PHONETEL TECHNOLOGIES INC
8-K, 1999-04-06
COMMUNICATIONS SERVICES, NEC
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<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION


                              Washington, DC 02549

                                  -------------

                                    FORM 8-K

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934


        Date of Report (Date of earliest event reported): March 30, 1999




                           PHONETEL TECHNOLOGIES, INC.
                           ---------------------------
             (Exact Name of Registrant as Specified in its Charter)


<TABLE>
<CAPTION>


<S>                                        <C>                                 <C>      
Ohio                                          0-16715                             34-146219
- ------------------------------------------------------------------------------------------------------
(State or Other Jurisdiction                (Commission                        (IRS Employer
of Incorporation)                           File Number)                        Identification Number)

North Point Tower, 7th Floor, 1001 Lakeside Avenue, Cleveland, Ohio                     44114-1195
- ---------------------------------------------------------------------------------------------------
(Address of Principal Executive Offices)                                                 (Zip Code)

Registrant's Telephone Number, including area code       (216) 241-2555
                                                   -------------------------
</TABLE>



<PAGE>   2


Item 5.    Other Events
- -----------------------

The Registrant has entered into an Employment Agreement dated March 30, 1999
(included herein as Exhibit 10.1) appointing John Chichester as President and
Chief Executive Officer. Peter G. Graf continues to serve as the Registrant's
Chairman of the Board and as a Director.


Item 7.    Exhibits
- -------------------

10.1     Employment Agreement dated March 30, 1999 between PhoneTel
         Technologies, Inc. and John Chichester.





                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                            PHONETEL TECHNOLOGIES, INC.




Date:    April 6, 1999                      By:      /s/ Richard P. Kebert
                                                     ---------------------
                                                     Richard P. Kebert
                                                     Chief Financial Officer








<PAGE>   1



                                  EXHIBIT 10.1
                                  ------------



                              EMPLOYMENT AGREEMENT
                              --------------------



         This AGREEMENT (the "Agreement") is made and entered into as of this
30th day of March, 1999, by and among PhoneTel Technologies, Inc. (the
"Corporation") and John Chichester (the "Executive").

         WHEREAS, the Corporation desires to have the Executive provide services
to the Corporation as President and Chief Executive Officer having determined
that the services of the Executive are of value to the Corporation, and the
Executive desires to be employed by the Corporation as President and Chief
Executive Officer.

         NOW THEREFORE, in consideration of the Executive's performance of the
duties set forth herein, and upon the other terms and conditions hereinafter
provided, the parties agree as follows:

         1.       Employment and Services.
                  ------------------------

         During the term of this Agreement, the Executive shall be employed as
President and Chief Executive Officer of the Corporation. As President and Chief
Executive Officer the Executive shall render administrative and management
services to the Corporation such as are customarily performed by persons
situated in similar executive positions, and such other duties as the Board of
Directors of the Corporation ("Board") may from time to time direct. As an
employee of the Corporation, the Executive shall report directly to the Chairman
of the Board, unless otherwise directed by the Board.

         2.       Term of Agreement.
                  ------------------

         The term of this Agreement shall continue for a period of one year
commencing on the date the Agreement is fully executed.

         3. Obligations of the Executive.
            -----------------------------

         Except as set forth herein, the Executive agrees to devote his best
efforts and such business time as may be reasonably necessary to the business
and affairs of the Corporation and to discharge his responsibilities herein in a
faithful and diligent manner. The Executive may serve on corporate, civic or
charitable boards or committees and may manage personal investments, so long as
such activities do not interfere in any material respect with the performance of
his responsibilities hereunder. While Executive is providing services pursuant
to the terms of this Agreement, Executive shall also be permitted to continue to
be involved as an officer and director of Urban Telecommunications, Inc.
("Urban"), provided such involvement does not interfere in 

<PAGE>   2



any material respect with his services to the Corporation. Other than in
connection with Executive's rendering of services to Urban, Executive shall not,
during the term of this Agreement, participate in any businesses competitive to
the Corporation.

         4.       Compensation.
                  -------------

                  a. SALARY. During the term of this Agreement the Corporation
shall pay the Executive a salary of $325,000 per annum, which shall be paid at
regular intervals in accordance with the Corporation's normal payroll practices.
The Company's current payroll practices mandate payment on a bi-weekly basis.

                  b. INCENTIVE BONUS. During the term of this Agreement, and any
renewal thereof, Corporation shall pay the Executive a bonus of up to $75,000.
Said bonus amount shall be based upon certain performance criteria (the
"Performance Plan") as mutually agreed upon between the Board and the Executive.
Corporation and Executive hereby agree to use their reasonable best efforts to
mutually agree upon said Performance Plan within forty-five (45) days after
execution of this Agreement. Any Incentive Bonus due to Executive pursuant to
this paragraph shall be subject to applicable withholding taxes and shall be
paid to Executive on the last day of the twelve month period during which
Executive is employed pursuant to the terms of this Agreement. In the event the
parties cannot reach agreement on such Performance Plan within such forty-five
(45) days, either party may terminate this Agreement and the only obligation of
the Corporation to the Executive will be the payment of his pro rata salary.

                  c. BENEFIT PLANS. The Executive shall be entitled to the
participate in all plans of the Corporation relating to pension, deferred
compensation, profit-sharing, stock purchase, group life insurance, medical
insurance or other retirement or employee benefits that the Corporation may then
have in force for the benefit of its executive employees, and for which he is
otherwise eligible, including but not limited to paid family medical insurance,
paid long-term disability insurance, and paid family dental insurance.

                  d. EXPENSE REIMBURSEMENT. In addition to the compensation
provided to the Executive pursuant to subparagraphs a, b and c hereof, and upon
receipt of proper documentation, the Corporation agrees to promptly reimburse
the Executive for reasonable entertainment, travel, lodging, and other
miscellaneous expenses incurred on its behalf and related to the performance of
his duties hereunder, including but not limited to roundtrip business class
airfare between Cleveland, Ohio and New York once a week for six (6) months or
once every other week for the full term of this Agreement.

                  e. OPTIONS. As further consideration for the services rendered
pursuant to the terms of this Agreement, and subject to the approval of the
Board, the Corporation shall issue to Executive common stock options based upon
operating performance of the Company during the term of this Agreement. Said
options shall be issued in an amount representing a percentage of the Company's
common shares then outstanding based upon the Company's EBITDA as contemplated
by the schedule set forth in Exhibit "A", which is attached hereto and
incorporated herein by reference. The 

                                       2
<PAGE>   3


options contemplated by this paragraph shall have an exercise price equal to
$.01 per share, shall vest fully upon issuance and shall have a three year term.
The right to acquire said shares shall be subsequently documented in an option
agreement to be approved by the Board and shall include terms and conditions as
are reasonably required under the circumstances. In the event the parties cannot
reach agreement on the terms of a formal option agreement within forty-five (45)
days of the date of execution of this Agreement, either party may terminate this
Agreement and the only obligation of the Corporation to the Executive shall be
the payment of the pro rata salary.

                  f. COMPANY VEHICLE. Company shall provide Executive with a
vehicle for business and personal use in Cleveland, Ohio and shall pay for all
expenses incident to the operation of said vehicle including gasoline and
insurance. Said vehicle shall be of a make and model mutually acceptable to
Executive and the Corporation.

         5.       Vacations.
                  ----------

         The Executive shall be entitled to an annual paid vacation of three (3)
weeks during the term of this Agreement. The timing of vacations shall be
scheduled at a time mutually agreed upon between the Executive and the Chairman
of the Board, but in no event shall the Executive take more than two (2) weeks
of vacation at any one time. The Executive shall not be entitled to receive any
additional compensation for his unused vacation time.

         6.       Termination Of Employment.
                  --------------------------

                  a. The Executive's employment under this Agreement may be
terminated by the Corporation for Cause, as hereinafter defined. Any termination
of the Executive by the Corporation other than for Cause shall not prejudice his
right to receive:

                           (i) Compensation in accordance with Paragraph 4 of
                  this Agreement for the remaining term hereof including a
                  pro-rata portion of the incentive bonus contemplated by
                  Paragraph 4(b), and

                           (ii) The other benefits provided by this Agreement
                  for the remaining term thereof.

                 b. For purposes of this Agreement, the term "Cause" shall mean
termination based on (i) the Executive's material breach of this Agreement which
is not cured fully within ten (10) days after written notice to the Executive
identifying such breach, provided that such ten (10) day period shall be
extended to thirty (30) days if such breach is not reasonably susceptible of
cure within ten (10) days and the Executive has commenced to cure and is then
proceeding with diligence to cure such breach; (ii) conviction of the Executive
for (A) any crime committed during the term of this Agreement constituting a
felony in the jurisdiction in which committed, (B) any crime committed during
the term of this Agreement involving moral turpitude (whether or not a felony)
or (C) any other criminal act committed during the term of this Agreement
against the Corporation involving dishonesty or willful misconduct intended to
injure the 

                                       3
<PAGE>   4


Corporation (whether or note a felony); (iii) habitual and excessive use of
alcohol or controlled substances other than for therapeutic reasons; (iv)
indictment of the Executive by a grand jury for a felony violation of the
federal securities laws; or (v) Executive's gross negligence in the performance
of his duties.

                  c. The Board shall have the obligation to act in good faith in
making any determinations with respect to termination for Cause provided for
under Subsections 6(b) above.

                  d. This Agreement may be voluntarily terminated by the
Executive at any time upon sixty (60) days' written notice to the Corporation or
upon such shorter period as may be agreed upon between the Executive and the
Board. In the event of such termination, the Corporation shall be obligated only
to continue to pay the Executive his salary up to the date of termination and
those retirement and/or employee benefits which have been earned or become
payable up to the date of termination.

                 e. If the Executive's employment terminates by reason of the
Executive's Death or Disability (as defined in Paragraph 7), the Corporation
shall pay the Executive any benefits which pursuant to the terms of any
compensation or benefit plan have been earned and have become payable but which
have not yet been paid to the Executive, together with a pro rata portion of any
additional compensation that the Executive would have been entitled to receive
in respect of the year in which the Executive's date of termination occurs had
he continued in employment until the end of such calendar year.

         7.       Disability.
                  -----------

         Executive shall be deemed to be disabled and the Corporation may
  terminate this Agreement if Executive shall, as a result of such Disability,
  fail to perform the duties hereunder for any two (2) months during a
  consecutive three (3) month period. The Corporation may terminate the
  Executive's employment after having established his Disability, which results
  in the Executive becoming eligible for long-term disability benefits. For
  purposes of this Agreement, "Disability" means a physical, or mental
  infirmity, which prevents the Executive from performing the essential
  functions of his position under this Agreement. In the event the Executive's
  employment is terminated by reason of Disability, he shall be entitled to the
  compensation and benefits provided under this Agreement for any period prior
  to the establishment of the Executive's Disability during which he is unable
  to work due to a physical or mental infirmity.

         8.       Change of Control.
                  ------------------

                  In the event of a sale of all or substantially all of the
  assets or equity of the Corporation, this Agreement shall be assumed by said
  successor and all obligations of the Corporation pursuant to the terms of this
  Agreement shall become obligations of said successor.

                                       4
<PAGE>   5


         9.       Non-Solicitation.
                  -----------------

                  a. The Executive agrees that, other than in connection with
the businesses currently serviced by Urban, during the term of this Agreement,
and for a period of one (1) year after the termination of this Agreement he will
not directly or indirectly:

                           (i) Solicit, divert  or take away any of the 
                  customers, business or patronage of the Corporation or its
                  subsidiaries or affiliates; or

                           (ii) Induce or attempt to influence any employee of
                  the Corporation or its subsidiaries or affiliates to terminate
                  his or her employment therewith.

                  b. In the event of a breach or threatened breach of the
Executive of the provisions of this Paragraph 9, the Corporation, or any duly
authorized officer thereof, will be entitled to seek a temporary restraining
order or injunction from a court of appropriate jurisdiction.

         10.      Directors and Officers.
                  -----------------------

         The Corporation shall provide Executive Directors and Officers with
insurance coverage at no cost to the Executive pursuant to the terms of any and
all policies maintained by the Corporation.

         11.      Living Expenses.
                  ----------------

         For a period of up to six (6) months after execution of the Agreement
the Corporation shall provide Executive with, and pay for expenses incident to,
temporary residential housing in Cleveland, Ohio. During such time period the
Corporation hereby agrees to reimburse Executive for round trip business class
travel expenses each weekend for Executive to return to his residence in New
York.

         12.      Successors; Binding Agreement.
                  ------------------------------

         This Agreement and all rights of the Executive hereunder shall inure to
  the benefit of and be enforceable by his personal or legal representatives,
  successors, heirs, distributees, devisees, legatees and permitted assigns.
  This Agreement and all rights of the Corporation hereunder shall inure to the
  benefit of and be enforceable by its successors and permitted assigns.

         13.      No Assignments.
                  ---------------

         This Agreement is personal to each the Executive and Executive shall
  not assign or delegate any of its rights or obligations hereunder, other than
  to Donna Torres, without first obtaining the written consent of the other
  party.

                                       5
<PAGE>   6


         14.      Notices.
                  --------

         All notices, requests, demands and other communications hereunder shall
  be in writing and shall be deemed to have been duly given if delivered by hand
  or mailed certified or registered mail, return receipt requested with postage
  repaid, to the following addresses or to such other address as either party
  may designate by like notice.

                  a.       If to the Corporation, to:

                           PhoneTel Technologies, Inc.
                           1001 Lakeside Avenue, 7th Floor
                           Cleveland, Ohio 44114
                           Attention: General Counsel

                  b.       If to the Executive, to:

                           23 Verona Place
                           Valley Stream, New York 11580

         With a copy to:

                           Bresler Goodman & Unterman
                           521 Fifth Avenue
                           New York, New York 10175
                           Attn: Lee D. Unterman, Esq.


and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.

         15.      Amendments.
                  -----------

         No amendments or additions to this Agreement shall be binding unless in
writing and signed by both parties except as herein otherwise provided.

         16.      Paragraph Headings.
                  -------------------

         The paragraph headings used in this Agreement are included solely for
convenience and shall not affect, or be used in connection with, the
interpretation of this Agreement.

         17.      Severability.
                  -------------

         The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provisions shall not affect the validity
or enforceability of the other provisions hereof.

                                       6
<PAGE>   7


         18.      Governing Law.
                  --------------

         This Agreement shall, except to the extent that Federal law shall be
deemed to preempt it, be governed by and construed and enforced in accordance
with the laws of the State of Ohio.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.

                                      PHONETEL TECHNOLOGIES, INC.


                                      By:   /s/  Peter G. Graf
                                      ------------------------
                                           Peter G. Graf,
                                           Chairman of the Board

                                      EXECUTIVE

                                      By:  /s/  John Chichester
                                      -------------------------
                                      Printed Name: John Chichester

                                       7

<PAGE>   8





                                   Exhibit "A"



            EBITDA (in Millions)

            Base-13.9                                    0.75%
            14-19.9                                      1.00%
            20-24.9                                      1.50%
            25+                                          2.00%





1. 3 Year Term, Exercise Price of $.01 per share, fully vested upon issuance 

2. Measurement beginning from 4/1/99 

3. Base = (125% of LTM EBITDA as of 12/31/98 - ADJUSTED TO NORMALIZE "DIAL  
   AROUND") (12/31/98 EBITDA = $5.6 Million)





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