<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Davel Communications, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
DAVEL COMMUNICATIONS, INC.
________________________________________________________________________________
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 25, 2000
________________________________________________________________________________
The 1999 Annual Meeting of Stockholders of Davel Communications, Inc. (the
"Company"), will be held at One North Franklin, Chicago, Illinois, on January
25, 2000 at 10:00 a.m. (local time) for the following purposes:
1. To elect eight directors to the Board of Directors; and
2. To transact such other business properly before the meeting and any
adjournments thereof.
Only stockholders of the Company of record as of the close of business on
December 31, 1999, will be entitled to notice of, and to vote at, the Annual
Meeting and any adjournments thereof.
If you do not expect to attend the Annual Meeting in Person, please sign,
date and return the accompanying proxy in the enclosed business reply envelope.
If you later find that you can be present or for any other reason desire to
revoke your proxy, you may do so at any time before the voting.
Sincerely,
Michael E. Hayes
Chief Operating Officer and
Corporate Secretary
January 10, 2000
<PAGE>
DAVEL COMMUNICATIONS, INC.
PROXY STATEMENT
GENERAL INFORMATION
The enclosed form of proxy is solicited by and on behalf of the Board of
Directors of Davel Communications, Inc. (together with its predecessors, unless
otherwise noted, the "Company") for use at the 1999 Annual Meeting of
Stockholders of the Company to be held at One North Franklin, Chicago, Illinois,
on January 25, 2000 (the "1999 Annual Meeting") and at any adjournments thereof.
The cost of preparing and mailing this Proxy Statement and accompanying
materials, and the cost of any supplementary solicitations is expected to be
approximately $50,000 and will be borne by the Company. Solicitations may be
made by mail, telephone, telegraph or personally by officers and employees of
the Company and its subsidiaries and by Chase Mellon Consulting Services, a
proxy solicitation firm. This Proxy Statement and form of proxy are first being
mailed to the stockholders of the Company on or about January 10, 2000.
Messrs. Michael E. Hayes and Bruce W. Renard, the persons named as proxies
on the proxy form accompanying this Proxy Statement, were selected by the Board
of Directors to serve in such capacity. Mr. Hayes is the Chief Operating
Officer of the Company and Mr. Renard is a Senior Vice President and General
Counsel of the Company. A stockholder giving a proxy has the power to revoke it
any time before it is exercised by notice in writing to the Secretary of the
Company at the Company's principal executive offices at 10120 Windhorst Road,
Tampa, Florida 33619, by properly submitting to the Company a duly executed
proxy bearing a later date, or by attending the meeting and voting in person.
The shares represented by the proxy will be voted as specified by the
stockholder in the spaces provided therefore or, if no specification is made, it
will be voted for Proposal 1, and with respect to any other matters voted upon
at the meeting, in the discretion of the named proxies.
Only stockholders of record at the close of business on December 31, 1999
(the "Record Date"), will be entitled to notice of, and to vote at, the 1999
Annual Meeting and any adjournments thereof. On the Record Date, the Company
had outstanding 11,033,882 shares of common stock, $.01 par value per share (the
"Common Stock"). Each outstanding share is entitled to one vote on each
director position, and each other matter, to be voted on at the 1999 Annual
Meeting. Votes cast by proxy or in person at the 1999 Annual Meeting will be
tabulated by the inspectors of election appointed by the Board for the meeting.
The eight persons receiving the highest number of votes represented at the
meeting will be elected directors, and the affirmative vote of a majority of
such shares is required to approve each of the other matters to be voted on.
Abstentions are included in the determination of shares represented at the
meeting.
1
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PROPOSAL 1: ELECTION OF DIRECTORS
Election of Directors
The Company has eight directors. Each member of the Board of Directors
will serve until the next annual meeting of the Company's stockholders or until
his successor has been elected and qualified. The persons named in the enclosed
form of proxy intend to vote the proxies in favor of the election of the
nominees listed below to serve as directors of the Company for terms expiring at
the next annual meeting of stockholders or until the election and qualification
of their successors, unless the stockholder indicates on the form of proxy that
the vote should be withheld or contrary directions are indicated. If one or
more nominees shall become unavailable for any reason, the Board of Directors,
in its discretion, may designate one or more substitute nominees, in which case
such proxies will be voted for such substituted nominees. The Board of Directors
has no reason to doubt the availability of any of the nominees, and each has
indicated his willingness to serve if elected.
The following table sets forth certain information for each nominee for
director. All of the nominees for director named in the following table are now
serving as directors of the Company.
Director
Continuously
Name Since Age
- ---- ------------ ---
Samuel Zell June 1998 58
Michael E. Hayes December 1994 41
David R. Hill April 1979 68
Robert D. Hill August 1993 48
F. Philip Handy June 1998 55
Justin S. Maccarone December 1998 40
Thomas M. Vitale July 1994 43
A. Jones Yorke, IV August 1993 68
- --------------------------------------------------------------------------------
Samuel Zell, Chairman of the Board of Directors, became a director in June
1998. Mr. Zell was the founder, and serves as Chairman of the Board, of Equity
Group Investments, L.L.C. ("EGI") and President of EGI-DM Investments, L.L.C.
("EGI-DM") (a principal shareholder of the Company). The managing member of EGI-
DM, with sole power to direct the vote and disposition
2
<PAGE>
of securities held by EGI-DM, is Samstock/SIT, L.L.C., which is indirectly owned
by a trust formed for the benefit of Samuel Zell and members of his family. Mr.
Zell is a Board designee of EGI-DM pursuant to the Investment Agreement dated
April 19, 1999 among the Company, EGI-DM and David Hill (the "Investment
Agreement") which amends and restates a prior agreement among Davel
Communications Group, Inc., David Hill and Samstock, L.L.C. Mr. Zell also serves
as the Chairman of the Board of Anixter International, Inc., a value-added
provider of integrated networking and cabling solutions; American Classic
Voyages, Co., a passenger cruise line; Chart House Enterprises, Inc., an owner
and operator of restaurants; Manufactured Home Communities, Inc., a real estate
investment trust that owns and operates manufactured home communities; Capital
Trust, a specialized real estate finance company; and Danielson Holding
Corporation, a financial services and investment company. Mr. Zell is a member
of the board of trustees and serves as Chairman of the Board of Equity
Residential Properties Trust, an apartment real estate investment trust, and
Equity Office Properties Trust, an office real estate investment trust. Mr. Zell
is also a non-executive director of RAMCO Energy plc.
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, a Senior Vice President in January 1996 and Chief Operating Officer in
August 1999. Mr. Hayes is a Board designee of David Hill pursuant to the
Investment Agreement.
David R. Hill founded the Company's predecessor, Davel Communications
Group, Inc. , and its subsidiaries. He served as the Chief Executive Officer of
the Company from October 1993 through December 1994 and as Chairman of the Board
until July 1999. Mr. Hill is a self-appointed Board designee pursuant to the
Investment Agreement. 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. From January 1995 until November
1999, he served as the Company's President and Chief Executive Officer. Mr. Hill
is a Board designee of David Hill pursuant to the Investment Agreement.
F. Philip Handy was appointed to the Board of Directors in June 1998. Mr.
Handy is a Board designee of EGI-DM pursuant to the Investment Agreement. Mr.
Handy is a private investor. He was a managing director of Equity Group
Corporate Investments, a division of EGI, from September 1997 through December
1999. Mr. Handy is Chairman and President of Winter Park Capital Company, a
private investment firm he founded in 1980. He also serves as a director of
Anixter International, Inc., Banca Quadrum, S.A., Inc., Chart House Enterprises,
Inc., Transmedia Network Inc. and Wink Communications, Inc.
Justin S. Maccarone was appointed to the Board of Directors following the
Company's merger with Peoples Telephone Company, Inc. ("PTC") in December 1998.
Mr. Maccarone is a partner in UBS Capital II LLC, a private investment firm, and
its affiliate UBS Capital LLC. Prior to joining UBS Capital in 1993, he was a
Senior Vice President with GE Capital Corporation.
3
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Thomas M. Vitale has been a partner of Mayer Brown & Platt, a national law
firm, since 1991.
A. Jones Yorke has been the Chairman of the Board of Auerback Financial
Corp., a finance company, since August 1998. From March 1997 to June 1998, Mr.
Yorke was the Chairman of Weatherly Securities Corp., a registered securities
dealer. From September 1995 to March 1997 he was President of Coleman & Company
Securities Corp., a registered securities dealer. Mr. Yorke was Chairman of
Auerbach, Pollack & Richardson, Inc., a registered securities dealer, from
September 1994 to September 1995. Mr. Yorke also serves as Chairman of 42nd
Street Development Corporation, a not-for-profit corporation, and a director of
Austins Steaks & Saloon Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE
NAMED ABOVE.
4
<PAGE>
Executive Officers
The following table sets forth the names and ages of the Company's
executive officers and their positions with the Company:
Name Age Position
- ---- --- --------
Michael E. Hayes 41 Chief Operating Officer,
Secretary and Treasurer
William K. Breaden 40 Chief Financial Officer
Bruce W. Renard 45 Senior Vice President of
Regulatory and External
Affairs and General Counsel
Lawrence T. Ellman 47 Senior Vice President of
National Accounts
Bruce Forsyth 44 Senior Vice President of
Marketing
- --------------------------------------------------------------------------------
William K. Breaden has been Chief Financial Officer since November 1999
when he joined the Company. From 1990 to 1999, he served in various controller
positions with Spalding Holding Corporation, a manufacturer and marketer of
sporting goods. From 1981 to 1990 he served on the audit staff of Deloitte &
Touche L.L.P.
Bruce W. Renard joined the Company as Senior Vice President of Regulatory
and External Affairs and Associate General Counsel in December 1998, subsequent
to the Company's merger with PTC. He has served as General Counsel since July
1999. At PTC, Mr. Renard served in the positions of General Counsel and
Executive Vice President of Regulatory Affairs from February 1996 to December
1998 and General Counsel and Vice President of Regulatory Affairs from January
1992 to February 1996. From September 1991 to December 1991, Mr. Renard was a
sole practitioner specializing in legal and regulatory consulting services to
the telecommunications and utility industries. From August 1984 to September
1991, Mr. Renard was a partner with the Florida law firm Vickers, Caparello,
French and Madsen, managing the utility and telecommunications law sections of
the firm. Mr. Renard also serves as a director and Chairman of the Legal
Committee for the American Public Communications Council, the national public
communication trade organization, and as a director of several state public
communication trade organizations.
Lawrence T. Ellman has been Senior Vice President of National Accounts
since December 1998 when he joined the Company following its merger with PTC.
Mr. Ellman was at PTC from 1994 through 1998 and held several sales related
positions including Executive Vice
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President/President National Accounts. Prior to joining PTC, Mr. Ellman was
President of Atlantic Telco, Inc., an independent pay telephone provider
operating in the Northeastern United States. Mr. Ellman has served as Treasurer
and a member of the board of directors for the American Public Communications
Council as well as President and Chairman of the Board for the Mid-Atlantic
Payphone Association.
Bruce Forsyth, Senior Vice President of Marketing, joined the Company in
July 1999. Prior to that time, Mr. Forsyth was a Vice President with Intermedia
Communications from 1996 to 1999 in its sales, marketing and planning
departments. From 1987 to 1996 he was with Frontier Communications in their
Marketing and Consumer Account Divisions. From 1986 to 1987 he was with MCI and
was with Rochester Telephone from 1979 to 1986.
Committees and Meetings of the Board of Directors
The business of the Company is under the general management of the Board of
Directors as provided by the laws of Delaware, the Company's state of
incorporation. The Board of Directors held one meeting during 1998. All members
of the Board of Directors were present at all meetings held in 1998. Between
Board meetings, Board responsibilities are delegated to the Executive Committee,
comprised of Messrs. Zell and Robert Hill. The Executive Committee was formed in
1999 and has held no meetings.
Compensation for all senior employees, including officers of the Company,
is determined by the Compensation Committee. The Compensation Committee also
administers the Company's Stock Option Plan. The Compensation Committee met once
in 1998. Messrs. Handy, Yorke and Vitale constitute the Compensation Committee.
The Audit Committee consists of Messrs. Vitale and Yorke. The Audit
Committee held one meeting during 1998. The Audit Committee performs the
following principal functions: (i) review of the quarterly and year-end
financial statements with the Company's outside auditors, internal accounting
staff and management; (ii) review of the scope of the external audit and
internal reports with the outside auditors, internal accounting staff and
management; (iii) review of the outside auditor's management letter; (iv)
recommendation of the selection of outside auditors; (v) review of the quality
and depth of the Company's internal audit, accounting and financial staffs; and
(vi) review and approval of the rendering of audit and nonaudit services by the
outside auditors.
The Board has not established a nominating committee or a committee serving
a similar function. Nominations are made by the full Board of Directors. There
are at present no mandatory retirement ages stipulated either for officers or
members of the Board of Directors.
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
6
<PAGE>
employees of the Company in the amount of $2,500 per meeting of the Board of
Directors or of any committee thereof. In April 1998, the Board approved a
resolution to eliminate the per-meeting payment and to begin paying (effective
as of the date of the 1998 Annual Meeting) an annual cash retainer to directors
who are not employees in the amount of $20,000. In July 1999, the Board approved
a resolution to eliminate the cash retainer and to begin granting, on the date
of each annual meeting (effective as of the 1999 Annual Meeting), to each non-
employee director 10,000 options to purchase Common Stock of the Company at a
strike price equal to the market price of the Common Stock as of the close of
business immediately preceding the date of grant. 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 provides Mr. Yorke with individual health insurance coverage.
OTHER MATTERS
The Board of Directors knows of no other business to be brought before the
1999 Annual Meeting. If any other matters properly come before the 1999 Annual
Meeting, the proxies will be voted on such matters in accordance with the
judgment of the persons named as proxies therein, or their substitutes, present
and acting at the meeting.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Ownership of Common Stock by Directors and Executive Officers
The following table sets forth certain information as of December 31, 1999,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person who is known by the Company to own beneficially more than 5% of the
Common Stock, (ii) each of the Company's directors and executive officers and
(iii) by all executive officers and directors as a group. Unless otherwise
indicated, each person has sole voting power and investment power with respect
to the shares attributed to him and such person's address is c/o Davel
Communications, Inc., 10120 Windhorst Road, Tampa, Florida 33619.
Number of Shares
Name (1) Beneficially Owned Percentage of Class
- -------- ------------------ --------------------
Samuel Zell(3)(13) 1,789,800 14.9%
David R. Hill(3)(4) 2,105,445 17.5%
Robert D. Hill(3)(5) 185,404 1.5%
Michael E. Hayes(2)(3)(6) 59,155 *
Lawrence T. Ellman(2)(7) 51,565 *
Bruce W. Renard(2)(8) 68,015 *
F. Philip Handy(3)(9) 34,699 *
Justin S. Maccarone(3)(10) 909,427 7.6%
William K. Breaden(2) - *
Bruce Forsyth(2) - *
Thomas M. Vitale(3)(11) 28,000 *
A. Jones Yorke(3)(12) 33,000 *
EGI-DM Investments, L.L.C.(14) 1,773,800 14.8%
Goldman, Sachs & Co.(15) 1,045,566 8.7%
UBS Capital II LLC(16) 909,427 7.6%
Heartland Advisors, Inc.(17) 879,054 7.3%
Ann Lurie(18) 737,059 6.1%
All current directors and 5,264,510 43.8%
executive directors as a
group (12 persons)(19)
- --------------------------------------------------------------------------------
* Less than 1%
(1) For purposes of calculating the beneficial ownership of each stockholder,
it was assumed (in accordance with the Securities and Exchange Commission's
definition of "beneficial ownership") that such stockholder had exercised
all options, conversion rights or warrants by which such stockholder had
the right, within 60 days, to acquire shares of such class of stock.
(2) Such person is an employee of the Company.
8
<PAGE>
(3) Such person is a director of the Company.
(4) Includes 284,412 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(5) Includes 91,250 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(6) Includes 57,488 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(7) Includes 51,565 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(8) Includes 68,015 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Stock Option Plan.
(9) Includes 20,000 shares that are owned by Blaine Trust, a trust for which
Mr. Handy acts as co-trustee.
(10) Includes 16,450 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan,
and 892,977 shares beneficially owned by UBS Capital II LLC that Mr.
Maccarone could be deemed to beneficially own as a result of being a
principal of UBS Capital II LLC. Mr. Maccarone disclaims beneficial
ownership of such shares.
(11) Includes 28,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan.
(12) Includes 30,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan.
(13) Includes 16,000 shares that could be acquired within 60 days upon the
exercise of options granted pursuant to the Directors' Stock Option Plan
and 1,773,800 shares beneficially owned by EGI-DM Investments, L.L.C.
(including warrants to acquire 299,513 shares) that Mr. Zell could be
deemed to beneficially own as a result of his relationship to EGI-DM. Mr.
Zell disclaims beneficial ownership of such shares. The managing member of
EGI-DM, with the sole power to direct the vote and disposition of
securities held by EGI-DM, is Samstock/SIT, L.L.C. ("Samstock/SIT"). The
sole member of Samstock/SIT is a trust formed for the benefit of Mr. Zell
and members of his family. Mr. Zell is the President of both EGI-DM and
Samstock/SIT. The principal business address for each of EGI-DM,
Samstock/SIT and Samuel Zell is c/o Equity Group Investments, L.L.C., Two
North Riverside Plaza, Chicago, Illinois 60606.
(14) Includes warrants to purchase 299,513 shares with an exercise price of
$32.00 per share from the Company and certain individual stockholders. Mr.
Zell disclaims beneficial ownership of such shares.
(15) Based on a Schedule 13G filed on February 12, 1999. The address of Goldman,
Sachs & Co. is 85 Broad Street, New York, NY 10004.
(16) Based on a Schedule 13D/A filed on January 14, 1999. Includes 16,450 shares
that could be acquired within 60 days upon the exercise of options granted
pursuant to the Directors' Stock Option Plan. The address of UBS Capital II
LLC is 299 Park Avenue, New York, NY 10171.
(17) Based on a Schedule 13G filed January 19, 1999. The address of Heartland
Advisors, Inc. is 790 North Milwaukee Street, Milwaukee, Wisconsin 53202.
(18) Based on a Schedule 13G filed on November 29, 1999. Includes shares owned
by the Ann Lurie Revocable Trust, of which Ms. Lurie is the sole trustee,
and the Robert H. and Ann Lurie Trust, of which Ms. Lurie is a co-trustee.
Ms. Lurie's address is Two North Riverside Plaza, Suite 1500, Chicago, IL
60606.
(19) Includes 663,180 shares that could be acquired within 60 days upon the
exercise of options and 299,513 shares that could be acquired within 60
days upon the exercise of warrants.
9
<PAGE>
EXECUTIVE OFFICER COMPENSATION AND BENEFITS
Executive Officer Compensation
The following tables and notes set forth the compensation of the Company's
Chief Operating Officer and the four highest paid executive officers whose
salary and bonuses exceeded $100,000 in the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------- ---------------------------------
Securities
Other Annual Common Underlying All Other
Name and Position Year Salary Bonus Compensation(1) Stock Grants Options Compensation(2)
- ----------------- ---- ------ ----- --------------- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David R. Hill 1998 $400,000 $ - - $100,000 - $2,400
Chairman of the 1997 400,000 160,000 - 100,000 34,412 2,250
Board (3) 1996 250,000 91,777 - - 200,000 2,250
Robert D. Hill 1998 $250,000 $105,000 - $ 0 130,500 $3,908
President and 1997 200,000 80,000 - 40,000 17,206 2,400
Chief Executive 1996 200,000 33,664 - 40,000 6,000 2,250
Officer (4)
Paul B. Demirdjian 1998 $190,000 $ 28,500 - $ 0 70,525 $1,171
Senior Vice 1997 145,000 59,450 - 30,000 12,824 2,091
President and 1996 145,000 30,696 - 30,000 6,000 2,250
Chief Information
Officer (5)
Michael G. Kouri 1998 $170,000 $ 25,500 - $ 0 65,655 $3,348
Senior Vice 1997 145,000 56,550 - 30,000 12,183 2,091
President of 1996 145,000 24,100 - 30,000 6,000 2,250
Business
Development (6)
Michael E. Hayes 1998 $170,000 $ 25,500 - $ 0 88,920 $3,138
Senior Vice 1997 120,000 49,200 - 30,000 10,613 1,693
President and 1996 120,000 13,034 - 30,000 6,000 1,995
Chief Financial
Officer (7)
</TABLE>
______________________________________________________________
(1) Other Annual Compensation was paid in the form of perquisites and was less
than the level required for reporting.
(2) All Other Compensation disclosed in this column represents the Company's
contributions, both vested and not vested, to the Company's defined
contribution plan.
(3) Mr. David Hill relinquished his position as Chairman of the Board in July
1999. The current Chairman of the Board is Samuel Zell, whose total
compensation is the compensation paid to each of the Company's directors
who are not employees. Mr. Hill has entered into an agreement to provide
consulting services to the Company in the years 2000 and 2001. See
"Employment Agreements" below.
(4) Mr. Robert Hill relinquished his position as the Chief Executive Officer in
November 1999. The Company is currently conducting a search for a Chief
Executive Officer. Mr. Hill has entered into an agreement to provide
consulting services to the Company in the years 2000 and 2001. See
"Employment Agreements" below.
(5) Mr. Demirdjian's employment as Senior Vice President and Chief Information
Officer ended in August 1999.
(6) Mr. Kouri's employment as Senior Vice President of Business Development
ended in September 1999.
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(7) In August 1999, Mr. Hayes became the Company's Chief Operating Officer.
William Breaden is the current Chief Financial Officer and his annualized
compensation consists of $175,000 base salary and participation in the
Company's bonus incentive program.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------------------------
Number of Shares Percent of Total of All Exercise or
Underlying Options Options Granted to Base Price Expiration Potential Realizable Value (1)
Name Grants Employees Per Share Date 0% 5% 10%
- ---- ------------------ ----------------------- ----------- ---------- -------------------------------
<S> <C> <C> <C> <C> <C>
David R. Hill 34,412 (2) 6% $24.875 7/1/03 $0/$236,496/$522,596
Robert D.Hill 58,000 (2) 10% 24.875 7/1/03 0/ 118,248/ 261,298
72,500 (3) 13% 6.50 4/21/04 0/ 130,500/ 287,825
Paul B. 37,000 (2) 6% 24.875 7/1/03 0/ 88,133/ 194,751
Demirdjian (4) 33,525 (3) 6% 6.50 4/21/04 0/ 60,345/ 133,094
Michael G. 30,000 (2) 5% 24.875 7/1/03 0/ 83,728/ 185,016
Kouri (5) 35,655 (3) 6% 6.50 4/21/04 0/ 64,179/ 141,550
Michael E. 47,500 (2) 8% 24.875 7/1/03 0/ 72,938/ 161,173
Hayes 41,420 (3) 7% 6.50 4/21/04 0/ 74,556/ 164,437
</TABLE>
_______________________________________________________________
(1) The values shown are purely hypothetical and have been calculated on the
assumption that the value of the Common Stock underlying an option
appreciates at the specified rate (0%, 5% or 10% per annum) from the date
of the grant of the option until its expiration. In fact, the options
cannot be valued without prediction of the future movement of the price of
the Common Stock. The amount realized from the options disclosed in this
table will depend upon, among other things, the continued employment of the
recipient of the option and the actual performance of the Common Stock
during the applicable period.
(2) Granted on July 1, 1998.
(3) Granted on April 21, 1999 for the 1998 fiscal year.
(4) During 1999, Mr. Demirdjian's employment ended. Under the terms of his
severance agreement, these options were cancelled and Mr. Demirdjian was
granted 10,000 new options with an exercise price of $5.375.
(5) During 1999, Mr. Kouri's employment ended and his outstanding options were
cancelled. The terms of Mr. Kouri's separation from the Company are
currently the subject of arbitration proceedings.
11
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of
Unexercised In- Value of
The-Money Unexercised In-The-
Number of Options at Year- Money Options at
Shares Number of Shares Underlying End December 31, 1999
Acquired Value Unexercised Options at Year End Exercisable/ Exercisable/
Name on Exercise Realized (1) ($) Exercisable/Unexercisable Unexercisable (2) Unexercisable (3)
- ---- ----------- ------------ ------------------------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C>
David R. Hill 0 0 211,471/22,941 $ 625,000/$0 $0/$0
Robert D. Hill 38,000 570,000 37,069/122,637 68,250/851,875 0/0
Paul B. 22,550 338,250 28,608/66,741 68,250/393,919 0/0
Demirdjian
Michael G. 21,450 321,750 20,029/63,713 33,000/418,946 0/0
Kouri
Michael E. 5,900 88,500 31,371/80,162 68,250/486,685 0/0
Hayes
</TABLE>
___________________________________________________________________
(1) Equals the difference between the aggregate exercise price of the option
exercised and the aggregate fair market value of the shares of Common Stock
received upon exercise at the time of exercise.
(2) 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, 1998, at which date the closing price of the Common Stock as
quoted on the Nasdaq National Market System was $18.25 per share. The above
valuations may not reflect the actual value of unexercised options as the
value of unexercised options fluctuates with market activity.
(3) 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, 1999, at which date the closing price of the Common Stock as
quoted on the Nasdaq National Market System was $4.75 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 June 1998, the Company entered into new employment agreements with Robert
D. Hill, formerly the President and Chief Executive Officer of the Company,
Michael E. Hayes, Paul B. Demirdjian and Michael G. Kouri (collectively, the
"Executives"), which replaced certain employment agreements entered into
between the Company and the Executives in 1996 and subsequently amended in 1997.
Following the merger of the Company with PTC, the Company also entered into
employment agreements with Messrs. Lawrence T. Ellman and Bruce W. Renard (who
for purposes hereof shall also be referred to as "Executives").
The employment agreements provide for an initial employment period through
December 31, 2000, with automatic one-year renewals unless either party notifies
the other at least 60 days prior
12
<PAGE>
to the end of any term. The employment agreements provide for an annual base
salary of at least $250,000 for Mr. Robert Hill, $170,000 for Mr. Hayes,
$190,000 for Mr. Demirdjian, $170,000 for Mr. Kouri, $170,000 for Mr. Ellman and
$170,000 for Mr. Renard. The employment agreements provide for employment of
such persons in their current respective positions, subject to change or
reassignment of duties by the Company. The employment agreements provide for
certain fringe benefits and incentive compensation as outlined below.
Under the employment agreements, the Company may terminate any Executive for
cause (as defined therein). An Executive can voluntarily terminate his
employment agreement by providing 60 days' written notice to the Company at any
time. In the event of termination with cause or voluntary termination, the
Executive will receive all accrued base pay and a credit for certain unused
vacation. If the Company breaches any provisions of, terminates without cause
or fails to renew an employment agreement with any Executive, the Executive will
be deemed to have been involuntarily terminated. In the event of involuntary
termination or termination for a disability, all of such Executive's options
fully vest and all accrued base pay and a credit for certain vacation benefits
become due. The Executive will also receive the greater of one year's base pay
or the remaining base pay due under the term of the employment agreement, the
greater of the target incentive bonus for such year or the highest annualized
bonus during the prior three years, and continuation of benefits for the
remainder of the term. The Executives will be deemed to have been terminated
upon a "Change in Control" if any party other than David Hill or his descendants
or Samstock, L.L.C. acquires control of 25% or more of the combined voting power
of the Company and within two years thereafter the Company terminates the
Executive or the Executive resigns for any reason. In the event of termination
upon such a Change in Control, an Executive will receive a severance payment
equal to the sum of the Executive's base salary and target incentive bonuses for
the year in which the Change in Control occurred multiplied by three, subject to
certain reductions if such amounts would constitute "parachute payments" under
the Internal Revenue Code. In addition, the Executive will receive those other
benefits described in the preceding paragraph afforded to the Executive as if he
had been involuntarily terminated. The Company's employment agreements with
Messrs. Hill, Demirdjian and Kouri were cancelled in 1999.
In September 1996, the Company entered into an employment agreement with Mr.
David Hill, the former Chairman of the Board and Chairman of the Executive
Committee of the Board, for six years at an annual base salary of $400,000.
Under the agreement, Mr. David Hill was eligible to receive a cash bonus as
well as a grant of options based upon the percentage by which the annual before
tax profit exceeds the annual before tax profit for 1996. Mr. David Hill agreed
not to compete with the Company during his employment and for a period of one
year afterwards. The agreement also provides that, upon a change of control (as
defined therein), (1) all stock options previously awarded to Mr. David Hill
will vest and become immediately exercisable and (2) in the event of a
termination of Mr. David Hill, he will receive severance pay from the Company
as specified in his employment agreement. Effective July 6, 1999 Mr. Hill
resigned as Chairman of the Board, agreed to terminate the employment agreement
and entered into a consulting agreement with the Company for the 2000 and 2001
years. Under the consulting agreement, Mr. Hill will receive monthly payments
aggregating $100,000 annually. Under certain circumstances the payments may be
deferred or paid in the Company's Common Stock.
13
<PAGE>
On November 9, 1999, the Company announced the resignation of Robert D. Hill
as its President and Chief Executive Officer. Following his departure, Mr.
Hill remains affiliated with the Company as a consultant and a member of the
Company's Board of Directors, serving on the Board's Executive Committee. Mr.
Hill agreed to terminate his employment agreement and subsequently entered into
a consulting agreement with the Company for the year 2000. Under the
consulting agreement, Mr. Hill will receive monthly payments aggregating
$120,000 for 2000. In addition, Mr. Hill received compensation, in the form of
common stock of the Company, having a value approximating the severance that
would have been payable under his employment agreement.
Incentive Compensation
The Company has implemented a bonus plan that allows each Executive to receive
an annual cash incentive. Under the plan, Messrs. Hayes, Demirdjian and Kouri
had potential maximum bonuses in 1998 of 60% of base pay and target bonuses of
30% of base pay. The bonuses are comprised of three parts: company objectives,
departmental objectives and personal objectives. The company objectives are
based upon growth in earnings per share and EBITDA, and the department and
personal goals are determined with respect to objectives established for each
Executive by January 30 of the applicable year. Messrs. Hayes, Ellman, Forsyth,
Breaden and Renard participated in the plan in 1999.
The Company also maintains a Stock Option Plan pursuant to which the
Executives are granted options to purchase Common Stock at the latest closing
price that is available prior to the date the options are awarded. Under the
employment agreements, each Executive is awarded a minimum of 5,000 stock
options each year of his employment and may be awarded a greater number at the
discretion of the Compensation Committee. Under the stock option plan, other
employees may be granted Common Stock and options to purchase shares of Common
Stock. The Compensation Committee of the Board currently administers the Stock
Option Plan. The Compensation 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.
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. In 1999, the 401(k) plan of the Company was
merged with the plans of PTC and Communications Central Inc., subsidiaries of
the Company.
14
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
determining the compensation of all executive officers of the Company. The
Committee is composed exclusively of directors who are neither employees or
former employees of the Company nor eligible to participate in the Company's
Stock Option Plan.
Compensation Philosophy
- -----------------------
The Committee's objectives in its compensation decisions are to establish
incentives for the Company's executive officers to achieve optimal short-term
and long-term operating performance for the Company and to link executive and
stockholder interests. The Company determines the elements of each executive
officers' compensation package by evaluating the responsibilities of his
position, his performance and that of the Company, as well as his contribution
to the Company's performance. Compensation for the Chief Executive Officer of
the Company is determined through a process and based on considerations similar
to those for executive officers generally.
1998 Compensation
- -----------------
The 1998 compensation of the Executives was established in their employment
agreements with the Company effective in 1998. The Committee has reviewed the
terms of these employment agreements and found them to be generally consistent
with the Committee's policies regarding executive compensation. The term of
these employment agreements with respect to the Executives expires on December
31, 2000.
There were four elements of the 1998 compensation of the Executives: base
salary, an annual cash bonus, stock options granted under the Stock Option Plan
and annual stock grants.
Each Executive's 1998 base salary was established at the beginning of the
term of his employment agreement. Base salaries of all officers were intended
to be relatively moderate and are believed to be at or below the median of the
base salaries paid in 1998 by public telecommunications companies of a size
comparable to the Company. The employment agreements did not provide for
increases in the base salary of any of the Executives.
Each Executive was entitled to a bonus determined by the percentage growth
in earnings per share, adjusted for extraordinary items, for the year in which
the bonus is applicable. These bonuses were intended to reward Executives for
increasing Company profitability.
In an effort to provide a long-term incentive for future performance that
aligns the Executives' interests with the interests of stockholders, Executives
are eligible for participation in the Company's Stock Option Plan. Stock
options are intended to provide an incentive for the creation of stockholder
value over the term of several years since the full benefit of options will be
15
<PAGE>
realized only if the price of Common Stock appreciates over that term. In 1998,
approximately 600,000 stock options were granted to the Executives of the
Company with respect to the Company's performance in 1997. The Company also
awards stock grants under the Stock Option Plan. Stock awarded under the Stock
Option Plan contains certain restrictions on transfer. Awarding stock with
restriction on its transfer provides further long-term incentives that align the
interests of the stockholder with the interests of the Executives. There were
no stock grants awarded in 1998.
Deductibility of Compensation
- -----------------------------
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
establishes, with certain exceptions, a $1 million deduction limit on executive
compensation for public companies. The Committee believes that it is in the best
interests of the Company's stockholders to structure its compensation plans to
achieve maximum deductibility under Section 162(m) to the extent consistent with
the Company's need to attract and retain qualified executives.
This Report of the Compensation Committee on Executive Compensation shall
not be deemed incorporated by reference by any general statement incorporating
by reference this proxy statement or any portion hereof into any of the
Company's filings with the Securities and Exchange Commission, and such
information shall not be deemed filed with the Securities and Exchange
Commission, except as specifically otherwise provided in such other filings or
to the extent required by Item 402 of Regulation S-K.
Thomas M. Vitale
F. Philip Handy
A. Jones Yorke
16
<PAGE>
PERFORMANCE GRAPH
The comparative stock performance graph below compares the cumulative
stockholder return on the Common Stock of the Company for the period from
October 20, 1993, the date the Common Stock began trading on the Nasdaq Stock
Market, through December 31, 1998 with the cumulative total return on (i) the
Total Return Index for the Nasdaq Stock Market (U.S. Companies) (the "Nasdaq
Composite Index") and (ii) a peer group of companies that compete with the
Company in the operation of independently-owned pay telephones (the "Peer
Group"), in each case assuming the reinvestment of dividends. None of the
companies in the Peer Group offers a range of products and services fully
comparable to those of the Company, although each competes with the Company with
respect to certain of the Company's significant business segments. The returns
of each company have been weighted according to their respective stock market
capitalization for purposes of arriving at a peer group average. The members of
the Peer Group are Peoples Telephone Company, Inc., Phonetel Technologies, Inc.
and Choicetel Communications, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Total Return Analysis
12/31/1993 12/30/1994 12/29/1995 12/27/1996 12/26/1997 12/25/1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Davel Communications $ 100.00 $ 82.93 $ 87.80 $ 113.82 $ 162.60 $ 127.64
- ------------------------------------------------------------------------------------------------------
Peer Group* $ 100.00 $ 46.55 $ 24.96 $ 30.83 $ 47.03 $ 47.04
- ------------------------------------------------------------------------------------------------------
Nasdaq Composite $ 100.00 $ 96.80 $ 135.44 $ 166.24 $ 194.56 $ 278.45
- ------------------------------------------------------------------------------------------------------
</TABLE>
Source: Carl Thompson Associates www.ctsonline.com (800) 959-9677. Data from
Bloomberg Financial Markets.
* Communications Central (CCIX) was acquired by Davel Communications in February
1998 and is not included in the peer group.
It was replaced with Choicetel Communications (PHON), which began trading on
11/14/97.
17
<PAGE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Certain Transactions
The Company has entered into certain transactions with Mr. David R. Hill,
who is a director. The Company leased an aircraft and residential real estate
from Mr. David Hill, and the Company paid $13,000 for 1998. Both leases were
terminated in July 1999. The Company also leased from Mr. Hill long-distance
switching equipment and office space in Jacksonville, Illinois for which it paid
aggregate amounts of $68,000, $196,000 and $239,000 in 1998, 1997 and 1996,
respectively. The lease payments for the long-distance switching equipment
ended in September 1997 when Davel purchased the equipment from Mr. Hill for
$378,000, which was its estimated fair market value equipment based upon
independent appraisals.
During 1999 the Company sold to Mr. David Hill a building located in Miami,
Florida for $2,250,000. The Company believes that the terms of the sale are at
least as favorable to the Company as those that could have been obtained from
unrelated parties at the time it was entered into.
In addition, the Company received payments from Mr. Hill for administrative
services provided to him by certain employees of the Company in the aggregate
amounts of $100,000, $107,000 and $122,000 in 1998, 1997 and 1996, respectively.
In connection with advisory services provided by EGI, an affiliate of EGI-
DM, to the Company, the Company has agreed to pay to EGI a fee, payable in the
Company's Common Stock, equal to 0.35% of the enterprise value of the merger
with PTC and any other merger, payable upon consummation of such merger. In
connection with the advisory agreement the Company also agreed to grant stock
options to EGI for ongoing consulting services. Each month EGI receives 12,500
options at a strike price based on the closing price of the Company's Common
Stock on the last day of the prior month. To date, options have been accrued
but not paid.
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.
Compensation Committee Interlocks and Insider Participation
Until June 29, 1998, the members of the Compensation Committee in 1998
were Messrs. Vitale, Yorke and Glen E. Barber, a former member of the Board of
Directors who resigned on that date. Following his appointment to the Board,
Mr. Handy filled the vacancy on the Compensation Committee created by Mr.
Barber's resignation. No member of the Compensation Committee was, at any time
during 1998 or previously, 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 of 1933, as amended.
18
<PAGE>
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, during 1998, all Section
16(a) filing requirements applicable to its officers, directors and ten-percent
shareholders were complied with.
STOCKHOLDER PROPOSALS
Any shareholder proposals to be presented at the 2000 Annual meeting of the
Company must be received by the Company no later than April 15, 2000 at its
principal executive offices at 10120 Windhorst Road, Tampa, Florida 33619 in
order to be considered for inclusion in the Company's proxy statement and proxy
relating to that meeting. Any proxy received by the Company in connection with
the 2000 Annual Meeting may confer discretionary authority to vote on any
stockholder proposal not received by the Company by April 15, 2000. If the date
of the 2000 Annual Meeting of the Company is changed by more than 30 days from
the date of the 1999 Annual Meeting, then this change will be disclosed in the
earliest possible Form 10-Q of the Company and any stockholder proposal to be
presented at the 2000 Annual Meeting must be received by a reasonable time
before the Company mails its proxy materials for the 2000 Annual Meeting.
19
<PAGE>
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
DAVEL COMMUNICATIONS, INC.
The undersigned stockholder of Davel Communications, Inc., a Delaware
corporation (the "Company"), hereby appoints Michael E. Hayes or Bruce W.
Renard, or either of them, each with full power of substitution, proxies or
proxy of the undersigned, to vote all the shares of Common Stock of the Company
which the undersigned would be entitled to vote if personally present at the
1999 Annual Meeting of Stockholders of the Company, to be held on January 25,
2000 at 10:00 a.m., local time, at One North Franklin, Chicago, Illinois, and at
any adjournment or adjournments thereof, hereby revoking any proxy heretofore
given:
All as described in the Notice of 1999 Annual Meeting of Stockholders and
accompanying Proxy Statement for such meeting, the receipt of which is hereby
acknowledged.
The undersigned hereby authorizes that if this proxy is delivered by means
of a telegram, facsimile transmission, or any other means of electronic
transmission, then this proxy and its transmission by such means shall be
considered to be the valid proxy of the undersigned for the purposes set forth
herein.
(Continued on reverse side.)
1. ELECTION OF DIRECTORS
- -------------------------------------------------------------------------------
FOR [_] all nominees listed WITHHOLD AUTHORITY [_]to vote
(except as marked to the contrary) for all nominees listed
- -------------------------------------------------------------------------------
Samuel Zell, Michael E. Hayes, David R. Hill,
Robert D. Hill, F. Philip Handy, Justin S.Maccarone,
Thomas M. Vitale, A. Jones Yorke
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below)
________________________________________________________________________
2. In their sole discretion, the above named proxies are authorized to vote in
accordance with their own judgment on other matters properly presented
before the annual meeting or any adjournment thereof.
- -------------------------------------------------------------------------------
Signature(s)_________________ Signature(s)___________________ Dated:_________
- -------------------------------------------------------------------------------
Note: This Proxy should be dated, signed by the shareholder(s) exactly as the
name(s) appear(s) hereon, and returned promptly in the enclosed envelope. Joint
owners should each sign. Trustees, executors and others signing in a
representative capacity should indicate this capacity. An authorized officer may
sign on behalf of a corporation and should indicate the name of the corporation
and his or her capacity.
