-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SoyEylqLQuDeUcY/NMIiwW/Ivk6ZnPfBW/bUtzvy3Dt4Rah0gSTzOEa+xoBoWkSX YlKbcjBiVYbOBKLc9DEVPw== 0001029737-98-000151.txt : 19980415 0001029737-98-000151.hdr.sgml : 19980415 ACCESSION NUMBER: 0001029737-98-000151 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980414 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAVETECH INTERNATIONAL INC CENTRAL INDEX KEY: 0000799694 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 222726569 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-15482 FILM NUMBER: 98593389 BUSINESS ADDRESS: STREET 1: 5210 E WILLIAMS CIRCLE STREET 2: STE 200 CITY: TUCSON STATE: AR ZIP: 85711 BUSINESS PHONE: 5207509093 MAIL ADDRESS: STREET 1: 5210 E WILLIAMS CIRCLE CITY: TUCSON STATE: AZ ZIP: 85711 FORMER COMPANY: FORMER CONFORMED NAME: WAVETECH INC DATE OF NAME CHANGE: 19920703 10QSB 1 QUARTERLY REPORT FOR THE QTR ENDED 2/28/98 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 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 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 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 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 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 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 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 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 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 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 EX-2 2 PLAN OF REORGANIZATION 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 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 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. 3 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. 4 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. 5 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. 6 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. 7 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. 8 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 9 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. 10 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. 11 (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 12 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. 13 (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 14 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 15 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 16 (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. 17 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. 18 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. 19 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. 20 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. 21 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 22 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 - -------------------------------- 23 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 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. 25 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 EX-3.1 3 ARTICLES OF INCORPORATION OF INTERPRETEL 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 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 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 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 (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 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 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 (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 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 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 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 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. 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. 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 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: EX-3.2 4 BYLAWS OF INTERPRETEL INTERNATIONAL, INC. 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. 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 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 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 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 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 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 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 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 EX-27 5 FINANCIAL DATA SCHEDULE
5 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. 6-MOS AUG-31-1998 SEP-01-1997 FEB-28-1998 46,265 0 196,237 0 0 253,049 788,110 (454,328) 3,160,534 941,980 0 0 0 16,203 2,016,727 3,160,534 78,675 78,675 75,189 75,189 519,250 0 18,931 (534,643) 0 0 0 0 0 (534,643) (0.03) 0
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