<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark one)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-22610
DAVEL COMMUNICATIONS GROUP, INC.
(Exact name of registrant as specified in its charter)
Illinois 37-1064777
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1429 Massaro Boulevard
Tampa, Florida 33619
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 623-3545
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, no 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 the 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. ( )
As of March 24, 1998, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $60,367,371. As of March
24, 1998, there were 4,647,812 shares of the registrant's Common Stock
outstanding.
Documents incorporated by reference: None
<PAGE>
This Form 10-K/A amends the Annual Report on Form 10-K for the year ended
December 31, 1997 of Davel Communications Group, Inc. (the "Company"), filed on
March 31, 1998, by providing that information required by items 10, 11, 12 and
13 of Form 10-K which was not included with the March 31, 1998 filing.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and ages of the Company's
directors and executive officers and their positions with the Company:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David R. Hill(1)(2) 66 Chairman of the Board
Robert D. Hill(1) 46 President and Chief Executive
Officer and Director
Paul B. Demirdjian 37 Senior Vice President of
Operations and Director
Michael E. Hayes 40 Senior Vice President and Chief
Financial Officer and Director
Michael G. Kouri 53 Senior Vice President of
Development and Finance
and Director
Theodore C. Rammelkamp, Jr.(1) 53 Senior Vice President and
General Counsel and Director
Glen E. Barber(3) 48 Director
Thomas M. Vitale(2)(3) 41 Director
A. Jones Yorke(2)(3) 65 Director
- -----------
</TABLE>
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
David R. Hill founded Davel Communications Group, Inc. and its
subsidiaries. He has been Chairman of the Board of these companies since their
respective dates of organization. He served as the Chief Executive Officer of
these companies through December 1994. He has been involved in industries
related to electronics and telecommunications since 1951. Mr. Hill is the
father of Robert D. Hill.
Robert D. Hill joined the Company in 1981 as the general manager of its
largest telephone remanufacturing facility. Between January 1990 and December
1994, he served as the Company's President and Chief Operating Officer. Since
January 1995, he has served as the Company's President and Chief Executive
Officer.
2
<PAGE>
Paul B. Demirdjian joined the Company in 1984. Since January 1990, he has
served as the Company's Senior Vice President of Operations.
Michael E. Hayes joined the Company in September 1992 as its Controller and
Treasurer. Mr. Hayes became Vice President and Chief Financial Officer in
August 1993 and became a Senior Vice President in January 1996.
Michael G. Kouri served as a financial consultant to the Company from
October 1990 through November 1993, when he was appointed Senior Vice President
of Development and Finance. Since 1983 he has been Chairman of the Board and
Chief Executive Officer of Elite Financial Corporation, a financial services
company. Two of Elite's subsidiaries, Telco Leasing Acceptance Corporation and
Eastern Payphones, Inc., specialize in the financing, operating and marketing of
pay telephones.
Theodore C. Rammelkamp, Jr. has been Senior Vice President and General
Counsel of the Company since April 1994. Prior to becoming an employee of the
Company, Mr. Rammelkamp was a member of the law firm of Rammelkamp, Bradney,
Dahman, Kuster, Keaton, Fritsche & Lindsay, P.C. from 1979 through March 1994,
serving as its managing partner from January 1991 through March 1994.
Glen E. Barber is the founder and has been President of New Age
Communications, Inc., a distributor of operator services, since 1989. Mr.
Barber serves on the Board of Directors of Medical Industries of America, Inc.,
a provider of diagnostic and therapeutic healthcare services to the surgical and
medical community, and as President and Director of the Museum of Art in
Tallahassee, Florida.
Thomas M. Vitale has been a partner in the law firm of Mayer, Brown & Platt
for over five years.
A. Jones Yorke is the Chief Executive Officer of Weatherly Securities, a
registered securities dealer, and serves as Chairman of 42nd Street Development
Corporation, a not-for-profit corporation. Mr. Yorke has been a financial
consultant to and President of Asset Channels, Inc., an investment company,
since February 1990. Mr. Yorke was Chairman of the Board of Auerbach, Pollack &
Richardson, Inc., a registered securities dealer, and Auerbach Financial Group,
Inc., a financial holding company, from November 1994 through November 1995.
3
<PAGE>
ITEM 11. EXECUTIVE OFFICER COMPENSATION AND BENEFITS
Executive Officer Compensation
The following tables and notes set forth the compensation of the Company's
Chief Executive Officer and the four highest paid executive officers whose
salary and bonuses exceeded $100,000 in the fiscal year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------------- ---------------------------------------------
Securities
Other Annual Common Underlying All Other
Name and Position Year Salary Bonus(1) Compensation (2) Stock Grants Options Compensation (4)
- ----------------- ---- ---------- ---------- ---------------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Hill, 1997 $ 400,000 $ 120,000 $ - $ 100,000 (3) $ 2,250
Chairman of the Board 1996 250,000 91,777 - - 200,000 2,250
1995 250,000 70,480 - - - 2,250
Robert D. Hill, 1997 $ 200,000 $ 40,000 $ - $ 40,000 (3) $ 2,400
President and Chief 1996 200,000 33,664 - 40,000 6,000 2,250
Executive Officer 1995 150,000 75,016 - - - 2,250
Paul B. Demirdjian, 1997 $ 145,000 $ 29,000 $ - $ 30,000 (3) $ 2,091
Senior Vice President 1996 145,000 30,696 - 30,000 6,000 2,250
of Operations 1995 90,000 90,938 - - - 2,080
Michael G. Kouri, 1997 $ 145,000 $ 29,000 $ - $ 30,000 (3) $ 2,091
Senior Vice President 1996 145,000 24,100 - 30,000 6,000 2,250
of Development 1995 85,000 88,419 - - - 1,957
and Finance
Theodore C. Rammelkamp, Jr. 1997 $ 120,000 $ 24,000 $ - $ 30,000 (3) $ 1,731
Senior Vice President 1996 120,000 17,935 - 30,000 6,000 2,069
and General Counsel 1995 85,000 55,240 - - - 1,414
</TABLE>
(1) The company has paid (based on growth in earnings per share for the year)
preliminary bonuses for 1997 at the minimum amounts potentially payable
pursuant to the executive officers' employment agreements. 1997 bonus
awards in excess of the minimum amounts payable are based on individual
performance and are currently under review by the Compensation Committee.
Final bonus amounts will be disclosed in the Company's 1998 definitive
proxy materials to be filed with the Securities and Exchange Commission.
(2) Other Annual Compensation was paid in the form of perquisites and was less
than the level required for reporting.
(3) 1997 stock option awards are currently under review by the Compensation
Committee. Final stock option awards will be disclosed in the Company's
1998 definitive proxy materials to be filed with the Securities and
Exchange Commission. No stock options have yet been awarded for 1997.
(4) All Other Compensation disclosed in this column represents the Company's
contributions, both vested and not vested, to the Company's defined
contribution plan.
4
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------------
Number of Percent of Total Exercise or Potential Realizable
Shares Underlying of All Options Base Price Expiration Value(2)
Name Option Grants(1) Granted to Employees Per Share Date 0% 5% 10%
- --------------------------- ----------------- -------------------- ----------- ---------- --------------------
<S> <C> <C> <C> <C> <C>
David R. Hill - - - - -
Robert D. Hill - - - - -
Paul B. Demirdjian - - - - -
Michael G. Kouri - - - - -
Theodore C. Rammelkamp, Jr. - - - - -
</TABLE>
(1) 1997 stock option awards are currently under review by the Compensation
Committee. Final stock option awards will be disclosed in the Company's
1998 definitive proxy materials to be filed with the Securities and
Exchange Commission.
(2) Because no stock options have yet been awarded for 1997, no potential
realizable values have been calculated.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Number of Shares Underlying Value of Unexercised In-The
Shares Acquired Value Unexercised Options at Year End ($) Money Options at Year-End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable (1)
- --------------------------- ----------------- -------- ----------------------------------- -----------------------------
<S> <C> <C> <C> <C>
David R. Hill 0 0 200,000/0 $2,075,000/$0
Robert D. Hill 0 0 50,000/0 630,250/0
Paul B. Demirdjian 0 0 39,900/0 504,000/0
Michael G. Kouri 0 0 32,800/0 411,500/0
Theodore C. Rammelkamp, Jr. 0 0 34,000/0 439,000/0
</TABLE>
(1) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of Common Stock that would be
received upon exercise, assuming such exercise occurred on December 31, 1997, at
which date the closing price of the Common Stock as quoted on the Nasdaq
National Market System was at $25.50 per share. The above valuations may not
reflect the actual value of unexercised options as the value of unexercised
options fluctuates with market activity.
Employment Agreements
In January 1996, the Company entered into employment agreements with
Messrs. Robert Hill, Demirdjian, Kouri and Rammelkamp (the "Executives"). The
employment agreements provide for employment in each Executive's current
position for three years. The employment agreements provide that the annual base
salaries of the Executives will be $200,000 for Mr. Robert Hill, $145,000 for
Mr. Demirdjian, $145,000 for Mr. Kouri and $120,000 for Mr. Rammelkamp. In
September 1996, the Company entered into an employment agreement with Mr. David
Hill for employment as Chairman of the Board for six years at an annual base
salary of $400,000.
In addition, each Executive is entitled to certain fringe benefits
specified in his employment agreement and to incentive compensation. Under each
employment agreement, the employment of the Executive may be terminated by the
Company for cause (as defined in the agreement) or without cause upon two weeks
notice subject to the payment of severance pay equal to the lesser of six months
base compensation or the base compensation payable for the remaining term of the
agreement.
5
<PAGE>
Upon a change in control (as defined in the agreement), each employment
agreement shall be automatically revised to eighteen months from the date of
such change in control if the remaining term is less than eighteen months. If at
or after a change in control, any of the following occur
(i) The Company or any successor of the Company terminates the Executive, or
(ii) The Executive elects to terminate employment by written notice within 60
days of the date of the change in control, or
(iii) The Executive is required to move more than 100 miles from his current
place of employment and the Executive elects to resign by written notice,
or
(iv) The Executive is required to assume a position which requires a change in
title or a diminution of responsibilities and the Executive elects to
resign by written notice,
then the amount of severance pay due shall be equal to the sum of the following:
(i) salary for services performed pro-rated through the date of termination,
plus
(ii) the greater of six months base compensation or the remaining base
compensation due under the agreement, plus
(iii) the maximum pro-rated cash bonus payable under the terms of the agreement.
Incentive Compensation
The Company maintains a bonus plan pursuant to which certain employees of
the Company are eligible to receive annual cash bonuses in an amount within a
range based upon the percentage change in earnings per share of the Company's
Common Stock measured from year to year in the cases of Messrs. Robert Hill,
Demirdjian, Kouri and Rammelkamp, and measured against a base year in the case
of Mr. David Hill with 1996 being set as the base year. The incentive bonuses
range from 5% to a maximum of 45% of the employee's base salary.
The Company also maintains a Stock Option Plan pursuant to which employees
may be granted Common Stock and options to purchase shares of Common Stock of
the Company. The Compensation Committee of the Board currently administers the
Stock Option Plan. The committee determines which individuals will be granted
options, the number of shares to be subject to options and other terms and
conditions applicable to the grants. The employment agreements with the
Executives provide that they shall receive option grants in amounts within a
range based upon the percentage change in earnings per share of the Company's
Common Stock measured from year to year in the cases of Messrs. Robert Hill,
Demirdjian, Kouri and Rammelkamp, and measured against a base
6
<PAGE>
year in the case of Mr. David Hill with 1996 being set as the base year. Mr.
David Hill also received a grant of options to purchase 200,000 shares of the
Company's Common Stock upon the signing of his employment agreement.
Pursuant to the Stock Option Plan, the Executives are also entitled to
annual grants of the Company's Common Stock during the terms of their respective
employment agreements. The employment agreements provide that the annual stock
grants provided to the Executives will be valued at $100,000 for Mr. David Hill,
$40,000 for Mr. Robert Hill and $30,000 each for Messrs. Demirdjian, Kouri and
Rammelkamp.
401(k) Plan
The Company maintains a 401(k) Plan which is available to all employees of
the Company, including its executive officers. The Company provides a matching
contribution to the plan up to a maximum of 1.5% of the salary of the
contributing employee. The Company's contribution to an employee's account vests
over a period of five years.
Compensation of Directors
Through December 31, 1995, the Company did not pay cash compensation for
service as directors. In 1996, the Company began paying cash compensation to
directors who are not employees of the Company in the amount of $2,500 per
meeting. In April 1998, the Company's Board of Directors approved a resolution
to eliminate the per-meeting payment and begin paying (effective as of the date
of the 1998 annual meeting) an annual cash retainer to directors who are not
employees of the Company in the amount of $20,000.
Directors of the Company who are not employees of the Company are also
reimbursed for their out-of-pocket expenses associated with attending meetings
of the Board of Directors and committees and are eligible to receive options
granted pursuant to the Company's Directors' Stock Option Plan.
The Company also provides Mr. Yorke with individual health insurance
coverage and Mr. Barber with family health insurance coverage.
Compliance with Section 16 of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act generally requires the
officers and directors of a public company, and persons who own more than ten
percent of a registered class of a public company's equity securities, to file
reports of beneficial ownership and changes in beneficial ownership with the
Securities and Exchange Commission. Based solely on its review of the copies of
such reports received by it, or upon written representations obtained from
certain reporting persons, the Company believes that,
7
<PAGE>
during 1997, all Section 16(a) filing requirements applicable to its officers,
directors and ten-percent shareholders were complied with.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Messrs. Vitale, Yorke
and Barber. No member of the Compensation Committee was at any time during 1997,
or formerly, an officer or employee of the Company or any subsidiary of the
Company, nor has any member of the Compensation Committee had any relationship
with the Company requiring disclosure under Item 404 of Regulation S-K under the
Securities Act.
No executive officer of the Company has served as a director or member of
the Compensation Committee (or other committee serving an equivalent function)
of any other entity, one of whose executive officers served as a director of or
member of the Compensation Committee of the Company.
8
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Ownership of Common Stock by Directors and Executive Officers
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of April 28, 1998 by each
director, each of the executive officers of the Company named on the Summary
Compensation Table and by all executive officers and directors as a group.
<TABLE>
<CAPTION>
Number of
Shares Beneficially Percentage
Name Owned of Class
- ---- ------------------- ----------
<S> <C> <C>
David R. Hill........................... 2,551,533/(1)/ 50.3%
Robert D. Hill.......................... 55,336/(2)/ 1.1%
Paul B. Demirdjian...................... 36,526/(3)/ *
Michael G. Kouri........................ 29,126/(4)/ *
Michael E. Hayes........................ 19,950/(5)/ *
Theodore C. Rammelkamp, Jr.............. 35,568/(6)/ *
Glen E. Barber........................ 12,000/(7)/ *
Thomas M. Vitale........................ 20,000/(8)/ *
A. Jones Yorke.......................... 33,000/(9)/ *
Executive officers and directors
as a group (9 persons)................ 2,793,039/(10)/ 55.0%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 200,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(2) Includes 50,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(3) Includes 34,550 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(4) Includes 27,450 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(5) Includes 17,900 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(6) Includes 8,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan
and 26,000 shares that could be acquired within 60 days upon the exercise
of options granted pursuant to the Stock Option Plan.
(7) Includes 12,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan.
(8) Includes 20,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan.
(9) Includes 20,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan
and 10,000 shares that could be acquired upon the exercise of a warrant.
(10) Includes 425,900 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan, the
Directors' Stock Option Plan and a warrant.
9
<PAGE>
Ownership of Common Stock by Certain Beneficial Owners
Based on information available to the Company and a review of statements
filed with the Securities and Exchange Commission pursuant to Section 13(d) and
13(g) of the Exchange Act, the following table sets forth as of April 28, 1998
certain information with respect to the number of shares of Common Stock
beneficially owned by each person or entity that beneficially owns (directly or
together with affiliates) more than 5% of the Common Stock. The Company
believes that each individual or entity named has sole investment and voting
power with respect to shares of Common Stock indicated as beneficially owned by
them, except as otherwise noted.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent
- ------------------------------------ -------------------- -------
<S> <C> <C>
David R. Hill
c/o Davel Communications Group, Inc.
1429 Massaro Boulevard
Tampa, FL 33619....................... 2,551,533(1) 50.3%
FMR Corp.
82 Devonshire Street
Boston, MA 02109...................... 401,500(2) 7.9%
Goldman, Sachs & Co. and
The Goldman Sachs Group, L.P.
85 Broad Street
New York, NY 10004.................... 432,800(3) 8.5%
Grandview Partners, L.P.
1 Financial Center, Suite 1600
Boston, MA 02111...................... 278,500(4) 5.5%
- ----------
</TABLE>
(1) According to a Statement on Form 5 dated February 13, 1998 and filed with
the Securities and Exchange Commission (the "Commission"), the beneficial owner
of such shares reported that it has sole voting power with respect to 2,303,384
of such shares and sole dispositive power with respect to 2,303,384 of such
shares.
(2) According to a Statement on Schedule 13G dated February 14, 1998 and filed
with the Commission, the beneficial owner of such shares reported that it has
sole voting power with respect to 401,500 of such shares and sole dispositive
power with respect to 401,500 of such shares.
(3) According to a Statement on Schedule 13G jointly filed with the Commission
for the period ending December 31, 1997, each beneficial owner of such shares
reported that it has shared voting power with respect to 295,700 of such shares
and shared dispositive power with respect to 432,800 of such shares.
10
<PAGE>
(4) According to a Statement on Schedule 13D dated August 22, 1995 and filed
with the Commission, the beneficial owner of such shares reported that it has
sole voting power with respect to 278,500 of such shares and sole dispositive
power with respect to 278,500 of such shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company leases approximately 30,750 square feet of office,
manufacturing and warehousing space in Jacksonville, Illinois from Mr. David
Hill who has beneficial ownership of 50.3% of the Company's outstanding common
stock. In June 1993, the Company and Mr. Hill entered into four leases, each
with a ten-year term expiring on June 30, 2003. The leases provide for annual
rents for such space aggregating $91,320. The Company believes that the terms
of these leases are at least as favorable to the Company as those that could
have been obtained from unrelated parties at the time they were entered into.
During 1997, the Company sold a life insurance policy, a house and an
airplane to Mr. Hill. The sale price was at the estimated fair value of the
assets as determined based upon independent appraisals and the sale resulted in
a gain of approximately $273,000. The house and the airplane were subsequently
leased back to the Company and the gain was deferred and is being recognized
ratably over the term of the lease. During 1997, the Company recognized
approximately $128,000 of the deferred gain.
The Company leased its long distance switching equipment in Tampa, Florida
from Mr. Hill pursuant to an equipment lease with a term of five years
commencing July 1993 and a monthly lease payment of $9,960. In September 1997,
the Company purchased the long distance switching equipment for a price of
$378,000. The price was the estimated fair market of the equipment based upon
independent appraisals obtained by the Company.
Certain employees of the Company devote a portion of their time to
businesses (other than the Company) owned by Mr. Hill. Mr. Hill's businesses
regularly reimburse the Company for an allocation of the salary and other costs
of these employees computed in proportion to the time spent by these employees
on other businesses owned by Mr. Hill compared to time spent on Company
business. In 1997, the Company was reimbursed approximately $107,000 for these
services. The remaining balance due to the Company as of December 31, 1997 for
these services was $1,026.
Mayer, Brown & Platt provides legal advice to the Company. Mr. Thomas M.
Vitale, a director of the Company, is a partner at Mayer, Brown & Platt.
Any future transactions between the Company and its officers, directors,
employees and affiliates that are outside the scope of the Company's employment
relationship with such persons will be subject to the approval of a majority of
the disinterested members of the Board of Directors.
11
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment on Form 10-K/A to the Annual Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
DAVEL COMMUNICATIONS GROUP, INC.
Date: April 30, 1998 By: /s/ Michael E. Hayes
-------------------------------------
Michael E. Hayes
Senior Vice President and
Chief Financial Officer
12
