<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY [AS PERMITTED BY RULE C-5(D)(2)]
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
PHONETEL TECHNOLOGIES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PRELIMINARY
-----------
PHONETEL TECHNOLOGIES, INC.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
(216) 241-2555
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 27, 1996
-------------------------
To the Shareholders of PhoneTel Technologies, Inc.:
The Annual Meeting of Shareholders of PhoneTel Technologies, Inc. (the
"Com pany") an Ohio corporation, will be held at the law offices of Skadden,
Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York 10022 on
Thursday, June 27, 1996 at 9:00 A.M., Eastern Standard Time, for the following
purposes:
1. To elect a Board of Directors to serve until the next Annual
Meeting of Shareholders or until their successors are duly
elected and qualified;
2. To approve an amendment to the Articles of Incorporation of
the Company to increase the number of shares that the Company
shall have authority to issue from 25 million to 60 million;
and
3. To approve an amendment to the Code of Regulations of the
Company increasing the maximum size of the Board of
Directors at nine; and
4. To approve the grant of conversion rights to the Company's
10% Non-Voting Preferred Stock so that each share of 10%
Non-Voting Preferred Stock shall be convertible into shares of
the Company's Common Stock pursuant to the World
Communications, Inc. Merger Agreement; and
<PAGE> 3
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on May 24, 1996 will be
entitled to vote at the Annual Meeting and at any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting.
The Company urges you to assure your representation at the Annual Meeting by
signing and returning the enclosed proxy in the postage prepaid envelope
provided. The giving of this proxy does not affect your right to vote in person
if you attend the Annual Meeting.
By Order of the Board of Directors
Tammy L. Martin
Secretary
Cleveland, Ohio
May ___, 1996
(date of mailing)
<PAGE> 4
PHONETEL TECHNOLOGIES, INC.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
-------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 27, 1996
MATTERS TO BE CONSIDERED AT THE MEETING
This Proxy Statement is being furnished in connection with the
solicitation of proxies by and on behalf of the Board of Directors of PhoneTel
Technologies, Inc, (the "Company") for use at the Annual Meeting of Shareholders
to be held on June 27, 1996 or at any adjournment thereof (the "Meeting") for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The Company's Annual Report for the year ended December 31, 1995
is being mailed together with this Proxy Statement to shareholders of record at
the close of business on May 24, 1996. The Company will pay the cost of
soliciting proxies.
The only business which the Board of Directors intends to present or
knows that others will present at the Meeting is as set forth in the attached
Notice of Annual Meeting of Shareholders. If any other matters are properly
presented at the Meeting for action to be taken thereon, the persons named in
the enclosed form of proxy and acting thereunder will have discretion to vote on
such matters in accordance with their best judgment.
VOTING, PROXIES AND REVOCABILITY
Shareholders of record at the close of business on May 24, 1996 are
entitled to one vote on each matter for each share then held of the Company's
Common Stock, $.01 par value ("Common Stock"). As of the close of business on
May 6, 1996 the Company had 4,364,016 shares of Common Stock outstanding.
A majority of the shares of Common Stock must be represented at the
Meeting in person or by proxy in order to constitute a quorum for the
transaction of business.
- 3 -
<PAGE> 5
Executed proxies which are returned will be voted as specified therein.
If no specification is made, the proxies will be voted FOR the election as
directors of the nominees listed below, FOR the approval of the proposed
amendments to the Company's Articles of Incorporation and Code of Regulations
and FOR the approval of the grant of conversion rights to the holders of the
Company's 10% Non-Voting Preferred Stock.
A shareholder giving a proxy has the power to revoke it at any time
before it is exercised by filing, with the Secretary of the Company at the above
address, either an instrument revoking the proxy or a duly executed proxy
bearing a later date. A proxy will be revoked automatically if the shareholder
who executed it is present at the Meeting and votes in person.
The Meeting may be adjourned and additional proxies solicited if, at
the time of the Meeting, the votes necessary to approve any of the proposed
actions have not been obtained. Any adjournment of the Meeting will require the
affirmative vote of a majority of the Common Stock represented at the Meeting,
in person or by proxy, even if less than a quorum.
-------------------------
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Code of Regulations provides for a Board of Directors
consisting of no less than four (4) nor more than seven (7) directors. The Code
of Regulations provides that the Board may fix or change the number of directors
within said numbers specified. The Board has fixed the number of Directors at
seven (7). The maximum number of the Board of Directors is proposed to be fixed
at nine (9). See Proposal 3-- "Amendment to the Code of Regulations", below.
Directors are elected for a term of one (1) year, or until their successors are
elected and qualified. The Board of Directors of the Company has designated
Joseph Abrams, Peter Graf, George Henry, Stuart Hollander, Aron Katzman, Nickey
Maxey and Steven Richman as nominees for election as directors of the Company,
to serve until the 1997 Annual Meeting of Shareholders or until their successors
are elected and qualified. Messrs. Abrams, Graf, Hollander, Katzman and Richman
were elected Directors by the Board of Directors subsequent to the 1995 Annual
Meeting of Shareholders, to fill vacancies in the Board, in accordance with the
Code of
- 4 -
<PAGE> 6
Regulations of the Company. Mr. Henry was reelected Director by the Shareholders
at the 1995 Annual Meeting.
Pursuant to certain voting agreements, (see "Security Ownership of
Certain Beneficial Owners and Management -- Voting Agreements", below), certain
shareholders of the Company have agreed to vote for certain Proposals, one of
which is to elect (or, if already appointed by the Board of Directors of the
Company, to ratify the appointment of) four directors designated jointly by
Stuart Hollander and Aron Katzman. Messrs. Hollander and Katzman have informed
the Company that the four nominees which they have jointly designated for the
purposes of such voting agreements are: Stuart Hollander, Aron Katzman, Peter
Graf and George Henry. These four persons are all directors of the Company who
have been nominated for reelection as directors by the Board. Accordingly, there
is no need for a separate proposal for the nomination for election as directors
of these four persons.
Shareholders are entitled to one vote for each share of Common Stock
held in their name of record as of the close of business on May 15, 1996. The
seven (7) candidates receiving the most votes are elected directors. Proxies
solicited hereunder granting authority to vote on the election of directors will
be voted for the reelection by shareholders of George Henry and for the election
by shareholders of Joseph Abrams, Peter Graf, Stuart Hollander, Aron Katzman,
Nickey Maxey and Steven Richman. In the event that cumulative voting is in
effect, the shares represented by such proxies will be voted for whichever
persons nominated at the meeting the persons authorized in the enclosed form of
proxy and acting thereunder shall select, and said persons shall have the
authority to cumulate such voting power as they possess and distribute their
votes among the nominees so as to assure the election of one or more of such
nominees, if possible.
In the event that any of the nominees become unavailable for any reason
prior to the meeting, the persons authorized in the enclosed form of proxy and
acting thereunder may either vote such shares for a substitute nominee or for a
reduced number of nominees, as they may deem advisable. The Company, however,
has no reason to believe that any of the nominees will not be available.
Under the General Corporation Law of Ohio, if notice in writing is
given by any shareholder to the President, a Vice President or Secretary of the
Company, not less than forty-eight hours before the time fixed for holding the
meeting, that the shareholder desires that the voting for election of Directors
shall be cumulative, and if an announcement of the giving of such notice is made
upon the convening of the meeting by the chairman or secretary of the meeting or
by or on behalf of the shareholder giving such notice, each shareholder will
have cumulative voting rights. If cumulative voting rights are invoked, then
- 5 -
<PAGE> 7
each shareholder shall be entitled to as many votes as shall equal the number of
shares of Common Stock he or she owns multiplied by the number of Directors to
be elected, and the shareholder may cast all of such votes for a single nominee
or any two or more nominees, as the shareholder may desire.
BIOGRAPHICAL INFORMATION CONCERNING NOMINEES
<TABLE>
<CAPTION>
NAME, AGE AND
TENURE AS DIRECTOR PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------ -------------------------------------------
<S> <C>
Joseph Abrams, Age 60 Served as a Director of the Company since September 1995.
Director since September 1995 Mr. Abrams also serves as a Director of Merisel, Inc. and
Spectrum Signal Processing, Inc.
Peter G. Graf, Age 58 Served as a Director, Chairman and Chief Executive Officer
Director since June 1995 since June 1995. Mr. Graf is an attorney and Certified
Public Accountant.
George H. Henry, Age 42 Served as a Director since April 1993 and is Managing
Director since April 1993 Director of G. Howard Associates, Inc., a private investment
firm.
Stuart Hollander, Age 66 Served as a Director and Vice Chairman since September 1995.
Director since September 1995 Mr. Hollander was founder, principal owner and Chairman of
the Board to World Communications, Inc. which was merged
with the Company in September 1995.
Aron Katzman, Age 58 Served as a Director of the Company since September 1995.
Director since September 1995 Mr. Katzman is President of New Legends, Inc. and Chairman
and Chief Executive Officer of Decorating Den of Missouri.
Mr. Katzman was formerly a director and officer of World
Communications, Inc., which was merged with the Company in
September 1995.
Nickey B. Maxey, Age 39 Served as a Director and Chief Operating Officer of the
Director since April 1996 Company since April 1996. Mr. Maxey was founder of
International Pay Phones, Inc.-Tennessee and International
Pay Phones, Inc.-South Carolina. Both companies were
</TABLE>
- 6 -
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
merged with the Company in March 1996. Mr. Maxey owns and
operates Resort Hospitality Services, Inc. a telecommunications company.
Steven Richman, Age 52 Served as a Director of the Company since September 1995. Mr. Richman is
Director since September 1995 principal owner, Chairman and President of Fabric Resources International.
</TABLE>
Meetings and Committees of the Board of Directors
During 1995, the Board of Directors held nine meetings and took action
by unanimous written consent on seven other occasions.
The Board of Directors of the Company has a Compensation Committee and
an Audit Committee, neither of which held any meetings in 1995.
The Compensation Committee has the authority to decide upon and make
recommendations with respect to executive compensation matters. Joseph Abrams,
George Henry and Steven Richman are members of the Compensation Committee.
Joseph Abrams was elected as Chairman of the Compensation Committee.
The Audit Committee has the authority to recommend to the Board of
Directors the independent accountants to audit the Company's financial
statements, to meet with the independent accountants and to review the Company's
financial statements, results of audits and fees charged. Peter Graf and Aron
Katzman are members of the Audit Committee. Aron Katzman was elected as
Chairman of the Audit Committee.
Compensation of Directors
The Company's Code of Regulations provides that the Board of Directors
may compensate directors for serving on the Board and reimburse them for any
expenses incurred as a result of Board meetings. Directors' fees have been
approved by the Board of Directors and are payable only to non-employee
directors. During 1995, Mr. Henry received a fee in the sum of $5,000 which was
paid in Common Stock of the Company valued at the market price at the close of
issue.
- 7 -
<PAGE> 9
EXECUTIVE OFFICERS
The Company has three executive officers other than Messrs. Graf and
Hollander.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS BUSINESS EXPERIENCE DURING THE LAST FIVE YEARS
- ------------------ ----------------------------------------------
<S> <C>
Tammy L. Martin Serves as Secretary of the Company since September 1995. Ms.
Age 31 Martin was elected Executive Vice President and Chief
Administrative Officer of the Company in April 1996. Ms.
Martin served as associate legal counsel for the Company
during 1993 and 1994.
Daniel J. Moos Serves as Executive Vice President, Chief Financial Officer
Age 45 and Treasurer since June 1994. Mr. Moos was a Director of
the Company from June 1995 to April 1996 at which time he
resigned.
Gary Pace Serves as Senior Vice President of the Company since its
Age 45 merger with World Communications, Inc. in September 1995.
</TABLE>
EXECUTIVE COMPENSATION
On May 1, 1995 the Company entered into an employment agreement with
the Company's former Chief Executive Officer, Jerry Burger. The agreement would
have entitled Mr. Burger to annual salaries of $180,000, $190,000 and $205,000
during the three year term of the agreement. The employment agreement also
provided for an automatic two year extension of the term if not terminated by
the Company on or before May 1, 1997 (the "Extended Term") and that the salaries
for said two years would have been $225,000 and $250,000, respectively. Pursuant
to the employment agreement, if a change in control of the Company would have
occurred as defined therein, Mr. Burger would have been entitled to terminate
the agreement and to receive payment from the Company in the amount of one
hundred fifty percent (150%) of the salary which would have been payable for the
unexpired portion of the agreement. On September 15, 1995, the Company and Mr.
Burger entered into a Separation Agreement, which provided for the termination
of the Employment Agreement and the resignation of Mr. Burger as a director,
officer, and employee of the Company. Pursuant to the Separation Agreement, the
Company agreed to pay Mr. Burger the amount of $650,000 in installments, with
the final amount paid March 15, 1996.
- 8 -
<PAGE> 10
On May 1, 1995, the Company entered into an employment agreement with
the Company's former President, Chief Operating Officer and Secretary, Bernard
Mandel. The agreement would have entitled Mr. Mandel to annual salaries of
$140,000, $150,000 and $165,000 over the three year term of the agreement. The
employment agreement also provided for an automatic two year extension of the
term if not terminated by the Company on or before May 1, 1997 (the "Extended
Term") and that the salaries for said two years would have been $225,000 and
$250,000, respectively. Pursuant to the employment agreement, if a change in
control of the Company would have occurred as defined therein, Mr. Mandel would
have been entitled to terminate the agreement and to receive payment from the
Company in the amount of one hundred fifty percent (150%) of the salary which
would have been payable for the unexpired portion of the agreement. On
September 15, 1995, the Company and Mr. Mandel entered into a Separation
Agreement which provided for the termination of the Employment Agreement and
the resignation of Mr. Mandel as a director, officer, and employee of the
Company. Pursuant to the Separation Agreement, the Company agreed to pay Mr.
Mandel the amount of $450,000 in installments, with the final amount paid
March 15, 1996.
On May 1, 1995, the Company entered into an employment agreement with
the Company's Chief Financial Officer, Daniel J. Moos. The agreement with Mr.
Moos entitles him to annual salaries of $95,000, $105,000 and $120,000 during
the three year term of the agreement. Pursuant to the employment agreement, if
there occurs a change in control of the Company as defined therein, Mr. Moos is
entitled to terminate the agreement and to receive payment from the Company in
the amount of one hundred fifty percent (150%) of the salary which would have
been payable for the unexpired portion of the agreement. The employment
agreement also provides for an automatic two-year extension of the term if not
terminated by the Company on or before May 1, 1997 (the "Extended Term") and
that the salaries for said two years shall be $130,000 and $140,000,
respectively.
On September 22, 1995, the Company entered into a consulting agreement
with the Company's Vice Chairman of the Board, Stuart Hollander. The agreement
with Mr. Hollander entitles him to annual salaries of $125,000 and $135,000
during the two year term of the agreement.
On September 22, 1995 the Company also entered into an employment
agreement with the Company's Senior Vice President, Gary Pace. The agreement
with Mr. Pace entitles him to annual salaries of $110,000 and $120,000 during
the two year term of the agreement.
- 9 -
<PAGE> 11
The following table sets forth a summary of all compensation of the
Company's Chief Executive Officer and all other executive officers whose total
compensation exceeded $100,000 per year for any year in the three year period
ended December 31, 1995.
<TABLE>
<CAPTION>
====================================================================================================================================
SUMMARY COMPENSATION TABLE
====================================================================================================================================
Long-Term Compensation
Annual Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
----- ---- ---- ---- ---- ---- ---- ---- ----
Other Long- All Other
Name Annual Restricted Term Com-
and Compen- Stock Options/ Incentive pen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (Number) ($) ($)
--------- ---- ------ ------ ------ ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerry H. Burger 1995 $74,293 $13,600 $ 13,600(8) -- 62,500 -- $212,000(2)
Former Chief 1994 $40,000 -- -- -- -- -- --
Executive 1993 $42,000 $75,000 $ 5,917(1) -- 43,333(4) -- --
Officer
Bernard Mandel 1995 $147,544 $ 9,760 $ 9,760(9) -- 41,666 -- $146,500(3)
Former 1994 $ 88,894 -- $ 4,154(1) -- -- -- --
President, 1993 $ 83,269 $25,000 $ 3,698(1) -- 10,000(5) -- --
Chief Operating
Officer,
Secretary
Peter G. Graf 1995 -- -- -- -- 47,583 -- --
Chief Executive 1994 -- -- -- -- 24,705 -- --
Officer,
Chairman &
Director
Daniel J. Moos 1995 $ 95,000 $ 1,442 $ 12,800(7) -- 59,999(6) -- --
Executive Vice
President,
Chief Financial
Officer,
Treasurer
<FN>
1 Value of non-business use of Company automobile.
2 Represents payment under Separation Agreement and related expenses
excluding payment of $445,000 plus accrued interest of $4,291 paid on March
15, 1996.
3 Represents payment under Separation Agreement excluding payment of $308,500
plus accrued interest of $2,976 paid on March 15, 1996.
4 26,000 options expired in 1995.
5 Expired in 1995.
6 33,000 options not vested at December 31, 1995.
7 Represents the value of 2,666 shares paid to Executive for services
provided.
8 Represents the value of 2,833 shares paid to Executive for services
provided.
9 Represents the value of 2,033 shares paid to Executive for services
provided.
</TABLE>
- 10 -
<PAGE> 12
================================================================================
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
================================================================================
<TABLE>
<CAPTION>
NUMBER PERCENT OF TOTAL
OF OPTIONS/
SECURITIES WARRANTS/ SARS EXERCISE
UNDERLYING GRANTED TO OR BASE
NAME AND OPTIONS/SARS EMPLOYEES IN PRICE
PRINCIPAL POSITION GRANTED (#) FISCAL YEAR (S/SH) EXPIRATION DATE
(a) (b) (c) (d) (e)
--------------- --------- ------- ------ ----------
<S> <C> <C> <C> <C>
Jerry H. Burger 62,500 9.5% $6.00 August 31, 1997
Former Chief Executive
Officer
Bernard Mandel 41,666 6.3% $6.00 August 31, 1997
Former President,
Chief Operating Officer &
Secretary
Peter G. Graf 41,833 6.3% $5.70 December 31, 1997
Chief Executive Officer August 15, 2000
Chairman & Director 5,750 0.9% $6.00
Daniel J. Moos 54,999 8.3% $6.00 Two years after
Executive Vice President, termination of
Chief Financial Officer employment
& Treasurer
</TABLE>
================================================================================
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FY-END OPTION/SAR VALUES
================================================================================
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON VALUE AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
(a) (b) (c) (d) (e)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Peter G. Graf -0- -0- 75,064 $31,316
Chief Executive Officer
Chairman & Director
Jerry H. Burger -0- -0- 127,361 $31,840
Former Chief Executive Officer
</TABLE>
- 11 -
<PAGE> 13
================================================================================
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FY-END OPTION/SAR VALUES
================================================================================
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON VALUE AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
(a) (b) (c) (d) (e)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Bernard Mandel -0- -0- 66,666 $91,667
Former President,
Chief Operating Officer &
Secretary
Daniel J. Moos -0- -0- 54,999(1) $13,750(2)
Executive Vice President,
Chief Financial Officer
& Treasurer
<FN>
1 33,333 not vested, unexercisable.
2 $8,333 not vested, unexercisable.
</TABLE>
OTHER MATTERS
Pursuant to the rules of the Securities and Exchange Act of 1934 (the
"Act"), the Company is obligated to identify each person, who at any time during
said fiscal year, was a director, officer and/or beneficial owner of more that
10% of any class of equity securities of the Company registered pursuant to
section 12 of the Act, or any other person subject to Section 16 of the Act with
respect to the Company (a "Reporting Person") that failed to file on a timely
basis, as disclosed in the Forms (as defined below), reports required by Section
16(a) of the Act during the fiscal year ended December 31, 1994, or prior fiscal
years.
The Company has, therefore, reviewed the following reports of Reporting
Persons received on or before May 10, 1996: Form 3 - Initial Statement of
Beneficial Ownership of Securities, Form 4 - Statement of Changes in Beneficial
Ownership of Securities, and amendments thereto, furnished to the Company during
the fiscal year ended December 31, 1995, and Form 5 - Annual Statement of
Changes of Beneficial Ownership, and amendments thereto, furnished to the
Company with respect to the fiscal year ended December 31, 1995 (collectively,
the "Forms"). No Forms were received during the period enumerated which were not
timely filed.
- 12 -
<PAGE> 14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 26,
1996, regarding the beneficial ownership of the Common Stock, owned by each
Director of the Company, each person known by the Company to own beneficially
more than 5% of the outstanding Common Stock, and all directors and officers as
a group. Unless otherwise indicated, the number of shares of Common Stock owned
by the named shareholders assumes the exercise of the warrants or options, the
number of which is separately referred to in a footnote, and the percentage
shown assumes the exercise of such warrants or options and assumes that no
warrants or options held by others are exercised. This information is based upon
information furnished by such persons and statements filed with the Securities
and Exchange Commission and other information known by the Company, but may not
include certain anti-dilution adjustments which may be required pursuant to
stock option agreements or other rights as a result of certain transactions.
<TABLE>
<CAPTION>
====================================================================================================================
NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
OF OF OF
BENEFICIAL OWNER BENEFICIAL OWNER OUTSTANDING
COMMON STOCK
====================================================================================================================
<S> <C> <C>
Peter G. Graf 1,009,922(1) 21.54%
Director, Chairman &
Chief Executive Officer
Six East 43rd Street
New York, NY 10017
Nickey B. Maxey 403,927(2) 10.32%
Director
81 Brahms Point Road
Hilton Head Isl., SC 29926
Steven Richman 255,293(3) 6.40%
Director
9 Beech Lane
Kings Point, NY 11024
Joseph Abrams 190,996(4) 4.76%
Director
85 Old Farm Road
Bedminister, NJ 07921
</TABLE>
- 13 -
<PAGE> 15
<TABLE>
<CAPTION>
====================================================================================================================
NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
OF OF OF
BENEFICIAL OWNER BENEFICIAL OWNER OUTSTANDING
COMMON STOCK
====================================================================================================================
<S> <C> <C>
Aron Katzman 171,096(5) 4.32%
Director
10 Layton Terrace
St. Louis, MO 63124
Stuart Hollander 99,252(6) 2.60%
Director & Vice Chairman
32 Lake Forest
St. Louis, MO 63117
George H. Henry 360,376(7) 9.34%
Director
6860 Sunrise Court
Coral Gables, FL 33133
Internationale Nederlanden (U.S.) 4,464,907(8) 53.87%
Capital Corporation
As agent for various lenders
135 East 57th Street
New York, NY 10022
Cerberus Partners, L.P. 4,464,907(9) 53.87%
950 Third Avenue, 20th floor
New York, NY 10022
Protel, Inc. 400,000(10) 9.47%
4150 Kidron Road
Lakeland, FL 33811
Brenner Securities Corporation 467,326(11) 11.04%
277 Park Avenue
New York, NY 10172
J & C Resources 476,160(12) 12.02%
216 Daniel Webster Highway S.
Nashua, NH 03060
DeBartolo Corporation and Affiliates 328,328(13) 7.91%
7620 Market Street
Youngstown, OH 44513
</TABLE>
- 14 -
<PAGE> 16
<TABLE>
<CAPTION>
====================================================================================================================
NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
OF OF OF
BENEFICIAL OWNER BENEFICIAL OWNER OUTSTANDING
COMMON STOCK
====================================================================================================================
<S> <C> <C>
Daniel J. Moos 66,998(17) 1.73%
Executive Vice President,
Chief Financial Officer
& Treasurer
7399 Stow Road
Hudson, OH 44236
Albert Miniaci 229,993(14) 5.67%
1411 S. W. 31st Avenue
Pompano Beach, FL 33069
Jerry Burger 159,242(15) 4.03%
Former Chief Executive Officer
27040 Cedar Road
Beachwood, OH 44122
Bernard Mandel 69,949(16) 1.80%
Former President, Chief Operating
Officer & Secretary
8233 Whispering Pines Drive
Russell, OH 44072
Executive Officers and Directors 2,602,897(18) 48.53%
As a group (10 persons)
<FN>
(1) Includes warrants to purchase 615,053 shares of Common Stock through
March 13, 2001, and 14% Preferred Stock which is convertible through
June 30, 2000 into 250,000 shares of Common Stock.
(2) Includes warrants to purchase 62,650 shares of Common Stock through
March 31, 2001, and 14% Preferred Stock which is convertible through
June 30, 2000 into 29,005 shares of Common Stock.
(3) Includes warrants to purchase 126,830 shares of Common Stock through
March 13, 2001, 4,444 shares of Common Stock held by his spouse, and
14% Preferred Stock which is convertible through June 30, 2000 into
41,667 shares of Common Stock.
</TABLE>
- 15 -
<PAGE> 17
(4) Includes warrants to purchase 125,997 shares of Common Stock through March
13, 2001 and 14% Preferred Stock which is convertible through June 30, 2000
into 58,333 shares of Common Stock.
(5) Includes warrants to purchase 95,128 shares of Common Stock through March
13, 2001 and 14% Preferred Stock which is convertible through June 30, 2000
into 44,040 shares of Common Stock.
(6) Includes 46,566 shares of Common Stock held by his spouse.
(7) Includes options to purchase 35,000 shares of Common Stock through October
9, 1998.
(8) Includes warrants to purchase 2,048,240 shares of Common Stock and certain
debt which is convertible into warrants to purchase 2,416,667 shares of
Common Stock.
(9) Includes warrants to purchase 2,048,240 shares of Common Stock and certain
debt which is convertible into warrants to purchase 2,416,667 shares of
Common Stock.
(10) Represents warrants to purchase 400,000 shares of Common Stock through
March 13, 1999.
(11) Includes warrants to purchase 310,660 shares of Common Stock through March
13, 2001 and 14% Preferred Stock which is convertible through June 30, 2000
into 100,000 shares of Common Stock.
(12) Represents 14% Preferred Stock which is convertible through June 30, 2000
into 137,500 shares of Common Stock.
(13) Includes options to purchase 41,666 shares of Common Stock through February
28, 1999, warrants to purchase 119,982 shares of Common Stock through March
13, 2001 and 14% Preferred Stock which is convertible through June 30, 2000
into 166,680 shares of Common Stock.
(14) Includes warrants to purchase 179,996 shares of Common Stock through March
13, 2001, and 14% Preferred Stock which is convertible through June 30,
2000 into 49,997 shares of Common Stock.
(15) Includes options to purchase 127,361 shares of Common Stock through August
31, 1997.
(16) Includes options to purchase 66,666 shares of Common Stock through August
31, 1997 and 1,250 shares of Common Stock held by his spouse.
- 16 -
<PAGE> 18
(17) Includes options to purchase 54,999 shares of Common Stock which expire two
years after termination of employment.
(18) Includes beneficial ownership of Common Stock described above with respect
to Messrs. Graf, Moos, Maxey, Richman, Abrams, Katzman, Hollander, Henry,
and beneficial ownership of Common Stock of Mr. Pace and Ms. Martin.
VOTING AGREEMENTS
On September 22, 1995, the Company acquired World Communications, inc.
("WCI") by the merger of WCI with and into a wholly-owned subsidiary of the
Company (the "Merger"). As an inducement for WCI to enter into the Merger, and
the WCI shareholders to approve the Merger, certain shareholders of the Company
(including Messrs. Graf, Henry and Abrams, Directors of the Company) entered
into a voting and proxy agreement dated as of September 22, 1995, as amended
(the "WCI Voting Agreement") with WCI wherein said holders agreed to call a
meeting of the shareholders of the Company to approve the following proposals
(the "Proposals"): to increase the number of Directors of the Company from seven
to eight; to elect (or, if already appointed by the Board of Directors of the
Company, to ratify the appointment of) four directors designated jointly by
Stuart Hollander and Aron Katzman; and to approve the grant of conversion rights
which would attach immediately to the 10% Non-Voting Preferred Stock issued to
the WCI shareholders in connection with the Merger (the "10% Preferred Stock"),
such that each share of 10% Preferred Stock would be convertible into shares of
Common Stock at a conversion ratio of 10 shares of Common Stock per one share of
10% Preferred Stock (due to the six-for-one reverse stock split of the Common
Stock which subsequently occurred, the conversion ratio is 1.6667 shares of
Common Stock for each one share of 10% Preferred Stock). Messrs. Hollander and
Katzman were officers and directors of WCI, and are currently directors of the
Company. In addition, the Company entered into a Voting and Proxy Agreement
dated October 16, 1995 with the former shareholders of Public Telephone
Corporation, which was acquired by the Company in exchange for the issuance of
shares of Common Stock (the "Public Voting Agreement"), pursuant to which the
former shareholders of Public Telephone Corporation are obligated to vote for
the Proposals. Pursuant to the WCI Voting Agreement and the Public Voting
Agreement, Mr. Aron Katzman has been appointed as the proxy to vote all of the
shares of each shareholder who is a party to either the WCI Voting Agreement or
the Public Voting Agreement in favor of the Proposals, in the event that any
such shareholder fails to comply with the provisions of either the WCI Voting
Agreement or the Public Voting Agreement. The amount of shares of Common Stock
subject to either the WCI Voting Agreement or the Public Voting Agreement is
1,244,767 shares, or 32.55% of the outstanding Common Stock. Pursuant to the WCI
Voting Agreement, the shareholders of the Company who are parties thereto,
- 17 -
<PAGE> 19
have agreed that, in the event the Proposals are not approved by shareholders at
this annual meeting then they shall exercise, in accordance with their terms,
within thirty days thereafter, options and warrants held by them to the extent
necessary so that at least 52% of the outstanding shares of Common Stock of the
Company will be obligated to vote in favor of the Proposals, assuming, for
purposes of this calculation, that all of the 402,500 shares of Common Stock, or
10.52% of the Outstanding Common Stock, issued in connection with the Merger
(the "Merger Common Stock") are so obligated.
In addition, subsequent to the WCI Voting Agreement, the Company
entered into separate voting and proxy agreements with certain other persons who
received shares of Common Stock as consideration for the acquisition by the
Company of their businesses and who are thereby obligated to vote for the
Proposals. These other agreements were as follows: Voting Agreement dated as of
March 15, 1996 by and among the Company and the former shareholders of
International Pay Phones, Inc. of South Carolina; voting Agreement dated March
15, 1996, by and among the Company and the former shareholders of International
Pay Phones, Inc. of Tennessee; and Voting Agreement dated as of March 15, 1996,
by and among the Company and the former shareholders of Paramount Communication
Systems, Inc. The shares of Common Stock subject to the foregoing Voting
Agreements are 555,589 shares, or 14.53% of the outstanding Common Stock.
In the event that all the shares of the Merger Common Stock and the
Common Stock subject to the WCI Voting Agreement, the Public Voting Agreement
and the other Voting Agreements referenced above are voted in favor of the
Proposals, then 57.60% of the Common Stock would be voted in favor of the
Proposals.
In addition, the Company has entered into a Voting and Proxy Agreement
as of February 21, 1996, with certain holders of the 10% Preferred Stock who, in
the aggregate, hold in excess of 50% of the outstanding shares of 10% Preferred
Stock (the "10% Preferred Voting Agreement") pursuant to which said holders have
agreed to their shares of 10% Preferred Stock vote for the Proposals with
respect to the class vote of the 10% Preferred Stock. The holders of the 10%
Preferred Stock who are parties to said agreement include Messrs. Hollander and
Katzman, Directors of the Company, and Mr. Pace, an executive officer of the
Company. The parties to the 10% Preferred Voting Agreement have appointed Peter
G. Graf, Chairman, CEO and a Director of the Company, and Tammy L. Martin,
Executive Vice President and Secretary of the Company, as proxies to vote their
shares of 10% Preferred Stock in favor of the Proposals in the event that any
such shareholder fails to comply with the provisions of the 10% Preferred Voting
Agreement. A total of 340,175 shares of 10% Preferred Stock are subject to the
10% Preferred Voting Agreement, or 64.12% of the 10% Preferred Stock.
- 18 -
<PAGE> 20
POSSIBLE CHANGE IN CONTROL
On March 15, 1996, the Company entered into a credit agreement ("Credit
Agreement") with Internationale Nederlanden (U.S.) Capital Corporation and
Cerberus Partners, L.P. (the "Lenders") pursuant to which the Company borrowed
$30,530,954 from the Lenders (the "Loan"). In connection with the Loan, the
Lenders were granted warrants to acquire preferred stock which, in turn, is
convertible into a total of 4,096,480 shares of Common Stock. Furthermore, up to
$29,000,000 of the principal amount of the Loan is convertible into preferred
stock which, in turn, is convertible into a total of 4,833,333 shares of Common
Stock. The Company is unable to predict whether the aforementioned rights of the
Lenders pursuant to the Credit Agreement would result at a subsequent date in a
change of control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 15, 1996, warrants to purchase 2,018,946 shares of Common
Stock at a nominal exercise price per share were issued in conjunction with
International Pay Phones, Inc.-Tennessee, International Pay Phones, Inc.-South
Carolina and Paramount Communication Systems, Inc. acquisitions, redemption of
the 10% Cumulative Preferred, 8% Preferred, and the 7% Preferred, and conversion
of certain debt of the Company into the 14% Preferred. The warrants expire on
March 13, 2001. Concurrent with their exchange of debt and preferred stock for
the 14% Preferred, the following Directors, Executive Officers or security
holders of more than 5% of the Company stock were issued warrants to purchase
Common Stock at a nominal exercise price.
<TABLE>
<CAPTION>
VALUE OF
DEBT/PREFERRED
SURRENDERED NUMBER
AND 14% PRE OF WARRANTS
FERRED ISSUED ISSUED
=============================================================================
<S> <C> <C>
Peter G. Graf $1,500,000 539,989
Chief Executive Officer
Chairman & Director
Joseph Abrams $ 350,000 125,997
Director
Aron Katzman $ 264,250 95,128
Director
Steven Richman $ 250,000 89,998
Director
</TABLE>
- 19 -
<PAGE> 21
<TABLE>
<CAPTION>
VALUE OF
DEBT/PREFERRED
SURRENDERED NUMBER
AND 14% PRE OF WARRANTS
FERRED ISSUED ISSUED
=============================================================================
<S> <C> <C>
Nickey Maxey $ 174,032 62,650
Director
Brenner Securities Cor $ 600,000 143,994
poration
Financial Advisors
J & C Resources $ 825,000 296,994(1)
5% Owner
</TABLE>
-------------------------
PROPOSAL 2
AMENDMENT OF ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF SHARES AUTHORIZED
PROPOSED AMENDMENT OF THE ARTICLES OF INCORPORATION
The Board of Directors recommends that shareholders approve a proposed
amendment to the Articles of Incorporation (the "Articles") of the Company
whereby the first sentence of Article FOURTH and subparagraphs (a) and (b)
thereof would be deleted and replaced by the following:
FOURTH: The number of shares which the Corporation is authorized to have
outstanding is Sixty Million (60,000,000) which shall be classified as
follows:
(a) Fifty Million (50,000,000) shares shall be Common Stock, $.01 par
value (hereinafter referred to as "Common Stock");
(b) Ten Million (10,000,000) shares shall be preferred stock, without par
value (hereinafter referred to as "Preferred Stock"), as further
designated by the Board of Directors of the Corporation in accordance
herewith.
- 20 -
<PAGE> 22
The proposed amendment to the Articles provides for the increase in the
number of shares the Company is authorized to have outstanding from 25 million
to 60 million, which is an increase of shares of Common Stock from 22.5 million
to 50 million, and an increase in shares of Preferred Stock from 2.5 million to
10 million. At May 10, 1996, there were 4,364,016 shares of Common Stock issued
and outstanding, and 639,116.32 shares of Preferred Stock issued and
outstanding. In addition, 16,871,559 of the remaining authorized shares of
Common Stock were reserved for future issuance in connection with the exercise
of outstanding options, warrants, conversion and other rights to acquire Common
Stock, including shares of Common Stock which will be reserved for future
issuance in the event of the passage of Proposal 4--Amendment of Articles of
Incorporation-Grant of Conversion Rights to 10% Preferred Stock, below.
The increase in authorized shares of stock will enhance the Company's
flexibility in connection with possible future actions such as stock dividends,
stock splits, financing, employee benefit programs, acquisitions and use for
other corporate purposes, without the delay and expense of calling a special
meeting of shareholders for such purpose. The Company does not have a present
intention to issue the shares of stock contemplated by this amendment and the
Company does not have any commitments, arrangements, understandings or
agreements which would require the issuance of the shares contem plated by this
amendment. Although currently authorized shares are sufficient to meet all known
present requirements, the Board of Directors believes that it is desirable that
the Company have the flexibility to issue additional shares of stock without
further stockholder action. If the proposed increase in the amount of authorized
shares is approved, the shares could be issued by action of the Board of
Directors at any time and for any purpose, subject to the provisions of the
Articles and other applicable legal requirements, without further approval or
action by the shareholders.
Shareholders have no preemptive rights to purchase any additional
shares of Common Stock which may be issued. Accordingly, the issuance of
additional shares would likely reduce the percentage interest of current
shareholders in the total outstanding shares. The terms of the additional shares
of Common Stock will be identical to those of the currently outstanding shares
of Common Stock.
ADOPTION OF AMENDMENT BY STOCKHOLDERS
The affirmative vote of a majority of the votes entitled to be cast at
the meeting is required for adoption of the proposed amendment to the Articles.
If the proposed amendment is adopted by the stockholders, it will become
effective upon filing and recording a Certificate of Amendment with the
Secretary of State of Ohio.
- 21 -
<PAGE> 23
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ADOPTION OF
THE PROPOSED AMENDMENT TO THE ARTICLES INCREASING THE NUMBER OF AUTHORIZED
SHARES.
-------------------------
PROPOSAL 3
AMENDMENT OF THE CODE OF REGULATIONS
TO INCREASE THE MAXIMUM NUMBER OF DIRECTORS TO NINE
PROPOSED AMENDMENT TO THE CODE OF REGULATIONS
The Board of Directors recommends that the shareholders approve the
proposal to amend the Company's Code of Regulations to increase the maximum
number of directors from seven to nine. If the proposed amendment is adopted,
the first two paragraphs of Article III, Section 1 of the Company's Code of
Regulations will be deleted in their entirety and replaced with the following:
Section 1. Powers, Number, Qualification, Term, Quorum and Vacancies.
All of the authority of the Corporation shall be exercised
by or under the direction of the Board of Directors. For their
own government, the directors may adopt bylaws that are not
inconsistent with the articles or these regulations.
The number of directors shall be not less than four (4)
persons nor more than nine (9) persons. Except as hereinafter
provided, directors shall be elected at the annual meeting of the
shareholders and each director shall be elected to service for
one year and until his successor is elected or until his earlier
resignation, removal from office, or death. The number of
directors may be increased or decreased from time to time by the
board of directors.
The Company's Code of Regulations now specifies that a minimum
number of four and a maximum number of seven directors shall serve on
the Board. Seven directors are proposed for election by the
shareholders at the 1996 annual meeting, all of whom are current
directors of the Company. The group of directors proposed for election
have
- 22 -
<PAGE> 24
diverse backgrounds and extensive experience in areas which are appropriate to
the Company's businesses and needs. The Board believes that, at present, a seven
member Board is an appropriate size and that a seven member Board can provide
sufficient diversity and expertise to satisfy the Company's needs. The proposed
amendment would give the Board the flexibility to elect an additional director
or directors to serve during the transition period preceding any expected
resignation or retirement, or at a time when additional expertise is deemed
necessary or appropriate.
Pursuant to certain voting agreements (See "Security Ownership of
Certain Beneficial Owners and Management -- Voting Agreements", above), certain
shareholders of the Company have agreed to vote for certain Proposals, one of
which is to increase the maximum number of directors from seven to eights.
Accordingly, the Board of Directors has approved Proposal 3, after taking into
consideration the foregoing voting agreements and the other factors referred to
herein. In addition, the proposed amendment would give the Board added
flexibility in negotiations for the acquisition of other companies by enabling
the Company to agree that one or more persons from such acquired companies would
be elected as a Director of the Company in accordance with the company's Code of
Regulations. There are no plans or proposals whereby the Company has agreed to
appoint a director in connection with any such acquisition.
The Board has no intention at this time to alter the current size of
the Board. Other than in consideration of the Voting Agreements referred to
above, the amendment to the Code of Regulations is not being proposed in
response to any specific shareholder action or proposal.
ADOPTION OF AMENDMENT BY STOCKHOLDERS
The affirmative vote of a majority of the votes entitled to be cast at
the meeting is required for adoption of the amendment to the Code of
Regulations.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION
OF THE PROPOSED AMENDMENT TO THE CODE OF REGULATIONS INCREASING THE MAXIMUM
NUMBER OF DIRECTORS.
-------------------------
- 23 -
<PAGE> 25
PROPOSAL 4
AMENDMENT OF ARTICLES OF INCORPORATION
GRANT OF CONVERSION RIGHTS TO 10% PREFERRED STOCK
Acquisition of World Communications, Inc.
On September 22, 1995, the Company consummated a merger transaction
with World Communications, Inc. ("WCI") by the merger of WCI with and into a
wholly-owned subsidiary of the Company (the "Merger"). In the Merger, the
Company issued to the shareholders of WCI 402,500 shares of Common Stock1 and
530,534 shares of the Company's 10% Non-Voting Preferred Stock, without par
value, $10 stated value, cumulative ("10% Preferred Stock"). In accordance with
certain provisions of the Ohio General Corporation Law which limit the number of
voting shares that the Board of Directors can issue in a majority share
acquisition, the 10% Preferred Stock was issued to the WCI shareholders in lieu
of 885,992 shares of Common Stock. In connection with the Merger, the Company
entered into employment and consulting agreements with three of WCI's former
officers, including Mr. Hollander, a director of the Company. See "Executive
Compensation", above.
As an inducement for WCI to enter into the Merger and the WCI
shareholders to approve the Merger, certain shareholders of the Company
(including Messrs. Abrams, Graf, Henry and Richman, directors of the Company)
entered into a Voting and Proxy Agreement dated as of September 22, 1995, as
amended (the "WCI Voting Agreement") with WCI wherein said holders agreed to
call a meeting of shareholders of the Company to approve the following
proposals (the "Proposals"): (i) to increase the number of directors of the
Company from seven to eight; (ii) to elect (or, if already appointed by the
Board of Directors of the Company, to ratify the appointment of) four directors
designated jointly by Stuart Hollander and Aron Katzman; and (iii) to approve
the grant of conversion rights which would attach immediately to the 10%
Preferred Stock such that each share of 10% Preferred Stock would be
convertible into shares of Common Stock at a conversion ratio of 10 shares of
Common Stock for one share of 10% Preferred Stock. (Due to the one-for-six
reverse stock split of the Common Stock which subsequently occurred, the
conversion ratio is 1.6667 shares of Common Stock for each one share of 10%
Preferred Stock.) (See "Security Ownership of Certain Beneficial Owners and
Management - Voting Agreements") Messrs. Hollander and Katzman were officers
and directors of WCI, and are currently directors of the Company, who are
proposed for re-election to the Board of
- --------
1 All share amounts of Common Stock referred to herein have been calculated
taking into account the six-for-one reverse split of the Common Stock effective
December 26, 1995.
- 24 -
<PAGE> 26
Directors of the Company. In addition, the Company has determined that it would
be appropriate to provide for the right of the Company, at its election, to
mandate the conversion of the 10% Preferred Stock into Common Stock in the event
a holder of the 10% Preferred Stock does not so elect.
The Proposed Amendment.
Accordingly, the Board of Directors has determined that shareholders
should consider and vote upon an amendment to the Company's Articles of
Incorporation (the "Articles") to amend subparagraph (j) of Article Fourth,
which subparagraph (j) sets forth the express terms of the 10% Preferred Stock,
by the addition thereto of the following as paragraphs 7, 7A, 7B and 7C:
7. CONVERSION RIGHTS. Any holder of 10% Non-Voting Preferred Stock may,
at any time, convert all, but not less than all, of his, her or its
shares of 10% Preferred Stock into fully paid and non-assessable shares
of Common Stock such that each Share of 10% Preferred Stock is
convertible into 1.6667 shares of Common Stock. In order to exercise
the conversion privilege, the holder of 10% Preferred Stock to be
converted shall surrender certificates for such stock, duly endorsed or
assigned to the Company or in blank, accompanied by written notice to
the Company that the holder elects to covert such stock (the
"Conversion Notice"). As soon as practicable but no later than twenty
(20) business days after the Company's receipt of the Conversion
Notice, the Company shall cause to be issued to the holder certificates
for such Common Stock. Such Common Stock shall carry with it the same
registration rights as were granted in connection with the merger of
World Communications, Inc. with and into PhoneTel II, Inc.
7A. The Company may, at any time, convert all, but not less than all,
of the outstanding shares of 10% Preferred Stock into fully paid and
non-assessable shares of Common Stock such that each Share of 10%
Preferred Stock is convertible into 1.6667 shares of Common Stock. In
order to exercise the conversion privilege, the Board of Directors of
the Company shall adopt a resolution, whereupon such conversion shall
be effective immediately. The Company shall promptly solicit each
holder of a certificate which previously represented 10% Preferred
Stock to surrender such certificates, duly endorsed or assigned to the
Company or in blank, in exchange for certificates representing the
appropriate number of shares of Common Stock. Such Common Stock shall
carry with it the same registration
- 25 -
<PAGE> 27
rights as were granted in connection with the Merger of World
Communications, Inc. with and into PhoneTel II, Inc.
7B. The conversion ratio of 1.6667 set forth in each of the preceding
two paragraphs shall be subject to appropriate adjustment in the event
of any stock split, reverse stock split, recapitalization or similar
event.
7C. Notwithstanding anything to the contrary contained in this subpara
graph (j), each holder of 10% Preferred Stock who would otherwise have
been entitled to receive a fractional part of a share of Common Stock
upon conversion shall receive, in lieu thereof, cash in an amount equal
to such fractional part of a share of Common Stock multiplied by the
closing price of the Common Stock as quoted on NASDAQ on June 27, 1996.
No such holder shall be entitled to dividends, voting rights, or any
right as a shareholder in respect of any fractional share.
7D. Upon the date on which conversion of a share of 10% Preferred Stock
is effective (the "Conversion Date"), the holder of the 10% Preferred
Stock converted on such date shall cease to be a stockholder with
respect to such share, and thereafter such shares shall no longer be
transferable on the books of the Company, and holders of the 10%
Preferred Stock shall have no interest in or claim against the Company
with respect to such shares, except the right to receive 1.6667 shares
of common Stock for each one share of 10% Preferred Stock converted.
The Board of Directors shall cause the transfer books of the Company to
be closed on the Conversion Date as to shares of 10% Preferred Stock
converted.
Modification of Outstanding Securities.
If the proposed amendment is passed, the express terms of the 10%
Preferred Stock would be modified by the addition of the right of conversion by
a holder thereof of one share of 10% Preferred Stock into 1.6667 shares of
Common Stock. In addition, the proposed amendment would permit the Company to
convert all, but not less than all, of the outstanding shares of 10% Preferred
Stock into fully paid and non-assessable shares of Common Stock, such that each
share of 10% Preferred Stock is convertible into 1.6667 shares of Common Stock.
All such shares of Common Stock into which the 10% Preferred Stock is converted
would have the same registration rights as were granted to the persons who
received Common Stock of the Company in connection with the Merger. The
- 26 -
<PAGE> 28
Company has not granted registration rights with respect to the registration of
the 10% Preferred Stock.
The express terms of the 10% Preferred Stock provide that if the 10%
Preferred Stock has not been made convertible into shares of Common Stock by the
date which is 15 months after the Merger Date, December 22, 1996 (the "Put
Date"), any holder of the 10% Preferred Stock may require the Company to
repurchase all, but not less than all, of his, her or its shares of 10%
Preferred Stock (the "Put") by giving written notice of the exercise of such Put
right to the Company (the "Put Notice") and delivering the shares of 10%
Preferred Stock held by such holder to the Company after the Put Date but prior
to the date which is 26 months after the Merger Date or November 22, 1997.
Within ten days of the Company's receipt of the Put Notice, the Company is
required to purchase all shares of 10% Preferred Stock so delivered to the
Company.
Interest of Company to Exercise Conversion Rights.
Upon conversion of the 10% Preferred Stock into shares of Common Stock,
there shall be no "Put" rights which attach to the shares of Common Stock
issuable upon conversion of the 10% Preferred Stock. In the event that the
proposed amendment is approved by the shareholders, it is the intention of the
Company to exercise its right, pursuant to Paragraph 7A of the proposed
amendment, to convert all of the outstanding shares of 10% Preferred Stock into
shares of Common Stock as soon as is practicable.
In the event that the 10% Preferred Stock is not converted either by
the Company or by the holders thereof into Common Stock by the Put Date, the
Company would be in violation of certain provisions of a Credit Agreement dated
as of March 15, 1996 among the Company, the various lenders which are parties
thereto and Internationale Nederlanden (U.S.) Capital Corporation as agent for
such lenders.
Class Vote of Holders of 10% Preferred Stock.
The holders of the 10% Preferred Stock are entitled to vote as a class
on the proposed amendment due to the inclusion therein of the provisions of
paragraph 7A. In this connection, the Company has entered into a Voting and
Proxy Agreement as of February 21, 1996, with certain holders of the 10%
Preferred Stock, who, in the aggregate, hold in excess of 50% of the outstanding
shares of 10% Preferred Stock, pursuant to which said holders have agreed to
vote for the Proposals, including the proposed amendment. Such holders include
Messrs. Hollander and Katzman, directors of the Company. The
- 27 -
<PAGE> 29
parties to the February 21, 1996 Voting and Proxy Agreement have appointed Peter
G. Graf, Chairman of the Company, and Tammy L. Martin, Secretary of the Company,
as proxies to vote their shares of 10% Preferred Stock in favor of the Proposals
in the event that any such shareholder fails to comply with the provisions of
such Agreement. The 10% Preferred Stock is preferred as to dividends and
liquidation over the shares of Common Stock and any other series of preferred
stock of the Company outstanding as of March 31, 1996. The proposed amendment
would not alter the preference rights of the 10% Preferred Stock.
Effects of the Proposed Amendment.
Shares of 10% Preferred Stock are currently not convertible into shares
of Common Stock or any other security of the Company, whether by the election of
the holder or at the election of the Company. In the event that the proposed
amendment is passed, each share of 10% Preferred Stock will be convertible,
either at the election of the holder thereof or at the election of the Company,
in accordance with the procedures specified in the proposed amendment, at any
time, into 1.6667 shares of Common Stock. The holder of a share of 10% Preferred
Stock on the date of conversion shall cease to be a stockholder with respect to
such share, and thereafter such shares shall no longer be transferable on the
books of the Company, and the holder of the 10% Preferred Stock shall have no
interest in or claim against the Company with respect to such shares, except the
right to receive 1.6667 shares of Common Stock for each one share of 10%
Preferred Stock converted. In the event of conversion in either manner, such
Common Stock shall carry with it the same registration rights as were granted to
the Common Stock issued in connection with the Merger. An additional effect of
the passage of the proposed amendment would be to cause the Company to reserve
for issuance upon conversion of the 10% Preferred Stock, 885,992 shares of
Common Stock out of the currently authorized but unissued shares of Common Stock
of the Company.
Effectiveness.
In the event the proposed amendment is approved by the shareholders, it
is the intention of the Company to cause said amendment to be filed promptly
with the Office of the Secretary of the State of Ohio. The proposed amendment
will become effective immediately upon the filing thereof by the Company with
the Secretary of the State of Ohio.
- 28 -
<PAGE> 30
Rights of Dissenting Holders of 10% Preferred Stock.
Holders of the 10% Preferred Stock who so desire are entitled to relief
as dissenting shareholders under Section 1701.84 of the Ohio Revised Code. Any
such dissenting holder of 10% Preferred Stock (a "Dissenting 10% Preferred
Holder") may have the "fair cash value" of his shares of 10% Preferred Stock
judicially determined and paid to him, but only if he strictly complies with the
requirements of Section 1701.85 of the Ohio Revised Code, a copy of which is
attached hereto as Appendix A.
Set forth below is a summary of the procedures relating to the exercise
of a shareholder's rights to relief as a dissenting shareholder ("Dissenters'
Rights"), which summary does not purport to be complete and is qualified in its
entirety by express reference to Section 1701.85 of the Ohio Revised Code. Any
10% Preferred Holder contemplating exercising Dissenters' Rights with respect to
his or her shares ("Dissenting 10% Preferred Shares") is urged to review
carefully such provisions since Dissenters' Rights will be lost if the
procedural requirements of Section 1701.85 are not fully and precisely
satisfied.
To perfect his Dissenters' Rights, a Dissenting 10% Preferred Holder
must satisfy each of the following conditions:
(a) 10% Preferred Holder as of the Record Date. The Dissenting 10% Preferred
Holder must have been a record holder of the 10% Preferred Stock as to which he
seeks relief as of the date fixed for the determination of shareholders entitled
to notice of the Annual Meeting.
(b) No Vote in Favor of the Proposed Amendment. Dissenting 10% Preferred Shares
must not be voted in favor of the proposal. This requirement will be satisfied
(1) if a proxy is signed and returned with instructions to vote against the
proposal or to abstain, (2) if no proxy is returned, or (3) if Dissenting 10%
Preferred Shares are voted at the Annual Meeting against approval and
authorization of the proposal. A vote in favor of the proposal constitutes a
waiver of Dissenters' Rights. A proxy that is returned signed but on which no
voting preference is indicated will be voted for the approval and authorization
of the proposal and will be deemed a waiver of Dissenters' Rights. A Dissenting
10% Preferred Holder may revoke his proxy at any time before its exercise by
filing with the Secretary of the Company an instrument revoking it or a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting thereat.
(c) Filing Written Demand. Not later than ten days after the Annual
Meeting, a Dissenting 10% Preferred Holder must deliver to the Company a
written demand (the
- 29 -
<PAGE> 31
"Demand") for payment of the fair cash value of the Dissenting 10% Preferred
Shares. The Demand should be delivered to the Company at PhoneTel Technologies,
Inc., 650 Statler Office Tower, 1127 Euclid Avenue, Cleveland, Ohio 44115,
Attention: Tammy L. Martin, Secretary, and it is recommended, although not
required, that the Demand be sent by registered or certified mail, return
receipt requested. A vote against the proposal does not itself satisfy the
requirements of a written demand for payment, and therefore does not constitute
a Demand.
The Demand must reasonably identify the holder of record of the
Dissenting 10% Preferred Shares and the Dissenting 10% Preferred Holder's
address, the number of the Dissenting 10% Preferred Shares and the amount
claimed as the fair cash value thereof. A beneficial owner must, in all cases,
have the record holder submit the Demand in respect of his Dissenting 10%
Preferred Shares.
From the time the Demand is given, all rights accruing from the
Dissenting 10% Preferred Shares, including voting and dividend rights, will be
suspended until either the termination of the rights and obligations under such
Demand or the purchase of such Dissenting 10% Preferred Shares by the Company.
If any dividend is paid on the Dissenting 10% Preferred Shares during the
suspension, an amount equal to the dividend which would have been payable on the
Dissenting 10% Preferred Shares, except for such suspension, shall be paid to
the holder of record of any Dissenting 10% Preferred Shares as a credit to the
fair cash value of such Dissenting 10% Preferred Shares. If the right to receive
fair cash value is terminated otherwise than by the purchase of the Dissenting
10% Preferred Shares by the Company, all rights will be restored to the
Dissenting 10% Preferred Holder and any distribution that would have been made
to the holder of record of the Dissenting 10% Preferred Shares, but for the
suspension, will be made at the time of the termination.
(d) Endorsement of Certificates. After receiving the Demand, the Company may
request in writing that the Dissenting 10% Preferred Holder deliver to it the
certificates representing the Dissenting 10% Preferred Shares. The Dissenting
10% Preferred Holder must then deliver such certificates to the Company at the
address stated above, within fifteen days of the sending of such request, to
permit the Company to place a legend on such certificates, stating that a demand
for fair cash value of such Dissenting 10% Preferred Shares has been made, and
return them promptly to the Dissenting 10% Preferred Holder. Failure of a
Dissenting 10% Preferred Holder to deliver certificates upon the request of the
Company terminates his rights as a Dissenting 10% Preferred Holder at the option
of the Company unless a court for good cause directs otherwise. If the
Dissenting 10% Preferred Shares represented by a certificate bearing such legend
are transferred, a
- 30 -
<PAGE> 32
transferee acquires only the rights which were held by the original Dissenting
10% Preferred Holder immediately after the delivery of the Demand.
If the Dissenting 10% Preferred Holder and the Company do not reach an
agreement on the fair cash value of the Dissenting 10% Preferred Shares, either
may, within three months after the service of the Demand, file a petition in the
Court of Common Pleas of Cuyahoga County, Ohio, or join or be joined in an
action similarly brought by another Dissenting 10% Preferred Holder of the
Company for a judicial determination of the fair cash value of the Dissenting
10% Preferred Shares. If the Court finds that the Dissenting 10% Preferred
Holder is entitled to be paid the fair cash value of any shares, the court may
appoint one or more appraisers to recommend the amount of such value. Payment of
the fair cash value of the Dissenting 10% Preferred Shares shall be made within
30 days after the date of final determination of such value.
Fair cash value is the amount which a willing seller, under no
compulsion to sell, would be willing to accept, and which a willing buyer, under
no compulsion to purchase, would be willing to pay, but in no event may the fair
cash value exceed the amount specified in the Demand. The fair cash value is to
be determined as of the day prior to the day of the Annual Meeting.
The Dissenters' Rights of any Dissenting 10% Preferred Holder will
terminate if, among other things, (a) he or she has not complied with Section
1701.85 (unless the Company waives compliance); (b) the proposed amendment is
abandoned or otherwise does not become effective; (c) he or she withdraws his or
her Demand (with the consent of the Company); or (d) no agreement has been
reached between the Company and such Dissenting 10% Preferred Holder with
respect to the fair cash value of the Dissenting 10% Preferred Shares and no
petition has been timely filed in the Court of Common Pleas of Cuyahoga County,
Ohio.
Vote Required.
In accordance with the provisions of Article Ninth of the Articles, the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power of the Company is required for the adoption of this proposed
amendment. In addition, the affirmative vote of the holders of the majority of
the shares of the 10% Preferred Stock is required for the adoption of this
proposed amendment.
- 31 -
<PAGE> 33
Board of Directors Recommendation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION
OF THE PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION GRANTING CONVERSION
RIGHTS TO THE 10% PREFERRED STOCK.
-------------------------
RELATIONSHIP WITH THE COMPANY'S AUDITORS
The Company is not required to obtain shareholder approval or
ratification of its selection of its auditors under the laws of the State of
Ohio, and the Audit Committee and the Board of Directors reserve the right to
make any change in auditors at any time, and without shareholder approval, which
they deem advisable or necessary, Representatives of Price Waterhouse, the
Company's current auditors, are expected to be present at the Annual Meeting and
will be afforded the opportunity to make a statement, if they so desire, and
will be available to respond to appropriate questions from shareholders.
-------------------------
ADDITIONAL INFORMATION
COST OF SOLICITATION OF PROXIES
The cost of soliciting proxies will be paid by the Company, including
expenses for preparing and mailing proxy solicitation materials. In addition to
use of the mails, proxies may be solicited by certain officers, directors and
regular employees of the Company, without extra compensation, by telephone,
telegraph or personal interview.
SHAREHOLDER PROPOSAL DEADLINE
A shareholder proposal intended to be presented to the 1997 Annual
Meeting must be received by the Company on or before January 19, 1997 to be
considered for inclusion
- 32 -
<PAGE> 34
in the Company's proxy statement and form of proxy relating to that meeting.
Said proposal should be addressed to Secretary, PhoneTel Technologies, Inc., 650
Statler Office Tower, 1127 Euclid Avenue, Cleveland, Ohio 44115-1601.
OTHER BUSINESS
The Company is not aware of any matters to be brought before the
Meeting. However, if other matters come before the Meeting, it is the intention
of the proxy holders named in the enclosed form of proxy to vote in accordance
with their discretion on such matters.
Shareholders are urged to specify their choice on the matters to be
voted on at the Meeting and to date, sign and return the enclosed proxy in the
envelope provided. A prompt response is helpful and your cooperation will be
appreciated.
By Order of the Board of Directors
Tammy L. Martin
Secretary
Cleveland, Ohio
May ___, 1996
-------------------------
FORM 10-KSB REPORT
IN ADDITION TO ITS ANNUAL REPORT TO SHAREHOLDER, THE COMPANY FILES AN
ANNUAL REPORT WITH THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-KSB.
SHAREHOLDERS MAY, WITHOUT CHARGE, OBTAIN A COPY WITHOUT EXHIBITS BY WRITING TO
THE COMPANY, ATTENTION: SECRETARY, PHONETEL TECHNOLOGIES, INC., 650 STATLER
OFFICE TOWER, 1127
EUCLID AVENUE, CLEVELAND, OHIO 44115-1601.
-------------------------
- 33 -
<PAGE> 35
APPENDIX A
RIGHTS OF DISSENTING SHAREHOLDERS
RIGHTS OF 10% PREFERRED HOLDERS
Holders of the 10% Preferred Stock (the "10% Preferred Stock") who so
desire are entitled to relief as dissenting shareholders under Section 1701.84
of the Ohio Revised Code. Any such dissenting holder of 10% Preferred Stock (a
"Dissenting 10% Preferred Holder") may have the "fair cash value" of his shares
of 10% Preferred Stock judicially determined and paid to him, but only if he
strictly complies with the requirements of Section 1701.85 of the Ohio Revised
Code, a copy of which is attached hereto as Appendix A.
Set forth below is a summary of the procedures relating to the exercise
of a shareholder's rights to relief as a dissenting shareholder ("Dissenters'
Rights"), which summary does not purport to be complete and is qualified in its
entirety by express reference to Section 1701.85 of the Ohio Revised Code. Any
10% Preferred Holder contemplating exercising Dissenters' Rights with respect to
his or her shares ("Dissenting 10% Preferred Shares") is urged to review
carefully such provisions since Dissenters' Rights will be lost if the
procedural requirements of Section 1701.85 are not fully and precisely
satisfied.
To perfect his Dissenters' Rights, a Dissenting 10% Preferred Holder
must satisfy each of the following conditions:
(a) 10% Preferred Holder as of the Record Date. The Dissenting 10%
Preferred Holder must have been a record holder of the 10% Preferred
Stock as to which he seeks relief as of the date fixed for the
determination of shareholders entitled to notice of the Annual Meeting.
(b) No Vote in Favor of the Proposed Amendment. Dissenting 10%
Preferred Shares must not be voted in favor of the proposal. This
requirement will be satisfied (1) if a proxy is signed and returned
with instructions to vote against the proposal or to abstain, (2) if no
proxy is returned, or (3) if Dissenting 10% Preferred Shares are voted
at the Annual Meeting against approval and authorization of the
proposal. A vote in favor of the proposal constitutes a waiver of
Dissenters' Rights. A proxy that is returned signed but on which no
voting preference is indicated will be voted for the approval and
authorization of the proposal and will be deemed a waiver of
Dissenters' Rights. A Dissenting 10% Preferred Holder may revoke his
proxy at any time
- 34 -
<PAGE> 36
before its exercise by filing with the Secretary of the Company an
instrument revoking it or a duly executed proxy bearing a later date,
or by attending the Annual Meeting and voting thereat.
(c) Filing Written Demand. Not later than ten days after the Annual
Meeting, a Dissenting 10% Preferred Holder must deliver to the Company
a written demand (the "Demand") for payment of the fair cash value of
the Dissenting 10% Preferred Shares. The Demand should be delivered to
the Company at PhoneTel Technologies, Inc., 650 Statler Office Tower,
1127 Euclid Avenue, Cleveland, Ohio 44115, Attention: Tammy L. Martin,
Executive Vice President and Secretary, and it is recommended, although
not required, that the Demand be sent by registered or certified mail,
return receipt requested. A vote against the proposal does not itself
satisfy the requirements of a written demand for payment, and therefore
does not constitute a Demand.
The Demand must reasonably identify the holder of record of
the Dissenting 10% Preferred Shares and the Dissenting 10% Preferred
Holder's address, the number of the Dissenting 10% Preferred Shares and
the amount claimed as the fair cash value thereof. A beneficial owner
must, in all cases, have the record holder submit the Demand in respect
of his Dissenting 10% Preferred Shares.
From the time the Demand is given, all rights accruing from
the Dissenting 10% Preferred Shares, including voting and dividend
rights, will be suspended until either the termination of the rights
and obligations under such Demand or the purchase of such Dissenting
10% Preferred Shares by the Company. If any dividend is paid on the
Dissenting 10% Preferred Shares during the suspension, an amount equal
to the dividend which would have been payable on the Dissenting 10%
Preferred Shares, except for such suspension, shall be paid to the
holder of record of any Dissenting 10% Preferred Shares as a credit to
the fair cash value of such Dissenting 10% Preferred Shares. If the
right to receive fair cash value is terminated otherwise than by the
purchase of the Dissenting 10% Preferred Shares by the Company, all
rights will be restored to the Dissenting 10% Preferred Holder and any
distribution that would have been made to the holder of record of the
Dissenting 10% Preferred Shares, but for the suspension, will be made
at the time of the termination.
- 35 -
<PAGE> 37
(d) Endorsement of Certificates. After receiving the Demand, the
Company may request in writing that the Dissenting 10% Preferred Holder
deliver to it the certificates representing the Dissenting 10%
Preferred Shares. The Dissenting 10% Preferred Holder must then deliver
such certificates to the Company at the address stated above, within
fifteen days of the sending of such request, to permit the Company to
place a legend on such certificates, stating that a demand for fair
cash value of such Dissenting 10% Preferred Shares has been made, and
return them promptly to the Dissenting 10% Preferred Holder. Failure of
a Dissenting 10% Preferred Holder to deliver certificates upon the
request of the Company terminates his rights as a Dissenting 10%
Preferred Holder at the option of the Company unless a court directs
otherwise. If the Dissenting 10% Preferred Shares represented by a
certificate bearing such legend are transferred, a transferee acquires
only the rights which were held by the original Dissenting 10%
Preferred Holder immediately after the delivery of the Demand.
If the Dissenting 10% Preferred Holder and the Company do not
reach an agreement on the fair cash value of the Dissenting 10%
Preferred Shares, either may, within three months after the service of
the Demand, file a petition in the Court of Common Pleas of Cuyahoga
County, Ohio, or join or be joined in an action similarly brought by
another Dissenting 10% Preferred Holder of the Company for a judicial
determination of the fair cash value of the Dissenting 10% Preferred
Shares. If the Court finds that the Dissenting 10% Preferred Holder is
entitled to be paid the fair cash value of any shares, the court may
appoint one or more appraisers to recommend the amount of such value.
Payment of the fair cash value of the Dissenting 10% Preferred Shares
shall be made within 30 days after the date of final determination of
such value.
Fair cash value is the amount which a willing seller, under no
compulsion to sell, would be willing to accept, and which a willing
buyer, under no compulsion to purchase, would be willing to pay, but in
no event may the fair cash value exceed the amount specified in the
Demand. The fair cash value is to be determined as of the day prior to
the day of the Annual Meeting. In computing this value, any
appreciation or depreciation in the market value of the Dissenting 10%
Preferred Shares resulting from the accomplishment or expectation of
the Merger is excluded.
- 36 -
<PAGE> 38
The Dissenters' Rights of any Dissenting 10% Preferred Holder
will terminate if, among other things, (a) he or she has not complied
with Section 1701.85 (unless the Company waives compliance); (b) the
proposed amendment is abandoned or otherwise not carried out; (c) he or
she withdraws his or her demand (with the consent of the Company); or
(d) no agreement has been reached between the Company and such
Dissenting 10% Preferred Holder with respect to the fair cash value of
the Dissenting 10% Preferred Shares and no petition has been timely
filed in the Court of Common Pleas of Cuyahoga County, Ohio.
-------------------------
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<PAGE> 39
PHONETEL TECHNOLOGIES, INC.
650 Statler Office Tower
1127 Euclid Avenue,
Cleveland, Ohio 44115
REVOCABLE PROXY
The undersigned hereby appoints Peter Graf and Tammy L. Martin, or
either of them, as Proxies, each with the power of substitution and
resubstitution and hereby authorizes them to represent and to vote, as
designated below, all shares of common stock par value $.01 of PhoneTel
Technologies, Inc. held of record on May 24, 1996 by the undersigned, at
the Annual Meeting of Shareholders to be held on June 28, 1996 or any
adjournment thereof.
<TABLE>
1. ELECTION OF BOARD OF DIRECTORS
<S> <C>
/ / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee, write that nominee's name on the space provided below.)
Peter Graf, Steven Richman, George H. Henry, Joseph Abrams, Stuart Hollander, Nickey B. Maxey, Aron Katzman
------------------------------------------------------------------------------------------------------------------------------
2. AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE NUMBER OF AUTHORIZED SHARES
/ / FOR ADOPTION OF PROPOSED AMENDMENT TO THE / / WITHHOLD AUTHORITY TO VOTE FOR
ARTICLES OF INCORPORATION TO INCREASE NUMBER ADOPTION OF PROPOSED AMENDMENT TO THE ARTICLES OF
OF AUTHORIZED SHARES INCORPORATION TO INCREASE NUMBER
OF AUTHORIZED SHARES
3. AMENDMENT TO THE CODE OF REGULATIONS
/ / FOR ADOPTION OF PROPOSED AMENDMENT TO THE / / WITHHOLD AUTHORITY TO VOTE FOR ADOPTION OF
CODE OF REGULATIONS PROPOSED AMENDMENT TO THE CODE OF REGULATIONS
4. GRANT OF CONVERSION RIGHTS TO THE COMPANY'S 10% NON-VOTING PREFERRED STOCK
/ / FOR ADOPTION OF CONVERSION RIGHTS / / WITHHOLD AUTHORITY TO VOTE
FOR ADOPTION OF CONVERSION RIGHTS
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
5. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS. IF ANY OTHER MATTERS ARE PROPERLY PRESENTED AT THE MEETING FOR
ACTION TO BE TAKEN THEREUNDER, THIS PROXY WILL BE VOTED ON SUCH MATTERS BY THE PERSONS NAMED AS PROXIES HEREIN IN
ACCORDANCE WITH THEIR BEST JUDGMENT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated: , 1996
-----------------
-----------------------------
Signature
-----------------------------
Signature if Held Jointly
(Important: Please sign name
as appears hereon indicating,
where proper, official
position or representative
capacity, in case of joint
holders, both should sign.)
/ / Yes, I plan to attend the
meeting.
/ / No, I do not plan to
attend the meeting.
THIS PROXY IS SOLICITED
ON BEHALF OF
THE BOARD OF DIRECTORS
</TABLE>
