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.
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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.
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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 0000 Xxxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 77056,or ' at such other place and time as the parties hereto may mutually
agree; provided, however, that in the event that Closing has not occurred by
June 30, 1998, either party hereto shall have the right to terminate this
Reorganization Agreement.
2.3. CONSIDERATION FOR THE MERGER. The manner of converting the shares
of Imagitel into shares of Wavetech shall be as set forth in the Plan of Merger.
2.4. SHAREHOLDER APPROVALS. Each of Wavetech and Imagitel shall call
their respective Shareholders Meetings in accordance with the applicable
provisions of Nevada law and federal securities laws (as applicable) for the
purpose of considering and voting on this Reorganization Agreement and the
transactions contemplated hereby. The Shareholders' Meetings shall be held as
soon as practicable. The board of directors of each of Wavetech and Imagitel
shall recommend (subject to compliance with their legal and fiduciary duties, as
advised by counsel) to their respective shareholders and use their best efforts
to obtain the approval of this Reorganization Agreement and the Merger. Wavetech
shall also take any reasonable action required to be taken under the federal
securities laws and blue sky laws in connection with the issuance of Wavetech
Common Stock in the Merger. Wavetech shall prepare the Proxy Statement, which
shall be acceptable to Imagitel, in its sole discretion. The Proxy Statement
shall be mailed to the Wavetech shareholders as soon as reasonably practicable
after it becomes permissible to do so under applicable federal securities laws,
with due consideration given to the anticipated length of time that will be
required to obtain the Regulatory Approvals.
2.5. COOPERATION; REGULATORY FILINGS. Subject to the terms and
conditions of this Reorganization Agreement, Wavetech and Imagitel shall
cooperate, and shall cause each of their subsidiaries to cooperate, in the
preparation and submission by Wavetech and Imagitel, as promptly as reasonably
practicable, of such applications, petitions, and other documents and materials
as any of them may reasonably deem necessary or desirable to the SEC, the
appropriate Regulatory Authorities, the shareholders of Imagitel and Wavetech,
and any other Persons for the purpose of obtaining any approvals or consents
necessary to consummate the transactions contemplated by this Reorganization
Agreement. Prior to the making of any such filings with any Regulatory Authority
or the making of any written disclosures with respect to the transactions
contemplated hereby to shareholders or to any third Person (such as mailings to
shareholders or press releases), the parties shall submit to each other the
material to be filed, mailed, or released. Any such materials shall be
reasonably acceptable to all parties prior to the filings with any Regulatory
Authorities or the disclosures to shareholders or to any third Person, except to
the extent that any Person is legally required to proceed prior to obtaining the
approvals of the other parties. Wavetech shall be responsible for all filings
fees associated with the Regulatory Approvals.
2.6 TAX TREATMENT. Wavetech and Imagitel intend that the Merger shall
qualify as a tax-free reorganization under Section 368(a) of the Code.
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2.7. OPTIONS. At the Effective Time, all outstanding obligations,
commitments, options, warrants or other securities set forth on Schedule 3.4 of
the hereto which are exercisable for or convertible into, or which require the
issuance of, shares of any class of capital stock of Imagitel ("Options"),
shall, after the Effective Date, represent only the right to receive shares of
Wavetech Common Stock based on the Conversion Ratio (as defined in the Plan of
Merger).
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF IMAGITEL
Imagitel hereby represents and warrants to Wavetech the following
matters on and as of the date of this Reorganization Agreement and at the
Effective Time; provided, however, that before any breach of or inaccuracy in
any of the representations or warranties given in this Section 3 shall be
actionable or shall constitute grounds for termination of or failure to perform
under the terms of this Reorganization Agreement by Wavetech, such breach or
inaccuracy must be materially adverse in the aggregate with respect to the
business of Imagitel.
3.1. ORGANIZATION, GOOD-STANDING AND CONDUCT OF BUSINESS. Imagitel is a
corporation, duly organized, validly existing and in good standing under the
laws of Nevada, and has full power and authority and all necessary governmental
and regulatory authorization to own all of its properties and assets and to
carry on its business as it is presently being conducted, and is properly
licensed, qualified and in good standing as a foreign corporation in all
jurisdictions wherein the character of the properties or the nature of the
business transacted by Imagitel makes such license or qualification necessary.
3.2. CORPORATE AUTHORITY. The execution, delivery and performance of
this Reorganization Agreement have been duly authorized by the Board of
Directors of Imagitel. Other than the Imagitel Shareholder Approval, no other
corporate acts or proceedings on the part of Imagitel are required or necessary
to authorize this Reorganization Agreement or the Merger.
3.3. BINDING EFFECT. Subject to receipt of the Shareholder Approvals
and any required Regulatory Approvals, when executed, this Reorganization
Agreement will constitute a valid and legally binding obligation of Imagitel,
enforceable against Imagitel in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect and general principles of equity. Each document and
instrument contemplated by this Reorganization Agreement, when executed and
delivered by Imagitel in accordance with the provisions hereof, shall be duly
authorized, executed and delivered by Imagitel and enforceable against Imagitel
in accordance with its terms, subject to the exceptions in the previous
sentence.
3.4. CAPITALIZATION OF IMAGITEL. The authorized capital stock of
Imagitel consists solely of (i) 1,000,000 authorized shares of common stock (no
par value), of which 210,526 shares are issued and outstanding. All of the
issued and outstanding shares of Imagitel are validly issued and fully paid and
nonassessable. Except for the items set forth on Schedule 3.4 attached hereto or
expressly referenced elsewhere herein, there are no outstanding obligations,
options, warrants or commitments of any kind or nature or any outstanding
securities or other instruments convertible into shares of any class of capital
stock of Imagitel, or pursuant to which Imagitel is or may become obligated to
issue any shares of its capital stock. None of the shares of the Imagitel Common
Stock is subject to any restrictions as to the transfer thereof, except as set
forth in Imagitel's Certificate of Incorporation or Bylaws and except for
restrictions on account of applicable federal or state securities laws. Imagitel
does not hold any equity securities of any other company or legal entity except
for shares in RRV Enterprises, Inc., a Texas corporation, and DDD Calling, Inc.,
a Texas corporation, Zapcom International, Inc., a Nevada corporation and
Contest Central, LLC, a Texas limited liability company. Imagitel, Inc. owns
100% of the outstanding shares of capital stock of such subsidiaries and there
are no outstanding obligations, options, warrants or commitments of any kind or
nature or any outstanding securities or other instruments convertible into
shares of any class of capital stock of such subsidiaries.
3.5. ABSENCE OF DEFAULTS. Imagitel is not in default under, or in
violation of, any provision of its Certificate of Incorporation or Bylaws.
Imagitel is not in default under, or in violation of, any agreement to which
Imagitel is a party, the effect of which default or violation would have a
material adverse effect on Imagitel or its business operations or prospects.
Except as disclosed in Schedule 3.5 hereto, Imagitel is not in violation of any
applicable law, rule or regulation, the effect of which violation would have a
material adverse effect on Imagitel or its business operations or prospects.
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3.6 NON-CONTRAVENTION AND DEFAULTS; NO LIENS. Neither the execution or
delivery of this Reorganization Agreement, nor the fulfillment of, or compliance
with, the terms and provisions hereof, will (i) result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in a
violation of, termination of or acceleration of the performance provided by the
terms of, any agreement to which Imagitel is a party or by which it may be
bound, (ii) violate any provision of any law, rule or regulation, (iii) result
in the creation or imposition of any lien, charge, restriction, security
interest or encumbrance of any nature whatsoever on any asset of Imagitel, or
(iv) violate any provisions of Imagitel's Certificate of Incorporation or
Bylaws. To the best of Imagitel's knowledge, no other party to any material
agreement to which Imagitel is a party is in default thereunder or in breach of
any provision thereof. To the best of Imagitel's knowledge, there exists no
condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such agreement.
3.7. NECESSARY APPROVALS. Imagitel has obtained all certificates of
authority, licenses, permits, franchises, registrations of foreign ownership or
other Regulatory Approvals in every jurisdiction necessary for the continuing
conduct of its business and ownership of its assets. Except for those which may
be renewed or extended in the ordinary course of business, no such certificate,
license, permit, franchise, registration or other Regulatory Approval is about
to expire, lapse, has been threatened to be revoked or has otherwise become
restricted by its terms which would, upon such expiration, lapse, revocation or
restriction, have a material adverse effect on the financial circumstances of
Imagitel. Further, there is no reasonable basis for any such expiration, lapse,
revocation, threat of revocation or restriction. Except for any necessary
Regulatory Approvals, no consent, approval, authorization, registration, or
filing with or by any governmental authority, foreign or domestic, is required
on the part of Imagitel in connection with the execution and delivery of this
Reorganization Agreement or the consummation by Imagitel of the transactions
contemplated hereby. Except for the items in the preceding sentence or as
disclosed in Schedule 3.7 hereto, Imagitel is not required to procure the
approval of any Person, in order to prevent the termination of any right,
privilege, license or contract of Imagitel as a result of this Reorganization
Agreement.
(b) Schedule 3.7 hereto sets forth all governmental licenses and each
other material approval, authorization, consent, license, certificate of public
convenience, order or other permit of all Regulatory Authority, necessary to
enable Imagitel or its subsidiaries to own, operate and lease their properties
and assets as and where such properties and assets are owned, leased or operated
and to provide service and carry on their business as presently provided and
conducted (collectively the "Permits") or required to permit the continued
conduct of such business following the Closing Date in the manner conducted on
the date of this Reorganization Agreement (indicating in each case whether or
not the consent of any Person is required for the consummation of the
transactions contemplated hereby).
3.8 FINANCIAL STATEMENTS. The financial statements of Imagitel's
subsidiaries (the "Imagitel Financial Statements") which have been provided to
Wavetech, are true, correct and complete in all material respects and present
fairly, in conformity with generally accepted accounting principles consistently
applied, the financial position of the respective entities at the dates
indicated and the results of its operations for each of the periods indicated,
except as otherwise set forth in the notes thereto and except, with respect to
the unaudited statements' normal year end adjustments. The books and records of
Imagitel have been kept, and will be kept to the Closing Date, in reasonable
detail, and will fairly and accurately reflect in all material respects to the
Closing Date, the transactions of Imagitel. Only RRV Enterprises, Inc. has
audited financial statements, all other subsidiaries of Imagitel have unaudited
financial statements that are only internal statements and all information
contained therein should be verified by Wavetech's auditors.
3.9. TAX RETURNS. Imagitel files its income tax returns and maintains
its tax books and records on the basis of a taxable year ending December 3 1.
Imagitel has duly filed all tax reports and returns required to be filed by any
federal, state or local taxing authorities (including, without limitation, those
due in respect of its properties, income, franchises, licenses, sales and
payrolls) through the date hereof, and Imagitel has duly paid all taxes with
respect to the periods covered thereby and has established adequate reserves in
accordance with generally accepted accounting principles consistently applied
for the payment of all income, franchises, property, sales, employment or other
taxes anticipated to be payable after the date hereof. Imagitel is not
delinquent in the payment of any taxes, assessments or governmental charges and
no deficiencies have been asserted or assessed, which have not been paid or for
which adequate reserves have not been established. Imagitel does not have in
effect any waiver relating to any statute of limitations for assessment of taxes
with respect to any federal, state or local income, property, franchise, sales,
license or payroll tax. Imagitel does not know, or have reason to know, of any
questions which have been raised or which may be raised by any taxing authority
relating to taxes or assessments of Imagitel which, if determined adversely,
would result in the assertion of any deficiency.
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3.10. UNDISCLOSED LIABILITIES. Except for the liabilities which are
disclosed in the Imagitel Financial Statements or as set forth on Schedule 3.10
hereto, Imagitel has no material liabilities or material obligations of any
nature, whether absolute, accrued, contingent or otherwise, and whether due or
to become due. Since December 31, 1996, there has been (i) no material adverse
change in the business or operations of Imagitel, (ii) no incurrence by or
subjection of Imagitel to any obligation or liability (whether fixed, accrued or
contingent) or commitment material to Imagitel not referred to in this
Reorganization Agreement, except such obligations or liabilities as were or may
be incurred in the ordinary course of business and which are reflected on the
Imagitel Financial Statements at and for the periods subsequent to December 31,
1996.
(b) Except as set forth in Schedule 3.10 hereto, Imagitel. has not
since December 31, 1996 provided any special promotions, discounts or other
incentives to its employees, agents, distributors or customers in connection
with the solicitation of new orders for service provided by Imagitel or any
subsidiary, nor has any customer pre-paid any material amount for services to be
provided by Imagitel or any subsidiary in the future.
(c) Since December 31, 1996, Imagitel's accounts payable have been
accrued and paid in a manner consistent with Imagitel's prior practice and at no
point in time since December 31, 1996 have Imagitel's aggregate past due
accounts payable been more than $125,000.
(d) Imagitel has paid or fully provided for all access charges properly
payable to local exchange carriers for access facilities and has properly
reported its percentage of interstate use ("PIU") to such carriers. As of
September 30, 1997, Imagitel does not have, and at the Closing Imagitel will not
have, any liability on account of PIU. Imagitel does not have material revenues
associated with international traffic. The subsidiaries of Imagitel will not
have any operating loss in excess of $500,000 for the period from inception
through the Closing Date, after taking into account any and all contingencies
associated with the provision or possible termination of such services,
including (i) any requirement to provide return traffic, (ii) any liability that
may arise in connection with the termination of contracts or other arrangements
with any agents or distributors, governmental entities or other Persons, and
(iii) and potential litigation costs related to any of the foregoing.
3.11. TITLE TO PROPERTIES, ENCUMBRANCES. Imagitel has good and
marketable title to all of the real property and depreciable tangible personal
property owned by it, free and clear of any liens, claims, charges, options or
other encumbrances, except for any lien for (i) current taxes not yet due and
payable, (ii) pledges to secure deposits and other liens incurred in the
ordinary course of the banking business, (iii) such imperfections of title,
easements and other encumbrances, if any, as are not material in character,
amount or extent, or (iv) such items as are set forth on Schedule 3. 11 hereto.
3.12. LITIGATION. Except as shown on Schedule 3.12 hereto, there are no
claims, actions, suits or proceedings pending or threatened against Imagitel, or
to its knowledge affecting Imagitel, at law or in equity, before or by any
Federal, state, municipal, administrative or other court, governmental
department, commission, board, or agency, an adverse determination of which
could have a material adverse effect on the business or operations of Imagitel,
and Imagitel knows of no basis for any of the foregoing. There is no order,
writ, injunction, or decree of any court, domestic or foreign, or any Federal or
state agency affecting Imagitel specifically or to which Imagitel is subject.
3.13. REPORTS. Imagitel has duly made all reports and filings required
to be made pursuant to applicable law, except for failures to file or reports
which would not have a material adverse effect on the business or financial
condition of Imagitel.
3.14. BROKERS. Except as provided in its contracts with Seruus Ventures
LLC and Maverick Management Group, Imagitel has not incurred any liability for
any commission or fee in the nature of a finder's, originator's or broker's fee
in connection with the transaction contemplated herein.
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3.15. EXPENDITURES. Schedule 3.15 hereto sets forth any single
expenditure of $75,000 or more proposed to be made by Imagitel after the date
hereof and a summary of the terms and conditions pertaining thereto. At least 20
business days prior to the Closing Date, Imagitel will advise Wavetech of any
changes to Schedule 3.15 hereto reflecting additions or deletions thereto since
the date hereof.
3.16 INSURANCE. Schedule 3.16 hereto is a true and complete summary of
the policies of fire, liability, life and other types of insurance held by
Imagitel, setting forth with respect to each such policy, the policy number,
name of the insured party, type of insurance, insurance company, annual premium,
expiration date, deductible amount, if any, and amount of coverage. Each such
policy is in an amount reasonably sufficient for the protection of the assets
and business covered thereby, and, in the aggregate, all such policies are
reasonably adequate for the protection of all the assets and business of
Imagitel taking into account the availability and cost of such coverage. To the
extent permissible pursuant to such policies, all such policies shall remain in
full force and effect for a period of at least 90 days following the Closing
Date. There is no reason known to Imagitel that any such policy will not be
renewable on terms and conditions as favorable as those set forth in such
policy.
3.17. CONTRACTS AND COMMITMENTS. Schedule 3.17 hereto sets forth each
contract or other commitment of Imagitel which requires an aggregate payment by
Imagitel after the date hereof of more than $75,000, and any other contract or
commitment that in the opinion of the Imagitel management materially affects the
business of Imagitel. Except for the contracts and commitments described in this
Reorganization Agreement or as set forth in Schedule 3.17 hereto, Imagitel is
not party to or subject to:
1. Any contracts or commitments which are material to its
business, operations or financial condition other than loans or agreements
with respect thereto entered into in the ordinary course of business;
2. Any employment contract or arrangement, whether oral or
written, with any officer, consultant, director or employee which is not
terminable on 30 days' notice without penalty or liability to make any
payment thereunder for more than 30 days after such termination;
3. Any plan or contract or other arrangement, oral or written,
providing for insurance for any officer or employee or members of their
families;
4. Any plan or contract or other arrangement, oral or written,
providing for bonuses, pensions, options, deferred compensation, retirement
payments, profit-sharing or other benefits for employees;
5. Any contract or agreement with any labor union;
6. Any contract or agreement with customers for the sale of
products or the furnishing of services, or any sales agency, broker,
distribution or similar contract, except contracts made in the ordinary
course of business;
7. Any contract restricting Imagitel from carrying on its
business anywhere in the United States;
8. Any instrument or arrangement evidencing or related to
indebtedness for money borrowed or to be borrowed, whether directly or
indirectly, by way of purchase money obligation, guaranty, conditional
sale, lease purchase, or otherwise;
9. Any joint venture contract or arrangement or any other
agreement involving a sharing of profits;
10. Any license agreement in which Imagitel is the licensor or
licensee;
11. Any material contract or agreement, not of the type covered
by any of the other items of this Section 3.17, which by its terms is
either (i) not to be performed prior to 30 days from the date hereof, or
(ii) does not terminate, or is not terminable without penalty to Imagitel,
or any successors or assigns prior to 30 days from the date hereof.
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3.18. EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.18 hereto contains a complete list of all Benefit Plans
sponsored or maintained by Imagitel or under which Imagitel may be obligated
("Imagitel Benefit Plans"). Imagitel has delivered to the Wavetech (i) accurate
and complete copies of all Imagitel Benefit Plan documents and all other
material documents relating thereto, including all summary plan descriptions,
summary annual reports and insurance contracts, (ii) accurate and complete
detailed summaries of all unwritten Imagitel Benefit Plans, (iii) accurate and
complete copies of the most recent financial statements and actuarial reports
with respect to all Imagitel Benefit Plans for which financial statements or
actuarial reports are required or have been prepared and (iv) accurate and
complete copies of all annual reports for all Imagitel Benefit Plans (for which
annual reports are required) prepared within the last two years. Any Imagitel
Benefit Plan providing benefits that are funded through a policy of insurance is
indicated by the word "insured" placed by the listing of the Imagitel Benefit
Plan on Schedule 3.18 hereto.
(b) All Imagitel Benefit Plans conform in all material respects to, and
are being administered and operated in material compliance with, the
requirements of ERISA, the Code and all other applicable Regulations. All
returns, reports and disclosure statements required to be filed or delivered
under ERISA and the Code with respect to all Imagitel Benefit Plans have been
filed or delivered. There have not been any "prohibited transactions," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA involving
any of the Imagitel Benefit Plans, that could subject Imagitel to any material
penalty or tax imposed under the Code or ERISA.
(c) Except as set forth in Schedule 3.18 hereto, any Imagitel Benefit
Plan that is intended to be qualified under Section 401(a) of the Code and
exempt from tax under Section 501(a) of the Code has been determined by the
Internal Revenue Service to be so qualified, and such determination remains in
effect and has not been revoked. Nothing has occurred since the date of any such
determination that is reasonably likely to affect adversely such qualification
or exemption, or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any Imagitel
Benefit Plan.
(d) Except as set forth in Schedule 3.18 hereto, Imagitel has no
current or contingent obligation to contribute to any multiemployer plan (as
defined in Section 3(37) of ERISA). Imagitel has no liability with respect to
any employee benefit plan (as defined in Section 3(3) of ERISA) other than with
respect to the Imagitel Benefit Plans.
(e) There are no pending or, threatened claims by or on behalf of any
Imagitel Benefit Plans, or by or on behalf of any individual participants or
beneficiaries of any Imagitel Benefit Plans, alleging any breach of fiduciary
duty on the part of Imagitel or any of such party's officers, directors or
employees under ERISA or any other applicable Regulations, or claiming benefit
payments other than those made in the ordinary operation of such plans. The
Imagitel Benefit Plans are not the subject of any investigation, audit or action
by the Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC"). Imagitel has made all required contributions
under the Imagitel Benefit Plans including the payment of any premiums payable
to the PBGC and other insurance premiums.
(f) With respect to any Imagitel Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(l) of ERISA) (a "Welfare
Plan"), (i) each such Welfare Plan for which contributions are claimed as
deductions under any provision of the Code is in material compliance with all
applicable requirements pertaining to such deduction, (ii) with respect to any
welfare benefit fund (within the meaning of Section 419 of the Code) related to
such a Welfare Plan, there is no disqualified benefit (within the meaning of
Section 4976(b) of the Code) that would result in the imposition of a tax under
Section 4976(a) of the Code, (iii) any Imagitel Benefit Plan that is a group
health plan (within the meaning of Section 4980B(g)(2) of the Code) complies,
and in each and every case has complied, with all of the material requirements
of Section 4980B of the Code, ERISA, Title XXII of the Public Health Service Act
and the applicable provisions of the Social Security Act, and (iv) such Welfare
Plan may be amended or terminated at any time on or after the Closing Date.
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.
0000 Xxxx Xxxxxxxx Xxxxxx, XXX 000
Xxxxxx, Xxxxxxx 00000
Copy to: ATT: Xxxxx Xxxxxxx
Squire, Xxxxxxx et al
00 Xxxxx Xxxxxxx Xxxxxx, XXX 0000
Xxxxxxx, Xxxxxxx 00000
For Imagitel: ATT: President
Imagitel, Inc.
0000 Xxxxxxx Xxxxx, XXX 0000
Xxxxxxx, Xxxxx 00000
Copies to: ATT: Xxxxxx Xxxxxxxx
Cades Xxxxxxx et al
0000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
11.5. COUNTERPARTS. This Reorganization Agreement may be executed in
one or more Counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
11.6 HEADINGS. The section and paragraph headings contained in this
Reorganization Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretations of this Reorganization Agreement.
11.7. LAW GOVERNING. This Reorganization Agreement shall be governed by
and construed in accordance with the laws of the State of Nevada.
11.8. AMENDMENT. This Reorganization Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties.
11.9. WAIVER. Any term, provision or condition of this Reorganization
Agreement (other than that required by law) may be waived in writing at any time
by the party which is entitled to the benefits thereof.
11. 10. NO THIRD PARTY BENEFICIARIES. Except for Section 10.1 hereof,
nothing in this Reorganization Agreement, express or implied, is intended to
confer upon any person, other than the parties hereto, any rights, obligations
or liabilities under or by reason of this Reorganization Agreement.
END OF PAGE
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IN WITNESS WHEREOF, this Reorganization Agreement has been duly entered
as of the date first written above.
WITNESSES WAVETECH, INC.
-------------------------------- By: /s/
--------------------------------
President
--------------------------------
WITNESSES WAVETECH INTERIM, INC.
-------------------------------- By: /s/
--------------------------------
President
--------------------------------
WITNESSES IMAGITEL, INC.
-------------------------------- By: /s/
--------------------------------
President
--------------------------------
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.
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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.
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