FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
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
incorporation or organization) I.D. No.)
2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172
(Address of principal executive offices) (Zip Code)
(305) 593-9667
(Registrant's telephone number, including area code)
____________________
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 and
(2) has been subject to such filing requirements for the past 90
days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. Common
Stock, $.01 Par Value, outstanding at May 8, 1996 : 16,194,684
shares.
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PEOPLES TELEPHONE COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
March 31, December 31,
Assets 1996 1995
_________ ____________
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 9,461 $ 12,366
Accounts receivable, net of
allowance for doubtful accounts
of $4,958 and $5,108 7,442 7,100
Inventory 2,187 1,990
Prepaid expenses and other
current assets 3,395 3,764
________ ________
Total current assets 22,485 25,220
Property and equipment, net 75,122 78,201
Location contracts, net . 29,255 29,270
Goodwill, net 8,495 8,904
Intangible assets, net 2,406 2,620
Other assets, net 8,220 8,713
Deferred income taxes 3,407 3,407
Investments 2,685 3,736
________ ________
Total assets $152,075 $160,071
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Notes payable and current
maturities of long-term debt $ 502 $ 506
Current portion of obligations
under capital leases 1,139 1,156
Accounts payable and accrued
expenses 19,741 19,603
Accrued interest payable 2,674 5,603
Income and other taxes payable 2,555 2,452
________ _______
Total current liabilities 26,611 29,320
Notes payable and long-term debt 101,098 101,259
Obligations under capital leases 1,141 1,318
________ _______
Total liabilities 128,850 131,897
________ _______
Commitments and contingencies - -
Preferred Stock
Cumulative convertible preferred
stock Series C, $.01 par value;
160 shares authorized; 150 shares
issued and outstanding 13,438 13,413
Preferred stock dividends payable 735 473
_______ _______
Total preferred stock 14,173 13,886
Shareholders' equity
Preferred stock; $.01 par value;
4,140 shares authorized; none
issued and outstanding - -
Convertible preferred stock;
Series B, $.01 par value; 600
shares authorized; none issued
and outstanding - -
Common stock; $.01 par value;
25,000 shares authorized;
16,173 and 16,108 shares
issued and outstanding 162 161
Capital in excess of par value 61,284 61,573
Accumulated deficit (51,946) (47,446)
Unrealized loss on investments (448) -
_________ _________
Total shareholders' equity 9,052 14,288
_________ _________
Total liabilities and
shareholders' equity $152,075 $160,071
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PEOPLES TELEPHONE COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
For the three months ended
March 31,
1996 1995
_________ ________
<S> <C> <C>
Revenues
Coin calls $ 18,141 $ 19,061
Non-coin calls 12,355 16,985
________ ________
Total revenues 30,496 36,046
Costs and expenses
Telephone charges 9,863 12,970
Commissions 8,267 8,282
Field service and collection 4,790 5,185
Selling, general and administrative 2,981 2,642
Depreciation and amortization 6,028 5,637
Interest 3,062 1,802
Gain on disposal of prepaid calling
card and international telephone
centers (545) -
Other 550 27
______ ______
Total costs and expenses 34,996 36,545
Loss from continuing operations
before income taxes (4,500) (499)
Benefit from income taxes - 188
_______ _______
Loss from continuing operations (4,500) (311)
_______ _______
Discontinued operations
Loss from operations - -
Loss on disposition - (50)
_______ _______
Loss from discontinued operations - (50)
Extraordinary loss from extinguishment
of debt, net - (2,894)
_______ ________
Net loss $ (4,500) $(3,255)
========= ========
Earnings (loss) per common share
Loss from continuing operations $ (.29) $ (.02)
Loss from discontinued operations - -
Extraordinary loss from extinguish-
ment of debt, net - (.18)
________ _______
Net loss $ (.29) $ (.20)
======== ========
Weighted average common and common
equivalent shares outstanding 16,173 16,081
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PEOPLES TELEPHONE COMPANY, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited, in thousands)
Three Months Ended,
March 31,
1996 1995
________ _________
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (4,500) $ (3,255)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 6,028 5,637
Deferred income taxes - (1,954)
Extraordinary loss from
extinguishment of debt - 4,631
Equity in losses of Global Link - 27
Gain on sale of assets (545) -
Change in assets and liabilities:
Decrease in accounts
receivable 158 1,132
Increase in inventory (197) (337)
Decrease (increase) in
prepaid expenses and other
current assets 369 (760)
Decrease (increase) in
other assets 313 (373)
Decrease in accounts
payable and accrued
expenses (54) (883)
Decrease in accrued
interest (2,929) (307)
Increase (decrease)
in taxes payable 103 (77)
Net effect of discontinued
operations - (2,622)
_______ _______
Net cash (used in) provided by
operating activities (1,254) 859
Cash flow from investing activities:
Payments for acquisitions and
certain contracts (1,303) (435)
Property and equipment additions (754) (1,337)
Proceeds from sale of assets 800 1,250
_______ _______
Net cash used in investing activities (1,257) (522)
Cash flow from financing activities:
Net payments under note payable
to bank (165) (83)
Principal payments under capital
lease obligations (229) (1,132)
Exercise of stock options and
warrants - 126
Officer loans - (190)
________ _______
Net cash used in financing activities (394) (1,279)
________ _______
Net decrease in cash and cash
equivalents (2,905) (942)
Cash and cash equivalents at beginning
of period 12,366 7,663
_______ _______
Cash and cash equivalents at end
of period $ 9,461 $ 6,721
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<PAGE>
PEOPLES TELEPHONE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND MARCH 31, 1995
(unaudited)
NOTE 1 - UNAUDITED INTERIM INFORMATION:
The accompanying interim consolidated financial data are unaudited;
however, in the opinion of management, the interim data include all
adjustments necessary for a fair presentation of the results for the
interim periods. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ
from those estimates.
The results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results to be expected for the
year ending December 31, 1996.
The interim unaudited consolidated financial statements should be
read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 1995 as
set forth in the Company's Form 10-K.
During the third quarter of 1995, the Company decided to retain the
remaining portion of its inmate telephone operations. The
accompanying consolidated statements of operations and of cash flows
for the three months ended March 31, 1995 have been reclassified to
present the inmate telephone operations as part of continuing
operations. In addition, certain other amounts for the prior year
have been reclassified to conform with current year presentation.
NOTE 2 - CHANGES IN ACCOUNTING POLICIES
Intangible Assets
During the first quarter of 1996, the Company adopted Statement No.
121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be
disposed of. The effect of adoption did not have a material impact
on the financial results of the Company for the three months ended
March 31, 1996.
Stock Options
In October 1995, the FASB issued Statement No. 123 ("SFAS 123"),
Accounting for Stock-Based Compensation,which requires companies to
either recognize expense for stock-based awards based on their fair
value on the date of grant or provide footnote disclosures regarding
the impact of such changes. The Company adopted the provisions of
SFAS 123 on January 1, 1996 but will continue to account for options
issued to employees or directors under the Company's non-qualified
stock option plans in accordance with Accounting Principles Board
Opinion No.25 ("APB 25"), Accounting for Stock Issued to Employees.
The exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant,
therefore, no compensation expense is recognized under APB 25.
<PAGE>
<PAGE>
Depreciation and Amortization
Effective January 1, 1996, the Company revised its depreciation and
amortization policy for certain fixed and intangible assets used in
the inmate telephone operations. Based on increased competition and
certain other changes within the inmate telephone industry, the
Company reduced the useful lives of various assets to five years.
This change in accounting estimate resulted in an increase in
Depreciation and amortization expense and Net loss for the three
months ended March 31, 1996 of approximately $0.3 million or $.02
per common share.
NOTE 3 - PREPAID CALLING CARD AND INTERNATIONAL TELEPHONE CENTERS
On September 28, 1995, the Company sold its international telephone
center operations for $2.0 million in cash and notes receivable.
For financial accounting purposes, the recovery of $2.0 million
previously written off will be recognized as the cash is received.
During the quarter ended March 31, 1996, the Company received a
payment of approximately $0.3 million which is included in "Gain on
disposal of prepaid calling card and international telephone
centers" in the accompanying Consolidated Statement of Operations.
On March 1, 1996, Global Link Teleco Corporation ("Global Link")
consummated a merger transaction (the "Merger")with Global
Telecommunications Solutions, Inc. ("GTS"). The Company exchanged
its outstanding notes and other receivables including accrued
interest for shares of GTS Common stock, $0.6 million in cash and
$1.5 million of notes receivable with various due dates through
September 1997. The Company's 19.99% equity interest in Global Link
was converted in the Merger into GTS shares. For financial
accounting purposes, a net gain of approximately $1.0 million will
be deferred until the outstanding receivable balances are collected.
In addition, a gain of approximately $0.3 million was recorded in
the first quarter of 1996 related to amounts collected at the time
of this transaction.
NOTE 4 - INVESTMENTS
The Company's investment in GTS is accounted for in accordance with
Statement No. 115 ("SFAS 115"), Accounting for Certain Investments
in Debt and Equity Securities. Investments in debt and equity
securities , other than those accounted for under the equity method,
are reported at fair value with unrealized gains or losses, net of
tax, recorded as a separate component of Shareholders' Equity. The
Company's investment in GTS at March 31, 1996 was approximately $3.9
million net of approximately $0.4 million of unrealized investment
losses.
NOTE 5 - EARNINGS PER SHARE:
The treasury stock method was used to determine the dilutive effect
of options and warrants on earnings per share data.
For 1996 and 1995, common stock equivalents were excluded since the
effect would be anti-dilutive. Therefore, fully diluted earnings
per share are not presented.
See earnings (loss) per common share calculation as summarized on
page 8.
NOTE 6 - LONG-TERM DEBT:
During April 1996, the Company amended the Fourth Amended Loan and
Security Agreement (the "Amendment") with Creditanstalt-Bankverein
(the "Bank"). In connection with the Amendment, the Bank waived the
Company's non-compliance with certain restrictive covenants
contained in the agreement for the three month period ended December
31, 1995. The Amendment, among other things, decreased the
facility to $10.0 million and reduced the requirements of the
financial covenants. The amended credit facility bears interest at
the Bank's prime rate plus 2% and requires all outstanding principal
balances to be repaid in September 1997. At the same time, the
Company decreased to $5.25 the exercise price of the warrants held
by Creditanstalt American Corporation to acquire Common Stock or
Series B Preferred Stock of the Company that had not already been
repriced. At March 31, 1996, the Company was in compliance with the
amended covenants and had no amounts borrowed under the facility.
<PAGE>
<PAGE>
NOTE 7 - INCOME TAXES:
At March 31, 1996, the Company recorded valuation allowances of
approximately $1.7 million against deferred tax assets generated
during the three months ended March 31, 1996. A valuation allowance
was provided to reduce the deferred tax assets to a level which,
more likely than not, will be realized.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PEOPLES TELEPHONE COMPANY, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(unaudited, in thousands, except per share data)
Three Months Ended
March 31,
1996 1995
__________________
<S> <C> <C>
Loss from continuing operations $(4,500) $ (311)
Less:
Cumulative preferred stock dividends 262 -
________ ________
Loss from continuing operations for
per share computations (4,762) (311)
Loss from discontinued operations - (50)
Extraordinary loss from extinguishment
of debt, net - (2,894)
________ _________
Net loss for per share computations $(4,762) $ (3,255)
======== =========
Number of shares:
Weighted average shares used in the
per share computation 16,173 16,081
======= =======
Earnings (loss) per common and common
equivalent share:
Loss from continuing operations $ (.29) $ (.02)
Loss from discontinued operations - -
Extraordinary loss from extinguishment
of debt, net - (.18)
_________ _________
Net loss $ (.29) $ (.20)
========= =========
</TABLE>
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis compares the quarter ended
March 31, 1996 to the quarter ended March 31, 1995 and should be
read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere in this Form 10-Q and in
conjunction with Management's Discussion and Analysis appearing in
the Company's Form 10-K for the year ended December 31, 1995.
The financial results discussed below relate to continuing
operations which primarily consist of the public pay telephone
business and inmate telephone operations. The accompanying
consolidated statements of operations and cash flows for the three
months ended March 31, 1995 have been reclassified to present the
inmate telephone operations as part of continuing operations.
Revenues
The Company primarily derives its revenues from coin and
non-coin calls. Coin revenue is generated exclusively from calls
made by depositing coins in the Company's public pay telephones.
Coin revenue represented approximately 59.5% and 52.9% of total
revenues from continuing operations for the quarters ended March 31,
1996 and 1995, respectively. Coin revenue decreased 4.8% to $18.1
million during the quarter ended March 31, 1996 compared to the same
period in 1995. This decrease is primarily attributable to the
decrease in the average number of public pay telephones operated by
the Company during the first quarter of 1996 to approximately 38,300
compared to an average of approximately 40,000 for the same period
in 1995. While the average coin revenue per public pay telephone
remained relatively consistent period to period, the Company
believes that the number of coin calls made at its public pay
telephones may decrease over time. The Company believes that,
among other things, the decreases will primarily result from the
increased usage of alternative methods of calling such as prepaid
calling cards and wireless technologies and the operation of more
public pay telephones in closer proximity to the Company's
telephones.
During the second quarter of 1995, the Company signed a contract
with AT&T to act as its primary third-party operator service
provider. Prior to the execution of this agreement, non-coin calls
were routed through the Company's private label operator service
program. The Company records as revenue the total amount the end
user pays for the call (net of taxes) when the call is completed
through the Company's private label operator service. In contrast,
when the call is completed through the third-party operator service
provider, the Company records as revenue the amount it receives from
the third-party operator service provider which represents a
negotiated percentage of the total amount the caller pays for the
call. The Company uses its private label operator service or a
third-party operator service provider based on which service the
Company believes nets it the highest gross margin from the call.
Non-coin revenue represented approximately 40.5% and 47.1% of
total revenues from continuing operations for the quarters ended
March 31, 1996 and 1995, respectively. Non-coin revenue is derived
from calling card calls, credit card calls, collect calls and
third-party billed calls placed from the Company's public pay
telephones and inmate telephones. For the quarter ended March 31,
1996, revenues from non-coin calls decreased 27.3% to approximately
$12.4 million, compared to the quarter ended March 31, 1995. This
decrease was primarily attributable to an increase in the number of
public pay telephone calls placed through third-party operator
service providers as opposed to the Company's private label operator
service and the decrease in the number of inmate telephone lines
operated by the Company. During the first quarter of 1996, the
Company operated approximately 2,100 inmate telephone lines,
compared to approximately 3,200 during the first quarter of 1995.
<PAGE>
<PAGE>
Operating Expenses
Operating expenses include telephone charges, commissions, field
service and collection expenses and selling, general and
administrative expenses. Telephone charges consist of local line
charges paid to Local Exchange Carriers which include costs of
basic service and transport of local coin calls, long-distance
transmission charges and network costs and billing, collection and
validation costs. Commissions represent payments to property owners
and correctional facilities for revenues generated by the Company's
telephones located on their properties. Field service and collection
expenses represent the costs of servicing and maintaining the
telephones on an ongoing basis, costs of collecting coin from the
telephones and other related operational costs. Selling, general and
administrative expenses primarily consist of payroll and related
costs, legal and other professional fees, promotion and advertising
expenses, property, gross receipts and certain other taxes,
corporate travel and entertainment and various other expenses.
The switch by the Company to a third-party operator service
resulted in a decreased revenue base due to the method of recording
revenue for calls made through that service as compared to calls
placed through the Company's private label operator service program
(see above). As a result, operating expenses as a percentage of
revenues for the three months ended March 31, 1996 increased
compared to the same period in 1995. Total operating expenses were
approximately 84.9% and 80.7% of total revenues from continuing
operations for the quarters ended March 31, 1996 and 1995,
respectively.
Telephone charges decreased as a percentage of total revenues
from continuing operations to 32.3% for the quarter ended March 31,
1996, compared to 36.0% for the same period in 1995. The decrease
in telephone charges is primarily due to a decline in the number of
calls placed through the Company's private label operator service
program. The Company paid the costs incurred to transmit, bill,
collect and validate the call when the call was completed through
its private label operator services. In contrast, the Company
incurred no such costs when a third-party operator service provider
completed the call. In addition, the Company has experienced a
decrease in telephone charges as a result of regulatory changes and
competition within the local/intraLata service market which began in
the third quarter of 1995. Telephone charges for the first quarter
of 1995 include a reduction of interexchange carrier expenses
related to a settlement with a service provider for certain billing
errors and underpayment of operator service revenue of approximately
$1.3 million.
Commissions as a percentage of total revenues from continuing
operations were approximately 27.1% and 23.0% for the quarters
ended March 31, 1996 and 1995, respectively. The increase in
commissions as a percentage of revenues was primarily attributable
to (i) the change in the Company's method of recording revenue as a
result of the Company's switch to a third-party operator service
provider; (ii) higher commission rates paid in connection with
the Atlanta Hartsfield International Airport account; and (iii)
higher commission rates for new and renewed contracts due to
increasing competition in the public pay telephone and inmate
telephone markets.
Field service and collection expenses as a percentage of total
revenues from continuing operations were 15.7% and 14.4% for the
first quarter of 1996 and 1995, respectively. This increase was
primarily attributable to the reduced revenue base as described
above. In total, field service and collection expenses decreased
to approximately $4.8 million for the first quarter of 1996 compared
to approximately $5.2 million for the same period in 1995. This
decrease was primarily attributable to cost savings resulting from
office and route consolidations and a focus on achieving further
operating efficiencies. Selling, general and administrative
expenses increased 12.8% to approximately $3.0 million in the first
quarter 1996 versus the first quarter 1995. This increase was
primarily attributable to an increase in insurance premiums, the
salary associated with the addition of an internal sales force and
increases in industry association dues, filing fees and promotional
costs.
<PAGE>
<PAGE>
Depreciation and Amortization
Depreciation is based on the cost of the telephones, booths,
pedestals and other enclosures, related installation costs and line
interconnection charges and is calculated on a straight-line method
using a ten-year useful life for public pay telephones and a
five-year useful life for inmate telephones. Amortization is
primarily based on acquisition costs including location contracts,
goodwill and non-competition provisions and is calculated on a
straight-line method using estimated useful lives ranging from five
to twenty years. Depreciation and amortization increased to $6.0
million for the quarter ended March 31, 1996, compared to $5.6
million for the same period in 1995. The increase in depreciation
and amortization is primarily attributable to the revision of the
depreciation and amortization policy for certain inmate assets.
Based on increased competition and certain other changes within the
inmate telephone industry, the Company reduced the useful lives of
various assets to five years. As a result of this change in
accounting estimate, depreciation and amortization increased
approximately $0.3 million in the first quarter of 1996.
Interest Expense
In the first quarter of 1996, interest expense increased 69.9%
to $3.1 million as compared to the same quarter in 1995. This
increase is primarily attributable to (i) the higher interest rate
on the Company's $100.0 million of Senior Notes as compared to the
rates in effect on the Company's revolving line of credit in
existence in the first quarter of 1995; and (ii) the inclusion of
interest expense in continuing operations which was previously
allocated to the Company's cellular operations which were included
in discontinued operations.
Gain on Disposal of Prepaid Calling Card and International Telephone
Centers
Gain on disposal of prepaid calling card and international
telephone centers includes approximately $0.3 million received in
connection with the sale of the Company's international telephone
center operations and approximately $0.3 million recognized in
connection with the merger of Global Link Teleco Corporation and
Global Telecommunications Solutions, Inc. (see Note 3 to the
accompanying consolidated financial statements).
Other
Other expense includes approximately $0.6 million of severance
obligations incurred under employment agreements with certain key
executives.
Benefit from Income Taxes
The Company's benefit from income taxes decreased approximately
$0.2 million for the quarter ended March 31, 1996 from the same
period in 1995 primarily due to the fact that for the 1996 period
the Company recorded valuation allowances for 100% of the deferred
tax assets generated from operating losses in the period. The
Company recorded deferred tax assets and deferred tax asset
valuation allowances of approximately $1.7 million for the quarter
ended March 31, 1996.
Net Loss from Continuing Operations before Extraordinary Item
The Company had a net loss from continuing operations of
approximately $4.5 million for the three months ended March 31,
1996, compared to a net loss from continuing operations of
approximately $0.3 million for the same period in 1995.
<PAGE>
<PAGE>
Extraordinary Loss
As a result of a March 1995 amendment to the Company's revolving
line of credit agreement, the Company recorded extraordinary losses
from the write-off of deferred financing costs associated with the
early extinguishment of debt of approximately $4.6 million, before
the related income tax benefit of $1.7 million, which is included in
the financial results of the Company for the three months ended
March 31, 1995. There were no such items recorded in the first
quarter of 1996.
Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA is not presented as an alternative to operating results
or cash flow from operations as determined by Generally Accepted
Accounting Principles ("GAAP"), but rather to provide additional
information related to the ability of the Company to meet current
trade obligations and debt service requirements. EBITDA should not
be considered in isolation from, or construed as having greater
importance than, GAAP operating income or cash flows from operations
as a measure of an entity's performance.
EBITDA from continuing operations was approximately $4.6
million for the quarter ended March 31, 1996, compared to $6.9
million the same period in 1995. Cash flow for the first quarter of
1995 included approximately $1.3 million of one-time income related
to a settlement with a vendor. The remaining decrease is
attributable to a decrease in the Company's installed base of inmate
telephone lines and public pay telephones, increased commissions and
higher selling, general and administrative expenses offset by
decreases in telephone charges and field service and collection
expenses as noted above.
Liquidity and Capital Resources
During the first quarter of 1996, the Company financed its
operations from operating cash flow. For the quarter ended March
31, 1996, the Company's operating cash flow was $(1.3) million
compared to $0.9 million for the same period in 1995.
The Company's working capital deficit was approximately $(4.1)
million, with a current ratio of .84 to 1, at March 31, 1996. This
is consistent with working capital deficit of $(4.1) million and a
current ratio of .86 to 1 at December 31, 1995.
In April 1996, the Company amended certain terms contained in
the Fourth Amended Loan and Security Agreement (the "Amendment").
In connection with the Amendment, the Bank waived the Company's
non-compliance with certain restrictive covenants contained in the
agreement for the three month period ended December 31, 1995.
The Amendment, among other things, decreased the facility to $10.0
million and reduced the requirements of the financial covenants.
The amended credit facility bears interest at the Bank's prime rate
plus 2% and requires all outstanding principal balances to be repaid
in September 1997. At the same time, the Company decreased to $5.25
the exercise price of the warrants held by Creditanstalt American
Corporation to acquire Common Stock or Series B Preferred Stock of
the Company that had not already been repriced. At March 31, 1996,
the Company was in compliance with the amended covenants and had no
amounts borrowed under the facility.
Based upon current expectations, the Company believes that cash
flow from operations, together with amounts which may be borrowed
under the amended credit facility, will be adequate for it to meet
its working capital requirements, pursue its business strategy and
service its obligations with respect to its 12 1/4% Senior Notes ,
although there can be no assurance that it will be able to do so.
<PAGE>
<PAGE>
Part II OTHER INFORMATION
Item 5. Other Events
(a) The Company has scheduled its Annual Meeting of Shareholders
to be held on July 15, 1996.
(b) E. Craig Sanders has been elected President, Chief
Executive Officer and a Director of the Company effective as of May
2, 1996. He succeeded Robert E. Lund in the positions of President
and Chief Executive Officer. Mr. Lund had been serving in those
positions on an interim basis and will continue as a Director of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Description
10.1 Second Amendment to Fourth Amended and Restated Loan and
Security Agreement dated April 4, 1996 between Peoples Telephone
Company, Inc. and Creditanstalt-Bankverein.
10.2 Second Amendment to Second Amended and Restated Warrant
Agreement dated April 4, 1996 between Peoples Telephone Company,
Inc. and Creditanstalt American Corporation.
10.3 Employment Agreement between E. Craig Sanders and the
Company dated May 2, 1996.
(b) Reports on Form 8-K:
None
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PEOPLES TELEPHONE COMPANY, INC.
Registrant
Date: May 14, 1996 /s/ Bonnie S. Biumi
________________________________
Bonnie S. Biumi
Chief Financial Officer
Exhibit 10.1
SECOND AMENDMENT TO THE FOURTH AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO THE FOURTH AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT (this "Amendment")is made and entered into as
of this 4th day of April, 1996,by and among PEOPLES TELEPHONE
COMPANY, INC., a New York corporation("Borrower"), each of the
Lenders signatory hereto (hereinafter referred to individually as a
"Lender" and collectively as the "Lenders"), and
CREDITANSTALT-BANKVEREIN, an Austrian banking corporation, as agent
for the Lenders (in such capacity, together with its successors and
assigns in such capacity, hereinafter referred to as the "Agent");
W I T N E S S E T H:
WHEREAS, on March 12, 1990, Borrower entered into a certain Loan
and Security Agreement, dated as of March 12, 1990, as amended (as so
amended, the "Original Loan Agreement"), among Borrower, the banks
party thereto and the Agent, pursuant to which such banks made
available to Borrower a revolving credit facility; and
WHEREAS, the Original Loan Agreement was superseded by that
certain Amended and Restated Loan and Security Agreement, dated as of
May 4, 1992 (the "First Restated Agreement") among the Borrower, the
banks party thereto and the Agent; and
WHEREAS, the First Restated Agreement was superseded by that
certain Second Amended and Restated Loan and Security Agreement,
dated as of March 29, 1993 (the "Second Restated Agreement") among
Borrower and PTC Cellular, Inc., a Delaware corporation, as
borrowers, the banks party thereto and the Agent; and
WHEREAS, the Second Restated Agreement was superseded by that
certain Third Amended and Restated Loan and Security Agreement, dated
as of February 17, 1994 (the "Third Restated Agreement") among the
Borrower, the lenders party thereto and the Agent; and
WHEREAS, the Third Restated Agreement was superseded by that
certain Fourth Amended and Restated Loan and Security Agreement,
dated as of July 19, 1995 (the "Fourth Restated Agreement") among
the Borrower, the lenders party thereto (the "Lenders") and the
Agent; and
WHEREAS, the Fourth Restated Agreement was amended on November
29, 1995 pursuant to that certain Waiver and First Amendment to
Fourth Amended and Restated Loan Agreement;
WHEREAS, Borrower was in default in certain financial covenants
as of the fiscal quarter ending December 31, 1995 and has requested
that the Lenders and the Agent waive such Events of Default;
WHEREAS, the Lenders and the Agent are willing to waive such
Events of Default on the condition that the Fourth Restated Agreement
is amended as set forth herein;
NOW, THEREFORE, for and in consideration of the foregoing
premises, the mutual promises, covenants and agreements contained
herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE>
<PAGE>
1. Definitions. All capitalized terms used herein and not
expressly defined herein shall have the same respective meanings
given to such terms in the Fourth Restated Agreement.
2. Definitions. The Fourth Restated Agreement is hereby
amended by deleting the definitions of "Borrowing Base," "Commitment"
and "Maturity Date" in their entirety and by substituting therefor
the following new definitions of "Borrowing Base," "Commitment" and
"Maturity Date" to read as follows:
"Borrowing Base" shall mean, as of any date, up to (a)
seventy-five percent (75%) of the net amount of Borrower's Eligible
Accounts plus (b) an amount equal to $1,200 multiplied by the number
of Eligible Pay Telephones.
"Commitment" shall mean the aggregate obligation of
the Lenders to make Loans to Borrower, subject to the terms and
conditions hereof, up to an aggregate principal amount not to exceed
at any one time outstanding as to all the Lenders equal to Ten
Million Dollars ($10,000,000), subject to reduction as set forth in
Section 2.10 hereof.
"Maturity Date" shall mean October 4, 1997.
3. Borrowing Procedures. The Fourth Restated Agreement is
hereby further amended by deleting the first sentence of Subsection
2.2(b) thereof in its entirety and by substituting therefor a new
sentence to read as follows:
Unless the Agent shall have been notified by any Lender not
later than 11:00 a.m. (New York time) on the date any Loan is to be
made, that such Lender does not intend to make available to the Agent
such Lender's Commitment Percentage of such Loan, the Agent may
assume that such Lender has made such amount available to the Agent
on the date of such Loan and the Agent may, in reliance upon such
assumption, make available to Borrower a corresponding amount.
4. Pro Rata. The Fourth Restated Agreement is hereby further
amended by deleting Subsection 2.9(c) thereof in its entirety and by
substituting therefor a Subsection 2.9(c) to read as follows:
(c) the making of Loans shall be made prorata among the
relevant Lenders according to their Commitment Percentage of the
Commitment;
5. Notices. The Fourth Restated Agreement is hereby further
amended by deleting Section 2.12 thereof in its entirety and by
substituting therefor a new Section 2.12 to read as follows:
All notices given by Borrower to the Agent of terminations
or reductions of the Commitment, or of borrowings, or prepayments of
Loans hereunder shall either be oral, with prompt written onfirmation
by telecopy, or in writing, with such written confirmation or
writing, in the case of a borrowing, to be substantially in the form
of Exhibit B attached hereto (a "Notice of Borrowing"); shall be
irrevocable; shall be effective only if received by Agent prior to
10:00 a.m. (New York time) on a Business Day which is: (a) at least
fifteen (15) days prior to such termination or reduction of the
Commitment; (b) not later than the date such Loan is to be made;
and (c) not later than the date of any such prepayment, in the case
of a prepayment of a Base Rate Loan. Each such notice to reduce the
Commitment or to prepay the Loans shall specify the amount of the
Commitment to be reduced or of the Loans to be prepaid and the date
of such reduction or prepayment. Each such notice of borrowing shall
<PAGE>
<PAGE>
specify: (1) the amount of such borrowing (which shall be an
integral multiple of $100,000); that the amount of the Loan to be
made, when aggregated with all other Loans to be outstanding
following the funding of such Loan, does not exceed the Borrowing
Base; and the date such Loan is to be made (which shall be a
Business Day). Each request for a borrowing of a Loan or for any
other financial accommodation by Borrower pursuant to this Agreement
or the other Loan Documents shall constitute (x) an automatic
warranty and representation by Borrower to each Lender that there
does not then exist a Default or Event of Default or any
event or condition which, with the making of such Loan, would
constitute a Default or Event of Default and (y) an affirmation that
as of the date of such request all of the representations and
warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material respects,
both before and after giving effect to the application of the
proceeds of the Loan except for such changes in such representations
and warranties which do not constitute a Default or Event of Default
hereunder, which do not, individually or in the aggregate, have a
Material Adverse Effect and which have, to the extent required, been
disclosed to the Agent and the Lenders pursuant to Section 6.2 hereof
or otherwise.
6. Interest Rate. The Fourth Restated Agreement is hereby
further amended by deleting Sections 3.1, 3.2 and 3.3 thereof in
their entirety and by substituting therefor new Sections 3.1, 3.2 and
3.3 to read as follows:
3.1 Interest.
(a) Subject to modification pursuant to
Subsection (b) below and Section 10.1 hereof, the average daily
outstanding principal amount of the Loans and all other sums payable
by Borrower hereunder shall bear interest from the date thereof until
paid in full at a fluctuating rate per annum equal to the Base
Lending Rate plus two percent (2%), calculated daily on the basis
of a 360-day year and actual days elapsed.
(b) Accrued interest shall be payable (i) in the
case of any Loan, monthly on the first day of each month hereafter
for the previous month, commencing with the first such day following
the Effective Date; (ii) in the case of any Loan, upon the payment or
prepayment thereof; (iii) in the case of any other sum payable
hereunder as set forth elsewhere in this Agreement or, if not so set
forth, on demand; and (iv) in the case of interest payable at the
Default Rate, on demand.
3.2 [Intentionally Deleted]
3.3 Conversions and Continuations. Commencing on
April 4th, 1996, Borrower shall no longer have the right to Convert
Base Rate Loans to Eurodollar Loans or to Continue Eurodollar Loans
as Eurodollar Loans. Upon the expiration of each Interest Period
outstanding on April 4th, 1996, the Eurodollar Loan relating
thereto shall automatically convert to a Base Rate Loan.
7. Investments. The Fourth Restated Agreement is hereby
further amended by deleting Section 7.5 thereof in its entirety and
by substituting therefor a new Section 7.5 to read as follows:
7.5 Investments. Borrower shall not, and shall not
permit any of its Subsidiaries to make any Investment in any Person
except for investments in (a) certificates of deposit issued by
<PAGE>
<PAGE>
commercial banks located in the United States (including foreign
banks with a United States Federal Branch) having combined capital
and surplus in excess of Five Hundred Million Dollars ($500,000,000),
and having a maturity date within one year after the date such
investment is made; (b) readily marketable commercial paper of a
domestic issuer rated at least "A-1" by Standard & Poor's Corporation
or "P-1" by Moody's Investors Service, Inc.; and (c) direct
obligations of the United States of America or agencies thereof or
obligations fully guaranteed by the United States of America.
8. Financial Covenants. The Fourth Restated Agreement is
hereby further amended by deleting Sections 8.1 and 8.2 thereof in
their entirety and by substituting therefor new Sections 8.1 and 8.2
to read as follows:
8.1 Net Worth. Borrower shall maintain at all times
during the applicable periods set forth below a Net Worth of not less
than the sum of the amount set forth opposite each such applicable
period:
<TABLE>
<CAPTION>
Applicable Period Amount
<S> <C>
01/01/96 - 03/31/96 $19,000,000
04/01/96 - 06/30/96 $14,000,000
07/01/96 - 09/30/96 $10,000,000
At all times thereafter $ 8,000,000
</TABLE>
Notwithstanding the foregoing, in the event that Borrower
completes an offering of its equity securities, the amount set forth
above for each applicable period, commencing with the applicable
period in which such issuance occurs, shall be increased by an amount
equal to seventy-five percent (75%) of the amount by which Borrower's
shareholders' equity is increased as a result of the issuance of
equity securities as a part of such offering.
8.2 Interest Coverage Ratio. Borrower shall
maintain as of the end of each fiscal quarter of Borrower during the
applicable periods set forth below an Interest Coverage Ratio of not
less than the ratio set forth opposite each such applicable period:
<TABLE>
<CAPTION>
Applicable Period Ratio
<S> <C>
01/01/96 - 03/31/96 0.75:1.00
Each Fiscal Quarter thereafter 1.00:1.00
</TABLE>
9. Other Financial Covenants. The Fourth Restated Agreement
is hereby further amended by deleting Sections 8.3, 8.4 and 8.5
thereof in their entirety.
10. Schedules. The Fourth Restated Agreement is hereby further
amended by deleting Schedules 5.5, 5.15, 5.21, 5.22 and 5.23 thereof
in their entirety and by substituting therefor new Schedules 5.5,
5.15, 5.21, 5.22 and 5.23 in the form attached to this Amendment.
11. Waiver. The Agent and the Lenders hereby waive any
Default or Event of Default arising under the Loan Agreement solely
as a result of Borrower's failure, for the fiscal quarter of Borrower
ending December 31, 1995, to maintain (a) the minimum Net Worth
required by Section 8.1 of the Loan Agreement (as in effect prior to
this Amendment); (b) the minimum Leverage Ratio required by Section
8.2 of the Loan Agreement (as in effect prior to this Amendment); (c)
the minimum Operating Cash Flow required by Section 8.4 of the Loan
<PAGE>
<PAGE>
Agreement (as in effect prior to this Amendment); or (d) the minimum
Interest Coverage Ratio required by Section 8.5 of the Loan Agreement
(as in effect prior to this Amendment).
12. Fee. In consideration of the waivers and amendments set
forth herein, Borrower agrees to pay to each Lender a fee (the "Fee")
of $200,000, which Fee shall be due and payable on the date of
execution hereof. Such fee shall be fully earned on payment thereof
and shall not be subject to proration or rebate for any reason.
13. Conditions Precedent. This Amendment shall not become
effective unless and until the following conditions have been met, to
the sole and complete satisfaction of the Lenders, the Agent and
their respective counsel:
(a) Fee. Borrower shall have paid to Lender the Fee
required by Section 12 of this Amendment.
(b) Representations and Warranties. Giving effect to
this Amendment, all of the representations and warranties made by
Borrower under the Fourth Restated Agreement and the Loan Documents
shall be true and correct in all material respects as of the date
hereof with the same force and effect as if made on and as the date
hereof except for such changes in such representations and warranties
which do not constitute a Default or Event of Default, which do not,
individually or in the aggregate, have a Material Adverse Effect and
which have, to the extent required, been disclosed to the Agent and
the Lenders pursuant to Section 6.2 or 6.8 of the Fourth Restated
Agreement or otherwise;
(c) No Material Adverse Change. Since December 31,
1995, there shall not have occurred any material adverse change in
the assets, liabilities, business, operations or condition (financial
or otherwise) of the Borrower, or any event, condition, or state of
facts which would be expected to have a Material Adverse Effect
subsequent to the date hereof;
(d) Documentation. The Agent and the Lenders shall
have received the following documents, each duly executed and
delivered to the Agent and the Lenders, and each to be satisfactory
in form and substance to Agent and its counsel:
(I) this Amendment;
(ii) the Note;
(iii) an amendment to the Second Amended and
Restated Warrant Agreement (the "Warrant Agreement Amendment");
(iv) the Warrant Certificates required pursuant
to the Warrant Agreement Amendment;
(v) a certificate signed by the President or the Chief
Financial Officer of Borrower, stating that, giving effect to this
Amendment, the representations and warranties set forth in Article 5
of the Fourth Restated Agreement, are true and correct in all
material respects on the date hereof, stating that Borrower is on the
date hereof in compliance with all the terms and conditions set forth
in the Fourth Restated Agreement, as amended hereby, and the Loan
Documents on its part to be observed and performed, and stating that
on the date hereof, after giving effect to this Amendment, no Default
or Event of Default has occurred or is continuing;
<PAGE>
<PAGE>
(vi) a certificate of the Secretary of Borrower
certifying (i) that attached thereto is a true and correct copy of
the resolutions adopted by its Board of Directors, authorizing the
execution, delivery and performance of this Amendment, the Note and
the other documents contemplated hereby, and (ii) as the incumbency
and genuineness of its officers executing this Amendment, the Note
and the other documents contemplated hereby;
(vii) the written opinion of Steel, Hector &
Davis, counsel to Borrower, in the form and substance satisfactory to
Lenders and Agent;
(viii) such other documents, instruments and
agreements with respect to the transactions contemplated by this
Amendment, in each case in such form and containing such additional
terms and conditions as may be reasonably satisfactory to the
Majority Lenders, and containing, without limitation, representations
and warranties which are customary and usual in such documents.
14. Representations and Warranties; No Default. Borrower
hereby represents and warrants to the Agent and the Lenders that
giving effect to the amendments set forth in Section 10 of this
Amendment, all of Borrower's representations and warranties contained
in the Fourth Restated Agreement and the other Loan Documents are
true and correct on and as of the date of Borrower's execution of
this Agreement; except in respect of the covenants referenced in
Section 10 hereof, no Default or Event of Default has occurred and is
continuing as of such date under any Loan Document; Borrower has the
power and authority to enter into this Agreement and to perform all
of its obligations hereunder; the execution, delivery and
performance of this Agreement have been duly authorized by all
necessary corporate action on the part of Borrower; and the
execution and delivery of this Agreement and performance thereof by
Borrower does not and will not violate the Articles of Incorporation,
By-laws or other organizational documents of the Borrower and does
not and will not violate or conflict with any law, order, writ,
injunction, or decree of any court, administrative agency or other
governmental authority applicable to Borrower or its properties.
15. Expenses. Borrower agrees to pay, immediately upon demand
by the Agent, all costs, expenses, attorneys' fees and other charges
and expenses actually incurred by the Agent in connection with the
negotiation, preparation, execution and delivery of this Agreement
and any other instrument, document, agreement or amendment executed
in connection with this Agreement.
16. Defaults Hereunder. The breach of any representation,
warranty or covenant contained herein or in any document executed in
connection herewith, or the failure to serve or comply with any term
or agreement contained herein shall constitute a Default or Event of
Default under the Fourth Restated Agreement and the Agent and the
Lenders shall be entitled to exercise all rights and remedies they
may have under the Fourth Restated Agreement, any other documents
executed in connection therewith and applicable law.
17. References. All references in the Fourth Restated
Agreement and the Loan Documents to the Fourth Restated Agreement
shall hereafter be deemed to be references to the Fourth Restated
Agreement as amended hereby and as the same may hereafter be amended
from time to time.
18. Limitation of Agreement. Except as especially set forth
herein, this Agreement shall not be deemed to waive, amend or modify
any term or condition of the Fourth Restated Agreement, each of which
<PAGE>
<PAGE>
is hereby ratified and reaffirmed and which shall remain in full
force and effect, nor to serve as a consent to any matter prohibited
by the terms and conditions thereof.
19. Counterparts. This Agreement may be executed in any number
of counterparts, and any party hereto may execute any counterpart,
each of which, when executed and delivered, will be deemed to be an
original and all of which, taken together will be deemed to be but
one and the same agreement.
20. Further Assurances. Borrower agrees to take such further
action as the Agent or the Majority Lenders shall reasonably request
in connection herewith to evidence the amendments herein contained to
the Fourth Restated Agreement.
21. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the successors and permitted assigns
of the parties hereto.
22. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York,
without regard to principles of conflicts of law.
23. No Claim. Borrower hereby represents, warrants,
acknowledges and agrees to end with the Lenders and Agent that (a)
Borrower neither holds nor claims any right of action, claim, cause
of action or damages, either at law or in equity, against the Lenders
and Agent which arises from, may arise from, allegedly arise from,
are based upon or are related in any manner whatsoever to the Fourth
Restated Agreement and the Loan Documents or which are based upon
acts or omissions of the Lenders or Agent in connection therewith and
(b) the Obligations are absolutely owed to the Lenders and Agent,
without offset, deduction or counterclaim.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment under seal as of the date first written above.
"BORROWER"
PEOPLES TELEPHONE COMPANY, INC.
By: __________________________
Bonnie S. Biumi
Chief Financial Officer
Attest:_______________________
Francis J. Harkins
Secretary
[CORPORATE SEAL]
[Signatures Continued On Next Page]
<PAGE>
<PAGE>
[Signatures Continued From Previous Page]
"AGENT"
CREDITANSTALT-BANKVEREIN
By:___________________________
Robert M. Biringer
Senior Vice President
By:___________________________
Joseph P. Longosz
Vice President
[Signatures Continued On Next Page]
<PAGE>
<PAGE>
[Signatures Continued From Previous Page]
"LENDER"
CREDITANSTALT-BANKVEREIN
By:___________________________
Robert M. Biringer
Senior Vice President
By:___________________________
Joseph P. Longosz
Vice President
EXHIBIT 10.2
SECOND AMENDMENT TO SECOND AMENDED AND
RESTATED WARRANT AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED
WARRANT AGREEMENT (the "Amendment") is made and entered into as of
the 4th day of April, 1996 between PEOPLES TELEPHONE COMPANY, INC., a
New York corporation (the "Issuer"), and CREDITANSTALT AMERICAN
CORPORATION, a Delaware corporation ("Creditanstalt").
W I T N E S S E T H :
WHEREAS, Creditanstalt and the Issuer made and entered
into that certain Second Amended and Restated Warrant Agreement dated
as of February 17, 1994, as amended (the "Warrant Agreement"),
pursuant to which the Issuer has agreed to issue to Creditanstalt or
an "Affiliate" (as defined in the Warrant Agreement) certain
"Warrants" (as defined in the Warrant Agreement); and
WHEREAS, the Warrant Agreement provides, inter alia,
for (a) Series A Warrants to purchase an aggregate of 150,000 shares
of Common Stock or Preferred Stock at an exercise price of $3.17 per
share, all of which Series A Warrants have been exercised; (b) Series
B Warrants to purchase an aggregate of 150,000 shares of Common
Stock or Preferred Stock at an exercise price of $8.00 per share;
Series C Warrants to purchase an aggregate of 300,000 shares of
Common Stock or Preferred Stock at an exercise price of $9.33 per
share; (d) Series D Warrants to purchase an aggregate of 50,000
shares of Common Stock or Preferred Stock at an exercise price of
$9.00 per share; and (e) Series E Warrants to purchase an aggregate
of 200,000 shares of Common Stock or Preferred Stock at an exercise
price of $5.25 per share; and
WHEREAS, Issuer is also a party to a certain Fourth
Amended and Restated Loan and Security Agreement, dated as of July
19, 1995, as amended (the "Loan Agreement"), between the Issuer and
Creditanstalt-Bankverein (the "Bank"), as the Agent and sole Lender
thereunder; and
WHEREAS, the Bank is the sole stockholder of
Creditanstalt; and
WHEREAS, the Issuer has asked the Bank to waive certain
"Events of Default" under, and as such term is defined in, the Loan
Agreement and the Bank has agreed to waive such Events of Default
only on the condition that the Issuer enter into this Amendment
reducing the exercise price of the Series B Warrants, the Series C
Warrants and the Series D Warrants to $5.25 per Warrant;
NOW, THEREFORE, to induce the Bank to waive the Events
of Default outstanding under the Loan Agreement, and in consideration
of the premises, the terms and conditions contained herein, and other
good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1. Definitions. All capitalized terms used herein
and not expressly defined herein shall have the same respective
meanings given to such terms in the Warrant Agreement.
<PAGE>
<PAGE>
2. Amendment of Definition of "Exercise Price". The
term "Exercise Price", as set forth in Section 1 of the Warrant
Agreement, is hereby deleted in its entirety and the following
definition is substituted in lieu thereof:
"Exercise Price" shall mean the exercise price of
the Warrant which shall be: (a) $3.17 per warrant with respect to the
Series A Warrants; (b) $5.25 per Warrant with respect to the Series B
Warrants; (c) $5.25 per Warrant with respect to the Series C
Warrants; (d) $5.25 per Warrant with respect to the Series D
Warrants; and (e) $5.25 per Warrant with respect to the Series E
Warrants."
3. Amendment of Exhibit A. Exhibit A of the Warrant
Agreement is hereby amended by deleting in its entirety the bracketed
language in line ten of the Warrant Certificate and substituting in
lieu thereof the following: "[$3.17//$5.25]".
4. Issuance and Registration of Warrants. The Issuer
hereby agrees to issue and deliver to Creditanstalt or, at the option
of Creditanstalt, an Affiliate thereof, new Warrant Certificates
evidencing the outstanding Series B Warrants, Series C Warrants and
Series D Warrants as hereby amended. Upon receipt of such new
Warrant Certificates, Creditanstalt shall deliver to the Issuer for
cancellation the old Warrant Certificates for the Series B Warrants,
Series C Warrants and Series D Warrants. On the date hereof, the
Issuer shall register the new Warrant Certificates in the Warrant
Register in the name of Creditanstalt or an Affiliate thereof as the
case may be.
5. Restatement of Representations and Warranties.
(a) Issuer hereby reaffirms each and every
representation and warranty heretofore made under or in connection
with the execution and delivery of the Warrant Agreement (including,
without limitation, those representations and warranties set forth in
Section 2 of the Warrant Agreement), as such representations and
warranties are amended in Section 5(b) and (c) of this Amendment, as
fully as though such representations and warranties have been made on
the date hereof and with specific reference to this Amendment.
(b) Solely with respect to Section 2(d) of the
Warrant Agreement, Issuer has authorized capital stock consisting of
25,000,000 shares of Common Stock, par value $.01 per share, of which
as of March 22, 1996, not less than 16,172,684 shares were issued and
outstanding, and 5,000,000 shares of Preferred Stock, $.01 par value,
100,000 shares of which are designated as Series A Preferred Stock,
none of which are issued and outstanding, 600,000 shares of which are
designated as Series B Preferred Stock, none of which are issued and
outstanding, and 160,000 shares of Series C Preferred Stock, $.01 par
value, of which as of the date hereof, at least 150,000 shares of
which were issued and outstanding.
(c) Solely with respect to Section 2(e) of the
Warrant Agreement, no holder of securities of the Issuer has any
right to the registration of such securities under the Securities Act
except (I) as set forth on Schedule J to the Warrant Agreement and
(ii) as provided for in that certain Registration Rights Agreement,
dated as of July 19, 1995 among the Issuer, UBS Partners, Inc., and
Appian Capital Partners, L.L.C.
6. Effect of Amendment. Except as expressly set
forth hereinabove, the Warrant Agreement shall remain in full force
and effect as originally written, and shall constitute the legal,
valid, binding and enforceable obligation of Issuer to Creditanstalt,
<PAGE>
<PAGE>
and Issuer hereby restates, ratifies and reaffirms each and every
term and condition set forth in the Warrant Agreement, as amended
hereby, effective as of the date hereof.
7. Counterparts. This Amendment may be executed in
any number of counterparts, each of which, when so executed and
delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute one and the same
instrument.
8. Successors and Assigns. This Amendment shall be
binding upon and inure to the benefit of the successors and permitted
assigns of the parties hereto.
9. Section References. Section titles and references
used in this Amendment shall be without substance and meaning or
content of any kind whatsoever and are not a part of the agreement
among the parties hereto evidenced hereby.
10. Further Assurances. Issuer agrees to take such
further action as Creditanstalt shall reasonably request in
connection herewith evidencing the Amendment herein contained to the
Warrant Agreement.
11. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the State
of New York, without regard to principles of conflicts of laws.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly
authorized officers, effective as of the date and year first above
written.
"Issuer"
PEOPLES TELEPHONE COMPANY, INC.
By:
Bonnie S. Biumi
Chief Financial Officer
Attest:
Francis J. Harkins
Secretary
[CORPORATE SEAL]
"Creditanstalt"
CREDITANSTALT AMERICAN CORPORATION
By:
Robert M. Biringer
Senior Vice President
By:
Joseph P. Longoz
Vice President
Exhibit 10.3
EMPLOYMENT AGREEMENT
Employment Agreement dated as of May 2, 1996 between
Peoples Telephone Company, Inc., a Florida corporation (the
"Company") and E. Craig Sanders (the "Employee").
Recitals
A. The Company is presently engaged in the business of
owning and operating telephone and wire communication systems within
the state of Florida and other businesses (the "Businesses").
B. The Company desires to employ the Employee for the
period set forth in this Agreement to obtain the services of the
Employee, and the Employee is willing to be employed by the Company
for that period on the terms and conditions set forth below.
Agreement
1. Term of Employment. The Company employs the Employee,
and the Employee accepts employment by the Company, for a term
commencing on the date of this Agreement and ending on December 31,
1998 (the "Term"), subject to the termination provisions of Section
5. Subject to Section 5(g) hereof, so long as Employee shall serve
hereunder as the Company's President and Chief Executive Officer, the
Company shall use its best efforts to cause Employee to be nominated
for election to the Board by the vote of the Company's voting shares.
2. Services Provided by Employee.
(a) The Employee and the Company agree that the
Employee shall serve as President and Chief Executive Officer of the
Company. In that capacity, he shall solely, under supervision of the
Board of Directors of the Company (the "Board"), have responsibility
for the overall management and operation of the Company's Businesses
and perform other duties reasonably assigned to him from time to time
by the Board provided the duties relate to the business of the
Company and are consistent with the Employee's position as President
and Chief Executive Officer, as well as Employee's background and
experience. The Employee shall devote his full business time to the
operations of the Company and shall use his best efforts, skills and
abilities to promote the interests of the Company.
(b) During the Term, the Employee shall not serve
as an officer, director, partner or employee, or act in an advisory
or other capacity for, an individual, firm, corporation or other
person without the prior written consent of the Board, which consent
shall not be unreasonably withheld.
3. Place of Performance. The Employee shall be based at
the Company's principal executive offices located at 2300 Northwest
89th Place, Miami, Florida, except for required travel relating to
the Company's Businesses to an extent substantially consistent with
the Employee's travel obligations.
<PAGE>
<PAGE>
4. Compensation.
(a) Base Salary. The Company shall pay
compensation every two weeks to the Employee at a rate of $300,000
per year (the "Salary") subject to increase from time to time upon
the review and determination of the Board (which review shall be
conducted no less frequently than annually).
(b) Bonus Compensation. The Company shall pay to
the Employee bonus compensation ("Bonus Compensation") of up to 50%
of the Salary based upon attainment of performance targets which
shall be mutually agreed upon between the Company and the Employee
and set forth as an annex to this Agreement within 90 days from the
date of this Agreement. Bonus Compensation shall be paid within 10
business days after the earlier (i) of the public release of fiscal
year earnings for the fiscal year in respect of which such Bonus
Compensation is being paid and (ii) the issuance of the audited
financial statements in respect of such year. In addition, the Board
shall consider the payment of additional bonus compensation in the
event that Bonus Compensation maximum performance targets are
exceeded.
(c) Stock Options. Within 90 days after the date
hereof, the Company agrees to grant to the Employee options to
purchase an aggregate 600,000 shares of the Company's Common Stock as
follows:
<TABLE>
<CAPTION>
Number of Shares Exercise Price Vesting/Exercisable
<C> <C> <C>
100,000 $ 2.50 12/31/96
100,000 4.25 12/31/96
100,000 5.25 12/31/97
100,000 6.25 12/31/97
200,000 7.25 12/31/98
</TABLE>
Such options shall be subject to all terms and conditions of the
applicable stock option agreement (which agreements shall be
reasonable and customary). Notwithstanding the foregoing, in the
event of a Change in Control (as defined below) all such options
shall vest in full automatically. All shares to be issued upon
exercise of such options shall be registered under applicable federal
and state securities laws.
(d) Employee Benefits. The Company shall provide
to Employee health insurance, a 401(k) plan and all other benefits at
a level and on a basis consistent with that provided by the Company
to its other executive officers. The Company at its cost shall
provide to Employee term life insurance providing an aggregate death
benefit payable to his designated beneficiary of $300,000.
(e) Vacation. The Employee shall be entitled to
four (4) weeks paid vacation in each calender year (including 1996)
and shall be entitled to all paid holidays given by the Company to
its employees generally. Upon any termination of this Agreement,
Employee shall be paid the value, based upon his then Salary, of any
unused and accrued vacation time for the year in which such
termination occurs. Vacation time shall be deemed to accrue on a
monthly basis for this purpose.
(f) Expenses. The Company shall reimburse the
Employee, in accordance with its standard practice after the Employee
submits expense receipts to the Company, for all reasonable
out-of-pocket expenses that are paid by the Employee in performing
the services set forth in Section 2.<PAGE>
(g) Moving Expenses. The Company shall pay the
Employee's reasonable out-of-pocket expenses in connection with
Employee's relocation to Miami area, including costs incurred in
connection with the termination of the lease of the Employee's
current residence and real estate brokerages fees and closing costs
in connection with the purchase or lease of a new residence in the
Miami area.
5. Termination. This Agreement may be terminated prior to
the expiration of the Term as follows:
(a) This Agreement shall terminate upon the death
of the Employee.
(b) The Company has the right to terminate this
Agreement if, by reason of Disability, the Employee has been unable
to perform his duties under this Agreement for a period of 90
consecutive days or 120 days in any 180 day period. For purposes of
this Agreement, "Disability" means physical or mental disability of
the Employee, which disability is expected to be of long or
indefinite duration and prevents the Employee from performing his
duties under this Agreement. All determinations of Disability made
by the Company pursuant to the Company's Long Term Disability
Insurance Policy, if any, shall be determinative of Disability under
this Agreement. If the Company does not have a Long Term Disability
Insurance Policy, Disability shall be determined by the Board upon
the basis of the evidence the Board deems appropriate.
(c) The Employee may terminate his employment under
this Agreement if his health (either physical or mental) becomes
impaired to an extent that makes the continued performance of his
duties under this Agreement materially harmful to his physical or
mental health or his life.
(d) The Company may terminate the Employee's
employment under this Agreement for Cause at any time. For purposes
of this Section 5(d), the Company shall have "Cause" to terminate the
Employee's employment if he (i) is convicted of a felony; (ii)
willfully engages in one or more acts involving fraud or moral
turpitude; (iii)(x) willfully misappropriates Company assets or (y)
willfully engages in gross misconduct materially injurious to the
Company or its subsidiaries; or (iv) if the Board determines that the
Employee has materially and willfully failed to perform his duties
under this Agreement, such determination to be made in good faith
after having given Employee a reasonably detailed written explanation
of such failure and the opportunity for Employee and his counsel to
be heard. For purposes of this Section 5(d), "willful" means an act
done, or omitted to be done, by the Employee in bad faith, provided
that the Employee knew or reasonably should have known that the
action or omission was not in the best interest of the Company.
Notwithstanding the foregoing, a termination for Cause as described
in clause (iii) (y) or (iv), shall not occur unless Employee shall
have been given notice of the existence of the basis for termination
thereunder and shall have had 30 calendar days to cure such basis to
the reasonable satisfaction of the Board.
(e) The Company may terminate the Employee's
employment under this Agreement without cause by providing the
Employee with written notice of such termination.
(f) The Employee may terminate his employment under
this Agreement for "Good Reason". For purposes of this Section 5(f),
the Employee shall have "Good Reason" to terminate his employment any
<PAGE>
<PAGE>
time during the Term of this Agreement if, after a Change in Control
of the Company (as defined below), the Company (i) assigns to the
Employee any duties that are inconsistent with the positions
described in Section 2 of this Agreement, (ii) diminishes
significantly the then existing duties of the Employee without the
written consent of the Employee (including the failure to nominate
Employee for election as director during the term hereof), (iii)
removes the Employee from or fails to re-elect the Employee to the
positions described in Section 2(a) of this Agreement, (iv) reduces
his Salary or the maximum percentage of Salary payable as Bonus
Compensation, (v) materially fails to comply with Section 4 of this
Agreement, (vi) requires the Employee to be based at any office or
location other than that described in Section 3 hereof which change
of location would require the Employee to commute a distance from his
primary residence in excess of the greater of (x) 50 miles and (y)
125 percent of the distance of such commute prior to such change of
location or (vii) fails to obtain the assumption of this Agreement by
a Successor (as hereinafter defined) as provided in Section 19 of
this Agreement.
For purposes of this Agreement, a "Change in Control"
means:
(1) the acquisition of beneficial ownership,
direct or indirect, of equity securities of the Company by any
person (as that term is defined in Sections 13(d) and 14(d) of the
Securities Exchange Act of l934, as amended (the "Exchange Act"))
which, when combined with all other securities of the Company
beneficially owned, directly or indirectly by that person, equals or
exceeds 50% of (i) either the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a
Change of Control: (i) any acquisition by the Company or any of its
subsidiaries, (ii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
subsidiaries or (iii) any acquisition by any corporation with respect
to which, following such acquisition, more than 75% of, respectively,
the then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such acquisition in substantially the same proportions as their
ownership, immediately prior to such acquisition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as
the case may be;
(2) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding for this purpose any such individual whose initial
assumption of office occurs as a result of either an actual or
<PAGE>
<PAGE>
threatened solicitation to which Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act applies or other actual or
threatened solicitation of proxies or consents;
(3) approval by the shareholders of the Company
of a reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than
75% of, respectively, the then outstanding shares of common stock and
the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such reorganization, merger
or consolidation in substantially the same proportions as their
ownership, immediately prior to such reorganization, merger or
consolidation of
the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be; or
(4) approval by the shareholders of the Company
of (i) a complete liquidation or dissolution
of the Company or (ii) the sale or other disposition of all or
substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or
other disposition, more than 75% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or
other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
The term "the sale or disposition by the Company of all
or substantially all of the assets of the Company" shall mean a sale
or other disposition transaction or series of related transactions
involving assets of the Company or of any direct or indirect
subsidiary of the Company (including the stock of any direct or
indirect subsidiary of the Company) in which the value of the assets
or stock being sold or otherwise disposed of (as measured by the
purchase price being paid therefor or by such other method as the
Board determines is appropriate in a case where there is no readily
ascertainable purchase price) constitutes more than two-thirds of the
fair market value of the Company (as hereinafter defined). The "fair
market value of the Company" shall be the aggregate market value of
the then outstanding Company Common Stock (on a fully diluted basis)
plus the aggregated market value of Company's other outstanding
equity securities. The aggregate market value of the shares of
Outstanding Company Common Stock shall be determined by multiplying
the number of shares of Outstanding Company Common Stock (on a fully
diluted basis) outstanding on the date of the execution and delivery
of a definitive agreement with respect to the transaction or series
of related transactions (the "Transaction Date") by the average
closing price of the shares of Outstanding Company Common Stock for
the ten trading days immediately preceding the Transaction Date. The
aggregate market value of any other equity securities of the Company
<PAGE>
<PAGE>
shall be determined in a manner similar to that prescribed in the
immediately preceding sentence for determining the aggregate market
value of the shares of Outstanding Company Common Stock or by such
other method as the Board shall determine is appropriate.
(g) A termination of the Employee's employment
under this Agreement shall be communicated by the terminating party
by written notice of termination ("Notice of Termination") that shall
include (i) the date such termination is to be effective; (ii) the
specific termination provision in Section 5 upon which the
terminating party has relied; and (iii) except for a termination
under Section 5(a), the facts and circumstances claimed by the
terminating party that provide a basis for the termination of the
Employee's employment under the provision indicated in the Notice of
Termination. Any termination of this Agreement shall, without
further action on the part of Employee, constitute Employee's
simultaneous resignation from the Board, all committees thereof and
all other positions and offices of the Company and its Subsidiaries
held by Employee.
6. Compensation Upon Termination.
(a) Upon termination of the Employee's employment
under Section 5(a), 5(b), 5(c) or 5(d), the Company shall have no
further obligation under this Agreement to make any payments to or
bestow any benefits on the Employee after the Termination Date (as
defined below), other than payments and benefits accrued and due and
payable to the Employee prior to the Termination Date. For purposes
of this Agreement, "Termination Date" means (i) if the Employee's
employment is terminated pursuant to Section 5(a) of this Agreement,
the date of the Employee's death; (ii) if the Employee's employment
is terminated by virtue of the expiration of this Agreement, the end
of the Term; or (iii) if the Employee's employment is terminated for
any other reason, the date specified in the Notice of Termination
which shall not be earlier than the date such notice is sent or given
to Employee.
(b) Upon termination of the Employee's employment
by the Company without Cause (except in the situation where Section
6(c) applies), the Company shall pay Employee, in addition to all
payments and benefits accrued, due and payable prior to the
Termination Date, a lump sum payment, within 5 business day after the
Termination Date, in an amount equal to 200 percent of his Salary as
in effect on the Termination Date. The Company shall also provide
Employee with all fringe benefits enjoyed by him at the Termination
Date (on a basis consistent with the basis upon which such benefits
were provided prior to such termination) until the second anniversary
of the Termination Date or, to the extent that Employee is not
eligible to participate in any Company fringe benefit plans (by the
terms of any such plan), the after tax value of providing such
benefits until the second anniversary of the Termination Date.
(c) If after a Change in Control (i) the Employee's
employment is terminated by the Company without Cause or (ii) is
terminated by the Employee for Good Reason, in addition to payments
and benefits accrued and due and payable to the Employee prior to the
Termination Date, the Company shall pay to the Employee, within 5
business days after the Termination Date, a lump sum payment equal to
200 percent of the sum of (x) his Salary as then in effect plus (y)
the maximum Bonus Compensation which Employee would have been
eligible to earn pursuant to Section 4(b) hereof as if the Company
achieved 100 percent of the performance targets for the year in which
such termination occurs. The Company shall also provide Employee
with all fringe benefits enjoyed by him at the Termination Date (on a
<PAGE>
<PAGE>
basis consistent with the basis upon which such benefits were
provided prior to such termination) until the second anniversary of
the Termination Date or, to the extent that Employee is not eligible
to participate in any Company fringe benefit plans (by the terms of
any such plan), the after tax value of providing such benefits until
the second anniversary of the Termination Date. In the event it
shall be determined that any payment or distribution by the Company
pursuant to this agreement following a Change in Control (a
"Payment") would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended, or any interest or
penalties are incurred by the Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then
the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Employee retains an amount of Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
(d) The Company shall maintain in full force and
effect until the Termination Date all group insurance plans (the
"Plans") in which the Employee was a participant immediately prior to
the date of the Notice of Termination. If the Employee's continued
participation is not permitted under the terms of a Plan, the Company
shall arrange to provide the Employee with alternative benefits
substantially similar to those provided under that Plan.
(e) For the purposes of all retirement plans of the
Company applicable to the Employee and in effect on the date of the
Notice of Termination, the Company shall provide for payment of
retirement or death benefits to the Employee or his surviving spouse
that are calculated to reflect service credits for the period ending
on the Date of Termination, as though the Employee were an employee
of the Company throughout this period.
(f) The Employee shall not be required to mitigate
the amount of any payment provided for in Section 6(b) or 6(c) by
seeking other employment or otherwise, nor shall the amount of any
payment provided for in Section 6(b) or 6(c) be reduced by any
compensation earned by the Employee as the result of employment by
another employer after the Termination Date, or otherwise. Fifty
percent (50%) of any payment under Section 6(b) or 6(c) shall be
deemed to be in consideration of Employee's covenant not to compete
set forth in Section 9 hereof.
7. Representations by Employee. The Employee represents
and warrants that he is not a party to any agreement or subject to
any restriction (including agreements containing confidentiality or
noncompete covenants) that may adversely affect the business of the
Company or restrict the performance by the Employee of his duties
under this Agreement.
8. Confidentiality.
(a) The Employee acknowledges that as a result of
the Employee's employment by the Company, the Employee will become
informed of, and have access to, valuable and confidential
information of the Company, including inventions, trade secrets,
technical information, know-how, plans, specifications, and the
identity of customers and suppliers (collectively, the "Confidential
<PAGE>
<PAGE>
Information"), and that this Confidential Information, even though it
may be contributed, developed or acquired by the Employee, is the
exclusive property of the Company to be held by the Employee in trust
and solely for the Company's benefit. Accordingly, the Employee
shall not at any time during or subsequent to the Term, use, reveal,
report, publish, transfer or otherwise disclose to any person,
corporation or other entity, any of the Confidential Information
without the prior written consent of the Company, except to
responsible officers and employees of the Company and other
responsible persons whom the Company agrees in writing are in a
contractual or fiduciary relationship with the Company or who have a
need for this information for purposes which are in the best
interests of the Company. This provision does not prohibit the
Employee from disclosing information which legally is or becomes of
general public knowledge from authorized sources other than the
Employee or as required by legal process or subpoena, provided that
Employee shall have given the Company a reasonable opportunity to
object to such process or subpeona.
(b) Upon the termination of this Agreement, the
Employee shall promptly deliver to the Company all customer lists,
drawings, manuals, letters, notes, notebooks, reports and copies
thereof and all other materials, including those of a secret or
confidential nature, relating to the Company's business which are in
the Employee's possession or control. The Employee agrees to
represent to the Company that he has complied with the provisions of
this Section at the time he ceases to be an employee of the Company.
9. Noncompetition. The Employee agrees that during the
Term and for one year after the Termination Date, the Employee shall
not (a) participate directly or as an employee, agent, owner,
consultant, director, shareholder or partner of any person which is
engaged in the pay telephone business in competition with the Company
in a geographic area in which the Company conducts such business
during that time; (b) recruit or otherwise solicit or induce any
person who during that time is an employee of the Company to
terminate his employment with, or otherwise cease his relationship
with the Company, or hire any such employee who has left the employ
of the Company within 90 days after termination of that employee's
employment with the Company; or (c) solicit any owner or operator of
property upon which Company pay telephones are located, to install
pay telephones of a competitor of the Company; provided, however,
that the foregoing shall not prohibit Employee from owning not more
than five percent of the voting securities of any publicly traded
entity.
The restrictions against competition set forth above
are considered by the parties to be reasonable for the purposes of
protecting the business of the Company. If any restriction is found
by a court of competent jurisdiction to be unenforceable because it
extends for too long a period of time, over too broad a range of
activities or in too large a geographic area, that restriction shall
be interpreted to extend only over the maximum period of time, range
of activities or geographic area as to which it may be enforceable.
10. Remedies. The Company and the Employee acknowledge
that the Company would not have an adequate remedy at law for money
damages if the covenants contained in Section 8 or 9 were not
complied with in accordance with their terms. Because the breach of
any of the covenants in Section 8 or 9 will result in immediate and
irreparable injury to the Company, the Employee agrees that the
Company shall be entitled to an injunction restraining him from
violating Section 8 and 9 to the fullest extent allowed by law.
Nothing in this Agreement shall prohibit the Company from pursuing
<PAGE>
<PAGE>
all other legal or equitable remedies that may be available to it for
a breach or threatened breach, including the recovery of damages.
11. Federal Income Tax Withholding. The Company may
withhold from benefits payable under this Agreement, or arrange for
the payment of, federal, state, local or other taxes as required
pursuant to law or governmental regulation or ruling.
12. Survival. The provisions of Sections 8, 9 and 10
shall survive the termination of this Agreement and shall inure to
the benefit of the Company and its Successors.
13. [Reserved]
14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of
which together shall be deemed one and the same instrument.
15. Waiver. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement, except by
written instrument of the party charged with the waiver or estoppel.
No written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each waiver shall operate only as to
the specific term or condition waived and shall not constitute a
waiver of the term or condition for the future or as to any act other
than that specifically waived.
16. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida
without reference to its conflicts of law principles.
17. [Reserved]
<PAGE>
<PAGE>
18. Notices. Notices required or permitted to be given
under this Agreement shall be in writing and effective upon delivery
in person or mailing by certified mail, return receipt requested, to
the parties at the addresses below or to another address as either
party shall direct by notice to the other party.
(a) If to the Company:
Peoples Telephone Company, Inc.
2300 N.W. 89th Place
Miami, FL 33172
Attention: Robert E. Lund
President and Chief Executive Officer
with a copy to:
Peoples Telephone Company, Inc.
2300 N.W. 89th Place
Miami, FL 33172
Attention: Bruce Renard
Executive Vice President,
General Counsel
(b) If to Employee:
Mr. E. Craig Sanders
1004 Meadow Creek Drive
No. 2122
Irving, Texas 75038
19. Assignment.
(a) This Agreement and all of the Employee's
rights, duties and obligations under this Agreement are personal in
nature and shall not be assignable by the Employee. A purported
assignment shall not be valid or binding on the Company. The Company
shall not assign this Agreement, its rights, duties and obligations
except to a Successor (as defined below).
(b) This Agreement shall inure to the benefit of
and be legally binding upon all Successors of the Company. The
Company will require a Successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially
all of the business and/or assets of the Company (a "Successor"), by
agreement in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. For purposes of
this Section 19, "Company" shall mean the Company as defined above
and any Successor to its business and/or assets that executes and
delivers the agreement provided for in this Section 19 or that
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
20. Entire Agreement. This Agreement constitutes the
entire understanding of the parties and supersedes all prior
discussions, negotiations, agreements and understandings, whether
oral or written, with respect to its subject matter. This Agreement
can be modified only by a written instrument properly executed by
the Employee and the Company.
21. Severability. If any one or more of the provisions
of this Agreement is held invalid, illegal or unenforceable, the
remaining provisions of this Agreement shall be unimpaired, and the
invalid, illegal or unenforceable provision shall be replaced by a
mutually acceptable valid, legal and enforceable provision which
comes closest to the intent of the parties.
The parties have executed this Agreement effective as of the
day and year first above written.
PEOPLES TELEPHONE COMPANY, INC.
By: /s/ Robert E. Lund
Robert E. Lund
President and Chief Executive Officer
/s/ E.Craig Sanders
E. Craig Sanders
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000819694
<NAME> PEOPLES TELEPHONE COMPANY, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9461000
<SECURITIES> 0
<RECEIVABLES> 12400000
<ALLOWANCES> (4958000)
<INVENTORY> 2187000
<CURRENT-ASSETS> 22485000
<PP&E> 134557000
<DEPRECIATION> (59435000)
<TOTAL-ASSETS> 152075000
<CURRENT-LIABILITIES> 26611000
<BONDS> 101098000
<COMMON> 162000
14173000
0
<OTHER-SE> 8890000
<TOTAL-LIABILITY-AND-EQUITY> 152075000
<SALES> 30496000
<TOTAL-REVENUES> 30496000
<CGS> 22920000
<TOTAL-COSTS> 31929000
<OTHER-EXPENSES> 5000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3062000
<INCOME-PRETAX> (4500000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4500000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4500000)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
