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, 1998.
[ ] 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 INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 22-2726569
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5210 E. WILLIAMS CIRCLE, SUITE 200
TUCSON, ARIZONA 85711
(Address of principal executive offices)
(520) 750-9093
(Issuer's telephone number)
WAVETECH, INC., FORMERLY INCORPORATED IN THE STATE OF NEW JERSEY
(Former name, former address, formal fiscal year, if changed from last report)
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 6, 1998.
Class No. Of Shares Outstanding
----- -------------------------
COMMON STOCK. PAR VALUE $.001 16,203,095
- ----------------------------- ----------
Transitional Small Business Disclosure Format (Check One): [ ] Yes [X] No
<PAGE>
INDEX
WAVETECH INTERNATONAL, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION Page
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets February 28, 1998
(unaudited) and August 31, 1997 (audited)...................... 3
Condensed Consolidated Statement of Operations -
Six Months Ended February 28, 1998 and
February 28, 1997 (unaudited).................................. 4
Condensed Consolidated Statements of Operations -
Three Months Ended February 28, 1998 and
February 28, 1997 (unaudited).................................. 5
Condensed Consolidated Statements of Cash Flows -
Six Months Ended February 28, 1998 and
February 28, 1997 (unaudited).................................. 6
Notes to Condensed Consolidated Financial Statements
- February 28, 1998 and February 28, 1997
(unaudited).................................................... 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.............................................. 9
ITEM 2. Change in Securities........................................... 9
ITEM 3. Defaults upon Senior Securities................................ 9
ITEM 4. Submission of Matters to a Vote of Security Holders............ 9
ITEM 5. Other Information............................................. 10
ITEM 6. Exhibits and Reports on Form 8 - K............................ 10
SIGNATURES.................................................................. 11
2
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WAVETECH INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1998 (UNAUDITED) AND AUGUST 31, 1997 (AUDITED)
ASSETS
February 28 August 31
1997 1997
----------- ---------
Current assets:
Cash and cash equivalents $ 46,265 $ 13,329
Accounts receivable, net of allowance of $527 46,237 26,273
License fee receivable 150,000 150,000
Prepaid expenses and other assets 10,547 9,725
----------- -----------
Total current assets 253,049 199,327
Property and equipment, net 333,782 410,182
Noncurrent assets:
Investment in Switch Telecommunications Pty Limited 2,316,165 2,316,165
License fee receivable 150,000 150,000
Intangibles, net 27,455 29,489
Deposits and other assets 80,083 35,633
----------- -----------
Total noncurrent assets 2,573,703 2,531,287
----------- -----------
Total assets $ 3,160,534 $ 3,140,796
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 457,506 $ 395,222
Accrued interest payable 5,355 5,248
Unearned revenue 150,000 150,000
Notes payable, current portion 273,000 172,071
Capital leases payable, current portion 56,119 56,119
----------- -----------
Total current liabilities 941,980 778,660
Noncurrent liabilities:
Capital leases payable 35,624 53,892
Unearned revenue - license fee 150,000 150,000
----------- -----------
Total noncurrent liabilities 185,624 203,892
----------- -----------
Total liabilities 1,127,604 982,552
Stockholders' equity:
Common stock, par value
$.001 per share; 50,000,000 shares
authorized, 16,203,095 and 15,076,807 shares
issued and outstanding 16,203 15,077
Additional paid in capital 7,433,028 7,024,823
Accumulated deficit (5,416,301) (4,881,656)
----------- -----------
Total stockholders' equity 2,032,930 2,158,244
----------- -----------
Total liabilities and stockholders' equity $ 3,160,534 $ 3,140,796
=========== ===========
3
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WAVETECH INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH PERIODS ENDED FEBRUARY 28, 1998
AND FEBRUARY 28, 1997 (UNAUDITED)
1998 1997
---- ----
Revenues: $ 78,675 $ 522,639
Cost of sales:
Direct costs 75,189 515,413
----------- -----------
Gross profit (loss) 3,486 7,226
Other costs
Development and administrative expenses 519,250 905,234
----------- -----------
Net loss from operations (515,764) (898,008)
Other income (expense)
Interest income 52 8,105
Interest expense (18,931) (5,838)
----------- -----------
Total other income (expense) (18,879) 2,267
----------- -----------
Net loss $ (534,643) $ (895,741)
=========== ===========
Per share data
Net loss per share (0.03) (0.06)
Weighted average number of shares outstanding 15,276,641 14,228,728
=========== ===========
4
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WAVETECH INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE-MONTH PERIODS ENDED FEBRUARY 28, 1998
AND FEBRUARY 28, 1997 (UNAUDITED)
1998 1997
---- ----
Revenues: $ 27,645 $ 514,240
Cost of sales:
Direct costs 22,619 464,184
----------- -----------
Gross profit (loss) 5,026 50,056
Other costs
Development and administrative expenses 271,254 453,117
----------- -----------
Loss before other income (expenses) $ (266,228) $ (403,061)
----------- -----------
Other income (expense)
Interest income 50 1,555
Interest expense (6,121) (3,538)
----------- -----------
Total other income (expense) (6,071) (1,983)
----------- -----------
Net loss $ (272,299) $ (405,044)
=========== ===========
Per share data
Net loss per share (0.02) (0.03)
Weighted average number of shares outstanding 15,406,797 14,314,442
=========== ===========
5
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WAVETECH INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED FEBRUARY 28, 1998 AND 1997 (UNAUDITED)
1998 1997
---- ----
Cash flows from operating activities:
Net Loss $(534,645) $(895,741)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 78,434 97,759
Common stock issued for services and accrued interest 50,196 23,333
Changes in assets and liabilities:
(Increase) in other current assets (20,786) (23,084)
Decrease in inventory deposit 241,037
(Increase) in intangibles due to purchase of
Telplex, Inc. -- (25,000)
Increase in accounts payable and accrued expenses 62,284 160,108
Increase in accrued interest payable 107 --
Decrease in unearned revenue -- (299,985)
--------- ---------
Total Adjustments 170,235 174,168
--------- ---------
Net cash used in operating activities (364,410) (721,573)
Cash flows from investing activities:
Purchase of property and equipment -- (21,897)
Increase in other assets (44,450) --
--------- ---------
Net cash used in investing activities (44,450) (21,897)
Cash flows from financing activities:
Proceeds from notes payable 460,000 --
Payments on capital lease payable (18,268) (11,703)
Proceeds from sale of warrants -- 20,000
Proceeds from common stock issued 64 --
--------- ---------
Net cash provided by financing activities 441,796 8,297
Net increase (decrease) in cash 32,936 (735,173)
Cash and cash equivalents, beginning of period 13,329 857,488
--------- ---------
Cash and cash equivalents, end of period $ 46,265 $ 122,315
========= =========
6
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WAVETECH INTERNATIONAL, 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. 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, 1998 are not necessarily indicative of the
results that may be expected for the fiscal year ending August 31, 1998. For
further information, refer to the Company's financial statements for the year
ended August 31, 1997 included in its Form 10-KSB.
The consolidated financial statements include the accounts of Wavetech
International, Inc. (the Company) , its wholly owned subsidiaries, Interpretel,
Inc. (Interpretel) and Telplex International Communications, Inc. (Telplex). All
material intercompany balances and transactions have been eliminated.
NOTE 2 - NOTES PAYABLE
In February, 1998, the Company established a $450,000 secured
line-of-credit with Imagitel, Inc. to facilitate interim financing needs. The
interest rate is 12 percent. Interest and principal are due July 1, 1998. The
note is secured by the assets of the Company. As of February 28, 1998, the
Company had total borrowings of $210,000 under the line-of-credit.
NOTE 3 - PER SHARE DATA
Per share data is based on the weighted average number of shares
outstanding throughout the periods. The assumed exercise of stock options
outstanding would not have a dilutive effect on the computation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This quarterly report contains certain "forward-looking" statements,
including statements regarding, among other items, consummation of a
reorganization by the Company and Imagitel, Inc., and anticipated trends in the
Company's business. Actual results could differ materially from these
forward-looking statements as a result of a number of factors, including, but
not limited to, the need for additional financing, the Company's inability to
maintain the inclusion of its Common Stock on the Nasdaq SmallCap Market,
failure of the Company's stockholders to approve the issuance of Wavetech Common
Stock in connection with the contemplated reorganization, intense competition in
various aspects of the Company's business, and other factors described herein as
well as the Company's reports and other documents filed from time to time with
the U.S. Securities and Exchange Commission.
7
<PAGE>
OPERATIONS OVERVIEW
The Company specializes in creating interactive communication systems
through the application of "intelligent" call processing technology and
proprietary software to reflect or target the needs of an identified audience.
These systems are often used as privatized networks for organizations and their
members, companies and their suppliers and/or customers and special purpose
groups. During the three-month period ended February 28, 1998, the Company
continued to support its existing customer base.
On January 7, 1998, the Company announced that it signed a definitive
reorganization agreement with Imagitel, Inc., a privately held company
headquartered in Houston, Texas. Following the reorganization, Wavetech shall
continue to exist, but shall conduct business under the name "Imagitel" and will
continue to offer enhanced telecommunications products and services. Under the
terms of the agreement, Imagitel, Inc. shall become a wholly-owned subsidiary of
the Company and the former shareholders of Imagitel, Inc. will own approximately
82.6 percent of the Company's Common Stock to be outstanding following the
reorganization. The merger has already been approved by the Board of Directors
of both companies. The transactions contemplated by the reorganization
agreement, certain of which must be approved by Wavetech's shareholders and
which are further subject to certain adjustments for working capital and funded
debt of the respective companies and other terms, is expected to be completed in
the second quarter of 1998.
THREE MONTHS ENDED FEBRUARY 28, 1998 COMPARED TO THREE MONTHS
ENDED FEBRUARY 28,1997
REVENUES
Revenues decreased to $27,645 for the three months ended February 28,
1998 from $514,240 for the three months ended February 28, 1997. The revenue
total during the quarter ended February 28, 1997 included $474,160 which was
received for the sale and the installation of the Interpretel System. The lower
revenue total for the quarter ended February 28, 1998 reflects the current
revenues, with no additional installation revenues.
COST AND EXPENSES
Cost of sales decreased to $22,619 for the three month period ended
February 28, 1998 from $464,184 for the three month period ended February 28,
1997. The decrease in cost of sales represented the cost of a computer platform
and software for the sale of the Interpretel System. These costs were incurred
in 1997. Expenses for the three months ended February 28, 1998 decreased by
$181,863 as compared to the quarter ended February 28, 1997. This decrease was
due largely to a reduction in the number of persons employed by the Company.
This reduction was implemented primarily to reduce the Company's operating
expenses. The Company intends to significantly increase the number of its
employees as soon as it is able to generate revenues or obtain financing
sufficient to compensate such persons; however, there can be no assurance when,
if ever, the Company will generate such revenues or obtain such financing.
Overhead costs typically comprise the majority of the Company's current
expenses.
8
<PAGE>
SIX MONTHS ENDED FEBRUARY 28, 1998 COMPARED TO SIX MONTHS
ENDED FEBRUARY 28, 1997
REVENUES
Total revenues decreased to $78,675 for the six months ended February
28, 1998 from $522,639 for the six months ended February 28, 1997. The decrease
was due almost entirely to the sale of the Interpretel system during the quarter
ended February 28, 1997, which system previously generated substantially all of
the Company's revenues.
COST AND EXPENSES
Cost of sales decreased to $75,189 for the six months ended February
28, 1998 from $515,413 for the six months ended February 28, 1997. The decrease
was attributable to the costs associated with the sale of the Interpretel System
during the quarter ended February 28, 1997. Expenses decreased to $519,250 for
the six months ended February 28, 1998 from $905,234 for the six months ended
February 28, 1997. The decrease of $385,984 was due to a reduction in workforce
in an effort to temporarily minimize the Company's operating expenses. However,
legal fees and other costs associated with the preparation of the Company's
proxy statement in connection with the Reorganization have increased
significantly during the quarter ended February 28, 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 1998, the Company had cash of $46,265 and an
additional $240,000 available remaining on a line of credit, which is secured by
the Company's assets. The Company is continually negotiating agreements for
additional financing although it does not presently have any agreements, binding
or non-binding, with respect to any such financing.
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.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE>
ITEM 5. OTHER INFORMATION
On January 5, 1998, the Company executed a definitive reorganization
agreement with Imagitel, Inc. Pursuant to such agreement, Imagitel, Inc. will
become a wholly-owned subsidiary of the Company and the former shareholders of
Imagitel, Inc. will be issued a number of shares of the Company's Common Stock
equal to approximately 84 percent of the total Common Stock to be outstanding
following the reorganization. In addition, the Company will change its name to
"Imagitel" following the reorganization. The Company intends to solicit approval
by its stockholders of the issuance of the shares to be held by the former
Imagitel, Inc. shareholders as a result of the reorganization. A vote of the
Company's stockholders shall be held at the 1998 Annual Meeting which is
presently scheduled to occur on or about May 18, 1998.
On January 12, 1998, the Company changed its corporate domicile from
New Jersey to Nevada. In connection with this change, the Company's name was
required to be changed from "Wavetech, Inc." to "Wavetech International, Inc."
This change of corporate domicile, and certain differences in the Company's
organizational documents resulting therefrom were previously approved by the
Company's stockholders at the 1997 Annual Meeting.
In order to maintain listing of its Common Stock on the Nasdaq SmallCap
Market, the Company is required to satisfy certain quantitative and qualitative
requirements. On February 27, 1998, The Nasdaq Stock Market, Inc. notified the
Company that it was out of compliance with the requirement to maintain a minimum
bid price of its Common Stock of $1.00 per share. If approved by the Company's
shareholders, the Company intends to effect a one for six reverse split of its
outstanding shares of Common Stock in order to, among other things, increase the
minimum bid price of its Common Stock sufficiently so as to satisfy the $1.00
requirement. If, however, the Company's Common Stock fails to satisfy the $1.00
minimum bid requirement for 10 or more consecutive trading days prior to May 28,
1998, the Common Stock shall be delisted from the Nasdaq SmallCap Market.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
a) Exhibits.
Number Description Method Of Filing
- ------ ----------- ----------------
2 Reorganization Agreement, dated January 5, 1998, among
Wavetech Inc., Wavetech Interim, Inc. and Imagitel, Inc. *
3.1 Articles of Incorporation, as originally filed with the
Nevada Secretary of State on February 19, 1998, and as
amended to date. *
3.2 Bylaws of Wavetech International, Inc. *
27 Financial Data Schedule *
- ----------
* Filed herewith
b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the undersigned
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: April 14, 1998 WAVETECH INTERNATIONAL, 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 2
This REORGANIZATION AGREEMENT is entered into as of this 5th day of
January, 1998 among Wavetech, Inc. ("Wavetech"), a corporation
organized and existing under the laws of the State of New Jersey,
Wavetech Interim, Inc. ("Interim"), a corporation organized and
existing under the laws of the State of Nevada, and Imagitel, Inc.
("Imagitel"), a corporation organized and existing under the laws of
Nevada.
WHEREAS, Wavetech desires to acquire Imagitel through the merger of
Interim with and into Imagitel (the "Merger");
WHEREAS, the respective Boards of Directors of Wavetech, Interim and
Imagitel have approved such Merger pursuant to the terms and conditions of this
Reorganization Agreement and the Plan of Merger attached hereto as Appendix A
(the "Plan of Merger");
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended; and
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein contained, Wavetech, Interim
and Imagitel hereby agree as follows:
ARTICLE 1. DEFINITIONS
1.1. CERTAIN DEFINITIONS : AS USED IN THIS REORGANIZ4TION AGREEMENT The
following terms shall have the meanings set forth below:
AFFILIATED PERSON. This means, with respect to Imagitel or Wavetech,
any (i) officer or director of such company or any subsidiary of such company;
(ii) a shareholder of such company that owns, or has the right to acquire, more
than five percent (5%) of the company's Common Stock on a fully diluted basis;
(iii) an entity that, directly or indirectly, alone or together with others,
controls, is controlled by or is under common control with such company or such
company's subsidiary; or (iv) Person that, directly or indirectly, alone or
together with others, is controlled by or under common control with any officer
or director of such company or of any subsidiary or any company shareholder
described in clause (ii) above.
BENEFIT PLANS. All employee benefit plans within the meaning of Section
3(3) of ERISA and any related or separate contracts, plans, trusts, programs,
policies, arrangements, practices, customs and understandings that provide
benefits of economic value to any present or former employee of, or current or
former beneficiary, dependent or assignee of any such employee or former
employee.
CERTIFICATE OF MERGER. The Certificate of Merger to be executed by
Interim and Imagitel and in a form appropriate for filing with the Secretary of
State of Nevada, and relating to the effective consummation of the Merger as
contemplated by the Plan of Merger.
CLOSING DATE. The terms Closing and Closing Date shall have the
meanings ascribed to them in Section 2.2 hereof.
CODE. The Internal Revenue Code of 1986, as amended.
CONFIDENTIAL INFORMATION. The term "Confidential Information" shall
mean all information of any kind concerning a party hereto that is furnished by
such party or on its behalf pursuant to Section 6.1 hereof and designated in
writing as "Confidential Information", except information (i) ascertainable or
obtained from public or published information, (ii) received from a third party
not known to the recipient of Confidential Information to be under an obligation
to keep such information confidential, (iii) which is or becomes known to the
public (other than through a breach of this Reorganization Agreement), (iv) of
which the recipient was in possession prior to disclosure thereof in connection
with the Merger, or (v) which was independently developed by the recipient
without the benefit of Confidential Information.
ERISA. The Employee Retirement Income Security Act of 1974, as amended.
1
<PAGE>
EFFECTIVE TIME. The date and time which the Merger becomes effective as
set forth in the Certificate of Merger.
IMAGITEL. Imagitel, Inc. a Nevada corporations headquartered in
Houston, Texas. Where the context permits, Imagitel shall include all subsidiary
entities.
IMAGITEL COMMON STOCK. The common stock, no par value share, of
Imagitel.
IMAGITEL SHAREHOLDER APPROVAL. This term shall mean the approval by the
requisite vote of the shareholders of Imagitel at the Imagitel Shareholders'
Meeting of the Merger, all in accordance with this Reorganization Agreement and
the Plan of Merger.
IMAGITEL SHAREHOLDERS' MEETING. The meeting of the shareholders of
Imagitel at which the Merger shall be voted upon.
INTERIM. Wavetech Interim, Inc. a Nevada corporation and a wholly-owned
subsidiary of Wavetech.
MERGER. The merger of Interim with and into Imagitel as more
particularly set forth herein and in the Plan of Merger.
PERSON. An individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a business
trust, a joint venture, an unincorporated organization, a governmental entity
(or any department, agency, or political subdivision thereof) or other entity.
PLAN OF MERGER. The Plan of Merger attached to this Reorganization
Agreement as Appendix A.
PROXY STATEMENT. The proxy statement which shall be furnished to the
Wavetech shareholders in connection with the solicitation by the Wavetech Board
of Directors of proxies for the approval of this Reorganization Agreement and
the matters contemplated hereby.
REGULATIONS. The regulations issued by the Internal Revenue Service
under the Code.
REGULATORY APPROVALS. Any approvals or consents of Regulatory
Authorities, which approvals or consents are necessary or reasonably desirable
in connection with the consummation of the transactions contemplated herein.
REGULATORY AUTHORITY. Any federal or state governmental agency or
authority charged with the supervision or regulation of Wavetech or Imagitel,
and any and all other agencies or departments of federal, state or local
government, including without limitation the SEC.
REORGANIZATION AGREEMENT. This Reorganization Agreement, including all
schedules, appendices and exhibits attached hereto.
SEC. The Securities and Exchange Commission.
SECURITIES ACT. The Securities Act of 1933, as amended.
SHAREHOLDER APPROVALS. The Imagitel Shareholders' Approval and the
Wavetech Shareholders' Approval.
SURVIVING CORPORATION. The surviving corporation after consummation of
the Merger, which shall be Imagitel.
WAVETECH. Wavetech, Inc. a New Jersey corporation headquartered in
Tucson, Arizona. Where the context permits, references to Wavetech shall include
all subsidiary entities.
WAVETECH COMMON STOCK. The common stock, par value $0.001 per share, of
Wavetech.
2
<PAGE>
WAVETECH SHAREHOLDER APPROVALS. THIS term shall mean, as the context
may require, the duly authorized written consent of Wavetech to the Merger (as
sole shareholder of Interim) and the approval by the requisite vote of the
shareholders of Wavetech at the Wavetech Shareholders' Meeting of the Merger,
all in accordance with this Reorganization Agreement and the Plan of Merger.
WAVETECH SHAREHOLDERS' MEETING. The meeting of the shareholders of
Wavetech at which the Merger shall be voted upon.
ARTICLE 2. THE MERGER
2.1. GENERAL PROVISIONS. Subject to the terms and conditions of this
Reorganization Agreement, including the Plan of Merger, at the Effective Time,
Interim shall be merged with and into Imagitel, which shall be the Surviving
Corporation and become a wholly-owned subsidiary of Wavetech. At the Effective
Time, the separate corporate existence of Interim shall cease. Wavetech and
Imagitel hereby agree that the Merger will be effected pursuant to the terms set
forth in the Plan of Merger.
2.2 THE CLOSING. The Closing of the transaction contemplated herein
shall be held as soon as reasonably practicable after fulfillment of all
conditions set forth in Article 7 and Article 8 hereof (the "Closing Date"), at
the offices of Imagitel located at 5120 Woodway Drive, Suite 7007, Houston,
Texas 77056,or ' at such other place and time as the parties hereto may mutually
agree; provided, however, that in the event that Closing has not occurred by
June 30, 1998, either party hereto shall have the right to terminate this
Reorganization Agreement.
2.3. CONSIDERATION FOR THE MERGER. The manner of converting the shares
of Imagitel into shares of Wavetech shall be as set forth in the Plan of Merger.
2.4. SHAREHOLDER APPROVALS. Each of Wavetech and Imagitel shall call
their respective Shareholders Meetings in accordance with the applicable
provisions of Nevada law and federal securities laws (as applicable) for the
purpose of considering and voting on this Reorganization Agreement and the
transactions contemplated hereby. The Shareholders' Meetings shall be held as
soon as practicable. The board of directors of each of Wavetech and Imagitel
shall recommend (subject to compliance with their legal and fiduciary duties, as
advised by counsel) to their respective shareholders and use their best efforts
to obtain the approval of this Reorganization Agreement and the Merger. Wavetech
shall also take any reasonable action required to be taken under the federal
securities laws and blue sky laws in connection with the issuance of Wavetech
Common Stock in the Merger. Wavetech shall prepare the Proxy Statement, which
shall be acceptable to Imagitel, in its sole discretion. The Proxy Statement
shall be mailed to the Wavetech shareholders as soon as reasonably practicable
after it becomes permissible to do so under applicable federal securities laws,
with due consideration given to the anticipated length of time that will be
required to obtain the Regulatory Approvals.
2.5. COOPERATION; REGULATORY FILINGS. Subject to the terms and
conditions of this Reorganization Agreement, Wavetech and Imagitel shall
cooperate, and shall cause each of their subsidiaries to cooperate, in the
preparation and submission by Wavetech and Imagitel, as promptly as reasonably
practicable, of such applications, petitions, and other documents and materials
as any of them may reasonably deem necessary or desirable to the SEC, the
appropriate Regulatory Authorities, the shareholders of Imagitel and Wavetech,
and any other Persons for the purpose of obtaining any approvals or consents
necessary to consummate the transactions contemplated by this Reorganization
Agreement. Prior to the making of any such filings with any Regulatory Authority
or the making of any written disclosures with respect to the transactions
contemplated hereby to shareholders or to any third Person (such as mailings to
shareholders or press releases), the parties shall submit to each other the
material to be filed, mailed, or released. Any such materials shall be
reasonably acceptable to all parties prior to the filings with any Regulatory
Authorities or the disclosures to shareholders or to any third Person, except to
the extent that any Person is legally required to proceed prior to obtaining the
approvals of the other parties. Wavetech shall be responsible for all filings
fees associated with the Regulatory Approvals.
2.6 TAX TREATMENT. Wavetech and Imagitel intend that the Merger shall
qualify as a tax-free reorganization under Section 368(a) of the Code.
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2.7. OPTIONS. At the Effective Time, all outstanding obligations,
commitments, options, warrants or other securities set forth on Schedule 3.4 of
the hereto which are exercisable for or convertible into, or which require the
issuance of, shares of any class of capital stock of Imagitel ("Options"),
shall, after the Effective Date, represent only the right to receive shares of
Wavetech Common Stock based on the Conversion Ratio (as defined in the Plan of
Merger).
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF IMAGITEL
Imagitel hereby represents and warrants to Wavetech the following
matters on and as of the date of this Reorganization Agreement and at the
Effective Time; provided, however, that before any breach of or inaccuracy in
any of the representations or warranties given in this Section 3 shall be
actionable or shall constitute grounds for termination of or failure to perform
under the terms of this Reorganization Agreement by Wavetech, such breach or
inaccuracy must be materially adverse in the aggregate with respect to the
business of Imagitel.
3.1. ORGANIZATION, GOOD-STANDING AND CONDUCT OF BUSINESS. Imagitel is a
corporation, duly organized, validly existing and in good standing under the
laws of Nevada, and has full power and authority and all necessary governmental
and regulatory authorization to own all of its properties and assets and to
carry on its business as it is presently being conducted, and is properly
licensed, qualified and in good standing as a foreign corporation in all
jurisdictions wherein the character of the properties or the nature of the
business transacted by Imagitel makes such license or qualification necessary.
3.2. CORPORATE AUTHORITY. The execution, delivery and performance of
this Reorganization Agreement have been duly authorized by the Board of
Directors of Imagitel. Other than the Imagitel Shareholder Approval, no other
corporate acts or proceedings on the part of Imagitel are required or necessary
to authorize this Reorganization Agreement or the Merger.
3.3. BINDING EFFECT. Subject to receipt of the Shareholder Approvals
and any required Regulatory Approvals, when executed, this Reorganization
Agreement will constitute a valid and legally binding obligation of Imagitel,
enforceable against Imagitel in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect and general principles of equity. Each document and
instrument contemplated by this Reorganization Agreement, when executed and
delivered by Imagitel in accordance with the provisions hereof, shall be duly
authorized, executed and delivered by Imagitel and enforceable against Imagitel
in accordance with its terms, subject to the exceptions in the previous
sentence.
3.4. CAPITALIZATION OF IMAGITEL. The authorized capital stock of
Imagitel consists solely of (i) 1,000,000 authorized shares of common stock (no
par value), of which 210,526 shares are issued and outstanding. All of the
issued and outstanding shares of Imagitel are validly issued and fully paid and
nonassessable. Except for the items set forth on Schedule 3.4 attached hereto or
expressly referenced elsewhere herein, there are no outstanding obligations,
options, warrants or commitments of any kind or nature or any outstanding
securities or other instruments convertible into shares of any class of capital
stock of Imagitel, or pursuant to which Imagitel is or may become obligated to
issue any shares of its capital stock. None of the shares of the Imagitel Common
Stock is subject to any restrictions as to the transfer thereof, except as set
forth in Imagitel's Certificate of Incorporation or Bylaws and except for
restrictions on account of applicable federal or state securities laws. Imagitel
does not hold any equity securities of any other company or legal entity except
for shares in RRV Enterprises, Inc., a Texas corporation, and DDD Calling, Inc.,
a Texas corporation, Zapcom International, Inc., a Nevada corporation and
Contest Central, LLC, a Texas limited liability company. Imagitel, Inc. owns
100% of the outstanding shares of capital stock of such subsidiaries and there
are no outstanding obligations, options, warrants or commitments of any kind or
nature or any outstanding securities or other instruments convertible into
shares of any class of capital stock of such subsidiaries.
3.5. ABSENCE OF DEFAULTS. Imagitel is not in default under, or in
violation of, any provision of its Certificate of Incorporation or Bylaws.
Imagitel is not in default under, or in violation of, any agreement to which
Imagitel is a party, the effect of which default or violation would have a
material adverse effect on Imagitel or its business operations or prospects.
Except as disclosed in Schedule 3.5 hereto, Imagitel is not in violation of any
applicable law, rule or regulation, the effect of which violation would have a
material adverse effect on Imagitel or its business operations or prospects.
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3.6 NON-CONTRAVENTION AND DEFAULTS; NO LIENS. Neither the execution or
delivery of this Reorganization Agreement, nor the fulfillment of, or compliance
with, the terms and provisions hereof, will (i) result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in a
violation of, termination of or acceleration of the performance provided by the
terms of, any agreement to which Imagitel is a party or by which it may be
bound, (ii) violate any provision of any law, rule or regulation, (iii) result
in the creation or imposition of any lien, charge, restriction, security
interest or encumbrance of any nature whatsoever on any asset of Imagitel, or
(iv) violate any provisions of Imagitel's Certificate of Incorporation or
Bylaws. To the best of Imagitel's knowledge, no other party to any material
agreement to which Imagitel is a party is in default thereunder or in breach of
any provision thereof. To the best of Imagitel's knowledge, there exists no
condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such agreement.
3.7. NECESSARY APPROVALS. Imagitel has obtained all certificates of
authority, licenses, permits, franchises, registrations of foreign ownership or
other Regulatory Approvals in every jurisdiction necessary for the continuing
conduct of its business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no such certificate,
license, permit, franchise, registration or other Regulatory Approval is about
to expire, lapse, has been threatened to be revoked or has otherwise become
restricted by its terms which would, upon such expiration, lapse, revocation or
restriction, have a material adverse effect on the financial circumstances of
Imagitel. Further, there is no reasonable basis for any such expiration, lapse,
revocation, threat of revocation or restriction. Except for any necessary
Regulatory Approvals, no consent, approval, authorization, registration, or
filing with or by any governmental authority, foreign or domestic, is required
on the part of Imagitel in connection with the execution and delivery of this
Reorganization Agreement or the consummation by Imagitel of the transactions
contemplated hereby. Except for the items in the preceding sentence or as
disclosed in Schedule 3.7 hereto, Imagitel is not required to procure the
approval of any Person, in order to prevent the termination of any right,
privilege, license or contract of Imagitel as a result of this Reorganization
Agreement.
(b) Schedule 3.7 hereto sets forth all governmental licenses and each
other material approval, authorization, consent, license, certificate of public
convenience, order or other permit of all Regulatory Authority, necessary to
enable Imagitel or its subsidiaries to own, operate and lease their properties
and assets as and where such properties and assets are owned, leased or operated
and to provide service and carry on their business as presently provided and
conducted (collectively the "Permits") or required to permit the continued
conduct of such business following the Closing Date in the manner conducted on
the date of this Reorganization Agreement (indicating in each case whether or
not the consent of any Person is required for the consummation of the
transactions contemplated hereby).
3.8 FINANCIAL STATEMENTS. The financial statements of Imagitel's
subsidiaries (the "Imagitel Financial Statements") which have been provided to
Wavetech, are true, correct and complete in all material respects and present
fairly, in conformity with generally accepted accounting principles consistently
applied, the financial position of the respective entities at the dates
indicated and the results of its operations for each of the periods indicated,
except as otherwise set forth in the notes thereto and except, with respect to
the unaudited statements' normal year end adjustments. The books and records of
Imagitel have been kept, and will be kept to the Closing Date, in reasonable
detail, and will fairly and accurately reflect in all material respects to the
Closing Date, the transactions of Imagitel. Only RRV Enterprises, Inc. has
audited financial statements, all other subsidiaries of Imagitel have unaudited
financial statements that are only internal statements and all information
contained therein should be verified by Wavetech's auditors.
3.9. TAX RETURNS. Imagitel files its income tax returns and maintains
its tax books and records on the basis of a taxable year ending December 3 1.
Imagitel has duly filed all tax reports and returns required to be filed by any
federal, state or local taxing authorities (including, without limitation, those
due in respect of its properties, income, franchises, licenses, sales and
payrolls) through the date hereof, and Imagitel has duly paid all taxes with
respect to the periods covered thereby and has established adequate reserves in
accordance with generally accepted accounting principles consistently applied
for the payment of all income, franchises, property, sales, employment or other
taxes anticipated to be payable after the date hereof. Imagitel is not
delinquent in the payment of any taxes, assessments or governmental charges and
no deficiencies have been asserted or assessed, which have not been paid or for
which adequate reserves have not been established. Imagitel does not have in
effect any waiver relating to any statute of limitations for assessment of taxes
with respect to any federal, state or local income, property, franchise, sales,
license or payroll tax. Imagitel does not know, or have reason to know, of any
questions which have been raised or which may be raised by any taxing authority
relating to taxes or assessments of Imagitel which, if determined adversely,
would result in the assertion of any deficiency.
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3.10. UNDISCLOSED LIABILITIES. Except for the liabilities which are
disclosed in the Imagitel Financial Statements or as set forth on Schedule 3.10
hereto, Imagitel has no material liabilities or material obligations of any
nature, whether absolute, accrued, contingent or otherwise, and whether due or
to become due. Since December 31, 1996, there has been (i) no material adverse
change in the business or operations of Imagitel, (ii) no incurrence by or
subjection of Imagitel to any obligation or liability (whether fixed, accrued or
contingent) or commitment material to Imagitel not referred to in this
Reorganization Agreement, except such obligations or liabilities as were or may
be incurred in the ordinary course of business and which are reflected on the
Imagitel Financial Statements at and for the periods subsequent to December 31,
1996.
(b) Except as set forth in Schedule 3.10 hereto, Imagitel. has not
since December 31, 1996 provided any special promotions, discounts or other
incentives to its employees, agents, distributors or customers in connection
with the solicitation of new orders for service provided by Imagitel or any
subsidiary, nor has any customer pre-paid any material amount for services to be
provided by Imagitel or any subsidiary in the future.
(c) Since December 31, 1996, Imagitel's accounts payable have been
accrued and paid in a manner consistent with Imagitel's prior practice and at no
point in time since December 31, 1996 have Imagitel's aggregate past due
accounts payable been more than $125,000.
(d) Imagitel has paid or fully provided for all access charges properly
payable to local exchange carriers for access facilities and has properly
reported its percentage of interstate use ("PIU") to such carriers. As of
September 30, 1997, Imagitel does not have, and at the Closing Imagitel will not
have, any liability on account of PIU. Imagitel does not have material revenues
associated with international traffic. The subsidiaries of Imagitel will not
have any operating loss in excess of $500,000 for the period from inception
through the Closing Date, after taking into account any and all contingencies
associated with the provision or possible termination of such services,
including (i) any requirement to provide return traffic, (ii) any liability that
may arise in connection with the termination of contracts or other arrangements
with any agents or distributors, governmental entities or other Persons, and
(iii) and potential litigation costs related to any of the foregoing.
3.11. TITLE TO PROPERTIES, ENCUMBRANCES. Imagitel has good and
marketable title to all of the real property and depreciable tangible personal
property owned by it, free and clear of any liens, claims, charges, options or
other encumbrances, except for any lien for (i) current taxes not yet due and
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of the banking business, (iii) such imperfections of title,
easements and other encumbrances, if any, as are not material in character,
amount or extent, or (iv) such items as are set forth on Schedule 3. 11 hereto.
3.12. LITIGATION. Except as shown on Schedule 3.12 hereto, there are no
claims, actions, suits or proceedings pending or threatened against Imagitel, or
to its knowledge affecting Imagitel, at law or in equity, before or by any
Federal, state, municipal, administrative or other court, governmental
department, commission, board, or agency, an adverse determination of which
could have a material adverse effect on the business or operations of Imagitel,
and Imagitel knows of no basis for any of the foregoing. There is no order,
writ, injunction, or decree of any court, domestic or foreign, or any Federal or
state agency affecting Imagitel specifically or to which Imagitel is subject.
3.13. REPORTS. Imagitel has duly made all reports and filings required
to be made pursuant to applicable law, except for failures to file or reports
which would not have a material adverse effect on the business or financial
condition of Imagitel.
3.14. BROKERS. Except as provided in its contracts with Seruus Ventures
LLC and Maverick Management Group, Imagitel has not incurred any liability for
any commission or fee in the nature of a finder's, originator's or broker's fee
in connection with the transaction contemplated herein.
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3.15. EXPENDITURES. Schedule 3.15 hereto sets forth any single
expenditure of $75,000 or more proposed to be made by Imagitel after the date
hereof and a summary of the terms and conditions pertaining thereto. At least 20
business days prior to the Closing Date, Imagitel will advise Wavetech of any
changes to Schedule 3.15 hereto reflecting additions or deletions thereto since
the date hereof.
3.16 INSURANCE. Schedule 3.16 hereto is a true and complete summary of
the policies of fire, liability, life and other types of insurance held by
Imagitel, setting forth with respect to each such policy, the policy number,
name of the insured party, type of insurance, insurance company, annual premium,
expiration date, deductible amount, if any, and amount of coverage. Each such
policy is in an amount reasonably sufficient for the protection of the assets
and business covered thereby, and, in the aggregate, all such policies are
reasonably adequate for the protection of all the assets and business of
Imagitel taking into account the availability and cost of such coverage. To the
extent permissible pursuant to such policies, all such policies shall remain in
full force and effect for a period of at least 90 days following the Closing
Date. There is no reason known to Imagitel that any such policy will not be
renewable on terms and conditions as favorable as those set forth in such
policy.
3.17. CONTRACTS AND COMMITMENTS. Schedule 3.17 hereto sets forth each
contract or other commitment of Imagitel which requires an aggregate payment by
Imagitel after the date hereof of more than $75,000, and any other contract or
commitment that in the opinion of the Imagitel management materially affects the
business of Imagitel. Except for the contracts and commitments described in this
Reorganization Agreement or as set forth in Schedule 3.17 hereto, Imagitel is
not party to or subject to:
1. Any contracts or commitments which are material to its
business, operations or financial condition other than loans or agreements
with respect thereto entered into in the ordinary course of business;
2. Any employment contract or arrangement, whether oral or
written, with any officer, consultant, director or employee which is not
terminable on 30 days' notice without penalty or liability to make any
payment thereunder for more than 30 days after such termination;
3. Any plan or contract or other arrangement, oral or written,
providing for insurance for any officer or employee or members of their
families;
4. Any plan or contract or other arrangement, oral or written,
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit-sharing or other benefits for employees;
5. Any contract or agreement with any labor union;
6. Any contract or agreement with customers for the sale of
products or the furnishing of services, or any sales agency, broker,
distribution or similar contract, except contracts made in the ordinary
course of business;
7. Any contract restricting Imagitel from carrying on its
business anywhere in the United States;
8. Any instrument or arrangement evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase money obligation, guaranty, conditional
sale, lease purchase, or otherwise;
9. Any joint venture contract or arrangement or any other
agreement involving a sharing of profits;
10. Any license agreement in which Imagitel is the licensor or
licensee;
11. Any material contract or agreement, not of the type covered
by any of the other items of this Section 3.17, which by its terms is
either (i) not to be performed prior to 30 days from the date hereof, or
(ii) does not terminate, or is not terminable without penalty to Imagitel,
or any successors or assigns prior to 30 days from the date hereof.
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3.18. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.18 hereto contains a complete list of all Benefit Plans
sponsored or maintained by Imagitel or under which Imagitel may be obligated
("Imagitel Benefit Plans"). Imagitel has delivered to the Wavetech (i) accurate
and complete copies of all Imagitel Benefit Plan documents and all other
material documents relating thereto, including all summary plan descriptions,
summary annual reports and insurance contracts, (ii) accurate and complete
detailed summaries of all unwritten Imagitel Benefit Plans, (iii) accurate and
complete copies of the most recent financial statements and actuarial reports
with respect to all Imagitel Benefit Plans for which financial statements or
actuarial reports are required or have been prepared and (iv) accurate and
complete copies of all annual reports for all Imagitel Benefit Plans (for which
annual reports are required) prepared within the last two years. Any Imagitel
Benefit Plan providing benefits that are funded through a policy of insurance is
indicated by the word "insured" placed by the listing of the Imagitel Benefit
Plan on Schedule 3.18 hereto.
(b) All Imagitel Benefit Plans conform in all material respects to, and
are being administered and operated in material compliance with, the
requirements of ERISA, the Code and all other applicable Regulations. All
returns, reports and disclosure statements required to be filed or delivered
under ERISA and the Code with respect to all Imagitel Benefit Plans have been
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA involving
any of the Imagitel Benefit Plans, that could subject Imagitel to any material
penalty or tax imposed under the Code or ERISA.
(c) Except as set forth in Schedule 3.18 hereto, any Imagitel Benefit
Plan that is intended to be qualified under Section 401(a) of the Code and
exempt from tax under Section 501(a) of the Code has been determined by the
Internal Revenue Service to be so qualified, and such determination remains in
effect and has not been revoked. Nothing has occurred since the date of any such
determination that is reasonably likely to affect adversely such qualification
or exemption, or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any Imagitel
Benefit Plan.
(d) Except as set forth in Schedule 3.18 hereto, Imagitel has no
current or contingent obligation to contribute to any multiemployer plan (as
defined in Section 3(37) of ERISA). Imagitel has no liability with respect to
any employee benefit plan (as defined in Section 3(3) of ERISA) other than with
respect to the Imagitel Benefit Plans.
(e) There are no pending or, threatened claims by or on behalf of any
Imagitel Benefit Plans, or by or on behalf of any individual participants or
beneficiaries of any Imagitel Benefit Plans, alleging any breach of fiduciary
duty on the part of Imagitel or any of such party's officers, directors or
employees under ERISA or any other applicable Regulations, or claiming benefit
payments other than those made in the ordinary operation of such plans. The
Imagitel Benefit Plans are not the subject of any investigation, audit or action
by the Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC"). Imagitel has made all required contributions
under the Imagitel Benefit Plans including the payment of any premiums payable
to the PBGC and other insurance premiums.
(f) With respect to any Imagitel Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(l) of ERISA) (a "Welfare
Plan"), (i) each such Welfare Plan for which contributions are claimed as
deductions under any provision of the Code is in material compliance with all
applicable requirements pertaining to such deduction, (ii) with respect to any
welfare benefit fund (within the meaning of Section 419 of the Code) related to
such a Welfare Plan, there is no disqualified benefit (within the meaning of
Section 4976(b) of the Code) that would result in the imposition of a tax under
Section 4976(a) of the Code, (iii) any Imagitel Benefit Plan that is a group
health plan (within the meaning of Section 4980B(g)(2) of the Code) complies,
and in each and every case has complied, with all of the material requirements
of Section 4980B of the Code, ERISA, Title XXII of the Public Health Service Act
and the applicable provisions of the Social Security Act, and (iv) such Welfare
Plan may be amended or terminated at any time on or after the Closing Date.
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3.19. ENVIRONMENTAL MATTERS. Imagitel is in compliance with all local,
state and federal environmental statutes, laws, rules, regulations and permits,
including but not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601 ET SEQ. ("CERCLA") and the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq. Imagitel has not, nor to
Imagitel's knowledge have other parties, used, stored, disposed of or permitted
any "hazardous substance" (as defined in CERCLA), petroleum hydrocarbon,
polychlorinated biphenyl, asbestos or radioactive material (collectively,
"Hazardous Substances") to remain at, on, in or under any of the real property
owned or leased by Imagitel (including, without limitation, the buildings or
structures thereon) (the "Real Property"). Imagitel has not, nor to Imagitel's
knowledge have other parties, installed, used, or disposed of any asbestos or
asbestos-containing material on, in or under any of the Real Property. Imagitel
has not, nor to Imagitel's knowledge have other parties, installed or used
underground storage tanks in or under any of the Real Property. Imagitel has
provided Interim with copies of all complaints, citations, orders, reports,
written data, notices or other communications sent or received by it with
respect to any local, state or federal environmental law, ordinance, rule or
regulation as any of them relate to Imagitel.
3.20. AFFILIATE TRANSACTIONS. Except as set forth in Schedule 3.20
hereto, (i) no Affiliated Person has any interest in any property or assets
(whether real or personal, tangible or intangible) owned or leased by Imagitel
or any subsidiary or otherwise utilized by Imagitel or any subsidiary in the
conduct of its business; (ii) has any direct or indirect interest of any nature
whatever in any Person that competes with, conducts any business similar to, has
any present (or contemplated) arrangement or agreement (including, without
limitation, arrangements regarding the shared use of personnel or facilities)
with (wither as a customer or supplier or otherwise), or is involved in any way
with, Imagitel or any subsidiary; (iii) neither Imagitel nor any subsidiary owes
any amount to any Affiliated Person; and (iv) no Affiliated Person owes any
amount to Imagitel or any subsidiary.
3.21. IMAGITEL INFORMATION. The written information with respect to
Imagitel, and its officers, directors, and affiliates which shall have been
supplied by Imagitel (or any of its accountants, counsel or other authorized
representatives) specifically for use in soliciting approval of the Merger by
shareholders of Wavetech, or which shall be contained in the Proxy Statement,
will not, on the date the Proxy Statement is first mailed to shareholders of
Wavetech or on the date of the Wavetech Shareholders' Meeting, contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or
necessary to correct any statement in any earlier communication to Wavetech
shareholders with respect to the Merger.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES BY WAVETECH AND INTERIM
Wavetech and Interim hereby represent and warrant to Imagitel the
following matters on and as of the date of this Reorganization Agreement and at
the Effective Time; provided, however, that before any breach of or inaccuracy
in any of the representations or warranties given in this Section 4 shall be
actionable or shall constitute grounds for termination of or failure to perform
under the terms of this Reorganization Agreement by Imagitel, such breach or
inaccuracy must be materially adverse in the aggregate with respect to the
business of Wavetech.
4.1. ORGANIZATION, GOOD-STANDING AND CONDUCT OF BUSINESS. Wavetech is a
corporation, duly organized, validly existing and in good standing under the
laws of New Jersey, and has full power and authority and all necessary
governmental and regulatory authorization to own all of its properties and
assets and to carry on its business as it is presently being conducted, and is
properly licensed, qualified and in good standing as a foreign corporation in
all jurisdictions wherein the character of the properties or the nature of the
business transacted by Wavetech makes such license or qualification necessary.
The only subsidiaries of Wavetech are set forth in Schedule 4.1 hereto. Each
subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power to carry on its business as it now being conducted or currently
proposed to be conducted. Each subsidiary is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary. All the outstanding shares of
capital stock of each subsidiary are validly issued, fully paid and
nonassessable, owned by Wavetech, or by a subsidiary of Wavetech, free and clear
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of any liens, claims or encumbrances. There are no existing options, warrants,
calls or other rights, agreements or commitments of any character relating to
the issued or unissued capital stock or other securities of any of the
subsidiaries of Wavetech. Except as set forth in Wavetech's Annual Report on
From 10-KSB for the year ended August 31, 1997, Wavetech does not directly or
indirectly own any interest in any other corporation, partnership, joint venture
or other business association or entity.
4.2. CORPORATE AUTHORITY. The execution, delivery and performance of
this Reorganization Agreement have been duly authorized by the Boards of
Directors of Wavetech and Interim. Other than the Wavetech Shareholder Approval,
no other corporate acts or proceedings on the part of Wavetech or Interim are
required or necessary to authorize this Reorganization Agreement or the Merger.
4.3. BINDING EFFECT. Subject to receipt of the Shareholder Approvals
and any required Regulatory Approvals, when executed, this Reorganization
Agreement will constitute a valid and legally binding obligation of Wavetech and
Interim, enforceable against Wavetech and Interim in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect and general principles of equity.
Each document and instrument contemplated by this Reorganization Agreement, when
executed and delivered by Wavetech and Interim in accordance with the provisions
hereof, shall be duly authorized, executed and delivered by Wavetech and Interim
and enforceable against Wavetech and Interim in accordance with its terms,
subject to the exceptions in the previous sentence.
4.4. CAPITALIZATION OF WAVETECH. The authorized capital stock of
Wavetech consists solely of (1) 50,000,000 authorized shares of common stock
($0.001 par value), of which 16,282,252 are issued and outstanding, and (ii)
10,000,000 shares of preferred stock, none of which is outstanding. All of the
issued and outstanding shares of Wavetech are validly issued and fully paid and
nonassessable. Except for the items set forth on Schedule 4.4 hereto, there are
no outstanding obligations, options, warrants or commitments of any kind or
nature or any outstanding securities or other instruments convertible into
shares of any class of capital stock of Wavetech, or pursuant to which Wavetech
is or may become obligated to issue any shares of its capital stock. None of the
shares of the Wavetech Common Stock is subject to any restrictions as to the
transfer thereof, except as set forth in Wavetech's Certificate of Incorporation
or Bylaws and except for restrictions on account of applicable federal or state
securities laws. Except for Interim (which is wholly-owned by Wavetech),
Wavetech does not hold 10% of any class of equity securities of any other
company or legal entity, except for those wholly owned subsidiaries disclosed in
Wavetech's public SEC filings.. The authorized capital stock of Interim consists
solely of (i) 10,000 authorized shares of common stock ($ 1.00 par value), of
which 100 shares are issued and outstanding. All of the issued and outstanding
shares of Interim are validly issued and fully paid and nonassessable. Except
for the items set forth on Schedule 4.4 hereto, there are no outstanding
obligations, options, warrants or commitments of any kind or nature or any
outstanding securities or other instruments convertible into shares of any class
of capital stock of Interim, or pursuant to which Interim is or may become
obligated to issue any shares of its capital stock.
4.5. ABSENCE OF DEFAULTS. Neither Wavetech nor Interim is in default
under, or in violation of, any provision of its Certificate of Incorporation or
Bylaws. Neither Wavetech nor Interim is in default under, or in violation of,
any agreement to which Wavetech or Interim is a party, the effect of which
default or violation would have a material adverse effect on Wavetech or Interim
or their respective business operations or prospects. Except as disclosed in
Schedule 4.5 hereto, neither Wavetech nor Interim is in violation of any
applicable law, rule or regulation, the effect of which would have a material
adverse effect on Wavetech or its business operations or prospects.
4.6 NON-CONTRAVENTION AND DEFAULTS; NO LIENS. Neither the execution or
delivery of this Reorganization Agreement, nor the fulfillment of, or compliance
with, the terms and provisions hereof, will (i) result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in a
violation of, termination of or acceleration of the performance provided by the
terms of, any agreement to which Wavetech or, Interim is a party or by which it
may be bound, (ii) violate any provision of any law, rule or regulation, (iii)
result in the creation or imposition of any lien, charge, restriction, security
interest or encumbrance of any nature whatsoever on any asset of Wavetech or
Interim, or (iv) violate any provisions of Wavetech's or Interim's charter or
Bylaws. To the best of Wavetech's knowledge, no other party to any material
agreement to which Wavetech or Interim is a party is in default thereunder or in
breach of any provision thereof. To the best of Wavetech's knowledge, there
exists no condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such agreement.
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4.7. NECESSARY APPROVALS. (a) Wavetech has obtained all certificates of
authority, licenses, permits, franchises, registrations of foreign ownership or
other Regulatory Approvals in every jurisdiction necessary for the continuing
conduct of its business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no such certificate,
license, permit, franchise, registration or other Regulatory Approval is about
to expire, lapse, has been threatened to be revoked or has otherwise become
restricted by its terms which would, upon such expiration, lapse, revocation or
restriction, have a material adverse effect on the financial circumstances of
Wavetech. Further, there is no reasonable basis for any such expiration, lapse,
revocation, threat of revocation or restriction. Except for any necessary
Regulatory Approvals, no consent, approval, authorization, registration, or
filing with or by any governmental authority, foreign or domestic, is required
on the part of Wavetech in connection with the execution and delivery of this
Reorganization Agreement or the consummation by Wavetech of the transactions
contemplated hereby. Except for the items in the preceding sentence or as
disclosed in Schedule 4.7 attached hereto, Wavetech is not required to procure
the approval of any Person, in order to prevent the termination of any right,
privilege, license or contract of Wavetech as a result of this Reorganization
Agreement.
(b) Schedule 4.7 hereto sets forth all governmental licenses and each
other material approval, authorization, consent, license, certificate of public
convenience, order or other permit of all Regulatory Authority, necessary to
enable Wavetech or its subsidiaries to own, operate and lease their properties
and assets as and where such properties and assets are owned, leased or operated
and to provide service and carry on their business as presently provided and
conducted (collectively the "Permits") or required to permit the continued
conduct of such business following the Closing Date in the manner conducted on
the date of this Reorganization Agreement (indicating in each case whether or
not the consent of any Person is required for the consummation of the
transactions contemplated hereby).
4.8. FINANCIAL STATEMENTS. The audited financial statements of Wavetech
at and for each of the fiscal years ended August 31, 1995, 1996 and 1997, and
the unaudited monthly statements subsequent to August 31, 1997 (the "Wavetech
Financial Statements") all of which have been provided to Imagitel, are true,
correct and complete in all material respects and present fairly, in conformity
with generally accepted accounting principles consistently applied, the
financial position of Wavetech at the dates indicated and the results of its
operations for each of the periods indicated, except as otherwise set forth in
the notes thereto and except, with respect to the unaudited statements' normal
year end adjustments. The books and records of Wavetech have been kept, and will
be kept to the Closing Date, in reasonable detail, and will fairly and
accurately reflect in all material respects to the Closing Date, the
transactions of Wavetech.
4.9. TAX RETURNS. Wavetech files its income tax returns and maintains
its tax books and records on the basis of a taxable year ending August 3 1.
Wavetech has duly filed all tax reports and returns required to be filed by any
federal, state or local taxing authorities (including, without limitation, those
due in respect of its properties, income, franchises, licenses, sales and
payrolls) through the date hereof, and Wavetech has duly paid all taxes with
respect to the periods covered thereby and has established adequate reserves in
accordance with generally accepted accounting principles consistently applied
for the payment of all income, franchises, property, sales, employment or other
taxes anticipated to be payable after the date hereof. Wavetech is not
delinquent in the payment of any taxes, assessments or governmental charges and
no deficiencies have been asserted or assessed, which have not been paid or for
which adequate reserves have not been established. Wavetech does not have in
effect any waiver relating to any statute of limitations for assessment of taxes
with respect to any federal, state or local income, property, franchise, sales,
license or payroll tax. Wavetech does not know, or have reason to know, of any
questions which have been raised or which may be raised by any taxing authority
relating to taxes or assessments of Wavetech which, if determined adversely,
would result in the assertion of any deficiency.
4.10. UNDISCLOSED LIABILITIES. (a) Except for the liabilities which are
disclosed in the Wavetech Financial Statements or as set forth on Schedule 4.10
hereto, Wavetech has no material liabilities or material obligations of any
nature, whether absolute, accrued, contingent or otherwise, and whether due or
to become due. Since August 31, 1997, there has been (i) no material adverse
change in the business or operations of Wavetech, (ii) no incurrence by or
subjection of Wavetech to any obligation or liability (whether fixed, accrued or
contingent) or commitment material to Wavetech not referred to in this
Reorganization Agreement, except such obligations or liabilities as were or may
be incurred in the ordinary course of business and which are reflected on the
Wavetech Financial Statements at and for the periods subsequent to August 31,
1997.
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(b) Except as set forth an Schedule 4.10 hereto, Wavetech has not since
August 31, 1997 provided any special promotions, discounts or other incentives
to its employees, agents, distributors or customers in connection with the
solicitation of new orders for service provided by Wavetech or any subsidiary,
nor has any customer pre-paid any material amount for services to be provided by
Wavetech or any subsidiary in the future.
(c) Since August 31, 1997, Wavetech's accounts payable have been
accrued and paid in a manner consistent with Wavetech's prior practice and at no
point in time since August 31, 1997 have Wavetech's aggregate past due accounts
payable been more than $ 450,000.
(d) Wavetech has paid or fully provided for all access charges properly
payable to local exchange carriers for access facilities and has properly
reported its PlU to such carriers. As of September 30, 1997, Wavetech does not
have, and at the Closing Wavetech will not have, any liability on account of
PIU. Wavetech's revenue from international traffic is fully collectible at the
recorded amounts thereof, less a provision for bad debts not in excess of 25%
thereof, and the subsidiaries of Wavetech will not have any operating loss in
excess of $6,500,000 for the period from March 8, 1995 through the Closing Date,
after taking into account any and all contingencies associated with the
provision or possible termination of such services, including (i) any
requirement to provide return traffic, (ii) any liability that may arise in
connection with the termination of contracts or other arrangements with any
agents Or distributors, governmental entities or other Persons, and (iii) and
potential litigation costs related to any of the foregoing.
4.11. TITLE TO PROPERTIES, ENCUMBRANCES. Wavetech has good and
marketable title to all of the real property and depreciable tangible personal
property owned by it, free and clear of any liens, claims, charges, options or
other encumbrances, except for any lien for (i) current taxes not yet due and
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of the banking business, (iii) such imperfections of title,
easements and other encumbrances, if any, as are not material in character,
amount or extent, or (iv) such items as are set forth on Schedule 4.11 hereto.
4.12. LITIGATION. Except as shown on Schedule 4.12 hereto, there are no
claims, actions, suits or proceedings pending or threatened against Wavetech, or
to its knowledge affecting Wavetech, at law or in equity, before or by any
Federal, state, municipal, administrative or other court, governmental
department, commission, board, or agency, an adverse determination of which
could have a material adverse effect on the business or operations of Wavetech,
and Wavetech knows of no basis for any of the foregoing. There is no order,
writ, injunction, or decree of any court, domestic or foreign, or any Federal or
state agency affecting Wavetech specifically or to which Wavetech is subject.
4.13. REPORTS. Wavetech has duly made all reports and filings required
to be made pursuant to applicable law, except for failures to file or reports
which would not have a material adverse effect on the business or financial
condition of Wavetech.
4.14. BROKERS. Wavetech has not incurred any liability for any
commission or fee in the nature of a finder's, originator's or broker's fee in
connection with the transaction contemplated herein.
4.15. EXPENDITURES. Schedule 4.15 hereto sets FORTH ANY SINGLE
EXPENDITURE of $25,000 or more proposed to be made by Wavetech after the date
hereof and a summary of the terms and conditions pertaining thereto. At least 20
business days prior to the Closing Date, Wavetech will advise Imagitel of any
changes to Schedule 4.15 hereto reflecting additions or deletions thereto since
the date hereof.
4.16 INSURANCE. Schedule 4.16 hereto is a true and complete summary of
the policies of fire, liability, life and other types of insurance held by
Wavetech, setting forth with respect to each such policy, the policy number,
name of the insured party, type of insurance, insurance company, annual premium,
expiration date, deductible amount, if any, and amount of coverage. Each such
policy is in an amount reasonably sufficient for the protection of the assets
and business covered thereby, and, in the aggregate, all such policies are
reasonably adequate for the protection of all the assets and business of
Wavetech taking into account the availability and cost of such coverage. To the
extent permissible pursuant to such policies, all such policies shall remain in
full force and effect for a period of at least 90 days following the Closing
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Date. There is no reason known to Wavetech that any such policy will not be
renewable on terms and conditions as favorable as those set forth in such
policy.
4.17. CONTRACTS AND COMMITMENTS. Schedule 4.17 hereto sets forth each
contract or other commitment of Wavetech which requires an aggregate payment by
Wavetech after the date hereof of more than $25,000, and any other contract or
commitment that in the opinion of the Wavetech management materially affects the
business of Wavetech. Except for the contracts and commitments described in this
Reorganization Agreement or as set forth in Schedule 4.17 hereto, Wavetech is
not party to or subject to:
1. Any contracts or commitments which are material to its
business, operations or financial condition other than loans or agreements
with respect thereto entered into in the ordinary course of business;
2. Any employment contract or arrangement, whether oral or
written, with any officer, consultant, director or employee which is not
terminable on 30 days' notice without penalty or liability to make any
payment thereunder for more than 30 days after such termination;
3. Any plan or contract or other arrangement, oral or written,
providing for insurance for any officer or employee or members of their
families;
4. Any plan or contract or other arrangement, oral or written,
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit-sharing or other benefits for employees;
5. Any contract or agreement with any labor union;
6. Any contract or agreement with customers for the sale of
products or the furnishing of services, or any sales agency, broker,
distribution or similar contract, except contracts made in the ordinary
course of business;
7. Any contract restricting Wavetech from carrying on its
business anywhere in the United States;
8. Any instrument or arrangement evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase money obligation, guaranty, conditional
sale, lease-purchase, or otherwise;
9. Any joint venture contract or arrangement or any other
agreement involving a sharing of profits;
10. Any license agreement in which Wavetech is the licensor or
licensee;
11. Any material contract or agreement, not of the type covered
by any of the other items of this Section 4.17, which by its terms is
either (i) not to be performed prior to 30 days from the date hereof, or
(ii) does not terminate, or is not terminable without penalty to Wavetech,
or any successors or assigns prior to 30 days from the date hereof.
4.18. EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.18 hereto contains a complete list of all
Benefit Plans sponsored or maintained' by Wavetech or under which
Wavetech may be obligated ("Wavetech Benefit Plans"). Wavetech has
delivered to Imagitel (i) accurate and complete copies of all Wavetech
Benefit Plan documents and all other material documents relating
thereto, including all summary plan descriptions, summary annual
reports and insurance contracts, (ii) accurate and complete detailed
summaries of all unwritten Wavetech Benefit Plans, (iii) accurate and
complete copies of the most recent financial statements and actuarial
reports with respect to all Wavetech Benefit Plans for which financial
statements or actuarial reports are required or have been prepared and
(iv) accurate and complete copies of all annual reports for all
Wavetech Benefit Plans (for which annual reports are required) prepared
within the last two years. Any Wavetech Benefit Plan providing benefits
that are funded through a policy of insurance is indicated by the word
"insured" placed by the listing of the Wavetech Benefit Plan on
Schedule 4.18 hereto.
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(b) All Wavetech Benefit Plans conform in all material
respects to, and are being administered and operated in material
compliance with, the requirements of ERISA, the Code and all other
applicable Regulations. All returns, reports and disclosure statements
required to be filed or delivered under ERISA and the Code with respect
to all Wavetech Benefit Plans have been filed or delivered. There have
not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA involving any of the
Wavetech Benefit Plans, that could subject Wavetech to any material
penalty or tax imposed under the Code or ERISA.
(c) Except as set forth in Schedule 4.18 hereto, any Wavetech
Benefit Plan that is intended to be qualified under Section 401(a) of
the Code and exempt from tax under Section 501(a) of the Code has been
determined by the Internal Revenue Service to be so qualified, and such
determination remains in effect and has not been revoked. Nothing has
occurred since the date of any such determination that is reasonably
likely to affect adversely such qualification or exemption, or result
in the imposition of excise taxes or income taxes on unrelated business
income under the Code or ERISA with respect to any Wavetech Benefit
Plan.
(d) Except as set forth in Schedule 4.18 hereto, Wavetech has
no current or contingent obligation to contribute to any multiemployer
plan (as defined in Section 3(37) of ERISA). Wavetech has no liability
with respect to any employee benefit plan (as defined in Section 3(3)
of ERISA) other than with respect to the Wavetech Benefit Plans.
(e) There are no pending or, threatened claims by or on behalf
of any Wavetech Benefit Plans, or by or on behalf of any individual
participants or beneficiaries of any Wavetech Benefit Plans, alleging
any breach of fiduciary duty on the part of Wavetech or any of such
party's officers, directors or employees under ERISA or any other
applicable Regulations, or claiming benefit payments other than those
made in the ordinary operation of such plans. The Wavetech Benefit
Plans are not the subject of any investigation, audit or action by the
Internal Revenue Service, the Department of Labor or the Pension
Benefit Guaranty Corporation ("PBGC"). Wavetech has made all required
contributions under the Wavetech Benefit Plans including the payment of
any premiums payable to the PBGC and other insurance premiums.
(f) With respect to any Wavetech Benefit Plan that is an
employee welfare benefit plan (within the meaning of Section 3(l) of
ERISA) (a "Welfare Plan"), (i) each such Welfare Plan for which
contributions are claimed as deductions under any provision of the Code
is in material compliance with all applicable requirements pertaining
to such deduction, (ii) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to such a
Welfare Plan, there is no disqualified benefit (within the meaning of
Section 4976(b) of the Code) that would result in the imposition of a
tax under Section 4976(a) of the Code, (iii) any Wavetech Benefit Plan
that is a group health plan (within the meaning of Section 498013(g)(2)
of the Code) complies, and in each and every case has complied, with
all of the material requirements of Section 4980B of the Code, ERISA,
Title XXII of the Public Health Service Act and the applicable
provisions of the Social Security Act, and (iv) such Welfare Plan may
be amended or terminated at any time on or after the Closing Date.
4.19. ENVIRONMENTAL MATTERS. Wavetech is in compliance with all local,
state and federal environmental statutes, laws, rules, regulations and permits,
including but not limited to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601 ET SEC. ("CERCLA") and the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq. Wavetech has not, nor to
Wavetech's knowledge have other parties, used, stored, disposed of or permitted
any "hazardous substance" (as defined in CERCLA), petroleum hydrocarbon,
polychlorinated biphenyl, asbestos or radioactive material (collectively,
"Hazardous Substances") to remain at, on, in or under any of the real property
owned or leased by Wavetech (including, without limitation, the buildings or
structures thereon) (the "Real Property"). Wavetech has not, nor to Wavetech's
knowledge have other parties, installed, used, or disposed of any asbestos or
asbestos-containing material on, in or under any of the Real Property. Wavetech
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has not, nor to Wavetech's knowledge have other parties, installed or used
underground storage tanks in or under any of the Real Property. Wavetech has
provided Interim with copies of all complaints, citations, orders, reports,
written data, notices or other communications sent or received by it with
respect to any local, state or federal environmental law, ordinance, rule or
regulation as any of them relate to Wavetech.
4.20. AFFILIATE TRANSACTIONS. Except as set forth in Schedule 4.20
hereto, (i) no Affiliated Person has any interest in any property or assets
(whether real or personal, tangible or intangible) owned or leased by Wavetech
or any subsidiary or otherwise utilized by Wavetech or any subsidiary in the
conduct of its business; (ii) has any direct or indirect interest of any nature
whatever in any Person that competes with, conducts any business similar to, has
any present (or contemplated) arrangement or agreement (including, without
limitation, arrangements regarding the shared use of personnel or facilities)
with (wither as a customer or supplier or otherwise), or is involved in any way
with, Wavetech or any subsidiary; (iii) neither Wavetech nor any subsidiary owes
any amount to any Affiliated Person; and (iv) no Affiliated Person owes any
amount to Wavetech or any subsidiary.
4.21. WAVETECH INFORMATION. The written information with respect to
Wavetech, and its officers, directors, and affiliates which shall have been
supplied by Wavetech (or any of its accountants, counsel or other authorized
representatives) specifically for use in soliciting approval of the Merger by
shareholders of Imagitel, or which shall be contained in the Proxy Statement,
will not, on the date the Proxy Statement is first mailed to shareholders of
Imagitel or on the date of the Imagitel Shareholders' Meeting, contain any
untrue statement of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or
necessary to correct any statement in any earlier communication to Imagitel
shareholders with respect to the Merger.
4.22 REPORTS. Wavetech has duly made all reports and filings required
to be made pursuant to applicable law, except for failures to file or reports
which would not have a material adverse effect on the business or financial
condition of Wavetech. Without limiting the foregoing, Wavetech has filed all
reports required to be filed under the Securities Exchange Act of 1934 for the
past 36 calendar months and has filed on a timely basis all reports required to
have been filed by Wavetech under the Securities Exchange Act of 1934 during the
past 12 months. Since August 31, 1997 Wavetech has not defaulted on any
installment or indebtedness for borrowed money or on any rental for any
long-term lease.
4.23. NASDAQ. The Wavetech Common Stock is listed on the Nasdaq small
Market.
ARTICLE 5. CONDUCT OF BUSINESS PENDING CLOSING
5.1. CONDUCT OF IMAGITEL PENDING CLOSING. During the period commencing
on the date hereof and continuing until the Closing Date, Imagitel covenants and
agrees to the following (except to the extent that Wavetech shall otherwise
expressly consent in writing; provided, however, that any breach of any of the
covenants given in this Section 5.1 must be material in the aggregate with
respect to the business of Imagitel before such breach shall be actionable or
shall constitute grounds for termination or failure to perform under this
Reorganization Agreement.
(a) Imagitel will carry on its business only in the ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent with such business, use all reasonable efforts to
preserve intact its business organization, maintain the services of its
present officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it so that
its goodwill and going business shall be unimpaired at the Closing Date.
(b) Imagitel will not amend its Certificate of Incorporation or
Bylaws as in effect on the date hereof.
(c) Except for:
(i) the issuance of capital stock in connection with items
set forth on Schedule 3.4 hereto, and
(ii) the issuance of up to 5,000 shares of its common stock
in connection with the contemplated acquisition of aCOMModation
Services, Inc., Imagitel will not issue, grant, pledge or sell,
or authorize the issuance of, reclassify or redeem, purchase or
otherwise acquire, any shares of its capital stock of any class
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or any securities convertible into shares of any class, or any
rights, warrants or options to acquire any such shares (except
for employee stock options in the ordinary course in accordance
with past practice and only upon prior notice to Wavetech); nor
will it enter into any arrangement or contract with respect to
the issuance of any such shares or other convertible securities;
nor will it make any other change in its equity capital
structure.
(d) Imagitel will promptly advise Wavetech orally and in writing
of any change in the businesses of Imagitel which is or may reasonably be
expected to be materially adverse to the business of Imagitel.
(e) Imagitel will not take, agree to take, or knowingly permit to
be taken any action or do or knowingly permit to be done anything in the
conduct of the business of Imagitel, or otherwise, which would be contrary
to or in breach of any of the terms or provisions of this Reorganization
Agreement, or which would cause any of the representations of Imagitel
contained herein to be or become untrue in any material respect.
(f) Imagitel will not incur any indebtedness for borrowed money,
issue or sell any debt securities, or assume or otherwise become liable,
whether directly, contingently or otherwise, for the obligation of any
other party, other than in the ordinary course of business.
(g) Except in the ordinary course of business and except for
expenses attendant to the Merger and current contractual obligations,
Imagitel will not incur any expense in an amount in excess of $75,000 after
the execution of this Reorganization Agreement without the prior written
consent of Wavetech,
(h) Imagitel will not grant any executive officers any increase
in compensation (except in the ordinary course in accordance with past
practice and only upon prior notice to Wavetech), or enter into any
employment agreement with any executive officer without the consent of
Wavetech except as may be required under employment or termination
agreements in effect on the date hereof which have been previously
disclosed to Wavetech in writing.
(i) Except as set forth expressly herein, Imagitel will not
acquire or agree to acquire by merging or consolidating with, purchasing
substantially all of the assets of or otherwise, any business of any
corporation, partnership, association or other business organization or
division thereof.
5.2. CONDUCT OF WAVETECH PENDING CLOSING. During the period commencing
on the date hereof and continuing until the Closing Date, Wavetech covenants and
agrees to the following (except to the extent that Wavetech shall otherwise
expressly consent in writing; provided, however, that any breach of any of the
covenants given in this Section 5.2 must be material in the aggregate with
respect to the business of Wavetech before such breach shall be actionable or
shall constitute grounds for termination or failure to perform under this
Reorganization Agreement.
(a) Wavetech will carry on its business only in the ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent with such business, use all reasonable efforts to
preserve intact its business organization, maintain the services of its
present officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it so that
its goodwill and going business shall be unimpaired at the Closing Date.
(b) Wavetech will not amend its Certificate of Incorporation or
Bylaws as in effect on the date hereof.
(c) Except for:
(i) the issuance of capital stock in connection with items
set forth on Schedule 4.4 hereto, and
(ii) the issuance of up to 500,000 shares (pre-reverse
split) at not less than $0.53 per share in connection with
capital raising transactions which are otherwise acceptable to
Imagitel, and
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(iii) the issuance of 1,428,572 shares (pre-reverse split)
at not less than $0.35 per share to Elgin Investments.
Wavetech will not issue, grant, pledge or sell, or authorize the issuance of,
reclassify or redeem, purchase or otherwise acquire, any shares of its capital
stock of any class or any securities convertible into shares of any class, or
any rights, warrants or options to acquire any such shares (except for employee
stock options in the ordinary course in accordance with past practice and only
upon prior notice to Wavetech); nor will it enter into any arrangement or
contract with respect to the issuance of any such shares or other convertible
securities; nor will it declare, set aside or pay any dividends (of any type) or
make any other change in its equity capital structure.
(d) Wavetech will promptly advise Imagitel orally and in writing
of any change in the businesses of Wavetech which is or may reasonably be
expected to be materially adverse to the business of Wavetech.
(e) Wavetech will not take, agree to take, or knowingly permit to
be taken any action or do or knowingly permit to be done anything in the
conduct of the business of Wavetech, or otherwise, which would be contrary
to or in breach of any of the terms or provisions of this Reorganization
Agreement, or which would cause any of the representations of Wavetech
contained herein to be or become untrue in any material respect.
(f) Wavetech will not incur any indebtedness for borrowed money,
issue or sell any debt securities, or assume or otherwise become liable,
whether directly, contingently or otherwise, for the obligation of any
other party, other than in the ordinary course of business.
(g) Except for expenses attendant to the Merger and current
contractual obligations, Wavetech will not incur any expense in an amount
in excess of $25,000 after the execution of this Reorganization Agreement
without the prior written consent of Imagitel.
(h) Wavetech will not grant any executive officers any increase
in compensation (except in the ordinary course in accordance with past
practice and only upon prior notice to Imagitel), or enter into any
employment agreement with any executive officer without the consent of
Imagitel except as may be required under employment or termination
agreements in effect on the date hereof which have been previously
disclosed to Imagitel in writing.
Wavetech will not acquire or agree to acquire by merging or
consolidating with, purchasing substantially all of the assets of or otherwise,
any business or any corporation, partnership, association or other business
organization or division thereof.
ARTICLE 6. COVENANTS OF THE PARTIES
6.1. ACCESS TO PROPERTIES AND RECORDS. Between the date of this
Reorganization Agreement and the Closing Date, the parties will provide to each
other and to their respective accountants, counsel and other authorized
representatives reasonable access, during reasonable business hours and upon
reasonable notice, to their respective premises, properties, contracts,
commitments, books, records and other information and will cause their
respective officers to furnish to the other party and its authorized
representatives such financial, technical and operating data and other
information pertaining to their respective businesses, as the parties shall from
time to time reasonably request. Each party will and will cause its employees
and agents to hold in strict confidence, unless disclosure is compelled by
judicial or administrative process, or in the opinion of its counsel, by other
requirements of law, all Confidential Information and will not disclose the same
to any Person. Confidential Information shall be used only for the purpose of
and in connection with consummating the transaction contemplated herein. If this
Reorganization Agreement is terminated, each party hereto will promptly return
all documents received by it from each other party containing Confidential
Information. The covenants in this Section 6.1 shall survive the Closing Date
forever.
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6.2 REGULATORY FILINGS. The parties hereto will use their respective
best efforts and cooperate with each other to obtain promptly all such
Regulatory Approvals and to make such filings as, in the opinion of their
respective counsels, may be necessary or advisable in connection with this
transaction. Wavetech shall be responsible for all filings fees required in
connection with such approvals or filings.
6.3. COOPERATION. Each party shall use its respective, reasonable best
efforts to take any and all necessary or appropriate actions, and to use its
reasonable best efforts to cause its officers, directors, employees, agents, and
representatives to use their reasonable best efforts and to take all steps in
good faith within their power, to cause to be fulfilled those of the conditions
precedent to its obligations to consummate the Mergers which are dependent upon
its or their actions, including but not limited to (i) requesting the delivery
of appropriate opinions and letters from its counsel and (ii) obtaining any
consents, approvals, or waivers required to be obtained from other parties.
6.4. AFFILIATES' LETTERS. Imagitel shall deliver to Wavetech a letter
identifying all Persons who are, at the time the Corporate Merger is submitted
to a vote of the shareholders of Imagitel, "affiliates" of Imagitel for purposes
of Rule 145 of the General Rules and Regulations under the Securities Act.
Imagitel shall use its reasonable best efforts to cause each Person who is
identified as an "affiliate" in the letter referred to above to deliver to
Wavetech on or prior to the Effective Time a written agreement, in form
reasonably satisfactory to Wavetech that such Person shall not sell, pledge,
transfer or otherwise dispose of any capital stock of Imagitel or any Wavetech
Common Stock owned by such person or to be received by such person as part of
the consideration except in compliance with the applicable provisions of the
Securities Act.
6.5. LISTING OF WAVETECH COMMON STOCK. Wavetech shall use its best
efforts to cause the shares of Wavetech Common Stock to be issued in the
transactions contemplated by this Reorganization Agreement to be approved for
quotation on the Nasdaq Small Cap, subject to official notice of issuance, prior
to the Effective Time. Wavetech shall give such notice to Nasdaq as may be
required to permit the listing of the Wavetech Common Stock issued in connection
with the Merger.
6.6. TAX TREATMENT; ACCOUNTING TREATMENT. Imagitel and Wavetech shall
each take such acts within their power as may be reasonably necessary to cause
the Merger to qualify as a "reorganization" within the meaning of Section 368(a)
of the Code, and at Imagitel's option for "pooling treatment" under GAAP.
6.7. EXPENSES. The parties shall pay their own fees and expenses
(including legal and accounting fees) incurred in connection with this
transaction. Reasonable estimates of these expenses shall be accrued by the
month-end immediately prior to the Closing Date.
6.8 MATERIAL EVENTS. At all times prior to the Closing Date, each party
shall promptly notify the other in writing of the occurrence of any event which
will or may result in the failure to satisfy the conditions specified in Article
6 or Article 7 of this Reorganization Agreement.
6.9. PUBLIC ANNOUNCEMENTS. At all times until after the Closing Date,
neither Imagitel nor Wavetech shall issue or permit any of its respective
subsidiaries, affiliates, officers, directors or employees to issue any press
release or other information to the press with respect to this Reorganization
Agreement, without the express prior consent of the other party, except as may
be required by law or the policies of NASDAQ (and in such case, the parties
shall provide prior notice of such disclosure and a reasonable opportunity to
comment upon such disclosure).
6.10. UPDATING OF SCHEDULES. Imagitel and Wavetech shall, at the
Closing, prepare and deliver to each other such supplements to the schedules
attached hereto as may be necessary or appropriate to ensure the accuracy and
completeness of the information required to be disclosed in such schedules at
all times prior to the Closing, provided that the furnishing of any such
supplement to such schedules shall not modify, limit, or otherwise affect any
representations or warranties of Imagitel or Wavetech contained herein or any
right of Imagitel or Wavetech to terminate this Reorganization Agreement.
Imagitel and Wavetech shall provide to each other drafts of such supplemental
schedules at least three (3) business days prior to the Closing Date.
6.11 DIRECTORS. At the Wavetech Shareholders' Meeting, Wavetech shall
have its shareholders authorize that upon Closing:(l) its Board of Directors
shall consist of five persons and (2) shall nominate as management's slate five
designees of Imagitel.
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6.12. PROHIBITED ACTIONS. (a) Except as expressly provided in this
Reorganization Agreement, as agreed to by Wavetech or as required by applicable
law, rules or regulations (including the fiduciary duties of the Imagitel
directors under applicable law), during the period from the date of this
Reorganization Agreement to the Effective Time, Imagitel shall, and shall cause
its subsidiaries to, (i) take no action which would adversely affect or delay
the ability of the parties hereto to obtain any necessary Regulatory Approvals
or Authorizations required for the transactions contemplated hereby or to
perform its covenants and agreements on a timely basis under this Reorganization
Agreement and (ii) take no action that could reasonably be expected to have a
Material Adverse Effect on Imagitel.
(b) Except as expressly provided in this Reorganization Agreement, as
agreed to by Imagitel or as required by applicable law, rules or regulations,
during the period from the date of this Reorganization Agreement to the
Effective Time, Wavetech shall, and shall cause its subsidiaries to, (i) take no
action which would adversely affect or delay the ability of the parties hereto
to obtain any necessary Regulatory Approvals or Authorizations required for the
transactions contemplated hereby or to perform its covenants and agreements on a
timely basis under this Reorganization Agreement and (ii) take no action that
could reasonably be expected to have a Material Adverse Effect on Wavetech.
ARTICLE 7. CONDITIONS TO WAVETECH'S OBLIGATION TO CLOSE
The obligation of Wavetech and Interim to consummate the transactions
contemplated in this Reorganization Agreement is subject to the satisfaction of
the following conditions at or before the Closing Date:
7.1. PERFORMANCE OF ACTS AND REPRESENTATIONS BY IMAGITEL. Each of the
acts and undertakings of Imagitel to be performed on or before the Closing Date
pursuant to the terms of this Reorganization Agreement shall have been duly
authorized and duly performed, and each of the representations and warranties of
Imagitel set forth in this Reorganization Agreement shall be true in all
material respects on the Closing Date, except as to transactions contemplated by
this Reorganization Agreement.
7.2 CONDUCT OF BUSINESS. The business of Imagitel shall have been
conducted in the usual and customary manner, and there shall have been no
material adverse change in the business or financial condition of Imagitel from
the date hereof through the Closing Date.
7.3 CONSENTS. All permits, orders, consents, or other authorizations
necessary, in the reasonable opinion of counsel for Wavetech, to the
consummation of the transactions contemplated hereby shall have been obtained,
and no governmental agency or department or judicial authority shall have issued
any order, writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Approvals of all applicable Regulatory
Agencies shall have been obtained without the imposition of any condition or
requirements that, in the reasonable judgment of Wavetech, renders the
consummation of this transaction unduly burdensome.
7.4 CERTIFICATE. Wavetech shall have been furnished with such
certificates of officers of Imagitel and/or such certificates of Imagitel
shareholders, in form and substance reasonably satisfactory to Wavetech, dated
as of the Closing Date, certifying to such matters as Wavetech may reasonably
request, including but not limited to the fulfillment of the conditions
specified in this Section VII.
7.5 DUE DILIGENCE. Wavetech shall have completed a due diligence
investigation of Imagitel, the results of which shall be reasonably satisfactory
to Wavetech.
7.6 SHAREHOLDER APPROVALS. The Shareholder Approvals shall have been
obtained.
7.7 FAIRNESS OPINION. The Board of Directors of Wavetech shall have
received a fairness opinion from a reputable investment banking firm, which
opinion shall be reasonably acceptable to Wavetech.
7.8 DISSENTER'S RIGHTS. None of the Imagitel shareholders shall have
exercised dissenters' rights.
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<PAGE>
7.9 SECURITIES MATTERS. Wavetech shall have receive certificates from
Imagitel's shareholders reasonably sufficient for Imagitel's counsel to conclude
that the issuance of Wavetech shares in connection with the transactions
contemplated herein will be exempt from registration under applicable federal
and state securities laws.
ARTICLE 8. CONDITIONS TO THE OBLIGATION OF IMAGITEL TO CLOSE
The obligation of Imagitel to consummate the transactions contemplated
in this Reorganization Agreement is subject to the satisfaction of the following
conditions at or before the Closing Date:
8.1. PERFORMANCE OF ACTS AND REPRESENTATIONS BY WAVETECH AND INTERIM.
Each of the acts and undertakings of Wavetech and Interim to be performed on or
before the Closing Date pursuant to the terms of this Reorganization Agreement
shall have been duly authorized and duly performed, and each of the
representations and warranties of Wavetech and Interim set forth in this
Reorganization Agreement shall be true in all material respects on the Closing
Date, except as to transactions contemplated by this Reorganization Agreement.
8.2. TAX OPINION. Imagitel shall have received an opinion from tax
counsel satisfactory in form and substance to Imagitel that the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code.
8.3. CONDUCT OF BUSINESS. There shall have been no material casualty
or material adverse change in the business or financial condition of Wavetech
from the date hereof through the Closing Date.
8.4. CONSENTS. All permits, orders, consents, or other authorizations
necessary, in the reasonable opinion of counsel for Imagitel, to the
consummation of the transactions contemplated hereby shall have been obtained,
and no governmental agency or department or judicial authority shall have issued
any order, writ, injunction or decree prohibiting the consummation of the
transactions contemplated hereby. Approvals of all applicable Regulatory
Agencies shall have been obtained without the imposition of any condition or
requirements that, in the reasonable judgment of Imagitel, renders the
consummation of this transaction unduly burdensome.
8.5. CERTIFICATE. Imagitel shall have been furnished with such
certificates of officers of Wavetech, in form and substance reasonably
satisfactory to Imagitel, dated as of the Closing Date, certifying to such
matters as Imagitel may reasonably request, including but not limited to the
fulfillment of the conditions specified in this Article 8.
8.6. SHAREHOLDER APPROVALS. The Shareholder Approvals shall have been
obtained.
8.7. DUE DILIGENCE. Imagitel shall have completed a due diligence
investigation of Wavetech, the results of which shall be reasonably satisfactory
to Imagitel.
8.8. DIRECTORS. The five designees of Imagitel shall have been elected
as the entire Board of Wavetech.
8.9. LINE OF CREDIT. Wavetech shall have put in place a line of credit
in the minimum amount of $3.5 million, which shall be acceptable in all respects
to Imagitel.
8.10. REGISTRATION RIGHTS AGREEMENT. Wavetech shall have entered into a
piggy-back and demand registration rights agreement acceptable to Imagitel with
respect to the registration of Wavetech shares to be issued to Imagitel
shareholders.
8.11. REVERSE STOCK SPLIT. Wavetech shall have effected a reverse stock
split of one share for every six shares outstanding. Such stock split may be
subject to change by the parties.
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ARTICLE 9. TERMINATION
9.1. TERMINATION. This Reorganization Agreement may be terminated at
any time prior to the Closing Date:
(a) by mutual consent of the parties;
(b) by either Wavetech or Imagitel, at that party's option, if a
permanent injunction or other order (including any order denying any
required regulatory consent or approval) shall have been issued by any
Federal or state court of competent jurisdiction in the United States or by
any United States Federal or state governmental or regulatory body, which
order prevents the consummation of the transactions contemplated herein;
(c) by either Wavetech or Imagitel if the other party has failed
to comply with the agreements or fulfill the conditions contained herein,
PROVIDED, however, that any such failure of compliance or fulfillment must
be material to the consolidated businesses of either Wavetech or Imagitel
and the breaching party must be given notice of the failure to comply and a
reasonable period of time to cure;
(d) by either Wavetech or Imagitel as set forth in Section 2.2
hereof.
(e) by either Wavetech or Imagitel, on or before January 31,
1998, if the results of the due diligence investigation of the other party
are not satisfactory to the terminating party in its sole discretion.
(f) By Imagitel if any updated schedule submitted pursuant to
Section 6.10 by Wavetech are not satisfactory to Imagitel or by Wavetech if
any updated schedules submitted by Imagitel pursuant to Section 6.10 are
not satisfactory to Wavetech.
9.2. EFFECT OF TERMINATION. In the event of termination of this
Reorganization Agreement by either Wavetech or Imagitel as provided above, this
Reorganization Agreement shall forthwith become void and there shall be no
liability hereunder on the part of Wavetech or Imagitel, or their respective
officers or directors, except for intentional breach. In the event this
Reorganization Agreement is terminated, any agreements between the two parties
as to Confidential Information shall survive such termination.
ARTICLE 10. INDEMNIFICATION
10.1. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Wavetech covenants
and agrees that it will cause each person who is an officer or director of
Imagitel and its subsidiaries (an "indemnitee") on the Closing Date to be
indemnified for any and all claims and liabilities arising out of such person's
service as an officer or director of Imagitel to the maximum extent that a
Nevada corporation is permitted by law to indemnify or insure its officers and
directors, including indemnification for the cost of defending such claims as
well as any liability resulting therefrom. Wavetech, upon request of such
indemnitees, shall advance expenses in connection with such indemnification,
provided that such advancement need be made if and only to the extent that such
advancement would have been proper under applicable Nevada law if such
indemnitees had been directors or officers of Wavetech. The provisions of this
Section 10.1 shall survive the Closing and shall be enforceable directly by each
officer and director of Imagitel benefited by this Section 10.1.
ARTICLE 11. MISCELLANEOUS
11.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants contained in this Reorganization
Agreement or in any other documents delivered pursuant hereto, shall not survive
the Closing of the transactions contemplated hereby.
11.2. ENTIRE AGREEMENT. This Reorganization Agreement, including any
schedules, exhibits, lists and other documents referred to herein which form a
part hereof, contains the entire agreement of the parties with respect to the
subject matter contained herein and there are no agreements, warranties,
covenants or undertakings other than those expressly set forth herein.
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11.3. Binding Agreement. This Reorganization Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Agreement shall
not be assigned by either of the parties hereto without the prior written
consent of the other party hereto.
11.4. Notices. Any notice given hereunder shall be in writing and
shall be deemed delivered and received upon reasonable proof of receipt. Unless
written designation of a different address is filed with each of the other
parties hereto, notice shall be transmitted to the following addresses:
For Wavetech: ATT: President
Wavetech, Inc.
5210 East Williams Circle, STE 200
Tucson, Arizona 85711
Copy to: ATT: Chris Johnson
Squire, Sanders et al
40 North Central Avenue, STE 2700
Phoenix, Arizona 85004
For Imagitel: ATT: President
Imagitel, Inc.
5120 Woodway Drive, STE 7007
Houston, Texas 77056
Copies to: ATT: Darryl Johnston
Cades Schutte et al
1000 Bishop Street
Honolulu, Hawaii 96813
11.5. COUNTERPARTS. This Reorganization Agreement may be executed in
one or more Counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
11.6 HEADINGS. The section and paragraph headings contained in this
Reorganization Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretations of this Reorganization Agreement.
11.7. LAW GOVERNING. This Reorganization Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada.
11.8. AMENDMENT. This Reorganization Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties.
11.9. WAIVER. Any term, provision or condition of this Reorganization
Agreement (other than that required by law) may be waived in writing at any time
by the party which is entitled to the benefits thereof.
11. 10. NO THIRD PARTY BENEFICIARIES. Except for Section 10.1 hereof,
nothing in this Reorganization Agreement, express or implied, is intended to
confer upon any person, other than the parties hereto, any rights, obligations
or liabilities under or by reason of this Reorganization Agreement.
END OF PAGE
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IN WITNESS WHEREOF, this Reorganization Agreement has been duly entered
as of the date first written above.
WITNESSES WAVETECH, INC.
- -------------------------------- By: /s/
--------------------------------
President
- --------------------------------
WITNESSES WAVETECH INTERIM, INC.
- -------------------------------- By: /s/
--------------------------------
President
- --------------------------------
WITNESSES IMAGITEL, INC.
- -------------------------------- By: /s/
--------------------------------
President
- --------------------------------
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APPENDIX A
PLAN OF MERGER
OF
WAVETECH INTERIM, INC.
WITH AND INTO
IMAGITEL, INC.
Pursuant to this Plan of Merger (the "Plan of Merger"), Wavetech
Interim, Inc. ("Interim"), a Nevada corporation and a wholly-owned subsidiary of
Wavetech, Inc., will be merged with and into Imagitel, Inc. ("Imagitel"), a
Nevada corporation.
ARTICLE 1. DEFINITIONS
The capitalized terms set forth below shall have the following
meanings:
"Certificate of Merger" shall mean the Certificate of Merger to be
executed by Interim and Imagitel in a form appropriate for filing with the
Secretary of State of Nevada, relating to the effective consummation of the
Merger as contemplated by the Plan of Merger.
"Conversion Ratio" shall mean the number of shares of Wavetech Common
Stock issuable in exchange for one share of Imagitel Common Stock, as calculated
pursuant to Section 3.1 hereof.
"Conversion Value of Imagitel" as set forth herein is to be used solely
for the purposes of calculating a Conversion Ratio and is not necessarily
indicative of its actual value.
"Conversion Value of Wavetech" as set forth herein is to be used solely
for the purposes of calculating a Conversion Ratio and is not necessarily
indicative of its actual value.
"Effective Time" shall mean the date and time which the Merger becomes
effective as more particularly set forth in Section 2.2 hereof
"Fair Market Value" shall mean, with respect to the Wavetech Common
Stock for a particular day in question, the average of the closing prices as
quoted on the automated quotation system for that particular day and the
immediately preceding 29 trading days.
"Interim Common Stock" shall mean the common stock, par value $1.00 per
share, of Interim.
"Merger" shall mean the merger of Interim with and into Imagitel as
more particularly set forth herein and in the Reorganization Agreement.
"Options" shall mean all outstanding obligations, commitments, options,
warrants or other securities set forth on Schedule 3.4 of the Reorganization
Agreement which are exercisable for or convertible into, or which require the
issuance of, shares of any class of capital stock of Imagitel.
"Reorganization Agreement" shall mean the Reorganization Agreement
among Wavetech, Interim and Imagitel dated the date hereof, to which this Plan
of Merger is attached as Appendix A.
"Surviving Corporation" shall mean Imagitel after consummation of the
Merger.
WAVETECH. Wavetech, Inc. a Nevada corporation headquartered in Tucson,
Arizona. Where the context permits, Wavetech shall include all subsidiary
entities.
"Wavetech Common Stock" shall mean the common stock, par value $0.001
per share, of Wavetech.
WAVETECH _______________ 24 _______________ IMAGITEL
<PAGE>
ARTICLE 2. THE MERGER
2.1. MERGER. Subject to the terms and conditions set forth in the
Reorganization Agreement, unless effectively waived as provided therein, and in
accordance with all applicable laws, regulations and regulatory requirements, at
the Effective Time, Interim shall be merged with and into Imagitel. Imagitel
shall be the Surviving Corporation of the Merger and shall continue to be
governed by the laws of the State of Nevada.
2.2. EFFECTIVE TIME. The Merger shall become effective on the date and
at the time specified in the Certificate of Merger.
2.3. CAPITALIZATION. The number of authorized shares of capital stock
of the Surviving Corporation shall be the same as immediately prior to the
Merger.
2.4. CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Imagitel as in effect at the Effective Time shall be and remain the certificate
of incorporation of the Surviving Corporation.
2.5. BYLAWS. The Bylaws of Imagitel, as in effect at the Effective
Time, shall continue in full force and effect as the bylaws of the Surviving
Corporation until otherwise amended as provided by law or by such bylaws.
2.6. PROPERTIES AND LIABILITIES OF IMAGITEL AND-INTERIM. At the
Effective Time, the separate existence and corporate organization of Interim
shall cease, and Imagitel shall thereupon and thereafter, to the extent
consistent with applicable law and with its certificate of incorporation and the
changes, if any, provided by the Merger, possess all the rights, privileges,
immunities, liabilities and franchises, of a public as well as a private nature
of Imagitel without. further act or deed.
ARTICLE 3. CONSIDERATION
3.1. MERGER CONSIDERATION. (a) Subject to adjustment as provided in
Section 3.1(b) below, in connection with the Merger, each Imagitel shareholder
shall, by virtue of the Merger and without any action on his part, be entitled
to receive 420 shares of Wavetech Common Stock for each share of Imagitel Common
Stock issued and outstanding immediately prior to the Effective Time (the
"Conversion Ratio"). The Conversion Ratio is calculated on a pre-reverse stock
split basis that does not yet include adjustments for a planned 6:1 reverse
stock split by Wavetech.
(b) (1) The Conversion Ratio shall be adjusted such that the number
of shares issuable under this Plan of Merger shall be either
increased or decreased in the following instances:
Actual Conversion Ratio shall be determined as of month end immediately prior to
closing using the following formula:
Actual number of Wavetech Shares Outstanding Conversion Value of Imagitel
Conversion Value of Wavetech
- --------------------------------------------------------------------------------
210.56
Based upon the following agreed upon conditions:
1) The Conversion Value of Wavetech is $7.9 million with a $300,000 working
capital deficit. The Conversion Value of Wavetech shall be adjusted, either
increased or decreased in the following instances:
(i) in the event that Wavetech's funded debt and working capital
deficit as of month end immediately prior to the Effective Time exceeds
$300,000, then the Conversion Value of Wavetech shall be decreased by an
amount equal to the working capital deficit that exceeds $300,000.
(ii) in the event that Wavetech's funded debt and working capital
deficit as of month end immediately prior to closing is less than $300,000,
then the Conversion Value of Wavetech shall be increased by an amount equal
to the difference between actual amount and the $300,000 deficit.
2) The Conversion Value of Imagitel is $37.4 million, with no working capital
deficit. The Conversion Value of Imagitel shall be adjusted, either
increased or decreased in the following instances:
(i) in the event that Imagitel. has positive working capital as
of month end immediately prior to the Effective Time, then the Conversion
Value of Imagitel shall be increased by an amount equal to the positive
working capital.
(ii) in the event that Imagitel has a working capital deficit as
of month end immediately prior to closing, then the Conversion Value of
Imagitel shall be decreased by an amount equal to the working capital
deficit.
(iii) the Conversion value of Imagitel shall not change if
Imagitel acquires acCOMModation Services, Inc. However, the number of
shares outstanding for Imagitel will increase, and the increase will not
change the Conversion Ratio - as it is already incorporated into the
formula calculations.
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<PAGE>
3.2. INTERIM COMMON STOCK. The shares of Interim shall be canceled as a
result of the Merger.
3.3. IMAGITEL COMMON STOCK. After consummation of the Merger, all of
the outstanding shares of Imagitel shall be held by Wavetech and its
capitalization shall be unchanged.
3.4. TREASURY SHARES. Any and all shares of Imagitel common stock held
as treasury shares by Imagitel shall be canceled and retired at the Effective
Time, and no consideration shall be issued or given in exchange therefor.
3.5. FRACTIONAL SHARES. No fractional shares of Wavetech Common Stock
will be issued as a result of the Merger. In lieu of the issuance of fractional
shares pursuant to Section 3.1 hereof, cash will be paid to the holders of the
Imagitel Common Stock in respect of any fractional share that would otherwise be
issuable based on the Fair Market Value of the Wavetech Common Stock on the last
trading day immediately preceding the Effective Time.
3.6. EQUITABLE ADJUSTMENTS. In the event of any change in the
outstanding Wavetech Common Stock by reason of a stock dividend, stock split,
stock consolidation, recapitalization, reorganization, merger, split up or the
like, the Conversation Ratio, all stock prices set forth in this Article 3, and
the number and kind of shares under option in the Options and the option price
of such Options shall be appropriately adjusted so as to preserve, but not
increase, the benefits of this Plan of Merger to the Imagitel Shareholders and
the holders of the Options.
ARTICLE 4. EXCHANGE OF COMMON STOCK CERTIFICATES
4.1. ISSUANCE OF WAVETECH CERTIFICATES; CASH FOR FRACTIONAL SHARES.
After the Effective Time, each holder of shares of Imagitel Common Stock issued
and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares to Wavetech or its transfer agent, and
shall promptly upon surrender receive in exchange therefor the consideration
provided in Section 3.1 of this Plan of Merger (except for Dissenting
Shareholders, as provided below). To the extent required by Section 3.4 of this
Plan of Merger, each holder of shares of Imagitel Common Stock issued and
outstanding at the Effective Time also shall receive, upon surrender of the
certificate or certificates representing such shares, cash in lieu of any
fractional share of Wavetech Common Stock to which such holder might be
entitled.
4.2. AUTHORIZED WITHHOLDINGS. Wavetech shall not be obligated to
deliver the consideration to which any former holder of Imagitel Common Stock is
entitled as a result of the Merger until such holder surrenders his or her
certificate or certificates representing the shares of Imagitel Common Stock for
exchange as provided in this Article 4, or, in default thereof, an appropriate
affidavit of loss and indemnity agreement and/or a bond as may be reasonably
required in each case by Wavetech or Imagitel. In addition, no dividend or other
distribution payable to the holders of record of Wavetech Common Stock as of any
time subsequent to the Effective Time shall be paid to the holder of any
certificate representing shares of Imagitel Common Stock issued and outstanding
at the Effective Time until such holder surrenders such certificate for exchange
as provided in Section 4.1 above. However, upon surrender of the Imagitel Common
Stock certificate both the Wavetech Common Stock certificate, together with all
such withheld dividends or other distributions and any withheld cash payments in
respect of fractional share interest, but without any obligation for payment of
interest by such withholding, shall be delivered and paid with respect to each
share represented by such certificate.
4.3. LIMITED RIGHTS OF FORMER IMAGITEL SHAREHOLDERS. Except as provided
in Section 4.4 below, after the Effective Time, each outstanding certificate
representing shares of Imagitel Common Stock prior to the Effective Time shall
be deemed for all corporate purposes (other than voting and the payment of
dividends and other distributions to which the former shareholder of Imagitel
Common Stock may be entitled) to evidence only the right of the holder thereof
to surrender such certificate and receive the requisite number of shares of
Wavetech Common Stock in exchange therefor as provided in this Plan of Merger.
4.4. DISSENTING SHAREHOLDERS. Shares of Imagitel Common Stock owned by
a holder who (i) shall not have voted in favor of the Merger, and (ii) shall
have delivered to Imagitel a written notice of his intent to demand payment for
his shares if the Merger is effectuated in the manner provided in the corporate
law of Nevada (collectively, the "Dissenting Shareholders"), shall not be
converted as provided above, but shall be entitled to receive such consideration
as shall be provided in the corporate law of Nevada, except that shares of any
Dissenting Shareholder who shall thereafter not perfect his right to appraisal
as provided in the corporate law of Nevada shall thereupon be deemed to have
been converted as of the Effective Time of the Merger, into Wavetech Common
Stock, as provided above.
4.5. STOCK TRANSFER BOOKS. AT the close of business on the day prior to
the Effective Time of the Merger, the stock transfer books of Imagitel shall be
closed and no transfer of Imagitel Common Stock shall thereafter be made on such
stock transfer books.
ARTICLE 5. STOCK OPTIONS
5.1. Options. At the Effective Time, all of the Options shall, after
the Effective Date, represent only the right to receive shares of Wavetech
Common Stock based on the Conversion Ratio.
26
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
INTERPRETEL INTERNATIONAL, INC.
1. The name of the Corporation is INTERPRETEL INTERNATIONAL, INC.
2. Its principal office in the State of Nevada is located at One East
First Street, Reno, Washoe County, Nevada 89501. The name and address of its
resident agent is the Corporation Trust Company of Nevada, One East First
Street, Reno, Nevada 89501.
3. The purpose for which the Corporation is organized is the
transaction of any and all lawful activities for which corporations may be
incorporated under the laws of the State of Nevada, as the same may be amended
from time to time, including but not limited to the business of developing
customized telephone networks and related businesses.
4. The total authorized capital stock of the Corporation is Fifty
Million (50,000,000) shares of common stock, $.001 par value and Ten Million
(10,000,000) shares of preferred stock, $.001 par value. Such shares may be
issued from time to time for such consideration as may be fixed by the Board of
Directors.
As to the preferred stock of the Corporation, the power to issue any
shares of preferred stock of any class or any series of any class and
designations, voting powers, preferences and relative participating, optional or
other rights, if any, or the qualifications, limitations or restrictions
thereof, shall be determined by the Board of Directors.
5. The governing board of this Corporation shall be known as Directors,
and the number of Directors may from time to time be increased up to ten (10) or
decreased in such manner as shall be provided by the Bylaws of this Corporation.
The first Board of Directors shall consist of four (4) directors.
The names and mailing addresses of the first Board of Directors who are
to serve until their successors are elected and qualified are:
NAME POST OFFICE ADDRESS
---- -------------------
Terence E. Belsham 5210 East Williams Circle, Suite 200
Tucson, Arizona 85711
Gerald I. Quinn 5210 East Williams Circle, Suite 200
Tucson, Arizona 85711
<PAGE>
Richard P. Freeman 5210 East Williams Circle, Suite 200
Tucson, Arizona 85711
Terrence H. Pocock 5210 East Williams Circle, Suite 200
Tucson, Arizona 85711
6. The capital stock, after the amount of the subscription price or par
value has been paid in, shall not be subject to assessment to pay the debts of
the Corporation.
7. The name and post office address of each of the incorporators
signing the Articles of Incorporation are as follows:
NAME POST OFFICE ADDRESS
---- -------------------
Gerald I. Quinn 5210 East Williams Circle, Suite 200
Tucson, Arizona 85711
Lydia M. Montoya 5210 East Williams Circle, Suite 200
Tucson, Arizona 85711
8. The Corporation is to have perpetual existence.
9. The fiscal year of the Corporation shall initially end on August 31
and begin on September 1 of each year; provided, however, that such date may be
changed from time to time as determined by the Board of Directors to be in the
best interest of the Corporation.
10. Meetings of stockholders may be held within or without the State of
Nevada, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the Nevada statutes, or the rules and
regulations promulgated thereunder) outside the State of Nevada at such place or
places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
11. To the fullest extent permitted by the laws of the State of Nevada,
as the same exist or may hereinafter be amended, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director or officer;
provided, however, that nothing contained herein shall eliminate or limit the
liability of a director or officer of the Corporation to the extent provided by
applicable laws (i) for acts or omissions which involve intentional misconduct,
fraud or knowing violation of law or (ii) for authorizing the payment of
2
<PAGE>
dividends in violation of Nevada Revised Statutes Section 78.300. The limitation
of liability provided herein shall continue after a director or officer has
ceased to occupy such position as to acts or omissions occurring during such
director's or officer's term or terms of office. No repeal, amendment or
modification of this Article, whether direct or indirect, shall eliminate or
reduce its effect with respect to any act or omission of a director or officer
of the Corporation occurring prior to such repeal, amendment or modification.
12. The Corporation shall indemnify, defend and hold harmless any
person who incurs expenses, claims, damages or liability by reason of the fact
that he or she is, or was, an officer, Director, employee or agent of the
Corporation, to the fullest extent allowed pursuant to Nevada law.
13. Pursuant to Nevada Revised Statutes Section 78.378, the Corporation
elects not to be governed by the provisions of Nevada Revised Statutes Sections
78.378 to 78.3793, inclusive, as the same may be amended from time to time; and
further, pursuant to Nevada Revised Statutes Section 78.434, the Corporation
elects not to be governed by the provisions of Nevada Revised Statutes Sections
78.411 to 78.444, inclusive, as the same may be amended from time to time.
14. Any Business Combination (as hereinafter defined) with an
Interested Stockholder (as hereinafter defined) shall be subject to the
following requirements:
(a) In addition to any affirmative vote required by law or these
Articles of Incorporation or the Bylaws of the Corporation, and except as
otherwise expressly provided in paragraph (b) of this Article 14, a Business
Combination involving an Interested Stockholder or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than sixty-six and two-thirds
percent (66 2/3%) of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock, voting together as a single class,
excluding Voting Stock beneficially owned by such Interested Stockholder. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be specified,
by law or in any agreement with any national securities exchange or otherwise.
(b) The provisions of paragraph (a) of this Article 14 shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or by
any other provision of these Articles of Incorporation or the Bylaws of the
Corporation, or any agreement with any national securities exchange, if, in the
case of a Business Combination not involving the payment of consideration to the
holders of the Corporation's outstanding Capital Stock (as hereinafter defined)
the conditions specified in the following Paragraph 1 are met or, in the case of
a Business Combination involving the payment of consideration to the holders of
the Corporation's outstanding Capital Stock, if the conditions specified in both
Paragraphs 1 and 2 are met:
3
<PAGE>
1. The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement of or public disclosure of the
intention to acquire, beneficial ownership of the Voting Stock that caused the
Interested Stockholder to become an Interested Stockholder) of the Continuing
Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
A. The aggregate amount of cash and the Fair Market Value
(as hereinafter defined) as of the date of the consummation of the Business
Combination of consideration other than cash to be received per share by holders
of Common Stock in such Business Combination shall be at least equal to the
highest amount determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any share of Common
Stock in connection with the acquisition by the Interested Stockholder of
beneficial ownership of shares of Common Stock (x) within the two-year period
immediately prior to the first public announcement of the proposed Business
Combination (the "Announcement Date") or (y) in the transaction in which such
person became an Interested Stockholder (the "Determination Date"), whichever is
higher, in either case as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to Common Stock; and
(ii) the Fair Market Value per share of Common Stock on
the Announcement Date or on the Determination Date, whichever is higher, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock.
B. The aggregate amount of cash and the Fair Market Value,
as of the date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of shares of any class or
series of outstanding Capital Stock, other than Common Stock, shall be at least
equal to the highest amount determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any share of such
class or series of Capital Stock in connection with the acquisition by the
Interested Stockholder of beneficial ownership of shares of such class or series
of Capital Stock (x) within the two-year period immediately prior to the
Announcement Date or (y) in the transaction in which such person became an
Interested Stockholder, whichever is higher in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock; and
4
<PAGE>
(ii) the Fair Market value per share of such class or
series of Capital Stock on the Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to such class or series of Capital
Stock.
The provisions of this Paragraph (b)2.B shall be required to
be met with respect to every class or series of outstanding Capital Stock,
whether or not the Interested Stockholder has previously acquired beneficial
ownership of any shares of a particular class or series of Capital Stock.
C. The consideration to be received by holders of a
particular class or series of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on behalf of the Interested
Stockholder in connection with the Interested Stockholder's direct or indirect
acquisition of beneficial ownership of shares of such class or series of Capital
Stock. If the consideration so paid for shares of any class or series of Capital
Stock varied as to form, the form of consideration for such class or series of
Capital Stock shall be either cash or the form used to acquire beneficial
ownership of the largest number of shares of such class or series of Capital
Stock previously acquired by the Interested Stockholder.
D. After the Determination Date and prior to the
consummation of such Business Combination: (i) except as approved by a majority
of the Continuing Directors, there shall have been no failure to declare and pay
at the regular date therefor any dividends (whether or not cumulative) payable
in accordance with the terms of any outstanding Capital Stock; (ii) there shall
have been no reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any stock split, stock dividend or subdivision
of the Common Stock), except as approved by a majority of the Continuing
Directors; (iii) there shall have been an increase in the annual rate of
dividends paid on the Common Stock as necessary to reflect any reclassification
(including any reverse stock split), recapitalization, reorganization or any
similar transaction that has the effect of reducing the number of outstanding
shares of Common Stock, unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors; and (iv) such Interested
Stockholder shall not have become the beneficial owner of any additional shares
of Capital Stock except as part of the transaction that results in such
Interested Stockholder becoming an Interested Stockholder and except in a
transaction that, after giving effect thereto, would not result in any increase
in the Interested Stockholder's percentage of beneficial ownership of any class
or series of Capital Stock.
E. After the Determination Date, such Interested Stockholder
shall not have received the benefit, directly or indirectly (except
proportionately as a stockholder of the Corporation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or other
tax advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise.
5
<PAGE>
F. A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Act") (or any subsequent provisions replacing such Act, rules or regulations)
shall be mailed to all stockholders of the Corporation at least thirty (30) days
prior to the consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed pursuant to such Act or
subsequent provisions). The proxy or information statement shall contain on the
first page thereof, in a prominent place, any statement as to the advisability
(or inadvisability) of the Business Combination that the Continuing Directors,
or any of them, may choose to make and, if deemed advisable by a majority of the
Continuing Directors, the opinion of an investment banking firm selected by a
majority of the Continuing Directors as to the fairness (or not) of the terms of
the Business Combination from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the Interested Stockholder and
its Affiliates or Associates, such investment banking firm to be paid a
reasonable fee for its services by the Corporation.
G. Such Interested Stockholder shall not have made any major
change in the Corporation's business or equity capital structure without the
approval of a majority of the Continuing Directors.
(c) For the purposes of this Article 14:
1. The term "Business Combination" shall mean:
A. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (i) any Interested Stockholder or (ii)
any other Corporation (whether or not itself an Interested Stockholder) which is
or after such merger or consolidation would be an Affiliate or Associate of an
Interested Stockholder; or
B. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition or security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit, joint venture
participation or other arrangement (in one transaction or a series of
transactions) with or for the benefit of any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder involving any assets or
securities or commitments of the Corporation, any Subsidiary or any Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder which,
together with all other such arrangements (including all contemplated future
events) has an aggregate Fair Market Value and/or involves aggregate commitments
of $10,000,000 or more or constitutes more than ten percent (10%) of the book
value of the total assets (in the case of transactions involving assets or
commitments other than Capital Stock) or ten percent (10%) of the stockholders'
equity (in the case of transactions in Capital Stock) of the entity in question
(the "Substantial Part"), as reflected in the most recent fiscal year end
consolidated balance sheet of such entity existing at the time the stockholders
of the Corporation would be required to approve or authorize the Business
Combination involving the assets, securities, obligations and/or commitments
constituting any Substantial Part; or
6
<PAGE>
C. the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation or for any amendment to these Articles of
Incorporation or the Bylaws proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
D. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital Stock, or any securities
convertible into Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
E. any agreement, contract or other arrangement providing
for any one or more of the actions specified in the foregoing clauses A to D.
2. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article 4 of these
Articles of Incorporation.
3. The term "person" shall mean any individual, firm, Corporation
or other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such person
has any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee of, or fiduciary with respect to, any such plan
when acting in such capacity) who (a) is or has announced or publicly disclosed
a plan or intention to become the beneficial owner of Voting Stock representing
ten percent (10%) or more of the votes entitled to be cast by the holders of all
the then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate
of the Corporation and at any time within the two-year period immediately prior
to the date in question, was the beneficial owner of Voting Stock representing
ten percent (10%) or more of the votes entitled to be cast by the holders of all
the then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Capital Stock
(a) which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or understanding; or
7
<PAGE>
(c) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purposes of determining
whether a person is an Interested Stockholder pursuant to Paragraph 4 of this
Section (c), the number of shares of Capital Stock deemed to be outstanding
shall include shares deemed beneficially owned by such person through
application of this Paragraph 5, but shall not include any other shares of
Capital Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
6. The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under the Act as in
effect on the date that these Articles of Incorporation are accepted for filing
by the Nevada Secretary of State (the term "registrant" in said Rule 12b-2
meaning in this case, the Corporation).
7. The term "Subsidiary" means any company of which a majority of
any class of equity security is beneficially owned by the Corporation; PROVIDED,
HOWEVER, that for the purposes of the definition of Interested Stockholder set
forth in Paragraph 4 of this Section (c), the term "Subsidiary" shall mean only
a company of which a majority of each class of equity security is beneficially
owned by the Corporation.
8. The term "Continuing Director" means (i) any member of the
Board of Directors on the date of the filing of these Articles of Incorporation
with the Nevada Secretary of State, and (ii) any member of the Board of
Directors who thereafter becomes a member of the Board of Directors while such
person is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and was a member of
the Board of Directors prior to the time that the Interested Stockholder became
an Interested Stockholder, and (iii) a successor of a Continuing Director while
such successor is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and is recommended or
elected to succeed the Continuing Director by a majority of Continuing
Directors.
9. The term "Fair Market Value" means (a) in the case of cash,
the amount of such cash; (b) in the case of stock, the highest closing sale
price during the 30-day period immediately preceding the date in question of a
share of such stock on the principal United States securities exchange
registered under the Act on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period immediately preceding the date in
question on the Nasdaq Small Cap Market or any similar system then in use, or if
no such quotations are available, the fair market value on the date in question
of a share of such stock as determined by a majority of the Continuing Directors
in good faith; and (c) in the case of property other than cash or stock, the
fair market value of such property on the date in question as determined in good
faith by a majority of the Continuing Directors.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received,"
as used in Paragraphs 2.A and 2.B of Section (b) of this Article 14, shall
include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
8
<PAGE>
11. The term "Voting Stock" means stock of any class or series
entitled to vote generally in the election of directors.
(d) A majority of the Continuing Directors shall have the power and
duty to determine for the purposes of this Article 14 on the basis of
information known to them after reasonable inquiry, (1) whether a person is an
Interested Stockholder, (2) the number of shares of Capital Stock or other
securities beneficially owned by any person, (3) whether a person is an
Affiliate or Associate, (4) whether the proposed action is with, or proposed by,
or on behalf of, an interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, (5) whether the assets that are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $10,000,000 or more and (6)
whether the assets or securities that are the subject of any Business
Combination constitute a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
(e) Nothing contained in this Article 14 shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
(f) The fact that any Business Combination complies with the
provisions of Section (b) of this Article 14 shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
(g) For the purposes of this Article 14, a Business Combination or any
proposal to amend, repeal or adopt any provision of these Articles of
Incorporation inconsistent with this Article 14 (collectively, the "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (1) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
director of the Corporation who, with respect to such Interested Stockholder,
would not qualify to serve as a Continuing Director or (2) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person, a majority of the Continuing Directors makes a
good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or person, based on
information known to them after reasonable inquiry.
9
<PAGE>
15. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation or in the
Bylaws of the Corporation, in the manner now or hereafter previously prescribed
by statute, and all rights conferred upon stockholders herein are granted
subject to this reservation, provided, however, that notwithstanding anything to
the contrary in these Articles of Incorporation, the affirmative vote of
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of stock of
this Corporation entitled to vote shall be required to amend, alter, change or
repeal, or adopt any provision inconsistent with, these Articles.
10
<PAGE>
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore
named, for the purpose of forming a Corporation pursuant to the General
Corporation Law of the State of Nevada, do make and file these Articles of
Incorporation, hereby declaring and certifying that the facts herein stated are
true, and accordingly have hereunto set our hands this day of December, 1997.
-------------------------------
Gerald I. Quinn
-------------------------------
Lydia M. Montoya
STATE OF ARIZONA )
) ss.
County of Pima )
On this ____ day of December, 1997, before me, a Notary Public,
personally appeared Gerald I. Quinn and Lydia M. Montoya who acknowledged that
they executed the above instrument.
-------------------------------
Notary Public
(Notary Seal)
My commission expires:
11
<PAGE>
ARTICLES OF MERGER
OF
WAVETECH, INC.,
A NEW JERSEY CORPORATION
INTO
INTERPRETEL INTERNATIONAL, INC.,
A NEVADA CORPORATION
These Articles of Merger are delivered to the Nevada Secretary of State
pursuant to Section 92A.200 of the Nevada Revised Statutes by the undersigned
corporations:
1. The names, addresses and states of incorporation of the merging
corporations are as follows:
Name and Address State of Incorporation
---------------- ----------------------
WAVETECH, INC. New Jersey
5210 East Williams Circle
Suite 200
Tucson, Arizona 85711
INTERPRETEL INTERNATIONAL, INC. Nevada
5210 East Williams Circle
Suite 200
Tucson, Arizona 85711
2. Interpretel International, Inc. is the "surviving" corporation.
3. An Agreement and Plan of Merger (the "PLAN") has been adopted by the
respective Boards of Directors of Wavetech International, Inc. and Interpretel
International, Inc.
4. The Plan was approved by the sole stockholder of Interpretel
International, Inc. as of December 10, 1997 and was approved by the stockholders
of Wavetech, Inc. at the 1997 Annual Meeting on March 26, 1997.
<PAGE>
5. All holders of Wavetech International, Inc. $.001 par value common
stock (the "WAVETECH COMMON STOCK") and the sole holder of Interpretel
International, Inc. $.001 par value common stock (the "INTERPRETEL COMMON
STOCK") were entitled to one vote for each share held. The number of shares of
stock of each corporation outstanding at the time of the approval by the
respective stockholders of the Plan was as follows:
Wavetech Common Stock 14, 715,538
Interpretel Common Stock 1
6. The number of shares of common stock of each corporation voting in
favor of or against the Plan were as follows:
Wavetech Common Stock 7,417,716 For 0 Against
--------- -----
Interpretel Common Stock 1 For 0 Against
--------- -----
7. The Articles of Incorporation of the surviving corporation,
Interpretel International, Inc., shall be amended as set forth on EXHIBIT A
attached hereto and incorporated by this reference. As set forth on EXHIBIT A,
upon the effectiveness of the merger, the name of the surviving corporation
shall be WAVETECH INTERNATIONAL, INC.
8. The complete, executed Plan is on file at the registered office of
the surviving corporation, Interpretel International, Inc., at 5210 East
Williams Circle, Suite 200, Tucson, Arizona 85711.
9. A copy of the Plan may be obtained at no cost upon written request
to Interpretel International, Inc., 5210 East Williams Circle, Suite 200,
Tucson, Arizona 85711, Attention: Lydia M. Montoya.
10. The Effective Date of the merger shall be 5:00 p.m. Pacific
Standard Time, February ___, 1998.
<PAGE>
IN WITNESS WHEREOF, Wavetech International, Inc. and Interpretel
International, Inc. have caused these Articles of Merger to be executed by their
respective duly authorized officers on this _____ day of January, 1998.
WAVETECH INTERNATIONAL, INC., INTERPRETEL INTERNATIONAL, INC.,
a New Jersey corporation a Nevada corporation
By /s/ Gerald I. Quinn By /s/ Gerald I. Quinn
-------------------------------- --------------------------------
Name: Gerald I. Quinn Name: Gerald I. Quinn
Title: President And Chief Executive Title: President And Chief Executive
Officer Officer
By /s/ Richard P. Freeman By /s/ Richard P. Freeman
-------------------------------- --------------------------------
Name: Richard P. Freeman Name: Richard P. Freeman
Title: Secretary Title: Secretary
<PAGE>
STATE OF ARIZONA, )
) ss.
County of Pima )
The foregoing instrument was acknowledged before me this _____ day of
January, 1998, by Gerald I. Quinn and Richard P. Freeman, the President and
Chief Executive Officer and Secretary, respectively, of WAVETECH INTERNATIONAL,
INC., a New Jersey corporation, on behalf of the corporation.
--------------------------------
Notary Public
My Commission Expires:
STATE OF ARIZONA, )
) ss.
County of Pima )
The foregoing instrument was acknowledged before me this _____ day of
January, 1998, by Gerald I. Quinn and Richard P. Freeman, the President and
Chief Executive Officer and Secretary, respectively, of INTERPRETEL
INTERNATIONAL, INC., a Nevada corporation, on behalf of the corporation.
--------------------------------
Notary Public
My Commission Expires:
EXHIBIT 3.2
INTERPRETEL INTERNATIONAL, INC.
BY-LAWS
ARTICLE I
OFFICES
SECTION 1. The principal office shall be in the City of Reno, County of
Washoe, State of Nevada.
SECTION 2. The corporation may also have offices at such other places
both within and without the State of Nevada as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All annual meetings of the stockholders shall be held in the
City of Tucson, State of Arizona. Special meetings of the stockholders may be
held at such time and place within or without the State of Nevada as shall be
stated in the notice of the meeting, or in a duly executed waiver of notice
thereof.
SECTION 2. Annual meetings of stockholders, commencing with the year
1998, shall be held on the third Monday in October of each year, if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
10:00 A.M., at which they shall elect by a plurality vote a board of directors,
and transact such other business as may properly be brought before the meeting.
SECTION 3. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the articles of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
SECTION 4. Notices of meetings shall be in writing and signed by the
president or a vice president, or the secretary, or an assistant secretary, or
by such other person or persons as the directors shall designate. Such notice
shall state the purpose or purposes for which the meeting is called and the time
when, and the place, which may be within or without the state of Nevada, where
it is to be held. A copy of such notice shall be either delivered personally or
shall be mailed, postage prepaid, to each stockholder of record entitled to vote
at such meeting not less than 10 nor more than 60 days before such meeting. If
mailed, it shall be directed to a stockholder at his address as it appears upon
the records of the corporation and upon such mailing of any such notice, the
service thereof shall be complete, and the time of the notice shall begin to run
from the date upon which such notice is deposited in the mail for transmission
to such stockholder. In the event of the transfer of stock after delivery or
mailing of the notice of, and before the holding of, the meeting, it shall not
be necessary to deliver or mail notice of the meeting to the transferee.
<PAGE>
SECTION 5. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 6. Stockholders holding at least a majority of the voting
power, present in person or represented by proxy, shall constitute a quorum at
all meetings of the stockholders for the transaction of business except as
otherwise provided by statute or by the articles of incorporation. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. 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 notified.
SECTION 7. An act of stockholders who hold at least a majority of the
voting power and are present at a meeting at which a quorum is present is the
act of the stockholders unless the statutes or articles of incorporation provide
for different proportions.
SECTION 8. Every stockholder of record of the corporation shall be
entitled at each meeting of stockholders to one vote for each share of stock
standing in his name on the books of the corporation.
SECTION 9. At any meeting of the stockholders, any stockholder may
designate another person or persons to act as a proxy or proxies as provided by
law. If any stockholders designates two or more persons to act as proxies, a
majority of those persons present at the meeting, or, if only one shall be
present, then that one shall have and may exercise all of the powers conferred
by such stockholder upon all of the persons so designated unless the stockholder
shall otherwise provide. No such proxy shall be valid after the expiration of
six months from the date of its creation, unless it is coupled with an interest,
or unless the stockholder specifies in it the length of time for which it is to
continue in force, which may not exceed seven years from the date of its
creation. Subject to the above, any proxy properly created is not revoked and
continues in full force and effect until another instrument or transmission
revoking it or a properly created proxy bearing a later date is filed with or
transmitted to the secretary of the corporation or another person or persons
appointed by the corporation to count the votes of stockholders and determine
the validity of proxies and ballots.
SECTION 10. Any action required or permitted to be taken at a meeting
if a written consent thereto is signed by stockholders holding at least a
majority of the voting power, unless the provisions of the statutes or of the
articles of incorporation require a greater proportion of voting power to
authorize such action, in which case, such greater proportion of written
consents shall be required.
2
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. The number of directors shall be no more than nine (9). The
number of directors is to be fixed by vote of the shareholders. The directors
shall be elected at the annual meeting of the stockholders, and except as
provided in Section 2 of this Article III, each director elected shall hold
office until his successor is elected and qualified. Directors need not be
stockholders.
SECTION 2. Vacancies, including those caused by an increase in the
number of directors, may be filled by a majority of the remaining directors
though less than a quorum. When one or more directors shall give notice of his
or their resignation to the board, effective at a future date, the board shall
have power to fill such vacancy or vacancies to take effect when such
resignation or resignations shall become effective, each director so appointed
to hold office during the remainder of the term of office of the resigning
director or directors.
SECTION 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the articles of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
SECTION 4. The board of directors of the corporation may hold meetings,
both regular and special, either within or without the State of Nevada.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION 6. Regular meetings of the board of directors may be held
without notice at such time and place as shall from time to time be determined
by the board.
SECTION 7. Special meetings of the board of directors may be called by
the president or secretary on the written request of two directors. Written
notice of special meetings of the board of directors shall be given to each
director with three (3) days notice before the date of the meeting.
SECTION 8. A majority of the board of directors, at a meeting duly
assembled, shall be necessary to constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the articles of
incorporation. Any action required or permitted to be taken at a meeting of the
directors may be taken without a meeting if, before or after such action,a
written consent thereto shall be signed by all of the directors entitled to vote
with respect to the subject matter thereof.
3
<PAGE>
COMMITTEES OF DIRECTORS
SECTION 9. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation, which, to the extent
provided in the resolution, shall have and may exercise the powers of the board
of directors in the management of the business and affairs of the corporation,
and may have power to authorize the seal of the corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
board of directors. The board of directors may appoint natural persons who are
not directors to serve on committees.
SECTION 10. The committees shall keep regular minutes of their
proceedings and report the same to the board when required.
COMPENSATION OF DIRECTORS
SECTION 11. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed sum
for attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
SECTION 1. Notices to directors and stockholders shall be in writing
and delivered personally or mailed to the directors or stockholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
SECTION 2. Whenever all parties entitled to vote at any meeting,
whether of directors or stockholders, consent, either by a writing on the
records of the meeting or filed with the secretary, or by presence at such
meeting and oral consent entered on the minutes, or by taking part in the
deliberations at such meeting without objection, the doings of such meeting
shall be as valid as if had at a meeting regularly called and noticed, and at
such meeting any business may be transacted which is not excepted from the
written consent or to the consideration of which no objection for want of notice
is made at the time, and if any meeting be irregular for want of notice or of
such consent, provided a quorum was present at such meeting, the proceedings of
said meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meetings; and such consent or approval of stockholders
may be by proxy or attorney, but all such proxies and powers of attorney must be
in writing.
SECTION 3. Whenever any notice whatever is required to be given under
the provisions of the statutes, of the articles of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
4
<PAGE>
ARTICLE V
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the board
of directors and shall be a president, a vice president, a secretary and a
treasurer. Any person may hold two or more offices.
SECTION 2. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, a vice president, a
secretary and a treasurer, none of whom need be a member of the board.
SECTION 3. The board of directors may appoint additional vice
presidents, and assistant secretaries and assistant treasurers and such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
SECTION 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
SECTION 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation by death, resignation, removal or otherwise shall be filled by the
board of directors
THE PRESIDENT
SECTION 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the board of
directors are carried into effect.
SECTION 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE PRESIDENT
SECTION 8. The vice president shall, in the absence or disability of
the president, perform the duties and exercise the powers of the president and
shall perform such other duties as the board of directors may from time to time
prescribe.
THE SECRETARY
SECTION 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
5
<PAGE>
president, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation and, when authorized by the board of directors,
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the treasurer or an assistant
secretary.
THE TREASURER
SECTION 10. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
SECTION 11. He shall disburse the funds of the corporation as may be
ordered by the board of directors taking proper vouchers for such disbursements,
and shall render to the president and the board of directors, at the regular
meetings of the board, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
SECTION 12. If required by the board of directors, he shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. Every stockholder shall be entitled to have a certificate,
signed by the president or a vice president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by him in the corporation. When the
corporation is authorized to issue shares of more than one class or more than
one series of any class, there shall be set forth upon the face or back of the
certificate, or the certificate shall have a statement that the corporation will
furnish to any stockholders upon request and without charge, a full or summary
statement of the voting powers, designations, preferences, limitations,
restrictions and relative rights of the various classes of stock or series
thereof.
SECTION 2. Whenever any certificate is countersigned or otherwise
authenticated by a transfer agent or transfer clerk, and by a registrar, then a
facsimile of the signatures of the officers or agents of the corporation may be
printed or lithographed upon such certificate in lieu of the actual signatures.
If any officer or officers who shall have signed, or whose facsimile signature
or signatures shall have been used on, any such certificate or certificates
shall cease to be such officer or officers of the corporation, whether because
of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the corporation, such certificate or certificates
may nevertheless be adopted by the corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates, or
whose facsimile signature or signatures shall have been used thereon, had not
ceased to be the officer or officers of such corporation.
6
<PAGE>
LOST CERTIFICATES
SECTION 3. The board of directors 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,
upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the board of directors may, in its discretion
and as a condition precedent to the issuance thereof, 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 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.
TRANSFER OF STOCK
SECTION 4. 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, cancel the old certificate and record the transaction upon its books
CLOSING OF TRANSFER BOOKS
SECTION 5. The directors may prescribe a period not exceeding 60 days
before to any meeting of the stockholders during which no transfer of stock on
the books of the corporation may be made, or may fix a day not more than 60 days
before the holding of any such meeting as the day as of which stockholders
entitled to notice of and to vote at such meeting shall be determined; and only
stockholders of record on such day shall be entitled to notice or to vote at
such meeting.
REGISTERED STOCKHOLDERS
SECTION 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Nevada.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the articles of incorporation, if any, may be declared by
the board of directors at any regular or special meeting pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the articles of incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
7
<PAGE>
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserves in the
manner in which it was created
CHECKS
SECTION 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
SECTION 4. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
SECTION 5. The corporate seal shall have inscribed thereon the name of
the corporation the year of its incorporation and the words "Corporate Seal,
Nevada."
ARTICLE VIII
AMENDMENTS
SECTION 1. These by-laws may be altered or repealed at any regular
meeting of the stockholders or of the board of directors or at any special
meeting of the stockholders or of the board of directors if notice of such
alteration or repeal be contained in the notice of such special meeting.
8
<PAGE>
FIRST AMENDMENT
TO THE
BYLAWS
OF
INTERPRETEL INTERNATIONAL, INC.
Pursuant to the provisions of Article VIII of the Bylaws of INTERPRETEL
INTERNATIONAL, INC., a Nevada corporation (the "CORPORATION"), the following
amendment to the Bylaws of the Corporation was adopted pursuant to a Unanimous
Consent in Lieu of Special Meeting of the Board of Directors of the Corporation,
dated as of December 10, 1997:
1. By deleting any and all reference to the corporate name INTERPRETEL
INTERNATIONAL, INC. and in lieu thereof inserting the new corporate
name:
WAVETECH INTERNATIONAL, INC.
2. Except as expressly amended herein, the Bylaws of the Corporation
shall remain in full force and effect as originally set forth.
CERTIFICATE
I, Richard P. Freeman, Secretary of INTERPRETEL INTERNATIONAL, INC. do
hereby certify that the foregoing is a true and correct copy of the First
Amendment to the Corporation's Bylaws adopted by the Directors of the
Corporation on December 10, 1997.
IN WITNESS WHEREOF, I have set my hand this ___ day of January, 1998.
----------------------------------
Richard P. Freeman, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
QUARTER ENDED FEBRUARY 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 46,265
<SECURITIES> 0
<RECEIVABLES> 196,237
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 253,049
<PP&E> 788,110
<DEPRECIATION> (454,328)
<TOTAL-ASSETS> 3,160,534
<CURRENT-LIABILITIES> 941,980
<BONDS> 0
0
0
<COMMON> 16,203
<OTHER-SE> 2,016,727
<TOTAL-LIABILITY-AND-EQUITY> 3,160,534
<SALES> 78,675
<TOTAL-REVENUES> 78,675
<CGS> 75,189
<TOTAL-COSTS> 75,189
<OTHER-EXPENSES> 519,250
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,931
<INCOME-PRETAX> (534,643)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (534,643)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
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