-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V4szVfWshewgyXiqTMyHOSvFV5t6B1O7hs/Dj+TMHLTUwntRg5HsKXLR2gXTPRKg fwuEuu51bBFUxgXdPCQ00Q== 0000819694-96-000003.txt : 19960515 0000819694-96-000003.hdr.sgml : 19960515 ACCESSION NUMBER: 0000819694-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES TELEPHONE COMPANY INC CENTRAL INDEX KEY: 0000819694 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 132626435 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16479 FILM NUMBER: 96564379 BUSINESS ADDRESS: STREET 1: 2300 NORTHWEST 89TH PL CITY: MIAMI STATE: FL ZIP: 33172 BUSINESS PHONE: 3055939667 MAIL ADDRESS: STREET 1: 2300 NORTHWEST 89TH PLACE CITY: MIAMI STATE: FL ZIP: 33172 10-Q 1 PEOPLES TELEPHONE COMPANY, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: March 31, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) Of the Securities Exchange Act of 1934 Commission File Number: 0-16479 PEOPLES TELEPHONE COMPANY, INC. (Exact Name of registrant as specified in its charter) NEW YORK 13-2626435 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) I.D. No.) 2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172 (Address of principal executive offices) (Zip Code) (305) 593-9667 (Registrant's telephone number, including area code) ____________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 Par Value, outstanding at May 8, 1996 : 16,194,684 shares. Part I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS
PEOPLES TELEPHONE COMPANY, INC. CONSOLIDATED BALANCE SHEET (in thousands) March 31, December 31, Assets 1996 1995 _________ ____________ (Unaudited) Current assets Cash and cash equivalents $ 9,461 $ 12,366 Accounts receivable, net of allowance for doubtful accounts of $4,958 and $5,108 7,442 7,100 Inventory 2,187 1,990 Prepaid expenses and other current assets 3,395 3,764 ________ ________ Total current assets 22,485 25,220 Property and equipment, net 75,122 78,201 Location contracts, net . 29,255 29,270 Goodwill, net 8,495 8,904 Intangible assets, net 2,406 2,620 Other assets, net 8,220 8,713 Deferred income taxes 3,407 3,407 Investments 2,685 3,736 ________ ________ Total assets $152,075 $160,071 ======== ======== Liabilities and Shareholders' Equity Current liabilities Notes payable and current maturities of long-term debt $ 502 $ 506 Current portion of obligations under capital leases 1,139 1,156 Accounts payable and accrued expenses 19,741 19,603 Accrued interest payable 2,674 5,603 Income and other taxes payable 2,555 2,452 ________ _______ Total current liabilities 26,611 29,320 Notes payable and long-term debt 101,098 101,259 Obligations under capital leases 1,141 1,318 ________ _______ Total liabilities 128,850 131,897 ________ _______ Commitments and contingencies - - Preferred Stock Cumulative convertible preferred stock Series C, $.01 par value; 160 shares authorized; 150 shares issued and outstanding 13,438 13,413 Preferred stock dividends payable 735 473 _______ _______ Total preferred stock 14,173 13,886 Shareholders' equity Preferred stock; $.01 par value; 4,140 shares authorized; none issued and outstanding - - Convertible preferred stock; Series B, $.01 par value; 600 shares authorized; none issued and outstanding - - Common stock; $.01 par value; 25,000 shares authorized; 16,173 and 16,108 shares issued and outstanding 162 161 Capital in excess of par value 61,284 61,573 Accumulated deficit (51,946) (47,446) Unrealized loss on investments (448) - _________ _________ Total shareholders' equity 9,052 14,288 _________ _________ Total liabilities and shareholders' equity $152,075 $160,071 ========== =========
The accompanying notes are an integral part of these consolidated financial statements.
PEOPLES TELEPHONE COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share data) For the three months ended March 31, 1996 1995 _________ ________ Revenues Coin calls $ 18,141 $ 19,061 Non-coin calls 12,355 16,985 ________ ________ Total revenues 30,496 36,046 Costs and expenses Telephone charges 9,863 12,970 Commissions 8,267 8,282 Field service and collection 4,790 5,185 Selling, general and administrative 2,981 2,642 Depreciation and amortization 6,028 5,637 Interest 3,062 1,802 Gain on disposal of prepaid calling card and international telephone centers (545) - Other 550 27 ______ ______ Total costs and expenses 34,996 36,545 Loss from continuing operations before income taxes (4,500) (499) Benefit from income taxes - 188 _______ _______ Loss from continuing operations (4,500) (311) _______ _______ Discontinued operations Loss from operations - - Loss on disposition - (50) _______ _______ Loss from discontinued operations - (50) Extraordinary loss from extinguishment of debt, net - (2,894) _______ ________ Net loss $ (4,500) $(3,255) ========= ======== Earnings (loss) per common share Loss from continuing operations $ (.29) $ (.02) Loss from discontinued operations - - Extraordinary loss from extinguish- ment of debt, net - (.18) ________ _______ Net loss $ (.29) $ (.20) ======== ======== Weighted average common and common equivalent shares outstanding 16,173 16,081 ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
PEOPLES TELEPHONE COMPANY, INC. STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited, in thousands) Three Months Ended, March 31, 1996 1995 ________ _________ Cash flow from operating activities: Net loss $ (4,500) $ (3,255) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 6,028 5,637 Deferred income taxes - (1,954) Extraordinary loss from extinguishment of debt - 4,631 Equity in losses of Global Link - 27 Gain on sale of assets (545) - Change in assets and liabilities: Decrease in accounts receivable 158 1,132 Increase in inventory (197) (337) Decrease (increase) in prepaid expenses and other current assets 369 (760) Decrease (increase) in other assets 313 (373) Decrease in accounts payable and accrued expenses (54) (883) Decrease in accrued interest (2,929) (307) Increase (decrease) in taxes payable 103 (77) Net effect of discontinued operations - (2,622) _______ _______ Net cash (used in) provided by operating activities (1,254) 859 Cash flow from investing activities: Payments for acquisitions and certain contracts (1,303) (435) Property and equipment additions (754) (1,337) Proceeds from sale of assets 800 1,250 _______ _______ Net cash used in investing activities (1,257) (522) Cash flow from financing activities: Net payments under note payable to bank (165) (83) Principal payments under capital lease obligations (229) (1,132) Exercise of stock options and warrants - 126 Officer loans - (190) ________ _______ Net cash used in financing activities (394) (1,279) ________ _______ Net decrease in cash and cash equivalents (2,905) (942) Cash and cash equivalents at beginning of period 12,366 7,663 _______ _______ Cash and cash equivalents at end of period $ 9,461 $ 6,721 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. PEOPLES TELEPHONE COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 AND MARCH 31, 1995 (unaudited) NOTE 1 - UNAUDITED INTERIM INFORMATION: The accompanying interim consolidated financial data are unaudited; however, in the opinion of management, the interim data include all adjustments necessary for a fair presentation of the results for the interim periods. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three months ended March 31, 1996 are not necessarily indicative of the results to be expected for the year ending December 31, 1996. The interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 1995 as set forth in the Company's Form 10-K. During the third quarter of 1995, the Company decided to retain the remaining portion of its inmate telephone operations. The accompanying consolidated statements of operations and of cash flows for the three months ended March 31, 1995 have been reclassified to present the inmate telephone operations as part of continuing operations. In addition, certain other amounts for the prior year have been reclassified to conform with current year presentation. NOTE 2 - CHANGES IN ACCOUNTING POLICIES Intangible Assets During the first quarter of 1996, the Company adopted Statement No. 121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The effect of adoption did not have a material impact on the financial results of the Company for the three months ended March 31, 1996. Stock Options In October 1995, the FASB issued Statement No. 123 ("SFAS 123"), Accounting for Stock-Based Compensation,which requires companies to either recognize expense for stock-based awards based on their fair value on the date of grant or provide footnote disclosures regarding the impact of such changes. The Company adopted the provisions of SFAS 123 on January 1, 1996 but will continue to account for options issued to employees or directors under the Company's non-qualified stock option plans in accordance with Accounting Principles Board Opinion No.25 ("APB 25"), Accounting for Stock Issued to Employees. The exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, therefore, no compensation expense is recognized under APB 25. Depreciation and Amortization Effective January 1, 1996, the Company revised its depreciation and amortization policy for certain fixed and intangible assets used in the inmate telephone operations. Based on increased competition and certain other changes within the inmate telephone industry, the Company reduced the useful lives of various assets to five years. This change in accounting estimate resulted in an increase in Depreciation and amortization expense and Net loss for the three months ended March 31, 1996 of approximately $0.3 million or $.02 per common share. NOTE 3 - PREPAID CALLING CARD AND INTERNATIONAL TELEPHONE CENTERS On September 28, 1995, the Company sold its international telephone center operations for $2.0 million in cash and notes receivable. For financial accounting purposes, the recovery of $2.0 million previously written off will be recognized as the cash is received. During the quarter ended March 31, 1996, the Company received a payment of approximately $0.3 million which is included in "Gain on disposal of prepaid calling card and international telephone centers" in the accompanying Consolidated Statement of Operations. On March 1, 1996, Global Link Teleco Corporation ("Global Link") consummated a merger transaction (the "Merger")with Global Telecommunications Solutions, Inc. ("GTS"). The Company exchanged its outstanding notes and other receivables including accrued interest for shares of GTS Common stock, $0.6 million in cash and $1.5 million of notes receivable with various due dates through September 1997. The Company's 19.99% equity interest in Global Link was converted in the Merger into GTS shares. For financial accounting purposes, a net gain of approximately $1.0 million will be deferred until the outstanding receivable balances are collected. In addition, a gain of approximately $0.3 million was recorded in the first quarter of 1996 related to amounts collected at the time of this transaction. NOTE 4 - INVESTMENTS The Company's investment in GTS is accounted for in accordance with Statement No. 115 ("SFAS 115"), Accounting for Certain Investments in Debt and Equity Securities. Investments in debt and equity securities , other than those accounted for under the equity method, are reported at fair value with unrealized gains or losses, net of tax, recorded as a separate component of Shareholders' Equity. The Company's investment in GTS at March 31, 1996 was approximately $3.9 million net of approximately $0.4 million of unrealized investment losses. NOTE 5 - EARNINGS PER SHARE: The treasury stock method was used to determine the dilutive effect of options and warrants on earnings per share data. For 1996 and 1995, common stock equivalents were excluded since the effect would be anti-dilutive. Therefore, fully diluted earnings per share are not presented. See earnings (loss) per common share calculation as summarized on page 8. NOTE 6 - LONG-TERM DEBT: During April 1996, the Company amended the Fourth Amended Loan and Security Agreement (the "Amendment") with Creditanstalt-Bankverein (the "Bank"). In connection with the Amendment, the Bank waived the Company's non-compliance with certain restrictive covenants contained in the agreement for the three month period ended December 31, 1995. The Amendment, among other things, decreased the facility to $10.0 million and reduced the requirements of the financial covenants. The amended credit facility bears interest at the Bank's prime rate plus 2% and requires all outstanding principal balances to be repaid in September 1997. At the same time, the Company decreased to $5.25 the exercise price of the warrants held by Creditanstalt American Corporation to acquire Common Stock or Series B Preferred Stock of the Company that had not already been repriced. At March 31, 1996, the Company was in compliance with the amended covenants and had no amounts borrowed under the facility. NOTE 7 - INCOME TAXES: At March 31, 1996, the Company recorded valuation allowances of approximately $1.7 million against deferred tax assets generated during the three months ended March 31, 1996. A valuation allowance was provided to reduce the deferred tax assets to a level which, more likely than not, will be realized.
PEOPLES TELEPHONE COMPANY, INC. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (unaudited, in thousands, except per share data) Three Months Ended March 31, 1996 1995 __________________ Loss from continuing operations $(4,500) $ (311) Less: Cumulative preferred stock dividends 262 - ________ ________ Loss from continuing operations for per share computations (4,762) (311) Loss from discontinued operations - (50) Extraordinary loss from extinguishment of debt, net - (2,894) ________ _________ Net loss for per share computations $(4,762) $ (3,255) ======== ========= Number of shares: Weighted average shares used in the per share computation 16,173 16,081 ======= ======= Earnings (loss) per common and common equivalent share: Loss from continuing operations $ (.29) $ (.02) Loss from discontinued operations - - Extraordinary loss from extinguishment of debt, net - (.18) _________ _________ Net loss $ (.29) $ (.20) ========= =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis compares the quarter ended March 31, 1996 to the quarter ended March 31, 1995 and should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and in conjunction with Management's Discussion and Analysis appearing in the Company's Form 10-K for the year ended December 31, 1995. The financial results discussed below relate to continuing operations which primarily consist of the public pay telephone business and inmate telephone operations. The accompanying consolidated statements of operations and cash flows for the three months ended March 31, 1995 have been reclassified to present the inmate telephone operations as part of continuing operations. Revenues The Company primarily derives its revenues from coin and non-coin calls. Coin revenue is generated exclusively from calls made by depositing coins in the Company's public pay telephones. Coin revenue represented approximately 59.5% and 52.9% of total revenues from continuing operations for the quarters ended March 31, 1996 and 1995, respectively. Coin revenue decreased 4.8% to $18.1 million during the quarter ended March 31, 1996 compared to the same period in 1995. This decrease is primarily attributable to the decrease in the average number of public pay telephones operated by the Company during the first quarter of 1996 to approximately 38,300 compared to an average of approximately 40,000 for the same period in 1995. While the average coin revenue per public pay telephone remained relatively consistent period to period, the Company believes that the number of coin calls made at its public pay telephones may decrease over time. The Company believes that, among other things, the decreases will primarily result from the increased usage of alternative methods of calling such as prepaid calling cards and wireless technologies and the operation of more public pay telephones in closer proximity to the Company's telephones. During the second quarter of 1995, the Company signed a contract with AT&T to act as its primary third-party operator service provider. Prior to the execution of this agreement, non-coin calls were routed through the Company's private label operator service program. The Company records as revenue the total amount the end user pays for the call (net of taxes) when the call is completed through the Company's private label operator service. In contrast, when the call is completed through the third-party operator service provider, the Company records as revenue the amount it receives from the third-party operator service provider which represents a negotiated percentage of the total amount the caller pays for the call. The Company uses its private label operator service or a third-party operator service provider based on which service the Company believes nets it the highest gross margin from the call. Non-coin revenue represented approximately 40.5% and 47.1% of total revenues from continuing operations for the quarters ended March 31, 1996 and 1995, respectively. Non-coin revenue is derived from calling card calls, credit card calls, collect calls and third-party billed calls placed from the Company's public pay telephones and inmate telephones. For the quarter ended March 31, 1996, revenues from non-coin calls decreased 27.3% to approximately $12.4 million, compared to the quarter ended March 31, 1995. This decrease was primarily attributable to an increase in the number of public pay telephone calls placed through third-party operator service providers as opposed to the Company's private label operator service and the decrease in the number of inmate telephone lines operated by the Company. During the first quarter of 1996, the Company operated approximately 2,100 inmate telephone lines, compared to approximately 3,200 during the first quarter of 1995. Operating Expenses Operating expenses include telephone charges, commissions, field service and collection expenses and selling, general and administrative expenses. Telephone charges consist of local line charges paid to Local Exchange Carriers which include costs of basic service and transport of local coin calls, long-distance transmission charges and network costs and billing, collection and validation costs. Commissions represent payments to property owners and correctional facilities for revenues generated by the Company's telephones located on their properties. Field service and collection expenses represent the costs of servicing and maintaining the telephones on an ongoing basis, costs of collecting coin from the telephones and other related operational costs. Selling, general and administrative expenses primarily consist of payroll and related costs, legal and other professional fees, promotion and advertising expenses, property, gross receipts and certain other taxes, corporate travel and entertainment and various other expenses. The switch by the Company to a third-party operator service resulted in a decreased revenue base due to the method of recording revenue for calls made through that service as compared to calls placed through the Company's private label operator service program (see above). As a result, operating expenses as a percentage of revenues for the three months ended March 31, 1996 increased compared to the same period in 1995. Total operating expenses were approximately 84.9% and 80.7% of total revenues from continuing operations for the quarters ended March 31, 1996 and 1995, respectively. Telephone charges decreased as a percentage of total revenues from continuing operations to 32.3% for the quarter ended March 31, 1996, compared to 36.0% for the same period in 1995. The decrease in telephone charges is primarily due to a decline in the number of calls placed through the Company's private label operator service program. The Company paid the costs incurred to transmit, bill, collect and validate the call when the call was completed through its private label operator services. In contrast, the Company incurred no such costs when a third-party operator service provider completed the call. In addition, the Company has experienced a decrease in telephone charges as a result of regulatory changes and competition within the local/intraLata service market which began in the third quarter of 1995. Telephone charges for the first quarter of 1995 include a reduction of interexchange carrier expenses related to a settlement with a service provider for certain billing errors and underpayment of operator service revenue of approximately $1.3 million. Commissions as a percentage of total revenues from continuing operations were approximately 27.1% and 23.0% for the quarters ended March 31, 1996 and 1995, respectively. The increase in commissions as a percentage of revenues was primarily attributable to (i) the change in the Company's method of recording revenue as a result of the Company's switch to a third-party operator service provider; (ii) higher commission rates paid in connection with the Atlanta Hartsfield International Airport account; and (iii) higher commission rates for new and renewed contracts due to increasing competition in the public pay telephone and inmate telephone markets. Field service and collection expenses as a percentage of total revenues from continuing operations were 15.7% and 14.4% for the first quarter of 1996 and 1995, respectively. This increase was primarily attributable to the reduced revenue base as described above. In total, field service and collection expenses decreased to approximately $4.8 million for the first quarter of 1996 compared to approximately $5.2 million for the same period in 1995. This decrease was primarily attributable to cost savings resulting from office and route consolidations and a focus on achieving further operating efficiencies. Selling, general and administrative expenses increased 12.8% to approximately $3.0 million in the first quarter 1996 versus the first quarter 1995. This increase was primarily attributable to an increase in insurance premiums, the salary associated with the addition of an internal sales force and increases in industry association dues, filing fees and promotional costs. Depreciation and Amortization Depreciation is based on the cost of the telephones, booths, pedestals and other enclosures, related installation costs and line interconnection charges and is calculated on a straight-line method using a ten-year useful life for public pay telephones and a five-year useful life for inmate telephones. Amortization is primarily based on acquisition costs including location contracts, goodwill and non-competition provisions and is calculated on a straight-line method using estimated useful lives ranging from five to twenty years. Depreciation and amortization increased to $6.0 million for the quarter ended March 31, 1996, compared to $5.6 million for the same period in 1995. The increase in depreciation and amortization is primarily attributable to the revision of the depreciation and amortization policy for certain inmate assets. Based on increased competition and certain other changes within the inmate telephone industry, the Company reduced the useful lives of various assets to five years. As a result of this change in accounting estimate, depreciation and amortization increased approximately $0.3 million in the first quarter of 1996. Interest Expense In the first quarter of 1996, interest expense increased 69.9% to $3.1 million as compared to the same quarter in 1995. This increase is primarily attributable to (i) the higher interest rate on the Company's $100.0 million of Senior Notes as compared to the rates in effect on the Company's revolving line of credit in existence in the first quarter of 1995; and (ii) the inclusion of interest expense in continuing operations which was previously allocated to the Company's cellular operations which were included in discontinued operations. Gain on Disposal of Prepaid Calling Card and International Telephone Centers Gain on disposal of prepaid calling card and international telephone centers includes approximately $0.3 million received in connection with the sale of the Company's international telephone center operations and approximately $0.3 million recognized in connection with the merger of Global Link Teleco Corporation and Global Telecommunications Solutions, Inc. (see Note 3 to the accompanying consolidated financial statements). Other Other expense includes approximately $0.6 million of severance obligations incurred under employment agreements with certain key executives. Benefit from Income Taxes The Company's benefit from income taxes decreased approximately $0.2 million for the quarter ended March 31, 1996 from the same period in 1995 primarily due to the fact that for the 1996 period the Company recorded valuation allowances for 100% of the deferred tax assets generated from operating losses in the period. The Company recorded deferred tax assets and deferred tax asset valuation allowances of approximately $1.7 million for the quarter ended March 31, 1996. Net Loss from Continuing Operations before Extraordinary Item The Company had a net loss from continuing operations of approximately $4.5 million for the three months ended March 31, 1996, compared to a net loss from continuing operations of approximately $0.3 million for the same period in 1995. Extraordinary Loss As a result of a March 1995 amendment to the Company's revolving line of credit agreement, the Company recorded extraordinary losses from the write-off of deferred financing costs associated with the early extinguishment of debt of approximately $4.6 million, before the related income tax benefit of $1.7 million, which is included in the financial results of the Company for the three months ended March 31, 1995. There were no such items recorded in the first quarter of 1996. Earnings Before Interest, Taxes, Depreciation and Amortization EBITDA is not presented as an alternative to operating results or cash flow from operations as determined by Generally Accepted Accounting Principles ("GAAP"), but rather to provide additional information related to the ability of the Company to meet current trade obligations and debt service requirements. EBITDA should not be considered in isolation from, or construed as having greater importance than, GAAP operating income or cash flows from operations as a measure of an entity's performance. EBITDA from continuing operations was approximately $4.6 million for the quarter ended March 31, 1996, compared to $6.9 million the same period in 1995. Cash flow for the first quarter of 1995 included approximately $1.3 million of one-time income related to a settlement with a vendor. The remaining decrease is attributable to a decrease in the Company's installed base of inmate telephone lines and public pay telephones, increased commissions and higher selling, general and administrative expenses offset by decreases in telephone charges and field service and collection expenses as noted above. Liquidity and Capital Resources During the first quarter of 1996, the Company financed its operations from operating cash flow. For the quarter ended March 31, 1996, the Company's operating cash flow was $(1.3) million compared to $0.9 million for the same period in 1995. The Company's working capital deficit was approximately $(4.1) million, with a current ratio of .84 to 1, at March 31, 1996. This is consistent with working capital deficit of $(4.1) million and a current ratio of .86 to 1 at December 31, 1995. In April 1996, the Company amended certain terms contained in the Fourth Amended Loan and Security Agreement (the "Amendment"). In connection with the Amendment, the Bank waived the Company's non-compliance with certain restrictive covenants contained in the agreement for the three month period ended December 31, 1995. The Amendment, among other things, decreased the facility to $10.0 million and reduced the requirements of the financial covenants. The amended credit facility bears interest at the Bank's prime rate plus 2% and requires all outstanding principal balances to be repaid in September 1997. At the same time, the Company decreased to $5.25 the exercise price of the warrants held by Creditanstalt American Corporation to acquire Common Stock or Series B Preferred Stock of the Company that had not already been repriced. At March 31, 1996, the Company was in compliance with the amended covenants and had no amounts borrowed under the facility. Based upon current expectations, the Company believes that cash flow from operations, together with amounts which may be borrowed under the amended credit facility, will be adequate for it to meet its working capital requirements, pursue its business strategy and service its obligations with respect to its 12 1/4% Senior Notes , although there can be no assurance that it will be able to do so. Part II OTHER INFORMATION Item 5. Other Events (a) The Company has scheduled its Annual Meeting of Shareholders to be held on July 15, 1996. (b) E. Craig Sanders has been elected President, Chief Executive Officer and a Director of the Company effective as of May 2, 1996. He succeeded Robert E. Lund in the positions of President and Chief Executive Officer. Mr. Lund had been serving in those positions on an interim basis and will continue as a Director of the Company. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit Description 10.1 Second Amendment to Fourth Amended and Restated Loan and Security Agreement dated April 4, 1996 between Peoples Telephone Company, Inc. and Creditanstalt-Bankverein. 10.2 Second Amendment to Second Amended and Restated Warrant Agreement dated April 4, 1996 between Peoples Telephone Company, Inc. and Creditanstalt American Corporation. 10.3 Employment Agreement between E. Craig Sanders and the Company dated May 2, 1996. (b) Reports on Form 8-K: None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PEOPLES TELEPHONE COMPANY, INC. Registrant Date: May 14, 1996 /s/ Bonnie S. Biumi ________________________________ Bonnie S. Biumi Chief Financial Officer EX-10.1 2 Exhibit 10.1 SECOND AMENDMENT TO THE FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO THE FOURTH AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment")is made and entered into as of this 4th day of April, 1996,by and among PEOPLES TELEPHONE COMPANY, INC., a New York corporation("Borrower"), each of the Lenders signatory hereto (hereinafter referred to individually as a "Lender" and collectively as the "Lenders"), and CREDITANSTALT-BANKVEREIN, an Austrian banking corporation, as agent for the Lenders (in such capacity, together with its successors and assigns in such capacity, hereinafter referred to as the "Agent"); W I T N E S S E T H: WHEREAS, on March 12, 1990, Borrower entered into a certain Loan and Security Agreement, dated as of March 12, 1990, as amended (as so amended, the "Original Loan Agreement"), among Borrower, the banks party thereto and the Agent, pursuant to which such banks made available to Borrower a revolving credit facility; and WHEREAS, the Original Loan Agreement was superseded by that certain Amended and Restated Loan and Security Agreement, dated as of May 4, 1992 (the "First Restated Agreement") among the Borrower, the banks party thereto and the Agent; and WHEREAS, the First Restated Agreement was superseded by that certain Second Amended and Restated Loan and Security Agreement, dated as of March 29, 1993 (the "Second Restated Agreement") among Borrower and PTC Cellular, Inc., a Delaware corporation, as borrowers, the banks party thereto and the Agent; and WHEREAS, the Second Restated Agreement was superseded by that certain Third Amended and Restated Loan and Security Agreement, dated as of February 17, 1994 (the "Third Restated Agreement") among the Borrower, the lenders party thereto and the Agent; and WHEREAS, the Third Restated Agreement was superseded by that certain Fourth Amended and Restated Loan and Security Agreement, dated as of July 19, 1995 (the "Fourth Restated Agreement") among the Borrower, the lenders party thereto (the "Lenders") and the Agent; and WHEREAS, the Fourth Restated Agreement was amended on November 29, 1995 pursuant to that certain Waiver and First Amendment to Fourth Amended and Restated Loan Agreement; WHEREAS, Borrower was in default in certain financial covenants as of the fiscal quarter ending December 31, 1995 and has requested that the Lenders and the Agent waive such Events of Default; WHEREAS, the Lenders and the Agent are willing to waive such Events of Default on the condition that the Fourth Restated Agreement is amended as set forth herein; NOW, THEREFORE, for and in consideration of the foregoing premises, the mutual promises, covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. All capitalized terms used herein and not expressly defined herein shall have the same respective meanings given to such terms in the Fourth Restated Agreement. 2. Definitions. The Fourth Restated Agreement is hereby amended by deleting the definitions of "Borrowing Base," "Commitment" and "Maturity Date" in their entirety and by substituting therefor the following new definitions of "Borrowing Base," "Commitment" and "Maturity Date" to read as follows: "Borrowing Base" shall mean, as of any date, up to (a) seventy-five percent (75%) of the net amount of Borrower's Eligible Accounts plus (b) an amount equal to $1,200 multiplied by the number of Eligible Pay Telephones. "Commitment" shall mean the aggregate obligation of the Lenders to make Loans to Borrower, subject to the terms and conditions hereof, up to an aggregate principal amount not to exceed at any one time outstanding as to all the Lenders equal to Ten Million Dollars ($10,000,000), subject to reduction as set forth in Section 2.10 hereof. "Maturity Date" shall mean October 4, 1997. 3. Borrowing Procedures. The Fourth Restated Agreement is hereby further amended by deleting the first sentence of Subsection 2.2(b) thereof in its entirety and by substituting therefor a new sentence to read as follows: Unless the Agent shall have been notified by any Lender not later than 11:00 a.m. (New York time) on the date any Loan is to be made, that such Lender does not intend to make available to the Agent such Lender's Commitment Percentage of such Loan, the Agent may assume that such Lender has made such amount available to the Agent on the date of such Loan and the Agent may, in reliance upon such assumption, make available to Borrower a corresponding amount. 4. Pro Rata. The Fourth Restated Agreement is hereby further amended by deleting Subsection 2.9(c) thereof in its entirety and by substituting therefor a Subsection 2.9(c) to read as follows: (c) the making of Loans shall be made prorata among the relevant Lenders according to their Commitment Percentage of the Commitment; 5. Notices. The Fourth Restated Agreement is hereby further amended by deleting Section 2.12 thereof in its entirety and by substituting therefor a new Section 2.12 to read as follows: All notices given by Borrower to the Agent of terminations or reductions of the Commitment, or of borrowings, or prepayments of Loans hereunder shall either be oral, with prompt written onfirmation by telecopy, or in writing, with such written confirmation or writing, in the case of a borrowing, to be substantially in the form of Exhibit B attached hereto (a "Notice of Borrowing"); shall be irrevocable; shall be effective only if received by Agent prior to 10:00 a.m. (New York time) on a Business Day which is: (a) at least fifteen (15) days prior to such termination or reduction of the Commitment; (b) not later than the date such Loan is to be made; and (c) not later than the date of any such prepayment, in the case of a prepayment of a Base Rate Loan. Each such notice to reduce the Commitment or to prepay the Loans shall specify the amount of the Commitment to be reduced or of the Loans to be prepaid and the date of such reduction or prepayment. Each such notice of borrowing shall specify: (1) the amount of such borrowing (which shall be an integral multiple of $100,000); that the amount of the Loan to be made, when aggregated with all other Loans to be outstanding following the funding of such Loan, does not exceed the Borrowing Base; and the date such Loan is to be made (which shall be a Business Day). Each request for a borrowing of a Loan or for any other financial accommodation by Borrower pursuant to this Agreement or the other Loan Documents shall constitute (x) an automatic warranty and representation by Borrower to each Lender that there does not then exist a Default or Event of Default or any event or condition which, with the making of such Loan, would constitute a Default or Event of Default and (y) an affirmation that as of the date of such request all of the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects, both before and after giving effect to the application of the proceeds of the Loan except for such changes in such representations and warranties which do not constitute a Default or Event of Default hereunder, which do not, individually or in the aggregate, have a Material Adverse Effect and which have, to the extent required, been disclosed to the Agent and the Lenders pursuant to Section 6.2 hereof or otherwise. 6. Interest Rate. The Fourth Restated Agreement is hereby further amended by deleting Sections 3.1, 3.2 and 3.3 thereof in their entirety and by substituting therefor new Sections 3.1, 3.2 and 3.3 to read as follows: 3.1 Interest. (a) Subject to modification pursuant to Subsection (b) below and Section 10.1 hereof, the average daily outstanding principal amount of the Loans and all other sums payable by Borrower hereunder shall bear interest from the date thereof until paid in full at a fluctuating rate per annum equal to the Base Lending Rate plus two percent (2%), calculated daily on the basis of a 360-day year and actual days elapsed. (b) Accrued interest shall be payable (i) in the case of any Loan, monthly on the first day of each month hereafter for the previous month, commencing with the first such day following the Effective Date; (ii) in the case of any Loan, upon the payment or prepayment thereof; (iii) in the case of any other sum payable hereunder as set forth elsewhere in this Agreement or, if not so set forth, on demand; and (iv) in the case of interest payable at the Default Rate, on demand. 3.2 [Intentionally Deleted] 3.3 Conversions and Continuations. Commencing on April 4th, 1996, Borrower shall no longer have the right to Convert Base Rate Loans to Eurodollar Loans or to Continue Eurodollar Loans as Eurodollar Loans. Upon the expiration of each Interest Period outstanding on April 4th, 1996, the Eurodollar Loan relating thereto shall automatically convert to a Base Rate Loan. 7. Investments. The Fourth Restated Agreement is hereby further amended by deleting Section 7.5 thereof in its entirety and by substituting therefor a new Section 7.5 to read as follows: 7.5 Investments. Borrower shall not, and shall not permit any of its Subsidiaries to make any Investment in any Person except for investments in (a) certificates of deposit issued by commercial banks located in the United States (including foreign banks with a United States Federal Branch) having combined capital and surplus in excess of Five Hundred Million Dollars ($500,000,000), and having a maturity date within one year after the date such investment is made; (b) readily marketable commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.; and (c) direct obligations of the United States of America or agencies thereof or obligations fully guaranteed by the United States of America. 8. Financial Covenants. The Fourth Restated Agreement is hereby further amended by deleting Sections 8.1 and 8.2 thereof in their entirety and by substituting therefor new Sections 8.1 and 8.2 to read as follows: 8.1 Net Worth. Borrower shall maintain at all times during the applicable periods set forth below a Net Worth of not less than the sum of the amount set forth opposite each such applicable period:
Applicable Period Amount 01/01/96 - 03/31/96 $19,000,000 04/01/96 - 06/30/96 $14,000,000 07/01/96 - 09/30/96 $10,000,000 At all times thereafter $ 8,000,000
Notwithstanding the foregoing, in the event that Borrower completes an offering of its equity securities, the amount set forth above for each applicable period, commencing with the applicable period in which such issuance occurs, shall be increased by an amount equal to seventy-five percent (75%) of the amount by which Borrower's shareholders' equity is increased as a result of the issuance of equity securities as a part of such offering. 8.2 Interest Coverage Ratio. Borrower shall maintain as of the end of each fiscal quarter of Borrower during the applicable periods set forth below an Interest Coverage Ratio of not less than the ratio set forth opposite each such applicable period:
Applicable Period Ratio 01/01/96 - 03/31/96 0.75:1.00 Each Fiscal Quarter thereafter 1.00:1.00
9. Other Financial Covenants. The Fourth Restated Agreement is hereby further amended by deleting Sections 8.3, 8.4 and 8.5 thereof in their entirety. 10. Schedules. The Fourth Restated Agreement is hereby further amended by deleting Schedules 5.5, 5.15, 5.21, 5.22 and 5.23 thereof in their entirety and by substituting therefor new Schedules 5.5, 5.15, 5.21, 5.22 and 5.23 in the form attached to this Amendment. 11. Waiver. The Agent and the Lenders hereby waive any Default or Event of Default arising under the Loan Agreement solely as a result of Borrower's failure, for the fiscal quarter of Borrower ending December 31, 1995, to maintain (a) the minimum Net Worth required by Section 8.1 of the Loan Agreement (as in effect prior to this Amendment); (b) the minimum Leverage Ratio required by Section 8.2 of the Loan Agreement (as in effect prior to this Amendment); (c) the minimum Operating Cash Flow required by Section 8.4 of the Loan Agreement (as in effect prior to this Amendment); or (d) the minimum Interest Coverage Ratio required by Section 8.5 of the Loan Agreement (as in effect prior to this Amendment). 12. Fee. In consideration of the waivers and amendments set forth herein, Borrower agrees to pay to each Lender a fee (the "Fee") of $200,000, which Fee shall be due and payable on the date of execution hereof. Such fee shall be fully earned on payment thereof and shall not be subject to proration or rebate for any reason. 13. Conditions Precedent. This Amendment shall not become effective unless and until the following conditions have been met, to the sole and complete satisfaction of the Lenders, the Agent and their respective counsel: (a) Fee. Borrower shall have paid to Lender the Fee required by Section 12 of this Amendment. (b) Representations and Warranties. Giving effect to this Amendment, all of the representations and warranties made by Borrower under the Fourth Restated Agreement and the Loan Documents shall be true and correct in all material respects as of the date hereof with the same force and effect as if made on and as the date hereof except for such changes in such representations and warranties which do not constitute a Default or Event of Default, which do not, individually or in the aggregate, have a Material Adverse Effect and which have, to the extent required, been disclosed to the Agent and the Lenders pursuant to Section 6.2 or 6.8 of the Fourth Restated Agreement or otherwise; (c) No Material Adverse Change. Since December 31, 1995, there shall not have occurred any material adverse change in the assets, liabilities, business, operations or condition (financial or otherwise) of the Borrower, or any event, condition, or state of facts which would be expected to have a Material Adverse Effect subsequent to the date hereof; (d) Documentation. The Agent and the Lenders shall have received the following documents, each duly executed and delivered to the Agent and the Lenders, and each to be satisfactory in form and substance to Agent and its counsel: (I) this Amendment; (ii) the Note; (iii) an amendment to the Second Amended and Restated Warrant Agreement (the "Warrant Agreement Amendment"); (iv) the Warrant Certificates required pursuant to the Warrant Agreement Amendment; (v) a certificate signed by the President or the Chief Financial Officer of Borrower, stating that, giving effect to this Amendment, the representations and warranties set forth in Article 5 of the Fourth Restated Agreement, are true and correct in all material respects on the date hereof, stating that Borrower is on the date hereof in compliance with all the terms and conditions set forth in the Fourth Restated Agreement, as amended hereby, and the Loan Documents on its part to be observed and performed, and stating that on the date hereof, after giving effect to this Amendment, no Default or Event of Default has occurred or is continuing; (vi) a certificate of the Secretary of Borrower certifying (i) that attached thereto is a true and correct copy of the resolutions adopted by its Board of Directors, authorizing the execution, delivery and performance of this Amendment, the Note and the other documents contemplated hereby, and (ii) as the incumbency and genuineness of its officers executing this Amendment, the Note and the other documents contemplated hereby; (vii) the written opinion of Steel, Hector & Davis, counsel to Borrower, in the form and substance satisfactory to Lenders and Agent; (viii) such other documents, instruments and agreements with respect to the transactions contemplated by this Amendment, in each case in such form and containing such additional terms and conditions as may be reasonably satisfactory to the Majority Lenders, and containing, without limitation, representations and warranties which are customary and usual in such documents. 14. Representations and Warranties; No Default. Borrower hereby represents and warrants to the Agent and the Lenders that giving effect to the amendments set forth in Section 10 of this Amendment, all of Borrower's representations and warranties contained in the Fourth Restated Agreement and the other Loan Documents are true and correct on and as of the date of Borrower's execution of this Agreement; except in respect of the covenants referenced in Section 10 hereof, no Default or Event of Default has occurred and is continuing as of such date under any Loan Document; Borrower has the power and authority to enter into this Agreement and to perform all of its obligations hereunder; the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of Borrower; and the execution and delivery of this Agreement and performance thereof by Borrower does not and will not violate the Articles of Incorporation, By-laws or other organizational documents of the Borrower and does not and will not violate or conflict with any law, order, writ, injunction, or decree of any court, administrative agency or other governmental authority applicable to Borrower or its properties. 15. Expenses. Borrower agrees to pay, immediately upon demand by the Agent, all costs, expenses, attorneys' fees and other charges and expenses actually incurred by the Agent in connection with the negotiation, preparation, execution and delivery of this Agreement and any other instrument, document, agreement or amendment executed in connection with this Agreement. 16. Defaults Hereunder. The breach of any representation, warranty or covenant contained herein or in any document executed in connection herewith, or the failure to serve or comply with any term or agreement contained herein shall constitute a Default or Event of Default under the Fourth Restated Agreement and the Agent and the Lenders shall be entitled to exercise all rights and remedies they may have under the Fourth Restated Agreement, any other documents executed in connection therewith and applicable law. 17. References. All references in the Fourth Restated Agreement and the Loan Documents to the Fourth Restated Agreement shall hereafter be deemed to be references to the Fourth Restated Agreement as amended hereby and as the same may hereafter be amended from time to time. 18. Limitation of Agreement. Except as especially set forth herein, this Agreement shall not be deemed to waive, amend or modify any term or condition of the Fourth Restated Agreement, each of which is hereby ratified and reaffirmed and which shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 19. Counterparts. This Agreement may be executed in any number of counterparts, and any party hereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original and all of which, taken together will be deemed to be but one and the same agreement. 20. Further Assurances. Borrower agrees to take such further action as the Agent or the Majority Lenders shall reasonably request in connection herewith to evidence the amendments herein contained to the Fourth Restated Agreement. 21. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 22. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law. 23. No Claim. Borrower hereby represents, warrants, acknowledges and agrees to end with the Lenders and Agent that (a) Borrower neither holds nor claims any right of action, claim, cause of action or damages, either at law or in equity, against the Lenders and Agent which arises from, may arise from, allegedly arise from, are based upon or are related in any manner whatsoever to the Fourth Restated Agreement and the Loan Documents or which are based upon acts or omissions of the Lenders or Agent in connection therewith and (b) the Obligations are absolutely owed to the Lenders and Agent, without offset, deduction or counterclaim. IN WITNESS WHEREOF, the parties hereto have executed this Amendment under seal as of the date first written above. "BORROWER" PEOPLES TELEPHONE COMPANY, INC. By: __________________________ Bonnie S. Biumi Chief Financial Officer Attest:_______________________ Francis J. Harkins Secretary [CORPORATE SEAL] [Signatures Continued On Next Page] [Signatures Continued From Previous Page] "AGENT" CREDITANSTALT-BANKVEREIN By:___________________________ Robert M. Biringer Senior Vice President By:___________________________ Joseph P. Longosz Vice President [Signatures Continued On Next Page] [Signatures Continued From Previous Page] "LENDER" CREDITANSTALT-BANKVEREIN By:___________________________ Robert M. Biringer Senior Vice President By:___________________________ Joseph P. Longosz Vice President EX-10.2 3 EXHIBIT 10.2 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED WARRANT AGREEMENT THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED WARRANT AGREEMENT (the "Amendment") is made and entered into as of the 4th day of April, 1996 between PEOPLES TELEPHONE COMPANY, INC., a New York corporation (the "Issuer"), and CREDITANSTALT AMERICAN CORPORATION, a Delaware corporation ("Creditanstalt"). W I T N E S S E T H : WHEREAS, Creditanstalt and the Issuer made and entered into that certain Second Amended and Restated Warrant Agreement dated as of February 17, 1994, as amended (the "Warrant Agreement"), pursuant to which the Issuer has agreed to issue to Creditanstalt or an "Affiliate" (as defined in the Warrant Agreement) certain "Warrants" (as defined in the Warrant Agreement); and WHEREAS, the Warrant Agreement provides, inter alia, for (a) Series A Warrants to purchase an aggregate of 150,000 shares of Common Stock or Preferred Stock at an exercise price of $3.17 per share, all of which Series A Warrants have been exercised; (b) Series B Warrants to purchase an aggregate of 150,000 shares of Common Stock or Preferred Stock at an exercise price of $8.00 per share; Series C Warrants to purchase an aggregate of 300,000 shares of Common Stock or Preferred Stock at an exercise price of $9.33 per share; (d) Series D Warrants to purchase an aggregate of 50,000 shares of Common Stock or Preferred Stock at an exercise price of $9.00 per share; and (e) Series E Warrants to purchase an aggregate of 200,000 shares of Common Stock or Preferred Stock at an exercise price of $5.25 per share; and WHEREAS, Issuer is also a party to a certain Fourth Amended and Restated Loan and Security Agreement, dated as of July 19, 1995, as amended (the "Loan Agreement"), between the Issuer and Creditanstalt-Bankverein (the "Bank"), as the Agent and sole Lender thereunder; and WHEREAS, the Bank is the sole stockholder of Creditanstalt; and WHEREAS, the Issuer has asked the Bank to waive certain "Events of Default" under, and as such term is defined in, the Loan Agreement and the Bank has agreed to waive such Events of Default only on the condition that the Issuer enter into this Amendment reducing the exercise price of the Series B Warrants, the Series C Warrants and the Series D Warrants to $5.25 per Warrant; NOW, THEREFORE, to induce the Bank to waive the Events of Default outstanding under the Loan Agreement, and in consideration of the premises, the terms and conditions contained herein, and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Definitions. All capitalized terms used herein and not expressly defined herein shall have the same respective meanings given to such terms in the Warrant Agreement. 2. Amendment of Definition of "Exercise Price". The term "Exercise Price", as set forth in Section 1 of the Warrant Agreement, is hereby deleted in its entirety and the following definition is substituted in lieu thereof: "Exercise Price" shall mean the exercise price of the Warrant which shall be: (a) $3.17 per warrant with respect to the Series A Warrants; (b) $5.25 per Warrant with respect to the Series B Warrants; (c) $5.25 per Warrant with respect to the Series C Warrants; (d) $5.25 per Warrant with respect to the Series D Warrants; and (e) $5.25 per Warrant with respect to the Series E Warrants." 3. Amendment of Exhibit A. Exhibit A of the Warrant Agreement is hereby amended by deleting in its entirety the bracketed language in line ten of the Warrant Certificate and substituting in lieu thereof the following: "[$3.17//$5.25]". 4. Issuance and Registration of Warrants. The Issuer hereby agrees to issue and deliver to Creditanstalt or, at the option of Creditanstalt, an Affiliate thereof, new Warrant Certificates evidencing the outstanding Series B Warrants, Series C Warrants and Series D Warrants as hereby amended. Upon receipt of such new Warrant Certificates, Creditanstalt shall deliver to the Issuer for cancellation the old Warrant Certificates for the Series B Warrants, Series C Warrants and Series D Warrants. On the date hereof, the Issuer shall register the new Warrant Certificates in the Warrant Register in the name of Creditanstalt or an Affiliate thereof as the case may be. 5. Restatement of Representations and Warranties. (a) Issuer hereby reaffirms each and every representation and warranty heretofore made under or in connection with the execution and delivery of the Warrant Agreement (including, without limitation, those representations and warranties set forth in Section 2 of the Warrant Agreement), as such representations and warranties are amended in Section 5(b) and (c) of this Amendment, as fully as though such representations and warranties have been made on the date hereof and with specific reference to this Amendment. (b) Solely with respect to Section 2(d) of the Warrant Agreement, Issuer has authorized capital stock consisting of 25,000,000 shares of Common Stock, par value $.01 per share, of which as of March 22, 1996, not less than 16,172,684 shares were issued and outstanding, and 5,000,000 shares of Preferred Stock, $.01 par value, 100,000 shares of which are designated as Series A Preferred Stock, none of which are issued and outstanding, 600,000 shares of which are designated as Series B Preferred Stock, none of which are issued and outstanding, and 160,000 shares of Series C Preferred Stock, $.01 par value, of which as of the date hereof, at least 150,000 shares of which were issued and outstanding. (c) Solely with respect to Section 2(e) of the Warrant Agreement, no holder of securities of the Issuer has any right to the registration of such securities under the Securities Act except (I) as set forth on Schedule J to the Warrant Agreement and (ii) as provided for in that certain Registration Rights Agreement, dated as of July 19, 1995 among the Issuer, UBS Partners, Inc., and Appian Capital Partners, L.L.C. 6. Effect of Amendment. Except as expressly set forth hereinabove, the Warrant Agreement shall remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligation of Issuer to Creditanstalt, and Issuer hereby restates, ratifies and reaffirms each and every term and condition set forth in the Warrant Agreement, as amended hereby, effective as of the date hereof. 7. Counterparts. This Amendment may be executed in any number of counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same instrument. 8. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 9. Section References. Section titles and references used in this Amendment shall be without substance and meaning or content of any kind whatsoever and are not a part of the agreement among the parties hereto evidenced hereby. 10. Further Assurances. Issuer agrees to take such further action as Creditanstalt shall reasonably request in connection herewith evidencing the Amendment herein contained to the Warrant Agreement. 11. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of laws. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers, effective as of the date and year first above written. "Issuer" PEOPLES TELEPHONE COMPANY, INC. By: Bonnie S. Biumi Chief Financial Officer Attest: Francis J. Harkins Secretary [CORPORATE SEAL] "Creditanstalt" CREDITANSTALT AMERICAN CORPORATION By: Robert M. Biringer Senior Vice President By: Joseph P. Longoz Vice President EX-10.3 4 Exhibit 10.3 EMPLOYMENT AGREEMENT Employment Agreement dated as of May 2, 1996 between Peoples Telephone Company, Inc., a Florida corporation (the "Company") and E. Craig Sanders (the "Employee"). Recitals A. The Company is presently engaged in the business of owning and operating telephone and wire communication systems within the state of Florida and other businesses (the "Businesses"). B. The Company desires to employ the Employee for the period set forth in this Agreement to obtain the services of the Employee, and the Employee is willing to be employed by the Company for that period on the terms and conditions set forth below. Agreement 1. Term of Employment. The Company employs the Employee, and the Employee accepts employment by the Company, for a term commencing on the date of this Agreement and ending on December 31, 1998 (the "Term"), subject to the termination provisions of Section 5. Subject to Section 5(g) hereof, so long as Employee shall serve hereunder as the Company's President and Chief Executive Officer, the Company shall use its best efforts to cause Employee to be nominated for election to the Board by the vote of the Company's voting shares. 2. Services Provided by Employee. (a) The Employee and the Company agree that the Employee shall serve as President and Chief Executive Officer of the Company. In that capacity, he shall solely, under supervision of the Board of Directors of the Company (the "Board"), have responsibility for the overall management and operation of the Company's Businesses and perform other duties reasonably assigned to him from time to time by the Board provided the duties relate to the business of the Company and are consistent with the Employee's position as President and Chief Executive Officer, as well as Employee's background and experience. The Employee shall devote his full business time to the operations of the Company and shall use his best efforts, skills and abilities to promote the interests of the Company. (b) During the Term, the Employee shall not serve as an officer, director, partner or employee, or act in an advisory or other capacity for, an individual, firm, corporation or other person without the prior written consent of the Board, which consent shall not be unreasonably withheld. 3. Place of Performance. The Employee shall be based at the Company's principal executive offices located at 2300 Northwest 89th Place, Miami, Florida, except for required travel relating to the Company's Businesses to an extent substantially consistent with the Employee's travel obligations. 4. Compensation. (a) Base Salary. The Company shall pay compensation every two weeks to the Employee at a rate of $300,000 per year (the "Salary") subject to increase from time to time upon the review and determination of the Board (which review shall be conducted no less frequently than annually). (b) Bonus Compensation. The Company shall pay to the Employee bonus compensation ("Bonus Compensation") of up to 50% of the Salary based upon attainment of performance targets which shall be mutually agreed upon between the Company and the Employee and set forth as an annex to this Agreement within 90 days from the date of this Agreement. Bonus Compensation shall be paid within 10 business days after the earlier (i) of the public release of fiscal year earnings for the fiscal year in respect of which such Bonus Compensation is being paid and (ii) the issuance of the audited financial statements in respect of such year. In addition, the Board shall consider the payment of additional bonus compensation in the event that Bonus Compensation maximum performance targets are exceeded. (c) Stock Options. Within 90 days after the date hereof, the Company agrees to grant to the Employee options to purchase an aggregate 600,000 shares of the Company's Common Stock as follows:
Number of Shares Exercise Price Vesting/Exercisable 100,000 $ 2.50 12/31/96 100,000 4.25 12/31/96 100,000 5.25 12/31/97 100,000 6.25 12/31/97 200,000 7.25 12/31/98
Such options shall be subject to all terms and conditions of the applicable stock option agreement (which agreements shall be reasonable and customary). Notwithstanding the foregoing, in the event of a Change in Control (as defined below) all such options shall vest in full automatically. All shares to be issued upon exercise of such options shall be registered under applicable federal and state securities laws. (d) Employee Benefits. The Company shall provide to Employee health insurance, a 401(k) plan and all other benefits at a level and on a basis consistent with that provided by the Company to its other executive officers. The Company at its cost shall provide to Employee term life insurance providing an aggregate death benefit payable to his designated beneficiary of $300,000. (e) Vacation. The Employee shall be entitled to four (4) weeks paid vacation in each calender year (including 1996) and shall be entitled to all paid holidays given by the Company to its employees generally. Upon any termination of this Agreement, Employee shall be paid the value, based upon his then Salary, of any unused and accrued vacation time for the year in which such termination occurs. Vacation time shall be deemed to accrue on a monthly basis for this purpose. (f) Expenses. The Company shall reimburse the Employee, in accordance with its standard practice after the Employee submits expense receipts to the Company, for all reasonable out-of-pocket expenses that are paid by the Employee in performing the services set forth in Section 2. (g) Moving Expenses. The Company shall pay the Employee's reasonable out-of-pocket expenses in connection with Employee's relocation to Miami area, including costs incurred in connection with the termination of the lease of the Employee's current residence and real estate brokerages fees and closing costs in connection with the purchase or lease of a new residence in the Miami area. 5. Termination. This Agreement may be terminated prior to the expiration of the Term as follows: (a) This Agreement shall terminate upon the death of the Employee. (b) The Company has the right to terminate this Agreement if, by reason of Disability, the Employee has been unable to perform his duties under this Agreement for a period of 90 consecutive days or 120 days in any 180 day period. For purposes of this Agreement, "Disability" means physical or mental disability of the Employee, which disability is expected to be of long or indefinite duration and prevents the Employee from performing his duties under this Agreement. All determinations of Disability made by the Company pursuant to the Company's Long Term Disability Insurance Policy, if any, shall be determinative of Disability under this Agreement. If the Company does not have a Long Term Disability Insurance Policy, Disability shall be determined by the Board upon the basis of the evidence the Board deems appropriate. (c) The Employee may terminate his employment under this Agreement if his health (either physical or mental) becomes impaired to an extent that makes the continued performance of his duties under this Agreement materially harmful to his physical or mental health or his life. (d) The Company may terminate the Employee's employment under this Agreement for Cause at any time. For purposes of this Section 5(d), the Company shall have "Cause" to terminate the Employee's employment if he (i) is convicted of a felony; (ii) willfully engages in one or more acts involving fraud or moral turpitude; (iii)(x) willfully misappropriates Company assets or (y) willfully engages in gross misconduct materially injurious to the Company or its subsidiaries; or (iv) if the Board determines that the Employee has materially and willfully failed to perform his duties under this Agreement, such determination to be made in good faith after having given Employee a reasonably detailed written explanation of such failure and the opportunity for Employee and his counsel to be heard. For purposes of this Section 5(d), "willful" means an act done, or omitted to be done, by the Employee in bad faith, provided that the Employee knew or reasonably should have known that the action or omission was not in the best interest of the Company. Notwithstanding the foregoing, a termination for Cause as described in clause (iii) (y) or (iv), shall not occur unless Employee shall have been given notice of the existence of the basis for termination thereunder and shall have had 30 calendar days to cure such basis to the reasonable satisfaction of the Board. (e) The Company may terminate the Employee's employment under this Agreement without cause by providing the Employee with written notice of such termination. (f) The Employee may terminate his employment under this Agreement for "Good Reason". For purposes of this Section 5(f), the Employee shall have "Good Reason" to terminate his employment any time during the Term of this Agreement if, after a Change in Control of the Company (as defined below), the Company (i) assigns to the Employee any duties that are inconsistent with the positions described in Section 2 of this Agreement, (ii) diminishes significantly the then existing duties of the Employee without the written consent of the Employee (including the failure to nominate Employee for election as director during the term hereof), (iii) removes the Employee from or fails to re-elect the Employee to the positions described in Section 2(a) of this Agreement, (iv) reduces his Salary or the maximum percentage of Salary payable as Bonus Compensation, (v) materially fails to comply with Section 4 of this Agreement, (vi) requires the Employee to be based at any office or location other than that described in Section 3 hereof which change of location would require the Employee to commute a distance from his primary residence in excess of the greater of (x) 50 miles and (y) 125 percent of the distance of such commute prior to such change of location or (vii) fails to obtain the assumption of this Agreement by a Successor (as hereinafter defined) as provided in Section 19 of this Agreement. For purposes of this Agreement, a "Change in Control" means: (1) the acquisition of beneficial ownership, direct or indirect, of equity securities of the Company by any person (as that term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of l934, as amended (the "Exchange Act")) which, when combined with all other securities of the Company beneficially owned, directly or indirectly by that person, equals or exceeds 50% of (i) either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition by the Company or any of its subsidiaries, (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (iii) any acquisition by any corporation with respect to which, following such acquisition, more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (2) individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation to which Rule 14a-11 of Regulation 14A promulgated under the Exchange Act applies or other actual or threatened solicitation of proxies or consents; (3) approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 75% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; or (4) approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, more than 75% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be. The term "the sale or disposition by the Company of all or substantially all of the assets of the Company" shall mean a sale or other disposition transaction or series of related transactions involving assets of the Company or of any direct or indirect subsidiary of the Company (including the stock of any direct or indirect subsidiary of the Company) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefor or by such other method as the Board determines is appropriate in a case where there is no readily ascertainable purchase price) constitutes more than two-thirds of the fair market value of the Company (as hereinafter defined). The "fair market value of the Company" shall be the aggregate market value of the then outstanding Company Common Stock (on a fully diluted basis) plus the aggregated market value of Company's other outstanding equity securities. The aggregate market value of the shares of Outstanding Company Common Stock shall be determined by multiplying the number of shares of Outstanding Company Common Stock (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement with respect to the transaction or series of related transactions (the "Transaction Date") by the average closing price of the shares of Outstanding Company Common Stock for the ten trading days immediately preceding the Transaction Date. The aggregate market value of any other equity securities of the Company shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the shares of Outstanding Company Common Stock or by such other method as the Board shall determine is appropriate. (g) A termination of the Employee's employment under this Agreement shall be communicated by the terminating party by written notice of termination ("Notice of Termination") that shall include (i) the date such termination is to be effective; (ii) the specific termination provision in Section 5 upon which the terminating party has relied; and (iii) except for a termination under Section 5(a), the facts and circumstances claimed by the terminating party that provide a basis for the termination of the Employee's employment under the provision indicated in the Notice of Termination. Any termination of this Agreement shall, without further action on the part of Employee, constitute Employee's simultaneous resignation from the Board, all committees thereof and all other positions and offices of the Company and its Subsidiaries held by Employee. 6. Compensation Upon Termination. (a) Upon termination of the Employee's employment under Section 5(a), 5(b), 5(c) or 5(d), the Company shall have no further obligation under this Agreement to make any payments to or bestow any benefits on the Employee after the Termination Date (as defined below), other than payments and benefits accrued and due and payable to the Employee prior to the Termination Date. For purposes of this Agreement, "Termination Date" means (i) if the Employee's employment is terminated pursuant to Section 5(a) of this Agreement, the date of the Employee's death; (ii) if the Employee's employment is terminated by virtue of the expiration of this Agreement, the end of the Term; or (iii) if the Employee's employment is terminated for any other reason, the date specified in the Notice of Termination which shall not be earlier than the date such notice is sent or given to Employee. (b) Upon termination of the Employee's employment by the Company without Cause (except in the situation where Section 6(c) applies), the Company shall pay Employee, in addition to all payments and benefits accrued, due and payable prior to the Termination Date, a lump sum payment, within 5 business day after the Termination Date, in an amount equal to 200 percent of his Salary as in effect on the Termination Date. The Company shall also provide Employee with all fringe benefits enjoyed by him at the Termination Date (on a basis consistent with the basis upon which such benefits were provided prior to such termination) until the second anniversary of the Termination Date or, to the extent that Employee is not eligible to participate in any Company fringe benefit plans (by the terms of any such plan), the after tax value of providing such benefits until the second anniversary of the Termination Date. (c) If after a Change in Control (i) the Employee's employment is terminated by the Company without Cause or (ii) is terminated by the Employee for Good Reason, in addition to payments and benefits accrued and due and payable to the Employee prior to the Termination Date, the Company shall pay to the Employee, within 5 business days after the Termination Date, a lump sum payment equal to 200 percent of the sum of (x) his Salary as then in effect plus (y) the maximum Bonus Compensation which Employee would have been eligible to earn pursuant to Section 4(b) hereof as if the Company achieved 100 percent of the performance targets for the year in which such termination occurs. The Company shall also provide Employee with all fringe benefits enjoyed by him at the Termination Date (on a basis consistent with the basis upon which such benefits were provided prior to such termination) until the second anniversary of the Termination Date or, to the extent that Employee is not eligible to participate in any Company fringe benefit plans (by the terms of any such plan), the after tax value of providing such benefits until the second anniversary of the Termination Date. In the event it shall be determined that any payment or distribution by the Company pursuant to this agreement following a Change in Control (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (d) The Company shall maintain in full force and effect until the Termination Date all group insurance plans (the "Plans") in which the Employee was a participant immediately prior to the date of the Notice of Termination. If the Employee's continued participation is not permitted under the terms of a Plan, the Company shall arrange to provide the Employee with alternative benefits substantially similar to those provided under that Plan. (e) For the purposes of all retirement plans of the Company applicable to the Employee and in effect on the date of the Notice of Termination, the Company shall provide for payment of retirement or death benefits to the Employee or his surviving spouse that are calculated to reflect service credits for the period ending on the Date of Termination, as though the Employee were an employee of the Company throughout this period. (f) The Employee shall not be required to mitigate the amount of any payment provided for in Section 6(b) or 6(c) by seeking other employment or otherwise, nor shall the amount of any payment provided for in Section 6(b) or 6(c) be reduced by any compensation earned by the Employee as the result of employment by another employer after the Termination Date, or otherwise. Fifty percent (50%) of any payment under Section 6(b) or 6(c) shall be deemed to be in consideration of Employee's covenant not to compete set forth in Section 9 hereof. 7. Representations by Employee. The Employee represents and warrants that he is not a party to any agreement or subject to any restriction (including agreements containing confidentiality or noncompete covenants) that may adversely affect the business of the Company or restrict the performance by the Employee of his duties under this Agreement. 8. Confidentiality. (a) The Employee acknowledges that as a result of the Employee's employment by the Company, the Employee will become informed of, and have access to, valuable and confidential information of the Company, including inventions, trade secrets, technical information, know-how, plans, specifications, and the identity of customers and suppliers (collectively, the "Confidential Information"), and that this Confidential Information, even though it may be contributed, developed or acquired by the Employee, is the exclusive property of the Company to be held by the Employee in trust and solely for the Company's benefit. Accordingly, the Employee shall not at any time during or subsequent to the Term, use, reveal, report, publish, transfer or otherwise disclose to any person, corporation or other entity, any of the Confidential Information without the prior written consent of the Company, except to responsible officers and employees of the Company and other responsible persons whom the Company agrees in writing are in a contractual or fiduciary relationship with the Company or who have a need for this information for purposes which are in the best interests of the Company. This provision does not prohibit the Employee from disclosing information which legally is or becomes of general public knowledge from authorized sources other than the Employee or as required by legal process or subpoena, provided that Employee shall have given the Company a reasonable opportunity to object to such process or subpeona. (b) Upon the termination of this Agreement, the Employee shall promptly deliver to the Company all customer lists, drawings, manuals, letters, notes, notebooks, reports and copies thereof and all other materials, including those of a secret or confidential nature, relating to the Company's business which are in the Employee's possession or control. The Employee agrees to represent to the Company that he has complied with the provisions of this Section at the time he ceases to be an employee of the Company. 9. Noncompetition. The Employee agrees that during the Term and for one year after the Termination Date, the Employee shall not (a) participate directly or as an employee, agent, owner, consultant, director, shareholder or partner of any person which is engaged in the pay telephone business in competition with the Company in a geographic area in which the Company conducts such business during that time; (b) recruit or otherwise solicit or induce any person who during that time is an employee of the Company to terminate his employment with, or otherwise cease his relationship with the Company, or hire any such employee who has left the employ of the Company within 90 days after termination of that employee's employment with the Company; or (c) solicit any owner or operator of property upon which Company pay telephones are located, to install pay telephones of a competitor of the Company; provided, however, that the foregoing shall not prohibit Employee from owning not more than five percent of the voting securities of any publicly traded entity. The restrictions against competition set forth above are considered by the parties to be reasonable for the purposes of protecting the business of the Company. If any restriction is found by a court of competent jurisdiction to be unenforceable because it extends for too long a period of time, over too broad a range of activities or in too large a geographic area, that restriction shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable. 10. Remedies. The Company and the Employee acknowledge that the Company would not have an adequate remedy at law for money damages if the covenants contained in Section 8 or 9 were not complied with in accordance with their terms. Because the breach of any of the covenants in Section 8 or 9 will result in immediate and irreparable injury to the Company, the Employee agrees that the Company shall be entitled to an injunction restraining him from violating Section 8 and 9 to the fullest extent allowed by law. Nothing in this Agreement shall prohibit the Company from pursuing all other legal or equitable remedies that may be available to it for a breach or threatened breach, including the recovery of damages. 11. Federal Income Tax Withholding. The Company may withhold from benefits payable under this Agreement, or arrange for the payment of, federal, state, local or other taxes as required pursuant to law or governmental regulation or ruling. 12. Survival. The provisions of Sections 8, 9 and 10 shall survive the termination of this Agreement and shall inure to the benefit of the Company and its Successors. 13. [Reserved] 14. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall be deemed one and the same instrument. 15. Waiver. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with the waiver or estoppel. No written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of the term or condition for the future or as to any act other than that specifically waived. 16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida without reference to its conflicts of law principles. 17. [Reserved] 18. Notices. Notices required or permitted to be given under this Agreement shall be in writing and effective upon delivery in person or mailing by certified mail, return receipt requested, to the parties at the addresses below or to another address as either party shall direct by notice to the other party. (a) If to the Company: Peoples Telephone Company, Inc. 2300 N.W. 89th Place Miami, FL 33172 Attention: Robert E. Lund President and Chief Executive Officer with a copy to: Peoples Telephone Company, Inc. 2300 N.W. 89th Place Miami, FL 33172 Attention: Bruce Renard Executive Vice President, General Counsel (b) If to Employee: Mr. E. Craig Sanders 1004 Meadow Creek Drive No. 2122 Irving, Texas 75038 19. Assignment. (a) This Agreement and all of the Employee's rights, duties and obligations under this Agreement are personal in nature and shall not be assignable by the Employee. A purported assignment shall not be valid or binding on the Company. The Company shall not assign this Agreement, its rights, duties and obligations except to a Successor (as defined below). (b) This Agreement shall inure to the benefit of and be legally binding upon all Successors of the Company. The Company will require a Successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company (a "Successor"), by agreement in form and substance satisfactory to the Employee, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. For purposes of this Section 19, "Company" shall mean the Company as defined above and any Successor to its business and/or assets that executes and delivers the agreement provided for in this Section 19 or that otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. 20. Entire Agreement. This Agreement constitutes the entire understanding of the parties and supersedes all prior discussions, negotiations, agreements and understandings, whether oral or written, with respect to its subject matter. This Agreement can be modified only by a written instrument properly executed by the Employee and the Company. 21. Severability. If any one or more of the provisions of this Agreement is held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision which comes closest to the intent of the parties. The parties have executed this Agreement effective as of the day and year first above written. PEOPLES TELEPHONE COMPANY, INC. By: /s/ Robert E. Lund Robert E. Lund President and Chief Executive Officer /s/ E.Craig Sanders E. Craig Sanders EX-27 5
5 0000819694 PEOPLES TELEPHONE COMPANY, INC. 3-MOS DEC-31-1996 MAR-31-1996 9461000 0 12400000 (4958000) 2187000 22485000 134557000 (59435000) 152075000 26611000 101098000 162000 14173000 0 8890000 152075000 30496000 30496000 22920000 31929000 5000 0 3062000 (4500000) 0 (4500000) 0 0 0 (4500000) (.29) (.29)
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