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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): Commission File Number:
FEBRUARY 12, 1999 1-10210
EXECUTIVE TELECARD, LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3486421
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
4260 E. EVANS AVENUE
DENVER, COLORADO 80222
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(303) 691-2115
(Former name or former address, if changed since last report)
1720 S. BELLAIRE STREET, 10TH FLOOR
DENVER, COLORADO 80222
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EXECUTIVE TELECARD, LTD.
ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS
On February 12, 1999 Executive TeleCard, Ltd., a Delaware
corporation ("EXTEL") acquired Telekey, Inc. ("Telekey"), a privately held
Georgia corporation, through the merger (the "Merger") of eGlobe Merger Sub No.
2, Inc., a Delaware corporation and a newly formed wholly owned subsidiary of
EXTEL ("Merger Sub"), with and into Telekey. The Merger was effected pursuant to
an Agreement and Plan of Merger, dated as of February 3, 1999, among EXTEL,
Merger Sub, Telekey and the stockholders of Telekey, which is attached hereto as
Exhibit 2.1 (the "Merger Agreement") and related certificate of merger filed
with the Georgia Secretary of State and certificate of merger filed with the
Delaware Secretary of State (the "Merger Certificates").
Telekey provides telephone cards for foreign travelers
visiting the US and Canada. Telekey had revenues in 1998 of approximately $4.7
million. Telekey will operate with its existing management and personnel in
existing facilities in Atlanta, Georgia.
As a result of the Merger and pursuant to the Merger Agreement
and Merger Certificates, all of the shares of common stock of Telekey issued and
outstanding immediately prior to the effective time of the Merger were converted
and exchanged for, in the aggregate, (a) a base amount of 1,010,000 shares of
Series F Convertible Preferred Stock ("Series F Preferred Stock") of EXTEL at
closing (the "Transfer Shares"), (b) up to 1,010,000 shares of Series F
Preferred Stock to be issued two years later or upon a change of control or
certain events of default if they occur before the end of two years (the
"Tranche 2 Issue Date"), subject to Telekey's meeting revenue and EBITDA tests
(the "Tranche 2 Shares"), (c) $125,000 in cash at closing and (d) Promissory
Notes in the original aggregate principal amount of $150,000 issued at closing.
The rights and preferences of the Series F Preferred Stock are set forth in the
Certificate of Designations, Rights and Preferences of the Series F Convertible
Preferred Stock, which is attached hereto as Exhibit 4.1 and the terms of the
Promissory Notes are set forth in the form of Promissory Notes, which is
attached hereto as Exhibit 4.2, and in each case incorporated herein by
reference.
The shares of Series F Preferred Stock will automatically
convert into shares of EXTEL Common Stock on the earlier to occur of (a) the
first date that the 15 day average closing sales price of our Common Stock is
equal to or greater than $4.00 or (b) July 1, 2001. EXTEL has "guaranteed" a
price of $4.00 per share at December 31, 1999 for the Tranche 1 Shares or
December 31, 2000 (or the Tranche 2 Issue Date) for the Tranche 2 Shares, as
applicable, to recipients of the Common Stock issuable upon the conversion of
the Series F Preferred Stock, subject to Telekey's achievement of revenue and
cash flow objectives. If the market price is less than $4.00 on December 31,
1999 or the Tranche 2 Issuance Date, as applicable, EXTEL will issue additional
shares of Common Stock upon conversion of the Series F Preferred Stock based on
the
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ratio of $4.00 to the market price, but not more than an aggregate of
approximately 600,000 additional shares of Common Stock with respect to each of
Tranche 1 and Tranche 2.
The Promissory Notes are due and payable in 12 monthly
installments of $12,500 beginning on March 5, 1999 and ending on February 5,
2000.
The foregoing description of the Merger does not purport to be
complete and is qualified in its entirety by reference to (a) the Merger
Agreement filed as Exhibit 2.1 hereto, (b) the Certificate of Designations,
Rights and Preferences of Series F Convertible Preferred Stock, filed as Exhibit
4.1 hereto, (c) the form of Promissory Notes, filed as Exhibit 4.2 hereto, each
of which is incorporated herein by reference. A copy of the press release, dated
February 25, 1999, issued by EXTEL regarding the above-described transaction is
attached as Exhibit 99 hereto.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of Business Acquired.
It is not practicable to provide the required financial
statements for Telekey at this time. The statement will be filed as soon as they
are prepared and not later than April 28, 1999.
(b) Pro Forma Financial Information.
It is not practicable to provide the required pro forma
financial statements for Telekey at this time. The statement will be filed as
soon as they are prepared and not later than April 28, 1999.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated February 3, 1999, by and
among Executive TeleCard, Ltd., Telekey, Inc., eGlobe Merger
Sub No. 2, Inc. and the stockholders of Telekey, Inc.
4.1 Certificate of Designations, Rights and Preferences of Series
F Convertible Preferred Stock of Executive TeleCard, Ltd.
4.2 Form of Promissory Notes payable to the stockholders of
Telekey, Inc. in the aggregate principal amount of $150,000.
99.1 Press Release, dated February 25, 1999, regarding the
Agreement and Plan of Merger and the transactions contemplated
thereby.
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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.
Date: March 1, 1999 By: /s/ W.P. Colin Smith, Jr.
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W. P. Colin Smith, Jr.
Vice President of Legal
Affairs and General Counsel
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EXHIBIT INDEX
Exhibit Description
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2.1 Agreement and Plan of Merger, dated February 3, 1999, by and among
Executive TeleCard, Ltd., Telekey, Inc., eGlobe Merger Sub No. 2,
Inc. and the stockholders of Telekey, Inc.
4.1 Certificate of Designations, Rights and Preferences of Series F
Convertible Preferred Stock of Executive TeleCard, Ltd.
4.2 Form of Promissory Notes payable to the stockholders of Telekey,
Inc. in the aggregate principal amount of $150,000.
99.1 Press Release dated February 25, 1998 relating to the Agreement and
Plan of Merger and the transactions contemplated thereby
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