-----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, VN05yCEywBz2dCG1WABSvjxpmkjKdFvrG8X4ooto5Njz1G9Y6pOEeUHd8YN8zrva ubyDo9AUnl2fVpy6ocVzjw== 0000898430-97-001305.txt : 19970401 0000898430-97-001305.hdr.sgml : 19970401 ACCESSION NUMBER: 0000898430-97-001305 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PORTACOM WIRELESS INC/ CENTRAL INDEX KEY: 0000907166 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-23228 FILM NUMBER: 97568958 BUSINESS ADDRESS: STREET 1: 8055 W MANCHESTER AVE STREET 2: SUITE 730 CITY: PLAYA DEL REY STATE: CA ZIP: 90293 BUSINESS PHONE: 3104484410 MAIL ADDRESS: STREET 1: 8055 W MANCHESTER AVE STREET 2: SUITE 730 CITY: PLAYA DEL REY STATE: CA ZIP: 90293 FORMER COMPANY: FORMER CONFORMED NAME: EXTREME TECHNOLOGIES INC DATE OF NAME CHANGE: 19950127 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL PCBX SYSTEMS INC DATE OF NAME CHANGE: 19940119 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the fiscal year ended December 31, 1996 ----------------- OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ______________ to ______________ Commission file number 0-23228 ------- PORTACOM WIRELESS, INC. (Exact Name of Registrant as Specified In Its Charter) Delaware 33-0650673 - ------------------------------------ ----------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 8055 W. Manchester Avenue, Suite 730 Playa del Rey, California 90293 - ------------------------------------ ----------------------------- (Address of principal (Zip Code) executive offices) (310) 448-4140 -------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock ------------------ (Title of Class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) X YES ____ NO ---- (2) X YES ____ NO --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Except where otherwise specified, all dollar amounts referenced in this document are denominated in United States dollars. As of January 31, 1997, the aggregate market value of the Registrant's Common Stock held by non-affiliates was $42,843,950 based upon the last sales price of C$5.00 (US$3.70) on the Vancouver Stock Exchange. The shares of Common Stock are also traded on the NASD Electronic Bulletin Board. See "ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS." As of January 31, 1997, there were 13,090,368 shares of the Registrant's Common Stock issued and outstanding. Transitional Small Business Disclosure Format (check one): (1) ____ YES X NO --- DOCUMENTS INCORPORATED BY REFERENCE: NONE PART I ------ ITEM 1. BUSINESS BACKGROUND PortaCom Wireless, Inc. (formerly known as "Extreme Technologies, Inc." and "International PCBX Systems, Inc." herein referred to alternatively as the "Company" or the "Registrant") was formed as a British Columbia, Canada corporation in 1989. On December 23, 1996, the Company reincorporated from British Columbia to Wyoming pursuant to a procedure known as a "continuance", and on December 24, 1996, the Company merged with its wholly owned Delaware subsidiary and thereby reincorporated into Delaware. The Delaware subsidiary had been formed in 1994 for the purpose of the merger, which had been postponed for business reasons. See "Delaware Reincorporation." The Company presently conducts business operations both directly and through one wholly owned U.S. subsidiary, PortaCom International, Ltd. ("PIL"). The Company also has three other wholly owned U.S. subsidiaries which are not presently operating: Extreme Telecom, Inc. ("Telecom"), PCBX Systems, Inc. ("PCBX"), and Extreme Laboratories, Inc., formerly known as Spheric Audio Laboratories, Inc. ("Laboratories"). Since 1994, both directly and through its PIL subsidiary, the Company has engaged in initial stage efforts to evaluate the feasibility of, and attempt to secure, licensing opportunities and joint venture arrangements for the operation of wireless telephone networks as well as other state-of-the-art mobile radio communication systems and new telephone technologies. Although the establishment and operation of wireless telephone networks and other advanced communications systems will be investigated by the Company wherever strategic opportunities arise, its principal efforts are presently focused (as of the date of this report) upon certain Eastern European and Asian emerging markets, including Cambodia and Vietnam. The Company, in December 1996, entered into a joint venture agreement as the managing partner of a limited liability company which holds a twenty-five (25) year renewable licence to develop a mobile wireless system in the Kingdom of Cambodia. The Company also holds an ownership position in Metromedia Asia Corporation ("MAC"), which is involved in the build-out of telecommunications projects in China. The activities of the Company's PIL subsidiary to date have produced no licences or joint venture opportunities, and management does not believe that revenues will be realized by PIL in 1997. See below under the sections "Business of PortaCom Wireless, Inc." and "Business of PortaCom International, Ltd." for additional information. PCBX Systems developed and marketed a personal computer branch exchange ("PCBX") which permitted the operation of a full-featured telephone network control system from a centrally located personal computer. The PCBX systems offered by the Company featured the Company's proprietary integrated circuit board which fit into a personal computer and allowed a number of fundamental and advanced features to be programmed into a telephone system. The principal advantages of the Company's PCBX systems over competing systems were believed by management to include low cost per feature, significant flexibility and mobility, and relative ease of programming, upgrading and maintenance. Telecom entered into an agreement with Nitsuko America Corporation ("Nitsuko America") to distribute telecommunications products manufactured by Nitsuko America which were not then being distributed otherwise in the United States. Laboratories developed and marketed a line of high quality audio speakers, as well as a proprietary audio recording and playback technology known as "SphericSound"(TM). "SphericSound" represented a form of audio recording and playback that featured multi-dimensional imaging that created the realistic sensation of directional sound movement emanating from stationary speakers. Because of substantial losses, the associated costs of continued development, the lack of profitability by competitors and the uncertainty of marketing costs associated with commercializing both proprietary technologies and other manufacturers' products, management decided in 1995 to discontinue the development and marketing activities of PCBX, Telecom and Laboratories. Funding of the Company's operations since inception has been provided by: (i) revenues from the sale of PCBX products, and, to a significantly lesser extent, the products of Telecom and Laboratories; (ii) proceeds from the sale of securities undertaken in a series of private placement transactions; (iii) completion of an initial public offering on the Vancouver Stock Exchange during October 1992; and (iv) revenues generated as a result of the recent AAT transaction. (See "Metromedia Asia Corporation.") DELAWARE REINCORPORATION At an Extraordinary and Special Meeting of the Shareholders of the Company held on December 23, 1996, the Company's shareholders, by an affirmative vote of least 51% of the outstanding shares and at least 75% of the shares represented at the meeting, approved a proposal by the Company's Board of Directors to change the Company's domicile briefly to Wyoming by way of a continuation pursuant to the Wyoming Business Corporation Act and, following confirmation of such continuation, to change its domicile from Wyoming to Delaware by way of a merger of the Company with and into its wholly owned Delaware subsidiary ("PortaCom Delaware"). Upon completion of the merger, (i) the Wyoming corporation ceased to exist, (ii) the stockholders of the Wyoming corporation became stockholders of the Delaware corporation, (iii) the stockholders' rights became governed by Delaware law, the Restated Certificate of Incorporation of PortaCom Delaware and PortaCom Delaware's Bylaws rather than by British Columbia or Wyoming law and the Company's former British Columbia and Wyoming governing documents, (iv) all options and rights to purchase shares of the Company's common stock were automatically converted into options or rights to acquire an equal number of equivalent shares in PortaCom Delaware, (v) no change occurred in the name, physical location, business, management, assets, liabilities or net worth of the Company and (vi) the incumbent directors and officers of the Company continued to serve in their respective capacities as directors and officers of PortaCom Delaware. See "Item 4: Submission of Matters to a Vote of Security Holders." INDUSTRY OVERVIEW Demand For Communications Services in Developing Countries. Many developing countries, including those in Southeast Asia and Eastern Europe, are experiencing rapid economic growth. Often, the telecommunications services presently available in these countries are inadequate to support current demand let alone such growth. To address the latent demand for communications services and to promote economic growth, governments in many developing countries have begun deregulating their telecommunications industries and encouraging the formation of private communications service providers. As a result, the Company believes there is a substantial opportunity for privately owned companies to provide wire line and wireless communications services in these countries. While the Company believes that the cellular telephony industry is well established in the developed world, the industry in the developing world is still in its infancy. The Company believes that wireless cellular telephony has the potential to grow rapidly in developing countries because of the poor quality of the existing wireline service, the unsatisfied demand for basic telephone service and the increasing requirements of users who want the convenience of cellular telephones. In some countries the cellular telephone network provides significantly improved access, in terms of call quality and service establishment time, to the local and international wireline network compared with the existing wireline service. In addition, developing countries are expected to benefit both from better technology and lower equipment costs than those experienced at comparable stages of market development in developed countries. Wireline networks involve extensive outside infrastructure in the form of buried or overhead cable networks, while cellular telephone systems do not require the same level of construction activities. For developing countries, cellular telephone systems can represent a faster and more cost-effective method of expanding telecommunications infrastructure than deployment of traditional wireline networks. Role of Wireless Technologies. A number of wireless technologies provide voice and data services that address the communications needs of developing countries. These services include cellular telephony, wireless local loop ("WLL") and paging. The Company believes that existing and emerging wireless technologies generally compare favorably to land-line technologies in terms of functions and service, yet provide lower system deployment costs and the potential for more rapid deployment. Cellular Telephony (Mobile Telephony). Cellular telephony systems are capable of providing high quality voice and data communications to and from vehicle-mounted and hand-held radio terminals (cell phones) and are capable of handling a great number of calls at any one time. Cellular telephony technology is based upon spatial diversity, the division of a given geographical area into a number of overlapping cells and the simultaneous re-use of radio channels in non-contiguous cells within the system. Each cell contains a low power transmitter-receiver as part of a base station that communicates by radio signal with cellular terminals in that cell. Each cell is interconnected by wire lines or microwave to a central switching point or Mobile Switching Center ("MSC") that controls the routing of calls and which, in turn, is connected to the public switched telephone network. It is the MSC that allows cellular telephone users to move freely from cell to cell while continuing their calls. Cellular telephone systems generally offer subscribers the features offered by the most up-to-date wireline telephone services. Most cellular telephone systems are interconnected with the wireline telephone network. Cellular telephone system operators therefore require an interconnect arrangement with the local wireline telephone companies and the terms of such arrangements are material to the economic viability of the system. Currently, most cellular systems use analog technologies such as AMPS (U.S. standard), TACS (UK/European standard) or NMT ( a European standard). In some high density markets analog systems are reaching their capacity limits and are being supplemented with new digital technologies that offer greater capacity than analog systems. Several digital cellular technologies have been developed in the last three to five years. D-AMPS has been introduced as a digital upgrade for operators of existing AMPS systems. In Europe, the digital Global System for Mobile Communication ("GSM") standard has been developed and is widely available throughout Europe and Asia. GSM provides approximately two to three times the capacity of analog systems and has the additional benefit of enabling international roaming due to its broad availability, system compatibility, and universal terminal compatibility. Another new digital technology, Code Division Multiple Access ("CDMA"), is being introduced in the U.S. and several other major countries. CDMA provides the highest capacity of any digital cellular technology at this point, with six to ten times analog system capacity in a mobile environment. Its first commercial deployment in Hong Kong has been successful, and has been deployed in Personal Communications Services ("PCS") networks in the United States and elsewhere. The Company's license in Cambodia requires CDMA-based technology. CDMA digital wireless technology provides a universal technology platform for a wide range of services and applications, including digital cellular, PCS, wireless local loop, mobile satellite systems, and other types of networks. Because of its spread spectrum RF characteristic, CDMA is able to provide a mix of higher data rates simultaneously with lower data rates than certain other wireless technologies. CDMA also offers superior call and voice quality than other wireless technologies. The cellular telephone industry is typically characterized by high fixed costs and low variable costs. Until technological limitations on total capacity are approached, additional cellular system capacity can normally be added in increments that closely match demand and at less than the proportionate cost of the initial capacity. The industry has also seen declining equipment prices in real terms. Once revenues exceed fixed costs, incremental revenues are expected to yield a high incremental operating profit, giving cellular telephone system operators an incentive to stimulate and satisfy demand for service in the market. The amount of profit, if any, under such circumstances is dependent on, among other things, prices and variable marketing costs, which, in turn, are affected by the amount and extent of competition. Wireless Local Loop. WLL refers to a group of technologies designed to provide customer access to the public switched telephone network using wireless radio technologies rather than traditional wire or fiber optic lines. A WLL system typically consists of a number of radio base stations (similar to cell sites used for cellular telephone) covering the target market area, a switching center, and fixed subscriber terminals on the subscriber's premises. On the fixed subscriber terminal a standard telephone jack allows connection to standard telephone equipment. In some systems portable handsets are available, providing the added value of wide-area cordless telephone service to the subscriber. The Company believes that WLL is an attractive technology for the rapid expansion of telephone facilities in developing countries. The coverage in terms of service area provided by a single base station can compare favorably with the coverage of a single cellular base station. The use of digital technology provides substantially greater capacity than analog alternatives which the Company believes results in WLL being a cost-effective communications solution. Several types of technology can be used to provide WLL, including CDMA technology. WLL networks provide subscribers with access to the standard land-line telephone network through wireless transmission from land-line switch to the telephone site in the home or business rather than through conventional land lines. This is accomplished by placing small transceivers at the telephone site. Functionally, WLL operates in the same way as a regular telephone, with the added possibility of wide area "cordless telephone" use. WLL networks are generally quicker to install and less expensive than deploying new land-line systems. Paging Technology Paging is a method of wireless communication that uses an assigned radio frequency to contact a subscriber virtually anywhere within a designated service area. A subscriber carries a pager that receives messages by the broadcast of a one-way radio signal. To send a message to a subscriber, a caller first dials an access code and the subscribers designated pager number. The call is routed to an electronic paging terminal which generates a signal that is sent to radio transmitters in the services area. Depending upon the topography of the service area, the operation radius of a radio transmitter typically ranges from 30 to 50 kilometers. The transmitters broadcast a signal that is received by the pager, which alerts the subscriber by a tone, vibration or flash that there is a message. There are three basic types of paging services: numeric (digital display); alphanumeric display and tone-only. Numeric paging services enable a caller, using a touchtone telephone, to transmit to a subscriber a numeric message consisting of a telephone number, an account number of coded information. Numeric pagers have memory capability to store several numeric messages which can be recalled by a subscriber when desired. Alphanumeric paging services allow subscribers to receive and store messages consisting of both letters and numbers. Alphanumeric pagers have sufficient memory to store between 500 and 5,000 characters. Advanced alphanumeric systems also permit the receiving page, by using a low-power transmitter installed in the pager to send a brief reply back to the sending pager. Tone-only paging service notifies the subscriber that a call has been received by making a beeping sound or producing a vibration, but does not display numbers or messages. BUSINESS STRATEGY The Company intends to become a pre-eminent provider of wireless communications services in selected developing countries, typically either through a joint venture with a local partner or as a significant participant in a corporate local venture. In some cases the Company's local partners may have previously been granted telecommunications licenses. The Company typically, although not exclusively, will play an active role in the development and management of its operating companies and developmental stage projects, and the Company will attempt to negotiate shareholder agreements that provide the Company with the right to approve key decisions at the operating company or developmental stage project level. The Company intends to operate mainly in developing markets, which it believes offer long-term growth characteristics superior to those in more developed markets. The economic growth in these markets is characterized by an expanding need for telecommunications services. BUSINESS OF PORTACOM WIRELESS, INC. Metromedia Asia Corporation On May 28, 1996, the Company announced an agreement to acquire, in exchange for shares of common stock of the Company, all of the outstanding shares of Asian American Telecommunications Corporation ("AAT"), a Cayman Islands telecommunications services developer which has focused its business activities on developing PSTN and wireless telecommunications services in China. On July 18, 1996, the Company announced that the terms of the acquisition had been adjusted to take into account a $25,000,000 financing by AAT. As management continued to review the proposed transaction, including analysis and discussion with legal, tax and financial advisors, it was recognized that the proposed transaction required further modification in order to avoid potentially adverse tax consequences to both the Company and its shareholders. On September 18, 1996, the Company announced that, due to significant tax and regulatory considerations, it had elected to receive a direct ownership position in AAT consisting of 2,000,000 common shares and warrants to acquire 4,000,000 common shares of AAT at a price of $4.00 per share, plus an immediate payment of $1,000,000 in cash from AAT to the Company. The 2,000,000 common shares of AAT are to be held in escrow until January 1, 1999 in the event of any claims arising out of the original proposed acquisition or the modification and subsequent termination of that agreement, although as of the date of this report, management is not aware of any claims or potential claims. On December 23, 1996 AAT agreed to enter into a Business Combination Agreement with Metromedia Asia Corporation ("MAC") and Metromedia International Telecommunications, Inc. ("MITI"). In connection with the Business Combination Agreement, MAC consummated, on February 28, 1997 an exchange offer for all of the outstanding shares and warrants of AAT (the "Exchange Offer"). The Company agreed to exchange all of its shares and warrants pursuant to the terms of the Exchange Offer. Under the terms of the Exchange Offer, each share of AAT common stock was exchanged for one share of MAC regular common stock, and each warrant to acquire AAT common stock at $4.00 per share was exchanged for a warrant to acquire MAC common stock at $4.00 per share. In addition, immediately prior to the Exchange Offer, MITI purchased additional shares of Class A common stock, carrying three votes per share, plus warrants. Accordingly, based on information supplied by AAT and MAC the Company owned 3.43% (9.16% on a fully diluted basis assuming exercise of all of its warrants) of MAC immediately following the consummation of the Exchange Offer. The 2,000,000 common shares of MAC will be held in escrow under the same terms and conditions as were applicable to the AAT shares which were tendered in the Exchange Offer. The following information regarding MAC and AAT and their respective operations is based on information announced by MAC. MAC is a subsidiary of Metromedia International Group, Inc., a global communications media and entertainment company ("MIG"). MAC was established to pursue the development and exploitation of telecommunications systems in China and other countries in the Pacific Rim. To further such objectives, MAC, through a joint venture contract with Golden Cellular Communication Co. Ltd. of China, is licensed to supply wireless telecommunications equipment, systems technology and software services and maintenance to public and private telephone networks throughout China. Moreover, MIG has entered into an agreement with DSC Communications Corporation for exclusive rights to introduce a new generation of wireless local loop telephony systems. AAT, though a joint venture agreement, has a contract with China United Telecommunications Corporation ("China Unicom") to develop wireless and wireline telecommunications services in Sichuan Province, China. Separately, through a joint venture with Ningbo United Telecommunications Investment Co. Ltd., AAT has entered into a contract with China Unicom to construct and operate a GSM telecommunications system within the city of Ningbo, located in China's Zhejiang Province. American Cambodian Telecommunications, Ltd. The Company, on December 26, 1996 entered into a joint venture agreement (the "Cambodian JVA") as the 86% managing partner of American Cambodian Telecommunications Ltd. ("ACT"), a limited liability company which holds a twenty-five (25) year renewable licence to develop a mobile wireless system in the Kingdom of Cambodia. After December 26, 1997 ACT has agreed to buy back all of the outstanding shares of its 14% joint venture partner, Khmer Sameky Telecom, Ltd. Also after December 26, 1997, the capital structure of ACT will change such that the Company will retain a 75% interest in ACT and the Ministry of Posts and Telecommunications of Cambodia will hold a 25% interest in ACT and will retain the right to purchase any new ACT shares issued in order to maintain a 25% interest. Specifically, ACT has been issued a license (the "Cambodian Licence")for the provision and operation of a CDMA based telecommunications system which includes the rights to install and operate base stations, cellular switch exchanges and any other facilities and equipment directly involved in the provision, development and operation of a PCS 1900 based mobile cellular system and to sell any and all types of terminals, devices and handsets for use with the CDMA PCS 1900 system. Further rights under the Cambodian Licence include certain frequency allocations, telephone number allocations and network interconnection rights for local and international telephone services with the existing PSTN and other telecommunications operator networks and other authorized international gateways. Although the Cambodian License covers the entire territory of the Kingdom of Cambodia, initial coverage is intended to be provided to Siem Reap, Phnom Penh, Kampong Som, and the highway connecting the aforementioned areas/cities. The Company estimates that the total population under licence is approximately 10,400,000. There are currently four cellular telephone competitors using GSM, D-AMPS, and NMT technology on a limited basis in the city of Phnom Penh, Cambodia. Furthermore, additional cellular telephone licences may be awarded. The Company expects to compete on the basis of operating a wireless telecommunication system that employs the state-of-the-art CDMA system which it believes provides significant advantages over the technology currently being employed in Cambodia. The Company will require substantial additional capital investment to pursue the development of its planned network in Cambodia which is expected to require approximately $15 million in start-up costs for the first full year of operations. The Company would also require substantial additional capital investment should an operating license be issued by any of the countries in which the Company is presently pursuing approvals or investments. Failure to generate sufficient funds from the issuance of additional debt or equity on favorable terms and conditions would have a material adverse effect on the financial condition of the Company. Terminated Acquisitions On October 20, 1995, the Company announced that it had agreed to acquire PortaCom Wireless Communications, Inc., a Delaware corporation ("PWC"), which had been developing new business opportunities in wireless telecommunications services in China, Burma, Laos, Bulgaria, Macedonia and certain other countries. The acquisition was approved by the shareholders on November 20, 1995 and remained subject to the approval of the Vancouver Stock Exchange ("VSE") and the receipt of an acceptable valuation of PWC. Upon closing, the Company was obligated to issue a total of 1,568,600 shares of common stock to the PWC shareholders. On July 18, 1996, the Company announced that it had terminated the acquisition as it had not yet received regulatory approval. The Company has determined, however, that it will issue shares of its common stock to Messrs. MacLellan and Stephens and to PJL, in the same amounts as previously provided in the PWC Agreement, in the event it is permissible to do so without receiving approval of the VSE. BUSINESS OF PORTACOM INTERNATIONAL, LTD. PIL was formed in 1994 to evaluate the feasibility of, and attempt to secure, licensing and joint venture arrangements for the operation of wireless telephone networks, and other communication systems and technologies. As of December 31, 1996, the operations of PIL had produced no revenues or definitive licensing arrangements and management believed these operations would likely continue to remain limited in scope until certain valuable licensing arrangements or joint venture participation could be secured. Since March 1994, PIL has made efforts to acquire telecommunications concessions, primarily in developing countries including Vietnam, China, and Honduras. In December 1994, PIL entered into an agreement with certain parties to form an entity of which PIL would own 40% of the authorized and outstanding shares. This entity was incorporated in the State of Nevada on January 10, 1995 under the name Telecommunications American International ("TAI"). In December 1994, under the name U.S. Telecommunications Consortium ("USA Telecom"), TAI entered into a Memorandum of Agreement with Saigon Postel Corporation ("PTS"), a Vietnamese joint stock company. TAI and PTS have agreed to form venture companies to effect different telecommunications business operations in Vietnam. As of December 31, 1996, TAI and PTS were negotiating Business Cooperation Contracts in which TAI would have interests in both a mobile cellular services venture and a PSTN services venture. Under the proposed agreements with PTS, TAI would own 50% and PTS would own 50% of each venture, which arrangements would remain in effect for up to 20 years. Although TAI and PTS are currently seeking to complete the operating license issuance process, management believes that the likelihood of an operating licence being issued has diminished substantially due to prolonged delays and apparent lack of progress. Furthermore, because of the uncertainty of operating costs associated with continuing to pursue an operating licence in cooperation with PTS, management has decided to discontinue funding of the development activities of TAI until significant further progress is evident. Accordingly, due to TAI's substantially exhausted financial resources, there is considerable doubt that a licence will be obtained in the near term unless TAI is successful in obtaining additional sources of capital. As of October 31, 1995, the Company had entered into a stock purchase agreement with certain stockholders of TAI which provided for the acquisition of an additional 13.1% of the outstanding shares of TAI. This acquisition, which was subject to the receipt of a professional valuation and the approval of the VSE, would have resulted in the Company owning a majority interest of 53.1% of TAI. In the interim, the agreements provided irrevocable proxies allowing the Company to vote all of the shares subject to each agreement. On July 18, 1996, however the Company terminated the acquisition as it had not yet received regulatory approval. SPECIAL CONSIDERATIONS Early Stage of Development of Wireless Projects. The Company's wireless projects are in the early stages of development. The successful development and commercialization of the Company's projects will depend on a number of significant financial, logistical, technical, marketing, legal and other factors, the outcome of which cannot be predicted. The Company's projects will require significant amounts of financing to fund capital expenditures, working capital requirements and other cash needs, including the costs of obtaining additional licenses. In addition, there can be no assurance that these projects will not encounter engineering, design or other operational problems. There can be no assurance that the Company can successfully develop any of its existing or planned developmental stage projects or that any of these projects or any of its operating companies will achieve commercial success. Negative Operating Cash Flow; Dependence on Additional Financing; No Commitments For Additional Financing. The Company has incurred net losses since its inception and had an accumulated deficit of approximately $9.78 million as of December 31, 1996. The Company anticipates that its net losses will increase significantly in the foreseeable future, and there can be no assurance as to whether or when the Company's operations will become profitable. The Company used cash in operations and investing activities of approximately $2.05 million in the year ended December 31, 1996, and expects such negative cash flows to continue and likely increase in the foreseeable future. Because of such negative cash flow and negative working capital and the capital intensive nature of the Company's business, the Company will require continuing sources of outside debt and equity financing to fund its working capital needs, investments and other cash requirements. In addition, the Company intends to pursue aggressively additional opportunities for wireless projects and anticipates that it will require additional sources of financing in order to pursue those projects. However, the Company has no commitments or arrangements for additional financing, and there can be no assurance that any additional debt or equity financing will be available to the Company on acceptable terms when required by the Company or at all. If adequate sources of additional financing are not available, the Company will be forced to delay, scale back or eliminate its projects or to liquidate its investments. Joint Venture and Investment Arrangements. The Company intends to conduct its business operations through joint ventures with local strategic partners and through investments in local companies that have previously been granted licenses . Its participation in each joint venture and investment will differ from market to market and the Company may not have majority ownership interests in some such joint ventures or investments. Even when the Company does have a majority ownership interest, the Company's ability to withdraw funds, including dividends, from its participation in, and to exercise management control over, joint ventures and investments therein, will be dependent in some cases on receiving the consent of the other participants, over which the Company may have no control. While the precise terms of the arrangements will vary, the Company's joint venture interests or investments may be adversely affected in the event that disagreements develop with joint venture partners or majority shareholders in a particular project. Risks Inherent in Growth Strategy. The Company hopes to grow rapidly, subject to the availability of additional financing, and is actively seeking and evaluating new investment opportunities in foreign countries. This strategy presents the risks inherent in assessing the value, strengths and weaknesses of development opportunities, in evaluating the costs and uncertain returns of building and expanding the facilities for operating systems and in integrating and managing the operations of additional operating systems. The Company's growth strategy will place significant demands on the Company's operational, financial and marketing resources and on its management. Any failure to manage the Company effectively could have a material adverse effect on the Company. Technological Risk; Risk of Obsolescence. The Company's operating companies and developmental stage projects generally use new and emerging technologies. For example, the Company's Cambodian project will use CDMA, a cellular technology that is not widely deployed on a commercial basis at the present time. Although many of the technologies currently in use and to be used in the future by the Company have been developed by large international telecommunications companies, most are generally advanced technologies which have only recently been developed and commercially introduced. There can be no assurance that the operating companies and developmental stage projects will not experience technical problems in the commercial deployment of these technologies, particularly because they are being introduced in developing countries. In addition, the technology used in wireless communications is evolving rapidly and one or more of the technologies currently utilized or planned by the Company to be utilized may be unpopular with its customers or may become obsolete, which in either case would likely have a material adverse effect on the Company. There can be no assurance that the Company will be able to keep pace with ongoing technological changes in the wireless telecommunications industry. Risk of Modification or Loss of Licenses; Uncertainty as to the Availability, Cost and Terms of Licenses; Restrictions on Licenses. The Company's ability to retain and exploit its existing telecommunications license and to renew it when it expires, and to obtain new licenses in the future, is essential to the Company's operations. However, these licenses are typically granted by governmental agencies in developing countries, and there can be no assurance that these governmental agencies will not seek to unilaterally limit, revoke or otherwise adversely modify the terms of these licenses in the future, any of which could have a material adverse effect on the Company, and the Company may have limited or no legal recourse if any of these events were to occur. In addition, there can be no assurance that renewals to these licenses will be granted or, if renewed, that the renewal terms will not be substantially less favorable to the Company than the original license terms, any of which could have a material adverse effect on the Company. Likewise, there can be no assurance that the Company's operating companies and developmental stage projects will obtain all of the licenses necessary for their proposed operations. Dependence on Partners. The Company will generally continue to depend on its local partners to obtain required licenses in all of its wireless projects. In addition, the Company is often dependent on strategic partners with resources beyond those of the Company to pursue larger scale projects, including certain WLL projects. In WLL projects, the Company may require the participation of a larger telecommunications company possessing the substantial capital and operating resources required to finance and deploy a WLL system. The failure of the Company to identify and enter into relationships with strong partners, or the failure of those partners to provide these resources, may have a material adverse effect on the Company. Construction Risks. The operating companies and developmental stage projects in which the Company invests typically will require substantial construction of new wireless networks and additions to existing wireless networks. Construction activity will require the operating companies and developmental stage projects to obtain qualified subcontractors and necessary equipment on a timely basis, the availability of which varies significantly from country to country. Construction projects are subject to cost overruns and delays not within the control of the operating company or the developmental stage project or its subcontractors, such as those caused by acts of governmental entities, financing delays and catastrophic occurrences. Delays also can arise from design changes and material or equipment shortages or delays in delivery. Accordingly, there can be no assurance that the operating companies or developmental stage projects will be able to complete current or future construction projects for the amount budgeted or within the time periods projected, or at all. Failure to complete construction for the amount budgeted or on a timely basis could jeopardize subscriber contracts, franchises or licenses and could have a material adverse effect on the Company. In particular, telecommunications licenses often are granted on the condition that network construction be completed or commercial operations be commenced by a specified date. Failure to comply with these deadlines could result in the loss or revocation of the licenses. Competition. Although the implementation of advanced wireless technologies is in the early stages of deployment in most developing countries, the Company believes that its business will become increasingly competitive, particularly as businesses and foreign governments realize the market potential of these wireless technologies. In particular, the Company faces competition presently in the Cambodian market from Millicom International Cellular, S.A., which is already operational in that market along with other companies. A number of large American, Japanese and European companies, including U.S.-based regional Bell operating companies and large international telecommunications companies, are actively engaged in programs to develop and commercialize wireless technologies in developing counties. In many cases, the Company will also compete against local land-line carriers, including government-owned telephone companies. Most of these companies have substantially greater financial and other resources, including research and development staffs and technical and marketing capabilities than the Company. The Company anticipates that there will be increasing competition for additional licenses and increased competition to the extent such licenses are obtained by others. Although the Company intends to employ relatively new technologies, there will be a continuing competitive threat from even newer technologies which may render the technologies employed by the Company obsolete. (See "Competition.") Regulation. The wireless services of the Company's operating companies and developmental stage projects are subject to governmental regulation, which may change from time to time. There can be no assurance that material and adverse changes in the regulation of the Company's existing or future operating companies or developmental stage projects will not occur in the future. Such regulations can encompass foreign ownership restrictions, service requirements, restrictions on interconnection of wireless systems to government-owned or private telephone networks, subscriber rate- setting, technology and construction requirements, among others. These regulations may be difficult to comply with, particularly given demographic, geographic or other issues in a particular market. Further, changes in the regulatory framework may limit the ability to add subscribers to developing systems. An operating company's or developmental stage project's failure to comply with applicable governmental regulations or operating requirements could result in the loss of licenses or otherwise could have a material adverse effect on the Company. Inflation; Currency Devaluations and Fluctuations. Many developing countries have experienced substantial, and in some periods extremely high, rates of inflation and resulting high interest rates for many years. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain developing countries and could have an adverse effect on the operating companies and developmental stage projects in those countries, including an adverse effect on their ability to obtain financing. The value of the Company's investment in an operating company or developmental stage project will be affected by the currency exchange rate between the U.S. dollar and the applicable local currency. In general, the Company does not hedge against foreign currency exchange rate risks. As a result, the Company may experience economic loss with respect to its investments and fluctuations in its results of operations solely as a result of currency exchange rate fluctuations. Foreign Corrupt Practices Act. The Company is subject to the Foreign Corrupt Practices Act ("FCPA"), which generally prohibits U.S. companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or licenses or otherwise obtaining favorable treatment. Although the Company has taken precautions to comply with the FCPA, there can be no assurance that such precautions will protect the Company against liability under the FCPA, particularly as a result of actions which may in the past have been taken or which may be taken in the future by agents and other intermediaries for whose actions the Company may be held liable under the FCPA. In particular, the Company may be held responsible for actions taken by its strategic or local partners even though such strategic or local partners are themselves typically foreign companies which are not subject to the FCPA; and the Company has no ability to control such strategic or local partners. Any determination that the Company has violated the FCPA could have a material adverse effect on the Company. Possible Changes in Regulatory Agencies and Political Structure; Political Instability. The Company intends to acquire interests in wireless telephone licenses around the world, and will likely be subject to government regulation in each market it enters. The governments of these countries are likely to differ widely with respect to structure, constitution and stability, and some of such countries may lack mature legal and regulatory systems. To the extent the Company's operations depend on governmental approval and regulatory decisions, the operations may be adversely affected by changes in the political structure or government representatives in each of the markets in which the Company will operate. No assurance can be given that factors such as these will not have a material adverse effect on the Company's operations in particular countries. Government actions in the future could have a significant adverse effect on economic conditions in a developing country or may otherwise have a material adverse effect on the Company and its operating companies and developmental stage projects. Expropriation, confiscatory taxation, nationalization, political, economic or social instability or other developments could materially adversely affect the value of the Company's interests in operating companies and developmental stage projects in particular developing countries. The Company also may be adversely affected by political or social unrest or instability in foreign countries. Such unrest or instability resulting from political, economic, social or other conditions in foreign countries could have a material adverse effect on the Company. The Company does not have political risk insurance in the countries in which it currently conducts business. Moreover, applicable agreements relating to the Company's interests in its operating companies are frequently governed by foreign law. As a result, in the event of a dispute, it may be difficult for the Company to enforce its rights. Accordingly, the Company may have little or no recourse upon the occurrence of any of these developments or if any of its partners seek to re-negotiate existing or future agreements. To the extent that any of the operating companies seeks to make a dividend or other distribution to the Company, or to the extent that the Company seeks to liquidate its investment in an operating company or developmental stage project and repatriate monies from a relevant country, local taxes, foreign exchange controls or other restrictions may effectively prevent the transfer of funds to the Company or the exchange of local currency for U.S. dollars. COMPETITION Because the implementation of wireless technologies is at a early stage of development in many developing countries, the Company believes there are significant opportunities to form, develop and operate companies that deploy these technologies. The Company believes its business will become increasingly competitive, particularly as businesses and foreign governments realize the market potential of wireless technologies. A number of large American, Japanese and European companies, including regional Bell operating companies and major international carriers, are actively engaged in programs to develop and commercialize wireless technologies in developing countries. Most of these companies have substantially greater financial and other resources, research and development staffs and technical and marketing capabilities than the Company. The Company's operating companies and developmental stage projects will frequently compete against traditional land-line companies (i.e. local telephone companies), cellular telephone companies and direct competitors using the same wireless technologies as the operating companies. The Company's competitive strategy depends on the service offered and the competitor. For example, the Company's strategy is for its CDMA operating companies to compete against cellular telephone service providers by offering greater functionality at lower cost, particularly for business users, to compete against traditional land-line carriers by offering better service, faster deployment and lower construction costs and to compete against direct competitors, including those formed by large American, Japanese and European companies, by relying on local partners to obtain operating licenses and provide access to existing telecommunications asset bases. There will, however, be increasing competition for licenses; and there will be increased competition once licenses are obtained from both other wireless operators and, in some cases, from government-owned telephone companies. Although the Company intends to employ new technologies, there will be a continuing competitive threat that even newer technologies will render the wireless systems employed by certain operating companies obsolete. There is no assurance that any of the Company's operating companies or developmental stage projects will compete successfully in the marketplace. PATENTS AND PROPRIETARY TECHNOLOGY The Company has applied for, and subsequently elected to abandon applications for, copyrights and patents on several of its products, and trade names and trade marks related to discontinued lines of business which are no longer material to the operations of the Company. The Company does not have or use patents, trademarks, or proprietary technology in its current or projected business operations. EMPLOYEES As of December 31, 1996, the Company employed six persons, including its executive officers and administrative personnel. The Company's business strategy entails employing substantially all personnel required for the Company's various operations through its operating joint ventures. The Company also engages a number of consultants and consulting firms in a variety of management, administrative, engineering, legal and public relations capacities. For example, substantially all engineering services are provided by JMS North America, Inc. ("JMS"), an international engineering services consulting firm with U.S. offices in the Washington, DC area and Texas, and foreign offices in Amsterdam, Brussels, Dusseldorf, Madrid, New Delhi and Singapore. JMS presently employs 145 persons worldwide on a full time basis, and at least 100 persons on an independent contractor basis. As of the date of this report, at least 10 employees from JMS are engaged in full time work on the Company's projects. ITEM 2. DESCRIPTION OF PROPERTY The Registrant's executive offices and the offices of its PIL subsidiary are located at 8055 W. Manchester Ave. Suite #730, Playa del Rey, CA. These facilities, which consist of the rental of an office, are occupied on a month to month arrangement at a rental expense of less than $2,000 per month. The Registrant's Canadian administrative offices are located at 1155 Melville Street, Suite #11, Vancouver, British Columbia. These facilities, which consist of the rental of an office and shared use of a conference room, are occupied on a month to month arrangement at a rental expense of less than $1,000 per month. All of the Registrant's properties were, in the opinion of management as at December 31, 1996, adequately covered by insurance. ITEM 3. LEGAL PROCEEDINGS As of December 31, 1996, neither the Registrant nor any of its subsidiaries was a party to any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held an Extraordinary and Special General Meeting of Stockholders on December 23, 1996 in Playa del Rey, California. Five proposals were submitted as described in the Company's Proxy Statement dated November 20, 1996. Proposal 1 was a Special Resolution and, accordingly, was required to be voted upon and approved by an affirmative vote of greater than 75% of shares present and eligible to vote in accordance with British Columbia law. Following the tabulation of votes with respect to Proposal 1, the meeting was briefly suspended to permit the filing of documentation in Wyoming to give effect to the proposal, whereupon the meeting was reconvened for the purpose of voting upon Proposals 2-5. Proposals 2-5 were voted upon and approved by a majority of the outstanding shares entitled to vote. 1. Changing the jurisdiction of incorporation of the Company from British Columbia, Canada to Wyoming, U.S.A., by way of a continuation under the Wyoming Business Corporation Act and the adoption by the Company of By- laws under Wyoming corporate legislation in substitution of the Company's current Memorandum; 2. Changing the domicile of the Company from Wyoming to Delaware to be accomplished by the merger of the Company with and into a wholly owned Delaware corporation formed solely for the purpose of completing the merger; 3. The authorization of 5,000,000 shares of $.001 par value preferred stock; 4. The elimination of the personal liability of directors to the fullest extent allowed under Delaware law; and 5. Providing officers, directors, employees and agents of the Company certain indemnification rights in addition to those currently provided. The following table indicates the number of votes cast for, against, or withheld, as well as the number of abstentions and broker non-votes, for each of the proposals.
Proposal For Against Abstentions Broker Non- Votes - ------------------------------------------------------------------------------- 1. Change Jurisdiction 6,390,777 10,250 17,551 2,207,393 - ------------------------------------------------------------------------------- 2. Change Domicile 6,392,877 10,150 1,800 2,221,144 - ------------------------------------------------------------------------------- 3. Issued Preferred Stock 6,010,222 340,205 54,400 2,216,144 - ------------------------------------------------------------------------------- 4. Eliminate Liability 7,876,564 554,775 193,632 1,000 - ------------------------------------------------------------------------------- 5. Indemnification Rights 7,883,409 541,230 200,332 1,000 - -------------------------------------------------------------------------------
PART II ------- ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS A. MARKET INFORMATION ------------------ The Registrant's common stock is currently listed on the Vancouver Stock Exchange under the symbol "PCW". The Registrant's securities became publicly traded by virtue of an initial public offering of 1,000,000 shares on the Vancouver Stock Exchange completed on October 1, 1992. On October 5, 1993, the Registrant commenced trading of its Common Stock within the United States by virtue of an exemption to the Securities Exchange Act of 1934 (the "Act") under Rule 12 g 3-2(b) under the Act on the over the counter market on the NASD Electronic Bulletin Board ("EBB") under the symbol "IPCBF". The Company subsequently waived its exemption and registered under the Act. For the period of July 30, 1996 to December 31, 1996, the trading symbol on the NASD Electronic Bulletin Board was "PCWIF", and since December 31, 1996 has been "PCWR". The following tables set forth the high and low sales prices of the Registrant's common stock as reported by the Vancouver Stock Exchange daily trading summary for the Registrant's last two fiscal years for the period ended December 31, 1996, the high and low bid prices as reported by the EBB for each quarterly period in 1995, and the high and low sales prices as reported by the EBB for each quarterly period in 1996. High and low bid prices for 1996 were not available from the EBB. The high and low bid prices for the common stock for each quarterly period in 1995 as reported by the EBB reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions. Vancouver Stock Exchange ------------------------ (Expressed in Canadian Dollars)
Calendar Quarter High Low - ----------------------- ------ ------ First Quarter, 1995 $5.50 $1.90 Second Quarter, 1995 $4.00 $1.50 Third Quarter, 1995 $2.70 $1.45 Fourth Quarter, 1995 $2.30 $1.65 First Quarter, 1996 $4.00 $1.30 Second Quarter, 1996 $8.40 $3.20 Third Quarter, 1996 $6.25 $3.80 Fourth Quarter, 1996 $4.25 $2.75
United States Electronic Bulletin Board(1) --------------------------------------- (Expressed in United States Dollars)
Calendar Quarter High Low - ---------------- ---- --- First Quarter, 1995 $ 3.625 $ 1.5 Second Quarter, 1995 $ 2.375 $ 1.25 Third Quarter, 1995 $ 1.875 $ 1.875 Fourth Quarter, 1995 $ 1.25 $ 1.25 First Quarter, 1996 $ 2.95 $ 1.0 Second Quarter, 1996 $ 7.45 $ 2.42 Third Quarter, 1996 $ 4.5 $ 2.75 Fourth Quarter, 1996 $ 3.32 $ 2.34
(1) The table sets forth the high and low bid prices as reported by the NASD Electronic Bulletin Board for each quarterly period in 1995, and the high and low sales prices as reported by the NASD Electronic Bulletin Board for each quarterly period in 1996. B. Holders ------- The number of record holders of the Common Stock as of December 31, 1996 was 102. The Registrant believes it has over 2,000 beneficial holders of its Common Stock. C. Dividends --------- The Registrant has not paid any cash dividends on its Common Stock to date, and does not anticipate or contemplate paying cash dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Registrant's business. D. Recent Sales of Unregistered Securities --------------------------------------- The Registrant has sold the following securities during 1996: On March 11, 1996, 96,560 shares of Common Stock were issued to Maroon Bells Capital Corporation in consideration for settlement of debt at a deemed price of $1.25 per share. On April 3, 1996, options to acquire an aggregate of 361,649 shares of Common Stock were granted to six individuals who were directors and/or officers at exercise prices of $3.00 per share and with expiration dates of April 2, 2001. On April 12, 1996, 97,500 common shares at a price of $1.11 per share were issued to two accredited investors, Warren Zee and Profektin AB, pursuant to private placement subscriptions made in 1995. On May 24, 1996, 1,256,561 common shares at a deemed price of $2.00 per share were issued to various creditors in consideration for settlement of debt aggregating $2,513,121 pursuant to debt settlement agreements. On June 28, 1996, options to acquire 90,000 shares of common stock were granted to R. Keith Alexander, a director, at an exercise price of $3.80 and with an expiration date of June 28, 2001. On September 27, 1996, 14,500 common shares were issued to Ronald Tupper, an individual, in consideration for loans which had been made to the Company. On December 19, 1996, an aggregate of 11,333 common shares were issued to Rozell Holdings Ltd and to Mario Romano in consideration for loans which had been made to the Company. On December 30, 1996, options to acquire an aggregate of 290,000 shares of Common Stock were granted to Douglas MacLellan and Stephen Leahy (who were directors and/or officers) at exercise prices of $2.68 per share and with expiration dates of December 30, 2001. Between December 19, 1995 and December 11, 1996, the Company arranged the private placements of convertible promissory notes to accredited investors having an aggregate principal amount of $2,417,000. Of this amount, $1,817,000 was received subsequent to, and $600,000 was received prior to, December 31, 1995. The promissory notes were due and payable after two years which ranged to December 1998, or after six months upon demand of the holder, and bore interest at 10% per annum with interest payable upon maturity or conversion. The promissory notes were convertible at the holders' option into shares of common stock of the Company at conversion prices ranging from $1.49 to $3.25 per share. Pursuant to the debt subscription agreements, the Company also agreed to issue to the investors non-transferable warrants to purchase up to an aggregate of 461,203 shares of common stock of the Company for a period of two years at a price equal to the conversion price of the notes. The conversion and warrant exercise prices were based on the market price of the Company's common stock at the date of the offering. On December 31, 1996, convertible promissory notes aggregating $2,267,000 had been converted to 1,097,163 shares of common stock which were then issued as consideration for the conversion of the convertible promissory notes. The issuance of all such securities was exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof and Regulation D promulgated thereunder. ITEM 6. SELECTED FINANCIAL DATA The following selected historical financial information of the Company is qualified by reference to and should be read in conjunction with the financial statements and notes thereto included elsewhere herein. The selected financial information set forth below for the fiscal year ended December 31, 1996, the fiscal transition period ended December 31, 1995, and the fiscal year ended March 31, 1995 is derived from the financial statements of the Company audited by KPMG, independent public accountants, which are included elsewhere herein. The selected financial information set forth below for the fiscal years ended March 31, 1994 and 1993 is derived from the financial statements of the Company audited by KPMG, independent public accountants, which are not included in this report.
DECEMBER DECEMBER MARCH 31, MARCH 31, MARCH 31, 31, 1996 (1) 31, 1995 (2) 1995 1994 1993 -------------------------------------------------------------------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND WEIGHTED AVERAGE DATA) Net sales or operating 9,014 56 (212) 375 161 revenues Income (loss) from 4,732 (1,880) (7,145) (3,205) (1,887) continuing operations Income (loss) from 0.38 (0.20) (0.90) (0.48) (0.42) continuing operations per share of common stock Weighted average common 12,622 9,000 7,975 6,742 4,511 shares and equivalents (3) Total assets 8,226 988 337 2,331 1,723 Long term obligations -- -- -- 1,037 87
(1) Results for 1996 were significantly affected by the acquisition of cash and common stock of MAC. See "Item 1.: Business; Business of PortaCom Wireless, Inc." (2) Nine month fiscal transition period ending December 31, 1995. (3) Expressed in thousands of common shares. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. In 1995 the Company changed its fiscal year end from March 31 to December 31. Accordingly, the discussion set forth below includes a comparison of the fiscal year ended December 31, 1996 to the nine month transition period ended December 31, 1995 (the "Transition Period") and a comparison of the Transition Period to the fiscal year ended March 31, 1995. Because the Company discontinued its previous business in 1995, the Company does not believe such presentation is meaningful and, in addition, the Company believes that historical results are not indicative of future results. RESULTS OF OPERATIONS - --------------------- Fiscal Year Ended December 31, 1996 Compared with the Nine Month Fiscal - ----------------------------------------------------------------------- Transition Period Ended December 31, 1995 (the "Transition Period") - ------------------------------------------------------------------- For the fiscal year ended December 31, 1996, the Company reported net income of $5,139,662 with sales of $10,000 and other income of $9,003,943 compared to a loss in the Transition Period of $1,334,480 on sales of $143,652 and other income of nil. Expressed in terms of earnings (loss) per share of common stock, results from operations for 1996 as compared with those for the Transition Period were $0.41 per share and ($0.14) per share, respectively. Other income is directly and solely attributable to an agreement between the Company and AAT pursuant to which the Company received $1,000,000 in cash, common stock (presently held in escrow) valued at $8,000,000 and 4,000,000 warrants to purchase common stock at $4.00 per share. Although the possibility exists that the Company could enter into one or more similar transactions in 1997, no assurances can be given to this effect. Accordingly, the improvement in the Company's financial condition resulting from the AAT transaction may not be, and should not be construed to be, indicative of future results. The reported decrease in net sales was due to the fact that the Company's revenue-producing subsidiaries (which were also generating significant net losses) were discontinued in 1995 and remained inactive throughout 1996. Additionally, the Company's revenue-producing activities from ongoing operations, with the exception of those directly related to the AAT agreement, have remained limited in scope throughout 1996. Sales are expected to remain at substantially the same level for the current year and the Company's operations are not expected to generate revenues until 1998. All of the 1996 sales were attributable to consulting activities of the Company, whereas substantially all of the sales in the Transition Period were attributable to the Company's PCBX systems and related products, with Telecom and Laboratories accounting for a nominal portion of Transition Period Sales. Cost of sales fell in 1996 to nil from $87,391 in the Transition Period. This decline in cost of sales was primarily due to the Company's current business development activities not including the manufacture or resale of equipment as was the case in the Transition Period. Furthermore, the cost of sales for 1996 is not comparable to that of prior periods due to the closure of the Company's revenue producing subsidiaries in August 1995. Operating expenses increased in 1996 to $4,281,558 from $1,936,665 in the Transition Period, an increase of $2,344,893. Of this increase, the most significant factor was a write down of promissory notes receivable and investment related to TAI and PWC. See "Item 1. Business". The increases in operating expenses were primarily related to the increase in activities of the Company with respect to the acquisitions and proposed acquisitions of wireless telecommunications interests in China, Cambodia, and Vietnam as compared with a general reduction in these expense categories throughout the Transition Period as a direct result of downsizing related to the closure of the Company's revenue producing subsidiaries in August 1995. During the fiscal year ended December 31, 1996, interest and bank charges rose to $627,234 from $73,394 recorded in the Transition Period. This increase was primarily related to interest accrued on the $2,417,000 in convertible promissory notes. Additional factors included increases in interest, legal and accounting, consulting fees, general and administrative, and travel expenses. Legal and accounting expenses increased to $727,882 from $273,665. Consulting expenses increased to $619,292 from $327,132. General and administrative expenses increased to $306,950 from $114,526. These increases were partially offset by decreases in depreciation, bad debt, rent, wages and benefits, advertising and promotion, and research and development expenses. The Company's operating expenses as a percentage of sales in 1996 are not comparable to the prior period due to the closure of the Company's revenue-producing subsidiaries in August 1995. As at December 31, 1996, management does not believe that revenues will likely be realized by the Company for the near term; however, the Company expects that it will need to expend significant funds in order to develop the Cambodian Licence and to obtain additional licenses and to form additional joint ventures necessary for the Company or PIL to provide wireless communications services in other markets where such opportunities are being sought, although the Company would not generate any revenues until such licenses were obtained and such joint ventures were operational. These activities would likely necessitate a material increase in general office overhead and other general and administrative costs. The preceding paragraph contains certain forward looking statements that are subject to inherent uncertainties. Among the factors resulting in such uncertainties are those described in "Item 1: Business; Certain Considerations." Transition Period Compared with Fiscal 1995 - ------------------------------------------- Sales in the nine month fiscal transition period ended December 31, 1995 were $143,652, a decrease of approximately 82% from the $780,839 reported for the prior fiscal year ending March 31, 1995 ("Fiscal 1995"). Substantially all of the Fiscal 1995 sales and most of the Transition Period sales were attributable to the Company's PCBX Systems and related products, with Telecom and Laboratories accounting for a nominal portion of Transition Period sales. The Company incurred a loss of $1,334,480 in the Transition Period, compared with a loss of $7,144,581 in Fiscal 1995, or $0.14 per share versus $0.90 per share, respectively. Cost of sales fell in the Transition Period to $87,391 from $992,807 in Fiscal 1995, or 61% and 127% of sales, respectively. This decrease in cost of sales, both in absolute terms and as a percentage of sales, was primarily due to a combination of reduced component costs for the PCBX line of products, an increase in the sale of software (PCBX's highest margin product). Operating expenses fell in the Transition Period to $1,936,665 from $6,932,613 in Fiscal 1995, a decrease of $4,995,948, or 72%. Of this decrease, the most significant factors were (i) a decrease in consulting fees to $327,132 from $1,470,000, (predominantly paid to related parties; See Item 12: "Certain Relationships and Related Transactions") related to downsizing, (ii) a decrease in general and administrative costs to $114,526 from $499,165, related to downsizing, (iii) a decrease in wages and benefits to $513,325 from $1,658,765, and (iv) a decrease in bad debt expenses to $80,628 from $571,003, due primarily to a drastic decrease in sales on account in favor of cash sales. Fiscal 1995 Compared with Fiscal 1994 - ------------------------------------- Sales in the fiscal year ended March 31, 1995 ("Fiscal 1995") were $780,839, a decrease of approximately 5.9% from the $829,844 reported for the prior fiscal year ("Fiscal 1994"). Revenues were expected to decline throughout the next fiscal year, if the Company was unable to obtain additional market acceptance for its products. All of the Fiscal 1994 sales and substantially all of the Fiscal 1995 sales were attributable to the Company's PCBX systems and related products, with Telecom and Laboratories accounting for a nominal portion of Fiscal 1995 sales. The Company incurred a loss of $7,144,581 in Fiscal 1995, compared with a loss of $3,205,237 in Fiscal 1994, or $0.90 per share versus $0.48 per share, respectively. Cost of sales rose in Fiscal 1995 to $992,807 from $454,383 in Fiscal 1994, or 127% and 55% of sales, respectively. This increase in cost of sales, both in absolute terms and as a percentage of sales, was primarily due to manufacturing and product quality problems, which resulted in the Company having to manufacture substantially more units in order to satisfy delivery requirements, although part of the increase was attributable to product enhancements which increased unit costs. The Company also experienced a substantial increase in product returns. Operating expenses rose in Fiscal 1995 to $6,932,613 from $3,580,698 in Fiscal 1994, an increase of $3,351,915, or 93.6%. Of this increase, the most significant factors were (i) an increase in consulting fees to $1,470,000 from $380,433, (predominately paid to related parties; See Item 12: "Certain Relationships and Related Transactions") (ii) an increase in general and administrative costs to $499,165 from $261,422, (iii) an increase in wages and benefits to $1,658,765 from $1,033,526, and (iv) an increase in bad debt expenses to $571,003 from $86,129, due in each case primarily to the Company's plans to launch its line of audio products, which did not occur as scheduled (although bad debt expense increased primarily because of difficulty in collecting accounts receivable due to customer dissatisfaction with the Company's products). Legal and accounting costs increased principally as a result of legal costs associated with organizational matters and other costs. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- During 1996, the Company's cash and cash equivalents decreased by $51,390. Although the Company generated $4,870,145 from financing activities, the Company's operations utilized a net of $1,911,481. The Company also used cash of $2,871,000 in repayment of short-term debt and $139,054 in investments in office equipment and in TAI and ACT. These activities contributed to a net working capital position as of December 31, 1996 of ($685,858), which is up $1,219,810 from ($1,905,668) at December 31, 1995. Working capital levels have only been able to increase by virtue of the Company's continued offerings of securities, its ability to secure short term loans, and the receipt of cash and securities pursuant to its agreement with AAT. The Company has incurred cumulative losses from inception through December 31, 1996 of $9,780,227 and has not achieved revenues sufficient to offset direct expenses and corporate overhead. Since inception, a substantial portion of the Company's operating capital has been provided through financing activities which have included an initial public offering and a series of private placements of common shares. During 1996, the Company sold 1,517,984 shares of common stock and 558,702 common stock purchase warrants in private placement transactions and upon the exercise outstanding stock options and warrants. The Company anticipates that it will seek additional financing through the private placement of equity or debt securities, although no assurances can be given as to the success of any future offerings of securities. Between December 19, 1995 and December 11, 1996, the Company arranged, subject to regulatory approval, private placements of convertible promissory notes having an aggregate principal amount of $2,417,000. Of this amount $1,817,000 was received subsequent to, and $600,000 was received prior to, December 31, 1995. The promissory notes were due and payable after two years which ranged to December 1998, or after six months upon demand of the holder, and bore interest at 10% per annum, with interest payable upon maturity or conversion. The promissory notes were convertible into shares of common stock of the Company at conversion prices ranging from $1.49 to $3.25 per share. Pursuant to the debt subscription agreements, the Company also agreed to issue to the investors non-transferable warrants to purchase an aggregate of up to 461,203 shares of common stock of the Company for a period of two years at a price equal to the conversion price of the notes. The conversion and warrant exercise prices were based on the market price of the Company's common shares at the date of their offering. On December 16, 1996, regulatory approval was received for the issuance of convertible promissory notes aggregating $2,417,000 and 461,203 warrants which were then issued by the Company. As of December 31, 1996, convertible notes aggregating $2,267,000 were converted to common stock. As of the date of this report, the remaining convertible notes aggregating $150,000 had also been converted to common stock. As of December 31, 1996 accrued interest on the convertible promissory notes aggregating approximately $180,000 was payable by the Company. As of December 31, 1996, the Company had 1,136,183 options and 725,703 warrants outstanding which, upon exercise, would yield to the Company additional proceeds in excess of $3.8 million. The exercise of existing options or warrants is impossible to predict with any certainty. Accordingly, management can render no assurances that any material funds will be realized upon the exercise of such options or warrants, or whether such will be exercised at all. Rental expense accounts for approximately $3,000 of fixed expenses on a monthly basis. Personnel costs, which are expected to increase somewhat throughout the year, are likely to account for between $75,000 and $100,000 of fixed expenses on a monthly basis. Additional variable expenses, such as consulting fees, legal and accounting, travel and entertainment, utilities and miscellaneous equipment purchases (or rentals) are expected to account for between approximately $50,000 and $75,000 per month. In addition to fixed rental and certain personnel expenses, as of December 31, 1996, the Company anticipates capital expenditures of approximately $15 million during 1997 in connection with the establishment and expansion of ACT's operations. The Company may also elect to exercise some or all of its MAC share purchase warrants in 1997, the purchase price for which would be $16 million assuming the exercise of all of its warrants. Management does not believe that in the near term the Company's operations will generate sufficient cash flow to finance its working capital and any capital expenditure requirements. The Company's operations will remain dependent on the Company's ability to obtain additional debt and equity financing (including from the exercise of existing warrants). The Company has been able to secure financing in the past through loans from certain stockholders, although management has no reason to believe that similar arrangements will be available in the future. While the Company will continue to seek both debt and equity financing, there can be no assurance that any such financing will be available on terms acceptable to the Company or at all. Without such additional sources of financing, the Company will not be able to continue as a going concern. The political systems of the countries in which the Company has or may seek to establish joint venture operations are in many cases emerging from legacies of totalitarianism or civil unrest. In addition, many of the economies are weak, volatile and reliant on foreign assistance. Free market reforms undertaken by some of these countries face uncertain success and may lead to further economic instability. These factors may adversely affect the Company's business activities and results of operations. The laws, rules and regulations applicable to the Company's activities in developing countries are generally new, subject to change and incomplete. There can be no assurance that local laws, rules and regulations will become stable or complete in the future, or that changes thereto will not materially adversely affect the operations of the Company. All of the Company's joint venture operations are and are expected to be outside the United States. As a result, such operations are exposed to currency fluctuations and the need to comply with a variety of foreign laws, including laws that control currency exchanges and currency repatriation. The Company does not hedge its foreign currency risks. There can be no assurance that the Company's operations will not be adversely affected by such factors. The preceding paragraphs contain certain forward looking statements that are subject to inherent uncertainties. Among the factors resulting in such uncertainties are those described in "Item 1: Business; Special Considerations." Investment in TAI Although the Company holds approximately a 41% interest in TAI, at year end it was determined that this investment had experienced an other than temporary decline in value and a significantly decreased likelihood that the $581,710 in loans would be repaid. Accordingly, the investment and advances were written down to their estimated fair value of $nil. Debt Settlements In October 1995, the Company began to enter into written agreements to settle indebtedness in the aggregate amount of approximately $2,809,000 for cash or share consideration. These agreements were subject to regulatory approval. In May 1996, the Company received regulatory approval and completed the settlement of $2,513,121 of such debt through the issuance of a total of 1,256,561 shares of common stock. As of January 31, 1997, 53,675 shares continue to be reserved for issuance when allowable. In December 1995, the Company agreed to the restructuring and settlement of claims of two parties related to each other. The amount of the settlement was subsequently reduced and fully paid by the Company in 1996. As of December 31, 1996, the outstanding accounts payable of the Company's closed subsidiaries accounts for approximately $90,000 of total accounts payable. The Company is continuing to attempt to settle the outstanding debt on terms favorable to the Company, although no assurances about such settlement terms can be given. Cancellation of Performance Shares In October 1995, certain shareholders agreed to surrender their 5,950,000 performance shares which were then held under an escrow arrangement. In consideration therefor, the Company agreed to issue 314,762 common shares at a deemed price of $2.00 per share. Although the performance shares have been irrevocably canceled by the Company, as of the date of this filing, the issuance of the 314,762 shares continues to be subject to the removal of the Company from the jurisdiction of both the Vancouver Stock Exchange and the British Columbia Securities Commission. Bonus Shares and Warrants In connection with the issuance of certain short-term debt by the Company in January 1995 and May 1996, the Company has agreed to issue, subject to regulatory approval, 85,590 "bonus" shares of common stock and 166,667 share purchase warrants, exercisable at $3.30, expiring on May 31, 1997. During 1996, regulatory approval was received for the issuance of 25,833 of these shares which were then issued by the Company. As of December 31, 1996, the issuance of the remaining 59,757 shares and 166,667 warrants continued to be subject to regulatory approval. EFFECTS OF INFLATION - -------------------- The Company does not expect inflation to materially affect its results of operations. However, it is expected that operating costs and the cost of capital equipment to be acquired in the future may be subject to general economic and inflationary pressures. ITEM 8. FINANCIAL STATEMENTS The consolidated financial statements and schedules required to be filed under this item are presented on the following pages. The Company does not believe that issued, but not yet effective, accounting standards will materially impact its financial position or results of operations upon adoption. Consolidated Financial Statements of PORTACOM WIRELESS, INC. (expressed in U.S. dollars) Year ended December 31, 1996 Nine month period ended December 31, 1995 Year ended March 31, 1995 F-1 AUDITORS' REPORT TO THE SHAREHOLDERS We have audited the consolidated balance sheets of PortaCom Wireless, Inc. as at December 31, 1996 and 1995 and the consolidated statements of operations, stockholders' equity (deficiency) and cash flows for the year ended December 31, 1996, the nine month period ended December 31, 1995 and the year ended March 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1996 and 1995 and the results of their operations and the changes in their cash flows for the year ended December 31, 1996, the nine month period ended December 31, 1995 and the year ended March 31, 1995 in accordance with generally accepted accounting principles in the United States. /s/ KPMG Chartered Accountants Vancouver, Canada January 15, 1997 COMMENTS BY AUDITOR FOR U.S. READERS ON CANADA-U.S. REPORTING DIFFERENCE In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when the financial statements are affected by conditions and events that cast substantial doubt on the Company's ability to continue as a going concern, such as those described in note 1 to the consolidated financial statements. Our report to the shareholders dated January 15, 1997 is expressed in accordance with Canadian reporting standards which do not permit a reference to such events and conditions in the auditors' report when these are adequately disclosed in the financial statements. /s/ KPMG Chartered Accountants Vancouver, Canada January 15, 1997 F-2 PORTACOM WIRELESS, INC. Consolidated Balance Sheets (expressed in U.S. dollars)
- ------------------------------------------------------------------------------------ December 31, December 31, 1996 1995 - ------------------------------------------------------------------------------------ Assets Current assets: Cash and cash equivalents $ 114,275 $ 165,665 Accounts receivable - 7,093 ----------------------------------------------------------------------------------- 114,275 172,758 Promissory notes receivable (note 4) - 815,400 Investments (note 5) 8,099,500 - Equipment, net 12,427 - - ------------------------------------------------------------------------------------ $8,226,202 $ 988,158 - ------------------------------------------------------------------------------------ Liabilities and Stockholders' Equity (Deficiency) Current liabilities: Accounts payable and accrued liabilities (note 6) $ 650,133 $ 1,107,426 Loans payable (note 7) 150,000 971,000 ----------------------------------------------------------------------------------- 800,133 2,078,426 Stockholders' equity (deficiency): Share capital (note 8): Issued: Common stock (1996 - 13,118,181; 1995 - 17,496,522) 13,118 17,496 Other paid-in capital 17,193,178 13,812,125 Deficit (9,780,227) (14,919,889) ----------------------------------------------------------------------------------- 7,426,069 (1,090,268) Future operations (note 1) Contingent liabilities (notes 5(a) and 9) - ------------------------------------------------------------------------------------ $8,226,202 $ 988,158 - ------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. On behalf of the Board: /s/ Stephen Leahy Director - ------------------------ /s/ Douglas MacLellan Director - ------------------------ F-3 PORTACOM WIRELESS, INC. Consolidated Statements of Operations (expressed in U.S. dollars)
- ------------------------------------------------------------------------------------------ Nine months Year ended ended Year ended December 31, December 31, March 31, 1996 1995 1995 - ------------------------------------------------------------------------------------------ Income: Sales, net $ 10,000 $ 143,652 $ 780,839 Cost of sales - 87,391 992,807 ----------------------------------------------------------------------------------------- 10,000 56,261 (211,968) Other income (note 5(a)) 9,003,943 - - - ------------------------------------------------------------------------------------------ 9,013,943 56,261 (211,968) Expenses: Advertising and promotion 3,545 60,820 281,649 Bad debts 2,513 80,628 571,003 Consulting fees (note 10) 619,292 327,132 1,470,000 Depreciation 2,127 143,786 210,052 General and administrative 306,950 114,526 499,165 Interest, bank charges and financing charges (note 7) 627,234 73,394 134,198 Legal and accounting 727,882 273,665 469,922 Management fees (note 10) 86,013 49,436 360,505 Placement fees 106,000 - - Rent 40,371 141,568 267,165 Research and development 4,530 60,437 570,441 Travel 273,726 97,948 439,748 Wages and benefits 434,665 513,325 1,658,765 Write-down of promissory notes receivable and investment ( note 10(f) ) 1,046,710 - - ----------------------------------------------------------------------------------------- 4,281,558 1,936,665 6,932,613 - ------------------------------------------------------------------------------------------ Income (loss) before extraordinary item 4,732,385 (1,880,404) (7,144,581) Gain on settlement of debt 407,277 545,924 - - ------------------------------------------------------------------------------------------ Net income (loss) for the period $ 5,139,662 $(1,334,480) $(7,144,581) - ------------------------------------------------------------------------------------------ Net income (loss) per share (note 3(g)) $ 0.41 $ (0.14) $ (0.90) - ------------------------------------------------------------------------------------------ Weighted average number of common stock outstanding (note 3(g)) 12,621,945 8,999,863 7,974,845 - ------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-4 PORTACOM WIRELESS, INC. Consolidated Statement of Stockholders' Equity (Deficiency) (expressed in U.S. dollars)
- --------------------------------------------------------------------------------------- Common Other Paid-in stock capital Deficit - --------------------------------------------------------------------------------------- Balance, March 31, 1994 after giving retroactive effect to change in authorized common stock (note 8(b)) $13,835 $ 6,962,626 $ (6,440,828) Year ended March 31, 1995: Common stock issued for cash 1,380 3,107,829 - Net loss for the year - - (7,144,581) - --------------------------------------------------------------------------------------- Balance, March 31, 1995 15,215 10,070,455 (13,585,409) Nine months ended December 31, 1995: Common stock issued: For cash 1,025 1,229,806 - On settlement of debt 1,256 2,511,864 - Net loss for the period - - (1,334,480) - --------------------------------------------------------------------------------------- Balance, December 31, 1995 17,496 13,812,125 (14,919,889) Year ended December 31, 1996: Common stock issued: For cash 299 552,847 - On settlement of liabilities 176 306,353 - On conversion of promissory notes 1,097 2,265,903 - Common stock cancelled (5,950) 5,950 - Value ascribed to warrants (note 7(b)) - 250,000 - Net income for the year - - 5,139,662 - --------------------------------------------------------------------------------------- Balance, December 31, 1996 $13,118 $17,193,178 $ (9,780,227) - ---------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-5 PORTACOM WIRELESS, INC. Consolidated Statements of Cash Flows (expressed in U.S. dollars)
- --------------------------------------------------------------------------------------------------------- Nine months Year ended ended Year ended December 31, December 31, March 31, 1996 1995 1995 - --------------------------------------------------------------------------------------------------------- Cash provided by (used in): Cash flows from operating activities: Net income (loss) for the period $ 5,139,662 $(1,334,480) $(7,144,581) Items not involving cash Depreciation 2,127 143,786 210,052 Fair value of investments received on settlement (note 5(a)) (8,000,000) - - Write-down of promissory notes receivable and investment 1,046,710 - - Share capital issuable in settlement of financing charges 328,399 - - Changes in operating assets and liabilities: Accounts and promissory notes receivable (199,527) (782,060) 24,314 Inventory - 58,852 327,995 Prepaid expenses - 6,680 62,260 Employee loans (note 10(c)) - - 147,209 Accounts payable and accrued liabilities (228,852) 1,405,889 1,657,069 - -------------------------------------------------------------------------------------------------------- Net cash used by operating activities (1,911,481) (501,333) (4,715,682) Cash flows from financing activities: Issue of and to be issued for common stock for cash 553,145 1,230,830 3,109,209 Bridge Financing 2,500,000 - - Repayment of Bridge Financing (2,500,000) - - Convertible promissory notes 1,817,000 600,000 - Repayment of note payable - - (150,000) Repayment of promissory note payable - (37,500) (50,000) Loans payable (371,000) (1,213,508) 584,508 - -------------------------------------------------------------------------------------------------------- Net cash generated by financing activities 1,999,145 579,822 3,493,717 Cash flows from investing activities: Equipment, net (14,554) 13,792 (92,379) Patents, trademarks and other assets - - (80,855) Investments (note 5) (124,500) - - - -------------------------------------------------------------------------------------------------------- Net cash generated (used) by investing activities (139,054) 13,792 (173,234) - -------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (51,390) 92,281 (1,395,199) Cash and cash equivalents, beginning of period 165,665 73,384 1,468,583 - -------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 114,275 $ 165,665 $ 73,384 - -------------------------------------------------------------------------------------------------------- Supplementary information: Interest paid $ 25,000 $ - $ - Income taxes paid - - - Non-cash transactions (note 11) - --------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements. F-6 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 1. FUTURE OPERATIONS: PortaCom Wireless Inc. (the "Company") was incorporated on July 7, 1989 under the Company Act (British Columbia) and was inactive until April 1990. Effective December 24, 1996, the Company emigrated its corporate charter from British Columbia to Delaware. This resulted in the restatement of the Company's authorized common and preferred stock (note 8). The Company is currently pursuing business ventures as a developer, financier and operator of companies providing cellular, wireless and PSTN telecommunications services in selected developing world markets. The Company intends to make investments primarily in wireless, cellular, PSTN and long distance networks in order to provide coverage and high-quality service in selected emerging markets. The Company's principal interests are focused on these technologies in Cambodia and other emerging markets which represents a single industry segment. The Company entered into a joint venture on December 26, 1996 as the managing partner of American Cambodian Telecom Ltd. ( "ACT" ) a limited liability company which holds a twenty-five year renewable license to develop a mobile wireless system in the Kingdom of Cambodia. The Company also holds a 3.43% interest in Metromedia Asia Corporation ( "MAC" ), which is active in the build-out of telecommunications in China. At December 31, 1996 the Company had a working capital deficiency of $685,858. At the date of these consolidated financial statements, the Company has not generated cash flow from recurring operating activities and it is uncertain when it will commence to generate such a cash flow. In addition, the Company's largest recorded asset is restricted until January 1, 1999 (note 5(a)). Accordingly, there can be considered to be doubt as to the nature and extent of the Company's future operations. The accompanying consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern which requires the realization of assets and settlement of liabilities in the ordinary course of business. The Company's viability as a going concern is dependent upon the continued restructuring of its asset base, the financial support of shareholders and creditors and, ultimately, the generation of profitable operations. Although it is management's intention to pursue these options, there can be no assurance that these events will or can occur. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 2. CHANGE IN FISCAL YEAR: In 1995, the Company changed the date on which its fiscal year ends from March 31 to December 31, 1995. Accordingly, results of operations and cash flows for the transition period which ended December 31, 1995 cover a nine- month period. F-7 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 2 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 3. SIGNIFICANT ACCOUNTING POLICIES: (a) Basis of presentation: These consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. In prior years, as a company incorporated in Canada, it reported to its shareholders based on Canadian accounting principles. Due to the emigration to Delaware, the Company is now required to file regulatory reports under United States accounting principles. The change from Canadian to United States generally accepted accounting principles did not impact reported amounts for total assets, stockholders' equity (deficiency) or net income (loss) for either the 1996 or prior reporting periods. Under Canadian accounting principles earnings (loss) per share would be calculated including escrowed shares as indicated in note 3(g). (b) Basis of consolidation: These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, PortaCom International, Ltd., PCBX Systems, Inc., Extreme Laboratories, Inc. and Extreme TeleCom, Inc. The Company's interest in ACT (note 5(b)) is accounted for by the equity method. All material intercompany accounts and transactions have been eliminated. Other investments are accounted for at cost. (c) Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. With respect to the Company's operations, these estimates primarily relate to the underlying value of investments which will only be determinable based upon future events. Management has applied its judgment to the information available to the date of the issuance of these consolidated financial statements in making such judgment. Actual results could differ from estimates made in preparing these consolidated financial statements. (d) Cash and cash equivalents: Cash equivalents are highly liquid investments, such as term deposits, having original maturities of three months or less, that are readily convertible to contracted amounts of cash. (e) Equipment: Equipment is recorded at cost. Depreciation is provided at rates which are calculated to amortize the cost of these assets over their estimated useful lives. F-8 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 3 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): (f) Income taxes: The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred tax assets and liabilities are recognized based on the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect of deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (g) Net income (loss) per share: Net income (loss) per share is computed based on the weighted average number of shares outstanding during the year, which number of shares excludes escrowed shares that are contingently returnable to the Company's treasury. If the escrowed shares had been included, net income (loss) per share would have been $0.39 (December 31, 1995 - $(0.09); March 31, 1995 - $(0.49)). If the escrowed shares become issuable, net income (loss) per share will be retroactively restated. Fully diluted net income (loss) per share has not been presented as the effect is either not materially dilutive or are anti-dilutive. (h) Currency: As the majority of the Company's activities are in U.S. dollars, these consolidated financial statements are stated in U.S. dollars, except where otherwise indicated. Translation of Canadian dollar transactions has taken place at the exchange rate in effect at the transaction date. There have been no material foreign exchange gains or losses through the date of these consolidated financial statements. (i) Fair value of financial instruments: Financial instruments include cash, investments, accounts payable and accrued liabilities and loans payable. In all cases, management's best estimate of their fair value is not materially different from carrying value. (j) Stock options: As described in note 8(d), from time-to-time the Company issues stock options to directors, officers and employees. These options are granted having exercise prices based on the market price of the Company's common shares at the date of grant. Stock options are accounted for in accordance with SFAS No. 123. As allowed under SFAS No. 123, the Company recognizes stock options granted in accordance with APB Opinion No. 25. (k) Revenue recognition: The Company recognizes revenue when the customer accepts delivery of the product and there is reasonable assurance as to the collectibility of any receivables. F-9 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 4 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 4. PROMISSORY NOTES RECEIVABLE: At December 31, 1995, promissory notes receivable bore interest at 10% per annum, were unsecured and without specific dates for repayment. The promissory notes receivable were due from entities which are related to the Company through common directors and management. All amounts have been written off in the current year as they were determined to be uncollectible. 5. INVESTMENTS:
- ------------------------------------------------------------------------------------- December 31, December 31, 1996 1995 - ------------------------------------------------------------------------------------- Asian American Telecommunications Corporation, 17% interest $8,000,000 $ - American Cambodian Telecom Ltd., a joint venture, 86% interest 99,500 Telecommunications American International, 41% interest - - - ------------------------------------------------------------------------------------- $8,099,500 $ - - -------------------------------------------------------------------------------------
(a) On May 28, 1996, the Company announced that it had entered into a contract to acquire all of the outstanding shares of Asian American Telecommunications Corporation ("AAT"), an unrelated Los Angeles-based telecommunications services developer. By an agreement made as of September 11, 1996, AAT and the Company agreed to terminate all rights and obligations of either party under the proposed business combination. As consideration for this termination, AAT issued to the Company 2,000,000 restricted common shares, and issued to the Company warrants to acquire 4,000,000 common shares of AAT for a period of three years at a price of $4.00 per share. The Company paid no cash consideration for these shares or warrants. The Company's investment is recorded at the estimated fair value of the assets received in excess of the consideration payable to exercise the warrants. This fair value was established by reference to capital stock issuances made by AAT for cash consideration. In addition, AAT paid the Company non-refundable cash consideration of $1,000,000 as part of this termination agreement. The 2,000,000 common shares have been pledged by the Company to AAT until January 1, 1999 pursuant to the Company's indemnification obligations under the termination agreement. These indemnification obligations provide that the Company grants to AAT a first priority lien on the common shares against any costs or losses arising to AAT, or specified related parties, arising from certain claims or potential claims related to the original proposed acquisition or the termination agreement. At the date of these consolidated financial statements, no claims under this indemnification agreement have arisen and the likelihood is considered to be remote. The receipt of cash and common stock pursuant to the termination agreement has been recorded as income in the consolidated statement of operations. On December 23, 1996, AAT entered into a business combination agreement with MAC. In connection with the Agreement, MAC offered to exchange all outstanding shares of AAT capital stock and all warrants to purchase shares of AAT capital stock for shares and warrants of MAC. F-10 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 5 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 5. INVESTMENTS (CONTINUED): Subsequent to year end, the Company agreed to exchange these shares and warrants of AAT for equivalent shares and warrants of MAC. Based on representations by MAC, these shares gave the Company a 3.43% interest in MAC immediately following the consummation of the exchange offer (9.16% interest calculated on a fully diluted basis if the Company exercises all warrants and no other outstanding warrants are exercised). (b) On December 26, 1996, the Company acquired an 86% non-controlling ownership interest in American Cambodian Telecom Ltd. ("ACT"), a newly formed Joint Venture agreement with another party under the consent of the Ministry of Posts and Telecommunications in Cambodia. ACT has been inactive to December 31, 1996. Under the Joint Venture agreement, the Company is required to contribute capital to ACT of at least 50 million Cambodian Riel (approximately $20,000). In addition, the Company is required to provide a refundable deposit of $200,000 within 45 business days of December 31, 1996. As of December 31, 1996 no capital or deposit had been contributed. (c) On August 5, 1996, the Company agreed to purchase 250 shares of the common stock of Telecommunications American International ("TAI") from a shareholder for the sum of $25,000. In addition, the Company had advanced an aggregate of $ 556,710 to TAI. In the year ended December 31, 1996, it was determined that the investment and advances had experienced an other than temporary decline in value and therefore they have been written down to their estimated fair value of $nil. This write down is included in the consolidated statement of operations. (d) The Company reviews the underlying value of all investments on an ongoing basis and provides for declines in value that are other than temporary as they are identified. Any impairments are charged to earnings and a new cost basis for the security is established. At December 31, 1996, no such impairments have been identified in the investments in AAT and ACT. 6. ACCRUED LIABILITIES: Management fees due to a director (formerly an officer) of the Company previously included in accrued liabilities ceased to accrue as at October 31, 1995. This liability was settled for common stock in the nine month period ended December 31, 1995. 7. LOANS PAYABLE:
- ----------------------------------------------------------------------------------------------------------------------------- December 31, December 31, 1996 1995 - ----------------------------------------------------------------------------------------------------------------------------- Convertible promissory notes (a) $150,000 $ 600,000 Note payable to former officer due December 31, 1996 - 200,000 Note payable to former services vendor, due as to $100,000 on or before April 5, 1996 (paid) and $71,000 on or before June 28, 1996 (paid) - 171,000 - ---------------------------------------------------------------------------------------------------------------------------- $150,000 $ 971,000 - ----------------------------------------------------------------------------------------------------------------------------
F-11 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 6 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 7. LOANS PAYABLE (CONTINUED): (a) Convertible promissory notes: Between December 19, 1995 and December 11, 1996, the Company arranged, private placements of convertible promissory notes having an aggregate principal amount of $2,417,000. Of this amount, $1,817,000 was received subsequent to, and $600,000 was received prior to, December 31, 1995. The promissory notes are due and payable after two years which range to December 1998, or after six months upon demand of the holder, and bear interest at 10% per annum with interest payable upon maturity or conversion. The promissory notes are convertible at the holders' option into shares of common stock of the Company at conversion prices ranging from $1.49 to $3.25 per share. Pursuant to the debt subscription agreements, the Company also agreed to issue to the investors non- transferable warrants to purchase up to an aggregate of 461,203 shares of common stock of the Company for a period of two years at a price equal to the conversion price of the notes. The conversion and warrant exercise prices are based on the market price of the Company's common stock at the date of the offering. To December 31, 1996, convertible notes aggregating $2,267,000 were converted to common stock (note 8(b)). (b) Bridge Financing: During 1996, the Company completed a Bridge Financing to raise $2,500,000 to provide interim financing pending the completion of a private placement of the convertible promissory notes described in (a). The Bridge Financing was due on demand after 30 days and bore interest at 12% per annum. In addition, 166,667 warrants were issuable to the lenders (notes 8(e) and (g)). For accounting purposes, the warrants have been recorded at their estimated fair value of $250,000 with a corresponding reduction in the recorded value of the Notes. This resulted in deemed interest expense of $250,000 in the year ended December 31, 1996 as all of the Notes were repaid. This deemed interest is included in interest expense in the consolidated statement of operations. 8. SHARE CAPITAL: (a) Authorized: Authorized share capital is as follows: 100,000,000 shares of common stock with a par value of $0.001 per share 5,000,000 shares of preferred stock with a par value of $0.001 per share F-12 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 7 (expressed in U.S. dollars) - ------------------------------------------------------------------------------ 8. SHARE CAPITAL (CONTINUED): (b) Issued common stock:
- ------------------------------------------------------------------------------------------------------ Number Per share Total of shares consideration consideration - ------------------------------------------------------------------------------------------------------ Balance, March 31, 1994 13,834,872 $6,976,461 Issued for cash: Free-trading shares, net of share issuance costs paid of $354,047 (f) 656,457 3.38 2,220,353 On exercise of stock options 266,000 1.61 427,325 On exercise of warrants 373,747 1.23 461,531 Issued as a finders fee in connection with issuance of the free trading common stock 83,742 - - - --------------------------------------------------------------------------------------------------- Balance, March 31, 1995 15,214,818 10,085,670 Issued for cash: Free-trading shares 204,878 1.36 277,490 On exercise of stock options 820,267 1.16 953,340 Issued on settlement of debt (f) 1,256,559 2.00 2,513,121 - --------------------------------------------------------------------------------------------------- Balance, December 31, 1995 17,496,522 13,829,621 Cancelled (c) (5,950,000) - Issued for cash: Free-trading shares 97,500 1.11 108,225 On exercise of warrants 97,878 2.98 291,500 On exercise of stock options 103,050 1.49 153,420 Issued as consideration for: Loans payable (g) 25,833 3.03 78,400 Settlement of debt 96,560 1.25 120,780 Convertible Promissory Notes 1,097,163 2.07 2,267,000 Fair value of warrants issuable in consideration for Bridge Financing (e) - 250,000 To be issued on settlement of debt (f) 53,675 2.00 107,350 - --------------------------------------------------------------------------------------------------- Balance, December 31, 1996 13,118,181 $17,206,296 - ---------------------------------------------------------------------------------------------------
Upon emigration to Delaware (note 1), the Company's authorized common stock was changed from 94,050,000 common shares without par value to 100,000,000 shares of capital stock with a par value of $0.001 per share. F-13 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 8 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 8. SHARE CAPITAL (CONTINUED): (b) Issued common stock (continued): After giving effect to this adjustment to the authorized share capital on a retroactive basis, the total consideration at December 31, 1996 and 1995 is allocated as follows:
- -------------------------------------------------------- 1996 1995 - -------------------------------------------------------- Common stock $ 13,118 $ 17,496 Contributed surplus 17,193,178 13,812,125 - -------------------------------------------------------- $17,206,296 $13,829,621 - --------------------------------------------------------
(c) Performance shares: Included in the issued and outstanding common stock are 600,000 shares which are subject to an escrow agreement. These shares are releasable from escrow on satisfaction of certain predetermined tests set out by regulatory authorities related to the generation of positive cash flow from operations. Shares not released from escrow by September 9, 2002 will be cancelled. Pursuant to the escrow agreement, holders of the shares may exercise all voting rights attached thereto except on a resolution to cancel any of the shares, and have waived their rights to receive dividends or to participate in the assets and property of the Company on a winding-up or dissolution of the Company. Upon release of the shares from escrow, compensation expense will be recorded. In October 1995, certain shareholders agreed to surrender their 5,950,000 escrowed shares which were then held under the escrow arrangement. In consideration therefor, the Company agreed to issue 314,762 shares of common stock at a deemed price of $2.00 per share. Although the escrowed shares have been irrevocably cancelled by the Company during 1996, the issuance of the 314,762 shares continues to be subject to the removal of the Company from the jurisdiction of both the Vancouver Stock Exchange and the British Columbia Securities Commission. F-14 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 9 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 8. SHARE CAPITAL (CONTINUED): (d) Stock options: Option changes for the period April 1, 1994 to December 31, 1996 were as follows:
Outstanding and exercisable as at March 31, 1994... 1,235,200 Granted at C$5.68 per share 274,800 Exercised at C$4.45 per share (80,000) Exercised at C$1.25 per share (186,000) --------------------------------------------------------------- Outstanding and exercisable as at March 31, 1995 1,244,000 Granted at C$1.90 per share 75,000 Granted at C$2.09 per share 400,000 Granted at C$2.41 per share 150,000 Exercised at C$1.25 per share (461,767) Exercised at C$2.09 per share (358,500) Cancelled (431,300) --------------------------------------------------------------- Outstanding and exercisable as at December 31, 1995 617,433 Granted at U$3.80 90,000 Granted at U$3.00 472,899 Granted at U$2.68 290,000 Exercised at C$1.25 (16,800) Exercised at C$1.90 (75,000) Exercised at U$3.00 (11,250) Cancelled (231,099) --------------------------------------------------------------- Outstanding and exercisable at December 31, 1996 1,136,183 ---------------------------------------------------------------
Stock options are issued at the average market price per share for the ten trading days prior to the date of issuance. Accordingly, no compensation cost has been recognized for options granted. Had compensation cost for the Company's stock options for 1996 and 1995 grants been determined consistent with FASB No. 123, the Company's net income (loss) and loss per share would have been adjusted to the pro forma amounts indicated below:
- ------------------------------------------------------------------ Nine months Year ended ended December 31, December 31, 1996 1995 - ------------------------------------------------------------------ Net income (loss): As reported $5,139,662 $(1,334,480) Pro forma 4,289,482 (1,659,480) Net income (loss) per share: As reported $ 0.41 $ (0.14) Pro forma 0.34 (0.18)
F-15 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 10 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 8. SHARE CAPITAL (CONTINUED): (e) Warrants: During the year ended March 31, 1995, the Company, in connection with private placements of common stock, issued warrants to purchase 483,457 shares of common stock at U$3.50 per share if exercised by October 1995 and at U$4.03 per share if exercised thereafter to October 1996. Of these warrants, 60,000 were exercised during 1996 and the balance expired. During the nine months ended December 31, 1995, the Company, in connection with a private placement, issued warrants to purchase 211,500 shares of common stock at U$5.10 per share if exercised by June 1995 and U$5.87 if exercised thereafter to June 1996. These warrants expired during the year. In addition, the Company, in connection with a number of private placements of common stock, issued warrants to purchase up to 204,878 shares of common stock at prices of between U$1.28 and U$1.47 per share if exercised by August 1996 and U$1.47 and U$1.69 if exercised thereafter to August 1997. Of these warrants, 37,878 were exercised during 1996 and 167,000 remain outstanding. During the year ended December 31, 1996, the Company, issued warrants to purchase 97,500 shares of common stock at U$1.11 per share if exercised by November 1996 and U$1.28 if exercised thereafter to November 1997. In addition, the Company issued 461,203 warrants attached to convertible promissory notes at prices ranging from U$1.49 to U$3.25 per share if exercised by dates ranging from December 19, 1997 to May, 7 1998. None of these warrants had been exercised at December 31, 1996; subsequent to year end, 20,134 of these warrants were exercised at $1.49 per share. In addition, pursuant to the Bridge Financing (note 7), 166,667 share purchase warrants exercisable at U $3.30 per share to May 31, 1997 are issuable. The warrants have been recorded at their estimated fair value of $250,000. At December 31, 1996, no warrants have been exercised. (f) Shares issued on settlement of debt: During the period ended December 31, 1995, the Company entered into agreements to issue 1,256,561 shares of common stock at their estimated fair value of $2.00 per share to settle outstanding liabilities aggregating $2,513,121. As the agreements were entered into prior to December 31, 1995, these settlements have been recorded in that period. The Company has further agreed to issue an additional 53,675 shares of common stock at their estimated fair value of $2.00 per share to settle additional outstanding liabilities aggregating $107,350. These issuances are subject to regulatory approval. F-16 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 11 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 8. SHARE CAPITAL (CONTINUED): (g) Shares to be issued for loans: In connection with the issuance of certain short-term debt by the Company in January 1995 and May 1996, the Company agreed to issue, subject to regulatory approval, 85,590 shares of common stock and 166,667 share purchase warrants, exercisable at $3.30 per share until May 31, 1997. During the current period, regulatory approval was received for the issuance of 25,833 of these shares which were then issued by the Company. At December 31, 1996, the issuance of the remaining 59,757 shares and 166,667 warrants continued to be subject to receipt of regulatory approval. Subsequent to December 31, 1996, regulatory approval was received for the issuance of 42,757 shares which were then issued by the Company. The fair value of the shares issuable are recognized as the Company becomes liable to meet the obligations. 9. CONTINGENT LIABILITY: During the year ended December 31, 1996, the Company emigrated from Canada as discussed in note 1. Subject to final determination by the income tax authorities in Canada, no tax liability arose on the emigration, and no income tax liability is currently outstanding in Canada. The Company has loss carry forwards in the United States of approximately $9,000,000 available to 2011. The potential benefit of these losses of approximately $3,600,000 has been fully offset by a valuation reserve. Accordingly, the accompanying consolidated financial statements reflect no provision for income taxes. 10. RELATED PARTY TRANSACTIONS: Related party transactions not disclosed elsewhere in these consolidated financial statements include: (a) Included in accounts payable at December 31, 1996 is approximately $24,000 (December 31, 1995 - $25,000) owing to related parties. (b) Management and consulting fees have predominantly been charged by related parties. (c) Included in bad debts expense for the year ended December 31, 1996 is $nil (period ended December 31, 1995 - $21,386; year ended March 31, 1995 -$227,000) recorded as provisions against employee loans. (d) The Company has reimbursed expenses incurred by directors and officers on its behalf during the periods presented. (e) In addition to amounts included in consulting paid to a director, expenses of approximately $50,000 are included in various other accounts for the year ended December 31, 1996 (nine months ended December 31, 1995 and year ended March 31, 1995 - $nil). (f) The write-down of promissory notes receivable and investment for the year ended December 31, 1996 of $1,046,710, represents a write-down of notes receivable and investment in TAI aggregating $ 581,710 (note 5(c)) and a write-down of other promissory notes receivable from a related party aggregating $ 465,000. F-17 PORTACOM WIRELESS, INC. Notes to Consolidated Financial Statements, page 12 (expressed in U.S. dollars) - -------------------------------------------------------------------------------- 11. CONSOLIDATED STATEMENTS OF CASH FLOWS: During the periods presented the Company has entered into non-cash financing and investing transactions which are not disclosed in the consolidated statements of cash flows. For each of the periods presented these are as follows: (a) in the year ended December 31, 1996, the Company issued common stock as consideration for financing costs on loans payable, in settlement of debt and on conversion of promissory notes, all in the amounts as set out in note 8(b); (b) in the nine months ended December 31, 1995, the Company issued 1,256,559 common stock having an assigned value of $2,513,121 in settlement of indebtedness in an equivalent amount; and (c) in the year ended March 31, 1995, the Company issued common stock as a finder's fee related to the issuance of free-trading shares for cash consideration. 12. CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash equivalents. The Company maintains cash equivalents with various financial institutions. These financial institutions are located in Canada and the United States. The Company's policy is to limit the exposure at any one financial institution and to invest solely in highly liquid investments that are readily convertible to contracted amounts of cash. F-18 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III -------- ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS - -------------------------------------------------- The following table identifies all of the current directors and executive officers of the Registrant and its subsidiaries. Directors serve until the next annual meeting or until their successors are elected and qualified. Officers serve at the discretion of the Board of Directors.
NAME AGE POSITION - ---- --- -------- Douglas C. MacLellan 41 President, Chief Executive Officer and Director of the Registrant Stephen M. Leahy 40 Secretary and Director of the Registrant Morris J. Magid 64 Treasurer of the Registrant; Director and Secretary of PCBX, Telecom and Laboratories Michael A. Richard 28 Vice President, Accounting of the Registrant, and Secretary, Treasurer and a Director of PIL R. Keith Alexander 66 Director Robert G. Flitton 34 Director Howard B. Frantom 62 Director Keith A.J. Hay 59 Director Stephen O. Stephens 66 Director Paul Robert Carr 53 Vice President, Asia-Pacific Thomas P. Scichili 37 Vice President, General Counsel Thomas P. Madden 39 Vice President, Investor Relations
DOUGLAS C. MACLELLAN -------------------- Mr. MacLellan has been President, Chief Executive Officer and Director of the Registrant since November 1995. Mr. MacLellan expends a majority of his professional time on behalf of the Registrant. Mr. MacLellan is a founder of PWC (see "Item 13. Certain Relationships and Related Transactions"), and has been President of PWC since July, 1995. From 1992 to the present Mr. MacLellan has been President of The MacLellan Group, Inc., a consulting firm providing a broad range of financial and management advisory services. From 1993 to 1995, Mr. MacLellan was a principal and co-founder of Maroon Bells Capital Partners, Inc., a merchant banking firm which specializes in providing corporate finance services to companies in the international and domestic telecommunications and media industries. From 1989 to 1992 Mr. MacLellan was Vice President (1989 to 1990) and President (1991 to 1992) of American Business Ventures, Inc., a venture capital, management consulting, and mergers and acquisition firm. Mr. MacLellan currently is a member of the board of directors and co- founder of InterAmericas Communications Corporation, a public reporting international telecommunications company which operates a competitive access fiber and satellite network in Latin America, and serves as a director of AMDL, Inc., a publicly held development stage biotechnology firm. Mr. MacLellan was educated at the University of Southern California in economics and finance, with advanced training in classical economic theory. PAUL ROBERT CARR ---------------- Mr. Carr has been Vice President, Asia-Pacific of the Registrant since April, 1996 and has served in a business development position since June, 1995. Mr. Carr is also managing director of ACT. From April, 1992 to 1995, Mr. Carr was a self employed consultant in the real estate industry. From 1988 to 1992, Mr. Carr was Senior Real Estate Coordinator and Civil Manager for Los Angeles Cellular Telephone Company. Mr. Carr holds a JD degree from Oakland State College, Flint, Michigan. STEPHEN M. LEAHY ---------------- Mr. Leahy is the Secretary of the Registrant, and has been a director since September 1991. Mr. Leahy has been President and a director of Delpet Resources, Ltd. since May, 1985 and is presently its Chairman. He has also been President and a director of North American Tungsten Corporation since June, 1995, of First Silver Reserve, Ltd. since June, 1988 and of United Sartis Enterprises, Inc. since January, 1993. THOMAS P. MADDEN ---------------- Mr. Madden has been Vice President-Investor Relations of the Registrant since September 1995. Since February, 1992, Mr. Madden has been an Investor Relations Consultant as President of Madden Consulting. MORRIS J. MAGID --------------- Mr. Magid has been Treasurer of the Registrant since November 1995 and is also a director of PCBX Systems, Telecom, and Laboratories. Mr. Magid is an active investor and real estate developer with extensive experience in the pharmaceutical industry. MICHAEL A. RICHARD ------------------ Mr. Richard has been the Vice President, Accounting of the Registrant since October 1996 and has been with the Company since 1991, serving as its Controller (1995 to 1996) and as an Accounting Manager for PCBX, Telecom and PIL (1991 to 1995). He has also served as Treasurer (1994 to present), Secretary (1996 to present) and as a Director of PIL (1996 to present). THOMAS P. SCICHILI ------------------ Mr. Scichili was appointed Vice President, General Counsel of the Registrant in March, 1997. Mr. Scichili has been an attorney in private practice since 1990 emphasizing business and corporate law and financial planning. From 1987 to 1990, Mr. Scichili held various positions at REFCO, Inc. and REFCO, S.A. R. KEITH ALEXANDER ------------------ Mr. Alexander has been a Director of the Registrant since June, 1996. From 1992 to 1996 he was an independent financial consultant. From 1984 to 1992 he was a Vice President of RBC Dominion Securities Ltd. He was a director of the Investment Dealers Association of Alberta from 1977-1985 and Governor of the Alberta Stock Exchange from 1980-1981. ROBERT G. FLITTON ----------------- Mr. Flitton has been a Director of the Registrant since February, 1996. Mr. Flitton has been a partner in Flitton Industries since July, 1992, where he specializes in acquisitions, financing arrangements, development approvals and troubleshooting for large residential and commercial projects in British Columbia, Washington and Colorado. HOWARD B. FRANTOM ----------------- Mr. Frantom has been a director of the Company since June, 1996 and served as its Chief Technical Officer from June, 1996 to November, 1996. He was the Company's Chairman of the Board and Chief Operating Officer from November, 1995 until June, 1996 and the Chief Executive Officer from June, 1995 to November, 1995. Mr. Frantom was President and Chief Executive Officer of PIL from March, 1994 to November, 1996. From 1992 to 1994, Mr. Frantom was President and CEO of PCBX. From 1990 to 1992, Mr. Frantom was President of Worldwide Cellular & Telecommunications Company, which contracted for the engineering and operations of a cellular system in Mexico. From 1988 to 1990, Mr. Frantom served as acting President and Vice President of Engineering and Operations (chief engineer) of Los Angeles Cellular Telephone Company. KEITH A.J. HAY -------------- Mr. Hay has been a Director of the Registrant since November, 1995. Since 1978 Mr. Hay has been President of Econolynx International Ltd. of Ottawa, Ontario, a consulting firm. He has been a Professor of Economics at Carleton University, Ottawa, since 1975, and a consultant to several Canadian government departments, multinational corporations and banks. Presently, Mr. Hay is advisor to the World Bank on economic reform in Guyana and to the Canadian International Development Agency on development policy in Southern Africa. He is also the principal consultant to the Canadian Association of Power Systems Exporters on export marketing of hydro electric power machinery and equipment. STEPHEN O. STEPHENS ------------------- Mr. Stephens has been a Director of the Registrant since August, 1995. Since 1969 Mr. Stephens has been President of Stephens International, Ltd., a diversified investment company. From 1993 to 1995 Mr. Stephens served as assistant to the Chairman of the Board of Stephens Group, from 1986 to 1995 he served as director of corporate communications for Stephens Inc. and from 1993 to 1995 he served as President of Stephens Entertainment, Inc. SECTION 16(A) REPORTS Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and any persons who own more than 10% of a registered class of the Company's equity securities to file with the Securities and Exchange Commission reports of ownership and changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10% shareholders are required by Securities and Exchange Commission regulation to furnish the Company with copies of all Section 16(a) forms they file. Based on the fact that the Company has not received any such filings, the Company believes that, during the period covered by this report, none of the filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with. The Company intends to implement a program to enhance compliance by directors and officers with future 16(a) reporting obligations, which will be under the supervision of the Company's Vice President, Accounting. ITEM 11. EXECUTIVE COMPENSATION The following table discloses, for the fiscal years ended December 31, 1996, 1995 and 1994, individual compensation information relating to the Company's Chief Executive Officers serving during the period. No other executive officers earned more than $100,000. Summary Compensation Table
================================================================================================================================== Annual Compensation Long-Term Compensation ------------------- ----------------------------------- Awards Payouts - ---------------------------------------------------------------------------------------------------------------------------------- All Other Name and Other Securities Compen- Principal Annual Restricted Underlying sation ($) Position of Fiscal Compen- Stock Options/ LTIP Executive Year or Salary Bonus sation Awards SARS Payouts Officer Transition ($) ($) ($) ($) (#) ($) Period Ending - ---------------------------------------------------------------------------------------------------------------------------------- Howard B. (1) Frantom, Past Dec 31, Chief Operating Officer of 1996 138,306 nil nil nil nil nil nil the Registrant, Past President of PIL, Past Dec. 31, Chief Executive Officer of 1995 115,200 nil nil nil nil nil nil the Registrant, Director of the Registrant March 31, 1995 120,000 nil nil nil nil nil nil March 31, 1994 120,000 nil nil nil nil nil nil March 31, 1993 120,000 nil nil nil nil nil nil Douglas C. MacLellan, Dec 31, President and CEO of the 1996 168,000 nil 30,000 nil 200,000 nil nil Registrant (2) Dec 31, 1995 28,000 nil nil nil nil nil nil ==================================================================================================================================
(1) Mr. Frantom served as Chief Executive Officer from June 1995 to November 1995. (2) Mr. MacLellan has served as Chief Executive Officer from November 1995. The terms and conditions of the employment contracts or arrangements with the above mentioned executive officers are as follows: No LTIP has been instituted by the Company and none are proposed at this time. Accordingly, there is no LTIP Awards Table set out in this Annual Report. No pension plans or retirement benefit plans have been instituted by the Company and none are proposed at this time. Accordingly, there is no Pension Plan Table set out in this Annual Report. The Company currently has a Compensation Committee comprised of Messrs. Hay, Leahy and Stephens. The directors of the Company and its Compensation Committee do not have any specific policies for determining compensation of executive officers. Rather, the Company has historically determined executive compensation based on salaries paid to comparable executives in similar companies. The Compensation Committee met once in the fiscal year ended December 31, 1996 to consider and recommend stock option grants to Messrs. Leahy and MacLellan. It is expected that the Company's Compensation Committee will meet in Fiscal 1997 to formulate more detailed policies with respect to officer compensation. Although the Company has no contractual bonus arrangements, bonuses are granted at the discretion of management. On June 19, 1992, PCBX Systems entered into an employment agreement (the "Employment Agreement") with Howard B. Frantom, whereby he was to be employed as its President and Chief Executive Officer for a term of five years. In addition to his salary, Mr. Frantom received 250,000 "Performance Shares" of the Registrant for $.01 per share (which were subsequently canceled), and stock options to purchase 250,000 additional shares of the Registrant at C$1.25 per share. In April, 1994 the terms of the Agreement were incorporated into a new Agreement whereby Mr. Frantom became employed by PIL, a subsidiary of the Company. The term of employment was extended to 1999. Effective July 26, 1996, Mr. Frantom's employment agreement was terminated by mutual agreement, although Mr. Frantom continued to be employed by the Registrant and received a salary until November 1996. In January, 1997, the Registrant entered into an employment agreement with Douglas C. MacLellan , whereby he is to be employed as its President and Chief Executive Officer on a month to month basis, and, subject to the approval of the Vancouver Stock Exchange, shall be paid a base salary of $192,000 per annum plus reimbursement of expenses. Additionally, in the event it is permissible to do so without receiving approval of the Vancouver Stock Exchange, Mr. MacLellan is to be paid compensation equivalent to four month's salary in the event that his employment is terminated by the Company. In November 1995, the Registrant had entered into a verbal employment agreement with Mr. MacLellan whereby he was employed under similar terms to those in the January, 1997 agreement except that the base salary to be paid was $168,000 per annum and there was no provision for additional compensation upon termination. GRANTS OF STOCK OPTIONS The following table provides the specified information concerning grants of options to purchase the Company's Common Stock made during the fiscal year ended December 31, 1996 to the persons named in the Summary Compensation Table.
- ------------------------------------------------------------------------------------------------- INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR OPTION TERM - ------------------------------------------------------------------------------------------------- Number of Percent of Name securities total Exercise Expiration 5% ($) 10% ($) underlying options/ or base date Options/SARs SARs price ($/ granted (#) granted to Sh) employees in fiscal year - ---------------------------------------------------------------------------------------------- Douglas 200,000 23.00 2.68 12/30/01 $116,000 $286,000 MacLellan - ----------------------------------------------------------------------------------------------
(1) Stock options exercisable into 852,899 shares of the Company's common stock were granted to certain directors, senior officers, and employees of the Company during the fiscal year ended December 31, 1996. (2) Pursuant to the policies of the Vancouver Stock Exchange, incentive stock options were granted at the average market price per share of the Company's common stock for the ten trading days prior to the date of issuance. (3) The dollar amounts under the potential realizable values columns use the 5% and 10% rates of appreciation permitted by the SEC, and are not intended to forecast actual future appreciation in the stock price. Actual gains, if any, on stock option exercises are dependent on the future performance of the Company's common stock. There can be no assurance that the amounts reflected in this table will be achieved. The assumed rates are compounded annually to the full five-year term of the options. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES TABLE The following table shows information regarding the exercise of stock options during the 1996 by the named executive officers and the number and value of any unexercised stock options held by them as of December 31, 1996:
- -------------------------------------------------------------------------------------- Number of securities Value of underlying unexercised in- unexercised the- money options/SARs options/SARs at fiscal year end fiscal year end (#) ($) ------------------------------------------- Name Shares Value Exercisable/ Exercisable/ acquired on Realized unexercisable unexercisable exercise (#) ($) (a) (b) (c) (d) (e) - --------------------------------------------------------------------------------------- Howard Frantom 0 0 250,000/0 $692,500(1) - --------------------------------------------------------------------------------------- Douglas MacLellan 0 0 200,000/0 $204,000(1) - ---------------------------------------------------------------------------------------
(1) The value of the options is calculated based upon the market price of the Company's Common Stock as of December 31, 1995 of $3.70 (C$5.00) per share, as reported by the Vancouver Stock Exchange. DIRECTORS FEES The Company does not pay independent directors who attend a regularly scheduled or special meeting of its Board of Directors. None of the directors of the Company were compensated by the Company or its subsidiaries during the most recently completed financial year for their services in their capacity as directors. Messrs. Hay and Stephens were each paid consulting fees of $2,500 per month for their services as consultants or experts independent of their attendance at meetings of the Company's Board of Directors. Furthermore, Mr. Leahy owns 50% of Mustang Management Ltd., which received approximately $35,000 for management and administrative services during 1996. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION For the fiscal year ended December 31, 1996, Messrs. Hay, Leahy and Stephens, all of whom are also directors of the Company, were the members of the Company's compensation committee. Mr. Leahy is also the Secretary of the Company. During the fiscal year ended December 31, 1996, Mr. Leahy was granted 90,000 incentive stock options at an exercise price of $2.68 and expiring December 30, 2001. Mr. Leahy abstained from voting on the approval of such options to himself. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of January 31, 1997, information with respect to the securities holdings of all persons which the Registrant has reason to believe may be deemed the beneficial owners of more than 5% of the Registrant's outstanding Common Stock. The following table indicates the beneficial ownership of such individuals numerically calculated based upon the total number of shares of Common Stock outstanding. Also set forth in the table is the beneficial ownership of all shares of the Registrant's outstanding stock, as of such date, of all directors and named executive officers, individually, and all directors and executive officers as a group.
Name and Address of Amount and Nature % of Beneficial Owner of Beneficial Ownership Ownership - ----------------- ----------------------- --------- R. Keith Alexander 90,100 (1) * North Bolero Bend Rio Verde, AZ 85263 Robert G. Flitton 45,000 (2) * 1 St. Andres Ct. Pueblo, CO 81001 Howard Frantom 285,297 (3) 2.1% 31112 Allview Drive Running Springs, CA 92382 Keith A.J. Hay 90,000 (4) * 7 Briggs Avenue Nepean, ON K2E 6W2 Stephen Leahy 107,100 (5) * 1055 W. Hastings St., Ste. 1010 Vancouver, BC V6E 2E9 Douglas C. MacLellan 208,000 (6) 1.6% 224 Redlands St. Playa del Rey, CA 90293 Morris J. Magid 1,046,028 (7) 8.0% 1054 N. Selby Avenue Los Angeles, CA 90024 Michael Marcus 963,160 (8) 7.3% 300 South 4th. Street Suite 1100
Las Vegas, NV 89101 Stephen O. Stephens 90,000 (9) * 700 East Ninth St., Suite 11-L Little Rock, AR 72202 All Directors and Executive 2,233,025 (10) 15.6% Officers as a group (11 persons) _______________________ (1) Includes options to purchase 90,000 shares of common stock of the Registrant, which are exercisable within sixty days. (2) Includes options to purchase 33,750 shares of common stock of the Registrant, which are exercisable within sixty days. (3) Includes options to purchase 250,000 shares of common stock of the Registrant, which are exercisable within sixty days. (4) Comprised of options to purchase 90,000 shares of common stock of the Registrant, which are exercisable within sixty days. (5) Includes options to purchase 90,000 shares of common stock of the Registrant, which are exercisable within sixty days. (6) Includes options to purchase 200,000 shares of common stock of the Registrant, which are exercisable within sixty days. (7) Includes 384,928 shares held by 380144 B.C. Ltd., a British Columbia corporation owned 60% by Morris Magid and 40% by Marvin Magid. Morris and Marvin Magid are brothers. Includes options to purchase 67,433 shares of common stock of the Registrant, which are exercisable within sixty days. (8) Includes options to purchase 45,000 shares of common stock of the Registrant, which are exercisable within sixty days. Includes warrants to purchase 459,080 shares of common stock of the Registrant purchased in private placement transactions. (9) Comprised of options to purchase 90,000 shares of common stock of the Registrant, which are exercisable within sixty days. (10) Includes options or warrants to purchase 1,181,183 shares of common stock of the Company, which are exercisable within sixty days. * Less than 1%. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 1. MAC Transaction --------------- Douglas C. MacLellan owns 500,000 shares of MAC. See "Item 1: Business; Business of PortaCom Wireless, Inc.; Metromedia Asia Corporation." 2. Acquisition of PWC ------------------ Pursuant to an agreement dated November 3, 1995 (the "PWC Agreement"), the Registrant agreed to acquire PortaCom Wireless Communications, Inc., a Delaware corporation, in exchange for shares of the Registrant's common stock. Of the shareholders of PWC, Douglas C. MacLellan, the President and a director of the Registrant, was to receive 682,000 shares, Stephen O. Stephens, a director of the Registrant , was to receive 136,400 shares, J. Michael Christianson, the former Chief Financial Officer of the Registrant, was to receive 341,000, and PJL Communications, Inc., was to receive 409,200 shares. On July 18, 1996, the Registrant terminated the acquisition of PWC as it had not yet received regulatory approval. The Registrant has determined, however, that it will issue shares of its common stock to Messrs. MacLellan and Stephens and to PJL, in the same amounts as previously provided in the PWC Agreement, in the event it is permissible to do so without receiving approval of the Vancouver Stock Exchange. 3. PortaCom International, Ltd. --------------------------- Asia Telecom, Inc., which owns 10% of TAI, is owned 100% by Howard Frantom's spouse, Vera Frantom. 4. Funds Advanced and Repaid ------------------------- On or about February 24, 1993, the Registrant repaid advances to Morris Magid ($384,000) and Marvin Magid ($57,000), brothers of Robert Magid. During 1993, the Registrant also used part of the net proceeds from the public offering to repay a loan from Robert Alexander ($30,000 (Cdn)). Such advances and loans were made to provide working capital to the Company until additional equity capital was obtained. On or about July 28, Morris Magid provided a $300,000 line of credit available to the Company for a sixty day period to be used as a bridge loan until a private placement of Common Stock could be completed. As of March 31, 1995, $140,000 remained outstanding under this line of credit. On July 21, 1995, at Mr. Magid's request, the Company applied the amount due, plus interest of approximately $10,000, towards the payment due to the Company by Mr. Magid pursuant to the exercise of 168,000 options at C$1.25 per share. In January 1994, a company controlled by Mr. Magid pledged 1,128,415 shares of common stock to guarantee a loan for the benefit of the Company. In connection with such advances and loans, the Company agreed, subject to regulatory approval, to issue a total of 42,757 bonus shares to Mr. Magid. As of the date of this report, regulatory approval for the issuance of 42,757 shares had been received and the Company had issued the shares. 5. Compensatory shares pursuant to cancellation of performance shares ------------------------------------------------------------------ As compensation for the agreement by Messrs. Morris Magid, Robert Alexander and Howard Frantom to surrender their 5,950,000 performance shares which were held under an escrow agreement, the Registrant has agreed to issue, at a deemed price of $2.00 per share, 43,516 common shares, 271,245 common shares and 1 common share each to Mr. Magid, Mr. Alexander, and Mr. Frantom, respectively. As of the date of this filing, none of the aforementioned shares have been issued. The Registrant does not expect to issue any of the compensatory shares while it remains subject to the jurisdiction of the Vancouver Stock Exchange and the British Columbia Securities Commission. ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K (a) The following Exhibits are filed as part of this Report:
Exhibit Description No. 3.1 Certificate of Incorporation of the Registrant /(1)/ 3.2 Amendment to Certificate of Incorporation dated May 1, 1990/(2)/ 3.3 Amendment to Certificate of Incorporation dated September 10, 1991/ (3)/ 3.4 Amendment to Certificate of Incorporation dated November 1, 1994/(4)/ 3.5 Amendment to Certificate of Incorporation dated December 5, 1995/(5)/ 3.6 Amended and Restated Certificate of Incorporation dated December 10, 1996* 3.7 By-Laws of the Registrant * 4.1 Specimen Stock Certificate * 4.2 Form of Escrow Agreement dated September 30, 1991 /(6)/ 4.3 Form of Escrow Agreement dated June 30, 1992 /(7)/ 10.1 Employment Agreement between PIL and Howard B. Frantom /(8)/ 10.2 Acquisition Agreement and Plan of Reorganization between the Registrant and Asian American Telecommunications Corporation ("AAT")/(9)/ 10.3 Form of First Amendment to Acquisition Agreement and Plan of Reorganization between the Registrant and Asian American Telecommunications Corporation ("AAT")/(10)/
10.4 Second Amendment to Acquisition Agreement and Plan of Reorganization between the Registrant and Asian American Telecommunications Corporation ("AAT")/(11)/ 10.5 Participation Agreement between Hoang Ly Huu, Sonny Luu, CMC International, Inc., Asia Telecom, Inc., and the Registrant /(12)/ 10.6 Stock Purchase Agreement between the Registrant, PortaCom International, Ltd., and Asia Telecom, Inc., Franklin A. Vincent, Jr., and Donald E. Thompson and Victoria L. Thompson /(13)/ 10.7 Form of Agreement For Cancellation of Stock Purchase Agreement between the Registrant, PortaCom International, Ltd., and Asia Telecom, Inc., Franklin A. Vincent, Jr., and Donald E. Thompson and Victoria L. Thompson /(14)/ 10.8 Agreement For Cancellation of Performance Shares between the Registrant and Morris J. Magid, Robert B. Alexander, and Howard B. Frantom /(15)/ 10.9 Form of Stock Purchase Agreement between the Registrant and Stephen O. Stephens, Douglas C. MacLellan, J. Michael Christiansen, PJL Communications, Inc., and PortaCom Wireless Communications, Inc./(16)/ 10.10 Separation and Consulting Agreement between the Registrant and Francis T. Phalen /(17)/ 10.11 Letter of Agreement Regarding Employment between the Registrant and Scott A. Mednick /(18)/ 10.12 Restructuring and Settlement Agreement between the Registrant and Scott A. Mednick and Associates, Inc. (dba The Mednick Group)/(19)/ 10.13 Amendment to Restructuring and Settlement Agreement between the Registrant and Scott A. Mednick and Associates, Inc. (dba The Mednick Group)/(20)/ 10.14 Restructuring and Settlement Agreement between the Registrant and Scott A. Mednick /(21)/ 10.15 Amendment to Restructuring and Settlement Agreement between the Registrant and Scott A. Mednick /(22)/ 10.16 Engagement Letter between the Registrant and Rozel International Holdings Ltd./(23)/ 10.17 Stock Option Agreement between the Registrant and Keith A.J. Hay /(24)/ 10.18 Stock Option Agreement between the Registrant and Robert Flitton /(25)/ 10.19 Stock Option Agreement between the Registrant and Stephen O. Stephens /(26)/
10.20 Agreement between the Registrant and Howard B. Frantom acknowledging cancellation of Employment Agreement/(27)/ 10.21 Agreement between the Registrant, PIL, and certain shareholders of TAI to cancel the Stock Purchase Agreement dated as of October 31, 1995/(28)/ 10.22 Form of Second Amendment to Acquisition Agreement and Plan of Reorganization between the Registrant and Asian American Telecommunications Corporation./(29)/ 10.23 Form of Termination Agreement between the Registrant and Asian American Telecommunications Corporation/(30)/ 10.24 Form of Employment Agreement between the Registrant and Douglas C. MacLellan * 10.25 Form of Employment Agreement between the Registrant and Michael A. Richard * 10.26 Joint Venture Agreement for the Establishment of a Joint Venture Enterprise for a CDMA Based Telecommunications System in the Kingdom of Cambodia * 10.27 License for the Provision and Operation of a CDMA Based Telecommunications System Within the Kingdom of Cambodia * 10.28 Stock Option Agreement between the Registrant and R. Keith Alexander * 10.29 Stock Option Agreement between the Registrant and Douglas C. MacLellan * 10.30 Stock Option Agreement between the Registrant and Stephen M. Leahy * 10.31 Employment Agreement between the Registrant and Thomas P. Scichili. A verbal agreement was entered into between the Registrant and Thomas P. Scichili whereby the Registrant agreed to pay Mr. Scichili a salary of up to $8,000 per month on a month-to-month basis, plus reimbursement of reasonable expenses, terminable mutually at will, to serve as the Registrant's Vice President-General Counsel. 10.32 Employment Agreement between the Registrant and Paul Robert Carr. A verbal agreement was entered into in March 1997 between the Registrant and Paul Robert Carr whereby the Registrant agreed to pay Mr. Carr a salary of $6,000 per month on a month-to-month basis, plus reimbursement of reasonable expenses, terminable mutually at will, to serve as the Registrant's Vice President-Asia Pacific. 10.33 Employment Agreement between the Registrant and Thomas P. Madden. A verbal agreement was entered into in March 1997 between the Registrant and Thomas P. Madden whereby the Registrant agreed to pay Mr. Madden a salary of $6,000 per month on a month-to-month basis, plus reimbursement of reasonable expenses, terminable mutually at will, to serve as the Registrant's Vice President-Investor Relations. 21 Subsidiaries of the Registrant* 27 Financial Data Schedule*
* Filed herewith (1)Incorporated by reference to Exhibit 3.1 to Form 10-SB filed with the Securities and Exchange Commission on January 18, 1994 (the "Form 10-SB"). (2)Incorporated by reference to Exhibit 3.3 to Amendment #1 to Form 10-SB filed with the Securities and Exchange Commission on September 8, 1994 (the "Amendment #1 to Form 10-SB"). (3)Incorporated by reference to Exhibit 3.4 to Amendment #1 to Form 10- SB. (4)Incorporated by reference to Exhibit 3.4 to Form 10-KSB for the fiscal year ended March 31, 1995. (5)Incorporated by reference to Exhibit 3.5 to Form 10-KSB for the fiscal year ended March 31, 1995. (6)Incorporated by reference to Exhibit 4.5 to Form 10-SB. (7)Incorporated by reference to Exhibit 4.6 to Form 10-SB. (8)Incorporated by reference to Exhibit 10.3 to Amendment #1 to Form 10-SB. (9)Incorporated by reference to Exhibit 10.2 to Form 10-KSB for the fiscal year ended March 31, 1995. (10)Incorporated by reference to Exhibit 10.3 to Form 10-KSB for the fiscal year ended March 31, 1995. (11)Incorporated by reference to Exhibit 10.4 to Form 10-KSB for the fiscal year ended March 31, 1995. (12)Incorporated by reference to Exhibit 10.5 to Form 10-KSB for the fiscal year ended March 31, 1995. (13)Incorporated by reference to Exhibit 10.6 to Form 10-KSB for the fiscal year ended March 31, 1995. (14)Incorporated by reference to Exhibit 10.7 to Form 10-KSB for the fiscal year ended March 31, 1995. (15)Incorporated by reference to Exhibit 10.8 to Form 10-KSB for the fiscal year ended March 31, 1995. (16)Incorporated by reference to Exhibit 10.9 to Form 10-KSB for the fiscal year ended March 31, 1995. (17)Incorporated by reference to Exhibit 10.10 to Form 10-KSB for the fiscal year ended March 31, 1995. (18)Incorporated by reference to Exhibit 10.11 to Form 10-KSB for the fiscal year ended March 31, 1995. (19)Incorporated by reference to Exhibit 10.12 to Form 10-KSB for the fiscal year ended March 31, 1995. (20)Incorporated by reference to Exhibit 10.13 to Form 10-KSB for the fiscal year ended March 31, 1995. (21)Incorporated by reference to Exhibit 10.14 to Form 10-KSB for the fiscal year ended March 31, 1995. (22)Incorporated by reference to Exhibit 10.15 to Form 10-KSB for the fiscal year ended March 31, 1995. (23)Incorporated by reference to Exhibit 10.16 to Form 10-KSB for the fiscal year ended March 31, 1995. (24)Incorporated by reference to Exhibit 10.17 to Form 10-KSB for the fiscal year ended March 31, 1995. (25)Incorporated by reference to Exhibit 10.18 to Form 10-KSB for the fiscal year ended March 31, 1995. (26)Incorporated by reference to Exhibit 10.19 to Form 10-KSB for the fiscal year ended March 31, 1995. (27)Incorporated by reference to Exhibit 10.20 to Form 10-KSB for the fiscal year ended March 31, 1995. (28)Incorporated by reference to Exhibit 10.21 to Form 10-KSB for the fiscal year ended March 31, 1995. (29)Incorporated by reference to Exhibit 10.01 to Form 10-QSB for the quarter and nine months ended September 30, 1996. (30)Incorporated by reference to Exhibit 10.02 to Form 10-QSB for the quarter and nine months ended September 30, 1996. (b) Reports on Form 8-K: The following reports on Form 8-K were filed during the last quarter of the period covered by this Report:
Date of Report Subject Matter -------------- -------------- 5/21/96 $20 million private placement of special warrants 9/20/96 Change of name 9/20/96 Change of fiscal year end 9/20/96 Unaudited financial statements for the nine months ended September 30, 1996 10/22/96 Unaudited financial statements for the nine months ended September 30, 1996 10/24/96 Unaudited financial statements for the nine months ended September 30, 1996, as corrected
SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K for the fiscal year ended December 31, 1996 to be signed on its behalf by the undersigned, thereunto duly authorized, in Playa del Rey, California, on March 27, 1997. PORTACOM WIRELESS, INC. By: /s/ Douglas C. MacLellan ------------------------------------- Douglas C. MacLellan President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K for the fiscal year ended December 31, 1996 has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ---- /s/ Douglas C. MacLellan Director, President and March 27, 1997 - --------------------------- Chief Executive Officer Douglas C. MacLellan /s/ Michael A. Richard Vice President, Accounting March 26, 1997 - --------------------------- (principal financial officer) Michael A. Richard /s/ R. Keith Alexander Director March 26, 1997 - --------------------------- R. Keith Alexander Director March , 1997 - --------------------------- -- Robert G. Flitton Director March , 1997 - --------------------------- -- Howard B. Frantom /s/ Keith A.J. Hay Director March 26, 1997 - --------------------------- Keith A.J. Hay
/s/ Stephen M. Leahy - --------------------------- Secretary and Director March 26, 1997 Stephen M. Leahy /s/ Stephen O. Stephens - --------------------------- Director March 26, 1997 Stephen O. Stephens
EX-3.6 2 AMENDED AND RESTATED CERTIFICATE OF INC. EXHIBIT 3.6 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PORTACOM WIRELESS, INC., A DELAWARE CORPORATION FIRST: The name of this corporation is PortaCom Wireless, Inc. SECOND: Its Registered Office in the State of Delaware is to be located at 9 East Loockerman Street, in the City of Dover, County of Kent, 19901. The Registered Agent in charge thereof is National Registered Agents, Inc. THIRD: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: The aggregate number of shares which the Corporation shall have authority to issue is One Hundred and Five Million (105,000,000), divided into One Hundred Million (100,000,000) shares of common stock of the par value of $.001 per share, and Five Million (5,000,000) shares of preferred stock of the par value of $.001 per share. FIFTH: The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of the Article FOURTH, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. The authority of the Board with respect to each series shall include, but not be limited to, determination of the following: a) The number of shares constituting that series and the distinctive designation of that series; b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; d) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; e) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund; g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; h) Any other relative rights, preferences and limitations of that series. Dividends on outstanding shares of Preferred Stock shall be paid or declared and set apart for payment on the common shares with respect to the same dividend period. If upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the assets available for distribution to holders of shares of Preferred Stock of all series shall be insufficient to pay such holders the full preferential amount to which they are entitled, then such assets shall be distributed ratably among the shares of all series of Preferred Stock in accordance with the respective preferential amounts (including unpaid cumulative dividends, if any) payable with respect thereto. SIXTH: The name and mailing address of the incorporator are as follows: NAME MAILING ADDRESS S. A. Morgan Irell & Manella Suite 900 1800 Avenue of the Stars Los Angeles, CA 90067 SEVENTH: The duration of the corporation shall be perpetual. EIGHTH: When a compromise or arrangement is proposed between the corporation and its creditors or any class of them or between the corporation and its shareholders or any class of them, a court of equity jurisdiction within the state, on application of the corporation or of a creditor or shareholder thereof, or on application of a receiver appointed for the corporation pursuant to provisions of Section 291 of Title 8 of the Delaware Code or on application of trustees in dissolution or of any receiver or receivers appointed for the corporation pursuant to provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or reorganization, to be summoned in such manner as the court directs. If a majority in number representing 3/4 in value of the creditors or class of creditors, or of the shareholders or class of shareholders to be affected by the proposed compromise or arrangement or a reorganization, agree to a compromise or 2 arrangement or a reorganization of the corporation as a consequence of the compromise or arrangement or reorganization, the compromise or arrangement and the reorganization, if sanctioned by the court to which the application has been made, shall be binding on all the creditors or class of creditors, or on all the shareholders or class of shareholders and also on the corporation. NINTH: The personal liability of all of the directors of the corporation is hereby eliminated to the fullest extent allowed as provided by the Delaware General Corporation Law, as the same may be supplemented and amended. TENTH: The corporation shall, to the fullest extent legally permissible under the provisions of the Delaware General Corporation Law, as the same may be amended and supplemented, shall indemnify and hold harmless any and all persons whom it shall have power to indemnify under said provisions from and against any and all liabilities (including expenses) imposed upon or reasonably incurred by him in connection with any action, suit or other proceeding in which he may be involved or with which he may be threatened, or other matters referred to in or covered by said provisions both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer of the corporation. Such indemnification provided shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, Agreement or Resolution adopted by the shareholders entitled to vote thereon after notice. ELEVENTH: The Board of Directors may adopt, amend or repeal the Bylaws of this corporation. 3 EX-3.7 3 BY-LAWS OF THE REGISTRANT EXHIBIT 3.7 PORTACOM WIRELESS, INC. (A DELAWARE CORPORATION) BYLAWS ARTICLE I OFFICES SECTION 1.01 Registered Office. The registered office of PortaCom Wireless, ----------------- Inc. (hereinafter called the Corporation) in the State of Delaware shall be at 9 East Loockerman Street, in the City of Dover, County of Kent, and the name of the registered agent in charge thereof shall be National Registered Agents, Inc. SECTION 1.02 Other Offices. The Corporation may also have an office or offices ------------- at such other place or places, either within or without the State of Delaware, as the Board of Directors (hereinafter called the Board) may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 2.01 Annual Meetings. Annual meetings of the stockholders of the --------------- Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time, date and place as the Board shall determine by resolution. SECTION 2.02 Special Meetings. A special meeting of the stockholders for the ---------------- transaction of any proper business may be called at any time by (i) the Board or (ii) the Chairman of the Board or (iii) the President or (iv) stockholders entitled to cast at least ten percent (10%) of the votes at such meeting. SECTION 2.03 Place of Meetings. All meetings of the stockholders shall be held ----------------- at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meeting and specified in the respective notices or waivers of notice thereof. SECTION 2.04 Notice of Meetings. Except as otherwise required by law, notice ------------------ of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his post office address furnished by him to the Secretary of the Corporation for such purpose or, if he shall not have furnished to the Secretary his address for such purpose, then at his post office address last known to the Secretary, or by transmitting a notice thereof to him at such address by telegraph, cable, or wireless. Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall have waived such notice and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except as a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 2.05 Quorum. Except in the case of any meeting for the election of ------ directors summarily ordered as provided by law, the holders of record of a majority in voting interest of the shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. SECTION 2.06 Voting. ------ (a) Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation having voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the Corporation: (i) on the date fixed pursuant to Section 6.05 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or (ii) if no such record date shall have been so fixed, then (a) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (b) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the 2 pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants in common, tenants by entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of the State of Delaware. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of the stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon, a quorum being present. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted. SECTION 2.07 List of Stockholders. The Secretary of the Corporation shall -------------------- prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 2.08 Judges. If at any meeting of the stockholders a vote by written ------ ballot shall be taken on any question, the chairman of such meeting may appoint a judge or judges to act with respect to such vote. Each judge so appointed shall first subscribe an oath faithfully to execute the duties of a judge at such meeting with strict impartiality and according to the best of his ability. Such judges shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question. Reports of judges shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. The judges need not be stockholders of the Corporation, and any officer of the Corporation may be a judge on any question other than a vote for or against a proposal in which he shall have a material interest. 3 SECTION 2.09 Action Without Meeting. Any action required to be taken at any ---------------------- annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III BOARD OF DIRECTORS SECTION 3.01 General Powers. The property, business and affairs of the -------------- Corporation shall be managed by the Board. SECTION 3.02 Number and Term of Office. The number of directors shall be not ------------------------- less than three (3) nor more than fifteen (15). The exact number of directors shall be seven (7) until changed, within the limits specified above, by a bylaw amending this Section 3.02, duly adopted by the Board of Directors or by the stockholders. Directors need not be stockholders. Each of the directors of the Corporation shall hold office until his successor shall have been duly elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3.03 Election of Directors. The directors shall be elected annually by --------------------- the stockholders of the Corporation and the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors. SECTION 3.04 Resignations. Any director of the Corporation may resign at any ------------ time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, it shall take effect immediately upon its receipt; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.05 Vacancies. Except as otherwise provided in the Certificate of --------- Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 3.06 Place of Meeting, Etc. The Board may hold any of its meetings at --------------------- such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting 4 of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 3.07 First Meeting. The Board shall meet as soon as practicable after ------------- each annual election of directors and notice of such first meeting shall not be required. SECTION 3.08 Regular Meetings. Regular meetings of the Board may be held at ---------------- such times as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given. SECTION 3.09 Special Meetings. Special meetings of the Board shall be held ---------------- whenever called by the President or a majority of the authorized number of directors. Except as otherwise provided by law or by these Bylaws, notice of the time and place of each such special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least five (5) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph or cable or facsimile or be delivered personally not less than forty-eight (48) hours before the time at which the meeting is to be held. Except where otherwise required by law or by these Bylaws, notice of the purpose of a special meeting need not be given. Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. SECTION 3.10 Quorum and Manner of Acting. Except as otherwise provided in --------------------------- these Bylaws or by law, the presence of a majority of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such. SECTION 3.11 Action by Consent. Any action required or permitted to be taken ----------------- at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee. SECTION 3.12 Removal of Directors. Subject to the provisions of the -------------------- Certificate of Incorporation, any director may be removed at any time, either with or without cause, by the affirmative vote of the stockholders having a majority of the voting power of the Corporation given at a special meeting of the stockholders called for the purpose. 5 SECTION 3.13 Compensation. The directors shall receive only such compensation ------------ for their services as directors as may be allowed by resolution of the Board. The Board may also provide that the Corporation shall reimburse each such director for any expense incurred by him on account of his attendance at any meetings of the Board or Committees of the Board. Neither the payment of such compensation nor the reimbursement of such expenses shall be construed to preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving compensation therefor. SECTION 3.14 Committees. The Board may, by resolution passed by a majority of ---------- the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board and except as otherwise limited by law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Any such committee shall keep written minutes of its meetings and report the same to the Board at the next regular meeting of the Board. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. ARTICLE IV OFFICERS SECTION 4.01 Number. The officers of the Corporation shall be a President, one ------ or more Vice Presidents (the number thereof and their respective titles to be determined by the Board), a Secretary and a Treasurer. SECTION 4.02 Election, Term of Office and Qualifications. The officers of the ------------------------------------------- Corporation, except such officers as may be appointed in accordance with Section 4.03, shall be elected annually by the Board at the first meeting thereof held after the election thereof. Each officer shall hold office until his successor shall have been duly chosen and shall qualify or until his resignation or removal in the manner hereinafter provided. SECTION 4.03 Assistants, Agents and Employees, Etc. In addition to the ------------------------------------- officers specified in Section 4.01, the Board may appoint other assistants, agents and employees as it may deem necessary or advisable, including one or more Assistant Secretaries, and one or more Assistant Treasurers, each of whom shall hold office for such period, have such authority, and perform such duties as the Board may from time to time determine. The Board may delegate to any officer of the Corporation or any committee of the Board the power to appoint, remove and prescribe the duties of any such assistants, agents or employees. SECTION 4.04 Removal. Any officer, assistant, agent or employee of the ------- Corporation may be removed, with or without cause, at any time: (i) in the case of an officer, assistant, agent or employee 6 appointed by the Board, only by resolution of the Board; and (ii) in the case of an officer, assistant, agent or employee, by any officer of the Corporation or committee of the Board upon whom or which such power of removal may be conferred by the Board. SECTION 4.05 Resignations. Any officer or assistant may resign at any time by ------------ giving written notice of his resignation to the Board or the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof by the Board or the Secretary, as the case may be; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 4.06 Vacancies. A vacancy in any office because of death, resignation, --------- removal, disqualification, or other cause, may be filled for the unexpired portion of the term thereof in the manner prescribed in these Bylaws for regular appointments or elections to such office. SECTION 4.07 The Chairman of the Board. The Chairman of the Board, if such an ------------------------- officer be elected, shall, if present, preside at all meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board or prescribed by the Bylaws. If there is no President, the Chairman of the Board shall, in addition, be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 4.08 of this Article IV. SECTION 4.08 The President. Subject to such supervisory powers, if any, as may ------------- be given by the Board to the Chairman of the Board, if there be such an officer, the President of the Corporation shall be the chief executive officer of the Corporation and shall have, subject to the control of the Board, general and active supervision and management over the business of the Corporation and over its several officers, assistants, agents and employees. SECTION 4.09 The Vice Presidents. Each Vice President shall have such powers ------------------- and perform such duties as the Board may from time to time prescribe. At the request of the President, or in case of the President's absence or inability to act upon the request of the Board, a Vice President shall perform the duties of the President and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. SECTION 4.10 The Secretary. The Secretary shall, if present, record the ------------- proceedings of all meetings of the Board, of the stockholders, and of all committees of which a secretary shall not have been appointed in one or more books provided for that purpose; he shall see that all notices are duly given in accordance with these Bylaws and as required by law; he shall be custodian of the seal of the Corporation and shall affix and attest the seal to all documents to be executed on behalf of the Corporation under its seal; and, in general, he shall perform all the duties incident to the office of Secretary and such other duties as may from time to time be assigned to him by the Board. SECTION 4.11 The Chief Financial Officer. The Chief Financial Officer shall --------------------------- also be the Treasurer, and shall have the general care and custody of the funds and securities of the Corporation, 7 and shall deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected by the Board. He shall receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever. He shall exercise general supervision over expenditures and disbursements made by officers, agents and employees of the Corporation and the preparation of such records and reports in connection therewith as may be necessary or desirable. He shall, in general, perform all other duties incident to the office of Chief Financial Officer and such other duties as from time to time may be assigned to him by the Board. SECTION 4.12 Compensation. The compensation of the officers of the Corporation ------------ shall be fixed from time to time by the Board. None of such officers shall be prevented from receiving such compensation by reason of the fact that he is also a director of the Corporation. Nothing contained herein shall preclude any officer from serving the Corporation, or any subsidiary corporation, in any other capacity and receiving such compensation by reason of the fact that he is also a director of the Corporation. Nothing contained herein shall preclude any officer from serving the Corporation, or any subsidiary corporation, in any other capacity and receiving proper compensation therefor. ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 5.01 Execution of Contracts. The Board, except as in these Bylaws ---------------------- otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. SECTION 5.02 Checks, Drafts, Etc. All checks, drafts or other orders for ------------------- payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such officer, assistant, agent or attorney shall give such bond, if any, as the Board may require. SECTION 5.03 Deposits. All funds of the Corporation not otherwise employed -------- shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the President, any Vice President or the Chief Financial Officer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation. 8 SECTION 5.04 General and Special Bank Accounts. The Board may from time to --------------------------------- time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient. ARTICLE VI SHARES AND THEIR TRANSFER SECTION 6.01 Certificates for Stock. Every owner of stock of the Corporation ---------------------- shall be entitled to have a certificate or certificates, to be in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the President or a Vice President, and by the Secretary or an Assistant Secretary or by the Chief Financial Officer or an Assistant Chief Financial Officer. Any of or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any such certificate, shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so canceled, except in cases provided for in Section 6.04. SECTION 6.02 Transfers of Stock. Transfers of shares of stock of the ------------------ Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.03, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. SECTION 6.03 Regulations. The Board may make such rules and regulations as it ----------- may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any officer or 9 officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them. SECTION 6.04 Lost, Stolen, Destroyed, and Mutilated Certificates. In any case --------------------------------------------------- of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do. SECTION 6.05 Fixing Date for Determination of Stockholders of Record. In order ------------------------------------------------------- that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders or expressing consent to corporate action without a meeting the Board shall not fix such a record date, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. ARTICLE VII INDEMNIFICATION SECTION 7.01 Action, Etc. Other Than by or in the Right of the Corporation. ------------------------------------------------------------- The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to 10 the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful. SECTION 7.02 Actions, Etc., by or in the Right of the Corporation. The ---------------------------------------------------- Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. SECTION 7.03 Determination of Right of Indemnification. Any indemnification ----------------------------------------- under Section 7.01 or 7.02 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 7.01 and 7.02. Such determination shall be made (i) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. SECTION 7.04 Indemnification Against Expenses of Successful Party. ---------------------------------------------------- Notwithstanding the other provisions of this Article, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. SECTION 7.05 Prepaid Expenses. Expenses incurred by an officer or director in ---------------- defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as authorized in this Article. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate. 11 SECTION 7.06 Other Rights and Remedies. The indemnification provided by this ------------------------- Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7.07 Insurance. Upon resolution passed by the Board, the Corporation --------- may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. SECTION 7.08 Constituent Corporations. For the purposes of this Article, ------------------------ references to "the Corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation, so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity. SECTION 7.09 Other Enterprises, Fines, and Serving at Corporation's Request. -------------------------------------------------------------- For purposes of this Article, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article. ARTICLE VIII MISCELLANEOUS SECTION 8.01 Seal. The Board shall provide a corporate seal, which shall be in ---- the form of a circle and shall bear the name of the Corporation and words and figures showing that the Corporation was incorporated in the State of Delaware and the year of incorporation. SECTION 8.02 Waiver of Notices. Whenever notice is required to be given by ----------------- these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in 12 writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice. SECTION 8.03 Amendments. These Bylaws, or any of them, may be altered, amended ---------- or repealed, and new Bylaws may be made, (i) by the Board, by vote of a majority of the number of directors then in office as directors, acting at any meeting of the Board, or (ii) by the stockholders, at any annual meeting of stockholders, without previous notice, or at any special meeting of stockholders, provided that notice of such proposed amendment, modification, repeal or adoption is given in the notice of special meeting. Any Bylaws made or altered by the stockholders may be altered or repealed by either the Board or the stockholders. EX-4.1 4 SPECIMEN STOCK CERTIFICATE EXHIBIT 4.1 INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE NUMBER PORTACOM WIRELESS, INC. SHARES ----------------- [CUSIP 735907 10 7] ----------------- THIS CERTIFIES THAT is the registered holder of FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK WITH A PAR VALUE OF U.S. $0.001 PER SHARE in the Capital of the above named Corporation tranferable on the books of the Corporation by the registered holder in person or by Attorney duly authorized in writing upon surrender of this certificate properly endorsed. This certificate and the shares represented hereby are subject to the laws of the State of Delaware, and to the Certificate of Incorporation and Bylaws of the Corporation, as now or hereafter amended. This certificate is not valid unless countersigned by the Transfer Agent and Registrar of the Corporation. IN WITNESS WHEREOF the Corporation has caused this certificate to be signed on its behalf by the facsimile signatures of its duly authorized officers. DATED Dec 31, 1996 COUNTERSIGNED AND REGISTERED PACIFIC CORPORATE SERVICES LTD. VANCOUVER - ------------------------------ TRANSFER AGENT AND REGISTRAR President - ------------------------------ By-------------------------------- Secretary Authorized Officer The Shares represented by this certificate are transferable at the offices of Pacific Corporate Services Ltd., Vancouver, B.C. EX-10.24 5 FORM OF EMP. AG. BETWEEN REGISTRANT & MACLELLAN EXHIBIT 10.24 [LETTERHEAD OF PORTACOM WIRELESS. INC.] EMPLOYMENT AGREEMENT -------------------- FOR: DOUGLAS C. MACLELLAN JANUARY 1, 1997 This Agreement is executed by and between Douglas C. MacLellan ("you", "your" or "yourself") and PortaCom Wireless, Inc. (hereinafter referred to as "PortaCom" or "We") This Agreement, once signed by you, will serve to confirm our mutual understanding and agreement regarding the provisions of an employment relationship as described in any and all previous agreements, whether oral or written. 1. Nature of Employment. You will be employed by PortaCom Wireless, Inc. as -------------------- its Chairman, Chief Executive Officer, and President, and will perform such duties and assume such additional assignments as may be assigned to you from time to time by the Board of Directors of PortaCom. You agree to devote reasonable business time, attentions and energies to performing your duties for PortaCom and its affiliates faithfully and to the best of your abilities. 2. Term of Employment. Your employment and compensation with PortaCom are "at ------------------ will" in that they can be terminated with or without cause, and with or without notice, at any time, at the option of either PortaCom or yourself, except as otherwise provided by law. The terms of this Agreement, therefore, do not and are not intended to create either an express and/or implied term of employment with PortaCom. No manager or representative of PortaCom, other than the Board of Directors or the Compensation Committee, acting together, has authority to enter into any agreement for employment for any specified period of time or to make any agreement or contract to the foregoing, and any promises to the contrary may only be relied upon by you if they are in writing and signed by the Board of Directors or the Compensation Committee of PortaCom. In the event this Agreement is terminated by either of us, with or without cause, you shall be entitled only to your salary compensation as provided in paragraph 3 through the date of your termination. In the event of any termination of employment, this Agreement shall terminate except that your obligations pursuant to paragraph 4 shall continue to survive such termination and PortaCom's obligations pursuant to paragraphs 3 and 4 shall survive such termination. Douglas C. MacLellan January 1, 1997 Page 2 of 3 3. Compensation. You will be compensated with a monthly salary in the amount ------------ of US $16,000.00 to be paid in accordance with PortaCom's normal payroll practices. You will continue to be entitled to such employee fringe benefits as PortaCom, in its discretion, makes available generally from time to time to its executives. Upon presentation of proper documentation in accordance with PortaCom's practice and prevailing Internal Revenue Service guidelines, other ordinary and reasonable out-of-pocket business expenses will also be reimbursed. Should PortaCom cease, at any time hereinafter, to be governed by and subject to the policies of the Vancouver Stock Exchange, you will receive a lump sum payment of four month's salary in the event you are terminated by the Company during the period of this contract. 4. Arbitration. Because PortaCom is an early-stage company, we think it is ------------ wise to include a provision dealing with how we will resolve any dispute in the unforeseen event that we should have one. We are reluctant even to discuss this subject because we do not foresee the likelihood of any such dispute. But, we believe prudence dictates that we think about this matter. Accordingly, in the event there is any dispute between us which we are unable to resolve ourselves, we both agree by entering into this Agreement that the exclusive remedy for determining any such dispute, regardless of its nature, will be by arbitration in Los Angeles County, California, in accordance with the then most applicable rules of the American Arbitration Association. In the event the parties are unable to agree upon an arbitrator, the parties shall select a single arbitrator from a list of seven arbitrators designated by the American Arbitration Association; four shall be retired judges of the Superior or Appellate Courts resident in Los Angeles County who are members of the "independent" list of retired judges and three shall be members of the National Academy of Arbitrators resident within Los Angeles County, California. This agreement to resolve any disputes arising out of your employment or the termination of your employment by binding arbitration shall extend to claims against any officers, directors, employees, or agents of PortaCom or any of the above and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law. In the event of any such arbitration, the prevailing party shall be awarded reasonable attorney's fees as part of the arbitration award. 5. General Provisions. ------------------- a. This Agreement constitutes the parties' entire agreement with respect to your employment, and supersedes all prior agreements and representations whether oral or written. b. This Agreement may not be amended except by a writing signed by both parties. It may, however, be supplemented by written policies and procedures established by PortaCom from time to time which policies and procedures, whether set forth in an employee handbook or otherwise are generally applicable to PortaCom's other Douglas C. MacLellan January 1, 1997 Page 3 of 3 executive employees. In the event of a conflict between this Agreement and any PortaCom policy or procedure, the provisions of this Agreement shall prevail. c. This Agreement is valid until December 31, 1997. d. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of California. e. The Agreement is subject to the approval of the Vancouver Stock Exchange. Mr. MacLellan, if you agree with and accept the terms of employment as stated herein, please sign and date below and return this Agreement to the Compensation Committee. We are confident your employment with PortaCom will continue to prove mutually beneficial. Very truly yours, PORTACOM WIRELESS, INC. Compensation Committee: __________________________ ___________________________ Keith A.J. Hay Stephen M. Leahy __________________________ Stephen O. Stephens -------------------------------------------------- I concur with the provisions of this Agreement: _________________________________________ Douglas C. MacLellan Dated:_____________________ -------------------------------------------------- EX-10.25 6 FORM OF EMP. AG. BETWEEN REGISTRANT AND RICHARD EXHIBIT 10.25 [LETTERHEAD OF PORTACOM WIRELESS, INC.] EMPLOYMENT AGREEMENT -------------------- FOR: MICHAEL A. RICHARD JANUARY 1, 1997 This Agreement is executed by and between Michael A. Richard ("you", "your", "yourself") and PortaCom Wireless, Inc. (hereinafter referred to as "PortaCom" or "We") This Agreement, once signed by you, will serve to confirm our mutual understanding and agreement regarding the provisions of an employment relationship as described in any and all previous agreements, whether oral or written. 1. Nature of Employment. You will be employed by PortaCom Wireless, Inc. as -------------------- its Vice President, Accounting, and will perform such duties and assume such additional assignments as may be assigned to you from time to time by the Board of Directors of PortaCom. You agree to devote reasonable business time, attentions and energies to performing your duties for PortaCom and its affiliates faithfully and to the best of your abilities. 2. Term of Employment. Your employment and compensation with PortaCom are "at ------------------ will" in that they can be terminated with or without cause, and with or without notice, at any time, at the option of either PortaCom or yourself, except as otherwise provided by law. The terms of this Agreement, therefore, do not and are not intended to create either an express and/or implied term of employment with PortaCom. No manager or representative of PortaCom, other than the Board of Directors or the Compensation Committee, acting together, has authority to enter into any agreement for employment for any specified period of time or to make any agreement or contract to the foregoing, and any promises to the contrary may only be relied upon by you if they are in writing and signed by the Board of Directors or the Compensation Committee of PortaCom. In the event this Agreement is terminated by either of us, with or without cause, you shall be entitled only to your salary compensation as provided in paragraph 3 through the date of your termination. In the event of any termination of employment, this Agreement shall terminate except that your obligations pursuant to paragraph 4 shall continue to survive such terminations and PortaCom's obligations pursuant to paragraphs 3 and 4 shall survive such termination. MICHEAL A. RICHARD JANUARY 1, 1997 PAGE 2 OR 3 3. Compensation. You will be compensated with a monthly salary in the amount ------------ of US$6,500 to be paid in accordance with PortaCom's normal payroll practices. You will continue to be entitled to such employee fringe benefits as PortaCom, in its discretion, makes available generally from time to time to its executives. Upon presentation of proper documentation in accordance with PortaCom's practice and prevailing Internal Revenue Service guidelines, other ordinary and reasonable out-of-pocket business expenses will also be reimbursed. Should PortaCom cease, at any time hereafter, to be governed by and subject to the policies of the Vancouver Stock Exchange you will receive a lump sum payment of four month's salary in the event you are terminated by the Company during the period of this contract. 4. Arbitration. Because PortaCom is an early-stage company, we think it is ------------ wise to include a provision dealing with how we will resolve any dispute in the unforeseen event that we should have one. We are reluctant even to discuss this subject because we do not foresee the likelihood of any such dispute. But, we believe prudence dictates that we think about this matter. Accordingly, in the event there is any dispute between us which we are unable to resolve ourselves, we both agree by entering into this Agreement that the exclusive remedy for determining any such dispute, regardless of its nature, will be by arbitration in Los Angeles County, California, in accordance with the then most applicable rules of the American Arbitration Association. In the event the parties are unable to agree upon an arbitrator, the parties shall select a single arbitrator from a list of seven arbitrators designated by the American Arbitration Association; four shall be retired judges of the Superior or Appellate Courts resident in Los Angeles County who are members of the "independent" list of retired judges and three shall be members of the National Academy of Arbitrators resident within Los Angeles County, California. This agreement to resolve any disputes arising out of your employment or the termination of your employment by binding arbitration shall extend to claims against any officers, directors, employees, or agents of PortaCom or any of the above and shall apply as well to claims arising out of state and federal statutes and local ordinances as well as to claims arising under the common law. In the event of any such arbitration, the prevailing party shall be awarded reasonable attorney's fees as part of the arbitration award. 5. General Provisions. ------------------- a. This Agreement constitutes the parties' entire agreement with respect to your employment, and supersedes all prior agreements and representations whether oral or written. b. This Agreement may not be amended except by a writing signed by both parties. It may, however, be supplemented by written policies and procedures established by PortaCom from time to time which policies and procedures, whether set forth in an employee handbook or otherwise are generally applicable to PortaCom's other MICHAEL A. RICHARD JANUARY 1, 1997 PAGE 3 OF 3 executive employees. In the event of a conflict between this Agreement and any PortaCom policy or procedure, the provisions of this Agreement shall prevail. c. This Agreement is valid until December 31, 1997. d. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of California. e. This Agreement is subject to the approval of the Vancouver Stock Exchange. Mr. Richard, if you agree with and accept the terms of employment as stated herein, please sign and date below and return this Agreement to the Compensation Committee. We are confident your employment with PortaCom will continue to prove mutually beneficial. Very truly yours, PORTACOM WIRELESS, INC. Compensation Committee: _____________________________ _______________________________ Keith A.J. Hay Stephen M. Leahy _____________________________ Stephen O. Stephens ______________________________________________________ I concur with the provisions of this Agreement: __________________________________________ Michael A. Richard Dated:_____________________ ______________________________________________________ EX-10.26 7 JOINT VENTURE AGREEMENT EXHIBIT 10.26 PortaCom Wireless Kingdom of Cambodia Telecommunications Project October 1996 JOINT VENTURE AGREEMENT - ----------------------- For the establishment of a joint enterprise for a CDMA based telecommunication system in THE KINGDOM OF CAMBODIA between THE MINISTRY OF POSTS AND TELECOMMUNICATIONS OF CAMBODIA (MPTC) and PORTACOM WIRELESS, INC. JOINT VENTURE AGREEMENT - ----------------------- In reference to: I) Request for approval of an investment by PortaCom Wireless, Inc. for a CDMA based Telecommunication System; II) Letter No. 232/96 dated 16/02/96 from the Council for the Development of Cambodia; III) Letter No. 1052 SCN dated 17/09/96 and 1204 scn dated 29/10/96 from the office of Prime Ministers. THIS JOINT VENTURE AGREEMENT is made and entered into this 26/th/ December, 1996 by and between: A. The Royal Government of Cambodia represented by the Ministry of Posts and Telecommunications of Cambodia (hereinafter referred as "Party A") having its principal office at the corner of Street 13/102, Wat Phnom Section, Daun Penh District, Phnom Penh, Cambodia; AND B. PORTACOM WIRELESS, INC. (hereinafter referred as PCW or as "Party B"), represented herein by Mr. Douglas Mac Lellan, its President and Chief Executive Officer, and Mr. Paul R. Carr, its Vice-President, having its principal office at 8055 W. Manchester Avenue, Suite 730, Playa Del Rey, California 90293, U.S.A., and Khmer Sameky Telecom Co., Ltd., a Cambodian Limited Liability company, represented herein by Mr. Sarun Oeurn, its President and Chief Executive Officer, having its principal office at No. 14, Street 327, Boeugkok 2, Toulkork, Phnom Penh, Cambodia. WHEREAS, Party A experienced in telecommunications business ventures and regulatory authorities in the Kingdom of Cambodia, its interested in con- operating with PCW; WHEREAS, Party B holds significant experience in the development, start up, operation and ownership of wireless and territorial based telecommunications networks and services in emerging market; WHEREAS, Party A and Party B mutually desire to enter into this Agreement to establish and operate a CDMA based telecommunications System in the Kingdom of Cambodia. NOW, therefore, the parties hereby agree as follows: 1. DEFINITIONS "MPTC" means Ministry of Posts and Telecommunications of Cambodia as a regulator. "Company" means a to be formed Cambodian Limited Liability company "American Cambodian Telecom, LTD." "Cambodian Law" means any laws, treaties, statutes, regulations, decrees and other legally binding promulgation of any national or local Cambodia governmental authority (ies) or body (ies), which are authorized to make such laws, statutes, regulations, degrees or promulgations now in existence or that may in the future come into force in the Kingdom of Cambodia throughout the term of this Agreement. "Equipment" means the Mobile Telephone Exchange (MTX), Mobile Switching Centers (MSC), Base Station Controllers (BSC), Base Transceiver Station (BTS), Radio Base Station (RBS), transmission equipment and other network element which, when connected/ interfaced together, constitutes a CDMA System described in the attached License. "CDMA" means Code Division Multiple Access telecommunications technology and or other PCS equivalent technology operated on the 1900 MHZ frequency band. "CDMA Based Telecommunication System" and or "CDMA System" means the installation and operation of base stations, cellular switch exchanges and any other facilities and equipment directly involved in the provision, development and operation of a PCS 1900 based mobile cellular system. "License" means the License awarded to the Company by MPTC for the installation and operation of a CDMA Based Telecommunications System in the Kingdom of Cambodia. A copy of which is attached hereto and incorporated herein by reference. "Net Interconnect Charge" means the difference between the in payment and out payment of interconnect charges with all other operations in Cambodia. 2. NAME The name of the company is American Cambodian TeleCom, LTD. (Hereinafter referred to as the "Company"). The registered office of the Company shall be at No. 435E2, Preash Sisowath Quay, Phnom Penh, Kingdom of Cambodia or P.O. Box 2352, Phnom Penh, Kingdom of Cambodia. 3. OBJECTIVES The Company shall, through its License, install and operate base stations, cellular switch exchanges and any other facilities and equipment directly involved in the provision, development and operation of a PCS 1900 CDMA based mobile cellular system and a paging system (Annex "A".) The Company shall obtain all necessary licenses, permits and authorizations required under applicable law to install, operate and expand, as and when necessary, the PCS 1900 CDMA based mobile cellular system throughout the Kingdom of Cambodia excluding Wireless Local Loop. The Company will also market and sell CDMA telecommunications services, equipment, terminals, handsets to customers throughout the Kingdom of Cambodia. 4. DURATION The duration of this agreement shall be the same as the duration of the License for the provision and operation of CDMA based Telecommunications System within the Kingdom of Cambodia awarded to PortaCom by MPTC. This Agreement shall be reviewed every five (5) years by both parties if requested by any party. 5. START OF CDMA SYSTEM COMMERCIAL SERVICE PortaCom shall start the commercial service of CDMA system not later than 24 months after the signing of this Joint Venture Agreement. The license for CDMA System for PortaCom shall become void if there is any deviation from the above timing. 6. CAPITAL AND SHARES A. For the first year after signing this Agreement, the initial share capital of the Company shall be 50,000,000.00 Cambodian Riel, or the monetary equivalent in US Dollars, which shall initially be contributed and owned entirely by PCW and Khmer Sameky Telecom Co., Ltd. according to the following schedule: I) PCW shall own 84% of the share capital and shall contribute US $ 15,925.92 or the monetary equivalent in Cambodian Riel; and II) Khmer Sameky TeleCom Co., LTD. shall own 14% of the share capital and shall contribute US $ 2,592.59 or the monetary equivalent in Cambodian Riel. B. The share capital of the Company can be increased by creating new shares in cash or by any other means that the Board of Directors and/or shareholders approve of, provided that it is in compliance with the statutes of the Company and Cambodian Law. Any debt financing approved by the Board of Directors shall be negotiated and secured by the Company on commercial terms. Such loans shall only be guaranteed by the Company and/or PCW when, and if necessary. Under no circumstances shall the MPTC or any other government agency or ministry guarantee the debt of the Company unless their prior written consent is obtained. At the end of the first year after signing this agreement, PCW agrees to buy out Khmer Sameky TeleCom Co., Ltd. C. After one year, the initial share Capital of the Joint Enterprise is USD 5,000,00.00 (US Dollars Five Million and zero/100) of which the share capital of Party A is 25% (twenty five percent) and 75% (seventy five percent) the share of Party B. D. The total contribution 100% (one hundred percent) for the share capital shall be made by Party B. E. At the end of the Agreement and License period, or any extension, or the early termination of the Agreement, MPTC shall be entitled to 100% (one hundred percent) of the fixed asset of the Company. F. The capital of the Joint Enterprise may be increased by the issuance of new shares or by other means as the Board of Directors and/or shareholders deem appropriate in accordance with the articles of Association and the applicable law of the Kingdom of Cambodia. In such case, the share holding ratio mentioned above shall be maintained by Party A on a twenty five (25%) percent of the first Capital Joint Enterprise of US $5,000,000.00 of American Cambodian TeleCom, LTD. Party A has the right to purchase any new share to maintain the share holding ratio. 7. OBLIGATION OF PARTY A Party A shall be responsible, but not exclusively, for the following: 1. Providing appropriate space, if available, in MPTC building and on MPTC land for the installation of Company equipment; 2. Assisting the Company in processing all customs and importation clearances for equipment entering the Kingdom of Cambodia; 3. Assisting expatriate personnel to obtain entry visa and work permits and processing all related documentation; 4. Keep the contents of this Contract in full confidence and refrain from disclosing the contents hereof to a third party, except as required by 5. Assisting for the Company, pursuant to the Company's application with the Council for the Development of Cambodia (CDC) and or any application to the Cambodian Investment Boards (CIB), the most favorable income and importation tax incentives, and any other investment incentives, available under current, or future Cambodian Law. 8. OBLIGATION OF PARTY B Party B shall be responsible, but not exclusively, for the following: 1. Assisting in the provision of expertise in the establishment of the network; 2. Ensuring to bring to the Kingdom of Cambodia the modern technologies for the improvement of telecommunication network; 3. Assisting in the recruitment of expatriate personnel; 4. Assisting in the provision of ongoing management expertise of the business; 5. Responsible for economic analysis pertaining to the business and the expenses incurred therefrom, upon request; 6. Assisting in the training of Cambodian technical personnel, management, sales and marketing personnel; 7. Arranging for the import of material and technical equipment with the agreement in principle of Party A and at prices based on International Market; 8. Keep the contents of this contract in full confidence and refrain from disclosing the contents hereof to a third party, except as required by law or with the prior written consent of MPTC; 9. The Company shall deposit USD 200,000.00 (two hundred thousand and zero/100 US Dollars) within 45 working days after signing this Agreement. Failure to do so, this Agreement shall be void. If the Company has deposit in a full required amount, the Company shall have a right to withdraw the full deposit amount after commencing the commercial business. 9. OBLIGATIONS OF THE PARTIES Each Party shall: 1. Use its best efforts to assist the other Party in Performing such other Party's obligations, hereunder and to ensure the success of the Company; 2. Use its best efforts to maximize publicity and increase market awareness of the Company and its products and/or services throughout the Kingdom of Cambodia and internationally. 10. MANAGEMENT OF THE JOINT ENTERPRISE 1. The Board of Directors shall determine the policies of the Company and direct its overall management, decide all major issues concerning the Joint Venture Company in according with this document, the Articles of Association and the applicable laws of the Kingdom of Cambodia. 2. The Board of Directors shall consist of five (5) members, appointed as follows: Party A two (2) members Party B three (3) members - The Chairmen of the Board of Directors shall be appointed by Party B. - The Vice Chairman shall be appointed by Party A. 3. The Chairman of the Board of Directors shall be the Chairman of the Board Meeting and shall have the power and duty to call a meeting, to take initiative and to give advice in respect of policies of the Joint Enterprise; 4. The Joint Enterprise shall be managed by the General Manager; 5. The General Manager and the Secretary of the Board of Directors shall be appointed by B; 6. The Deputy General Manager shall be appointed by Party A; 7. The General Manager and the Deputy General Manager shall be directors of the Board; 8. The General Manager shall be responsible directly to the Board of Directors for the daily business operations and affairs of the Joint Venture Company and shall supervise the activities of all other personnel. In case of absence of General Manager, the Deputy General Manager shall act on his behalf having the same authority as conferred to him. 11. ANNUAL GENERAL MEETING (SHAREHOLDERS MEETING) The annual general meeting of the Joint Enterprise Company shall be convened for the election of directors, approval of the audited financial statements and the transaction of other business not less than once a year, in accordance with the Articles of Association and the laws of the Kingdom of Cambodia. 12. EXTRAORDINARY GENERAL MEETING The extraordinary general meeting of the Company shall be convened in accordance with the provisions of the Articles of Association and the laws of the Kingdom of Cambodia. 13. BOARD OF DIRECTORS MEETING At every Board of Directors meeting, the Chairman of the Board shall preside over as the Chairman of the meeting. In the absence of the Chairman of the Board, the Vice Chairman shall preside over the meeting. In the case where both the Chairman and Vice Chairman of the Board are absent, the Board shall appoint on Director to chair the meeting. The investment and the expansion of the business and the operations of the Joint Enterprise can be performed only when the Board of Directors deem appropriate, provided that the said investment and expansion shall be limited to the field of telecommunications only. The powers and duties, the proceeding, the vote of Directors and the quorum of Directors meeting shall be defined in accordance with the provisions of the Articles of Association and the applicable laws of the Kingdom of Cambodia. 14. LIMITATION OF LIABILITY The debts, obligations and liabilities of the Company, whether arising from or in connection with any contract, tort or otherwise, shall be the sole responsibility of the Company, and no Director, Officer, Manager or Attorney of the Company shall be personally liable for any such debt, obligation or other liability of the Company solely by reason of being a Director, Officer, Manager or Attorney of the Company. 15. INDEMNIFICATION OF DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES AND ATTORNEYS A. Each person who was or is made a party, or is threatened to be made a party to, or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding") by reason of the fact that he or she is or was a Director, Officer, Manager, Employee or Attorney of the Company, whether the basis of such proceeding is alleged action in an official capacity or otherwise, shall be indemnified and held harmless by the Company to the fullest extent authorized by Cambodian Law (including indemnification for negligence or gross negligence but excluding indemnification (I) for acts or omissions involving actual fraud or willful misconduct or (II) with respect to any transaction from which the indemnitee derived improper personal benefit), against all expense, liability and loss (including attorney's fee, judgments, fines, exercise tax or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnified person in connection therewith. B. The right to indemnification conferred in Clause A of this section 15 shall include the right to be paid by the Company the expenses (including attorney's fee) incurred in defending any proceeding in advance of its final disposition (hereinafter an advancement of expenses"). The rights to indemnification and to advancement of expenses shall be contract rights and such rights shall survive as to an indemnified person who has ceased to be a Director, Manager, Officer, Employee or Attorney and shall inure to the benefit of the indemnified person's heirs, executors and administrators. C. The rights to indemnification and to the advancement of expenses shall be inclusive of any other right that any other person or entity may have or hereinafter acquire under any statute, agreement, vote or otherwise. D. The Company may maintain insurance, at its expense, to protect itself and any Director, Manager, Officer, Employee or Attorney of the Company against any expense, liability or loss, irrespective of whether or not the Company would have the power or indemnify such person(s) against expense, liability or loss under Cambodian Law. E. The Company may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to advancement of expenses to any other agent of the Company to the fullest extent of the provisions of this section with respect to the indemnification and advancement of expenses of Directors, Officers and Attorneys of the Company. 16. SHARING OF REVENUES MPTC shall be paid the following percentages of gross revenue, which are derived from the following charges: - - Connection fee - - Monthly rental - - Local charges - - Long Distance charges - - Surcharge on international calls - - Net interconnect settlement charge - - Profit of the sales of handsets, equipments, terminals and others of the CDMA PCS 1900 System - - All other service charge - - 7% gross revenue per annum for the first three (3) years of commercial operation of CDMA System; - - 12% gross revenue per annum for the second three (3) years of commercial operation; - - 15% gross revenue per annum for the rest of the contract duration. 17. DISTRIBUTIONS Within ninety (90) days following the completion of the yearly audit, the General Manager shall prepare a proposal based on the results of the yearly audit regarding the distribution of net profits and submit it to the Board of Directors for examination and approval notwithstanding the equity interests in clause 6 above, the parties agree that any dividend shall be in the proportion: - - Party A 20% (twenty percent) - - Party B 80% (eighty percent) 18. FINANCIAL STATEMENTS, ACCOUNTING AND BALANCE SHEETS 1. The fiscal year of the Company shall commence on January 1/st/ and end on December 31/st/ of each year. For the first year of operations, the fiscal year shall start from the commencement of commercial operations and end on December 31/st/ of that year; 2. The internal quarterly financial statements of the Joint Enterprise shall be carried out in accordance with the International Accounting Standard (IAS) and recognized by the Ministry of Finances of the Kingdom of Cambodia; 3. The account of the Joint Enterprise shall be audited by two (2) independent external auditors, one each to be appointed by each party; 4. Within sixty (60) days after the end of each fiscal year, the General Manager shall present to the Board of Directors at the Annual General Meeting a report on the operations, accounting and financial statements as at the end of the previous year; 5. Statistic report, as requested by the MPTC to all operators shall be submitted to the MPTC. 19. ARBITRATION A. Both parties agree that all issues pertaining to this Agreement shall be settled expediently and amicably through discussions and negotiations. B. Failing a negotiated agreement regarding any disputes or differences pertaining to this agreement, including any question regarding its existence, validity or termination, the dispute shall be referred to Arbitration in accordance with the Rules of Arbitration and Conciliation of the International Chamber of Commerce. The award of such an Arbitration shall be final and binding upon parties. C. Any Arbitration pursuant to this Article 19 shall take place at a location to be agreed by both parties, or in Singapore if there is no agreement regarding the location, and shall be conducted in English language. 20. FORCE MAJEURE Neither party shall be liable for any breach of this Agreement caused by act of God, insurrection or civil disorder, war or military operations, national or local emergency, compliance with any statutory obligation, industrial disputes of any kind, fire, lighting, explosion, flood, subsistence, weather of exceptional severity or omissions of persons for whom neither Party to the Agreement is responsible or any other cause outside its reasonable control. 21. MISCELLANEOUS This Agreement has been prepared in English and translated into a version in Khmer. In the event of any dispute and/or arbitration concerning this Agreement, including any question regarding its existence, interpretation, validity or termination, solely the English version shall control. 22. FINAL PROVISION This Agreement has been prepared in both Khmer and English languages. This agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be fully executed on the date first written above. MINISTRY OF POST AND TELECOMMUNICATIONS KINGDOM OF CAMBODIA By: /s/ H. E. So Khun ----------------------------------------------------------- Name: H. E. So Khun Title: Secretary of States, MPTC PORTACOM WIRELESS, INC By: /s/ Paul R. Carr ----------------------------- Name: Paul R. Carr Title: Vice President KHMER SAMEKY TELECOM CO., LTD By: /s/ Sarun Oeurn ----------------------------- Name: Sarun Oeurn Title: President & CEO WITNESS By: /s/ Koy Kim Sea By: /s/ Quyen Nguyen --------------- ---------------- Name: Koy Kim Sea Name: Quyen Nguyen EX-10.27 8 LICENSE FOR PROVISION AND OPERATION CDMA EXHIBIT 10.27 KINGDOM OF CAMBODIA ------------------- NATION RELIGION KING -------------------- MINISTRY OF POSTS AND TELECOMMUNICATIONS LICENSE ------- FOR THE PROVISION AND OPERATION OF A CDMA BASED TELECOMMUNICATIONS SYSTEM WITHIN THE KINGDOM OF CAMBODIA ISSUED AND GRANTED BY THE MINISTRY OF POSTS AND TELECOMMUNICATIONS (MPTC) TO AMERICAN CAMBODIAN TELECOM, LTD. TABLE OF CONTENTS 1. CDMA SYSTEM 2 2. ALLOCATION OF RADIO SPECTRUM 2 3. SYSTEM LINKS 3 4. INTERNATIONAL TRAFFIC 4 5. COMPLEMENTARY AND VALUE ADDED SERVICES 4 6. COVERAGE 4 7. INTERNATIONAL STANDARDS 5 8. TERMINAL EQUIPMENT 5 9. INTERCONNECTION 6 10 ALLOCATION OF NUMBER 6 11. DIRECTORY INFORMATION 6 12. EMERGENCY SERVICES 7 13. PERFORMANCE GUARANTEES 7 14. SECURITY ASPECTS 8 15. RELATIONS WITH CUSTOMERS 8 16. TARIFF AND BILLING 9 17. ACCOUNTING SETTLEMENTS 9 18. PROVISION OF INFORMATION 10 19. FISCAL AND ADMINISTRATIVE MATTERS 11 20. LICENSE TERMS 11 21. CONFIDENTIALITY 12 22. APPLICABLE LEGISLATION 13 23. GENERAL 13
LICENSE ------- FOR THE PROVISION AND OPERATION OF A CODE DIVISION MULTIPLE ACCESS (CDMA) BASED TELECOMMUNICATIONS SYSTEM (HEREINAFTER "CDMA SYSTEM" WITHIN THE KINGDOM OF CAMBODIA THIS LICENSE IS GRANTED ON THE 26TH DECEMBER, 1996, WHEREBY: THE MINISTRY OF POSTS AND TELECOMMUNICATIONS OF THE KINGDOM OF CAMBODIA (MPTC) HEREBY GRANTS A LICENSE TO PROVIDE AND OPERATE A CDMA BASED TELECOMMUNICATIONS SYSTEM (HEREINAFTER "LICENSE") WITHIN THE KINGDOM OF CAMBODIA TO: AMERICAN CAMBODIAN TELECOM, LTD., (HEREINAFTER "PORTACOM"), A TO BE FORMED CAMBODIAN LIMITED LIABILITY COMPANY INCORPORATED UNDER THE LAWS OF THE KINGDOM OF CAMBODIA, WHOSE PRINCIPAL SHAREHOLDERS ARE: PORTACOM WIRELESS, INC. AND KHMER SAMEKY TELECOM CO., LTD; AND MINISTRY OF POSTS AND TELECOMMUNICATIONS (MPTC) THE LICENSE IS GRANTED SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS: 1. THE CDMA SYSTEM THE CDMA SYSTEM IS DESCRIBED HEREIN AS: A. CDMA TECHNOLOGY IS DEFINED AS CODE DIVISION MULTIPLE ACCESS TELECOMMUNICATIONS TECHNOLOGY AND OR OTHER PCS EQUIVALENT ADVANCED TECHNOLOGY OPERATED ON THE 1900 MHZ FREQUENCY BAND; B. IN THE DEVELOPMENT OF THIS CDMA SYSTEM, PORTACOM SHALL HAVE THE RIGHT TO INSTALL AND OPERATE BASE STATIONS, CELLULAR SWITCH EXCHANGES AND ANY OTHER FACILITIES AND EQUIPMENT DIRECTLY INVOLVED IN THE PROVISION DEVELOPMENT AND OPERATION OF A PCS 1900 BASED MOBILE CELLULAR SYSTEM, NOT INCLUDING THE WIRELESS LOCAL LOOP (WLL) SYSTEM; C. THE LICENSE COVERS THE ENTIRE TERRITORY OF THE KINGDOM OF CAMBODIA. 2. ALLOCATION OF RADIO SPECTRUM A. PORTACOM WILL HAVE USE, DURING THE VALIDITY OF THE LICENSE, AND ANY EXTENSION THEREOF, OF FREQUENCIES WITHIN THE BANDS 1900 MHZ TO OPERATE THE CDMA SYSTEM. MPTC UNDERTAKES THAT THERE WILL BE NO INTERFERENCE WITHIN THESE BANDS 1870 - 1879.8 MHZ AND 1950- 1959.8 MHZ OR A MINIMUM WORKABLE FREQUENCY FOR CDMA SYSTEM WITH PCS 1900 ASSIGNED TO PORTACOM; B. THE FOLLOWING ARE THE INITIAL NON-EXCLUSIVE MICROWAVE FREQUENCY ALLOCATIONS AND ASSIGNMENTS OF THE LICENSE: I. LONG HAUL: THE 7 OR 8 GHZ BAND AND THE 2 GHZ BAND. II. SHORT HAUL: 15 GHZ BAND (14400-15350 MHZ). THE FREQUENCY ASSIGNMENT SHALL BE MADE ON A CASE BASIS AND SUCH APPROVAL WOULD NOT BE UNREASONABLY WITHHELD. C. ADDITIONAL BANDWITH FOUND TO BE NEEDED TO EXPAND AND ENHANCE THE CDMA SYSTEM WILL NOT BE UNREASONABLY WITHHELD BY THE MPTC. D. PORTACOM WILL RECEIVE ADDITIONAL BANDS AS REQUIRED FOR CAPACITY REASONS, AND/OR TO PROVIDE NEW CDMA SYSTEM RELATED SERVICES THAT MAY BE DEVELOPED THROUGH NEW TECHNOLOGY, IF THE FREQUENCIES ARE AVAILABLE; E. PORTACOM SHALL PAY FOR THE FREQUENCY AS CONTAINED IN THE GENERAL TARIFF OF MPTC. F. FOR THE ALLOCATION OF ADDITIONAL MICROWAVE FREQUENCIES, APPROVED BY MPTC, PORTACOM SHALL NOTIFY THE MPTC, NOT LATER THAN THREE (3) MONTHS PRIOR TO THE START OF INSTALLATION OF THE SYSTEM EQUIPMENT, OF THE APPLICABLE OPERATING PARAMETERS (E.G. PREFERRED FREQUENCIES, TRANSMISSION POWER, ANTENNA SITES AS WELL AS TYPES, HEIGHT AND OTHER PERTINENT INFORMATION) NECESSARY FOR CO- ORDINATION OF FREQUENCY ALLOCATIONS. THE MPTC WILL RESPOND WITHIN THIRTY (30) DAYS, TO SUCH REQUEST. 3. SYSTEM LINKS A. PROVIDED THAT THE MPTC HAS SUITABLE EXCESS TRANSMISSION CAPACITY EXISTING BETWEEN TWO LOCATIONS, PORTACOM SHALL HAVE THE RIGHT TO LEASE SUCH CAPACITY WHEN PORTACOM EXPANDS THE CDMA SYSTEM COVERAGE. WITHIN AN APPROPRIATE PERIOD OF TIME, (NOT TO EXCEED 90 DAYS AFTER PORTACOM'S FORMAL REQUEST TO THE MPTC) PORTACOM HAS THE RIGHT TO INSTALL AND OPERATE ANY TRANSMISSION INFRASTRUCTURES THAT IT MAY REQUIRE FOR USE SOLELY WITHIN ITS OWN SYSTEM. THE TRANSMISSION INFRASTRUCTURE MAY CONSIST OF MICROWAVE, SATELLITE, OR CABLE SYSTEMS OR ANY OTHER APPROPRIATE TECHNOLOGY CONSISTENT WITH ITU STANDARDS, OR SUCH STANDARDS THAT MIGHT BECOME AVAILABLE WITH TECHNOLOGICAL DEVELOPMENTS. C. PORTACOM HAS THE ADDITIONAL RIGHT TO LEASE THE TRANSMISSION CAPACITY OF OTHER PUBLIC NETWORK OPERATORS TO UNDERTAKE THESE CONNECTIONS. 4. INTERNATIONAL TRAFFIC PORTACOM SHALL HAVE THE RIGHT TO PROVIDE INTERNATIONAL TELEPHONE SERVICE TO ITS CUSTOMERS BY MEANS OF INTERCONNECTION TO THE PUBLIC SWITCHED TELEPHONE NETWORK (PSTN) AND/OR OTHER AUTHORIZED INTERNATIONAL GATEWAYS (ISC). 5. COMPLEMENTARY AND VALUE ADDED SERVICES PORTACOM WILL OFFER A STANDARD RANGE OF BASIC CELLULAR SERVICES TO ITS CUSTOMERS, WHICH WILL INCLUDE VOICE, DATA ( FOR CDMA PCS 1900 SYSTEM), AND FACSIMILE (SERVICE). PORTACOM MAY ALSO, AND SUBJECT TO MPTC APPROVAL, OFFER ADDITIONAL VALUE ADDED SERVICES AS DEVELOPED OVER TIME. 6. COVERAGE A. PORTACOM WILL SUBMIT A ROLL OUT SCHEDULE DEFINING COVERAGE TARGETS TO MPTC FOR ITS INFORMATION AND COMMENT. B. PORTACOM SHALL PREPARE AND SUBMIT TO MPTC BEFORE THE END OF EACH CALENDER YEAR ITS CURRENT FIVE-YEAR BUSINESS AND DEVELOPMENT PLAN. 7. INTERNATIONAL STANDARDS PORTACOM SHALL APPLY ACCEPTED INTERNATIONAL STANDARDS, INCLUDING BUT NOT LIMITED TO THOSE OF THE ITU, FOR THE CONSTRUCTION AND OPERATION OF THE CDMA SYSTEM. IN THE ABSENCE OF SUCH STANDARDS, PORTACOM SHALL, TO THE EXTENT PRACTICAL, FOLLOW PREVAILING AND ACCEPTED INTERNATIONAL PRACTICES. PORTACOM, AND SUBJECT TO MPTC APPROVAL, MAY SUBSTITUTE OR COMPLEMENT EXISTING TECHNOLOGY WITH SUCH TECHNOLOGY THAT MIGHT BE DEVELOPED AND BECOME AVAILABLE LATER DURING THE VALIDITY OF THIS LICENSE. 8. TERMINAL EQUIPMENT A. PORTACOM SHALL ENSURE THAT ONLY TERMINAL EQUIPMENT WHICH COMPLIES WITH CDMA SYSTEM STANDARDS, IS CONNECTED TO THE SYSTEM. B. PORTACOM MAY REFUSE TO TRANSMIT CALLS OR OTHER COMMUNICATIONS ON ITS CDMA SYSTEM WHERE TERMINAL OR OTHER EQUIPMENT MAY CAUSE DAMAGE OR INTERFERENCE. C. PORTACOM SHALL BE OBLIGED TO CONNECT TERMINAL EQUIPMENT THAT MEETS THE CDMA SYSTEM STANDARDS, COMPLY WITH PORTACOM'S REGISTRATION REGULATION AND IS LEGALLY IMPORTED INTO CAMBODIA UNDER PROPER CUSTOMS FORMALITY AND WHICH IS NOT NECESSARILY PROCURED THROUGH PORTACOM. D. PORTACOM SHALL HAVE THE RIGHT TO SELL TO CUSTOMERS ANY AND ALL TYPES OF TERMINALS, DEVICES AND HANDSETS FOR USE THE CDMA PCS 1900 SYSTEM. 9. INTERCONNECTION A. PORTACOM SHALL BE ENTITLED TO INTERCONNECT THE CDMA SYSTEM WITH THE PSTN AND OTHER TELECOMMUNICATION OPERATOR NETWORKS AS CONTAINED IN THE MPTC INTERCONNECT REGULATION AND/OR, IF NECESSARY, A SEPARATE INTERCONNECT AGREEMENT WITHIN THREE MONTHS OF THE GRANTING OF THE LICENSE. B. MPTC WILL PROVIDE SUFFICIENT CAPACITY FOR PORTACOM'S CDMA SYSTEM'S REQUIREMENTS AT THE LOCAL TRUNK AND INTERNATIONAL LEVEL AT ALL TIMES. 10. ALLOCATION OF NUMBER A. PORTACOM SHALL BE ASSIGNED A UNIQUE AND EXCLUSIVE ACCESS CODE FOR THE OPERATION OF ITS CDMA SYSTEM WITHIN THE FRAMEWORK OF THE MPTC'S NATIONAL NUMBERING PLAN. B. PORTACOM SHALL APPLY FOR AND BE GRANTED SUFFICIENT TELEPHONE NUMBERS BY MPTC TO FULFILL ITS REQUIREMENTS FOR THE DURATION OF LICENSE. 11. DIRECTORY INFORMATION A. PORTACOM SHALL USE ITS BEST ENDEAVORS TO ENSURE THAT ITS CUSTOMERS HAVE ACCESS TO THE DIRECTORY ASSISTANCE SERVICES OF OTHER CAMBODIAN TELECOMMUNICATIONS PROVIDERS. B. PORTACOM SHALL FURNISH ALL APPROPRIATE INFORMATION CONCERNING ITS CUSTOMERS TO MPTC FOR PUBLICATION IN THE NATIONAL TELEPHONE DIRECTORY EXCEPT WHERE PORTACOM'S CUSTOMERS HAVE REQUESTED THAT SUCH INFORMATION REMAIN CONFIDENTIAL. 12. EMERGENCY SERVICES A. PORTACOM WILL PROVIDE ITS CUSTOMERS ACCESS TO THE NATIONAL EMERGENCY SERVICES IN CAMBODIA FREE OF CHARGE VIA INTERCONNECTION WITH THE PSTN. B. AS ALLOWED BY THE CUSTOMER'S EQUIPMENT, ALL EMERGENCY CALLS ORIGINATING ON THE CDMA SYSTEM WILL BE ACCEPTED. 13. PERFORMANCE GUARANTEES A. PORTACOM AGREES TO ESTABLISH A RELIABLE CONTROL AND QUALITY MEASUREMENT SYSTEM FOR ITS SERVICES TO ENSURE COMPLIANCE WITH ITU AND OTHER ESTABLISHED STANDARDS AND PRACTICES, OR DEVELOPING TECHNOLOGY THAT BECOMES COMMERCIALLY AVAILABLE AND REASONABLY SATISFACTORY TO THE MPTC. B. PORTACOM SHALL DEMONSTRATE ITS ABILITY TO COMPLY WITH THE FOLLOWING REQUIREMENTS: I) THE CDMA MOBILE CELLULAR OPERATION MUST BE DESIGNED TO PROVIDE SERVICE ON A CONTINUOUS BASIS 24 HOURS A DAY, 365 DAYS A YEAR; II) PORTACOM WILL HAVE AN OBLIGATION TO ENSURE THAT ALL NETWORK FAILURES WILL BE RECTIFIED AND SERVICE RESTORED WITHOUT UNDUE DELAY. III) THE GENERAL SERVICE QUALITY SHALL BE ACCEPTABLE IN ACCORDANCE WITH ETSI (EUROPEAN TECHNICAL STANDARD INSTITUTE) OR EQUIVALENT AMERICAN INSTITUTE FOR CDMA STANDARDS. IV) PORTACOM WILL USE ITS BEST ENDEAVORS TO MINIMIZE DOWN-TIME FOR ESSENTIAL MAINTENANCE AND SYSTEM DEVELOPMENT. 14. SECURITY ASPECTS A. IN ACCORDANCE WITH CAMBODIAN LAW, AND DULY REQUESTED BY THE RELEVANT AUTHORITY(IES), PORTACOM SHALL PROVIDE THE FACILITIES TO MONITOR THE COMMUNICATIONS, THE COST FOR THIS IS TO BE BORN BY THE RESPECTIVE AUTHORITY(IES). B. IN THE EVENT OF A BONA FIDE NATIONAL SECURITY CRISIS, AND AT THE REQUEST OF THE RELEVANT AUTHORITY(IES) AND IN COMPLIANCE WITH CAMBODIA LAW, THE CDMA SYSTEM SERVICES AND CAPACITIES SHALL BE PUT AT THEIR DISPOSAL TO THE EXTENT NECESSARY. HOWEVER, THE INCOME DERIVED FROM NORMAL COMMERCIAL COMMUNICATIONS DURING ANY SUCH PERIOD OF CRISIS SHALL NEVERTHELESS BE COLLECTED AND SHALL CONSTITUTE PORTACOM REVENUE 15. RELATIONS WITH CUSTOMERS A. PORTACOM SHALL MAKE ITS SERVICES AVAILABLE TO THE GENERAL PUBLIC ON FAIR REASONABLE BASIS AND TERMS; PORTACOM SHALL ALSO PROVIDE ITS SERVICES ON A NON-DISCRIMINATORY BASIS. B. PORTACOM SHALL OFFER A SERVICE AGREEMENT TO ALL OF ITS CUSTOMER ESTABLISHING TERMS AND CONDITIONS OF SERVICE IN ACCORDANCE WITH THE LICENSE. 16. TARIFF AND BILLING A. TARIFFS FOR SERVICES PROVIDED IN THE CDMA SYSTEM WILL BE DETERMINED BY PORTACOM WITHIN THE REGULATION SET BY MPTC. B. PORTACOM SHALL PUBLISH THE TARIFFS TERMS AND CONDITIONS FOR ITS STANDARD AND SERVICE AT LEAST ONCE A YEAR AND SHALL KEEP ITS CUSTOMERS CONTINUALLY INFORMED OF ANY CHANGES THEREOF. C. THE PORTACOM BILLING SYSTEM SHALL COMPILE DATA ABOUT ITS CUSTOMER'S USE OF THE CDMA SYSTEM'S SERVICES INCLUDING THE CALLING AND CALLED NUMBERS AND THE DATE, TIME AND DURATION OF CALLS AS WELL AS ANY OTHER INFORMATION CONSIDERED OF VALUE. SUCH INFORMATION SHALL BE AVAILABLE TO THE CUSTOMERS CONCERNED, INCLUDING THE INTERCONNECTED OPERATORS/NETWORKS. D. PORTACOM IS AUTHORIZED TO DIRECTLY INVOICE AND COLLECT FOR ALL SERVICES PROVIDED TO ITS CUSTOMERS. E. PORTACOM MUST SUBMIT THE UNAUDITED BALANCE SHEET OF THE COMPANY TO MPTC EVERY THREE (3) MONTHS. 17. ACCOUNT SETTLEMENTS A. PORTACOM SHALL MAKE PAYMENTS FOR ITS USE OF THE MPTC NETWORK AND FACILITIES INCLUDING INTERNATIONAL TRAFFIC WITHIN TWO (2) MONTHS AFTER THE INVOICE DATE. B. PORTACOM SHALL MAKE PAYMENTS TO MPTC FOR THE REVENUE AND PROFIT SHARING WITHIN THREE (3) MONTHS AFTER THE FINAL AUDIT OF THE FINANCIAL STATEMENTS IS COMPLETED. C. PENALTY PAYMENTS SHALL BE MADE BY PORTACOM FOR LATE PAYMENT AS DETERMINED BY THE MINISTRY OF FINANCES GUIDELINES. D. IF PAYMENTS ARE NOT MADE WITHIN SIX (6) MONTHS FROM THE DUE DATE WITHOUT REASONABLE CAUSE THE MPTC MAY, AT ITS OWN DISCRETION, SUSPEND PORTACOM OPERATIONS. 18. PROVISION OF INFORMATION A. PORTACOM WILL PROVIDE TO MPTC WITH TECHNICAL, ADMINISTRATIVE AND FINANCIAL INFORMATION REASONABLY REQUIRED FOR THE CONTROL OF AND COMPLIANCE WITH THE TERMS OF THE LICENSE. B. PORTACOM SHALL PRODUCE A YEARLY AUDITED REPORT IN ACCORDANCE WITH ESTABLISHED INTERNATIONAL ACCOUNTING PRACTICES THAT MEET THE REQUIREMENTS OF THE CONCERNED CAMBODIA FISCAL AND FINANCIAL AUTHORITIES, AND SHALL SUBMIT THE SAME TO MPTC. C. ALL INFORMATION THAT MPTC OBTAINS, REGARDING PORTACOM, ITS OPERATIONS AND/OR THE CDMA SYSTEM, IS PRIVILEGED AND CONFIDENTIAL AND SHALL BE TREATED AS SUCH AND KEPT CONFIDENTIAL WITH THE EXCEPTION OF SUCH INFORMATION THAT MUST BE DISCLOSED ACCORDING TO CAMBODIAN LAW. 19. FISCAL AND ADMINISTRATIVE MATTERS TO THE EXTENT ALLOWED BY CAMBODIAN LAWS, RULES AND REGULATIONS, MPTC UNDERTAKES TO ASSIST IN OBTAINING APPROVALS FOR THE FOLLOWING: I) WORKING PERMITS FOR NON-CAMBODIAN STAFF AS REQUIRED BY PORTACOM; II) DUTY-FREE IMPORT OF NECESSARY TELECOMMUNICATIONS EQUIPMENT; III) ASSIST WHERE POSSIBLE, WITH THE RECRUITING OF VARIOUS CATEGORIES OF QUALIFIED CAMBODIAN MANAGEMENT AND WORKING PERSONNEL. 20. LICENSE TERMS 20.1 DURATION THE LICENSE SHALL BE VALID FOR A TOTAL OF TWENTY FIVE (25) YEARS FROM THE ORIGINAL CONTRACT DATE, WHICH IS 26TH DECEMBER, 1996. 20.2 EXTENSION PRIOR TO THE END OF TWENTY FIVE (25) YEARS LICENSE PERIOD, PORTACOM MAY WRITE TO MPTC FOR AN EXTENSION OF THE LICENSE, IF IT SO DESIRES. 20.3 ASSIGNMENT OF RIGHTS A. PORTACOM MAY NOT ASSIGN, TRANSFER OR DISPOSE OF THE LICENSE OR THE RIGHTS DERIVED THEREFROM IN FAVOR OF THE THIRD PARTIES WITHOUT THE PRIOR APPROVAL OF MPTC. B. SUBJECT TO THE APPROVAL OF MPTC, PORTACOM MAY SUBCONTRACT TO OTHER PARTIES FOR THE PROVISION OF SERVICES AND/OR EQUIPMENT WITH MAY BE PROVIDED BY PORTACOM UNDER THE TERMS OF THIS LICENSE. 20.4 CDMA SYSTEM OWNERSHIP UPON THE EXPIRATION OF THE LICENSE, OR ANY EXTENSION, OR IN THE EVENT OF EARLY TERMINATION OF THE CONTRACT THEREOF, PORTACOM SHALL TRANSFER TITLE TO AND OWNERSHIP OF ALL OF ITS ASSETS TO THE MPTC AT NO COST. 21. CONFIDENTIALITY A. PORTACOM SHALL ASSURE CONFIDENTIALITY OF INFORMATION RECEIVED FROM OR CONCERNING ITS CUSTOMERS AS WELL AS ANY THIRD PARTIES, AND SHALL NOT DISCLOSE ANY SUCH INFORMATION WITHOUT THE EXPRESS WRITTEN AGREEMENT OF THOSE CONCERNED. B. CONFIDENTIAL INFORMATION SHALL BE USED EXCLUSIVELY FOR THE PURPOSE FOR WHICH IT WAS DISCLOSED. C. IN THE EVENT THAT ANY CONFIDENTIAL INFORMATION, AS MENTIONED ABOVE, IS REQUIRED IN ACCORDANCE WITH CAMBODIAN LAW, THIS WILL BE DISCLOSED TO THE RELEVANT AUTHORITY(IES) FOLLOWING DUE FORMAL PROCEDURE. 22. APPLICABLE LEGISLATION A. PORTACOM'S ACTIVITIES DETERMINED BY THE CONDITIONS OF THIS LICENSE ARE GOVERNED BY CAMBODIAN LEGISLATION AND BY THE TERMS OF THIS LICENSE, AS WELL AS BY ANY PACT, AGREEMENTS AND TREATIES SUBSCRIBED AND RATIFIED BY THE ROYAL GOVERNMENT OF THE KINGDOM OF CAMBODIA. B. IN THE EVENT OF NEW LAWS OR CHANGES OF INTERPRETATION OF EXISTING LAWS IN ANY ADVERSE WAY AFFECT THE COMMERCIAL OR OPERATING CONDITIONS UNDER THIS LICENSE, THE MPTC AGREES TO MAKE THE NECESSARY ADJUSTMENT TO ENABLE A CONTINUATION OF THE OPERATION OF THE CDMA SYSTEM AND SERVICES UNDER UNCHANGED COMMERCIAL AND OPERATIONAL CONDITIONS. 23. GENERAL THIS AGREEMENT HAS BEEN PREPARED IN ENGLISH AND TRANSLATED INTO AVERSION IN KHMER. IN THE EVENT OF ANY DISPUTE AND/OR ARBITRATION CONCERNING THE LICENSE, INCLUDING ANY QUESTION REGARDING ITS EXISTENCE, INTERPRETATION, VALIDITY OR TERMINATION, THE ENGLISH VERSION SHALL CONTROL. ISSUED BY: SECRETARY OF STATE MINISTRY OF POSTS AND TELECOMMUNICATIONS OF CAMBODIA (MPTC) BY: /s/ H. E. SO KHUN ----------------------------------- NAME: H. E. SO KHUN TITLE: SECRETARY OF STATE ACCEPTED BY LICENSEE: PORTACOM, LTD. BY: /s/ PAUL R. CARR -------------------------------- AUTHORIZED SIGNATURE OF PAUL R. CARR VICE PRESIDENT AND MANAGING DIRECTOR KHMER SAMEKY TELECOM CO., LTD BY: /s/ SARUN OEURN --------------------------------- AUTHORIZED SIGNATURE OF SARUN OEURN PRESIDENT & CEO KINGDOM OF CAMBODIA ------------------- NATION-RELIGION-KING -------------------- MINISTRY OF POSTS AND TELECOMMUNICATIONS PHNOM PENH TEL. 426 820 APPENDIX 1 ---------- (ATTACHED TO THE JOINT VENTURE AGREEMENT FOR THE PROVISION OF OPERATION OF CDMA BASED TELECOMMUNICATIONS SYSTEM BETWEEN MPTC AND PORTACOM WIRELESS INC.) THE MINISTRY OF POSTS AND TELECOMMUNICATIONS UNDERTAKES TO GRANT A LICENSE TO PORTACOM FOR THE PROVISION AND OPERATION OF PAGING SERVICE WITHIN THE KINGDOM OF CAMBODIA. PORTACOM SHALL PAY THE LICENSE FEES AS DETERMINED BY THE MINISTRY OF POSTS AND TELECOMMUNICATIONS. DATED 26 DECEMBER 1996 THE SECRETARY OF STATE /s/ SO KHUN ----------------------- SO KHUN EX-10.28 9 STOCK OPTION AG. BETWEEN REGISTRANT & ALEXANDER EXHIBIT 10.28 STOCK OPTION AGREEMENT ---------------------- THIS AGREEMENT is made as of the 28th day of June, 1996 BETWEEN: PORTACOM WIRELESS, INC., ----------------------- Suite 730, 8055 W. Manchester Avenue, Playa del Rey, California 90293 USA (the "Company") OF THE FIRST PART AND: ROBERT KEITH ALEXANDER, ---------------------- #228 - 20 Midpark Crescent S.E. Calgary, AB T2X 1P3 (the "Optionee") OF THE SECOND PART WHEREAS: A. The Optionee is a director or senior officer of the Company or its wholly-owned subsidiary, as the case may be; B. The Company wishes to grant the Optionee an option to purchase common shares in the capital of the Company; C. The Company's shares are listed and posted for trading on the Vancouver Stock Exchange; NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the sum of $1.00 given by the Optionee to the Company (the receipt of which is hereby acknowledged by the Company) the parties hereto agree as follows: 1. The Company hereby grants the Optionee as an incentive and not in lieu of salary or any other compensation for services, an option to purchase a total of 90,000 common shares in its capital (the "Option") at a price of US$3.80 per share exercisable on or before June 28, 2001 (the "Expiry Date"). 2 2. In order to exercise the Option, the Optionee shall, before 5:00 p.m. on the Expiry Date, give notice to the Company of the Optionee's intention to exercise the Option in whole or in part, such notice to be accompanied by cash, bank draft, money order or certified cheque, payable to the Company, in the appropriate amount. 3. If the Optionee: (a) dies prior to the expiration of the Option, the Optionee's legal representatives may, within one year from the Optionee's death and prior to the expiry of the Option, exercise that portion of the Option which remains outstanding after which time the Option shall terminate; or (b) ceases to act as a director or senior officer of the Company or its wholly-owned subsidiary for any reason other than the Optionee's death, the Option shall terminate 30 days after the date of such cessation. 4. If the issued and outstanding common shares in the capital of the Company are at any time changed by subdivision, consolidation, re-division, reduction in capital, reclassification or recapitalization (such changes are herein called collectively "Capital Alterations"), not including any issuance of additional shares for consideration, the Option shall be adjusted as follows: (a) the number and class of shares in respect of which the Option is granted shall be adjusted in such a manner as to parallel the change created by the Capital Alterations in the class and total number of the issued and outstanding common shares; and (b) the exercise price of each share in respect of which the Option shall operate shall be increased or decreased proportionately, as the case may require, so that upon exercising the Option the same proportionate shareholdings at the same aggregate purchase price shall be acquired after such Capital Alterations as would have been acquired before the Capital Alterations. 5. The Option granted is personal to the Optionee and may not be assigned or transferred in whole or in part. 6. This Agreement constitutes and expresses the whole agreement of the parties with reference to the appointment of the Optionee and with reference to any of the matters or things herein discussed or mentioned with reference to such appointment, all promises, representations and understandings relative thereto being merged herein. 7. Any amendment to this Agreement shall be subject to the approval of the shareholders of the Company if the Optionee was an insider of the Company, as that term 3 is used in the Securities Act (British Columbia), at the time of granting the -------------- Option or is an insider of the Company at the time of the amendment. 8. This Agreement shall be construed and enforced in accordance with the laws of British Columbia. 9. This Agreement shall be subject to the approval of all securities regulatory authorities having jurisdiction. 10. If the Optionee is an insider of the Company, as that term is defined in the Securities Act (British Columbia), the Optionee shall not exercise the -------------- Option prior to the approval of the Option by the shareholders of the Company. For the purposes of this paragraph, approval of the shareholders may be granted in advance of the Option, by way of blanket or omnibus resolution authorizing the Company's Board of Directors to grant options or alternatively by approving a stock option plan adopted by the Company. In the event the Company has adopted a stock option plan, then notwithstanding anything to the contrary contained herein, the Option and the Agreement shall be governed under the terms of such stock option plan, and in the event of any inconsistencies between this Agreement and the stock option plan, the terms of the stock option plan shall prevail. If the shareholders do not approve the Option and this Agreement, then the Option and this Agreement shall be void ab initio. 4 IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written. THE COMMON SEAL OF ) PORTACOM WIRELESS, INC. was ) hereunto affixed in the presence of: ) ) ) c/s _____________________________ ) ) ) _____________________________ ) SIGNED, SEALED AND DELIVERED ) by ROBERT KEITH ALEXANDER in the ) presence of: ) ) ) _____________________________ ) Signature ) ) _____________________________ ) ______________________________ Name ) ROBERT KEITH ALEXANDER ) _____________________________ ) Address ) ) EX-10.29 10 STOCK OPTION AG. BETWEEN REGISTRANT & MACLELLAN EXHIBIT 10.29 THIS DIRECTOR INCENTIVE OPTION AGREEMENT dated for reference as at the 30th day of December, 1996. BETWEEN: PORTACOM WIRELESS, INC., a company duly incorporated under the laws of the State of Delaware, with an office at #11 - 1155 Melville Street, in the City of Vancouver, in the Province of British Columbia, V6Z 4G4. (the "Company") OF THE FIRST PART AND: DOUGLAS MACLELLAN 224 Redlands Street Playa del Rey, California 90293 (the "Director ") OF THE SECOND PART WHEREAS: A. The Director is a director of the Company. B. It is advantageous for the Company to grant to the Director stock options to purchase the Company's shares as an incentive for services to be rendered to the Company by the Director. IN CONSIDERATION OF THESE PREMISES, AND THE COVENANTS AND AGREEMENTS HEREIN CONTAINED IN THIS AGREEMENT, THE PARTIES COVENANT AND AGREE AS FOLLOWS: 1. Grant of Options. The Company grants to the Director, irrevocable ---------------- within the time limited by this Agreement, options (the "Options") to purchase free and clear of all liens, charges and encumbrances, in aggregate, 200,000 common shares of the Company (the "Option Shares") at the price per Option Share set out in paragraph 2. 2. Term and Price. Subject as hereinafter provided, the Options may be -------------- exercised by the Director during the period December 30, 1996 to December 30, 2001 inclusive (the "Option Term"), at a price of $2.68 (U.S.) per share, or such other price as may be approved by the Vancouver Stock Exchange. 3. Exercise of Options. The Director may exercise the Options either ------------------- wholly or in part any time and from time to time within the Option Term by transmitting notice in writing to the Company setting out the number of shares to be purchased, together with payment for those shares by certified cheque, bank draft or wire order. 4. Continuing to Act in Designated Capacity. The Options are subject to ---------------------------------------- the Director continuing to act as a director of the Company during the Option Term. If the Director should cease to continue to act as a director of the Company during the Option Term for any reason except by reason of death, then the Options allocated to such Director pursuant to paragraph 1 shall be terminated without further action of the Company and become null and void within thirty (30) days of the Director so ceasing to act. 5. Corporate Authority. Prior to the issuance of any of the Option ------------------- Shares the Company will take or cause to be taken all necessary steps to validly and effectively approve or authorize the allotment and issuance by the Company of the Option Shares. 6. Death of Optionee. In the event of the death of the Director, the ----------------- Options allocated to the Director may be exercised by the Director's estate or legal representative for a period of six (6) months from the date of death. 7. Options Personal. The Options granted are personal to the Director ---------------- and shall not be assigned or transferred. It is acknowledged and agreed that the Director has not been induced to exercise any of the Options or to purchase any of the Option Shares pursuant to this Agreement by expectation of employment or, if applicable, continued employment with the Company. 8. Regulatory and Shareholder Approvals. This Agreement and any ------------------------------------ amendments hereto and the Options provided for herein are subject to the approval of the Vancouver Stock Exchange, and are further subject to the approval of the shareholders of the Company in a general meeting prior to any exercise of the Options as a result of the Director being considered to be an "insider" of the Company as that term is defined in the Securities Act (British Columbia). In addition, the Director acknowledges that there may be resale restrictions and reporting requirements imposed upon any or all of the Option Shares. The Director agrees to abide by any resale restrictions as may be imposed and any and all reporting requirements as prescribed by the Securities Act (British Columbia) and the rules and regulations pursuant thereto, and, if the Director is not a resident of British Columbia, further agrees to abide by all applicable securities laws (including, but not limited to such hold periods as may be applicable in respect of any resale of the Option Shares as a result of such securities laws) in the jurisdiction in which the Director is resident. 9. Adjustment of Terms on Capital Alterations. If, during the Option ------------------------------------------ Term, there is a subdivision, consolidation, redivision, or reclassification of the issued common shares of the Company, the class, number and price of the balance of the Option Shares to be issued in respect of any of the Options thereafter will be adjusted proportionately. 10. Notice of Exercise. Notice of exercise of the Options shall be deemed ------------------ to be well and sufficiently given if sent by prepaid registered mail or delivered to the Company at the address set forth above together with the appropriate exercise payment. 11. Counterparts. This Agreement may be executed in several parts in the ------------ same form and such parts as so executed shall together form one original agreement, and such parts if more than one shall be read together and construed as if all the signing parties had executed one copy of this Agreement. 12. Enurement. This Agreement shall enure to the benefit of and be --------- binding upon the parties to this Agreement and their respective heirs, executors, administrators and successors. 13. Headings. The paragraph headings that appear at the beginning of each -------- paragraph of this Agreement are not intended to form a part of this Agreement, but are inserted for convenience of reference only. 14. Time of the Essence. Time shall be of the essence. ------------------- 15. Governing Law. This Agreement shall be governed and construed in ------------- accordance with the laws of the Province of British Columbia. THE PARTIES have executed this Agreement as at the day first above written. THE CORPORATE SEAL OF PORTACOM ) WIRELESS, INC. was hereunto affixed in the ) presence of: ) ) ) ) ______________________________________ ) Authorized Signatory ) C/S ) ) ) ) SIGNED, SEALED AND DELIVERED by ) DOUGLAS MACLELLAN, in the ) presence of: ) ) ) ) _________________________________ ) WITNESS _________________________ DOUGLAS MACLELLAN EX-10.30 11 STOCK OPTION AG. BETWEEN REGISTRANT & LEAHY EXHIBIT 10.30 DIRECTOR INCENTIVE OPTION AGREEMENT dated for reference as at the 30th day of December, 1996. BETWEEN: PORTACOM WIRELESS, INC., a company duly incorporated under the laws of the State of Delaware, with an office at #11 -1155 Melville Street, in the City of Vancouver, in the Province of British Columbia, V6Z 4G4. (the "Company") OF THE FIRST PART AND: STEPHEN LEAHY 3995 Hillcrest Avenue North Vancouver, B.C. V7R 4B7 (the "Director ") OF THE SECOND PART WHEREAS: A. The Director is a director of the Company. B. It is advantageous for the Company to grant to the Director stock options to purchase the Company's shares as an incentive for services to be rendered to the Company by the Director. IN CONSIDERATION OF THESE PREMISES, AND THE COVENANTS AND AGREEMENTS HEREIN CONTAINED IN THIS AGREEMENT, THE PARTIES COVENANT AND AGREE AS FOLLOWS: 1. Grant of Options. The Company grants to the Director, irrevocable ---------------- within the time limited by this Agreement, options (the "Options") to purchase free and clear of all liens, charges and encumbrances, in aggregate, 90,000 common shares of the Company (the "Option Shares") at the price per Option Share set out in paragraph 2. 2. Term and Price. Subject as hereinafter provided, the Options may be -------------- exercised by the Director during the period December 30, 1996 to December 30, 2001 inclusive (the "Option Term"), at a price of $2.68 (U.S.) per share, or such other price as may be approved by the Vancouver Stock Exchange. 3. Exercise of Options. The Director may exercise the Options either ------------------- wholly or in part any time and from time to time within the Option Term by transmitting notice in writing to the Company setting out the number of shares to be purchased, together with payment for those shares by certified cheque, bank draft or wire order. 4. Continuing to Act in Designated Capacity. The Options are subject to ---------------------------------------- the Director continuing to act as a director of the Company during the Option Term. If the Director should cease to continue to act as a director of the Company during the Option Term for any reason except by reason of death, then the Options allocated to such Director pursuant to paragraph 1 shall be terminated without further action of the Company and become null and void within thirty (30) days of the Director so ceasing to act. 5. Corporate Authority. Prior to the issuance of any of the Option ------------------- Shares the Company will take or cause to be taken all necessary steps to validly and effectively approve or authorize the allotment and issuance by the Company of the Option Shares. 6. Death of Optionee. In the event of the death of the Director, the ----------------- Options allocated to the Director may be exercised by the Director's estate or legal representative for a period of six (6) months from the date of death. 7. Options Personal. The Options granted are personal to the Director ---------------- and shall not be assigned or transferred. It is acknowledged and agreed that the Director has not been induced to exercise any of the Options or to purchase any of the Option Shares pursuant to this Agreement by expectation of employment or, if applicable, continued employment with the Company. 8. Regulatory and Shareholder Approvals. This Agreement and any ------------------------------------ amendments hereto and the Options provided for herein are subject to the approval of the Vancouver Stock Exchange, and are further subject to the approval of the shareholders of the Company in a general meeting prior to any exercise of the Options as a result of the Director being considered to be an "insider" of the Company as that term is defined in the Securities Act (British Columbia). In addition, the Director acknowledges that there may be resale restrictions and reporting requirements imposed upon any or all of the Option Shares. The Director agrees to abide by any resale restrictions as may be imposed and any and all reporting requirements as prescribed by the Securities Act (British Columbia) and the rules and regulations pursuant thereto, and, if the Director is not a resident of British Columbia, further agrees to abide by all applicable securities laws (including, but not limited to such hold periods as may be applicable in respect of any resale of the Option Shares as a result of such securities laws) in the jurisdiction in which the Director is resident. 9. Adjustment of Terms on Capital Alterations. If, during the Option ------------------------------------------ Term, there is a subdivision, consolidation, redivision, or reclassification of the issued common shares of the Company, the class, number and price of the balance of the Option Shares to be issued in respect of any of the Options thereafter will be adjusted proportionately. 10. Notice of Exercise. Notice of exercise of the Options shall be deemed ------------------ to be well and sufficiently given if sent by prepaid registered mail or delivered to the Company at the address set forth above together with the appropriate exercise payment. 11. Counterparts. This Agreement may be executed in several parts in the ------------ same form and such parts as so executed shall together form one original agreement, and such parts if more than one shall be read together and construed as if all the signing parties had executed one copy of this Agreement. 12. Enurement. This Agreement shall enure to the benefit of and be --------- binding upon the parties to this Agreement and their respective heirs, executors, administrators and successors. 13. Headings. The paragraph headings that appear at the beginning of each -------- paragraph of this Agreement are not intended to form a part of this Agreement, but are inserted for convenience of reference only. 14. Time of the Essence. Time shall be of the essence. ------------------- 15. Governing Law. This Agreement shall be governed and construed in ------------- accordance with the laws of the Province of British Columbia. THE PARTIES have executed this Agreement as at the day first above written. THE CORPORATE SEAL OF PORTACOM ) WIRELESS, INC. was hereunto affixed in ) the presence of: ) ) ) ) Authorized Signatory ) ) C/S ) Authorized Signatory ) ) SIGNED, SEALED AND DELIVERED by ) STEPHEN LEAHY, in the presence of: ) ) ) ) __________________________________ ) WITNESS ) ______________________ STEPHEN LEAHY EX-21 12 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 Subsidiaries of PortaCom Wireless, Inc. Name ---- PortaCom International, Ltd. Extreme Telecom, Inc. PCBX Systems, Inc. Extreme Laboratories, Inc. EX-27 13 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THE COMPANY, AUDITED BY KPMG, FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 114,275 0 0 0 0 114,275 8,111,927 0 8,226,202 800,133 0 0 0 13,118 17,193,178 8,226,202 10,000 9,013,943 0 0 3,654,324 0 627,234 0 0 0 0 407,277 0 5,139,662 0.41 0
-----END PRIVACY-ENHANCED MESSAGE-----