SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)}
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PEOPLES TELEPHONE COMPANY, INC.
{Name of Registrant as Specified in its Charter}
(Name of Persons(s) Filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on the table below per Exchange Act Rules (14a-6
(i)(4).
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determine):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check ox if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No:
3) Filing Party:
4) Date Filed:
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PEOPLES TELEPHONE COMPANY, INC.
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On July 15, 1996
TO THE SHAREHOLDERS OF PEOPLES TELEPHONE COMPANY, INC.:
The Annual Meeting of Shareholders of PEOPLES TELEPHONE COMPANY,
INC., a New York corporation (the "Company"), will be held at the
Radisson Mart Plaza Hotel at 711 Northwest 72nd Avenue, Miami, Florida
33126, on July 15, 1996, at 10:00 a.m., for the following purposes:
1. To elect three persons to the Company's Board of Directors (with
the holders of Common Stock and Series C Cumulative Convertible
Preferred Stock voting together as a single class), as more
fully described in the accompanying Proxy Statement, to hold
office until the next Annual Meeting of Shareholders and until
their respective successors are duly elected and qualified; and
2. To transact all other business that may properly come before the
meeting and all adjournments of the meeting.
Pursuant to the terms of the Company's Series C Cumulative
Convertible Preferred Stock (the "Preferred Stock"), the holders of the
Preferred Stock are entitled to vote on all matters submitted to the
shareholders for a vote together with the holders of the Common Stock,
voting together as a single class, with each share of Common Stock
entitled to one vote per share and each share of Preferred Stock
entitled to one vote for each share of Common Stock issuable upon the
conversion of the Preferred Stock as of the record date. As of the
close of business on June 3, 1996, the record date for the meeting,
each share of Preferred Stock was convertible into 19.04762 shares of
Common Stock.
Whether or not you expect to be present at the meeting, please
sign, date and return the enclosed proxy in the enclosed envelope as
promptly as possible.
By Order of the Board of Directors
/s/ Francis J. Harkins
Francis J. Harkins, Secretary
June 11, 1996
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO
ATTEND THE MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE
TO ATTEND IN PERSON SHOULD PROMPTLY EXECUTE AND RETURN THE
ENCLOSED
PROXY CARD. SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY ATTEND THE
MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
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PEOPLES TELEPHONE COMPANY, INC.
PROXY STATEMENT
_______________________
1996 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On July 15, 1996
_______________________
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors of Peoples Telephone Company,
Inc., a New York corporation (the "Company"), of proxies from the
holders of common stock, par value $.01 per share ("Common Stock") and
Series C Cumulative Convertible Preferred Stock, par value $.01 per
share ("Preferred Stock"), of the Company for use at the 1996 Annual
Meeting of Shareholders of the Company (the "Annual Meeting") and at
any adjournments or postponements of the Annual Meeting.
The Annual Meeting will be held at the Radisson Mart Plaza Hotel
at 711 Northwest 72nd Avenue, Miami, Florida 33126, on July 15, 1996,
at 10:00 a.m. The Company's 1995 Annual Report to Shareholders
accompanies this Proxy Statement but does not form a part of this Proxy
Statement. It is expected that this Proxy Statement and a proxy will
be mailed to the shareholders of the Company on or about June 14, 1996.
The principal executive offices of the Company are located at 2300 N.W.
89th Place, Miami, Florida 33172.
OUTSTANDING STOCK AND VOTING RIGHTS
On July 19, 1995, the Company issued to UBS Partners, Inc. ("UBS
Partners") 150,000 shares of Preferred Stock for gross proceeds of
$15.0 million (the "Preferred Stock Investment"). Pursuant to the
terms of the Preferred Stock, the holders of the Preferred Stock are
currently entitled to elect two members of the Board of Directors of
the Company. The terms of the Preferred Stock also provide that as
long as the Preferred Stock is entitled to elect at least one director,
the Board of Directors shall consist of no more than six directors.
UBS Partners has indicated to the Company that it intends to re-elect
Mr. Charles J. Delaney and Mr. Justin S. Maccarone to serve on the
Board of Directors of the Company.
The holders of the Preferred Stock are entitled to vote on all
matters submitted to the shareholders of the Company for a vote
together with the holders of the Common Stock, voting together as a
single class, with each share of Common Stock entitled to one vote per
share and each share of Preferred Stock entitled to one vote for each
share of Common Stock issuable upon conversion of the Preferred Stock.
In accordance with the Bylaws of the Company, the Board of
Directors has fixed the close of business on June 3, 1996 as the record
date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting. Only shareholders of record at the
close of business on that date will be entitled to vote. Each
shareholder who submits a proxy on the accompanying form has the power
to revoke it by notice of revocation directed to the proxy-holders or
to the Company at any time before it is voted. Unless authority is
withheld, proxies which are properly executed will be voted for the
proposal set forth on the proxies. Although
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a shareholder may have given a proxy, the holder may nevertheless
attend the meeting, revoke the proxy and vote in person. As of the
date of this Proxy Statement, the Board of Directors knows of no
business other than the election of directors which is to be submitted
to the shareholders of the Company at the Annual Meeting.
At the close of business on June 3, 1996, there were 16,194,684
shares of Common Stock outstanding and 150,000 shares of Preferred
Stock (convertible into 2,857,143 shares of Common Stock) outstanding.
Every holder of record of Preferred Stock or Common Stock of the
Company at the close of business on June 3, 1996 is entitled to notice
of the meeting and to vote, in person or by proxy, 19.04762 votes for
each share of Preferred Stock and one (1) vote for each share of Common
Stock, as the case may be, held by such holder. A majority of the
shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at the Annual Meeting. Under the laws of the State
of New York (in which the Company is incorporated), the election of
directors requires the affirmative vote of a majority of the votes cast
at the meeting by the holders of shares entitled to vote thereon. For
purposes of determining whether the proposal has received a majority
vote, abstentions will not be included in the vote totals and, in
instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned a proxy (so
called "broker non-votes"), those votes will not be included in the
vote totals. However, abstentions and broker non-votes will be counted
in the determination of a quorum.
PROPOSAL 1
ELECTION OF DIRECTORS
As discussed under "Outstanding Stock and Voting Rights," the
holders of the Preferred Stock have the right to elect two of the
directors of the Company. With regard to the remaining directors, the
Board of Directors has nominated the three persons listed below to
serve as directors of the Company until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualified.
Proxies cannot be voted for more than three persons. With the
exception of Mr. Robert E. Lund and Mr. E. Craig Sanders, none of the
nominees listed below or the directors elected by the holders of the
Preferred Stock is a current or former employee of the Company or its
subsidiaries. It is intended that proxies will be voted for the
nominees listed below, all of whom are presently serving as directors
of the Company.
To the best of the Company's knowledge, each of the nominees for
director is able and intends, if elected, to serve on the Board of
Directors. If, prior to the Annual Meeting, any of the nominees should
become unable to serve for any reason, the persons named as proxies
will have full discretion to vote for all other persons who are nominated.
The names and ages of, and certain other information about,
the nominees for election are set forth below:
Jody Frank, age 44, has served as a director of the Company and
its predecessor since September 1986. Since February 1990, he has been
a vice president of Shearson Lehman and, after Smith Barney Inc.
acquired the assets of Shearson Lehman in 1994, Smith Barney Inc.
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Robert E. Lund, age 52, was elected as a director of the Company
in May 1994. He served as Chief Executive Officer of the Company from
November 1995 until May 1996 and as President from February 1996 until
May 1996. From September 1990 to February 1992, Mr. Lund was Chairman
and Chief Executive Officer of International Telecharge, Inc., a
telecommunications company. From February 1993 until October 1994
(when Newtrend, L.P. was sold), Mr. Lund served as Chief Operating
Officer of Newtrend, L.P., a provider of software and professional
services. From December 1994 through December 1995, Mr. Lund served
as President and Chief Executive Officer of S2 Software, Inc., a
Dallas, Texas software company.
E. Craig Sanders, age 51, has served as President, Chief
Executive Officer and a director of the Company since May 1996. From
1995 to 1996, Mr. Sanders was a partner of PSN Ventures, L.L.C., a
company which identifies investment opportunities in the
telecommunications industry. From 1994 to 1995, Mr. Sanders served as
Chairman and Executive Officer of Matrix Telecom, Inc., a privately
held long distance company. From 1982 to 1994, Mr. Sanders was an
employee of Sprint Corporation, and held the office of Senior Vice
President for Product Management from 1991 until his departure in 1994.
The Board of Directors recommends a vote FOR the proposal to
elect the three nominees to the Board.
As discussed under "Outstanding Stock and Voting Rights" above,
the holder of the Preferred Stock has indicated to the Company that it
intends to re-elect Mr. Charles J. Delaney and Mr. Justin S. Maccarone
to serve as directors of the Company. Certain information about
Messrs. Delaney and Maccarone is set forth below:
Charles J. Delaney, age 36, has served as a director of the
Company since July 1995. Mr. Delaney has been President of UBS Capital
Corporation, a wholly-owned subsidiary of Union Bank of Switzerland,
and an affiliate of UBS Partners ("UBS Capital"), since January 1993
and Managing Director in charge of the Leveraged Finance Group of the
Corporate Banking Division of Union Bank of Switzerland since May 1989.
Prior to May 1989, Mr. Delaney was Vice President of Marine Midland
Bank, N.A. Mr. Delaney is also a director of Specialty Foods
Corporation, SDW Holding Corporation and RU Corporation.
Justin S. Maccarone, age 37, has served as a director of the
Company since June 1996. Mr. Maccarone has been a Managing Director
of UBS Capital, LLC since 1993 and, before that time, was a Senior Vice
President of GE Capital Corporation.
MEETINGS AND COMMITTEES OF THE BOARD
Twenty-three meetings of the Board of Directors were held during
1995. Except for Charles Delaney, each of the directors of the Company
participated, during the period of 1995 when he was a director, in at
least 75% of the total of the meetings of the Board of Directors and
the meetings of the committees on which the Board member served. Mr.
Delaney participated in four out of the nine meetings of the Board held
during his tenure as a director in 1995.
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The Compensation Committee held three meetings during 1995. The
Compensation Committee's responsibilities include, among other things,
recommending salary adjustments, establishing bonuses and granting
options to employees. No additional fees were paid to directors for
serving on the Compensation Committee in 1995. The members of the
Compensation Committee are Messrs. Delaney, Frank and Maccarone.
The Audit Committee held three meetings during 1995. The Audit
Committee's responsibilities include, among other things, recommending
independent auditors to the Board, reviewing the scope of audit
functions of the independent auditors and reviewing audit reports
rendered by the independent auditors. The members of the Audit
Committee are Messrs. Delaney, Lund and Maccarone.
The Nominating Committee held one meeting during 1995. The
responsibilities of the Nominating Committee include the recommendation
of candidates for nomination as directors of the Company. The
Nominating Committee will consider nominees recommended by
shareholders. Nominees for election at the 1997 Annual Meeting of
Shareholders should be submitted to the Board of Directors not later
than December 31, 1996. The full Board of Directors acted as the
Nominating Committee with respect to the nomination of directors for
the 1996 Annual Meeting of Shareholders.
Directors Compensation
For 1996, all directors will receive, as compensation for serving
on the Board of Directors, $500 per person for each meeting attended
telephonically and $1,000 per person for each meeting attended in
person. Upon election (or re-election) by the shareholders of the
Company at an annual meeting of shareholders, pursuant to the terms of
the Company's 1993 Non-Employee Director Stock Option Plan, each
non-employee director of the Company receives an option to purchase
10,000 shares of Common Stock of the Company. Non-employee directors
who are chosen to fill a newly created directorship or vacancy in the
Board of Directors are also granted an option to purchase 10,000 shares of
Common Stock of the Company. The exercise price of any option granted
to directors is the fair market value of the Common Stock of the
Company on the date the option is granted. All of the directors of the
Company are reimbursed for all travel and other expenses incurred in
attending meetings.
In addition to the standard director compensation described
above, certain directors of the Company received compensation for
consulting services or for serving on the Board in 1995 in the form of
cash payments and/or grants of options. Jody Frank received $20,000
in 1995 for consulting fees and, pursuant to an agreement with the
Company, $10,000 for service on the Board of Directors. Former
director Bernard M. Frank received a total grant of 32,500 options in
1995. Bernard M. Frank is the father of current director Jody Frank.
Former director Ronald Gelber received $16,000 (representing a monthly
fee of $2,000 per month for serving as the Chairman of the Audit
Committee) and a total grant of 32,500 options in 1995. Chairman of
the Board and former Chief Executive Officer of the Company Jeffrey
Hanft received $500,000 in 1995 pursuant to an employment agreement
with the Company, the terms of which are described elsewhere in this
Proxy Statement. See "Employment Agreements."
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of the Common Stock of the Company as of June 3,
1996 (except as otherwise indicated) by (i) each person known by the
Company to beneficially own more than five percent of the outstanding
Common Stock of the Company, (ii) each current director and nominee for
director of the Company, (iii) each executive officer named in the
Summary Compensation Table, and (iv) all directors and executive
officers of the Company, as a group. Except as otherwise indicated,
the persons named in the table have the sole voting and investment
power with respect to the shares shown as beneficially owned by them.
Amount and Nature Percent
Name of Beneficial Owner of Beneficial Ownership(1) of Class
_______________________ __________________________ ________
Charles J. Delaney - -
Jody Frank 224,262(2)(3) 1.38%
Jeffrey Hanft 595,362(2)(4) 3.59%
Robert E. Lund 51,350(2) *
Justin S. Maccarone - -
E. Craig Sanders - -
Bonnie S. Biumi 100,000(5) *
Lawrence T. Ellman 45,000(5) *
Bruce W. Renard 144,167(5) *
All directors and 1,160,141(2)(3)(4) 6.75%
executive officers (5)
as a group
(9 persons) (6)
Creditanstalt 850,000(7)(8) 5.03%
American Corp.
245 Park Avenue
New York, New York
10167
Heartland Group 3,644,600(7) 22.50%
790 N. Milwaukee St.
Milwaukee, Wisconsin
53202
Kayne Anderson Investment 1,023,200(7) 6.32%
Management, Inc.
1800 Avenue of Stars
Los Angeles, California
90067
________________________
* Less than one percent.
(footnotes on next page)
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Amount and Nature Percent
Name of Beneficial Owner of Beneficial Ownership(1) of Class
_______________________ __________________________ ________
UBS Partners, Inc.
299 Park Avenue
New York, New York 10171 2,887,143(7)(9) 15.13%
Wellington Management
Company
75 State Street
Boston, Massachusetts
02109 1,671,690(7) 10.32%
Robert D. Rubin 248,883(10) 1.52%
Richard F. Militello 93,400(11) *
_________________________
* Less than one percent.
(1) Includes shares of Common Stock issuable upon the exercise of
stock options, which are exercisable within 60 days of June 3,
1996.
(2) Includes options to purchase shares of Common Stock granted to
the following directors: 115,000 to Jody Frank (at an average
exercise price of $8.49 per share); 392,500 to Jeffrey Hanft
(at an average exercise price of $8.30 per share); and 40,000
to Robert E. Lund (at an average exercise price of $7.84 per
share).
(3) Includes 40,050 shares of Common Stock in a voting trust of
which Jody Frank is the beneficial owner. Also includes 3,812
shares owned by Jody Frank as custodian for Aaron Frank,
Rebekah Frank and Lucy Frank, Mr. Frank's minor children.
(4) Includes 11,980 shares of Common Stock held by Rikki Hanft,
the minor daughter of Jeffrey Hanft.
(5) Includes options to purchase 289,167 shares of Common Stock
granted under the Company's stock option plans to the
following executive officers: 100,000 to Bonnie S. Biumi (at
an average exercise price of $5.69 per share; 45,000 to
Lawrence T. Ellman (at an average exercise price of $5.69 per
share); and 144,167 to Bruce W. Renard (at an average
exercise price of $5.80 per share).
(6) Charles J. Delaney, Jody Frank, Jeffrey Hanft, Robert E.
Lund, Justin S. Maccarone, E. Craig Sanders, Bonnie S. Biumi,
Lawrence T. Ellman, and Bruce W. Renard.
(7) Information provided by Schedule 13D and/or 13Gs filed by such
persons. The Company has not independently verified such
information.
(8) Represents currently exercisable warrants received in
connection with a previous credit facility between the Company
and Creditanstalt-Bankverein (of which Creditanstalt American
Corporation is a wholly-owned subsidiary) and 150,000 shares
of Common Stock obtained upon the exercise of
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warrants in connection with a previous credit facility. The currently
exercisable warrants expire March 12, 2000 and are exercisable
for 700,000 shares of Common Stock or the Company's Series B
Preferred Stock at a price of $5.25 per share. Each share of
Series B Preferred Stock is convertible into one share of
Common Stock. See "Certain Relationships and Related
Transactions."
(9) Includes: (i) options to acquire 30,000 shares of Common Stock
of the Company at an average exercise price of $4.17, held for
the benefit of UBS Partners by former director Jeffrey Keenan
and current directors Charles Delaney and Justin Maccarone;
and (ii) 2,857,143 shares of Common Stock issuable upon
conversion of 150,000 shares of Preferred Stock currently
outstanding. All of the outstanding Preferred Stock is owned
by UBS Partners (a wholly-owned subsidiary of Union Bank of
Switzerland).
(10) Includes options to purchase 133,333 shares of Common Stock
granted under the Company's stock option plans to Robert D.
Rubin, a former executive officer, at an average exercise
price of $8.50 per share.
(11) Includes 5,625 shares of Common Stock owned by Richard F.
Militello as custodian for Laura Militello, Sara Militello and
Michael Militello, his minor children.
Ownership and Transaction Reports
Under Section 16 of the Securities Exchange Act of 1934, the
Company's directors and certain of its officers, and beneficial
owners of more than 10% of the outstanding Common Stock, are
required to file reports with the Securities and Exchange Commission
concerning their ownership of and transactions in Common Stock; such
persons are also required to furnish the Company with copies of such
reports. To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and related
information furnished to the Company, the Company believes that all
such filing requirements were complied with in a timely manner with
respect to 1995.
EXECUTIVE OFFICERS
The principal occupation of each executive officer (other than
Mr. Sanders) for at least the last five years is set forth below:
Bonnie S. Biumi, age 34, joined the Company in July 1994.
Since that time she has served as Chief Financial Officer and, since
February 1996, has also served as an Executive Vice President.
Prior to joining the Company, Ms. Biumi was a Senior Manager with
Price Waterhouse LLP in Miami, Florida. Ms. Biumi is a certified
public accountant.
Lawrence T. Ellman, age 44, joined the Company in June 1994 as
President of its Pay Telephone Division and held that office until
February 1996. Since that time he has served as Executive Vice
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President -- Sales. From 1990 until joining the Company, Mr. Ellman
was President of Atlantic Telco Joint Venture, an independent public
pay telephone operator acquired by the Company in June 1994. For
approximately eight years prior thereto, he was Executive Vice
President and Chief Financial Officer of American Potomac
Distributing Company, a beverage distributor.
Bruce W. Renard, age 42, joined the Company as General Counsel
and Vice President -- Regulatory Affairs in January 1992 and, since
February 1996, has served as General Counsel and Executive Vice
President -- Legal & Regulatory Affairs/Carrier Relations. From
September 1, 1991 to December 31, 1991, Mr. Renard was a sole
practitioner specializing in legal and regulatory consulting
services to the telecommunications and utility industries. From
August 1984 to September 1991, Mr. Renard was a partner with the
Florida law firm of Messer, Vickers, Caparello, French and Madsen,
managing the utility and telecommunications law sections of the
firm. Prior to that time, Mr. Renard served as Associate General
Counsel for the Florida Public Service Commission.
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EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended
December 31, 1995, 1994 and 1993, the compensation paid by the
Company to its Chief Executive Officers and each of the five
remaining most highly compensated executive officers for the fiscal
year ended December 31, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
__________________________ ____________
Securities All Other
Name and Principal Underlying Compen-
Position Year Salary Bonus Options(#) sation(1)
_________________ ____ ______ _____ __________ _________
<S> <C> <C> <C> <C> <C>
Robert E.Lund(2) 1995 $13,962 10,000 -
1994 - - 15,000 -
1993 - - 15,000 -
Bonnie S. Biumi, 1995 149,994 $25,000 - $2,300
Chief Financial 1994 66,344 - 100,000 -
Officer, Executive
Vice President (3)
Lawrence T. Ellman 1995 149,994 25,000 - -
Executive Vice 1994 105,000 10,000 45,000 -
President, Sales (3)
Bruce W. Renard, 1995 171,635 25,000 50,000 355
Executive Vice 1994 150,000 - 20,000 2,000
President, Legal& 1993 164,000 25,000 15,000 2,000
Regulatory Affairs/
Carrier Relations,
General Counsel
Jeffrey Hanft, 1995 500,000 - - 2,300
Chairman of the 1994 417,000 - 300,000 2,000
Board (4) 1993 361,000 - 68,000 2,000
Robert D.Rubin (5) 1995 327,115 - - 81,050(6)
1994 263,000 - 240,000 2,000
1993 233,000 - 54,000 2,000
Richard F.Militello
(7) 1995 250,000 - - 650
1994 208,000 - 180,000 1,000
1993 176,000 - 42,000 1,000
<FN>
________________
(1) The amounts disclosed in this column include the Company's
contributions on behalf of the named executive officer to the
Company's 401(k) retirement plan in amounts equal to 25% of
the executive officer's yearly participation in the plan.
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(2) Mr. Lund served as Chief Executive Officer of the Company from
November 1995 until May 1996 and as President from February
1996 until May 1996.
(3) Joined the Company in 1994.
(4) Mr. Hanft has served as Chairman of the Board since 1983 and
as Chief Executive Officer from 1983 until November 1995.
(5) Mr. Rubin served as President from June 1994 until December
1995.
(6) Includes $78,750 of severance payments. See "Certain
Relationships and Related Transactions" for description of
additional amounts paid to Mr. Rubin.
(7) Mr. Militello served as Chief Operating Officer of the Company
from August 1993 until February 1996 and as Executive Vice
President -- Operations from February 1996 until April 1996.
</FN>
</TABLE>
The following table sets forth certain information with
respect to stock options granted during the year ended December 31,
1995 to the executive officers named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Potential Realizable
% of Total Value of Assumed
Number of Options Exercise Annual Rates of Stock
Securities Granted to or Base Price Appreciation
Underlying Employees in Price ($ Expiration for Option Term(1)
Options Fiscal Year /share) Date 5% 10%
_________ ___________ ________ __________ ___________________
<S> <C> <C> <C> <C> <C> <C>
Bruce W.
Renard 50,000(2) 58.82 2.44 01/01/2005 33,708 74,482
Robert
E. Lund 10,000(3) 11.76 4.31 08/25/2000 11,908 26,313
<FN>
_____________________
(1) These amounts represent assumed rates of appreciation which
may not necessarily be achieved. The actual gains, if any,
are dependent on the market value of the Company's Common
Stock at a future date as well as the option holder's
continued employment throughout the vesting period.
Appreciation reported is net of exercise price.
(2) Options were granted for a term of 10 years, subject to
earlier termination in certain events related to termination
of employment. Options become exercisable in three equal
annual installments.
(3) Granted prior to Mr. Lund's employment as CEO. Options were
granted for a term of 5 years in accordance with the 1993 Non-Employee
Director Stock Option Plan. Options become exercisable at the time of
grant.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
The following table sets forth certain information as to each
exercise of stock options during the year ended December 31, 1995 by
the executive officers named in the Summary Compensation Table and
the fiscal year end value of unexercised options:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Number of Value of
Unexercised Unexercised
Options at Options at
Fiscal Year Fiscal Year
End End
_____________ ______________
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise(s) Realized Unexercisable Unexercisable
______ _______________ ________ _____________ ______________
<S> <C> <C> <C> <C>
Robert
E. Lund - - 40,000/- -/-
Bonnie
S. Biumi - - 66,667/33,333 -/-
Lawrence
T. Ellman - - 30,000/15,000 -/-
Bruce W.
Renard - - 144,167/23,333 -/-
Jeffrey
Hanft - - 392,500/- -/-
Robert
D. Rubin(1) - - 247,333/- -/-
Richard F.
Militello(1) - - 237,000/- -/-
<FN>
_________________
(1) Includes options to purchase shares of Common Stock of the
Company issued under the terms of the Company's stock option
plans which were canceled in accordance with the terms of the
plans for the following executives: Robert D. Rubin (114,000)
and Richard Militello (237,000).
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company is a party to an employment agreement with E.
Craig Sanders, the President and Chief Executive Officer of the
Company. The employment agreement is for a term commencing May 2,
1996 and ending on December 31, 1998. The agreement provides for a
base salary at the annual rate of $300,000, subject to increase upon
the review of the Board. The agreement provides for bonus
compensation based upon the attainment of performance targets. The
agreement provides for the grant of stock options for 600,000 shares
of the Company's Common Stock at exercise prices ranging from $2.50
to $7.25 per share, vesting at various dates during the contract
term. If the Company terminates Mr. Sanders' employment without
cause (except in the circumstances described in the following
sentence), the Company will pay Mr. Sanders an amount equal to 200%
of his base salary in effect on the date of the termination, as well
as provide those fringe benefits enjoyed by him at the date of his
termination for a period of two years or, to the extent Mr. Sanders
is not eligible to participate in any Company fringe benefit plans,
the after tax value of such benefits. If, after a change in control
of the Company, Mr. Sanders' employment is terminated by the Company
without cause or terminated by Mr. Sanders for good reason, the
Company will pay him an amount equal to 200% of the sum of his base
salary plus the maximum bonus compensation which he would have been
entitled to receive had the Company achieved the performance targets
to which bonus compensation is tied for the year of such termination
and will continue to provide him with those fringe benefits enjoyed
at the date of his termination
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<PAGE>
for a period of two years or, to the extent Mr. Sanders is not eligible
to participate in any Company fringe benefit plans, the after tax value
of such benefits.
The Company entered into an agreement with Robert E. Lund
regarding his former employment as Chief Executive Officer. The
agreement provided that Mr. Lund would receive a salary of $27,500
per month, in addition to other benefits and reimbursements, and was
terminable by Mr. Lund or the Company upon 30 days notice. The
agreement was terminated in May 1996.
The Company is a party to an employment agreement with Bonnie
S. Biumi, the Chief Financial Officer and an Executive Vice
President of the Company. The employment agreement is for a term
commencing July 11, 1994 and ending December 31, 1998. The
agreement provides for automatic one year extensions thereafter
unless either party gives notice that it is not to be extended. The
agreement provides for a base salary at the annual rate of $150,000,
increasing 10% each year with the approval of the Board of
Directors. The base salary may also be increased annually by merit
increases or at any time at the discretion of the Board of
Directors. Under certain circumstances (e.g., if the Company's
income is not at certain levels), no increase may be granted. Ms.
Biumi may, at the sole discretion of the Company, be granted a
bonus. If the Company terminates Ms. Biumi's employment agreement
without cause or Ms. Biumi terminates the agreement for certain
defined reasons, the Company will pay Ms. Biumi (a) her base salary
through the termination date and (b) as severance pay a lump sum
amount equal to 200% of Ms. Biumi's annual base salary at the
highest rate in effect during the 12 months immediately preceding
termination. Upon termination in connection with a change in
control of the Company, Ms. Biumi shall receive (a) her base salary
through the termination date, (b) all other benefits provided in the
employment agreement in connection with a change in control and (c)
severance pay equal to 200% of her annual base salary at the highest
rate in effect during the 12 months immediately preceding such
termination. Upon termination of her employment for disability, Ms.
Biumi is entitled to 100% of her base salary then in effect for one
year and 50% of her base salary for two additional years.
The Company is a party to an employment agreement with
Lawrence T. Ellman, Executive Vice President -- Sales. The
employment agreement is for a three year term commencing June 22,
1994 and ending June 22, 1997. The agreement provides for a base
salary at the annual rate of $150,000, increasing 10% each year with
the approval of the Board of Directors, and a minimum annual bonus
of $25,000. The Company has no obligation to pay Mr. Ellman
benefits upon a termination for cause, disability or death. Upon
termination in connection with a change of control of the Company,
Mr. Ellman shall receive (a) his base salary through the termination
date and (b) severance pay equal to 100% of his annual base salary
at the highest rate in effect during the 12 months immediately
preceding such termination.
The Company is a party to an employment agreement with Bruce
W. Renard, the Company's General Counsel and Executive Vice
President -- Legal and Regulatory Affairs/Carrier Relations. The
employment agreement is for a three year term commencing on January
1, 1995 and ending on December 31, 1997. The agreement provides for
payment of a base salary initially fixed at the annual rate of
$172,500 with an annual increase of 10%, provided the Company has
met certain income targets. If the Company terminates Mr. Renard's
employment without cause or Mr. Renard terminates the agreement for
certain defined reasons, the
<PAGE>
<PAGE>
Company will pay Mr. Renard (a) his base salary through the date of
termination and (b) as severance pay a lump sum amount equal to 100%
of Mr. Renard's salary in effect during the 12 months immediately
preceding termination. Mr. Renard's employment agreement also provides
that upon termination in connection with a change in control,
Mr. Renard shall receive (a) his base salary through the termination date,
(b) all other benefits provided in the employment agreement in connection
with a change in control and (c) as severance pay a lump sum amount equal
to 100% of his highest annual base salary in effect during the 12
months immediately preceding the termination. Mr. Renard's
agreement is otherwise similar to that of Ms. Biumi.
The employment agreements above restrict the employee from
competing with the Company for one year in the areas in which the
Company then operates following termination of the agreement. Under
Ms. Biumi's and Mr. Renard's agreements, the Company may terminate
an employment agreement without further payment if the employee
materially breaches his or her obligations and duties under the
agreement or is convicted of a felony under certain circumstances or
upon the death of the employee. Under Mr. Ellman's agreement, the
Company may terminate the agreement without further payment if the
employee commits a felony involving serious moral turpitude, refuses
to perform his duties, or engages in misconduct injurious to the
Company.
The Company is a party to an employment agreement with Jeffrey
Hanft, the Chairman of the Board and former President and Chief
Executive Officer of the Company, commencing January 1, 1994 and
ending on December 31, 1998. The agreement provides for automatic
one year extensions thereafter unless either party gives notice that
it is not to be extended. The employment agreement provides for
payment of a base salary fixed at the annual rate of $500,000 from
January 1, 1995 to December 31, 1995. Commencing January 1, 1996
and every January 1st thereafter during the term of the agreement,
the base salary will increase by an amount equal to 10% of the
previous year's base salary. The base salary may also be increased
annually by merit increases or at any time at the discretion of the
Board of Directors. Under certain circumstances (e.g., if the
Company's income is not at certain levels), no increase may be
granted. Mr. Hanft may also receive an incentive bonus for each of
the Company's fiscal years during the term of his agreement. The
incentive bonus shall be equal to 3% of the Company's pre-tax
consolidated net income but shall not exceed 60% of Mr. Hanft's base
salary for such fiscal year. Mr. Hanft is also entitled under the
agreement to other employee benefits. Further, if the Company
terminates Mr. Hanft's employment agreement without cause or Mr.
Hanft terminates the agreement for certain defined reasons, the
Company will pay Mr. Hanft (a) his base salary through the
termination date and (b) as severance pay a lump sum amount equal to
200% of the sum of (i) the annual base salary at the highest rate in
effect during the 12 months immediately preceding termination and
(ii) the average of the three annual bonus payments paid with
respect to the preceding three years under the agreement. Upon
termination due to a change in control within one year after the
change in control, Mr. Hanft shall receive (a) his base salary
through the termination date, (b) all other benefits provided in the
agreement in connection with a change in control and (c) severance
pay equal to 299.99% of the average taxable compensation of Mr.
Hanft for the five taxable years prior to such termination. Upon
termination of his employment for disability, Mr. Hanft is entitled
to 100% of his base salary then in effect for one year and 50% of
his base salary for two additional years.
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Pursuant to an agreement dated as of December 26, 1995 (the
"Rubin Agreement"), the Company and Robert D. Rubin agreed to Mr.
Rubin's resignation, the termination of Mr. Rubin's employment
agreement (the "Rubin Employment Agreement"), except for certain
provisions regarding changes of control, non-competition and
confidentiality, and to mutual releases by Mr. Rubin and the
Company. If a change of control of the Company occurs within six
months of the execution of the Rubin Agreement, Mr. Rubin will
receive all the benefits provided in the Rubin Employment Agreement
in connection with a change of control and severance pay equal to
299.99% of his average taxable compensation for 1994 and 1995;
provided, however, that all amounts paid under the Rubin Agreement
will be credited against the amounts payable under the Rubin
Employment Agreement. Mr. Rubin is prohibited, until December 31,
1996, from competing with the Company, soliciting the Company's
clients or soliciting the employees of the Company. He is also subject to
the confidentiality provisions of the Rubin Employment Agreement until
December 31, 1998. The Company has also entered into a consulting
agreement with Mr. Rubin pursuant to which Mr. Rubin has agreed to
provide certain consulting services to the Company during the nine-month
period ending September 30, 1996. Mr. Rubin's compensation under the
consulting agreement is $10,000 per month during the nine-month period.
For additional terms of the Rubin Agreement, see "Certain Relationships
and Related Transactions."
In 1995, the Company was subject to an employment agreement
with Richard F. Militello, the Company's former Chief Operating
Officer. The Company, pursuant to the terms of the agreement,
terminated Mr. Militello's employment without cause effective April
3, 1996, triggering a severance payment obligation under the
employment agreement in the amount of $500,000. The after tax
portion of this amount was offset against certain outstanding loans
owed by Mr. Militello to the Company. See "Certain Relationships
and Related Transactions." If a change of control of the Company
occurs before October 3, 1996, the termination of Mr. Militello will
be deemed to be due to a change in control and Mr. Militello will be
entitled to receive (a) the benefits provided in his employment
agreement in connection with a change of control and (b) severance
pay equal to 299.99% of his average taxable compensation for the 5
taxable years prior to his termination (subject to an offset for the
prior severance payment of $500,000). Under the agreement, Mr.
Militello is prohibited, for one year following his termination,
from competing with the Company, from soliciting the Company's
clients or soliciting the employees of the Company. He is also
subject to the confidentiality provision of the agreement for two
years following his termination.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the
Company (the "Committee") is composed of three non-employee
directors. The Committee is responsible for reviewing and approving
the compensation paid to executive officers of the Company,
including salaries, bonuses and stock options. Following review and
approval by the Committee, actions pertaining to executive
compensation are reported to the full Board of Directors.
As a general matter, executive compensation is set at levels
which are sufficiently competitive with companies of similar size
and complexity to permit the Company to attract and retain the best
possible individuals. The compensation plans are structured to
provide incentives for executive officer performance
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<PAGE>
that promote continuing improvement in the Company's financial
results and long-term shareholder value. The plans are also designed
to align the interests of the Company's executives and its shareholders by
providing for payment of a significant portion of incentive
compensation in the form of options to purchase the Company's Common
Stock. Moreover, each executive officer's compensation is based
upon both individual performance and Company performance.
Consideration is given to the Company's income, cash flow, growth,
return on capital employed and other factors. The contributions of
each executive officer to such items are evaluated in determining
adjustments to salaries and whether incentive awards will be made.
Certain executive officers have entered into employment contracts
with the Company which take these factors into consideration. The
Committee also uses subjective criteria it deems relevant in its
reasonable business discretion.
As may be seen on the Summary Compensation Table included on
page 9, the compensation of executive officers consists of three
principal parts, each of which is reviewed by the Committee. Annual
salaries shown in the Table represent the fixed portion of
compensation for the year. Changes in salary depend upon Company as
well as individual performance. The Bonus shown in the table paid
to executive officers also depends on the performance of the
individual and the financial performance of the Company. The final
component of compensation arises from the Company's grant of stock
options to executive officers. The Company has a history of
encouraging employee ownership of the Company's stock. The
Committee sets the number of options to be granted based upon the
recipient's performance. All options are granted at fair market
value, and, therefore, any value which ultimately accrues to the
executive officer is based entirely on the Company's performance, as
perceived by investors who establish the price for the Company's
stock.
Jeffrey Hanft, who served as the Chairman of the Board during
1995 and Chief Executive Officer through November 1995, was
compensated during 1995 pursuant to his employment agreement which
was entered into in 1994. Mr. Hanft received a base salary of
$500,000 and no bonus or stock options in 1995.
Robert E. Lund joined the management of the Company as Chief
Executive Officer in November 1995 pending the Company's search for
a permanent Chief Executive Officer. Mr. Lund's compensation as an
employee of the Company was set at $27,500 per month, which salary
he received from December 1995 until May 1996. This salary was set
after arms-length negotiations between the Company and Mr. Lund and
was competitive for the telecommunications industry. Mr. Lund
received no bonus in 1995. In August 1995, prior to becoming an
employee of the Company, Mr. Lund received an option to purchase
10,000 shares of the Company's Common Stock under the Company's
Non-Employee Director Stock Option Plan.
E. Craig Sanders became President and Chief Executive Officer
of the Company in May 1996. Mr. Sanders' base salary as an employee
of the Company is set at $300,000 annually and includes other terms
as set forth in the "Employment Agreements" section of this Proxy
Statement. These terms were established after arms-length
negotiations between the Company and Mr. Sanders and are believed by
the Company to be appropriate for an executive of Mr. Sanders'
experience in the increasingly competitive and rapidly evolving
telecommunications industry.
<PAGE>
<PAGE>
Rules of the Securities and Exchange Commission require the
inclusion in this Proxy Statement of a graph of the cumulative total
return to shareholders during the previous 5 years in comparison
with a broad market index (the NASDAQ Total Return Index - US
Companies in the case of the Company) and a peer group index (the
NASDAQ Total Return Industry Index - Telecommunications in the case
of the Company). The Company's record in this area is a factor of
management's performance considered by the Compensation Committee.
The Compensation Committee
Respectfully Submitted,
Charles J. Delaney
Jody Frank
Justin S. Maccarone
Compensation Committee Interlocks and Insider Participation
Robert E. Lund served as a member of the Compensation
Committee of the Board of Directors during 1995 and, from November
29, 1995 through May 1, 1996, served as the Chief Executive Officer
of the Company.
Compensation Committee member Jody Frank has participated in
transactions with the Company and has borrowed money from the
Company since January 1, 1995, which transactions and borrowings are
described in paragraphs number 1 and 2 of the section titled
"Certain Relationships and Related Transactions."
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
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<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of the five year
cumulative return (assuming reinvestment of any dividends), among
the Company, the NASDAQ Total Return Index (US Companies) ("Nasdaq-US"),
and a peer group selected by the Company, the NASDAQ Total
Return Industry Index -Telecommunications ("Nasdaq-Telecom"). This
graph and table assume an investment of $100 in the Common Stock and
each index on December 31, 1990.
Note: The stock price performance shown on the graph below is
not necessarily indicative of future price performance.
1990 1991 1992 1993 1994 1995
____ ____ ____ ____ ____ ____
Nasdaq-US 100 161 187 214 210 297
Nasdaq-Telecom 100 138 169 261 216 260
Company 100 244 281 366 114 58
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1995, the Company has engaged in the
following transactions with directors and/or executive officers of
the Company, shareholders listed in the security ownership table on
pages 5 and 6, or with businesses with which they are associated:
1. In February 1995, after obtaining a fairness opinion
indicating the proposed sale of the assets for the agreed upon
consideration was fair to the Company from a financial point of view
and after the transaction was approved by the disinterested members
of the Company's Board of Directors, the Company sold substantially
all of the assets of its prepaid calling card business to Global
Link Teleco Corporation ("Global Link") for approximately $6.3
million. Upon the sale, the Company maintained the right to
designate one member of Global Link's Board of Directors. The
Company received $1.0 million in cash, a $5.3 million promissory
note due February 1998, bearing interest at 8.5%, payable quarterly,
and shares of common stock of Global Link. As a result of the
February 1995 transaction, the Company's interest in the outstanding
common stock of Global Link was 19.99%. At the time of such
transaction, Jeffrey Hanft and Jody Frank were directors of Global
Link and Jody Frank was a shareholder of Global Link.
On March 1, 1996, Global Link consummated a merger transaction
(the "Merger") with Global Telecommunications Solutions, Inc. ("GTS").
In connection with the Merger, the Company exchanged its outstanding
notes and other receivables including accrued interest and its 19.9%
equity ownership in Global Link 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. Jody Frank is a shareholder of
GTS.
2. Information concerning indebtedness of the Company's
directors, nominees for director and/or executive officers is as
follows: (a) largest aggregate indebtedness outstanding since
January 1, 1995: Jody Frank ($308,668); Jeffrey Hanft ($2,386,394);
Richard Militello ($907,022) and Robert D. Rubin ($733,166); (b)
currently outstanding indebtedness: Jody Frank ($248,501); Jeffrey
Hanft ($2,320,293); Richard Militello ($614,686); and Robert D.
Rubin ($0). Interest charged on outstanding indebtedness is
described below.
The Company loaned certain funds (the "Company Loans") to
Jeffrey Hanft, Jody Frank, Robert D. Rubin and Richard F. Militello
(the "Borrowers") for the reasons described below. Each of the
Company Loans was made following approval by the members of the
Board of Directors who were not parties to the transactions as a
means to provide the Borrowers with a vehicle to refinance certain
commercial bank indebtedness they had incurred to exercise Company
stock options and pay related income taxes. The Borrowers exercised
the stock options in December 1993 to purchase the Company's Common
Stock for purposes of increasing the Company's shareholders' equity
without accessing the external capital markets. The Borrowers
personally borrowed the funds to exercise the options from a
commercial bank and pledged the Company's Common Stock issued upon
exercise as collateral for the bank loans ("Bank Loans"). This
equity increase in turn was a significant factor in permitting the
Company to increase its credit facility from $60.0 million to $125.0
million in February 1994.
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<PAGE>
Commencing in May 1994, as the market price of the stock
declined, the bank on several occasions required the Borrowers to
pay down the Bank Loans or provide additional collateral. The
Borrowers approached the disinterested members of the Company's
Board of Directors to seek the Company's assistance in refinancing a
portion of their Bank Loans. The Company then advanced the Company
Loans. Included in the Company Loans are borrowings by Mr. Hanft,
Mr. Frank and Mr. Militello in connection with the payment of
personal income taxes related to the phantom gain incurred upon the
December 1993 exercise of the stock options mentioned above. In an
unrelated transaction, in lieu of receiving payment of their earned
1993 bonus, Mr. Hanft, Mr. Rubin and Mr. Militello agreed to accept
loans from the Company (the "Bonus Loans").
In addition to the Company Loans and the Bonus Loans, the
Company made advances to Mr. Hanft in the aggregate principal amount
of $384,877, of which approximately $134,877 is accruing interest at
the publicly declared prime rate and the balance is accruing
interest at the annual rate of 12%. The remaining principal amount
of Mr. Hanft's indebtedness to the Company is accruing interest at
the annual rate of 12% (other than Bonus Loans in the aggregate
principal amount of $160,000, which accrue interest at a rate equal
to the average annual borrowing rate of the Company's senior debt
for the fiscal year ending on or immediately preceding the date
interest on the outstanding principal balance is payable). The
Company is currently in discussions with Mr. Hanft regarding the
repayment of his indebtedness.
In February 1996, the Company agreed to restructure all of its
loans to Jody Frank, which loans were due and payable at that time
in the amount of $248,501. In connection with the restructuring,
the Company received from Mr. Frank a stock pledge agreement
encumbering 35,000 shares of Common Stock of the Company held by Mr.
Frank. As restructured, $124,250.50 of Mr. Frank's loans are
evidenced by a non-recourse promissory note (which note limits
enforcement of the note to the 35,000 pledged shares of Common
Stock) bearing interest at the rate of 6.43% annually, and payable
in full on February 1, 2001. The remaining $124,250.50 is
evidenced by a promissory note bearing interest at the rate of 6.19%
annually and payable in five annual installments beginning on
February 1, 2002.
In connection with Robert Rubin's resignation from the
Company, and in consideration of a release by Mr. Rubin of alleged
claims against the Company, the Company agreed to pay Mr. Rubin
$1,040,000, of which $448,474 was used to repay Mr. Rubin's Company
Loans. In addition, Mr. Rubin's Bonus Loans (outstanding in the
amount of $162,920, including interest) were canceled. The Company
also agreed to waive the obligation of Mr. Rubin to repay
contributions by the Company to purchase a split dollar life
insurance contract owned by Mr. Rubin. Such Company contributions
to Mr. Rubin's life insurance contract totaled $186,000.
In connection with the termination of Richard Militello,
former Chief Operating Officer, the Company set off indebtedness
owed to the Company by Mr. Militello from the after tax portion of
Mr. Militello's severance payment. See "Employment Agreements." The
remaining indebtedness of Mr. Militello to the Company consists of:
(i) $396,316 principal amount accruing interest at the rate of 12%
annually; (ii) $70,370 principal amount accruing interest at the
rate of 5.88% annually; and (iii) $148,000 of Company contributions
to a split dollar life insurance contract owned by Mr. Militello.
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<PAGE>
3. On July 19, 1995, UBS Partners purchased 150,000 shares
of the Preferred Stock for gross proceeds of $15.0 million. See
"Outstanding Stock and Voting Rights." Charles J. Delaney, a
director of the Company, is the President of UBS Capital, an
affiliate of UBS Partners. Jeffrey J. Keenan, a former director of
the Company, was also a director and vice president of UBS Partners.
In connection with the Preferred Stock Investment, the Company
reimbursed UBS Partners for its out of pocket expenses of $356,000.
4. On November 24, 1994, the Company entered into a
Settlement Agreement with Richard Whitman, then a director of the
Company, to resolve claims arising under an indemnity provision in
connection with the November 1, 1991 merger of Ram Telephone and
Communications ("Ram") into the Company. Pursuant to the Settlement
Agreement, Mr. Whitman executed a promissory note in favor of the
Company, agreeing to pay $273,000, plus simple interest of eight
percent (8%) per annum, due and payable in full on December 31,
1997. Mr. Whitman also executed a security agreement, providing a
pledge of up to 150,000 shares of the Company's Common Stock to
collateralize payment of the promissory note. Mr. Whitman was a
shareholder of Ram.
5. In March 1995, the Company amended its credit facility
agreement with Creditanstalt-Bankverein and certain other lenders by
reducing the credit facility from $125 million to $100 million. The
Company decreased from $9.00 to $5.25 the exercise price of 200,000
warrants to acquire Common Stock or Series B Preferred Stock of the
Company, which warrants are held by Creditanstalt American
Corporation (a subsidiary of Creditanstalt-Bankverein) in return
for the cancellation of a demand registration right held by
Creditanstalt American Corporation. In July 1995, the Company
repaid the approximately $95.5 million of indebtedness under the
credit facility, amended the credit facility to reduce the line of
credit to $40 million, and paid Creditanstalt-Bankverein a loan
origination fee of $200,000. In November 1995, Creditanstalt-Bankverein
waived certain defaults arising under the credit facility
and the Company agreed to pay a waiver fee of $50,000. In addition,
the parties agreed to restrict the Company's borrowing based on the
achievement of minimum cash flow targets. In April 1996,
Creditanstalt-Bankverein and the Company amended the credit facility
to accomplish, among other things, the following: (i) Creditanstalt-
Bankverein waived additional defaults arising under the credit
facility; (ii) the Company agreed to pay a waiver fee of $200,000;
(iii) and the line of credit under the credit facility was decreased
from $40 million to $10 million. 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.
The warrants repriced in April 1996 consisted of warrants to
acquire 150,000, 300,000 and 50,000 shares at exercise prices of
$8.00 per share, $9.33 per share and $9.00 per share, respectively.
Between January 1, 1995 and April 15, 1996, the Company paid
approximately $6.3 million in interest and fees to Creditanstalt-
Bankverein as agent and as a lender in connection with the Company's
credit facilities (including waiver fees).
In May 1995, in order to facilitate a $2.5 million loan to PTC
Cellular, Inc., a wholly-owned subsidiary of the Company, the
Company entered into an exchange agreement under which it granted to
Creditanstalt Corporate Finance, Inc. (an affiliate of Creditanstalt
American Corporation) the right to exchange indebtedness under the
loan for shares of Common Stock of the Company, with an exchange
ratio based on the then current market price of the Common Stock.
The exchange agreement could only be exercised while the borrower
had indebtedness outstanding. All of the borrower's indebtedness
was repaid in November 1995.
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<PAGE>
Concurrently with the exchange agreement, PTC Cellular, Inc. issued
warrants to acquire 263,916 shares of Class A or Class B Common
Stock of PTC Cellular, Inc. to Creditanstalt Corporate Finance, Inc,
at an exercise price of $.01 per share. The warrants expire on
May 3, 2005. PTC Cellular, Inc. sold substantially all of its
assets in November 1995.
CERTAIN INFORMATION AS TO INSURANCE
No shareholder action is required with respect to the
following information which is included to fulfill the requirements
of Sections 725 and 726 of the Business Corporation Law of the State
of New York. Effective December 31, 1995, the Company renewed
insurance providing for reimbursement, with certain exclusions and
deductions, to (i) the Company for payments it makes to indemnify
directors and officers of the Company and its subsidiaries, and (ii)
directors and officers for losses, costs and expenses incurred by
them in connection with their acts in those capacities for which
they are not indemnified by the Company. This insurance is provided
to the Company by Reliance Insurance Company and Genesis Insurance
Company. The cost of this insurance is $443,000 for a one year
term.
In 1994, a class action complaint was filed in federal court
by Albert Hirschensohn, et al., naming the Company and certain
officers. The complaint, as amended, alleged violations of federal
securities laws through the issuance of "false and misleading"
statements in connection with the proposed merger (subsequently
terminated) with IDB Communications Group, Inc. and the Company's
1994 results. In July 1995, the parties agreed to settle this
action in its entirety through the establishment of a settlement
fund. The Company's portion of the settlement fund was $925,000 and
the Company's insurer's portion was $2,775,000. In January 1996,
the settlement was approved by the Court and the case was dismissed.
RELATIONSHIP WITH THE COMPANY'S AUDITORS
The Company is not required to obtain shareholder approval or
ratification of its selection of its auditors under the laws of the
State of New York, and the Audit Committee and the Board of
Directors reserve the right to make any change in auditors at any
time, and without shareholder approval, which the Board of Directors
and Audit Committee deem advisable or necessary. Representatives of
Ernst & Young LLP, the Company's current auditors, are expected to
be present at the Annual Meeting and will be afforded the
opportunity to make a statement, if they so desire, and will be
available to respond to appropriate questions from shareholders.
On December 15, 1995, the Board of Directors of the Company
approved the recommendation of the Audit Committee not to retain
Price Waterhouse LLP, of Miami, Florida, as the independent
accountant chosen to audit the Company's financial statements and
approved the appointment of Ernst & Young LLP, Miami, Florida, as
the Company's independent accountant, which appointment of Ernst &
Young LLP became effective immediately.
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Price Waterhouse LLP's report on the financial statements of
the Company for each of the last two fiscal years did not contain an
adverse opinion or a disclaimer of opinion, and was not qualified as
to audit scope or accounting principles. Their report on the
Company's December 31, 1994 financial statements dated March 28,
1995, except as to the second paragraph of Note 17 and as to Note
18, which are as of May 31, 1995, did contain an explanatory
paragraph with respect to certain matters which raised substantial
doubt about the Company's ability to continue as a going concern and
an explanatory paragraph with respect to certain pending litigation.
During the Company's two most recent fiscal years and during
the subsequent interim period preceding the date of Price Waterhouse
LLP's replacement, there has been no disagreement with Price
Waterhouse LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Price
Waterhouse LLP, would have caused Price Waterhouse LLP to make a
reference to the subject matter of the disagreement in connection
with its report.
On June 27, 1995, Price Waterhouse LLP reported to the Audit
Committee that the Company did not achieve proper cut-off of its
quarterly financial information for the first half of 1994 and that
such failure, in their opinion, constituted a material weakness.
This matter was discussed by the Audit Committee with Price
Waterhouse LLP and the Company has addressed this matter by
implementing improved cut-off controls and establishing a policy of
having its independent accountants review quarterly information
prior to its release. The Company has authorized Price Waterhouse
LLP to respond fully to the inquiries of Ernst & Young LLP regarding
such matter.
OTHER MATTERS
Management is not aware of any other business that may come
before the Annual Meeting. However, if additional matters properly
come before the Annual Meeting, proxies will be voted at the
discretion of the proxy-holders.
SOLICITATION PROCEDURES
The cost of soliciting proxies will be borne by the Company.
In addition, the Company will reimburse brokers or other persons
holding stock in their names or in the names of their nominees for
charges and expenses in forwarding proxies and proxy material to the
beneficial owners. Solicitations may also be made by employees of
the Company, without additional compensation, by use of the mails,
telephone, telegraph or otherwise. The Company may elect to retain
a proxy solicitation firm to assist in the solicitation of proxies
and estimates that such services would cost approximately $3,000
(plus reasonable out-of-pocket expenses).
<PAGE>
<PAGE>
SHAREHOLDER PROPOSALS
Under the regulations applicable to the solicitation of
proxies, shareholder proposals intended to be presented at the 1997
Annual Meeting of Shareholders of the Company must be received by
the Company not later than December 31, 1996, at its principal
executive offices, 2300 N.W. 89th Place, Miami, Florida 33172,
Attention: E. Craig Sanders, President, for inclusion in the Proxy
Statement relating to the 1997 Annual Meeting of Shareholders.
By Order of the Board of Directors
/s/ Francis J. Harkins
Francis J. Harkins, Secretary
Miami, Florida
June 11, 1996
<PAGE>
<PAGE>
PEOPLES TELEPHONE COMPANY, INC.
ANNUAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints E. Craig Sanders, Bonnie S. Biumi,
Bruce W. Renard, or any one of them, with full power of substitution, the
proxies of the undersigned, to vote all shares of Common Stock or Series C
Cumulative Convertible Preferred Stock of Peoples Telephone Company, Inc.
Which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Shareholders to be held on July 15, 1996, at
10:00 a.m., at the Radisson Mart Plaza Hotel at 711 N.W. 72nd Avenue,
Miami, Florida 33126, and at any adjournments thereof, as to the matters
specified on the reverse side, all as more fully described in the
accompanying proxy statement. The board of directors currently knows of
no other matters to be presented at the Annual Meeting.
THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED
AS DIRECTED BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, SUCH
SHARES WILL BE VOTED "FOR" THE NOMINEES LISTED IN PROPOSAL 1.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IN
PROPOSAL 1.
(Continued on reverse side)
<PAGE>
<PAGE>
The Board of Directors Recommends a Vote "For" the Nominees named below:
1. Election of Directors: Nominees: Jody Frank, Robert E. Lund
and E. Craig Sanders
FOR [ ] WITHHELD [ ]
To withhold authority to vote for any individual
nominee, write that nominee's name in the space
provided below:
______________________________________________________
2. In their discretion, to transact and vote upon all other business
as may properly come before the meeting and all adjournments of the meeting.
Please mark, date and sign as your name appears hereon
and return in the enclosed envelope. If acting as
executor, administrator, trustee, guardian, etc.,
you should so indicate when signing. If the signatory
is a corporation, a duly authorized officer should sign
for the corporation. If shares are held jointly, each
shareholder named should sign.
Date: _____________________________________, 1996
______________________________________________________
Signature
______________________________________________________
Signature (if held jointly)
<PAGE>
