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EXHIBIT 10.2
TERMINATION OPTION AGREEMENT
This TERMINATION OPTION AGREEMENT (this "Agreement"), is made
and 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 New York corporation (the "Grantor").
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
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"), 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
irrevocable option (the "Stock Option") to purchase up to 3,226,274 shares of
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
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, 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 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 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.
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3. Conditions to Closing. The obligation of the Grantor to issue
shares 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 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 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
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not, and the performance of this Agreement by the Grantor will not, (1) violate
the certificate of 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 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,
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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.
7. Registration Rights. In the event that the Grantee shall
desire to 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
Securities Act all or any part of the shares purchased pursuant to the Stock
Option ("Restricted Shares") beneficially owned by the Grantee (the "Registrable
Securities") pursuant to a bona fide firm commitment underwritten public
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
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)
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"). 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
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
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
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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 thereto, the provisions of this Section 7 shall again be
applicable to any proposed registration; provided, however, that the Grantee
shall not be entitled 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 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 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 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 and inure to the benefit of the parties hereto and their respective
successors, and permitted assigns. Except as
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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 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 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, 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
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Title: Chairman
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PEOPLES TELEPHONE COMPANY, INC.
By: /s/ E. Xxxxx Xxxxxxx
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Name: E. Xxxxx Xxxxxxx
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Title: CEO/President
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