SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Commission File
earliest event reported): Number:
JUNE 17, 1999 1-10210
EGLOBE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3486421
(State or other jurisdiction of (IRS Employer Identification
incorporation) Number)
1250 24th Street, NW, Suite 725
Washington, D.C. 20037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(202) 822-8981
(Former name or former address, if changed since last report)
NA
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EGLOBE, INC.
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EXPLANATORY NOTE
Pursuant to Items 7(a)(4) and 7(b)(2) of the Securities and Exchange
Commission's (the "Commission") General Instructions for Form 8-K, eGlobe, Inc.
(the "Company") formerly Executive TeleCard, Ltd., hereby amends Items 7(a) and
7(b) of its Current Report on Form 8-K, filed with the Commission on July 2,
1999 to file combined financial statements of Connectsoft Communications
Corporation, substantially all the assets of which were acquired by the Company
through its new subsidiary Vogo Networks, LLC on June 17, 1999 and to file pro
forma financial information for the Company reflecting such acquisition.
The Company has included a brief description of Vogo's acquisition of
substantially all of the assets of Connectsoft Communications Corporation and
Connectsoft Holding Corp. ("Connectsoft") by its new subsidiary Vogo Networks,
LLC ("Vogo") along with the pro forma information for the Company. Telekey, Inc
and Subsidiary and Travelers Services, Inc. ("Telekey") were acquired on
February 12, 1999. UCI Tele Networks, Ltd. ("UCI") was acquired on December 31,
1998 and IDX International Inc. and Subsidiaries ("IDX") was acquired on
December 2, 1998. The Telekey, UCI and IDX acquisitions were previously reported
on Form 8-K/A filed on April 30, 1999. In June 1999, the stockholders of the
Company approved the increase in the convertibility of the preferred stock
issued to the IDX stockholders and in July 1999 the terms of the IDX purchase
agreement were renegotiated, both of which are further described in this Form
8-K/A. Item 7c of the July 2, 1999 Current Report is also hereby amended to add
the Exchange Agreement, the Certificate of Designations for the Series H
Convertible Preferred Stock, the Certificate of Designations for the Series I
Convertible Optional Redemption Preferred Stock and the form of Warrant relating
to the renegotiated IDX deal.
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EGLOBE, INC.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
ITEM 7(A). FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
Filed herewith as a part of this report are the following
financial statements: Connectsoft Communications Corporation, (i)
Report of Independent Certified Public Accountants, (ii) Combined
Statements of Net Liabilities as of July 31, 1998 (audited) and
May 31, 1999 (unaudited), (iii) Combined Statements of Revenues
and Expenses for the year ended July 31, 1998 (audited) and for
the ten months ended May 31, 1999 and 1998 (unaudited), (iv)
Notes to Combined Financial Statements for the twelve months
ended July 31, 1998 (audited) and for the ten months ended May
30, 1999 and 1998. (unaudited).
ITEM 7(B). PRO FORMA FINANCIAL INFORMATION
Filed herewith as a part of this report are the Company's
Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the twelve months ended December 31, 1998 and for
the six months ended June 30, 1999 (unaudited) and the notes
thereto. A pro forma condensed consolidated balance sheet is not
included in this report as the acquisition of Connectsoft
occurred in June 1999 and is included in the June 30, 1999
historical unaudited balance sheet of the Company as reported on
Form 10-Q filed on August 16, 1999. The effect of the Company's
stockholder approval of the increase in the IDX preferred stock
conversion terms is also included in the June 30, 1999 historical
unaudited balance sheet.
ITEM 7(C). EXHIBITS
2.6 Exchange Agreement dated July 26, 1999, by and between the
former stockholders of IDX International, Inc. and eGlobe, Inc.
4.5 Certificate of Designations, Rights and Preferences of Series
H Convertible Preferred Stock of eGlobe, Inc.
4.6 Certificate of Designations, Rights and Preferences of Series
I Convertible Optional Redemption Preferred Stock of eGlobe, Inc.
4.7 Form of Warrants to purchase up to 1,250,000 shares of common
stock of eGlobe, Inc.
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INDEX TO FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants 5
Combined Statements of Net Liabilities as of July 31, 1998
and May 31, 1999 (unaudited) 6
Combined Statements of Revenues and Expenses for
the year ended July 31, 1998 and for the ten months ended
May 31, 1999 and 1998 (unaudited) 7
Notes to Combined Financial Statements 8 - 16
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Connectsoft Communications Corporation
Bellevue, Washington
We have audited the accompanying combined statement of net liabilities of
Connectsoft Communications Corporation (the "Company") and the related combined
statement of revenues and expenses for the year ended July 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined net liabilities of Connectsoft
Communications Corporation as of July 31, 1998 and the results of their
operations for the year ended July 31, 1998, in conformity with generally
accepted accounting principles.
The accompanying combined financial statements have been prepared assuming that
Connectsoft Communications Corporation will continue as a going concern. As
discussed in Note 1 to the combined financial statements, Connectsoft
Communications Corporation has suffered from recurring net losses and negative
cash flow from operations that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The combined financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ BDO Seidman, LLP
Denver, Colorado
July 21, 1999
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CONNECTSOFT COMMUNICATIONS CORPORATION
COMBINED STATEMENTS OF NET LIABILITIES
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<TABLE>
<CAPTION>
JULY 31, 1998 MAY 31, 1999
(UNAUDITED)
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 116,000 $ 35,000
Trade accounts receivable 28,000 --
Other assets 16,000 20,000
---------------- ---------------
Total current assets 160,000 55,000
Property and equipment, net (Note 4) 865,000 513,000
---------------- ---------------
1,025,000 568,000
---------------- ---------------
LIABILITIES
Current liabilities
Accounts payable 312,000 292,000
Accrued liabilities 629,000 1,322,000
Advances from eGlobe (Note 3) 550,000 1,867,000
Capital lease obligations (Note 5) 2,808,000 2,943,000
---------------- ---------------
Total liabilities 4,299,000 6,424,000
---------------- ---------------
Commitments and contingencies (Notes 3, 5, 6, 7 and 8)
Net liabilities (Note 3) $ (3,274,000) $ (5,856,000)
================ ===============
</TABLE>
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
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CONNECTSOFT COMMUNICATIONS CORPORATION
COMBINED STATEMENTS OF REVENUES AND EXPENSES
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<TABLE>
<CAPTION>
TEN MONTHS ENDED MAY 31,
------------------------------
YEAR ENDED 1999 1998
JULY 31, 1998 (UNAUDITED) (UNAUDITED)
------------- ----------- -----------
<S> <C> <C> <C>
Revenues $373,000 $ 176,000 $ 311,000
Cost of revenues 287,000 157,000 239,000
-------------- --------------- -------------
Gross profit 86,000 19,000 72,000
-------------- --------------- -------------
Research and development expenses 2,771,000 2,622,000 2,309,000
Selling, general and
administrative expenses 1,774,000 1,189,000 1,478,000
-------------- --------------- -------------
Total expenses 4,545,000 3,811,000 3,787,000
-------------- --------------- -------------
Operating loss (4,459,000) (3,792,000) (3,715,000)
Interest expense 464,000 387,000 387,000
-------------- --------------- -------------
Excess of expenses over revenues $ (4,923,000) $ (4,179,000) $ (4,102,000)
============== ================ =============
</TABLE>
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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1. Description of business and basis of presentation
The accompanying statements of net liabilities and revenues and
expenses relate to the assets and operations of Connectsoft
Communications Corporation ("CCC") and the network operations center of
Connectsoft Holding Corp. ("NOC") (collectively, "Connectsoft" or "the
Company"). Both entities are wholly owned subsidiaries of American
United Global, Inc. ("AUGI"). The combined statements of net
liabilities include those assets to be acquired and liabilities to be
assumed under an Asset Purchase Agreement by eGlobe, Inc., formerly
known as Executive TeleCard, Ltd., ("eGlobe"), a public company with
complimentary technologies and customers, through its newly formed
subsidiary, Vogo Networks, LLC (see Note 3). The combined statements of
net liabilities do not include assets and liabilities of the business
that are not intended to be transferred to or assumed by eGlobe under
the terms of the Asset Purchase Agreement. Accordingly, the statement
of cash flows is not included or applicable to the business being sold.
Connectsoft has developed, and continues to enhance a server based
integrated communication system which it is marketing as Vogo. Vogo is
a phone portal that integrates messaging, internet applications,
content and personal services. The software is presently being marketed
as a service in the United States, with the introduction scheduled for
August 1999. The NOC provides internet connectivity and co-location
services to corporate customers in the northwestern United States.
During the periods reflected in the financial statements, the
operations of CCC were maintained as a separate entity. The operations
of the NOC were incorporated into the financial statements of AUGI and
Connectsoft Holding Corp. and include allocations of expenses which
management believes represents a reasonable allocation of such costs to
present the net liabilities and revenues and expenses of Connectsoft on
a standalone basis. These allocations consist of salary and benefit
expenses for operations personnel related to the NOC, depreciation
expense, communications expenses and interest expense on liabilities
assumed in the purchase. All material intercompany accounts and
transactions have been eliminated.
The financial statements have been prepared to substantially
comply with the rules and regulations of the Securities and Exchange
Commission for businesses acquired. The financial information presented
does not necessarily reflect what the financial position and results of
operations of Connectsoft would have been had it operated as a
standalone entity during the periods presented and may not be
indicative of future results.
Liquidity and Capital Resources
Per the requirements of the Securities and Exchange Commission for
businesses acquired, although Connectsoft has been funded to date by
its former parent company and by eGlobe, Connectsoft's combined
financial statements are presented on a standalone, going concern
basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
Connectsoft's ability to generate sufficient revenues and ultimately
achieve profitable operations as a standalone entity is uncertain,
since the financial statements assume no funding by the former parent
company or by eGlobe. Ultimately, Connectsoft's ability to continue as
a going concern is dependent upon its ability to demonstrate sustained
commercial viability of its service and to obtain sufficient working
capital, both of which are uncertain at this time.
8
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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During the twelve-month period ended July 31, 1998, Connectsoft
incurred a net loss of $4.9 million and had negative working capital of
$4.1 million. At July 31, 1998 and May 31, 1999, Connectsoft's total
liabilities exceeded its total assets by $3.3 million and $5.9 million.
Connectsoft plans to operate in a fashion to generate both increased
revenues and cash flows through the introduction of its phone portal
technology scheduled for August 1999. However, no assurance can be
given that Connectsoft will, in fact, be able to improve operating
results.
As discussed in Notes 3 and 5, in connection with the purchase
transaction, eGlobe has advanced Connectsoft through May 31, 1999,
$1,867,000, and has successfully refinanced Connectsoft's equipment
leases. Connectsoft's management believes that eGlobe will provide
Connectsoft with financial and operational support which, together with
existing cash and anticipated cash flows from operations, should enable
Connectsoft to continue operations. However, the financial statements
assume no additional funding by eGlobe. In the absence of such
financing, since Connectsoft does not have significant cash resources,
there is substantial doubt about Connectsoft's ability to continue as a
going concern on a standalone basis. The combined financial statements
do not include any adjustments to reflect the possible future effects
on May 31, 1999 related to the recoverability and classification of
assets or the amounts and classification of liabilities that may result
from the possible inability of Connectsoft to continue as a going
concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. The Company
assesses the recoverability of its property and equipment at each
fiscal year end to determine if an asset impairment has occurred using
a cash flow model. No impairments have been recorded to date.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as follows:
Furniture and fixtures 5 years
Computer equipment 3 years
SOFTWARE DEVELOPMENT COSTS
Software development costs incurred in connection with product
development are charged to research and development expense until
technological feasibility is established. Thereafter, through general
release of the product, all software development costs are capitalized
and reported at the lower of unamortized cost or net realizable value.
The establishment of technological feasibility and the ongoing
assessment of the recoverability of costs require considerable judgment
by the Company with respect to certain external factors, including, but
not limited to, anticipated future gross product sales, estimated
economic life, and changes in
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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software and hardware technology. Through May 31, 1999 the Company has
not developed software to be sold or leased for which technological
feasibility has been established and accordingly all software costs
have been expensed.
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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INCOME TAXES
The Company accounts for income taxes using an asset and
liability approach which requires the recognition of deferred tax
assets and liabilities for the expected future consequences of
temporary differences between the carrying amounts for financial
reporting purposes and the tax bases of assets and liabilities.
The Company has incurred net losses for financial reporting
and tax purposes since inception. As a result of the sale of assets of
the Company, net operating losses generated through June 17, 1999, the
date of acquisition by eGlobe will remain with AUGI.
REVENUE RECOGNITION
The Company recognizes revenue from the license of its
proprietary software in accordance with the provisions of Statement of
Position ("SOP") 97-2 "Software Revenue Recognition." SOP 97-2 provides
guidelines concerning the recognition of revenue of software products.
This statement requires, among other things, the individual elements of
a contract for the sale of software products to be identified and
accounted for separately.
Service revenues for the use of the Company's Vogo service
and the NOC are recognized when the service is provided.
RESEARCH AND DEVELOPMENT
Expenditures relating to the development of new products and
processes, including significant improvements and refinements of
existing products, are expensed as incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. Actual results
could differ from those estimates.
INTERIM FINANCIAL INFORMATION
The financial information as of May 31, 1999 and for the ten
month periods ended May 31, 1999 and 1998 is unaudited but includes all
adjustments (consisting only of normal recurring accruals) that
management considers necessary for a fair presentation of the financial
position at such date and the results of operations for those periods.
Operating results for the ten months
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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ended May 31, 1999 and 1998 are not necessarily indicative of the
results that may be expected for the entire fiscal year.
3. ACQUISITION OF NET LIABILITIES
On June 17, 1999 (the "Closing Date"), eGlobe, Inc., through
its new subsidiary Vogo Networks, LLC ("Vogo"), acquired substantially
all of the assets of CCC and NOC. In the transaction, eGlobe acquired
software and related technology and intellectual property, as well as a
talented and dedicated development team and a half million dollars in
cash. The purchase price consisted of preferred stock of eGlobe and the
assumption of debt by eGlobe and Vogo totaling approximately $8
million: (1)Vogo has assumed approximately $5 million in liabilities of
CCC and NOC, consisting primarily of refinanced long-term lease
obligations (Note 5) and non-interest bearing advances from eGlobe
totaling $550,000 and $1,867,000 at July 31, 1998 and May 31, 1999; (2)
eGlobe has issued to AUGI its 6% Series G Cumulative Convertible
Redeemable Preferred Stock (the "Series G Preferred Stock"), having a
liquidation value of $3 million (the "Liquidation Preference"); and (3)
eGlobe has issued a note (the "eGlobe Note") to AUGI in the amount of
$500,000.
The Series G Preferred Stock shall be redeemed by eGlobe for
cash in an amount equal to the Liquidation Preference on the earlier to
occur of five years from the Closing Date or the first date that eGlobe
receives in any transaction or series of transactions any equity
financing of at least $25 million. The Series G Preferred Stock is
convertible from and after October 1, 1999 at the option of the holder,
with a conversion price equal to 75% of the market price of eGlobe
stock at the time of conversion (but not less than $3.00 per share).
The holders of the Series G Preferred Stock are entitled to receive
cumulative annual dividends of 6.0% of the Liquidation Preference
payable, at the option of eGlobe, in cash, in shares of eGlobe common
stock, or a combination of cash and eGlobe common stock.
The acquisition was effected under an Asset Purchase
Agreement, dated as of July 10, 1998, as amended, most recently by an
amendment dated June 17, 1999 (the "Purchase Agreement") and related
documents.
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Property and equipment are comprised of the following:
JULY 31, MAY 31,
1998 1999
---- ----
<S> <C> <C>
Furniture $ 112,000 $ 25,000
Computer equipment 1,130,000 961,000
-------------- ---------------
1,242,000 986,000
Accumulated depreciation (377,000) (473,000)
-------------- ---------------
Property and equipment, net $ 865,000 $ 513,000
============== ===============
</TABLE>
Total depreciation expense was $377,000 for the year ended
July 31, 1998, and $310,000 and $314,000 for the ten months ended May
31, 1999 and 1998, respectively. Substantially all of the fixed assets
have been pledged as collateral under capital lease obligations (Note
5).
5. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has facilities in Bellevue and Seattle, Washington
under operating leases for office space. Future minimum lease payments
under non-cancellable leases as of the statement of net liabilities
dates are as follows:
Years ending July 31,
---------------------
1999 $20,000 (two months)
2000 88,000
2001 4,000
In addition to the above, the leases generally contain
requirements for the payment of property taxes, maintenance and
insurance expenses. Total rent expense was $209,000 for the year ended
July 31, 1999, and $170,000 and $174,000 for the 10 months ended May
31, 1999 and 1998, respectively.
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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In August 1998, the Company sublet a portion of its office
space to an unrelated third party on terms similar to its own lease. In
February 1999 the Company terminated its lease with its landlord and,
in a concurrent transaction, sublet a smaller space from the incoming
tenant.
CAPITAL LEASE OBLIGATIONS
The Company is committed under capital leases for furniture
and computer equipment. These leases are for 3 years, bear interest at
the rates ranging from 10.48% to 16.5%, are collateralized by furniture
and computer equipment and contain buyout clauses at the end of the
lease term. Certain of these leases are guaranteed by AUGI. Subsequent
to year end, the Company defaulted on these lease payments and thus has
recorded the obligations as current. Future minimum lease payments as
of the statement of net liabilities date are as follows:
<TABLE>
<CAPTION>
JULY 31, 1998 MAY 31, 1999
------------- ------------
<S> <C> <C>
Total lease payments $3,329,000 $ 3,481,000
Less amount representing interest 521,000 538,000
---------- -------------
Present value of future minimum
lease payments $2,808,000 $ 2,943,000
========== =============
</TABLE>
In July 1999, as a part of the purchase transaction, eGlobe
successfully refinanced leases. The total amount refinanced was
$2,992,000. The new leases are for a term of 36 months, bear interest
at rates ranging from 10.24% to 11.40% and contain buyout options at
the end of the lease terms. The revised payment schedule as of July 31,
1999 is as follows:
1999 $ 52,000 (one month)
2000 1,169,000
2001 1,169,000
2002 1,072,000
--------------
Total annual lease payments 3,462,000
Less amounts representing interest 470,000
--------------
Present value of future minimum
lease payments $ 2,992,000
==============
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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TELECOMMUNICATIONS LINES
In the normal course of business, the Company enters into agreements
for the use of telecommunications lines for network and internet
connectivity for its customers. Future minimum payments under such
agreements are as follows:
Years ending July 31,
---------------------
1999 $18,000 (two months)
2000 54,000
LEGAL PROCEEDINGS
The Company is involved in certain legal proceedings that have
arisen in the normal course of business. Based on the advice of legal
counsel, management does not anticipate that these matters will have a
material effect on the Company's combined statements of net liabilities
or statements of revenues and expenses.
EMPLOYEE SAVINGS PLAN
The Company has a voluntary savings plan pursuant to Section
401(k) of the Internal Revenue Code, whereby eligible participants may
contribute a percentage of compensation subject to certain limitations.
The Company has the option to make discretionary qualified
contributions to the plan, however, no Company contributions were made
for the year ended July 31, 1998 and the ten months ended May 31, 1999
and 1998.
6. THIRD PARTY LICENSE AGREEMENTS
In July 1997 the Company entered into a software license
agreement with Data Connection Limited ("DCL") to incorporate DCL's
proprietary technology into the Vogo service. The obligations under
this agreement, as amended, are comprised of initial development and
minimum royalty fees totaling $1,300,000. The agreement calls for
additional royalty payments of 5.0% of revenues as defined in the
agreement. The term of the agreement is perpetual, but may be
terminated by either party upon the other party's material breach,
bankruptcy or insolvency. Development and royalty Ffees incurred under
this agreement totaled $875,000 for the year ended July 31, 1998 and
$606,000 and $275,000 for the ten months ended May 31, 1999 and 1998,
respectively. Such costs are included in research and development
expenses in the accompanying combined statement of revenues and
expenses.
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CONNECTSOFT COMMUNICATIONS CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
INFORMATION WITH RESPECT TO MAY 31, 1999 AND 1998 IS UNAUDITED
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7. JOINT MARKETING AND REVENUE SHARING AGREEMENT
On May 7, 1999, the Company entered into a non-exclusive Joint
Marketing and Revenue Sharing Agreement with a company that provides
complimentary services. The two companies will jointly market and share
the subscription and net usage revenues from a joint service offering.
Costs incurred by each of the respective companies are their own to
bear. The agreement expires in two years with a possible one-year
extension.
8. YEAR 2000 ISSUE (UNAUDITED)
The Company could be adversely affected if its computer
systems, the software it has developed or the computer systems its
suppliers or customers use do not properly process and calculate date
related information and data from the period surrounding and including
January 1, 2000. Additionally, this issue could impact non-computer
system devices. The Company believes that its internal systems and its
software are Year 2000 compliant. However, it cannot provide assurances
as to the readiness of its suppliers or customers computer systems. At
this time, because of the complexities involved in the issue,
management cannot provide assurances that the Year 2000 issue will not
have an impact on the Company's operations.
16
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EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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The following unaudited pro forma condensed consolidated statements of
operations give effect to the acquisitions by the Company for the entities
previously described and reported on Form 8-K/A filed on April 30, 1999, the
June 1999 stockholder approval of the increase of the number of shares of common
stock issuable upon conversion of the preferred stock issued to the IDX
stockholders, the terms of the IDX purchase agreement as renegotiated in July
1999 and the Connectsoft acquisition and are based on the estimates and
assumptions set forth herein and in the notes to such financial statements.
These transactions have been detailed below. This pro forma presentation has
been prepared utilizing historical financial statements and notes thereto,
certain of which are included herein as well as pro forma adjustments as
described in the Notes to Pro Forma Condensed Consolidated Financial Statements.
The pro forma financial data does not purport to be indicative of the results
which actually would have been obtained had the acquisitions been effected on
the dates indicated or the results which may be obtained in the future.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1998 includes the operating results of the Company, IDX,
Telekey, and Connectsoft, assuming the acquisitions occurred January 1, 1998.
Also, the subsequent increase in the preferred conversion factor for preferred
shares originally issued to IDX stockholders and the renegotiation of the terms
of the IDX purchase agreement were assumed to have occurred on January 1, 1998.
The historical results of the Company include the results of IDX for the period
from December 2, 1998, the effective date of the acquisition, to December 31,
1998. UCI was acquired on December 31, 1998 and had minimal operations which
have not been reflected in the Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the year ended December 31, 1998. However, the
recurring effect of the goodwill amortization related to the UCI acquisition has
been included in the Unaudited Pro Forma Condensed Consolidated Statement of
Operations.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for the
six months ended June 30, 1999 assumes that the Telekey and Connectsoft
acquisitions and the subsequent increase in the IDX purchase price related to
the increase in the convertibility of the preferred stock originally issued to
the IDX stockholders and renegotiation of the IDX purchase agreement occurred at
the beginning of the periods presented. The historical results of operations of
the Company for the six months ended June 30, 1999 include the results of
Telekey from February 1, 1999, the effective date of the acquisition, to June
30, 1999, and the results of Connectsoft from June 1, 1999, the effective date
of the acquisition, to June 30, 1999.
The unaudited pro forma condensed consolidated statements of operations are
presented for illustrative purposes only and do not purport to represent what
the Company's results of operations would have been had the acquisitions
described herein occurred on the dates indicated for any future period or at any
future date, and are therefore qualified in their entirety by reference to and
should be read in conjunction with the historical consolidated financial
statements of the Company and the historical financial statements of
Connectsoft, contained elsewhere herein. Historical financial statements of IDX
and Telekey were previously filed in Form 8-K/A on April 30, 1999.
17
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EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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ACQUISITION OF CONNECTSOFT COMMUNICATIONS CORPORATION
In June 1999, the Company through its new subsidiary, Vogo Networks,
LLC ("Vogo"), purchased substantially all the assets of Connectsoft, in exchange
for (a) one share of the Company's 6% Series G Cumulative Convertible Redeemable
Preferred Stock valued at $3.0 million; (b) assumed liabilities of approximately
$5.0 million, consisting primarily of long-term lease obligations; (c) $1.8
million in advances to Connectsoft made by the Company prior to the acquisition
which were converted into part of the purchase price and (d) direct costs
associated with the acquisition of approximately $0.4 million. This acquisition
has been accounted for under the purchase method of accounting. The financial
statements of the Company reflect the preliminary allocation of the purchase
price. The preliminary allocation has resulted in acquired intangibles of $10.1
million that are being amortized on a straight-line basis over their estimated
useful lives. The acquired intangibles consist of goodwill of $1.0 million to be
amortized over seven years, existing technology of $8.4 million to be amortized
over five years and other identified intangibles of $0.7 million to be amortized
over seven years. The preliminary allocation of the purchase price was based on
appraisals performed by a third party.
The Company issued one share of Series G Preferred valued at $3.0
million. The one share of Series G Preferred is convertible, at the holder's
option, into shares of the Company's common stock any time after October 1, 1999
at a conversion price equal to the greater of (i) 75% of the market price of the
common stock on the date notice of conversion is received by the Company and
(ii) minimum purchase price of $3.00. The Company shall automatically redeem the
Series G Preferred at a price equal to the fair value plus accrued and unpaid
dividends in cash, upon the first to occur of the following dates (a) on the
first day on which the Company receives in any transaction or series of
transactions any equity financing of at least $25.0 million or (b) on June 17,
2004. The Series G Preferred carries an annual dividend of 6%, payable annually
beginning June 30, 2000. If the Board of Directors of the Company does not
declare dividends, they accrue and remain payable.
The Company also borrowed $0.5 million from the seller, which bears
interest at a variable rate (8.0% at June 30, 1999). Principal and interest
payments are due in twelve (12) equal monthly payments commencing on September
1, 1999. The remaining principal and accrued interest also become due on the
first date on which (i) the Company receives in any transaction or series of
transactions any equity or debt financing of at least $50.0 million or (ii) Vogo
receives in any transaction or series of transactions any equity or debt
financing of at least $5.0 million.
18
<PAGE>
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The acquisition has been recorded using the purchase method of accounting and
the components of the purchase price and its preliminary allocation to the
assets and liabilities acquired are as follows:
Components of Purchase Price:
Company's Series G Preferred Stock $3,000,000
Company's advances converted to investment
in Connectsoft 1,851,000
Direct acquisition costs 450,000
-----------
Total purchase price 5,301,000
===========
Allocation of purchase price:
Cash (35,000)
Other current assets (20,000)
Property and equipment (513,000)
Intangibles (9,120,000)
Goodwill (993,000)
Current liabilities 3,516,000
Long-term liabilities 1,864,000
-----------
Total $ --
===========
19
<PAGE>
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STOCKHOLDERS APPROVAL
IDX INTERNATIONAL, INC. AND SUBSIDIARIES PURCHASE
At the Company's annual meeting in June 1999, the stockholders
approved the increase of the convertibility of the 500,000 shares of
Series B Convertible Preferred Stock used in acquiring IDX from
2,000,000 shares of common stock to 2,500,000 shares of common stock
and warrants to purchase up to an additional 2,500,000 shares of
common stock if IDX meets certain performance objectives. As a result,
the acquired goodwill associated with the IDX purchase was increased
by approximately $1.5 million to reflect the higher conversion feature
approved in June 1999. The effect of this increase in goodwill has
been included in the Unaudited Pro Forma Condensed Consolidated
Statement of Operations.
RENEGOTIATION OF THE TERMS TO THE IDX PURCHASE AGREEMENT
In July 1999, the Company renegotiated the terms of the IDX purchase
agreement with the IDX stockholders as follows:
(a) The 500,000 shares of Series B Convertible Preferred Stock
("Series B Preferred") have been reacquired by the Company in
exchange for 500,000 shares of Series H Convertible Preferred
Stock ("Series H Preferred"), with a par value of $.001 per
share.
(b) The Company has reacquired the original warrants in exchange for
new warrants to acquire up to 1,250,000 shares of the Company's
common stock, subject to IDX meeting certain revenue, traffic
and EBITDA levels at September 30, 2000 or December 31, 2000.
(c) The Company has reacquired the notes payable of $1.5 million and
$2.5 million (previously due in June 1999 and October 1999
respectively) in exchange for 400,000 shares of Series I
Convertible Optional Redemption Preferred Stock ("Series I
Preferred") with a par value of $.001 per share.
(d) The maturity date of the convertible subordinated promissory
note, face value of $418,024, was extended to July 15, 1999 from
May 31, 1999, and subsequently paid by issuance of 140,579
shares of common stock.
(e) The Company waived its right to reduce the principal balance of
the $2.5 million note payable by certain claims as provided for
under the terms of the original IDX purchase agreement.
The shares of Series H Preferred Stock convert automatically into up
to 3,750,000 shares of common stock, subject to adjustment as
described below, on January 31, 2000 or earlier if the 15 day average
closing sales price of the common stock is equal to or greater than
$6.00. If the market price of the common stock is less than $6.00 per
share on January 31, 2000, the Company will issue additional shares of
common stock upon conversion of the Series H Preferred Stock based on
the ratio of $6.00 to the market price (as defined, but not less than
$3.3333 per share), but not more than 3.0 million additional shares of
common stock.
20
<PAGE>
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Company may redeem 150,000 shares of its Series I Preferred Stock
prior to February 14, 2000 and the remainder prior to July 17, 2000 at
a price of $10 per share. The redemption may be made in cash, common
stock or a combination of the two. If the Company redeems the shares,
8% of the value of the Series I Preferred Stock per annum from
December 2, 1998 through the date of redemption will be paid in common
stock. Any Series I Preferred Stock not redeemed by the applicable
date will be converted automatically into common stock based on a
conversion price equal to $10 divided by the greater of the current
market price of the common stock or $2 per share plus 8% of the value
of the Series I Preferred Stock per annum from December 2, 1998
through the date of conversion up to a maximum of 3.9 million shares
of common stock.
As a result of the exchange agreement, the Company has recorded the
excess of the fair value of the new preferred stock issuances and the
warrants over the carrying value of the reacquired preferred stock,
warrants and notes payable as a dividend to the Series B Preferred
stockholders. The estimated dividend of approximately $6.4 million has
been reflected in the unaudited pro forma condensed consolidated
statement of operations for the year ended December 31, 1998. In
addition, upon the conversion of the Series H Preferred Stock, an
additional dividend of up to $9.0 million may be recorded if more than
3,750,000 shares of common stock are issued.
At the acquisition date, the stockholders of IDX received Series B
Preferred Stock and warrants as discussed above, which were ultimately
convertible into common stock subject to IDX meeting its performance
objectives. These stockholders in turn granted preferred stock and
warrants, each of which was convertible into a maximum of 240,000
shares of the Company's common stock, to IDX employees. The stock
grants are performance based and adjusted each reporting period (but
not below zero) for the changes in stock price until the shares and/or
warrants (if and when) issued are converted to common stock. The
company is currently renegotiating these agreements. As a result, the
Unaudited Pro Forma Condensed Consolidated Statements of Operations do
not reflect adjustments to reflect the effect of the renegotiated IDX
purchases agreement on these employee agreements.
21
<PAGE>
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EGLOBE
TWELVE MONTHS IDX TELEKEY CONNECTSOFT
ENDED 12/31/98 ELEVEN MONTHS TWELVE MONTHS TWELVE MONTHS ADJUSTMENTS
(NOTE A) (1) ENDED 11/30/98 ENDED 12/31/98 ENDED 12/31/98 (NOTE A) PRO FORMA
------------- ------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE $ 30,030,000 $ 2,795,000 $ 4,705,000 $ 288,000 $(121,000)(2) $37,697,000
COST OF REVENUE 16,806,000 3,176,000 1,294,000 248,000 (65,000)(3) 21,459,000
------------- ------------- ----------- ------------- ------------- -------------
GROSS PROFIT (LOSS) 13,224,000 (381,000) 3,411,000 40,000 (56,000) 16,238,000
------------- ------------- ----------- ------------- ------------- -------------
COSTS AND EXPENSES:
Selling, general and
administrative 18,070,000 3,011,000 2,811,000 2,473,000 165,000(4) 26,530,000
Research and
development -- -- -- 2,057,000 -- 2,057,000
Depreciation and
amortization 3,070,000 510,000 192,000 231,000 4,533,000(5) 8,536,000
------------- ------------- ----------- ------------- ------------- -----------
TOTAL COSTS AND
EXPENSES 21,140,000 3,521,000 3,003,000 4,761,000 4,698,000 37,123,000
------------- ------------- ----------- ------------- ------------- -------------
INCOME (LOSS) FROM
OPERATIONS (7,916,000) (3,902,000) 408,000 (4,721,000) (4,754,000) (20,885,000)
------------- ------------- ----------- ------------- ------------- -------------
OTHER INCOME
(EXPENSE):
Other income
(expense) (1,981,000) 358,000 (61,000) (377,000) (205,000)(6) (2,266,000)
Proxy related
litigation expense (3,647,000) -- -- -- -- (3,647,000)
------------- ------------- ----------- ------------- ------------- -------------
TOTAL OTHER INCOME
(EXPENSE) (5,628,000) 358,000 (61,000) (377,000) (205,000) (5,913,000)
------------- ------------- ----------- ------------- ------------- -------------
INCOME (LOSS) BEFORE
TAXES ON INCOME (13,544,000) (3,544,000) 347,000 (5,098,000) (4,959,000) (26,798,000)
MINORITY INTEREST IN
INCOME OF SUBSIDIARY -- -- (59,000) -- 59,000(7) --
INCOME TAXES 1,500,000 -- -- -- 21,000(8) 1,521,000
------------- ------------- ----------- ------------- ------------- -------------
NET INCOME (LOSS) (15,044,000) (3,544,000) 288,000 (5,098,000) $ (4,921,000) $(28,319,000)
------------- ------------- ----------- ------------- ------------- -------------
PREFERRED STOCK
DIVIDENDS 6,900,000(9) 6,900,000
NET LOSS ATTRIBUTABLE
TO COMMON STOCK $(15,044,000) $ (3,544,000) $ 288,000 $ (5,098,000) $(11,821,000) $(35,219,000)
------------- ------------- ----------- ------------- ------------- -------------
NET LOSS PER SHARE (NOTES
10 AND 11)
Basic and diluted $ (0.85) -- -- -- -- $ (1.96)
============= ============= =========== ============= ============= =============
</TABLE>
See notes to the pro forma condensed consolidated financial statements
22
<PAGE>
EGLOBE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EGLOBE TELEKEY CONNECTSOFT
SIX MONTHS ENDED ONE MONTH ENDED FIVE MONTHS ENDED ADJUSTMENTS
6/30/99 1/31/99 5/31/99 (NOTE B) PRO FORMA
---------------- --------------- ----------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
REVENUE $17,501,000 $ 190,000 $73,000 $ -- $17,764,000
COST OF REVENUE 17,237,000 59,000 65,000 -- 17,361,000
----------- --------- --------- ----------- -----------
GROSS PROFIT 264,000 131,000 8,000 -- 403,000
----------- --------- --------- ----------- -----------
COSTS AND EXPENSES:
Selling, general and
administrative 11,570,000 141,000 436,000 72,000(12) 12,219,000
Research and development -- -- 1,092,000 -- 1,092,000
Depreciation and
amortization 3,381,000 16,000 129,000 898,000(13) 4,424,000
----------- --------- --------- ----------- -----------
TOTAL COSTS AND EXPENSES 14,951,000 157,000 1,657,000 970,000 17,735,000
----------- --------- --------- ----------- -----------
LOSS FROM OPERATIONS (14,687,000) (26,000) (1,649,000) (970,000) (17,332,000)
----------- --------- --------- ----------- -----------
OTHER INCOME (EXPENSE) (4,062,000) (6,000) (162,000) 182,000(14) (4,048,000)
----------- --------- --------- ----------- -----------
NET LOSS (18,749,000) (32,000) (1,811,000) (788,000) (21,380,000)
----------- --------- --------- ----------- -----------
PREFERRED STOCK DIVIDENDS 4,329,000 -- -- 235,000(15) (4,564,000)
----------- --------- --------- ----------- -----------
NET LOSS ATTRIBUTABLE TO
COMMON STOCK $(23,078,000) $(32,000) $(1,811,000) $(1,023,000) $(25,944,000)
----------- --------- --------- ----------- -----------
NET LOSS PER SHARE (NOTES 16
AND 17)
Basic and diluted $(1.22) -- -- -- $(1.36)
=========== ========= ========= =========== ===========
</TABLE>
See notes to the pro forma condensed consolidated financial statements
23
<PAGE>
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(1) Effective with the period ended December 31, 1998, the Company changed from
a March 31 to a December 31 fiscal year end. As a result, the
following table is required to reflect twelve months of operations.
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS TWELVE MONTHS
ENDED 12/31/98 ENDED 3/31/98 ENDED 12/31/98
-------------- ------------- --------------
<S> <C> <C> <C>
Revenue $ 22,491,000 $ 7,539,000 $ 30,030,000
Cost of revenue 12,619,000 4,187,000 16,806,000
------------- ------------- -------------
Gross profit 9,872,000 3,352,000 13,224,000
Costs and expenses:
Selling, general and administrative 13,555,000 4,515,000 18,070,000
Depreciation and amortization 2,256,000 814,000 3,070,000
------------- ------------- -------------
Total costs and expenses 15,811,000 5,329,000 21,140,000
------------- ------------- -------------
Loss from operations (5,939,000) (1,977,000) (7,916,000)
------------- ------------- -------------
Other income (expenses):
Other expense (1,031,000) (950,000) (1,981,000)
Proxy related litigation expense (120,000) (3,527,000) (3,647,000)
------------- ------------- -------------
Total other expenses (1,151,000) (4,477,000) (5,628,000)
------------- ------------- -------------
Loss before taxes on income (7,090,000) (6,454,000) (13,544,000)
Income taxes -- 1,500,000 1,500,000
------------- ------------- -------------
Net loss $ (7,090,000) $ (7,954,000) $(15,044,000)
------------- ------------- -------------
</TABLE>
UCI was acquired on December 31, 1998 and had minimal operations which have not
been reflected in the Pro Forma Condensed Consolidated Statement of Operations
for the year ended December 31, 1998. However, the recurring effect of the
goodwill amortization related to the UCI acquisition has been included in the
Unaudited Pro Forma Condensed Consolidated Statement of Operations.
24
<PAGE>
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWELVE MONTHS ENDED DECEMBER 31, 1998 (CONT)
The following pro forma adjustments to the condensed consolidated statement of
operations are as if the acquisitions had been completed at the beginning of the
period presented and are not indicative of what would have occurred had the
acquisitions actually been made as of such date. IDX was acquired on December 2,
1998; therefore, the results of operations of IDX for the month of December 1998
are included in the historical results of the Company for the twelve months
ended December 31, 1998.
<TABLE>
<CAPTION>
(2) Adjustments to revenue:
<S> <C>
Elimination of IDX billings to the Company $ (41,000)
Adjustment to revenue to give effect to IDX's purchase of a subsidiary in April, 1998
and its sale of another subsidiary in November, 1998 as if the purchase and sale had
been completed at the beginning of the period presented (80,000)
--------------
$ (121,000)
==============
(3) Adjustments to cost of revenue:
Elimination of IDX billings to the Company $ (41,000)
Adjustment to cost of revenue to give effect to IDX's purchase of a subsidiary in April,
1998 and its sale of another subsidiary in November, 1998 as if the purchase and sale
had been completed at the beginning of the period presented (24,000)
--------------
$ (65,000)
==============
(4) Adjustments to selling, general and administrative expenses:
Adjustment for the incremental increase in IDX and Telekey management compensation $ 78,000
Adjustment for incremental increase in Connectsoft management compensation 173,000
Adjustment for deferred compensation related to Telekey purchase 232,000
Adjustment for deferred compensation related to IDX purchase (stockholder approval
in June 1999 for increase in conversion feature) 105,000
Adjustment to give effect to IDX's purchase of a subsidiary in April, 1998 and its sale of
another subsidiary in November, 1998 as if the purchase and sale had been
completed at the beginning of the period presented (423,000)
--------------
$ 165,000
==============
(5) Adjustments to depreciation and amortization expenses:
Amortization for eleven months of original cost in excess of net assets acquired for the IDX $ 1,425,000
purchase which was effective December 2, 1998 (7 year straight-line amortization)
Amortization of costs in excess of net assets acquired for UCI purchase which was effective
December 31, 1998 (7 year straight line amortization) 214,000
Amortization of costs in excess of net assets related to stockholder approval in June 1999
of increase in conversion feature for the IDX purchase (7 year straight-line
amortization) 165,000
Amortization of intangibles and cost in excess of net assets acquired for the Telekey
purchase (7 year straight-line amortization) 717,000
Amortization of intangibles acquired in the Connectsoft purchase (3-5 year
straight-line amortization) 1,870,000
Amortization of cost in excess of net assets acquired for the Connectsoft
purchase (7 year straight-line amortization) 142,000
--------------
$ 4,533,000
==============
</TABLE>
25
<PAGE>
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(CON'T)
<TABLE>
<CAPTION>
<S> <C>
(6) Adjustment to other income (expenses) (note that interest on the two IDX notes that
were subsequently renegotiated and exchanged for shares of Series I Preferred
Stock is not included below):
Adjustment to give effect to IDX's purchase of a subsidiary in April,
1998 and its sale of another subsidiary in November, 1998 as if the
purchase and sale had been completed at the beginning of the period
presented $ (411,000)
Interest on $0.418 million IDX note @ 7.75% due 5/99 13,000
Interest on $0.5 million UCI note @8% due 6/99 20,000
Interest on $0.5 million UCI note @8% due 5/2000 40,000
Interest on $1.0 million IDX note @7.75% due 2/99 19,000
Additional interest recorded for value of 50,000 warrants issued in
connection with the UCI purchase 43,000
Interest on $0.5 million note payable to seller of Connectsoft 40,000
---------------
(236,000)
Less interest expense recorded by the Company in the historical
results of operations for the twelve months ended December 31, 1998 31,000
---------------
$ (205,000)
===============
(7) To eliminate the minority interest in income of a subsidiary. In connection with the
acquisition of Telekey by the Company, the 20% minority interest in Telekey,
L.L.C. was acquired by Telekey. $ 59,000
===============
(8) To reflect state income taxes (Telekey was previously an S-corporation) at 6% as
Georgia does not allow for a consolidated filing. The Telekey federal taxable
income can be offset with the Company's current period losses. $ 21,000
===============
</TABLE>
26
<PAGE>
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(9) To reflect the preferred stock dividends associated with these transactions:
<S> <C>
Annual dividend on Series G Preferred Stock $ 180,000
Annual dividend on Series I Preferred Stock 320,000
Dividend to IDX stockholders due to renegotiation of purchase agreement. 6,400,000
---------------
$ 6,900,000
===============
(10) Adjustment to the basic weighted average number of shares outstanding of
17,736,654 as if the acquisitions and IDX renegotiation had been completed
at the beginning of the period presented:
Issuance of common stock in payment of $0.4 million IDX note 141,000
Issuance of common stock in UCI purchase 63,000
---------------
204,000
===============
(11) Convertible preferred stock and convertible preferred notes were not included
in diluted earnings (loss) per share due to the Company recording a loss
for the period presented. The following table reflects the hares of common
stock that would have been issuable upon conversion:
Series H Preferred Stock 3,750,000
Series I Preferred Stock, including payment of accrued dividend 1,440,000
Convertible $1.0 million IDX note payable, including interest (converted in
1999) 474,000
Series F Preferred Stock 1,515,000
Series G Preferred Stock 1,000,000
---------------
8,179,000
===============
</TABLE>
27
<PAGE>
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE B. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1999
The following pro forma adjustments to the condensed consolidated statement
of operations are as if the acquisitions had been completed at the beginning
of the fiscal period presented and are not indicative of what would have
occurred had the acquisitions actually been made as of such date.
Connectsoft was acquired in June 1999 and Telekey was acquired in February
1999; therefore, the results of operations of Connectsoft for the month of
June 1999 and the results of operations of Telekey for February through June
1999 are included in the historical results of the Company for the six
months ended June 30, 1999.
<TABLE>
<CAPTION>
<S> <C>
(12) Adjustment to selling, general and administrative expenses:
Adjustment for the incremental increase in Connectsoft management
compensation $72,000
=========
(13) Adjustments to depreciation and amortization expenses:
One month of amortization intangibles and of cost in excess of net
assets acquired for Telekey purchase (7 year straight-line
amortization) 60,000
Five months of amortization of intangibles acquired in the Connectsoft
purchase (3-5 year straight-line amortization) 779,000
Five months of amortization of cost in excess of net assets acquired for
Connectsoft purchase (7 year straight-line amortization) 59,000
---------
$898,000
=========
(14) Adjustment to other income (expenses):
Reverse interest recorded on $4.0 million IDX notes subsequently
exchanged for Series I Preferred Stock $(182,000)
=========
(15) Adjustment to preferred stock dividends:
Five months dividend on 6% Series G Preferred Stock $75,000
issued in Connectsoft acquisition
Dividend on Series I Preferred Stock 160,000
---------
$ 235,000
=========
</TABLE>
28
<PAGE>
EGLOBE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(16) Adjustment to the basic weighted average number of shares outstanding
of 18,904,001 as if the acquisitions and IDX renegotiation had been
completed at the beginning of the fiscal period presented.
<TABLE>
<CAPTION>
<S> <C>
Issuance of common stock in payment of $0.4 million IDX note 141,000
Issuance of common stock in UCI purchase 63,000
----------
204,000
==========
(17) Convertible preferred stock and convertible preferred notes were not
included in diluted earnings (loss) per share due to the Company
recording a loss for the period presented. The following table reflects
the shares of common stock that would have been issuable upon
conversion:
Series H Preferred Stock 3,750,000
Series I Preferred Stock including payment of accrued dividend 1,493,000
Series F Preferred Stock 1,515,000
Series G Preferred Stock 1,000,000
----------
7,758,000
==========
</TABLE>
29
<PAGE>
EGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE C. CONTINGENCIES
The following adjustments to the pro forma basic net loss per share are
to reflect the following: (1) the issuance of additional shares of
Series F Preferred Stock and warrants and the assumed conversion into
common stock which would have occurred if Telekey and IDX,
respectively, had met their earn-out formulas at the beginning of the
periods presented; (2) the additional shares of common stock to be
issued to UCI shareholders assuming UCI had met its earn-out provision;
(3) the estimated additional compensation expense related to the IDX
stockholders' grant of shares under the original agreement, including
shares issuable under the IDX warrant; and (4) the assumption that the
Company's common stock met the guaranteed trading price of $6.00 per
share for IDX related shares, $8.00 per share for UCI related shares
and $4.00 per share for the Telekey related shares. The increase in
goodwill amortization expense is the result of the additional goodwill
recorded as a result of the above issuances amortized over 7 years
using straight-line amortization.
In addition, if the Company's common stock does not trade at the
guaranteed trading prices for UCI related shares and Telekey related
shares and, subject to UCI and Telekey meeting their earn-out
objectives, the Company will be required to issue additional shares of
common stock and the estimated goodwill amortization reflected below
will change. If the Company's common stock does not trade at the
guaranteed trading price of $6.00 for IDX related shares and upon
conversion of Series H Preferred Stock, the Company may record an
additional dividend of up to $9.0 million if more than 3,750,000 shares
of common stock are issued.
The final purchase price allocations will be determined when certain
contingencies are resolved as discussed earlier and additional
information becomes available. This is not indicative of what would
have occurred had the acquisitions actually been made as of such date.
30
<PAGE>
EGLOBE, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1999 DECEMBER 31, 1998
---------------- -------------------
<S> <C> <C>
PRO FORMA BASIC AND DILUTED LOSS PER SHARE:
NUMERATOR
Pro forma net loss attributable to common stock $(25,944,000) $(35,219,000)
Increase in goodwill amortization expense for
earn-out formulas (7
year straight-line amortization) (1,894,000) (3,788,000)
Additional estimated compensation related to
stock granted to IDX employees by IDX
stockholders after the Company's purchase of
IDX -- (3,420,000)
Additional estimated compensation related to
stock granted to Telekey employees by
Telekey stockholders after the Company's
purchase of Telekey -- (248,000)
---------------- --------------------
Adjusted pro forma net loss $(27,838,000) $(42,675,000)
---------------- --------------------
DENOMINATOR
Weighted average shares outstanding 19,108,001 18,003,154
Number of shares of common stock issuable
under earn-out formulas:
UCI (contingent earn-out stock) 62,500 62,500
---------------- --------------------
Adjusted pro forma basic weighted average shares
outstanding: 19,170,501 18,065,654
---------------- --------------------
PER SHARE AMOUNTS
Adjusted pro forma basic and diluted loss per share $(1.45) $(2.36)
</TABLE>
- --------------------------------------------------------------------------------
The diluted loss per share in the above table does not
reflect the 1,755,000 shares of common stock that would be
issuable upon the conversion of the Series F Preferred Stock
and exercise of the IDX warrants under the respective
earn-out agreements. As the Company reported losses in both
periods, the effects of these transactions are
anti-dilutive.
31
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed in its
behalf by the undersigned, thereunto duly authorized.
eGlobe, Inc.
(Registrant)
Date: August 27, 1999 By /S/ Anne Haas
-----------------------------------------
Anne Haas
Controller, Treasurer
(Principal Accounting Officer)
32
EXHIBIT 2.6
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is made and entered into this
____ day of July, 1999, by and between certain former stockholders (the
"Stockholders") of IDX International, Inc., a Virginia corporation (the
"Company"); and eGlobe, Inc., a Delaware corporation ("Acquiror").
WHEREAS, the Stockholders, other former stockholders of the Company and
Acquiror entered into an Agreement and Plan of Merger ("Merger Agreement") dated
June 10, 1998, wherein Acquiror, through its wholly owned subsidiary, purchased
all of the issued and outstanding stock of the Company in exchange for (a)
500,000 shares of Series B Convertible Preferred Stock, par value $.001 per
share, of Acquiror (the "Series B Preferred Stock"), (b) warrants (the "Original
Warrants") to acquire up to 2,500,000 shares of Common Stock, par value $.001
per share ("Acquiror Common Stock"), of Acquiror and certain promissory notes in
the aggregate principal amount of $5 million, of which $4 million in aggregate
principal amount (the "Current Amount") (not including accrued interest) is
outstanding (the Subordinated Convertible Promissory Notes");
WHEREAS, the Company, the Stockholders and Acquiror desire to enter
into new arrangements with respect to such securities;
NOW, THEREFORE, in consideration of the promises, the mutual
representations, warranties and covenants set forth herein, the Stockholders and
Acquiror hereby agree as follows:
1. Exchange. At a closing to occur within 10 business days following
the execution and delivery of this Agreement (the "Closing"), the Stockholders
shall:
(a) exchange their issued and outstanding shares of Series B Preferred
Stock for an equal number of shares of Series H Convertible Preferred Stock, par
value $.001 per share, of Acquiror (the "Series H Preferred Stock");
(b) exchange their Original Warrants for warrants ("Replacement
Warrants") to acquire up to 1,250,000 shares of Acquiror Common Stock, pro rated
downward based upon the ratio of the number of shares subject to the Original
Warrants so exchanged to the number of shares subject to all Original Warrants;
and
<PAGE>
(c) exchange their interests in the final two Subordinated Convertible
Promissory Notes for 400,000 shares of Series I Convertible Optional Redemption
Preferred Stock, par value $.001 per share, of Acquiror (the "Series I Preferred
Stock"), pro rated downward based upon the ratio of the interests in the two
promissory notes so exchanged to the Current Amount.
The terms of the Series H Preferred Stock and Series I Preferred Stock shall be
as set forth in the forms of Certificate of Designations for the Series H
Preferred Stock and the Series I Preferred Stock Convertible attached hereto as
Exhibit A and B, respectively. The terms of the Replacement Warrants shall be as
set forth in the form of Replacement Warrant attached hereto as Exhibit C.
2. Registration of Stock. Acquiror shall, following the Closing, use
its reasonable best efforts, consistent with policies and regulations of the
Securities and Exchange Commission, National Association of Securities Dealers
and the Nasdaq Stock Market, to register the Acquiror Common Stock issuable upon
the conversion of the Series H Preferred Stock and the Series I Preferred Stock,
or upon exercise of the Replacement Warrants, respectively, held by Stockholders
for public resale, including filing a registration statement with the SEC with
respect to such Acquiror Common Stock (a "Resale Registration Statement"),
provided that Acquiror shall not be required to disclose in such Resale
Registration Statement any material non-public information regarding Acquiror.
Acquiror shall use its best efforts to have the Resale Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing. Acquiror shall maintain the effectiveness of the Resale
Registration Statement until all Acquiror Common Stock registered pursuant to
the Resale Registration Statement has been disposed of by the Stockholders or
such Acquiror Common Stock is otherwise eligible for public resale under
applicable securities laws.
3. Waiver of Right of Setoff and Claims. Pursuant to the terms of the
Merger Agreement, Acquiror is entitled to reduce the aggregate principal balance
of the Subordinated Convertible Promissory Note due October 30, 1999 (the "Final
Note") by the Closing Indebtedness as defined in the Merger Agreement (the
"Right of Setoff"). Acquiror has represented that it has claims against the
former stockholders of the Company based upon misrepresentations and rights of
indemnification, including for a shortfall in net working capital (collectively,
"Claims"), in the amount (together with its Right of Setoff) of up to $1
million. Acquiror hereby waives its Right of Setoff and all Claims against the
Stockholders (which waiver does not apply to Acquiror's rights against former
stockholders of the Company not parties hereto).
-2-
<PAGE>
4. Extension of Dividend Note. Each Stockholder that previously owned
shares of the Company's preferred stock and accordingly has a right to its pro
rata portion of the proceeds from the Subordinated Convertible Promissory Note
in the original principal amount of $418,024 relating to the accrued but unpaid
dividends on the Company's preferred stock hereby agrees to the extension of the
maturity date under such note from May 31, 1999 to July 15, 1999.
5. Closing. At the Closing, the Stockholders shall (a) deliver to
Acquiror certificates evidencing all of their outstanding shares of Series B
Preferred Stock duly endorsed in blank or with duly executed stock powers
attached and their Original Warrants and (b) cause the Representative (as
defined in the Merger Agreement) to deliver the two Subordinated Convertible
Promissory Notes to reflect the retirement of their interests therein. In
exchange therefor, Acquiror shall deliver to the Stockholders (by delivery to
the Representative) at Closing (i) certificates evidencing the shares of Series
H Preferred Stock issuable pursuant to Section 1(a), (ii) the Replacement
Warrants issuable pursuant to Section 1(b) evidencing the right to purchase
shares of Acquiror Common Stock, (iii) certificates evidencing the shares of
Series I Preferred Stock issuable pursuant to Section 1(c) and (iv) new
Subordinated Convertible Promissory Notes representing the balance, if any, of
the two Subordinated Convertible Promissory Notes payable to the other former
stockholders of the Company.
At the Closing, to the extent permitted by law, each Stockholder's
shares of Series B Preferred Stock and Original Warrants shall, by virtue of
such Stockholder's execution of this Agreement, be deemed converted into the
right to receive an equal number of shares of Series H Preferred Stock and a
Replacement Warrant. As a result of such Stockholder's execution of this
Agreement, to the extent permitted by law, all of such Stockholder's shares of
Series B Preferred Stock and their Original Warrant shall cease to be
outstanding and shall be canceled and retired and shall cease to exist even if
the certificate representing such shares of Series B Preferred Stock or the
Original Warrant are not surrendered.
6. Miscellaneous.
(a) Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement of the Stockholders and
Acquiror.
(b) Waiver. Any breach of any obligation, covenants, agreement
or condition contained herein shall be deemed waived by the non-breaching party,
only by a writing, setting forth with particularity the breach being waived and
the scope of the waiver, but such waiver shall not operate
-3-
<PAGE>
as a waiver of, or estoppel with respect to, any subsequent or other breach. No
waiver shall be implied from any conduct or action of the non-breaching party.
No failure or delay by any party in exercising any right, power or privilege
hereunder or under the Series B Preferred Stock, the Replacement Warrants or the
Series I Preferred Stock and no course of dealing by any party shall operate as
a waiver and any right, power or privilege hereunder or under the Series B
Preferred Stock, the Replacement Warrants or the Series I Preferred Stock nor
shall any single or partial exercise thereof or the exercise of any other right,
power or privilege.
(c) Binding Nature of Agreement. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties. Any such assignment without the prior written consent of all the
parties shall be invalid.
(d) Governing Law. This Agreement and the legal relations
among the parties hereto shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and performed
therein.
(e) Expenses. Except as provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
(f) Counterparts. This Agreement may be signed in counterparts
with the same effect as if all parties had signed one and the same instrument.
(g) Form of Signature. The parties hereto agree to accept a
facsimile transaction copy of their respective signatures as evidence of their
respective actual signatures to this Agreement; provided, however, that each
party who produces a facsimile signature agreement, by the express terms hereof,
to place, immediately after transmission of its signature by fax, a true and
correct original copy of its signature in overnight mail to the address of the
other party.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first above written.
ACQUIROR
eGLOBE, INC.
By:
-------------------------------------
Christopher J. Vizas
Chairman and Chief Executive Officer
STOCKHOLDERS*
----------------------------------------
HILK International, Inc.
----------------------------------------
Chatwick Investments, Ltd.
----------------------------------------
Jeffey J. Gee
----------------------------------------
Yi-Shang Shen
----------------------------------------
Michael Muntner
----------------------------------------
Trylon Partners, Inc.
----------------------------------------
Orville Greynolds
----------------------------------------
Teknos Communications, S.A.
-5-
<PAGE>
----------------------------------------
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.
*By Jeffey Gee
under an Agreement to Amendment
authorizing execution of this
Agreement on such Stockholders'
behalf
- -------------------------------------
Jeffey Gee
-6-
EXHIBIT 4.5
CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES
OF
SERIES H CONVERTIBLE PREFERRED STOCK
OF
eGLOBE, INC.
- --------------------------------------------------------------------------------
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 eGlobe, Inc., 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 H
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 they hereby
are, designated as "Series H Convertible Preferred
<PAGE>
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 Chief
Executive Officer and attested to by its Secretary this 3rd day of August, 1999.
eGLOBE, INC.
By: /s/ Christopher J. Vizas
---------------------------------
[SEAL] Name: Christopher J. Vizas
Title: President and Chief Executive
Officer
ATTEST:
/s/ Graeme S.R. Brown
- ------------------------------------
Name: Graeme S.R. Brown
Title: Assistant Secretary
-2-
<PAGE>
EXHIBIT A
SERIES H 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 H Convertible Preferred Stock, par value $.001 per
share ("Series H 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 H 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 H 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 H 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.
Section 2. No Redemption.
Series H Preferred shall not be redeemable.
Section 3. Dividend Rights.
Except as otherwise provided herein or as required by law,
holders of Series H Preferred shall be entitled to receive dividends only when
and as declared by the Corporation's Board of Directors with respect to Series H
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 H
Preferred, at the same time that it declares and pays such dividends to the
holders of the Common Stock, the
-3-
<PAGE>
dividends which would have been declared and paid with respect to the Common
Stock issuable upon conversion of the Series H Preferred had all of the
outstanding Series H 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 H
Preferred, the holders of Series H 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 H Preferred receive
aggregate distributions equal to the amounts that such holders would have
received if the Series H Preferred Stock had been converted into Common Stock
immediately prior to such Liquidation.
Section 5. Conversion.
The holders of the Series H Preferred shall have the following
rights with respect to the conversion of the Series H Preferred into shares of
Common Stock:
5A. Series H Conversion Rate.
(i) Conversion Rate Formula. The conversion rate in
effect at any time for conversion of the Series H Preferred (the "Series H
Conversion Rate") shall be the product of (i) seven and a half (7.5), multiplied
by (ii) the quotient obtained by dividing $6.00 by the applicable "Series H
Market Factor" (determined as provided in Section 5A(ii)).
(ii) Series H Market Factor. The Series H 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 H Market Factor shall equal
$3.33-1/3; (B) if the Market Price is greater than $3.33-1/3 but less than $6.00
as of the Adjustment Date, the Series H Market Factor shall equal the Market
Price; and (C) if the Market Price is greater than or equal to $6.00 as of the
Adjustment Date, the Series H Market Factor shall equal $6.00; provided,
however, that notwithstanding clauses (A), (B) and (C) of this Section 5A(ii),
if Series H Preferred is converted prior to the Adjustment Date (whether by the
holder or automatically pursuant to 5F(i)), the Series H Market Factor shall
equal $6.00.
-4-
<PAGE>
(iii) Adjustment. The Series H Conversion Rate shall
be subject to adjustment pursuant to Section 5C.
5B. 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 H Preferred (the
"Original Series H Issue Date") effect a subdivision of the outstanding Common
Stock, the Series H 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 H Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares,
the Series H Conversion Rate in effect immediately before the combination shall
be proportionately decreased. Any adjustment under this Section 5C 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 H Issue Date makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Series H
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 H 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 H Conversion Rate shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Series H Conversion Rate shall be adjusted pursuant to this
Section 5B to reflect the actual payment of such dividend or distribution.
5C. Reorganizations, Mergers or Consolidations. If at any time
or from time to time after the Original Series H 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 H
Preferred shall thereafter be entitled to receive upon conversion of the Series
-5-
<PAGE>
H 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 H Preferred after such transaction to the end that the
provisions of this Section 5 (including adjustment of the Series H Conversion
Rate then in effect and the number of shares issuable upon conversion of the
Series H 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
H Issue Date, the Common Stock issuable upon the conversion of the Series H
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 or stock dividend or a
reorganization, merger or consolidation provided for elsewhere in this Section
5), in any such event each holder of Series H 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 H 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.
5D. Notices.
(i) Immediately upon any adjustment of the Series H
Conversion Rate, the Corporation shall give written notice thereof to all
holders of Series H 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
-6-
<PAGE>
to each holder of Series H 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.
5E. Automatic Conversion. Each share of Series H Preferred
shall automatically be converted into shares of Common Stock, based on the
then-effective Series H Conversion Rate, on the earliest to occur of (i) the
first date as of which the Market Price is $6.00 or more for any 15 consecutive
trading days during any period in which Series H Preferred is outstanding and
(ii) the Adjustment Date. The number of shares of Common Stock to which a holder
of Series H Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series H Conversion Rate" then in effect
(determined as provided in Section 5A) by the number of shares of Series H
Preferred being converted.
5F. Mechanics of Conversion. Upon the occurrence of the event
specified in Section 5E, the outstanding shares of Series H 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 H 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 H Preferred at the office of
the Corporation or any transfer agent for the Series H 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 H 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 H Preferred shall be deemed
for all corporate purposes to represent
-7-
<PAGE>
the number of shares of Common Stock resulting from such automatic conversion.
5G. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series H Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series H 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 H 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.
5H. 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 H 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 H 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 H 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.
5I. Payment of Taxes. The issuance of certificates for shares
of Common Stock upon conversion of Series H Preferred shall be made without
charge to the holders of such Series H 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
-8-
<PAGE>
than that in which the shares of Series H Preferred so converted were
registered.
Section 6. Definitions.
"Adjustment Date" means January 31, 2000.
"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 upon conversion of Series H 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 H 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 eGlobe, Inc. a Delaware corporation.
"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
-9-
<PAGE>
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 days
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 H 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 H Preferred.
"Series H Preferred" means the Corporation's Series H
Convertible Preferred Stock, par value $.001 per share.
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<PAGE>
Section 7. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or
provisions of the Series H Preferred shall be binding or effective without the
prior approval (by vote or written consent) of the holders of a majority of the
Series H Preferred then outstanding. Any amendment, modification or waiver of
any of the terms or provisions of the Series H Preferred with such approval,
whether prospective or retroactively effective, shall be binding upon all
holders of Series H Preferred.
Section 8. Registration of Transfer.
The Corporation shall keep at its principal office a register
for the registration of Series H Preferred. Upon the surrender of any
certificate representing Series H 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 H Preferred
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Series H
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 H 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 H Preferred shares
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
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
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<PAGE>
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.
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EXHIBIT 4.6
CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES
OF
SERIES I CONVERTIBLE OPTIONAL
REDEMPTION PREFERRED STOCK
OF
eGLOBE, INC.
- --------------------------------------------------------------------------------
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 eGlobe, Inc., 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 I
Convertible Optional Redemption 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 I Convertible Optional
Redemption Preferred Stock;" that the number of shares constituting
such series shall be, and it hereby is, 400,000; 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 Chief
Executive Officer and attested to by its Secretary this 3rd day of August, 1999.
eGLOBE, INC.
By: /s/ Christopher J. Vizas
-------------------------------------
[SEAL] Name: Christopher J. Vizas
Title: President and Chief Executive
Officer
ATTEST:
/s/ Graeme S.R. Brown
- --------------------------------------
Name: Graeme S.R. Brown
Title: Assistant Secretary
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<PAGE>
EXHIBIT A
SERIES I 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 I Convertible Preferred Stock, par value $.001 per
share ("Series I 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 I Preferred shall have no voting rights.
Section 2. Redemption. The shares of Series I Preferred shall
be subject to redemption, as follows.
2A. Redemption Rights. At the option of the Corporation, in
its sole discretion,
(i) Up to 150,000 shares of Series I Preferred (the
"First Redemption Shares") on a pro rata basis from the holders of the Series I
Preferred (based upon the aggregate number of shares of Series I Preferred held
by such holders) shall be subject to redemption at any time prior to February
14, 2000 (the "First Redemption Period").
(ii) All shares of Series I Preferred other than the
First Redemption Shares (the "Second Redemption Shares") shall be subject to
redemption at any time prior to July 17, 2000 (the "Second Redemption Period"
and together with the First Redemption Period, the "Redemption Periods"). Any
such redemption shall be on a pro rata basis from the holders of the Series I
Preferred based upon the aggregate number of shares of Series I Preferred held
by such holders.
The shares of the Series I Preferred may be redeemed, in whole or in part, at
the option of the Corporation at a redemption price (the "Redemption Price") per
share equal to $10 (the "Current Amount") plus an amount equal to the Current
Amount times an 8% annual interest rate calculated from December 2, 1998 through
the date on which redemption takes place (the "Redemption Date"). The Redemption
Price is payable in (i) cash, (ii) by delivery of shares of Common Stock, valued
at the Market Price or (iii) a combination thereof.
3
<PAGE>
2B. Redemption Mechanics. The Corporation shall give
a redemption notice (the "Redemption Notice") on or prior to the final day of
the relevant Redemption Periods (i) by certified mail, postage prepaid, (ii) by
a nationally known overnight delivery service or (iii) delivered by hand,
addressed to each holder of record of shares of Series I Preferred, notifying
such holder of the redemption and specifying the Redemption Price applicable to
the Series I Preferred, the Redemption Date and the place where said Redemption
Price shall be payable. The Redemption Notice shall be addressed to each holder
at his address as shown by the records of the Corporation. On or after the
Redemption Date fixed in such Redemption Notice, each holder of shares of Series
I Preferred to be so redeemed shall present and surrender the certificate or
certificates for such shares to the Corporation at the place designated in said
notice and thereupon the Redemption Price of such shares shall be paid to, or to
the order of, the Person whose name appears on such certificate or certificates
as the owner thereof. From and after the close of business on the Redemption
Date, unless there shall have been a default in the payment of the Redemption
Price upon surrender of a certificate or certificates representing shares of
Series I Preferred to be redeemed, all rights of holders of shares of Series I
Preferred subject to redemption on the Redemption Date (except the right to
receive the Redemption Price upon surrender of a certificate or certificates
representing shares of Series I Preferred to be redeemed, but without interest)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the Corporation or be deemed to be outstanding for
any purpose whatsoever.
Section 3. Dividend Rights.
Except as otherwise provided herein or as required by law,
holders of Series I Preferred shall be entitled to receive dividends only when
and as declared by the Corporation's Board of Directors with respect to Series I
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
Redemption Date or Conversion Date (as defined below), other than dividends
payable solely in shares of Common Stock, the Corporation shall also declare and
pay to the holders of the Series I 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 Stock issuable upon
conversion of the Series I Preferred had all of the outstanding Series I
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.
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<PAGE>
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 I
Preferred, the holders of Series I 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 I Preferred receive
aggregate distributions equal to the amounts that such holders would have
received if the Series I Preferred Stock had been converted into Common Stock
immediately prior to such Liquidation.
Section 5. Conversion.
5A. Automatic Conversion.
(i) All First Redemption Shares not redeemed by the
Corporation prior to the First Redemption Date shall automatically be converted
into shares of Common Stock on February 14, 2000 (the "First Conversion Date").
(ii) Each Second Redemption Share not redeemed by
the Corporation prior to the Second Redemption Date shall automatically be
converted into shares of Common Stock on July 17, 2000 (the "Second Conversion
Date" and together with the First Conversion Date, the "Conversion Date"). The
number of shares of Common Stock to which a holder of Series I Preferred shall
be entitled upon conversion shall be the product obtained by multiplying the
"Series I Conversion Rate" then in effect (determined as provided in 5B) by the
number of shares of Series I Preferred being converted.
(iii) Notwithstanding the foregoing, the Series I
Preferred may be converted into a maximum of 3,900,000 shares of Common Stock,
and from and after issuance of such number of shares of Common Stock upon
conversion of the Series I Preferred, all shares of the Series I Preferred shall
cease to be convertible (a "Cessation of Conversion Event"). Following the
Cessation of Conversion Event, the Corporation shall redeem all then outstanding
shares of Series I Preferred (on the applicable Conversion Date) for an amount
equal to the Redemption Price.
5B. Conversion Rate Formula. The conversion rate in
effect at any time for conversion of the Series I Preferred (the "Series I
Conversion Rate") shall equal (1) $10 plus an amount equal to the Current Amount
times an 8% annual interest rate calculated from December 2, 1998 through the
Conversion Date, divided by (2) the greater of the Market Price of the Common
Stock on the date of conversion and $2.00. The Series I Conversion Rate shall be
adjusted to the extent required by Section 5A(iii). The Series I Conversion Rate
shall be subject to adjustment pursuant to Section 5C.
-5-
<PAGE>
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 I Preferred (the
"Original Series I Issue Date") effect a subdivision of the outstanding Common
Stock, the Series I 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 I Issue Date
combine the outstanding shares of Common Stock into a smaller number of shares,
the Series I Conversion Rate in effect immediately before the combination shall
be proportionately decreased. Any adjustment under this Section 5C 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 I Issue Date makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Series I
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 I 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 I Conversion Rate shall be
recomputed accordingly as of the close of business on such record date and
thereafter the Series I 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 I 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 I
Preferred shall thereafter be entitled to receive upon conversion of the Series
I 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 I Preferred after such transaction to the end that the
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<PAGE>
provisions of this Section 5 (including adjustment of the Series I Conversion
Rate then in effect and the number of shares issuable upon conversion of the
Series I 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
I Issue Date, the Common Stock issuable upon the conversion of the Series I
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 or stock dividend or a
reorganization, merger or consolidation provided for elsewhere in this Section
5), in any such event each holder of Series I 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 I 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 I Conversion
Rate, the Corporation shall give written notice thereof to all holders of Series
I 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 I 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.
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<PAGE>
5F. Mechanics of Conversion. Upon the occurrence of the
applicable event specified in Section 5A, the outstanding shares of Series I
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 I 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 I Preferred at the office of
the Corporation or any transfer agent for the Series I 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 I 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 I Preferred shall be deemed
for all corporate purposes to represent the number of shares of Common Stock
resulting from such automatic conversion.
5G. Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Series I Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series I 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 I 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.
5H. 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
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<PAGE>
I 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 I
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 I 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.
5I. Payment of Taxes. The issuance of certificates for shares
of Common Stock upon conversion of Series I Preferred shall be made without
charge to the holders of such Series I 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 I Preferred so converted were registered.
Section 6. Definitions.
"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 upon conversion of Series I 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 I 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 eGlobe, Inc. a Delaware corporation.
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<PAGE>
"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
immediately prior to the Conversion Date (the "Pricing Period"), the Closing
Price of the Common Stock averaged over the 15 consecutive trading days
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 I 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 I Preferred.
"Series I Preferred" means the Corporation's Series I
Convertible Preferred Stock, par value $.001 per share.
Section 7. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or
provisions of the Series I Preferred shall be binding or effective without the
prior approval (by vote or written consent) of the holders of a majority of the
Series I Preferred then outstanding. Any amendment, modification or waiver of
any of the terms or provisions of the Series I Preferred with such approval,
whether prospective or retroactively effective, shall be binding upon all
holders of Series I Preferred.
Section 8. Registration of Transfer.
The Corporation shall keep at its principal office a register
for the registration of Series I Preferred. Upon the surrender of any
certificate representing Series I 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 I Preferred
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such
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<PAGE>
number of Series I 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 I 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 I Preferred shares
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
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.
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EXHIBIT 4.7
RESTRICTION ON TRANSFER
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE SECURITIES LAWS, AND
CANNOT BE RESOLD UNLESS SUBSEQUENTLY REGISTERED UNDER THE ACT AND SUCH LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
WARRANT
To purchase shares of Common Stock of
eGlobe, Inc.
1. Grant of Warrant. This is to certify that, for value
received, ____________________________ (the "Holder") is entitled to purchase,
subject to and in compliance with the provisions of this Warrant, from eGlobe,
Inc., a Delaware corporation ("eGlobe"), an aggregate of __________ shares (the
"Initial Number") [the Initial Numbers will add up to 1,250,000 shares] of
Common Stock (as defined below) of eGlobe, as the Initial Number will be
adjusted following the Adjustment Date (as defined below), at a purchase price
per share equal to $.001 (the "Exercise Price"). The Initial Number, as
adjusted, and the Exercise Price are subject to adjustment as provided below.
2. Term. This Warrant may be exercised, subject to and in
compliance with the provisions of this Warrant, in whole at any time or from
time to time during the period commencing on the Adjustment Date (provided, that
if the Determination Date (as defined below) has not occurred by the time the
Holder seeks to exercise this Warrant, eGlobe may postpone any exercise until
the Determination Date, but then shall take appropriate steps to put the Holder
in the same economic position as if the Common Stock issuable upon exercise of
this Warrant had been issued on the date of attempted exercise and such Common
Stock held until the Determination Date), and ending on the date that is 30 days
after the Determination Date.
3. Adjustments.
(i) Determination Date Adjustment Formula. On the
Determination Date, the Initial Number shall be multiplied by the applicable
Target Achievement Percentage (as defined in the Side Letter). The Initial
Number, as so adjusted, is referred to herein as the "Adjusted Number." If the
"Target Achievement Percentage" equals zero (0), this Warrant shall not become
exercisable, and shall terminate in its entirety.
<PAGE>
(ii) Adjustment for Stock Splits and Combinations, Common
Stock Dividends and Distributions. If eGlobe shall at any time or from time to
time after the date of the initial issuance of this Warrant (the "Original Issue
Date") effect a subdivision of the outstanding Common Stock, the Adjusted Number
in effect immediately before that subdivision shall be proportionately increased
and the Exercise Price shall be proportionately decreased. Conversely, if eGlobe
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares, the Adjusted
Number in effect immediately before the combination shall be proportionately
decreased and the Exercise Price shall be proportionately increased. Any
adjustment under this Section 3(ii) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
If eGlobe at any time or from time to time after the Original
Issue Date makes, or fixes a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, in each such event the Adjusted Number in
effect immediately before that issuance shall be proportionately increased and
the Exercise Price shall be proportionately decreased 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 Adjusted Number 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, and by multiplying the Exercise Price then in
effect by the inverse of such fraction; 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 Adjusted Number and the Exercise
Price shall be recomputed accordingly as of the close of business on such record
date and thereafter the Adjusted Number and the Exercise Price shall be adjusted
pursuant to this Section 3(ii) to reflect the actual payment of such dividend or
distribution.
(iii) Reorganizations, Mergers or Consolidations. If at any
time or from time to time after the Original 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 3), as a part of
such transaction, provision shall be made so that the Holder shall thereafter be
entitled to receive upon exercise of this Warrant the number of shares of stock
or other securities or property of eGlobe to which a holder of the number of
shares of Common Stock deliverable upon exercise would have been entitled in
connection with such transaction, subject to adjustment in respect of
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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 3
with respect to the rights of the Holder after such transaction to the end that
the provisions of this Section 3 (including adjustment of the Adjusted Number
and the Exercise Price then in effect) shall be applicable after that event and
be as nearly equivalent as practicable. In the case of any reorganization,
merger or consolidation in which eGlobe is not the surviving entity, eGlobe
shall not consummate the transaction unless the entity surviving such
transaction assumes all of eGlobe's obligations hereunder.
If at any time or from time to time after the Original Issue
Date, the Common Stock issuable upon the exercise of this Warrant 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 or stock dividend or a reorganization,
merger or consolidation provided for elsewhere in this Section 3), in any such
event the Holder shall have the right thereafter to exercise this Warrant for
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 for which this Warrant
could have been exercised 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.
(iii) Notices.
(I) Immediately upon determination of the Adjusted
Number, and any further adjustment of the Adjusted Number and the Exercise
Price, eGlobe shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(II) Upon (A) any taking by eGlobe 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 eGlobe, any merger or consolidation of eGlobe with or into any
other corporation, or any Liquidation, eGlobe shall mail to the Holder 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
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deliverable upon such reorganization, reclassification, transfer, consolidation,
merger or Liquidation.
4. Definitions.
"Adjustment Date" means September 30, 2000 if the Target
Achievement Percentage as of such date is 100%, otherwise December 31, 2000.
"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, eGlobe's common stock, par
value $.001 per share; and if there is a change such that the securities
issuable upon exercise of this Warrant are issued by an entity other than eGlobe
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 exercise of
this Warrant 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.
"Determination Date" means the date (following the Adjustment
Date) on which eGlobe has determined the Adjusted Number as of the Adjustment
Date and mailed written notice thereof to the Holder.
"IDX" means IDX International, Inc., a Virginia corporation.
"Liquidation" means the liquidation, dissolution or winding up
of eGlobe, whether voluntary or involuntary; provided, however, that neither the
consolidation or merger of eGlobe into or with any other entity or entities, nor
the sale or transfer by eGlobe of all or any part of its assets, nor the
reduction of the capital stock of eGlobe, 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
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trading days prior to such day (the "Pricing Period"), the Closing Price of the
Common Stock averaged over the 15 consecutive trading days 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 eGlobe and the Holder 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 eGlobe
(which appraiser may be eGlobe's investment banker, and the fees and expenses of
such appraiser shall be borne by eGlobe), which determination shall be final and
binding upon eGlobe and the Holder.
"Side Letter" means the side letter dated as of July __, 1999
by and among eGlobe and certain former stockholders of IDX.
5. Exercise Procedures.
(i) In order to exercise this Warrant, the Holder shall send a
written notice of exercise to eGlobe on any business day at eGlobe's principal
office, addressed to the attention of the Secretary of eGlobe, which notice
shall specify the number of shares for which this Warrant is being exercised.
Payment of the Exercise Price for the shares of eGlobe Common Stock purchased
pursuant to the exercise of this Warrant shall be made as provided in Section
5(ii). If the person or entity exercising this Warrant is not the Holder, such
person or entity shall also deliver, with the notice of exercise, appropriate
proof of the right of such person or entity to exercise this Warrant. An attempt
to exercise this Warrant granted hereunder other than as set forth above shall
be invalid and of no force and effect. Promptly after exercise of this Warrant
as provided for above, eGlobe shall deliver to the person exercising this
Warrant a certificate or certificates for the shares of eGlobe Common Stock
being purchased. In the event this Warrant is exercised in part only, eGlobe
shall, upon surrender of this Warrant for cancellation, execute and deliver to
the Holder a new Warrant of like tenor evidencing the right of the Holder to
purchase the balance of the shares of eGlobe Common Stock subject to purchase
hereunder. Such stock certificate or certificates shall be appropriately
legended to the extent required by federal or state securities laws. All shares
of eGlobe Common Stock issued upon exercise of this Warrant shall be duly
authorized and validly issued, fully paid and nonassessable.
(ii) The Exercise Price to be paid upon any exercise of this
Warrant shall be paid by reducing the number of shares of Common Stock otherwise
issuable pursuant to the election to purchase. The number of shares of Common
Stock to be issued to the Holder as a result of an exercise of this Warrant will
therefore equal the number of shares of Common Stock otherwise issuable pursuant
to the election to purchase multiplied by the following fraction:
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(Market Price per share - Exercise Price per share)
---------------------------------------------------
Market Price per share
6. Transferability. This Warrant may not be transferred by the
Holder in whole or in part without the prior written consent of eGlobe.
7. Reservation of Shares. eGlobe 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 exercise of this Warrant, such
number of shares of Common Stock as shall from time to time be sufficient to
effect the full exercise of this Warrant. 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 exercise of all then-outstanding shares of this Warrant, eGlobe
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.
8. Fractional Shares. No fractional shares of Common Stock
shall be issued upon exercise of this Warrant. All shares of Common Stock
(including fractions thereof) issuable upon more than one exercise of this
Warrant by the Holder thereof shall be aggregated for purposes of determination
whether the exercise would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the exercise would result in the issuance
of any fractional share, eGlobe 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 exercise.
9. General Restrictions. eGlobe shall not be required to issue
any shares of eGlobe Common Stock under this Warrant if the issuance of such
shares would constitute a violation by eGlobe of any provision of any law or
regulation of any governmental authority, including without limitation,
compliance with the registration or qualification requirement of applicable
federal and state securities laws or regulations. If at any time eGlobe shall
determine, based upon a written opinion of securities counsel, that the
registration or qualification of any shares subject to this Warrant under any
applicable state or federal law is necessary as a condition of, or in connection
with, the issuance of shares, this Warrant may not be exercised in whole or in
part unless such registration or qualification shall have been effected or
obtained free of any conditions not reasonably acceptable to eGlobe, and any
delay caused thereby shall in no way affect the date of termination of this
Warrant. Specifically in connection with the Securities Act of 1933 (as now in
effect or as hereafter amended) (the "Securities Act"), unless a registration
statement under the Securities Act is in effect with respect to the shares of
eGlobe Common Stock covered by this Warrant, eGlobe shall not be required to
issue such shares
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unless the Board of Directors of eGlobe has received evidence reasonably
satisfactory to it that the holder of this Warrant may acquire such shares
pursuant to an exemption from registration under the Securities Act. eGlobe's
only obligation to register any securities covered hereby pursuant to the
Securities Act is set forth in the Side Letter. As to any jurisdiction that
expressly imposes the requirement that this Warrant shall not be exercisable
unless and until the shares of eGlobe Common Stock covered by this Warrant are
registered or are subject to an available exemption from registration, the
exercise of this Warrant (under circumstances in which the laws of such
jurisdiction apply) shall be deemed conditioned upon the effectiveness of such
registration or the availability of such an exemption.
10. Divisibility; Combination. This Warrant may, at the option
of the Holder, without expense, be divided into or combined with other Warrants
for eGlobe Common Stock which carry the same rights. Upon surrender of this
Warrant and any such other Warrant to eGlobe together with a written notice
signed by the Holder and specifying the denominations for not less than 1,000
shares of eGlobe Common Stock in which new Warrants are to be issued, eGlobe
shall execute and deliver new Warrants, as requested entitling the Holder to
purchase in the aggregate the same number of shares of eGlobe Common Stock
purchasable hereunder and under any such other Warrants. The term "Warrant" as
used herein includes any Warrant into which this Warrant may be divided or
combined.
11. Applicable Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of Delaware except to the
extent federal law may be applicable.
12. Payment of Taxes. The issuance of certificates for shares
of Common Stock upon exercise of this Warrant shall be made without charge to
the Holder for any issuance tax in respect thereof or other cost incurred by
eGlobe in connection with such exercise and the related issuance of shares of
Common Stock.
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IN WITNESS WHEREOF, eGlobe has caused this Warrant to be duly
executed on the day and year set forth below.
DATED: __________ __, 1999
[SEAL] eGLOBE, INC.
ATTEST:
By
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Its
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