UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994 Commission File Number: 0-16479
PEOPLES TELEPHONE COMPANY, INC.
(Exact Name of registrant as specified in its charter)
NEW YORK 13-2626435
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (305) 593-9667
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, $.01 par value
(Title of class)
Indicate by check mark whether the registrant has (1) 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. X Yes ___ No
As of March 24, 1995, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $74,115,078. As of March 24,
1995, there were 16,035,875 shares of the registrant's Common Stock outstanding.
<PAGE>
Part III of the Annual Report on Form 10-K of Peoples Telephone Company,
Inc. (the "Company") for the year ended December 31, 1994 is amended in its
entirety to add the following information:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name, age and position of each of the
directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey Hanft 48 Chairman and Chief Executive Officer/Director
Robert D. Rubin 36 President/Director
Richard F. Militello 45 Chief Operating Officer
Bonnie S. Biumi 32 Chief Financial Officer
Lawrence T. Ellman 43 President, Pay Telephone Division
F. J. Pollak 32 President, PTCC
Bruce W. Renard 41 Vice President-Regulatory Affairs/General Counsel
Karen V. Garcia 38 Vice President-Customer Support
Jody Frank (1) 43 Director
Ronald Gelber (1) (2) 45 Director
Robert E. Lund 50 Director
Richard Whitman (2) 44 Director
<FN>
____________________________
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
</FN>
</TABLE>
The principal occupation of each director and executive officer for at least
the last five years is set forth below:
Jeffrey Hanft has been a Director of the Company and its predecessor since
December 1983 and the Chief Executive Officer and Chairman of the Board of
Directors of the Company since March 1987. He was also the President of the
Company from March 1987 until May 1990 and from September 1993 until June 1994.
Mr. Hanft was the chairman of the Florida Pay Telephone Association from 1987 to
December 1990 and the chairman of the American Public Communications Council
("APCC") from April 1988 to January 1992. Mr. Hanft is currently the chairman
of the Legal Committee of the APCC and chairman emeritus of the APCC.
Robert D. Rubin joined the Company in August 1989 as Executive Vice
President and became President in June 1994 and a director in February 1995.
Mr. Rubin is also chairman of the Company's merger and acquisition committee.
Mr. Rubin was an attorney from August 1984 to August 1989 specializing in
mergers and acquisitions, securities laws and general corporate law.
2
<PAGE>
Richard F. Militello has been employed by the Company since October 1986. He
served as Chief Financial Officer of the Company from March 1987 to August 1993,
as Vice President-Finance from June 1988 to August 1993, and as Chief Operating
Officer since August 1993.
Bonnie S. Biumi joined the Company in June 1994 as Chief Financial Officer.
Prior to joining the Company, Ms. Biumi was a Senior Manager with Price
Waterhouse LLP in Miami, Florida. Ms. Biumi is a certified public accountant.
Lawrence T. Ellman joined the Company in June 1994 as President of its Pay
Telephone Division. From 1990 until joining the Company, Mr. Ellman was
President of Atlantic Telco Joint Venture, an independent public pay telephone
operator acquired by the Company in June 1994. For approximately eight years
prior thereto, he was Executive Vice President and Chief Financial Officer of
American Potomac Distributing Company, a beverage distributor.
F. J. Pollak has been employed by the Company since November 1993 as
President of PTCC. From October 1992 through October 1993, Mr. Pollak was
Marketing Director for Weisman Enterprises ("Weisman"), the holding company for
Intera Communications, Best Vendors and Mobile Merchandising, Inc. From January
1988 through September 1992, he was Executive Vice President of Nationwide
Vending Services, Inc., whose assets were sold to Weisman.
Bruce W. Renard joined the Company as Vice President-Regulatory
Affairs/General Counsel in January 1992. From September 1, 1991 to December 31,
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 of Messer, Vickers, et al., managing the utility and telecommunication law
sections of the firm. Prior to that time Mr. Renard served as Associate General
Counsel for the Florida Public Service Commission.
Karen V. Garcia joined the Company in October 1990 as National Sales
Manager. Ms. Garcia's previous employment included 13 years with the Bell
System, two of which were at New York Telephone Company and the remaining eleven
with Southern Bell Telephone Company. Ms. Garcia has been Vice President of
Customer Support since November 1993.
Jody Frank, has served as a Director of the Company and its predecessor
since May 1986. Since February 1990, he has been a vice president of Shearson
Lehman and, after Smith Barney acquired the assets of Shearson Lehman in 1994,
of Smith Barney Shearson.
Ronald Gelber has served as a Director of the Company and its predecessor
since September 1986. Since 1985, Mr. Gelber has served as president of the
public accounting firm of Gelber/Appel & Company in Miami, Florida.
Robert E. Lund, was elected as Director of the Company in May 1994. From
September 1990 to February 1992, Mr. Lund was Chairman and Chief Executive
officer of International Telecharge, Inc., a telecommunications company. From
February 1993 until November 1994 (when Newtrend, L.P. was sold), Mr. Lund
served as Chief Operating Officer of Newtrend, L.P., a provider of software and
professional services. Since December 1994, Mr. Lund has served as President
and Chief Executive Officer of S2 Software, Inc., a Dallas, Texas software
company.
3
<PAGE>
Richard Whitman has been a Director of the Company since December 1991. In
October 1987, Mr. Whitman co-founded RAM Telephone & Communications, Inc., where
he served as the chief executive officer, president and a director until its
merger with the Company in December 1991. From December 1988 to December 1991,
Mr. Whitman was chief executive officer, president and a director of United
Tele-Services, Inc. ("UTS"), a long-distance provider and reseller which he co-
founded. In December 1991, UTS was merged into Ram. From 1989 to December
1991, Mr. Whitman served as Vice Chairman of the APCC and from 1990 to 1991 he
served as Chairman of the California Pay Phone Association. Since 1981, Mr.
Whitman has served as a director of Holex Office Systems, Inc., a diversified
manufacturer of office products.
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth, for the fiscal years ended December 31,
1994, 1993 and 1992, the compensation paid by the Company to its Chief Executive
Officer and each of the four remaining most highly compensated executive
officers for the fiscal year ended December 31, 1994.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
- ------------------------ ------ -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Jeffrey Hanft, 1994 $417,000 $ 0 300,000 $2,000
CEO, Chairman 1993 361,000 0 68,000 2,000
of the Board 1992 282,000 120,000 75,000 2,000
Robert D. Rubin, 1994 263,000 0 240,000 2,000
President 1993 233,000 0 54,000 2,000
1992 179,000 80,000 60,000 1,000
Richard F. Militello, 1994 208,000 0 180,000 1,000
Chief Operating 1993 176,000 0 42,000 1,000
Officer 1992 135,000 57,000 83,000 1,000
Bruce W. Renard, 1994 150,000 0 20,000 2,000
V.P. Regulatory 1993 164,000 25,000 15,000 2,000
Affairs, General 1992 150,000 43,000 0 0
Counsel
Lawrence T. Ellman 1994(2) 105,000 10,000 45,000 0
President, Pay Telephone
Division
<FN>
____________________
(1) The amounts disclosed in this column include the Company's contributions on
behalf of the named executive officer to the Company's 401(k) retirement
plan in amounts equal to 25% of the executive officer's yearly participation
in the plan.
(2) Mr. Ellman joined the Company in June 1994.
</FN>
</TABLE>
4
<PAGE>
Option Grants in Last Fiscal Year
The following table sets forth certain information with respect to stock
options granted during the year ended December 31, 1994 to the executive
officers named in the Summary Compensation Table:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE OF
ASSUMED ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION FOR OPTION
SECURITIES OPTIONS GRANTED EXERCISE OR TERM(2)
UNDERLYING TO EMPLOYEES IN BASE PRICE -----------------------------
OPTIONS(1) FISCAL YEAR ($/SHARE) EXPIRATION DATE 5% 10%
---------- --------------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Hanft 250,000 22.67% $8.50 2/16/99 $588,000 $1,301,000
50,000(3) 4.53 5.13 10/13/99 71,000 157,000
Robert D. Rubin 200,000 18.13 8.50 2/16/99 470,000 1,041,000
40,000(3) 3.63 5.13 10/13/99 57,000 126,000
Richard F. Militello 150,000 13.60 8.50 2/16/99 353,000 780,000
30,000(3) 2.72 5.13 10/13/99 43,000 94,000
Bruce W. Renard 20,000 1.81 5.13 10/13/99 28,000 63,000
Lawrence T. Ellman 45,000 4.08 5.69 7/11/99 71,000 157,000
<FN>
_____________________
(1) Options were granted for a term of five years, subject to earlier
termination in certain events related to termination of employment. Options
become exercisable in three equal annual installments.
(2) These amounts represent assumed rates of appreciation which may not
necessarily be achieved. The actual gains, if any, are dependent on the
market value of the Company's common stock at a future date as well as
the option holder's continued employment throughout the vesting period.
Appreciation reported is net of exercise price.
(3) Vesting of options is contingent upon the Company meeting certain
performance levels during 1995.
</FN>
</TABLE>
5
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth certain information as to each exercise of
stock options during the year ended December 31, 1994 by the executive officers
named in the Summary Compensation Table and the fiscal year end value of
unexercised options:
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT FISCAL YEAR VALUE OF UNEXERCISED OPTIONS
SHARES END AT FISCAL YEAR END
ACQUIRED ON VALUE ------------------------- ----------------------------
NAME EXERCISE(S) REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- -------------------- ----------- ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Jeffrey Hanft 0 $ 0 261,667/180,833 $ 0/0
Robert D. Rubin 0 0 229,333/124,667 0/0
Richard F. Militello 0 0 173,000/94,000 0/0
Bruce W. Renard 0 0 99,167/18,333 4,200/0
Lawrence T. Ellman 0 0 15,000/30,000 0/0
<FN>
________________________
(1) Market value less exercise price before payment of applicable federal or
state taxes.
</FN>
</TABLE>
Employment Agreements
The Company has entered into an employment agreement with Jeffrey Hanft for
a five year term commencing January 1, 1994 and ending on December 31, 1998.
The agreement provides for automatic one year extensions thereafter unless
either party gives notice that it is not to be extended. The employment
agreement provides for payment of a base salary currently fixed at the annual
rate of $500,000 from January 1, 1995 to December 31, 1995. Commencing January
1, 1996 and every January 1st thereafter during the term of the agreement, the
base salary will increase by an amount equal to the previous year's base salary
multiplied by 10%. The base salary may also be increased annually by merit
increases or at any time at the discretion of the Board of Directors. Under
certain circumstances, i.e., if the Company's income is not at certain levels,
no increase may be granted. Mr. Hanft may also receive an incentive bonus for
each of the Company's fiscal years during the term of his agreement. The
incentive bonus shall be equal to 3% of the Company's pre-tax consolidated net
income but shall not exceed 60% of Mr. Hanft's base salary for such fiscal year.
Mr. Hanft is also entitled under the agreement to other employee benefits.
Further, if the Company terminates Mr. Hanft's employment agreement without
cause or Mr. Hanft terminates the agreement for certain defined reasons, the
Company will pay Mr. Hanft (a) his base salary through the termination date and
(b) as severance pay a lump sum amount equal to 200% of the sum of (i) the
annual base salary at the highest rate in effect during the 12 months
immediately preceding termination and (ii) the average of the three annual bonus
payments paid with respect to the preceding three years under the agreement.
Upon termination due to a change in control within one year after the change in
control, Mr. Hanft shall receive (a) his base salary through the termination
date, (b) all other benefits provided in the agreement and (c) severance pay
equal to 299.99% of the average taxable compensation of Mr. Hanft for the five
taxable years prior to such termination. Upon termination of his employment for
disability, Mr. Hanft is entitled to 100% of his base salary then in effect for
one year and 50% of his base salary for two additional years.
The Company has entered into an employment agreement with Robert D. Rubin,
the Company's President. The employment agreement is for a four year term
commencing January 1, 1994 and ending December 31, 1997. Mr. Rubin's base
salary for 1994 and 1995 under such agreement is $315,000. The agreement
provides for automatic one year extensions thereafter unless either party gives
notice that it is not to be extended.
6
<PAGE>
Mr. Rubin's employment agreement is otherwise similar to Mr. Hanft's, except
that Mr. Rubin's incentive bonus is 1.85% of the Company's pre-tax consolidated
net income.
The Company has entered into an employment agreement with Richard F.
Militello, the Company's Chief Operating Officer. The employment agreement is
for a three year term commencing January 1, 1994 and ending December 31, 1996.
Mr. Militello's base salary for 1994 and 1995 under such agreement is $250,000.
The agreement provides for automatic one year extensions thereafter unless
either party gives notice that it is not to be extended. Mr. Militello's
employment agreement is otherwise similar to those of Messrs. Hanft and Rubin,
except that Mr. Militello's incentive bonus is 1.5% of the Company's pre-tax
consolidated net income.
As a result of losses incurred by the Company in the first quarter of 1994,
effective June 1, 1994 Messrs. Hanft, Rubin and Militello voluntarily reduced
their salaries by 50%. On October 1, 1994, their salaries were reinstated to
their contract amounts.
The Company has entered into an employment agreement with Bruce W. Renard,
the Company's Vice President-Regulatory Affairs/General Counsel. The employment
agreement is for a three year term commencing on January 1, 1995 and ending on
December 31, 1997. The agreement provides for payment of a base salary
initially fixed at the annual rate of $172,500 with an annual increase of 10%,
provided the Company has met certain income targets. The agreement provides for
automatic one year extensions thereafter unless either party gives notice that
it is not to be extended. Mr. Renard's employment agreement also provides for
an incentive bonus in the sole discretion of the board and that upon termination
due to a change in control, Mr. Renard shall receive severance pay equal to 100%
of his highest annual base salary.
The Company has entered into an employment agreement with Lawrence T.
Ellman, the President of the Company's Pay Telephone Division. The employment
agreement is for a three year term commencing June 22, 1994 and ending June 22,
1997. The agreement provides for a base salary at the annual rate of $150,000,
increasing 10% each year with the approval of the Board of Directors, and a
minimum annual bonus of $25,000. The Company shall have no obligation to pay
benefits upon a termination for cause, disability or death, and no additional
benefits accrue to Mr. Ellman upon a change in control.
Each employment agreement above restricts the employee from competing with
the Company for one year in the areas in which the Company then operates
following termination of the agreement. Generally, except as set forth above,
the Company may terminate an employment agreement without further payment if the
employee materially breaches his or her obligations and duties under the
agreement or is convicted of a felony under certain circumstances or violates
the non-competition provision contained in the employment agreement or upon
death of the employee.
Directors' Compensation and Consulting Arrangements
Jody Frank has agreed to provide consulting services to the Company in the
areas of financial analysis and acquisitions. Mr. Frank received a fee of
$50,000 in 1994. In 1995, Mr. Frank will receive a monthly fee of $2,000 for
such consulting services. Mr. Frank also received grants of options on 15,000
shares of Common Stock of the Company in 1994.
Bernard M. Frank, who was a director of the Company and a Compensation
Committee member in 1994, received $25,000 and a grant of options on 15,000
shares of Common Stock of the Company in 1994. Mr. Frank resigned from the
Board of Directors and the Compensation Committee in February 1995. Mr. Frank
is the father of Jody Frank.
7
<PAGE>
Richard Whitman received $47,500 in 1994 for providing consulting services
to the Company. Mr. Whitman received grants of options on 15,000 shares of
Common Stock of the Company in 1994.
Ronald Gelber received fees of $50,000 in 1994 from the Company for serving
on its Board of Directors. In 1995, Mr. Gelber will receive a monthly fee of
$2,000 for serving as the chairman of the Audit Committee. In 1994, Mr. Gelber
also received a grant of options on 15,000 shares of Common Stock of the
Company.
Robert Lund received $32,500 from the Company in 1994 for consulting
services and for serving on its Board of Directors. Mr. Lund also received a
grant of options on 15,000 shares of Common Stock of the Company in 1994.
For 1995, all directors will receive as compensation for serving on the
Board of Directors $500 per person for each meeting attended telephonically and
$1,000 per person for each meeting attended in person. Upon election, pursuant
to the terms of the Company's 1993 Non-Employee Director Stock Option Plan, each
non-employee director of the Company receives an option to purchase 15,000
shares of Common Stock of the Company. The exercise price of any option granted
to directors is the fair market value of the Common Stock of the Company on the
date the option is granted.
Compensation Committee Interlocks and Insider Participation
See "Directors' Compensation and Consulting Arrangements" with regard to
Messrs. Bernard Frank and Ronald Gelber and "Certain Relationships and Related
Transactions" with regard to Mr. Frank. Mr. Bernard Frank resigned from the
Board of Directors and the Compensation Committee in February 1995.
8
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the beneficial
ownership of the Common Stock of the Company as of April 21, 1995 by (i) each
person known by the Company to beneficially own more than five percent of the
outstanding Common Stock of the Company, (ii) each director of the Company,
(iii) each of the executive officers named in the summary compensation table,
and (iv) all directors and executive officers of the Company as a group. Except
as otherwise indicated, the persons named in the table have the sole voting and
investment power with respect to the shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS(1)
------------------------ -------------------------- -----------
<S> <C> <C>
Jeffrey Hanft 781,529(2)(3) 4.87%
Robert D. Rubin 344,833(3) 2.15%
Richard F. Militello 306,275(3)(4) 1.91%
Richard Whitman 264,219(5) 1.65%
Jody Frank 214,262(5)(6)(7) 1.33%
Bruce W. Renard 115,833(3) *
Ronald Gelber 60,000(5) *
Lawrence T. Ellman 15,000(3) *
Robert E. Lund 31,350(5) *
Kayne Anderson Investment
Management, Inc.
1800 Avenue of Stars
Los Angeles, California 90067 1,023,200@ 6.37%
Creditanstalt American Corp.
245 Park Avenue
New York, New York 10167 850,00 @(8) 5.30%
All directors and executive
officers as a group (12 persons) 2,185,801(2)(3)(4)
(5)(6)(7) 13.62%
<FN>
_________________________
* Less than one percent.
@ Information provided by Schedule 13D and/or 13Gs filed by such persons. The
Company has not independently verified such information.
9
<PAGE>
(1) Includes shares of Common Stock of the Company issuable upon the exercise of
stock options, which are exercisable within 60 days of the date herein.
(2) Includes 11,980 shares of Common Stock of the Company issued to Rikki Hanft,
the minor daughter of Jeffrey Hanft.
(3) Includes currently exercisable options to purchase 778,167 shares of Common
Stock of the Company granted under the Company's stock option plans to the
following executive officers: 261,667 to Jeffrey Hanft (at an average
exercise price of $8.30 per share); 229,333 to Robert D. Rubin (at an
average exercise price of $8.14 per share); 173,000 to Richard F. Militello
(at an average exercise price of $8.15 per share); 115,833 to Bruce W.
Renard (at an average exercise price of $6.18 per share); and 15,000
to Lawrence T. Ellman (at an average exercise price of $5.69 per share).
(4) Includes 5,625 shares owned by Richard F. Militello as custodian for Laura
Militello, Sara Militello and Michael Militello, his minor children.
(5) Includes currently exercisable options to purchase Common Stock of the
Company granted to the following directors: 60,000 to Richard Whitman (at
an average exercise price of $10.03 per share); 105,000 to Jody Frank (at an
average exercise price of $8.70 per share); 45,000 to Ronald Gelber (at
an average exercise price of $7.40 per share); and 30,000 to Robert E. Lund
(at an average exercise price of $8.00 per share).
(6) Includes shares of Common Stock of the Company in a voting trust of which
Jody Frank is the beneficial owner of 40,050 shares held in the voting
trust.
(7) Includes 3,812 shares for which Jody Frank is custodian and as to which
Aaron Frank, Rebekah Frank and Lucy Frank, Mr. Franks' children, are the
beneficial owners of 1,812 shares, 1,000 shares and 1,000 shares,
respectively.
(8) Represents a currently exercisable warrant received in connection with a
credit facility and 150,000 shares of Common Stock of the Company obtained
upon the exercise of a warrant in connection with a previous credit
facility. The warrant expires March 12, 2000 and is exercisable into
700,000 shares of the Company's Series B Preferred Stock at an average price
of $8.93 per share. Each share of Series B Preferred Stock is convertible
into one share of Common Stock of the Company.
</FN>
</TABLE>
Ownership and Transaction Reports
Under Section 16 of the Securities Exchange Act of 1934, the Company's
directors, certain of its officers, and beneficial owners of more than 10% of
the outstanding Common Stock are required to file reports with the Securities
and Exchange Commission concerning their ownership of and transactions in Common
Stock; such persons are also required to furnish the Company with copies of such
reports. Based solely upon the reports and related information furnished to the
Company, the Company believes that all such filing requirements were complied
with in a timely manner during and with respect to 1994.
10
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1994, the Company has engaged in the following transactions
with directors and/or executive officers of the Company or with businesses with
which they are associated:
1. The Company prepaid a deposit on a real property lease for its Russian
joint venture, Artel Business and Telecommunications, to Robin Enterprises, Inc.
("Robin") in the amount of $675,000. The Company intended to use the facility
in connection with its Russian joint venture operations. In June 1994, such
lease was canceled and the prepaid deposit returned to the Company.
Robin is a corporation which owns an approximately 32,000 square foot
building in Moscow. Jeffrey Hanft, Jody Frank, Bernard M. Frank, Robert D.
Rubin, Richard F. Militello and Richard Whitman are shareholders of Robin.
2. On March 31, 1994, the Company sold certain of its telephone calling
center assets ("Phone Rooms") to Global Link for a total of $2.5 million. In
connection with the transaction, Global Link delivered to the Company 10% of the
issued and outstanding capital stock of Global Link and granted the Company the
right to designate two members on Global Link's Board of Directors. In February
1995, after obtaining a fairness opinion indicating the proposed sale of assets
for the agreed upon consideration was fair to the Company from a financial point
of view and after the transaction was approved by the disinterested members of
the Company's Board of Directors, the Company sold substantially all of the
assets of its prepaid calling card business to Global Link for $6.25 million.
Upon the sale, the Company maintained the right to designate one member on
Global Link's Board of Directors. The purchase price consisted of $1.0
million in cash, a $5.25 million promissory note payable in February 1998,
which bears interest at the rate of 8-1/2% per annum, and 9.9% of Global
Link's issued and outstanding capital stock, which increased the Company's
equity interest in Global Link to 19.9% of Global Link's issued and
outstanding capital stock. Jeffrey Hanft and Jody Frank are directors and
shareholders of Global Link as is Mr. Bernard M. Frank, a former director of
the Company.
3. Information concerning indebtedness of directors and/or executive
officers to the Company since January 1, 1994 is as follows: (a) Largest
Aggregate Indebtedness Outstanding: Jeffrey Hanft ($2,385,000); Robert D. Rubin
($735,000); Richard F. Militello ($907,000); Jody Frank ($309,000); Ronald
Gelber ($47,000); (b) Currently Outstanding Indebtedness: Jeffrey Hanft
($1,712,000); Robert D. Rubin ($574,000); Richard F. Militello ($734,000); Jody
Frank ($309,000); Ronald Gelber ($47,000).
Since January 1, 1994, the Company has loaned (the "Company Loans") certain
funds to Jeffrey Hanft, Robert D. Rubin, Richard F. Militello, Jody Frank and
Ronald Gelber (the "Borrowers") for reasons described below. Each of the Company
Loans is evidenced by a promissory note. Each such Company Loan is due in full
on March 28, 1996, and bears interest at Creditanstalt's prime rate of interest.
Included in the currently outstanding loans for these transactions are the
following: Mr. Hanft $967,000; Mr. Rubin $434,000; Mr. Militello $501,000;
Mr. Frank $239,000; and Mr. Gelber $47,000.
Each of the Company Loans was made following approval by the members of the
Board of Directors who were not parties to the transaction as a means to provide
the Borrowers with a vehicle to refinance certain commercial bank indebtedness
they had incurred to exercise Company stock options and pay related income
taxes. The Borrowers exercised the stock options in December 1993 to purchase
the Company's common stock for purposes of increasing the Company's
shareholders' equity without accessing external capital markets. The Borrowers
personally borrowed the funds to exercise the options from a commercial bank
and pledged the
11
<PAGE>
Company's common stock issued upon exercise as collateral for the bank loans
("Bank Loans"). This equity increase in turn was a significant factor in
permitting the Company to increase its credit facility from $60,000,000 to
$125,000,000 in February 1994.
Commencing in May 1994, as the market price of the stock declined, the bank
on several occasions required the Borrowers to pay down the Bank Loans or
provide additional collateral. Given that the option exercises were intended
to, and in fact did, benefit the Company, the Borrowers then approached the
disinterested members of the Company's Board of Directors to seek the Company's
assistance in refinancing a portion of their Bank Loans. The Company then
advanced the Company Loans upon the repayment terms noted above.
Mr. Hanft, Mr. Militello and Mr. Frank also borrowed $535,000, $128,000 and
$70,000, respectively, from the Company in connection with the payment of
personal income taxes related to the phantom gain incurred upon the December
1993 exercise of the stock options mentioned above. The loans are due in 1995
and bear interest at a rate equal to the average annual borrowing rate of the
Company for senior debt (for the fiscal year ending on or immediately preceding
the date interest on the outstanding principal is payable).
In an unrelated transaction, in lieu of receiving payment of their earned
1993 bonus, Mr. Hanft, Mr. Rubin and Mr. Militello agreed to accept loans from
the Company which bear interest at a rate equal to the average annual borrowing
rate of the Company's senior debt (for the fiscal year ending on or immediately
preceding the date interest on the outstanding principal balance is payable)
which loans are payable within five years of the date of the loan. Included in
the currently outstanding loans for this transaction are the following; Mr.
Hanft $210,000; Mr. Rubin $140,000; and Mr. Militello $105,000.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PEOPLES TELEPHONE COMPANY, INC.
DATE: April 28, 1995 By: /s/ Robert D. Rubin
--------------------------------
Robert D. Rubin
President
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