U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended February 28, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ________________ to _______________.
Commission File Number 0-15482
WAVETECH INC.
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(Exact name of small business issuer as specified in its charter)
NEW JERSEY 22-2726569
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5210 E. WILLIAMS CIRCLE, SUITE 200
TUCSON, ARIZONA 85711
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(Address of principal executive offices)
(520) 750-9093
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(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports,
and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: April 10 , 1997 .
Class No. Of Shares Outstanding
Common Stock. Par Value $.001 14,526,775
- ----------------------------- ----------
Transitional Small Business Disclosure Format (Check One): [ ] Yes [X] No
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INDEX
WAVETECH, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
February 28, 1997 (unaudited) and August 31, 1996 . . . . . 3
Condensed Consolidated Statements of Operations -
Six Months Ended February 28, 1997 and February 29, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Operations -
Three Months Ended February 28, 1997 and February 29, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended February 28, 1997 and February 29, 1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial
Statements - February 28, 1997 and February 29,
1996
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.. . . . . . . . . . . . 8/9
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 10
ITEM 2. Change in Securities . . . . . . . . . . . . . . . . . . . 10
ITEM 3. Defaults upon Senior Securities . . . . . . . . . . . . . . 10
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . 10
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . 10
ITEM 6. Exhibits and Reports on Form 8 - K . . . . . . . . . . . . 11
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
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WAVETECH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1997 (UNAUDITED) AND AUGUST 31, 1996
ASSETS
FEBRUARY 28 AUGUST 31
1997 1996
---- ----
Current assets:
Cash and cash equivalents $ 122,315 $ 857,488
License fee receivable 200,000 200,000
Inventory deposit -- 241,037
Other current assets 105,472 82,388
----------- -----------
Total current assets 427,787 1,380,913
Property and equipment, net 465,144 539,528
Other assets:
License fee receivable 300,000 300,000
Investment in Switch Telecommunications
Pty Limited 2,316,165 2,316,165
Other assets 67,155 43,633
----------- -----------
Total other assets 2,683,320 2,659,798
----------- -----------
Total assets $ 3,576,251 $ 4,580,239
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 290,825 $ 130,715
Unearned revenue 200,000 499,985
Notes payable, current portion 53,639 53,639
Capital leases payable, current portion 31,091 31,091
----------- -----------
Total current liabilities 575,555 715,430
Other liabilities:
Capital leases payable 43,396 55,099
Unearned revenue - license fee 300,000 300,000
----------- -----------
Total other liabilities 343,396 355,099
----------- -----------
Total liabilities 918,951 1,070,529
Stockholders' equity:
Common stock, par value
$.001 per share; 50,000,000 shares
authorized, 14,514,442 and 14,114,441
shares issued and outstanding 14,514 14,114
Additional paid in capital 6,790,902 6,747,967
Retained earnings (accumulated deficit) (4,148,116) (3,252,371)
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Total stockholders' equity 2,657,300 3,509,710
----------- -----------
Total liabilities and stockholders' equity $ 3,576,251 $ 4,580,239
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WAVETECH ,INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED FEBRUARY 28, 1997 AND 1996 (UNAUDITED)
1997 1996
---- ----
Revenue $ 522,639 $ 1,983
Cost of sales:
Direct costs 515,413 104,090
------------ ------------
Gross profit (loss) 7,226 (102,107)
Other costs
Development and administrative expenses 905,234 605,065
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Net loss from operations (898,008) (707,172)
Other income (expense)
Interest income 8,105 10,549
Interest expense (5,838) (832)
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Total other income (expense) 2,267 9,717
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Net loss $ (895,741) $ (697,455)
============ ============
Per share data
Net loss per common share $ (0.06) $ (0.07)
------------ ------------
Weighted average number of shares outstanding 14,228,728 10,432,818
============ ============
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WAVETECH ,INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED FEBRUARY 28, 1997 AND 1996 (UNAUDITED)
1997 1996
---- ----
Revenue $ 514,240 $ (3,009)
Cost of sales:
Direct costs 464,184 74,462
------------ ------------
Gross profit (loss) 50,056 (77,471)
Other costs
Development and administrative expenses
453,117 339,968
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Net loss from operations (403,061) (417,439)
Other income (expense)
Interest income
1,555 8,181
Interest expense (3,538) (832)
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Total other income (expense)
(1,983) 7,349
------------ ------------
Net loss $ (405,044) $ (410,090)
============ ============
Per share data
Net loss per common share (0.03) (0.04)
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Weighted average number of shares outstanding $ 14,314,442 $ 10,500,582
============ ============
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WAVETECH ,INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED FEBRUARY 28, 1997 AND 1996 (UNAUDITED)
1997 1996
---- ----
Cash flows from operating activities:
Net loss $ (895,741) $ (697,455)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 97,759 34,684
Common stock issued for services 23,333
Changes in assets and liabilities:
(Increase) in other current assets (23,084) (50)
Decrease in inventory deposit 241,037
(Increase) in intangibles due to purchase
of Telplex, Inc. (25,000)
Increase (decrease) in accounts payable
and accrued expenses 160,108 (103,311)
(Decrease) in accrued interest payable (39,327)
Decrease in unearned revenue (299,985)
Total Adjustments 174,168 (108,004)
----------- -----------
Net cash used in operating activities (721,573) (805,459)
Cash flows from investing activities:
Purchase of property and equipment (21,897) (62,783)
Increase in other assets (31,593)
----------- -----------
Net cash used in investing activities (21,897) (94,376)
Cash flows from financing activities:
Payment of notes payable (307,939)
Payments on capital lease payable (11,703)
Proceeds from sale of warrants 20,000
Proceeds from common stock issued 1,200,614
----------- -----------
Net cash provided by financing activities 8,297 892,675
----------- -----------
Net increase (decrease) in cash (735,173) (7,160)
Cash and cash equivalents, beginning of period 857,488 285,793
----------- -----------
Cash and cash equivalents, end of period $ 122,315 $ 278,633
=========== ===========
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WAVETECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. The balances as of August 31, 1996 were derived from
audited financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operation results for the three month and six
month periods ended February 28, 1997 are not necessarily indicative of the
results that may be expected for the fiscal year ending August 31, 1997. For
further information, refer to the Company's financial statements for the year
ended August 31, 1996 included in its Form 10-KSB/A.
The consolidated financial statements include the accounts of Wavetech, Inc.
(the Company) and its wholly owned subsidiaries, Interpretel, Inc., Interpretel
(Canada) Inc., International Environment Services Corporation (an inactive
corporation), and Telplex International Communications, Inc. - (see Note 2). All
material intercompany balances and transactions have been eliminated.
On March 8, 1995, the Company entered into a Plan and Agreement of
Reorganization for the Exchange of Stock ("Acquisition") with the former
shareholders of Interpretel, Inc., an Arizona corporation ("Interpretel"),
pursuant to which the Company agreed to issue 6,000,000 shares of its common
stock in exchange for 100% of the 1,532,140 shares of Interpretel's common stock
then outstanding. In addition, former shareholders of Interpretel are entitled
to receive additional shares of the Company's common stock if the Company meets
certain net profit thresholds. Interpretel's business consists of developing,
marketing, and providing interactive telecommunication systems and services to
business and individual customers. The systems incorporate interactive call
processing, computer-telephony integration, card production/fulfillment, billing
services, marketing, sales support, and customer service to provide features and
services, including but not limited to long distance dialing, voice/fax
messaging, voice/fax broadcast, language interpretation/translation,
information, retrieval, interface to existing databases, and product promotion
services. Each Interpretel system is developed to reflect or target the needs of
an identified (target) market, with services provided to individual customers
via a calling card product incorporating the use of certain trade secrets, trade
marks, service marks, and materials related thereto.
NOTE 2 - ACQUISITION
On January 1, 1997, the Company acquired certain intangible assets of Telplex,
Inc., an Arizona corporation, in exchange for $25,000 in cash. These assets were
placed in a new wholly-owned subsidiary of Wavetech, Inc. called Telplex
International Communications, Inc. ("Telplex"). The Company did not assume any
of the liabilities of Telplex. Telplex is a switchless international long
distance reseller. The Acquisition of Telplex's assets was made pursuant to an
Asset Purchase Agreement dated January 22, 1997 by the Company, although it is
deemed effective as of January 1, 1997.
This Acquisition has been accounted for under the purchase method of accounting
and the results of Telplex's operations since the acquisition date have been
included with those of the Company.
NOTE 3 - PER SHARE DATA
Per share data is based on the weighted average number of shares outstanding
throughout the periods. There is no difference between primary and fully
dilutive earnings per share, because the assumed exercise of stock options
outstanding would not have a dilutive effect on the computation.
7
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2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
THREE MONTHS ENDED FEBRUARY 28, 1997 COMPARED TO
THREE MONTHS ENDED FEBRUARY 29, 1996
Beginning for the year ended August 31, 1997 the income statement now has a
separate line item for the direct allocation of cost of sales due to the
increase in revenue.
REVENUES
Revenues increased to $514,240 for the three months ended February 28, 1997 from
($3,009) for the three months ended February 29, 1996 . $474,160 was due to
revenue representing the purchase and installation of an Interpretel System
which consisted of a computer platform and related software and $35,000
represents revenues resulting from the resale of international long distance
minutes.
COST OF SALES
Cost of sales increased to $464,184 for the three months ended February 28, 1997
from $74,462 for the three months ended February 29, 1996. $378,009 of this
increase was due to the cost of a computer platform and software for the sale of
an Interpretel System and $28,180 represents the cost associated with the resale
of international long distance minutes. The increase was also due to greater
expenditures on print advertising and costs associated with the creative
development and printing of the fulfillment kits for the various cards.
DEVELOPMENT AND ADMINISTRATIVE COSTS
Expenses increased to $453,117 for the three months ended February 28, 1997 from
$339,968 for the three months ended February 29, 1996. $14,000 of the increase
resulted from additional overhead costs associated with the Acquisition of
certain intangible assets of Telplex, Inc., an Arizona corporation, in January
1997. Other costs associated with the increase related to investor relations,
legal costs associated with the preparation of the 10KSB, proxy solicitation and
various required filings, marketing and depreciation expenses.
SIX MONTHS ENDED FEBRUARY 28, 1997 COMPARED TO
SIX MONTHS ENDED FEBRUARY 29, 1996
REVENUES
Total revenues increased to $522,639 for the six months ended February 28, 1997
from $1,983 for the six months ended February 29, 1996. This increase was due
almost entirely to the installation revenue and to resale of the international
long distance minutes.
COST OF SALES
Total cost of sales increased to $515,413 for the six months ended February 28,
1997 from $104,090 for the six months ended February 29, 1996. $406,189 of the
increase in cost of sales was attributable to the costs associated with the
installation of the Interpretel System and costs associated with the resale of
international long distance minutes. Marketing and the costs of fulfillment for
the six months ended February 28, 1997 accounted for an increase of $67,500 as
compared to $0 for the six months ended February 29, 1996.
8
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DEVELOPMENT AND ADMINISTRATIVE COSTS
Total development and administrative costs increased to $905,234 for the six
months ended February 28, 1997 from $605,065 for the six months ended February
29, 1996. This increase was due to greater expenditures on advertising, investor
relations, platform services, rent escalation, legal, and depreciation expenses.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1997, the Company had $122,315 in cash. The Company's principal
uses of cash were for general working capital purposes. In March 1997, the
Company entered into an agreement to secure approximately $200,000 of short-term
financing while the Company continues to aggressively pursue long-term
financing.
The Company's liquidity position is strained. Liquidity needs are currently
being met from internally generated funds and financing activities. Because the
Company has not achieved positive cash flow from its operating activities, the
Company's ability to continue operations is dependent upon its ability to raise
additional equity and/or debt financing. Although the Company is negotiating an
agreement to raise equity and/or financing, in order to meet its long-term
liquidity needs, and is actively engaged in activities regarding such financing,
there can be no assurance that the Company will be able to consummate the
transaction and/or raise the additional financing necessary to pursue its
business plan on a timely basis.
INFLATION
Although the Company's operations are influenced by general economic trends and
technology advances in the telecommunications industry, the Company does not
believe that inflation has a material effect on its operations.
TRENDS
Within the computer telephony industry, there is a strong trend toward
consolidation by both established and emerging growth companies. Since this
industry is very dynamic and not considered mature, consolidation allows
companies to leverage their technologies to acquire market shares more rapidly.
It is the intent of Wavetech to identify synergistic companies within this
industry and to form alliances through strategic partnerships, mergers and or
acquisitions. Benchmarks used for identifying prospective companies include:
technology innovations; market growth opportunities; management expertise; and
ongoing revenue.
9
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NOT APPLICABLE
ITEM 2. CHANGE IN SECURITIES
On January 21, 1997, the Company issued a Warrant to purchase up to 2,000,000
shares of Common Stock to Switch Telecommunications Australia Pty Ltd., an
Australian corporation ("Switch") in exchange for $20,000 cash. The Warrant
permits Switch to purchase up to 2,000,000 shares of the Company's Common Stock
at any time on or before January 21, 2001 at a price of $1.50 per share. The
Warrant was issued in connection with a memorandum of understanding, dated May
21, 1996, between the Company and Switch.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NOT APPLICABLE
ITEM 5. OTHER INFORMATION - NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Number Description Method of Filing
------ ----------- ----------------
3.1 Certificate of Incorporation *
3.2 By-laws *
10.1 Warrant, dated January 21, 1997, by the Company
to Switch Telecommunications Pty *
10.2 Employment Agreement, dated January 22, 1997,
between Telplex International Communications,
Inc. and John Vogel *
27 Financial Data Schedule *
* Filed herewith
(b) REPORTS ON FORM 8-K -- NOT APPLICABLE
10
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: WAVETECH, INC.
By: /s/ Gerald I. Quinn
---------------------------------------
Gerald I. Quinn
President and Chief Executive Officer
By: /s/ Lydia M. Montoya
---------------------------------------
Lydia M. Montoya
Chief Financial Officer
11
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
WAVETECH, INC.
THIS IS TO CERTIFY THAT there is hereby organized a corporation under and by
virtue of N. J. S. 14A:1-1 et seq., the "New Jersey Business Corporation Act."
FIRST: The name of the corporation is Wavetech, Inc.
SECOND: The address of the corporation's initial registered office is One
Cherry Hill, Cherry Hill, New Jersey 08002. The name of the registered agent at
such address is William N. Levy, Esq.
THIRD: The purpose for which this corporation is organized is to engage in
any activity within the purposes for which corporations may be organized under
the "New Jersey Business Corporation Act." N. J. S. 14A:1-1 et seq.
FOURTH: The aggregate number of shares which the corporation shall have
authority to issue is 50 Million shares with par value of $.001 per share.
FIFTH: The number of directors constituting the initial Board of Directors
of this corporation is five. The name and address of each person who is to serve
as such Director is: Joseph Leporace, 7050 Kaighn Avenue, Pennsauken, New
Jersey, 08019. Sergio Zefelippo, Sr., 7050 Kaighn Avenue, Pennsauken, New
Jersey, 08019. Sergio Zefelippo, Jr., 7050 Kaighn Avenue, Pennsauken, New
Jersey, 08019. Francis F. Walton, 7050 Kaighn Avenue, Pennsauken, New Jersey,
08019. Ralph Leporace, 7050 Kaighn Avenue, Pennsauken, New Jersey, 08019.
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SIXTH: The name and address of the incorporator is Capitol Information
Service, Inc., 156 West State Street, Trenton, New Jersey 08608.
In Witness Whereof, each individual incorporator, being over eighteen years
of age has signed this certificate; or if the incorporator be a corporation has
caused this certificate to be signed by its duly authorized officers this 7th
day of July 1986.
/s/ Terry Monroe
---------------------------------
Terry Monroe, Vice President
Capitol Information Service, Inc.
156 West State Street
Trenton, New Jersey 08608
FILED FOR: William N. Levy, Esq.
Levy & Levy, P.A.
One Cherry Hill
Cherry Hill, New Jersey 08002
2
Exhibit 3.2
BY-LAWS
OF
WAVETECH, INC.
ARTICLE I
OFFICES
The registered office of the corporation shall be at 7050 Kaighn Avenue,
Pennsauken, New Jersey 08109 but such address may be changed from time to time
by the Board of Directors.
The corporation shall have a principal office and such other offices,
either within or without the State of New Jersey, as the Board of Directors may
designate or the business of the corporation may require from time to time.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders shall be held on
the Third (3rd) Monday of October each year, beginning with the year 1986, at
the hour of 10:00 A.M., local time, for the election of directors and such other
business as may properly come before the meeting. If the day fixed for the
annual meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated for any annual meeting, or at any adjournment hereof, the Board
of Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as may be practicable.
<PAGE>
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders may be called
by the Board of Directors, by the President, or by the holders of not less than
one-fifth of the outstanding shares entitled to vote at such meeting, and shall
be called by the President or the Secretary at the request in writing of a
majority of the board or at the request in writing by shareholders owning a
majority in amount of the shares issued and outstanding. Such request shall
state the purpose or purposes of the proposed meeting. Business transacted at a
special meeting shall be confined to the purposes stated in the notice.
SECTION 3. PLACE OF MEETING. Special meetings of the shareholders shall take
place at such location within the State of New Jersey or as designated by the
Board of Directors.
SECTION 4. NOTICE OF MEETING. Written notice of each meeting of shareholders
shall state the purpose or purposes for which the meeting is called, the place,
date and hour of the meeting and unless it is an annual meeting, shall indicate
that it is being issued by or at the direction of the person or persons calling
the meeting. Notice shall be given either personally or by mail to each
shareholder entitled to vote at such meeting, not less than thirty (30) nor more
than sixty (60) days before the date of the meeting. If action is proposed to be
taken that might entitle shareholders to payment for their shares, the notice
shall include a statement of that purpose and to that effect. If mailed, the
notice is given when deposited in the United States mail with postage thereon
prepaid, directed to the shareholder at his address as it appears on the record
of shareholders, or, if he shall have filed with the Secretary a written request
that notices to him be mailed to some other address, then directed to him at
such other address.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall meet at
any time and place, either within or without the State of New Jersey and consent
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to the holding of a meeting, such meeting shall be valid without call or notice
and at such meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the corporation may provide
that the stock transfer books shall be closed for a state period but not to
exceed, in any case, sixty (60) days. If the stock transfer books shall not be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be no
more than sixty (60) days and, in case of a meeting of shareholders, not less
than ten (10) days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. If the stock transfer books
is not closed and no record date is fixed for the determination shareholders
entitled to notice of or to vote at a meeting shareholders, or shareholders
entitled to receive payment of a dividend, the first date on which notice of the
meeting mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
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SECTION 7. VOTING RECORD. The officer or agent having charge of the stock
transfer books for shares of the corporation shall make a complete record of the
shareholders entitled to vote at each meeting of shareholders or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting for the purposes thereof. The original
stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or stock transfer books or to vote at
any meeting of shareholders.
SECTION 8. QUORUM: A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally noted.
The shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
SECTION 9. PROXIES. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy. Every proxy must by signed by
the shareholder or his attorney-in-fact. No proxy shall be valid after eleven
(11) months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the shareholder executing it, except
otherwise provided by law.
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SECTION 10. VOTE OF SHAREHOLDERS. Except as otherwise required by statute or by
the certificate of incorporation:
(a) at each election of directors every shareholder entitled to vote at such
election shall have one vote for each full voting share of the corporation that
stands in that person's name on the books of the corporation;
(b) all corporate action, including that of the election of Directors, shall be
authorized by a majority of the votes cast.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of
another corporation may be voted by either the president of such corporation or
by proxy appointed by him unless the Board of Directors of such corporation
should determine otherwise, in which event any other person authorized to vote
such shares shall produce a certified copy of a resolution of the board of
Directors of such corporation so indicating.
Shares held by an administrator, executor, guardian, conservator, or committee
may be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.
Shares standing in the joint names of three or more fiduciaries shall be voted
in the manner determined by the majority of such fiduciaries, unless the
instrument or order appointing such fiduciaries otherwise directs.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
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without the transfer thereof into his name if authority so to do be contained in
___ appropriate order of the court by which such receiver is appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred to the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
SECTION 12. INSPECTORS OF ELECTION. The board may, in ________ance of any
shareholders' meeting, or of the tabulation written consents of shareholders
without a meeting, appoint one or more inspectors to act at the meeting or any
adjournment thereof or to tabulate such consents and make a written report
thereof. If inspectors to act at any meeting of shareholders are not so
appointed or shall fail to qualify, the person presiding at a shareholders'
meeting ___ and on the request of any shareholder entitled to ____ thereat,
shall, make such appointment.
____ inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute ____ duties of inspector with strict
impartiality and according to the best of his ability. No person shall be
elected a _____ in an election for which he has served as an inspector.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the corporation shall be
managed by its Board of Directors.
SECTION 2. ELECTION AND TERM OF DIRECTORS. At each annual meeting of
shareholders, the shareholders shall elect directors to hold office until the
next annual meeting.
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Each director shall hold office until the expiration of the term for which he is
elected and until his successor has been elected and qualified, or until his
prior resignation or removal.
SECTION 3. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the
corporation shall be no more than 9, however, the initial number of directors of
the corporation shall be four (4), and this current board may be increased from
time to time to fill the vacancies without amendment of this By-law. Each
director shall hold office until the next annual meeting of shareholders and
until his successor shall have been elected and qualified. Directors need not be
residents of New Jersey nor shareholders of the corporation.
SECTION 4. REGULAR MEETING. A regular meeting of the Board of Directors shall be
held without other notice than this By-law, immediately after, and at the same
place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of New Jersey for the holding of additional regular meetings without other
notice than such resolution.
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the president or any two directors. The person or
persons authorized to call special meetings of the Board of Directors ____ fix
any place, either within or without the State of New Jersey as the place for
holding any special meeting of the board of Directors called by them.
SECTION 6. NOTICE OF MEETINGS OF THE BOARD, ADJOURNMENT.
(a) Regular meetings of the board may be held without notice at such time and
place as it shall from time to time determine. Special meetings of the board
shall be held upon notice to the directors and may be called by the President
upon three (3) days' notice to each director either personally or by mail or
wire; special meetings shall be called by the President or by the Secretary in a
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like manner on written request of two directors. Notice of a meeting need not be
given to any director who submits a waiver of notice whether before or after the
meeting or who attends the meeting without protesting prior thereto or at its
commencement, the lack of notice to him.
(b) A majority of the directors present, whether or not a quorum is present, may
adjourn any meeting to another time and place. Notice of the adjournment shall
be given all directors who were absent at the time of the adjournment and,
unless such time and place are announced at the meeting, to the other directors.
SECTION 7. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken by the board of Directors, or by a committee thereof, at a meeting may be
taken without a meeting if a consent in writing, setting forth the action taken,
shall be signed by all of the directors, or by all of the members of the
committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
SECTION 8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the board for any reason except the removal of directors
without cause may be fulled by a vote of a majority of the directors then in
office, although less than a quorum exists. Vacancies occurring by reason of the
removal of directors without a cause shall be filed by vote of the shareholders.
A director elected to fill a vacancy caused by resignation, death or removal
shall be elected to hold office for the unexpired term of his predecessor.
SECTION 9. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for
cause by vote of the shareholders or by action of the board. Directors may be
removed without cause only by vote of the shareholders.
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SECTION 10. RESIGNATION. A director may resign at any time by giving written
notice to the board, the President or the Secretary of the corporation. Unless
otherwise specified in the notice, the resignation shall take effect upon
receipt thereof by the board or such officer, and the acceptance of the
resignation shall not be necessary to make it effective.
SECTION 11. QUORUM OF DIRECTORS. A majority of the then _______ board shall
constitute a quorum for the transaction of business or of any specified item of
business.
SECTION 12. ACTION OF THE BOARD. Unless otherwise required by law, the vote of a
majority of the directors present at the time of the vote, if a quorum is
present at such time, shall be the act of the board. Each director ______ shall
have one vote regardless of the number of _______, if any, which he may hold.
SECTION 13. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors, may designate
from among its members an __________________ committee and one or more other
committees each _________________, to the extent provided in such resolution,
shall _________ may exercise all the authority of the Board of Directors, but no
such committee shall have the authority of the Board of Directors in reference
to amending the Articles of Incorporation, adopting a plan of merger or
consolidation, recommending to the shareholders the sale, lease, exchange or
other disposition of all or substantially all the property and assets of the
corporation otherwise than in the usual and regular course of business,
recommending to the shareholders a voluntary dissolution of the corporation or a
revocation thereof, or amending the By-laws.
SECTION 14. COMPENSATION. No compensation shall be paid to directors, as such,
for their services, but by resolution of the board a fixed sum and expenses for
actual attendance at each regular or special meeting of the board may be
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authorized. Nothing herein contained shall be construed to preclude any director
form serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS, ELECTION, TERM.
(a) The board may elect or appoint a president, one or more vice-presidents, a
secretary and a treasurer, and such other officers as it may determine, who
shall have such duties, powers and functions as hereinafter provided.
(b) All officers shall be elected or appointed to hold office until the meeting
of the board following the annual meeting of shareholders.
(c) Each officer shall hold office for the term for which he is elected or
appointed and until his successor has been elected or appointed and qualified.
SECTION 2. REMOVAL, RESIGNATION, SALARY, ETC.
(a) Any officer or agent may be removed by the Board of Directors whenever in
its judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
(b) In the event of the death, resignation or removal of an officer, the board
in its discretion may elect or appoint a successor to fill the unexpired term.
(c) Any two or more offices may be held by the same person, except the offices
of president and secretary.
(d) The salaries and other compensation of all officers, employees and agents of
the corporation shall be fixed by the board of Directors, except that the Board
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of Directors may designate the president or other officer of the corporation to
fix the salaries of all or certain employees.
(e) The directors may require any officer to give security for the faithful
performance of his duties.
SECTION 3. PRESIDENT. The president shall be the principal executive officer of
the corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
corporation. It shall, when present, preside at all meetings of the
shareholders. He may sign, with the secretary or any other proper officer of the
corporation thereunto authorized by the Board of Directors, certificates for
shares of the corporation, and deeds, mortgages, bonds, contracts, or other
instruments which the board of Directors has authorized to be executed, except
in cases where the signing and execution thereof shall be expressly delegated by
the Board of Directors or by these By-laws to some other officer of agent of the
corporation, or shall be required by law to be otherwise signed or executed; and
in general shall perform all duties incident to the office of president and such
other duties as may be prescribed by the Board of Directors from time to time.
SECTION 4. VICE-PRESIDENT. In the absence of the president or in the event of
his death, inability or refusal to act, the vice-president (or in the event
there no more than one vice-president, the vice-presidents in the order
designated at the time of their election, or in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. Any vice-president may sign, with the secretary
or an assistant secretary, certificates for shares of the corporation; and shall
perform such other duties as from time to time may be assigned to him by the
president or by the board of Directors.
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SECTION 5. SECRETARY. The secretary shall:
(a) attend all meetings of the board and of the shareholders;
(b) record all votes and minutes of all proceedings in a book to be kept for
that purpose;
(c) give or cause to be given notice of all meetings of shareholders and of
special meetings of the board;
(d) keep in safe custody the seal of the corporation and affix it to any
instrument when authorized by the board;
(e) when required, prepare or cause to be prepared and available at each meeting
of shareholders a certified list in alphabetical order of the names of
shareholders entitled to vote thereat, indicating the number of shares of each
respective class held by each;
(f) keep all the documents and records of the corporation as required by law or
otherwise in a proper and safe manner.
(g) perform such other duties as may be prescribed by the board.
SECTION 6. ASSISTANT-SECRETARIES. During the absence or disability of the
secretary, the assistant-secretary, or if there are more than one, the one so
designated by the secretary or by the board, shall have all the powers and
functions of the secretary.
SECTION 7. TREASURER. The treasurer shall:
(a) have custody of corporate funds and securities;
(b) keep full and accurate accounts of receipts and disbursements in the
corporate books;
(c) deposit all such moneys and other valuables in the name and to the credit of
the corporation in such depositories as may be designated by the board;
(d) disburse the funds of the corporation as may be ordered or authorized by the
board and preserve proper vouchers for such disbursements;
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(e) render to the president and board at the regular meetings of the board, or
whenever they require it, an account of all his transactions as treasurer and of
the financial condition of the corporation;
(f) render a full financial report at the annual meeting of the shareholders if
so requested;
(g) be furnished by all corporate officers and agents at his request, with such
reports and statements as he may require as to all financial transactions of the
corporation;
(h) perform such other duties as are given to him by these By-laws or as from
time to time are assigned to him by the board or the president. The President
may also hold the office of Treasurer.
SECTION 8. ASSISTANT TREASURER. During the absence or disability of the
treasurer, the assistant-treasurer, or if there are more than one, the one so
designated by the secretary of by the board, shall have all the powers and
functions of the treasurer.
SECTION 9. CHAIRMAN OF THE BOARD. The office of chairman of the board is hereby
authorized. The Board of Directors may elect a chairman of the board as an
executive officer of the corporation and, subject to the control of the Board of
Directors, or, the Board of Directors may elect one of its members to act as
chairman for such board meeting as the board deems appropriate. If no specific
chairman of the board is elected either permanently or temporarily, the
president, when present, shall preside over meetings of the Board of Directors.
SECTION 10. SURETIES AND BONDS. In case the board shall so require, any officer
or agent of the corporation shall execute to the corporation a bond in such sum
and with such surety or sureties as the board may direct, conditioned upon the
faithful performance of his duties to the corporation and including
responsibility for negligence and for the accounting for all property, funds or
securities of the corporation which may come into his hands.
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ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the president or a
vice-president and by the secretary or an assistant secretary and shall bear the
corporate seal.
The signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar,
other than the corporation itself or one of its employees. Each certificate for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled.
SECTION 2. LOST OR DESTROYED CERTIFICATES. The board may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation, alleged to have been lost or
destroyed. When authorizing such issue of a new certificate or certificates, the
board may, in its discretion and as a condition precedent to the issuance
thereof, require an affidavit from the person claiming the certificate to be
lost or destroyed, or require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the corporation a bond in such sum and with such
surety or
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sureties as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
SECTION 3. TRANSFER OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, and
cancel the old certificate; every such transfer shall be entered on the transfer
book of the corporation which shall be kept at its principal office. No transfer
shall be made within ten (10) days next preceding the annual meeting of
shareholders.
(b) The corporation shall be entitled to treat the holder of record of any share
as the holder in fact thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such share on the part of any
other person whether or not it shall have express or other notice thereof,
except as expressly provided by the laws of New Jersey.
SECTION 4. CLOSING TRANSFER BOOKS. The board shall have the power to close the
share transfer books of the corporation for a period of not more than ten (10)
days during the thirty (30) day period immediately preceding (1) any
shareholders' meeting, or (2) any date upon which shareholders shall be called
upon to or have a right to take action without a meeting, or (3) any date fixed
for the payment of a dividend or any other form of distribution, and only those
shareholders of record at the time the transfer books are closed, shall be
recognized as such for the purpose of (1) receiving notice of or voting at such
meeting, or (2) allowing them to take appropriate action, or (3) entitling them
to receive any dividend or other form of distribution.
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ARTICLE VI
DIVIDENDS
Subject to applicable law, dividends on the outstanding shares of the
corporation may be declared in such amounts and at such time or times as the
board may determine. Before payment of any dividend, there may be set aside out
of the net profits of the corporation available for dividends such sum or sums
as the board from time to time in its absolute discretion deems proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the board shall think conducive to the interests of the corporation,
and the board may modify or abolish such reserve.
ARTICLE VII
CORPORATE SEAL
The seal of the corporation shall be circular in form and bear the name of the
corporation, the year of its organization and the words "Corporate Seal,
Pennsylvania." The seal may be used by causing it to be impressed directly in
the instrument or writing to be sealed, or upon adhesive substance affixed
thereto. The seal on the certificates for shares or on any corporate obligation
for the payment may be a facsimile, engraved or printed.
ARTICLE VIII
EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or countersigned,
executed, verified or acknowledged by such officer or officers or other person
or persons as the board may from time to time designate.
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ARTICLE IX
FISCAL YEAR
The fiscal year shall begin the 1st day of September of each year.
ARTICLE X
BOOKS AND ACCOUNTS
The corporation shall keep books and records of account and minutes of the
proceedings of the shareholders, Board of Directors and executive committee, if
any. Such books, records and minutes may be kept outside this State. The
corporation shall make available for inspection at its registered office, or at
the office of a transfer agent in this State, a record or records containing the
names and addresses of all shareholders, the number, class and series of shares
held by each and the dates when they respectively became the owners of record
thereof, within ten (10) days after demand by a shareholder entitled to inspect
them, except that in the case of shares listed on a national securities
exchange, the records may be made available at the office of a transfer agent
within or without this State.
ARTICLE XI
INSPECTION
Any person who shall have been a shareholder of record of the corporation for at
least six (6) months immediately preceding his demand, or any person holding, or
so authorized in writing by the holders of, at least five (5) percent of the
outstanding shares of any class or series, upon at least five (5) days' written
demand shall have the right for any proper purpose to examine in person or by
agent or attorney, during usual business hours, the minutes of the proceedings
of the shareholders and record of shareholders and to make extracts therefrom at
the places where the same are kept.
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ARTICLE XII
LOANS TO OFFICERS OR EMPLOYEES
The corporation may lend money to, or guarantee any obligation of, or otherwise
assist, any officer or other employee of the corporation or of any subsidiary,
whenever it may reasonably be expected to benefit the corporation. If the
officer or employee is also a director of the corporation, such loan, guarantee
or assistance, unless pursuant to a plan adopted by the shareholders in
accordance with the provisions of Chapter 8 of the Act (Employee Benefit Plans),
shall be authorized by a majority of the entire Board of Directors.
ARTICLE XIII
DISALLOWED COMPENSATION
Any payments made to an officer or employee of the corporation such as a salary,
commission, bonus, interest, rent, travel or entertainment expense incurred by
him, which shall be disallowed in whole or in part as a deductible expense by
the Internal Revenue Service, shall be reimbursed by such officer or employee to
the corporation to the full extent of such disallowance. It shall be the duty of
the directors, as a Board, to enforce payment of each such amount disallowed. In
lieu of payment by the officer or employee, subject to the determination of the
directors, proportionate amounts may be withheld from his future compensation
payments until the amount owed to the corporation has been recovered.
ARTICLE XIV
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or director of
the corporation under the provisions of these By-laws, or under the provisions
of the Articles of Incorporation, or under the provisions of the New Jersey
Business Corporation Act, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
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ARTICLE XV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall indemnify each of its directors and officers 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 or officer 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.
Except as provided herein below, any such indemnification shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth above. Such
determination shall be made: (a) by the Board of Directors by a majority vote of
a quorum of directors who were or are not parties to such action, suit, or
proceeding, or (b) by the shareholders.
Expenses (including attorneys' fees) incurred in defending a civil or criminal
action, suit, or proceeding may be paid by the corporation in advance of the
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final disposition of such action or proceeding, if authorized by the Board of
Directors and 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.
To the extent that a director or officer has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, 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, without any further determination that he has met the
applicable standard of conduct set forth above.
ARTICLE XVI
REFERENCES TO CERTIFICATE OF INCORPORATION
Reference to the certificate of incorporation in these by-laws shall include all
amendments thereto or changes thereof unless specifically excepted.
ARTICLE XVII
BY-LAW CHANGES
SECTION 1. AMENDMENT, REPEAL, ADOPTION, ELECTION OF DIRECTORS.
(a) Except as otherwise provided in the certificate of incorporation the By-laws
may be amended, repealed or adopted by majority vote of the holders of the
shares at the time entitled to vote in the election of any directors. By-laws
may also be amended, repealed or adopted by the board but any By-law adopted by
the board may be amended by the shareholders entitled to vote thereon as
hereinabove provided.
(b) If any By-law regulating an impending election of directors is adopted,
amended or repealed by the board, there shall be set forth in the notice of the
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next meeting of shareholders for the election of directors the By-law so
adopted, amended or repealed, together with a concise statement of the changes
made.
Read, approved and adopted by the Board of Directors, this 15th day of July,
1986.
WAVETECH, INC.
--------------------------------
JOSEPH LEPORACE
--------------------------------
SERGIO ZEFELIPPO
--------------------------------
F. CLARK WALTON
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EXHIBIT 10.1
NEITHER THIS WARRANT NOR THE SECURITIES REPRESENTED HEREBY HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL SUCH ARE
REGISTERED UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED UPON ITS
EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT
Number of Shares: 2,000,000
(subject to adjustment)
Date of Issuance: January 21,1997
WAVETECH, INC.
Common Stock Purchase Warrant
(Void after January 21, 2000)
WAVETECH, INC., a New Jersey corporation (the "Company"), for value
received, hereby certifies that Switch Telecommunications Australia Pty Ltd., an
Australian company, or its registered assigns (the "Registered Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company, at
any time or from time to time on or after the date of issuance and on or before
January 21, 2000 at not later than 5:00 p.m. (Tucson, Arizona time), 2,000,000
shares of Common Stock, $.001 par value per share, of the Company, at a purchase
price of $1.50 United States Dollars per share. The shares purchasable upon
exercise of this Warrant, and the purchase price per share, each as adjusted
from time to time pursuant to the provisions of this Warrant, are hereinafter
referred to as the "Warrant Shares" and the "Purchase Price," respectively.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit I duly executed by such Registered Holder or by such Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full, in lawful money of the United States, of the Purchase Price payable in
respect of the number of Warrant Shares purchased upon such exercise.
<PAGE>
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day (the "Exercise
Date") on which this Warrant shall have been surrendered to the Company as
provided in subsection l(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection l(c) below shall be deemed to have become the
holder or holders of record of the Warrant Shares represented by such
certificates.
(c) As soon as practicable after the exercise of this Warrant in full
or in part, within 10 days thereafter, the Company, at its expense, will cause
to be issued in the name of, and delivered to, the Registered Holder, or as such
Holder (upon payment by such Holder of any applicable transfer taxes) may
direct:
(i) a certificate or certificates for the number of full Warrant
Shares to which such Registered Holder shall be entitled upon such exercise
plus, in lieu of any fractional share to which such Registered Holder would
otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of Warrant Shares equal (without giving
effect to any adjustment therein) to the number of such shares called for on the
face of this Warrant minus the sum of the number of such shares purchased by the
Registered Holder upon such exercise.
2. Adjustments. The Purchase Price shall be subject to adjustment from time
to time pursuant to the terms of this Section 2.
(a) Recapitalizations. If outstanding shares of the Company's Common
Stock shall be subdivided into a greater number of shares or a dividend in
Common Stock shall be paid in respect of Common Stock, the Purchase Price in
effect immediately prior to such subdivision or at the record date of such
dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased.
(b) Mergers, etc. If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a subdivision or
combination as provided for in subsection 2(a) above), or any consolidation or
merger of the Company with or into another corporation, or a transfer of all or
substantially all of the assets of the Company, then, as part of any such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the Registered Holder of this Warrant
shall have the right thereafter to receive upon the exercise hereof the kind and
amount of shares of stock or other securities or property which such Registered
Holder would have been entitled to receive if, immediately prior to any such
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reorganization, reclassification, consolidation, merger or sale, as the case may
be, such Registered Holder had held the number of shares of Common Stock which
were then purchasable upon the exercise of this Warrant. In any such case,
appropriate adjustment (as reasonably determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interests thereafter of the
Registered Holder of this Warrant, such that the provisions set forth in this
Section 2 (including provisions with respect to adjustment of the Purchase
Price) shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property thereafter
deliverable upon the exercise of this Warrant.
(c) Adjustment in Number of Warrant Shares. When any adjustment is
required to be made in the Purchase Price, the number of Warrant Shares
purchasable upon the exercise of this Warrant shall be changed to the number
determined by dividing (i) an amount equal to the number of shares issuable upon
the exercise of this Warrant immediately prior to such adjustment, multiplied by
the Purchase Price in effect immediately prior to such adjustment, by (ii) the
Purchase Price in effect immediately after such adjustment.
(d) Certificate of Adjustment. When any adjustment is required to be
made pursuant to this Section 2, the Company shall promptly mail to the
Registered Holder a certificate setting forth the Purchase Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment. Such certificate shall also set forth the kind and amount of stock
or other securities or property into which this Warrant shall be exercisable
following such adjustment.
3. Fractional Shares. The Company shall not be required upon the exercise
of this Warrant to issue any fractional shares, but shall make an adjustment
therefor in cash on the basis of the Fair Market Value per share of Common
Stock. As used herein "Fair Market Value" shall mean: (i) if the Common Stock is
listed on a nationally recognized securities exchange, the last reported sale
price per share of Common Stock on the Exercise Date, or the next preceding
business day if no such price is reported on the Exercise Date, or (ii) if the
Common Stock is not listed on a nationally recognized securities exchange, as
determined by the Board of Directors in good faith.
4. Requirements for Transfer.
(a) The Company or its agent will maintain a register containing the
names and addresses of the Registered Holders of this Warrant. Any Registered
Holder may change its or his address as shown on the warrant register by written
notice to the Company requesting such change.
(b) This Warrant and the Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
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5. No Impairment. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.
6. Notices of Record Date, etc. In case:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time deliverable upon the exercise of this
Warrant) for the purpose of entitling or enabling them to receive any dividend
or other distribution, or to receive any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to receive any other
right; or
(b) of any capital reorganization of the Company, any reclassification
of the capital stock of the Company, any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the surviving entity), or any transfer of all or substantially
all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at the
time deliverable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Common Stock (or such other stock or securities) for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the
record date or effective date for the event specified in such notice.
7. Reservation of Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other stock, securities and property, as from
time to time shall be issuable upon the exercise of this Warrant.
8. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
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indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
9. Mailing of Notices, etc. All notices and other communications from the
Company to the Registered Holder of this Warrant shall be mailed by first-class
certified or registered mail, postage prepaid, to the address furnished to the
Company in writing by the last Registered Holder of this Warrant who shall have
furnished an address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in connection
herewith to the Company shall be mailed by first-class certified or registered
mail, postage prepaid, to the Company at its principal office set forth below.
If the Company should at any time change the location of its principal office to
a place other than as set forth below, it shall give prompt written notice to
the Registered Holder of this Warrant and thereafter all references in this
Warrant to the location of its principal office at the particular time shall be
as so specified such notice.
10. No Rights as Stockholder. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
11. Headings. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.
12. Governing Law. This Warrant will be governed by and construed in
accordance with the laws of the State of Arizona.
WAVETECH, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
ATTEST:
- -----------------------------------------
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EXHIBIT I
PURCHASE FORM
To: Secretary Dated:
WAVETECH, INC. -----------------
5210 E. Williams Circle
Suite 200
Tucson, AZ 85711
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase _____________ shares of the
Common Stock covered by such Warrant. The undersigned herewith makes payment of
$_______________, in United States Dollars representing the full purchase price
for such shares at the price per share provided for in such Warrant.
SWITCH TELECOMMUNICATIONS AUSTRALIA Pty
Ltd., an Australian company
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Address:
--------------------------------
--------------------------------
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and effective January 22,
1997, by and between TELPLEX INTERNATIONAL COMMUNICATIONS, INC., an Arizona
corporation ("Corporation") and JOHN G. VOGEL ("Employee").
R E C I T A L S
A. Corporation is a wholly owned subsidiary of Wavetech, Inc., a NASDAQ
listed corporation registered in New Jersey ("Wavetech"). Corporation has
acquired certain goodwill, proprietary information and other assets (the
"Assets") of Telplex, Inc., an Arizona corporation ("Telplex") pursuant to that
certain Asset Purchase Agreement between Corporation, Wavetech, Telplex and
Employee dated effective January 1, 1997 ("Asset Agreement"). Telplex was
engaged in the switchless long distance reselling business, and is being
dissolved pursuant to the Asset Agreement.
B. As part of the consideration for Corporation's agreement to purchase
the Assets from Telplex, Employee has agreed to act as the President and CEO of
Corporation pursuant to the terms of this Employment Agreement, including the
restrictive covenants described herein.
C. For good and valuable consideration, consisting of the mutual covenants
contained herein, the parties agree as follows:
1. TERM OF EMPLOYMENT. Corporation agrees to employ Employee as the
President, chief executive officer and administrator of Corporation, and
Employee hereby accepts such employment in accordance with the terms of this
Agreement. The term of employment shall commence on January 22, 1997, and shall
continue until August 31, 2000, unless sooner terminated or extended as provided
herein ("Initial Term"). Unless previously terminated pursuant to the terms
hereof, this Agreement shall be extended for successive periods of one (1) year.
Nothing contained herein shall be construed to require Corporation to offer
employment to Employee following the expiration or termination of the Original
Term, or any extended term hereof, or to require Employee to accept such
employment. Unless otherwise agreed in writing, the base salary payable to
Employee and all other terms and conditions of employment during any extended
terms shall be the same as those in effect at the end of the applicable term
prior to the extension. Moreover, in the event that this Agreement is not
extended, it shall remain in full force and effect until terminated by either
party pursuant to the terms hereof, and the restrictive covenants described in
Section 9 shall continue in effect not withstanding the termination of this
Agreement.
2. DUTIES OF EMPLOYEE
2.1 General Duties: During the term of this Agreement, Employee
agrees to serve as the president and chief executive officer of Corporation. In
this capacity, Employee shall be responsible, subject to the direction of the
Corporation's Board of Directors and Wavetech's President, for developing,
managing and implementing business plans related to the operation of the
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Corporation and for the day to day administration and management of the
Corporation. Employee's duties shall include, but are not limited to, (i) the
development and implementation of marketing and sales strategies for the
Corporation, (ii) the expansion of the Corporation into related areas and
markets, both domestically and internationally, (ii) the creation of policies
and procedures for the Corporation, (iv) the creation and implementation of
budgets of the Corporation, (v) the hiring, firing and supervision of the
Corporation's employees, and (vi) achieving targets and goals for the
Corporation set by the Corporation's Board of Directors. All such duties shall
be subject to the control of the Corporation's Board of Directors and Wavetech's
president, and Employee shall perform such duties for the Corporation as may
from time to time be required of him by the articles of incorporation and bylaws
of the Corporation, or assigned to him by the Board of Directors of the
Corporation, without further compensation except as provided for in this
Agreement.
2.2 Other Business Activities: Employee agrees that he shall
devote his best efforts, energies and skills to the discharge of his duties and
responsibilities hereunder. Employee agrees that during the term of his
employment he shall devote his full business time and attention to the business
and affairs of the Corporation and shall not, directly or indirectly, engage or
participate in (whether as owner, partner, proprietor or otherwise), invest in,
lend to or become an officer, director, or shareholder of, or become employed
by, or render advisory consulting or other services in connection with, any
other business enterprise, including, without limitation, competing enterprises,
except for such activities that are consistent with the interests of the
Corporation and Wavetech and that are approved of in writing in advance by the
Board of Directors of the Corporation. Nothing contained herein shall restrict
Employee from devoting such time as may be reasonably necessary in connection
with his personal investments and activities that are not inconsistent with the
foregoing, provided such activities do not interfere with the performance of his
duties and responsibilities hereunder.
2.3 Restrictions: Employee may not, without the prior approval of
the Corporation's Board of Directors (a) cause the Corporation to incur debt
other than short term operating debt incurred in the ordinary course of
business; (b) cause the Corporation to purchase any real property or enter into
any lease of real property, (c) cause the Corporation to purchase or lease any
personal property except in the ordinary course of business; or (d) cause the
Corporation to make capital expenditures without the consent of a representative
of Wavetech or its affiliate Interpretel, Inc., designated by the Corporation's
board of directors.
3. COMPENSATION. Employee will be paid compensation during this Agreement
as follows:
3.1 Base Salary. A base salary of Seventy Thousand Dollars
($70,000.00) per year, payable by the Business and in semi-monthly installments
according to the regular payroll schedule for the Business ("Salary"). In the
event this Agreement is not sooner terminated, the Base Salary may be adjusted
at the end of each year ("Anniversary Date") of employment at the sole
discretion of Corporation's Board of Directors; plus,
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3.2 Stock Option Incentive. In addition to the Salary, Employee
shall be eligible to exercise on the applicable Vesting Date (as defined below)
common stock options ("Stock Options") to purchase up to four hundred thousand
(400,000) shares of Wavetech's common stock ("Shares") as publicly traded on
NASDAQ, by payment of an option price equal to the price of the Wavetech stock
as of the closing bid of the stock on January 31, 1997, being the date fifteen
(15) days from and after the filing with NASDAQ of the Corporation's employee
stock option incentive plan. The Stock Options may be exercised only after
Corporation has made all filings with NASDAQ required under its rules have been
made and only if all Gross Revenue Requirements (as defined below) to the
exercise of the Stock Options have been met by Employee and only upon the
vesting of the Stock Options by Employee's continued employment with the
Corporation on the following dates and pursuant to the following vesting
schedule:
100,000 Shares on August 31, 1997;
100,000 Shares on August 31, 1998;
100,000 Shares on August 31, 1999; and
100,000 Shares on August 31, 2000 (the "Vesting Dates")
Employee's right to exercise the Stock Options on the Vesting Dates is subject
to Employee's continued employment with Corporation on the applicable Vesting
Date and upon satisfaction of each of the following "Gross Revenue
Requirements":
(i) For the August 31, 1997 Vesting Date, the Corporation
shall have achieved at least five million dollars
($3,500,000.00) in gross revenues by such date, as
determined by generally accepted accounting principles
("GAAP").
(ii) For the August 31, 1998 Vesting Date, the Corporation
shall have achieved at least six million, five hundred
thousand dollars ($5,000,000.00) in gross revenues for
the fiscal year ending August 31, 1998, as determined
by GAAP;
(iii) For the August 31, 1999 Vesting Date, the Corporation
shall have achieved at least eight million, four
hundred and fifty thousand dollars ($6,500,000.00) in
gross revenue for the fiscal year ending August 31,
1999, as determined by GAAP.
(iv) For the August 31, 2000 Vesting Date, the Corporation
shall have achieved at least ten million, nine hundred
and eighty five thousand dollars ($8,450,000.00) in
gross revenue for the fiscal year ending August 31,
2000, as determined by GAAP.
Each of the Gross Revenue Requirements is independent of the other Gross Revenue
Requirements, and if Employee fails to achieve a Gross Revenue Requirement for
one of the Vesting Dates and is thus ineligible to exercise the applicable Stock
Option available on such date, then Employee may
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still exercise the Stock Option(s) available on the other Vesting Dates,
assuming continued employment and the achievement of the Gross Revenue
Requirement on such later Vesting Date(s). For example, if Employee fails to
achieve the Gross Revenue Requirement for the August 31, 1997 Vesting Date, but
achieves the Gross Revenue Requirement for the August 31, 1998 Vesting Date,
then Employee shall be not be eligible to exercise the 100,000 shares of Stock
Options which vest on August 31, 1997, but shall be eligible to exercise the
100,000 shares of Stock Options which vest on August 31, 1998, and the Stock
Options which vest in subsequent years, assuming the Gross Revenue Requirements
have been met for such subsequent years.
Employee may exercise all vested Stock Options at any time after the vesting
period, provided Employee remains an employee of the Corporation. Subject to the
terms of Section 6, below, if Employee's employment with Corporation is
terminated for any reason, whether voluntarily or involuntarily, then Employee
shall have sixty (60) days from such termination date to exercise the Stock
Options as to all vested Shares, and Stock Options as to nonvested Shares will
be canceled effective the date of termination. Any Stock Options for vested
Shares which are not exercised within sixty (60) days of Employee's termination
of employment expire and shall be of no further force or effect.
4. BENEFITS. During Employee's employment hereunder, Employee
shall be entitled to participate in any health insurance, employee benefit
plans, and paid vacation, if any, made available by the Corporation to its
employees, all in accordance with the Corporation's policies concerning such
plans and benefits, and in the sole discretion of the Corporation's Board of
Directors. Employee acknowledges and agrees that such benefits may vary with
duties, salary and length of employment, and that they may from time to time be
modified or terminated, in the sole discretion of the Board of Directors of the
Corporation.
5. EXPENSES. In connection with his employment hereunder,
Employee may be required to incur reasonable travel, entertainment and other
business expenses. If such expenses are approved, in the sole discretion of the
Board of Directors of the Corporation, the Corporation will reimburse Employee
for such expenses incident to the performance of his duties and responsibilities
hereunder, upon submission by Employee to the Corporation of vouchers or expense
statements satisfactorily evidencing the expenses for which reimbursement is
sought.
6. PAYMENTS ON DEATH. In the event of Employee's death during the
term of employment, the personal representative of Corporation's estate shall be
entitled to (i) receive the Salary provided for in Section 3 hereof through the
end of the month in which Corporation's death occurs, and (ii) exercise all
vested Stock Options which are fully vested on the date of Employee's death,
including, if the Gross Revenue Requirement for the year in which death occurs,
the Stock Option to become vested in the year of death, regardless of whether
death occurs prior to or subsequent to the August 31 Vesting Date of that year,
subject, however, to the restrictions described in Section 3.2. Payment to
Employee's personal representative or exercise by Employee's personal
representative of the fully vested Stock Options shall be a full discharge and
release of the Corporation of and from any further obligations pursuant to this
Agreement, except with respect to any rights of Employee in any pension or
profit sharing plans of the Corporation, if applicable.
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7. TERMINATION FOR CAUSE.
7.1 The Corporation shall have the right to terminate the
employment of Employee hereunder for cause at any time for any of the following
reasons:
(a) Employee shall be convicted, by a court of competent and
final jurisdiction, of any crime (whether or not involving the
Corporation or any of its affiliates) that constitutes a felony in the
jurisdiction involved.
(b) Employee shall commit any act of fraud,
misappropriation, embezzlement, unethical business conduct, or other
act of dishonesty, against the Corporation or any of its affiliates,
or shall materially breach a fiduciary obligation to the Corporation
or any of its affiliates.
(c) Employee shall materially breach this Agreement; or
(d) The liquidation of the Corporation.
7.2 In the event that the employment of Employee shall be terminated
by the Corporation for cause pursuant to this Section 7, Employee shall be
entitled to receive the salary provided for in Section 3 hereof through the end
of the pay period in which such termination occurs. Such salary shall be a full
discharge and release of the Corporation of and from any other or further
obligations pursuant to this Agreement, except with respect to any vested rights
of Employee in any pension or profit sharing plans of the Corporation. In the
event of termination of this Agreement and Employee's employment for cause as
described in this Section 7, all unexercised Stock Options shall be terminated
and void.
7.3 Notwithstanding anything to the contrary in this Agreement,
nothing contained in this Section 7, or any act done, or payment accepted
pursuant hereto shall constitute a wavier or release by the Corporation of any
rights, claims or remedies it may have against Employee for acts or omissions
that may give rise to an event causing termination of this Agreement pursuant to
this Section 7.
8. TERMINATION WITHOUT CAUSE. Employee agrees and understands that he is an
employee at will of the Corporation, and that Employee's employment may be
terminated by the Corporation as provided herein. Notwithstanding any language
in this Agreement to the contrary, this Agreement may be terminated by either
party, without cause, upon two (2) weeks written notice. In the event this
Agreement is terminated by the Corporation without cause, Employee shall be
entitled to receive the Salary described in Section 3.1 hereof for the two (2)
week period after such notice ("Severance Pay") and all Stock Options shall
immediately vest and may be exercised by Employee within sixty (60) days
thereafter, notwithstanding any language to the contrary in Section 3; provided,
however, that the Corporation may elect to discharge the Employee immediately,
subject to the Corporation's obligation to pay Employee the Severance Pay and
allow Employee to exercise the Stock Options for a period of sixty days. Payment
of such Severance Pay shall be a full
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discharge and release of the Corporation of and from any other or further
obligations pursuant to this Agreement, except with respect to Employee's right
to exercise any vested Stock Options and any vested rights of Employee in any
pension or profit sharing plans of the Corporation, if applicable. The Employee
benefits (to the extent allowed by the terms of the applicable contracts)
provided pursuant to Section 4 hereof shall continue until the end of the two
(2) week Severance Pay period described above.
9. RESTRICTIVE COVENANT AND ANTIPIRACY CLAUSE.
9.1 Employee acknowledges that Wavetech and the Corporation would not
have entered into the Asset Agreement (or have issued to Employee 450,000 shares
of Wavetech common stock as described therein) or have given Employee the Stock
Option incentive described in Section 3 of this Agreement, unless Employee had
agreed to enter into this Employment Agreement and the restrictive covenants
described herein. The Corporation is also making Employee the President, CEO and
principal administrator of the Corporation's office, and Employee will be the
Corporation's and Wavetech's principal contact with clients in the industry.
9.2 For the reasons set forth in Section 9.1, Employee agrees and
acknowledges that the Corporation and Wavetech would be irreparably harmed if,
upon termination of employment with the Corporation, Employee competed directly
or indirectly with the Corporation or Wavetech. Accordingly, Employee agrees
that during the term of this Agreement and any extensions hereof, and for a
period of two (2) years after Employee's employment with the Corporation is
terminated for any reason whatsoever, Employee shall not, in any state or
foreign country where the Corporation is then doing business or in any other
market where the Corporation is then doing business ("Restricted Area"),
directly or indirectly, engage in any business which is competitive with or
deceptively similar to that of the Corporation or Wavetech on the date of such
termination. For purposes of this subparagraph, a business shall be deemed to be
competitive with or deceptively similar to that of the Corporation or Wavetech
if such business involves (i) the reselling of switchless long distance minutes,
(ii) wholesale or retail national or international voice or data long distance
reselling activities, (iii) the national or international sale of pre-paid
calling cards, (iv) the national or international sale of long distance calling
cards in kiosks, arcades or similar locations, (v) the transfer of international
bank notes, or (vi) any other business activity in which the Corporation or
Wavetech is engaged at the time of termination of Employee's employment.
9.3 In the event, upon the termination of employment with the
Corporation and for two (2) years thereafter, Employee violates the restrictive
covenant described in Section 9.1 above by directly or indirectly competing with
the Corporation in the Restricted Area, then Employee agree to pay to the
Corporation liquidated damages equal to all profits, fees, commissions, and
other income, whether deferred or otherwise, received by Employee, or by any
business entity owned or controlled by Employee within two (2) years following
Employee's termination of employment with the Corporation.
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9.4 Employee expressly acknowledges that the Corporation has entered
into the Asset Agreement and has offered the position described in this
Agreement to Employee based on Employee's agreement not to compete with the
Corporation. Upon Employee's termination of employment, for whatever reason,
Employee agrees and acknowledges that the subject matter, territorial and time
restrictions contained in this Section 9 are reasonable and are properly
required for the protection of the Corporation and Wavetech, and that such
restrictions will not impose any undue hardship on Employee. Further, Employee
agrees and acknowledges that it would be difficult, if not impossible, to
determine the exact damages which would be suffered by the Corporation upon a
breach by Employee of the restrictive covenant, and, consequently, that the
liquidated damages described in Section 9.3 represent a reasonable and good
faith estimate of the damages which would actually be incurred by the
Corporation.
9.5 Employee agrees that all confidential information (including, but
not limited to, customer lists, contracts or other agreements with long distance
telephone suppliers, financial statements, pricing policies, employment
agreements, policy manuals, trade secrets, systems, procedures and manuals)
relating to the Corporation, Wavetech and its affiliates, if any, shall be
retained in confidence. Accordingly, Employee agrees that he will not, during or
after the term of employment hereunder, except if required in connection with
his duties with the Corporation, disclose any confidential information relating
to the business of the Corporation, or any of its affiliates, to any individual
or entity. The provisions of this subsection shall not apply to information
which Employee is required to disclose by order of a court of competent
jurisdiction, but only to the extent specifically ordered by such court. When
reasonably possible, Employee shall give the Corporation prior written notice of
such required disclosure so that the Corporation has the opportunity to seek a
protective order if it deems it appropriate.
9.6 Without limiting the generality of the foregoing, Employee
acknowledges and agrees that memoranda, notes, records and any other written,
recorded, taped or graphic matters made or compiled by Employee, or made
available to Employee during the term of her employment, concerning the business
of the Corporation, including, but not limited to, any customer lists or other
trade secrets, shall be the Corporation's property and shall be delivered by
Employee to the Corporation upon termination of his employment and at any other
time at the Corporation's request.
9.7 Employee agrees that, for a period of two (2) years after the
expiration or termination of his employment hereunder, he will not, directly or
indirectly (i) induce any person employed by the Corporation or Wavetech to
leave such employment; or (ii) solicit the employment of any such person on his
own behalf or on behalf of any other individual or entity; or (iii) knowingly
and willfully endeavor on his own behalf, or on the behalf of any other
individual or entity, to interfere with any of the Corporation's or Wavetech's
existing or prospective business relationships.
9.8 The provisions of this Section 9 shall survive the termination or
expiration of Employee's employment hereunder, regardless of the reason for
termination.
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9.9 If any of the restrictions contained in this Section 9 are
hereafter construed to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the remainder of the restrictions, which shall
be given full effect, without regard to the invalid or unenforceable portions.
Furthermore, if the scope of any restriction contained in this Section 9 is too
broad to permit enforcement of such restriction to its full extent, then such
restriction shall be enforced to the maximum extent permitted by law, and
Employee hereby consents and agrees that such scope may be judicially modified
accordingly in any proceeding brought to enforce such restriction.
9.10 If Employee violates any restriction contained in this Section 9
and the Corporation or Wavetech brings legal action for injunctive or other
relief, the Corporation and Wavetech shall not, as a result of the time involved
in obtaining the relief, be deprived of the benefit of the full period of any
restriction specified herein.
10. TRANSACTIONS OFFERED TO THE CORPORATION. During the term of his
employment hereunder, Employee agrees to bring to the attention of the Board of
Directors of the Corporation and offer to the Corporation, all proposals,
business opportunities or investments of whatever nature, in areas in which the
Corporation or Wavetech conduct business, which opportunities are created or
devised by Employee or come to the attention of Employee and which might
reasonably be expected to be of interest to the Corporation, Wavetech or any of
its affiliates.
11. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants that he is not under any obligation, contractual or otherwise, to any
other individual or entity that would prohibit or impede him from performing his
duties and responsibilities hereunder and that he is free to enter into and
perform the terms of this Agreement. Employee hereby indemnifies and holds
harmless the Corporation, Wavetech and all of their officers, directors,
stockholders, agents and employees with respect to the representations and
warranties set forth in this Section 11. The provisions of this Section 11 shall
survive the termination or expiration of Employee's employment hereunder,
regardless of the reason for termination.
12. REMEDIES; INJUNCTION. Employee acknowledges that the services to be
rendered by him are of a special, unique and extraordinary character, and that
in connection with such services, he will have access to confidential
information vital to the Corporation's business. Accordingly, Employee consents
and agrees that if he violates any of the provisions of Section 9 hereof, the
Corporation would sustain irreparable harm. Therefore, in addition to any other
remedies that the Corporation may have under this Agreement or otherwise, the
Corporation shall be entitled to apply to any court of competent jurisdiction
for an injunction restraining Employee, or any of his agents, representatives or
persons acting directly or indirectly for Employee from committing or continuing
any such violation of this Agreement. The Corporation shall also be entitled to
an accounting and repayments of profits, compensation, commissions, remuneration
or other benefits Employee, directly or indirectly, has realized and/or may
realize as a result of, growing out of, or in connection with any violations of
this Agreement. Nothing in this Agreement shall be construed as prohibiting the
Corporation from pursuing any other remedy or remedies at any time, or from time
to time at law or in equity, in whole or in part, concurrently or successively ,
including, without
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limitation, recovery of damages. Any action for injunctive relief or to compel
arbitration of a dispute as provided in Section 21 may be brought, in the
Corporation's discretion, in any court of competent jurisdiction in Maricopa
County or Pima County, Arizona. The provisions of this Section 12 shall survive
the termination or expiration of Employee's employment hereunder, regardless of
the reason for termination.
13. INTEGRATION; AMENDMENT; ASSIGNMENT. This Agreement supersedes any and
all prior agreements and understandings between the parties concerning the
employment of Employee by the Corporation, including, but not limited to the
Memorandum of Understanding dated December 5, 1996, and this Agreement
constitutes the complete understanding between the parties with respect to the
employment of Employee. This Agreement may not be altered, modified or amended,
except by written approval of a majority of the Board of Directors of the
Corporation and by written instrument signed by each of the parties hereto.
14. WAIVER. Waiver, or successive waivers, by any party hereto of any
breach or default by the other party hereto of any of the terms of this
Agreement shall not operate as a waiver of any other breach or default, whether
similar to or different from the breach or default waived.
15. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, addressed to the other
party hereto at the addresses set forth below.
If to Employee: John Vogel
--------------------------------
--------------------------------
If to Corporation: c/o Wavetech, Inc.
Attention: Gerald Quinn
5210 E. Williams Circle, Suite 200
Tucson, Arizona 85711
Notices are effective upon delivery to the notice addresses set forth above.
Either party may change the address to which notices, requests, demands and
others communications hereunder shall be directed, by giving written notice of
such change of address to the other party in the manner set forth
above.
16. BINDING AGREEMENT. This Agreement shall inure to the benefit of and
shall be binding upon the heirs and personal representative of Employee and
shall inure to the benefit of and be binding upon the Corporation and its
successors and assigns. Notwithstanding the foregoing, the Corporation shall be
entitled to assign this Agreement in connection with the merger or consolidation
of the Corporation with another Corporation or the sale of all or substantially
all of the assets and business of the Corporation to another Corporation or
business entity.
9
<PAGE>
17. HEADINGS. The paragraph headings of this Agreement are for --------
convenience of reference only, and shall not expand, identify, limit or define
the text hereof.
18. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be invalid, illegal or unenforceable in any respect, in
whole or in part, the validity, legality and enforceability of the remainder of
the provisions contained herein shall not in any way be affected thereby.
19. RECOVERY OF FEES AND COSTS. In the event suit is brought (or
arbitration instituted), or an attorney is retained by either party to this
Agreement or by Wavetech to enforce the terms of this Agreement or to collect
any money due hereunder, or to collect money damages for breach hereof, the
prevailing party shall be entitled to recover, in addition to any other remedy,
reimbursement for reasonable attorney's fees, court costs, costs of
investigation and other related expenses incurred in connection therewith.
20. CONTROLLING LAW. This Agreement shall be governed by and construed in
accordance with the laws and judicial decisions of the State of Arizona.
21. ARBITRATION. The parties agree that they will use their best efforts to
resolve any dispute arising out of or relating to this Agreement. Except for any
injunctive relief authorized pursuant to Section 9 hereof, any controversy,
claim or dispute that cannot be resolved shall be settled by final binding
arbitration in accordance with the rules of the American Arbitration
Association, or such other arbitration rules as the parties may agree upon, and
judgment upon the award rendered by the arbitrator or arbitrators shall be
binding on the parties thereto and may be entered in any court of competent
jurisdiction. Any such arbitration shall be conducted in Tucson, Arizona, or
such other place as may be mutually agreed upon by the parities. Within fifteen
(15) days after the commencement of the arbitration, each party shall select one
person to act as arbitrator, and the two arbitrators so selected shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrator's expenses
and administrative fees of arbitration. Notwithstanding the above, Corporation
shall be entitled to seek injunctive relief from any court of competent
jurisdiction as provided in Section 12 to enforce the restrictive covenants
described in Section 9.
22. APPROVAL BY WAVETECH STOCKHOLDERS. Employee acknowledges and agrees
that the Stock Options described in Section 3 hereof must be approved by the
shareholders of Wavetech, a public company. It is anticipated that such approval
will occur at Wavetech's annual general meeting scheduled for February 21, 1997.
If such approval does not occur, then Employee may terminate this Agreement,
provided all compensation paid to Employee pursuant to the Asset Agreement or
pursuant to this Agreement, other than earned Salary, is returned or transferred
by Employee to Wavetech or Corporation, as applicable.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date stated in the introductory paragraph.
10
<PAGE>
CORPORATION TELPLEX INTERNATIONAL
COMMUNICATIONS, INC.,
an Arizona corporation
By:
-------------------------------------
Its:
------------------------------------
EMPLOYEE ------------------------------------
John Vogel
APPROVED AND ACCEPTED WAVETECH, INC., a New Jersey corporation
By:
-------------------------------------
Its:
------------------------------------
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial data extracted from the Consolidated
Balance Sheet and Consolidated Statements of Operations, ended February 28, 1997
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 122,315
<SECURITIES> 0
<RECEIVABLES> 200,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 427,787
<PP&E> 730,987
<DEPRECIATION> (265,843)
<TOTAL-ASSETS> 3,576,251
<CURRENT-LIABILITIES> 575,555
<BONDS> 0
0
0
<COMMON> 14,514
<OTHER-SE> 2,642,786
<TOTAL-LIABILITY-AND-EQUITY> 3,576,251
<SALES> 514,240
<TOTAL-REVENUES> 514,240
<CGS> 464,184
<TOTAL-COSTS> 464,184
<OTHER-EXPENSES> 453,117
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,538
<INCOME-PRETAX> (405,044)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (405,044)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
