CERTIFICATE OF DESIGNATIONS, RIGHTS, PREFERENCES AND LIMITATIONS
WAVETECH INTERNATIONAL, INC.
SERIES B CONVERTIBLE PREFERRED STOCK
PURSUANT TO TITLE 7, CHAPTER 78, SECTION 78.1955 OF THE NEVADA REVISED STATUTES
It is certified that:
A. The name of the corporation is Wavetech International, Inc., a Nevada
corporation (hereinafter the "Company").
B. The certificate of incorporation of the Company, as amended, authorizes
the issuance of Ten Million (10,000,000) shares of Preferred Stock, $.001 par
value per share, and expressly vests in the Board of Directors of the Company
the authority provided therein to issue all of said shares in one or more series
and by resolution or resolutions to establish the designation and number and to
fix the relative rights and preferences of each series to be issued.
C. The Board of Directors of the Company, pursuant to the authority
expressly vested in it, has adopted the following resolutions creating a class
of Series B Preferred Stock:
RESOLVED, that a portion of the Ten Million (10,000,000) authorized shares
of Preferred Stock of the Company shall be designated as a separate series
possessing the rights and preferences set forth below:
1. DESIGNATION AND AMOUNT. The shares of such series shall have a par value
of $.001 per share and shall be designated as "Series B Convertible Preferred
Stock" (the "Series B Preferred Stock") and the number of shares constituting
the Series B Preferred Stock shall be up to 1,000. The Series B Preferred Stock
shall be offered for sale at a purchase price of $5,000 per share (the "Purchase
Price").
2. RANKING. The Series B Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.001 per share ("Common Stock"); (ii)
junior to the Corporation's Series A Convertible Preferred Stock, par value
$.001 per share (the "Series A Preferred Stock"); (iii) prior to any class or
series of capital stock of the Corporation hereafter created (unless, with the
consent of the holders of Series B Preferred Stock (which may be withheld in
such holders' sole and absolute discretion) obtained in accordance with Section
8 hereof, such class or series of capital stock specifically, by its terms,
ranks senior to or PARI PASSU with the Series B Preferred Stock); (iv) PARI
PASSU with any class or series of capital stock of the Corporation hereafter
created (with the consent of the holders of the Series B Preferred Stock (which
may be withheld in such holders' sole and absolute discretion) obtained in
accordance with Section 8 hereof) specifically ranking, by its terms, on parity
with the Series B Preferred Stock ("Pari Passu Securities"); and (v) junior to
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any class or series of capital stock of the Corporation hereafter created (with
the consent of the holders of Series B Preferred Stock (which may be withheld in
such holders' sole and absolute discretion) obtained in accordance with Section
8 hereof) specifically ranking, by its terms, senior to the Series B Preferred
Stock ("Senior Securities"), in each case as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
3. DIVIDEND RIGHTS.
(a) The holders of shares of Series B Preferred Stock shall be entitled to
receive out of any assets legally available therefor cumulative dividends at the
rate per share equal to six percent (6%) per year of the amount of the
Liquidation Value of the Series B Preferred Stock, in preference and priority to
any payment of any dividend on the Common Stock or any other class or series of
stock of the corporation except for the Series A Preferred Stock. Such dividends
shall accrue on any given share from the day of original issuance of such share
and shall accrue from day to day whether or not earned or declared. Such
dividends shall be cumulative so that if such dividends in respect of any
previous or current annual dividend period, at the annual rate specified above,
shall not have been paid or declared and a sum sufficient for the payment
thereof set apart for all Series B Preferred Stock at the time outstanding, the
deficiency shall first be fully paid before any dividend or other distribution
shall be paid on or declared or set apart for the Common Stock or any other
class or series of stock of the corporation except for the Series A Preferred
Stock. Dividends on the Series B Preferred Stock shall be non-participating and
the holders of the Series B Preferred Stock shall not be entitled to participate
in any other dividends beyond the cumulative dividends specified herein.
(b) Any dividends payable pursuant to the provisions of this section 3 may
be paid, at the Company's option, either in cash or unrestricted shares of
Common Stock of the Company, and shall be paid within five days of when due. The
number of shares of Common Stock to be issued by the Company in lieu of a cash
payment for dividends due as set forth herein shall be equal to the number of
shares of Common Stock resulting from dividing the dollar amount of dividends
owed by the Conversion Price (as defined below) on such date as the dividends
are payable (if such date is not a Trading Day, then the next Trading Day (as
defined below) immediately thereafter).
(c) The holders of the outstanding shares of Series B Preferred Stock shall
not be entitled to other distributions of the assets of the Company other than
distributions of the assets of the Company upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary.
For purposes of this Certificate, unless the context otherwise requires,
"distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of Common Stock or other equity securities of
the Company (other than redemptions set forth in Section 6 below or repurchases
of Common Stock or other equity securities held by employees or consultants of
the Company upon termination of their employment or services pursuant to
agreements providing for such repurchase) for cash or property payable other
than in shares of Common Stock or other equity securities of the Company.
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3. LIQUIDATION, DISSOLUTION OR WINDING UP
The Series B Preferred Stock carries a liquidation preference of $5,000.00
per share, plus any accrued but unpaid dividends (the "Liquidation Preference").
In the event of any liquidation, dissolution, winding up, either voluntary or
involuntary, of the Corporation, or any partial liquidation effected by means of
a distribution of assets or return of capital, the holders of each share of
Series B Preferred Stock shall be entitled to receive and be paid in cash out of
the surplus funds of the Corporation or out of the assets so distributed, full
payment of the Liquidation Preference of such share before any amount shall be
paid to the holders of any other class of capital stock of the Corporation
except for the Series A Preferred Stock
If upon liquidation, the assets of the Corporation available for
distribution to stockholders shall be insufficient to permit the payment in full
of the Liquidation Preference payable hereunder to the holders of the Series A
Preferred Stock, the Series B Preferred Stock and PARI PASSU Securities, then
all such assets shall be distributed first to the Series A Preferred Stock and
thereafter, to extent sufficient ratably among the holders of such shares of
Convertible Preferred Stock and PARI PASSU Securities first in payment of the
Liquidation Preference per share of Convertible Preferred Stock and PARI PASSU
Securities, in proportion to the respective amounts that would be payable per
share if such assets were sufficient to permit such payments in full.
No distribution shall be made with respect to any class of capital stock of
the Corporation standing junior in preference to the Series B Preferred Stock
until the distributions required hereunder have been paid in full to all holders
of Series B Preferred Stock. After the holders of Series B Preferred Stock have
received the sum per share equal to the Liquidation Preference of such Series B
Preferred Stock, the holders of classes of capital stock standing junior in
preference shall be entitled to share in accordance with their respective rights
and preferences hereunder in the distribution of all remaining assets of the
Corporation available for distribution.
4. VOTING RIGHTS. Except as otherwise required by law, and except as set
forth in Section 8 of this Certificate, the holders of Series B Preferred Stock
shall not be entitled to vote upon any matter relating to the business or
affairs of the Company or for any other purpose.
5. CONVERSION RIGHTS FOR THE SERIES B PREFERRED STOCK. The holders of
Series B Preferred Stock shall have conversion rights as follows ("Conversion
Rights"):
(a) RIGHT TO CONVERT. The Series B Preferred Stock may be converted, in
whole or in part, at any time after the closing date (the "Closing Date") of the
sale of the Series B Preferred Stock.
(b) CONVERSION RATE. Each share of Series B Preferred Stock may be
converted into the number of fully-paid and non-assessable shares of Common
Stock of the Company calculated in accordance with the following formula
("Conversion Rate"):
The number of shares issuable upon conversion of one share of Series B
Preferred Stock shall be determined by dividing the Purchase Price by the
Conversion Price, where:
(i) The Purchase Price is defined in Section 1 hereof;
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(ii) the Conversion Price equals the lesser of (x) one hundred ten
percent (110%) of the average of the Closing Bid Prices (defined below) for the
Common Stock for the five (5) trading days prior to the date of issuance of the
Series B Preferred Stock being converted, or (y) eighty percent (80%) (the
"Conversion Percentage") of the average of the Closing Bid Prices for the Common
Stock for the three (3) lowest trading days out of the ten (10) consecutive
trading days immediately preceding the Conversion Date (as herein defined), as
reported on the National Association of Securities Dealers OTC Bulletin Board
Market (or on such other national securities exchange or market as the Common
Stock may trade at such time);
(iii) for purposes hereof, the term "Closing Bid Price" shall mean for
any security as of any date, the last closing bid price for such security on the
OTC: Bulletin Board Market as reported by Bloomberg, L.P., or, if the OTC:
Bulletin Board Market is not the principal trading market for such security, the
last closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg,
L.P., or, if no last closing bid or trade price is reported for such security by
Bloomberg, L.P., the closing bid price shall be determined by reference to the
closing bid price as reported on the principal trading market, and if not so
reported shall be determined from the average of the bid prices of any market
makers for such security as reported in the "pink sheets" published by the
National Quotation Bureau, Inc. If the closing bid price cannot be calculated
for such security on such date on any of the foregoing bases, the closing bid
price of such security on such date shall be the fair market value as mutually
agreed by the Company and the holders of two-thirds of the outstanding shares of
Series B Preferred Stock.
(c) FORCED CONVERSION. In the event the holders of the Series B Preferred
Stock have not exercised the Conversion Rights set forth herein within two years
after the date of issuance of the Series B Preferred Stock (the "Final Date"),
the Series B Preferred Stock shall automatically be converted as if the holder
had exercised their Conversion Rights on the Final Date.
(d) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the conversion of the Series B Preferred Stock shall be changed
into the same or different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification, stock split, stock
dividend, or similar event, then and in each such event, the holder of each
share of Series B Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
property receivable upon such capital reorganization, reclassification or other
change which such holder would have received had its shares of Series B
Preferred Stock been converted immediately prior to such capital reorganization,
reclassification or other change.
(e) CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. If at any time or
from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for in Section 5(d) above), or a merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all of the
Company's properties and/or assets to any other person or entity (any of which
events is herein referred to as a "Reorganization"), then as a part of such
Reorganization, provision shall be made so that the holders of the Series B
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Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series B Preferred Stock, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
Reorganization, to which such holder would have been entitled if such holder had
converted its shares of Series B Preferred Stock immediately prior to such
Reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of the Series B Preferred Stock after the Reorganization, to the end
that the provisions of this Section 5 (including adjustment of the number of
shares issuable upon conversion of the Series B Preferred Stock) shall be
applicable after that event in as nearly equivalent a manner as may be
practicable.
(f) CERTIFICATE AS TO ADJUSTMENTS; NOTICE BY COMPANY. Upon the occurrence
of each adjustment or readjustment of the Conversion Price of the Series B
Preferred Stock, the Company, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such Series B Preferred Stock a certificate executed
by the president and chief financial officer (or in the absence of a person
designated as the chief financial officer, by the treasurer) setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment are based. The Company shall, upon written request at
any time of any holder of Series B Preferred Stock, furnish or cause to be
furnished to such holder a certificate setting forth (A) the Conversion Price at
the time in effect, and (B) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of a share of Series B Preferred Stock.
(g) EXERCISE OF CONVERSION RIGHTS. Holders of Series B Preferred Stock may
exercise their right to convert the Series B Preferred Stock by telecopying an
executed and completed Notice of Conversion to the Company and delivering the
original Notice of Conversion in the form annexed hereto as Exhibit A ("Notice
of Conversion") and the certificate representing the Series B Preferred Stock
(once fully converted, unless specifically requested otherwise by the Company)
by express courier. Each business date on which a Notice of Conversion is
telecopied to and received by the Company in accordance with the provisions
hereof shall be deemed a "Conversion Date." Such holders of Series B Preferred
Stock which have sent a Notice of Conversion to the Company shall, if requested
by the Company, deliver the originally executed Series B Preferred Stock
certificates to the Company within three business days from the Conversion Date.
The Company will transmit, or instruct its transfer agent to transmit, the
certificates representing shares of Common Stock issuable upon conversion of any
share of Series B Preferred Stock (together with the certificates representing
the Series B Preferred Stock not so converted, if the prior certificate was
delivered to the Company) to the holder thereof via express courier, by
electronic transfer or otherwise, within three business days after the Company
has received the facsimile Notice of Conversion. In addition to any other
remedies which may be available to the holders of shares of Series B Preferred
Stock, Except as otherwise stated in the Purchase Agreement, in the event that
the Company fails to deliver, or has failed to contact its transfer agent within
two business days to deliver, such shares of Common Stock within such three
business day period, the holder will be entitled to revoke the relevant Notice
of Conversion by delivering a notice to such effect to the Company whereupon the
Company and the holder shall each be restored to their respective positions
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immediately prior to delivery of such Notice of Conversion. The Notice of
Conversion and Series B Preferred Stock certificates representing the portion of
the Series B Preferred Stock converted shall be delivered as follows:
To the Company: Wavetech International, Inc.
5210 E. Williams Circle
Suite 200
Tucson, Arizona 85711
Telephone: (520) 750-9093
Facsimile:
Attention:
In the event that shares representing the Common Stock issuable upon
conversion of the Series B Preferred Stock (the "Conversion Shares") are not
delivered by the Company within five (5) business days of receipt by the Company
of the facsimile Notice of Conversion, the Company shall pay to the holders
thereof, in immediately available funds, upon demand, as liquidated damages for
such failure and not as a penalty, the amounts stated in the following schedule,
which liquidated damages shall begin to accrue on the sixth business day after
the Conversion Date provided that the Company shall not be responsible for or
required to pay such liquidated damages if such failure to deliver or convert
was not caused by any actions or omissions of the Company, the Company's
transfer agent or counsel to the Company. Any and all payments required pursuant
to this paragraph shall be payable in cash on demand.
Late Payment For Each $10,000
of Preferred Stock Liquidation
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each Business
Day Late beyond 5 days from
The Delivery Date
Nothing herein shall limit the holder's right to seek specific performance of
the Company's obligations hereunder and other remedies and damages for the
Company's actions or inactions resulting in the transfer agent's failure to
issue and deliver the Common Stock to the holder.
(h) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of evidence of
the loss, theft, destruction or mutilation of any Series B Preferred Stock
certificate(s), and (in the case of loss, theft or destruction) of indemnity or
security reasonably satisfactory to the Company, and upon the cancellation of
the Series B Preferred Stock certificate(s), if mutilated, the Company shall
execute and deliver new certificates for Series B Preferred Stock of like tenure
and date. However, the Company shall not be obligated to reissue such lost or
stolen certificates for shares of Series B Preferred Stock if the holder
contemporaneously requests the Company to convert such Series B Preferred Stock
into Common Stock.
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(i) FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued
upon conversion of shares of Series B Preferred Stock. In lieu of any fractional
share to which the holder would be entitled for this paragraph, the number of
shares of Common Stock to be received shall be rounded to the nearest whole
share.
(j) PARTIAL CONVERSION. In the event some but not all of the shares of
Series B Preferred Stock represented by a certificate or certificates are
converted, the Company may require the holder to surrender the said
certificate(s) to the Company within three (3) business days after such a
conversion; if so, the Company shall execute and deliver to or to the order of
the holder, at the expense of the Company, a new certificate representing the
number of shares of Series B Preferred Stock which were not converted.
(k) RESERVATION OF COMMON STOCK. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of the Series B
Preferred Stock (including also exercise of the Option), such number of its
shares of Common Stock as shall from time to time be sufficient or as may be
available to effect the conversion of all outstanding shares of the Series B
Preferred Stock, including also full exercise of the Option, and if at any time
the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all the then outstanding shares of the
Series B Preferred Stock, including also full exercise of the Option, the
Company shall use its best efforts to take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
6. REDEMPTION.
(a) The Company may redeem any or all of the outstanding shares of the
Series B Preferred Stock on any date (the "Redemption Date") set by the Board of
Directors of the Company for such redemption at any time at the Redemption
Price, as that term is defined below, for each share of Series B Preferred
Stock, to be paid in cash on the Redemption Date, PROVIDED, that (except as
hereinafter provided) the Company shall not send a Redemption Notice, as that
term is defined below, to any of the holders of Series B Preferred Stock, unless
it has good and clear funds, for payment of the Redemption Price for the shares
of Series B Preferred Stock it intends to redeem, in a bank account controlled
by the Company, and PROVIDED FURTHER, HOWEVER, that in the event the redemption
is to be made simultaneously with the closing of a public offering of the
Company, then the Company may send a Redemption Notice even if it does not have
such good and clear funds, but not earlier than on the day prior to the date the
public offering is priced.
(b) The Redemption Price shall be an amount equal to one hundred
twenty-five percent (125%) of the Purchase Price, plus an amount equal to all
accrued but unpaid dividends, whether or not declared, to but excluding the
Redemption Date.
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(c) The Redemption Price shall be payable in cash. If fewer than all of the
outstanding shares of Series B Preferred Stock are to be redeemed, the
redemption shall be pro rata among the holders of the Series B Preferred Stock
based upon the number of shares held by such holders and subject to such other
provisions as may be determined by the Board of Directors of the Company.
(d) Five days prior to the Redemption Date, the Company shall send, by
facsimile transmission and by first class mail, postage prepaid, a notice (the
"Redemption Notice") to each holder of Series B Preferred Stock, which notice
shall contain all instructions and materials necessary to enable such holders to
tender Series B Preferred Stock pursuant to the redemption. Such notice shall
(i) state that a redemption is being effected, (ii) specify the Redemption Date,
and (iii) state that holders will be required to surrender the certificate or
certificates representing such shares, properly endorsed, in the manner and at
the place specified in the notice prior to the close of business on the business
day prior to the Redemption Date. The Company may not redeem any portion of the
Series B Preferred Stock that has been converted on or prior to the date of the
Redemption Notice. In the event the Company fails to deliver the Redemption
Price plus accrued and unpaid dividends on or before (i) six days after the date
of the Redemption Notice or (ii) in the event the redemption is made
simultaneously with the closing of a public offering of the Company, six days
after the closing date of such public offering, the Redemption Notice shall be
null and void and the Company will relinquish its Redemption rights provided by
this section.
(e) On the Redemption Date, unless the Company defaults in the payment for
the shares of Series B Preferred Stock tendered pursuant to the redemption,
dividends will cease to accrue with respect to the shares of Series B Preferred
Stock tendered. All rights of holders of such tendered shares will terminate,
except for the right to receive payment therefor, on the Redemption Date. (f)
After receipt of the Redemption Notice, the holders of Series B Preferred Stock
may not convert all or any portion of their shares of Series B Preferred Stock
into shares of Common Stock; provided, however, that if the Company fails for
any reason to pay the Redemption Price on the Redemption Date, the rights of the
holders of Series B Preferred Stock to convert such shares to Common Stock shall
be immediately restored.
(g) The Company may, at its option, at any time after the mailing of the
Redemption Notice pursuant to Section 6 (d) above, deposit the aggregate amount
payable upon redemption of the Series B Preferred Stock with a bank or trust
company (the "Depositary") having its principal office in New York, New York,
and having a combined capital and surplus (as shown by its then most recently
published financial statement) of at least $200,000,000, designated by the Board
of Directors of the Company, to be held in trust by the Depositary for payment
to the holders of the shares to be redeemed. Upon such deposit, the Company
shall be released and discharged from any obligation to pay the Redemption Price
of the shares to be redeemed, and the holders of the shares instead shall have
the right to receive from the Depositary only, and not from the Company, the
amount payable upon redemption of the shares on surrender to the Depositary of
the certificates representing the shares. Any money so deposited with the
Depositary that is not claimed after one year from the Redemption Date shall be
repaid to the Company by the Depositary on demand, and the holder of any of the
shares shall thereafter look only to the Company for any payment to which the
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holder may be entitled. Any interest which accrues on money deposited with the
Depositary shall belong to the Company and shall be paid to the Company from
time to time by the Depositary.
(h) Any Series B Preferred Stock redeemed or re-purchased by the Company
shall be canceled and shall have the status of authorized and unissued shares of
preferred stock, without designation as to class or series.
7. NO REISSUANCE OF SERIES B PREFERRED STOCK. Any share or shares of Series
B Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise SHALL be canceled, shall return to the status of
authorized but unissued preferred stock of no designated series, and shall not
be reissuable or re-sellable by the Company as Series B Preferred Stock.
8. RESTRICTIONS AND LIMITATIONS
(a) AMENDMENTS TO CHARTER. The Company shall not amend its certificate of
incorporation without the approval by the holders of at least a majority of the
then outstanding shares of Series B Preferred Stock if such amendment would:
(i) change the relative seniority rights of the holders of Series B
Preferred Stock as to the payment of dividends in relation to the holders of any
other capital stock of the Company, or create any other class or series of
capital stock entitled to seniority as to the payment of dividends in relation
to the holders of Series B Preferred Stock;
(ii) reduce the amount payable to the holders of Series B Preferred
Stock upon the voluntary or involuntary liquidation, dissolution or winding up
of the Company, or change the relative seniority of the liquidation preferences
of the holders of Series B Preferred Stock to the rights upon liquidation of the
holders of other capital stock of the Company, or change the dividend rights of
the holders of Series B Preferred Stock;
(iii) cancel or modify the conversion rights of the holders of Series
B Preferred Stock provided for in Section 5 herein; or
(iv) cancel or modify the rights of the holders of the Series B
Preferred Stock provided for in this Section 8.
9. NOTICES OF RECORD DATE. In the event of:
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger of the Company,
or any transfer of all or substantially all of the assets of the Company to any
other corporation, or any other entity or person, or
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(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Company, then and in each such event the Company shall mail or cause to be
mailed to each holder of Series B Preferred Stock a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, merger, dissolution, liquidation or winding up is
expected to become effective and (iii) the time, if any, that is to be fixed, as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, transfer, merger, dissolution, liquidation
or winding up. Such notice shall be mailed at least ten days prior to the date
specified in such notice on which such action is to be taken.
10. CERTIFICATE OF INCORPORATION. The statements contained in the
foregoing, creating and designating the said Series B issue of Preferred Stock
and fixing the number, powers, preferences and relative, OPTIONAL,
participating, and other special rights and the qualifications, limitations and
restrictions shall, upon the effective date of said series, be deemed to be
included in and be a part of the Articles of Incorporation of the Company
pursuant to the relevant provisions of the General Corporation Law of the State
of Nevada.
11. LIMITATION ON NUMBER OF CONVERSION SHARES.
(a) If (i) the Common Stock shall be listed on the Nasdaq Small Cap Market
or the Nasdaq National Market, and (ii) such Market shall have advised the
Company in writing that a proposed issuance of shares of Common Stock upon
conversion of shares of Series B Preferred Stock would exceed the issuance of
that number of shares of Common Stock which the Company may issue upon
conversion of the Series B Preferred Stock (the "Exchange Cap") without
breaching the Company's obligations under the rules and regulations of The
Nasdaq Stock Market, Inc., then notwithstanding any other provision herein, the
Company shall not be obligated to issue any shares of Common Stock upon
conversion of the Series B Preferred Stock if the issuance of such shares of
Common Stock would exceed the Exchange Cap, except that such limitation shall
not apply in the event that the Company (a) obtains the approval of its
stockholders as required by applicable rules of The Nasdaq Sock Market, Inc.,
for issuances of Common Stock in excess of such amount or (b) obtains a written
opinion from outside counsel to the Company that such approval is not required,
which opinion shall be reasonably satisfactory to the holders of a majority of
the shares of Series B Preferred Stock then outstanding; PROVIDED, HOWEVER, that
notwithstanding anything herein to the contrary, the Company will issue such
number of shares of Common Stock issuable upon conversion of the Series B
Preferred Stock at the then current Conversion Price up to the Exchange Cap.
Until such approval or written opinion is obtained, no holder of Series B
Preferred Stock pursuant to the Securities Purchase Agreement ("Purchase
Agreement") shall be issued, upon conversion of Series B Preferred Stock, shares
of Common Stock in an amount greater than the product of (i) the Exchange Cap
amount multiplied by (ii) a fraction, the numerator of which is the number of
shares of Series B Preferred Stock issued to such holder pursuant to the
Purchase Agreement and the denominator of which is the aggregate amount of all
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the shares of Series B Preferred Stock issued to all holders pursuant to the
Purchase Agreement (the "Cap Allocation Amount"). In the event that any holder
of Series B Preferred Stock shall convert all of such holder's shares of Series
B Preferred Stock into a number of shares of Common Stock which, in the
aggregate, is less than such holder's Cap Allocation Amount, then the difference
between such holder's Cap Allocation Amount and the number of shares of Common
Stock actually issued to such holder shall be allocated to the respective Cap
Allocation Amounts of the remaining holders of Series B Preferred Stock on a pro
rata basis in proportion to the number of shares of Series Preferred Stock then
held by each such holder. The provisions of this paragraph will apply only in
the event the Company becomes listed for trading on the NASDAQ stock market
(either Small Cap or National Market).
(b) CONVERSION RESTRICTIONS. Notwithstanding anything to the contrary set
forth herein or in the Certificate of Designations, in no event shall any holder
of the Series B Preferred Stock be entitled to convert Series B Preferred Stock
(or exercise the Option to receive Option Shares) in excess of such portion of
the principal of the Series B Preferred Stock that, upon giving effect to such
conversion, would cause the aggregate number of shares of Common Stock
beneficially owned by such converting holder and its affiliates to exceed 4.99%
of the outstanding shares of the Common Stock following such conversion. For
purposes of the foregoing proviso, the aggregate number of shares of Common
Stock beneficially owned by the holder and its affiliates shall include the
number of shares of Common Stock issuable upon conversion of the Series B
Preferred Stock with respect to which the determination of such proviso is being
made. Except as set forth in the preceding sentence, for purposes of this
Section 2(a), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. The
limitations imposed by this Section 4(l) on conversion of Series B Preferred
Stock shall no longer apply, and the holder of the Series B Preferred Stock may
convert all or any portion of the Series B Preferred Stock, irrespective of the
resulting beneficial ownership of the Company's Common Stock, should any of the
following events occur: (I) The Company shall either: (i) become insolvent; (ii)
admit in writing its inability to pay its debts generally or as they become due;
(iii) make an assignment for the benefit of creditors or commence proceedings
for its dissolution; or (iv) apply for, or consent to the appointment of, a
trustee, liquidator, or receiver for its or for a substantial part of its
property or business; or (II) A trustee, liquidator or receiver shall be
appointed for the Company or for a substantial part of its property or business
without the Company's consent and such appointment is not discharged within
sixty (60) days after such appointment; or (III) Any governmental agency or any
court of competent jurisdiction at the instance of any governmental agency shall
assume custody or control of the whole or any substantial portion of the
properties or assets of the Company and shall not be dismissed within sixty (60)
days thereafter; or (V) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within sixty days after
such institution or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in, any such
proceeding.
11
Signed and attested to on April 28, 2000.
WAVETECH INTERNATIONAL, INC.
By: /s/ Gerald I. Quinn
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Name: Gerald I. Quinn
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Title: President & CEO
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Attest:
/s/ Richard P. Freeman
- -----------------------------------
Secretary
12
STATE OF )
---------------------------) ss.
County of )
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On this _____ day of April, 2000, before me personally appeared/personally
known to me me ______________________, the _________________ of WAVETECH
INTERNATIONAL, INC., a Nevada corporation, on behalf of said corporation.
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Notary Public
My Commission Expires:
- -----------------------------------
13
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order
to Convert the Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert ___ shares of Series B
Preferred Stock, Certificate No. ___ (the "Preferred Stock") into shares of
Common Stock of Wavetech International, Inc. (the "Company"), according to the
conditions hereof, as of the date written below.
The undersigned hereby irrevocably elects to purchase ____ Option Shares, at an
exercise price per share equal to the Conversion Price, or $_______ per share.
The undersigned shall pay the purchase price for such Option Shares to the
Company within two (2) business days after the date of delivery of this Notice
of Conversion.
The undersigned represents and warrants that
(i) All offers and sales by the undersigned of the shares of Common Stock
issuable to the undersigned upon conversion of the Series B Preferred
Stock (and exercise of the Option as stated above) shall be made in
compliance with Regulation D, pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the
"Securities Act"), or pursuant to registration of the Common Stock
under the Act, subject to any restrictions on sale or transfer set
forth in the purchase agreement between the Company and the original
holder of the Certificate submitted herewith for conversion.
(ii) Upon conversion (and exercise of the Option, if applicable) pursuant
to this Notice of Conversion, the undersigned will not own of record
(within the meaning of the Securities Exchange Act of 1934, as
amended) 4.99% or more of the then issued and outstanding shares of
the Company.
------------------ ---------------------------
Date of Conversion Applicable Conversion Price
-------------------------------- ----------------------
Number of shares of Common Stock $ Amount of Conversion
issuable upon Conversion
Legal Name of Converting Holder:
------------------------------------------
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Signature/Title of Authorized Representative of
Converting Holder
Address for Delivery of Shares:
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