SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): FEBRUARY 5, 1997
EXECUTIVE TELECARD, LTD.
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(Exact name of registrant as specified in its charter)
Delaware 1-10210 13-3486421
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8 Avenue C, Nanuet, New York 10954
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Address of principal executive offices
Registrant's telephone number, including area code: (914) 627-2060
N/A
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(Former name or former address, if changed since last report.)
Exhibit Index on Page 8.
Item 5. OTHER EVENTS.
On February 5, 1997, the Board of Directors of Executive Telecard,
Ltd. (the "Company") declared a dividend of one preference share purchase right
(a "Right") for each outstanding share of common stock, par value $.001 per
share (the "Common Shares"), of the Company. The dividend is payable on February
28, 1997 (the "Record Date") to the stockholders of record on that date. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Participating Preference stock, par value
$.001 per share (the "Preference Shares"), of the Company at a price of $70 per
one one-hundredth of a Preference Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement"), dated as of February 18, 1997, between the
Company and American Stock Transfer & Trust Company, as Rights Agent (the
"Rights Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding Common Shares or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding Common Shares
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Share certificates
outstanding as of the Record Date, by such Common Share certificate with a copy
of the Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after the Record Date upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for Common Shares outstanding as of
the Record Date, even without such notation or a copy of the Summary of Rights
being attached thereto, will also constitute the transfer of the Rights
associated with the Common Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights (the "Right Certificates") will be mailed to holders of record of the
Common Shares as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
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The Rights are not exercisable until the Distribution Date. The
Rights will expire on February 28, 2007 (the "Final Expiration Date"), unless
the Final Expiration Date is extended or unless the Rights are earlier redeemed
or exchanged by the Company, in each case, as described below.
The Purchase Price payable, and the number of Preference Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preference Shares, (ii) upon the grant to holders of the Preference Shares of
certain rights or warrants to subscribe for or purchase Preference Shares at a
price, or securities convertible into Preference Shares with a conversion price,
less than the then-current market price of the Preference Shares or (iii) upon
the distribution to holders of the Preference Shares of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Preference Shares) or of
subscription rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one
one-hundredths of a Preference Share issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Shares or
a stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preference Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preference Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preference Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each
Preference Share will have 100 votes, voting together with the Common Shares.
Finally, in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preference Share will be entitled to receive
100 times the amount received per Common Share. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preference Shares' dividend,
liquidation and voting rights, the value of the one one-hundredth interest in a
Preference Share purchasable upon exercise of each Right should approximate the
value of one Common Share.
In the event that the Company is acquired in a merger or other
business combination transaction or 50% or more of its consolidated assets or
earning power are sold after a person or group has become an Acquiring Person,
proper provisions will be made so that each holder of a Right will thereafter
have the right
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to receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right. In the event that any person or group of affiliated or
associated persons becomes an Acquiring Person, proper provision shall be made
so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of Common Shares having a market value of
two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person
and prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group, which will have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-hundredth of a Preference Share (or of a share of a class or series of
the Company's preference stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preference Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preference
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preference Shares on the last trading day prior to the date
of exercise.
At any time prior to the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or more of the
outstanding Common Shares, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). The redemption of the Rights may be made effective at such time on such
basis with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights, including an
amendment to lower certain thresholds described above to not less than the
greater of (i) the sum of .001% and the largest percentage of the outstanding
Common Shares then known to the Company to be beneficially owned by any person
or group of affiliated or associated persons and (ii) 10%, except that from and
after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person no such amendment may adversely affect the interests
of the holders of the Rights.
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Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors, except pursuant to an
offer conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors since the Rights may be redeemed by the Company at the
Redemption Price prior to the time that a person or group has acquired
beneficial ownership of 15% or more of the Common Shares.
The Rights Agreement, dated as of February 18, 1997, between the
Company and American Stock Transfer & Trust Company, as Rights Agent, specifying
the terms of the Rights and including the form of the Certificate of
Designations setting forth the terms of the Preference Shares as an exhibit
thereto is attached to the Company's Form 8-A as an exhibit and is incorporated
herein by reference. The foregoing description of the Rights is qualified in its
entirety by reference to such exhibit.
The Board of Directors also amended the Bylaws of the Corporation to
eliminate the ability of stockholders to call a special meeting and to require
stockholders to provide reasonable notice to the Company for nominations of
persons for election to its Board and for proposals of business to be considered
at stockholder meetings.
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Item 7.FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
3.1 Amendments to the Bylaws of Executive Telecard, Ltd..
4.1 Form of Rights Agreement, dated as of February 18, 1997, between
Executive Telecard, Ltd. and American Stock Transfer & Trust Company
(Incorporated by reference to the Company's Registration Statement
of Form 8-A filed with the Commission on February 26. 1997).
99.1 Press Release dated February 18, 1997.
99.2 Form of Letter to Stockholders to be mailed with copies of Summary
of Rights to Purchase Preference Shares.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXECUTIVE TELECARD, LTD.
Dated: February 25, 1997 By: /s/ Anthony Balinger
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Name: Anthony Balinger
Title: President
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EXHIBIT LIST
3.1 Amendments to the Bylaws of Executive Telecard, Ltd.
4.1 Form of Rights Agreement, dated as of February 18, 1997, between
Executive Telecard, Ltd. and American Stock Transfer & Trust Company
(Incorporated by reference to the Company's Registration Statement
of Form 8-A filed with the Commission on February 26. 1997).
99.1 Press Release dated February 18, 1997.
99.2 Form of Letter to Stockholders to be mailed with copies of Summary
of Rights to Purchase Preference Shares.
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