<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A-1
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 (Fee required)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
-----------------
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (No fee required)
COMMISSION FILE NUMBER 0-16715
PHONETEL TECHNOLOGIES, INC.
---------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
OHIO 34-1462198
---- ----------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO,)
INCORPORATION OR ORGANIZATION)
1127 EUCLID AVENUE, SUITE 650, STATLER OFFICE TOWER 44115-1601
- --------------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 241-2555
--------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
NONE NONE
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
COMMON STOCK, $0.01 PAR VALUE
-----------------------------
(TITLE OF CLASS)
CHECK WHETHER THE ISSUER: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH SHORTER
PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR PAST 90 DAYS. YES X NO
--- ---
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE TO ITEM 405 OF
REGULATION S-B IS NOT CONTAINED IN THIS FORM, AND NO DISCLOSURE WILL BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB
OR ANY AMENDMENT TO THIS FORM 10-KSB. [ X ]
Revenues for the year ended December 31, 1995 $18,717,983.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 26, 1996 was $12,470,948.
The number of shares outstanding of the registrant's Common Stock, $.01 par
value, as of April 26, 1996 was 3,824,027
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
Page 1 of 25 Pages
<PAGE> 2
The undersigned registrant hereby amends the following items and exhibits of its
Annual Report for the fiscal year ended December 31, 1995 previously filed on
Form 10-KSB as set forth in the pages attached hereto.
COVER PAGE
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGE-
MENT
ITEM 12. CERTAIN RELATIONSHIPS AND RE-
LATED TRANSACTIONS
PART IV
ITEM 13. EXHIBITS, LIST AND REPORTS ON
FORM 8-K
Page 2 of 25 Pages
<PAGE> 3
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of the members of the
Company's Board of Directors and the positions with the Company held by each.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Peter G. Graf 58 Chairman,
Chief Executive Officer
and Director
Stuart Hollander 66 Vice Chairman
Director
George H. Henry 42 Director
Joseph Abrams 60 Director
Aron Katzman 58 Director
Steve Richman 52 Director
Nickey B. Maxey 39 Director
</TABLE>
PETER G. GRAF has been a Director, Chairman and Chief Executive Officer of the
Company since June 1995. Mr. Graf is an attorney and Certified Public
Accountant.
STUART HOLLANDER has been a Director and Vice Chairman since September 1995. Mr.
Hollander was founder, principal owner and Chairman of the Board of World
Communications, Inc. until it was merged into the Company in 1995. Prior to that
he was Executive Vice President of Hollander & Company, Inc., one of the largest
distributors of consumer electronics in the U.S., representing Zenith Radio
Corporation; the founder and an officer of Lesley Acceptance Corporation;
Chairman and a Member of the Board of Jaeger of Canada, Inc.; and Board Member
of Pioneer Bank and Trust Company.
GEORGE H. HENRY has been a Director since April 1993. Mr. Henry has been the
Managing Director of G. Howard Associates, Inc., a private investment firm,
since 1986. Mr. Henry is also a Director of Biovail Corporation International, a
pharmaceutical company, and a Trustee of Mitchell College.
JOSEPH ABRAMS has been a Director since September 1995. Mr. Abrams is also a
Director of Merisel, Inc. a publicly traded company that distributes micro
computer hardware and software, and Spectrum Signal Processing, Inc., a publicly
traded company that specializes in digital signal solutions. Previously, Mr.
Abrams was founder and President of AGS Computers.
Page 3 of 25 Pages
<PAGE> 4
ARON KATZMAN has been a Director since September 1995. Mr. Katzman is President
of New Legends, Inc., a country club\residential community in the St. Louis
area, and Chairman and Chief Executive Officer of Decorating Den of Missouri, a
company engaged in the selling of decorating franchises in Missouri. Previously,
Mr. Katzman was founder and former Director of Medicine Shoppe, Inc., a
franchisor of pharmacies, and Chairman and Chief Executive Officer of Roman
Company, a manufacturer and distributor of fashion costume jewelry, from 1984
until it was sold in 1994.
STEVEN RICHMAN has been a Director since September 1995. Mr. Richman is owner,
Chairman and President of Fabric Resources International. Previously, Mr.
Richman was founder and an officer of Cable Systems USA; an officer at Cellular
Systems USA and USA Mobile Communica tions, Inc. II.
NICKEY B. MAXEY has been a Director since April, 1996. Mr. Maxey was the founder
of International Pay Phones, Inc., Tennessee and International Pay Phones, Inc.,
South Carolina, both pay telephone companies. In April 1996 both pay phone
companies were merged into the Company at which time he was elected as a
Director by the Board of Directors. Mr. Maxey is the President of Resort
Hospitality Services, Inc. of Hilton Head, a company offering telecommunica
tions services to the hospitality industry.
EXECUTIVE OFFICERS OF THE REGISTRANT
DANIEL J. MOOS, age 45, has served as Executive Vice President, Chief Financial
Officer and Treasurer 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, age 45, has served as Senior Vice President of the Company since its
merger with World Communications, Inc. in September 1995. Prior to joining the
Company, Mr. Pace was President of World Communications, Inc.
TAMMY L. MARTIN, age 31, joined the Company in 1993 as Associate Legal Counsel.
Ms. Martin has served as Secretary and General Counsel for the Company since
September 1995. Prior to joining the Company, Ms. Martin was in private legal
practice.
ITEM 10. EXECUTIVE COMPENSATION
On May 1, 1995 the Company entered into an employment agreement with the
Company's former Chief Executive Officer, Jerry Burger. The agreement would have
entitled Mr. Burger to annual salaries of $180,000, $190,000 and $205,000 during
the three year term of the agreement. The employment agreement also provided for
an automatic two year extension of the term if not terminated by the Company on
or before May 1, 1997 (the "Extended Term") and that the salaries
Page 4 of 25 Pages
<PAGE> 5
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 (the "Extended
Term") and that the salaries for said two years would have been $225,000 and
$250,000, respectively. Pursuant to the employment agreement, if a change in
control of the Company would have occurred as defined therein, Mr. Mandel would
have been entitled to terminate the agreement and to receive payment from the
Company in the amount of one hundred fifty percent (150%) of the salary which
would have been payable for the unexpired portion of the agreement. On
September 15, 1995, the Company and Mr. Mandel entered into a Separation
Agreement, which provided for the termination of the Employment Agreement and
the resignation of Mr. Mandel as a director, officer, and employee of the
Company. Pursuant to the Separation Agreement, the Company agreed to pay Mr.
Mandel the amount of $450,000 in installments, with the final amount paid March
15, 1996.
On May 1, 1995 the Company entered into an employment agreement with the
Company's Chief Financial Officer, Daniel J. Moos. The agreement with Mr.
Moos entitles him to annual salaries of $95,000, $105,000 and $120,000 during
the three year term of the agreement. Pursuant to the employment agreement, if
there occurs a change in control of the Company as defined therein, Mr. Moos is
entitled to terminate the agreement and to receive payment from the Company in
the amount of one hundred fifty percent (150%) of the salary which would have
been payable for the unexpired portion of the agreement. The employment
agreement also provides for an automatic two-year extension of the term if not
terminated by the Company on or before May 1, 1997 (the "Extended Term") and
that the salaries for said two years shall be $130,000 and $140,000,
respectively.
On September 22, 1995 the Company entered into an employment 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 $100,000 per year for any year in the three year period
ended December 31, 1995.
Page 5 of 25 Pages
<PAGE> 6
<TABLE>
<CAPTION>
================================================================================================================================
SUMMARY COMPENSATION TABLE
================================================================================================================================
Long-Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
----- ---- ---- ---- ---- ---- ---- ---- ----
All
Other Long- Other
Name Annual Restricted Term Com-
and Compen- Stock Options/ Incentive pen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (Number) ($) ($)
--------- ---- ------ ------ ------ ------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerry H. Burger 1995 $ 74,293 $13,600 $ 13,600(8) -- 62,500 -- $ 212,000(2)
Former Chief 1994 $ 40,000 -- -- -- -- -- --
Executive 1993 $ 42,000 $75,000 $ 5,917(1) -- 43,333(4) -- --
Officer
Bernard Mandel 1995 $147,544 $ 9,760 $ 9,760(9) -- 41,666 -- $ 146,500(3)
Former 1994 $ 88,894 -- $ 4,154(1) -- -- -- --
President, 1993 $ 83,269 $25,000 $ 3,698(1) -- 10,000(5) -- --
Chief Operating
Officer, &
Secretary
Peter G. Graf 1995 -- -- -- -- 47,583 -- --
Chief Executive 1994 -- -- -- -- 24,705 -- --
Officer,
Chairman & Director
Daniel J. Moos 1995 $ 95,000 $ 1,442 $ 12,800(7) 54,999(6)
Executive Vice
President,
Chief Financial
Officer,
Treasurer
<FN>
1 Value of non-business use of Company automobile.
2 Represents payment under Separation Agreement and related expenses
excluding payment of $445,000 plus accrued interest of $4,291 paid on March
15, 1996.
3 Represents payment under Separation Agreement excluding payment of $308,500
plus accrued interest of $2,976 paid on March 15, 1996.
4 26,000 options expired in 1995.
5 Expired in 1995.
6 33,000 options not vested at December 31, 1995.
7 Represents the value of 2,666 shares paid to Executive for services provided.
8 Represents the value of 2,833 shares paid to Executive for services provided.
9 Represents the value of 2,033 shares paid to Executive for services provided.
</TABLE>
Page 6 of 25 Pages
<PAGE> 7
<TABLE>
<CAPTION>
========================================================================================================================
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
========================================================================================================================
NUMBER PERCENT OF
OF TOTAL OPTIONS/
SECURITIES WARRANTS/SARS EXERCISE
UNDERLYING GRANTED TO OR BASE MARKET
NAME AND OPTIONS/SARS EMPLOYEES IN PRICE PRICE ON
PRINCIPAL POSITION GRANTED (#) FISCAL YEAR (S/SH) DATE OF EXPIRATION
(A) (B) (C) (D) GRANT DATE (E)
--------------- --------- ------- ------ ------- ----------
<S> <C> <C> <C> <C> <C>
Jerry H. Burger 62,500 9.5% $6.00 $6.28 August 31,
Former Chief Executive 1997
Officer
Bernard Mandel 41,666 6.3% $6.00 $6.28 August 31,
Former President, 1997
Chief Operating Officer, & Secretary
Peter G. Graf 41,833 6.3% $5.70 $6.00 December 31,
Chief Executive Officer 1997
Chairman & Director 5,750 0.9% $6.00 $6.39 August 15,
2000
Daniel J. Moos 54,999 8.3% $6.00 $6.28 Two years
Executive Vice after
President, termination of
Chief Financial Officer employment
& Treasurer
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================================
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FY-END OPTION/SAR VALUES
==================================================================================================================
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON VALUE AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
(A) (B) (C) (D) (E)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Peter G. Graf -0- -0- 75,064 $31,316
Chief Executive Officer
Chairman & Director
Jerry H. Burger -0- -0- 127,361 $31,840
Former Chief Executive Officer
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>
Page 7 of 25 Pages
<PAGE> 8
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 26, 1996,
regarding the beneficial ownership of the Common Stock, owned by each Director
of the Company, each person known by the Company to own beneficially more than
5% of the outstanding Common Stock, and all directors and officers as a group.
Unless otherwise indicated, the number of shares of Common Stock owned by the
named shareholders assumes the exercise of the warrants or options, the number
of which is separately referred to in a footnote, and the percentage shown
assumes the exercise of such warrants or options and assumes that no warrants or
options held by others are exercised. This information is based upon information
furnished by such persons and statements filed with the Securities and Exchange
Commission and other information known by the Company.
<TABLE>
<CAPTION>
====================================================================================================================
NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
OF OF OF
BENEFICIAL OWNER BENEFICIAL OWNER OUTSTANDING
COMMON STOCK
====================================================================================================================
<S> <C> <C>
Peter G. Graf 1,009,922(1) 21.54%
Director, Chairman & Chief Executive Officer
Six East 43rd Street
New York, NY 10017
Nickey B. Maxey 403,927(2) 10.32%
Director
81 Brahms Point Road
Hilton Head Isl., SC 29926
Steven Richman 255,293(3) 6.40%
Director
9 Beech Lane
Kings Point, NY 11024
Joseph Abrams 190,996(4) 4.76%
Director
85 Old Farm Road
Bedminister, NJ 07921
Aron Katzman 171,096(5) 4.32%
Director
10 Layton Terrace
St. Louis, MO 63124
</TABLE>
Page 8 of 25 Pages
<PAGE> 9
<TABLE>
<CAPTION>
====================================================================================================================
NAME AND ADDRESS AMOUNT AND NATURE PERCENTAGE
OF OF OF
BENEFICIAL OWNER BENEFICIAL OWNER OUTSTANDING
COMMON STOCK
====================================================================================================================
<S> <C> <C>
Stuart Hollander 99,252(6) 2.60%
Director & Vice Chairman
32 Lake Forest
St. Louis, MO 63117
George H. Henry 360,376(7) 9.34%
Director
6860 Sunrise Court
Coral Gables, FL 33133
ING Capital Corporation 4,464,907(8) 53.87%
As agent for various lenders
135 East 57th Street
New York, NY 10022
Cerberus Partners, L.P. 4,464,907(9) 53.87%
950 Third Avenue, 20th floor
New York, NY 10022
Protel, Inc. 400,000(10) 9.47%
4150 Kidron Road
Lakeland, FL 33811
Brenner Securities Corporation 467,326(11) 11.04%
277 Park Avenue
New York, NY 10172
J & C Resources 476,160(12) 12.02%
216 Daniel Webster Highway S.
Nashua, NH 03060
DeBartolo Corporation and Affiliates 328,328(13) 7.91%
7620 Market Street
Youngstown, OH 44513
Daniel J. Moos 66,998(17) 1.73%
Executive Vice President,
Chief Financial Officer
& Treasurer
7399 Stow Road
Hudson, OH 44236
Albert Miniaci 229,993(14) 5.67%
1411 S.W. 31st Avenue
Pompano Beach, FL 33069
Jerry Burger $159,242(15) 4.03%
Former Chief Executive Officer
27040 Cedar Road
Beachwood, OH 44122
Bernard Mandel 69,949(16) 1.80%
Former President, Chief Operating
Officer & Secretary
8233 Whispering Pines Drive
Russell, OH 44072
Executive Officers and Directors 2,602,897(18) 48.53%
As a group (10 persons)
</TABLE>
Page 9 of 25 Pages
<PAGE> 10
(1) Includes warrants to purchase 615,053 shares of Common Stock through
March 13, 2001, and 250,000 shares of Common Stock by virtue of
conversion of 14% Preferred Stock owned by him.
(2) Includes warrants to purchase 62,650 shares of Common Stock through
March 31, 2001, and 29,005 shares of Common Stock by virtue of
conversion of 14% Preferred Stock owned by him.
(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
41,667 shares of Common Stock by virtue of conversion of 14%
Preferred Stock owned by him.
(4) Includes warrants to purchase 125,997 shares of Common Stock through
March 13, 2001 and 58,333 shares of Common Stock by virtue of
conversion of 14% Preferred Stock owned by him.
(5) Includes warrants to purchase 95,128 shares of Common Stock through
March 13, 2001 and 44,040 shares of Common Stock by virtue of
conversion of 14% Preferred Stock owned by him.
(6) Includes 46,566 shares of Common Stock held by his spouse.
(7) Includes options to purchase 35,000 shares of Common Stock through
October 9, 1998.
(8) Includes warrants to purchase 2,048,240 shares of Common Stock and
warrants to purchase 2,416,667 shares of Common Stock by virtue of debt
conversion.
(9) Includes warrants to purchase 2,048,240 shares of Common Stock and
warrants to purchase 2,416,667 shares of Common Stock by virtue of debt
conversion.
(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 100,000 shares of Common Stock by virtue of
conversion of 14% Preferred Stock owned by the company.
(12) Represents 137,500 shares of Common Stock by virtue of conversion of
14% Preferred Stock owned by the company.
Page 10 of 25 Pages
<PAGE> 11
(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 166,680 shares of Common Stock by virtue of
conversion of 14% Preferred Stock owned by the company.
(14) Includes warrants to purchase 179,996 shares of Common Stock through
March 13, 2001, and 49,997 shares of Common Stock by virtue of
conversion of 14% Preferred Stock owned by him.
(15) Includes options to purchase 127,361 shares of Common Stock through
August 31, 1997.
(16) Includes options to purchase 66,666 shares of Common Stock through
August 31, 1997 and 1,250 shares of Common Stock held by his spouse.
(17) Includes options to purchase 54,999 shares of Common Stock which
expire two years after termination of employment.
(18) Includes beneficial ownership of Common Stock described above with
respect to Messrs. Graf, Moos, Maxey, Richman, Abrams, Katzman,
Hollander, Henry, and beneficial ownership of Common Stock of Mr. Pace
and Ms. Martin.
- -------------------------------------------------------------------------------
VOTING AGREEMENTS. On September 22, 1995, the Company acquired World
Communications, Inc. ("WCI") by the merger of WCI with and into a wholly-owned
subsidiary of the Company (the "Merger"). As an inducement for WCI to enter
into the Merger, and the WCI shareholders to approve the Merger, certain
shareholders of the Company (including Messrs. Graf, Henry and Abrams,
directors of the Company) entered into a voting and proxy agreement dated as of
September 22, 1995, as amended (the "WCI voting Agreement") with WCI wherein
said holders agreed to call a meeting of the shareholders of the Company to
approve the following proposals (the "Proposals"): to increase the number of
directors of the Company from seven to eight, to elect (or, if already
appointed by the Board of Directors of the Company, to rarify the appointment
of) four directors designated jointly by Stewart Hollander and Aron Katzman;
and to approve the grant of conversion rights which would attach immediately to
the 10% Non-Voting Preferred Stock issued to the WCI shareholders in connection
with the Merger (the "10% Preferred Stock"), such that each share of 10%
Preferred Stock would be convertible into shares of Common Stock at a
conversion ratio of 10 shares of Common Stock per one share of 10% Preferred
Stock (due to the six-for-one reverse stock split of the Common Stock which
subsequently occurred, the conversion ratio is 1.6667 shares of Common Stock
for each one share of 10% Preferred Stock). Messrs Hollander and Katzman were
officers and directors of WCI, and are currently directors of the Company. In
addition, the Company entered into a Voting and Proxy Agreement dated October
16, 1995 with the former shareholders of Public Telephone Corporation, which
was acquired by the Company in exchange for the issuance of shares of Common
Stock (the "Public Voting Agreement"), pursuant to which the former
shareholders of Public Telephone Corporation are obligated to vote for the
Proposals. Pursuant to the WCI Voting Agreement and the Public Voting
Agreement, Mr. Aron Katzman has been appointed as the proxy to vote all of the
shares of each shareholder who is a party to either the WCI Voting Agreement or
the Public Voting Agreement in favor of the Proposals, in the event that any
such shareholders 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. 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
Communications Systems, Inc. The shares of Common Stock subject to the
foregoing Voting Agreements are 555,589 shares, or 14.53% of the outstanding
Common Stock.
In the event that all the shares of the Merger Common Stock and the
Common Stock subject to the WCI Voting Agreement, the Public Voting Agreement
and the other Voting Agreements referenced above are voted in favor of the
Proposals, then 57.60% of the Common Stock would be voted in favor of the
Proposals.
In addition, the Company has entered into a Voting and Proxy Agreement
as of February 21, 1996, with certain holders of the 10% Preferred Stock who,
in the aggregate, hold in excess of 50% of the outstanding shares of 10%
Preferred Stock (the "10% Preferred Voting Agreement") pursuant to which said
holders have agreed to their shares of 10% Preferred Stock vote for the
Proposals with respect to the class vote of the 10% Preferred Stock. The
holders of the 10% Preferred Stock who are parties to said agreement include
Messrs. Hollander and Katzman, directors of the Company, and Mr. Pace, an
executive officer of the Company. The parties to the 10% Preferred Voting
Agreement have appointed Peter G. Graf, Chairman, CEO and a director of the
Company, and Tammy L. Martin, General Counsel and Secretary of the Company, as
proxies to vote their shares of 10% Preferred Stock in favor of the Proposals
in the event that any such shareholder fails to comply with the provisions of
the 10% Preferred Voting Agreement. A total of 340,175 shares of 10% Preferred
Stock are subject to the 10% Preferred Voting Agreement, or 64.12% of the 10%
Preferred Stock.
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, without more, result at a
subsequent date in a change of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 15, 1996, warrants to purchase 2,018,946 shares of Common Stock at a
nominal exercise price per share were issued in conjunction with the IPP and
Paramount acquisitions, redemption of the 10% Cumulative Preferred, 8%
Preferred, and the 7% Preferred, and conversion of certain debt of the Company
into the 14% Preferred. The warrants expire on March 13, 2001. Concurrent with
their exchange of debt and preferred stock for the 14% Preferred, the following
Directors, Executive Officers or security holders of more than 5% of the Company
stock were issued warrants to purchase Common Stock at a nominal exercise price.
<TABLE>
<CAPTION>
VALUE OF
DEBT/PREFERRED
SURRENDERED
AND 14% NUMBER OF
PREFERRED WARRANTS
ISSUED ISSUED
=============================================================================
<S> <C> <C>
Peter G. Graf $1,500,000 539,989
Chief Executive Officer
Chairman & Director
</TABLE>
Page 11 of 25 Pages
<PAGE> 12
<TABLE>
<CAPTION>
VALUE OF
DEBT/PREFERRED
SURRENDERED
AND 14% NUMBER OF
PREFERRED WARRANTS
ISSUED ISSUED
=============================================================================
<S> <C> <C>
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
Brenner Securities $ 600,000 143,994
Corporation
Financial Advisors
J & C Resources $ 825,000 296,994(1)
5% Owner
DeBartolo Corporation $1,000,000 119,982
5% Owner
<FN>
(1) Exercised on March 21, 1996.
</TABLE>
Page 12 of 25 Pages
<PAGE> 13
PART IV
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
1. Financial Statements - Incorporated by reference from the Company's
Form 10-KSB for the year ended December 31, 1995.
Report of Independent Accountants .................................F-1
Consolidated Balance Sheets as of December 31, 1995 and 1994 ......F-2
Consolidated Statements of Operations for the Years Ended
December 31, 1995 and 1994 ...................................F-3
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1995 and 1994 ...................................F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994 ...................................F-5
Notes to Financial Statements for the Years Ended
December 31, 1995 and 1994 ...................................F-7
2. Exhibits
3.1 Articles of Incorporation (1)
3.2 Amendment to Articles of Incorporation dated August 30,
1989 (2)
3.3 Amended and Restated Code of Regulations (7)
3.5 Amendment to Articles of Incorporation dated January 3,
1992 (7)
3.6 Amendment to Articles of Incorporation dated January 20,
1992 (7)
3.7 Amendment to Articles of Incorporation dated April 9,
1992 (8)
3.8 Amendment to Articles of Incorporation dated June 18,
1993 (10)
3.9 Amendment to Articles of Incorporation dated June 30,
1993 (10)
3.10 Amendment to Articles of Incorporation dated September
22, 1995 (15)
3.11 Amendment to Articles of Incorporation dated December
15, 1995 (15)
3.12 Amendment to Articles of Incorporation dated February
28,1996 - Enclosed herewith, replacing in its entirety
Exhibit 3.12 as previously filed with Form 10-KSB for
the year ended December 31, 1995
4.1 Specimen of Common Stock Certificate (3)
Page 13 of 25 Pages
<PAGE> 14
4.2 Form of 10% Non-Voting Preferred Stock (15)
4.3 Form of 14% Convertible Preferred Stock (15)
10.1 Stock Option Agreement between William Tymoszczuk and
PhoneTel Technologies, Inc., dated March 1, 1987 (3)
10.4 Stock Incentive Plan for Key Employees, dated May 5,
1987 (1)
10.30 Stock Option Agreement between PhoneTel Technologies,
Inc. and Richard E. George (4)
10.31 Amended and Restated Stock Option Agreement between
PhoneTel Tech nologies, Inc. and Jerry H. Burger dated
July 1, 1993 (10)
10.32 Stock Option Agreement dated July 1, 1993 between
PhoneTel Technolo gies, Inc. and Bernard Mandel (10)
10.36 Billing and Collection Services Agreement between Zero
Plus Dialing, Inc. and PhoneTel Technologies, Inc. dated
March 5, 1991 (6)
10.40 Advanced Payment Agreement between PhoneTel
Technologies, Inc. and Zero Plus Dialing, Inc. dated
March 5, 1991 (6)
10.44 Form of Stock Option Agreement between PhoneTel
Technologies, Inc. and DeBartolo, Inc. (5)
10.45 Extension of Stock Option Agreement between PhoneTel
Technologies, Inc. and The Edward J. DeBartolo
Corporation (10)
10.55 Separation Agreement dated September 15, 1995 between
PhoneTel Technologies, Inc. and Jerry Burger, together
with amendments thereto (15)
10.56 Separation Agreement dated September 15, 1995 between
PhoneTel Technologies, Inc. and Bernard Mandel, together
with amendments thereto (15)
10.58 Lease Agreement between PhoneTel Technologies, Inc. and
Bankers Leasing Association, Inc. dated February 12,
1992 (7)
10.60 Registration Rights Agreement dated April 10, 1992 among
PhoneTel Technologies, Inc., George H. Henry, Carl
Kirchhoff and Charles Stuart (7)
10.64 Registration Rights Agreement among PhoneTel
Technologies, Inc., J & C Resources, Inc. and Allen
Moskowitz (7)
10.68 Master Agreement between PhoneTel Technologies, Inc. and
The Edward J. DeBartolo Corporation dated March 24, 1992
(7)
10.69 Second Restated and Amended National Management
Agreement between PhoneTel Technologies, Inc. and
Fun-N-Games Associates dated March 24, 1992 (7)
Page 14 of 25 Pages
<PAGE> 15
10.70 Form of Stock Option Agreement and Registration Rights
Agreement between PhoneTel Technologies, Inc. and The
Edward J. DeBartolo Corpo ration (7)
10.71 Stock Option Agreement and Registration Rights Agreement
between PhoneTel Technologies, Inc. and William D.
Moses, Jr. dated May 11, 1992 (7)
10.71.1 Assignment Agreement between William D. Moses, Jr. and
Edward A. Moulton transferring the right to receive
options to acquire 5,000 shares of Common Stock of
PhoneTel Technologies, Inc. (11)
10.72 Stock Option Agreement and Registration Rights Agreement
between PhoneTel Technologies, Inc. and George H. Henry
dated March 24, 1992 (7)
10.74 Letter Agreement between PhoneTel Technologies, Inc. and
The Edward J. DeBartolo Corporation dated May 6, 1992
(7)
10.75 Amendment No. 1 to Amended and Restated Loan Agreement
and Regis tration Rights Agreement dated October 23,
1992 by and among PhoneTel Technologies, Inc., J & C
Resources, Inc. and Allen Moskowitz (8)
10.77 Lease between PhoneTel Technologies, Inc. and Trembal
Construction Co. dba Statler Office Tower dated April
23, 1992 (8)
10.78 Master Agreement between The Cafaro Company and PhoneTel
Technolo gies, Inc. dated December 23, 1992 (8)
10.79 Stock Option and Restricted Stock Agreement between The
Cafaro Company and PhoneTel Technologies, Inc. dated
December 23, 1992 (8)
10.80 Form of Registration Rights Agreement between PhoneTel
Technologies, Inc. and The Cafaro Company (8)
10.87 Service Agreement dated July 1, 1992 between Litel
Telecommunications Corporation dba LCI International and
PhoneTel Technologies, Inc. (8)
10.88 Amendment No. 2 to Service Agreement dated February 26,
1993 between Litel Telecommunications Corporation dba
LCI International and PhoneTel Technologies, Inc. (8)
10.94 Amended and Restated Purchase Agreement dated March 25,
1994 between PhoneTel Technologies, Inc., Alpha Pay
Phones-IV, L.P., and American Telecommunications
Management Corporation (9)
10.94.1 Post-Closing Amendment to Amended and Restated Purchase
Agreement dated August 25, 1994 between PhoneTel
Technologies, Inc., Alpha Payphones-IV, L.P., and
American Telecommunications Management Corporation (11)
10.95 Purchase Price Promissory Note ($593,119.97) and related
Purchase Price Note Security Agreement dated March 25,
1994 between PhoneTel Tech nologies, Inc. and Alpha Pay
Phones-IV, L.P. (9)
Page 15 of 25 Pages
<PAGE> 16
10.95.1 Amendment No. 1 to Purchase Price Note Security
Agreement dated August 25, 1994 between PhoneTel
Technologies, Inc. and Alpha Pay Phones-IV, L.P. (11)
10.95.2 Escrow Promissory Note ($300,000.00) dated August 25,
1994 between PhoneTel Technologies, Inc. and Alpha Pay
Phones-IV, L.P. (11)
10.95.3 Contingency Promissory Note ($7,500.00) dated August 25,
1994 between PhoneTel Technologies, Inc. and Alpha Pay
Phones-IV, L.P. (11)
10.96 Assignment and Acceptance Agreement dated August 25,
1994 between PhoneTel Technologies, Inc., Alpha Pay
Phones-IV, L.P., American Telecommunications Management
Corporation and Donovan Leisure Newton & Irvine (11)
10.96.1 Consent Agreement dated October 14, 1994 between
PhoneTel Technologies, Inc., Alpha Pay Phones-IV, L.P.,
American Telecommunications Management Corporation,
Donovan Leisure Newton & Irvine and U. S. Long Distance,
Inc. (11)
10.97 Assignment and Assumption Agreement dated March 25, 1994
between Alpha Pay Phones-IV. L.P., American
Telecommunications Management Corporation, PhoneTel
Technologies, Inc. and U.S. Long Distance, Inc. (9)
10.98 Renewal Promissory Note ($325,750.00) and related
Amended and Restated Security Agreement dated March 25,
1994 between Alpha Pay Phones- IV, L.P., American
Telecommunications Management Corporation and U.S. Long
Distance, Inc. (9)
10.99 Renewal Promissory Note ($1,775,788.00) and related
Amended and Restated Security Agreement dated March 25,
1994 between Alpha Pay Phones-IV, L.P. and U.S. Long
Distance, Inc. (9)
10.99.1 Letter Agreement among PhoneTel Technologies, Inc.,
Alpha Pay Phones-IV, L.P. and U.S. Long Distance, Inc.
dated September 29, 1994 (11)
10.100 Promissory Note ($62,500.00) to U.S. Long Distance, Inc.
executed on behalf of Alpha Pay Phones-IV, L.P. (9)
10.101 Operator Subscriber Service Agreement dated March 25,
1994 between U.S. Long Distance, Inc. and Alpha Pay
Phones-IV, L.P. (9)
10.102 Non-competition Agreement among PhoneTel Technologies,
Inc., Alpha Pay Phones-IV, L.P., American
Telecommunications Management Corporation, Stephen C.
Fowler and Ronald T. Huggard dated January 5, 1994 (10)
10.103 Offshore Security Subscription Agreements entered into
during March 1994 for approximately 500,000 shares of
PhoneTel Technologies, Inc. Common Stock, placed to
non-U. S. persons in an offshore transaction under
Regulation S (10)
10.104 Stock Option Agreement for WEA Investments, Inc.
relative to 50,000 shares of Common Stock under option
dated on or about November 30, 1993 (10)
Page 16 of 25 Pages
<PAGE> 17
10.105 Stock Option Agreement with Allenstown Investments
Limited dated on or about January 10, 1994 relative to
grant of an option to purchase 126,000 shares of
PhoneTel Technologies, Inc. Common Stock (10)
10.106 Stock Option Agreement with Douglas Abrams with respect
to 45,000 shares of Common Stock of PhoneTel
Technologies, Inc. dated on or about January 10, 1994
(10)
10.106.1 Amendment to Stock Option Agreement dated January 10,
1994 with Douglas Abrams with respect to 45,000 shares
of Common Stock of PhoneTel Technologies, Inc. (11)
10.107 Stock Option Agreement with William Moses, Jr. relative
to 75,000 shares of Common Stock of PhoneTel
Technologies, Inc. dated on or about January 29, 1993
(10)
10.108 Agreement dated January 5, 1994 between PhoneTel
Technologies, Inc. and the Estate of William Moses
relative to loan in the amount of one million dollars
and providing for warrants to purchase 100,000 shares
and contingent right to acquire warrants to purchase
400,000 shares of PhoneTel Technologies, Inc. Common
Stock (10)
10.108.1 Agreement dated September 13, 1994 between PhoneTel
Technologies, Inc. and the Estate of William Moses
relative to restructuring the repayment schedule of
certain monies owed by PhoneTel Technologies, Inc. and
providing for warrants to purchase 45,000 shares of
PhoneTel Technologies, Inc. Common Stock (11)
10.109 Loan Agreement dated December 29, 1993 between PhoneTel
Technologies, Inc. and certain lenders identified
therein with respect to borrowing by PhoneTel
Technologies, Inc. of $400,000 and the granting of
warrants to purchase, in the aggregate, a total of
62,745 shares of Common Stock by PhoneTel Technologies,
Inc. (10)
10.109.1 Letter Agreement dated February 23, 1995 between
PhoneTel Technologies, Inc. and certain lenders
identified therein with respect to the extension of the
maturity dates of certain promissory notes and the
granting of additional warrants to purchase Common Stock
of PhoneTel Technologies, Inc. (11)
10.112 Service Agreement dated January 20, 1994 between
Rochester Communications, Inc. and PhoneTel
Technologies, Inc. (10)
10.113 Offshore Security Subscription Agreements entered into
during May 1994 for approximately 316,000 shares of
PhoneTel Technologies, Inc. Common Stock, placed to
non-U.S. persons in offshore transactions under
Regulation S (11)
10.114 Stock Option Agreement dated March 1, 1995 between
PhoneTel Technologies, Inc. and Howard Meister relative
to a grant of an option to purchase 10,000 shares of
PhoneTel Technologies, Inc. Common Stock (11)
Page 17 of 25 Pages
<PAGE> 18
10.115 Stock Option Agreement dated March 3, 1994 between
PhoneTel Technologies, Inc. and George H. Henry relative
to a grant of an option to purchase 39,000 shares of
PhoneTel Technologies, Inc. Common Stock (11)
10.116 Stock Option Agreements dated in January 1994 between
PhoneTel Technologies, Inc. and George H. Henry granting
options to purchase, in the aggregate, a total of
106,551 shares of PhoneTel Technologies, Inc. Common
Stock (11)
10.117 Stock Option Agreement with George H. Henry dated in
August 1993 relative to a grant of an option to purchase
150,000 shares of PhoneTel Technologies, Inc. Common
Stock (11)
10.118 Partial Assignment of Stock Option Agreement between
Richard E. George and Gary Berk dated on or about April
23, 1994 and related Stock Option Agreement with Gary
Berk a relative to 65,000 shares of Common Stock under
option dated March 7, 1995 (11)
10.119 Stock Option Agreement with Vincent Mann relative to
5,000 shares of Common Stock under option dated November
15, 1994 (11)
10.120 Stock Option Agreement with Donald Vella with respect to
20,000 shares of Common Stock of PhoneTel Technologies,
Inc. dated on or about November 15, 1994 (11)
10.121 Amendments to Warrant Agreements between PhoneTel
Technologies, Inc. and Richard Thatcher dated March
1995, and related Warrant Agreements thereto, issued
pursuant to a Letter Agreement dated February 23, 1995,
relative to the grant of warrants, in the aggregate, to
purchase a total of 49,412 shares of PhoneTel
Technologies, Inc. Common Stock (11)
10.122 Warrant Agreements with Richard Thatcher dated February,
March and April 1995, issued pursuant to a Letter
Agreement dated February 23, 1995, relative to the grant
of warrants, in the aggregate, to purchase a total of
7,500 shares of PhoneTel Technologies, Inc. Common Stock
(11)
10.123 Amendments to Warrant Agreements between PhoneTel
Technologies, Inc. and Gerald Waldshutz dated March
1995, and related Warrant Agreements thereto, issued
pursuant to a Letter Agreement dated February 23, 1995,
relative to the grant of warrants, in the aggregate, to
purchase a total of 41,177 shares of PhoneTel
Technologies, Inc. Common Stock (11)
10.124 Warrant Agreements with Gerald Waldshutz dated February,
March and April 1995, issued pursuant to a Letter
Agreement dated February 23, 1995, relative to the grant
of warrants, in the aggregate, to purchase a total of
6,250 shares of PhoneTel Technologies, Inc. Common Stock
(11)
10.125 Amendments to Warrant Agreements between PhoneTel
Technologies, Inc. and Steve Richman dated March 1995,
and related Warrant Agreements thereto, issued pursuant
to a Letter Agreement dated February 23, 1995, relative
to the grant of warrants, in the aggregate, to purchase
a total of 41,177 shares of PhoneTel Technologies, Inc.
Common Stock (11)
Page 18 of 25 Pages
<PAGE> 19
10.126 Warrant Agreements with Steve Richman dated February,
March and April 1995, issued pursuant to a Letter
Agreement dated February 23, 1995, relative to the grant
of warrants, in the aggregate, to purchase a total of
6,250 shares of PhoneTel Technologies, Inc. Common Stock
(11)
10.127 Amendments to Warrant Agreements between PhoneTel
Technologies, Inc. and Janice Fuelhart dated March 1995,
and related Warrant Agreements thereto, issued pursuant
to a Letter Agreement dated February 23, 1995, relative
to the grant of warrants, in the aggregate, to purchase
a total of 49,412 shares of PhoneTel Technologies, Inc.
Common Stock (11)
10.128 Warrant Agreements with Janice Fuelhart dated February,
March and April 1995, issued pursuant to a Letter
Agreement dated February 23, 1995, relative to the grant
of warrants, in the aggregate, to purchase a total of
1,250 shares of PhoneTel Technologies, Inc. Common Stock
(11)
10.129 Amendments to Warrant Agreements between PhoneTel
Technologies, Inc. and Peter Graf dated in March 1995,
and related Warrant Agreements thereto, issued pursuant
to a Letter Agreement dated February 23, 1995, relative
to the grant of warrants, in the aggregate, to purchase
a total of 148,235 shares of PhoneTel Technologies, Inc.
Common Stock (11)
10.130 Warrant Agreements with Peter Graf dated February, March
and April 1995, issued pursuant to a Letter Agreement
dated February 23, 1995, relative to the grant of
warrants, in the aggregate, to purchase a total of
28,750 shares of PhoneTel Technologies, Inc. Common
Stock (11)
10.131 Stock Option Agreement dated May 24, 1994 between
PhoneTel Technologies, Inc. and the Estate of William D.
Moses, and subsequent assignment thereof dated February
2, 1995, relative to the grant of an option to purchase
50,000 shares of PhoneTel Technologies, Inc. Common
Stock (11)
10.132 Stock Option Agreement dated September 13, 1994 between
PhoneTel Technologies, Inc. and the Estate of William D.
Moses, and subsequent assignment thereof dated February
2, 1995, relative to the grant of an option to purchase
45,000 shares of PhoneTel Technologies, Inc. Common
Stock (11)
10.133 Warrant Agreement dated March 31, 1994 between PhoneTel
Technologies, Inc. and the Estate of William D. Moses,
and subsequent assignment thereof dated February 2,
1995, relative to the grant of warrants to purchase
200,000 shares of PhoneTel Technologies, Inc. Common
Stock (11)
10.134 Agreement and Plan of Merger dated September 22, 1995,
together with Exhibits attached thereto, by and among
PhoneTel Technologies, Inc. PhoneTel II, Inc., and World
Communication, Inc. (12)
10.135 Amendment to Agreement and Plan of Merger dated
September 22, 1995 by and among PhoneTel Technologies,
Inc., PhoneTel II, Inc., and World Communications, Inc.
(12)
Page 19 of 25 Pages
<PAGE> 20
10.136 Agreement and Plan of Merger dated October 16, 1995,
together with Exhibits attached thereto, by and among
PhoneTel Technologies, Inc., PhoneTel II, Inc., and
Public Telephone Corporation. (13)
10.137 Agreement and Plan of Merger dated November 22, 1995,
between PhoneTel Technologies, Inc. and International
Pay Phones, Inc., South Carolina corporation, and all
amendments thereto. (14)
10.138 Agreement and Plan of Merger dated November 22, 1995,
between PhoneTel Technologies, Inc. and International
Pay Phones, Inc., Tennessee corporation, and all
amendments thereto. (14)
10.139 Share Purchase Agreement dated as of November 16, 1995,
between PhoneTel Technologies, Inc. and Paramount
Communications Systems, Inc., and all amendments
thereto. (14)
10.140 Credit Agreement dated as of March 15, 1996 among
PhoneTel Technologies, Inc., Various Lenders and
Internationale Nederlanden (U.S.) Capital Corporation.
(14)
10.141 Security Agreement dated as of March 15, 1996 among
PhoneTel Technologies, Inc., Public Telephone
Corporation, World Communications, Inc., Northern
Florida Telephone Corporation and Paramount
Communications Systems, Inc. and Internationale
Nederlanden (U.S.) Capital Corporation as Agent for
itself and certain other lenders. (14)
10.142 Warrant Purchase Agreement dated as of March 15, 1996
between PhoneTel Technologies, Inc. and Internationale
Nederlanden (U.S.) Capital Corporation and Cerberus
Partners, L.P. (14)
10.143 Registration Rights Agreement dated as of March 15, 1996
between PhoneTel Technologies, Inc. and Internationale
Nederlanden (U.S.) Capital Corporation and Cerberus
Partners, L.P. (14)
10.144 Warrant Certificate dated as of March 15, 1996 granting
Internationale Nederlanden (U.S.) Capital Corporation
the right to purchase 102,412 shares of Series A Special
Convertible Preferred Stock of PhoneTel Technologies,
Inc. (15)
10.145 Warrant Certificate dated as of March 15, 1996 granting
Cerberus Partners, L.P. the right to purchase 102,412
shares of Series A Special Convertible Preferred Stock
of PhoneTel Technologies, Inc. (15)
10.146 Form of Warrant issued on March 15, 1996 to persons
listed on Schedule A to this exhibit. (15)
10.147 Operator Service Subscriber Agreement dated as of
February 29, 1996 by and between Intellicall Operator
Services, Inc. and PhoneTel Technologies, Inc. (15)
10.148 Intellistar License Agreement dated as of February 29,
1996 by and between Intellicall, Inc. and PhoneTel
Technologies, Inc. (15)
Page 20 of 25 Pages
<PAGE> 21
10.149 Relay Services Agreement dated as of February 29, 1996
by and between Intellicall, Inc. and PhoneTel
Technologies, Inc. (15)
10.150 Voting and Proxy Agreement dated as of September 22,
1995 by and among World Communications, Inc. and certain
shareholders of PhoneTel Technologies, Inc. together
with an Amendment thereto. (15)
10.151 Voting and Proxy Agreement dated as of October 16, 1995
by and among PhoneTel Technologies, Inc. and the former
shareholders of Public Telephone Corporation. (15)
10.152 Voting Agreement dated as of March 15, 1996 by and among
PhoneTel Technologies, Inc. and Jeff Huffman, Alton L.
Huffman, Nickey Maxey and Hugh Collins. (15)
10.153 Voting Agreement dated as of March 15, 1996 by and among
PhoneTel Technologies, Inc. and Nickey Maxey and Hugh
Collins. (15)
10.154 Voting Agreement dated as of March 15, 1996 by and among
PhoneTel Technologies, Inc. and the former shareholders
of Paramount Communications Systems, Inc. (15)
10.155 Voting and Proxy Agreement dated as of February 21, 1996
by and among PhoneTel Technologies, Inc. and the former
shareholders of World Communications, Inc. (15)
10.156 Employment Agreement dated May 1, 1995 between PhoneTel
Technologies, Inc. and Daniel J. Moos (15)
10.157 Stock Option Agreement dated April 1, 1995 between
PhoneTel Technologies, Inc. and Daniel J. Moos (15)
21 Subsidiaries of PhoneTel Technologies, Inc. (15)
27 Financial Data Schedule (15)
(1) Incorporated by reference from the Company's Registration
Statement on Form S- 18 (Registration No. 33-16962C), filed with
the Securities and Exchange Commission on September 1, 1987.
(2) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-1, Registration No. 33-30428,
filed September 27, 1989.
(3) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-18 (Registration No.
33-16962C), filed with the Securities and Exchange Commission on
October 30, 1987.
(4) Incorporated by reference from Amendment No. 2 to the Company's
Registration Statement on Form S-1, Registration No. 33-30428,
filed October 27, 1989.
(5) Incorporated by reference from the Company's Form 10-K for the
year ended December 31, 1989.
Page 21 of 25 Pages
<PAGE> 22
(6) Incorporated by reference from the Company's Form 10-K for the
year ended December 31, 1990.
(7) Incorporated by reference from the Company's Form 10-K for the
year ended December 31, 1991.
(8) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1992.
(9) Incorporated by reference from the Company's Form 8-K dated
March 25, 1994.
(10) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1993.
(11) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1994.
(12) Incorporated by reference from the Company's Form 8-K dated
September 22, 1995.
(13) Incorporated by reference from the Company's Form 8-K dated
October 16, 1995.
(14) Incorporated by reference from the Company's Form 8-K dated
March 15, 1996.
(15) Incorporated by reference from the Company's Form 10-KSB for the
year ended December 31, 1995.
(b) REPORT ON FORM 8-K
The following reports on Form 8-K were filed by the Company during the
fourth quarter of 1995.
Form 8-K dated September 22, 1995:
(a) Financial Statements of Business Acquired:
1. World Communications, Inc.
Consolidated Financial Statements with
Supplemental Material
Years ended December 31, 1994 and 1993
2. World Communications, Inc.
Consolidated Financial Statements and
Schedules
Years ended December 31, 1993 and 1992
(c) Other exhibits:
1. Agreement and Plan of Merger
2. Amendment to Agreement and Plan of Merger
Page 22 of 25 Pages
<PAGE> 23
Form 8-K/A amending Form 8-K dated September 22, 1995:
(b) Pro Forma Financial Information:
1. World Communications, Inc. and PhoneTel
Technologies, Inc. Unaudited Pro Forma
Combined Condensed Balance Sheet at June 30,
1995.
2. World Communications, Inc. and PhoneTel
Technologies, Inc. Unaudited Pro Forma
Combined Condensed Income Statement for the
Year Ended December 31, 1994 and Six Months
Ended June 30, 1995.
Form 8-K/A-1 amending Form 8-K dated September 22, 1995::
(a) Financial Statements of Business Acquired:
1. World Communications, Inc. - Unaudited
Consolidated Balance Sheet at June 30, 1995.
2. World Communications, Inc. - Unaudited
Consolidated Statements of Income for the
Six Months ended June 30, 1995 and 1994 and
the Three Months ended June 30, 1995 and
1994.
3. World communications, Inc. - Unaudited
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1995 and 1994.
4. World Communications, Inc. Unaudited Notes
to the Financial Statements for the period
ended June 30, 1995.
(b) Pro Forma Financial Formation:
1. World Communications, Inc. and PhoneTel
Technologies, Inc. Unaudited Pro Forma
Combined Condensed Balance Sheet at June 30,
1995.
2. World Communications, Inc. and PhoneTel
Technologies, Inc. Unaudited Pro Forma
Combined Condensed Income Statement for the
Year Ended December 31, 1994 and Six Months
Ended June 30, 1995.
Form 8-K dated October 16, 1995:
(a) Financial Statements of Business Acquired:
1. Public Telephone Corporation Financial
Statements
Years Ended June 30, 1995 and 1994
2. Public Telephone Corporation Financial
Statements
Years Ended June 30, 1994 and 1993
Page 23 of 25 Pages
<PAGE> 24
3. Public Telephone Corporation Financial
Statements
Year Ended June 30, 1993
(c) Other Exhibits:
1. Agreement and Plan of Merger
Form 8-K/A-1 amending Form 8-K dated October 16, 1995:
(a) Financial Statements of Business Acquired:
1. Public Telephone Corporation - Amended
Financial Statements Years Ended June 30,
1995 and 1994. (On December 26, 1995, Geo.
S. Olive & Co., LLC, Public Telephone's
auditors reissued the audited financial
statements on Public Telephone Corporation
for the Years Ended June 30, 1995 and 1994,
due to an addition error on the Statement of
Income.)
2. Public Telephone Corporation - Unaudited
Balance Sheets at September 30, 1995.
3. Public Telephone Corporation - Unaudited
Consolidated Statements of Income for the
Three Months ended September 30, 1995 and
1994.
4. Public Telephone Corporation - Unaudited
Consolidated Statements of Cash Flows for
the Three Months Ended September 30, 1995
and 1994.
5. Public Telephone Corporation - Unaudited
Notes to the Financial Statements for the
period ended September 30, 1995.
(b) Pro Forma Financial Information:
1. Public Telephone Corporation and PhoneTel
Technologies, Inc. Unaudited Pro Forma
Combined Condensed Balance Sheet at
September 30, 1995.
2. Public Telephone Corporation and PhoneTel
Technologies, Inc. Unaudited Pro Forma
Combined Condensed Income Statements for the
Year Ended December 31, 1994, and Six Months
Ended September 30, 1995.
(c) EXHIBITS
The response to this portion of Item 13 is submitted as a separate
section of this report.
Page 24 of 25 Pages
<PAGE> 25
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment Number 1 to Form 10-KSB to be signed
on its behalf by the undersigned thereunto duly authorized.
PHONETEL TECHNOLOGIES, INC.
Date: April 29, 1996 By: /s/ Peter G. Graf
----------------------- -------------------------
Peter G. Graf
Chairman of the Board
and
Chief Executive Officer
Page 25 of 25 Pages
<PAGE> 1
EXHIBIT 3.12
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
PHONETEL TECHNOLOGIES, INC.
The undersigned, Peter G. Graf, Chairman of the Board, and Tammy
Martin, Secretary, of PhoneTel Technologies, Inc., an Ohio corporation (the
"Company"), do certify that pursuant to the provisions of Ohio Revised Code
section 1701.70, the Board of Directors of the Company did adopt, at a duly
called meeting of the Board of Directors held on February 23, 1996, at which a
quorum was present, the following resolution of amendment to the Company's
Articles of Incorporation:
RESOLVED, that pursuant to the authority granted in Article
FOURTH (b) of the Company's Articles of Incorporation, the
proposed form of amendment to the Articles of Incorporation of
the Company providing for the fixing of the express terms and
the issuance of three new classes of preferred stock,
designated respectively as the "Series A Special Convertible
Preferred Stock," the "Series B Special Convertible Preferred
Stock" and the "14% Convertible Preferred Stock", containing
the terms and provisions set forth on Exhibit A attached
hereto and presented at this meeting, is hereby unanimously
approved, and the Chairman of the Board and Secretary are
authorized and directed to execute and file with the Secretary
of State of Ohio the amendment and any Certificate of
Amendment necessary or required in connection therewith.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
28th day of February, 1996.
By: /s/ Peter G. Graf
----------------------------
Peter G. Graf
Chairman of the Board
By: /s/ Tammy L. Martin
----------------------------
Tammy Martin
Secretary
<PAGE> 2
EXHIBIT A
---------
TO
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
PHONETEL TECHNOLOGIES, INC.
Article FOURTH of the Articles of Incorporation of the Company shall be
amended by adding thereto the following subparagraphs (l), (m) and (n):
(I) Out of the Company's existing authorized but unissued shares of
Preferred Stock (as described above in subparagraph (b) of this
Article FOURTH), two hundred and fifty thousand (250,000) shares of a
new series of Convertible Preferred Stock, $0.20 par value, $0.20
stated value, hereinafter designated as the "Series A Special
Preferred Stock", which shall have the following designations, powers,
preferences and rights, and shall be subject to the following
qualifications, limitations and restrictions:
(i) DESIGNATION OF STOCK. The new series of Convertible Preferred
Stock, $0.20 par value, $0.20 stated value, shall bear the
designation "Series A Special Preferred Stock".
(ii) NUMBER OF SHARES. The maximum number of shares of Series A
Special Preferred Stock shall be 250,000.
(iii) DIVIDENDS. If the Company pays a dividend or makes a
distribution to the holders of its Common Stock of any
securities (other than capital stock for which an adjustment in
the Conversion Rate (as defined in subparagraph (l) (iv)) is
made pursuant to subparagraph (l) (vii)) or property (including
cash or securities of other companies) of the Company, or any
rights, options or warrants to subscribe for or purchase
securities (other than Common Stock of the Company) or property
(including securities of other companies) of the Company, then,
simultaneously with the payment of such dividend or the making
of such distribution, and as a condition precedent to its right
to do so, it will pay or distribute to the holders of record of
Series A Special Preferred Stock an
1
<PAGE> 3
amount of property (including, without limitation, cash) and/or
securities (including, without limitation, securities of other
companies) of the Company as would have been received by such
holders had they exercised their conversion rights and converted
such shares of Series A Special Preferred Stock into Common Stock
immediately prior to the record date (or other applicable date)
used for determining stockholders of the Company entitled to
receive such dividend or distribution. Anything in subparagraph
(l) (vii) to the contrary notwithstanding, no adjustment to the
Conversion Rate shall be made for any distribution of Convertible
Securities (as defined in subparagraph (l) (vii) (C)) or rights,
options or warrants to purchase such Convertible Securities of
the Company to holders of Series A Special Preferred Stock
pursuant to the provisions of this subparagraph (l) (iii).
(iv) CONVERSION. Each share of Series A Special Preferred Stock shall
be convertible, at the option of the holder, at any time and from
time to time into twenty (20) shares of Common Stock, $.01 par
value, of the Company ("Common Stock"); PROVIDED, HOWEVER, that
the number of whole and fractional shares (the "Conversion Rate")
of Common Stock issuable upon conversion of each share of Series
A Special Preferred Stock shall be adjusted as provided in
subparagraph (l) (vii); PROVIDED, FURTHER, HOWEVER, that shares
of Series A Special Preferred Stock may be converted into shares
of Common Stock only after the holder of such shares of Series A
Special Preferred Stock shall have certified to the Company that
it is not a "bank holding company" or a "subsidiary" of a "bank
holding company" within the meaning of Section 4 of the Bank
Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder, or one of the following shall have
occurred: (1) the BONA FIDE sale to any purchaser (including,
without limitation, an underwriter) of such shares of Series A
Special Preferred Stock (x) pursuant to a registration statement
declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale of the Company's common stock in a
BONA FIDE public offering, or (y) pursuant to Rules 144 and 144A
promulgated under the Act, or in a
2
<PAGE> 4
public distribution pursuant to Regulation A of the General Rules
and Regulations under the Act; (2) the BONA FIDE sale to any
purchaser of such shares of Series A Special Preferred Stock in a
transaction not involving a sale of the Company's common stock to
the public, provided that such purchaser does not immediately
after such transaction hold shares of Common Stock (including any
shares converting to Common Stock in accordance herewith)
equaling two percent (2%) or more of the then-outstanding shares
of Common Stock; or (3) the receipt by the Company of (y) a staff
opinion, ruling or other written advice from the Board of
Governors of the Federal Reserve System, or from the appropriate
Federal Reserve Bank, or (z) an opinion of counsel experienced in
bank regulatory matters, in each case to the effect that such
shares of Series A Special Preferred Stock may be converted into
shares of Common Stock without violation of Section 4 of the Bank
Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder. Each conversion of shares of Series A
Special Preferred stock into shares of Common Stock permitted by
this subparagraph (l) (iv) shall be effected by the surrender of
the certificate or certificates representing the shares to be
converted at the principal office of the Company (or such other
office or agency of the Company as the Company may designate by
notice in writing to the holder or holders of the Series A
Special Preferred Stock) at any time during normal business
hours, together with a written notice by the holder of such
Series A Special Preferred Stock stating that such holder desires
to convert the shares, or a stated number of the shares, of
Series A Special Preferred Stock represented by such certificate
or certificates into Common Stock and that such conversion is
permitted in accordance with this subparagraph (l) (iv). Upon
receipt of such statement, the Company shall be obligated to
issue such Common Stock promptly and without further inquiry.
Such conversion shall be deemed to have been effected as of the
close of business on the date on which such certificate or
certificates have been surrendered and such notice has been
received, and at such time the rights of the holder of the
converted Series A Special Preferred Stock shall cease and the
person or persons in whose name or names the certificate
3
<PAGE> 5
or certificates for shares of Common Stock are to be issued upon
such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented
thereby. Promptly after such surrender and the receipt of such
written notice, the Company shall promptly issue and deliver in
accordance with the surrendering holder's instructions (i) the
certificate or certificates for the Common Stock issuable upon
such conversion and (ii) a certificate representing any Series A
Special Preferred Stock which was represented by the certificate
or certificates delivered to the Company in connection with such
conversion but which was not converted. Notwithstanding anything
to the contrary set forth in this subparagraph (l) (iv), in the
event that a holder of the Company's Warrants to purchase Series
A Special Preferred Stock (the "Warrants") desires to exercise
such holder's Warrants, in whole or in part, and immediately
thereafter convert in whole or in part the shares of Series A
Special Preferred Stock issuable upon such exercise, such shares
of Series A Special Preferred Stock shall be deemed converted in
accordance with a written notice by the holder of such Warrants
stating that such holder desires such Series A Special Preferred
Stock issuable upon exercise of such Warrants to be converted
immediately upon issuance, without any requirement that the
Company issue a certificate or certificates to represent such
Series A Special Preferred Stock or any requirement that such
holder surrender any such certificate or certificates. The
issuance of certificates for Common Stock upon conversion of
Series A Special Preferred Stock shall be made without charge to
the holders of such shares for any stamp, transfer or issuance
tax in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of
Common Stock. The Company shall not close its books against the
transfer of Common Stock or of Common Stock issued or issuable
upon conversion of Series A Special Preferred Stock in any manner
which would interfere with the timely conversion of Series A
Special Preferred Stock.
(v) LIQUIDATION. The shares of Series A Special Preferred Stock shall
be preferred over the shares of Common Stock and any
4
<PAGE> 6
other series of Preferred Stock other than the Company's 10%
Preferred Stock, without par value, $10 Stated Value, Cumulative
(the "10% Preferred Stock") (which shall be preferred in
liquidation over the Series A Special Preferred Stock) and other
than the Company's Series B Special Convertible Preferred Stock,
$0.20 par value (the "Series B Special Preferred Stock") (which
shall be PARI PASSU in liquidation with the Series A Special
Preferred Stock), as to assets so that in the event of any
liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, the holders of the Series A Special
Preferred Stock shall be entitled to receive on a ratable and
PARI PASSU basis with the holders of the Series B Special
Preferred Stock, out of the assets of the Company available for
distribution to its stockholders, whether from capital, surplus
or earnings, before any distribution is made to holders of shares
of Common Stock or any other series of Preferred Stock, but only
after distribution is made to the holders of the 10% Preferred
Stock, an amount equal to $0.20 per share plus all dividends and
distributions accrued and unpaid on the shares of Series A
Special Preferred Stock to the date payment is made. If, upon any
liquidation, dissolution or winding-up of the Company, the assets
of the Company, or proceeds thereof, distributable among the
holders of Series A Special Preferred Stock and the Series B
Special Preferred Stock are insufficient to pay in full the
preferential amount aforesaid, then such assets, or proceeds
thereof, shall be distributed among such holders ratably in
accordance with the respective amount which would be payable on
such shares if all amounts payable thereon were payable in full.
For purposes hereof, neither the voluntary sale, lease,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of
the property or assets of the Company, nor the consolidation or
merger of the Company with one or more other companies, shall be
deemed to be a liquidation, dissolution or winding-up, voluntary
or involuntary, unless such voluntary sale, lease, conveyance,
exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding-up of the Company.
5
<PAGE> 7
(vi) VOTING. Except as provided by law, the holders of the Series A
Special Preferred Stock shall have no voting rights whatsoever.
(vii) ADJUSTMENT OF NUMBER OF SHARES ISSUABLE. The Conversion Rate is
subject to adjustment from time to time upon the occurrence of
any of the events enumerated in this subparagraph (l) (vii).
Such adjustments shall be made in respect of any such events
occurring from and after the date on which any Warrants are
first issued (the "Closing Date") and shall be applicable to all
authorized shares of Series A Special Preferred Stock whether or
not any such shares are issued and outstanding.
(A) Adjustment for Change in Capital Stock of the Company
-----------------------------------------------------
If the Company (i) pays a dividend or makes a distribution on any class
of its Common Stock in shares of any class of its Common Stock, (ii) subdivides
its outstanding shares of any class of Common Stock into a greater number of
shares, (iii) combines its outstanding shares of any class of Common Stock into
a smaller number of shares, (iv) makes a distribution on any class of its Common
Stock in shares of its capital stock other than Common Stock, or (v) issues by
reclassification of any class of its Common Stock any shares of its capital
stock, then the Conversion Rate in effect immediately prior to such action shall
be proportionately adjusted so that any holder of any Series A Special Preferred
Stock thereafter exercised may receive the aggregate number and kind of shares
of capital stock which it would have owned immediately following such action if
such Series A Special Preferred Stock had been issued and outstanding (if not
then issued and outstanding) and converted immediately prior to such action. The
adjustment shall become effective immediately after the record date in the case
of a dividend or distribution and immediately after the effective date in the
case of a subdivision, combination or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
If after an adjustment a holder of Series A Special Preferred Stock may
receive shares of two or more classes of capital stock of the Company, the Board
of Directors of the Company shall determine in the good faith exercise of its
reasonable business judgment the allocation of the adjusted Conversion Rate
between the classes of capital stock. After such allocation, the exercise
privilege and the Conversion Rate of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those in this
subparagraph (l) (vii).
6
<PAGE> 8
(B) Adjustment for Common Stock Issues
----------------------------------
If the Company issues shares of Common Stock for a consideration per
share less than the Fair Market Value per Share on the date the Company fixes
the offering price of such additional shares, the Conversion Rate shall be
adjusted in accordance with the following formula:
E ' = E x A
--------------
P
-
O + M
where:
E ' = the adjusted Conversion Rate.
E = the then current Conversion Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares.
P = the aggregate consideration received for the issuance
of such additional shares.
M = the Fair Market Value per Share on the date the Company
fixes the offering price of such additional shares.
A = the number of shares of Common Stock outstanding
immediately after the issuance of such additional
shares.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance. The provisions
of this subparagraph (l) (vii) (B) do not apply to (i) transactions described in
subparagraph (l) (vii) (A) or (ii) transactions for which an adjustment has been
made pursuant to the provisions of subparagraphs (l) (vii) (C) or (l) (vii) (D).
(C) Adjustment for Convertible Securities Issues
--------------------------------------------
If the Company issues any evidences of indebtedness, shares of stock or
other securities which are directly or indirectly convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for shares of Common Stock,
7
<PAGE> 9
either immediately or upon the occurrence of a specified date or a specified
event ("CONVERTIBLE SECURITIES"), other than Series A Special Preferred Stock
and Series B Special Preferred Stock for which an adjustment has been made
pursuant to the provisions of subparagraph (l) (vii) (D), whether or not the
right to convert or exchange thereunder is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-occurrence of some
other event, or both, for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such Convertible Securities less than
the Fair Market Value per Share on the date of issuance of such Convertible
Securities, the Conversion Rate shall be adjusted in accordance with this
formula:
E ' = E x O + D
------------
P
-
O + M
where:
E ' = the adjusted Conversion Rate.
E = the then current Conversion Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such Convertible
Securities.
P = the aggregate consideration received for the issuance
of such Convertible Securities.
M = the Fair Market Value per Share on the date of
issuance of such Convertible Securities.
D = the maximum number of shares of Common Stock
deliverable upon exercise, conversion or in exchange
of such Convertible Securities at the Minimum Price
(as defined below).
In this subparagraph (l) (vii) (C), the term "MINIMUM PRICE" means the lowest
price at which the Convertible Securities can be converted into or exchanged for
Common Stock, regardless of whether that is the initial rate or is conditioned
upon the passage of time, the occurrence or non-occurrence of some other event,
or both. The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such Convertible Securities has not been issued when such Convertible Securities
are no
8
<PAGE> 10
longer outstanding, then the Conversion Rate with respect to the shares of
Series A Special Preferred Stock that have not been converted shall promptly be
readjusted to the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Convertible Securities been made on the
basis of the actual number of shares of Common Stock issued upon conversion or
exchange of such Convertible Securities.
(D) Adjustment for Right, Option and Warrant Issues
-----------------------------------------------
If the Company issues any rights, options or warrants to subscribe for
or purchase or otherwise acquire Common Stock or Convertible Securities, whether
or not the right to exercise such rights, options or warrants or to convert or
exchange such Convertible Securities is immediately exercisable or is
conditioned upon the passage of time, the occurrence of non-occurrence of some
other event, or both (the "Option Securities"), for a consideration per share of
Common Stock initially deliverable upon exercise of such Option Securities or
conversion or exchange of such Convertible Securities less than the Fair Market
Value per Share on the date of issuance of such Option Securities, the
Conversion Rate shall be adjusted in accordance with this formula:
E ' = E x O + D
-------
P
-
O + M
where:
E ' = the adjusted Conversion Rate.
E = the then current Conversion Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such Option
Securities.
P = the aggregate consideration received for the issuance
of such Option Securities.
M = the Fair Market Value per Share on the date of issuance
of such Option Securities.
D = the maximum number of shares of Common Stock deliverable
upon exercise, conversion or in exchange of such Option
Securities at the Minimum Price (as defined below).
In this subparagraph (l) (vii) (D), the term "MINIMUM PRICE" means the
lowest price at which the Option Securities may be exercised (directly or
through the conversion or
9
<PAGE> 11
exchange of Convertible Securities which may be acquired upon exercise of the
Option Securities) to purchase or otherwise acquire Common Stock, regardless of
whether that is the initial price or is conditioned upon the passage of time,
the occurrence or non-occurrence of some other event, or both. The adjustment
shall be made successively whenever any such issuance is made, and shall become
effective immediately after such issuance.
If all of the Common Stock and/or Convertible Securities deliverable
upon exercise of such Option Securities or upon conversion or exchange of such
Option Securities has not been issued when such Option Securities are no longer
outstanding, then the Conversion Rate with respect to the shares of Series A
Special Preferred Stock that have not been converted shall promptly be
readjusted to the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Option Securities been made on the basis of
the actual number of shares of Common Stock issued upon such exercise,
conversion or exchange of such Option Securities.
(E) Consideration Received
----------------------
For purposes of any computation respecting consideration received
pursuant to any provision of the subparagraph (l) (vii), the following shall
apply:
1. In the case of the issuance of shares of Common Stock for cash the
consideration received shall be the amount of cash received by the Company
therefor, without deduction therefrom of any reasonable expenses incurred by the
Company in connection therewith or any reasonable underwriters' discounts, fees
and commissions paid or allowed by the Company in connection therewith.
2. In the case of the issuance of shares of Common Stock for a
consideration consisting in whole or in part of other than cash, the
consideration other than cash shall be initially determined by the Board of
Directors of the Company in good faith, with notice of such determination to be
promptly given to the holders of the Series A Special Preferred Stock and the
holders of the Warrants.
a. If such issuance (i) is solely in connection with an
acquisition for stock of a corporation 80% of the assets of which are
used in the operation of Telephones (as defined below) and 80% of the
revenues of which are derived from the operation of Telephones, and
(ii) (A) such acquisition, together with any related acquisitions,
involves less than 250 Telephones and (B) such acquisition, together
with any acquisitions during any twelve month period, involves less
than 1,000
10
<PAGE> 12
Telephones, such determination by the Board of Directors of the
Company in good faith shall be binding.
b. If such issuance is in connection with an acquisition or
acquisitions satisfying the requirements of clause (i) of the
immediately preceding paragraph a., but in excess of the amounts
described in clauses (ii) (A) or (B) of the immediately preceding
paragraph a., such good faith determination by the Board of Directors
of the Company shall be binding only if the Company shall have received
from an investment banking firm reasonably satisfactory to the Required
Holders a written opinion to the effect that such acquisition is fair
to the Company and its shareholders from a financial point of view.
c. In all other cases, if within 30 days after the date such
written notice is given, the Company and the Required Holders (as
defined in subparagraph (l) (vii) (M)) agree upon the fair market
value, then the fair market value for purposes of this paragraph (2)
shall be as so agreed. If the Required Holders and the Company do not
agree upon such fair market value within such 30 day period, then the
Required Holders and the Company shall appoint a recognized investment
banking firm of national reputation, reasonably acceptable to the
Required Holders and the Company. If the Company and the Required
Holders cannot agree on the appointment of a mutually acceptable
investment banking firm, or if the firm so appointed declines or fails
to serve, then the Required Holders and the Company shall each choose
one such investment banking firm and the respective firms so chosen
shall appoint another recognized investment banking firm of national
reputation. The investment banking firm so selected shall appraise the
fair market value for the purposes of this paragraph 2; and such
investment banking firm shall make such appraisal (which shall be in
the form of a written report signed by such investment banking firm)
and, for the purposes of determining the fair market value pursuant to
this paragraph 2, such appraised fair market value determined as herein
provided shall be final and conclusive and binding on the Company and
all holders of Series A Special Preferred Stock and all holders of
Warrants. All costs of appraisal shall be borne by the Company.
As used herein, the term "Telephone" shall mean a
microprocessor-based non-cellular telephone through which a user may initiate a
call payable only by coins or by credit card, collect or third number billing
procedures and which has been installed for operation.
3. In the case of the issuance of Convertible Securities or securities
issuable upon the exercise of Option Securities, the aggregate consideration
received therefor
11
<PAGE> 13
shall be deemed to be the consideration received by the Company for the issuance
of such Convertible Securities, plus the consideration, if any, received by the
Company for the issuance of such Option Securities, plus the additional minimum
consideration, if any, to be received by the Company upon the conversion,
exchange or exercise thereof (the consideration in each case to be determined in
the same manner as provided in paragraphs 1 and 2 of this subparagraph (l) (vii)
(E)).
(F) Special Adjustment
------------------
If the purchase price provided for in any Option Securities, the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock shall change, the Conversion
Rate or number of shares issuable upon conversion of the Series A Special
Preferred Stock in effect at the time of such event shall forthwith be
readjusted. The Conversion Rate or number of shares issuable upon conversion of
the Series A Special Preferred Stock shall be adjusted to those amounts which
would have been in effect at such time had such Option Securities or Convertible
Securities outstanding at such time initially been granted, issued or sold and
the Conversion Rate or number of shares issuable upon conversion of the Series A
Convertible Preferred Stock Initially adjusted as provided in this subparagraph
(l) (vii), whichever was applicable, except that the minimum amount of
additional consideration payable and the total maximum number of shares issuable
shall be determined after giving effect to such event (and any prior event or
events).
(G) When No Adjustment Required
---------------------------
No adjustment need be made for a change in the par value or absence of
par value of any Common Stock. Notwithstanding any other provisions of this
Agreement, the provisions of this subparagraph (l) (vii) shall not apply to, and
no adjustment in the Conversion Rate need be made as a result of, the issuance
of shares of Common Stock, Convertible Securities or Option Securities in any
bona fide, underwritten public offering for which the lead underwriter is a
recognized investment banking firm of national reputation that is not an
affiliate of the Company. Furthermore, no adjustment shall be made in the
Conversion Rate in respect of the issuance or sale of shares of Common Stock
pursuant to (i) the conversion or exercise of Convertible Securities (including
the Series A Special Preferred Stock and the Series B Special Preferred Stock)
and Option Securities outstanding on the Closing Date or (ii) the conversion of
the shares of 10% Non-Voting Preferred Stock at the rate of 1.6667 shares of
Common Stock for each share of such Preferred Stock.
12
<PAGE> 14
(H) Determination of Fair Market Value per Share - Notice of Adjustment
-------------------------------------------------------------------
Subject to the provisions of the immediately following paragraph, the
Fair Market Value per Share of Common Stock shall be deemed to be an amount
equal to the average of the Quoted Prices (as defined below) for Common Stock
for the thirty (30) consecutive trading days commencing forty-five (45) trading
days before the date of determination or, if no such Quoted Price is available,
the Fair Market Value per Share initially shall be determined by the Board of
Directors of the Company. "Quoted Price" of Common Stock for each day means the
last reported sales price of Common Stock on such day as reported by NASDAQ or,
if Common Stock is listed on a national securities exchange, the last reported
sales price of Common Stock on such exchange (which shall be for consolidated
trading if applicable to such exchange) on such day, or if not so reported or
listed, the average of the last reported bid and asked prices of Common Stock on
such day, in each case as appropriately adjusted for any stock splits or reverse
stock splits occurring after the date of this Certificate of Amendment.
No later than the date of issuance of any Common Stock, Convertible
Securities or Option Securities, the Company shall give the holders of Series A
Special Preferred Stock and the holders of Warrants written notice of the Fair
Market Value per Share of such securities as determined in accordance with the
immediately preceding paragraph. If within twenty (20) days after the date such
notice is given, the Required Holders agree that the Fair Market Value per Share
adequately reflects the value of a share of Common Stock, then the Fair Market
Value per Share shall be as so determined. If, within such 20 day period, the
Company and the Required Holders do not agree that such Fair Market Value per
Share adequately reflects the value of a share of Common Stock, then the
Required Holders and the Company shall appoint a recognized investment banking
firm of national reputation, reasonably acceptable to the Required Holders and
the Company. If the Company and the Required Holders cannot agree on the
appointment of a mutually acceptable investment banking firm, or if the firm so
appointed declines or fails to serve, then the Required Holders and the Company
shall each choose one such investment banking firm and the respective firms so
chosen shall appoint another recognized investment banking firm of national
reputation. The investment banking firm so selected shall appraise the value of
the Company for the purposes of determining the Fair Market Value per Share, and
such investment banking firm shall make such appraisal (which shall be in the
form of a written report signed by such investment banking firm) and, for the
purposes of determining the Fair Market Value per Share, such appraised value of
the Company determined as herein provided shall be final and conclusive and
binding on the Company and all holders of Series A Special Preferred Stock and
all holders of Warrants. All costs of appraisals shall be borne by the Company.
13
<PAGE> 15
Whenever the Conversion Rate is adjusted or the Company takes any
action that would require any adjustment in the Conversion Rate or the number
and type of securities or other property constituting shares issuable upon
conversion of the Series A Special Preferred Stock, the Company shall provide
written notice thereof to each holder of Series A Special Preferred Stock and to
each holder of Warrants.
( I ) Adjustment of Conversion Rate Upon Certain Circumstances
--------------------------------------------------------
In the event that the Company issues any Option Securities or
Convertible Securities to Peter G. Graf, the Conversion Rate shall be adjusted
in accordance with this formula:
E ' = E x O + D
-------
O
where:
E ' = the adjusted Conversion Rate.
E = the then current Conversion Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such Option
Securities or Convertible Securities.
D = the maximum number of shares of Common Stock deliverable
upon exercise, conversion or in exchange of such Option
Securities or Convertible Securities at the Minimum
Price.
In this subparagraph (l) (vii) (I), the term "MINIMUM PRICE" means the
lowest price at which the Option Securities may be exercised (directly or
through the conversion or exchange of Convertible Securities which may be
acquired upon exercise of the Option Securities) to purchase or otherwise
acquire Common Stock or the Convertible Securities can be converted into or
exchanged for Common Stock, regardless of whether that is the initial price or
is conditioned upon the passage of time, the occurrence or non-occurrence of
some other event, or both. The adjustment shall be made successively whenever
any such issuance is made, and shall become effective immediately after such
issuance.
If all of the Common Stock and/or Convertible Securities deliverable
upon exercise of such Option Securities or upon conversion or exchange of such
Option Securities has not been issued when such Option Securities are no longer
outstanding, then the Conversion Rate with respect to the shares of Series A
Special Preferred Stock that have
14
<PAGE> 16
not been converted shall promptly be readjusted to the Conversion Rate which
would then be in effect had the adjustment upon the issuance of such Option
Securities been made on the basis of the actual number of shares of Common Stock
issued upon such exercise, conversion or exchange of such Option Securities.
(J) When Issuance or Payment May Be Deferred
----------------------------------------
In any case in which this subparagraph (l) (vii) shall require that an
adjustment in the Conversion Rate be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Series A Special Preferred Stock
converted after such record date shares of Common Stock issuable upon such
conversion over and above the shares of Common Stock issuable upon such
conversion on the basis of the Conversion Rate prior to such adjustment and (ii)
paying to such holder any amount in cash in lieu of a fractional share pursuant
to subparagraph (l) (vii) (K); provided, however, that the Company shall deliver
to such holder a bill or other appropriate instrument evidencing such holder's
right to receive such additional shares of Common Stock and cash upon the
occurrence of the event requiring such adjustment.
(K) Fractional Interests
--------------------
The Company shall not be required to issue fractional shares of Common
Stock on the conversion of Series A Special Preferred Stock. If more than one
share certificate shall be presented for conversion in full at the same time by
the same holder, the number of full shares of Common Stock which shall be
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares issuable on conversion of the Series A Special Preferred Stock
evidenced by all share certificates so presented. If any fraction of the shares
of Common Stock would, except for the provisions of this subparagraph (l) (vii)
(K), be issuable on conversion of any shares of Series A Special Preferred Stock
(or specified portion thereof), the Company shall pay an amount in cash equal to
the Fair Market Value per Share on the day immediately preceding the date the
share certificate evidencing such Series A Special Preferred Stock is presented
for conversion, multiplied by such fraction.
(L) Par Value of Common Stock
-------------------------
Before taking any action which would cause an adjustment in the
Conversion Rate pursuant to this subparagraph (l) (vii) such that the aggregate
par value of the number of shares of Common Stock (including fraction shares)
into which a share of Series A Special Preferred Stock is convertible is greater
than the par value of a share of Series
15
<PAGE> 17
A Special Preferred Stock, the Company will take any corporate action necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the basis of the Conversion Rate as so
adjusted.
(M) Required Holders
----------------
Whenever reference is made in this subsection (l) (vii) to "Required
Holders" such reference means the registered holders of at least 66-2/3% of the
outstanding Series A Special Preferred Stock (treating all Warrants as fully
exercised for shares of Series A Special Preferred Stock to which the registered
holders of Warrants would be entitled upon exercise of such Warrants).
(m) Out of the Company's existing authorized but unissued shares
of Preferred Stock (as described above in subparagraph (b) of this
Article FOURTH), two hundred and fifty thousand (250,000) shares of a
new series of Convertible Preferred Stock, $0.20 par value, $120
stated value, hereinafter designated as the "Series B Special
Preferred Stock", which shall have the following designations, powers,
preferences and rights, and shall be subject to the following
qualifications, limitations and restrictions:
(i) DESIGNATION OF STOCK. The new series of Convertible Preferred
Stock, $0.20 par value, $120 stated value, shall bear the
designation "Series B Special Preferred Stock".
(ii) NUMBER OF SHARES. The maximum number of share of Series B
Special Preferred Stock shall be 250,000.
(iii) DIVIDENDS. If the Company pays a dividend or makes a
distribution to the holders of its Common Stock of any
securities (other than capital stock for which an adjustment in
the Conversion Rate as defined in subparagraph (m) (iv) ) is
made pursuant to subparagraph (m) (vii) or property (including
cash or securities of other companies) of the Company, or any
rights, options, or warrants to subscribe for or purchase
securities (other than Common Stock of the Company) or property
(including securities of other companies) of the Company, then
simultaneously with the payment of such dividend or the making
of such distribution, and as a condition precedent to its right
to do so, it will pay or distribute to the holders of record of
Series B Special Preferred Stock an
16
<PAGE> 18
amount of property (including, without limitation, cash) and/or
securities (including, without limitation, securities of other
companies) of the Company as would have been received by such
holders had they exercised their conversion rights and converted
such shares of Series B Special Preferred Stock into Common Stock
immediately prior to the record date (or other applicable date)
used for determining stockholders of the Company entitled to
receive such dividend or distribution. Anything in subparagraph
(m) (vii) to the contrary notwithstanding, no adjustment to the
Conversion Rate shall be made for any distribution of Convertible
Securities (as defined) in subparagraph (m) (vii) (C) ) or
rights, options or warrants to purchase such Convertible
Securities of the Company to holders of Series B Special
Preferred Stock pursuant to the provisions of this sub paragraph
(m) (iii).
(iv) CONVERSION. Each share of Series B Special Preferred Stock shall
be convertible, at the option of the holder, at any time and from
time to time into twenty (20) shares of Common Stock, $0.01 par
value, of the Company ("Company Stock"); PROVIDED, HOWEVER, that
the number of whole and fractional shares (the "Conversion Rate")
of Common Stock issuable upon conversion of each share of Series
B Special Preferred Stock shall be adjusted as provided in
subparagraph (m) (vii); PROVIDED, FURTHER, HOWEVER, that shares
of Series B Special Preferred Stock may be converted into shares
of Common Stock only after the holder of such shares of Series B
Special Preferred Stock shall have certified to the Company that
it is not a "bank holding company" or a "subsidiary" of a "bank
holding company" within the meaning of Section 4 of the Bank
Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder, or one of the following shall have
occurred: (1) the BONA FIDE sales to any purchaser (including,
without limitation, an underwriter) of such shares of Series B
Special Preferred Stock (x) pursuant to a registration statement
declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale of the Company's common stock in a
BONA FIDE public offering, or (y) pursuant to Rules 144 and 144A
promulgated under the Act, or in a
17
<PAGE> 19
public distribution pursuant to Regulation A of the General Rules
and Regulations under the Act; (2) the BONA FIDE sale to any
purchase of such shares or Series B Special Preferred Stock in a
transaction not involving a sale of the Company's common stock to
the public, provided that such purchaser does not immediately
after such transaction hold shares of Common Stock (including any
shares converting to Common Stock in accordance herewith)
equaling two percent (2%) or more of the then outstanding shares
of Common Stock; or (3) the receipt by the Company of (y) a staff
opinion, ruling or other written advice from the Board of
Governors of the Federal Reserve System, or from the appropriate
Federal Reserve Bank, or (z) an opinion of counsel experienced in
bank regulatory matters, in each case to the effect that such
shares of Series B Special Preferred Stock may be converted into
shares of Common Stock without violation of Section 4 of the Bank
Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder. Each conversion of shares of Series B
Special Preferred Stock into shares of Common Stock permitted by
this subparagraph (m) (iv) shall be effected by the surrender of
the certificate or certificates representing the shares to be
converted at the principal office of the Company (or such other
office or agency of the Company as the Company may designate by
notice in writing to the holder or holders of the Series B
Special Preferred Stock) at any time during normal business
hours, together with a written notice by the holder of such
Series B Special Preferred Stock stating that such holder desires
to convert the shares, or a stated number of the shares, of
Series B Special Preferred Stock represented by such certificate
or certificates into Common Stock and that such conversion is
permitted in accordance with this subparagraph (m) (iv). Upon
receipt of such statement, the Company shall be obligated to
issue such Common Stock promptly and without further inquiry.
Such conversion shall be deemed to have been effected as of the
close of business on the date on which such certificate or
certificates have been surrendered and such notice has been
received, and at such time the rights of the holder of the
converted Series B Special Preferred Stock shall cease and the
person or persons in whose name or names the certificate
18
<PAGE> 20
or certificates for shares of Common Stock are to be issued upon
such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented
thereby. Promptly after such surrender and the receipt of such
written notice, the Company shall promptly issue and deliver in
accordance with the surrendering holder's instructions (i) the
certificate or certificates for the Common Stock issuable upon
such conversion and (ii) a certificate representing any Series B
Special Preferred Stock which was represented by the certificate
or certificates delivered to the Company in connection with such
conversion but which was not converted. Notwithstanding anything
to the contrary set forth in this subparagraph (m) (iv), in the
event that a holder of the Company's Notes which are convertible
into shares of Series B Special Preferred Stock (the "Notes")
desires to convert such holder's Notes, in whole or in part, and
immediately thereafter convert in whole or in part the shares of
Series B Special Preferred Stock issuable upon such conversion,
such shares of Series B Special Preferred Stock shall be deemed
converted in accordance with a written notice by the holder of
such Notes stating that such holder desires such Series B Special
Preferred Stock issuable upon conversion of such Notes to be
converted immediately upon issuance, without any requirement that
the Company issue a certificate or certificates to represent such
Series B Special Preferred Stock or any requirement that such
holder surrender any such certificate of certificates. The
issuance of certificates for Common Stock upon conversion of
Series B Special Preferred Stock shall be made without charge to
the holders of such shares for any stamp, transfer or issuance
tax in respect thereof or other cost incurred by the Company in
connection with such conversion and the related issuance of
Common Stock. The Company shall not close its books against the
transfer of Common Stock or of Common Stock issued or issuable
upon conversion of Series B Special Preferred Stock in any manner
which would interfere with the timely conversion of Series B
Special Preferred Stock.
(v) LIQUIDATION. The shares of Series B Special Preferred Stock shall
be preferred over the shares of Common Stock and any
19
<PAGE> 21
other series of Preferred Stock other than the Company's 10%
Preferred Stock, without par value, $10 Stated Value, Cumulative
(the "10% Preferred Stock") (which shall be preferred in
liquidation over the Series B Special Preferred Stock) and other
than the Company's Series A Special Convertible Preferred Stock,
$0.20 par value (the "Series A Special Preferred Stock") (which
shall be PARI PASSU in liquidation with the Series B Special
Preferred Stock), as to assets so that in the event of any
liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, the holders of the Series B Special
Preferred Stock shall be entitled to receive on a ratable and
PARI PASSU basis with the holders of the Series A Special
Preferred Stock, out of the assets of the Company available for
distribution to its stockholders of the Series A Special
Preferred Stock, out of the assets of the Company available for
distribution to its stockholders, whether from capital, surplus
or earnings, before any distribution is made to holders of shares
of Common Stock or any other series of Preferred Stock, but only
after distribution if made to the holders of the 10% Preferred
Stock, an amount equal to $120.00 per share plus all dividends
and distributions accrued and unpaid on the shares of Series B
Special Preferred Stock to the date payment is made. If, upon any
liquidation, dissolution or winding-up of the Company, the assets
of the Company, or proceeds thereof, distributable among the
holders of Series B Special Preferred Stock and the Series A
Special Preferred Stock are insufficient to pay in full the
preferential amount aforesaid, then such assets, or proceeds
thereof, shall be distributed among such holders ratably in
accordance with the respective amount which would be payable on
such shares if all amounts payable thereon were payable in full.
For purposes hereof, neither the voluntary sale, lease,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of
the property or assets of the Company, nor the consolidation or
merger of the Company with one or more other companies, shall be
deemed to be a liquidation, dissolution or winding-up, voluntary
or involuntary, unless such voluntary sale, lease, conveyance,
exchange or transfer
20
<PAGE> 22
shall be in connection with a plan of liquidation, dissolution
or winding-up of the Company.
(vi) VOTING. Except as provided by law, the holders of the Series B
Special Preferred Stock shall have no voting rights whatsoever.
(vii) ADJUSTMENT OF NUMBER OF SHARES ISSUABLE. The Conversion Rate is
subject to adjustment from time to time upon the occurrence of
any of the events enumerated in this subparagraph (m) (vii).
Such adjustments shall be made in respect of any such events
occurring from and after the date of which any Notes are first
issued (the "Closing Date") and shall be applicable to all
authorized shares of Series B Special Preferred Stock whether or
not any such shares are issued and outstanding.
(A) Adjustment for Change in Capital Stock of the Company
-----------------------------------------------------
If the Company (i) pays a dividend or makes a distribution on any class
of its Common Stock in shares of any class of its common Stock, (ii) subdivides
its outstanding shares of any class of Common Stock into a greater number of
shares, (iii) combines its outstanding shares of any class of Common Stock into
a smaller number of shares, (iv) makes a distribution on any class of its Common
Stock in shares of its capital stock other than Common Stock, or (v) issues by
reclassification of any class of its Common Stock any shares of its capital
stock, then the Conversion Rate in effect immediately prior to such action shall
be proportionately adjusted so that any holder of any Series B Special Preferred
Stock thereafter exercised may receive the aggregate number and kind of shares
of capital stock which is would have owned immediately following such action if
such Series B Special Preferred Stock had been issued and outstanding (if not
then issued and outstanding) and converted immediately prior to such action. The
adjustment shall become effective immediately after the record date in the case
of a dividend or distribution and immediately after the effective date in the
case of a subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur.
If after an adjustment a holder of Series B Special Preferred Stock may
receive shares of two or more classes of capital stock of the Company, the Board
of Directors of the Company shall determine in the good faith exercise of its
reasonable business judgment the allocation of the adjusted Conversion Rate
between the classes of capital
21
<PAGE> 23
stock. After such allocation, the exercise privilege and the Conversion Rate of
each class of capital stock shall thereafter be subject to adjustment on terms
comparable to those in this subparagraph (m) (vii).
(B) Adjustment for Common Stock Issues
----------------------------------
If the Company issues shares of Common Stock for a consideration per
share less than the Fair Market Value per share on the date the Company fixes
the offering price of such additional shares, the Conversion Rate shall be
adjusted in accordance with the following formula:
E' = E x A
-----
P
-
O+ M
where:
E' = the adjusted Conversion Rate
E = the then current Conversion Rate
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional
shares.
P = the aggregate consideration received for the issuance
of such additional shares.
M = the Fair Market Value per Share on the date the Company
fixes the offering price of such additional shares.
A = the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance is
made, and shall become effective immediately after such issuance. The provisions
of this subparagraph (m) (vii) (B) do not apply to (i) transactions described in
subparagraph (m) (vii) (A) or (ii) transactions for which an adjustment has been
made pursuant to the provision of subparagraphs (m) (vii) (C) or (m) (vii) (D).
(C) Adjustment for Convertible Securities Issues
--------------------------------------------
If the Company issues any evidences of indebtedness, shares of stock or
other securities which are directly or indirectly convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for shares of Common Stock,
22
<PAGE> 24
either immediately or upon the occurrence of a specified date or a specified
event ("CONVERTIBLE SECURITIES"), other than Series A Special Preferred Stock
and Series B Special Preferred Stock for which an adjustment has been made
pursuant to the provisions of subparagraph (m) (vii) (D), whether or not the
right to convert or exchange thereunder is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-occurrence of some
other event, or both, for a consideration per share of Common Stock initially
deliverable upon conversion or exchange of such Convertible Securities less than
the Fair Market Value per Share on the date of issuance of such Convertible
Securities, the Conversion Rate shall be adjusted in accordance with this
formula:
O + D
-----
E' = E x P
-
O + M
where:
E' = the adjusted Conversion Rate
E = the then current Conversion Rate
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such Convertible
Securities.
P = the aggregate consideration received for the issuance
of such Convertible Securities.
M = the Fair Market Value per Share on the date of issuance
of such Convertible Securities.
D = the maximum number of shares of Common Stock deliverable
upon exercise, conversion or in exchange of such
Convertible Securities at the Minimum Price (as defined
below).
In this subparagraph (m) (vii) (C), the term "MINIMUM PRICE" means the
lowest price at which the Convertible Securities can be converted into or
exchanged for Common Stock, regardless of whether that is the initial rate or is
conditioned upon the passage of time, the occurrence or non-occurrence of some
other event, or both. The adjustment shall be made successively whenever any
such issuance is made, and shall become effective immediately after such
issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such Convertible Securities has not been issued when such Convertible Securities
are no
23
<PAGE> 25
longer outstanding, then the Conversion Rate with respect to the shares of
Series B Special Preferred Stock that have not been converted shall promptly be
readjusted to the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Convertible Securities been made on the
basis of the actual number of shares of Common Stock issued upon conversion or
exchange of such Convertible Securities.
(D) Adjustment for Right, Option and Warrant Issues
-----------------------------------------------
If the Company issues any rights, options or warrants to subscribe for
or purchase or otherwise acquire Common Stock or Convertible Securities, whether
or not the right to exercise such rights, options or warrants or to convert or
exchange such Convertible Securities is immediately exercisable or is
conditioned upon the passage of time, the occurrence or non-occurrence of some
other event, or both (the "OPTION SECURITIES"), for a consideration per share of
Common Stock initially deliverable upon exercise of such Option Securities or
conversion or exchange of such Convertible Securities less than the Fair Market
Value per Share on the date of issuance of such Option Securities, the
Conversion Rate shall be adjusted in accordance with this formula:
O + D
-----
E' = E x P
-
O + M
where:
E' = the adjusted Conversion
E = the then current Conversion Rate
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such Option
Securities.
P = the aggregate consideration received for the issuance
of such Option Securities.
M = the Fair Market Value per Share on the date of issuance
of such Option Securities.
D = the maximum number of shares of Common Stock deliverable
upon exercise, conversion or in exchange of such Option
Securities at the Minimum Price (as defined below).
In this subparagraph (m) (vii) (D), the term "MINIMUM PRICE" means the
lowest price at which the Option Securities may be exercised (directly or
through the conversion or
24
<PAGE> 26
exchange of Convertible Securities which may be acquired upon exercise of the
Option Securities) to purchase or otherwise acquire Common Stock, regardless of
whether that is the initial price or is conditioned upon the passage of time,
the occurrence or non-occurrence of some other event, or both. The adjustment
shall be made successively whenever any such issuance is made, and shall become
effective immediately after such issuance.
If all of the Common Stock and/or Convertible Securities deliverable
upon exercise of such Option Securities or upon conversion or exchange of such
Option Securities has not been issued when such Option Securities are no longer
outstanding, then the Conversion Rate with respect to the shares of Series B
Special Preferred Stock that have not been converted shall promptly be
readjusted to the Conversion Rate which would then be in effect had the
adjustment upon the issuance of such Option Securities been made on the basis of
the actual number of shares of Common Stock issued upon such exercise,
conversion or exchange of such Option Securities.
(E) Consideration Received
----------------------
For purposes of any computation respecting consideration received
pursuant to any provision of the subparagraph (m) (vii), the following shall
apply:
1. In the case of the issuance of shares of Common Stock for cash, the
consideration received shall be the amount of cash received by the Company
therefor, without deduction therefrom of any reasonable expenses incurred by the
Company in connection therewith or any reasonable underwriters' discounts, fees
and commissions paid or allowed by the Company in connection therewith.
2. In the case of the issuance of shares of Common Stock for a
consideration consisting in whole or in part of other than cash, the
consideration other than cash shall be initially determined by the Board of
Directors of the Company in good faith, with notice of such determination to be
promptly given to the holders of the Series B Special Preferred Stock and the
holders of the Notes.
a. If such issuance (i) is solely in connection with an
acquisition for stock of a corporation 80% of the assets of which are
used in the operation of Telephones (as defined below) and 80% of the
revenues of which are derived from the operation of Telephones, and
(ii) (A) such acquisition, together with any related acquisitions,
involves less than 250 Telephones and (B) such acquisition, together
with any acquisitions during any twelve-month period, involves less
than 1,000
25
<PAGE> 27
Telephones, such determination by the Board of Directors of the
Company in good faith shall be binding.
b. If such issuance is in connection with an acquisition or
acquisitions meeting the requirements of clause (i) of the immediately
preceding paragraph a., but in excess of the amounts described in
clause (ii) (A) or (B) of the immediately preceding paragraph a., such
good faith determination by the Board of Directors of the Company shall
be binding only if the Company shall have received from an investment
banking firm reasonably satisfactory to the Required Holders a written
opinion to the effect that such acquisition is fair to the Company and
its shareholders from a financial point of view.
c. In all other cases, if within 30 days after the date such
written notice is given, the Company and the Required Holders (as
defined in subparagraph (m) (vii) (M)) agree upon the fair market
value, then the fair market value for purposes of this paragraph (2)
shall be as so agreed. If the Required Holders and the Company do not
agree upon such fair market value within such 30 day period, then the
Required Holders and the Company shall appoint a recognized investment
banking firm of national reputation, reasonably acceptable to the
Required Holders and the Company. If the Company and the Required
Holders cannot agree on the appointment of a mutually acceptable
investment banking firm, or if the firm so appointed declines or fails
to serve, then the Required Holders and the Company shall each choose
one such investment banking firm and the respective firms so chosen
shall appoint another recognized investment banking firm of national
reputation. The investment banking firm so selected shall appraise the
fair market value for the purposes of this paragraph 2, and such
investment banking firm shall make such appraisal (which shall be in
the form of a written report signed by such investment banking firm)
and, for the purposes of determining the fair market value pursuant to
this paragraph 2, such appraised fair market value determined as herein
provided shall be final and conclusive and binding on the Company and
all holders of Series B Special Preferred Stock and all holders of
Notes. All costs of appraisal shall be borne by the Company.
As used herein, the term "Telephone" shall mean a microprocessor-based
non-cellular telephone through which a user may initiate a call payable only by
coins or by credit card, collect or third number billing procedures and which
has been installed for operation.
3. In the case of the issuance of Convertible Securities or securities
issuable upon the exercise of Option Securities, the aggregate consideration
received therefor
26
<PAGE> 28
shall be deemed to be the consideration received by the Company for the issuance
of such Convertible Securities, plus the consideration, if any, received by the
Company for the issuance of such Option Securities, plus the additional minimum
consideration, if any, to be received by the Company upon the conversion,
exchange or exercise thereof (the consideration in each case to be determined in
the same manner as provided in paragraphs 1 and 2 of this subparagraph (m) (vii)
(E)).
(F) Special Adjustment
------------------
If the purchase price provided for in any Option Securities, the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities or the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock shall change, the Conversion
Rate or number of shares issuable upon conversion of the Series B Special
Preferred Stock in effect at the time of such event shall forthwith be
readjusted. The Conversion Rate or number of shares issuable upon conversion of
the Series B Special Preferred Stock shall be adjusted to those amounts which
would have been in effect at such time had such Option Securities or Convertible
Securities outstanding at such time initially been granted, issued or sold and
the Conversion Rate or number of shares issuable upon conversion of the Series B
Convertible Preferred Stock initially adjusted as provided in this subparagraph
(m) (vii), whichever was applicable, except that the minimum amount of
additional consideration payable and the total maximum number of shares issuable
shall be determined after giving effect to such event (and any prior event or
events).
(G) When No Adjustment Required
---------------------------
No adjustment need be made for a change in the par value or absence of
par value of any Common Stock. Notwithstanding any other provisions of this
Agreement, the provisions of this subparagraph (m) (vii) shall not apply to, and
no adjustment in the Conversion Rate need be made as a result of, the issuance
of shares of Common Stock, Convertible Securities or Option Securities in any
bona fide, underwritten public offering for which the lead underwriter is a
recognized investment banking firm of national reputation that is not an
affiliate of the Company. Furthermore, no adjustment shall be made in the
Conversion Rate in respect of the issuance or sale of shares of Common Stock
pursuant to (i) the conversion or exercise of Convertible Securities (including
the Series A Special Preferred Stock and the Series B Special Preferred Stock)
and Option Securities outstanding on the Closing Date or (ii) the conversion of
the shares of 10% Non-Voting Preferred Stock at the rate of 1.6667 shares of
Common Stock for each share of such Preferred Stock.
27
<PAGE> 29
(H) Determination of Fair Market Value per Share - Notice of Adjustment
-------------------------------------------------------------------
Subject to the provisions of the immediately following paragraph, the
Fair Market Value per Share of Common Stock shall be deemed to be an amount
equal to the average of the Quoted Prices (as defined below) for Common Stock
for the thirty (30) consecutive trading days commencing forty-five (45) trading
days before the date of determination or, if no such Quoted Price is available,
the Fair Market Value per Share initially shall be determined by the Board of
Directors of the Company. "Quoted Price" of Common Stock for each day means the
last reported by NASDAQ or, if Common Stock is listed on a national securities
exchange, the last reported sales price of Common Stock on such exchange (which
shall be for consolidated trading if applicable to such exchange) on such day,
or if not so reported or listed, the average of the last reported bid and asked
prices of Common Stock on such day, in each case as appropriately adjusted for
any stock splits or reverse stock splits occurring after the date of this
Certificate of Amendment.
No later than the date of issuance of any Common Stock, Convertible
Securities or Option Securities, the Company shall give the holders of Series B
Special Preferred Stock and the holders of Notes written notice of the Fair
Market Value per Share of such securities as determined in accordance with the
immediately preceding paragraph. If within twenty (20) days after the date such
notice is given, the Required Holders agree that the Fair Market Value per Share
adequately reflects the value of a share of Common Stock, then the Fair Market
Value per Share shall be as so determined. If, within such 20-day period, the
Company and the Required Holders do not agree that such Fair Market Value per
Share adequately reflects the value of a share of Common Stock, then the
Required Holders and the Company shall appoint a recognized investment banking
firm of national reputation, reasonably acceptable to the Required Holders and
the Company. If the Company and the Required Holders cannot agree on the
appointment of a mutually acceptable investment banking firm, or if the firm so
appointed declines or fails to serve, then the Required Holders and the Company
shall each choose one such investment banking firm and the respective firms so
chosen shall appoint another recognized investment banking firm of national
reputation. The investment banking firm so selected shall appraise the value of
the Company for the purposes of determining the Fair Market Value per Share, and
such investment banking firm shall make such appraisal (which shall be in the
form of a written report signed by such investment banking firm) and, for the
purposes of determining the Fair Market Value per Share, such appraised value of
the Company determined as herein provided shall be final and conclusive and
binding on the Company and all holders of Series B Special Preferred Stock and
all holders of Notes. All costs of appraisals shall be borne by the Company.
28
<PAGE> 30
Whenever the Conversion Rate is adjusted or the Company takes any
action that would require any adjustment in the Conversion Rate or the number
and type of securities or other property constituting shares issuable upon
conversion of the Series B Special Preferred Stock, the Company shall provide
written notice thereof to each holder of Series B Special Preferred Stock and to
each holder of Notes.
( I ) Adjustment of Conversion Rate Upon Certain Circumstances
--------------------------------------------------------
In the event that the Company issues any Option Securities or
Convertible Securities to Peter G. Graf, the Conversion Rate shall be adjusted
in accordance with this formula:
E ' = E x O + D
-------
O
where:
E ' = the adjusted Conversion Rate.
E = the then current Conversion Rate.
O = the number of shares of Common Stock outstanding
immediately prior to the issuance of such Option
Securities or Convertible Securities.
D = the maximum number of shares of Common Stock deliverable
upon exercise, conversion or in exchange of such Option
Securities or Convertible Securities at the Minimum
Price.
In this subparagraph (m) (vii) (I), the term "MINIMUM PRICE" means the
lowest price at which the Option Securities may be exercised (directly or
through the conversion or exchange of Convertible Securities which may be
acquired upon exercise of the Option Securities) to purchase or otherwise
acquire Common Stock or the Convertible Securities can be converted into or
exchanged for Common Stock, regardless of whether that is the initial price or
is conditioned upon the passage of time, the occurrence or non-occurrence of
some other event, or both. The adjustment shall be made successively whenever
any such issuance is made, and shall become effective immediately after such
issuance.
If all of the Common Stock and/or Convertible Securities deliverable
upon exercise of such Option Securities or upon conversion or exchange of such
Option Securities has not been issued when such Option Securities are no longer
outstanding, then the Conversion Rate with respect to the shares of Series B
Special Preferred Stock that have
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not been converted shall promptly be readjusted to the Conversion Rate which
would then be in effect had the adjustment upon the issuance of such Option
Securities been made on the basis of the actual number of shares of Common Stock
issued upon such exercise, conversion or exchange of such Option Securities.
(J) When Issuance or Payment May Be Deferred
----------------------------------------
In any case in which this subparagraph (m) (vii) shall require that an
adjustment in the Conversion Rate be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Series B Special Preferred Stock
converted after such record date shares of Common Stock issuable upon such
conversion over and above the shares of Common Stock issuable upon such
conversion on the basis of the Conversion Rate prior to such adjustment and (ii)
paying to such holder any amount in cash in lieu of a fractional share pursuant
to subparagraph (m) (vii) (K); PROVIDED, HOWEVER, that the Company shall deliver
to such holder a bill or other appropriate instrument evidencing such holder's
right to receive such additional shares of Common Stock and cash upon the
occurrence of the event requiring such adjustment.
(K) Fractional Interests
--------------------
The Company shall not be required to issue fractional shares of Common
Stock on the conversion of Series B Special Preferred Stock. If more than one
share certificate shall be presented for conversion in full at the same time by
the same holder, the number of full shares of Common Stock which shall be
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares issuable on conversion of the Series B Special Preferred Stock
evidenced by all share certificates so presented. If any fraction of the shares
of Common Stock would, except for the provisions of this subparagraph (m) (vii)
(K), be issuable on conversion of any shares of Series B Special Preferred Stock
(or specified portion thereof), the Company shall pay an amount in cash equal to
the Fair Market Value per Share on the day immediately preceding the date the
share certificate evidencing such Series B Special Preferred Stock is presented
for conversion, multiplied by such fraction.
(L) Par Value of Common Stock
-------------------------
Before taking any action which would cause an adjustment in the
Conversion Rate pursuant to this subparagraph (m) (vii) such that the aggregate
par value of the number of shares of Common Stock (including fractional shares)
into which a share of Series B Special Preferred Stock is convertible is greater
than the par value of a share of Series
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B Special Preferred Stock, the Company will take any corporate action necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the basis of the Conversion Rate as so
adjusted.
(M) Required Holders
----------------
Whenever reference is made in this subsection (m) (vii) to "Required
Holders" such reference means the registered holders of at least 66-2/3% of the
outstanding Series B Special Preferred Stock (treating all Notes as fully
exercised for shares of Series B Special Preferred Stock to which the registered
holders of Notes would be entitled upon conversion of such Notes).
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(n) Out of the Company's existing authorized but unissued
shares of Preferred Stock (as described above in subparagraph (b) of
this Article FOURTH), Two Hundred Thousand (200,000) shares of a new
series of 14% Convertible Preferred Stock, Without Par Value, $60
Stated Value, Cumulative and Redeemable, hereinafter designated as the
"14% Convertible Preferred Stock", which shall have the following
designations, powers, preferences and rights, and shall be subject to
the following qualifications, limitations and restrictions:
1. DESIGNATION OF STOCK. The new 14% Convertible Preferred Stock,
Without Par Value, $60 Stated Value, Cumulative and Redeemable, shall bear the
designation "14% Convertible Preferred Stock".
2. NUMBER OF SHARES. The maximum number of shares of 14% Convertible
Preferred Stock shall be 200,000.
3. DIVIDENDS Holders of record of shares of 14% Convertible Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors, dividends, payable in shares of 14% Convertible Preferred Stock, at
the quarterly rate of 0.035 shares of 14% Convertible Preferred Stock per share
of 14% Convertible Preferred Stock with respect to such shares outstanding as of
the immediately preceding Record Date (as hereinafter defined). Such dividends
shall be payable on the first business day of April, July, October and January
(hereinafter referred to as a "Dividend Payment Date") commencing April 1, 1996
to persons who are holders of record on the fifteenth (15th) day of the month
immediately preceding such Dividend Payment Date (a "Record Date"). Such
dividends with respect to any share of 14% Convertible Preferred Stock shall
accrue (whether or not declared) from the date of issue thereof. Fractional
shares of 14% Convertible Preferred Stock may be issued in connection with a
payment of a dividend, and any such fractional shares shall be rounded down to
the nearest one-hundredth (1/100) of a share.
So long as any of the 14% Convertible Preferred Stock is
outstanding, the Company will not declare or pay or set apart for payment any
dividends (other than a dividend in Common Stock or in any other class of stock
ranking junior to the 14% Convertible Preferred Stock both as to dividends and
upon liquidation) or make any other distribution on any class of Company stock
ranking junior to the 14% Convertible Preferred Stock either as to dividends or
upon liquidation and will not redeem, purchase or otherwise acquire for value,
or set apart money for any sinking or other analogous fund for the redemption or
purchase of, any shares of any such junior class unless all dividends on the 14%
Convertible Preferred Stock for all Dividend Payment Dates prior to or
concurrent with the payment with respect to any such dividend, distribution,
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<PAGE> 34
redemption, purchase or acquisition as to such junior class (in any such case, a
"Junior Payment"), and, if the Junior Payment does not occur on a Dividend
Payment Date for the 14% Convertible Preferred Stock, for the next succeeding
Dividend Payment Date, shall have been paid. The foregoing notwithstanding, the
holders of fifty percent (50%) or more of the outstanding 14% Convertible
Preferred Stock may approve any redemption or purchase of any of the securities
listed above. Further, the Company may purchase its Common Stock for purposes of
fulfilling payment of employee benefits or for which the Company has agreements
effective prior to the issuance of the 14% Convertible Preferred Stock.
4. LIQUIDATION. The shares of 14% Convertible Preferred Stock shall be
preferred over the shares of Common Stock and any other series of Preferred
Stock other than the 10% Non-Voting Preferred Stock, without par value, $10
Stated Value, Cumulative (the "10% Non-Voting Preferred Stock"), the Series A
Special Preferred Stock, and the Series B Special Preferred Stock, as to assets
of the Company available for distribution to its stockholders, so that in the
event of any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of the 14% Convertible Preferred Stock
shall be entitled to receive out of the assets of the Company available for
distribution to its stockholders, whether from capital, surplus or earnings,
before any distribution is made to holders of shares of Common Stock or any
other series of Preferred Stock, but only after distribution is made to the
holders of the 10% Non-Voting Preferred Stock, the Series A Special Preferred
Stock, and the Series B Special Preferred Stock, an amount equal to $60 per
share of 14% Convertible Preferred Stock outstanding as of the date payment is
made. If, upon any liquidation, dissolution or winding up of the Company, the
assets of the Company, or proceeds thereof, distributable among the holders of
14% Convertible Preferred Stock are insufficient to pay in full the preferential
amount aforesaid, then such assets, or proceeds thereof, shall be distributable
among such holders ratably in accordance with the respective amount which would
be payable on such shares if all amounts payable thereon where payable in full.
For the purposes of this paragraph 4, neither the voluntary sale,
lease, conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all the property or assets of
the Company, nor the consolidation or merger of the Company with one or more
other companies, shall be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, unless such voluntary sales, lease, conveyance,
exchange or transfer shall be in connection with a plan of liquidation,
dissolution or winding up of the Company.
5. CONVERSION. The shares (including fractional portions thereof) of
14% Convertible Preferred Stock shall be convertible into Common Stock, $.01 par
value, of
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the Company ("Common Stock"), subject to adjustment as provided in paragraph 6,
as follows: each share of 14% Convertible Preferred Stock is convertible into
ten (10) shares of Common Stock, plus each share of 14% Convertible Preferred
Stock comprising accrued and unpaid dividends with respect to such converted
share concurrently shall be converted into ten (10) shares of Common Stock;
provided, however, that the number of shares of Common Stock issuable upon
conversion of each share of 14% Convertible Preferred Stock may be adjusted as
provided in paragraph 6, and provided further that fractional shares of 14%
Convertible Preferred Stock may be converted into the number of whole shares of
Common Stock derived by multiplying the amount of fractional shares of 14%
Convertible Preferred Stock by 10 and rounding down to the nearest whole share
of Common Stock. Holders of 14% Convertible Preferred Stock may convert each
share of 14% Convertible Preferred Stock at any time or from time to time after
the date of issuance of such shares and prior to the Redemption Date (as
hereinafter defined). Each share of 14% Convertible Preferred Stock shall be
deemed to have been converted ("Conversion Date") when the Company shall have
received a written notice of conversion from the holder thereof specifying the
number of shares of 14% Convertible Preferred Stock being converted and
accompanied by the share certificate or certificates representing such shares
being converted thereby, duly endorsed to reflect the conversion thereof; where
upon the Company shall issue ten (10) shares of its Common Stock ("Conversion
Shares") for each share of 14% Convertible Preferred Stock delivered for
conversion, plus ten (10) shares of Common Stock for each share of 14%
Convertible Preferred Stock comprising accrued and unpaid dividends, if any, on
the shares of 14% Convertible Preferred Stock delivered for conversion, plus the
shares of Common Stock into which fractional shares of 14% Convertible Preferred
Stock are convertible as provided above, each subject to adjustment as provided
in paragraph 6 hereof. The Company shall deliver to the holder named therein a
certificate or certificates representing the Conversion Shares within fifteen
(15) days of the Conversion Date. Unless all of the 14% Convertible Preferred
Stock evidenced by the surrendered certificate shall have been converted, the
Company shall within fifteen (15) days of the Conversion Date deliver to the
holder named therein a new certificate, substantially identical to that
surrendered, representing the 14% Convertible Preferred Stock formerly
represented by the surrendered certificate which shall not have been converted
or redeemed.
6. CONVERSION ADJUSTMENTS. If at any time or from time to time the Company
shall by stock dividend, subdivision, combination, or reclassification of shares
or otherwise, change as a whole the outstanding shares of Common Stock into a
different number or class of shares, the number of shares issuable upon
conversion of shares of 14% Convertible Preferred Stock, immediately prior to
the date upon which such change shall become effective, shall be proportionately
adjusted. Irrespective of any adjustment or change in the number of shares of
Common Stock actually issuable upon conversion
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<PAGE> 36
hereof, the certificate theretofore and thereafter issued with respect to any
shares of 14% Convertible Preferred Stock may continue to express the number of
shares issuable with respect to the 14% Convertible Preferred Stock when
initially issued. In the case of the issuance of additional shares of Common
Stock as a dividend, the aggregate number of shares of Common Stock issued in
payment of such dividend shall be deemed to have been issued at the close of
business on the record date fixed for the determination of shareholders entitled
to such dividend and shall be deemed to have been issued without consideration;
provided, however, that if the Company, after fixing such record date, shall
legally abandon its plan to so issue Common Stock as a dividend, no adjustment
shall be required by reason of the fixing of such record date.
If at any time while shares of the 14% Convertible Preferred Stock are
outstanding the Company effects any consolidation or merger with any other
corporation or entity, the holders of the 14% Convertible Preferred Stock shall
thereafter be entitled upon such conversion to acquire, with respect to each
share of Common Stock issuable hereunder immediately prior to the date upon
which such consolidation or merger shall become effective, the securities or
property to which a holder of one share of Common Stock would have been entitled
upon such consolidation or merger, or without further consideration other than
the delivery of the certificate or certificates representing the 14% Convertible
Preferred Stock upon such consolidation or merger.
7. REDEMPTION. The Company may redeem at any time, and from time to
time, upon delivery of written notice of such redemption to the holder thereof,
shares of 14% Convertible Preferred Stock and accrued and unpaid dividends
thereon at a redemption price of $60 per share for each share redeemed, with a
proportionate amount for each fractional share (the "Redemption Price"). The
holder of each share of 14% Convertible Preferred Stock shall have the right to
convert the 14% Convertible Preferred Stock into Common Stock in accordance with
the provisions of paragraph 5 hereof within twenty (20) days of receipt of the
notice of such redemption. The twenty-first day after receipt of such notice of
redemption shall be the "Optional Redemption Date."
On June 30, 2000 (the "Mandatory Redemption Date"), the Company shall
redeem all shares of 14% Convertible Preferred Stock then outstanding and all
accrued and unpaid dividends thereon, at the Redemption Price.
Upon the earlier of the Optional Redemption Date or the Mandatory
Redemption Date (a "Redemption Date") (provided that payment thereof is made
available by the Company on the Redemption Date) holders of the 14% Convertible
Preferred Stock to be redeemed on such date shall cease to be stockholders with
respect to such shares and thereafter such shares shall no longer be
transferable on the books
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<PAGE> 37
of the Company and holders of the 14% Convertible Preferred Stock shall have no
interest in or claim against the Company with respect to such shares except the
right to receive payment of the Redemption Price. The Board of Directors shall
cause the transfer books of the Company to be closed as to shares to be
redeemed. Any redemption of the 14% Convertible Preferred Stock shall be
accomplished with funds legally available for such purpose.
8. VOTING. Except as provided by law, the holders of shares of 14%
Convertible Preferred Stock shall have no voting rights whatsoever.
36
