SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of l934
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 Sec. 240.14a-11(c) or Sec. 240.14a-12
Peoples Telephone Company, Inc.
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[x ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials. [ ] Check box if any part
of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No:
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4) Date Filed:
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<PAGE>
PEOPLES TELEPHONE COMPANY, INC.
Notice of Annual Meeting of Shareholders
June 16, 1998
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of Peoples Telephone Company, Inc. (the "Company") will be held on
Tuesday, June 16, 1998 at 10:00 a.m., local time, at the Company's principal
executive offices at 2300 N.W. 89th Place., Miami, Florida 33172, for the
following purposes, as described in the attached proxy statement:
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
and until their respective successors are duly elected and qualified; and
2. To transact all other business that may properly come before the Annual
Meeting and all adjournments of the Annual Meeting.
The Board of Directors has fixed the close of business on Tuesday, May 5,
1998 as the record date for the determination of shareholders entitled to notice
of, and to vote at, the Annual Meeting and any adjournment or postponement
thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the accompanying Proxy Statement for further information
with respect to the business to be transacted at the Annual Meeting. Whether or
not you plan to attend the Annual Meeting, please complete, sign, date and
return the enclosed proxy card promptly. The return of the enclosed proxy card
will not affect your right to revoke your proxy or to vote in person if you do
attend the Annual Meeting.
By Order of the Board of Directors,
/s/ Bruce W. Renard, Secretary
Bruce W. Renard, Secretary
May 15, 1998
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.
<PAGE>
PEOPLES TELEPHONE COMPANY, INC.
_______________________
PROXY STATEMENT
_______________________
ANNUAL MEETING OF SHAREHOLDERS
June 16, 1998
This Proxy Statement has been prepared and is furnished by the Board of
Directors (the "Board") of Peoples Telephone Company, Inc., a New York
corporation (the "Company"), in connection with the solicitation 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
("Series C Preferred Stock"), of the Company for use at the Annual Meeting of
Shareholders of the Company to be held on Tuesday, June 16, 1998 (the "Annual
Meeting") and at any adjournment thereof, for the purposes set forth in the
accompanying notice of meeting.
The Annual Meeting will be held at the Company's principal executive
offices at 2300 N.W. 89th Place, Miami, Florida 33172, on Tuesday, June 16,
1998, at 10:00 a.m. It is expected that this Proxy Statement and a proxy will be
mailed to the shareholders of the Company on or about May 15, 1998.
OUTSTANDING STOCK AND VOTING RIGHTS
The Company has currently outstanding 150,000 shares of Series C Preferred
Stock. The holders of the Series C Preferred Stock are currently entitled to
elect two members of the Board. The terms of the Series C Preferred Stock also
provide that as long as the Series C Preferred Stock is entitled to elect at
least one director, the Board shall consist of no more than six directors. The
holder of the Series C Preferred Stock has elected Mr. Charles J. Delaney and
Mr. Justin S. Maccarone to serve on the Board and has informed the Company that
it intends to re-elect such directors.
The holders of the Series C 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 Series C
Preferred Stock entitled to one vote for each share of Common Stock issuable
upon conversion of the Series C Preferred Stock.
In accordance with the Bylaws of the Company, the Board has fixed the close
of business on May 5, 1998 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 specific voting instructions
are indicated on the proxy, proxies which are properly executed will be voted
FOR the proposals set forth on the proxies. Although a shareholder may have
given a proxy, the shareholder may nevertheless attend the meeting, revoke the
proxy and vote in person. As of the date of this Proxy Statement, the Board
knows of no business other than the proposals described herein which is to be
submitted to the shareholders of the Company at the Annual Meeting.
<PAGE>
At the close of business on May 5, 1998, there were 16,212,434 shares of
Common Stock outstanding and 150,000 shares of Series C Preferred Stock
(convertible into 2,857,143 shares of Common Stock) outstanding. Every holder of
record of Common Stock or Series C Preferred Stock of the Company at the close
of business on May 5, 1998 is entitled to notice of the meeting and to vote, in
person or by proxy, one (1) vote for each share of Common Stock and 19.04762
votes for each share of Series C Preferred 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 (pursuant to which the Company is incorporated), the election
of directors requires a plurality of the votes cast with respect to the election
of directors at the Annual Meeting. Abstentions and broker non-votes (instances
where brokers are prohibited from exercising discretionary authority for
beneficial owners who have not returned a proxy) will not affect the outcome of
the voting. Abstentions and broker non-votes will be counted in the
determination of a quorum. The Company has been informed that the holder of the
Series C Preferred Stock will cast its 2,857,143 votes in favor of the proposal
set forth herein.
ELECTION OF DIRECTORS
As discussed under "Outstanding Stock and Voting Rights," the holders of
the Series C 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 Series C
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 46, has served as a director of the Company and its
predecessor since September 1986. From November 1997 to the present, he has been
an Executive Director of CIBC Oppenheimer Corp., a financial services company.
From February 1990 to October 1997, he was a Vice President of Shearson Lehman
and, after Smith Barney Inc. acquired the assets of Shearson Lehman in 1994,
Smith Barney Inc.
Robert E. Lund, age 53, has served as a director of the Company since May
1994. He has served as Chief Executive Officer of Intrepid Tech, Inc., a
technology services company, since December 1996. 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. From December 1994 through December
1995, Mr. Lund served as President and Chief Executive Officer of S2 Software,
Inc., a software 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 1990 to 1992, Mr. Lund was
Chairman and Chief Executive Officer of International Telecharge, Inc., a
telecommunications company.
2
<PAGE>
E. Craig Sanders, age 53, 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 Chief Executive Officer of 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 1994.
As discussed under "Outstanding Stock and Voting Rights" above, the holder
of the Series C 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 37, has served as a Director of the Company since
August, 1995. Mr. Delaney has been President of UBS Capital II LLC, a wholly
owned subsidiary of Union Bank of Switzerland involved in private equity
financing, since January 1993. From 1989 to 1996 Mr. Delaney was also a Managing
Director of the leveraged finance group of the Union Bank of Switzerland. Mr.
Delaney is also a director of Van de Kamp's Inc., CBP Resources, Inc.,
Speciality Foods Corporation and Cinnabon International.
Justin S. Maccarone, age 38, has served as a director of the Company since
June 1996. Mr. Maccarone has been a Managing Director of UBS Capital II LLC, a
wholly owned subsidiary of Union Bank of Switzerland involved in private equity
financing, since 1993 and, before that time, was a Senior Vice President at GE
Capital Corporation. Mr. Maccarone is also a director of American Sports Product
Group, Inc., Communications Supply Corporation, Cinnabon International, Inc. and
Trident Automotive, PLC.
BOARD OF DIRECTORS
Meetings and Committees of the Board
The Board of Directors of the Company held five meetings during its fiscal
year ended December 31, 1997. The Board has a Compensation Committee and an
Audit Committee. Each of the directors of the Company participated 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. For the Board of Directors as a
whole, average attendance at Board and committee meetings during 1997 was over
90%.
The Compensation Committee held five meetings during 1997. The Compensation
Committee's responsibilities include, among other things, recommending salary
adjustments, establishing bonuses, granting options to employees and determining
the terms of those options. No additional fees were paid to directors for
serving on the Compensation Committee in 1997. The members of the Compensation
Committee are Messrs. Delaney, Frank and Maccarone.
The Audit Committee held two meetings during 1997. 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 full Board of Directors, a majority of which are non-employee
directors, acts as the Nominating Committee and nominated directors for election
at the 1998 Annual Meeting of Shareholders. The Board of Directors will consider
3
<PAGE>
nominees for director that are recommended by shareholders. Nominees for
election at the 1999 Annual Meeting of Shareholders should be submitted to the
Board of Directors not later than January 15, 1999.
Director Compensation
Currently, all directors 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.
Voting Requirements
Each director shall be elected by a plurality of the votes cast in person
or by proxy at the Annual Meeting. 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 Board of Directors recommends a vote FOR the proposal to elect the
three nominees to the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert E. Lund served as a member of the Compensation Committee of the
Board of Directors during 1996 and 1997 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 since January 1, 1997, which transactions and borrowings are
described below. See "Certain Relationships and Related Transactions."
4
<PAGE>
<TABLE>
<CAPTION>
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 May 5, 1998
(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, (iii) the Company's Chief Executive Officer
and each of the four remaining most highly compensated executive officers for
the fiscal year ended December 31, 1997 (the "Named Executive Officers") and
(iv) all directors and executive officers of the Company, as a group.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class(2)
- ------------------------ ----------------------- -------------------
<S> <C> <C>
Charles J. Delaney............................... 0 (13) N/A
Robert E. Lund................................... 121,350 (3) *
Jody Frank....................................... 238,262 (4) 1.46%
Justin S. Maccarone.............................. 0 (13) N/A
E. Craig Sanders................................. 400,000 (5) 2.41%
Lawrence T. Ellman............................... 52,500 (6) *
Bruce W. Renard.................................. 92,500 (7) *
C. Keith Pressley................................ 9,500 (8) *
Neil N. Snyder, III.............................. 66,666 (9) *
All directors and executive officers as a
group (11 persons)............................. 996,778 (10) 5.85%
Creditanstalt American Corp...................... 850,000 (11) 5.03%
245 Park Avenue
New York, New York 10167
Heartland Advisors, Inc.......................... 4,956,300 (12) 30.57%
790 N. Milwaukee Street
Milwaukee, Wisconsin 53202
UBS Capital II LLC............................... 2,917,143 (13) 15.25%
299 Park Avenue
New York, New York 10171
Wellington Management Company, LLP............... 2,267,290 (14) 13.98%
75 State Street
Boston, Massachusetts 02109
Vanguard Explorer Fund, Inc...................... 1,540,300 (14) 9.50%
P.O. Box 2600, VM #V34
Valley Forge, PA 19482
Goldman Sachs & Co............................... 1,337,900 (16) 8.25%
85 Broad Street
New York, New York 10004
</TABLE>
- -------------------------
*Less than one percent.
(footnotes on following page)
5
<PAGE>
(1) Includes shares of Common Stock issuable upon the exercise of stock
options, which are exercisable within 60 days of May 5, 1998. Except as
otherwise indicated, the persons named in the table have sole voting and
investment power with respect to the shares shown as beneficially owned by
them.
(2) Each beneficial owner's percentage ownership is determined by assuming that
convertible securities, options or warrants that are held by such person
(but not those held by any other person) and which are exercisable within
60 days of the date of this Proxy Statement have been exercised.
(3) Includes 90,000 shares subject to options.
(4) Includes 110,000 shares subject to options and 3,812 shares owned by Jody
Frank as custodian for Aaron Frank, Rebekah Frank and Lucy Frank, Mr.
Frank's minor children.
(5) Includes 400,000 shares subject to options.
(6) Includes 52,500 shares subject to options.
(7) Includes 92,500 shares subject to options.
(8) Includes 9,500 shares subject to options.
(9) Includes 66,666 shares subject to options.
(10) Includes all of the shares subject to options in footnotes 2-8 above.
(11) Includes 700,000 shares subject to exercisable warrants.
(12) Based on a Schedule 13G filed as of February 6, 1998 by Heartland Advisors
Inc. The Company has not independently verified this information.
(13) Includes 50,000 shares subject to options held for the benefit of UBS
Capital II LLC by current directors Charles J. Delaney and Justin S.
Maccarone and 2,867,143 shares issuable upon conversion of 150,000 shares
of Preferred Stock currently outstanding owned by UBS Capital II LLC (a
wholly-owned subsidiary of Union Bank of Switzerland).
(14) Based on a Schedule 13G filed as of February 11, 1998 by Wellington
Management Company, LLP ("WMC"). WMC reports that, in its capacity as
investment adviser, it has "shared power to vote or to direct the vote" of
105,090 shares of these shares. WMC also reports that the total shares
indicated includes those shares held by Vanguard Explorer Fund, Inc.
referenced in footnote 15 below. The Company has not independently verified
this information.
(15) Based on a Schedule 13G filed as of February 9, 1998 by Vanguard Explorer
Fund, Inc. Vanguard Explorer Fund, Inc. reports that it has sole voting
power over all of the reported shares. The Company has not independently
verified this information.
(16) Based on a Schedule 13G filed as of February 13, 1998 by Goldman Sachs
Group LP. Goldman Sachs Group LP reports that it has sole voting power over
none of the reported shares and shared voting power over 967,900 of the
reported shares. The Company has not independently verified this
information.
6
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS
The following sets forth the name, age and position of each of the
executive officers of the Company:
Name Age Position
- ----------------- ---- --------
<S> <C> <C>
E. Craig Sanders 53 President, Chief Executive Officer and Director
Neil N. Snyder, III 51 Chief Operating Officer and Executive Vice
President
Bruce W. Renard 44 General Counsel, Executive Vice President-Legal
and Regulatory Affairs/Carrier Relations and
Secretary
Lawrence T. Ellman 46 Executive Vice President and President-
National Accounts
William A. Baum 48 Chief Financial Officer and Senior Vice President
David A. Arvizu 49 Senior Vice President-Sales and Services
C. Keith Pressley 54 Vice President-Revenue Management
</TABLE>
The principal occupation of each executive officer for at least the last
five years is set forth below:
E. Craig Sanders has served as President, Chief Executive Officer and
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 Chief Executive Officer of 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 1994.
Neil N. Snyder, III joined the Company in September 1996 as Executive Vice
President and Chief Operating Officer. Prior to joining the Company, Mr. Snyder
concluded over 28 years in the U.S. Army, rising to the rank of Brigadier
General, most recently as the senior staff officer for operational support at
the U.S. Army Training and Doctrine Command in Hampton, Virginia where he
oversaw the management of 16 installations and the $3.2 billion budget for those
bases.
Bruce W. Renard joined the Company as General Counsel and Vice President-
Regulatory Affairs in January 1992 and, since February 1996, has served as
General Counsel, Executive Vice President-Legal & Regulatory Affairs/Carrier
Relations and Secretary. 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 Messrs, 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.
7
<PAGE>
Lawrence T. Ellman joined the Company in June 1994 as President of its Pay
Telephone Division and held that office until February 1996 when he became
Executive Vice President/President-National Accounts, the position that he
continues to hold. From 1990 until joining the Company, Mr. Ellman was President
of Atlantic Telco Joint Venture, an independent public 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.
William A. Baum has served as the Company's Senior Vice President and Chief
Financial Officer since July 1997. Previously, he served for 16 years in a
series of financial management positions with Ryder System, Inc., a highway
transportation and logistics company, most recently as Vice President Finance
and Chief Financial Officer of Ryder Integrated Logistics. Prior to joining
Ryder, Mr. Baum spent seven years with Arthur Andersen, rising to the position
of manager in their audit services practice.
David A. Arvizu joined the Company in March 1997 as Senior Vice President
of Sales and Marketing for local and regional markets and was named Senior Vice
President, Sales and Services in December 1997. From 1994 to 1997, Mr. Arvizu
served as Vice President-Western Region of Western Union Financial Services,
Inc. From 1991 to 1994, he was President of a sales, marketing and consulting
service for a co-op of independent Pepsi-Cola franchisees. Prior to 1991, Mr.
Arvizu spent twenty years in sales and brand management positions with Pepsico
Inc. and General Foods Corp.
C. Keith Pressley joined the Company in February 1994 as Vice President of
Management Information Systems. He became President of the Inmate
Telecommunications Division in June 1996. Upon the sale of the inmate operations
in December 1997, he was named Vice President-Revenue Management. Prior to
joining the Company, he was Director of Information Systems for Smith
International, Inc., an oil field services company, since 1991.
8
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended December 31,
1997, 1996 and 1995, the compensation earned by the Named Executive Officers.
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
Name and Principal Shares Underlying All Other
Position Year Salary Bonus Options(in shares) Compensation(1)
- -------------------------- ------ --------- -------- ------------------- ----------------
<S> <C> <C> <C> <C> <C>
E. Craig Sanders(2)........ 1997 $300,000 $130,000 0 $ 2,375
President, ................ 1996 $212,000 -- 600,000 --
Chief Executive Officer
Neil N. Snyder, III(3)..... 1997 $150,000 $ 24,375 0 $ 2,375
Executive Vice President .. 1996 $ 50,577 -- 200,000 --
Chief Operating Officer
Lawrence T. Ellman ........ 1997 $170,000 $ 42,850 37,500 --
Executive Vice President .. 1996 $167,000 $ 43,000 0 --
President-National Accounts 1995 $150,000 $ 25,000 0 --
Bruce W. Renard............ 1997 $192,500 $140,425 37,500 $ 1,188
Executive Vice President,.. 1996 $192,500 $115,000 0 --
Legal & Regulatory Affairs, 1995 $172,000 $ 25,000 50,000 $ 355
Carrier Relations,
General Counsel
C. Keith Pressley.......... 1997 $120,000 $ 10,500 22,500 $ 2,375
Vice President- ........... 1996 $112,000 $ 10,500 0 $ 1,800
Revenue Management ........ 1995 $100,000 -- 0 $ 1,800
</TABLE>
- -------------------
(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. Perquisites and other personal benefits do not
exceed 10% of salary and bonus.
(2) Mr. Sanders joined the Company in May 1996.
(3) Mr. Snyder joined the Company in September 1996.
9
<PAGE>
<TABLE>
<CAPTION>
Option Grants. The following table sets forth certain information with
respect to stock options granted during the year ended December 31, 1997 to the
Named Executive Officers:
Option Grants During Fiscal 1997
Individual Grants
---------------------------------------------------------------------
Potential Realizable
Value of Assumed
Annual Rates of
% of Total Stock Price
Number of Options Granted Exercise or Appreciation for
Securities to Employees in Base price Option Term (1)
Name Underlying Options Fiscal Year ($/share) Expiration Date 5% 10%
- ----------------- ------------------ -------------- ----------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lawrence T. Ellman 7,500 $3.63 2007 $16,297 $ 42,077
7,500 $4.25 2007 $11,647 $ 37,427
7,500 $5.25 2007 $ 4,147 $ 29,927
7,500 $6.25 2007 $ 0 $ 22,427
7,500 $7.25 2007 $ 0 $ 14,927
------ ------- --------
Total 37,500 8.04% $32,091 $146,285
Bruce W. Renard 7,500 $3.63 2007 $16,297 $ 42,077
7,500 $4.25 2007 $11,647 $ 37,427
7,500 $5.25 2007 $ 4,147 $ 29,927
7,500 $6.25 2007 $ 0 $ 22,427
7,500 $7.25 2007 $ 0 $ 14,927
------ ------- --------
Total 37,500 8.04% $32,091 $146,285
C. Keith Pressley 4,500 $3.63 2007 $ 9,778 $ 25,246
4,500 $4.25 2007 $ 6,988 $ 22,456
4,500 $5.25 2007 $ 2,488 $ 17,956
4,500 $6.25 2007 $ 0 $ 13,456
4,500 $7.25 2007 $ 0 $ 8,956
------ ------- --------
Total 22,500 4.82% $19,254 $ 88,070
</TABLE>
- ---------------
(1) These gains are based on assumed rates of stock price appreciation of 5%
and 10% compounded annually from the date of grant to their expiration
date. Appreciation reported is net of exercise price. 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.
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<PAGE>
<TABLE>
<CAPTION>
Option Exercises. The following table sets forth certain information as to
each exercise of stock options during the year ended December 31, 1997 by the
Named Executive Officers:
Aggregated Option Exercises In Last Fiscal Year
and Fiscal Year-End Option Values
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year End at Fiscal Year-End(1)
Shares --------------------------- ---------------------------
Acquired on Value
Name Exercise(s) Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ------------- ---------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
E. Craig Sanders .. 0 N/A 400,000 200,000 $118,750 $ 0
Neil N. Snyder, III 0 N/A 66,666 133,334 $ 10,250 $ 0
Lawrence T. Ellman 0 N/A 45,000 37,500 $ 0 $ 431
Bruce W. Renard ... 0 N/A 85,000 37,500 $ 62,375 $ 431
C. Keith Pressley . 0 N/A 5,000 22,500 $ 0 $ 259
</TABLE>
- -----------------
(1) In accordance with the Securities and Exchange Commission's rules, values
are based on the difference between the option exercise price and the fair
market value per share (closing price) on December 31, 1997 ($3-11/16 per
share) multiplied by the number of shares underlying the option.
Option Repricing. The following table sets forth certain information
regarding the repricing of stock options granted to executive officers of the
Company in the last ten years:
<TABLE>
<CAPTION>
Ten-year Option Repricing
Exercise
Price at Length of
Number of Securities Market Price of Time of New Original Option Term
Underlying Options Stock at time of Repricing Exercise Remaining at Date of
Name Date Repriced or Amended Repricing or Amendment or Amendment Price Repricing or Amendment
- -------------- ------- -------------------- ---------------------- ------------ --------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Hanft, 10/9/96 250,000 $4.25 $8.50 (1) (1)
former Chairman,
President and Chief
Executive Officer
</TABLE>
- ------------------
(1) In connection with the termination of Mr. Hanft's employment with the
Company, Mr. Hanft agreed to pledge his options and the underlying shares
to the Company to secure certain prior indebtedness owed by Mr. Hanft to
the Company. As a part of the consideration for such pledge, in the event
of a change in control of the Company occurring on or prior to December 31,
1998, the exercise price of Mr. Hanft's options will be adjusted to the
market price prevailing immediately prior to such change in control.
11
<PAGE>
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 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. In addition, upon a change
in control of the Company, all options granted to Mr. Sanders will vest.
The Company is a party to an employment agreement with Neil N. Snyder, III,
the Executive Vice President and Chief Operating Officer of the Company. The
employment agreement is for a term commencing August 15, 1996 and ending on
December 31, 1999. The agreement provides for a base salary at the annual rate
of $150,000, 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 200,000
shares of the Company's Common Stock at exercise prices ranging from $3.38 to
$7.25 per share, vesting at various dates during the contract term. If the
Company terminates Mr. Snyder's employment without cause (except in the
circumstances described in the following sentence), the Company will pay Mr.
Snyder an amount equal to 150% 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. Snyder 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. Snyder's
employment is terminated by the Company without cause or terminated by Mr.
Snyder for good reason, the Company will pay him an amount equal to 150% 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 for a period
of two years or, to the extent Mr. Snyder is not eligible to participate in any
Company fringe benefit plans, the after tax value of such benefits. In addition,
upon a change in control of the Company, all options granted to Mr. Snyder will
vest.
The Company is a party to an employment agreement with Bruce W. Renard, the
Company's General Counsel, Executive Vice President-Legal and Regulatory
Affairs/Carrier Relations and Secretary. The employment agreement was originally
for a three year term commencing on January 1, 1995 and ending on December 31,
1997 and has been extended to December 31, 1998. 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 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.
12
<PAGE>
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; additionally,
options granted to Mr. Renard under the employment agreement will vest.
The employment agreements above generally 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.
The Company is a party to a change in control agreement with C. Keith
Pressley, Vice President-Revenue Management, an at-will employee of the Company.
Upon termination in connection with a change of control of the Company, Mr.
Pressley shall receive (a) his base salary through the termination date, (b)
severance pay equal to 50% of his annual base salary at the highest rate in
effect during the 12 months immediately preceding such termination and (c) all
options granted to Mr. Pressley will vest.
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.
Compensation Philosophy
The Company's compensation philosophy is characterized by the following
three features: (i) competitiveness as to salary, (ii) granting only
performance-based bonuses and (iii) granting a significant portion of an
executive's compensation in stock options that vest over an extended period
(e.g., five years) with exercise prices at or above fair market value at the
time of grant. In light of the Company's past financial difficulties and
continuing efforts to return to profitability, and in light of the effects of
the passage of the Telecommunications Act of 1996 on the Company and the
telecommunications industry in general, the Company believes its compensation
program should be designed to allow the Company to attract, motivate and retain
executives of the highest caliber to permit the Company's future growth and
profitability. Since 1996, the new management of the Company has made special
efforts to ensure that the Company's compensation program is structured to
provide incentives for executive officer performance that promote continuing
improvement in the Company's financial results and long-term shareholder value.
As a general matter, executive compensation is set by the Company at levels
which take into account the compensation paid by companies of similar size and
complexity. The program is 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. Such option grants generally vest over a period of years
to encourage executive retention. Moreover, each executive officer's
compensation is based upon both individual performance and Company performance.
Consideration is given to the Company's income, earnings per share, cash flow,
revenue growth, EBITDA 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.
13
<PAGE>
Executive Compensation
As may be seen in 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, consistent with the Company's compensation
philosophy set forth above. 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 or above fair market value (see, for
example, "Option Grants During Fiscal 1997" on page 10), 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. As noted above, options granted by the Company generally vest
over an extended period.
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.
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 and a peer
group index. The Company's record in this area is a factor of management's
performance considered by the Compensation Committee.
The Compensation Committee
Charles J. Delaney
Jody Frank
Justin S. Maccarone
14
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of the five year cumulative return
(assuming reinvestment of any dividends) among the Company, the American Stock
Exchange Market Value Index ("AMEX") and 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, 1991.
Effective November 13, 1996, the Common Stock of the Company began trading on
the American Stock Exchange. Previously, the Company's stock was traded on the
NASDAQ's National Market System and the SmallCap Market.
The Performance Graph below is presented in accordance with SEC
requirements. Shareholders are cautioned that historical stock price performance
shown on the Performance Graph is not necessarily indicative of future stock
price performance and in no way reflects the Company's forecast of future stock
price performance.
[Performance Graph to be inserted here]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AMEX 100 120 109 137 146 177
NASDAQ-Telecom 100 154 129 169 172 254
Company 100 130 61 31 43 49
</TABLE>
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since January 1, 1997 the Company has engaged in the following transactions
with directors and/or executive officers of the Company shareholders listed in
the Security Ownership Table or with businesses with which they are associated.
Company Loans. As disclosed in previous proxy statements, the Company
loaned certain funds (the "Company Loans") to Jody Frank, and certain now former
executive officers of the Company (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.
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, including an aggregate of $213,217 to Mr. Frank, of which $143,217 was to
refinance his bank loan and $70,000 was 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 February 1996, the Company agreed to restructure the full principal
amount of Mr. Frank's loans plus accrued interest in an aggregate 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. Except for such restructured loan and related pledge of Common Stock, Mr.
Frank has no indebtedness to the Company.
Credit Facility. In April 1996, the Company amended its credit facility
with Creditanstalt-Bankverein to accomplish, among other things, the following:
(i) Creditanstalt-Bankverein waived additional defaults arising under the credit
facility; (ii) 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. On March 26, 1997, the
Company increased its credit facility with Creditanstalt-Bankverein from
$10,000,000 to $20,000,000. Since January 1, 1997 the Company has paid
Creditanstalt-Bankverein $290,000 in fees as a lender in connection with
Company's credit facilities.
16
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Securities Exchange Act of 1934, the Company's
directors, certain of its officers and beneficial owners of more than 10% of the
outstanding Common Stock are required to file reports with the Securities and
Exchange Commission concerning their ownership of and transactions in Common
Stock; such persons are also required to furnish the Company with copies of such
reports. Based solely upon the reports and related information furnished to the
Company, the Company believes that all such filing requirements were complied
with in a timely manner during 1997.
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, 1997,
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 $294,500 for a one
year term.
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.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at
the Annual Meeting other than the matters described herein and does not intend
to bring any other matters before the meeting. However, if any other matters
should properly come before the Annual Meeting, or any adjournment thereof, the
persons named in the enclosed proxy will have discretionary authority to vote
all proxies in accordance with their best judgment.
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 incurred in
forwarding proxies and proxy material to the beneficial owners. Proxies will be
solicited principally by mail, but directors, officers and regular employees of
the Company may solicit proxies personally, by telephone, facsimile transmission
or otherwise. The Company has retained a proxy solicitation firm, D.F. King &
Co., Inc., to assist in the solicitation of proxies and estimates that such
services will cost approximately $5,000 (plus reasonable out-of-pocket
expenses).
17
<PAGE>
SHAREHOLDER PROPOSALS FOR THE
1999 ANNUAL MEETING
Under the regulations applicable to the solicitation of proxies,
shareholder proposals intended to be presented at the 1999 Annual Meeting of
Shareholders of the Company must have been received by the Company not later
than January 15, 1999, 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 1999 Annual Meeting of Shareholders.
Kindly date, sign and return the enclosed proxy card.
By Order of the Board of Directors,
/s/ Bruce W. Renard
BRUCE W. RENARD
Secretary
Miami, Florida
May 15, 1998
18
<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, William A. Baum, 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 June 16, 1998, at 10:00 a.m., at Peoples
Telephone Company, Inc. 2300 N.W. 89th Place, Miami, Florida 33172 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 LISTED IN
PROPOSAL 1.
(Continued on reverse side)
<PAGE>
1. Election of Directors. Nominees: Jody Frank, Robert E. Lund
and E. Craig Sanders
FOR ALL WITHHOLD
NOMINEES AUTHORITY TO To withhold authority to vote for any
EXCEPT AS VOTE FOR ALL individual nominee, write that nominee's
INDICATED NOMINEES name in the space provided below:
[ ] [ ] -------------------------------------------
2. In their discretion, the proxy holders are authorized to transact and vote
upon all other business as may properly come before the meeting and all
adjournments of the meeting.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the proposals set forth herein.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders dated on or about May 15, 1998, and the accompanying Proxy
Statement.
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: -----------------------------, 1998
- -----------------------------------
Signature
- -----------------------------------
Signature (if held jointly)
