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Exhibit 2.1
DAVEL COMMUNICATIONS, INC.
10120 Windhorst Road
Tampa, Florida 33619
June 12, 2001
PhoneTel Technologies, Inc.
North Point Tower
1001 Lakeside Avenue, 7th Floor
Cleveland, Ohio 44114
Attention: Board of Directors
Re: A Business Combination Involving PhoneTel Technologies, Inc.
("PhoneTel") and Davel Communications, Inc. ("Davel")
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Gentlemen:
Representatives of PhoneTel and Davel have had preliminary
discussions regarding a potential business combination between them. This
letter, which represents a binding agreement to enter into a transaction subject
to the terms and conditions set forth herein, reflects our intent to consummate
a merger (the "Merger") of a wholly owned subsidiary of Davel with and into
PhoneTel, with PhoneTel surviving as a wholly owned subsidiary of Davel, as set
forth below and as described more fully in a definitive agreement to be
negotiated between the parties:
1. DEBT STRUCTURE. Prior to and contingent upon the consummation of the
Merger, the debt of each of PhoneTel and Davel will be restructured as follows:
Phonetel
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The existing senior secured creditors of PhoneTel shall have
exchanged a sufficient amount of PhoneTel's consolidated debt
into equity securities of PhoneTel and restructured the
remaining debt amount, including principal and accrued
interest, so that PhoneTel will, as of immediately prior to
the effective time of the Merger, have outstanding aggregate
senior secured debt not exceeding $36.5 million, consisting of
(i) $18.25 million of amortizing, cash-pay term debt and (ii)
$18.25 million of debt bearing interest to be paid-in-kind.
Davel
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The existing senior secured creditors of Davel shall have
exchanged a sufficient amount of Davel's consolidated debt
into equity securities of Davel and restructured the remaining
debt amount, including principal and accrued interest, so that
Davel will, as of immediately prior to the effective time of
the Merger, have outstanding
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PhoneTel Technologies, Inc.
June 12, 2001
Page 2
aggregate senior secured debt not exceeding $63.5 million,
consisting of (i) $31.75 million of amortizing, cash-pay term
debt and (ii) $31.75 million of debt bearing interest to be
paid-in-kind.
2. EQUITY STRUCTURE. Prior to and contingent upon the consummation of
the Merger, each of PhoneTel and Davel will be owned as follows:
PhoneTel
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In connection with the restructuring of PhoneTel debt as
described in Section 1 above, PhoneTel's existing senior
secured lenders will be granted a sufficient number of shares
so that such lenders will, as of immediately prior to the
effective time of the Merger, own 87% of the outstanding
common stock of PhoneTel (on a fully diluted basis), and 4% of
PhoneTel's common stock will be reserved for the post-Merger
issuance of employee stock options to PhoneTel employees.
Existing holders of PhoneTel's common stock will own the
remaining 9% of PhoneTel's common stock. Existing holders of
PhoneTel's common stock will also continue to own, on an
equivalently-adjusted basis, the registered rights to purchase
additional shares of such stock that were issued in connection
with PhoneTel's plan of reorganization.
Davel
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In connection with the restructuring of Davel debt as
described in Section 1 above, Davel's existing senior secured
lenders will be granted a sufficient number of shares so that
such lenders will, as of immediately prior to the effective
time of the Merger, own 93% of the outstanding common stock of
Davel (on a fully diluted basis), and 4% of Davel's common
stock will be reserved for the post-Merger issuance of
employee stock options to Davel employees. Existing holders of
Davel's common stock will own the remaining 3% of Davel's
common stock.
Combined Entity
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The holders of PhoneTel's common stock as of immediately prior
to the Merger (including holders of options exercisable for
PhoneTel common stock that are not canceled in the Merger)
shall receive in the Merger a number of shares of Davel common
stock equal to 36.5% of the outstanding shares of common stock
of Davel (on a fully diluted basis) as of immediately
following the Merger, and the holders of Davel's common stock
as of immediately prior to the Merger shall, following the
Merger, own the remaining 63.5% of the outstanding shares of
common stock of Davel (on a fully diluted basis). The exchange
ratio used in connection with the Merger shall be fixed and
shall not fluctuate for any reason.
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PhoneTel Technologies, Inc.
June 12, 2001
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3. OPERATIONS PENDING CLOSING. The business and operations of each of
PhoneTel and Davel will be conducted between the date of this letter agreement
and the effective time of the Merger in the usual and ordinary course consistent
with past practice and in accordance with good business practices, except as may
be provided by the servicing agreement referenced below. Without limiting the
generality of the foregoing, each of PhoneTel and Davel agree that neither will
make any dividends or distributions of cash or other property to their
respective shareholders or to the existing senior secured lenders (except as may
be agreed to in writing by the existing senior secured lenders of each of
PhoneTel and Davel) between the date of this letter agreement and the closing
date, or sell or otherwise dispose of any material asset without the consent of
the other party. In order to initiate cost savings measures prior to the
effective time of the Merger, PhoneTel and Davel shall, contemporaneously with
this letter agreement, enter into a servicing agreement, which is attached
hereto as EXHIBIT A.
4. CORPORATE INSPECTION AND ACCESS. Each of PhoneTel and Davel and
their respective directors, employees, advisors, consultants and/or lenders will
have full access to appropriate management and all information relating to the
business, operations, properties, employees and financial, legal, accounting,
tax and other matters relating to the business and operations of the other party
for the purpose of completing their respective due diligence reviews.
5. DEFINITIVE AGREEMENT. PhoneTel and Davel intend to prepare and
negotiate, in a reasonably prompt manner, a definitive merger agreement. Such
definitive agreement will initially be prepared by Davel's counsel based upon
the form of the merger agreement previously entered into between them and will
incorporate the terms and conditions outlined in this letter agreement and
contain other terms and conditions, including representations, warranties,
covenants, conditions to close, termination events, break-up fee provisions and
other items customary for a transaction of this nature. The definitive agreement
will provide for a reasonable closing schedule (taking into account applicable
lender, shareholder and regulatory approvals). In addition to the definitive
merger agreement, each of PhoneTel and Davel will use its reasonable best
efforts to cause the holders of material blocks of its capital stock to enter
into customary voting agreements for the purpose of voting such blocks of
capital stock in favor of the Merger. The obligations of the parties pursuant to
this letter agreement shall terminate in the event that a definitive agreement
has not been executed by the parties on or before July 31, 2001.
6. CONDITIONS TO CLOSING. The closing of the transactions described in
this letter agreement is subject to (i) the execution of a definitive merger
agreement on terms consistent with those described in this letter agreement,
(ii) board of directors approval for each of PhoneTel and Davel, (iii)
shareholder approval for each of PhoneTel and Davel and (iv) the receipt of all
other material third-party (including the approval of the existing senior
secured lenders of each of PhoneTel and Davel) and governmental approvals and
consents (including, but not limited to, SEC clearance of a joint proxy
statement and registration statement).
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PhoneTel Technologies, Inc.
June 12, 2001
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7. MANAGEMENT STRUCTURE. Each of PhoneTel and Davel will use good faith
efforts to agree on the constituency of the board of directors of the combined
entity following the Merger and such information shall be set forth as part of
the definitive merger agreement. John D. Chichester will serve as the chief
executive officer, and Bruce W. Renard will serve as the president, of the
combined entity. Pending the merger, the administrative offices of each company
will remain in Cleveland, Ohio and Tampa, Florida, respectively.
8. EXCLUSIVITY; NO PUBLICITY. Each of PhoneTel and Davel agrees that it
will not directly or indirectly (and will not permit its representatives,
directors, officers, employees or affiliates to) (i) make, entertain, solicit or
encourage inquiries or proposals, enter into or conduct discussions, or
negotiate or enter into an agreement with any other party for a business
combination involving all or any portion of its business or operations, whether
by way of a sale of assets or equity interests, partnership, joint venture,
merger, consolidation or other transaction; PROVIDED that the obligations of
each party under this clause (i) shall terminate on December 31, 2001 or such
earlier date on which a definitive agreement is executed, or (ii) without the
prior written consent of the other party, disclose to any other person or entity
the contents of this letter agreement, except to the extent required by law.
Notwithstanding the foregoing, the parties shall agree upon the text of a joint
press release, to be issued promptly following the execution hereof, announcing
the execution of this letter agreement and the attached servicing agreement.
9. BINDING EFFECT, GOVERNING LAW, ETC.. This binding letter agreement
shall be governed by the laws of Delaware and, when signed by both PhoneTel and
Davel, will serve as the basis upon which the parties will negotiate a
definitive agreement consistent with the matters set forth herein. In the event
of a breach of this letter agreement by either party, the other party may seek
all remedies legally available to it at law or in equity, including specific
performance hereof. This letter agreement shall be executed in two or more
counterparts, all of which taken together will constitute one and the same
letter agreement, which counterparts may be delivered via facsimile if followed
promptly by originally executed signature pages.
10. TRANSACTION EXPENSES. Each party to this letter agreement will be
responsible for all fees and expenses incurred by it, whether or not the
transactions contemplated hereby are consummated.
11. EXPIRATION OF OFFER. The proposal represented hereby will expire at
5:00 p.m. Eastern Daylight Time on June 12, 2001, unless accepted in writing by
PhoneTel as provided below at or prior to such time.
* * * * *
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PhoneTel Technologies, Inc.
June 12, 2001
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If you agree with the foregoing, please so indicate by signing
the enclosed copy of this letter agreement and returning it to the undersigned.
Yours truly,
DAVEL COMMUNICATIONS, INC.
By: /s/ Raymond A. Gross
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Name: Raymond A. Gross
Title: Chief Executive Officer
ACCEPTED and AGREED to this
12th day of June, 2001:
PHONETEL TECHNOLOGIES, INC.
By: /s/ John D. Chichester
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Name: John D. Chichester
Title: Chief Executive Officer
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