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U.S. Securities and Exchange Commission

UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION

Securities Exchange Act of 1934
Release No. 48703 / October 27, 2003

Administrative Proceedings
File No. 3-11315


In the Matter of

William A. Wilkerson and The Phoenix Group of Florida, Inc.,

Respondents.


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ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER

I.

The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against William A. Wilkerson ("Wilkerson") and The Phoenix Group of Florida, Inc. ("Phoenix Group").1

II.

In anticipation of the institution of these proceedings, Respondents have submitted Offers of Settlement (the "Offers"), which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings, which Respondents admit, Respondents consent to the entry of this Order Instituting Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order").

III.

On the basis of this Order and Respondents' Offers, the Commission finds that:

A. Respondents

Wilkerson, 61, is a resident of Florida. He is Chairman of the Board, Chief Executive Officer and President of BCT International, Inc. Wilkerson is also the sole officer and shareholder of The Phoenix Group of Florida, Inc.

Phoenix Group is a Nevada corporation headquartered and doing business in Florida. Wilkerson formed Phoenix Group for the purpose of acquiring and owning shares of BCT International, Inc.

B. Other Relevant Entities

BCT International, Inc. ("BCTI") is a Delaware corporation headquartered in Fort Lauderdale, Florida. BCTI is a holding company of Business Cards Tomorrow, Inc., which franchises wholesale thermography printing plants and sells paper stock and catalogs. BCTI's common stock is registered with the Commission pursuant to Section 12(g) of the Exchange Act and trades on the NASDAQ Electronic Bulletin Board under the symbol BCTI.OB.

Phoenix Acquisition Corp. ("PAC") is a Delaware corporation and a wholly-owned subsidiary of Phoenix Group that was formed solely for the purpose of effecting transactions involving the purchase or acquisition of the issued and outstanding shares of BCTI.

C. Facts

1. Summary

This matter involves violations of the "going private" rules under Section 13(e) of the Exchange Act.2 Rule 13e-3 under the Exchange Act requires issuers or their affiliates who take steps to effect a going private transaction to promptly disclose information relating to that transaction by filing a Schedule 13E-3 with the Commission. Between May and September 2001, Wilkerson and Phoenix Group engaged in a series of transactions to purchase BCTI stock for the purpose of acquiring control of BCTI and taking it private. However, Wilkerson and Phoenix Group failed to timely file a Schedule 13E-3 disclosing these purchases and their intent to effect a going private transaction, and they failed to disseminate the disclosure to security holders as required by Rule 13e-3(f). As a result, holders of BCTI securities and other investors did not know of Respondents' efforts to take BCTI private, nor were they provided with other important information that was required to be disclosed, such as: (i) the purposes for the transaction; (ii) the effects that the transaction would have on BCTI and its unaffiliated security holders; and (iii) the factors concerning the fairness of the transaction to the unaffiliated security holders. Finally, Wilkerson and Phoenix Group also failed to make adequate and timely disclosures in the Schedules 13D that they filed with the Commission. Respondents thus violated Sections 13(d) and 13(e) of the Exchange Act and Rules 13d-1, 13d-2 and 13e-3 thereunder.

2. Respondents' Acquisitions of BCTI Stock

Beginning in 1986, Wilkerson acquired shares of the company through the sale of his business to BCTI, the conversion of loans he made to the company, and a convertible debenture that he converted into BCTI stock. By May 1, 2001, Wilkerson owned 998,057 shares of BCTI stock, or 19.1% of its issued and outstanding shares. He also acquired options under BCTI's stock option plan to purchase an additional 330,000 shares of BCTI stock.3

In May 2001, Wilkerson initiated a series of transactions to purchase additional BCTI stock. The purpose of these transactions was to gain control of the company and take it private. All of the transactions were private transactions in which Wilkerson purchased or acquired the right to purchase BCTI stock. Wilkerson entered into these transactions directly or through Phoenix Group, an entity that he formed in June 2001 for the purpose of acquiring and owning BCTI stock. Between May and September 2001, Wilkerson and/or Phoenix Group made the following acquisitions of BCTI stock:

Date

Transaction

# of Shares

Price per share

Shares Owned by Wilkerson/ Phoenix Group

Wilkerson/Phoenix Group's % of BCTI shares outstanding

5/20/01

Rights under Option Agreement4

623,782

$1.75

1,951,839

35.8%5

8/17/01

Assignment of Rights under Stock Purchase Agreement6

618,442

$1.50

2,570,281

47.1%

8/20 -21/01

Private Negotiated Purchases

237,848

$0.90

2,808,129

51.6%

9/1/01

Private Negotiated Purchases

288,858

$0.90

3,096,987

56.8%

As a result of these transactions, by August 21, 2001, Wilkerson and Phoenix Group had acquired majority ownership and control of the company.

3. Respondents' Plan to Take BCTI Private

On May 23, 2001, Wilkerson disclosed to BCTI's board of directors, which he controlled, his May 20 acquisition of an option to purchase 623,782 shares of BCTI stock. According to the minutes of the board meeting, Wilkerson "expressed to the BCTI Board his interest in exploring the possibility of purchasing the shares of BCTI common stock not already owned by him."

In June 2001, Wilkerson sought financing for his purchases of BCTI stock. In mid-June, Wilkerson received a loan proposal from a bank reflecting that the purpose of the financing was "the purchase of outstanding shares of common stock of [BCTI] in one or more private transactions." On June 19, Wilkerson informed BCTI's board of directors that he was preparing a proposal "involving the purchase of the Company's shares not already owned by [him]."In anticipation of Wilkerson's proposal, BCTI's board retained counsel to assist it in connection with its "review of matters related to a potential `going private' transaction." Shortly thereafter, on June 25, Wilkerson formed Phoenix Group to acquire the outstanding shares of BCTI stock that he did not already own.

4. Respondents' Schedule 13D Filings

On June 29, 2001, Wilkerson filed a Schedule 13D with the Commission disclosing his acquisition of the option on May 20, which increased in his beneficial ownership of BCTI stock from 19% to 35.8%. In the Schedule 13D, Wilkerson disclosed in boilerplate fashion that he was "considering various alternative courses of action with respect to the management and ongoing operations of the Issuer" and that he may engage in one or more of the following activities: (i) the acquisition of additional BCTI stock; (ii) the acquisition of all or substantially all of BCTI's assets or the remaining outstanding BCTI stock (whether by means of a merger or another form of transaction); (iii) meetings and discussions with BCTI's board (on which Wilkerson then served) with the intent to influence the BCTI's business and affairs; and (iv) any other activities deemed by Wilkerson to be effective for the purpose of so influencing BCTI's business and affairs.

On August 22, 2001, Wilkerson and Phoenix Group jointly filed a Schedule 13D disclosing beneficial ownership of 51.6% of BCTI's issued and outstanding shares, including the receipt of an assignment of rights to purchase 618,442 shares of BCTI stock under a stock purchase agreement and the acquisition of 237,848 additional shares of BCTI through privately negotiated purchases. The disclosures in the Schedule 13D concerning the purpose of these transactions were virtually identical to the disclosures that Wilkerson made in the Schedule 13D that he filed on June 29.

On September 7, 2001, Wilkerson and Phoenix Group jointly filed an amended Schedule 13D with the Commission disclosing that Phoenix Group had exercised its rights under the option agreement and that, through various privately negotiated oral agreements, Phoenix Group had acquired the right to purchase an additional 288,858 shares of BCTI stock. As a result of these transactions, Wilkerson and Phoenix Group held roughly 56.8% of the company's stock. In an exhibit to the amended Schedule 13D, Wilkerson and Phoenix Group disclosed for the first time their intent to "purchase for cash all of the Company's shares held by persons other than Phoenix (or its affiliates)."

In November 2001, BCTI's board approved an offer from Wilkerson, Phoenix Group and PAC to purchase all of the outstanding BCTI stock not already owned by them at $1.13 per share. On December 17, 2001, BCTI, Wilkerson, Phoenix Group and PAC jointly filed a preliminary proxy statement and, for the first time, a Schedule 13E-3 with the Commission. The Schedule 13E-3 disclosed that as a result of the contemplated transactions, BCTI "will be a privately held corporation, 100% of which will be beneficially owned by [Phoenix Group and Wilkerson]."

Concerned that Wilkerson and Phoenix Group may have failed to comply with their disclosure and filing obligations under Sections 13(d) and 13(e) of the Exchange Act and Rules 13d-1, 13d-2 and 13e-3 thereunder, as applicable, the Division of Corporation Finance declined to clear their filing, and referred the matter to the Division of Enforcement. After being contacted by the Division of Enforcement, Wilkerson, Phoenix Group and PAC terminated that offer in April 2002.

In March 2003, in response to an inquiry made by directors of BCTI who had constituted a Special Committee to consider such matters, Wilkerson and the Phoenix Group began to discuss anew with that Committee their interest in taking BCTI private, and as a result of negotiations with the Committee and its considerations of various proposals, Wilkerson, Phoenix Group and PAC made another proposal, ultimately with an increased price of $2 per share. That new proposal was approved by the Special Committee and resulted in a new Schedule 13E-3 filed with the Commission on June 17, 2003 reflecting its terms.7

IV.

LEGAL DISCUSSION

When the Commission promulgated Rule 13e-3 in 1979, it recognized that going private transactions present opportunities for overreaching and abuse by issuers and their affiliates and can have a coercive effect on individual investors.8 For example, when a going private transaction is undertaken by an issuer or one of its affiliates, the terms of the transaction, including the consideration to be paid to the other shareholders, may be designed to accommodate the interests of the affiliated parties rather than determined through arm's-length negotiations. This concern is heightened when a significant insider initiates the going private transaction. The Commission also expressed its concern that such transactions might be coercive because the issuer or affiliate may already have the requisite number of votes to approve the transaction. Finally, as a result of such transactions, small shareholders might be forced out of their equity interests, face the prospect of an illiquid market for their securities, face a reduction or termination of the protections afforded under the federal securities laws, or be subject to further efforts by the issuer or affiliate to eliminate their equity interests.

In response to these concerns, the Commission adopted Rule 13e-3 of the Exchange Act. Rule 13e-3 prohibits issuers and their affiliates from engaging in fraudulent, deceptive or manipulative acts in connection with a "Rule 13e-3 transaction." In addition, Rule 13e-3 requires any issuer or affiliate that engages in a Rule 13e-3 transaction to file a Schedule 13E-3 disclosing its plan to take the company private and to make prompt amendments to reflect certain information about the proposed transaction.9 In the Schedule 13E-3, the filing party must disclose the purposes for the transaction, whether any alternative means for accomplishing the stated purposes were considered, the reasons for the structure of the transaction and why it was being undertaken at that time, the effects that the transaction would have on the issuer and its unaffiliated security holders, and the factors concerning the fairness of the transaction to the unaffiliated security holders.10 Further, Rule 13e-3(f) requires dissemination of the information required by Schedule 13E-3 to security holders within specified time periods.

A. The Elements of a Rule 13e-3 transaction

A Rule 13e-3 transaction is any transaction (or series of transactions) involving, among other things, a purchase of any equity security by the issuer of such security or by an affiliate11 of such issuer, which has either a reasonable likelihood or a purpose of producing, either directly or indirectly, the effect of causing any class of equity securities which is subject to Section 12(g) or Section 15(d) of the Exchange Act to be owned by less than 300 holders of record, or causing the delisting of a class of equity securities from a national exchange or inter-dealer quotation system.12

Whether a transaction by an issuer or affiliate is part of a series of transactions constituting a Rule 13e-3 transaction is based on the particular facts and circumstances of each situation.13 Generally, a transaction is regarded as a Rule 13e-3 transaction if it is part of or in furtherance of a series of actions, which, when taken together, have a reasonable likelihood or purpose of producing, directly or indirectly, any of the effects discussed above. Thus, the rule applies to a transaction that, by itself, may not constitute a Rule 13e-3 transaction.14 A Rule 13e-3 transaction is deemed to commence with the first transaction that occurs at or after the time that it becomes reasonably likely that any of the above-referenced events will occur.15 Accordingly, purchases of securities by an issuer or affiliate, made prior to any going private announcement, can be transactions that constitute Rule 13e-3 transactions if they are in furtherance of the going private transaction. Finally, the information required by Rule 13e-3 must be disclosed and disseminated to security holders with respect to each transaction by the issuer or its affiliate that is a step in the Rule 13e-3 transaction.16

B. Respondents Violated Section 13(e) of the Exchange Act and Rule 13e-3 Thereunder

As set forth above, on May 20, 2001, Wilkerson engaged in a transaction that had a reasonable likelihood or the purpose of producing a Rule 13e-3 transaction, when he obtained an option to purchase 623,782 shares of BCTI.17 Shortly thereafter, he engaged in other transactions that also constituted steps in the Rule 13e-3 transaction and for which he should have filed a Schedule 13E-3 with the Commission. On May 23, Wilkerson informed BCTI's board, which he controlled, of his interest in acquiring additional BCTI stock.18 He then sought financing from a bank to purchase additional shares in one or more private transactions. Finally, in June 2001, Wilkerson formed Phoenix Group for the purpose of acquiring the outstanding shares of BCTI stock that he did not already own. These acts are evidence of his intent to effect a Rule 13e-3 transaction and, in any event, had a reasonable likelihood or purpose of producing a Rule 13e-3 transaction.

After Phoenix Group was formed, it also engaged in transactions that constituted steps in the Rule 13e-3 transaction. In particular, Phoenix Group's purchases and acquisitions of BCTI stock in August and September 2001 were transactions that had a reasonable likelihood or the purpose of producing the requisite Rule 13e-3 effects.

Under Rule 13e-3 of the Exchange Act, Wilkerson and Phoenix Group were required to disclose these transactions in a Schedule 13E-3. Specifically, Respondents should have filed a Schedule 13E-3 at least 30 days prior to each acquisition of securities that constituted a step in the Rule 13e-3 transaction. However, Respondents did not file a Schedule 13E-3 with the Commission until almost seven months after the initial transaction in furtherance of Wilkerson's plan to acquire control of BCTI and take it private, and they did not disseminate the Schedule 13E-3 disclosure to the company's shareholders. As a result, investors were deprived of critical information concerning, among other things, the purposes for the transactions, the effects that the transactions would have on BCTI and its unaffiliated security holders and the factors concerning the fairness of the transaction to the unaffiliated security holders. For these reasons, Wilkerson and Phoenix Group violated Section 13(e) of the Exchange Act and Rule 13e-3 thereunder.

C. Respondents Violated Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 Thereunder

Section 13(d) of the Exchange Act and the rules thereunder require a person acquiring beneficial ownership of more than 5% of a class of registered equity securities (and not eligible to file a Schedule 13G pursuant to Rule 13d-1(b)) to disclose within ten days certain information relating to his or her share acquisition on Schedule 13D. Section 13(d) is designed to alert the marketplace to large, rapid accumulations of securities that might represent a potential shift in corporate control.19 Specifically, Item 4 of Schedule 13D requires the disclosure of the purpose of the acquisition, including plans regarding possible acquisition of additional securities . . . or an extraordinary corporate transaction. Further, a person required to file an initial Schedule 13D has a continuing obligation to promptly amend his or her prior filings if any material change occurs in share ownership, the purpose of the acquisition or in any of the other information required in the initial filing.20

In this case, Respondents violated Section 13(d) and Rules 13d-1 and 13d-2. Although the Schedule 13D that Wilkerson filed on June 29, 2001 discussed, in boilerplate fashion, activities in which he may engage in the future, he did not disclose his intent to acquire control of the company and take BCTI private, that the purpose of the shares he acquired through the exercise of the option was in furtherance of that objective, and that he intended to acquire additional shares for the same purpose. Thereafter, he failed to amend the Schedule 13D to disclose his intent to take BCTI private, and did not disclose the transfer of shares to Phoenix Group. Similarly, the Schedule 13D that Wilkerson and Phoenix Group jointly filed on August 22, 2001 failed to disclose that the shares acquired in the privately negotiated purchases on August 20 and 21 and the shares received under the assignment on August 17 were for the purpose of effecting a going private transaction. Finally, the amended Schedule 13D that Wilkerson and Phoenix Group filed on September 7 did not disclose the purpose of the privately negotiated purchases on September 1. These omissions constituted violations of Section 13(d) of the Exchange Act and Rules 13d-1 and 13d-2 thereunder.

V.

UNDERTAKINGS

On June 17, 2003, BCTI, Wilkerson, Phoenix Group and PAC jointly filed a new proxy statement and Schedule 13E-3 with the Commission indicating their intent to take BCTI private. In their Schedule 13E-3, Wilkerson, Phoenix Group and PAC disclosed their current beneficial ownership of 3,094,487 shares of BCTI, representing 55.4% of the company's issued and outstanding common stock. As set forth above, certain of these shares were acquired in violation of Sections 13(d) and 13(e) of the Exchange Act and Rules 13d-1, 13d-2 and 13e-3 thereunder. Accordingly, to avoid any unjust enrichment or improper benefit from their prior violations, Respondents shall undertake as follows:

A. With respect to the manner in which their shares are voted in connection with the pending (or any future) proxy solicitation by them, Wilkerson, Phoenix Group and PAC shall, as part of any such proposal by them to acquire the shares of BCTI that they do not own:

1. vote all the BCTI shares they own or control for or against such proposal in the same proportion as the shares not owned or controlled by them, thus requiring the affirmative vote of a majority of the shares held by persons other than members of the acquisition group to approve their proposal; and

2. ensure that the Special Committee of the BCTI Board of Directors (the "Special Committee") has the right to solicit and entertain alternatives to their proposal, and to accept such other proposal if, in the exercise of the Special Committee's judgment and fiduciary duties, the Special Committee determines that the acceptance of the alternative offer would be in the best interest of BCTI's shareholders.

B. In the event that the Special Committee determines to accept any alternative proposal pursuant to paragraph A. 2. above, Wilkerson, Phoenix Group and PAC shall vote all of theshares that they acquired during the period May 1, 2001 through September 30, 2001 for or against such proposal in the same proportion as the shares not owned or controlled by them, thus depriving Wilkerson and Phoenix Group of the power to block approval of a competing superior proposal.

VI.

In view of the foregoing, the Commission finds that Respondents violated Sections 13(d) and 13(e) of the Exchange Act and Rules 13d-1, 13d-2 and 13e-3 thereunder.

ACCORDINGLY, IT IS HEREBY ORDERED THAT:

A. Pursuant to Section 21C of the Exchange Act, Respondents shall cease and desist from committing or causing any violations and any future violations of Sections 13(d) and 13(e) of the Exchange Act and Rules 13d-1, 13d-2 and 13e-3 thereunder; and

B. Respondents shall comply with the undertakings enumerated in Section V. above.

By the Commission.

Jonathan G. Katz
Secretary

Endnotes:

1 This matter is related to SEC v. William A. Wilkerson, Case No. 1:03CV2197 (D.D.C.) (October 27, 2003).

2 A going private transaction occurs when any class of equity securities of an issuer which is subject to Section 12(g) or Section 15(d) of the Exchange Act becomes owned by less than 300 holders of record or is delisted from a national exchange or inter-dealer quotation system. 17 C.F.R. 240.13e-3(a)(4).

3 Wilkerson's total beneficial ownership of BCTI shares upon the option becoming exercisable would be 25%.

4 On August 17, 2001, Wilkerson assigned his rights under the option agreement to Phoenix Group, which exercised those rights on September 1, 2001.

5 In the Schedule 13D that he filed on June 29, 2001, Wilkerson calculated the percentage of shares that he beneficially owned as 35.1%.

6 Phoenix Group received an assignment of rights under a stock purchase agreement with a BCTI board member on August 17, 2001. Phoenix Group exercised its rights under the stock purchase agreement on August 29, 2001.

7 Wilkerson and Phoenix Group, however, did not timely amend their Schedule 13D when they renewed their effort to acquire all of the shares of BCTI common stock and take the company private.

8 Release No. 34-16075, 44 Fed. Reg. 46736 (August 2, 1979). Subsequently, the Commission reaffirmed these concerns when it issued guidance for compliance with Rule 13e-3. See Interpretive Release Relating to Going Private transactions Under Rule 13e-3, Release No. 34-17719, 46 Fed. Reg. 22571 (April 13, 1981) (hereinafter, "Interpretive Release").

9 17 C.F.R. 240.13e-3(d)(1). These disclosures are required as a means reasonably designed to prevent fraudulent, deceptive or manipulative acts or practices in connection with any Rule 13e-3 transaction.

10 See Schedule 13E-3, transaction Statement Under Section 13(e) of the Securities Exchange Act of 1934 and Rule 13e-3 Thereunder, Items 7, 8 and 9.

11 Rule 13e-3(a)(1) defines an affiliate of an issuer as a person that directly or indirectly controls, is controlled by, or is under the common control with, such issuer.

12 The "reasonable likelihood" and "purpose" tests are alternative tests; the presence of either triggers Schedule 13E-3 disclosure obligations. Exchange Act Rel. No. 16075, 44 Fed. Reg. 46736 (August 2, 1979).

13 See Interpretive Release (Question 4).

14 Id.

15 Id.

16 See Interpretive Release (Question 15).

17 Wilkerson is an affiliate within the meaning of Rule 13e-3(a)(1).

18 After informing BCTI's board in mid-June that he was planning to purchase additional shares of BCTI stock, the board recognized that it needed counsel to advise it in connection with a "potential `going private' transaction."

19 See In re Herbert Moskowitz, Exchange Act Rel. No. 45609 (March 21, 2002), 77 SEC Docket 481, 483 (citing GAF Corp. v. Milstein, 453 F.2d 709, 717 (2d Cir. 1971), cert. denied, 406 U.S. 910 (1972)

20 GAF Corp., 453 F.2d at 720 (quoting section 13(d)(2)).


http://www.sec.gov/litigation/admin/34-48703.htm


Modified: 10/27/2003