EXHIBIT 10.2
TERMINATION OPTION AGREEMENT
This TERMINATION OPTION AGREEMENT (this "Agreement"), is made and
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entered into as of July 5, 1998, by and among Davel Communications Group, Inc.,
an Illinois corporation (the "Grantee"), and Peoples Telephone Company, Inc., a
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New York corporation (the "Grantor").
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WHEREAS, concurrently with the execution and delivery of this
Agreement, the Grantor, the Grantee and Davel Holdings, Inc., a Delaware
corporation ("Holdings"), are entering into an Agreement and Plan of Merger and
Reorganization, dated as of the date hereof (the "Merger Agreement"); and
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WHEREAS, as a condition to the Grantee's willingness to enter into the
Merger Agreement, the Grantee has requested that the Grantor agree, and in order
to induce the Grantee to enter into the Merger Agreement, the Grantor has so
agreed, to grant to the Grantee an option with respect to certain shares of the
Grantor's common stock, $0.01 par value per share (the "Grantor Common Stock"),
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on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Grant of Option. The Grantor hereby grants to the Grantee an
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irrevocable option (the "Stock Option") to purchase up to 3,226,274 shares of
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Grantor Common Stock, or such other number of shares of the Grantor Common Stock
as equals 19.9% of the issued and outstanding shares of the Grantor Common Stock
at the time of exercise of the Stock Option, in the manner set forth below, at a
price of $5.86 per share (the "Exercise Price"), payable in cash in accordance
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with Section 4 hereof. Capitalized terms used and not otherwise defined herein
shall have the meanings set forth in the Merger Agreement.
2. Exercise of Option. The Stock Option may be exercised by the Grantee,
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in whole or in part, at any time or from time to time after the termination of
the Merger Agreement pursuant to Sections 9.01(e), 9.01(f) or 9.01(h) thereof.
The Stock Option shall be exercisable until the earliest to occur of (i) the
closing of any transaction pursuant to an Acquisition Proposal with any
corporation, partnership, person, other entity or group (as defined in Section
13(d)(3) of the Exchange Act) other than Grantor or any of its subsidiaries or
affiliates (each a "Third Party"); (ii) any Third Party acquiring beneficial
ownership of more than 50% of the outstanding Grantor Common Stock; or (iii)
twelve (12) months after the date of termination of the Merger Agreement. In the
event the Grantee wishes to exercise the Stock Option, the Grantee shall deliver
to the Grantor a written notice (an "Exercise Notice") specifying the total
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number of shares of the Grantor Common Stock it wishes to purchase. Each
closing of a purchase of shares of Grantor Common Stock (a "Closing") shall
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occur at a place, on a date and at a time designated by the Grantee in any
Exercise Notice delivered at least two (2) business days prior to the date of
such Closing.
3. Conditions to Closing. The obligation of the Grantor to issue shares
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of the Grantor Common Stock to the Grantee hereunder is subject to the
conditions (which, other than the conditions described in clauses (a) and (b)
below, may be waived by the Grantor in its sole discretion) that (a) all waiting
periods, if any, under the HSR Act applicable to the issuance of shares of the
Grantor Common Stock hereunder shall have expired or have been terminated, and
all consents, approvals, order or authorization of, or registration,
declarations or filings with, any federal or state administrative agency or
commission or other federal or state governmental authority or instrumentality,
if any, required in connection with the issuance of shares of the Grantor Common
Stock hereunder shall have been obtained or made, as the case may be; (b) no
preliminary or permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall be in
effect; (c) any consent under any material contract, agreement or other
instrument to which the Grantor is a party or by which its assets are bound has
been obtained (other than those consents the failure of which to be obtained
would not have a material adverse effect on the Grantor); and (d) such shares
shall have been approved for listing on the American Stock Exchange (or such
other exchange or quotation system upon which the Grantor Common Stock is then
listed or included), subject to official notice of issuance.
4. Closing. At any Closing, (a) the Grantor will deliver to the Grantee
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a single certificate in definitive form representing the number of shares of the
Grantor Common Stock designated by the Grantee in its Exercise Notice, such
certificate to be registered in the name of the Grantee, or a nominee of the
Grantee designated by the Grantee in the Exercise Notice, and to bear the legend
set forth in Section 9 hereof, and (b) the Grantee will deliver to the Grantor
the aggregate Exercise Price for the shares of the Grantor Common Stock so
designated and being purchased at such Closing by wire transfer of immediately
available funds.
5. Representations and Warranties of the Grantor. The Grantor represents
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and warrants to the Grantee that (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by the Grantor and the consummation by the Grantor of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Grantor and no other corporate proceedings
on the part of the Grantor are necessary to authorize this Agreement or any of
the transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by the Grantor and constitutes a valid and binding obligation of
the Grantor, and, assuming this Agreement constitutes a valid and binding
obligation of the Grantee, is enforceable against the Grantor in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles, (d) the Grantor
has taken all necessary corporate action to authorize and reserve for issuance
and to permit it to issue, upon exercise of the Stock Option, and at all times
from the date hereof through the expiration of the Stock Option will have so
reserved, 3,226,274 unissued shares of Grantor Common Stock, all of which, upon
their issuance and delivery in accordance with the terms of this Agreement, will
be validly issued, fully paid and nonassessable, (e) upon delivery of such
shares of the Grantor Common Stock to the Grantee upon exercise of the Stock
Option, the Grantee will acquire valid title to all of such shares, free and
clear of any and all Liens of any nature whatsoever, (f) the execution and
delivery of this Agreement by the Grantor does not, and the performance of this
Agreement by the Grantor will not, (1) violate the certificate of
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incorporation or bylaws of the Grantor, (2) conflict with or violate any
statute, rule, regulation, order, judgment or decree applicable to the Grantor
or by which it or any of its assets or properties is bound or affected, or (3)
assuming the obtaining of consents as set forth above result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give rise to any rights or
termination, amendment, acceleration or cancellation of, or result in the
creation of any Lien on any of the property or assets of the Grantor pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license, or
other instrument or obligation to which the Grantor or any of its Subsidiaries
is a party or by which the Grantor or any of its assets or properties is bound
or affected (except, in the case of clauses (2) and (3) above, for violations,
breaches or defaults which would not, individually or in the aggregate, have a
material adverse effect on the Grantor and except with respect to any item
listed in Schedule 3.05 of the Merger Agreement), and (g) the execution and
delivery of this Agreement by the Grantor does not, and the performance of this
Agreement by the Grantor will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any governmental or regulatory
authority except for pre-merger notification requirements of the HSR Act and
except with respect to any item listed in Schedule 3.05 of the Merger Agreement.
6. Representations and Warranties of the Grantee. The Grantee represents
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and warrants to the Grantor that (a) the Grantee is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by the Grantee and the consummation by the Grantee of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Grantee and no other corporate proceedings
on the part of the Grantee are necessary to authorize this Agreement or any of
the transactions contemplated hereby, (c) this Agreement has been duly executed
and delivered by the Grantee and constitutes a valid and binding obligation to
the Grantee in accordance with its terms subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles, (d) the execution and delivery of this Agreement by the Grantee does
not, and the performance of this Agreement by the Grantee will not (1) violate
the certificate of incorporation or bylaws of the Grantee, (2) conflict with or
violate any statute, rule, regulation, order, judgment or decree applicable to
the Grantee or by which it or any of its properties or assets is bound or
affected or (3) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give rise to any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the property or assets of the
Grantee pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, or other instrument or obligation to which the Grantee is a
party or by which the Grantee or any of its properties or assets is bound or
affected (except, in the case of clauses (2) and (3) above, for violations,
breaches, or defaults which would not, individually or in the aggregate, have a
material adverse effect on the Grantee), (e) the execution and delivery of this
Agreement by the Grantee does not, and the performance of this Agreement by the
Grantee will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, except
for pre-merger notification requirements of the HSR Act and (f) any shares of
the Grantor Common Stock acquired upon exercise of the Stock Option will be, and
the Stock Option is being, acquired by the Grantee for its own account and not
with a view to the public distribution or resale thereof in any manner which
would be in violation of applicable United States securities laws.
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7. Registration Rights. In the event that the Grantee shall desire to
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sell any of the shares of the Grantor Common Stock purchased pursuant to the
Stock Option within two (2) years after such purchase, and such sale requires in
the opinion of counsel to the Grantor, which opinion shall be reasonably
satisfactory to the Grantee and its counsel, registration of such shares under
the Securities Act of 1933, the Grantee may, by written notice (the
"Registration Notice") to the Grantor, request the Grantor to register under the
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Securities Act all or any part of the shares purchased pursuant to the Stock
Option ("Restricted Shares") beneficially owned by the Grantee (the "Registrable
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Securities") pursuant to a bona fide firm commitment underwritten public
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offering in which the Grantee and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any person (including any Group) and its
affiliates from purchasing through such offering Restricted Shares representing
more than 2% of the outstanding shares of common stock of the Grantor on a fully
diluted basis (a "Permitted Offering"). The Registration Notice shall include a
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certificate executed by the Grantee and its proposed managing underwriter, which
underwriter shall be an investment banking firm of nationally recognized
standing reasonably acceptable to the Grantor (the "Manager"), stating that (a)
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it has a good faith intention to commence promptly a Permitted Offering and (b)
the Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price to be specified in such Registration Notice (the "Fair Market Value").
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The Grantor (and/or any person designated by the Grantor) shall thereupon have
the option, exercisable by written notice delivered to the Grantee within ten
(10) business days after the receipt of the Registration Notice, irrevocably to
agree to purchase all or any part of the Registrable Securities for cash at a
price (the "Option Price") equal to the product of (a) the number of Registrable
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Securities and (b) the Fair Market Value of such Registrable Securities. Any
such purchase of Registrable Securities by the Grantor hereunder shall take
place at a closing to be held at the principal executive offices of the Grantor
or its counsel at any reasonable date and time designated by the Grantor and its
designee in such notice within forty (40) business days after delivery of such
notice. Any payment for the shares to be purchased shall be made by delivery at
the time of such closing of the Option Price in immediately available funds. If
the Grantor does not elect to exercise its option pursuant to this Section 7
with respect to all Registrable Securities designated in the Registration
Notice, it shall use its best efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable Securities;
provided, however, that (a) the Grantee shall not be entitled to more than an
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aggregate of two effective registration statements hereunder and (b) the Grantor
will not be required to file any such registration statement during any period
of time (not to exceed 90 days after such request in the case of clause (ii)
below or 150 days in the case of clauses (i) and (iii) below) when (i) the
Grantor is in possession of material non-public information which it reasonably
believes would be detrimental to be disclosed at such time and, in the judgment
of the Board of Directors of the Grantor, such information would have to be
disclosed if a registration statement were filed at that time; (ii) the Grantor
is required under the Securities Act to include audited financial statements for
any period in such registration statement and such financial statements are not
yet available for inclusion in such registration statement; or (iii) the Grantor
determines, in its reasonable judgment, that such registration would interfere
with any financing, acquisition or other material transaction involving the
Grantor or any of its affiliates. If consummation of the sale of any
Registrable Securities pursuant to a registration hereunder does not occur
within 120 days after the filing with the SEC of the initial registration
statement with respect
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thereto, the provisions of this Section 7 shall again be applicable to any
proposed registration; provided, however, that the Grantee shall not be entitled
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to request more than two registrations pursuant to this Section 7 to be
qualified for sale under the securities or blue-sky laws of such jurisdictions
as the Grantee may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, further, that the
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Grantor shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision. The
registration rights set forth in this Section 7 are subject to the condition
that the Grantee shall provide the Grantor with such information with respect to
the Grantee's Registrable Securities, the plans for the distribution thereof,
and such other information with respect to the Grantee as, in the reasonable
judgment of counsel for the Grantor, is necessary to enable the Grantor to
include in such registration statement all material facts required to be
disclosed with respect to a registration thereunder. A registration effected
under this Section 7 shall be effected at the Grantor's expense, except for
underwriting discounts and commissions and the fees and the expenses of counsel
to the Grantee, and the Grantor shall provide to the underwriters such
documentation (including certificates, opinions of counsel and "comfort" letters
from auditors) as are customary in connection with underwritten public offerings
as such underwriters may reasonably require. In connection with any such
registration, the parties agree (a) to indemnify each other and the underwriters
in the customary manner and (b) to enter into an underwriting agreement in form
and substance customary to transactions of this type with the Manager and the
other underwriters participating in such offering.
8. Adjustment upon Changes in Capitalization. In the event of any change
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in the Grantor Common Stock by reason of stock dividends, stock splits, mergers
(other than the Merger), recapitalizations, combinations, exchange of shares or
the like, the type and number of shares or securities subject to the Stock
Option, and the Exercise Price per share, shall be adjusted appropriately.
9. Restrictive Legends. Each certificate representing shares of the
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Grantor Common Stock issued to the Grantee hereunder shall initially be endorsed
with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION AND
APPLICABLE STATE SECURITIES LAWS IS AVAILABLE. SUCH SECURITIES ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE
TERMINATION OPTION AGREEMENT, DATED JULY 5, 1998, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER HEREOF.
10. Binding Effect; No Assignment. This Agreement shall be binding upon
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and inure to the benefit of the parties hereto and their respective successors,
and permitted assigns. Except as expressly provided in this Agreement, neither
this Agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the other
party; provided, however, that the Grantee may assign its rights and obligations
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hereunder to Holdings at any time after the consummation of the PhoneTel/Davel
Merger (as defined in the Merger Agreement) and prior to the Closing. Nothing
contained in this Agreement, express or implied, is
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intended to confer upon any person other than the parties hereto and their
respective permitted assigns any rights or remedies of any nature whatsoever by
reason of this Agreement. Any Restricted Shares sold by a party in compliance
with the provisions of Section 7 hereof shall, upon consummation of such sale,
be free of the restrictions imposed with respect to such shares by this
Agreement, in no event will any transferee of any Restricted Shares be entitled
to the rights of the Grantee hereunder. Certificates representing shares sold in
a registered public offering pursuant to Section 7 hereof shall not be required
to bear the legend set forth in Section 9 hereof.
11. Incorporation by Reference. The provisions of Sections 10.01, 10.04,
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10.06, 10.07, 10.08 and 10.10 of the Merger Agreement are incorporated herein by
reference, to be read as though the references therein to the Merger Agreement
were references to this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DAVEL COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxx Xxxx
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Name: Xxxxx Xxxx
Title: Chairman
PEOPLES TELEPHONE COMPANY, INC.
By: /s/ E. Xxxxx Xxxxxxx
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Name: E. Xxxxx Xxxxxxx
Title: CEO/President
