-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L0QlDIZYZx9Sf9qjCV340eUr8CPAOk6Dlh/erQL4X+m8DPKdhaPoQth9bGByu9db xE4KUUTEjSQQfL9DT6xSlg== 0001005150-97-000333.txt : 19970501 0001005150-97-000333.hdr.sgml : 19970501 ACCESSION NUMBER: 0001005150-97-000333 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEL SAVE HOLDINGS INC CENTRAL INDEX KEY: 0000948545 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 232827736 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26728 FILM NUMBER: 97591907 BUSINESS ADDRESS: STREET 1: 6805 ROUTE 202 CITY: NEW HOPE STATE: PA ZIP: 18938 BUSINESS PHONE: 2158621500 MAIL ADDRESS: STREET 1: 6805 RIYTE 202 CITY: NEW HOPE STATE: PA ZIP: 18938 10-K/A 1 FORM 10-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NO. 0 - 26728 Tel-Save Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware 23-2827736 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 6805 Route 202 New Hope, Pennsylvania 18938 (215) 862-1500 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - -------------------- ------------------------------------------ None Not applicable Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share Indicate by check mark whether the Registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. [ ] The aggregate market value of voting stock held by non- affiliates of the registrant as of April 28, 1997 was approximately $580,777,000 based on the average of the high and low prices of the Common Stock on April 28, 1997 of $14.6875 per share as reported on the Nasdaq National Market. As of April 28, 1997, the Registrant had outstanding 64,258,823 shares of its Common Stock, par value $.01 per share. This Form 10-K/A is being filed in accordance with General Instruction G.(3) to include the information required by Part III of Form 10-K. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. DIRECTORS The Company's Amended and Restated Certificate of Incorporation provides that the Board of Directors shall consist of not less than one nor more than 15 persons, the exact number to be fixed and determined from time to time by resolution of the Board of Directors. The Board of Directors has acted to fix the number of directors at seven. Pursuant to the terms of the Company's Amended and Restated Certificate of Incorporation, the Board of Directors is divided into three classes, as nearly equal in number as reasonably possible, with terms currently expiring at the annual meeting of stockholders in 1997 ("Class II"), the annual meeting of stockholders in 1998 ("Class I") and the annual meeting of stockholders in 1999 ("Class III"), respectively. The following sets forth certain biographical information, present occupation and business experience for the past five years for each of the Class I, Class II and Class III directors. CLASS I: DIRECTORS WHOSE TERMS WILL EXPIRE IN 1998 DANIEL BORISLOW, AGE 35. Mr. Borislow founded the Company and has served as a director and as Chief Executive Officer of the Company since its inception in 1989. Prior to founding the Company, Mr. Borislow formed and managed a cable construction company. RONALD R. THOMA, AGE 61. Mr. Thoma currently serves as Executive Vice President of Crown Cork and Seal Company, Inc. where he has been employed since 1955. Mr. Thoma has served as a director of the Company since 1995. CLASS II: DIRECTORS WHOSE TERMS WILL EXPIRE IN 1997 GARY W. MCCULLA, AGE 37. Mr. McCulla currently serves as President and Director of Sales and Marketing. In 1991, Mr. McCulla founded GNC and was its President. Until March 1994, GNC was a privately-held independent marketing company and one of the Company's partitions. At that time, the Company acquired certain assets of GNC. GEORGE FARLEY, AGE 58. Mr. Farley is currently Group Vice President of Finance/Chief Financial Officer of Twin County Grocers, Inc., a food distribution company. Prior to joining Twin County in September 1995, Mr. Farley was a partner of BDO Seidman LLP, where he had served as a partner since 1974. HAROLD FIRST, AGE 60. Mr. First currently serves as a director of Cadus Pharmaceutical Corporation. Mr. First served as Chief Financial Officer of Icahn Holdings Corporation and related entities from December 1990 through December 1992. Mr. First is a certified public accountant. Mr. First has served as a director of the Company since 1995. CLASS III: DIRECTORS WHOSE TERMS WILL EXPIRE IN 1999 EMANUEL J. DEMAIO, AGE 38. Mr. DeMaio joined the Company in February 1992 and currently serves as Chief Operations Officer. Prior to joining the Company, from 1981 through 1992, Mr. DeMaio held various technical and managerial positions with AT&T. JOSEPH A. SCHENK, AGE 38. Mr. Schenk joined the Company in January 1996 and currently serves as Chief Financial Officer and Treasurer. He is a certified public accountant. From September 1993 to January 1996, Mr. Schenk was Vice President, Capital Markets Group, with Jefferies & Co. Previously, Mr. Schenk was Vice President of Transcap Associates, a venture capital firm, and held various roles with Price Waterhouse and Deloitte & Touche. EXECUTIVE OFFICERS Information with respect to executive officers of the Company is presented following Item 4 of this report. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company's directors and certain officers and persons who are the beneficial owners of more than 10 percent of the Common Stock are required to report their ownership of the Common Stock, options and certain related securities and any changes in that ownership to the Securities and Exchange Commission ("SEC"). Specific due dates for these reports have been established, and the Company is required to report in this proxy statement any failure to file by such dates in 1996. Although the Company believes that all of the required filings have been made, the Company failed to inform Messrs. First and Thoma that the grant of certain stock options could not be reported on a deferred basis. Promptly upon receipt of such notification from the Company, Messrs. First and Thoma each filed a report relating to the grant of those options approximately one month late. In making this statement, the Company has relied on copies of the reporting forms received by it. ITEM 11. EXECUTIVE COMPENSATION. SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION The following table sets forth information as to the compensation paid by the Company to the Chief Executive Officer for services rendered and the four other most highly compensated executive officers (the "Named Executives") of the Company for the fiscal years ended December 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Securities Underlying Options/SARs Name and Principal Position Year Salary(1) Bonus(1) (#)(2) - --------------------------- ---- --------- -------- ------------- DANIEL BORISLOW, Chairman and Chief Executive 1996 $325,000 $500,000 -- Officer 1995 $300,000 $5,769 -- 1994 $275,000 -- -- GARY W. MCCULLA, President and Director of 1996 $300,000 $350,000 900,000 Sales and Marketing 1995 $240,000 $304,615 199,200 1994 $150,000 $450,000(3) 783,900 EMANUEL J. DEMAIO, Chief Operations Officer 1996 $165,000 $150,000 270,000 1995 $130,000 $152,500 199,200 1994 $120,000 $ 25,000 -- EDWARD B. MEYERCORD, III(4), 1996 $ 52,000 $400,000 800,000 Executive Vice President--Marketing and Corporate Development JOSEPH A. SCHENK, 1996 $180,000 $ 18,000 600,000 Chief Financial Officer
- ----------------------------------- (1) The costs of certain benefits are not included because they did not exceed, in the case of each Named Executive, the lesser of $50,000 or 10% of the total annual salary and bonus reported in the above table. (2) As adjusted to reflect a two-for-one stock split effective as of January 31, 1997. (3) In March 1994, GNC, a partition wholly owned by Mr. McCulla, sold certain assets to the Company for $300,000 and, in connection therewith, Mr. McCulla agreed to become an employee of the Company and was paid $450,000. (4) Mr. Meyercord was hired by the Company effective as of September 5, 1996. In connection therewith, Mr. Meyercord was paid $400,000. STOCK OPTION GRANTS The following table sets forth further information regarding grants of options to purchase Common Stock made by the Company during the fiscal year ended December 31, 1996 to the Named Executives.
OPTION/SAR GRANTS IN LAST FISCAL YEAR Potential Realizable Percent of Value at Assumed Total Annual Rates of Stock Number of Options/ Price Appreciation for Securities SARs Option Term(3) Underlying Granted to Exercise Options/SARs Employees in Price per Expiration 5% 10% Name Granted(1)(2) 1996 Share(2) Date ($) ($) - ------------------------------------------------------------------------------------------------------------------- Gary W. McCulla 450,000 13.5% $ 4.58 7/12/98 268,000 558,000 450,000 $ 4.58 7/12/99 385,000 819,000 Emanuel J. DeMaio 135,000 4.1% $ 4.58 7/12/98 80,000 167,000 135,000 $ 4.58 7/12/99 115,000 246,000 Edward B. Meyercord, III(4) 266,666 12.0% $11.13 9/5/99 468,000 982,000 266,666 $11.13 9/5/00 640,000 1,377,000 266,666 $11.13 9/5/01 820,000 1,812,000 Joseph A. Schenk 600,000 9.0% $ 4.25 7/16/97 194,000 395,000
(1) Options generally are not vested until 12 months after the date of original grant and expire either six months or two years from the date of vesting. (2) The number of shares of Common Stock, underlying options and the exercise price of the options has been adjusted to reflect a two-for-one stock split in the form of a stock dividend effective as of January 31, 1997. (3) Disclosures of the 5% and 10% assumed annual compound rates of stock appreciation are mandated by the rules of the SEC and do not represent the Company's estimate or projection of future common stock prices. The actual value realized may be greater or less than the potential realizable value set forth in the table. (4) Such options have been granted subject to stockholder approval. The following table sets forth information concerning the year-end value of unexercised in-the-money options held by each of the Named Executives.
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUES Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options/SARs Options/SARs at at Fiscal Year-End(#) Fiscal Year-End($)(1) ------------------------------------------------- Shares Acquired Exercisable/ Exercisable/ Name on Exercise(#) Value Realized($) Unexercisable(2) Unexercisable Daniel Borislow - - 300,000/ - 4,254,000/ - Gary W. McCulla 600,000 $5,709,000 383,100/900,000 4,534,113/8,928,000 Emanuel J. DeMaio 330,000 $3,230,700 497,100/270,000 6,200,286/2,678,400 Edward B. Meyercord, III - - - /800,000 - /2,696,000 Joseph A. Schenk - - - /600,000 - /6,150,000
(1) Based on a year-end fair market value of the underlying securities equal to $14.50 as adjusted to reflect a two-for-one stock split in the form of a stock dividend effective as of January 31, 1997). EMPLOYMENT CONTRACTS Daniel Borislow is a party to an employment agreement with the Company that expires in September 2000. Under the terms of the agreement, Mr. Borislow is entitled to an annual base salary of $300,000, customary benefits and a cost of living adjustment based upon the Consumer Price Index as published by the Department of Labor. In March 1996, the non-employee director members of the Compensation Committee approved an increase in Mr. Borislow's annual base salary to $325,000. Gary W. McCulla is a party to an employment agreement with the Company that expires on April 1, 1999. Under the contract, Mr. McCulla is entitled to a minimum annual base salary of $300,000 for each year. Emanuel J. DeMaio is a party to an employment agreement with the Company that expires April 1, 1999. Under the contract, Mr. DeMaio is entitled to a minimum annual base salary of $165,000 for the first year, $175,000 for the second year and $185,000 for the third year. Edward B. Meyercord, III entered into a five-year employment agreement with the Company effective as of September 5, 1996. Under the contract, Mr. Meyercord is entitled to a minimum annual base salary of $210,000 for each year. Joseph A. Schenk entered into a three-year employment agreement with the Company effective as of January 16, 1996. Under the terms of the agreement, Mr. Schenk is entitled to a minimum annual base salary of $200,000. The above-described agreements require each of the executives to maintain the confidentiality of Company information and assign inventions to the Company. In addition, each of such executive officers has agreed that such person will not compete with the Company by engaging in any capacity in any business that is competitive with the business of the Company during the term of his respective agreement and thereafter for specified periods. COMPENSATION OF DIRECTORS The Company pays non-employee directors an annual retainer of $20,000. As of March 16, 1996, the Company's employee directors approved the grant to each non-employee director of an option to purchase 40,000 shares of Common Stock. The Board may, from time to time in the future, grant options to non-employee directors. Non-employee directors also are reimbursed for reasonable expenses incurred in connection with attendance at Board meetings or meetings of committees thereof. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Daniel Borislow, the Chief Executive Officer of the Company, serves on the Compensation Committee. Mr. Borislow's compensation is determined by the non-employee director members of the Compensation Committee, subject to the terms of Mr. Borislow's employment agreement. See "Employment Contracts." In connection with a reorganization of a predecessor corporation to the Company, Mr. Borislow was granted the right to request certain loans from the Company of up to $5 million, bearing interest at 8.75% and secured by shares of Mr. Borislow's Common Stock. During the first quarter of 1996, the entire amount of such loans was outstanding. Mr. Borislow discharged such indebtedness, plus accrued interest, and relinquished any rights to additional loans in April 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth certain information known to the Company with respect to beneficial ownership of the Company's Common Stock as of April 29, 1997 (except as otherwise noted) by (i) each stockholder who is known by the Company to own beneficially more than five percent of the outstanding Common Stock, (ii) each of the Company's directors, (iii) each of the executive officers named below and (iv) all current directors and executive officers of the Company as a group. Except as otherwise indicated below, the Company believes that the beneficial owners of the Common Stock listed below have sole investment and voting power with respect to such shares. Number of Percent of Shares Shares Beneficially Beneficially Name Owned(1) Owned ------ ------------- ------------ Daniel Borislow 24,236,540(2)(3)(7) 37.6% Putnam Investments, Inc.(4) 8,045,342 12.5% One Post Office Square Boston, Massachusetts 02109 Paul Rosenberg 7,590,000(2) 11.8% 4068 Boc Aire Boulevard Boca Raton, Florida 33487 Massachusetts Financial Services Company(5) 6,983,500 10.9% 500 Boylston Street Boston, Massachusetts 02116 FMR Corp.(6) 4,812,300 7.5% 82 Devonshire Street Boston, Massachusetts 02109 Gary W. McCulla 383,100(7) * Emanuel J. DeMaio 497,100(7) * Joseph A. Schenk 600,000 * Edward B. Meyercord, III ---- * George Farley ---- * Harold First 70,000 * Ronald R. Thoma 70,000 * All directors and executive officers as a group (11 persons)(7) 26,376,540 40.0% - ---------- * Less than 1%. 1 The securities "beneficially owned" by a person are determined in accordance with the definition of "beneficial ownership" set forth in the regulations of the Securities and Exchange Commission ("SEC") and, accordingly, may include securities owned by or for, among others, the spouse, children or certain other relatives of such person. The same shares may be beneficially owned by more than one person. Beneficial ownership may be disclaimed as to certain of the securities. The number of shares of Common Stock reported herein have been adjusted to reflect a two-for-one stock split effective as of January 31, 1997. 2 Includes 7,590,000 shares of Common Stock owned of record by Mr. Rosenberg for which Mr. Borislow has the right to vote pursuant to a voting trust agreement. 3 Includes 300,000 shares of Common Stock that may be acquired upon the exercise of stock options. 4 Based on information provided to the Company, Putnam Investments, Inc., together with certain affiliates, reports beneficial ownership of 8,045,342 shares as of March 11, 1997. 5 Massachusetts Financial Services Company ("MFS"), an investment adviser, filed an amendment to a Schedule 13G with the SEC on April 17, 1997 (the "MFS 13G"), in which it reported beneficial ownership of 6,983,500 shares, 6,223,400 of which are also beneficially owned by MFS Series Trust II--MFS Emerging Growth Fund, an investment company, and 760,100 of which are also owned by certain non-reporting entities as well as MFS. The foregoing information is derived from the MFS 13G. 6 FMR Corp. and Fidelity International Limited (collectively "Fidelity") filed Schedules 13D with the SEC on April 25, 1997 (the "Fidelity 13Ds") in which they and certain affiliates reported beneficial ownership of a total of 4,812,300 shares. The foregoing information is derived from the Fidelity 13Ds. 7 Includes shares of Common Stock that may be acquired upon the exercise of stock options within 60 days of April 29, 1997 in the following amounts: Mr. Borislow, 300,000 shares (see note 2); Mr. McCulla, 383,100 shares; Mr. DeMaio 497,100 shares; Mr. First, 70,000 shares; Mr. Thoma, 70,000 shares; and all directors and officers as a group, 1,660,000 shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS. See "Compensation Committee Interlocks and Insider Participation" under Item 11 hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TEL-SAVE HOLDINGS, INC. By: /s/ Daniel Borislow -------------------------------- Daniel Borislow Chairman of the Board of Directors, Chief Executive Officer and Director Date: April 30, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this registration statement has been signed by the following persons in the capacities and on the dates indicated below: Signature Title Date --------- ----- ----- /s/ Daniel Borislow Chairman of the Board April 30, 1997 ---------------------- of Directors, Chief Daniel Borislow Executive Officer and Director (Principal Executive Officer) /s/ Gary W. McCulla President, Director April 30, 1997 ---------------------- of Sales and Marketing Gary W. McCulla and Director /s/ Emanuel J. DeMaio Chief Operations April 30, 1997 ---------------------- Officer and Director Emanuel J. DeMaio /s/ Joseph A. Schenk Chief Financial Officer April 30, 1997 ---------------------- and Director (Principal Joseph A. Schenk Financial Officer) /s/ Kevin R. Kelly Controller (Principal April 30, 1997 ---------------------- Accounting Officer) Kevin R. Kelly /s/ George P. Farley Director April 30, 1997 ---------------------- George P. Farley /s/ Harold First Director April 30, 1997 ---------------------- Harold First /s/ Ronald R. Thoma Director April 30, 1997 ---------------------- Ronald R. Thoma -----END PRIVACY-ENHANCED MESSAGE-----