directors. Under the terms of this stock option plan, each of the five directors of the Company was granted an option to purchase 30,000 shares of the Company's Class A Common Stock or a total of 150,000 shares at a price of $0.3125 per share, equal to the market price of the stock at the date of grant. The option is exercisable until December 31, 2003, and no options have been exercised through February 28, 1997. Pursuant to the Order of Confirmation entered by the Reno Federal Bankruptcy Court of September 15, 1998, the above option grants are rescinded. 91 97 CHANGE-IN-CONTROL ARRANGEMENTS, EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT On February 29, 1996 the Company executed a binding letter of intent with Waterford Trust Company, Limited an Irish corporation ("Waterford"), in which the Company agreed to sell to Waterford or its nominee approximately 2,000,000 shares of Series A preferred shares. On May 1, 1996 the Company announced the completion of this transaction in which Waterford's nominee, Golden Chance, Limited ("Golden Chance"), an Isle of Man private company limited by shares, agreed to purchase 1,960,795 shares of Series A Preferred stock at $2.50 per share and 152,381 shares of Class A common stock at $0.643125 per share. A cash payment for the Class A common shares in the amount of $100,000 and a $4,900,000 promissory note made and delivered by Golden Chance. The promissory note is secured by the corporate guarantee of Waterford Trust Company, Limited, an Irish corporation ("Waterford") and an escrow of the shares of registrants series A preferred shares acquired by Golden Chance. The promissory note is requires installment payments. The first installment was payable July 1, 1996 in the amount of $400,000. Subsequent installments of $500,000 are payable every thirty days thereafter until paid in full. The total principal amount of the promissory note was due and payable on April 1,1997. Waterford has guaranteed the obligation of Golden Chance. The Series A Preferred shares acquired by Golden Chance are held in escrow with an escrow agent for the benefit of the registrant. Upon payment of each installment under the promissory note, a portion of the Series A Preferred shares will convert to the registrants class A common stock pursuant to the certificate of designation of the Series A Preferred shares, which is on file with the Delaware Secretary of State. The converted shares will be released from escrow. Subsequent to May 1, 1996, cash payments in the amount of $100,000 for the Class A common stock and $780,255 in cash payment on the note secured by the Series A preferred shares was deposited in accounts which were substantially outside the control of the Company's officers. The money deposited in these accounts was substantially diverted or paid to persons who had no legal right to the funds. In connection with this agreement, pursuant to a letter agreement ("Letter of Intent") dated February 29, 1996, and conditional to the sale of series A preferred shares, the former control group Chairman, Jeffrey Antisdel, and Director, Richard Cascarilla, voluntarily resigned their respective Board of Director positions, with nominee Directors, Charles Cain and Peter Cannell elected by the Board of Directors. The remaining former members of the Board subsequently resigned and John Goold was nominated to the Board. The active size of the board was reduced from five directorships to three directorships. In conjunction with the agreements relating to the change in control, the Company entered into prospective consulting agreements with Mr. Antisdel and Mr. Cascarilla. These two year agreements were to take effect upon termination from the Company as an employee. Mr. Antisdel and Mr. Cascarilla were terminated without cause as President and Secretary respectively on September 26, 1996 due to their intent to make public disclosures of the default by Waterford and 92 98 Golden Chance Limited on payments owing to the Company. Subsequently, the Company failed to make payments under the consulting agreements and both Mr. Antisdel and Mr. Cascarilla filed suit with respect to their rights under the agreements, including acceleration of payment. (See "Litigation") [INTENTIONALLY LEFT BLANK.] 93 99 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WORLDCALL CORPORATION Date: March 19, 1999 /s/ Richard A. Cascarilla ------------------------------ ---------------------------------- Richard A. Cascarilla, Director Date: March 19, 1999 /s/ Jeffrey L. Hartman ------------------------------ ---------------------------------- Jeffrey L. Hartman, Director Date: March 19, 1999 /s/ Michael R. Kassouff ------------------------------ ---------------------------------- Michael R. Kassouff, Director 94 100 PART II EXHIBITS (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession A. Debtor's Second Amended Disclosure Statement, filed with the United States Bankruptcy Court, District of Nevada, July 24, 1998............................................. Page B. Debtor's First Amended Plan of Reorganization filed with the United States Bankruptcy Court, District of Nevada, July 24, 1998............................................. Page C. Order Approving and Confirming Debtor's First Amended Plan of Reorganization, as Revised and Amended, issued September 15, 1998............................................ Page (3)(i) Articles of Incorporation A. Certificate of Correction of the Restated Certificate of Incorporation of Nevada Energy Company, Inc., filed November 25, 1998....................................................... Page B. Certificate of Correction of the Certificate of Amendment to the Certificate of Incorporation of PowerTel USA, Inc., filed November 25, 1998....................................................... Page C. Certificate of Correction of the Certificate of Correction of the Restated Certificate of Incorporation of PowerTel USA, Inc., filed November 25, 1998................................ Page D. Certificate of Correction of the Certificate of Correction to the Certificate of Amendment of PowerTel USA, Inc., filed November 25, 1998....................................................... Page E. Certificate of Correction of the Restated Certificate of Incorporation of PowerTel USA, Inc., filed November 25, 1998....................................................... Page
101 F. Certificate of Correction of the Certificate of Correction to the Restated Certificate of Incorporation of PowerTel USA, Inc., filed November 25, 1998................................ Page G. Certificate of Correction of the Restated Certificate of Incorporation of PowerTel USA, Inc., filed November 25, 1998....................................................... Page H. Certificate of Renewal, Restoration and Revival of Certificate of Incorporation of Nevada Energy Company, Inc., filed November 25, 1998............................................................. Page J. Restated Certificate of Incorporation of Nevada Energy Company, Inc, filed December 15, 1998.................................. Page (3)(ii) By-Laws A. PowerTel USA, Inc. Amended and Restated ByLaws, dated November 25, 1998. ............................................. Page (4) Instruments Defining the Rights of Security Holders, including Indentures A. Stock Option and Purchase Agreement between Richard A. Cascarilla and Nevada Energy Company, Inc., dated December, 1998........................................... Page B. Stock Option and Purchase Agreement between Jeffrey Modesitt and Nevada Energy Company, Inc., dated December, 1998........................................... Page C. Stock Option and Purchase Agreement between Michael Kassouff and Nevada Energy Company, Inc., dated December, 1998........................................... Page D. Stock Option and Purchase Agreement between Jeffrey Hartman and Nevada Energy Company, Inc., dated December, 1998........................................... Page
102 E. Stock Option Agreement between Nevada Energy Company, Inc. and Richard A. Cascarilla, dated December, 1998........................................... Page F. Stock Option Agreement between Nevada Energy Company, Inc. and Jeffrey L. Hartman, dated December, 1998.............................................. Page G. Stock Option Agreement between Nevada Energy Company, Inc. and Michael Kassouff, dated December, 1998................................................ Page H. Stock Option Agreement between Nevada Energy Company, Inc. and Richard A. Cascarilla, dated December, 1998........................................... Page I. Stock Option Agreement between Nevada Energy Company, Inc. and Michael Kassouff, dated December, 1998................................................ Page J. Stock Option Agreement between Nevada Energy Company, Inc. and Lawrence Herth, dated December, 1998................................................... Page (10) Material Contracts A. First Amended and Restated Settlement and Release Agreement among PowerTel USA, Inc., Nevada Energy Partners I, Nevada Electric Power Company, and Sixteen Bahamian Corporations, effective December 1, 1997.................................................... Page i. Receipts by Sixteen Bahamian Corporations of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel, dated March 16, 1998.................................................. .Page B. Settlement and Mutual Release Agreement among PowerTel USA, Inc., Viva Telecommunications, Inc., David L. Wallace, Jeffrey Antisdel, John Vogel, and Dean Chamberlain, effective January 25, 1998.................................. Page
103 C. Amended and Restated Agreement for Exchange of Stock between David Wallace and PowerTel, USA, Inc. Regarding Viva Telecommunications, Inc., effective February 12, 1998................................................... Page D. Amended and Restated Agreement for Exchange of Stock between David Wallace and PowerTel USA, Inc. Regarding Diego Tel, Inc., effective February 12, 1998................................................... Page E. Employment Agreement between PowerTel USA, Inc. and Richard Cascarilla, dated August 26, 1998............................ Page F. Employment Agreement between PowerTel USA, Inc. and Michael R. Kassouff, dated August 26, 1998........................... Page G. Telecommunications Services Agreement between Viva Servicos, S. de R.L. de C.V. and Diego Tel, Inc. effective June 8, 1998 (a portion of this document has been redacted because it contains confidential information).................................................................. Page (11) Statement re: Computation of Per Share Earnings...................................... Page (15) Letter re: Unaudited Interim Financial Information................................... Not Applicable (18) Letter re: Change in Accounting Principles........................................... Not Applicable (19) Report Furnished to Security Holders................................................. Not Applicable (22) Published Report Regarding Matters Submitted to Vote of Security Holders.......................................................... Not Applicable (23) Consents of Experts and Counsel...................................................... Not Applicable (24) Power of Attorney.................................................................... Not Applicable (26) Invitations for Competitive Bids..................................................... Not Applicable (27) Financial Data Schedule.............................................................. Unavailable
104 (99) Additional Exhibits A. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for April, 1997...................................... Page B. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for May, 1997........................................ Page C. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for June, 1997....................................... Page D. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for July, 1997....................................... Page E. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for August, 1997..................................... Page F. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for September, 1997.................................. Page G. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for October, 1997.................................... Page H. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for November, 1997................................... Page I. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for December, 1997................................... Page J. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for January, 1998.................................... Page K. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for February, 1998................................... Page L. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for March, 1998...................................... Page M. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for April, 1998...................................... Page N. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for May, 1998........................................ Page
105 O. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for June, 1998....................................... Page P. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for July, 1998....................................... Page Q. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for August, 1998..................................... Page R. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for September, 1998.................................. Page S. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for October, 1998.................................... Page T. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for November, 1998................................... Page U. PowerTel USA, Inc., 97-30265, Chapter 11, Monthly Operating Report for December, 1998................................... Page
EX-2.A 2 EXHIBIT 2A 1 Exhibit 2a STEPHEN R. HARRIS, ESQ. BELDING & HARRIS Nevada Bar No. 001463 417 West Plumb Lane Reno, Nevada 89509 Telephone: (702) 786-7600 Facsimile: (702) 786-7764 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA IN RE: POWERTEL USA, INC., formerly known as Case No. BK-97-30265-BMG NEVADA ENERGY COMPANY, INC., (Chapter 11) also formerly known as MUNSON GEOTHERMAL, INC., Debtor. Hrg. DATE: June 29, 1998 and TIME: 2:00 p.m. DEBTOR'S SECOND AMENDED DISCLOSURE STATEMENT PURSUANT TO 11 U.S.C. Section 1125 IMPORTANT INFORMATION FOR CREDITORS AND SHAREHOLDERS of POWERTEL USA, INC. (formerly known as Munson Geothermal, Inc. and Nevada Energy Company, Inc.) IF YOU ARE A CREDITOR OR SHAREHOLDER OF POWERTEL USA, INC., DEBTOR HEREIN, THIS Second Amended DISCLOSURE STATEMENT ("DISCLOSURE STATEMENT") CONTAINS IMPORTANT INFORMATION THAT YOU SHOULD READ AND EVALUATE. AS YOU REVIEW THIS DOCUMENT, REMEMBER: 1. THIS DISCLOSURE STATEMENT IS SUBMITTED TO ALL CREDITORS AND SHAREHOLDERS OF POWERTEL USA, INC. ("DEBTOR" OR 'POWERTEL"). THIS STATEMENT CONTAINS IMPORTANT INFORMATION THAT MAY AFFECT YOUR DECISION TO ACCEPT OR REJECT THE DEBTOR'S PLAN OF REORGANIZATION ("PLAN"). 2. THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS INTENDED TO PROVIDE ADEQUATE DISCLOSURE REGARDING THE DEBTOR'S 2 PLAN. ALL CREDITORS AND SHAREHOLDERS ARE URGED TO READ THE DISCLOSURE STATEMENT WITH CARE AND IN ITS ENTIRETY. 3. ON JUNE 29, 1998, THE BANKRUPTCY COURT APPROVED THIS DISCLOSURE STATEMENT AS CONTAINING ADEQUATE INFORMATION PURSUANT TO 11 U.S.C. Section 1125, FOR SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE PROPOSED PLAN. THE BANKRUPTCY COURT, HOWEVER, IS AN IMPARTIAL TRIBUNAL; THEREFORE, THE COURT NEVER OFFICIALLY ENDORSES ANY PLAN OF REORGANIZATION. IF YOU ARE ELIGIBLE TO VOTE, A COPY OF THE PROPOSED PLAN ACCOMPANIES THIS DISCLOSURE STATEMENT. IF YOU ARE NOT ELIGIBLE TO VOTE, A COPY OF THE PROPOSED PLAN IS AVAILABLE UPON REQUEST. 4. IF YOU ARE ELIGIBLE TO VOTE YOU ARE URGED BY DEBTOR TO VOTE IN FAVOR OF THE PLAN AND TO RETURN YOUR BALLOT NO LATER THAN JULY _, 1998. IN THE OPINION OF THE BOARD OF DIRECTORS OF POWERTEL AND ITS MANAGEMENT, THE PLAN AS SUBMITTED IS THE BEST AND MOST FEASIBLE MEANS TO REHABILITATE THE BUSINESS AND ADDRESS THE CONCERNS OF CREDITORS AND SHAREHOLDERS. 5. THE PROPOSED PLAN ANTICIPATES THAT DEBTOR WILL ISSUE COMMON STOCK IN THE IMPLEMENTATION OF THIS PLAN. THE COMMON STOCK HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO 15 U.S.C. Section 77, THE SECURITIES ACT OF 1933, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION REVIEWED OR APPROVED THE CONTENT OF THIS DISCLOSURE STATEMENT. ANY REPRESENTATION OTHERWISE IS BOTH INCORRECT AND IN VIOLATION OF THE SECURITIES ACT OF 1933. 6. THIS DISCLOSURE STATEMENT CONTAINS FORWARD LOOKING INFORMATION WITH RESPECT TO THE ANTICIPATED FUTURE BUSINESS AND FINANCIAL AFFAIRS OF THE DEBTOR. THESE FORWARD LOOKING STATEMENTS ARE NOT GUARANTEES OR ASSURANCES THAT THE FORWARD LOOKING EVENTS WILL OCCUR AS DESCRIBED. THERE ARE SUBSTANTIAL RISKS AND CONTINGENCIES WHICH CAN INFLUENCE, IMPEDE OR PROHIBIT THE ABILITY OF THE DEBTOR TO ACHIEVE THESE FORWARD LOOKING STATEMENTS. THE RISKS AND CONTINGENCIES ARE DISCUSSED IN SECTION XI OF THIS DISCLOSURE STATEMENT. 7. THE PLAN OF REORGANIZATION CONTEMPLATES THAT THE COURT WILL CONFIRM (a) AN AGREEMENT BY WHICH THE DEBTOR'S WILL ACQUIRE UPON CONFIRMATION OF THE PLAN 100.0% OF THE ISSUED AND OUTSTANDING COMMON STOCK OF DIEGO TEL, INC. IN EXCHANGE FOR A COMMITMENT TO ISSUE SHARES OF CLASS A COMMON STOCK IN AN AMOUNT UP TO 35.0% OF THE ISSUED AND OUTSTANDING CLASS A COMMON STOCK. THIS COMMON STOCK WILL BE DISTRIBUTED WHEN DIEGO TEL ACHIEVES CERTAIN REVENUE 3 PROJECTIONS; AND (b) THE TRANSFER OF 50.0% OF DEBTOR'S CLASS A COMMON STOCK PURSUANT TO A SETTLEMENT AND RELEASE AGREEMENT IN ORDER TO RESOLVE LITIGATION, DISPUTES AND CLAIMS BETWEEN THE DEBTOR, NEVADA ENERGY PARTNERS I (A NEVADA LIMITED PARTNERSHIP), NEVADA ELECTRIC POWER COMPANY AND OTHERS. AS A RESULT OF THESE TWO EVENTS, THE DEBTOR MAY ISSUE A LARGE QUANTITY OF ITS CLASS A COMMON STOCK -- 85.0% -- TO A TOTAL OF SEVENTEEN ENTITIES OR PERSONS. PLEASE SEE PAGE 74 FOR SPECIFIC DETAILS. THIS MAY HAVE LONG TERM IMPLICATIONS FOR THE DEBTOR. SPECIAL NOTICE The Plan provides that the Reorganized Debtor will purchase Diego Tel and have entered into two agreements. A copy of each of these contracts is enclosed. Review them carefully. These contracts contain important provisions which will effect the Reorganized Debtor. TABLE OF CONTENTS
Page 1. INTRODUCTION AND SUMMARY OF PROPOSED PLAN OF REORGANIZATION................................................................ 1 A. Introduction................................................................... 1 B. General Overview of PowerTel USA, Inc. and the Chapter 11 Case................. 1 C. Summary Information............................................................ 5 II. DEFINITIONS........................................................................... 12 III. INFORMATION ABOUT THE DEBTOR.......................................................... 17 A. Corporate Structure............................................................ 17 B. Summary of Debtor's Operations 1990-May 1996................................... 19 C. Change of Control (May 3,1996)................................................. 20 D. Summary of Pre-Petition Events from May 3, 1996 through the Petition Date...... 21 IV. INFORMATION ABOUT THE CHAPTER 11 CASE................................................. 28 A. The Involuntary Petition....................................................... 28 B. Actions by the Interim Trustee................................................. 29 C. The Debtor-in-Possession....................................................... 29 D. Summary of Activities of the Debtor-in-Possession.............................. 30 V. THE DEBTOR'S ESTATE................................................................... 32 A. Business Operations............................................................ 32 B. Assets and Financial Condition................................................. 32 C. Claims and Liabilities......................................................... 33 D. Business Affairs............................................................... 35
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Page E. Litigation and Claims.......................................................... 35 VI. THE REORGANIZED DEBTOR'S BUSINESS PLAN................................................ 39 VII. THE PROPOSED PLAN..................................................................... 44 A. Designated Dates............................................................... 44 B. Classification of Claims and Interest.......................................... 44 C. Provisions for Payments of Claims.............................................. 46 VIII. DISCUSSION OF PROCEDURAL MATTERS COMMON TO ALL CLAIMS............................... 58 A. Acceptance or Rejection of Plan: Effect of Rejection By One or More Classes of Claims.................................................. 58 B. Amendment to the Plan.......................................................... 59 C. Disallowance of Settled Claims and Post-Petition Additions..................... 59 D. Discharge of Debtor............................................................ 59 E. Disputed Claims Reserve........................................................ 59 F. Events of Default.............................................................. 61 G. Executory Contracts and Unexpired Leases....................................... 61 H. Means for Execution of the Plan................................................ 62 1. Multiple Claims................................................................ 64 J. Post-Confirmation Injunction and Automatic Stay................................ 64 K. Prohibition Against Discriminatory Treatment................................... 64 L. Provisions Covering Distributions.............................................. 65 M. Provisions for Execution and Supervision of the Plan........................... 65 N. Provisions for Treatment of Disputed Claims.................................... 66 0. Restriction on Transfer of Shares.............................................. 67 P. Set Offs....................................................................... 68 Q. Title to Assets; Discharge of Liabilities...................................... 69 R. Effect of Discharge on Rights Between Third Parties............................ 69 S. Filing of Additional Documents................................................. 70 T. Post Confirmation Acquisitions, Mergers and Stock Splits....................... 70 U. Class A Common Stock in Lieu of Cash........................................... 70 V. Settlement of Claims on Interests.............................................. 70 W. Ratification of Agreements..................................................... 71 X. Contested Claims............................................................... 71 IX. DISCUSSION OF MATTERS OF CORPORATE GOVERNANCE......................................... 72 A. Officers and Directors of Reorganized Debtor................................... 72 B. Compensation for Directors..................................................... 72 C. Cash Compensation for Officers and Employees................................... 72 D. Provisions for Management...................................................... 72 E. Capitalization................................................................. 73
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Page X. CERTAIN INCOME TAX CONSEQUENCES OF THE PLAN........................................... 74 A. General........................................................................ 74 B. Acquisition of DIEGO TEL....................................................... 78 C. Creditors...................................................................... 79 XI. MAJOR CONTINGENCIES AND RISK FACTORS.................................................. 79 A. General Business Matters....................................................... 79 B. Energy Cogeneration Related Matters............................................ 82 C. Telecommunications Related Operating Results Subject to Significant Fluctuations................................................................................ 82 Significant Competition........................................................ 90 D. Other Matters.................................................................. 93 XII. LIQUIDATION ANALYSIS.................................................................. 95 XIII. VOTING PROCEDURES AND REQUIREMENTS.................................................... 97 A. Ballots and Voting Deadline.................................................... 97 B. Creditors and Shareholders Entitled to Vote.................................... 98 C. Definition of Impairment....................................................... 99 D. Classes Impaired Under the Plan................................................ 99 E. Identification of Claims and Equity Interest Not Impaired by the Plan.......... 99 F. Information on Voting and Ballots.............................................. 99 G. Vote Required for Class Acceptance............................................ 100 H. Confirmation of the Plan...................................................... 100 XIV. CONCLUSION........................................................................... 102
6 1. INTRODUCTION AND SUMMARY OF PROPOSED PLAN OF REORGANIZATION A. Introduction. You have been provided with this document (which is called a "Disclosure Statement") (Note: capitalized terms are defined in Article 11 of this Disclosure Statement) because you have been identified as having a potentially legally recognized claim or interest in Debtor (referred to as either "PowerTel" or "Debtor'), which is currently involved in a reorganization pursuant to Chapter 11 of the Bankruptcy Code, 11 U.S.C. Sections 1101-1174. This Disclosure Statement is being made available to Creditors, Equity Interest holders, and others in order that everyone who has an interest in Debtor will have up-to-date information with respect to Debtor and its proposed Plan of Reorganization ("Plan"). Depending upon the nature of your interest in the debtor, you may be entitled to vote on the acceptance or rejection of the Plan, and this Disclosure Statement will assist you in evaluating your course of action. Therefore, you should read the Disclosure Statement carefully. This Disclosure Statement is relatively complicated but every effort has been made to organize it in a logical and straight forward fashion. To that end, the Disclosure Statement will follow the sequence set forth: History New Business Plan Plan of Reorganization Legal, Corporate, and Judicial Matters Common to all Claims Risk Factors Liquidation Analysis Voting Procedures B. General Overview of PowerTel USA, Inc. and the Chapter 11 Case. Debtor is a Delaware corporation established in 1983 which has largely functioned as a 7 nonregulated utility holding company during the period 1983 (the year of its incorporation) through February 1997 (when this Chapter 11 case was commenced). Its operations were mostly conducted through wholly owned subsidiaries, partnerships, and/or joint ventures with third parties. During this period, Debtor was known by various names (i.e., Munson Geothermal, Inc. and Nevada Energy Company, Inc.). In 1997, the former Board of Directors and President attempted to amend the Debtor's Articles of Incorporation to change, among other things, the name of the Company from Nevada Energy Company to PowerTel USA, Inc. Although the amendment was not valid because it was not approved by the shareholders, the Company has functioned using the name "PowerTel USA" and is referred to by that name in this reorganization. The Class A Common Stock of Debtor is registered with the Securities and Exchange Commission pursuant to Section 12 of the Securities Exchange Act of 1934, 15 U.S.C. Section 78, and prior to March 1997, the Class A Common Stock was traded in the over-the-counter market through various members of the National Association of Securities Dealers, Inc. ("NASD"). Debtor's Class A Common Stock was listed as a "small cap" stock with the NASD, but that listing was suspended in or about March 1997. In addition to its Class A Common Stock, Debtor has the following Equity Interests: 1) Class B Common Stock. The Class B Common Stock was issued in conjunction with the Munson Reorganization. The Class B is owned of record (100.0%) by Nevada Energy Partners 1, a Nevada limited partnership ("NEP"), which has sold the Class B to sixteen (16) business entities which owns equitable title. Pursuant to a settlement agreement which resolves certain pending litigation (see Article III), the Class B will be exchanged for Class A Common Stock in an amount equal 8 to 50.0% of the issued and outstanding Class A Common Stock computed as of ten days after the Effective Date. 2) Series A. Series B, and Series C Preferred Shares. The Series A (2,000,000 shares) was sold on May 3, 1996, to Golden Chance, Ltd., nominee for Waterford Trust Company. The Series B was sold on May 3, 1996, to four outgoing Directors of NEC, Messrs. Richard Cascarilla (two shares), Jeff Hartman (one share), Michael Kassouff (one share), and Jeffrey Modesitt (one share). The Series B had special voting rights in the event that Waterford/Golden Chance defaulted with respect to timely payments of its purchase obligations with respect to the Series A. The Series C was authorized but never issued. On February 13, 1997, several Creditors of Debtor filed an Involuntary Petition for Reorganization pursuant to section 303 of the United States Bankruptcy Code (the "Bankruptcy Code"). Thereafter, the Court permitted Debtor to resume operations functioning as a Debtor-in-Possession pursuant to section 1107 of the Bankruptcy Code. Debtor has filed a proposed Plan with the Court. The Plan is the only Plan which is being submitted for consideration to its Creditors. Debtor has also prepared this Disclosure Statement which has been reviewed by the Court and found to contain the requisite information necessary to permit Creditors and other interested parties to make an informed decision as to the proposed Plan. This Disclosure Statement is being made available to all known Creditors of Debtor, Equity Interest holders, and other parties-in- 9 interest in order to disclose important information pertaining to the proposed Plan in order that each Creditor, Equity Interest holder and party-in-interest will be reasonably informed before making a decision to accept or reject the proposed Plan. The purpose of this Introduction and Summary is to provide an overview of selected information which most often is requested upon receipt of a Disclosure Statement. ALL SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THE PLAN ITSELF, WHICH IS CONTROLLING IN THE EVENT OF ANY INCONSISTENCY. The Plan as designed and proposed by Debtor sets forth a specific proposal for the treatment of Debtor's Creditors and Equity Interest holders. A copy of the Plan will be transmitted only to all "Impaired" Creditors and Voting Shareholders because they are the only persons and entities who are entitled to vote on acceptance or rejection of the Plan. Classes 4, 5, 7, and 8 are the only classes of Creditors deemed to be impaired. This Disclosure Statement is not intended to replace a careful review and analysis of the Plan. Rather, this Disclosure Statement is intended to aide you in your independent review and analysis. While substantial effort has been made to explain all of the terms and conditions of the Plan, you may have additional questions or comments. If this is the situation, you are encouraged to contact legal counsel to Debtor, and counsel will attempt to be of assistance; it is important, however, to understand that the attorneys who are representing Debtor are not permitted to provide legal representation to individual Creditors or shareholders. Therefore, if you have questions regarding your specific legal rights or remedies, you should confer with your personal attorney. Moreover, neither this Disclosure Statement nor the Plan are intended to provide legal, tax, investment, or accounting advice to Creditors or shareholders. To the extent that there are questions with respect to the information set forth in this Disclosure Statement or the proposed Plan, questions should be directed to: 10 Van P. Carter, Esq. Walter & Haverfield P.L.L. 1300 Terminal Tower Cleveland, Ohio 44113 Telephone: (216) 348-8934 ext. 6032 Telefax: (216) 575-0911 e-mail: w&h@walterhav.com Counsel for PowerTel USA; or or Richard A. Cascarilla, President PowerTel USA, Inc. c/o 321 W. Lake Lansing Road East Lansing, Michigan 48823 Telephone: (517) 333-5277 Telefax: (517) 333-9869 DEBTOR STRONGLY ENCOURAGES YOU TO VOTE IN FAVOR OF THE PROPOSED PLAN WHICH IS THE ONLY MEANS (IN THE OPINION OF DEBTOR'S BOARD OF DIRECTORS AND MANAGEMENT) TO ADDRESS THE CONCERNS OF CREDITORS AND SHAREHOLDERS. On June 29, 1998, the United States Bankruptcy Court entered an order approving this Disclosure Statement as containing information of a kind and in sufficient detail to permit Creditors and Equity Interest holders who are eligible to vote to make an informed decision as to acceptance or rejection of the proposed Plan. A copy of the Order approving this Disclosure Statement is available upon request. This Disclosure Statement should be read in its entirety prior to voting. No solicitation of votes may be made except pursuant to this Disclosure Statement and section 1125 of the Bankruptcy Code, and no person has been authorized to use any of the information set forth in this Disclosure Statement or otherwise to solicit acceptances or rejections of the Plan other than with the information contained in this Disclosure Statement. Creditors should not rely 11 upon any information pertaining to Debtor other than the information contained in this Disclosure Statement with the attached Exhibits. EXCEPT AS SET FORTH IN THIS DISCLOSURE STATEMENT AND ITS EXHIBITS, NO REPRESENTATIONS CONCERNING DEBTOR, ITS ASSETS, ITS PAST OR FUTURE OPERATIONS, OR THE PLAN ARE AUTHORIZED, NOR ARE ANY SUCH REPRESENTATIONS TO BE RELIED UPON IN ARRIVING AT A DECISION TO ACCEPT OR REJECT THE PROPOSED PLAN. THERE HAS NOT BEEN AN INDEPENDENT AUDIT OF THE FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT. THE DEBTOR IS UNABLE TO WARRANT OR REPRESENT THAT THE FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS WITHOUT ANY INACCURACY. THE APPROVAL BY THE BANKRUPTCY COURT OF DEBTOR'S DISCLOSURE STATEMENT DOES NOT CONSTITUTE ANY ENDORSEMENT BY THE COURT OF THE DEBTOR'S PLAN OR A GUARANTY OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN. C. Summary Information 1. Who is in Bankruptcy? PowerTel USA, Inc. (which is sometimes referred to as "the Debtor" and sometimes as "PowerTel") is the business entity which is the subject of the pending bankruptcy case. The Debtor was incorporated in the State of Delaware in 1983 under the name "Munson Geothermal, Inc." In 1990, the debtor was renamed "Nevada Energy Company, Inc." An attempt was made to rename the Debtor as "PowerTel USA, Inc." in January 1997 and the Company will be using that name for purposes of this proceeding. 12 2 What is the nature of this reorganization? This reorganization is being conducted pursuant to Chapter 11 of the Bankruptcy Code. In summary, Chapter 11 permits a business such as Debtor to propose a plan by which its liabilities may be restructured in order to remain in business. In this instance, on February 13, 1997, several of the creditors of Debtor filed an Involuntary Petition for Reorganization pursuant to Section 303 of the United States Bankruptcy Code. After the proceeding was initiated, the Bankruptcy Court appointed an interim trustee to manage the affairs of the debtor. At that time, Debtor's Board of Directors consisted of Messrs. Charles Cain, Peter Cannell, and Michael Kassouff. Messrs. Cain and Cannell resigned, and Mr. Kassouff (as the sole remaining Director), pursuant to applicable Delaware law and Debtor's By-Laws, elected Messrs. Lawrence Herth and Richard A. Cascarilla as replacement Directors. Mr. Cascarilla had been a Director of NEC prior to May 3, 1996. The Board of Directors elected Mr. Cascarilla as President and Mr. Herth as Secretary-Treasurer. Following these events, the United States Trustee concurred in a request that management of the Debtor be resumed by the Board of Directors of Debtor and its Officers. Accordingly, on September 24, 1997, the United States Bankruptcy Court permitted the company to resume management of its own affairs and function as a "Debtor-in-Possession" pursuant to Section 1107 of the Bankruptcy Code. As a Debtor-in-Possession, Debtor is permitted to conduct its day-to-day business affairs but remains accountable to the Court. 3. Where is this taking Place? The Chapter 11 case was filed in the United States Bankruptcy Court for the State of Nevada. The presiding judge is the Honorable Bert M. Goldwater. 13 Reno, Nevada was the principal place of business of Debtor at the time of filing. The corporate offices were subsequently relocated to East Lansing, Michigan, the Chapter 11 proceeding, however, remains in Reno and is subject to the jurisdiction of that Court. 4. What is being submitted to the Creditors for their Analysis? Debtor has prepared a proposed Plan to address its financial responsibilities. The Creditors are being asked to review and approve that Plan. The purpose of this Disclosure Statement is to provide in-depth, detailed information so Creditors may determine whether to accept or reject the proposed Plan. Also included with this Disclosure Statement is a ballot (Exhibit 1) which will be used by Creditors and Equity Interest holders who are eligible to vote in order to cast a vote in favor of or against the Plan. The Disclosure Statement is also accompanied by various exhibits which contain information of an operational, financial, or business nature. It is important to read and examine the Disclosure Statement and all Exhibits. 5. When will this take place? The Bankruptcy Court has reviewed this Disclosure Statement and has made a determination that it meets the criteria established by the Bankruptcy Code, in particular Section 1125. That determination was made on June 29, 1998. The Court has also established a date by which ballots must be received by the Court. That date is August 24, 1998. When you vote, depending upon the nature of your Claim, it may be necessary for you to make an election with respect to two or more alternative payment structures. After the ballots are received, Debtor will submit a report to the Bankruptcy Court with respect to outcome of the voting. If the Plan is approved, the Bankruptcy Court will hold a 14 hearing for the purpose of confirming the Plan. In the event that one or more classes of Creditors should reject the Plan, the Court has the authority, pursuant to section 1129 (b) of the Bankruptcy Code, to mandate the adoption of the Plan. This requires at least one (1) impaired accepting class of Creditors. This authority is sometimes referred to as the "cramdown" power of the Court. 6. What is the nature of the Plan? Debtor has proposed a Plan which has four main components: a. Creditors. Each Creditor will be assigned to one of eight classes of Creditors. There is a ninth class for Disputed Claims of Creditors and a tenth class for Equity Interest holders. With the exception of four classes, all Creditors will be paid in full in Cash on the Effective Date, which is one hundred twenty (120) days after the Plan has been approved by the Court. Four classes of Creditors (Class 4, Allowed Priority Tax Claims, Class 5, Allowed Claims of Secured Creditors, Class 7, Allowed Claims of general Unsecured Creditors of Claims in Excess of $1,200, and Class 8, Claims of Nevada Energy Partners, Ltd. and others) will be paid a percentage of their Claim based upon the dollar amount of their Claim or will otherwise receive on the Payment Date less than 100.0% of the amount of each Claim. Because Creditors in Classes 4, 5, 7 and 8 will not receive 100.0% of their Claims in Cash, the Creditors in these Classes are considered to be "Impaired" and, therefore, Creditors in Classes 4, 5, 7 and 8 are the only Creditors who will be allowed to vote on acceptance or rejection of the proposed Plan. As to the Creditors in Class 4, the Plan provides that these Claims will be paid in Cash in 15 sixteen (16) equal quarterly installments over a four (4) year term with the first payment being made on the Payment Date. As to Creditors in Class 5, the Plan provides that these Claims will be paid in full in Cash on the Effective Date or, alternatively, at the Debtor's sole option, in equal monthly installments, the first installment to be made on the Payment Date and continuing over a term consisting of thirty (30) months, or upon such other terms as may be agreed upon between the Creditor and Debtor. As to the Creditors in Class 7, the Plan provides that the Creditor may elect to receive either (1) a lump sum payment of $1,200 on the Effective Date, (2) a combination of Cash and Class A Common Stock, or (3) all stock. As to Class 8, which has multiple parties-in-interest, Debtor is proposing the Court ratify its settlement of litigation and a compromise of claims involving the Class 8 claimants. As to Class 9, that class has been reserved for disputed claims. b. Equity lnterest Holders As to the Equity Interest Holders in Class 10, most shareholders owning Class A Common Stock are also entitled to vote on acceptance of the Plan. These shareholders entitled to vote are any shareholder of record holding Class A Common Stock on May 21, 1998 except any shareholder who acquired Class A Common Stock subsequent to May 3, 1996 and (a) who failed to file a Proof of Interest or (b) filed a Proof of Interest which Proof of Interest has been disputed by Debtor. The capitalization of Debtor will be significantly effected as follows: i. Class B Common Stock will be converted to Class A Common Stock, and there will be a reverse stock split to reduce the number of shares to no less than 500,000 and no more than 20,000,000. Thereafter, the Series A and Series C Preferred Shares 16 and the Class B Common Stock shall be deemed to be extinguished by Amendment to the Articles of Incorporation; ii. The Series B Preferred Shares shall be repurchased by Debtor. The Articles of Incorporation will be amended to extinguish Series B Preferred Shares and to establish a new class of preferred shares called "Special Stock." iii. All Class A Common Stock issued after May 3, 1996 will be rescinded and deemed to be null and void ab initio. except as to shareholders who are (i) bona fide purchasers for value, and (ii) filed a Proof of Interest on or before November 10, 1997, which Proof of Interest was not disputed by the Debtor. iv. The reverse stock split effect by NEC in January 1997 will be deemed null and void ab initio. v. By virtue of the conversion of the Class B Common Stock to Class A Common Stock and the issuance of Class A Common Stock in conjunction with the acquisition of Diego Tel, there will be substantial dilution of the equity interest of the Class A Common Stock shareholders of record as of May 3, 1996, whose interest will be diluted from 100% of the issued and outstanding Class A Common Stock to 15.0%. c. Judicial Actions Promptly after the Confirmation Date, the Bankruptcy Court shall enter an Order to the effect that: i. All Common and Preferred Stock issued by Debtor subsequent to May 3, 1996 is null and void ab initio, except as to shareholders who (i) are bona fide purchasers for value, and (ii) have filed a Proof of Interest on or before November 10, 1997, which Proof of Interest was not contested by the Debtor; 17 ii. The election of Michael Kassouff as a Director is hereby ratified and all subsequent elections of officers are also ratified. iii. The 1:6 reverse stock split effected by Debtor in January 1997 is null and void ab initio; iv. The amendments to Debtor's Articles of Incorporation filed with the Secretary of State for the State of Delaware in January 1997 are null and void ab initio, v. Any claimed security interest of Brady Geothermal Park Power Partners against any asset of Debtor is null and void. vi. The following actions taken by the Debtor's Board of Directors are null and void ab initio: (a.) Proposal to Amend Corporate Name and Symbol (b.) Proposal to Increase Authorized Shares (c.) Proposal to Increase Authorized Class B Shares (d.) Proposal to Authorize Class C Stock (e.) Proposal to Authorize Lease Guaranty for Santa Barbara Property (f.) Debtor reserves the right to amend, supplement or modify this listing upon further investigation of the corporate records. vii. The Debtor is authorized to retain and to enforce any claims or interests which the Debtor has or may have pursuant to the Bankruptcy Code, whether or not such claims or interests have been lodged in an adversary proceeding commenced prior to the Confirmation of the Plan. 18 viii. Debtor is granted 120 days from the Confirmation Date to cure all defaults, if any, to National Union Fire Insurance Company, pursuant to policy number 445- 53-00, renewal of policy number 443-38-50, and is authorized to reserve all rights to pursue any and all remedies covered by said policy. ix. Debtor shall be authorized to take all necessary steps to effect the above. d. Litigation and Claims. Debtor has entered into settlements with various creditors, litigants and other parties, the most significant of which is the settlement with NEP. The Court will (1) ratify those Settlements and (2) authorize the Debtor to retain and to enforce any claims or interests which the Debtor has or may have pursuant to the Bankruptcy Code. 7. How do I vote for or against the Plan? Creditors who are eligible to vote and Voting Shareholders will be entitled to cast a vote in favor of acceptance or rejection of the Plan. The ballot is enclosed as Exhibit 1. Creditors who are eligible to vote and Voting Shareholders should follow the procedures set forth in Article XII of this Disclosure Statement. In deciding whether to vote in favor of or against the Plan as proposed by Debtor, Creditors and entitled to vote and Voting Shareholders should review this Disclosure Statement carefully. Certain words and phrases have a specific meaning, and these words and phrases are defined in Article II of this Disclosure Statement. 8. How can I obtain a copy of documents referenced in the Plan or Disclosure Statement? The Plan and Disclosure Statement reference various agreements and documents, some 19 of which are not attached as Exhibits. For a copy of any document referenced in either the Plan or the Disclosure Statement, please contact Debtor or its legal counsel at the addresses and telephone numbers in Article 1, Section B of this Disclosure Statement. II. DEFINITIONS As used in the Plan, the following special terms have the respective meanings set forth below: A. Administration Expense: Any cost or expense of administration of the Chapter 11 case entitled to priority pursuant to section 507(a)(1) and allowed pursuant to section 503(b) of the Bankruptcy Code, including without limitation, any actual and necessary expenses of preserving the Debtor's estate, and actual and necessary expenses of operating the business of the Debtor (including the post-petition compensation of Officers and Directors of Debtor), any indebtedness or obligations incurred by or assessed against the Debtor in connection with the conduct of its business, or for the acquisition or lease of property or for providing of services to the Debtor, and allowances of compensation or reimbursement of expenses to the extent allowed by the Bankruptcy Court under the Bankruptcy Code, and any fees or charges assessed against the Debtor's estate pursuant to Title 28, Chapter 123, United States Code. B. Affiliates: Every other entity which is an "affiliate" of Debtor within the meaning of section 101 (2) of the Bankruptcy Code. C. Allowed Claim or Allowed Equity Interest: Any Claim against or Equity Interest in the Debtor, proof of which was filed on or before the last date designated by the Bankruptcy Court as the last date for filing Proofs of Claims or Equity Interest or (if no Proof of Claim or Equity Interest is filed) which has been or hereafter is listed by the Debtor as liquidated in amount and not disputed or contingent and, in either case, a Claim or Equity Interest as to 20 which no objection to the allowance thereof has been interposed or such Claim or Equity Interest has been allowed in whole or in part by a Final Order. Unless otherwise specified in the Plan, "Allowed Claim" shall not, for the purposes of computation or Distributions under the Plan, include post-petition interest on the amount of such Claim. D. Allowed Priority Tax Claim: A Priority Tax Claim to the extent that it is or has become an Allowed Claim, which in any event shall be reduced by the amount of any offsets, credits, or refunds to which the Debtor or Debtor-in-Possession shall be entitled on the Confirmation Date. E. Allowed Secured Claim: A Secured Claim to the extent it is or has become an Allowed Claim. F. Allowed Unsecured Claim: An Unsecured Claim to the extent it is or has become an Allowed Claim. G. Bankruptcy Code: The Bankruptcy Reform Act of 1978, as amended and codified as Title 11, United States Code. H. Bankruptcy Court: The unit of the United States District Court for the District of Nevada having jurisdiction over the Chapter 11 case, or in the event such court ceases to exercise jurisdiction over the Chapter 11 case, such court or adjunct thereof that exercises jurisdiction over Chapter 11 cases in lieu of the United States Bankruptcy Court for the District of Nevada. J. Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure (as amended), as applicable to the Chapter 11 cases. K. CEC: Combustion Energy Company, a Nevada corporation with its 21 principal place of business in Reno, Nevada. L. Cash: Cash, cash equivalents and other readily marketable securities or instruments issued by a person other than Debtor, including, without limitation, readily marketable direct obligations of the United States of America, certificates of deposit issued by banks and commercial paper of any entity, including interest accrued or earned thereon. M. Chapter 11 Case: The case being conducted pursuant to Chapter 11 of the United States Bankruptcy Code in which Debtor is the Debtor-in-Possession and identified as Case No. 97-30265-BMG. N. Claim: Any right to payment from the Debtor, which right arose on or before the Petition Date, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured or unsecured; or any right to an equitable remedy for future performance if such breach gives rise to a right of payment from the Debtor, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, disputed, undisputed, secured or unsecured. O. Class A Common Stock: The Class A Common Stock of Debtor. P. Class B Common Stock: The Class B Common Stock of Debtor previously issued by NEC pursuant to the Munson Reorganization. Q. Confirmation Date: The Date upon which the Bankruptcy Court shall enter the Confirmation Order; provided, however, that if on motion the Confirmation Order 22 or consummation of the Plan is stayed pending appeal, then the Confirmation Date shall be the entry of the Final Order vacating such stay or the date on which such stay expires and is no longer in effect. R. Creditor: Any person that has a Claim against the Debtor that arose on or before the Petition Date. S. Debtor: PowerTel, USA, Inc. formerly known as Nevada Energy Company, Inc. ("NEC") and also formally known as Munson Geothermal, Inc. ("Munson"). T. Debtor-in-Possession: PowerTel, as Debtor-in-Possession. U. Declaration Date : The thirtieth (30th) day after the Confirmation Date. W. Diego Tel: Diego Tel, Inc. a Nevada corporation to be acquired by Debtor. Y. Disputed Claim. Claims or Equity Interests against the Debtor which (a) are listed in a "Schedule of Unresolved Claims" which may be filed with the Bankruptcy Court by the Debtor on or before the Confirmation Date, or (b) are the subject of an objection which has been filed on or before the Effective Date by a party-in-interest and which objection has not been withdrawn or resolved by entry of a Final Order on or before the Effective Date or (c) are identified in the Debtor's Schedules as contingent, unliquidated or disputed. X. Distributions: The property required by the Plan to be distributed to the holders of Allowed Claims and Allowed Equity Interests. AA. Effective Date: Date upon which certain Distribution to be made pursuant 23 to the Plan will be effect, which date shall be on the first business day following the expiration of one hundred twentieth (120th) day after the Confirmation Date. BB. Equity Interest: Any interest in the Debtor represented by ownership of Common and/or Preferred Stock. CC. Exchange Act: The Securities Exchange Act of 1934, as amended and codified in 15 U.S.C. Section 78b, et. seq. DD. Final Order: An order of judgment of the Bankruptcy Court which has not been reversed, stayed, modified or amended and as to which (a) any appeal that has been taken has been finally determined or dismissed, or (b) the time for appeal has expired and no notice of appeal has been filed. EE. Munson Reorganization: The 1988 Chapter 11 case involving Munson Geothermal, Inc. and referenced as Case No. 88-278. FF. NEP: Nevada Energy Partners I, Limited Partnership, a limited partnership organized pursuant to the laws of the State of Nevada. The general partner is Nevada Electric Power Company, which is wholly owned by Jeffrey Antisdel, former president of the Debtor. GG. NEP Agreement: The August 16, 1996 Agreement between NEP and Debtor. HH. NEP Settlement: The Settlement and Release Agreement dated as of December 1, 1997 by and among Debtor, NEP and others. JJ. NEPC Indemnification: The Indemnification Agreement dated as of 24 December 1, 1997 by and among Nevada Electric Power Company, the Debtor and others. KK. Ownership Settlement: The Settlement and Release Agreement dated as of February 10, 1998 by and among Mr. John Vogel, Mr. Dean Chamberlain, David Wallace, the Debtor and others. LL. Payment Date: Date upon which certain payments to be made pursuant to the Plan will be effected, which date shall be the first business day following expiration of three hundred sixty-five (365) days following the Confirmation Date. MM. Person: An individual, a corporation, a partnership, an association, a joint stock company, a joint venture, an estate, a trust, an unincorporated organization or a government or any particular subdivision thereon or other entity. NN. Petition Date: February 13, 1997, the date of filing of the involuntary bankruptcy petition. OO. Plan: The Plan of Reorganization, either in its present form or as it may be altered, amended, or modified from time to time. PP. PowerTel: PowerTel USA, Inc., the Debtor. QQ. Pre 1990 Priority Tax Claim: Any Priority Tax Claim arising prior to 1990 and which was the subject of the Plan of Reorganization adjusted in the Munson Reorganization. RR. Priority Non-Tax Claim: Any Claim other than (i) an Administrative Expense or (ii) a Priority Tax Claim to the extent entitled to priority and payment under section 507(a) of the Bankruptcy Code. SS. Priority Tax Claim: Any Claim entitled to priority in payment under section 25 507(a)(8) of the Bankruptcy Code. TT. Pro Rata: Proportionately so that the ratio of the amount of a particular Claim or interest to the total amount of Allowed Claims or Allowed Equity Interests of the class in which the particular Claim or interest is included is the same as the ratio of the amount of consideration distributed on account of such particular Claim or interest to the consideration distributed on account of Allowed Claim or Allowed Equity Interest of the class in which the particular Claim or interest is included. UU. Reorganized Debtor: The Debtor subsequent to Confirmation of the Plan. VV. Secured Claim: A right to payment from the Debtor, other than an Administration Expense or Priority Tax Claim, for a prepetition debt to the extent that it is validly and properly secured, in accordance with applicable law, by any form of collateral, real, personal, intangible or tangible, which is evidenced by a timely filed Proof of Claim or by Debtor's Schedules. WW. SEC: The United States Securities and Exchange Commission. XX. Schedules: Schedules and Statement of Affairs, as amended, filed by the Debtor with the Bankruptcy Court listing liabilities and assets. YY. TTI: Telecom Technologies, Inc., a wholly owned subsidiary of the Debtor. ZZ. Unsecured Creditor: Any Creditor that holds a Claim which is not a Secured Claim. AAA. VivaTel: Viva Telecommunications, Inc., a Nevada corporation, acquired by the Debtor. BBB. Voting Shareholder: Any shareholder of record on May 21, 1998 holding Class 26 A Common Stock except any shareholder who has filed a Proof of Interest for which Proof of Interest was disputed by Debtor. CCC. Wage Claim: A claim for wages due, payable, and earned prior to the Petition Date. III. INFORMATION ABOUT THE DEBTOR A. Corporate Structure. Debtor was incorporated in Delaware on December 20, 1983 under the name "Munson Geothermal, Inc." In 1990, following confirmation of a Plan of Reorganization pursuant to Chapter 11 of the Bankruptcy Code, the Debtor's name was changed to "Nevada Energy Company." In January 1997, the Debtor's Articles of Incorporation were refiled with the Secretary of State for Delaware in an attempt to change the name of the Debtor to "PowerTel USA, Inc." According to the Debtor's Articles of Incorporation, the Debtor has the following classes of common and preferred stock: * Class A Common Stock, par value of $.001 The Class A Common Stock is publicly traded by members of the National Association of Securities Dealers, Inc. ("NASD"). In March 1997, the Debtors Class A Common Stock was listed by the NASD as a "small cap" stock, but the Class A Common Stock was delisted. As of the Petition Date, there were about 1,000 shareholders of record owning Class A Common Stock. * Class B Common Stock, par value of $.001 The Class B Common Stock was initially created in 1990 when the 27 Debtor's Articles of Incorporation were amended following confirmation of a Plan of Reorganization in the Munson bankruptcy. The Class B Common Stock pays no dividend but is voting. The Class B Common Stock has a right to be converted to Class A Common Stock at any time. When issued in 1990, the Class B Common Stock, if converted, would be equal to 50.0% of the issued and outstanding Class A Common Stock, computed subsequent to the conversion. The Class B Common Stock is vested with a "non-dilution" provision, i.e. for every share of Class A Common Stock which is issued, an additional share of Class B Common Stock has a right to be issued. As of the Petition Date, the sole shareholder of record owning Class B Common Stock was Nevada Energy Partnership I, a Nevada limited partnership. On or about August 1996, NEP converted Class B common stock to Class A common stock and sold the Class A to 16 Bahamian corporations; however, the shares certificates were never transferred. Accordingly, while NEP appears as the shareholder of record, equitable title is owned by the 16 Bahamian corporations * Series A Preferred Shares An amendment to the Debtor's Articles of Incorporation in 1996 authorized the Debtor to issue 2,000,000 Series A Preferred Shares, which were immediately sold to Golden Chance, Ltd., an Isle of Man company limited by shares, as nominee per Waterford Trust Company Limited, an Irish corporation. The Series A Preferred Shares are 28 nonvoting but are convertible into Class A Common Stock at a 1:1 ratio. As of the Petition Date, the sole shareholder of record of the Series A Preferred Shares was Golden Chance, Ltd. * Series B Preferred Shares When the Debtor's Articles of Incorporation were amended to authorize the issuance of Series A Preferred Shares, the Articles of Incorporation were also amended to authorize the Debtor to issue Series B Preferred Shares. The Series B Preferred Shares do not receive a dividend and are non-voting unless and until there is a default with respect to the purchase of Series A Preferred Shares by Golden Chance, Ltd. As of the Petition Date, there were 5 shares of Series B Preferred Shares issued and outstanding, which were owned of record by Mr. Richard A. Cascarilla (2 shares), Mr. Jeffrey Hartman (1 share), Mr. Jeffrey Modesitt (1 share) and Mr. Michael Kassouff (1 share). * Series C Preferred Shares The Debtor's Articles of Incorporation state that the Debtor is authorized to issue 20,000,000 shares of Series C Preferred. To the best of the Debtor's information, no Series C Preferred Shares have been issued. B. Summary of Debtor's Operations 1990-May 1996. 1 . Operations. Commencing with the confirmation of the Plan of Reorganization for the Debtor by the United States Bankruptcy Court for the District of Nevada in Case No. 88-278 captioned In re: Munson Geothermal, Inc. in December 1990 and continuing through May 3, 1996 the Debtor functioned as a non-regulated utility holding company primarily 29 engaged in the development, financing, construction and operation of geothermal, wind and biomass energy resources which are used primarily to generate electric power. In 1994, the Debtor (through one of its then subsidiaries) acquired by merger Herth Printing and Business Supplies, Inc. As a result of that acquisition, the Debtor also began to operate a custom printing and catalogue based retail office supply business. The Debtor's operations were conducted through a variety of joint ventures, partnerships and subsidiaries and are discussed in detail in filings made by the Debtor with the Securities and Exchange Commission. The latest SEC filings by the Debtor include the following: * An annual report for the twelve months ended February 28, 1996 as reported on Form 1 O-KSB, and * Quarterly reports for the three months ended on May 30, August 30 and November 30, 1996 as reported on Form 10-QSB. The Debtor believes that the financial information contained in its quarterly reports for the period ending May 30, August 30 and November 30, 1996 as reported on form 10- QSB and filed with the FCC may have been inaccurate for, among other things, failure to take into consideration the existence of and disbursement from the Palm Desert Bank account. A copy of any one or all of the foregoing reports are available upon request, without charge, by contacting the Debtor or its legal counsel. 2. Financial Results. During the period 1990 through May 3, 1996, the Debtor continuously generated revenue from operations and was able to meet its financial obligations as they became due. The Debtor was also profitable on an intermittent basis. During this approximately six year period, the Debtor's Class A Common Stock traded 30 in the over-the-counter market in a range of $3.62/share (high) to $0.25/share (low). The Debtor's filings with the SEC referenced above contain detailed financial. statements for the fiscal years ending February 28, 1990, 1991, 1992, 1993, 1994, 1995 and 1996. Interim (unaudited) financial statements also appear in the Debtor's quarterly reports on Form 10-QSB for the three months ended May 30, August 30 and November 30, 1996. 3. Management. During the period 1990 through May 3, 1996, the Debtor's Board of Directors and Officers consisted of:
Name Position ---- -------- Jeffrey Antisdel Director and President Richard A. Cascarilla Director and Secretary Jeffrey Modesitt Director Jeffrey Hartman Director Michael Kassouff Director
Information on the professional experience, education and background of each of the individuals identified above was contained in the Debtor's annual Proxy solicitation, which are also available without charge upon request to Debtor or its legal counsel. C. Change of Control (May 3, 1996). On or about May 3, 1996, the Debtor sold to Golden Chance, Ltd., an Isle of Mann corporation limited by shares, 2,000,000 shares of the Debtor's Series A Preferred Shares. The terms of sale, in summary, were (i) $100,000 cash, and (2) a promissory note to pay $4,900,000 together with interest over a term not to exceed twelve (12) months. Golden Chance, Ltd. was obligated to pay the Debtor the amount of $500,000 per month commencing in August 1996. The promissory note did not allow for prepayment. The promissory note was guaranteed by Waterford Trust Company Limited, an Irish corporation. Simultaneously with the sale of the Series A Preferred Shares, the Debtor sold 5 shares 31 of its Series B Preferred Shares. Upon the issuance of the Series A Preferred Shares to Golden Chance, Ltd., the Board of Directors of the Debtor resigned and was replaced by Directors designated by Golden Chance, Ltd. as follows:
Name Position ---- -------- Charles Cain Director Charles Cannell Director Robert Goold Director
Messrs. Antisdel and Cascarilla agreed to remain as President and Secretary (respectively) on an interim basis until new officers were appointed by the Board of Directors. The new Board of Directors and their "consultant"/advisor, Mr. Pattinson Hayton III, assumed control of the Debtor on or about May 3, 1996. Unknown to the Debtor and its former Board of Directors, Mr. Hayton had been previously enjoined by the United States District Court for the District of Columbia, Docket No. 88-305-NHJ on August 18, 1988, from violating certain provisions of the federal securities laws and had been fined $60,000 for civil contempt of that injunction. D. Summary of Pre-Petition Events from May 3, 1996 through the Petition Date. During the period May 3, 1996 through the Petition Date, the operational and financial affairs of the Debtor deteriorated significantly. Among other things, * Valuable assets were sold, transferred or conveyed for little or no consideration, * Large amounts of cash were wire transferred off-shore, paid to third parties or converted into travelers checks and released, * False, misleading or inaccurate documents were filed with the Securities 32 and Exchange Commission, * Litigation was commenced by various third parties seeking restitution and/or specific performance of contractual commitments involving the Debtor, * One or more companies were acquired for substantial cash and Class A Common Stock despite the fact that the acquired company had no assets, no revenue, no proprietary products and was unable to produce audited or auditable financial statements, * Golden Chance, Ltd. defaulted with respect to payment of its $4,900,000 promissory note for the purchase of Series A Preferred Shares, and Waterford failed to fulfill its financial guarantee * False, misleading or inaccurate press releases were issued, and * Massive amounts of Class A Common Stock were issued for which the Debtor received little or no consideration. Several events warrant more detailed discussion, including the following: 1 . Sale of Class B Common Stock. In May 1996, when Waterford contracted to purchase the Series A Preferred, Golden Chance contracted to purchase 100% of the issued and outstanding Class B Common Stock from Nevada Energy Partners I ("NEP"), a Nevada limited partnership. Under the contract, NEP retained the Class B Common Stock until fully paid but Golden Chance received a proxy to vote the Class B stock which was less than 20% of 33 the outstanding voting shares of the Debtor. The General Partner for NEP was Nevada Electric Power Company, a Nevada corporation which was owned 100.0% by Mr. Jeffery Antisdel, the then President of the Debtor. The General Partner of NEP owned 40.0%. Under the August 16, 1996 agreement the Class B Common Stock owned by NEP was convertible into Class A Common Stock on a 1:1 ratio. As of August 1996, the Class B Common Stock, if converted, was equal to 50.0% of the issued and outstanding Class A Common Stock. Because the Class B Common Stock had voting rights, whoever controlled the Class B Common Stock had a significant impact on the resolution of issues submitted to the Shareholders for approval. In May 1996, the Debtor's Articles of Incorporation provided that a "supermajority" vote of 80.0% of the voting stock (i.e. the Class A and Class B Common Stock) was required to amend the Debtor's Articles of Incorporation. When Golden Chance purchased the Series A Preferred Stock, and they subsequently entered into a separate agreement with NEPC. Although the Debtor has not been provided with a copy of this Agreement, it is Debtor's understanding that the Agreement provided, in substance, as follows: * NEPC granted to Golden Chance a Power of Attorney to vote the Class B Common Stock, and * Golden Chance agreed to purchase 4,437,473 shares of Class B Common Stock, from NEPC in exchange for $1,200,000 to be paid at the rate of $50,000 per month, and pursuant to the terms of a Promissory Note given to NEPC by Golden Chance. No payments were ever made. 34 The Debtor's Annual Meeting of Shareholders was scheduled for August 16, 1996 in Santa Barbara, California. Prior to the meeting, David Wallace, Esq., legal counsel for NEPC, declared an event of default with respect to the $1,200,000 Promissory Note issued to NEPC and threatened to revoke the proxy granted to Golden Chance to vote the Class B Common Shares. If the proxy were revoked, NEP would have controlled less than 50.0% of the votes to be cast at the annual meeting. Immediately prior to the commencement of the Annual Meeting, a new agreement was negotiated between the Debtor (whose Directors had been designated by Golden Chance), and NEPC. The subject Agreement is attached hereto as Exhibit 2. Subsequent to the execution of this revised agreement, Mr. Wallace negotiated an agreement between NEPC and 16 Bahamian corporations. The Debtor has learned that NEPC contracted to sell about 4,437,473 shares of Class A Common Stock to the 16 Bahamian corporations for a total of about $1,200,000 which obligation was set forth in Promissory Notes issued to NEPC. Debtor has been informed that no payments were ever made on this Note. After the commencement of this Chapter 11 case and the entry of an Order authorizing the Debtor to function as Debtor-in-Possession, the Debtor has given notice of its intent to commence an adversary proceeding for the purposing of setting aside the August 1996 agreement as being in violation of Section 547 and/or 548 of the Bankruptcy Code. All of the parties to the August 1996 Agreement have entered into a settlement agreement that is attached hereto as Exhibit 2. 2. The Palm Desert Bank Account. On May 2, 1996 a bank account was opened in Palm Desert, California at a branch office 35 of Bank of America in the name of "Nevada Energy Company." The initial deposit into that account consisted of $100,000, which was the initial payment to be made by Golden Chance for the purchase of the Debtor's Series A Preferred Stock. Although this bank account was in the name of "Nevada Energy Company," no corporate officer of the Debtor controlled this account. The new Board of Directors designated by Waterford, authorized the formation of this account and placed it under the control of Mr. Pattinson Hayton's assistant, Darlene Ramos. During the period May 2 through August 5, 1996, a total of $1,342,401 was wire transferred into this account. Of this sum, the Debtor received less than $200,000. All of the balance (i.e. more than $1,100,000) was disbursed without the prior knowledge or approval of any of Debtors officers, although Mr. Antisdel (the then President of the Debtor) knew of this bank account and demanded that the payments be deposited into the Debtor's bank account in Reno, Nevada. Prior to the 1996 Annual Meeting of Shareholders, Mr. Jeffery Antisdel received an itemized schedule of disbursements from the Palm Desert bank account. This schedule confirmed disbursements of large amount of money, but detailed documentation was not provided. Mr. Antisdel and Mr. Cascarilla entered into an agreement with the Debtor's auditors, Kafoury, Armstrong and Company, to investigate this account. Darlene Ramos refused to turn over the necessary documents at Pattinson Hayton's direction. Following the Annual Meeting of Shareholders, there was a meeting involving two of the Debtors three Directors, the officers, Mr. Antisdel, Mr. Cascarilla, Mr. Hayton and. others. At that meeting, Mr. Hayton represented that he would repay to the Debtor any proceeds which Mr. Antisdel determined had been improperly disbursed. Mr. Antisdel was terminated by the 36 Debtor's Board of Directors in September 1996 prior to making any determination regarding disbursements from the Palm Desert account. The Debtor is currently investigating these disbursements and the accuracy of its filings with the SEC, and intends to seek disgorgement and/or restitution where appropriate. 3. Telecom Technologies, Inc. ("TTI"). In August 1996, the Directors designated by Waterford authorized the Debtor to acquire 100% of the issued and outstanding common stock of TTI in exchange for (i) the payment of $500,000 cash, and (ii) 2,000,000 shares of Class A Common Stock, which was then trading for about $1.00 per share. The Debtor purchased TTI from WINA Associates. Immediately prior to the 1996 Annual Meeting of Shareholders, Messrs. Antisdel and Cascarilla learned that TTI had recently been sold by Mr. and Mrs. Dean Chamberlain (its sole shareholders) to WINA Associates for (i) a promise to pay $135,000 of which only $45,000 had been paid, and (ii) 100,000 shares of Class A Common Stock. Mr. Chamberlain also confirmed his understanding that Mr. Pattinson Hayton owned or controlled WINA Associates. Mr. Antisdel then directed the Debtors auditors to examine the books and records of TTI in anticipation of requisite SEC filings. The auditors informed Mr. Antisdel that TTI did not maintain its financial records in accordance with generally accepted accounting principles. According to the auditors, TTI had little or no revenue or assets. Messrs. Cascarilla and Antisdel objected to this transaction and asked that the Golden Chance designated Board of Directors rescind the transaction. The Board refused to do so. Debtor later filed a Form 8K indicating that the transaction had been rescinded, but no consideration was returned to the Debtor. The Debtor is in the process of investigating this transaction and intends to seek 37 restitution and/or disgorgement. 4. The Santa Barbara Lease. In the fall of 1996, Mr. Hayton went to Santa Barbara and entered into negotiations to lease 100.0% of a multistory building consisting of about 32,000 sq. ft. At that time, the Debtor had only four employees and nominal revenue, which was not sufficient to pay the monthly rental. Although the exact purpose for this transaction is not known, it is believed that Mr. Hayton wanted to utilize the building as a vehicle to create the illusion that the Debtor's business and operations were successful and growing, and operate his personal business at the Debtor's expense. Central Communications Corporation ("CCC"), a subsidiary of Debtor, thereafter executed a lease agreement to rent the entire building. In order to give CCC the illusion of stability, the Debtor (under the control of the Golden Chance Board of Directors) caused financial statements to be prepared and filed with the SEC which were inaccurate. Once acquired, Mr. Hayton occupied an executive suite and conducted business on behalf of other companies and enterprises at that facility. The landlord demanded that the Debtor guarantee the leasehold obligation. The Board of Directors never authorized this guarantee. CCC never had any revenue. CCC ultimately defaulted with respect to its lease payment obligations. The landlord has filed a Proof of Claim seeking to rely upon the alleged guarantee of Debtor. The Debtor has objected to this Proof of Claim and denies that its Board of Directors ever authorized the guarantee. After the approval of the Disclosure Statement, the landlord withdrew the claim. 38 5. February 1997 Stock Issuance. On February 6, 1997, just 7 days before the Petition Date, Mr. Pattinson Hayton (the then President of the Debtor) arranged for 470,000 shares of the Debtor's Class A Common Stock to be issued to three (3) entities. The Class A common stock was to be distributed as follows:
Name Number of Shares - -------------------------------------------------------------------------------- Pillsbury Madison & Sutro 150,000 Jones, McCloy and Peterson 220,000 Wilson, Elser, Moskowitz, Esselman and Dicker 100,000
The Debtor received little or no consideration for the issuance of this stock. At that time, the Debtor's Class A stock was traded at approximately $0.125 per share. The Debtor is in the process of investigating these transactions and intends to seek disgorgement and or restitution arising out of these events. The plan of reorganization provides, among other things, that the January, 1997 "amended" Articles of Incorporation are rescinded and withdrawn and in place thereof new Articles of Incorporation will be filed with the Secretary of State for the State of Delaware. The Debtor is in the process of investigating the facts and circumstances surrounding the attempt in 1997 to amend the Articles of Incorporation. The Debtor anticipates that it will pursue claims for damages and restitution arising out of such actions. 6. Attempt to Amend Articles of Incorporation. In the Fall of 1996, the Debtor's then Board of Directors designed a strategy to amend the Debtor's Articles of Incorporation in order to increase the authorized number of shares of Class A common stock and to create a new class of common stock, to be known as "Class C 39 Common Stock". At that time, the Debtor's Articles of Incorporation contained a "super majority" voting requirement. In other words, in order for the Articles of' Incorporation to be amended, the affirmative vote of eighty percent (80%) of the issued and outstanding Class A and Class B common shares was required. Without securing the affirmative vote of eighty percent (80%) of the Class A and Class B common shares, the then Board of Directors of the Debtor, working in conjunction with various attorneys, caused an affidavit to be filed with the Secretary of State for the State of Delaware to the effect that the super voting requirement had not been properly adopted and, therefore, the Articles of Incorporation to be amended on the basis of the affirmative vote of only fifty percent (50%) of the issued and outstanding Class A and Class B common shares. On the basis of that affidavit, the Secretary of State for the State of Delaware permitted the Debtor to file Amended Articles of Incorporation. The Debtor has determined that the affidavit as submitted to the Secretary of State for the State of Delaware was false and inaccurate. Accordingly, the attempt to amend the Articles of Incorporation was void. 7. Waterford Defaults. In consideration of its purchase of the Series A Preferred Shares, Golden Chance was contractually obligated to pay to Debtor a total of $4,950,000 to be paid in equal monthly installments of $500,000 per month commencing August 1996. Prior to September 1996, Golden Chance was in default of its payment obligations. At that time. Mr. Antisdel (as President) made demand for payment upon Waterford Trust Company Limited, an Irish corporation, which had guaranteed timely payment of the Golden Chance note. Waterford failed to fulfill its guarantee commitment. 40 Messrs. Antisdel (as President, and Richard Cascarilla, as Secretary to the Debtor) prepared a special report on Form 8-K to be filed with the SEC reporting the default. Messrs. Antisdel and Cascarilla were fired the day before that Form 8-K could be filed. Thereafter, the Debtor's Board of Directors adopted a resolution waiving the default. At least two members of the Board of Directors (Messrs. Cain and Cannel) were also Directors or affiliates of Waterford and/or Golden Chance. Subsequent to the default, to the best of Debtor's knowledge, Golden Chance made no further payments on its promissory note and Waterford failed to fulfill its guarantee. As a result of these events, the Debtor's financial condition deteriorated significantly subsequent to May 3, 1996, and Debtor failed to pay its creditors' claims. For this reason, several creditors filed a Petition for Involuntary Reorganization pursuant to Section 303 of the Bankruptcy Code. IV. INFORMATION ABOUT THE CHAPTER 11 CASE. A. The Involuntary Petition. Three of Debtor's creditors -- Mr. Richard Cascarilla, Unishippers and Geothermal Development Associates -- filed an involuntary petition pursuant to Section 303 of the Bankruptcy Code to reorganize the Debtor. The Petition was filed on February 13, 1997 (the "Petition Date"). At that time, the Debtor's Board of Directors and Officers consisted of the following individuals: 41
Name Position ---- -------- Pattinson Hayton, III President Kevin Quinn Secretary Charles Cain Director Charles Cannell Director Michael Kassouff Director
Mr. Kassouff had been elected by the Series B shareholders after Golden Chance went into default with respect to its $4,900,000 promissory note initially given for the purchase of the Series A Preferred Shares. When the involuntary petition was filed, the Debtor opposed the Petition. In summary, the Debtor asserted that it was generating revenue and, therefore, the Petition was inappropriate. Mr. Kassouff was of the opinion that the appointment of a Trustee was necessary and appropriate for the protection of both creditors and shareholders. After holding a hearing to consider the objections made on behalf of the Debtor by Mr. Hayton, the Bankruptcy Court entered an Order (1) authorizing the Petition to remain as filed, and (2) appointing an interim trustee. At this hearing, the Debtor was represented by Mr. Kevin Quinn, an alleged attorney hired by Pattinson Hayton, whose licence to practice law had been suspended by the State Bar of California, and subsequently disbarred. B. Actions by the Interim Trustee. The Interim Trustee assumed control of the Debtor, began an analysis of the Debtor's assets and liabilities and attempted to gain control over the affairs of the Debtor. He was opposed in this process by Mr. Hayton who, among other things, caused the Debtor to issue Class A Common Stock subsequent to the appointment of the Interim Trustee but without the consent of the Bankruptcy Court or the Interim Trustee. Among other things, the Interim Trustee negotiated and completed a sale of the Debtor's 42 interest in San Jacinto Power Company, an energy cogeneration project. The sales price was $200,000 cash and assumption of outstanding liabilities which exceeded $300,000. C. The Debtor-in-Possession. While the Interim Trustee was attempting to secure control over the affairs of the Debtor, Messrs. Cain and Cannell resigned as Directors. The sole remaining Director (Mr. Michael Kassouff) elected as successor Directors Messrs. Richard A. Cascarilla and Mr. Lawrence A. Herth. Immediately thereafter, the Board of Directors terminated Messrs. Hayton and Quinn and elected Mr. Richard A. Cascarilla as President and Mr. Lawrence Herth as Secretary. The new Board of Directors then filed a petition requesting that the Court permit the Debtor to resume operations functioning as the Debtor-in-Possession pursuant to 11 U.S.C. Section 1107. The Court approved that Petition in September, 1997. D. Summary of Activities of the Debtor-in-Possession. Functioning as Debtor-in-Possession, Debtor concentrated its efforts in the following arenas: * The Trustee negotiated the sale of the Debtor's partnership units in a California venture known as San Jacinto Power Company. * The Company engaged professionals to assist in the investigation of claims and causes of action to be initiated by or on behalf of Debtor in order to recoup assets which had been dissipated in violation of sections 547, 548 or 550 of the Bankruptcy Code. * An evaluation was conducted of the pending litigation in which Debtor was a defendant for the purpose of determining the validity of defenses 43 and exploring the feasibility of settlement. * Management focused upon an evaluation of current Debtor resources in order to design a new business plan upon which a plan of reorganization would be structured. * Efforts were initiated for the purpose of identifying and regaining possession of Debtor assets which had been dissipated and/or conveyed to third parties. * Negotiations were commenced with Debtor's largest creditor and shareholder NEP for the purpose of resolving open issues that would result in meaningful support for a plan of reorganization. * Working in conjunction with Mr. David Wallace, management identified a specific strategy for the penetration of international telecommunication services, and commenced to implement that strategy through the acquisition of two companies which had been established by Mr. Wallace anticipated (VivaTel and Diego Tel), which had recently developed relationships for access to telecommunication services as both as a vendor and supplier and had secured one or more letters of credit which totaled $270,000 and other equity funding. As of result of these activities, several significant documents were prepared and agreements were entered into: 1. Debtor, Diego Tel, VivaTel and Mr. Wallace entered into a Share Exchange Agreement dated as of December 1, 1997, pursuant to the terms of which Debtor acquired 100.0% of the issued and outstanding Common Stock of VivaTel and 44 Diego Tel. The agreement involving Diego Tel is predicted to be superseded by an Amended and Restated Agreement for Exchange of Stock (Debtor also entered into an "Ownership Settlement" Agreement regarding VivaTel, see Article III, Section G, "Litigation and Claims"). Both Agreements require approval of the Bankruptcy Court. 2. Debtor, NEP, Nevada Energy Power Company ("NEPC") and others entered into a "Settlement Agreement" with respect to claims and assertions between them. As a result of this Settlement Agreement, which was effective as of December 1, 1997, Debtor recouped ownership of Combustion Energy Corporation and its operations (Herth Printing & Business Supplies), as well as title to a parcel of real estate situated in Reno, Nevada. 3. Debtor negotiated an "Indemnification Agreement" with Nevada Electric Power Company and Mr. Jeffrey Antisdel, pursuant to the terms of which NEPC and Mr. Antisdel guaranteed that net operating losses recognized by Debtor during the tenure of Mr. Antisdel were valid and would remain in full force and effect. NEPC and Mr. Antisdel agreed to indemnify and hold Debtor harmless from any and all expenses and damages which it might incur in the event that there is any adjustment with respect to these net operating losses. 4. A Plan of Reorganization and Disclosure Statement were prepared, reviewed by the Debtor's Board of Directors, adopted by the Board of Directors, submitted to the Court for review and (with the permission of the Court) transmitted to the Creditors for consideration. In addition, as of December 1, 1997, Debtor resumed operations. Revenue for the period 45 December 1997 through May 1998 was attributable to Debtor's subsidiary CEC, which owned Herth Printing and Business Supplies. Substantial time, energy and resources have been expended in the exploration and development of a new business plan. See Article III, Section E. As part of this endeavor, management and professionals assisting the Debtor have been involved in extensive, protracted and complex negotiations on various facets of this new business plan, especially the acquisition of Viva Tel and Diego Tel. V. THE DEBTOR'S ESTATE. A. Business Operations. As of the petition date, the Debtor s operations consisted almost exclusively of its interest in San Jacinto Power, which was subsequently sold by the interim trustee. In or about April, 1998, the Debtor entered into a Settlement and Release Agreement with NEP, one which is discussed below in more detail. As a result of this agreement, retroactively to December 1, 1997, Debtor regained ownership of a revenue generating former subsidiary (Combustion Energy Corp.). Through the reacquisition of this subsidiary, the Debtor currently receives revenue which is reported to the Court in the Debtor's monthly reports, which are available upon request. B. Assets and Financial Condition. As of the Petition Date, the Debtor's assets consisted of the following: * Ownership of the following subsidiaries: San Jacinto Power Company * Ownership of ten (10) energy cogeneration units * Claims for damages arising out of transactions involving consist of its 46 former President and Directors * Claims for damages against third parties set forth in Section E below. Financial statements for the period ending May 31, 1998 and pro forma financial statements are enclosed as Exhibit 3. C. Claims and Liabilities. In addition to the pending litigation, the Debtor has various claims and is investigating the following: Among others, the Debtor investigation is focusing upon: 1. Banks and others which participated in the receipt and transfer of monies belonging to Debtor; 2. Attorneys who issued legal opinions and/or assisted in the design and implementation of transactions in violation of law; 3. CPA's who issued opinions with respect to financial statements upon which Debtor relied to its detriment; 4. Corporations and individuals who received Cash, Class A Common Stock or other assets from Debtor for which Debtor received little, no or inadequate consideration; and 5. Individuals who participated or aided and abetted participation by others in acts and practices which resulted in damages to Debtor. 6. The administration of a bank account established in Palm Desert, California allegedly on behalf of Debtor and the disbursement of more than $1,000,000 from that account; 7. The purchase of 100.0% of the issued and outstanding common stock of Telecom 47 Technologies, Inc. by Debtor in 1996; 8. The formation and administration of Central Communications Company and its operations including, but not limited to, the lease of real property situated in Santa Barbara, California; 9. Whether Messrs. Cain, Cannell, Goold, Tevis, Hayton, Bowers and Kevin Quinn fulfilled their statutory and fiduciary duties as Officers and/or Directors of Debtor; 10. Whether Waterford Trust Co. or its nominee (Golden Chance, Ltd.) violated Section 17(a) of the Securities Act of 1933, Section 10(b) or Rule 10-b(5) of the Securities Exchange Act of 1934 or any analogous state statute in conjunction with the purchase of Series A Preferred Shares from Debtor in May 1996 and, if so, whether Debtor has the right to seek restitution from persons controlling such entities; 11. Whether during the period May 3, 1996 through the Commencement Date Debtor failed to file reports otherwise required to be filed pursuant to the Securities Exchange Act of 1934 and, if so, whether Debtor has a cause of action against the then Officers and Directors of Debtor for damages and expenses arising out of such failures; 12. Whether one or more individuals who are subject to section 16 of the Securities Exchange Act of 1934 purchased and sold securities issued by the Debtor within a six (6) month period in violation of section 16(b) of that statute; 13. Whether Cash, real property, contract rights, intellectual property or other assets (real, personal or equitable) were misappropriated, misused or wrongfully 48 appropriated by third parties; 14. Whether Messrs. Cain, Cannell, Goold, Tevis, Hayton, Quinn or Bowers, individually or acting in concert, directly or indirectly usurped any corporate opportunity, contract or asset of Debtor for personal gain; 15. Whether any person identified in the Securities Act of 1933 or the Securities Exchange Act is liable to Debtor for violations of either of these statutes; 16. Whether Debtor has a cause of action arising pursuant to the Racketeer Influence and Corrupt Organizations Act; 17. Whether, subsequent to the Petition Date, any assets of the estate of the Debtor was misappropriated to or wrongfully taken by a third party; 18. Whether any underwriters, brokers, dealers, banks and stock transfer agents participated in or aided and abetted in the transfer of securities issued by Debtor; and 19. Whether Debtor has a claim for indemnification arising out of a policy for Directors and Officers liability insurance in effect for part of 1996. While its investigation is not yet complete, on the basis of information uncovered to date, the Board of Directors of Debtor anticipates that Debtor will institute civil proceedings against multiple parties unless they voluntarily settle with the Debtor. The Plan provides, pursuant to section 1123 (b)(3) of the Bankruptcy Code, for the retention and enforcement by the Debtor of any claim or interest belonging to the estate of the Debtor including, but not limited to, the matters summarized above. Debtor has been contacted by the SEC with respect to an ongoing investigation by the SEC into the activities of various individuals. Debtor has offered to cooperate with the SEC in 49 this matter. The Board of Directors has also authorized the President (Mr. Cascarilla) to confer with the United States Attorney for the District of Reno, Nevada for the purpose of discussing potential criminal conduct of certain individuals and entities. In order to enact the new business plan, the Debtor has prepared and submitted to the Court a Plan of Reorganization to resolve the claims of its Creditors. D. Business Affairs. The Debtor's operations subsequent to the Petition Date are discussed in periodic reports filed by the Debtor with the Court on a monthly basis. A copy of the monthly reports are available upon request. E. Litigation and Claims. Debtor was both a plaintiff and a defendant in civil litigation pending as of the commencement of the Chapter 11 case. When the Chapter 11 case was initiated, all pending civil litigation, in which Debtor was a defendant, was automatically stayed pursuant to section 362 of the Bankruptcy Code. Civil litigation and the status of each matter is as follows: Proceedings in which Debtor is a Defendant
Case Docket No. Nature of Claim Comment - ---- ---------- --------------- ------- Mary Kay Robinson, 216651 Breach of Lease-- 1. Case stayed Trustee v. Central Superior Court Alleged Damages 2. Plaintiff filed Central Communications Santa Barbara, of $1,200,000 Proof of Claim Company and Nevada California 3. NEC denies Energy Company disputed Proof of Claim
50 Jeffrey Antisdel vs. CV96-07001 Breach of Contract Settlement Nevada Energy Company County of Damages alleged negotiated Washoe, to be approximately in amt of $384,500 Nevada $384,500 Jeffrey L. Hartman, CV96-07453 Breach of Contract Claims to be paid Michael Kassouff and County of Damages alleged with interest Jeffrey Modesitt vs. Washoe, to be about Nevada Energy Company Nevada $13,200 for each Plaintiff Nevada Energy Partners CV96-07487 Breach of Contract, Settled. See Article vs. Nevada Energy Company County of Washoe Specific Performance and III Section I. Nevada damages in excess of $6,000,000 Smith, Katzenstein & Furlow 96-12-004-JEB Action on account, Settled, Stipulated vs. Nevada Energy Company Superior Court, Damages of $78,731 judgment for New Castle, DE $78,731
Proceedings in Which Debtor is a Plaintiff Case Docket No. Nature of Claim Comment Nevada Energy Company 216568 Rescission and Specific Dismissed per vs. Nevada Energy Partners, Superior Court Performance settlement. See Santa Barbara, CA Article II Section C NEC v. Charles Cain 15421 NC Breach of fiduciary duty Pending in Court of Chancery discovery stage New Castle County, DE NEC v. Peter Cannell 15421 NC Breach of fiduciary duty Pending in Court of Chancery discovery stage New Castle County, DE NEC v. John Goold 15421 NC Breach of fiduciary duty Default obtained Court of Chancery New Castle County, DE
51 NEC v. Stefan Tevis 15421 NC Breach of fiduciary duty Default obtained Court of Chancery New Castle County, DE NEC v. Waterford Trust 96C-12-150 Breach of contract Default Judgment Company and Golden Chance Superior Court obtained for New Castle County, approximately DE $5,000,000
Claims and Potential Claims by PowerTel U.S.A. Charles Cain Peter Cannell John Goold Stefan Tevis Waterford Trust Co., judgment entered for $5,000,000 Golden Chance Limited, judgment entered for $5,000,000 1. Telecom (AE) - an Isle of Man corporation which represented that it held contract rights to telecommunication projects. Allegedly assigned rights to Wina Associates, Ltd. which later sold these rights to NEC for 2,000,000 shares of Class A stock and $500,000 cash. Original contracts were from Dean Chamberlain for $135,000 and 100,000 shares of Class A stock. 2. Roderick McCloy, Attorney - Canadian attorney who is a director of Waterford Trust Co., attorney for Golden Chance, Telecom (AE), and personally for the NEC directors. Never represented NEC, but received $500,000 cash by wire transfer and check identified as attorneys' fees. Also was issued stock in an excess of 220,000 shares. Acted as escrow agent for various entities and worked with Pacific International for distributing all the unrestricted stock issued by the company under S-3, S-8, and Reg S opinions issued by Kevin Quinn, who has not held a law license since 1993. 3. Kevin Quinn - disbarred attorney who has been suspended since 1993. Issued Reg S opinions for Telecom (AE), Golden Chance and PowerTel since May of 1996. Also filed an S-8 registration in 1996 for 1.3 million shares of Class A stock. Was secretary of the company. Has received in excess of 500,000 shares of unrestricted stock. 52 4. Mortlake Venture Capital Corporation. - California corporation allegedly owned by Pattinson Hayton. Has received over $370,000 and 300,000 shares of stock for little or no consideration. 5. Pillsbury Madison & Sutro/Graham Taylor, Esq. - Subsequent to the Petition Date, the Debtor's Board of Directors initiated an internal investigation into the activities of the Debtor during the period of May 1996 through the Petition Date. Among other things, the Debtor has focused on the activities of the various attorneys, accountants and financial advisors who had been engaged by the Waterford-Golden Chance Board of Directors. One of the law firms so engaged was Pillsbury, Madison & Sutro of San Francisco, California which was engaged as "securities counsel" and "general counsel' to the company. During the course of that investigation, the Debtor has identified certain evidence which appears to indicate that Pillsbury, Madison & Sutro had been legal counsel to Pattinson Hayton (and/or his affiliated companies and associates), Waterford and Golden Chance, and that Pillsbury, Madison & Sutro provided legal representation to Mr. Hayton regarding matters involving the Securities and Exchange Commission. One of the partners of that firm, Graham Taylor, has been a long time friend and associate of Mr. Hayton. The Debtor has also traced funds and Class A Common Stock into the possession and/or control of Pillsbury, Madison & Sutro. While Pillsbury, Madison & Sutro was serving as "securities counsel," filings were made by debtor with the SEC which appear to be inaccurate, false and/or misleading. The role and involvement of Pillsbury, Madison & Sutro in these events is being investigated. In view of the foregoing, the Debtor is pursuing an investigation for the purpose of confirming whether the Debtor has causes of action against Pillsbury, Madison & Sutro and/or any of its partners. In addition, the Debtor is in the process of evaluating whether Pillsbury, Madison & Sutro secured written waivers of actual or potential conflicts of interest and/or engaged in acts and practices by or on behalf of another client to the detriment of the Debtor. Finally, Debtor is evaluating whether it has claims for damages to itself and its shareholders arising out of the conduct of Pillsbury, Madison & Sutro. At this time, the Debtor's investigation is continuing. Pillsbury, Madison & Sutro has cooperated by providing Debtor with access to almost 3700 pages of documents, but has declined an offer to meet with Debtor for the purpose of discussing the firm's conduct 6. James Kaplan, Esq. - Florida attorney at firm of Wilson, Elser, Moskowitz & Eselman, who has worked with Hayton for many years. He also has represented Waterford. Has received unrestricted stock in excess of 100,000 shares. 53 7. Donald Davis, Esq. - California attorney. Issued the S-3 opinion for $10,000. 8. Morris, Nichols, et al. - Delaware firm which issued the legal opinion which NASDAQ relied on to approve the reverse split of the company's common stock. 9. Weil, Gotchill & Manges -New York law firm which wrote an eight-page letter to NASDAQ on February 13, 1997, on behalf of the company which contained factual errors. 10. Paul Messina, C.P.A. - located in Palm Springs are and has done auditing work for Hayton, Waterford, and NEC. Did financial statements for Waterford which were relied upon by NEC in finalizing the GCL deal. Also was the independent auditor who counted the ballots at the August stockholder meeting. 11. Signature Transfer Company - Texas stock transfer company hired by the Waterford board. Issued Class A common stock without general ledgers held by former transfer company, Corporate Stock Transfer in Colorado. Documents verify that the two overlapped for approximately eight days while substantial stock was issued. 12. Claims Stone Brothers (Disputed) As discussed elsewhere in this Second Amended Disclosure Statement, Debtor owns Ormats power generating equipment and related equipment ("Ormats"). The Ormats are located in Fernley, Nevada, at Stone Brothers Nevada Machinery. There is a dispute with Stone Brothers regarding its entitlement to rent for the storage of the Ormats. The Debtor believes that the Independent Contractor Agreement between Stone Brothers Welding & Equipment Sales and Nevada Energy Co. dated July 3, 1992, governs the respective obligations of the parties. If the parties are unable to resolve the dispute, the matter will be set for hearing for the Court to decide the issues. In some instances, Defendants have operated in foreign countries and the potential for recovery is uncertain. In other instances, the credit worthiness of the Defendants are unknown. In most instances, the Debtor is represented by legal counsel who has agreed to pursue claims 54 and collecting on a contingent fee basis. There is no assurance or guarantee that Debtor will be successful in its attempt to collect on these judgments. In addition to the foregoing, Debtor has initiated an investigation into the acts and practices of its Directors and Officers during the period May 3, 1996 through February 1997. The investigation also focuses upon all business transactions to which Debtor was a party during this time period. The objective is to determine whether Debtor has a claim pursuant to the Bankruptcy Code (Section 547 or 548) or otherwise (i.e., pursuant to Delaware law, the Federal securities laws or the applicable common law) for damages and/or disgorgement and return of assets. VI. THE REORGANIZED DEBTOR'S BUSINESS PLAN Upon confirmation of the Plan of Reorganization, the Debtor will be deemed to be "reorganized." The Reorganized Debtor's business plan will consist of three business segments, viz: 1. Functioning as a non-regulated utility holding company, the Reorganized Debtor will seek to identify and develop an application for its ORMAT units in the operation of geothermal, wind and biomass energy projects, primarily through joint ventures and partnerships with third parties. At this time, no specific project has been identified. 2. The exploitation of its current printing and business supply operation situated in Reno, Nevada conducted under the name "Herth Printing and Business Supply." 3. The creation, development and implementation of an international long distance telecommunication business focusing exclusively upon the sale of long distance services where the ultimate destination is out of the United States. 55 With respect to the development of an energy cogeneration business, the Reorganized Debtor is anticipated to have substantial physical resources, consisting of its ORMAT Units. Management believes that the Reorganized Debtor will be successful in negotiating joint venture or partnership relationships in which the Reorganized Debtor will contribute its Energy Cogeneration equipment. It is also likely, however, that the Reorganized Debtor will require additional working capital in order to implement that line of business. With respect to its printing and business supply operation, management anticipates that the Reorganized Debtor will continue to function largely as it has done in the past. However, the Reorganized Debtor will be mindful of opportunities to expand the business and printing supply operation, perhaps through the acquisition of other companies or operations. At this time, no such acquisition has been identified or under consideration. In the event that the Board of Directors of the Reorganized Debtor determine that continued operation of the printing and business supply operation is not consistent with the long term objectives of the Reorganized Debtor, consideration may be given to a sale or disposition of that portion of the Reorganized Debtor's business. With respect to its entry into the long distance telecommunication market, the Reorganized Debtor intends to do so through the acquisition of VivaTel and Diego Tel, which will be finalized upon confirmation of the Plan of Reorganization. The Reorganized Debtor will acquire VivaTel for a one-time payment of $500. VivaTel is currently owned by Mr. David Wallace, who is its sole shareholder, officer and director. Diego Tel currently holds an authorization granted by the Federal Communications Commission pursuant to Section 214 of the Federal Communications Act. A Section 214 authority permits the holder to market and sell long distance 56 telecommunication services in the United States on condition that the ultimate destination of the long distance telephone call is to a country which is outside the United States. At this time, a Section 214 license permits long distance telephone calls to over 100 countries. To the best of management's knowledge, no additional license or permit is required in order to conduct such business within the United States. With respect to Diego Tel, the Reorganized Debtor has entered into a contract to purchase 100.0% of the issued and outstanding common stock of Diego Tel from Mr. David Wallace upon confirmation of the Plan. The terms of the acquisition are as follows: * Subject to receipt of certain cash payments arising out of telecommunications operations as discussed below in more detail, the Reorganized Debtor will issue to Mr, Wallace Class A Common Stock in an amount not to exceed 35.0% of the issued and outstanding Class A Common Stock computed as of a date ten (10) days after the Effective Date of the Plan of Reorganization. Under the terms of the contract, no Class A Common Stock will be issued to Mr. Wallace unless and until the Reorganized Debtor receives cash receipts arising from the telecommunications operations. For each month that the Reorganized Debtor receives cash receipts of at least $100,000 greater than the preceding calendar month, an incremental 10.0% will be distributed to Mr. Wallace. * Mr. Wallace will have a total of 30 months commencing with the Effective Date of the Plan within which to generate a minimum of $4,500,000 in cash receipts to the Reorganized Debtor. Assuming that the entire $4,500,000 in cash receipts is generated pursuant to the formula set forth in the Purchase Agreement, Mr. Wallace will be deemed to have earned and will receive Class A Common Stock 57 in an amount equal to 35.0% of the issued and outstanding common stock of the Reorganized Debtor computed ten (10) days after the Effective Date. * In the event that the Reorganized Debtor does not receive any cash receipts within the 30 month period or if the cash receipts fail to achieve the minimum threshold of $100,000 per month, no Class A Common Stock will be issued to Mr. Wallace. * In the event that the first payment threshold is achieved (i.e., in the event that there is a minimum of $100,000 cash receipts within a calendar month) but the total cash receipts of $4,200,000 are not received, a prorata distribution will be made to Mr. Wallace. A copy of the contract, as amended and supplemented, is enclosed as Exhibit 4. Based upon the current market value of the Debtor's Class A Common Stock, the Board of Directors has valued the Class A Common Stock to be earned by Mr. Wallace to be less than $150,000. In the opinion of Debtor's Board of Directors, the purchase price is quite reasonable. Mr. Wallace has provided representations and warrants that Diego Tel has been issued and has valid authority pursuant to Section 214 of the Federal Communications Act. In addition, Diego Tel has leased or otherwise acquired fiber optic cables suitable for the transmission of long distance telecommunication services to its point of presence in Southern California. In addition, according to Mr. Wallace, Diego Tel has purchased or leased appropriate gateway switching equipment in order that Diego Tel can function as a direct distributor of long distance telecommunication services. Finally, Diego Tel has entered into a five (5) year agreement with a Mexican carrier, to provide services into Mexico. 58 As part, of its agreement with Mr. Wallace, the Reorganized Debtor will be placing substantial reliance upon Mr. Wallace with respect to the development, marketing and implementation of its long distance telecommunications program. Mr. Wallace, a Board Certified Tax Attorney, has prior experience in the organization and operation of a for-profit business. Mr. Wallace will receive no compensation from the Debtor. David Wallace is 50 years old and has known Richard Cascarilla, the current president, since 1981. Mr. Wallace first became interested in the telecommunication field at age 18 when he received a First Class Radio Telephone Operator's License from the Federal Communications Commission. He then operated a commercial radio station as the board engineer. He attended the University of Michigan and received a B.S. in Microbiology from the Literature, Science and Arts College. After graduation, he became the supervisor of the Genesee County Public Health Department in Flint, Michigan. Subsequently, he returned to school and received a law degree from the Thomas M. Cooley law school in Lansing, Michigan. He was admitted to the Michigan and Florida Bar in 1981. In 1989 he passed the tax certification examination by the Florida Bar and was board certified as a tax attorney. Mr. Wallace has operated an oil and gas drilling company in Michigan, and owned a furniture business in Florida. Since 1996 Mr. Wallace began devoting his time to the telecommunications business. In 1997 this business was a substantial portion of his business activities. He has developed a level of expertise that the Debtor believes will benefit the company, its creditors and shareholders. 59 Mr. Wallace has previously represented NEP and NEPC in 1996, and negotiated the August 16, 1996 settlement between the Debtor, NEP and NEPC. Mr. Wallace has fully cooperated with the Debtor in preparing its legal case against the former Board and their affiliates. Mr. Wallace lives in Sarasota, Florida, with his wife, Dr. Arlie Wallace and their three children. The management and Board of Directors of the Debtor believe that Mr. Wallace, who has invested substantial time and personal resources in the exploration and examination of the telecommunications arena, has the knowledge, ability and skill to develop this business. The Reorganized Debtor's telecommunications business plan anticipates that the Reorganized Debtor will seek to exploit a niche market for long distance telecommunications needs among immigrant, minority and lower income migrant workers who need access to long distance telecommunication services but who might not otherwise have access to more traditional, conventional modes of communication. In addition, the Reorganized Debtor intends to market its long distance telecommunication services to businesses which utilize long distance telecommunication services in large volumes for transmission of voice and data to one or more of the countries served by Diego Tel. The Business Plan anticipates that Diego Tel will operate as a "low cost" provider retaining a small percentage of the gross revenue while having a small overhead. Proforma financial projections with respect to the Reorganized Debtor's telecommunications operations are attached as Exhibit 5. These proforma financial statements have been prepared by Mr. Wallace. 60 VII. THE PROPOSED PLAN A. Designated Dates The Plan designates four dates which govern the Debtor's obligations pursuant to the Plan. The dates are: 1. Confirmation Date, the date on which the Bankruptcy Court confirms the Plan. 2. Declaration Date, which is the thirtieth (30th) day after the Confirmation Date. Creditors must make certain elections on or before the Declaration Date in order that the Debtor can determine the amount of Cash and Class A Common Stock to be issued or disbursed pursuant to the Plan. 3. Effective Date which is one-hundred twenty (120) days after the Confirmation Date. On the Effective Date, the Debtor will distribute Class A Common Stock and certain Cash Payments to those unimpaired Creditors eligible to receive the same pursuant to the Plan. 4. Payment Date, which is three hundred sixty-five (365) days after the Confirmation Date. On the Payment Date, the Debtor will distribute additional Cash payments to be made to impaired creditors pursuant to the Plan. The four dates have been selected by the Debtor in order to allow sufficient time (1) to implement the administrative components of the Plan (e.g. to amend the Articles of Incorporation and to issue new stock certificates to existing shareholders), (2) to allow Creditors a reasonable period of time to evaluate the financial and operational performance of the Debtor in order to determine whether to elect to accept Class A Common Stock in lieu of 61 (or as partial payment for) Cash, (3) to effect a distribution of Class A Common Stock to Creditors pursuant to the Plan, and (4) to generate Cash from operations in order to disburse Cash payments to Creditors as provided in the Plan. B. Classification of Claims and Interest For purposes of the Plan, Claims of Creditors and Equity Interest holders are classified as either "Allowed" or "Disputed." A Claim is "Allowed" if: (a) Proof of Claim was filed on or before the last date designated by the Bankruptcy Court as the last date for filing Proofs of Claims or (if no Proof of Claim is filed) the Claim or Equity Interest has been listed by the Debtor as liquidated in amount and not disputed; and (b) Debtor has either (i) not filed an objection to the Claim. or (ii) if an objection was filed by Debtor, the Court refused in a Final Order to sustain the objection. A Claim that is not "Allowed" is deemed to be Disputed. The Plan focuses upon Allowed Claims and Equity Interests, with each Claim or interest allocated into one of nine classes (one class is for Disputed Claims). * Class 1 - Allowed Claims for Administrative Expense. * Class 2 - Allowed Wage Claims. * Class 3 - Allowed Munson Reorganization Priority Tax Claims. * Class 4 - Allowed Priority Tax Claims. * Class 5 - Allowed Claims of Secured Creditors. * Class 6 - Allowed Claims of Unsecured Creditors Not in Excess of twelve hundred dollars ($1,200). * Class 7 - Allowed Claims of Unsecured Creditors in Excess of twelve hundred 62 dollars ($1,200). * Class 8 - Allowed Claims of Nevada Energy Partners, Ltd., NEPC, and others. * Class 9 - Disputed Claims. * Class 10 -Allowed Equity Interests. C. Provisions for Payments of Claims 1. Provisions for Payment of Allowed Administration Expenses Claim (Class 1) The first Class of Creditors to be paid (Class 1) consists of those Creditors in possession of an Allowed Claim for Administrative Expenses. In summary, Claim 1 Claims pertain to expenses incurred by the Debtor which are actual and necessary expenses of preserving the estate of Debtor or operating its business, any indebtedness or obligations incurred by or assessed against the Debtor in connection with the conduct of its business or for the acquisition or lease of property or for providing services to the Debtor, as well as allowances for compensation or reimbursement of expenses to the extent allowed by the Bankruptcy Court. Finally, administrative expenses include any fees or charges assessed against the Debtor's estate pursuant to 28 U.S.C. Section 123. The known and anticipated administrative expenses are estimated to be at least $200,000. The Plan provides that on the Effective Date each Allowed Administration Expense shall be paid in full in Cash or upon such other terms as may be agreed upon by and between the Creditor and Debtor. However, Administration Expenses representing indebtedness or other obligations incurred or assumed by the Debtor shall be assumed and paid or performed by the Debtor in accordance with the specific terms and conditions of any agreement relating to such obligation. Among other things, the Allowed Administrative Expenses include (but are not limited 63 to) the following: * Post-petition compensation to the current Directors and Officers of Debtor; * Payments to attorneys and accountants for services rendered to the Debtor; and * Expenses incurred in conjunction with the ordinary and necessary business expense incurred between February 13, 1997 and the filing of the Plan. The post-Confirmation Fees and Administrative Expenses shall be paid as they are incurred and billed, without further approval of the Bankruptcy Court. In addition, the Confirmation Order for the Plan shall designate a "Bar Date" which is the date by which filing of Claims must be made by those entities asserting Claims for compensation pursuant to sections 330 and/or 530 of the Bankruptcy Code. In general, this encompasses Claims for compensation to professionals (such as attorneys and accountants) providing services to Debtor. 2. Provisions for Payment of Allowed Wage Claims (Class 2) Debtor has designated Class 2 as being for Allowed Wage Claims for payment of pre Petition wages. Under the proposed Plan, on the Effective Date, each Allowed Wage Claim shall be paid in full in Cash or upon such other terms as may be agreed upon between any Allowed Wage Claimant and the Debtor. There are no Allowed Wage Claims. There are Disputed Wage Claims totaling about $24,000. 3. Provisions for Payment of Pre-1990 Allowed Priority Tax Claims (Class 3) The pre-1990 Priority Tax Claims (Class 3) consists of Tax Claims for obligations arising prior to 1990 and which are the subject of a plan of reorganization confirmed in 1990 by the United States Bankruptcy Court in a proceeding involving Munson Geothermal, Inc. 64 The pre 1990 Priority Tax Claims shall be paid in full in Cash on the Effective Date, or upon such other terms and conditions as may be agreed upon between any pre-1990 Allowed Priority Tax Claimant and the Debtor. The Allowed Class 3 claims total about $26,000. 4. Provisions for Treatment of Post-1990 Allowed Priority Tax Claims (Class 4) With respect to Allowed Priority Tax Claims arising after 1990 (i.e. the Class 4 Claims), the Plan provides that such Allowed Claims shall be paid over a term consisting of sixteen (16) consecutive quarterly payments ending four years after the Payment Date, with the first payment to be made on the Payment Date, or upon such other terms as may be agreed upon by and between any Class 4 Claimant and the Debtor. There are no Allowed Class 4 Claims. There are Disputed Class 4 claims totaling about $550,000. 5. Provisions for Treatment of Allowed Secured Creditors (Class 5) The fifth Class of Creditors (Class 5) consists of Secured Creditors whose Claim has been Allowed. Class 5 Creditors will be paid in full in Cash on the Effective Date. Alternatively, at the sole election of Debtor, the Allowed Secured Claim, together with interest at a rate to be determined by the Bankruptcy Court, shall be paid in equal monthly installments, the first installment to be made on the Payment Date, over a term consisting of thirty (30) consecutive months, or upon such other terms as may be agreed upon by and between the Secured Creditor(s) and Debtor. There are no Allowed Class 5 claims. There are Disputed Class 5 claims which total about $25,000. 65 6. Provisions for Payment of Allowed Unsecured Creditors not Exceeding $1,200 per Claim (Class 6) Class 6 consists of Allowed Unsecured Claims not in excess of $1,200 per Claim. Pursuant to the terms of the proposed Plan, Class 6 Creditors will be paid in full in Cash on the Effective Date, or upon such other terms and conditions as may be agreed upon by and between any Class 6 Creditor and Debtor. Each Class 6 Creditor has the right to receive Class A Common Stock in lieu of Cash, with the number of shares computed as follows: C6 x 120% = F F/(divided by) AVP = NS where: C6 = The dollar amount of the Class 6 Claim. F = Proceeds to be converted into Class A Common Stock. AVP = An average of the closing price per share for the fifteen trading days immediately preceding the Effective Date. NS = Number of Shares of Class A Common Stock to be issued. For example, if the Class 6 Allowed Claim was $1,000, the computation would be as follows: $1,000 x 120% = $1,200 $1,200/$1.00 = 1,200 Shares of Class A Common Stock (assuming $1.00 to be the AVP) The Class A Common Stock will be issued on the Effective Date, which is after Debtor will have effected a reverse stock split. The Creditor's election must be made on or before the Declaration Date. The reverse stock split will occur after the Declaration Date but at least twenty trading days before the Effective Date. The Allowed Claims of Class 6 total about 66 $30,000. There are no Disputed Class 6 Claims. 7. Provisions for Payment of Allowed Unsecured Claims in Excess of $1,200 per Claim (Class 7) Class 7 consists of Allowed Claims which are (i) unsecured and (ii) in excess of $1,200. Pursuant to the proposed Plan, each Creditor holding a Class 7 Claim must make an election to receive either: Option A. A lump sum payment of $1,200 to be paid on the Effective Date as a full, complete settlement of the Class 7 Claim, or Option B. To receive a combination of Cash and Class A Common Stock of Debtor (claimants selecting Option B must make a further election to receive either (i) cash or (ii) stock), or Option C. To receive only Class A Common Stock. The following example is intended to illustrate the proposed treatment of Class 7 Creditors by the Plan. Assume, for purposes of illustration only, that Class 7 Creditor has an Allowed Unsecured Claim in the amount of $10,000 and assume that the average closing price per share for the fifteen (15) trading days immediately preceding the Effective Date ("AVP") is $1.00 per share. The alternatives would be computed as follows pursuant to the Plan: Option A: Receive $1,200 in Cash on the Effective Date. Option B: Plan 1: Cash 1. 20.0% of the Allowed Claim paid in Cash on the Payment Date 2. 80.0% of the Allowed Claim to be paid over sixteen (16) consecutive 67 quarters commencing on the Payment Date 3. Class A Common Stock issued on the Effective Date computed pursuant to the following formula: C7 X 80% = NP NP x 20% = F F/(divided by) AVP = NS where C7 = The dollar amount of the Class 7 Claim. NP = The dollar amount of the Class 7 Allowed Claim that was not scheduled to be paid in lump sum on the Payment Date. F = Dollar amount of funds allocated for purchase of Class A Common Stock. AVP = An average of the closing price per share of Class A Common Stock for the 15 trading days immediately preceding the Effective Date. NS = Number of Shares of Class A Common Stock to be issued. Or, by way of example: $10, 000 x 80. 0% = $8,000 20.0% x $8,000 = $1,600 $1,600/ $1.00 = 1,600 Shares of Class A Common Stock Option B: Plan 2: Cash 1. 20.0% of the Allowed Claim paid in Cash on the Payment Date 2. Class A Common Stock to be issued on the Effective Date computed pursuant to the following formula: C7 X 80% = NP 68 NP x 120% = F F/(divided by) AVP = NS where C7 = The dollar amount of the Class 7 Allowed Claim. NP = The dollar amount of the Class 7 Allowed Claim that was not scheduled to be paid in lump sum on the Payment Date. F = Dollar amount of funds allocated for purchase of Class A Common Stock. AVP = An average of the closing price per share of Class A Common Stock for the 15 trading days immediately preceding the Effective Date. NS = Number of shares of Class A Common Stock to be issued. Or, by way of example: $10, 000 x 80. 0% = $8,000 $ 8,000 x 120.0% = $9,600 $ 9,600/ $1.00 = 9,600 Shares of Class A Common Stock Option C: Receive all Stock. If the Class 7 Creditor elects, the Creditor may receive on the Effective Date Class A Common Stock computed as follows: C7 X 200% = F F/(divided by) AVP = NS where C7 = The dollar amount of the Class 7 Claim. F = Dollar amount of funds allocated for purchase of Class A Common Stock. AVP= An average of the closing price per share of Class A Common Stock for the 15 69 trading days immediately preceding the Effective Date. NS = Number of Shares of Class A Common Stock to be issued. Or, by way of example: $10, 000 x 200% = $20, 000 $20,000/$1.00 = 20,000 Shares of Class A Common Stock The following table compares the various payment alternatives:
Option A Option B Option C Plan 1 Plan 2 -------- --------------------- -------- Claim $10,000 $10,000 $10,000 $10,000 Cash paid on Effective Date or $ 1,200 $ 2,000 $ 2,000 -0- Payment Date (As the case may be) Cash paid over sixteen Quarters -0- $ 8,000 -0- -0- Class A Common Stock (Shares) -0- 1,600 9,600 20,000
In order to conserve its Cash, Debtor would prefer that Creditors elect to accept Option C and thereby receive all stock. The Class A Common Stock will be issued on the Effective Date, which is after Debtor will have effected a reverse stock split. The Creditors election must be made on or before the Declaration Date. The reverse stock split will occur after the Declaration Date but at least twenty trading days before the Effective Date. The Allowed Claims of Class 7 total about $1 million. Class 7 Creditors are required to designate a payment mode when voting on the Plan. If 70 a Class 7 Creditor fails to select a payment mode, the Creditor will be deemed to have selected Option C - all stock. A Creditor may revoke his/her/its election by in writing at any time provided that Debtor receives the written revocation prior to noon Cleveland, Ohio time on the Declaration Date with notice to the Debtor in the manner set forth in Article XII, Section A of this Disclosure Statement. The Allowed Class 7 Claims total about $1,000,000. The Disputed Class 9 Claims total about $1,600,000. In the event a Class 9 claim is allowed, in part or in full, it becomes a Class 7 claim and will be entitled to the same treatment as provided for other members of that Class.** 8. Provisions for Payment of Claims of Nevada Energy Partners, Ltd. (Class 8) Class 8 consists of the Claims of Nevada Energy Partners, Ltd.. In summary, NEP, its Partners and the Debtor have entered into a Settlement and Release Agreement, a copy of which will be provided upon request, pursuant to the terms of which the following will transpire: 1. Subject to approval of the Bankruptcy Court and confirmation of the Plan, the NEP Agreement between NEP and Debtor will be amended and restated. As a result of this rescission of conveyances, the Debtor shall receive 100.0% of the issued and outstanding Common Stock of Combustion Energy Company and title to a parcel of real property situated in Reno, Nevada. 2. Debtor will stipulate that NEP shall be deemed to be the shareholder of record of 13,245,958 shares of Class B Common Stock, which is convertible into 13,245,958 shares of Class A Common Stock on August 16, 1996. NEP, as of December 17 1997, will be deemed to have converted Class B Common Stock 71 into Class A Common Stock such that NEP owns 13,245,958 shares of Class A Common Stock which is equal to 50.0% of the issued and outstanding Class A Common Stock of Debtor as of August 16, 1996. 3. Debtor stipulates that the Class A Common Stock held of record by NEP is beneficially owned by sixteen separate corporations who are also deemed to be Creditors of the Debtor. 4. Debtor agrees to permit the transfer of the Class A Common Stock to the sixteen beneficial owners and stipulates that these sixteen corporate entities shall be issued (if necessary) additional Class A Common Stock such that they own 50.0% of the issued and outstanding Class A Common Stock of Power Tel computed as of ten (10) business days after the Effective Date, which will be subsequent to the reverse stock split to be effected by the Debtor pursuant to the Plan, and subsequent to the issuance of Class A Common Stock to Creditors pursuant to the Plan. In the event, however, that Creditors with a Disputed Claim receive Class A Common Stock pursuant to the Disputed Claims Reserve, there will not be any additional distributions of Class A Common Stock pursuant to the NEP Settlement. 5. The limited partnership agreement for NEP will be deemed to be amended and modified such that 99.0% of all profits and losses are allocated to the capital account of the limited partner effective as of January 1, 1995. The general partner (NEPC) stipulates that Debtor is the sole limited partner. Any and all distributions of cash and property are to be allocated 60.0% to the limited partner and 40.0% to the general partner. 72 6. All parties to the NEC Settlement do forever settle, release and compromise all Claims and causes of action which they have or may bring against any other party as of the date of that Agreement, and NEP specifically waives and extinguishes its Proof of Claim for Six Million Dollars ($6,000,000.). (A copy of the NEP Settlement is attached as Exhibit 2). 9. Treatment of Disputed Claims (Class 9) With respect to Claims that are Disputed, contingent or unliquidated, as such time as a Claim becomes Allowed, the Claim will be reclassified into the class in which it would have been allocated in the event that it had been Allowed. For example, in the event that a Disputed, contingent or unliquidated Claim should become Allowed and the Claim is one which would otherwise constitute a Claim pursuant to Class 5, at such time as the Claim becomes Allowed it will be deemed to be a Claim and encompassed within Class 5 and will be paid pursuant to the provisions of Article V, Section E (Disputed Claims Reserve). To the extent any disputed claim allocated to Class 9 is deemed to be allowed for purposes of voting on the Plan, the disputed claim will vote as a member of the class to which it would be allocated if it were not disputed. 10. Equity Interests (Class 10) The last class, Class 10, is designed for Allowed Claims of holders of Equity Interests. Pursuant to the Plan: 1. The Series A and Series C Preferred Shares and the Class B Common Stock shall be extinguished through amendment to the Debtor's Articles of Incorporation (Series B Preferred will also be extinguished through amendment following the actions described in paragraph 2, below). 73 2. The five (5) shares of Series B, Preferred Shares shall be repurchased by the Debtor for a per share price of (i) 100,000 shares of Class A Common Stock; and (ii) a 24 month option to purchase an additional 100,000 shares of Class A Common Stock at an exercise price of $0.10 per share. These shares are currently owned by Rick Cascarilla (two shares), and Messrs. Jeffrey Modesitt, Jeffrey Hartman, and Michael Kassouff (one share each). After repurchase, the Series B Preferred Shares shall be extinguished by amendment to the Articles of Incorporation, which amendment, among other things, shall establish a new class of preferred shares to be known as "Special Stock." The Special Stock has the right to elect two (2) Directors of Debtor's Board of Directors. One share each of Special Stock, as set forth in the amended Articles of Incorporation, shall be issued to Richard Cascarilla, Jeffrey Hartman and Michael Kassouff as partial consideration for their serving on the Board of Directors. The Articles of Incorporation and By-Laws will be amended so that the Board will be authorized to set the terms of the Special Stock. 3. All holders of Class A Common Stock will be reinstated to the exact same share ownership which existed as of May 3, 1996, immediately prior to the sale of the Series A Preferred Shares to Waterford/Golden Chance. 4. The Debtor will convert the Class B Common Stock to Class A Common Stock and will issue Class A Common Stock in an amount not to exceed 85.0% of the outstanding Class A Common Stock, pursuant to (i) the Share Exchange Agreement for acquisition of Diego Tel, Inc. and (ii) the NEP Settlement. 5. Debtor will effect a reverse stock split at a ratio to be designated by the Board of Directors such that the total number of shares of Class A Common Stock outstanding subsequent to the reverse stock split is no less than 500,000 shares nor more than 20,000,000 74 shares. RATIFICATION OF AGREEMENTS During the pendency of the Chapter 11 case, the Debtor has negotiated the resolution of various disputes. These negotiations have resulted in the execution of two Settlement and Release Agreements and one Indemnification Agreement. The Plan provides that, upon confirmation, the Court shall ratify the two Settlement Agreements. The Settlement Agreements One Settlement Agreement (the "NEP Settlement") resolves the issue of the August 16 Agreement. A copy of this Agreement is enclosed as Exhibit 2. In summary, the objective of the NEP Settlement is to amend the Agreement entered into as of August 16, 1996 by and among the Debtor, NEP and NEPC and to settle and permanently resolve the disputes which resulted in the commencement of two lawsuits involving the Debtor and a 6 million dollar claim by NEP. In negotiating this settlement, the Board of Directors of the Debtor took into consideration numerous factors including, but not limited to, the following: * The Debtor has limited capital resources to utilize in the prosecution of any claim against the parties. * The Debtor has been informed by Mr. Antisdel that a substantial portion of the consideration consists of multiple Promissory Notes in the aggregate principal amount of approximately $1 million. In the opinion of the Debtor's Board of Directors, the collectibility of any of the Promissory Notes is uncertain, and therefore the Debtor does not believe that the pursuit of that claim would likely result in meaningful assets to the creditors or to the Debtor. 75 * NEP and/or NEPC commands a lawsuit in which the Debtor is a defendant. The defense of that litigation would be time-consuming and expensive. Given the Debtor's limited capital resources, the Board of Directors does not believe that the allocation of funds to defend such litigation is appropriate. * As of the execution of the Settlement and Release Agreement, there was little market for the Debtors Class A Common Shares, which were trading for approximately $.0l per share. In negotiating and consenting to the Settlement Agreement, the Board of Directors of the Debtor specifically recognized that the practical consequence of this Agreement will be a substantial dilution with respect to the equity interest of the shareholders who own Class A Common Stock, but the Board of Directors also took into consideration the legal right of NEP (as the sole shareholder of record of the Class B Common Stock) to convert the Class B Common Stock to Class A Common Stock at anytime and the right of NEP to enter into and complete a sale of the Class B Common Stock (or the Class A Common Stock, when converted) at anytime. The Board of Directors of the Debtor has specifically determined that the Settlement and Release Agreement is in the best interest of the Debtor, its shareholders and the creditors as a whole. The second Settlement and Release Agreement involves the Debtor, Mr. John Vogel and Mr. Dean Chamberlin. In summary, after the Debtor entered into a contract to purchase from Mr. David Wallace 100.0% of the issued and outstanding common stock of Viva Telecommunications, Inc., three individuals (Messrs. John Vogel, Dean Chamberlin and Mark Snyder) alleged that they owned a portion of the common stock of Viva Telecommunications. 76 Subsequent to the execution of the contract to acquire VivaTel, three individuals (Messrs. John Vogel, Dean Chamberlin and Mark Snyder) asserted that they owned the equitable right to a portion of the common stock of Viva Tel. The Debtor commenced an adversary proceeding in the Bankruptcy Court for the purpose of securing a declaratory judgment to the effect that Mr. Wallace owned 100.0% of the issued and outstanding common stock of VivaTel. Thereafter, the Debtor entered into a Settlement and Release Agreement with Messrs. John Vogel and Dean Chamberlin. Pursuant to the terms of this Settlement and Release Agreement, Messrs. John Vogel and Dean Chamberlin abandoned their claim of an interest in VivaTel. In consideration of that abandonment, the Debtor agreed to pay certain expenses not to exceed $20,000. With respect to the claim of Mr. Snyder, the Bankruptcy Court has entered a default with respect to Mr. Snyder who failed to effect a timely appearance in the adversary proceeding. On May 13, 1998, the Bankruptcy Court entered an Order to the effect that Mr. Wallace owned 100.0% of the issued and outstanding common stock of VivaTel. No appeal has been made with respect to that Order. The Indemnification Agreement As part of the NEP Settlement between and among the Debtor, NEC, NEPC and the 16 Bahamian corporations, the parties agreed to a retroactive reallocation of partnership interest between the general partner and the limited partner of NEP. In agreeing to this course of action, the Board of Directors of the Debtor took into consideration the existence as of February 28, 1996 of a net operating loss which totaled approximately $5,500,000. During these negotiations, NEPC and its sale shareholder, Mr. Jeffrey Antisdel, agreed to 77 represent and warrant that the Debtors cumulative net operating loss had not been and would not be subject to an adverse determination or adjustment as a result of (a) the confirmation of the Plan of Reorganization and implementation. thereof, or (b) the issuance of securities by the Debtor prior to the Petition Date. In addition, NEPC and Mr. Antisdel agreed to indemnify and hold the Debtor harmless from any and 211 damages and expense which it might incur, including legal fees, if any, in the event that the Debtor's net operating loss was to be adversely effected as a result of the Settlement and Release Agreement. The Plan of Reorganization proposes that the Bankruptcy Court will confirm and ratify the two Settlement Agreements set forth above and the Indemnification Agreement upon confirmation of the Plan. VIII. DISCUSSION OF PROCEDURAL MATTERS COMMON TO ALL CLAIMS. A. Acceptance or Rejection of Plan: Effect of Rejection by One or More Classes of Claims A Class of Creditors shall have accepted the Plan if the Plan is accepted by at least 2/3 in amount and more than 1/2 in number of the Allowed Claims of such class that have voted. B. Amendment to the Plan The Plan may be amended by the Debtor before or after the Effective Date as provided in section 1127 of the Bankruptcy Code. C. Disallowance of Settled Claims and Post-petition Additions All Claims that have been settled and satisfied during the pendency of the Chapter 11 Case will be deemed disallowed, without the necessity of filing and prosecuting objections to such Claims. In addition, Debtor will not be required to make any specific objection to Proofs of Claim alleging the right to recover post-petition interest, penalties, fees and other accruals with respect to repetition Claims (except secured Claims entitled to such accruals pursuant to 78 section 506(b) of the Bankruptcy Code) and any Proofs of Claim asserting a right to such payment will be disallowed to the extent thereof. The disallowance provided for with respect to such post-petition additions is subject to reconsideration upon a motion by the claimant filed with the Bankruptcy Court and properly served upon Debtor. Notwithstanding any other provisions of the Plan, only whole numbers of shares of Class A Common Stock shall be issued. D. Discharge of Debtor. The rights afforded in the Plan and the treatment of all Creditors therein shall be in exchange for and in complete satisfaction, discharge and release of Claims or Equity Interests of any nature whatsoever, including any interest accrued thereon from and after the Petition Date against the Debtor or any of its assets or properties. Except as otherwise provided herein, upon the Confirmation Date, in accordance with section 1141 of the Bankruptcy Code, all such Claims or Equity Interests against the Debtor shall be satisfied, discharged and released in full. All Creditors and holders of Equity Interests shall be precluded from asserting against the Debtor or its respective assets or properties any other or further Claims based upon any acts or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. E. Disputed Claims Reserve. 1. In determining the amount of the Distributions due the holders of Allowed Claims, the appropriate Pro Rata calculations required by the Plan shall be made as if all Disputed Claims were Allowed Claims in the full amount claimed by the holders thereof. Debtor will presume, for purposes of the Disputed Claims Reserve, that all Disputed Claim Creditors elect to receive Class A Common Stock. If the claim is allowed and the Creditor elects to receive cash, the treatment is as set forth in paragraph 4 of this section. 79 2. On the Effective Date, the Debtor shall compute the number of shares of Class A Common Stock to which the Disputed Claim Creditor may be entitled and shall hold such shares in a segregated account (hereinafter the "Disputed Claims Reserve") to be held in trust by the Debtor for the benefit of the holders of Disputed Claims pending determination of their entitlement thereto under the terms of the Plan. The Class A Common Stock held in the Disputed Claims Reserve shall be deemed to be "treasury" stock of the Debtor and thus non-voting during the period within which it is held in the Disputed Claims Reserve. The Disputed Claims Reserve shall also be held in trust by the Debtor for the benefit of the holders of Allowed Claims. 3. As soon as practicable after a Disputed Claim becomes an Allowed Claim, the Class A Common Stock reserved for such Allowed Claim shall be released by the Debtor from the Disputed Claims Reserve and delivered to the holder of such Allowed Claim. In the event that the Disputed Claim is disallowed, the Class A Common Stock provided for such Claim shall be released to Debtor for use in the course of its business, as deemed appropriate by its Board of Directors. 4. In the event that a Disputed Claim becomes an Allowed Claim and the Creditor is entitled to receive Cash, the Debtor shall pay such Cash upon the later of (i) the Payment Date, or (ii) ninety (90) days after the Disputed Claim becomes an Allowed Claim. In the event any Class A Common Stock remains unclaimed upon expiration of five years following the Effective Date, such Class A Common Stock shall be released to the Debtor. 5. The release of Class A Common Stock from the Disputed Claims Reserve shall not be a basis for or result in the issuance of additional Class A Common Stock pursuant to the NEP Settlement or the Diego Tel Amended and Restated Agreement for Exchange of Stock. 80 F. Events of Default In the event that Debtor defaults under the provisions of the Plan, any Creditor or party-in-interest desiring to assert such a default shall provide Debtor with written notice of the alleged default. Debtor shall have thirty days from receipt of the written notice in which to cure the default. Such notice shall be delivered by certified mail (return receipt requested) to the attorneys for Debtor at the address stated on the final page hereof. If the default is not cured within the thirty day cure period, any Creditor or party-in-interest may thereafter file and serve upon counsel for Debtor a motion to compel compliance with the applicable provision of the Plan. The Bankruptcy Court, upon finding a material default, shall issue an order compelling compliance with the applicable provisions of the Plan. G. Executory Contracts and Unexpired Leases 1. Assumption of Executory Contract under Plan. Upon Confirmation of the Plan, any executory contracts or unexpired leases not rejected by the Debtor with the Bankruptcy Court prior to the Confirmation Date, or within sixty (60) days thereafter, or which are not the subject of a motion to reject the same pending as of the Confirmation Date shall be deemed to have been assumed by the Debtor upon the Confirmation Date, in accordance with section 365 of the Bankruptcy Code. The Debtor is a party to what it believes is an executory contract with Stone Brothers Welding & Equipment Sales, entitled Independent Contractor Agreement, dated July 3, 1992. The Debtor will determine at or before confirmation whether it intends to assume or reject the executory contract. 81 2. Filing of Claims Arising out of Rejection or Assumption of Contracts. In the event the rejection or assumption of an existing contract effected pursuant to the above gives rise to a Claim not otherwise provided for herein, the holder of such Claim may file such Claim within thirty (30) days following the Confirmation Date or if the contract is not rejected by Debtor prior to the Confirmation Date, within thirty (30) days after the rejection or assumption which gives rise to the Claim. Such Claim shall, in addition to its filing with the Bankruptcy Court, be served upon the undersigned attorneys for the Debtor. Any objection to Claims filed pursuant to this provision shall be governed by the procedures provided in Article XIV of the Plan. In the event a claim for rejection damages is allowed, it shall be entitled to treatment available to all Class 7 claimants. 3. Executory Contracts of Indemnification with Directors. Debtor has executory contracts in effect with its past and current Board of Directors and Officers, some of which it is accepting and some of which are being rejected as follows:
Acceptance/Rejection Name Position of Executory Contract --------------------- ------------------ --------------------- Jeffrey Antisdel Director/Officer Accept Kenton Bowers Officer Reject Peter Cannell Director Reject Charles Cain Director Reject Richard Cascarilla Director/Officer Accept John Goold Director Reject Jeffrey Hartman Director Accept Lawrence Herth Director Accept Pattinson Hayton, III Officer/Consultant Reject Michael Kassouff Director Accept Jeffrey Modesitt Director Accept Stefan Tevis Director/Officer Reject
By rejecting the executory contracts set forth above, it is Debtor's specific intent to rescind any express or implied obligation (if any) which it has or may have to such individuals to 82 indemnify or to hold them harmless for damages or expenses which they may incur as a result of claims of wrongdoing lodged against them from any source whatsoever. H. Means for Execution of the Plan The Plan will be implemented utilizing the following resources: 1. Cash accrued from operations and Class A Common Stock will be used to satisfy Claims of Classes 1 through 8 and Class 10. 2. The Debtor owns ten Ormats. Creditors in Classes 4, 5 and 7 shall be granted a secured interest in one Ormat Unit to secure repayment of those obligations. 3. Promptly after the Confirmation Date, the Debtor shall take the following action in the sequence presented: a. File a notice with the Secretary of State for the State of Delaware to the effect that the amendments) to NEC's Articles of Incorporation as filed in January 1997, were filed without requisite shareholder approval and are, therefore, invalid and void ab initio; b. File Amended and Restated Articles of Incorporation with the Secretary of State for the State of Delaware which Amended Articles of Incorporation shall (among other things): (i) extinguish the existing Series A, Series B, and Series C Preferred Shares and the Class B Common Stock; (ii) create a new class of preferred stock to be known as "Special Stock" which shall be entitled to elect two (2) Directors to the Debtors Board of Directors; (iii) provide that the affirmative vote of 65.0% of the issued and outstanding Class A Common Stock is required to amend the Articles of Incorporation; and (iv) change the name of the Debtor to WorldCall, Inc. and thereafter 83 issue new stock certificates. c. Adopt amended and restated By-Laws. 4. The Debtor shall acquire 100% of the issued and outstanding common stock of VivaTel in exchange for $500.00. Subject to Court approval, the Debtor has acquired Diego Tel for $500.00. The number of shares of Class A Common Stock is predicted to be equal to 35.0% of the issued and outstanding Class A Common Stock. 5. Subsequent to the Declaration Date, but at least twenty days prior to the Effective Date, the Debtor shall effect a reverse stock split such that the number of shares of Class A Common Stock outstanding shall be no less than 500,000 shares nor more than 20,000,000 shares, the exact ratio of the reverse stock split to be set by the Debtor's Board of Directors. 6. All Class A Common Stock issued to a Creditor pursuant to the Plan, shall be issued pursuant to section 1145 of the Bankruptcy Code and shall be issued without a restrictive legend if the Creditor establishes that the Creditor is not an "underwriter' as defined in section 1145(b) of the Bankruptcy Code. If the Creditor or recipient is deemed to be an "underwriter' as defined in Section 1145(b) of the Bankruptcy Code, the Class A Common Stock will be issued pursuant to Section 4(2) of the Security Act of 1933, Regulation D or Rule 144 of that Act and, therefore, will be restricted. The Class A Common Stock to be issued to the exchanging shareholder of Diego Tel shall be restricted and subject to significant restraints on transfer as set forth in the Plan and in the acquisition agreements. 84 I. Multiple Claims If a claimant holds more than one Claim in any one class, all Claims of the claimant in that class will be aggregated into one Claim and distribution will be made with respect to each aggregated Claim. Furthermore, the Debtor will be permitted to defer and accumulate distribution in amounts of less than $50 each. Once the Allowed Claim payment amount reaches $50, a distribution will be made. J. Post-confirmation Injunction and Automatic Stay. The Confirmation Order will operate as an injunction against discrimination against Debtor by governmental authorities because of the filing of the Chapter 11 Case. The reorganized debtor retains all rights granted to it pursuant to section 525 of the bankruptcy code. All pending lawsuits, with certain exceptions, will be deemed dismissed and the automatic stay continued in effect, and an injunction will be issued under sections 105 and 1141 of the Bankruptcy Code discharging the Debtor and preventing the litigation of Claims in any forum other than the Bankruptcy Court. K. Prohibition Against Discriminatory Treatment. As provided in Section 525 of the Bankruptcy Code, a governmental unit may not deny, revoke, suspend, or refuse to renew any license or similar grant to, condition such a grant to, or discriminate with respect to such a grant against, Debtor or any of its subsidiaries, or any other person or entity with whom Debtor has been associated, solely because of the existence of the Chapter 11 Case, any provisions in the Plan, or the legal effect of the Plan. The Confirmation Order will contain an express injunction against any such discrimination, effective except as otherwise limited by applicable law. 85 L. Provisions Covering Distributions 1. Payments and Distributions to be Made on the Effective Date or the Payment Date. Payments and Distributions to be made by the Debtor on the Effective Date pursuant to the Plan shall be made on the Effective Date or as soon as practicable thereafter, except as otherwise provided for in the Plan, or as may be ordered by the Bankruptcy Court. Payments and Distributions to be made by the Debtor of the Payment Date pursuant to the Plan shall be made on the Payment Date or as soon as practicable thereafter, except as otherwise provided for in the Plan, or as may be ordered by the Bankruptcy Court. 2. Method of Payment. Payments to be made by the Debtor pursuant to the Plan shall be made by check drawn on a domestic bank or by wire transfer from a domestic bank. 3. Payment to be Made by Debtor. Distributions to be made to Creditors and Equity Interest holders under the Plan shall be made by Debtor. 4. Class A Common Stock. Distributions of Class A Common Stock shall be made through Corporate Stock Transfer Company or the then Transfer Agent for Debtor. M. Provisions for Execution and Supervision of the Plan 1. Retention of Jurisdiction The Bankruptcy Court shall retain and have exclusive jurisdiction over the Chapter 11 case for the following purposes: a. to determine any and all objections to the allowance of Claims or Equity Interests; 86 b. to determine any and all pending applications for the rejection or assumption of executory contracts or unexpired leases to which the Debtor is a party or with respect to which it may be liable, and to hear and determine, and if need be to liquidate, any and all Claims arising therefrom; c. to determine any and all applications, adversary proceeding and contested or liquidated matters that may be pending on the Confirmation Date, except as provided in the Confirmation Order; d. to consider any modifications to the Plan, any defect or omission or reconcile any inconsistency in any order of the Bankruptcy Court, including the Confirmation Order, to the extent authorized by the Bankruptcy Court; e. to determine all controversies, suits and disputes that may arise in connection with the interpretation, enforcement or consummation of the Plan, to include disputes between classes of claimants under the Plan regarding allocations or payment of Distributions hereunder; f. to consider and act on the compromise and settlement of any claim against or cause of action by or against the Debtor's estate; g. to issue such orders in aid of execution of the Plan to the extent authorized by section 1142 of the Bankruptcy Code; and h. to determine such other matters which may be set forth in the Confirmation Order or which may arise in connection with the Plan 87 or the Confirmation Order,, including, but not limited to, extending deadlines and time limits provided in the Plan. N. Provisions for Treatment of Disputed Claims 1. Authority to Object. The Debtor and any party-in-interest shall have the authority to object to and contest the allowance of any Claim filed with the Bankruptcy Court in respect of any Claim listed as disputed, contingent or unliquidated on the Debtor's schedules, except as to any Claim otherwise treated by the Plan or previously allowed or disallowed by final order of the Bankruptcy Court. 2. Objections to Claims to be Filed Within Sixty Days After Confirmation Date. Unless otherwise ordered by the Court, after notice and a hearing, objections to Claims and Equity Interests shall be made and filed by the Debtor or by any party-in-interest and shall be served upon each holder of the Claim or Equity Interest to which objections are made (and upon the Debtor's attorney if one of the Debtors is not the objecting party) and filed with the Bankruptcy Court as soon as practicable, but in no event later than 60 days subsequent to the Confirmation Date. 3. Prosecution of Objections to Claims. All legal fees and expenses of the Debtor incurred in the prosecution of Claim objections and in the consummation of the Plan shall be paid first by the Debtor as a Post-Confirmation Administrative Expense pursuant to Article 4.2 of the Plan. 88 4. Final Order. Except as may be otherwise agreed with respect to any Disputed Claim, no payments or Distributions shall be made with respect to all or any portion of a Disputed Claim unless and until all objections to such Disputed Claim have been determined by a Final Order of the Bankruptcy Court. Payments and Distributions to each holder of a Disputed Claim or Disputed Equity Interest to the extent that it ultimately becomes an Allowed Claim or Allowed Equity Interest shall be made in accordance with the provisions of the Plan with respect to the Class of Creditors or Equity Interest to which the respective holder of an Allowed Claim or Allowed Equity Interest belongs. Such payments and Distributions shall be made as soon as practicable after the date that the order or judgment of the Bankruptcy Court allowing such Claim or Equity Interest becomes a Final Order. O. Restriction on Transfer of shares. Unless otherwise set forth in this Article, all Class A Common Stock to be issued by the Debtor shall be issued pursuant to section 1145 of the Bankruptcy Code without registration pursuant to section 5 of the Securities Act of 1933. The following Class A Common Stock shall be issued pursuant to Section 4(2) of the Securities Act of 1933, Regulation D or Rule 144 promulgated thereunder, and therefore shall restricted from transfer: 1. All Class A Common Stock issued to acquire the Common Stock Diego Tel. 2. The Class A common stock to be issued to the 16 Bahamian corporations pursuant to the NEP settlement. 3. The Class A Common Stock issued to any person who is deemed to be an "underwriter" for purposes of section 1145(b) of the Bankruptcy Code. 89 4. All Class A Common Stock which is restricted pursuant to Section 22.2 of the Plan shall bear the following restrictive legend: THE SECURITIES REPRESENTED -BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO SECTION 5 OF THE SECURITIES ACT OF 1933, NOR HAVE THESE SECURITIES BEEN REGISTERED PURSUANT TO ANY COMPARABLE STATE SECURITIES ACT OR REGULATION. ACCORDINGLY, TRANSFER, SALE, PLEDGE, HYPOTHECATION OR CONVEYANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS PROHIBITED UNLESS AND UNTIL (1) THE SHARES REPRESENTED HEREBY HAVE BEEN REGISTERED PURSUANT TO SECTION 5 OF THE SECURITIES ACT OF 1933 AND, AS REQUIRED, PURSUANT TO A SIMILAR STATE STATUTE OR REGULATION, OR (2) THE SHAREHOLDER SUBSTANTIATES THAT THERE IS A VALID EXEMPTION FROM THE REGISTRATION REQUIREMENT PROVIDED BY SECTION 5 OF THE SECURITIES ACT OF 1933 AND SUBSTANTIATES SUCH EXEMPTION BY MEANS OF A LEGAL OPINION ACCEPTABLE TO POWERTEL USA, INC. AND ITS LEGAL COUNSEL. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED IN CONJUNCTION WITH A PLAN OF REORGANIZATION CONFIRMED BY THE UNITED STATES BANKRUPTCY COURT FOR NEVADA AND THIS RESTRICTION ON TRANSFER HAS BEEN INCLUDED AS PART OF THE TERMS AND CONDITIONS OF THE CONFIRMED PLAN OF REORGANIZATION. FOR ADDITIONAL INFORMATION CONCERNING THIS RESTRICTION, INQUIRIES SHOULD BE DIRECTED TO: Van P. Carter, Esq. Walter & Haverfield P.L.L. 1300 Terminal Tower Cleveland, Ohio 44113 (216) 781-1212 P. Set Offs. Debtor may, but shall not be required, to set off against any Claim and the distributions to the holder under the Plan, claims of any nature that Debtor may have against the holder of such Claim. Allowance of a Claim or failure to exercise any right of set off with respect to a claim does not constitutes a waiver or release by Debtor Of any rights or Class that Debtor may have against the holder of such Claim. Debtor's rights of set off may be limited in the manner 90 provided for in the Plan if such rights are not exercised on or before the Effective Date of the Plan. Debtor may exercise rights of set off with respect to Claims for which it has payment responsibility. Q. Title to Assets: Discharge of Liabilities. Except as otherwise provided by the Plan, on the Confirmation Date, title to all assets and properties dealt with by the Plan shall vest in Debtor in accordance with section 1141 of the Bankruptcy Code, free and clear of all Claims and Equity Interests; and the order confirming the Plan shall be a judicial determination of discharge of the Debtor's liabilities except as provided in the Plan. R. Effect of Discharge on Rights Between Third Parties. If the Plan is confirmed, the provisions of the Plan will bind the Debtor and all Creditors and Equity Interest holders, whether or not they accept the Plan. Confirmation will also discharge the Debtor from all debts that arose before confirmation as of the Confirmation Date, including intercompany obligations (if any) owing by the Debtor to an Affiliate, whether such Affiliate is itself a debtor. The classification and the manner of satisfying all Claims under the Plan takes into consideration the existence of any guarantees by the Debtor Of any obligation of any person and the fact that the Debtor may be a joint obligor with another person or persons, with respect to the same obligation. The Plan also takes into account any contentions by Creditors or holders of Equity Interests that the Claims of other Creditors or other holders of Equity Interests may be subordinated by contract or pursuant to the Articles of Incorporation or ByLaws of the Debtor. All Claims against the Debtor based upon any such guarantees will be discharged in the manner provided in the Plan. Each Creditor and stockholder will receive the Distribution provided in 91 the Plan, which will not be subject to any Claim of another Creditor or stockholder by reason of any claimed contractual right of subordination based upon any defaults occurring prior to the Confirmation Date. The Distributions provided for in the Plan will be in exchange for and in complete satisfaction, discharge and release of all Claims and Equity Interests, including any Claim for interest after the Petition Date. On the Confirmation Date, all Creditors and existing Equity Interest holders shall be precluded form asserting any Claim against the Debtor or its assets or properties based upon any transaction or other activity of any kind that occurred prior to the Confirmation Date; provided, however, that nothing contained in the Plan will alter the legal, equitable and contractual right of the holder of any Claim or Equity Interest specifically designated as being unimpaired in the Plan, it being specifically intended that all such rights are to remain unaltered by the Plan. S. Filing of Additional Documents. On or before the Effective Date, the Debtor shall file with the Bankruptcy Court such agreements, indentures, supplemental indentures and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. T. Post Confirmation Acquisitions, Mergers and Stock Splits. In order to fulfill its financial obligations to Creditors and to expand its operations, it is anticipated that the Debtor will effect one or more acquisitions or mergers subsequent to the Confirmation Date. For a two (2) year period commencing with the Effective Date, Debtor will be permitted pursuant to the Plan to effect acquisitions and mergers, stock splits and reverse stock splits. based solely upon the affirmative vote of its Board of Directors and without the necessity of requesting and receiving the consent of the Debtor shareholders. 92 U. Class A Common Stock in Lieu of Cash. Any Creditor entitled to receive Cash pursuant to the Plan may, by mutual agreement of the Creditor and the Debtor, receive Class A Common Stock with the number of shares to be issued and per share price to be agreed upon between the Debtor and the Creditor. V. Settlement of Claims on Interests. Pursuant to section 1 1 23(b)(3)(A) of the Bankruptcy Code, upon Confirmation of the Plan, the following settlements will be deemed to have been ratified by the Bankruptcy Court and will be in full force and effect: (1) the NEP Settlement, (2) Ownership Settlement Agreement, and (3) the settlements entered into with respect to the claims set forth in Article III, Section G of this Disclosure Statement. W. Ratification of Agreements. Upon Confirmation of the Plan, the Bankruptcy Court shall ratify the Amended and Restated Agreement for the Exchange of Stock for the Acquisition of DIEGO TEL and the Acquisition Agreement of VivaTel. X. Contested Claims. Except with respect to the Claims of Creditors whose Claims arise from the rejection of an executory contract, which Claims must be filed no later than (i) thirty days after the Confirmation Date, or (ii) if not rejected prior to the Confirmation Date, thirty (30) days following the rejection or assumption which gives rise to the Claim; the Debtor or any party-in-interest may object to any Claims, within sixty (60) days after the Confirmation Date, by filing an objection with the Bankruptcy Court and serving a copy on such claimant, in which event the Claim shall be treated as a contested Claim under the Plans. If and when a contested Claim is resolved by allowing the Claim in whole or in part, the Debtor shall make distributions to the 93 holder of the Claim in accordance with the provisions of the Plans applicable to the Claims of that class, or in accordance with the provisions pertaining to the Disputed Claims Reserve Section 14.5 of the Plan. 1. Disclosure of Information. The information in this Disclosure Statement, and the Exhibits therein regarding the Debtor, its business operations, the value of its assets or the value of any benefits offered pursuant to the Plan, is expressly confined to the context of this Disclosure Statement, and Debtor specifically rejects use of any such information outside of consideration of the Disclosure Statement. 2. Termination of Committees. On the Confirmation Date, all Committee of Creditors, if any, appointed by the Bankruptcy Court in the Chapter 11 Cases of the Debtor, pursuant to section 1102 of the Bankruptcy Code, shall be terminated. IX. DISCUSSION OF MATTERS OF CORPORATE GOVERNANCE A. Officers and Directors of Reorganized Debtor The Reorganized Debtor's officers and directors will be as follows: Richard A. Cascarilla Director and President Michael Kassouff Director and President Jeffrey Hartman Director
B. Compensation for Directors. Directors of Debtor will receive for attending duly called meetings of the board of directors, plus reimbursement of actual out-of-pocket expenses incurred in attending such meetings, whether telephonically or in person, retroactive compensation for all services issued to the date of confirmation in the form of stock options allowing for the purchase of 5,000 Class 94 A Common Stock per Director per month at $.10 per share. Following confirmation, directors shall receive annual Cash compensation of $10,000 per year (paid quarterly), plus actual out-of-pocket expenses so incurred, plus Stock options to purchase 2,500 shares of Class A Common Stock per Director per quarter at $.l0 per share. C. Cash Compensation for Officers and Employees. Officers and employees will be paid standard wages as is normal and customary in the marketplace for equivalent services rendered. The Board of Directors of Debtor may adopt bonus, performance, and incentive plans as the Board deems necessary and appropriate, including stock option plans. D. Provisions for Management 1. Directors. If the Plan is confirmed, subject to the Bankruptcy Court's approval under Bankruptcy Code section 1129(a)(5), the Debtor shall have as directors of Debtor Messrs. Cascarilla and Kassouff. Mr. Herth will resign, to be replaced by Mr. Jeffrey Hartman, a former Director of Debtor. These directors shall serve as directors of Debtor after the Confirmation Date until removed or replaced by the post-confirmation stockholders of Debtor. The tenure and manner of selection of directors of Debtor shall be as provided in the Articles of Incorporation and By Laws. A summary of the education, business, experience and professional qualifications of Messrs. Cascarilla, Kassouff and Hartman is included as Exhibit 6. 2. Officers. If the Plan is confirmed, subject to the Bankruptcy Court's approval under Bankruptcy Code section 1129(a)(5), the officers of Debtor, as identified in the Disclosure Statement, shall be Mr. Cascarilla (President) and Mr. Kassouff (Secretary-Treasurer). The Board of Directors 95 shall designate the officers of Debtor and shall specify the tenure of the individuals holding those offices. 3. Ratification of Corporate Actions. Debtor ratifies the election of Michael Kassouff as director and the elections of any and all officers thereafter. 4. Employment Contracts. Debtor will enter into employment contracts with its respective officers which shall only be operative if the Plan is confirmed. Copies of the employment contracts that will take effect immediately upon confirmation have been filed with the Bankruptcy Court. The employment contracts shall contain sufficient information to comply with Bankruptcy Code section 1129(a)(5)(B) as to disclosure of compensation to be paid to insiders who are the subject of contracts and are subject to the approval of the Bankruptcy Court and are attached as Exhibit 7. E. Capitalization. As a result of the confirmation of the Plan, the Reorganized Debtor's capitalization will be as follows: CLASS A COMMON STOCK Post-Confirmation and Post-Reverse Stock Split (but excluding any Disputed Claimants who may be Entitled to Stock): assuming that the total number of shares of Class A Common Stock is 10,000,000. 96
ESTIMATED NAME NUMBER OF SHARES PERCENTAGES - --------------------------------------------------------------------------------------- Mr. David Wallace* 3,500,000 35.00% - --------------------------------------------------------------------------------------- Parklane Mayfair, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Clermot and Annabelle, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Burke Douglas Holdings, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Clarendon Atlantic Holdings, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Macaulay Island Investments, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Young, Bayshore Investments, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Wilton Ashfield, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Greyshire House, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- August Lake Holdings, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Maitland Investments, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Berkeley Square Investments, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Whitestone Brooke Holdings, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Porterman Williams, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- North Oldenfield, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Blackstone Sterling Holdings, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Shepherd Market, Ltd.** 312,000 3.12% - --------------------------------------------------------------------------------------- Officer and Directors 20,000 0.20% - --------------------------------------------------------------------------------------- All Others 1,488,000 14.88% - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- TOTAL 10,000,000 100.00% - ---------------------------------------------------------------------------------------
* Pursuant to Amended and Restated Agreement for Exchange of Stock with Diego Tel assuming that all financial performance standards have been satisfied and the maximum number of shares have been earned by Mr. Wallace. ** Pursuant to NEP Settlement 97 X. CERTAIN INCOME TAX CONSEQUENCES OF THE PLAN A. General. Certain significant federal income tax consequences of the Plan pursuant to the Internal Revenue Code (the "Tax Code") are described below. The discussion focuses on the net operating loss carryover ("NOL") rules and the implications of the Plan upon the retention of a net operating loss in excess of $4,500,000. In addition, there is discussion of the corporate alternative minimum tax which may adversely effect corporations with NOLs and with significant differences between income reported for tax purposes and income reported for financial statement purposes. Due to the complexity of the transactions contemplated by the Plan, the differing facts and circumstances governing the Claims of Creditors and holders of Equity Interests, differences in the nature of the Claims of the various Creditors, their taxpayer status, residences, and methods of accounting (including Creditors within the same Creditor Class) and prior actions taken by Creditors with respect to their Claims, as well as the possibility that events subsequent to the date hereof could change the federal tax consequences of the transactions, the tax consequences described below are subject to significant uncertainties. CREDITORS AND STOCKHOLDERS ARE ADVISED TO CONSULT WITH THEIR INDIVIDUAL TAX ADVISORS RESPECTING THE TAX CONSEQUENCES OF THE PLAN, INCLUDING STATE AND LOCAL TAXES. 1. Net Operating Loss Carryovers. For federal income tax purposes, Debtor has a substantial NOL carryover that may be available to offset the future taxable income of the reorganized company. These amounts are, however, subject to review and allowance upon audit by the IRS. As of February 28, 1996, the 98 NOL carryovers estimated to be reported on Debtor's consolidated tax return aggregated approximately $4,500,000. These NOL carryovers may be reduced as a result of the reduction in the indebtedness of Debtor, but may remain substantial in amount. Pursuant to the Tax Reform Act of 1986, complex, substantial changes were made to sections 382 and 383 of the Tax Code. Thereafter, the Internal Revenue Service issued lengthy, complicated new temporary Treasury Regulations implementing new section 382. The temporary regulations were subsequently adopted on a permanent basis. Under section 382, for reorganizations occurring after May 5, 1986, resulting in a change of ownership of more than 50% of the stock owned in a loss corporation, the amount of the loss corporation's taxable income after the change that can be offset by existing NOLs cannot in any one year exceed an amount equal to the value of the loss corporation multiplied by the long-term exempt rate of return prescribed by the IRS. In addition, no NOL or tax credit carry forwards will survive if the continuity of business enterprise requirement is not met during the two-year period beginning on the date of the change in ownership of the loss corporation. Under this continuity requirement, the loss corporation is required to continue its historic business or to use a significant portion of its assets in such a business. If the loss corporation has more than one line of business, continuity of business enterprise requires only that it continue a significant line of business. Any NOL that remains unused after fifteen years from the date incurred will expire. The limitations of section 382 arise upon the occurrence of an "ownership change." An ownership change occurs if, following any change in stock ownership affecting the percentage of stock owned by a "5% shareholder' (as defined below) during a three-year testing period there is a more than fifty percentage point increase in the percentage ownership of the loss corporation 99 held at the close of the testing period by 5% shareholders over the lowest percentage holdings by such shareholders during the "testing period." An owner shift or equity structure shift may effect an ownership change. An owner shift is a change in stock ownership that affects a 5% shareholder. In general, under the Regulations any issuance of stock is also an owner shift. An equity structure shift is a tax reorganization under the Tax Code. An equity structure shift is also generally an owner shift. The Temporary Treasury Regulations essentially make no distinction between an owner shift and an equity structure shift. The term '5% shareholder' means any person holding 5% or more in value of the stock of the corporation at any time during the testing period. As discussed below, transactions affecting stock ownership can result in segregating groups of shareholders (individually owning less than 5% of the stock) into groups treated as 5% shareholders, including groups that in fact own less than 5% of the stock of the loss company. In general, stock includes all Equity Interests that participate in the earnings of the corporation, that vote, or that are convertible into common stock. After November 5, 1992, unexercised options will not be treated as stock. Special attribution and aggregation rules are provided in Section 382. The total percentage of the stock of a corporation held by persons who are not 5% shareholders is aggregated and is taken into account as if held by a single 5% shareholder and as if changes in their aggregate ownership were changes in the percentage holdings of an individual 5% shareholder. Certain family members are also aggregated for purposes of determining ownership changes and percentage ownership for this purpose. Certain transactions can result in the segregation of such less than 5% shareholders into separate groups. Thus, the less than 5% shareholders of each corporation, a party to a tax reorganization, are each segregated and treated 100 as a separate 5% shareholder. Likewise, each issuance of stock by a corporation is segregated and the persons receiving such stock are segregated and treated as a separate 5% shareholder for purposes of determining whether an ownership change has occurred. The loss corporation may combine separate-less-than-5%- shareholder for purposes of determining whether an ownership change has occurred. The loss corporation may combine separate less-than-5%-shareholder groups, each holding an aggregate of less than 5% of the loss corporation's stock, first identified during any year into a single less-than-5%-shareholder group. Stock owned by a corporation or other entity is attributed to its shareholders; under certain circumstances stock attributed to such shareholders is also aggregated and treated as if it were held by a separate 5% shareholder. Stock ownership reporting rules are provided by the Regulations. Implementation of the Plan and the transactions therein contemplated could therefore result in a substantial percentage of the Reorganized Debtor Common Stock being held by persons who receive such instruments in an owner shift or equity structure shift and who in the aggregate are treated as one or more separate groups deemed to be a 5% shareholder for purposes of new Section 382. Section 382 also contains a special provision which provides that in the case of an exchange of debt for stock in a case under the jurisdiction of a Bankruptcy Court brought under Title 11 of the United States Code (relating to bankruptcy) (a "Title 11 Case"), the limitations of section 382 will not apply to any ownership change resulting from such a proceeding if Creditors and shareholders immediately before the exchange own, as a result of such exchange, 50% of the stock of the loss corporation. To qualify for this exception, only Claims held by persons who were Creditors as of a date eighteen months prior to the filing of the petition under Title 11 or whose Claims arose in the ordinary course of trade or business of the debtor (and 101 were at all times beneficially owned by such persons) are taken into account. However, the Title 11 exception may result in the reduction of NOLs by some percentage of the debt discharge amount deemed satisfied by stock and by interest paid or accrued on indebtedness since the beginning of the third tax year prior to the exchange of such indebtedness for stock. 2. Alternative Minimum Tax The Corporate Alternative Minimum Tax (AMT) applies to all C corporations whose average gross receipts for the prior three years are in excess of $5 million. Once AMT becomes applicable, the corporation is required to compute its taxable income and its tax under two separate systems. The first is the regular tax system. As stated above, the corporation has a regular tax NOL in excess of $4 million. If this loss is not limited or expired under the above discussion, any taxable income of the corporation in the future will be offset dollar for dollar by this NOL until it either is all utilized or expires. However, for AMT purposes, there is a separate calculation of the AMT NOL. This AMT NOL is usually smaller than the regular tax NOL. The amount of the AMT NOL available to the corporation is unknown at this time. When the corporation's taxable income is calculated for AMT purposes, the amount subject to tax is reduced by the available AMT NOL as limited under the same rules applicable to the regular tax NOLs under Section 382 as discussed above. However, assuming that there is sufficient AMT NOL available to offset taxable income and it is not limited or expired, there are still limitations on the use of the AMT NOL against AMT Taxable income. As such, even if there is no regular tax payable in a give corporate tax year, there may be AMT payable. Thus, notwithstanding anything discussed above, the corporation may be required to pay federal income tax. The amount of the potential tax is unknown at this time. 102 THIS DOCUMENT SHALL NOT BE CONSTRUED AS PROVIDING TAX ADVICE TO CREDITORS, SHAREHOLDERS OR OTHER READERS OF THIS DOCUMENT. ALL PARTIES ARE URGED TO SEEK ADVICE FROM THEIR OWN TAX ADVISORS. B. Acquisition of DIEGO TEL. The acquisition of DIEGO TEL will occur by means of an exchange of (a) Class A Common Stock for (b) 100.0% of the issued and outstanding Common Stock of DIEGO TEL. It is the objective of the parties that this transaction qualify as a tax free reorganization pursuant to Section 382 of the Internal Revenue Code. C. Creditors. No opinion is expressed with regard to the tax treatment of any Creditor who elects to receive Class A Common Stock pursuant to this Plan. Creditors are encouraged to seek advice from there personal attorney, accountant or tax advisor. XI. MAJOR CONTINGENCIES AND RISK FACTORS A. General Business Matters. 1. Approval of the NEP Settlement. NEP is the Debtor's largest single Creditor. Perhaps more importantly, NEP controls assets (i.e., CEC d/b/a Herth Printing and Business Supplies and certain real property situated in Reno, Nevada) which had been a core component of the Company's asset base and revenue stream prior to August 1996. In the event that the Court and Creditors should refuse to ratify the NEP Settlement, the Company would incur substantial legal fees and expenses in order to pursue its claims against 103 NEP, and there is no guarantee or assurance that the Company would prevail. Moreover, in the event that the NEP Settlement is not ratified, it is probable that the acquisition of Diego Tel and VivaTel would also be challenged. Accordingly, in the opinion of the Debtor, ratification of the NEP Settlement is a key component to the Plan of Reorganization and implementation of the Debtor's business plan. 2. Acquisition of VivaTel and Diego Tel. Although VivaTel and Diego Tel are newly organized companies, Diego Tel is already negotiating potentially substantial contracts for the resale of long distance telecommunications services. These contracts represent an opportunity for immediate revenue to the Debtor. More importantly, based upon the events of the past year, it is the opinion of management that expansion and modification of the Debtor's business plan is necessary and appropriate in order for the Debtor to become commercially viable on a long term basis. The opportunity to acquire a foothold into the rapidly expanding telecommunications industry is consistent with the opinion of the Board of Directors that Debtor should diversify its business into business segments which are not interdependent. The Board of Directors believes telecommunications to be one of the core components. Accordingly, in the event that the VivaTel and DIEGO TEL acquisitions are not approved by the Bankruptcy Court, the Company's Plan will be significantly handicapped.- 3. General Business Risks and Contingencies. Both VivaTel and Diego Tel are recently organized entities without a previous business history. Debtors business must be considered in light of the risks faced by early stage companies in the rapidly evolving international telecommunications market. Early stage companies must respond to external factors, such as competition and changing regulations, 104 without the resources, infrastructure and broader business base of more established companies. Early stage companies also must respond to these risks while simultaneously developing systems, adding personnel and entering new markets. As a result, these risks can have a much greater effect on early stage companies. If it does not successfully address such risks, Debtor's business, operating results and financial condition would be materially adversely affected. 4. Management of Changing Business. a) Increased Demands on Management and Need to Continue to Improve Systems. Debtor hopes to experience revenue from the telecommunication business that it will acquire upon confirmation. In such event will expand the number of its employees and the geographic scope of its operations. These factors will result in increased responsibilities for management personnel and place increased demands upon Debtor's operating and financial systems. Debtor expects that its sale of long distance communication services into foreign countries will lead to increased financial and administrative demands, such as increased operational complexity associated with expanded network facilities, administrative burdens associated with managing an increasing number of relationships with foreign partners and expanded treasury functions to manage foreign currency risks. Accounting systems and policies will be developed as Debtor experiences significant growth, and Debtor will require personnel, systems and policies to comply with the reporting requirements of a publicly held company. Although Debtor plans to acquire a financial accounting system in 1998, there can be no assurance that Debtor's personnel, systems, procedures and controls will be adequate to support Debtor's future operations. Difficulties encountered in Debtor's development of an accounting system or the failure to implement and improve Debtor's operation, financial and management systems as needed to accommodate any expansion of Debtor's business could have a material 105 adverse effect on Debtor's business, operating results and financial condition. b) Risks of Expansion into Commercial Market. Debtor intends to expand into the commercial market and such expansion will increase the risk of bad debt exposure and lead to higher operating costs. Debtor also may be required to update and improve its billing systems and procedures and/or hire new management personnel to handle the demands of the commercial market. There can be no assurance that Debtor will be able to effectively manage the costs of and risks associated with expansion into the commercial market. 5. Dependence on Key Personnel. Debtor's success, if any, will depend to a significant degree upon the efforts of senior management personnel and a group of employees with longstanding industry relationships and technical knowledge of Debtor's operations. None are bound by the terms of Non-Compete Agreements, which would restrict Debtor's ability to offer domestic interexchange products and services and solicit certain customers. Debtor's management team has limited experience working together and there can be no assurance that they can successfully integrate as a management team. Debtor believes that its future success will depend in large part upon its continuing ability to attract and retain highly skilled personnel. Competition for qualified, high-level telecommunications personnel is intense and there can be no assurance that Debtor will be successful in attracting and retaining such personnel. The loss of the services of one or more of Debtor's key individuals, or the failure to attract and retain other key personnel, could materially adversely affect Debtor's business, operating results and financial condition. See Article IV, Section F. 106 B. Energy Cogeneration Related Matters. In order to rehabilitate and develop the reorganized Debtor's energy cogeneration business, the reorganized Debtor must identify and negotiate joint venture or partnership relationships with energy cogeneration companies which have both working capital and marketing presence. There is no assurance to guaranty that the reorganized Debtor will be successful in that regard. In the event that the reorganized Debtor is unable to establish joint venture or partnership relationships, the reorganized Debtor must generate substantial working capital in order to reenter the energy cogeneration arena. If that should be the situation, it is likely that the reorganized Debtor would elect to liquidate its format units rather than to seek investor capital for that purpose. The energy cogeneration business is extremely competitive, and the development of revenue from such operations must be viewed as a long term, speculative venture. C. Telecommunications Related Operating Results Subject to Significant Fluctuations. Debtor's telecommunications related operating results are difficult to forecast with any degree of accuracy because a number of factors subject these results to significant fluctuations. 1. Factors Influencing Operating Results, including Revenues, Costs and Margins. In projecting future revenue from the newly acquired telecommunications business, the following factors must be considered: a) Call volume fluctuations, particularly in regions with relatively high per-minute rates; b) The addition or loss of major customers, whether through competition, merger, consolidation or otherwise; 107 c) The loss of economically beneficial routing options for the termination of Debtor's traffic; d) Financial difficulties of major customers; e) Pricing pressure resulting from increased competition; and f) Technical difficulties with or failures of portions of the network that would impact Debtor's ability to provide service to or bill its customers. In projecting future cost of services and operating expenses, the following factors must be considered: a) Fluctuations in rates charged by carriers to terminate Debtor's traffic; b) The timing of capital expenditures and other costs associated with acquiring or obtaining other rights to switching and other transmission facilities; c) Changes in Debtor's sales incentive plans; and d) Costs associated with changes in staffing levels of sales, marketing, technical support and administrative personnel. In projecting Debtor's operating results, the following factors must be considered: a) Changes in routing due to variations in the quality of transmission capability; b) The amount of, and the accounting policy for, return traffic under operating agreements; c) Actions by domestic or foreign regulatory entities; 108 d) The level, timing and pace of Debtor's expansion. in international and commercial markets; and e) General domestic and international economic and political conditions. Since Debtor plans to have long term arrangements for the purchase or resale of long distance services, and since historically rates fluctuate significantly over short periods of time, Debtor's gross margins are subject to significant fluctuations over short periods of time. Debtor's gross margins also may be negatively impacted in the longer term by competitive pricing pressures. If one of Debtor's major customers informed Debtor that it was experiencing financial difficulties and would be unable to pay in full, on a timely basis, then Debtor intends to increase its reserves to account for the potential inability to collect the account receivable from the customer. There can be no assurance that Debtor will be able to obtain adequate recourse from the customer's assets, if necessary, or that Debtor's reserves will be adequate. Debtor's ability to collect the outstanding amounts would be adversely affected to the extent that a customers financial condition deteriorates further or the customer commences bankruptcy proceedings. In such an instance, Debtor's revenue would grow slowly if a major customer reduced traffic because of financial difficulties. Such events could have a material adverse affect on Debtor's business, operating results or financial condition. 2. No Assurance of Growth in the Telecommunications Business. Although Debtor expects certain significant revenue from its telecommunications business, early results should not be considered indicative of future revenue growth or operating results. If revenue levels fall below expectations, net income is likely to be disproportionately adversely affected because a proportionately smaller amount of Debtor's operating expenses will 109 vary with its revenues. This effect is likely to increase as a greater percentage of Debtor's cost of services are associated with telecommunications facilities. There can be no assurance that Debtor will be able to achieve or maintain profitability on a quarterly or annual basis. Due to all of the foregoing factors, it is likely that in some future quarter Debtor's operating results will be below the expectations of public market analysts and investors. In such event, the price of Debtor's Class A Common Stock could be materially adversely affected. 3. Risks of International Telecommunications Business. Debtor will generate substantially all its revenues by providing international telecommunications services to its customers on a wholesale basis. The international nature of Debtor's operations involves certain risks, such as changes in U.S. and foreign government regulations and telecommunications standards, dependence on foreign partners, tariffs, taxes and other trade barriers, the potential for nationalization and economic downturns and political instability in foreign countries. In addition, Debtor's business could be adversely affected by a reversal in the current trend toward deregulation of telecommunications carriers. 4. Risk of Dependence on Foreign Partners. Debtor will rely on foreign partners to terminate its traffic in foreign countries and to assist in installing transmission facilities and network switches, complying with local regulations, obtaining required licenses, and assisting with customer and vendor relationships. Debtor may have limited recourse if its foreign partners do not perform under their contractual arrangements with Debtor. Debtor's arrangements with foreign partners may expose Debtor to legal, regulatory or economic risks. One foreign partner will be a Mexican company owned or controlled by Mr. David Wallace. 110 5. Risks Associated with Foreign Government Control and Highly Regulated Markets. Governments of many countries exercise substantial influence over various aspects of the telecommunications market. In some cases, the government owns or controls companies that may become competitors of Debtor or companies (such as national telephone companies) upon which Debtor and its foreign partners may depend for required interconnections to local telephone networks and other services. Accordingly, government actions could have a material adverse effect on Debtor's operations. In highly regulated countries in which Debtor will not be dealing directly with the dominant local exchange carrier, the dominant carrier may have the ability to terminate service to Debtor or its foreign partner and, if this occurs, Debtor may have limited or no recourse. In countries where competition is not yet fully established and Debtor will be dealing with an alternative carrier, foreign laws may prohibit or impede the entry of such new carriers in the market. In situations in which the Debtor will have a foreign-partner, there may be an increased risk to the Debtor in the event that the foreign partner fails to comply with applicable foreign law. 6. Risks Associated with International Settlement Rates, International Traffic and Foreign Currency Fluctuations. Debtor's revenues and cost of long distance services may be sensitive to changes in international settlement rates, imbalances in the ratios between outgoing and incoming traffic and foreign currency fluctuations. International rates charged to customers are likely to fluctuate for a variety of reasons, including increased competition between existing long distance providers, new entrants into the market and the consummation of joint ventures among large international long distance providers that facilitate targeted pricing and cost reductions. There can be no assurance that Debtor will be able to meet projected traffic volume or operating 111 costs to offset any possible rate decreases. In addition, Debtor expects that a portion of Debtors net revenue and expenses may be denominated in currencies other than U.S. dollars, and changes in exchange rates may have a significant effect on Debtors results of operations. As Debtor continues to pursue a strategy of entering into operating agreements where it is economically advantageous to do so, Debtor's results of operations will be subject to the risks of changes in international settlement rates and foreign currency fluctuations. 7. Foreign Corrupt Practices Act. Due to its acquisition of DIEGO TEL, Debtor may become 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 8. Potential Effects of Government Regulation. Debtors business will be subject to various Federal laws, regulations, agency actions and court decisions. Debtors international facilities-based and resale services are subject to regulation by the Federal Communications Commission (the "FCC"). The FCC requires authorization prior to leasing capacity, acquiring international facilities, and/or initiating international service. Prior FCC approval is also required to transfer control of an authorized carrier. Debtor is also subject to the FCC rules that regulate the manner in which international services may be provided, including, for instance, the circumstances under which carriers may provide international switched services by using private lines or route traffic through third countries. 9. The FCC's Private Line Resale Policy. The FCC's private line resale policy prohibits a carrier from reselling international private leased circuits to provide switched services to a country unless the FCC has found that the 112 country affords U.S. carriers equivalent opportunities to engage in similar activities in that country. Debtor may enter into arrangements with foreign carriers may involve the transmission of switched services for termination in a country that has not been found by the FCC to offer equivalent resale opportunities. There can be no assurance that the FCC, upon viewing these alternate carrier arrangements, would permit these arrangements under its private line resale policy. If the FCC finds that these arrangements conflict with its policy, among other measures, it may issue a cease and desist order or impose fines on Debtor, which could have a material adverse effect on Debtor's business, operating results and financial condition. It is also possible that the regulatory agency of the foreign government would find that foreign law does not permit the operation of alternate carriers or that the alternate carriers have not met foreign law requirements for such operations. Such a finding could have a material adverse effect on Debtor's business, operating results and financial condition. 10. The FCC's International Settlements Policy. Debtor is also required to conduct its international business in compliance with the FCC's international settlements policy (the "ISP"). The ISP establishes the permissible arrangements for U.S.-based carriers and their foreign counterparts to settle the cost of terminating each other's traffic over their respective networks. 11. Recent and Potential FCC Actions. Regulatory action that has been and may be taken in the future by the FCC may enhance the intense competition faced by Debtor. The FCC has enacted certain changes in its rules designed to permit more flexibility in its ISP as a method of achieving lower cost-based accounting rates as more facilities-based competition is permitted in foreign markets. Specifically, the FCC has decided to allow U.S. carriers, subject to certain competitive safeguards, to propose methods to 113 pay for international call termination that deviate from traditional bilateral accounting rates and the ISP. The FCC has also proposed to establish lower ceilings ("benchmarks") for the rates that U.S. carriers will pay foreign carriers for the termination of international services. In separate proceedings, the FCC is considering equivalency determinations for Australia, Chile, Denmark, Finland, Hong Kong and Mexico. While these rule changes may provide more flexibility to Debtor to respond more rapidly to changes in the global telecommunications market, it will also provide similar flexibility to Debtor's competitors. 12. Foreign Regulations. Debtor may also be subject to regulation in foreign countries in connection with certain of its business activities. For example, Debtor's use of transit, international simple resale ("ISR") or other routing arrangements may be affected by laws or regulations in either the transited or terminating foreign jurisdiction. Foreign countries, either independently or jointly as members of the ITU, may have adopted or may adopt laws or regulatory requirements for which compliance would be difficult or expensive, that could force Debtor to choose less cost-effective routing alternatives and that could adversely affect Debtor's business, operating results and financial condition. To the extent that it seeks to provide telecommunications services in other non-U.S. markets, Debtor is subject to the developing laws and regulations governing the competitive provision of telecommunications services in those markets. Debtor currently plans to provide a limited range of services in the Far East and Mexico, as permitted by regulatory conditions in those markets, and to expand its operations as these markets implement scheduled liberalization to permit competition in the full range of telecommunications services in the next several years. The nature, extent and timing of the opportunity for Debtor to compete in these markets will be determined, in part, by the actions taken by the governments in these countries 114 to implement competition and the response of incumbent carriers to these efforts. There can be no assurance that these countries will implement competition in the near future, or at all, or that Debtor will be able to take advantage of any such liberalization in a timely manner. 13. Regulation of Target Customers. Debtor's targeted customers may also be subject to actions taken by domestic or foreign regulatory authorities that may affect the ability of customers to deliver traffic to Debtor. Those actions could materially adversely affect the volume of traffic received from a major customer, which could have a material adverse effect on Debtor's business, financial condition and results of operations. 14. Dependence on Availability of Transmission Capacity. For fiscal 1998, Debtor predicts substantially all of its revenue to be derived from the sale of international long distance services terminated through resale arrangements with other long distance providers. There can be no assurance that predicted resale arrangements will be available to Debtor on a cost-effective basis or at all. Most transmission capacity that Debtor will be using will be obtained on a variable, per minute basis, subjecting Debtor to the possibility of unanticipated price increases and service cancellations. Debtor will also require high voice quality transmission capacity, which may not always be available at cost-effective rates. If Debtor is not able to enter into cost-effective resale arrangements with its primary vendors, or is unable to locate suitable replacement vendors that offer sufficient, high quality alternative capacity, Debtor's business, operating results and financial condition could be materially adversely affected. For instance, to the extent that Debtor's variable costs increase, Debtor may experience reduced or, in certain circumstances, negative margins for some services. As its traffic volume increases on particular routes, Debtor expects to decrease its 115 reliance on variable usage arrangements and enter into fixed monthly or longer-term leasing or ownership arrangements, subject to obtaining any requisite authorization. To the extent that Debtor does so, and incorrectly projects traffic volume in a particular geographic area, Debtor would experience higher fixed costs without a related increase in revenue. Debtor intends to invest in developing its own global transmission and switching facilities, which is a capital intensive and time-consuming process. There can be no assurance that Debtor will successfully complete development of its global network in a timely manner and within budget. 15. Risks Associated with Complex Switching and Information Systems Hardware and Software. Debtor's information systems and switching equipment are expensive to purchase, complex to install and maintain, and subject to hardware defects and software bugs. Debtor may experience technical difficulties with its hardware or software which could adversely affect Debtor's ability to provide service to its customers, manage its network, collect billing information, or perform other vital functions. Such events could have a material adverse affect on Debtor's business, operating results or financial condition. 16. Significant Competition. The international telecommunications industry is intensely competitive and subject to rapid change. Debtors competitors in the international wholesale switched long distance market include large, facilities-based multinational corporations and PTTS, smaller facilities-based providers in the U.S. and overseas that have emerged as a result of deregulation, switched-based resellers of international long distance services and international joint ventures and alliances among such companies. International wholesale switched long distance providers compete on the basis of price, customer service, transmission quality, breadth of service offerings and value-added services. Debtor believes that competition will continue to increase, placing downward 116 pressure on prices. Such pressure could adversely affect Debtors gross margins if Debtor is not able to reduce its costs commensurate with such price reductions. 17. Competition from Domestic and International Companies and Alliances. The U.S.-based international telecommunications services market is dominated by American Telephone & Telegraph Co. ("AT&T"), MCI Communications Corp. ("MCI") and Sprint Communications Company L.P. ("Sprint"). Other significant competitors include WorldCom, Inc., Pacific Gateway Exchange, Inc., TresCom International, Inc. and other U.S. based and foreign long distance providers, many of which have considerably greater financial and other resources and more extensive domestic and international communications networks than Debtor. Debtor anticipates that it will encounter additional substantial competition as a result of the formation of global alliances among large long distance telecommunications providers. Many of Debtor's current competitors are also Debtor's potential customers. Debtor's business would be materially adversely affected to the extent that a significant number of such potential customers limit or refuse to do business with Debtor for competitive or other reasons. 18. Competition from New Technologies. The telecommunications industry is in a period of rapid technological evolution, marked by the introduction of new product and service offerings and increasing satellite transmission capacity for services similar to those provided by Debtor. Such technologies include satellite-based systems, such as the proposed Iridium and GlobalStar systems, utilization of the Internet for international voice and data communications and digital wireless communication systems such as personal communications services ("PCS"). Debtor is unable to predict which of many possible future product and service offerings will be important to maintain its competitive 117 position or what expenditures will be required to develop and provide such products and services. 19. Increased Competition as a Result of a Changing Regulatory Environment. The FCC recently granted AT&T's petitions to be classified as a non-dominant carrier in the domestic interstate and international markets, which has allowed AT&T to obtain relaxed pricing restrictions and relief from other regulatory constraints, including reduced tariff notice requirements. These reduced regulatory requirements could make it easy for AT&T to compete with Debtor. In addition, the Telecommunications Act of 1996 (the "Telecommunications Act"), which substantially revises the Communications Act of 1934 (the "Communications Act"), permits and is designed to promote additional competition in the intrastate, interstate and international telecommunications markets by both U.S.-based and foreign companies, including the Regional Bell Operating Companies ("RBOCs"). As a result of these and other factors, there can be no assurance that Debtor will compete favorably in the future. 20. Dependence on Other Long Distance Providers and Customer Concentration. Debtor's primary business as a wholesale long distance provider makes it highly dependent upon traffic delivered to Debtor by other long distance providers pursuant to arrangements that can generally be terminated by the provider on short notice. Assuming that the Debtors customer develops a customer base, Debtor could lose significant customer traffic for many reasons, including the entrance into the market of significant new competitors with lower rates than Debtor, downward pressure on the overall costs of transmitting international calls, transmission quality problems, changes in U.S. or foreign regulations, or unexpected increases in Debtor's cost structure as a result of expenses related to installing a global network or otherwise. Any significant loss of customer traffic would have a material adverse effect on 118 Debtors business, operating results and financial condition. Debtor's customer concentration could also amplify the risk of non-payment by customers. Debtor's largest customers are anticipated to account for a significant amount of Debtors gross accounts receivable. If one of Debtor's major customers informed Debtor that it was experiencing financial difficulties and would be unable to pay in full, on a timely basis, Debtor would convert a portion of the account receivable into a note from the customer. Debtor would increase its reserves to account for the potential inability to collect on the note or the accounts receivable from this customer. There can be no assurance that the note or the accounts receivable would be paid, that Debtor would be able to obtain adequate recourse from the note, if necessary, or that Debtor's reserves will be adequate. Debtors ability to collect these outstanding amounts would be adversely affected to the extent that this customer's financial condition deteriorates further or the customer commences bankruptcy proceedings. While Debtor intends to perform ongoing credit evaluations of its customers, it generally does not require collateral to support accounts receivable from its customers, and there can be no assurance that reserves will be adequate in future periods. The inability of Debtor to collect significant accounts receivable in any given period could have a material adverse effect on Debtor's Cash flow and financial condition. 21. Capital Expenditures: Potential Need for Additional Financing. Development of Debtor's network facilities will require a significant investment in equipment and facilities. If Debtor believes that its assets, combined with other sources of liquidity, are not sufficient to fund its capital requirements for the next twelve (12) months, Debtor will be required to obtain additional financing depending on factors such as the rate and extent of Debtor's international expansion, increased investment in ownership rights in fiber 119 optic cable, and increased sales and marketing expenses to support international wholesale and commercial operations. Issuance of additional equity securities would result in dilution to stockholders. There can be no assurance that additional financing will be available on terms acceptable to Debtor, or at all. Debtor's inability to fund its capital requirements would have a material adverse effect on Debtor's business, operating results and financial condition. 22. Effects of Natural Disasters and Other Catastrophic Events. Debtor's business is susceptible to natural disasters such as earthquakes, as well as other catastrophic events such as fire, terrorism and war. While Debtor has taken a number of steps such as building redundant systems for power supply to the switching equipment, to prevent its network from being affected by natural disasters, fire and the like, there can be no assurance that any such systems will prevent Debtor's switches from becoming disabled in the event of an earthquake, power outage or otherwise. The failure of Debtor's network, or a significant decrease in telephone traffic resulting from effects of a natural or man-made disaster, could have a material adverse effect on Debtor's relationship with its customers, Debtor's business, operating results and financial condition. D. Other Matters. 1. Securities and Exchange Commission. As of the filing of the Plan, the Company is not current with respect to reports which it is required to file with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. The delinquency in filing is attributable to actions taken by the former Board of Directors, the former President of the Company (Mr. Pattinson Hayton III), and various third parties who were affiliated with the Board of Directors and Mr. Hayton. The Company is currently unable to comply with the reporting requirements established 120 by the SEC because the Company does not have audited financial statements. It is the Company's intention, prior to the Effective Date, to engage Kafoury, Armstrong and Company as its independent auditors for the purpose of preparing audited financial statements. Kafoury and Armstrong served as the Company's auditors for the period 1993 through approximately September 1996, at which time the firm resigned due to disputes with the then management and Board of Directors. In the event that the Company is unable to secure audited financial statements, there will be substantial difficulty in complying with the reporting requirements. In that event, the market value of the Company's stock may decline. 2. NASD. The Company's Class A Common Stock was previously classified as a "SmallCap" stock eligible for trading on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"). The National Association of Securities Dealers, Inc. ("NASD") subsequently delisted the Class A Common Stock when the Company failed to file its required reports with the Securities and Exchange Commission and when the market value of the Company's Common Shares failed to meet the minimum listing criteria established by the NASD. Currently, the Company's Common Stock is traded on an ad hoc basis in the over-the-counter market; however, there is no active market for the Company's stock. The ability of the Company to establish and maintain a market demand for its stock is directly dependent upon approval of the Plan (as submitted) together with the preparation of audited financial statements and compliance with the reporting obligations of the Company pursuant to the Securities and Exchange Act of 1934. It is estimated that the costs associated 121 with this effort will range from $40,000 to $100,000. In the event that none of these events fail to occur, there will be an adverse impact upon the market value of the Company's stock. 3. Market for Class A Common Stock. Debtor's common stock is currently not traded in the NASDAQ Small Cap Market, having been de-listed from such exchange. However, the Debtor's Class A Common Stock does currently trade on the NASD Electronic Bulletin Board for Over-The-Counter or "Pink Sheet" stocks. It is not anticipated that the Class A Common Stock issued pursuant to the Plan will be immediately listed for trading on any exchange. The inability of Debtor's ability to qualify for re-listing on the NASD or an a national stock exchange could adversely affect marketability of the Debtor's Class A Common Stock and otherwise impair its ability to raise new capital. 4. No Dividends: Dilution It is not anticipated that Debtor will pay any Cash dividends on its New Class A Common Stock for the foreseeable future. However, the Plan does contemplate distributions of securities undertaken in connection with one or more merger transactions of either the Debtor or existing or newly formed subsidiaries. XII. LIQUIDATION ANALYSIS Section 1129(a)(7) of the Bankruptcy Code requires, in pertinent part, that the Debtor determine the amount of proceeds available for distribution to Creditors in the event of a liquidation of the Debtor. This analysis is conducted in order that Creditors may determine whether the proposed Plan is likely to result in distributions in excess of the amount that would be received in the event that the Debtor were to be liquidated. In this context, Debtor's assets (in the event of a liquidation) would be limited to (1) Cash 122 on hand, and (2) the energy co-generation equipment previously acquired by Debtor. In other words, the common stock of CEC, VivaTel, and Diego Tel would not be taken into consideration because these assets would not be owned by Debtor in the event that the Plan is not confirmed and the Bankruptcy Court were to order a liquidation of the Debtor. As of May 30, 1998, Debtor's Cash on hand totaled approximately $22,000. Based upon an appraisal secured in 1996, the energy co-generation equipment owned by Debtor had an appraised fair market value as of approximately $5,700,000, less accumulated depreciation and changes in the equipment. For purposes of conducting the liquidation analysis, Debtor has computed its Allowed liabilities to total $11,326,500 as follows:
Allowed Claims Disputed -------------- ---------- Class 1 $ 200,000 0 Class 2 $ 0 $ 24,000 Class 3 $ 26,000 0 Class 4 0 $ 550,000 Class 5 $ 0 0 Class 6 $ 30,000 0 Class 7 $1,000,000 $3,500,000 Class 8 $6,000,000 0 Class 10 $ 0 0 Total $7,326,000 $4,200,000*
* Deemed to be Class 9 Claims. With respect to the energy co-generation equipment, although this equipment has an 123 appraised value of $5,700,000, in the opinion of the Board of Directors of Debtor and its management, in the event of a liquidation of Debtor, it is unlikely that a third party would purchase the energy co-generation equipment at its appraised value. In the opinion of Debtor's Board of Directors and management, the Company's energy co-generation equipment, if sold at auction on a liquidation basis, would likely generate less than $4,000,000 and may require a substantial lead time to affect the transaction. The Board of Directors and management have taken into consideration, at arriving at this figure, the facts that (1) the energy co-generation equipment is currently in storage and, therefore, a prospective buyer would have difficulty in confirming that the equipment will function as designed, (2) the energy co-generation equipment is currently stored in remote locations and not readily accessible to prospective buyers, (3) there is limited application for the equipment in the commercial environment and, therefore, the number of prospective purchasers is limited, (4) if sold in a liquidating transaction, it is likely that purchasers would seek to offer lower prices than would occur under other circumstances because there is no surviving business entity against which recourse may be asserted. In other words, the equipment would be purchased "AS IS" and "WHERE IS." The opinions expressed above are subjective in nature. There is no empirical mechanism by which Debtor may determine the actual purchase price which would be paid by a third party. While the Board of Directors and management believe that the 1996 appraisal (which is consistent with the appraisals in a previously obtained in 1993, 1994 and 1995) represent a reasonable estimate of the fair market value of the equipment if sold on an arm's length basis to a ready, willing, and able buyer who is not motivated by factors other than affective utilization of the equipment, there is no assurance or guaranty that the equipment would generate a minimum of $4,000,000 if sold in a liquidating transaction. 124 Assuming, however, for the purposes of this analysis that the energy cogeneration were to generate $4 million (net of transaction costs), Debtor would have available approximately $3,700,000 to be distributed among creditors whose claims total approximately $7,326,500. (Note: this is allowed claims only and presumes 0.0% of the disputed claims are valid. If 100.0% of the disputed claims were to be allowed, the allowed claims creditors would total approximately $11,526,000. (In this event a liquidation would result in the payment of approximately 49.0% of the amount of each claim). In contrast, the proposed plan affords creditors the opportunity to secure (a) cash, (b) stock or (c) a combination of cash and stock. Depending upon the combination which is elected, the creditor will receive an amount in excess of the distribution which would occur in the event of liquidation, as set forth in the following chart, which compares the distribution to a creditor holding a claim in the amount of $10,000.00: CLAIM = $10,000.00 Liquidation Plan
Option A Option B1 Option B2 Option C --------- ----------- ---------- -------- One time cash payment $4,9000.00 $1,200.00 $ 2,000.00 $2,000.00 0 Cash 0 $ 8,000.00 0 0 Class A Stock 0 1,600.00 9,600.00 20,000 Total $4,900.00 $1,200.00 $10,000.00 $2,000.00 0 + + 1,600 shares 9,600 shares 20,000 shares
125 Every general unsecured creditor holding an allowed claim has the right to elect, pursuant to the Plan the payment option the creditor feels to be in the creditor's best interest. As the above chart illustrates, if the creditor elects Option B, Plan 1 the creditor will receive an amount in excess of the cash distribution to be effected in the event of a liquidation. In contrast, if the creditor elects Option C, the creditor will receive significantly less cash, and in lieu thereof, will receive Class A Common Stock. There is no assurance of guaranty that the Class A Common Stock has or will ever have any economic value. At this time, the Debtor's board of directors places a de minimis value upon the Class A Common Stock, and therefore, a Creditor who elects to receive Class A Common Stock in lieu of or as partial payment for the Creditor's allowed claim, is assuming a substantial risk as the Class A Common Stock may never have value. If, on the other hand, the Class A Common Stock were to achieve value in the marketplace, it is possible that the Class A Common Stock could have a value substantially in excess of the amount of cash to be distributed under Option A, Option B1, or Option B2 of the Plan. All Creditors are treated equally. Every Creditor has the right to select the payment plan which the Creditor believes to be in the individual Creditor's best interest. The proposed Plan would result in a significantly higher distribution to the Debtor. For this reason, the Board of Directors and management of Debtor believe that the proposed Plan is in the best interests of all Creditors and encourage its acceptance. XIII. VOTING PROCEDURES AND REQUIREMENTS A. Ballots and Voting Deadline. A ballot to be used for voting to accept or reject the Plan is enclosed with this Disclosure 126 Statement and provided to Creditors and Equity Interest holders who are entitled to vote. A Creditor or Equity Interest holder voting must (i) carefully review the ballot and the instructions printed thereon, (ii) vote to accept or reject the Plan, (iii) with respect to Creditors in Class 7 of the Plan, indicate under which payment alternative you elect to receive in the event that the Plan is confirmed by the Court, and (iv) return the ballot to the address indicated thereon by the deadline in order to enable the ballot to be considered for voting purposes. The record date for determining which holders of Class A Common Stock are entitled to vote on the Plan is the date on which the Bankruptcy Court approves the Disclosure Statement. DO NOT RETURN YOUR STOCK CERTIFICATE WITH YOUR BALLOT. Bank and broker nominees will transmit a ballot, together with a copy of this Disclosure Statement, to each beneficial owner of Class A Common Stock of Debtor held in the name of such nominees. Instructions for returning ballots will also be sent to beneficial owners by nominees. If your Class A Common Stock is held in the name of a brokerage firm or bank, please return your ballot in the envelope provided by that institution. Debtor intends to make pre-solicitation inquiry to nominees in order to determine (i) the number of beneficial owners of Debtor securities, and (ii) the number of copies of the Disclosure Statement necessary to supply record or nominee holders of the solicitation materials in sufficient time to make an informed decision. The Bankruptcy Court has directed that, in order to be counted for voting purposes, ballots for the acceptance or rejection of the Plan must be received by the Debtor no later than 5:00 p.m. (PST) on August 24, 1998 at the following address: 127 PowerTel, USA, Inc. c/o Belding Harris & Petroni Stephen R. Harris 417 W. Plumb Ln. Reno, NV 89509 Counsel for Debtor TO BE COUNTED, YOUR BALLOT MUST BE RECEIVED BY 5.00 P.M., PACIFIC STANDARD TIME ON AUGUST 24,1998. B. Creditors and Shareholders Entitled to Vote. Any Creditor of Debtor whose Claim is "impaired" under the Plan is entitled to vote if either (i) the Claim has been scheduled by the Debtor (and such Claim is not scheduled as disputed, contingent or unliquidated), or (ii) it has filed a Proof of Claim on or before the last date set by the Bankruptcy Court for such filings. Any Claim as to which an objection has been filed (and such objection is still pending) is not entitled to vote, unless the Bankruptcy Court temporarily allows the Claim in an amount which it deems proper for the purpose of accepting or rejecting the Plan, such authorization to be made upon motion by a Creditor whose Claim has been the subject of an objection. Such motions must be heard and determined by the Bankruptcy Court prior to the date established by the Court to confirm the Plan. In addition, a Creditor's vote may be disregarded if the Bankruptcy Court determines that the Creditor's acceptance or rejection of the Plan was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. C. Definition of Impairment. Section 1124 of the Bankruptcy Code specifies certain terms and conditions pursuant to which a class of Claims or Equity Interests are deemed to be "impaired" under a plan of reorganization. 128 D. Classes Impaired Under the Plan. (i) Creditors holding Claims in Classes 4, 5, 7 and 8 and Equity Interest holders in Class 10 are deemed to be "impaired" for purposes of section 1124 of the Bankruptcy Code and, therefore, are eligible to vote on acceptance or rejection of the Plan. (ii) Voting Shareholders are also eligible to vote. E. Identification of Claims and Equity Interest Not Impaired by the Plan. 1. Unimpaired Classes. Claims of classes 1, 2, 3 and 6 are not impaired under the Plan. 2. Controversy Concerning Impairment. In the event of a controversy as to whether any Creditors or holders of Equity Interest or class of Creditors or class of holders of Equity Interest are impaired under the Plan, the Bankruptcy Court shall, after notice and a hearing, determine such controversy. F. Information on Voting and Ballots While ballots are being forwarded to all Creditors, unimpaired Creditors under the Plan are conclusively deemed to have accepted their treatment under the Plan and votes by those Creditors will not be considered by the Bankruptcy Court. G. Vote Required for Class Acceptance. The Bankruptcy Code defines acceptance of a plan of reorganization by a class of creditors to be the acceptance by holders of two-thirds (2/3) in dollar amount and a majority in the number of Claims of that class which actually casts ballots for acceptance or rejection of the plan of reorganization. In other words, acceptance takes place only if the plan is approved by two-thirds (2/3) an amount and a majority in number of the Creditors actually voting. DEBTOR URGES YOU TO VOTE IN FAVOR OF ITS PLAN WHICH, IN THE OPINION OF ITS 129 BOARD OF DIRECTORS AND MANAGEMENT, REPRESENTS THE BEST OPPORTUNITY FOR THE CREDITORS AND EQUITY INTEREST HOLDERS TO RECEIVE COMPENSATION. H. Confirmation of the Plan Under the Bankruptcy Code, the following steps must be taken to confirm the Plan: 1. Confirmation Hearing. Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on confirmation of the Plan (the "Confirmation Hearing"). Section 1128(b) provides that any party-in-interest may object to the confirmation of the Plan. By order of the Bankruptcy Court dated May 21, 1998, the Confirmation Hearing has been scheduled for August 25, 1998 at 10:00 a.m. in Court Room United States Federal Building, 300 Booth Street, Reno, Nevada. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for an announcement made at the Confirmation Hearing or any adjournment thereof. Any objection to the confirmation must be made in writing and filed with the Bankruptcy Court with proof of service and served upon the following parties on or before August 11, 1998: PowerTel USA, Inc. c/o Walter & Haverfield P. L. L. 1300 Terminal Tower Cleveland, Ohio 44113 Attention: Van P. Carter, Esq., Counsel for Debtor UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT WILL NOT BE CONSIDERED BY THE BANKRUPTCY COURT. 130 2. Requirements for Confirmation of the Plan. At the Confirmation Hearing, the Bankruptcy Court shall determine whether the requirements of section 1129 of the Bankruptcy Code have been satisfied, in which event the Bankruptcy Court shall enter an order confirming the Plan. The Debtor believes that the Plan satisfies all of the statutory requirements of Chapter 11 of the Bankruptcy Code, that the Debtor has complied or will have complied with all of the requirements of Chapter 11 and that the proposal set forth in the Plan is made in good faith. The Debtor contends that holders of all Claims impaired under the Plan will receive payments under the Plan having a present value as of the Confirmation Date in amounts not less than the amounts likely to be received if the Debtor was to be liquidated in a Chapter 7 proceeding pursuant to the Bankruptcy Code. Included in Section X. of this Disclosure Statement is a summary of the amounts estimated to be realized by the Creditors of Debtor in the event of its liquidation pursuant to Chapter 7. At the Confirmation Hearing, the Bankruptcy Court will determine whether Creditors would receive greater Distributions pursuant to the Plan than would be distributed in a liquidation pursuant to Chapter 7. 3. Cramdown. In the event that any impaired class of Claims in the Plan does not accept the Plan, the Bankruptcy Court may still confirm the Plan at the request of the Debtor if, as to each impaired class which has not accepted the Plan, the Plan "does not discriminate unfairly" and is "fair and equitable." A plan of reorganization does not discriminate unfairly within the meaning of the Bankruptcy Code if no class receives more than it is legally entitled to receive for its claims or equity interest. The term "fair and equitable" has different meanings for secured and unsecured 131 claims and equity interests. With respect to a secured claim, the term "fair and equitable" means either: (a) the impaired secured creditor retains its liens to the extent of its allowed claim and receives deferred cash payments at least equal in amount to the allowed amount of its claim with a present value as of the effective date at least equal to the value of such creditor's interest in the property securing its liens; (ii) property subject to the lien of the impaired secured creditor is sold free and clear of that lien, with that lien attaching to the proceeds of the sale, and such lien proceeds must be treated in accordance with clauses (i) and (iii) hereof; or (iii) the impaired secured creditor realizes the "indubitable equivalent" of its claim under a plan of reorganization. With respect to an unsecured claim, the term "fair and equitable" means either: (i) each impaired unsecured creditor receives or retains property of a value equal to the amount of its allowed claim; or (ii) the holders of claims in interest that are junior to the claims of the dissenting class will not receive any property under, a plan of reorganization. With respect to a claim of equity interest, the term "fair and equitable" means either: (i) each impaired equity interest receives or retains on account of such interest property of a value equal to the greatest of the allowed amount of any fixed liquidation preference to which such holder is entitled, any fixed redemption price to which such holder is entitled, or the value of such interest; or (ii) the holder of any interest that is junior to the interest of such class will not receive or retain under the plan on account of such junior interest any property. In the event one or more classes of impaired claims of the Plan rejects the Plan, the Bankruptcy Court will determine at the Confirmation Hearing whether the Plan is fair and equitable and does not discriminate unfairly against any rejecting impaired class of claims. 132 XIV. CONCLUSION For the foregoing reasons, the Board of Directors of Debtor recommends adoption of the Plan as submitted. Respectfully submitted, /s/ Stephen R. Harris ----------------------------------------- STEPHEN R. HARRIS, ESQ. BELDING AND HARRIS Nevada Bar No. 001463 417 W. Plumb Lane Reno, NV 89509 133 SCHEDULE OF EXHIBITS Exhibit 1 - Ballot (to be provided) Exhibit 2 - First Amended and Restated Setlement and Release Agreement Exhibit 3 - Balance Sheet dated May 31, 1998 Exhibit 4 - Amended and Restated Agreement for Exchange of Stock Exhibit 5 - Budget Report by Month: May 1, 1998 through December 31, 1998 Exhibit 6 - Summary of Directors (to be provided) Exhibit 7 - Employment Contracts 134 Stephen R. Harris, Esq. BELDING & HARRIS, LTD. 417 West Plumb Lane Reno, NV 89509 Telephone: (702) 786-7600 Attorneys for Debtor UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA IN RE: CASE NO. 97-30265-BMG CHAPTER 11 PowerTel USA, INC., formerly known as NEVADA ENERGY, INC., also formerly known BALLOT FOR ACCEPTING OR as MUNSON GEOTHERMAL, INC., REJECTING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION Debtor. HEARING DATE: _______________________________________/ HEARING TIME: The undersigned acknowledges receipt of the Plan of Reorganization ("Plan") filed July 1998, and votes as follows: [Check One Box] Class of Creditor: ______ Accepts (_______) Rejects (_______) Amount of Claim: $__________________ Name of Creditor: __________________ Address: __________________________ __________________________ By: __________________________ Title: __________________________ CLASS 6 CLAIMANTS ONLY The undersigned, an unsecured creditor of PowerTel USA, Inc., in the unpaid principal amount of $_____________, [ ] Accepts [ ] Rejects the treatment for Class 6 claimants set forth in the Plan proposed by Debtor PowerTel USA, Inc. OR CLASS 6 ALTERNATIVE TREATMENT ELECTION The undersigned, an unsecured creditor of PowerTel USA, Inc. in the unpaid principal amount of $_____________, elects [ ] Cash [ ] Stock 135 CLASS 7 CLAIMANTS ONLY The undersigned, an unsecured creditor of PowerTel USA, Inc., in the unpaid principal amount of $____________, [ ] Accepts [ ] Rejects the treatment for Class 7 claimants set forth in the Plan proposed by Debtor PowerTel USA, Inc. OR CLASS 7 ALTERNATIVE TREATMENT ELECTION If you hold a Class 7 Allowed Unsecured Claim and you vote to support the First Amended Plan of Reorganization, you must make an election on how your claim will be treated. OPTION A: My Allowed Unsecured Claim exceeds $1,200. [ ] I elect to accept $1,200 one the Effective Date in full satisfaction of my Class 7 claim. OPTION B: My Allowed Unsecured Claim exceeds $1,200. [ ] I elect to accept a combination of Cash and Stock for my Allowed Unsecured Claim. [ ] I elect to accept Option B Plan 1 [ ] I elect to accept Option B Plan 2 OPTION C: My Allowed Unsecured Claim exceeds $1,200. [ ] I elect to receive all stock for my Allowed Unsecured Claim. NOTE: IN THE EVENT THAT THE HOLDER OF A CLASS 7 ALLOWED UNSECURED CLAIM FAILS TO ELECT OPTION A, B OR C, IT WILL BE DEEMED TO HAVE ELECTED OPTION C. The First Amended Plan of Reorganization referred to in this Ballot can be confirmed by the Court only if two-thirds in amount and more than one-half in number of creditors in each class of claims or interests voting on the Plan accept the Plan, or, in the event of a rejection, the Court finds that the Plan nonetheless conforms to the requirements of the law. See 11 U.S.C. Section 1129(a) and (b). This Ballot must be returned on or before ____________, 1998 to: Stephen R. Harris, Esq. 417 West Plumb Lane Reno, NV 89509 DATED this _____ day of _________________, 1998 BELDING & HARRIS, LTD. ______________________________________ Stephen R. Harris, Esq. Attorneys for Debtor 136 Stephen R. Harris, Esq. BELDING & HARRIS, LTD. 417 West Plumb Lane Reno, NV 89509 Telephone: (702) 786-7600 Attorneys for Debtor UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA IN RE: CASE NO. 97-30265-BMG CHAPTER 11 PowerTel USA, INC., formerly known as NEVADA ENERGY, INC., also formerly known AMENDED ERRATA TO BALLOT as MUNSON GEOTHERMAL, INC., AND TO DEBTOR'S SECOND AMENDED DISCLOSURE STATEMENT Debtor. PURSUANT TO 11 U.S.C.SECTION 1125 HEARING DATE: 8/25/98 _______________________________________/ HEARING TIME: 10:00 A.M. PowerTel USA, Inc. hereby files this Errata to its Second Amended Disclosure Statement Pursuant To 11 U.S.C. Section 1125 ("Disclosure Statement"). Section IV D at page 30 is amended to include: Working in conjunction with David Wallace, management identified a specific strategy for the penetration of international telecommunication services, and commenced to implement that strategy through the acquisition of two companies, VivaTel and DiegoTel, both of which were established by David Wallace. VivaTel was formed in 1997 of the purpose of establishing a business in the international long distance service with a primary emphasis on wholesale purchases and sales. VivaTel had in place a $270,000 letter of credit to secure a contract with a wholesale vendor of international long distance services. The letters of credit were returned to the funding source in 1998 and the contract was mutually rescinded. DiegoTel offered the opportunity to expand into the wholesale international long distance telecommunications business. The specific business plan of DiegoTel is set forth in Section VI. DiegoTel is purchasing on a wholesale basis, telecommunication services from Viva Servicios. Viva Servicios is purchasing telecommunication services from Tier One and Tier Two carriers as well as other international carriers on a best available price basis. Section XI C 4. at page 88 should be amended to include: One foreign partner is a Mexican company owned or controlled by David Wallace. Exhibit 3 is amended to include the following information regarding the liabilities of PowerTel as a February, 1997 (exclusive of costs of administration), which are being addressed by the plan of reorganization: 137 Class 1 Administrative Expenses $200,000 (est.) Class 2 Wages 0 Class 3 Taxes (Munson Geo) 26,000 Class 4 Priority Taxes 16,000 (est.) Class 5 Secured 0 Class 6 Unsecured Claims less than $1200 3,800 Class 7 Unsecured Claims greater than 1200 640,000 Class 8 NEP 0 Class 9 Disputed 303,000 Class 10 Equity Stock ------------ $988,000
In the event that you decide, as a result of these amendments, to change your ballot, please contact Stephen R. Harris, Esq., at (702) 786-7600 on or before August 24, 1998. DATED this ____ day of _____________, 1998. BELDING & HARRIS, LTD. By: ________________________________ Stephen R. Harris, Esq. Attorneys for PowerTel USA, Inc. 138 FIRST AMENDED AND RESTATED SETTLEMENT AND RELEASE AGREEMENT This First Amended and Restated Settlement and Release Agreement ("Amended Agreement") is entered into by and among (1) PowerTel USA, Inc. ("PowerTel") a Delaware Corporation whose principal place of business is situated in East Lansing, Michigan and formerly known as Munson Geothermal, Inc. and also formerly known as Nevada Energy Company, Inc. ("NEC") (collectively "Company"), (2) Nevada Energy Partners I, a Nevada Limited Partnership ("NEP"), by Nevada Electric Power Company, its general partner, (3) Nevada Electric Power Company, a Nevada corporation with its principal place of business situated in Reno, Nevada ("NEPC"), and (4) the following sixteen (16) Corporations: Wilton Ashfield, Ltd., Greyshire House, Ltd., August Lake Holdings, Ltd., Whitestone Brooke Holdings, Ltd., Porterman Williams, Ltd., North Oldenfield, Ltd., Shepherd Market, Ltd., Parklane Mayfair, Ltd., Clermont & Annabel, Ltd., Berkeley Square Investments, Ltd., Blackstone Sterling Holdings, Ltd., Burke Douglas Holdings, Ltd., Clarendon Atlantic Holdings, Ltd., Macaulay Island Investments, Ltd., Young Bayshore Investments, Ltd., and Maitland Investments, Ltd., (collectively referred to as "the Corporations"). "The Parties" referred to in this Agreement refer to PowerTel, NEP, NEPC and the Corporations. This Agreement is executed as of the day and year set forth below but is deemed to be effective retroactive as of December 1, 1997 (the "Settlement Date"). RECITALS: WHEREAS, the Parties to this Agreement have negotiated and executed an Agreement (the "Initial Contract") addressing the subject of this Amended Agreement but subsequent to the execution of the Initial Contract the Parties have concluded that the Initial Contract did not reflect the intent of the Parties; WHEREAS, the Parties intend to amend and modify the Initial Contract by this Amended Agreement and, therefore, declare the Initial Contract to be null and void ab initio and further declare that this Amended Agreement to be the only binding, enforceable contract between the parties with respect to the subject matters set forth herein; WHEREAS, prior to August 16, 1996, NEP owned 100.0% of the issued Class B Common Stock of NEC; which Class B Common Stock was convertible into shares of Class A Common Stock of NEC in an amount equal to 50.0% of the issued and outstanding Class A Common Stock; and WHEREAS, NEC and NEP entered into an Agreement dated August 16, 1996 (the "1996 Agreement") a copy of which is attached hereto as Exhibit 1; and WHEREAS, pursuant to the terms of the 1996 Agreement various transactions occurred between NEP and the Company, between NEP and NEPC and thereafter between NEPC and/or NEP and the Corporations; and 139 WHEREAS, in reliance upon the 1996 Agreement, NEP agreed to sell and did in fact sell to the Corporations all of the Class A Common Stock of NEC which was owned beneficially by NEP: and WHEREAS, NEC allegedly refused to honor the terms of the 1996 Agreement thereby precluding NEP from delivering the Class A Common Stock to the Corporations; and WHEREAS, on or about November 19, 1996 NEP beneficially on behalf of the Corporations commenced litigation as Plaintiff against Company seeking specific performance of the 1996 Agreement and alleging damages in excess of Six Million Dollars ($6,000,000), such litigation being identified as Nevada Energy Partners I vs. PowerTel USA, Inc. and being Case No. CV 96-07487, Second Judicial District Court of the State of Nevada in and for the County of Washoe (the "NEP Litigation"); and WHEREAS, Company denies all liability in the NEP Litigation and intends to vigorously contest NEP's claims if and when said litigation proceeds; and WHEREAS, on or about February 13, 1997 multiple creditors of PowerTel filed an involuntary petition for reorganization pursuant to Chapter 11 of the United States Bankruptcy Code (the "Code") such application being filed pursuant to Section 303 of the Code, and such case being styled In Re. PowerTel USA, Inc.; United States Bankruptcy Court, District of Nevada, Case No. 97-30265-BMG; and WHEREAS, the filing of Case No. 97-30265-BMG automatically stayed further prosecution of the NEP Litigation; and WHEREAS, NEP filed a Proof of Claim in the Chapter 11 case; and WHEREAS, the Corporations are the beneficiaries of the NEP Proof of Claim and, therefore, are deemed to be creditors of PowerTel; and WHEREAS, PowerTel has removed the NEP Litigation to the United States Bankruptcy Court; and WHEREAS, subsequent to the execution of the 1996 Agreement, NEC conveyed to NEP 100.0% of the issued and outstanding Common Stock of Combustion Energy Company ("CEC"), a Nevada corporation with its principal place of business situated in Reno, Nevada together with title to a parcel of real property also situated in Reno, Nevada (collectively the "1996 Assets"). Thereafter, NEP transferred the 1996 Assets to NEPC in two separate transactions; and WHEREAS, PowerTel has given notice to NEP, NEPC and the Corporations of its intent to commence a proceeding pursuant to Sections 547 and 548 of the Code for the purpose of voiding the 1996 Agreement and all transactions arising therefrom between NEP, NEPC and the Corporations; and 140 WHEREAS, NEPC and NEP have denied that Company has the right to rescind the 1996 Agreement under any terms or conditions including, but not limited to, alleged violations of Sections 547 and 548 of the Code; and WHEREAS, the Parties to this Amended Agreement stipulate and acknowledge that the prosecution of the multiple civil and administrative proceedings recited above will be expensive, time consuming and difficult to resolve and there is no assurance or guarantee that any party will prevail at trial and, in the event of a favorable judgment, there is no assurance or guarantee that the judgment will be sustained on appeal; and WHEREAS, the Parties to this Amended Agreement desire to achieve a final, complete resolution of all of their disputes and controversies by and among them. NOW THEREFORE, in consideration with the mutual covenants and conditions set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency which is hereby acknowledged, the Parties to this Amended Agreement, intending to be legally bound, do hereby agree as follows: 1. The Recitals set forth above are true and correct and are incorporated herein as if fully rewritten. 2. This Amended Agreement is subject to ratification by the United States Bankruptcy Court for the District of Nevada by virtue of the pending Chapter 11 Reorganization involving PowerTel in Case Number 97-30265-BMG. All Parties to this Amended Agreement hereby consent to the authority and subject matter jurisdiction of the United States Bankruptcy Court for all purposes, including ratification of this Amended Agreement. 3. This Amended Agreement, when ratified by the United States Bankruptcy Court, shall constitute a full, final and complete resolution of any and all disputes by or among any one or more or all of the Parties hereto of whatever cause or nature, including but not limited to any waiver for damages of any kind, nature or amount, contingent or liquidated and each party does hereby forever release, discharge, and waive each and every cause of action which it has or may have against any other party as of the Settlement date of this Agreement, except that Company retains and does not waive or release any claim or cause of action, if any, which it has or may have against NEPC arising out of actions performed by NEPC in its capacity as the General Partners of NEP. NEPC represents and warrants that the Corporations are the only entities who have any equitable or beneficial rights in or to the Class A or Class B Common Stock of NEC owned or received by NEP as of the Settlement Date. 4. PowerTel, NEP and NEPC acknowledge that the Corporations are domiciled outside the United States and, in recognition of this, PowerTel, NEP and NEPC, stipulate that this Amended Agreement will be executed by Mr. Jeffrey Antisdel on their 141 behalf. Mr. Antisdel represents and warrants to Company that (i) he has the legal power and authority to execute this Amended Agreement on behalf of each of the Corporations, and (ii) each of the Corporations will ratify this Agreement by executing the Memorandum described in Section 5.d of this Amended Agreement on or before July 15, 1998 (the "Final Execution Date"). In the event that each and every one of the Corporations have not ratified this Agreement by the Final Execution Date, Company has the option of either (a) declaring this Amended Agreement to be null and void, or (b) enforcing this Amended Agreement as to all signatories. In order to expedite execution of this Amended Agreement, PowerTel, NEP and NEPC stipulate that (i) this Amended Agreement may be executed in multiple counterparts, and (ii) the receipt of a facsimile signature page executed by any one of the Corporations shall be deemed to be an original signature. NEPC agrees to indemnify and hold Company harmless from any and all damages and expenses (including legal fees) incurred by PowerTel in the event that any of the Corporations refuse to execute this Agreement. 5. In consideration of the mutual releases as set forth herein and the consideration as set forth in the Recitals, the Parties to this Amended Agreement do hereby agree as follows: 1. The 1996 Agreement attached hereto as Exhibit 1 is hereby deemed to be amended and restated in its entirety, except as set forth in this Amended Agreement and, therefore, remains legally binding upon all parties thereto. Notwithstanding the foregoing, NEPC and NEP shall reconvey to PowerTel (i) 100% of the issued and outstanding Common Stock of Combustion Energy Company, a Nevada corporation, and (ii) title to a parcel of real property situated at 403 Fourth Street, Reno, NV. 1. 2. The Company and NEPC do hereby modify, amend and revise the Agreement of Limited Partnership of Nevada Energy Partners I, a Nevada limited partnership, retroactively to January 1, 1995 to provide that for the period January 1, 1995 through August 15, 1996 (i) any and all distributions of cash and property are to be allocated 60.0% to the limited partner and 40.0% to the general partner, and (ii) the allocations of profits and loses to capital accounts shall be 99.0% of all profits and loses accredited and charged to the capital account of the limited partner and 1.0% of all profits and loses are charged and credited to the capital account of the general partner. The Parties stipulate that, commencing January 1, 1995 through August 15, 1996, NEPC is and shall be the sole general partner of NEP and the Company shall be the sole and exclusive limited partner of NEP. As of August 16, 1996, the Company specifically relinquishes, waives and forever abandons any claim or interest which it has or may have in or to any partnership interest of NEP. NEPC and the Company stipulate and acknowledge that, subsequent to January 1, 1995, cash distributions were made to NEPC and the Company pursuant to the 60/40 allocation set forth above. In addition, NEPC and the Company stipulate that on or about August 16, 1996 (after withdrawal of NEC from NEP), NEP distributed to NEPC, as its general partner, Class B Common Stock of the Company totaling 4,437,473 142 shares which, thereafter NEPC sold to the corporations on a prorata basis. NEPC and the Company also stipulate that, as of August 16, 1996, NEP relinquished any and all rights which it had pursuant to the Plan of Reorganization involving Munson Geothermal, Inc. to receive additional Class A Common Stock and, thereby, waived and forever relinquished its right to receive additional Class B Common Stock in the amount of 8,808,485 shares. 3. The Company does specifically that on or about August 16, 1996 NEPC converted the Class B Common to Class A Common and, further recognizes that NEPC sold to the Corporations the Class A Common Stock owned by NEPC as set forth above. The Company does hereby agree that NEPC shall retain any and all consideration paid or to be paid by the Corporations. In order to effect a permanent, common final and complete resolution of any and all disputes among the parties to this Agreement, the Company stipulates that the Class B Common Stock distributed to NEPC as of August 16, 1996 was convertible into Class A Common Stock at a ratio equal to 50.0% of the issued and outstanding Class A Common Stock as of August 16, 1996. Accordingly, the Company stipulates that the Corporations, by virtue of their purchase of the Class A Common Stock, are entitled to own Class A Common Stock. The Company further stipulates that, ten days after the Effective Date of the Plan of Reorganization, the Company shall adjust (i.e., increase or decrease) the number of shares of Class A Common Stock to be distributed to the Corporations such that the Corporations shall own 50.0% of the issued and outstanding Class A Common Stock as of the close of business ten days after the Effective Date of the Plan of Reorganization. 4. NEPC, as the General Partner of NEP shall wind up the affairs of the partnership with all deliberate speed including but not limited to the preparation and filing of all requisite tax returns. The General Partner shall not charge the Limited Partner for the expenses of winding up the Partnership and the Limited Partner waives any right of reimbursement for any distribution to the General Partner prior to the date of this Agreement. 6. In the event that the United States Bankruptcy Court fails to ratify this Agreement, this Agreement shall be voidable by any Party upon prompt notice to Company and NEPC. If the Agreement is voided, then any Property conveyed pursuant to this Agreement shall be returned to the grantor from whom or which it was received. 7. Company shall have seventy-five (75) days from the Confirmation Date of the Plan of Reorganization to conduct any "due diligence," investigation, inquiry and/or review ("Review") which it deems to be necessary of appropriate concerning any statement of fact, warranty, representation, consent and/or condition ("Represented Fact") made or given to Company by any other party to this Amended Agreement and upon which PowerTel has relied upon in the execution of this Amended Agreement. If on the basis of the Review, PowerTel in its sole and absolute discretion concludes that any Represented Fact is inaccurate, false, misleading or 143 deceptive, PowerTel has the right to revoke this Amended Agreement upon providing all other written notice of such termination and the basis therefor. 8. The Parties to this Amended Agreement stipulate and acknowledge that a variety of supplemental documents may be necessary in order to effectuate the objectives anticipated by this Amended Agreement or to obtain ratification hereof by the United States Bankruptcy Court, and every party to this Amended Agreement does irrevocably commit to act in good faith to implement this Amended Agreement and to execute any additional documents necessary or appropriate to achieve the objective of this Amended Agreement and/or ratification hereof. 9. This Amended Agreement shall be governed by the laws of the State of Nevada, without regard to its conflict of laws provision. Every party to this Amended Agreement consents to the exclusive jurisdiction of the United States Bankruptcy Court for the District of Nevada with regard to the enforcement, interpretation, or any other issue or claim arising as a result of this Amended Agreement. 10. It is the intention to the Parties to this Amended Agreement that the 1996 Agreement shall be amended and restated. Accordingly, to the extent that any party to this Amended Agreement has any contractual rights, causes of action, claims or other legal or equitable rights or remedies (collectively "Rights") which existed prior to the 1996 Agreement and were extinguished, waived, released or modified thereby, such Rights shall be deemed to be fully and completely restored and each party to this Amended Agreement does hereby agree that the Statute of Limitations, if any, which would otherwise operate as a bar to the prosecution of any cause of action or claim of any nature to enforce such Rights is hereby tolled and each party does irrevocably waive and agrees not to assert for a twelve (12) month term from the Settlement Date of this Amended Agreement the Statute of Limitations as a defense to the prosecution of any cause of action or claim of any nature to enforce such Rights which is restored by virtue of this Agreement. 11. Each and every section of this Agreement shall survive execution, delivery and performance of this Amended Agreement. 12. The "1996 Agreement," the form of the Memorandum attached hereto and the Memorandums as executed by each of the Corporations are incorporated by reference and are deemed to constitute material components of this Amended Agreement: 13. Exhibits 1 and 2 are hereby incorporated herein by reference. 14. Unless otherwise directly set forth in this Amended Agreement, any contract, agreement, memorandum of understanding or other legally binding and enforceable agreement by or among the Parties to this Amended Agreement shall remain in full force and effect and is not amended, modified, superseded or otherwise affected by this Amended Agreement. 144 IN WITNESS WHEREOF, this The Parties have executed this Amended Agreement as of the day and year set forth with their signatures. NEVADA ENERGY PARTNERS I, a Nevada Limited Partnership By: Nevada Electric Power Company Its: General Partner Date : 6-25-98 By: /s/ Jeffrey Antisdel ------------------- -------------------------------- Jeffrey Antisdel, Its President NEVADA ELECTRIC POWER COMPANY Date : 6-25-98 By: /s/ Jeffrey Antisdel ------------------- --------------------------------- Jeffrey Antisdel, Its President POWERTEL USA, INC. Date : 6-25-98 By: /s/ Richard A. Cascarilla ------------------- --------------------------------- Richard Cascarilla, Its President "THE CORPORATIONS" Date : 6-25-98 By: /s/ Jeffrey Antisdel ------------------- --------------------------------- Jeffrey Antisdel 145 EXHIBIT 1 --------- AGREEMENT THIS AGREEMENT, ("Agreement"), is entered into between Nevada Energy Company, Inc., a Delaware corporation, ("NEC"), and Nevada Energy Partners I, Limited Partnership, a Nevada Limited Partnership, ("NEP"), both having offices at 401 East 4th Street, Reno, Nevada, USA, 89512. RECITALS: --------- A. Nevada Energy Partners I, Limited Partnership, ("NEP"), is a Nevada partnership with one corporate limited partner and a corporate general partner. B. Nevada Energy Company, Inc., ("NEC"), is the sole limited partner of NEP, and owns 60% of the partnership interest in NEP. C. Nevada Electric Power Company, Inc., ("NEPC"), is the general partner of NEP, and owns the remaining 40% of the partnership interest of NEP. D. As of July 25, 1996, the partnership NEP, currently owns 4,437,473 shares of Class B Common Stock of NEC, ("Class B Stock"), which represents all the issued and outstanding shares of Class B Common Stock of NEC. E. The owners of the Class B Stock of NEC have voting rights and liquidation rights in the assets of NEC without the right to participate in earnings or cash dividends, except on sale, liquidation or merger. In addition, such owners have the right to pro rata issuance of one share of Class B Common Stock for each share of Class A Common Stock, ("Class A Stock"), issued and outstanding. The consideration for the issuance may be subject to a determination by the board of directors of NEC. F. As of July 25, 1996, there are 12,203,247 shares of Class A Common Stock of NEC issued and outstanding. G. Based upon the number of NEC's issued Class A Common shares, NEP has the right to acquire an additional 8,865,774 shares of Class B Common Stock. H. NEC desires to redeem the Class B Stock in exchange for Class A Stock. I. NEC currently owns 6,000 shares of common stock of Combustion Energy Company, which represents all of the issued and outstanding common shares of Combustion Energy Company, a Nevada Corporation, ("CEC"). 146 J. NEP is a plaintiff and a counter-defendant in litigation in the Second District Court in Washoe County, State of Nevada, in case CV92-04609, Dept. No. 1, ("Litigation"). K. For the past four years, NEC and NEPC have shared in the costs and expenses of NEP, including without limitation, the costs and expenses of the Litigation on a 60/40 basis respectively. L. NEC does not wish to participate any further in the Litigation or further business with NEP. M. NEC wishes to withdraw from NEP. N. NEP wishes to acquire the stock CEC. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, NEP and NEC, agree as follows: 1. DEFINITIONS. For purposes of this Agreement, the terms set forth below shall have the following meanings: a. Agreement shall mean this agreement. b. Class A Stock shall mean the Class A common shares of NEC. c. Class B Stock shall mean the Class B common shares of NEC, all of which are owned by NEP. d. Herth Printing shall refer to the business known as Herth Printing and Business Supplies, Inc., which was merged into Combustion Energy Company, a Nevada Corporation, a wholly owned subsidiary of NEC, in December 1994. e. Knowledge means actual knowledge after reasonable investigation. f. Law shall mean any statute, regulation, rule, judgment, ordinance, order, decree, stipulation, injunction, charge, or other restrictions of any federal, state or local government, governmental agency, or court. g. Liability means any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, and whether due or to become due), including any liability for taxes. h. Litigation shall refer to the lawsuit filed in the Second Judicial District Court of the State of Nevada, County of Washoe, Case No. CV92-04609, Dept. No. 1, between NEP, as plaintiff, and Hot Springs Power Company, a Nevada corporation, Randy S. Goldenhersh and George W. Holbrook, Jr., as defendants and counter-plaintiff, and NEP as counter-defendant. i. Material Adverse Effect means an adverse effect of fifty thousand dollars or more upon the business, operations, properties, assets or condition of NEP. j. NEC shall refer to Nevada Energy Company, Inc., a Delaware corporation. 147 k. NEP shall refer to Nevada Energy Partners I, Limited Partnership, a Nevada Limited Partnership. l. NEPC shall refer to Nevada Electric Power Company, a Nevada corporation, and General Partner of NEP. m. Securities Act means the Securities Act of 1933, as amended. n. Securities Exchange Act means the Securities Exchange Act of 1934. o. Security Interest means any mortgage, pledge, security interest, encumbrance, charge or other lien, other than i. construction, mechanic's materialmen's, and similar liens, ii. liens for taxes not yet due and payable, iii. liens arising under worker's compensation, unemployment insurance, social security, retirement, and similar legislation, iv. liens arising in connection with sales of foreign receivables, v. purchase money liens and liens securing rental payments under capital lease arrangements, and, vi. other liens arising in the ordinary course of business and not incurred in connection with the borrowing of money. 2. BASIC TRANSACTION a. NEC shall exchange all of NEP's Class B Common Stock for an equal number of NEC Class A Common Stock. The effective date of the exchange shall be September 1, 1996. b. NEC shall withdraw as a limited partner from NEP. c. In general, NEPC, as general partner, will release NEC, as limited partner, from NEP, the partnership. NEC will waive all rights to any assets, litigation rights or other attributes of the partnership. d. In general, NEPC, as general partner, will agree to indemnify NEC for any present and future litigation expenses, obligations or damages arising out of the Litigation. e. NEP will release any claims that NEP may have for additional shares of Class B Stock pursuant to Amended Certificate of incorporation under the Order of the Bankruptcy Court dated November 20, 1990. f. NEC shall transfer to NEP all of the shares of CEC. g. This Agreement and other related documents shall be held in escrow, ("Release Escrow"), pending the completion of the post closing events. 3. EXCHANGE OF CLASS B SHARES FOR CLASS A SHARES. NEC desires to retire all of the Class B shares as follows: a. NEP as the owners of the Class B Stock of NEC have voting rights and liquidation rights in the assets of NEC without the right to participate in earnings or cash dividends, except on sale, liquidation or merger. In addition, NEP has the right to pro rata issuance of one share of Class B Common Stock for each share of Class A Common Stock issued and outstanding. The consideration for the issuance may be subject to a determination by the board of directors of NEC. 148 b. NEP has the right to an additional 8,808,485 shares of Class B Common Stock of NEC. c. NEP herewith exchanges 4,437,473 shares of Class B Common Stock of NEC, which represents all the issued and outstanding shares of Class B Common Stock of NEC for 4,437,473 shares of Class A Common Stock of NEC which shall be free trading without restrictions. d. NEP herewith forbears forever from any and all claims for an additional 8,808,485 shares of Class B Common Stock of NEC. 4. WITHDRAWAL OF NEC FROM NEP. NEC no longer desires to participate in the partnership NEP and withdraws as follows: a. NEC has participated in the Litigation since its inception. The counter-plaintiffs claim damages in excess of one million ($1,000,000.00) dollars and further damages to be proved against NEC. b. NEC has contributed from time to time its pro rata share of attorney fees, legal costs and expenses. c. There appears to be no possibility of settlement or resolution of the Litigation in the near future. d. NEP was a partner with Hot Springs Power Company, a Nevada corporation in Nevada Geothermal Power Partners, a Nevada Limited Partnership. The Litigation arises out of the partnership relationship. The plaintiff and counter-defendant is NEP. The defendant and counter-plaintiff is Hot Springs Power Company. e. Nevada Geothermal Power Partners has ceased doing business and has wound up its affairs. The only remaining relationship between the partners is the Litigation. f. NEC hereby withdraws as a limited partner in NEP and waives further accounting except as necessary to prepare its federal tax returns. The effective date of the withdrawal shall be September 1, 1996. 5. RELEASE OF NEC FROM THE LITIGATION AND FURTHER OBLIGATIONS OF NEP. NEPC, as general partner of NEP, hereby releases NEC from all further partnership obligations and duties. a. Pursuant to the partnership agreement, NEC was obligated to contribute to the attorneys' fees, legal costs and expenses of any litigation arising out of the partnership relationship. b. Concurrent with the withdrawal of NEC as a limited partner, NEP releases NEC from any further contributions for attorneys' fees, legal costs or expenses with respect to the Litigation. NEP agrees to indemnify NEC for any damages arising out of the Litigation. NEC shall have the right to have its own co-counsel at its own expense. c. NEPC, as general partner of NEP, will hereby guaranty the payment of attorneys' fees, legal costs and expenses by NEC for counsel under NEP's guidance and employ who will defend NEC's interests. 149 d. NEC agrees to cooperate in the prosecution and defense of the Litigation and to the extent possible, NEC waives its attorney client privilege in favor of NEP. 6. NEP RELEASES ALL CLAIMS UNDER THE ORDER OF THE BANKRUPTCY COURT. As the sole recipient of Class B shares under order from the Bankruptcy Court, NEP waives any claims it may have for additional shares of Class B Stock without consideration as follows: a. Rights and Restrictions. The rights and restrictions of the Class B Stock are as follows: i. Federal Bankruptcy Court's Plan of Reorganization. On November 20, 1990, the Bankruptcy Court of Nevada, by Order, required the amendment of the Certificate of Incorporation. The Order provided at page 25, "Class B Common Stock will have full voting rights but will have no participation in dividends. The terms of the Class B Common shares will also provide that, upon the issuance of any share, or fraction thereof, of Class A Common Stock, the owners of Class B Common Stock will contemporaneously have issued to them, on a pro rata basis, a number of shares of Class B Common Stock which is the same as the number of Class A Common shares then being issued. ii. Amendment of the Certificate of Incorporation. NEC (then Munson Geothermal, Inc.) amended its Certificate of Incorporation on November 20, 1990 (filed on December 3, 1990) and submitted a new paragraph defining NEC's capital, paragraph 4-A. The new paragraph governed the description of all capital stock. The new paragraph authorized Class A Common Stock and Class B Common Stock. All Common Stock has a par value of $.001 per share. All common stockholders (either Class A or Class B) received one vote for each whole share of stock. The Certificate authorized that Class A and Class B Common Stock would not participate in the earnings of the corporation through dividends. A Class B Common Stockholder would only receive funds from NEC by statute upon the sale, merger, or liquidation in the form of a liquidating distribution. iii. Voting Rights of the Class B Stock. Class B Stock shares do not receive dividends but would participate in distribution of proceeds if the NEC sells, merges or liquidates. Class B Stock shares are entitled to vote. Because the Class B Stock shares are entitled to fifty percent (50%) of the Common Stock, the Class B Stock shares are entitled to 50% of the votes. iv. Class B Stock and NEP. The Plan of Reorganization provided that immediately after the reorganization that NEP would own 100% of the Class B Stock. According to the Plan of Reorganization, any holder of Class B Stock through NEP at the time of the reorganization was entitled to an additional share of Class B Stock for each share of Class A Stock issued. v. Conflict between the Plan of Reorganization and the Certificate regarding Issuance of Class B Stock. The Certificate provided that upon the issuance of any share of Class A Common Stock, NEC shall issue a pro rata amount of Class B Common Stock to Class B Stock holders. Only present shareholders of Class B Stock shares would be eligible to receive additional Class B Stock shares. Further, paragraph 4-D states, "such shares of Class B Common Stock shall be issued for such 150 CONSIDERATION as may be determined from time to time by the Board of Directors". (Emphasis added.) The Plan of Reorganization DOES NOT provide for payment of "consideration" in exchange for newly issued shares of Class B Stock. b. Concurrent with the exchange of shares, NEP forever waives and gives up any rights for additional Class B Stock without payment of consideration as provided in the Order of the Bankruptcy Court dated November 20, 1990. 7. NEP TRANSFERS THE SHARES OF CEC. NEC herewith transfers to NEP all of NEC's six thousand (6,000) shares of CEC as follows: a. NEC merged its wholly owned subsidiary, CEC, with a business known as Herth Printing and Business Supplies in 1994. b. The business of CEC is not compatible with the general business plan of NEC. c. The shares of CEC are not registered as described in section 8.d. d. In consideration of the obligations assumed by NEP under this agreement, NEC herewith transfers and assigns all rights, title and interest to the shares and assets of CEC to NEP. The effective date of the transfer shall be September 1, 1996. 8. REPRESENTATIONS AND WARRANTIES OF NEP. NEP represents and warrants to NEC that the statements contained in this Section 8.d. are correct and complete as of the date of this Agreement. a. Organization of NEP. NEP is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Nevada and is in good standing and qualified to do business under the laws of each jurisdiction in which the nature of the business or the ownership or leasing of its properties requires such qualification. NEP has full power and authority to carry on the business in which it is engaged and to own and use the properties owned, leased and used by it. b. Authorization of Transaction. NEP has full power under its partnership agreement and authority to execute and deliver this agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the General Partner of NEP has fully authorized the execution, delivery and performance of this Agreement by NEP. This Agreement constitutes the valid and legally binding obligations of NEP, enforceable in accordance with its terms and conditions, subject to the effect of i. bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights and remedies of creditors generally, and ii. general principles of equity. c. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate or (ii) conflict with, result in a breach of, constitute a default under, result in the require any notice of any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument or indebtedness, Security Interest, or other arrangement to which NEP is a party of by which it is bound or to which any of its assets is subject, 151 or result in the imposition of any Security Interest upon any of its assets. NEP need not give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency to consummate the transactions contemplated by this Agreement. d. Acknowledgment of Unregistered Stock. In connection with this Agreement, NEP represents and warrants, which representations and warranties shall survive the transfer of CEC's shares to NEP pursuant to this Agreement, as follows: i. NEP is aware that no market may exist for the resale of the CEC stock received under this Agreement. ii. NEP is obtaining the shares for investment and not for the further distribution of CEC stock. iii. NEP is aware of any and all restrictions imposed on the further distribution of the CEC stock, including, but not limited to, any restrictive legends appearing on the certificate(s). e. Disclosure. The representations and warranties contained in this Section 8.e. do not contain any untrue statements of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 8.d. not misleading. 9. REPRESENTATIONS AND WARRANTIES OF NEC. NEC represents and warrants to NEP that the statements contained in this Section 9 are correct and complete as of the date of this Agreement. a. Organization of NEC. NEC is a Company Incorporated in Delaware duly organized, validly existing and in good standing under the Laws of Delaware, and is in good standing and qualified to do business under the laws of each jurisdiction in which the nature of its business or the ownership or leasing of its properties requires such qualification. NEC has full power and authority to carry on the business in which it is engaged and to own and use the properties owned, leased and used by it. b. Authorization of Transaction. NEC has full power under its organization agreement and authority to execute and deliver this Agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the Directors of NEC have fully authorized the execution, delivery and performances of this Agreement by NEC. This Agreement constitutes the valid and legally binding obligation of NEC, enforceable in accordance with its terms and conditions, subject to the effect of; i. bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights and remedies of creditors generally, and ii. general principles of equity. c. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate or (ii) conflict with, result in a breach of, constitute a default under, result in the require any notice of any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, 152 instrument or indebtedness, Security Interest, or other arrangement to which NEC is a party of by which it is bound or to which any of its assets is subject, or result in the imposition of any Security Interest upon any of its assets. NEC need not give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency to consummate the transactions contemplated by this Agreement. d. Disclosure of Unregistered Securities. NEC hereby discloses the following information to NEP in connection with the offer and sale of CEC stock by NEP, i. The CEC stock have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and were acquired by NEC pursuant to a registration exemption contained in Section 4(2) of the Securities Act and/or Securities and Exchange Commission Rule 506, promulgated thereunder. ii. The CEC stock have the status of securities acquired under Section 4(2) of the Securities Act and cannot be resold without registration under the Securities Act or the availability of an exemption from registration. iii. A legend has been, or will be, placed on each certificate or other document evidencing the CEC stock in substantially the following form: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE RESOLD UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE. iv. Prior to this transaction, stop transfer instructions to the appropriate officers of NEC had been placed in NECs records with respect to the CEC stock so as to restrict the resale, pledge, hypothecation, or other transfer thereof. v. The CEC stock have not been registered under the Nevada Securities Act, set forth in the Nevada Revised Statutes, as amended (the "Nevada Act"), and were acquired by NEC pursuant to a exemption. vi. NEC reasonably believes that NEP is obtaining the shares for investment and has no information to the contrary. e. Disclosure. The representations and warranties contained in this Section 9.e do not contain any untrue statements of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 9 not misleading. 10. CONDITIONS TO RELEASE OF THE ESCROW. This Agreement and all f the documents related to this Agreement shall be held in escrow referred to as the Release Escrow which shall be released upon the satisfaction of following conditions. a. NEP and NEC shall have executed and delivered an escrow agreement to and for the Release Escrow agent. b. All actions to be taken by NEC in connection with consummation of the transactions contemplated hereby and all certifications, opinions, instruments, and other documents required to effect the transactions contemplated hereby 153 will be reasonably satisfactory in form and substance to the General Partner of NEP who shall not unreasonably withhold approval of the transactions contemplated by this Agreement. c. NEC shall have received from counsel to NEP an opinion addressed to NEC stating the legal organization of NEP and that NEP has the authority to enter into this Agreement. d. All actions to be taken by NEP in connection with consummation of the transactions contemplated hereby and all certifications, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Directors of NEC who shall not unreasonably withhold approval of the transactions contemplated by this Agreement. e. NEP shall have received from counsel to NEC an opinion addressed to NEP stating the legal organization of NEC and that NEC has the authority to enter in this Agreement. f. NEC shall have executed and delivered any additional agreement or agreements necessary to withdrawing or liquidating its interests in NEP in favor of NEP. g. NEPC shall have executed and delivered a guaranty of all payment of liability, including attorneys' fees, costs and expenses, in favor of NEC regarding the Litigation. h. NEP shall have executed and transferred all of the Class B Stock to NEC. i. NEC shall have issued free trading Class A Stock with restrictions of any kind to NEP or its assigns. j. NEC shall have executed and transferred all the common shares of CEC to NEP. k. In general, the obligation of NEP to consummate the transactions to be performed by it after this agreement is executed is subject to satisfaction that the representations and warranties set forth in Section 9 above shall be true and correct in all material respects at and as of the date of execution of this Agreement and: i. NEC shall have preformed and complied with all of its covenants hereunder in all material respects at and as of the date of execution of this Agreement; ii. The Board of Directors of NEC shall have approved the transactions contemplated by this Agreement; iii. All actions to be taken by NEC in connection with consummation of the transactions contemplated hereby and all instruments and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to NEP. 11. MISCELLANEOUS. a. Notices. All notices or other communications required or permitted hereunder, including notice of intent to arbitrate, shall be in writing and shall be deemed to have been duly given if delivered in person or sent by overnight delivery, confirmed telecopy or prepaid first class registered or certified mail, return receipt requested, to the following addresses: 154 If to NEP, to: with courtesy copies to: Nevada Energy Partners I, L.L.P. David L. Wallace, Esq. 401 East Fourth Street 2055 Wood Street, Suite 220 Reno, Nevada 89512 Sarasota, Florida, USA 34237-7929 Telephone: (702) 786-7979 Telephone: (941) 364-9598 Facsimile: (702) 786-7989 Facsimile: (941) 364-9599 If to NEC, to: with courtesy copies to: Roderick H. McCloy, Esq. Roderick H. McCloy Law Corporation Jones McCloy Peterson 1700 Three Bentail Centre P.O. Box 49117 595 Burrard Street Vancouver, B.C. V7X 1G4 Telephone: (604) 882-1851 Facsimile: (604) 682-7329 Any such notices shall be effective when delivered in person or sent by telecopy, one business day after being sent by overnight deliver or three business days after being be registered or certified mail. Any of the foregoing addressed may be changed by giving notice of such change in the foregoing manner, except that notices for changes of address shall be effective only upon receipt. b. Further Assurances. At any time, and from time to time, each party will execute additional instruments and take such action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Agreement. c. Costs and Expenses. Each party hereto agrees to pay its own costs and expenses, including legal, accounting, consultant, and advisor fees, incurred in negotiation this Agreement and consummating the transactions described herein. d. Time. Time is of the essence. e. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. f. Amendment. This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party against whom enforcement of any such amendment, supplement or modification is sought. 155 g. Assignment. NEC may not assign this Agreement to any affiliated entity or nominee or to any party hereto without the prior written consent of the NEP h. Choice of Law. This Agreement will be interpreted, construed and enforced in accordance with the laws of the State of Nevada, without regard to conflicts of law. i. Dispute Arbitration. NEC and NEP intend to provide a speedy and informal method for resolving all disputes and other matters in question arising out of, or relating to, this Agreement, which involves interstate commerce and is subject to the Federal Arbitration Code. All disputes and other matters in question, of any kind, between NEC and NEP arising out of, or relating to this Agreement, shall be decided by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The decision of the arbitrator shall be binding. The arbitrator is specifically granted authority and directed to award reasonable attorneys' fees, expenses and costs to the successful party. A court of competent jurisdiction may be used to enforce, but not to appeal or challenge, the arbitrators' decision including the award of attorneys' fees, expenses and costs. If it becomes necessary to enforce the arbitrators' decision at either the trial or appellate level, a reasonable attorney fee for the enforcement of the arbitrators' decision shall become an additional item of damages. Any suit between NEC and NEP must be brought in Washoe County, Nevada. NEC consents to personal jurisdiction in Nevada. j. Construction. NEC and NEP and their respective legal counsel participated in the preparation of this Agreement, therefore, this Agreement shall be construed neither against nor in favor of any of the parties hereto, but rather in accordance with the fair meaning thereof. k. Effect of Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same. The waiver by any party or any breach of any provision of this Agreement will not be construed to be a waiver, by any such party of any succeeding breach of that provision or a waiver by such party or any breach of any other provision. l. Severability. The invalidity, illegality or unenforceability of any provision of this Agreement, which will remain in full force and effect, nor will the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reasons be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. m. Binding Nature. This Agreement, including the requirement to arbitrate, will be binding upon and will enure to the benefit of any successors of the parties hereto. n. Counterparts. This Agreement is intended to be executed in more than one counterpart, including facsimile counterparts. Each counterpart shall be 156 deemed an original on all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, NEP and NEC have executed this Agreement. Nevada Energy Company, Inc., a Delaware corporation August 16, 1996 By: Charles A. Cain - ------------------------------ ---------------------------------- Date Charles A. Cain Its: Director ---------------------------------- August 16, 1996 By: Peter J. Cannell - ------------------------------ ---------------------------------- Date Peter J. Cannell Its: Director ---------------------------------- Nevada Energy Partners, I, a Nevada Limited Partnership, by Nevada Electric Power Company, General Partner August 16, 1996 By: David L. Wallace - ------------------------------ ---------------------------------- Date David L. Wallace Its: Attorney In Fact ---------------------------------- Power of Attorney attached. 157 EXHIBIT 2 --------- M E M O R A N D U M TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: XXXXXXXXX, XXX., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as AXXXXXXX"), with mailing address at XXXXXXXXXXXXX. RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and XXXXXXX have entered into a First Amended and Restated Settlement and Release Agreement effective as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG. Pursuant to the Plan, XXXXXXX is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, XXXXXXX represents and warrants to PowerTel and to the Court that XXXXXXX is not an Aunderwriter@ as that term is defined in Section 1145(b) of the Bankruptcy Code. XXXXXXX also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. XXXXXXX also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel=s understanding that XXXXXXX is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. XXXXXXX also confirms that it has received and reviewed the FIRST AMENDED DISCLOSURE STATEMENT PURSUANT TO 11 U.S.C. '1125 filed by PowerTel and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. XXXXXXX has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). XXXXXXX acknowledges that a copy of these filings is available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. XXXXXXX acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. XXXXXXX is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. XXXXXXX is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. XXXXXXX represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, XXXXXXX acknowledges that there is no agreement, contract or understanding (either oral or written) by and between XXXXXXX and PowerTel. XXXXXXXXX further acknowledges the authority and ratifies the signature of Jeffrey Antisdel on the First Amended and Restated Settlement and Release Agreement on behalf of XXXXXXXXXXXXXXX. XXXXXXX acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In Witness Whereof, XXXXXXXXX, XXX., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL XXXXXXXXX, XXX., a Company Limited by Shares of XXXXXXXXX, XXX. under the International Business Companies Act of 1989, Commonwealth of the Bahamas Date: ____________________ Per:________________________________ Managing Director 158 POWERTEL BALANCE SHEET MAY 31, 1998 Assets Current Assets: Cash $ 21,333.85 -------------- Accounts Receivable $ -------------- Allowance for Doubtful Accounts $ -------------- Accounts Receivable (Net) $ -------------- Inventory $ -------------- Prepaid Expenses $ -------------- Total Current Assets $ 21,333.85 -------------- Property and Equipment (Fair Market Value) Real Property $ -------------- Machinery and Equipment $ 5,700,000.00 -------------- Furniture and Fixtures $ -------------- Office Equipment $ -------------- Leasehold Improvements $ -------------- Vehicles $ -------------- Other _____________ $ _____________ -------------- $ -------------- Total Property and Equipment $ 5,700,000.00 -------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 374,875.00 -------------- Total Assets: $ 6,096,208.85 --------------
159 WILLIAM J. CRANDALL, CHARTERED CERTIFIED PUBLIC ACCOUNTANTS 1885 SOUTH ARLINGTON, SUITE 105 RENO, NEVADA 89509 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) RENO, NEVADA WE HAVE COMPILED THE ACCOMPANYING SPECIAL-PURPOSE STATEMENT OF ASSETS AND LIABILITIES OF HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY CO.) AS OF MAY 31, 1998 AND THE RELATED SPECIAL-PURPOSE STATEMENTS OF REVENUES AND EXPENSES, AND CASH FLOWS FOR THE ONE MONTH AND THREE MONTHS THEN ENDED IN ACCORDANCE WITH STATEMENTS ON STANDARDS FOR ACCOUNTING AND REVIEW SERVICES ISSUED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. A COMPILATION IS LIMITED TO PRESENTING IN THE FORM OF FINANCIAL STATEMENTS INFORMATION THAT IS THE REPRESENTATION OF MANAGEMENT. WE HAVE NOT AUDITED OR REVIEWED THE FINANCIAL STATEMENTS AND, ACCORDINGLY, DO NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE ON THEM. THE ACCOMPANYING SPECIAL-PURPOSE STATEMENTS WERE PREPARED FOR THE PURPOSE OF PRESENTING THE BRANCH OPERATION CF HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY CO.) WITHOUT ALL DISCLOSURES AND FOOTNOTES, AND ARE NOT INTENDED TO BE A PRESENTATION IN CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. THIS REPORT IS INTENDED SOLELY FOR THE INFORMATION AND USE OF THE BOARD OF DIRECTORS AND MANAGEMENT OF COMBUSTION ENERGY COMPANY, AND SHOULD NOT BE USED FOR ANY OTHER PURPOSE. JUNE 9, 1998 160 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) FINANCIAL STATEMENTS FOR ONE MONTH AND THREE MONTHS ENDED MAY 31, 1998 (WITH ACCOUNTANTS' COMPILATION REPORT) 161 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF CASH FLOWS ONE MONTH AND THREE MONTHS ENDED MAY 31, 1998 (SEE ACCOUNTANTS' COMPILATION REPORT)
CURRENT YEAR TO MONTH DATE ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES NET LOSS (3,972) (9,345) ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES DEPRECIATION 5,770 17,318 DECREASE IN RECEIVABLES 9,401 16,482 (INCREASE) DECREASE IN INVENTORY (348) 1,345 (DECREASE) IN ACCOUNTS PAYABLE (325) (13,069) (DECREASE) IN ACCRUED LIABILITIES (1,465) (3,616) INCREASE IN CUSTOMER DEPOSITS 0 17,968 ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES 9,061 27,093 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES PAYMENTS ON LONG TERM DEBT (2,337) (6,953) ------- ------- NET CASH (USED) BY FINANCING ACTIVITIES (2,337) (6,953) ------- ------- NET INCREASE IN CASH & EQUIVALENTS 6,724 20,140 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 77,790 64,374 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD 84,514 84,514 ======= =======
162 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF REVENUES AND EXPENSES ONE MONTH AND THREE MONTHS ENDED MAY 31, 1998 (SEE ACCOUNTANTS' COMPILATION REPORT)
CURRENT YEAR TO MONTH PERCENT DATE PERCENT ------- ------- ------- ------- OPERATING EXPENSES (CONTINUED) FREIGHT OUT 326 0.49 907 0.43 INSURANCE 797 1.19 2,534 1.20 INTEREST 1,881 2.80 5,701 2.71 JANITORIAL 0 0.00 180 0.09 LAUNDRY AND LINEN 168 0.25 394 0.19 LEGAL AND ACCOUNTING 740 1.10 4,165 1.98 MAINTENANCE & REPAIR 1,147 1.71 6,415 3.05 OFFICE EXPENSE 77 0.11 405 0.19 OFFICE AND ADMINISTRATIVE 2,052 3.06 5,138 2.44 SECURITY 0 0.00 105 0.05 TAXES AND LICENSES 211 0.31 211 0.10 TAXES-PAYROLL 2,981 4.41 10,442 4.98 TELEPHONE 279 0.42 542 0.26 UTILITIES 1,224 1.82 2,522 1.20 ------- ------- ------- ------- 12,034 17.92 39,995 19.02 ------- ------- ------- ------- EXPENSES OVER REVENUES (3,972) 5.92 (9,345) 4.44
163 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF REVENUES AND EXPENSES ONE MONTH AND THREE MONTHS ENDED MAY 31, 1998 (SEE ACCOUNTANTS' COMPILATION REPORT)
CURRENT YEAR TO MONTH PERCENT DATE PERCENT --------- --------- --------- --------- SALES SALES-OFFICE SUPPLIES 1,384 2.06 5,141 2.44 SALES-PRINTING 67,615 100.71 209,022 99.38 SALES RETURNS AND ALLOW. (1,890) 2.82 (3,976) 1.89 OTHER INCOME 31 0.05 132 0.06 --------- --------- --------- --------- 67,140 100.00 210,319 100.00 --------- --------- --------- --------- COST OF SALES BEGINNING INVENTORY 11,029 12,722 PURCHASES 26,415 82,292 LABOR SALARIES 12,122 37,853 SALES SALARIES 11,425 36,161 SUPPLIES & FREIGHT 3,716 4,765 DEPRECIATION 5,748 17,253 ENDING INVENTORY (11,377) (11,377) --------- --------- 59,078 87.99 179,669 85.43 --------- --------- --------- --------- GROSS PROFIT 8,062 12.01 30,650 14.57 --------- --------- --------- --------- OPERATING EXPENSES ADVERTISING 0 0.00 32 0.02 AUTOMOBILE 56 0.08 144 0.07 CASH VARIANCE 9 0.01 9 0.00 DEPRECIATION 22 0.03 55 0.03 DUES AND SUBSCRIPTIONS 84 0.13 84 0.04
164 LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES ACCOUNTS PAYABLE 14,874 CUSTOMER DEPOSITS 18,343 CONTRACT - CURRENT PORTION 29,582 ACCRUED PAYROLL COSTS 5,746 ACCRUED PROFESSIONAL FEES 22,000 ACCRUED SALES TAX 2,323 -------- TOTAL CURRENT LIABILITIES 92,848 -------- LONG TERM DEBT NET OF CURRENT PORTION 199,668 -------- HOME OFFICE EQUITY 384,220 CURRENT PERIOD REVENUE OVER EXPENSES (9,345) -------- 374,875 -------- 667,391 ========
165 HERTH PRINTING AND BUSINESS SUPPLY (A DIVISION OF COMBUSTION ENERGY COMPANY) STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1998 (SEE ACCOUNTANTS' COMPILATION REPORT) ASSETS CURRENT ASSETS CASH 84,514 ACCOUNTS RECEIVABLE 100,199 INVENTORY 11,377 PREPAID EXPENSES 12,500 ------- TOTAL CURRENT ASSETS 208,590 ------- OTHER ASSETS DEPOSITS 2,754 ------- PROPERTY AND EQUIPMENT FURNITURE AND FIXTURES 17,433 MACHINERY AND EQUIPMENT 455,938 VEHICLES 4,700 BUILDING 253,156 LAND 70,000 ------- 801,227 LESS ACCUMULATED DEPRECIATION 345,180 ------- TOTAL PROPERTY AND EQUIPMENT 456,047 ------- 667,391 =======
166 POWERTEL USA, INC. Forecasted Statements of Income for years ended February 28, 1999, February 29, 2000 and February 28, 2001 (With Accountants' Compilation Report) 167 WILLIAM J. CRANDALL CHARTERED Certified Public Accountants William J. Crandall, C.P.A. INCLINE VILLAGE RENO 761 Northwood Blvd. 1885 So. Arlington Ave., Ste. 105 Incline Village, Nevada 89451 Reno, Nevada 89509 Telephone 702-831-1787 Telephone 702-324-1787 FAX 702-831-3357 FAX 702-324-1791 Board of Directors Powertel USA, Inc. East Lansing, Michigan We have compiled the accompanying forecasted statements of income of Powertel USA, Inc. for the fiscal years ending February 28, 1999, February 29, 2000, and February 28, 2001, in accordance with standards established by the American Institute of Certified Public Accountants. A compilation is limited to presenting in the form of a forecast information that is the representation of management and does not include evaluation of the support for the assumptions underlying the forecast. We have not examined the forecast and, accordingly, do not express an opinion or any other form of assurance on the accompanying statements or assumptions. Furthermore, there will usually be differences between the forecasted and actual results because events and circumstances frequently do not occur as expected, and those differences may be material. We have no responsibility to update this report for events and circumstances occurring after the date of this report. June 24, 1998 168 2 POWERTEL USA, INC. Forecasted Statements of Income Years Ended February 28, 1999, February 29, 2000 and February 28, 2001 (With Accountants' Compilation Report)
February 28, February 29, February 28, 1999 2000 2001 ------------ ------------ ------------ Sales $ 11,572,600 $ 30,547,300 $ 33,542,700 Sales returns (1,100) (1,150) (1,200) Other income 105,800 198,800 218,600 ------------ ------------ ------------ 11,677,300 30,744,950 33,760,100 ------------ ------------ ------------ Cost of sales Materials 364,400 375,300 386,600 Service 8,750,000 23,760,000 26,136,000 Equipment lease 136,000 224,400 246,800 Trunk line lease 60,000 99,000 108,900 Switching service 8,000 13,200 14,600 Carrier line 20,000 33,000 36,300 Wages 426,400 580,900 616,800 ------------ ------------ ------------ 9,764,800 25,085,800 27,546,000 ------------ ------------ ------------ Gross profit 1,912,500 5,659,150 6,214,100 ------------ ------------ ------------ General and administrative Advertising 100 100 100 Automobile 3,500 5,600 6,100 Bank charges 250 300 300 Depreciation 69,200 47,700 49,100 Dues and publications 300 300 300 Freight and shipping 5,900 6,100 6,300 Insurance 16,800 20,300 21,500 Interest 22,100 18,800 19,400 Janitorial and laundry 2,000 2,100 2,200 Legal and accounting 16,600 17,600 18,200 Maintenance and repair 18,800 19,400 20,000 Office costs 2,800 2,900 3,000 Office wages 51,600 87,200 94,600 Rent 40,000 66,000 72,600 Taxes and licenses 14,400 21,700 23,400 Taxes - payroll 52,900 77,300 82,400 Telephone 28,300 44,500 48,800 Utilities 18,900 24,900 26,700 Other 24,000 26,400 29,000 ------------ ------------ ------------ 388,450 489,200 524,000 ------------ ------------ ------------ Income before provision for federal income tax 1,524,050 5,169,950 5,690,100 Federal income tax 235,950 1,934,600 ------------ ------------ ------------ Net income $ 1,524,050 $ 4,934,000 $ 3,755,500 ============ ============ ============
See accompanying summary of significant forecast assumptions. 169 3 POWERTEL USA, INC. Note to Forecasted Statements February 28, 1999, February 29, 2000 and February 28, 2001 .(See Accountants, Compilation Report) 1. Summary of Significant Forecast Assumptions The financial forecast presents, to the best of management's knowledge and belief, the Company's expected results of operations. Accordingly, the forecast reflects management's judgement as of June 24, 1998, the date of this forecast, of the expected conditions and its expected course of action. The assumptions disclosed herein are those that management believes are significant to the forecast. There will usually be differences between the forecasted and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Sales Management developed sales forecasts from expected long distance line use and available capacity, and known sales of its printing division already in operation. Increases in sales year to year were estimated using rates of increase of 10% and 3% for the long distance service and printing sales respectively. Long distance service will be between Southern California and Mexico. Cost of Sales Materials cost represents those items used in printing operation including print brokerage and are forecasted using inventory costs and past experience. Service cost is the charge paid by the Company for long distance service, which is 80% of sales amount. Equipment lease, trunk line lease, switching service and carrier line are costs directly associated with providing long distance phone service and each is a fixed monthly amount by contract. Wages are combined for both long distance service and printing operation. The long distance services wages are for sales personnel only which is not expected to be a material cost. Wages for the printing operation includes both sales and production personnel and is forecasted based on past experience. 170 4 POWERTEL USA, INC. Note to Forecasted Statements February 28, 1999, February 29, 2000 and February 28, 2001 (See Accountants' Compilation Report) Note I (continued) General and Administrative Expenses General and administrative expenses are forecasted to be consistent and relatively low from year to year. Office wages and payroll taxes, rent, and telephone service account for the majority of long distance service general and administrative costs. These are estimated from known and estimated costs. Costs of the printing operation are forecasted from past experience. Income Taxes Forecasted income taxes are based on statutory rates in effect at the date of this forecast, after subtraction from operating income of available net operating loss carryforwards. 2. Summary of Significant Accounting Policies The financial forecast has been prepared on the basis of generally accepted accounting principles expected to be used in the financial statements covering the forecast periods. Depreciation Fixed assets are recorded at cost in the period acquired. Depreciation is calculated using the declining balance method over estimated useful lives of the assets. 171 AMENDED AND RESTATED -------------------- AGREEMENT FOR EXCHANGE OF STOCK ------------------------------- This amended and restated agreement ("AGREEMENT") is entered into this date and is effective as of February 12, 1998 by and among (i) POWERTEL USA, INC., a corporation incorporated under the laws of Delaware with its principal place of business situated in East Lansing, Michigan ("POWERTEL"), (ii) DIEGO TEL, INC. a Nevada corporation with its principal place of business situated in Sarasota, Florida ("DIEGOTEL"), and (iii) DAVID L. WALLACE, an individual residing in Sarasota, Florida ("WALLACE"), who owns 100% of the issued and outstanding Common Stock of DIEGOTEL. RECITALS -------- WHEREAS, WALLACE is the owner of 100% the issued and outstanding shares of DIEGOTEL; and WHEREAS, DIEGOTEL is engaged in the business of purchasing and reselling long distance telecommunication services and related activities ("BUSINESS"); and WHEREAS, WALLACE desires to exchange with POWERTEL common stock of POWERTEL in exchange for 100% of the common stock of the DIEGOTEL and POWERTEL desires to exchange stock as noted above; and WHEREAS, for federal income tax purposes, it is intended that this transaction shall qualify as a "reorganization" within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended; and WHEREAS, DIEGOTEL desires to guarantee the obligations of WALLACE pursuant to this AGREEMENT; and WHEREAS, this AGREEMENT is specifically contingent upon confirmation by the Bankruptcy Court of the Plan of Reorganization to be filed by POWERTEL with the Bankruptcy Court (the "CONFIRMATION"), WHEREAS, the Parties to this Agreement have previously executed a document entitled "Agreement for Exchange of Stock" executed February 12, 1997, (the "Initial Agreement"); and WHEREAS, the Parties have decided to amend and restate the Initial Agreement in order to incorporate certain supplemental terms and modifications. NOW, THEREFORE, in consideration of the foregoing, the payment of $100,000.00 to POWERTEL by WALLACE in the form of a promissory note and the exchange of stock pursuant 172 to this AGREEMENT and the representations, warranties, covenants, and mutual promises contained herein, the parties hereto, intending to be legally bound, do agree as follows: SECTION 1. ---------- EXCHANGE OF SHARES OF STOCK --------------------------- 1.1 EXCHANGE. At CLOSING as defined in Section 9 of this AGREEMENT, WALLACE shall tender to POWERTEL 100% of the issued and outstanding shares of common stock of DIEGOTEL ("SHARES") and a Promissory Note in the amount of $100,000.00 in consideration of the tender by POWERTEL of the Class A Common Stock of POWERTEL as provided in this AGREEMENT. 1.2 CONVEYANCE OF TITLE. The conveyance of title to the SHARES shall be effective as of the CLOSING by the delivery of the stock certificates therefor at the CONFIRMATION duly endorsed for transfer to POWERTEL. 1.3 EXCLUSIVE NATURE OF AGREEMENT. This AGREEMENT shall preclude and restrict WALLACE from entertaining other offers of sale or exchange of the SHARES. SECTION 2. ---------- CONSIDERATION AND POST-CONFIRMATION ADJUSTMENT ---------------------------------------------- 2.1 ADJUSTMENT. In consideration of the tender to POWERTEL of 100% of the issued and outstanding common stock of DIEGOTEL, POWERTEL shall forthwith tender to the escrow agent an amount of the issued and outstanding Class A Common Stock of POWERTEL such that the escrow agent will hold Thirty-Five (35%) percent of the issued and outstanding Class A Common Stock of POWERTEL. In the event that POWERTEL, as a result of its Plan of Reorganization or any settlements of any claims (except those of the disputed class) issues additional Class A Common Stock or effects a reverse stock split at any time before the tenth day following the Effective Date of the Plan of Reorganization, then the number of shares of Class A Common Stock issued to the escrow agent shall be adjusted to Thirty-Five 35.0% of the issued and outstanding Class A Common Stock of POWERTEL subsequent to implementation of the Plan of Reorganization and distribution to WALLACE on a pro rata basis. 2.2 ESCROW OF POWERTEL CLASS A COMMON STOCK AND POST CONFIRMATION ADJUSTMENT OF PURCHASE PRICE. Because WALLACE has made certain representations to POWERTEL respecting the business affairs of DIEGOTEL and its future financial performance WALLACE agrees as follows: a) The Class A Common Stock of POWERTEL to be issued pursuant to Section 2.1 of this AGREEMENT shall be held in escrow as provided in Section 2.2(d) for up to a thirty month term after the Distribution Date in POWERTEL'S Plan. 173 b) The Class A Common Stock held in escrow shall be restricted stock pursuant to the Securities Act of 1933 and shall be separated into 10 equal allotments, each of which shall be referred to as a 10 percent allotment. The escrow agent shall release a 10 percent allotment at the end of the month in which POWERTEL receives telecommunications revenue in excess of $100,000. The escrow agent shall release an additional 10 percent allotment for each additional incremental increase of $100,000 of telecommunications revenue more than the month before. The 10 percent allotments shall be distributed to WALLACE at no more than monthly intervals. To receive all ten allotments, POWERTEL must receive telecommunications revenue in excess of 4.5 million dollars within thirty months after the Distribution Date in POWERTEL'S Plan. c) If shares remain in the escrow at the end of thirty months, than the escrow shall release the remaining shares within 30 days. In no event shall the escrow agent return the unissued shares to POWERTEL if the telecommunications revenue exceeds 4.5 million dollars. If the total telecommunications revenue is less that 4.5 million dollars then the remaining shares shall be distributed on a pro rata basis among WALLACE and POWERTEL based upon a formula for distribution set forth in Section 2.2. d) All stock and transfer ledgers to be exchanged pursuant to this AGREEMENT shall be held in escrow by Walter & Haverfield, P.L.L. of Cleveland, Ohio, (the "Escrow Agent"), legal counsel to POWERTEL. In the event that either (a) the Bankruptcy Court refuses to ratify this AGREEMENT, (b) the Plan of Reorganization is not confirmed, or (c) POWERTEL elects to terminate this AGREEMENT, this AGREEMENT shall be deemed to be null and void and the Escrow Agent shall return the stock to the grantor from whom it was received, otherwise the stock shall be exchanged and distributed by the Escrow Agent pursuant to the terms of this AGREEMENT. e) During the period of time that the stock is held in escrow, POWERTEL shall have full power to vote all shares in escrow. SECTION 3. ---------- REPRESENTATIONS AND WARRANTIES OF WALLACE ----------------------------------------- Unless otherwise set forth in writing to POWERTEL, WALLACE represents and warrants to the best of his knowledge as follows: 3.1 CORPORATE STATUS. DIEGOTEL is duly organized, validly existing, and in good standing under the laws of the state of Nevada and has the power and authority to own its properties and to conduct its business as now being conducted. DIEGOTEL does not have any subsidiaries and does not own any stock in any other corporation or have any investments in any partnerships or joint ventures. 3.2 CAPITALIZATION. The authorized stock of DIEGOTEL consists solely of 25,000 shares of common stock with par value of $0.001 per share of which only the SHARES are issued and 174 outstanding. The SHARES constitute all of the issued and outstanding shares of stock of DIEGOTEL. The SHARES are validly issued, fully paid and non-assessable. 3.3 OWNERSHIP OF SHARES. WALLACE is the owner of the 25,000 of SHARES and in the aggregate owns 100% of the issued and outstanding SHARES of DIEGOTEL. WALLACE has title to the SHARES free and clear of any and all liens and encumbrances. 3.4 CONSENT OF THIRD PARTIES. This AGREEMENT is legally binding upon WALLACE and the consummation of the transactions contemplated hereby in accordance with the terms hereof does not require the consent of any third party. 3.5 FINANCIAL STATEMENTS AND PRO FORM FINANCIAL PROJECTIONS. If requested by POWERTEL, within sixty (60) days of the date of this AGREEMENT, WALLACE shall cause DIEGOTEL to prepare balance sheets, income statements and related schedules and footnotes for DIEGOTEL'S fiscal period commencing in 1997 with the date of incorporation and continuing through December 31, 1997 ("FINANCIAL STATEMENT") which FINANCIAL STATEMENT shall accurately and fairly reflect the financial condition of DIEGOTEL as of the dates indicated thereon, and the results of the operations of DIEGOTEL for the respective fiscal periods then ended. In addition to the foregoing, to the best of WALLACE'S knowledge, the pro forma financial projections for DIEGOTEL previously provided to POWERTEL and WALLACE accurately and fairly reflect the current and future financial condition of DIEGOTEL as of the dates indicated thereon, and the results of the operations of DIEGOTEL for the respective fiscal periods then ended, subject to the assumptions and representations set forth therein. 3.6 ABSENCE OF CERTAIN CHANGES. The business operations of DIEGOTEL have been conducted prudently and in the ordinary course of business and there has been no material change in the financial condition, results of operations, business, business prospects, capitalization or any increase in the compensation of DIEGOTEL'S employees, if any. 3.7 LIABILITIES. To the best of WALLACE'S knowledge (i) as of the date of the last FINANCIAL STATEMENT, DIEGOTEL did not have any liabilities, whether absolute, accrued, contingent or otherwise, that are not disclosed in the FINANCIAL STATEMENT attached hereto, and (ii) there was no basis upon which any person could assert a liability against DIEGOTEL which was not disclosed on the last FINANCIAL STATEMENT. Since the date of the last FINANCIAL STATEMENT, DIEGOTEL has not incurred any liabilities not in the ordinary course of business, and to the best of WALLACE'S knowledge there is presently no basis upon which a person could assert such a liability, nor has any person asserted the existence of such a liability. 3.8 TAX MATTERS. DIEGOTEL'S federal, state and local tax returns for 1997 have not been filed or audited. There are no pending tax examinations of, or tax claims asserted against, DIEGOTEL and there are no known bases for any such claims. DIEGOTEL has not granted any extension of any limitation period applicable to tax claims which extension is still in effect and has not filed a consent under Section 341(f) of the Internal Revenue Code of 1986. DIEGOTEL has never filed an election to be taxed as a small business corporation pursuant to IRC sec. 1361. 175 DIEGOTEL is and has not been a member of a "control group" as defined in IRC sec.1563 or an affiliated group as defined in IRC sec.1504. 3.9 TITLE TO PROPERTY. DIEGOTEL has good and marketable title to all of its assets free and clear of all liens and encumbrances. DIEGOTEL'S use of intangibles has not and will not infringe the rights of any other person. The rights, properties and other assets presently owned, leased or licensed by DIEGOTEL and described in this AGREEMENT include all rights, properties and other assets necessary to permit DIEGOTEL to conduct its business in the same manner as its business has been conducted. 3.10 RECEIVABLES. All of the receivables of DIEGOTEL are reflected on the books of DIEGOTEL and are considered to be collectible or have been collected as of the CLOSING. 3.11 INVENTORIES. The inventories of DIEGOTEL, if any, are of a quality and quantity to be usable and salable in the ordinary course of DIEGOTEL'S business. 3.12 CONDITION OF TANGIBLE PROPERTY. The equipment, and other tangible property of DIEGOTEL are, to the best of WALLACE'S knowledge, in good condition and repair, and are adequate for the uses to which such property is put in the conduct of the BUSINESS. WALLACE has no knowledge of any defects in any of such tangible property. 3.13 CONDEMNATION. No property owned or leased by DIEGOTEL is subject to any governmental decree or order, or to the best of WALLACE'S knowledge, threatened or proposed order to be sold or taken by any public authority. 3.14 SCHEDULE OF CONTRACTS. Upon request for POWERTEL, WALLACE shall prepare a complete list of all contracts of any type, other than insurance policies, to which DIEGOTEL is a party. All contracts to which DIEGOTEL is a party are in full force and effect and DIEGOTEL and the other parties thereto have performed all of the obligations required to be performed by them thereunder and are not in default thereof. Neither the execution of this AGREEMENT, nor the consummation of the transactions contemplated hereby, will constitute a default under any of such contracts as to which the sale of the shares contemplated by this AGREEMENT may or does constitute a default. None of such contracts will result in a loss to DIEGOTEL upon the completion thereof and none of the purchase commitments which are the subject thereof are in excess of the normal requirements of the BUSINESS or establish a price in excess of that customarily charged for the items which are the subject thereof. Full and complete copies of all such contracts will be supplied to POWERTEL upon request. 3.15 EMPLOYMENT MATTERS. Upon request from POWERTEL, WALLACE shall prepare a complete schedule of the compensation paid to all employees of DIEGOTEL. 3.16 LABOR RELATIONS. To the best of WALLACE'S knowledge, DIEGOTEL has complied with all laws, rules, and regulations relating to the employment of labor and has no labor troubles in the sense that there are no strikes, lockouts, work stoppages, or slow downs, pending or threatened against DIEGOTEL. 176 3.17 LEGAL PROCEEDINGS. There are no legal or administrative proceedings of any nature pending or, to the best of WALLACE'S knowledge, threatened against or affecting DIEGOTEL. DIEGOTEL is not in default of any judgment, writ, injunction, or order of any court or governmental agency. 3.18 COMPLIANCE WITH LAWS. DIEGOTEL has not received any notice from any governmental entity asserting a violation by DIEGOTEL of any laws, regulations, or governmental pronouncements of any type, including, without limitation, zoning ordinances, and (i) there are no known claims or investigations involving asserted violations thereof, and (ii) DIEGOTEL has duly complied with all statutes, regulations and governmental pronouncements of all types (including, without limitation, zoning ordinances) and has acquired all licenses and permits required for the operation of its business. 3.19 LACK OF MARKET FOR POWERTEL SHARES. WALLACE represents that he has had direct, continuing and first-hand experience with the business and operation of POWERTEL and its financial condition and affairs. WALLACE acknowledges that (i) POWERTEL is currently functioning as Debtor-in-Possession pursuant to Chapter 11 of the United States Bankruptcy Code, (ii) there is little, if any, market for POWERTEL's Class A Common Stock and there may never be any market for such securities, (iii) the Class A Common Stock is deemed to be "high risk" and "speculative," (iv) there is no assurance or guarantee that the Class A Common Stock will ever have any economic value, and (v) the securities issued to WALLACE will be restricted for not less than one year. 3.20 BANK ACCOUNTS. Upon request from POWERTEL, WALLACE shall prepare a complete and accurate list of each bank or financial institution with which DIEGOTEL has an account (including the account numbers) or safety deposit box and the names of the persons authorized to draw thereon or have access thereto. 3.21 DISCLOSURE. WALLACE has disclosed to POWERTEL all facts material to the business, assets, operations, financial condition, and prospects of DIEGOTEL. 3.22 RELATED PARTIES' LOANS. Upon request from POWERTEL, WALLACE shall prepare a list of all loans to or from DIEGOTEL. 3.23 DELIVERIES BY WALLACE. In connection with the proposed sale of the SHARES, WALLACE will deliver to POWERTEL the corporate documents at CONFIRMATION. 3.24 SECURITIES EXEMPTION. WALLACE's sophisticated and knowledgeable individual who is an "accredited investor" as defined in Rule 501 of Regulation D of the Securities Act of 1933. WALLACE has had an opportunity to conduct an independent investigation into the affairs of DIEGOTEL. WALLACE represents that he is acquiring the SHARES for his personal investment and not with an intention to re-sell or distribute the SHARES to third parties who are not parties to the AGREEMENT. WALLACE stipulates that the purchase of the SHARES is a speculative transaction and that WALLACE is prepared to incur risk of loss of its investment. WALLACE also stipulates that the sale of the SHARES pursuant to the AGREEMENT has been effected pursuant 177 to the provisions of Regulation D and Section 4(2) of the Securities Act of 1933 and comparable provisions of applicable state securities laws. WALLACE agrees to file any documents reasonably required by POWERTEL to comply with applicable securities laws. SECTION 4. ---------- REPRESENTATIONS AND WARRANTIES OF POWERTEL ------------------------------------------ POWERTEL, represents and warrants as follows: 4.1 CONSENT OF THIRD PARTIES. Subject only to ratification of this AGREEMENT by the United States Bankruptcy Court, this AGREEMENT is legally binding upon POWERTEL and POWERTEL'S consummation of the transactions contemplated hereby does not require the consent of any third party except for approval by the Bankruptcy Court as referenced in Section 6.5. 4.2 SECURITIES EXEMPTION. POWERTEL is a sophisticated and knowledgeable individual who is an "accredited investor" as defined in Rule 501 of Regulation D of the Securities Act of 1933. POWERTEL has had an opportunity to conduct an independent investigation into the affairs of DIEGOTEL. POWERTEL represents that it is acquiring the SHARES for its personal investment and not with an intention to re-sell or distribute the SHARES to third parties who are not parties to the AGREEMENT. POWERTEL stipulates that the purchase of the SHARES is a speculative transaction and that POWERTEL is prepared to incur risk of loss of its investment. POWERTEL also stipulates that the sale of the SHARES pursuant to the AGREEMENT has been effected pursuant to the provisions of Regulation D and Section 4(2) of the Securities Act of 1933 and comparable provisions of applicable state securities laws. POWERTEL agrees to file any documents reasonably required by WALLACE to comply with applicable securities laws. 4.3 FINANCIAL STATEMENT AND PRO FORM FINANCIAL PROJECTIONS. Upon request by WALLACE, POWERTEL will provide WALLACE with a copy of its FINANCIAL STATEMENT as filed with the United States Bankruptcy Court. POWERTEL hereby authorizes WALLACE (at WALLACE'S expense) to secure a credit report on POWERTEL. POWERTEL represents that the final statements identified above fairly and accurately reflect POWERTEL'S financial condition and that there are no adverse facts not described to WALLACE in writing regarding POWERTEL'S financial affairs. SECTION 5. ---------- COVENANTS OF WALLACE -------------------- Unless POWERTEL waives such performance in writing, WALLACE covenants as follows: 5.1 CONVEYANCE OF TITLE TO SHARES. Pursuant to Section 2.2(d), at CONFIRMATION (as defined in Section 9.1 hereinafter), WALLACE will convey good and marketable title to the SHARES to POWERTEL free and clear of all security interests, claims, liens, proxies, charges, or other encumbrances. 178 5.2 WALLACE'S CONFIRMATION CERTIFICATE. WALLACE shall execute and deliver to POWERTEL at the CONFIRMATION a certificate which shall certify that, except as otherwise specifically provided therein: (a) all of the representations and warranties made by WALLACE in this AGREEMENT are true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time; and (b) WALLACE have fully performed and/or complied with all of his covenants and other obligations under this AGREEMENT required to be performed and/or complied with by them as of the CONFIRMATION. WALLACE shall describe in such certificate the circumstances concerning any incorrect or inaccurate representations or warranties identified therein. 5.3 CONDUCT OF BUSINESS. To and through the date of CONFIRMATION, subject to Section 5.8 hereof, DIEGOTEL shall conduct its business prudently and in the ordinary course consistent with past practice. 5.4 NO AMENDMENTS. To and through the date of CONFIRMATION, no change or amendment shall be made to the Articles of Incorporation of DIEGOTEL. 5.5 NO CAPITAL CHANGES. To and through the date of CONFIRMATION, DIEGOTEL shall not issue or grant options, warrants, or rights to purchase or to subscribe to any of its stock or any securities or obligations convertible into its stock or make any other changes in its capital structure. 5.6 NO DIVIDENDS OR REDEMPTIONS. To and through the date of CONFIRMATION, DIEGOTEL shall not declare or pay any dividend or other distribution in respect of its stock or purchase any of its stock. 5.7 FORBEARANCE BY CORPORATION. To and through the date of CONFIRMATION, except as otherwise specifically provided for or required herein, DIEGOTEL shall not do, or agree to do, any of the following: a) Mortgage, pledge, or otherwise encumber any of its assets; b) Incur liabilities in an aggregate amount greater than $250,000 without the express written consent of POWERTEL other than in the ordinary course of business or pay any liability other than current liabilities and current maturities of existing long term debt; c) Sell or transfer any of its assets other than sales of inventory in the ordinary course of business; d) Sell any of the inventory of DIEGOTEL other than in the ordinary course of business; e) Cancel, release, or assign any obligations owed to DIEGOTEL or any claims held by it; 179 f) Increase in any manner the compensation of any of DIEGOTEL'S employees (including an increase in fringe benefits or the provision of fringe benefits to employees not previously entitled thereto) or pay or agree to pay any pension or retirement allowance not required by any existing plan or agreement to any employees, or enter into any new pension, retirement, or profit sharing plan or agreement or employment agreement; g) Hire or terminate any employee, except for just cause; h) Loan money or assets to any person; or i) Adopt any new method of accounting; 5.8 ACCESS. To and through the date of CONFIRMATION, WALLACE shall grant POWERTEL and its agents full access to all personnel records, assets, records and documents of DIEGOTEL and shall furnish such financial and operating information as POWERTEL may reasonably request. WALLACE shall provide, upon POWERTEL'S request, verification of DIEGOTEL'S receivables and liabilities. 5.9 FILING OF TAX RETURNS. To and through the date of CONFIRMATION, any tax returns required to be filed by DIEGOTEL on or prior to the CONFIRMATION shall be submitted to POWERTEL for review. SECTION 6. ---------- CONDITIONS PRECEDENT TO OBLIGATIONS OF POWERTEL ----------------------------------------------- The obligations of POWERTEL to be performed hereunder shall be subject to the satisfaction (or waiver by POWERTEL) on or before the CONFIRMATION of each of the following conditions, absent which, at POWERTEL'S election, both parties shall be relieved of any further obligation to one another and any funds or securities deposited or paid by either party shall be returned to the party so depositing or paying compensation: 6.1 REPRESENTATIONS AND WARRANTIES TRUE AND ACCURATE AS OF CONFIRMATION. The representations and warranties of WALLACE contained herein shall be true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time. 6.2 PERFORMANCE OF OBLIGATIONS OF WALLACE. WALLACE shall have completely performed all of his covenants and obligations hereunder. 6.3 EXCHANGE OF ASSETS. WALLACE and POWERTEL shall exchange all securities in the amount and manner specified herein. 6.4 MATERIAL ADVERSE FACTS. POWERTEL shall not have discovered nor shall there have occurred after the date hereof, any events, facts or circumstances which reflect in any material 180 adverse way on the financial condition, assets, liabilities, business, or prospects of DIEGOTEL, in the event that POWERTEL discovers any such fact, event or circumstance at any time prior to the Effective Date of the Plan of Reorganization, POWERTEL, at its sole election, may declare this AGREEMENT to be null and void. WALLACE may cause DIEGOTEL to pay out to WALLACE all cash, the cash value of life insurance policies, and funds in bank accounts to satisfy compensation and debt obligations owed to WALLACE by DIEGOTEL, and POWERTEL consents thereto. 6.5 FORM OF DOCUMENTS. All certificates, opinions, and other documents to be delivered by WALLACE to POWERTEL hereunder shall be in form and substance satisfactory to POWERTEL. 6.6 RATIFICATION OF THE AGREEMENT AND CONFIRMATION OF THE PLAN OF REORGANIZATION. POWERTEL is currently functioning as a Debtor-in-Possession pursuant to Section 1107 of the United States Bankruptcy Code. The obligations of POWERTEL to be performed pursuant to this AGREEMENT are specifically contingent upon ratification of this AGREEMENT by the United States Bankruptcy Court for the District of Nevada. In the event that the Bankruptcy Court refuses, for any reason, to ratify this AGREEMENT, the AGREEMENT shall be null and void and have no legal binding effect upon POWERTEL or WALLACE. In addition to the foregoing, this AGREEMENT is specifically contingent upon confirmation by the Bankruptcy Court of the Plan of Reorganization to be filed by POWERTEL with the Bankruptcy Court, and in the event that the Bankruptcy Court refuses, for any reason, to confirm the Plan of Reorganization as submitted by POWERTEL, this AGREEMENT shall be null and void and have no further effect or impact upon POWERTEL or WALLACE. WALLACE specifically and explicitly assumes the risk that either (a) the Bankruptcy Court may refuse to ratify this AGREEMENT, or (b) the Bankruptcy Court may refuse to confirm the Plan of Reorganization as submitted by POWERTEL. SECTION 7. ---------- COVENANTS OF POWERTEL --------------------- From the date hereof to and including the CONFIRMATION, POWERTEL covenants as follows (unless otherwise agreed in writing by WALLACE): 7.1 POWERTEL'S CONFIRMATION CERTIFICATE. POWERTEL shall execute and deliver to WALLACE a certificate which shall certify that, except as otherwise specifically provided therein: (a) all of the representations and warranties made by POWERTEL in this AGREEMENT are true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time; (b) POWERTEL has performed and/or complied with all of its covenants and other obligations under this AGREEMENT required to be performed and/or complied with by it as of the CONFIRMATION; and (c) a statement showing the calculation used by POWERTEL in determining that the escrow agent has received an amount equal to Thirty-Five (35%) percent of the issued and outstanding Class A Common Stock of POWERTEL subsequent to implementation of the Plan of Reorganization. From the date hereof until the date of CONFIRMATION, POWERTEL shall notify WALLACE immediately in writing if any of the representations and warranties made herein should become untrue or inaccurate. 181 SECTION 8. ---------- CONDITIONS PRECEDENT TO OBLIGATIONS OF WALLACE ---------------------------------------------- The obligations of WALLACE to be performed hereunder shall be subject to the satisfaction (or waiver by WALLACE) on or before the CONFIRMATION of each of the following conditions: 8.1 REPRESENTATIONS AND WARRANTIES TRUE AND ACCURATE AS OF CONFIRMATION. The representations and warranties of WALLACE contained herein shall be true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time. 8.2 FORM OF DOCUMENTS AND PLAN OF REORGANIZATION. All certificates and other documents to be delivered by POWERTEL to WALLACE hereunder shall be in form and substance satisfactory to WALLACE. If the Plan of Reorganization as confirmed by the Bankruptcy Court as referred to in Section 6.5, does not conform or alters in any way this AGREEMENT, then this AGREEMENT shall be null and void and have no further effect or impact upon POWERTEL or WALLACE. POWERTEL specifically and explicitly assumes the risk that either (a) the Bankruptcy Court may refuse to ratify this AGREEMENT, (b) the Bankruptcy Court may refuse to confirm the Plan of Reorganization as submitted by POWERTEL, or (c) WALLACE may determine that the Plan of Reorganization does not conform or alters this AGREEMENT within ten days of receipt of a copy of the Plan or any amendments. SECTION 9. ---------- CLOSING AND CONFIRMATION ------------------------ 9.1 DATE. The CLOSING is deemed the date of CONFIRMATION. The CONFIRMATION is date the Bankruptcy Court confirms the Plan. 9.2 OBLIGATIONS OF WALLACE. Within ten days of this AGREEMENT, WALLACE and POWERTEL shall deliver, or cause to be delivered, to Escrow Agent the following: a) The certificates for the SHARES duly endorsed for transfer to POWERTEL by WALLACE, b) The certificates for the Class A Common Stock deposited with the escrow agent shall be issued in the name of POWERTEL and reissued to WALLACE at time of distribution, c) The corporate records, minute book and stock record book of DIEGOTEL. d) The Promissory Note from WALLACE to POWERTEL in the amount of $100,000 at 9% per year interest with payments to commence six months after the date of DISTRIBUTION and to be paid over thirty monthly 182 payments and in no event will the final shares be distributed until the Note is paid in full. 9.3 ADDITIONAL ACTIONS. Each of the parties, individually and/or in their corporate capacities, hereby agrees to execute and deliver all such additional documents and take all actions necessary or appropriate to consummate any and all of the transactions contemplated hereby. SECTION 10. ----------- INDEMNIFICATION AND POST CLOSING ADJUSTMENT IN PURCHASE PRICE ------------------------------------------------------------- 10.1 INDEMNIFICATION BY WALLACE. WALLACE agrees to indemnify and hold POWERTEL and DIEGOTEL harmless from any liabilities or losses (including attorneys' fees and all costs of defense) which are not otherwise covered by any policy of insurance to which the DIEGOTEL was, or is, a party, resulting from: a) The falsity or inaccuracy of any representations or warranties made herein by WALLACE; b) The failure of WALLACE to completely perform any of its covenants or other obligations hereunder; or c) Any liability or loss incurred or suffered by DIEGOTEL or POWERTEL after the CLOSING which relates or is attributable to intentional acts or omissions of WALLACE prior to the CONFIRMATION. 10.2 INDEMNIFICATION BY POWERTEL. POWERTEL agrees to indemnify and hold WALLACE harmless from any liabilities or losses resulting from: a) The falsity or inaccuracy of any representations or warranties made herein by POWERTEL; b) The failure of POWERTEL to completely perform any of his covenants or other obligations hereunder; or c) Any liability or loss incurred or suffered by WALLACE after the CLOSING which relates or is attributable to acts or omissions of POWERTEL prior to the CONFIRMATION. 10.3 DEFENSE. If an indemnified party or parties hereunder should receive notice of any claim or proceeding against it or them made by a third party that might result in an indemnification claim hereunder, the indemnified party or parties shall promptly give the indemnifying party or parties written notice of such claim or proceeding and shall permit the indemnifying party or parties at their option, to conduct or participate in the defense of such claim or proceeding by counsel of the indemnifying party's or parties' own choosing and at their own expense. If the indemnifying party or parties accept the tender of the defense of such claim, they shall be deemed to have accepted for 183 their account any and all liability resulting from or relating to such claim. If the indemnifying party or parties decline to conduct the defense of such claim or proceeding, the indemnified party or parties shall assume the defense thereof and may settle the same without the consent of the indemnifying party or parties. SECTION 11. ----------- MISCELLANEOUS PROVISIONS ------------------------ 11.1 SURVIVAL OF CLOSING. The provisions of Sections 2, 3, 4, 5.14, 5.15, 7, 10 and 11 shall survive the CLOSING and CONFIRMATION. 11.2 NOTICES. Any notices required or permitted hereby shall be deemed given when sent by one party to the other, and to its counsel, in writing by registered or certified U.S. mail, postage prepaid, addressed as follows: WALLACE: David L. Wallace 5545 Shadow Lawn Drive Sarasota, FL 34242 POWERTEL: POWERTEL USA, Inc. c/o Mr. Richard Cascarilla, President 321 West Lake Lansing Rd., Suite 100 East Lansing, NH 48823 POWERTEL'S COUNSEL: Van P. Carter, Esq. Walter & Haverfield 1300 Terminal Tower Cleveland, Ohio 44113 DIEGO TEL: DIEGOTEL, Inc. c/o David Wallace 5545 Shadow Lawn Drive Sarasota, FL 34242 The above addresses may be changed from time to time by giving notice thereof in the manner provided herein. 11.3 SUCCESSORS AND ASSIGNS. None of the parties hereto may assign their rights or delegate their duties hereunder without the prior written consent of all parties to this AGREEMENT, which consent will not be unreasonably withheld. This AGREEMENT shall be binding upon and inure to the benefit of the heirs, executors, administrators, and successors of the parties hereto. 184 11.4 INTEGRATED AGREEMENT. This instrument and the exhibits attached hereto constitute the complete and exclusive agreement of the parties. The terms of this AGREEMENT may not be modified except in a writing signed by all of the parties hereto. 11.5 RISK OF LOSS. Risk of loss of, or damage or destruction to, the assets of DIEGOTEL shall be borne by WALLACE until the CONFIRMATION. In the event of material damage or destruction to such property, WALLACE shall promptly notify POWERTEL. POWERTEL shall thereupon have the right, at its option, to elect to terminate this AGREEMENT without liability or to proceed to the CONFIRMATION and accept any insurance proceeds received by DIEGOTEL as a result of such damage or destruction. "Material damage" shall mean such damage as prevents the CORPORATION from effectively conducting its business. 11.6 GOVERNING LAW. The rights and obligations of the parties hereunder and the interpretation of this AGREEMENT shall be governed by the laws of the state of Nevada (other than those relating to conflicts of laws). 11.7 NO FINDER'S FEES OR BROKERAGE COMMISSIONS. Each of the parties hereto represents that it dealt with no brokers or finders with respect to the sale of the SHARES hereunder and that there are no brokerage commissions, finder's fees, or similar payments owed as a result thereof. 11.8 COUNTERPARTS. This AGREEMENT may be executed in two or more counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. The receipt of a telefax copy of any executed page shall be accepted as the original. 11.9 WAIVERS. Waiver of the benefit of any provision hereof must be in writing to be effective. The waiver by any party of a breach of any provision of this AGREEMENT shall not operate or be construed as a waiver of any subsequent breach. No action taken pursuant to this AGREEMENT, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or other obligations contained herein. 11.10 BOOKS AND RECORDS AND TAX RETURNS. POWERTEL will during regular business hours provide WALLACE with reasonable access to WALLACE'S financial and accounting books and records which relate to the period prior to the CONFIRMATION, provided, however, that WALLACE shall have similar access at if audits of WALLACE'S individual federal, state or local income tax returns necessitate access to DIEGOTEL'S records or in the event POWERTEL defaults in the timely payment of any amounts due to WALLACE hereunder. For purposes hereof, access to books and records shall include the right to make copies thereof. In addition, neither DIEGOTEL nor POWERTEL shall file any federal, state or local tax return or form for the fiscal year ending February 28, 1997 unless and until such return is reviewed and approved by WALLACE. 11.11 INTERPRETATION. Except where otherwise required by the context, words of any gender used herein shall be deemed to include any and all genders and the singular and plural shall be interchangeable. 185 11.12 NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is intended to confer or shall be construed as conferring upon or giving to any person other than the parties hereto and DIEGOTEL any rights or benefits under or by reason of this AGREEMENT. 11.13 INCORPORATION BY REFERENCE. Each Exhibit referenced in this AGREEMENT is hereby incorporated by reference and deemed to be a material component of this AGREEMENT as if fully set forth therein. 11.14 COMMITMENT TO ASSIST IN POST CLOSING MATTERS. The Parties to this AGREEMENT acknowledge that it may be necessary to amend this AGREEMENT and/or to execute additional documents in order to implement the understanding which has been reached, and each Party to this AGREEMENT commits to cooperate and use its/his best efforts in order that the objectives of this AGREEMENT may be achieved. 11.16 ACCURACY OF RECITALS. The Recitals set forth above are true and correct and are hereby incorporated herein by reference. 11.17 ENTIRE AGREEMENT. This AGREEMENT constitutes the entire agreement by and among the Parties with respect to the exchange of shares and all other agreements, oral or written shall be deemed to be null and void. To evidence their consent to the foregoing, the parties executed this instrument on the dates set opposite their signatures below. POWERTEL USA, INC. Dated: April 22, 1998 By: /s/ Richard A. Cascarilla ----------------------- ---------------------------------------- Its: President, Richard A. Cascarilla DIEGO TEL, INC. Dated: April 22, 1998 By: /s/ David L. Wallace ----------------------- ----------------------------------------- Its: President, David L. Wallace Dated: April 22, 1998 By: /s/ David L. Wallace ----------------------- --------------------------------------- David L. Wallace 186 ADDENDUM TO AMENDED AND RESTATED AGREEMENT ------------------------------------------ FOR EXCHANGE OF STOCK --------------------- THIS ADDENDUM TO AMENDED AND RESTATED AGREEMENT FOR EXCHANGE OF STOCK (the "Addendum") is intended to and does by execution hereof amend, modify, and alter the Amended and Restated Agreement for Exchange of Stock between David Wallace and POWERTEL USA, Inc. dated April 22,1998 as follows: Section 2.1 entitled "Adjustment' is hereby deleted in its entirety and the new Section 2.1 will read: 2.1 ADJUSTMENT. In consideration of the tender to POWERTEL of 100% of the issued and outstanding common stock of DIEGO TEL, POWERTEL shall forthwith tender to the Escrow Agent an amount of the issued and outstanding, Class A Common Stock of POWERTEL such that the Escrow Agent will hold Thirty-Five Percent (35%) of the issued and outstanding Class A Common Stock of POWERTEL. In the event that POWERTEL, as a result of its Plan of Reorganization or any settlements of any claims (except those of the disputed class) issues additional Class A Common Stock or effects a reverse stock split at any time before the tenth day following the Effective Date of the Plan of Reorganization, then the number of shares of Class A Common Stock issued to the Escrow Agent shall be adjusted to Thirty-Five Percent (35%) of the issued and outstanding Class A Common Stock of POWERTEL subsequent to implementation of the Plan of Reorganization and distributed to WALLACE in accordance with Section 2.2(b) of this Agreement. 187 Section 2.2(b) is hereby deleted in its entirety and new Section 2.2(b) will read: The Class A Common Stock held in escrow shall be restricted stock pursuant to the Securities Act of 1933 and shall be separated into ten (10) equal allotments, each of which shall be referred to as a 10 percent allotment. The Escrow Agent shall release a 10 percent allotment at the end of the month in which POWERTEL receives "Telecommunications Revenue," which for purposes of this Agreement means the cash receipts actually received by POWERTEL, in excess of $100,000. The Escrow Agent shall release an additional 10 percent allotment for each additional incremental increase of $100,000 of Telecommunications Revenue more than the month before. The 10 percent allotments shall be distributed to WALLACE at no more than monthly intervals. To receive all ten allotments, POWERTEL must receive Telecommunications Revenue in excess of $4.5 Million within thirty months after the Confirmation Date as defined in POWERTEL's Plan of Reorganization. Section 2.2(c) is hereby deleted in its entirety and the new Section 2.2(c) will read: (c) If shares remain in the escrow at the end of the thirty months, then the escrow shall release the remaining shares within thirty (30) days. In no event shall the Escrow Agent return the unissued shares to POWERTEL if the Telecommunications Revenue exceeds $4.5 Million and provided WALLACE has paid in full the Promissory Note in the amount $100,000 held in escrow by the Escrow Agent. If the total Telecommunications Revenue is less than $4.5 Million, then the remaining, unearned and unissued shares shall be returned to POWERTEL and the earned 10 percent allotments shall be distributed to WALLACE upon payment in full of the $100,000 Promissory Note. 188 IN WITNESS WHEREOF, the POWERTEL, DIEGO TEL and WALLACE have signed duplicate copies of this Addendum on this 8th day of June , 1998. Signed in the Presence of: POWERTEL USA, INC. /s/ Wendy S. Burhard By: /s/ Richard Cascarilla - ----------------------------------- ------------------------------------ Richard Cascarilla Title: President --------------------------- DIEGO TEL, INC. By: /s/ David L. Wallace - ----------------------------------- -------------------------------- David L. Wallace Title: President --------------------------- /s/ David L. Wallace - ----------------------------------- -------------------------------- David L. Wallace, Individually 189 Budget Report by Month 5/1/98 Through 12/31/98 Month 1
5/1/98 5/31/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 0.00 0.00 Sales: Wholesale: Mexico 0.00 0.00 0.00 TOTAL Wholesale 0.00 0.00 0.00 TOTAL Sales 0.00 0.00 0.00 TOTAL INFLOWS 0.00 0.00 0.00 OUTFLOWS Admin Services: Bookkeeping 0.00 0.00 0.00 TOTAL Admin Services 0.00 0.00 0.00 Aero Harris 0.00 0.00 0.00 Auto: Fuel 0.00 0.00 0.00 Insurance 0.00 0.00 0.00 TOTAL Auto 0.00 0.00 0.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 24,000.00 24,000.00 TOTAL Cost of Service 0.00 24,000.00 24,000.00 Insurance: Ins office 0.00 0.00 0.00 Insurance - Other 0.00 0.00 0.00 TOTAL Insurance 0.00 0.00 0.00 LA DACS Lease 0.00 0.00 0.00 LA SD Line 0.00 0.00 0.00 LA SD Service 0.00 0.00 0.00 Payroll: Bookkeeper 0.00 0.00 0.00 Off Mgr 0.00 0.00 0.00 Sales Staff 0.00 0.00 0.00 Secretary 0.00 0.00 0.00 TOTAL Payroll 0.00 0.00 0.00 SD AeroRent 0.00 0.00 0.00 SD TJ Line 0.00 0.00 0.00 SD TJ Service 0.00 0.00 0.00 Tax: State 0.00 0.00 0.00 Tax - Other 0.00 0.00 0.00 TOTAL Tax 0.00 0.00 0.00 Telephone: Phone cellular 0.00 0.00 0.00 Phone long 0.00 0.00 0.00 Phone office 0.00 0.00 0.00 Telephone - Other 0.00 0.00 0.00 TOTAL Telephone 0.00 0.00 0.00 TJ Trunk 0.00 0.00 0.00 Utilities: Gas & Electric 0.00 0.00 0.00 Water 0.00 0.00 0.00 TOTAL Utilities 0.00 0.00 0.00 Uncategorized Outflows 16,087.50 0.00 -16,087.50 TOTAL OUTFLOWS 16,087.50 24,025.00 7,937.50 OVERALL TOTAL -16,087.50 -24,025.00 7,937.50
190 Budget Report by Month 5/1/98 Through 12/31/98 Month 2
6/1/98 6/30/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 0.00 0.00 Sales: Wholesale: Mexico 0.00 0.00 0.00 TOTAL Wholesale 0.00 0.00 0.00 TOTAL Sales 0.00 0.00 0.00 TOTAL INFLOWS 0.00 0.00 0.00 OUTFLOWS Admin Services: Bookkeeping 0.00 0.00 0.00 TOTAL Admin Services 0.00 0.00 0.00 Aero Harris 0.00 0.00 0.00 Auto: Fuel 0.00 0.00 0.00 Insurance 0.00 0.00 0.00 TOTAL Auto 0.00 0.00 0.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 126,000.00 126,000.00 TOTAL Cost of Service 0.00 126,000.00 126,000.00 Insurance: Ins office 0.00 0.00 0.00 Insurance - Other 0.00 0.00 0.00 TOTAL Insurance 0.00 0.00 0.00 LA DACS Lease 0.00 0.00 0.00 LA SD Line 0.00 0.00 0.00 LA SD Service 0.00 0.00 0.00 Payroll: Bookkeeper 0.00 0.00 0.00 Off Mgr 0.00 0.00 0.00 Sales Staff 0.00 0.00 0.00 Secretary 0.00 0.00 0.00 TOTAL Payroll 0.00 0.00 0.00 SD AeroRent 0.00 0.00 0.00 SD TJ Line 0.00 0.00 0.00 SD TJ Service 0.00 0.00 0.00 Tax: State 0.00 1,200.00 1,200.00 Tax - Other 0.00 0.00 0.00 TOTAL Tax 0.00 1,200.00 1,200.00 Telephone: Phone cellular 0.00 0.00 0.00 Phone long 0.00 0.00 0.00 Phone office 0.00 0.00 0.00 Telephone - Other 0.00 0.00 0.00 TOTAL Telephone 0.00 0.00 0.00 TJ Trunk 0.00 0.00 0.00 Utilities: Gas & Electric 0.00 0.00 0.00 Water 0.00 0.00 0.00 TOTAL Utilities 0.00 0.00 0.00 Uncategorized Outflows 0.00 0.00 0.00 TOTAL OUTFLOWS 0.00 127,225.00 127,225.00 OVERALL TOTAL 0.00 -127,225.00 127,225.00
191 Budget Report by Month 5/1/98 Through 12/31/98 Month 3
7/1/98 7/31/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 0.00 0.00 Sales: Wholesale: Mexico 0.00 250,000.00 -250,000.00 TOTAL Wholesale 0.00 250,000.00 -250,000.00 TOTAL Sales 0.00 250,000.00 -250,000.00 TOTAL INFLOWS 0.00 250,000.00 -250,000.00 OUTFLOWS Admin Services: Bookkeeping 0.00 100.00 100.00 TOTAL Admin Services 0.00 100.00 100.00 Aero Harris 0.00 15,000.00 15,000.00 Auto: Fuel 0.00 200.00 200.00 Insurance 0.00 200.00 200.00 TOTAL Auto 0.00 400.00 400.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 200,000.00 200,000.00 TOTAL Cost of Service 0.00 200,000.00 200,000.00 Insurance: Ins office 0.00 300.00 300.00 Insurance - Other 0.00 300.00 300.00 TOTAL Insurance 0.00 600.00 600.00 LA DACS Lease 0.00 2,000.00 2,000.00 LA SD Line 0.00 2,500.00 2,500.00 LA SD Service 0.00 500.00 500.00 Payroll: Bookkeeper 0.00 0.00 0.00 Off Mgr 0.00 1,000.00 1,000.00 Sales Staff 0.00 5,000.00 5,000.00 Secretary 0.00 0.00 0.00 TOTAL Payroll 0.00 6,000.00 6,000.00 SD AeroRent 0.00 5,000.00 5,000.00 SD TJ Line 0.00 5,000.00 5,000.00 SD TJ Service 0.00 500.00 500.00 Tax: State 0.00 0.00 0.00 Tax - Other 0.00 200.00 200.00 TOTAL Tax 0.00 200.00 200.00 Telephone: Phone cellular 0.00 200.00 200.00 Phone long 0.00 2,000.00 2,000.00 Phone office 0.00 500.00 500.00 Telephone - Other 0.00 3,500.00 3,500.00 TOTAL Telephone 0.00 6,200.00 6,200.00 TJ Trunk 0.00 2,500.00 2,500.00 Utilities: Gas & Electric 0.00 1,000.00 1,000.00 Water 0.00 100.00 100.00 TOTAL Utilities 0.00 1,100.00 1,100.00 Uncategorized Outflows 0.00 0.00 0.00 TOTAL OUTFLOWS 0.00 247,625.00 247,625.00 OVERALL TOTAL 0.00 2,375.00 -2,375.00
192 Budget Report by Month 5/1/98 Through 12/31/98 Month 4
8/1/98 8/31/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 15,000.00 -15,000.00 Sales: Wholesale: Mexico 0.00 750,000.00 -750,000.00 TOTAL Wholesale 0.00 750,000.00 -750,000.00 TOTAL Sales 0.00 750,000.00 -750,000.00 TOTAL INFLOWS 0.00 765,000.00 -765,000.00 OUTFLOWS Admin Services: Bookkeeping 0.00 100.00 100.00 TOTAL Admin Services 0.00 100.00 100.00 Aero Harris 0.00 15,000.00 15,000.00 Auto: Fuel 0.00 200.00 200.00 Insurance 0.00 200.00 200.00 TOTAL Auto 0.00 400.00 400.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 600,000.00 600,000.00 TOTAL Cost of Service 0.00 600,000.00 600,000.00 Insurance: Ins office 0.00 300.00 300.00 Insurance - Other 0.00 300.00 300.00 TOTAL Insurance 0.00 600.00 600.00 LA DACS Lease 0.00 2,000.00 2,000.00 LA SD Line 0.00 2,500.00 2,500.00 LA SD Service 0.00 500.00 500.00 Payroll: Bookkeeper 0.00 500.00 500.00 Off Mgr 0.00 1,500.00 1,500.00 Sales Staff 0.00 10,000.00 10,000.00 Secretary 0.00 0.00 0.00 TOTAL Payroll 0.00 12,000.00 12,000.00 SD AeroRent 0.00 5,000.00 5,000.00 SD TJ Line 0.00 5,000.00 5,000.00 SD TJ Service 0.00 500.00 500.00 Tax: State 0.00 0.00 0.00 Tax - Other 0.00 400.00 400.00 TOTAL Tax 0.00 400.00 400.00 Telephone: Phone cellular 0.00 200.00 200.00 Phone long 0.00 2,000.00 2,000.00 Phone office 0.00 500.00 500.00 Telephone - Other 0.00 0.00 0.00 TOTAL Telephone 0.00 2,700.00 2,700.00 TJ Trunk 0.00 2,500.00 2,500.00 Utilities: Gas & Electric 0.00 1,000.00 1,000.00 Water 0.00 100.00 100.00 TOTAL Utilities 0.00 1,100.00 1,100.00 Uncategorized Outflows 0.00 0.00 0.00 TOTAL OUTFLOWS 0.00 650,325.00 650,325.00 OVERALL TOTAL 0.00 114,675.00 -114,675.00
193 Budget Report by Month 5/1/98 Through 12/31/98 Month 5
5/1/98 9/30/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 15,000.00 -15,000.00 Sales: Wholesale: Mexico 0.00 1,000,000.00 -1,000,000.00 TOTAL Wholesale 0.00 1,000,000.00 -1,000,000.00 TOTAL Sales 0.00 1,000,000.00 -1,000,000.00 TOTAL INFLOWS 0.00 1,015,000.00 -1,015,000.00 OUTFLOWS Admin Services: Bookkeeping 0.00 100.00 100.00 TOTAL Admin Services 0.00 100.00 100.00 Aero Harris 0.00 15,000.00 15,000.00 Auto: Fuel 0.00 200.00 200.00 Insurance 0.00 200.00 200.00 TOTAL Auto 0.00 400.00 400.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 800,000.00 800,000.00 TOTAL Cost of Service 0.00 800,000.00 800,000.00 Insurance: Ins office 0.00 300.00 300.00 Insurance - Other 0.00 300.00 300.00 TOTAL Insurance 0.00 600.00 600.00 LA DACS Lease 0.00 2,000.00 2,000.00 LA SD Line 0.00 2,500.00 2,500.00 LA SD Service 0.00 500.00 500.00 Payroll: Bookkeeper 0.00 1,000.00 1,000.00 Off Mgr 0.00 2,000.00 2,000.00 Sales Staff 0.00 10,000.00 10,000.00 Secretary 0.00 500.00 500.00 TOTAL Payroll 0.00 13,500.00 13,500.00 SD AeroRent 0.00 5,000.00 5,000.00 SD TJ Line 0.00 5,000.00 5,000.00 SD TJ Service 0.00 500.00 500.00 Tax: State 0.00 0.00 0.00 Tax - Other 0.00 700.00 700.00 TOTAL Tax 0.00 700.00 700.00 Telephone: Phone cellular 0.00 200.00 200.00 Phone long 0.00 2,000.00 2,000.00 Phone office 0.00 500.00 500.00 Telephone - Other 0.00 0.00 0.00 TOTAL Telephone 0.00 2,700.00 2,700.00 TJ Trunk 0.00 2,500.00 2,500.00 Utilities: Gas & Electric 0.00 1,000.00 100.00 Water 0.00 100.00 100.00 TOTAL Utilities 0.00 1,100.00 1,100.00 Uncategorized Outflows 0.00 0.00 0.00 TOTAL OUTFLOWS 0.00 852,125.00 852,125.00 OVERALL TOTAL 0.00 162,875.00 -162,875.00
194 Budget Report by Month 5/1/98 Through 12/31/98 Month 6
10/1/98 10/31/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 15,000.00 -15,00.00 Sales: Wholesale: Mexico 0.00 1,250,000.00 -1,250,000.00 TOTAL Wholesale 0.00 1,250,000.00 -1,250,000.00 TOTAL Sales 0.00 1,250,000.00 -1,265,000.00 TOTAL INFLOWS 0.00 1,265,000.00 -1,265,000.00 OUTFLOWS Admin Services: Bookkeeping 0.00 100.00 100.00 TOTAL Admin Services 0.00 100.00 100.00 Aero Harris 0.00 15,000.00 15,000.00 Auto: Fuel 0.00 200.00 200.00 Insurance 0.00 200.00 200.00 TOTAL Auto 0.00 400.00 400.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 1,000,000.00 1,000,000.00 TOTAL Cost of Service 0.00 1,000,000.00 1,000,000.00 Insurance: Ins office 0.00 300.00 300.00 Insurance - Other 0.00 300.00 300.00 TOTAL Insurance 0.00 600.00 600.00 LA DACS Lease 0.00 2,000.00 2,000.00 LA SD Line 0.00 2,500.00 2,500.00 LA SD Service 0.00 500.00 500.00 Payroll: Bookkeeper 0.00 1,000.00 1,000.00 Off Mgr 0.00 2,500.00 2,500.00 Sales Staff 0.00 19,000.00 10,000.00 Secretary 0.00 1,000.00 1,000.00 TOTAL Payroll 0.00 14,500.00 14,500.00 SD AeroRent 0.00 5,000.00 5,000.00 SD TJ Line 0.00 5,000.00 5,000.00 SD TJ Service 0.00 500.00 500.00 Tax: State 0.00 0.00 0.00 Tax - Other 0.00 900.00 900.00 TOTAL Tax 0.00 900.00 900.00 Telephone: Phone cellular 0.00 200.00 200.00 Phone long 0.00 2,000.00 2,000.00 Phone office 0.00 500.00 500.00 Telephone - Other 0.00 0.00 0.00 TOTAL Telephone 0.00 2,700.00 2,700.00 TJ Trunk 0.00 2,500.00 2,500.00 Utilities: Gas & Electric 0.00 1,000.00 1,000.00 Water 0.00 100.00 100.00 TOTAL Utilities 0.00 1,100.00 1,100.00 Uncategorized Outflows 0.00 0.00 0.00 TOTAL OUTFLOWS 0.00 1,053,325.00 1,053,325.00 OVERALL TOTAL 0.00 211,675.00 -211,675.00
195 Budget Report by Month 5/1/98 Through 12/31/98 Month 7
11/1/98 11/30/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 15,000.00 -15,000.00 Sales: Wholesale: Mexico 0.00 1,500,000.00 -1,500,000.00 TOTAL Wholesale 0.00 1,500,000.00 -1,500,000.00 TOTAL Sales 0.00 1,500,000.00 -1,500,000.00 TOTAL INFLOWS 0.00 1,515,000.00 -1,515,000.00 OUTFLOWS Admin Services: Bookkeeping 0.00 100.00 100.00 TOTAL Admin Services 0.00 100.00 100.00 Aero Harris 0.00 15,000.00 15,000.00 Auto: Fuel 0.00 200.00 200.00 Insurance 0.00 200.00 200.00 TOTAL Auto 0.00 400.00 400.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 1,200,000.00 1,200,000.00 TOTAL Cost of Service 0.00 1,200,000.00 1,200,000.00 Insurance: Ins office 0.00 300.00 300.00 Insurance - Other 0.00 300.00 300.00 TOTAL Insurance 0.00 600.00 600.00 LA DACS Lease 0.00 2,000.00 2,000.00 LA SD Line 0.00 2,500.00 2,500.00 LA SD Service 0.00 500.00 500.00 Payroll: Bookkeeper 0.00 1,000.00 1,000.00 Off Mgr 0.00 2,500.00 2,500.00 Sales Staff 0.00 10,000.00 10,000.00 Secretary 0.00 1,500.00 1,500.00 TOTAL Payroll 0.00 15,000.00 15,000.00 SD AeroRent 0.00 5,000.00 5,000.00 SD TJ Line 0.00 5,000.00 5,000.00 SD TJ Service 0.00 500.00 500.00 Tax: State 0.00 0.00 0.00 Tax - Other 0.00 1,000.00 1,000.00 TOTAL Tax 0.00 1,000.00 1,000.00 Telephone: Phone cellular 0.00 200.00 200.00 Phone long 0.00 2,000.00 2,000.00 Phone office 0.00 500.00 500.00 Telephone - Other 0.00 0.00 0.00 TOTAL Telephone 0.00 2,700.00 2,700.00 TJ Trunk 0.00 2,500.00 2,500.00 Utilities: Gas & Electric 0.00 1,000.00 1,000.00 Water 0.00 100.00 100.00 TOTAL Utilities 0.00 1,100.00 1,100.00 Uncategorized Outflows 0.00 0.00 0.00 TOTAL OUTFLOWS 0.00 1,253,925.00 1,253,925.00 OVERALL TOTAL 0.00 261,075.00 -261,075.00
196 Budget Report by Month 5/1/98 Through 12/31/98 Month 8
12/1/98 12/31/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 15,000.00 -15,000.00 Sales: Wholesale: Mexico 0.00 1,750,000.00 -1,750,000.00 TOTAL Wholesale 0.00 1,750,000.00 -1,750,000.00 TOTAL Sales 0.00 1,750,000.00 -1,750,000.00 TOTAL INFLOWS 0.00 1,750,000.00 -1,765,000.00 OUTFLOWS Admin Services: Bookkeeping 0.00 100.00 100.00 TOTAL Admin Services 0.00 100.00 100.00 Aero Harris 0.00 15,000.00 15,000.00 Auto: Fuel 0.00 200.00 200.00 Insurance 0.00 200.00 200.00 TOTAL Auto 0.00 400.00 400.00 Bank Charge 0.00 25.00 25.00 Cost of Service: VIVA MEX 0.00 1,400,000.00 1,400,000.00 TOTAL Cost of Service 0.00 1,400,000.00 1,400,000.00 Insurance: Ins office 0.00 300.00 300.00 Insurance - Other 0.00 300.00 300.00 TOTAL Insurance 0.00 600.00 600.00 LA DACS Lease 0.00 2,000.00 2,000.00 LA SD Line 0.00 2,500.00 2,500.00 LA SD Service 0.00 500.00 500.00 Payroll: Bookkeeper 0.00 1,000.00 1,000.00 Off Mgr 0.00 2,500.00 2,500.00 Sales Staff 0.00 20,000.00 20,000.00 Secretary 0.00 1,500.00 1,500.00 TOTAL Payroll 0.00 25,000.00 25,000.00 SD AeroRent 0.00 5,000.00 5,000.00 SD TJ Line 0.00 5,000.00 5,000.00 SD TJ Service 0.00 500.00 500.00 Tax: State 0.00 0.00 0.00 Tax - Other 0.00 1,000.00 1,000.00 TOTAL Tax 0.00 1,000.00 1,000.00 Telephone: Phone cellular 0.00 200.00 200.00 Phone long 0.00 2,000.00 2,000.00 Phone office 0.00 500.00 500.00 Telephone - Other 0.00 0.00 0.00 TOTAL Telephone 0.00 2,700.00 2,700.00 TJ Trunk 0.00 2,500.00 2,500.00 Utilities: Gas & Electric 0.00 1,000.00 1,000.00 Water 0.00 100.00 100.00 TOTAL Utilities 0.00 1,100.00 1,100.00 Uncategorized Outflows 0.00 0.00 0.00 TOTAL OUTFLOWS 0.00 1,463,925.00 1,463,925.00 OVERALL TOTAL 0.00 301,075.00 -301,075.00
197 Budget Report by Month 5/1/98 Through 12/31/98 Year Total
12/1/98 12/31/98 Category Description Actual Budget Difference INFLOWS Other Inc 0.00 75,000.00 -75,000.00 Sales: Wholesale: Mexico 0.00 6,500,000.00 -6,500,000.00 TOTAL Wholesale 0.00 6,500,000.00 -6,500,000.00 TOTAL Sales 0.00 6,500,000.00 -6,500,000.00 TOTAL INFLOWS 0.00 6,575,000.00 -6,575,000.00 OUTFLOWS Admin Services: Bookkeeping 0.00 600.00 600.00 TOTAL Admin Services 0.00 600.00 600.00 Aero Harris 0.00 90,000.00 90,000.00 Auto: Fuel 0.00 1,200.00 1,200.00 Insurance 0.00 1,200.00 1,200.00 TOTAL Auto 0.00 2,400.00 2,400.00 Bank Charge 0.00 200.00 200.00 Cost of Service: VIVA MEX 0.00 5,350,000.00 5,350,000.00 TOTAL Cost of Service 0.00 5,350,000.00 5,350,000.00 Insurance: Ins office 0.00 1,800.00 1,800.00 Insurance - Other 0.00 1,800.00 1,800.00 TOTAL Insurance 0.00 3,600.00 3,600.00 LA DACS Lease 0.00 12,000.00 12,000.00 LA SD Line 0.00 15,000.00 15,000.00 LA SD Service 0.00 3,000.00 3,000.00 Payroll: Bookkeeper 0.00 4,500.00 4,500.00 Off Mgr 0.00 12,000.00 12,000.00 Sales Staff 0.00 65,000.00 65,000.00 Secretary 0.00 4,500.00 4,500.00 TOTAL Payroll 0.00 86,000.00 86,000.00 SD AeroRent 0.00 30,000.00 30,000.00 SD TJ Line 0.00 30,000.00 30,000.00 SD TJ Service 0.00 3,000.00 3,000.00 Tax: State 0.00 1,200.00 1,200.00 Tax - Other 0.00 4,200.00 4,200.00 TOTAL Tax 0.00 5,400.00 5,400.00 Telephone: Phone cellular 0.00 1,200.00 1,200.00 Phone long 0.00 12,000.00 12,000.00 Phone office 0.00 3,000.00 3,000.00 Telephone - Other 0.00 3,500.00 3,500.00 TOTAL Telephone 0.00 19,700.00 19,700.00 TJ Trunk 0.00 15,000.00 15,000.00 Utilities: Gas & Electric 0.00 6,000.00 6,000.00 Water 0.00 600.00 600.00 TOTAL Utilities 0.00 6,600.00 6,600.00 Uncategorized Outflows 16,087.50 0.00 -16,087.50 TOTAL OUTFLOWS 16,087.50 5,672,500.00 5,656,412.50 OVERALL TOTAL -16,087.50 902,500.00 -918,587.50
198 RICHARD A. CASCARILLA, ESQ., has practiced law in the State of Michigan since 1981 and is a former partner in the law firm of Cascarilla & Brogan. He was named Secretary and Treasurer of the PowerTel in November, 1990 and has served as the PowerTel's General Counsel. Mr. Cascarilla was a director until May, 1996. From May until September 1996, Mr. Cascarilla served as an officer of the PowerTel until he was terminated by the management of the PowerTel. As described in the Disclosure Statement, in December, 1996, the Series B Preferred Shareholders elected one director to take control of the PowerTel due to the continuing default of Golden Chance. Mr. Kassouff was the director elected. Mr. Kassouff then appointed two temporary directors to serve until further notice. One of those directors was Mr. Cascarilla. After the order adjudicating PowerTel a chapter 11 debtor, management filed a motion to restore the debtor to possession which motion was granted. Since September, 1997, Mr. Cascarilla has been serving as President of PowerTel and has been reporting to the bankruptcy court on a regular basis regarding the reorganization effort. MICHAEL KASSOUFF first became a director of PowerTel in June, 1992. Mr. Kassouff is co-owner and operations manager of Guaranteed Builders, Inc., and has acted as a professional real estate developer and investor for over a decade. Mr. Kassouff is a limited partner of Nevada Geothermal Power Partners. Mr. Kassouff resigned as a director in May, 1996. In December, 1996, Mr. Kassouff was named by the Series B Preferred Shareholders to take control of the PowerTel due to the continuing default of Golden Chance. Mr. Kassouff continues to serve as a director and it is anticipated that he will be re-elected as a director at the next annual meeting of PowerTel. JEFFREY E HARTMAN was a director of the PowerTel from November 1, 1992 until May, 1996. Hartman has practiced law in the State of Nevada since 1982 and is a partner in the law firm of Hartman & Armstrong, Ltd. It is anticipated that Mr. Hartman will be elected as a director at the next annual meeting of PowerTel. 199 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into on the 26th day of August, 1998, by and between Powertel USA, Inc., a Delaware Corporation (the "Company") and Richard Cascarilla, an individual residing in Mason, Michigan (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") desires to secure for the Company the services of the Executive on the terms and conditions set forth herein; and WHEREAS, the Executive desires to provide such services on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the promises and the mutual covenants, terms and conditions hereinafter set forth, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and the Executive hereby agree as follows: 1. EMPLOYMENT. The Company hereby employs the Executive as its President and Chief Executive Officer, and the Executive hereby accepts employment from the Company in such position for the term set forth below and upon conditions provided herein. 2. THE EXECUTIVE'S DUTIES. (a) The Executive hereby agrees to perform competently and diligently the duties of the office of President of the Company, including such executive duties as may be reasonably required from time to time by the Board. (b) The Executive agrees to observe and comply with all rules, regulations, policies and practices adopted by the Company, either orally or in writing, both as they now exist and as they may be adopted or modified from time to time. 3. TERM. The term of this Employment Agreement shall commence as of August 26, 1998 and shall end on August 25, 2001, unless earlier terminated pursuant to Paragraph 6. or 7. below. 4. COMPENSATION. In consideration of the services to be rendered hereunder by the Executive, the Company hereby agrees to pay compensation to the Executive as follows: (a) During the first contract year hereunder (i.e., from August 26, 1998 to August 26, 1999), a base salary in the amount of EIGHTY-FOUR THOUSAND DOLLARS, ($84,000.00). During the second contract year hereunder (i.e., from August 26, 1999 to August 26, 2000), a base salary in the amount of NINETY-TWO THOUSAND DOLLARS, ($92,000.00). During the third contract year hereunder (i.e., from August 26, 2000 to August 26, 2001), a base salary in the amount of ONE HUNDRED 200 THOUSAND DOLLARS, ($100,000.00). Such a salary, less customary deductions for withholding and other charges, shall be payable on the Company's customary pay days. (b) In addition, the Executive will receive a bonus, depending upon the Company's operating results of $15,000.00 for each $1 million of earnings before interest, taxes, depreciation, amortization and such bonuses ("EBITDAB") as generated by the Company during any fiscal year beginning on August 26, 1998. 5. FRINGE BENEFITS. (a) The Company agrees to reimburse the Executive for the expense incurred by the Executive in connection with the performance of his duties hereunder. (b) The Executive shall also be provided health insurance and a life insurance policy of an amount not less than the total amount of this contract. Executive shall also be entitled to three (3) weeks of vacation each year. 6. TERMINATION. Notwithstanding anything to the contrary contained herein, the Company may terminate this Employment Agreement, the Executive's employment hereunder, and all compensation due to the Executive pursuant to Paragraph 4. above at any time for "just cause". For purposes of this agreement, termination for "just cause" shall mean: (a) a termination due to malfeasance or nonfeasance by the Executive in the performance of this duties for which he is employed, in either such instance so as to cause harm to the Company; (b) a termination due to the Executive's committing fraud, misappropriation or embezzlement in the performance of his duties as an employee of the Company; (c) a termination due to the Executive's committing any felony for which he is convicted and which, as determined in good faith by the Board, constitutes a crime involving moral turpitude, which causes harm to the Company; or (d) a substantial breach of any of the terms of this Employment Agreement. 7. TERMINATION UPON DEATH. If the Executive shall die before the expiration of term hereof, this Employment Agreement shall terminate and the Company shall have no further obligation hereunder to the Executive, except that the Company shall pay to the Executive's estate the amount of any earned but unpaid compensation pursuant to Paragraph 4. above to the date of death. 8. ENTIRE AGREEMENT. This Employment Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all of the covenants, promises, representations, warranties and agreements between the parties with respect to the employment of the Executive by the Company. Any modification of this Employment Agreement will be effective only if it is in writing and signed by the party to be charged. 9. SEVERABILITY. Any determination by the court of competent jurisdiction that any provision herein contained is invalid or unenforceable shall not affect the validity or the enforceability of any other provision of this Employment Agreement. 201 IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first above written. POWERTEL USA, INC. By: ________________________________________ Richard A. Cascarilla, President By: ________________________________________ Michael R. Kassouff, Secretary/Treasurer 202 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into on the 26th day of August, 1998, by and between Powertel USA, Inc., a Delaware Corporation (the "Company") and Michael R. Kassouff, an individual residing in Houston, Texas (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") desires to secure for the Company the services of the Executive on the terms and conditions set forth herein; and WHEREAS, the Executive desires to provide such services on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the promises and the mutual covenants, terms and conditions hereinafter set forth, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and the Executive hereby agree as follows: 1. Employment. The Company hereby employs the Executive as its Secretary/Treasurer, and the Executive hereby accepts employment from the Company in such position for the term set forth below and upon conditions provided herein. 2 THE EXECUTIVE'S DUTIES. (a) The Executive hereby agrees to perform competently and diligently the duties of the office of Secretary/Treasurer of the Company, including such executive duties as may be reasonably required from time to time by the Board. (b) The Company acknowledges that, during the term hereof, the Executive's duties will be performed on a part-time basis, and the Executive's construction business will require considerable time and attention by the Executive. Nevertheless, the Executive agrees to be reasonably available to the Company and will comply with the Company's reasonable requests for his presence in Reno, Nevada or any other places deemed necessary by the Corporation. (c) The Executive agrees to observe and comply with all rules, regulations, policies and practices adopted by the Company, either orally or in writing, both as they now exist and as they may be adopted or modified from time to time. 3. TERM. The term of this Employment Agreement shall commence as of August 26, 1998 and shall end on August 25, 2001, unless earlier terminated pursuant to Paragraph 6. or 7. below. 4. COMPENSATION. In consideration of the services to be rendered hereunder by the Executive, the Company hereby agrees to pay compensation to the Executive as follows: 203 (a) During the first contract year hereunder (i.e., from August 26, 1998 to August 26, 1999), a base salary in the amount of EIGHTEEN THOUSAND DOLLARS, ($18,000.00). During the second contract year hereunder (i.e., from August 26, 1999 to August 26, 2000), a base salary in the amount of TWENTY-FOUR THOUSAND DOLLARS, ($24,000.00). During the third contract year hereunder (i.e., from August 26, 2000 to August 26, 2001), a base salary in the amount of Thirty Thousand Dollars, ($30,000.00). Such a salary, less customary deductions for withholding and other charges, shall be payable on the Company's customary pay days. (b) In addition, the Executive will receive a bonus, depending upon the Company's operating results of $10,000.00 for each $1 million of earnings before interest, taxes, depreciation, amortization and such bonuses ("EBITDAB") as generated by the Company during any fiscal year beginning on August 26, 1998. 5. FRINGE BENEFITS. (a) The Company agrees to reimburse the Executive for the expense incurred by the Executive in connection with the performance of his duties hereunder. (b) The Executive shall also be provided health insurance and a life insurance policy of an amount not less than the total amount of this contract. 6. TERMINATION. Notwithstanding anything to the contrary contained herein, the Company may terminate this Employment Agreement, the Executive's employment hereunder, and all compensation due to the Executive pursuant to Paragraph 4. above at any time for "just cause". For purposes of this agreement, termination for "just cause" shall mean: (a) a termination due to malfeasance or nonfeasance by the Executive in the performance of this duties for which he is employed, in either such instance so as to cause harm to the Company; (b) a termination due to the Executive's committing fraud, misappropriation or embezzlement in the performance of his duties as an employee of the Company; (c) a termination due to the Executive's committing any felony for which he is convicted and which, as determined in good faith by the Board, constitutes a crime involving moral turpitude, which causes harm to the Company; or (d) a substantial breach of any of the terms of this Employment Agreement. 7. TERMINATION UPON DEATH. If the Executive shall die before the expiration of term hereof, this Employment Agreement shall terminate and the Company shall have no further obligation hereunder to the Executive, except that the Company shall pay to the Executive's estate the amount of any earned but unpaid compensation pursuant to Paragraph 4. above to the date of death. 8. ENTIRE AGREEMENT. This Employment Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all of the covenants, promises, representations, warranties and agreements between the parties with respect to the employment of the Executive by the Company. Any modification of this Employment Agrement will be effective only if it is in writing and signed by the party to be charged. 204 9. SEVERABILITY. Any determination by the court of competent jurisdiction that any provision herein contained is invalid or unenforceable shall not affect the validity or the enforceability of any other provision of this Employment Agrement. IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first above written. POWERTEL USA, INC. By: ________________________________________ Richard A. Cascarilla, President By: ________________________________________ Michael R. Kassouff, Secretary/Treasurer EX-2.B 3 EXHIBIT 2B 1 Exhibit 2b STEPHEN R. HARRIS, ESQ. BELDING, HARRIS & PETRONI, LTD. Nevada Bar No. 001463 417 West Plumb Lane Reno, Nevada 89509 Telephone: (702) 786-7600 Facsimile: (702) 786-7764 UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA IN RE: POWERTEL USA, INC., formerly known as Case No. BK-97-30265-BMG NEVADA ENERGY COMPANY, INC., (Chapter 11) also formerly known as MUNSON GEOTHERMAL, INC., Debtor. Hrg. DATE: August 25,1998 and TIME: 10:00 a.m. Est Time: 1 day Set By: Judge Goldwater ________________________________/ DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION PowerTel USA, Inc. (generally referred to as "Debtor" but sometimes referred to as "PowerTel"), a Delaware corporation, currently operating as Debtor-in-Possession pursuant to 11 U.S.C. Section 1107 of the United States Bankruptcy Code (the "Bankruptcy Code"), does hereby propose the following DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION ("Plan") for the resolution of Debtor's outstanding Allowed Claims and Equity Interests. NOTE: Capitalized terms are defined in Article 11 of this Plan. 2 ARTICLE I: INTRODUCTION Debtor is a Delaware corporation established in 1983. When incorporated, the Debtor was known as Munson Geothermal, Inc. ("Munson"). In May 1988, Munson (together with its wholly owned subsidiary) filed a Petition for Reorganization pursuant to Chapter 11 of the Bankruptcy Code (the "Munson Reorganization"). The Munson Reorganization resulted in the confirmation of a FIRST AMENDED PLAN OF REORGANIZATION submitted by Mr. Jeffrey Antisdel and Hot Springs Power Company. The Plan was confirmed in or about November 1990, and the Debtor's name was changed to Nevada Energy Company, Inc. ("Debtor"). From November 1990 through May 1996, Debtor conducted business under the leadership of Mr. Antisdel. As of May 1996, Debtor existed as a publicly traded company current with respect to all filings required to be made with the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934 ("Exchange Act"). In addition, Debtor was financially solvent with net assets in excess of $4,000,000 and was intermittently profitable. In March 1996, Debtor entered into an agreement to sell preferred shares to Waterford Trust Company, Ltd. As part of that transaction, the Shareholders and Directors of Debtor consented to a change of control. As a result, in May 1996, the Board of Directors of Debtor resigned and was replaced by Directors designated by Waterford's nominee, Golden Chance, Ltd. From May 1996 through February 13, 1997 (the day of the commencement of this proceeding), the financial affairs of Debtor declined significantly. Among other things, the Debtor Board, aided and abetted by various third parties, entered into a series of contracts and transactions which dissipated corporate assets; revenue declined significantly; the Company was unable to pay its debts as they became due; and the Company failed to file reports mandated by the Exchange Act. 3 There was even an attempt to amend the Debtor's Articles of Incorporation without securing requisite shareholder approval. As a consequence of this decline in Debtor's financial condition, pursuant to section 303 of the Bankruptcy Code, on February 13, 1997, multiple creditors initiated a legal proceeding to cause the Debtor to be involuntarily reorganized pursuant to Chapter 11 of the Bankruptcy Code. As a result of the forced reorganization, the following events occurred: 1. On or about March 3, 1997, the Court appointed an interim Trustee to administer the affairs of the Debtor. 2. There was a change of control with respect to the Debtor's Board of Directors, and new management was elected. 3. On or about September 24, 1997, the Court authorized the Debtor to function as a Debtor-in-Possession pursuant to section 1107 of the Bankruptcy Code. This FIRST AMENDED PLAN OF REORGANIZATION is submitted by the Debtor and is intended to constitute a full and final resolution of Debtor's Allowed Claims and Equity Interests. Each Claim and Equity Interest will be allocated into one of ten separate Classes. Eight of the Classes will be for Allowed Claims, four of which will be Impaired. One Class will be for Disputed Claims. One Class will be for Equity Interests. In developing this Plan, the Board of Directors of Debtor examined the affairs of Debtor and its predecessor-in-name - Debtor. Based upon that examination, the Board has concluded that Debtor must develop a new business plan and this business plan should seek to develop the telecommunications business opportunities initially brought to Debtor through its acquisition of 4 Telecom Technologies, Inc. ("TTI") in August 1996. Debtor also plans to continue exploring business opportunities or its cogeneration assets. In designing its business plan, the Board took into consideration various factors including, but not limited to, the substantial equity position held by Nevada Energy Partners I, a Nevada limited partnership ("NEP") (which is equal to 50.0% of the issued and outstanding Class A Common Stock of Debtor) and the potential impact of the claim of $6,000,000 lodged by NEP upon the estate of Debtor. In negotiating with NEP and others, Debtor was not in a position of economic strength and, therefore, some of the negotiations may not have been conducted on an arm's length basis. Nevertheless, on balance, taking all factors into consideration, Debtor's Board has determined that the Plan, as presented, is reasonable and fair and, in the business judgment of the Board, represents the best opportunity for Debtor's Creditors and shareholders to recoup their investment. The Plan is predicated upon several events transpiring as anticipated, including (but not limited to) the following: 1. Successful implementation of the Debtor's new Business Plan, which anticipates that the Debtor will shift emphasis from energy co-generation to telecommunications. As part of this new Business Plan, the Debtor anticipates that it may issue up to 35.0% of its Class A Common Stock to one individual in conjunction with a start-up telecommunications company; 2. Execution of the Settlement and Release Agreement by all Parties to that Agreement, including the Debtor, NEP, Nevada Electric Power Company and others (the "NEP Settlement"); 5 3. Ratification of the NEP Settlement by the Bankruptcy Court; 4. Confirmation of this Plan as submitted; 5. Utilization of the Debtor's cogeneration assets as collateral for Letters of Credit or otherwise securing working capital to fund or secure payment of the Debtor's current and future business operations, especially the telecommunication business; 6. Preparation and filing of all reports required to be filed pursuant to the Exchange Act; 7. Approval of an application to be filed by the Debtor with the National Association of Securities Dealers, Inc. ("NASD") relisting the Debtor's Class A Common Stock as a "small cap" security; 8. The resumption of an active secondary market through the NASD for the Debtor's Class A Common Stock; and 9. The recision of all Common and Preferred Stock allegedly issued subsequent to May 3, 1996 by Debtor and recision of the 1:6 reverse stock split attempted in January 1997. Should any one or more of these events not transpire, DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION will have to be reconsidered and, perhaps, revised and amended. There is, of course, no assurance or guaranty that any one or all of the above events will transpire as desired. As a result of events 1 and 2 above, the Debtor will issue Class A Common Stock to a total of 16 persons or entities in an amount equal to 50.0% of the issued and outstanding Class A Common Stock on the Effective Date. An additional 35.0% of the Class A Common Stock may be 6 issued pursuant to the Diego Tel share exchange agreement. These events may have long term implications for the remaining shareholders. ARTICLE II: DEFINITIONS: As used in the Plan, the following special terms have the respective meanings set forth below: 2.1 Administration Claimant: Any Person entitled to payment of an Administration Expense. 2.2 Administration Expense: Any cost or expense of administration of the Chapter 11 case entitled to priority pursuant to section 507(a)(1) and allowed pursuant to section 503(b) of the Bankruptcy Code, including without limitation, any actual and necessary expenses of preserving the Debtor's estate, and actual and Debtor expenses of operating the business of the Debtor (including the post-petition compensation of Officers and Directors of Debtor), any indebtedness or obligations incurred by or assessed against the Debtor in Debtor with the conduct of its business, or for the acquisition or lease of property or for providing of services to the Debtor, and allowances of compensation or reimbursement of expenses to the extent allowed by the Bankruptcy Court under the Bankruptcy Code, and any fees or charges assessed against the Debtor's estate pursuant to Title 28, Chapter 123 United States Code. 2.3 Affiliates: Every other entity which is an "affiliate" of Debtor within the meaning of section 101(2) of the Bankruptcy Code. 2.4 Allowed Claim and/or Allowed Equity Interest: Any Claim against or Equity Interest in the Debtor, proof of which was filed on or before the last date designated by the Bankruptcy Court as the last date for filing Proofs of Claims or Equity Interest or (if no proof of claim or Equity 7 Interest is filed) which has been or hereafter is listed by the Debtor as liquidated in amount and not disputed or contingent and, in either case, a Claim or Equity Interest as to which no objection to the allowance thereof has been interposed or such Claim or Equity Interest has been allowed in whole or in part by a Final Order. Unless otherwise specified in the Plan, "Allowed Claim" shall not, for the purposes of computation of Distributions under the Plan, include post-petition interest on the amount of such Claim. 2.5 Allowed Priority Tax Claim: A Priority Tax Claim to the extent that it is or has become an Allowed Claim, which in any event shall be reduced by the amount of any offsets, credits, or refunds to which the Debtor or Debtor-in-Possession shall be entitled on the Confirmation Date. 2.6 Allowed Secured Claim: A Secured Claim to the extent it is or has become an Allowed Claim. 2.7 Allowed Unsecured Claim: An Unsecured Claim to the extent it is or has become an Allowed Claim. 2.8 Bankruptcy Code: The Bankruptcy Reform Act of 1978, as amended and codified as Title 11, United States Code. 2.9 Bankruptcy Court: The unit of the United States District Court for the District of Nevada having jurisdiction over the Chapter 11 case, or in the event such court ceases to exercise jurisdiction over the Chapter 11 case, such court or adjunct thereof that exercises jurisdiction over Chapter 11 cases in lieu of the United States Bankruptcy Court for the District of Nevada. 2.10 Bankruptcy Rules: The Federal Rules of Bankruptcy Procedure (as amended), as applicable to the Chapter 11 cases. 8 2.11 CEC: Combustion Energy Company, a Nevada corporation with its principal place of business in Reno, Nevada. 2.12 Cash: Cash, cash equivalents and other readily marketable securities or instruments issued by a person other than Debtor, including, without limitation, readily marketable direct obligations of the United States of America, certificates of deposit issued by banks and commercial paper of any entity, including interest accrued or earned thereon. 2.13 Chapter 11 Case: The case being conducted pursuant to Chapter 11 of the United States Bankruptcy Code in which Debtor is the Debtor-in-Possession and identified as Case No. 97-30265-BMG. 2.14 Claim: Any right to payment from the Debtor, which night arose on or before the Petition Date, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured or unsecured; or any right to an equitable remedy for future performance if such breach gives rise to a right of payment from the Debtor, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, disputed, undisputed, secured or unsecured. 2.15 Class A Common Stock: The Class A Common Stock of Debtor. 2.16 Class B Common Stock: The Class B Common Stock of Debtor previously issued by Debtor pursuant to the Munson Reorganization. 2.17 Confirmation Date: The Date upon which the Bankruptcy Court shall enter the Confirmation Order; provided, however, that if on motion the Confirmation Order or consummation of the Plan is stayed pending appeal, then the Confirmation Date shall be the date of entry of the Final Order vacating such stay or the date on which such stay expires and is no longer in effect. 9 2.18 Creditor: Any person that has a Claim against the Debtor that arose on or before the Petition Date. 2.19 Debtor: Debtor, formerly known as Nevada Energy Company, Inc. ("Debtor") and also formerly known as Munson Geothermal, Inc. ("Munson"). 2.20 Debtor-in-Possession: Debtor, as Debtor-in-Possession. 2.21 "Debtor's First Amended Disclosure Statement" means the written DEBTOR'S FIRST AMENDED DISCLOSURE STATEMENT with respect to this Second Amended Plan which is approved by the Bankruptcy Court under Section 1125 of the Bankruptcy Code. 2.22 Declaration Date: The thirtieth (30th) day after the Confirmation Date. 2.23 Diego Tel: Diego Tel, Inc. a Nevada corporation to be acquired by Debtor. 2.24 Disputed Claim: Equity Interests or Claims against the Debtor which (a) are listed in a "Schedule of Unresolved Claims" which may be filed with the Bankruptcy Court by the Debtor on or before the Confirmation Date, or (b) are the subject of an objection which has been filed on or before the Effective Date by a party-in-interest and which objection has not been withdrawn or resolved by entry of a Final Order on or before the Effective Date or (c) are identified in the Debtor's Schedules as contingent, unliquidated or disputed. 2.25 Distributions: The property required by the Plan to be distributed to the holders of Allowed Claims and Allowed Equity Interests. 2.26 Effective Date: Date upon which certain Distributions to be made pursuant to the Plan will be effected, which date shall be on the first business day following the expiration of one hundred twenty (120) days following the Confirmation Date. 10 2.27 Equity Interest: Any interest in the Debtor represented by ownership of Common and/or Preferred Stock. 2.28 Exchange Act: The Securities Exchange Act of 1934, as amended and codified in 15 USC Section 78b, et. seq. 2.29 Final Order: An order of judgment of the Bankruptcy Court which has not been reversed, stayed, modified or amended and as to which (a) any appeal that has been taken has been finally determined or dismissed, or (b) the time for appeal has expired and no notice of appeal has been filed. 2.30 Impaired: As defined by 28 U.S.C. Section 1124. 2.31 Munson Reorganization: The 1988 Chapter 11 case involving Munson Geothermal, Inc. and referenced as Case No. 88-278. 2.32 NEP: Nevada Energy Partners I, Limited Partnership, a limited partnership organized pursuant to the laws of the State of Nevada. The general partner is Nevada Electric Power Company. 2.33 NEP Agreement: The August 16, 1996 Agreement between NEP and Debtor. 2.34 NEP Settlement: The Settlement and Release Agreement dated as of December 1, 1997 by and among the Debtor, NEP and others. 2.35 NEPC Indemnification: The Indemnification Agreement dated as of December 1, 1997 by and among Nevada Electric Power Company, the Debtor and others. 2.36 Ownership Settlement Agreement: The Settlement and Release Agreement dated as of February 10, 1998 by and among Mr. John Vogel, Mr. Dean Chamberlain, the Debtor, Mr. David Wallace and others. 11 2.37 Payment Date: Date upon which certain payments to be made pursuant to the Plan will be effected, which date shall be the first business day following the expiration of the three hundred sixty five (365) days following the Confirmation Date. 2.38 Person: An individual, a corporation, a partnership, an association, a joint stock company, a joint venture, an estate, a trust, an unincorporated organization or a government or any particular subdivision thereon or other entity. 2.39 Petition Date: February 13, 1997, the date of filing of the involuntary bankruptcy petition. 2.40 Plan: This Debtor's First Amended Disclosure Statement, either in its present form or as it may be altered, amended, or modified from time to time. 2.41 Debtor: PowerTel USA, Inc., the Debtor. 2.42 Pre 1990 Priority Tax Claim: Any Priority Tax Claim arising prior to 1990 and which was the subject of the Debtor's First Amended Plan of Reorganization adjusted in the Munson Reorganization. 2.43 Priority Tax Claim: Any Claim entitled to priority in payment under section 507(a)(8) of the Bankruptcy Code. 2.44 Pro Rata: Proportionately so that the ratio of the amount of a particular claim or interest to the total amount of Allowed Claims or Allowed Equity Interests of the class in which the particular Claim or Interest is included is the same as the ratio of the amount of consideration distributed on account of such particular claim or interest to the consideration distributed on account of Allowed Claim or Allowed Equity Interest of the class in which the particular claim or interest is included. 12 2.45 Secured Claim: A right to payment from the Debtor, other than an Administration Expense or Priority Tax Claim, for a prepetition debt to the extent that it is validly and property secured, in accordance with applicable law, by any form of collateral, real, personal, intangible or tangible, which is evidenced by a timely filed proof of claim or by Debtor's Schedules. 2.46 SEC: The United States Securities and Exchange Commission. 2.47 Schedules: Schedules and Statement of Affairs, as amended, filed by the Debtor with the Bankruptcy Court listing liabilities and assets. 2.48 Unsecured Creditor: Any Creditor that holds a Claim which is not a Secured Claim. 2.49 VivaTel: Viva Telecommunications, Inc., a Nevada corporation to be acquired by the Debtor. 2.50 Voting Shareholder: Any shareholder of record on May 21, 1998 holding Class A Common Stock except any shareholder who acquired Class A Common Stock subsequent to May 3, 1996 and who (a) failed to file a Proof of Interest; or (b) has filed a Proof of Interest which Proof of Interest has been disputed by Debtor. 2.51. Wage Claim: A claim for wages due, payable and earned prior to the Petition Date. ARTICLE III. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS Claims and Equity Interests are classified as follows: Class 1 - Administration Expenses. Class 2 - Allowed Wage Claims. Class 3 - Allowed Munson Reorganization Priority Tax Claims. Class 4 - Allowed Priority Tax Claims.* Class 5 - Allowed Claims of Secured Creditors.* 13 Class 6 - Allowed Unsecured Claims Not in Excess of $1,200. Class 7 - Allowed Unsecured Claims in Excess of $1,200.* Class 8 - Claims of NEP, NEPC and others.* Class 9 - Disputed Claims. Class 10 - Allowed Equity Interests. * Denotes a class whose Claims are deemed to be "Impaired" pursuant to section 1124 of the Bankruptcy Code. ARTICLE IV. PROVISIONS FOR PAYMENT OF ADMINISTRATION EXPENSES CLAIM (CLASS 1) 4.1 100% Payment. On the Effective Date, each Allowed Administration Expense shall be paid in full in Cash or upon such other terms as may be agreed upon by and between any Administration Claimant and the Debtor, provided, however, that Administration Expenses representing indebtedness or other obligations incurred or assumed by the Debtor-in-Possession shall be assumed and paid or performed by the Debtor in accordance with the terms and conditions of any agreements relating thereto. 4.2 Post-Confirmation Administration Expenses. Debtor shall pay post-confirmation Administration Expenses, including fees for professional services, out of cash flow from operations and other assets without further approval of the Bankruptcy Court. 4.3 Bar Date for Fee Claim. The Confirmation Order shall provide a Bar Date for filing of claims by those entities asserting claims for compensation pursuant to section 330 and/or section 503 of the Bankruptcy Code. 14 ARTICLE V. PROVISIONS FOR PAYMENT OF ALLOWED WAGE CLAIMS (CLASS 2) 5.1 100% Payment. On the Effective Date, each Allowed Wage Claim shall be paid in full in Cash or upon such other terms as may be agreed upon by and between any Allowed Wage Claimant and the Debtor. ARTICLE VI. PROVISIONS FOR PAYMENT OF ALLOWED MUNSON REORGANIZATION PRIORITY TAX CLAIMS (CLASS 3) 6.1 100% Payment. On the Effective Date, each Munson Reorganization Allowed Priority Tax Claim that arose prior to 1990 and which was Allowed in the Munson DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION shall be paid in full in Cash or upon such other terms as may be agreed upon by and between any Munson Reorganization Allowed Priority Tax Claimant and the Debtor. ARTICLE VII. PROVISIONS FOR PAYMENT OF ALLOWED PRIORITY TAX CLAIMS (CLASS 4) 7.1 Amortized Payment of Allowed Priority Tax Claims. The Allowed Priority Tax Claims not included in Article VI of this Plan shall be paid in full in Cash together with interest at a rate to be determined by the Bankruptcy Court in equal quarterly installments, the first installment to be made on the Payment Date over a term consisting of sixteen (16) consecutive quarters ending four (4) years after the Payment Date or upon such other terms as may be agreed upon by and between any Allowed Priority Tax Claimant and the Debtor. ARTICLE VIII. PROVISIONS FOR PAYMENT OF ALLOWED SECURED CLAIMS (CLASS 5) 8.1 Payment to Allowed Secured Creditors. Each Allowed Secured Claim will be paid in full in Cash on the Effective Date. Alternatively, at the Debtor's sole option, any Allowed Secured 15 Claim, together with interest at a rate to be determined by the Bankruptcy Court, shall be paid in equal monthly installments, the first installment to be made on the Payment Date and continuing over a term consisting of thirty (30) months or upon such other terms as may be agreed upon by and between the Secured Creditor(s) and the Debtor. ARTICLE IX. PROVISIONS FOR PAYMENT OF ALLOWED UNSECURED CLAIMS NOT EXCEEDING $1,200 (CLASS 6) 9.1 100% Payment. On the Effective Date, each Allowed Unsecured Claim not in excess of $1,200 (a "Class 6 Claim") shall be paid in full in Cash or upon such other terms as may be agreed upon by and between any Claimant holding a Class 6 Claim and the Debtor. 9.2 Election to Receive Class A Common Stock. Each Claimant holding a Class 6 Claim, in lieu of a Cash payment as provided in Section 9.1 of this Plan, may elect in writing as provided in Article XII of the Disclosure Statement on or before the Declaration Date to receive Class A Common Stock computed as follows: C6 x 120% = F F/(divided by) AVP = NS where: C6 = The dollar amount of the Allowed Class 6 Claim F = Proceeds to be converted into Class A Common Stock AVP = An average of the closing price per share of Class A Common Stock for the 15 trading days immediately preceding the Effective Date NS = Number of Shares of Class A Common Stock to be issued The Class A Common Stock to be issued pursuant to this Article IX will be issued on the Effective Date, but subsequent to a reverse stock split to be effected by the Debtor pursuant to this Plan. Said reverse stock split will occur on a date to be designated by the Debtor's Board of 16 Directors, which date will be subsequent to the Declaration Date but at least twenty (20) trading days prior to the Effective Date. X. PROVISIONS FOR PAYMENT OF ALLOWED UNSECURED CLAIMS IN EXCESS OF $1,200 (CLASS 7) 10.1 Election of Payment Mode. Each Claimant holding an Allowed Unsecured Claim in excess of $1,200 (i.e., a Class 7 Claim) shall elect to be paid pursuant to one of the three following payment modes (Option A, B or C). If Option B is selected, the Class 7 Claimant must elect between Plan #1 and Plan #2. Option A. The Allowed Unsecured Claim shall be reduced to $1,200 and shall be deemed to be a Class 6 Claim to be paid pursuant to the provisions of Article IX of this Plan. Option B. The Allowed Unsecured Claim shall be paid partly in Cash and partly in Class A Common Stock pursuant to Plan #1 or Plan #2 below: Plan 1: The Claimant will receive both Cash and Class A Common Stock computed as follows: 1. On the Payment Date, the Claimant will receive a Cash payment equal to 20.0% of the Class 7 Allowed Unsecured Claim; 2. The balance of the Class 7 Allowed Unsecured Claim (i.e. 80%) will be paid in Cash in sixteen (16) quarterly payments with the first payment being made on the Payment Date and 17 the final payment being made four (4) years after the Payment Date, but no interest shall be paid by Debtor; and 3. On the Effective Date, the Claimant will receive Class A Common Stock computed pursuant to the following formula: C7 x 80% = NP NP x 20% = F F/(divided by) AVP = NS where C7 = The dollar amount of the Class 7 Claim. NP = The dollar amount of the Class 7 Allowed Claim that was not scheduled to be paid in lump sum on the Payment Date. F = Dollar amount of funds allocated for purchase of Class A Common Stock. AVP = An average of the closing price per share of Class A Common Stock for the 15 trading days immediately preceding the Effective Date. NS = Number of Shares of Class A Common Stock to be issued. Plan 2: The Claimant will receive both Cash and Class A Common Stock computed as follows: 1. On the Payment Date, the Claimant will receive a Cash payment equal to 20.0% of the Class 7 Allowed Unsecured Claim, and 2. On the Effective Date, the Claimant will receive Class A Common Stock computed pursuant to the following formula: 18 C7 X 80% = NP NP x 120% = F F/(divided by) AVP = NS where C7 = The dollar amount of the Class 7 Allowed Claim. NP = The dollar amount of the Class 7 Allowed Claim that was not scheduled to be paid in lump sum on the Payment Date. F = Dollar amount of funds allocated for purchase of Class A Common Stock. AVP = An average of the closing price per share of Class A Common Stock for the 15 trading days immediately preceding the Effective Date. NS = Number of shares of Class A Common Stock to be issued. Option C: On the Effective Date, the Claimant holding a Class 7 Allowed Unsecured Claim shall receive Class A Common Stock computed as follows: C7 x 200% = F F/(divided by) AVP = NS where: C7 = Dollar amount of the Class 7 Allowed Unsecured Claim. F = Dollar amount of funds allocated for purchase of Class A Common Stock. AVP = An average of the closing price per share of Class A Common Stock for the 15 trading days immediately preceding the Effective Date. NS = Number of Shares of Class A Common Stock to be issued. Option C does not provide for any Cash payment. 19 10.2 Elect Alternative When Voting. When the Class 7 Claimant votes to accept or reject the Plan, the Claimant shall elect which payment alternative shall apply to his/her/its Class 7 Claim. If no election is made, the Claimant shall be deemed to have consented to receive payment pursuant to Option C. The Claimant may revoke the election in writing at any time and effect a new election provided that the Debtor receives the written revocation prior to noon Cleveland, Ohio time on the Declaration Date with notice being sent to Debtor as provided in Article XII of the Disclosure Statement. 10.3 Reverse Stock Split. The Class A Common Stock to be issued pursuant to this Article X will be issued on the Effective Date, which will be subsequent to a reverse stock split to be effected by the Debtor pursuant to this Plan. The reverse stock split will occur on a date to be designated by the Debtor's Board of Directors, which date will be after the Declaration Date, but at least twenty (20) trading days prior to the Effective Date. ARTICLE XI. FOR PAYMENT OF CLAIMS OF NEVADA ENERGY PARTNERS, LTD., NEVADA ELECTRIC POWER COMPANY AND OTHERS (CLASS 8) 11.1 NEP, Nevada Energy Power Company ("NEPC"), the Debtor and others have entered into a Settlement and Release Agreement ("NEP Settlement") pursuant to the terms of which the following will transpire: A. Subject to approval of the Bankruptcy Court and confirmation of this Plan, the NEP Agreement between NEP and amended and restated. As a result of this rescission of conveyances, the Debtor shall receive 100% of the issued and outstanding Common Stock of Combustion Energy Company and title to a parcel of real property situated in Reno, Nevada. B. Debtor will stipulate that NEP shall be deemed to be the shareholder of record of 13,245,958 shares of Class B Common Stock, which is convertible into 13,245,958 shares of Class A Common Stock as of August 16, 1996. 20 NEP, as of December 1, 1997, will be deemed to have converted Class B Common Stock into Class A Common Stock such that NEP owns 13,245,958 shares of Class A Common Stock which is equal to 50.0% of the issued and outstanding Class A Common Stock of Debtor as of August 16, 1996. C. Debtor will stipulate that the Class A Common Stock held of record by NEP is beneficially owned by sixteen (16) separate corporations who are also deemed to be Creditors of the Debtor. D. Debtor will agree to permit the transfer of the Class A Common Stock from NEP to the sixteen (16) beneficial owners and will stipulate that these sixteen corporate entities shall be issued (if Debtor) additional Class A Common Stock such that they own 50.0% of the issued and outstanding Class A Common Stock of Power Tel computed as of ten (10) business days after the Effective Date, which will be subsequent to the reverse stock split to be effected by the Debtor pursuant to this Plan, subsequent to the issuance of Class A Common Stock to Creditors pursuant to this Plan, and subsequent to the issuance of Class A Common Stock to acquire Diego Tel. In the event, however, that Creditors with a Disputed Claim receive Class A Common Stock pursuant to the Disputed Claims Reserve, there will not be any additional distributions of Class A Common Stock pursuant to the NEP Settlement. E. The limited partnership agreement for NEP is deemed to be amended and modified such that 99.0% of all profits and losses are allocated to the capital account of the limited partner effective as of January 1, 1995. The general partner (NEPC) will stipulate that Debtor is the sole limited partner. Any and all distributions of cash and property are to be allocated 60.0% to the limited partner and 40.0% to the general partner. F. All parties to the NEP Settlement do forever settle, release and compromise all claims and causes of action which they have or may bring against any other party as of the date of that Agreement, and NEP specifically waives and commits to extinguish its Proof of Claim for $6,000,000.00. ARTICLE XII. PROVISIONS FOR ADJUDICATION OF DISPUTED CLAIMS (CLASS 9) 12.1 The Debtor has disputed certain Claims submitted by various alleged Creditors. If and when any such disputed Claim becomes an Allowed Claim or Equity Interest, such Allowed 21 Claim or Equity Interest shall be treated as if it was an Allowed Claim or Equity Interest with respect to the classification of Claims and Equity Interest provided in Article III of this Plan. ARTICLE XIII. PROVISIONS FOR TREATMENT OF ALLOWED EQUITY INTEREST (CLASS 10) 13.1 Upon Confirmation of the Plan, the Debtor will initiate various actions which will affect the Equity Interests of Shareholder who own either (a) Class A or Class B Common Stock, or (b) Series A, Series B or Series C Preferred Stock. 13.2 It is the Debtor's position that certain actions taken by the Board of Directors of Debtor subsequent to May 3, 1996 and prior to February 13, 1997 are void, illegal and/or invalid including, but not limited to, all offers and sales of Common or Preferred Shares of Debtor. Accordingly, all Common and Preferred Shares of Debtor issued subsequent to May 3, 1996 are deemed to be void ab initio except as to any Shareholder who (i) is a bona fide purchaser for value, and (ii) filed a Proof of Interest on or before November 10, 1997, which Proof of Interest has not been disputed by the Debtor. In addition, the attempted 1:6 reverse stock split purportedly implemented by the Debtor Board of Directors in January 1997 is also void ab initio. It is the express intent of this Plan to reinstate all Class A Common Stockholders of record to the same share ownership which existed as of May 3, 1996 immediately prior to the sale of the Series A Preferred Shares to Waterford/Golden Chance. 13.3 After the Confirmation Date, the Debtor shall effect the actions set forth in Article XIX of this plan. As a consequence of such events, the following shall occur: A. The Series A and Series C Preferred Shares and the Class B Common Stock shall be deemed to be extinguished through amendment to the Debtor's Articles of Incorporation (Series B Preferred and the Class B Common Stock 22 will also be extinguished through amendment following the actions described below). B. The five (5) shares of Series B Preferred Shares owned by Messrs. Rick Cascarilla (2 shares), Jeff Hartman, Michael Kassouff and Jeff Modesitt (all former Directors of Debtor who acquired the Series B as part of the May 1996 transaction with Waterford/Golden Chance) shall be repurchased by the Debtor for a per share price of (i) 100,000 shares of Class A Common Stock; and (ii) a 24 month option to purchase an additional 100,000 shares of Class A Common Stock at an exercise price of $0.10 per share. The Series B Preferred Shares thereafter shall be extinguished by means of an amendment to the Articles of Incorporation, which amendment, among other things, shall establish a new class of preferred shares to be known as "Special Stock." The Special Stock has the right to elect two (2) Directors of the Debtor's Board of Directors. One share each of Special Stock, as set forth in the amended Articles of Incorporation, shall be issued to Richard Cascarilla, Jeffrey Hartman and Michael Kassouff as partial consideration for their serving on the Board of Directors. The Articles of Incorporation and By-Laws will be amended so that the Board will be authorized to set additional terms of the Special Stock. C. All holders of Class A Common Stock will be reinstated to the exact same share ownership which existed as of May 3, 1996, immediately prior to the sale of the Series A Preferred Shares to Waterford/Golden Chance. D. The Debtor will convert the Class B Common Stock to Class A Common Stock pursuant to the NEP Settlement (see Article XI of this Plan) and will issue Class A Common Stock in an amount equal to 50.0% of the outstanding Class A Common Stock pursuant to the NEP Settlement. E. Debtor will affect a reverse stock split at a ratio to be designated by the Board of Directors such that the total number of shares of Class A Common Stock outstanding subsequent to the reverse stock split is no less than 500,00 shares nor more than 20,000,000 shares. Subsequent to the reverse stock split and the issuance of Class A Common Stock to creditors, the Debtor will adjust the number of shares of Class A Common Stock issued per the NEP settlement to maintain that figure at 50.0% of the issued and outstanding Class A. Up to a maximum of 35.0% of additional shares of Class A Common Stock may be issued in conjunction with the acquisition of Diego Tel. 23 13.4 Reorganization of Class A Common Stock. In addition to consenting to the transfer of Class A Common Stock from NEP to the sixteen entities as set forth in Section 11.2, Debtor anticipates that it may issue additional shares of Class A Common Stock in conjunction with its acquisition of Diego Tel. At this time, based upon current negotiations, the Debtor anticipates that it may issue Class A Common Stock equal to 35.0% of the issued and outstanding Class A Common Stock. The Class A Common Stock will be issued by the Debtor once certain revenue projections are satisfied. The Debtor and Mr. Wallace have executed an Agreement which has been amended and restated. The amended Agreement will be filed with the Court and ratified as part of the Plan. ARTICLE XIV. PROVISIONS FOR TREATMENT OF DISPUTED CLAIMS 14.1 Authority to Object. The Debtor and any party-in-interest shall have the authority to object to and contest the allowance of any Claim filed with the Bankruptcy Court in respect of any Claim listed as disputed, contingent, or unliquidated on the Debtor's schedules, except as to any Claim otherwise treated by the Plan or previously allowed or disallowed by final order of the Bankruptcy Court. 14.2 Objections to Claims to be Filed Within Sixty Days After Confirmation Date. Unless otherwise ordered by the Court, after notice and a hearing, objections to Claims and Equity Interests shall be made and filed by the Debtor or by any party-in-interest and shall be served upon each holder of the Claim or Equity Interest to which objections are made (and upon the Debtor's attorney if the Debtor is not the objecting party) and filed with the Bankruptcy Court as soon as practicable, but in no event later than sixty (60) days subsequent to the Confirmation Date. 24 14.3 Prosecution of Objections to Claims. A. The objecting party shall litigate to judgment, settle, or withdraw objections to Disputed Claims. B. All legal fees and expenses of the Debtor incurred in the prosecution of claim objections and in the consummation of the Plan shall be paid first by the Debtor as a Post-Confirmation Administrative Expense pursuant to Article 4.2 of this Plan. 14.4 Final Order. Except as may be otherwise agreed with respect to any Disputed Claim, no payments or Distributions shall be made with respect to all or any portion of a Disputed Claim unless and until all objections to such Disputed Claim have been determined by a Final Order of the Bankruptcy Court. Payments and Distributions to each holder of a Disputed Claim or Disputed Equity Interest to the extent that it ultimately becomes an Allowed Claim or Allowed Equity Interest shall be made in accordance with the provisions of the Plan with respect to the Class of Creditors or Equity Interest to which the respective holder of an Allowed Claim or Allowed Equity Interest belongs, unless otherwise provided in Section 14.5 herein below. 14.5 Disputed Claims Reserve. A. In determining the amount of Distributions due the holders of Allowed Claims, the appropriate Pro Rata calculations required by the Plan shall be made as if all Disputed Claims were Allowed Claims in the full amount claimed by the holders thereof. Debtor will presume, for purposes of the Disputed Claims Reserve, that all Disputed Claim Creditors elect to receive Class A Common Stock. B. On the Effective Date, the Debtor shall compute the number of shares of Class A Common Stock to which the Disputed Claim Creditors may be entitled and shall disburse such shares (hereinafter the "Disputed Claims Reserve") to be held in trust by the Debtor for the benefit of the holders of Allowed Claims whose Distributions are unclaimed and the holders of Disputed Claims pending determination of their entitlement thereto under the terms of the Plan. The Class A Common Stock held in the Disputed Claims Reserve shall be deemed to be "treasury" stock of the Debtor and thus non- 25 voting during the period within which it is held in the Disputed Claims Reserve. C. As soon as practicable after a Disputed Claim becomes an Allowed Claim, the Class A Common Stock reserved for such Allowed Claim shall be released by the Debtor from the Disputed Claims Reserve and delivered to the holder of such Allowed Claim. In the event that the Disputed Claim is disallowed, the Class A Common Stock provided for such claim shall be released to Debtor for use in the course of its business, as deemed appropriate by its Board of Directors. In the event that a Disputed Claim becomes an Allowed Claim and the Creditor is entitled to receive Cash, the Debtor shall pay such Cash upon the later of (i) the Payment Date, or (ii) ninety (90) days after the Disputed Claim becomes an Allowed Claim. D. In the event any Class A Common Stock held in the Disputed Claims Reserve remain unclaimed upon expiration of five years following the Effective Date, such Class A Common Stock shall be released to Debtor. If Class A Common Stock is issued pursuant to this Article XIV, such action shall not be a basis for an adjustment with respect to the number of shares of Class A Common Stock issued pursuant to the NEP Settlement or for the acquisition of Diego Tel. ARTICLE XV. CRAMDOWN OF PLAN 15.1 In the event that any one or more classes of impaired Claims does not approve the Plan by the requisite vote and the Plan is not confirmed, the Debtor shall seek confirmation of the Plan pursuant to the provisions of section 1129(b) of the Bankruptcy Code. In the event that the Bankruptcy Court refuses to approve the Plan pursuant to section 1129(b) of the Bankruptcy Code, the NEP Settlement, the agreement for the acquisition of VivaTel and Diego Tel and the Ownership Settlement Agreement shall be deemed null and void and the parties thereto shall be returned to their respective positions, status quo ante. 26 ARTICLE XVI. IDENTIFICATION OF CLAIMS AND EQUITY INTEREST NOT IMPAIRED BY THE PLAN 16.1 Unimpaired Classes. Claims of classes 1, 2, 3 and 6 are not impaired under the Plan. 16.2 Impaired Classes to Vote on Plan. Claims in the classes specified in Classes 4, 5, 7 and 8 of the Plan are impaired and therefore Creditors holding Claims in these classes are entitled to vote whether to accept or reject the Plan. Voting Shareholders are also entitled to vote. 16.3 Controversy Concerning Impairment. In the event of a controversy as to whether any Creditors or holders of Equity Interest or class of Creditors or class of holders of Equity Interest are impaired under the Plan or otherwise entitled to vote, the Bankruptcy Court shall, after notice and a hearing, determine such controversy. ARTICLE XVII. ACCEPTANCE OR REJECTION OF PLAN: EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS 17.1 Acceptance by Class of Creditors. A Class of Creditors shall have accepted the Plan if the Plan is accepted by at least 2/3 in amount and more than 1/2 in number of the Allowed Claims of such class that have voted. 17.2 Cramdown. In the event that any impaired class of Creditors with Claims against any of the Debtor's estate shall fail to accept the Plan, in accordance with section 1129(a) of the Bankruptcy Code, the Debtors shall request the Bankruptcy Court to confirm the Plan in accordance with section 1129(b) of the Bankruptcy Code. 27 ARTICLE XVIII. JUDICIAL ACTIONS 18.1 Promptly after the Confirmation Date, the Bankruptcy Court shall enter an Order to the effect that: A. All Common and Preferred Stock issued by Debtor subsequent to May 3, 1996 was issued in violation of the Company's Articles of Incorporation or without requisite approval of the Board of Directors and, therefore, is null and void ab initio except as to Shareholders who (i) are bona fide purchasers for value, and (ii) filed a Proof of Interest on or before November 10, 1997, which Proof of Interest was not disputed by the Debtor. B. The election of Michael Kassouff as a Director by the Series B Preferred Shareholders is ratified. The election by Michael Kassouff, as the sole Director, of Messrs. Richard Cascarilla and Lawrence Herth as Directors is ratified. Also ratified are all elections of officers by the Debtor's Board of Directors; C. The 1:6 reverse stock split effected by Debtor in January 1997 was conducted without requisite shareholder approval and is null and void ab initio; D. The amendments to Debtor's Articles of Incorporation filed with the Secretary of State for the State of Delaware in January 1997 were not adopted by Debtor's shareholders and, therefore, are null and void ab initio; E. Any claimed security interest of Brady Geothermal Park Power Partners against any assets of Debtor is null and void; F. The following actions taken by the Debtor's Board of Directors are null and void ab initio due to violations of applicable provisions of Delaware law: i. Proposal to Amend Corporate Name and Symbol, ii. Proposal to Increase Authorized Shares, iii. Proposal to Increase Authorized Class B Shares, iv. Proposal to Authorize Class C Stock, and v. Proposal to Authorize Lease Guaranty for Santa Barbara Property; G. Pursuant to section 1123(b)(3) of the Bankruptcy Code, Debtor is authorized to amend, supplement or modify this listing upon further investigation of the corporate records; 28 H. Pursuant to section 1123(b)(3) the Debtor will have the exclusive right to enforce any and all causes of action against any person in rights of the Debtor that arose before or after the petition date, including but not limited to the rights and powers of a trustee and debtor in possession, against any person whatsoever, including but not limited to all avoidance powers granted to the debtor under the Bankruptcy Code and all causes of actions and remedies granted pursuant to sections 502, 510, 541, 544, 545, 547 through 551 and 533 of the Bankruptcy Code. I. Pursuant to section 1123(a)(5)(g), the Debtor is granted a 120 day period commencing on the Confirmation Date within which to cure the default(s) by Debtor, if any, with respect to a policy of insurance previously issued by National Union Fire Insurance Company, and identified as policy number 445-53-00 (being a renewal of policy number 443-38-50) and the Debtor is authorized to reserve all rights to pursue any and all remedies, benefits and contractual rights established by said policy; J. Debtor, through its Board of Directors, is authorized to take all Debtor actions to effect the above as well as the actions set forth in Article XIX; K. The NEP indemnification, in which NEP and Mr. Jeff Antisdel agree to indemnify Debtor against any tax penalties resulting from the amended and restated NEP Settlement, shall be deemed to be ratified and in full force and effect; and L. The Ownership Settlement Agreement, in which Messrs. Vogel and Chamberlain give up all claims, if any, to any interest in VivaTel shall be deemed to be ratified and in full force and effect. ARTICLE XIX. MEANS FOR EXECUTION OF THE PLAN 19.1 The Plan will be implemented utilizing the following resources and by means of the following events: A. Cash accrued from operations and Class A Common Stock will be used to satisfy Claims of Classes 1 through 8 and Class A Common Stock will be used to satisfy Class 10. B. The Debtor owns ten binary cycle energy co-generation units ("Ormats") and Classes 4, 5 and 7 shall be granted a secured interest in one unit to secure repayment of those obligations. 29 C. Promptly after the Confirmation Date, the Debtor shall take the following action; 1. File a notice with the Secretary of State for the State of Delaware to the effect that the amendment(s) to Debtor's Articles of Incorporation as filed in January 1997, were filed without requisite shareholder approval and are, therefore, invalid and void ab initio; 2. Subsequent to its repurchase of the Series B Preferred, file Amended and Restated Articles of Incorporation with the Secretary of State for the State of Delaware which Amended Articles of Incorporation shall (among other things): (i) extinguish the existing Series A, Series B and Series C Preferred Shares and the Class B Common Stock; (ii) create a new class of preferred stock be known as "Special Stock" which shall be entitled to elect two (2) Directors to the Debtor's Board of Directors; (iii) provide that the affirmative vote of 65.0% of the issued and outstanding Class A Common Stock is required to amend the Articles of Incorporation , and (iv) change the name of the Debtor to WorldCall, Inc. Thereafter, new stock certificates will be issued; and 3. Adopt amended and restated By-Laws. D. Subsequent to the Declaration Date but at least 20 trading days prior to the Effective Date, the Debtor shall effect a reverse stock split such that the number of shares of Class A Common Stock outstanding shall be no less than 500,000 shares nor more than 20,000,000 shares, the exact ratio to be set by the Debtor's Board of Directors. E. The Debtor shall acquire 100% of the issued and outstanding Common Stock of VivaTel in exchange for $500.00. Debtor will acquire Diego Tel for Class A Common Stock. The number of Shares of Class A Common Stock is predicted to be equal to 35.0% of the issued and outstanding Class A Common Stock. F. Debtor shall consent to the transfer of Class A Common Stock in conjunction with the amended and restated NEP Settlement Agreement such that sixteen (16) corporate entities shall receive Class A Common Stock equal to 50.0% of the issued and outstanding Class A Common Stock of Debtor computed ten (10) days after the Effective Date. G. All Class A Common Stock issued to a Creditor pursuant to this Plan, shall be issued pursuant to section 1145 of the Bankruptcy Code and shall be 30 issued without a restrictive legend if the Creditor establishes that the Creditor is not an "underwriter" as defined in section 1145(b) of the Bankruptcy Code. The Class A Common Stock to be issued to the exchanging shareholder of Diego Tel shall be restricted and subject to significant restraints on transfer as set forth in this Plan and in the acquisition agreements. ARTICLE XX. EXECUTORY CONTRACTS AND UNEXPIRED LEASES 20.1 Assumption of Executory Contracts under Primary Plan. Any executory contracts or unexpired leases not rejected by the Debtor with the Bankruptcy Court prior to the Confirmation Date or within sixty (60) days thereafter or which are not the subject of a motion to reject the same pending as of the Confirmation Date shall be deemed to have been assumed by the Debtor upon the Confirmation Date, in accordance with section 365 of the Bankruptcy Code. 20.2 Filing of Claims Arising out of Rejection or Assumption of Contracts. In the event the rejection or assumption of an existing contract effected pursuant to Section 20.1 above gives rise to a Claim not otherwise provided for herein, the holder of such Claim may file such Claim within 30 days following the Confirmation Date or if the contract is not rejected by Debtor prior to the Confirmation Date, within thirty days after the rejection or assumption which gives rise to the Claim. Such Claim shall, in addition to its filing with the Bankruptcy Court, be served upon the undersigned attorneys for the Debtor. Any objection to claims filed pursuant to this provision shall be governed by the procedures provided in Article XIV hereof. 20.3 Executory Contracts of Indemnification with Directors. Debtor has executory contracts in effect with its past and current Board of Directors and Officers, some of which it is accepting and some of which are being rejected as follows: 31
Acceptance or Rejection Name Position of Executory Contract ---- -------- --------------------- Jeffrey Antisdel Director/Officer Accept Kenton Bowers Officer Reject Peter Cannell Director Reject Charles Cain Director Reject Richard Cascarilla Director/Officer Accept John Goold Director Reject Jeffery Hartman Director Accept Lawrence Herth Director/Officer Accept Pattinson Hayton, III Officer/Consultant Reject Michael Kassouff Director Accept Jeffery Modesitt Director Accept Stefan Tevis Director/Officer Reject
By rejecting the executory contracts set forth above, it is Debtor's specific intent to rescind any express or implied obligation (if any) which it has or may have to such individuals to indemnify or to hold them harmless for damages or expenses which they may incur as a result of Claims of wrongdoing lodged against them from any source whatsoever. ARTICLE XXI. PROVISIONS COVERING DISTRIBUTIONS 21.1 Payments To Be Made on Effective Date or Payment Date. Payments to be made by the Debtor on the Effective Date or on the Payment Date pursuant to the Plan shall be made on the Effective Date or on the Payment Date, as applicable, except as otherwise provided for in the Plan, or as may be ordered by the Bankruptcy Court. 21.2 Distributions Made on the Effective Date. Distributions of Class A Common Stock to be made on the Effective Date shall be made on the Effective Date, except as otherwise provided for in this Plan or as may be ordered by the Bankruptcy Court. 21.3 Method of Payment. Cash payments to be made by the Debtor pursuant to the Plan shall be made by check drawn on a domestic bank or by wire transfer from a domestic bank. 32 21.4 Payments to be Made by Debtor. Payments to be made to Creditors and Equity Interests under the Plan shall be made by Debtor. 21.5 Class A Common Stock. Distributions of Class A Common Stock shall be made through Corporate Stock Transfer Company or the then transfer agent for Debtor. ARTICLE XXII. ARTICLES OF INCORPORATION AND BY-LAWS OF THE DEBTOR 22.1 Amendment of Articles of Incorporation and By-Laws. The Articles of Incorporation and By-Laws of the Debtor shall be amended after the Confirmation Date in order to effectuate the provisions of the Plan and section 1123(a)(6) of the Bankruptcy Code. 22.2 Restriction on Transfer of Shares. Unless otherwise set forth in this Article XXII, all Class A shares to be issued by the Debtor shall be issued pursuant to section 1145(a) of the Bankruptcy Code, without registration pursuant to Section 5 of the Securities Act of 1933. The following Class A Common Shares shall be restricted from transfer: A. All Class A Common Stock issued to acquire the common stock Diego Tel; and B. All Class A Common Stock to be issued pursuant to the amended and restated NEP settlement, and C. The Class A Common Stock issued to any person who is deemed to be an "underwriter" for purposes of section 1145(b) of the Bankruptcy Code. 22.3 Restrictive Legend: All Class A Common Shares which are restricted pursuant to section 22.2 of this Plan shall bear the following restrictive legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO SECTION 5 OF THE SECURITIES ACT OF 1933, NOR HAVE THESE SECURITIES BEEN REGISTERED PURSUANT TO ANY COMPARABLE STATE SECURITIES ACT OR REGULATION. 33 ACCORDINGLY, TRANSFER, SALE, PLEDGE, HYPOTHECATION OR CONVEYANCE OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS PROHIBITED UNLESS AND UNTIL (1) THE SHARES REPRESENTED HEREBY HAVE BEEN REGISTERED PURSUANT TO SECTION 5 OF THE SECURITIES ACT OF 1933 AND, AS REQUIRED, PURSUANT TO A SIMILAR STATE STATUTE OR REGULATION, OR (2) THE SHAREHOLDER SUBSTANTIATES THAT THERE IS, A VALID EXEMPTION FROM THE REGISTRATION REQUIREMENT PROVIDED BY SECTION 5 OF THE SECURITIES ACT OF 1933 AND SUBSTANTIATES SUCH EXEMPTION BY MEANS OF A LEGAL OPINION ACCEPTABLE TO THE ISSUER AND ITS LEGAL COUNSEL. THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED IN CONJUNCTION WITH A DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION CONFIRMED BY THE UNITED STATES BANKRUPTCY COURT FOR NEVADA AND THIS RESTRICTION ON TRANSFER HAS BEEN INCLUDED AS PART OF THE TERMS AND CONDITIONS OF THE CONFIRMED DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION. FOR ADDITIONAL INFORMATION CONCERNING THIS RESTRICTION, INQUIRIES SHOULD BE DIRECTED TO: Van P. Carter, Esq. Walter & Haverfield P.L.L. 1300 Terminal Tower Cleveland, Ohio 44113 (216) 781-1212 ARTICLE XXIII. PROVISIONS FOR EXECUTION AND SUPERVISION OF THE PLAN 23.1 Retention of Jurisdiction. The Bankruptcy Court shall retain and have exclusive jurisdiction over the Chapter 11 case for the following purposes: A. to determine any and all objections to the allowance of Claims or Equity Interests; B. to determine any and all pending applications for the rejection or assumption of executory contracts or unexpired leases to which the Debtor is a party or 34 with respect to which it may be liable, and to hear and determine, and if need be to liquidate, any and all Claims arising therefrom; C. to determine any and all applications, adversary proceedings and contested or litigated matters that may be pending on the Confirmation Date, except as provided in the Confirmation Order; D. to consider any modifications of the Plan, any defect or omission or reconcile any inconsistency in any order of the Bankruptcy Court, including the Confirmation Order, to the extent authorized by the Bankruptcy Court; E. to determine all controversies, suits and disputes that may arise in connection with the interpretation, enforcement or consummation of the Plan, to include disputes between classes of claimants under the Plan regarding allocations or payment of Distribution hereunder; F. to consider and act on the compromise and settlement of any Claim against or cause of action by or against the Debtor's estate; G. to issue such orders in aid of execution of the Plan to the extent authorized by section 1142 of the Bankruptcy Code; and H. to determine such other matters which may be set forth in the Confirmation Order or which may arise in connection with the Plan or the Confirmation Order, including, but not limited to, extending deadlines and time limits provided in the Plan. 23.2 Amendment of Plan. The Plan may be amended by the Debtor before or after the Effective Date as provided in section 1127 of the Bankruptcy Code. ARTICLE XXIV. PROVISIONS FOR MANAGEMENT 24.1 Directors. Upon confirmation of the Plan, subject to the Bankruptcy Court's approval under Bankruptcy Code section 1129(a)(5), the reorganized Debtor shall have as directors of Debtor the directors for Debtor as identified in the Disclosure Statement. These directors shall serve as directors of Debtor after the Confirmation Date until removed or replaced by the post-confirmation stockholders of Debtor. The tenure and manner of selection of directors of Debtor shall be as 35 provided in the Articles of Incorporation and By-Laws, as may be amended pursuant to Article XXII hereof. 24.2 Officers. Upon confirmation of the Plan, subject to the Bankruptcy Court's approval under Bankruptcy Code section 1129(a)(5), the officers of reorganized Debtor, as identified in the Disclosure Statement, shall serve as officers of Debtor after the Effective Date. The Board of Directors shall elect the officers of Debtor and shall specify the tenure of the individuals holding those offices. 24.3 Employment Contracts. Debtor may enter into employment contracts with its respective officers, employees or others which shall only be operative if the Plan is confirmed. Copies of any employment contracts that are to take effect immediately after the Confirmation Date were filed with the bankruptcy Court fifteen (15) days prior to the commencement of the hearing to consider the Disclosure Statement. The employment contracts shall contain sufficient information to comply with Bankruptcy Code section 1129(a)(5)(B) as to disclosure of compensation to be paid to insiders who are the subject of contracts and are subject to the approval of the Bankruptcy Court. ARTICLE XXV. EVENTS OF DEFAULT 25.1 In the event that Debtor defaults under the provisions of the Plan, any Creditor or party-in-interest desiring to assert such a default shall provide Debtor with written notice of the alleged default. Debtor shall have 30 days from receipt of the written notice in which to cure the default. Such notice shall be delivered by certified mail (return receipt requested) to the attorneys for Debtor at the address stated on the final page hereof. If the default is not cured within the 30-day cure period, any Creditor or party-in-interest may thereafter file and serve upon counsel for Debtor a motion to compel compliance with the applicable provision of the Plan. The Bankruptcy Court, 36 upon finding a material default, shall issue an order compelling compliance with the applicable provisions of the Plan. ARTICLE XXVI. MISCELLANEOUS PROVISIONS 26.1 Discharge of Debtors. The rights afforded in the Plan and the treatment of all Creditors therein shall be in exchange for and in complete satisfaction, discharge and release of all Claims or Equity Interests of any nature whatsoever, including any interest accrued thereon from and after the Petition Date against the Debtor or any of its assets or properties. Except as otherwise provided herein, upon the Confirmation Date, in accordance with section 1141 of the Bankruptcy Code, all such Claims or Equity Interests against the Debtor shall be satisfied, discharged and released in full. All Creditors and holders of Equity Interests shall be precluded from asserting against the Debtor or its respective assets or properties any other or further Claims based upon any acts or omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. 26.2 Title to Assets: Discharge of Liabilities. Except as otherwise provided by the Plan, on the Confirmation Date, title to all assets and properties dealt with by the Plan shall vest in Debtor in accordance with section 1141 of the Bankruptcy Code, free and clear of all Claims and Equity Interests; and the order confirming the Plan shall be a judicial determination of discharge of the Debtor's liabilities except as provided in the Plan. 26.3 Effect of Discharge on Rights Between Third Parties. If the Plan is confirmed, the provisions of the Plan will bind the Debtor and all Creditors and Equity Interest holders, whether or not they accept the Plan. Confirmation will also discharge the Debtor from all debts that arose 37 before confirmation as of the Confirmation Date, including intercompany obligations (if any) owing by the Debtor to an affiliate, whether such affiliate is itself a debtor. The classification and the manner of satisfying all Claims under the Plan takes into consideration the existence of any guarantees by the Debtor of any obligation of any person and the fact that the Debtor may be a joint obligor with another person or persons, with respect to the same obligation. The Plan also takes into account any contentions by Creditors or holders of Equity Interests that the Claims of other Creditors or other holders of Equity Interest may be subordinated by contract or pursuant to the Articles of Incorporation or ByLaws of the Debtor. All Claims against the Debtor based upon any such guarantees will be discharged in the manner provided in the Plan. Each Creditor and stockholder will receive the distribution provided in the Plan, which will not be subject to any Claim of another Creditor or stockholder by reason of any claimed contractual right of subordination based upon any defaults occurring prior to the Confirmation Date. The distributions of consideration provided for in the Plan will be in exchange for and in complete satisfaction, discharge and release of all Claims and Equity Interests, including any Claim for interest after the Petition Date. On the Confirmation Date, all Creditors and existing Equity Interest holders shall be precluded form asserting any Claim against the Debtor or its assets or properties based upon any transaction or other activity of any kind that occurred prior to the Confirmation Date; provided, however, that nothing contained in the Plan will alter the legal, equitable and contractual right of the holder of any Claim or Equity Interest specifically designated as being unimpaired in the Plan, it being specifically intended that all such rights are to remain unaltered by the Plan. 38 26.4 Filing of Additional Documents. On or before the Effective Date, the Debtor shall file with the Bankruptcy Court such agreements, indentures, supplemental indentures and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan. 26.5 Post Confirmation Acquisitions, Mergers and Stock Splits. In order to fulfill its financial obligations to Creditors and to expand its operations, it is anticipated that the Debtor will effect one or more acquisitions or mergers subsequent to the Confirmation Date. For a two (2) year period commencing with the Effective Date, Debtor will be permitted pursuant to this Plan to effect acquisitions and mergers, additional stock splits and reverse stock splits based solely upon the affirmative vote of its Board of Directors and without the necessity of requesting and receiving the consent of the Debtor shareholders. 26.6 Class A Common Stock in Lieu of Cash. Any Creditor entitled to receive Cash pursuant to this Plan may, by mutual agreement of the Creditor and the Debtor, receive Class A Common Stock pursuant to terms and conditions to be negotiated between the Creditor and the Debtor and agreed to by the Debtor and the Creditor. 26.7 Ratification of Settlements. Pursuant to Section 1123(b)(3)(A) of the Bankruptcy Code, upon Confirmation of the Plan, the following settlements are deemed to have been ratified by the Bankruptcy Court and are in full force and effect: (1) the amended and restated NEP Settlement, (2) Ownership Settlement Agreement, (3) the NEPC Indemnification, and (4) the settlements entered into with respect to the claims set forth in Article III, Section G of the Disclosure Statement. 26.8 Ratification of Agreements. Upon Confirmation of the Plan, the following contracts and agreements will be deemed to have been ratified by the Bankruptcy Court: (1) the Agreement 39 for the Exchange of Stock for the acquisition of Viva Telecommunications, Inc. and (2) the amended and restated Agreement for the Exchange of Stock for the Acquisition of Diego Tel, Inc. if and when amended and filed with the Bankruptcy Court. 26.9 Set Offs. Debtor may, but shall not be required, to set off against any claim and the distribution to any holder under the Plan, claims of any nature that Debtor may have against the holder of such claim. Allowance of a claim or failure to exercise any right of set off with respect to a claim does not constitute a waiver or release by Debtor of any rights or claims the Debtor may have against the holder of such claim. Debtor's rights of set off may be limited in the manner provided for in the Plan if such rights are not exercised on or before the Effective Date. Debtor may exercise right of set off with respect to claims for which it has payment responsibility. 26.10 Fractional Shares. Debtor will not issue fractional shares of Class A Common Stock. In the event that a Claimant is entitled to receive fractional shares, the fractional share will be deemed to have been repurchased from the Creditor by the Debtor based upon a per share purchase price of $.l0 per share. 26.11. Section Headings. The section headings contained in the Plan are for reference purposes only and shall not affect in any way the meaning or interpretation of the Plan. Respectfully submitted this 24th day of July, 1998. BELDING, HARRIS & PETRONI, LTD. /s/ Stephen R. Harris, Esq. ------------------------------------ Stephen R. Harris, Esq. BELDING, HARRIS & PETRONI, LTD. 417 W. Plumb Lane Reno, NV 89509 40 CONSENT On behalf of PowerTel USA, Inc., the undersigned represents that the Board of Directors of PowerTel has read, reviewed, and approved the foregoing DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION and authorizes the filing of this Plan with the United States Bankruptcy Court for the District of Nevada. PowerTel USA, Inc. By: /s/ Richard Cascarilla --------------------------------- Richard Cascarilla, President EX-2.C 4 EXHIBIT 2C 1 Exhibit 2c STEPHEN R. HARRIS, ESQ. BELDING, HARRIS & PETRONI, LTD. NEVADA BAR NO. 001463 417 West Plumb Lane Reno, Nevada 89509 Telephone: (702) 786-7600 Facsimile: (702) 786-7764 Attorney for Debtor UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA * * * * * IN RE: POWERTEL USA, INC. formerly known Case No. 97-30265-BMG as NEVADA ENERGY, INC., also formerly (Chapter 11) known as MUNSON GEOTHERMAL, INC., Debtor. Hrg. DATE: August 25, 1998 and TIME: 10:00 a.m. E.I.N. 84-089777l / - ----------------------------- ORDER APPROVING AND CONFIRMING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, AS REVISED AND AMENDED POWERTEL USA, INC., a Delaware corporation, formerly known as NEVADA ENERGY, INC., also formerly known as MUNSON GEOTHERMAL, INC., the Debtor and Debtor-in- Possession in this Chapter 11 bankruptcy reorganization case ("Debtor"), by and through its attorney, STEPHEN R. HARRIS, ESQ., of Belding, Harris & Petroni, Ltd., having filed its DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION (dated July 24, 1998), and commonly referred to herein as the Plan; with the Plan being attached hereto as Exhibit "A" and incorporated herein by that reference, and the Plan having been duly filed, served and noticed for an 11 U.S.C. Section l129 2 Confirmation Hearing, together with (1) the DEBTOR'S SECOND AMENDED DISCLOSURE STATEMENT (dated July 24, 1998), and (2) the ORDER APPROVING DEBTOR'S FIRST AMENDED DISCLOSURE STATEMENT, AS AMENDED, AS CONTAINING ADEQUATE INFORMATION (11 U.S.C. Section 1125), AND FIXING TIME FOR FILING ACCEPTANCES OR REJECTIONS OF PLAN, on July 27, 1998, to all creditors and parties requesting notice thereof; and having filed its ERRATA TO BALLOT AND TO DEBTOR'S SECOND AMENDED DISCLOSURE STATEMENT PURSUANT TO 11 U.S.C. Section 1125, on August 17,1998, and its AMENDED ERRATA TO BALLOT AND TO DEBTOR'S SECOND AMENDED DISCLOSURE STATEMENT PURSUANT TO 11 U.S.C. Section 1125, on August 17,1998, and served on August 18, 1998, with the duly noticed hearing to consider confirmation of the Debtor's Plan, conducted on August 25, 1998, at 10:00 a.m.; with STEPHEN R. HARRIS, ESQ., of BELDING, HARRIS & PETRONI, LTD., appearing on behalf of the Debtor, POWERTEL USA, INC., a Delaware corporation; and Richard Cascarilla, President of the Debtor, also present; NICHOLAS STROZZA, Assistant U.S. Trustee, appearing on behalf of the Office of the United States Trustee; and the Court also noting the appearances of other attorneys for creditors, creditors and interested parties; and the Court having considered all papers and pleadings on file; and no opposition having been filed; It having been determined after hearing on notice that: 1. The Plan has been accepted in writing by the creditors whose acceptance is required by law; 2. The provisions of Chapter 11 of the Code have been complied with; that the Plan has been proposed in good faith and not by any means forbidden by law; and that the proponent of the Plan complies with the applicable provisions of the Bankruptcy Code; 3 3. Each holder of a claim has accepted the Plan or will receive or retain under the Plan property of a value, on account of such claim, as of the Effective Date of the Plan, that is not less than the amount that such holder would receive or retain if the Debtor POWERTEL USA, INC., a Delaware corporation, was liquidated under Chapter 7 of the Code on such date, and further, the Plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims that is impaired under, and had not accepted the Plan; 4. All payments made or promised by the Debtor POWERTEL USA, INC., a Delaware corporation, or by a person(s) issuing securities or acquiring property under the Plan or by any other person for services or for costs and expenses in, or in connection with, the Plan and incident to this case, have been fully disclosed to the Court and are reasonable or, if to be fixed after confirmation of the Plan, will be subject to the approval of the Court; 5. The identity, qualifications, and affiliations of the persons who are to be directors or officers of the successor to the Debtor POWERTEL USA, INC., a Delaware corporation, under the Plan, have been disclosed, if any; 6. The identity of any insider that will be employed or retained by the Debtor and their compensation has been fully disclosed, if any; 7. Confirmation of the Plan is not likely to be followed by the need for further financial reorganization of the Debtor or any successor to it under the Plan, and the Plan is feasible; 8. At least one impaired class of claims has accepted the Plan, determined without including any acceptances of the Plan by an insider holder of a claim of such class; and 4 9. That all creditors, by virtue of acceptance of the Plan by the requisite number and amount of members in each class, those accepting classes being the following: Class 6 General Unsecured Allowed Creditors' Claims of $1,200.00 or Less (deemed to have accepted the Plan by their affirmative class vote), Class 7 General Unsecured Allowed Creditors' Claims of More than $1,200.00 (deemed to have accepted the Plan by their affirmative class vote), Class 8 Claims of Nevada Energy Partners, Ltd. (affirmative class vote) and Class 10 Equity Security Holders (deemed to have accepted the Plan by their affirmative class vote); and those creditors in Class 6 and 7 (General Allowed Unsecured Creditors) that have not voted to accept or reject the plan are deemed to have accepted by reason of the class acceptance resulting from the majority voting in number with two-thirds (2/3) the claims amount of the Class 6 and Class 7 General Unsecured Creditors having voted for acceptance; and good cause appearing, IT IS HEREBY ORDERED that the DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION (dated July 24, 1998), filed with the Court on July 24, 1998, and attached hereto as EXHIBIT "A" and incorporated herein by that reference, be and the same hereby is approved and confirmed, and its terms and conditions set forth therein are binding on all Equity Interest Holders, Creditors and parties-in-interest in the above-captioned bankruptcy case; and IT IS FURTHER ORDERED that the interests of the Class 10 Equity Interest Holders will be modified pursuant to the Plan, and further, Class 10 Equity Interest Holders shall not receive any dividends or monetary distributions until all allowed creditors' claims are paid in full and/or sufficient monies are on deposit with the Disbursing Agent to pay disputed claims in the event of allowance of same; and 5 IT IS FURTHER ORDERED that the Effective Date of the Plan shall be the first business day occurring one-hundred and twenty (120) days after the date on which the Order Confirming the Plan is entered by the Clerk's Office; and IT IS FURTHER ORDERED that Debtor POWERTEL USA, INC., a Delaware corporation, shall withhold payment to any Class of creditors until the Effective Date, and thereafter paid as stated in the Plan, as amended and revised herein, except Administrative Claims, which Administrative Claims shall be paid by the Effective Date, unless otherwise agreed to in writing; and IT IS FURTHER ORDERED that this Court shall retain jurisdiction to adjudicate all matters (except to the extent contrary to the terms of the Plan) pertinent to the administration of the Debtor and the Reorganized Debtor, and enforcement of the Plan, including, but not limited to the discharge of any and all claim(s) of Creditors and interest(s) of Equity Interest Holders, to the extent provided by law and under the terms of the Plan; and IT IS FURTHER ORDERED that the Reorganized and Revested Debtor is authorized to take all actions necessary to effectuate the DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION (dated July 24, 1998), as revised and amended herein; and IT IS FURTHER ORDERED that the assets of the bankrupt estate shall vest in the Reorganized Debtor, as well as any remaining assets being liquidated and/or distributed to the allowed secured and unsecured creditors' claims; and IT IS FURTHER ORDERED that in accordance with 11 U.S.C. Section 1123 (b)(2), the Debtor rejects those executory contracts of indemnification identified to be rejected in Article VIII, Section G(3) of the DEBTOR'S SECOND AMENDED DISCLOSURE STATEMENT, and accepts those identified to be accepted, and further, as to the Independent Contractor Agreement with Stone 6 Brothers Welding and Equipment Sales, the Debtor shall have sixty (60) days from the Confirmation Date within which to place that contract at issue with the Bankruptcy Court; and IT IS FURTHER ORDERED that in accordance with 11 U.S.C. Section 1123(b)(3)(A), a plan of reorganization may provide for the settlement of any claim(s) belonging to the estate, and in that regard, the Plan contemplates the approval of four (4) settlement agreements detailed as follows: (1) the Agreement between and among PowerTel, Nevada Electric Power Company and Nevada Energy Partners, Ltd. ("the NEP Settlement"), specifically, the NEP Settlement is described in detail at Section 11.1 of the Plan, which Plan was sent to all creditors and to which no creditor had objected, and further, the NEP Settlement resolves litigation and a $6 million claim against the Debtor without any monetary obligation, and the Debtor receives 100% of the stock ownership in Combustion Energy Company and the benefit of said corporation's assets, and further, taking into consideration all of the factors of In re A & C Properties, 784 F.2d 1377 (9th Cir. 1986), the Court finds and concludes that the NEP Settlement is hereby ratified and approved, and is reasonable, fair and equitable and in the best interest of creditors; (2) the Agreement with John Vogel and Dean Chamberlain (the "VivaTel Settlement Agreement and Mutual Release"), which VivaTel Settlement Agreement and Mutual Release previously has been approved by the Court, in that certain Stipulated Judgment and Order, filed in adversary proceeding 97-3151BMG, and entered on the docket on March 16, 1998, which VivaTel Settlement Agreement and Mutual Release is hereby ratified and approved; (3) the First Amended Agreement for the Exchange of Stock, dated April 22, 1998, between David Wallace and PowerTel USA, Inc., regarding DiegoTel, Inc., is hereby ratified and approved; and (4) the First Amended Agreement for the Exchange of Stock, dated February 19, 7 1998, between David Wallace and PowerTel USA, Inc., regarding VivaTel, Inc., is hereby ratified and approved; and IT IS FURTHER ORDERED that in accordance with 11 U.S.C. Section 1123(b)(3)(B), a plan may provide for the appointment of the debtor for the retention and enforcement of any claim belonging to the estate. In accordance with such provision, the Court hereby appoints PowerTel, the Reorganized Debtor, as the entity to pursue all claims belonging to the estate, as identified in Article V, Section E of the DEBTOR'S SECOND AMENDED DISCLOSURE STATEMENT, including but not limited to Patttinson Hayton, his alter egos, employees, affiliates, agents and attorneys-in-fact, first for the benefit of the Reorganized Debtor's administrative and unsecured creditors and then for the benefit of the Reorganized Debtor; and IT IS FURTHER ORDERED that pursuant to 11 U.S.C. Section 1146(c) of Title 11, the revesting, transfer and sale of any real or personal property of the Debtor in accordance with the DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, as amended and revised herein, shall become vested of public record in any purchaser/transferee, free from the imposition of any state or local tax, fee or imposition, including transfer taxes pursuant to N.R.S. Section 357.090, and IT IS FURTHER ORDERED that the confirmation of this DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, as revised and amended herein, constitutes a discharge set forth in 11 U.S.C. Section 1141(d) of the Bankruptcy Code, except as noted herein; and IT IS FURTHER ORDERED that pursuant to 11 U.S.C. Section 1106(a)(7), the Debtor shall file with the Clerk, not later than 180 days after the entry of this order, a report of the action taken by the Reorganized Debtor and the progress made toward consummation of its confirmed Plan, as 8 amended and revised herein and further, said report shall include, as a minimum, the following information: (1) A schedule of any real property, and its cost, acquired since confirmation of the plan, and a schedule of each item of personal property acquired at a cost of more than $20,000.00 since confirmation of the plan. (2) A schedule of each debt and each class, listing the total amount of the plan required to be paid, the amount required to be paid to date, the amount actually paid to date, and the amount unpaid. (3) A schedule of executory contracts entered into or assumed after plan confirmation. (4) A statement indicating that post-petition taxes of every kind have been paid current, identifying each type of tax which has been paid and is current (i.e., income, payroll, property, sales, etc.), or a detailed explanation of any and all delinquencies, by type of tax, and dollar amount. (5) An estimate of the time for plan consummation and application for final decree. (6) Any other pertinent information needed to explain the progress toward completion of the confirmed plan; and IT IS FURTHER ORDERED that effective August 25, 1998, for professional services rendered from that date forward, the Debtor's duly appointed professionals do not need court approval, after notice and hearing, for payment of professional fees and costs, and that the Reorganized Debtor may pay said professionals for the times spent and costs incurred in the ordinary course of its business; and IT IS FURTHER ORDERED that the Debtor has sixty (60) days after the Confirmation Date within which to file objection(s) to any disputed claims of creditors; and 9 IT IS FURTHER ORDERED that Debtor POWERTEL USA, INC., a Delaware corporation, shall pay such fees to the Office of the United States Trustee as are required by 28 U.S.C. Section 1930(a)(6) until such time a final decree is entered closing its case; and IT IS FURTHER ORDERED that the Debtor's stock transfer agent may rely on this Order as a basis to establish shareholders of record ("Equity Interest Holders"), and may compute a reconfigured shareholder ledger. DATED: September 15, 1998 /s/ Bert M. Goldwater ------------------------------------ BERT M. GOLDWATER UNITED STATES BANKRUPTCY JUDGE Prepared by: STEPHEN R. HARRIS, ESQ. BELDING, HARRIS & PETRONI, LTD. 417 West Plumb Lane Reno, NV 89509 (702) 786-7600 Attorneys for Debtor Approved and accepted Approved as to form this ___ day of this 9th day of September, 1998 September, 1998 /s/ Richard Cascarilla /s/ Nicholas Strozza, Esq. - ------------------------------- ----------------------------------------- RICHARD CASCARILLA, President NICHOLAS STROZZA, ESQ. POWERTEL USA, INC., Debtor Assistant U.S. Trustee Office of the United States Trustee EX-3.I.A 5 EXHIBIT 3(I)(A) 1 Exhibit 3(i)(a) CERTIFICATE OF CORRECTION OF THE RESTATED CERTIFICATE OF INCORPORATION OF NEVADA ENERGY COMPANY, INC. NEVADA ENERGY COMPANY, INC., a Delaware corporation (the "Company"), certifies pursuant to Section 103(f) of the General Corporation Law of the State of Delaware that: 1. The Company filed on November 27, 1996, a Restated Certificate of Incorporation of Nevada Energy Company, Inc. (SRV number 960348615) (the "Restated Certificate"). 2. The Restated Certificate was an inaccurate record of the corporate action because the amendments purportedly effected by such filing were not approved by the stockholders of the Company, and therefore, should not have been filed with the Secretary of State of the State of Delaware. As a result of such inaccuracy, said Restated Certificate is null and void AB INITIO and shall have no further force or effect. IN WITNESS WHEREOF, the Company has caused this Certificate of Correction to be executed by its duly authorized officer this 25th day of November, 1998. NEVADA ENERGY COMPANY, INC. By: /s/ Richard A. Cascarilla -------------------------------- Richard A. Cascarilla, President EX-3.I.B 6 EXHIBIT 3(I)(B) 1 Exhibit 3(i)(b) CERTIFICATE OF CORRECTION OF THE CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF POWERTEL USA, INC. POWERTEL USA, INC., a Delaware corporation (the "Company"), certifies pursuant to Section 103(f) of the General Corporation Law of the State of Delaware that: 1. The Company filed on January 2, 1997, a Certificate of Amendment to the Certificate of Incorporation of POWERTEL USA, INC., (SRV number 971000916) (the "Certificate of Amendment"). 2. The Certificate of Amendment was an inaccurate record of the corporate action and is null and void AB INITIO as confirmed by an ORDER APPROVING AND CONFIRMING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, AS REVISED AND AMENDED of the U.S. Bankruptcy Court of the District of Nevada, Case No: 97-30265-BMG, dated September 15, 1998. IN WITNESS WHEREOF, the Company has caused this Certificate of Correction to be executed by its duly authorized officer this 25th day of November, 1998. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla -------------------------------- Richard A. Cascarilla, President EX-3.I.C 7 EXHIBIT 3(I)(C) 1 Exhibit 3(i)(c) CERTIFICATE OF CORRECTION OF THE CERTIFICATE OF CORRECTION OF THE RESTATED CERTIFICATE OF INCORPORATION OF POWERTEL USA, INC. POWERTEL USA, INC., a Delaware corporation (the "Company"), certifies pursuant to Section 103(f) of the General Corporation Law of the State of Delaware that: 1. The Company filed on January 14, 1997, a Certificate of Correction of the Restated Certificate of Incorporation of POWERTEL USA, INC., (SRV number 971013560) (the "Certificate of Correction"). 2. The Certificate of Correction was an inaccurate record of the corporate action and is null and void AB INITIO as confirmed by an ORDER APPROVING AND CONFIRMING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, AS REVISED AND AMENDED of the U.S. Bankruptcy Court of the District of Nevada, Case No: 97-30265-BMG, dated September 15, 1998. IN WITNESS WHEREOF, the Company has caused this Certificate of Correction to be executed by its duly authorized officer this 25th day of November, 1998. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla -------------------------------- Richard A. Cascarilla, President EX-3.I.D 8 EXHIBIT 3(I)(D) 1 Exhibit 3(i)(d) CERTIFICATE OF CORRECTION OF THE CERTIFICATE OF CORRECTION TO THE CERTIFICATE OF AMENDMENT OF POWERTEL USA, INC. POWERTEL USA, INC., a Delaware corporation (the "Company"), certifies pursuant to Section 103(f) of the General Corporation Law of the State of Delaware that: 1. The Company filed on January 22, 1997, a Certificate of Correction to the Certificate of Amendment of POWERTEL USA, INC., (SRV number 971021082) (the "Certificate of Correction"). 2. The Certificate of Correction was an inaccurate record of the corporate action and is null and void AB INITIO as confirmed by an ORDER APPROVING AND CONFIRMING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, AS REVISED AND AMENDED of the U.S. Bankruptcy Court of the District of Nevada, Case No: 97-30265-BMG, dated September 15, 1998. IN WITNESS WHEREOF, the Company has caused this Certificate of Correction to be executed by its duly authorized officer this 25th day of November, 1998. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla -------------------------------- Richard A. Cascarilla, President EX-3.I.E 9 EXHIBIT 3(I)(E) 1 Exhibit 3(i)(e) CERTIFICATE OF CORRECTION OF THE RESTATED CERTIFICATE OF INCORPORATION OF POWERTEL USA, INC. POWERTEL USA, INC., a Delaware corporation (the "Company"), certifies pursuant to Section 103(f) of the General Corporation Law of the State of Delaware that: 1. The Company filed on January 22, 1997, a Restated Certificate of Incorporation of POWERTEL USA, INC., (SRV number 971021090) (the "Restated Certificate"). 2. The Restated Certificate was an inaccurate record of the corporate action and is null and void AB INITIO as confirmed by an ORDER APPROVING AND CONFIRMING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, AS REVISED AND AMENDED of the U.S. Bankruptcy Court of the District of Nevada, Case No: 97-30265- BMG, dated September 15, 1998. IN WITNESS WHEREOF, the Company has caused this Certificate of Correction to be executed by its duly authorized officer this 25th day of November, 1998. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla ------------------------------------ Richard A. Cascarilla, President EX-3.I.F 10 EXHIBIT 3(I)(F) 1 Exhibit 3(i)(f) CERTIFICATE OF CORRECTION OF THE CERTIFICATE OF CORRECTION TO THE RESTATED CERTIFICATE OF INCORPORATION OF POWERTEL USA, INC. POWERTEL USA, INC., a Delaware corporation (the "Company"), certifies pursuant to Section 103(f) of the General Corporation Law of the State of Delaware that: 1. The Company filed on January 24, 1997, a Certificate of Correction to the Restated Certificate of Incorporation of POWERTEL USA, INC., (SRV number 971024478) (the "Certificate of Correction"). 2. The Certificate of Correction was an inaccurate record of the corporate action and is null and void AB INITIO as confirmed by an ORDER APPROVING AND CONFIRMING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, AS REVISED AND AMENDED of the U.S. Bankruptcy Court of the District of Nevada, Case No: 97-30265-BMG, dated September 15, 1998. IN WITNESS WHEREOF, the Company has caused this Certificate of Correction to be executed by its duly authorized officer this 25th day of November, 1998. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla -------------------------------- Richard A. Cascarilla, President EX-3.I.G 11 EXHIBIT 3(I)(G) 1 Exhibit 3(i)(g) CERTIFICATE OF CORRECTION OF THE RESTATED CERTIFICATE OF INCORPORATION OF POWERTEL USA, INC. POWERTEL USA, INC., a Delaware corporation (the "Company"), certifies pursuant to Section 103(f) of the General Corporation Law of the State of Delaware that: 1. The Company filed on January 27, 1997, a Restated Certificate of Incorporation of POWERTEL USA, INC., (SRV number 971026370) (the "Restated Certificate"). 2. The Restated Certificate was an inaccurate record of the corporate action and is null and void AB INITIO as confirmed by an ORDER APPROVING AND CONFIRMING DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, AS REVISED AND AMENDED of the U.S. Bankruptcy Court of the District of Nevada, Case No: 97-30265- BMG, dated September 15, 1998. IN WITNESS WHEREOF, the Company has caused this Certificate of Correction to be executed by its duly authorized officer this 25th day of November, 1998. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla -------------------------------- Richard A. Cascarilla, President EX-3.I.H 12 EXHIBIT 3(I)(H) 1 Exhibit 3(i)(h) CERTIFICATE OF RENEWAL, RESTORATION AND REVIVAL OF CERTIFICATE OF INCORPORATION OF NEVADA ENERGY COMPANY, INC. 1. The name of the corporation is Nevada Energy Company, Inc. 2. Its registered office in the State of Delaware is located at 800 Delaware Avenue, City of Wilmington, County of New Castle 19801 and the name of its registered agent at such address is Delaware Corporations Inc. 3. The date of the filing of the original Certificate of Incorporation was December 20, 1982. 4. The date when restoration, renewal, and revival of the charter of this company is to commence the 24th day of January, 1998 same being prior to the date of the expiration of the charter. This renewal and revival of the charter of this corporation is to be perpetual. 5. This corporation was duly organized and carried on the business authorized by its charter until the 25th day of January, 1998, at such time its charter became inoperative and forfeited for failure to obtain a registered agent and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, and in compliance with the provisions of Section 312 of the Delaware General Corporation Law of the State of Delaware, as amended, providing for the renewal, extension and restoration of charters, Richard A. Cascarilla the last and acting authorized officer hereunto set his hand to this Certificate this 25th day of November, 1998. By: /s/ Richard A. Cascarilla --------------------------- Authorized Officer Name: Richard A. Cascarilla ------------------------- Print or Type Title: President ------------------------ EX-3.I.J 13 EXHIBIT 3(I)(J) 1 Exhibit 3(i)(j) RESTATED CERTIFICATE OF INCORPORATION OF NEVADA ENERGY COMPANY, INC. Nevada Energy Company, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation") and the undersigned authorized officer hereby certify that (i) the date of filing the Corporation's original Certificate of Incorporation with the Secretary of State of Delaware was December 20, 1982 and the Corporation's initial name was Munson Geothermal, Inc., (ii) this Restated Certificate of Incorporation, as previously amended, was duly approved and duly adopted in accordance with Section 303 of the General Corporation Law of the State of Delaware, (iii) pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of the Corporation was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG (the "Order"), and (iv) the Order contains a provision for the making of this Restated Certificate of Incorporation of the Corporation; and in connection therewith the Corporation's Certificate of Incorporation is amended and restated in its entirety to provide as follows: FIRST: The name of the Corporation is WORLDCALL, CORPORATION. SECOND: The registered office of the Corporation in the State of Delaware is located at 800 Delaware Avenue, City of Wilmington, New Castle County, 19801. The registered agent of the Corporation at that address is Delaware Corporations Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: (a) The total number of shares of stock which the Corporation is authorized to issue is (i) twenty-five million (25,000,000) shares of Class A Common Stock, $.001 par value per share ("Common Stock") and (ii) seven (7) shares of special stock, $.001 par value per share, designated as Special Stock. (b) The Special Stock shall have the voting rights, preferences and relative participating, optional or other special rights and qualifications, limitations and restrictions as follows: 2 (i) Dividends No dividend of any kind or nature shall be paid or declared on the Special Stock. (ii) Liquidation Rights Special Stock shall rank pari passu with the Common Stock as to liquidation rights. (iii) Voting Rights and Rights to Appoint a Director (a) Except as expressly provided in this Certificate of Incorporation or by law, holders of shares of Special Stock shall have no voting rights and shall not be entitled to vote on any matter. (b) The holders of a majority of the issued and outstanding shares of Special Stock shall have the power and authority to and shall, either at a meeting or by written consent, voting separately as a separate series, elect two (2) director's to the Board of Directors of the Corporation (individually, a "Special Director" and collectively, the "Special Directors"). Each Special Director shall be elected for a term of one year. A Special Director whose term has expired shall continue in office until such Director's successor is elected and qualified, except as otherwise provided herein or required by law. If the office of any Special Director becomes vacant by reason of death, resignation, disqualification, removal or other cause, the holders of a majority of the issued and outstanding shares of Special Stock shall elect a successor for the unexpired term and until a successor is elected and qualified. Each Special Director shall be entitled to one vote on any matter to which a director of the Corporation is entitled to vote. (iv) Amendment The Corporation shall not take any action, whether by amendment to the Certificate of Incorporation, merger, consolidation, sale of assets or other corporate action of any kind (whether or not similar in kind or nature to an amendment, merger, consolidation or sale of assets) that would amend, alter, repeal or change, or have the effect of amending, altering, repealing or changing, the authorized number of shares or Special Stock, or any of the voting rights or other powers, preferences, or special rights of the Special Stock without the affirmative vote of the holders of a majority of the outstanding shares of Special Stock, voting as a single series. FIFTH: (a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and the directors need not be elected by ballot unless required by the By-Laws of the Corporation. 3 (b) The number of directors constituting the entire Board of Directors shall be not less than three (3) not more than seven (7) as fixed from time to time by resolution adopted by the vote of a majority of the entire Board, provided, however, that the number of directors shall not be reduced so as to shorten the term of any director at the time in office, and provided further, that the number of directors constituting the entire Board shall be three (3) until otherwise fixed by resolution adopted by vote of a majority of the entire Board. SIXTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors is expressly authorized to make, amend or repeal the By-Laws. SEVENTH: Every person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another Corporation, or as its representative in a partnership, joint venture, trust or other enterprise, whether the basis of such action, suit or proceeding is any alleged action in an official capacity as director, officer or representative, or in any other capacity while serving as director, officer or representative, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by him or her in connection therewith; provided, however, that the Corporation shall indemnify any such person in connection with any action, suit or proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Such right shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any action, suit or proceeding in advance of its final disposition upon delivery to the Corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced unless it should be determined ultimately that such person is not entitled to be indemnified under this Article SEVENTH or otherwise. The rights conferred by this Article SEVENTH shall not be exclusive of any other right which such persons may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. EIGHTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (a) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (b) for acts of omissions not in good faith or which involve intentional misconduct or knowing violation law, (c) under Section 174 of the General Corporation Law of the State of Delaware, or (d) for any transaction from which the director derived an improper personal benefit, it being the intention of this Article EIGHTH that a director of the Corporation shall, to the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may 4 hereafter be amended, not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. NINTH: Notwithstanding any other provision of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding the fact that some lesser percentage may be specified by law, this Certificate of Incorporation or the By-Laws of the Corporation), any amendment of the Certificate of Incorporation and any amendment to the By-Laws of the Corporation adopted by the stockholder shall require the affirmative vote of the holders of 65% or more of the outstanding shares of capital stock of the Corporation entitled to vote. The ByLaws may be amended by the Board of Directors by a majority vote of the entire Board. IN WITNESS WHEREOF, the Corporation and the undersigned duly authorized officer have caused this Restated Certificate of Incorporation, to be executed this 8 day of December, 1998. NEVADA ENERGY COMPANY, INC. By: /s/ Richard A. Cascarilla -------------------------------- RICHARD A. CASCARILLA, PRESIDENT EX-3.I.I.A 14 EXHIBIT 3(II)A 1 Exhibit 3(ii)(a) POWERTEL USA, INC. AMENDED AND RESTATED BYLAWS ARTICLE I - STOCKHOLDERS SECTION 1. ANNUAL MEETING. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen months subsequent to the later of the date of incorporation or the last annual meeting of stockholders. SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called by the Board of Directors or the chief executive officer and shall be held at such place, on such date, and at such time as the persons or person calling the special meeting shall fix. SECTION 3. NOTICE OF MEETINGS. Written notice of the place, date and time of all meetings of the stockholders shall be given, not less than ten nor more than sixty days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the corporation). When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty days after the date 2 for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. SECTION 4. QUORUM. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of the stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting. SECTION 5. ORGANIZATION. Such person as the Board of Directors may have designated or, in the absence of such a person, the chief executive officer of the corporation or, in his absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the Secretary of the corporation, the secretary of the meeting shall be such person as the chairman appoints. SECTION 6. CONDUCT OF BUSINESS. The chairman of any meeting of stockholders shall 3 determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to the chairman in order. SECTION 7. PROXIES AND VOTING. At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting. Each stockholder shall have one vote for every share of stock entitled to vote which is registered in such stockholder's name on the record date for the meeting, except as otherwise provided herein or required by law. All voting, including on the election of directors, but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder (or a person acting as proxy for a stockholder) entitled to vote, a stock vote shall be taken. Every stock vote shall be taken by ballot. Each ballot shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballot shall be counted by an inspector or inspectors appointed by the chairman of the meeting. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast. SECTION 8. STOCK LIST. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in such stockholder's name, shall be open to the examination of any such 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. 4 The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. SECTION 9. CONSENT OF STOCKHOLDERS IN LIEU OF 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 the 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 and shall be delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent. 5 ARTICLE II - BOARD OF DIRECTORS SECTION 1. NUMBER AND TERM OF OFFICE. The number of directors who shall constitute the whole board shall be such number as the Board of Directors shall at the time have designated, except that in the absence of any such designation, such number shall be three (3). A director whose term has expired and whose directorship has not been eliminated by a decrease in the number of directors effective upon the expiration of the director's term shall continue in office until such director's successor is elected and qualified, except as otherwise provided herein or required by law. SECTION 2. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized in writing among all directors. A separate written notice of each regular meeting shall not be required. SECTION 3. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by one-third of the directors then in office (rounded up to the nearest whole number) or by the chief executive officer and shall be held at such place, on such date, and at such time as the person or persons calling the special meeting shall fix. Notice of the place, date, and time of each such special meeting shall be given each director by whom it is not waived by mailing written notice not less than five days before the meeting or by providing written notice by facsimile or other means of electronic transmission the same not less than twenty-four hours before the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. SECTION 4. QUORUM. At any meeting of the Board of Directors, a majority of the total number of the whole board shall constitute a quorum for all purposes. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to any place, 6 date, or time, without further notice or waiver thereof. SECTION 5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting. SECTION 6. CONDUCT OF BUSINESS. At any meeting of the Board of Directors, business shall be transacted in such order and manner as the board may from time to time determine, and all matters shall be determined by the vote of a majority of the directors present, except as otherwise provided herein or required by law. Action may be taken by the Board of Directors without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors. SECTION 7. POWERS. The Board of Directors may, except as otherwise required by law, exercise all such powers and do all such acts and things as may be exercised or done by the corporation. SECTION 8. COMPENSATION OF DIRECTORS. Directors shall receive fees or other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors. Directors may be reimbursed for actual out-of-pocket expenses incurred by them in the performance of their duties as directors. SECTION 9. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Every person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person, or a person of whom such person is the legal representative, is or was a director or officer of the 7 corporation or is or was serving at the request of the corporation as a director or officer of another corporation, or as its representative in a partnership, joint venture, trust or other enterprise, whether the basis of such action, suit or proceeding is any alleged action in an official capacity as director, officer or representative, or in any other capacity while serving as a director, officer or representative, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that the corporation shall indemnify any such person in connection with any action, suit or proceeding (or part thereof) initiated by such person only if such action, suit or proceeding (or part thereof) was authorized by the Board of Directors of the corporation. Such right shall be a contract right and shall include the right to be paid by the corporation expenses incurred in defending any action, suit or proceeding in advance of its final disposition upon delivery to the corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced unless it should be determined ultimately that such person is entitled to be indemnified under this Section 9 or otherwise. The rights conferred by this Section 9 shall not be exclusive of any other right to indemnification or advancement of expenses which a person may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. 8 ARTICLE III - COMMITTEES SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Director may from time to time designate committees of the board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of any member of any committee and any alternate member in his place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. SECTION 2. CONDUCT OF BUSINESS. Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third of the members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of such committee. 9 ARTICLE IV - OFFICERS SECTION 1. GENERALLY. The officers of the corporation shall consist of a president, a secretary, a treasurer and such other officers as may from time to time be appointed by the Board of Directors. Officers shall be elected by the Board of Directors which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. The president shall be a member of the Board of Directors. Any number of offices may be held by the same person. SECTION 2. PRESIDENT. The president shall be the chief executive officer of the corporation. Subject to the provisions of these bylaws and to the direction of the Board of Directors, the president shall have the responsibility for the general management and control of the business and affairs of the corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him by the Board of Directors. The president shall have power to sign all stock certificates, contracts and other instruments of the corporation which are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the corporation. SECTION 3. VICE PRESIDENT. Each vice president, to the extent that there are any, shall have such powers and duties as may be delegated to him or her by the Board of Directors. One vice president shall be designated by the board to perform the duties and exercise the powers of the president in the event of the president's absence or disability. SECTION 4. TREASURER. The treasurer shall have the responsibility for maintaining the financial records of the corporation and shall have custody of all monies and securities of the corporation. The 10 treasurer shall make such disbursements of the funds of the corporation as are authorized and shall render from time to time an account of all such transactions and of the financial condition of the corporation. The treasurer shall also perform such other duties as the Board of Directors may from time to time prescribe. SECTION 5. SECRETARY. The secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. The secretary shall have charge of the corporate books and shall perform such other duties as the Board of Directors may from time to time prescribe. SECTION 6. DELEGATION OF AUTHORITY. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any other provision of these bylaws. SECTION 7. REMOVAL. Any officer of the corporation may be removed at any time, with or without cause, by the Board of Directors. SECTION 8. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless otherwise directed by the Board of Directors, the president shall have power to vote and otherwise act on behalf of the corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this corporation may hold securities and otherwise to exercise any and all rights and powers which this corporation may possess by reason of its ownership of securities in such other corporation. 11 ARTICLE V - STOCK SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled to a certificate signed by, or in the name of the corporation by, the president or a vice president, and by the secretary or an assistant secretary, or the treasurer or an assistant treasurer, certifying the number of shares owned by such stockholder. Any of or all the signatures on the certificate may be facsimile. SECTION 2. TRANSFERS OF STOCK. Transfers of stock shall be made only upon the transfer books of the corporation kept at an office of the corporation or by transfer agents designated to transfer shares of the stock of the corporation. Except where a certificate is issued in accordance with Section 4 of Article V of these bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor. SECTION 3. RECORD DATE. 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, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. 12 In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish (or in the absence of such regulations, pursuant to a resolution adopted by the Board of Directors) concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity. SECTION 5. REGULATIONS. The issue, transfer, conversion and registration of certificates of stock shall be governed by such other regulations as the Board of Directors may by resolution establish from time to time. 13 ARTICLE VI - NOTICES SECTION 1. NOTICES. Except as otherwise specifically provided herein or required by law, all notices required by these bylaws to be given to any stockholder, director, officer, employee or agent, shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, by sending such notice by prepaid telegram or mailgram, or by sending such notice by Federal Express or other similar private carrier providing evidence of delivery. Any such notice shall be addressed to such stockholder, director, officer, employee, or agent at his or her last known address as the same appears on the books of the corporation. The time when such notice is received, if hand delivered, or dispatched, if delivered through the mails, by telegram or mailgram or by private carrier, shall be the time of the giving of the notice. SECTION 2. WAIVERS. A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. 14 ARTICLE VII - MISCELLANEOUS SECTION 1. FACSIMILE SIGNATURES. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the corporation may be used whenever and as authorized by the Board of Directors or a committee thereof. SECTION 2. CORPORATE SEAL. The Board of Directors may approve and adopt a suitable seal, containing the name of the corporation, which seal shall be in the charge of the secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the treasurer or by an assistant secretary or assistant treasurer. SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each member of any committee designated by the Board of Directors, and each officer of the corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon the books of account or other records of the corporation, and upon such information, opinions, reports and statements made to the corporation by any of its officers, employees, or committees of the board of directors, or by any other person as to matters reasonably believed to be within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the corporation. SECTION 4. FISCAL YEAR. The fiscal year of the corporation shall be as fixed by the Board of Directors. 15 SECTION 5. TIME PERIODS. In applying any provision of these bylaws which requires that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. 16 ARTICLE VIII - AMENDMENTS SECTION 1. AMENDMENTS. These bylaws may be amended or repealed by the Board of Directors at any meeting or by the affirmative vote of 65% or more of the outstanding shares of capital stock of the corporation entitled to vote at any meeting. EX-4.A 15 EXHIBIT 4(A) 1 Exhibit 4a STOCK OPTION AND PURCHASE AGREEMENT THIS STOCK OPTION AND PURCHASE AGREEMENT (this "Agreement") is made as of this 3 day of December, 1998 between Richard A. Cascarilla ("Seller") and Nevada Energy Company, Inc. ("Buyer"). RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of Buyer (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. The Plan contains a provision requiring Buyer to repurchase the shares of Series B Preferred Stock of Buyer owned by Seller for a per share price of 100,000 shares of Class A Common Stock and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock at an exercise price of $0.10 per share. C. Seller owns two (2) shares of Series B Preferred Stock, $0.01 par value per share (the "Stock"), of Buyer. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Stock Purchase. Seller shall sell, assign and transfer to Buyer and Buyer shall purchase from Seller the Stock in exchange for a per share price of 100,000 shares of Class A Common Stock of Buyer and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock of Buyer at an exercise price of $0.10 per share. 2. Payment. Buyer shall deliver certificates representing 200,000 shares of Class A Common Stock of Buyer in favor of Seller, concurrently with the execution hereof, the receipt of which Seller hereby acknowledges. In addition, Buyer hereby grants to Seller the right and option to purchase an additional 200,000 shares of Class A Common Stock of Buyer subject to, and in accordance with, the following terms and conditions (the "Option"): 2 2.1. The purchase price at which Seller shall be entitled to purchase shares of Class A Common Stock of Buyer upon exercise of the Option shall be $0.10 per share. 2.2. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four (24) months from the date of this Agreement. 2.3. Subject to the terms and conditions of this Agreement, including the limitation set forth in Section 2.2 above, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Buyer at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Seller. If requested by Buyer, Seller shall deliver this Agreement to the Secretary of the Buyer who shall endorse thereon a notation of such exercise. 2.4. The notice of exercise described in Section 2.3 above shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 2.5. Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is exercised, Buyer shall take such action as may be necessary to effect the transfer to Seller of the number of shares as to which such exercise was effective. 2.6. Seller shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Seller shall have paid the full purchase price for the numbers of shares in respect of 3 which the Option is exercised, (ii) Buyer shall have issued and delivered to Seller certificates evidencing the shares, and (iii) Seller's name shall have been entered as a stockholder of record on the books of Buyer, whereupon Seller shall have full voting and other ownership rights with respect to such shares. 2.7. Buyer shall take such action as is necessary to reserve a sufficient number of shares of Class A Common Stock for issuance upon exercise of the Option. 2.8. The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Seller, the Option shall be exercisable only by Seller. Any shares that Seller acquires upon exercise of the Option may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act of 1933 and applicable state securities laws. 2.9. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of Buyer, the Option shall continue in effect in accordance with its terms and Seller shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 2.10 If there shall be any capital reorganization, or consolidation, or merger of the Buyer with any other entity, or any sale of all or substantially all of the Buyer's property 4 and assets to any other entity, Buyer shall take appropriate action to enable Seller to receive upon any subsequent exercise of the Option, in whole or in part, in lieu of any common shares of Buyer, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such common shares. 2.11 Each certificate representing Common Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Seller pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER__, 1998 BETWEEN RICHARD A. CASCARILLA AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Class A Common Stock shall also bear this legend, unless Buyer shall have waived the requirement of such legend. 5 2.12 Seller hereby represents and warrants to Buyer that Seller is acquiring the Option and any Class A Common Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Class A Common Stock. 3. Surrender of Shares. Concurrently with the execution hereof, Seller shall deliver to Buyer Certificate No. ___ which represents the Stock duly endorsed for transfer to Buyer, receipt of which Buyer hereby acknowledges. Seller further covenants and agrees to take any and all reasonable steps necessary to transfer legal ownership of the Stock to Buyer. 4. Representation of Seller. Seller represents and warrants that he is the sole owner, both of record and beneficially, of the Stock and the Stock is free and clear of all claims, liens, charges and assessments of any kind whatsoever. 5. Survival of Representation and Warranties. All representations and warranties made hereunder shall survive the delivery of the Stock sold hereunder. 6. Closing. Closing for this transaction shall occur on December __, 1998. 7. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their legal representatives, successors and assigns. 8. Entire Agreement. This Agreement is intended by the parties hereto as a final expression of their agreement with respect to the subject matter hereof, and is intended as a complete and exclusive agreement of the terms and conditions of that agreement. This Agreement may not be modified, rescinded or terminated orally, and no modification, rescission, termination or attempted waiver of any of the terms, provisions or conditions hereof (including this paragraph) shall be valid unless in writing and signed by the party against whom the same is sought to be enforced. 6 9. Non-Waiver. No delay or failure by any party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right, unless otherwise expressly provided herein. 10. Payment of Legal Expenses. Buyer shall pay all fees and expenses of counsel incurred with respect to this Agreement. 11. Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. 12. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SELLER: Richard A. Cascarilla /s/ (Illegible) /s/ Richard A. Cascarilla - ------------------------------- ----------------------------- Witness BUYER: Nevada Energy Company, Inc. /s/ (Illegible) /s/ Richard A. Cascarilla - ------------------------------- ----------------------------- Witness By: President EX-4.B 16 EXHIBIT 4(B) 1 Exhibit 4b STOCK OPTION AND PURCHASE AGREEMENT THIS STOCK OPTION AND PURCHASE AGREEMENT (this "Agreement") is made as of this 3rd day of December, 1998 between Jeffrey Modesitt ("Seller") and Nevada Energy Company, Inc. ("Buyer"). RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of Buyer (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. The Plan contains a provision requiring Buyer to repurchase the shares of Series B Preferred Stock of Buyer owned by Seller for a per share price of 100,000 shares of Class A Common Stock and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock at an exercise price of $0.10 per share. C. Seller owns one (1) share of Series B Preferred Stock, $0.01 par value per share (the "Stock"), of Buyer. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Stock Purchase. Seller shall sell, assign and transfer to Buyer and Buyer shall purchase from Seller the Stock in exchange for a per share price of 100,000 shares of Class A Common Stock of Buyer and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock of Buyer at an exercise price of $0.10 per share. 2. Payment. Buyer shall deliver certificates representing 100,000 shares of Class A Common Stock of Buyer in favor of Seller, concurrently with the execution hereof, the receipt of which Seller hereby acknowledges. In addition, Buyer hereby grants to Seller the right and option to purchase an additional 100,000 shares of Class A Common Stock of Buyer subject to, and in accordance with, the following terms and conditions (the "Option"): 2 2.1. The purchase price at which Seller shall be entitled to purchase shares of Class A Common Stock of Buyer upon exercise of the Option shall be $0.10 per share. 2.2. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four (24) months from the date of this Agreement. 2.3. Subject to the terms and conditions of this Agreement, including the limitation set forth in Section 2.2 above, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Buyer at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Seller. If requested by Buyer, Seller shall deliver this Agreement to the Secretary of the Buyer who shall endorse thereon a notation of such exercise. 2.4. The notice of exercise described in Section 2.3 above shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 2.5. Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is exercised, Buyer shall take such action as may be necessary to effect the transfer to Seller of the number of shares as to which such exercise was effective. 2.6. Seller shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Seller shall have paid the full purchase price for the numbers of shares in respect of 3 which the Option is exercised, (ii) Buyer shall have issued and delivered to Seller certificates evidencing the shares, and (iii) Seller's name shall have been entered as a stockholder of record on the books of Buyer, whereupon Seller shall have full voting and other ownership rights with respect to such shares. 2.7. Buyer shall take such action as is necessary to reserve a sufficient number of shares of Class A Common Stock for issuance upon exercise of the Option. 2.8. The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Seller, the Option shall be exercisable only by Seller. Any shares that Seller acquires upon exercise of the Option may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act of 1933 and applicable state securities laws. 2.9. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of Buyer, the Option shall continue in effect in accordance with its terms and Seller shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 2.10 If there shall be any capital reorganization, or consolidation, or merger of the Buyer with any other entity, or any sale of all or substantially all of the Buyer's property 4 and assets to any other entity, Buyer shall take appropriate action to enable Seller to receive upon any subsequent exercise of the Option, in whole or in part, in lieu of any common shares of Buyer, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such common shares. 2.11 Each certificate representing Common Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Seller pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER__, 1998 BETWEEN JEFFREY MODESITT AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Class A Common Stock shall also bear this legend, unless Buyer shall have waived the requirement of such legend. 5 2.12 Seller hereby represents and warrants to Buyer that Seller is acquiring the Option and any Class A Common Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Class A Common Stock. 3. Surrender of Shares. Concurrently with the execution hereof, Seller shall deliver to Buyer Certificate No. B3 which represents the Stock duly endorsed for transfer to Buyer, receipt of which Buyer hereby acknowledges. Seller further covenants and agrees to take any and all reasonable steps necessary to transfer legal ownership of the Stock to Buyer. 4. Representation of Seller. Seller represents and warrants that he is the sole owner, both of record and beneficially, of the Stock and the Stock is free and clear of all claims, liens, charges and assessments of any kind whatsoever. 5. Survival of Representation and Warranties. All representations and warranties made hereunder shall survive the delivery of the Stock sold hereunder. 6. Closing. Closing for this transaction shall occur on December __, 1998. 7. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their legal representatives, successors and assigns. 8. Entire Agreement. This Agreement is intended by the parties hereto as a final expression of their agreement with respect to the subject matter hereof, and is intended as a complete and exclusive agreement of the terms and conditions of that agreement. This Agreement may not be modified, rescinded or terminated orally, and no modification, rescission, termination or attempted waiver of any of the terms, provisions or conditions hereof (including this paragraph) shall be valid unless in writing and signed by the party against whom the same is sought to be enforced. 6 9. Non-Waiver. No delay or failure by any party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right, unless otherwise expressly provided herein. 10. Payment of Legal Expenses. Buyer shall pay all fees and expenses of counsel incurred with respect to this Agreement. 11. Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. 12. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SELLER: Jeffrey Modesitt /s/ (Unknown) /s/ Jeffrey Modesitt - ---------------------------------- ----------------------------------- Witness BUYER: Nevada Energy Company, Inc. /s/ (Unknown) /s/ Richard Cascarilla - ---------------------------------- ----------------------------------- Witness By: EX-4.C 17 EXHIBIT 4(C) 1 Exhibit 4c STOCK OPTION AND PURCHASE AGREEMENT THIS STOCK OPTION AND PURCHASE AGREEMENT (this "Agreement") is made as of this 8th day of December, 1998 between Michael Kassouff ("Seller") and Nevada Energy Company, Inc. ("Buyer"). RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of Buyer (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. The Plan contains a provision requiring Buyer to repurchase the shares of Series B Preferred Stock of Buyer owned by Seller for a per share price of 100,000 shares of Class A Common Stock and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock at an exercise price of $0.10 per share. C. Seller owns one (1) share of Series B Preferred Stock, $0.01 par value per share (the "Stock"), of Buyer. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Stock Purchase. Seller shall sell, assign and transfer to Buyer and Buyer shall purchase from Seller the Stock in exchange for a per share price of 100,000 shares of Class A Common Stock of Buyer and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock of Buyer at an exercise price of $0.10 per share. 2. Payment. Buyer shall deliver certificates representing 100,000 shares of Class A Common Stock of Buyer in favor of Seller, concurrently with the execution hereof, the receipt of which Seller hereby acknowledges. In addition, Buyer hereby grants to Seller the right and option to purchase an additional 100,000 shares of Class A Common Stock of Buyer subject to, and in accordance with, the following terms and conditions (the "Option"): 2 2.1. The purchase price at which Seller shall be entitled to purchase shares of Class A Common Stock of Buyer upon exercise of the Option shall be $0.10 per share. 2.2. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four (24) months from the date of this Agreement. 2.3. Subject to the terms and conditions of this Agreement, including the limitation set forth in Section 2.2 above, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Buyer at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Seller. If requested by Buyer, Seller shall deliver this Agreement to the Secretary of the Buyer who shall endorse thereon a notation of such exercise. 2.4. The notice of exercise described in Section 2.3 above shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 2.5. Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is exercised, Buyer shall take such action as may be necessary to effect the transfer to Seller of the number of shares as to which such exercise was effective. 2.6. Seller shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Seller shall have paid the full purchase price for the numbers of shares in respect of 3 which the Option is exercised, (ii) Buyer shall have issued and delivered to Seller certificates evidencing the shares, and (iii) Seller's name shall have been entered as a stockholder of record on the books of Buyer, whereupon Seller shall have full voting and other ownership rights with respect to such shares. 2.7. Buyer shall take such action as is necessary to reserve a sufficient number of shares of Class A Common Stock for issuance upon exercise of the Option. 2.8. The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Seller, the Option shall be exercisable only by Seller. Any shares that Seller acquires upon exercise of the Option may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act of 1933 and applicable state securities laws. 2.9. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of Buyer, the Option shall continue in effect in accordance with its terms and Seller shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 2.10 If there shall be any capital reorganization, or consolidation, or merger of the Buyer with any other entity, or any sale of all or substantially all of the Buyer's property 4 and assets to any other entity, Buyer shall take appropriate action to enable Seller to receive upon any subsequent exercise of the Option, in whole or in part, in lieu of any common shares of Buyer, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such common shares. 2.11 Each certificate representing Common Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Seller pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER__, 1998 BETWEEN MICHAEL KASSOUFF AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Class A Common Stock shall also bear this legend, unless Buyer shall have waived the requirement of such legend. 5 2.12 Seller hereby represents and warrants to Buyer that Seller is acquiring the Option and any Class A Common Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Class A Common Stock. 3. Surrender of Shares. Concurrently with the execution hereof, Seller shall deliver to Buyer Certificate No. B4 which represents the Stock duly endorsed for transfer to Buyer, receipt of which Buyer hereby acknowledges. Seller further covenants and agrees to take any and all reasonable steps necessary to transfer legal ownership of the Stock to Buyer. 4. Representation of Seller. Seller represents and warrants that he is the sole owner, both of record and beneficially, of the Stock and the Stock is free and clear of all claims, liens, charges and assessments of any kind whatsoever. 5. Survival of Representation and Warranties. All representations and warranties made hereunder shall survive the delivery of the Stock sold hereunder. 6. Closing. Closing for this transaction shall occur on December __, 1998. 7. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their legal representatives, successors and assigns. 8. Entire Agreement. This Agreement is intended by the parties hereto as a final expression of their agreement with respect to the subject matter hereof, and is intended as a complete and exclusive agreement of the terms and conditions of that agreement. This Agreement may not be modified, rescinded or terminated orally, and no modification, rescission, termination or attempted waiver of any of the terms, provisions or conditions hereof (including this paragraph) shall be valid unless in writing and signed by the party against whom the same is sought to be enforced. 6 9. Non-Waiver. No delay or failure by any party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right, unless otherwise expressly provided herein. 10. Payment of Legal Expenses. Buyer shall pay all fees and expenses of counsel incurred with respect to this Agreement. 11. Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. 12. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SELLER: Michael Kassouff /s/ (Unknown) /s/ Michael Kassouff - --------------------------------- ------------------------------------ Witness BUYER: Nevada Energy Company, Inc. /s/ (Unknown) /s/ Richard Cascarilla - --------------------------------- ------------------------------------ Witness By: EX-4.D 18 EXHIBIT 4(D) 1 Exhibit 4d STOCK OPTION AND PURCHASE AGREEMENT THIS STOCK OPTION AND PURCHASE AGREEMENT (this "Agreement") is made as of this 9th day of December, 1998 between Jeffrey Hartman ("Seller") and Nevada Energy Company, Inc. ("Buyer"). RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of Buyer (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. The Plan contains a provision requiring Buyer to repurchase the shares of Series B Preferred Stock of Buyer owned by Seller for a per share price of 100,000 shares of Class A Common Stock and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock at an exercise price of $0.10 per share. C. Seller owns one (1) share of Series B Preferred Stock, $0.01 par value per share (the "Stock"), of Buyer. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Stock Purchase. Seller shall sell, assign and transfer to Buyer and Buyer shall purchase from Seller the Stock in exchange for a per share price of 100,000 shares of Class A Common Stock of Buyer and a twenty-four (24) month option to purchase an additional 100,000 shares of Class A Common Stock of Buyer at an exercise price of $0.10 per share. 2. Payment. Buyer shall deliver certificates representing 100,000 shares of Class A Common Stock of Buyer in favor of Seller, concurrently with the execution hereof, the receipt of which Seller hereby acknowledges. In addition, Buyer hereby grants to Seller the right and option to purchase an additional 100,000 shares of Class A Common Stock of Buyer subject to, and in accordance with, the following terms and conditions (the "Option"): 2 2.1. The purchase price at which Seller shall be entitled to purchase shares of Class A Common Stock of Buyer upon exercise of the Option shall be $0.10 per share. 2.2. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four (24) months from the date of this Agreement. 2.3. Subject to the terms and conditions of this Agreement, including the limitation set forth in Section 2.2 above, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Buyer at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Seller. If requested by Buyer, Seller shall deliver this Agreement to the Secretary of the Buyer who shall endorse thereon a notation of such exercise. 2.4. The notice of exercise described in Section 2.3 above shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 2.5. Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is exercised, Buyer shall take such action as may be necessary to effect the transfer to Seller of the number of shares as to which such exercise was effective. 2.6. Seller shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Seller shall have paid the full purchase price for the numbers of shares in respect of 3 which the Option is exercised, (ii) Buyer shall have issued and delivered to Seller certificates evidencing the shares, and (iii) Seller's name shall have been entered as a stockholder of record on the books of Buyer, whereupon Seller shall have full voting and other ownership rights with respect to such shares. 2.7. Buyer shall take such action as is necessary to reserve a sufficient number of shares of Class A Common Stock for issuance upon exercise of the Option. 2.8. The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Seller, the Option shall be exercisable only by Seller. Any shares that Seller acquires upon exercise of the Option may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act of 1933 and applicable state securities laws. 2.9. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of Buyer, the Option shall continue in effect in accordance with its terms and Seller shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 2.10 If there shall be any capital reorganization, or consolidation, or merger of the Buyer with any other entity, or any sale of all or substantially all of the Buyer's property 4 and assets to any other entity, Buyer shall take appropriate action to enable Seller to receive upon any subsequent exercise of the Option, in whole or in part, in lieu of any common shares of Buyer, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such common shares. 2.11 Each certificate representing Common Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Seller pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER__, 1998 BETWEEN JEFFREY HARTMAN AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Class A Common Stock shall also bear this legend, unless Buyer shall have waived the requirement of such legend. 5 2.12 Seller hereby represents and warrants to Buyer that Seller is acquiring the Option and any Class A Common Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Class A Common Stock. 3. Surrender of Shares. Concurrently with the execution hereof, Seller shall deliver to Buyer Certificate No. ___ which represents the Stock duly endorsed for transfer to Buyer, receipt of which Buyer hereby acknowledges. Seller further covenants and agrees to take any and all reasonable steps necessary to transfer legal ownership of the Stock to Buyer. 4. Representation of Seller. Seller represents and warrants that he is the sole owner, both of record and beneficially, of the Stock and the Stock is free and clear of all claims, liens, charges and assessments of any kind whatsoever. 5. Survival of Representation and Warranties. All representations and warranties made hereunder shall survive the delivery of the Stock sold hereunder. 6. Closing. Closing for this transaction shall occur on December __, 1998. 7. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the respective parties hereto, their legal representatives, successors and assigns. 8. Entire Agreement. This Agreement is intended by the parties hereto as a final expression of their agreement with respect to the subject matter hereof, and is intended as a complete and exclusive agreement of the terms and conditions of that agreement. This Agreement may not be modified, rescinded or terminated orally, and no modification, rescission, termination or attempted waiver of any of the terms, provisions or conditions hereof (including this paragraph) shall be valid unless in writing and signed by the party against whom the same is sought to be enforced. 6 9. Non-Waiver. No delay or failure by any party to exercise any right under this Agreement, and no partial or single exercise of that right, shall constitute a waiver of that or any other right, unless otherwise expressly provided herein. 10. Payment of Legal Expenses. Buyer shall pay all fees and expenses of counsel incurred with respect to this Agreement. 11. Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. 12. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SELLER: Jeffrey Hartman /s/ Jeffrey Hartman - --------------------------------- ----------------------------------- Witness BUYER: Nevada Energy Company, Inc. /s/ Richard Cascarilla - --------------------------------- ----------------------------------- Witness By: EX-4.E 19 EXHIBIT 4(E) 1 Exhibit 4e STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement") is dated as of December __, 1998 between Nevada Energy Company, Inc. (the "Company") and Richard A. Cascarilla. RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of the Company (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. As set forth in the Company's Second Amended Disclosure Statement Pursuant to 11 U.S.C. Section 1125 (the "Disclosure Statement"), which Disclosure Statement was submitted to all creditors and shareholders of the Company in connection with acceptance or rejection of the Plan, upon confirmation of the Plan, directors of the Company are to receive compensation in the form of, among other things, options to purchase 2,500 shares of Class A Common Stock of the Company per director per quarter at $0.10 per share. C. Richard A. Cascarilla was a director of the Company as of the date of confirmation of the Plan and continues to serve in that capacity. NOW, THEREFORE, in consideration of the premises, obligations and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used herein, the following terms have the following respective meanings. Capitalized terms not defined in this Section 1 shall have the meanings assigned to them elsewhere in this Agreement. a. "Stock" means the Class A Common Stock of the Company, par value $.001 per share. b. "Director's Shares" means the shares of Stock that Director acquires by exercising the Option. 2 c. "Code" means the Internal Revenue Code of 1986, as amended. d. "Securities Act" means the Securities Act of 1933, as amended. 2. Grant of Options. a. For the quarter beginning September 1998 and ending December 1998 the Company hereby grants to Director the right and option to purchase all or any part of 2,500 shares of Stock subject to, and in accordance with, the terms and conditions set forth herein (the "Option"). b. The Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. c. The Company shall take such action as is necessary to reserve a sufficient number of shares of Stock for issuance upon exercise of the Option. 3. Purchase Price. The purchase price per share at which Director shall be entitled to purchase shares of Stock upon exercise of the Option shall be $0.10 per share. 4. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four months (24) months from the date of this Agreement. 5. Manner of Exercisability and Payment. 5.1 Subject to the terms and conditions of this Agreement, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Company at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Director. If requested by the Company, Director shall deliver this Agreement to the Company for endorsement thereon a notation of such exercise. 5.2 The notice of exercise described in Section 5.1 hereof shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 5.3 Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is being exercised. the Company shall take such action as may be 3 necessary to effect the transfer to Director of the number of shares as to which such exercise was effective. 5.4 Director shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Director shall have paid the full purchase price for the number of shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered to Director certificates evidencing the shares, and (iii) Director's name shall have been entered as a stockholder of record on the books of the Company, whereupon Director shall have full voting and other ownership rights with respect to such shares. 6. Nontransferability. 6.1 The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Director, the Option shall be exercisable only by Director. Director's Shares may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and any applicable state securities laws. 7. Effect of Liquidation, Dissolution, Reorganization, Consolidation or Merger. 7.1. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of the Company, the Option shall continue in effect in accordance with its terms and Director shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 7.2. If there shall be any capital reorganization, or consolidation, or merger of the Company with any other entity, or any sale of all or substantially all of the Company's property and assets to any other entity, Company shall take appropriate action to enable Director to receive upon any subsequent exercise of such Option, in whole or in part, in lieu of any common shares of the Company, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such commons shares. 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Director that: a. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. 4 b. The Company has the requisite power and authority to enter into and perform the terms of this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Company and no other corporate approval or authorization or other action on the part of the Company is necessary in order to permit the Company to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company, and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms c. Shares of Stock, when issued, delivered and paid for upon exercise of any Option as described in this Agreement will be validly issued, fully paid and non-assessable. 9. Representations and Warranties of Director. Director hereby represents and warrants to the Company that Director is acquiring the Option and any Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Stock. 10. Stock Legend. Each certificate representing Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Director pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER __, 1998 BETWEEN RICHARD A. CASCARILLA AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL 5 BE EFFECTIVE UNTIL ALL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Common Stock shall also bear this legend, unless the Company shall have waived the requirement of such legend. 11. Notices. All notices or other communications which may be or are required to be given, served or sent by a party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission, addressed as follows: If to the Company: NEVADA ENERGY COMPANY, INC. 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 Attention: Richard A. Cascarilla, President If to Director: Richard A. Cascarilla 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 or to such other address as may be provided in writing by party to the other parties. 12. Modification of Agreement. This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. 6 13. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. 14. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. 15. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of Director's legal representatives. All obligations imposed upon Director and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon Director's heirs, executors, administrators and successors. 16. Headings. Headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 17. Counterparts. This Agreement may be executed in ore or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. [EXECUTION PAGE FOLLOWS] 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COMPANY: NEVADA ENERGY COMPANY, INC. /s/ Richard A. Cascarilla ---------------------------------- By: Richard A. Cascarilla Title: President OPTIONEE: /s/ Richard A. Cascarilla ---------------------------------- Richard A. Cascarilla EX-4.F 20 EXHIBIT 4(F) 1 Exhibit 4f STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement") is dated as of December 9th, 1998 between Nevada Energy Company, Inc. (the "Company") and Jeffrey L. Hartman. RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of the Company (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. As set forth in the Company's Second Amended Disclosure Statement Pursuant to 11 U.S.C. Section 1125 (the "Disclosure Statement"), which Disclosure Statement was submitted to all creditors and shareholders of the Company in connection with acceptance or rejection of the Plan, upon confirmation of the Plan, directors of the Company are to receive compensation in the form of, among other things, options to purchase 2,500 shares of Class A Common Stock of the Company per director per quarter at $0.10 per share. C. Jeffrey L. Hartman was named a director of the Company as of the date of confirmation of the Plan and continues to serve in that capacity. NOW, THEREFORE, in consideration of the premises, obligations and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used herein, the following terms have the following respective meanings. Capitalized terms not defined in this Section 1 shall have the meanings assigned to them elsewhere in this Agreement. a. "Stock" means the Class A Common Stock of the Company, par value $.001 per share. b. "Director's Shares" means the shares of Stock that Director acquires by exercising the Option. c. "Code" means the Internal Revenue Code of 1986, as amended. 2 d. "Securities Act" means the Securities Act of 1933, as amended. 2. Grant of Options. a. For the quarter beginning September 1998 and ending December 1998 the Company hereby grants to Director the right and option to purchase all or any part of 2,500 shares of Stock subject to, and in accordance with, the terms and conditions set forth herein (the "Option"). b. The Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. c. The Company shall take such action as is necessary to reserve a sufficient number of shares of Stock for issuance upon exercise of the Option. 3. Purchase Price. The purchase price per share at which Director shall be entitled to purchase shares of Stock upon exercise of the Option shall be $0.10 per share. 4. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four months (24) months from the date of this Agreement. 5. Manner of Exercisability and Payment. 5.1 Subject to the terms and conditions of this Agreement, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Company at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Director. If requested by the Company, Director shall deliver this Agreement to the Company for endorsement thereon a notation of such exercise. 5.2 The notice of exercise described in Section 5.1 hereof shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 5.3 Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is being exercised. the Company shall take such action as may be 3 necessary to effect the transfer to Director of the number of shares as to which such exercise was effective. 5.4 Director shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Director shall have paid the full purchase price for the number of shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered to Director certificates evidencing the shares, and (iii) Director's name shall have been entered as a stockholder of record on the books of the Company, whereupon Director shall have full voting and other ownership rights with respect to such shares. 6. Nontransferability. 6.1 The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Director, the Option shall be exercisable only by Director. Director's Shares may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and any applicable state securities laws. 7. Effect of Liquidation, Dissolution, Reorganization, Consolidation or Merger. 7.1. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of the Company, the Option shall continue in effect in accordance with its terms and Director shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 7.2. If there shall be any capital reorganization, or consolidation, or merger of the Company with any other entity, or any sale of all or substantially all of the Company's property and assets to any other entity, Company shall take appropriate action to enable Director to receive upon any subsequent exercise of such Option, in whole or in part, in lieu of any common shares of the Company, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such commons shares. 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Director that: a. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. 4 b. The Company has the requisite power and authority to enter into and perform the terms of this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Company and no other corporate approval or authorization or other action on the part of the Company is necessary in order to permit the Company to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company, and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms c. Shares of Stock, when issued, delivered and paid for upon exercise of any Option as described in this Agreement will be validly issued, fully paid and non-assessable. 9. Representations and Warranties of Director. Director hereby represents and warrants to the Company that Director is acquiring the Option and any Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Stock. 10. Stock Legend. Each certificate representing Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Director pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER __, 1998 BETWEEN JEFFREY L. HARTMAN AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE 5 EFFECTIVE UNTIL ALL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Common Stock shall also bear this legend, unless the Company shall have waived the requirement of such legend. 11. Notices. All notices or other communications which may be or are required to be given, served or sent by a party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission, addressed as follows: If to the Company: NEVADA ENERGY COMPANY, INC. 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 Attention: Richard A. Cascarilla, President If to Director: Jeffrey L. Hartman, Esquire Hartman & Armstrong, Ltd. 427 West Plumb Lane Reno, NV 89509 or to such other address as may be provided in writing by party to the other parties. 12. Modification of Agreement. This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. 6 13. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. 14. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. 15. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of Director's legal representatives. All obligations imposed upon Director and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon Director's heirs, executors, administrators and successors. 16. Headings. Headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 17. Counterparts. This Agreement may be executed in ore or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. [EXECUTION PAGE FOLLOWS] 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COMPANY: NEVADA ENERGY COMPANY, INC. /s/ Richard A. Cascarilla ----------------------------------- By: Richard A. Cascarilla Title: President OPTIONEE: /s/ Jeffrey L. Hartman ----------------------------------- Jeffrey L. Hartman EX-4.G 21 EXHIBIT 4(G) 1 Exhibit 4g STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement") is dated as of December 10, 1998 between Nevada Energy Company, Inc. (the "Company") and Michael Kassouff. RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of the Company (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. As set forth in the Company's Second Amended Disclosure Statement Pursuant to 11 U.S.C. Section 1125 (the "Disclosure Statement"), which Disclosure Statement was submitted to all creditors and shareholders of the Company in connection with acceptance or rejection of the Plan, upon confirmation of the Plan, directors of the Company are to receive compensation in the form of, among other things, options to purchase 2,500 shares of Class A Common Stock of the Company per director per quarter at $0.10 per share. C. Michael Kassouff was a director of the Company as of the date of confirmation of the Plan and continues to serve in that capacity. NOW, THEREFORE, in consideration of the premises, obligations and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used herein, the following terms have the following respective meanings. Capitalized terms not defined in this Section 1 shall have the meanings assigned to them elsewhere in this Agreement. a. "Stock" means the Class A Common Stock of the Company, par value $.001 per share. b. "Director's Shares" means the shares of Stock that Director acquires by exercising the Option. c. "Code" means the Internal Revenue Code of 1986, as amended. 2 d. "Securities Act" means the Securities Act of 1933, as amended. 2. Grant of Options. a. For the quarter beginning September 1998 and ending December 1998 the Company hereby grants to Director the right and option to purchase all or any part of 2,500 shares of Stock subject to, and in accordance with, the terms and conditions set forth herein (the "Option"). b. The Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. c. The Company shall take such action as is necessary to reserve a sufficient number of shares of Stock for issuance upon exercise of the Option. 3. Purchase Price. The purchase price per share at which Director shall be entitled to purchase shares of Stock upon exercise of the Option shall be $0.10 per share. 4. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four months (24) months from the date of this Agreement. 5. Manner of Exercisability and Payment. 5.1 Subject to the terms and conditions of this Agreement, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Company at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Director. If requested by the Company, Director shall deliver this Agreement to the Company for endorsement thereon a notation of such exercise. 5.2 The notice of exercise described in Section 5.1 hereof shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 5.3 Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is being exercised. the Company shall take such action as may be 3 necessary to effect the transfer to Director of the number of shares as to which such exercise was effective. 5.4 Director shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Director shall have paid the full purchase price for the number of shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered to Director certificates evidencing the shares, and (iii) Director's name shall have been entered as a stockholder of record on the books of the Company, whereupon Director shall have full voting and other ownership rights with respect to such shares. 6. Nontransferability. 6.1 The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Director, the Option shall be exercisable only by Director. Director's Shares may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and any applicable state securities laws. 7. Effect of Liquidation, Dissolution, Reorganization, Consolidation or Merger. 7.1. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of the Company, the Option shall continue in effect in accordance with its terms and Director shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 7.2. If there shall be any capital reorganization, or consolidation, or merger of the Company with any other entity, or any sale of all or substantially all of the Company's property and assets to any other entity, Company shall take appropriate action to enable Director to receive upon any subsequent exercise of such Option, in whole or in part, in lieu of any common shares of the Company, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such commons shares. 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Director that: a. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. 4 b. The Company has the requisite power and authority to enter into and perform the terms of this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Company and no other corporate approval or authorization or other action on the part of the Company is necessary in order to permit the Company to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company, and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms c. Shares of Stock, when issued, delivered and paid for upon exercise of any Option as described in this Agreement will be validly issued, fully paid and non-assessable. 9. Representations and Warranties of Director. Director hereby represents and warrants to the Company that Director is acquiring the Option and any Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Stock. 10. Stock Legend. Each certificate representing Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Director pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER __, 1998 BETWEEN MICHAEL KASSOUFF AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE 5 EFFECTIVE UNTIL ALL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Common Stock shall also bear this legend, unless the Company shall have waived the requirement of such legend. 11. Notices. All notices or other communications which may be or are required to be given, served or sent by a party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission, addressed as follows: If to the Company: NEVADA ENERGY COMPANY, INC. 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 Attention: Richard A. Cascarilla, President If to Director: Michael Kassouff 6421 W. Sam Houston Parkway N. Houston, TX 77041 or to such other address as may be provided in writing by party to the other parties. 12. Modification of Agreement. This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. 6 13. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. 14. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. 15. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of Director's legal representatives. All obligations imposed upon Director and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon Director's heirs, executors, administrators and successors. 16. Headings. Headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 17. Counterparts. This Agreement may be executed in ore or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. [EXECUTION PAGE FOLLOWS] 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COMPANY: NEVADA ENERGY COMPANY, INC. /s/ Richard Cascarilla ----------------------------------- By: Richard A. Cascarilla Title: President OPTIONEE: /s/ Michael Kassouff ----------------------------------- Michael Kassouff EX-4.H 22 EXHIBIT 4(H) 1 Exhibit 4h STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement") is dated as of December __, 1998 between Nevada Energy Company, Inc. (the "Company") and Richard A. Cascarilla. RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of the Company (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. As set forth in the Company's Second Amended Disclosure Statement Pursuant to 11 U.S.C. Section 1125 (the "Disclosure Statement"), which Disclosure Statement was submitted to all creditors and shareholders of the Company in connection with acceptance or rejection of the Plan, upon confirmation of the Plan, directors of the Company are entitled to receive retroactive compensation for all services issued to the date of confirmation of the Plan in the form of stock options allowing for the purchase of 5,000 shares of Class A Common Stock of the Company per director per month at $0.10 per share. C. Richard A. Cascarilla was a director of the Company as of the date of the Disclosure Statement and has served in that capacity continuously from May 19, 1997 through the present. NOW, THEREFORE, in consideration of the premises, obligations and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used herein, the following terms have the following respective meanings. Capitalized terms not defined in this Section 1 shall have the meanings assigned to them elsewhere in this Agreement. a. "Stock" means the Class A Common Stock of the Company, par value $.001 per share. 2 b. "Director's Shares" means the shares of Stock that Director acquires by exercising the Option. c. "Code" means the Internal Revenue Code of 1986, as amended. d. "Securities Act" means the Securities Act of 1933, as amended. 2. Grant of Options. a. The Company hereby grants to Director the right and option to purchase all or any part of 80,000 shares of Stock, subject to, and in accordance with, the terms and conditions set forth herein (the "Option"). b. The Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. c. The Company shall take such action as is necessary to reserve a sufficient number of shares of Stock for issuance upon exercise of the Option. 3. Purchase Price. The purchase price per share at which Director shall be entitled to purchase shares of Stock upon exercise of the Option shall be $0.10 per share. 4. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four months (24) months from the date of this Agreement. 5. Manner of Exercisability and Payment. 5.1 Subject to the terms and conditions of this Agreement, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Company at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Director. If requested by the Company, Director shall deliver this Agreement to the Company for endorsement thereon a notation of such exercise. 5.2 The notice of exercise described in Section 5.1 hereof shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 3 5.3 Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is being exercised. the Company shall take such action as may be necessary to effect the transfer to Director of the number of shares as to which such exercise was effective. 5.4 Director shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Director shall have paid the full purchase price for the number of shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered to Director certificates evidencing the shares, and (iii) Director's name shall have been entered as a stockholder of record on the books of the Company, whereupon Director shall have full voting and other ownership rights with respect to such shares. 6. Nontransferability. 6.1 The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Director, the Option shall be exercisable only by Director. Director's Shares may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and any applicable state securities laws. 7. Effect of Liquidation, Dissolution, Reorganization, Consolidation or Merger. 7.1. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of the Company, the Option shall continue in effect in accordance with its terms and Director shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 7.2. If there shall be any capital reorganization, or consolidation, or merger of the Company with any other entity, or any sale of all or substantially all of the Company's property and assets to any other entity, Company shall take appropriate action to enable Director to receive upon any subsequent exercise of such Option, in whole or in part, in lieu of any common shares of the Company, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such commons shares. 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Director that: 4 a. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. b. The Company has the requisite power and authority to enter into and perform the terms of this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Company and no other corporate approval or authorization or other action on the part of the Company is necessary in order to permit the Company to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company, and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms c. Shares of Stock, when issued, delivered and paid for upon exercise of any Option as described in this Agreement will be validly issued, fully paid and non-assessable. 9. Representations and Warranties of Director. Director hereby represents and warrants to the Company that Director is acquiring the Option and any Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Stock. 10. Stock Legend. Each certificate representing Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Director pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER __, 1998 BETWEEN RICHARD A. CASCARILLA AND NEVADA ENERGY COMPANY, 5 INC. NO TRANSFER OF THESE SECURITIES SHALL BE EFFECTIVE UNTIL ALL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Common Stock shall also bear this legend, unless the Company shall have waived the requirement of such legend. 11. Notices. All notices or other communications which may be or are required to be given, served or sent by a party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission, addressed as follows: If to the Company: NEVADA ENERGY COMPANY, INC. 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 Attention: Richard A. Cascarilla, President If to Director: Richard A. Cascarilla 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 or to such other address as may be provided in writing by party to the other parties. 12. Modification of Agreement. This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. 6 13. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. 14. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. 15. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of Director's legal representatives. All obligations imposed upon Director and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon Director's heirs, executors, administrators and successors. 16. Headings. Headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 17. Counterparts. This Agreement may be executed in ore or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. [EXECUTION PAGE FOLLOWS] 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COMPANY: NEVADA ENERGY COMPANY, INC. /s/ Richard A. Cascarilla ----------------------------------- By: Richard A. Cascarilla Title: President OPTIONEE: /s/ Richard A. Cascarilla ----------------------------------- Richard A. Cascarilla EX-4.I 23 EXHIBIT 4(I) 1 Exhibit 4i STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement") is dated as of December 10, 1998 between Nevada Energy Company, Inc. (the "Company") and Michael Kassouff. RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of the Company (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. As set forth in the Company's Second Amended Disclosure Statement Pursuant to 11 U.S.C. Section 1125 (the "Disclosure Statement"), which Disclosure Statement was submitted to all creditors and shareholders of the Company in connection with acceptance or rejection of the Plan, upon confirmation of the Plan, directors of the Company are entitled to receive retroactive compensation for all services issued to the date of confirmation of the Plan in the form of stock options allowing for the purchase of 5,000 shares of Class A Common Stock of the Company per director per month at $0.10 per share. C. Michael Kassouff was a director of the Company as of the date of the Disclosure Statement and has served in that capacity continuously from January 1, 1997 through the present. NOW, THEREFORE, in consideration of the premises, obligations and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used herein, the following terms have the following respective meanings. Capitalized terms not defined in this Section 1 shall have the meanings assigned to them elsewhere in this Agreement. a. "Stock" means the Class A Common Stock of the Company, par value $.001 per share. b. "Director's Shares" means the shares of Stock that Director acquires by exercising the Option. 2 c. "Code" means the Internal Revenue Code of 1986, as amended. d. "Securities Act" means the Securities Act of 1933, as amended. 2. Grant of Options. a. The Company hereby grants to Director the right and option to purchase all or any part of 105,000 shares of Stock, subject to, and in accordance with, the terms and conditions set forth herein (the "Option"). b. The Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. c. The Company shall take such action as is necessary to reserve a sufficient number of shares of Stock for issuance upon exercise of the Option. 3. Purchase Price. The purchase price per share at which Director shall be entitled to purchase shares of Stock upon exercise of the Option shall be $0.10 per share. 4. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four months (24) months from the date of this Agreement. 5. Manner of Exercisability and Payment. 5.1 Subject to the terms and conditions of this Agreement, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Company at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Director. If requested by the Company, Director shall deliver this Agreement to the Company for endorsement thereon a notation of such exercise. 5.2 The notice of exercise described in Section 5.1 hereof shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 5.3 Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is being exercised. the Company shall take such action as may be 3 necessary to effect the transfer to Director of the number of shares as to which such exercise was effective. 5.4 Director shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Director shall have paid the full purchase price for the number of shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered to Director certificates evidencing the shares, and (iii) Director's name shall have been entered as a stockholder of record on the books of the Company, whereupon Director shall have full voting and other ownership rights with respect to such shares. 6. Nontransferability. 6.1 The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Director, the Option shall be exercisable only by Director. Director's Shares may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and any applicable state securities laws. 7. Effect of Liquidation, Dissolution, Reorganization, Consolidation or Merger. 7.1. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of the Company, the Option shall continue in effect in accordance with its terms and Director shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 7.2. If there shall be any capital reorganization, or consolidation, or merger of the Company with any other entity, or any sale of all or substantially all of the Company's property and assets to any other entity, Company shall take appropriate action to enable Director to receive upon any subsequent exercise of such Option, in whole or in part, in lieu of any common shares of the Company, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such commons shares. 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Director that: a. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. 4 b. The Company has the requisite power and authority to enter into and perform the terms of this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Company and no other corporate approval or authorization or other action on the part of the Company is necessary in order to permit the Company to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company, and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms c. Shares of Stock, when issued, delivered and paid for upon exercise of any Option as described in this Agreement will be validly issued, fully paid and non-assessable. 9. Representations and Warranties of Director. Director hereby represents and warrants to the Company that Director is acquiring the Option and any Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Stock. 10. Stock Legend. Each certificate representing Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Director pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER 10, 1998 BETWEEN MICHAEL KASSOUFF AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE 5 EFFECTIVE UNTIL ALL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Common Stock shall also bear this legend, unless the Company shall have waived the requirement of such legend. 11. Notices. All notices or other communications which may be or are required to be given, served or sent by a party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission, addressed as follows: If to the Company: NEVADA ENERGY COMPANY, INC. 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 Attention: Richard A. Cascarilla, President If to Director: Michael Kassouff 6421 W. Sam Houston Parkway N. Houston, TX 77041 or to such other address as may be provided in writing by party to the other parties. 12. Modification of Agreement. This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. 13. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. 6 14. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. 15. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of Director's legal representatives. All obligations imposed upon Director and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon Director's heirs, executors, administrators and successors. 16. Headings. Headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 17. Counterparts. This Agreement may be executed in ore or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. [EXECUTION PAGE FOLLOWS] 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COMPANY: NEVADA ENERGY COMPANY, INC. /s/ Richard A. Cascarilla ------------------------------------ By: Richard A. Cascarilla Title: President OPTIONEE: /s/ Michael Kassouff ------------------------------------ Michael Kassouff EX-4.J 24 EXHIBIT 4(J) 1 Exhibit 4j STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement") is dated as of December __, 1998 between Nevada Energy Company, Inc. (the "Company") and Lawrence Herth. RECITALS A. Pursuant to Section 1129 under Chapter 11 of Title 11 of the United States Code, the Bankruptcy Code, a plan of reorganization of the Company (the "Plan") was confirmed on September 15, 1998 by Order of the United States Bankruptcy Court for the District of Nevada, Case No. BK-97-30265-BMG. B. As set forth in the Company's Second Amended Disclosure Statement Pursuant to 11 U.S.C. Section 1125 (the "Disclosure Statement"), which Disclosure Statement was submitted to all creditors and shareholders of the Company in connection with acceptance or rejection of the Plan, upon confirmation of the Plan, directors of the Company are entitled to receive retroactive compensation for all services issued to the date of confirmation of the Plan in the form of stock options allowing for the purchase of 5,000 shares of Class A Common Stock of the Company per director per month at $0.10 per share. C. Lawrence Herth was a director of the Company as of the date of the Disclosure Statement and served in that capacity continuously from May 19, 1997 until September 15, 1998. NOW, THEREFORE, in consideration of the premises, obligations and agreements contained herein, and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used herein, the following terms have the following respective meanings. Capitalized terms not defined in this Section 1 shall have the meanings assigned to them elsewhere in this Agreement. a. "Stock" means the Class A Common Stock of the Company, par value $.001 per share. b. "Director's Shares" means the shares of Stock that Director acquires by exercising the Option. 2 c. "Code" means the Internal Revenue Code of 1986, as amended. d. "Securities Act" means the Securities Act of 1933, as amended. 2. Grant of Options. a. The Company hereby grants to Director the right and option to purchase all or any part of 80,000 shares of Stock, subject to, and in accordance with, the terms and conditions set forth herein (the "Option"). b. The Option is not intended to qualify as an incentive stock option within the meaning of Section 422 of the Code. c. The Company shall take such action as is necessary to reserve a sufficient number of shares of Stock for issuance upon exercise of the Option. 3. Purchase Price. The purchase price per share at which Director shall be entitled to purchase shares of Stock upon exercise of the Option shall be $0.10 per share. 4. Duration of Option. The Option shall be exercisable to the extent and in the manner provided herein for a period of twenty-four months (24) months from the date of this Agreement. 5. Manner of Exercisability and Payment. 5.1 Subject to the terms and conditions of this Agreement, the Option may be exercised in whole at any time, or in part from time to time, by delivery of written notice to the Company at its principal executive office. Such notice shall state the number of shares in respect of which the Option is being exercised and shall be signed by Director. If requested by the Company, Director shall deliver this Agreement to the Company for endorsement thereon a notation of such exercise. 5.2 The notice of exercise described in Section 5.1 hereof shall be accompanied by the full purchase price for the shares in respect of which the Option is being exercised, in cash or by check. 5.3 Upon receipt of notice of exercise and full payment for the shares in respect of which the Option is being exercised. the Company shall take such action as may be 3 necessary to effect the transfer to Director of the number of shares as to which such exercise was effective. 5.4 Director shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to any shares subject to the Option until (i) the Option shall have been exercised pursuant to the terms of this Agreement and Director shall have paid the full purchase price for the number of shares in respect of which the Option was exercised, (ii) the Company shall have issued and delivered to Director certificates evidencing the shares, and (iii) Director's name shall have been entered as a stockholder of record on the books of the Company, whereupon Director shall have full voting and other ownership rights with respect to such shares. 6. Nontransferability. 6.1 The Option shall not be transferable other than by will or by the laws of descent and distribution. During the lifetime of Director, the Option shall be exercisable only by Director. Director's Shares may be transferred freely upon registration under the Securities Act and any applicable state securities laws, or pursuant to an exemption from registration under the Securities Act and any applicable state securities laws. 7. Effect of Liquidation, Dissolution, Reorganization, Consolidation or Merger. 7.1. Subject to the terms and conditions of this Agreement, upon the effective date of the liquidation or dissolution of the Company, the Option shall continue in effect in accordance with its terms and Director shall be entitled to receive in respect of all shares subject to the Option, upon exercise of the Option, the same number and kind of stock, securities, cash, property or other consideration that each holder of shares was entitled to receive in such transaction. 7.2. If there shall be any capital reorganization, or consolidation, or merger of the Company with any other entity, or any sale of all or substantially all of the Company's property and assets to any other entity, Company shall take appropriate action to enable Director to receive upon any subsequent exercise of such Option, in whole or in part, in lieu of any common shares of the Company, the share or shares, securities, interest or interests, or other assets as were issuable or payable upon such reorganization, consolidation, merger, or sale in respect of or in exchange for such commons shares. 8. Representations and Warranties of the Company. The Company hereby represents and warrants to Director that: a. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. 4 b. The Company has the requisite power and authority to enter into and perform the terms of this Agreement. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of the Company and no other corporate approval or authorization or other action on the part of the Company is necessary in order to permit the Company to consummate the transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company, and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms c. Shares of Stock, when issued, delivered and paid for upon exercise of any Option as described in this Agreement will be validly issued, fully paid and non-assessable. 9. Representations and Warranties of Director. Director hereby represents and warrants to the Company that Director is acquiring the Option and any Stock acquired by him pursuant to the exercise of the Option for his own account, for investment and not with a view to the sale or distribution thereof, nor with any present intention to distribute or sell the Stock. 10. Stock Legend. Each certificate representing Stock initially issued upon exercise of an Option, unless at the time of the exercise the Company has completed an initial public offering of its Common Stock and the sale of shares to Director pursuant to the exercise of the Option has been registered under the Securities Act, shall bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR IN A MANNER EXEMPT FROM REGISTRATION UNDER SUCH ACT. IN ADDITION, THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS SET FORTH IN A STOCK OPTION AGREEMENT DATED DECEMBER __, 1998 BETWEEN LAWRENCE HERTH AND NEVADA ENERGY COMPANY, INC. NO TRANSFER OF THESE SECURITIES SHALL BE 5 EFFECTIVE UNTIL ALL SUCH CONDITIONS HAVE BEEN FULFILLED. Certificates issued upon the transfer of any such shares of Common Stock shall also bear this legend, unless the Company shall have waived the requirement of such legend. 11. Notices. All notices or other communications which may be or are required to be given, served or sent by a party pursuant to this Agreement shall be in writing and shall be hand delivered (including delivery by courier), mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, or transmitted by telegram, telex or facsimile transmission, addressed as follows: If to the Company: NEVADA ENERGY COMPANY, INC. 321 West Lake Lansing Road Asher Court, Suite 100 East Lansing, MI 48823 Attention: Richard A. Cascarilla, President If to Director: Lawrence Herth 401 East 4th Street Reno, NV 89509 or to such other address as may be provided in writing by party to the other parties. 12. Modification of Agreement. This Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto. 13. Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms. 6 14. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of laws principles thereof. 15. Successors in Interest. This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of Director's legal representatives. All obligations imposed upon Director and all rights granted to the Company under this Agreement shall be final, binding and conclusive upon Director's heirs, executors, administrators and successors. 16. Headings. Headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 17. Counterparts. This Agreement may be executed in ore or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. [EXECUTION PAGE FOLLOWS] 7 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. COMPANY: NEVADA ENERGY COMPANY, INC. /s/ Richard A. Cascarilla ------------------------------------ By: Richard A. Cascarilla Title: President OPTIONEE: /s/ Lawrence Herth ------------------------------------ Lawrence Herth EX-10.A 25 EXHIBIT 10(A) 1 Exhibit 10a FIRST AMENDED AND RESTATED SETTLEMENT AND RELEASE AGREEMENT This First Amended and Restated Settlement and Release Agreement ("Amended Agreement") is entered into by and among (1) PowerTel USA, Inc. ("PowerTel") a Delaware Corporation whose principal place of business is situated in East Lansing, Michigan and formerly known as Munson Geothermal, Inc. and also formerly known as Nevada Energy Company, Inc. ("NEC") (collectively "Company"), (2) Nevada Energy Partners I, a Nevada Limited Partnership ("NEP"), by Nevada Electric Power Company, its general partner, (3) Nevada Electric Power Company, a Nevada corporation with its principal place of business situated in Reno, Nevada ("NEPC"), and (4) the following sixteen (16) Corporations: Wilton Ashfield, Ltd., Greyshire House, Ltd., August Lake Holdings, Ltd., Whitestone Brooke Holdings, Ltd., Porterman Williams, Ltd., North Oldenfield, Ltd., Shepherd Market, Ltd., Parklane Mayfair, Ltd., Clermont & Annabel, Ltd., Berkeley Square Investments, Ltd., Blackstone Sterling Holdings, Ltd., Burke Douglas Holdings, Ltd., Clarendon Atlantic Holdings, Ltd., Macaulay Island Investments, Ltd., Young Bayshore Investments, Ltd., and Maitland Investments, Ltd., (collectively referred to as "the Corporations"). "The Parties" referred to in this Agreement refer to PowerTel, NEP, NEPC and the Corporations. This Agreement is executed as of the day and year set forth below but is deemed to be effective retroactive as of December 1, 1997 (the "Settlement Date"). RECITALS: WHEREAS, the Parties to this Agreement have negotiated and executed an Agreement (the "Initial Contract") addressing the subject of this Amended Agreement but subsequent to the execution of the Initial Contract the Parties have concluded that the Initial Contract did not reflect the intent of the Parties; WHEREAS, the Parties intend to amend and modify the Initial Contract by this Amended Agreement and, therefore, declare the Initial Contract to be null and void ab initio and further declare that this Amended Agreement to be the only binding, enforceable contract between the parties with respect to the subject matters set forth herein; WHEREAS, prior to August 16, 1996, NEP owned 100.0% of the issued Class B Common Stock of NEC; which Class B Common Stock was convertible into shares of Class A Common Stock of NEC in an amount equal to 50.0% of the issued and outstanding Class A Common Stock; and WHEREAS, NEC and NEP entered into an Agreement dated August 16, 1996 (the "1996 Agreement") a copy of which is attached hereto as Exhibit 1; and WHEREAS, pursuant to the terms of the 1996 Agreement various transactions occurred between NEP and the Company, between NEP and NEPC and thereafter between NEPC and/or NEP and the Corporations; and 2 WHEREAS, in reliance upon the 1996 Agreement, NEP agreed to sell and did in fact sell to the Corporations all of the Class A Common Stock of NEC which was owned beneficially by NEP: and WHEREAS, NEC allegedly refused to honor the terms of the 1996 Agreement thereby precluding NEP from delivering the Class A Common Stock to the Corporations; and WHEREAS, on or about November 19, 1996 NEP beneficially on behalf of the Corporations commenced litigation as Plaintiff against Company seeking specific performance of the 1996 Agreement and alleging damages in excess of Six Million Dollars ($6,000,000), such litigation being identified as Nevada Energy Partners I vs. PowerTel USA, Inc. and being Case No. CV 96-07487, Second Judicial District Court of the State of Nevada in and for the County of Washoe (the "NEP Litigation"); and WHEREAS, Company denies all liability in the NEP Litigation and intends to vigorously contest NEP's claims if and when said litigation proceeds; and WHEREAS, on or about February 13, 1997 multiple creditors of PowerTel filed an involuntary petition for reorganization pursuant to Chapter 11 of the United States Bankruptcy Code (the "Code") such application being filed pursuant to Section 303 of the Code, and such case being styled In Re. PowerTel USA, Inc.; United States Bankruptcy Court, District of Nevada, Case No. 97-30265-BMG; and WHEREAS, the filing of Case No. 97-30265-BMG automatically stayed further prosecution of the NEP Litigation; and WHEREAS, NEP filed a Proof of Claim in the Chapter 11 case; and WHEREAS, the Corporations are the beneficiaries of the NEP Proof of Claim and, therefore, are deemed to be creditors of PowerTel; and WHEREAS, PowerTel has removed the NEP Litigation to the United States Bankruptcy Court; and WHEREAS, subsequent to the execution of the 1996 Agreement, NEC conveyed to NEP 100.0% of the issued and outstanding Common Stock of Combustion Energy Company ("CEC"), a Nevada corporation with its principal place of business situated in Reno, Nevada together with title to a parcel of real property also situated in Reno, Nevada (collectively the "1996 Assets"). Thereafter, NEP transferred the 1996 Assets to NEPC in two separate transactions; and WHEREAS, PowerTel has given notice to NEP, NEPC and the Corporations of its intent to commence a proceeding pursuant to Sections 547 and 548 of the Code for the purpose of voiding the 1996 Agreement and all transactions arising therefrom between NEP, NEPC and the Corporations; and 3 WHEREAS, NEPC and NEP have denied that Company has the right to rescind the 1996 Agreement under any terms or conditions including, but not limited to, alleged violations of Sections 547 and 548 of the Code; and WHEREAS, the Parties to this Amended Agreement stipulate and acknowledge that the prosecution of the multiple civil and administrative proceedings recited above will be expensive, time consuming and difficult to resolve and there is no assurance or guarantee that any party will prevail at trial and, in the event of a favorable judgment, there is no assurance or guarantee that the judgment will be sustained on appeal; and WHEREAS, the Parties to this Amended Agreement desire to achieve a final, complete resolution of all of their disputes and controversies by and among them. NOW THEREFORE, in consideration with the mutual covenants and conditions set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency which is hereby acknowledged, the Parties to this Amended Agreement, intending to be legally bound, do hereby agree as follows: 1. The Recitals set forth above are true and correct and are incorporated herein as if fully rewritten. 2. This Amended Agreement is subject to ratification by the United States Bankruptcy Court for the District of Nevada by virtue of the pending Chapter 11 Reorganization involving PowerTel in Case Number 97-30265-BMG. All Parties to this Amended Agreement hereby consent to the authority and subject matter jurisdiction of the United States Bankruptcy Court for all purposes, including ratification of this Amended Agreement. 3. This Amended Agreement, when ratified by the United States Bankruptcy Court, shall constitute a full, final and complete resolution of any and all disputes by or among any one or more or all of the Parties hereto of whatever cause or nature, including but not limited to any waiver for damages of any kind, nature or amount, contingent or liquidated and each party does hereby forever release, discharge, and waive each and every cause of action which it has or may have against any other party as of the Settlement date of this Agreement, except that Company retains and does not waive or release any claim or cause of action, if any, which it has or may have against NEPC arising out of actions performed by NEPC in its capacity as the General Partners of NEP. NEPC represents and warrants that the Corporations are the only entities who have any equitable or beneficial rights in or to the Class A or Class B Common Stock of NEC owned or received by NEP as of the Settlement Date. 4. PowerTel, NEP and NEPC acknowledge that the Corporations are domiciled outside the United States and, in recognition of this, PowerTel, NEP and NEPC, stipulate that this Amended Agreement will be executed by Mr. Jeffrey Antisdel on their behalf. Mr. Antisdel represents and warrants to Company that (i) he has 4 the legal power and authority to execute this Amended Agreement on behalf of each of the Corporations, and (ii) each of the Corporations will ratify this Agreement by executing the Memorandum described in Section 5.d of this Amended Agreement on or before July 15, 1998 (the "Final Execution Date"). In the event that each and every one of the Corporations have not ratified this Agreement by the Final Execution Date, Company has the option of either (a) declaring this Amended Agreement to be null and void, or (b) enforcing this Amended Agreement as to all signatories. In order to expedite execution of this Amended Agreement, PowerTel, NEP and NEPC stipulate that (i) this Amended Agreement may be executed in multiple counterparts, and (ii) the receipt of a facsimile signature page executed by any one of the Corporations shall be deemed to be an original signature. NEPC agrees to indemnify and hold Company harmless from any and all damages and expenses (including legal fees) incurred by PowerTel in the event that any of the Corporations refuse to execute this Agreement. 5. In consideration of the mutual releases as set forth herein and the consideration as set forth in the Recitals, the Parties to this Amended Agreement do hereby agree as follows: a. The 1996 Agreement attached hereto as Exhibit 1 is hereby deemed to be amended and restated in its entirety, except as set forth in this Amended Agreement and, therefore, remains legally binding upon all parties thereto. Notwithstanding the foregoing, NEPC and NEP shall reconvey to PowerTel (i) 100% of the issued and outstanding Common Stock of Combustion Energy Company, a Nevada corporation, and (ii) title to a parcel of real property situated at 403 Fourth Street, Reno, NV. b. The Company and NEPC do hereby modify, amend and revise the Agreement of Limited Partnership of Nevada Energy Partners I, a Nevada limited partnership, retroactively to January 1, 1995 to provide that for the period January 1, 1995 through August 15, 1996 (i) any and all distributions of cash and property are to be allocated 60.0% to the limited partner and 40.0% to the general partner, and (ii) the allocations of profits and loses to capital accounts shall be 99.0% of all profits and loses accredited and charged to the capital account of the limited partner and 1.0% of all profits and loses are charged and credited to the capital account of the general partner. The Parties stipulate that, commencing January 1, 1995 through August 15, 1996, NEPC is and shall be the sole general partner of NEP and the Company shall be the sole and exclusive limited partner of NEP. As of August 16, 1996, the Company specifically relinquishes, waives and forever abandons any claim or interest which it has or may have in or to any partnership interest of NEP. NEPC and the Company stipulate and acknowledge that, subsequent to January 1, 1995, cash distributions were made to NEPC and the Company pursuant to the 60/40 allocation set forth above. In addition, NEPC and the Company stipulate that on or about August 16, 1996 (after withdrawal of NEC from NEP), NEP distributed to NEPC, as its general partner, Class B Common 5 Stock of the Company totaling 4,437,473 shares which, thereafter NEPC sold to the corporations on a prorata basis. NEPC and the Company also stipulate that, as of August 16, 1996, NEP relinquished any and all rights which it had pursuant to the Plan of Reorganization involving Munson Geothermal, Inc. to receive additional Class A Common Stock and, thereby, waived and forever relinquished its right to receive additional Class B Common Stock in the amount of 8,808,485 shares. c. The Company does specifically that on or about August 16, 1996 NEPC converted the Class B Common to Class A Common and, further recognizes that NEPC sold to the Corporations the Class A Common Stock owned by NEPC as set forth above. The Company does hereby agree that NEPC shall retain any and all consideration paid or to be paid by the Corporations. In order to effect a permanent, common final and complete resolution of any and all disputes among the parties to this Agreement, the Company stipulates that the Class B Common Stock distributed to NEPC as of August 16, 1996 was convertible into Class A Common Stock at a ratio equal to 50.0% of the issued and outstanding Class A Common Stock as of August 16, 1996. Accordingly, the Company stipulates that the Corporations, by virtue of their purchase of the Class A Common Stock, are entitled to own Class A Common Stock. The Company further stipulates that, ten days after the Effective Date of the Plan of Reorganization, the Company shall adjust (i.e., increase or decrease) the number of shares of Class A Common Stock to be distributed to the Corporations such that the Corporations shall own 50.0% of the issued and outstanding Class A Common Stock as of the close of business ten days after the Effective Date of the Plan of Reorganization. d. NEPC, as the General Partner of NEP shall wind up the affairs of the partnership with all deliberate speed including but not limited to the preparation and filing of all requisite tax returns. The General Partner shall not charge the Limited Partner for the expenses of winding up the Partnership and the Limited Partner waives any right of reimbursement for any distribution to the General Partner prior to the date of this Agreement. 6. In the event that the United States Bankruptcy Court fails to ratify this Agreement, this Agreement shall be voidable by any Party upon prompt notice to Company and NEPC. If the Agreement is voided, then any Property conveyed pursuant to this Agreement shall be returned to the grantor from whom or which it was received. 7. Company shall have seventy-five (75) days from the Confirmation Date of the Plan of Reorganization to conduct any "due diligence," investigation, inquiry and/or review ("Review") which it deems to be necessary of appropriate concerning any statement of fact, warranty, representation, consent and/or condition ("Represented Fact") made or given to Company by any other party to this Amended Agreement and upon which PowerTel has relied upon in the execution of this Amended Agreement. If on the basis of the Review, PowerTel 6 in its sole and absolute discretion concludes that any Represented Fact is inaccurate, false, misleading or deceptive, PowerTel has the right to revoke this Amended Agreement upon providing all other written notice of such termination and the basis therefor. 8. The Parties to this Amended Agreement stipulate and acknowledge that a variety of supplemental documents may be necessary in order to effectuate the objectives anticipated by this Amended Agreement or to obtain ratification hereof by the United States Bankruptcy Court, and every party to this Amended Agreement does irrevocably commit to act in good faith to implement this Amended Agreement and to execute any additional documents necessary or appropriate to achieve the objective of this Amended Agreement and/or ratification hereof. 9. This Amended Agreement shall be governed by the laws of the State of Nevada, without regard to its conflict of laws provision. Every party to this Amended Agreement consents to the exclusive jurisdiction of the United States Bankruptcy Court for the District of Nevada with regard to the enforcement, interpretation, or any other issue or claim arising as a result of this Amended Agreement. 10. It is the intention to the Parties to this Amended Agreement that the 1996 Agreement shall be amended and restated. Accordingly, to the extent that any party to this Amended Agreement has any contractual rights, causes of action, claims or other legal or equitable rights or remedies (collectively "Rights") which existed prior to the 1996 Agreement and were extinguished, waived, released or modified thereby, such Rights shall be deemed to be fully and completely restored and each party to this Amended Agreement does hereby agree that the Statute of Limitations, if any, which would otherwise operate as a bar to the prosecution of any cause of action or claim of any nature to enforce such Rights is hereby tolled and each party does irrevocably waive and agrees not to assert for a twelve (12) month term from the Settlement Date of this Amended Agreement the Statute of Limitations as a defense to the prosecution of any cause of action or claim of any nature to enforce such Rights which is restored by virtue of this Agreement. 11. Each and every section of this Agreement shall survive execution, delivery and performance of this Amended Agreement. 12. The "1996 Agreement," the form of the Memorandum attached hereto and the Memorandums as executed by each of the Corporations are incorporated by reference and are deemed to constitute material components of this Amended Agreement: 13. Exhibits 1 and 2 are hereby incorporated herein by reference. 14. Unless otherwise directly set forth in this Amended Agreement, any contract, agreement, memorandum of understanding or other legally binding and enforceable agreement by or among the Parties to this Amended Agreement shall 7 remain in full force and effect and is not amended, modified, superseded or otherwise affected by this Amended Agreement. IN WITNESS WHEREOF, this The Parties have executed this Amended Agreement as of the day and year set forth with their signatures. NEVADA ENERGY PARTNERS I, a Nevada Limited Partnership By: Nevada Electric Power Company Its: General Partner Date : 6-25-98 By: /s/ Jeffrey Antisdel ------- ------------------------------------- Jeffrey Antisdel, Its President NEVADA ELECTRIC POWER COMPANY Date : 6-25-98 By: /s/ Jeffrey Antisdel ------- ------------------------------------- Jeffrey Antisdel, Its President POWERTEL USA, INC. Date : 6-25-98 By: /s/ Richard A. Cascarilla ------- ------------------------------------- Richard Cascarilla, Its President "THE CORPORATIONS" Date : 6-25-98 By: /s/ Jeffrey Antisdel ------- ------------------------------------- Jeffrey Antisdel 8 EXHIBIT 1 AGREEMENT THIS AGREEMENT, ("Agreement"), is entered into between Nevada Energy Company, Inc., a Delaware corporation, ("NEC"), and Nevada Energy Partners I, Limited Partnership, a Nevada Limited Partnership, ("NEP"), both having offices at 401 East 4th Street, Reno, Nevada, USA, 89512. RECITALS: A. Nevada Energy Partners I, Limited Partnership, ("NEP"), is a Nevada partnership with one corporate limited partner and a corporate general partner. B. Nevada Energy Company, Inc., ("NEC"), is the sole limited partner of NEP, and owns 60% of the partnership interest in NEP. C. Nevada Electric Power Company, Inc., ("NEPC"), is the general partner of NEP, and owns the remaining 40% of the partnership interest of NEP. D. As of July 25, 1996, the partnership NEP, currently owns 4,437,473 shares of Class B Common Stock of NEC, ("Class B Stock"), which represents all the issued and outstanding shares of Class B Common Stock of NEC. E. The owners of the Class B Stock of NEC have voting rights and liquidation rights in the assets of NEC without the right to participate in earnings or cash dividends, except on sale, liquidation or merger. In addition, such owners have the right to pro rata issuance of one share of Class B Common Stock for each share of Class A Common Stock, ("Class A Stock"), issued and outstanding. The consideration for the issuance may be subject to a determination by the board of directors of NEC. F. As of July 25, 1996, there are 12,203,247 shares of Class A Common Stock of NEC issued and outstanding. G. Based upon the number of NEC's issued Class A Common shares, NEP has the right to acquire an additional 8,865,774 shares of Class B Common Stock. H. NEC desires to redeem the Class B Stock in exchange for Class A Stock. I. NEC currently owns 6,000 shares of common stock of Combustion Energy Company, which represents all of the issued and outstanding common shares of Combustion Energy Company, a Nevada Corporation, ("CEC"). 9 J. NEP is a plaintiff and a counter-defendant in litigation in the Second District Court in Washoe County, State of Nevada, in case CV92-04609, Dept. No. 1, ("Litigation"). K. For the past four years, NEC and NEPC have shared in the costs and expenses of NEP, including without limitation, the costs and expenses of the Litigation on a 60/40 basis respectively. L. NEC does not wish to participate any further in the Litigation or further business with NEP. M. NEC wishes to withdraw from NEP. N. NEP wishes to acquire the stock CEC. NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, NEP and NEC, agree as follows: 1. Definitions. For purposes of this Agreement, the terms set forth below shall have the following meanings: a. Agreement shall mean this agreement. b. Class A Stock shall mean the Class A common shares of NEC. c. Class B Stock shall mean the Class B common shares of NEC, all of which are owned by NEP. d. Herth Printing shall refer to the business known as Herth Printing and Business Supplies, Inc., which was merged into Combustion Energy Company, a Nevada Corporation, a wholly owned subsidiary of NEC, in December 1994. e. Knowledge means actual knowledge after reasonable investigation. f. Law shall mean any statute, regulation, rule, judgment, ordinance, order, decree, stipulation, injunction, charge, or other restrictions of any federal, state or local government, governmental agency, or court. g. Liability means any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, and whether due or to become due), including any liability for taxes. h. Litigation shall refer to the lawsuit filed in the Second Judicial District Court of the State of Nevada, County of Washoe, Case No. CV92-04609, Dept. No. 1, between NEP, as plaintiff, and Hot Springs Power Company, a Nevada corporation, Randy S. Goldenhersh and George W. Holbrook, Jr., as defendants and counter-plaintiff, and NEP as counter-defendant. i. Material Adverse Effect means an adverse effect of fifty thousand dollars or more upon the business, operations, properties, assets or condition of NEP. j. NEC shall refer to Nevada Energy Company, Inc., a Delaware corporation. 10 k. NEP shall refer to Nevada Energy Partners I, Limited Partnership, a Nevada Limited Partnership. l. NEPC shall refer to Nevada Electric Power Company, a Nevada corporation, and General Partner of NEP. m. Securities Act means the Securities Act of 1933, as amended. n. Securities Exchange Act means the Securities Exchange Act of 1934. o. Security Interest means any mortgage, pledge, security interest, encumbrance, charge or other lien, other than i. construction, mechanic's materialmen's, and similar liens, ii. liens for taxes not yet due and payable, iii. liens arising under worker's compensation, unemployment insurance, social security, retirement, and similar legislation, iv. liens arising in connection with sales of foreign receivables, v. purchase money liens and liens securing rental payments under capital lease arrangements, and, vi. other liens arising in the ordinary course of business and not incurred in connection with the borrowing of money. 2. Basic Transaction a. NEC shall exchange all of NEP's Class B Common Stock for an equal number of NEC Class A Common Stock. The effective date of the exchange shall be September 1, 1996. b. NEC shall withdraw as a limited partner from NEP. c. In general, NEPC, as general partner, will release NEC, as limited partner, from NEP, the partnership. NEC will waive all rights to any assets, litigation rights or other attributes of the partnership. d. In general, NEPC, as general partner, will agree to indemnify NEC for any present and future litigation expenses, obligations or damages arising out of the Litigation. e. NEP will release any claims that NEP may have for additional shares of Class B Stock pursuant to Amended Certificate of incorporation under the Order of the Bankruptcy Court dated November 20, 1990. f. NEC shall transfer to NEP all of the shares of CEC. g. This Agreement and other related documents shall be held in escrow, ("Release Escrow"), pending the completion of the post closing events. 3. Exchange of Class B Shares for Class A Shares. NEC desires to retire all of the Class B shares as follows: a. NEP as the owners of the Class B Stock of NEC have voting rights and liquidation rights in the assets of NEC without the right to participate in earnings or cash dividends, except on sale, liquidation or merger. In addition, NEP has the right to pro rata issuance of one share of Class B Common Stock for each share of Class A Common Stock issued and outstanding. The consideration for the issuance may be subject to a determination by the board of directors of NEC. 11 b. NEP has the right to an additional 8,808,485 shares of Class B Common Stock of NEC. c. NEP herewith exchanges 4,437,473 shares of Class B Common Stock of NEC, which represents all the issued and outstanding shares of Class B Common Stock of NEC for 4,437,473 shares of Class A Common Stock of NEC which shall be free trading without restrictions. d. NEP herewith forbears forever from any and all claims for an additional 8,808,485 shares of Class B Common Stock of NEC. 4. Withdrawal of NEC from NEP. NEC no longer desires to participate in the partnership NEP and withdraws as follows: a. NEC has participated in the Litigation since its inception. The counter-plaintiffs claim damages in excess of one million ($1,000,000.00) dollars and further damages to be proved against NEC. b. NEC has contributed from time to time its pro rata share of attorney fees, legal costs and expenses. c. There appears to be no possibility of settlement or resolution of the Litigation in the near future. d. NEP was a partner with Hot Springs Power Company, a Nevada corporation in Nevada Geothermal Power Partners, a Nevada Limited Partnership. The Litigation arises out of the partnership relationship. The plaintiff and counter-defendant is NEP. The defendant and counter-plaintiff is Hot Springs Power Company. e. Nevada Geothermal Power Partners has ceased doing business and has wound up its affairs. The only remaining relationship between the partners is the Litigation. f. NEC hereby withdraws as a limited partner in NEP and waives further accounting except as necessary to prepare its federal tax returns. The effective date of the withdrawal shall be September 1, 1996. 5. Release of NEC from the Litigation and further obligations of NEP. NEPC, as general partner of NEP, hereby releases NEC from all further partnership obligations and duties. a. Pursuant to the partnership agreement, NEC was obligated to contribute to the attorneys' fees, legal costs and expenses of any litigation arising out of the partnership relationship. b. Concurrent with the withdrawal of NEC as a limited partner, NEP releases NEC from any further contributions for attorneys' fees, legal costs or expenses with respect to the Litigation. NEP agrees to indemnify NEC for any damages arising out of the Litigation. NEC shall have the right to have its own co-counsel at its own expense. c. NEPC, as general partner of NEP, will hereby guaranty the payment of attorneys' fees, legal costs and expenses by NEC for counsel under NEP's guidance and employ who will defend NEC's interests. d. NEC agrees to cooperate in the prosecution and defense of the Litigation and to the extent possible, NEC waives its attorney client privilege in favor of NEP. 12 6. NEP releases all claims under the Order of the Bankruptcy Court. As the sole recipient of Class B shares under order from the Bankruptcy Court, NEP waives any claims it may have for additional shares of Class B Stock without consideration as follows: a. Rights and Restrictions. The rights and restrictions of the Class B Stock are as follows: i. Federal Bankruptcy Court's Plan of Reorganization. On November 20, 1990, the Bankruptcy Court of Nevada, by Order, required the amendment of the Certificate of Incorporation. The Order provided at page 25, "Class B Common Stock will have full voting rights but will have no participation in dividends. The terms of the Class B Common shares will also provide that, upon the issuance of any share, or fraction thereof, of Class A Common Stock, the owners of Class B Common Stock will contemporaneously have issued to them, on a pro rata basis, a number of shares of Class B Common Stock which is the same as the number of Class A Common shares then being issued. ii. Amendment of the Certificate of Incorporation. NEC (then Munson Geothermal, Inc.) amended its Certificate of Incorporation on November 20, 1990 (filed on December 3, 1990) and submitted a new paragraph defining NEC's capital, paragraph 4-A. The new paragraph governed the description of all capital stock. The new paragraph authorized Class A Common Stock and Class B Common Stock. All Common Stock has a par value of $.001 per share. All common stockholders (either Class A or Class B) received one vote for each whole share of stock. The Certificate authorized that Class A and Class B Common Stock would not participate in the earnings of the corporation through dividends. A Class B Common Stockholder would only receive funds from NEC by statute upon the sale, merger, or liquidation in the form of a liquidating distribution. iii. Voting Rights of the Class B Stock. Class B Stock shares do not receive dividends but would participate in distribution of proceeds if the NEC sells, merges or liquidates. Class B Stock shares are entitled to vote. Because the Class B Stock shares are entitled to fifty percent (50%) of the Common Stock, the Class B Stock shares are entitled to 50% of the votes. iv. Class B Stock and NEP. The Plan of Reorganization provided that immediately after the reorganization that NEP would own 100% of the Class B Stock. According to the Plan of Reorganization, any holder of Class B Stock through NEP at the time of the reorganization was entitled to an additional share of Class B Stock for each share of Class A Stock issued. v. Conflict between the Plan of Reorganization and the Certificate regarding Issuance of Class B Stock. The Certificate provided that upon the issuance of any share of Class A Common Stock, NEC shall issue a pro rata amount of Class B Common Stock to Class B Stock holders. Only present shareholders of Class B Stock shares would be eligible to receive additional Class B Stock shares. Further, paragraph 4-D states, "such shares of Class B Common Stock shall be issued for such consideration as may be determined from time to time by the Board of Directors". (Emphasis added.) The Plan of Reorganization does not provide for payment of "consideration" in exchange for newly issued shares of Class B Stock. 13 b. Concurrent with the exchange of shares, NEP forever waives and gives up any rights for additional Class B Stock without payment of consideration as provided in the Order of the Bankruptcy Court dated November 20, 1990. 7. NEP transfers the shares of CEC. NEC herewith transfers to NEP all of NEC's six thousand (6,000) shares of CEC as follows: a. NEC merged its wholly owned subsidiary, CEC, with a business known as Herth Printing and Business Supplies in 1994. b. The business of CEC is not compatible with the general business plan of NEC. c. The shares of CEC are not registered as described in section 8.d. d. In consideration of the obligations assumed by NEP under this agreement, NEC herewith transfers and assigns all rights, title and interest to the shares and assets of CEC to NEP. The effective date of the transfer shall be September 1, 1996. 8. Representations and Warranties of NEP. NEP represents and warrants to NEC that the statements contained in this Section 8.d. are correct and complete as of the date of this Agreement. a. Organization of NEP. NEP is a limited partnership duly organized, validly existing and in good standing under the Laws of the State of Nevada and is in good standing and qualified to do business under the laws of each jurisdiction in which the nature of the business or the ownership or leasing of its properties requires such qualification. NEP has full power and authority to carry on the business in which it is engaged and to own and use the properties owned, leased and used by it. b. Authorization of Transaction. NEP has full power under its partnership agreement and authority to execute and deliver this agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the General Partner of NEP has fully authorized the execution, delivery and performance of this Agreement by NEP. This Agreement constitutes the valid and legally binding obligations of NEP, enforceable in accordance with its terms and conditions, subject to the effect of i. bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights and remedies of creditors generally, and ii. general principles of equity. c. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate or (ii) conflict with, result in a breach of, constitute a default under, result in the require any notice of any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument or indebtedness, Security Interest, or other arrangement to which NEP is a party of by which it is bound or to which any of its assets is subject, or result in the imposition of any Security Interest upon any of its assets. NEP need not give any notice 14 to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency to consummate the transactions contemplated by this Agreement. d. Acknowledgment of Unregistered Stock. In connection with this Agreement, NEP represents and warrants, which representations and warranties shall survive the transfer of CEC's shares to NEP pursuant to this Agreement, as follows: i. NEP is aware that no market may exist for the resale of the CEC stock received under this Agreement. ii. NEP is obtaining the shares for investment and not for the further distribution of CEC stock. iii. NEP is aware of any and all restrictions imposed on the further distribution of the CEC stock, including, but not limited to, any restrictive legends appearing on the certificate(s). e. Disclosure. The representations and warranties contained in this Section 8.e. do not contain any untrue statements of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 8.d. not misleading. 9. Representations and Warranties of NEC. NEC represents and warrants to NEP that the statements contained in this Section 9 are correct and complete as of the date of this Agreement. a. Organization of NEC. NEC is a Company Incorporated in Delaware duly organized, validly existing and in good standing under the Laws of Delaware, and is in good standing and qualified to do business under the laws of each jurisdiction in which the nature of its business or the ownership or leasing of its properties requires such qualification. NEC has full power and authority to carry on the business in which it is engaged and to own and use the properties owned, leased and used by it. b. Authorization of Transaction. NEC has full power under its organization agreement and authority to execute and deliver this Agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the Directors of NEC have fully authorized the execution, delivery and performances of this Agreement by NEC. This Agreement constitutes the valid and legally binding obligation of NEC, enforceable in accordance with its terms and conditions, subject to the effect of; i. bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights and remedies of creditors generally, and ii. general principles of equity. c. Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) violate or (ii) conflict with, result in a breach of, constitute a default under, result in the require any notice of any contract, lease, sublease, license, sublicense, franchise, permit, indenture, agreement or mortgage for borrowed money, instrument or indebtedness, Security Interest, or other arrangement to which NEC is a party of by which it is 15 bound or to which any of its assets is subject, or result in the imposition of any Security Interest upon any of its assets. NEC need not give any notice to, make any filing with, or obtain any authorization, consent or approval of any government or governmental agency to consummate the transactions contemplated by this Agreement. d. Disclosure of Unregistered Securities. NEC hereby discloses the following information to NEP in connection with the offer and sale of CEC stock by NEP, i. The CEC stock have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and were acquired by NEC pursuant to a registration exemption contained in Section 4(2) of the Securities Act and/or Securities and Exchange Commission Rule 506, promulgated thereunder. ii. The CEC stock have the status of securities acquired under Section 4(2) of the Securities Act and cannot be resold without registration under the Securities Act or the availability of an exemption from registration. iii. A legend has been, or will be, placed on each certificate or other document evidencing the CEC stock in substantially the following form: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE RESOLD UNLESS REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE. iv. Prior to this transaction, stop transfer instructions to the appropriate officers of NEC had been placed in NECs records with respect to the CEC stock so as to restrict the resale, pledge, hypothecation, or other transfer thereof. v. The CEC stock have not been registered under the Nevada Securities Act, set forth in the Nevada Revised Statutes, as amended (the "Nevada Act"), and were acquired by NEC pursuant to a exemption. vi. NEC reasonably believes that NEP is obtaining the shares for investment and has no information to the contrary. e. Disclosure. The representations and warranties contained in this Section 9.e do not contain any untrue statements of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this Section 9 not misleading. 10. Conditions to Release of the Escrow. This Agreement and all of the documents related to this Agreement shall be held in escrow referred to as the Release Escrow which shall be released upon the satisfaction of following conditions. a. NEP and NEC shall have executed and delivered an escrow agreement to and for the Release Escrow agent. b. All actions to be taken by NEC in connection with consummation of the transactions contemplated hereby and all certifications, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance 16 to the General Partner of NEP who shall not unreasonably withhold approval of the transactions contemplated by this Agreement. c. NEC shall have received from counsel to NEP an opinion addressed to NEC stating the legal organization of NEP and that NEP has the authority to enter into this Agreement. d. All actions to be taken by NEP in connection with consummation of the transactions contemplated hereby and all certifications, opinions, instruments, and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Directors of NEC who shall not unreasonably withhold approval of the transactions contemplated by this Agreement. e. NEP shall have received from counsel to NEC an opinion addressed to NEP stating the legal organization of NEC and that NEC has the authority to enter in this Agreement. f. NEC shall have executed and delivered any additional agreement or agreements necessary to withdrawing or liquidating its interests in NEP in favor of NEP. g. NEPC shall have executed and delivered a guaranty of all payment of liability, including attorneys' fees, costs and expenses, in favor of NEC regarding the Litigation. h. NEP shall have executed and transferred all of the Class B Stock to NEC. i. NEC shall have issued free trading Class A Stock with restrictions of any kind to NEP or its assigns. j. NEC shall have executed and transferred all the common shares of CEC to NEP. k. In general, the obligation of NEP to consummate the transactions to be performed by it after this agreement is executed is subject to satisfaction that the representations and warranties set forth in Section 9 above shall be true and correct in all material respects at and as of the date of execution of this Agreement and: i. NEC shall have preformed and complied with all of its covenants hereunder in all material respects at and as of the date of execution of this Agreement; ii. The Board of Directors of NEC shall have approved the transactions contemplated by this Agreement; iii. All actions to be taken by NEC in connection with consummation of the transactions contemplated hereby and all instruments and other documents required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to NEP. 11. Miscellaneous. a. Notices. All notices or other communications required or permitted hereunder, including notice of intent to arbitrate, shall be in writing and shall be deemed to have been duly given if delivered in person or sent by overnight delivery, confirmed telecopy or prepaid first class registered or certified mail, return receipt requested, to the following addresses: 17 If to NEP, to: with courtesy copies to: Nevada Energy Partners I, L.L.P. David L. Wallace, Esq. 401 East Fourth Street 2055 Wood Street, Suite 220 Reno, Nevada 89512 Sarasota, Florida, USA 34237-7929 Telephone: (702) 786-7979 Telephone: (941) 364-9598 Facsimile: (702) 786-7989 Facsimile: (941) 364-9599 If to NEC, to: with courtesy copies to: Roderick H. McCloy, Esq. Roderick H. McCloy Law Corporation Jones McCloy Peterson 1700 Three Bentail Centre P.O. Box 49117 595 Burrard Street Vancouver, B.C. V7X 1G4 Telephone: (604) 882-1851 Facsimile: (604) 682-7329 Any such notices shall be effective when delivered in person or sent by telecopy, one business day after being sent by overnight deliver or three business days after being be registered or certified mail. Any of the foregoing addressed may be changed by giving notice of such change in the foregoing manner, except that notices for changes of address shall be effective only upon receipt. b. Further Assurances. At any time, and from time to time, each party will execute additional instruments and take such action as may be reasonably requested by the other party to confirm or perfect title to any property transferred hereunder or otherwise to carry out the intent and purposes of this Agreement. c. Costs and Expenses. Each party hereto agrees to pay its own costs and expenses, including legal, accounting, consultant, and advisor fees, incurred in negotiation this Agreement and consummating the transactions described herein. d. Time. Time is of the essence. e. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. f. Amendment. This Agreement may not be amended, supplemented or modified in whole or in part except by an instrument in writing signed by the party against whom enforcement of any such amendment, supplement or modification is sought. g. Assignment. NEC may not assign this Agreement to any affiliated entity or nominee or to any party hereto without the prior written consent of the NEP 18 h. Choice of Law. This Agreement will be interpreted, construed and enforced in accordance with the laws of the State of Nevada, without regard to conflicts of law. i. Dispute Arbitration. NEC and NEP intend to provide a speedy and informal method for resolving all disputes and other matters in question arising out of, or relating to, this Agreement, which involves interstate commerce and is subject to the Federal Arbitration Code. All disputes and other matters in question, of any kind, between NEC and NEP arising out of, or relating to this Agreement, shall be decided by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. The decision of the arbitrator shall be binding. The arbitrator is specifically granted authority and directed to award reasonable attorneys' fees, expenses and costs to the successful party. A court of competent jurisdiction may be used to enforce, but not to appeal or challenge, the arbitrators' decision including the award of attorneys' fees, expenses and costs. If it becomes necessary to enforce the arbitrators' decision at either the trial or appellate level, a reasonable attorney fee for the enforcement of the arbitrators' decision shall become an additional item of damages. Any suit between NEC and NEP must be brought in Washoe County, Nevada. NEC consents to personal jurisdiction in Nevada. j. Construction. NEC and NEP and their respective legal counsel participated in the preparation of this Agreement, therefore, this Agreement shall be construed neither against nor in favor of any of the parties hereto, but rather in accordance with the fair meaning thereof. k. Effect of Waiver. The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same. The waiver by any party or any breach of any provision of this Agreement will not be construed to be a waiver, by any such party of any succeeding breach of that provision or a waiver by such party or any breach of any other provision. l. Severability. The invalidity, illegality or unenforceability of any provision of this Agreement, which will remain in full force and effect, nor will the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reasons be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein. m. Binding Nature. This Agreement, including the requirement to arbitrate, will be binding upon and will enure to the benefit of any successors of the parties hereto. n. Counterparts. This Agreement is intended to be executed in more than one counterpart, including facsimile counterparts. Each counterpart shall be 19 deemed an original on all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, NEP and NEC have executed this Agreement. Nevada Energy Company, Inc., a Delaware corporation August 16, 1996 By: /s/ Charles A. Cain - ----------------------------------- ----------------------------------- Date Charles A. Cain Its: Director -------------- August 16, 1996 By: /s/ Peter J. Cannell - ----------------------------------- ----------------------------------- Date Peter J. Cannell Its: Director -------------- Nevada Energy Partners, I, a Nevada Limited Partnership, by Nevada Electric Power Company, General Partner August 16, 1996 By: /s/ David L. Wallace - ----------------------------------- ----------------------------------- Date David L. Wallace Its: Attorney in Fact ------------------------------- Power of Attorney attached. 20 EXHIBIT 2 M E M O R A N D U M TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: XXXXXXXXX, XXX., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "XXXXXXX"), with mailing address at XXXXXXXXXXXXX. RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and XXXXXXX have entered into a First Amended and Restated Settlement and Release Agreement effective as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG. Pursuant to the Plan, XXXXXXX is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, XXXXXXX represents and warrants to PowerTel and to the Court that XXXXXXX is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. XXXXXXX also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. XXXXXXX also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that XXXXXXX is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. XXXXXXX also confirms that it has received and reviewed the FIRST AMENDED DISCLOSURE STATEMENT PURSUANT TO 11 U.S.C. Section 1125 filed by PowerTel and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. XXXXXXX has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). XXXXXXX acknowledges that a copy of these filings is available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. XXXXXXX acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. XXXXXXX is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. XXXXXXX is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. XXXXXXX represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, XXXXXXX acknowledges that there is no agreement, contract or understanding (either oral or written) by and between XXXXXXX and PowerTel. XXXXXXXXX further acknowledges the authority and ratifies the signature of Jeffrey Antisdel on the First Amended and Restated Settlement and Release Agreement on behalf of XXXXXXXXXXXXXXX. XXXXXXX acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In Witness Whereof, XXXXXXXXX, XXX., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL XXXXXXXXX, XXX., a Company Limited by Shares of XXXXXXXXX, XXX. under the International Business Companies Act of 1989, Commonwealth of the Bahamas Date: _________________________ Per:________________________________ Managing Director 21 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Maitland Investments, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Maitland") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Maitland have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Maitland is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Maitland, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Maitland is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Maitland also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Maitland also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Maitland is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Maitland also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Maitland has been advised that, for the preceding three calendar years, PowerTel has made various filings, with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Maitland, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 22 Maitland acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be Implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Maitland is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Maitland is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Maitland represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Maitland acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Maitland and PowerTel. Maitland acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Maitland hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Maitland and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Maitland. In Witness Whereof, Maitland Investments, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Maitland Investments, Ltd., a Company of Maitland Investments, Ltd. Limited by Shares under the International Business Companies Act of 1989, Date: March 16, 1998 Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------- Managing Director 23 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Shepherd Market, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Shepherd Market") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Shepherd Market have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Shepherd Market is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Shepherd Market, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Shepherd Market is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Shepherd Market also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Shepherd Market also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Shepherd Market is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Shepherd Market also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Shepherd Market has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Shepherd Market, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 24 Shepherd Market acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Shepherd Market is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Shepherd Market is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Shepherd Market represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Shepherd Market acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Shepherd Market and PowerTel. Shepherd Market acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Shepherd Market hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Shepherd Market and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Shepherd Market. In Witness Whereof, Shepherd Market, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Shepherd Market, Ltd., a Company Limited of Shepherd Market, Ltd. by Shares under the International Business Companies Act of 1989, Commonwealth of Date: March 16, 1998 the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ---------------------------------- Managing Director 25 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Berkeley Square Investments, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Berkeley Square") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Berkeley Square have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan, of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Berkeley Square is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Berkeley Square, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Berkeley Square is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Berkeley Square also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Berkeley Square also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Berkeley Square is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Berkeley Square also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Berkeley Square has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Berkeley Square, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 26 Berkeley Square acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Berkeley Square is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Berkeley Square is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Berkeley Square represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Berkeley Square acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Berkeley Square and PowerTel. Berkeley Square acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional documents) are required in order to issue the Shares, Berkeley Square hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Berkeley Square and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Berkeley Square. In Witness Whereof, Berkeley Square Investments, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Berkeley Square Investments, Ltd., a of Berkeley Square Investments, Ltd. Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas Date: March 16, 1998 By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ---------------------------------- Managing Director 27 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Clermont & Annabel, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Clermont Annabel") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Clermont Annabel have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Clermont Annabel is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Clermont Annabel, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Clermont Annabel is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Clermont Annabel also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Clermont Annabel also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Clermont Annabel is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Clermont Annabel also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Clermont Annabel has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Clermont Annabel, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 28 Clermont Annabel acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Clermont Annabel is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Clermont Annabel is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Clermont Annabel represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Clermont Annabel acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Clermont Annabel and PowerTel. Clermont Annabel acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Clermont Annabel hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Clermont Annabel and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Clermont Annabel. In Witness Whereof, Clermont & Annabel, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Clermont & Annabel, Ltd., a Company of Clermont & Annabel, Ltd. Limited by Shares under the International Business Companies Act of 1989, Date: March 16, 1998 Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------- Managing Director 29 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Burke Douglas Holdings, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Burke Douglas") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Burke Douglas have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Burke Douglas is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Burke Douglas, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Burke Douglas is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Burke Douglas also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Burke Douglas also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Burke Douglas is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Burke Douglas also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Burke Douglas has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Burke Douglas, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 30 Burke Douglas acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Burke Douglas is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Burke Douglas is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Burke Douglas represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Burke Douglas acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Burke Douglas and PowerTel. Burke Douglas acknowledges that both PowerTel -and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Burke Douglas hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Burke Douglas and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Burke Douglas. In Witness Whereof, Burke Douglas Holdings, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Burke Douglas Holdings, Ltd., a Company of Burke Douglas Holdings, Ltd. Limited by Shares under the International Business Companies Act of 1989, Date: March 16, 1998 Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------- Managing Director 31 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Parklane Mayfair, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Parklane Mayfair") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Parklane Mayfair have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan, of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Parklane Mayfair is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Parklane Mayfair, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Parklane Mayfair is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Parklane Mayfair also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Parklane Mayfair also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Parklane Mayfair is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Parklane Mayfair also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Parklane Mayfair has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Parklane Mayfair, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 32 Parklane Mayfair acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Parklane Mayfair is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Parklane Mayfair is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Parklane Mayfair represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Parklane Mayfair acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Parklane Mayfair and PowerTel. Parklane Mayfair acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Parklane Mayfair hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Parklane Mayfair and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Parklane Mayfair. In Witness Whereof, Parklane Mayfair, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Parklane Mayfair, Ltd., a Company Limited of Parklane Mayfair, Ltd. by Shares under the International Business Companies Act of 1989, Commonwealth of Date: March 16, 1998 the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ----------------------------------------- Managing Director 33 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Clarendon Atlantic Holdings, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Clarendon Atlantic") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Clarendon Atlantic have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Clarendon Atlantic is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Clarendon Atlantic, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Clarendon Atlantic is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Clarendon Atlantic also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Clarendon Atlantic also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Clarendon Atlantic is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Clarendon Atlantic also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Clarendon Atlantic has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Clarendon Atlantic, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 34 Clarendon Atlantic acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be Implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Clarendon Atlantic is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Clarendon Atlantic is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Clarendon Atlantic represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Clarendon Atlantic acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Clarendon Atlantic and PowerTel. Clarendon Atlantic acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional documents) are required in order to issue the Shares, Clarendon Atlantic hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Clarendon Atlantic and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Clarendon Atlantic. In Witness Whereof, Clarendon Atlantic Holdings, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Clarendon Atlantic Holdings, Ltd., a of Clarendon Atlantic Holdings, Ltd. Company Limited by Shares under the International Business Companies Act of Date: March 16, 1998 1989, Commonwealth of the Bahamas ---------------- By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ----------------------------------- Managing Director 35 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Macaulay Island Investments, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Macaulay") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Macaulay have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Macaulay is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Macaulay, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Macaulay is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Macaulay also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Macaulay also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Macaulay is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Macaulay also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Macaulay has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Macaulay, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. Macaulay acknowledges that PowerTel has not made any representation or warranty 36 that (i) its Plan will be Implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Macaulay is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Macaulay is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Macaulay represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Macaulay acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Macaulay and PowerTel. Macaulay acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Macaulay hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Macaulay and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Macaulay. In Witness Whereof, Macaulay Island Investments, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Macaulay Island Investments, Ltd., a of Macaulay Island Investments, Ltd. Company Limited by Shares under the International Business Companies Act of Date: March 16, 1998 1989, Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------- Managing Director 37 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Young Bayshore Investments, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Young Bayshore") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc, ("PowerTel") and Young Bayshore have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Young Bayshore is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Young Bayshore, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Young Bayshore is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Young Bayshore also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Young Bayshore also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Young Bayshore is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Young Bayshore also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Young Bayshore has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Young Bayshore, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 38 Young Bayshore acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Young Bayshore is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Young Bayshore is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Young Bayshore represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Young Bayshore acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Young Bayshore and PowerTel. Young Bayshore acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Young Bayshore hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Young Bayshore and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Young Bayshore. In Witness Whereof, Young Bayshore Investments, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Young Bayshore Investments, Ltd., a of Young Bayshore Investments, Ltd. Company Limited by Shares under the International Business Companies Act of Date: March 16, 1998 1989, Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------- Managing Director 39 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Wilton Ashfield, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Wilton Ashfield") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Wilton Ashfield have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Wilton Ashfield is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Wilton Ashfield, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Wilton Ashfield is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Wilton Ashfield also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Wilton Ashfield also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Wilton Ashfield is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Wilton Ashfield also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Wilton Ashfield has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Wilton Ashfield, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 40 Wilton Ashfield acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Wilton Ashfield is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Wilton Ashfield is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Wilton Ashfield represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Wilton Ashfield acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Wilton Ashfield and PowerTel. Wilton Ashfield acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Wilton Ashfield hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Wilton Ashfield and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Wilton Ashfield. In Witness Whereof, Wilton Ashfield, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Wilton Ashfield, Ltd., a Company Limited of Wilton Ashfield, Ltd. by Shares under the International Business Companies Act of 1989, Commonwealth of Date: March 16, 1998 the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ---------------------------------------- Managing Director 41 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Greyshire House, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Greyshire") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Greyshire have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Greyshire is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Greyshire, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Greyshire is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Greyshire also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Greyshire also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Greyshire is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Greyshire also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Greyshire has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Greyshire, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 42 Greyshire acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be Implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Greyshire is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Greyshire is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Greyshire represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Greyshire acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Greyshire and PowerTel. Greyshire acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Greyshire hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Greyshire and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Greyshire. In Witness Whereof, Greyshire House, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Greyshire House, Ltd., a Company Limited of Greyshire House, Ltd. by Shares under the International Business Companies Act of 1989, Commonwealth of Date: March 16, 1998 the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard -------------------------------------- Managing Director 43 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: August Lake Holdings, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "August Lake") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and August Lake have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, August Lake is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, August Lake, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that August Lake is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. August Lake also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. August Lake also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that August Lake is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. August Lake also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. August Lake has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to August Lake, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 44 August Lake acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. August Lake is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. August Lake is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. August Lake represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, August Lake acknowledges that there is no agreement, contract or understanding (either oral or written) by and between August Lake and PowerTel. August Lake acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, August Lake hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of August Lake and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by August Lake. In Witness Whereof, August Lake Holdings, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL August Lake Holdings, Ltd., a Company of August Lake Holdings, Ltd. Limited by Shares under the International Business Companies Act of 1989, Date: March 16, 1998 Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------- Managing Director 45 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Whitestone Brooke Holdings, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Whitestone Brooke") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Whitestone Brooke have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Whitestone Brooke is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Whitestone Brooke, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Whitestone Brooke is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Whitestone Brooke also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Whitestone Brooke also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Whitestone Brooke is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Whitestone Brooke also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Whitestone Brooke has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Whitestone Brooke, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 46 Whitestone Brooke acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Whitestone Brooke is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Whitestone Brooke is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Whitestone Brooke represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Whitestone Brooke acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Whitestone Brooke and PowerTel. Whitestone Brooke acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional documents) are required in order to issue the Shares, Whitestone Brooke hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Whitestone Brooke and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Whitestone Brooke. In Witness Whereof, Whitestone Brooke Holdings, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Whitestone Brooke Holdings, Ltd., a of Whitestone Brooke Holdings, Ltd. Company Limited by Shares under the International Business Companies Act of Date: March 16, 1998 1989, Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ----------------------------------- Managing Director 47 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Porterman Williams, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Porterman Williams") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Porterman Williams have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Porterman Williams is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Porterman Williams, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Porterman Williams is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Porterman Williams also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Porterman Williams also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Porterman Williams is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Porterman Williams also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Porterman Williams has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Porterman Williams, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 48 Porterman Williams acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Porterman Williams is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Porterman Williams is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Porterman Williams represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Porterman Williams acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Porterman Williams and PowerTel. Porterman Williams acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, Porterman Williams hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Porterman Williams and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Porterman Williams. In Witness Whereof, Porterman Williams, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Porterman Williams, Ltd., a Company of Porterman Williams, Ltd. Limited by Shares under the International Business Companies Act of 1989, Date: March 16, 1998 Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------- Managing Director 49 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: North Oldenfield, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "North Oldenfield") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and North Oldenfield have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, North Oldenfield is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, North Oldenfield, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that North Oldenfield is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. North Oldenfield also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. North Oldenfield also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that North Oldenfield is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. North Oldenfield also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. North Oldenfield has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to North Oldenfield, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 50 North Oldenfield acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. North Oldenfield is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. North Oldenfield is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. North Oldenfield represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, North Oldenfield acknowledges that there is no agreement, contract or understanding (either oral or written) by and between North Oldenfield and PowerTel. North Oldenfield acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional document(s) are required in order to issue the Shares, North Oldenfield hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of North Oldenfield and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by North Oldenfield. In Witness Whereof, North Oldenfield, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL North Oldenfield, Ltd., a Company of North Oldenfield, Ltd. Limited by Shares under the International Business Companies Act of 1989, Date: March 16, 1998 Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ------------------------------------ Managing Director 51 MEMORANDUM TO: PowerTel USA, Inc., A Delaware, USA, corporation (Referred to as "PowerTel") FROM: Blackstone Sterling Holdings, Ltd., a Company Limited by Shares under the International Business Companies Act of 1989, Commonwealth of the Bahamas (Referred to as "Blackstone") RE: Receipt of Class A Common Stock Pursuant to the Plan of Reorganization of PowerTel PowerTel USA, Inc. ("PowerTel") and Blackstone have entered into a Settlement and Release Agreement dated as of December 1, 1997 (the "Agreement"), which Agreement was subsequently incorporated into and made a part of a Plan of Reorganization (the "Plan") filed by PowerTel with the United States Bankruptcy Court for the District of Nevada in a Chapter 11 proceeding identified as Case No 97-30265-BMG, which Plan was subsequently confirmed by the Court. Pursuant to the Plan, Blackstone is to receive Class A Common Shares (the "Shares") to be issued by PowerTel pursuant to Section 1145 of the United States Bankruptcy Code. In consideration of the issuance of the Shares, Blackstone, acting through its duly authorized representative, represents and warrants to PowerTel and to the Court that Blackstone is not an "underwriter" as that term is defined in Section 1145(b) of the Bankruptcy Code. Blackstone also acknowledges that the Shares which it will receive have not been registered with the United States Securities and Exchange Commission pursuant to Section 5 of the Securities Act of 1933 in reliance upon the exemption from registration provided in Section 1145(a) of the Bankruptcy Code. Blackstone also confirms that it has been advised that PowerTel has consented to the issuance of the Shares based upon PowerTel's understanding that Blackstone is experienced in financial matters, has access to advisors who are experienced in evaluating investments and is ready, willing and able to assume the risk of acquiring a speculative, high risk investment, such as the Shares. Blackstone also confirms that it has received and reviewed the Disclosure Statement filed by PowerTel, approved by the Court and distributed to its Creditors and has been afforded an opportunity to make inquiry into the affairs of PowerTel, including an opportunity to confer with the Directors and Officers of PowerTel. Blackstone has been advised that, for the preceding three calendar years, PowerTel has made various filings with the Securities and Exchange Commission (including but not limited to annual reports on Form 10-KSB, quarterly reports on Form 10-QSB and at least one registration statement on Form S-8). While PowerTel has not provided a copy of these filings to Blackstone, a copy will be made available upon request or may be procured from the United States Securities and Exchange Commission, Washington, D.C. 52 Blackstone acknowledges that PowerTel has not made any representation or warranty that (i) its Plan will be implemented successfully, (ii) there will be a market for the Shares or (if there is a market) that the per Share price will be maintained within any specific bid/ask range, or (iii) PowerTel will be financially solvent or that its pro forma financial projections will materialize as anticipated. Blackstone is aware that there are various Federal and State statutes, rules and regulations in the United States governing the offer and sale of securities. Blackstone is also aware that the Securities Exchange Act of 1934 imposes duties and responsibilities upon certain shareholders, officers and directors. Blackstone represents that it shall comply with all applicable statutes, rules and regulations. Except as set forth in the Agreement and the Plan, Blackstone acknowledges that there is no agreement, contract or understanding (either oral or written) by and between Blackstone and PowerTel. Blackstone acknowledges that both PowerTel and the United States Bankruptcy Court will rely upon this Memorandum in issuing the Shares. In the event that any additional documents) are required in order to issue the Shares, Blackstone hereby designates Mr. David Wallace, Esq. of Sarasota, Florida as its Agent and hereby grants to Mr. Wallace its Power of Attorney coupled with an interest in order to execute documents by or on behalf of Blackstone and agrees that, in such event, all documents executed by Mr. Wallace may be relied upon by the recipient as if fully executed by Blackstone. In Witness Whereof, Blackstone Sterling Holdings, Ltd., has given its Common Seal this date. GIVEN UNDER THE COMMON SEAL Blackstone Sterling Holdings, Ltd., a of Blackstone Sterling Holdings, Ltd. Company Limited by Shares under the International Business Companies Act of Date: March 16, 1998 1989, Commonwealth of the Bahamas By: Rupert N. Folkard Per: /s/ Rupert N. Folkard ---------------------------------- Managing Director EX-10.B 26 EXHIBIT 10(B) 1 Exhibit 10b SETTLEMENT AND MUTUAL RELEASE AGREEMENT This Settlement and Mutual Release Agreement ("Agreement") is entered into by and among (1) PowerTel USA, Inc., a Delaware corporation with its principal place of business situated in East Lansing, Michigan and formerly known as Munson Geothermal, Inc. and also formerly known as Nevada Energy Company ("PowerTel"), (2) Viva Telecommunications, Inc., a Nevada corporation with its principal place of business situated in Sarasota, Florida ("VivaTel"), (3) David L. Wallace, a resident of Sarasota, Florida ("Mr. Wallace"), (4) Jeffrey Antisdel, a resident of Reno, Nevada ("Mr. Antisdel"), (5) John Vogel, a resident of Tucson, Arizona ("Mr. Vogel"), and (6) Dean Chamberlain, a resident of Portland, Oregon ("Mr. Chamberlain"), collectively referred to as "the Parties". This Agreement is entered into and deemed to be effective as of January 25, 1998. R E C I T A L S WHEREAS, in August, 1996, NEC purchased 100.0% of the issued and outstanding Common Stock of Telecom Technologies, Inc. ("TTI"), which was engaged at that time in the purchase and resale of long distance telecommunication services; and WHEREAS, subsequent to the purchase of TTI, the officers of NEC, former members of the Board of Directors of NEC and representatives of major shareholders of NEC began to focus on the telecommunications industry for the purpose of determining whether the TTI acquisition had economic value and whether NEC should consider additional acquisitions in that industry segment; and 2 WHEREAS, in 1997 Mr. Wallace incorporated Viva Telecommunications, Inc. ("VivaTel"), for the purpose of purchasing and selling telecommunication services; and WHEREAS, in or about December, 1997, PowerTel acquired 100.0% of the issued and outstanding Common Stock of VivaTel from Mr. Wallace based upon Mr. Wallace's representation that he was the sole shareholder of VivaTel; and WHEREAS, Messrs. Vogel and Chamberlain have asserted that each of them has a right in and to some or all of the Common Stock of VivaTel; and WHEREAS, the assertions made by Messrs. Vogel and Chamberlain were based upon their personal understanding of what is right or equitable and an individual belief that they should receive part ownership in VivaTel because they were to be employees of VivaTel; and WHEREAS, upon further reflection Messrs. Vogel and Chamberlain are aware that they were never VivaTel shareholders of record, there was never a written contract indicating that they would receive VivaTel stock, nor was there at any time a legal right for them to hold or own stock in VivaTel; and WHEREAS, PowerTel has commenced a declaratory judgment action in the United States Bankruptcy Court for the District of Nevada for the purpose of confirming that it has acquired 100.0% of the issued and outstanding Common Stock of VivaTel, said proceeding being identified as In re PowerTel, Inc. vs.. Messrs Snyder, Vogel and Wallace, ADV 97-3151 (U.S. Bankruptcy Court, NV) (the "Declaratory Judgment Action"); and WHEREAS, in the Declaratory Judgment Action, PowerTel has named as Respondents, Messrs. Wallace and Vogel; and 3 WHEREAS, PowerTel has provided written notice to Mr. Chamberlain of its intent to add Mr. Chamberlain as an additional Respondent in the Declaratory Judgment Action identified above; and WHEREAS, the Clerk of the Court for the United States Bankruptcy Court has entered a default because neither Mr. Wallace, nor Mr. Vogel has filed a timely response to the declaratory judgment complaint filed by PowerTel; and WHEREAS, Mr. Vogel has provided notice of his intention to file an answer to the Declaratory Judgment Action and to initiate a Third-Party complaint and cross-claim for damages; and WHEREAS, Mr. Chamberlain has tendered notice of his intent to seek to become a Party in the Declaratory Judgment Action; and WHEREAS, Messrs. Chamberlain and Vogel now recognize that if they were to pursue a Third-Party complaint and cross-claim for damages alleging that they have a right to own shares of VivaTel stock, their claim would be without legal support and would be solely based upon their emotional belief; and WHEREAS, PowerTel has provided Mr. Chamberlain with notice that PowerTel intends to seek disgorgement of certain proceeds totaling $45,000 received by Mr. Chamberlain in conjunction with the sale of TTI to NEC, such disgorgement to be sought pursuant to Sections 547 and 548 of the United States Bankruptcy Code; and WHEREAS, Mr. Chamberlain objects to any claim that he has acted in violation of Sections 547 or 548 of the United States Bankruptcy Code; and 4 WHEREAS, the Parties to this Agreement desire to reach a full, final and complete compromise and settlement of any and all disputes, claims and causes of action (if any) which anyone of them may have arising out of the transactions summarized above; NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth herein, the consideration paid and to be paid to Messrs. Vogel and Chamberlain by PowerTel, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties to this Agreement, having had the opportunity to confer with legal counsel, enter into this Agreement intending to be legally bound and do hereby agree that: 1. The recitals set forth are true and correct and are incorporated herein by reference for all purposes. 2. This Agreement shall be governed by the laws of the State of Nevada, without regard to its conflicts of laws provisions. 3. Any communication required or permitted to be given to any Party to this Agreement shall be transmitted to the addresses set forth below, which address may be amended at anytime by providing written notice to all Parties to this Agreement: TO: PowerTel USA, Inc. c/o Mr. Richard A. Cascarilla, President 321 West Lake Lansing Road, Suite 100 East Lansing, MI 48823 Telefax: 517/333-9869 With a copy to: Walter & Haverfield P.L.L. Legal Counsel to PowerTel 1300 Terminal Tower Cleveland, OH 44113 c/o Van P. Carter, Esq. Telefax: 216/575-0911 5 TO: Viva Telecommunications, Inc. c/o Mr. David Wallace, President 5545 Shadow Lawn Drive Sarasota, FL 34242 TO: Mr. Jeffrey Antisdel 401 E. Fourth Street Reno, NE 89512 TO: Mr. David L. Wallace 5545 Shadow Lawn Drive Sarasota, FL 34242 TO: Mr. John Vogel 5845 N. Calle Tiburon Tucson, AZ 85704 TO: Mr. Dean Chamberlain 18029 Fitch Dr. Sherwood, OR 97140 4. This Agreement is intended to be a full, complete and final compromise and settlement of each and every dispute, claim, cause of action or grievance of any nature whatsoever, whether real or personal, contractual, equitable or otherwise, whether arising in contract, statute or by common law (the "Claims") and each Party does hereby waive and forever relinquish each and every Claim which it has or may have (a) against each and every Party to this Agreement and his/its successors, heirs, insurers, shareholders, assigns, executors, estates and successors in interest, and (b) against each and every officer, director, employee, attorney, accountant, financial advisor, consultant to any Party to this Agreement, including, but not limited to, Ms. Trudi Wilcox-Woods, Mr. Van P. Carter, Walter & Haverfield P.L.L., Mr. Michael Kassouff, Mr. Richard A. Cascarilla, and each and every subsidiary of any Party to this Agreement, collectively referred to as the "Non-Party Beneficiaries". 5. Messrs. Vogel and Chamberlain, individually and on behalf of their heirs, assigns, executors, agents and representatives, do hereby represent and warrant that they have not filed, transmitted or submitted and will not file, transmit or submit any complaint, grievance, claim or allegation of wrongdoing, whether made in writing or orally, in any court or with any federal, state or local regulatory agency or disciplinary authority with respect to (a) the transactions and events described in the Recitals to this Agreement, or (b) any Party to this Agreement or Non-Party beneficiary as identified in Paragraph 4(b) of this Agreement. Every Party and each Non-Party Beneficiary may rely upon the representation and warranty set forth in this Paragraph 5. 6 6. It is the specific intention of this Agreement that any and all Claims by and among the Parties to this Agreement shall be permanently, completely compromised and settled. To the extent, however, that Mr. Chamberlain or Mr. Vogel retain, by operation of law or otherwise, any Claim whatsoever, Mr. Chamberlain and Mr. Vogel in consideration of this Agreement, including but not limited to Paragraphs 11 and 12 hereof, do hereby grant, bargain, sell and convey all of their right, title and interest in and to any residual claim or cause of action to PowerTel. Mr. Chamberlain and Mr. Vogel furthermore agree to cooperate with PowerTel in any and all proceedings which may result or have resulted from the transaction set forth herein, including, without limitation, the Bankruptcy proceeding and any adversary proceeding filed therein. 7. This Agreement does not include any express or implied covenant of noncompetition. Accordingly, every Party to this Agreement has the right to engage in competitive business activities with any other Party to this Agreement. 8. Messrs. Vogel, Chamberlain and Wallace do hereby agree to execute and consent to the entry of the judgment in the form attached hereto as Exhibit A, pursuant to which (a) PowerTel will be deemed to own 100.0% of the issued and outstanding Common Stock of VivaTel, and (b) the United States Bankruptcy Court for the District of Nevada pursuant to Section 107 of the United States Bankruptcy Code and Rule 9018(2) of the Federal Rules of Bankruptcy Procedure shall seal all documents in the Declaratory Judgment Action. 9. Messrs. Vogel and Chamberlain represent and warrant that they shall immediately cease and desist from conducting any business utilizing the name "VivaTel" or "Viva Telecommunications" and that they shall cease and desist and shall forever refrain from holding themselves out as officers, directors or shareholders of VivaTel. Messrs. Vogel and Chamberlain represent and warrant that they shall, within five calendar days of the effective date of this Agreement, deliver to PowerTel at the address set forth above any and all documents or assets in their possession, custody or control which belong to, are owned by, or pertain to VivaTel, its business, organization, operation or structure, including but not limited to correspondence, memoranda, contracts, bank statements, checks, canceled checks, corporate records, corporate minute books, and any other written document of any nature whatsoever, whether or not the document has been prepared by Mr. Chamberlain or Mr. Vogel. Messrs. Vogel and Chamberlain represent and warrant that, upon request by PowerTel, they will meet in person or telephonically with a designated representative of PowerTel for the purpose of providing information with respect to the business affairs of VivaTel, any actions which they undertook by or on behalf of or in the name of VivaTel, including but not limited to, any contracts, marketing presentations, sales presentations or negotiations which were held with third-parties. Messrs. Vogel and Chamberlain represent and warrant that all information provided to PowerTel pursuant to this Section 9 of this Agreement shall be true and accurate in all material respects and that they shall not omit material information in the course of such disclosure and PowerTel is and may rely upon the disclosures addressed herein and such disclosures are material terms and conditions of this Agreement. 10. Mr. Vogel represents and warrants that over a reasonable time period he shall pay, cause to be paid or otherwise secure the release of all debts and obligations of VivaTel as of the date of this Agreement such that VivaTel shall have no financial obligation of any nature to any creditor, 7 including but limited to the Internal Revenue Service and state or local authorities for payment of taxes of any nature whatsoever, wages, rent, services or products secured from JD Services of Salt Lake City, Utah and any and all other accounts payable except that Mr. Vogel shall have no obligation toward any debts incurred to or on behalf VivaTel by Mr. Mark Snyder. PowerTel agrees to assume responsibility for the debts incurred by VivaTel as a result of actions by Mr. Wallace. 11. In addition to the mutual covenants and conditions set forth in this Agreement, as further and additional consideration, PowerTel hereby agrees as follows: A. Within 10 days of confirmation of the Plan of Reorganization to be filed by PowerTel in the United States Bankruptcy Court for the District of Nevada, PowerTel will issue a $20,000 check to Mr. Vogel as compensation for services rendered to VivaTel, and PowerTel agrees that this payment will be perfected in a security interest in the letter of credit advanced to VivaTel in effect as of February 2, 1998. B. PowerTel agrees that it shall not pursue its claim against Mr. Chamberlain that Mr. Chamberlain disgorge pursuant to Sections 547 or 548 of the United States Bankruptcy Code the $45,000 previously paid to him by NEC and Mr. Chamberlain hereby agrees that (i) he shall confirm in an affidavit that he has received no consideration, directly or indirectly, for the sale of TTI other than the $45,000 paid to him by NEC, (ii) he shall assist PowerTel in its investigation into the circumstances surrounding the acquisition of TTI and in PowerTel's attempt to recoup the $500,000 cash and 2,000,000 shares of Common Stock which were transferred in exchange for the TTI Common Stock, (iii) he hereby stipulates that PowerTel owns 100.0% of the issued and outstanding Common Stock of TTI and agrees to assist and cooperate with PowerTel in its investigation into the business affairs of TTI; and, (iv) he hereby stipulates that he is not entitled to any further compensation from PowerTel arising out of the TTI Agreement or otherwise. 12. As further and additional consideration for this Agreement, Mr. Antisdel agrees to transfer $50,000 worth of PowerTel Class A Common stock to Mr. Vogel (or his assigns) 6 months after the confirmation date for the Plan of Reorganization to be submitted by PowerTel to the United States Bankruptcy Court for the District of Nevada. The number of shares of stock shall be determined by the per-share closing price for the trading date immediately preceding transfer of the shares. 13. This Agreement is specifically contingent upon confirmation of the Plan of Reorganization to be submitted by PowerTel to the United States Bankruptcy Court for the District of Nevada. In the event that the Plan is not confirmed as submitted, any Party to this Agreement has the right to declare this Agreement to be null and void as to that Party, in which event the Agreement shall remain operative with respect to those Parties which have not elected to terminate the Agreement. 8 14. Every Party to this Agreement represents and warrants that he/it shall refrain from making disparaging, derogatory or inflammatory statements and comments, whether orally or in writing regarding any other Party to this Agreement. 15. Every Party to this Agreement shall be responsible for his/its own expenses, including legal fees. 16. This Agreement may be executed by multiple counterpart and the receipt of a telefaxed signature page shall be accepted as if it were an originally executed signature page. 17. In the event that any Party to this Agreement breaches any representation or warranty or fails to perform any covenant or obligation as set forth in this Agreement, the damaged Party or Non-Party Beneficiary (as the case may be) shall be entitled (1) to offset any payments due pursuant to this Agreement by the the damages incurred, including attorney fees, and (2) to reimbursement of actual and consequential damages, including attorneys fees. In the event that any Party violates the terms of paragraphs 5, 9 or 14 of this Agreement, the violating Party hereby consents to the entry of a temporary restraining order, preliminary and permanent injunction to be issued by the Second Judicial District Court, County of Washoe, State of Nevada and hereby consents to the jurisdiction of that Court. The provisions of paragraphs 4, 5, 8, 9, 10, 11, 12, 14, 17 and 18 of this Agreement are perpetual and shall survive performance of all other provisions of this Agreement. 18. To the extent that any supplemental documents are required to be executed in order to implement the objectives of this Agreement, each Party to this Agreement agrees to cooperate in good faith in order that such supplemental documents may be prepared and executed. IN WITNESS WHEREOF, this Agreement has been executed as of the effective date set forth above. WITNESSES: POWERTEL USA, INC. /s/ (Unknown) By: /s/ Richard A. Cascarilla - -------------------------------- --------------------------------- Its: President - -------------------------------- -------------------------------- VIVA TELECOMMUNICATIONS, INC. By: /s/ David L. Wallace - -------------------------------- --------------------------------- Its: President - -------------------------------- -------------------------------- 9 JEFFREY ANTISDEL, Individually /s/ (Unknown) /s/ Jeffrey Antisdel - -------------------------------- --------------------------------- - -------------------------------- --------------------------------- DAVID L. WALLACE, Individually /s/ David L. Wallace - -------------------------------- --------------------------------- - -------------------------------- --------------------------------- JOHN VOGEL, Individually /s/ (Unknown) /s/ John Vogel - -------------------------------- --------------------------------- - -------------------------------- --------------------------------- DEAN CHAMBERLAIN, Individually /s/ (Unknown) /s/ Dean Chamberlain - -------------------------------- --------------------------------- - -------------------------------- --------------------------------- EX-10.C 27 EXHIBIT 10(C) 1 Exhibit 10c AMENDED AND RESTATED AGREEMENT FOR EXCHANGE OF STOCK BETWEEN DAVID WALLACE AND POWERTEL USA, INC. REGARDING VIVA TELECOMMUNICATIONS, INC. 2 AMENDED AND RESTATED AGREEMENT FOR EXCHANGE OF STOCK This agreement ("AGREEMENT") is entered into as of February 12, 1998 by and among (i) VIVA TELECOMMUNICATIONS, INC. ("VIVATEL"), a corporation incorporated under the laws of Nevada (hereinafter referred to as "VIVATEL" or "CORPORATION") with its principal place of business situated in Tucson, Arizona, (ii) POWERTEL USA, INC., a corporation incorporated under the laws of Delaware with its principal place of business situated in East Lansing, Michigan ("POWERTEL" or "BUYER"), and (iii) DAVID L. WALLACE, an individual residing in Sarasota, Florida ("SELLER"), who owns 100% of the issued and outstanding Common Stock of VIVATEL. RECITALS WHEREAS, SELLER is the owner of 100% the issued and outstanding shares of the CORPORATION; and WHEREAS, the CORPORATION is engaged in the business of purchasing and reselling long distance telecommunication services and related activities ("BUSINESS"); and WHEREAS, SELLER desires to exchange with BUYER common stock of BUYER in exchange for 100% of the common stock of the CORPORATION and BUYER desires to exchange stock as noted above; and WHEREAS, for federal income tax purposes, it is intended that this transaction shall qualify as a "reorganization" within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended; and WHEREAS, the CORPORATION desires to guarantee the obligations of SELLER pursuant to this AGREEMENT; and WHEREAS, BUYER and SELLER have previously entered into a written agreement for the exchange of 100% of the issued and outstanding stock of VIVATEL in exchange for common stock of the BUYER (the "Prior Agreement"); and WHEREAS, BUYER and SELLER desire to amend and modify the Prior Agreement; NOW, THEREFORE, in consideration of the foregoing, the payment of $100.00 to SELLER by POWERTEL, the receipt and sufficiency of which is hereby acknowledged, the exchange of stock pursuant to this Agreement and the representations, warranties, covenants, and mutual promises contained herein, the parties hereto, intending to be legally bound, do agree as follows: 3 SECTION 1. EXCHANGE OF SHARES OF STOCK 1.1 Purchase. SELLER shall tender to BUYER 100% of the issued and outstanding shares of common stock of the CORPORATION ("SHARES") in consideration of the receipt of POWERTEL common stock as set forth in Section 2 of this AGREEMENT. 1.2 Conveyance of Title. The conveyance of title to the SHARES shall be effected by the delivery of the stock certificates therefor at the closing duly endorsed for transfer to BUYER or with duly executed stock powers attached. 1.3 Exclusive Nature of Agreement. This AGREEMENT shall preclude and restrict SELLER from entertaining other offers of sale or exchange of the SHARES. SECTION 2. CONSIDERATION TO BE PAID TO SELLER; SECURITY 2.1 Purchase Price for Shares. In consideration of the tender to the BUYER of 100% of the issued and outstanding common stock of the CORPORATION, BUYER shall tender to SELLER, Class A Common Stock of the BUYER in an amount equal to One (1%) percent of the issued and outstanding common stock of the BUYER computed as of the close of business on the date of CLOSING as set forth in Section 9 of this AGREEMENT. In the event that POWERTEL, as a result of its Plan of Reorganization, issues additional Class A Common Stock or effects a reverse stock split, the number of shares of Class A Common Stock issued to SELLER shall be adjusted such that SELLER own 1.0% of the issued and outstanding Class A Common Stock of BUYER subsequent to implementation of the Plan of Reorganization. 2.2 Prohibition on Transfer of Common Stock. The Common Stock to be issued to the SELLER by the BUYER has not been registered pursuant to Section 5 of the Securities Act of 1933, and there is no duty or obligation on the part of the BUYER to affect such registration. Each stock certificate shall bear the following conspicuous legend: THE COMMON STOCK REPRESENTED BY THE CERTIFICATE HAS NOT BEEN REGISTERED PURSUANT TO SECTION 5 OF THE SECURITIES ACT OF 1933 OR ANY ANALYSIS STATE STATUTE. SALE, TRANSFER, HYPOTHECATION, PLEDGE OR CONVEYANCE OF ANY OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS STRICTLY PROHIBITED UNLESS AND UNTIL EITHER (A) THE SHARES REPRESENTED BY THE CERTIFICATE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO SECTION 5 OF THE SECURITIES ACT OF 1933 AND, AS REQUIRED, BY ANY ANALOGOUS STATE STATUTE, OR (B) THE SHAREHOLDER SUBSTANTIATES THAT THERE IS A VALID EXEMPTION FROM THE REGISTRATION REQUIREMENT AND 4 SUBSTANTIATES SUCH EXEMPTION BY MEANS OF A LEGAL OPINION SATISFACTORY IN FORM AND SUBSTANCE TO BOTH THE ISSUER (POWERTEL USA, INC.) AND ITS LEGAL COUNSEL. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND A CONTINGENT RECONVEYANCE OBLIGATION TO THE ISSUER PURSUANT TO THE TERMS OF AN AGREEMENT DATED DECEMBER 1, 1997. INFORMATION ABOUT THAT AGREEMENT MAY BE OBTAINED ON A CONFIDENTIAL BASIS, FROM THE ISSUER. QUESTIONS REGARDING THIS RESTRICTION ON TRANSFER SHOULD BE DIRECTED TO: PowerTel USA, Inc. c/o Walter & Haverfield P.L.L. 1300 Terminal Tower Cleveland, Ohio 44113 Attn: Van P. Carter, Esq. SELLER specifically acknowledges that the Common Shares which SELLER will receive are subject to significant transfer restrictions. In addition, SELLER acknowledges that SELLER may be deemed to be an "insider" or "control person" for purposes of the Securities Act of 1933 and/or the Securities Exchange Act of 1934. SELLER represents and warrants that SELLER will comply with all applicable provisions of the federal and state securities laws including, but not limited to, the Securities Act of 1933 and the Securities Exchange Act of 1934. BUYER represent that he is acquiring the POWERTEL Class A Common Stock with the intent of holding such securities indefinitely and not with the intention of distributing same. SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER Unless otherwise set forth in writing to BUYER, SELLER represents and warrants to the best of his knowledge as follows: 3.1 Corporate Status. CORPORATION is duly organized, validly existing, and in good standing under the laws of the state of Nevada and has the power and authority to own its properties and to conduct its business as now being conducted. The CORPORATION does not have any subsidiaries and does not own any stock in any other corporation or have any investments in any partnerships or joint ventures. 3.2 Capitalization. The authorized stock of CORPORATION consists solely of 25,000 shares of common stock with par value of $0.0001 per share of which only the SHARES are issued and outstanding. The SHARES constitute all of the issued and outstanding shares of stock of CORPORATION. The SHARES are validly issued, fully paid and nonassessable. 5 3.3 Ownership of Shares. SELLER is the owner of the 25,000 of SHARES and in the aggregate owns 100% of the issued and outstanding SHARES of CORPORATION. The SELLER has title to the SHARES free and clear of any and all liens and encumbrances. 3.4 Consent of Third Parties. This AGREEMENT is legally binding upon SELLER and the consummation of the transactions contemplated hereby in accordance with the terms hereof does not require the consent of any third party. 3.5 Financial Statements and Pro Form Financial Projections. If requested by BUYER, within sixty (60) days of the date of this AGREEMENT, SELLER shall cause CORPORATION to prepare balance sheets, income statements and related schedules and footnotes for the CORPORATION'S fiscal period commencing in 1997 with the date of incorporation and continuing through December 31, 1997 ("FINANCIAL STATEMENT") which FINANCIAL STATEMENT shall accurately and fairly reflect the financial condition of CORPORATION as of the dates indicated thereon, and the results of the operations of the CORPORATION for the respective fiscal periods then ended. In addition to the foregoing, to the best of SELLER'S knowledge, the proforma financial projections for the CORPORATION previously provided to BUYER and SELLER accurately and fairly reflect the current and future financial condition of the CORPORATION as of the dates indicated thereon, and the results of the operations of the CORPORATION for the respective fiscal periods then ended, subject to the assumptions and representations set forth therein. 3.6 Absence of Certain Changes. The business operations of CORPORATION have been conducted prudently and in the ordinary course of business and there has been no material change in the financial condition, results of operations, business, business prospects, capitalization or any increase in the compensation of the CORPORATION'S employees, if any. 3.7 Liabilities. To the best of SELLER'S knowledge (i) as of the date of the last FINANCIAL STATEMENT, CORPORATION did not have any liabilities, whether absolute, accrued, contingent or otherwise, that are not disclosed in the Financial Statement attached hereto, and (ii) there was no basis upon which any person could assert a liability against CORPORATION which was not disclosed on the last FINANCIAL STATEMENT. Since the date of the last FINANCIAL STATEMENT, CORPORATION has not incurred any liabilities not in the ordinary course of business, and to the best of SELLER'S knowledge there is presently no basis upon which a person could assert such a liability, nor has any person asserted the existence of such a liability. SELLER shall be personally liable for, and shall indemnify and hold CORPORATION and BUYER harmless from any and all liabilities of CORPORATION in excess of $50,000 unless BUYER agrees in writing to waive this duty of indemnification. 3.8 Tax Matters. CORPORATION'S federal, state and local tax returns for 1997 have not been filed or audited. There are no pending tax examinations of, or tax claims asserted against, CORPORATION and there are no known bases for any such claims. CORPORATION has not granted any extension of any limitation period applicable to tax claims which extension is still in effect and has not filed a consent under Section 341(f) of the Internal Revenue Code of 1986. CORPORATION has never filed an election to be taxed as a small business corporation pursuant 6 to IRC Section 1361. CORPORATION is and has not been a member of a "control group" as defined in IRC Section 1563 or an affiliated group as defined in IRC Section 1504. 3.9 Title to Property. CORPORATION has good and marketable title to all of its assets free and clear of all liens and encumbrances. CORPORATION'S use of intangibles has not and will not infringe the rights of any other person. The rights, properties and other assets presently owned, leased or licensed by CORPORATION and described in this AGREEMENT include all rights, properties and other assets necessary to permit CORPORATION to conduct its business in the same manner as its business has been conducted. 3.10 Receivables. All of the receivables of CORPORATION are reflected on the books of CORPORATION and are considered to be collectible or have been collected as of the CLOSING DATE. 3.11 Inventories. The inventories of CORPORATION, if any, are of a quality and quantity to be usable and salable in the ordinary course of CORPORATION'S business. 3.12 Condition of Tangible Property. The equipment, and other tangible property of CORPORATION are, to the best of SELLER' knowledge, in good condition and repair, and are adequate for the uses to which such property is put in the conduct of the BUSINESS. SELLER have no knowledge of any defects in any of such tangible property. 3.13 Condemnation. No property owned or leased by CORPORATION is subject to any governmental decree or order, or to the best of SELLER'S knowledge, threatened or proposed order to be sold or taken by any public authority. 3.14 Schedule of Contracts. Upon request from BUYER, SELLER shall prepare a complete list of all contracts of any type, other than insurance policies, to which CORPORATION is a party. All contracts to which CORPORATION is a party are in full force and effect and the CORPORATION and the other parties thereto have performed all of the obligations required to be performed by them thereunder and are not in default thereof. Neither the execution of this AGREEMENT, nor the consummation of the transactions contemplated hereby, will constitute a default under any of such contracts as to which the sale of the shares contemplated by this AGREEMENT may or does constitute a default. None of such contracts will result in a loss to CORPORATION upon the completion thereof and none of the purchase commitments which are the subject thereof are in excess of the normal requirements of the BUSINESS or establish a price in excess of that customarily charged for the items which are the subject thereof. Full and complete copies of all such contracts will be supplied to BUYER upon request. 3.15 Insurance Policies. Upon request from BUYER, SELLER shall prepare a complete list of all of CORPORATION'S insurance policies and performance bonds. All such insurance policies are in full force and effect and all premiums due thereunder have been paid on a timely basis. CORPORATION has not been notified by any representative of any insurer of the existence of any ground for cancellation of said policies or for the reduction of coverages provided thereby. 7 3.16 Employment Matters. Upon request from BUYER, SELLER shall prepare a complete schedule of the compensation paid to all employees of CORPORATION. 3.17 Labor Relations. To the best of SELLER'S knowledge, CORPORATION has complied with all laws, rules, and regulations relating to the employment of labor and has no labor troubles in the sense that there are no strikes, lockouts, work stoppages, or slow downs, pending or threatened against CORPORATION. 3.18 Legal Proceedings. There are no legal or administrative proceedings of any nature pending or, to the best of SELLER'S knowledge, threatened against or affecting CORPORATION. CORPORATION is not in default of any judgment, writ, injunction, or order of any court or governmental agency. 3.19 Compliance with Laws. CORPORATION has not received any notice from any governmental entity asserting a violation by CORPORATION of any laws, regulations, or governmental pronouncements of any type, including, without limitation, zoning ordinances and, to the best of SELLER'S knowledge, (i) there are no known claims or investigations involving asserted violations thereof, and (ii) CORPORATION has duly complied with all statutes, regulations and governmental pronouncements of all types (including, without limitation, zoning ordinances) and has acquired all licenses and permits required for the operation of its business. 3.20 Environmental Matters. a) CORPORATION has, to the best of SELLER'S knowledge: (i) obtained all permits, licenses and other authorizations which are required to be obtained by CORPORATION for the operation of its business under federal, state and local laws relating to the environment; (ii) handled, stored, transported and disposed of its wastes, toxic, hazardous or otherwise, in complete compliance with all such laws; and (iii) complied with all terms and conditions of all such required permits, licenses and authorizations. b) SELLER is not aware of and has no knowledge of the presence on or under real property leased by CORPORATION of any pollutants and/or contaminants (by whatever name called) which are prohibited, restricted or otherwise regulated by any federal, state or local governmental entity or authority, including but not limited to the United States EPA, and/or any state, municipal or county health department. c) SELLER has not, during the period of time CORPORATION has occupied such real property, knowingly caused or permitted any of such pollutants and/or contaminants, as described above, to have been deposited, placed or suffered to remain on or under the real property in violation of law. d) SELLER shall not, following the date hereof, cause or permit any of such pollutants and/or contaminants, as described above, to be deposited, placed or suffered to remain on or under the real property in violation of law. 8 e) Provided, further, however, that nothing described above shall impose liability on SELLER in the event of the presence, unknown to SELLER, on or under the real property of any such pollutants and/or contaminants which have migrated to the real property from an outside third party source. f) SELLER is not aware of and have no knowledge of any claim having been made by or any classification having been made or determined by the Department of the Army, Corps of Engineers, that all or any part of the real property, has been, is, or should be classified as "wetlands". 3.21 Affiliations. SELLER does not have any direct or indirect interest in any business enterprises which either compete with CORPORATION or have had business dealings with CORPORATION that have not been disclosed in this AGREEMENT or otherwise in writing to the BUYER. 3.22 Bank Accounts. Upon request from BUYER, the SELLER shall prepare a complete and accurate list of each bank or financial institution with which CORPORATION has an account (including the account numbers) or safety deposit box and the names of the persons authorized to draw thereon or have access thereto. 3.23 Disclosure. SELLER has disclosed to BUYER all facts material to the business, assets, operations, financial condition, and prospects of CORPORATION. 3.24 Related Parties' Loans. Upon request from BUYER, the SELLER shall prepare a list of all loans to or from CORPORATION and its officers, directors, shareholders, employees, and members of their families. 3.25 Deliveries by SELLER. In connection with the proposed sale of the SHARES, SELLER have delivered to BUYER or its counsel the documents, or true and complete copies thereof, listed below: a) The Articles of Incorporation of CORPORATION; and b) The Code of Regulations of CORPORATION. SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER BUYER represents and warrants as follows: 4.1 Consent of Third Parties. Subject only to ratification of this AGREEMENT by the United States Bankruptcy Court, this AGREEMENT is legally binding upon BUYER and BUYER'S consummation of the transactions contemplated hereby does not require the consent of any third party. 9 4.2 Securities Exemption. BUYER is a sophisticated and knowledgeable individual who is an "accredited investor" as defined in Rule 501 of Regulation D of the Securities Act of 1933. BUYER has had an opportunity to conduct an independent investigation into the affairs of the CORPORATION. BUYER represents that it is acquiring the SHARES for its personal investment and not with an intention to re-sell or distribute the SHARES to third parties who are not parties to the AGREEMENT. BUYER stipulates that the purchase of the SHARES is a speculative transaction and that BUYER is prepared to incur risk of loss of his investment. BUYER also stipulates that the sale of the SHARES pursuant to the AGREEMENT has been effected pursuant to the provisions of Regulation D and Section 4(2) of the Securities Act of 1933 and comparable provisions of applicable state securities laws. BUYER agrees to file any documents reasonably required by SELLER to comply with applicable securities laws. SELLER represents that he has had direct, continuing and first-hand experience with the business and operation of BUYER and its financial condition and affairs. SELLER acknowledges that (i) BUYER is currently functioning as Debtor-in-Possession pursuant to Chapter 11 of the United States Bankruptcy Code, (ii) there is little, if any, market for the BUYER's Class A Common Stock and there may be never be any market for such securities, (iii) the Class A Common Stock is deemed to be "high risk" and "speculative," and (iv) there is no assurance or guarantees that the Class A Common Stock will never have any economic value. 4.3 Financial Statement and Pro Form Financial Projections. Upon request by SELLER, BUYER will provide SELLER with a copy of its financial statement as filed with the United States Bankruptcy Court. BUYER hereby authorizes SELLER (at SELLER'S expense) to secure a credit report on BUYER. BUYER represents that the final statements identified above fairly and accurately reflect BUYER'S financial condition and that there are no adverse facts not described to SELLER in writing regarding BUYER'S financial affairs. SECTION 5. COVENANTS OF SELLER Unless BUYER waives such performance in writing, SELLER covenants as follows: 5.1 Conveyance of Title to Shares. At the CLOSING (as defined in SECTION 9 hereinafter), SELLER will convey good and marketable title to the SHARES to BUYER free and clear of all security interests, claims, liens, proxies, charges, or other encumbrances. 5.2 SELLER'S Closing Certificate. SELLER shall execute and deliver to BUYER at the CLOSING a certificate which shall certify that, except as otherwise specifically provided therein: (a) all of the representations and warranties made by SELLER in this AGREEMENT are true and accurate in all respects as of the CLOSING with the same force and effect as though made at such time; and (b) SELLER has fully performed and/or complied with all of his covenants and other obligations under this AGREEMENT required to be performed and/or complied with by them as of the CLOSING. SELLER shall describe in such certificate the circumstances concerning any incorrect or inaccurate representations or warranties identified therein. From the date hereof until 10 the date of CLOSING, SELLER shall notify BUYER immediately in writing if any of the representations and warranties made herein should become untrue or inaccurate. 5.3 Conduct of Business. To and through the date of CLOSING, subject to SECTION 5.8 hereof, CORPORATION shall conduct its business prudently and in the ordinary course consistent with past practice. 5.4 No Amendments. To and through the date of CLOSING, no change or amendment shall be made to the Articles of Incorporation or Code of Regulation of CORPORATION. 5.5 No Capital Changes. To and through the date of CLOSING, CORPORATION shall not issue or grant options, warrants, or rights to purchase or to subscribe to any of its stock or any securities or obligations convertible into its stock or make any other changes in its capital structure. 5.6 No Dividends or Redemptions. To and through the date of CLOSING, CORPORATION shall not declare or pay any dividend or other distribution in respect of its stock or purchase any of its stock. 5.7 Forbearance by Corporation. To and through the date of CLOSING, except as otherwise specifically provided for or required herein, CORPORATION shall not do, or agree to do, any of the following: a) Incur any liability other than in the ordinary course of business or pay any liability other than current liabilities and current maturities of existing long term debt; b) Incur any indebtedness for borrowed money or assume, guarantee or otherwise become responsible for the obligations of any other person; c) Mortgage, pledge, or otherwise encumber any of its assets; d) Sell or transfer any of its assets other than sales of inventory in the ordinary course of business; e) Sell any of the inventory of CORPORATION other than in the ordinary course of business; f) Cancel, release, or assign any obligations owed to CORPORATION or any claims held by it; g) Enter into or terminate any leases or contracts or make any material changes therein; h) Increase in any manner the compensation of any of CORPORATION'S employees (including an increase in fringe benefits or the provision of fringe benefits to employees not previously entitled thereto) or pay or agree to pay any pension or retirement allowance not 11 required by any existing plan or agreement to any employees, or enter into any new pension, retirement, or profit sharing plan or agreement or employment agreement; i) Hire or terminate any employee, except for just cause; j) Grant or extend any power of attorney or appoint any agent; k) Loan money or assets to any person; l) Adopt any new method of accounting; or m) Make any capital expenditures without BUYERS consent in writing. 5.8 Insurance; Maintenance and Location of Property. To and through the date of CLOSING, CORPORATION shall continue to insure its business, employees, and assets against all insurable risks in the manner and to the extent such items were insured on the date hereof and all assets of CORPORATION shall be used, maintained, and repaired in a careful and reasonably prudent manner. On the CLOSING DATE all of the assets of CORPORATION shall be located on premises owned or leased by CORPORATION. 5.9 Access. To and through the date of CLOSING, SELLER shall grant BUYER and its agents full access to all personnel records, assets, records and documents of CORPORATION and shall furnish such financial and operating information as BUYER may reasonably request. SELLER shall provide, upon BUYER'S request, verification of CORPORATION'S receivables and liabilities. 5.10 Filing of Tax Returns. To and through the date of CLOSING, any tax returns required to be filed by CORPORATION on or prior to the CLOSING shall be submitted to BUYER for review. 5.11 Resignations. To and through the date of CLOSING, SELLER shall cause CORPORATION'S statutory agent and all of its officers, directors, and trustees of CORPORATION'S retirement plans to resign in writing from such positions as of the CLOSING. 5.12 Professional Fees. As of CLOSING, all professional fees, including, without limitation, all attorney or accountant fees, incurred by SELLER as a result of the negotiation and preparation of the within AGREEMENT and the consummation of the transactions contemplated hereby shall be paid by BUYER. 5.13 Confidential Information. For a period of three (3) years after the CLOSING, SELLER shall not disclose any confidential or proprietary information or trade secrets of CORPORATION including, without limiting the foregoing, the identity of any of CORPORATION'S customers or suppliers, and the prices at which CORPORATION has sold or purchased products or services nor shall SELLER use such information for their own purposes to the detriment of CORPORATION. 12 5.14 Noncompetition Covenant. For a period of three (3) years after the CLOSING hereof, SELLER shall not within the United States of America, Canada or Mexico directly or indirectly engage in any activity competitive with the business of CORPORATION, including the business activities conducted by the CORPORATION subsequent to its incorporation and prior to the CLOSING DATE. For purposes hereof, indirect engagement shall be deemed to include involvement in, or association with, any corporation, partnership, joint venture, or other entity (whether as shareholder, director, officer, partner, investor, joint venturer, employee, agent, or independent contractor) engaged in any activity in competition with the business of CORPORATION. The foregoing shall not prohibit SELLER from owning stock in any corporation whose stock is publicly-traded, from owning shares in any mutual fund or from owning any life insurance, annuity or variable annuity policy issued by a life insurance company. SELLER acknowledges that money damages would be an inadequate remedy for a breach of this covenant and that in addition to such money damages BUYER shall be entitled to injunctive relief. SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER The obligations of BUYER to be performed hereunder shall be subject to the satisfaction (or waiver by BUYER) on or before the CLOSING of each of the following conditions, absent which, at BUYER'S election, both parties shall be relieved of any further obligation to one another and any funds or securities deposited or paid by either party shall be returned to the party so depositing or paying compensation: 6.1 Representations and Warranties True and Accurate as of Closing. The representations and warranties of SELLER contained herein shall be true and accurate in all respects as of the CLOSING with the same force and effect as though made at such time. 6.2 Performance of Obligations of SELLER. SELLER shall have completely performed all of his covenants and obligations hereunder. 6.3 Material Adverse Facts. BUYER shall not have discovered nor shall there have occurred after the date hereof, any events, facts or circumstances which reflect in any material adverse way on the financial condition, assets, liabilities, business, or prospects of CORPORATION, in the event that BUYER discovers any such fact, event or circumstance at any time prior to the Effective Date of the Plan of Reorganization, the BUYER, at its sole election, may declare this AGREEMENT to be null and void. SELLER may cause the CORPORATION to pay out to SELLER all cash, the cash value of life insurance policies, and funds in bank accounts to satisfy compensation and debt obligations owed to the SELLER by the CORPORATION, and BUYER consents thereto. 6.4 Form of Documents. All certificates, opinions, and other documents to be delivered by SELLER to BUYER hereunder shall be in form and substance satisfactory to counsel for BUYER. 13 6.5 Consulting and Employment Agreements. The key employees identified by BUYER shall have executed and delivered Employment or Consulting Agreements to the CORPORATION in form satisfactory to counsel for BUYER: 6.6 Ratification of the Agreement and Confirmation of the Plan of Reorganization. BUYER is currently functioning as a Debtor-in-Possession pursuant to Section 1107 of the United States Bankruptcy Code. The obligations of BUYER to be performed pursuant to this AGREEMENT are specifically contingent upon ratification of this AGREEMENT by the United States Bankruptcy Court for the District of Nevada. In the event that the Bankruptcy Court refuses, for any reason, to ratify this AGREEMENT, the AGREEMENT shall be null and void and have no legal binding effect upon the BUYER or SELLER. In addition to the foregoing, this AGREEMENT is specifically contingent upon confirmation by the Bankruptcy Court of the Plan of Reorganization to be filed by the BUYER with the Bankruptcy Court, and in the event that the Bankruptcy Court refuses, for any reason, to confirm the Plan of Reorganization as submitted by the BUYER, this AGREEMENT shall be null and void and have no further effect or impact upon the BUYER or SELLER. SELLER specifically and explicitly assumes the risk that either (a) the Bankruptcy Court may refuse to ratify this AGREEMENT, or (b) the Bankruptcy Court may refuse to confirm the Plan of Reorganization as submitted by the BUYER. SECTION 7. COVENANTS OF BUYER From the date hereof to and including the CLOSING, BUYER covenants as follows (unless otherwise agreed in writing by SELLER): 7.1 BUYER'S Closing Certificate. BUYER shall execute and deliver to SELLER at the CLOSING a certificate which shall certify that, except as otherwise specifically provided therein: (a) all of the representations and warranties made by BUYER in this AGREEMENT are true and accurate in all respects as of the CLOSING with the same force and effect as though made at such time; and (b) BUYER has performed and/or complied with all of its covenants and other obligations under this AGREEMENT required to be performed and/or complied with by it as of the CLOSING. Such certificate shall describe in detail the circumstances which caused it to identify the falsity or inaccuracy of any representations or warranties or the failure to perform or comply with any covenant or other obligation hereunder. From the date hereof until the date of CLOSING, BUYER shall notify SELLER immediately in writing if any of the representations and warranties made herein should become untrue or inaccurate. SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER The obligations of SELLER to be performed hereunder shall be subject to the satisfaction (or waiver by SELLER) on or before the CLOSING of each of the following conditions: 14 8.1 Representations and Warranties True and Accurate as of Closing. The representations and warranties of BUYER contained herein shall be true and accurate in all respects as of the CLOSING with the same force and effect as though made at such time. 8.2 Payment of Purchase Price. BUYER shall pay the purchase price in the amount and manner specified herein. 8.3 Escrow. All stock to be exchanged pursuant to this AGREEMENT shall be held in escrow by Walter & Haverfield, P.L.L. of Cleveland, Ohio, (the "Escrow Agent"), legal counsel to BUYER until the Effective Date of the Plan of Reorganization. In the event that either (a) the Bankruptcy Court refuses to ratify this AGREEMENT, (b) the Plan of Reorganization is not confirmed, or (c) the BUYER elects to terminate this AGREEMENT, this AGREEMENT shall be deemed to be null and void and the Escrow Agent shall return the stock to the grantor from whom it was received, otherwise the stock shall be exchanged and distributed by the Escrow Agent on the Effective Date of the Plan of Reorganization, pursuant to the terms of this AGREEMENT. SECTION 9. CLOSING 9.1 Time and Place. The closing (CLOSING) of the sale of the SHARES hereunder shall take place at a mutually agreeable location at 9:00 a.m. on the Effective Date of the Plan of Reorganization as submitted by the BUYER, as the term "Effective Date" is defined in the Plan. 9.2 Obligations of SELLER. Within thirty (30) days of the date of this AGREEMENT, SELLER and BUYER shall deliver, or cause to be delivered, to Escrow Agent the following: a) The certificates for the SHARES duly endorsed for transfer to BUYER or with duly executed stock powers attached and the shares to be exchanged by SELLER to BUYER, duly endorsed; b) The certificates attesting to the truth of SELLER'S representations and warranties as of the CLOSING required hereby; c) The resignations of CORPORATION'S statutory agent, officers, directors, trustees and employees required hereby; d) Any necessary supplements to the exhibits attached hereto; and e) The minute book and stock record book of CORPORATION. 9.3 Additional Actions. Each of the parties, individually and/or in their corporate capacities, hereby agrees to execute and deliver all such additional documents and take all actions necessary or appropriate to consummate any and all of the transactions contemplated hereby. 15 SECTION 10. INDEMNIFICATION AND POST CLOSING ADJUSTMENT IN PURCHASE PRICE 10.1 Indemnification by SELLER. SELLER agrees to indemnify and hold BUYER and CORPORATION harmless from any liabilities or losses (including attorneys' fees and all costs of defense) which are not otherwise covered by any policy of insurance to which the CORPORATION was, or is, a party, resulting from: a) The falsity or inaccuracy of any representations or warranties made herein by SELLER; b) The failure of SELLER to completely perform any of its covenants or other obligations hereunder; or c) Any liability or loss incurred or suffered by CORPORATION or BUYER after the CLOSING which relates or is attributable to intentional acts or omissions of SELLER prior to the CLOSING or (ii) SELLER'S performance pursuant to this AGREEMENT. SELLER shall be required to hold BUYER and CORPORATION harmless from the cost of defending a claim (which is the subject of indemnification hereunder) made by a third party against CORPORATION and/or BUYER even if it is ultimately determined that the claim is without merit. 10.2 Indemnification by Buyer. BUYER agrees to indemnify and hold SELLER harmless from any liabilities or losses resulting from: a) The falsity or inaccuracy of any representations or warranties made herein by BUYER; b) The failure of BUYER to completely perform any of his covenants or other obligations hereunder; or c) Any liability or loss incurred or suffered by SELLER after the CLOSING which relates or is attributable to acts or omissions of BUYER prior to or after the CLOSING. 10.3 Defense of Ownership in Chapter 11 Proceeding. BUYER acknowledges that it is aware that one or more third parties may assert a claim of ownership to some or all of the SHARES of VIVATEL. BUYER has informed SELLER that, BUYER intends to commence an adversary proceeding in the United States Bankruptcy Court for the purposes of confirming that it has acquired ownership (free and clear of all liens and encumbrances) to the SHARES. BUYER agrees that is shall be responsible for all expenses (including attorney fees) incurred by BUYER or SELLER in this Chapter 11 adversary proceeding. BUYER has no duty or obligation to indemnify or hold SELLER harmless with respect to (i) any expenses, attorney fees or damages incurred by SELLER in any legal proceeding except as noted above and (ii) any monetary judgment which may be entered against SELLER in the Bankruptcy case or any other legal proceeding. If BUYER incurs any 16 expenses in the defense of SELLER, BUYER, at its election, may retain a portion of the Class A Common Stock as an offset against such expenses. In the event that a court of complete jurisdiction should determine that SELLER does not own the SHARES, SELLER shall reimburse BUYER for all costs and attorney fees incurred in the prosecution of its claim. 10.4 Defense. If an indemnified party or parties hereunder should receive notice of any claim or proceeding against it or them made by a third party that might result in an indemnification claim hereunder, the indemnified party or parties shall promptly give the indemnifying party or parties written notice of such claim or proceeding and shall permit the indemnifying party or parties at their option, to conduct or participate in the defense of such claim or proceeding by counsel of the indemnifying party's or parties' own choosing and at their own expense. If the indemnifying party or parties accept the tender of the defense of such claim, they shall be deemed to have accepted for their account any and all liability resulting from or relating to such claim. If the indemnifying party or parties decline to conduct the defense of such claim or proceeding, the indemnified party or parties shall assume the defense thereof and may settle the same without the consent of the indemnifying party or parties. 10.5 Escrow of POWERTEL Class A Common Stock and Post Closing Adjustment of Purchase Price. SELLER has made certain representations to BUYER respecting the business affairs of VIVATEL and its future financial performance. SELLER has agreed as follows: a) The Class A Common Stock of POWERTEL to be issued pursuant to Section 2.1 of this AGREEMENT shall be held in escrow as provided in Section 8.3 for a 24 month term after CLOSING, except that 5/35th (14.3%) of the shares shall be released to SELLER at CLOSING. b) After the initial distribution of 5/35ths, the remaining 30/35th of the shares shall not be distributed from escrow until the occurrence of one of the following three events. The first event shall be deemed to occur at the end of the third consecutive month in which VIVATEL has collected revenues from telecommunications operations in excess of $300,000 (U.S.) for each of the preceding three months. Upon the occurrence of the first event, 10/30 of the remaining shares in escrow shall be released. The second event shall be deemed to occur at the end of the third consecutive month in which VIVATEL has collected revenues from telecommunications operations in excess of $600,000 (U.S.) for each of the preceding three months. Upon the occurrence of the second event, 1/2 of the remaining shares in escrow shall be released. The Third event shall be deemed to occur at the end of the third consecutive month in which VIVATEL has collected revenues from telecommunications operations in excess of $900,000 (U.S.) for each of the preceding three months. Upon the occurrence of the third event, the remaining shares in escrow shall be released. In the event that VIVATEL fails to achieve the revenue targets within 24 months after CLOSING, SELLER shall be deemed to have forfeited the remaining Class A Common Stock and the Escrow Agent shall return the unissued shares to POWERTEL USA. For purposes of this Section 10.5(b), the three breakpoints (i.e. the $300,000, $600,000 and $900,000) must be achieved separately, not concurrently, i.e. if the VIVATEL revenue is $900,000 per month for three consecutive months, but VIVATEL has not previously satisfied the breakpoints of $300,000 and $600,000, the $900,000 revenue is deemed to satisfy only the first breakpoint and not all three breakpoints. 17 SECTION 11. MISCELLANEOUS PROVISIONS 11.1 Survival of Closing. The provisions of Sections 2, 3, 4, 5.14, 5.15, 7, 10 and 11 shall survive the CLOSING. 11.2 Notices. Any notices required or permitted hereby shall be deemed given when sent by one party to the other, and to its counsel, in writing by registered or certified U.S. mail, postage prepaid, addressed as follows: SELLER: David L. Wallace 5545 Shadow Lawn Drive Sarasota FL 34242 BUYER: PowerTel USA, Inc. c/o Mr. Richard Cascarilla President 321 West Lake Lansing Rd., Suite 100 East Lansing, MI 48823 BUYER'S COUNSEL: Van P. Carter, Esq. Walter & Haverfield 1300 Terminal Tower Cleveland, Ohio 44113 VIVATEL: VivaTel Telecommunications, Inc. c/o David Wallace 5545 Shadow Lawn Drive Sarasota, FL 34242 The above addresses may be changed from time to time by giving notice thereof in the manner provided herein. 11.3 Successors and Assigns. None of the parties hereto may assign their rights or delegate their duties hereunder without the prior written consent of all parties to this AGREEMENT, which consent will not be unreasonably withheld. This AGREEMENT shall be binding upon and inure to the benefit of the heirs, executors, administrators, and successors of the parties hereto. 11.4 Integrated Agreement. This instrument and the exhibits attached hereto constitute the complete and exclusive agreement of the parties. The terms of this AGREEMENT may not be modified except in a writing signed by all of the parties hereto. 11.5 Risk of Loss. Risk of loss of, or damage or destruction to, the assets of CORPORATION shall be borne by SELLER until the CLOSING. In the event of material damage 18 or destruction to such property, SELLER shall promptly notify BUYER. BUYER shall thereupon have the right, at its option, to elect to terminate this AGREEMENT without liability or to proceed to the CLOSING and accept any insurance proceeds received by CORPORATION as a result of such damage or destruction. "Material damage" shall mean such damage as prevents the CORPORATION from effectively conducting its business. 11.6 Governing Law. The rights and obligations of the parties hereunder and the interpretation of this AGREEMENT shall be governed by the laws of the state of Nevada (other than those relating to conflicts of laws). 11.7 No Finder's Fees or Brokerage Commissions. Each of the parties hereto represents that it dealt with no brokers or finders with respect to the sale of the SHARES hereunder and that there are no brokerage commissions, finder's fees, or similar payments owed as a result thereof. 11.8 Counterparts. This AGREEMENT may be executed in two or more counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. The receipt of a telefax copy of any executed page shall be accepted as the original. 11.9 Waivers. Waiver of the benefit of any provision hereof must be in writing to be effective. The waiver by any party of a breach of any provision of this AGREEMENT shall not operate or be construed as a waiver of any subsequent breach. No action taken pursuant to this AGREEMENT, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or other obligations contained herein. 11.10 Books and Records and Tax Returns. Prior to the CLOSING, BUYER will during regular business hours provide SELLER with reasonable access to SELLER'S financial and accounting books and records which relate to the period prior to the CLOSING, provided, however, that SELLER shall have similar access at if audits of the SELLER'S individual federal, state or local income tax returns necessitate access to CORPORATION'S records or in the event BUYER defaults in the timely payment of any amounts due to SELLER hereunder. For purposes hereof, access to books and records shall include the right to make copies thereof. In addition, neither the CORPORATION nor BUYER shall file any federal, state or local tax return or form for the fiscal year ending August 30, 1997 unless and until such return is reviewed and approved by SELLER. 11.11 Interpretation. Except where otherwise required by the context, words of any gender used herein shall be deemed to include any and all genders and the singular and plural shall be interchangeable. 11.12 Public Announcement. The parties hereto shall make no public announcement of the transactions which are the subject of this AGREEMENT until after the CLOSING. Until such time, the parties shall use their best efforts to prevent third persons (other than third persons whose consent must be obtained in order to consummate such transactions) from learning of such transactions, the negotiations concerning same, or the fact that the SELLER desire to sell the SHARES. 19 11.13 No Third Party Beneficiaries. Nothing herein expressed or implied is intended to confer or shall be construed as conferring upon or giving to any person other than the parties hereto and CORPORATION any rights or benefits under or by reason of this AGREEMENT. 11.14 Incorporation by Reference. Each Exhibit referenced in this AGREEMENT is hereby incorporated by reference and deemed to be a material component of this AGREEMENT as if fully set forth therein. 11.15 Commitment to Assist in Post Closing Matters. The Parties to this AGREEMENT acknowledge that it may be necessary to amend this AGREEMENT and/or to execute additional documents in order to implement the understanding which has been reached, and each Party to this AGREEMENT commits to cooperate and use its/his best efforts in order that the objectives of this AGREEMENT may be achieved. 11.16 Accuracy of Recitals. The Recitals set forth above are true and correct and are hereby incorporated herein by reference. 11.17 Entire Agreement. This AGREEMENT constitutes the entire agreement by and among the Parties with respect to the exchange of shares and all other agreements, oral or written including but not limited to the Prior Agreement shall be deemed to be null and void. 11.18 Effective Date. This AGREEMENT supersedes the Prior Agreement and is effective retroactively to December 1, 1997, the effective date of this AGREEMENT. 20 To evidence their consent to the foregoing, the parties executed this instrument on the dates set opposite their signatures below. BUYER: POWERTEL USA, INC. Dated: By: /s/ Richard A. Cascarilla ------------------- -------------------------------- Its: President VIVA TELECOMMUNICATIONS, INC. Dated: By: /s/ David L. Wallace ------------------- -------------------------------- Its: President SELLER: DAVID L. WALLACE Dated: /s/ David L. Wallace ------------------- ------------------------------------ EX-10.D 28 EXHIBIT 10(D) 1 Exhibit 10d AMENDED AND RESTATED AGREEMENT FOR EXCHANGE OF STOCK BETWEEN DAVID WALLACE AND POWERTEL USA, INC. REGARDING DIEGO TEL, INC. 2 AMENDED AND RESTATED AGREEMENT FOR EXCHANGE OF STOCK This amended and restated agreement ("AGREEMENT") is entered into this date and is effective as of February 12, 1998 by and among (i) POWERTEL USA, INC., a corporation incorporated under the laws of Delaware with its principal place of business situated in East Lansing, Michigan ("POWERTEL"), (ii) DIEGO TEL, INC. a Nevada corporation with its principal place of business situated in Sarasota, Florida ("DIEGOTEL"), and (iii) DAVID L. WALLACE, an individual residing in Sarasota, Florida ("WALLACE"), who owns 100% of the issued and outstanding Common Stock of DIEGOTEL. RECITALS WHEREAS, WALLACE is the owner of 100% the issued and outstanding shares of DIEGOTEL; and WHEREAS, DIEGOTEL is engaged in the business of purchasing and reselling long distance telecommunication services and related activities ("BUSINESS"); and WHEREAS, WALLACE desires to exchange with POWERTEL common stock of POWERTEL in exchange for 100% of the common stock of the DIEGOTEL and POWERTEL desires to exchange stock as noted above; and WHEREAS, for federal income tax purposes, it is intended that this transaction shall qualify as a "reorganization" within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended; and WHEREAS, DIEGOTEL desires to guarantee the obligations of WALLACE pursuant to this AGREEMENT; and WHEREAS, this AGREEMENT is specifically contingent upon confirmation by the Bankruptcy Court of the Plan of Reorganization to be filed by POWERTEL with the Bankruptcy Court (the "CONFIRMATION"), WHEREAS, the Parties to this Agreement have previously executed a document entitled "Agreement for Exchange of Stock" executed February 12, 1997, (the "Initial Agreement"); and WHEREAS, the Parties have decided to amend and restate the Initial Agreement in order to incorporate certain supplemental terms and modifications. 3 NOW, THEREFORE, in consideration of the foregoing, the payment of $100,000.00 to POWERTEL by WALLACE in the form of a promissory note and the exchange of stock pursuant to this AGREEMENT and the representations, warranties, covenants, and mutual promises contained herein, the parties hereto, intending to be legally bound, do agree as follows: SECTION 1. EXCHANGE OF SHARES OF STOCK 1.1 Exchange. At CLOSING as defined in Section 9 of this AGREEMENT, WALLACE shall tender to POWERTEL 100% of the issued and outstanding shares of common stock of DIEGOTEL ("SHARES") and a Promissory Note in the amount of $100,000.00 in consideration of the tender by POWERTEL of the Class A Common Stock of POWERTEL as provided in this AGREEMENT. 1.2 Conveyance of Title. The conveyance of title to the SHARES shall be effective as of the CLOSING by the delivery of the stock certificates therefor at the CONFIRMATION duly endorsed for transfer to POWERTEL. 1.3 Exclusive Nature of Agreement. This AGREEMENT shall preclude and restrict WALLACE from entertaining other offers of sale or exchange of the SHARES. SECTION 2. CONSIDERATION AND POST-CONFIRMATION ADJUSTMENT 2.1 Adjustment. In consideration of the tender to POWERTEL of 100% of the issued and outstanding common stock of DIEGOTEL, POWERTEL shall forthwith tender to the escrow agent an amount of the issued and outstanding Class A Common Stock of POWERTEL such that the escrow agent will hold Thirty-Five (35%) percent of the issued and outstanding Class A Common Stock of POWERTEL. In the event that POWERTEL, as a result of its Plan of Reorganization or any settlements of any claims (except those of the disputed class) issues additional Class A Common Stock or effects a reverse stock split at any time before the tenth day following the Effective Date of the Plan of Reorganization, then the number of shares of Class A Common Stock issued to the escrow agent shall be adjusted to Thirty-Five 35.0% of the issued and outstanding Class A Common Stock of POWERTEL subsequent to implementation of the Plan of Reorganization and distribution to WALLACE on a pro rata basis. 2.2 Escrow of POWERTEL Class A Common Stock and Post CONFIRMATION Adjustment of Purchase Price. Because WALLACE has made certain representations to POWERTEL respecting the business affairs of DIEGOTEL and its future financial performance WALLACE agrees as follows: 4 a) The Class A Common Stock of POWERTEL to be issued pursuant to Section 2.1 of this AGREEMENT shall be held in escrow as provided in Section 2.2(d) for up to a thirty month term after the Distribution Date in POWERTEL'S Plan. b) The Class A Common Stock held in escrow shall be restricted stock pursuant to the Securities Act of 1933 and shall be separated into 10 equal allotments, each of which shall be referred to as a 10 percent allotment. The escrow agent shall release a 10 percent allotment at the end of the month in which POWERTEL receives telecommunications revenue in excess of $100,000. The escrow agent shall release an additional 10 percent allotment for each additional incremental increase of $100,000 of telecommunications revenue more than the month before. The 10 percent allotments shall be distributed to WALLACE at no more than monthly intervals. To receive all ten allotments, POWERTEL must receive telecommunications revenue in excess of 4.5 million dollars within thirty months after the Distribution Date in POWERTEL'S Plan. c) If shares remain in the escrow at the end of thirty months, than the escrow shall release the remaining shares within 30 days. In no event shall the escrow agent return the unissued shares to POWERTEL if the telecommunications revenue exceeds 4.5 million dollars. If the total telecommunications revenue is less that 4.5 million dollars then the remaining shares shall be distributed on a pro rata basis among WALLACE and POWERTEL based upon a formula for distribution set forth in Section 2.2. d) All stock and transfer ledgers to be exchanged pursuant to this AGREEMENT shall be held in escrow by Walter & Haverfield, P.L.L. of Cleveland, Ohio, (the "Escrow Agent"), legal counsel to POWERTEL. In the event that either (a) the Bankruptcy Court refuses to ratify this AGREEMENT, (b) the Plan of Reorganization is not confirmed, or (c) POWERTEL elects to terminate this AGREEMENT, this AGREEMENT shall be deemed to be null and void and the Escrow Agent shall return the stock to the grantor from whom it was received, otherwise the stock shall be exchanged and distributed by the Escrow Agent pursuant to the terms of this AGREEMENT. e) During the period of time that the stock is held in escrow, POWERTEL shall have full power to vote all shares in escrow. SECTION 3. REPRESENTATIONS AND WARRANTIES OF WALLACE Unless otherwise set forth in writing to POWERTEL, WALLACE represents and warrants to the best of his knowledge as follows: 3.1 Corporate Status. DIEGOTEL is duly organized, validly existing, and in good standing under the laws of the state of Nevada and has the power and authority to own its properties and to conduct its business as now being conducted. DIEGOTEL does not have any subsidiaries and 5 does not own any stock in any other corporation or have any investments in any partnerships or joint ventures. 3.2 Capitalization. The authorized stock of DIEGOTEL consists solely of 25,000 shares of common stock with par value of $0.001 per share of which only the SHARES are issued and outstanding. The SHARES constitute all of the issued and outstanding shares of stock of DIEGOTEL. The SHARES are validly issued, fully paid and non-assessable. 3.3 Ownership of Shares. WALLACE is the owner of the 25,000 of SHARES and in the aggregate owns 100% of the issued and outstanding SHARES of DIEGOTEL. WALLACE has title to the SHARES free and clear of any and all liens and encumbrances. 3.4 Consent of Third Parties. This AGREEMENT is legally binding upon WALLACE and the consummation of the transactions contemplated hereby in accordance with the terms hereof does not require the consent of any third party. 3.5 Financial Statements and Pro Form Financial Projections. If requested by POWERTEL, within sixty (60) days of the date of this AGREEMENT, WALLACE shall cause DIEGOTEL to prepare balance sheets, income statements and related schedules and footnotes for DIEGOTEL'S fiscal period commencing in 1997 with the date of incorporation and continuing through December 31, 1997 ("FINANCIAL STATEMENT") which FINANCIAL STATEMENT shall accurately and fairly reflect the financial condition of DIEGOTEL as of the dates indicated thereon, and the results of the operations of DIEGOTEL for the respective fiscal periods then ended. In addition to the foregoing, to the best of WALLACE'S knowledge, the pro forma financial projections for DIEGOTEL previously provided to POWERTEL and WALLACE accurately and fairly reflect the current and future financial condition of DIEGOTEL as of the dates indicated thereon, and the results of the operations of DIEGOTEL for the respective fiscal periods then ended, subject to the assumptions and representations set forth therein. 3.6 Absence of Certain Changes. The business operations of DIEGOTEL have been conducted prudently and in the ordinary course of business and there has been no material change in the financial condition, results of operations, business, business prospects, capitalization or any increase in the compensation of DIEGOTEL'S employees, if any. 3.7 Liabilities. To the best of WALLACE'S knowledge (i) as of the date of the last FINANCIAL STATEMENT, DIEGOTEL did not have any liabilities, whether absolute, accrued, contingent or otherwise, that are not disclosed in the FINANCIAL STATEMENT attached hereto, and (ii) there was no basis upon which any person could assert a liability against DIEGOTEL which was not disclosed on the last FINANCIAL STATEMENT. Since the date of the last FINANCIAL STATEMENT, DIEGOTEL has not incurred any liabilities not in the ordinary course of business, and to the best of WALLACE'S knowledge there is presently no basis upon which a person could assert such a liability, nor has any person asserted the existence of such a liability. 6 3.8 Tax Matters. DIEGOTEL'S federal, state and local tax returns for 1997 have not been filed or audited. There are no pending tax examinations of, or tax claims asserted against, DIEGOTEL and there are no known bases for any such claims. DIEGOTEL has not granted any extension of any limitation period applicable to tax claims which extension is still in effect and has not filed a consent under Section 341(f) of the Internal Revenue Code of 1986. DIEGOTEL has never filed an election to be taxed as a small business corporation pursuant to IRC Section 1361. DIEGOTEL is and has not been a member of a "control group" as defined in IRC Section 1563 or an affiliated group as defined in IRC Section 1504. 3.9 Title to Property. DIEGOTEL has good and marketable title to all of its assets free and clear of all liens and encumbrances. DIEGOTEL'S use of intangibles has not and will not infringe the rights of any other person. The rights, properties and other assets presently owned, leased or licensed by DIEGOTEL and described in this AGREEMENT include all rights, properties and other assets necessary to permit DIEGOTEL to conduct its business in the same manner as its business has been conducted. 3.10 Receivables. All of the receivables of DIEGOTEL are reflected on the books of DIEGOTEL and are considered to be collectible or have been collected as of the CLOSING. 3.11 Inventories. The inventories of DIEGOTEL, if any, are of a quality and quantity to be usable and salable in the ordinary course of DIEGOTEL'S business. 3.12 Condition of Tangible Property. The equipment, and other tangible property of DIEGOTEL are, to the best of WALLACE'S knowledge, in good condition and repair, and are adequate for the uses to which such property is put in the conduct of the BUSINESS. WALLACE has no knowledge of any defects in any of such tangible property. 3.13 Condemnation. No property owned or leased by DIEGOTEL is subject to any governmental decree or order, or to the best of WALLACE'S knowledge, threatened or proposed order to be sold or taken by any public authority. 3.14 Schedule of Contracts. Upon request for POWERTEL, WALLACE shall prepare a complete list of all contracts of any type, other than insurance policies, to which DIEGOTEL is a party. All contracts to which DIEGOTEL is a party are in full force and effect and DIEGOTEL and the other parties thereto have performed all of the obligations required to be performed by them thereunder and are not in default thereof. Neither the execution of this AGREEMENT, nor the consummation of the transactions contemplated hereby, will constitute a default under any of such contracts as to which the sale of the shares contemplated by this AGREEMENT may or does constitute a default. None of such contracts will result in a loss to DIEGOTEL upon the completion thereof and none of the purchase commitments which are the subject thereof are in excess of the normal requirements of the BUSINESS or establish a price in excess of that customarily charged for the items which are the subject thereof. Full and complete copies of all such contracts will be supplied to POWERTEL upon request. 7 3.15 Employment Matters. Upon request from POWERTEL, WALLACE shall prepare a complete schedule of the compensation paid to all employees of DIEGOTEL. 3.16 Labor Relations. To the best of WALLACE'S knowledge, DIEGOTEL has complied with all laws, rules, and regulations relating to the employment of labor and has no labor troubles in the sense that there are no strikes, lockouts, work stoppages, or slow downs, pending or threatened against DIEGOTEL. 3.17 Legal Proceedings. There are no legal or administrative proceedings of any nature pending or, to the best of WALLACE'S knowledge, threatened against or affecting DIEGOTEL. DIEGOTEL is not in default of any judgment, writ, injunction, or order of any court or governmental agency. 3.18 Compliance with Laws. DIEGOTEL has not received any notice from any governmental entity asserting a violation by DIEGOTEL of any laws, regulations, or governmental pronouncements of any type, including, without limitation, zoning ordinances, and (i) there are no known claims or investigations involving asserted violations thereof, and (ii) DIEGOTEL has duly complied with all statutes, regulations and governmental pronouncements of all types (including, without limitation, zoning ordinances) and has acquired all licenses and permits required for the operation of its business. 3.19 Lack of Market for POWERTEL Shares. WALLACE represents that he has had direct, continuing and first-hand experience with the business and operation of POWERTEL and its financial condition and affairs. WALLACE acknowledges that (i) POWERTEL is currently functioning as Debtor-in-Possession pursuant to Chapter 11 of the United States Bankruptcy Code, (ii) there is little, if any, market for POWERTEL's Class A Common Stock and there may never be any market for such securities, (iii) the Class A Common Stock is deemed to be "high risk" and "speculative," (iv) there is no assurance or guarantee that the Class A Common Stock will ever have any economic value, and (v) the securities issued to WALLACE will be restricted for not less than one year. 3.20 Bank Accounts. Upon request from POWERTEL, WALLACE shall prepare a complete and accurate list of each bank or financial institution with which DIEGOTEL has an account (including the account numbers) or safety deposit box and the names of the persons authorized to draw thereon or have access thereto. 3.21 Disclosure. WALLACE has disclosed to POWERTEL all facts material to the business, assets, operations, financial condition, and prospects of DIEGOTEL. 3.22 Related Parties' Loans. Upon request from POWERTEL, WALLACE shall prepare a list of all loans to or from DIEGOTEL. 8 3.23 Deliveries by WALLACE. In connection with the proposed sale of the SHARES, WALLACE will deliver to POWERTEL the corporate documents at CONFIRMATION. 3.24 Securities Exemption. WALLACE's sophisticated and knowledgeable individual who is an "accredited investor" as defined in Rule 501 of Regulation D of the Securities Act of 1933. WALLACE has had an opportunity to conduct an independent investigation into the affairs of DIEGOTEL. WALLACE represents that he is acquiring the SHARES for his personal investment and not with an intention to re-sell or distribute the SHARES to third parties who are not parties to the AGREEMENT. WALLACE stipulates that the purchase of the SHARES is a speculative transaction and that WALLACE is prepared to incur risk of loss of its investment. WALLACE also stipulates that the sale of the SHARES pursuant to the AGREEMENT has been effected pursuant to the provisions of Regulation D and Section 4(2) of the Securities Act of 1933 and comparable provisions of applicable state securities laws. WALLACE agrees to file any documents reasonably required by POWERTEL to comply with applicable securities laws. SECTION 4. REPRESENTATIONS AND WARRANTIES OF POWERTEL POWERTEL, represents and warrants as follows: 4.1 Consent of Third Parties. Subject only to ratification of this AGREEMENT by the United States Bankruptcy Court, this AGREEMENT is legally binding upon POWERTEL and POWERTEL'S consummation of the transactions contemplated hereby does not require the consent of any third party except for approval by the Bankruptcy Court as referenced in Section 6.5. 4.2 Securities Exemption. POWERTEL is a sophisticated and knowledgeable individual who is an "accredited investor" as defined in Rule 501 of Regulation D of the Securities Act of 1933. POWERTEL has had an opportunity to conduct an independent investigation into the affairs of DIEGOTEL. POWERTEL represents that it is acquiring the SHARES for its personal investment and not with an intention to re-sell or distribute the SHARES to third parties who are not parties to the AGREEMENT. POWERTEL stipulates that the purchase of the SHARES is a speculative transaction and that POWERTEL is prepared to incur risk of loss of its investment. POWERTEL also stipulates that the sale of the SHARES pursuant to the AGREEMENT has been effected pursuant to the provisions of Regulation D and Section 4(2) of the Securities Act of 1933 and comparable provisions of applicable state securities laws. POWERTEL agrees to file any documents reasonably required by WALLACE to comply with applicable securities laws. 4.3 Financial Statement and Pro Form Financial Projections. Upon request by WALLACE, POWERTEL will provide WALLACE with a copy of its FINANCIAL STATEMENT as filed with the United States Bankruptcy Court. POWERTEL hereby authorizes WALLACE (at WALLACE'S expense) to secure a credit report on POWERTEL. POWERTEL represents that the final statements identified above fairly and accurately reflect POWERTEL'S financial condition and 9 that there are no adverse facts not described to WALLACE in writing regarding POWERTEL'S financial affairs. SECTION 5. COVENANTS OF WALLACE Unless POWERTEL waives such performance in writing, WALLACE covenants as follows: 5.1 Conveyance of Title to Shares. Pursuant to Section 2.2(d), at CONFIRMATION (as defined in Section 9.1 hereinafter), WALLACE will convey good and marketable title to the SHARES to POWERTEL free and clear of all security interests, claims, liens, proxies, charges, or other encumbrances. 5.2 WALLACE'S CONFIRMATION Certificate. WALLACE shall execute and deliver to POWERTEL at the CONFIRMATION a certificate which shall certify that, except as otherwise specifically provided therein: (a) all of the representations and warranties made by WALLACE in this AGREEMENT are true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time; and (b) WALLACE have fully performed and/or complied with all of his covenants and other obligations under this AGREEMENT required to be performed and/or complied with by them as of the CONFIRMATION. WALLACE shall describe in such certificate the circumstances concerning any incorrect or inaccurate representations or warranties identified therein. 5.3 Conduct of Business. To and through the date of CONFIRMATION, subject to Section 5.8 hereof, DIEGOTEL shall conduct its business prudently and in the ordinary course consistent with past practice. 5.4 No Amendments. To and through the date of CONFIRMATION, no change or amendment shall be made to the Articles of Incorporation of DIEGOTEL. 5.5 No Capital Changes. To and through the date of CONFIRMATION, DIEGOTEL shall not issue or grant options, warrants, or rights to purchase or to subscribe to any of its stock or any securities or obligations convertible into its stock or make any other changes in its capital structure. 5.6 No Dividends or Redemptions. To and through the date of CONFIRMATION, DIEGOTEL shall not declare or pay any dividend or other distribution in respect of its stock or purchase any of its stock. 5.7 Forbearance by Corporation. To and through the date of CONFIRMATION, except as otherwise specifically provided for or required herein, DIEGOTEL shall not do, or agree to do, any of the following: 10 a) Mortgage, pledge, or otherwise encumber any of its assets; b) Incur liabilities in an aggregate amount greater than $250,000 without the express written consent of POWERTEL other than in the ordinary course of business or pay any liability other than current liabilities and current maturities of existing long term debt; c) Sell or transfer any of its assets other than sales of inventory in the ordinary course of business; d) Sell any of the inventory of DIEGOTEL other than in the ordinary course of business; e) Cancel, release, or assign any obligations owed to DIEGOTEL or any claims held by it; f) Increase in any manner the compensation of any of DIEGOTEL'S employees (including an increase in fringe benefits or the provision of fringe benefits to employees not previously entitled thereto) or pay or agree to pay any pension or retirement allowance not required by any existing plan or agreement to any employees, or enter into any new pension, retirement, or profit sharing plan or agreement or employment agreement; g) Hire or terminate any employee, except for just cause; h) Loan money or assets to any person; or i) Adopt any new method of accounting; 5.8 Access. To and through the date of CONFIRMATION, WALLACE shall grant POWERTEL and its agents full access to all personnel records, assets, records and documents of DIEGOTEL and shall furnish such financial and operating information as POWERTEL may reasonably request. WALLACE shall provide, upon POWERTEL'S request, verification of DIEGOTEL'S receivables and liabilities. 5.9 Filing of Tax Returns. To and through the date of CONFIRMATION, any tax returns required to be filed by DIEGOTEL on or prior to the CONFIRMATION shall be submitted to POWERTEL for review. 11 SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF POWERTEL The obligations of POWERTEL to be performed hereunder shall be subject to the satisfaction (or waiver by POWERTEL) on or before the CONFIRMATION of each of the following conditions, absent which, at POWERTEL'S election, both parties shall be relieved of any further obligation to one another and any funds or securities deposited or paid by either party shall be returned to the party so depositing or paying compensation: 6.1 Representations and Warranties True and Accurate as of CONFIRMATION. The representations and warranties of WALLACE contained herein shall be true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time. 6.2 Performance of Obligations of WALLACE. WALLACE shall have completely performed all of his covenants and obligations hereunder. 6.3 Exchange of Assets. WALLACE and POWERTEL shall exchange all securities in the amount and manner specified herein. 6.4 Material Adverse Facts. POWERTEL shall not have discovered nor shall there have occurred after the date hereof, any events, facts or circumstances which reflect in any material adverse way on the financial condition, assets, liabilities, business, or prospects of DIEGOTEL, in the event that POWERTEL discovers any such fact, event or circumstance at any time prior to the Effective Date of the Plan of Reorganization, POWERTEL, at its sole election, may declare this AGREEMENT to be null and void. WALLACE may cause DIEGOTEL to pay out to WALLACE all cash, the cash value of life insurance policies, and funds in bank accounts to satisfy compensation and debt obligations owed to WALLACE by DIEGOTEL, and POWERTEL consents thereto. 6.5 Form of Documents. All certificates, opinions, and other documents to be delivered by WALLACE to POWERTEL hereunder shall be in form and substance satisfactory to POWERTEL. 6.6 Ratification of the Agreement and Confirmation of the Plan of Reorganization. POWERTEL is currently functioning as a Debtor-in-Possession pursuant to Section 1107 of the United States Bankruptcy Code. The obligations of POWERTEL to be performed pursuant to this AGREEMENT are specifically contingent upon ratification of this AGREEMENT by the United States Bankruptcy Court for the District of Nevada. In the event that the Bankruptcy Court refuses, for any reason, to ratify this AGREEMENT, the AGREEMENT shall be null and void and have no legal binding effect upon POWERTEL or WALLACE. In addition to the foregoing, this AGREEMENT is specifically contingent upon confirmation by the Bankruptcy Court of the Plan of Reorganization to be filed by POWERTEL with the Bankruptcy Court, and in the event that the Bankruptcy Court refuses, for any reason, to confirm the Plan of Reorganization as submitted by 12 POWERTEL, this AGREEMENT shall be null and void and have no further effect or impact upon POWERTEL or WALLACE. WALLACE specifically and explicitly assumes the risk that either (a) the Bankruptcy Court may refuse to ratify this AGREEMENT, or (b) the Bankruptcy Court may refuse to confirm the Plan of Reorganization as submitted by POWERTEL. SECTION 7. COVENANTS OF POWERTEL From the date hereof to and including the CONFIRMATION, POWERTEL covenants as follows (unless otherwise agreed in writing by WALLACE): 7.1 POWERTEL'S CONFIRMATION Certificate. POWERTEL shall execute and deliver to WALLACE a certificate which shall certify that, except as otherwise specifically provided therein: (a) all of the representations and warranties made by POWERTEL in this AGREEMENT are true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time; (b) POWERTEL has performed and/or complied with all of its covenants and other obligations under this AGREEMENT required to be performed and/or complied with by it as of the CONFIRMATION; and (c) a statement showing the calculation used by POWERTEL in determining that the escrow agent has received an amount equal to Thirty-Five (35%) percent of the issued and outstanding Class A Common Stock of POWERTEL subsequent to implementation of the Plan of Reorganization. From the date hereof until the date of CONFIRMATION, POWERTEL shall notify WALLACE immediately in writing if any of the representations and warranties made herein should become untrue or inaccurate. SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF WALLACE The obligations of WALLACE to be performed hereunder shall be subject to the satisfaction (or waiver by WALLACE) on or before the CONFIRMATION of each of the following conditions: 8.1 Representations and Warranties True and Accurate as of CONFIRMATION. The representations and warranties of WALLACE contained herein shall be true and accurate in all respects as of the CONFIRMATION with the same force and effect as though made at such time. 8.2 Form of Documents and Plan of Reorganization. All certificates and other documents to be delivered by POWERTEL to WALLACE hereunder shall be in form and substance satisfactory to WALLACE. If the Plan of Reorganization as confirmed by the Bankruptcy Court as referred to in Section 6.5, does not conform or alters in any way this AGREEMENT, then this AGREEMENT shall be null and void and have no further effect or impact upon POWERTEL or WALLACE. POWERTEL specifically and explicitly assumes the risk that either (a) the Bankruptcy Court may refuse to ratify this AGREEMENT, (b) the Bankruptcy Court may refuse to confirm the Plan of 13 Reorganization as submitted by POWERTEL, or (c) WALLACE may determine that the Plan of Reorganization does not conform or alters this AGREEMENT within ten days of receipt of a copy of the Plan or any amendments. SECTION 9. CLOSING AND CONFIRMATION 9.1 Date. The CLOSING is deemed the date of CONFIRMATION. The CONFIRMATION is date the Bankruptcy Court confirms the Plan. 9.2 Obligations of WALLACE. Within ten days of this AGREEMENT, WALLACE and POWERTEL shall deliver, or cause to be delivered, to Escrow Agent the following: a) The certificates for the SHARES duly endorsed for transfer to POWERTEL by WALLACE, b) The certificates for the Class A Common Stock deposited with the escrow agent shall be issued in the name of POWERTEL and reissued to WALLACE at time of distribution, c) The corporate records, minute book and stock record book of DIEGOTEL. d) The Promissory Note from WALLACE to POWERTEL in the amount of $100,000 at 9% per year interest with payments to commence six months after the date of DISTRIBUTION and to be paid over thirty monthly payments and in no event will the final shares be distributed until the Note is paid in full. 9.3 Additional Actions. Each of the parties, individually and/or in their corporate capacities, hereby agrees to execute and deliver all such additional documents and take all actions necessary or appropriate to consummate any and all of the transactions contemplated hereby. SECTION 10. INDEMNIFICATION AND POST CLOSING ADJUSTMENT IN PURCHASE PRICE 10.1 Indemnification by WALLACE. WALLACE agrees to indemnify and hold POWERTEL and DIEGOTEL harmless from any liabilities or losses (including attorneys' fees and all costs of defense) which are not otherwise covered by any policy of insurance to which the DIEGOTEL was, or is, a party, resulting from: 14 a) The falsity or inaccuracy of any representations or warranties made herein by WALLACE; b) The failure of WALLACE to completely perform any of its covenants or other obligations hereunder; or c) Any liability or loss incurred or suffered by DIEGOTEL or POWERTEL after the CLOSING which relates or is attributable to intentional acts or omissions of WALLACE prior to the CONFIRMATION. 10.2 Indemnification by POWERTEL. POWERTEL agrees to indemnify and hold WALLACE harmless from any liabilities or losses resulting from: a) The falsity or inaccuracy of any representations or warranties made herein by POWERTEL; b) The failure of POWERTEL to completely perform any of his covenants or other obligations hereunder; or c) Any liability or loss incurred or suffered by WALLACE after the CLOSING which relates or is attributable to acts or omissions of POWERTEL prior to the CONFIRMATION. 10.3 Defense. If an indemnified party or parties hereunder should receive notice of any claim or proceeding against it or them made by a third party that might result in an indemnification claim hereunder, the indemnified party or parties shall promptly give the indemnifying party or parties written notice of such claim or proceeding and shall permit the indemnifying party or parties at their option, to conduct or participate in the defense of such claim or proceeding by counsel of the indemnifying party's or parties' own choosing and at their own expense. If the indemnifying party or parties accept the tender of the defense of such claim, they shall be deemed to have accepted for their account any and all liability resulting from or relating to such claim. If the indemnifying party or parties decline to conduct the defense of such claim or proceeding, the indemnified party or parties shall assume the defense thereof and may settle the same without the consent of the indemnifying party or parties. SECTION 11. MISCELLANEOUS PROVISIONS 11.1 Survival of CLOSING. The provisions of Sections 2, 3, 4, 5.14, 5.15, 7, 10 and 11 shall survive the CLOSING and CONFIRMATION. 15 11.2 Notices. Any notices required or permitted hereby shall be deemed given when sent by one party to the other, and to its counsel, in writing by registered or certified U.S. mail, postage prepaid, addressed as follows: WALLACE: David L. Wallace 5545 Shadow Lawn Drive Sarasota, FL 34242 POWERTEL: POWERTEL USA, Inc. c/o Mr. Richard Cascarilla, President 321 West Lake Lansing Rd., Suite 100 East Lansing, NH 48823 POWERTEL'S COUNSEL: Van P. Carter, Esq. Walter & Haverfield 1300 Terminal Tower Cleveland, Ohio 44113 DIEGO TEL: DIEGOTEL, Inc. c/o David Wallace 5545 Shadow Lawn Drive Sarasota, FL 34242 The above addresses may be changed from time to time by giving notice thereof in the manner provided herein. 11.3 Successors and Assigns. None of the parties hereto may assign their rights or delegate their duties hereunder without the prior written consent of all parties to this AGREEMENT, which consent will not be unreasonably withheld. This AGREEMENT shall be binding upon and inure to the benefit of the heirs, executors, administrators, and successors of the parties hereto. 11.4 Integrated Agreement. This instrument and the exhibits attached hereto constitute the complete and exclusive agreement of the parties. The terms of this AGREEMENT may not be modified except in a writing signed by all of the parties hereto. 11.5 Risk of Loss. Risk of loss of, or damage or destruction to, the assets of DIEGOTEL shall be borne by WALLACE until the CONFIRMATION. In the event of material damage or destruction to such property, WALLACE shall promptly notify POWERTEL. POWERTEL shall thereupon have the right, at its option, to elect to terminate this AGREEMENT without liability or to proceed to the CONFIRMATION and accept any insurance proceeds received by DIEGOTEL as a result of such damage or destruction. "Material damage" shall mean such damage as prevents the CORPORATION from effectively conducting its business. 16 11.6 Governing Law. The rights and obligations of the parties hereunder and the interpretation of this AGREEMENT shall be governed by the laws of the state of Nevada (other than those relating to conflicts of laws). 11.7 No Finder's Fees or Brokerage Commissions. Each of the parties hereto represents that it dealt with no brokers or finders with respect to the sale of the SHARES hereunder and that there are no brokerage commissions, finder's fees, or similar payments owed as a result thereof. 11.8 Counterparts. This AGREEMENT may be executed in two or more counterparts, each of which shall be deemed to be an original, and all of which taken together shall constitute one and the same instrument. The receipt of a telefax copy of any executed page shall be accepted as the original. 11.9 Waivers. Waiver of the benefit of any provision hereof must be in writing to be effective. The waiver by any party of a breach of any provision of this AGREEMENT shall not operate or be construed as a waiver of any subsequent breach. No action taken pursuant to this AGREEMENT, including without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants, or other obligations contained herein. 11.10 Books and Records and Tax Returns. POWERTEL will during regular business hours provide WALLACE with reasonable access to WALLACE'S financial and accounting books and records which relate to the period prior to the CONFIRMATION, provided, however, that WALLACE shall have similar access at if audits of WALLACE'S individual federal, state or local income tax returns necessitate access to DIEGOTEL'S records or in the event POWERTEL defaults in the timely payment of any amounts due to WALLACE hereunder. For purposes hereof, access to books and records shall include the right to make copies thereof. In addition, neither DIEGOTEL nor POWERTEL shall file any federal, state or local tax return or form for the fiscal year ending February 28, 1997 unless and until such return is reviewed and approved by WALLACE. 11.11 Interpretation. Except where otherwise required by the context, words of any gender used herein shall be deemed to include any and all genders and the singular and plural shall be interchangeable. 11.12 No Third Party Beneficiaries. Nothing herein expressed or implied is intended to confer or shall be construed as conferring upon or giving to any person other than the parties hereto and DIEGOTEL any rights or benefits under or by reason of this AGREEMENT. 11.13 Incorporation by Reference. Each Exhibit referenced in this AGREEMENT is hereby incorporated by reference and deemed to be a material component of this AGREEMENT as if fully set forth therein. 17 11.14 Commitment to Assist in Post Closing Matters. The Parties to this AGREEMENT acknowledge that it may be necessary to amend this AGREEMENT and/or to execute additional documents in order to implement the understanding which has been reached, and each Party to this AGREEMENT commits to cooperate and use its/his best efforts in order that the objectives of this AGREEMENT may be achieved. 11.16 Accuracy of Recitals. The Recitals set forth above are true and correct and are hereby incorporated herein by reference. 11.17 Entire Agreement. This AGREEMENT constitutes the entire agreement by and among the Parties with respect to the exchange of shares and all other agreements, oral or written shall be deemed to be null and void. To evidence their consent to the foregoing, the parties executed this instrument on the dates set opposite their signatures below. POWERTEL USA, INC. Dated: April 22, 1998 By: /s/ Richard A. Cascarilla ------------------ ------------------------------------------ Its: President, Richard A. Cascarilla DIEGO TEL, INC. Dated: April 22, 1998 By: /s/ David L. Wallace ------------------ ------------------------------------------ Its: President, David L. Wallace Dated: April 22, 1998 By: /s/ David L. Wallace ------------------ ------------------------------------------ David L. Wallace 18 ADDENDUM TO AMENDED AND RESTATED AGREEMENT FOR EXCHANGE OF STOCK THIS ADDENDUM TO AMENDED AND RESTATED AGREEMENT FOR EXCHANGE OF STOCK (the "Addendum") is intended to and does by execution hereof amend, modify, and alter the Amended and Restated Agreement for Exchange of Stock between David Wallace and POWERTEL USA, Inc. dated April 22,1998 as follows: Section 2.1 entitled "Adjustment' is hereby deleted in its entirety and the new Section 2.1 will read: 2.1 Adjustment. In consideration of the tender to POWERTEL of 100% of the issued and outstanding common stock of DIEGO TEL, POWERTEL shall forthwith tender to the Escrow Agent an amount of the issued and outstanding, Class A Common Stock of POWERTEL such that the Escrow Agent will hold Thirty-Five Percent (35%) of the issued and outstanding Class A Common Stock of POWERTEL. In the event that POWERTEL, as a result of its Plan of Reorganization or any settlements of any claims (except those of the disputed class) issues additional Class A Common Stock or effects a reverse stock split at any time before the tenth day following the Effective Date of the Plan of Reorganization, then the number of shares of Class A Common Stock issued to the Escrow Agent shall be adjusted to Thirty-Five Percent (35%) of the issued and outstanding Class A Common Stock of POWERTEL subsequent to implementation of the Plan of Reorganization and distributed to WALLACE in accordance with Section 2.2(b) of this Agreement. 19 Section 2.2(b) is hereby deleted in its entirety and new Section 2.2(b) will read: The Class A Common Stock held in escrow shall be restricted stock pursuant to the Securities Act of 1933 and shall be separated into ten (10) equal allotments, each of which shall be referred to as a 10 percent allotment. The Escrow Agent shall release a 10 percent allotment at the end of the month in which POWERTEL receives "Telecommunications Revenue," which for purposes of this Agreement means the cash receipts actually received by POWERTEL, in excess of $100,000. The Escrow Agent shall release an additional 10 percent allotment for each additional incremental increase of $100,000 of Telecommunications Revenue more than the month before. The 10 percent allotments shall be distributed to WALLACE at no more than monthly intervals. To receive all ten allotments, POWERTEL must receive Telecommunications Revenue in excess of $4.5 Million within thirty months after the Confirmation Date as defined in POWERTEL's Plan of Reorganization. Section 2.2(c) is hereby deleted in its entirety and the new Section 2.2(c) will read: (c) If shares remain in the escrow at the end of the thirty months, then the escrow shall release the remaining shares within thirty (30) days. In no event shall the Escrow Agent return the unissued shares to POWERTEL if the Telecommunications Revenue exceeds $4.5 Million and provided WALLACE has paid in full the Promissory Note in the amount $100,000 held in escrow by the Escrow Agent. If the total Telecommunications Revenue is less than $4.5 Million, then the remaining, unearned and unissued shares shall be returned to POWERTEL and the earned 10 percent allotments shall be distributed to WALLACE upon payment in full of the $100,000 Promissory Note. 20 IN WITNESS WHEREOF, the POWERTEL, DIEGO TEL and WALLACE have signed duplicate copies of this Addendum on this 8th day of June , 1998. Signed in the Presence of: POWERTEL USA, INC. /s/ Wendy S. Burhard By: /s/ Richard Cascarilla - ------------------------------- ----------------------------- Richard Cascarilla Title: President DIEGO TEL, INC. By: /s/ David L. Wallace - ------------------------------- ----------------------------- David L. Wallace Title: President /s/ David L. Wallace - ------------------------------- ----------------------------- David L. Wallace, Individually EX-10.E 29 EXHIBIT 10(E) 1 Exhibit 10e EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into on the 26th day of August, 1998, by and between Powertel USA, Inc., a Delaware Corporation (the "Company") and Richard Cascarilla, an individual residing in Mason, Michigan (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") desires to secure for the Company the services of the Executive on the terms and conditions set forth herein; and WHEREAS, the Executive desires to provide such services on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the promises and the mutual covenants, terms and conditions hereinafter set forth, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and the Executive hereby agree as follows: 1. Employment. The Company hereby employs the Executive as its President and Chief Executive Officer, and the Executive hereby accepts employment from the Company in such position for the term set forth below and upon conditions provided herein. 2 The Executive's Duties. (a) The Executive hereby agrees to perform competently and diligently the duties of the office of President of the Company, including such executive duties as may be reasonably required from time to time by the Board. (b) The Executive agrees to observe and comply with all rules, regulations, policies and practices adopted by the Company, either orally or in writing, both as they now exist and as they may be adopted or modified from time to time. 3. Term. The term of this Employment Agreement shall commence as of August 26, 1998 and shall end on August 25, 2001, unless earlier terminated pursuant to Paragraph 6. or 7. below. 4. Compensation. In consideration of the services to be rendered hereunder by the Executive, the Company hereby agrees to pay compensation to the Executive as follows: (a) During the first contract year hereunder (i.e., from August 26, 1998 to August 26, 1999), a base salary in the amount of Eighty-Four Thousand Dollars, ($84,000.00). During the second contract year hereunder (i.e., from August 26, 1999 to August 26, 2000), a base salary in the amount of Ninety-Two Thousand Dollars, ($92,000.00). During the third contract year hereunder (i.e., from August 26, 2000 to August 26, 2001), a base salary in the amount of One Hundred 2 Thousand Dollars, ($100,000.00). Such a salary, less customary deductions for withholding and other charges, shall be payable on the Company's customary pay days. (b) In addition, the Executive will receive a bonus, depending upon the Company's operating results of $15,000.00 for each $1 million of earnings before interest, taxes, depreciation, amortization and such bonuses ("EBITDAB") as generated by the Company during any fiscal year beginning on August 26, 1998. 5. Fringe Benefits. (a) The Company agrees to reimburse the Executive for the expense incurred by the Executive in connection with the performance of his duties hereunder. (b) The Executive shall also be provided health insurance and a life insurance policy of an amount not less than the total amount of this contract. Executive shall also be entitled to three (3) weeks of vacation each year. 6. Termination. Notwithstanding anything to the contrary contained herein, the Company may terminate this Employment Agreement, the Executive's employment hereunder, and all compensation due to the Executive pursuant to Paragraph 4. above at any time for "just cause". For purposes of this agreement, termination for "just cause" shall mean: (a) a termination due to malfeasance or nonfeasance by the Executive in the performance of this duties for which he is employed, in either such instance so as to cause harm to the Company; (b) a termination due to the Executive's committing fraud, misappropriation or embezzlement in the performance of his duties as an employee of the Company; (c) a termination due to the Executive's committing any felony for which he is convicted and which, as determined in good faith by the Board, constitutes a crime involving moral turpitude, which causes harm to the Company; or (d) a substantial breach of any of the terms of this Employment Agreement. 7. Termination Upon Death. If the Executive shall die before the expiration of term hereof, this Employment Agreement shall terminate and the Company shall have no further obligation hereunder to the Executive, except that the Company shall pay to the Executive's estate the amount of any earned but unpaid compensation pursuant to Paragraph 4. above to the date of death. 8. Entire Agreement. This Employment Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all of the covenants, promises, representations, warranties and agreements between the parties with respect to the employment of the Executive by the Company. Any modification of this Employment Agreement will be effective only if it is in writing and signed by the party to be charged. 9. Severability. Any determination by the court of competent jurisdiction that any provision herein contained is invalid or unenforceable shall not affect the validity or the enforceability of any other provision of this Employment Agreement. 3 IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first above written. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla ----------------------------------------- Richard A. Cascarilla, President By: /s/ Michael R. Kassouff ----------------------------------------- Michael R. Kassouff, Secretary/Treasurer EX-10.F 30 EXHIBIT 10(F) 1 Exhibit 10f EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT is entered into on the 26th day of August, 1998, by and between Powertel USA, Inc., a Delaware Corporation (the "Company") and Michael R. Kassouff, an individual residing in Houston, Texas (the "Executive"). WHEREAS, the Board of Directors of the Company (the "Board") desires to secure for the Company the services of the Executive on the terms and conditions set forth herein; and WHEREAS, the Executive desires to provide such services on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the promises and the mutual covenants, terms and conditions hereinafter set forth, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and the Executive hereby agree as follows: 1. Employment. The Company hereby employs the Executive as its Secretary/Treasurer, and the Executive hereby accepts employment from the Company in such position for the term set forth below and upon conditions provided herein. 2 The Executive's Duties. (a) The Executive hereby agrees to perform competently and diligently the duties of the office of Secretary/Treasurer of the Company, including such executive duties as may be reasonably required from time to time by the Board. (b) The Company acknowledges that, during the term hereof, the Executive's duties will be performed on a part-time basis, and the Executive's construction business will require considerable time and attention by the Executive. Nevertheless, the Executive agrees to be reasonably available to the Company and will comply with the Company's reasonable requests for his presence in Reno, Nevada or any other places deemed necessary by the Corporation. (c) The Executive agrees to observe and comply with all rules, regulations, policies and practices adopted by the Company, either orally or in writing, both as they now exist and as they may be adopted or modified from time to time. 3. Term. The term of this Employment Agreement shall commence as of August 26, 1998 and shall end on August 25, 2001, unless earlier terminated pursuant to Paragraph 6. or 7. below. 4. Compensation. In consideration of the services to be rendered hereunder by the Executive, the Company hereby agrees to pay compensation to the Executive as follows: 2 (a) During the first contract year hereunder (i.e., from August 26, 1998 to August 26, 1999), a base salary in the amount of Eighteen Thousand Dollars, ($18,000.00). During the second contract year hereunder (i.e., from August 26, 1999 to August 26, 2000), a base salary in the amount of Twenty-Four Thousand Dollars, ($24,000.00). During the third contract year hereunder (i.e., from August 26, 2000 to August 26, 2001), a base salary in the amount of Thirty Thousand Dollars, ($30,000.00). Such a salary, less customary deductions for withholding and other charges, shall be payable on the Company's customary pay days. (b) In addition, the Executive will receive a bonus, depending upon the Company's operating results of $10,000.00 for each $1 million of earnings before interest, taxes, depreciation, amortization and such bonuses ("EBITDAB") as generated by the Company during any fiscal year beginning on August 26, 1998. 5. Fringe Benefits. (a) The Company agrees to reimburse the Executive for the expense incurred by the Executive in connection with the performance of his duties hereunder. (b) The Executive shall also be provided health insurance and a life insurance policy of an amount not less than the total amount of this contract. 6. Termination. Notwithstanding anything to the contrary contained herein, the Company may terminate this Employment Agreement, the Executive's employment hereunder, and all compensation due to the Executive pursuant to Paragraph 4. above at any time for "just cause". For purposes of this agreement, termination for "just cause" shall mean: (a) a termination due to malfeasance or nonfeasance by the Executive in the performance of this duties for which he is employed, in either such instance so as to cause harm to the Company; (b) a termination due to the Executive's committing fraud, misappropriation or embezzlement in the performance of his duties as an employee of the Company; (c) a termination due to the Executive's committing any felony for which he is convicted and which, as determined in good faith by the Board, constitutes a crime involving moral turpitude, which causes harm to the Company; or (d) a substantial breach of any of the terms of this Employment Agreement. 7. Termination Upon Death. If the Executive shall die before the expiration of term hereof, this Employment Agreement shall terminate and the Company shall have no further obligation hereunder to the Executive, except that the Company shall pay to the Executive's estate the amount of any earned but unpaid compensation pursuant to Paragraph 4. above to the date of death. 8. Entire Agreement. This Employment Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all of the covenants, promises, representations, warranties and agreements between the parties with respect to the employment of the Executive by the Company. Any modification of this Employment Agreement will be effective only if it is in writing and signed by the party to be charged. 3 9. Severability. Any determination by the court of competent jurisdiction that any provision herein contained is invalid or unenforceable shall not affect the validity or the enforceability of any other provision of this Employment Agreement. IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first above written. POWERTEL USA, INC. By: /s/ Richard A. Cascarilla ----------------------------------------- Richard A. Cascarilla, President By: /s/ Michael R. Kassouff ----------------------------------------- Michael R. Kassouff, Secretary/Treasurer EX-10.G 31 EXHIBIT 10(G) 1 Exhibit 10g CONFIDENTIAL INFORMATION TELECOMMUNICATIONS SERVICES AGREEMENT This Telecommunications Services Agreement ("Agreement") is entered into this 8th day of June, 1998, by and between Viva Servicios, S.de R.L. de C.V., a corporation of the state of Baja California in Mexico with its principal office at Blvd Agua Calente 4558, 22420 Tijuana, B.C., Mexico, ("VIVA"), and Diego Tel, Inc., a corporation of the state of Nevada in the United States of America with its principal office at 5545 Shadow Lawn Drive, Sarasota, FL 34242 USA, ("Diego Tel"). WITNESSETH: VIVA agrees to provide and Diego Tel agrees to accept switched telecommunications services and other associated services (collectively "Service"), as described in Service Schedule(s) identified herewith, subject to the terms of this Agreement. 1. EFFECTIVE DATE - MINIMUM SERVICE TERM. (A) Effective Date This Agreement shall be effective between the parties as of the date first written above. (B) Start Of Service VIVA's obligation to provide and Diego Tel's obligation to accept and pay for Service shall be binding to the extent provided for in this Agreement upon the execution of a Service Schedule by both parties and shall commence with respect to any Service as of the later of the Diego Tel's designated "Requested Service Date" set forth on each Service Schedule or the date Service becomes available ("Start of Service"). Start of Service for particular Switched Services shall be further described in the relevant Service Schedule(s). (C) Minimum Service Term Except as otherwise provided herein, the parties' obligations hereunder with respect to Switched Service shall continue from the Start of Service Date and over the "Minimum Service Term" set forth in the relevant Service Schedule. Upon the expiration of the Minimum Service Term relevant to any Service, the Service in question will continue to be provided on a month-to-month basis subject to termination by either party upon thirty (30) days prior written notice to the other party. Diego Tel shall be liable to pay VIVA-for all charges associated with the Service in question during the Minimum Service Term and any month-to-month continuation thereof as well as any and all charges for actual and/or Minimum Committed Monthly Usage Level of the Service as set forth in the relevant Exhibit(s) whether such usage occurred during the Minimum Service Term or otherwise. Any applicable Minimum Usage Charges as set forth in Section 3 (B) and relevant Service Schedule(s) are in addition to charges associated with actual and/or minimum Committed Usage. 2 CONFIDENTIAL INFORMATION 2. TARIFFS AND SERVICE SCHEDULES. (A) Tariffs Service shall be provided pursuant to this Agreement as supplemented by applicable tariffs (including tariff revisions) filed by VIVA with the United States Federal Communications Commission for international service and/or any applicable tariff filed with the Mexico COFETEL ("Tariffs"). In the event of any conflict between this Agreement and any Tariff, this Agreement shall control. Additionally, the rates for service set forth in this Agreement shall prevail in all cases, and such rates shall only be subject to change as provided in Section 5(B) of this agreement. (B) Service Schedules Service requested by Diego Tel hereunder shall be requested on VIVA Service Schedule forms and subscribed to by authorized representatives of Diego Tel and VIVA (the "Service Schedule"). Each Service Schedule shall reference this Agreement and shall become a part of this Agreement to the extent that it describes the Service, Requested Service date, Service Interconnection, if any, relevant to the Service in question, charges, specific Service terms and other information necessary for VIVA to provide Service to Diego Tel. 3. SERVICE INTERCONNECTIONS. (A) Technical Requirements In order to utilize certain Switched Service, one or more full time dedicated connections between Diego Tel's network ("Diego Tel Location") and the VIVA Network at one or more VIVA designated locations ("VIVA POP") must be established ("Service Interconnection"). Unless otherwise indicated in a Service Schedule, Diego Tel shall be responsible for establishing each Service Interconnection over facilities subject to VIVA's approval. Service Interconnections shall only be comprised of DS- I facilities unless otherwise provided for in the Service Schedule. If a Service Interconnection is proposed to be made via an international exchange carrier, VIVA may direct Diego Tel to utilize VIVA's entrance facilities or local serving arrangement ("LSA") with the relevant local telephone operating company, and Diego Tel will be subject to a non-discriminatory charges therefor from VIVA. The monthly recurring charge relevant to Diego Tel's use of LSA capacity shall be subject to upward adjustment by VIVA from time to time. Such adjustment, if any, shall not exceed the rate that otherwise would be charged for the equivalent switched access capacity between the same points by the relevant local telephone operating company pursuant to its published charges I the type of service in question. If other private line inter exchange facilities are necessary to establish a Service Interconnection, and such facilities are requested from VIVA, such facilities will be provided on an individual case basis. Service Schedules are to be completed per DS-1 Connection order. The Diego Tel is responsible for ordering the appropriate number of DS-1 connections within the ninety (90) day ramp-up-period in order to accommodate the Minimum committed Usage Level for all contracted Services. (B) Interconnection Lodging Diego Tel must provide an average loading on each DS-1 (or DS-1 equivalent) comprising the Service Interconnection at each VIVA POP of not less than the number 3 CONFIDENTIAL INFORMATION of minutes of usage per calendar month of the Minimum Service Term (or any pro rata portion thereof) set forth in the relevant Service Schedule ("Minimum Monthly Usage") . In the event Diego Tel fails to deliver the required Minimum Monthly Usage level in a given calendar month, Diego Tel shall pay to VIVA an additional amount for the difference between the Minimum Monthly Usage level and the actual usage of the Service Interconnection in question upon the charge set forth in the relevant Service Schedule ("Minimum Usage Charge"). Example: Diego Tel has a Minimum Monthly Usage level of 100,000 minutes. Diego Tel's actual monthly usage for 2 DS-1s comprising Diego Tel's Service Interconnection at VIVA POP A is 180,000 minutes and Diego Tel's actual monthly usage for 2 DS- 1s comprising Diego Tel's Service Interconnection at VIVA POP B is 270,000 minutes. Diego Tel would be subject to a Minimum Usage charge of $600 since Diego Tel's Minimum Monthly Usage at VIVA POP A was below 200,000 [(2 x 100,000)- 180,000 x $.03 $600] and no Minimum Monthly Usage Charge for the Service Interconnection at VIVA POP B, because Diego Tel exceeded the required minimum of 200,000 in actual minutes of use for the 2 DS-ls comprising the Service Interconnection at VIVA POP B. To the extent available as determined by VIVA and subject to VIVA's standard terms, conditions and charges, VIVA will provide space at VIVA POPs for Service Interconnections. Diego Tel will be responsible for the provision of echo cancellation equipment at Diego Tel's end of the Service Interconnections. 4. DIEGO TEL RESPONSIBILITIES (A) Diego Tel Facilities Diego Tel has sole responsibility for the installation, testing, operation of and costs associated with facilities, services and equipment other than that specifically to be provided by VIVA as described in a Service Schedule ("Diego Tel Facilities"). In no event will the untimely installation or non-operation of Diego Tel Facilities relieve Diego Tel of its obligation to pay charges for Service provided by VIVA. If Diego Tel is responsible for establishing a Service Interconnection over facilities other than those controlled by VIVA, VIVA shall not be obligated to provide Service relevant thereto if the Service Interconnection in question is not activated within sixty (60) days following the Requested Service Date. (B) Expedited Charges Should Diego Tel request expeditious Services and/or changes to orders and VIVA agrees to such request VIVA will pass through the charges assessed by any supplying parties involved at the same rate to Diego Tel. VIVA may further condition its agreement with such request upon Diego Tel's payment of additional charges to VIVA. (C) Diego Tel Services Diego Tel shall not be relieved of any obligation under this Agreement by virtue of the fact that Service is ultimately by a customer of Diego Tel ("End User"). Diego Tel 4 CONFIDENTIAL INFORMATION shall be solely responsible for End User solicitation, service requests, credit worthiness, Diego Tel service, billing and collection. Diego Tel shall be solely liable for, and shall not be relieved of any obligation hereunder on account of amounts it cannot collect from End Users for any reason, and billing adjustments it grants End Users for any reason including adjustments for fraudulent charges, directory assistance or any other form of credit. (D) Fraudulent Calls Diego Tel shall indemnify and hold VIVA harmless from all costs, expenses, claims or actions arising from fraudulent calls of any nature which may comprise a portion of the Services to the extent that the party claiming the calls(s) in question to be fraudulent is (or had been at the time of the call) an End User of the Services through Diego Tel or an End User of the Service through Diego Tel's Diego Tel distribution channels. Diego Tel shall not be excused from paying VIVA for Services provided to Diego Tel or any portion thereof on the basis that fraudulent calls comprised a corresponding portion of the Services. In the event VIVA discovers fraudulent calls being made (or reasonably believes fraudulent calls are being made), nothing contained herein shall prohibit VIVA from taking immediate action (without notice to Diego Tel) that is reasonably necessary to prevent such fraudulent calls from taking place, including without limitation, denying Services to particular ANI's or terminating Service to or from Specific locations. VIVA shall not, however, have any obligation to monitor the Service or take any other action to detect fraudulent calls. (E) Licenses and State Certifications Diego Tel warrants that in all jurisdictions in which it provides long distance services that require licensing, registration or certification, it has obtained the necessary authority from the appropriate governmental authority. Further, if requested by VIVA, Diego Tel agrees to provide proof of such authority acceptable to VIVA. In the event Diego Tel is prohibited, either on a temporary or permanent basis, from continuing to conduct its telecommunications operations in any jurisdiction, Diego Tel shall (i) immediately notify VIVA by facsimile or E-mail, and (ii) send written notice to VIVA within twenty-four (24) hours of such prohibition. (F) Tax Exemption Diego Tel will provide VIVA, with a valid tax exemption form to exempt VIVA, under applicable law, from taxes that would otherwise be paid by VIVA. VIVA will invoice Diego Tel for taxes that are not covered by a tax exemption certificate properly file with VIVA. (G) Forecasts Before Diego Tel's initial order for Service, Diego Tel shall provide VIVA with a forecast regarding the number of minutes expected to be terminated or originated in various LATAs, tandems and/or international destinations so as to enable VIVA to configure optimum network arrangements. If applicable, forecast for international destinations must be provided by band of service. Diego Tel will provide VIVA with additional forecasts from time to time upon VIVAs request which shall not be more frequent than once every three (3) months. Should the distribution of traffic change, VIVA reserves the right to modify rates or eliminate service with thirty (30) days notice for domestic locations and thirty (30) days notice for international locations. 5 CONFIDENTIAL INFORMATION (H) PIU Certification Absent the automatic number identification ("ANI") of the calling party, Diego Tel shall provide VIVA with a written certification (the "Certification") of the percentage of international minutes of use relevant to the minutes of traffic to be terminated in the same Mexican state in which the VIVA POP is located to which the Service Interconnection is made. This Certification shall be provided by Diego Tel prior to Start of Service for any Service Interconnection and may be modified from time to time by Diego Tel and subject to recertification upon the request of VIVA which requests shall not be made unilaterally by VIVA more than once each calendar quarter. Any such modification(s) Certification(s) shall be effective as of the first day of any calendar month and following at least forty-five (45) days notice from Diego Tel. In the event Diego Tel fails to make such Certification, the relevant minutes of use will be deemed to be subject to the International Rates provided for in the pricing exhibit to Diego Tel's Service Schedule (or, if no such rates are provided, at VIVA's tariffed international rates). Diego Tel agrees to retain all records which support Diego Tells Certification for a period of one (1) year or any longer period required by any applicable regulatory requirements. In the event VIVA or any other third party requires an audit of VIVA's international/international minutes of traffic, Diego Tel agrees to cooperate in such audit at its expense and make its call detail records, billing systems and other necessary information reasonably available to VIVA or any third party solely for the purpose of verifying Diego Tel's international/international minutes of traffic. Diego Tel agrees to indemnify VIVA for any liability VIVA incurs in the event Diego Tel's Certification is different than that determined by the audit. 5. CHARGES AND PAYMENT TERMS (A) Taxes Diego Tel acknowledges and understands that all charges stated in Service Schedules are computed by VIVA exclusive of any applicable use, excise, gross receipts, sales and privilege taxes, duties, fees or other taxes or similar liabilities (other than general income or property taxes), whether charged to or against VIVA or Diego Tel because of the Service furnished to Diego Tel ("Additional Charges"). Such additional Charges shall be paid by Diego Tel in addition to all other charges provided for herein. (B) Modification of Charges VIVA reserves the right to eliminate Services and/or modify charges for Services, upon not less than thirty (30) days prior notice to Diego Tel for international Services, which notice will state the effective date for the elimination or modification. (C) Charges and Payment Terms VIVA billings for Service are made on a weekly basis (or such other basis as may be mutually agreed to by the parties) following Start of Service. Service shall be billed at the rates set forth on the Service Requests. Diego Tel will pay each VIVA invoice for Service within five (5) business days of the invoice date set forth on each VIVA invoice to Diego Tel ("Due Date"). All payments due hereunder shall be made in U.S. dollars via wire transfer or other such method(s) as may be specified by VIVA from time to time. If payment is not received by VIVA on or before the Due Date, Diego Tel shall also pay a late fee in the amount of the lesser of one and one-half percent (1 1/2%) of the unpaid balance of the Service charges per month or the 6 CONFIDENTIAL INFORMATION maximum lawful rate under applicable law. (D) Billing Disputes Notwithstanding the foregoing, Diego Tel may deduct from VIVA Service billings for amounts reasonably disputed by Diego Tel, provided Diego Tel: (i) pays all undisputed charges on or before the Due Date, (ii) presents a written statement of any billing discrepancies to VIVA in reasonable detail on or before the Due Date of the invoice in question, and (iii) negotiates in good faith with VIVA for the purpose of resolving such dispute. In the event such dispute is resolved in favor of VIVA, Diego Tel agrees to pay VIVA the disputed amounts together with any applicable late fees within five (5) days of the resolution. VIVA and Diego Tel agree to make good faith efforts to promptly resolve any billing disputes. In the event that any dispute cannot be resolved between the parties, then it shall be settled by arbitration pursuant to the provisions of Section 16(C) hereof. VIVA shall not be obligated to consider any Diego Tel notice of billing discrepancies which are received by VIVA more than ninety (90) days from the Due Date of the invoice in question. In the event that Diego Tel fails to pay an invoice in full because of a billing dispute, VIVA shall have the right after giving Diego Tel five (5) days prior notice, to suspend all or any portion of the Service to Diego Tel until such time as the dispute is resolved. (E) Suspension of Services In the event payment in full is not received from Diego Tel by the Due Date, VIVA shall also have the right, after giving Diego Tel five (5) days prior notice, to suspend all or any portion of the Service to Diego Tel until such time as Diego Tel has paid in full all charges then due, including any late fees. Following such payment VIVA shall be required to reinstated Service to Diego Tel only upon the provision by Diego Tel to VIVA of satisfactory assurance (such as a deposit) of Diego Tel's ability to pay for Service and Diego Tel's advance payment of the cost of reinstituting Service. If Diego Tel fails to make such payment by a date determined by and acceptable to VIVA, Diego Tel will be deemed to have canceled the Service suspended effective as of the date of such suspension. Such cancellation shall not relieve Diego Tel payment liability for the unexpired portion of the Minimum Service Term relevant to the canceled Service in question. (F) Credit Diego Tel's execution of this Agreement signifies Diego Tel's acceptance of VIVA initial and continuing credit approval procedures and policies. VIVA reserves the right to withhold initiation or full implementation of Service under this Agreement pending initial satisfactory credit review and approval thereof which may be conditioned upon terms specified by VIVA, including, but not limited to, security for payments due hereunder in the form of a cash deposit, guarantee, irrevocable letter of credit or other means. Upon request by VIVA at any time, Diego Tel agrees to provide financial statements or other indications of financial circumstances. In addition, as may be determined by VIVA in its sole discretion at any time, if the financial circumstances, payment history or credit exposure of Diego Tel is or becomes unacceptable, VIVA may require a new or increased deposit, guarantee or irrevocable letter of credit, at VIVA's option, to secure Diego Tel payments for the term of the Agreement. Failure of Diego Tel to provide the requested security within five (5) days after demand by VIVA shall permit VIVA to suspend service and/or terminate 7 CONFIDENTIAL INFORMATION this Agreement without further notice. 6. WARRANTY. VIVA will use reasonable efforts under the circumstances to maintain its overall network quality. The quality of Service provided hereunder shall be consistent with other common carrier industry standards, government regulations and sound business practices. VIVA MAKES NO OTHER WARRANTIES ABOUT THE SERVICE PROVIDED HEREUNDER, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. 7. CONTINUING RELATIONSHIP AND TERMINATION. This Agreement and the relationship of the Parties may be terminated in accordance with applicable provisions hereof and/or the occurrence of any of the following events which shall constitute a default: (A) VIVA may terminate this Agreement in the event: (1) Diego Tel fails to make any payment when due and fails to cure such default within five (5) days after receipt of notice of such default; or (2) Diego Tel fails to furnish security within five (5) days after demand by VIVA pursuant to Section 5(F) hereof. (B) A party may terminate this Agreement in the event of: (1) A material breach of this Agreement by the other party (other than as specified in Section 7(A) above) which is not cured by the breaching party within fourteen (14) days after receipt of notice of such default; (2) The adjudication of bankruptcy of the other party under army Federal, state or municipal bankruptcy or insolvency act, or the appointment of a receiver or any act or action constituting a general assignment by such other party of its proprieties and interest for the benefit of its creditors; or (3) The determination by any governmental entity having jurisdiction over the Service provided under this Agreement that the relationship of the Parties and/or Services provided hereunder are contrary to then existing laws. 8. LIABILITY AND INDEMNITY. (A) Limited Liability. IN NO EVENT WILL ETHER PARTY HERETO BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION, 8 CONFIDENTIAL INFORMATION LOSS OF REVENUE, LOSS OF DIEGO TEL'S OR CLIENTS, LOSS OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS AGREEMENT, THE SERVICE OR THE PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS HEREUNDER. (B) Indemnity In the event parties other than Diego Tel (e.g., End Users and/or their Diego Tels) shall have use of the Service through Diego Tel, then Diego Tel agrees to forever indemnify and hold VIVA, its affiliated companies and any third-party provider or operator of facilities employed in provision of the Service harmless from and against any and all claims, demand, suits, actions, losses, damages, assessments or payments which may be asserted by said parties arising out of or relating to any defect in the Service. 9. FORCE MAJEURE. If either party's performance of this Agreement or any obligation hereunder is prevented, restricted or interfered with by causes beyond its reasonable control including, but not limited to, acts of God, fire, explosion, vandalism, cable out, storm or other similar occurrence, any law, order, regulation, direction, action or request of the Mexico or United States government or state or local government, or of any department, agency, commission, court, bureau, corporation or other. instrumentality of any one or more said governments, or of any civil or military authority, or by national emergency, insurrection, riot, war, strike, lockout or work stoppage or other labor difficulties, supplier failure, shortage, breach or delay, then such party shall be excused from such performance on a day-to-day basis to the extent of such restriction or interference. Such party shall use reasonable efforts under the circumstances to avoid or remove such causes of nonperformance and shall proceed to perform with reasonable dispatch whenever such causes are removed or cease. Notwithstanding the foregoing, this provision may not be invoked with respect to any event listed in Section 7 or to excuse or delay performance of Sections 5(C), 5(E) or (F). 10. INTERNATIONAL SERVICE. Except with respect to Switched Service specifically designated as interstate Service or intrastate Service, the rates provided to Diego Tel in a Service Schedule are applicable only to Switched Service if such Service is used for carrying international telecommunications (i.e., Service subject to the jurisdiction of COFETEL and the Federal Communications Commission). VIVA shall not be obligated to provide Switched Service with end points within a single state or Switched Service which originates/terminates at points both of which are situated within a single state. Where VIVA is authorized to provide international service (i.e., telecommunications transmission services subject to the jurisdiction of the international regulatory authorities), VIVA will, at its option, provide international Service pursuant to applicable state laws, regulations and applicable tariff, if any, filed by VIVA with state regulatory authorities as required by applicable law. 11. NETWORK PROTECTION. In the event Diego Tel's Service traffic volumes result in a lower than industry standard completion rate or otherwise adversely affect the VIVA network (including, but not limited to a looping situation where Diego Tel's traffic is delivered by VIVA to another carrier 9 CONFIDENTIAL INFORMATION for termination and ultimately returned to VIVA), VIVA reserves the right to block and refuse to accept such adverse traffic at any time, without prior notice or liability. 12. NOTICES. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by: (i) prepaid first class mail, (ii) facsimile or other means of electronic communication or (iii) delivery as hereafter provided. Any such notice or other communication, if mailed by prepaid first-class mail at any time other than during a general discontinuance of postal service due to strike, lockout or otherwise shall be deemed to have been received on the fourth business day after the postmarked date thereof, or if sent by facsimile or other means of electronic communication, shall be deemed to have been received on the date of transmission, provided that a hard copy is immediately sent by prepaid first class mail as aforesaid; or if delivered by hand, shall be deemed to have been received at the time it is delivered to the applicable address noted below either to the individual designated below or to an individual at such address having apparent authority to accept deliveries on behalf of the addressee. Notice, of change of address shall also be governed by this Section. In the event of a general discontinuance of postal service due to strike, lock-out, or otherwise, notices or other communications shall be delivered by hand or sent by facsimile or other means of electronic communication and shall be deemed to have been received in accordance with this Second Notices and other communications shall be addressed as follows: a) In the case of VIVA Viva Servicios, S. de R.L. de C.V. Blvd Agua Calente 4558, 22420 Tijuana, B.C. Mexico b) In the case of Diego Tel: Diego Tel, Inc. 5545 Shadow Lawn Drive Sarasota, FL 34242 Office: (941) 349-3542 Facsimile: (941) 349-3546 c) Billing Address of Diego Tel: Same as Above 13. NO-WAIVER. No term or provision of this Agreement shall be deemed waived and no breach or default shall be deemed excused unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented No consent by any party to, or waiver of, a breach or default by the other, whether express or implied, shall constitute a consent to, waiver of, or excuse 10 CONFIDENTIAL INFORMATION for any different or subsequent breach or default. 14. PARTIAL INVALIDITY: GOVERNMENT ACTION. (A) Partial Invalidity If any term or provision of this Agreement shall be found to be illegal or unenforceable, then, notwithstanding such illegality or unenforceability, this Agreement shall remain in full force and effect and such term or provision shall be deemed to be deleted. (B) Government Action Upon thirty (30) days prior notice, either party shall have the right, without liability to the other, to cancel an affected portion of the Service if any material rate or term contained herein and relevant to the affected Service is substantially changed or found to be unlawful or the relationship between the parties hereunder is found to be unlawful by order of the highest court of competent jurisdiction to which the matter is appealed, the Communications Commission, or other local, state or federal government authority of competent jurisdiction within any country. 15. USE OF SERVICE. Upon VIVA acceptance of a Service Schedule hereunder, VIVA will provide the Service specified therein to Diego Tel upon condition that the Service shall not be used for any unlawful purpose. The provision of Service will not create a partnership or joint venture between the parties or result in a joint communications service offering to the third parties. 16. CHOICE-OF LAW: FORUM AND ARBITRATION (A) Law This Agreement shall be construed under the laws of the Bahamas without regard to choice of law principles. (B) Forum Any arbitration, civil action or other legal proceeding arising out of or relating to this Agreement or any dealings between Diego Tel, on the one hand, and VIVA and/or VIVA officers, directors, employees, or agents on the other hand, whether brought before or after any termination of this Agreement, shall be brought and heard only in Nassau in the Bahamas, and the parties hereto expressly waive any right under any law or rule to cause any such proceeding to be brought or heard in any other location. Diego Tel consents to jurisdiction in any court located in Nassau in the Bahamas in any other legal proceeding arising out of or relating to this Agreement. (C) Arbitration Any claim or controversy arising out of or relating to this Agreement or any dealings between Diego Tel, on one hand, and VIVA and/or VIVA's officers, directors, employees or agents, on the other hand, shall be resolved by final and binding arbitration before J.A.M.S./ENDISPUTE ("JAMS") in accordance with the then obtaining Comprehensive Arbitration Pules and Procedures of JAMS, as modified herein. The arbitrator may not limit, expand or otherwise modify the terms of this Agreement and shall not have authority to award punitive or other non-compensatory damages to either party. In order to provide an expeditious resolution of any dispute, the parties agree that: (i) if the parties have not agreed on an arbitrator within ten (10) days 11 CONFIDENTIAL INFORMATION after the date of commencement of the arbitration, JAMS shall designate a single arbitrator and that designation shall be final and binding; and (ii) absent extraordinary circumstances, the arbitration hearing shall begin within ninety (90) days from the date of commencement of arbitration, and shall continue each business day thereafter until completed. The award in such arbitration proceeding may be entered in any Court specified in Section 16(B) of this Agreement. 17. PROPRIETARY INFORMATION. (A) Confidential Information The parties understand and agree that the terms and conditions of this Agreement, all documents referenced (including invoices to Diego Tel for Service provided hereunder) herein, communications between the parties regarding this Agreement of the Service to be provided hereunder (including price quotes to Diego Tel for any Service proposed to be provided or actually provided hereunder) and all information regarding the Diego Tels of Diego Tel, as well as such information relevant to any other agreement between the parties (collectively "Confidential Information"), are confidential as between Diego Tel and VIVA. (B) Limited Disclosure A party shall not disclose Confidential Information unless subject to discovery or disclosure. pursuant to legal process, or to any other party other than the directors, officers, and employees of a party or agents of a party including their respective brokers, lenders, insurance carries or prospective purchasers who have specifically agreed in writing to non-disclosure of the terms and conditions hereof. Any disclosure hereof required by legal process shall only be made after providing the non-disclosing party with notice thereof in order to permit the non-disclosing party to seek an appropriate protective order or exemption. Violation by a party or its agents of the foregoing provisions shall entitle the non-disclosing patty, at its option, to obtain injunctive relief without a showing of irreparable harm or injury and without bond. (C) Press Release The parties further agree that any press release, advertisement or publication generated by a party regarding this Agreement, the Service provided hereunder or in which a party desires to mention the name of the other party or the other party's parent or affiliated company(ies), will be submitted to the non-publishing party for its written approval prior to publication. (D) Survival and Confidentiality The provisions of this Section 17 will be effective as of the date of this Agreement and remain in full force and effect for a period equal to the longer of (i) one (1) year following the effective date of this Agreement; or (ii) one (1) year following the termination of all Service hereunder. 18. SUCCESSORS AND ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto. and their respective successors or assigns, provided, however, that Diego Tel shall not assign or transfer its rights or obligations under this Agreement without the prior written consent of VIVA, which shall not unreasonably be withheld, and further provided that any assignment or transfer without such consent shall be void. 12 CONFIDENTIAL INFORMATION 19. GENERAL. (A) Survival of Terms The terms and provisions contained in this Agreement that by their sense and context are intended to survive the performance thereof by the parties hereto shall so survive the completion of performance and termination of this Agreement, including without limitation, provisions for arbitration, forum selection indemnification and the making of any and all payments due hereunder. (B) Headings Descriptive headings in the Agreement are for convenience only and shall not affect the construction of this Agreement. (C) Industry Terms Words having well-know technical or trade meanings shall be so construed, and all listings of items shall not be taken to be exclusive, but shall include other items, whether similar or dissimilar to those listed, as the context reasonably requires. (D) Rule of Construction No rule of construction requiring interpretation against the draftsman hereof shall apply in the interpretation of this Agreement. (E) Legal Fees In any arbitration, civil action or other legal proceeding arising out of or relating to this Agreement, the prevailing party shall be awarded its costs and reasonable attorneys' fees. (F) Place of Acceptance This Agreement shall be deemed to have been accepted and entered into in Nassau in the Bahamas. 20. ENTIRE AGREEMENT. This Agreement consists of: (i) all the terms and conditions contained herein; in executed Service Schedules that are identified herewith; (ii) and all documents incorporated herein specifically by reference. This Agreement constitutes the complete and exclusive statement of the understandings between the parties and supersedes all proposals and prior agreements (oral or written) between the parties relating to Service provided hereunder. No subsequent agreement between the parties concerning the Service shall be effective or binding unless it is made in writing and subscribed to by authorized representatives of Diego Tel and VIVA. IN WITNESS WHEREOF, the parties have executed this Agreement on the date first written above. Viva Servicios, S. de R.L. de C. V., a Baja Diego Tel, Inc., California, Mexico, corporation a Nevada, USA, corporation By: /s/ David L. Wallace By: /s/ David L. Wallace ---------------------------------- ---------------------------- David L. Wallace David L. Wallace Its: President Its: President 13 CONFIDENTIAL INFORMATION SERVICE SCHEDULE (VIVA TERMINATION SERVICE) [THE CONFIDENTIAL PORTION OF THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] 14 CONFIDENTIAL INFORMATION THIS EXHIBIT A IS NOT TO BE DISCLOSED UNDER ANY CIRCUMSTANCES. EXHIBIT A [THE CONFIDENTIAL PORTION OF THIS DOCUMENT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.] EX-11 32 EXHIBIT 11 1 COMPUTATION OF PER SHARE EARNINGS --------------------------------- The net Income (Loss) Per Share is computed based on the total number of shares of Class A Common Stock issued and outstanding as of November 30, 1998. As of that date, there was a total of 9,573,487 shares of Class A Common Stock outstanding. In October, 1998, the United States Bankruptcy Court approved a Plan of Reorganization. Pursuant to that Plan, all Class A Stock issued subsequently to May 3, 1996, was deemed to have been rescinded and voided, except as to shareholders who filed a valid proof of interest on or before November 10, 1997. In addition, the Plan of Reorganization reinstated all shareholders of record as of May 3, 1996. As of May 3, 1996, a total of 8,808,487 shares of Class A Common Stock were issued and outstanding. Shareholders filed valid proofs of interest for an additional 2,483,008 shares of Class A Common Stock, but as of November 30, 1998, these shares had not been reissued. Pursuant to the Plan of Reorganization, the Company has issued a total of 500,000 shares of Class A Common Stock to the shareholders owning Series B Preferred Stock in exchange for 100% of the issued and outstanding Series B Preferred Stock. In addition, 265,000 shares of Class A Common Stock had been issued to directors for services rendered prior to and after confirmation of the Plan of Reorganization. The total number of shares of Class A. Common Stock deemed to be issued and outstanding as of November 30, 1998 was as follows: Shares ---------- 8,808,487 May 3, 1996 ledger 265,000 Director shares 500,000 Purchase of Series B Stock ---------- 9,573,487 The computation set forth above does not include the 2,483,008 shares of Class A Common Stock to be issued to shareholders who file a valid proof of interest because such shares had not been issued as of November 30, 1998. As of November 30, 1998, a total of 12,568,495 shares of Class B Stock were issued and outstanding. Pursuant to the Plan of Reorganization, these shares are to be converted into Class A. Common Stock in an amount equal to 50.0% of the issued and outstanding Class A Common Stock subsequent to implementation of the Plan of Reorganization. This conversion had not occurred as of November 30, 1998. The loss set forth in the unaudited Consolidated Statement of Operations is $338,946. The loss was divided by the total number of shares of Class A Common Stock issued and outstanding as of November 30, 1998 (9,573,487 shares) which results in a loss per share of $.04. EX-99.A 33 EXHIBIT 99(A) 1 Exhibit 99a POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT APRIL 1997 The Trustee is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Trustee by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Trustee to file a complete Monthly Operating Report. /s/ Barry L. Solomon ------------------------------------ BARRY L. SOLOMON, TRUSTEE 2 INCOME STATEMENT (Accrual Basis) (Month/Year) 4/97
Current Year to Month Date ------- ------- Income $40.00 $40.00 Cost of Goods Sold Beginning Inventory $ $ Inventory Purchases $ $ Ending inventory $ $ Total Costs of Goods Sold $40.00 $40.00 Operating Expenses Salaries and Wages $ $ Employee Benefits $ $ Equipment Lease Payments $ $ Rent $ $ Secured Debt Payments $ $ Utilities $ $ Telephone $ $ Repairs & Maintenance $ $ Misc $ $ Advertising $ $ Travel & Entertainment $ $ Professional Fees $ $ Depreciation $ $ Insurance: Liability $ $ Property $ $ Vehicle $ $ Worker's Compensation $ $ Other $ $ Taxes: Payroll $ $ Sales $ $ Income $ $ Real Property $ $ Personal Property $ $ Total Operating Expenses $ -0- $40.00 Total Profit (Loss) from Operations $40.00 $40.00 Other Income (Expense) $ $ Gain (Loss) on Sale of Assets $ $ Interest Expense $ $ Interest Income $ .08 $ .08 Dividend income $ $ Total $ .08 $ .08 Total Profit (Loss) for Month $40.08 $40.08
(FORM NO. 2) 3 INCOME STATEMENT Schedule of Professional Fees
Current Prepayment Fees Balance Accrued (If any) Name of Professional: Attorneys: Accountants: Other:
4 CASH FLOW STATEMENT (Month/Year) 4/97
Projected Current For current Month Month ------- ----------- Receipts: Sales (Cash Only) $ 40.00 $ Collections of Accounts Receivable $ $ Other Income $ .08 $ Total Receipts $ 40.08 $ Disbursements: Purchases and Inventory $ $ Salaries and Wages $ $ Employee Benefits $ $ Equipment Lease Payments $ $ Rent $ $ Secured Debt Payments $ $ Utilities $ $ Telephone $ $ Repairs & Maintenance $ $ Misc. Office Expense $ $ Advertising $ $ Travel & Entertainment $ $ Professional Fees $ $ Depreciation $ $ Insurance: Liability $ $ Property $ $ Vehicle $ $ Worker's Compensation $ $ Other $ $ Taxes: Payroll $ $ Sales $ $ Income $ $ Real Property $ $ Personal Property $ $ Total Disbursements $ $ Cash Flow $ 40.08 $
(FORM NO. 3) 5 RECAPITULATION 4/97 Balance from Prior Month General Account $ -0- Bank CHASE Branch New York Account #: Payroll Account $ Bank Branch Account # Tax Account $ Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 40.08 Payroll Account: $ Tax Account: $
(FORM NO. 3) 6 PROJECTED CASH FLOW STATEMENT (Month/Year)
Next Following Month Month Projected Receipts: Sales (Cash Only) $____________ $____________ Collections of Accounts Receivable $____________ $____________ Other Income $____________ $____________ Total Projected Receipts: $____________ $____________ Projected Disbursements: Purchase and Inventory $____________ $____________ Salaries and Wages $____________ $____________ Employee Benefits $____________ $____________ Equipment Lease Payments $____________ $____________ Rent $____________ $____________ Secured Debt Payments $____________ $____________ Utilities $____________ $____________ Telephone $____________ $____________ Repairs & Maintenance $____________ $____________ Misc. Office Expense $____________ $____________ Advertising $____________ $____________ Travel & Entertainment $____________ $____________ Professional Fees $____________ $____________ Depreciation $____________ $____________ Insurance: Liability $____________ $____________ Property $____________ $____________ Vehicle $____________ $____________ Workers' Compensation $____________ $____________ Other _____________________ $____________ $____________ Taxes: Payroll $____________ $____________ Sales $____________ $____________ Income $____________ $____________ Real Property $____________ $____________ Personal Property $____________ $____________ Total Projected Disbursements $____________ $____________ Projected Cash Flow $____________ $____________
(FORM NO. 4) 7 BALANCE SHEET (Month/Year) 4/97
Assets Current Assets: Cash $ 40.08 Accounts Receivable $ Allowance for Doubtful Accounts $ Accounts Receivable (Net) $ Inventory $ Prepaid Expenses $ Total Current Assets $ 40.08 Property and Equipment (Fair Market Value) Real Property $ Machinery and Equipment $ Furniture and Fixtures $ Office Equipment $ Leasehold Improvements $ Vehicles $ Other $ Total Property and Equipment -0- Total Assets: $ 40.08
(FORM NO. 5) 8 LIABILITIES 4/97 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ Payroll Taxes $ Sales Taxes $ Income Taxes $ Real Property Taxes $ Personal Property Taxes $ Accounts Payable $ Postpetition Real Property Lease Arrearages $ Postpetition Equipment Lease Arrearages $ Accrued Professional Fees Other $ $ Total Postpetition Liabilities $ -0- Prepetition Liabilities Priority Debt $ Secured Debt $ Unsecured Debt $ Total Prepetition Liabilities $ -0- Shareholder's Equity Common Stock $ Paid-In Capital $ Retained Earnings $ 40.08 Total Shareholder's Equity $ 40.08 Total Liabilities & Equity $ 40.08
(FORM NO. 5) 9 MONTHLY QUESTIONNAIRE I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable: Accounts Payable Accounts Receivable Less Than 31 Days Past Due ________________ ________________ 31 to 60 Days Past Due ________________ ________________ 61 to 90 Days Past Due ________________ ________________ 91 to 120 Days Past Due ________________ ________________ Over 120 Days Past Due ________________ ________________ II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Post Petitions Payments Made Missed Payment Periodic Date of Creditor Name Period Payment Last Amount (mo/wk) Amount Payment # Amt. # Amt.
(FORM NO. 6) 10 MONTHLY QUESTIONNAIRE Page 2 III.TAX LIABILITY Gross Payroll Expense for Report Month: $ Gross Sales Subject to Sales Tax for Report Month $
Postpetition Taxes Date Paid Amount Paid Due But Not Paid Accrued But Not Due Federal Payroll & Withholding State Payroll & Withholding State Sales & Use
IV. INSURANCE COVERAGE
Policy Carrier/ Amount of Expiration Policy Paid Agent Name Coverage Date Through Date Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: (FORM NO. 6) 11 MONTHLY QUESTIONNAIRE Page 3 VII. U.S. Trustee Fees
Total Total Quarterly Quarter Disbursement Quarterly Amount Date Fees Due But Ending During Quarter Fee Paid Paid Not Paid
12 DATE SUBMITTED: 06/26/97 PAGE 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING : 01/01/00 - 05/31/97 BOND AMOUNT : BLANKET BOND
- --------------------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE - --------------------------------------------------------------------------------------------------------------------------------- 03/28/97 SMITH, KATZENSTEIN & FURLOW CERTIFICATES OF STOCK 40.00 40.00 OWNERSHIP 04/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.08 40.08 MANHATTAN BANK on 4/30/97 Current Interest Rate is 2.6000% 05/29/97 {1} BANK OF AMERICA CLOSE BANK ACCOUNTS 11.42 51.50 05/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.08 51.58 MANHATTAN BANK on 05/30/97; Current Interest Rate is 2.6000% ------ ----- ----- ACCOUNT TOTALS: $51.58 $0.00 $51.58 Less Bank Transfers: $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $51.58 $0.00 CASE TOTALS: $51.58 $0.00 $51.58 Less Bank Transfers $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $51.58 $0.00
Gross Receipts: $51.58 Less Payments to Debtor: $ 0.00 ------ Net Estates: $51.58
13 DATE SUBMITTED: 06/26/97 PAGE 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 A SAN JACINTO POWER CORP TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312750667865 - MONEY MARKET ACCOUNT PERIOD ENDING : 01/01/00 - 05/31/97 BOND AMOUNT : BLANKET BOND
- ------------------------------------------------------------------------------------------------------------------------------------ TANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE - ------------------------------------------------------------------------------------------------------------------------------------ 05/06/97 SOUTHERN CALIFORNIA EDISON PURCHASED 330,000 KWH OF 5,919.31 5,919.31 P O BOX 700 ENERGY 3-1-97 TO 4-1-97 ROSEMEAD, CA 91770 05/16/97 101 DESERTRON ELECTRIC, INC CONTRACT -2,500.00 3,419.31 P O BOX 1060 N PALM SPRINGS, CA 92258-1060 05/27/97 102 CONTRACTORS CRANE SERVICES, LLC REPAIRS -210.00 3,209.31 P O BOX 1156 N PALM SPRINGS, CA 92258 05/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 8.53 3,217.84 MANHATTAN BANK on 05/30/97; Current Interest Rate is 2.6000% ---- --------- ---------- --------- ACCOUNT TOTALS: $5,927.84 $-2,710.00 $3,217.84 Less Bank Transfers: $ 0.00 $ 0.00 --------- ---------- NET RECEIPTS/DISBURSEMENTS: $5,927.84 $-2,710.00 CASE TOTALS: $5,927.84 $-2,710.00 $3,217.84 Less Bank Transfers $ 0.00 $ 0.00 --------- ---------- NET RECEIPTS/DISBURSEMENTS: $5,927.84 $-2,710.00
Gross Receipts: $5,927.84 Less Payments to Debtor: $ 0.00 --------- Net Estates: $5,927.84
EX-99.B 34 EXHIBIT 99(B) 1 Exhibit 99b POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT MAY 1997 The Trustee is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel USA, Inc. have not cooperated with the Trustee by providing the necessary information. The books and Records are missing. Therefore, it is impossible for the Trustee to file a complete Monthly Operating Report. /s/ Barry L. Solomon -------------------------------------- BARRY L. SOLOMON, TRUSTEE 2 INCOME STATEMENT (Accrual Basis) (Month/Year) 5/97
Current Year to Month Date ------------ ------------ Income $ 5930.73 $ 5970.53 ------------ ------------ Cost of Goods Sold Beginning Inventory $ $ ------------ ------------ Inventory Purchases $ $ ------------ ------------ Ending inventory $ $ ------------ ------------ Total Costs of Goods Sold $ -0- $ -0- ------------ ------------ Operating Expenses Salaries and Wages $ $ ------------ ------------ Employee Benefits $ $ ------------ ------------ Equipment Lease Payments $ $ ------------ ------------ Rent $ $ ------------ ------------ Secured Debt Payments $ $ ------------ ------------ Utilities $ $ ------------ ------------ Telephone $ $ ------------ ------------ Repairs & Maintenance $ 2710.00 $ 2710.00 ------------ ------------ Misc. Office Expense $ $ ------------ ------------ Advertising $ $ ------------ ------------ Travel & Entertainment $ $ ------------ ------------ Professional Fees $ $ ------------ ------------ Depreciation $ $ ------------ ------------ Insurance: Liability $ $ ------------ ------------ Property $ $ ------------ ------------ Vehicle $ $ ------------ ------------ Worker's Compensation $ $ ------------ ------------ Other___________________ $ $ ------------ ------------ Taxes: Payroll $ $ ------------ ------------ Sales $ $ ------------ ------------ Income $ $ ------------ ------------ Real Property $ $ ------------ ------------ Personal Property $ $ ------------ ------------ Total Operating Expenses $ 2710.00 $ 2710.00 ------------ ------------ Total Profit (Loss) from Operations $ 3220.73 $ 3260.73 ------------ ------------ Other Income (Expense) $ $ ------------ ------------ Gain (Loss) on Sale of Assets $ $ ------------ ------------ Interest Expense $ $ ------------ ------------ Interest Income $ 8.61 $ 8.69 ------------ ------------ Dividend income $ $ ------------ ------------ Total $ 8.61 $ 8.69 ------------ ------------ Total Profit (Loss) for Month $ 3229.34 $ 3269.42 ------------ ------------
(Form No. 2) 3 INCOME STATEMENT SCHEDULE OF PROFESSIONAL FEES
Current Prepayment Fees Balance Accrued (If any) ------------ ------------ Name of Professional: Attorneys: Accountants: Other:
(Form No. 2) 4 CASH FLOW STATEMENT (Month/Year) 5/97
Projected Current For current Month Month ------------ ------------ Receipts: Sales (Cash Only) $ 5930.73 $ ------------ ------------ Collections of Accounts Receivable $ $ ------------ ------------ Other Income $ 8.61 $ ------------ ------------ Total Receipts $ 5939.34 $ ------------ ------------ Disbursements: Purchases and Inventory $ $ ------------ ------------ Salaries and Wages $ $ ------------ ------------ Employee Benefits $ $ ------------ ------------ Equipment Lease Payments $ $ ------------ ------------ Rent $ $ ------------ ------------ Secured Debt Payments $ $ ------------ ------------ Outside Services $ $ ------------ ------------ Telephone $ $ ------------ ------------ Repairs & Maintenance $ 2710.00 $ ------------ ------------ Misc. Office Expense $ $ ------------ ------------ Advertising $ $ ------------ ------------ Travel & Entertainment $ $ ------------ ------------ Professional Fees $ $ ------------ ------------ Court Costs $ $ ------------ ------------ Insurance: Liability $ $ ------------ ------------ Property $ $ ------------ ------------ Vehicle $ $ ------------ ------------ Worker's Compensation $ $ ------------ ------------ Other $ $ ------------ ------------ Taxes: Payroll $ $ ------------ ------------ Sales $ $ ------------ ------------ Income $ $ ------------ ------------ Real Property $ $ ------------ ------------ Personal Property $ $ ------------ ------------ Total Disbursements $ 2710.00 $ ------------ ------------ Cash Flow $ 3229.34 $ ------------ ------------
(Form No. 3) 5 RECAPITULATION 5/97 Balance from Prior Month General Account $ 40.08 -------- Bank: CHASE Branch: New York Account #: 312731324365 SAN JACINTO POWER $ .00 -------- Bank: CHASE Branch: New York Account #: 312750667865 Tax Account $ -------- Bank: Branch: Account #: Balance to Carry Forward to Next Month: General Account $ 51.58 -------- SAN JACINTO POWER $3217.84 -------- Tax Account: $ --------
(Form No. 3) 6 PROJECTED CASH FLOW STATEMENT (Month/Year)
Next Following Month Month ------------ ------------ Projected Receipts: Sales (Cash Only) $ $ ------------ ------------ Collections of Accounts Receivable $ $ ------------ ------------ Other Income $ $ ------------ ------------ Total Projected Receipts $ $ ------------ ------------ Projected Disbursements: Purchases and Inventory $ $ ------------ ------------ Salaries and Wages $ $ ------------ ------------ Employee Benefits $ $ ------------ ------------ Equipment Lease Payment $ $ ------------ ------------ Rent $ $ ------------ ------------ Secured Debt Payments $ $ ------------ ------------ Utilities $ $ ------------ ------------ Telephone $ $ ------------ ------------ Repairs & Maintenance $ $ ------------ ------------ Misc. Office Expense $ $ ------------ ------------ Advertising $ $ ------------ ------------ Travel & Entertainment $ $ ------------ ------------ Professional Fees $ $ ------------ ------------ Depreciation $ $ ------------ ------------ Insurance: Liability $ $ ------------ ------------ Property $ $ ------------ ------------ Vehicle $ $ ------------ ------------ Worker's Compensation $ $ ------------ ------------ Other $ $ ------------ ------------ Taxes: Payroll $ $ ------------ ------------ Sales $ $ ------------ ------------ Income $ $ ------------ ------------ Real Property $ $ ------------ ------------ Personal Property $ $ ------------ ------------ Total Projected Disbursements $ $ ------------ ------------ Projected Cash Flow $ $ ------------ ------------
(Form No. 4) 7 BALANCE SHEET (MONTH/YEAR) 5/97 Assets Current Assets: Cash $ 3269.42 ------------- Accounts Receivable $ ------------- Allowance for Doubtful Accounts $ ------------- Accounts Receivable (Net) $ ------------- Inventory $ ------------- Prepaid Expenses $ ------------- Total Current Assets $ 3269.42 ------------- Property and Equipment (Fair Market Value) Real Property $ ------------- Machinery and Equipment $ ------------- Furniture and Fixtures $ ------------- Office Equipment $ ------------- Leasehold Improvements $ ------------- Vehicles $ ------------- Other___________________ $ ------------- Total Property and Equipment $ -0- ------------- Total Assets: $ 3269.42 -------------
(Form No. 5) 8 LIABILITIES 5/97 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ ------------- Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other________________________ $ ------------- __________________________ $ ------------- Total Postpetition Liabilities $ -0- ------------- Prepetition Liabilities Priority Debt $ ------------- Secured Debt $ ------------- Unsecured Debt $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $ ------------- Retained Earnings $ 3269.42 ------------- Total Shareholder's Equity $ 3269.42 ------------- Total Liabilities & Equity $ 3269.42 -------------
(Form No. 5) 9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation come due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable ---------------- ------------------- Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Payment Periodic Date of Post Petition Payments Creditor Name Period Payment Last Made Missed and Address (mo/wk) Amount Payment # Amt. # Amt. - ---------------- ------- ------ ------- ------ ---- ----- ------
(Form No. 6) 10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $ Gross Sales Subject to Sales Tax for Report Month $
Postpetition Taxes Date Amount Due But Accrued But Paid Paid Not Paid Not Due ---- ------ -------- ----------- Federal Payroll & Withholding State Payroll & Withholding State Sales & Use
IV. INSURANCE COVERAGE
Policy Carrier/ Amount of Expiration Policy Paid Agent Name Coverage Date Through Date ---------- --------- ---------- ------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: 11 MONTHLY QUESTIONNAIRE Page 3 VII. U.S. Trustee Fees
Total Total Quarterly Quarter Disbursement Quarterly Amount Date Fees Due But Ending During Quarter Fee Paid Paid Not Paid - ------- -------------- --------- ------ ---- ---------------
12 DATE SUBMITTED: 06/26/97 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS
CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING : 01/01/00 - 05/31/97 BOND AMOUNT : BLANKET BOND
- ----------------------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE - ----------------------------------------------------------------------------------------------------------------------------------- 03/28/97 SMITH, KATZENSTEIN & FURLOW CERTIFICATES OF STOCK 40.00 40.00 OWNERSHIP 04/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.08 40.08 MANHATTAN BANK on 4/30/97 Current Interest Rate is 2.6000% 05/29/97 {1} BANK OF AMERICA CLOSE BANK ACCOUNTS 11.42 51.50 05/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.08 51.58 MANHATTAN BANK on 05/30/97; Current Interest Rate is 2.6000% ------ ----- ------ ACCOUNT TOTALS: $51.58 $0.00 $51.58 Less Bank Transfers: $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $51.58 $0.00 CASE TOTALS: $51.58 $0.00 $51.58 Less Bank Transfers $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $51.58 $0.00 Gross Receipts: $51.58 Less Payments to Debtor: $ 0.00 Net Estates: $51.58
13 DATE SUBMITTED: 06/26/97 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312750667865 - MONEY MARKET ACCOUNT PERIOD ENDING : 01/01/00 - 05/31/97 BOND AMOUNT : BLANKET BOND
- ------------------------------------------------------------------------------------------------------------------------------------ TANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE - ------------------------------------------------------------------------------------------------------------------------------------ 05/06/97 SOUTHERN CALIFORNIA EDISON PURCHASED 330,000 KWH OF 5,919.31 5,919.31 P O BOX 700 ENERGY 3-1-97 TO 4-1-97 ROSEMEAD, CA 91770 05/16/97 101 DESERTRON ELECTRIC, INC CONTRACT -2,500.00 3,419.31 P O BOX 1060 N PALM SPRINGS, CA 92258-1060 05/27/97 102 CONTRACTORS CRANE SERVICES, LLC REPAIRS -210.00 3,209.31 P O BOX 1156 N PALM SPRINGS, CA 92258 05/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 8.53 3,217.84 MANHATTAN BANK on 05/30/97; Current Interest Rate is 2.6000% --------- ---------- --------- ACCOUNT TOTALS: $5,927.84 $-2,710.00 $3,217.84 Less Bank Transfers: $ 0.00 $ 0.00 --------- ---------- NET RECEIPTS/DISBURSEMENTS: $5,927.84 $-2,710.00 CASE TOTALS: $5,927.84 $-2,710.00 $3,217.84 Less Bank Transfers $ 0.00 $ 0.00 --------- ---------- NET RECEIPTS/DISBURSEMENTS: $5,927.84 $-2,710.00 Gross Receipts: $5,927.84 Less Payments to Debtor: $ 0.00 Net Estates: $5,927.84
EX-99.C 35 EXHIBIT 99(C) 1 Exhibit 99c POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT JUNE 1997 The Trustee is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel USA., Inc. have not cooperated with the Trustee by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Trustee to file a complete Monthly Operating Report. /s/ Barry L. Solomon ---------------------------------- BARRY L. SOLOMON, TRUSTEE 2 INCOME STATEMENT (Accrual Basis) (Month/Year) June 1997
Current Year Month to Date ----- ------- Income $ 208851.46 $ 214822.19 ----------- ----------- Cost of Goods Sold Beginning Inventory $ $ -------------- ------------ Inventory Purchases $ $ -------------- ------------ Ending inventory $ $ -------------- ------------ Total Costs of Goods Sold $ $ -------------- ------------ Operating Expenses Salaries and Wages $ $ -------------- ------------ Employee Benefits $ $ -------------- ------------ Equipment Lease Payment $ $ -------------- ------------ Rent $ 153.00 $ 153.00 -------------- ------------ Secured Debt Payments $ $ -------------- ------------ Utilities $ $ -------------- ------------ Telephone $ $ -------------- ------------ Repairs & Maintenance $ $ 2710.00 -------------- ------------ Misc. Office Expense $ $ -------------- ------------ Advertising $ $ -------------- ------------ Travel & Entertainment $ $ -------------- ------------ Professional Fees $ $ -------------- ------------ Depreciation $ $ -------------- ------------ Insurance: Liability $ $ -------------- ------------ Property $ $ -------------- ------------ Vehicle $ $ -------------- ------------ Worker's Compensation $ $ -------------- ------------ Other - ______________ $ $ -------------- ------------ Taxes: Payroll $ $ -------------- ------------ Sales $ $ -------------- ------------ Income $ $ -------------- ------------ Real Property $ $ -------------- ------------ Personal Property $ $ -------------- ------------ Total Operating Expenses $ 153.00 $ 2863.00 -------------- ------------ Total Profit (Loss) from Operations $ 208698.46 $ 211959.19 -------------- ------------ Other Income (Expense) Gain (Loss) on Sale of Assets $ $ -------------- ------------ Interest Expense $ 273.34 $ 282.03 -------------- ------------ Interest Income $ $ -------------- ------------ Dividend income $ $ -------------- ------------ Total $ 273.74 $ 282.03 -------------- ------------ Total Profit (Loss) for Month $ 208971.80 $ 212241.22 -------------- ------------
(Form No. 2) 3 INCOME STATEMENT SCHEDULE OF PROFESSIONAL FEES
CURRENT PREPAYMENT FEES BALANCE ACCRUED (IF ANY) ------- -------- Name of Professional: Attorneys: Accountants: Other:
(Form No. 2) 4 CASH FLOW STATEMENT (Month/Year) June 1997
Projected Reported For Current Month Month ----- ----- Receipts: Sales (Cash Only) $ 208851.46 $ ------------- ---------------- Collections of Accounts Receivable $ $ ------------- ---------------- Other Income $ 273.34 $ ------------- ---------------- Total Receipts $ 209124.80 $ ------------- ---------------- Disbursements: Purchases and Inventory $ $ ------------- ---------------- Salaries and Wages $ $ ------------- ---------------- Employee Benefits $ $ ------------- ---------------- Equipment Lease Payments $ $ ------------- ---------------- Rent $ 153.00 $ ------------- ---------------- Secured Debt Payments $ $ ------------- ---------------- Utilities $ $ ------------- ---------------- Telephone $ $ ------------- ---------------- Repairs & Maintenance $ $ ------------- ---------------- Misc. Office Expense $ $ ------------- ---------------- Advertising $ $ ------------- ---------------- Travel & Entertainment $ $ ------------- ---------------- Professional Fees $ $ ------------- ---------------- Depreciation $ $ ------------- ---------------- Insurance: Liability $ $ ------------- ---------------- Property $ $ ------------- ---------------- Vehicle $ $ ------------- ---------------- Worker's Compensation $ $ ------------- ---------------- Other _______________ $ $ ------------- ---------------- Taxes: Payroll $ $ ------------- ---------------- Sales $ $ ------------- ---------------- Income $ $ ------------- ---------------- Real Property $ $ ------------- ---------------- Personal Property $ $ ------------- ---------------- Total Disbursements $ 153.00 $ ------------- ---------------- Cash Flow $ 208971.80 $ ------------- ----------------
(Form No. 3) 5 RECAPITULATION June 1997 Balance from Prior Month General Account $ 51.58 -------------- Bank: CHASE Branch: NEW YORK Account #312731324365 San Jacinto Power Account $ 3217.84 -------------- Bank: Chase Branch: New York Account: #312750667865 San Jacinto Power Account $ .00 -------------- Bank: Chase Branch: New York Account: #312750667867 Balance to Carry Forward to Next Month: General Account $ 76.97 -------------- San Jacinto Account $ 11911.94 -------------- San Jacinto Account $ 200252.31 --------------
(Form No. 3) 6 PROJECTED CASH FLOW STATEMENT (Month/Year)
Next Following Month Month ----- ----- Projected Receipts: Sales (Cash Only) $ $ ------------- ------------ Collections of Accounts Receivable $ $ ------------- ------------ Other Income $ $ ------------- ------------ Total Projected Receipts: $ $ ------------- ------------ Projected Disbursements: Purchase and Inventory $ $ ------------- ------------ Salaries and Wages $ $ ------------- ------------ Employee Benefits $ $ ------------- ------------ Equipment Lease Payments $ $ ------------- ------------ Rent $ $ ------------- ------------ Secured Debt Payments $ $ ------------- ------------ Utilities $ $ ------------- ------------ Telephone $ $ ------------- ------------ Repairs & Maintenance $ $ ------------- ------------ Misc. Office Expense $ $ ------------- ------------ Advertising $ $ ------------- ------------ Travel & Entertainment $ $ ------------- ------------ Professional Fees $ $ ------------- ------------ Depreciation $ $ ------------- ------------ Insurance: Liability $ $ ------------- ------------ Property $ $ ------------- ------------ Vehicle $ $ ------------- ------------ Worker's Compensation $ $ ------------- ------------ Other _______________ $ $ ------------- ------------ Taxes: Payroll $ $ ------------- ------------ Sales $ $ ------------- ------------ Income $ $ ------------- ------------ Real Property $ $ ------------- ------------ Personal Property $ $ ------------- ------------ Total Projected Disbursements $ $ ------------- ------------ Projected Cash Flow $ $ ------------- ------------
(Form No. 4) 7 BALANCE SHEET (MONTH/YEAR) JUNE 1997 ASSETS Current Assets: Cash $ 212241.22 ------------- Accounts Receivable $ ------------- Allowance for Doubtful Accounts $ ------------- Accounts Receivable (Net) $ ------------- Inventory $ ------------- Prepaid Expenses $ ------------- Total Current Assets $ 212241.22 ------------- Property and Equipment (Fair Market Value) Real Property $ ------------- Machinery and Equipment $ ------------- Furniture and Fixtures $ ------------- Office Equipment $ ------------- Leasehold Improvements $ ------------- Vehicles $ ------------- Other ________________ $ ------------- $ ------------- Total Property and Equipment $ ------------- Total Assets: $ 212241.22 -------------
(Form No. 5) 8 LIABILITIES JUNE 1997 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------ Payroll Taxes $ ------------ Sales Taxes $ ------------ Income Taxes $ ------------ Real Property Taxes $ ------------ Personal Property Taxes $ ------------ Accounts Payable $ ------------ Postpetition Real Property Lease Arrearages $ ------------ Postpetition Equipment Lease Arrearages $ ------------ Accrued Professional Fees Other ___________________ $ ------------ ___________________ $ ------------ Total Postpetition Liabilities $ .00 ------------ Prepetition Liabilities Priority Debt $ ------------ Secured Debt $ ------------ Unsecured Debt $ ------------ Total Prepetition Liabilities $ .00 ------------ Shareholder's Equity Common Stock $ ------------ Paid-In Capital $ ------------ Retained Earnings $ 212241.22 ------------ Total Shareholder's Equity $ 212241.22 ------------ Total Liabilities & Equity $ 212241.22 ------------
(Form No. 5) 9 MONTHLY QUESTIONNAIRE I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable ---------------- ------------------- Less Than 31 Days Past Due ----------------- -------------------- 31 to 60 Days Past Due ----------------- -------------------- 61 to 90 Days Past Due ----------------- -------------------- 91 to 120 Days Past Due ----------------- -------------------- Over 120 Days Past Due ----------------- --------------------
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Post Petitions Payments Made Missed Payment Periodic Date of Creditor Name Period Payment Last Amount (mo/wk) Amount Payment # Amt. # Amt. - ------ ------- ------ ------- ------ ---- ----- -----
(FORM NO. 6) 10 MONTHLY QUESTIONNAIRE Page 2 III. TAX LIABILITY Gross Payroll Expense for Report Month: $ --------------- Gross Sales Subject to Sales Tax for Report Month $ ---------------
Postpetition Taxes Date Paid Amount Paid Due But Not Paid Accrued But Not Due Federal Payroll & Withholding ---------- ----------- ---------------- -------------------- State Payroll & Withholding ---------- ----------- ---------------- -------------------- State Sales & Use ---------- ----------- ---------------- --------------------
IV. INSURANCE COVERAGE
Policy Carrier/ Amount of Expiration Policy Paid Agent Name Coverage Date Through Date ---------- -------- ---- ------------ Worker's Compensation Liability ----------- ------------ ---------- ----------- Fire & Extended Coverage ----------- ------------ ---------- ----------- Property ----------- ------------ ---------- ----------- Theft ----------- ------------ ---------- ----------- Vehicle ----------- ------------ ---------- ----------- Life (Beneficiary): ----------- ------------ ---------- ----------- Other (specify): ----------- ------------ ---------- -----------
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order?_____________ If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? ___________________________ If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. (FORM NO. 6) 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Total Total Quarterly Quarter Disbursement Quarterly Amount Date Fees Due But Ending During Quarter Fee Paid Paid Not Paid - ------ -------------- --- ---- ---- --------
12 DATE SUBMITTED: 7/14/97 Page: 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE :97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY SOLOMON (480141) TAXPAYER I.D. :84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED :02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT
- ----------------------------------------------------------------------------------------------------------------------------------- TRANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 03/28/97 SMITH, KATZENSTEIN & FURLOW CERTIFICATES OF STOCK 40.00 40.00 OWNERSHIP 04/30/97 THE CHASE MANHATTAN BANK Interest Posting from THE CHASE 0.08 40.08 MANHATTAN BANK on 04/30/97; Current Interest Rate is 2.6000% 05/29/97 {1} BANK OF AMERICA CLOSE BANK ACCOUNTS 11.42 51.50 05/30/97 THE CHASE MANHATTAN BANK Interest Posting from THE CHASE 0.08 51.58 Current Interest Rate is 2.6000% 06/02/97 {1} UNITED PARCEL SERVICE ERRONEOUSLY 25.25 76.83 CHARGED/REFUNDED 06/30/97 THE CHASE MANHATTAN BANK Interest Posting from THE CHASE 0.14 76.97 MANHATTAN BANK on 06/30/97 Current Interest Rate is 2.6000% ------ ----- ------ ACCOUNT TOTALS: $76.97 0.00 $76.97 Less Bank Transfers: $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $76.97 0.00 CASE TOTALS: $76.97 0.00 Less Bank Transfers: $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $76.97 0.00
Gross Receipts: $76.97 Less Payments to Debtor: $ 0.00 ------ Net Estate: $76.97
13 DATE SUBMITTED 7/14/97 Page: 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE :97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY SOLOMON (480141) TAXPAYER I.D. :84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED :02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING :01/01/00 - 06/30/97 BOND AMOUNT : BLANKET BOND
TRANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 05/06/97 SOUTHERN CALIFORNIA EDISON PURCHASED 330,000 KWH OF 5,919.31 5,919.31 P.O. BOX 700 ENERGY 3-1-97 TO 4-1-97 ROSEMEAD, CA 91770 05/16/97 101 DESERTON ELECTRIC, INC. CONTRACT -2,500.00 3,419.31 P.O. BOX 1060 N PALM SPRINGS, CA 92258-1060 05/27/97 102 CONTRACTORS CRANE SERVICES, LLC REPAIRS - 210.00 3,209.31 P.O. BOX 1156 N PALM SPRINGS, CA 92258 05/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 8.53 3,217.84 MANHATTAN BANK on 06/30/97; Current Interest Rate is 2.6000% 06/03/97 SOUTHERN CALIFORNIA DIVISION ACCOUNTS RECEIVABLE 8,826.21 12,044.05 06/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 20.89 12,064.94 MANHATTAN BANK on 06/30/97; Current Interest Rate is 2.6000% 06/30/97 103 SECURITY PUBLIC STORAGE STORAGE FEES - 153.00 11,911.94 39-505 BERKEY DR PALM DESERT, CA 92211 ---------- ---------- ---------- ACCOUNT TOTALS: $14,774.94 $-2,863.00 $11,911.94 Less Bank Transfers: 0.00 0.00 ---------- ---------- NET RECEIPTS/DISBURSEMENTS: $14,774.94 $-2,863.00
14 DATE SUBMITTED 7/14/97 Page: 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE :97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY SOLOMON (480141) TAXPAYER I.D. :84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED :02/26/97 ACCOUNT : 312750667867 - MONEY MARKET ACCOUNT PERIOD ENDING :01/01/00 - 06/30/97
TRANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 06/11/97 {1} SAN GORGONI O FARMS, INC. SALE OF STOCK SAN 10,000.00 10,000.00 JACINTO POWER 06/11/97 {1} SAN GORGONI O FARMS, INC. SALE OF STOCK SAN 10,000.00 20,000.00 JACINTO POWER 06/13/97 {1} WIRE PURCHASE OF STOCK 180,000.00 200,000.00 06/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE MANHATTAN 252.31 200,252.31 BANK on 06/30/97; Current Interest Rate is 2.6000% ----------- --------- ----------- ACCOUNT TOTALS: 200,252.31 $ 0.00 $200,252.31 Less Bank Transfers: $ 0.00 0.00 ----------- ---------- NET RECEIPTS/DISBURSEMENTS: $200,252.31 $ 0.00 CASE TOTALS: $215,027.25 $-2,683.00 $212,164.25 Less Bank Transfers: $ 0.00 $ 0.00 ----------- ---------- NET RECEIPTS/DISBURSEMENTS: $215,027.25 $-2,683.00
Gross Receipts: $215,027.25 Less Payments to Debtor: $ 0.00 ----------- Net Estate: $215,027.25
15 DATE SUBMITTED: 07/14/97 Page: 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS
CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING : 01/01/00 - 06/30/97 BOND AMOUNT : BLANKET BOND TRANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 03/28/97 SMITH, KATZENSTEIN & FURLOW CERTIFICATES OF STOCK 40.00 40.00 OWNERSHIP 04/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.08 40.08 MANHATTAN BANK on 4/30/97; Current Interest Rate is 2.6000% 05/29/97 {1} BANK OF AMERICA CLOSE BANK ACCOUNTS 11.42 51.50 05/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.08 51.58 MANHATTAN BANK on 05/30/97; Current Interest Rate is 2.6000% 06/02/97 {1} UNITED PARCEL SERVICE ERRONEOUSLY 25.25 76.83 CHARGED/REFUNDED 06/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.14 76.97 MANHATTAN BANK on 6/30/97; Current Interest Rate is 2.6000% ------ ----- ------ ACCOUNT TOTALS: $76.97 $0.00 $76.97 Less Bank Transfers: $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $76.97 $0.00 CASE TOTALS: $76.97 $0.00 $76.97 Less Bank Transfers: $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $76.97 $0.00
Gross Receipts: 76.97 Less Payments to Debtor: $ 0.00 ------ Net Estates: 76.97
16 DATE SUBMITTED 7/14/97 Page: 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE :97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY SOLOMON (480141) TAXPAYER I.D. :84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED :02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING :01/01/00 - 06/30/97 BOND AMOUNT : BLANKET BOND
TRANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 05/06/97 SOUTHERN CALIFORNIA EDISON PURCHASED 330,000 KWH OF 5,919.31 5,919.31 P.O. BOX 700 ENERGY 3-1-97 TO 4-1-97 ROSEMEAD, CA 91770 05/16/97 101 DESERTON ELECTRIC, INC. CONTRACT -2,500.00 3,419.31 P.O. BOX 1060 N PALM SPRINGS, CA 92258-1060 05/27/97 102 CONTRACTORS CRANE SERVICES, LLC REPAIRS -210.00 3,209.31 P.O. BOX 1156 N PALM SPRINGS, CA 92258 05/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 8.53 3,217.84 MANHATTAN BANK on 06/30/97; Current Interest Rate is 2.6000% 06/03/97 SOUTHERN CALIFORNIA DIVISION ACCOUNTS RECEIVABLE 8,826.21 12,044.05 06/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 20.89 12,064.94 MANHATTAN BANK on 06/30/97; Current Interest Rate is 2.6000% 06/30/97 103 SECURITY PUBLIC STORAGE STORAGE FEES -153.00 11,911.94 39-505 BERKEY DR PALM DESERT, CA 92211 ---------- ---------- ---------- ACCOUNT TOTALS: $14,774.94 $-2,863.00 $11,911.94 Less Bank Transfers: 0.00 0.00 ---------- ---------- NET RECEIPTS/DISBURSEMENTS: $14,774.94 $-2,863.00
17 DATE SUBMITTED: 07/14/97 Page: 2 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312750667867 - MONEY MARKET ACCOUNT PERIOD ENDING : 01/01/00 - 06/30/97 BOND AMOUNT : BLANKET BOND
- ----------------------------------------------------------------------------------------------------------------------------------- TANS. {REF#}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 06/11/97 {1} SAN GORGONIO FARMS, INC. SALE OF STOCK SAN 10,000.00 10,000.00 JACINTO POWER 06/11/97 {1} SAN GORGONIO FARMS, INC. SALE OF STOCK SAN 10,000.00 20,000.00 JACINTO POWER 06/13/97 {1} WIRE PURCHASE OF STOCK 180,000.00 200,000.00 06/30/97 THE CHASE MANHATTAN BANK Interest posting from THE 252.31 200,252.31 CHASE MANHATTAN BANK on 6/30/97; Current Interest Rate is 2.6000% ----------- ---------- ----------- ACCOUNT TOTALS: $200,252.31 $ 0.00 $200,252.31 Less Bank Transfers: $ 0.00 $ 0.00 ----------- ---------- NET RECEIPTS/DISBURSEMENTS: $200,252.31 $0.00 CASE TOTALS: $215,027.25 $-2,863.00 $212,164.25 Less Bank Transfers: $ 0.00 $ 0.00 ----------- ---------- NET RECEIPTS/DISBURSEMENTS: $215,027.25 $-2,863.00
- -------------------------------------------------------------------------------- Gross Receipts: $215,027.25 Less Payments to Debtor: $ 0.00 ----------- Net Estates: $215,027.25 - --------------------------------------------------------------------------------
EX-99.D 36 EXHIBIT 99(D) 1 EXHIBIT 99d POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT JULY 1997 The Trustee is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel USA, Inc. have not cooperated with the Trustee by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Trustee to file a complete Monthly Operating Report. /s/ Barry L. Solomon ---------------------------- BARRY L. SOLOMON, TRUSTEE 2 INCOME STATEMENT (Accrual Basis) (Month/Year) 7/97
Current Year to Month Date ----- ---- Income $ 8,005.87 $222,828.06 ------------ ----------- Cost of Goods Sold Beginning Inventory $ $ ------------ ----------- Inventory Purchases $ $ ------------ ----------- Ending inventory $ $ ------------ ----------- Total Costs of Goods Sold $ $ ------------ ----------- Operating Expenses Salaries and Wages $ $ ------------ ----------- Employee Benefits $ $ ------------ ----------- Equipment Lease Payments $ $ ------------ ----------- Rent $ 78.00 $ 231.00 ------------ ----------- Secured Debt Payments $ $ ------------ ----------- Utilities $ $ ------------ ----------- Telephone $ $ ------------ ----------- Repairs & Maintenance $ $ 2,710.00 ------------ ----------- Miscellaneous Office Expense $ $ ------------ ----------- Advertising $ $ ------------ ----------- Travel & Entertainment $ $ ------------ ----------- Professional Fees $ 1,128.75 $ 1,128.75 ------------ ----------- U.S. Trustee Fees $ 250.00 $ 250.00 ------------ ----------- Insurance: Liability $ $ ------------ ----------- Property $ $ ------------ ----------- Vehicle $ $ ------------ ----------- Worker's Compensation $ $ ------------ ----------- Other _______________ $ $ ------------ ----------- Taxes: Payroll $ $ ------------ ----------- Sales $ $ ------------ ----------- Income $ $ ------------ ----------- Real Property $ $ ------------ ----------- Personal Property $ $ ------------ ----------- Total Operating Expenses $ 1,456.75 $ 4,319.75 ------------ ----------- Total Profit (Loss) from Operations $ 6,549.12 $218,508.31 ------------ ----------- Other Income (Expense) $ $ ------------ ----------- Gain (Loss) on Sale of Assets $ $ ------------ ----------- Interest Expense $ $ ------------ ----------- Interest Income $ 476.11 $ 758.14 ------------ ----------- Dividend Income $ $ ------------ ----------- Total $ 476.11 $ 758.14 ------------ ----------- Total Profit (Loss) for Month $ 7,025.23 $219,266.45 ------------ -----------
(Form No. 2) 3 INCOME STATEMENT SCHEDULE OF PROFESSIONAL FEES
Current Prepayment Fees Balance Accrued (If any) ------- -------- Name of Professional: Attorneys: Accountants: Other:
(Form No. 2) 4 CASH FLOW STATEMENT (Month/Year) 7/97
Projected Current for Current Month Month ----- ----- Receipts: Sales (Cash Only) $ 8,005.87 $ ----------- ------------- Collections of Accounts Receivable $ $ ----------- ------------- Other Income $ 476.11 $ ----------- ------------- Total Receipts $ 8,481.98 $ ----------- ------------- Disbursements: Purchases and Inventory $ $ ----------- ------------- Salaries and Wages $ $ ----------- ------------- Employee Benefits $ $ ----------- ------------- Equipment Lease Payments $ $ ----------- ------------- Rent $ 78.00 $ ----------- ------------- Secured Debt Payments $ $ ----------- ------------- Utilities $ $ ----------- ------------- Telephone $ $ ----------- ------------- Repairs & Maintenance $ $ ----------- ------------- Miscellaneous Office Expense $ $ ----------- ------------- Advertising $ $ ----------- ------------- Travel & Entertainment $ $ ----------- ------------- Professional Fees $ 1,128.75 $ ----------- ------------- U.S. Trustee Fees $ 250.00 $ ----------- ------------- Insurance: Liability $ $ ----------- ------------- Property $ $ ----------- ------------- Vehicle $ $ ----------- ------------- Worker's Compensation $ $ ----------- ------------- Other _________________ $ $ ----------- ------------- Taxes: Payroll $ $ ----------- ------------- Sales $ $ ----------- ------------- Income $ $ ----------- ------------- Real Property $ $ ----------- ------------- Personal Property $ $ ----------- ------------- Total Disbursements $ 1,456.75 $ ----------- ------------- Cash Flow $ 7,025.23 $ ----------- -------------
(Form No. 3) 5 RECAPITULATION 7/97
Balance from Prior Month Account $ 76.97 ----------- Bank: Chase Branch: New York Account #: 312731324365 Account: San Jacino $ 11,911.94 ----------- Bank: Chase Branch: New York Account #: 312750667865 Stock Sale Account: San Jacinto $200,252.31 ----------- Bank: Chase Branch: New York Account #: 312750667866 San Jacinto Checking 312750667866 Balance to Carry Forward to Next Month: $ .00 ----------- General Account: $ 77.13 ----------- Account: San Jacinto $ 17,912.09 ----------- Stock Sale Account: San Jacinto $200,694.98 ----------- San Jacinto Checking $ 582.25 -----------
(Form No. 3) 6 PROJECTED CASH FLOW STATEMENT (Month/Year) 7/97
Next Following Month Month ----- ----- Projected Receipts: Sales (Cash Only) $ $ ----------- ---------- Collections of Accounts Receivable $ $ ----------- ---------- Other Income $ $ ----------- ---------- Projected Receipts $ $ ----------- ---------- Projected Disbursements: Purchases and Inventory $ $ ----------- ---------- Salaries and Wages $ $ ----------- ---------- Employee Benefits $ $ ----------- ---------- Equipment Lease Payments $ $ ----------- ---------- Rent $ $ ----------- ---------- Secured Debt Payments $ $ ----------- ---------- Utilities $ $ ----------- ---------- Telephone $ $ ----------- ---------- Repairs & Maintenance $ $ ----------- ---------- Misc. Office Expense $ $ ----------- ---------- Advertising $ $ ----------- ---------- Travel & Entertainment $ $ ----------- ---------- Professional Fees $ $ ----------- ---------- Depreciation $ $ ----------- ---------- Insurance: Liability $ $ ----------- ---------- Property $ $ ----------- ---------- Vehicle $ $ ----------- ---------- Workers' Compensation $ $ ----------- ---------- Other $ $ ----------- ---------- Taxes: Payroll $ $ ----------- ---------- Sales $ $ ----------- ---------- Income $ $ ----------- ---------- Real Property $ $ ----------- ---------- Personal Property $ $ ----------- ---------- Total Projected Disbursements $ $ ----------- ---------- Projected Cash Flow $ $ ----------- ----------
(Form No. 4) 7 BALANCE SHEET (MONTH/YEAR) 7/97
ASSETS Current Assets: Cash $ 219266.45 ------------ Accounts Receivable $ ----------- Allowance for Doubtful Accounts $ Accounts Receivable (Net) ----------- $ ------------ Inventory $ ------------ Prepaid Expenses $ ------------ Total Current Assets $ 219266.45 ------------ Property and Equipment (Fair Market Value) Real Property $ ------------ Machinery & Equipment $ ------------ Furniture & Fixtures $ ------------ Office Equipment $ ------------ Leasehold Improvements $ ------------ Vehicles $ ------------ Other ____________________ $ ------------ __________________________ $ ------------ Total Property and Equipment $ ------------ Total Assets: $ 219266.45 ------------
(Form No. 5) 8
LIABILITIES 7/97 Postpetition Liabilities (Accrued and Unpaid) Salaries and Wages $ ------------ Payroll Taxes $ ------------ Sales Taxes $ ------------ Income Taxes $ ------------ Real Property Taxes $ ------------ Personal Property Taxes $ ------------ Accounts Payable $ ------------ Postpetition Real Property $ ------------ Lease Arrearages $ ------------ Postpetition Equipment $ ------------ Lease Arrearages $ ------------ Accrued Professional Fees $ ------------ Other ____________________ $ ------------ ____________________ $ ------------ Total Postpetition Liabilities $ .00 ------------ Repetition Liabilities Priority Debt $ ------------ Secured Debt $ ------------ Unsecured Debt $ ------------ Total Repetition Liabilities $ .00 ------------ Shareholders Equity Common Stock $ ------------ Paid-In Capital $ ------------ Retained Earnings $ 219266.45 ------------ Total Shareholder's Equity $ 219266.45 ------------ Total Liabilities & Equity $ 219266.45 ------------
(Form No. 5) 9 MONTHLY QUESTIONNAIRE I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation come due. Provide summary information below for both accounts payable and accounts receivable. Accounts Payable Account Receivable Less than 31 days past due ________________ __________________ 31 to 60 days past due ________________ __________________ 61 to 90 days past due ________________ __________________ 91 to 120 days past due ________________ __________________ Over 120 days past due ________________ __________________ II. Payments to Secured Creditors and Lessors Identify every secured creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Post Petitions Payments Payment Periodic Date of Made Missed Creditor Name Period Payment Last and Address (mo/week) Amount Payment # Amt. # Amt. - ----------- --------- ------ ------- - ---- - ----
(Form No. 6) 10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $ ---------- Gross Sales Subject to Sales Tax for Report Month: $ ----------
Postpetition Taxes Date Amount Due But Accrued But Paid Paid Not Paid Not Due ---- ---- -------- ------- Federal Payroll & Withholding ______ _______ _________ _________ State Payroll & Withholding ______ _______ _________ _________ State Sales & Use ______ _______ _________ _________
IV. Insurance Coverage
Policy Carrier/ Amount of Expiration Policy Paid Agent Name Coverage Date Through Date ---------- -------- ----- ------------ Worker's Compensation __________ ________ __________ ____________ Liability __________ ________ __________ ____________ Fire & Extended Coverage __________ ________ __________ ____________ Property __________ ________ __________ ____________ Theft __________ ________ __________ ____________ Vehicle __________ ________ __________ ____________ Life (Beneficiary: __________ ________ __________ ____________ _____________________ ) Other (specify): __________ ________ __________ ____________
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? ______________ If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? ______________ If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. (Form No. 6) 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Total Total Quarterly Quarter Disbursements Quarterly Amount Date Fees Due But Ending During Quarter Fee Paid Paid Not Paid - ------ -------------- --- ---- ---- --------
12 DATE SUBMITTED: 08/11/97 PAGE: 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORD CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING : 07/01/97 - 07/31/97 BOND AMOUNT : BLANKET BOND
TANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 101 KENTON H. BOWERS SERVICES VOIDED 0.00 76.97 78-365 HIGHWAY 111-#157 LAQUINTA, CA 92253 07/31/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 0.16 77.13 MANHATTAN BANK on 07/31/97; Current Interest Rate is 2.6000%
------ ----- ------ ACCOUNT TOTALS: $77.13 $0.00 $77.13 Less Bank Transfers: $ 0.00 $0.00 ------ ----- ------ NET RECEIPTS/DISBURSEMENTS: $77.13 $0.00 CASE TOTALS: $77.13 $0.00 $77.13 Less Bank Transfers $ 0.00 $0.00 ------ ----- NET RECEIPTS/DISBURSEMENTS: $77.13 $0.00
Gross Receipts: $77.13 Less Payments to Debtor: $ 0.00 ------ Net Estate: $77.13
13 DATE SUBMITTED: 08/11/97 PAGE: 1 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312750667865 - MONEY MARKET ACCOUNT PERIOD ENDING : 07/01/97 - 07/31/97 BOND AMOUNT : BLANKET BOND
TANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 07/07/97 104 SECURITY PUBLIC STORAGE BALANCE DUE -39.00 11,872.94 39-505 BERKEY DR PALM DESERT, CA 92211 07/09/97 SO CAL EDISON ACCOUNTS RECEIVABLE 8,005.87 19,878.81 07/21/97 To Account #312750667866 TRANSFER FUNDS TO CHECKING -500.00* 19,378.81 07/29/97 To Account #312750667866 TRANSFER FUNDS TO CHECKING -1,500.00* 17,878.81 07/31/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 33.28 17,912.09 MANHATTAN BANK on 07/31/97; Current Interest Rate is 2.6000%
---------- ---------- ---------- ACCOUNT TOTALS: $22,814.09 $-4,902.00 $17,912.09 Less Bank Transfers: $ 0.00 $-2,000.00 ---------- ---------- NET RECEIPTS/DISBURSEMENTS: $22,814.09 $-2,902.00
14 DATE SUBMITTED: 08/11/97 PAGE: 2 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312750667866 - CHECKING ACCOUNT PERIOD ENDING : 07/01/97 - 07/31/97 BOND AMOUNT : BLANKET BOND
TANS. {REF #}/ CHECKING ACCOUNT DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 07/21/97 From Account #312750667865 TRANSFER FUNDS TO CHECKING 500.00* 500.00 07/21/97 101 U S TRUSTEES PAYMENT CENTER 2ND QUARTER U S TRUSTEE -250.00 250.00 P O BOX 198246 FEES ATLANTA, GA 30384-8246 07/21/97 102 SECURITY PUBLIC STORAGE STORAGE FEES - 39.00 211.00 39-505 BERKEY DRI PALM DESERT, CA 92211 07/29/97 From Account #312750667865 TRANSFER FUNDS TO CHECKING 1,500.00* 1,711.00 07/29/97 103 KENTON H. BOWERS SERVICES -1,128.75 582.25 78-365 HIGHWAY 111 - #1587 LAQUINTA, CA 92253
--------- ---------- ------- ACCOUNT TOTALS: $2,000.00 $-1,417.75 $582.25 Less Bank Transfers: $2,000.00 $ 0.00 --------- ---------- NET RECEIPTS/DISBURSEMENTS: $0.00 $-1,417.75
15 DATE SUBMITTED: 08/11/97 PAGE: 3 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORD
CASE : 97-30265A G SAN JACINTO POWER CORP TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : CHEMICAL BANK DATE FILED : 02/26/97 ACCOUNT : 312750667866 - MONEY MARKET ACCOUNT PERIOD ENDING : 07/01/97 - 07/31/97 BOND AMOUNT : BLANKET BOND
TANS. {REF #}/ MONEY MARKET DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE 07/31/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE 442.67 200,694.98 MANHATTAN BANK on 07/31/97; Current Interest Rate is 2.6000%
----------- ---------- ----------- ACCOUNT TOTALS: $200,694.98 $ 0.00 $200,694.98 Less Bank Transfers: $ 0.00 $ 0.00 ----------- ---------- NET RECEIPTS/DISBURSEMENTS: $200,694.98 $ 0.00 CASE TOTALS: $225,509.07 $-6,319.75 $219.189.32 Less Bank Transfers: $ 2,000.00 $-2,000.00 ----------- ---------- NET Receipts/Disbursements: $223,509.07 $-4,319.75
Gross Receipts: $223.509.07 Less Payments to Debtor: $0.00 ----------- Net Estate: $223,509.07
EX-99.E 37 EXHIBIT 99(E) 1 EXHIBIT 99e POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT AUGUST 1997 The Trustee is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel USA, Inc. have not cooperated with the Trustee by providing the necessary Information. The Books and Records are missing. Therefore, it is impossible for the Trustee to file a complete Monthly Operating Report. /s/ Barry L. Solomon BARRY L. SOLOMON, TRUSTEE 2 INCOME STATEMENT (Accrual Basis) (Month/Year) 8/97
Current Year to Month Date --------------- --------------- Income $ $ 222828.06 --------------- --------------- Cost of Goods Sold Beginning Inventory $ $ --------------- ---------------- Inventory Purchases $ $ --------------- ---------------- Ending Inventory $ $ --------------- ---------------- Total Costs of Goods Sold $ $ --------------- ---------------- Operating Expenses Income from San Jacinto to new owner $ 24354.09 $ 24354.09 --------------- ---------------- Employee Benefits $ $ --------------- ---------------- Equipment Lease Payments $ $ --------------- ---------------- Rent $ 39.00 $ 270.00 --------------- ---------------- Secured Debt Payments $ $ --------------- ---------------- Utilities $ $ --------------- ---------------- Telephone $ $ --------------- ---------------- Repairs & Maintenance $ $ 2710.00 --------------- ---------------- Misc. Office Expense $ $ 32.00 --------------- ---------------- U. S. Trustee $ $ 250.00 --------------- ---------------- Travel & Entertainment $ $ --------------- ---------------- Professional Fees $ 12667.17 $ 13795.92 --------------- ---------------- Operating Fees $ 3500.00 $ 3500.00 --------------- ---------------- Insurance: Liability $ $ --------------- ---------------- Property $ $ --------------- ---------------- Vehicle $ $ --------------- ---------------- Worker's Compensation $ $ --------------- ---------------- Other Bond $ 1020.00 $ 1020.00 --------------- ---------------- Taxes: Payroll $ $ --------------- ---------------- Sales $ $ --------------- ---------------- Income $ $ --------------- ---------------- Real Property $ $ --------------- ---------------- Personal Property $ $ --------------- ---------------- Total Operating Expenses $ 41612.26 $ 45932.01 --------------- ---------------- Total Profit (Loss) from Operations $ (41612.26) $ $176896.05 --------------- ---------------- Other Income (Expense) $ $ --------------- ---------------- Gain (Loss) on Sale of Assets $ $ --------------- ---------------- Interest Expense $ $ --------------- ---------------- Interest Income $ 431.52 $ 1189.66 --------------- ---------------- Dividend Income $ $ --------------- ---------------- Total $ 431.52 $ 1189.66 --------------- ---------------- Total Profit (Loss) for Month $ (41180.74) $ $178085.71 --------------- ----------------
(Form No. 2) 3 CASH FLOW STATEMENT (Month/Year) 8/97
Projected Reported For current Month Month -------------- -------------- Receipts: Sales (Cash Only) $ $ -------------- -------------- Collections of Accounts Receivable $ $ -------------- -------------- Other Income $ 431.52 $ -------------- -------------- Total Receipts $ 431.52 $ -------------- -------------- Disbursements: Transfer income from San Jacinto to New Owner $ 24354.09 $ -------------- -------------- Salaries and Wages $ $ -------------- -------------- Employee Benefits $ $ -------------- -------------- Equipment Lease Payments $ $ -------------- -------------- Rent $ 39.00 $ -------------- -------------- Secured Debt Payments $ $ -------------- -------------- Utilities $ $ -------------- -------------- Telephone $ $ -------------- -------------- Repairs & Maintenance $ $ -------------- -------------- Misc. Office Expense $ 32.00 $ -------------- -------------- Advertising $ $ -------------- -------------- Travel & Entertainment $ $ -------------- -------------- Professional Fees $ 12667.17 $ -------------- -------------- Operating Fees $ 3500.00 $ -------------- -------------- Insurance: Liability $ $ -------------- -------------- Property $ $ -------------- -------------- Vehicle $ $ -------------- -------------- Worker's Compensation $ $ -------------- -------------- Other Bond $ 1020.00 $ -------------- -------------- Taxes: Payroll $ $ -------------- -------------- Sales $ $ -------------- -------------- Income $ $ -------------- -------------- Real Property $ $ -------------- -------------- Personal Property $ $ -------------- -------------- Total Disbursements $ 41612.26 $ -------------- -------------- Cash Flow $ (41180.74) $ -------------- --------------
(Form No. 3) 4 RECAPITULATION 8/97 Balance from Prior Month Money Market Account $ 77.13 --------------- Bank Chase Branch New York Account # 312731324365 Money Market San Jasinto Account $ 17912.09 --------------- Bank Chase Branch New York Account # 312750667865 M/M San Jacinto Account $ 200694.98 --------------- Bank Chase Branch New York Account # 312750667867 Checking San Jacinto 582.25 Balance to Carry Forward to Next Month: Money Market Account $ 158757.94 --------------- Money Market Account: San Jacinto $ 17951.69 --------------- Checking S.J. Account $ 582.25 --------------- Checking 312731324366 793.83 Money Market S.J. 312750667867 $ 0.00 ---------------
(Form No. 3) 5 BALANCE SHEET (MONTH/YR) 8/97 Assets Current Assets: Cash $ 178085.71 -------------- Accounts Receivable $ -------------- Allowance for Doubtful Accounts $ -------------- Accounts Receivable (Net) $ -------------- Inventory $ -------------- Prepaid Expenses $ -------------- Total Current Assets $ 178085.71 -------------- Property and Equipment (Fair Market Value) Real Property $ -------------- Machinery and Equipment $ -------------- Furniture and Fixtures $ -------------- Office Equipment $ -------------- Leasehold Improvements $ -------------- Vehicles $ -------------- Other $ -------------- Total Property and Equipment $ -------------- Total Assets: $ 178085.71 --------------
6 LIABILITIES 8/97 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ ------------- Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other ____________________ $ ____________________ ------------- $ ------------- Total Postpetition Liabilities $ ------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ------------- Secured Debt (Schedule A-2) $ ------------- Unsecured Debt (Schedule A-3) $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $ ------------- Retained Earnings $ 178085.71 ------------- Total Shareholder's Equity $ 178085.71 ------------- Total Liabilities & Equity $ -------------
7 DATE SUBMITTED: 10/03/97 FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS
CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING : 08/01/97 - 08/31/97 BOND AMOUNT : BLANKET BOND - -------------------------------------------------------------------------------------------------------------------------- TNS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - -------------------------------------------------------------------------------------------------------------------------- 08/01/97 102 U.S. POSTMASTER 100 STAMPS TRUSTEE'S FIRST & FINAL APPLICATION FOR COMPENSATION AND REIMBURSEMENT OF ACTUAL EXPENSES 08/07/97 {1,2} SAN JANCINTO POWER TRANSFER FUNDS FROM SALE TO POWERTEL ACCT. 08/07/97 103 INTERNATIONAL SURETIES, LTD. TRUSTEE BOND 210 BARONNE STREET SUITE 1700 NEW ORLEANS, LA 70112 08/08/97 104 DESERTRON ELECTRIC INCC per invoice of 7-17-97 P O BOX 1060 N PALM SPRINGS, CA 92258-1060 08/14/97 To Account #312731324366 REGULAR TRANSFER 0814/97 To Account #312731324366 REGULAR TRANSFER 08/14/97 To Account #312731324366 SEE LETTER OF 8-13-97 SAN JACINTO POWER INCOME FROM OPERATIONS SOUTHERN CALIF EDISON 08/29/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE MANHATTAN BANK on 08/29/97; Current Interest Rate is 2.6000% ACCOUNT TOTALS: Less Bank Transfers: NET RECEIPTS/DISBURSEMENTS: - -------------------------------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - -------------------------------------------------------------------------------- 08/01/97 -32.00 45.13 08/07/97 200,780.77 200,825.90 08/07/97 -1,020.00 199,805.90 08/08/97 -3,500.00 196,305.90 08/14/97 -500.00* 195,805.90 08/14/97 -13,000.00* 182,805.90 08/14/97 -24,354.09* 158,451.81 08/29/97 306.13 158.757.94 ------------------------------------- ------------------- $201,164.03 $-42,406.09 $158,757.94 $ 0.00 $-37,854.09 ------------------------------------- $201,164.03 $-4,552.00
{}Assets reference(s) * Denotes A Transfer Of Funds 8
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312731324366 - CHECKING ACCOUNT PERIOD ENDING : 08/01/97 - 08/31/97 BOND AMOUNT : BLANKET BOND - ------------------------------------------------------------ TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM - ------------------------------------------------------------ 08/14/97 From Account #312731324365 08/14/97 From Account #312731324365 08/14/97 From Account #312731324365 08/14/97 101 STEPHEN R. HARRIS, ESQ. BELDING & HARRIS 417 WEST PLUMB LANE RENO, NV 89509 08/14/97 102 STEPHAN R. HARRIS, ESQ. BELDING & HARRIS 08/14/97 103 SECURITY PUBLIC STORAGE 39-505 BERKEY DR PALM DESERT, CA 08/14/97 104 VENTURE PACIFIC, INC C/O CHRISTOPHER LEE, ESQ 351 CALIFORNIA ST #800 SAN FRANCISCO, CA 94104 - ------------------------------------------------------------------------------------------------------------------- MONEY MARKET DESCRIPTION OF TRANSACTION MEMO RECEIPTS DISBURSEMENTS BALANCE - ------------------------------------------------------------------------------------------------------------------- 08/14/97 REGULAR TRANSFER 500.00* 500.00 08/14/97 REGULAR TRANSFER 13,000.00* 13,000.00 08/14/97 SEE LETTER OF 8-13-97 SAN 24,354.09* 37,854.09 JACINTO POWER INCOME FROM OPERATIONS SOUTHER CALIF EDISON 08/14/97 ATTORNEY FEES -12,187.50 25,666.59 08/14/97 EXPENSES -479.67 25,186.92 08/14/97 SPACE E15-01 -39.00 25,147.92 08/14/97 SAN JANCINTO POWER INCOME -24,354.09 793.83 FROM OPERATIONS AND ELECTRIC USAGE OF SO. CALIF. EDISON --------------- ------------------- ------------------- ACCOUNT TOTALS: $37,854.09 $-37,060.26 $793.83 Less Bank Transfers: $37,854.09 $0.00 --------------- ------------------- NET RECEIPTS/DISBURSEMENTS: $ 0.00 $-37,060.26
{}Assets reference(s) * Denotes A Transfer Of Funds 9 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312731324366 - CHECKING ACCOUNT PERIOD ENDING : 08/01/97 - 08/31/97 BOND AMOUNT : BLANKET BOND - ----------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - ----------------------------------------------------------------------------------- CASE TOTALS: Less Bank Transfers: NET RECEIPTS/DISBURSEMENTS: Gross Receipts: Less Payments to Debtor: Net Estate: - ---------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - ---------------------------------------------------------- $239,018.12 $-79,466.35 $159,551.77 $ 37,854.09 $-37,854.09 ------------ ------------ $201,164.03 $-41,612.26 $201,164.03 $0.00 ----------- $201,164.03
{}Assets reference(s) * Denotes A Transfer Of Funds 10 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265A G SAN JACINTO POWER GROUP TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312750667865 - MONEY MARKET ACCOUNT PERIOD ENDING : 08/01/97 - 08/31/97 BOND AMOUNT : BLANKET BOND - ------------------------------------------------------------------------------------------------------------------------ TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO - ------------------------------------------------------------------------------------------------------------------------ 8/29/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE MANHATTAN BANK on 08/29/97; Current Interest Rate is 2.6000% ACCOUNT TOTALS: Less Bank Transfers: NET RECEIPTS/DISBURSEMENTS: - ------------------------------------------------ MONEY MARKET RECEIPTS DISBURSEMENTS BALANCE - ------------------------------------------------ 8/29/97 39.60 17,951.69 ------------ ------------ ---------- $ 22,853.69 $ -4,902.00 $17,951.69 $ 0.00 $ -2,000.00 ------------ ------------ $ 22,853.69 $ -2,902.00
{}Assets reference(s) * Denotes A Transfer Of Funds 11 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265A G POWERTEL USA, INC TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312750667866 - CHECKING ACCOUNT PERIOD ENDING : 08/01/97 - 08/31/97 BOND AMOUNT : BLANKET BOND - --------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO - --------------------------------------------------------------------------------------------------------------------- ACCOUNT TOTALS: Less Bank Transfers: NET RECEIPTS/DISBURSEMENTS: - ------------------------------------------------- MONEY MARKET RECEIPTS DISBURSEMENTS BALANCE - ------------------------------------------------- $ 2,000.00 $-1,417.75 $582.25 $ 2,000.00 $ 0.00 ---------- ----------- $ 0.00 $-1,417.75
{}Assets reference(s) * Denotes A Transfer Of Funds 12 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265A G POWERTEL USA, INC TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312750667867 - MONEY MARKET ACCOUNT PERIOD ENDING : 08/01/97 - 08/31/97 BOND AMOUNT : BLANKET BOND - ---------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION MEMO RECEIPTS - ---------------------------------------------------------------------------------------------------------- 08/07/97 POWERTEL TRANSFER FUNDS TO POWERTEL -200,780.77 08/07/97 CHASE BANK FINAL TRANSFER BEFORE 85.79 CLOSING ACCOUNT ----------- ACCOUNT TOTALS: $0.00 Less Bank Transfers: $0.00 ----- NET RECEIPTS/DISBURSEMENTS: $0.00 CASE TOTALS: $24,853.69 Less Bank Transfers: $ 2,000.00 NET RECEIPTS/DISBURSEMENTS: $22,853.69 Gross Receipts: $22,853.69 Less Payments to Debtor: $0.00 ---------- Net Estate: $22,853.69 - ----------------------------------- MONEY MARKET DISBURSEMENTS BALANCE - ----------------------------------- 08/07/97 -85.79 08/07/97 0.00 ----------- ---------- $0.00 $0.00 $0.00 ----- $0.00 $-6,319.75 $18,533.94 $-2,000.00 $-4,319.75
{}Assets reference(s) * Denotes A Transfer Of Funds EX-99.F 38 EXHIBIT 99(F) 1 EXHIBIT 99f POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT SEPTEMBER 1997 The Trustee is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Trustee by providing the necessary Information. The Books and Records are missing. Therefore, it is impossible for the Trustee to file a complete Monthly Operating Report. /s/ Barry L. Solomon BARRY L. SOLOMON, TRUSTEE 2 INCOME STATEMENT (Accrual Basis) (Month/Year) 9/97
Current Year to Month Date ------------------ ---------------- Income $ $ 222828.06 ------------------ ---------------- Cost of Goods Sold Beginning Inventory $ $ ------------------ ---------------- Inventory Purchases $ $ ------------------ ---------------- Ending Inventory $ $ ------------------ ---------------- Total Costs of Goods Sold $ $ ------------------ ---------------- Operating Expenses Income from San Jacinto to new owner $ $ 24354.09 ------------------ ---------------- Employee Benefits $ $ ------------------ ---------------- Equipment Lease Payments $ $ ------------------ ---------------- Rent $ 39.00 $ 309.00 ------------------ ---------------- Secured Debt Payments $ $ ------------------ ---------------- Utilities $ $ ------------------ ---------------- Telephone $ $ ------------------ ---------------- Repairs & Maintenance $ $ 2710.00 ------------------ ---------------- Misc. Office Expense $ 15.90 $ 47.90 ------------------ ---------------- U.S. Trustee $ $ 250.00 ------------------ ---------------- Travel & Entertainment $ $ ------------------ ---------------- Professional Fees $ 14165.98 $ 27961.90 ------------------ ---------------- Operation Fees $ $ 3500.00 ------------------ ---------------- Insurance: Liability $ $ ------------------ ---------------- Property $ $ ------------------ ---------------- Vehicle $ $ ------------------ ---------------- Worker's Compensation $ $ ------------------ ---------------- Other - Bond $ $ 1020.00 ------------------ ---------------- Taxes: Payroll $ $ ------------------ ---------------- Sales $ $ ------------------ ---------------- Income $ $ ------------------ ---------------- Real Property $ $ ------------------ ---------------- Personal Property $ $ ------------------ ---------------- Total Operating Expenses $ 14220.88 $ 60152.89 ------------------ ---------------- Total Profit (Loss) from Operations $ (14220.88) $ 162675.17 ------------------ ---------------- Other Income (Expense) $ $ ------------------ ---------------- Gain (Loss) on Sale of Assets $ $ ------------------ ---------------- Interest Expense $ $ ------------------ ---------------- Interest Income $ 260.38 $ 1450.04 ------------------ ---------------- Dividend Income $ $ ------------------ ---------------- Total $ 260.38 $ 1450.04 ------------------ ---------------- Total Profit (Loss) for Month $ (13960.50) $ 164125.21 ------------------ ----------------
(FORM NO. 2) 3 CASH FLOW STATEMENT (Month/Year) 9/97
Projected Current For current Month Month -------------- -------------- Receipts: Sales (Cash Only) $ $ -------------- -------------- Collections of Accounts Receivable $ $ -------------- -------------- Other Income $ 260.38 $ -------------- -------------- Total Receipts $ $ -------------- -------------- Disbursements: Purchases and Inventory $ $ -------------- -------------- Salaries and Wages $ $ -------------- -------------- Employee Benefits $ $ -------------- -------------- Equipment Lease Payments $ $ -------------- -------------- Rent $ 39.00 $ -------------- -------------- Secured Debt Payments $ $ -------------- -------------- Utilities $ $ -------------- -------------- Telephone $ $ -------------- -------------- Repairs & Maintenance $ $ -------------- -------------- Misc. Office Expense $ 15.90 $ -------------- -------------- Advertising $ $ -------------- -------------- Travel & Entertainment $ $ -------------- -------------- Professional Fees $ 14165.98 $ -------------- -------------- Court Costs $ $ -------------- -------------- Insurance: Liability $ $ -------------- -------------- Property $ $ -------------- -------------- Vehicle $ $ -------------- -------------- Worker's Compensation $ $ -------------- -------------- Other $ $ -------------- -------------- Taxes: Payroll $ $ -------------- -------------- Sales $ $ -------------- -------------- Income $ $ -------------- -------------- Real Property $ $ -------------- -------------- Personal Property $ $ -------------- -------------- Total Disbursements $ 14220.88 $ -------------- -------------- Cash Flow $ (13960.50) $ -------------- --------------
(FORM NO. 3) 4 RECAPITULATION Balance from Prior Month Powertel M/M Account $ 158757.94 ----------- Bank Chase Branch New York Account #: 312731324365 San Jacinto M/M Account $ 17951.69 ----------- Bank Chase Branch New York Account # 312750667865 SJP Checking Account $ 582.25 ----------- Bank Chase Branch New York Account # 312750667866 Powertel Checking Account $ 793.83 ----------- Bank Branch Account # 312731324366 Powertel M/M Account $ 2976.51 ----------- Bank Branch Account # 312731324365 Balance to Carry Forward to Next Month General Account $ ------------ Payroll Account: $ ------------ Tax Account: $ ------------
(FORM NO. 3) 5 BALANCE SHEET (Month/Year) 9/97 Assets Current Assets: Cash $ 164125.21 ----------- Accounts Receivable $ ----------- Allowance for Doubtful Accounts $ ----------- Accounts Receivable (Net) $ ----------- Inventory $ ----------- Prepaid Expenses $ ----------- Total Current Assets $ 164125.21 ----------- Property and Equipment (Fair Market Value) Real Property $ ----------- Machinery and Equipment $ ----------- Furniture and Fixtures $ ----------- Office Equipment $ ----------- Leasehold Improvements $ ----------- Vehicles $ ----------- Other $ ----------- Total Property and Equipment $ ----------- Total Assets: $ 164125.21 -----------
(FORM NO. 5) 6 LIABILITIES 9/97 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ --------------------- Payroll Taxes $ --------------------- Sales Taxes $ --------------------- Income Taxes $ --------------------- Real Property Taxes $ --------------------- Personal Property Taxes $ --------------------- Accounts Payable $ --------------------- Postpetition Real Property Lease Arrearages $ --------------------- Postpetition Equipment Lease Arrearages $ --------------------- Accrued Professional Fees Other $ --------------------- $ --------------------- Total Postpetition Liabilities $ --------------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ --------------------- Secured Debt (Schedule A-2) $ --------------------- Unsecured Debt (Schedule A-3) $ --------------------- Total Prepetition Liabilities $ --------------------- Shareholder's Equity Common Stock $ --------------------- Paid-In Capital $ --------------------- Retained Earnings $ 164125.21 --------------------- Total Shareholder's Equity $ --------------------- Total Liabilities & Equity $ 164125.21 ---------------------
(FORM NO. 5) 7 Page: 1 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312731324365 - MONEY MARKET ACCOUNT PERIOD ENDING : 09/01/97 - 09/30/97 BOND AMOUNT : BLANKET BOND - ------------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - ------------------------------------------------------------------------------------------------------------------------- 09/16/97 To Account #312731324366 TRANSFER FUNDS TO CHECKING 09/22/97 To Account #312731324366 TRANSFER FUNDS TO CHECKING 09/30/97 THE CHASE MANHATTAN BANK Interest posting from THE CHASE MANHATTAN BANK on 09/30/97; Current Interest Rate is 2.6000% - ----------------------------------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - ----------------------------------------------------------------------------------- - 14,166.00* 144,591.94 -141,848.94* 2,743.00 233.51 2,976.51 ----------- ------------ ---------- ACCOUNT TOTALS: $201,397.54 $-198,421.03 $ 2,976.51 LESS BANK TRANSFERS: 0.00 -193,869.03 NET RECEIPTS/DISBURSEMENTS: $201,397.54 $ -4,552.00
{} Asset reference(s) * Denotes A Transfer Of Funds 8 Page: 2 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312731324366- CHECKING ACCOUNT PERIOD ENDING : 09/01/97 - 09/30/97 BOND AMOUNT : BLANKET BOND - ------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - ------------------------------------------------------------------------------------------------------------------- 09/02/97 105 GOLDEN STATE OVERNIGHT OVERNIGHT MAIL 2120 ADAMS AVE SAN LEANDRO, CA 94577 09/03/97 106 GOLDEN STATE OVERNIGHT OVERNIGHT MAIL 2120 ADAMS AVENUE SAN LEANDRO, CA 94577 09/10/97 107 SECURITY PUBLIC STORAGE STORAGE FEES 39-505 BERKEY DR PALM DESERT, CA 92211 09/16/97 From Account #312731324365 TRANSFER FUNDS TO CHECKING 09/16/97 108 BARRY L SOLOMON FEES 09/16/97 109 BARRY L SOLOMON TRUSTEE EXPENSES 09/22/97 From Account #312731324365 TRANSFER FUNDS TO CHECKING 09/22/97 110 POWERTEL USA, INC. TURNOVER FUNDS TO POWERTEL 321 W. LAKE LANSING RD. ASHER COURT, SUITE 100 E. LANSING, MI 48823 - --------------------------------------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - --------------------------------------------------------------------------------------- -6.95 786.88 -8.95 777.93 -39.00 738.93 14,166.00* 14,904.93 -13,905.63 999.30 -260.35 738.95 141,848.94* 142,587.89 -142,587.89 0.00 ----------- ------------ ----------- ACCOUNT TOTALS: $193,869.03 $-193,869.03 $0.00 LESS BANK TRANSFERS: 193,869.03 0.00 ----------- ------------ NET RECEIPTS/DISBURSEMENTS: $0.00 $-193,869.03
{} Asset reference(s) * Denotes A Transfer Of Funds 9 Page: 3 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 84-0897771, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312731324366 - CHECKING ACCOUNT PERIOD ENDING : 09/01/97 - 09/30/97 BOND AMOUNT : BLANKET BOND - ------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - ------------------------------------------------------------------------------------------------------------------- Gross Receipts: $201,397.54 Less Payments to Debtor: $0.00 ----------- Net Estate: $201,397.54 - --------------------------------------------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - --------------------------------------------------------------------------------------------- CASE TOTALS: $395,266.57 $ -392,290.06 $2,976.51 LESS BANK TRANSFERS: 193,869.03 -193,869.03 NET RECEIPTS/DISBURSEMENTS: $201,397.54 $ -198,421.03
{} Asset reference(s) * Denotes A Transfer Of Funds 10 Page: 1 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312750667865 - MONEY MARKET ACCOUNT PERIOD ENDING : 09/01/97 - 09/30/97 BOND AMOUNT : BLANKET BOND - ------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - ------------------------------------------------------------------------------------------------------------------- 09/22/97 Interest Posting Current Interest Rate is 2.6000% 09/22/97 To Account #312750667866 CLOSE OUT ACCOUNT - -------------------------------------------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - -------------------------------------------------------------------------------------------- 26.87 17,978.56 -17,978.56* 0.00 ------------- ----------- --------- ACCOUNT TOTALS: $22,880.56 -22,880.56 $0.00 LESS BANK TRANSFERS: 0.00 -19,978.56 ------------- ----------- NET RECEIPTS/DISBURSEMENTS: $22,880.56 $ -2,902.00
{} Asset reference(s) * Denotes A Transfer Of Funds 11 Page: 2 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312750667866 - CHECKING ACCOUNT PERIOD ENDING : 09/01/97 - 09/30/97 BOND AMOUNT : BLANKET BOND - ------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - ------------------------------------------------------------------------------------------------------------------- 09/22/97 From Account #312750667865 CLOSE OUT ACCOUNT 09/22/97 104 POWERTEL USA, INC. CLOSE ACCOUNTS 321 W. LAKE LANSING RD ASHER COURT, SUITE 100 E. LANSING , MI 48823 - -------------------------------------------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - -------------------------------------------------------------------------------------------- 17,978.56* 18,560.81 -18,560.81 0.00 ---------- ------------ ----------- ACCOUNT TOTALS: $19,978.56 $ -19,978.56 $0.00 LESS BANK TRANSFERS: 19,978.56 0.00 ---------- ------------ NET RECEIPTS/DISBURSEMENTS: $0.00 $ -19,978.56
{} Asset reference(s) * Denotes A Transfer Of Funds 12 Page: 3 DATE SUBMITTED: 10/03/97
FORM 2 ESTATE CASH RECEIPTS AND DISBURSEMENTS RECORDS CASE : 97-30265 G POWERTEL USA, INC. TRUSTEE : BARRY L. SOLOMON (480141) TAXPAYER I.D. : 88-0309701, DEPOSITORY : THE CHASE MANHATTAN BANK DATE FILED : 02/26/97 ACCOUNT : 312750667867 - MONEY MARKET ACCOUNT PERIOD ENDING : 09/01/97 - 09/30/97 BOND AMOUNT : BLANKET BOND - ----------------------------------------------------------------------------------------------------------------------- TANS. {REF #}/ DATE CHECK # PAID TO/RECEIVED FROM DESCRIPTION OF TRANSACTION - ----------------------------------------------------------------------------------------------------------------------- Gross Receipts: $ 22,880.56 Less Payments to Debtor: $.000 ------------ Net Estate: $ 22,880.56 - -------------------------------------------------------------------------------------------- MONEY MARKET MEMO RECEIPTS DISBURSEMENTS BALANCE - -------------------------------------------------------------------------------------------- ACCOUNT TOTALS: $0.00 0.00 $0.00 LESS BANK TRANSFERS: 0.00 0.00 ----------- ------------ NET RECEIPTS/DISBURSEMENTS: $0.00 $ 0.00 CASE TOTALS: $42,859.12 $-42,859.12 $0.00 LESS BANK TRANSFERS: 19,978.56 -19,978.56 ----------- ------------ NET RECEIPTS/DISBURSEMENTS: $22,880.56 $-22,880.56
{} Asset reference(s) * Denotes A Transfer Of Funds EX-99.G 39 EXHIBIT 99(G) 1 EXHIBIT 99g POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT OCTOBER 1997 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla ---------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2
BALANCE SHEET OCTOBER 1997 Assets Current Assets: Cash $ 139,099.37 ------------- Accounts Receivable $ ------------- Allowance for Doubtful Accounts $ ------------- Accounts Receivable (Net) $ ------------- Inventory $ ------------- Prepaid Expenses $ ------------- Total Current Assets $ 139,099.37 ------------- Property and Equipment (Fair Market Value) Real Property $ ------------- Machinery and Equipment $5,700,000.00 ------------- Furniture and Fixtures $ ------------- Office Equipment $ ------------- Leasehold Improvements $ ------------- Vehicles $ ------------- Other $ ------------- Total Property and Equipment $5,700,000.00 ------------- Total Assets: $5,839,099.37 -------------
3
LIABILITIES OCTOBER 1997 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ 2,767.70 ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other LOAN SHAREHOLDER $ ------------- DIEGOTEL, INC STOCK-BOOK VALUE $ ------------- Total Postpetition Liabilities $ 2,767.70 ------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ------------- Secured Debt (Schedule A-2) $ ------------- Unsecured Debt (Schedule A-3) $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $5,700,000.00 ------------- Retained Earnings $ 136,331.67 ------------- Total Shareholder's Equity $ 5,836,331.67 -------------- Total Liabilities & Equity $ 5,839,099.37 --------------
4 RECAPITULATION OCTOBER 1997
Balance from Prior Month PowerTel M/M General Account $ 2,976.51 ----------- Bank Chase Branch New York Account #312731324365 PowerTel General Account $161,148.70 ----------- Bank First of America Bank, N.A. Michigan Branch Okemos, Michigan 48864 Account # 62-3007936-7 Tax Account $ ----------- Bank Branch Account # Balance to Carry Forward to Next Month General Account #312731324365 $ 2,983.09 ----------- General Account #62-3007936-7 $136,116.28 ----------- Tax Account $ -----------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 (PTELBANK.107) OCTOBER 31, 1997
FIRST OF DATE DESCRIPTION AMERICA CHASE TOTALS - ---- ----------- ------- ----- ------ 09.22.97 BEGINNING BALANCE .00 2976.51 2976.51 ------------ ------------ -------------- 09.22.97 FUNDS TO OPEN ACCOUNT 100.00 100.00 09.29.97 TRANSFER FROM CHASE #312731324366 142587.89 142587.89 09.29.97 TRANSFER FROM CHASE #312750667866 18560.81 18560.81 09.29.97 INTEREST EARNED .17 .17 10.31.97 INTEREST EARNED 6.58 6.58 ------------ ------------ -------------- 10.31.97 TOTAL DEPOSITS 161248.87 6.58 161255.45 ------------ ------------ -------------- 10.31.97 CHECKS WRITTEN PER ATTACHED LISTING 25132.29 .00 25132.29 ------------ ------------ -------------- 10.31.97 BALANCE 136116.58 2983.09 139,099.67 ============ ============ =============
6 RUN DATE: 11/10/97 POWERTEL USA, INC. PAGE: I SYS DATE: 10/31/97 TRANSACTION JOURNAL TIME: 12:04 PM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 10/31/97 1020-000-00 25,132.01 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - -------- ---- ------- ---------- ------------ 0001001 10/02/97 CASEY & BOOG 6600-000-00 95.00 0001002 10/02/97 KNUTSONS TRAVEL PORT 7900-000-00 734.09 0001003 10/02/97 MCBEE SYSTEM 6500-000-00 206.01 0001004 10/02/97 HERTH PRINTING 6500-000-00 210.00 0001005 10/02/97 AMERITECH 7800-000-00 66.22 0001006 10/02/97 BANK OF AMERICA 6500-000-00 80.00 0001007 10/03/97 RICHARD A. CASCARILLA 8100-000-00 3,200.00 0001008 10/03/97 VOID 1020-000-00 .00 0001009 10/03/97 H. LAWRENCE HERTH 8100-000-00 991.20 0001010 10/03/97 VOID 1020-000-00 .00 0001011 10/03/97 UPS 6500-000-00 23.75 0001012 10/06/97 BYE GONE TRAVEL 7900-000-00 323.00 0001013 10/06/97 POSTMASTER E. LANSING 6500-000-00 160.00 0001014 10/07/97 KNUTSON TRAVEL PORT 7900-000-00 479.00 0001015 10/07/97 MBNA 6500-000-00 677.07 0001016 10/18/97 PEPPERMILL HOTEL 7900-000-00 575.73 0001016 10/18/97 PEPPERMILL HOTEL 6300-000-00 229.56 --------- CHECK 0001016 TOTALS 805.29 0001017 10/18/97 CASEY & BOOG 6600-000-00 95.00 0001018 10/26/97 UPS 6500-000-00 37.25 0001019 10/28/97 AMERITECH 7800-000-00 77.71 0001020 10/28/97 VOID 1020-000-00 .00 0001021 10/29/97 WALL STREET JOURNAL 5670-000-00 16,872.00 --------- JOURNAL CD-0001 TOTALS: 25,132.59 --------- SOURCE CD TOTALS: 25,132.59 --------- REPORT TOTALS: 25,132.59 =========
7 CASH FLOW STATEMENT OCTOBER, 1997
Projected Current For current Month Month ----- ----- Receipts: Sales (Cash Only) $ $ -------------- ------------- Collections of Accounts Receivable $ $ -------------- ------------- Other Income $ 6.75 $ -------------- ------------- Total Receipts $ 6.75 $ -------------- ------------- Disbursements: Purchases and Inventory $ $ -------------- ------------- Salaries and Wages $ 4,091.20 $ -------------- ------------- Employee Benefits $ $ -------------- ------------- Equipment Lease Payments $ $ -------------- ------------- Rent $ $ -------------- ------------- Secured Debt Payments $ $ -------------- ------------- Outside Services $ 190.00 $ -------------- ------------- Telephone $ 143.43 $ -------------- ------------- Repairs & Maintenance $ $ -------------- ------------- Miscellaneous Office Expense $ 1,394.08 $ -------------- ------------- Advertising $ $ -------------- ------------- Travel & Entertainment $ 2,341.38 $ -------------- ------------- Professional Fees $ $ -------------- ------------- Court Costs $ 16,872.00 $ -------------- ------------- Insurance: Liability $ $ -------------- ------------- Property $ $ -------------- ------------- Vehicle $ $ -------------- ------------- Worker's Compensation $ $ -------------- ------------- Other $ $ -------------- ------------- Taxes: Payroll $ $ -------------- ------------- Sales $ $ -------------- ------------- Income $ $ -------------- ------------- Real Property $ $ -------------- ------------- Personal Property $ $ Total Disbursements $ 25,032.59 $ -------------- ------------- Cash Flow $ (25,025.84) $ -------------- -------------
8 INCOME STATEMENT (Accrual Basis) OCTOBER 1997
Current Year to Month Date ----- ---- Income $ $ --------------- ------------- Cost of Goods Sold Beginning Inventory $ $ --------------- ------------- Inventory Purchases $ $ --------------- ------------- Ending Inventory $ $ --------------- ------------- Total Costs of Goods Sold $ $ --------------- ------------- Operating Expenses Salaries and Wages $ 6,200.00 $ 6,200.00 --------------- ------------- Employee Benefits $ $ --------------- ------------- Equipment Lease Payments $ $ --------------- ------------- Rent $ $ --------------- ------------- Secured Debt Payments $ $ --------------- ------------- Outside Services $ 190.00 $ 190.00 --------------- ------------- Telephone $ 143.93 $ 143.93 --------------- ------------- Repairs & Maintenance $ $ --------------- ------------- Miscellaneous Office Expense $ 1,394.08 $ 1,394.08 --------------- ------------- Advertising $ $ --------------- ------------- Travel & Entertainment $ 2,341.38 $ 2,341.38 --------------- ------------- Professional Fees $ $ --------------- ------------- Court Costs $ 16,872.00 $ 16,872.00 --------------- ------------- Insurance: Liability $ $ --------------- ------------- Property $ $ --------------- ------------- Vehicle $ $ --------------- ------------- Worker's Compensation $ $ --------------- ------------- Other $ $ --------------- ------------- Taxes: Payroll $ 658.90 $ 658.90 --------------- ------------- Sales $ $ --------------- ------------- Income $ $ --------------- ------------- Real Property $ $ --------------- ------------- Personal Property $ $ --------------- ------------- Total Operating Expenses $ 27,800.29 $ 27,800.29 --------------- ------------- Total Profit (Loss) from Operations $ (27,800.29) $ (27,800.29) --------------- ------------- Other Income (Expense) $ $ --------------- ------------- Gain (Loss) on Sale of Assets $ $ --------------- ------------- Interest Expense $ $ --------------- ------------- Interest Income $ 6.75 $ 6.75 --------------- ------------- Dividend income $ $ --------------- ------------- Herth Printing Income (loss) $ $ --------------- ------------- Total $ 6.75 $ 6.75 --------------- ------------- Total Profit (Loss) for Month $ (27,793.54) $ (27,793.54) --------------- -------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable: Accounts Payable Accounts Receivable ---------------- ------------------- Less Than 31 Days Past Due -0- -0- 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Creditor Name and Address Payment Periodic Date of Post Petition Payments Period Payment Last Made Missed ---- ------ (mo/wk) Amount Payment No. Amount No. Amount --- ------ --- ------
10 MONTHLY QUESTIONNAIRE Page 2
III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month $0.00 ---------
Date Paid Amount Paid Due But Not Paid Accrued But Not Due --------- ----------- ---------------- ------------------- Federal Payroll & Withholding 1,882.70 State Payroll & Withholding 885.00 State Sales & Use
IV. Insurance Coverage
Carrier/Agent Name Amount of Policy Policy Paid Coverage Expiration Through Date Date Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Quarter Total Quarterly Fee Amount Paid Date Paid Total Quarterly Ending Disbursement Fees Due But During Quarter Not Paid
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and,- after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 20th day of October, 1997. By: /s/ Richard Cascarilla ----------------------------- EX-99.H 40 EXHIBIT 99(H) 1 EXHIBIT 99h POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT NOVEMBER 1997 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla --------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET NOVEMBER 30, 1997
Assets Current Assets: Cash $ 130,209.12 -------------- Accounts Receivable $ -------------- Allowance for Doubtful Accounts $ -------------- Accounts Receivable (Net) $ -------------- Inventory $ -------------- Prepaid Expenses $ -------------- Total Current Assets $ 130,209.12 -------------- Property and Equipment (Fair Market Value) Real Property $ -------------- Machinery and Equipment $ 5,700,000.00 -------------- Furniture and Fixtures $ -------------- Office Equipment $ -------------- Leasehold Improvements $ -------------- Vehicles $ -------------- Other $ -------------- Total Property and Equipment $ 5,700,000.00 -------------- Total Assets: $ 5,830,209.12 --------------
3 LIABILITIES NOVEMBER 30, 1997 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ --------------- Payroll Taxes $ 3,602.30 --------------- Sales Taxes $ --------------- Income Taxes $ --------------- Real Property Taxes $ --------------- Personal Property Taxes $ --------------- Accounts Payable $ --------------- Postpetition Real Property Lease Arrearages $ Postpetition Equipment Lease Arrearages $ --------------- Accrued Professional Fees Other ________________ $ --------------- ________________ $ --------------- Total Postpetition Liabilities $ 3,602.30 --------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ --------------- Secured Debt (Schedule A-2) $ --------------- Unsecured Debt (Schedule A-3) $ --------------- Total Prepepetition Liabilities $ --------------- Shareholder's Equity Common Stock $ --------------- Paid-In Capital $ 5,700,000.00 --------------- Retained Earnings $ 126,606.82 --------------- Total Shareholder's Equity $ 5,826,606.82 --------------- Total Liabilities & Equity $ 5,830,209.12 ---------------
4 RECAPITULATION NOVEMBER 30, 1997 Balance from Prior Month $ ----------- PowerTel M/M General Account $ 2,983.09 ----------- Bank Chase Branch New York Account #312731324365 PowerTel General Account $136,116.28 ----------- Bank First of America Bank, N.A. Michigan Branch Okemos, Michigan Account #62-3007936-7 Tax Account $ ----------- Bank Branch Account # Balance to Carry Forward to Next Month General Account #312731324365 $ 2,989.47 ----------- General Account #62-3007936-7 $127,219.65 ----------- Tax Account $ -----------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 (PTELBANK.117) NOVEMBER 30, 1997
FIRST OF DATE DESCRIPTION AMERICA CHASE TOTALS - ---- ----------- ------- ----- ------ 11.01.97 BEGINNING BALANCE 136116.28 2983.09 139099.37 11.30.97 DIVIDEND EARNED 6.38 6.38 .00 .00 .00 .00 --------- ------- --------- 11.30.97 TOTAL DEPOSITS 0.00 6.38 6.38 --------- ------- --------- - -- 11.30.97 CHECKS WRITTEN PER ATTACHED LISTING 8896.63 .00 8896.63 --------- ------- --------- 11.30.97 BALANCE 127219.65 2989.47 130209.12 ========== ======= =========
6 RUN DATE: 12/04/97 POWERTEL USA, INC. PAGE: 1 SYS DATE: 11/30/97 TRANSACTION JOURNAL TIME: 03:31 PM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 11/30/97 1020-000-00 8,896.63 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - ---------- -------- ------------------------ ------------------ -------------------------- 0001023 11/01/97 CASEY & BOOG 6600-000-00 95.00 0001024 11/01/97 H LAWRENCE HERTH 8100-000-00 991.20 0001025 11/01/97 RICHARD CASCARILLA 8100-000-00 3,200.00 0001026 11/11/97 SUNSHINE REPORTING 6600-000-00 1,044.93 0001027 11/12/97 FIRST OF AMERICA 2110-001-00 474.30 0001027 11/12/97 FIRST OF AMERICA 2110-002-00 884.50 0001027 11/12/97 FIRST OF AMERICA 2110-005-00 474.30 ---------- CHECK 0001027 TOTALS: 1,833.10 0001028 11/12/97 CASEY & BOOG 6500-000-00 13.70 0001029 11/16/97 DOUBLETREE GUEST SUITES 7900-000-00 424.24 0001030 11/17/97 CORESTATES 7900-000-00 161.66 0001031 11/17/97 MIKE KASOUFF 7900-000-00 151.48 0001032 11/18/97 FISHER TRANSFER & STORAG 6000-000-00 959.32 0001033 11/19/97 UPS 6000-000-00 22.00 --------- JOURNAL CD-0001 TOTALS: 8,896.63 --------- SOURCE CD TOTALS: 8,896.63 --------- REPORT TOTALS: 8,896.63 =========
7 CASH FLOW STATEMENT NOVEMBER, 1997
Projected Current For current Month Month ----- ----- Receipts: Sales (Cash Only) $ $ -------------- ------------- Collections of Accounts Receivable $ $ -------------- ------------- Other Income $ 6.38 $ -------------- ------------- Total Receipts $ 6.38 $ -------------- ------------- Disbursements: Purchases and Inventory $ $ -------------- ------------- Salaries and Wages $ 4,191.20 $ -------------- ------------- Employee Benefits $ $ -------------- ------------- Shipping & Freight $ 981.32 $ -------------- ------------- Rent $ $ -------------- ------------- Secured Debt Payments $ $ -------------- ------------- Outside Services $ 1,139.93 $ -------------- ------------- Telephone $ $ -------------- ------------- Repairs & Maintenance $ $ -------------- ------------- Miscellaneous Office Expense $ 13.70 $ -------------- ------------- Advertising $ $ -------------- ------------- Travel & Entertainment $ 737.38 $ -------------- ------------- Professional Fees $ $ -------------- ------------- Court Costs $ $ -------------- ------------- Insurance: Liability $ $ -------------- ------------- Property $ $ -------------- ------------- Vehicle $ $ -------------- ------------- Worker's Compensation $ $ -------------- ------------- Other $ $ -------------- ------------- Taxes: Payroll $ 1,833.10 $ -------------- ------------- Sales $ $ -------------- ------------- Income $ $ -------------- ------------- Real Property $ $ -------------- ------------- Personal Property $ $ -------------- ------------- Total Disbursements $ 8,896.63 $ -------------- ------------- Cash Flow $ (8,890.25) $ -------------- -------------
8 INCOME STATEMENT (Accrual Basis) October 1 to November 30, 1997
Current Year to Month Date ----- ---- Income $ $ -------------- ----------- Cost of Goods Sold Beginning Inventory $ $ -------------- ----------- Inventory Purchases $ $ -------------- ----------- Ending Inventory $ $ -------------- ----------- Total Costs of Goods Sold $ $ -------------- ----------- Operating Expenses Salaries and Wages $ 6,200.00 $ 12,400.00 -------------- ----------- Employee Benefits $ $ -------------- ----------- Shipping $ 981.32 $ 981.32 -------------- ----------- Rent $ $ -------------- ----------- Secured Debt Payments $ $ -------------- ----------- Outside Services $ 1,139.93 $ 1,139.93 -------------- ----------- Telephone $ $ 143.93 -------------- ----------- Repairs & Maintenance $ $ -------------- ----------- Miscellaneous Office Expense $ 13.70 $ 1,407.78 -------------- ----------- Advertising $ $ -------------- ----------- Travel & Entertainment $ 737.38 $ 3,078.76 -------------- ----------- Professional Fees $ $ -------------- ----------- Court Costs $ $ 16,872.00 -------------- ----------- Insurance: Liability $ $ -------------- ----------- Property $ $ -------------- ----------- Vehicle $ $ -------------- ----------- Worker's Compensation $ $ -------------- ----------- Other - Bond $ $ -------------- ----------- Taxes: Payroll $ 658.90 $ 1,317.80 -------------- ----------- Sales $ $ -------------- ----------- Income $ $ -------------- ----------- Real Property $ $ -------------- ----------- Personal Property $ $ -------------- ----------- Total Operating Expenses $ 9,731.23 $ 37,531.52 -------------- ----------- Total Profit (Loss) from Operations $ (9,731.23) $(37,531.52) -------------- ----------- Other Income (Expense) $ $ -------------- ----------- Gain (Loss) on Sale of Assets $ $ -------------- ----------- Interest Expense $ $ -------------- ----------- Interest Income $ $ -------------- ----------- Dividend Income $ 6.38 $ 13.13 -------------- ----------- Total $ 6.38 $ 13.13 -------------- ----------- Total Profit (Loss) for Month $ (9,724.85) $(37,518.39) -------------- -----------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable: Accounts Payable Accounts Receivable Less Than 31 Days Past Due -0- -0- 31 to 60 Days Past Due ________________ ___________________ 61 to 90 Days Past Due ________________ ___________________ 91 to 120 Days Past Due ________________ ___________________ Over 120 Days Past Due ________________ ___________________ II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Creditor Name and Address Payment Period Periodic Date of Post Petition Payments (mo/wk) Payment Last Made Missed Amount Payment No. Amount No. Amount
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month $0.00 -----
Date Paid Amount Paid Due But Not Paid Accrued But Not Due --------- ----------- ---------------- ------------------- Federal Payroll & Withholding 1,932.30 State Payroll & Withholding 1,670.00 State Sales & Use
IV. INSURANCE COVERAGE
Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date ---- -------- ---- ------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: 11 MONTHLY QUESTIONNAIRE Page 3 VII. U.S. Trustee Fees
Quarter Ending Total Quarterly Fee Amount Paid Date Paid Total Quarterly Disbursement Fees Due But During Quarter Not Paid
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 19th day of November, 1997. By: /s/ Richard Cascarilla ---------------------- EX-99.I 41 EXHIBIT 99(I) 1 Exhibit 99i POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT DECEMBER 1997 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla --------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET DECEMBER 31, 1997 Assets Current Assets: Cash $ 91,964.13 -------------- Accounts Receivable $ -------------- Allowance for Doubtful Accounts $ -------------- Accounts Receivable (Net) $ -------------- Inventory $ -------------- Prepaid Expenses $ -------------- Total Current Assets $ 91,964.13 ------------- Property and Equipment (Fair Market Value) Real Property $ -------------- Machinery and Equipment $ 5,700,000.00 -------------- Furniture and Fixtures $ -------------- Office Equipment $ -------------- Leasehold Improvements $ -------------- Vehicles $ -------------- Other $ -------------- Total Property and Equipment $ 5,700,000.00 -------------- Investments: Total Assets: $ 5,791,964.13 --------------
3 LIABILITIES DECEMBER 31, 1997 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ -------------- Payroll Taxes $ 6,514.90 -------------- Sales Taxes $ -------------- Income Taxes $ -------------- Real Property Taxes $ -------------- Personal Property Taxes $ -------------- Accounts Payable $ -------------- Postpetition Real Property Lease Arrearages $ -------------- Postpetition Equipment Lease Arrearages $ -------------- Accrued Professional Fees Other $ -------------- $ -------------- Total Postpetition Liabilities $ 6,514.90 -------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ -------------- Secured Debt (Schedule A-2) $ -------------- Unsecured Debt (Schedule A-3) $ -------------- Total Prepetition Liabilities $ -------------- Shareholder's Equity Common Stock $ -------------- Paid-In Capital $ 5,700,000.00 -------------- Retained Earnings $ 85,449.23 -------------- Total Shareholder's Equity $ 5,785,449.23 -------------- Total Liabilities & Equity $ 5,791,964.13 --------------
4 RECAPITULATION December 31, 1997 Balance from Prior Month General Account $ 2,989.47 ------------ Bank CHASE Branch NEW YORK Account #312731324365 General Account $ 127,219.65 ------------ Bank FIRST OF AMERICA BANK, N.A., MICHIGAN Branch OKEMOS, MICHIGAN Account # 62-3007936-7 Tax Account $ ------------ Bank Branch Account # Balance to Carry Forward to Next Month General Account #312731324365 $ -0- ------------ General Account #62-3007936-7 $ 91,964.13 ------------ Tax Account $ ------------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUYIWIES #97-30265 (PTELBANK.127) DECEMBER 31, 1997
FIRST OF DATE DESCRIPTION AMERICA CHASE TOTALS - ---- ----------- ------- ----- ------ 12.01.97 BEGINNING BALANCE 127219.65 2989.47 130209.12 --------- ------- --------- 12.31.97 DIVIDEND EARNED 3.21 3.21 12.31.97 TRANSFER FROM CHASE 267.43 267.43 12.31.97 BOND REFUND 920.00 920.00 --------- ------- --------- 12.31.97 TOTAL DEPOSITS 1187.43 3.21 1190.64 --------- ------- --------- 12.09.97 WALTERS & HAVERFIELD 15000.00 15000.00 12.09.97 SMITH, KATZNSTEN & FURLOW 10000.00 10000.00 12.09.97 S. HARRIS 2725.25 2725.25 12.09.97 TRANSFER TO FIRST OF AMERICA 267.43 267.43 12.09.97 WIRE TRANSFER FEES 30.00 30.00 12.31.97 CHECKS WRITTEN PER ATTACHED 11412.95 .00 11412.95 --------- ------- --------- 12.31.97 TOTAL DISBURSEMENTS 36442.95 2992.68 39435.63 --------- ------- --------- 12.31.97 BALANCE 91964.13 .00 91964.13 ========= ======= =========
6 RUN DATE: 1/13/98 POWERTEL USA, INC. PAGE: I SYS DATE: 12/31/97 TRANSACTION JOURNAL TIME: 10:32 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 12/31/97 1020-000-00 11,412.95 DISBURSEMENTS CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - -------- ---- ------- ---------- ------------ 0001034 12/01/97 RICHARD CASCARILLA 8100-000-00 3,200.00 0001035 12/01/97 CASEY & BOOG 6600-000-00 95.00 0001036 12/01/97 AMERITECH 7800-000-00 87.50 0001037 12/10/97 FIRST OF AMERICA 2110-001-00 474.30 0001037 12/10/97 FIRST OF AMERICA 2110-002-00 884.50 0001037 12/10/97 FIRST OF AMERICA 2110-005-00 474.30 -------- CHECK 0001037 TOTALS 1,833.10 0001038 12/15/97 CASEY & BOOG 6600-000-00 95.00 0001039 12/19/97 ROBERT J. LINDBERG CPA 5050-000-00 661.50 0001040 12/25/97 KNUTSON TRAVEL PORT 7900-000-00 436.00 0001041 12/26/97 UPS 6000-000-00 11.00 0001042 12/26/97 RICHARD CASCARILLA 8100-000-00 3,200.00 0001043 12/26/97 H. LAWRENCE HEATH 8100-000-00 991.20 0001044 12/30/97 MIKE KASOUFF 7900-000-00 411.00 0001045 12/30/97 CORPORATE STOCK TRANSFER 7900-000-00 279.77 0001046 12/31/97 CORPORATE SERVICES 7800-000-00 93.27 0001047 12/31/97 AMERITECH 7800-000-00 18.61 -------- JOURNAL CD-0001 TOTALS: 11,412.95 --------- SOURCE CD TOTALS: 11,412.95 --------- REPORT TOTALS: 11,412.95 =========
7 INCOME STATEMENT (Accrual Basis) October 1, to December 31, 1997
Current Year to Month Date ----- ---- Income $ $ ------------ ------------ Cost of Goods Sold Beginning Inventory $ $ ------------ ------------ Inventory Purchases $ $ ------------ ------------ Ending Inventory $ $ ------------ ------------ Total Costs of Goods Sold $ $ ------------ ------------ Operating Expenses Salaries and Wages $ 11,200.00 $ 23,600.00 ------------ ------------ Employee Benefits $ $ ------------ ------------ Shipping & Freight $ 11.00 $ 992.32 ------------ ------------ Rent $ $ ------------ ------------ Secured Debt Payments $ $ ------------ ------------ Outside Services $ 190.00 $ 1,519.93 ------------ ------------ Telephone $ 199.38 $ 343.31 ------------ ------------ Repairs & Maintenance $ $ ------------ ------------ Miscellaneous Office Expense $ 30.00 $ 1,437.78 ------------ ------------ Advertising $ $ ------------ ------------ Travel & Entertainment $ 1,126.77 $ 4,205.53 ------------ ------------ Professional Fees $ 28,386.75 $ 28,386.75 ------------ ------------ Court Costs $ $ 16,872.00 ------------ ------------ Insurance: Liability $ $ ------------ ------------ Property $ $ ------------ ------------ Vehicle $ $ ------------ ------------ Worker's Compensation $ $ ------------ ------------ Other - Bond $ (920.00) $ (920.00) ------------ ------------ Taxes: Payroll $ 936.90 $ 2,254.70 ------------ ------------ Sales $ $ ------------ ------------ Income $ $ ------------ ------------ Real Property $ $ ------------ ------------ Personal Property $ $ ------------ ------------ Total Operating Expenses $ 41,160.80 $ 78,692.32 ------------ ------------ Total Profit (Loss) from Operations $ (41,160.80) $(78,692.32) ------------ ------------ Other Income (Expense) $ $ ------------ ------------ Gain (Loss) on Sale of Assets $ $ ------------ ------------ Interest Expense $ $ ------------ ------------ Interest Income $ $ ------------ ------------ Dividend income $ 3.21 $ 16.34 ------------ ------------ Total $ 3.21 $ 16.34 ------------ ------------ Total Profit (Loss) for Month $ (41,157.59) $ (78,675.98) ------------ ------------
8 CASH FLOW STATEMENT December 31, 1997
Projected Current For current Month Month Receipts: Sales (Cash Only) $ $ ------------ ------------ Collections of Accounts Receivable $ $ ------------ ------------ Other Income - Bond Refund & Dividend $ 923.21 $ ------------ ------------ Total Receipts $ 923.21 $ ------------ ------------ Disbursements: Purchases and Inventory $ $ ------------ ------------ Salaries and Wages $ 7,391.20 $ ------------ ------------ Employee Benefits $ $ ------------ ------------ Shipping & Freight $ 11.00 $ ------------ ------------ Rent $ $ ------------ ------------ Secured Debt Payments $ $ ------------ ------------ Outside Services $ 190.00 $ ------------ ------------ Telephone $ 199.38 $ ------------ ------------ Repairs & Maintenance $ $ ------------ ------------ Miscellaneous Office Expense $ 30.00 $ ------------ ------------ Advertising $ $ ------------ ------------ Travel & Entertainment $ 1,126.77 $ ------------ ------------ Professional Fees $ 28,386.75 $ ------------ ------------ Court Costs $ $ ------------ ------------ Insurance: Liability $ $ ------------ ------------ Property $ $ ------------ ------------ Vehicle $ $ ------------ ------------ Worker's Compensation $ $ ------------ ------------ Other $ $ ------------ ------------ Taxes: Payroll $ 1,833.10 $ ------------ ------------ Sales $ $ ------------ ------------ Income $ $ ------------ ------------ Real Property $ $ ------------ ------------ Personal Property $ $ ------------ ------------ Total Disbursements $ 39,168.20 $ ------------ ------------ Cash Flow $ (38,244.99) $ ------------ ------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable - ---------------------------------------------------------------------------------------------- Less Than 31 Days Past Due ---------------- ------------------- 31 to 60 Days Past Due ---------------- ------------------- 61 to 90 Days Past Due ---------------- ------------------- 91 to 120 Days Past Due ---------------- ------------------- Over 120 Days Past Due ---------------- -------------------
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Creditor Name and Address Payment Periodic Date of Post Petition Payments Period Payment Last Made Missed (mo/wk) Amount Payment -------------------------------------- No. Amount No. Amount - -------------------------------------------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $11,200.00 ---------- Gross Sales Subject to Sales Tax for Report Month $ 0.00 ----------
Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ---------------------------------------------------------------------------------------------------------------------------- Federal Payroll & Withholding 3,450.40 State Payroll & Withholding 3,064.50 State Sales & Use
IV. Insurance Coverage
Amount of Policy Expiration Policy Paid Carrier/Agent Name Coverage Date Through Date - ----------------------------------------------------------------------------------------------------------------------------------- Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Quarter Ending Total Quarterly Fee Amount Paid Date Paid Total Quarterly Disbursement Fees Due But During Quarter Not Paid - -------------------------------------------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 18th day of December, 1997. By: /s/ Richard Cascarilla ---------------------- EX-99.J 42 EXHIBIT 99(J) 1 EXHIBIT 99j POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT JANUARY 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla -------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET JANUARY 31, 1998 Assets Current Assets: Cash $ 78,051.73 ------------------ Accounts Receivable $ ------------------ Allowance for Doubtful Accounts $ ------------------ Accounts Receivable (Net) $ ------------------ Inventory $ ------------------ Prepaid Expenses $ ------------------ Total Current Assets $ 78,051.73 ------------------ Property and Equipment (Fair Market Value) Real Property $ ------------------ Machinery and Equipment $ 5,700, 000. 00 ------------------ Furniture and Fixtures $ ------------------ Office Equipment $ ------------------ Leasehold Improvements $ ------------------ Vehicles $ ------------------ Other $ ------------------ Total Property and Equipment $ 5,700,000.00 ------------------ Total Assets: $ 5,778,051.73 ------------------
3 LIABILITIES JANUARY 31, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ----------------------- Payroll Taxes $ 2,166.30 ----------------------- Sales Taxes $ ----------------------- Income Taxes $ ----------------------- Real Property Taxes $ ----------------------- Personal Property Taxes $ ----------------------- Accounts Payable $ ----------------------- Postpetition Real Property Lease Arrearages $ ----------------------- Postpetition Equipment Lease Arrearages $ ----------------------- Accrued Professional Fees Other $ ----------------------- $ ----------------------- Total Postpetition Liabilities $ 2,166.30 ----------------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ----------------------- Secured Debt (Schedule A-2) $ ----------------------- Unsecured Debt (Schedule A-3) $ ----------------------- Total Prepetition Liabilities $ ----------------------- Shareholder's Equity Common Stock $ ----------------------- Paid-In Capital $ 5,700,000.00 ----------------------- Retained Earnings $ 75,885.43 ----------------------- Total Shareholder's Equity $ 5,775.885.43 ----------------------- Total Liabilities & Equity $ 5,778,051.73 -----------------------
4 RECAPITULATION JANUARY 31, 1998 Balance from Prior Month General Account $ 91,964.13 ----------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-3007936-7 General Account $ ----------- Bank Branch Account # Tax Account $ ----------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 78,051.73 ----------- General Account $ ----------- Tax Account $ -----------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 (PTELBANK.198) JANUARY 31, 1998
FIRST OF DATE DESCRIPTION AMERICA - ------------------ --------------------------- ------------ 01.01.98 BEGINNING BALANCE $ 91,964.13 ------------ 01.31.98 TOTAL DEPOSITS $ 0.00 ------------ 01.31.98 CHECKS WRITTEN PER ATTACHED $ 13,912.40 ------------ 01.31.98 TOTAL DISBURSEMENTS $ 13,912.40 ------------ 01.31.98 BALANCE $ 78,051.73 ============
6 RUN DATE: 2/13/98 POWERTEL USA, INC. PAGE: I SYS DATE: 01/31/98 TRANSACTION JOURNAL TIME: 09:15 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 01/31/98 1020-000-00 13,912.40 DISBURSEMENTS CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - ---------- -------- ------------------------ ----------- ------------------- 0001040 01/04/98 U.P.S. 6000-000-00 11.00 0001049 01/04/98 CASEY & BOOG 6600-000-00 95.00 0001050 01/05/98 POSTMASTER EL 6500-000-00 80.00 0001051 01/12/98 MICHALE KASOUFF 7900-000-00 704.00 0001052 01/13/98 FLEET CREDIT CORP. 7900-000-00 398.86 0001053 01/14/98 STATE OF MICHIGAN 2110-003-00 2,700.00 0001054 01/14/98 FIRST OF AMERICA 2110-001-00 856.80 0001054 01/14/98 FIRST OF AMERICA 2110-002-00 1,652.00 0001054 01/14/98 FIRST OF AMERCIA 2110-005-00 856.80 --------- CHECK 0001054 TOTALS: 3,365.60 --------- 0001055 01/16/98 CASEY & BOOG 6600-000-00 95.00 0001056 01/19/98 BARB FELDKAMP 6600-000-00 100.00 0001057 01/25/98 U.P.S. 6000-000-00 22.00 0001058 01/25/98 CORPORATE SERVICES 7800-000-00 54.04 0001059 01/25/98 KNUTSON TRAVEL PORT 7900-000-00 1,056.00 0001060 01/25/98 RICHARD A. CASCARILLA 8100-000-00 3,723.00 0001061 01/27/98 ROBERT LINDBERG CPA 5050-000-00 170.40 0001062 01/28/98 INTERNAL REVENUE SERVICE 2110-005-00 84.80 0001063 01/28/98 MESC 2110-005-00 256.50 0001064 01/28/98 NEV. EMP. SEC. DIV. 2110-005-00 5.00 0001065 01/28/98 H. LAWRENCE HERTH 8100-000-00 991.20 --------- JOURNAL CD-0001 TOTALS: 13,912.40 --------- SOURCE CD TOTALS: 13,912.40 --------- REPORT TOTALS: 13,912.40 =========
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO OCTOBER 31, 1998
Current Year to Month Date ----------------- ------------------ Income $ $ ----------------- ------------------ Cost of Goods Sold Beginning Inventory $ $ ----------------- ------------------ Inventory Purchases $ $ ----------------- ------------------ Ending Inventory $ $ ----------------- ------------------ Total Costs of Goods Sold $ $ ----------------- ------------------ Operating Expenses Salaries and Wages $ 6,200.00 $ 29,800.00 ----------------- ------------------ Employee Benefits $ $ ----------------- ------------------ Freight & Shipping $ 113.00 $ 1,105.32 ----------------- ------------------ Rent $ $ ----------------- ------------------ Secured Debt Payments $ $ ----------------- ------------------ Outside Services $ 290.00 $ 1,809.93 ----------------- ------------------ Telephone $ 54.04 $ 397.35 ----------------- ------------------ Repairs & Maintenance $ $ ----------------- ------------------ Miscellaneous Office Expense $ $ 1,437.78 ----------------- ------------------ Advertising $ $ ----------------- ------------------ Travel & Entertainment $ 2,158.86 $ 6,364.39 ----------------- ------------------ Professional Fees $ 170.40 $ 28,557.15 ----------------- ------------------ Court Costs $ $ 16,872.00 ----------------- ------------------ Insurance: Liability $ $ ----------------- ------------------ Property $ $ ----------------- ------------------ Vehicle $ $ ----------------- ------------------ Worker's Compensation $ $ ----------------- ------------------ Other - Bond $ $ (920.00) ----------------- ------------------ Taxes: Payroll $ 577.50 $ 2,832.20 ----------------- ------------------ Sales $ $ ----------------- ------------------ Income $ $ ----------------- ------------------ Real Property $ $ ----------------- ------------------ Personal Property $ $ ----------------- ------------------ Total Operating Expenses $ 9,563.80 $ 88,256.12 ----------------- ------------------ Total Profit (Loss) from Operations $ (9,563.80) $ (88,256.12) ----------------- ------------------ Other Income (Expense) $ $ ----------------- ------------------ Gain (Loss) on Sale of Assets $ $ ----------------- ------------------ Interest Expense $ $ ----------------- ------------------ Interest Income $ $ ----------------- ------------------ Dividend Income $ $ 16.34 ----------------- ------------------ Total $ $ (16.34) ----------------- ------------------ Total Profit (Loss) for Month $ (9,563.80) $ (88,239.78) ----------------- ------------------
8 CASH FLOW STATEMENT JANUARY 31, 1998
Projected Current For current Month Month ----------------- ----------------- Receipts: Sales (Cash Only) $ $ ----------------- ----------------- Collections of Accounts Receivable $ $ ----------------- ----------------- Other Income $ $ ----------------- ----------------- Total Receipts $ $ ----------------- ----------------- Disbursements: Purchases and Inventory $ $ ----------------- ----------------- Salaries and Wages $ 4,714.20 $ ----------------- ----------------- Employee Benefits $ $ ----------------- ----------------- Shipping & Freight $ 113.00 $ ----------------- ----------------- Rent $ $ ----------------- ----------------- Secured Debt Payments $ $ ----------------- ----------------- Outside Services $ 290.00 $ ----------------- ----------------- Telephone $ 54.04 $ ----------------- ----------------- Repairs & Maintenance $ $ ----------------- ----------------- Miscellaneous Office Expense $ $ ----------------- ----------------- Advertising $ $ ----------------- ----------------- Travel & Entertainment $ 2,158.86 $ ----------------- ----------------- Professional Fees $ 170.40 $ ----------------- - Court Costs $ $ ----------------- ----------------- Insurance: Liability $ $ ----------------- ----------------- Property $ $ ----------------- ----------------- Vehicle $ $ ----------------- ----------------- Worker's Compensation $ $ ----------------- ----------------- Other $ $ ----------------- ----------------- Taxes: Payroll $ 6,411.90 $ ----------------- ----------------- Sales $ $ ----------------- ----------------- Income $ $ ----------------- ----------------- Real Property $ $ ----------------- ----------------- Personal Property $ $ ----------------- ----------------- Total Disbursements $ 13,912.40 $ ----------------- ----------------- Cash Flow $ (13,912.40) $ ----------------- -----------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable ---------------- ------------------- Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Creditor Name and Address Payment Periodic Date of Post Petition Payments Period Payment Last Made Missed (mo/wk) Amount Payment ------------------------------------ No. Amount No. Amount
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $ ---------- Gross Sales Subject to Sales Tax for Report Month $ ----------
Date Paid Amount Paid Due But Not Paid Accrued But Not Due --------- ----------- ---------------- ------------------- Federal Payroll & Withholding 1,808.20 State Payroll & Withholding 358.10 State Sales & Use
IV. Insurance Coverage
Policy Amount of Expiration Policy Paid Carrier/Agent Name Coverage Date Through Date ------------------ --------- ----------- ------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 IV. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Quarter Total Quarterly Fee Amount Paid Date Paid Total Quarterly Ending Disbursement Fees Due But During Quarter Not Paid - ---------------------------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and,- after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 19th day of January, 1998. By: /s/ Richard Cascarilla ---------------------- EX-99.K 43 EXHIBIT 99(K) 1 Exhibit 99K POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT FEBRUARY 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla --------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET FEBRUARY 28, 1998 Assets Current Assets: Cash $ 69,824.13 --------------- Accounts Receivable $ --------------- Allowance for Doubtful Accounts $ --------------- Accounts Receivable (Net) $ --------------- Inventory $ --------------- Prepaid Expenses $ --------------- Total Current Assets $ 69,824.13 --------------- Property and Equipment (Fair Market Value) Real Property $ --------------- Machinery and Equipment $5,700, 000. 00 --------------- Furniture and Fixtures $ --------------- Office Equipment $ --------------- Leasehold Improvements $ --------------- Vehicles $ --------------- Other $ --------------- Total Property and Equipment $ 5,700,000.00 --------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 384,218.00 --------------- Total Assets: $ 6,154,042.13 ---------------
3 LIABILITIES FEBRUARY 28, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ 2,536.50 ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ ------------- Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other $ ------------- $ ------------- Total Postpetition Liabilities $ 2,536.50 ------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ------------- Secured Debt (Schedule A-2) $ ------------- Unsecured Debt (Schedule A-3) $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $6,131,096.00 ------------- Retained Earnings $ 20,409.63 ------------- Total Shareholder's Equity $6,151,505.63 ------------- Total Liabilities & Equity $6,154,042.13 -------------
4 RECAPITULATION FEBRUARY 28, 1998
Balance from Prior Month General Account $ 78,051.73 ----------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-3007936-7 General Account $ ----------- Bank Branch Account # Tax Account $ ----------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ General Account $ 69,824.13 ----------- Tax Account $ -----------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUYIWIES #97-30265 (PRELBANK.298) FEBRUARY, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- ---------------------------- ---------- 02.01.98 BEGINNING BALANCE $78,051.73 ---------- 02.28.98 TOTAL DEPOSITS $ 0.00 ---------- 02.28.98 CHECKS WRITTEN PER ATTACHED $ 8,227.60 ---------- 02.28.98 TOTAL DISBURSEMENTS $ 8,227.60 02.28.98 BALANCE $69,854.13 ==========
6 RUN DATE: 03/11/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 02/28/98 TRANSACTION JOURNAL TIME: 04:59 PM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 02/28/98 1020-000-00 8,227.60 DISBURSEMENTS CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - -------- -------- --------------- ----------- --------------- 0001067 02/02/98 CASEY & BOOG PLC 6600-000-00 95.00 0001068 02/02/98 CASEY & BOOG 6500-000-00 5.90 0001069 02/03/98 AMERITECH 7800-000-00 18.90 0001070 02/06/98 U.P.S. 6000-000-00 13.50 0001071 02/17/98 CASEY & BOOG 6600-000-00 95.00 0001072 02/17/98 FIRST OF AMERICA 2110-001-00 474.30 0001072 02/17/98 FIRST OF AMERICA 2110-002-00 810.00 0001072 02/17/98 FIRST OF AMERICA 2110-005-00 474.30 -------- CHECK 0001072 TOTALS: 1,758.60 -------- 0001073 02/23/98 CORPORATE SERVICES 7800-000-00 58.31 0001074 02/24/98 FLEET 7900-000-00 803.19 0001075 02/25/98 RICHARD CASCARILLA 8100-000-00 3,723.00 0001076 02/28/98 CASEY & BOOG 6600-000-00 95.00 0001077 02/28/98 U.P.S. 6000-000-00 24.00 0001078 02/28/98 H. LAWRENCE HEATH 8100-000-00 991.20 0001079 02/28/98 MICHAEL KASSOUFF 7900-000-00 369.00 0001080 02/28/98 JOHN VOGEL 7900-000-00 177.00 -------- JOURNAL CD-0001 TOTALS: 8,227.60 -------- SOURCE CD TOTALS: 8,227.60 -------- REPORT TOTALS: 8,227.60 ========
7 CASH FLOW STATEMENT FEBRUARY 28, 1998
Projected Current For current Month Month ---------- ----------- Receipts: Sales (Cash Only) $ $ ---------- ----------- Collections of Accounts Receivable $ $ ---------- ----------- Other Income $ $ ---------- ----------- Total Receipts $ $ ---------- ----------- Disbursements: Purchases and Inventory $ $ ---------- ----------- Salaries and Wages $ 4,714.20 $ ---------- ----------- Employee Benefits $ $ ---------- ----------- Shipping & Freight $ 37.50 $ ---------- ----------- Rent $ $ ---------- ----------- Secured Debt Payments $ $ ---------- ----------- Outside Services $ 285.00 $ ---------- ----------- Telephone $ 77,21 $ ---------- ----------- Repairs & Maintenance $ $ ---------- ----------- Miscellaneous Office Expense $ 5.90 $ ---------- ----------- Advertising $ $ ---------- ----------- Travel & Entertainment $ 1,349.19 $ ---------- ----------- Professional Fees $ $ ---------- ----------- Court Costs $ $ ---------- ----------- Insurance:Liability $ $ ---------- ----------- Property $ $ ---------- ----------- Vehicle $ $ ---------- ----------- Worker's Compensation $ $ ---------- ----------- Other $ $ ---------- ----------- Taxes: Payroll $ 1,758.60 $ ---------- ----------- Sales $ $ ---------- ----------- Income $ $ ---------- ----------- Real Property $ $ ---------- ----------- Personal Property $ $ ---------- ----------- Total Disbursements $ $ ---------- ----------- Cash Flow $(8,227.60) $ ---------- -----------
8 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO FEBRUARY 28, 1998
Current Year to Month Date Income $ $ ------------ ----------- Cost of Goods Sold Beginning Inventory $ $ ------------ ----------- Inventory Purchases $ $ ------------ ----------- Ending inventory $ $ ------------ ----------- Total Costs of Goods Sold $ $ ------------ ----------- Operating Expenses Salaries and Wages $ 6,200.00 $ 36,000.00 ------------ ----------- Employee Benefits $ $ ------------ ----------- Shipping & Freight $ 37.50 $ 1,142.82 ------------ ----------- Rent $ $ ------------ ----------- Secured Debt Payments $ $ ------------ ----------- Outside Services $ 285.00 $ 2,094.93 ------------ ----------- Telephone $ 77.21 $ 474.56 ------------ ----------- Repairs & Maintenance $ $ ------------ ----------- Miscellaneous Office Expense $ 5.90 $ 1,443.68 ------------ ----------- Advertising $ $ ------------ ----------- Travel & Entertainment $ 1,349.19 $ 7,713.58 ------------ ----------- Professional Fees $ $ 28,557.15 ------------ ----------- Court Costs $ $ 16,872.00 ------------ ----------- Insurance:Liability $ $ ------------ ----------- Property $ $ ------------ ----------- Vehicle $ $ ------------ ----------- Worker's Compensation $ $ ------------ ----------- Other - Bond $ $ (920.00) ------------ ----------- Taxes: Payroll $ 643.00 $ 3,475.20 ------------ ----------- Sales $ $ ------------ ----------- Income $ $ ------------ ----------- Real Property $ $ ------------ ----------- Personal Property $ $ ------------ ----------- Total Operating Expenses $ 8,597.80 $ 96,853.92 ------------ ----------- Total Profit (Loss) from Operations $ (8,597.80) $(96,853.92) ------------ ----------- Other Income (Expense) $ $ ------------ ----------- Gain (Loss) on Sale of Assets $ $ ------------ ----------- Interest Expense $ $ ------------ ----------- Interest Income $ $ ------------ ----------- Dividend income $ $ 16.34 ------------ ----------- Herth Printing Income (loss) $ (33,141.00) $(46,878.00) ------------ ----------- Total $ (33,141.00) $(46,861.66) ------------ ----------- Total Profit (Loss) for Month $ (41,738.80) $(143,715.58) ------------ -----------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation come due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable ---------------- ------------------- Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Creditor Name and Address Payment Periodic Date of Post Petitions Payments Period Payment Last Made Missed (mo/wk) Amount Payment ------------------------------------- No. Amount No. Amount - ------------------------- ------ -------- ------- --- ------ --- ------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month $ 0.00 ---------
Date Paid Amount Paid Due But Not Paid Accrued But Not Due --------- ----------- ---------------- ------------------- Federal Payroll & Withholding 1,833.80 State Payroll & Withholding 702.70 State Sales & Use
IV. Insurance Coverage
Carrier/Agent Name Amount of Policy Expiration Policy Paid Coverage Date Through Date ------------------ --------- ----------------- ------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? /NO/ If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? /NO/ If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Quarter Total Quarterly Fee Amount Paid Date Paid Total Quarterly Ending Disbursement Fees Due But During Quarter Not Paid - ------- -------------- ------------- ----------- --------- ---------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 19th day of February, 1998. By: /s/ Richard Cascarilla ---------------------- EX-99.L 44 EXHIBIT 99(L) 1 EXHIBIT 99l POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT MARCH 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary Information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard A. Cascarilla ------------------------------------ RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET MARCH 31, 1998
Assets Current Assets: Cash $ 61,741.46 ------------- Accounts Receivable $ ------------- Allowance for Doubtful Accounts $ ------------- Accounts Receivable (Net) $ ------------- Inventory $ ------------- Prepaid Expenses $ ------------- Total Current Assets $ 61,741.46 ------------- Property and Equipment (Fair Market Value) Real Property $ ------------- Machinery and Equipment $5,700,000.00 ------------- Furniture and Fixtures $ ------------- Office Equipment $ ------------- Leasehold Improvements $ ------------- Vehicles $ ------------- Other $ ------------- Total Property and Equipment $5,700,000.00 ------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 393,253.00 ------------- Total Assets: $6,154,994.46 -------------
3 LIABILITIES MARCH 31, 1998
Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ --------------- Payroll Taxes $ 2,769.20 --------------- Sales Taxes $ --------------- Income Taxes $ --------------- Real Property Taxes $ --------------- Personal Property Taxes $ --------------- Accounts Payable $ --------------- Postpetition Real Property Lease Arrearages $ --------------- Postpetition Equipment Lease Arrearages $ --------------- Accrued Professional Fees Other $ --------------- $ --------------- Total Postpetition Liabilities $ 2,769.20 --------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ --------------- Secured Debt (Schedule A-2) $ --------------- Unsecured Debt (Schedule A-3) $ --------------- Total Prepetition Liabilities $ --------------- Shareholder's Equity Common Stock $ --------------- Paid-In Capital $ 6,131,096.00 --------------- Retained Earnings $ 21,129.26 --------------- Total Shareholder's Equity $ 6,152,225.26 --------------- Total Liabilities & Equity $ 6,154,994.46 ---------------
4 RECAPITULATION MARCH 31, 1998
Balance from Prior Month General Account $69,824.13 ---------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-3007936-7 General Account $ ---------- Bank Branch Account # Tax Account $ ---------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $61,741.46 ---------- General Account $ ---------- Tax Account $ ----------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUYIWIES #97-30265 (PTELBANK. 398) MARCH, 1998
FIRST OF DATE DESCRIPTION AMERICA - ------------------ ---------------------------- ---------- 03.01.98 BEGINNING BALANCE $69,824.13 03.31.98 TOTAL DEPOSITS $ 0.00 03.31.98 CHECKS WRITTEN PER ATTACHED $ 8,162.67 03.31.98 VOID CHECK #1006 (80.00) ---------- 03.31.98 TOTAL DISBURSEMENTS 8,082.67 ---------- 03.31.98 BALANCE $61,741.46 ==========
6 RUN DATE: 04/16/98 POWERTEL USA, INC. PAGE: I SYS DATE: 03/31/98 TRANSACTION JOURNAL TIME: 10:54 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 03/31/98 1020-000-00 8,162.67 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - -------- ---- ------- ---------- ------------ 0001081 03/09/98 AMERITECH 7800-000-00 18.76 0001082 03/16/98 FIRST OF AMERICA 2110-001-00 474.30 0001082 03/16/98 FIRST OF AMERICA 2110-002-00 810.00 0001082 03/16/98 FIRST OF AMERICA 7200-001-00 474.30 -------- CHECK 0001082 TOTALS: 1,758.60 0001083 03/16/98 CASEY & BOOG 6600-000-00 95.00 0001084 03/24/98 CASEY & BOOG 6500-000-00 43.95 0001085 03/25/98 FLEET 6000-000-00 754.20 0001086 03/25/98 CORPORATE SERVICES 7000-000-00 61.96 0001087 03/24/98 BANK OF AMERICA 6500-000-00 82.00 0001088 03/25/98 RICHARD CASCARILLA 8100-000-00 3,723.00 0001089 03/25/98 EL POSTMASTER 6500-000-00 80.00 0001090 03/26/98 KNUTSON TRAVEL POST 7900-000-00 444.00 0001091 03/26/98 U.P.S. 6000-000-00 24.00 0001092 03/26/98 H. LAWRENCE HERTH 8100-000-00 991.20 0001093 03/31/98 CASEY & BOOG 6600-000-00 95.00 -------- JOURNAL CD-0001 TOTALS: 8,162.67 -------- SOURCE CD TOTALS: 8,162.67 -------- REPORT TOTALS: 8,162.67 ========
7 INCOME STATEMENT (Accrual Basis) October 1, 1997 TO March 31, 1998
Current Year to Month Date ----- ---- Income $ $ ----------------- ---------------- Cost of Goods Sold Beginning Inventory $ $ ----------------- ---------------- Inventory Purchases $ $ ----------------- ---------------- Ending Inventory $ $ ----------------- ---------------- Total Costs of Goods Sold $ $ ----------------- ---------------- Operating Expenses Salaries and Wages $ 6,200.00 $ 42,200.00 ----------------- ---------------- Employee Benefits $ $ ----------------- ---------------- Shipping & Freight $ 24.00 $ 1,166.82 ----------------- ---------------- Rent $ $ ----------------- ---------------- Secured Debt Payments $ $ ----------------- ---------------- Outside Services $ 190.00 $ 2,284.93 ----------------- ---------------- Telephone $ 80.72 $ 555.28 ----------------- ---------------- Repairs & Maintenance $ $ ----------------- ---------------- Miscellaneous Office Expense $ 125.95 $ 1,569.63 ----------------- ---------------- Advertising $ $ ----------------- ---------------- Travel & Entertainment $ 1,189.20 $ 8,902.78 ----------------- ---------------- Professional Fees $ $ 28,557.15 ----------------- ---------------- Court Costs $ $ 16,872.00 ----------------- ---------------- Insurance: Liability $ $ ----------------- ---------------- Property $ $ ----------------- ---------------- Vehicle $ $ ----------------- ---------------- Worker's Compensation $ $ ----------------- ---------------- Other - Bond $ $ (920.00) ----------------- ---------------- Taxes: Payroll $ 505.00 $ 3,980.70 ----------------- ---------------- Sales $ $ ----------------- ---------------- Income $ $ ----------------- ---------------- Real Property $ $ ----------------- ---------------- Personal Property $ $ ----------------- ---------------- Total Operating Expenses $ 8,315.37 $ 105,169.29 ----------------- ---------------- Total Profit (Loss) from Operations $ (8,315.37) $ (105,169.29) ----------------- ---------------- Other Income (Expense) $ $ ----------------- ---------------- Gain (Loss) on Sale of Assets $ $ ----------------- ---------------- Interest Expense $ $ ----------------- ---------------- Interest Income $ $ ----------------- ---------------- Dividend Income $ $ 16.34 ----------------- ---------------- Herth Printing Income (loss) $ 9035.00 $ (37,843.00) ----------------- ---------------- Total $ (9,035.00) $ (37,826.66) ----------------- ---------------- Total Profit (Loss) for Month $ 719.63 $ 142,995.95 ----------------- ----------------
8 CASH FLOW STATEMENT March, 1998
Projected Current For current Month Month ----- ----- Receipts: Sales (Cash Only) $ $ --------------- ---------------- Collections of Accounts Receivable $ $ --------------- ---------------- Other Income $ $ --------------- ---------------- Total Receipts $ $ --------------- ---------------- Disbursements: Purchases and Inventory $ $ --------------- ---------------- Salaries and Wages $ 4,714.20 $ --------------- ---------------- Employee Benefits $ $ --------------- ---------------- Shipping & Freight $ 24.00 $ --------------- ---------------- Rent $ $ --------------- ---------------- Secured Debt Payments $ $ --------------- ---------------- Outside Services $ 190.00 $ --------------- ---------------- Telephone $ 80.72 $ --------------- ---------------- Repairs & Maintenance $ $ --------------- ---------------- Miscellaneous Office Expense $ 125.95 $ --------------- ---------------- Advertising $ $ --------------- ---------------- Travel & Entertainment $ 1,189.20 $ --------------- ---------------- Professional Fees $ $ --------------- ---------------- Court Costs $ $ --------------- ---------------- Insurance: Liability $ $ --------------- ---------------- Property $ $ --------------- ---------------- Vehicle $ $ --------------- ---------------- Worker's Compensation $ $ --------------- ---------------- Other $ $ --------------- ---------------- Taxes: Payroll $ 1,758.60 $ --------------- ---------------- Sales $ $ --------------- ---------------- Income $ $ --------------- ---------------- Real Property $ $ --------------- ---------------- Personal Property $ $ --------------- ---------------- Total Disbursements $ 8,082.67 $ --------------- ---------------- Cash Flow $ (8,082.67) $ --------------- ----------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable: Accounts Payable Accounts Receivable Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Creditor Name and Address Payment Periodic Date of Post Petition Payments Period Payment Last Made Missed (mo/wk) Amount Payment No. Amount No. Amount
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $ ---------- Gross Sales Subject to Sales Tax for Report Month $ ----------
Date Paid Amount Paid Due But Not Paid Accrued But Not Due --------- ----------- ---------------- ------------------- Federal Payroll & Withholding 1,843.40 State Payroll & Withholding 952.80 State Sales & Use
IV. Insurance Coverage
Carrier/Agent Name Amount of Policy Policy Paid Coverage Expiration Through Date Date Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Quarter Total Quarterly Fee Amount Paid Date Paid Total Quarterly Ending Disbursement Fees Due But During Quarter Not Paid
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and,- after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 23rd day of April, 1998. By: /s/ Richard Cascarilla ------------------------------- EX-99.M 45 EXHIBIT 99(M) 1 Exhibit 99m POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT APRIL 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla --------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET APRIL 30, 1998 Assets Current Assets: Cash $ 30,326.41 -------------- Accounts Receivable $ -------------- Allowance for Doubtful Accounts $ -------------- Accounts Receivable (Net) $ -------------- Inventory $ -------------- Prepaid Expenses $ -------------- Total Current Assets $ 30,326.41 -------------- Property and Equipment (Fair Market Value) Real Property $ -------------- Machinery and Equipment $ 5,700,000.00 -------------- Furniture and Fixtures $ -------------- Office Equipment $ -------------- Leasehold Improvements $ -------------- Vehicles $ -------------- Other $ -------------- Total Property and Equipment $ 5,700,000.00 -------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 378,850.00 -------------- Total Assets: $ 6,109,176.41 --------------
3 LIABILITIES APRIL 30, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ -------------- Payroll Taxes $ 2,046.70 -------------- Sales Taxes $ -------------- Income Taxes $ -------------- Real Property Taxes $ -------------- Personal Property Taxes $ -------------- Accounts Payable $ -------------- Postpetition Real Property Lease Arrearages $ -------------- Postpetition Equipment Lease Arrearages $ -------------- Accrued Professional Fees Other ___________ $ -------------- ___________ $ -------------- Total Postpetition Liabilities $ 2,046.70 -------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ -------------- Secured Debt (Schedule A-2) $ -------------- Unsecured Debt (Schedule A-3) $ -------------- Total Prepetition Liabilities $ -------------- Shareholder's Equity Common Stock $ -------------- Paid-In Capital $ 6,131,096.00 -------------- Retained Earnings $ (23,966.29) -------------- Total Shareholder's Equity $ 6,107,129.71 -------------- Total Liabilities & Equity $ 6,109,176.41 --------------
4 RECAPITULATION APRIL 30, 1998 Balance from Prior Month General Account $ 61,741.46 -------------- Bank First of America Bank, N.A. Michigan Branch Okemos, Michigan Account #62-30079367 General Account $ -------------- Bank Branch Account # Tax Account $ -------------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 30,326.41 -------------- General Account $ -------------- Tax Account $ --------------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 (PTELBANK.498) APRIL, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- --------------------------------- ----------- 04.01.98 BEGINNING BALANCE $ 61,746.41 ----------- ----------- 04.30.98 TOTAL DEPOSITS -0- ----------- 04.30.98 CHECKS WRITTEN PER ATTACHED $ 11,400.05 04.07.98 WIRE TRANSFER-WALTER & HAVERFIELD 20,000.00 04.07.98 WIRE TRANSFER FEE 15.00 ----------- 04.30.98 TOTAL DISBURSEMENTS 31,415.05 ----------- 04.30.98 BALANCE $ 30,326.41 ==========
6 RUN DATE: 05/11/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 04/30/98 TRANSACTION JOURNAL TIME: 01:39 PM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 04/30/98 1020-000-00 11,400.05 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - -------- -------- ------------------------------ ----------- ------------ 0001094 04/03/98 UNITED STATES TRUSTEE 6200-000-00 2,000.00 0001095 04/06/98 UPS 6000-000-00 36.00 0001096 04/06/98 AMERITECH 7800-000-00 18.85 0001097 04/09/98 CASEY & BOOG 6500-000-00 5.81 0001098 04/09/98 MIKE KASSTUFF 7900-000-00 299.00 0001099 04/13/98 UPS 6000-000-00 12.00 0001100 04/19/98 FIRST OF AMERICA 2110-001-00 474.30 0001100 04/19/98 FIRST OF AMERICA 2110-002-00 810.00 0001100 04/19/98 FIRST OF AMERICA 2110-005-00 474.30 ------------ CHECK 0001100 TOTALS: 1,758.60 0001101 04/19/98 STATE OF MICHIGAN 2110-003-00 604.50 0001102 04/22/98 SPRINT 7800-000-00 123.79 0001103 04/20/98 CASEY & BOOG 6500-000-00 95.00 0001104 04/24/98 UPS 6000-000-00 24.00 0001105 04/24/98 STATE OF MICHIGAN MESC 2110-005-00 256.50 0001106 04/24/98 NEVADA EQUA. SEC. DEPART 2110-005-00 86.40 0001107 04/24/98 NEVADA DEPART. OF TAXAT. 2110-005-00 8.00 0001108 04/24/98 NEVADA DEPART. OF TAXAT. 2110-005-00 7.00 0001109 04/25/98 RICHARD A. CASCARILLA 8100-000-00 3,723.00 0001110 04/27/98 KNUTSON TRAVEL POST 7900-000-00 486.00 0001111 04/27/98 UPS 6000-000-00 18.00 0001112 04/28/98 FLEET 7900-000-00 846.40 0001113 04/28/98 H. LAWERENCE HERTH 8100-000-00 991.20 ------------ JOURNAL CD-0001 TOTALS: 11,400.05 ------------ SOURCE CD TOTALS: 11,400.05 ------------ REPORT TOTALS: 11,400.05
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO APRIL 30, 1998
Current Year to Month Date --------------- ------------ Income $ $ --------------- ------------ Cost of Goods Sold Beginning Inventory $ $ --------------- ------------ Inventory Purchases $ $ --------------- ------------ Ending Inventory $ $ --------------- ------------ Total Costs of Goods Sold $ $ --------------- ------------ Operating Expenses Salaries and Wages $ 6,200.00 $ 48,400.00 --------------- ------------ Employee Benefits $ $ --------------- ------------ Shipping & Freight $ 90.00 $ 1,256.82 --------------- ------------ Rent $ $ --------------- ------------ Secured Debt Payments $ $ --------------- ------------ Outside Services $ $ 2,284.93 --------------- ------------ Telephone $ 142.64 $ 697.92 --------------- ------------ Repairs & Maintenance $ $ --------------- ------------ Miscellaneous Office Expense $ 115.81 $ 1,685.44 --------------- ------------ Advertising $ $ --------------- ------------ Travel & Entertainment $ 1,631.40 $ 10,534.18 --------------- ------------ Professional Fees $ 20,000.00 $ 48,557.15 --------------- ------------ Court Costs $ 2,000.00 $ 18,872.00 --------------- ------------ Insurance: Liability $ $ --------------- ------------ Property $ $ --------------- ------------ Vehicle $ $ --------------- ------------ Worker's Compensation $ $ --------------- ------------ Other - Bond $ $ (920.00) --------------- ------------ Taxes: Payroll $ 512.70 $ 4,493.40 --------------- ------------ Sales $ $ --------------- ------------ Income $ $ --------------- ------------ Real Property $ $ --------------- ------------ Personal Property $ $ --------------- ------------ Total Operating Expenses $ 30,692.55 $ 135,861.84 --------------- ------------ Total Profit (Loss) from Operations $ (30,692.55) $(135,861.84) --------------- ------------ Other Income (Expense) $ $ --------------- ------------ Gain (Loss) on Sale of Assets $ $ --------------- ------------ Interest Expense $ $ --------------- ------------ Interest Income $ $ --------------- ------------ Dividend Income $ $ 16.34 --------------- ------------ Herth Printing Income (loss) $ (14,403.00) $ (52,246.00) --------------- ------------ Total $ (14,403.00) $ (52,229.66) --------------- ------------ Total Profit (Loss) for Month $ (45,095.55) $ 188,091.50 --------------- ------------
8 CASH FLOW STATEMENT APRIL 30, 1998
Projected Current For Current Month Month ------------ ------------ Receipts: Sales (Cash Only) $ $ ------------ ------------ Collections of Accounts Receivable $ $ ------------ ------------ Other Income $ $ ------------ ------------ Total Receipts $ $ ------------ ------------ Disbursements: Purchases and Inventory $ $ ------------ ------------ Salaries and Wages $ 4,714.20 $ ------------ ------------ Employee Benefits $ $ ------------ ------------ Shipping & Freight $ 90.00 $ ------------ ------------ Rent $ $ ------------ ------------ Secured Debt Payments $ $ ------------ ------------ Outside Services $ $ ------------ ------------ Telephone $ 142.64 $ ------------ ------------ Repairs & Maintenance $ $ ------------ ------------ Miscellaneous Office Expense $ 115.81 $ ------------ ------------ Advertising $ $ ------------ ------------ Travel & Entertainment $ 1,631.40 $ ------------ ------------ Professional Fees $ 20,000.00 $ ------------ ------------ Court Costs $ 2,000.00 $ ------------ ------------ Insurance: Liability $ $ ------------ ------------ Property $ $ ------------ ------------ Vehicle $ $ ------------ ------------ Worker's Compensation $ $ ------------ ------------ Other ___________ $ $ ------------ ------------ Taxes: Payroll $ 2,721.00 $ ------------ ------------ Sales $ $ ------------ ------------ Income $ $ ------------ ------------ Real Property $ $ ------------ ------------ Personal Property $ $ ------------ ------------ Total Disbursements $ 31,415.05 $ ------------ ------------ Cash Flow $ (31,415.05) $ ------------ ------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Payable Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
- -------------------------------------------------------------------------------------------------------------- Post Petition Payments Periodic Made Missed Creditor Name and Payment Period Payment Date of Last --------------------------------- Address (mo/wk) Amount Payment No. Amount No. Amount - --------------------------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month: $ -0- ---------
Postpetition Taxes Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ------------------------------------------------------------------------------------------------------------------------------ Federal Payroll & Withholding 1,843.40 State Payroll & Withholding 203.30 State Sales & Use
IV. INSURANCE COVERAGE
Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------------------------------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Total Total Quarterly Disbursement Fees Due But Quarter Ending During Quarter Quarterly Fee Amount Paid Date Paid Not Paid 3-31-98 2,000.00 2,000.00 4-3-98
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 17th day of April, 1998. By: /s/ Richard Cascarilla ---------------------- EX-99.N 46 EXHIBIT 99(N) 1 Exhibit 99n POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT MAY 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard A. Cascarilla -------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET MAY 31, 1998 Assets Current Assets: Cash $ 21,333.85 ------------- Accounts Receivable $ ------------- Allowance for Doubtful Accounts $ ------------- Accounts Receivable (Net) $ ------------- Inventory $ ------------- Prepaid Expenses $ ------------- Total Current Assets $ 21,333.85 ------------- Property and Equipment (Fair Market Value) Real Property $ ------------- Machinery and Equipment $5,700,000.00 ------------- Furniture and Fixtures $ ------------- Office Equipment $ ------------- Leasehold Improvements $ ------------- Vehicles $ ------------- Other $ Total Property and Equipment $5,700,000.00 ------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 374,875.00 ------------- Total Assets: $6,096,208.85 -------------
3 LIABILITIES MAY 31, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ 2,323.20 ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ ------------- Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other ___________ $ ------------- ___________ $ ------------- Total Postpetition Liabilities $ 2,323.20 ------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ------------- Secured Debt (Schedule A-2) $ ------------- Unsecured Debt (Schedule A-3) $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $6,131,096.00 ------------- Retained Earnings $ (37,210.35) ------------- Total Shareholder's Equity $6,093,885.65 ------------- Total Liabilities & Equity $6,096,208.85 -------------
4 RECAPITULATION MAY 31, 1998 Balance from Prior Month General Account $ 30,326.41 ------------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-30079367 General Account $ ------------- Bank Branch Account # Tax Account $ ------------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 21,333.85 ------------- General Account $ ------------- Tax Account $ -------------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 (PTELBANK.598) MAY, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- --------------------------- ----------- 05.01.98 BEGINNING BALANCE $ 30,326.41 ----------- ----------- 05.31.98 TOTAL DEPOSITS -0- ----------- 05.31.98 CHECKS WRITTEN PER ATTACHED $ 8,992.56 ----------- 05.31.98 BALANCE $ 21,333.85 ===========
6 RUN DATE: 06/08/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 05/31/98 TRANSACTION JOURNAL TIME: 09:55 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 05/31/98 1020-000-00 8,992.56 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - ---------- -------- ------------------------ ----------- ------------ 0001114 05/02/98 AMERITECH 7800-000-00 18.85 0001115 05/02/98 CASEY & BOOG 6600-000-00 95.00 0001116 05/04/98 POSTMASTER-E. LANSING 6500-000-00 160.00 0001117 05/11/98 CASEY & BOOG 6500-000-00 20.55 0001118 05/12/98 UPS 6000-000-00 12.00 0001119 05/14/98 UPS 6000-000-00 24.00 0001120 05/14/98 FIRST OF AMERICA 2110-001-00 474.30 0001120 05/14/98 FIRST OF AMERICA 2110-002-00 810.00 0001120 05/14/98 FIRST OF AMERICA 2110-005-00 474.30 ------------ CHECK 0001120 TOTALS: 1,758.60 0001121 05/26/98 RICHARD A. CASCARILLA 8100-000-00 3,723.00 0001122 05/25/98 KNUTSON TRAVEL POST 7900-000-00 842.75 0001123 05/26/98 CASEY & BOOG 6600-000-00 95.00 0001124 05/26/98 CORPORATE SERVICES 7800-000-00 108.66 0001125 05/26/98 UPS 6000-000-00 12.00 0001126 05/27/98 U.S. TRUSTEE 6200-000-00 500.00 0001127 05/27/98 H. LAWRENCE HERTH 8100-000-00 991.20 0001128 05/27/98 KNUTSON TRAVEL POST 7900-000-00 612.00 0001129 05/30/98 AMERITECH 7800-000-00 18.95 ------------ JOURNAL CD-0001 TOTALS: 8,992.56 ------------ SOURCE CD TOTALS: 8,992.56 ------------ REPORT TOTALS: 8,992.56 ============
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO MAY 31, 1998
Current Year to Month Date -------------- --------------- Income $ -0- $ -0- -------------- --------------- Cost of Goods Sold Beginning Inventory $ $ -------------- --------------- Inventory Purchases $ $ -------------- --------------- Ending Inventory $ $ -------------- --------------- Total Costs of Goods Sold $ $ -------------- --------------- Operating Expenses Salaries and Wages $ 6,200.00 $ 54,600.00 -------------- --------------- Employee Benefits $ $ -------------- --------------- Shipping & Freight $ 48.00 $ 1,304.82 -------------- --------------- Rent $ $ -------------- --------------- Secured Debt Payments $ $ -------------- --------------- Outside Services $ 190.00 $ 2,474.93 -------------- --------------- Telephone $ 146.46 $ 844.38 -------------- --------------- Repairs & Maintenance $ $ -------------- --------------- Miscellaneous Office Expense $ 180.55 $ 1,865.99 -------------- --------------- Advertising $ $ -------------- --------------- Travel & Entertainment $ 1,454.75 $ 11,988.93 -------------- --------------- Professional Fees $ $ 48,557.15 -------------- --------------- Court Costs $ 500.00 $ 19,372.00 -------------- --------------- Insurance: Liability $ $ -------------- --------------- Property $ $ -------------- --------------- Vehicle $ $ -------------- --------------- Worker's Compensation $ $ -------------- --------------- Other - Bond $ $ (920.00) -------------- --------------- Taxes: Payroll $ 549.30 $ 5,042.70 -------------- --------------- Sales $ $ -------------- --------------- Income $ $ -------------- --------------- Real Property $ $ -------------- --------------- Personal Property $ $ -------------- --------------- Total Operating Expenses $ 9,269.06 $ 145,130.90 -------------- --------------- Total Profit (Loss) from Operations $ (9,269.06) $ (145,130.90) -------------- --------------- Other Income (Expense) $ $ -------------- --------------- Gain (Loss) on Sale of Assets $ $ -------------- --------------- Interest Expense $ $ -------------- --------------- Interest Income $ $ -------------- --------------- Dividend Income $ $ 16.34 -------------- --------------- Herth Printing Income (loss) $ (3,975.00) $ (56,221.00) -------------- --------------- Total $ (3,975.00) $ (56,204.66) -------------- --------------- Total Profit (Loss) for Month $ (13,244.06) $ (201,335.56) -------------- ---------------
8 CASH FLOW STATEMENT MAY 1998
Projected Current For current Month Month -------------- --------------- Receipts: Sales (Cash Only) $ $ -------------- --------------- Collections of Accounts Receivable $ $ -------------- --------------- Other Income $ $ -------------- --------------- Total Receipts $ $ -------------- --------------- Disbursements: Purchases and Inventory $ $ -------------- --------------- Salaries and Wages $ 4,714.20 $ -------------- --------------- Employee Benefits $ $ -------------- --------------- Shipping & Freight $ 48.00 $ -------------- --------------- Rent $ $ -------------- --------------- Secured Debt Payments $ $ -------------- --------------- Outside Services $ 190.00 $ -------------- --------------- Telephone $ 146.46 $ -------------- --------------- Repairs & Maintenance $ $ -------------- --------------- Miscellaneous Office Expense $ 180.55 $ -------------- --------------- Advertising $ $ -------------- --------------- Travel & Entertainment $ 1,454.75 $ -------------- --------------- Professional Fees $ $ -------------- --------------- Court Costs $ 500.00 $ -------------- --------------- Insurance: Liability $ $ -------------- --------------- Property $ $ -------------- --------------- Vehicle $ $ -------------- --------------- Worker's Compensation $ $ -------------- --------------- Other ___________ $ $ -------------- --------------- Taxes: Payroll $ 1,758.60 $ -------------- --------------- Sales $ $ -------------- --------------- Income $ $ -------------- --------------- Real Property $ $ -------------- --------------- Personal Property $ $ -------------- --------------- Total Disbursements $ 8,992.56 $ -------------- --------------- Cash Flow $ (8,992.56) $ -------------- ---------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Post Petitions Payments Payment Periodic Date of Made Missed Period Payment Last --------------------------- Creditor Name and Address (mo/wk) Amount Payment No. Amount No. Amount
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month: $ -0- ---------
Postpetition Taxes Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ------------------------------------------------------------------------------------------------------------------------------ Federal Payroll & Withholding 1,862.60 State Payroll & Withholding 460.60 State Sales & Use
IV. INSURANCE COVERAGE
Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------------------------------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 V. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VI. U.S. Trustee Fees
Total Total Quarterly Disbursement Fees Due But Quarter Ending During Quarter Quarterly Fee Amount Paid Date Paid Not Paid 3-31-98 500.00 500.00 500.00 5-27-98 -0-
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 12 day of June, 1997. By: /s/ Richard Cascarilla ------------------------------ EX-99.O 47 EXHIBIT 99(O) 1 Exhibit 99o POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT JUNE 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary Information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla --------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET JUNE 30, 1998 Assets Current Assets: Cash $ 11,154.55 --------------- Accounts Receivable $ --------------- Allowance for Doubtful Accounts $ --------------- Accounts Receivable (Net) $ --------------- Inventory $ --------------- Prepaid Expenses $ --------------- Total Current Assets $ 11,154.55 --------------- Property and Equipment (Fair Market Value) Real Property $ --------------- Machinery and Equipment $ 5,700,000.00 --------------- Furniture and Fixtures $ --------------- Office Equipment $ --------------- Leasehold Improvements $ --------------- Vehicles $ --------------- Other $ --------------- Total Property and Equipment $ 5,700,000.00 --------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 392,788.00 --------------- Total Assets: $ 6,103,942.55 ---------------
3 LIABILITIES JUNE 30, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ --------------- Payroll Taxes $ 2,561.50 --------------- Sales Taxes $ --------------- Income Taxes $ --------------- Real Property Taxes $ --------------- Personal Property Taxes $ --------------- Accounts Payable $ --------------- Postpetition Real Property Lease Arrearages $ --------------- Postpetition Equipment Lease Arrearages $ --------------- Accrued Professional Fees Other LOAN SHAREHOLDER $ --------------- DIEGOTEL, INC STOCK-BOOK VALUE $ --------------- Total Postpetition Liabilities $ 2,561.50 --------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ --------------- Secured Debt (Schedule A-2) $ --------------- Unsecured Debt (Schedule A-3) $ --------------- Total Prepetition Liabilities $ --------------- Shareholder's Equity Common Stock $ --------------- Paid-In Capital $ 6,131,096.00 --------------- Retained Earnings $ (29,714.95) --------------- Total Shareholder's Equity $ 6,101,381.05 --------------- Total Liabilities & Equity $ 6,103,942.55 ---------------
4 RECAPITULATION JUNE 30, 1998 Balance from Prior Month General Account $ 21,333.85 ------------ Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-30079367 General Account $ ------------ Bank Branch Account # Tax Account $ ------------ Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 11,154.55 ------------ General Account $ ------------ Tax Account $ ------------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 (PTELBANK.698) JUNE, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- --------------------------- ------------ 06.01.98 BEGINNING BALANCE $ 21,333.85 ------------ ------------ 06.30.98 TOTAL DEPOSITS -0- ------------ 06.30.98 CHECKS WRITTEN PER ATTACHED $ 10,179.30 ------------ 06.30.98 BALANCE $ 11,154.55 ============
6 RUN DATE: 07/14/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 06/30/98 TRANSACTION JOURNAL TIME: 08:42 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 06/30/98 1020-000-00 10,179.30 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - -------- -------- ------------------------ ------------------ ------------ 0001130 06/01/98 CASEY & BOOG 6600-000-00 95.00 0001131 06/02/98 FLEET 7900-000-00 1,464.77 0001132 06/07/98 UPS 6000-000-00 12.00 0001133 06/08/98 KNUTSON TRAVEL PORT 7900-000-00 356.00 0001134 06/11/98 CASEY & BOOG PLC 6500-000-00 17.77 0001135 06/13/98 FIRST OF AMERICA 2110-001-00 474.30 0001135 06/13/98 FIRST OF AMERICA 2110-002-00 810.00 0001135 06/13/98 FIRST OF AMERICA 2110-005-00 474.30 --------- CHECK 0001135 TOTALS: 1,758.60 0001136 06/15/98 CASEY & BOOG 6600-000-00 95.00 0001137 06/18/98 UPS 6000-000-00 12.00 0001138 06/25/98 KNUTSON TRAVEL PORT 7900-000-00 437.00 0001139 06/25/98 RICHARD A CASCARILLA 8100-000-00 3,723.00 0001140 06/30/98 UPS 6000-000-00 36.00 0001141 06/30/98 AMERITECH 7800-000-00 18.96 0001142 06/30/98 ROBERT LINDBERG CPA 5050-000-00 1,162.00 0001143 06/30/98 H LAURENCE HERTH 8100-000-00 991.20 --------- JOURNAL CD-0001 TOTALS: 10,179.30 --------- SOURCE CD TOTALS: 10,179.30 --------- REPORT TOTALS: 10,179.30 =========
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO JUNE 30, 1998
Current Year to Month Date -------------- --------------- Income $ -0- $ -0- -------------- --------------- Cost of Goods Sold Beginning Inventory $ $ -------------- --------------- Inventory Purchases $ $ -------------- --------------- Ending Inventory $ $ -------------- --------------- Total Costs of Goods Sold $ $ -------------- --------------- Operating Expenses Salaries and Wages $ 6,200.00 $ 60,800.00 -------------- --------------- Employee Benefits $ $ -------------- --------------- Shipping & Freight $ 60.00 $ 1,364.82 -------------- --------------- Rent $ $ -------------- --------------- Secured Debt Payments $ $ -------------- --------------- Outside Services $ 190.00 $ 2,664.93 -------------- --------------- Telephone $ 18.96 $ 863.34 -------------- --------------- Repairs & Maintenance $ $ -------------- --------------- Miscellaneous Office Expense $ 17.77 $ 1,883.76 -------------- --------------- Advertising $ $ -------------- --------------- Travel & Entertainment $ 2,257.77 $ 14,246.70 -------------- --------------- Professional Fees $ 1,162.00 $ 49,719.15 -------------- --------------- Court Costs $ $ 19,372.00 -------------- --------------- Insurance: Liability $ $ -------------- --------------- Property $ $ -------------- --------------- Vehicle $ $ -------------- --------------- Worker's Compensation $ $ -------------- --------------- Other - Bond $ $ (920.00) -------------- --------------- Taxes: Payroll $ 511.10 $ 5,553.80 -------------- --------------- Sales $ $ -------------- --------------- Income $ $ -------------- --------------- Real Property $ $ -------------- --------------- Personal Property $ $ -------------- --------------- Total Operating Expenses $ 10,417.60 $ 155,548.50 -------------- --------------- Total Profit (Loss) from Operations $ (10,417.60) $ (155,548.50) -------------- --------------- Other Income (Expense) $ $ -------------- --------------- Gain (Loss) on Sale of Assets $ $ -------------- --------------- Interest Expense $ $ -------------- --------------- Interest Income $ $ -------------- --------------- Dividend income $ $ 16.34 -------------- --------------- Herth Printing Income (loss) $ 17,913.00 $ (38,308.00) -------------- --------------- Total $ 17,913.00 $ (38,291.66) -------------- --------------- Total Profit (Loss) for Month $ 7,495.40 $ (193,840.16) -------------- ---------------
8 CASH FLOW STATEMENT JUNE 1998
Projected Current For current Month Month --------------- ------------ Receipts: Sales (Cash Only) $ $ --------------- ------------ Collections of Accounts Receivable $ $ --------------- ------------ Other Income $ $ --------------- ------------ Total Receipts $ $ --------------- ------------ Disbursements: Purchases and Inventory $ $ --------------- ------------ Salaries and Wages $ 4,714.20 $ --------------- ------------ Employee Benefits $ $ --------------- ------------ Shipping & Freight $ 60.00 $ --------------- ------------ Rent $ $ --------------- ------------ Secured Debt Payments $ $ --------------- ------------ Outside Services $ 190.00 $ --------------- ------------ Telephone $ 18.96 $ --------------- ------------ Repairs & Maintenance $ $ --------------- ------------ Miscellaneous Office Expense $ 17.77 $ --------------- ------------ Advertising $ $ --------------- ------------ Travel & Entertainment $ 2,257.77 $ --------------- ------------ Professional Fees $ 1,162.00 $ --------------- ------------ Court Costs $ $ --------------- ------------ Insurance: Liability $ $ --------------- ------------ Property $ $ --------------- ------------ Vehicle $ $ --------------- ------------ Worker's Compensation $ $ --------------- ------------ Other ___________ $ $ --------------- ------------ Taxes: Payroll $ 1,758.60 $ --------------- ------------ Sales $ $ --------------- ------------ Income $ $ --------------- ------------ Real Property $ $ --------------- ------------ Personal Property $ $ --------------- ------------ Total Disbursements $ 10,179.30 $ --------------- ------------ Cash Flow $ (10,179.30) $ --------------- ------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Payable Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
- -------------------------------------------------------------------------------------------------------------- Post Petition Payments Periodic Made Missed Creditor Name and Payment Period Payment Date of Last --------------------------------- Address (mo/wk) Amount Payment No. Amount No. Amount - --------------------------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month: $ -0- ---------
Postpetition Taxes Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ------------------------------------------------------------------------------------------------------------------------------ Federal Payroll & Withholding 1,870.60 State Payroll & Withholding 690.00 State Sales & Use
IV. INSURANCE COVERAGE
Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------------------------------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: 11 MONTHLY QUESTIONNAIRE Page 3 VII. U.S. Trustee Fees
Total Total Quarterly Disbursement Fees Due But Quarter Ending During Quarter Quarterly Fee Amount Paid Date Paid Not Paid
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 20 day of July, 1998. By: /s/ Richard Cascarilla --------------------------------------- EX-99.P 48 EXHIBIT 99(P) 1 Exhibit 99p POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT JULY 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard A. Cascarilla -------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET JULY 31, 1998 Assets Current Assets: Cash $ 6,882.64 ------------- Accounts Receivable $ ------------- Allowance for Doubtful Accounts $ ------------- Accounts Receivable (Net) $ ------------- Inventory $ ------------- Prepaid Expenses $ ------------- Total Current Assets $ 6,882.64 ------------- Property and Equipment (Fair Market Value) Real Property $ ------------- Machinery and Equipment $5,700,000.00 ------------- Furniture and Fixtures $ ------------- Office Equipment $ ------------- Leasehold Improvements $ ------------- Vehicles $ ------------- Other $ ------------- Total Property and Equipment $5,700,000.00 ------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 381,585.00 ------------- Total Assets: $6,088,467.64 -------------
3 LIABILITIES JULY 31, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ 1,988.90 ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ ------------- Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other ___________ $ ------------- ___________ $ ------------- Total Postpetition Liabilities $ 1,988.90 ------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ------------- Secured Debt (Schedule A-2) $ ------------- Unsecured Debt (Schedule A-3) $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $6,131,096.00 ------------- Retained Earnings $ (44,617.26) ------------- Total Shareholder's Equity $6,086,478.74 ------------- Total Liabilities & Equity $6,088,467.64 -------------
4 RECAPITULATION JULY 31, 1998 Balance from Prior Month General Account $ 11,154.55 ------------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-30079367 General Account $ ------------- Bank Branch Account # Tax Account $ ------------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 6,882.64 ------------- General Account $ ------------- Tax Account $ -------------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 (PTELBANK.698) JULY, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- -------------------------------- ----------- 06.01.98 BEGINNING BALANCE $ 11,154.55 ----------- 07.28.98 HERTH PRINTING INC. DISTRIBUTION 7,000.00 ----------- 07.31.98 TOTAL DEPOSITS 7,000.00 ----------- 07.31.98 CHECKS WRITTEN PER ATTACHED $ 11,271.91 ----------- 07.31.98 BALANCE $ 6,882.64 ===========
6 RUN DATE: 08/07/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 07/31/98 TRANSACTION JOURNAL TIME: 11:25 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 07/31/98 1020-000-00 11,271.91 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - ---------- -------- ------------------------ ----------- ------------ 0001144 07/03/98 CASEY & BOOG 6600-000-00 95.00 0001145 07/05/98 CASEY & BOOG 6500-000-00 47.70 0001146 06/07/98 FLEET 7900-000-00 1,045.36 0001147 07/13/98 BELDING & HARRIS 6200-000-00 150.00 0001148 07/13/98 UPS 6000-000-00 12.00 0001149 07/15/98 STATE OF MICHIGAN 2110-003-00 604.50 0001150 07/15/98 FIRST OF AMERICA 2110-001-00 474.30 0001150 07/15/98 FIRST OF AMERICA 2110-002-00 810.00 0001150 07/15/98 FIRST OF AMERICA 2110-005-00 474.30 --------- CHECK 0001150 TOTALS: 1,758.60 0001151 07/16/98 E LANSING POSTMASTER 6500-000-00 128.00 0001152 07/16/98 UPS 6000-000-00 12.00 0001153 07/20/98 CASEY & BOOG 6600-000-00 95.00 0001154 07/20/98 CORPORATE 7800-000-00 802.03 0001155 07/24/98 UPS 6000-000-00 36.00 0001156 07/24/98 FIRST OF AMERICA 2110-005-00 112.00 0001157 07/24/98 NEVADA EMPL SECURITY COM 2110-005-00 86.40 0001158 07/24/98 NEVADA EMPL SECURITY COM 2110-005-00 7.00 0001159 07/29/98 RICHARD CASCARILLA 8100-000-00 3,723.00 0001160 07/29/98 H LAURENCE HERTH 8100-000-00 991.20 0001161 07/31/98 BELDING & HARRIS 6200-000-00 1,566.12 --------- JOURNAL CD-0001 TOTALS: 11,271.91 --------- SOURCE CD TOTALS: 11,271.91 --------- REPORT TOTALS: 11,271.91 =========
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO JULY 31, 1998
Current Year to Month Date -------------- --------------- Income $ -0- $ -0- -------------- --------------- Cost of Goods Sold Beginning Inventory $ $ -------------- --------------- Inventory Purchases $ $ -------------- --------------- Ending Inventory $ $ -------------- --------------- Total Costs of Goods Sold $ $ -------------- --------------- Operating Expenses Salaries and Wages $ 6,200.00 $ 67,800.00 -------------- --------------- Employee Benefits $ $ -------------- --------------- Shipping & Freight $ 60.00 $ 1,424.82 -------------- --------------- Rent $ $ -------------- --------------- Secured Debt Payments $ $ -------------- --------------- Outside Services $ 190.00 $ 2,854.93 -------------- --------------- Telephone $ $ 863.34 -------------- --------------- Repairs & Maintenance $ $ -------------- --------------- Miscellaneous Office Expense $ 175.70 $ 2,059.46 -------------- --------------- Advertising $ $ -------------- --------------- Travel & Entertainment $ 1,847.39 $ 16,094.09 -------------- --------------- Professional Fees $ 1,716.12 $ 51,435.27 -------------- --------------- Court Costs $ $ 19,372.00 -------------- --------------- Insurance: Liability $ $ -------------- --------------- Property $ $ -------------- --------------- Vehicle $ $ -------------- --------------- Worker's Compensation $ $ -------------- --------------- Other - Bond $ $ (920.00) -------------- --------------- Taxes: Payroll $ 510.10 $ 6,063.90 -------------- --------------- Sales $ $ -------------- --------------- Income $ $ -------------- --------------- Real Property $ $ -------------- --------------- Personal Property $ $ -------------- --------------- Total Operating Expenses $ 10,699.31 $ 166,247.81 -------------- --------------- Total Profit (Loss) from Operations $ (10,699.31) $ (166,247.81) -------------- --------------- Other Income (Expense) $ $ -------------- --------------- Gain (Loss) on Sale of Assets $ $ -------------- --------------- Interest Expense $ $ -------------- --------------- Interest Income $ $ -------------- --------------- Dividend Income $ $ 16.34 -------------- --------------- Herth Printing Income (loss) $ (4,203.00) $ (42,511.00) -------------- --------------- Total $ (4,203.00) $ (42,494.66) -------------- --------------- Total Profit (Loss) for Month $ (14,902.31) $ (208,742.47) -------------- ---------------
8 CASH FLOW STATEMENT JULY 1998
Projected Current For current Month Month -------------- --------------- Receipts: Sales (Cash Only) $ $ -------------- --------------- Collections of Accounts Receivable $ $ -------------- --------------- Other Income - HERTH PRINTING DISTRIBUTION $ 7,000.00 $ -------------- --------------- Total Receipts $ 7,000.00 $ -------------- --------------- Disbursements: Purchases and Inventory $ $ -------------- --------------- Salaries and Wages $ 4,714.20 $ -------------- --------------- Employee Benefits $ $ -------------- --------------- Shipping & Freight $ 60.00 $ -------------- --------------- Rent $ $ -------------- --------------- Secured Debt Payments $ $ -------------- --------------- Outside Services $ 190.00 $ -------------- --------------- Telephone $ $ -------------- --------------- Repairs & Maintenance $ $ -------------- --------------- Miscellaneous Office Expense $ 175.70 $ -------------- --------------- Advertising $ $ -------------- --------------- Travel & Entertainment $ 1,847.39 $ -------------- --------------- Professional Fees $ 1,716.12 $ -------------- --------------- Court Costs $ $ -------------- --------------- Insurance: Liability $ $ -------------- --------------- Property $ $ -------------- --------------- Vehicle $ $ -------------- --------------- Worker's Compensation $ $ -------------- --------------- Other ___________ $ $ -------------- --------------- Taxes: Payroll $ 2,568.50 $ -------------- --------------- Sales $ $ -------------- --------------- Income $ $ -------------- --------------- Real Property $ $ -------------- --------------- Personal Property $ $ -------------- --------------- Total Disbursements $ 11,271.91 $ -------------- --------------- Cash Flow $ (4,271.91) $ -------------- ---------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable - ------------------------------------------------------------------------------ Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Post Petition Payments Payment Periodic Date of Made Missed Period Payment Last --------------------------- Creditor Name and Address (mo/wk) Amount Payment No. Amount No. Amount - -------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month $ 0.00 ---------
Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ------------------------------------------------------------------------------------------------------------------------------ Federal Payroll & Withholding 1,758.60 State Payroll & Withholding 230.30 State Sales & Use
IV. Insurance Coverage
Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------------------------------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Total Total Quarterly Disbursement Fees Due But Quarter Ending During Quarter Quarterly Fee Amount Paid Date Paid Not Paid - ---------------------------------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 17th day of July, 1998. By: /s/ Richard Cascarilla ---------------------- EX-99.Q 49 EXHIBIT 99(Q) 1 Exhibit 99q POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT AUGUST 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard A. Cascarilla -------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET AUGUST 31, 1998 Assets Current Assets: Cash $ 1,240.25 ------------- Accounts Receivable $ ------------- Allowance for Doubtful Accounts $ ------------- Accounts Receivable (Net) $ ------------- Inventory $ ------------- Prepaid Expenses $ ------------- Total Current Assets $ 1,240.25 ------------- Property and Equipment (Fair Market Value) Real Property $ ------------- Machinery and Equipment $5,700,000.00 ------------- Furniture and Fixtures $ ------------- Office Equipment $ ------------- Leasehold Improvements $ ------------- Vehicles $ ------------- Other $ ------------- Total Property and Equipment $5,700,000.00 ------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 3,876.29 ------------- Total Assets: $6,088,869.25 -------------
3 LIABILITIES AUGUST 31, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ 2,219.20 ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ ------------- Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other $ ------------- $ ------------- Total Postpetition Liabilities $ 2,219.20 ------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ------------- Secured Debt (Schedule A-2) $ ------------- Unsecured Debt (Schedule A-3) $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $6,131,096.00 ------------- Retained Earnings $ (44,445.95) ------------- Total Shareholder's Equity $6,086,650.05 ------------- Total Liabilities & Equity $6,088,869.25 -------------
4 RECAPITULATION AUGUST, 1998 Balance from Prior Month General Account $ 6,882.64 ------------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-30079367 General Account $ ------------- Bank Branch Account # Tax Account $ ------------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 1,240.25 ------------- General Account $ ------------- Tax Account $ -------------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 AUGUST, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- --------------------------------- ----------- 08.01.98 BEGINNING BALANCE $ 6,882.64 08.19.98 HERTH PRINTING INC. DISTRIBUTION $ 6,000.00 ---------- 08.31.98 TOTAL DEPOSITS $ 6,000.00 ---------- 08.31.98 CHECKS WRITTEN PER ATTACHED $11,642.39 ---------- 08.31.98 BALANCE $ 1,240.25 ==========
6 RUN DATE: 09/14/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 08/31/98 TRANSACTION JOURNAL TIME: 12:03 PM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 08/31/98 1020-000-00 11,642.39 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - ---------- -------- ------------------------ ------------------ ------------- 0001162 08/03/98 CASEY & BOOG 6600-000-00 95.00 0001163 08/03/98 UPS 6000-000-00 78.25 0001164 08/04/98 KNUTSEN TRAVEL PORT 7900-000-00 550.00 0001165 08/04/98 AMERITECH 7800-000-00 18.82 0001166 08/06/98 STATE OF NEVADA 7600-000-00 389.96 0001167 08/07/98 CASEY & BOOG 6500-000-00 25.68 0001168 08/14/98 FIRST AMERICA 2110-001-00 474.30 0001168 08/14/98 FIRST AMERICA 2110-002-00 810.00 0001168 08/14/98 FIRST AMERICA 2110-005-00 474.30 ---------- CHECK 0001168 TOTALS: 1,758.60 0001169 08/14/98 UPS 6000-000-00 12.00 0001170 08/14/98 FED EX 6000-000-00 44.75 0001171 08/18/98 MICHAEL KASSOUFF 7900-000-00 327.00 0001172 08/17/98 LAURIE WEBB & ASSOCIATES 6200-000-00 442.50 0001173 08/18/98 KNUTSEN TRAVEL PORT 7900-000-00 1,167.00 0001174 08/19/98 CORPORATE STOCK TRANSFER 7900-000-00 213.96 0001175 08/18/98 CASEY & BOOG 6600-000-00 90.00 0001176 08/18/98 US TRUSTEE 6200-000-00 250.00 0001177 08/18/98 AT&T 7800-000-00 4.91 0001178 08/27/98 H LAWRENCE HERTH 8100-000-00 991.20 0001179 08/27/98 RICHARD A. CASCARILLA 8100-000-00 3,723.00 0001180 08/28/98 AMERITECH 7800-000-00 18.82 0001181 08/28/98 UPS 6000-000-00 12.00 0001182 08/28/98 FLEET 7900-000-00 1,138.15 0001183 08/31/98 FIRST UNION 7900-000-00 290.79 ---------- JOURNAL CD-0001 TOTALS: 11,642.39 ---------- SOURCE CD TOTALS: 11,642.39 ---------- REPORT TOTALS: 11,642.39 ==========
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO AUGUST 31, 1998
Current Year to Month Date -------------- --------------- Income $ 0.00 $ 0.00 -------------- --------------- Cost of Goods Sold Beginning Inventory $ $ -------------- --------------- Inventory Purchases $ $ -------------- --------------- Ending inventory $ $ -------------- --------------- Total Costs of Goods Sold $ $ -------------- --------------- Operating Expenses Salaries and Wages $ 6,200.00 $ 73,200.00 -------------- --------------- Employee Benefits $ $ -------------- --------------- Shipping & Freight $ 147.00 $ 1,571.82 -------------- --------------- Rent $ $ -------------- --------------- Secured Debt Payments $ $ -------------- --------------- Outside Services $ 185.00 $ 3,039.93 -------------- --------------- Telephone $ 42.55 $ 905.89 -------------- --------------- Repairs & Maintenance $ $ -------------- --------------- Miscellaneous Office Expense $ 25.68 $ 2,085.14 -------------- --------------- Advertising $ $ -------------- --------------- Travel & Entertainment $ 3,686.90 $ 19,780.99 -------------- --------------- Professional Fees $ 692.50 $ 52,127.77 -------------- --------------- Court Costs $ $ 19,372.00 -------------- --------------- Insurance: Liability $ $ -------------- --------------- Property $ $ -------------- --------------- Vehicle $ $ -------------- --------------- Worker's Compensation $ $ -------------- --------------- Other - Bond $ $ (920.00) -------------- --------------- Taxes: Payroll $ 893.06 $ 6,956.96 -------------- --------------- Sales $ $ -------------- --------------- Income $ $ -------------- --------------- Real Property $ $ -------------- --------------- Personal Property $ $ -------------- --------------- Total Operating Expenses $ 11,872.69 $ 178,120.50 -------------- --------------- Total Profit (Loss) from Operations $ (11,872.69) $ (178,120.50) -------------- --------------- Other Income (Expense) $ $ -------------- --------------- Gain (Loss) on Sale of Assets $ $ -------------- --------------- Interest Expense $ $ -------------- --------------- Interest Income $ $ -------------- --------------- Dividend Income $ $ 16.34 -------------- --------------- Herth Printing Income (loss) $ 12,044.00 $ (30,467.00) -------------- --------------- Total $ 12,044.00 $ (30,450.66) -------------- --------------- Total Profit (Loss) for Month $ 171.31 $ (208,571.16) -------------- ---------------
8 CASH FLOW STATEMENT AUGUST, 1998
Projected Current For current Month Month -------------- --------------- Receipts: Sales (Cash Only) $ $ -------------- --------------- Collections of Accounts Receivable $ $ -------------- --------------- Other Income - HERTH PRINTING DIVIDEND $ 6,000.00 $ -------------- --------------- Total Receipts $ 6,000.00 $ -------------- --------------- Disbursements: Purchases and Inventory $ $ -------------- --------------- Salaries and Wages $ 4,714.20 $ -------------- --------------- Employee Benefits $ $ -------------- --------------- Shipping & Freight $ 147.00 $ -------------- --------------- Rent $ $ -------------- --------------- Secured Debt Payments $ $ -------------- --------------- Outside Services $ 185.00 $ -------------- --------------- Telephone $ 42.55 $ -------------- --------------- Repairs & Maintenance $ $ -------------- --------------- Miscellaneous Office Expense $ 25.68 $ -------------- --------------- Advertising $ $ -------------- --------------- Travel & Entertainment $ 3,686.90 $ -------------- --------------- Professional Fees $ 692.50 $ -------------- --------------- Court Costs $ $ -------------- --------------- Insurance: Liability $ $ -------------- --------------- Property $ $ -------------- --------------- Vehicle $ $ -------------- --------------- Worker's Compensation $ $ -------------- --------------- Other $ $ -------------- --------------- Taxes: Payroll $ 2,148.56 $ -------------- --------------- Sales $ $ -------------- --------------- Income $ $ -------------- --------------- Real Property $ $ -------------- --------------- Personal Property $ $ -------------- --------------- Total Disbursements $ 11,642.39 $ -------------- --------------- Cash Flow $ (5,642.39) $ -------------- ---------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation come due. Provide summary information below for both accounts payable and accounts receivable:
Accounts Payable Accounts Receivable - ------------------------------------------------------------------------------ Less Than 31 Days Past Due 31 to 60 Days Past Due 61 to 90 Days Past Due 91 to 120 Days Past Due Over 120 Days Past Due
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
Payment Periodic Date of Post Petitions Payments Period Payment Last Made Missed Creditor Name and Address (mo/wk) Amount Payment No. Amount No. Amount - -------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $6,200.00 --------- Gross Sales Subject to Sales Tax for Report Month: $ 0.00 ---------
Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ------------------------------------------------------------------------------------------------------------------------------ Federal Payroll & Withholding 1,758.60 State Payroll & Withholding 460.60 State Sales & Use
IV. INSURANCE COVERAGE
Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------------------------------------ Worker's Compensation Liability Fire & Extended Coverage Property Theft Vehicle Life (Beneficiary): Other (specify):
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court Order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
Total Total Quarterly Disbursement Fees Due But Quarter Ending During Quarter Quarterly Fee Amount Paid Date Paid Not Paid - ---------------------------------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 18th day of September , 1997. By: /s/ Richard A. Cascarilla ---------------------------------------- EX-99.R 50 EXHIBIT 99(R) 1 Exhibit 99r POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT SEPTEMBER 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard Cascarilla ----------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET SEPTEMBER 30, 1998 Assets Current Assets: Cash $ 5,555.18 --------------- Accounts Receivable $ --------------- Allowance for Doubtful Accounts $ --------------- Accounts Receivable (Net) $ --------------- Inventory $ --------------- Prepaid Expenses $ --------------- Total Current Assets $ 5,555.18 --------------- Property and Equipment (Fair Market Value) Real Property $ --------------- Machinery and Equipment $ 5,700, 000.00 --------------- Furniture and Fixtures $ --------------- Office Equipment $ --------------- Leasehold Improvements $ --------------- Vehicles $ --------------- Other $ --------------- Total Property and Equipment $ 5,700,000.00 --------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 388,747.00 --------------- Total Assets: $ 6,0942,302.18 ---------------
3 LIABILITIES SEPTEMBER 30, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ -------------- Payroll Taxes $ 460.60 -------------- Sales Taxes $ -------------- Income Taxes $ -------------- Real Property Taxes $ -------------- Personal Property Taxes $ -------------- Accounts Payable $ -------------- Postpetition Real Property Lease Arrearages $ Postpetition Equipment Lease Arrearages $ -------------- Accrued Professional Fees Other LOAN SHAREHOLDER $ 4,000.00 -------------- DIEGOTEL, INC. STOCK-BOOK VALUE $ 7,500.00 -------------- Total Postpetition Liabilities $ 11,960.60 -------------- Repetition Liabilities Priority Debt (Schedule A-1) $ -------------- Secured Debt (Schedule A-2) $ -------------- Unsecured Debt (Schedule A-3) $ -------------- Total Prepetition Liabilities $ -------------- Shareholder's Equity Common Stock $ -------------- Paid-In Capital $ 6,131,096.00 -------------- Retained Earnings $ (48,754.42) -------------- Total Shareholder's Equity $ 6,082,341.58 -------------- Total Liabilities & Equity $ 6,094,302.18 --------------
4 RECAPITULATION SEPTEMBER, 1998 Balance from Prior Month General Account $ 1,240.25 ---------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-30079367 General Account $ ---------- Bank Branch Account # Tax Account $ ---------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 5,555.18 ---------- General Account $ ---------- Tax Account $ ----------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 SEPTEMBER, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- ---------------------------- ---------- 09.01.98 BEGINNING BALANCE $ 1,240.25 ---------- 09.08.98 SHAREHOLDER LOANS $ 4,000.00 09.25.98 TRANSFER FROM DIEGOTEL, INC. $ 7,500.00 ---------- 09.30.98 TOTAL DEPOSITS $11,500.00 09.30.98 CHECKS WRITTEN PER ATTACHED $ 7,185.07 ---------- 09.30.98 BALANCE $ 5,555.18 ==========
6 RUN DATE: 10/09/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 09/30/98 TRANSACTION JOURNAL TIME: 09:30 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 09/30/98 1020-000-00 7,185.07 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - ---------- -------- ------------------------ ----------- ------------ 0001184 09/01/98 CASEY & BOOG 6600-000-00 95.00 0001185 09/01/98 CABO 6900-000-00 500.00 0001186 09/04/98 MIKE KASSOUFF 6500-000-00 199.23 0001187 09/04/98 JEFFREY ANTISDEL 6000-000-00 42.20 0001188 09/04/98 CASEY & BOOG 6600-000-00 167.00 0001189 09/10/98 CASEY & BOOG 6600-000-00 167.00 0001190 09/11/98 CASEY & BOOG 6500-000-00 29.79 0001191 09/15/98 FIRST OF AMERICA 2110-001-00 474.30 0001191 09/15/98 FIRST OF AMERICA 2110-002-00 810.00 0001191 09/15/98 FIRST OF AMERICA 2110-005-00 474.30 --------- CHECK 0001191 TOTALS: 1,758.60 0001192 09/19/98 KNUTSEN TRAVEL REPORT 7900-000-00 93.00 0001193 09/19/98 CORPORATE SERVICES 7800-000-00 263.76 0001194 09/19/98 CASEY AND BOOG 6600-000-00 95.00 0001195 09/19/98 KNUTSEN TRAVEL REPORT 7900-000-00 133.00 0001196 09/19/98 CASEY & BOOG 6600-000-00 167.00 0001197 09/24/98 ROBERT LINDBERG CPA 5050-000-00 1,041.90 0001198 09/24/98 PAUL GOEBEL GROUP 6110-000-00 530.02 0001199 09/24/98 UPS 6000-000-00 24.00 0001200 09/25/98 ENDS CHRISTIE 6600-000-00 500.00 0001201 09/25/98 CASEY & BOOG 6600-000-00 167.00 0001202 09/25/98 CORPORATE STOCK TRANSFER 7900-000-00 51.94 0001203 09/29/98 FLEET CREDIT CARD 7900-000-00 1,159.63 -------- JOURNAL CD-0001 TOTALS: 7,185.07 -------- SOURCE CD TOTALS: 7,185.07 -------- REPORT TOTALS: 7,185.07 --------
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO SEPTEMBER 30, 1998
Current Year to Month Date ------------ ------------- Income $ $ ------------ ------------- Cost of Goods Sold Beginning Inventory $ $ ------------ ------------- Inventory Purchases $ $ ------------ ------------- Ending inventory $ $ ------------ ------------- Total Costs of Goods Sold $ $ ------------ ------------- Operating Expenses Salaries and Wages $ $ 73,200.00 ------------ ------------- Employee Benefits $ 530.02 $ 530.02 ------------ ------------- Shipping & Freight $ 66.20 $ 1,638.02 ------------ ------------- Rent $ 500.00 $ 500.00 ------------ ------------- Secured Debt Payments $ $ ------------ ------------- Outside Services $ 1,358.00 $ 4,397.93 ------------ ------------- Telephone $ 263.76 $ 1,169.65 ------------ ------------- Repairs & Maintenance $ $ ------------ ------------- Miscellaneous Office Expense $ 229.02 $ 2,314.16 ------------ ------------- Advertising $ $ ------------ ------------- Travel & Entertainment $ 1,437.57 $ 21,218.56 ------------ ------------- Professional Fees $ 1,041.90 $ 53.169.67 ------------ ------------- Court Costs $ $ 19,372.00 ------------ ------------- Insurance: Liability $ $ ------------ ------------- Property $ $ ------------ ------------- Vehicle $ $ ------------ ------------- Worker's Compensation $ $ ------------ ------------- Other - Bond $ $ (920.00) ------------ ------------- Taxes: Payroll $ $ 6,956.96 ------------ ------------- Sales $ $ ------------ ------------- Income $ $ ------------ ------------- Real Property $ $ ------------ ------------- Personal Property $ $ ------------ ------------- Total Operating Expenses $ 5,426.47 $ 183,546.97 ------------ ------------- Total Profit (Loss) from Operations $ (5,426.47) $ (183,546.97) ------------ ------------- Other Income (Expense) $ $ ------------ ------------- Gain (Loss) on Sale of Assets $ $ ------------ ------------- Interest Expense $ $ ------------ ------------- Interest Income $ $ ------------ ------------- Dividend Income $ $ 16.34 ------------ ------------- Herth Printing Income (loss) $ 1,118.00 $ (29,349.00) ------------ ------------- Total $ 1,118.00 $ (29,332.66) ------------ ------------- Total Profit (Loss) for Month $ (4,308.47) $ (212,879.63) ------------ -------------
8 CASH FLOW STATEMENT SEPTEMBER, 1998
Projected Current For current Month Month ------------ ------------ Receipts: Sales (Cash Only) $ $ ------------ ------------ Collections of Accounts Receivable $ $ ------------ ------------ Other Income - DIEGTOTEL INC. TRANSFER $7,500 $ 11,500.00 $ ------------ ------------ LOAN - SHAREHOLDERS $4,000 Total Receipts $ 11,500.00 $ ------------ ------------ Disbursements: Purchases and Inventory $ $ ------------ ------------ Salaries and Wages $ $ ------------ ------------ Employee Benefits $ 530.02 $ ------------ ------------ Shipping & Freight $ 66.20 $ ------------ ------------ Rent $ 500.00 $ ------------ ------------ Secured Debt Payments $ $ ------------ ------------ Outside Services $ 1,358.00 $ ------------ ------------ Telephone $ 263.76 $ ------------ ------------ Repairs & Maintenance $ $ ------------ ------------ Miscellaneous Office Expense $ 229.02 $ ------------ ------------ Advertising $ $ ------------ ------------ Travel & Entertainment $ 1,437.57 $ ------------ ------------ Professional Fees $ 1,041.90 $ ------------ ------------ Court Costs $ $ ------------ ------------ Insurance: Liability $ $ ------------ ------------ Property $ $ ------------ ------------ Vehicle $ $ ------------ ------------ Worker's Compensation $ $ ------------ ------------ Other $ $ ------------ ------------ Taxes: Payroll $ 1,758.60 $ ------------ ------------ Sales $ $ ------------ ------------ Income $ $ ------------ ------------ Real Property $ $ ------------ ------------ Personal Property $ $ ------------ ------------ Total Disbursements $ 7,185.07 $ ------------ ------------ Cash Flow $ 4,314.93 $ ------------ ------------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation come due. Provide summary information below for both accounts payable and accounts receivable:
- -------------------------------------------------------------------------------- Accounts Payable Accounts Receivable - -------------------------------------------------------------------------------- Less Than 31 Days Past Due - -------------------------------------------------------------------------------- 31 to 60 Days Past Due - -------------------------------------------------------------------------------- 61 to 90 Days Past Due - -------------------------------------------------------------------------------- 91 to 120 Days Past Due - -------------------------------------------------------------------------------- Over 120 Days Past Due - --------------------------------------------------------------------------------
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
- --------------------------------------------------------------------------------------------------------- Creditor Name and Address Payment Period Periodic Date of Post Petition Payments (mo/wk) Payment Last Made Missed Amount Payment No. Amount No. Amount - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $0.00 ----- Gross Sales Subject to Sales Tax for Report Month: $0.00 -----
- ----------------------------------------------------------------------------------------------------------- Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ----------------------------------------------------------------------------------------------------------- Federal Payroll & Withholding - ----------------------------------------------------------------------------------------------------------- State Payroll & Withholding 460.60 - ----------------------------------------------------------------------------------------------------------- State Sales & Use - -----------------------------------------------------------------------------------------------------------
IV. INSURANCE COVERAGE
- ------------------------------------------------------------------------------------------------------ Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------------ Worker's Compensation Liability - ------------------------------------------------------------------------------------------------------ Fire & Extended Coverage - ------------------------------------------------------------------------------------------------------ Property - ------------------------------------------------------------------------------------------------------ Theft - ------------------------------------------------------------------------------------------------------ Vehicle - ------------------------------------------------------------------------------------------------------ Life (Beneficiary): - ------------------------------------------------------------------------------------------------------ Other (specify): - ------------------------------------------------------------------------------------------------------
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court Order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO 11 MONTHLY QUESTIONNAIRE Page 3 If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
- ----------------------------------------------------------------------------------------------- Quarter Ending Total Quarterly Fee Amount Paid Date Paid Total Quarterly Disbursement Fees Due But During Quarter Not Paid - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 18 day of September, 1998. By: /s/ Richard Cascarilla EX-99.S 51 EXHIBIT 99(S) 1 Exhibit 99s POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT OCTOBER 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA. Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard A. Cascarilla ----------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET OCTOBER 31, 1998 Assets Current Assets: Cash $ 654.32 -------------- Accounts Receivable $ -------------- Allowance for Doubtful Accounts $ -------------- Accounts Receivable (Net) $ -------------- Inventory $ -------------- Prepaid Expenses $ -------------- Total Current Assets $ 654.32 -------------- Property and Equipment (Fair Market Value) Real Property $ -------------- Machinery and Equipment $ 5,700,000.00 -------------- Furniture and Fixtures $ -------------- Office Equipment $ -------------- Leasehold Improvements $ -------------- Vehicles $ -------------- Other $ -------------- Total Property and Equipment $ 5,700,000.00 -------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 381,680.00 -------------- Total Assets: $ 6,082,334.32 --------------
3 LIABILITIES OCTOBER 31, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ------------- Payroll Taxes $ 57.60 ------------- Sales Taxes $ ------------- Income Taxes $ ------------- Real Property Taxes $ ------------- Personal Property Taxes $ ------------- Accounts Payable $ ------------- Postpetition Real Property Lease Arrearages $ ------------- Postpetition Equipment Lease Arrearages $ ------------- Accrued Professional Fees Other LOAN SHAREHOLDER $ 4,000.00 ------------- DIEGOTEL, INC STOCK-BOOK VALUE $ 7,500.00 ------------- Total Postpetition Liabilities $ 11,557.60 ------------- Repetition Liabilities Priority Debt (Schedule A-1) $ ------------- Secured Debt (Schedule A-2) $ ------------- Unsecured Debt (Schedule A-3) $ ------------- Total Prepetition Liabilities $ ------------- Shareholder's Equity Common Stock $ ------------- Paid-In Capital $6,131,096.00 ------------- Retained Earnings $ (60,319.28) ------------- Total Shareholder's Equity $6,070,776.72 ------------- Total Liabilities & Equity $6,082,334.32 -------------
4 RECAPITULATION OCTOBER, 1998 Balance from Prior Month General Account $ 5,555.18 ---------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-30079367 General Account $ ---------- Bank Branch Account # Tax Account $ ---------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 654.32 ---------- General Account $ ---------- Tax Account $ ----------
5 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-31265 OCTOBER, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- --------------------------- ---------- 10.01.98 BEGINNING BALANCE $ 5,555.18 10.31.98 TOTAL DEPOSITS $ 0.00 10.30.98 BANK SERVICE CHARGE $ 7.85 10.31.98 CHECKS WRITTEN PER ATTACHED $ 4,893.01 ---------- 10.31.98 BALANCE $ 4,900.86 ==========
6 RUN DATE: 11/04/98 POWERTEL USA, INC. PAGE: I SYS DATE: 10/31/99 TRANSACTION JOURNAL TIME: 02:33 PM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 10/31/98 1020-000-00 4,893.01 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - ---------- -------- ------------------------ ----------- ------------ 0001204 10/02/98 CASEY & BOOG 6600-000-00 167.00 0001205 10/02/98 CASEY & BOOG 6600-000-00 95.00 0001206 10/02/98 UPS 6000-000-00 12.00 0001207 10/02/98 CABO 6900-000-00 500.00 0001208 10/09/98 US POSTMASTER 6500-000-00 180.00 0001209 10/09/98 CASEY & BOOG 6500-000-00 21.59 0001210 10/09/98 CORPORATE SERVICES 7800-000-00 102.63 0001211 10/09/98 BILL STEPHENS PRODUCTION 6600-000-00 544.63 0001212 10/09/98 CASEY & BOOG 6600-000-00 167.00 0001213 10/12/98 KNUTSON TRAVEL PORT 7900-000-00 302.00 0001214 10/12/98 PAUL GOEBEL GROUP 6100-000-00 407.70 0001215 10/15/99 NEVADA DEPARTMENT OF TAXATION 2110-005-00 5.00 0001216 10/15/98 STATE OF MICHIGAN 2110-003-00 403.00 0001217 10/15/98 UPS 6000-000-00 48.00 0001218 10/18/98 CASEY & BOOG 6600-000-00 95.00 0001219 10/21/98 AT&T 7800-000-00 13.08 0001220 10/21/98 SPRINT 7800-000-00 133.12 0001221 10/21/98 CORPORATE STOCK TRANSFER 7900-000-00 54.85 0001222 10/21/98 ROBERT LINDBERG CPA 5050-000-00 198.90 0001223 10/22/98 ELLIE SOPER 6600-000-00 50.00 0001224 10/22/98 CASEY 4 BOOG 6600-000-00 150.00 0001225 10/22/98 ENOS CHRISTIE 6600-000-00 500.00 0001226 10/26/99 PAUL GOEBEL GROUP 6110-000-00 529.84 0001227 10/28/98 UPS 6000-000-00 12.00 0001228 10/29/90 AMERITECH 7800-000-00 38.67 0001229 10/30/98 CASEY & BOOG 6600-000-00 150.00 0001230 10/30/98 UPS 6000-000-00 12.00 --------- JOURNAL CD-0001 TOTALS: 4,893.01 --------- SOURCE CD TOTALS: 4,893.01 --------- REPORT TOTALS: 4,893.01 =========
7 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO OCTOBER 31, 1998
Current Year to Month Date ------------ ------------- Income $ $ ------------ ------------- Cost of Goods Sold Beginning Inventory $ $ ------------ ------------- Inventory Purchases $ $ ------------ ------------- Ending inventory $ $ ------------ ------------- Total Costs of Goods Sold $ $ ------------ ------------- Operating Expenses Salaries and Wages $ $ 73,200.00 ------------ ------------- Employee Benefits $ 529.84 $ 1,059.86 ------------ ------------- Shipping & Freight $ 84.00 $ 1,722.02 ------------ ------------- Rent $ 500.00 $ 1,000.00 ------------ ------------- Secured Debt Payments $ $ ------------ ------------- Outside Services $ 1,198.63 $ 6,316.56 ------------ ------------- Telephone $ 287.50 $ 1,457.15 ------------ ------------- Repairs & Maintenance $ $ ------------ ------------- Miscellaneous Office Expense $ 209.44 $ 2,523.60 ------------ ------------- Advertising $ $ ------------ ------------- Travel & Entertainment $ 356.85 $ 21,575.41 ------------ ------------- Professional Fees $ 198.90 $ 53,368.57 ------------ ------------- Court Costs $ $ 19,372.00 ------------ ------------- Insurance: Liability $ $ ------------ ------------- Property $ 407.70 $ 407.70 ------------ ------------- Vehicle $ $ ------------ ------------- Worker's Compensation $ $ ------------ ------------- Other - Bond $ $ (920.00) ------------ ------------- Taxes: Payroll $ 5.00 $ 6,961.96 ------------ ------------- Sales $ $ ------------ ------------- Income $ $ ------------ ------------- Real Property $ $ ------------ ------------- Personal Property $ $ ------------ ------------- Total Operating Expenses $ 4,497.86 $ 188,044.83 ------------ ------------- Total Profit (Loss) from Operations $ (4,497.86) $ (188,044.83) ------------ ------------- Other Income (Expense) $ $ ------------ ------------- Gain (Loss) on Sale of Assets $ $ ------------ ------------- Interest Expense $ $ ------------ ------------- Interest Income $ $ ------------ ------------- Dividend Income $ $ 16.34 ------------ ------------- Herth Printing Income (loss) $ (7,067.00) $ (36,416.00) ------------ ------------- Total $ (7,067.00) $ (36,399.66) ------------ ------------- Total Profit (Loss) for Month $ (11,564.86) $ (224,444.49) ------------ -------------
8 CASH FLOW STATEMENT OCTOBER, 1998
Projected Current For current Month Month ----------- ----------- Receipts: Sales (Cash Only) $ $ ----------- ----------- Collections of Accounts Receivable $ $ ----------- ----------- Other Income $ $ ----------- ----------- Total Receipts $ $ ----------- ----------- Disbursements: Purchases and Inventory $ $ ----------- ----------- Salaries and Wages $ $ ----------- ----------- Employee Benefits $ 529.84 $ ----------- ----------- Shipping & Freight $ 84.00 $ ----------- ----------- Rent $ 500.00 $ ----------- ----------- Secured Debt Payments $ $ ----------- ----------- Outside Services $ 1,918.63 $ ----------- ----------- Telephone $ 287.50 $ ----------- ----------- Repairs & Maintenance $ $ ----------- ----------- Miscellaneous Office Expense $ 209.44 $ ----------- ----------- Advertising $ $ ----------- ----------- Travel & Entertainment $ 356.85 $ ----------- ----------- Professional Fees $ 198.90 $ ----------- ----------- Court Costs $ $ ----------- ----------- Insurance: Liability $ $ ----------- ----------- Property $ 407.70 $ ----------- ----------- Vehicle $ $ ----------- ----------- Worker's Compensation $ $ ----------- ----------- Other $ $ ----------- ----------- Taxes: Payroll $ 408.00 $ ----------- ----------- Sales $ $ ----------- ----------- Income $ $ ----------- ----------- Real Property $ $ ----------- ----------- Personal Property $ $ ----------- ----------- Total Disbursements $ 4,900.86 $ ----------- ----------- Cash Flow $ (4,900.86) $ ----------- -----------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
- -------------------------------------------------------------------------------- Accounts Payable Accounts Receivable - -------------------------------------------------------------------------------- Less Than 31 Days Past Due - -------------------------------------------------------------------------------- 31 to 60 Days Past Due - -------------------------------------------------------------------------------- 61 to 90 Days Past Due - -------------------------------------------------------------------------------- 91 to 120 Days Past Due - -------------------------------------------------------------------------------- Over 120 Days Past Due - --------------------------------------------------------------------------------
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
- --------------------------------------------------------------------------------------------------------- Creditor Name and Address Payment Period Periodic Date of Post Petition Payments (mo/wk) Payment Last Made Missed Amount Payment No. Amount No. Amount - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $ -0- ----- Gross Sales Subject to Sales Tax for Report Month: $ -0- -----
- ----------------------------------------------------------------------------------------------------------- Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ----------------------------------------------------------------------------------------------------------- Federal Payroll & Withholding - ----------------------------------------------------------------------------------------------------------- State Payroll & Withholding 57.60 - ----------------------------------------------------------------------------------------------------------- State Sales & Use - -----------------------------------------------------------------------------------------------------------
IV. Insurance Coverage
- ------------------------------------------------------------------------------------------------- Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------- Worker's Compensation Liability - ------------------------------------------------------------------------------------------------- Fire & Extended Coverage - ------------------------------------------------------------------------------------------------- Property - ------------------------------------------------------------------------------------------------- Theft - ------------------------------------------------------------------------------------------------- Vehicle - ------------------------------------------------------------------------------------------------- Life (Beneficiary): - ------------------------------------------------------------------------------------------------- Other (specify): - -------------------------------------------------------------------------------------------------
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
- ----------------------------------------------------------------------------------------------- Quarter Ending Total Quarterly Fee Amount Paid Date Paid Total Quarterly Disbursement Fees Due But During Quarter Not Paid - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 16 day of November, 1998. By: /s/ Richard Cascarilla EX-99.T 52 EXHIBIT 99(T) 1 Exhibit 99t POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT NOVEMBER 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel, USA, Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard A. Cascarilla ----------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET NOVEMBER 30, 1998 Assets Current Assets: Cash $ 2,439.04 -------------- Accounts Receivable $ -------------- Allowance for Doubtful Accounts $ -------------- Accounts Receivable (Net) $ -------------- Inventory $ -------------- Prepaid Expenses $ -------------- Total Current Assets $ 2,439.04 -------------- Property and Equipment (Fair Market Value) Real Property $ -------------- Machinery and Equipment $ 5,700,000.00 -------------- Furniture and Fixtures $ -------------- Office Equipment $ -------------- Leasehold Improvements $ -------------- Vehicles $ -------------- Other $ -------------- Total Property and Equipment $ 5,700,000.00 -------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 383,235.00 -------------- Total Assets: $ 6,085,674.04 --------------
3 LIABILITIES NOVEMBER 30, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ -------------- Payroll Taxes $ 57.60 -------------- Sales Taxes $ -------------- Income Taxes $ -------------- Real Property Taxes $ -------------- Personal Property Taxes $ -------------- Accounts Payable $ -------------- Postpetition Real Property Lease Arrearages $ -------------- Postpetition Equipment Lease Arrearages $ -------------- Accrued Professional Fees Other LOAN SHAREHOLDER $ 4,000.00 -------------- DIEGOTEL, INC STOCK-BOOK VALUE $ 14,500.00 -------------- Total Postpetition Liabilities $ 18,557.60 -------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ -------------- Secured Debt (Schedule A-2) $ -------------- Unsecured Debt (Schedule A-3) $ -------------- Total Prepetition Liabilities $ -------------- Shareholder's Equity Common Stock $ -------------- Paid-In Capital $ 6,131,096.00 -------------- Retained Earnings $ (63,979.56) -------------- Total Shareholder's Equity $ 6,067,116.44 -------------- Total Liabilities & Equity $ 6,085,674.04 --------------
4 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO NOVEMBER 30, 1998
Current Year to Month Date ----------- ------------- Income $ $ ----------- ------------- Cost of Goods Sold Beginning Inventory $ $ ----------- ------------- Inventory Purchases $ $ ----------- ------------- Ending Inventory $ $ ----------- ------------- Total Costs of Goods Sold $ $ ----------- ------------- Operating Expenses Salaries and Wages $ $ 73,200.00 ----------- ------------- Employee Benefits $ 529.84 $ 1,589.70 ----------- ------------- Shipping & Freight $ 12.00 $ 1,734.02 ----------- ------------- Rent $ 500.00 $ 1,500.00 ----------- ------------- Secured Debt Payments $ $ ----------- ------------- Outside Services $ 1,679.18 $ 7,995.74 ----------- ------------- Telephone $ 115.97 $ 1,573.12 ----------- ------------- Repairs & Maintenance $ $ ----------- ------------- Miscellaneous Office Expense $ 254.81 $ 2,778.41 ----------- ------------- Advertising $ $ ----------- ------------- Travel & Entertainment $ 1,369.18 $ 22,944.59 ----------- ------------- Professional Fees $ 754.30 $ 54,122.87 ----------- ------------- Court Costs $ $ 19,372.00 ----------- ------------- Insurance: Liability $ $ ----------- ------------- Property $ 407.70 $ 407.70 ----------- ------------- Vehicle $ $ ----------- ------------- Worker's Compensation $ $ ----------- ------------- Other - Bond $ $ (920.00) ----------- ------------- Taxes: Payroll $ $ 6,961.96 ----------- ------------- Sales $ $ ----------- ------------- Income $ $ ----------- ------------- Real Property $ $ ----------- ------------- Personal Property $ $ ----------- ------------- Total Operating Expenses $ 5,215.28 $ 193,260.11 ----------- ------------- Total Profit (Loss) from Operations $ (5,215.28) $ (193,260.11) ----------- ------------- Other Income (Expense) $ $ ----------- ------------- Gain (Loss) on Sale of Assets $ $ ----------- ------------- Interest Expense $ $ ----------- ------------- Interest Income $ $ ----------- ------------- Dividend Income $ $ 16.34 ----------- ------------- Herth Printing Income (loss) $ (1,555.00) $ (34,861.00) ----------- ------------- Total $ (1,555.00) $ (34,844.66) ----------- ------------- Total Profit (Loss) for Month $ (3,660.28) $ (228,104.77) ----------- -------------
5 RECAPITULATION NOVEMBER 30, 1998 Balance from Prior Month General Account $ 654.32 ---------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account #62-30079367 General Account $ ---------- Bank Branch Account # Tax Account $ ---------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 2,439.04 ---------- General Account $ ---------- Tax Account $ ----------
6 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-30265 NOVEMBER, 1998
FIRST OF DATE DESCRIPTION AMERICA - -------- --------------------------- ---------- 11.01.98 BEGINNING BALANCE $ 654.32 11.31.98 TOTAL DEPOSITS $ 7,000.00 11.30.98 CHECKS WRITTEN PER ATTACHED $ 5,215.28 ---------- 11.30.98 BALANCE $ 2,439.04 ==========
7 TOTAL DR/CR 0.00 0.00 RUN DATE: 12/11/98 POWERTEL USA, INC. PAGE: 1 SYS DATE: 11/30/98 TRANSACTION JOURNAL TIME: 09:25 AM
SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 11/30/98 1020-000-00 5,215.28 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT - -------- -------- -------------------- ----------- ------------ 0001231 11/02/98 CASEY & BOOG 6600-000-00 95.00 0001232 11/02/98 CABO 6900-000-00 500.00 0001233 11/04/98 KNUTSONS TRAVEL PORT 7900-000-00 255.50 0001234 11/04/98 MCBEE 6500-000-00 120.08 0001235 11/06/98 CASEY & BOOG 6600-000-00 150.00 0001236 11/06/98 CASEY & BOOG PLC 6500-000-00 20.73 0001237 11/06/98 KNUTSON TRAVEL PORT 7900-000-00 465.99 0001238 11/13/98 CASEY & BOOG 6600-000-00 150.00 0001239 11/16/98 CASEY & BOOG 6600-000-00 95.00 0001240 11/16/98 SUNSHINE REPORTING 6600-000-00 389.18 0001241 11/17/98 IKON 6500-000-00 114.00 0001242 11/19/98 CORPORATE STOCK 7900-000-00 52.22 0001243 11/19/98 CORPORATE SVCS TELECOM 7800-000-00 115.97 0001244 11/19/08 ROBERT LINDBERG 5050-000-00 254.30 0001245 11/20/98 CASEY & BOOG 6600-000-00 150.00 0001246 11/25/98 ENOS CHRISTIE 6600-000-00 500.00 0001247 11/25/98 FLEET 7900-000-00 213.47 0001248 11/25/98 PAUL GOEBEL GROUP 6110-000-00 529.84 0001249 11/24/98 US TRUSTEE 6200-000-00 500.00 0001250 11/24/98 VOID 1020-000-00 .00 0001251 11/29/98 KNUTSON TRAVEL 7900-000-00 382.00 0001252 11/28/98 CASEY & BOOG 6600-000-00 150.00 0001253 11/30/98 UPS 6000-000-00 12.00 --------- JOURNAL CD-0001 TOTALS: 5,215.28 --------- SOURCE CD TOTALS: 5,215.28 --------- REPORT TOTALS: 5,215.28 =========
8 CASH FLOW STATEMENT NOVEMBER, 1998
Projected Current For current Month Month ---------- ---------- Receipts: Sales (Cash Only) $ $ ---------- ---------- Collections of Accounts Receivable $ $ ---------- ---------- Other Income DIEGOTEL INC.-TRANSFER $ 7,000.00 $ ---------- ---------- Total Receipts $ 7,000.00 $ ---------- ---------- Disbursements: Purchases and Inventory $ $ ---------- ---------- Salaries and Wages $ $ ---------- ---------- Employee Benefits $ 529.84 $ ---------- ---------- Shipping & Freight $ 12.00 $ ---------- ---------- Rent $ 500.00 $ ---------- ---------- Secured Debt Payments $ $ ---------- ---------- Outside Services $ 1,679.18 $ ---------- ---------- Telephone $ 115.97 $ ---------- ---------- Repairs & Maintenance $ $ ---------- ---------- Miscellaneous Office Expense $ 254.81 $ ---------- ---------- Advertising $ $ ---------- ---------- Travel & Entertainment $ 1.369.18 $ ---------- ---------- Professional Fees $ 754.30 $ ---------- ---------- Court Costs $ $ ---------- ---------- Insurance: Liability $ $ ---------- ---------- Property $ $ ---------- ---------- Vehicle $ $ ---------- ---------- Worker's Compensation $ $ ---------- ---------- Other $ $ ---------- ---------- Taxes: Payroll $ $ ---------- ---------- Sales $ $ ---------- ---------- Income $ $ ---------- ---------- Real Property $ $ ---------- ---------- Personal Property $ $ ---------- ---------- Total Disbursements $ 5,215.28 $ ---------- ---------- Cash Flow $ 1,784.72 $ ---------- ----------
9 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation come due. Provide summary information below for both accounts payable and accounts receivable:
- -------------------------------------------------------------------------------- Accounts Payable Accounts Receivable - -------------------------------------------------------------------------------- Less Than 31 Days Past Due - -------------------------------------------------------------------------------- 31 to 60 Days Past Due - -------------------------------------------------------------------------------- 61 to 90 Days Past Due - -------------------------------------------------------------------------------- 91 to 120 Days Past Due - -------------------------------------------------------------------------------- Over 120 Days Past Due - --------------------------------------------------------------------------------
II. Payments to Secured Creditors and Lessors: Identify every secured Creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
- --------------------------------------------------------------------------------------------------------- Creditor Name and Address Payment Period Periodic Date of Post Petition Payments (mo/wk) Payment Last Made Missed Amount Payment No. Amount No. Amount - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
10 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $0.00 ----- Gross Sales Subject to Sales Tax for Report Month: $0.00 -----
- ----------------------------------------------------------------------------------------------------------- Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ----------------------------------------------------------------------------------------------------------- Federal Payroll & Withholding - ----------------------------------------------------------------------------------------------------------- State Payroll & Withholding 57.60 - ----------------------------------------------------------------------------------------------------------- State Sales & Use - -----------------------------------------------------------------------------------------------------------
IV. Insurance Coverage
- ------------------------------------------------------------------------------------------------- Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------- Worker's Compensation Liability - ------------------------------------------------------------------------------------------------- Fire & Extended Coverage - ------------------------------------------------------------------------------------------------- Property - ------------------------------------------------------------------------------------------------- Theft - ------------------------------------------------------------------------------------------------- Vehicle - ------------------------------------------------------------------------------------------------- Life (Beneficiary): - ------------------------------------------------------------------------------------------------- Other (specify): - -------------------------------------------------------------------------------------------------
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 11 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
- ----------------------------------------------------------------------------------------------- Quarter Ending Total Quarterly Fee Amount Paid Date Paid Total Quarterly Disbursement Fees Due But During Quarter Not Paid - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 21 day of December, 1998. By: /s/ Richard Cascarilla -------------------------------- EX-99.U 53 EXHIBIT 99(U) 1 Exhibit 10u POWERTEL USA, INC. 97-30265 CHAPTER 11 MONTHLY OPERATING REPORT DECEMBER 1998 The Debtor in Possession is filing an incomplete Monthly Operating Report due to the lack of complete records. The former officers of PowerTel USA, Inc. have not cooperated with the Debtor by providing the necessary information. The Books and Records are missing. Therefore, it is impossible for the Debtor to file a complete Monthly Operating Report. /s/ Richard A. Cascarilla ----------------------------------------- RICHARD A. CASCARILLA, PRESIDENT DEBTOR IN POSSESSION 2 BALANCE SHEET December 31, 1998
Assets Current Assets: Cash $ 14,901.03 ----------------- Accounts Receivable $ ----------------- Allowance for Doubtful Accounts $ ----------------- Accounts Receivable (Net) $ ----------------- Inventory $ ----------------- Prepaid Expenses $ ----------------- Total Current Assets $ 14,901.03 ----------------- Property and Equipment (Fair Market Value) Real Property $ ----------------- Machinery and Equipment $ 5,700,000.00 ----------------- Furniture and Fixtures $ ----------------- Office Equipment $ ----------------- Leasehold Improvements $ ----------------- Vehicles $ ----------------- Other $ ----------------- Total Property and Equipment $ 5,700,000.00 ----------------- Investments: Herth Printing and Business Supply Stock (at Book Value) $ 379,760.00 ----------------- Total Assets: $ 6,094,661.03 -----------------
3
Liabilities December 31, 1998 Postpetition Liabilities (Accrued and Unpaid) Salaries & Wages $ ---------------- Payroll Taxes $ 8,347.85 ---------------- Sales Taxes $ ---------------- Income Taxes $ ---------------- Real Property Taxes $ ---------------- Personal Property Taxes $ ---------------- Accounts Payable $ ---------------- Postpetition Real Property Lease Arrearages $ Postpetition Equipment Lease Arrearages $ ---------------- Accrued Professional Fees $ 209,557.74 ---------------- Other: Loan Pay-Shareholder $ 4.000.00 ---------------- DiegoTel, Inc. Stock-Book Value $ 14,500.00 ---------------- Total Postpetition Liabilities $ 236,405.59 ---------------- Prepetition Liabilities Priority Debt (Schedule A-1) $ ---------------- Secured Debt (Schedule A-2) $ ---------------- Unsecured Debt (Schedule A-3) $ 647,000.00 ---------------- Total Prepetition Liabilities $ 647,000.00 ---------------- Shareholder's Equity Common Stock $ ---------------- Paid-In Capital $ 6,131,096.00 ---------------- Retained Earnings $ (919,840.56) ---------------- Total Shareholder's Equity $ 5,211,255.44 ---------------- Total Liabilities & Equity $ 6,094,661.03 ----------------
4 INCOME STATEMENT (Accrual Basis) OCTOBER 1, 1997 TO DECEMBER 31, 1998 Current Year to Month Date ----------- ----------- Income $ $ ----------- ----------- Cost of Goods Sold Beginning Inventory $ $ ----------- ----------- Inventory Purchases $ $ ----------- ----------- Ending inventory $ $ ----------- ----------- Total Costs of Goods Sold $ $ ----------- ----------- Operating Expenses Salaries and Wages $ 25,500.00 $ 98,700.00 ----------- ----------- Employee Benefits $ 529.84 $ 2,119.54 ----------- ----------- Shipping & Freight $ 150.00 $ 1,884.02 ----------- ----------- Rent $ 500.00 $ 2,000.00 ----------- ----------- Secured Debt Payments $ $ ----------- ----------- Utilities $ 8,940.00 $ 16,935.74 ----------- ----------- Telephone $ 146.32 $ 1,719.44 ----------- ----------- Lawsuit Settlement $ 10,000.00 $ 10,000.00 ----------- ----------- Misc $ 164.78 $ 2,943.19 ----------- ----------- Advertising $ 320.00 $ 320.00 ----------- ----------- Travel & Entertainment $ 335.77 $ 23,280.36 ----------- ----------- Professional Fees $255,691.04 $309,813.91 ----------- ----------- Court Costs $ $ 19,372.00 ----------- ----------- Insurance: Liability $ $ ----------- ----------- Property $ $ 407.70 ----------- ----------- Vehicle $ $ ----------- ----------- Worker's Compensation $ $ ----------- ----------- Other: Bond $ $ (920.00) ----------- ----------- Taxes: Payroll $ 2,108.25 $ 9,070.21 ----------- ----------- Sales $ $ ----------- ----------- Income $ $ ----------- ----------- Real Property $ $ ----------- ----------- Personal Property $ $ ----------- ----------- Total Operating Expenses $304,386.00 $497,646.11 ----------- ----------- Total Profit (Loss) from Operations $(304,386.00) $(497,646.11) ----------- ----------- Other Income (Expense) $ $ ----------- ----------- Gain (Loss) on Sale of Assets $ $ ----------- ----------- Interest Expense $ $ ----------- ----------- Interest Income $ $ ----------- ----------- Dividend Income $ $ 16.34 ----------- ----------- Herth Printing Income (loss) $ 1,525.00 $(33,336.00) ----------- ----------- Total $ 1,525.00 $(33,319.66) ----------- ----------- Total Profit (Loss) for Month $(302,861.00) $(530,965.77) ----------- -----------
5 Recapitulation DECEMBER 1998
Balance from Prior Month General Account $ 2,439.04 -------------- Bank FIRST OF AMERICA BANK, N.A. MICHIGAN Branch OKEMOS, MICHIGAN Account # 62-30079367 General Account $ -------------- Bank Branch Account # Tax Account $ -------------- Bank Branch Account # Balance to Carry Forward to Next Month General Account $ 14,901.03 -------------- General Account $ -------------- Tax Account $ --------------
6 POWERTEL USA, INC. EAST LANSING, MICHIGAN BANK ACCOUNT SUMMARIES #97-31265 DECEMBER, 1998
FIRST OF DATE DESCRIPTION AMERICA -------------- ------------------------------------------------------- 12.01.98 BEGINNING BALANCE $ 2,439.04 12.31.98 TOTAL DEPOSITS 99,000.00 12.31.98 CHECKS WRITTEN PER ATTACHED 86,538.01 ---------------- 12.31.98 BALANCE $14,901.03 ----------------
7 RUN DATE: 1/19/99 POWERTEL USA, INC. PAGE: 1 SYS DATE: 12/31/98 TRANSACTION JOURNAL TIME: 09:02 AM SOURCE POSTING CREDIT JOURNAL DATE ACCOUNT NO BATCH TOTAL JOURNAL COMMENT CD-0001 12/31/98 1020-000-00 86,538.01 DISBURSEMENTS
CHECK NO DATE COMMENT DEBIT ACCT TRANS AMOUNT --------- -------- ------------------------ ----------- ------------- 0001254 12/01/98 WALTER & HAVERFIELD 6200-000-00 30,000.00 0001255 12/02/98 ROBERT L. LINDBERG CPA 5050-000-00 188.30 0001256 12/02/98 AMERITECH 7800-000-00 18.98 0001257 12/02/98 MICHAEL KASSOUF 8100-000-00 3,681.00 0001258 12/02/98 RICHARD A. CASCARILLA 8100-000-00 15,637.00 0001259 12/03/98 CABO 6900-000-00 500.00 0001260 12/03/98 CASEY & BOOG 6600-000-00 95.00 0001261 12/03/98 JOHN VOGEL & DEAN C 2001-000-00 10,000.00 0001262 12/03/98 STEVEN HARRIS 6200-000-00 15,000.00 0001263 12/07/98 KAFNEY ACCOUNTING 5050-000-00 785.00 0001264 12/08/98 CASEY & BOOG 6600-000-00 150.00 0001265 12/07/98 UPS 6000-000-00 12.00 0001266 12/09/98 CASEY & BOOG 6500-000-00 25.78 0001267 12/11/98 CASEY & BOOG 6600-000-00 150.00 0001268 12/14/98 CORPORATE STOCK TRANSFER 7900-000-00 140.77 0001269 12/14/98 UPS 6000-000-00 36.00 0001270 12/15/98 HARTMAN & ARMSTRONG 6200-000-00 160.00 0001271 12/16/98 CASEY & BOOG 6600-000-00 95.00 0001272 12/16/98 CASEY & BOOG 6600-000-00 150.00 0001273 12/17/98 PR NEWSWIRE 5100-000-00 320.00 0001274 12/21/98 PAUL GOEBEL GROUP 6150-000-00 529.84 0001275 12/24/98 ENOS CHRISTIE 6600-000-00 500.00 0001276 12/24/98 JEFFREY HARTMAN 5750-000-00 2,500.00 0001277 12/24/98 MICHAEL KASSOUF 5750-000-00 2,500.00 0001278 12/24/98 RICHARD CASCARILLA 5750-000-00 2,500.00 0001279 12/24/98 UPS 6000-000-00 12.00 0001280 12/24/98 CASEY & BOOG 6600-000-00 150.00 0001281 12/25/98 UPS 6000-000-00 90.00 0001282 12/25/98 CUSIP 5900-000-00 139.00 0001283 12/28/98 CORPORATE SERVICES 7800-000-00 106.38 0001284 12/28/98 AMERITECH 7800-000-00 20.96 0001285 12/30/98 CASEY & BOOG 6600-000-00 150.00 0001286 12/30/98 KNUTSON TRAVEL PORT 7900-000-00 195.00 ------------ JOURNAL CD-0001 TOTALS: 86,538.01 ------------- SOURCE CD TOTALS: 86,538.01 ------------- REPORT TOTALS: 86,538.01 =============
8 CASH FLOW STATEMENT DECEMBER 1998
Projected Reported For Current Month Month Receipts: Sales (Cash Only) $ $ ----------- ---------- Collections of Accounts Receivable $94,000.00 $ Sales (Cash Only) ----------- ---------- Other Income HERTH PRINTING, INC.-DIVIDEND $ 5,000.00 $ Sales (Cash Only) ----------- ---------- Total Receipts $99,000.00 $ Sales (Cash Only) ----------- ---------- Disbursements: Purchases and Inventory $ $ ----------- ---------- Salaries and Wages $19,318.00 $ ----------- ---------- Employee Benefits $ 529.84 $ ----------- ---------- Shipping & Freight $ 150.00 $ ----------- ---------- Rent $ 500.00 $ ----------- ---------- Secured Debt Payments $ $ ----------- ---------- Utilities $ 8,940.00 $ ----------- ---------- Telephone $ 146.32 $ ----------- ---------- Repairs & Maintenance $ $ ----------- ---------- Misc. Office Expense $ 164.78 $ ----------- ---------- Advertising $ 320.00 $ ----------- ---------- Travel & Entertainment $ 335.77 $ ----------- ---------- Professional Fees $56,133.30 $ ----------- ---------- Court Costs $ $ ----------- ---------- Insurance: Liability $ $ ----------- ---------- Property $ $ ----------- ---------- Vehicle $ $ ----------- ---------- Worker's Compensation $ $ ----------- ---------- Other $ $ --------------- ----------- ---------- Taxes: Payroll $ $ ----------- ---------- Sales $ $ ----------- ---------- Income $ $ ----------- ---------- Real Property $ $ ----------- ---------- Personal Property $ $ ----------- ---------- Total Disbursements $86,538.01 $ ----------- ---------- Cash Flow $12,461.09 $ ----------- ----------
9 POWERTEL USA, INC. EAST LANSING MICHIGAN ACCOUNTS PAYABLE #97-31265 DECEMBER, 1998 WALTER & HAVERFIELD $158,485.12 CLEVELAND, OHIO LEGAL FEES BELDING & HARRIS 51,072.62 RENO, NV LEGAL FEES ----------- $209,557.74 =========== 10 Monthly Questionnaire I. Accounts Payable and Receivable Aging: Attach an Accounts Payable and Receivable Aging Schedule, identifying in chronological (or reverse chronological) order every debt which came due after the commencement of the bankruptcy case but has not been paid, and specifying the creditor by name and address, the nature of the debt (e.g., rent, advertising, wages, etc.), the amount owed and the date on which the obligation came due. Provide summary information below for both accounts payable and accounts receivable:
- -------------------------------------------------------------------------------- Accounts Payable Accounts Receivable - -------------------------------------------------------------------------------- Less Than 31 Days Past Due 209,557.74 - -------------------------------------------------------------------------------- 31 to 60 Days Past Due - -------------------------------------------------------------------------------- 61 to 90 Days Past Due - -------------------------------------------------------------------------------- 91 to 120 Days Past Due - -------------------------------------------------------------------------------- Over 120 Days Past Due - --------------------------------------------------------------------------------
II. Payments to Secured Creditors and Lessors: Identify every secured creditor and lessor by name and address, and provide the requested information. Where there is a postpetition stipulation or court order governing the creditor's treatment, respond on the basis of that stipulation or order; otherwise, respond on the basis of the prepetition contract or lease.
- --------------------------------------------------------------------------------------------------------- Creditor Name and Address Payment Period Periodic Date of Post Petition Payments (mo/wk) Payment Last Made Missed Amount Payment No. Amount No. Amount - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
11 MONTHLY QUESTIONNAIRE Page 2 III. Tax Liability Gross Payroll Expense for Report Month: $25,550.00 ---------- Gross Sales Subject to Sales Tax for Report Month: $ -0- ----------
Postpetition Taxes
- ----------------------------------------------------------------------------------------------------------- Date Paid Amount Paid Due But Not Paid Accrued But Not Due - ----------------------------------------------------------------------------------------------------------- Federal Payroll & Withholding 7,328.75 - ----------------------------------------------------------------------------------------------------------- State Payroll & Withholding 1,019.10 - ----------------------------------------------------------------------------------------------------------- State Sales & Use - -----------------------------------------------------------------------------------------------------------
IV. INSURANCE COVERAGE
- ------------------------------------------------------------------------------------------------- Carrier/Agent Amount of Policy Expiration Policy Paid Name Coverage Date Through Date - ------------------------------------------------------------------------------------------------- Worker's Compensation Liability - ------------------------------------------------------------------------------------------------- Fire & Extended Coverage - ------------------------------------------------------------------------------------------------- Property - ------------------------------------------------------------------------------------------------- Theft - ------------------------------------------------------------------------------------------------- Vehicle - ------------------------------------------------------------------------------------------------- Life (Beneficiary): - ------------------------------------------------------------------------------------------------- Other (specify): - -------------------------------------------------------------------------------------------------
V. Postpetition Payments A. Has the Debtor made any payments outside of the ordinary course of business to any officers, shareholders, directors, other principals or insider-employees or to professionals without specific authorization under a Bankruptcy Court order? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. B. Has the Debtor, following the commencement of the bankruptcy case, made any payments on account of prepetition unsecured debts, except as specifically authorized by the Bankruptcy Court? NO If the answer is yes, identify each person paid, the date and amount of such payment(s) and the basis for each such payment. 12 MONTHLY QUESTIONNAIRE Page 3 VI. Narrative Provide a brief narrative report of any significant events outside of the ordinary course of business which occurred during the Report Month: VII. U.S. Trustee Fees
- ----------------------------------------------------------------------------------------------- Quarter Ending Total Quarterly Fee Amount Paid Date Paid Total Quarterly Disbursement Fees Due But During Quarter Not Paid - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
I declare under penalty of perjury that I have reviewed the income statement, cash flow statement, projections, balance sheet and monthly questionnaire attached hereto and, after making reasonable inquiry, believe that these documents are accurate and correct. DATED this 20th day of January , 1999. By: /s/ Richard Cascarilla ---------------------- -----END PRIVACY-ENHANCED MESSAGE-----