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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PortaCom Wireless, Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
PRELIMINARY COPY
----------------
PORTACOM WIRELESS, INC.
8055 W. MANCHESTER AVENUE, SUITE 730, PLAYA DEL REY, CALIFORNIA 90293
NOTICE OF EXTRAORDINARY AND
SPECIAL GENERAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 23, 1996
TO THE STOCKHOLDERS OF
PORTACOM WIRELESS, INC.
Notice is hereby given that an extraordinary and special general meeting of
PORTACOM WIRELESS, INC. (the "Company") will be held at 8055 Manchester Avenue,
Suite 730, Playa del Rey, California, U.S.A., on Monday, the 23rd day of
December, 1996 at nine o'clock in the morning (9:00 a.m.) for the following
purposes:
1. to consider and if deemed advisable, to pass a Special Resolution
authorizing the Company to change its jurisdiction of incorporation
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. to consider and if deemed advisable, to pass a resolution authorizing
the Company to subsequently change its domicile 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. to consider and, if deemed advisable, to pass a resolution authorizing
the Company to issue 5,000,000 shares of $.001 par value preferred
stock;
4. to consider and, if deemed advisable, to pass a resolution authorizing
the Company to eliminate the personal liability of directors to the
fullest extent allowed under Delaware law;
5. to consider and, if deemed advisable, to pass a resolution authorizing
the Company to provide officers, directors, employees and agents of
the Company certain indemnification rights in addition to those
currently provided; and
6. to transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Stockholders should note that Proposals 1 and 2 are mutually conditioned,
such that a vote against either proposal will constitute a vote against both
proposals.
Stockholders should also note that Proposal 1 is a "Special Resolution"
and, accordingly, an affirmative vote of 75% of shares present and eligible to
vote is required for approval, while Proposal 2 requires the affirmative vote
only of a majority of the outstanding shares entitled to vote.
The text of the Special Resolution authorizing the Company to continue
under the Wyoming Business Corporation Act is set out in Exhibit D to
the Proxy Statement (Information Circular) which accompanies this notice.
The Board of Directors has fixed the close of business on November 18, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the extraordinary and special general meeting.
Take notice that pursuant to the Company Act (British Columbia) you may,
until 5:00 p.m. (Vancouver, British Columbia time) on December 21, 1996, give
the Company a notice of dissent, by registered mail addressed to the Company at
Godinho Sinclair, Barristers and Solicitors, Suite 1020, 510 Burrard Street,
Vancouver, British Columbia, Canada, V6C 3A8, being the registered office of the
Company, with respect to the Special Resolution to continue the Company's
jurisdiction of incorporation from British Columbia to the State of Wyoming. As
a result of giving a notice of dissent you may, on receiving a notice of
intention to act under Section 231 of the Company Act (British Columbia),
require the Company to purchase all of your shares in respect of which the
notice of dissent was given. See "Right of Dissent - British Columbia" in the
accompanying Proxy Statement - Information Circular.
IF YOU ARE UNABLE TO ATTEND THE EXTRAORDINARY AND SPECIAL GENERAL MEETING IN
PERSON, KINDLY READ THE NOTES ON THE REVERSE SIDE OF THE PROXY, THEN COMPLETE
AND RETURN THE PROXY WITHIN THE TIME SET OUT IN THE NOTES. THE PROXY IS
SOLICITED BY MANAGEMENT, BUT YOU MAY AMEND IT BY STRIKING OUT THE NAMES LISTED
AND INSERTING THE NAME OF THE PERSON YOU WISH TO REPRESENT YOU AT THE MEETING.
Your attention is directed to the Proxy Statement (Information Circular)
accompanying this notice for a more complete statement regarding matters to be
acted upon at the extraordinary and special general meeting.
By Order of the Board of Directors
Douglas C. MacLellan,
President, Chief Executive
Officer and Director
Playa Del Rey, California
November 22, 1996
PRELIMINARY COPY
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PORTACOM WIRELESS, INC.
8055 W. MANCHESTER AVENUE, SUITE 730
PLAYA DEL REY, CALIFORNIA 90293
EXTRAORDINARY AND SPECIAL GENERAL MEETING
TO BE HELD DECEMBER 23, 1996
______________________
PROXY STATEMENT
(INFORMATION CIRCULAR)
______________________
This Proxy Statement (generally referred to in British Columbia as an
Information Circular, hereinafter referred to as "Proxy Statement") is furnished
in connection with the solicitation by the management of PortaCom Wireless,
Inc., a British Columbia, Canada, corporation (the "Company") of proxies to be
used at the extraordinary and special general meeting of stockholders of the
Company to be held at the time and place and for the purposes set forth in the
accompanying Notice of Extraordinary and Special General Meeting. The
solicitation of proxies is made on behalf of the Company and all the expenses of
soliciting proxies from stockholders will be borne by the Company. In addition
to the solicitation of proxies by use of the mails, officers and regular
employees may communicate with stockholders personally or by mail, telephone,
telegram or otherwise for the purpose of soliciting such proxies, but in such
event no additional compensation will be paid to any such persons for such
solicitation. The Company will reimburse banks, brokers and other nominees for
their reasonable out-of-pocket expenses in forwarding soliciting material to
beneficial owners of shares held of record by such persons. The approximate date
on which this Proxy Statement and the enclosed form of proxy are being first
sent or given to stockholders is November 22, 1996.
PROPOSALS MUTUALLY CONDITIONED
Stockholders should note that Proposal 1 (seeking authorization for the
Company to change its domicile to Wyoming, U.S.A.) and Proposal 2 (seeking
authorization for the Company to subsequently reincorporate in Delaware, U.S.A.)
are mutually conditioned. As a consequence, a vote against either proposal will
constitute a vote against both proposals. Additionally, in the event Proposals 1
and 2 are approved and any one or more of Proposals 3-5 are not approved, the
Company shall cause its Delaware subsidiary to amend its Certificate of
Incorporation or Bylaws, as the case may be, to eliminate the provisions in such
documents which do not receive stockholder approval prior to merging with its
Delaware subsidiary and consummating the Delaware Reincorporation.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the enclosed proxy are directors or officers of the
Company. A stockholder desiring to appoint some other person to represent him at
the meeting may do so by striking out the printed names and inserting such
person's name in the blank space provided in the form of proxy and depositing
the completed proxy with Pacific Corporate Trust Company, 830-625 Howe Street,
Vancouver, British Columbia V6C 3D8, not less than 48 hours, excluding Saturdays
and holidays, preceding the meeting or an adjournment of the meeting. The other
person need not be a stockholder of the Company.
A stockholder who has given a proxy may revoke it either (a) by signing a
proxy bearing a later date and depositing as aforesaid, or (b) by attending the
meeting in person and registering with the scrutineers as a stockholder
personally present, or (c) by an instrument in writing signed by the
intermediary or shareholder or his attorney authorized in writing, and, in the
case of a corporation, executed under its corporate seal or signed by a duly
authorized officer or attorney for the corporation and either delivered to the
registered office of the Company at Suite 1020, 510 Burrard Street, Vancouver,
British Columbia, V6C 3A8 at any time up to and including the last business day
preceding the day of the Meeting, or any adjournment thereof, or deposited with
the Chairman of the Meeting on the day of the Meeting, prior to the hour of
commencement, or (d) in any other manner provided by law.
EXERCISE OF DISCRETION BY PROXIES
The persons named in the enclosed form of proxy will vote the shares on any
poll in accordance with the direction of the stockholder appointing them. IN
THE ABSENCE OF ANY DIRECTION, IT IS INTENDED THE SHARES WILL BE VOTED FOR ALL
PROPOSALS SET OUT IN THE PROXY.
The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to amendments or variations to matters itemized in
the accompanying Notice of Extraordinary and Special General Meeting or on any
other matter that may properly come before the Meeting. At the time of printing
of this Proxy Statement, the management of the Company knew of no other matters
that may properly come before the Meeting other than those referred to in the
accompanying Notice of Extraordinary and Special Meeting.
VOTING OF SHARES
On the date of the accompanying Notice of Extraordinary and Special General
Meeting the Company was authorized to issue 100,000,000 common shares and had
outstanding 11,956,010 such shares, each carrying the right to one vote, so that
the aggregate number of votes attaching to all the outstanding shares is
11,956,010. In addition, the Company is authorized to issue 100,000,000 Class
"A" preferred shares and 100,000,000 Class "B" preferred shares, none of which
are outstanding. November 18, 1996, has been fixed in advance by the directors
as the record date for the purpose of determining members entitled to notice of
the meeting and to vote thereat. This proxy statement has been mailed on or
about November 22, 1996, to all stockholders of record at the close of business
on November 18, 1996 and to intermediaries in compliance with National Policy
No. 41 of the Canadian Securities Administrators.
Pursuant to British Columbia law, voting at the Meeting would be by a show
of hands, each shareholder having one vote, unless a poll is requested or
required (if the number of shares represented by proxies that are to be voted
against a motion are greater than 5% of the votes that could be cast at the
Meeting), in which case each shareholder is entitled to one vote for each share
held. It is anticipated that a poll will be requested. In order to approve a
motion proposed at the Meeting in accordance with British Columbia law, a
majority of greater than 50% of the votes cast either in person or by proxy is
required (an "ordinary resolution") unless the motion requires a Special
Resolution in which case a majority of 75% of the votes cast in person or by
proxy will be required. The resolution to continue the Company's jurisdiction of
incorporation from British Columbia to Wyoming requires a Special Resolution.
The motion to effect the reincorporation from Wyoming to Delaware and the
related Proposals 3-5 referred to herein must, pursuant to Wyoming law, be
passed by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock entitled to vote.
2
Abstentions and broker non-votes are included in the determination of the
number of shares present and entitled to vote for purposes of determining a
quorum. Abstentions and broker non-votes, however, do not constitute a vote
"for" or "against" against any special resolution and thus will be disregarded
in the calculation of a plurality or of "votes cast." Accordingly, abstentions
and broker non-votes will have the same effect as a vote against the motions.
The persons named in the accompanying Proxy as proxyholders are directors
or senior officers of the Company. A SHAREHOLDER OR AN INTERMEDIARY HOLDING
SHARES AND ACTING ON BEHALF OF AN UNREGISTERED SHAREHOLDER HAS THE RIGHT TO
APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT ON HIS BEHALF
AT THE MEETING OTHER THAN THE PERSONS NAMED IN THE PROXY AS PROXYHOLDERS. TO
EXERCISE THIS RIGHT, THE SHAREHOLDER OR INTERMEDIARY MUST STRIKE OUT THE NAMES
OF THE PERSONS NAMED IN THE PROXY AS PROXYHOLDERS AND INSERT THE NAME OF HIS
NOMINEE IN THE SPACE PROVIDED.
A shareholder or intermediary acting on behalf of a shareholder may
indicate the manner in which the persons named in the enclosed Proxy are to vote
with respect to any matter by checking the appropriate space. On any poll
required by virtue of 5% or more of the outstanding shares of the Company being
represented by proxies at the Meeting that are to be voted against a matter or
by a shareholder or proxyholder requesting a poll, those persons will vote or
withhold from voting the shares in respect of which they are appointed in
accordance with the directions, if any, given in the Proxy provided such
directions are certain.
If the shareholder or intermediary acting on behalf of a shareholder wishes
to confer a discretionary authority with respect to any matter, then the space
should be left blank. IN SUCH INSTANCE, THE PROXYHOLDER, IF ONE PROPOSED BY
MANAGEMENT, INTENDS TO VOTE THE SHARES REPRESENTED BY THE PROXY IN FAVOR OF THE
MOTION. The enclosed Proxy, when properly signed, also confers discretionary
authority with respect to amendments or variations to the matters identified in
the Notice of Meeting and with respect to other matters which may be properly
brought before the Meeting. At the time of printing this Proxy Statement, the
management of the Company is not aware that any such amendments, variations or
other matters are to be presented for action at the Meeting. If, however, other
matters which are not now known to the management should properly come before
the Meeting, the Proxies hereby solicited will be exercised on such matters in
accordance with the best judgment of the nominees.
The Proxy must be dated and signed by the shareholder or by his attorney
authorized in writing or by the intermediary acting on behalf of a shareholder.
In the case of a corporation, the Proxy must be executed under its corporate
seal or signed by a duly authorized officer or attorney for the corporation.
COMPLETED PROXIES TOGETHER WITH THE POWER OF ATTORNEY OR OTHER AUTHORITY,
IF ANY, UNDER WHICH IT WAS SIGNED OR A NOTARIALLY CERTIFIED COPY THEREOF MUST BE
DEPOSITED WITH THE COMPANY'S TRANSFER AGENT, PACIFIC CORPORATE TRUST COMPANY, OF
SUITE 830, 625 HOWE STREET, VANCOUVER, BRITISH COLUMBIA, V6C 3B8, AT LEAST 48
HOURS (EXCLUDING SATURDAYS AND HOLIDAYS) BEFORE THE TIME OF THE MEETING OR
ADJOURNMENT THEREOF. UNREGISTERED SHAREHOLDERS WHO RECEIVED THE PROXY THROUGH AN
INTERMEDIARY MUST DELIVER THE PROXY IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN BY
SUCH INTERMEDIARY.
The person duly appointed under any instrument of proxy will only be
entitled to vote the shares represented thereby if the instrument of proxy
together with any instrument which may be required as set out in the instrument
of proxy is deposited with Pacific Corporate Trust Company at the address
aforesaid not less than 48 hours, excluding Saturdays and holidays, preceding
the meeting or an adjournment of the meeting.
3
Notice of the meeting was filed in accordance with National Policy No. 41
of the Canadian Securities Administrators (Stockholder Communication), with
securities administrators of jurisdictions wherein the Company's registered
stockholders have their addresses, and given to stock exchanges upon which
securities of the Company are listed and clearing agencies.
INTERESTS OF CERTAIN PERSONS IN MATTERS
TO BE ACTED UPON
None of the directors or senior officers of the Company, nor any person who
has held such a position since the beginning of the last completed financial
year of the Company, nor any associate or affiliate of the foregoing persons,
has any substantial or material interest, direct or indirect, by way of
beneficial ownership of securities or otherwise, in any matter to be acted on at
the Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 15, 1996, information with
respect to the securities holdings of all persons which the Company has reason
to believe may be deemed the beneficial owners of more than 5% of the Company'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 Company's outstanding stock, as of such date, of
all directors and executive officers, including such executive officers as are
named in the Summary Compensation Table set forth herein, individually, and all
directors and executive officers as a group. The persons named herein hold sole
voting power and investment power with respect to the shares shown opposite
their respective names, unless otherwise specified. The information with respect
to each person specified is as supplied or confirmed by such person or based on
statements filed with the Securities and Exchange Commission.
Amount and Nature % of
of Beneficial Ownership Ownership
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Howard Frantom (1) 285,297 2.3%
3112 Allview Drive
Running Springs, CA 92382
Douglas C. MacLellan 0 *
224 Redlands St.
Playa del Rey, CA 90293
Morris J. Magid (2) 1,349,695 11.3%
1054 N. Selby Avenue
Los Angeles, CA 90024
4
Stephen Leahy(3) 28,400 *
1055 W. Hastings St., Ste. 1010
Vancouver, BC V6E 2E9
Stephen O. Stephens(4) 90,000 *
700 East Ninth St., Suite 11-L
Little Rock, AR 72202
Keith A.J. Hay(5) 90,000 *
1900 Merivale Rd., #202
Nepean, ON K2G4N4
Robert G. Flitton(6) 49,500 *
1 St. Andres Ct.
Pueblo, CO 81001
R. Keith Alexander(7) 90,100 *
228 Westshore
20 Midpark Crescent SE
Calgary, AB T2X 1P3
Michael Richard(8) 26,500 *
8055 W. Manchester Avenue
Suite 730
Playa del Rey, CA 90293
All Directors and Executive 1,998,242 15.27%
Officers as a group (9 persons)(9)
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(1) Includes options to purchase 250,000 shares of common stock of the Company,
which are exercisable within sixty days.
(2) Includes warrants to purchase 152,100 shares of common stock and options to
purchase 365,100 shares, which are exercisable within 60 days. Includes
641,546 shares (which includes 341,330 shares issuable on exercise of
warrants) held by 380144 B.C. Ltd., a British Columbia corporation owned
60% by Morris Magid and 40% by Marvin Magid. Includes 341,330 warrants
purchased in private placement transactions. Morris and Marvin Magid are
brothers.
(3) Includes options to purchase 20,000 shares of common stock of the Company,
which are exercisable within sixty days.
(4) Includes options to purchase 90,000 shares of common stock of the Company,
which are exercisable within sixty days.
(5) Includes options to purchase 90,000 shares of common stock of the Company,
which are exercisable within sixty days.
5
(6) Includes options to purchase 33,750 shares of common stock of the Company,
which are exercisable within sixty days.
(7) Includes options to purchase 90,000 shares of common stock of the Company,
which are exercisable within sixty days.
(8) Includes options to purchase 25,000 shares of common stock of the Company,
which are exercisable within sixty days.
(9) Includes options or warrants to purchase 1,115,950 shares of common stock
of the Company, which are exercisable within sixty days.
* Less than 1%.
STATEMENT OF EXECUTIVE COMPENSATION (U.S. DOLLARS)
In March, 1996, the Company changed its fiscal year-end from March 31 to
December 31. The period from April 1, 1995 to December 31, 1995 is referred to
herein as the "Transition Period." The following table discloses, for the fiscal
transition period ended December 31, 1995, individual compensation information
relating to the Chief Executive Officers serving during the period and for each
such person for the two prior fiscal years. Other than Howard B. Frantom, who
is named in the following table, no executive officers earned more than
$100,000, either in U.S. or Canadian currency.
6
Summary Compensation Table
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Annual Compensation Long-Term Compensation
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Awards Payouts
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All
Name and Other Securities Other
Principal Annual Restricted Underlying Com-
Position of Fiscal Compen- Stock Options/ LTIP pen-
Executive Year or Salary Bonus sation ($) Awards SARS Payouts sation
Officer Transition ($) ($) ($) (#) ($) ($)
Period
Ending
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Howard B. (1) Dec. 31,
Frantom, Chief 1995 115,200 nil nil nil nil nil nil
Operating Officer
of the Company, March 31,
Past Chief 1995 120,000 nil nil nil nil nil nil
Executive Officer
of the Company March 31,
1994 120,000 nil nil nil nil nil nil
March 31,
1993 120,000 nil nil nil nil nil nil
Scott Mednick, Dec. 31, nil (3) nil nil nil nil nil nil
Past Chief 1995
Executive Officer
and Chairman of March 31, nil (3) nil nil nil nil nil nil
the Board (2) 1995
Douglas C. Dec 31,
MacLellan, 1995 28,000 nil nil nil nil nil nil
President and
CEO of the
Company (4)
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(1) Mr. Frantom served as Chief Executive Officer from June 1995 to
November 1995.
(2) Mr. Mednick served as Chairman of the Board from December 1994 to
June 1995 and President and Chief Executive Officer from February
1995 to June 1995.
(3) See discussion below regarding the Company's settlement agreement
with Mr. Mednick concerning his employment agreement.
(4) Mr. MacLellan has served as Chief Executive Officer from November
1995.
7
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. Although the Company has no
formal bonus arrangements, bonuses are granted at the discretion of
management.
The terms and conditions of the employment contracts or arrangements with the
above mentioned executive officers are as follows:
On June 19, 1992, a subsidiary of the Company 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 of the subsidiary
for a term of five years. In addition to his salary, Mr. Frantom received
250,000 "Performance Shares" of the Company for $.01 per share (which were
subsequently canceled), and stock options to purchase 250,000 additional
shares of the Company 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 another 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 Company and received a salary until November 1996.
Effective December 5, 1994, the Company entered into an employment
contract with Scott Mednick whereby he was employed as Chairman of the Board
of the Company and of one of its wholly owned subsidiaries. Mr. Mednick was
subsequently appointed President and Chief Executive Officer of the Company on
February 10, 1995. Effective June 19, 1995, Mr. Mednick resigned for personal
reasons. His basic compensation was to be at the annual rate of $150,000 and
he was to be reimbursed up to a maximum of $300,000 for additional expenses
his businesses would incur as a result of his employment by the Company. He
was also to receive certain stock options. Upon Mr. Mednick's resignation,
the Company entered into separate settlement agreements, which were
subsequently amended, with Mr. Mednick and Scott A. Mednick & Associates, Inc.
(dba The Mednick Group). Pursuant to the amended settlement agreements, the
Company would (i) pay Mr. Mednick $200,000 on or before December 31, 1996, and
(ii) make payments totaling $171,000 to The Mednick Group in full satisfaction
of the Company's obligations to The Mednick Group which had been paid prior to
July 31, 1996. As at the date of this Proxy Statement $155,000 of such
payments had been made.
In November 1995, the Company 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 shall be paid a base salary
of $168,000 per annum plus reimbursement of expenses.
COMPENSATION COMMITTEE
The Company does not currently have a "Compensation Committee" and
therefor the entire board of directors of the Company constitutes its
Compensation Committee. The directors of the Company do not have any specific
policies for determining compensation of executive officers. The Company
intends to name a "Compensation Committee" which will be comprised of certain
outside directors of the Company.
The compensation of executive officers is composed primarily of two
elements; namely a base salary and the allocation of incentive stock options.
The Company does not award bonuses nor is there any current intention to do
so. In establishing the levels of base salary and in granting stock options
the Board of Directors takes, and the Compensation Committee will take, into
consideration an individual's performance, level of expertise,
8
responsibilities, length of service to the Company and compensation paid by
other companies of comparable size and development in the industry.
The compensation paid to each of the Company's Chief Executive Officers
during the Company's most recently completed financial year was based upon
negotiations between each Chief Executive Officer and the Board of Directors
following the Board's consideration of candidates for the position of Chief
Executive Officer.
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return of the Company's common shares against the
cumulative total return of a broad equity market index assuming reinvestment
of dividends. The graph compares the total cumulative shareholder return for
$100 invested in common shares of the Company for a five year period ending
March 31, 1996 with the cumulative total return of the Vancouver Stock
Exchange ("VSE") Composite Index.
COMPARISON OF FIVE-YEAR TOTAL COMMON SHAREHOLDERS' RETURN
AMONG PORTACOM WIRELESS AND VSE COMPOSITE INDEX
PERFORMANCE GRAPH APPEARS HERE
=============================================================================
DECEMBER
INPUTS 1993/(1)/ 1994 1995 31, 1995 1996
- -----------------------------------------------------------------------------
Year End Stock Price $3.45 $6.875 $3.05 $1.49 $4.00
- -----------------------------------------------------------------------------
Dividends 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------
VSE Composite Index 809.92 1132.88 743.51 795.93 1092.61
=============================================================================
Note /(1)/: The first year end for the Company on the VSE was March 31, 1993.
=============================================================================
TOTAL RETURN ANALYSIS
- -----------------------------------------------------------------------------
Number of Shares 28.98 28.98 28.98 28.98 28.98
- -----------------------------------------------------------------------------
Market Value 100.00 199.27 88.40 43.18 115.94
- -----------------------------------------------------------------------------
VSE Composite Index 100.00 139.87 91.80 98.27 134.90
=============================================================================
=============================================================================
DECEMBER
1993/(1)/ 1994 1995 31, 1995 1996
- -----------------------------------------------------------------------------
Company 100.00 199 88 43 116
- -----------------------------------------------------------------------------
VSE 100.00 140 92 98 135
=============================================================================
Note /(1)/: The VSE Composite Index used is at March 31 of each year. In
1995 PortaCom changed its year end to December 31 from March 31
of each year. For the purposes of the Performance Graph March 31
stock prices and values have been used throughout, except that
disclosure as at December 31, 1995 has also been included.
VSE is based on the VSE Composite Index.
The year end values of each investment shown are based on the closing share
price plus dividends reinvested during the year.
GRANT OF STOCK OPTIONS
There were no option grants to any of the Company's named executive
officers during the transition period ended December 31, 1995 or for the
fiscal year ending March 31, 1995.
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 fiscal Transition Period ended December 31, 1995 and the
prior fiscal year ended March 31, 1995 by the executive officers named in the
Table of Executive Compensation, above, and the number and value of any
unexercised stock options held by them as of December 31, 1995:
Number of Value of
Securities Unexercised in
Underlying the Money
Unexercised Options/SARS
Options/SARS at Fiscal Year
Aggregate at Fiscal Year End ($)
Name of Securities Value End (#)
Executive Acquired on Realized Exercisable/ Exercisable/
Officer Exercise (#) ($) Unexercisable Unexercisable
------- ------------ --- ------------- -------------
Howard
Frantom 0 0 250,000/0 43,968 (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 $1.09 per
share, as reported by the Vancouver Stock Exchange.
OPTIONS AND SAR REPRICINGS.
There were no options or SAR repricings granted to executive officers
during the Transition Period or during the twelve months ending March 31,
1995.
9
COMPENSATION OF DIRECTORS.
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, nor for services as consultants or experts. However, Stephen Leahy
owns 50% of Mustang Management Ltd., which received approximately $15,000 for
rent and administrative services during the fiscal transition period ending
December 31, 1995.
INTEREST OF MANAGEMENT AND INSIDERS IN MATERIAL TRANSACTIONS
Save as set forth below, none of the directors or senior officers of the
Company, nor any person who beneficially owns, directly or indirectly, shares
carrying more than 10% of the voting rights attached to all outstanding shares
of the Company, nor any associate or affiliate of the foregoing persons has
any material interest, direct or indirect, in any transaction since the
commencement of the Company's last completed financial year or in any proposed
transaction which, in either case, has or will materially affect the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1. Proposed Transaction With AAT
-----------------------------
Douglas C. MacLellan, the Company's President and Chief Executive Officer
and a Director, owns approximately 1.4% of Asian American Telecommunications
Corporation, a Cayman Islands corporation ("AAT") with which the Company
entered an agreement and plan of reorganization on April 26, 1996. Such
agreement was subsequently terminated on September 16, 1996.
2. Acquisition of PWC
------------------
PortaCom Wireless Communications, Inc. ("PWC"), is a Delaware
corporation, of which Douglas C. MacLellan owns 43.5%. The Company entered
into an agreement to acquire PWC but on July 18, 1996, the Company announced
that it had terminated the acquisition as it had not yet received regulatory
approval.
3. PortaCom International, Ltd.
---------------------------
Asia Telecom, Inc., which owns 10% of Telecommunications American
International, a Nevada corporation ("TAI"), is owned 100% by Howard Frantom's
spouse, Vera Frantom. Howard Frantom is a director of the Company. As of
December 3, 1995, Asia Telecom, Inc. agreed to sell all of its shares in TAI
to the Company. On July 18, 1996, however, the Company announced that it had
terminated the acquisition as it had not yet received regulatory approval.
4. Employment Arrangements
-----------------------
The Company has entered into agreements and other employment arrangements
with certain of its officers and directors. See "STATEMENT OF EXECUTIVE
COMPENSATION."
10
5. Funds Advanced and Repaid
-------------------------
As of June 30, 1994, the Company owed its Chairman and former Chief
Executive Officer, Robert Alexander, $112,500 in consulting fees that have
periodically accrued since inception. In October, 1995, the total accrued
debt of $164,500 was settled for 82,250 shares at a deemed price of $2.
Furthermore, consulting fees ceased to accrue after October 31, 1995.
On or about July 28, 1993, Morris Magid, the Company's Treasurer,
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 $1.25 (Cdn) per share.
6. Compensatory Shares Pursuant to Cancellation of Performance Shares
------------------------------------------------------------------
As compensation for an agreement in October, 1995, 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 Company has
agreed to issue, at a deemed price of $2.00 per share (representing the
approximate trading price of the common stock at that time), 43,516 common
shares, 271,245 common shares and 1 common share each to Mr. Magid, Mr.
Alexander, and Mr. Frantom, respectively. The performance shares would have
vested upon the Company attaining certain financial targets, which were not
reached due to the underperformance of certain subsidiaries. Accordingly, a
settlement was reached involving the cancellation of the performance shares
and the issuance of a lesser number of shares. As of the date of this Proxy
Statement, none of the aforementioned shares have been issued. The Company
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 because the issuance would require the approval
of such bodies and the Company has believed that it would effectuate this
Continuance and Merger before such approval could be obtained.
MANAGEMENT CONTRACTS
Management services for the Company are not, to any material degree,
performed by persons other than the senior officers of the Company.
CHANGE OF DOMICILE TO WYOMING
AND SUBSEQUENT DELAWARE REINCORPORATION
(PROPOSALS ONE AND TWO)
INTRODUCTION
For the reasons set forth below, the Board of Directors believes that the
best interests of the Company and its stockholders will be served by changing
the domicile of the Company from British Columbia, Canada, to Delaware, U.S.A.
(the "Delaware Reincorporation"). The effect of the change of domicile will
be that the Company shall cease to be a company within the meaning of the
British Columbia Company Act and will be a corporation under the Delaware
General Corporation Law (the "Delaware Corporation Law") as if it had been
incorporated under the Delaware Corporation Law. STOCKHOLDERS ARE URGED TO
READ CAREFULLY THE FOLLOWING SECTIONS OF THE PROXY STATEMENT, INCLUDING THE
RELATED EXHIBITS, BEFORE VOTING ON PROPOSALS WHICH, IF APPROVED, WILL
AUTHORIZE THE COMPANY TO CHANGE ITS DOMICILE INITIALLY TO WYOMING, U.S.A. AND
THEN SUBSEQUENTLY TO DELAWARE. Throughout this Proxy Statement, the term
"PortaCom Delaware" refers to the Delaware corporation, a wholly owned
subsidiary of the Company that was formed by the Company in 1994 in
anticipation of the Delaware Reincorporation and is the proposed successor to
the
11
Company. PortaCom Delaware has been inactive since inception, save that it
has served as an intermediary holding company for the Company's wholly owned
operating subsidiaries.
Since it is not possible to reincorporate a British Columbia company
directly into Delaware (mergers and continuances to jurisdictions not granting
British Columbia corporations reciprocal rights are not recognized under
British Columbia law), the Delaware Reincorporation will be effected in two
steps. The first step requires the Company to initially change its domicile
by filing Articles of Continuance in the State of Wyoming ( a jurisdiction
that grants British Columbia corporations reciprocal rights with respect to
continuances) (the "Wyoming Continuation") in substitution for the Company's
current Memorandum. The Company does not presently have any particular legal
relationship with or business affiliates in the State of Wyoming. Wyoming was
selected as the state into which the Company would initially change its
domicile because Wyoming was the first state to enter into a treaty with
British Columbia recognizing a continuance, the relevant statute is based on
British Columbia law, and the practice of effecting a continuance from British
Columbia into Wyoming is thus familiar to legal practitioners in the State and
is widely recognized, and hence the Company believes that the appropriate
mechanics and procedures will be smoothly handled in Wyoming by its local
counsel and by the appropriate state administrators.
The discontinuance of the Company to Wyoming under the British Columbia
Company Act requires (i) Vancouver Stock Exchange approval, (ii) approval by a
resolution of stockholders passed in general meeting by a majority vote of not
less than 75% of those voting at the meeting in person or by proxy ("Special
Resolution"), at which meeting a quorum of one person holding or representing
by proxy one share of the Company is present, and (iii) the issuance of a
letter of consent by the Registrar of Companies pursuant to British Columbia
Company Act Section 37. As of the date of this Proxy Statement the Company had
received notification from the VSE that the Continuance is acceptable in
principle, but the Company had not yet received a letter of consent from the
Registrar of Companies. The Company has no reason to believe that such letter
of consent will not be issued.
Upon receipt of such consent and approval, the Company intends to change
its domicile, briefly, to Wyoming by way of a continuation pursuant to Section
17-16-1710 of the Wyoming Business Corporation Act (the "Wyoming Corporation
Act"). Following confirmation of such continuation the Company will
immediately file the appropriate documents to change the Company's domicile
from Wyoming to Delaware. The change of domicile from Wyoming to Delaware
shall be accomplished by the merger (the "Merger") of the Company with and
into PortaCom Delaware. The continuance of the Company from British Columbia
to Wyoming gives rise to dissent rights pursuant to the British Columbia
Company Act. See "Right of Dissent - British Columbia" herein for
details.
In order to effect the redomiciling of the Company from British Columbia
to Delaware the meeting of stockholders will be adjourned following the vote
being taken on the continuance of the Company from British Columbia to Wyoming
and while the appropriate documents are obtained from the Registrar of
Companies for British Columbia and filings are made under the Wyoming
Corporation Act. Once (and subject to) the Company having been continued to
Wyoming the meeting of stockholders will be reconvened (with the Company then
being a Wyoming corporation) to consider the Merger in accordance with the
applicable laws of Wyoming and Delaware.
The Merger will be effected in accordance with the terms of the Plan of
Reorganization and Agreement of Merger, a form of which is attached hereto as
Exhibit A (the "Merger Agreement"). Upon completion of the Merger, (i) the
Company will cease to exist, (ii) the stockholders of the Company's Common
Stock automatically will become the stockholders of PortaCom Delaware, (iii)
the stockholders' rights, as stockholders of PortaCom Delaware and no longer
as stockholders of the Company, will be governed by Delaware law, PortaCom
Delaware's Restated Certificate of Incorporation and PortaCom Delaware's
Bylaws rather than by British Columbia law, the Company's current Articles and
Memorandum of the Company, (iv) all options and rights to purchase shares of
the Company's Common Stock automatically will be converted into options or
rights to acquire an equal number of equivalent shares of PortaCom Delaware's
Common Stock, (v) no change will occur 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 will serve in their
respective capacities as directors and officers of PortaCom Delaware.
Upon consummation of the change of domicile to Wyoming and after the
effective time (the "Effective Time") of the Merger, the Company will become a
company governed by the Delaware Corporation Law. Differences between the
British Columbia Company Act and the Delaware Corporation Law and between the
12
Company's existing Memorandum and Articles (the "British Columbia Constating
Documents") and the Restated Certificate of Incorporation and Bylaws of
PortaCom Delaware ("PortaCom Delaware") (the "Delaware Constating Documents"),
will result in various changes to the capital structure of the Company and in
the rights of current stockholders of the Company. By approving the change of
domicile to Wyoming and the subsequent Merger and Delaware Reincorporation,
stockholders of the Company will be authorizing the replacement of the British
Columbia Constating Documents with the Delaware Constating Documents,
including those provisions of PortaCom Delaware's Restated Certificate of
Incorporation and Bylaws relating to the limitation of director liability and
expanded scope of indemnification of directors, officers and key employees
under Delaware law, and including those provisions having "anti-takeover"
implications, which may be of significance to the Company and its stockholders
in the future.
Pursuant to the Merger Agreement, each outstanding share of the Company's
Common Stock, no par value, automatically will be converted into one share of
PortaCom Delaware Common Stock, $0.001 par value, upon the Effective Time.
Each stock certificate representing issued and outstanding shares of the
Company's Common Stock will be replaced with new stock certificates
representing the same number of shares of Common Stock of PortaCom Delaware.
Following the Merger the Company will cause Letters of Transmittal to be
delivered to stockholders requesting that stock certificates in the Company be
delivered to Pacific Corporate Trust Company for replacement by stock
certificates of PortaCom Delaware. The Common Stock of the Company is listed
for trading on the VSE and the EBB, and the Company intends to apply to have
its common stock quoted on the National Association of Securities Dealers
Automated Quotation System Small Cap Stock Market ("NASDAQ"). Before the
Merger, the shares of PortaCom Delaware's Common Stock were qualified for such
listing on the VSE under the symbol "PCW" and on the EBB under the symbol
"PCWIF". After the Merger, PortaCom Delaware's Common Stock will be traded on
the VSE and EBB without any interruption having occurred to the trading of the
Company's Common Stock because of the Merger. If the Company's application to
have its common stock quoted on the NASDAQ is accepted, however, the Company
anticipates delisting from the VSE and the EBB.
On the day preceding the effective date of execution of the Merger
Agreement (November 15, 1996), the high and low sales prices of the Company's
Common Stock as reported by the VSE daily trading summary were $______ and
$_____ respectively (expressed in U.S. dollars) and the high and low bid
prices as reported by the EBB at such date were $_____ and $_____,
respectively. The high and low bid prices for the Common Stock as reported by
the EBB reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
As part of the Delaware Reincorporation, PortaCom Delaware will assume
all of the obligations of the Company under the Company's outstanding stock
options or warrants. If the Company's stockholders approve the Delaware
Reincorporation, outstanding stock options or warrants to purchase the
Company's Common Stock will be exercisable for equivalent shares of PortaCom
Delaware Common Stock, and all parties holding such options or warrants will
be entitled to purchase shares of the Company's Common Stock. As part of the
Delaware Reincorporation, PortaCom Delaware also will assume all other
employee benefit plans and arrangements of the Company. The stockholders'
approval of the Delaware Reincorporation will constitute their approval of the
assumption by PortaCom Delaware of the options and warrants and all other
employee benefit plans and arrangements of the Company.
The discussion set forth below is qualified in its entirety, by reference
to the Merger Agreement, the Restated Certificate of Incorporation of PortaCom
Delaware (the "Certificate of Incorporation") and the Bylaws of PortaCom
Delaware, draft copies of which are attached hereto as Exhibits A, B and C,
respectively. The text
13
of the Special Resolution that will be voted upon at the meeting in order to
continue the Company to Wyoming is set forth as Exhibit D to this Proxy
Statement.
APPROVAL BY THE STOCKHOLDERS OF THE CHANGE OF DOMICILE TO WYOMING AND
APPROVAL OF THE DELAWARE REINCORPORATION ARE MUTUALLY CONDITIONED. AS A
CONSEQUENCE, A VOTE AGAINST EITHER PROPOSAL WILL CONSTITUTE A VOTE AGAINST
BOTH PROPOSALS. ADDITIONALLY, IN THE EVENT PROPOSALS 1 AND 2 ARE APPROVED AND
ANY ONE OR MORE OF PROPOSALS 3-5 ARE NOT APPROVED, THE CORPORATION SHALL CAUSE
PORTACOM DELAWARE TO AMEND ITS CERTIFICATE OF INCORPORATION OR BYLAWS, AS THE
CASE MAY BE, TO ELIMINATE PROVISIONS IN SUCH DOCUMENTS WHICH HAVE NOT RECEIVED
STOCKHOLDER APPROVAL PRIOR TO MERGING WITH PORTACOM DELAWARE AND CONSUMMATING
THE DELAWARE REINCORPORATION.
VOTE REQUIRED; BOARD RECOMMENDATION
Approval of the change of domicile to Wyoming is a condition precedent to
the Delaware Reincorporation. The change of domicile to Wyoming will require
the affirmative vote of 75% of the stockholders voting at the meeting either
in person or by proxy. Approval of the Delaware Reincorporation will require
the affirmative vote of the holders of a majority of the outstanding shares of
the Company's Common Stock entitled to vote. Each of the foregoing proposals
is expressly conditional upon passage of the other.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTES "FOR" THE CHANGE OF
DOMICILE TO WYOMING AND "FOR" THE DELAWARE REINCORPORATION.
PRINCIPAL REASONS FOR THE DELAWARE REINCORPORATION
Advantages of Delaware Corporation Law For many years, Delaware has
followed a policy of encouraging incorporation under its jurisdiction. In
furtherance of that policy, Delaware has long been the leading state in
adopting, construing and implementing comprehensive and flexible corporate
laws responsive to the legal and business needs of corporations. As a result,
Delaware's General Corporation Law has become widely regarded as the most
extensive and well-defined body of corporate law in the United States.
Because of Delaware's prominence as the state of incorporation for many major
corporations, both the legislature and courts in Delaware have demonstrated an
ability and a willingness to act quickly and effectively to meet changing
business needs. Moreover, the Delaware courts have rendered a substantial
number of decisions interpreting and explaining Delaware law. The Delaware
Reincorporation accordingly will be beneficial to the Company in that it will
give the Company (i) a greater degree of predictability and certainty
regarding how the Company's affairs should be conducted in order to comply
with applicable laws (such predictability and certainty resulting from a large
body of case law decided under those laws) and (ii) the comfort and security
resulting from the Company's awareness of the responsiveness of Delaware's
legislature and courts to the needs of corporations organized under Delaware's
jurisdiction. For these reasons, many American corporations have initially
chosen Delaware as their home state for their state of incorporation or have
subsequently changed their corporate domicile to Delaware in a manner similar
to the Delaware Reincorporation.
Antitakeover Implications. Delaware, like many other states, permits a
corporation to adopt a number of measures (through amendment of the corporate
charter or bylaws or otherwise) designed to reduce a corporation's
vulnerability to unsolicited takeover attempts. The Delaware Reincorporation
is not being proposed in order to prevent any known attempt to acquire control
of the Company, obtain representation on the Board of Directors or take any
significant action affecting the Company. Such anti-takeover measures, which
would
14
enhance the ability of the Board of Directors to negotiate with an unsolicited
bidder, include, but are not limited to, the adoption of severance agreements
for the Company's management and key employees that become effective upon the
occurrence of a change in control of the Company and the designation and
issuance of preferred stock, the rights and preferences of which are
determined by the Board of Directors (subject to the receipt of appropriate
regulatory approval). Substantial judicial precedent also exists in the
Delaware courts as to the legal principles applicable to such defensive
measures and as to the conduct of the Board of Directors under the business
judgment rule with respect to unsolicited takeover attempts, and, in the
context of a future unsolicited takeover event, such precedent will give the
Board of Directors greater assurance and confidence that the defensive
strategies and conduct of the Board of Directors are in full compliance with
applicable laws and will be effective under the circumstances.
Certain effects of the Delaware Reincorporation may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation
Law, from which PortaCom Delaware does NOT intend to opt out, restricts
certain "business combinations" with "interested stockholders" for three years
following the date on which a person becomes an interested stockholder, unless
the Board of Directors approves the business combination. The British
Columbia Company Act does not contain comparable provisions with respect to
business combinations. See "Comparison of Stockholder Rights - Anti-Takeover
Provisions and Interested Stockholders."
The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its stockholders because:
a. a non-negotiated takeover bid may be timed to take advantage of
temporarily depressed stock prices;
b. a non-negotiated takeover bid may be designed to foreclose or
minimize the possibility of more favorable competing bids; and
c. a non-negotiated takeover bid may involve the acquisition of only a
controlling interest in the Company's stock, without affording all
stockholders the opportunity to receive the same economic benefits.
By contrast, in a transaction in which an acquiror must negotiate with an
independent board of directors, such board of directors can and should take
account the underlying and long term values of the Company's assets, the
possibilities for alternative transactions on more favorable terms, the
possible advantages of a tax-free reorganization, the anticipated favorable
developments in the Company's business not yet reflected in the stock price
and the equality of treatment of all the Company's stockholders.
Directors' Liability and Indemnification. Over the past decade, the
frequency and magnitude of claims and litigation against directors and
officers of corporations have increased. Over the same period, the cost of
directors' and officers' insurance policies has increased substantially, with
the amount of risk covered by such policies having significantly decreased.
As a result, and because potential personal liability associated with service
as a director or officer of a corporation can be significant, it has become
increasingly difficult for corporations to find and retain talented and
experienced directors and officers. The Delaware Reincorporation will enable
the Company to reduce the potential personal liability of members of the Board
of Directors associated with their service as directors and to expand the
scope of the Company's indemnification of its directors and officers, which
should enable the Company to continue finding and retaining talented and
15
experienced directors and officers. In addition, the Delaware Reincorporation
would eliminate the requirement of British Columbia law that a majority of the
Board of Directors shall be Canadian residents.
POSSIBLE DISADVANTAGES
Despite the unanimous belief of the Board of Directors that the Delaware
Reincorporation is in the best interests of the Company and its stockholders,
it should be noted that Delaware law has been criticized by some commentators
on the grounds that it does not afford minority stockholders the same
substantive rights and protections as are available in a number of other
states. For a comparison of stockholders' rights and the powers of management
under Delaware and British Columbia law, see "Comparison of Stockholder
Rights."
Despite the unanimous belief of the Board of Directors as to the benefits
to stockholders of the Delaware Reincorporation, the Delaware Reincorporation
may be disadvantageous to the extent that it has the effect of discouraging a
future takeover attempt that is not approved by the Board of Directors but may
be deemed by a majority of the stockholders to be in their best interests
(because, for example, the possible takeover could cause stockholders to
receive a substantial premium for their shares over their then current market
value or over the stockholders' cost basis in such shares). As a result of
such effects of the Delaware Reincorporation, stockholders who might wish to
participate in a tender offer may not have an opportunity to do so. In
addition, to the extent that the Delaware Reincorporation will enable the
Board of Directors to resist a takeover or a change in control of the Company,
the Delaware Reincorporation could make it more difficult to change the
existing Board of Directors and management.
NO CHANGE IN THE BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR LOCATION OF PRINCIPAL
FACILITIES OF THE COMPANY.
The change of domicile to Wyoming and the Delaware Reincorporation that
follows will effect only a change in the legal domicile of the Company and
other changes of a legal nature, certain of which are described in this Proxy
Statement. The Delaware Reincorporation will NOT result in any change in the
business, management, fiscal year, assets or liabilities or location of the
principal facilities of the Company. PortaCom Delaware will assume the
obligations of the Company under the outstanding convertible securities,
options and warrants and all other employee benefit plans of the Company, and
upon the Effective Time each convertible security, option or warrant will be
converted into a convertible security, option or warrant to purchase the same
number of shares of PortaCom Delaware Common Stock, at the same price per
share, under the same terms and subject to the same conditions as previously
set forth. Stockholders should note that their approval of the Reincorporation
Proposal also will constitute their approval of the assumption by PortaCom
Delaware of the Company's obligations. As noted above, after the Merger, the
shares of Common Stock of PortaCom Delaware will continue to be traded,
without interruption, in the same principal markets or, if the Company's
application thereto is accepted, on the NASDAQ.
REGULATORY APPROVAL
The change of domicile of the Company from British Columbia , Canada to
Delaware, by way of continuation under the Wyoming Business Corporation Act
and subsequent Merger and Delaware Reincorporation may be deemed to constitute
the issuance and sale of securities within the meaning of the U.S. Securities
Act of 1933, as amended (the "Securities Act"). The deemed issuance of
securities will not be registered under the Securities Act and will be
effected in reliance upon the exemption provided by Section 3(a)(10)
thereunder. As a basis for that exemption, and before the change of domicile
to either Wyoming or Delaware becomes effective, the terms and conditions of
such changes of domicile must be approved by the
16
California Commissioner of Corporations as fair to the Company's stockholders
following a hearing at which all of the stockholders of the Company are
entitled to appear. The Company has submitted to the jurisdiction of the
California Department of Corporations because its corporate headquarters are
located in California and because, out of a total of 91 record holders of the
Company's common stock, 26 are California residents holding in the aggregate
16% of the outstanding common stock. In addition, although many of his shares
are held in street name, the Company is aware that a single shareholder,
Morris J. Magid, a resident of Los Angeles, California, beneficially owns or
controls 11.3% of the outstanding common stock.
The fairness of the changes of domicile are being reviewed by the Los
Angeles Office of the California Department of Corporations, which is located
at 3700 Wilshire Boulevard, Los Angeles, California 90010. A Notice of Hearing
providing specific information as to the time and place of the California
hearing will be mailed to all shareholders of record in advance of the
hearing. Any determination by the California Department of Corporations will
not affect any stockholders' rights to dissent or exercise their appraisal
rights.
Before mailing this Proxy Statement, the Company filed applications for
permits authorizing the sale and issuance of securities with the California
Commissioner of the Corporations pursuant to Section 25121 of the California
Corporate Securities Law of 1968, and requested pursuant to Section 25142 that
the Commissioner hold a hearing upon the fairness of the terms and conditions
of the change of domicile to Wyoming and the subsequent Merger and Delaware
Reincorporation to the Company's stockholders. The Company has advised the
Commissioner that, if the Commissioner determines the transactions to be fair
to the Company's stockholders, that determination will form the basis for
effecting the continuance without registration under the Securities Act in
reliance on the exemption provided by Section 3(a)(10).
COMPARISON OF STOCKHOLDER RIGHTS.
Subject to stockholder and regulatory approval, prior to the effective
time (the "Effective Time") of the Merger, the Company will change its
domicile to Wyoming by way of a continuance under the Wyoming Business
Corporation Act (the "Wyoming Corporation Act") and shall thereafter be
governed by corporate charter documents adopted in accordance with the Wyoming
Corporation Act. Upon its continuance from British Columbia and the issuance
of a Certificate of Continuation in Wyoming, the Company will become "PortaCom
Wireless, Inc.", a Wyoming corporation ("PortaCom Wyoming") and the
outstanding shares of the Company's common stock will be deemed for all
purposes to evidence ownership of, and to represent, shares of PortaCom
Wyoming.
MATERIAL CHANGES IN CONSTATING DOCUMENTS
The Delaware Constating Documents effectively amend the British Columbia
Constating Documents by (i) authorizing the issuance of 5,000,000 of $.001 par
value Preferred Stock to replace the existing 200,000,000 authorized but
unissued shares of preferred stock, (ii) eliminating the personal liability of
directors to the fullest extent allowed under Delaware law and (iii) providing
officers, directors and agents of the Corporation with certain indemnification
rights in addition to those currently provided. See "Ratification of Material
Changes in Constating Documents Affecting Stockholders' Rights."
The Delaware Corporation Law and the Delaware Constating Documents differ
in many respects from the British Columbia Company Act and the British
Columbia Constating Documents. It is not practical to summarize all of those
differences in the Proxy Statement, but all of the principal differences that
could materially affect the rights of stockholders of the Corporation are
discussed below. See Restated Certificate of Incorporation and Bylaws of
PortaCom Delaware, copies of which are attached to the Proxy Statement as
Exhibits B and C, respectively.
Since the Corporation effectively is changing its jurisdiction of
incorporation from British Columbia, Canada to Delaware, and since the
proposed change of domicile to Wyoming will not occur unless the subsequent
Delaware Reincorporation is also approved, a description of the differences
between Wyoming and Delaware law has not been included in this Proxy
Statement.
Quorum of Shareholders. Under the British Columbia Constating Documents,
a quorum shall consist of one individual present in person or by proxy and
holding not less than one voting share of the Company. The Delaware
Constating Documents provide that the holders of a majority of the outstanding
shares entitled to vote shall constitute a quorum.
17
Notice, Adjournment and Place of Stockholders' Meetings. The British
Columbia Company Act requires that notice of stockholders' meetings be given
at least twenty-one (21) days before a meeting unless the stockholders waive
or reduce the notice period by unanimous consent in writing. The Delaware
Constating Documents require such notice to be given between ten (10) and
sixty (60) days before a meeting.
Both British Columbia and Delaware law provide for adjournments of
stockholders' meetings. The British Columbia Constating Documents require
notice of the adjournment if the adjournment is for ten (10) days or more.
Delaware Corporation Law requires that if the adjournment is for more than
thirty (30) days or if a new record date is fixed, notice must be given to the
stockholders as for an original meeting.
The British Columbia Company Act requires all meetings of stockholders to
be held in British Columbia unless the prior consent of the British Columbia
Registrar of Companies is obtained to hold a meeting outside the province.
The Delaware Corporation Law permits meetings of stockholders to be held at
such place as is designated by or in the manner provided in the bylaws, or, if
not so designated, at the registered office of the company in Delaware.
Stockholder Consent in Lieu of Meeting. British Columbia law provides
that written consent in lieu of a meeting can only be utilized where a company
is not a reporting company. The Company is a reporting company in British
Columbia. Therefore, the British Columbia Constating Documents do not provide
for stockholder consent in lieu of a meeting.
The Delaware Corporation Law provides that any action that may be taken at
a stockholders' meeting may be taken without a meeting, without prior notice
and without a vote if a consent in writing is signed and dated by the holders
of shares having at least the number of votes necessary to pass such a
resolution at a stockholders' meeting unless the corporation's certificate of
incorporation provides otherwise. No written consent will be effective to
take the corporate action to which it refers, unless written consents
sufficient to take the action are delivered to the corporation within sixty
(60) days of the earliest dated consent delivered. The Delaware Constating
Documents currently permit written consent in lieu of a stockholder's meeting.
There is no similar provision in the British Columbia Constating Documents.
Director Qualifications, Election and Removal of Directors and Filling
Vacancies on the Board of Directors. The British Columbia Constating
Documents provide that the Company shall have at least three directors but not
more than 15 directors. The British Columbia Company Act requires that a
company have at least three (3) directors. The majority of the directors must
be ordinarily resident in Canada, and one (1) director must be ordinarily
resident in the Province of British Columbia. The directors may not be
persons under the age of eighteen (18), undischarged bankrupts, persons found
to be mentally infirm, corporations, or persons convicted of certain offenses
relating to corporate activities or fraud or that had certain registrations
with the British Columbia Securities Commission canceled.
Except as may otherwise be provided in the certificate of incorporation or
in specific provisions of the Delaware Corporation Law, a Delaware corporation
is required to be managed by a board of directors consisting of one (1) or
more members. The number of directors or the manner of selecting them must be
included in the corporation's bylaws, unless the certificate of incorporation
fixes the number of directors. The certificate of incorporation or the bylaws
may prescribe certain requirements for directors, including that they be
stockholders. PortaCom Delaware's Certificate of Incorporation provides that
the size of its board of directors shall be fixed by resolution of the Board
but contains no provisions regarding directors' qualifications.
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Under both the British Columbia Constating Documents and the Delaware
Constating Documents, directors are elected at each annual meeting. Both the
British Columbia Constating Documents and the Delaware Constating Documents
provide that, subject to certain limitations, vacancies on the Board may be
filled by the remaining directors for the remainder of the unexpired term,
even where the remaining directors constitute less than a quorum of the Board
of Directors. The British Columbia Constating Documents provide that between
annual general meetings of stockholders the directors may appoint additional
directors, provided that the number of additional directors does not exceed
one-third of the number elected at the last annual meeting. The Delaware
Constating Documents provide that any vacancy resulting from an increase in
the number of directors may be filled by the remaining directors for the
remainder of the current term of the new directorship.
Under the British Columbia Company Act, directors generally may be removed
before the expiration of their term by a special resolution approved by
seventy-five percent (75%) of the votes cast on the resolution at a meeting
called for that purpose, and a replacement for the director so removed may be
appointed by an ordinary resolution approved by a majority of the votes cast.
The Delaware Constating Documents provide that the directors may be
removed with or without cause by a vote of a majority of all holders of voting
stock.
Right to Call Special Meetings and Nomination of Directors. Under the
British Columbia Company Act, stockholders holding in aggregate not less than
ten percent (10%) of the shares having the right to vote at a meeting at which
directors will be elected may nominate directors by delivering such nomination
to the company's registered office not less than thirty-five (35) days before
the date of the meeting. The British Columbia Company Act also provides that
the holders of five percent (5%) of the issued shares with a right to vote at
a general meeting can requisition the calling of a general meeting within four
(4) months of the date of the requisition. Stockholders may deliver to the
Company's registered office at least eight (8) days before the date the
Company is required to send out notice of the requisitioned meeting a written
statement not exceeding one thousand (1,000) words explaining the position of
the requisitionists for inclusion in the information circular being sent to
stockholders in respect of the meeting.
Regulations of the Securities and Exchange Commission provide that any
stockholder may nominate directors and bring other business before an annual
stockholders meeting by delivering written notice of the nomination or other
business to the company's head office generally one hundred and twenty (120)
days prior to the date specified in the previous year's proxy materials for
the current year's meeting. Under the Delaware Corporation Law, a special
meeting of stockholders may be called by the board of directors or by any
other person authorized to do so in the certificate of incorporation or the
bylaws. The Delaware Constating Documents permit a special meeting to be
called by the president, the chairman of the board of directors, a majority of
the directors or stockholders entitled to cast at least 10% of the votes at
the meeting.
Amendment to Internal Affairs. Under the British Columbia Company Act,
any amendment to the articles or memorandum of a company will generally
require approval by Special Resolution, which is a resolution passed by a
majority of not less than seventy-five percent (75%) of the votes cast by
stockholders in person or by proxy on the resolution. The company also, by
Special Resolution approved by seventy-five percent (75%) of the holders of
shares who vote in person or by proxy on such resolution, may create or add
special rights or restrictions to any shares, whether issued or unissued.
A separate class resolution of preferred stockholders, if any, must be
approved by a separate resolution (a) consented to in writing by all holders
of preferred shares; or (b) presented at a meeting of holders of preferred
shares, called for such purpose, at which at least ten percent (10%) of the
issued and outstanding preferred shares
19
are represented in person or by proxy and passed by the affirmative vote of at
least seventy-five percent (75%) of the votes cast.
The holders of (a) not less than ten percent (10%) of the shares entitled
to vote and who did vote against the Special Resolution; (b) the holders of
not less than ten percent (10%) of the class of shares whose rights are
affected by the Special Resolution and who voted against the Special
Resolution; or (c) the holders of ten percent (10%) of a series of shares
whose rights are affected differently from those attached to another series of
the same share class affected by the Special Resolution, and who voted against
the Special Resolution, may within fourteen (14) days of the Special
Resolution apply to the court to have it set aside. On such an application,
the court may set aside or affirm the resolution or require the company to
purchase the shares of any stockholder.
The Delaware Corporation Law requires the approval of the holders of a
majority of the outstanding stock entitled to vote for any amendment to the
certificate of incorporation unless the certificate of incorporation requires
a higher level of approval. PortaCom Delaware's Certificate of Incorporation
does not provide for such a higher level. Whether or not provided in the
certificate of incorporation, holders of the outstanding shares of a class are
entitled to vote as a class upon a proposed amendment that would change the
number of shares authorized in the class, change the par value of the shares
of such class, or adversely change the powers, preferences, or special rights
of the shares of the class. The number of authorized shares in a class,
however, may be increased or decreased (but not below the number outstanding)
by a majority vote of the stockholders of the corporation without a class
vote, if so provided in (a) the original certificate of incorporation, (b) an
amendment creating the class or adopted before shares of the class were
issued, or (c) an amendment approved by a majority of the holders of shares of
the class.
The Delaware General Corporation law provides that a corporation's bylaws
may be amended by the corporation's stockholders, or, if so provided in the
corporation's certificate of incorporation, by the corporation's directors.
PortaCom Delaware's Certificate of Incorporation provides that PortaCom
Delaware's directors may amend PortaCom Delaware's bylaws.
Anti-takeover Provisions and Interested Stockholder. Except under certain
circumstances the Delaware Corporation Law prohibits a "business combination"
between the corporation and an "interested stockholder" within three (3) years
of the stockholder becoming an "interested stockholder." Generally, an
"interested stockholder" is a person or group that directly or indirectly,
controls fifteen percent (15%) or more of the outstanding voting stock or is
an affiliate or associate of the corporation and was the owner of fifteen
percent (15%) or more of such voting stock at any time within the previous
three (3) years. A "business combination" includes a merger, consolidation,
sale or other disposition of assets having an aggregate value in excess of ten
percent (10%) of the aggregate market value of the consolidated assets of the
corporation or its outstanding stock, and certain transactions that would
increase the interested stockholder's proportionate share ownership in the
corporation. This provision does not apply where (a) the business combination
is approved by the corporation's board of directors prior to the date the
interested stockholder became an interested stockholder; (b) the interested
stockholder acquired at least eighty-five percent (85%) of the outstanding
voting stock of the corporation in the transaction in which the stockholder
became an interested stockholder excluding, for determining the number of
shares outstanding, shares held by persons who are directors and also officers
and by employee stock plans in which participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered; (c) the business combination is approved by a majority of the board
of directors and the affirmative vote of two-thirds of the votes entitled to
be cast by disinterested stockholders at an annual or special meeting, (d) the
corporation does not have a class of voting stock that is listed on a national
securities exchange, authorized for quotation on an interdealer quotation
system of a registered national securities association, or held by more than
two thousand (2,000) stockholders unless any of the foregoing results from
action taken, directly or
20
indirectly, by an interested stockholder or (e) the corporation has opted out
of this provision. PortaCom Delaware has not opted out of these provisions
governing business combinations as permitted under the Delaware Corporation
Law.
The British Columbia Company Act does not contain comparable provisions
with respect to business combinations. See "Transactions With Officers and
Directors" below.
Mergers, Sales of Assets and Other Extraordinary Transactions. Under the
British Columbia Company Act, certain extraordinary corporate actions, such as
certain amalgamations, continuances, sales, leases or exchanges of all or
substantially all the assets of a corporation and other extraordinary
corporate actions such as liquidations, dissolutions or arrangements, are
required to be approved by Special Resolution (a resolution passed by a
majority of not less than seventy-five percent (75%) of the votes cast by the
stockholders who voted on the resolution either in person or by proxy) and, in
certain cases, such Special Resolution is also required to be approved by
stockholders separately as a class or series.
The Delaware Corporation Law provides that, unless otherwise specified in
a corporation's certificate of incorporation or unless the provisions of the
Delaware Corporation Law relating to "business combinations" discussed above
are applicable, a sale or other disposition of all or substantially all of the
corporation's assets, a merger or consolidation of the corporation with
another corporation or a dissolution of the corporation requires the
affirmative vote of the board of directors of each constituent corporation
plus, with certain exceptions, the affirmative vote of a majority of the
outstanding stock entitled to vote on the proposal. In a merger, approval by
the stockholders of a constituent corporation is not required if (a) the
constituent corporation will be the surviving corporation, its certificate of
incorporation will not be amended in the merger, its common stock will not be
diluted by more than twenty percent (20%) and each share of its stock
outstanding before the merger will be an identical outstanding or treasury
share after the effective date of the merger; or (b) the corporation is a
subsidiary of a parent corporation that owns at least ninety percent (90%) of
the subsidiary's outstanding stock before the merger, and the parent
corporation is merging the subsidiary into itself or one or more other
corporations of which the parent owns ninety percent (90%) of the outstanding
stock.
Transactions With Officers and Directors. The British Columbia Company
Act provides that every director who is in any way, directly or indirectly,
interested in a proposed contract or transaction with the company must
disclose the nature and extent of such interest and is liable to account to
the company for any profit made as a consequence of the company entering into
such transaction unless he (a) disclosed his interest at the meeting of
directors where the proposed transaction was first considered; (b) after his
disclosure, the transaction was approved by the directors and (c) he abstained
from voting on such transaction; or unless the contract or transaction was
fair and reasonable to the company and, after full disclosure by the director,
the transaction is approved by a Special Resolution of the company's
stockholders.
Under the Delaware Corporation Law, contracts or transactions in which a
director or officer is financially interested are not automatically void or
voidable, if approved by the stockholders or the directors under substantially
the same circumstances as in British Columbia. Approval by the stockholders,
however, requires only a simple majority. Board approval must be by a
majority of the disinterested directors, but interested directors may be
counted for purposes of establishing a quorum.
Dissent Rights. The British Columbia Company Act provides that
stockholders of a British Columbia company are entitled to exercise dissent
rights and to be paid the fair value of their shares in connection with
certain matters including (a) the continuance of the company into another
jurisdiction; (b) the company providing financial assistance to a person in
connection with the acquisition by that person of shares in the capital of the
21
company (unless that person either alone or with his associates will end up
owning not less than 90% of the issued shares of the company and authorization
by Special Resolution is obtained); (c) the sale, lease or disposition of
substantially the whole of the business of the company; (d) the alteration of
the company's memorandum by changing any restriction on the business to be
carried on by the company or on its powers; (e) any amalgamation of the
company with another company; (f) where, in the event of the company being
wound up, the transfer, sale or arrangement of the company's business involves
the assumption of liability or the payment of money by the stockholders of the
company. Stockholders who voted in favor of a resolution in connection with
the foregoing may not subsequently exercise dissent rights in respect of that
resolution.
Under the Delaware Corporation Law, a person generally is entitled to
demand appraisal of and obtain payment of the fair value of the shares that
the person holds in a Delaware corporation, if the corporation is party to a
plan of merger or consolidation. However, the right to demand appraisal does
not apply to stockholders if: (a) they are stockholders of a surviving
corporation and a vote of the corporation's stockholders is not necessary to
authorize the merger or consolidation; (b) the shares held by the stockholders
are of a class or series registered on the New York Stock Exchange or the
American Stock Exchange, designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc., or are held of record by more than 2,000 stockholders on the
date set to determine the stockholders entitled to vote on the merger or
consolidation. Notwithstanding the above, appraisal rights are available for
the shares of any class or series of stock of a Delaware corporation if the
holders are required by the terms of an agreement of merger or consolidation
to accept for their stock anything except: (a) shares of stock of the
corporation surviving or resulting from the merger or consolidation; (b)
shares of stock of any other corporation which, at the effective date of the
merger or consolidation, will be listed on the New York Stock Exchange or the
American Stock Exchange, designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc., or held of record by more than 2,000 stockholders; (c) cash in
lieu of fractional shares of the corporations described in (a) and (b); or (d)
any combination of the shares of stock and cash in lieu of fractional shares
described in (a), (b) and (c).
In a short-form merger under Section 253 of the Delaware Corporation Law,
a parent corporation and one or more subsidiary corporations of which the
parent owns at least 90% of the outstanding shares may merge into the parent
corporation or one of the subsidiaries. Stockholders of the parent
corporation in the short-form merger are not entitled to appraisal rights,
whether the parent corporation survives the merger or not. Dissenting
minority stockholders of a disappearing subsidiary in a short-form merger
under the Delaware Corporation Law are entitled to appraisal rights.
A Delaware corporation may provide in its certificate of incorporation
that appraisal rights shall be available for the shares of any class or series
of its stock as the result of an amendment to its certificate of
incorporation, any merger or consolidation to which the corporation is a
party, or a sale of all or substantially all of the assets of the corporation.
PortaCom Delaware's Certificate of Incorporation does not expand the appraisal
rights to which its stockholders otherwise are entitled under the Delaware
Corporation Law.
Derivative Actions. Under the British Columbia Company Act, a
stockholder, director or any other person who, in the opinion of the court is
a proper person to apply (a "complainant") may, with leave of the court, bring
an action in the name of and on behalf of the company to enforce a right, duty
or obligation owed to the company or to obtain damages for any breach thereof.
A complainant (as defined above) also may defend, with leave of the court, in
the name and on behalf of the company, any action brought against the company.
A stockholder or director may apply to the court for such leave on notice to
the company if (a) he has made reasonable efforts to cause the directors of
the company to commence, diligently prosecute or defend the action; (b) he is
acting in good faith; (c) it is prima facie in the interests of the company
that the action be brought or defended; and (d) in the
22
case of an application by a stockholder, he was a stockholder of the company
at the time of the event giving rise to the cause of action. No action
brought or defended as a derivative action can be settled or discontinued
without approval of the court.
Derivative actions may be brought in Delaware by a stockholder on behalf
of, and for the benefit of the corporation. The Delaware Corporation Law
provides that a stockholder must aver in the complaint that he was a
stockholder of the corporation at the time of the transaction of which he
complains, and the stockholder must remain a stockholder until the derivative
action is concluded. However, no action may be brought by a stockholder
unless he first seeks remedial action on his claim from his corporation's
board of directors, unless such a demand for redress is excused. The board of
directors of a Delaware corporation can appoint an independent litigation
committee to review a stockholder's request for a derivative action, and the
litigation committee, acting reasonably and in good faith, can terminate the
stockholder's action subject to court's review of such committee's
independence, good faith and reasonable investigation. Under the Delaware
Corporation Law, the court in a derivative action may apply a variety of legal
and equitable remedies on behalf of the corporation which vary depending on
the facts and circumstances of the case and the nature of the action brought.
Attorneys' fees may be awarded where prosecuting or settling the action
confers a specific and substantial benefit on the corporation.
Oppression Remedy. The British Columbia Company Act contains an
oppression remedy that enables the court, if satisfied upon application by a
complainant (as defined above in "Derivative Action") that (a) the affairs of
the company are being conducted or the powers of the directors are being
exercised in an oppressive manner, or (b) some act of the company has been
done or is threatened or some resolution has been passed or is proposed that
is unfairly prejudicial, to make any order it considers appropriate, including
the cancellation of any transaction, the purchase of shares of any
stockholder, appointment of a receiver, the winding up of the company,
compensation to the complainant and the rectification of any corporate record.
Delaware Corporation Law does not provide a statutory remedy specifically
like the British Columbia Company Act oppression remedy. However, the
Delaware law provides a variety of legal and equitable remedies to a
corporation's stockholders for improper acts or omissions of a corporation,
its officers and directors. In an action alleging a breach of fiduciary duty
by the directors of a corporation the "business judgment rule" must be
overcome. Simply stated, the business judgment rule creates a rebuttable
presumption in court that disinterested directors' decisions have been made in
good faith, with due care and in the best interests of the corporation, absent
a showing of intentional misconduct or gross negligence.
Investigations. The British Columbia Company Act provides that, on
application by shareholders holding not less than twenty percent (20%) of the
issued shares of any class of a corporation's stock, or on application of a
corporation, the court may appoint an inspector to investigate the affairs and
management of a corporation or its affiliates.
The Delaware Corporation Law provides that any stockholder has the right
to inspect the books and records of the corporation upon written demand under
oath for a purpose reasonably related to such person's interest as a
stockholder. The stockholder may compel inspection by court order, if the
corporation refuses to permit such inspection or does not respond within five
(5) business days.
The British Columbia Company Act also allows any stockholder to inspect
the corporate records of a company which is a reporting company under the
British Columbia Company Act (except for directors' minutes, documents and
instruments approved by the directors and mortgages created or assumed by the
Company).
23
Indemnification of Officers and Directors. Under the British Columbia
Company Act and pursuant to the British Columbia Constating Documents, the
Company may indemnify a director or officer, a former director or officer or a
person who acts or has acted at the Company's request as a director or officer
of a body corporate of which the Company is or was a stockholder or creditor
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by him in respect of any
civil, criminal or administrative action or proceeding to which he is made a
party by reason of being or having been a director or officer of the Company
or such body corporate if (a) he acted honestly and in good faith with a view
to the best interests of the company and (b), in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he
had reasonable grounds for believing that his conduct was lawful. In respect
of an action by or on behalf of PortaCom Delaware or such body corporate, a
company may, with court approval, provide indemnification against all costs,
charges and expenses reasonably incurred by such persons in connection with
such action who fulfill the conditions set forth in (a) and (b) immediately
above. The British Columbia Company Act requires court approval of any
indemnification by a British Columbia corporation.
The Delaware Corporation Law permits a corporation to adopt a provision in
its certificate of incorporation eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, with the following
exceptions: (a) a breach of the director's duty of loyalty; (b) payment of an
unlawful stock dividend or making an unlawful stock repurchase or redemption;
(c) acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law; or (d) in any transaction in which the director
derived an improper personal benefit. PortaCom Delaware's Certificate of
Incorporation eliminates the liability of directors of the corporation for
monetary damages to the fullest extent permissible under Delaware law.
The Delaware Corporation Law permits a corporation to indemnify its
directors, officers, employees and other agents under circumstances similar to
those for which the British Columbia Constating Documents provide. The
Delaware Constating Documents require PortaCom Delaware to indemnify all such
persons whom it has the power to indemnify to the fullest extent legally
permissible by the Delaware Corporation Law. PortaCom Delaware's bylaws
permit PortaCom Delaware to advance expenses to a director or officer,
provided that the director or executive officer undertakes to repay amounts
advanced unless it is ultimately determined that such person ultimately is
entitled to indemnification, and subject to such other conditions as the Board
may impose.
Indemnification rights conferred on a person by PortaCom Delaware's bylaws
are deemed to be contractual, in that their repeal or modification shall have
prospective effect only and shall not affect rights in effect under the bylaws
at the time of an alleged occurrence, act or omission that is the basis of a
proceeding against the person or the corporation. Indemnification rights to
which a person becomes entitled under PortaCom Delaware's bylaws continue
after the person ceases to be a director, officer, employee or other agent of
PortaCom Delaware.
Indemnification rights under the Delaware Corporation Law are not
exclusive. Accordingly, PortaCom Delaware's bylaws specifically permit
PortaCom Delaware to indemnify its directors, officers, employees and other
agents pursuant to an agreement, bylaw provision, stockholder vote or vote of
disinterested directors or otherwise, any or all of which may provide
indemnification rights broader than those currently available under the
British Columbia or Delaware indemnification statutes.
Both the Delaware Constating Documents and British Columbia Constating
Documents provide that PortaCom Delaware and the Company, respectively, may
purchase insurance on behalf of those persons entitled to be indemnified by
the Company.
24
Dividends and Distributions. Under the British Columbia Company Act,
directors of a company shall not declare or pay a dividend if there are
reasonable grounds for believing that the company is, or would after the
payment be, insolvent.
The Delaware Corporation Law generally provides that a corporation may
declare and pay dividends out of surplus (defined as the excess, if any, of
net assets over stated capital) or, when no surplus exists, out of net profits
for the fiscal year in which the dividend is declared and/or the preceding
fiscal year, subject to any restrictions contained in a corporation's
certificate of incorporation. PortaCom Delaware's certificate of
incorporation contains no such restrictions. Dividends may not be paid out of
net profits if the stated capital of the corporation is less than the amount
of stated capital represented by outstanding preferred stock, if any.
Preemptive Rights. Neither the Delaware Corporation Law, nor the British
Columbia Company Act (with respect to reporting companies), automatically
provides for preemptive rights to acquire a corporation's unissued stock.
However, such right expressly may be granted to the stockholders in a
corporation's certificate of incorporation under the Delaware Corporation Law.
Neither the Delaware Constating Documents nor the British Columbia Constating
Documents provide for preemptive rights.
RIGHT OF DISSENT
British Columbia Law. Pursuant to Sections 37 and 231 of the Company Act
(British Columbia), any stockholder of the Company who dissents in respect of
the Special Resolution to continue the Company's jurisdiction of incorporation
from British Columbia to Wyoming is entitled, upon compliance with appropriate
procedures, to be paid the fair market value of the shares held by him
determined as of the day before the Special Resolution was passed. A copy of
the relevant sections of the Company Act (British Columbia) is attached hereto
as Exhibit E. The following is a summary of the operation of the provisions
of the Company Act (British Columbia) relating to stockholder's dissent and
appraisal rights. Any stockholder of the Company considering the exercise of
his right of dissent should seek his own legal advice since failure to comply
strictly with the provisions of the Company Act (British Columbia) may
prejudice his right of dissent.
Pursuant to the Company Act (British Columbia), a stockholder who wishes
to dissent in respect of the Special Resolution to continue the Company's
jurisdiction of incorporation to the laws of Wyoming must give written notice
of his dissent ("Notice of Dissent") to the Company, no later than 5:00 p.m.
(Vancouver, British Columbia time) on December 21, 1996. Notice of Dissent is
to be delivered by registered mail addressed to the Company at 1020 - 510
Burrard Street, Vancouver, British Columbia, V6C 3A8. The giving of a Notice
of Dissent does not deprive a stockholder of his right to vote on the Special
Resolution. A vote against the Special Resolution or the execution or
exercise of a proxy does not constitute Notice of Dissent. A stockholder
however is not entitled to dissenters' rights if such stockholder votes (or
instructs or is deemed, by submission of any incomplete proxy, to have
instructed his proxyholder to vote, such as by returning a signed but unmarked
proxy) any such shares in favor of the Special Resolution, but a stockholder
may abstain from voting on the Special Resolution, or may vote as a proxy for
a stockholder whose proxy requires an affirmative vote without affecting his
dissent rights.
If the Special Resolution pertaining to the continuation of the Company's
jurisdiction of incorporation to Wyoming is passed, the Company is required to
give the dissenting stockholder (the "Dissenting Stockholder") prior notice of
the Company's intention to act ("Notice of Intention to Act") on the Special
Resolution and to advise the Dissenting Stockholder of his rights under the
Company Act (British Columbia). Within 14 days after the Company giving the
Notice of Intention to Act, each Dissenting Stockholder must send to the
Company a written notice containing his name and address, the number of shares
in respect of which he dissents and a
25
requirement that the Company purchase all such shares (the "Demand for
Purchase") together with the share certificates representing the shares in
respect of which he dissents. A Dissenting Stockholder may not vote or
exercise or assert any rights of a stockholder in respect of the shares for
which Notice of Dissent has been given unless the Dissenting Stockholder
withdraws his Demand for Purchase with the consent of the Company. Until the
Dissenting Stockholder is paid in full for such shares, he may exercise and
assert the rights of a creditor of the Company with respect to such shares.
The price to be paid to a Dissenting Stockholder for his shares shall, in
accordance with the Company Act (British Columbia), be the fair value as of
the day before the date on which the Special Resolution was passed, including
any appreciation or depreciation in anticipation of the vote on the Special
Resolution.
Either the Dissenting Stockholder or the Company is entitled to apply to
the Court, which may fix the price and the terms of purchase and sale of the
shares in respect of which the dissent is made or order that the price and
terms be established by arbitration or make such consequential orders and give
such directions as the Court considers appropriate.
Wyoming Law. Upon the effectiveness of the change of domicile of the
Company from British Columbia, Canada to Wyoming, the Company will be subject
to the provisions of the Wyoming Corporation Act. Accordingly, stockholders
will have a right of dissent under Sections 17-16-1301 through 17-16-1331 with
respect to the Delaware Reincorporation (Proposal 2). A record stockholder
may assert dissenters' rights as to fewer than all shares registered in his
name only if he dissents with respect to all shares beneficially owned by any
one person and notifies the Company in writing of the name and address of each
person on whose behalf he asserts dissenters' rights. A beneficial stockholder
may assert dissenters' rights as to shares held on his behalf only if (i) he
submits to the Company the record stockholder's written consent to the dissent
not later than the time the beneficial stockholder asserts dissenters' rights
and (ii) he does so with respect to all shares of which he is the beneficial
stockholder or over which he has power to direct the vote.
In order to dissent, a stockholder is required to send to the Company, at
or before the meeting, a written notice of intent to demand payment ("Notice
of Intent"). Wyoming Corporations Act sec. 17-16-1321. The Notice of Intent
should be sent to the Company at 1020 - 510 Burrard Street, Vancouver, British
Columbia, V6C 3A8. A vote against the Delaware Reincorporation, an
abstention, the return of a signed but unmarked proxy or the execution or
exercise of a proxy to vote against the Delaware Reincorporation does not
constitute a Notice of Intent, but a stockholder need not vote his shares
against the Delaware Reincorporation in order to object. A vote in favor of
the Delaware Reincorporation will deprive the stockholder of further dissent
rights with respect to the Delaware Reincorporation, including by return
of a signed but unmarked proxy.
If any Notices of Intent are received by the Company and if the Delaware
Reincorporation is adopted, the Company shall deliver a written dissenters'
notice ("Dissenters' Notice") within ten days of the approval of the Delaware
Reincorporation to all stockholders duly submitting Notices of Intent. Wyoming
Corporation Act sec. 17-16-1322.
A stockholder receiving a Dissenters' Notice shall have not less than 30
nor more than 60 days after the date of delivery of such notice to demand
payment, certify that he acquired beneficial ownership of the shares prior to
the required date and deposit his share certificates in accordance with the
Dissenters' Notice. Wyoming Corporation Act sec. 17-16-1323.
Upon receipt of the payment demand, the Company shall pay each dissenter
the amount the Company deems to be the fair value of his shares, plus accrued
interest. The payment shall be accompanied by a statement
26
of how the Company's estimate of fair value was determined. Wyoming
Corporation Act sec. 17-16-1325. A stockholder objecting to the Company's
estimate of fair value may, but is not required to, submit his own estimate of
fair value and demand payment of his estimate, less any payment already
received. Wyoming Corporation Act sec. 17-16-1328. In the event the Company
and the stockholders are unable to resolve the matter, the Company is required
to commence a judicial proceeding within 60 days to determine the fair value
of the shares. Wyoming Corporation Act sec. 17-16-1330.
The foregoing is only a summary of the provisions of the Sections 17-16-
1301 through 17-16-1331 of the Wyoming Corporation Act. Stockholders
considering exercising such right of dissent should specifically refer to such
sections of the Wyoming Corporation Act, a copy of which is attached hereto as
Exhibit F. A failure to strictly comply with the provisions of the statute may
prejudice the stockholder's right of dissent. It is suggested that any
stockholder seeking to exercise such right obtain his own legal advice as to
the manner of exercising such right and the implication thereof for the
stockholder.
TAX CONSIDERATIONS
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS -- OWNERSHIP OF THE COMPANY
COMMON STOCK PRE-CONTINUANCE AND MERGER
General. The following section summarizes certain provisions of United
States federal income tax law that may affect (i) the Company and its
subsidiaries, and (ii) U.S. Stockholders (as defined below) of the Company.
Although this summary discusses the principal tax considerations deemed by
the Company to be material to a current investment in the Company's Common
Stock, it does not purport to discuss all of the United States federal income
tax consequences that may be relevant to such an investment nor will it apply
to the same extent or in the same way to all investors. It is based, among
other things, on provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and published judicial decisions, regulations and rulings
thereunder as in effect on the date of this report, and the assumption that
the Company will continue to be structured and to operate its business in the
manner described in this report. No information is provided herein with
respect to the effect of any state or local tax law, rule or regulation nor is
any information provided as to the effect of any foreign tax law (other than
the federal law of Canada to the extent specifically set forth herein) or any
provision of United States tax law other than United States federal income tax
law. The following summary assumes that the Company will continue to operate
its current business without material changes in the structure of its
operations.
Persons that are not U.S. Stockholders will be taxed differently under
United States federal income tax law from U.S. Stockholders. THIS DISCUSSION
DOES NOT ADDRESS U.S. TAXATION OF NON-U.S. STOCKHOLDERS. EACH U.S. AND NON-
U.S. INVESTOR IN THE COMPANY'S COMMON STOCK OR WARRANTS IS URGED TO CONSULT
WITH AN INDIVIDUAL TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO SUCH
INVESTOR OF AN INVESTMENT IN SUCH SECURITIES.
The Company and Subsidiaries. The Company is a holding company
incorporated in Canada. All of the Company's business operations are
conducted itself and by its U.S. subsidiaries in the United States. The
Company is subject to tax in Canada and may be subject to tax in the United
States. The U.S. subsidiaries are also subject to tax in the United States.
The U.S. subsidiaries will not be subject to tax in Canada unless they receive
certain types of Canadian source income or carry on a business through a
permanent establishment in Canada.
U.S. Withholding Tax on Dividends to the Company. The Company will be
subject to a U.S. withholding tax on any dividends paid by its U.S.
subsidiary. The tax rate is expected to be 6% for dividends paid in 1996,
27
reduced to 5% for dividends paid in 1997, provided the Company qualifies under
the Canada - U.S. Tax Convention (the "Treaty"). Management does not
anticipate the payment of dividends for the foreseeable future. See
"Dividends."
Taxation of U.S. Stockholders. For purposes of this summary, U.S.
Stockholders generally include stockholders that are (i) corporations or
partnerships organized under the laws of the United States or any political
subdivision thereof, (ii) estates or trusts, the income of which, from sources
without the United States, is includable in gross income for federal income
tax purposes regardless of its connection with the conduct of a trade or
business within the United States, (iii) United States Citizens, or (iv)
United States resident aliens (as defined in Section 7701(b) of the Code).
For purposes of this discussion, U.S. Stockholders do not include persons
subject to special provisions of federal income tax law, such as tax-exempt
organizations, qualified retirement plans, financial institutions, insurance
companies, real estate investment trusts, regulated investment companies,
broker-dealers, and stockholders who acquired their stock through the exercise
of employee stock options or otherwise as compensation.
Purchase and Sale. If the Company Common Stock is sold or exchanged, gain
or loss will be recognized, measured by the difference between the amount
realized from such sale or exchange and the basis, generally the cost, of the
Common Stock sold or exchanged.
Generally, any gain or loss recognized as a result of the foregoing with
respect to the Company Common Stock held as a capital asset will be a capital
gain or loss and will either be long-term or short-term depending upon the
period of time the Common Stock sold or exchanged was held. A holding period
of more than one year results in long-term capital gain or loss treatment.
The maximum rate on long-term capital gains for individuals is 28%. There are
limitations on the ability to utilize capital losses to offset ordinary
income.
Distributions on Common Stock. No dividends have been paid by the Company
to date, and none is anticipated to be paid for the foreseeable future.
However, U.S. Stockholders receiving dividend distributions with respect to
the Company's Common Stock would be required to include in gross income for
United States federal income tax purposes the gross amount of such
distributions to the extent that the Company has current or accumulated
earnings and profits, without reduction for any Canadian income tax withheld
from such distributions. See "Withholding Tax on Dividends to U.S.
Stockholders." To the extent that distributions exceeded current or
accumulated earnings and profits of the Company they would be treated first as
a return of capital up to the U.S. Stockholder's adjusted basis in the Common
Stock and thereafter as gain from the sale or exchange of such shares.
Withholding Tax on Dividends to U.S. Stockholders. If any dividends were
paid by the Company, they would be subject to a Canadian withholding tax.
Individual U.S. Stockholders of the Company that qualify under the Treaty
would be subject to a 15% Canadian withholding tax on any dividend
distributions from the Company. Certain qualifying corporate U.S.
Stockholders would only be subject to a 6% withholding tax, reduced to 5% in
1997. The withholding tax would be withheld by the Company from dividend
distributions and paid to the Canadian government. A U.S. Stockholder may be
entitled to a U.S. foreign tax credit for any Canadian withholding tax. In
connection with a dividend distribution, a domestic corporation that owns 10
percent or more of the voting stock of the Company may also be entitled to a
foreign tax credit with respect to Canadian income taxes paid by the Company.
Complex rules govern the availability and amount of foreign tax credits to
which a particular U.S. Stockholder may be entitled. Each U.S. Stockholder
should consult its own tax advisor regarding the possible availability of a
foreign tax credit.
28
Information Reporting Requirements. IRC Section 6046 requires each five
percent-or-greater U.S. Stockholder of the Company to file Form 5471. Form
5471 is an information return designed to help the IRS track U.S. persons
owning five percent or more of foreign corporations. EACH U.S. STOCKHOLDER
SHOULD CONSULT WITH U.S. TAX COUNSEL WITH RESPECT TO THESE FILING
REQUIREMENTS.
Additional Tax Considerations. Special U.S. tax rules that may be adverse
to a U.S. Stockholder and that are not discussed herein may apply to a U.S.
Stockholder that owns, directly or through rules of attribution, 10% or more
of the voting stock of the Company if the Company is ever classified as a
controlled foreign corporation ("CFC"). Other adverse U.S. tax rules may
apply to all U.S. Stockholders if the Company is ever classified as a passive
foreign investment company ("PFIC") as defined at IRC Section 1296. PFIC
status could characterize the gain on the disposition of shares as an excess
distribution as defined at IRC Section 1291(b) and could result in additional
tax or an interest charge with respect to distributions. Management believes
that the Company is not now a CFC or a PFIC, nor has it ever met the
definition of a CFC or a PFIC.
CANADIAN TAX CONSIDERATIONS -- OWNERSHIP OF THE COMPANY COMMON STOCK PRE-
CONTINUANCE AND MERGER
General. The following is a general summary of certain of the Canadian
federal income tax considerations relating to a current investor in the
Company Common Stock, who deals at arm's length with the Company, who is not a
tax deferred entity such as a deferred income plan, and who holds
shares of the Company as capital property, all for the purposes of the Income
Tax Act (Canada) ("ITA"). The summary is based on the current provisions of
the ITA, regulations thereunder (the "Regulations") and current administrative
and assessing practices of Revenue Canada, Taxation ("Revenue Canada"). In
addition, this summary takes into account all specific proposals to amend the
ITA and Regulations publicly announced by the Department of Finance prior to
the date hereof (collectively, the "Proposed Tax Amendments"). No assurance
can be given that the Proposed Tax Amendments will be enacted as announced or
at all. This summary does not otherwise take into account or anticipate any
changes in law, whether by judicial, governmental or legislative decision or
action, nor does it take into account provincial, territorial or foreign tax
legislation or considerations which may differ significantly from those
discussed herein.
This summary is of a general nature only and is not intended to be nor
should it be construed to be, legal or tax advice to any particular holder of
shares of the Company. Accordingly, such persons should consult their own tax
advisors for advice with respect to their own particular circumstances.
This summary addresses certain provisions of Canadian federal income tax
law that may affect Canadian resident stockholders and U.S. stockholders of
the Company. For purposes of this summary, U.S. stockholders include U.S.
resident individuals and U.S. corporations. U.S. stockholders should seek
independent advice regarding the income tax consequences of investing in the
Company Common Stock.
The Company and Subsidiaries. The Company was incorporated in Canada and
is subject to tax on its income in Canada. The Company is the parent company
of U.S. subsidiaries. The U.S. subsidiaries will not be taxed in Canada unless
they carry on a business through a permanent establishment in Canada or
receive certain types of Canadian source income.
If the Company has a branch in the U.S., it may be subject to income taxes
in the U.S. It will be entitled to a credit against Canadian income taxes for
any such U.S. income taxes, provided the foreign tax credit qualifications are
met.
Taxation on Disposition. A disposition or deemed disposition by a
holder of Company stock will generally result in a holder realizing a
capital gain (or a capital loss) equal to the amount by
29
which proceeds of disposition are greater (or less) than the aggregate of the
holder's adjusted cost base of the stock and the costs of such disposition.
Three-quarters of any capital gain realized by a holder will be included
in computing the holder's income as a taxable capital gain. Three-quarters of
any capital loss realized by a holder may generally be deducted against
taxable capital gains realized in the year of disposition or the three
preceding taxation years or any subsequent taxation years, subject to detailed
rules contained in the ITA in this regard.
Distributions on Common Stock. A dividend received, or deemed to be
received, on the Common Stock will be included in computing the taxable income
of an individual holder of Common Stock as a dividend from a taxable Canadian
corporation, subject to the normal gross up and dividend tax credit
provisions. While dividends received on the Common Stock by a corporation will
be included in computing its income, the corporation will generally be
entitled to deduct an equivalent amount. "A private corporation" as defined in
the ITA, or any other corporation controlled by or for the benefit of an
individual or a related group of individuals will generally be liable to pay a
33-1/3% refundable tax under Part IV of the Act on any deemed dividend
received to the extent such deemed dividend is deductible in computing the
corporation's income under the ITA. The amount of any such deemed dividend
will not generally be included in computing the proceeds of disposition to any
holder for the purposes of computing any capital gain or loss arising on the
disposition of the shares to the Company. If the stockholder is a corporation,
any such capital loss may in certain circumstances be reduced by the amount of
any dividends, including deemed dividends, which were deductible in computing
taxable income of the corporate stockholder. Analogous rules apply to a
partnership or trust of which a corporation is a member or a beneficiary.
Taxation of U.S. Stockholders. A U.S. Stockholder who holds the Company
Common Stock as capital property will not be subject to Canadian tax on
capital gains realized on the disposition of such Common Stock unless the
Common Stock is "taxable Canadian property" within the meaning of the Income
Tax Act (Canada), and on which no relief is afforded under the Treaty. For
most investors, it is unlikely that the Company Common Stock will be
considered taxable Canadian property. However, any stockholder who has been a
resident of Canada should seek independent tax advice.
All U.S. stockholders, whether or not subject to Canadian income tax on
the disposition of stock or warrants, will be subject to Canadian withholding
tax on any dividends received from the Company. Dividends paid on the Company
Common Stock held by U.S. stockholders not having a permanent establishment or
fixed base in Canada (within the meaning of the Treaty), will be subject to
Canadian withholding tax at the Treaty-reduced rate of 15%. Where, however,
the beneficial owner of the dividend is a company which owns at least 10% of
the voting stock of the Company, in which case the Treaty-reduced tax rate is
6% (reduced to 5% in 1997 and thereafter).
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS -- THE CONTINUANCE AND MERGER
The following summary is a general discussion of certain United
States federal income tax consequences of the Continuance and Merger. This
summary is based upon the Code, regulations and rulings now in effect or
proposed thereunder, current administrative rulings and practice and judicial
authority, all of which are subject to change. Any such change, which may or
may not be retroactive, could alter the tax consequences to the Company or its
stockholders set forth herein. This summary does not discuss all aspects of
United States federal income taxation that may be relevant to a particular
investor in light of personal circumstances or to certain types of investors
subject to special treatment under the United States federal income tax laws
(for example, life insurance companies, tax-exempt organizations, foreign
investors, dealers in securities and taxpayers subject to the alternative
minimum tax) and does not discuss any aspect of state, local, Canadian or
other foreign tax laws.
The Company has not obtained an opinion from tax counsel or an independent
accountant in connection with the preparation of this summary. The following
discussion was prepared by the Company's counsel, Day Campbell & McGill in
Costa Mesa, California, based on disclosure appearing in proxy statements
filed by other companies engaged in similar transactions, and was extensively
reviewed and commented upon as to Canadian law by experienced tax counsel with
the Canadian firm of Koffman, Birnie & Kalef in Vancouver, British Columbia,
and by tax accountants with the Vancouver office of the Company's auditors,
KPMG Peat Marwick, and as to United States law by tax counsel with a United
States law firm named The Busch Firm in Irvine, California.
The Continuance and Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, and the Company will be a party to that
reorganization within the meaning of Section 368(b) of the Code. The
transitory domicile of the Company as a Wyoming Corporation will be viewed for
United States federal income tax purposes as an integrated step of a single
transaction. The discussion below analyzes
30
the Continuance and Merger as a direct continuation from British Columbia to
Delaware, because this is how the transactions will be viewed for United
States federal income tax purposes.
The following are the material United States federal income tax
consequences to the Company and its stockholders: (i) no gain or loss would be
recognized by the Company of the reorganization; (ii) no gain or loss would be
recognized by stockholders of the Company, except to holders of the Company
Common Stock who receive cash upon the exercise of dissenters rights, as
described herein; (iii) the tax basis of the shares of the Company Common
Stock held by stockholders of the Company will be unchanged and (iv) the
holding period of the shares of the Company Common Stock held by stockholders
of the Company will be unchanged, provided such stock is held as a capital
asset at the effective time of the reorganization.
Because stockholders of the Company will hold stock in a domestic
corporation rather than a foreign corporation as a result of the Continuance
and Merger, the tax treatment of the Company stockholders who are U.S.
Stockholders (as defined above under "United States Federal Income Tax
Considerations--Ownership of the Company Common Stock") may also be affected
by Section 367(b) of the Code. Under existing regulations issued pursuant to
Section 367(b) of the Code, since management believes that the Company is not
presently, nor has it ever been, a CFC or a PFIC (as defined above under
"United States Federal Income Tax Considerations--Ownership of the Company
Common Stock") neither the Company nor stockholders of the Company should be
required to recognize gain under Section 367(b) of the Code. However, under
proposed regulations pursuant to Section 367(b) of the Code, which regulations
(with certain exceptions) are proposed to be effective for transactions
occurring on or after the date which is 30 days after the date on which such
regulations are finalized, U.S. stockholders of the Company who own less than
10 percent of the Company could recognize gain, if any, realized on the
Continuance or Merger, if such proposed regulations are adopted as final
regulations in the form currently proposed, and if such adoption as final
regulations occurs more than 30 days before the Continuance takes place. In
addition, if the proposed regulations are adopted as final regulations in the
form currently proposed, to the extent of the gain, if any, realized on the
Continuance or Merger, U.S. Stockholders who own 10% or more of the Company
will be taxed on their pro rata shares of the Company's cumulative earnings
and profits that had not been previously subject to U.S. tax and that had been
accumulated as of the date of Continuance or Merger, even if the proposed
regulations are finalized after the date of Continuance or Merger.
For U.S. tax purposes, the U.S. stockholders of the Company Common Stock
who receive cash upon the exercise of any dissenters rights generally will
recognize gain or loss measured by the difference between the amount of cash
received and their aggregate adjusted tax basis in such shares. Such gain or
loss generally will be long-term capital gain or loss, if such shares have
been held at the effective time of the Continuance or Merger for more than one
year. However, stockholders who exercise dissenters' rights and who are
considered for United Stated federal income tax purposes to own constructively
shares of the Company Common Stock actually owned by other persons may, under
certain circumstances, recognize dividend income (taxable as ordinary income)
equal to the full amount of the cash they receive.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY. SUCH DISCUSSION MAY NOT BE APPLICABLE TO A
STOCKHOLDER WHO ACQUIRED SHARES OF THE COMPANY STOCK PURSUANT TO THE EXERCISE
OF AN EMPLOYEE STOCK OPTION OR OTHERWISE AS COMPENSATION. THE COMPANY
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR MORE SPECIFIC AND
DEFINITE ADVICE AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO
THEM OF THE CONTINUANCE AS WELL AS ADVICE TO THE APPLICATION AND EFFECT OF
STATE, LOCAL, CANADIAN AND OTHER FOREIGN INCOME AND OTHER TAX LAWS.
31
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS -- OWNERSHIP OF THE COMPANY
COMMON STOCK FOLLOWING THE CONTINUANCE AND MERGER
If the Continuance takes place, certain of the tax considerations
described above under "United States Federal Income Tax Considerations--
Ownership of the Company Common Stock Pre-Continuance and Merger" would no
longer apply. Only the tax considerations altered by the Continuance are
described below.
The Company and Subsidiaries. Following the Continuance, it is not
expected that the Company would be subject to tax in Canada. The Company
would be subject to tax in the United States.
U.S. Withholding Tax on Dividends to the Company. If the Continuance
takes place, the Company will be a U.S. corporation. Accordingly, dividends,
if any paid to the Company by its U.S. subsidiary would no longer be subject
to U.S. withholding tax.
Distributions on Common Stock. If the Continuance takes place, because
the Company will be a U.S. corporation, the rules generally applicable
regarding the dividends received deduction available to corporations receiving
dividends from certain United States corporations would apply to dividends, if
any, paid by the Company to corporations that are U.S. stockholders.
Withholding Tax on Dividends to U.S. Stockholders. If the Continuance
takes place, because the Company will be a U.S. corporation, there would no
longer be a Canadian withholding tax on dividends paid by the Company to U.S.
stockholders.
Information Reporting Requirements. If the Continuance takes place,
because the Company will be a U.S. corporation, the information reporting
requirements that may apply to U.S. stockholders of foreign corporations would
no longer be applicable.
Additional Tax Considerations. If the Continuance takes place, because
the Company will be a U.S. corporation, special U.S. tax rules that could have
applied in certain circumstances to the Company as a foreign corporation,
would no longer be applicable.
Non-U.S. Stockholders. If the Continuance takes place, because the
Company will be a U.S. corporation, dividends paid to non-U.S. Stockholders
could be subject to U.S. withholding tax at a statutory rate of 30 percent or
such lower rate as is provided by any applicable income tax treaty between the
United States and the stockholder's country of tax residence. For Canadian
stockholders the withholding rate under the Treaty is 15%, unless the
beneficial owner of the dividend is a company which owns at least 10% of the
voting stock of the Company, in which case the Treaty-reduced rate is 6%
(reduced to 5% in 1997 and thereafter).
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS -- THE CONTINUANCE AND MERGER
The following is a general summary of certain of the Canadian federal
income tax considerations relating to the Continuance of the Company to
Wyoming and subsequent merger with a Delaware company which are generally
applicable to the Company, who are not tax exempt entities such as deferred
income plans, and the holders of shares of the Company, who deal at arm's
length with the Company and who hold shares of the Company as capital
property, all for the purposes of the Income Tax Act (Canada) ("ITA"). The
summary is based on the current provisions of the ITA, regulations thereunder
(the "Regulations") and current administrative and assessing practices of
Revenue Canada Taxation ("Revenue Canada"). In addition, this summary takes
into account all specific proposals to amend the ITA and Regulations
32
publicly announced by the Department of Finance prior to the date hereof
(collectively, the "Proposed Tax Amendments"). No assurance can be given that
the Proposed Tax Amendments will be enacted as announced or at all. This
summary does not otherwise take into account or anticipate any changes in law,
whether by judicial, governmental or legislative decision or action, nor does
it take into account provincial, territorial or foreign tax legislation or
considerations which may differ significantly from those discussed herein.
This summary is of a general nature only and is not intended to be nor
should it be construed to be, legal or tax advice to any particular holder of
shares of the Company. Accordingly, such persons should consult their own tax
advisors for advice with respect to their own particular circumstances.
The Company
Upon the Continuance of the Company to Wyoming, the Company will cease to
be a resident of Canada for tax purposes under the ITA. The taxation year
of the Company will be deemed to end immediately before the Company ceased to
be a resident of Canada. Each property owned by the Company immediately
before the deemed year end is deemed to have been disposed by the Company for
proceeds of disposition equal to the property's fair market value. Gains and
losses derived by the Company from such deemed disposition will be included in
computing its income for the taxation year ending at the deemed year end and
will be subject to tax under Part I of the ITA.
Further, tax pursuant to Part XIV of the ITA, will apply at the rate of
25%, reduced by the Treaty to 6% if the continuance occurs in 1996 or 5% if
after 1996, of the amount if any by which the fair market value of the
Company's assets at the time of the continuance exceeds the aggregate of the
paid up capital in respect of the shares outstanding immediately before the
continuance and the aggregate of the corporation's debts (excluding those
relating to dividends) all as calculated in accordance with detailed rules
under the ITA.
Residents of Canada
A holder of shares of the Company will not dispose of, or be deemed to
dispose of, such shares on the Continuance of the Company to Wyoming. No tax
consequence will accrue to such holder solely as a result of the Continuance.
Residents of Canada who exercise dissenters' rights prior to the time the
corporation ceases to be a Canadian resident company, with respect to the
Continuance of the Company to Wyoming will dispose of their shares to the
Company for fair market value. Such holder will generally realize a deemed
dividend equal to the difference between the paid up capital of the shares
repurchased by the Company and the amount received from the Company on the
repurchase by the Company. Such deemed dividend received by an individual
will be included in income of the individual subject to the gross up and
dividend tax credit rules normally applicable to dividends received from
taxable Canadian corporations. A "private corporation," as defined in the
ITA, or any other corporation controlled by or for the benefit of an
individual or a related group of individuals will generally be liable to pay a
33-1/3% refundable tax under Part IV of the Act on any deemed dividend
received to the extent such deemed dividend is deductible in computing the
corporation's income under the ITA. The amount of any such deemed dividend
will not generally be included in computing the proceeds of disposition to any
holder for the purposes of computing any capital gain or loss arising on the
disposition of the shares to the Company. If the stockholder is a
corporation, any such capital loss may in certain circumstances be reduced by
the amount of any dividends, including deemed dividends, which were deductible
in computing taxable income of the corporate stockholder. Analogous rules
apply to a partnership or trust of which a corporation is a member or a
beneficiary.
33
Under Canadian tax law, where there has been a foreign merger in which the
shares owned by a taxpayer of the capital stock of a corporation that was a
predecessor foreign corporation immediately before the merger were exchanged
for or became shares of the capital stock of the new foreign corporation,
subsection 87(8) of the ITA applies to have subsection 87(4) of the ITA deem a
taxpayer who holds shares of a predecessor foreign corporation as capital
property to have disposed of the shares for proceeds equal to their adjusted
cost bases and to have acquired shares of the new foreign corporation at the
same amount. Therefore provided a holder of shares of the Company holds the
shares as capital property and does not elect out of the application of
subsection 87(4), no gain or loss should be realized by the shareholder as a
result of the merger of the company with the Delaware corporation.
Foreign mergers are defined in subsection 87(8.1) of the ITA to mean a
merger or combination of two or more corporations resident in the same foreign
jurisdiction to form a single corporate entity which is resident in the same
jurisdiction. In addition, all or substantially all of the assets and
liabilities of the predecessor corporation (except inter-company receivables,
payables and shareholdings) must become assets and liabilities of the new
foreign corporation by virtue of the merger or combination and all or
substantially all of the shares of the predecessor foreign corporations must
be exchanged for or become shares of capital stock of the new foreign
corporation by virtue of the merger or combination. The rollover provisions
of subsection 87 (8) of the ITA will not apply if the merger or combination
resulted from the distribution of property to one corporation upon the wind-up
of another corporation.
Non-Residents of Canada
The following summary is applicable to non-residents of Canada for the
purposes of the ITA.
A holder of shares of the Company will not dispose of, or be deemed to
dispose of, the shares on the Continuance of the Company to Wyoming nor on the
subsequent merger of the Company with a Delaware corporation. No tax
consequence will be accrued to such holder solely as a result of the
Continuance and Merger.
A disposition or deemed disposition by a holder of a share in the Company
after the Continuance who is not a resident in Canada will not give rise to
tax under the ITA.
Dividends received on shares of the Company after the Continuance will not
give rise to tax under the ITA.
A non-resident of Canada for the purposes of the ITA who exercises
dissenters rights on the Continuance of the Company to Delaware will have its
shares of the Company purchased by the Company for fair market value. Such
purchase will result in a deemed dividend being received by the holder equal
to the amount by which the amount received by the holder on the repurchase of
the shares exceeds its paid up capital. Such deemed dividend will be subject
to a 25% withholding tax. Such withholding tax may be reduced by the
provisions of any bilateral tax treaty entered into between Canada and the
country in which the holder is resident. The amount of any such deemed
dividend will not generally be included in computing the proceeds of
disposition to any holder for the purposes of computing any capital gain or
loss arising on the disposition of the shares to the Company.
CANADIAN TAX CONSIDERATIONS - OWNERSHIP OF THE COMPANY COMMON STOCK FOLLOWING
THE CONTINUANCE AND MERGER
If the Continuance and subsequent merger takes place, certain of the tax
considerations described above under "Canadian Tax Considerations - Ownership
of the Company Stock Pre-Continuance and Merger" would no longer apply. Only
the tax considerations altered by the Continuance and merger are described
below.
34
The Company and Subsidiaries. Following the Continuance the Company would
no longer be resident in Canada and therefore the Company would not be subject
to Canadian taxation provided it did not carry on business in Canada through a
permanent establishment in Canada.
Distributions on Common Stock. No dividends have been paid by the Company
to date and none is anticipated to be paid for the foreseeable future.
However, resident Canadian stockholders receiving dividend distributions with
respect to the Company's Common Stock would be required to include in gross
income for Canadian federal income tax purposes the gross amount of dividends
received on the stock.
Withholding Tax on Dividends to Canadian Stockholders. If any dividends
were paid by the Company, they would be subject to U.S. withholding tax.
Individual Canadian stockholders of the Company that qualify under the Treaty
would be subject to a 15% U.S. withholding tax on any dividend distributions
from the Company. Certain qualifying corporate Canadian stockholders would
only be subject to a 6% withholding tax (reduced to 5% in 1997). The
withholding tax would be withheld by the Company from dividend distributions
and paid to the U.S. government. A Canadian resident stockholder may be
entitled to a Canadian foreign tax credit for any U.S. withholding tax,
calculated in accordance with detailed rules under the ITA, in respect of all
or a portion of any United States withholding taxes payable on dividends paid
to the holder. Each Canadian stockholder should consult his own tax advisor
regarding the possible availability of a foreign tax credit.
Deferred Plans. The shares of the Company, following the Continuance and
Merger, may no longer be qualified investments for deferred plans and, where
still qualified, will constitute foreign property for such plans. Penalties
are prescribed under the ITA where deferred plans hold non-qualified
investments or where the foreign property holdings of deferred plans are above
prescribed thresholds.
Information Reporting Requirements. Under draft legislation released
March 5, 1996 Canadian resident taxpayers with interests in specified foreign
property having a total cost in excess of $100,000 Canadian will be required
to report and provide details on such holdings on Form T1135. The shares of
the Company, subsequent to its continuance, will constitute specified foreign
property.
Additional Tax Considerations. Special Canadian tax rules that may be
adverse to a Canadian resident stockholder and that are not discussed herein
may apply to a Canadian stockholder where the Company derives its value
primarily from portfolio investments in assets generally considered to be of
an investment nature, such as the shares of the capital stock of one or more
other corporations. If it may reasonably be concluded that one of the main
reasons for holding the stock in the Company is to reduce the amount of
Canadian tax that would otherwise apply to the holder of shares of the Company
from holding such portfolio investments directly then a resident Canadian
holder may be subject to attributed income generally equal to the holder' s
cost amount of the stock multiplied by the prescribed rate of interest under
the ITA.
RATIFICATION OF MATERIAL CHANGES IN CONSTATING
DOCUMENTS AFFECTING STOCKHOLDERS' RIGHTS
(PROPOSALS THREE - FIVE)
INTRODUCTION
The Delaware Constating Documents effectively amend the British Columbia
Constating Documents by (i) canceling the existing Class "A" and Class "B"
preferred shares and authorizing the issuance of 5,000,000 shares of $.001 par
value Preferred Stock; (ii) eliminating the personal liability of directors to
the fullest extent allowed under Delaware law; and (iii) providing additional
indemnification in excess of that currently provided.
The Board of Directors unanimously deems each of the foregoing changes in
the Company's Constating documents to be in the best interest of the Company
and its stockholders.
35
AUTHORIZATION OF PREFERRED STOCK
(PROPOSAL THREE)
The Delaware Constating Documents authorize the issuance of 5,000,000 of
$.001 par value Preferred Stock. Preferred stock is currently authorized in
the British Columbia Constating Documents, but such shares will be canceled.
The Board of Directors considers it desirable to have the Preferred Stock
available for issuance from time to time for such purposes and for such
consideration as the Board of Directors may approve without the need to
obtain the approval of the Company's stockholders. Moreover, the terms of the
Preferred Stock including, without limitation, dividends, conversion prices,
voting rights, liquidation and redemption prices will be determined by the
Board of Directors.
Although, at the present time, there are no plans to issue the Preferred
Stock which will be authorized upon the approval of the change of domicile to
Delaware and the adoption of the Delaware Constating Documents, the Board of
Directors could issue such Preferred Stock with dividend and liquidation
rights senior to those of the holders of the Common Stock without stockholder
approval. In addition, although the Board has no present intention of doing
so, shares of Preferred Stock could, without stockholder approval, be issued
to a holder who would vote against a merger, a sale of assets or another
extraordinary corporate transaction which may result in the disapproval of a
transaction favored by or favorable to a majority of stockholders.
VOTE REQUIRED; BOARD RECOMMENDATION
The ratification of the authorization of the issuance of Preferred Stock
will require the affirmative vote of a majority of the outstanding shares of
Common Stock entitled to vote at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
PROPOSED CHANGES IN THE LIMITED LIABILITY OF DIRECTORS
AND IN THE INDEMNIFICATION PROVIDED TO THE COMPANY'S
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
(PROPOSALS FOUR AND FIVE)
The British Columbia Constating Documents include a provision which
eliminates officers' and directors' personal liability under certain specific
circumstances and provides for mandatory indemnification of the Company's
directors, officers, employees and agents of the Company if (i) such person
acted honestly and in good faith with a view to the best interests of the
Company and (ii) in the case of a criminal or administrative action or
proceeding, such person had reasonable grounds for believing his conduct was
lawful.
The Company believes that it is important to continue to provide the
Company's directors and officers with protection from the risk of litigation
and personal liability, thereby ensuring that the Company can continue to
attract and retain experienced individuals to serve as directors and officers
and that the Company's directors and officers will continue to consider all
possible alternatives when making business decisions. The Board of Directors
has determined that it is in the best interests of the stockholders of
PortaCom Delaware that the Certificate of Incorporation of PortaCom Delaware
include a "Delaware Director Liability Provision" (as defined below) and that
the Bylaws of PortaCom Delaware contain a "Delaware Indemnification Provision"
(as defined below) in order to take full advantage of the protections
permitted under Delaware law. Due to certain differences
36
between British Columbia and Delaware law, PortaCom Delaware may be able to
provide indemnification to its employees and agents and limited liability to
its directors under a somewhat broader range of circumstances than currently
permitted under British Columbia law. The stockholders should note that the
members of the Company's Board of Directors will be beneficiaries of the
Delaware Director Liability Provision and the Delaware Indemnification
Provision and therefore have a personal interest in their approval.
At present, there is no pending litigation or proceeding involving a
director, officer or employee of the Company where indemnification would be
sought or allowed for in the British Columbia Constating Documents of the
Company or where a director's liability would be limited thereby.
Director Liability. The Certificate of Incorporation of PortaCom Delaware
includes a provision eliminating the directors' personal liability for
monetary damages for a breach of the directors' duty of care to PortaCom
Delaware or its stockholders (the "Delaware Director Liability Provision").
As a result of the Delaware Director Liability Provision, no director of
PortaCom Delaware will be liable for monetary damages for negligence or gross
negligence occurring after the Delaware Reincorporation. Each director will,
however, remain personally liable to PortaCom Delaware for failure to act in
good faith or to comply with his or her duty of loyalty to PortaCom Delaware
and will continue to be subject to equitable remedies, although such remedies
in some circumstances may not, as a practical matter, be available. In
addition, under Delaware law, each director will remain liable for engaging in
a transaction from which such director derives an improper personal benefit,
for engaging in intentional misconduct or a knowing violation of law or for
the wrongful payment of a dividend or repurchase of shares by PortaCom
Delaware where such dividend or repurchase was willfully or negligently caused
by such director. The Delaware Director Liability Provision also may not
limit a director's liability for violations of the federal securities laws.
The Delaware Director Liability Provision is a somewhat broader
limitation-of-liability provision in comparison to the provisions set forth in
the British Columbia Constating Documents. Delaware law also may permit the
limitation of directors' liability in a broader range of circumstances than
does British Columbia law.
Indemnification. Delaware law provides a detailed statutory framework
covering indemnification of directors, officers, employees and agents against
liabilities and expenses arising out of legal proceedings brought against them
by reason of their status or service as directors, officers, employees or
agents. Section 145 of the General Corporation Law of Delaware ("Section
145") provides that a director, officer, employee or agent of a corporation:
(a) shall be indemnified by the corporation for expenses, including attorneys'
fees, in defense of any action or proceeding if the director, officer,
employee or agent is sued by reason of his or her service to the corporation,
to the extent that such person has been successful in defense of such action
or proceeding, or in defense of any claim, issue or matter raised in such
litigation; (b) may, in actions other than actions by or in the right of the
corporation (such as derivative actions), be indemnified for expenses,
judgments, fines, amounts paid in settlement of such litigation and other
amounts even if he or she is not successful on the merits, if he or she acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the corporation (and in a criminal
proceeding, if he or she did not have reasonable cause to believe his or her
conduct was unlawful); and (c) may be indemnified by the corporation for
expenses (but not judgments or settlements) of any action by the corporation
or of a derivative action (such as a suit by a stockholder alleging a breach
by a director or officer of a duty owed to the corporation), even if he or she
is not successful, provided that he or she acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation, provided that no indemnification is permitted without court
approval if the person is adjudged liable to the corporation.
37
Delaware law also permits a corporation to elect to indemnify its
directors, officers, employees and agents under a broader range of
circumstances than that provided under Section 145. The indemnification
provision in the Bylaws of PortaCom Delaware (the "Delaware Indemnification
Provision") takes full advantage of the Delaware indemnification laws with
regard to directors and officers and provides, among other things, that: (i)
PortaCom Delaware is required to indemnify its directors and officers to the
full extent permitted by law, including those circumstances in which
indemnification would otherwise be discretionary; and (ii) PortaCom Delaware
may advance expenses to its directors and officers as incurred, provided that
they undertake to repay the amount advanced unless it is ultimately determined
that they are entitled to indemnification.
Like the Bylaws of PortaCom Delaware, the British Columbia Constating
Documents provide that the Company may indemnify its directors, officers,
employees and agents. British Columbia law, however, restricts a corporation
from providing indemnification in certain situations in which indemnification
may be permitted under Delaware law. British Columbia law, for example,
prohibits indemnification of a director for liability resulting from acts or
omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was or
should have been aware of a serious risk of injury to the corporation or its
shareholders, or for liability resulting from acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication
of the director's duty to the corporation or its stockholders. Delaware law
does not expressly prohibit indemnification in such circumstances. The
standard of conduct required of persons being indemnified under British
Columbia law in civil actions is also more stringent than that applied in
Delaware. Under British Columbia law, a person must have acted in good faith
and in a manner the person reasonably believed to be in the best interests of
the corporation and, in actions by or in the right of the corporation, of its
stockholders. Under Delaware law, a person must have acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation.
Possible Disadvantages of Indemnification and Directors' Limited
Liability Generally. The Delaware Director Liability Provision and the
Delaware Indemnification Provision could have an adverse impact on the
Company. In the event that PortaCom Delaware is injured as a result of a
director's breach of fiduciary duties, including in connection with a takeover
attempt, the Delaware Director Liability Provision could prevent PortaCom
Delaware from recovering compensation for the damage it has suffered. The
fact that a director knows that he or she will not suffer personal liability
for his or her negligence or gross negligence may also cause the director to
be less careful in handling PortaCom Delaware's affairs. In addition, the
Delaware Indemnification Provision may require PortaCom Delaware to pay the
costs of a legal defense and legal judgment arising out of injuries to third
parties caused by the acts of its directors or officers which PortaCom
Delaware would not otherwise be obligated to pay. The comparable charter and
bylaw provisions currently in effect for the Company, however, have these same
potential adverse effects.
VOTE REQUIRED; BOARD RECOMMENDATION
The ratification of the provisions of the Delaware Constating Documents
limiting the liability of directors and the increased indemnification rights
provided to the Company's officers, directors, employees and agents by the
Delaware Constating Documents will require the affirmative vote of a majority
of the outstanding shares of Common Stock entitled to vote at the meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL
LIMITING THE LIABILITY OF DIRECTORS AND "FOR" THE INCREASED INDEMNIFICATION OF
THE COMPANY'S OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS.
38
STOCKHOLDER PROPOSALS
Stockholders of the Company who intend to submit proposals to the
Company's stockholders at the annual meeting of stockholders to be held in
1997 must submit such proposals to the Company no later than January 25,
1997, in order for them to be included in the Company's proxy materials for
such meeting. Stockholder proposals should be directed to the attention of
the Secretary of the Company at the address of the Company set forth on the
first page of this Proxy Statement.
OTHER MATTERS
The board of directors is not aware of any other matters to be brought before
the extraordinary and special general meeting. If any other matters, however,
are properly brought before the meeting, the persons named in the enclosed
form of proxy will have discretionary authority to vote all proxies with
respect to such matters in accordance with their best judgment.
The contents of this Proxy Statement (Information Circular) have been approved
and its mailing has been authorized by a resolution of the directors of the
Company.
Dated at Playa Del Rey, California this 22nd day of November, 1996
ON BEHALF OF THE BOARD
-----------------------------------------------
Douglas C. MacLellan
President, Chief Executive Officer and Director
39
EXHIBITS
TO
PROXY STATEMENT
OF
PORTACOM WIRELESS, INC.
EXHIBIT A
MERGER AGREEMENT
PLAN OF REORGANIZATION AND AGREEMENT OF MERGER
THIS PLAN OF REORGANIZATION AND AGREEMENT OF MERGER (the "Merger
Agreement") is made as of October _____, 1996 by and between PortaCom Wireless,
Inc., a Wyoming corporation ("PortaCom Wyoming"), and PortaCom Wireless, Inc., a
Delaware corporation ("PortaCom Delaware"). PortaCom Wyoming and PortaCom
Delaware are sometimes referred to herein as the "Constituent Corporations."
RECITALS
A. PortaCom Delaware is a corporation duly organized and existing under
the laws of the State of Delaware.
B. PortaCom Wyoming is a corporation duly organized and existing under the
laws of the State of Wyoming.
C. On the date of this Merger Agreement, PortaCom Delaware has authority
to issue 100,000,000 shares of Common Stock, par value $0.001 per share, of
which ten shares are issued and outstanding and owned by PortaCom Wyoming.
D. On the date of this Merger Agreement, PortaCom Wyoming has authority to
issue 100,000,000 shares of Common Stock, without par value, of which 11,956,010
shares are issued and outstanding, and 100,000,000 shares, each of Class A and
Class B Preferred Stock, without par value, of which no shares are issued or
outstanding.
E. The respective Boards of Directors of PortaCom Delaware and PortaCom
Wyoming have determined that, for the purpose of effecting the reincorporation
of PortaCom Wyoming in the State of Delaware, it is advisable and to the
advantage of such corporations and their respective shareholders that PortaCom
Wyoming merge with and into PortaCom Delaware upon the terms and conditions
herein provided.
F. The respective Boards of Directors of PortaCom Delaware and PortaCom
Wyoming have approved this Merger Agreement and have directed that this Merger
Agreement be submitted to the vote of their respective shareholders.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that PortaCom Wyoming
shall merge with and into PortaCom Delaware on the following terms, conditions
and other provisions.
2
I. TERMS AND CONDITIONS
1.1. Merger. PortaCom Wyoming shall be merged with and into PortaCom
------
Delaware (the "Merger"), and PortaCom Delaware shall be the surviving
corporation, effective upon the date this Merger Agreement is made effective in
accordance with applicable law (the "Effective Date").
1.2. Succession. Upon the Effective Date, the separate existence of
----------
PortaCom Wyoming shall cease and PortaCom Delaware shall succeed to all of the
rights, privileges, powers and property of PortaCom Wyoming in the manner of and
as more fully set forth in Section 259 of the General Corporation Law of the
State of Delaware.
1.3. Common Stock of PortaCom Wyoming. Upon the Effective Date, by virtue
--------------------------------
of the Merger and without any action on the part of the holder thereof or the
Constituent Corporations, each share of Common Stock of PortaCom Wyoming issued
and outstanding immediately prior thereto shall be changed and converted into
one fully paid and nonassessable share of Common Stock, par value $0.001 per
share, of PortaCom Delaware.
1.4. Common Stock of PortaCom Delaware. Upon the Effective Date, by
---------------------------------
virtue of the Merger and without any action on the part of the holder thereof or
the Constituent Corporations, each share of Common Stock of PortaCom Delaware
issued and outstanding immediately prior thereto shall automatically be canceled
and returned to the status of an authorized but unissued share.
1.5. Stock Certificates. Upon and after the Effective Date, all of the
------------------
outstanding certificates which prior to that time represented shares of Common
Stock of PortaCom Wyoming shall be deemed for all purposes to evidence ownership
of and to represent the shares of Common Stock of PortaCom Delaware into which
the shares of Common Stock of PortaCom Wyoming represented by such certificates
have been converted in the Merger. The registered owner on the books and records
of PortaCom Delaware or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to PortaCom Delaware or its
transfer agent, have and be entitled to exercise any voting and other rights
with respect to and to receive any dividends and other distributions upon the
shares of Common Stock of PortaCom Delaware evidenced by such outstanding
certificate as provided above.
1.6. Options. Upon the Effective Date, PortaCom Delaware will assume and
-------
continue all of PortaCom Wyoming's stock options and the outstanding and
unexercised portions of all options and rights to purchase Common Stock of
PortaCom Wyoming shall be converted into and become options or rights to
purchase the same number of shares of Common Stock of PortaCom Delaware at the
same exercise price and upon the same terms and subject to the same conditions
as set forth in the agreements entered into by PortaCom Wyoming pertaining to
such options and rights, as such agreements are in effect at the Effective Date.
Upon the Effective Date, PortaCom Delaware will assume the outstanding and
unexercised portions of such options and rights and all obligations of PortaCom
Wyoming with respect thereto.
3
1.7. Other Employee Benefit Plans. Upon the Effective Date, PortaCom
----------------------------
Delaware will assume all obligations of PortaCom Wyoming under any and all
employee benefit plans in effect as of the Effective Date or with respect to
which employee rights or accrued benefits are outstanding as of the Effective
Date.
1.8. Warrants. Upon the Effective Date, each of the warrants to purchase
--------
shares of Common Stock of PortaCom Wyoming which is outstanding immediately
prior to the Effective Date shall be converted into and become a warrant to
purchase the same number of shares of Common Stock of PortaCom Delaware at the
same exercise price and upon the same terms and subject to the same conditions
as set forth in each of such respective warrants as in effect at the Effective
Date. Upon the Effective Date, PortaCom Delaware will assume the outstanding and
unexercised portions of such warrants and all obligations of PortaCom Wyoming
with respect thereto.
1.9. Reservation of Shares. Upon the Effective Date, an aggregate number
---------------------
of shares of Common Stock of PortaCom Delaware shall be reserved for issuance
upon the exercise of options, stock purchase rights and warrants equal to the
aggregate number of shares of Common Stock of PortaCom Wyoming so reserved
immediately prior to the Effective Date.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1. Certificate of Incorporation and Bylaws. The Certificate of
---------------------------------------
Incorporation of PortaCom Delaware as in effect immediately prior to the
Effective Date shall continue in full force and effect thereafter as the
Certificate of Incorporation of PortaCom Delaware without change or amendment,
until such Certificate of Incorporation is duly amended in accordance with the
provisions thereof and applicable law. The Bylaws of PortaCom Delaware in effect
immediately prior to the Effective Date shall continue in full force and effect
thereafter as the Bylaws of PortaCom Delaware without change or amendment, until
such Bylaws are duly amended in accordance with the provisions thereof and
applicable law.
2.2. Directors. The directors of PortaCom Delaware immediately prior to
---------
the Effective Date shall upon the Effective Date remain the directors of
PortaCom Delaware and shall serve until the next annual meeting of shareholders
of PortaCom Delaware and until their successors are duly elected and qualified
or until their earlier resignation, removal or death.
2.3. Officers. The officers of PortaCom Wyoming shall become officers of
--------
PortaCom Delaware upon the Effective Date and shall serve until their successors
are duly elected and qualified or their earlier resignation, removal or death.
III. MISCELLANEOUS
3.1. Further Assurances. From time to time, as and when required by
------------------
PortaCom Delaware or by its successors and assigns, there shall be executed and
delivered on behalf of PortaCom Wyoming such deeds and other instruments, and
there shall be taken or caused to be taken by it such
4
further and other actions, as shall be appropriate or necessary in order to
vest, perfect or confirm, of record or otherwise, in PortaCom Delaware the title
to and possession of all of the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of PortaCom Wyoming and otherwise
to carry out the purposes of this Merger Agreement, and the proper officers and
directors of PortaCom Delaware are fully authorized in the name and on behalf of
PortaCom Wyoming or otherwise to take any and all such action and to execute and
deliver any and all such deeds and other instruments.
3.2. Amendment. At any time before or after approval by the shareholders
---------
of the Constituent Corporations and subject to applicable law, this Merger
Agreement may be amended in any manner as may be determined in the judgment of
the respective Boards of Directors of PortaCom Wyoming and PortaCom Delaware to
be necessary, desirable or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purposes and intent of this Merger
Agreement; provided, however, that an amendment made subsequent to the adoption
of this Merger Agreement by the shareholders of either Constituent Corporation
shall not: (1) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation; (2) alter or change any term of the Certificate of Incorporation of
PortaCom Delaware to be effected by the Merger; or (3) alter or change any of
the terms and conditions of this Merger Agreement if such alteration or change
would adversely affect the holders of any class or series of capital stock of
either Constituent Corporation.
3.3. Abandonment. At any time before the Effective Date, this Merger
-----------
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either PortaCom Wyoming or PortaCom Delaware or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
PortaCom Wyoming and PortaCom Delaware.
3.4. Governing Law. This Agreement shall in all respects be construed,
-------------
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
Wyoming Business Corporation Act.
3.5. Counterparts. In order to facilitate the filing and recording of this
------------
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Boards of Directors of PortaCom Wyoming and PortaCom Delaware, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
5
PORTACOM WIRELESS, INC.,
a Wyoming corporation
By: ____________________________
Douglas C. MacLellan, President
ATTEST:
________________________________
Michael Richard, Secretary
PORTACOM WIRELESS, INC.,
a Delaware corporation
By: ____________________________
Douglas C. MacLellan, President
ATTEST:
_______________________________
Michael Richard, Secretary
6
EXHIBIT B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PORTACOM WIRELESS, INC.,
A DELAWARE CORPORATION
7
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PORTACOM WIRELESS, INC.
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;
8
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
William Petty 2030 Main Street
Suite 1040
Irvine, California 92714.
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 arrangement
9
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.
10
EXHIBIT C
BYLAWS
OF
PORTACOM WIRELESS, INC.,
A DELAWARE CORPORATION
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.
11
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
12
(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 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.
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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.
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.
14
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 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
15
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.
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
16
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 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
17
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, 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
18
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.
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.
19
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 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.
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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 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
21
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.
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.
22
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 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.
CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of PortaCom
Wireless, Inc., a Delaware corporation, hereby certifies that the Bylaws to
which this Certificate is attached were duly adopted by the Board of Directors
of said Corporation on October ____, 1996.
_______________________________
Michael Richard, Its Secretary
23
EXHIBIT D
WYOMING CONTINUANCE RESOLUTION
SPECIAL RESOLUTION OF STOCKHOLDERS
"RESOLVED as a Special Resolution that:
the continuance of the Company's jurisdiction from the Province of British
Columbia, Canada to the State of Wyoming, United States of America and any and
all amendments to the Company's Articles including the adoption of Articles of
Continuance as may be approved by the Company's directors in substitution of the
Company's Memorandum as a result thereof be and are hereby approved.
BE IT FURTHER RESOLVED as a Special Resolution that:
the directors of the Company be and they are hereby authorized and directed to
take all such acts and proceedings and any one director of the Company be and is
hereby authorized and directed to execute and deliver all such applications,
authorizations, certificates, documents, filings and instruments (along with
amendments thereto), including (but not so as to limit the generality of the
foregoing) Articles of Continuance, whether under seal of the Company or
otherwise, as in their opinion may be necessary or desirable in connection with
the foregoing.
BE IT FURTHER RESOLVED as a Special Resolution that:
the directors of the Company shall have sole and complete discretion on whether
to abandon the continuance of the Company's jurisdiction from the Province of
British Columbia, Canada to the State of Wyoming, United States of American and,
notwithstanding stockholder approval of same, there shall be no obligation to
proceed with the continuance."
24
EXHIBIT E
BRITISH COLUMBIA COMPANY ACT SECTION 231
DISSENT PROCEEDINGS
231. (1) Where,
(a) being entitled to give notice of dissent to a resolution as
provided in section 37, 127, 150, 246, 268, 273 or 313, a member
of a company (in this Act called a "dissenting member") gives
notice of dissent;
(b) the resolution referred to in paragraph (a) is passed; and
(c) the company or its liquidator proposes to act on the authority of
the resolution referred to in paragraph (a),
the company or the liquidator shall first give to the dissenting member notice
of the intention to act and advise the dissenting member of his rights under
this section.
(2) On receiving a notice of intention to act in accordance with
subsection (1), a dissenting member is entitled to require the company to
purchase all his shares in respect of which the notice of dissent was given.
(3) The dissenting member shall exercise his right under subsection
(2) by delivering to the registered office of the company, within 14 days after
the company, or the liquidator, gives the notice of intention to act,
(a) a notice that he requires the company to purchase all his shares
referred to in subsection (2); and
(b) the share certificates representing all his shares referred to in
subsection (2);
and thereupon he is bound to sell those shares to the company and the company is
bound to purchase them. [am. 1980, c. 50, s. 22]
(4) A dissenting member who has complied with subsection (3), the
company, or, if there has been an amalgamation, the amalgamated company, may
apply to the court, which may
(a) require the dissenting member to sell, and the company or the
amalgamated company to purchase, the shares in respect of
which the notice of dissent has been given;
25
(b) fix the price and terms of the purchase and sale, or order
that the price and terms be established by arbitration, in
either case having due regard for the rights of creditors;
(c) in the application any other dissenting member who has
complied with subsection (3); and
(d) make consequential orders and given directions it considers
appropriate.
(5) The price to be paid to a dissenting member for his shares shall
be their fair value as of the day before the date on which the resolution
referred to in subsection (1) was passed, including any appreciation or
depreciation in anticipation of the vote on the resolution, and every dissenting
member who has complied with subsection (3) shall be paid the same price.
(6) The amalgamation or winding up of the company, or any change in
its capital, assets or liabilities resulting from the company acting on the
authority of the resolution referred to in subsection (1), shall not affect the
right of the dissenting member and the company under this section or the price
to be paid for the shares.
(7) Every dissenting member who has complied with subsection (3) may
(a) not vote, or exercise or assert any rights of a member, in
respect of the shares for which notice of dissent has been
given, other than under this section;
(b) not withdraw the requirement to purchase his shares, unless
the company consents; and
(c) until he is paid in full, exercise and assert all the rights
of a creditor of the company.
(8) Where the court determines that a person is not a dissenting
member, or is not otherwise entitled to the right provided by subsection (2),
the court may make the order, without prejudice to any acts or proceedings which
the company, its members, or any class of members may have taken during the
intervening period, it considers appropriate to remove the limitations imposed
on him by subsection (7).
(9) The relief provided by this section is not available if,
subsequent to giving his notice of dissent, the dissenting member acts
inconsistently with his dissent; but a request to withdraw the requirement to
purchase his shares is not an act inconsistent with his dissent.
(10) A notice of dissent ceases to be effective if the member giving
it consents to or votes in favor of the resolution of the company to which he is
dissenting, except where the consent or vote is given solely as a proxy holder
for a person whose proxy required an affirmative vote.
26
EXHIBIT F
WYOMING BUSINESS CORPORATION ACT
SEC.17-16-1301 THROUGH SEC.17-16-1331
"DISSENTERS' RIGHTS"
ARTICLE 13. DISSENTERS' RIGHTS
Subarticle A. Right to Dissent and Obtain Payment for Shares
SEC. 17-16-1301. DEFINITIONS.
(a) As used in this article:
(i) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the
record shareholder;
(ii) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving, new, or acquiring
corporation by merger, consolidation, or share exchange of that
issuer;
(iii) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under W.S. 17-16-1302 and who exercises that
right when and in the manner required by W.S. 17-16-1320 through
17-16-1328;
(iv) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the
corporate action to which the dissenter objects, excluding any
appreciation or depreciation in anticipation of the corporate
action unless exclusion would be inequitable;
(v) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans,
or, if none, at a rate that is fair and equitable under all the
circumstances;
(vi) "Record shareholder" means the person in whose names shares are
registered in the records of a corporation or the beneficial
owner of shares to the extent of the rights granted by a nominee
certificate on file with a corporation;
(vii) "Shareholder" means the record shareholder or the beneficial
shareholder. (Laws 1989, ch. 249, sec. 1.)
27
SEC. 17-16-1302. RIGHT TO DISSENT.
(a) A shareholder is entitled to dissent from, and to obtain payment of the fair
value of his shares in the event of, any of the following corporate actions:
(i) Consummation of a plan of merger or consolidation to which the
corporation is a party if;
(A) Shareholder approval is required for the merger or the consolidation
by W.S. 17-16-103 or 17-16-111 or the articles of incorporation and
the shareholder is entitled to vote on the merger or consolidation;
or
(B) The corporation is a subsidiary that is merged with its parent under
W.S. 17-16-1104.
(ii) Consumation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(iii) Consummation of a sale or exchange of all, or substantially all, of
the older icorporation other than in the usual and regular course
of business, if the sharehs entitled to vote on the sale or
exchange, is entitled to vote on the sale or exchange, including a
sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be
distributed to the shareholders within one (1) year after the date
of sale;
(iv) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because
it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters or abolishes a right in respect of redemption,
including a provisison respecting a sinking fund for the redemption
or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the shares
to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares other securities with similar voting rights; or
(E) Reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for
cash under W.S. 17-6-604.
28
(v) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of
the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his
shares under this article may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation. (Laws 1989, ch. 249, sec. 1.)
SEC. 17-16-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer
than all the shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one (1) person and notifies the corporation
in writing of the name and address of each person on whose behalf he asserts
dissenters' rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his behalf only if:
(i) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial
shareholder asserts dissenters' rights; and
(ii) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the
vote. (Laws 1989, ch. 249, sec. 1.)
Subarticle B. Procedure for Exercise of Dissenters' Rights
SEC. 17-16-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
W.S. 17-16-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenters' rights under W.S. 17-16-
1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in W.S. 17-16-1322.
(Laws 1989. ch. 249, sec. 1.)
SEC. 17-16-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
W.S. 17-16-1302 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights
29
shall deliver to the corporation before the vote is taken written notice of his
intent to demand payment for his shares if the proposed action is effectuated
and shall not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection
(a) of this section is not entitled to payment for his shares under this
article. (Laws 1989, ch. 249, sec. 1.)
SEC. 17-16-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
W.S. 17-16-1302 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of W.S. 17-16-1321.
(b) The dissenters' notice shall be sent no later than ten (10) days
after the corporate action was taken, and shall:
(i) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited;
(ii) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is
received;
(iii) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms
of the proposed corporate action and requires that the person
asserting dissenters' rights certify whether or not he acquired
beneficial ownership of the shares before that date;
(iv) Set a date by which the corporation shall receive the payment
demand, which date may not be fewer than thirty (30) nor more than
sixty (60) days after the date the notice required by subsection
(a) of this section is delivered; and
(v) Be accompanied by a copy of this article. (Laws 1989, ch. 249,
sec. 1.)
SEC. 17-16-1323. DUTY TO DEMAND PAYMENT.
A shareholder sent a dissenters' notice described in W.S. 17-16-1322
shall demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to W.S. 17-16-1322(b)(iii), and deposit his certificates in accordance
with the terms of the notice.
(b) The shareholder who demands payment and deposits his share
certificates under subsection (a) of this section retains all other rights of a
shareholder until these rights are cancelled or modified by the taking of the
proposed corporate action.
30
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article. (Laws 1989, ch. 249,
sec. 1.)
SEC. 17-16-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares
from the date the demand for their payment is received until the proposed
corporate action is taken or the restrictions released under W.S. 17-16-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(Laws 1989, ch. 249, sec. 1.)
SEC. 17-16-1325. PAYMENT.
(a) Except as provided in W.S. 17-16-1327, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who complied with W.S. 17-16-1323 the amount the
corporation estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by:
(i) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of
payment, an income statement for that year, a statement of changes
in shareholders' equity for that year, and the latest available
interim financial statements, if any;
(ii) A statement of the corporation's estimate of the fair value of the
shares;
(iii) An explanation of how the interest was calculated;
(iv) A statement of the dissenter's right to demand payment under W.S.
17-16-1328; and
(v) A copy of this article. (Laws 1989, ch. 249, sec. 1.)
SEC. 17-16-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within sixty (60) days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
31
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under W.S. 17-16-1322 and repeat the payment demand
procedure. (Laws 1989, ch. 249, sec. 1.)
SEC. 17-16-1327. AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by W.S. 17-16-1325 from
a dissenter unless he was the beneficial owner of the shares before the date set
forth in the dissenters' notice as the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under subsection
(a) of this section, after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of his
demand. The corporation shall send with its offer a statement of its estimate of
the fair value of the shares, an explanation of how the interest was calculated,
and a statement of the dissenter's right to demand payment under W.S. 17-16-
1328. (Laws 1989, ch. 249, sec. 1.)
SEC. 17-16-1328. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of the
fair value of his shares and amount of interest due, and demand payment of his
estimate, less any payment under W.S. 17-16-1325, or reject the corporation's
offer under W.S. 17-16-1327 and demand payment of the fair value of his shares
and interest due, if:
(i) The dissenter believes that the amount paid under W.S. 17-16-1325 or
offered under W.S. 17-16-1327 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(ii) The corporation fails to make payment under W.S. 17-16-1325 within
sixth (60) days after the date set for demanding payment; or
(iii) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within sixty (60) days after the date
set for demanding payment.
(b) A dissenter waives his right to demand payment under this section unless he
notifies the corporation of his demand in writing under subsection
(a) of this section within thirty (30) days after the corporation made or
offered payment for his shares. (Laws 1989, ch. 249, sec. 1.)
32
Subarticle C. Judicial Appraisal of Shares
SEC. 17-16-1330. COURT ACTION.
(a) If a demand for payment under W.S. 17-16-1328 remains unsettled, the
corporation shall commence a proceeding within sixty (60) days after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty (60) day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the district court of the
county where a corporation's principal office, or if none in this state, its
registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(c) The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unsettled parties to the proceeding as in an action
against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this section is plenary and exclusive. The court may appoint
one (1) or more persons as appraisers to receive evidence and recommend decision
on the question of fair value. The appraisers have the powers described in the
order appointing them, or in the amendment to it. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment for:
(i) The amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation; or
(ii) The fair value, plus accrued interest, of his after-acquired shares
for which the corporation elected to withhold payment under W.S.
17-16-1327. (Laws 1989, ch. 249, sec. 1.)
SEC. 17-16-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under W.S. 17-16-1330 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of appraisers appointed by the court. The court shall assess the costs
against the corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously, or not in good faith
in demanding payment under W.S. 17-16-1328.
33
(b) The court may also assess the fees and expenses of counsel and experts for
the respective parties, in amounts the court finds equitable:
(i) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of W.S. 17-16-1320 through 17-16-1328; or
(ii) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(c) If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonably fees to be paid out of the amounts awarded the
dissenters who were benefited. (Laws 1989, ch. 249, sec. 1.)
34
PRELIMINARY COPY
----------------
PORTACOM WIRELESS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
EXTRAORDINARY AND SPECIAL GENERAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 23, 1996
The undersigned stockholder of PortaCom Wireless, Inc. (the "Company")
hereby appoints Douglas C. MacLellan, President of the Company, or failing him
Michael Richard, Vice-President of the Company, or ,
----------------------
as proxy to attend the Extraordinary and Special General Meeting of Stockholders
and any adjournment or adjournments thereof and to vote the shares in the
capital of the Company registered in the name of the undersigned as
follows:
1. TO APPROVE AS A SPECIAL RESOLUTION A CHANGE IN THE COMPANY'S JURISDICTION
OF INCORPORATION FROM BRITISH COLUMBIA, CANADA TO WYOMING, U.S.A., BY WAY OF A
CONTINUATION UNDER THE WYOMING BUSINESS CORPORATION ACT.
/ / FOR / / AGAINST / / ABSTAIN
2. TO CONSIDER AND IF DEEMED ADVISABLE, TO PASS A RESOLUTION AUTHORIZING THE
CORPORATION TO SUBSEQUENTLY CHANGE ITS DOMICILE FROM WYOMING TO DELAWARE TO BE
ACCOMPLISHED BY THE MERGER OF THE CORPORATION WITH AND INTO A WHOLLY OWNED
DELAWARE CORPORATION FORMED SOLELY FOR THE PURPOSE OF COMPLETING THE MERGER.
/ / FOR / / AGAINST / / ABSTAIN
3. TO CONSIDER AND IF DEEMED ADVISABLE, TO PASS A RESOLUTION AUTHORIZING THE
CORPORATION TO ISSUE 5,000,000 SHARES OF $.001 PAR VALUE PREFERRED STOCK.
/ / FOR / / AGAINST / / ABSTAIN
4. TO CONSIDER AND IF DEEMED ADVISABLE, TO PASS A RESOLUTION AUTHORIZING THE
CORPORATION TO ELIMINATE THE PERSONAL LIABILITY OF DIRECTORS TO THE FULLEST
EXTENT ALLOWED UNDER DELAWARE LAW.
/ / FOR / / AGAINST / / ABSTAIN
5. TO CONSIDER AND IF DEEMED ADVISABLE, TO PASS A RESOLUTION AUTHORIZING THE
CORPORATION TO PROVIDE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS OF THE
CORPORATION CERTAIN INDEMNIFICATION RIGHTS IN ADDITION TO THOSE CURRENTLY
PROVIDED.
/ / FOR / / AGAINST / / ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AND WHERE A CHOICE IS
SPECIFIED WILL BE VOTED AS DIRECTED. WHERE NO CHOICE IS SPECIFIED, THIS PROXY
WILL CONFER DISCRETIONARY AUTHORITY AND WILL BE VOTED IN FAVOR OF THE
RESOLUTIONS REFERRED TO ABOVE. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY
TO VOTE IN RESPECT OF ANY AMENDMENTS OR VARIATIONS TO THE MATTERS IDENTIFIED IN
THE NOTICE OF EXTRAORDINARY AND SPECIAL GENERAL MEETING OR ANY OTHER MATTER
WHICH MAY PROPERLY COME BEFORE THE MEETING AND IN SUCH MANNER AS SUCH NOMINEE IN
HIS JUDGMENT MAY DETERMINE, all in the same manner and to the same extent and
with the same power as the undersigned could do if the undersigned were
personally present at the meeting.
The undersigned hereby revokes any proxy previously given.
AS WITNESS MY HAND this ____ day of __________________, 1996.
PRINT NAME
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SIGNATURE
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ADDRESS
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NOTE: YOU MUST DATE AND SIGN THE PROXY
NOTES
1. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED WHERE A CHOICE IS
SPECIFIED AS DIRECTED. WHERE NO CHOICE IS SPECIFIED, THIS PROXY WILL CONFER
DISCRETIONARY AUTHORITY AND WILL BE VOTED IN FAVOR OF THE RESOLUTIONS REFERRED
TO ABOVE. THIS PROXY ALSO CONFERS DISCRETIONARY AUTHORITY TO VOTE IN RESPECT OF
ANY AMENDMENTS OR VARIATIONS TO THE MATTERS IDENTIFIED IN THE NOTICE OF
EXTRAORDINARY AND SPECIAL GENERAL MEETING, MATTERS INCIDENT TO THE CONDUCT OF
THE MEETING, OR ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING AND
IN SUCH MANNER AS SUCH NOMINEE IN HIS JUDGMENT MAY DETERMINE.
2. IF THE SHAREHOLDER DOES NOT WANT TO APPOINT EITHER OF THE PERSONS NAMED IN
THE INSTRUMENT OF PROXY, HE SHOULD STRIKE OUT THEIR NAMES AND INSERT IN THE
BLANK SPACE PROVIDED THE NAME OF THE PERSON HE WISHES TO ACT AS HIS PROXY. SUCH
OTHER PERSON NEED NOT BE A SHAREHOLDER OF THE CORPORATION.
3. THE INSTRUMENT OF PROXY WILL NOT BE VALID UNLESS IT IS DATED AND SIGNED BY
THE SHAREHOLDER OR BY HIS ATTORNEY DULY AUTHORIZED BY HIM IN WRITING, OR, IN THE
CASE OF A CORPORATION, IS EXECUTED BY AN OFFICER OR OFFICERS OR ATTORNEY FOR THE
CORPORATION. IF THE INSTRUMENT OF PROXY IS EXECUTED BY AN ATTORNEY FOR AN
INDIVIDUAL SHAREHOLDER OR JOINT SHAREHOLDERS OR BY AN OFFICER OR OFFICERS OR
ATTORNEY OF A CORPORATE SHAREHOLDER, THE INSTRUMENT SO EMPOWERING THE OFFICER OR
OFFICERS OR THE ATTORNEY, AS THE CASE MAY BE, OR A NOTARIAL COPY THEREOF, MUST
ACCOMPANY THE PROXY INSTRUMENT.
4. THE INSTRUMENT OF PROXY TO BE EFFECTIVE MUST BE DEPOSITED WITH:
PACIFIC CORPORATE TRUST COMPANY
830-625 HOWE STREET
VANCOUVER, BRITISH COLUMBIA V6C 3D8
BEFORE THE CLOSE OF BUSINESS (VANCOUVER, BRITISH COLUMBIA TIME) NOT LESS THAN
FORTY-EIGHT (48) HOURS, EXCLUDING SATURDAYS AND HOLIDAYS, PRECEDING THE MEETING
OR AN ADJOURNMENT OF THE MEETING.
5. THIS PROXY IS VALID FOR ONE YEAR FROM ITS DATE.
6. THIS PROXY MAY BE REVOKED AT ANY TIME BY (A) SIGNING AND DELIVERING A PROXY
BEARING A LATER DATE, (B) ATTENDING THE MEETING IN PERSON AND REGISTERING WITH
THE SCRUTINEERS, OR (C) BY A SIGNED INSTRUMENT DELIVERED TO THE REGISTERED
OFFICE OF THE COMPANY AT SUITE 1020, 510 BURRARD STREET, VANCOUVER, BRITISH
COLUMBIA, V6C 3A8, OR DEPOSITED WITH THE CHAIRMAN OF THE MEETING, AS DESCRIBED
MORE FULLY AT "APPOINTMENT AND REVOCATION OF PROXIES" IN THE ACCOMPANYING PROXY
STATEMENT.