SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement/Prospectus [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement/Prospectus
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
eGLOBE, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement/Prospectus if Other Than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Perunit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
--------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
eGLOBE, INC.
1250 24TH STREET, NW, SUITE 725
WASHINGTON, DC 20037
August __, 2000
Dear Stockholder:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of eGlobe, Inc. to be held on Thursday, August 31, 2000 at 9:30 a.m., local
time, at the Washington Monarch Hotel, 2401 M Street, NW, Washington, DC 20037.
The matters to be acted upon at the Annual Meeting, as well as other
important information, are set forth in the accompanying Notice of Annual
Meeting and Proxy Statement which you are urged to review carefully.
Regardless of your plans for attending in person, it is important that your
shares be represented and voted at the Annual Meeting. Accordingly, you are
requested to complete, sign, date, and return the enclosed proxy card in the
enclosed postage paid envelope. Signing this proxy will not prevent you from
voting in person should you be able to attend the meeting, but will assure that
your vote is counted if, for any reason, you are unable to attend.
We hope that you can attend the 2000 Annual Meeting of Stockholders. Your
interest and support in the affairs of eGlobe, Inc. are appreciated.
Sincerely,
CHRISTOPHER J. VIZAS
Co-Chairman of the Board of Directors
and Chief Executive Officer
<PAGE>
eGLOBE, INC.
1250 24TH STREET, NW SUITE 725
WASHINGTON, DC 20037
(202) 822-8981
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 31, 2000
NOTICE IS HEREBY GIVEN that our Annual Meeting of Stockholders (the "Annual
Meeting") will be held on Thursday, August 31, 2000, at 9:30 a.m., local time,
at the Washington Monarch Hotel, 2401 M Street, NW, Washington, DC 20037, and
thereafter as it may from time to time be adjourned for the purposes stated
below:
1. To elect two directors to our Board of Directors to a term of three
years and until their successors have been duly elected and qualified
(Proposal 1, see page 7);
2. To approve the possible issuance of shares of our common stock upon the
conversion of shares of our Series P Convertible Preferred Stock and
Series Q Convertible Preferred Stock and exercise of warrants issued in
connection with the Series P Convertible Preferred Stock and the Series Q
Convertible Preferred Stock, where the number of shares issuable may
equal or exceed 20% of our common stock outstanding at the time these
securities were issued (Proposal 2, see page 28);
3. To approve each of the alternative proposals to effect a one-for-2.7,
one-for-3.7 or one-for-4.7 reverse stock split of our outstanding common
stock (Proposal 3, see page 34);
4. To amend our 1995 Employee Stock Option and Appreciation Rights Plan to
increase the number of shares of common stock under that plan from
7,000,000 to 12,000,000 (subject to periodic increases) and increase the
number of options that may be granted to a recipient during a two-year
period from 500,000 to 1,000,000 (Proposal 4, see page 38); and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
The above matters are described in the Proxy Statement. All of our
stockholders are cordially invited to attend the Annual Meeting. Only holders of
record of our common stock at the close of business on July 17, 2000 will be
entitled to vote at the Annual Meeting and any adjournments or postponements
thereof, either in person or by proxy. Our stock transfer books will not be
closed.
BY ORDER OF THE BOARD OF DIRECTORS
GRAEME BROWN, ESQ.
Deputy General Counsel and Secretary
August --, 2000
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN, AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY, IF YOU WISH, REVOKE YOUR PROXY
AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
<PAGE>
eGLOBE, INC.
1250 24TH STREET, NW SUITE 725
WASHINGTON, DC 20037
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 31, 2000
This Proxy Statement ("Proxy Statement") is furnished to stockholders of
eGlobe, Inc. (the "Company") in connection with the solicitation by our Board of
Directors of proxies (each individually, a "Proxy") to be used at our 2000
Annual Meeting of Stockholders (the "Annual Meeting") and at any adjournments or
postponements thereof. The Annual Meeting will be held on Thursday, August 31,
2000 at 9:30 a.m., local time, at the Washington Monarch Hotel, 2401 M Street,
NW, Washington, DC 20037, and thereafter as it may from time to time be
adjourned, for the purposes stated below.
At the Annual Meeting, our stockholders will be asked:
1. To elect two directors to our Board of Directors to a term of three
years and until their successors have been duly elected and qualified
(Proposal 1, see page 7);
2. To approve the possible issuance of shares of our common stock upon
the conversion of shares of our Series P Convertible Preferred Stock
and Series Q Convertible Preferred Stock and exercise of warrants
issued in connection with the Series P Convertible Preferred Stock and
the Series Q Convertible Preferred Stock, where the number of shares
issuable may equal or exceed 20% of our common stock outstanding at
the time these securities were issued (Proposal 2, see page 28);
3. To approve each of the alternative proposals to effect a one-for-2.7,
one-for-3.7 or one-for-4.7 reverse stock split of our outstanding
common stock (Proposal 3, see page 34);
4. To amend our 1995 Employee Stock Option and Appreciation Rights Plan
to increase the number of shares of common stock under that plan from
7,000,000 to 12,000,000 (subject to periodic increases) and increase
the number of options that may be granted to a recipient during a
two-year period from 500,000 to 1,000,000 (Proposal 4, see page 38);
and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournments or postponements thereof.
All Proxies in the enclosed form of proxy that are properly executed and
returned to us prior to commencement of voting at the Annual Meeting will be
voted at the Annual Meeting or any adjournments or postponements thereof in
accordance with the instructions thereon. EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED FOR APPROVAL OF THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT. We do not
know of any matters other than those set forth herein which may come before the
annual meeting. If any other matters should properly come before the annual
meeting, proxies will be voted in the discretion of the proxy holders.
The approximate date on which this Proxy Statement and form of proxy are
first being sent or given to our stockholders is August , 2000.
The cost of soliciting Proxies in the form enclosed herewith will be borne
entirely by the Company. In addition to the solicitation of Proxies by mail,
Proxies may be solicited by our officers and directors and our regular
employees, without additional remuneration, by personal interviews, telephone,
telegraph or otherwise. We may also utilize the services of our transfer agent,
American Stock Transfer & Trust Company, to provide broker search and proxy
distribution services at an estimated cost of $2,500. Copies of solicitation
material may be furnished to brokers, custodians, nominees and other fiduciaries
for forwarding to beneficial owners of shares of our common stock and normal
handling charges may be paid for such forwarding service.
The presence of a stockholder at the Annual Meeting will not automatically
revoke such stockholder's proxy. Stockholders may, however, revoke a proxy at
any time before its exercise by filing with the Secretary of the Company a
written revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
A COPY OF THE ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999, THE QUARTERLY REPORT FOR THE FISCAL QUARTER ENDED MARCH 31,
2000 AND THE CURRENT REPORT PURSUANT TO WHICH WE FILED RESTATED FINANCIAL
STATEMENTS WHICH REFLECT OUR MERGER WITH TRANS GLOBAL COMMUNICATIONS ACCOMPANIES
THIS PROXY STATEMENT.
OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE FOR APPROVAL
OF EACH OF THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Shares Outstanding and Voting Rights ..................................................... 4
Security Ownership of Management ......................................................... 5
Security Ownership of Certain Beneficial Owners .......................................... 6
Proposal 1: Election of Directors ........................................................ 7
Meetings and Committees of our Board of Directors ........................................ 11
Executive Compensation ................................................................... 12
Summary Compensation Table ............................................................... 12
Option/SAR Grants in Last Fiscal Period .................................................. 13
Aggregated Option/SAR Exercises in Last Fiscal Period and Fiscal Period-End Option/SAR
Values.................................................................................. 13
Compensation of Directors ................................................................ 14
Employment Agreements, Termination of Employment and Change in Control Arrangements ...... 14
Compensation Committee Interlocks and Insider Participation .............................. 19
Compensation Committee Report on Executive Compensation .................................. 20
Stock Performance Chart .................................................................. 23
Certain Relationships and Related Transactions ........................................... 23
Section 16(a) Beneficial Ownership Reporting Obligations ................................. 27
Proposal 2: Approval of the Issuance of Common Stock Upon the Conversion and Exercise of
the Series P Convertible Preferred Stock, Series Q Convertible Preferred Stock
and Certain Warrants ......................................................... 28
Proposal 3: Approval of the Reverse Split of shares of our common stock and amendment of
our Restated Certificate of Incorporation to effect the Reverse Stock Split .. 34
Proposal 4: Approval of Amendment to the 1995 Employee Stock Option and Appreciations
Rights Plan .................................................................. 38
Independent Accountants .................................................................. 42
Incorporation by Reference ............................................................... 42
Stockholder Proposals and Other Matters .................................................. 42
</TABLE>
3
<PAGE>
SHARES OUTSTANDING AND VOTING RIGHTS
Only holders of record of our common stock at the close of business on
Monday, July 17, 2000, will be entitled to notice of and to vote at the Annual
Meeting or any adjournments or postponements thereof. On July 17, 2000, there
were issued and outstanding, 97,042,828 shares of common stock of which
93,042,828 shares are entitled to vote. The remaining shares are owned by us or
our subsidiaries and may not be voted or counted towards calculation of a quorum
under Delaware corporation law.
Each holder of our common stock of record on such date will be entitled to
one vote on all matters to be voted upon at the Annual Meeting, including the
election of Directors. Our common stock votes as a single class. Holders of a
majority of the common stock represented at a meeting may approve most actions
submitted to the stockholders. Cumulative voting in the election of Directors is
not permitted.
A majority of our outstanding common stock represented in person or by
Proxy and entitled to vote will constitute a quorum at the Annual Meeting. Any
stockholder present in person or by Proxy who abstains from voting on any
particular matter described herein will be counted for purposes of determining a
quorum. For purposes of voting on the matters described herein, at any meeting
of stockholders at which a quorum is present, the required vote is as follows:
(a) the affirmative vote of a plurality of the shares of common stock present or
represented by Proxy at the Annual Meeting is required to elect the two (2)
nominees for Directors, (b) the affirmative vote of a majority of the
outstanding shares of common stock is required to amend our Restated Certificate
of Incorporation and (c) the affirmative vote of a majority of the shares of
common stock present or represented by Proxy at the Annual Meeting is required
to approve the other matters at the Annual Meeting. In such a case, the
aggregate number of votes cast by all stockholders present in person or by Proxy
will be used to determine whether a motion will carry.
All votes will be tabulated by the inspector of elections (the "Inspector")
appointed for the Annual Meeting who will, for each proposal to be voted on,
determine the number of shares outstanding, the number of shares entitled to
vote, the number of shares represented at the Annual Meeting, the existence of a
quorum, and the authenticity, validity and effect of all proxies received by the
Company. The Inspector will also separately tabulate affirmative and negative
votes and broker "non-votes", and determine the result for each proposal.
An abstention from voting on a matter by a stockholder present in person or
by Proxy at the Annual Meeting will have no effect on the item on which the
stockholder abstains from voting. In addition, although broker "non-votes" will
be counted for purposes of determining a quorum, they will have no effect on the
vote on matters at the Annual Meeting. All valid Proxies received may be voted
at the discretion of the proxy holders named therein for adjournments or
postponements or other matters that may properly come before the Annual Meeting.
The proxy holders may exercise their discretion to vote all valid Proxies for an
adjournment or postponement in the absence of a quorum, to the extent necessary
to facilitate the tabulation process or in other cases.
4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number and percentage of shares of our
common stock owned beneficially, as of July 17, 2000, by each director and
executive officer of eGlobe, and by all directors and executive officers of
eGlobe as a group. Information as to beneficial ownership is based upon
statements furnished to us by such persons. Unless otherwise indicated, the
address of each of the named individuals is c/o eGlobe, Inc., 1250 24th Street,
N.W., Suite 725, Washington, DC 20037.
<TABLE>
<CAPTION>
NAME OF NUMBER OF SHARES PERCENT OF COMMON
BENEFICIAL OWNER OWNED BENEFICIALLY (1) STOCK OUTSTANDING (2)
-------------------------------------------------------------------------- ------------------------ ----------------------
<S> <C> <C>
Christopher J. Vizas (3) ................................................ 447,536 *
Arnold Gumowitz ......................................................... 10,640,000 11.0%
David W. Warnes (4) ..................................................... 111,000 *
Richard A. Krinsley (5) ................................................. 180,182 *
Donald H. Sledge (6) .................................................... 98,000 *
James O. Howard (7) ..................................................... 105,000 *
John H. Wall (8) ........................................................ 50,000 *
Gary Gumowitz ........................................................... 13,300,000 13.7
John W. Hughes .......................................................... 3,800,000 3.9
Bijan Moaveni ........................................................... 1,138,814 1.2
David Skriloff (9) ...................................................... 50,061 *
Anne Haas (10) .......................................................... 45,617 *
All executive officers and directors as a Group (12 persons) (11) ....... 29,966,210 30.6%
</TABLE>
----------
* Less than 1%
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be a "beneficial owner" of a security if he or she has or shares the power
to vote or direct the voting of such security or the power to dispose or
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has the right to
acquire beneficial ownership within 60 days from July 17, 2000. More than
one person may be deemed to be a beneficial owner of the same securities.
All persons shown in the table above have sole voting and investment power,
except as otherwise indicated. This table includes shares of common stock
subject to outstanding options granted pursuant to our option plans.
(2) For the purpose of computing the percentage ownership of each beneficial
owner, any securities which were not outstanding but which were subject to
options, warrants, rights or conversion privileges held by such beneficial
owner exercisable within 60 days were deemed to be outstanding in
determining the percentage owned by such person, but were deemed not to be
outstanding in determining the percentage owned by any other person.
(3) Includes options to purchase 130,372 shares of common stock exercisable
within 60 days from July 17, 2000. Does not include options to purchase
933,334 shares of common stock which are not exercisable within such
period.
(4) Consists solely of options to purchase common stock exercisable within 60
days from July 17, 2000.
(5) Includes options to purchase 96,000 shares of common stock exercisable
within 60 days from July 17, 2000.
(6) Consists solely of options to purchase common stock exercisable within 60
days from July 17, 2000.
(7) Includes options to purchase 85,000 shares of common stock exercisable
within 60 days from July 17, 2000.
(8) Includes options to purchase 50,000 shares of common stock exercisable
within 60 days from July 17, 2000. Does not include 15% interest in
warrants to purchase 18,000 shares of common stock which are not
exercisable within 60 days from July 17, 2000.
(9) Does not include (1) warrants to purchase 4,218 shares of common stock or
(2) options to purchase 264,000 shares of common stock which are not
exercisable within 60 days from July 17, 2000.
(10) Includes options to purchase 33,950 shares of common stock exercisable
within 60 days from July 17, 2000. Does not include options to purchase
76,666 shares of common stock which are not exercisable within 60 days from
July 17, 2000.
(11) Includes (1) options to purchase 604,322 shares of common stock exercisable
within 60 days from July 17, 2000. Does not include (1) options to purchase
1,274,000 shares of common stock or (2) warrants to purchase 22,218 shares
of common stock which are not exercisable within such period.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the number and percentage of shares of our
common stock owned beneficially, as of July 17, 2000, by any person who is known
to us to be the beneficial owner of 5% or more of our common stock. Information
as to beneficial ownership is based upon statements furnished to us by such
persons.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OWNED OF RECORD COMMON STOCK
OF BENEFICIAL OWNER AND BENEFICIALLY (1) OUTSTANDING (2)
-------------------------------- ---------------------- ----------------
<S> <C> <C>
EXTL Investors LLC (3) ......... 13,886,410 13.9%
850 Cannon, Suite 200
Hurst, Texas 76054
Gary Gumowitz .................. 13,300,000 13.7%
c/o eGlobe, Inc.
1250 24th Street, N.W.,
Suite 725
Washington, D.C. 20037
Arnold Gumowitz ................ 10,640,000 11.0%
c/o eGlobe, Inc.
1250 24th Street, N.W.,
Suite 725
Washington, D.C. 20037
</TABLE>
----------
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be a "beneficial owner" of a security if he or she has or shares the power
to vote or direct the voting of such security or the power to dispose or
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has the right to
acquire beneficial ownership within 60 days from July 17, 2000. More than
one person may be deemed to be a beneficial owner of the same securities.
All persons shown in the table above have sole voting and investment power,
except as otherwise indicated.
(2) For the purpose of computing the percentage ownership of each beneficial
owner, any securities which were not outstanding but which were subject to
options, warrants, rights or conversion privileges held by such beneficial
owner exercisable within 60 days were deemed to be outstanding in
determining the percentage owned by such person, but were not deemed
outstanding in determining the percentage owned by any other person.
(3) Includes warrants to purchase 3,297,334 shares of common stock exercisable
within 60 days from July 17, 2000. Gladys Jensen is the holder of 99% of the
membership interest and the sole executive officer of EXTL Investors, LLC
and holds a proxy to vote the remaining 1% membership interest held by her
husband, Ronald Jensen. As such, Gladys and Ronald Jensen may be deemed to
be beneficial owners of the securities held by EXTL Investors, LLC. However,
Ronald Jensen disclaims beneficial ownership of the shares held by EXTL
Investors, LLC.
6
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
Our Board of Directors recommends the election as directors of the two (2)
nominees listed below as Class I Directors. The two nominees, if elected, would
hold office until the annual meeting of stockholders in 2003 and until their
successors are elected and qualified or until their earlier death, resignation
or removal.
The following table sets forth the name and age of each nominee for
director, indicating all positions and offices with eGlobe currently held by
him, and the period during which he has served as a director:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE POSITION WITH EGLOBE SINCE DIRECTOR
-------------------------- ----- ---------------------------- ---------
<S> <C> <C> <C>
David W. Warnes .......... 53 Class I Director 1995
John W. Hughes ........... 51 Class I Director 2000
</TABLE>
It is intended that shares represented by Proxies in the accompanying form
will be voted "For" the election of the nominees named above unless a contrary
direction is indicated. If at the time of the Annual Meeting any of the nominees
named above should be unable to serve, which event is not expected to occur, the
discretionary authority provided in the Proxy will be exercised to vote for such
substitute nominee or nominees, if any, as shall be designated by our Board of
Directors.
The affirmative vote of a plurality of the shares of common stock present
or represented by Proxy at the Annual Meeting is required to elect directors.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
7
<PAGE>
Shown below are the names of all directors and executive officers of
eGlobe, all positions and offices held by each such person, the period during
which each person has served as such, and the principal occupations and
employment of each such person during the last five years:
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------- ----- ---------------------------------------------
<S> <C> <C>
Christopher J. Vizas .......... 50 Co-Chairman of the Board and Chief Executive
Officer and Class III Director
Arnold S. Gumowitz ............ 71 Co-Chairman of the Board and Class III
Director
David W. Warnes ............... 53 Class I Director
Richard A. Krinsley ........... 70 Class III Director
James O. Howard ............... 57 Class III Director
Donald H. Sledge .............. 59 Class II Director
John H. Wall .................. 34 Class II Director
Gary S. Gumowitz .............. 38 President, eGlobe Development Corp. and
Class II Director
John W. Hughes ................ 51 Class I Director
Bijan Moaveni ................. 54 Chief Operating Officer
David Skriloff ................ 34 Chief Financial and Administrative Officer
Anne Haas ..................... 49 Vice President, Controller and Treasurer
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
CHRISTOPHER J. VIZAS, age 50, has been a Director of eGlobe since October
25, 1997 and the Chairman of the Board of Directors since November 10, 1997. Mr.
Vizas served as eGlobe's acting Chief Executive Officer from November 10, 1997
to December 5, 1997, on which date he became eGlobe's Chief Executive Officer.
Before joining eGlobe, Mr. Vizas was a co-founder of, and since October 1995,
served as Chief Executive Officer of Quo Vadis International, an investment and
financial advisory firm. Before forming Quo Vadis International, he was Chief
Executive Officer of Millennium Capital Development, a merchant banking firm,
and of its predecessor Kouri Telecommunications & Technology. Before joining
Kouri, Mr. Vizas shared in the founding and development of a series of
technology companies, including Orion Network Systems, Inc. of which he was a
founder and a principal executive. From April 1987 to 1992, Mr. Vizas served as
Vice Chairman of Orion, an international satellite communications company, and
served as a Director from 1982 until 1992. Mr. Vizas has also held various
positions in the United States government.
ARNOLD S. GUMOWITZ, age 71, was appointed Co-Chairman of the Board of
Directors on March 24, 2000. Mr. Gumowitz has been the Chairman and Chief
Financial Officer of Trans Global since its inception in 1995. Before joining
Trans Global, Mr. Gumowitz was a co-founder and Chairman of AAG Management,
Inc., a real estate concern which commenced operations in 1979. In addition,
Mr. Gumowitz has over 40 years experience in the textile, apparel and
manufacturing fields.
DAVID W. WARNES, age 53, has been a Director of eGlobe since June 30, 1995.
Mr. Warnes has been the Chief Operating Officer of Global Light
Telecommunications Inc. since September 1997 and a Director since June 1997. He
has been the President and Chief Executive Officer of Vitacom, a subsidiary of
Highpoint Telecommunications Inc., a telecommunications company, since December
1995, and President and CEO of Highpoint since April 1998. Previously, Mr.
Warnes held various senior management and executive positions with Cable and
Wireless or its affiliated companies for two decades. From October 1992 through
October 1995, he was Vice President, Operations and Chief Operating Officer, and
from August 1994 through October 1995, he was Assistant Managing Director of
Tele 2, a telecommunications service provider in Sweden partially owned by Cable
and Wireless. From August 1988 through June 1992, he was a principal consultant
and General Manager, Business Development of IDC, an international
telecommunications service provider based in Japan and partially owned by Cable
and Wireless. Mr. Warnes is a Chartered Engineer, a Fellow of the Institution of
Electrical Engineers, and a graduate of the University of East London.
8
<PAGE>
RICHARD A. KRINSLEY, age 70, has been a Director of eGlobe since June 30,
1995. Mr. Krinsley retired in 1991 as the Executive Vice President and Publisher
of Scholastic Corporation; a publicly held company traded on the Nasdaq Stock
Market. While employed by Scholastic between 1983 and 1991, Mr. Krinsley, among
many other duties, served on that company's management committee. From 1961 to
1983, Mr. Krinsley was employed by Random House where he held, among other
positions, the post of Executive Vice President. At Random House, Mr. Krinsley
also served on that company's executive committee.
JAMES O. HOWARD, age 57, has been a Director of eGlobe since January 16,
1998. Since 1990, Mr. Howard has served as the Chief Financial Officer and a
member of the management committee of Benton International, Inc., a wholly
owned subsidiary of Perot Systems Corporation. From 1981 to 1990, Mr. Howard
was employed by Benton International, Inc. as a consultant and sector manager.
Before joining Benton International, Inc., Mr. Howard held a number of legal
positions in the federal government, including General Counsel of the National
Commission on Electronic Fund Transfers.
DONALD H. SLEDGE, age 59, has been a Director of eGlobe since November 10,
1997. Mr. Sledge has served as the Chief Executive Officer of RateXchange
Corporation, a telecommunications company since January 2000. Mr. Sledge served
as Vice Chairman, President and Chief Executive Officer of TeleHub
Communications Corp., a privately held technology development company,
beginning in 1996. Mr. Sledge served as President and Chief Operating Officer
of West Coast Telecommunications, Inc., a long distance company, from 1994 to
1995. From 1993 to 1994, Mr. Sledge was employed by New T&T, a Hong Kong-based
company, as head of operations. Mr. Sledge was Chairman and Chief Executive
Officer of Telecom New Zealand International from 1991 to 1993 and the Managing
Director of Telecom New Zealand International's largest local carrier from 1988
to 1991. Mr. Sledge is currently Chairman of the Board of United Digital
Network, a small interexchange carrier that operates primarily in Texas,
Oklahoma, Arizona and California. Mr. Sledge is a member of the Board of
Advisors of DataProse and serves as a director of AirCell Communications, Inc.
He also serves as advisor and board member to several small technology-based
start-up companies.
JOHN H. WALL, age 34, has been a Director of eGlobe since June 16, 1999.
Mr. Wall has been the Vice President and Chief Technology Officer for Insurdata
Incorporated, a healthcare technology solutions and services provider, since
March 1998. Prior to joining Insurdata, Mr. Wall served as Chief Technical
Officer for BT Systems Integrators, a provider of imaging and information
management solutions from 1996 to 1998. Mr. Wall also was employed as an
engineer and technical analyst by Georgia Pacific and Dana Corporation from
1995 to 1996 and 1988 to 1995, respectively.
GARY S. GUMOWITZ, age 38, was appointed President of eGlobe Development
Corp., a wholly owned subsidiary of eGlobe, and Director of eGlobe on March 24,
2000. Mr. Gumowitz was the founder of Trans Global and has served as its Chief
Executive Officer since its inception in 1995. Previously, Mr. Gumowitz served
on Trans Global's board of directors, and on the boards of AAG Management
Company and GGB Associates with interests in the real estate and hospitality
industries since 1990. He is a graduate of the University of Rhode Island and
holds a degree in Economics.
JOHN W. HUGHES, age 51, has been a Director of eGlobe on March 24, 2000.
Mr. Hughes was Senior Vice President and General Counsel of eGlobe from March
2000 to July 2000 and is currently in private practice. Mr. Hughes was the
outside General Counsel of Trans Global since its inception in 1995 and was a
sole proprietor practicing law in New York for twenty-five years, specializing
in the areas of taxation, business organizations, and contracts. Mr. Hughes
served as a faculty member in the tax department at Pace University and as a
lecturer at the Cornell University Graduate School of Business Administration.
In addition, Mr. Hughes served on Trans Global's board of directors. He is an
alumnus of Cornell University, where he earned a Bachelor's Degree in l970, an
MBA in 1971 and a J.D. in l974.
BIJAN MOAVENI, age 54, was appointed Chief Operating Officer of eGlobe on
December 3, 1999. Prior to joining eGlobe, Mr. Moaveni served as President and
Chief Executive Officer of Coast International, Inc., a private
telecommunications company which he founded and which was acquired by eGlobe in
December 1999, for twelve years. Before founding Coast, Mr. Moaveni held various
senior management positions with Sprint Corporation, including marketing and
sales, telecommunications networks, customer service, billing and business and
system development.
9
<PAGE>
DAVID SKRILOFF, age 34, was appointed Chief Financial and Administrative
Officer of eGlobe effective as of January 1, 2000. Prior to joining eGlobe, Mr.
Skriloff was employed by Gerard Klauer Mattison & Co., a registered investment
bank and eGlobe's financial banker, beginning in 1993 where he was a Senior
Associate before being promoted to Vice President, Corporate Finance. Mr.
Skriloff also worked as an Associate at The American Acquisition Company, a
venture capital group and was a co-founder and Senior Vice President of Sales
and Marketing at Performance Technologies, Inc., a computer software company.
ANNE HAAS, age 49, was appointed Vice President, Controller and Treasurer
of eGlobe on October 21, 1997. Ms. Haas served as the Vice President of Finance
of Centennial Communications Corp., a start-up multi-national two way radio
company, during 1996-97. From 1992 to 1996, Ms. Haas served as Controller of
Quark, Inc., a multi-national desk top publishing software company. Before
1992, Ms. Haas worked for the accounting firm of Price Waterhouse in San Jose,
California and Denver, Colorado.
10
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Directors are elected for three year terms with approximately one-third of
such overall directors elected each year; except that in order to implement the
staggered board, at the June 16, 1999 annual meeting, Class I Directors were
elected for a one-year term, Class II Directors were elected for a two-year term
and Class III Directors were elected for a full three-year term. Directors will
hold office until the end of their term and until their successors are elected
and qualified. Executive Officers serve at the pleasure of the Board or until
the next annual meeting of stockholders. Arnold Gumowitz is the father of Gary
Gumowitz.
Our Board is entrusted with managing our business and affairs. Pursuant to
the powers bestowed upon our Board by our Amended and Restated Bylaws, as
amended (the "Bylaws"), our Board may establish committees from among its
members. In addition, the Bylaws provide that our Board must annually appoint
officers of the Company to manage the affairs of the Company on a day to day
basis as set forth in the Bylaws or as otherwise directed by our Board. During
the fiscal period ended December 31, 1999, there were a total of 12 meetings
held by our Board of Directors. All of the Directors attended at least 75% of
the meetings held by our Board of Directors during the fiscal period ended
December 31, 1999.
In April 1998, our Board reconstituted the then-existing committees of the
Company as four standing committees of our Board: the Executive Committee, the
Audit Committee, the Finance Committee and the Compensation Committee. We do not
have a Nominating Committee. The Executive Committee oversees activities in
those areas not assigned to other committees of our Board and has the full power
and authority of our Board to the extent permitted by Delaware law. Our
Executive Committee is presently comprised of Messrs. Howard, Sledge, A.
Gumowitz and Vizas. The Audit Committee's duties include making recommendations
concerning the engagement of independent public accountants, reviewing with the
independent public accountants the plans and results of the audit engagement,
reviewing and approving professional services rendered by the independent public
accountants, reviewing the independence of the independent public accountants,
considering the range of audit and non-audit fees, reviewing the adequacy of our
internal auditing controls; and reviewing situations or transactions involving
actual or potential conflicts of interest. Our Audit Committee is presently
comprised of Messrs. Howard, Warnes, Wall and Vizas (in an ex officio capacity).
The Compensation Committee is responsible for approving all compensation
for senior officers and employees, makes recommendations to our Board with
respect to the grant of stock options and eligibility requirements, including
grants under and the requirements of our stock option plans and may make grants
to Directors under such stock option plans. Our Compensation Committee is
presently comprised of Messrs. Vizas, Krinsley and Sledge.
The Executive Committee held 11 meetings during the fiscal period ended
December 31, 1999. The Audit Committee held 2 meetings during the fiscal period
ended December 31, 1999. The Compensation Committee held 5 meetings during the
fiscal period ended December 31, 1999.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation for the three most recent
fiscal periods ended December 31, 1999, December 31, 1998 and March 31, 1998 of
our Chief Executive Officer and the four most highly compensated other executive
officers whose total annual salary and bonus exceed $100,000 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
OTHER ANNUAL RESTRICTED SECURITIES
SALARY COMPENSATION STOCK UNDERLYING
NAME AND PRINCIPAL POSITION(1) YEAR ($) BONUS ($) ($) AWARDS ($) OPTIONS/SARS
-------------------------------- -------- ----------- ----------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Vizas 1999 $207,692 0 0 0 1,004,768
Chairman and Chief *1998 153,847 0 0 0 110,000
Executive Officer (2) ......... 1998 62,308 0 0 0 520,000
Ronald A. Fried 1999 $150,000 $28,077 0 0 247,200
Vice President, Business *1998 112,500 0 0 0 40,000
Development (3) ............... 1998 12,500 0 0 0 100,000
Anthony Balinger 1999 $150,000 0 $19,200 0 2,400
Senior Vice President and *1998 103,846 0 9,600 0 45,000
Vice Chairman (4) . 1998 150,000 0 0 $7,875 84,310
W.P. Colin Smith 1999 $127,884 $10,000 0 0 0
Vice President *1998 91,539 25,000 0 0 25,000
Legal Affairs (5) . 1998 11,538 0 0 0 100,000
Allen Mandel 1999 $137,730 0 0 0 101,800
Senior Vice President (6) . *1998 103,000 0 0 0 30,000
1998 90,077 0 0 0 87,676
</TABLE>
----------
* Nine month period ended December 31, 1998
(1) We no longer employ Messrs. Balinger and Smith, however, Mr. Smith continues
to provide consulting services to us. We hired Bijan Moaveni in December
1999 to act as our Chief Operating Officer and David Skriloff to act as our
Chief Financial and Administrative Officer in January 2000. Each of Messrs.
Moaveni and Skriloff has base salaries in excess of $100,000. In connection
with the consummation of the Merger with Trans Global, we hired Arnold
Gumowitz to act as our Co-Chairman and Gary Gumowitz to act as President of
eGlobe Development Corp. Both Messrs. Gumowitz and Gumowitz have base
salaries in excess of $100,000.
(2) Mr. Vizas has served as our Chief Executive Officer since December 5, 1997.
From November 10, 1997 to December 5, 1997, Mr. Vizas served as our acting
Chief Executive Officer. Mr. Vizas' employment agreement provides for a
base salary of $200,000, performance based bonuses of up to 50% of base
salary and options to purchase up to 500,000 shares, subject to various
performance criteria. See "Employment Agreements and Termination of
Employment and Change in Control Arrangements." Mr. Vizas' base salary for
2000 will increase to $300,000.
(3) Mr. Fried has served as our Vice President of Business Development since
February 20, 1998. Mr. Fried's employment agreement provides for a base
salary of $150,000, performance based bonuses of up to 50% of base salary
and options to purchase up to 100,000 shares, subject to various
performance criteria. See "Employment Agreements and Termination of
Employment and Change in Control Arrangements." Mr. Fried resigned
effective July 24, 2000.
(4) Mr. Balinger served as our President from April 1995 until November 10,
1997. Mr. Balinger served as Chief Executive Officer from January 3, 1997
through November 10, 1997. Mr. Balinger has served as our Senior Vice
President and Vice Chairman since November 6, 1997. Amounts shown as Other
Annual Compensation consist of an annual housing allowance paid to Mr.
Balinger while he resided in the United States and while he resided in
Hong Kong. See "Employment Agreements, Termination of Employment and
Change of Control Agreements."
(5) Mr. Smith served as our Vice President of Legal Affairs from February 1,
1998 until January 7, 2000. Mr. Smith's employment agreement provided for
a base salary of $135,000, performance based bonuses of up $50,000 and
options to purchase up to 100,000 shares, subject to various performance
criteria. See "Employment Agreements, Termination of Employment and Change
in Control Arrangements." Mr. Smith currently acts as our Senior
Litigation Counsel under a consulting arrangement.
(6) Mr. Mandel has served as our Senior Vice President since 1991.
12
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL PERIOD
The following table sets forth the information concerning individual grants
of stock options and stock appreciation rights ("SARs") during the last period
to each of the Named Executive Officers during such period. All of the options
granted in the year ended December 31, 1999 to the Named Executive Officers have
terms of between five (5) and ten (10) years. A total of 3,798,182 options were
granted to our employees and directors in the 12-month period ended December 31,
1999 under eGlobe's 1995 Employee Stock Option and Appreciation Rights Plan (the
"Employee Stock Option Plan") and outside of the Employee Stock Option Plan.
OPTION/SAR GRANTS IN LAST FISCAL PERIOD
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/SARS ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------------------
NAME GRANTED (#) FISCAL PERIOD ($/SH) DATE 0%($)(1) 5% ($) 10% ($)
------------------------------ -------------- --------------- ------------ ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Christopher J. Vizas ......... 1,768 0% $ 0.01 06/25/04 $5,194 $ 6,636 $ 8,351
1,500 0% $ 1.69 06/25/04 $4,407 $ 3,110 $ 4,565
1,500 0% $ 1.46 06/25/04 $4,407 $ 3,455 $ 4,910
1,000,000 26.3% $ 2.8125 12/16/04 -- $787,500 $1,715,625
Ronald A. Fried .............. 20,000 0.5% $ 3.16 05/14/04 -- $ 16,006 $ 36,427
1,100 0% $ 1.69 06/25/04 $3,232 $ 2,281 $ 3,348
1,100 0% $ 1.46 06/25/04 $3,232 $ 2,534 $ 3,601
225,000 5.9% $ 2.8125 12/16/04 -- $177,188 $ 386,016
Anthony Balinger ............. 1,200 0% $ 1.69 06/25/04 $3,326 $ 2,488 $ 3,652
1,200 0% $ 1.46 06/25/04 $3,526 $ 2,897 $ 3,652
W.P. Colin Smith ............. -- -- -- -- -- -- --
Allen Mandel ................. 900 0% $ 1.69 06/25/04 $2,644 $ 1,866 $ 2,739
900 0% $ 1.46 06/25/04 $2,644 $ 2,073 $ 2,946
100,000 2.6% $ 2.8125 12/16/04 -- $ 78,750 $ 171,563
</TABLE>
----------
(1) For options granted below market, values were calculated by multiplying the
closing transaction price of the common stock as reported on the Nasdaq
National Market at date of grant by the number of options granted.
The following table sets forth information concerning each exercise of
stock options during the last fiscal period by each of the Named Executive
Officers during such fiscal period and the fiscal period end value of
unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL PERIOD
AND FISCAL PERIOD-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT FP-END AT FP-END($)
ACQUIRED VALUE --------------------------- --------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-------------------------- ------------- ------------ --------------------------- --------------------------
<S> <C> <C> <C> <C>
Christopher J. Vizas ..... 270,396 $497,220 204,372/933,334 $380,550/$1,304,960
Ronald A. Fried .......... 56,250 91,406 16,047/248,571 $ 45,522/$422,632
Anthony Balinger ......... 0 0 86,310/ 16,666 $ 169,085/$33,724
W.P. Colin Smith ......... 0 0 48,333/ 43,334 $ 86,762/$72,426
Allen Mandel ............. 25,000 40,625 76,911/117,565 $ 169,666/$207,940
</TABLE>
----------
(1) Values were calculated by multiplying the closing transaction price of the
common stock as reported on the Nasdaq National Market on December 31, 1999
of $4.4375 by the respective number of shares of common stock and
subtracting the exercise price per share, without any adjustment for any
termination or vesting contingencies.
13
<PAGE>
COMPENSATION OF DIRECTORS
Effective November 10, 1997, and contingent upon eGlobe experiencing a
fiscal quarter of profitability, non-executive members of the Board receive a
Director's fee of $500 for each regular meeting and committee meeting attended.
Our directors are also reimbursed for expenses incurred in connection with
attendance at Board meetings.
During the fiscal periods ended 1995, 1996 and 1997, under our 1995
Directors Stock Option and Appreciation Rights Plan which then provided for
automatic annual grants, each non-executive Director received an annual grant of
ten year options to purchase 10,000 shares at an exercise price equal to the
fair market value of our common stock on the date of grant. Commencing with the
amendments to the Directors Stock Option Plan which were approved by our
stockholders at the 1997 annual meeting held on February 26, 1998, options to
directors may be made at the discretion of the Board of Directors or
Compensation Committee and there are no automatic grants.
On December 16, 1999, options to purchase 50,000 shares of our common stock
at an exercise price of $2.8125 per share were granted to each of Messrs.
Warnes, Krinsley, Howard, Sledge and Wall. Such options have a term of five
years and vested upon grant.
On December 16, 1999, Mr. Vizas was granted options to purchase 750,000
shares of common stock at an exercise price of $2.8125 per share. Such options
have a term of five years and vest in three annual installments of 250,000
shares beginning on December 16, 2000. In addition, Mr. Vizas was granted
options to purchase 250,000 shares of common stock, of which 239,628 options
were issued outside of our Employee Stock Option Plan. Such options vested upon
grant and were immediately exercised.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Effective December 5, 1997, we entered into a three year employment
agreement with Christopher J. Vizas, our Chief Executive Officer. Mr. Vizas'
employment agreement provides for a minimum salary of $200,000 per annum,
reimbursement of certain expenses, annual bonuses based on financial performance
targets to be adopted by eGlobe and Mr. Vizas, and the grant of options to
purchase an aggregate of 500,000 shares of common stock. The options granted to
Mr. Vizas pursuant to his employment agreement are comprised of:
o options to purchase 50,000 shares of common stock at an exercise price of
$2.32 which vested upon their grant;
o options to purchase 50,000 shares of common stock at an exercise price of
$2.32 which vested on December 5, 1998;
o options to purchase up to 100,000 shares of common stock at an exercise price
of $2.32 which expired due to our failure to achieve certain financial
performance targets;
o options to purchase 50,000 shares at an exercise price of $3.50 which vested
on December 5, 1999;
o options to purchase up to 100,000 shares of common stock at an exercise price
of $3.50 which expired due to our failure to achieve certain financial
performance targets;
o options to purchase 50,000 shares at an exercise price of $4.50 which vest on
December 5, 2000 (contingent upon Mr. Vizas' continued employment as of
such date); and
o options to purchase up to 100,000 shares of common stock at an exercise price
of $4.50 which vest on December 5, 2000 (contingent upon Mr. Vizas' continued
employment as of such date and the attainment of certain financial
performance targets).
Each option has a term of five years.
Mr. Vizas' employment agreement provides that, if we terminate Mr. Vizas'
employment other than for "cause," Mr. Vizas shall continue to receive, for one
year commencing on the date of such termination, his full base salary, any bonus
that is earned after the termination of employment, and all other benefits and
compensation that Mr. Vizas would have been entitled to under his employment
14
<PAGE>
agreement in the absence of termination of employment (the "Vizas Severance
Amount"). Mr. Vizas may be terminated for cause if he engages in any personal
dishonesty, willful misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, or regulation (other than traffic violations or similar offenses), or
material breach of any provision of his employment agreement.
If there is an early termination of Mr. Vizas' employment following a
"change of control," Mr. Vizas would be entitled to a lump cash payment equal to
the Vizas Severance Amount. Additionally, if during the term of Mr. Vizas'
employment agreement there is a "change in control" of eGlobe and in connection
with or within two years after such change of control we terminate Mr. Vizas'
employment other than "termination for cause," all of the options described
above will vest in full to the extent and at such time that such options would
have vested if Mr. Vizas had remained employed for the remainder of the term of
his employment agreement. A "change of control" means if (1) any person becomes
the beneficial owner of 20% or more of the total number of our voting shares;
(2) any person becomes the beneficial owner of 10% or more, but less than 20%,
of the total number of our voting shares, if the Board of Directors makes a
determination that such beneficial ownership constitutes or will constitute
control of eGlobe; or (3) as the result of any business combination, the persons
who were directors of eGlobe before such transaction shall cease to constitute
at least two-thirds of the Board of Directors.
On February 1, 1997, we entered into a new three year employment agreement
with Anthony Balinger. Pursuant to his new employment agreement, Mr. Balinger
served as eGlobe's President and Chief Executive Officer until November 10, 1997
when he resigned that position and was appointed Senior Vice President and Vice
Chairman of eGlobe. Mr. Balinger's employment agreement provides for a minimum
salary of $150,000 per annum, reimbursement of certain expenses, a $1,600 per
month housing allowance, and payment for health, dental and disability insurance
and various other benefits.
Mr. Balinger's employment agreement also provides for payment of the
greater of $125,000 or the balance of the annual base salary to which Mr.
Balinger would be entitled at the end of the employment term, relocation to the
country of Mr. Balinger's choice, buy-out of his auto and residential leases and
a 90 day exercise period for his vested options after termination if we
terminate Mr. Balinger without "cause." "Cause" means any criminal conviction
for an offense by Mr. Balinger involving any misappropriation of our funds or
material property or a willful and repeated refusal to follow any careful
directive of our Board of Directors for the performance of material duties which
Mr. Balinger is required to perform under his employment agreement (after cure
period). This employment agreement superseded a prior employment agreement.
If, during the term of Mr. Balinger's employment agreement, there is a
"change in control" of eGlobe, then the agreement shall be deemed to have been
terminated by us and we shall be obligated to pay Mr. Balinger a lump sum cash
payment equal to five times the "base amount" of Mr. Balinger's compensation, as
that term is defined by the Internal Revenue Code. A "change of control" occurs
if (i) we sell all or substantially all of our assets, (ii) we merge or
consolidate with or into another corporation such that our shareholders own 50%
or less of the combined corporation following the merger or consolidation, (iii)
a majority of our Board is replaced in a given year without approval of the
directors who constituted the board at the beginning of year, or (iv) any person
becomes the beneficial owner of 15% or more of the total number of our voting
shares. The employment agreement with Mr. Balinger terminated in January 2000.
On February 1, 1998, we entered into an employment agreement with W. P.
Colin Smith pursuant to which Mr. Smith agreed to serve as Vice President of
Legal Affairs and General Counsel of eGlobe through December 31, 2000. Mr.
Smith's employment agreement provides for a minimum salary of $125,000 per
annum, reimbursement of certain expenses, annual and quarterly bonuses based on
financial performance targets to be adopted by the Chairman and Chief Executive
and Mr. Smith, and the grant of options to purchase an aggregate of 100,000
shares of common stock. The options granted to Mr. Smith pursuant to his
employment agreement are comprised of options to purchase 33,333 shares of
common stock at an exercise price of $3.125 which vested on February 1, 1999 but
which expired due to eGlobe's failure to achieve certain financial performance
targets, 33,333 shares of common stock at an exercise
15
<PAGE>
price of $3.125 which vested on February 1, 2000 and 33,334 shares of common
stock at an exercise price of $3.125 which will vest on February 1, 2001
(contingent upon Mr. Smith's continued employment as of such date and the
attainment of certain financial performance targets). Each of the options have a
term of five years. Vesting of all options will accelerate in the event that the
current Chairman and Chief Executive Officer (Christopher J. Vizas) ceases to be
the Chief Executive Officer of eGlobe and Mr. Smith's employment terminates or
reasonable advance notice of such termination is given.
Mr. Smith's employment agreement provides that, if we terminate Mr. Smith's
employment other than "for cause" or after a material breach of the employment
agreement by eGlobe, Mr. Smith shall continue to receive, for six months (in all
cases thereafter) commencing on the date of such termination, his full base
salary, any annual or quarterly bonus that has been earned before termination of
employment or is earned after the termination of employment (where Mr. Smith met
the applicable performance goals prior to termination and we meet the applicable
corporate performance goals after termination), and all other benefits and
compensation that Mr. Smith would have been entitled to under his employment
agreement in the absence of termination of employment (the "Smith Severance
Amount"). "Termination for cause" means termination by eGlobe because of Mr.
Smith's (1) fraud or material misappropriation with respect to our business or
assets; (2) persistent refusal or willful failure materially to perform his
duties and responsibilities to us which continues after Mr. Smith receives
notice of such refusal or failure; (3) conduct that constitutes disloyalty to
eGlobe and which materially harms us or conduct that constitutes breach of
fiduciary duty involving personal profit; (4) conviction of a felony or crime,
or willful violation of any law, rule, or regulation, involving moral turpitude;
(5) the use of drugs or alcohol which interferes materially with Mr. Smith's
performance of his duties; or (6) material breach of any provision of his
employment agreement.
If, during the term of Mr. Smith's employment agreement, there is a "change
in control" of eGlobe and in connection with or within two years after such
change of control we terminate Mr. Smith's employment other than "termination
for cause" or Mr. Smith terminates with good reason, we shall be obligated,
concurrently with such termination, to pay the Smith Severance Amount in a
single lump sum cash payment to Mr. Smith. A "change of control" occurs if (1)
any person becomes the beneficial owner of 35% or more of the total number of
our voting shares, (2) we sell substantially all of assets, (3) we merge or
combine with another company and immediately following such transaction the
persons and entities who were stockholders of eGlobe before the merger own less
than 50% of the stock of the merged or combined entity, or (4) the current
Chairman and Chief Executive Officer (Christopher J. Vizas) ceases to be the
Chief Executive Officer of eGlobe. Mr. Smith's employment terminated in January
2000. On January 15, 2000, we entered into a consulting arrangement with Mr.
Smith pursuant to which Mr. Smith will act as our Senior Litigation Counsel
until December 31, 2000. Under this new arrangement, the vesting schedule for
all of Mr. Smith's outstanding options (including options to purchase 35,333
shares of common stock at an exercise price of $3.125 per share and options to
purchase 10,000 shares of common stock at an exercise price of $1.57 per share)
was accelerated and such options became immediately exercisable. Mr. Smith will
be entitled to be paid $5,000 per month for the first 25 hours worked per month
plus an additional hourly amount for hours worked in excess of 25 hours per
month and to receive health, dental and life insurance benefits.
On February 20, 1998, we entered into an employment agreement with Ronald
A. Fried pursuant to which Mr. Fried agreed to serve as our Vice President of
Business Development through December 31, 2000. Mr. Fried's employment agreement
provides for a minimum salary of $150,000 per annum, reimbursement of certain
expenses, annual bonuses based on financial performance targets to be adopted by
the Chairman and Chief Executive and Mr. Fried, and the grant of options to
purchase an aggregate of 100,000 shares of common stock. The options granted to
Mr. Fried pursuant to his employment agreement are comprised of options to
purchase 33,333 shares of common stock at an exercise price of $3.03 which
vested on August 20, 1998, 33,333 shares of common stock at an exercise price of
$3.03 which vested on August 20, 1999 and 33,334 shares of common stock at an
exercise price of $3.03 which will vest on August 20, 2000 (contingent upon Mr.
Fried's continued employment as of such date and the attainment of certain
financial performance targets). Each of the options has a term of five years.
Mr. Fried's employment agreement provides that, if we terminate Mr.
Fried's employment other than pursuant to a "termination for cause" or after a
material breach of the employment agreement by
16
<PAGE>
us, Mr. Fried shall continue to receive, for one year commencing on the date of
such termination, his full base salary, any annual or quarterly bonus that has
been earned before termination of employment or is earned after the termination
of employment (where Mr. Fried meets the applicable performance goals prior to
termination and we meet the applicable Company performance goals after
termination), and all other benefits and compensation that Mr. Fried would have
been entitled to under his employment agreement in the absence of termination of
employment (the "Fried Severance Amount"). A "termination for cause" is defined
as termination by us because of Mr. Fried's personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, persistent
refusal or willful failure materially to perform his duties and responsibilities
to us which continues after Mr. Fried receives notice of such refusal or
failure; willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses), or material breach of any provision of his
employment agreement.
If during the term of Mr. Fried's employment agreement there is a "change
in control" of eGlobe and in connection with or within two years after such
change of control we terminate Mr. Fried's employment other than "termination
for cause" or Mr. Fried terminates with good reason, we shall be obligated,
concurrently with such termination, to pay the Fried Severance Amount in a
single lump sum cash payment to Mr. Fried. A "change of control" is deemed to
have taken place under Mr. Fried's employment agreement if any person becomes
the beneficial owner of 35% or more of the total number of our voting shares.
On December 3, 1999, we entered into an employment agreement with Bijan
Moaveni pursuant to which Mr. Moaveni agreed to serve as Chief Operating Officer
of eGlobe through December 31, 2002. Mr. Moaveni's employment agreement provides
for a minimum salary of $180,000 per annum, reimbursement of certain expenses,
and annual bonuses based on performance goals to be adopted by the Chairman and
Chief Executive and Mr. Moaveni. On December 16, 1999 our Board of Directors
granted Mr. Moaveni options to purchase 150,000 shares of common stock at an
exercise price equal to $2.8125 which will vest upon achievement of certain
performance criteria. Mr. Moaveni was also granted options to purchase 75,000
shares of common stock which will vest in three equal annual installments
beginning on December 31, 2001. The vesting of options to purchase an additional
75,000 shares was accelerated and such options were exercised during March 2000.
Mr. Moaveni's employment agreement provides that, if we terminate Mr.
Moaveni's employment other than "for cause" or after a material breach of the
employment agreement by us, Mr. Moaveni shall continue to receive, for one year
commencing on the date of such termination, his full base salary, any annual or
quarterly bonus that has been accrued or earned prior to termination of
employment, and all other benefits and compensation that Mr. Moaveni would have
been entitled to under his employment agreement in the absence of termination of
employment (the "Moaveni Severance Amount"). "Termination for cause" means
termination by us because of Mr. Moaveni's (1) fraud or material
misrepresentation with respect to our business or assets; (2) persistent refusal
or failure to materially perform his duties and responsibilities to us which
continues after Mr. Moaveni receives notice of such refusal or failure; (3)
conduct that constitutes disloyalty to eGlobe and which materially harms eGlobe
or conduct that constitutes breach of fiduciary duty involving personal profit;
(4) conviction of a felony or crime, or willful violation of any law, rule, or
regulation, involving dishonesty or moral turpitude; (5) the use of drugs or
alcohol which interferes materially with Mr. Moaveni's performance of his
duties; or (6) material breach of any provision of his employment agreement.
If, during the term of Mr. Moaveni's employment agreement, there is a
"change in control" of eGlobe and in connection with or within two years after
such change of control we terminate Mr. Moaveni's employment other than
termination for cause, or we reduce Mr. Moaveni's responsibility and authority
or takes steps which amount to a demotion of Mr. Moaveni, we shall be obligated,
concurrently with such termination, to pay the Moaveni Severance Amount in a
single lump sum cash payment to Mr. Moaveni. A "change of control" occurs if (1)
Christopher J. Vizas is terminated by eGlobe or is no longer the Chairman or
Chief Executive Officer; (2) more than half of the members of our Board of
Directors are replaced at one time; or (3) any person becomes the beneficial
owner of 35% or more of the total number of our voting shares.
17
<PAGE>
Under a side letter to Mr. Moaveni's employment agreement, we were
obligated to repurchase at Mr. Moaveni's request the 247,213 shares of common
stock issued to Mr. Moaveni in our acquisition of Coast for $700,000 under
certain conditions. Subsequent to December 31, 1999, Mr. Moaveni waived his
rights to cause us to redeem such shares.
On January 1, 2000, we entered into an employment agreement with David
Skriloff pursuant to which Mr. Skriloff agreed to serve as Chief Financial
Officer of eGlobe through January 1, 2004.
Mr. Skriloff's employment agreement provides for a minimum salary of
$160,000 per annum, reimbursement of certain expenses, annual bonuses based on
performance goals to be adopted by the Chairman and Chief Executive and Mr.
Skriloff, the purchase of 36,000 shares of our common stock through a four year
loan from us to Mr. Skriloff at an interest rate of 8%, and the grant of options
to purchase an aggregate of 264,000 shares of our common stock. The options
granted to Mr. Skriloff pursuant to his employment agreement are comprised of
options to purchase 144,000 shares of common stock (the "Skriloff Time-Vested
Options") at an exercise price of $4.44 which vest in installments of 36,000
shares each on December 31, 2000, 2001, 2002, and 2003 (contingent upon Mr.
Skriloff's continued employment as of such date) and 120,000 shares of common
stock (the "Skriloff Performance Options") at an exercise price of $4.44 which
will vest in installments of 40,000 shares each on December 31, 2000, 2001, and
2002 (contingent upon Mr. Skriloff's continued employment as of such date and
certain performance goals). The Skriloff Time-Vested Options have a term of five
years from January 1, 2000. The Skriloff Performance Options have a term of nine
years from January 1, 2000.
Mr. Skriloff's employment agreement provides that, if we terminate Mr.
Skriloff's employment other than "for cause" or in the event of any "resignation
for good reason," Mr. Skriloff shall receive his Accrued Rights and shall
continue to receive, for one year commencing on the date of such termination,
his full base salary and all other benefits and compensation that Mr. Skriloff
would have been entitled to under his employment agreement in the absence of
termination of employment (the "Skriloff Severance Amount"). "Termination for
cause" means termination by us because of Mr. Skriloff's (1) fraud or material
misrepresentation with respect to our business or assets; (2) persistent refusal
or failure to materially perform his duties and responsibilities to eGlobe which
continues after Mr. Skriloff receives notice of such refusal or failure; (3)
conduct that constitutes breach of a fiduciary duty involving personal profit;
(4) conviction or plea of nolo contendere of a felony under the laws of the
United States or any state thereof, or any equivalent crime in any foreign
jurisdiction, (5) willful violation of any law, rule, or regulation, involving
dishonesty or moral turpitude that is materially detrimental to us; or (6) the
use of illegal drugs or alcohol which interferes materially with Mr. Skriloff's
performance of his duties. "Resignation for good reason" means a resignation
following (1) material reduction, without Mr. Skriloff's consent, of Mr.
Skriloff's duties, titles, or reporting relationships; (2) any reduction,
without Mr. Skriloff's consent, of Mr. Skriloff's base salary; (3) any
involuntary relocation of Mr. Skriloff's principal place of business; or (4) a
material breach of Mr. Skriloff's employment agreement by us.
If, during the term of Mr. Skriloff's employment agreement, there is a
"change in control" of eGlobe and in connection with or within two years after
such change of control we terminate Mr. Skriloff's employment other than
termination for cause or Mr. Skriloff resigns with good reason, we shall be
obligated, concurrently with such termination, to pay the Skriloff Severance
Amount in a single lump sum cash payment to Mr. Skriloff. A "change of control"
occurs if (1) eGlobe or its shareholders enter into an agreement to dispose of
all or substantially all of our assets or stock (other than any agreement of
merger or reorganization where the shareholders of eGlobe immediately before the
consummation of the transaction will own 50% or more of the fully diluted equity
of the surviving entity immediately after the consummation of the transaction);
(2) during any period of two consecutive years (not including any period prior
to the date of Mr. Skriloff's employment agreement), individuals who at the
beginning of such period constitute the Board of Directors (and any new
directors whose election by the Board of Directors or nomination for election by
our shareholders was approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of the period or
whose election or nomination for election was so approved) cease for any reason
(except for death, disability, or voluntary retirement) to constitute a majority
thereof; or (3) during any two consecutive years (not including any period prior
to the date of Mr. Skriloff's employment agreement), individuals who at the
18
<PAGE>
beginning of such period constitute the senior management of eGlobe cease for
any reason (except for death, disability, or voluntary retirement) to constitute
a majority thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Vizas, our Chief Executive Officer, serves as a member of the
Compensation Committee of the Board of Directors. Although Mr. Vizas makes
recommendations to the Compensation Committee of the Board of Directors with
regard to the other executive officers, including Named Executive Officers, he
did not participate in the Compensation Committee's deliberations with respect
to his own compensation.
Mr. Sledge, a member of our Board of Directors and Compensation Committee,
is the Chief Executive Officer of RateXchange Corporation, a telecommunications
company. Mr. Vizas serves on the Board of Directors of RateXchange.
THE 1995 EMPLOYEE STOCK OPTION AND APPRECIATION RIGHTS PLAN
The Compensation Committee of our Board of Directors administers the 1995
Employee Stock Option and Appreciation Rights Plan (the "Employee Plan") and may
grant stock options and stock appreciation rights to our employees, advisors and
consultants.
Incentive stock options granted under the Employee Plan are intended to
qualify as incentive stock options under Section 422 of the Internal Revenue
Code, unless they exceed certain limitations or are specifically designated
otherwise, and, accordingly, may be granted to our employees only. All other
options granted under the Employee Plan are nonqualified stock options, meaning
an option not intended to qualify as an incentive stock option or an incentive
stock option which is converted into a nonqualified stock option under the terms
of the Employee Plan.
The option exercise price for incentive stock options granted under the
Employee Plan may not be less than 100% of the fair market value of our common
stock on the date of grant of the option (or 110% in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of our
common stock). For nonqualified stock options, the option price shall be equal
to the fair market value of our common stock on the date the option is granted.
The maximum option term is 10 years (or five years in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of the
outstanding common stock) and the options vest over periods determined by the
Compensation Committee.
The Compensation Committee has decided not to grant any more tandem stock
appreciation rights with stock options. However, the Compensation Committee may
award freestanding stock appreciation rights. The maximum number of shares of
common stock that may be issued upon exercise of stock options and stock
appreciation rights granted under the Employee Plan is 7,000,000 shares. The
Employee Plan will terminate on December 14, 2005, unless terminated earlier by
our Board of Directors.
THE DIRECTORS STOCK OPTION AND APPRECIATION RIGHTS PLAN
The 1995 Directors Stock Option and Appreciation Rights Plan (the "Director
Plan") is administered by our Compensation Committee. Effective June 16, 1999,
the Director Plan was amended to reduce the number of shares of common stock
available for issuance thereunder to 437,000, the number of shares underlying
options then outstanding.
Options granted under the Director Plan expire ten (10) years from the date
of grant, or in the case of incentive stock options granted to Directors who are
employees holding more than 10% of the total combined voting power of all
classes of our stock, five (5) years from the date of grant. However, upon a
change of control of eGlobe as defined in the Director Plan, all options will
become fully exercisable. Unless terminated earlier by the Compensation
Committee, the Director Plan will terminate on December 14, 2005.
19
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which includes Messrs. Vizas, Krinsley and
Sledge is responsible for approving all compensation for senior officers and
employees, making recommendations to our Board with respect to the grant of
stock options and eligibility requirements, including grants under and the
requirements of our Employee Plan. The Compensation Committee believes that the
actions of each executive officer have the potential to impact our short-term
and long-term profitability and considers the impact of each executive officer's
performance in designing and administering the executive compensation program.
Compensation of Chief Executive Officer in 1999. Mr. Vizas entered into
his current employment agreement with us in 1997. Mr. Vizas' base salary in
1999 was $207,692. Mr. Vizas did not receive a cash bonus in 1999, however he
was granted options to purchase 1,004,768 shares of common stock in 1999. In
connection with our recent acquisition of Trans Global Communications and as
requested by the principals of Trans Global, Mr. Vizas agreed to enter into a
long term employment contract with us. The employment contract with Mr. Vizas
has not been executed, but eGlobe still intends to enter into a long term
employment contract with Mr. Vizas.
After consummation of the Trans Global acquisition the Compensation
Committee increased Mr. Vizas' base salary for 2000 to $300,000. We have
reviewed two salary surveys from independent salary/compensation experts hired
by us regarding the compensation practices of other similarly sized companies
based on revenues or market capitalization in the communications or related
industries including, but not limited to, Covad Communications, DeltaThree.com,
Global Telesystems Group, ITXC, Net2Phone, PSINet, iBasis, GRIC Communications
and Winstar Communications. Based on his new salary for the year 2000, the
Compensation Committee believes that Mr. Vizas's total cash compensation is in
the mid range of salary levels of similarly sized companies in similar
industries.
New Hires of Executive Officers in 1999. During 1999, under the direction
of our Co-Chairman and Chief Executive Officer, we hired two new executive
officers, Bijan Moaveni and David Skriloff, as Chief Operating Officer and Chief
Financial Officer, respectively. We negotiated compensation with each officer.
Based on the surveys referred to above, the Compensation Committee believes that
the new executive officers' compensation is at or below the mid range of
salaries for similarly sized companies in similar industries.
In setting compensation, the Compensation Committee adhered to the
following philosophy, objectives and policies:
Philosophy and Objectives. The purpose of our executive compensation
program is to: (a) attract, motivate and retain key executives responsible for
our success as a whole; (b) increase stockholder value; (c) increase our
overall performance; and (d) increase the performance of the individual
executive.
Executive Compensation Policies. The Compensation Committee's executive
compensation policies are designed to provide competitive levels of compensation
that integrate compensation with our short-term and long-term performance goals,
reward above-average corporate performance, recognize individual initiative and
achievements, and assist us in attracting and retaining qualified executives.
The two salary surveys, indicate that the levels of executive officers' overall
compensation is at or below the mid range of salaries of similarly situated
senior executives in the communications or related industries, which is
consistent with where we target compensation of our senior executives. In
determining the incentive portions of executive compensation levels, particular
factors apart from industry comparables which the Compensation Committee
believes are important are growth in revenues, completion of our financing
plans, or other major transactions or corporate goals, implementation of our
strategic plan and, on a longer term basis, growth in stockholder value measured
by stock price.
Our executive compensation structure is comprised of base salary, annual
cash performance bonuses, long-term compensation in the form of stock option
grants, and various benefits, including medical, and other benefits generally
available to all our employees.
Base Salary. In establishing appropriate levels of base salary, the
Compensation Committee negotiated with its new executives, considering their
functions, the significant level of commitment required to advance eGlobe to a
higher level of competitiveness, our size and growth rate and other factors. Our
performance was
20
<PAGE>
not a material factor in establishing the base salaries for our executives;
however performance is the primary factor considered for granting bonuses and
stock options, as discussed below. The Compensation Committee has obtained the
salary surveys of similarly sized telecommunications companies. According to the
surveys, executive base salaries generally were at or below the mid range salary
levels of similarly sized companies in the telecommunications and similar
industries.
Annual Performance Bonuses. During 1999, the Compensation Committee placed
increased reliance on cash bonuses as a significant portion of compensation for
executives. Generally, potential bonuses have ranged up to 50% of a senior
executive's annual base salary and are paid on a quarterly or annual basis. In
1999, certain officers, including two Named Executive Officers, earned a cash
bonus. None of the other Named Executive Officers and few other members of
management received performance bonuses for 1999 because the targets set for
eGlobe and the executive were not satisfied for 1999. The actual amount of a
bonus grant is determined based upon performance criteria detailed in written
performance goals established by the senior executive and our human resource
department and/or senior management and, accordingly, the terms under which
bonuses may be granted may vary among executives. Performance criteria include,
among others, the achievement of financial targets expressed in gross revenues
and earnings, such as achievement of a percentage increase in annual revenue,
other criteria based upon our performance, such as achievement of a percentage
increase in stock price over the relevant year, and the individual's
achievements during the course of the year, such as identification of suitable
acquisition targets. Generally, achievement of eGlobe's financial goals based
upon an individualized performance plan is weighted heaviest among the bonus
criteria in a determination as to whether an executive will receive a cash
bonus. None of the bonuses that were based on increases in our revenue and
earnings for 1999 were granted due to failure to achieve the minimum targets set
by our Chief Executive Officer. Please see the "Summary Compensation Table" at
page 13 for the cash bonus amounts for Messrs. Fried and Smith, which were based
upon satisfaction of individual goals and contractual obligations, respectively.
Salary Increases and Bonus Awards: The Compensation Committee expects that
future salary increases and bonuses will be based on performance, either by us
or individual performance by the executive officer.
Stock Options and Stock Appreciation Rights: The Compensation Committee
expects that stock options will continue to play an important role in executive
officer compensation. The Compensation Committee has decided not to grant any
more tandem stock appreciation rights with stock options. The members of the
Compensation Committee believe that stock options not only encourage performance
by our executive officers but they align the interests of our executive officers
with the interests of our stockholders. The number of stock options granted to
each senior executive officer is determined subjectively, both at the time we
hire that executive and subsequently for performance achievement, based on a
number of factors, including the individual's anticipated degree of
responsibility, salary level, performance milestones achieved and stock option
awards by other similarly sized communications or related companies. Performance
milestones include, among others, the achievement of financial targets expressed
in gross revenues and earnings, such as achievement of a percentage increase in
annual revenue, other criteria based upon our performance, such as achievement
of a percentage increase in stock price over the relevant year, and the
individual's achievements during the course of the year, such as identification
of suitable acquisition targets. Stock option grants by the Compensation
Committee generally are under our Employee Plan at the prevailing market value
and will have value only if our stock price increases. Grants made by the
Compensation Committee generally vest in equal annual installments over the five
year grant period. Executives must be employed by us at the time of vesting to
exercise the options.
Stock option grants made to executive officers in 1999 reflect significant
individual contributions relating to operations and implementation of
development and growth programs. In 1998, we had a single product line and
revenues for the nine months ended December 31, 1998 of only $90.4 million, that
were declining. By the end of 1999, we had $142.0 million in annual revenues,
which had grown by 25% quarterly, had multiple product lines and had reorganized
our procedures to gain efficiencies. Certain newly hired executive officers also
received stock option grants at the time of the commencement of their
employment. During 1999, we granted stock options covering a total of 3,798,182
shares of our common stock to 172 employees, including
21
<PAGE>
options covering an aggregate of 1,954,251 shares of common stock to ten
executive officers. The per shares option exercise price of such options ranged
from $0.01 to $6.8125 for the ten executive officers and from $0.01 to $7.67 for
non-executive officer employees, which generally equaled the fair market value
of a share of common stock on the respective dates of grant. Most of the option
grants made in late 1999, other than those made to our newly hired Chief
Operating Officer and Chief Financial Officer, were made in recognition of our
revenue growth, acquisition completions and achievement of business plan goals,
and a commitment to eGlobe during 1999 that was exhibited by our employees.
As shown in the table entitled "Option/SAR Grants in Last Fiscal Period" on
page 14, in 1999 stock option grants were made to each of the Named Executive
Officers. Option grants to Messrs. Vizas, Balinger, Smith, Fried, Moaveni, and
Skriloff are discussed above under "Employment Agreements, Termination of
Employment and Change in Control Arrangements." Additional options granted on
December 16, 1999 to Mr. Vizas are discussed under "Compensation of Directors".
The Compensation Committee recommended that the Company loan certain of our
senior executive officers, including Messrs. Vizas, Fried and Mandel, an
aggregate of $1,209,736 in connection with their exercise of stock options
granted on December 16, 1999. For more information, see "Certain Relationship
and Related Transactions" on page 23 below.
Employment Agreements. The Compensation Committee has previously authorized
the agreements with certain Named Executive Officers as described above under
"Employment Agreements, Termination of Employment and Change in Control
Arrangements." The Compensation Committee authorized employment arrangements
with Messrs. Moaveni and Skriloff during 1999.
COMPENSATION COMMITTEE
Christopher J. Vizas
Richard A. Krinsley
Donald Sledge
22
<PAGE>
STOCK PERFORMANCE CHART
The following chart graphs the performance of the cumulative total return
on our common stock over a five-year period with the cumulative total return on
the Standard and Poor's 500 Stock Index and the MSCI O/AC Telecommunications
Index over the same periods, assuming the investment of $100 in each on December
31, 1994 and the reinvestment of all dividends. The MSCI O/AC Telecommunications
Index is a full market-capitalization-weighted total return index, comprised of
companies constituting a selected peer group of companies of comparable focus
with us.
COMPARATIVE FIVE-YEAR TOTAL CUMULATIVE RETURNS
EGLOBE, INC., S&P 500 INDEX AND
MSCI O/AC TELECOMMUNICATIONS INDEX
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
MSCI O/AC
TELECOMMUNICATIONS EGLO S&P 500
-------------------- ------------- -------------
<S> <C> <C> <C>
1994 $ 100.00 $ 100.00 $ 100.00
1995 $ 119.72 $ 117.07 $ 134.09
1996 $ 127.43 $ 121.95 $ 211.33
1997 $ 155.82 $ 46.34 $ 211.26
1998 $ 220.09 $ 31.71 $ 267.60
1999 $ 317.66 $ 86.59 $ 319.86
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 31, 1998, two officers of eGlobe each loaned $50,000 to us for
short term needs. The loans were repaid, including a 1% fee, in February, 1999.
In November 1998, we reached an agreement with Mr. Ronald Jensen, who, at
the time, was our largest stockholder. The agreement concerned settlement of
unreimbursed costs and potential claims. Mr. Jensen had purchased $7.5 million
of our common stock in a private placement in June 1997 and later was elected
Chairman of our Board of Directors. After approximately three months, Mr.
Jensen resigned
23
<PAGE>
his position, citing both other business demands and the challenges of managing
our business. During his tenure as Chairman, Mr. Jensen incurred staff and other
costs that were not billed to eGlobe. Also, Mr. Jensen subsequently communicated
with our current management, indicating there were a number of issues raised
during his involvement with eGlobe relating to the provisions of his share
purchase agreement which could result in claims against us.
In December 1998, to resolve all current and potential issues, we exchanged
75 shares of our 8% Series C cumulative convertible preferred stock ("Series C
Preferred Stock"), which management estimated to have a fair market value of
approximately $3.4 million and a face value of $7.5 million, for Mr. Jensen's
then current holding of 1,425,000 shares of common stock. The terms of the
Series C Preferred Stock permitted Mr. Jensen to convert the Series C Preferred
Stock into the number of shares equal to the face value of the preferred stock
divided by 90% of the common stock market price, but with a minimum conversion
price of $4.00 per share and a maximum of $6.00 per share, subject to adjustment
if we issue common stock for less than the conversion price. The difference
between the estimated fair value of the Series C Preferred Stock to be issued
and the market value of the common stock surrendered resulted in a one-time
non-cash charge to our statement of operations of $1.0 million in the quarter
ended September 30, 1998 with a corresponding credit to stockholders' equity.
In connection with subsequent issuances of securities which are convertible
into or exercisable for our common stock, we discussed with Mr. Jensen the
extent to which the conversion price of the Series C Preferred Stock should be
adjusted downward. On February 12, 1999 (1) Mr. Jensen exchanged 75 shares of
Series C Preferred Stock (convertible into 1,875,000 shares of common stock) for
3,000,000 shares of common stock, which exchange would have the same economic
effect as if the Series C Preferred Stock had been converted into common stock
with an effective conversion price of $2.50 per share and (2) Mr. Jensen waived
any rights to the warrants associated with the Series C Preferred Stock. The
market value of the 1,125,000 incremental shares of common stock issued of
approximately $2.2 million was recorded as a preferred stock dividend in the
quarter ended March 31, 1999. Mr. Jensen transferred all his interests in the
3,000,000 shares of common stock he received in exchange for the Series C
Preferred Stock to EXTL Investors LLC, a limited liability company in which Mr.
Jensen and his wife are the sole members.
In February 1999, contemporaneously with the exchange of Mr. Jensen's
Series C Preferred Stock for shares of common stock, we concluded a private
placement of $5 million with EXTL Investors. We sold 50 shares of our 8% Series
E cumulative convertible redeemable preferred stock (the "Series E Preferred
Stock") and warrants (the "Series E Warrants") to purchase (1) 723,000 shares of
common stock with an exercise price of $2.125 per share and (2) 277,000 shares
of common stock with an exercise price of $.01 per share to EXTL Investors. The
shares of Series E Preferred Stock will automatically be converted into shares
of our common stock, on the earliest to occur of (1) the first date as of which
the last reported sales price of our common stock on Nasdaq is $5.00 or more for
any 20 consecutive trading days during any period in which Series E Preferred
Stock is outstanding, (2) the date that 80% or more of the Series E Preferred
Stock we have issued has been converted into common stock, or (3) we complete a
public offering of equity securities at a price of at least $3.00 per share and
with gross proceeds to us of at least $20 million. The initial conversion price
for the Series E Preferred Stock is $2.125, subject to adjustment if we issue
common stock for less than the conversion price. As of February 1, 2000, because
the closing sales price of our common stock was over the required threshold for
the requisite number of trading days, the shares of Series E Preferred Stock
converted into shares of our common stock.
On April 9, 1999, we and our wholly owned subsidiary, eGlobe Financing
Corporation, entered into a loan and note purchase agreement with EXTL Investors
(which, together with its affiliates, is our largest stockholder). eGlobe
Financing initially borrowed $7.0 million from EXTL Investors and we granted
EXTL Investors warrants (1/3 of which are presently exercisable) to purchase
1,500,000 shares of our common stock at an exercise price of $0.01 per share. As
a condition to receiving this $7.0 million unsecured loan, we entered into a
subscription agreement with eGlobe Financing to subscribe for eGlobe Financing
stock for an aggregate subscription price of up to $7.5 million (the amount
necessary to repay the loan and accrued interest). We used the proceeds of this
financing to fund capital expenditures relating to network enhancement of IP
trunks and intelligent platforms for calling card and unified messaging
services, and for working capital and general corporate purposes.
24
<PAGE>
As of June 30, 1999, the loan and note purchase agreement with EXTL
Investors was amended to add two additional borrowers (IDX Financing Corporation
and Telekey Financing Corporation), each of which is an indirect wholly owned
subsidiary of us. Also effective as of that date, EXTL Investors purchased $20
million of 5% secured notes from eGlobe Financing, IDX Financing and Telekey
Financing (collectively, the "Financing Companies"). As required by the loan and
note purchase agreement, eGlobe Financing used proceeds of such financing to
repay the $7 million April 1999 loan from EXTL Investors and approximately $8
million of senior indebtedness to IDT Corporation. We granted EXTL Investors
warrants to purchase 5,000,000 shares of our common stock at an exercise price
of $1.00 per share, and 2/3 of the warrants to purchase 1,500,000 shares granted
in connection with the $7 million loan expired upon issuance of the secured
notes. The 5% secured notes must be repaid in 36 specified monthly installments
commencing on August 1, 1999, with the remaining unpaid principal and accrued
interest being due in a lump sum with the last payment. The entire amount
becomes due earlier if we complete an offering of debt or equity securities from
which we receive net proceeds of at least $100 million (a "Qualified Offering").
The principal and interest of the 5% secured notes may be paid in cash. However,
up to 50% of the original principal amount of the 5% secured notes may be paid
in our common stock at our option if:
o the closing price of our common stock on Nasdaq is $8.00 or more for
any 15 consecutive trading days;
o we close a public offering of equity securities at a price of at least
$5.00 per share and with gross proceeds to us of at least $30 million;
or
o we close a Qualified Offering (at a price of at least $5.00 per share,
in the case of an offering of equity securities).
EXTL Investors also has agreed to make advances to the Financing Companies from
time to time based upon eligible accounts receivables. These advances may not
exceed the lesser of:
o 50% of eligible accounts receivable; or
o the aggregate amount of principal payments made by the Financing
Companies under the 5% secured notes.
As of December 31, 1999, we have borrowed $1.1 million under the accounts
receivable facility. The 5% secured notes and the accounts receivable revolving
note are secured by substantially all of our and our subsidiaries' equipment and
other personal property and our and IDX's accounts receivables. In order to
provide such security arrangements, we and each of our subsidiaries transferred
equipment and other personal property to the Financing Companies and we have
agreed that we will and will cause our subsidiaries to transfer equipment and
other personal property acquired after the closing date to the Financing
Companies. We and our operating subsidiaries have guaranteed payment of the
secured notes.
In November 1999, we prepaid $4 million of the 5% secured notes with the
issuance of shares of Series J Preferred Stock. The shares of Series J Preferred
Stock automatically converted into 2,564,102 shares of common stock on January
31, 2000 because the closing sales price of our common stock was over the
required threshold for the requisite number of trading days.
On October 14, 1999, we acquired iGlobe, Inc., a wholly owned subsidiary of
Highpoint Telecommunications, Inc. iGlobe has created an infrastructure
supplying telecommunications services, including Internet protocol services,
particularly voice over Internet protocol ("VoIP"), throughout Latin America.
iGlobe's network in Latin America complements the network we are building in
Asia and the rest of the world. David Warnes, an eGlobe Director, has been the
President and Chief Executive Officer of Highpoint since April 1998.
We acquired iGlobe for one share of our Series M cumulative convertible
preferred stock (the "Series M Preferred Stock") valued at $9.6 million, direct
acquisition costs of approximately $0.3 million, and Highpoint received a
non-voting beneficial twenty percent (20%) interest of the equity interest
subscribed or held by us in a yet to be completed joint venture business
currently known as IP Solutions, B.V.
25
<PAGE>
The share of Series M Preferred Stock is convertible, at the holder's
option, into shares of common stock beginning on October 15, 2000 at a
conversion price equal to $2.385. The share of Series M Preferred Stock will
automatically be converted into shares of common stock, on the earliest to occur
of: (1) the first date as of which the last reported sales price of common stock
on Nasdaq is $5.00 or more for any 10 consecutive trading days during any period
in which Series M Preferred Stock is outstanding, (2) the date that is seven
years after the date of issuance, or (3) we complete a public offering of equity
securities at a price of at least $4.00 per share and with gross proceeds to us
of at least $20 million, but in no event shall the Series M Preferred Stock
convert prior to the first anniversary of the date of issuance. We may
repurchase the Series M Preferred Stock for $9 million plus any accrued but
unpaid dividends on the Series M Preferred Stock at any time prior to
Highpoint's exercise of its conversion rights. Pursuant to an agreement dated
April 17, 2000, we issued Highpoint 3,773,584 shares of common stock in exchange
for the outstanding share of Series M Preferred Stock.
On December 3, 1999, we acquired Coast International, Inc. Prior to our
acquisition of Coast, its majority stockholder was Ronald Jensen, a member of
EXTL Investors, our largest stockholder. We issued Mr. Jensen 11,270 shares of
our Series O Preferred Stock and 618,033 shares of our common stock. The Series
O Preferred Stock is convertible into 3,220,000 shares of our common stock, at
the holder's option, into shares of our common stock at any time after the later
of (A) one year after the date of issuance and (B) the date we have received
stockholder approval for such conversion and the applicable Hart-Scott-Rodino
waiting period has expired or terminated. Upon conversion of the Series O
Preferred Stock, the former Coast Stockholders will own approximately 22.6% of
our outstanding common stock on a fully diluted basis. On January 26, 2000, the
closing sales price of our common stock was over the required threshold for the
requisite number of trading days. Accordingly, on April 30, 2000, following
receipt of shareholder approval of our issuance of more than 20% of our common
stock upon conversion of the Series O Preferred Stock to the former Coast
stockholders, the outstanding Series O Preferred Stock converted into 3,220,000
shares of common stock.
Prior to closing, Coast incurred $3.25 million of unsecured debt with an
affiliate of EXTL Investors. With the consent of our existing lender, EXTL
Investors, we and our operating subsidiaries have guaranteed the repayment of
the $3.25 million debt and Coast has secured its repayment obligation with its
operating assets. The debt is evidenced by (1) a promissory note in the original
principal amount of $3 million which bears interest at a variable rate and
matures on July 1, 2000 and (2) a promissory note in the original principal
amount of $250,000 which bears interest at 11% per annum and matures on November
29, 2000.
Our stockholders approved at the most recent annual meeting of stockholders
held on June 16, 1999 a proposal to allow EXTL Investors to own 20% or more of
eGlobe common stock outstanding now or in the future and the possible issuance
of common stock upon the exercise of the warrants issued in connection with the
$20 million debt placement and the possible repayment of up to 50% of the $20
million debt using shares of common stock, where the number of shares issuable
may equal or exceed 20% of common stock outstanding.
As of December 16, 1999, we loaned certain of our senior executive officers
an aggregate of $1,209,736 in connection with their exercise of employee stock
options, including $673,954 to Christopher Vizas, $158,203 to Ronald Fried and
$70,313 to Allen Mandel. The loans are evidenced by full-recourse promissory
notes, which accrue interest at a rate of 6% per annum and mature on the
earliest to occur of (a) for $177,188 of the loans December 16, 2003 and for
$1,032,548 of the loans December 16, 2004, (b) the date that is 90 days after
the date that the senior executive's employment with us terminates, unless such
termination occurs other than "for cause" (as defined below), and (c) promptly
after the date that an executive sells all or a portion of the collateral under
his note, in which case such executive must repay the note in full or that
portion of the note that can be repaid if only a portion of the collateral is
sold. The loans are secured by the shares of common stock received upon exercise
of the options and any cash, securities, dividends or rights received upon any
sale of such shares of common stock.
"Termination for cause" means termination because of (i) the executive's
fraud or material misappropriation with respect to our business of assets; (ii)
the executive's persistent refusal or failure to materially perform his duties
and responsibilities, which continues after the executive receives notice of
26
<PAGE>
such refusal or failure; (iii) conduct that constitutes disloyalty or materially
harms us; (iv) conviction of felony or crime; (v) use of drugs or alcohol which
materially interferes with the executive's performance of his duties; or (vi)
material breach of any provision of the executive's employment agreement.
Arnold Gumowitz, Co-Chairman of our Board of Directors, owns the building
located at 421 Seventh Avenue, New York, New York and leases space in this
building to us for the executive offices and telecommunications switching
equipment of our Trans Global subsidiary. We lease 20,000 square feet at that
location at an annual rate of $568,800, which increases to $600,000 by the end
of the lease term. The lease terminates on March 31, 2003.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING OBLIGATIONS
Section 16(a) of the Exchange Act requires our executive officers and
directors, and persons who own more than ten percent of our common stock, to
file reports of ownership and changes in ownership with the SEC and the exchange
on which our common stock is listed for trading. Those persons are required by
regulations promulgated under the Exchange Act to furnish us with copies of all
reports filed pursuant to Section 16(a). Based solely upon our review of such
copies, we believe all reports required pursuant to Section 16(a) with respect
to our directors, executive officers and ten percent beneficial owners for the
year ended December 31, 1999 were timely filed, with the following exceptions:
Messrs. Howard, Krinsley, Wall and Vizas each failed to file one report on a
timely basis with respect to a single transaction.
27
<PAGE>
APPROVAL OF THE ISSUANCE OF COMMON STOCK UPON THE CONVERSION
OF THE SERIES P CONVERTIBLE PREFERRED STOCK AND SERIES Q
CONVERTIBLE PREFERRED STOCK AND EXERCISE OF CERTAIN WARRANTS
(PROPOSAL 2)
On January 27, 2000 we closed a $15.0 million equity private placement with
RGC International Investors, LDC, a company organized under the laws of the
Cayman Islands ("Rose Glen"). Pursuant to the terms of a securities purchase
agreement, we issued Rose Glen 15,000 shares of our Series P convertible
preferred stock (the "Series P Preferred Stock") and warrants to purchase
375,000 shares of our common stock with a per share exercise price equal to
$12.04, subject to adjustment for issuances of shares of our common stock below
market price. On March 17, 2000, we closed a $4 million equity private placement
with Rose Glen. Pursuant to the terms of a securities purchase agreement, we
issued Rose Glen 4,000 shares of our Series Q convertible preferred stock (the
"Series Q Preferred Stock") and warrants (the "Series Q Warrants" and together
with the Series P Preferred Stock, the Series P Warrants and the Series Q
Preferred Stock, the "Rose Glen Securities") to purchase 100,000 shares of our
common stock with a per share exercise price equal to $12.04, subject to
adjustment for issuances of shares of our common stock below market price. Under
the terms of the Series Q securities purchase agreement, we are obligated to
issue 6,000 additional shares of Series Q Preferred Stock under the same terms.
At that time we also will issue to Rose Glen warrants to purchase 150,000 shares
of common stock. The closing of the sale of the additional 6,000 shares of
Series Q Preferred Stock and warrants to purchase 150,000 shares of common stock
are conditional upon effectiveness of the registration statement registering the
shares of common stock underlying the 15,000 shares of Series P Preferred Stock
and warrants to purchase 375,000 shares of common stock, and 10,000 shares of
Series Q Preferred Stock and warrants to purchase 250,000 shares of common
stock.
The rules of the National Association of Securities Dealers, Inc. ("NASD")
currently require stockholder approval by issuers of securities quoted on the
Nasdaq National Market, on which our common stock is currently quoted, as to the
issuance of shares of common stock (or securities convertible into common stock)
in certain sales or issuances of common stock (or securities convertible into or
exercisable for common stock) in a non-public offering equal to 20% or more of
the voting power outstanding before the issuance for less than the greater of
book or market value of the stock. If the issuances of the Series P Preferred
Stock and the Series P Warrants in January 2000 are integrated with the
issuances of the Series Q Preferred Stock and the Series Q Warrants in March
2000, the issuance of our common stock upon conversion and exercise of such
securities is subject to this NASD rule.
The initial issuance of the Series P Preferred Stock and the Series P
Warrants in January 2000 and the initial issuance of the Series Q Preferred
Stock and the Series Q Warrants in March 2000 did not require stockholder
approval under the NASD rule as the Certificate of Designations of each of the
Series P Preferred Stock and the Series Q Preferred Stock place a cap on the
number of shares that can be issued upon conversion and exercise of the Series P
Preferred Stock and the Series P Warrants and the Series Q Preferred Stock and
the Series Q Warrants, respectively, such that in no event can the holder
convert or exercise the Rose Glen Securities into 20% or more of our issued and
outstanding common stock. We, however, must obtain stockholder approval prior to
issuance of shares of common stock exceeding that limit if we wish to maintain
our Nasdaq listing.
The initial conversion price for each of the Series P Preferred Stock and
the Series Q Preferred Stock was $12.04 (which at the time of the Rose Glen
Securities were issued was above the market price of our common stock). However
on April 27, 2000, the conversion price for each of the Series P Preferred Stock
and the Series Q Preferred Stock adjusted and became equal to the lesser of:
o the lowest five consecutive day average closing price of our common
stock on Nasdaq during the 22-day period prior to conversion, and
o $12.04.
Accordingly, the exact number of shares of common stock issuable upon conversion
of the Rose Glen Securities is dependent on the market price of our common stock
at the time of conversion and, therefore, is not currently known or
determinable. However, the number of shares could be substantial
28
<PAGE>
and if the market price of the common stock falls low enough, it could exceed
25%, 30% or even more of our common stock. Assuming issuance of the remaining
6,000 shares of Series Q Preferred Stock and related warrants, conversion of all
of the Rose Glen Securities on August 1, 2000 and receipt of stockholder
approval, the Rose Glen Securities would be convertible into approximately
37.1% of our common stock on January 27, 2000.
If this Proposal 2 is approved and we issue 20% or more of our common stock
upon conversion and exercise of the Rose Glen Securities, common stockholders
will experience a substantial reduction in their equity interests and voting
power in eGlobe. Based on our market price on August 1, 2000, each common
stockholder would experience dilution equal to 13.9%. Even if Proposal 2 is not
approved and, accordingly, we are not able to issue more than 19.9% of our
common stock upon the conversion and exercise of the Rose Glen Securities,
common stockholders will experience dilution upon conversion and exercise of the
Rose Glen Securities.
We have agreed to register the shares of common stock issuable upon
conversion and exercise of the Rose Glen Securities. A registration statement
covering the number of shares of common stock issuable upon conversion and
exercise of the Rose Glen Securities (including the securities to be issued as
the second closing and assuming approval of this Proposal 2) has been filed with
the SEC. To the extent that the holders of Rose Glen Securities convert and then
sell their common stock upon registration, our common stock price may decrease
due to the additional shares in the market.
We may be required to redeem the outstanding Series P Preferred Stock and
Series Q Preferred Stock that would be convertible into the number of shares of
common stock above 7,157,063 shares (19.99% of our common stock on January 27,
2000) under certain circumstances, including if the Series P Preferred Stock and
the Series Q Preferred Stock are no longer convertible into common stock because
the holder has already converted such preferred stock into at least 7,157,063
shares of common stock and we have not obtained stockholder approval of our
issuance of more than 20% of our outstanding common stock on January 27, 2000
upon conversion and exercise of the Rose Glen Securities. The holder has not
converted any of the Rose Glen Securities. At the current market price of $2.75,
the number of shares of common stock issuable upon conversion and exercise of
the Rose Glen Securities (including the securities to be issued at the second
closing) would exceed 7,157,000 shares. Redemption of the Series P Preferred
Stock and the Series Q Preferred Stock will require a large sum of cash. We are
currently unable to immediately pay the redemption value of the Series P
Preferred Stock and the Series Q Preferred Stock. We currently estimate we will
need to raise up to $20.0 million (excluding the amount required to redeem
outstanding shares of Series P Preferred Stock and Series Q Preferred Stock) to
have sufficient working capital to run our business, acquire assets and
technology, repay indebtedness primarily incurred in connection with
acquisitions, upgrade our facilities, develop new services, continue to fund
certain anticipated operating losses and meet the cash obligations through March
31, 2001. We believe we will be able to raise the required funds. If we are
unable to raise the required funds, redemption of the Series P Preferred Stock
and Series Q Preferred Stock would require us to reallocate funds from other
intended uses, including acquisitions and product development. Accordingly,
redemption of the Series P Preferred Stock and the Series Q Preferred Stock may
negatively effect our ability to finance our current and future operations.
Stockholders are requested in this Proposal 2 to approve the issuance of
the number of shares of common stock upon the conversion and exercise of the
Rose Glen Securities (including the Rose Glen Securities issuable pursuant to
the Series Q purchase agreement after our registration statement is declared
effective), equal to or greater than 20% of the common stock outstanding on
January 27, 2000. The affirmative vote of a majority of the shares of common
stock present in person or represented by Proxy and entitled to vote at the
Annual Meeting will be required in connection with the foregoing transactions.
If the stockholders fail to approve this Proposal 2, Rose Glen will be
permitted to receive upon conversion of the Rose Glen Securities no more than
19.9% of the common stock outstanding at January 27, 2000. In addition, if the
Series P Preferred Stock or the Series Q Preferred Stock are no longer
convertible into common stock, the mandatory redemption provision of the
Certificate of Designations of each of the Series P Preferred Stock or the
Series Q Preferred Stock will be triggered and we will have to redeem the
outstanding securities for cash.
29
<PAGE>
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
Material terms and conditions of the Rose Glen Securities are described
below.
GENERAL DESCRIPTION OF THE SERIES P PREFERRED STOCK
VOTING RIGHTS. The holders of the Series P Preferred Stock do not have
voting rights, unless otherwise provided by Delaware corporation law.
LIQUIDATION RIGHTS. Upon our dissolution, liquidation, or winding-up, the
holders of the Series P Preferred Stock are entitled on a parity basis with any
preferred stock ranking on a parity with the Series P Preferred Stock to a
liquidation preference over the common stock and any preferred stock ranking
junior to the Series P Preferred Stock, but after all preferential amounts due
holders of any class of stock having a preference over the Series P Preferred
Stock are paid in full, equal to the sum of $1,000 plus an annual interest rate
of 5% on the $1,000 for the period the Series P Preferred Stock is outstanding
plus any default payments specified in the certificate of designations divided
by the number of shares of Series P Preferred Stock then outstanding.
DIVIDENDS. The Series P Preferred Stock does not bear any dividends. No
dividends may be granted on common stock or any preferred stock ranking junior
to the Series P Preferred Stock while the Series P Preferred Stock remains
outstanding.
CONVERSION. The Series P Preferred Stock is convertible, at the holder's
option, into shares of common stock. The shares of Series P Preferred Stock will
automatically be converted into shares of common stock on January 26, 2003,
subject to delay for specified events. The conversion price for the Series P
Preferred Stock is equal to the lesser of the lowest five consecutive day
average closing price of our common stock on Nasdaq during the 22-day period
prior to conversion, and $12.04.
We can force a conversion of the Series P Preferred Stock on any trading
day following a period in which the closing bid price of our common stock has
been greater than $24.08 for a period of at least 35 trading days after the
earlier of (1) the first anniversary of the date the common stock issuable upon
conversion of the Series P Preferred Stock and warrants is registered for
resale, and (2) the completion of a firm commitment underwritten public offering
with gross proceeds to us of at least $45 million.
The Series P Preferred Stock is convertible into a maximum of 5,151,871
shares of common stock. This maximum share amount is subject to increase if the
average closing bid prices of our common stock for the 20 trading days ending on
the later of June 30, 2000 and the 60th calendar day after the common stock
issuable upon conversion of the Series P Preferred Stock and warrants is
registered is less than $9.375, provided that under no circumstances will the
Series P Preferred Stock (together with the other Rose Glen Securities) be
convertible into more than 7,157,063 shares of our common stock, unless we
obtain stockholder approval of the issuance of more shares. In addition. no
holder may convert the Series P Preferred Stock or exercise the warrants it owns
for any shares of common stock that would cause it to own following such
conversion or exercise in excess of 4.9% of the shares of our common stock then
outstanding.
REDEMPTION. We may be required to redeem the Series P Preferred Stock in
the following circumstances:
o if we fail to timely file all reports required to be filed with the SEC
in order to become eligible and maintain our eligibility for the use of
SEC Form S-3;
o if we fail to register the shares of common stock underlying the Series
P Preferred Stock and associated warrants with the SEC by July 15,
2000;
o if we fail to timely honor conversions of the Series P Preferred
Stock;
o if we fail to use our best efforts to maintain at least 6,000,000
shares of common stock reserved for the issuance upon conversion of the
Series P Preferred Stock and associated warrants;
o if we fail to issue irrevocable instructions to our transfer agent to
issue common stock certificates for conversion shares and warrant
shares;
30
<PAGE>
o if we or any of our subsidiaries make an assignment for the benefit of
creditors or become involved in bankruptcy, insolvency, reorganization
or liquidation proceedings;
o if we merge out of existence without the surviving company assuming
the obligations relating to the Series P Preferred Stock;
o if our common stock is no longer listed on the Nasdaq National Market
which is where our common stock is listed at present or, if we cease to
be listed on the Nasdaq National Market, our common stock is not
alternatively listed on the Nasdaq SmallCap Market, the New York Stock
Exchange or the American Stock Exchange;
o if the Series P Preferred Stock is no longer convertible into common
stock because it would result in an aggregate issuance of more than
5,151,871 shares of common stock, as such number may be adjusted, and
we have not waived such limit, or
o if, assuming we have waived the 5,151,871 limit above, the Series P
Preferred Stock is no longer convertible into common stock because it
would result in an aggregate issuance (taken together with the shares
issued upon conversion on exercise of the other Rose Glen Securities)
of more than 7,157,063 shares of our common stock and we have not
obtained stockholder approval of a higher limit.
The holder of the Series P Preferred Stock has advised us in writing that
it has no present intention to exercise its rights to demand redemption by
virtue of the second circumstance described above so long as the registration
statement is declared effective by August 31, 2000.
If the Series P Preferred Stock is redeemed under any of the first eight
circumstances described above, the redemption value will be equal to the greater
of (a) 120% multiplied by the sum of (1) the stated value ($1,000 per share),
(2) 5% per annum and (3) any penalties in arrears or (b) the sum of (1) the
stated value plus (2) 5% per annum, divided by the then effective conversion
rate multiplied by the highest closing price for our common stock during the
period from the date of the first occurrence of the mandatory redemption event
until one day prior to the mandatory redemption date.
If the Series P Preferred Stock is redeemed under either of the latter two
circumstances described above, the redemption value will be equal to $1,000 per
share multiplied by 5% per annum.
GENERAL DESCRIPTION OF THE SERIES Q PREFERRED STOCK
VOTING RIGHTS. The holders of the Series Q Preferred Stock do not have
voting rights, unless otherwise provided by Delaware corporation law.
LIQUIDATION RIGHTS. Upon our dissolution, liquidation, or winding-up, the
holders of the Series Q Preferred Stock are entitled on a parity basis with any
preferred stock ranking on a parity with the Series Q Preferred Stock to a
liquidation preference over the common stock and any preferred stock ranking
junior to the Series Q Preferred Stock, but after all preferential amounts due
holders of any class of stock having a preference over the Series Q Preferred
Stock are paid in full, equal to the sum of $1,000 plus an annual interest rate
of 5% on the $1,000 for the period the Series Q Preferred Stock is outstanding
plus any default payments specified in the certificate of designations divided
by the number of shares of Series Q Preferred Stock then outstanding.
DIVIDENDS. The Series Q Preferred Stock does not bear any dividends. No
dividends may be granted on common stock or any preferred stock ranking junior
to the Series Q Preferred Stock while the Series Q Preferred Stock remains
outstanding.
CONVERSION. The Series Q Preferred Stock is convertible, at the holder's
option, into shares of common stock. The shares of Series Q Preferred Stock will
automatically be converted into shares of common stock on March 15, 2003,
subject to delay for specified events. The conversion price for the Series Q
Preferred Stock is equal to the lesser of the lowest five day average closing
price of our common stock on Nasdaq during the 22-day period prior to
conversion, and $12.04.
We can force a conversion of the Series Q Preferred Stock on any trading
day following a period in which the closing bid price of our common stock has
been greater than $24.08 for a period of at least 35 trading days after the
earlier of (1) the first anniversary of the date the common stock issuable upon
conversion of the Series Q Preferred Stock and warrants is registered for
resale, and (2) the completion of a firm commitment underwritten public offering
with gross proceeds to us of at least $45 million.
31
<PAGE>
The Series Q Preferred Stock is convertible into a maximum of 3,434,581
shares of common stock. This maximum share amount is subject to increase if the
average closing bid prices of our common stock for the 20 trading days ending on
the later of June 30, 2000 and the 60th calendar day after the common stock
issuable upon conversion of the Series Q Preferred Stock and warrants is
registered is less than $9.375, provided that under no circumstances will the
Series Q Preferred Stock (together with the other Rose Glen Securities) be
convertible into more than 7,157,063 shares of our common stock, unless we
obtain stockholder approval of the issuance of more shares. In addition. no
holder may convert the Series Q Preferred Stock or exercise the Series Q
Warrants it owns for any shares of common stock that would cause it to own
following such conversion or exercise in excess of 4.9% of the shares of our
common stock then outstanding.
REDEMPTION. We may be required to redeem the Series Q Preferred Stock in
the following circumstances:
o if we fail to timely file all reports required to be filed with the SEC
in order to become eligible and maintain our eligibility for the use of
SEC Form S-3;
o if we fail to register the shares of common stock underlying the Series
P Preferred Stock, the Series Q Preferred Stock and associated warrants
with the SEC by July 15, 2000;
o if we fail to timely honor conversions of the Series Q Preferred
Stock;
o if we fail to use our best efforts to maintain at least 4,000,000
shares of common stock reserved for the issuance upon conversion of the
Series Q Preferred Stock and associated warrants;
o if we fail to issue irrevocable instructions to our transfer agent to
issue common stock certificates for conversion shares and warrant
shares;
o if we or any of our subsidiaries make an assignment for the benefit of
creditors or become involved in bankruptcy, insolvency, reorganization
or liquidation proceedings;
o if we merge out of existence without the surviving company assuming
the obligations relating to the Series P Preferred Stock;
o if our common stock is no longer listed on the Nasdaq National Market
which is where our common stock is listed at present or, if we cease to
be listed on the Nasdaq National Market, our common stock is not
alternatively listed on the Nasdaq SmallCap Market, the New York Stock
Exchange or the American Stock Exchange;
o if the Series Q Preferred Stock is no longer convertible into common
stock because it would result in an aggregate issuance of more than
3,434,581 shares of common stock, as such number may be adjusted, and
we have not waived such limit, or
o if, assuming we have waived the 3,434,581 limit above, the Series Q
Preferred Stock is no longer convertible into common stock because it
would result in an aggregate issuance (taken together with the shares
issued upon conversion or exercise of the other Rose Glen Securities)
of more than 7,157,063 shares of our common stock and we have not
obtained stockholder approval of a higher limit.
The holder of the Series Q Preferred Stock has advised us in writing that
it has no present intention to exercise its rights to demand redemption by
virtue of the second circumstance described above so long as the registration
statement is declared effective by August 31, 2000.
If the Series Q Preferred Stock is redeemed under any of the first eight
circumstances described above, the redemption value will be equal to the greater
of (a) 120% multiplied by the sum of (1) the stated value ($1,000 per share),
(2) 5% per annum and (3) any penalties in arrears or (b) the sum of (1) the
stated value plus (2) 5% per annum, divided by the then effective conversion
rate multiplied by the highest closing price for our common stock during the
period from the date of the first occurrence of the mandatory redemption event
until one day prior to the mandatory redemption date.
If the Series Q Preferred Stock is redeemed under either of the latter two
circumstances described above, the redemption value will be equal to $1,000 per
share multiplied by 5% per annum.
32
<PAGE>
GENERAL DESCRIPTION OF THE SERIES P WARRANTS
In connection with the private placement of the Series P Preferred Stock in
January 2000, we issued warrants to purchase 375,000 shares of our common stock
with a per share exercise price equal to $12.04, subject to adjustment for
issuances of shares of our common stock below market price. The warrants are
exercisable for 5 years beginning January 27, 2000.
GENERAL DESCRIPTION OF THE SERIES Q WARRANTS
In connection with the private placement of the Series Q Preferred Stock in
March 2000, we issued warrants to purchase 100,000 shares of our common stock
with a per share exercise price equal to $12.04, subject to adjustment for
issuances of shares of our common stock below market price. The warrants are
exercisable for 5 years beginning March 17, 2000. Under the terms of the Series
Q securities purchase agreement, we may issue additional warrants to purchase an
additional 150,000 shares of our common stock according to the same terms.
33
<PAGE>
PROPOSAL 3
APPROVAL OF A REVERSE SPLIT OF SHARES OF OUR
COMMON STOCK AND AMENDMENT OF OUR
RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT THE REVERSE STOCK SPLIT
Our Board has directed management to seek stockholder approval of a reverse
stock split (the "Reverse Stock Split") of our common stock to be effected prior
to December 31, 2000, if at all, in one of the following ratios:
o every 2.7 issued and outstanding shares to be exchanged for one share,
o every 3.7 issued and outstanding shares to be exchanged for one share,
or
o every 4.7 issued and outstanding shares to be exchanged for one share.
If stockholders approve the Reverse Stock Split, our Board will have the
discretion to determine which one of the alternative exchange ratios, if any, to
implement. Our Board believes that stockholder approval of each of the
one-for-2.7, one-for-3.7 or one-for-4.7 exchange ratios (as opposed to approval
of any one ratio) in which the Reverse Stock Split may be effected is in the
best interests of eGlobe and its stockholders and will provide our Board with
the greatest ability to achieve the goals of the Reverse Stock Split.
If stockholders approve the Reverse Stock Split and, at any time prior to
December 31, 2000, our Board determines that it is in the best interests of
eGlobe and its stockholders, our Board will implement the Reverse Stock Split by
amendment of our Restated Certificate of Incorporation. Our Board may, in its
sole discretion, determine not to effect the Reverse Stock Split. If the Reverse
Stock Split is not effected prior to December 31, 2000, the Reverse Stock Split
will be abandoned without further action by the stockholders pursuant to Section
242(c) of the Delaware General Corporation Law.
Our Board's decision to select one of the three exchange ratios and abandon
the others, or alternatively, to reject all of the exchange ratios and not
effectuate the Reverse Stock Split, will be based on factors including, but not
limited to:
o the existing and expected marketability and liquidity of our common
stock,
o overall trends in the stock market,
o likelihood of a deal with a strategic partner,
o our listing status on the Nasdaq National Market,
o our business developments, and
o our actual and projected financial performance.
CORPORATE AND SECURITIES LAW CONSEQUENCES OF THE REVERSE STOCK SPLIT
The Reverse Stock Split will result in a consolidation or reduction in the
number of shares of our common stock that are issued and outstanding, so that
after the Reverse Stock Split each stockholder will own 1/2.7, 1/3.7 or 1/4.7 of
the number of shares owned prior to the Reverse Stock Split and each optionee,
warrant holder or preferred stockholder will have the right to receive upon
conversion or exercise of the securities they own 1/2.7, 1/3.7 or 1/4.7 of the
number of shares they would have been entitled to receive prior to the Reverse
Stock Split. Although the Reverse Stock Split will reduce the number of
outstanding shares, it will not reduce the number of authorized shares.
Implementation of the Reverse Stock Split will not change the relative equity
positions among common and convertible preferred stockholders nor the contingent
equity positions of the holders of stock options and warrants. The Reverse Stock
Split will not alter the relative rights of the common stockholders, preferred
stockholders, warrant holders or optionees.
The Reverse Stock Split will not:
o affect your percentage ownership interest or proportional voting
power, except for minor differences if you receive cash instead of a
fractional share,
o reduce the authorized number of common shares,
34
<PAGE>
o have an effect on the par value of our common stock,
o substantially affect your voting rights or other privileges, unless
you would receive cash for all of your stock holdings before the
Reverse Stock Split, or
o substantially reduce our number of stockholders.
Upon the increase or decrease in the number of shares of our common stock
outstanding by a stock split, our Restated Certificate of Incorporation provides
for the automatic proportionate adjustment of the conversion rate used to
calculate the number of shares of common stock into which the Series I
convertible optional redemption preferred stock is convertible. Upon the
increase or decrease in the number of shares of our common stock outstanding by
a stock split, our Restated Certificate of Incorporation provides for the
automatic adjustment of the conversion price used to calculate the number of
shares of common stock into which the Series P Preferred Stock and the Series Q
Preferred Stock are convertible. The Series I convertible optional redemption
preferred stock, Series P Preferred Stock and the Series Q Preferred Stock are
the only series of preferred stock outstanding. Therefore, immediately upon the
effectiveness of the Reverse Stock Split, the conversion price will
automatically be adjusted such that each share of Series P Preferred Stock and
Series Q Preferred Stock will be convertible into proportionately fewer shares
of common stock.
Pursuant to the terms of our Employee Stock Option Plan, we will reduce
proportionately the total number of shares that we have reserved for grants and
options granted under the plan, and we will increase proportionately the cash
consideration payable per share upon exercise of the options pursuant to these
plans. Our warrants have similar provisions.
Our common stock is currently registered under section 12(g) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The Reverse Stock
Split will not affect the registration of our common stock under the 1934 Act.
REASONS FOR THE REVERSE STOCK SPLIT
Although the effect of a Reverse Stock Split on the market price of our
common stock cannot accurately be predicted, we believe that if stockholders
approve the Reverse Stock Split and the Reverse Stock Split is effected, the
market price of our common stock will likely increase. We cannot guarantee that
the market price of our common stock following the Reverse Stock Split will
increase in direct proportion to the exchange ratio selected by our Board or
that any such increase will be sustained for an extended period of time. Nor can
we guarantee that the Reverse Stock Split will not adversely affect the market
price of our common stock.
There are two principal reasons management believes a Reverse Stock Split
would be in the best interests of eGlobe and its stockholders. First, management
believes our ability to attract and enter into strategic alliances or other
major transactions with desirable partners would likely increase following a
Reserve Stock Split. Assuming the market price of our common stock will increase
following effectiveness of the Reverse Stock Split, management believes that the
perception of our common stock as an investment will improve and that our common
stock will appeal to a broader market. Due to the volatility of low priced
stocks, we believe the investment community generally views common stock that
sells at an abnormally low price negatively. Some brokers are reluctant to or
will not recommend that their clients purchase lower priced stocks, and
institutional investors may be prohibited from purchasing such stocks as a
matter of policy. These practices may adversely affect the liquidity of our
common stock and our ability to raise additional equity capital. Management
believes that additional interest in our common stock by the investment
community is desirable and could result in a more stable trading market for our
common stock. An increased market price that may result from the Reverse Stock
Split may encourage interest in us as a business partner.
Second, we must comply with certain requirements to maintain our common
stock's status as a listed security on the Nasdaq National Market, including
under one set of eligibility criteria a minimum bid price requirement. As of
June 15, 2000, the closing market price of our common stock was below the
minimum bid price requirement. If stockholders approve the Reverse Stock Split,
management would
35
<PAGE>
have the ability to employ the Reverse Stock Split as a means of possibly
increasing the market price of our common stock in excess of the minimum bid
price required for continued listing on the Nasdaq National Market under
applicable eligibility criteria.
In addition, by decreasing the number of outstanding shares of common stock
and the number of shares of common stock the holders of outstanding options,
warrants and convertible securities are entitled to acquire, the Reverse Stock
Split will increase the number of shares of our common stock available for
future issuance. Our Restated Certificate of Incorporation currently authorizes
the issuance of up to 200,000,000 shares of common stock, par value $0.001 per
share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As
of June 1, 2000, we had 94,735,471 shares of common stock issued and outstanding
and 129.0 million shares on a fully diluted basis, including shares issuable
upon the exercise of outstanding options and warrants and preferred share
conversions. The Reverse Stock Split will increase the number of shares
available for future issuance by approximately 47.7 million shares (assuming a
one-for-2.7 reverse stock split and assuming that we do not issue additional
shares of common stock).
IMPLEMENTATION OF THE REVERSE STOCK SPLIT
The effective date of the Reverse Stock Split will be the date on which the
amendment is filed with the Secretary of State of the State of Delaware. The
form of the proposed amendment to effect the Reverse Stock Split is annexed to
this Proxy Statement as Annex "A". The exact timing of the filing of the
proposed amendment to effect the Reverse Stock Split will be determined by our
Board based upon its evaluation as to when such action will be most advantageous
to eGlobe and its stockholders, and the Board of Directors reserves the right to
delay filing the proposed amendment to effect the Reverse Stock Split until
December 30, 2000. In addition, our Board of Directors reserves the right,
notwithstanding stockholder approval and without further action by the
stockholders, to elect not to proceed with the Reverse Stock Split if, at any
time prior to filing the proposed amendment to effect the Reverse Stock Split,
our Board, in its sole discretion, determines that it is no longer in the best
interests of eGlobe and its stockholders.
If stockholders approve the Reverse Stock Split and our Board of Directors
thereafter elects to implement the Reverse Stock Split, we intend to issue a
press release announcing the terms and effective date of the Reverse Stock Split
not less than 10 days prior to filing the proposed amendment to effect the
Reverse Stock Split.
No fractional shares will be issued in connection with the proposed Reverse
Stock Split. Rather, we will pay cash in lieu of any fraction of a share that
any stockholder would otherwise receive. The price for such fractional share
will be based on the closing market price of our common stock on the day
preceding the filing date of the Reverse Stock Split. As a result, stockholders
holding fewer than 2.7 shares, if a one-for-2.7 reverse split is consummated,
will receive only cash and will no longer hold any common stock.
As soon as practicable after filing the amendment to the Restated
Certificate of Incorporation, stockholders will be notified and requested to
surrender their certificates representing shares of pre-split common stock to
our transfer agent so that certificates representing the appropriate number of
shares of post-split common stock, together with a cash payment in lieu of any
fractional share, may be issued in exchange therefore. We expect to adopt a new
stock certificate in connection with imlplementation of the Reverse Stock Split,
if it is approved by stockholders and effected by our Board.
TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
A summary of the federal income tax consequences of the proposed Reverse
Stock Split to individual stockholders is set forth below. The following
discussion is based upon present federal income tax law. The discussion is not
intended to be, nor should it be relied on as, a comprehensive analysis of the
tax issues arising from or relating to the proposed Reverse Stock Split. In
addition, we have not and will not seek an opinion of counsel or a ruling from
the Internal Revenue Service regarding the federal income tax consequences of
the proposed Reverse Stock Split. ACCORDINGLY, STOCKHOLDERS ARE ADVISED TO
36
<PAGE>
CONSULT THEIR OWN TAX ADVISORS FOR MORE DETAILED INFORMATION REGARDING THE
EFFECTS OF THE PROPOSED REVERSE STOCK SPLIT ON THEM UNDER APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN INCOME TAX LAWS.
o Except with respect to any cash received for fractional shares, we believe
that the Reverse Stock Split will be a tax-free recapitalization.
Accordingly, a stockholder, will not recognize any gain or loss as a
result of the receipt of our post-split common stock pursuant to the
Reverse Stock Split.
o The shares of our post-split common stock in the hands of a stockholder
will have an aggregate basis for computing gain or loss equal to the
aggregate basis of shares of our pre-split common stock held by that
stockholder immediately prior to the Reverse Stock Split, reduced by the
basis allocable to any fractional shares which the stockholder is treated
as having sold for cash (see paragraph 4 below).
o A stockholder's holding period for the post-split common stock will
include the holding period of the pre-split common stock exchanged.
o Stockholders who receive cash for all of their holdings (as a result of
owning fewer than 2.7, 3.7 or 4.7 shares, depending on the ratio selected
by our Board) will recognize a gain or loss for federal income tax
purposes equal to the difference between the cash received and their basis
in the pre-split common stock. Although the tax consequences to other
stockholders who receive cash for fractional shares are not entirely
certain, these stockholders will probably be treated for federal income
tax purposes as having sold their fractional shares and will recognize
gain or loss in an amount equal to the difference between the cash
received and the portion of their basis for the pre-split common stock
allocated to the fractional shares. It is possible that such stockholders
will recognize gain based on the entire amount of cash received for
fractional shares without offset for an allocable portion of their tax
basis in their shares prior to the exchange. In any event, the gain will
be long-term capital gain if the shares are held as capital assets and if
the stockholders held the shares for more than one year before the Reverse
Stock Split. Stockholders who do not receive any cash for their holdings
will not recognize any gain or loss for federal income tax purposes as a
result of the Reverse Stock Split.
VOTE REQUIRED AND RECOMMENDATION OF OUR BOARD
The affirmative vote of a majority of the shares of common stock
outstanding will be required to approve the Reverse Stock Split to be effected
pursuant to an amendment of our Restated Certificate of Incorporation in our
Board's discretion prior to December 31, 2000. Unless otherwise indicated,
properly executed Proxies will be voted in favor of Proposal 3 to approve the
Reverse Stock Split.
Our Board of Directors, pursuant to a five to one vote, has directed
management to seek stockholder approval of the Reverse Stock Split. Gary
Gumowitz voted against the Reserve Stock Split because of the uncertainty as to
whether an increase in our market price as a result of the Reserve Stock Split
would be sustained.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 3.
37
<PAGE>
PROPOSAL 4
APPROVAL OF AMENDMENT AND RESTATEMENT OF THE 1995
EMPLOYEE STOCK OPTION AND APPRECIATION RIGHTS PLAN
In December 1995, our Board of Directors adopted, and the stockholders
subsequently approved, our 1995 Employee Stock Option and Appreciation Rights
Plan (the "Employee Plan"). In February 1998, our Board of Directors adopted,
and the stockholders subsequently approved, an increase in the shares available
for issuance under the Employee Plan from 1,000,000 to 1,750,000 (representing
approximately 10% of our common stock at a time when we had approximately
17,350,653 shares of common stock outstanding). In May 1999, our Board of
Directors adopted, and the stockholders subsequently approved, an amendment to
the Employee Plan to increase the number of shares of common stock that may be
issued thereunder to 3,250,000 shares (representing approximately 15% of our
common stock at a time when we had approximately 21,348,943 shares of common
stock outstanding). In December 1999, our Board of Directors adopted, and the
stockholders subsequently approved in March 2000, an amendment to the Employee
Plan to increase the number of shares of common stock that may be issued
thereunder to 7,000,000 shares (representing approximately 9% of our common
stock at a time when we had approximately 39,610,770 shares of common stock
outstanding and anticipated issuing an additional 40 million shares of common
stock in connection with our merger with Trans Global Communications). In each
case, our increase in the number of shares available for issuance under the
Employee Plan was in response to an increase in the number of outstanding common
stock due primarily to issuances in connection with various acquisitions.
On June 28, 2000, our Board of Directors (exclusive of Gary Gumowitz, who
abstained) adopted an amendment to the Employee Plan, subject to stockholder
approval, that changes two provisions of the Employee Plan. The first change
made by the amendment is to increase the number of shares of common stock
issuable under the Employee Plan to 12,000,000 shares. The amendment further
provides that the 12,000,000 share limit will be automatically increased from
time to time so that the limit remains equal to 10% of our issued and
outstanding shares of common stock on a fully diluted basis (including any
shares of common stock that may be issuable upon conversion or exercise of
preferred stock, warrants or other convertible securities, but excluding any
shares of common stock issued upon the exercise of options granted under the
Plan); provided; that, at no time may the number of shares issuable under the
Employee Plan exceed 15,000,000 shares. The amendment makes our practice of
periodically increasing the option pool an automatic feature of the Employee
Plan until the Employee Plan reaches 15,000,000 shares. If our Board determines
to increase the option pool above 15,000,000, we will have to seek stockholder
approval of such increase.
Prior to the amendment the Employee Plan provided that no participant under
the plan may be issued options to purchase more than 500,000 shares of common
stock in any two year period. The second change made by the amendment to the
Employee Plan is to increase this limit to 1,000,000 shares per any single
participant over any two year period.
The amendment to the Employee Plan is needed to have options available for
grants made to our employees and employees of companies acquired by eGlobe or
that may be acquired in the future as well as outside directors and executive
officers. Our number of employees continues to grow significantly, and we need
additional options to grant to employees to serve as an incentive for superior
performance. The number of shares authorized under the Employee Plan would
constitute 5.7% of our capital stock (assuming conversion of convertible
preferred stock and exercise of outstanding warrants). At July 12, 2000, options
outstanding under the Employee Plan exceeded the shares of common stock
available for grant by 277,358 shares (net of canceled or expired options) and
no shares remained available for future grant under the Employee Plan. On July
12, 2000, the closing price of our common stock was $2.5156 per share.
VOTE REQUIRED AND RECOMMENDATION OF OUR BOARD
At the Annual Meeting, eGlobe's stockholders will be asked to consider and
vote on the proposed amendment to the Employee Plan (1) increasing the number of
shares of common stock issuable under the Employee Plan to 12,000,000 (subject
to periodic increases as described above, up to a maximum of
38
<PAGE>
15,000,000 shares) and (2) providing that no participant under the plan may be
issued options to purchase more than 1,000,000 shares of common stock in any two
year period. Unless otherwise instructed on the Proxy, properly executed proxies
will be voted in favor of approving the proposed amendment and restatement of
the Employee Plan. The affirmative vote of a majority of the shares of common
stock present or represented by Proxy at the Annual Meeting will be required to
approve the amendment and restatement of the Employee Plan.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 4.
The purpose of the Employee Plan is to advance our interests by providing
eligible individuals, including employees, consultants and other key persons, an
opportunity to acquire or increase a proprietary interest in us, which thereby
will create a stronger incentive to expend maximum effort for our growth and
success and will encourage such eligible individuals to maintain their
affiliation with us. Our board of directors believes that stock options and
other stock-based incentive awards are important to attract and to encourage the
continued employment and service of officers, other key employees and
non-employee directors by facilitating their purchase of a stock interest in us
and that increasing the aggregate number of shares available under the Employee
Plan will afford us additional flexibility in making awards deemed necessary in
the future.
The following is a summary description of the Employee Plan, as amended,
originally approved by our stockholders, effective December 14, 1995. A copy of
the Employee Plan is annexed to this Proxy Statement as Annex "B".
DESCRIPTION OF THE 1995 EMPLOYEE STOCK OPTION AND APPRECIATION RIGHTS PLAN
GENERAL. The Compensation Committee administers the Employee Plan. The
Compensation Committee, in its sole discretion, may grant a variety of stock
incentive awards based on our common stock, including nonqualified stock
options, incentive stock options and stock appreciation rights. All of our
employees, advisors, consultants and non-employee directors are eligible to
receive stock incentive awards under the Employee Plan; provided, however that
incentive stock options may be granted only to our employees. Our Board of
Directors may terminate or suspend the Employee Plan at any time. Unless
previously terminated, the Employee Plan will terminate automatically on
December 14, 2005, the tenth anniversary of the date of adoption of the Employee
Plan by our Board of Directors.
As amended, the number of shares of common stock issuable under the
Employee Plan is 12,000,000 shares. This 12,000,000 share limit will be
automatically increased from time to time so that the limit remains equal to 10%
of our issued and outstanding shares of common stock on a fully diluted basis
(including any shares of common stock that may be issuable upon conversion or
exercise of preferred stock, warrants or other convertible securities, but
excluding any shares of common stock issued upon the exercise of options granted
under the Plan); provided; that, at no time may the number of shares issuable
under the Employee Plan exceed 15,000,000 shares.
STOCK OPTIONS. Incentive stock options granted under the Employee Plan are
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code, unless they exceed certain limitations or are specifically
designated otherwise. All other options granted under the Employee Plan are
nonqualified stock options, meaning an option not intended to qualify as an
incentive stock option or an incentive stock option which is converted into a
nonqualified stock option under the terms of the Employee Plan.
The option exercise price for incentive stock options granted under the
Employee Plan may not be less than 100% of the Fair Market Value (as defined in
the Employee Plan) of our common stock on the date of grant of the option (or
110% in the case of an incentive stock option granted to an optionee
beneficially owning more than 10% of our outstanding common stock). For
nonqualified stock options, the option price shall be equal to the Fair Market
Value of our common stock on the date the option is granted. The maximum option
term is 10 years (or five years in the case of an incentive stock option granted
to an optionee beneficially owning more than 10% of the outstanding common
stock). Moreover, the aggregate Fair Market Value (determined as of the time
that option is granted) of the shares with
39
<PAGE>
respect to which incentive stock options are exercisable for the first time by
any individual employee during any single calendar year under the Employee Plan
shall not exceed $100,000. The right to purchase shares covered by any option
under the Employee Plan shall be exercisable only in accordance with the terms
and conditions of the grant to the participant. Such terms and conditions may
include a time period or schedule whereby some of the options granted may become
exercisable, or "vested," over time and certain conditions, such as continuous
service or specified performance criteria or goals, must be satisfied for such
vesting. Whether to impose any such vesting schedule or performance criteria,
and the terms of such schedule or criteria, shall be within the sole discretion
of the Compensation Committee. These terms and conditions may be different for
different participants so long as all options satisfy the requirements of the
Employee Plan.
Payment for shares purchased under the Employee Plan may be made either in
cash or in shares of our common stock, or any combination thereof. Shares
tendered as payment for option exercises shall, if acquired from us, have been
held for at least six months and shall be valued at the Fair Market Value of the
shares on the date of exercise. The Compensation Committee may also permit a
participant to effect a net exercise of an option without tendering any shares
of our stock as payment for the option. In such an event, the participant will
be deemed to have paid for the exercise of the option with shares of our stock
and shall receive from us a number of shares equal to the difference between the
shares that would have been tendered and the number of options exercised.
Members of the Compensation Committee may effect a net exercise of their options
only with the approval of our Board of Directors. In addition, the Compensation
Committee may permit exercise of options by means of a broker-assisted cashless
exercise.
In general, options granted under the Employee Plan may not be sold,
transferred, pledged, or assigned other than by will or under applicable laws of
descent and distribution. However, we may permit limited transfers of options
which are not incentive stock options for the benefit of immediate family
members of optionees to help with estate planning concerns.
STOCK APPRECIATION RIGHTS. Pursuant to the Employee Plan, the Compensation
Committee may award a stock appreciation right either as a freestanding award or
in tandem with a stock option, however, the Compensation Committee has decided
not to grant any more tandem stock appreciation rights with stock options. If
the stock appreciation right is granted in tandem with a stock option, exercise
of the option cancels the related stock appreciation right. Upon exercise of the
stock appreciation right, the holder will be entitled to receive an amount equal
to the excess of the Fair Market Value on the date of exercise of our common
stock over the exercise price per share specified in the related stock option
(or, in the case of freestanding stock appreciation rights, the price per share
specified in such right) times the number of shares of common stock with respect
to which the stock appreciation right is exercised. This amount may be paid in
cash, common stock, or a combination thereof, as determined by the Compensation
Committee.
ADJUSTMENTS, STOCK DIVIDENDS AND SIMILAR EVENTS. The Compensation Committee
will make appropriate adjustments in outstanding stock incentive awards and the
number of shares available for issuance under the Employee Plan, including the
individual limitations on awards, to reflect common stock dividends, stock
splits and other similar events.
AMENDMENT THE PLAN. Our Board of Directors may amend the plan at any time
and for any reason. However, amendments will be submitted for stockholder
approval to the extent required by the Internal Revenue Code or other applicable
laws.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material Federal income tax consequences
of stock incentive awards under the Employee Plan. It does not describe all
Federal tax consequences under the Employee Plan, nor does it describe state or
local tax consequences.
INCENTIVE STOCK OPTIONS. An optionee will not recognize taxable income upon
exercise of an incentive stock option (except that the alternative minimum tax
may apply), and any gain realized upon a disposition of shares of common stock
received pursuant to the exercise of an incentive stock option
40
<PAGE>
will be taxed as long-term capital gain if the optionee holds the shares of
common stock for at least two years after the date of grant and for one year
after the date of exercise (the "holding period requirement"). We will not be
entitled to any business expense deduction with respect to the exercise of an
incentive stock option, except as discussed below.
For the exercise of an incentive stock option to qualify for the foregoing
tax treatment, the optionee generally must be one of our employees from the date
the option is granted through a date within three months before the date of
exercise of the option. In the case of an optionee who is disabled, the
three-month period is extended to one year. In the case of an employee who dies,
the three-month period and the holding period requirement for shares of common
stock received pursuant to the exercise of the option are waived.
If all of the requirements for incentive option treatment are met except
for the holding period requirement, the optionee will recognize ordinary income
upon the disposition of shares of common stock received pursuant to the exercise
of an incentive stock option in an amount equal to the excess of the fair market
value of the shares of common stock at the time the option was exercised over
the exercise price. The balance of the realized gain, if any, will be long- or
short-term capital gain, depending upon whether or not the shares of common
stock were sold more than one year after the option was exercised. We will be
allowed a business expense deduction to the extent the optionee recognizes
ordinary income, subject to Section 162(m) of the Internal Revenue Code as
summarized below.
If an optionee exercises an incentive stock option by tendering shares of
common stock with a fair market value equal to part or all of the option
exercise price, the exchange of shares will be treated as a nontaxable exchange
(except that this treatment would not apply if the optionee had acquired the
shares being transferred pursuant to the exercise of an incentive stock option
and had not satisfied the holding period requirement summarized above). If the
exercise is treated as a tax free exchange, the optionee would have no taxable
income from the exchange and exercise (other than alternative minimum taxable
income as noted above) and the tax basis of the shares of common stock exchanged
would be treated as the substituted basis for the shares of common stock
received. If the optionee used shares received pursuant to the exercise of an
incentive stock option (or another statutory option) as to which the optionee
had not satisfied the holding period requirement, the exchange would be treated
as a taxable disqualifying disposition of the exchanged shares, and the excess
of the fair market value of the shares tendered over the optionee's basis in the
shares would be taxable.
NON-QUALIFIED OPTIONS. Upon exercising an option that is not an incentive
stock option, an optionee will recognize ordinary income in an amount equal to
the difference between the exercise price and the fair market value of the
shares of common stock on the date of exercise. Upon a subsequent sale or
exchange of shares of common stock acquired pursuant to the exercise of a
non-qualified stock option, the optionee will have taxable gain or loss,
measured by the difference between the amount realized on the disposition and
the tax basis of the shares of common stock (generally, the amount paid for the
shares of common stock plus the amount treated as ordinary income at the time
the option was exercised).
If we comply with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the optionee recognizes ordinary income.
STOCK APPRECIATION RIGHTS. Recipients of stock appreciation rights
generally do not recognize income upon the grant of such rights. When a
participant elects to receive payment of a stock appreciation right, the
participant recognizes ordinary income in an amount equal to the cash and fair
market value of shares of common stock received, and we are entitled to a
deduction equal to such amount.
If we comply with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, we will be entitled
to a business expense deduction in the same amount and generally at the same
time as the participant recognizes ordinary income.
SECTION 162(M) OF THE INTERNAL REVENUE CODE. Section 162(m) of the Internal
Revenue Code limits publicly-held companies such as us to an annual deduction
for federal income tax purposes of $1,000,000 for compensation paid to their
chief executive officer and the four highest compensated executive officers
41
<PAGE>
(other than the chief executive officer) determined at the end of each year (the
"covered employees"). However, performance-based compensation is excluded from
this limitation. The Employee Plan is designed to permit the Compensation
Committee to grant awards that qualify as performance-based for purposes of
satisfying the conditions of Section 162(m). The Employee Plan imposes a limit
designed to satisfy the performance-based compensation exception and that limit,
as amended, states that the maximum number of shares that can be awarded under
the Employee Plan to any person is 1,000,000 shares in any two year period.
INDEPENDENT ACCOUNTANTS
Our Board of Directors has appointed BDO Seidman, LLP ("BDO Seidman") as
our independent accountants for the fiscal year ending December 31, 2000.
Representatives of BDO Seidman will be present at the Annual Meeting, and will
be available to respond to appropriate questions.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" information into this Proxy Statement, which means that we can
disclose important information to you by referring you to another document we
have filed separately with the SEC. The information incorporated by reference is
considered to be part of this Proxy Statement. This Proxy Statement incorporates
by reference our Annual Report on Form 10-K, including financial statements and
schedules thereto, as filed with the Securities and Exchange Commission, for the
fiscal year ended December 31, 1999, our Quarterly Report on Form 10-Q/A,
including financial statements and schedules thereto, that was filed with the
Securities and Exchange Commission on August 18, 2000 and our Current Report on
Form 8-K that was filed with the Securities and Exchange Commission on May 22,
2000 to restate our financial statements which reflect the merger with Trans
Global Communications using pooling of interests accounting. A copy of our
Annual Report and Current Report are being mailed to stockholders with this
Proxy Statement.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
Any proposals by stockholders of eGlobe to be considered for inclusion in
our proxy statement relating to the 2001 Annual Meeting of Stockholders must be
in writing and received by us, at our principal office, not later than the close
of business on July 2, 2001. Nothing in this paragraph shall be deemed to
require the Company to include in the Proxy Statement and proxy relating to the
2001 Annual Meeting of Stockholders any stockholder proposal that does not meet
all of the requirements for such inclusion in effect at that time.
Management of the Company knows of no other business presented for action
by the stockholders at the Annual Meeting. If, however, any other matters should
properly come before the Annual Meeting, the enclosed proxy authorizes the
persons named therein to vote the shares represented thereby in their
discretion.
BY ORDER OF THE BOARD OF DIRECTORS
GRAEME BROWN, ESQ.
DEPUTY GENERAL COUNSEL AND SECRETARY
August __, 2000
42
<PAGE>
ANNEX A
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
EGLOBE, INC.
eGlobe, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), does hereby certify as follows:
eGlobe, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
as follows:
FIRST: That in accordance with the requirements of Section 242 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, acting at a meeting of the directors of the Corporation at which a
quorum was present duly adopted resolutions proposing and declaring advisable a
reverse stock split of the Common Stock outstanding and recommending that such
proposal be submitted to the stockholders of the Corporation for their
consideration, action and approval.
SECOND: Article 4 of the Restated Certificate of Incorporation of this
Corporation, as previously amended, shall be further amended by adding a new
paragraph to the end of said Article 4, which new paragraph shall read as
follows [ANY ONE OF THE FOLLOWING ALTERNATIVE PROPOSALS, AS DETERMINED BY THE
BOARD OF DIRECTORS, IN ITS SOLE DISCRETION]:
"Upon the filing and effectiveness (the "Effective Time") of a certificate
pursuant to the Delaware General Corporation Law to reflect the addition of
this paragraph to Article 4 of the Corporation's Restated Certificate of
Incorporation, each 2.7 shares of the Common Stock, $.001 par value per share
(the "Old Common Stock"), issued and outstanding immediately prior to the
Effective Time shall be reclassified as and changed into one (1) validly
issued, fully paid and non-assessable share of the Corporation's common
stock, $.001 par value per share (the "New Common Stock"), without any action
by the holder thereof. The Corporation shall not issue fractions of shares of
New Common Stock in connection with such reclassification. Stockholders who,
immediately prior to the Effective Time, own a number of shares of Old Common
Stock which is not evenly divisible by 2.7 shall, with respect to such
fractional interest, be entitled to receive from the Corporation in lieu of
fractions of shares of New Common Stock an amount in cash equal to the
product obtained by multiplying $ by the number of shares of Old Common Stock
held by such stockholder which is not evenly divisible by 2.7. Each
certificate that theretofore represented shares of Old Common Stock shall
thereafter represent that number of shares of New Common Stock into which the
shares of Old Common Stock represented by such certificate shall have been
reclassified; provided, however, that each person holding of record a stock
certificate or certificates that represented shares of Old Common Stock shall
receive, upon surrender of such certificate or certificates, a new
certificate or certificates evidencing and representing the number of shares
of New Common Stock to which such person is entitled under the foregoing
reclassification."
OR
"Upon the filing and effectiveness (the "Effective Time") of a certificate
pursuant to the Delaware General Corporation Law to reflect the addition of
this paragraph to Article 4 of the Corporation's Restated Certificate of
Incorporation, each 3.7 shares of the Common Stock, $.001 par value per share
(the "Old Common Stock"), issued and outstanding immediately prior to the
Effective Time shall be reclassified as and changed into one (1) validly
issued, fully paid and non-assessable share of the Corporation's common
stock, $.001 par value per share (the "New Common Stock"), without any action
by the holder thereof. The Corporation shall not issue fractions of shares of
New Common Stock in connection with such reclassification. Stockholders who,
immediately prior to the Effective Time, own a number of shares of Old Common
Stock which is not evenly divisible by 3.7
<PAGE>
shall, with respect to such fractional interest, be entitled to receive from
the Corporation in lieu of fractions of shares of New Common Stock an amount
in cash equal to the product obtained by multiplying $ by the number of
shares of Old Common Stock held by such stockholder which is not evenly
divisible by 3.7. Each certificate that theretofore represented shares of Old
Common Stock shall thereafter represent that number of shares of New Common
Stock into which the shares of Old Common Stock represented by such
certificate shall have been reclassified; provided, however, that each person
holding of record a stock certificate or certificates that represented shares
of Old Common Stock shall receive, upon surrender of such certificate or
certificates, a new certificate or certificates evidencing and representing
the number of shares of New Common Stock to which such person is entitled
under the foregoing reclassification."
OR
"Upon the filing and effectiveness (the "Effective Time") of a certificate
pursuant to the Delaware General Corporation Law to reflect the addition of
this paragraph to Article 4 of the Corporation's Restated Certificate of
Incorporation, each 4.7 shares of the Common Stock, $.001 par value per share
(the "Old Common Stock"), issued and outstanding immediately prior to the
Effective Time shall be reclassified as and changed into one (1) validly
issued, fully paid and non-assessable share of the Corporation's common
stock, $.001 par value per share (the "New Common Stock"), without any action
by the holder thereof. The Corporation shall not issue fractions of shares of
New Common Stock in connection with such reclassification. Stockholders who,
immediately prior to the Effective Time, own a number of shares of Old Common
Stock which is not evenly divisible by 4.7 shall, with respect to such
fractional interest, be entitled to receive from the Corporation in lieu of
fractions of shares of New Common Stock an amount in cash equal to the
product obtained by multiplying $ by the number of shares of Old Common Stock
held by such stockholder which is not evenly divisible by 4.7. Each
certificate that theretofore represented shares of Old Common Stock shall
thereafter represent that number of shares of New Common Stock into which the
shares of Old Common Stock represented by such certificate shall have been
reclassified; provided, however, that each person holding of record a stock
certificate or certificates that represented shares of Old Common Stock shall
receive, upon surrender of such certificate or certificates, a new
certificate or certificates evidencing and representing the number of shares
of New Common Stock to which such person is entitled under the foregoing
reclassification."
THIRD: That thereafter, pursuant to resolution of the Board of Directors,
at least a majority of the outstanding stock of the Corporation entitled to vote
thereon, acting at a meeting of stockholders of the Corporation at which a
quorum was present in accordance with the General Corporation Law of the State
of Delaware, duly approved the aforesaid amendment to the Restated Certificate
of Incorporation of the Corporation.
FOURTH: That the aforesaid amendment to the Restated Certificate of
Incorporation of the Corporation was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, eGlobe, Inc. has caused this Certificate of Amendment
to the Restated Certificate of Incorporation to be duly executed in accordance
with Section 103 of the General Corporation Law of the State of Delaware this
day of , 2000.
eGLOBE, INC.
(Registrant)
By /s/ David Skriloff
--------------------------------
David Skriloff
Chief Financial Officer
(Principal Financial Officer)
Date: August 18, 2000
<PAGE>
ANNEX B
eGLOBE, INC.
1995 EMPLOYEE STOCK OPTION AND
APPRECIATION RIGHTS PLAN
AS AMENDED AND RESTATED
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. Purpose ................................................................ 1
2. General Provisions ..................................................... 1
3. Eligibility ............................................................ 1
4. Number of Shares Subject to Plan ....................................... 1
5. Stock Options .......................................................... 2
6. Stock Appreciation Rights .............................................. 4
7. Effect of Changes in Capitalization .................................... 5
8. Nontransferability ..................................................... 6
9. Amendment, Suspension, or Termination of Plan .......................... 6
10. Effective Date ......................................................... 7
11. Termination Date ....................................................... 7
12. Resale of Shares Purchased ............................................. 7
13. Acceleration of Rights and Options ..................................... 7
14. Written Notice Required; Tax Withholding ............................... 7
15. Compliance with Securities Laws ........................................ 7
16. Waiver of Vesting Restrictions by Committee ............................ 8
17. Reports to Participants ................................................ 8
18. No Employee Contract ................................................... 8
</TABLE>
<PAGE>
eGLOBE, INC.
1995 EMPLOYEE STOCK OPTION AND
APPRECIATION RIGHTS PLAN
AS AMENDED AND RESTATED
1. Purpose. eGlobe, Inc. hereby establishes its 1995 Employee Stock Option
and Appreciation Rights Plan (the "Plan"). The purpose of the Plan is to advance
the interests of Executive TeleCard, Ltd. and its subsidiaries (collectively
"the Company") and the Company's stockholders by providing a means by which the
Company shall be able to attract and retain competent employees, officers,
non-employee directors, consultants and advisors by providing them with an
opportunity to participate in the increased value of the Company which their
effort, initiative, and skill have helped produce.
2. General Provisions.
(a) The Plan will be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"), provided, however, that
except as otherwise expressly provided in this Plan or in order to comply with
Rule 16b-3 under the Securities Exchange Act of 1934, as now in effect or as
hereafter amended (the "Exchange Act"), the Board of Directors of the Company
(the "Board") may exercise any power or authority granted to the Committee under
this Plan. The Committee shall be comprised of two or more directors designated
by the Board.
(b) The Committee shall have full power to construe and interpret the
Plan and to establish and amend rules and regulations for its administration.
Any action of the Committee with respect to the Plan shall be taken by majority
vote or by the unanimous written consent of the Committee members.
(c) The Committee shall determine, in its sole discretion, which
participants under the Plan shall be granted stock options or stock
appreciation rights, the time or times at which options or rights are granted,
as well as the number and the duration of the options or rights which are
granted to participants; provided, however, that no participant may be granted
options to purchase more than 500,000 1,000,000 shares of common stock of the
Company ("Common Stock") under the Plan in any two (2) year period, SUBJECT TO
ADJUSTMENT AS PROVIDED FOR IN SECTION 7.
(d) The Committee shall also determine any other terms and conditions
relating to options and rights granted under the Plan as the Committee may
prescribe, in its sole discretion.
(e) The Committee shall make all other determinations and take all other
actions which it deems necessary or advisable for the administration of the
Plan.
(f) All decisions, determinations and interpretations made by the
Committee shall be binding and conclusive on all participants in the Plan and on
their legal representatives, heirs and beneficiaries.
3. Eligibility. The Company's employees, non-employee directors, advisors,
consultants and any other individual whose participation in the Plan is
determined to be in the best interests of the Company by the Board shall be
eligible to participate in the Plan and to receive options and rights hereunder,
provided, however, that Incentive Stock Options may only be granted to employees
of the Company or its subsidiaries.
4. Number of Shares Subject to Plan. The SUBJECT TO ADJUSTMENT ONLY AS
PROVIDED IN SECTION 7 HEREOF, THE aggregate number of shares of the Company's
Common Stock which may be granted to participants shall be 7,000,000 shares,
subject to adjustment only as provided in Sections 5(h) and 7 hereof 12,000,000
SHARES, WHICH LIMIT SHALL BE INCREASED FROM TIME TO TIME SO THAT THE LIMIT IS
EQUIVALENT TO 10% OF THE ISSUED AND OUTSTANDING SHARES OF COMMON STOCK ON A
FULLY DILUTED BASIS (INCLUDING ANY SHARES OF COMMON STOCK THAT MAY BE ISSUABLE
UPON CONVERSION OR EXERCISE OF PREFERRED STOCK, WARRANTS OR OTHER CONVERTIBLE
SECURITIES, BUT EXCLUDING ANY SHARES OF COMMON STOCK ISSUED UPON THE EXERCISE
OF OPTIONS GRANTED UNDER THE PLAN); PROVIDED, THAT, THE NUMBER OF SHARES WHICH
MAY BE ISSUED UNDER THE PLAN SHALL IN NO EVENT EXCEED 15,000,000 SHARES. These
shares may consist of shares of the Company's authorized but unissued Common
Stock or shares of the Company's authorized and issued Common Stock reacquired
by the Company and held in its treasury or any combination thereof. If an option
granted under this Plan is surrendered, or for any other reason ceases to be
exercisable in whole or in part, the shares as to which
<PAGE>
the option ceases to be exercisable shall be available for options to be granted
to the same or other participants under the Plan, except to the extent that an
option is deemed surrendered by the exercise of a tandem stock appreciation
right and that right is paid by the Company in stock, in which event the shares
issued in satisfaction of the right shall not be available for new options or
rights under the Plan. Further, shares issued under the Plan through the
settlement, assumption or substitution of outstanding awards or obligations to
grant future awards as a result of acquiring another entity shall not reduce the
maximum number of shares available for delivery under the Plan.
5. Stock Options.
(a) Type of Options. Options granted may be either Nonqualified Stock
Options or Incentive Stock Options as determined by the Committee in its sole
discretion and as reflected in the Notice of Grant issued by the Committee.
"Incentive Stock Option" means an option intended to qualify as an incentive
stock option within the meaning of (section) 422 of the Internal Revenue Code of
1986 (the "Code"). "Nonqualified Stock Option" means an option not intended to
qualify as an Incentive Stock Option or an Incentive Stock Option which is
converted to a Nonqualified Stock Option under Section 5(f) hereof.
(b) Option Price. The price at which options may be granted under the
Plan shall be determined by the Committee at the time of grant as follows:
(i) For Incentive Stock Options the option price shall be equal to
100% of the Fair Market Value of the stock on the date the option is granted;
provided, however, that for Incentive Stock Options granted to any person who,
at the time such option is granted, owns (as defined in (section) 422 of the
Code) shares possessing more than 10% of the total combined voting power of all
classes of shares of the Company or its parent or subsidiary corporation, the
option price shall be 110% of the Fair Market Value.
(ii) For Nonqualified Stock Options the option price shall be not less
than the par value of a share of the Stock covered by the Option.
(iii) For purposes of this Plan, and except as otherwise set forth
herein, "Fair Market Value" shall mean: (A) if there is an established market
for the Company's Common Stock on a stock exchange, in an over-the-counter
market or otherwise, shall be the closing price of the shares of Common Stock on
such exchange or in such market (the highest such closing price if there is more
than one such exchange or market) on the valuation date, or (B) if there were no
such sales on the valuation date, then in accordance with Treas. Reg. (section)
20.2031-2 or successor regulations. Unless otherwise specified by the Committee
at the time or grant (or in the formula proposed for such grant, if applicable),
the valuation date for purposes of determining Fair Market Value shall be the
date of grant. The Committee (or the Board of Directors with respect to grants
to Committee members pursuant to Section 5(g) hereof may specify in any grant of
an option or stock appreciation right that, instead of the date of grant, the
valuation date shall be a valuation period of up to ninety (90) days prior to
the date of grant, and Fair Market Value for purposes of such grant shall be the
average over the valuation period of the closing price of the shares of Common
Stock on such exchange or in such market (the highest such closing price if
there is more than one such exchange or market) on each date on which sales were
made in the valuation period, provided, however, that if the Committee (or the
Board of Directors) fails to specify a valuation period and there were no sales
on the date of grant then Fair Market Value shall be determined as if the
Committee had specified a thirty (30) day valuation period for such
determination, unless there is no established market for the Company's Common
Stock in which case the determination of Fair Market Value shall be in
accordance with clause (B) above.
(c) Exercise of Option. The right to purchase shares covered by any
option under this Plan shall be exercisable only in accordance with the terms
and conditions of the grant to the participant. Such terms and conditions may
include a time period or schedule whereby some of the options granted may become
exercisable, or "vested", over time and certain conditions, such as continuous
service or specified performance criteria or goals, must be satisfied for such
vesting. The determination as to whether to impose any such vesting schedule or
performance criteria, and the terms of such schedule or criteria, shall be
within the sole discretion of the Committee. These terms and conditions may be
different for different participants so long as all options satisfy the
requirements of the Plan.
2
<PAGE>
The exercise of options shall be paid for in cash or in shares of the
Company's Common Stock, or any combination thereof. Shares tendered as payment
for option exercises shall, if acquired from the Company, have been held for at
least six months and shall be valued at the Fair Market Value of the shares on
the date of exercise. The Committee may, in its discretion, agree to a loan by
the Company to one or more participants of a portion of the exercise price (not
to exceed the exercise price minus the par value of the shares to be acquired,
if any) for up to three (3) years with interest payable at the prime rate quoted
in the Wall Street Journal on the date of exercise. Members of the Committee may
receive such loans from the Company for the exercise of their options, if any,
only with approval by the Board.
The Committee may also permit a participant to effect a net exercise of an
option without tendering any shares of the Company's stock as payment for the
option. In such an event, the participant will be deemed to have paid for the
exercise of the option with shares of the Company's stock and shall receive from
the Company a number of shares equal to the difference between the shares that
would have been tendered and the number of options exercised. Members of the
Committee may effect a net exercise of their options only with the approval of
the Board.
The Committee may also cause the Company to enter into arrangements with
one or more licensed stock brokerage firms whereby participants may exercise
options without payment therefor but with irrevocable orders to such brokerage
firm to immediately sell the number of shares necessary to pay the exercise
price for the option and the withholding taxes, if any, and then to transmit the
proceeds from such sales directly to the Company in satisfaction of such
obligations.
The Committee may prescribe forms which must be completed and signed by a
participant and tendered with payment of the exercise price in order to exercise
an option.
(d) Duration of Options. Unless otherwise prescribed by the Committee or
this Plan, options granted hereunder shall expire ten (10) years from the date
of grant, subject to early termination as provided in Section 5(f) hereof.
(e) Incentive Stock Options Limitations. In no event shall an Incentive
Stock Option be granted to any person who, at the time such option is granted,
owns (as defined in (section) 422 of the Code) shares possessing more than 10%
of the total combined voting power of all classes of shares of the Company or of
its parent or subsidiary corporation, unless the option price is at least 110%
of the Fair Market Value of the stock subject to the Option, and such Option is
by its terms not exercisable after the expiration of five (5) years from the
date such Option is granted. Moreover, the aggregate Fair Market Value
(determined as of the time that option is granted) of the shares with respect to
which Incentive Stock Options are exercisable for the first time by any
individual employee during any single calendar year under the Plan shall not
exceed $100,000. In addition, in order to receive the full tax benefits of an
Incentive Stock Option, the employee must not resell or otherwise dispose of the
stock acquired upon exercise of the Incentive Stock Option until two (2) years
after the date the option was granted and one (1) year after it was exercised.
(f) Early Termination of Options. In the event a participant's employment
with or service to the Company shall terminate as the result of total
disability, as defined below, or the result of retirement at 65 years of age or
later, then any options granted to such participant shall expire and may no
longer be exercised three (3) months after such termination. If the participant
dies while employed or engaged by the Company, to the extent that the option was
exercisable at the time of the participant's death, such option may, within one
year after the participant's death, be exercised by the person or persons to
whom the participant's rights under the option shall pass by will or by the
applicable laws of descent and distribution; provided, however, that an option
may not be exercised to any extent after the expiration of the option as
originally granted. In the event a participant's employment or engagement by the
Company shall terminate as the result of any circumstances other than those
referred to above, whether terminated by the participant or the Company, with or
without cause, then all options granted to such participant under this Plan
shall terminate and no longer be exercisable as of the date of such termination,
provided, however, that if an employee with an Incentive Stock Option terminates
employment prior to its exercise, but notwithstanding such termination becomes
or remains a non-employee advisor, consultant or director eligible for
Nonqualified Stock Options hereunder or any other stock option plan
3
<PAGE>
of the Company, then the Incentive Stock Option shall be converted to a
Nonqualified Stock Option on the date the Incentive Stock Option would otherwise
have terminated. A change in a participant's status from one eligible category
to another (e.g., from an employee to a consultant) without a break in service
shall not be considered a termination of that participant's employment or
engagement for purposes hereof.
An employee who is absent from work with the Company because of total
disability, as defined below, shall not by virtue of such absence alone be
deemed to have terminated such participant's employment with the Company. All
rights which such participant would have had to exercise options granted
hereunder will be suspended during the period of such absence and may be
exercised cumulatively by such participant upon his return to the Company so
long as such rights are exercised prior to the expiration of the option as
originally granted. For purposes of this Plan, "total disability" shall mean
disability, as a result of sickness or injury, to the extent that the
participant is prevented from engaging in any substantial gainful activity and
is eligible for and receives a disability benefit under Title II of the Federal
Social Security Act.
Notwithstanding the foregoing, the Committee may, in its discretion, permit
the exercise of an option after termination of a participant's employment or
engagement by the Company or during any absence from work because of total
disability.
(g) Grants to Committee Members. The Committee shall have no authority to
make grants to its members hereunder, rather the Board of Directors (with
members of the Committee abstaining) shall have the authority to make grants
under this Plan to members of the Committee. Any designation of such grants may
be by means of a formula specified by the Board of Directors to award grants
automatically at a stated time. Nothing in this Section 5(g) shall be
interpreted to prohibit the Board of Directors from granting options or rights
to its members if the Board of Directors is administering the Plan in accordance
with Section 2(a) above.
6. Stock Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted by the Committee
under this Plan upon such terms and conditions as it may prescribe. A stock
appreciation right may be granted in connection with an option previously
granted to or to be granted under this Plan or may be granted by itself. Each
stock appreciation right related to an option (a "Tandem Right") shall become
nonexercisable and be forfeited if the option to which it relates (the "Related
Option") is exercised. "Stock appreciation right" as used in this Plan means a
right to receive the excess of Fair Market Value, on the date of exercise, of a
share of the Company's Common Stock on which an appreciation right is exercised
over the option price provided for in the related option and is issued in
consideration of services performed for the Company or for its benefit by the
participant. Such excess is hereafter called "the differential."
(b) Exercise of Stock Appreciation Rights. Stock appreciation rights
shall be exercisable and be payable in the following manner:
(i) A stock appreciation right not issued with a Related Option (a
"Separate Right") shall be exercisable at the time or times prescribed by the
Committee. A Tandem Right shall be exercisable by the participant at the same
time or times that the Related Option could be exercised. A participant wishing
to exercise a stock appreciation right shall give written notice of such
exercise to the Company. Upon receipt of such notice, the Company shall
determine, in its sole discretion, whether the participant's stock appreciation
rights shall be paid in cash or in shares of the Company's Common Stock or any
combination of cash and shares and thereupon shall, without deducting any
transfer or issue tax, deliver to the person exercising such right an amount of
cash or shares of the Company's Common Stock or a combination thereof with a
value equal to the differential. The date the Company receives the written
notice of exercise hereunder is the exercise date. The shares issued upon the
exercise of a stock appreciation right may consist of shares of the Company's
authorized but unissued Common Stock or of its authorized and issued Common
Stock reacquired by the Company and held in its treasury or any combination
thereof. No fractional share of Common Stock shall be issued; rather, the
Committee shall determine whether cash shall be given in lieu of such fractional
share or whether such fractional share shall be eliminated.
4
<PAGE>
(ii) The exercise of a Tandem Right shall automatically result in the
surrender of the Related Option by the participant on a share for share basis.
Likewise, the exercise of a stock option shall automatically result in the
surrender of the related Tandem Right. Shares covered by surrendered options
shall be available for granting further options under this Plan except to the
extent and in the amount that such rights are paid by the Company with shares of
stock, as more fully discussed in Section 4 hereof.
(iii) The Committee may impose any other terms and conditions it
prescribes upon the exercise of a stock appreciation right, which conditions may
include a condition that the stock appreciation right may only be exercised in
accordance with rules and regulations adopted by the Committee from time to
time.
(c) Limitation on Payments. Notwithstanding any other provision of this
Plan, the Committee may from time to time determine, including at the time of
exercise, the maximum amount of cash or stock which may be given upon exercise
of any stock appreciation right in any year; provided, however, that all such
amounts shall be paid in full no later than the end of the year immediately
following the year in which the participant exercised such stock appreciation
rights. Any determination under this paragraph may be changed by the Committee
from time to time provided that no such change shall require the participant to
return to the Company any amount theretofore received or to extend the period
within which the Company is required to make full payment of the amount due as
the result of the exercise of the participant's stock appreciation rights.
(d) Expiration or termination of stock appreciation rights.
(i) Each Tandem Right and all rights and obligations thereunder shall
expire on the date on which the Related Option expires or terminates. Each
Separate Right shall expire on the date prescribed by the Committee.
7. Effect of Changes in Capitalization
(a) Changes in Common Stock. If the number of outstanding shares of
Common Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any recapitalization, reclassification, stock split-up, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Company, occurring after the effective date of
the Plan, a proportionate and appropriate adjustment shall be made by the
Company in the number and kind of shares for which options or stock appreciation
rights are outstanding, so that the proportionate interest of the participant
immediately following such event shall, to the extent practicable, be the same
as immediately prior to such event. Any such adjustment in outstanding options
shall not change the aggregate option price payable with respect to shares
subject to the unexercised portion of the option outstanding but shall include a
corresponding proportionate adjustment in the option price per share. Similar
adjustments shall be made to the terms of stock appreciation rights.
(b) Reorganization with the Company Surviving. Subject to Section 7(c)
hereof, if the Company shall be the surviving entity in any reorganization,
merger or consolidation of the Company with one or more other entities, any
option theretofore granted pursuant to the Plan shall pertain to and apply to
the securities to which a holder of the number of shares of Common Stock subject
to such option would have been entitled immediately following such
reorganization, merger or consolidation, with a corresponding proportionate
adjustment of the option price per share so that the aggregate option price
thereafter shall be the same as the aggregate option price of the shares
remaining subject to the option immediately prior to such reorganization, merger
or consolidation. Similar adjustments shall be made to the terms of stock
appreciation rights.
(c) Other Reorganizations, Sale of Assets or Common Stock. Upon the
dissolution or liquidation of the Company, or upon a merger, consolidation or
reorganization of the Company with one or more other entities in which the
Company is not the surviving entity, or upon a sale of substantially all of the
assets of the Company to another person or entity, or upon any transaction
(including, without limitation, a merger or reorganization in which the Company
is the surviving entity) approved by the
5
<PAGE>
Board that results in any person or entity (other than persons who are holders
of stock of the Company at the time the Plan is approved by the Stockholders and
other than an Affiliate) owning 80 percent or more of the combined voting power
of all classes of stock of the Company, the Plan and all options and stock
appreciation rights outstanding hereunder shall terminate, except to the extent
provision is made in connection with such transaction for the continuation of
the Plan and/or the assumption of the options and stock appreciation rights
theretofore granted, or for the substitution for such options and stock
appreciation rights of new options and stock appreciation rights covering the
stock of a successor entity, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and exercise prices, in which
event the Plan, options and stock appreciation rights theretofore granted shall
continue in the manner and under the terms so provided. In the event of any such
termination of the Plan, each participant shall have the right (subject to the
general limitations on exercise set forth in Section 5(d) hereof and except as
otherwise specifically provided in the option agreement relating to such option
or stock appreciation right), immediately prior to the occurrence of such
termination and during such period occurring prior to such termination as the
Committee in its sole discretion shall designate, to exercise such option or
stock appreciation right in whole or in part, whether or not such option or
stock appreciation right was otherwise exercisable at the time such termination
occurs, but subject to any additional provisions that the Committee may, in its
sole discretion, include in any option agreement. The Committee shall send
written notice of an event that will result in such a termination to all
participants not later than the time at which the Company gives notice thereof
to its stockholders.
(d) Adjustments. Adjustments under this Section 7 relating to stock or
securities of the Company shall be made by the Committee, whose determination in
that respect shall be final and conclusive. No fractional shares of Common Stock
or units of other securities shall be issued pursuant to any such adjustment,
and any fractions resulting from any such adjustment shall be eliminated in each
case by rounding downward to the nearest whole share or unit.
(e) No Limitations on Company. The grant of an option or stock
appreciation right pursuant to the Plan shall not affect or limit in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.
8. Nontransferability. During a participant's lifetime, a right or an
option may be exercisable only by the participant. options and rights granted
under the Plan and the rights and privileges conferred thereby shall not be
subject to execution, attachment or similar process and may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by the applicable laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by
applicable law and, if the Company has a class of securities registered under
the Exchange Act, by Exchange Act Rule 16b-3, the Committee may, in its sole
discretion, (i) permit a recipient of a Nonqualified Stock Option to designate
in writing during the participant's lifetime a beneficiary to receive and
exercise the participant's Nonqualified Stock Options in the event of such
participant's death (as provided in Section 5(f)), (ii) grant Nonqualified Stock
Options that are transferable to the immediate family, a family trust of the
participant or any other legal entity in which immediate family members own or
hold the only interests and (iii) modify existing Nonqualified Stock Options to
be transferable to the immediate family, a family trust or a family legal entity
of the participant. Any other attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of any option or right under the Plan, or of any right or
privilege conferred thereby, contrary to the provisions of the Plan shall be
null and void.
9. Amendment, Suspension, or Termination of Plan. The Committee or the
Board of Directors may at any time suspend or terminate the Plan and may amend
it from time to time in such respects as the Committee may deem advisable in
order that options and rights granted hereunder shall conform to any change in
the law, or in any other respect which the Committee or the Board may deem to be
in the best interests of the Company; provided, however, that no such amendment
shall, without the participant's consent, alter or impair any of the rights or
obligations under any option or stock appreciation rights theretofore granted to
him or her under the Plan; and provided further that no such amendment shall,
without shareholder approval, increase the total number of shares available for
grants of options or rights under the Plan (except as provided by Section 7
hereof).
6
<PAGE>
10. Effective Date. The effective date of the Plan is December 14, 1995.
11. Termination Date. Unless this Plan shall have been previously
terminated by the Committee, this Plan shall terminate on December 14, 2005,
except as to stock, options and rights theretofore granted and outstanding under
the Plan at that date, and no stock, option or right shall be granted after that
date.
12. Resale of Shares Purchased. All shares of stock acquired under this
Plan may be freely resold, subject to applicable state and federal securities
laws restricting their transfer. As a condition to exercise of an option,
however, the Company may impose various conditions, including a requirement that
the person exercising such option represent and warrant that, at the time of
such exercise, the shares of Common Stock being purchased are being purchased
for investment and not with a view to resale or distribution thereof. In
addition, the resale of shares purchased upon the exercise of Incentive Stock
Options may cause the employee to lose certain tax benefits if the employee
fails to comply with the holding period requirements described in Section 5(e)
hereof.
13. Acceleration of Rights and Options. If the Company or its shareholders
enter into an agreement to dispose of all or substantially all of the assets or
stock of the Company by means of a sale, merger or other reorganization,
liquidation, or otherwise, any right or option granted pursuant to the Plan
shall become immediately and fully exercisable during the period commencing as
of the date of the agreement to dispose of all or substantially all of the
assets or stock of the Company and ending when the disposition of assets or
stock contemplated by that agreement is consummated or the option is otherwise
terminated in accordance with its provisions or the provisions of the Plan,
whichever occurs first; provided that no option or right shall be immediately
exercisable under this Section on account of any agreement of merger or other
reorganization where the shareholders of the Company immediately before the
consummation of the transaction will own 50% or more of the total combined
voting power of all classes of stock entitled to vote of the surviving entity
(whether the Company or some other entity) immediately after the consummation of
the transaction. In the event the transaction contemplated by the agreement
referred to in this section is not consummated, but rather is terminated,
canceled or expires, the options and rights granted pursuant to the Plan shall
thereafter be treated as if that agreement had never been entered into. In the
event any provision of the Plan or any option or right granted pursuant to the
Plan would prevent the use of pooling of interests accounting in a corporate
transaction involving the Company and such transaction is contingent upon
pooling of interests accounting, then that provision shall be deemed amended or
revoked to the extent required to preserve such pooling of interests. The
Company may require in any agreement that an optionee who receives a grant under
the Plan shall, upon advice from the Company, take (or refrain from taking, as
appropriate) all actions necessary or desirable to ensure that pooling of
interests accounting is available.
14. Written Notice Required; Tax Withholding. Any option or right granted
pursuant to the Plan shall be exercised when written notice of that exercise by
the participant has been received by the Company at its principal office and,
with respect to options, when full payment for the shares with respect to which
the option is exercised has been received by the Company. By accepting a grant
under the Plan, each participant agrees that, if and to the extent required by
law, the Company shall withhold or require the payment by participant of any
state, federal or local taxes resulting from the exercise of an option or right;
provided, however, that to the extent permitted by law, the Committee (or, for
Committee members, the Board) may in its discretion, permit some or all of such
withholding obligation to be satisfied by the delivery by the participant of, or
the retention by the Company of, shares of its Common Stock.
15. Compliance with Securities Laws. Shares shall not be issued with
respect to any option or right granted under the Plan unless the exercise of
that option and the issuance and delivery of the shares pursuant thereto shall
comply with all relevant provisions of state and federal law, including without
limitation the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder and the requirements of any stock exchange or automated
quotation system upon which shares of the Company's stock may then be listed or
traded, and shall be further subject to the approval of counsel for the Company
with respect to such compliance. Further, each participant must consent to the
imposition of a legend on the certificate representing the shares of Common
Stock issued upon the exercise of the option or right restricting their
transferability as may be required by law, the option or right, or the Plan.
7
<PAGE>
16. Waiver of Vesting Restrictions by Committee. Notwithstanding any
provision of the Plan, the Committee shall have the discretion to waive any
vesting restrictions on the participant's options or rights, or the early
termination thereof.
17. Reports to Participants. The Company shall furnish to each participant
a copy of the annual report, if any, sent to the Company's shareholders. Upon
written request, the Company shall furnish to each participant a copy of its
most recent annual report and each quarterly report to shareholders issued since
the end of the Company's most recent fiscal year.
18. No Employee Contract. The grant of restricted stock or an option or
right under the Plan shall not confer upon any participant any right with
respect to continuation of employment by, or the rendition of advisory or
consulting services to, the Company, nor shall it interfere in any way with the
Company's right to terminate the participant's employment or services at any
time.
* * *
As adopted by the Board of Directors of the Company on December 14, 1995,
as approved by stockholders on July 26, 1996, as amended and restated by the
Board of Directors on October 25, 1997, as amended and restated by the Board of
Directors on January 17, 1998 and as approved by stockholders (with respect to
the increase in the number of shares) on February 26, 1998, as further amended
and restated by the Board of Directors on May 14, 1999 and as approved by the
stockholders (with respect to the increase in the number of shares) on June 16,
1999, and as further amended and restated by the Board of Directors on December
16, 1999 and as approved by the stockholders (with respect to the increase in
the number of shares) on March 23, 2000, AND AS FURTHER AMENDED AND RESTATED BY
THE BOARD OF DIRECTORS ON JUNE _, 2000 AND AS APPROVED BY THE STOCKHOLDERS
(WITH RESPECT TO THE INCREASE IN THE NUMBER OF SHARES AND THE INCREASE IN THE
INDIVIDUAL LIMITS) ON , 2000.
By
--------------------------------
8
<PAGE>
REVOCABLE PROXY
eGLOBE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF OUR BOARD OF DIRECTORS
The undersigned stockholder of eGlobe, Inc. (the "Company") hereby
appoints Christopher J. Vizas, David Skriloff, and Anne Haas, or either of them,
attorneys and proxies of the undersigned, with full power of substitution and
with authority in each of them to act in the absence of the other, to vote and
act for the undersigned stockholder at the Annual Meeting of Stockholders to be
held at 9:30 a.m., local time, on Thursday, August 31, 2000, at the Washington
Monarch Hotel, 2401 M Street, N.W., Washington, D.C. 20037 and at any
adjournments or postponements thereof, upon the following matters:
PROPOSAL ONE: Election of two directors to our Board of Directors to serve a
term of three years, or until their successors have been duly elected and
qualified.
[ ] FOR all nominees listed at right Nominees: David W. Warnes
(except as marked to the contrary below) John W. Hughes
[ ] WITHHOLD AUTHORITY to vote for all (INSTRUCTION: To withhold authority
nominees listed at right to vote for an individual nominee,
cross out that nominee's name at
right.)
PROPOSAL TWO: Approval of the possible issuance of FOR AGAINST ABSTAIN
shares of our common stock upon the conversion of [ ] [ ] [ ]
shares of our Series P Convertible Preferred Stock
and Series Q Convertible Preferred Stock and
exercise of warrants issued in connection with the
Series P Convertible Preferred Stock and Series Q
Convertible Preferred Stock, where the number of
shares issuable may equal or exceed 20% of our
common stock outstanding at the time these
securities were issued.
PROPOSAL THREE: Approval of each of the FOR AGAINST ABSTAIN
alternative proposals to effect a 1-for-2.7, [ ] [ ] [ ]
1-for-3.7 or 1-for-4.7 reverse stock split of our
outstanding common stock.
PROPOSAL FOUR: Amendment of our 1995 Employee FOR AGAINST ABSTAIN
Stock Option and Appreciations Rights Plan to [ ] [ ] [ ]
increase the number of shares under the plan from
7,000,000 to 12,000,000 (subject to periodic
increases) and increase the number of options that
may be granted to a recipient during a two-year
period from 500,000 to 1,000,000.
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS ONE THROUGH
FOUR.
If you receive more than one proxy card, please sign and return all cards
in the accompanying envelope.
[ ] I PLAN TO ATTEND THE AUGUST 31, 2000 ANNUAL STOCKHOLDERS MEETING
Date: , 2000.
--------------------------
----------------------------------------
(Signature of Stockholder or Authorized
Representative)
----------------------------------------
(Print name)
Please date and sign exactly as name
appears hereon. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other fiduciary
should sign and indicate his or her full
title. In the case of stock ownership in
the name of two or more persons, both
persons should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE ANNUAL MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO ADDITIONAL EXPENSE.
