EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES
OF
SERIES F CONVERTIBLE PREFERRED STOCK
OF
EXECUTIVE TELECARD, LTD.
- --------------------------------------------------------------------------------
Pursuant to Section 151
of the General Corporation Law
of the State of Delaware
- --------------------------------------------------------------------------------
The undersigned DOES HEREBY CERTIFY that, pursuant to the
authority contained in Article IV of the Restated Certificate of Incorporation
of Executive TeleCard, Ltd., a Delaware corporation (the "Corporation"), and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation has authorized the creation
of Series F Convertible Preferred Stock having the designations, rights and
preferences as are set forth in Exhibit A hereto and made a part hereof and that
the following resolution was duly adopted by the Board of Directors of the
Corporation:
RESOLVED, that a series of authorized Preferred
Stock, par value $.001 per share, of the Corporation be, and it hereby
is, created; that the shares of such series shall be, and they hereby
are, designated as "Series F Convertible Preferred Stock"; that the
number of shares constituting such
series shall be, and it hereby is, 2,020,000; and that the
designations, rights and preferences of the shares of such series are
as set forth in Exhibit A attached hereto and made a part hereof.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by its President and attested
to by its Secretary this 5th day of February, 1999.
EXECUTIVE TELECARD, LTD.
By:
---------------------------------
[SEAL] Name: Christopher J. Vizas
Title: Chairman of the Board of Directors
and President
ATTEST:
- --------------------------
Name: John E. Koonce
Title: Assistant Secretary
EXHIBIT A
SERIES F CONVERTIBLE PREFERRED STOCK
The following sections set forth the powers, rights and preferences,
and the qualifications, limitations and restrictions thereof, of the
Corporation's Series F Convertible Preferred Stock, par value $.001 per share
("Series F Preferred"). Capitalized terms used herein are defined in Section 6
below.
SECTION 1. VOTING RIGHTS.
Except as otherwise provided herein or as required by law, the Series F
Preferred shall vote with the shares of the Common Stock of the Corporation (and
each other class of stock so voting), and not as a separate class, at any annual
or special meeting of stockholders of the Corporation, and may act by written
consent in the same manner as the Common Stock, in either case upon the
following basis: each holder of shares of Series F Preferred shall be entitled
to such number of votes as shall be equal to 25% of the number of shares of
Common Stock into which such holder's aggregate number of shares of Series F
Preferred are convertible pursuant to Section 5 below immediately after the
close of business on the record date fixed for such meeting or the effective
date of such written consent, rounded up to the nearest whole number.
SECTION 2. NO REDEMPTION.
Series F Preferred shall not be redeemable.
SECTION 3. DIVIDEND RIGHTS.
Except as otherwise provided herein or as required by law, holders of
Series F Preferred shall be entitled to receive dividends only when and as
declared by the Corporation's Board of Directors with respect to Series F
Preferred, only out of funds that are legally available therefor and only in the
event that the Corporation at the same time declares or pays any dividends upon
the Common Stock (whether payable in cash, securities or other property). In the
event that the Corporation declares or pays any dividends upon the Common Stock
(whether payable in cash, securities or other property) on or prior to the
Adjustment Date, other than dividends payable solely in shares of Common Stock,
the Corporation shall also declare and pay to the holders of the Series F
Preferred, at the same time that it declares and pays such dividends to the
holders of the Common Stock, the dividends which would have been declared and
paid with respect to the Common Stock issuable upon conversion of the Series F
Preferred had all of the outstanding Series F Preferred been converted
immediately prior to the record date for such dividend, or if no record date is
fixed, the date as. of which the record holders of Common Stock entitled to such
dividends are to be determined. Series F dividend rights shall be junior to the
dividend rights of all earlier series of preferred stock.
SECTION 4. LIQUIDATION RIGHTS.
Upon any Liquidation, after the payment of the full liquidation
preference of any series of preferred stock senior to the Series F Preferred,
the holders of Series F Preferred shall be entitled to participate in
distributions to holders of the Common Stock (along with each other class of
stock with similar rights) such that the holders of Series F Preferred receive
aggregate distributions equal to the amounts that such holders would have
received if the Series F Preferred Stock had been converted into Common Stock
immediately prior to such Liquidation. Series F liquidation rights shall be
junior to the liquidation rights of all earlier series of preferred stock.
SECTION 5. CONVERSION.
The holders of the Series F Preferred shall have the following rights
with respect to the conversion of the Series F Preferred into shares of Common
Stock:
5A. Optional Conversion. At any time and from time to time after the
issuance thereof, subject to and in compliance with the provisions of this
Section 5, any shares of Series F Preferred may, at the option of the holder, be
converted at any time into fully-paid and nonassessable, shares of Common Stock.
The number of shares of Common Stock to which a holder of Series F Preferred
shall be entitled upon conversion shall be the product obtained by multiplying
the "Series F Conversion Rate" then in effect (determined as provided in Section
5B) by the number of shares of Series F Preferred being converted.
5B. Series F Conversion Rate.
(i) Conversion-Rate Formula. The conversion rate in effect at
any time for conversion of the Series F Preferred (the "Series F Conversion
Rate") shall be equal to the quotient obtained by dividing $4.00 by the
applicable "Series F Market Factor" (determined as provided in Section 5B(ii)).
(ii) Series F Market Factor. The Series F Market Factor for
the Tranche 1 Shares shall mean the following: (A) if the Market Price is less
than or equal to $2.50 as of the Adjustment Date, the Series F Market Factor
shall equal $2.50; (B) if the Market Price is greater than $2.50 but less than
$4.00 as of the Adjustment Date, the Series F Market Factor shall equal the
Market Price; and (C) if the Market Price is greater than or equal to $4.00 as
of the Adjustment Date, the Series F Market Factor shall equal $4.00. The Series
F Market Factor for the Tranche 2 Shares shall mean the following: (A) if the
Market Price is less than or equal to $2.50 as of the Determination Date, the
Series F Market Factor shall equal $2.50; (B) if the Market Price is greater
than $2.50 but less than $4.00 as of the Determination Date, the Series F Market
Factor shall equal the Market Price; and (C) if the Market Price is greater than
or equal to $4.00 as of the Determination Date, the Series F Market Factor shall
equal $4.00. Notwithstanding the foregoing, (i) the Series F Market Factor shall
equal $4.00 (1) for any Series F Preferred that is converted prior to the
Adjustment Date (whether by the holder or automatically
pursuant to Section 5E), and (2) for any Series F Preferred if the Target
Achievement Percentage (as defined in the Side Letter) is fifty percent (50%),
and (ii) the Series F Market Factor shall equal $2.50 for the Tranche 2 Shares
if it is not deemed to equal $4.00 under clause (i) of this sentence and the
Determination Date occurs as a result a Default Event prior to the occurrence of
all dates referred to in clauses (i) and (iii) of the definition of
Determination Date.
5C. Reorganizations, Mergers or Consolidations. If at any time or from
time to time after the Original Series F Issue Date, the Common Stock is
converted into other securities or property, whether pursuant to a
reorganization, merger, consolidation or otherwise (other than a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 5), as a part of
such transaction ("Change of Control Transaction"), provision shall be made so
that the holders of the Series F Preferred shall thereafter be entitled to
receive upon conversion of the Series F Preferred the number of shares of stock
or other securities or property of the Corporation to which a holder of the
number of shares of Common Stock deliverable upon conversion would have been
entitled in connection with such transaction, subject to adjustment in respect
of such stock or securities by the terms thereof In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 5
with respect to the rights of the holders of Series F Preferred after such
transaction to the end that the provisions of this Section 5 (including
adjustment of the Series F Conversion Rate then in effect and the number of
shares issuable upon conversion of the Series F Preferred) shall be applicable
after that event and be as nearly equivalent as practicable. In the case of any
reorganization, merger or consolidation in which the Corporation is not the
surviving entity, the Corporation shall not consummate the transaction unless
the entity surviving such transaction assumes all of the Corporation's
obligations hereunder.
If at any time or from time to time after the Original Series F Issue
Date, the Common Stock issuable upon the conversion of the Series F Preferred is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger or consolidation provided for elsewhere in this Section 5), in any such
event each holder of Series F Preferred shall have the right thereafter to
convert such stock into the kind and amount of stock and other securities and
property receivable in connection with such recapitalization, reclassification
or other change with respect to the maximum number of shares of Common Stock
into which such shares of Series F Preferred could have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further adjustments as provided herein or with respect to such other
securities or property by the terms thereof
5D. Notices.
(i) Immediately upon any adjustment of the Series F Conversion
Rate other than as contemplated in Section 5B, the Corporation shall give
written notice
thereof to all holders of Series F Preferred, setting forth in reasonable detail
and certifying the calculation of such adjustment.
(ii) Upon (A) any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution, or (B)
any reorganization, any reclassification or recapitalization of the capital
stock of the Corporation, any merger or consolidation of the Corporation with or
into any other corporation, or any Liquidation, the Corporation shall mail to
each holder of Series F Preferred at least twenty (20) days prior to the record
date specified therein a notice specifying (1) the date on which any such record
is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (2) the date on which any such
reorganization, reclassification, transfer, consolidation, merger or Liquidation
is expected to become effective, and (3) the date, if any, that is to be fixed
for determining the holders of record of Common Stock (or other securities) that
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property deliverable upon such reorganization,
reclassification, transfer, consolidation, merger or Liquidation.
5E. Automatic Conversion. Each share of Series F Preferred then
outstanding shall automatically be converted into shares of Common Stock, based
on the then-effective Series F Conversion Rate, on the earliest to occur of (i)
the first date as of which the Market Price is $4.00 or more for any 15
consecutive trading days during any period in which Series F Preferred is
outstanding and (ii) July 1, 2001. Any Series F Preferred issued at any time
after an automatic conversion under the prior sentence shall be converted
automatically into shares of Common Stock, based on the then-effective Series F
Conversion Rate, on the earliest to occur of (i) the first date after the date
of issuance of such Series F Preferred as of which the Market Price is $4.00 or
more for any 15 consecutive trading days during any period in which such Series
F Preferred is outstanding and (ii) July 1, 2001.
5F. Mechanics of Conversion.
(i) Optional Conversion. Each holder of Series F Preferred who
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Series F Preferred,
and shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Series F Preferred being converted. Thereupon, the Corporation shall promptly
issue and deliver at such office to such holder a certificate or certificates
for the number of shares of Common Stock to which such holder is entitled and a
certificate representing any Series F Preferred shares which were represented by
the certificate or certificates delivered to the Corporation in connection with
such conversion but which were not converted. Such conversion shall be deemed to
have been made at the close of business on the date of such surrender of the
certificate representing the shares of Series F Preferred to be converted, and
the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
(ii) Automatic Conversion. Upon the occurrence of the event
specified in Section 5E, the outstanding shares of Series F Preferred shall be
converted into Common Stock automatically without any further action by the
holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series F Preferred are either delivered
to the Corporation or its transfer agent as provided below, or the holder
notifies the Corporation or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon surrender by any holder of the
certificates formerly representing shares of Series F Preferred at the office of
the Corporation or any transfer agent for the Series F Preferred, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Series F Preferred surrendered were convertible on the date on which such
automatic conversion occurred. Until surrendered as provided above, each
certificate formerly representing shares of Series F Preferred shall be deemed
for all corporate purposes to represent the number of shares of Common Stock
resulting from such automatic conversion.
5G. Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series F Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series F Preferred by a holder thereof shall be aggregated for purposes of
determination whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion. Notwithstanding the foregoing, in the event that any
holder converts shares of Series F Preferred ten times within any one year
period, the Corporation shall not be obligated to pay any cash amount for
fractional shares upon any subsequent conversion(s) by such holder during such
year, but may withhold the fractional share(s) and aggregate such fractional
share(s) with any additional fractional share(s) issuable to such holder during
such year, and pay the cash (if any) required by this section for any fractional
shares remaining after such aggregation at the end of such year.
5H. Reservation of Shares. The Corporation shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of issuance upon the conversion of the shares of Series F
Preferred, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Series F
Preferred. All shares of Common
Stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges. If at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then-outstanding shares of the
Series F Preferred, the Corporation will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
5I. Payment of Taxes. The issuance of certificates for shares of Common
Stock upon conversion of Series F Preferred shall be made without charge to the
holders of such Series F Preferred for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Common Stock, excluding any tax or other
charge imposed in connection with any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the shares
of Series F Preferred so converted were registered.
SECTION 6. DEFINITIONS.
"Adjustment Date" means the earlier of the date of a Change of Control
Transaction (as defined in Section 5C) or December 31, 1999.
"Closing Price" of each share of Common Stock or other security means
the composite closing price of the sales of the Common Stock or such other
security on all securities exchanges on which such security may at the time be
listed (as reported in The Wall Street Journal) or, if there has been no sale on
any such exchange on any day, the average of the highest bid and lowest asked
prices of the Common Stock or such other security on all such exchanges at the
end of such day, or, if such security is not so listed, the closing price (or
last price, if applicable) of sales of the Common Stock or such other security
in the Nasdaq National Market (as reported in The Wall Street Journal on such
day, or if such security is not quoted in the Nasdaq National Market but is
traded over-the-counter, the average of the highest bid and lowest asked prices
on such day in the over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization.
"Common Stock" means, collectively, the Corporation's common stock, par
value $.001 per share; and if there is a change such that the securities
issuable upon conversion of Series F Preferred are issued by an entity other
than the Corporation or there is a change in the class of securities so
issuable, then the term "Common Stock" shall mean the shares of the security
issuable upon conversion of Series F Preferred if such security is issuable in
shares, or shall mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
"Corporation" means Executive TeleCard, Ltd. d/b/a eGlobe, Inc., a
Delaware corporation.
"Determination Date" means the earliest to occur of (i) a Change of
Control Transaction (as defined in Section 5C), (ii) a Default Event (as defined
in the Side Letter), or (iii) the date that is the earlier of March 30, 2001 or
the date when the Corporation announces its fourth quarter and annual financial
results for the 2000 fiscal year.
"Liquidation" means the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary; provided, however, that neither
the consolidation or merger of the Corporation into or with any other entity or
entities, nor the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation, shall be
deemed to be a Liquidation.
"Market Price" means (i) if the Common Stock is listed on any
securities exchange, quoted in the Nasdaq National Market, or quoted in the
over-the-counter market throughout the period of 15 consecutive trading days
consisting of the day as of which the Market Price is being determined and the
14 consecutive trading days prior to such day (the "Pricing- Period"), -the
Closing Price of the Common Stock averaged over the 15 consecutive trading days
constituting the Pricing Period, or (ii) if the Common Stock is not listed on
any securities exchange, quoted in the Nasdaq National Market, or quoted in the
over-the-counter market throughout the Pricing Period, the fair value of the
Common Stock determined by agreement between the Corporation and the holders of
a majority of the outstanding Series F Preferred or, if they are unable to reach
agreement within a reasonable period of time, the fair value of the Common Stock
as determined by an independent appraiser selected by the Corporation (which
appraiser may be the Corporation's investment banker, and the fees and expenses
of such appraiser shall be borne by the Corporation), which determination shall
be final and binding upon the Corporation and the holders of the outstanding
Series F Preferred.
"Merger Agreement" means the Agreement and Plan of Merger dated as of
February ___, 1999 by and among the Corporation, TeleKey, the stockholders of
TeleKey, and eGlobe Merger Sub No. 2, Inc., a wholly-owned subsidiary of the
Corporation.
"Original Series F_ Issue Date" means the Effective Time, as such term
is defined in the Merger Agreement.
"Series F Preferred" means the Corporation's Series F Convertible
Preferred Stock, par value $.001 per share.
"Side Letter" means the side letter, dated as of 1998 by and among the
Corporation, TeleKey and the stockholders of TeleKey, which sets forth the
procedure for calculating the Target Achievement Percentage.
"TeleKey" means TeleKey, Inc., a Georgia corporation.
"Tranche 1 Shares" means 1,010,000 shares of Series F Preferred to be
issued on the Closing Date, as such term is defined in the Merger Agreement.
"Tranche 2 Shares" means the up to 1,010,000 shares of Series F
Preferred constituting the Acquiror Convertible Preferred Stock Tranche 2, as
such term is defined in the Side Letter.
SECTION 7. AMENDMENT AND WAIVER.
No amendment, modification or waiver of any of the terms or provisions
of the Series F Preferred shall be binding or effective without the prior
approval (by vote or written consent) of the holders of a majority of the Series
F Preferred then outstanding. Any amendment, modification or waiver of any of
the terms or provisions of the Series F Preferred with such approval, whether
prospective or retroactively effective, shall be binding upon all holders of
Series F Preferred.
SECTION 8. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for the
registration of Series F Preferred. Upon the surrender of any certificate
representing Series F Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Series F Preferred shares
represented by the surrendered certificate. Each such new certificate shall be
registered in such name and shall represent such number of Series F Preferred
shares as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.
SECTION 9. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the Corporation (an
affidavit of the registered holder shall be satisfactory) of the ownership and
the loss, theft, destruction or mutilation of any certificate evidencing shares
of Series F Preferred, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Corporation (provided
that if the holder is a financial institution or other institutional investor,
its own agreement shall be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of Series F Preferred shares represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
SECTION 10. NOTICES.
Except as otherwise expressly provided hereunder, all notices referred
to herein shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage
prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All notices shall be addressed (i) if to the Corporation, to its
principal executive offices, and (ii) if to stockholders, to each holder of
record at the address of such holder appearing on the books of the Corporation.