SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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<S> <C>
Date of Report (Date of earliest event reported): Commission File Number:
DECEMBER 2, 1998 1-10210
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EXECUTIVE TELECARD, LTD.
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C>
DELAWARE 13-3486421
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
</TABLE>
1720 S. BELLAIRE STREET, 10TH FLOOR
DENVER, COLORADO 80222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(303) 691-2115
(Former name or former address, if changed since last report)
NOT APPLICABLE
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EXECUTIVE TELECARD, LTD.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
On December 2, 1998 (the "Closing Date"), Executive TeleCard, Ltd., a
Delaware corporation ("EXTEL") acquired IDX International, Inc., a privately
held Virginia corporation ("IDX"), through the merger (the "Merger") of IDX with
and into EXTEL Merger Sub No. 1, Inc. ("Merger Sub"), a newly formed
wholly-owned subsidiary of EXTEL. The Merger was effected pursuant to an
Agreement and Plan of Merger, dated as of June 10, 1998 among EXTEL, Merger Sub,
IDX and the stockholders of IDX (the "IDX Stockholders"), which was subsequently
amended by a Consent and Extension, dated as of August 27, 1998, and an
Amendment No. 2 to Agreement and Plan of Merger, dated October __, 1998 (the
"Merger Agreement") and related articles of merger between Merger Sub and IDX
filed with the Virginia State Corporation Commission on December 2, 1998 (the
"Articles of Merger").
IDX International, Inc., the survivor of the Merger ("IDX
International"), is a supplier of IP (Internet protocol) fax and IP voice
platforms and services to telecommunications operators and Internet Service
Providers ("ISP's") in 12 countries. IDX International, with 50 employees,
currently has approximately $6.5 million of annualized revenue (based upon
revenues for the one month period ended November 30, 1998). IDX International
will provide EXTEL with two key services for EXTEL's new suite of Internet
services: operationally proven IP fax and IP voice. For at least the first year,
IDX International will operate as a separate subsidiary, although its platform
services will begin to be used immediately to serve EXTEL's customer base. IDX
International will operate with its existing management and personnel in
existing facilities in Fairfax, Virginia. Pursuant to the Merger Agreement, Hsin
Yen, the Chief Executive Officer of IDX, and Richard Chiang, a former
stockholder of IDX, were appointed directors of EXTEL.
As a result of the Merger and pursuant to the Merger Agreement and the
Articles of Merger, all of the shares of common stock, no par value, and all of
the shares of preferred stock, no par value, of IDX, issued and outstanding
immediately prior to the effective time of the Merger (excluding any treasury
shares), were converted into and exchanged for, in the aggregate, (a) 500,000
shares of Series B Convertible Preferred Stock, par value $.001 per share, of
EXTEL ("Series B Convertible Preferred Stock"), which are convertible into up to
2,500,000 shares of Common Stock, par value $.001 per share, of EXTEL (the
"EXTEL Common Stock"), subject to adjustment as described below, (b) warrants to
purchase up to 2,500,000 shares of Common Stock, subject to adjustment as
described below, and (c) $5,000,000, which amount is subject to decrease as
described below, in interest bearing Convertible Subordinated Promissory Notes.
The rights and preferences of the Series B Convertible Preferred Stock are set
forth in the Certificate of Designations, Rights and Preferences of the Series B
Convertible Preferred Stock, which is attached hereto as Exhibit 4.1, the terms
of the Warrants are set forth in
2
<PAGE>
the form of Warrant, which is attached hereto as Exhibit 4.2, and the terms of
Convertible Subordinated Promissory Notes are set forth in the forms of
Convertible Subordinated Promissory Notes, which are attached hereto as Exhibit
4.3, and in each case incorporated herein by reference.
The shares of Series B Preferred Stock will automatically convert into
shares of EXTEL Common Stock on the earlier to occur of (a) the first date that
the 15 day average closing sales price of EXTEL Common Stock is equal to or
greater than $8.00 or (b) 30 days after the later to occur of (i) the one year
anniversary of the Closing Date or (ii) the receipt of any necessary shareholder
approval relating to the issuance of the Common Stock upon such conversion. The
Warrants are exercisable only to the extent that IDX International achieves
certain revenue and cash flow goals over the twelve months following the Closing
Date. EXTEL has guaranteed a price of $8.00 per share, at the one year
anniversary of the Closing Date, to recipients of the Common Stock issuable upon
the conversion or exercise, as the case may be, of the Series B Preferred Stock
and Warrants, subject to IDX International's achievement of certain revenue and
cash flow objectives. If the market price is less than $8.00 on the one year
anniversary of the Closing Date, EXTEL will issue additional shares of Common
Stock upon conversion of the Series B Preferred Stock and exercise of the
Warrants (subject to the receipt of any necessary stockholder approval) based on
the ratio of $8.00 to the market price, but not more than an aggregate of 7
million additional shares of Common Stock in the aggregate.
In addition, EXTEL has agreed to pay the accrued, but unpaid,
dividends (the "Accrued Dividend") on IDX's preferred stock pursuant to an
interest bearing Convertible Subordinated Promissory Note in the original
principal amount of $418,024, the terms of which are set forth in the form of
Convertible Subordinated Promissory Note, which is attached hereto as Exhibit
4.4 and incorporated herein by reference. EXTEL is entitled to reduce the
aggregate principal balance of the $2.5 million Subordinated Convertible
Promissory Note due October 30, 1999 representing the remainder of the cash
portion of the purchase price by the Accrued Dividend and certain other amounts
unless offset by net proceeds from the sale of a subsidiary of IDX International
and a note issued to IDX International by an option holder.
The foregoing description of the Merger does not purport to be
complete and is qualified in its entirety by reference to (a) the Merger
Agreement and amendments, filed as Exhibit 2.1, 2.2 and 2.3 hereto, (b) the
Certificate of Designations, Rights and Preferences of Series B Convertible
Preferred Stock, filed as Exhibit 4.1 hereto, (c) the form of Warrant, filed as
Exhibit 4.2 hereto, (d) the forms of Convertible Subordinated Promissory Notes,
filed as Exhibit 4.3 hereto, and (e) the form of Convertible Subordinated
Promissory Note, filed as Exhibit 4.4, each of which is incorporated herein by
reference. A copy of the press release, dated
3
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December 3, 1998, issued by EXTEL regarding the above-described transaction is
attached as Exhibit 99 hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
It is not practicable to provide the required financial statements for
IDX at this time. The statement will be filed as soon as they are prepared and
not later than February 15, 1999.
(b) Pro Forma Financial Information.
It is not practicable to provide the required pro forma financial
statements for IDX at this time. The statement will be filed as soon as they are
prepared and not later than February 15, 1999.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated June 10, 1998, by and among
Executive TeleCard, Ltd., IDX International, Inc., EXTEL Merger Sub
No. 1, Inc. and the stockholders of IDX International, Inc.
(Incorporated by reference to Exhibit 2.1 in Current Report on Form
8-K of Executive TeleCard, Ltd. dated June 24, 1998).
2.2 Consent and Extension, dated August 27, 1998, by and among Executive
TeleCard, Ltd., IDX International, Inc., EXTEL Merger Sub No. 1, Inc.
and Jeffey Gee, as representative of the stockholders of IDX
International, Inc.
2.3 Amendment No. 2 to Agreement and Plan of Merger, dated October __,
1998, by and among Executive TeleCard, Ltd., IDX International, Inc.,
EXTEL Merger Sub No. 1, Inc. and the stockholders of IDX
International, Inc.
4.1 Certificate of Designations, Rights and Preferences of Series B
Convertible Preferred Stock of Executive TeleCard, Ltd.
4.2 Form of Warrant by and between Executive TeleCard, Ltd. and each of
the stockholders of IDX International, Inc. (Incorporated by reference
to Exhibit 2.1 in Current Report on Form 8-K of Executive TeleCard,
Ltd. dated June 24, 1998).
4
<PAGE>
4.3 Forms of Convertible Subordinated Promissory Notes payable to the
stockholders of IDX International, Inc. in the aggregate principal
amount of $5,000,000.
4.4 Form of Convertible Subordinated Promissory Note payable to the
preferred stockholders of IDX International, Inc. in the aggregate
principal amount of $418,024.
99.1 Press Release, dated December 3, 1998, regarding the Agreement and
Plan of Merger and the transactions contemplated thereby.
5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXECUTIVE TELECARD, LTD.
Date: December 17, 1998 By: /s/ W.P. Colin Smith, Jr.
-------------------------
W. P. Colin Smith, Jr.
Vice President of Legal
Affairs and General Counsel
6
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EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- -----
2.1 Agreement and Plan of Merger, dated June 10, 1998, by and among
Executive TeleCard, Ltd., IDX International, Inc., EXTEL Merger Sub
No.1, Inc. and the stockholders of IDX International, Inc.
(Incorporated by reference to Exhibit 2.1 in Current Report on Form
8-K of Executive TeleCard, Ltd. dated June 24, 1998).
2.2 Consent and Extension, dated August 27, 1998, by and among Executive
TeleCard, Ltd., IDX International, Inc., EXTEL Merger Sub No.1, Inc.
and Jeffey Gee, as representative of the stockholders of IDX
International, Inc.
2.3 Amendment No.2 to Agreement and Plan of Merger, dated October __,
1998, by and among Executive TeleCard, Ltd., IDX International, Inc.,
EXTEL Merger Sub No.1, Inc. and the stockholders of IDX International,
Inc.
4.1 Certificate of Designations, Rights and Preferences of Series B
Convertible Preferred Stock of Executive TeleCard, Ltd.
4.2 Form of Warrant by and between Executive TeleCard, Ltd. and each of
the stockholders of IDX International, Inc. (Incorporated by reference
to Exhibit 2.1 in Current Report on Form 8-K of Executive TeleCard,
Ltd. dated June 24, 1998).
4.3 Forms of Convertible Subordinated Promissory Notes payable to the
stockholders of IDX International, Inc. in the aggregate principal
amount of $5,000,000.
4.4 Form of Convertible Subordinated Promissory Note payable to the
preferred stockholders of IDX International, Inc. in the aggregate
principal amount of $418,024.
99.1 Press Release dated December 3, 1998 relating to the Agreement and
Plan of Merger and the transactions contemplated thereby
EXHIBIT 2.2
CONSENT AND EXTENSION
This Consent and Extension is entered into this 27th day of August,
1998 by and among EXECUTIVE TELECARD, LTD., a Delaware corporation ("Acquiror"),
EXTEL MERGER SUB NO.1, INC., a Virginia corporation and a wholly-owned
subsidiary of Acquiror ("Merger Sub"), IDX INTERNATIONAL, INC., a Virginia
corporation (the "Company"), and Jeffey Gee, as representative of the
stockholders of the Company (the "Representative").
WHEREAS, Acquiror, Merger Sub, the Company and the stockholders of the
Company entered into an Agreement and Plan of Merger (the "Merger Agreement") as
of June, 1998; and
WHEREAS, the parties desire to extend one of the dates set forth in
the Merger Agreement.
NOW THEREFORE, the parties hereto do hereby agree as follows:
1. Section 10.1(g) of the Merger Agreement provides that the Merger
Agreement may be terminated by the Company and the Representative if Acquiror
has not raised the $5,000,000 in financing necessary to pay the cash portion of
the Purchase Price on or prior to August 31, 1998 (unless such date shall be
extended by the mutual written consent of the parties). The parties hereto
hereby agree that such termination right shall not be exercised by the Company
and the Representative unless such financing has not been raised by Acquiror by
October 30, 1998.
2. Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Merger Agreement. This Consent and Extension
shall constitue an amendment to the Merger Agreegment, but except to the extent
that Pargraph 1 hereof amends Section 10.1(g) of the Merger Agreement all terms
and provisions of the Merger Agreement shall continue in full force and effect
and are hereby confirmed in all respects.
3. This Consent and Extension may be executed in several counterparts,
each of which is an original, but all of which together constitue one and the
same agreement.
<PAGE>
4. This Consent and Extension shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law.
IN WITNESS WHEREOF, the parties have executed this Consent and
Extension on and as of the date first set forth above.
EXECUTIVE TELECARD, LTD.
By:_________________________
Name:_______________________
Title:______________________
EXTEL MERGER SUB NO. 1, INC.
By:_________________________
Name:_______________________
Title:______________________
IDX INTERNATIONAL, INC.
By:_________________________
Name:_______________________
Title:______________________
REPRESENTATIVE
___________________________
Jeffey Gee
EXHIBIT 2.3
AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 2 TO AGREEMENT AND PLAN OF MERGER is entered into
as of October ___, 1998 by and among EXECUTIVE TELECARD, LTD., a Delaware
corporation ("Buyer"), EXTEL Merger Sub. No. 1, Inc., a Virginia corporation and
a wholly-owned subsidiary of Buyer ("Merger Sub"), IDX INTERNATIONAL, INC., a
Virginia corporation (the "Company"), and each of the Company's stockholders
listed on the signature pages hereto (the "Stockholders").
WHEREAS, Buyer, Merger Sub, the Company and the Stockholders entered
into an Agreement and Plan of Merger dated June __, 1998, which was subsequently
amended on August 27, 1998 pursuant to a certain Consent and Extension (the
"Merger Agreement"); and
WHEREAS, the parties desire to make certain amendments to the Merger
Agreement.
NOW THEREFORE, the parties hereto do hereby agree as follows:
1. Section 2.1(a) of the Merger Agreement shall be replaced in its
entirety so as to read as follows:
"(a) Company Stock. All of the shares of common stock, no par value
("Company Common Stock"), and all of the shares of preferred stock, no par
value, of the Company ("Company Preferred Stock", and together with Company
Common Stock, "Company Stock"), issued and outstanding immediately prior to the
Effective Time (excluding any shares described in Section 2.1(c)), shall be
converted into and exchanged for, in the aggregate, the right to receive (i)
500,000 shares of Series B Convertible Preferred Stock, par value $.001 per
share, of Acquiror ("Acquiror Convertible Preferred Stock"), and Warrants
("Acquiror Warrants") to purchase 2,500,000 shares of Common Stock, par value
$.001 per share, of Acquiror ("Acquiror Common Stock"), with the terms and
conditions referred to in Section 2.1(b), plus (ii) the amount of FIVE MILLION
DOLLARS ($5,000,000) in the form of convertible promissory notes (as described
in more detail below) decreased by the amount of the Closing Indebtedness (as
defined in Section 2.4) and any other amounts to be deducted from the notes
portion of the Purchase Price as provided herein, including Section 12.11 hereof
(collectively, the "Notes Portion"). The net
<PAGE>
amount determined pursuant to this clause, including both stock and notes
portions, is referred to as the ("Purchase Price"). The Notes Portion shall be
evidenced by three (3) convertible subordinated promissory notes of Buyer, in
the respective forms attached hereto as Exhibits D1, 2, and 3 (the "Notes"),
which by their terms are convertible into Acquiror Common Stock under certain
circumstances. The Purchase Price shall be allocated among the Stockholders in
the proportions set forth opposite the names of such Stockholders in the column
on Schedule 2.1 entitled "Purchase Price Payable at Closing" (the "Stockholder
Percentages"), with the Notes Portion made payable to the Representative (as
hereinafter defined) for the benefit of the Stockholders, to be distributed to
the Stockholders by the Representative in such proportions following payment or
conversion into Acquiror Common Stock. All such shares of Company Stock shall
cease to be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each certificate previously evidencing any such shares
shall thereafter represent only the right to receive the shares of Acquiror
Convertible Preferred Stock, Acquiror Warrants and the proceeds of the Notes
(whether cash or Acquiror Common Stock, when paid or issued) pursuant to this
Section 2.1(a) and the cash payable in lieu of fractional shares pursuant to
Section 2.1(e). The holders of certificates previously evidencing such shares of
Company Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Stock, except as
otherwise provided herein or by law. Each such certificate shall be exchanged
for certificates evidencing the appropriate number of shares of Acquiror
Convertible Preferred Stock, Acquiror Warrants to purchase the appropriate
number of shares of Acquiror Common Stock and the right to receive the
appropriate portion of the proceeds of the Notes (whether cash or Acquiror
Common Stock, when paid or issued) as set forth on Schedule 2.1 upon the
surrender of such certificate as provided in Section 2.2."
2. Section 2.4 of the Merger Agreement shall be replaced in its
entirety so as to read as follows:
"Immediately prior to the Effective Time, Acquiror shall cause to be
paid all principal and accrued interest outstanding under any debt to
stockholders ("Stockholder Debt"). The sum of (x) the Stockholder Debt and (y)
(I) the net collectible accounts receivable of the Company (on a consolidated
basis) as of the Closing Date, net of accounts payable of the Company (on a
consolidated basis) as of the Closing Date (all as determined in accordance with
generally accepted accounting principles consistently applied), less (II) all
accrued but
<PAGE>
unpaid dividends as of the Closing Date, is referred to herein collectively as
the "Closing Indebtedness". Any principal and interest outstanding under various
Loan Agreements between Acquiror and the Company and various Promissory Notes of
the Company in favor of Acquiror of the same date, including without limitation
the Second Bridge Loan (as defined in Section 8.15) shall not constitute Closing
Indebtedness for purposes of this Agreement. Payment of Closing Indebtedness
owed to any creditor other than Acquiror shall be made in accordance with a
written payoff letter from the holder of the Closing Indebtedness in a form
reasonably acceptable to Acquiror."
3. Section 2.1(e) shall be renumbered as Section 2.1(f) and a new
Section 2.1(e) shall be included in the Merger Agreement which shall read as
follows:
"(e) Fractional Shares. The Acquiror shall not be obligated to deliver
to the Stockholders any fractional share of Acquiror Convertible Preferred Stock
or Acquiror Common Stock upon conversion of Acquiror Convertible Preferred Stock
or Acquiror Warrants, but in lieu thereof may at its option make a cash payment
in respect thereof in any manner permitted by law equal to the Market Price (as
defined in Exhibit A hereto) of the Acquiror Common Stock or, in the case of the
Acquiror Preferred Stock, the Acquiror Common Stock into which the Acquiror
Preferred Stock is convertible. All shares of Common Stock (including fractions
thereof) issuable under this Agreement shall be aggregated for purposes of
determination whether the issuance would result in the issuance of any
fractional shares."
4. Section 8.13(g) shall be renumbered as Section 8.13(h) and a new
Section 8.13(g) shall be included in the Merger Agreement which shall read as
follows:
"(g) Receive the proceeds of the Notes and allocate and distribute
such proceeds as provided in Section 2.1(a) of the Merger Agreement and in the
Notes. Nothing in this Agreement shall give rise to any liability on the part of
Representative for any mistakes that may occur in making such allocations and
distributions so long as Representative, has acted in good faith and without
willful misconduct or fraud."
5. All references in the Merger Agreement to a cash portion of the
Purchase Price shall be deemed to refer instead to the Notes Portion. All
references in the Merger Agreement to payment of cash by Acquiror as part
<PAGE>
of the Purchase Price shall be deemed to refer instead to the proceeds of the
Notes (whether cash or Acquiror Common Stock, when paid or issued).
6. Capitalized terms used herein and not defined herein shall have the
meaning ascribed to them in the Merger Agreement. All other terms and provisions
of the Merger Agreement shall continue in full force and effect and unchanged
and are hereby confirmed in all respects.
7. This Amendment No. 2 to the Agreement and Plan of Merger may be
executed in several counterparts, each of which is an original, but all of which
together constitute one and the same agreement. The descriptive headings in this
Amendment No. 2 to the Agreement and Plan of Merger are for convenience of
reference only and shall not define or limit the provisions hereof.
8. This Amendment No. 2 to Agreement and Plan of Merger is governed
by, and shall be construed in accordance with, the laws of the State of
Virginia.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 to
the Agreement and Plan of Merger on and as of the date first set forth above.
EXECUTIVE TELECARD, LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
EXTEL MERGER SUB NO. 1, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
IDX INTERNATIONAL, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
STOCKHOLDERS:
__________________________________
HILK International, Inc.
__________________________________
Chatwick Investments, Ltd.
__________________________________
Jeffey J. Gee
__________________________________
Yi-Shang Shen
__________________________________
Michael Muntner
<PAGE>
___________________________________
Trylon Partners, Inc.
___________________________________
Orville Greynolds
___________________________________
Teknos Communications, S.A.
___________________________________
Tenrich Holdings, Ltd.
___________________________________
Telecommunications Development
Corporation
__________________________________
Cheng Li-Yun Chang
___________________________________
Silicon Applications Corporation
___________________________________
Chih Hsian Chang
___________________________________
Ming Yang Chang
___________________________________
Kou Yuan Chen
___________________________________
Hao Li Lin
___________________________________
Tien Fu Jane
___________________________________
Chuang Su Chen
___________________________________
Flextech Holdings Ltd.
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
EXECUTIVE TELECARD, LTD.
--------------------------------------------
Pursuant to Section 151
of the General Corporation Law
of the State of Delaware
---------------------------------------------
The undersigned DOES HEREBY CERTIFY that, pursuant to the authority
contained in Article IV of the Restated Certificate of Incorporation of
Executive TeleCard, Ltd., a Delaware corporation (the "Corporation"), and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation has authorized the creation
of Series B Convertible Preferred Stock having the designations, rights and
preferences as are set forth in Exhibit A hereto and made a part hereof and that
the following resolution was duly adopted by the Board of Directors of the
Corporation:
RESOLVED, that a series of authorized Preferred Stock, par value $.001
per share, of the Corporation be, and it hereby is, created; that the shares of
such series shall be, and
<PAGE>
they hereby are, designated as "Series B Convertible Preferred Stock;" that the
number of shares constituting such series shall be, and it hereby is, 500,000;
and that the designations, rights and preferences of the shares of such series
are as set forth in Exhibit A attached hereto and made a part hereof.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to
be hereunto affixed and this Certificate to be signed by its President and
attested to by its Secretary this ____ day of __________, 1998.
EXECUTIVE TELECARD, LTD.
By:_________________________________________
[SEAL] Name: Christopher J. Vizas
Title:President
ATTEST:
___________________________
Name: W.P. Colin Smith
Title: Secretary
<PAGE>
EXHIBIT A
SERIES B CONVERTIBLE PREFERRED STOCK
The following sections set forth the powers, rights and preferences,
and the qualifications, limitations and restrictions thereof, of the
Corporation's Series B Convertible Preferred Stock, par value $.001 per share
("Series B Preferred"). Capitalized terms used herein are defined in Section 6
below.
Section 1. Voting Rights.
Except as otherwise provided herein or as required by law, the Series
B Preferred shall vote with the shares of the Common Stock of the Corporation
(and each other class of stock so voting), and not as a separate class, at any
annual or special meeting of stockholders of the Corporation, and may act by
written consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series B Preferred shall be entitled
to such number of votes as shall be equal to 25% of the number of shares of
Common Stock into which such holder's aggregate number of shares of Series B
Preferred are convertible pursuant to Section 5 below immediately after the
close of business on the record date fixed for such meeting or the effective
date of such written consent, rounded up to the nearest whole number; provided,
however, that the Series B Preferred shall not have any voting rights in
connection with a Shareholder Approval (as defined below).
Section 2. No Redemption.
Series B Preferred shall not be redeemable.
Section 3. Dividend Rights.
Except as otherwise provided herein or as required by law, holders of
Series B Preferred shall be entitled to receive dividends only when and as
declared by the Corporation's Board of Directors with respect to Series B
Preferred, only out of funds that are legally available therefor and only in the
event that the Corporation at the same time declares or pays any dividends upon
the Common Stock (whether payable in cash, securities or other property). In the
event that the Corporation declares or pays any dividends upon the Common Stock
(whether payable in cash, securities or other property) on or prior to the
Adjustment Date, other than dividends payable solely in shares of Common Stock,
the Corporation shall also declare and pay to the holders of the Series B
Preferred, at the same time that it declares and pays such dividends to the
holders of the Common Stock, the dividends which would have been declared and
paid with respect to the Common
<PAGE>
Stock issuable upon conversion of the Series B Preferred had all of the
outstanding Series B Preferred been converted immediately prior to the record
date for such dividend, or if no record date is fixed, the date as of which the
record holders of Common Stock entitled to such dividends are to be determined.
Section 4. Liquidation Rights.
Upon any Liquidation, after the payment of the full liquidation
preference of any series of preferred stock senior to the Series B Preferred,
the holders of Series B Preferred shall be entitled to participate in
distributions to holders of the Common Stock (along with each other class of
stock with similar rights) such that the holders of Series B Preferred receive
aggregate distributions equal to the amounts that such holders would have
received if the Series B Preferred Stock had been converted into Common Stock
immediately prior to such Liquidation.
Section 5. Conversion.
The holders of the Series B Preferred shall have the following rights
with respect to the conversion of the Series B Preferred into shares of Common
Stock:
5A. Optional Conversion. At any time and from time to time after the
issuance thereof, subject to and in compliance with the provisions of this
Section 5, any shares of Series B Preferred may, at the option of the holder, be
converted at any time into fully-paid and nonassessable shares of Common Stock
(provided, that if the Adjustment Date has occurred but the Determination Date
has not occurred, the Corporation may postpone any conversion of Series B
Preferred until the Determination Date, but then shall take appropriate steps to
put each holder of Series B Preferred who exercised such holder's right to
convert Series B Preferred shares prior to the Determination Date in the same
economic position as if such conversion had occurred on the date of exercise and
the Common Stock received upon such conversion held until the Determination
Date). The number of shares of Common Stock to which a holder of Series B
Preferred shall be entitled upon conversion shall be the product obtained by
multiplying the "Series B Conversion Rate" then in effect (determined as
provided in Section 5B) by the number of shares of Series B Preferred being
converted.
5B. Series B Conversion Rate.
(i) Conversion Rate Formula. The conversion rate in effect at any time
for conversion of the Series B Preferred (the "Series B Conversion Rate") shall
be the product of (i) five (5), multiplied by (ii) the quotient obtained by
dividing $8.00 by the applicable "Series B Market Factor" (determined as
provided in Section 5B(ii)); provided, however, that the Conversion Rate shall
not exceed four (4) unless and until the Shareholder Approval (as defined below)
has been obtained.
<PAGE>
(ii) Series B Market Factor. The Series B Market Factor shall mean the
following: (A) if the Market Price is less than or equal to $3.33-1/3 as of the
Adjustment Date, the Series B Market Factor shall equal $3.33-1/3; (B) if the
Market Price is greater than $3.33-1/3 but less than $8.00 as of the Adjustment
Date, the Series B Market Factor shall equal the Market Price; and (C) if the
Market Price is greater than or equal to $8.00 as of the Adjustment Date, the
Series B Market Factor shall equal $8.00; provided, however, that
notwithstanding clauses (A), (B) and (C) of this Section 5B(ii), if Series B
Preferred is converted prior to the Adjustment Date (whether by the holder or
automatically pursuant to Section 5F(i)), or if the Target Achievement
Percentage (as defined in the Side Letter) equals zero (0), the Series B Market
Factor shall equal $8.00.
(iii) Adjustment. The Series B Conversion Rate shall be subject to
adjustment pursuant to Section 5C.
5C. Adjustment for Stock Splits and Combinations, Common Stock
Dividends and Distributions. If the Corporation shall at any time or from time
to time after the date of the initial issuance of Series B Preferred (the
"Original Series B Issue Date") effect a subdivision of the outstanding Common
Stock, the Series B Conversion Rate in effect immediately before that
subdivision shall be proportionately increased. Conversely, if the Corporation
shall at any time or from time to time after the Original Series B Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares,
the Series B Conversion Rate in effect immediately before the combination shall
be proportionately decreased. Any adjustment under this Section 5(d) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
If the Corporation at any time or from time to time after the Original
Series B Issue Date makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a divided or other distribution
payable in additional shares of Common Stock, in each such event the Series B
Conversion Rate that is then in effect shall be increased as of the time of such
issuance or, in the event such record date is fixed, as of the close of business
on such record date, by multiplying the Series B Conversion Rate then in effect
by a fraction (1) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution, and (2) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Series B Conversion Rate shall be
recomputed accordingly as of the close of business on such
<PAGE>
record date and thereafter the Series B Conversion Rate shall be adjusted
pursuant to this Section 5C to reflect the actual payment of such dividend or
distribution.
5D. Reorganizations, Mergers or Consolidations. If at any time or from
time to time after the Original Series B Issue Date, the Common Stock is
converted into other securities or property, whether pursuant to a
reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 5), as a part of
such transaction, provision shall be made so that the holders of the Series B
Preferred shall thereafter be entitled to receive upon conversion of the Series
B Preferred the number of shares of stock or other securities or property of the
Corporation to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled in connection with such
transaction, subject to adjustment in respect of such stock or securities by the
terms thereof. 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 Series B Preferred after such transaction to the end that the
provisions of this Section 5 (including adjustment of the Series B Conversion
Rate then in effect and the number of shares issuable upon conversion of the
Series B Preferred) shall be applicable after that event and be as nearly
equivalent as practicable. In the case of any reorganization, merger or
consolidation in which the Corporation is not the surviving entity, the
Corporation shall not consummate the transaction unless the entity surviving
such transaction assumes all of the Corporation's obligations hereunder.
If at any time or from time to time after the Original Series B Issue
Date, the Common Stock issuable upon the conversion of the Series B Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares o stock dividend or a reorganization,
merger or consolidation provided for elsewhere in this Section 5), in any such
event each holder of Series B Preferred shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable in connection with such recapitalization, reclassification
or other change with respect to the maximum number of shares of Common Stock
into which such shares of Series B Preferred could have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further adjustments as provided herein or with respect to such other
securities or property by the terms thereof.
5E. Notices.
(i) Immediately upon any adjustment of the Series B Conversion Rate
other than as contemplated in Section 5B, the Corporation shall
<PAGE>
give written notice thereof to all holders of Series B Preferred, setting forth
in reasonable detail and certifying the calculation of such adjustment.
(ii) Upon (A) any taking by the Corporation 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 (B) any
reorganization, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into any
other corporation, or any Liquidation, the Corporation shall mail to each holder
of Series B Preferred at least twenty (20) days prior to the record date
specified therein a notice specifying (1) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution, (2) the date on which any such reorganization,
reclassification, transfer, consolidation, merger or Liquidation is expected to
become effective, and (3) the date, if any, that is to be fixed for determining
the holders of record of Common Stock (or other securities) that shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger or Liquidation.
5F. Automatic Conversion. Each share of Series B Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series B Conversion Rate, on the earliest to occur of (i) the
first date as of which the Market Price is $8.00 or more for any 15 consecutive
trading days during any period in which Series B Preferred is outstanding and
(ii) the date that is 30 days after the later of the Determination Date and the
date any required Shareholder Approval is received.
5G. Mechanics of Conversion.
(i) Optional Conversion. Each holder of Series B Preferred who desires
to convert the same into shares of Common Stock pursuant to this Section 5 shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or any transfer agent for the Series B Preferred, and shall
give written notice to the Corporation at such office that such holder elects to
convert the same. Such notice shall state the number of shares of Series B
Preferred being converted. Thereupon, the Corporation shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and a
certificate representing any Series B Preferred shares which were represented by
the certificate or certificates delivered to the Corporation in connection with
such conversion but which were not converted. Such conversion shall be deemed to
have been made at the close of business on the date of such surrender of the
certificate representing the shares of Series B Preferred to be converted, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion shall
<PAGE>
be treated for all purposes as the record holder of such shares of Common Stock
on such date.
(ii) Automatic Conversion. Upon the occurrence of the event specified
in Section 5F, the outstanding shares of Series B Preferred shall be converted
into Common Stock automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of Series B Preferred are either delivered to the
Corporation or its transfer agent as provided below, or the holder notifies the
Corporation or its transfer agent that such certificates have been lost, stolen
or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. Upon surrender by any holder of the certificates formerly
representing shares of Series B Preferred at the office of the Corporation or
any transfer agent for the Series B Preferred, there shall be issued and
delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Series B Preferred
surrendered were convertible on the date on which such automatic conversion
occurred. Until surrendered as provided above, each certificate formerly
representing shares of Series B Preferred shall be deemed for all corporate
purposes to represent the number of shares of Common Stock resulting from such
automatic conversion.
5H. Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series B Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series B Preferred by a holder thereof shall be aggregated for purposes of
determination whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion. Notwithstanding the foregoing, in the event that any
holder converts shares of Series B Preferred ten times within any one year
period, the Corporation shall not be obligated to pay any cash amount for
fractional shares upon any subsequent conversion(s) by such holder during such
year, but may withhold the fractional share(s) and aggregate such fractional
share(s) with any additional fractional share(s) issuable to such holder during
such year, and pay the cash (if any) required by this section for any fractional
shares remaining after such aggregation at the end of such year.
<PAGE>
5I. Reservation of Shares. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of the shares of Series B
Preferred, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series B
Preferred. All shares of Common Stock which are so issuable shall, when issued,
be duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges. If at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then-outstanding shares of the Series B Preferred, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
5J. Payment of Taxes. The issuance of certificates for shares of
Common Stock upon conversion of Series B Preferred shall be made without charge
to the holders of such Series B Preferred for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Common Stock, excluding any tax
or other charge imposed in connection with any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that in which the
shares of Series B Preferred so converted were registered.
Section 6. Definitions.
"Adjustment Date" means the date that is 12 months after the date of
the closing of the merger of a wholly-owned subsidiary of the Corporation into
IDX pursuant to the Merger Agreement.
"Closing Price" of each share of Common Stock or other security means
the composite closing price of the sales of the Common Stock or such other
security on all securities exchanges on which such security may at the time be
listed (as reported in The Wall Street Journal), or, if there has been no sale
on any such exchange on any day, the average of the highest bid and lowest asked
prices of the Common Stock or such other security on all such exchanges at the
end of such day, or, if such security is not so listed, the closing price (or
last price, if applicable) of sales of the Common Stock or such other security
in the Nasdaq National Market (as reported in The Wall Street Journal) on such
day, or if such security is not quoted in the Nasdaq National Market but is
traded over-the-counter, the average of the highest bid and lowest asked prices
on such day in the over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization.
"Common Stock" means, collectively, the Corporation's common stock,
par value $.001 per share; and if there is a change such that the securities
issuable
<PAGE>
upon conversion of Series B Preferred are issued by an entity other than the
Corporation or there is a change in the class of securities so issuable, then
the term "Common Stock" shall mean the shares of the security issuable upon
conversion of Series B Preferred if such security is issuable in shares, or
shall mean the smallest unit in which such security is issuable if such security
is not issuable in shares.
"Corporation" means Executive TeleCard, Ltd. a Delaware corporation.
"Determination Date" means the date (following the Adjustment Date) on
which the Corporation has determined the Series B Conversion Rate as of the
Adjustment Date and mailed written notice thereof to each holder of record of
Series B Preferred.
"IDX" means IDX International, Inc., a Virginia corporation.
"Liquidation" means the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary; provided, however, that neither
the consolidation or merger of the Corporation into or with any other entity or
entities, nor the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation, shall be
deemed to be a Liquidation.
"Market Price" means (i) if the Common Stock is listed on any
securities exchange, quoted in the Nasdaq National Market, or quoted in the
over-the-counter market throughout the period of 15 consecutive trading days
consisting of the day as of which the Market Price is being determined and the
14 consecutive trading days prior to such day (the "Pricing Period"), the
Closing Price of the Common Stock averaged over the 15 consecutive trading
constituting the Pricing Period, or (ii) if the Common Stock is not listed on
any securities exchange, quoted in the Nasdaq National Market, or quoted in the
over-the-counter market throughout the Pricing Period, the fair value of the
Common Stock determined by agreement between the Corporation and the holders of
a majority of the outstanding Series B Preferred or, if they are unable to reach
agreement within a reasonable period of time, the fair value of the Common Stock
as determined by an independent appraiser selected by the Corporation (which
appraiser may be the Corporation's investment banker, and the fees and expenses
of such appraiser shall be borne by the Corporation), which determination shall
be final and binding upon the Corporation and the holders of the outstanding
Series B Preferred.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
June 10, 1998 by and among the Corporation, IDX and the stockholders of IDX.
"Series B Preferred" means the Corporation's Series B Convertible
Preferred Stock, par value $.001 per share.
<PAGE>
"Shareholder Approval" means any approval of stockholders of the
Corporation which may be required, in the reasonable determination of the
Corporation upon advice of its counsel, under the rules or regulations of the
Nasdaq Stock Market, as in effect at the applicable time, with respect to the
issuance of 20% or more of the Common Stock in connection with the acquisition
of IDX.
"Side Letter" means the side letter, dated as of June 10, 1998 by and
among the Corporation, IDX and stockholders of IDX, which sets forth the
procedure for calculating the Target Achievement Percentage.
Section 7. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or provisions
of the Series B Preferred shall be binding or effective without the prior
approval (by vote or written consent) of the holders of a majority of the Series
B Preferred then outstanding. Any amendment, modification or waiver of any of
the terms or provisions of the Series B Preferred with such approval, whether
prospective or retroactively effective, shall be binding upon all holders of
Series B Preferred.
Section 8. Registration of Transfer.
The Corporation shall keep at its principal office a register for the
registration of Series B Preferred. Upon the surrender of any certificate
representing Series B Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Series B Preferred shares
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of Series B Preferred
shares as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.
Section 9. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares of Series B Preferred, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor, its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Corporation
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Series B Preferred shares
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
<PAGE>
Section 10. Notices.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed (i) if to the Corporation, to its principal executive
offices, and (ii) if to stockholders, to each holder of record at the address of
such holder appearing on the books of the Corporation.
EXHIBIT 4.3
EXHIBIT D-1
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$1,000,000 December , 1998
FOR VALUE RECEIVED, Executive TeleCard, Ltd., a Delaware corporation
("Maker"), promises to pay to the order of Jeffey Gee ("Payee"), in his capacity
as Representative of and for the benefit of the Stockholders of IDX
International, Inc., a Virginia corporation (the "Company"), on December 31,
1998 (the "Maturity Date"), the principal amount of One Million Dollars
($1,000,000), together with interest on the unpaid principal balance, said
interest to be due and payable on the Maturity Date, at a rate per annum equal
to LIBOR plus 250 basis points, in the manner provided below. "LIBOR" shall mean
the offered rates on three-month Eurodollar deposits, which appear on the
display designated as page "LIBO" on the Reuters Monitor Money Rates Service or
such other page as may replace the LIBO page on that service for the purpose of
displaying London Interbank Eurodollar offered rates of major banks of the
highest credit rating as determined by Maker in its commercially reasonable
discretion. Interest shall be calculated on the basis of a year of 365 days, as
applicable, and charged for the actual number of days elapsed. All payments
hereunder shall be made in lawful money of the United States of America (except
to the extent paid in Common Stock of Maker, as provided below).
This Note is issued pursuant to and in accordance with the terms and
conditions of the Agreement and Plan of Merger, dated June 10, 1998, among
Maker, Extel Merger Sub No. 1, the Company and the Stockholders (as defined
therein), which was subsequently amended on August 27, 1998 pursuant to a
certain Consent and Extension and amended again on October , 1998 by Amendment
No. 2 to Agreement and Plan of Merger (the "Merger Agreement"), and is subject
to the terms and conditions of the Merger Agreement, which are, by this
reference, incorporated herein and made a part hereof, including particularly
the provisions regarding the authority of Payee as the Representative and the
allocation of the amounts payable (or stock issuable) hereunder among the
Stockholders. Capitalized terms used in this Note which are not otherwise
defined herein shall have the respective meanings set forth in the Merger
Agreement.
The outstanding principal amount of this Note, together with interest
accrued thereon as provided herein (the "Maturity Amount") shall be due and
<PAGE>
payable in full on the Maturity Date, or such earlier date on which this Note
may become due following an Event of Default (as defined below).
All payments of principal and interest on this Note shall be made by
check or wire transfer of immediately available funds to an account specified by
Payee in written instructions to Maker at least three (3) business days prior to
the Maturity Date. If any payment of principal or interest on this Note is due
on a day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall be taken into account
in calculating the amount of interest payable under this Note. "Business Day"
means any day other than Saturday, Sunday or a legal holiday in the Commonwealth
of Virginia.
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note.
The occurrence of any one of more the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for ten Business Days after
Payee notifies Maker in writing of such Event of Default.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing is inability to pay its debts
as they become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
Upon the occurrence of any such Event of Default, Maker, in its sole
and absolute option, may convert (the "Conversion") all or any part of the then
outstanding principal and accrued but unpaid interest under this Note into
shares of its Common Stock, par value $.001 ("Maker Common Stock"), as provided
below, which Conversion shall constitute payment in full of the amount being so
converted (the "Converted Amount"). Maker may effect such Conversion by written
notice to Payee (pursuant to the applicable notice provisions of the Merger
Agreement), at any time or from time to time until the outstanding principal and
accrued but unpaid interest under this Note has been paid in full, of the
Maker's election to
<PAGE>
effect the Conversion and the portion of the outstanding principal and accrued
but unpaid interest being converted. Upon receipt of such notice by Payee, such
Conversion shall be deemed effective, and the Converted Amount shall be deemed
converted into the right to receive the number of shares of Maker Common Stock
equal to the Converted Amount divided by the Closing Price (as defined in
Exhibit A to the Merger Agreement) on the date of the occurrence of the Event of
Default.
Should an Event of Default exist and be continuing for ten Business
Days (unless Maker has paid the then outstanding principal and accrued but
unpaid interest under this Note or given notice of Conversion as provided herein
of the entire amount then due and payable), (x) simple interest shall accrue on
the outstanding principal balance of this Note from the date of such Event of
Default at the rate of LIBOR plus 400 basis points ("Default Interest") until
the outstanding principal and accrued but unpaid interest under this Note has
been paid (or Maker has given notice of Conversion as provided herein of the
entire amount then due and payable), and (y) (in the case of the first Event of
Default to exist and be continuing for such period) Maker shall issue Payee, as
Representative of the Stockholders, a warrant, substantially in the form
attached hereto as Appendix A ("Default Warrant"), to purchase such number of
shares of Common Stock as is equal to ten percent (10%) of the then outstanding
principal and accrued but unpaid interest under this Note divided by the
exercise price of the Default Warrants, which shall equal Closing Price (as
defined in Exhibit A to the Merger Agreement) on the date of the occurrence of
such Event of Default.
Presentment, demand, protest and all other notices of any kind from or
to be given by Payee are hereby expressly waived.
Amounts payable by Maker (including Maker Common Stock and Default
Warrants that may be issued) hereunder shall be received by Payee for the
benefit of the Stockholders solely in Payee's capacity as Representative of the
Stockholders, and shall be allocated among the Stockholders in accordance with
the Stockholder Percentages as provided in the Merger Agreement, to be
distributed to the Stockholders by the Representative in such proportions
following each payment or Conversion hereunder. Maker shall use all reasonable
efforts to assist Payee in making such allocations and distributions. Nothing
herein shall give rise to any liability on the part of Payee or Maker for any
mistakes that may occur in making such allocations and distributions so long as
Payee or Maker, respectively, has acted in good faith and without willful
misconduct or fraud.
Notwithstanding anything else to the contrary herein, Maker shall not
effect any Conversion or issue any Default Warrants to the extent, but only to
the extent (and notice of Conversion shall be deemed revised to the extent
necessary to permit Maker to comply with this sentence), that Shareholder
Approval (as defined in Exhibit A to the Merger Agreement) would be required for
such Conversion or such issuance (taken together with any issuance of Maker
stock under the Merger
<PAGE>
Agreement or required hereby which would be considered under applicable rules
and regulations together with such Conversion or such issuance in determining
whether Shareholder Approval is required), unless and until such Shareholder
Approval has been obtained.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Virginia, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
Whenever used herein, the words "Maker" and "Payee" shall be deemed to
include their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has duly executed this Note, or
has caused this Note to be duly executed on its behalf, as of the day and year
first hereinabove set forth.
[SEAL] EXECUTIVE TELECARD, LTD.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
EXHIBIT D-2
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$1,500,000 December , 1998
FOR VALUE RECEIVED, Executive TeleCard, Ltd., a Delaware corporation
("Maker"), promises to pay to the order of Jeffey Gee ("Payee"), in his capacity
as Representative of and for the benefit of the Stockholders of IDX
International, Inc., a Virginia corporation (the "Company"), on June 30, 1999
(the "Maturity Date"), the principal amount of One Million Five Hundred Dollars
($1,500,000), together with interest on the unpaid principal balance, said
interest to be due and payable on the Maturity Date, at a rate per annum equal
to LIBOR plus 250 basis points, in the manner provided below. "LIBOR" shall mean
the offered rates on three-month Eurodollar deposits, which appear on the
display designated as page "LIBO" on the Reuters Monitor Money Rates Service or
such other page as may replace the LIBO page on that service for the purpose of
displaying London Interbank Eurodollar offered rates of major banks of the
highest credit rating as determined by Maker in its commercially reasonable
discretion. Interest shall be calculated on the basis of a year of 365 days, as
applicable, and charged for the actual number of days elapsed. All payments
hereunder shall be made in lawful money of the United States of America (except
to the extent paid in Common Stock of Maker, as provided below).
This Note is issued pursuant to and in accordance with the terms and
conditions of the Agreement and Plan of Merger, dated June 10, 1998, among
Maker, Extel Merger Sub No. 1, the Company and the Stockholders (as defined
therein), which was subsequently amended on August 27, 1998 pursuant to a
certain Consent and Extension and amended again on October , 1998 by Amendment
No. 2 to Agreement and Plan of Merger (the "Merger Agreement"), and is subject
to the terms and conditions of the Merger Agreement, which are, by this
reference, incorporated herein and made a part hereof, including particularly
the provisions regarding the authority of Payee as the Representative and the
allocation of the amounts payable (or stock issuable) hereunder among the
Stockholders. Capitalized terms used in this Note which are not otherwise
defined herein shall have the respective meanings set forth in the Merger
Agreement.
The outstanding principal amount of this Note, together with interest
accrued thereon as provided herein (the "Maturity Amount") shall be due and
payable in full on the Maturity Date, or such earlier date on which this Note
may become due following an Event of Default (as defined below).
<PAGE>
All payments of principal and interest on this Note shall be made by
check or wire transfer of immediately available funds to an account specified by
Payee in written instructions to Maker at least three (3) business days prior to
the Maturity Date. If any payment of principal or interest on this Note is due
on a day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall be taken into account
in calculating the amount of interest payable under this Note. "Business Day"
means any day other than Saturday, Sunday or a legal holiday in the Commonwealth
of Virginia.
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note.
The occurrence of any one of more the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for ten Business Days after
Payee notifies Maker in writing of such Event of Default.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing is inability to pay its debts
as they become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
Upon the occurrence of any such Event of Default, Maker, in its sole
and absolute option, may convert (the "Conversion") all or any part of the then
outstanding principal and accrued but unpaid interest under this Note into
shares of its Common Stock, par value $.001 ("Maker Common Stock"), as provided
below, which Conversion shall constitute payment in full of the amount being so
converted (the "Converted Amount"). Maker may effect such Conversion by written
notice to Payee (pursuant to the applicable notice provisions of the Merger
Agreement), at any time or from time to time until the outstanding principal and
accrued but unpaid interest under this Note has been paid in full, of the
Maker's election to effect the Conversion and the portion of the outstanding
principal and accrued but unpaid interest being converted. Upon receipt of such
notice by Payee, such Conversion shall be deemed effective, and the Converted
Amount shall be deemed
<PAGE>
converted into the right to receive the number of shares of Maker Common Stock
equal to the Converted Amount divided by the Closing Price (as defined in
Exhibit A to the Merger Agreement) on the date of the occurrence of the Event of
Default.
Should an Event of Default exist and be continuing for ten
Business Days (unless Maker has paid the then outstanding principal and accrued
but unpaid interest under this Note or given notice of Conversion as provided
herein of the entire amount then due and payable), (x) simple interest shall
accrue on the outstanding principal balance of this Note from the date of such
Event of Default at the rate of LIBOR plus 400 basis points ("Default Interest")
until the outstanding principal and accrued but unpaid interest under this Note
has been paid (or Maker has given notice of Conversion as provided herein of the
entire amount then due and payable), and (y) (in the case of the first Event of
Default to exist and be continuing for such period) Maker shall issue Payee, as
Representative of the Stockholders, a warrant, substantially in the form
attached hereto as Appendix A ("Default Warrant"), to purchase such number of
shares of Common Stock as is equal to ten percent (10%) of the then outstanding
principal and accrued but unpaid interest under this Note divided by the
exercise price of the Default Warrants, which shall equal Closing Price (as
defined in Exhibit A to the Merger Agreement) on the date of the occurrence of
such Event of Default.
Presentment, demand, protest and all other notices of any kind from or
to be given by Payee are hereby expressly waived.
Amounts payable by Maker (including Maker Common Stock and Default
Warrants that may be issued) hereunder shall be received by Payee for the
benefit of the Stockholders solely in Payee's capacity as Representative of the
Stockholders, and shall be allocated among the Stockholders in accordance with
the Stockholder Percentages as provided in the Merger Agreement, to be
distributed to the Stockholders by the Representative in such proportions
following each payment or Conversion hereunder. Maker shall use all reasonable
efforts to assist Payee in making such allocations and distributions. Nothing
herein shall give rise to any liability on the part of Payee or Maker for any
mistakes that may occur in making such allocations and distributions so long as
Payee or Maker, respectively, has acted in good faith and without willful
misconduct or fraud.
Notwithstanding anything else to the contrary herein, Maker shall not
effect any Conversion or issue any Default Warrants to the extent, but only to
the extent (and notice of Conversion shall be deemed revised to the extent
necessary to permit Maker to comply with this sentence), that Shareholder
Approval (as defined in Exhibit A to the Merger Agreement) would be required for
such Conversion or such issuance (taken together with any issuance of Maker
stock under the Merger Agreement or required hereby which would be considered
under applicable rules and regulations together with such Conversion or such
issuance in determining
<PAGE>
whether Shareholder Approval is required), unless and until such Shareholder
Approval has been obtained.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Virginia, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
Whenever used herein, the words "Maker" and "Payee" shall be deemed to
include their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has duly executed this Note, or
has caused this Note to be duly executed on its behalf, as of the day and year
first hereinabove set forth.
[SEAL] EXECUTIVE TELECARD, LTD.
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
EXHIBIT D-3
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$2,500,000 December , 1998
FOR VALUE RECEIVED, Executive TeleCard, Ltd., a Delaware corporation
("Maker"), promises to pay to the order of Jeffey Gee ("Payee"), in his capacity
as Representative of and for the benefit of the Stockholders of IDX
International, Inc., a Virginia corporation (the "Company"), on October 31, 1999
(the "Maturity Date"), the principal amount of Two Million Five Hundred Dollars
($2,500,000), together with interest on the unpaid principal balance, said
interest to be due and payable on the Maturity Date, at a rate per annum equal
to LIBOR plus 250 basis points, in the manner provided below. "LIBOR" shall mean
the offered rates on three-month Eurodollar deposits, which appear on the
display designated as page "LIBO" on the Reuters Monitor Money Rates Service or
such other page as may replace the LIBO page on that service for the purpose of
displaying London Interbank Eurodollar offered rates of major banks of the
highest credit rating as determined by Maker in its commercially reasonable
discretion. Interest shall be calculated on the basis of a year of 365 days, as
applicable, and charged for the actual number of days elapsed. All payments
hereunder shall be made in lawful money of the United States of America (except
to the extent paid in Common Stock of Maker, as provided below).
This Note is issued pursuant to and in accordance with the terms and
conditions of the Agreement and Plan of Merger, dated June 10, 1998, among
Maker, Extel Merger Sub No. 1, the Company and the Stockholders (as defined
therein), which was subsequently amended on August 27, 1998 pursuant to a
certain Consent and Extension and amended again on October , 1998 by Amendment
No. 2 to Agreement and Plan of Merger (the "Merger Agreement"), and is subject
to the terms and conditions of the Merger Agreement, which are, by this
reference, incorporated herein and made a part hereof, including particularly
the provisions regarding the authority of Payee as the Representative and the
allocation of the amounts payable (or stock issuable) hereunder among the
Stockholders. Capitalized terms used in this Note which are not otherwise
defined herein shall have the respective meanings set forth in the Merger
Agreement.
The outstanding principal amount of this Note, together with interest
accrued thereon as provided herein (the "Maturity Amount") shall be due and
payable in full on the Maturity Date, or such earlier date on which this Note
may become due following an Event of Default (as defined below).
<PAGE>
All payments of principal and interest on this Note shall be made by
check or wire transfer of immediately available funds to an account specified by
Payee in written instructions to Maker at least three (3) business days prior to
the Maturity Date. If any payment of principal or interest on this Note is due
on a day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall be taken into account
in calculating the amount of interest payable under this Note. "Business Day"
means any day other than Saturday, Sunday or a legal holiday in the Commonwealth
of Virginia.
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note.
The occurrence of any one of more the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for ten Business Days after
Payee notifies Maker in writing of such Event of Default.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing is inability to pay its debts
as they become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
Upon the occurrence of any such Event of Default, Maker, in its sole
and absolute option, may convert (the "Conversion") all or any part of the then
outstanding principal and accrued but unpaid interest under this Note into
shares of its Common Stock, par value $.001 ("Maker Common Stock"), as provided
below, which Conversion shall constitute payment in full of the amount being so
converted (the "Converted Amount"). Maker may effect such Conversion by written
notice to Payee (pursuant to the applicable notice provisions of the Merger
Agreement), at any time or from time to time until the outstanding principal and
accrued but unpaid interest under this Note has been paid in full, of the
Maker's election to effect the Conversion and the portion of the outstanding
principal and accrued but unpaid interest being converted. Upon receipt of such
notice by Payee, such Conversion shall be deemed effective, and the Converted
Amount shall be deemed
<PAGE>
converted into the right to receive the number of shares of Maker Common Stock
equal to the Converted Amount divided by the Closing Price (as defined in
Exhibit A to the Merger Agreement) on the date of the occurrence of the Event of
Default.
Should an Event of Default exist and be continuing for ten Business
Days (unless Maker has paid the then outstanding principal and accrued but
unpaid interest under this Note or given notice of Conversion as provided herein
of the entire amount then due and payable), (x) simple interest shall accrue on
the outstanding principal balance of this Note from the date of such Event of
Default at the rate of LIBOR plus 400 basis points ("Default Interest") until
the outstanding principal and accrued but unpaid interest under this Note has
been paid (or Maker has given notice of Conversion as provided herein of the
entire amount then due and payable), and (y) (in the case of the first Event of
Default to exist and be continuing for such period) Maker shall issue Payee, as
Representative of the Stockholders, a warrant, substantially in the form
attached hereto as Appendix A ("Default Warrant"), to purchase such number of
shares of Common Stock as is equal to ten percent (10%) of the then outstanding
principal and accrued but unpaid interest under this Note divided by the
exercise price of the Default Warrants, which shall equal Closing Price (as
defined in Exhibit A to the Merger Agreement) on the date of the occurrence of
such Event of Default.
Presentment, demand, protest and all other notices of any kind from or
to be given by Payee are hereby expressly waived.
Amounts payable by Maker (including Maker Common Stock and Default
Warrants that may be issued) hereunder shall be received by Payee for the
benefit of the Stockholders solely in Payee's capacity as Representative of the
Stockholders, and shall be allocated among the Stockholders in accordance with
the Stockholder Percentages as provided in the Merger Agreement, to be
distributed to the Stockholders by the Representative in such proportions
following each payment or Conversion hereunder. Maker shall use all reasonable
efforts to assist Payee in making such allocations and distributions. Nothing
herein shall give rise to any liability on the part of Payee or Maker for any
mistakes that may occur in making such allocations and distributions so long as
Payee or Maker, respectively, has acted in good faith and without willful
misconduct or fraud.
Notwithstanding anything else to the contrary herein, Maker shall not
effect any Conversion or issue any Default Warrants to the extent, but only to
the extent (and notice of Conversion shall be deemed revised to the extent
necessary to permit Maker to comply with this sentence), that Shareholder
Approval (as defined in Exhibit A to the Merger Agreement) would be required for
such Conversion or such issuance (taken together with any issuance of Maker
stock under the Merger Agreement or required hereby which would be considered
under applicable rules and regulations together with such Conversion or such
issuance in determining
<PAGE>
whether Shareholder Approval is required), unless and until such Shareholder
Approval has been obtained.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Virginia, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
Whenever used herein, the words "Maker" and "Payee" shall be deemed to
include their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has duly executed this Note, or
has caused this Note to be duly executed on its behalf, as of the day and year
first hereinabove set forth.
[SEAL] EXECUTIVE TELECARD, LTD.
By:______________________________
Name:____________________________
Title:___________________________
EXHIBIT 4.4
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
$418,024 December , 1998
FOR VALUE RECEIVED, Executive TeleCard, Ltd., a Delaware corporation
("Maker"), promises to pay to the order of Jeffey Gee ("Payee"), in his capacity
as representative of and for the benefit of certain preferred stockholders of
IDX International, Inc., a Virginia corporation (the "Company") under an
agreement to which a form of this Note is attached (the "Dividend Agreement"),
on May 31, 1999 (the "Maturity Date"), the principal amount of Four Hundred
Eighteen Thousand Twenty-Four Dollars ($418,024), together with interest on the
unpaid principal balance, said interest to be due and payable on the Maturity
Date, at a rate per annum equal to LIBOR plus 250 basis points, in the manner
provided below. "LIBOR" shall mean the offered rates on three-month Eurodollar
deposits, which appear on the display designated as page "LIBO" on the Reuters
Monitor Money Rates Service or such other page as may replace the LIBO page on
that service for the purpose of displaying London Interbank Eurodollar offered
rates of major banks of the highest credit rating as determined by Maker in its
commercially reasonable discretion. All payments hereunder shall be made in
lawful money of the United States of America (except to the extent paid in
Common Stock of Maker, as provided below).
This Note is issued pursuant to and in accordance with the terms and
conditions of (i) the Dividend Agreement and (ii) the Agreement and Plan of
Merger, dated June 10, 1998, among Maker, EXTEL Merger Sub No. 1, Inc., the
Company and the Stockholders (as defined therein), which was subsequently
amended on August 27, 1998 pursuant to a certain Consent and Extension and
amended again on October _, 1998 by Amendment No. 2 to Agreement and Plan of
Merger (the "Merger Agreement"), and is subject to the terms and conditions of
the Dividend Agreement and the Merger Agreement, which are, by this reference,
incorporated herein and made a part hereof, including particularly the
provisions regarding the authority of Payee as the Representative and the
allocation of the amounts payable (or stock issuable) hereunder among the
Stockholders. Capitalized terms used in this Note which are not otherwise
defined herein shall have the respective meanings set forth in the Dividend
Agreement.
The outstanding principal amount of this Note, together with interest
accrued thereon as provided herein (the "Maturity Amount") shall be due and
payable in full on the Maturity Date, or such earlier date on which this Note
may become due following an Event of Default (as defined below).
<PAGE>
All payments of principal and interest on this Note shall be made by
check or wire transfer of immediately available funds to an account specified by
Payee in written instructions to Maker at least three (3) business days prior to
the Maturity Date. If any payment of principal or interest on this Note is due
on a day which is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall be taken into account
in calculating the amount of interest payable under this Note. "Business Day"
means any day other than Saturday, Sunday or a legal holiday in the Commonwealth
of Virginia.
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note.
The occurrence of any one of more the following events with respect to
Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for ten Business Days after
Payee notifies Maker in writing of such Event of Default.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official; (iv) make an assignment for the
benefit of its creditors; or (v) admit in writing is inability to pay its debts
as they become due.
(c) If a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that (i) is for relief against Maker in an involuntary
case, (ii) appoints a trustee, receiver, assignee, liquidator or similar
official for Maker or substantially all of Maker's properties, or (iii) orders
the liquidation of Maker, and in each case the order or decree is not dismissed
within 120 days.
Upon the occurrence of any such Event of Default, Maker, in its sole
and absolute option, may convert (the "Conversion") all or any part of the then
outstanding principal and accrued but unpaid interest under this Note into
shares of its Common Stock, par value $.001 ("Maker Common Stock"), as provided
below, which Conversion shall constitute payment in full of the amount being so
converted (the "Converted Amount"). Maker may effect such Conversion by written
notice to Payee (pursuant to the applicable notice provisions of the Merger
Agreement), at any time or from time to time until the outstanding principal and
accrued but unpaid interest under this Note has been paid in full, of the
Maker's election to effect the Conversion and the portion of the outstanding
principal and accrued but unpaid interest being converted. Upon receipt of such
notice by Payee, such Conversion shall be deemed effective, and the Converted
Amount shall be deemed
<PAGE>
converted into the right to receive the number of shares of Maker Common Stock
equal to the Converted Amount divided by the Closing Price (as defined in
Exhibit A to the Merger Agreement) on the date of the occurrence of the Event of
Default.
Should an Event of Default exist and be continuing for ten Business
Days (unless Maker has paid the then outstanding principal and accrued but
unpaid interest under this Note or given notice of Conversion as provided herein
of the entire amount then due and payable), (x) simple interest shall accrue on
the outstanding principal balance of this Note from the date of such Event of
Default at the rate of LIBOR plus 400 points ("Default Interest") until the
outstanding principal and accrued but unpaid interest under this Note has been
paid (or Maker has given notice of Conversion as provided herein of the entire
amount then due and payable), and (y) (in the case of the first Event of Default
to exist and be continuing for such period) Maker shall issue Payee, as
Representative of the Stockholders, a warrant, substantially in the form
attached hereto as Appendix A ("Default Warrant"), to purchase such number of
shares of Common Stock as is equal to ten percent (10%) of the then outstanding
principal and accrued but unpaid interest under this Note divided by the
exercise price of the Default Warrants, which shall equal Closing Price (as
defined in Exhibit A to the Merger Agreement) on the date of the occurrence of
such Event of Default.
Presentment, demand, protest and all other notices of any kind from or
to be given by Payee are hereby expressly waived.
Amounts payable by Maker (including Maker Common Stock and Default
Warrants that may be issued) hereunder shall be received by Payee for the
benefit of the Stockholders solely in Payee's capacity as Representative of the
Stockholders, and shall be allocated among the Stockholders in accordance with
the relative Stockholder Percentages of the Stockholders as provided in the
Merger Agreement, to be distributed to the Stockholders by the Representative in
such proportions following each payment or Conversion hereunder. Maker shall use
all reasonable efforts to assist Payee in making such allocations and
distributions. Nothing herein shall give rise to any liability on the part of
Payee or Maker for any mistakes that may occur in making such allocations and
distributions so long as Payee or Maker, respectively, has acted in good faith
and without willful misconduct or fraud.
Notwithstanding anything else to the contrary herein, Maker shall not
effect any Conversion or issue any Default Warrants to the extent, but only to
the extent (and notice of Conversion shall be deemed revised to the extent
necessary to permit Maker to comply with this sentence), that Shareholder
Approval (as defined in Exhibit A to the Merger Agreement) would be required for
such Conversion or such issuance (taken together with any issuance of Maker
stock under the Merger Agreement and documents referred to therein or required
hereby which would be considered under applicable rules and regulations together
with such Conversion or
<PAGE>
such issuance in determining whether Shareholder Approval is required), unless
and until such Shareholder Approval has been obtained.
This Note shall be governed by, and construed in accordance with, the
laws of the State of Virginia, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law.
Whenever used herein, the words "Maker" and "Payee" shall be deemed to
include their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned has duly executed this
Note, or has caused this Note to be duly executed on its behalf, as of the day
and year first hereinabove set forth.
[SEAL] EXECUTIVE TELECARD, LTD.
By:______________________________
Name:____________________________
Title:___________________________
EXHIBIT 99.1
Thursday December 3, 3:07 pm Eastern Time
Company Press Release
SOURCE: eGlobe, Inc.
eGLOBE COMPLETES ACQUISITION OF IDX
DENVER, Colo., Dec. 3 /PRNewswire/ -- eGlobe (Nasdaq: EGLO - news), formerly
Executive Telecard) today announced the completion of the acquisition of IDX
International, Inc. (IDX), the privately held IP-based fax and telephony
company.
As previously announced, the specific terms of the IDX transaction include
eGlobe issuing interest-bearing notes to IDX totaling $5 million, which will be
due between December 31, 1998 and October 31, 1999. eGlobe has the option of
paying the notes on their due dates in either cash or shares of eGlobe Common
Stock and warrants to purchase shares of eGlobe Common Stock. In addition,
eGlobe will issue convertible preferred stock and warrants. The convertible
preferred stock converts into 2,500,000 shares of eGlobe Common Stock at the end
of one year, with a price guarantee of $8.00 per share at the time if IDX
achieves certain revenue and cash flow goals. The warrants are exercisable only
if IDX achieves revenue and cash flow goals over the next twelve months in
addition to the goals necessary for the price guarantee. Various levels of
revenue and cash flow performance also determine the amount of eGlobe Common
Stock (up to an additional 2,500,000 Common Shares) for which the warrants
become exercisable. If IDX achieves all of its goals, then eGlobe will acquire
more than $40 million of additional annual revenue with positive EBITDA and IDX
shareholders will receive $5 million and 5,000,000 Common Shares, adjusted as
appropriate for the price guarantee.
eGlobe is a leading supplier of enhanced communications services, including
Internet voice and fax, post paid and prepaid calling card services along with
related validation, billing and payment systems, and other international
Intranet and inter-networking services in partnership with telecommunications
operators around the world. Operating through its World Direct network, eGlobe
originates traffic in 88 countries and terminates anywhere in the world. eGlobe
provides its services principally to telecommunications companies and financial
institutions.
Certain statements in this news release are "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 and involve
known and unknown risks, uncertainties and other factors that may cause the
Company's actual results, performance or achievements to be materially different
from the results, performance or achievements expressed or implied by the
forward looking statement. Factors that impact such forward looking statements
<PAGE>
include, among others, the ability of the Company to attract additional
business, the ability of the Company to successfully integrate the IDX
acquisition, complete software development and offer new products, changes in
expectations regarding restructurings, including tax liabilities and reductions
in cost, possible changes in collections of accounts receivable, risks of
competition, price and margin trends, changes in worldwide general economic
conditions, changes in interest rates, currency rates and worldwide competition.
SOURCE: eGlobe, Inc.
Copyright (C) 1998 PRNewswire. All rights reserved. Republication or
redistribution of PRNewswire content is expressly prohibited without the prior
written consent of PRNewswire. PRNewswire shall not be liable for any errors or
delays in the content, or for any actions taken in reliance thereon. See our
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