SEC filling 14C
globetel communications corp May-13-2005 20050513
Contents
Header
PRE 14C
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Header
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SUBMISSION:
ACCESSION NUMBER: 0001144204-05-015208
TYPE: PRE 14C
PUBLIC DOCUMENT COUNT: 1
PERIOD: 20050513
FILING DATE: 20050513
DATE AS OF CHANGE: 20050513
FILER:
COMPANY DATA:
CONFORMED NAME: GLOBETEL COMMUNICATIONS CORP
CIK: 0000919742
ASSIGNED SIC: 4813
IRS NUMBER: 880292161
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: PRE 14C
ACT: 34
FILE NUMBER: 000-23532
FILM NUMBER: 05828447
BUSINESS ADDRESS:
STREET1: 444 BRICKELL AVE SUITE 522
CITY: MIAMI
STATE: FL
ZIP: 33131
PHONE: 3055799922
MAIL ADDRESS:
STREET1: 110 NORTH CENTER STREET
STREET2: SUITE 202
CITY: HICKORY
STATE: NC
ZIP: 28601
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN DIVERSIFIED GROUP INC
DATE CHANGED: 19950329
FORMER COMPANY:
FORMER CONFORMED NAME: TERA WEST VENTURES INC
DATE CHANGED: 19940303
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PRE 14C
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U.S. SECURITIES AND EXCHANGE
COMMISSION Washington, D.C.
20549
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14(a)-6(e)(2))
[ ] Definitive Information Statement
GLOBETEL COMMUNICATIONS CORP
(Name of the Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee Computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit 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):
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4. Proposed aggregate offering price:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box is 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.
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1. Amount previously paid:
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2. Form, schedule, or registration statement number:
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3. Filing party:
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4. Date filed:
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Notes:
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INFORMATION STATEMENT
Dated MAY 13, 2005
Globetel Communications Corp.
9010 Pines Blvd. Suite 110
Pembroke Pines, FL 33324
(954) 241-0590
General
This information statement is being circulated to the shareholders of Globetel
Communications Corp., a Delaware corporation ("Globetel"), to the holders of
record at the close of business on May 6, 2005 ("Record Date"), of Globetel's
outstanding common stock, par value $0.00001 per share ("Common Stock"),
pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act").
We Are Not Asking You for a Proxy and You Are Requested Not To Send Us a Proxy
This Information Statement is being furnished to the stockholders in connection
with a the following action taken by the Board of Directors and approved by a
majority of shareholders: (1) to authorize the Board of Directors to effect a
reverse stock split of one-for-fifteen (1:15) (the "Reverse Stock Split"); and
(2) to amend the Articles of Incorporation to authorize the Board of Directors,
at its sole discretion, to carry out a forward or reverse split of the
outstanding shares of authorized common stock of the corporation at any time
without the need for a shareholder vote.
The Reverse Stock Split and authorization to amend the Articles of Incorporation
of the corporation to allow the Board of Directors to authorize forward or
reverse splits of the common stock of the corporation without further
shareholder approval was approved by the Board of Directors on May 6, 2005 and
was subsequently approved by a majority of shareholders on the same day. The
Reverse Stock Split will not be effective until at least ten (10) days after
Globetel has filed the Definitive Information Statement and notified
shareholders of this action.
This Information Statement will be mailed to our shareholders within the time
periods required by Rules 14c-2 and 14c-5, in connection with the approval of
the Reverse Stock Split and the Authorization to amend the Articles of
Incorporation by a majority of Globetel's shareholders entitled to take action.
Delaware General Corporate Law allows any action that can be taken at an annual
or special meeting of shareholders to be taken without a meeting, without prior
notice and without a vote, if a majority of the holders of outstanding stock
entitled to vote consent in writing.
As of the date of the Board's approval of the reverse split, one shareholder who
has a voting right equal to 50.1% of the outstanding voting Common Stock of
Globetel, authorized by written consent, the Reverse Stock Split and the
Authorization to amend the Articles of Incorporation of Globetel Communications
Corp. There are currently 1,078,145,447 shares of Globetel's Common Stock
outstanding.
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Accordingly, Globetel has obtained all necessary corporate approvals in
connection with the matters referred to in this statement, and furnishes this
Information Statement solely for the purpose of informing stockholders, in the
manner required under the Securities Act of 1934, as amended, of these corporate
actions before they take effect.
Globetel will pay the cost of preparing and sending out this Information
Statement. It will be sent to shareholders via regular mail following the filing
of a definitive Information Statement with the Securities and Exchange
Commission on or after May 22, 2005.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS THEREOF
Shareholders are entitled to receive notice of this corporate action if they
were shareholders of record at the close of business on May 6, 2005. On May 6,
2005, Globetel had 1,078,145,447 shares of $0.00001 par value Common Stock
issued and outstanding. Each share is entitled to one vote per share on any
matter which may properly come before the shareholders and there are no
cumulative voting rights on any shares. Pursuant to applicable Delaware law,
there are no dissenter's or appraisal rights relating to the matters outlined in
this statement.
All matters to be voted on require an affirmative written vote of a majority of
the issued and outstanding shares of Globetel. Globetel has received written
consent of the Reverse Stock Split and the Authorization to Increase Shares from
management and other major shareholders who hold, directly or indirectly, the
right to to vote a majority of the outstanding shares as of the record date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of
shares of Globetel's common stock as of May 6, 2005 by (i) all shareholders
known to Globetel to be beneficial owners of more than 5% of the outstanding
Common Stock; (ii) each director and executive officer; and (iii) all officers
and directors of Globetel as a group. Except as may be otherwise indicated in
the footnotes to the table, each person has sole voting power and sole
dispositive power as to all of the shares shown as beneficially owned by them.
Globetel had 1,078,145,447 shares issued and outstanding on May 6, 2005.
Amount and Nature of Percentage
Title of Class Name and Address of Beneficial Owner Beneficial Ownership of Class (1)
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Common Stock Przemyslaw L. Kostro Chairman 9,211,385 shares 0.85%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Timothy M. Huff, CEO 34,244,467 shares 3.17%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Leigh A. Coleman President Since June 2004 5,176,003 shares 0.48%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Mitchell A. Siegel, COO 26,592,598(2) shares 2.46%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Thomas Y. Jimenez, CFO 13,720,879(3) shares 1.27%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Lawrence E. Lynch Sr. VP Since August 2004 193,461 shares 0.02%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Joseph Seroussi, CTO Since November 2004 4,580,969 shares 0.42%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Michael Molen, Director Since April 2004 130,728 shares 0.01%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Common Stock Kyle McMahan, Director Since May 2004 111,382 shares 0.01%
9050 Pines Blvd. Suite 110
Pembroke Pines, FL 33024
Total of all Officers and Directors as a Group 119,122,378 1.03%
(1) Based on 1,078,145,447 shares issued and outstanding on March 22, 2005.
(2) The shares beneficially owned by Mitchell A. Siegel include 8,614,798 shares
owned of record by Mr. Siegel's spouse, Mrs. Vivian Manevich-Siegel, a former
company officer, which are deemed beneficially owned by Mr. Siegel.
(3) The shares beneficially owned by Thomas Y. Jimenez, include 10,000 shares
owned of record by Mr. Jimenez's spouse.
Name Age Position Term
Przemyslaw L. Kostro 42 Chairman One Year
Timothy M. Huff 40 Chief Executive Officer
******* & Director One Year
Leigh A. Coleman 56 President & Director One Year
Mitchell A. Siegel 58 Chief Operating Officer
******* & Director One Year
Thomas Y. Jimenez 46 Chief Financial Officer One Year
Michael Molen 48 Director One Year
Kyle McMahan 47 Director One Year
Laina Raveendran Greene 40 Director One Year
All directors hold office until the next annual meeting of our stockholders and
until their successors have been elected and shall qualify. Officers serve at
the discretion of our Board of Directors. Przemyslaw L. Kostro, Chairman, was
first elected to the Board of Directors in November 2001. From November 2001 to
April 2002, Mr. Kostro also served as the CEO of GlobeTel before relinquishing
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the position to our current CEO. Over the past five years, Mr. Kostro has been
an attorney engaged in international law, and has been providing professional
and consulting services to several large and mid-sized entities in Europe.
During the past two years, he has been providing services to assist us in
expanding our business and services worldwide and in obtaining funding for us.
Timothy M. Huff, Director, Chief Executive Officer, joined GlobeTel in October
1999, and has served as CEO and as a member of the Board of Directors since
April 2002. Prior to joining GlobeTel, Mr. Huff spent over five years owning and
operating several successful private telecom companies. Mr. Huff has over
eighteen years experience in international telecom business that included
working with Sprint and MCI International, where he was involved in the
construction of MCI's first international gateways.
Leigh Coleman, President, joined the Company in September 2003. Mr. Coleman was
CEO of a major division for an internationally recognized Dutch public company
based in the United States. In 2001, Mr. Coleman was CEO of an Australian public
company specializing in IP PBX applications and CP equipment before joining
GlobeTel. Mr. Coleman has a Masters in Business Administration, and has lectured
in Strategic Management at Curtin University in Australia. He has focused on
growing companies and international business development since 1986.
Mitchell A. Siegel, Director, Chief Operating Officer, has served in this
capacity and as a member of the Board of Directors since May 2002. Since 1996,
he was a consultant to Global Transmedia Communications Corporation and was
instrumental in defining our role as a licensed telecommunications company. Mr.
Siegel graduated from American University, holding a Bachelors Degree in
Business Administration and has completed Masters Degree courses in finance at
City College of New York - Bernard Baruch School of Finance.
Thomas Y. Jimenez, CPA, Chief Financial Officer, has served as our CFO since
joining the Company in October 1999. For the three years prior to joining the
Company, Mr. Jimenez was a consultant to various telecommunications companies,
running their financial department and assisted in building networks in
different countries. Previously, Mr. Jimenez was a partner in certified public
accounting firm in the New York City area. Mr. Jimenez graduated from Cleveland
State University with a degree in Business Administration.
Michael Molen has served on our Board of Directors since May 2004. Since 1995,
he has served in various capacities for Sanswire Technologies, Inc., including
Chairman, Chief Executive Officer and Director. He currently serves as Chief
Executive Officer of Sanswire Technologies, Inc. He was nominated to serve on
the Company's Board of Directors in accordance with the terms of the Company's
asset purchase agreement with Sanswire Technologies, Inc.
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Kyle McMahan has served on our Board of Directors since May 2004. From 1989 to
2003, Mr. McMahan served as Chief Executive Officer of Southern Mortgage
Reporting, Inc., a credit-reporting agency. From April 2001 through September
2003, he served as chairman of INFO 1 Co., Inc., a company that organized,
planned and financed the startup of new businesses in the credit reporting
industry. Mr. McMahan has served as a board member of The Mortgage Bankers
Association of Georgia and The National Credit Reporting Association. He has
been nominated to serve on the Company's Board of Directors in accordance with
the terms of the Company's asset purchase agreement with Sanswire Technologies,
Inc.
Ms. Laina Raveendran Greene joined the Board of Directors of the Company in
February 2005. Since 1998, Ms. Greene has been the CEO of GetIT Multimedia Pte.
Ltd., a Silicon Valley company based in Singapore. GetIT Multimedia is a content
development and delivery company providing solutions for e-learning and
e-communications. Ms. Greene has also worked as Business Development Manager for
Singapore Telecommunications Limited; an adjunct lecturer at the National
University of Singapore; worked with the Singapore delegation during the 1990
GATT-Uruguay Rounds; and acted as a legal consultant and advisor to the
International Telecommunications Union (ITU).
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EXECUTIVE COMPENSATION.
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Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
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Securites
Restricted Underlying LTIP All Other
Other Annual Stock Awards Options/SARs Payouts Comp.
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) ($) (#) ($) ($)
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Przemyslaw L. Kostro Chairman 2004 0 0 443,750 (d) 0 0 0 0
Przemyslaw L. Kostro Chairman 2003 0 0 0 0 0 0 0
Przemyslaw L. Kostro Chairman 2002 0 0 0 0 0 0 0
Timothy M. Huff, CEO 2004 200,000 (a) 200,000 (b) 18,750 (d) 1,418,394 (e) 0
Timothy M. Huff, CEO 2003 175,000 (a) 0 0 0 0 0 0
Timothy M. Huff, CEO 2002 150,000 (a) 0 0 0 0 0 0
Jerrold R. Hinton, Director/
Former President 2004 0 18,750 (d) 472,798 (e) 0 0 0
Jerrold R. Hinton, Director/
Former President 2003 100,000 (a) 0 0 0 0 0 0
Jerrold R. Hinton, Director/
Former President 2002 100,000 (a) 0 0 0 0 0 0
Leigh A. Coleman President
Since June 2004 2004 70,780 (a) 125,000 (b) 50,031 (d) 472,798 (e) 0 0 0
Mitchell A. Siegel, COO 2004 175,000 (a) 175,000 (b) 18,750 (d) 945,596 (e) 0 0 0
Mitchell A. Siegel, COO 2003 150,000 (a) 0 0 0 0 0 0
Mitchell A. Siegel, COO 2002 125,000 (a) 0 0 0 0 0 0
Thomas Y. Jimenez, CFO 2004 175,000 (a) 175,000 (b) 14,063 (d) 709,197 (e) 0 0 0
Thomas Y. Jimenez, CFO 2003 150,000 (a) 0 0 0 0 0 0
Thomas Y. Jimenez, CFO 2002 125,000 (a) 0 0 0 0 0 0
Lawrence E. Lynch
Sr. VP Since August 2004 2004 37,500 (a) 37,500 (b) 0 0 0 0 0
Joseph Seroussi, CTO
Since November 2004 2004 25,000 (a) 31,250 (b) 0 472,798 (e) 0 0 0
Vivian Manevich, CAO
Through Dec. 2002 2004 (c) 0 0 0 0 0 0
Vivian Manevich, CAO
Through Dec. 2002 2003 (c) 0 0 0 0 0 0
Vivian Manevich, CAO
Through Dec. 2002 2002 75,000 (c) 0 0 0 0 0 0
Michael Molen, Director
Since April 2004 2004 0 (c) 0 18,750 (d) 0 0 0 0
Kyle McMahan, Director
Since May 2004 2004 0 (c) 0 18,750 (d) 0 0 0 0
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(a) Effective January 1, 2002, GlobeTel entered into a three-year employment
agreements with its key management. For the year 2002, the agreements provided
for annual compensation of $150,000 for its Chief Executive Officer (CEO),
$125,000 each for its Chief Financial Officer (CFO) and Chief Operating Officer
(COO) and $75,000 each for its Chief Administrative Officer (CAO) and VP of
Network Operations. Further, there remained an employment contract with its
former President, as described below, which called for a salary of $100,000 per
annum through 2003.
In 2003, the base compensation increased to $175,000 for its CEO, $150,000 each
for its CFO and COO, $90,000 each for its CAO and VP of Network Operations.
In 2004, the base compensation increases to $200,000 for its CEO, $175,000 each
for its CFO and COO, $120,000 for the Controller (formerly the CAO) and $110,000
for its VP of Network Operations. Also, GlobeTel hired a new President at an
annual compensation of $125,000 in June 2004, a Senior Vice President (Sr. VP)
at an annual compensation of $100,000 in August 2004, and a Chief Technology
Officer (CTO) at an annual compensation of $125,000 in November 2004.
Accrued but unpaid base compensation of $82,500 for the CEO, $57,500 for the CFO
and $58,333 for the COO (a total of $198,333) were owed as of December 31, 2004.
These amounts were paid in January 2005.
(b) In addition to the base compensation, the employment agreements provide for
payment of bonuses that at a minimum equal the executives' base compensation,
unless otherwise agreed to by the executives. As of December 31, 2003 and 2002,
the executives all agreed not to receive bonuses they are entitled to pursuant
to the employment agreements. For 2004, the executives did receive the bonuses
as entitled to under the agreements. The President received a bonus equal to his
gross annual base compensation, the Sr. VP received a bonus equal to his amount
of gross compensation received during 2004, and the CTO received a bonus equal
to his amount of gross compensation received during 2004. All executive bonuses
for 2004 were included in the 2004 Stock Options Plan (see Note 22 to financial
statements) and paid with stock options.
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(c) Vivian Manevich served as the CAO through 2002. Thereafter, Ms. Manevich
accepted a non-executive position in the Company, and, accordingly, any and all
compensation for 2003 and 2004 was included in employee payroll and none of her
compensation was included in executive compensation.
(d) The Company's Directors received stipends of $6,250 per quarter, beginning
the second quarter of 2004, for a total of $18,750 per director for 2004. The
CFO, who functioned as treasurer reporting to the Board, received stipends equal
to 75% of the directors' stipends, or $4,688 per quarter, beginning the second
quarter of 2004, for a total of $14,063. All Directors' stipends were paid with
stock options (see Note 22 to financial statements).
In addition, the Chairman received additional stock compensation of $425,000,
for services rendered providing assistance in expanding our business and
services world-wide and in obtaining funding for us.
(e) Pursuant to an Officers' Stock Option Grant plan approved by the Board (see
Note 22 to financial statements), certain officers are entitled to receive stock
options in amounts which, after the exercise of such options, would effect
ownership of various percentages of the total shares then issued and
outstanding. The following officers received options for restricted shares in
the following percentages: CEO - 3%, COO - 2%, CFO - 1.5%, Director and former
President - 1.0%, current President - 1%, and CTO - 1%.
All of the stock options issued to executives in 2003 were subsequently
exercised in January and February 2004. The schedule below indicates the date
issued, number of shares received upon exercise and the aggregate dollar value
realized upon exercise.
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Shares Exercised Name Valuation Relationship
---------------- --------------- ---------- --------------------------------------
7,702,180 Timothy Huff $658,918 Chief Executive Officer / Director
6,410,513 Thomas Jimenez 625,168 Chief Financial Officer
22,796,483 Jerrold Hinton 1,339,010 Director/Former President
11,003,106 Mitchell Siegel 1,080,168 Chief Operating Officer / Director
1,000,000 Leigh Coleman 108,000 President / Director / Former Consultant
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Series C Preferred Stock
On August 20, 2004, the Company agreed to sell 500 shares of Series C Preferred
Stock of GlobeTel Communications Corp. ("GTEL") to Paul E. Taboada for a total
investment of $500,000. Mr. Taboada, an individual investor, has also been
providing consulting services for the Company for over four years. The Company
is using this $500,000 investment for working capital and purchase of equipment
for Sanswire, LLC, necessary to launch the prototype of the Stratellite.
The purchase price is payable in five (5) installments of $100,000, payable no
later than August 30, 2004, September 30, 2004, October 30, 2004, November 30,
2004, and December 30, 2004. The Purchaser has a three-day cure period to remit
the monthly payments. As of December 31, 2004, the Company has received the full
$500,000 as agreed upon.
On October 22, 2004, the Company agreed to sell 250 shares of Series C Preferred
Stock of GlobeTel Communications Corp. ("GTEL") to Lawrence Lynch for a total
investment of $250,000. Mr. Lynch, an individual investor, is also the current
Chief Operating Officer of the Company. The Company used this $250,000
investment for working capital and purchase of equipment necessary to expand the
Company's stored value card programs.
As of December 31, 2004, the there were no subscriptions receivable for Series C
preferred stock, and the Company does not anticipate issuing any additional
shares in connection with this preferred stock series.
Series D Preferred Stock
On July 28, 2004, the Company agreed to sell 1,000 shares of Series D Preferred
Stock of GlobeTel Communications Corp. ("GTEL") to Mitchell A. Siegel, Chief
Operating Officer of the Company. The Company intends to use $1 million of this
investment for working capital and purchase of equipment necessary to expand the
Company's stored value card programs.
Mitchell A. Siegel agreed to advance $1 million to GTEL in four (4) quarterly
installments beginning August 2004. The agreement was subsequently modified for
the installment period to be semi-annual and to begin in October 2004. Mr.
Siegel has remitted the initial $250,000 and expects to remit the remaining
amounts within the established timetable.
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The Certificate of Designation for the Series D Preferred Stock was filed with
the State of Delaware on July 30, 2004.
Provided that the preferred shares have not been converted, the Holders of the
Series D Preferred Stock, voting as a group, will have voting rights equal to
the current conversion share amount at the time of the vote of GTEL's authorized
shares of common stock for a period of three years from the first closing date.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
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Section 16(a) of the Exchange Act requires the Company's directors and officers,
and the persons who beneficially own more than ten percent of the Common Stock
of the Company, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Copies of all filed reports are required to
be furnished to the Company pursuant to Rule 16a-3 promulgated under the
Exchange Act. Based solely on the reports received by the Company and on the
representations of the reporting persons, the Company believes that these
persons have complied with all applicable filing requirements during the fiscal
year ended December 31, 2004.
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AUTHORIZATION FOR THE BOARD OF DIRECTORS OF THE COMPANY
TO EFFECTUATE A REVERSE STOCK SPLIT OF
ONE-FOR-FIFTEEN OF THE COMPANY'S ISSUED
AND OUTSTANDING SHARES OF COMMON STOCK
REVERSE STOCK SPLIT
The Board of Directors of the Company, at a special meeting, authorized and
approved, subject to shareholder approval, a reverse stock split of
one-for-fifteen (the "Reverse Stock Split") of the Company's issued and
outstanding shares of common stock. The Reverse Stock Split may be effectuated
by the Board as soon as legally possible. The intent of the Reverse Stock Split
is to decrease the number of outstanding authorized shares of the Common Stock
of the Company.
Holders representing a majority of the shares having a right to vote on this
matter have approved the Reverse Stock Split pursuant to the execution of a
Written Consent of Shareholders. The Reverse Stock Split will become effective
on any date (the "Effective Date") selected by the Board of Directors on or
after to May 19, 2005, upon filing appropriate documentation with all applicable
regulatory authorities and providing notice to shareholders.
Purpose and Effect of the Reverse Stock Split
Effectuation of the Reverse Stock Split will reduce the number of shares of
Common Stock outstanding from 1,078,145,447 to approximately 71,876,364. The
actual number of shares may be different due to rounding of fractional shares.
The number of authorized shares will remain 1,500,000,000.
The Common Stock is listed for trading on the OTC Bulletin Board under the
symbol "GTEL." On the date hereof, the reported closing price of the common
stock on the OTC Bulletin Board was $0.228 per share. Management intends to
effectuate a Reverse Stock Split at a level of one-for-15 which it believes is
sufficient to attain its goal of decreasing the number of shares outstanding of
the Company's common stock. The reduction will allow for the Company to meet the
listing standards of the American Stock Exchange and commence with the listing
on the Exchange which is approved subject to the reverse split and that the
Company remains compliant with the listing standards of the Exchange.
The Reverse Stock Split would have the following effects upon the number of
shares of common stock outstanding (1,078,145,447 shares as of the date hereof)
and no effect upon the number of authorized and unissued shares of common stock
(assuming that no additional shares of common stock are issued by the Company
after the Record Date and that the Reverse Stock Split is effected and without
taking into account any increase in the number of outstanding shares resulting
from the exercise of outstanding options and warrants). The common stock will
continue to be $0.00001 par value common stock following any Reverse Stock
Split, and the number of shares of common stock outstanding will be decreased.
The following example is intended for illustrative purposes.
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Reverse Stock Common Stock Authorized Common Stock Outstanding
Split Outstanding Common Stock After Reverse Split
----- ----------- ------------ -------------------
1 for 15 1,078,145 1,500,000,000 71,876,364 (approximate)
At the Effective Date, each share of the common stock issued and outstanding
immediately prior thereto (the "Old Common Stock"), will be reclassified as and
changed into the appropriate number of shares of the Company's Common Stock,
$0.00001 par value per share (the "New Common Stock"). Shortly after the
Effective Date, the Company will send transmittal forms to the holders of the
Old Common Stock to be used in forwarding their certificates formerly
representing shares of Old Common Stock for surrender and exchange for
certificates representing shares of New Common Stock.
Federal Income Tax Consequences of the Reverse Stock Split
The following is a summary of the material federal income tax consequences of
the proposed Reverse Stock Split. This summary does not purport to be complete
and does not address the tax consequences to holders that are subject to special
tax rules, such as banks, insurance companies, regulated investment companies,
personal holding companies, foreign entities, nonresident alien individuals,
broker-dealers and tax-exempt entities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations and proposed
regulations, court decisions and current administrative rulings and
pronouncements of the Internal Revenue Service ("IRS"), all of which are subject
to change, possibly with retroactive effect, and assumes that the New Common
Stock will be held as a "capital asset" (generally, property held for
investment) as defined in the Code. Holders of Old Common Stock are advised to
consult their own tax advisers regarding the federal income tax consequences of
the proposed Reverse Stock Split in light of their personal circumstances and
the consequences under state, local and foreign tax laws.
The reverse Stock Split will qualify as a recapitalization described in Section
368(a)(1)(E) of the Code. No gain or loss will be recognized by the Company in
connection with the Reverse Stock Split. No gain or loss will be recognized by a
shareholder who exchanges all of his shares of Old Common Stock solely for
shares of New Common Stock.
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The aggregate basis of the shares of New Common Stock to be received in the
Reverse Stock Split will be the same as the aggregate basis of the shares of Old
Common Stock surrendered in exchange therefore. The holding period of the shares
of New Common Stock to be received in the Forward Stock Split will include the
holding period of the shares of the Old Common Stock surrendered in exchange
therefor.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY,
EACH HOLDER OF COMMON STOCK OF THE COMPANY IS URGED TO CONSULT WITH HIS OWN TAX
ADVISER WITH RESPECT TO THE TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK
SPLIT, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, MUNICIPAL,
FOREIGN OR OTHER TAXING JURISDICTION.
BOARD RECOMMENDATION
The Board recommended approval of the Reverse Stock Split, and each of the
resolutions with respect thereto set forth in Exhibit A hereto to the majority
shareholders for approval.
AUTHORIZATION FOR THE SHAREHOLDERS TO GRANT THE BOARD OF DIRECTORS OF THE
COMPANY AUTHORITY TO EFFECT A REVERSE SPLIT OF THE NUMBER OF OUTSTANDING SHARES
OF COMMON STOCK.
AUTHORIZATION TO DECREASE OR INCREASE SHARES
The Board of Directors approved a resolution to request the holders of the
majority of Shares entitled to vote to approve a motion to allow the Articles of
Incorporation of the Company to be amended to allow for a reverse split in the
ratio of 1 for 15.
Purpose of the Authorization to Amend the Articles of Incorporation to allow the
Board of Directors to effect a reverse split of the Company's outstanding shares
By order of the Board of Directors
May 13, 2005
/s/ Timothy Huff
----------------
Timothy Huff
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Exhibit A
RESOLUTION OF BOARD OF DIRECTORS OF
GLOBETEL COMMUNICATIONS CORP.
(the Corporation)
A Delaware Corporation
Adopted May 6, 2005
At a meeting of the Board of Directors of Globetel Communications Corp., a
Delaware corporation (the "Corporation"), the following resolution was passed:
RESOLVED, that the fourth article of the Certificate of Incorporation of
GLOBETEL COMMUNICATIONS CORP. be amended by consolidating the issued shares of
the corporation on the basis of 15 of such shares shall become one (1) share and
by amending the par value of the shares of the corporation, both issued and
non-issued, from $0.00001 each before such consolidation to $0.00001 each after
such consolidation; provided that no fractional shares of the corporation shall
be issued in connection with the consolidation and the number of shares to be
received by a stockholder shall be rounded up or down to the nearest whole
number of shares in the event that such stockholder would otherwise be entitled
to receive a fractional share upon such consolidation. The total authorized
common shares shall remain 1,500,000,000.
Dated the 6th Day of May 6, 2005
The foregoing accurately reflects the resolution passed by the Board of
Directors at the meeting thereof on the date first stated above:
Attest:
/s/ Timothy M. Huff
-------------------------
Timothy M. Huff, Director
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