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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 02549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 5, 1998
PEOPLES TELEPHONE COMPANY, INC.
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(Exact Name of Registrant as Specified in its Charter)
New York 1-12443 13-2626435
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
2300 N.W. 89th Place, Miami, Florida 33172
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code (305) 593-9667
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Item 1. Change in Control of Registrant
(a) Not applicable.
(b) On July 5, 1998, Peoples Telephone Company, Inc. ("Peoples")
entered into a definitive Agreement and Plan of Merger and Reorganization (the
"Merger Agreement") with Davel Communications Group, Inc. ("Old Davel") and
Davel Holdings, Inc. ("New Davel"), a company formed in connection with the
previously announced acquisition of PhoneTel Technologies, Inc. by Old Davel
(the "PhoneTel/Davel Transaction"). Pursuant to the Merger Agreement, Peoples
will become a subsidiary of Old Davel or, in the event that the PhoneTel/Davel
Transaction is consummated at the same time or prior to consummation of the
merger pursuant to the Merger Agreement (the "Peoples/Davel Transaction"), New
Davel.
Under the terms of the Merger Agreement, which has been unanimously
approved by the boards of directors of Peoples, Old Davel and New Davel, holders
of outstanding common stock of Peoples will receive 0.235 shares of Old Davel
common stock for each outstanding share of Peoples common stock. The exchange
ratio is fixed and not subject to adjustment. Based on Old Davel's closing price
of $24.9375 on July 2, 1998, the last trading day prior to announcement of the
Peoples/Davel Transaction, Peoples' common stock would be valued at $5.86 per
share. The transaction is expected to be tax free to shareholders of both
Peoples and Old Davel.
Consummation of the Peoples/Davel Transaction is conditioned upon its
approval by shareholders of both Peoples and Old Davel, its eligibility for
pooling-of-interests accounting treatment, and the receipt of regulatory
approvals, including termination or expiration of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The
Peoples/Davel Transaction is also subject to certain other conditions, including
the conversion of Peoples Series C Cumulative Convertible Preferred Stock (the
"Series C Preferred Stock") into common stock and receipt by Old Davel of
financing for, and successful consummation of, a cash tender offer for Peoples'
12 1/4% Senior Notes due 2002, pursuant to which a minimum of 85% of the
outstanding principal amount of $100 million shall have been tendered. No
assurances can be given that all of the conditions to consummation of the
Peoples/Davel Transaction will be satisfied. The closing of the Peoples/Davel
Transaction is not contingent upon consummation of the PhoneTel/Davel
Transaction.
In connection with the Merger Agreement, Old Davel, New Davel, Peoples
and UBS Capital II LLC ("UBS") entered into a Corporate Governance, Liquidity
and Voting Agreement, dated as of July 5, 1998 (the "UBS Voting Agreement"),
pursuant to which, among other things, UBS agreed to vote all of its shares of
Series C Preferred Stock in favor of the approval of the Merger Agreement. The
UBS Voting Agreement also provides that a representative of UBS who currently
serves on the board of directors of Peoples will serve for one year on the board
of directors of Old Davel or New Davel (as appropriate). UBS will also be
entitled to receive additional shares of common stock of Old Davel or New Davel
(as appropriate) in respect of accrued and unpaid dividends on its shares of
Series C Preferred Stock, as well as the agreed-upon
2
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future fair value of the Series C Preferred Stock. UBS has also been granted
registration rights, to become effective under certain circumstances, with
respect to the shares it will receive in the Peoples/Davel Transaction. UBS is
the holder of all of the outstanding shares of Series C Preferred Stock.
Old Davel and Peoples also entered into a Termination Option Agreement,
dated as of July 5, 1998 (the "Option Agreement"), pursuant to which Peoples
granted Old Davel an option to purchase up to 3,226,274 shares of newly issued
Peoples common stock, at a price of $5.86 per share, subject to certain
adjustments (the "Option"). The Option becomes exercisable in the event that the
Merger Agreement is terminated under certain conditions.
Effective as of July 5, 1998, Peoples entered into Shareholder Voting
Agreements with each of Mr. David R. Hill, Chairman of the Board of Old Davel,
and Samstock, L.L.C., an affiliate of Equity Group Investments, Inc.
("Samstock"), pursuant to which, among other things, each of Mr. Hill and
Samstock agreed to vote all shares of Old Davel common stock owned by them in
favor of the Peoples/Davel Transaction. Samstock, an investment vehicle
controlled by Mr. Sam Zell, is the record and beneficial owner of 1,623,900
shares of Old Davel common stock.
The foregoing is a summary only and is qualified in its entirety by
reference to the Merger Agreement, the UBS Voting Agreement, the Option
Agreement, and the Shareholder Voting Agreements, each of which is filed as an
exhibit hereto.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
2 Agreement and Plan of Merger and Reorganization dated as of
July 5, 1998 by and among Davel Holdings, Inc., Davel
Communications Group, Inc. and Peoples Telephone Company, Inc.
10.1 Corporate Governance, Liquidity and Voting Agreement by and
among UBS Capital II LLC, Davel Communications Group, Inc.,
Davel Holdings, Inc. and Peoples Telephone Company, Inc. dated
as of July 5, 1998.
10.2 Termination Option Agreement dated as of July 5, 1998 by and
among Davel Communications Group, Inc. and Peoples Telephone
Company, Inc.
10.3 Voting Agreement, dated as of July 5, 1998, by and between
Peoples Telephone Company, Inc. and Mr. David R. Hill.
10.4 Voting Agreement, dated as of July 5, 1998, by and between
Peoples Telephone Company, Inc. and Samstock, L.L.C.
3
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99 Joint Press Release of Peoples Telephone Company, Inc. and
Davel Communications Group, Inc., dated July 6, 1998.
SIGNATURES
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 hereunto duly authorized.
PEOPLES TELEPHONE COMPANY, INC.
Dated: July 14, 1998 By: /s/ William A. Baum
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William A. Baum
Chief Financial Officer
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Index to Exhibits
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Exhibit Exhibit
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Number
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2 Agreement and Plan of Merger and Reorganization dated as of
July 5, 1998 by and among Davel Holdings, Inc., Davel
Communications Group, Inc. and Peoples Telephone Company, Inc.
10.1 Corporate Governance, Liquidity and Voting Agreement by and
among UBS Capital II LLC, Davel Communications Group, Inc.,
Davel Holdings, Inc. and Peoples Telephone Company, Inc. dated
as of July 5, 1998.
10.2 Termination Option Agreement dated as of July 5, 1998 by and
among Davel Communications Group, Inc. and Peoples Telephone
Company, Inc.
10.3 Voting Agreement, dated as of July 5, 1998, by and between
Peoples Telephone Company, Inc. and Mr. David R. Hill.
10.4 Voting Agreement, dated as of July 5, 1998, by and between
Peoples Telephone Company, Inc. and Samstock, L.L.C.
99 Joint Press Release of PhoneTel Technologies, Inc. and Davel
Communications Group, Inc., dated July 6, 1998.
</TABLE>
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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
DATED AS OF
JULY 5, 1998
BY AND AMONG
DAVEL HOLDINGS, INC.,
DAVEL COMMUNICATIONS GROUP, INC.
AND
PEOPLES TELEPHONE COMPANY, INC.
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER.....................................................................2
SECTION 1.01 The Merger...................................................2
SECTION 1.02 Conversion of Shares.........................................2
SECTION 1.03 Exchange of Shares...........................................3
SECTION 1.04 Certain Adjustments; Effect of Consummation of the
Davel/PhoneTel Merger........................................7
SECTION 1.05 Stock Options, Warrants and Restricted Stock.................8
ARTICLE 2 THE SURVIVING CORPORATION.....................................................10
SECTION 2.01 Articles of Incorporation...................................10
SECTION 2.02 Bylaws......................................................10
SECTION 2.03 Directors and Officers......................................10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................10
SECTION 3.01 Corporate Organization......................................10
SECTION 3.02 Authorization...............................................11
SECTION 3.03 Capital Stock...............................................11
SECTION 3.04 Subsidiaries................................................11
SECTION 3.05 Consents and Approvals; No Violation........................12
SECTION 3.06 SEC Reports and Financial Statements........................13
SECTION 3.07 Absence of Undisclosed Liabilities..........................13
SECTION 3.08 Changes.....................................................13
SECTION 3.09 Investigations; Litigation..................................14
SECTION 3.10 Contracts and Commitments...................................15
SECTION 3.11 Environmental and Safety Matters............................16
SECTION 3.12 Taxes.......................................................16
SECTION 3.13 Employment Agreements.......................................17
SECTION 3.14 Change of Control Provisions................................17
SECTION 3.15 Employee Benefit Plans......................................17
SECTION 3.16 Licenses....................................................18
SECTION 3.17 Real Estate Leases..........................................19
SECTION 3.18 Real Property...............................................19
SECTION 3.19 Intellectual Property.......................................19
SECTION 3.20 Compliance with Other Instruments and Laws..................20
SECTION 3.21 Employees...................................................20
SECTION 3.22 Information Supplied........................................20
SECTION 3.23 Certain Fees................................................20
SECTION 3.24 Opinion of Financial Advisor................................21
SECTION 3.25 Voting Requirements.........................................21
SECTION 3.26 State Takeover Statutes.....................................21
SECTION 3.27 Payphones...................................................21
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TABLE OF CONTENTS
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SECTION 3.28 Average Net Revenue.........................................21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT......................................21
SECTION 4.01 Corporate Organization......................................22
SECTION 4.02 Authorization...............................................22
SECTION 4.03 Capital Stock...............................................22
SECTION 4.04 Subsidiaries................................................23
SECTION 4.05 Consents and Approvals; No Violations.......................23
SECTION 4.06 SEC Reports and Financial Statements........................24
SECTION 4.07 Absence of Undisclosed Liabilities..........................24
SECTION 4.08 Changes.....................................................25
SECTION 4.09 Investigations; Litigation..................................25
SECTION 4.10 Environmental and Safety Matters............................26
SECTION 4.11 Certain Fees................................................26
SECTION 4.12 Taxes.......................................................27
SECTION 4.13 Change of Control Provisions................................27
SECTION 4.14 Licenses....................................................27
SECTION 4.15 Compliance with Other Instruments and Laws..................27
SECTION 4.16 Employees...................................................28
SECTION 4.17 Information Supplied........................................28
SECTION 4.18 Opinion of Financial Advisor................................28
SECTION 4.19 Voting Requirements.........................................28
SECTION 4.20 State Takeover Statutes.....................................28
SECTION 4.21 No Company Shares...........................................29
SECTION 4.22 Rights......................................................29
SECTION 4.23 Financing...................................................29
ARTICLE 5 COVENANTS OF THE COMPANY......................................................29
SECTION 5.01 Conduct of Business by the Company Pending the Merger.......29
SECTION 5.02 Stockholders' Meeting.......................................31
SECTION 5.03 Access to Information.......................................31
SECTION 5.04 No Solicitation.............................................31
SECTION 5.05 Corporate Organization......................................32
SECTION 5.06 Termination Option Agreement................................32
SECTION 5.07 Preferred Stock and Senior Notes............................32
ARTICLE 6 COVENANTS OF PARENT AND HOLDINGS..............................................33
SECTION 6.01 Access to Information.......................................33
SECTION 6.02 Newco Incorporation; Obligations of Newco...................33
SECTION 6.03 Indemnification.............................................33
SECTION 6.04 Stockholders' Meeting.......................................34
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TABLE OF CONTENTS
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SECTION 6.05 Parent Financing............................................34
SECTION 6.06 Employee Matters............................................34
SECTION 6.07 Financial Disclosure........................................35
SECTION 6.08 Conduct of Business of Parent Pending the Merger............35
ARTICLE 7 COVENANTS OF PARENT AND THE COMPANY...........................................36
SECTION 7.01 Reasonable Best Efforts.....................................36
SECTION 7.02 Certain Filings.............................................37
SECTION 7.03 Public Announcements........................................37
SECTION 7.04 Further Assurances..........................................37
SECTION 7.05 Notices of Certain Events...................................37
SECTION 7.06 Preparation of the Form S-4 and the Proxy Statement.........38
SECTION 7.07 Letters of Accountants......................................39
SECTION 7.08 Affiliates..................................................39
SECTION 7.09 Nasdaq Listing..............................................40
SECTION 7.10 Tax Treatment...............................................40
SECTION 7.11 Pooling of Interests........................................40
SECTION 7.12 Representations.............................................40
SECTION 7.13 Confidentiality.............................................41
ARTICLE 8 CONDITIONS TO THE MERGER......................................................41
SECTION 8.01 Conditions to the Obligations of Each Party.................41
SECTION 8.02 Conditions to the Obligations of Parent and Holdings........42
SECTION 8.03 Conditions to the Obligations of the Company................43
ARTICLE 9 TERMINATION...................................................................43
SECTION 9.01 Termination.................................................43
SECTION 9.02 Waiver......................................................45
SECTION 9.03 Closing.....................................................45
SECTION 9.04 Effect of Termination; Termination Fee......................45
ARTICLE 10 MISCELLANEOUS.................................................................46
SECTION 10.01 Notices.....................................................46
SECTION 10.02 Survival of Representations and Warranties..................47
SECTION 10.03 Amendments; No Waivers......................................47
SECTION 10.04 Expenses....................................................47
SECTION 10.05 Successors and Assigns......................................48
SECTION 10.06 Governing Law...............................................48
SECTION 10.07 Counterparts; Effectiveness.................................48
SECTION 10.08 Headings; Schedules.........................................48
SECTION 10.09 Obligations of Parent and Holdings..........................48
SECTION 10.10 No Third Party Beneficiaries................................49
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DEFINED TERMS
<TABLE>
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Term Page Number
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Acquisition Proposal..........................................................32
Adjusted Option................................................................8
Adjusted Warrant...............................................................8
Affected Employee.............................................................34
Agreement......................................................................1
Average Net Revenue...........................................................21
Certificate of Merger..........................................................2
Certificates...................................................................3
Closing.......................................................................45
Closing Date..................................................................45
Code...........................................................................1
Common Stock Trust.............................................................5
Company........................................................................1
Company Award..................................................................9
Company Common Stock...........................................................3
Company Material Adverse Effect...............................................10
Company Reports...............................................................13
Company Stock Option Plans.....................................................8
Company Stockholder Approval..................................................21
Company Stockholders Meeting..................................................31
Davel/PhoneTel Merger..........................................................7
Davel/PhoneTel Merger Agreement................................................7
Disclosure Document...........................................................37
Disparate Adverse Effect......................................................36
Effective Time.................................................................2
Environmental Laws............................................................16
ERISA.........................................................................17
Excess Shares..................................................................5
Exchange Act..................................................................12
Exchange Agent.................................................................3
Exchange Fund..................................................................3
Exchange Ratio.................................................................3
Financing.....................................................................29
Form S-4......................................................................20
GAAP..........................................................................13
Governmental Entity...........................................................12
Holdings.......................................................................1
Holdings Common Stock..........................................................7
HSR Act.......................................................................12
Indemnified Parties...........................................................33
Intellectual Property.........................................................19
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DEFINED TERMS
<TABLE>
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Term Page Number
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Investigation.................................................................14
knowledge of Parent...........................................................26
knowledge of the Company......................................................14
Letter........................................................................29
Licenses......................................................................18
Location Owners...............................................................16
Merger.........................................................................2
Merger Consideration...........................................................3
New York Law...................................................................2
Newco..........................................................................1
Notes.........................................................................32
Parent.........................................................................1
Parent Common Stock............................................................3
Parent Investigation..........................................................25
Parent Material Adverse Effect................................................22
Parent Reports................................................................24
Parent Rights.................................................................29
Parent Stock Option Plans......................................................9
Parent Stockholder Approval...................................................22
Parent Stockholders Meeting...................................................34
Parent Subsidiaries...........................................................23
Parent Subsidiary.............................................................23
PhoneTel......................................................................38
Plans.........................................................................17
Pooling Affiliate.............................................................40
Proxy Statement...............................................................12
SEC...........................................................................12
Securities Act................................................................12
Share..........................................................................3
Site Location Agreements......................................................19
Subsidiaries..................................................................11
Subsidiary....................................................................11
Surviving Corporation..........................................................2
Termination Option Agreement...................................................1
Transaction....................................................................2
Warrants.......................................................................8
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement") is made and entered into as of July 5, 1998, by and among Davel
Holdings, Inc., a Delaware corporation ("Holdings"), Davel Communications Group,
Inc., an Illinois corporation ("Parent"), and Peoples Telephone Company, Inc., a
New York corporation (the "Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Holdings and the Company
deem it advisable and in the best interests of the stockholders of such
corporations to effect a merger of Miami Merger Corp., a New York corporation to
be formed as a wholly owned subsidiary of Parent (or, if the Davel/PhoneTel
Merger (as defined below) is consummated prior to or at the Effective Time (as
defined below), of Holdings) ("Newco"), with and into the Company pursuant to
this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Holdings and
the Company have approved the merger of Newco with and into the Company and the
Board of Directors of the Company has unanimously resolved to recommend that it
be approved by the stockholders of the Company;
WHEREAS, it is intended that the Merger (as defined below) qualify
as a tax-free reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger (as
defined below) be accounted for as a "pooling of interests;"
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, Parent and the Company have entered into a Termination
Option Agreement dated as of the date of this Agreement (the "Termination Option
Agreement"), pursuant to which the Company has granted Parent an option to
purchase shares of common stock of the Company under certain circumstances;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
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ARTICLE 1
THE MERGER
SECTION 1.01 The Merger.
(a) At the Effective Time (as defined in Section 1.01(b)
hereof), Newco shall be merged (the "Merger") with and into the Company in
accordance with the New York Business Corporation Law ("New York Law"),
whereupon the separate existence of Newco shall cease, and the Company
shall be the surviving corporation (the "Surviving Corporation"). The
Merger and the other transactions contemplated hereby are sometimes
hereinafter referred to as the "Transaction."
(b) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the
Company and Newco will cause a certificate of merger to be executed,
verified and delivered for filing by the New York Department of State (the
"Certificate of Merger") and make all other filings or recordings required
by New York Law in connection with the Merger. The Merger shall become
effective at such time as the Certificate of Merger is duly filed by the
New York Department of State and any additional requirements of New York
Law are complied with or at such later time as is specified in the
Certificate of Merger (the "Effective Time").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the assets, rights, privileges, powers and
franchises and be subject to all of the liabilities, restrictions,
disabilities and duties of the Company and Newco, all as provided under
New York Law.
SECTION 1.02 Conversion of Shares.
(a) At the Effective Time and by virtue of the Merger and
without any action on the part of the holders thereof:
(i) each share of common stock of the Company held by
the Company as treasury stock or owned by Parent, Holdings, Newco or
any subsidiary of either of them immediately prior to the Effective
Time shall be canceled, and no payment shall be made with respect
thereto; provided, however, that any shares of common stock of the
Company as to which the Company, Holdings or Parent is or may be
required to act as a fiduciary or in a similar capacity shall not be
canceled but, instead, shall be treated as set forth in Section
1.02(a)(iii) below;
(ii) each share of capital stock of Newco outstanding
immediately prior to the Effective Time shall be converted into and
become one share of capital stock of the Surviving Corporation with
the same rights and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the
Surviving Corporation; and
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(iii) subject to Section 1.03(e) and Section 1.04
hereof, each share (a "Share") of common stock of the Company, $0.01
par value per share (the "Company Common Stock"), outstanding
immediately prior to the Effective Time shall, except as otherwise
provided in clause (i) of this subsection, be converted into the
right to receive .235 (the "Exchange Ratio") fully paid and
nonassessable shares of common stock, no par value (the "Parent
Common Stock"), of Parent (the "Merger Consideration"). As of the
Effective Time, all such Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such
Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and
any cash in lieu of fractional shares of Parent Common Stock to be
issued or paid in consideration therefor upon surrender of such
certificate in accordance with Section 1.03 hereof, without
interest.
SECTION 1.03 Exchange of Shares.
(a) As of the Effective Time, Parent or Holdings, as
applicable, shall enter into an agreement with ChaseMellon Shareholder
Services, L.L.C., as exchange agent for the Merger (the "Exchange Agent"),
which shall provide that Parent or Holdings, as applicable, shall deposit
with the Exchange Agent as of the Effective Time, for the benefit of the
holders of Shares, for exchange in accordance with this Article 1, through
the Exchange Agent, certificates representing the shares of Parent Common
Stock or, if applicable, Holdings Common Stock (as defined below) (such
shares of Parent Common Stock or Holdings Common Stock, together with any
dividends or distributions with respect thereto with a record date after
the Effective Time, any Excess Shares (as defined in Section 1.03(e)
hereof) and any cash (including cash proceeds from the sale of the Excess
Shares) payable in lieu of any fractional shares of Parent Common Stock
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 1.02 hereof in exchange for outstanding Shares.
(b) As soon as reasonably practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Company Common Stock (the "Certificates") whose
shares were converted into the right to receive the Merger Consideration,
pursuant to Section 1.02 hereof, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent or, if applicable, Holdings may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for
certificates representing the Merger Consideration, as applicable. Upon
surrender of a Certificate for cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange Agent, the holder
of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common
Stock or, if applicable, Holdings Common Stock
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which such holder has the right to receive pursuant to the provisions of
this Article 1, certain dividends or other distributions in accordance
with Section 1.03(c) hereof and cash in lieu of any fractional share of
Parent Common Stock or, if applicable, Holdings Common Stock in accordance
with Section 1.03(e) hereof, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares
which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common
Stock or, if applicable, Holdings Common Stock may be issued to a person
other than the person in whose name the Certificate so surrendered is
registered if such Certificate is properly endorsed or otherwise in proper
form for transfer and the person requesting such issuance pays any
transfer or other taxes required by reason of the issuance of shares of
Parent Common Stock or, if applicable, Holdings Common Stock to a person
other than the registered holder of such Certificate or establishes to the
satisfaction of Parent that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 1.03, each Certificate
shall be deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the Merger Consideration, which the
holder thereof has the right to receive in respect of such Certificate
pursuant to the provisions of this Article 1, certain dividends or other
distributions in accordance with Section 1.03(c) hereof and cash in lieu
of any fractional share of Parent Common Stock or Holdings Common Stock in
accordance with Section 1.03(e) hereof. No interest shall be paid or will
accrue on any cash payable to holders of Certificates pursuant to the
provisions of this Article 1.
(c) No dividends or other distributions with respect to
Parent Common Stock or, if applicable, Holdings Common Stock with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common
Stock or Holdings Common Stock represented thereby, and, in the case of
Certificates representing Company Common Stock, no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section
1.03(e) hereof, and all such dividends, other distributions and cash in
lieu of fractional shares of Parent Common Stock or, if applicable,
Holdings Common Stock shall be paid by Parent or, if applicable, Holdings
to the Exchange Agent and shall be included in the Exchange Fund, in each
case until the surrender of such Certificate in accordance with this
Article 1. Subject to the effect of applicable escheat or similar laws,
following surrender of any such Certificate there shall be paid to the
holder of the certificate representing whole shares of Parent Common Stock
or Holdings Common Stock issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock or Holdings
Common Stock, and, in the case of Certificates representing Company Common
Stock, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock or, if applicable, Holdings Common Stock to which such
holder is entitled pursuant to Section 1.03(e) hereof, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender
and with a payment date subsequent to such surrender payable with respect
to such whole shares of Parent Common Stock or Holdings Common Stock.
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(d) All shares of Parent Common Stock or, if applicable,
Holdings Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article 1 (including any
cash paid pursuant to this Article 1) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the Company
Common Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective
Time which may have been declared or made by the Company on such shares of
Company Common Stock which remain unpaid at the Effective Time, and there
shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article 1, except as otherwise provided by law.
(e) (i) No certificates or scrip representing
fractional shares of Parent Common Stock or, if applicable, Holdings
Common Stock shall be issued upon the surrender for exchange of
Certificates, no dividend or distribution of Parent or, if
applicable, Holdings shall relate to such fractional share interests
and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent or
Holdings.
(ii) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (A) the
number of whole shares of Parent Common Stock or, if applicable,
Holdings Common Stock delivered to the Exchange Agent by Parent or
Holdings pursuant to Section 1.03(a) hereof over (B) the aggregate
number of whole shares of Parent Common Stock or, if applicable,
Holdings Common Stock to be distributed to former holders of Company
Common Stock pursuant to Section 1.03(b) hereof (such excess being
herein called the "Excess Shares"). Following the Effective Time,
the Exchange Agent shall, on behalf of former holders of
Certificates representing Company Common Stock, sell the Excess
Shares at then-prevailing prices on the Nasdaq National Market, all
in the manner provided in Section 1.03(e)(iii) hereof.
(iii) The sale of the Excess Shares by the Exchange
Agent shall be executed on the Nasdaq National Market in round lots
to the extent practicable. The Exchange Agent shall use reasonable
efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's sole
judgment, is practicable consistent with obtaining the best
execution of such sales in light of prevailing market conditions.
Until the net proceeds of such sale or sales have been distributed
to the holders of Certificates formerly representing Company Common
Stock, the Exchange Agent shall hold such proceeds in trust for such
holders (the "Common Stock Trust"). The Surviving Corporation shall
pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the
Exchange Agent incurred in connection with such sale of the Excess
Shares. The Exchange Agent shall determine the portion of the
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Common Stock Trust to which each former holder of Company Common
Stock is entitled, if any, by multiplying the amount of the
aggregate net proceeds comprising the Common Stock Trust by a
fraction, the numerator of which is the amount of the fractional
share interest to which such former holder of Company Common Stock
is entitled (after taking into account all shares of Company Common
Stock held at the Effective Time by such holder) and the denominator
of which is the aggregate amount of fractional share interests to
which all former holders of Company Common Stock are entitled.
(iv) Notwithstanding the provisions of Section
1.03(e)(ii) and (iii) hereof, the Surviving Corporation may elect at
its option, exercised prior to the Effective Time, in lieu of the
issuance and sale of Excess Shares and the making of the payments
hereinabove contemplated, to pay each former holder of Company
Common Stock an amount in cash equal to the product obtained by
multiplying (A) the fractional share interest to which such former
holder (after taking into account all shares of Company Common Stock
held at the Effective Time by such holder) would otherwise be
entitled by (B) the closing price for a share of Parent Common Stock
or, if applicable, Holdings Common Stock as reported on the Nasdaq
National Market (as reported in The Wall Street Journal, or, if not
reported thereby, any other authoritative source) on the Closing
Date, and, in such case, all references herein to the cash proceeds
of the sale of the Excess Shares and similar references shall be
deemed to mean and refer to the payments calculated as set forth in
this Section 1.03(e)(iv).
(v) As soon as practicable after the determination of
the amount of cash, if any, to be paid to holders of Certificates
formerly representing Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available
such amounts to such holders of Certificates formerly representing
Company Common Stock subject to and in accordance with the terms of
Section 1.03(c) hereof.
(f) Any portion of the Exchange Fund which remains
undistributed to the holders of the Certificates for six months after the
Effective Time shall be delivered to Parent or, if applicable, Holdings,
upon demand, and any holders of the Certificates who have not theretofore
complied with this Article 1 shall thereafter look only to Parent or, if
applicable, Holdings for payment of their claims for Merger Consideration,
any dividends or distributions with respect to Parent Common Stock or
Holdings Common Stock, as applicable, and any cash in lieu of fractional
shares of Parent Common Stock or Holdings Common Stock.
(g) None of Parent, Holdings, the Company nor the Exchange
Agent shall be liable to any person in respect of any shares of Parent
Common Stock or Holdings Common Stock, any dividends or distributions with
respect thereto, any cash in lieu of fractional shares of Parent Common
Stock or Holdings Common Stock or any cash from the Exchange Fund, in each
case, delivered to a public official pursuant to any applicable
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abandoned property, escheat or similar law. If any Certificate shall not
have been surrendered prior to two years after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration,
any dividends or distributions payable to the holder of such Certificate
or any cash payable to the holder of such Certificate formerly
representing Company Common Stock pursuant to this Article 1, would
otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 3.05 hereof)), any such Merger Consideration, dividends
or distributions in respect of such Certificate or such cash shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Parent or, if applicable, Holdings, on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Parent or, if applicable, Holdings.
(i) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration and, if
applicable, any unpaid dividends and distributions on shares of Parent
Common Stock or Holdings Common Stock deliverable in respect thereof and
any cash in lieu of fractional shares, in each case, due to such person
pursuant to this Agreement.
SECTION 1.04 Certain Adjustments; Effect of Consummation of the
Davel/PhoneTel Merger.
(a) If after the date hereof and on or prior to the
Effective Time the outstanding shares of Parent Common Stock (or, if
applicable, Holdings Common Stock) or Company Common Stock shall be
changed into a different number, class or series of shares or any other
security by reason of any reclassification, recapitalization,
reorganization, merger, business combination, split-up, stock split,
combination or exchange of shares, or any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, or any similar event shall occur, the Exchange Ratio (and/or the
security or securities to be issued to the holders of Company Common
Stock) shall be appropriately adjusted to provide the effects contemplated
by this Agreement prior to such reclassification, recapitalization,
reorganization, merger, business combination, split-up, stock split,
combination, exchange or dividend or similar event.
(b) Notwithstanding anything contained herein to the
contrary, in the event that the effective time of the Davel Merger (as
defined in and contemplated by the Agreement and Plan of Merger and
Reorganization, dated June 11, 1998 (the "Davel/PhoneTel Merger
Agreement"), by and among Parent, Holdings, D Subsidiary, Inc., PT Merger
Corp. and PhoneTel Technologies, Inc. (the "Davel/PhoneTel Merger")) shall
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have occurred simultaneously with or prior to the Effective Time, Parent,
Holdings and the Company agree that the first sentence of Section
1.02(a)(iii) shall be deemed, effective at the effective time of the
Davel/PhoneTel Merger, to be deleted in its entirety and replaced with the
following: "subject to Section 1.03(e) and Section 1.04 hereof, each share
(a "Share") of common stock of the Company, $.01 par value per share (the
"Company Common Stock"), outstanding immediately prior to the Effective
Time shall, except as otherwise provided in clause (i) of this subsection,
be converted into the right to receive .235 (the "Exchange Ratio") fully
paid and nonassessable shares of common stock ("Holdings Common Stock"),
par value $.01 per share, of Holdings (the "Merger Consideration")." In
addition, the parties hereto agree that, in such event, all provisions of
this Agreement that contemplate an exchange of Parent Common Stock for
Company Common Stock in the Merger shall be deemed to contemplate in lieu
thereof an exchange of Holdings Common Stock for Company Common Stock in
the Merger and, with respect to options, warrants and other outstanding
rights to purchase Company Common Stock, an exchange of equivalent
instruments with respect to Holdings Common Stock. Parent and Holdings
shall cause Newco to agree in writing with Parent, Holdings and the
Company to take the actions required to be taken by it pursuant to this
Agreement.
SECTION 1.05 Stock Options, Warrants and Restricted Stock.
(a) As of the Effective Time, (i) each outstanding employee
stock option to purchase Company Common Stock granted under the Company's
incentive and stock option plans (collectively, the "Company Stock Option
Plans") or otherwise, shall be converted into an option (an "Adjusted
Option") to purchase the number of shares of Parent Common Stock (or, if
the Davel/PhoneTel Merger shall have occurred prior to or at the Effective
Time, Holdings Common Stock) equal to the number of shares of Company
Common Stock subject to such options immediately prior to the Effective
Time multiplied by the Exchange Ratio (rounded to the nearest whole number
of shares of Parent Common Stock or, if applicable, Holdings Common
Stock), at an exercise price per share equal to the exercise price for
each such share of Company Common Stock subject to such option divided by
the Exchange Ratio (rounded down to the nearest whole cent), and
all references in each such option to the Company shall be deemed to refer
to Parent or Holdings, as appropriate; provided, however, that the
adjustments provided in this clause (i) with respect to any options which
are "incentive stock options" (as defined in Section 422 of the Code) or
which are described in Section 423 of the Code shall be effected in a
manner consistent with the requirements of Section 424(a) of the Code,
(ii) Parent (or, if applicable, Holdings) shall assume the obligations of
the Company under the Company Stock Option Plans and (iii) each
outstanding warrant to purchase Company Common Stock (the "Warrants")
shall be converted into a warrant (an "Adjusted Warrant") to purchase the
number of shares of Parent Common Stock (or, if applicable, Holdings
Common Stock) equal to the number of Company Common Stock shares subject
to such Warrants immediately prior to the Effective Time multiplied by the
Exchange Ratio (rounded to the nearest whole number of shares of Parent
Common Stock or, if applicable, Holdings Common Stock), at an exercise
price per share equal to the exercise price for each such share of Company
Common Stock subject to such Warrant divided by the Exchange Ratio
(rounded down to the nearest whole cent), and
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<PAGE> 15
all references in each such Warrant to the Company shall be deemed to
refer to Parent or Holdings, as appropriate. The other terms of each
Adjusted Option and Adjusted Warrant, and the plans or agreements under
which they were issued (including accelerated vesting of options which
shall occur by virtue of the consummation of the Merger, to the extent
required by the terms of the Company Stock Option Plans, the agreements
under which the options were granted, or employment agreements), shall
continue to apply in accordance with their terms. The date of grant of
each Adjusted Option and Adjusted Warrant shall be the date on which the
corresponding option or warrant was granted. Prior to the Effective Time,
the Company shall use its reasonable best efforts, subject to Section
7.11, to obtain any consents from holders of options or warrants to
purchase Shares that are necessary to give effect to the transactions
contemplated by this Section 1.05(a).
(b) As of the Effective Time, (i) each outstanding award
(including restricted stock, deferred stock, phantom stock, stock
equivalents and stock units) (each a "Company Award") under the Company
Stock Option Plans shall be converted into the same instrument of Parent
(or, if applicable, Holdings), in each case with such adjustments (and no
other adjustments) to the terms of such Company Awards as are necessary to
preserve the value inherent in such Company Awards without any detrimental
effect to the holder thereof and (ii) Parent (or, if applicable, Holdings)
shall assume the obligations of the Company under the Company Awards. The
other terms of each Company Award, and the plans or agreements under which
they were issued, shall continue to apply in accordance with their terms.
(c) The Company, Parent and Holdings agree that each of the
Company Stock Option Plans and each of the applicable Parent or Holdings
stock option plans (the "Parent Stock Option Plans") shall be amended, to
the extent necessary, to reflect the transactions contemplated by this
Agreement, including, but not limited to the conversion of each Share of
Company Common Stock held or to be awarded or paid pursuant to such
benefit plans, programs or arrangements into shares of Parent Common Stock
or, if applicable, Holdings Common Stock on a basis consistent with the
transactions contemplated by this Agreement. The Company, Parent and
Holdings agree to submit the amendments to the Parent Stock Option Plans
or the Company Stock Option Plans to their respective stockholders, if
such submission is determined to be necessary by counsel to the Company or
Parent and Holdings after consultation with one another; provided,
however, that such approval shall not be a condition to the consummation
of the Merger.
(d) Parent (or, if applicable, Holdings) shall (i) reserve
for issuance the number of shares of Parent Common Stock (or, if
applicable, Holdings Common Stock) that will become subject to the benefit
plans, programs and arrangements referred to in this Section 1.05 and (ii)
issue or cause to be issued the appropriate number of shares of Parent
Common Stock (or, if applicable, Holdings Common Stock) pursuant to
applicable plans, programs and arrangements, upon the exercise or
maturation of rights existing thereunder on the Effective Time or
thereafter granted or awarded. No later than the Effective Time, Parent
(or, if applicable, Holdings) shall prepare and file with the SEC an
effective registration statement on Form S-8 (or other appropriate form)
registering a number of shares
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of Parent Common Stock (or, if applicable, Holdings Common Stock)
necessary to fulfill its obligations under this Section 1.05. Such
registration statement shall be kept effective (and the current status of
the prospectus required thereby shall be maintained), if then required by
the SEC, for at least as long as Adjusted Options, Adjusted Warrants or
Company Awards remain outstanding.
(e) As soon as practicable after the Effective Time, Parent
(or, if applicable, Holdings) shall deliver to the holders of the options
granted under the Company Stock Option Plans, Warrants and Company Awards
appropriate notices setting forth such holders' rights pursuant to the
respective Company Stock Option Plans and the agreements evidencing the
grants of such options, Warrants and Company Awards and that such options,
Warrants and Company Awards and the related agreements shall be assumed by
Parent and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 1.05 after giving
effect to the Merger).
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.01 Articles of Incorporation. At the Effective Time,
the articles of incorporation of Newco as in effect immediately prior to the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until amended in accordance with applicable law, except that the
name of the Surviving Corporation shall be "Peoples Telephone Company, Inc."
SECTION 2.02 Bylaws. At the Effective Time, the bylaws of Newco
as in effect immediately prior to the Effective Time shall be the bylaws of the
Surviving Corporation until amended in accordance with applicable law.
SECTION 2.03 Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed in accordance
with applicable law, (a) the directors of Newco immediately prior to the
Effective Time shall constitute all of the directors of the Surviving
Corporation, and (b) the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Holdings that:
SECTION 3.01 Corporate Organization. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York, and has all requisite corporate power and authority to
own, operate and lease its properties and assets and to
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carry on its business as it is now being conducted. Except as set forth on
Schedule 3.01 hereto, the Company is duly qualified to do business and is in
good standing in each jurisdiction in which the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing will not, individually or in the aggregate, have a material
adverse effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and the Subsidiaries taken as a whole,
except for the impact of any order or determination by the Federal
Communications Commission or Federal appellate court concerning compensation
paid by interexchange carriers and local exchange carriers to payphone service
providers as provided in the Federal Communications Commission CC Docket No.
96-128, Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996 (a "Company Material Adverse
Effect").
SECTION 3.02 Authorization. The Company has the necessary
corporate power and authority to enter into this Agreement and the Termination
Option Agreement and, subject to Company Stockholder Approval (as defined
below), to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Termination Option Agreement by the Company,
the performance by the Company of its obligations hereunder and thereunder and
the consummation by the Company of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Company's Board of
Directors, have been unanimously approved by the Board of Directors prior to
either Parent, Holdings or Newco becoming an "interested shareholder" as defined
in Section 912(a)(10) of New York Law and have been approved as otherwise
required by the Company's certificate of incorporation, as amended. Except for
the approval of this Agreement, the Termination Option Agreement and the Merger
by the Company's stockholders, no other corporate proceeding on the part of the
Company is necessary for the execution and delivery of this Agreement and the
Termination Option Agreement by the Company, the performance of the Company's
obligations hereunder and thereunder or the consummation by the Company of the
transactions contemplated hereby and thereby. This Agreement and the Termination
Option Agreement have been duly and validly executed and delivered by the
Company and are legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or other laws affecting creditors' rights generally or by the
availability of equitable remedies generally.
SECTION 3.03 Capital Stock. As of June 29, 1998, the authorized
capital stock of the Company consisted of: (a) 75,000,000 shares of Company
Common Stock, of which there were 16,212,434 shares issued and outstanding (and
no shares held in the Company's treasury) and (b) 5,000,000 shares of preferred
stock, $.01 par value per share, consisting of (i) 600,000 shares designated as
Series B Preferred Stock, of which no shares are issued and outstanding, (ii)
160,000 shares designated as Series C Cumulative Convertible Preferred Stock, of
which 150,000 shares are issued and outstanding, and (iii) 4,240,000 shares
undesignated as to series, of which no shares are issued and outstanding. All of
the outstanding capital stock of the Company and all of the outstanding shares
of capital stock of the Company's Subsidiaries (as defined in Section 3.04
hereof) have been validly issued and are fully paid, nonassessable and free of
preemptive rights with no personal liability attaching to the ownership thereof.
As of June 12, 1998, except for options to
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acquire not more than 2,599,908 shares of Company Common Stock pursuant to stock
options and warrants to acquire not more than 975,000 shares of Company Common
Stock or 700,000 shares of Series B Convertible Preferred Stock and except for
2,857,143 shares of Company Common Stock issuable upon the conversion of the
outstanding shares of Series C Cumulative Convertible Preferred Stock, there
were no outstanding subscriptions, options, warrants, rights, contracts or other
arrangements or commitments obligating the Company to issue any shares of its
capital stock or any securities convertible into or exchangeable for shares of
its capital stock.
SECTION 3.04 Subsidiaries. Schedule 3.04 hereto lists all
direct and indirect subsidiaries of the Company (each, a "Subsidiary" and
collectively, the "Subsidiaries"). Except as listed in Schedule 3.04 hereto, the
Company does not directly or indirectly own any interest in any other
corporation, partnership, joint venture or other business association or entity.
Each Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, operate and lease its properties
and assets and to carry on its business as it is now being conducted. Except as
set forth on Schedule 3.04 hereto, each Subsidiary is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so qualified or to
be in good standing would not, individually or in the aggregate, be reasonably
expected to have a Company Material Adverse Effect. Except as set forth on
Schedule 3.04 hereto, all outstanding shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable and are owned by the Company or
another Subsidiary free and clear of any liens, claims or encumbrances.
SECTION 3.05 Consents and Approvals; No Violation. Except as
set forth on Schedule 3.05 hereto and except for (a) applicable requirements of
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act") and the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the "Exchange Act"), including the filing
with and clearing by the United States Securities and Exchange Commission (the
"SEC") of a proxy statement relating to the Company Stockholders Meeting (as
defined in Section 5.02 hereof) and the Parent Stockholders Meeting (as defined
in Section 6.04 hereof), as amended or supplemented from time to time (the
"Proxy Statement"), (b) the filing of a Pre-Merger Notification and Report Form
by the Company and the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (c) the filing of the Certificate of Merger as required by New York Law,
(d) such filings and consents as may be required under any environmental law
pertaining to any notification, disclosure or required approval triggered by the
Transaction, (e) filing with the American Stock Exchange and the SEC with
respect to the delisting and deregistration of the shares of Company Common
Stock and (f) such consents, approvals, orders, authorizations, notifications,
registrations, declarations and filings as may be required under public utility,
telecommunication or payphone laws, rules or regulations of any state or
municipality or under the corporation, takeover or blue sky laws of various
states, no filing with or prior notice to, and no permit, authorization, consent
or approval of, any federal, state, local, foreign or other governmental
department, commission, board, bureau, agency or instrumentality (each, a
"Governmental Entity") is necessary for the consummation by the Company of the
Transaction. Neither the execution and delivery of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby nor
compliance by the
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Company with any of the provisions hereof will (i) conflict with or result in
any violation of any provision of the certificate of incorporation, as amended,
or bylaws of the Company or any Subsidiary, (ii) except as set forth on Schedule
3.05, result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which the Company or any Subsidiary is a party
or by which any of them or any of their properties or assets may be bound, or,
(iii) assuming that all filings, consents and approvals contemplated by the
first sentence of this Section 3.05 have been or shall have been made or
obtained, violate any federal, state, local or foreign order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any Subsidiary or
any of their properties or assets, excluding from the foregoing clauses (ii) and
(iii) violations, breaches or defaults which, either individually or in the
aggregate, would not reasonably be expected to have a Company Material Adverse
Effect or impair materially the Company's ability to perform its obligations
hereunder or prevent or materially delay the consummation of the Transaction.
The New York Security Takeover Disclosure Act (Section 1600 et seq. of the New
York Law) does not apply to the execution and delivery of this Agreement or the
consummation of the Merger and the other transactions contemplated hereby.
SECTION 3.06 SEC Reports and Financial Statements.
(a) Since December 31, 1994, the Company has filed all
required forms, reports and documents with the SEC required to be filed by
it pursuant to the Securities Act and the Exchange Act (hereinafter
collectively referred to as the "Company Reports"), all of which have
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act. The Company has previously made
available to Parent copies of all such Company Reports.
(b) None of the Company Reports, including, without
limitation, any financial statements or schedules included therein, at the
time filed, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) Except as set forth on Schedule 3.06 hereto, the
consolidated balance sheets and the related consolidated statements of
operations, stockholders' equity and changes in financial position
(including, without limitation, the related notes thereto) of the Company
and the Subsidiaries included in the financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997
and in the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 present fairly, in all material respects, the consolidated
financial position of the Company and the Subsidiaries as of their
respective dates, and the results of consolidated operations and changes
in consolidated financial position for the periods then ended, all in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis, except as otherwise noted therein, and subject in
the case of unaudited interim financial statements to normal year-end
audit adjustments and the absence of notes thereto.
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SECTION 3.07 Absence of Undisclosed Liabilities. Neither the
Company nor any Subsidiary has any liabilities (whether absolute, accrued or
contingent), except: (a) liabilities, obligations or contingencies that are
accrued or for which adequate reserves have been provided in the consolidated
balance sheet of the Company and the Subsidiaries as of March 31, 1998 or
reflected in the notes thereto or in the notes to the Company's financial
statements as at and for the year ended December 31, 1997, (b) liabilities
incurred since December 31, 1997 in the ordinary course of business, (c)
liabilities disclosed in Schedule 3.07 hereto or (d) any liabilities which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.08 Changes. Since December 31, 1997, and except as
set forth in the Company Reports filed prior to the date of this Agreement, and
except as otherwise disclosed in Schedule 3.08 hereto or as otherwise provided
in this Agreement:
(a) there have been no events or circumstances that would
constitute a Company Material Adverse Effect, provided that, for purposes
of this Section 3.08(a), any effect that could have been reasonably
expected to result from the execution of this Agreement or the
transactions contemplated hereby or the announcement thereof will not be
deemed to constitute a Company Material Adverse Effect;
(b) except as permitted by this Agreement, there has been no
direct or indirect redemption, purchase or other acquisition of any shares
of the Company's capital stock, or any declaration, setting aside or
payment of any dividend or other distribution by the Company in respect of
the Company's capital stock, or any issuance of any shares of capital
stock of the Company, or any granting to any person of any option to
purchase or other right to acquire shares of capital stock of the Company
or any stock split or other change in the Company's capitalization;
(c) neither the Company nor any Subsidiary has entered into
or agreed to enter into any new or amended contract with any labor unions
representing employees of the Company or any Subsidiary;
(d) neither the Company nor any Subsidiary has entered into
or agreed to enter into any new or amended contract with any of the
officers thereof or otherwise increased the compensation payable to the
officers or directors of any such entity;
(e) neither the Company nor any Subsidiary has (i) entered
into or amended in any material respect any bonus, incentive compensation,
deferred compensation, profit sharing, retirement, pension, group
insurance or other benefit plan except as required by law or regulations
or (ii) made any contribution to any such plan except for contributions
specifically required by law or pursuant to the terms thereof; and
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(f) the Company has not made any change in accounting
methods, principles or practices materially and adversely affecting its
assets, liabilities or business, except in accordance with GAAP.
SECTION 3.09 Investigations; Litigation.
(a) Except as described in Schedule 3.09(a), and other than
reviews pursuant to the HSR Act, there are no pending or, to the knowledge
of the Company, threatened, investigations, reviews or inquiries by any
Governmental Entity with respect to the Company or any Subsidiary or, to
the knowledge of the Company, with respect to the activities of any
officer, director or employee of the Company (an "Investigation"), other
than Investigations which, if the resolution thereof were adverse, would
not, individually or in the aggregate, have a Company Material Adverse
Effect. For the purpose of this Agreement, "knowledge of the Company"
shall be deemed to mean the actual knowledge, after reasonable inquiry, of
any executive officer of the Company.
(b) Except as described in Schedule 3.09(b) hereto, (i)
there are no actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary before any court
or before any administrative agency or administrative officer or
executive, whether federal, state, local or foreign, which seek to enjoin
the Merger or which, if adversely determined, would, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse
Effect, (ii) there are no outstanding domestic or foreign judgments,
decrees or orders against the Company or any Subsidiary that, individually
or in the aggregate, would reasonably be expected to have a Company
Material Adverse Effect, (iii) neither the Company nor any Subsidiary is
in violation of, and none of them has received any claim or notice that it
is in violation of, any federal, state, local or foreign laws, statutes,
rules, regulations or orders promulgated or judgments entered by any
Governmental Entity, which violations, individually or in the aggregate,
would reasonably be expected to have a Company Material Adverse Effect;
and (iv) as of the date of this Agreement, there are no actions pending,
or to the knowledge of the Company, threatened against the directors or
any director of the Company alleging a breach of such directors' or
director's fiduciary duties that, individually or in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.10 Contracts and Commitments.
(a) Except as set forth on the attached Schedule 3.10 or in
the Company Reports, the Company is not nor is any Subsidiary, with
respect to its business, a party to any oral or written contract:
(i) that prohibits the Company or any of its
Subsidiaries from freely engaging or competing, in any material
respect, in its line of business anywhere in the world;
(ii) that is not on arms-length terms;
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(iii) that is material to the Company and its
Subsidiaries, taken as a whole, and by its terms may be terminated
upon consummation of the Merger;
(iv) that commits the Company or any of its
Subsidiaries to purchase or sell any properties or assets outside of
the ordinary course of business for consideration in excess of
$250,000; or
(v) that, other than Site Location Agreements (as
defined below), involves an unfulfilled obligation, individually or
in the aggregate, to one party in excess of $250,000 and is not
terminable by the Company or any of its Subsidiaries upon less than
60 calendar days' notice for a cost of not less than $100,000.
(b) Except as specifically disclosed in the attached
Schedule 3.10, (i) since December 31, 1997, none of the Company's or any
Subsidiary's customers, suppliers, outside service providers or sources of
referral has indicated that it will stop or materially decrease the rate
of business done with or referred to either the Company or any such
Subsidiary.
(c) The Company has made available to Parent a true and
correct copy of all written contracts which are referred to on the
attached Schedule 3.10, together with all amendments, exhibits,
attachments, waivers or other changes thereto.
SECTION 3.11 Environmental and Safety Matters. Except as
described in the Company Reports or on Schedule 3.11 hereto, (a) the Company and
each of its Subsidiaries are in compliance with all applicable Federal, state,
local and foreign laws and regulations and all judicial and administrative
orders and determinations relating to pollution or protection of the environment
or of human health (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata) (collectively, "Environmental
Laws"), except for non-compliance that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect,
which compliance includes, but is not limited to, the possession by the Company
and each of its Subsidiaries of permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof; (b) neither the Company nor any of the Subsidiaries has
received written notice of, or, to the knowledge of the Company, is the subject
of, any actions, causes of action, claims, investigations, demands or notices by
any person alleging liability under or non-compliance with any Environmental Law
that would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect; and (c) there has not been by the Company or
any of the Subsidiaries any treatment, storage, disposal or release of any
hazardous or toxic material, substance or waste or of petroleum, or any
fractions or by-products thereof, at any of their current or, to the knowledge
of the Company, former properties or facilities or any current or, to the
knowledge of the Company, former offsite properties and facilities used in the
business of the Company or the Subsidiaries (in each case, other than properties
or facilities where payphones are located pursuant to Site Location Agreements
with location providers ("Location Owners")) in a manner or at levels that
require or are reasonably likely to require investigation, removal or
remediation under Environmental Laws that would, either individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
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<PAGE> 23
SECTION 3.12 Taxes.
(a) Each of the Company and the Subsidiaries has filed all
tax returns and reports required to be filed by it and all such returns
and reports are complete and correct in all materials respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such
failures to file, to be complete or correct or to have extensions granted
that remain in effect individually or in the aggregate would not
reasonably be expected to have a Company Material Adverse Effect. Each of
the Company and the Subsidiaries has timely paid (or the Company has paid
on its behalf) all taxes that have become due and payable, except to the
extent the failure to pay such taxes individually or in the aggregate
would not reasonably be expected to have a Company Material Adverse
Effect, and the most recent financial statements contained in the Company
Reports reflect an adequate reserve in accordance with GAAP for all taxes
payable by the Company and the Subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements.
(b) Except as set forth on Schedule 3.12(b) hereto, no
deficiencies for any taxes have been proposed, asserted or assessed
against the Company or any of the Subsidiaries that are not adequately
reserved for, except for deficiencies that individually or in the
aggregate would not reasonably be expected to have a Company Material
Adverse Effect. Except as set forth on Schedule 3.12(b) hereto, there is
no action, suit, taxing authority proceeding or audit now in progress,
pending, or, to the knowledge of the Company, threatened against or with
respect to the Company or any of the Subsidiaries.
SECTION 3.13 Employment Agreements. Except as disclosed in
Schedule 3.13 hereto, there are no employment, consulting, severance or
indemnification contracts or agreements between the Company or any Subsidiary,
on the one hand, and any directors, officers or other employees of the Company
or any Subsidiary, on the other hand, other than those that are terminable at
will for less than $100,000 in the aggregate.
SECTION 3.14 Change of Control Provisions. Except as disclosed
in Schedule 3.14 hereto, none of the contracts or agreements set forth in
Section 3.13 hereof and none of the Company's or any Subsidiary's employee
benefit plans, programs or arrangements contains any provision that would become
operative as the result of the Merger or any other transactions contemplated by
this Agreement.
SECTION 3.15 Employee Benefit Plans.
(a) Except as set forth on Schedule 3.15 hereto, all of the
(i) Plans (as defined in subsection (b) of this Section 3.15), and (ii)
other bonus, insurance, pension, profit sharing, retirement, health, and
other benefit plans, stock option plans and stock purchase or ownership
plans currently maintained by the Company or any of the Subsidiaries or to
which the Company or any of the Subsidiaries is a party may be terminated
by the Surviving Corporation following the Effective Time without material
financial penalty or premium and
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<PAGE> 24
there will be no obligation of the Surviving Corporation or Parent
following the Effective Time to issue any shares of their respective
capital stock pursuant to any of the foregoing or otherwise following the
Effective Time. Except as set forth in Schedule 3.15 hereto, no payment by
the Company or any of the Subsidiaries to any person (whether payable or
distributable pursuant to the foregoing agreements and plans, this
Agreement or otherwise) will be nondeductible by the Company or any of the
Subsidiaries for federal income tax purposes because of Section 280G of
the Code.
(b) Except as set forth on Schedule 3.15 hereto, all
employee benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), maintained
by the Company or any of the Subsidiaries since December 31, 1997
(collectively, the "Plans") are in material compliance with, and have been
administered and operated in all material respects in accordance with, the
terms of such Plans and applicable law, and the Internal Revenue Service
has determined that each such Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified and that
each related trust is exempt from tax under Section 501(a) of the Code. No
event which constitutes a "reportable event" as defined in Section 4043 of
ERISA for which the 30-day notice requirement to the Pension Benefit
Guaranty Corporation has not been waived has occurred and is continuing
with respect to any Plan subject to Title IV of ERISA. No material
liability under any statutes, orders, governmental rules or regulations
applicable to any Plan, including, without limitation, ERISA and the Code,
has been or may reasonably be expected to be incurred with respect to any
Plan (other than liabilities for premiums to the Pension Benefit Guaranty
Corporation and the payment of contributions and benefits in the ordinary
course) that has not been satisfied in full. No Plan has been terminated
pursuant to Title IV of ERISA. No event has occurred and no condition
exists with respect to any Plan which presents a material risk of
termination or partial termination of any Plan, which could reasonably be
anticipated to result in material liability on the part of the Company or
any of the Subsidiaries. Full payment has been made, or provision has been
made therefor in the Company's or a Subsidiary's financial statements or
records, of all amounts which the Company or any of the Subsidiaries were
required under the terms of the Plans to have paid as contributions to
such Plans on or prior to the date hereof and no Plan which is subject to
Part 3 of Subtitle B of Title I of ERISA has incurred any "accumulated
funding deficiency" (within the meaning of Section 302 of ERISA or Section
412 of the Code), whether or not waived. Neither the Company nor any of
the Subsidiaries nor, to the knowledge of the Company, any other
"disqualified person" or "party in interest" (as defined in Section 4975
of the Code and Section 3(14) of ERISA, respectively) has engaged in any
nonexempt prohibited transactions in connection with any Plan (or its
related trust) with respect to which the Company, any of the Subsidiaries,
or any officer, director, employee of the Company or any of the
Subsidiaries or, to the knowledge of the Company, any trustee,
administrator or other fiduciary of any Plan, would be subject to either a
civil penalty pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code nor, to the knowledge of the Company, will the
consummation of the transactions contemplated by this Agreement constitute
such a transaction. Except as disclosed on Schedule 3.15 hereto, no claim,
action or litigation has been made, commenced or, to the knowledge of the
Company, threatened with respect to any Plan (other than routine claims
for benefits). No
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<PAGE> 25
Plan or related trust owns any securities in violation of Section 407 of
ERISA. No withdrawal by the Company or any of the Subsidiaries, partial or
complete, within the meaning of Title IV of ERISA, has occurred or may be
reasonably expected to occur with respect to any Plan which is a
multiemployer plan which would create a material liability not adequately
reserved against by the Company. With respect to each employee pension
benefit plan (as defined in Section 3(2) of ERISA) which is a defined
benefit plan and is not a multiemployer plan, the assets of such Plan
available to meet the accrued liabilities of such Plan would exceed such
liabilities, based on the actuarial assumptions used for plan termination.
The Company has paid, or has set up an adequate reserve for the payment
of, all liabilities under each Plan.
SECTION 3.16 Licenses. Except as set forth on Schedule 3.16
hereto, the Company and its Subsidiaries have obtained all permits, concessions,
grants, franchises, licenses and other federal, state, local or foreign
governmental authorizations and approvals (collectively, "Licenses") material,
individually or in the aggregate, to the conduct of the business of the Company
and the Subsidiaries taken as a whole. All of such Licenses are in full force
and effect and, to the knowledge of the Company, will not be impaired or
adversely affected by the Transaction in a manner or to a degree that would
reasonably be expected to have a Company Material Adverse Effect. There is not
pending or, to the knowledge of the Company, threatened any domestic or foreign
suit or proceeding with respect to the suspension, revocation, cancellation,
modification or non-renewal of any of such Licenses, and, except as set forth on
Schedule 3.16, no event under the control of the Company has occurred that
(whether with notice or lapse of time, or both) would reasonably be expected to
result in a suspension or revocation of or failure to renew any of the Licenses,
the loss of which would reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.17 Real Estate Leases. Schedule 3.17 hereto sets
forth a list of (a) all leases and subleases under which the Company or any of
the Subsidiaries is lessor or lessee of any real property, together with all
amendments, supplements, nondisturbance agreements and other agreements
pertaining thereto, (b) all options held by the Company and the Subsidiaries or
contractual obligations on the part of the Company and the Subsidiaries to
purchase or acquire any interest in real property and (c) all options granted by
the Company and the Subsidiaries or contractual obligations on the part of the
Company and the Subsidiaries to sell or dispose of any interest in real
property, in each case, other than site location agreements between the Company
or any of the Subsidiaries and Location Owners ("Site Location Agreements").
SECTION 3.18 Real Property. Schedule 3.18 hereto lists all real
property owned, as of the date of this Agreement, by the Company and its
Subsidiaries. Each of the Company and its Subsidiaries has good and marketable
title in fee simple to its respective real properties set forth on Schedule 3.18
hereto, in each case, to the knowledge of the Company, free and clear of all
liens, except for (a) liens set forth on Schedule 3.18 hereto, (b) mechanics',
construction, carriers', workmen's, repairmen's or other like liens arising or
incurred in the ordinary course of business, (c) liens for taxes and other
governmental charges that are not due and payable or which may thereafter be
paid without penalty, (d) minor survey exceptions, reciprocal easement
agreements and other customary liens on title to real property that (i) were not
incurred in connection with any
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<PAGE> 26
indebtedness, (ii) do not render title to the property encumbered thereby
unmarketable and (iii) do not, individually or in the aggregate, materially
adversely affect the value of or the use of such property for its present
purposes, and (e) liens in favor of Parent or Holdings.
SECTION 3.19 Intellectual Property.
(a) All of the patents, registered trademarks, registered
service marks, registered copyrights, application for any of the foregoing
and material unregistered trademarks, service marks, copyrights, trade
names and corporate names material to the conduct, as of the date of this
Agreement, of the business of the Company and its Subsidiaries taken as a
whole (collectively, "Intellectual Property") are set forth on Schedule
3.19. To the knowledge of the Company and except as set forth on Schedule
3.19, (i) the Company and its Subsidiaries owns and possesses all right,
title and interest in and to, or possess the valid and enforceable right
to use, the Intellectual Property; (ii) the Company has not received any
notice of, and neither the Company nor any of its Subsidiaries has any
knowledge of any potential claim of any, infringement of or
misappropriation from any third party with respect to any material item of
Intellectual Property; and (iii) the Company and its Subsidiaries are not
currently infringing and, except as set forth on Schedule 3.19, have not
infringed any intellectual property of any other person. To the knowledge
of the Company, the transactions contemplated by this Agreement will not
impair in any material respect any item of Intellectual Property.
(b) The Company has taken or is taking all commercially
reasonable measures to ensure that none of the computer software, computer
firmware, computer hardware (whether general or special purpose) or other
similar or related items of automated, computerized or software systems
that are material to the conduct of the Company's business will
malfunction, will cease to function, will generate incorrect data or will
produce incorrect results in any material respect when processing,
providing or receiving (i) date-related data from, onto and between the
twentieth and twenty-first centuries or (ii) date-related data in
connection with any valid date in the twentieth and twenty-first
centuries.
SECTION 3.20 Compliance with Other Instruments and Laws. Except
as set forth on Schedule 3.20, neither the Company nor any Subsidiary is in
violation of any term of its articles of incorporation, as amended, or bylaws,
or in violation of any mortgage, indenture, instrument or agreement relating to
indebtedness for borrowed money or of any judgment, decree or order which names
the Company or any Subsidiary or in violation of any term of any other material
instrument, contract or agreement to which it is a party or by which it or any
of its properties or assets is bound, except to the extent that any such
violation would not reasonably be expected to have a Company Material Adverse
Effect. Except as set forth on Schedule 3.20, the Company's and each
Subsidiary's businesses are in compliance in all material respects with all
federal, state, local or foreign statutes, laws, ordinances, rules, governmental
regulations, permits, concessions, grants, franchises, licenses or other
governmental authorizations or approvals applicable to the operation of such
business, except to the extent that the failure to be in compliance would not
reasonably be expected to have a Company Material Adverse Effect.
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<PAGE> 27
SECTION 3.21 Employees. Except as set forth on Schedule 3.21
hereto, to the knowledge of the Company, as of the date of this Agreement, no
key employee, or group of employees of the Company has any plans to terminate
employment with the Company. Without limiting the generality of Section 3.20
hereof, the Company has complied in all material respects with all laws relating
to the employment of labor, including provisions thereof relating to wages,
hours, equal opportunity and collective bargaining, and it does not have any
material labor relations problems (including without limitation threatened or
actual strikes or work stoppages or material grievances).
SECTION 3.22 Information Supplied. None of the information
supplied or to be supplied by the Company specifically for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of Parent Common
Stock in the Merger (the "Form S-4") will, at the time the Form S-4 is filed
with the SEC, at any time it is amended or supplemented or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading or (ii) the Proxy Statement will, at the
date it is first mailed to the Company's stockholders or at the time of the
Company Stockholders Meeting (as defined below), contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
will comply as to form in all material respects with the requirements of the
Exchange Act, except that no representation or warranty is made by the Company
with respect to statements made or incorporated by reference therein based on
information supplied by Parent specifically for inclusion or incorporation by
reference in the Proxy Statement.
SECTION 3.23 Certain Fees. Except in connection with the
engagement of Goldman, Sachs & Co., neither the Company nor any Subsidiary has
employed any broker or finder or incurred any liability for any financial
advisory, brokerage or finders' fees or commissions in connection with the
transactions contemplated hereby.
SECTION 3.24 Opinion of Financial Advisor. The Company has
received the oral opinion of Goldman, Sachs & Co., to be confirmed in writing,
to the effect that the Exchange Ratio pursuant to this Agreement is fair from a
financial point of view to holders of Company Common Stock.
SECTION 3.25 Voting Requirements. The affirmative vote of the
holders of two-thirds of the outstanding shares of Company Common Stock and the
Series C Cumulative Convertible Preferred Stock voting as a single class with
each share of such Preferred Stock entitled to one vote for each share of
Company Common Stock issuable upon the conversion thereof and the holders of a
majority of the outstanding shares of such Preferred Stock voting as a separate
class ("Company Stockholder Approval") at the Company Stockholders Meeting is
the only vote of the holders of any class or series of the Company's capital
stock necessary to approve and adopt this Agreement and the transactions
contemplated hereby. The Board of Directors of the Company has
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<PAGE> 28
duly and validly approved and taken all corporate action required to be taken by
the Company Board of Directors for the consummation of the transactions
contemplated by this Agreement.
SECTION 3.26 State Takeover Statutes. The Board of Directors of
the Company has approved this Agreement and the consummation of the Merger and
the other transactions contemplated hereby and, assuming that none of Parent,
Holdings or Newco was and is an "interested shareholder" within the meaning of
such Section 912 of New York Law, such approval constitutes approval of the
Merger and the other transactions contemplated by this Agreement by the Board of
Directors of the Company under the provisions of Section 912 of New York Law
such that Section 912 of New York Law does not apply to the Merger or the other
transactions contemplated by this Agreement. No other New York takeover statute,
and, to the knowledge of the Company, no other state takeover statute, is
applicable to the Merger or the other transactions contemplated by this
Agreement.
SECTION 3.27 Payphones. Except as disclosed on Schedule 3.27
hereto, as of June 26, 1998, the Company had good and marketable title to at
least 43,244 payphones in operation, subject to enforceable site location
agreements. As of June 26, 1998, such site location agreements have an average
remaining term of at least 33 months.
SECTION 3.28 Average Net Revenue. The Average Net Revenue is at
least $70.00 per payphone in operation as of June 26, 1998. For purposes of this
Agreement, "Average Net Revenue" for such payphones shall mean the average of
the monthly gross revenues minus telephone bills and commissions (excluding
dial-around compensation) for the 3 months prior to March 31, 1998. Average Net
Revenue from operator service providers shall only include revenues received by
the Company from such providers.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
SECTION 4.01 Corporate Organization. Each of Parent and
Holdings is a corporation duly organized, validly existing and in good standing
under the laws of the state of its incorporation, with all requisite corporate
power and authority to own, operate and lease its properties and assets and to
carry on its businesses as now being conducted. Except as set forth in Schedule
4.01 hereto, each of Parent and Holdings is duly qualified to do business and in
good standing in each jurisdiction in which the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or to be in
good standing would not, individually or in the aggregate, have a Parent
Material Adverse Effect. As used herein, "Parent Material Adverse Effect" shall
mean a material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of Parent, Holdings and their respective
subsidiaries taken as a whole, except for the impact of any order or
determination by the Federal Communications Commission or Federal appellate
court concerning compensation
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paid by interexchange carriers and local exchange carriers to payphone service
providers as provided in the Federal Communications Commission CC Docket No.
96-128, Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996.
SECTION 4.02 Authorization. Each of Parent and Holdings has the
necessary corporate power and authority to enter into this Agreement and,
subject to the approval of this Agreement by the affirmative vote of at least a
majority of the outstanding shares of Parent Common Stock or, if applicable, the
affirmative vote of at least a majority of the outstanding shares of Holdings
Common Stock ("Parent Stockholder Approval"), to carry out its obligations
hereunder. The execution and delivery of this Agreement by Parent and Holdings,
the performance by Parent and Holdings of their respective obligations hereunder
and the consummation by Parent and Holdings of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of Parent and Holdings. Except for the Parent Stockholder Approval, no
other corporate proceeding on the part of either Parent or Holdings is necessary
for the execution and delivery of this Agreement by such party, the performance
of its obligations hereunder or the consummation by either such party of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Holdings and is a legal, valid and binding
obligation of Parent and Holdings, enforceable against each of them in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or other laws
affecting creditors' rights generally or by the availability of equitable
remedies generally.
SECTION 4.03 Capital Stock. As of June 26, 1998, the authorized
capital stock of Parent consisted of: (a) 10,000,000 shares of Parent Common
Stock, of which 4,647,809 shares were issued and outstanding and no shares were
held in Parent's treasury and (b) 1,000,000 shares of preferred stock, par value
$.01 per share, of which, as of June 26, 1998, no shares were issued and
outstanding. All of the outstanding shares of capital stock of Parent have been
validly issued and are fully paid, nonassessable and free of preemptive rights
with no personal liability attaching to the ownership thereof. As of June 26,
1998, there were no outstanding subscriptions, options, warrants, rights,
contracts or other arrangements or commitments obligating Parent to issue any
shares of its capital stock or any securities convertible into or exchangeable
for shares of its capital stock, except pursuant to the Davel/PhoneTel Merger
Agreement and this Agreement and for options to acquire not more than 500,350
shares of Parent Common Stock pursuant to Parent's stock option plans and
warrants to acquire not more than 58,000 shares of Parent Common Stock. As of
June 26, 1998, the authorized capital stock of Holdings consisted of 1,000
shares of Holdings Common Stock, of which 1,000 shares were issued and
outstanding. All of the outstanding shares of capital stock of Holdings have
been validly issued and are fully paid, nonassessable and free of preemptive
rights with no personal liability attaching to the ownership thereof. As of June
26, 1998, there were no outstanding subscriptions, options, warrants, rights,
contracts or other arrangements or commitments obligating Holdings to issue any
shares of its capital stock or any securities convertible into or exchangeable
for shares of its capital stock, except pursuant to the Davel/PhoneTel Merger
Agreement and this Agreement.
SECTION 4.04 Subsidiaries. Schedule 4.04 hereto lists all
direct and indirect subsidiaries of Parent as of the date hereof (each, a
"Parent Subsidiary" and collectively, the "Parent
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<PAGE> 30
Subsidiaries"). Except for the Parent Subsidiaries and as set forth in Schedule
4.04 hereto, Parent does not directly or indirectly own any interest in any
other corporation, partnership, joint venture or other business association or
entity. Each Parent Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, operate and lease its
properties and assets and to carry on its business as it is now being conducted.
Except as set forth in Schedule 4.04, each Parent Subsidiary is duly qualified
to do business and is in good standing in each jurisdiction in which the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified or to be in good standing would not, individually or in the aggregate,
be reasonably expected to have a Parent Material Adverse Effect. Except as set
forth in Schedule 4.04 hereto, all outstanding shares of capital stock of each
Parent Subsidiary are validly issued, fully paid and nonassessable and are owned
by Parent or another Parent Subsidiary free and clear of any liens, claims or
encumbrances.
SECTION 4.05 Consents and Approvals; No Violations. Except for
(a) applicable requirements of the Securities Act and the Exchange Act,
including the filing with and clearing by the SEC of the Form S-4 and the Proxy
Statement, (b) the filing of a Pre-Merger Notification and Report Form by Parent
or Holdings and the expiration or termination of the waiting period under the
HSR Act, (c) the filing of the Certificate of Merger as required by New York
Law, (d) such filings and consents as may be required under any environmental
law pertaining to any notification, disclosure or required approval triggered by
the Transaction, (e) filings with the Nasdaq Stock Market to permit the shares
of Parent Common Stock that are to be issued in the Transaction to be approved
for listing on the Nasdaq Stock Market, subject to official notice of issuance,
and to continue to be listed on the Nasdaq Stock Market following the Closing
Date (as defined below), and (f) such consents, approvals, orders,
authorizations, notifications, registrations, declarations and filings as may be
required under public utility, telecommunication or payphone laws, rules or
regulations of any state or municipality or under the corporation, takeover or
blue sky laws of various states, no filing with or prior notice to, and no
permit, authorization, consent or approval of any Governmental Entity is
necessary for the consummation by either Parent or Holdings of the Transaction.
Except as set forth in Schedule 4.05 hereto, neither the execution and delivery
of this Agreement by Parent and Holdings, nor the consummation by Parent and
Holdings of the transaction contemplated hereby nor compliance by Parent and
Holdings with any of the provisions hereof, will (i) conflict with or result in
any violation of any provision of the articles of incorporation or bylaws, or
comparable organizational documents, of Parent, Holdings or any Parent
Subsidiary, (ii) at the Effective Time, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage indenture,
license, agreement or other instrument or obligation to which Parent, Holdings
or any Parent Subsidiary is a party or by which any of them or any of their
respective properties or assets may be bound, or (iii) assuming that all
filings, consents and approvals contemplated by the first sentence of this
Section 4.05 have been or shall have been made or obtained, violate any Federal,
state, local or foreign order, writ, injunction, decree, statute, rule or
regulation applicable to Parent, Holdings or any Parent Subsidiary or any of
their properties or assets, excluding from the foregoing clauses (ii) and (iii)
violations, breaches or defaults which would not, individually or in the
aggregate, be reasonably expected to
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have a Parent Material Adverse Effect or impair materially Parent's ability to
perform its obligations hereunder or prevent or materially delay the
consummation of the Transaction.
SECTION 4.06 SEC Reports and Financial Statements.
(a) Since December 31, 1994, Parent has filed all required
forms, reports and documents with the SEC required to be filed by it
pursuant to the Securities Act and the Exchange Act (hereinafter
collectively referred to as the "Parent Reports"), all of which have
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act.
(b) None of the Parent Reports, including, without
limitation, any financial statements or schedules included therein, at the
time filed, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) The consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and changes in
financial position (including, without limitation, the related notes
thereto) of Parent and its consolidated subsidiaries included in the
financial statements contained in Parent's Annual Report on Form 10-K for
the year ended December 31, 1997 and in Parent's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 present fairly, in all material
respects, the consolidated financial position of Parent and its
consolidated subsidiaries as of their respective dates, and the results of
consolidated operations and changes in consolidated financial position for
the periods then ended, all in conformity with GAAP applied on a
consistent basis, except as otherwise noted therein, and in the case of
unaudited interim financial statements subject to normal year-end audit
adjustments and the absence of footnotes thereto.
SECTION 4.07 Absence of Undisclosed Liabilities. None of
Parent, Holdings or any Parent Subsidiary has any liabilities (whether absolute,
accrued or contingent), except: (a) liabilities, obligations or contingencies
that are accrued or for which adequate reserves have been provided in the
consolidated balance sheet of Parent and the Parent Subsidiaries as of March 31,
1998 or reflected in the notes thereto or in the notes to Parent's financial
statements as at and for the year ended December 31, 1997, (b) liabilities
incurred since December 31, 1997 in the ordinary course of business, (c)
liabilities disclosed in Schedule 4.07 hereto, or (d) any liabilities which,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Parent Material Adverse Effect.
SECTION 4.08 Changes. Since December 31, 1997, and except as
set forth in the Parent Reports filed prior to the date of this Agreement, and
except as otherwise disclosed in Schedule 4.08 hereto or as otherwise provided
by this Agreement:
(a) there have been no events or circumstances that would
constitute a Parent Material Adverse Effect, provided that, for purposes
of this Section 4.08(a), any effect
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that could have been reasonably expected to result from the execution of
this Agreement or the transactions contemplated hereby or the announcement
thereof will not be deemed to constitute a Parent Material Adverse Effect;
(b) as of the date hereof, except as permitted or otherwise
contemplated by this Agreement, there has been no direct or indirect
redemption, purchase or other acquisition of any shares of Parent's
capital stock, or any declaration, setting aside or payment of any
dividend or other distribution by Parent in respect of Parent's capital
stock, or any issuance of any shares of capital stock of Parent, or any
granting to any person of any option to purchase or other right to acquire
shares of capital stock of Parent or any stock split or other change in
Parent's capitalization;
(c) as of the date hereof, none of Parent, Holdings or any
Parent Subsidiary has entered into or agreed to enter into any new or
amended contract with any labor unions representing employees of Parent,
Holdings or such Parent Subsidiary;
(d) as of the date hereof, none of Parent, Holdings or any
Parent Subsidiary has entered into or agreed to enter into any new or
amended contract with any of the officers thereof or otherwise increased
the compensation payable to the officers or directors of any such entity;
(e) as of the date hereof, none of Parent, Holdings or any
Parent Subsidiary has (i) entered into or amended in any material respect
any bonus, incentive compensation, deferred compensation, profit sharing,
retirement, pension, group insurance or other benefit plan except as
required by law or regulations or (ii) made any contribution to any such
plan except for contributions specifically required by law or pursuant to
the terms of such plans; and
(f) none of Parent, Holdings or any Parent Subsidiary has
made any change in accounting methods, principles or practices materially
and adversely affecting its assets, liabilities or business, except in
accordance with GAAP.
SECTION 4.09 Investigations; Litigation.
(a) Except as described in Schedule 4.09 hereto, and other
than reviews pursuant to the HSR Act, there are no pending or, to the
knowledge of Parent, threatened investigations, reviews or inquiries by
any Governmental Entity with respect to Parent, Holdings or any Parent
Subsidiary or, to the knowledge of Parent, with respect to the activities
of any officer, director or employee of Parent (a "Parent Investigation"),
other than Parent Investigations which, if the resolution thereof were
adverse, would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. For the purpose of this
Agreement, "knowledge of Parent" shall be deemed to mean the actual
knowledge, after reasonable inquiry, of any executive officer of Parent.
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(b) Except as described in Schedule 4.09 hereto, (i) there
are no actions or proceedings pending or, to the knowledge of Parent,
threatened against Parent, Holdings or any Parent Subsidiary before any
court or before any administrative agency or administrative officer or
executive, whether federal, state, local or foreign, which seek to enjoin
the Merger or which, if adversely determined, would, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse
Effect, (ii) there are no outstanding domestic or foreign judgments,
decrees or orders against either Parent or Holdings that, individually or
in the aggregate, would reasonably be expected to have a Parent Material
Adverse Effect, (iii) none of Parent, Holdings or any Parent Subsidiary is
in violation of, and none of them has received any claim or notice that it
is in violation of, any federal, state, local or foreign laws, statutes,
rules, regulations or orders promulgated or judgments entered by any
Governmental Entity, which violations, individually or in the aggregate,
would reasonably be expected to have a Parent Material Adverse Effect; and
(iv) as of the date of this Agreement, there are no actions pending or, to
the knowledge of Parent, threatened against the directors or any director
of Parent alleging a breach of such directors' or director's fiduciary
duties that, individually or in the aggregate, would reasonably be
expected to have a Parent Material Adverse Effect.
SECTION 4.10 Environmental and Safety Matters. Except as
described in the Parent Reports, (a) Parent, Holdings and the Parent
Subsidiaries are in compliance with all applicable Environmental Laws, except
for non-compliance that would not, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect, which compliance includes,
but is not limited to, the possession by Parent, Holdings and the Parent
Subsidiaries of permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof; (b) none of Parent, Holdings or any Parent Subsidiary has received
written notice of, or, to the knowledge of Parent, is the subject of, any
actions, causes of action, claims, investigations, demands or notices by any
person alleging liability under or non-compliance with any Environmental Law
that would, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect; and (c) there has not been by either Parent or
Holdings any treatment, storage, disposal or release of any hazardous or toxic
material, substance or waste or of petroleum, or any fractions or by-products
thereof, at any of their current or, to the knowledge of Parent, former
properties or facilities or any current or, to the knowledge of Parent, former
offsite properties and facilities used in the business of Parent, Holdings or
any Parent Subsidiary (in each case, other than properties or facilities where
payphones are located pursuant to Site Location Agreements with Location Owners)
in a manner or at levels that require or are reasonably likely to require
investigation, removal or remediation under Environmental Laws that would,
either individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.11 Certain Fees. Except as described in Schedule 4.11
hereto, neither Parent nor Holdings has employed any broker or finder or
incurred any liability for any financial advisory, brokerage or finders' fees or
commissions in connection with the transactions contemplated hereby.
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SECTION 4.12 Taxes.
(a) Each of Parent, Holdings and the Parent Subsidiaries has
filed all tax returns and reports required to be filed by it and all such
returns and reports are complete and correct in all material respects, or
requests for extensions to file such returns or reports have been timely
filed, granted and have not expired, except to the extent that such
failures to file, to be complete or correct or to have extensions granted
that remain in effect individually or in the aggregate would not
reasonably be expected to have a Parent Material Adverse Effect. Each of
Parent, Holdings and the Parent Subsidiaries has timely paid (or Parent
has paid on its behalf) all taxes that have become due and payable, except
to the extent the failure to pay such taxes individually or in the
aggregate would not reasonably be expected to have a Parent Material
Adverse Effect, and the most recent financial statements contained in the
Parent Reports reflect an adequate reserve in accordance with GAAP for all
taxes payable by Parent, Holdings and the Parent Subsidiaries for all
taxable periods and portions thereof accrued through the date of such
financial statements.
(b) No deficiencies for any taxes have been proposed,
asserted or assessed against Parent, Holdings or any Parent Subsidiary
that are not adequately reserved for, except for deficiencies that
individually or in the aggregate would not reasonably be expected to have
a Parent Material Adverse Effect. Except as set forth in Schedule 4.12
hereto, there is no action, suit, taxing authority proceeding or audit now
in progress, pending, or, to the knowledge of Parent, threatened against
or with respect to any of Parent, Holdings or any Parent Subsidiary.
SECTION 4.13 Change of Control Provisions. Except as disclosed
in Schedule 4.13 hereto, none of the employment, consulting, severance or
indemnification contracts or agreements between Parent, Holdings or any Parent
Subsidiary, on the one hand, and any directors, officers or other employees of
Parent, Holdings or such Parent Subsidiary, on the other hand, and none of
Parent's, Holdings' or any Parent Subsidiary's employee benefit plans, programs
or arrangements contains any change-in-control provision that would become
operative as a result of the Merger or the Davel/PhoneTel Merger.
SECTION 4.14 Licenses. Parent, Holdings and the Parent
Subsidiaries have obtained all Licenses material, individually or in the
aggregate, to the conduct of the business of Parent, Holdings and the Parent
Subsidiaries taken as a whole. All of such Licenses are in full force and effect
and, to the knowledge of Parent, will not be impaired or adversely affected by
the Transaction in a manner or to a degree that would reasonably be expected to
have a Parent Material Adverse Effect. There is not pending or, to the knowledge
of Parent, threatened any domestic or foreign suit or proceeding with respect to
the suspension, revocation, cancellation, modification or non-renewal of any of
such Licenses, and, except as set forth in Schedule 4.14 hereto, no event under
the control of Parent has occurred that (whether with notice or lapse of time,
or both) would reasonably be expected to result in a suspension or revocation of
or failure to renew any of such Licenses, the loss of which would reasonably be
expected to have a Parent Material Adverse Effect.
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SECTION 4.15 Compliance with Other Instruments and Laws. Except
as set forth in Schedule 4.15 hereto, none of Parent, Holdings or any Parent
Subsidiary is in violation of any term of its articles of incorporation or
bylaws or comparable organizational documents, or in violation of any judgment,
decree or order which names Parent, Holdings or any Parent Subsidiary or in
violation of any term of any other material instrument, contract or agreement to
which it is a party or by which it or any of its properties or assets is bound,
except to the extent that any such violation would not reasonably be expected to
have a Parent Material Adverse Effect. Except as set forth in Schedule 4.15, the
businesses of Parent, Holdings and the Parent Subsidiaries are in compliance
with all federal, state, local and foreign statutes, laws, ordinances, rules,
governmental regulations, permits, concessions, grants, franchises, licenses or
other governmental authorizations or approvals applicable to the operation of
such business, except to the extent that the failure to be in compliance would
not reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.16 Employees. Without limiting the generality of
Section 4.15 hereof, Parent has complied in all material respects with all laws
relating to the employment of labor, including provisions thereof relating to
wages, hours, equal opportunity and collective bargaining, and, to the knowledge
of Parent, it does not have any material labor relations problems (including,
without limitation, actual or threatened strikes or work stoppages or material
grievances).
SECTION 4.17 Information Supplied. None of the information
supplied or to be supplied by Parent or Holdings for inclusion or incorporation
by reference in (i) the Form S-4 shall, at the time the Form S-4 is filed with
the SEC or at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading or (ii)
the Proxy Statement shall, at the date it is first mailed to Parent's
stockholders (or, if applicable, Holdings' stockholders) or at the time of the
Parent Stockholders Meeting (as defined below), contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Form S-4 shall
comply as to form in all material respects with the requirements of the
Securities Act, except that no representation or warranty is made by Parent with
respect to statements made or incorporated by reference in either the Form S-4
or the Proxy Statement based on information supplied by the Company for
inclusion or incorporation by reference therein.
SECTION 4.18 Opinion of Financial Advisor. Parent has received
the opinion of ABN AMRO Incorporated, dated June 28, 1998, to the effect that,
as of such date, the Merger Consideration to be paid by Parent in connection
with the Transaction is fair to Parent and its stockholders from a financial
point of view.
SECTION 4.19 Voting Requirements. Parent Stockholder Approval
is the only vote of the holders of any class or series of Parent's capital stock
necessary to allow Parent to consummate the transactions contemplated hereby.
SECTION 4.20 State Takeover Statutes. To the knowledge of
Parent, assuming no shareholder of the Company will beneficially own 15 percent
or more of the
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outstanding Parent Common Stock after the Effective Time, no "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation enacted under state or federal law applicable to Parent is
applicable to the Transaction.
SECTION 4.21 No Company Shares. Neither Parent nor Holdings
owns any shares of Company Common Stock.
SECTION 4.22 Rights. Assuming that no stockholder of the
Company shall, upon consummation of the Merger, become the beneficial owner of
15 percent or more of the shares of Parent Common Stock then outstanding, the
execution of this Agreement and the consummation of the Transaction do not and
will not result in the ability of any person to exercise any rights ("Parent
Rights") pursuant to the Rights Agreement dated as of April 22, 1998, between
Davel and ChaseMellon Shareholder Services, L.L.C., or enable or require any
Parent Rights to separate from the shares of the Parent Common Stock to which
they are attached or to be triggered or become exercisable.
SECTION 4.23 Financing. Parent has received a "highly
confident" letter (the "Letter") from a responsible financing source that
indicates the belief that funds shall be available from third parties sufficient
in the aggregate to provide the funds necessary to effect the Debt Tender in
accordance with Section 5.07 hereof and to pay the fees and expenses related to
the Transaction (such necessary funds being referred to herein as the
"Financing"). The Letter has not been rescinded or withdrawn or amended in a
manner adverse to the Company. A copy of the Letter has been provided to the
Company. Parent knows of no fact or circumstance that is reasonably likely to
result in the inability of the Company, Parent or Holdings to receive the
proceeds from such Financing.
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.01 Conduct of Business by the Company Pending the
Merger. The Company covenants and agrees that, from the date of this Agreement
until the Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 9.01 hereof, unless Parent shall otherwise
consent in writing or except as otherwise contemplated by this Agreement:
(a) the businesses of the Company and the Subsidiaries will
be conducted only in the ordinary and usual course; the Company will use
its reasonable best efforts to preserve intact its business organization
and goodwill, keep available the services of its officers and employees
and maintain satisfactory relationships with suppliers, distributors,
customers and others having business relationships with it and the
Subsidiaries; and the Company will promptly notify Parent and Newco of any
event or occurrence or emergency not in the ordinary and usual course of
the business of the Company or any Subsidiary that is material to the
business of the Company and the Subsidiaries, taken as a whole;
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(b) the Company will not (i) amend its articles of
incorporation or bylaws or (ii) split, combine or reclassify the
outstanding Shares or declare, set aside or pay any dividend payable in
cash, stock or property with respect to the Shares;
(c) neither the Company nor any Subsidiary will issue or
agree to issue any additional shares of, or rights of any kind to acquire
shares of, its capital stock of any class other than the issuance of
shares of capital stock of a Subsidiary to the Company or Subsidiary
directly wholly owned by the Company or, with respect to the Company,
Shares issuable upon (i) exercise of outstanding stock options, (ii)
exercise of outstanding Warrants or warrants exercisable for Series B
Convertible Preferred Stock or (iii) conversion of the Series C Cumulative
Convertible Preferred Stock;
(d) neither the Company nor any Subsidiary will enter into
or agree to enter into any new or amended contract or agreement with any
labor unions representing employees of the Company or any Subsidiary;
(e) except as contemplated by Section 5.04 hereto, the
Company will not authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into an agreement in principle
or an agreement with respect to any merger, consolidation or business
combination (other than the Merger), any acquisition or disposition of a
material amount of assets or securities (including, without limitation,
the assets or securities of any Subsidiary) or any material change in its
capitalization, or enter, other than in the ordinary course of business
consistent with past practice, into a material contract or any release or
relinquishment of any material contract rights;
(f) except as set forth on Schedule 5.01(f) hereto, the
Company will not, and will not permit any Subsidiary to, (i) enter into or
amend any employment, severance or change-in-control agreement, or any
bonus, incentive compensation, deferred compensation, profit sharing,
retirement, pension, group insurance or other benefit plan except as
required by law or regulations, or as expressly provided by this Agreement
or (ii) make any contribution to any such plan except for contributions
specifically required pursuant to the terms thereof;
(g) the Company will not (i) except as set forth on Schedule
5.01(g) hereto, create, incur or assume any long-term indebtedness for
borrowed money (including, without limitation, obligations in respect of
capital leases) or, except in the ordinary course of business or except to
fund out-of-pocket costs incurred in connection with the transactions
contemplated hereby, create, incur, assume, maintain or permit to exist
any short-term indebtedness for borrowed money in an aggregate amount for
the Company and the Subsidiaries as a whole exceeding $250,000; (ii)
except as set forth on Schedule 5.01(g), assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except wholly-owned
Subsidiaries of the Company in the ordinary course of business and
consistent with past practices; or (iii) make any loans, advances or
capital contributions to, or investments in, any
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other person other than a wholly-owned Subsidiary (other than customary
advances to employees and short-term investments pursuant to customary
cash management systems of the Company in the ordinary course and
consistent with past practice); and
(h) neither the Company nor any Subsidiary shall agree in
writing or otherwise to take (i) any action that it is prohibited from
taking by this Section 5.01 or (ii) any action that would constitute or is
likely to cause or result in a breach in any material respect of any
covenant, agreement, or representation or warranty set forth herein.
Subject to applicable law, the Company shall, during the period between the date
of this Agreement and the Effective Time, consult with Parent regarding Parent's
consideration of alternatives regarding the manner in which to best organize and
manage the business of the Company and Parent after the Effective Time and other
matters relating to transition planning; provided, however, that prior to the
Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, control and supervision over its operations and
nothing contained in this Section 5.01 shall be interpreted to give Parent or
Holdings, directly or indirectly, the right to control or direct the operations
of the Company and the Subsidiaries prior to the Effective Time.
SECTION 5.02 Stockholders' Meeting. Subject to Section 5.04
hereof, the Company shall cause a meeting of its stockholders to be duly called
and held as soon as reasonably practicable for the purpose of voting on the
approval and adoption of this Agreement and the Merger (the "Company
Stockholders Meeting"). Subject to Section 5.04 hereof, the Board of Directors
of the Company will (a) unanimously recommend approval and adoption of this
Agreement by the Company's stockholders hereof and (b) use reasonable best
efforts to obtain the necessary approval by the Company's stockholders of this
Agreement and the transactions contemplated hereby.
SECTION 5.03 Access to Information. Subject to the terms of
Section 7.13 hereof, the Company will give Parent, its counsel, financial
advisors, auditors and other authorized representatives reasonable access during
normal business hours throughout the period prior to the Effective Time to all
of the offices, properties, business and marketing plans, books, files and
records of the Company and the Subsidiaries, will furnish to Parent, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request and will instruct the Company's employees, counsel and
financial advisors to cooperate with Parent in its investigation of the business
of the Company and its Subsidiaries. The Company will furnish promptly to Parent
and Holdings (a) a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of Federal or state securities laws,
and (b) all such other information concerning its business, properties and
personnel as Parent or Newco may reasonably request; provided that no
investigation pursuant to this Section 5.03 shall affect any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
SECTION 5.04 No Solicitation.
(a) The Company shall not, and shall use reasonable best
efforts to cause its officers, directors, employees, investment bankers,
attorneys, accountants and other agents
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retained by it not to, initiate, solicit or encourage any inquiries
relating to, or the making of any, Acquisition Proposal or engage in
negotiations or discussions with, or furnish any information to, any third
party relating to any Acquisition Proposal. Notwithstanding the foregoing
or any other provision of this Agreement, the Company (i) may participate
in discussions or negotiations (including, as a part thereof, making any
counterproposal) with, or furnish information to, any third party with
respect to any Acquisition Proposal if the Company's Board of Directors
determines in good faith, after consultation with counsel, that the
failure to participate in such discussions or negotiations or to furnish
such information may constitute a breach of its fiduciary duties under, or
otherwise violate, applicable law, and (ii) shall be permitted to (A) take
and disclose to the Company's stockholders a position with respect to an
Acquisition Proposal or amend or withdraw such position or its position
with respect to the Merger, or (B) make disclosure to the Company's
stockholders, in each case, if the Company's Board of Directors determines
in good faith, after consultation with counsel, that the failure to take
such action may constitute a breach of its fiduciary duties under, or
otherwise violate, applicable law. As used herein, "Acquisition Proposal"
shall mean any proposal made by a third party, other than Parent, Holdings
or Newco to acquire, directly or indirectly, (x) more than 25% of the
shares and/or voting power of the Company Common Stock then outstanding
pursuant to a merger, consolidation or other business combination,
purchase of shares, tender offer or exchange offer or similar transaction,
including, without limitation, any single or multi-step transaction or
series of related transactions or (y) all or a substantial portion of the
business or assets of the Company and the Subsidiaries.
(b) The Company shall advise Parent in writing of (i) the
receipt, directly or indirectly, of any inquiries relating to an
Acquisition Proposal promptly following such receipt, (ii) the status of
any discussions or negotiations with respect thereto, (iii) its intention
to enter into any agreement relating to an Acquisition Proposal at least
24 hours prior to executing any such agreement, and (iv) any actions taken
pursuant to Section 5.04(a) hereof promptly following such action.
Following the receipt, directly or indirectly, of any Acquisition Proposal
(or any inquiry referred to in clause (i) above), the Company shall
furnish to Parent either a copy of such Acquisition Proposal (or such
inquiry) or a written summary of such Acquisition Proposal (or such
inquiry).
SECTION 5.05 Corporate Organization. Notwithstanding anything
to the contrary contained in this Agreement or in the Schedules hereto, the
Company and each Subsidiary shall use reasonable best efforts to be duly
qualified and in good standing on the Effective Date with the Secretary of State
in each jurisdiction in which the character of its properties owned or held
under lease or the nature of its activities makes such qualification necessary.
SECTION 5.06 Termination Option Agreement. The Company will
fully perform its obligations under the Termination Option Agreement.
SECTION 5.07 Preferred Stock and Senior Notes. Prior to the
Effective Time, the Company shall (a) take all actions reasonably necessary to
allow all outstanding shares of preferred stock of the Company, including,
without limitation, all outstanding shares of the Series C
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Cumulative Convertible Preferred Stock, to be converted into shares of Company
Common Stock in accordance with the terms of such preferred stock and (b)
subject to the receipt of funds sufficient for such purposes from the proceeds
of the Financing, use reasonable best efforts to (i) consummate a tender offer
for all of the Company's 12 1/4% Senior Notes due 2002 (the "Notes") at a price
reasonably acceptable to Parent, pursuant to which at least 85% of the aggregate
outstanding principal amount of the Notes shall have been tendered (it being
understood and agreed that (A) Parent and Holdings will use their reasonable
best efforts to obtain the Financing and (B) any failure to receive tenders of
at least 85% of the aggregate outstanding principal amount of the Notes shall
not be a breach of the covenant set forth in this Section 5.07), (ii) procure
the consent of the requisite principal amount of the Notes to allow the Company
to amend the indenture governing the Notes in a manner reasonably satisfactory
to Parent and (iii) enter into a supplemental indenture with respect to the
Notes reflecting such amendments.
ARTICLE 6
COVENANTS OF PARENT AND HOLDINGS
Parent agrees that:
SECTION 6.01 Access to Information. Subject to the terms of
Section 7.13 hereof, Parent will give the Company, its counsel, financial
advisors, auditors and other authorized representatives reasonable access, in
Parent's reasonable discretion, during normal business hours throughout the
period prior to the Effective Time to all of the offices, properties, books,
files and records of Parent and the Parent Subsidiaries, will furnish to the
Company, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request and will, in Parent's reasonable discretion,
instruct Parent's employees, counsel and financial advisors to cooperate with
the Company in its investigation of the business of Parent and the Parent
Subsidiaries. Parent will furnish promptly to the Company (a) a copy of each
report, schedule and other document filed or received by it pursuant to the
requirements of Federal or state securities laws, and (b) all such other
information concerning its business, properties and personnel as the Company may
reasonably request; provided that no investigation pursuant to this Section 6.01
shall affect any representation or warranty contained herein or the conditions
to the obligations of the parties to consummate the Merger.
SECTION 6.02 Newco Incorporation; Obligations of Newco. Newco
will be incorporated for the sole purpose of acting as a vehicle for the
facilitation of the Transaction and will not undertake any activities other than
those specifically contemplated by this Agreement or otherwise required for such
purpose. Newco will have no subsidiaries. Parent or, if appropriate, Holdings
will take all action necessary to cause Newco to perform its obligations under
this Agreement and to consummate the Merger on the terms and conditions set
forth in this Agreement.
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SECTION 6.03 Indemnification.
(a) Parent and Holdings shall indemnify, or shall cause the
Surviving Corporation to indemnify, to the fullest extent permitted under
New York Law, the present and former directors or officers of the Company
and the Subsidiaries (the "Indemnified Parties") in respect of actions
taken prior to and including the Effective Time in connection with their
duties as directors or officers of the Company (including the transactions
contemplated hereby) for a period of not less than six years from the
Effective Time; provided that, in the event any claim or claims are
asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue
until final disposition of any and all such claims. Without limitation of
the foregoing, in the event any Indemnified Party becomes involved in such
capacity in any action, proceeding or investigation in connection with any
matter, including the transactions contemplated hereby, occurring prior to
and including the Effective Time, the Surviving Corporation, to the
fullest extent permitted and on such conditions as may be required by
applicable law, shall make advances for or reimburse such Indemnified
Party for his legal and other out-of-pocket expenses (including the cost
of any investigation and preparation) as incurred in connection therewith.
In addition, during such six-year period, the charter and by-laws of the
Surviving Corporation and its successors and assigns shall contain
provisions no less favorable to the present and former directors and
officers of the Company than those in effect in the Certificate of
Incorporation of the Company and the By-laws of the Company as in effect
on the date of this Agreement.
(b) For not less than six years after the Effective Time,
Parent, Holdings or the Surviving Corporation or their respective
successors or assigns shall maintain in effect directors' and officers'
liability insurance covering the Indemnified Parties who are currently
covered by the Company's existing directors' and officers' liability
insurance, on terms and conditions no less favorable to such directors and
officers than those in effect on the date hereof with respect to Parent's
officers and directors; provided, however, that in no event shall Parent
or the Surviving Corporation be required to pay an amount to maintain such
insurance covering the Indemnified Parties in excess of 200% of the amount
paid by the Company as of the date hereof for such coverage.
SECTION 6.04 Stockholders' Meeting. Parent shall cause a
meeting of its stockholders (the "Parent Stockholders Meeting") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the approval of the issuance of Parent Common Stock in the Merger. The Board of
Directors of Parent will (a) unanimously recommend approval of such issuance of
Parent Common Stock by Parent's stockholders and (b) use reasonable best efforts
to obtain the necessary approval by the Company's stockholders of such issuance
of Parent Common Stock.
SECTION 6.05 Parent Financing. Parent shall use reasonable best
efforts to, or to enable Holdings to, secure the Financing and to enter into
appropriate indentures, loan agreements or other agreements with respect to the
Financing.
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SECTION 6.06 Employee Matters.
(a) Parent agrees that individuals who are employed by the
Company or any of the Subsidiaries immediately prior to the Closing Date
shall remain employees of the Company or such Subsidiary as of the Closing
Date (each such employee, an "Affected Employee"); provided, however, that
nothing contained herein shall confer upon any Affected Employee the right
to continued employment by the Company or any of the Subsidiaries for any
period of time after the Closing Date which is not otherwise required by
law.
(b) Holdings or Parent shall, or shall cause the Company or
the Parent Subsidiaries to, give Affected Employees full credit for
purposes of eligibility and vesting under any employee benefit plans or
arrangements maintained by Parent, the Company or any of the Parent
Subsidiaries for such Affected Employees' service with Parent, the Company
or any affiliate thereof to the same extent recognized immediately prior
to the Closing Date.
(c) Holdings or Parent shall, or shall cause the Company or
the Parent Subsidiaries to, (i) waive all limitations as to preexisting
conditions exclusions and waiting periods with respect to participation
and coverage requirements applicable to the Affected Employees under any
welfare benefit plans in which such employees may be eligible to
participate as of the Closing Date, other than limitations or waiting
periods that are already in effect with respect to such employees and that
have not been satisfied as of the Closing Date under any welfare plan
maintained for the Affected Employees immediately prior to the Closing
Date, and (ii) provide each Affected Employee with credit for any
co-payments and deductibles paid prior to the Closing Date in satisfying
any applicable deductible or out-of-pocket requirements under any welfare
plans that such employees are eligible to participate in as of the Closing
Date.
(d) As of the Closing Date, Parent or Holdings shall, or
shall cause the Company or the Parent Subsidiaries to, provide coverage
and benefits to Affected Employees pursuant to the employee benefit plans
or arrangements (including, without limitation, the Plans) maintained by
the Company for such Affected Employees immediately prior to the Closing
Date; provided, however, that (i) this Section 6.06(d) shall not require
Holdings or Parent to provide or maintain any equity-based compensation
plans of the Company and (ii) except as provided in Section 1.05 hereof,
nothing contained herein shall confer upon any Affected Employee the right
to continued coverage and benefits pursuant to such plans or arrangements
after December 31, 1998.
(e) The Surviving Corporation shall continue to honor all
employment, severance, separation and other compensation agreements
existing as of the Closing Date between the Company or any of the
Subsidiaries with any officer or employee thereof, which are set forth on
Schedule 6.06(e).
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SECTION 6.07 Financial Disclosure. Parent or, if applicable,
Holdings shall use reasonable best efforts to publish financial results
(including combined sales and net income) covering at least 30 days of
post-Transaction operations within 45 days and, in any event, shall publish such
results within 75 days after the end of the first full calendar month following
the month in which the Closing Date occurs.
SECTION 6.08 Conduct of Business of Parent Pending the Merger.
Parent and Holdings covenant and agree that, from the date of this Agreement
until the Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 9.01 hereof, unless the Company shall otherwise
consent in writing or except as otherwise contemplated in this Agreement:
(a) Parent and Holdings shall not (i) amend their respective
articles of incorporation or bylaws in a manner that would be reasonably
likely to have a Disparate Adverse Effect (as defined below), (ii) split,
combine or reclassify the outstanding Parent Common Stock or the
outstanding Holdings Common Stock in a manner that would be reasonably
likely to have a Disparate Adverse Effect or (iii) declare, set aside or
pay any dividend with respect to shares of Parent Common Stock or Holdings
Common Stock payable (A) in cash or property or (B) in stock or otherwise
in a manner that would be reasonably likely to have a Disparate Adverse
Effect;
(b) Parent, Holdings and the Parent Subsidiaries shall not
enter into any new line of business that is not substantially related to
existing or past businesses of Parent or the Parent Subsidiaries;
(c) Parent, Holdings and the Parent Subsidiaries shall not
acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any
one manner, any business or any corporation, partnership, association or
other business organization or division, or otherwise acquire or agree to
acquire any assets of any person that (i) would violate Section 6.08(b) or
(ii) is reasonably likely to materially delay or prevent the consummation
of the Financing or the Merger; and
(d) Parent, Holdings and the Parent Subsidiaries shall not
agree in writing or otherwise to take (i) any action that any of them is
prohibited from taking by this Section 6.08 or (ii) any action that would
constitute or is likely to cause or result in a breach in any material
respect of any covenant, agreement, or representation or warranty of
Parent or Holdings set forth herein.
For purposes of this Section 6.08, a change, circumstance or event shall be
deemed to have a "Disparate Adverse Effect" if the effect thereof on the holders
of Company Common Stock, after giving effect to the Merger, is less favorable,
in any material respect, than the effect that such change, circumstance or event
has on the holders of Holdings Common Stock (after giving effect to the
Davel/PhoneTel Merger Agreement) or Parent Common Stock.
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ARTICLE 7
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.01 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement, provided that
nothing herein shall require Parent, the Surviving Corporation or Holdings to
hold, manage or operate any assets separately or to enter into any sale or
divestiture of assets, the effect of which would be to impair, in any material
respect, the full benefit of the Transaction to Parent and Holdings. The
Company, Parent and Newco shall each furnish to one another and to one another's
counsel all such information as may be required in order to accomplish the
foregoing actions. In connection with and without limiting the foregoing, the
Company and Parent shall (a) take all reasonable action necessary to ensure that
no state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement or any of the other transactions
contemplated hereby and (b) if any state takeover statute or similar statute or
regulation becomes applicable to the Merger, this Agreement or any of the other
transactions contemplated hereby, take all reasonable action necessary to ensure
that the Merger and the other transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger and the other transactions contemplated by this Agreement.
SECTION 7.02 Certain Filings. The Company and Parent shall
cooperate with one another (a) in connection with the preparation of the Form
S-4, the Proxy Statement and any other disclosure document filed after the date
hereof pursuant to the Securities Act, the Exchange Act or any state securities
law (each a "Disclosure Document"), (b) in determining whether any other action
by or in respect of, or filing with, any Governmental Entity or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts in connection with the consummation of the transactions
contemplated by this Agreement and (c) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information required
in connection therewith or with the Form S-4, the Proxy Statement and the
Disclosure Documents and seeking timely to obtain any such actions, consents,
approvals or waivers.
SECTION 7.03 Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or making any public
statement with respect to this Agreement and the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange, will not issue any such press release or
make any such public statement prior to such consultation.
SECTION 7.04 Further Assurances. Upon the terms and subject to
the satisfaction of the conditions contained in this Agreement, each of the
parties hereto shall use its reasonable best efforts to take, or cause to be
taken, all appropriate action, and to do or cause to be
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done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the Merger.
SECTION 7.05 Notices of Certain Events. The Company and Parent
shall promptly notify the other of:
(a) any notice or other communication from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement;
(c) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened against,
relating to or involving or otherwise affecting the Company or any
Subsidiary, on the one hand, or Parent or Newco, on the other hand, which
relate to the consummation of the transactions contemplated by this
Agreement; and
(d) any action, event or occurrence that would constitute a
breach of any representation, warranty, covenant or agreement of it set
forth in this Agreement.
SECTION 7.06 Preparation of the Form S-4 and the Proxy
Statement.
(a) As soon as practicable following the date of this
Agreement, the Company and Parent shall jointly prepare and file with the
SEC the Proxy Statement and Parent shall prepare and file with the SEC the
Form S-4, in which the Proxy Statement will be included as a prospectus.
Each of the Company and Parent shall use reasonable best efforts to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company and Parent shall use their
respective reasonable best efforts to cause the Proxy Statement to be
mailed to their respective stockholders as promptly as practicable after
the Form S-4 is declared effective under the Securities Act. Parent shall
also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable
state securities laws in connection with the issuance of the Parent Common
Stock in the Merger and the Company shall furnish all information
concerning the Company and the holders of the Shares as may be reasonably
requested in connection with any such action. No filing of, or amendment
or supplement to, the Form S-4 will be made by Parent or to the Proxy
Statement will be made by the Company or Parent without providing the
other party the opportunity to review and comment thereon. Parent will
advise the Company, promptly after it receives notice thereof, of the time
when the Form S-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the
qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC
for amendment of the Proxy Statement or the Form S-4 or comments thereon
and
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responses thereto or requests by the SEC for additional information. If at
any time prior to the Effective Time any information relating to the
Company or Parent, or any of their respective affiliates, officers or
directors, should be discovered by the Company or Parent which should be
set forth in an amendment or supplement to any of the Form S-4 or the
Proxy Statement, so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of the Company and Parent.
(b) The Company hereby (i) consents to the use of its name
and, on behalf of its subsidiaries and affiliates, the names of such
subsidiaries and affiliates and to the inclusion of financial statements
and business information relating to it and its subsidiaries and
affiliates (in each case, to the extent required by applicable securities
laws) in any registration statement or proxy statement prepared by Parent
(or, if applicable, Holdings) and PhoneTel Technologies, Inc. ("PhoneTel")
in connection with seeking stockholder approval for the transactions
contemplated by the Davel/PhoneTel Merger Agreement, (ii) agrees to use
all reasonable efforts to obtain the written consent of any person or
entity retained by it which may be required to be named (as an expert or
otherwise) in such registration statement or proxy statement (provided,
however, that the Company shall not be required to make any material
payment to such person or entity in connection with the Company's efforts
to obtain any such consent), and (iii) agrees to cooperate, and agrees to
cause its subsidiaries and affiliates to cooperate, with any legal
counsel, investment banker, accountant or other agent or representative
retained by any of the parties specified in clause (i) in connection with
the preparation of any and all information required, as determined after
consultation with each party's counsel, to be disclosed by applicable
securities laws in any such registration statement or proxy statement.
(c) Parent hereby agrees to use reasonable best efforts to
cause PhoneTel (i) to consent to the use of its name and, on behalf of its
subsidiaries and affiliates, the names of such subsidiaries and affiliates
and to the inclusion of financial statements and business information
relating to PhoneTel and its subsidiaries and affiliates (in each case, to
the extent required by applicable securities laws) in any registration
statement or proxy statement prepared by Parent (or, if applicable,
Holdings) and the Company in connection with seeking stockholder approval
for the transactions contemplated by this Agreement, (ii) to use all
reasonable efforts to obtain the written consent of any person or entity
retained by PhoneTel which may be required to be named (as an expert or
otherwise) in such registration statement or proxy statement (provided,
however, that Parent shall not be required to make any material payment to
such person or entity in connection with Parent's efforts to obtain any
such consent), and (iii) to agree to cooperate, and to agree to cause its
subsidiaries and affiliates to cooperate, with any legal counsel,
investment banker, accountant or other agent or representative retained by
any of the parties specified in clause (i) in connection with the
preparation of any and all information required, as determined after
consultation with each
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party's counsel, to be disclosed by applicable securities laws in any such
registration statement or proxy statement.
SECTION 7.07 Letters of Accountants.
(a) Each of Parent and the Company shall use its reasonable
best efforts to cause to be delivered to the other party two letters from
the Company's independent accountants, one dated a date within two
business days before the date on which the Form S-4 shall become effective
and one dated a date within two business days before the Closing Date,
each addressed to Parent, in form and substance reasonably satisfactory to
Parent and the Company and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
(b) Each of Parent and the Company shall use reasonable best
efforts to cause to be delivered to the other party and the other party's
independent accountants two letters from its independent accountants
addressed to Parent and the Company, one dated as of the date the Form S-4
is effective and one dated as of the Closing Date, in each case stating
that accounting for the Merger as a pooling of interests under Opinion 16
of the Accounting Principles Board and applicable SEC rules and
regulations is appropriate if the Merger is consummated in accordance with
this Agreement.
SECTION 7.08 Affiliates.
(a) Not less than 45 days prior to the Effective Time, the
Company shall deliver to Parent a list of names and addresses of each
person who, in the Company's reasonable judgment, is an affiliate within
the meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act or otherwise applicable SEC accounting releases with
respect to pooling of interests accounting treatment (each such person, a
"Pooling Affiliate") of the Company. The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes
of reviewing such list. The Company shall deliver or cause to be delivered
to Parent, not later than 30 days prior to the Effective Time, an
affiliate letter in the form attached hereto as Exhibit 7.08(a), executed
by each of the Pooling Affiliates of the Company identified in the
foregoing list. Parent shall be entitled to place legends as specified in
such affiliate letters on the certificates evidencing any of the Parent
Common Stock to be received by the Pooling Affiliates of the Company
pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of such letters.
(b) Not less than 45 days prior to the Effective Time,
Parent shall deliver to the Company a list of names and addresses of each
person who, in Parent's reasonable judgment, is a Pooling Affiliate of
Parent. Parent shall provide the Company such information and documents as
the Company shall reasonably request for purposes of reviewing such list.
Parent shall deliver or cause to be delivered to the Company, not later
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than 30 days prior to the Effective Time, an affiliate letter in the form
attached hereto as Exhibit 7.08(b), executed by each Pooling Affiliate of
Parent identified in the foregoing list.
SECTION 7.09 Nasdaq Listing. Parent or, if applicable, Holdings
shall use its reasonable best efforts to cause the Parent Common Stock or, if
applicable, Holdings Common Stock to be approved for listing on the Nasdaq Stock
Exchange, subject to official notice of issuance, as promptly as practicable
after the date hereof, and in any event prior to the Closing Date and to
continue to be listed on the Nasdaq Stock Exchange following the Effective Time.
SECTION 7.10 Tax Treatment. Each of Parent, Holdings and the
Company shall use reasonable best efforts to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code, including,
without limitation, forebearing from taking any action that would cause the
Merger not to qualify as a reorganization under the provisions of Section 368(a)
of the Code.
SECTION 7.11 Pooling of Interests. Each of Parent, Holdings and
the Company shall use their respective reasonable best efforts to cause the
transactions contemplated by this Agreement, including the Merger, to be
accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations, and each of the
Company and Parent agrees that it will not knowingly take any action that would
cause such accounting treatment not to be obtained.
SECTION 7.12 Representations. Each of the Company, on the one
hand, and Parent and Holdings, on the other, (a) will use its reasonable best
efforts to take all action necessary to render true and correct as of the
Closing Date its representations and warranties contained in this Agreement, (b)
will refrain from taking any action that would render any such representation or
warranty untrue or incorrect as of such time, and (c) will perform or cause to
be satisfied each agreement, covenant or condition to be performed or satisfied
by it.
SECTION 7.13 Confidentiality. Each of the Company and Parent
will hold, and will use its reasonable best efforts to cause its affiliates and
its and their respective officers, directors, employees, consultants, advisors
and agents to hold, in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all trade secrets and
confidential information concerning the other party and its subsidiaries
furnished to it in connection with the transactions contemplated by this
Agreement, except to the extent that such information can be shown to have been
(a) previously known on a nonconfidential basis by the party receiving such
information, (b) in the public domain through no fault of the party receiving
such information or (c) lawfully available to the party receiving such
information from sources other than the other party; provided, however, that any
party so receiving such information may disclose such information to such
affiliates and officers, directors, employees, consultants, advisors and agents
so long as such persons are informed by such party of the confidential nature of
such information and are directed by such party to treat such information
confidentially; and provided further that the party receiving such information
shall be responsible for any disclosures of such information by any such
persons. If this Agreement is terminated, such confidence shall be maintained
and each of the Company and Parent will, and will use its reasonable best
efforts to cause its affiliates and its and their respective
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officers, directors, employees, consultants, advisors and agents to, destroy or
deliver to the other party, upon request, all documents and other materials, and
all copies thereof, obtained by it or on its behalf from the other party in
connection with this Agreement that are subject to such confidence.
ARTICLE 8
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Newco to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement shall have been approved and adopted by
the stockholders of the Company in accordance with New York Law;
(b) if required by applicable law or regulation or the rules
of the Nasdaq Stock Market, the issuance of Parent Common Stock (or, if
applicable, Holdings Common Stock) in the Merger shall have been approved
by the stockholders of Parent (or, if applicable, Holdings);
(c) any applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated;
(d) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation of
the Merger;
(e) the Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order;
(f) the shares of Parent Common Stock (or, if applicable,
Holdings Common Stock) issuable to the Company's stockholders as
contemplated by this Agreement shall have been approved for listing on the
Nasdaq Stock Market, subject to official notice of issuance;
(g) all outstanding shares of the Series C Cumulative
Convertible Preferred Stock of the Company shall have been converted into
Company Common Stock; and
(h) Parent (or, if applicable, Holdings) shall have obtained
the Financing and entered into appropriate indentures, loan agreements, or
other agreements with respect to the Financing.
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SECTION 8.02 Conditions to the Obligations of Parent and
Holdings. The obligations of Parent and Holdings to consummate the Merger are
subject to the satisfaction of the following additional conditions:
(a) the representations and warranties of the Company as set
forth in this Agreement shall be true and correct as if made on and as of
the Effective Time (other than those representations and warranties which
address matters only as of a certain date, which shall be true and correct
as of such certain date), except where the facts, circumstances or events
that cause or constitute the failure of such representations and
warranties to be true and correct (after giving effect to the disclosures
made by the Company in any disclosure schedules delivered pursuant hereto,
but disregarding any materiality qualifications contained within the body
of such representations and warranties) has not had and would not be
reasonably likely to have, in the aggregate, a Company Material Adverse
Effect and the Company shall have complied with or performed in all
material respects all agreements and covenants required to be complied
with or performed by it under this Agreement at or prior to the Closing
Date;
(b) receipt by Parent of an opinion of its independent
certified public accountants stating that accounting for the Merger as a
pooling of interests under Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations is appropriate if the Merger is
consummated in accordance with this Agreement;
(c) at least 85% of the aggregate outstanding principal
amount of the Notes shall have been tendered to the Company pursuant to
and in accordance with of Section 5.07 hereof; and
(d) Parent shall have received an opinion from Kirkland &
Ellis, counsel to Parent, dated as of the Closing Date, substantially to
the effect that the Merger will constitute a reorganization for U.S.
federal income tax purposes within the meaning of Section 368(a) of the
Code. In rendering such opinion, counsel to Parent shall be entitled to
rely upon usual and customary representations of shareholders and officers
of Parent, Holdings, the Company and others.
SECTION 8.03 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following additional conditions:
(a) the representations and warranties of Parent as set
forth in this Agreement shall be true and correct as if made on and as of
the Effective Time (other than those representations and warranties which
address matters only as of a certain date, which shall be true and correct
as of such certain date), except where the facts, circumstances or events
that cause or constitute the failure of such representations and
warranties to be true and correct (after giving effect to the disclosures
made by Parent in any disclosure schedules delivered pursuant hereto, but
disregarding any materiality qualifications contained within the body of
such representations and warranties) has not had and would not be
reasonably
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likely to have, in the aggregate, a Parent Material Adverse Effect and
Parent and Holdings shall have complied with or performed in all material
respects all agreements and covenants required to be complied with or
performed by them under this Agreement at or prior to the Closing Date;
(b) receipt by the Company of an opinion of its independent
certified public accountants stating that accounting for the Merger as a
pooling of interests under Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations is appropriate if the Merger is
consummated in accordance with this Agreement;
(c) the Company shall have received an opinion from Shearman
& Sterling, counsel to the Company, dated as of the Closing Date,
substantially to the effect that the Merger will constitute a
reorganization for U.S. federal income tax purposes within the meaning of
Section 368(a) of the Code. In rendering such opinion, counsel to the
Company shall be entitled to rely upon usual and customary representations
of shareholders and officers of Parent, Holdings, the Company and others;
and
(d) Samstock, L.L.C. and its affiliates shall continue to
hold the securities to be purchased by it pursuant to the Stock Purchase
Agreement, dated as of May 14, 1998, by and between Samstock, L.L.C. and
Parent and to be represented on Parent's or Holdings' Board of Directors
as contemplated thereby.
ARTICLE 9
TERMINATION
SECTION 9.01 Termination. This Agreement may be terminated and
the Transaction may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Merger has not
been consummated by December 31, 1998; provided that no party may
terminate this Agreement pursuant to this subsection if such party's
failure to fulfill any of its obligations under this Agreement shall have
been the reason that the Effective Time shall not have occurred on or
before such date;
(c) by either the Company or Parent, if there shall be any
law or regulation that makes consummation of the Transaction illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Parent or the Company from consummating the Transaction is
entered and such judgment, injunction, order or decree shall have become
final and nonappealable;
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(d) by either the Company or Parent, if this Agreement shall
not have been approved and adopted by the stockholders of the Company at
the Company Stockholders Meeting or if the issuance of Parent Common Stock
(or, if applicable, Holdings Common Stock) in the Merger shall not have
been approved by the stockholders of Parent (or, if applicable, Holdings)
at the Parent Stockholders Meeting;
(e) by Parent, if the Company's Board of Directors shall (i)
withdraw, modify or change its recommendation or approval in respect of
this Agreement or the Merger in a manner adverse to Parent or Holdings or
(ii) have recommended any Acquisition Proposal other than by Parent,
Holdings or Newco;
(f) by Parent, if any corporation, partnership, person,
other entity or group (as defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Holdings or Newco or any of their respective
subsidiaries or affiliates shall have become the beneficial owner of more
than 15% of the outstanding Shares (either on a primary or a fully diluted
basis) and such beneficial owner files or is required to file a Schedule
13D with the SEC describing any plan or proposal of such beneficial owner
which would result in its acquisition of additional securities of the
Company, any change in the present Board of Directors or management of the
Company or any other extraordinary corporate transaction involving the
Company that could prevent or materially delay the consummation of the
Merger;
(g) by Parent (provided that Parent is not then in breach of
its obligations hereunder in any material respect), if the Company shall
have breached in any material respect any of its representations,
warranties, covenants or agreements contained herein, such that the
condition to consummation in Section 8.02(a) would not be fulfilled, and
the Company shall not have cured such breach within 30 days after the
Company receives written notice of such breach from Parent;
(h) by the Company, to allow the Company to enter into an
agreement in respect of an Acquisition Proposal which the Company's Board
of Directors has determined in the exercise of its fiduciary duties is
more favorable to the Company and its stockholders than the transactions
contemplated hereby (provided that the termination described in this
subsection (h) shall not be effective unless and until the Company shall
have paid to Parent the fee described in Section 9.04(b) hereof);
(i) by the Company (provided that the Company is not then in
breach of its obligations hereunder in any material respect), if Parent
shall have breached in any material respect any of its representations,
warranties, covenants or agreements contained herein, such that the
condition to consummation in Section 8.03(a) would not be fulfilled, and
Parent shall not have cured such breach within 30 days after Parent
receives written notice of such breach from the Company; or
(j) by the Company, if the Davel/PhoneTel Merger Agreement
has been amended, or any obligation of PhoneTel thereunder has been
waived, and such waiver or amendment causes a material reduction in the
value of the Merger Consideration to the
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holders of Company Common Stock or any reduction in the value of the
Merger Consideration to the holders of Company Common Stock that does not
have the same relative impact on holders of Parent Common Stock (or, after
the Davel/PhoneTel Merger, on such holders whose Parent Common Stock has
been exchanged for Holdings Common Stock).
Such right of termination shall be exercised by written notice of termination
given by the terminating party to the other parties hereto in the manner
hereinafter provided. Any such right of termination shall not be an exclusive
remedy hereunder but shall be in addition to any other legal or equitable
remedies that may be available to any non-defaulting party hereto arising out of
any default hereunder by any other party hereto.
SECTION 9.02 Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken by or pursuant to resolutions of their
respective Boards of Directors, may (a) extend the time for the performance of
any of the obligations or other acts of the parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) except for the requirements set
forth in Sections 8.01(a) through (f), waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
SECTION 9.03 Closing. Subject to the satisfaction of the
conditions contained in Article 8 hereof, the closing of the Merger contemplated
by this Agreement (the "Closing") shall take place at the offices of Kirkland &
Ellis in Chicago, Illinois as soon as practicable after the satisfaction or
waiver of all of the conditions to the Merger contained in Article 8 hereof or
at such other time and place as Parent and the Company shall agree (the "Closing
Date").
SECTION 9.04 Effect of Termination; Termination Fee.
(a) If this Agreement is terminated pursuant to Section 9.01
hereof, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that the agreements
contained in Sections 7.13, 9.04(b) and 10.04 hereof shall survive the
termination hereof and the Termination Option Agreement shall survive in
accordance with its terms, and except that no such termination shall
relieve any party from liability for breach of this Agreement or failure
by it to perform its obligations hereunder.
(b) If (i) Parent or Holdings shall have terminated this
Agreement pursuant to clause (e) of Section 9.01 hereof or (ii) the
Company shall have terminated this Agreement pursuant to clause (h) of
Section 9.01 hereof, then in either such case, the Company shall promptly,
but in no event later than two business days after the date of such
failure to close or termination, pay Parent a termination fee of
$5,000,000 plus an amount, not to exceed $1,000,000, equal to the actual
and reasonably documented out-of-pocket expenses incurred by Parent and
Equity Group Investments, Inc. directly attributable to the proposed
acquisition of the Company, including negotiation and execution of this
Agreement and the attempted financing and completion of the Merger, which
fee and amount shall be
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payable in same day funds. In no event shall the Company be required to
pay more than one termination fee and reimbursement of expenses pursuant
to this Section 9.04(b).
ARTICLE 10
MISCELLANEOUS
SECTION 10.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile,
telex or similar writing) and shall be given,
if to Parent or Newco, to:
Davel Communications Group, Inc.
1429 Massaro Boulevard
Tampa, Florida 33619
Attention: General Counsel
Facsimile: (813) 626-9610
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: R. Scott Falk
Facsimile: (312) 861-2200
if to the Company, to:
Peoples Telephone Company, Inc.
2300 N.W. 89th Place
Miami, Florida 33172
Attention: General Counsel
Facsimile: (305) 593-6116
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with copies to:
Steel Hector & Davis LLP
200 South Biscayne Blvd.
Miami, Florida 33131-2398
Attention: Ira N. Rosner, P.A.
Facsimile: (305) 577-7001
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John Madden, Esq.
Facsimile: (212) 848-7179
or such other address, telecopy or telex number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each such notice,
request or other communication shall be effective (a) if given by facsimile or
telex, upon confirmation of receipt, or (b) if given by any other means, when
delivered at the address specified in this Section 10.01.
SECTION 10.02 Survival of Representations and Warranties. The
representations and warranties contained herein shall not survive the Effective
Time.
SECTION 10.03 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by the Company, Parent
and Newco or in the case of a waiver, by the party against whom the waiver
is to be effective; provided that after the adoption of this Agreement by
the stockholders of the Company, no such amendment or waiver shall,
without the further approval of such stockholders, alter or change (i) the
amount or kind of consideration to be received in exchange for any shares
of capital stock of the Company, (ii) any term of the articles of
incorporation of the Surviving Corporation or (iii) any of the terms or
conditions of this Agreement if such alteration or change would adversely
affect the holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 10.04 Expenses. Except as provided in Section 9.04
hereof, each party shall pay its own costs and expenses relating to this
Agreement and the transactions
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contemplated hereby, except that each of Parent and the Company shall bear and
pay one-half of the costs and expenses incurred in connection with the filing,
printing and mailing of the Form S-4 and the Proxy Statement (including SEC
filing fees).
SECTION 10.05 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
SECTION 10.06 Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of New York applicable
to contracts executed in and to be performed in that State.
SECTION 10.07 Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts (including by means of telecopied signature
pages), each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
SECTION 10.08 Headings; Schedules.
(a) Section headings used in this Agreement are for
convenience only and shall be ignored in the construction and
interpretation hereof.
(b) The parties hereto acknowledge that certain matters set
forth in the Schedules to this Agreement are included for informational
purposes only, notwithstanding the fact that, because they do not rise
above applicable materiality thresholds or otherwise, they would not be
required to be set forth therein by the terms of this Agreement and that
disclosure of such matters shall not be taken as an admission by the
Company or Parent that such disclosure is required to be made under the
terms of any provision of this Agreement and in no event shall the
disclosure of such matters be deemed or interpreted to broaden or
otherwise amplify the representations and warranties contained in this
Agreement or be used as a basis for interpreting the materiality
thresholds in this Agreement (including, but not limited to, the terms
"material," "materially," "materiality," "material adverse change,"
"material adverse effect" or "Material Adverse Effect").
SECTION 10.09 Obligations of Parent and Holdings.
Notwithstanding anything to the contrary contained in this Agreement: (a) Parent
shall be jointly and severally responsible, with Holdings, for the fulfillment
of all of the obligations of Holdings under this Agreement and for any breach by
Holdings of any representations, warranties, covenants and agreements of
Holdings contained in this Agreement; and (b) Holdings shall be jointly and
severally responsible for the fulfillment of all of the obligations of Parent
under this Agreement and for any breach by Parent of any representations,
warranties, covenants and agreements of Parent contained in this Agreement.
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SECTION 10.10 No Third Party Beneficiaries. Except for Section
6.03 hereof, no provision of this Agreement is intended to, or shall, confer any
third party beneficiary or other rights or remedies upon any person other than
the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
and Plan of Merger and Reorganization to be duly executed by their respective
authorized officers as of the day and year first above written.
DAVEL COMMUNICATIONS GROUP, INC.
By: /s/ David Hill
----------------------------
Name: David Hill
----------------------------
Title: Chairman
----------------------------
DAVEL HOLDINGS, INC.
By: /s/ David Hill
----------------------------
Name: David Hill
----------------------------
Title: President
----------------------------
PEOPLES TELEPHONE COMPANY, INC.
By: /s/ E. Craig Sanders
----------------------------
Name: E. Craig Sanders
----------------------------
Title: CEO/President
----------------------------
<PAGE> 1
EXHIBIT 10.1
CORPORATE GOVERNANCE, LIQUIDITY AND VOTING AGREEMENT
This CORPORATE GOVERNANCE, LIQUIDITY AND VOTING AGREEMENT, by and among
UBS Capital II LLC ("UBS"), Davel Communications Group, Inc. ("Davel"), Davel
Holdings, Inc. ("Holdings"), and Peoples Telephone Company, Inc. (the
"Company"), is entered into as of July 5, 1998.
WHEREAS, concurrently with the execution and delivery of this
Agreement, Davel, Holdings and the Company have entered into an Agreement and
Plan of Merger and Reorganization (the "Merger Agreement"), dated the date
hereof, pursuant to which a newly formed subsidiary of Davel or Holdings will be
merged with and into the Company with the Company surviving as a wholly owned
subsidiary of Davel or Holdings (the "Peoples/Davel Merger");
WHEREAS, the consummation of the Peoples/Davel Merger and the other
transactions contemplated by the Merger Agreement (the "Transaction") is subject
to certain conditions, including the approval of the Merger Agreement by (i)
two-thirds of the holders of the outstanding shares of common stock, par value
$.01 per share, of the Company ("Peoples Common Stock") and the Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred"), voting as a
single class, with each share of Series C Preferred entitled to one vote for
each share of Peoples Common Stock issuable upon the conversion thereof and (ii)
by the holders of a majority of the outstanding shares of the Series C Preferred
voting as a separate class;
WHEREAS, 160,000 shares of Series C Preferred have been authorized for
issuance, 150,000 shares of Series C Preferred have been issued and are
outstanding, and UBS is the holder of all 150,000 outstanding shares of Series C
Preferred (the "Preferred Shares");
WHEREAS, the Preferred Shares are convertible into an aggregate of
2,857,143 shares of Peoples Common Stock (the "Common Shares");
WHEREAS, under the terms of the Merger Agreement, upon the conversion
of all of the Preferred Shares into the Common Shares prior to the Effective
Time, as contemplated by this Agreement, UBS will be entitled to receive in the
Peoples/Davel Merger, in exchange for all of the Common Shares, 671,428 shares
of the common stock of Davel or, if applicable, Holdings (plus cash in lieu of
any fractional share); and
WHEREAS, as a condition to the willingness of the Company, Davel and
Holdings to enter into the Merger Agreement, UBS has agreed as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereby agree
as follows:
<PAGE> 2
ARTICLE I
COVENANTS OF UBS
Section 1.1 Agreement to Convert Preferred Shares. UBS covenants and
agrees with the Company, Davel and Holdings that, not later than immediately
prior to the effective time of the Peoples/Davel Merger (the "Effective Time"),
UBS will convert all of the Preferred Shares into the Common Shares issuable
upon conversion of the Preferred Shares and will continue to hold the Common
Shares through the Effective Time. In addition, UBS covenants and agrees with
the Company, Davel and Holdings that it will, except as provided in Section 1.4,
continue to hold the Preferred Shares through the record date of the Peoples
Stockholders Meeting (as hereinafter defined) so that UBS is the holder of
record of all of the Series C Preferred entitled to vote at the Peoples
Stockholders Meeting.
Section 1.2 Agreement to Vote. At any meeting of the stockholders of
the Company held prior to the Termination Date (as hereinafter defined), however
called ("Peoples Stockholders Meeting"), and at every reconvened meeting
following any adjournment or postponement thereof prior to the Termination Date,
or in connection with any written consent of the stockholders of the Company
executed prior to the Termination Date, UBS shall vote all of the Preferred
Shares in favor of the approval of the Merger Agreement, the Peoples/Davel
Merger and any actions required in furtherance thereof which requires
stockholder approval. Prior to the Termination Date and subject to Section 1.4,
UBS shall not enter into any agreement or understanding with any person,
directly or indirectly, to vote, grant any proxy or give instructions with
respect to the voting of the Preferred Shares or the Common Shares issued upon
conversion thereof in any manner inconsistent with the preceding sentence.
Section 1.3 Proxies. (a) UBS hereby revokes any and all previous
proxies granted with respect to matters set forth in Section 1.2 for the
Preferred Shares and the Common Shares.
(b) Prior to the Termination Date, UBS shall not grant any proxies
or powers of attorney with respect to matters set forth in Section 1.2, deposit
any of the Preferred Shares or Common Shares into a voting trust or enter into a
voting agreement, other than this Agreement, with respect to any of the
Preferred Shares or Common Shares, in each case with respect to such matters.
Section 1.4 Transfer of Shares by UBS. Prior to the Termination Date,
UBS shall not (a) pledge or place any encumbrance on any Preferred Shares or
Common Shares, other than pursuant to this Agreement, or (b) transfer, sell,
exchange or otherwise dispose of any Preferred Shares or Common Shares, in each
case, unless the pledgee, encumbrance holder, transferee, purchaser or acquiror
of such shares enters into a voting agreement with the Company containing
substantially the same terms as are set forth in Sections 1.1, 1.2, 1.3 and 1.4
of this Agreement.
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<PAGE> 3
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF UBS
UBS represents, warrants and covenants to the Company, Davel and
Holdings that:
Section 2.1 Ownership. As of the date hereof, UBS is the beneficial
owner of 150,000 Preferred Shares, free and clear of all liens, charges and
encumbrances. UBS will have the sole right to vote the Preferred Shares and,
upon the conversion of the Preferred Shares, UBS will be the beneficial and
record owner of, and have the sole right to vote, the Common Shares and, subject
to this Agreement, there will be no restrictions on rights of disposition or
other liens pertaining to the Common Shares. UBS has not agreed to subject any
Preferred Shares or Common Shares to any voting trust or other agreement,
arrangement or restriction with respect to the voting of the Preferred Shares or
the Common Shares.
Section 2.2 Authority and Non-Contravention. UBS has the right, power
and authority to enter into this Agreement and, subject to the issuance to UBS
of the Common Shares, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by UBS and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary action on the part of UBS. This Agreement has been
duly executed and delivered by UBS and constitutes a valid and binding
obligation of UBS, enforceable against UBS in accordance with its terms, subject
to general principles of equity and as may be limited by bankruptcy, insolvency,
moratorium, or similar laws affecting creditors' rights generally. Neither the
execution and delivery of this Agreement by UBS nor the consummation by UBS of
the transactions contemplated hereby will (i) materially violate, or require any
consent, approval or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to UBS, the Preferred Shares or,
upon issuance thereof to UBS, the Common Shares or (ii) violate or conflict with
the certificate of incorporation or bylaws of UBS or constitute a material
violation of or default under any contract, commitment, agreement,
understanding, arrangement or other restriction of any kind to which UBS is a
party or by which UBS or its assets are bound.
Section 2.3 Total Shares. As of the date hereof, UBS does not own,
beneficially (other than through ownership of the Series C Preferred or through
options granted to representatives of UBS in their capacity as directors of the
Company) or of record, any shares of capital stock of the Company. Other than
the Preferred Shares and options granted to representatives of UBS in their
capacity as directors of the Company, UBS does not have any option to purchase
or right to subscribe for or otherwise acquire any securities of the Company and
has no other interest in or voting rights with respect to any other securities
of the Company.
Section 2.4 Notifications. Prior to the Termination Date, UBS will
notify the Company promptly of the number of any shares of capital stock of the
Company acquired by UBS after the date hereof.
Section 2.5 Delivery of Affiliate Letter. In the event that counsel to
the Company reasonably determines that UBS is an affiliate of the Company for
purposes of Rule 145 under the
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<PAGE> 4
Securities Act of 1933, as amended, or for purposes of pooling-of-interests
accounting treatment, UBS agrees to execute and deliver to the Company not later
than 30 days prior to the Effective Time an Affiliate Letter substantially in
the form attached hereto as Exhibit A.
ARTICLE III
COVENANTS OF THE COMPANY, DAVEL AND HOLDINGS
Each of the Company, Davel and Holdings covenants to UBS on behalf of
itself that:
Section 3.1 Corporate Governance. Davel and Holdings agree that at the
Effective Time and thereafter, Davel and Holdings shall exercise all authority
to cause Charles J. Delaney or Justin S. Maccarone, as determined by UBS
(including any principal or employee of UBS or one of its affiliates who is
appointed by UBS to replace such initial designee, the "UBS Designee") to be
elected as a member of the Board of Directors of Davel or, if the PhoneTel/Davel
Merger (as defined in the Merger Agreement, the "PhoneTel/Davel Merger") shall
have occurred, Holdings, in either case until the first anniversary of the
Effective Time; provided, however, that if UBS shall at any time during such
one-year period be the beneficial owner of less than 95% of the number of shares
of common stock of Davel or, if applicable, Holdings received by UBS in the
Peoples/Davel Merger (i.e., 818,105 shares, subject to adjustment for stock
splits, combinations and reclassifications), then the UBS Designee shall
immediately thereupon resign as a member of such Board of Directors.
Section 3.2 Merger Consideration for the Preferred Shares. Davel,
Holdings and the Company agree with UBS that, at the Effective Time, the
2,857,143 Common Shares into which UBS shall have converted the 150,000
Preferred Shares shall be entitled to receive therefor 671,428 shares of common
stock of Davel (or, if the PhoneTel/Davel Merger shall have occurred, of
Holdings), plus cash in lieu of any fractional share. In addition, in
consideration of accrued but unpaid dividends on the Preferred Shares plus the
agreed-upon future fair value of the Preferred Shares should they have remained
outstanding after the Effective Time, Davel and Holdings shall pay or cause to
be paid to UBS upon the consummation of the Peoples/Davel Merger an additional
189,735 (plus such additional number as will equal in value (calculated based on
the Exchange Ratio set forth in the Merger Agreement multiplied by the closing
price of the common stock of Davel on the trading day immediately prior to the
date hereof) any additional dividends on the Preferred Shares accruing after the
date hereof and prior to the Effective Time) shares (plus cash in lieu of any
fractional share) of the common stock of Davel (or, if the PhoneTel/Davel Merger
shall have occurred, of Holdings).
Section 3.3 Registration Rights. UBS, the Company, Davel and Holdings
agree that, as of the Effective Time, all of the rights of UBS and all of the
obligations of the Company and its successors and assigns as set forth in the
Registration Rights Agreement, dated as of July 19, 1995, by and among the
Company, UBS and Appian Capital Partners, L.L.C. (as amended, the "Existing
Registration Agreement") shall terminate and, with respect to such parties, the
Existing Registration Agreement shall be of no further force or effect. In lieu
thereof, in the event that the UBS Designee resigns or is otherwise no longer
serving or, in accordance with Section 3.1, is no longer entitled to
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<PAGE> 5
serve as a member of the Board of Directors of Davel or Holdings, the provisions
set forth in Exhibit B hereto shall become effective.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS OF
THE COMPANY, DAVEL AND HOLDINGS
Each of the Company, Davel and Holdings represents, warrants and
covenants to UBS on behalf of itself that:
Section 4.1 Authority and Non-Contravention. It has the right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
it and the consummation of the transactions contemplated by this Agreement have
been duly authorized by all necessary action on the part of it. This Agreement
has been duly executed and delivered by it and constitutes a valid and binding
obligation of it, enforceable against it in accordance with its terms, subject
to general principles of equity and as may be limited by bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally. Neither the
execution and delivery of this Agreement nor the consummation by it of the
transactions contemplated hereby will (i) materially violate, or require any
consent, approval or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to it or (ii) violate or conflict
with the certificate or articles of incorporation or by laws of it or constitute
a material violation of or default under any contract, commitment, agreement,
understanding, arrangement or other restriction of any kind to which it is a
party or by which it or its assets are bound.
ARTICLE V
MISCELLANEOUS
Section 5.1 Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such costs or expenses;
provided, however, that the Company shall pay reasonable fees and expenses of
counsel to UBS incurred in connection with the negotiation and execution of this
Agreement.
Section 5.2 Further Assurances. From time to time, at the request of
the Company, Davel or Holdings in the case of UBS, or at the request of UBS in
the case of the Company, Davel or Holdings, and without further consideration,
each party shall execute and deliver or cause to be executed and delivered such
additional documents and instruments and take all such further action as may be
reasonably necessary or desirable to consummate the transactions contemplated by
this Agreement.
Section 5.3 Specific Performance. Each party hereto agrees that the
other parties hereto would be irreparably damaged if for any reason it fails to
perform any of its obligations under this
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<PAGE> 6
Agreement, and that the other parties would not have an adequate remedy at law
for money damages in such event. Accordingly, the aggrieved party shall be
entitled to seek specific performance and injunctive and other equitable relief
to enforce the performance of this Agreement by the other parties hereto. This
provision is without prejudice to any other rights that each party may have
against the other parties hereto for any failure to perform their obligations
under this Agreement.
Section 5.4 Amendments, Termination. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by each
party hereto. The representations, warranties, covenants and agreements set
forth in Article I, Article II, Article III (other than Sections 3.1 and 3.3
thereof) and Article IV shall terminate, except with respect to liability for
prior breaches thereof, upon the earliest to occur of (i) termination of the
Merger Agreement in accordance with its terms, (ii) the Closing Date (as defined
in the Merger Agreement) and (iii) the date, if any, upon which the Company's
Board of Directors withdraws, modifies or changes its recommendation or approval
of the Merger Agreement or the Peoples/Davel Merger in a manner adverse to Davel
and Holdings (the "Termination Date").
Section 5.5 Assignment. Subject to Section 1.4 hereof and the
provisions of Exhibit B, neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
Section 5.6 Entire Agreement. This Agreement (including the documents
referred to herein) (a) constitutes the entire agreement, and supersedes all
prior agreements and understandings, both oral and written between the parties
with respect to the subject matter of this Agreement and (b) is not intended to
confer upon any person other than the parties hereto any rights or remedies.
Section 5.7 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
documented overnight delivery service or telecopied with confirmation of
receipt, to the parties at the addresses specified below (or at such other
address or telecopy or telex number for a party as shall be specified by like
notice):
If to the Company, to:
Peoples Telephone Company, Inc.
2300 N.W. 89th Place
Miami, Florida 33172
Attention: General Counsel
Facsimile: (305) 593-6116
with copies to:
Steel Hector & Davis LLP
200 South Biscayne Blvd.
Miami, Florida 33131-2398
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<PAGE> 7
Attention: Ira N. Rosner, P.A.
Facsimile: (305) 577-7001
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John Madden, Esq.
Facsimile: (212) 848-7179
If to Davel or Holdings, to:
Davel Communications Group, Inc.
1429 Massaro Boulevard
Tampa, Florida 33619
Attention: Theodore C. Rammelkamp, Jr.
Facsimile: (813) 626-9610
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: R. Scott Falk
Facsimile: (312) 861-2200
If to UBS, to:
UBS Capital II LLC
299 Park Avenue
New York, New York 10171
Attention: Justin S. Maccarone
Facsimile: (212) 821-6333
with a copy to:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Nancy Fuchs
Facsimile: (212) 836-7150
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<PAGE> 8
Section 5.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 5.9 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and, shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties in original or facsimile
form.
Section 5.10 Interpretation. The headings contained in this Agreement
are inserted for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 5.11 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 5.12 Consent to Jurisdiction. Each party hereto irrevocably
submits to the nonexclusive jurisdiction of (a) the state courts of the State of
New York and (b) the United States federal district courts located in the State
of New York for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transaction contemplated hereby.
Section 5.13 Attorney's Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
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<PAGE> 9
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the date first above written.
UBS CAPITAL II LLC
By: /s/ Justin S. Maccarone
-----------------------------
Name: Justin S. Maccarone
-----------------------------
Title: Managing Director
-----------------------------
PEOPLES TELEPHONE COMPANY, INC.
By: /s/ E. Craig Sanders
-----------------------------
Name: E. Craig Sanders
-----------------------------
Title: CEO/President
-----------------------------
DAVEL HOLDINGS, INC.
By: /s/ David Hill
-----------------------------
Name: David Hill
-----------------------------
Title: President
-----------------------------
DAVEL COMMUNICATIONS GROUP, INC.
By: /s/ David Hill
-----------------------------
Name: David Hill
-----------------------------
Title: Chairman
-----------------------------
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<PAGE> 10
EXHIBIT A
Davel Communications Group, Inc.
1429 Massaro Boulevard
Tampa, Florida 33619
Dear Sirs:
The undersigned, a holder of shares of common stock, par value $.01 per
share ("Peoples Common Stock"), of Peoples Telephone Company, Inc., a New York
corporation ("Peoples"), is entitled to receive in connection with the merger
(the "Merger") of Peoples with and into a wholly owned subsidiary of Davel
Communications Group, Inc., an Illinois corporation ("Davel"), shares of common
stock, no par value (the "Davel Common Stock"), of Davel. [SUBSTITUTE DAVEL
HOLDINGS, INC. FOR DAVEL COMMUNICATIONS GROUP, INC. THROUGHOUT THIS LETTER IF
PHONETEL/DAVEL MERGER HAS OCCURRED.] The undersigned has been advised that the
undersigned may be deemed an "affiliate" of Peoples within the meaning of Rule
145 ("Rule 145") promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), by the Securities and Exchange Commission (the "SEC") and may
be deemed an "affiliate" of Peoples for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations. Nothing contained
herein should be construed as an admission that I am an "affiliate" of Peoples
as described in the immediately preceding sentence.
If, in fact, the undersigned were an affiliate under the Securities
Act, the undersigned's ability to sell, assign or transfer the shares of Davel
Common Stock received by the undersigned in exchange for any shares of Peoples
Common Stock in connection with the Merger may be restricted unless such
transaction is registered under the Securities Act or an exemption from such
registration is available. The undersigned understands that such exemptions are
limited and the undersigned has obtained or will obtain advice of counsel as to
the nature and conditions of such exemptions, including information with respect
to the applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act. The undersigned understands that Davel
will not be required to maintain the effectiveness of any registration statement
under the Securities Act for the purposes of sale, transfer or other disposition
of shares of Davel Common Stock by the undersigned (other than pursuant to the
Registration Rights Agreement, dated _______, 1998, between Davel and the
undersigned) or take any action (other than to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended, so long as it
is subject to such requirements) to make compliance with an exemption from
registration available to the undersigned.
The undersigned hereby represents to and covenants with Davel that the
undersigned will not sell, assign or transfer any of the shares of Davel Common
Stock received by the undersigned in exchange for shares of Peoples Common Stock
in connection with the Merger except (i) pursuant to an effective registration
statement under the Securities Act, (ii) in conformity with the volume and other
limitations of Rule 145 or (iii) in a transaction which, in the opinion of the
general counsel of Davel or other counsel reasonably satisfactory to Davel or as
described in a "no-action"
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<PAGE> 11
or interpretive letter from the staff of the SEC specifically issued with
respect to a transaction to be engaged in by the undersigned, is not required to
be registered under the Securities Act.
The undersigned hereby further represents to and covenants with Davel
that from the date that is 30 days prior to the Effective Time (as defined in
the Agreement and Plan of Merger, dated as of _______, 1998, by and among Davel,
Davel Holdings, Inc. and Peoples), the undersigned will not sell, transfer or
otherwise dispose of any shares of Peoples Common Stock held by the undersigned
and that the undersigned will not sell, transfer or otherwise dispose of any
shares of Davel Common Stock received by the undersigned in the Merger until
after such time as results covering at least 30 days of post-Merger combined
operations of Peoples and Davel have been published by Davel, in the form of a
quarterly earnings report, an effective registration statement filed with the
SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes such combined results of operations, except after
prior written notice to Davel of the undersigned's intention to make such sale
and Davel's determination that such sale would not reasonably be expected to
adversely affect the qualification of the Merger as a pooling-of-interests.
In the event of a sale or other disposition by the undersigned of
shares of Davel Common Stock pursuant to Rule 145 or other exempt transaction,
the undersigned will supply Davel with evidence of compliance with such Rule, in
the form of a letter in the form of Annex I hereto or the opinion of counsel or
no-action letter referred to above, as the case may be. The undersigned
understands that Davel may instruct its transfer agent to withhold the transfer
of any shares of Davel Common Stock disposed of by the undersigned, but that
(provided such transfer is not prohibited by any other provision of this letter
agreement) upon receipt of such evidence of compliance, Davel shall cause the
transfer agent to effectuate the transfer of the shares of Davel Common Stock
sold as indicated in such letter.
The undersigned acknowledges and agrees that the legend set forth below
will be placed on certificates representing the Davel Common Stock received by
the undersigned in connection with the Merger or held by a transferee thereof,
which legend will be removed by delivery of substitute certificates upon receipt
of an opinion in form and substance reasonably satisfactory to Davel from
counsel reasonably satisfactory to Davel to the effect that such legend is no
longer required for purposes of the Securities Act.
There will be placed on the certificates for Davel Common Stock issued
to the undersigned, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO A
BUSINESS COMBINATION WHICH IS BEING ACCOUNTED FOR AS A POOLING OF INTERESTS, IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933
APPLIES. THE SHARES HAVE NOT BEEN ACQUIRED BY THE HOLDER WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED (i) UNTIL SUCH TIME AS DAVEL SHALL HAVE PUBLISHED FINANCIAL RESULTS
COVERING AT LEAST 30 DAYS OF COMBINED OPERATIONS AFTER THE EFFECTIVE TIME AND
(ii) EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF 1933."
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<PAGE> 12
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of Davel
Common Stock and (ii) the receipt by Davel of this letter is an inducement to
Davel's obligations to consummate the Merger.
Very truly yours,
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<PAGE> 13
ANNEX I TO EXHIBIT A
[Date]
[Name]
On __________, the undersigned sold shares of common stock (the "Davel
Common Stock") of Davel Communications Group, Inc., an Illinois corporation
("Davel"), which were received by the undersigned in connection with the merger
of Peoples Telephone Company, Inc. with and into a wholly owned subsidiary of
Davel.
Based upon the most recent report or statement filed by Davel with the
Securities and Exchange Commission, the shares of Davel Common Stock sold by the
undersigned were within the prescribed limitations set forth in paragraph (e) of
Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
The undersigned hereby represents that the shares of Davel Common Stock
were sold in "brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that term is
defined in Section 3(a)(38) of the Securities Exchange Act of 1934, as amended.
The undersigned further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Davel Common Stock, and that
the undersigned has not made any payment in connection with the offer or sale of
the Davel Common Stock to any person other than to the broker who executed the
order in respect of such sale.
Very truly yours,
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<PAGE> 14
EXHIBIT B
(a) All capitalized terms used but not defined in this Exhibit B
shall have the meanings assigned to them in the Agreement to which this Exhibit
B is attached. For purposes of the provisions contained in this Exhibit B:
(i) The term "Common Stock" means the common stock, no
par value of Davel or, if the PhoneTel/Davel Merger (as defined in the
Merger Agreement) has occurred, the common stock, par value $.01 per
share, of Holdings.
(ii) The term "Holder" means, at any given time, UBS,
provided that UBS owns of record shares of Common Stock of the Issuer
at such time, and any affiliate of UBS who then owns of record
Registrable Securities, provided that such affiliate has previously
executed and delivered a written counterpart to this Agreement.
(iii) The term "Issuer" means Davel or Holdings, as
applicable.
(iv) The term "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act.
(v) The term "Registrable Securities" means shares of
Common Stock of the Issuer held, from time to time, by any Holder.
(vi) The term "Rule 415 Offering" means an offering on a
delayed or continuous basis pursuant to Rule 415 (or any successor rule
to similar effect) promulgated under the Securities Act.
(vii) The term "SEC" means the Securities and Exchange
Commission or any governmental agency that is a successor thereto.
(viii) The term "Securities Act" means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
(ix) The term "Shelf Registration Statement" means a
registration statement intended to effect a shelf registration in
connection with a Rule 415 Offering.
(b) On a single occasion, the Issuer shall, upon the written
request of Holder, prepare and file with the SEC a registration statement with
respect to all or any portion of (or at the request of UBS a Shelf Registration
Statement with respect to all shares of) the Issuer's Common Stock acquired by
UBS in or in connection with the Peoples/Davel Merger for distribution of such
stock in the manner or manners specified in such request and use its reasonable
best efforts to cause such registration statement to become effective and keep
such registration statement effective until such time as such shares have been
sold or disposed of thereunder or sold, transferred or otherwise disposed of to
a person that is not a Holder (but in any event, with respect to a registration
statement
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<PAGE> 15
other than a Shelf Registration Statement, no later than the third anniversary
of the date such registration statement becomes effective); provided, however,
that Holder shall not be entitled to demand registration of Common Stock
pursuant to this paragraph (b) in an underwritten public offering if, at the
time of such request, such Holder does not beneficially own at least 25% of the
number of shares of Common Stock received by UBS in or in connection with the
Peoples/Davel Merger; and provided further that if, at any time after giving a
written request for registration (other than a shelf registration) and prior to
the effective date of the registration statement filed in connection with such
request, the managing underwriters of such offering determine that the aggregate
amount of shares requested to be registered by the Holders of the Registrable
Securities, together with the amount of shares requested by all persons and
entities ("Other Persons") exercising (with respect to such offering) incidental
registration rights granted to such Other Persons by Davel or Holdings, could
materially and adversely affect such offering, then the Issuer may reduce the
number of Registrable Securities of such Holders to be included in such offering
to the maximum number of shares that the underwriters deem advisable, and the
Issuer will allocate the number of securities to be registered among such
Holders and Other Persons on a pro rata basis in accordance with the number of
shares each Holder and Other Person initially requested to be sold (it being
understood that if, as a result of such reduction and allocation, less than 75%
of the Registrable Securities requested by such Holders to be included in such
offering are so included, then the Holders shall again be entitled to the
benefits of this paragraph (b)). Notwithstanding the foregoing, if the Issuer
shall furnish to Investor a certificate signed by the Chief Executive, Chief
Operating, or Chief Financial Officer of the Issuer stating that, in the good
faith judgment of a majority of the Issuer's directors, it would be materially
detrimental to the Issuer for such registration statement to be filed, the
Issuer shall have the right to defer such filing for a period of not more than
90 days after receipt of UBS' request; provided that the Issuer may not utilize
this right more than once in any 12-month period.
(c) If the Issuer proposes to register any Common Stock to be
issued by it or held by any other person ("Other Securities") in a public
offering under the Securities Act, on a form and in a manner which would permit
registration of Registrable Securities for sale to the public under the
Securities Act, it will give prompt written notice to each Holder of its
intention to do so, and upon the written request of a Holder delivered to the
Issuer within fifteen business days after the giving of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such Holder and the intended method of disposition thereof), the Issuer will use
its reasonable best efforts to effect, in connection with the registration of
the Other Securities, the registration under the Securities Act of all
Registrable Securities which the Issuer has been so requested to register by
such Holder, to the extent required to permit the disposition (in accordance
with the intended method or methods thereof as aforesaid) of the Registrable
Securities so to be registered, provided that:
(i) if, at any time after giving such written notice of
its intention to register any Other Securities and prior to the
effective date of the registration statement filed in connection with
such registration, the managing underwriters of such offering or
offerings determine that the aggregate amount of shares to be
registered by the Holders of the Registrable Securities, together with
all other shares requested by all other persons or entities to be
included in such offering, could materially and adversely affect such
offering, then the Issuer may reduce the number of Registrable
Securities of such Holders or such other persons or entities to be
included in such offering to the maximum number of shares that the
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<PAGE> 16
underwriters deem advisable, and the Issuer will allocate the number of
securities to be registered among such Holders and other persons or
entities on a pro rata basis in accordance with the number of shares
each Holder and other person or entity initially requested to be sold.
(ii) the Issuer shall not be required to effect any
registration of Registrable Securities under this paragraph (c)
incidental to the registration of any of its securities in connection
with (A) mergers, acquisitions or exchange offers on Form S-4 or any
successor form, (B) dividend reinvestment plans or (C) stock option or
other employee benefit plans; and
(iii) Holders, cumulatively, shall have the right to
exercise registration rights pursuant to this paragraph (c) without
limit during the term hereof.
No registration of Registrable Securities effected under this paragraph (c)
shall relieve the Issuer of its obligation to effect a registration of
Registrable Securities pursuant to paragraphs (b) or (c).
(d) Whenever the Issuer is required to effect a registration
statement pursuant to paragraphs (b) or (c), the Issuer shall, as expeditiously
as reasonably possible:
(i) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered thereby.
(ii) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities covered by such registration statement owned by
them.
(iii) Use its reasonable best efforts to register and
qualify the securities covered by such registration statement under
such other securities or Blue Sky laws of such states or other
jurisdictions as shall be reasonably requested by any Holder, provided
that the Issuer shall not be required to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions where it is not so subject.
(iv) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and then
use its best efforts to promptly correct such statement or omission.
Notwithstanding the foregoing and anything to the contrary set forth in
this paragraph (d), each Holder acknowledges that the Issuer shall have
the right to suspend the use of the prospectus forming a part of a
registration statement if such offering would interfere with a pending
corporate transaction or for other reasons until such time as an
amendment to the registration
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<PAGE> 17
statement has been filed by the Issuer and declared effective by the
SEC, or until such time as the Issuer has filed an appropriate
disclosure report with the SEC. Each Holder hereby covenants that it
will (i) keep any such notice strictly confidential, and (ii) not sell
any shares of Common Stock pursuant to such prospectus during the
period commencing at the time at which the Issuer gives the Holder
notice of the suspension of the use of such prospectus and ending at
the time the Issuer gives the Holder notice that it may thereafter
effect sales pursuant to such prospectus. The Issuer shall only be able
to suspend the use of such prospectus for periods aggregating no more
than 90 days in respect of any registration.
(v) Make available for inspection by any Holder of
Registrable Securities included in such registration statement, any
underwriter participating in any offering pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
such Holder or underwriter (collectively, the "Inspectors"), all
financial and other records and other information, pertinent corporate
documents and properties of any of the Issuer and its subsidiaries and
affiliates (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence
responsibilities; provided, however, that the Records that the Issuer
determines, in good faith, to be confidential and which it notifies the
Inspectors in writing are confidential shall not be disclosed to any
Inspector unless such Inspector signs a confidentiality agreement
reasonably satisfactory to the Issuer (which shall permit the
disclosure of such Records in such registration statement or the
related prospectus if necessary to avoid or correct a material
misstatement in or material omission from such registration statement
or prospectus) and either (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction; provided, further, that (A) any decision regarding the
disclosure of information pursuant to subclause (i) shall be made only
after consultation with counsel for the applicable Inspectors and the
Issuer and (B) with respect to any release of Records pursuant to
subclause (ii), each Holder of Registrable Securities agrees that it
shall, promptly after learning that disclosure of such Records is
sought in a court having jurisdiction, give notice to the Issuer so
that the Issuer, at the Issuer's expense, may undertake appropriate
action to prevent disclosure of such Records.
(vi) Enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the Holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities
(including obtaining opinions of counsel and "cold comfort" letters and
updates thereof from the Issuer's independent certified public
accountants).
(e) It shall be a condition precedent to the obligations of the
Issuer to take any action pursuant to this Agreement with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Issuer such information regarding itself, the Registrable Securities held by
it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities and
as may be required from time to time to keep such registration current.
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<PAGE> 18
(f) All expenses incurred by or on behalf of the Issuer in
connection with registrations, filings or qualifications pursuant to paragraphs
(b) or (c), including, without limitation, all registration, filing and
qualification fees, printers' and accounting fees, and fees and disbursements of
counsel for the Issuer, shall be borne by the Issuer. In no event shall the
Issuer be obligated to bear any underwriting discounts or commissions or
brokerage fees or commissions relating to Registrable Securities or, except as
otherwise set forth herein, the fees and expenses of counsel to the selling
Holders.
(g) In the event of registration of any Registrable Securities
hereunder:
(i) To the extent permitted by law, the Issuer will
indemnify and hold harmless each Holder and the affiliates of such
Holder, and their respective directors, officers, general and limited
partners, agents and representatives (and the directors, officers,
affiliates and controlling persons thereof), and each other person, if
any, who controls such Holder within the meaning of the Securities Act,
against any losses, claims, damages, or liabilities ("Losses"), joint
or several, to which they may become subject under the Securities Act
or other federal or state law, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary
prospectus (provided that this indemnity shall not apply to the extent
that the Losses are attributable to an untrue statement or alleged
untrue statement of any material fact or omission or alleged omission
to state a material fact in a preliminary prospectus that was corrected
in a final prospectus which was provided to the Holder on a timely
basis but which the Holder or the underwriters failed to deliver to the
purchaser within the time required by applicable securities laws)
contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading (but only if such omission is not corrected in the final
prospectus), or (iii) any violation or alleged violation by the Issuer
in connection with the registration of Registrable Securities under the
Securities Act, any state securities law or any rule or regulation
promulgated under the Securities Act or any state securities law; and
the Issuer will pay to each such Holder, affiliate or controlling
person, as incurred, any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such Loss or
action; provided, however, that the indemnity contained in this
subparagraph (g)(i) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Issuer (which consent shall not be
unreasonably withheld), nor shall the Issuer be liable in any such case
for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by or on behalf
of such Holder or its Affiliates or controlling person. Each
indemnified party shall furnish such information regarding itself or
the claim in question as an indemnifying party may reasonably request
in writing and as shall be reasonably required in connection with the
defense of such claim and litigation resulting therefrom.
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<PAGE> 19
(ii) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Issuer, each of its directors,
each of its officers who has signed the registration statement, each
person, if any, who controls the Issuer within the meaning of the
Securities Act, any underwriter, any other Holder selling securities in
such registration statement and any controlling person of any such
underwriter or other Holder, against any Losses, joint or several, to
which any of the foregoing persons may become subject, under the
Securities Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
pay, as incurred, any legal or other expenses reasonably incurred by
any person intended to be indemnified pursuant to this subparagraph
(g)(ii) in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the
indemnity contained in this subparagraph (g)(ii) shall not apply to
amounts paid in settlement of any such Loss or action if such
settlement is effected without the consent of such Holder, which
consent shall not be unreasonably withheld; provided, that, in no event
shall any indemnity under this subparagraph (g)(ii) exceed the gross
proceeds from the offering received by such Holder.
(iii) Promptly after receipt by an indemnified party of
notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is
to be made against any indemnifying party under this paragraph (g),
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate
in, and, to the extent the indemnifying party so desires, jointly with
any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties. The failure
to deliver written notice to the indemnifying party within a reasonable
time after the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
paragraph (g) to the extent of such prejudice, but the omission so to
deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than
under this paragraph (g). The indemnified party shall have the right,
but not the obligation, to participate in the defense of any action
referred to above through counsel of its own choosing and shall have
the right, but not the obligation, to assert any and all separate
defenses, cross claims or counterclaims which it may have, and the fees
and expenses of such counsel shall be at the expense of such
indemnified party unless (A) the employment of such counsel has been
specifically authorized in advance by the indemnifying party, (B) there
is a conflict of interest that prevents counsel for the indemnifying
party from adequately representing the interests of the indemnified
party or there are defenses available to the indemnified party that are
different from, or additional to, the defenses that are available to
the indemnifying party, (C) the indemnifying party does not employ
counsel that is reasonably satisfactory to the indemnified party within
a reasonable period of time, or (D) the indemnifying party fails to
assume the defense or does not reasonably contest such action in good
faith, in which case, if the indemnified party notifies the
indemnifying party that it elects to employ separate counsel, the
indemnifying party shall not have the right to assume the defense of
such action on behalf of the indemnified party and the reasonable fees
and
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<PAGE> 20
expenses of such separate counsel shall be borne by the indemnifying
party; provided, however, that, the indemnifying party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more
than one separate firm (in addition to, to the extent reasonably
necessary to employ local counsel, one firm acting as local counsel)
for all indemnified parties.
(iv) If the indemnification provided for in this paragraph
(g) is unavailable to an indemnified party in respect of any Losses
(other than in accordance with its terms), then each applicable
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such Losses, in such proportion as is appropriate
to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other hand, in connection with
the actions, statements or omissions that resulted in such Losses as
well as any other relevant equitable considerations. The relative fault
of such indemnifying party, on the one hand, and indemnified party, on
the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue statement
of a material fact or omission or alleged omission to state a material
fact, has been taken by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include
any legal or other fees or expenses incurred by such party in
connection with any investigation or proceeding. No contribution
required by this paragraph to be made by any Holder shall exceed the
gross proceeds from the offering received by such Holder.
(v) The obligations of the Issuer and the Holders under
this paragraph (g) shall survive the completion of any offering of
Registrable Securities in a registration statement under this
Agreement.
(vi) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the
underwriting agreement (if any) entered into in connection with any
underwritten public offering of the Registrable Securities are in
conflict with the foregoing provisions, the provisions in such
underwriting agreement shall control.
(h) With a view to making available to the holders the benefits of
Rule 144 and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Issuer to the public without registration or
pursuant to a registration on Form S-3, the Issuer agrees to:
(i) use its reasonable best efforts to make and keep
public information available, as those terms are understood and defined
in Rule 144;
(ii) use its reasonable best efforts to file with the SEC
in a timely manner all reports and other documents required under the
Securities Act and the Securities Exchange Act of 1934, as amended; and
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<PAGE> 21
(iii) furnish to any Holder forthwith upon request (i) a
written statement by the Issuer as to its compliance with the reporting
requirements of Rule 144, or as to whether it qualifies as a registrant
whose securities may be resold pursuant to Form S-3, (ii) a copy of the
most recent annual or quarterly report of the Issuer and such other
reports and documents so filed by the Issuer, and (iii) such other
information (and the Issuer shall take such action) as may be
reasonably requested in availing any Holder of any rule or regulation
of the SEC which permits the selling of any such securities without
registration or pursuant to such form.
(i) The rights to cause the Issuer to register Registrable
Securities pursuant to this Agreement may only be assigned by a Holder to a
transferee or assignee of any Registrable Securities if such transferee or
assignee is or becomes a Holder in connection with such transfer or assignment.
(j) The observance by the Issuer of any provision of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) with the written consent of the Holders of a
majority of the Registrable Securities, and any waiver effected in accordance
with this paragraph shall be binding upon each Holder of Registrable Securities.
(k) Each Holder of Registrable Securities, if requested by an
underwriter of any registered public offering of Issuer securities being sold in
a firm commitment underwriting, agrees not to sell or otherwise transfer or
dispose of any Common Stock (or other voting securities of the Issuer) held by
such Holder other than shares of Registrable Securities included in the
registration during the seven days prior to, and during a period of up to 180
days following, the effective date of the registration statement. Such agreement
shall be in writing in a form reasonably satisfactory to the Issuer and such
underwriter. The Issuer may impose stop-transfer instructions with respect to
the securities subject to the foregoing restriction until the end of the
required stand-off period. Notwithstanding the foregoing, Holder shall only be
bound by the provisions of this paragraph (k) if all other holders of Common
Stock entitled to registration rights are similarly restricted.
B-8
<PAGE> 1
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.
<PAGE> 2
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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<PAGE> 3
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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<PAGE> 4
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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<PAGE> 5
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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<PAGE> 6
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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<PAGE> 7
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/ David Hill
------------------------
Name: David Hill
------------------------
Title: Chairman
------------------------
PEOPLES TELEPHONE COMPANY, INC.
By: /s/ E. Craig Sanders
------------------------
Name: E. Craig Sanders
------------------------
Title: CEO/President
------------------------
<PAGE> 1
EXHIBIT 10.3
VOTING AGREEMENT
VOTING AGREEMENT, dated as of July 5, 1998, between David R. Hill, an
individual ("Hill"), and Peoples Telephone Company, Inc., a New York corporation
("Peoples").
WHEREAS, Peoples, Davel Communications Group, Inc., an Illinois
corporation ("Parent"), and Davel Holdings, Inc., a Delaware corporation
("Holdings"), have entered into an Agreement and Plan of Merger and
Reorganization dated as of July 5, 1998 (the "Merger Agreement"), pursuant to
which (a) a newly formed company ("Newco") will be organized as a New York
corporation and a direct, wholly owned subsidiary of Parent (or if the
Davel/PhoneTel Merger has, by the time of such formation, been consummated, of
Holdings) and (b) Newco will be merged (the "Peoples Merger") with and into
Peoples pursuant to the Merger Agreement.
WHEREAS, the consummation of the Peoples Merger and the other
transactions contemplated by the Merger Agreement (the "Transaction") will be
subject to certain conditions, including the approval of the Merger Agreement
and the Peoples Merger by the stockholders of Parent (or, if applicable,
Holdings), if required by applicable law or regulation or the rules of the
Nasdaq Stock Market.
WHEREAS, Hill is the record and beneficial owner of 1,851,533 shares of
Parent Common Stock, representing approximately 32.1% of the shares of Parent
Common Stock outstanding as of the date hereof (such 1,851,533 shares, together
with any other shares of capital stock of Parent acquired by Hill after the date
hereof and during the term of this Agreement, as such number may be reduced upon
the exercise by Samstock, L.L.C. of warrants to purchase up to 131,250 of such
shares, being collectively referred to herein as the "Shares"). If the
Davel/PhoneTel Merger is consummated, the term "Shares" shall refer to shares of
Holdings Common Stock.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Terms used but not defined herein shall have the respective
meaning given to such terms in the Merger Agreement.
ARTICLE II
COVENANTS OF HILL
Section 2.1 Agreement to Vote. At any meeting of the shareholders of
Parent (or, if applicable, Holdings), held prior to the Termination Date (as
defined in Section 5.4 hereof), however called, and at every reconvened meeting
following any adjournment thereof prior to the Termination
<PAGE> 2
Date, or in connection with any written consent of the shareholders of Parent
(or, if applicable, Holdings) executed prior to the Termination Date, Hill shall
vote the Shares in favor of the approval of the Merger Agreement and each of the
actions contemplated by the Merger Agreement to be performed by Parent (or, if
applicable, Holdings) in connection with the Transaction and any actions
required in furtherance thereof. After the date hereof and prior to the
Termination Date and subject to Section 2.3 hereof, Hill shall not enter into
any agreement or understanding with any person, directly or indirectly, to vote,
grant any proxy or give instructions with respect to the voting of the Shares in
any manner inconsistent with the preceding sentence.
Section 2.2 Proxies.
(a) Hill hereby revokes any and all previous proxies granted with
respect to matters set forth in Section 2.1 for the Shares.
(b) After the date hereof and prior to the Termination Date, Hill shall
not grant any proxies or powers of attorney with respect to matters set forth in
Section 2.1, deposit any of the Shares into a voting trust or enter into a
voting agreement, other than this Agreement, the Stock Purchase Agreement, dated
May 14, 1998, by and between Hill and Samstock, L.L.C. (the "Stock Purchase
Agreement"), the Agreement, dated May 14, 1998, between Hill and Samstock,
L.L.C. (the "Hill/Samstock Voting Agreement"), the Voting Agreement, dated June
14, 1998, between Hill and PhoneTel Technologies, Inc. (the "Hill/PhoneTel
Voting Agreement" and, together with the Hill/Samstock Voting Agreement, the
"Voting Agreements"), the Investment Agreement, dated June 29, 1998, by and
among Hill, Parent and Samstock, L.L.C. (the "Investment Agreement"), the
Shareholders Agreement, dated as of June 29, 1998, by and among Hill, Samstock,
L.L.C. and, solely for purposes of Sections 2(a), 2(b), 3, 4, 6 and 8 through 19
thereof, Parent (the "Shareholders Agreement"), and any pledge agreement to be
executed between Hill and Samstock, L.L.C. (the "Pledge Agreement"), with
respect to any of the Shares, in each case with respect to such matters.
Section 2.3 Transfer of Shares by Hill. After the date hereof and prior
to the Termination Date, except as set forth in the Stock Purchase Agreement,
the Hill/Samstock Voting Agreement and the Pledge Agreement, Hill shall not (a)
pledge or place any encumbrance on any Shares, other than pursuant to this
Agreement, or (b) transfer, sell, exchange or otherwise dispose of any Shares,
in each case unless the pledgee, encumbrance holder, transferee, purchaser or
acquiror of such Shares enters into a Voting Agreement with Peoples containing
substantially the same terms as this Agreement.
Section 2.4 Action in Shareholder Capacity Only. Hill makes no
agreement or understanding herein in any capacity other than his capacity as a
record holder and beneficial owner of the Shares, and nothing herein shall limit
or affect any actions taken in any other capacity.
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<PAGE> 3
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF HILL
Hill represents, warrants and covenants to Peoples that:
Section 3.1 Ownership. Except as set forth in the Stock Purchase
Agreement, the Voting Agreements, the Investment Agreement, the Shareholders
Agreement and the Pledge Agreement, (i) Hill is, as of the date hereof, the
beneficial and record owner of 1,851,533 shares of Parent Common Stock and has
the sole right to vote such shares and (ii) there are no restrictions on rights
of disposition or other liens pertaining to such shares. None of such shares is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting of such shares other than pursuant to the Voting
Agreements, the Pledge Agreement, the Investment Agreement and the Shareholders
Agreement.
Section 3.2 Authority and Non-Contravention. Hill has the right, power
and authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly executed and
delivered by Hill and constitutes a valid and binding obligation of Hill,
enforceable against Hill in accordance with its terms, subject to general
principles of equity and as may be limited by bankruptcy, insolvency,
moratorium, or similar laws affecting creditors' rights generally. Neither the
execution and delivery of this Agreement by Hill nor the consummation by Hill of
the transactions contemplated hereby will (i) materially violate, or require any
consent, approval or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Hill or the Shares or (ii)
constitute a material violation of or default under any contract, commitment,
agreement, understanding, arrangement or other restriction of any kind to which
Hill is a party or by which Hill or his assets are bound.
Section 3.3 Total Shares. Except for options to purchase 234,196 shares
of Parent Common Stock (and except for rights issued pursuant to the Rights
Agreement, dated as of April 22, 1998, between Old Davel and Chase Mellon
Shareholder Services, L.L.C.), Hill does not have any option to purchase or
right to subscribe for or otherwise acquire any securities of Parent and has no
other interest in or voting rights with respect to any other securities of
Parent.
Section 3.4 Reasonable Efforts. Prior to the Termination Date, Hill
shall use reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with Parent in doing, all
things reasonably necessary, proper or advisable to consummate and make
effective, in the most expeditious manner reasonably practicable, the
Transaction.
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<PAGE> 4
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PEOPLES
Peoples represents, warrants and covenants to Hill that:
Section 4.1 Authority and Non-Contravention. Peoples has the right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Peoples and the consummation of the transactions contemplated by
this Agreement have been duly authorized by all necessary action on the part of
Peoples. This Agreement has been duly executed and delivered by Peoples and
constitutes a valid and binding obligation of Peoples, enforceable against
Peoples in accordance with its terms, subject to general principles of equity
and as may be limited by bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally. Neither the execution and delivery of
this Agreement nor the consummation by Peoples of the transactions contemplated
hereby will (i) materially violate, or require any consent, approval or notice
under, any provision of any judgment, order, decree, statute, law, rule or
regulation applicable to Peoples or (ii) violate or conflict with the
certificate of incorporation or bylaws of Peoples or constitute a material
violation of or default under any contract, commitment, agreement,
understanding, arrangement or other restriction of any kind to which Peoples is
a party or by which Peoples or its assets are bound.
ARTICLE V
MISCELLANEOUS
Section 5.1 Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such costs or expenses.
Section 5.2 Further Assurances. From time to time, at the request of
Peoples in the case of Hill, or at the request of Hill, in the case of Peoples,
and without further consideration, each party shall execute and deliver or cause
to be executed and delivered such additional documents and instruments and take
all such further action as may be reasonably necessary or desirable to
consummate the transactions contemplated by this Agreement.
Section 5.3 Specific Performance. Hill agrees that Peoples would be
irreparably damaged if for any reason Hill fails to perform any of Hill's
obligations under this Agreement, and that Peoples would not have an adequate
remedy at law for money damages in such event. Accordingly, Peoples shall be
entitled to seek specific performance and injunctive and other equitable relief
to enforce the performance of this Agreement by Hill. This provision is without
prejudice to any other rights that Peoples may have against Hill for any failure
to perform its obligations under this Agreement.
Section 5.4 Amendments, Termination. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by each
party hereto. The representations, warranties, covenants and agreements set
forth in Article II, Article III and Article IV shall terminate,
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<PAGE> 5
except with respect to liability for prior breaches thereof, upon the earliest
to occur of (i) termination of the Merger Agreement in accordance with its
terms, (ii) the Closing Date and (iii) the date, if any, upon which Peoples'
Board of Directors withdraws, modifies or changes its recommendation or approval
of the Merger Agreement or the Peoples Merger in a manner adverse to Parent (the
"Termination Date").
Section 5.5 Assignment. Subject to Section 2.3 hereof, neither this
Agreement nor any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of law or otherwise by any
of the parties without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
Section 5.6 Certain Events. Hill agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person to which legal or beneficial ownership of such shares shall pass, whether
by operation of law or otherwise.
Section 5.7 Entire Agreement. This Agreement (including the documents
referred to herein) (a) constitutes the entire agreement, and supersedes all
prior agreements and understanding, both oral and written between the parties
with respect to the subject matter of this Agreement and (b) is not intended to
confer upon any person other than the parties hereto any rights or remedies.
Section 5.8 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
documented overnight delivery service or telecopied with confirmation of
receipt, to the parties at the addresses specified below (or at such other
address or telecopy or telex number for a party as shall be specified by like
notice):
If to Peoples, to:
Peoples Telephone Company, Inc.
2300 N.W. 89th Place
Miami, Florida 33172
Attention: General Counsel
Telecopy number: (305) 593-6116
with a copy to:
Steel Hector & Davis LLP
200 South Biscayne Blvd.
Miami, Florida 33131-2398
Attention: Ira N. Rosner, P.A.
Facsimile: (305) 577-7001
and
Shearman & Sterling
599 Lexington Avenue
-5-
<PAGE> 6
New York, New York 10022
Attention: John Madden, Esq.
Facsimile: (212) 848-7179
If to Hill, to:
David R. Hill
601 West Morgan
Jacksonville, Illinois 62650
Telecopy number: (217) 243-6016
Section 5.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 5.10 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and, shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties in original or facsimile
form.
Section 5.11 Interpretation. The headings contained in this Agreement
are inserted for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 5.12 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 5.13 Consent to Jurisdiction. Each party hereto irrevocably
submits to the nonexclusive jurisdiction of (a) the state courts of the State of
Illinois and (b) the United States federal district courts located in the State
of Illinois for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transaction contemplated hereby.
Section 5.14 Attorney's Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
******
-6-
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the date first above written.
/s/ David R. Hill
---------------------------
David R. Hill
PEOPLES TELEPHONE COMPANY, INC.
By: /s/ E. Craig Sanders
----------------------------
Name: E. Craig Sanders
----------------------------
Title: CEO/President
----------------------------
<PAGE> 1
EXHIBIT 10.4
VOTING AGREEMENT
VOTING AGREEMENT, dated as of July 5, 1998, between Samstock, L.L.C., a
Delaware limited liability company ("Samstock"), and Peoples Telephone Company,
Inc., a New York corporation ("Peoples").
WHEREAS, Peoples, Davel Communications Group, Inc., an Illinois
corporation ("Parent"), and Davel Holdings, Inc., a Delaware corporation
("Holdings"), have entered into an Agreement and Plan of Merger and
Reorganization dated as of July 5, 1998 (the "Merger Agreement"), pursuant to
which (a) a newly formed company ("Newco") will be organized as a New York
corporation and a direct, wholly owned subsidiary of Parent (or if the
Davel/PhoneTel Merger has, by the time of such formation, been consummated, of
Holdings) and (b) Newco will be merged (the "Peoples Merger") with and into
Peoples pursuant to the Merger Agreement.
WHEREAS, the consummation of the Peoples Merger and the other
transactions contemplated by the Merger Agreement (the "Transaction") will be
subject to certain conditions, including the approval of the Merger Agreement
and the Peoples Merger by the stockholders of Parent (or, if applicable,
Holdings), if required by applicable law or regulation or the rules of the
Nasdaq Stock Market.
WHEREAS, Samstock is the record and beneficial owner of 1,623,900
shares of Parent Common Stock (which number excludes 350,000 shares of Parent
Common Stock that may be acquired by Samstock pursuant to warrants (the
"Warrants") issued by Parent and David R. Hill ("Hill")), representing
approximately 28.1% of the shares of Parent Common Stock outstanding on the date
hereof (such 1,623,900 shares, together with any other shares of capital stock
of Parent acquired by Samstock after the date hereof and during the term of this
Agreement, being collectively referred to herein as the "Shares"). If the
Davel/PhoneTel Merger is consummated, the term "Shares" shall refer to shares of
Holdings Common Stock.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Terms used but not defined herein shall have the respective
meanings given to such terms in the Merger Agreement.
<PAGE> 2
ARTICLE II
COVENANTS OF SAMSTOCK
Section 2.1 Agreement to Vote. At any meeting of the shareholders of
Parent held prior to the Termination Date (as defined in Section 5.4 hereof),
however called, and at every reconvened meeting following any adjournment
thereof prior to the Termination Date, or in connection with any written consent
of the shareholders of Parent executed prior to the Termination Date, Samstock
shall vote the Shares in favor of the approval of the Merger Agreement and each
of the actions contemplated by the Merger Agreement to be performed by Parent in
connection with the Transaction and any actions required in furtherance thereof.
After the date hereof and prior to the Termination Date and subject to Section
2.3 hereof, Samstock shall not enter into any agreement or understanding with
any person, directly or indirectly, to vote, grant any proxy or give
instructions with respect to the voting of the Shares in any manner inconsistent
with the preceding sentence.
Section 2.2 Proxies. (a) Samstock hereby revokes any and all previous
proxies granted with respect to matters set forth in Section 2.1 for the Shares.
(b) After the date hereof and prior to the Termination Date, Samstock
shall not grant any proxies or powers of attorney with respect to matters set
forth in Section 2.1, deposit any of the Shares into a voting trust or enter
into a voting agreement, other than this Agreement, the Stock Purchase
Agreement, dated May 14, 1998, by and between Hill and Samstock, L.L.C., the
Stock Purchase Agreement, dated May 14, 1998, by and between Parent and
Samstock, L.L.C., the Agreement, dated May 14, 1998, between Hill and Samstock,
L.L.C. (the "Hill/Samstock Voting Agreement"), the Investment Agreement, dated
June 29, 1998, by and among Hill, Parent and Samstock, L.L.C. (the "Investment
Agreement"), the Shareholders Agreement, dated as of June 29, 1998, by and among
Hill, Samstock, L.L.C. and, solely for purposes of Sections 2(a), 2(b), 3, 4, 6
and 8 through 19 thereof, Parent (the "Shareholders Agreement"), and the Pledge
Agreement, dated July __, 1998, between Hill and Samstock, L.L.C., with respect
to any of the Shares, in each case with respect to such matters.
Section 2.3 Transfer of Shares by Samstock. After the date hereof and
prior to the Termination Date, Samstock shall not (a) transfer, sell, exchange
or otherwise dispose of any Shares unless such transferee, purchaser or acquiror
enters into a voting agreement with Peoples containing substantially the same
terms as this Agreement or (b) pledge or place any encumbrance on any Shares,
other than pursuant to this Agreement and other than a pledge or encumbrance of
any Shares to any bank or other financial institution in connection with any
bona fide financing transaction by Samstock or any such transferee, purchaser or
acquiror, provided that such bank or financial institution, as a condition to
exercising its rights to seize and vote such Shares, enters into a voting
agreement with Peoples containing substantially the same terms as this
Agreement.
Section 2.4 Action in Shareholder Capacity Only. Samstock makes no
agreement or understanding herein in any capacity other than in its capacity as
a record holder and beneficial owner of the Shares, and nothing herein shall
limit or affect any actions taken in any other capacity.
-2-
<PAGE> 3
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF SAMSTOCK
Samstock represents, warrants and covenants to Peoples that:
Section 3.1 Ownership. Samstock is, as of the date hereof, the
beneficial and record owner of 1,623,900 shares of Parent Common Stock (which
number excludes 350,000 shares of Parent Common Stock that may be acquired by
Samstock pursuant to the Warrants), and has the sole right to vote such shares,
and, except as set forth in (i) the Hill/Samstock Voting Agreement, (ii) the
Voting Agreement dated June 14, 1998 between Samstock and PhoneTel Technologies,
Inc. (collectively, the "Voting Agreements"), (iii) the Investment Agreement and
(iv) the Shareholders Agreement, there are no restrictions on rights of
disposition or other liens pertaining to such shares. None of such shares is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting of such shares other than pursuant to the Voting
Agreements, the Investment Agreement and the Shareholders Agreement.
Section 3.2 Authority and Non-Contravention. Samstock has the right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Samstock and the consummation of the transactions contemplated by
this Agreement have been duly authorized by all necessary action on the part of
Samstock. This Agreement has been duly executed and delivered by Samstock and
constitutes a valid and binding obligation of Samstock, enforceable against
Samstock in accordance with its terms, subject to general principles of equity
and as may be limited by bankruptcy, insolvency, moratorium, or similar laws
affecting creditors' rights generally. Neither the execution and delivery of
this Agreement by Samstock nor the consummation by Samstock of the transactions
contemplated hereby will (i) materially violate, or require any consent,
approval or notice under, any provision of any judgment, order, decree, statute,
law, rule or regulation applicable to Samstock or the Shares or (ii) violate or
conflict with the limited liability company agreement of Samstock or constitute
a material violation of or default under any contract, commitment, agreement,
understand ing, arrangement or other restriction of any kind to which Samstock
is a party or by which Samstock or its assets are bound.
Section 3.3 Total Shares. Except as contemplated by the Shareholders
Agreement, the Investment Agreement and the Warrants, Samstock does not have any
option to purchase or right to subscribe for or otherwise acquire any securities
of Parent and has no other interest in or voting rights with respect to any
other securities of Parent.
Section 3.4 Reasonable Efforts. Prior to the Termination Date, Samstock
shall use reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with Parent in doing, all
things reasonably necessary, proper or advisable to consummate and make
effective, in the most expeditious manner reasonably practicable, the
Transaction.
-3-
<PAGE> 4
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PEOPLES
Peoples represents, warrants and covenants to Samstock that:
Section 4.1 Authority and Non-Contravention. Peoples has the right,
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Peoples and the consummation of the transactions contemplated by
this Agreement have been duly authorized by all necessary action on the part of
Peoples. This Agreement has been duly executed and delivered by Peoples and
constitutes a valid and binding obligation of Peoples, enforceable against
Peoples in accordance with its terms, subject to general principles of equity
and as may be limited by bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally. Neither the execution and delivery of
this Agreement nor the consummation by Peoples of the transactions contemplated
hereby will (i) materially violate, or require any consent, approval or notice
under, any provision of any judgment, order, decree, statute, law, rule or
regulation applicable to Peoples or (ii) violate or conflict with the
certificate of incorporation or bylaws of Peoples or constitute a material
violation of or default under any contract, commitment, agreement,
understanding, arrangement or other restriction of any kind to which Peoples is
a party or by which Peoples or its assets are bound.
ARTICLE V
MISCELLANEOUS
Section 5.1 Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such costs or expenses.
Section 5.2 Further Assurances. From time to time, at the request of
Peoples, in the case of Samstock, or at the request of Samstock, in the case of
Peoples, and without further consideration, each party shall execute and deliver
or cause to be executed and delivered such additional documents and instruments
and take all such further action as may be reasonably necessary or desirable to
consummate the transactions contemplated by this Agreement.
Section 5.3 Specific Performance. Samstock agrees that Peoples would be
irreparably damaged if for any reason Samstock fails to perform any of
Samstock's obligations under this Agreement, and that Peoples would not have an
adequate remedy at law for money damages in such event. Accordingly, Peoples
shall be entitled to seek specific performance and injunctive and other
equitable relief to enforce the performance of this Agreement by Samstock. This
provision is without prejudice to any other rights that Peoples may have against
Samstock for any failure to perform its obligations under this Agreement.
Section 5.4 Amendments, Termination. This Agreement may not be modified
or amended except by an instrument or instruments in writing signed by each
party hereto. The representations, warranties, covenants and agreements set
forth in Article II, Article III and Article IV shall terminate,
-4-
<PAGE> 5
except with respect to liability for prior breaches thereof, upon the earliest
to occur of (i) termination of the Merger Agreement in accordance with its
terms, (ii) the Closing Date and (iii) the date, if any, upon which Peoples's
Board of Directors withdraws, modifies or changes its recommendation or approval
of the Merger Agreement or the Peoples Merger in a manner adverse to Parent (the
"Termination Date").
Section 5.5 Assignment. Subject to Section 2.3 hereof, neither this
Agreement nor any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of law or otherwise by any
of the parties without the prior written consent of the other parties. Subject
to the preceding sentence, this Agreement shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors and assigns.
Section 5.6 Certain Events. Samstock agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person to which legal or beneficial ownership of such shares shall pass, whether
by operation of law or otherwise.
Section 5.7 Entire Agreement. This Agreement (including the documents
referred to herein) (a) constitutes the entire agreement, and supersedes all
prior agreements and understanding, both oral and written between the parties
with respect to the subject matter of this Agreement and (b) is not intended to
confer upon any person other than the parties hereto any rights or remedies.
Section 5.8 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, sent by
documented overnight delivery service or telecopied with confirmation of
receipt, to the parties at the addresses specified below (or at such other
address or telecopy or telex number for a party as shall be specified by like
notice):
If to Peoples, to:
Peoples Telephone Company, Inc.
2300 N.W. 89th Place
Miami, Florida 33172
Attention: General Counsel
Telecopy number: (305) 593-6116
-5-
<PAGE> 6
with a copy to:
Steel Hector & Davis LLP
200 South Biscayne Blvd.
Miami, Florida 33131-2398
Attention: Ira N. Rosner, P.A.
Facsimile: (305) 577-7001
and
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: John Madden, Esq.
Facsimile: (212) 848-7179
If to Samstock, to:
Samstock, L.L.C.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Mr. F. Philip Handy
Telecopy number: (312) 454-1671
with a copy to:
Rosenberg & Liebentritt, P.C.
Two North Riverside Plaza
Chicago, Illinois 60606
Attention: Walter S. Lowry, Esq.
Telecopy number: (312) 454-0335
Section 5.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 5.10 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement,
and, shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties in original or facsimile
form.
Section 5.11 Interpretation. The headings contained in this Agreement
are inserted for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
-6-
<PAGE> 7
Section 5.12 Severability. Any provision hereof which is invalid or
unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 5.13 Consent to Jurisdiction. Each party hereto irrevocably
submits to the nonexclusive jurisdiction of (a) the state courts of the State of
Illinois and (b) the United States federal district courts located in the State
of Illinois for the purposes of any suit, action or other proceeding arising out
of this Agreement or any transaction contemplated hereby.
Section 5.14 Attorney's Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled
******
-7-
<PAGE> 8
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of
each of the parties as of the date first above written.
SAMSTOCK, L.L.C.
By SZ Investments, L.L.C., its sole member
By Zell General Partnership, Inc., its managing member
By: /s/ Donald J. Liebentritt
-----------------------------
Name: Donald J. Liebentritt
-----------------------------
Title: Vice President
-----------------------------
PEOPLES TELEPHONE COMPANY, INC.
By: /s/ E. Craig Sanders
-----------------------------
Name: E. Craig Sanders
-----------------------------
Title: CEO/President
-----------------------------
<PAGE> 1
EXHIBIT 99
DAVEL COMMUNICATIONS GROUP, INC.
1429 Massaro Boulevard
Tampa, FL 33619
(Nasdaq: DAVL)
AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
Michael Hayes General Information: Analyst Information: Media Contact:
(217)243-4391 Alison Ziegler Jordan Darrow Alicia Nieva-Woodgate
(212)661-8030 (212)661-8030 (212)661-8030
FOR IMMEDIATE RELEASE
July 6, 1998
DAVEL COMMUNICATIONS GROUP AND PEOPLES TELEPHONE ANNOUNCE SIGNING
OF MERGER AGREEMENT
COMBINED COMPANY WILL OPERATE OVER 125,000 PAYPHONES ACROSS THE NATION
TAMPA, FLORIDA/MIAMI, FLORIDA -- July 6, 1998, Davel Communications Group, Inc.
(Nasdaq: DAVL), and Peoples Telephone Company, Inc. (AMEX: PHO), today announced
the signing of a definitive agreement to merge the two companies. The
combination of the companies, when coupled with PhoneTel Technologies, Inc.,
with which Davel recently announced its intention to merge, will be the nation's
largest independent payphone provider, with more than 125,000 installed
payphones and pro forma 1997 revenues in excess of $320 million. The merger of
the companies is expected to result in significant cost savings from lower line
and transmission costs, lower field operating costs through more efficient
concentration of payphone routes, and elimination of redundant general and
administrative expenses.
Under the terms of the agreement, which has been approved by the Board of
Directors of each company, holders of common stock of Peoples Telephone will
receive 0.235 shares of Davel common stock for each outstanding share of Peoples
Telephone common stock. The exchange ratio is fixed and not subject to
adjustment. The companies expect the transaction to be tax-free to shareholders
of both companies. Based on Davel's closing price of $24.9375 on July 2, 1998,
the transaction is valued at $5.86 per share of Peoples Telephone common stock.
The transaction, which is intended to close in the fall of 1998, is subject to
the approval of the shareholders of both companies, receipt of required
regulatory approvals and other customary conditions. Consummation of the merger
is conditioned on its eligibility for pooling-of-interests accounting treatment.
The transaction is also subject to conversion of Peoples Telephone's convertible
preferred stock into common stock and receipt by Davel of financing for, and
successful consummation of, a cash tender offer for Peoples' 12 1/4% Senior
Notes due 2002, pursuant to which a minimum of 85% of the aggregate outstanding
principal amount of $100 million shall have been tendered. The refinancing of
the combined companies' indebtedness will be achieved through a combination of
high
<PAGE> 2
Davel Communications Group
Page 2
yield debt and a senior credit facility. No assurances can be given that all of
the conditions to consummation of the proposed merger will be satisfied. The
Peoples Telephone transaction is independent of and not contingent on
consummation of Davel's previously announced merger agreement with PhoneTel.
Robert D. Hill, President and Chief Executive Officer of Davel commented, "The
combination of our operations with Peoples Telephone, a recognized quality
public access leader, presents an exciting opportunity for Davel and its
shareholders. We believe that this transaction creates an opportunity to achieve
meaningful cost savings. In addition to creating significant synergy value, this
merger will provide our combined sales staff with the opportunity to market
payphone services on a truly nationwide basis. For the first time, customers
with a nationwide presence can look to a single payphone provider to fill their
public communications needs throughout the country."
Peoples Telephone is expected to become a subsidiary of the previously announced
holding company to be formed in connection with the PhoneTel combination which
will be called Davel Communications, Inc. The new company will be headquartered
in Tampa, Florida and will be operated by senior management of Davel
Communications Group. Davel's Board of Directors will be joined for a period of
one year by a representative of UBS Capital II LLC who currently serves on the
Board of Directors of Peoples Telephone.
Commenting on the merger, E. Craig Sanders, President and Chief Executive
Officer of Peoples Telephone said, "This merger, which unites Peoples Telephone
with the Davel organization, is an ideal combination that maximizes value for
our shareholders, and dramatically alters the public communications landscape.
The transaction value of $5.86 per share represents an 88% premium over Peoples
Telephone's closing price on July 2. Peoples believes that the new company, with
Sam Zell's investment, possesses the resources and complementary skills to
compete effectively in the new telecommunications environment. We anticipate
that this merger will yield route density, cost efficiencies and broad service
synergies -- making this an excellent transaction for both our customers and
stakeholders. Peoples' Telephone is excited over the prospects presented by this
combination, and we look forward to the days ahead."
Concluding his comments, Mr. Hill said, "We are fortunate to have the
management, systems and financial resources available to manage the task of
integrating these companies. By combining Peoples Telephone, PhoneTel and
Communications Central Inc. with Davel, we will have created the first
independent payphone provider to rival the size of the Regional Bell Operating
Companies' payphone operations. We further believe that our nationwide footprint
provides us with significant competitive advantages in the areas of marketing
and customer service."
Davel Communications Group, Inc. operates a system of approximately 40,000 pay
telephones in 36 states and the District of Columbia and provides long distance
operator services for its payphones through its digitally-switched long distance
network.
PhoneTel Technologies, Inc. operates a system of approximately 45,000 payphones
in 42 states and the District of Columbia.
<PAGE> 3
Davel Communications Group
Page 3
Peoples Telephone Company, Inc. operates a system of approximately 43,000
installed payphones in 39 states and the District of Columbia and provides
value-added services to thousands of additional payphones throughout the United
States.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein may be, within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934, forward-looking statements (rather than historical facts) that are
subject to risks and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
Davel Communications Group, Inc. or its successors to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Information on significant potential risks and
uncertainties is set forth more fully in the Company's annual report on Form
10-K for the year ended December 31, 1997 and the Quarterly Report on Form 10-Q
for the first quarter of 1998.
