<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
COMMISSION FILE NUMBER 0-16715
PHONETEL TECHNOLOGIES, INC.
---------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-1462198
---- ----------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
NORTH POINT TOWER, 7TH FLOOR, 1001 LAKESIDE AVENUE, CLEVELAND, OHIO 44114-1195
- ------------------------------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 241-2555
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
COMMON STOCK, PAR VALUE $0.01 NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
------------------------------
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO __
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 22, 1999 was $924,000.
The number of shares outstanding of the registrant's Common Stock, $.01 par
value, as of March 22, 1999 was 18,754,133.
Documents Incorporated by Reference
None
<PAGE> 2
The undersigned registrant hereby amends the following items and
exhibits of its previously filed Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 as set forth in the pages
attached hereto.
<TABLE>
<CAPTION>
<S> <C>
COVER PAGE..............................................................................PAGE 1
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ...................PAGE 3
ITEM 11. EXECUTIVE COMPENSATION ...............................................PAGE 4
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT .......................................................PAGE 9
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .......................PAGE 13
SIGNATURE(S)............................................................................PAGE 15
</TABLE>
2
<PAGE> 3
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
BIOGRAPHICAL INFORMATION CONCERNING CURRENT DIRECTORS
<TABLE>
<CAPTION>
NAME AND AGE TENURE AS DIRECTOR AND PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------ ------------------------------------------------------------------
<S> <C>
Joseph Abrams, Age 62 Served as a Director of the Company since September 1995. Mr. Abrams
is also a director of Spectrum Signal Processing, Inc., a public
company that specializes in digital signal solutions. Mr. Abrams was
a co-founder of and served as the President of AGS Computers from
1967 to 1991. Since 1991, Mr. Abrams has been a private investor.
Peter G. Graf, Age 61 Served as a Director and Chairman of the Company since July 1995 and
as Chief Executive Officer from July 1995 to March 1999. Mr. Graf is
licensed as an attorney and certified public accountant and serves as
an officer and/or director of various privately held companies and as
the Managing Partner of an accounting firm. From 1991 to September
1995, Mr. Graf served as Vice Chairman of USA Mobile Communications
Holdings, Inc.
George H. Henry, Age 45 Served as a Director of the Company since April 1990. Mr. Henry has
been the President of G. Howard Associates, Inc., a private
investment firm, since 1986. Mr. Henry is also a director of Access
Television Network and of The Recovery Network.
Aron Katzman, Age 60 Served as a Director of the Company since September 1995. Mr. Katzman
is President of New Legends, Inc., a country club/residential
community in the St. Louis, Missouri 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
franchiser 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. Mr. Katzman was
formerly a director and officer of World Communications, Inc., which
was merged into the Company in September 1995.
Steven Richman, Age 55 Served as a Director of the Company since September 1995. Mr. Richman
is the principal owner and has served as the Chief Executive Officer
of Fabric Resources International for more than the past five years.
Mr. Richman was the co-founder and an officer of Cable Systems USA,
an officer at Cellular Systems USA, and a director of USA Mobile
Communications Holdings, Inc.
</TABLE>
3
<PAGE> 4
CURRENT EXECUTIVE OFFICERS
The Company has three executive officers other than Mr. Graf.
<TABLE>
<CAPTION>
NAME AND AGE TENURE AS AN OFFICER AND BUSINESS EXPERIENCE DURING THE LAST FIVE YEARS
- ------------ -----------------------------------------------------------------------
<S> <C>
John D. Chichester Served as President and Chief Executive Officer since March 30, 1999.
Age 50 Prior to joining the Company, Mr. Chichester served as a director and
Executive Vice President of Urban Telecommunications, Inc. and
continues to serve in that capacity. From 1970 to 1992, Mr.
Chichester held various positions with the Public Communication
Department of Nynex including Director of Operations where he
directed the company's payphone operations.
Tammy L. Martin Served as Executive Vice President and Chief Administrative Officer
Age 34 of the Company since April 1996 and has been General Counsel and
Secretary of the Company since September 1995. Previously, Ms. Martin
served as Associate Legal Counsel for the Company during 1993 and
1994. Prior to joining the Company, Ms. Martin was in private legal
practice from 1992 to 1993.
Richard P. Kebert Served as Chief Financial Officer and Treasurer of the Company since
Age 52 September 1996. Prior to joining the Company, Mr. Kebert was an
independent consultant. From 1994 to 1996, he was Vice President -
Finance and Administration of Acordia of Cleveland, Inc. For 12 years
prior thereto, Mr. Kebert held several senior management positions
with Mr. Coffee, inc., including Vice President of Administration and
Secretary. Mr. Kebert is a certified public accountant.
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to the rules of the Securities Exchange Act of 1934 (the
"Act"), the Company is obligated to identify each person who, at any time during
the fiscal year, was a Director, Officer and/or beneficial owner of more than
10% of any class of equity securities of the Company registered pursuant to
Section 12 of the Act, or any other person subject to Section 16 of the Act with
respect to the Company (a "Reporting Person") that failed to file on a timely
basis, as disclosed in the Forms (as defined below), reports required by Section
16(a) of the Act during the fiscal year ended December 31, 1998, or prior fiscal
years.
The Company has, therefore, reviewed the following reports of Reporting
Persons received on or before March 31, 1999: Form 3--Initial Statement of
Beneficial Ownership of Securities and Form 4--Statement of Changes in
Beneficial Ownership of Securities, and amendments thereto, furnished to the
Company during the fiscal year ended December 31, 1998, and Form 5--Annual
Statement of Changes of Beneficial Ownership, and amendments thereto, furnished
to the Company with respect to the fiscal year ended December 31, 1998
(collectively, the "Forms"). No Forms were received by the Company during the
period enumerated which were not timely filed.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation for
services rendered during the three-year period ended December 31, 1998 paid to
the Company's Chief Executive Officer (the "CEO") and to each of the Company's
most highly compensated executive officers who were serving as executive
officers at December 31, 1998 and each of whose total salary and bonus for
fiscal 1998 exceeded $100,000.
4
<PAGE> 5
================================================================================
SUMMARY COMPENSATION TABLE
================================================================================
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
---------------------------------- --------------- --------------------
Long-
Other Securities Term
Name Annual Restricted Underlying Incen- All Other
And Compen- Stock Options/ tive Compen-
Principal Salary Bonus sation Award(s) SARs Payouts sation
Position Year ($) ($) ($) ($) (#) ($) ($)
-------- ---- ------ ----- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter G. Graf (a) 1998 ___ ___ ___ ___ ___ ___ ___
Chairman, Director 1997 ___ ___ ___ ___ 450,000(b) ___ ___
and Former Chief 1996 ___ ___ ___ ___ ___ ___ ___
Executive Officer
Peter Buonaiuto
Former President and 1998 103,384 ___ ___ ___ 105,000(g) ___ ___
Chief Operating 1997 ___ ___ ___ ___ ___ ___ ___
Officer 1996 ___ ___ ___ ___ ___ ___ ___
Tammy L. Martin
Executive Vice 1998 137,076 104,939 ___ ___ ___ ___ 3,463(d)
President, Chief 1997 132,000 48,061 ___ ___ 200,000(C) ___ 3,160(d)
Administrative 1996 98,123 106,892 ___ ___ ___ ___ ___
Officer, General
Counsel and
Secretary
Richard P. Kebert 1998 124,615 57,500 ___ ___ ___ ___ 4,800(f)
Chief Financial 1997 120,000 14,922 ___ ___ 30,000(e) ___ 4,700(f)
Officer and 1996 54,615 __ ___ ___ ___ ___ 1,600(f)
Treasurer
</TABLE>
(a) Mr. Graf has received no cash compensation for his service as Chief
Executive Officer.
(b) On February 4, 1997, Mr. Graf received a grant of 450,000 stock options
pursuant to the Company's 1997 Stock Incentive Plan, at an exercise price of
$4.00 per share, which vests over a three-year period.
(c) On May 7, 1997, Ms. Martin received a grant of 200,000 stock options
pursuant to the Company's 1997 Stock Incentive Plan, at an exercise price of
$2.69 per share, which vests over a three-year period.
(d) Represents value of personal usage of Company provided vehicle.
(e) On September 17, 1997, Mr. Kebert received a grant of 30,000 stock options
pursuant to the Company's 1997 Stock Incentive Plan, at an exercise price of
$2.50 per share, which vests over a three-year period.
(f) Represents automobile allowance.
(g) On October 29, November 29 and December 29, 1998, Mr. Buonaiuto received
grants of 35,000 stock options on each of the respective dates, at an
exercise price of $0.81 per share, which vested upon issuance.
5
<PAGE> 6
================================================================================
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
================================================================================
<TABLE>
<CAPTION>
Individual Grants
-----------------
NUMBER OF PERCENT GRANT DATE
SECURITIES OF TOTAL PRESENT VALUE
UNDERLYING OPTIONS/SARS BASED ON BLACK-
OPTIONS/SARS GRANTED TO EM- EXERCISE OR BASE SCHOLES OPTION
GRANTED PLOYEES IN FISCAL PRICE EXPIRATION PRICING MODEL
NAME (#) YEAR ($/SHARE) DATE ($)
- --------------------------- ------------ ------------------ ---------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Peter Buonaiuto 35,000 33.3% 0.81 10/28/03 3,300
Former President 35,000 33.3 0.81 11/28/03 2,200
and Chief 35,000 33.4 0.81 12/28/03 1,100
Operating Officer ------- ----- -----
105,000 100.0% 6,600
</TABLE>
The following table sets forth certain information as of December 31,
1998 about unexercised stock options held by the named executive officers at
December 31, 1998. No stock options were exercised by such persons during 1998.
===============================================================================
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND
FY-END OPTION VALUES
===============================================================================
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT
SHARES AT FY-END
NAME ACQUIRED ON VALUE FY-END (#) ($)
AND EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
PRINCIPAL POSITION (#) ($) UNEXERCISABLE UNEXERCISABLE
------------------ ----------- -------- ------------------- --------------------
<S> <C> <C> <C> <C>
Peter G. Graf -- -- 150,000 --
Chairman, Director 300,000 --
and Former
Chief Executive Officer
-- -- 105,000 --
Peter Buonaiuto -- --
Former President
and Chief Operating Officer
Tammy L. Martin -- -- 67,000 --
Executive Vice President, 133,333 --
Chief Administrative Officer,
General Counsel
and Secretary
Richard P. Kebert -- -- 10,000 --
Chief Financial Officer 20,000 --
and Treasurer
</TABLE>
6
<PAGE> 7
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL
ARRANGEMENTS
On September 3, 1996, the Company entered into an employment agreement
with the Company's Chief Financial Officer, Richard P. Kebert. The agreement
with Mr. Kebert entitled him to an annual salary of $120,000 during the eighteen
(18) month term (the "Term") of the agreement, as well as a minimum incentive
bonus. The agreement was automatically extended for a one-year period through
March 3, 1999 at which time the employment agreement expired. Mr.
Kebert continues to serve as the Company's Chief Financial Officer.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1998, the Board of Directors held six meetings and took action
by unanimous written consent on three other occasions.
The Board of Directors of the Company has a Compensation Committee,
Nominating Committee and an Audit Committee, none of which held any meetings in
1998.
The Compensation Committee has the authority to decide upon and make
recommendations with respect to executive compensation matters. Joseph Abrams,
Peter Graf and George Henry are members of the Compensation Committee. Joseph
Abrams is the Chairman of the Compensation Committee.
The Audit Committee has the authority to recommend to the Board of
Directors the independent accountants to audit the Company's financial
statements, to meet with the independent accountants and to review the Company's
financial statements, results of audits and fees charged. Peter Graf, Aron
Katzman and Steven Richman are members of the Audit Committee. Aron Katzman is
the Chairman of the Audit Committee.
The Nominating Committee evaluates the composition of the Board of
Directors and makes recommendations to the Board of Directors as to nominees
(including any nomination of qualified candidates submitted in writing by
shareholders to the Secretary of the Company) for Director to be submitted to
the shareholders. Joseph Abrams, Peter Graf and Steven Richman are members of
the Nominating Committee. Peter Graf is the Chairman of the Nominating
Committee.
During 1998, all Directors attended at least 75% of the aggregate total
number of the meetings of the Board and Committees on which they served.
COMPENSATION OF DIRECTORS
The Company's Code of Regulations provides that the Board of Directors
may compensate Directors for serving on the Board and reimburse them for any
expenses incurred as a result of Board meetings. Directors' fees have been
approved by the Board of Directors and are payable only to non-employee
Directors. On April 6, 1998, the Board authorized the issuance of 25,000
warrants to purchase Common Stock of the Company to each non-employee Director,
at an exercise price of $1.875 per share, as compensation for services rendered
during the 1997-98 service year. Compensation of Directors for the 1998-99
service year has not yet been determined.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Peter G. Graf served as a member of the Compensation Committee of the
Board of Directors during 1998 and also served as Chief Executive Officer of the
Company.
Peter G. Graf, the Company's Chairman and former Chief Executive
Officer, received no monetary compensation for his service during 1998. During
1997, Mr. Graf received a grant of 450,000 stock options, which vests over a
three-year
7
<PAGE> 8
period. The number of Mr. Graf's options was set at a level based upon his lack
of monetary compensation and is believed by the Company to be competitive in the
telecommunications industry.
Compensation Committee members Peter Graf and Joseph Abrams received
nominal value warrants and are holders of the Company's 14% Preferred Stock,
which are described below. See "Certain Relationships and Related Transactions."
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors (the "Committee")
is composed of two non-employee Directors and the Company's Chairman and former
Chief Executive Officer. The Committee is responsible for reviewing and
approving the compensation paid to executive officers of the Company, including
salaries, bonuses and stock options. Following review and approval by the
Committee, action pertaining to executive compensation is reported to the full
Board of Directors.
COMPENSATION PHILOSOPHY
The Company's compensation of executive officers and its philosophy
regarding executive compensation is comprised of the following characteristics:
(i) Competitive base salary; and
(ii) Granting Stock Options as a portion of the total compensation which
vest over a certain number of years and have an exercise price equal to
the market price on the date of grant; and
(iii) Granting performance-based bonuses. Given the Company's recently
demonstrated growth pattern and recently enacted federal legislation
affecting the pay telephone industry, the Company believes its
executive compensation should be designed to allow the Company to
attract, motivate and retain executives of a high caliber to permit the
Company's continued growth. The Company takes into account the
compensation paid at similarly situated companies, both within and
outside of the pay telephone industry, when determining executive
compensation. The Company believes that by granting stock options to
purchase the Company's Common Stock to its executives that vest over a
certain number of years, it will be able to encourage executives to
remain with the Company. Additionally, individual performance of the
executive is considered as a factor in determining executive
compensation, as well as the overall performance of the Company, which
includes, but is not limited to earnings, revenue growth, cash flow and
earnings per share. The committee also uses subjective criteria it
deems relevant in its reasonable discretion.
Respectfully submitted,
Joseph Abrams, Chairman
Peter G. Graf
George H. Henry
PERFORMANCE GRAPH
The Company's Common Stock is currently traded over the counter and is
quoted on the National Quotation Service Pink Sheets under the symbol "PHNT".
From November 14, 1996 to February 12, 1999, the Common Stock of the Company
traded under the symbol "PHN" on the American Stock Exchange. Previously, the
Company's stock was traded on the NASDAQ's Small Cap Market.
8
<PAGE> 9
The following graph shows a comparison of the five-year cumulative
return (assuming reinvestment of any dividends) among the Common Stock of the
Company, the S&P 500 Index ("S&P 500"), the Russell 2000 Index ("Russell 2000"),
and a peer group selected by the Company. The peer group previously consisted of
Peoples Telephone Company, Inc. ("Peoples"), Communications Central Inc. ("CCI")
and Davel Communications Group, Inc. ("Davel"). Due to the acquisition by Davel
of CCI on February 3, 1998, CCI is no longer included in the peer group. The
stock price used to determine the 1998 peer group appreciation includes the
price of Peoples shares on December 22, 1998, the day before it was acquired by
Davel. The information in the graph assumes an investment of $100 in the Common
Stock of the Company and each index or group on December 31, 1993.
The stock price performance information shown in the following graph is
historical information and is not necessarily indicative of future price
performance. The stock price of the Company set forth below has been adjusted to
reflect a one for six reverse stock split which was effective on December 26,
1995.
COMPARISON OF FIVE YEAR CUMULATIVE APPRECIATION AMONG
PHONETEL, THE S&P 500, THE RUSSELL 2000 AND A PEER GROUP*
<TABLE>
<CAPTION>
RUSSELL
AS OF DECEMBER 31 PEERS 2000 S&P 500 PHNT
<S> <C> <C> <C> <C>
1993 100 100 100 100
1994 69 97 98 153
1995 63 118 132 223
1996 85 140 159 41
1997 116 169 208 38
1998 90 163 264 1
* Assumes $100 is invested on December 31, 1993.
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information 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, the named executive officers and all Directors and
officers as a group as of March 31, 1999. Unless otherwise indicated, the number
of shares of Common Stock owned by the named shareholders assumes the exercise
of the warrants or options that are exercisable within 60 days, 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 Commission and other
information known by the Company.
9
<PAGE> 10
<TABLE>
<CAPTION>
================================================================================================================
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF COMMON STOCK OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
=================================================================================================================
DIRECTORS
---------
<S> <C> <C>
Peter G. Graf (a) 1,808,880 9.3%
Chairman, Director and
Former Chief Executive Officer
1001 Lakeside Avenue, 7th Floor
Cleveland, OH 44114-1195
George H. Henry (b) 365,376 1.9%
Director
6860 Sunrise Court
Coral Gables, FL 33133
Steven Richman (c) 312,109 1.7%
Director
9 Beech Lane
Kings Point, NY 11024
Aron Katzman (d) 304,154 1.6%
Director
10 Layton Lane
St. Louis, MO 63124
Joseph Abrams (e) 261,351 1.4%
Director
85 Old Farm Road
Bedminster, NJ 07921
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
================================================================================================================
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF COMMON STOCK OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
=================================================================================================================
<S> <C> <C>
NAMED EXECUTIVE OFFICERS
------------------------
140,000 *
Peter Buonaiuto (f)
Former President and Chief
Operating Officer
1001 Lakeside Avenue, 7th Floor
Cleveland, OH 44114-1195
Tammy L. Martin (g) 133,666 *
Executive Vice President,
Chief Administrative Officer,
General Counsel and Secretary
1001 Lakeside Avenue, 7th Floor
Cleveland, OH 44114-1195
Richard P. Kebert (h) 10,000 *
Chief Financial Officer
and Treasurer
1001 Lakeside Avenue, 7th Floor
Cleveland, OH 44114-1195
Executive Officers and Directors (i) 3,335,536 16.6%
As a group (8 persons)
5% BENEFICIAL OWNERS
--------------------
ING (U.S.) Investment Corporation (j) 2,017,500 10.8%
135 East 57th Street
New York, NY 10022
Cerberus Partners, L.P. (k) 1,922,540 9.4%
950 Third Avenue, 20th Floor
New York, NY 10022
Jackson Square Management, LLC (l) 1,200,000 6.4 %
909 Montgomery Street, Suite 500
San Francisco, CA 94133
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
================================================================================================================
NUMBER OF SHARES PERCENTAGE
NAME AND ADDRESS OF COMMON STOCK OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
=================================================================================================================
<S> <C> <C>
Gabriel Capital, L.P. (m) 1,100,764 5.7 %
Ariel Fund Limited
450 Park Avenue
New York, NY 10022
Fleet Financial Group, Inc. (n) 965,790 5.1%
One Federal Street
Boston, MA 02211
</TABLE>
* Less than 1.0%
(a) Includes warrants to purchase 33,231 shares of Common Stock through
December 31, 2000, warrants to purchase 41,833 shares of Common Stock
through August 15, 2000, options to purchase 300,000 shares of Common
Stock through February 3, 2005 and 14% Preferred Stock (as defined
herein) which is convertible through June 30, 2000 into 380,092 shares
of Common Stock.
(b) Includes warrants to purchase 25,000 shares of Common Stock through
April 6, 2003.
(c) Includes warrants to purchase 25,000 shares of Common Stock through
April 6, 2003, warrants to purchase 12,500 shares of Common Stock
through August 15, 2000, warrants to purchase 16,222 shares of Common
Stock through August 29, 2000, 11,033 shares of Common Stock and
warrants to purchase 3,244 shares of Common Stock through August 29,
2000 held by his spouse and 14% Preferred Stock which is convertible
through June 30, 2000 into 63,349 shares of Common Stock.
(d) Includes 14% Preferred Stock which is convertible through June 30, 2000
into 66,959 shares of Common Stock and warrants to purchase 25,000
shares of Common Stock through April 6, 2003.
(e) Includes 14% Preferred Stock which is convertible through June 30, 2000
into 88,688 shares of Common Stock and warrants to purchase 25,000
shares of Common Stock through April 6, 2003.
(f) Includes warrants to purchase 140,000 shares of Common Stock, which
expire in 35,000 share increments from October 2003 through January
2004.
(g) Includes options to purchase 333 shares of Common Stock through January
3, 2000, and options to purchase 133,333 shares of Common Stock through
May 6, 2005.
(h) Includes options to purchase 10,000 shares of Common Stock through
September 16, 2005.
(i) Includes beneficial ownership of Common Stock described above with
respect to Messrs. Graf, Abrams, Henry, Katzman, Richman, Kebert,
Buonaiuto and Ms. Martin.
(j) Reflects beneficial ownership of ING (U.S.) Investment Corporation, a
wholly owned subsidiary of Internationale Nederlanden (U.S.) Capital
Corporation ("ING").
(k) Reflects warrants to purchase the Series A Preferred Stock, which is
immediately convertible into 1,798,240 shares of Common Stock.
(l) Reflects beneficial ownership of Jackson Square Partners LP, Will K.
Weinstein Revocable Trust, Will K. Weinstein and Oded Levy.
(m) Includes warrants to purchase 270,116 shares of Common Stock which
expire in August through November of 2005 and 239,270 shares of Common
Stock beneficially owned by Gabriel, L.P. and warrants to purchase
270,116 shares of Common Stock which expire in August through November
of 2005 and 321,262 shares of Common Stock beneficially owned by Ariel
Fund Limited.
(n) Reflects beneficial ownership of Fleet National Bank and Fleet
Investment Advisors.
12
<PAGE> 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 15, 1996, warrants with a nominal value ("Nominal Value
Warrants") to purchase 2,018,942 shares of Common Stock expiring March 13, 2001,
were issued in conjunction with certain acquisitions, the redemption of certain
preferred stocks and conversion of certain debt of the Company into the 14%
Convertible Cumulative Redeemable Preferred Stock ("14% Preferred Stock"). The
14% Preferred Stock accrues dividends at the quarterly rate of 0.035 shares of
14% Preferred Stock per share and is redeemable by the Company for $60 per share
plus accrued and unpaid dividends at any time prior to June 30, 2000, at which
date the Company must redeem all outstanding shares of 14% Preferred Stock at
$60 per share. Each share of 14% Preferred Stock is convertible into 10 shares
of Common Stock. Concurrently with their exchange of debt and preferred stock
for the 14% Preferred Stock, the following Directors, Executive Officers and
security holders who at the time held 5% or more of the Common Stock, received
the amount of 14% Preferred Stock and Nominal Value Warrants shown below.
<TABLE>
<CAPTION>
=====================================================================================================
Value of Debt/
Preferred Surrendered Number of Nominal
and Stated Value of 14% Value Warrants
Name of Beneficial Owner Preferred Stock Issued Issued
=====================================================================================================
<S> <C> <C>
Peter G. Graf $1,500,000 539,989
Chairman, Director and Former
Chief
Executive Officer
Joseph Abrams $ 350,000 125,997
Director
Aron Katzman $ 264,250 95,128
Director
Steven Richman $ 250,000 89,998
Director
</TABLE>
On May 30, 1997, the Company entered into an agreement (the "Credit
Agreement") with various lenders (collectively referred to as the "Lenders").
ING was Agent for the Lenders and Transamerica Business Credit Corporation and
Finova Capital Corporation were Co-Agents for the Lenders. The Credit Agreement
provided a $75,000,000 commitment of which $60,000,000 was to be utilized for
future acquisitions ("Expansion Loan Commitment"), and $15,000,000 was to be
utilized for general working capital requirements. Borrowings accrued interest
at the ING Alternate Base Rate (as defined in the Credit Agreement) plus 1.50%.
The Lenders received customary fees in connection with the execution of the
Credit Agreement. The Credit Agreement was originally scheduled to mature on May
20, 2000 and all the Company's installed public pay telephones are pledged as
collateral. The Company borrowed $17,700,000 under the Expansion Loan Commitment
to complete certain acquisitions during 1997. The Company also borrowed
$7,300,000 under the Revolving Credit Commitment for interest payments due under
the Company's $125,000,000 12% Senior Notes and for general working capital
purposes. Subsequent to the September 16, 1997 Court ruling which vacated
dial-around compensation, and pursuant to certain terms of the Credit Agreement,
the agent gave notice to the Company that it was prohibited from making
additional borrowings under the Credit Agreement, without prior approval from
the Lenders.
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The Credit Agreement includes covenants, which, among other things,
require the Company to maintain ratios as to fixed charges, debt to earnings,
current ratio and interest coverage (all as defined in the Credit Agreement).
Other covenants limit incurrence of additional long-term debt, the level of
capital expenditures, the incurrence of lease obligations and permitted
investments.
On February 24, 1998, the Credit Agreement was amended to increase the
Revolving Credit Commitment to $20,000,000 and to decrease the Expansion Loan
Commitment to $55,000,000 (the "First Amendment"). The amount available for
letters of credit under the working capital commitment was reduced from
$5,000,000 to $3,000,000 and certain covenants therein were modified. On the
same date, the Company was permitted to borrow an additional $3,000,000 for
working capital purposes under the Revolving Credit Commitment. On March 31,
1998, the Credit Agreement was further amended (the "Second Amendment") to
modify certain financial covenants.
On May 8, 1998, the Company amended the Credit Agreement (the "Third
Amendment") and Foothill Capital Corporation, as replacement Agent and lender,
assumed all of the rights and obligations of the former Lenders.
Accordingly, the Company is no longer obligated to ING under the Credit
Agreement.
Under a loan agreement among ING and Cerberus Partners, L.P.
("Cerberus") and the Company, which was repaid in 1996, ING and Cerberus
received warrants for the purchase of Series A Special Convertible Preferred
Stock (the "Series A Warrants"). On October 13, 1998, the Company received
notice from Cerberus which purported to exercise its put right as defined in the
agreement for the Series A Warrants (the "Warrant Agreement") with respect to
89,912 Series A Warrants and 124,300 Common Shares. The Warrant Agreement
specifies that the Company is to redeem Series A Warrants that are convertible
into shares of Common Stock (or shares of Common Stock obtained from such
conversion) at a value determined by a formula, subject to certain limitations,
set forth therein. In 1998, the Company recorded an accrued liability and a
charge to additional paid-in capital of $1,452,000 relating to this put. The
Company intends to engage in further negotiations with Cerberus regarding such
notice. On November 13, 1998, the other former lender, ING, exercised warrants
to purchase 100,875 shares of Series A Preferred and immediately converted their
Series A Preferred to Common Stock. This exercise resulted in the issuance of
2,017,500 shares of Common Stock, net of Common Stock not issued in lieu of cash
payment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment Number 1 to its previously filed
Annual Report on Form 10-K for the fiscal year ended December 31, 1998 to be
signed on its behalf by the undersigned thereunto duly authorized.
PHONETEL TECHNOLOGIES, INC.
April 30, 1999 By: /s/ Peter G. Graf
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Peter G. Graf
Chairman of the Board
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