<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>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] 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)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $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:
[X] 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
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
"Company") an Ohio corporation, will be held at the law offices of Skadden,
Arps, Slate, Meagher & Flom, 919 Third Avenue, 43rd Floor, 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;
and
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 to 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; and
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 29, 1996
<PAGE> 3
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 24, 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.
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.
<PAGE> 4
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 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 24, 1996. The seven
(7) candidates receiving the most votes shall be 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 becomes 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 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
2
<PAGE> 5
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 Served as a Director of the Company since September 1995.
Age 60 Mr. Abrams also serves and has served as a Director of
Director since September 1995 Merisel, Inc. and Spectrum Signal Processing, Inc.
PETER G. GRAF Served as a Director, Chairman and Chief Executive Officer
Age 58 since June 1995. Mr. Graf is and has been an attorney and
Director since June 1995 Certified Public Accountant.
GEORGE H. HENRY Served as a Director since April 1993 and is and has been
Age 42 Managing Director of G. Howard Associates, Inc., a private
Director since April 1993 investment firm.
STUART HOLLANDER Served as a Director and Vice Chairman since September 1995.
Age 66 Mr. Hollander was founder, principal owner and Chairman of
Director since September 1995 the Board to World Communications, Inc. which was merged
with the Company in September 1995.
ARON KATZMAN Served as a Director of the Company since September 1995.
Age 58 Mr. Katzman is President of New Legends, Inc. and Chairman
Director since September 1995 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 Served as a Director and Chief Operating Officer of the
Age 39 Company since April 1996. Mr. Maxey was founder and
Director since April 1996 President of International Pay Phones, Inc.-Tennessee and
International Pay Phones, Inc.-South Carolina. Both
companies were merged with the Company in March 1996. Mr.
Maxey owns and operates Resort Hospitality Services, Inc. a
telecommunications company.
STEVEN RICHMAN Served as a Director of the Company since September 1995.
Age 52 Mr. Richman is principal owner, Chairman and President of
Director since September 1995 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.
3
<PAGE> 6
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.
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. Martin was
Age 31 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. Prior to joining the Company, Ms. Martin
was in private legal practice.
Daniel J. Moos Serves as Executive Vice President, Chief Financial Officer and Treasurer
Age 45 since June 1994. Mr. Moos was a Director of the Company from June 1995 to
April 1996 at which time he resigned. Prior to joining the Company, Mr.
Moos has served in various financial and operating positions with
B.F.Goodrich, Argo-Tech, LDI Corporation and Business Health Network.
Gary Pace Serves as Senior Vice President of the Company since its merger with World
Age 45 Communications, Inc. in September 1995. Mr. Pace was President of World
Communications, Inc. prior to its merger with the Company.
</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 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.
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 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
4
<PAGE> 7
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 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.
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 $100,000 per year for any year in the three year period
ended December 31, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ---------------------------------------------------------- --------------------- ---------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
- --------------------- ---- -------- ------- ------- ----------- -------- ---------- ---------
OTHER LONG-
NAME ANNUAL RESTRICTED TERM ALL OTHER
AND COMPEN- STOCK OPTIONS/ INCENTIVE COMPEN-
PRINCIPAL SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) ($) ($) ($) (NUMBER) ($) ($)
- --------------------- ---- -------- ------- ------- ----------- -------- ---------- ---------
<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 Officer 1993 $ 42,000 $75,000 $ 5,917(1) -- 43,333(4) -- --
Bernard Mandel 1995 $147,544 $ 9,760 $ 9,760(9) -- 41,666 -- $146,500(3)
Former President, 1994 $ 88,894 -- $ 4,154(1) -- -- -- --
Chief Operating 1993 $ 83,269 $25,000 $ 3,698(1) -- 10,000(5) -- --
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
</TABLE>
5
<PAGE> 8
- ---------------
(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.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER 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 5,750 0.9% $ 6.00 August 15, 2000
Chairman & Director
Daniel J. Moos 54,999 8.3% $ 6.00 Two years after
Executive Vice termination of
President, Chief employment
Financial Officer &
Treasurer
</TABLE>
6
<PAGE> 9
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE- MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END (#) AT FY-END ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
(A) (#)(B) ($)(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
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.
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
7
<PAGE> 10
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.
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
NAME AND ADDRESS BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
- ---------------------------- ---------- ------------
<S> <C> <C>
Peter G. Graf 1,009,922(1)(19) 21.54%
Director, Chairman &
Chief Executive Officer
Six East 43rd Street
New York, NY 10017
Nickey B. Maxey 403,927(2)(19) 9.07%
Director
81 Brahms Point Road
Hilton Head Isl., SC 29926
Steven Richman 255,293(3)(19) 5.63%
Director
9 Beech Lane
Kings Point, NY 11024
Joseph Abrams 190,996(4)(19) 4.20%
Director
85 Old Farm Road
Bedminister, NJ 07921
Aron Katzman 171,096(5)(19) 3.80%
Director
10 Layton Terrace
St. Louis, MO 63124
Stuart Hollander 101,212(6) 2.32%
Director & Vice Chairman
32 Lake Forest
St. Louis, MO 63117
George H. Henry 360,376(7) 8.19%
Director
6860 Sunrise Court
Coral Gables, FL 33133
Internationale Nederlanden (U.S.) 4,464,907(8) 50.57%
Capital Corporation as agent
for various lenders
135 East 57th Street
New York, NY 10022
Cerberus Partners, L.P. 4,464,907(9) 50.57%
950 Third Avenue, 20th floor
New York, NY 10022
Protel, Inc. 400,000(10) 8.40%
4150 Kidron Road
Lakeland, FL 33811
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
NAME AND ADDRESS BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER OWNERSHIP COMMON STOCK
- ---------------------------- ---------- ------------
<S> <C> <C>
Brenner Securities Corporation 467,326(11)(19) 9.79%
277 Park Avenue
New York, NY 10172
J & C Resources 476,160(12)(19) 10.58%
216 Daniel Webster Highway
S. Nashua, NH 03060
DeBartolo Corporation and Affiliates 328,328(13)(19) 7.00%
7620 Market Street
Youngstown, OH 44513
Albert Miniaci 229,993(14)(19) 5.01%
1411 S. W. 31st Avenue
Pompano Beach, FL 33069
Jerry Burger 159,242(15) 3.55%
Former Chief Executive Officer
27040 Cedar Road
Beachwood, OH 44122
Bernard Mandel 69,949(16) 1.58%
Former President, Chief Operating
Officer & Secretary
8233 Whispering Pines Drive
Russell, OH 44072
Daniel J. Moos 66,998(17) 1.52%
Executive Vice President,
Chief Financial Officer & Treasurer
7399 Stow Road
Hudson, OH 44236
Executive Officers and Directors 2,604,857(18)(19) 48.57%
As a group (10 persons)
<FN>
- ---------------
(1) Includes warrants to purchase 75,064 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.
(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 and 1,960 shares
of Common Stock held by other family members.
(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.
</TABLE>
9
<PAGE> 12
(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; 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.
(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; 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.
(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; 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.
(17) Includes options to purchase 54,999 shares of Common Stock which expire two
years after termination of employment; 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.
(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.
(19) See "Certain Relationships and Related Transactions" below for information
with respect to the 14% Preferred Stock and certain warrants.
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"): (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%
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
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). 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
10
<PAGE> 13
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, 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, including the conversion provisions of the proposed amendment. (See
"Amendment of Articles of Incorporation -- Grant of Conversion Rights to 10%
Preferred Stock", below.) 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 vote their shares of 10% Preferred Stock for the conversion provisions
of the proposed amendment (see "Amendment of Articles of Incorporation -- Grant
of Conversion Rights to 10% Preferred Stock," below) 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. In addition, each of
said holders have agreed that, within five business days following approval of
Proposal 4 by the holders of the 10% Preferred Stock and the Common Stock, he or
she shall take all steps necessary to exercise his or her right of conversion
with respect to all shares of 10% Preferred Stock owned by him or her. 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.
11
<PAGE> 14
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
expiring March 13, 2001 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%
Convertible Preferred Stock, without par value, $60 stated value, cumulative and
redeemable ("14% Preferred"). The 14% Preferred accrues dividends at the
quarterly rate of 0.035 shares of 14% Preferred per share of 14% Preferred and
is redeemable by the Company for $60 per share plus accrued and unpaid dividends
at any time prior to June 30, 2000, at which date the Company shall redeem all
outstanding shares of 14% Preferred at $60 per share. Each share of 14%
Preferred is convertible into 10 shares of Common Stock. 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 14% Preferred in the amount of stated value and the amount of
warrants shown below to purchase Common Stock at a nominal exercise price.
<TABLE>
<CAPTION>
VALUE OF
DEBT/PREFERRED
SURRENDERED
AND 14% NUMBER
PREFERRED OF WARRANTS
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
Nickey Maxey $ 174,032 62,650
Director
J & C Resources $ 825,000 296,994
5% Owner
</TABLE>
Brenner Securities Corporation received $600,000 in cash, $600,000 of 14%
Preferred Stock and 143,994 Warrants as fees with respect to the provision of
investment banking advice and for other services to the Company in connection
with the Loan provided by the Lenders. (See "Security Ownership of Certain
Beneficial Owners and Management -- Possible Change of Control", above)
12
<PAGE> 15
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.
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 in the authorized number of shares of Common
Stock from 22.5 million to 50 million, and an increase in the authorized number
of shares of Preferred Stock from 2.5 million to 10 million. At May 24, 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 contemplated 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.
13
<PAGE> 16
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.
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 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 eight.
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
14
<PAGE> 17
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.
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 Stock(1),
representing 16.666% of the shares of Common Stock outstanding immediately
thereafter, 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 authorize the
Company to 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.
Assuming all of such shares of 10% Preferred Stock were granted the conversion
rights set forth in the proposed amendment and were converted as of the May 24,
1996 record date for the 1996 Annual Meeting of Shareholders of the Company, the
885,992 shares of Common Stock into which the 10% Preferred Stock were so
converted, when added to the 402,500 shares of Common Stock issued pursuant to
the Merger, would together represent 24.54% of the shares of Common Stock
outstanding as of May 24, 1996, the record date for the 1996 Annual Meeting of
Shareholders. The securities of the Company issued to the WCI shareholders
pursuant to the Merger were issued in a private placement pursuant to an
exemption from the registration requirements of the Securities Act of 1933 (the
"1933 Act") under Section 4(2) thereof, and, accordingly, may be transferred by
the holders thereof only pursuant to a registration statement or an exemption
from registration under the 1933 Act. The WCI shareholders were granted certain
registration rights with respect to the shares of Common Stock issued pursuant
to the Merger. 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.)
In connection with the Merger, the WCI shareholders desired to obtain
adequate assurances that the 10% Preferred Stock would be made convertible into
shares of Common Stock within a reasonable period of time after the Merger and
that, when converted into unregistered shares of Common Stock, such shares of
Common Stock would be subject to the
- ---------------
(1) All share amounts of Common Stock referred to herein have been calculated
taking into account the one-for-six reverse split of the Common Stock
effective December 26, 1995.
15
<PAGE> 18
same registration rights granted in connection with the shares of Common Stock
originally issued to the WCI shareholders pursuant to the Merger. Accordingly,
pursuant to negotiations between the Company, WCI and the major shareholders of
the Company, and 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 (See "Security Ownership of
Certain Beneficial Owners and Management -- Voting Agreements") wherein said
holders agreed to call a meeting of shareholders of the Company to approve
certain proposals, including a proposal 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.) The proposed amendment provides that the
shares of Common Stock issued on conversion of the 10% Preferred Stock shall
have the same registration rights as were granted with respect to the Common
Stock issued in connection with the Merger. In addition, to further assure that
the Company and its major shareholders would take the actions necessary to cause
the 10% Preferred Stock to be convertible into Common Stock, the terms of the
10% Preferred Stock provide that, in the event that the 10% Preferred Stock has
not been made convertible into Common Stock by December 22, 1996, the holders
thereof could require the Company to repurchase shares of 10% Preferred Stock
owned by them. 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. Certain Voting Agreements
entered into by the Company obligate certain shareholders of the Company to
approve the grant to the Company of the right to convert, at any time, all of
the outstanding shares of 10% Preferred Stock not otherwise converted, as well
as the grant of conversion rights to the holders of the 10% Preferred Stock.
THE PROPOSED AMENDMENT.
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, 7C and 7D:
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
16
<PAGE> 19
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 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 and paragraph 7D hereof 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 subparagraph
(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 a share of 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 a share of 10% Preferred Stock
so converted shall have no interest in or claim against the Company with
respect to such share, 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 nonassessable 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 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.
17
<PAGE> 20
EXERCISE OF CONVERSION RIGHTS BY THE COMPANY.
Upon conversion of a share of 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 such share of 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 addition, in the event that the 10% Preferred Stock is not made
convertible into Common Stock at any time after September 30, 1996, or in the
event that the 10% Preferred Stock is subject to redemption by the Company at
the option of the holders thereof at any time after such date, then the Company
would be in violation of a certain provision 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 (the "Credit Agreement"). In the event that the proposed amendment is
approved by shareholders and becomes effective prior to September 30, 1996, then
the 10% Preferred Stock would, by its express terms, be convertible into Common
Stock and the condition precedent to the exercise of the "put" rights would have
been eliminated, and the Company would not be in violation of such provision of
the Credit Agreement. In addition, in the event that any shares of the 10%
Preferred Stock remain not converted into Common Stock on September 30, 1996,
the Company may be in violation of that provision of the Credit Agreement
prohibiting the declaration, payment or making of any dividend or distribution
payment.
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. 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 conversion provisions of the proposed amendment. (See
"Security Ownership of Certain Beneficial Owners and Management -- Voting
Agreements", above.) Such holders include Messrs. Hollander and Katzman,
directors of the Company. The 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. In addition, each of said
holders have agreed that, within five business days following approval of the
proposed amendment by the holders of the 10% Preferred Stock and the Common
Stock, he or she shall take all steps necessary to exercise his or her right of
conversion with respect to all shares of 10% Preferred Stock owned by him or
her. 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.
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 share shall no longer be transferable on the
books of the Company, and the holder of such share of 10% Preferred Stock shall
have no interest in or claim against
18
<PAGE> 21
the Company with respect to such share, 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.
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 "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,
19
<PAGE> 22
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 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
20
<PAGE> 23
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.
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 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.
21
<PAGE> 24
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 29, 1996
------------------------
FORM 10-KSB REPORT
IN ADDITION TO ITS ANNUAL REPORT TO SHAREHOLDERS, 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.
------------------------
22
<PAGE> 25
APPENDIX A
RELIEF TO DISSENTING SHAREHOLDER
OF DOMESTIC CORPORATION
OHIO REVISED CODE 1701.85
(A) (1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals in sections 1701.71,
1701.74, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date
fixed for the determination of shareholders entitled to notice of a meeting
of the shareholders at which the proposal is to be submitted, and such
shares shall not have been voted in favor of the proposal. Not later than
ten days after the date on which the vote on such proposal was taken at the
meeting of the shareholders, the shareholder shall deliver to the
corporation a written demand for payment to him of the fair cash value of
the shares as to which he seeks relief, stating his address, the number and
class of such shares, and the amount claimed by him as the fair cash value
of the shares.
(3) The dissenting shareholder entitled to relief under division (C)
of section 1701.84 of the Revised Code in the case of a merger pursuant to
section 1701.80 of the Revised Code and a dissenting shareholder entitled
to relief under division (E)of section 1701.84 of the Revised Code in the
case of a merger pursuant to section 1701.801 of the Revised Code shall be
a record holder of the shares of the corporation as to which he seeks
relief as of the date on which the agreement of merger was adopted by the
directors of that corporation. Within twenty days after he has been sent
the notice provided in section 1701.80 or 1701.801 of the Revised Code, the
shareholder shall deliver to the corporation a written demand for payment
with the same information as that provided for in division (A)(2) of this
section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or
the new corporation, whether served before, on, or after the effective date
of the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates
representing the shares as to which he seeks relief, he, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested, in order that the corporation may
forthwith endorse on them a legend to the effect that demand for the fair
cash value of such shares has been made. The corporation promptly shall
return such endorsed certificates to the shareholder. Failure on the part
of the shareholder to deliver such certificates terminates his rights as a
dissenting shareholder, at the option of the corporation, exercised by
written notice sent to him within twenty days after the lapse of the
fifteen-day period, unless a court for good cause shown otherwise directs.
If shares represented by a certificate on which such a legend has been
endorsed are transferred, each new certificate issued for them shall bear a
similar legend, together with the name of the original dissenting holder of
such shares. Upon receiving a demand for payment from a dissenting
shareholder who is the record holder of uncertificated securities, the
corporation shall make an appropriate notation of the demand for payment in
its shareholder records. If uncertificated shares for which payment has
been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as
provided in this paragraph. A transferee of the shares so endorsed, or of
uncertificated securities where such notation has been made, acquires only
such rights in the corporation as the original dissenting holder of such
shares had
A-1
<PAGE> 26
immediately after the service of a demand for payment of the fair cash
value of the shares. Such request by the corporation is not an admission by
the corporation that the shareholder is entitled to relief under this
section.
(B) Unless the corporation and the dissenting shareholder shall have come
to an agreement on the fair cash value per share of the shares as to which he
seeks relief, the shareholder or the corporation, which in case of a merger or
consolidation may be the surviving or the new corporation, within three months
after the service of the demand by the shareholder, may file a complaint in the
court of common pleas of the county in which the principal office of the
corporation which issued such shares is located, or was located at the time when
the proposal was adopted by the shareholders of the corporation, or, if the
proposal was not required to be submitted to the shareholders, was approved by
the directors. Other dissenting shareholders, within the period of three months,
may join as plaintiffs, or may be joined as defendants in any such proceeding,
and any two or more such proceedings may be consolidated. The complaint shall
contain a brief statement of the facts, including the vote and the facts
entitling the dissenting shareholder to the relief demanded. No answer to such
complaint is required. Upon the filing of the complaint, the court, on motion of
the petitioner, shall enter an order fixing a date for a hearing on the
complaint, and requiring that a copy of the complaint and a notice of the filing
and of the date for hearing be given to the respondent or defendant in the
manner in which summons is required to be served or substituted service is
required to be made in other cases. On the day fixed for the hearing on the
complaint or any adjournment of it, the court shall determine from the complaint
and from such evidence as is submitted by either party whether the shareholder
is entitled to be paid the fair cash value of any shares and, if so, the number
and class of such shares. If the court finds that the shareholder is so
entitled, the court may appoint one or more persons as appraisers to receive
evidence and to recommend a decision on the amount of the fair cash value. The
appraisers have such power and authority as is specified in the order of their
appointment. The court thereupon shall make a finding as to the fair cash value
of a share, and shall render judgment against the corporation for the payment of
it, with interest at such rate and from such date as the court considers
equitable. The costs of the proceeding, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable. The proceeding is a special proceeding, and final
orders in it may be vacated, modified, or reversed on appeal pursuant to the
rules of appellate procedure and, to the extent not in conflict with those
rules, Chapter 2505 of the Revised Code. If, during the pendency of any
proceeding instituted under this section, a suit or proceeding is or has been
instituted to enjoin or otherwise to prevent the carrying out of the action as
to which the shareholder has dissented, the proceeding instituted under this
section shall be stayed until the final determination of the other suit or
proceeding. Unless any provision in division (D) of this section is applicable,
the fair cash value of the shares as agreed upon by the parties or as fixed
under this section shall be paid within thirty days after the date of final
determination of such value under this division, the effective date of the
amendment to the articles, or the consummation of the other action involved,
whichever occurs last. Upon the occurrence of the last such event, payment shall
be made immediately to a holder of uncertificated securities entitled to such
payment. In the case of holders of shares represented by certificates, payment
shall be made only upon and simultaneously with the surrender to the corporation
of the certificates representing the shares for which such payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to that on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller,
under no compulsion
A-2
<PAGE> 27
to sell, would be willing to accept, and that a willing buyer, under no
compulsion to purchase, would be willing to pay, but in no event shall the fair
cash value of it exceed the amount specified in the demand of the particular
shareholder. In computing such fair cash value, any appreciation or depreciation
in market value resulting from the proposal submitted to the directors or to the
shareholders shall be excluded.
(D) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if:
(1) Such shareholder has not complied with this section, unless the
corporation by its directors waives such failure;
(2) The corporation abandons, or is finally enjoined or prevented from
carrying out, or the shareholders rescind their adoption, of the action
involved;
(3) The shareholder withdraws his demand, with the consent of the
corporation by its directors;
(4) The corporation and the dissenting shareholder shall not have come
to an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation shall have filed or joined in the complaint
under division (B) of this section within the period provided.
(E) From the time of giving the demand, until either the termination of the
rights and obligations arising from it or the purchase of the shares by the
corporation, all other rights accruing from such shares, including voting and
dividend or distribution rights, are suspended. If during the suspension, any
dividend or distribution is paid in money upon shares of such class, or any
dividend, distribution, or interest is paid in money upon any securities issued
in extinguishment of or in substitution for such shares, an amount equal to the
dividend, distribution, or interest which, except for the suspension, would have
been payable upon such shares or securities, shall be paid to the holder of
record as a credit upon the fair cash value of the shares. If the right to
receive fair cash value is terminated otherwise than by the purchase of the
shares by the corporation, all rights of the holder shall be restored and all
distributions which, except for the suspension, would have been made shall be
made to the holder of record of the shares at the time of termination.
A-3
<PAGE> 28
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 27, 1996 or any
adjournment thereof.
1. ELECTION OF BOARD OF DIRECTORS
<TABLE>
<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 ADOPTION OF
ARTICLES OF INCORPORATION TO INCREASE NUMBER PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION TO
OF AUTHORIZED SHARES 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 INCREASING THE MAXIMUM PROPOSED AMENDMENT TO THE CODE OF REGULATIONS
SIZE OF THE BOARD INCREASING THE MAXIMUM SIZE OF THE BOARD
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>
<PAGE> 29
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 non-voting 10% Preferred Stock, without
par value, $10 stated value 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 27, 1996 or any adjournment thereof.
1. GRANT OF CONVERSION RIGHTS TO THE COMPANY'S 10% NON-VOTING PREFERRED
STOCK
<TABLE>
<S> <C>
[ ] FOR ADOPTION OF CONVERSION RIGHTS [ ] WITHHOLD AUTHORITY TO VOTE FOR ADOPTION OF
CONVERSION RIGHTS
</TABLE>
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
(Continued, and to be dated and signed, on the other side)
(Continued from the other side)
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
