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.
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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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
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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AMENDMENTS TO BYLAWS
OF
EXECUTIVE TELECARD, LTD.
AMENDMENT TO EXISTING BYLAWS:
NEW BYLAW PROVISION:
SECTION 1.9. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS
(a) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who was a stockholder
of record at the time of giving of notice provided for in this Bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1)
of this Bylaw, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the close of business on the 10th day
following the day on which public announcement of the date of such meeting is
first made by the Corporation. Such stockholder's notice shall set forth (i) as
to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as a nominee and
to
<PAGE>
serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Bylaw to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased Board of Directors at least
70 days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
date on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) provided that the Board
of Directors has determined that directors shall be elected at such meeting, by
any stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this Bylaw, who shall be entitled to vote at
the meeting and who complies with the notice procedures set forth in this Bylaw.
In the event the Corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the Board, any such stockholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (a)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the 90th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior
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<PAGE>
to such special meeting or the 10th day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
(c) General.
(1) Notwithstanding any provision of these Bylaws to the contrary,
only such persons who are nominated in accordance with the procedures set forth
in this Bylaw shall be eligible to serve as directors and only such business
shall be conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in this Bylaw.
Except as otherwise provided by law, the Certificate of Incorporation, as
amended, or these Bylaws, the officer of the Corporation or other person
presiding over the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made or
proposed, as the case may be, in accordance with the procedures set forth in
this Bylaw and, if any proposed nomination or business is not in compliance with
this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.
(2) For purpose of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
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Executive TeleCard, Ltd.
One Blue Hill Plaza
P. O. Box 1769
Suite 1650
PEARL RIVER, NY 10965
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FOR IMMEDIATE RELEASE
CONTACTS: RICHARD E. COOPER/ROB SCHATZ
STRATEGIC GROWTH INTERNATIONAL, INC.
(516) 829-7111
EXECUTIVE TELECARD, LTD. ADOPTS STOCKHOLDER RIGHTS PLAN
(Pearl River, New York, February 18, 1997) -- Executive TeleCard, Ltd.
(Nasdaq\National Market: EXTL) announced today that its Board of Directors has
unanimously adopted a Stockholder Rights Plan and has declared a dividend
granting to its stockholders the right to purchase for each Common Share one
one-hundredth of a share of a series of preferred stock that will be established
by the Company, at a price of $70 for each one one-hundredth of a Preference
Share. The Rights will be issued on February 28, 1997 or shortly thereafter, to
shareholders on that date.
The Company stated that the Plan is designed to protect stockholders
from various abusive takeover tactics, including attempts to acquire control of
the Company at an inadequate price which would deny stockholders the full value
of their investments. The Plan is designed to assure that any acquisition of the
Company and/or any acquisition of control of the Company would take place under
circumstances in which the Board of Directors can secure the best available
transaction for all of the Company's stockholders. The Plan will encourage a
potential buyer to negotiate appropriately with the Board prior to attempting a
takeover and will have no effect on lawful proxy solicitation activity.
Initially, the Rights are attached to the Company's common stock and
are not exercisable. They become detached from the common stock and became
immediately exercisable after any person or group becomes the beneficial owner
of 15% or more of the Company's common stock or 10 days after any person or
group of persons publicly announces a tender or exchange offer that would result
in that same beneficial ownership level. If a buyer becomes a 15% owner in the
Company, all Rights holders except such "Acquiring Person" (as defined in the
"Plan") will be entitled to purchase the Company's stock at a price discounted
from the then market price. If the Company is acquired in a merger after such
acquisition, all Rights holders except the Acquiring Person will also be
entitled to purchase stock in the acquiring company at a discount in accordance
with the Plan.
<PAGE>
The distribution of Rights will be made to common stockholders of
record on February 28, 1997 and shares of common stock that are newly-issued
after that date will also carry Rights until the Rights become detached from the
common stock. The Rights will expire on February 28, 2007. The Company may
redeem the Rights for $.01 each at any time before a buyer acquires a 15%
position in the Company, and under certain other circumstances. The Rights
distribution is not taxable to stockholders. Details of the Plan are included
with a letter which will be mailed to all of the Company's stockholders of
record as of February 28, 1997.
The Board of Directors also approved an amendment to the Company's
by-laws today 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 all other proposals of
business to be considered at stockholder meetings.
Executive TeleCard, founded in 1987, is an international
telecommunications service company providing direct voice and data
communications services via its World Direct(TM) global network. The key to
Executive TeleCard's ongoing success is its unique partnerships with Postal
Telegraph and Telephone Authorities around the world. Executive TeleCard's
products and services include: revenue sharing partnerships, global calling
cards, the only true global prepaid card platform, global Internet access
(eGlobe(TM)), international and domestic toll-free service (Service 800(TM)),
Colorado-based long-distance service (TeleCall(TM)) and multi-currency, detailed
billing.
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Form of Letter to Stockholders
[EXECUTIVE TELECARD, LTD. LETTERHEAD]
February [ ], 1997
To Our Stockholders:
The Company has recently declared a dividend distribution of
Preference Share Purchase Rights (the "Rights"), thereby creating a Stockholder
Rights Plan (the "Plan"). This letter describes the Plan and the reasons of the
Company's Board of Directors (the "Board") for adopting it.
The Rights contain provisions to protect stockholders in the event
of an unsolicited attempt to acquire the Company, including a gradual
accumulation of shares in the open market, a partial or two-tier tender offer
that does not treat all stockholders equally, a squeeze-out merger and other
abusive takeover tactics which the Board believes are not in the best interests
of stockholders. These tactics unfairly pressure stockholders, squeeze them out
of their investment without giving them any real choice and deprive them of the
full value of their shares.
Over 1,700 companies, including approximately half of the Business
Week 1000 companies and Fortune 500 companies, have issued rights to protect
their stockholders against these tactics. We consider the Plan to be the best
available means of protecting both your right to retain your equity investment
in Executive TeleCard, Ltd. and the full value of that investment, while not
foreclosing a fair acquisition bid for the Company.
The Rights are not intended to prevent a takeover of the Company and
will not do so. However, they should deter any attempt to acquire the Company in
a manner or on terms not approved by the Board. The Rights are designed to deal
with the very serious problem of another person or company using abusive tactics
to deprive the Company's Board and its stockholders of any real opportunity to
determine the destiny of the Company.
The Rights may be redeemed by the Board for one cent per Right prior
to the accumulation, through open-market purchases, a tender offer or otherwise,
of 15% or more of the Company's shares by a single acquiror or group. Because of
the redemption feature, the Rights should not interfere with any merger or
business combination approved by the Board prior to that time.
The Board believes that the issuance of the Rights does not in any
way weaken the financial strength of the Company or interfere with its business
plans. The issuance of the Rights has
<PAGE>
no dilutive effect, will not affect reported earnings per share, is not taxable
to the Company or to you, and will not change the way in which you can presently
trade the Company's shares. As explained in detail below, the Rights will only
be exercisable if and when the problem arises which they were created to deal
with. They will then operate to protect you against being deprived of your right
to share in the full measure of your Company's long-term potential.
The Board was aware when it acted that some people have advanced
arguments that securities of the sort we are issuing deter legitimate
acquisition proposals. We carefully considered these views and concluded that
the arguments are speculative and do not justify leaving stockholders without
any protection against unfair treatment by an acquiror, who, after all, is
seeking his own company's advantage, not yours. The Board believes that these
Rights represent a sound and reasonable means of addressing the complex issues
of corporate policy created by the current takeover environment.
The Rights were issued on February 28, 1997 to stockholders of
record on that date and will expire in ten years. Initially, the Rights will not
be exercisable, certificates will not be sent to you, and the Rights will
automatically trade with the common shares. However, ten days after a person or
group acquires 15% or more of the Company's shares, or ten business days (or
such later date as may be determined by the Board prior to a person or group
acquiring 15% or more of the Company's shares) after a person or group announces
an offer the consummation of which would result in such person or group owning
15% or more of the shares (even if no purchases actually occur), the Rights will
become exercisable and separate certificates representing the Rights will be
distributed. We expect that the Rights will begin to trade independently from
the Company's shares at that time. At no time will the Rights have any voting
power.
When the Rights first become exercisable, unless a holder is a
person or group who has acquired 15% or more of the Company's shares, that
holder will be entitled to buy from the Company one one-hundredth of a share of
a new series of participating preference stock for $70.00. If the Company is
involved in a merger or other business combination with a person or group or
affiliate at any time after that person or group has acquired 15% or more of the
Company's shares, the Rights will entitle a holder to buy a number of shares of
common stock of the acquiring company having a market value of twice the
exercise price of each Right. For example, if at the time of the business
combination the acquiring company's stock has a per share value of $60, the
holder of each Right would be entitled to receive 4 shares of the acquiring
company's common stock for $120, i.e., at a 50% discount.
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If any person or group acquires 15% or more of the Company's
outstanding common stock, the "flip-in" provision of the Rights will be
triggered and the Rights will entitle a holder (other than such person or any
member of such group) to buy a number of additional shares of common stock of
the Company having a market value of twice the exercise price of each Right.
Thus, if at the time of the 15% acquisition the Company's stock were to have a
market value per share equal to $10, the holder of each Right (other than such
person or any member of such group) would be entitled to receive 4 shares of the
Company's common stock for $20.
Following the acquisition by any person or group of 15% or more of
the Company's common stock, but only prior to the acquisition by a person or
group of a 50% stake, the Board will also have the ability to exchange the
Rights (other than Rights held by such person or group), in whole or in part,
for one share of common stock (or one one-hundredth of a share of the new series
of participating preference stock) per Right. This provision will have an
economically dilutive effect on the acquiror, and provide a corresponding
benefit to the remaining rightsholders, that is comparable to the flip-in
without requiring rightsholders to go through the process and expense of
exercising their Rights.
While, as noted above, the distribution of the Rights will not be
taxable to you or the Company, stockholders may recognize taxable income upon
the occurrence of certain subsequent events.
In addition to authorizing the purchase rights, your Board today
authorized the new series of participating preference stock purchasable upon
exercise of the Rights. The shares of the new series of participating preference
stock will be nonredeemable. Each preference share will be entitled to an
aggregate dividend equal to the greater of $1 per share or 100 times the
dividend declared on the common shares. In the event of liquidation, the holders
of the preference shares will be entitled to receive an aggregate liquidation
payment equal to the greater of $100 or 100 times the payment made per share of
common stock. 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 of consideration received per common
share. These rights are protected by customary anti-dilution provisions. In the
event of issuance of preference shares upon exercise of the Rights, in order to
facilitate trading a depositary receipt may be issued for each one one-hundredth
of a preference share. The dividend, liquidation and voting rights, and the
nonredemption feature, of the preference shares are designed so that the value
of the one-hundredth interest in a preference share purchasable with each right
will approximate the value of one share of common stock.
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<PAGE>
In declaring the Rights dividend, we have expressed our confidence
in the future of the Company and our determination that you, our stockholders,
be given every opportunity to participate fully in that future.
On behalf of the Board of Directors,
By_________________________________
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