EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
DATED
JUNE 11, 1998
BY AND AMONG
DAVEL COMMUNICATIONS GROUP, INC.,
DAVEL HOLDINGS, INC.,
D SUBSIDIARY, INC.,
PT MERGER CORP.
AND
PHONETEL TECHNOLOGIES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
THE PHONETEL MERGER
Section 1.01 Effectuation of the PhoneTel Merger . . . . . -2-
Section 1.02 Conversion of PhoneTel Shares . . . . . . . . -3-
Section 1.03 Exchange of PhoneTel Shares . . . . . . . . . -4-
Section 1.04 Certain PhoneTel Adjustments . . . . . . . . . -7-
Section 1.05 PhoneTel Stock Options and Warrants . . . . . -7-
Section 1.06 Dissenter's Rights . . . . . . . . . . . . . . -8-
Section 1.07 PhoneTel Articles of Incorporation . . . . . . -9-
Section 1.08 PhoneTel Bylaws . . . . . . . . . . . . . . . -9-
Section 1.09 PhoneTel Directors and Officers . . . . . . . -9-
ARTICLE II
THE DAVEL MERGER
Section 2.01 Effectuation of Davel Merger . . . . . . . . . -9-
Section 2.02 Conversion of Old Davel Shares . . . . . . . -10-
Section 2.03 Exchange of Old Davel Shares . . . . . . . . -11-
Section 2.04 Certain Davel Adjustments . . . . . . . . . -13-
Section 2.05 Davel Stock Options and Warrants . . . . . . -13-
Section 2.06 Dissenters' Rights . . . . . . . . . . . . . -14-
Section 2.07 Davel Articles of Incorporation . . . . . . -15-
Section 2.08 Davel Bylaws . . . . . . . . . . . . . . . . -15-
Section 2.09 Davel Directors and Officers . . . . . . . . -15-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PHONETEL
Section 3.01 Corporate Organization . . . . . . . . . . . -15-
Section 3.02 Authorization . . . . . . . . . . . . . . . -16-
Section 3.03 Capital Stock . . . . . . . . . . . . . . . -16-
Section 3.04 Subsidiaries . . . . . . . . . . . . . . . . -16-
Section 3.05 Consents and Approvals; No Violation . . . . -17-
Section 3.06 SEC Reports and Financial Statements . . . . -18-
Section 3.07 Absence of Undisclosed Liabilities . . . . . -18-
Section 3.08 Changes . . . . . . . . . . . . . . . . . . -18-
Section 3.09 Investigations; Litigation . . . . . . . . . -19-
Section 3.10 Contracts and Commitments . . . . . . . . . -20-
Section 3.11 Environmental Matters . . . . . . . . . . . -20-
Section 3.12 Taxes . . . . . . . . . . . . . . . . . . . -21-
Section 3.13 Employment Agreements . . . . . . . . . . . -21-
Section 3.14 Change of Control Provisions . . . . . . . . -21-
Section 3.15 Employee Benefit Plans . . . . . . . . . . . -21-
Section 3.16 Licenses . . . . . . . . . . . . . . . . . . -23-
Section 3.17 Real Estate Leases . . . . . . . . . . . . . -23-
Section 3.18 Intellectual Property . . . . . . . . . . . -23-
Section 3.19 Compliance with Other Instruments and Laws . -24-
Section 3.20 Employees . . . . . . . . . . . . . . . . . -24-
Section 3.21 Information Supplied . . . . . . . . . . . . -24-
Section 3.22 Certain Fees . . . . . . . . . . . . . . . . -25-
Section 3.23 Opinion of Financial Advisor . . . . . . . . -25-
Section 3.24 Voting Requirements . . . . . . . . . . . . -25-
Section 3.25 State Takeover Statutes . . . . . . . . . . -25-
Section 3.26 Payphones . . . . . . . . . . . . . . . . . -25-
Section 3.27 Average Net Revenue . . . . . . . . . . . . -25-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF OLD DAVEL
Section 4.01 Corporate Organization . . . . . . . . . . . -26-
Section 4.02 Authorization . . . . . . . . . . . . . . . -26-
Section 4.03 Capital Stock . . . . . . . . . . . . . . . -27-
Section 4.04 Subsidiaries . . . . . . . . . . . . . . . . -27-
Section 4.05 Consents and Approvals; No Violations . . . -27-
Section 4.06 SEC Reports and Financial Statements . . . . -28-
Section 4.07 Absence of Undisclosed Liabilities . . . . . -28-
Section 4.08 Changes . . . . . . . . . . . . . . . . . . -29-
Section 4.09 Investigations; Litigation . . . . . . . . . -29-
Section 4.10 Environmental Matters . . . . . . . . . . . -30-
Section 4.11 Certain Fees . . . . . . . . . . . . . . . . -30-
Section 4.12 Taxes . . . . . . . . . . . . . . . . . . . -31-
Section 4.13 Change of Control Provisions . . . . . . . . -31-
Section 4.14 Licenses . . . . . . . . . . . . . . . . . . -31-
Section 4.15 Compliance with Other Instruments and Laws . -31-
Section 4.16 Employees . . . . . . . . . . . . . . . . . -32-
Section 4.17 Information Supplied . . . . . . . . . . . . -32-
Section 4.18 Opinion of Financial Advisor . . . . . . . . -32-
Section 4.19 Voting Requirements . . . . . . . . . . . . -32-
Section 4.20 State Takeover Statutes . . . . . . . . . . -32-
Section 4.21 No Company Shares . . . . . . . . . . . . . -33-
Section 4.22 Rights . . . . . . . . . . . . . . . . . . . -33-
Section 4.23 Davel Financing Arrangements . . . . . . . . -33-
ARTICLE V
COVENANTS OF PHONETEL
Section 5.01 Conduct of Business by PhoneTel Pending
the PhoneTel Merger . . . . . . . . . . . . . . . -33-
Section 5.02 Stockholders' Meeting . . . . . . . . . . . -34-
Section 5.03 Access to Information . . . . . . . . . . . -35-
Section 5.04 No Solicitation . . . . . . . . . . . . . . -35-
Section 5.05 Corporate Organization . . . . . . . . . . . -36-
Section 5.06 Preferred Stock and Notes . . . . . . . . . -36-
Section 5.07 Additional Voting Agreements . . . . . . . . -36-
Section 5.08 Confidentiality. . . . . . . . . . . . . . . -36-
ARTICLE VI
COVENANTS OF OLD DAVEL
Section 6.01 Confidentiality . . . . . . . . . . . . . . -37-
Section 6.02 Obligations of the Davel Subsidiaries . . . -37-
Section 6.03 Indemnification . . . . . . . . . . . . . . -37-
Section 6.04 Davel Stockholders' Meeting . . . . . . . . -38-
Section 6.05 New Davel Corporate Governance . . . . . . . -38-
Section 6.06 Davel Financing . . . . . . . . . . . . . . -38-
Section 6.07 Employee Matters . . . . . . . . . . . . . . -38-
Section 6.08 Financial Disclosure . . . . . . . . . . . . -39-
ARTICLE VII
COVENANTS OF THE PARTIES
Section 7.01 Reasonable Best Efforts . . . . . . . . . . -39-
Section 7.02 Certain Filings . . . . . . . . . . . . . . -40-
Section 7.03 Public Announcements . . . . . . . . . . . . -40-
Section 7.04 Further Assurances . . . . . . . . . . . . . -40-
Section 7.05 Notices of Certain Events . . . . . . . . . -40-
Section 7.06 Preparation of the Form S-4 and the Proxy
Statement . . . . . . . . . . . . . . . . -41-
Section 7.07 Letters of Accountants . . . . . . . . . . . -41-
Section 7.08 Affiliates . . . . . . . . . . . . . . . . . -42-
Section 7.09 Nasdaq Listing . . . . . . . . . . . . . . . -42-
Section 7.10 Tax Treatment . . . . . . . . . . . . . . . -42-
Section 7.11 Pooling of Interests . . . . . . . . . . . . -43-
Section 7.12 Representations . . . . . . . . . . . . . . -43-
ARTICLE VII
CONDITIONS TO THE MERGER
Section 8.01 Conditions to the Obligations of Each Party -43-
Section 8.02 Conditions to the Obligations of Old Davel,
New Davel, D Sub and P Sub . . . . . . . . -44-
Section 8.03 Conditions to the Obligations of PhoneTel . -45-
ARTICLE IX
TERMINATION AND WAIVER
Section 9.01 Termination . . . . . . . . . . . . . . . . -45-
Section 9.02 Waiver . . . . . . . . . . . . . . . . . . . -47-
Section 9.03 Effect of Termination; Termination Fee . . . -47-
ARTICLE X
MISCELLANEOUS
Section 10.01 Closing . . . . . . . . . . . . . . . . . . -48-
Section 10.02 Notices . . . . . . . . . . . . . . . . . . -48-
Section 10.03 Survival of Representations and Warranties . -49-
Section 10.04 Amendments; No Waivers . . . . . . . . . . . -49-
Section 10.05 Expenses . . . . . . . . . . . . . . . . . . -49-
Section 10.06 Successors and Assigns . . . . . . . . . . . -49-
Section 10.07 Governing Law; Jurisdiction . . . . . . . . -49-
Section 10.08 Counterparts; Effectiveness . . . . . . . . -50-
Section 10.09 Headings . . . . . . . . . . . . . . . . . . -50-
Section 10.10 No Third Party Beneficiaries . . . . . . . . -50-
Section 10.11 Entire Agreement . . . . . . . . . . . . . . -50-
DEFINED TERMS
PAGE
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . -35-
Adjusted Old Davel Option . . . . . . . . . . . . . . . . . . . . . . -13-
Adjusted Old Davel Warrant . . . . . . . . . . . . . . . . . . . . . -13-
Adjusted PhoneTel Option . . . . . . . . . . . . . . . . . . . . . . . -7-
Adjusted PhoneTel Warrant . . . . . . . . . . . . . . . . . . . . . . . -7-
Affected Employee . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Average Net Revenue . . . . . . . . . . . . . . . . . . . . . . . . . -25-
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . -36-
Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
D Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Davel Articles of Merger . . . . . . . . . . . . . . . . . . . . . . . -9-
Davel Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . -26-
Davel Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . -14-
Davel Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . -9-
Davel Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Davel Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . -10-
Davel Material Adverse Effect . . . . . . . . . . . . . . . . . . . . -26-
Davel Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Davel Merger Consideration . . . . . . . . . . . . . . . . . . . . . -10-
Davel Stockholders Approval . . . . . . . . . . . . . . . . . . . . . -26-
Davel Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . -38-
Davel Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . -27-
Davel Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
Davel Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . -9-
Davel Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . -2-
DCG, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Debt Tender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
Disclosure Document . . . . . . . . . . . . . . . . . . . . . . . . . -40-
Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
Employment Agreement . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Environmental and Safety Laws . . . . . . . . . . . . . . . . . . . . -30-
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . -20-
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
Executive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Filed Davel Reports . . . . . . . . . . . . . . . . . . . . . . . . . -29-
Filed PhoneTel Reports . . . . . . . . . . . . . . . . . . . . . . . -18-
Final Average Closing Price . . . . . . . . . . . . . . . . . . . . . . -3-
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . -17-
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Illinois Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . -37-
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . -23-
Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
Location Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
Measurement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
New Davel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
New Davel Common Stock . . . . . . . . . . . . . . . . . . . . . . . . -3-
New Davel Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
New Davel Rights Agreement . . . . . . . . . . . . . . . . . . . . . . -3-
New Davel Stock Option Plans . . . . . . . . . . . . . . . . . . . . . -7-
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
Ohio Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
Old Davel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Old Davel 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Old Davel 10-Q . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Old Davel Certificates . . . . . . . . . . . . . . . . . . . . . . . -11-
Old Davel Common Stock . . . . . . . . . . . . . . . . . . . . . . . -10-
Old Davel Investigation . . . . . . . . . . . . . . . . . . . . . . . -29-
Old Davel Options . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
Old Davel Reports . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Old Davel Rights . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
Old Davel Warrants . . . . . . . . . . . . . . . . . . . . . . . . . -13-
P Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
PhoneTel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
PhoneTel 10-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
PhoneTel 10-Q . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
PhoneTel Certificate of Merger . . . . . . . . . . . . . . . . . . . . -2-
PhoneTel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . -4-
PhoneTel Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . -3-
PhoneTel Disclosure Letter . . . . . . . . . . . . . . . . . . . . . -15-
PhoneTel Effective Time . . . . . . . . . . . . . . . . . . . . . . . . -2-
PhoneTel Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . -4-
PhoneTel Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . -3-
PhoneTel Material Adverse Effect . . . . . . . . . . . . . . . . . . -15-
PhoneTel Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
PhoneTel Merger Consideration . . . . . . . . . . . . . . . . . . . . . -3-
PhoneTel Options . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
PhoneTel Reports . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
PhoneTel Stockholder Approval . . . . . . . . . . . . . . . . . . . . -16-
PhoneTel Stockholders Meeting . . . . . . . . . . . . . . . . . . . . -34-
PhoneTel Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . -16-
PhoneTel Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . -16-
PhoneTel Surviving Corporation . . . . . . . . . . . . . . . . . . . . -2-
PhoneTel Voting Agreements . . . . . . . . . . . . . . . . . . . . . . -1-
PhoneTel Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
PIK Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
Pooling Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -8-
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . -16-
Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . -16-
Site Location Agreements . . . . . . . . . . . . . . . . . . . . . . -23-
Trading Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement") is made and entered into June 11, 1998, by and among Davel
Communications Group, Inc., an Illinois corporation ("Old Davel"), Davel
Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Old
Davel ("New Davel"), PT Merger Corp., an Ohio corporation and a wholly
owned subsidiary of New Davel ("P Sub"), D Subsidiary, Inc., an Illinois
corporation and a wholly owned subsidiary of New Davel ("D Sub"), and
PhoneTel Technologies, Inc., an Ohio corporation ("PhoneTel").
RECITALS
WHEREAS, the Boards of Directors of Old Davel and PhoneTel deem
it advisable and in the best interests of the stockholders of such
corporations to effect a business combination of Old Davel and PhoneTel
through the transactions provided for herein (collectively, the
"Transaction"), as a result of which each of Old Davel and PhoneTel shall
become a wholly-owned subsidiary of New Davel;
WHEREAS, in order to effect the Transaction, (a) D Sub shall be
merged with and into Old Davel with Old Davel surviving as a wholly owned
subsidiary of New Davel (the "Davel Merger"), and (b) P Sub shall be merged
with and into PhoneTel with PhoneTel surviving as a wholly-owned subsidiary
of New Davel (the "PhoneTel Merger"), in each case pursuant to this
Agreement;
WHEREAS, the respective Boards of Directors of Old Davel and D
Sub have approved the Davel Merger, and the Board of Directors of Old Davel
has unanimously resolved to recommend that the Davel Merger be approved by
the stockholders of Old Davel;
WHEREAS, the respective Boards of Directors of PhoneTel and P Sub
have approved of the PhoneTel Merger, and the PhoneTel Board of Directors
has unanimously resolved to recommend that the PhoneTel Merger be approved
by the stockholders of PhoneTel;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Old Davel
and New Davel to enter into this Agreement, (i) each director of PhoneTel,
ING (U.S.) Investment Corporation and Cerberus Partners, L.P. have entered
into Voting Agreements with Old Davel dated the date of this Agreement
(collectively, the "PhoneTel Voting Agreements"), (ii) the chief executive
officer of PhoneTel has entered into a Consulting and Non-Competition
Agreement with PhoneTel, dated the date of this Agreement (the "Consulting
Agreement"), and (iii) the chief administrative officer of PhoneTel has
entered into an Employment and Non-Competition Agreement with PhoneTel,
dated the date of this Agreement (the "Employment Agreement" and, together
with the Consulting Agreement, the "Executive Agreements");
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to PhoneTel's willingness to
enter into this Agreement, ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇ and Samstock, L.L.C. have
entered into Voting Agreements with PhoneTel, dated the date of this
Agreement (collectively, the "Davel Voting Agreements");
WHEREAS, for Federal income tax purposes, it is intended that the
PhoneTel Merger and the Davel Merger shall collectively qualify as an
integrated transaction described in Section 351 of the Internal Revenue
Code of 1986, as amended (the "Code"), and that the shareholders of
PhoneTel and Old Davel will recognize no gain or loss for Federal income
tax purposes as a result of the consummation of the PhoneTel Merger or the
Davel Merger, except with respect to any cash received.
WHEREAS, Old Davel, New Davel and D Sub desire, for Federal
income tax purposes, that the Davel Merger also qualify as a tax-free
reorganization under the provisions of Section 368(a) of the Code and that
this Agreement adopted as a plan of reorganization under the provisions of
Section 368(a) of the Code, and
WHEREAS, for accounting purposes, it is intended that the
Transaction be accounted for as a "pooling of interests".
NOW, THEREFORE, in consideration of the foregoing and of the
mutual representations, warranties, covenants and agreements set forth
herein, the parties agree as follows:
ARTICLE I
THE PHONETEL MERGER
Section 1.01 Effectuation of the PhoneTel Merger.
(a) On the terms and subject to the conditions hereof, on
the Closing Date, the parties shall effect the PhoneTel Merger, pursuant to
which P Sub shall be merged with and into PhoneTel in accordance with the
Ohio General Corporation Law ("Ohio Law"), whereupon the separate corporate
existence of P Sub shall cease, and PhoneTel shall be the surviving
corporation (the "PhoneTel Surviving Corporation").
(b) On the Closing Date, in order to effectuate the
PhoneTel Merger, PhoneTel and P Sub shall file a certificate of merger with
the Secretary of State of the State of Ohio (the "PhoneTel Certificate of
Merger") and make all other filings or recordings required by Ohio Law in
connection with the PhoneTel Merger. The PhoneTel Merger shall become
effective at such time as the PhoneTel Certificate of Merger is duly filed
with the Secretary of State of the State of Ohio and any additional
requirements of Ohio Law are complied with (the "PhoneTel Effective Time").
(c) From and after the PhoneTel Effective Time, the
PhoneTel 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 PhoneTel and P Sub, all as
provided under Ohio Law.
Section 1.02 Conversion of PhoneTel Shares.
(a) At the PhoneTel Effective Time and by virtue of the
PhoneTel Merger and without any action on the part of the holders thereof:
(i) each share of common stock, par value $0.01 per
share, of PhoneTel ("PhoneTel Common Stock") held by PhoneTel as
treasury stock, or owned by Old Davel, New Davel or any other Davel
Subsidiary, if any, immediately prior to the PhoneTel Effective Time
shall be canceled, and no payment shall be made with respect thereto;
provided, however, that any shares of PhoneTel Common Stock as to
which PhoneTel or any PhoneTel Subsidiary 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 P Sub outstanding
immediately prior to the PhoneTel Effective Time shall be converted
into and become one share of capital stock of the PhoneTel 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 PhoneTel Surviving Corporation; and
(iii) subject to Sections 1.03(e) and 1.06 hereof,
each share of PhoneTel Common Stock outstanding immediately prior to
the PhoneTel Effective Time shall, except as otherwise provided in
clause (i) of this subsection, be converted into the right to receive
a number of fully paid and nonassessable shares of common stock, par
value $.01 per share (including each attached New Davel Right, the
"New Davel Common Stock") of New Davel (the "PhoneTel Merger
Consideration") equal to the quotient (the "PhoneTel Exchange Ratio")
of $3.08 divided by the average of the closing prices (the "Final
Average Closing Price") of Old Davel Common Stock on the Nasdaq
National Market on the 30 consecutive Trading Days ending on the
second Trading Day (the "Measurement Date") prior to the date of the
PhoneTel Stockholders Meeting; provided, however, that if the Final
Average Closing Price shall be less than $22.375, the Final Average
Closing Price as determined in accordance with this Section
1.02(a)(iii) shall be deemed to be $22.375 and the PhoneTel Exchange
Ratio shall be 0.13765. As of the PhoneTel Effective Time, all such
shares of PhoneTel Common Stock 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 PhoneTel Common
Stock shall cease to have any rights with respect thereto, except the
right to receive the PhoneTel Merger Consideration and any cash in
lieu of fractional shares of New Davel Common Stock to be issued or
paid in consideration therefor upon surrender of such certificate in
accordance with Section 1.03(e) hereof, without interest. The term
"New Davel Right", as used herein, means the common stock purchase
rights to be issued pursuant to the Rights Agreement (the "New Davel
Rights Agreement") to be entered into by and between New Davel and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, between the
date hereof and the Closing Date. For the purposes hereof, "Trading
Day" shall mean any day on which the Nasdaq Stock Market is open for
trading.
Section 1.03 Exchange of PhoneTel Shares.
(a) Prior to the PhoneTel Effective Time, New Davel shall
enter into an agreement with ChaseMellon Shareholder Services, L.L.C., as
exchange agent for the PhoneTel Merger and the Davel Merger (the "Exchange
Agent"), which shall provide that New Davel shall deposit with the Exchange
Agent prior to the PhoneTel Effective Time, for the benefit of the holders
of shares of PhoneTel Common Stock, for exchange in accordance with this
Article I, through the Exchange Agent, certificates representing the shares
of New Davel Common Stock issuable pursuant to Section 1.02 hereof in
exchange for outstanding shares of PhoneTel Common Stock (such shares of
New Davel Common Stock, together with any dividends or distributions with
respect thereto payable to such holder in accordance with Section 1.03(c)
hereof, and any cash payable in lieu of any fractional shares of New Davel
Common Stock in accordance with Section 1.03(e) hereof, being herein
referred to as the "PhoneTel Exchange Fund").
(b) As soon as reasonably practicable after the PhoneTel
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the PhoneTel
Effective Time represented outstanding shares of PhoneTel Common Stock (the
"PhoneTel Certificates") whose shares of PhoneTel Common Stock were
converted into the right to receive the PhoneTel 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
PhoneTel Certificates shall pass, only upon delivery of the PhoneTel
Certificates to the Exchange Agent and shall be in such form and have such
other provisions typical in transactions of this type as New Davel may
reasonably specify) and (ii) instructions for use in surrendering the
PhoneTel Certificates in exchange for the PhoneTel Merger Consideration, as
applicable. Upon surrender of a PhoneTel 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 PhoneTel Certificate shall be entitled
to receive in exchange therefor a certificate representing that number of
whole shares of New Davel Common Stock which such holder has the right to
receive pursuant to the provisions of this Article I, any dividends or
other distributions with respect thereto payable to such holder in
accordance with Section 1.03(c) hereof and any cash payable in lieu of any
fractional share of New Davel Common Stock in accordance with Section
1.03(e) hereof, and the PhoneTel Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of shares of PhoneTel
Common Stock which is not registered in the transfer records of PhoneTel, a
certificate representing the proper number of shares of New Davel Common
Stock may be issued to a person other than the person in whose name the
PhoneTel Certificate so surrendered is registered if such PhoneTel
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 New Davel Common Stock to a
person other than the registered holder of such PhoneTel Certificate or
establishes to the satisfaction of New Davel that such tax has been paid or
is not applicable. Until surrendered as contemplated by this Section 1.03,
each PhoneTel Certificate shall be deemed at any time after the PhoneTel
Effective Time to represent only the right to receive upon such surrender
that number of whole shares of New Davel Common Stock which the holder
thereof has the right to receive pursuant to the provisions of this Article
I, any dividends or other distributions payable to the holder thereof in
accordance with Section 1.03(c) hereof and cash in lieu of any fractional
share of New Davel Common Stock in accordance with Section 1.03(e) hereof.
No interest shall be paid or shall accrue on any cash payable to holders of
PhoneTel Certificates pursuant to the provisions of this Article I.
(c) No dividends or other distributions with respect to New
Davel Common Stock with a record date after the PhoneTel Effective Time
shall be paid to the holder of any unsurrendered PhoneTel Certificate with
respect to the shares of New Davel Common Stock represented thereby, and,
in the case of PhoneTel Certificates, no cash payment in lieu of a
fractional share of New Davel Common Stock 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 New Davel Common
Stock shall be paid by New Davel to the Exchange Agent and shall be
included in the Exchange Fund, in each case, until the surrender of such
PhoneTel Certificate in accordance with this Article I. Subject to the
effect of applicable escheat or similar laws, following surrender of any
such PhoneTel Certificate, there shall be paid to the holder of the
certificate representing whole shares of New Davel 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
PhoneTel Effective Time theretofore paid with respect to such whole shares
of New Davel Common Stock, and, in the case of PhoneTel Certificates, the
amount of any cash payable in lieu of a fractional share of New Davel
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 PhoneTel Effective Time
but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of New Davel Common
Stock.
(d) All shares of New Davel Common Stock issued upon the
surrender for exchange of PhoneTel Certificates in accordance with the
terms of this Article I (including any cash paid in lieu of fractional
shares of New Davel Common Stock pursuant to this Article I) shall be
deemed to have been issued (and paid) in full satisfaction of all rights
pertaining to PhoneTel Common Stock theretofore represented by such
PhoneTel Certificates, subject, however, to the PhoneTel Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the PhoneTel Effective Time which
may have been declared or made by PhoneTel on such shares of PhoneTel
Common Stock which remain unpaid at the PhoneTel Effective Time, and there
shall be no further registration of transfers on the stock transfer books
of the PhoneTel Surviving Corporation of the shares of PhoneTel Common
Stock which were outstanding immediately prior to the PhoneTel Effective
Time. If, after the PhoneTel Effective Time, PhoneTel Certificates are
presented to the PhoneTel Surviving Corporation or the Exchange Agent for
any reason, they shall be canceled and exchanged as provided in this
Article I, except as otherwise provided by law.
(e) (i) No certificates or scrip representing
fractional shares of New Davel Common Stock shall be issued upon the
surrender for exchange of PhoneTel Certificates, no dividend or
distribution of New Davel shall relate to such fractional share
interests and such fractional share interests shall not entitle the
owner thereof to vote or to any rights of a stockholder of New Davel.
(ii) New Davel shall pay or cause to be paid to each
former holder of PhoneTel 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
PhoneTel Common Stock held at the PhoneTel Effective Time by such
holder) would otherwise be entitled by (B) the Final Average Closing
Price.
(iii) As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of
PhoneTel Certificates formerly representing PhoneTel Common Stock with
respect to any fractional share interests, the Exchange Agent shall
make available such amounts to such holders of PhoneTel Certificates
formerly representing shares of PhoneTel 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 PhoneTel Certificates six months after the
Closing Date shall be delivered to New Davel, upon demand, and any holders
of the PhoneTel Certificates who have not theretofore surrendered their
PhoneTel Certificates in accordance with this Article I shall thereafter
look only to New Davel for payment of their claims for PhoneTel Merger
Consideration, any dividends or distributions with respect to New Davel
Common Stock, as applicable, and any cash in lieu of fractional shares of
New Davel Common Stock.
(g) None of New Davel, PhoneTel or the Exchange Agent shall
be liable to any person in respect of any shares of New Davel Common Stock,
any dividends or distributions with respect thereto, or any cash in lieu of
fractional shares of New Davel Common Stock, in each case, delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. If any PhoneTel Certificate shall not have been surrendered
prior to the date on which any PhoneTel Merger Consideration, any dividends
or distributions payable to the holder of such PhoneTel Certificate or any
cash payable to the holder of such PhoneTel Certificate formerly
representing PhoneTel Common Stock pursuant to this Article I would
otherwise escheat to or become the property of any Governmental Entity, any
such PhoneTel Merger Consideration, dividends or distributions in respect
of such PhoneTel Certificate or any such cash shall, to the extent
permitted by applicable law, become the property of the PhoneTel 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 PhoneTel Exchange Fund, as directed by New Davel, on a daily basis.
Any interest and other income resulting from such investments shall be paid
to New Davel.
(i) If any PhoneTel Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such PhoneTel Certificate to be lost, stolen or destroyed
and, if required by the PhoneTel Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the PhoneTel Surviving
Corporation may direct as indemnity against any claim that may be made
against it with respect to such PhoneTel Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed PhoneTel
Certificate the PhoneTel Merger Consideration and, if applicable, any
unpaid dividends and distributions on shares of New Davel Common Stock
deliverable in respect thereof and any cash in lieu of any fractional
share, in each case, due to such person pursuant to this Agreement.
Section 1.04 Certain PhoneTel Adjustments. If, after the date
hereof and on or prior to the PhoneTel Effective Time, the outstanding
shares of New Davel Common Stock or PhoneTel 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 PhoneTel Exchange Ratio (and/or the security or
securities to be issued to the holders of PhoneTel 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.
Section 1.05 PhoneTel Stock Options and Warrants.
(a) As of the PhoneTel Effective Time, (i) each outstanding
option to purchase PhoneTel Common Stock (collectively, the "PhoneTel
Options"), shall be converted into an option (an "Adjusted PhoneTel
Option") to purchase the number of shares of New Davel Common Stock equal
to the number of shares of PhoneTel Common Stock subject to such options
immediately prior to the PhoneTel Effective Time multiplied by the PhoneTel
Exchange Ratio (rounded to the nearest whole number of shares of New Davel
Common Stock), at an exercise price per share equal to the exercise price
for each such share of PhoneTel Common Stock subject to such option divided
by the PhoneTel Exchange Ratio (rounded down to the nearest whole cent),
and all references in each such option to PhoneTel shall be deemed to refer
to New Davel, where 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) New
Davel shall assume the obligations of PhoneTel under the PhoneTel Options,
(iii) each outstanding warrant to purchase PhoneTel Common Stock (the
"PhoneTel Warrants") shall be converted into a warrant (an "Adjusted
PhoneTel Warrant") to purchase the number of shares of New Davel Common
Stock equal to the number of shares of PhoneTel Common Stock subject to
such PhoneTel Warrants immediately prior to the PhoneTel Effective Time
multiplied by the PhoneTel Exchange Ratio (rounded to the nearest whole
number of shares of New Davel Common Stock), at an exercise price per share
equal to the exercise price for each such share of PhoneTel Common Stock
subject to such PhoneTel Warrant divided by the PhoneTel Exchange Ratio
(rounded to the nearest whole cent), and all references in each such
PhoneTel Warrant to PhoneTel shall be deemed to refer to New Davel, where
appropriate and (iv) New Davel shall assume the obligations of PhoneTel
under the PhoneTel Warrants. The other terms of each Adjusted PhoneTel
Option and Adjusted PhoneTel Warrant, and the plans or agreements under
which they were issued, shall continue to apply in accordance with their
terms. The date of grant of each Adjusted PhoneTel Option and Adjusted
PhoneTel Warrant shall be the date on which the corresponding PhoneTel
Option or PhoneTel Warrant was granted.
(b) PhoneTel and New Davel agree that each of the
applicable PhoneTel stock option plans, programs or agreements and each of
the applicable New Davel stock option plans (the "New Davel 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 PhoneTel Common Stock held or to be awarded
or paid pursuant to such plans, programs or agreements into shares of New
Davel Common Stock on a basis consistent with the transactions contemplated
by this Agreement. PhoneTel and New Davel agree to submit such amendments
to the New Davel Stock Option Plans or such PhoneTel plans, programs or
agreements to their respective stockholders, if such submission is
determined to be necessary by counsel to PhoneTel or New Davel after
consultation with one another to preserve the benefits of the PhoneTel
Options; provided, however, that such approval shall not be a condition to
the consummation of the Transaction.
(c) New Davel shall (i) reserve for issuance the number of
shares of New Davel Common Stock that shall become subject to the Adjusted
PhoneTel Warrants and the plans, programs and agreements referred to in
this Section 1.05 and (ii) issue or cause to be issued the appropriate
number of shares of New Davel Common Stock pursuant to the Adjusted
PhoneTel Warrants and applicable plans, programs and agreements, upon the
exercise or maturation of rights existing thereunder on the PhoneTel
Effective Time or thereafter granted or awarded. No later than the
PhoneTel Effective Time, New Davel shall prepare and file with the
Securities and Exchange Commission (the "SEC") a registration statement on
Form S-8 (or other appropriate form) registering a number of shares of New
Davel Common Stock necessary to fulfill New Davel's 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 any Adjusted PhoneTel
Options remain outstanding.
(d) As soon as practicable after the PhoneTel Effective
Time, New Davel shall deliver to the holders of PhoneTel Options and
PhoneTel Warrants appropriate notices setting forth (i) such holders'
rights pursuant to the respective plans and agreements evidencing the
grants of the related PhoneTel Options and PhoneTel Warrants, (ii) the
number of Shares of New Davel Common Stock for which such holder's Adjusted
PhoneTel Options or Adjusted PhoneTel Warrants are then exercisable and the
exercise price therefor, and (iii) that such PhoneTel Options and PhoneTel
Warrants and the related plans, programs and agreements shall be assumed by
New Davel 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 PhoneTel Merger).
Section 1.06 Dissenter's Rights.
(a) Any PhoneTel Common Stock as to which dissenting
shareholders' rights are perfected under Sections 1701.84 and 1701.85 of
the Ohio Law ("Dissenting Shares") shall not be converted into or represent
a right to receive the PhoneTel Merger Consideration. Holders of
Dissenting Shares shall be entitled only to the rights of a dissenting
shareholder under Section 1701.85 of the Ohio Law, and such PhoneTel Common
Stock shall be canceled and retired and shall cease to exist.
(b) If the rights of any holder who has made a demand for
dissenting shareholders' rights under Section 1701.85 of the Ohio Law are
terminated for any reason other than the purchase by the PhoneTel Surviving
Corporation or New Davel of the PhoneTel Common Stock subject to the
demand, the shares subject to the demand shall be converted into and
represent only the right to receive the PhoneTel Merger Consideration,
without interest thereon, upon surrender of the certificates representing
the shares, and such shares shall be canceled and retired and shall cease
to exist.
(c) PhoneTel shall give Old Davel (i) prompt notice and
copies of any demands for dissenting shareholders' rights under Sections
1701.84 and 1701.85 of the Ohio Law and of any withdrawals of any such
demands and (ii) the right to direct all negotiations and proceedings with
respect to any such demands. PhoneTel shall not, except with the prior
written consent of Old Davel or New Davel, voluntarily make any payment
with respect to any such demands or any offer to settle any such demands
and PhoneTel's board of directors shall not waive any failure by any
dissenting shareholder to comply with Section 1701.85 of the Ohio Law.
Section 1.07 PhoneTel Articles of Incorporation. The articles
of incorporation of P Sub in effect at the PhoneTel Effective Time shall be
the articles of incorporation of the PhoneTel Surviving Corporation until
amended in accordance with applicable law, except that the name of the
PhoneTel Surviving Corporation shall be "PhoneTel Technologies, Inc."
Section 1.08 PhoneTel Bylaws. The code of regulations of P Sub
in effect at the PhoneTel Effective Time shall be the code of regulations
of the PhoneTel Surviving Corporation until amended in accordance with
applicable law.
Section 1.09 PhoneTel Directors and Officers. From and after
the PhoneTel Effective Time, until successors are duly elected or appointed
in accordance with applicable law, (a) the directors of P Sub at the
PhoneTel Effective Time shall constitute all of the directors of the
PhoneTel Surviving Corporation, and (b) the officers of P Sub at the
PhoneTel Effective Time shall be the officers of the PhoneTel Surviving
Corporation.
ARTICLE II
THE DAVEL MERGER
Section 2.01 Effectuation of Davel Merger.
(a) On the terms and subject to the conditions hereof, on
the Closing Date, the parties shall effect the Davel Merger, pursuant to
which D Sub shall be merged with and into Old Davel in accordance with the
Illinois Business Corporation Act ("Illinois Law"), whereupon the separate
corporate existence of D Sub shall cease, and Old Davel shall be the
surviving corporation (the "Davel Surviving Corporation").
(b) On the Closing Date, in order to effectuate the Davel
Merger, Old Davel and D Sub shall file articles of merger with the
Secretary of State of the State of Illinois (the "Davel Articles of
Merger") and make all other filings or recordings required by Illinois Law
in connection with the Davel Merger. The Davel Merger shall become
effective at such time as the Davel Articles of Merger are duly filed with
the Secretary of State of the State of Illinois and any additional
requirements of Illinois Law are complied with (the "Davel Effective
Time").
(c) From and after the Davel Effective Time, the Davel
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 Davel and D Sub, all as provided
under Illinois Law.
Section 2.02 Conversion of Old Davel Shares.
(a) At the Davel Effective Time and by virtue of the Davel
Merger and without any action on the part of the holders thereof:
(i) each share of common stock, no par value per
share, of Old Davel (including each attached Old Davel Right, "the Old
Davel Common Stock") held by Old Davel as treasury stock, or owned by
PhoneTel or any PhoneTel Subsidiary, if any, immediately prior to the
Davel Effective Time shall be canceled, and no payment shall be made
with respect thereto; provided, however, that any shares of Old Davel
Common Stock as to which Old Davel or any Davel Subsidiary 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
2.02(a)(iv) below;
(ii) each share of capital stock of D Sub outstanding
immediately prior to the Davel Effective Time shall be converted into
and become one share of capital stock of the Davel 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 Davel Surviving Corporation;
(iii) each share of capital stock of New Davel
outstanding immediately prior to the Davel Effective Time shall be
canceled and cease to exist, and no payment shall be made with respect
thereto; and
(iv) subject to Section 2.06 hereof, each share of Old
Davel Common Stock, outstanding immediately prior to the Davel
Effective Time shall, except as otherwise provided in clause (i) of
this subsection, be converted on a one-for-one basis (the "Davel
Exchange Ratio") into the right to receive one fully paid and
nonassessable share of New Davel Common Stock (the "Davel Merger
Consideration"). As of the Davel Effective Time, all such shares of
Old Davel Common Stock 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 Old Davel Common
Stock shall cease to have any rights with respect thereto, except the
right to receive the Davel Merger Consideration to be issued or paid
in consideration therefor upon surrender of such certificate in
accordance with Section 2.03 hereof, without interest. As used
herein, "Old Davel Rights" shall mean the common stock purchase rights
issued pursuant to the Rights Agreement, dated as of April 22, 1998,
between Old Davel and ChaseMellon Shareholder Services, L.L.C.
Section 2.03 Exchange of Old Davel Shares.
(a) Prior to the Davel Effective Time, New Davel shall
enter into an agreement with the Exchange Agent, which shall provide that
New Davel shall deposit with the Exchange Agent prior to the Davel
Effective Time, for the benefit of the holders of shares of Old Davel
Common Stock, for exchange in accordance with this Article II, through the
Exchange Agent, certificates representing the shares of New Davel Common
Stock issuable pursuant to Section 2.02 hereof in exchange for outstanding
shares of Old Davel Common Stock (such shares of New Davel Common Stock,
together with any dividends or distributions with respect thereto payable
to such holder in accordance with Section 2.03(c) hereof being herein
referred to as the "Davel Exchange Fund").
(b) As soon as reasonably practicable after the Davel
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Davel Effective
Time represented outstanding shares of Old Davel Common Stock (the "Old
Davel Certificates") whose shares of Old Davel Common Stock were converted
into the right to receive the Davel Merger Consideration pursuant to
Section 2.02 hereof, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Old Davel
Certificates shall pass, only upon delivery of the Old Davel Certificates
to the Exchange Agent and shall be in such form and have such other
provisions typical in transactions of this type as New Davel may reasonably
specify) and (ii) instructions for use in surrendering the Old Davel
Certificates in exchange for the Davel Merger Consideration, as applicable.
Upon surrender of an Old Davel 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 Old Davel Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of shares of New
Davel Common Stock which such holder has the right to receive pursuant to
the provisions of this Article II, any dividends or other distributions
with respect thereto payable to such holder in accordance with Section
2.03(c) hereof, and the Old Davel Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of shares
of Old Davel Common Stock which is not registered in the transfer records
of Old Davel, a certificate representing the proper number of shares of New
Davel Common Stock may be issued to a person other than the person in whose
name the Old Davel Certificate so surrendered is registered if such Old
Davel 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 New Davel Common
Stock to a person other than the registered holder of such Old Davel
Certificate or establishes to the satisfaction of New Davel that such tax
has been paid or is not applicable. Until surrendered as contemplated by
this Section 2.03, each Old Davel Certificate shall be deemed at any time
after the Davel Effective Time to represent only the right to receive upon
such surrender that number of shares of New Davel Common Stock which the
holder thereof has the right to receive pursuant to the provisions of this
Article II and any dividends or other distributions payable to the holder
thereof in accordance with Section 2.03(c) hereof. No interest shall be
paid or shall accrue on any cash payable to holders of Old Davel
Certificates pursuant to the provisions of this Article II.
(c) No dividends or other distributions with respect to Old
Davel Common Stock with a record date after the Davel Effective Time shall
be paid to the holder of any unsurrendered Old Davel Certificate with
respect to the shares of Old Davel Common Stock represented thereby, and
all such dividends and other distributions shall be paid by New Davel to
the Exchange Agent and shall be included in the Davel Exchange Fund, in
each case, until the surrender of such Old Davel Certificate in accordance
with this Article II. Subject to the effect of applicable escheat or
similar laws, following surrender of any such Old Davel Certificate, there
shall be paid to the holder of the certificate representing shares of New
Davel 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 Davel Effective Time theretofore paid with
respect to such whole shares of New Davel Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Davel Effective Time but prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of New Davel Common Stock.
(d) All shares of New Davel Common Stock issued upon the
surrender for exchange of Old Davel Certificates in accordance with the
terms of this Article II shall be deemed to have been issued (and paid) in
full satisfaction of all rights pertaining to the Old Davel Common Stock
theretofore represented by such Old Davel Certificates, subject, however,
to the Davel Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Davel
Effective Time which may have been declared or made by New Davel on such
shares of Old Davel Common Stock which remain unpaid at the Davel
Effective Time, and there shall be no further registration of transfers on
the stock transfer books of the Davel Surviving Corporation of the shares
of Old Davel Common Stock which were outstanding immediately prior to the
Davel Effective Time. If, after the Davel Effective Time, Old Davel
Certificates are presented to the Davel Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II, except as otherwise provided by law.
(e) Any portion of the Davel Exchange Fund which remains
undistributed to the holders of the Old Davel Certificates six months after
the Closing Date shall be delivered to New Davel, upon demand, and any
holders of the Old Davel Certificates who have not theretofore surrendered
their Old Davel Certificates in accordance with this Article II shall
thereafter look only to New Davel for payment of their claims for Davel
Merger Consideration and any dividends or distributions with respect to New
Davel Common Stock, as applicable.
(f) None of New Davel, D Sub or the Exchange Agent shall be
liable to any person in respect of any shares of New Davel Common Stock any
dividends or distributions with respect thereto, in each case, delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Old Davel Certificate shall not have been surrendered
prior to the date on which any Davel Merger Consideration, any dividends or
distributions payable to the holder of such Old Davel Certificate or any
cash payable to the holder of such Old Davel Certificate formerly
representing Old Davel Common Stock pursuant to this Article II would
otherwise escheat to or become the property of any Governmental Entity, any
such Davel Merger Consideration, dividends or distributions in respect of
such Old Davel Certificate or such cash shall, to the extent permitted by
applicable law, become the property of the Davel Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(g) The Exchange Agent shall invest any cash included in
the Davel Exchange Fund, as directed by New Davel, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
New Davel.
(h) If any Old Davel Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Old Davel Certificate to be lost, stolen or destroyed
and, if required by the Davel Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Davel Surviving
Corporation may direct as indemnity against any claim that may be made
against it with respect to such Old Davel Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Old Davel
Certificate the Davel Merger Consideration and, if applicable, any unpaid
dividends and distributions on shares of New Davel Common Stock deliverable
in respect thereof, in each case, due to such person pursuant to this
Agreement.
Section 2.04 Certain Davel Adjustments. If after the date
hereof and on or prior to the Davel Effective Time the outstanding shares
of New Davel Common Stock or Old Davel 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 Davel Exchange Ratio (and/or the security or securities to be issued to
the holders of Old Davel 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.
Section 2.05 Davel Stock Options and Warrants.
(a) As of the Davel Effective Time, (i) each outstanding
option to purchase Old Davel Common Stock (collectively, the "Old Davel
Options"), shall be converted into an option (an "Adjusted Old Davel
Option") to purchase the same number of shares of New Davel Common Stock at
an exercise price per share equal to the exercise price for each such share
of Old Davel Common Stock subject to such option, and all references in
each such option to Old Davel shall be deemed to refer to New Davel, where
appropriate, (ii) New Davel shall assume the obligations of Old Davel under
the Old Davel Options, (iii) each outstanding warrant to purchase Old Davel
Common Stock (the "Old Davel Warrants") shall be converted into a warrant
(an "Adjusted Old Davel Warrant") to purchase the same number of shares of
New Davel Common Stock, at an exercise price per share equal to the
exercise price for each such share of Old Davel Common Stock subject to
such Old Davel Warrant, and all references in each such Old Davel Warrant
to Old Davel shall be deemed to refer to New Davel, where appropriate and
(iv) New Davel shall assume the obligations of Old Davel under the Old
Davel Warrants. The other terms of each Adjusted Old Davel Option and
Adjusted Old Davel Warrant, and the plans or agreements under which they
were issued, shall continue to apply in accordance with their terms. The
date of grant of each Adjusted Old Davel Option and Adjusted Old Davel
Warrant shall be the date on which the corresponding option or warrant was
granted.
(b) Old Davel and New Davel agree that each of the
applicable Old Davel stock option plans, programs or agreements and each of
the applicable New Davel 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 Old Davel
Common Stock held or to be awarded or paid pursuant to such plans, programs
or agreements into shares of New Davel Common Stock on a basis consistent
with the transactions contemplated by this Agreement. Old Davel and New
Davel agree to submit such amendments to the New Davel Stock Option Plans
or such Old Davel plans, programs or agreements to their respective
stockholders, if such submission is determined to be necessary by counsel
to Old Davel or New Davel after consultation with one another; provided,
however, that such approval shall not be a condition to the consummation of
the Transaction.
(c) New Davel shall (i) reserve for issuance the number of
shares of New Davel Common Stock that shall become subject to the plans,
programs and agreements referred to in this Section 2.05 and (ii) issue or
cause to be issued the appropriate number of shares of New Davel Common
Stock pursuant to applicable plans, programs and agreements, upon the
exercise or maturation of rights existing thereunder on the Davel Effective
Time or thereafter granted or awarded. No later than the Davel Effective
Time, New Davel shall prepare and file with the SEC a registration
statement on Form S-8 (or other appropriate form) registering a number of
shares of New Davel Common Stock necessary to fulfill New Davel's
obligations under this Section 2.05. 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
any Adjusted Old Davel Options remain outstanding.
(d) As soon as practicable after the Davel Effective Time,
New Davel shall deliver to the holders of Old Davel Options and Old Davel
Warrants appropriate notices setting forth (i) such holders' rights
pursuant to the respective plans and agreements evidencing the grants of
the related Old Davel Options and Old Davel Warrants, (ii) the number of
shares of New Davel Common Stock for which such holder's Adjusted Old Davel
Options or Adjusted Old Davel Warrants are then exercisable and the
exercise price therefor and (iii) that such Old Davel Options and Old Davel
Warrants and the related plans, programs and agreements shall be assumed by
New Davel and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 2.05 after giving
effect to the Davel Merger).
Section 2.06 Dissenters' Rights.
(a) Any Old Davel Common Stock as to which rights are
perfected under Sections 5/11.65 and 5/11.70 of the Illinois Law ("Davel
Dissenting Shares") shall not be converted into or represent a right to
receive the Old Davel Merger Consideration. Holders of Davel Dissenting
Shares shall be entitled only to the rights of a dissenting shareholder
under Section 5/11.70 of the Illinois Law, and such Old Davel Common Stock
shall be canceled and retired and shall cease to exist.
(b) If the rights of any holder who has made a demand for
dissenters' rights under Section 5/11.70 of the Illinois Law are terminated
for any reason other than the purchase by the Davel Surviving Corporation or
New Davel of the Old Davel Common Stock subject to the demand, the shares
subject to the demand shall be converted into and represent only the right to
receive the Davel Merger Consideration, without interest thereon, upon
surrender of the certificates representing the shares, and such shares shall
be canceled and retired and shall cease to exist.
Section 2.07 Davel Articles of Incorporation. The articles of
incorporation of D Sub in effect at the Davel Effective Time shall be the
articles of incorporation of the Davel Surviving Corporation until amended
in accordance with applicable law, except that the name of the Davel
Surviving Corporation shall be "DCG, Inc." or such other name as Old Davel
shall determine.
Section 2.08 Davel Bylaws. The bylaws of D Sub in effect at
the Davel Effective Time shall be the bylaws of the Davel Surviving
Corporation until amended in accordance with applicable law.
Section 2.09 Davel Directors and Officers. From and after the
Davel Effective Time, until successors are duly elected or appointed in
accordance with applicable law, (a) the directors of D Sub at the Davel
Effective Time shall constitute all of the directors of the Davel Surviving
Corporation, and (b) the officers of D Sub at the Davel Effective Time
shall be the officers of the Davel Surviving Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PHONETEL
PhoneTel represents and warrants to Old Davel and New Davel that:
Section 3.01 Corporate Organization. PhoneTel is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio, 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 Section 3.01 of the
disclosure letter delivered by PhoneTel to Old Davel and New Davel
concurrently with the execution of this Agreement (the "PhoneTel Disclosure
Letter"), PhoneTel 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, have a PhoneTel
Material Adverse Effect. As used herein, "PhoneTel Material Adverse
Effect" shall mean a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of PhoneTel and
the PhoneTel 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.
Section 3.02 Authorization. PhoneTel has the necessary
corporate power and authority to enter into this Agreement and, subject to
the approval of this Agreement and the PhoneTel Merger by the affirmative
vote of the holders of a majority of the outstanding shares of PhoneTel
Common Stock at the PhoneTel Stockholders Meeting ("PhoneTel Stockholder
Approval"), to carry out its obligations hereunder. The execution and
delivery of this Agreement by PhoneTel, the performance by PhoneTel of its
obligations hereunder and the consummation by PhoneTel of the Transaction
have been duly and validly authorized by PhoneTel's Board of Directors,
have been unanimously approved by the PhoneTel Board of Directors prior to
either Old Davel or New Davel becoming an "interested shareholder" (as
defined in Section 1704.01(C)(8) of Ohio Law) and have been approved by
PhoneTel's Board of Directors as otherwise required by PhoneTel's articles
of incorporation. Except for PhoneTel Stockholder Approval, no other
corporate proceeding on the part of PhoneTel is necessary for the execution
and delivery of this Agreement by PhoneTel, the performance by PhoneTel of
its obligations hereunder or the consummation by PhoneTel of the
Transaction. This Agreement has been duly and validly executed and
delivered by PhoneTel and is a legal, valid and binding obligation of
PhoneTel, enforceable against PhoneTel 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 3.03 Capital Stock. As of June 1, 1998, the authorized
capital stock of PhoneTel consisted of: (a) 50,000,000 shares of PhoneTel
Common Stock, of which 16,641,505 shares were issued and outstanding and no
shares were held in PhoneTel's treasury and (b) 10,000,000 shares of
preferred stock, without par value, consisting of (i) 200,000 shares
designated as 14% Convertible Cumulative Redeemable Preferred Stock (the
"PIK Preferred Stock"), of which 142,982 shares were issued and
outstanding, (ii) 250,000 shares designated as Series A Special Convertible
Preferred ("Series A Preferred Stock"), of which no shares were issued and
outstanding, and (iii) 250,000 shares designated as Series B Special
Convertible Preferred ("Series B Preferred Stock"), of which no shares were
issued and outstanding (the PIK Preferred Stock, the Series A Preferred
Stock and the Series B Preferred Stock sometimes being collectively
referred to herein as the "Preferred Stock"). All of the outstanding
shares of capital stock of PhoneTel 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 1, 1998, except
for (i) the Preferred Stock, (ii) options to acquire up to 1,978,313 shares
of PhoneTel Common Stock and (iii) warrants to acquire up to 5,284,011
shares of PhoneTel Common Stock, there were no outstanding subscriptions,
options, warrants, rights, contracts or other arrangements or commitments
obligating PhoneTel 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. Section 3.04 of the PhoneTel
Disclosure Letter lists all direct and indirect subsidiaries of PhoneTel
(each, a "PhoneTel Subsidiary" and collectively, the "PhoneTel
Subsidiaries"). Except for the PhoneTel Subsidiaries and as listed in
Section 3.04 of the PhoneTel Disclosure Letter, PhoneTel does not directly
or indirectly own any interest in any other corporation, partnership, joint
venture or other business association or entity. Each PhoneTel 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 Section 3.04 of the PhoneTel Disclosure
Letter, each PhoneTel 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 PhoneTel Material Adverse Effect. Except as
set forth in Section 3.04 of the PhoneTel Disclosure Letter, all
outstanding shares of capital stock of each PhoneTel Subsidiary are validly
issued, fully paid and nonassessable and are owned by PhoneTel or another
PhoneTel Subsidiary free and clear of any liens, claims or encumbrances.
Section 3.05 Consents and Approvals; No Violation. Except as
set forth in Section 3.05 of the PhoneTel Disclosure Letter and except for
(a) applicable requirements of 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 SEC of a joint proxy
statement relating to the PhoneTel Stockholders Meeting and the Davel
Stockholders Meeting, as amended or supplemented from time to time (the
"Proxy Statement"), (b) the filing of a Pre-Merger Notification and Report
Form by PhoneTel and the expiration or termination of the waiting period
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (c) the filing of the PhoneTel Certificate of Merger as
required by Ohio 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
American Stock Exchange and the SEC with respect to the delisting and
deregistration of the shares of PhoneTel Common Stock and (f) such
consents, approvals, orders, authorizations, notifications, registrations,
declarations and filings as may be required by state public utility or
public service commissions 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 PhoneTel of the Transaction. Neither the execution and
delivery of this Agreement by PhoneTel nor the consummation by PhoneTel of
the Transaction, nor compliance by PhoneTel 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 PhoneTel or any PhoneTel Subsidiary, (ii) except as set forth
in Section 3.05 of the PhoneTel Disclosure Letter, 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 note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which PhoneTel or any
PhoneTel Subsidiary is a party or by which any of them or any of their
properties or assets may be bound, or, (iii) subject to the governmental
filings and other matters referred to above in this Section 3.05, violate
any Federal, state, local or foreign order, writ, injunction, decree,
statute, rule or regulation applicable to PhoneTel, any PhoneTel 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 PhoneTel
Material Adverse Effect or impair materially PhoneTel's ability to perform
its obligations hereunder or prevent or materially delay the consummation
of the Transaction. The Ohio Control Share Acquisition Act (Section
1701.831 et seq. of the Ohio Law) does not apply to the execution and
delivery of this Agreement or the consummation of the Transaction.
Section 3.06 SEC Reports and Financial Statements.
(a) Since December 31, 1994, PhoneTel has filed all
required forms, reports and documents with the SEC required to be filed by
it pursuant to the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act") and the Exchange
Act (hereinafter collectively referred to as the "PhoneTel 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 PhoneTel 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 PhoneTel and the PhoneTel Subsidiaries included in the
financial statements contained in PhoneTel's Annual Report on Form 10-K for
the year ended December 31, 1997 (the "PhoneTel 10-K") and in PhoneTel's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998 (the
"PhoneTel 10-Q"), present fairly the consolidated financial position of
PhoneTel and the PhoneTel 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 footnotes.
Section 3.07 Absence of Undisclosed Liabilities. Neither
PhoneTel nor any PhoneTel Subsidiary has any liabilities (whether absolute,
accrued or contingent), except: (a) liabilities, obligations or
contingencies that are accrued and reserved against in the consolidated
balance sheet of PhoneTel and the PhoneTel Subsidiaries as of December 31,
1997 or reflected in the notes thereto, (b) liabilities incurred since
December 31, 1997 in the ordinary course of business, (c) liabilities
disclosed in Section 3.07 of the PhoneTel Disclosure Letter, or (d) any
liabilities which, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a PhoneTel Material Adverse
Effect.
Section 3.08 Changes. Since the date of the PhoneTel 10-K, and
except as set forth in the PhoneTel Reports filed prior to the date of this
Agreement (as amended to the date hereof, the "Filed PhoneTel Reports"),
and except as otherwise disclosed in Section 3.08 of the PhoneTel
Disclosure Letter or as otherwise provided by this Agreement:
(a) there has been no 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 PhoneTel's capital stock, or any declaration, setting aside or
payment of any dividend or other distribution by PhoneTel in respect of
PhoneTel's capital stock, or any issuance of any shares of capital stock of
PhoneTel (other than pursuant to the exercise of options and warrants
pursuant to their terms), or any granting to any person of any option to
purchase or other right to acquire shares of capital stock of PhoneTel or
any stock split or other change in PhoneTel's capitalization;
(c) neither PhoneTel nor any PhoneTel Subsidiary has
entered into or agreed to enter into any new or amended contract with any
labor unions representing employees of PhoneTel or any PhoneTel Subsidiary;
(d) neither PhoneTel nor any PhoneTel 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 PhoneTel nor any PhoneTel Subsidiary has (i)
entered into or amended any bonus, incentive compensation, deferred
compensation, profit sharing, retirement, pension, group insurance or other
benefit plan except as required by law or regulations and except for the
Executive Agreements 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) neither PhoneTel nor any PhoneTel 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 3.09 Investigations; Litigation.
(a) Except as described in Section 3.09(a) of the PhoneTel
Disclosure Letter and other than reviews pursuant to the HSR Act, there are
no pending or, to the knowledge of PhoneTel, threatened investigations,
reviews or inquiries by any Governmental Entity with respect to PhoneTel or
any PhoneTel Subsidiary or with respect to the activities of any officer,
director or, to the knowledge of PhoneTel, employee of PhoneTel (an
"Investigation"), other than Investigations which, if the resolution
thereof were adverse, would not, individually or in the aggregate,
reasonably be expected to have a PhoneTel Material Adverse Effect. For the
purpose of this Agreement, "knowledge of PhoneTel" shall be deemed to mean
the actual knowledge, after reasonable inquiry, of any executive officer of
PhoneTel.
(b) Except as described in Section 3.09(b) of the PhoneTel
Disclosure Letter, (i) there are no actions or proceedings pending or, to
the knowledge of PhoneTel, threatened against PhoneTel or any PhoneTel
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 PhoneTel Merger or the Davel Merger or
which, if adversely determined, would, individually or in the aggregate,
reasonably be expected to have a PhoneTel Material Adverse Effect,
(ii) there are no outstanding domestic or foreign judgments, decrees or
orders against PhoneTel or any PhoneTel Subsidiary that, individually or in
the aggregate, would reasonably be expected to have a PhoneTel Material
Adverse Effect, (iii) neither PhoneTel nor any PhoneTel 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 PhoneTel Material Adverse Effect;
and (iv) there are no actions pending or, to the knowledge of PhoneTel,
threatened against the directors or any director of PhoneTel alleging a
breach of such directors' or director's fiduciary duties (except such
actions which may arise as a result of the Transaction).
Section 3.10 Contracts and Commitments.
(a) Except as are attached as exhibits to any Filed
PhoneTel Report or as set forth in Section 3.10 of the PhoneTel Disclosure
Letter, PhoneTel is not, nor is any PhoneTel Subsidiary, with respect to
its business, a party to any contracts or agreements that are material to
the business, properties, assets or financial condition of PhoneTel and the
PhoneTel Subsidiaries, taken as a whole (together with all amendments,
exhibits, attachments, waivers or other changes thereto, the "Contracts").
(b) PhoneTel has supplied or made available to Old Davel
valid copies of all Contracts.
(c) Since January 1, 1998, PhoneTel has not altered its
payment practices with regard to amounts payable to local exchange carriers
in respect of payphone services or with regard to amounts payable to
Location Owners in respect of commissions, which alteration would result in
a material breach of the contractual duties of PhoneTel to such local
exchange carriers in the aggregate or to such Location Owners in the
aggregate.
Section 3.11 Environmental Matters. Except as described in the
Filed PhoneTel Reports, (a) PhoneTel and each of the PhoneTel 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 PhoneTel
Material Adverse Effect, which compliance includes, but is not limited to,
the possession by PhoneTel and each of the PhoneTel Subsidiaries of permits
and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof;
(b) neither PhoneTel nor any of the PhoneTel Subsidiaries has received
written notice of, or, to the knowledge of PhoneTel, 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 PhoneTel Material Adverse Effect; and (c) there has
not been by PhoneTel or any of the PhoneTel 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 PhoneTel, former properties or
facilities or any current or, to the knowledge of PhoneTel, former offsite
properties and facilities used in the business of PhoneTel or the PhoneTel
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 is
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 PhoneTel Material Adverse Effect.
Section 3.12 Taxes. (a) Each of PhoneTel and the PhoneTel
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 PhoneTel Material Adverse
Effect. Each of PhoneTel and the PhoneTel Subsidiaries has timely paid (or
PhoneTel 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 PhoneTel
Material Adverse Effect, and the most recent financial statements contained
in the PhoneTel Reports reflect an adequate reserve in accordance with GAAP
for all taxes payable by PhoneTel and the PhoneTel 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 PhoneTel or any of the PhoneTel Subsidiaries
that are not adequately reserved for, except for deficiencies that
individually or in the aggregate would not reasonably be expected to have a
PhoneTel Material Adverse Effect. There is no action, suit, taxing
authority proceeding or audit now in progress, pending, or, to the
knowledge of PhoneTel, threatened against or with respect to PhoneTel or
any of the PhoneTel Subsidiaries.
Section 3.13 Employment Agreements. Except as disclosed in
Section 3.13 of the PhoneTel Disclosure Letter and except for the Executive
Agreements, there are no employment, consulting, severance or
indemnification contracts or agreements between PhoneTel or any PhoneTel
Subsidiary, on the one hand, and any directors, officers or other employees
of PhoneTel or any PhoneTel Subsidiary, on the other hand.
Section 3.14 Change of Control Provisions. Except as disclosed
in Section 3.14 of the PhoneTel Disclosure Letter, none of the contracts or
agreements set forth in Section 3.13 of the PhoneTel Disclosure Letter and
none of PhoneTel's or any PhoneTel Subsidiary's employee benefit plans,
programs or arrangements contains any provision that would become operative
as the result of a change of control of PhoneTel or that would become
operative as a result of the PhoneTel Merger or the Transaction.
Section 3.15 Employee Benefit Plans.
(a) Except as set forth in Section 3.15(a) of the PhoneTel
Disclosure Letter, all of the (i) Plans 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
PhoneTel or any of the PhoneTel Subsidiaries or to which PhoneTel or any of
the PhoneTel Subsidiaries is a party may be terminated by the PhoneTel
Surviving Corporation following the PhoneTel Effective Time without
financial penalty or premium and there shall be no obligation of the
PhoneTel Surviving Corporation or New Davel following the PhoneTel
Effective Time to issue any shares of their respective capital stock
pursuant to any of the foregoing or otherwise following the PhoneTel
Effective Time. Except as set forth in Section 3.15(a) of the PhoneTel
Disclosure Letter, no payment by PhoneTel or any of the PhoneTel
Subsidiaries to any person (payable or distributable pursuant to the
foregoing agreements and plans or this Agreement) shall be nondeductible by
PhoneTel or any of the PhoneTel Subsidiaries for Federal income tax
purposes because of Section 280G of the Code.
(b) Since December 31, 1997, all employee benefit plans
within the meaning of Section 3(3) of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained by PhoneTel or any
of the PhoneTel Subsidiaries (collectively, the "Plans") are in material
compliance with, and have been administered and operated 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 has occurred and is continuing
with respect to any Plan subject to Title III 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 the payment of contributions and benefits
in the ordinary course). 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 risk of termination or partial termination of any
Plan which could reasonably be anticipated to result in liability on the
part of PhoneTel or any of the PhoneTel Subsidiaries. Full payment has
been made, or provision has been made therefor, of all amounts which
PhoneTel or any of the PhoneTel 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 PhoneTel nor any of the PhoneTel Subsidiaries nor, to the
knowledge of PhoneTel, 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
PhoneTel, any of the PhoneTel Subsidiaries, or any officer, director,
employee of PhoneTel or any of the PhoneTel Subsidiaries or, to the
knowledge of PhoneTel, any trustee, administrator or other fiduciary of any
Plan, would be subject to either a penalty pursuant to Section 502(i) of
ERISA or a material tax imposed by Section 4975 of the Code nor, to the
knowledge of PhoneTel, shall the consummation of the Transaction constitute
such a transaction. Except as disclosed in Section 3.15(b) of the PhoneTel
Disclosure Letter, no claim, action or litigation, has been made, commenced
or, to the knowledge of PhoneTel, threatened with respect to any Plan
(other than claims for benefits made in the ordinary course). No Plan or
related trust owns any securities in violation of Section 407 of ERISA. No
withdrawal by PhoneTel or any of the PhoneTel 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 PhoneTel. 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.
PhoneTel has paid, or has set up an adequate reserve for, all liabilities
under each Plan.
Section 3.16 Licenses. PhoneTel and the PhoneTel 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 PhoneTel and the PhoneTel
Subsidiaries taken as a whole. All such Licenses are in full force and
effect and, to the knowledge of PhoneTel, 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 PhoneTel Material Adverse Effect. There
is not pending or, to the knowledge of PhoneTel, 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 Section 3.16 of the PhoneTel Disclosure Letter, no
event under the control of PhoneTel 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 PhoneTel Material
Adverse Effect.
Section 3.17 Real Estate Leases. Section 3.17 of the PhoneTel
Disclosure Letter sets forth a list of (a) all leases and subleases under
which PhoneTel and the PhoneTel 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
PhoneTel and the PhoneTel Subsidiaries or contractual obligations on the
part of PhoneTel and the PhoneTel Subsidiaries to purchase or acquire any
interest in real property and (c) all options granted by PhoneTel and the
PhoneTel Subsidiaries or contractual obligations on the part of PhoneTel
and the PhoneTel Subsidiaries to sell or dispose of any interest in real
property, in each case, other than site location agreements between
PhoneTel or any of the PhoneTel Subsidiaries and Location Owners ("Site
Location Agreements").
Section 3.18 Intellectual Property.
(a) All of the patents, registered trademarks, registered
service marks, registered copyrights, applications for any of the foregoing
and unregistered trademarks, service marks, copyrights, trade names and
corporate names material to the conduct of the business of PhoneTel and the
PhoneTel Subsidiaries (collectively, "Intellectual Property") are set forth
in Section 3.18 of the PhoneTel Disclosure Letter. To the knowledge of
PhoneTel and except as set forth in Section 3.18 of the PhoneTel Disclosure
Letter, (i) PhoneTel or one of the PhoneTel Subsidiaries owns and possesses
all right, title and interest in and to, or possesses the valid right to
use, the Intellectual Property; (ii) neither PhoneTel nor any PhoneTel
Subsidiary has received any notice of any potential claim of any,
infringement of or misappropriation from any third party with respect to
any material item of Intellectual Property; (iii) each item of Intellectual
Property is valid and enforceable; and (iv) neither PhoneTel nor any of the
PhoneTel Subsidiaries is currently infringing and, except as set forth in
Section 3.18 of the PhoneTel Disclosure Letter, has not infringed any
intellectual property of any other person. To the knowledge of PhoneTel,
the PhoneTel Merger and the Transaction will not impair any item of
Intellectual Property.
(b) PhoneTel has taken 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 used or
relied on by PhoneTel or by any of the PhoneTel Subsidiaries in the conduct
of its business shall malfunction, cease to function, generate incorrect
data or produce incorrect results 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, except where any such malfunction
or generation of incorrect data or results would not reasonably be expected
to have a PhoneTel Material Adverse Effect.
Section 3.19 Compliance with Other Instruments and Laws.
Except as set forth in Section 3.19 of the PhoneTel Disclosure Letter,
neither PhoneTel nor any PhoneTel Subsidiary is in violation of any term of
its articles of incorporation or code of regulations or comparable
organizational documents, or in violation of any Contract or of any
judgment, decree or order which names PhoneTel or any PhoneTel 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 PhoneTel Material Adverse Effect. Except
as set forth in Section 3.19 of the PhoneTel Disclosure Letter, PhoneTel's
and each PhoneTel Subsidiary's businesses 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 PhoneTel Material
Adverse Effect.
Section 3.20 Employees. Without limiting the generality of
Section 3.19 hereof, PhoneTel 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 PhoneTel, it does not have any material labor relations
problems (including, without limitation, actual or threatened strikes or
work stoppages or material grievances).
Section 3.21 Information Supplied. None of the information
supplied or to be supplied by PhoneTel for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by New Davel in connection with the issuance of New Davel Common
Stock in the Transaction (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 PhoneTel's stockholders or at the time of the PhoneTel
Stockholders Meeting, 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 shall
comply as to form in all material respects with the requirements of the
Exchange Act, except that no representation or warranty is made by PhoneTel
with respect to statements made or incorporated by reference therein based
on information supplied by Old Davel or New Davel for inclusion or
incorporation by reference in the Proxy Statement.
Section 3.22 Certain Fees. Except in connection with the
engagement of Ladenburg, ▇▇▇▇▇▇▇ & Company and as otherwise set forth in
Section 3.22 of the PhoneTel Disclosure Letter, neither PhoneTel nor any
PhoneTel 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 Transaction. The fees payable by
PhoneTel to Ladenburg, ▇▇▇▇▇▇▇ & Company in connection with the Transaction
are set forth in Section 3.22 of the PhoneTel Disclosure Letter.
Section 3.23 Opinion of Financial Advisor. PhoneTel has
received the opinion of Ladenburg, ▇▇▇▇▇▇▇ & Company, dated the date
hereof, to the effect that, as of such date, the Merger Consideration to be
received in the PhoneTel Merger by PhoneTel's stockholders is fair to
PhoneTel's stockholders from a financial point of view.
Section 3.24 Voting Requirements. PhoneTel Stockholder
Approval is the only vote of the holders of any class or series of
PhoneTel's capital stock necessary to adopt this Agreement and the PhoneTel
Merger.
Section 3.25 State Takeover Statutes. The Board of Directors of
PhoneTel has approved this Agreement and the consummation of the PhoneTel
Merger and the Transaction, and such approval constitutes approval of the
PhoneTel Merger by the Board of Directors of PhoneTel under the provisions
of Section 1704 of Ohio Law such that Section 1704 of Ohio Law does not
apply to the Transaction. To the knowledge of PhoneTel, no "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation enacted under state or Federal law applicable to
PhoneTel is applicable to the Transaction.
Section 3.26 Payphones. PhoneTel has good and marketable title
to at least 45,000 installed payphones, all of which, except for those
specifically described in Section 3.26 of the PhoneTel Disclosure Letter,
are operational and which, except for those payphones further specifically
described in Section 3.26 of the PhoneTel Disclosure Letter, are subject to
enforceable Site Location Agreements with an average remaining term of 46
months.
Section 3.27 Average Net Revenue. The Average Net Revenue is
at least $70.00 per payphone in operation by PhoneTel and the PhoneTel
Subsidiaries as of the date hereof. For purposes of this Agreement,
"Average Net Revenue" for such payphones shall mean the average of the
monthly gross revenues (excluding dial-around compensation) minus telephone
bills (excluding operator service provider fees) and commissions for the 3
months prior to March 31, 1998.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF OLD DAVEL
Old Davel represents and warrants to PhoneTel as follows:
Section 4.01 Corporate Organization. Each of Old Davel, New
Davel, D Sub and P Sub 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 Section 4.01 of the disclosure letter
delivered by Old Davel to PhoneTel concurrently with the execution of this
Agreement (the "Davel Disclosure Letter"), Old Davel, New Davel, D Sub and
P Sub are duly qualified to do business and are in good standing in each
jurisdiction in which the character of their properties owned or held under
lease or the nature of their 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 Davel Material Adverse
Effect. As used herein, "Davel Material Adverse Effect" shall mean a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of Old Davel and its 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.
Section 4.02 Authorization. Each of Old Davel, New Davel,
D Sub and P Sub 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 two-thirds of the outstanding shares of Old
Davel Common Stock at the Davel Stockholders Meeting ("Davel Stockholder
Approval") and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Old Davel, New Davel, D Sub and P Sub, the
performance by Old Davel, New Davel, D Sub and P Sub of their respective
obligations hereunder and the consummation by Old Davel, New Davel, D Sub
and P Sub of the Transaction have been duly and validly authorized by the
respective Boards of Directors of Old Davel, New Davel, D Sub and P Sub,
have been approved by the Boards of Directors of Old Davel, New Davel, D
Sub and P Sub as otherwise required by their respective articles of
incorporation or comparable organizational documents, and have been
approved by Old Davel as the sole stockholder of New Davel and by New Davel
as the sole stockholder of each of D Sub and P Sub. Except for Davel
Stockholder Approval, no other corporate proceeding on the part of Old
Davel, New Davel, D Sub or P Sub is necessary for the execution and
delivery of this Agreement by each of Old Davel, New Davel, D Sub and P
Sub, the performance of their obligations hereunder and the consummation by
Old Davel, New Davel, D Sub and P Sub of the Transaction. This Agreement
has been duly and validly executed and delivered by each of Old Davel and
P Sub and is a legal, valid and binding obligation of each of Old Davel,
New Davel, D Sub and P Sub, 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 1, 1998, the authorized
capital stock of Old Davel consisted of: (a) 10,000,000 shares of Old
Davel Common Stock, of which 4,647,809 shares were issued and outstanding
and no shares were held in Old Davel's treasury and (b) 1,000,000 shares of
preferred stock, par value $.01 per share, of which no shares were issued
and outstanding. All of the outstanding shares of capital stock of Old
Davel 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 1, 1998, except for Old Davel Options to acquire not
more than 500,350 shares of Old Davel Common Stock and Old Davel Warrants
to acquire not more than 58,000 shares of Old Davel Common Stock, there
were no outstanding subscriptions, options, warrants, rights, contracts or
other arrangements or commitments obligating Old Davel to issue any shares
of its capital stock or any securities convertible into or exchangeable for
shares of its capital stock.
Section 4.04 Subsidiaries. Section 4.04 of the Davel
Disclosure Letter lists all direct and indirect subsidiaries of Old Davel
(each, a "Davel Subsidiary" and collectively, the "Davel Subsidiaries").
Except for the Davel Subsidiaries and as set forth in Section 4.04 of the
Davel Disclosure Letter, Old Davel does not directly or indirectly own any
interest in any other corporation, partnership, joint venture or other
business association or entity. Each Davel 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
Section 4.04 of the Davel Disclosure Letter, each Davel 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 Davel
Material Adverse Effect. Except as set forth in Section 4.04 of the Davel
Disclosure Letter, all outstanding shares of capital stock of each Davel
Subsidiary are validly issued, fully paid and nonassessable and are owned
by Old Davel or another Davel 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 Exchange Act, including the filing with
and clearing by the SEC of the Form S-4, (b) the filing of a Pre-Merger
Notification and Report Form by Old Davel and the expiration or termination
of the waiting period under the HSR Act, (c) the filing of the PhoneTel
Certificate of Merger as required by Ohio Law and the filing of the Davel
Articles of Merger as required by Illinois 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 New Davel
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, and (f) such consents, approvals, orders, authorizations,
notifications, registrations, declarations and filings as may be required
by state public utility or public service commissions 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 Old Davel, New
Davel, D Sub or P Sub of the Transaction. Except as set forth in Section
4.05 of the Davel Disclosure Letter, neither the execution and delivery of
this Agreement by Old Davel, New Davel, D Sub or P Sub, nor the
consummation by Old Davel, New Davel, D Sub or P Sub of the Transaction nor
compliance by Old Davel, New Davel, D Sub or P Sub 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 Old Davel or any Davel Subsidiary, (ii) at the
PhoneTel 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
note, bond, mortgage indenture, license, agreement or other instrument or
obligation to which Old Davel or any Davel Subsidiary is a party or by
which any of them or any of their respective properties or assets may be
bound, or (iii) subject to the governmental filings and other matters
referred to above in this Section 4.05, violate any Federal, state, local
or foreign order, writ, injunction, decree, statute, rule or regulation
applicable to Old Davel or any Davel 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 have a Davel Material Adverse Effect.
Section 4.06 SEC Reports and Financial Statements.
(a) Since December 31, 1994, Old Davel 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 "Old Davel 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 Old Davel 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 Old
Davel and its consolidated subsidiaries included in the financial
statements contained in Old Davel's Annual Report on Form 10-K for the year
ended December 31, 1997 (the "Old Davel 10-K") and in Old Davel's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998 (the "Old Davel
10-Q") present fairly the consolidated financial position of Old Davel 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.
Section 4.07 Absence of Undisclosed Liabilities. Neither Old
Davel nor any Davel Subsidiary has any liabilities (whether absolute,
accrued or contingent), except: (a) liabilities, obligations or
contingencies that are accrued and reserved against in the consolidated
balance sheet of Old Davel and the Davel Subsidiaries as of December 31,
1997 or reflected in the notes thereto, (b) liabilities incurred since
December 31, 1997 in the ordinary course of business, (c) liabilities
disclosed in Section 4.07 of the Davel Disclosure Letter, or (d) any
liabilities which, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Davel Material Adverse Effect.
Section 4.08 Changes. Since the date of the Davel 10-K, and
except as set forth in the Davel Reports filed prior to the date of this
Agreement (as amended to the date hereof, the "Filed Davel Reports"), and
except as otherwise disclosed in Section 4.08 of the Davel Disclosure
Letter or as otherwise provided by this Agreement:
(a) there has been no Davel 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 Old Davel's
capital stock, or any declaration, setting aside or payment of any dividend
or other distribution by Old Davel in respect of Old Davel's capital stock,
or any issuance of any shares of capital stock of Old Davel, or any
granting to any person of any option to purchase or other right to acquire
shares of capital stock of Old Davel or any stock split or other change in
Old Davel's capitalization;
(c) as of the date hereof, neither Old Davel nor any Davel
Subsidiary has entered into or agreed to enter into any new or amended
contract with any labor unions representing employees of Old Davel or any
Davel Subsidiary;
(d) as of the date hereof, neither Old Davel nor any Davel
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, neither Old Davel nor any Davel
Subsidiary has (i) entered into or amended any bonus, incentive
compensation, deferred compensation, profit sharing, retirement, pension,
group insurance or other benefit plan except as required by law or
regulations and except for the Executive Agreements 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) neither Old Davel nor any Davel 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 Section 4.09 of the Davel
Disclosure Letter, and other than reviews pursuant to the HSR Act, there
are no pending or, to the knowledge of Old Davel, threatened
investigations, reviews or inquiries by any Governmental Entity with
respect to Old Davel or any of the Davel Subsidiaries or with respect to
the activities of any officer, director or, to the knowledge of Old Davel,
employee of Old Davel (an "Old Davel Investigation"), other than Old Davel
Investigations which, if the resolution thereof were adverse, would not,
individually or in the aggregate, reasonably be expected to have a Davel
Material Adverse Effect. For the purpose of this Agreement, "knowledge of
Old Davel" shall be deemed to mean the actual knowledge, after reasonable
inquiry, of any executive officer of Old Davel.
(b) Except as described in Section 4.09 of the Davel
Disclosure Letter, (i) there are no actions or proceedings pending or, to
the knowledge of Old Davel, threatened against Old Davel or any of the
Davel Subsidiaries before any court or before any administrative agency or
administrative officer or executive, whether Federal, state, local or
foreign, which seek to enjoin the PhoneTel Merger or the Davel Merger
which, if adversely determined, would, individually or in the aggregate,
reasonably be expected to have a Davel Material Adverse Effect, (ii) there
are no outstanding domestic or foreign judgments, decrees or orders against
Old Davel or any of its subsidiaries that, individually or in the
aggregate, would reasonably be expected to have a Davel Material Adverse
Effect, (iii) neither Old Davel nor any of the Davel Subsidiaries 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 Davel Material Adverse Effect; and
(iv) there are no actions pending or, to the knowledge of Old Davel,
threatened against the directors or any director of Old Davel alleging a
breach of such directors' or director's fiduciary duties (except such
actions which may arise as a result of the Transaction).
Section 4.10 Environmental Matters. Except as described in the
Filed Davel Reports, (a) Old Davel and each of the Davel 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 Davel Material Adverse Effect, which compliance
includes, but is not limited to, the possession by Old Davel and each of
the Davel Subsidiaries of permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms
and conditions thereof; (b) neither Old Davel nor any of the Davel
Subsidiaries has received written notice of, or, to the knowledge of Old
Davel, 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 Davel Material Adverse
Effect; and (c) there has not been by Old Davel or any of the Davel
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 Old
Davel, former properties or facilities or any current or, to the knowledge
of Old Davel, former offsite properties and facilities used in the business
of Old Davel or the Davel Subsidiaries (in each case, other than properties
or facilities where payphones are located pursuant to agreements with
Location Owners) in a manner or at levels that require or is 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 Davel Material Adverse Effect.
Section 4.11 Certain Fees. Except in connection with the
engagement of ABN AMRO Incorporated, none of Old Davel, D Sub, P Sub or New
Davel has employed any broker or finder or incurred any liability for any
financial advisory, brokerage or finders' fees or commissions in connection
with the Transaction.
Section 4.12 Taxes. (a) Each of Old Davel and the Davel
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 Davel Material Adverse Effect.
Each of Old Davel and the Davel Subsidiaries has timely paid (or Old Davel
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 Davel Material Adverse
Effect, and the most recent financial statements contained in the Davel
Reports reflect an adequate reserve in accordance with GAAP for all taxes
payable by Old Davel and the Davel 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 Old Davel or any of the Davel Subsidiaries
that are not adequately reserved for, except for deficiencies that
individually or in the aggregate would not reasonably be expected to have a
Davel Material Adverse Effect. Except as set forth in Section 4.12 of the
Davel Disclosure Letter, there is no action, suit, taxing authority
proceeding or audit now in progress, pending, or, to the knowledge of Old
Davel, threatened against or with respect to Old Davel or any of the Davel
Subsidiaries.
Section 4.13 Change of Control Provisions. Except as disclosed
in Section 4.13 of the Davel Disclosure Letter, none of the employment,
consulting, severance or indemnification contracts or agreements between
Old Davel or any Davel Subsidiary, on the one hand, and any directors,
officers or other employees of Old Davel or any Davel Subsidiary, on the
other hand, and none of Old Davel's or any Davel Subsidiary's employee
benefit plans, programs or arrangements contains any change-in-control
provision that would be triggered as a result of the Transaction.
Section 4.14 Licenses. Old Davel and the Davel Subsidiaries
have obtained all Licenses material, individually or in the aggregate, to
the conduct of the business of Old Davel and the Davel Subsidiaries taken
as a whole. All of such Licenses are in full force and effect and, to the
best of Old Davel's knowledge, 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 Davel Material Adverse Effect. There is not pending or,
to the knowledge of Old Davel, 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 Section 4.14 of the Davel Disclosure Letter, no event under the
control of Old Davel 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 Davel Material Adverse Effect.
Section 4.15 Compliance with Other Instruments and Laws.
Except as set forth in Section 4.15 of the Davel Disclosure Letter, neither
Old Davel nor any of the Davel Subsidiaries 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 Old
Davel or any of the Davel Subsidiaries 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
Davel Material Adverse Effect. Except as set forth in Section 4.15 of the
Davel Disclosure Letter, Old Davel's and each of the Davel Subsidiaries'
businesses 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 Davel Material Adverse Effect.
Section 4.16 Employees. Without limiting the generality of
Section 4.15 hereof, Old Davel 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 Old Davel, 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 Old Davel 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 Old Davel's stockholders or at the time of the Davel
Stockholders Meeting, 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 Old Davel 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. Old Davel has
received the opinion of ABN AMRO Incorporated, dated the date hereof, to
the effect that, as of such date, the PhoneTel Merger Consideration to be
paid in the PhoneTel Merger is fair to Old Davel and its stockholders from
a financial point of view.
Section 4.19 Voting Requirements. Davel Stockholder Approval
is the only vote of the holders of any class or series of Old Davel's
capital stock necessary to approve this Agreement and the Davel Merger.
Section 4.20 State Takeover Statutes. To the knowledge of Old
Davel, assuming no PhoneTel Shareholder will beneficially own 15% or more
of the outstanding New Davel Common Stock after the PhoneTel 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 Old Davel is applicable to the Transaction.
Section 4.21 No Company Shares. None of Old Davel, D Sub,
P Sub or New Davel owns any shares of PhoneTel Common Stock.
Section 4.22 Rights. Assuming that no stockholder of PhoneTel
shall, upon consummation of the PhoneTel Merger, become the beneficial
owner of 15 percent or more of the shares of New Davel 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 New Davel Rights or enable or require any New Davel Rights to
separate from the shares of the New Davel Common Stock to which they are
attached or to be triggered or become exercisable.
Section 4.23 Davel Financing Arrangements. Old Davel has
received a "highly confident" letter (the "Letter") from a responsible
financing source which 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 and the redemption of the PIK Preferred
in accordance with Section 5.06 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 PhoneTel. A copy of the Letter has been
provided to PhoneTel.
ARTICLE V
COVENANTS OF PHONETEL
Section 5.01 Conduct of Business by PhoneTel Pending the
PhoneTel Merger. PhoneTel covenants and agrees that, prior to the PhoneTel
Effective Time or the date, if any, on which this Agreement is earlier
terminated pursuant to Section 9.01 hereof, except as contemplated by
Section 5.04 hereof or as set forth in Section 5.01 of the PhoneTel
Disclosure Letter, unless Old Davel shall otherwise consent in writing or
except as otherwise contemplated by this Agreement:
(a) the businesses of PhoneTel and the PhoneTel
Subsidiaries shall be conducted only in the ordinary and usual course; to
the extent consistent therewith, PhoneTel shall use its best efforts to,
and shall cause each PhoneTel Subsidiary to, preserve intact their
respective business organizations and goodwill, keep available the services
of their respective officers and employees and maintain satisfactory
relationships with their respective suppliers, distributors, customers and
others having business relationships with them; and PhoneTel shall notify
Old Davel as promptly as practicable of any event or occurrence or
emergency not in the ordinary and usual course of the business of PhoneTel
or any PhoneTel Subsidiary and material to the business of PhoneTel and the
PhoneTel Subsidiaries, taken as a whole;
(b) neither PhoneTel nor any PhoneTel Subsidiary shall (i)
amend its articles of incorporation or code of regulations or comparable
organizational documents or (ii) split, combine or reclassify the
outstanding PhoneTel Common Stock or declare, set aside or pay any dividend
payable in cash, stock or property with respect to the PhoneTel Common
Stock;
(c) neither PhoneTel nor any PhoneTel Subsidiary shall
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 PhoneTel Subsidiary to PhoneTel or, with
respect to PhoneTel, PhoneTel Common Stock issuable upon exercise of
PhoneTel Options or PhoneTel Warrants or upon conversion of Preferred
Stock;
(d) neither PhoneTel nor any PhoneTel Subsidiary shall
enter into or agree to enter into, or amend, any contract or agreement with
any labor unions representing employees of PhoneTel or any PhoneTel
Subsidiary;
(e) except as contemplated by Section 5.04 hereof, PhoneTel
shall 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 Transaction), any acquisition or disposition of
a material amount of assets or securities (including, without limitation,
the assets or securities of any PhoneTel Subsidiary) or any material change
in its capitalization, or enter into, other than in the ordinary course of
business, a material contract or any release or relinquishment of any
material contract rights;
(f) PhoneTel shall not, and shall not permit any PhoneTel
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 and except for the Executive Agreements or (ii)
make any contribution to any such plan except for contributions
specifically required by law or pursuant to the terms of such plans;
(g) PhoneTel shall not (i) create, incur or assume any
long-term debt (including, without limitation, obligations in respect of
capital leases) or, except in the ordinary course of business under
existing lines of credit or except to fund out-of-pocket costs incurred in
connection with the Transaction, create, incur, assume, maintain or permit
to exist any short-term debt; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person except wholly owned PhoneTel
Subsidiaries 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 other person other than a wholly owned PhoneTel
Subsidiary (other than customary advances to employees and short-term
investments pursuant to customary cash management systems of PhoneTel in
the ordinary course and consistent with past practice); and
(h) neither PhoneTel nor any PhoneTel 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 of any representation or
warranty set forth herein or a breach in any material respect of any
covenant or agreement set forth herein.
Section 5.02 Stockholders' Meeting. Subject to Section 5.04
hereof, (a) PhoneTel shall cause a meeting of its stockholders to be duly
called and held as soon as reasonably practicable for the purpose of
obtaining PhoneTel Stockholder Approval (the "PhoneTel Stockholders
Meeting") and (b) the Board of Directors of PhoneTel shall (i) unanimously
recommend adoption of this Agreement by PhoneTel's stockholders and
(ii) use reasonable best efforts to obtain PhoneTel Stockholder Approval.
Section 5.03 Access to Information. Subject to the terms of
Section 6.01 hereof, PhoneTel shall give Old Davel, its counsel, financial
advisors, auditors and other authorized representatives reasonable access
during normal business hours throughout the period prior to the Closing
Date to all of the offices, properties, business and marketing plans,
books, files and records of PhoneTel and the PhoneTel Subsidiaries, shall
furnish to Old Davel, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such persons may reasonably request and shall instruct
PhoneTel's employees, counsel and financial advisors to cooperate with Old
Davel in its preparation for integration into the business of Old Davel of
the business of PhoneTel and the PhoneTel Subsidiaries. Throughout the
period prior to the Closing Date, PhoneTel shall furnish promptly to Old
Davel (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 Old Davel 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 Transaction.
Section 5.04 No Solicitation.
(a) PhoneTel shall not, and shall use reasonable best
efforts to cause its officers, directors, employees, investment bankers,
attorneys, accountants and other agents 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, PhoneTel (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
PhoneTel'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 PhoneTel's stockholders a
position with respect to an Acquisition Proposal or amend or withdraw such
position or its position with respect to the PhoneTel Merger, or (B) make
disclosure to PhoneTel's stockholders, in each case, if PhoneTel'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 Old Davel, New Davel, D Sub or P Sub, to acquire, directly or
indirectly, (x) more than 25% of the shares and/or voting power of the
PhoneTel 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 PhoneTel and the PhoneTel
Subsidiaries.
(b) PhoneTel shall advise Old Davel 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), PhoneTel shall furnish to
Old Davel 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 PhoneTel Disclosure
Letter, PhoneTel and each PhoneTel Subsidiary shall take all reasonable
actions necessary in order to remain duly qualified and in good standing
until the PhoneTel Effective Time 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 Preferred Stock and Notes. On or prior to the
Closing Date, PhoneTel shall (a) take all actions necessary to (i) allow
the PhoneTel Warrants to be exercised by the holders thereof, (ii) allow
the Series A Preferred Stock or the Series B Preferred Stock, as the case
may be, issued upon exercise of the PhoneTel Warrants, to be converted by
the holders thereof into PhoneTel Common Stock and (iii) redeem for cash,
at par, the PIK Preferred Stock, subject to the receipt of funds sufficient
for such purpose from the proceeds of the Financing, and (b) use its
reasonable best efforts to (i) consummate a tender offer (the "Debt
Tender") for all of PhoneTel's outstanding 12% Senior Notes due 2006 (the
"Notes") at a price not exceeding 101% of the principal amount of the
Notes, subject to the receipt of funds sufficient for such purpose from the
proceeds of the Financing, pursuant to which at least 80% of the aggregate
outstanding principal amount of the Notes shall have been tendered (it
being understood and agreed that (A) Old Davel shall use reasonable best
efforts to enable New Davel to obtain the Financing necessary for PhoneTel
to consummate such tender offer, as well as any redemption or purchase of
the PIK Preferred Stock, and (B) any failure to receive tenders of at least
80% of the aggregate outstanding principal amount of the Notes shall not be
a breach of the covenant set forth in this Section 5.06), (ii) procure the
consent of the requisite principal amount of the Notes to allow PhoneTel to
amend the indenture governing the Notes in a manner reasonably satisfactory
to Old Davel and (iii) enter into a supplemental indenture with respect to
the Notes reflecting such amendments.
Section 5.07 Additional Voting Agreements. PhoneTel shall use
reasonable best efforts to cause additional holders of PhoneTel Common
Stock to enter into voting agreements containing substantially the same
terms as the PhoneTel Voting Agreements.
Section 5.08 Confidentiality. PhoneTel shall hold, and shall
cause the PhoneTel Subsidiaries to hold, and shall use their respective,
reasonable best efforts to cause their officers, directors, employees,
consultants, advisors and agents to hold, in confidence, all trade secrets
and confidential information concerning Old Davel and the Davel
Subsidiaries furnished to PhoneTel in connection with the Transaction in
accordance with the Confidentiality Agreement, dated May 29, 1998, by and
between Old Davel and PhoneTel (the "Confidentiality Agreement").
ARTICLE VI
COVENANTS OF OLD DAVEL
Section 6.01 Confidentiality. Old Davel shall hold, and shall
cause the Davel Subsidiaries to hold, and shall use their respective
reasonable best efforts to cause their officers, directors, employees,
consultants, advisors and agents to hold, in confidence, all trade secrets
and confidential information concerning PhoneTel and the PhoneTel
Subsidiaries furnished to Old Davel in connection with the Transaction in
accordance with the Confidentiality Agreement.
Section 6.02 Obligations of the Davel Subsidiaries. Old Davel
shall cause New Davel, D Sub and P Sub to perform their respective
obligations under this Agreement and to consummate the Transaction on the
terms and conditions set forth in this Agreement.
Section 6.03 Indemnification.
(a) New Davel shall indemnify, or shall cause the PhoneTel
Surviving Corporation or its successors or assigns to indemnify, to the
fullest extent permitted under Ohio Law, each person who was or is or
becomes prior to the PhoneTel Effective Time, a director, officer or
trustee of PhoneTel and the PhoneTel Subsidiaries (the "Indemnified
Parties") for costs and expenses incurred in respect of actions taken prior
to and including the PhoneTel Effective Time in connection with their
duties as directors, officers or trustees of PhoneTel (including the
Transaction) for a period of not less than six years from the PhoneTel
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 pending or threatened action, proceeding or investigation
in connection with any matter, including the Transaction, occurring prior
to and including the PhoneTel Effective Time, the PhoneTel 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 or her 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 PhoneTel Surviving Corporation or its successors or
assigns shall contain provisions no less favorable to the present and
former directors and officers of PhoneTel than those in effect in PhoneTel
charter and by-laws as of the date hereof.
(b) For not less than six years after the PhoneTel
Effective Time, the Davel Surviving Corporation or the PhoneTel Surviving
Corporation or their respective successors and assigns shall maintain in
effect directors' and officers' liability insurance covering the
Indemnified Parties who are currently covered by PhoneTel's existing
directors' and officers' liability insurance, on terms and conditions no
less favorable to the Indemnified Parties than those in effect on the date
hereof with respect to the Indemnified Parties; provided, however, that in
no event shall the Davel Surviving Corporation or the PhoneTel Surviving
Corporation or their successors and assigns be required to pay an amount to
maintain such insurance covering the Indemnified Parties in excess of 200%
of the amount paid by PhoneTel as of the date hereof for such coverage; and
provided further that if such amount would exceed 200% of the amount paid
as of the Closing Date for such coverage, (i) the Indemnified Parties may
accept the level of coverage available at 200% of the amount paid by
PhoneTel as of the date hereof for such coverage or (ii) the Indemnified
Parties may pay to the Davel Surviving Corporation or the PhoneTel
Surviving Corporation, as directed by New Davel, such additional amount as
would then be required to be paid in order to maintain the full amount of
such coverage and the Davel Surviving Corporation or the PhoneTel Surviving
Corporation, as the case may be, shall so maintain such coverage.
Section 6.04 Davel Stockholders' Meeting. Old Davel shall
cause a meeting of its stockholders to be duly called and held as soon as
reasonably practicable for the purpose of obtaining Davel Stockholder
Approval (the "Davel Stockholders Meeting"). The Board of Directors of Old
Davel shall (a) unanimously recommend approval of this Agreement and the
Davel Merger by Old Davel's stockholders and (b) use reasonable best
efforts to obtain Davel Stockholder Approval.
Section 6.05 New Davel Corporate Governance. (a) At the
Closing, the Certificate of Incorporation of New Davel shall be
substantially similar to the articles of incorporation of Old Davel with
such modifications as may be necessary or desirable to conform to the
Delaware General Corporation Law, except that the name of New Davel shall
be changed to "Davel Communications, Inc.".
(b) At the Closing, the Bylaws of New Davel shall be
substantially similar to the bylaws of Old Davel with such modifications as
may be necessary or desirable to conform to the Delaware General
Corporation Law.
(c) At the Closing and thereafter, New Davel shall exercise
all authority to cause Mr. ▇▇▇▇▇ ▇▇▇▇ to be elected as a member of the
Board of Directors of New Davel to serve until the first anniversary of the
Closing Date.
Section 6.06 Davel Financing. Old Davel shall use reasonable
best efforts to enable New Davel to secure the Financing and to enter into
appropriate indentures, loan agreements or other agreements with respect to
the Financing. In the event all or any portion of the Financing
contemplated by the Letter becomes unavailable for any reason, Old Davel
shall use reasonable best efforts to enable New Davel to secure the
Financing by alternative means.
Section 6.07 Employee Matters.
(a) New Davel agrees that individuals who are employed by
PhoneTel or any of the PhoneTel Subsidiaries immediately prior to the
Closing Date shall remain employees of PhoneTel or such PhoneTel 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 PhoneTel or any of
the PhoneTel Subsidiaries for any period of time after the Closing Date
which is not otherwise required by law.
(b) New Davel shall, or shall cause PhoneTel or one of the
Davel Subsidiaries to give Affected Employees full credit for purposes of
eligibility and vesting under any employee benefit plans or arrangements
maintained by New Davel, PhoneTel or any of the Davel Subsidiaries for such
Affected Employees' service with New Davel, PhoneTel or any affiliate
thereof to the same extent recognized immediately prior to the Closing
Date.
(c) New Davel shall, or shall cause PhoneTel or one of the
Davel 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 or after 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 or after the
Closing Date.
(d) As of the Closing Date and through the period ending no
earlier than December 31, 1998, New Davel shall, or shall cause PhoneTel or
one of the Davel Subsidiaries to, provide coverage and benefits to Affected
Employees pursuant to the employee benefit plans or arrangements
(including, without limitation, the Plans) maintained by PhoneTel for such
Affected Employees immediately prior to the Closing Date; provided,
however, that (i) this Section 6.07(d) shall not require New Davel to
provide or maintain any equity-based compensation plans of PhoneTel and
(ii) nothing contained herein shall confer upon any Affected Employee the
right to continued coverage and benefits pursuant to such PhoneTel plans or
arrangements after December 31, 1998.
(e) The PhoneTel Surviving Corporation shall continue to
honor all employment, severance, separation and other compensation
agreements existing as of the Closing Date between PhoneTel or any of the
PhoneTel Subsidiaries with any officer or employee thereof, which are set
forth on Schedule 6.07(e).
Section 6.08 Financial Disclosure. New Davel 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.
ARTICLE VII
COVENANTS OF THE PARTIES
Section 7.01 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party shall 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 Transaction, provided that nothing herein
shall require Old Davel or New Davel to hold, manage or operate any assets
separately or to enter into any sale or divestiture of assets. PhoneTel
and Old Davel 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, subject to the terms and conditions of this Agreement.
In connection with and without limiting the foregoing, PhoneTel and Old
Davel 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 Transaction and (b) if any state takeover statute or
similar statute or regulation becomes applicable to the Transaction, take
all reasonable action necessary to ensure that the Transaction 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 Transaction.
Section 7.02 Certain Filings. PhoneTel and Old Davel 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 Transaction 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. Old Davel and PhoneTel
shall consult with each other before issuing any press release or making
any public statement with respect to this Agreement or the Transaction and,
except as may be required by applicable law or any listing agreement with
any national securities exchange, shall 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 done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the Transaction.
Section 7.05 Notices of Certain Events. PhoneTel and Old Davel
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 Transaction;
(b) any notice or other communication from any Governmental
Entity in connection with the Transaction;
(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 PhoneTel or any PhoneTel
Subsidiary, on the one hand, or Old Davel or any Davel Subsidiary, on the
other hand, which relate to the consummation of the Transaction; 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, PhoneTel and Old Davel shall jointly prepare and file with the
SEC the Proxy Statement and PhoneTel, Old Davel and New Davel shall
prepare, and New Davel shall file, with the SEC the Form S-4, in which the
Proxy Statement shall be included as a prospectus. Each of PhoneTel, Old
Davel and New Davel shall use reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable
after such filing. PhoneTel and Old Davel 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. New Davel also shall take any
action (other than qualifying to do business in any jurisdiction in which
Old Davel is not now so qualified or to file a general consent to service
of process) reasonably required to be taken under any applicable state
securities laws in connection with the issuance of the New Davel Common
Stock in the Transaction, and PhoneTel and New Davel shall each furnish all
information as may be reasonably requested in connection with any such
action. No filing of, or amendment or supplement to, the Form S-4 shall be
made by New Davel or to the Proxy Statement shall be made by PhoneTel or
Old Davel, without providing the other party the opportunity to review and
comment thereon. New Davel shall advise PhoneTel, 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 New Davel Common Stock
issuable in connection with the Transaction 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 responses thereto or
requests by the SEC for additional information. If at any time prior to
the Closing Date any information relating to PhoneTel or Old Davel, or any
of its affiliates, officers or directors, should be discovered by PhoneTel
or Old Davel 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 PhoneTel and Old Davel.
Section 7.07 Letters of Accountants.
(a) Each of Old Davel and PhoneTel shall use its reasonable
best efforts to cause to be delivered to the other party two letters from
PhoneTel'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 the other party, in form and substance reasonably satisfactory
to Old Davel and PhoneTel 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 Old Davel and PhoneTel shall use reasonable
best efforts to cause to be delivered to the other party and such other
party's independent accountants two letters from its independent
accountants addressed to Old Davel and PhoneTel, 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 Transaction as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations is appropriate if the Transaction is consummated in
accordance with this Agreement.
Section 7.08 Affiliates.
(a) Not less than 45 days prior to the PhoneTel Effective
Time, PhoneTel shall deliver to New Davel a list of names and addresses of
each person who, in PhoneTel'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 PhoneTel. PhoneTel shall provide New Davel such information
and documents as New Davel shall reasonably request for purposes of
reviewing such list. PhoneTel shall deliver or cause to be delivered to
New Davel, not later than 30 days prior to the PhoneTel Effective Time, an
affiliate letter in the form attached hereto as Exhibit A, executed by each
of the Pooling Affiliates of PhoneTel identified in the foregoing list.
New Davel shall be entitled to place legends as specified in such affiliate
letters on the certificates evidencing any of the New Davel Common Stock to
be received by the Pooling Affiliates of PhoneTel pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the New Davel Common Stock, consistent with the terms of
such letters.
(b) Not less than 45 days prior to the PhoneTel Effective
Time, Old Davel shall deliver to New Davel a list of names and addresses of
each person who, in Old Davel's reasonable judgment, is a Pooling Affiliate
of Old Davel. Old Davel shall provide New Davel such information and
documents as New Davel shall reasonably request for purposes of reviewing
such list. Old Davel shall deliver or cause to be delivered to New Davel,
not later than 30 days prior to the Davel Effective Time, an affiliate
letter in the form attached hereto as Exhibit B, executed by each Pooling
Affiliate of Old Davel identified in the foregoing list.
Section 7.09 Nasdaq Listing. New Davel shall use its
reasonable best efforts to cause the New Davel Common Stock to be issued in
the Transaction to be approved for listing on the Nasdaq Stock Market,
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 Closing Date.
Section 7.10 Tax Treatment. Each of New Davel, Old Davel and
PhoneTel shall use its reasonable best efforts to cause each of the
PhoneTel Merger and the Davel Merger to qualify as tax-free transactions
(except with respect to any cash received).
Section 7.11 Pooling of Interests. Each of Old Davel and
PhoneTel shall use its reasonable best efforts to cause the Transaction 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 PhoneTel and Old Davel shall not knowingly take any action that
would cause such accounting treatment not to be obtained.
Section 7.12 Representations. Each of PhoneTel and Old Davel
shall (a) 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) refrain from taking any action
that would render any such representation or warranty untrue or incorrect
as of such time, and (c) perform or cause to be satisfied each agreement,
covenant or condition to be performed or satisfied by it.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.01 Conditions to the Obligations of Each Party. The
obligations of PhoneTel, Old Davel, New Davel, D Sub and P Sub to
consummate the Transaction are subject to the satisfaction or waiver of the
following conditions:
(a) this Agreement and the PhoneTel Merger shall have been
approved and adopted by the stockholders of PhoneTel in accordance with
Ohio Law;
(b) this Agreement and the Davel Merger shall have been
approved by the stockholders of Old Davel in accordance with Illinois Law;
(c) any applicable waiting period under the HSR Act
relating to the PhoneTel Merger and the Transaction shall have expired or
been terminated;
(d) no Governmental Entity shall have issued any judgment,
injunction, order or decree or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Transaction, which
judgment, injunction, order or decree or other action shall have become
final and nonappealable;
(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 Davel Common Stock issuable to PhoneTel'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) the PIK Preferred Stock shall have been redeemed, as
contemplated by Section 5.06 hereof;
(h) the transactions contemplated by that certain Stock
Purchase Agreement, dated as of May 14, 1998, by and between Samstock,
L.L.C. and Old Davel shall have been consummated; and
(i) New Davel shall have obtained the Financing and entered
into appropriate indentures, loan agreements, or other agreements with
respect to the Financing.
Section 8.02 Conditions to the Obligations of Old Davel, New
Davel, D Sub and P Sub. The obligations of Old Davel, New Davel, D Sub and
P Sub to consummate the Transaction are subject to the satisfaction of the
following additional conditions:
(a) the representations and warranties of PhoneTel as set
forth in this Agreement shall be true and correct in all material respects
as if made on and as of the Closing Date (other than those representations
and warranties which address matters only as of a certain date, which shall
be true and correct in all material respects as of such certain date) and
PhoneTel 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; provided, that, for
purposes of determining whether the condition set forth in this
Section 8.02(a) has been satisfied, no representation or warranty of
PhoneTel shall be deemed untrue, incorrect, not complied with or not
performed as a consequence of the existence or absence of any fact,
circumstance or event unless such fact, circumstance or event, individually
or when taken together with all other facts, circumstances or events
inconsistent with the representations or warranties of PhoneTel, has had or
would reasonably be expected to have a PhoneTel Material Adverse Effect
(disregarding for this purpose any materiality qualification contained in
such representations or warranties);
(b) receipt by Old Davel of an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP, its independent certified public accountants, stating that accounting
for the Transaction as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations is
appropriate if the Transaction is consummated in accordance with this
Agreement;
(c) at least 80% of the aggregate outstanding principal
amount of the Notes shall have been tendered to PhoneTel pursuant to and in
accordance with of Section 5.06 hereof; and
(d) Old Davel shall have received an opinion from ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇, counsel to Old Davel, dated as of the Closing Date, to the effect
that (i) the Davel Merger, taken together with the PhoneTel Merger, will be
treated as part of an integrated transaction that qualifies as an exchange
of property for stock as described in Section 351 of the Code and (ii) no
gain or loss will be recognized by a shareholder of Old Davel upon the
exchange of its shares of Old Davel Common Stock for shares of New Davel
Common Stock pursuant to the Davel Merger. In rendering such opinion,
counsel to Old Davel shall be entitled to rely upon usual and customary
representations of shareholders and officers of New Davel, Old Davel,
PhoneTel and others.
Section 8.03 Conditions to the Obligations of PhoneTel. The
obligations of PhoneTel to consummate the Transaction are subject to the
satisfaction of the following additional conditions:
(a) the representations and warranties of Old Davel as set
forth in this Agreement shall be true and correct in all material respects
as if made on and as of the PhoneTel Effective Time (other than those
representations and warranties which address matters only as of a certain
date, which shall be true and correct in all material respects as of such
certain date) and Old Davel, New Davel, D Sub and P Sub 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; provided, that, for purposes of determining
whether the condition set forth in this Section 8.03(a) has been satisfied,
no representation or warranty of Old Davel shall be deemed untrue,
incorrect, not complied with or not performed as a consequence of the
existence or absence of any fact, circumstance or event unless such fact,
circumstance or event, individually or when taken together with all other
facts, circumstances or events inconsistent with the representations or
warranties of Old Davel, has had or would reasonably be expected to have a
Davel Material Adverse Effect (disregarding for this purpose any
materiality qualification contained in such representations or warranties);
(b) receipt by PhoneTel of an opinion of Price Waterhouse
LLP, its independent certified public accountants, stating that accounting
for the Transaction as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations is
appropriate if the Transaction is consummated in accordance with this
Agreement; and
(c) PhoneTel shall have received an opinion from Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, counsel to PhoneTel, dated as of the
Closing Date, to the effect that the PhoneTel Merger, taken together with
the Davel Merger, will be treated as part of an integrated transaction that
qualifies as an exchange of property for stock as described in Section 351
of the Code and (ii) no gain or loss will be recognized by a shareholder of
PhoneTel upon the exchange of its shares of PhoneTel Common Stock for
shares of New Davel Common Stock pursuant to the PhoneTel Merger, except
with respect to cash, if any, received in lieu of a fractional share of New
Davel Common Stock. In rendering such opinion, counsel to PhoneTel shall
be entitled to rely upon usual and customary representations of
shareholders and officers of New Davel, Old Davel, PhoneTel and others.
ARTICLE IX
TERMINATION AND WAIVER
Section 9.01 Termination. This Agreement may be terminated and
the Transaction may be abandoned at any time prior to the Closing Date
(notwithstanding any approval of this Agreement and the PhoneTel Merger by
the stockholders of PhoneTel or any approval of this Agreement and the
Davel Merger by the stockholders of Old Davel as provided herein):
(a) by mutual written consent of PhoneTel and Old Davel;
(b) by either PhoneTel or Old Davel, if the Transaction has
not been consummated by December 7, 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 Closing shall not have occurred on or before such
date;
(c) by either PhoneTel or Old Davel, if there shall be
adopted or enacted after the date hereof any law or regulation that makes
consummation of the Transaction illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining Old Davel or PhoneTel from
consummating the Transaction is entered and such judgment, injunction,
order or decree shall have become final and nonappealable;
(d) by either PhoneTel or Old Davel, if (i) PhoneTel
Stockholder Approval shall not have been obtained at the PhoneTel
Stockholders Meeting or any adjournment or postponement thereof or (ii) if
Davel Stockholder Approval shall not have been obtained at the Davel
Stockholders Meeting or any adjournment or postponement thereof;
(e) by Old Davel, if PhoneTel's Board of Directors shall
(i) withdraw, modify or change its recommendation or approval of this
Agreement or the PhoneTel Merger in a manner adverse to Old Davel or (ii)
have recommended any Acquisition Proposal other than by Old Davel, New
Davel, P Sub or D Sub;
(f) by Old Davel (provided that Old Davel is not then in
breach of its obligations hereunder in any material respect), if PhoneTel
shall have breached in any material respect any of its representations,
warranties, covenants or agreements contained herein (determined in
accordance with Section 8.02(a) hereof) and shall not have cured such
breach within 30 days after PhoneTel receives written notice of such breach
from Old Davel;
(g) by PhoneTel, to allow PhoneTel to enter into an
agreement in respect of an Acquisition Proposal which PhoneTel's Board of
Directors has determined in the exercise of its fiduciary duties is more
favorable to PhoneTel and its stockholders than the Transaction (provided
that the termination described in this subsection (g) shall not be
effective unless and until PhoneTel shall have paid to Old Davel the
termination fee described in Section 9.03(b) hereof); or
(h) by PhoneTel (provided that PhoneTel is not then in
breach of its obligations hereunder in any material respect), if Old Davel
shall have breached in any material respect any of its representations,
warranties, covenants or agreements contained herein (determined in
accordance with Section 8.03(a) hereof) and shall not have cured such
breach within 30 days after Old Davel receives written notice of such
breach from PhoneTel.
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 Closing Date,
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(d), (e) and (f) and except for
obtaining PhoneTel Stockholder Approval and Davel Stockholder Approval and
for required filings with the Federal Trade Commission or the Department of
Justice pursuant to the HSR Act and compliance with applicable waiting
periods thereunder, 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 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 5.08, 6.01, 9.03(b), 9.03(c), 10.05 and 10.07 hereof
shall survive the termination hereof 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) Old Davel shall have terminated this Agreement
pursuant to Section 9.01(e) hereof or PhoneTel shall have terminated this
Agreement pursuant to Section 9.01(g) hereof, then in either such case,
PhoneTel shall (i) promptly, but in no event later than two business days
after the date of such termination (or, if terminated by PhoneTel pursuant
to Section 9.01(g) hereof, at the time specified in Section 9.01(g)), pay
to Old Davel in same day funds a termination fee of $3,000,000 and (ii)
promptly following the receipt of documentation with respect thereto, pay
to Old Davel in same day funds an amount, not to exceed $1,000,000, equal
to the actual and reasonably documented out-of-pocket expenses incurred by
Old Davel and Equity Group Investments, Inc. directly attributable to the
proposed Transaction, including negotiation and execution of this Agreement
and the Financing. In no event shall PhoneTel be required to pay more than
one termination fee and reimbursement of expenses pursuant to this Section
9.03(b).
(c) If PhoneTel or Old Davel shall have terminated this
Agreement pursuant to Section 9.01 (b) and the condition set forth in
Section 8.01(i) shall not then have been satisfied, then Old Davel shall
(i) promptly, but in no event later than two business days after the date
of such termination, pay to PhoneTel in same day funds a termination fee of
$1,000,000 and (ii) promptly following the receipt of documentation with
respect thereto, pay to PhoneTel in same day funds an amount, not to exceed
$500,000, equal to the actual and reasonably documented out-of-pocket
expenses incurred by PhoneTel directly attributable to the proposed
Transaction, including negotiation and execution of this Agreement, any
redemption or purchase of the PIK Preferred Stock and the Debt Tender. In
no event shall Old Davel be required to pay more than one termination fee
and reimbursement of expenses pursuant to this Section 9.03(c).
ARTICLE X
MISCELLANEOUS
Section 10.01 Closing. The closing of each of the PhoneTel
Merger and the Davel Merger and the Transaction (the "Closing"), including
the PhoneTel Effective Time and the Davel Effective Time, shall take place
contemporaneously as soon as practicable after the satisfaction or, where
applicable, waiver of the conditions contained in Article VIII hereof at
such time and place as Old Davel and PhoneTel shall agree. The date on
which the PhoneTel Effective Time and the Davel Effective Time occur is
referred to herein as the "Closing Date".
Section 10.02 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 Old Davel, New Davel, D Sub or P Sub, to:
Davel Communications Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to PhoneTel, to:
PhoneTel Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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 10.02.
Section 10.03 Survival of Representations and Warranties. The
representations and warranties contained herein shall not survive the
Closing Date.
Section 10.04 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or
waived prior to the Closing (whether before or after approval of this
Agreement by the stockholders of Old Davel or PhoneTel, if, and only if,
such amendment or waiver is in writing and signed, in the case of an
amendment, by all of the parties hereto or in the case of a waiver, by the
party against whom the waiver is to be effective; provided that after any
such approval by the stockholders of Old Davel or PhoneTel, 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 Old Davel or
PhoneTel, (ii) any term of the articles of incorporation of the PhoneTel
Surviving Corporation (except that alterations or changes may be made that
could otherwise be adopted by the Board of Directors of the PhoneTel
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 class or series of shares of capital stock of Old Davel or PhoneTel.
(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 10.05 Expenses. Except as provided in Section 9.03
hereof, each party shall pay its own costs and expenses relating to this
Agreement and the Transaction, except that each of Old Davel and PhoneTel
shall bear and pay one-half of the costs and expenses incurred in
connection with the printing and mailing of the Proxy Statement.
Section 10.06 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 10.07 Governing Law; Jurisdiction. This Agreement shall
be construed in accordance with and governed by the law of the State of
Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware. Each party hereto
irrevocably submits to the nonexclusive jurisdiction of (a) the state
courts of Delaware and (b) the federal district courts located in the State
of Delaware for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby.
Section 10.08 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 10.09 Headings. Section headings used in this Agreement
are for convenience only and shall be ignored in the construction and
interpretation hereof.
Section 10.10 No Third Party Beneficiaries. Except for
Section 6.03 and 6.05(c) 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.
Section 10.11 Entire Agreement. This Agreement and the
Confidentiality Agreement (including the documents and the instruments
referred to herein and therein) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof.
* * * * *
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__________________________________________
Name:
Title:
DAVEL HOLDINGS, INC.
By__________________________________________
Name:
Title:
D SUBSIDIARY, INC.
By__________________________________________
Name:
Title:
PT MERGER CORP.
By__________________________________________
Name:
Title:
PHONETEL TECHNOLOGIES, INC.
By__________________________________________
Name:
Title: