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.
<PAGE>
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
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation
Securities
Underlying
Options/SARs
Name and Principal Position Year Salary(1) Bonus(1) (#)(2)
- --------------------------- ---- --------- -------- -------------
<S> <C> <C> <C>
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
</TABLE>
- -----------------------------------
(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 $400,000.
<PAGE>
STOCK OPTION GRANTS
The following table sets forth further information regarding grants of
options to purchase Common Stock made by the Company during the fiscal year
ended December 31, 1996 to the Named Executives.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Percent of Value at Assumed
Total Annual Rates of Stock
Number of Options/ Price Appreciation for
Securities SARs Option Term(3)
Underlying Granted to Exercise
Options/SARs Employees in Price per Expiration 5% 10%
Name Granted(1)(2) 1996 Share(2) Date ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
(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.
<PAGE>
The following table sets forth information concerning the year-end
value of unexercised in-the-money options held by each of the Named Executives.
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C>
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
</TABLE>
(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.
<PAGE>
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.
<PAGE>
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%.
<PAGE>
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.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
See "Compensation Committee Interlocks and Insider Participation" under
Item 11 hereto.
<PAGE>
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
<PAGE>
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
