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Exhibit 99.1
SERVICING AGREEMENT
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THIS SERVICING AGREEMENT (the "Servicing Agreement") is executed as of
June 12, 2001, by and between PHONETEL TECHNOLOGIES, INC., an Ohio corporation
("PhoneTel"), and DAVEL COMMUNICATIONS, INC., a Delaware corporation ("Davel")
(collectively referred to as the "Parties").
W I T N E S S E T H:
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WHEREAS, PhoneTel and Davel have entered into a letter of intent as of
the date hereof (the "Effective Date") evidencing their intention to enter into
a strategic business combination (the "Merger") pursuant to the terms of a
definitive agreement to be negotiated by the parties (the "Merger Agreement");
WHEREAS, Davel and PhoneTel recognize that it is in the mutual best
interests of PhoneTel and Davel to commence certain cost-saving initiatives
prior to the Merger;
WHEREAS, the respective Boards of Directors of PhoneTel and Davel have
determined that the best interests of their respective stakeholders would be
served by entering into this Servicing Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
MUTUAL ENGAGEMENT FOR SERVICING
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1.1 RECIPROCAL APPOINTMENT. Davel hereby retains PhoneTel, and PhoneTel
hereby agrees to provide services to Davel, upon the terms and subject to the
conditions herein set forth (the "Davel Services"), in such circumstances as are
set forth below, in accordance with the terms of this Servicing Agreement, and
PhoneTel hereby retains Davel, and Davel hereby agrees to provide services to
PhoneTel, upon the terms and subject to the conditions herein set forth (the
"PhoneTel Services"), in such circumstances as are set forth below, in
accordance with the terms of this Servicing Agreement.
1.2 DAVEL SERVICES. Subject to the other terms and provisions of this
Servicing Agreement and subject to mutually agreed upon modifications hereof
reflecting specific or unique operating circumstances, in such Geographic Areas
(as defined below) as are hereafter mutually (and irrevocably during the term of
this Agreement) determined in writing by Davel and PhoneTel to be a Geographic
Area (each, a "PhoneTel Geographic Area") in which PhoneTel shall be responsible
for the following services with respect to Davel:
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(i) Assuming responsibility for all field operations,
including the collection, repair, maintenance, service,
installation/de-installation and modification of Davel's payphones and booths,
in those designated PhoneTel Geographic Areas;
(ii) Collecting "polling" data on Davel's payphones in each
PhoneTel Geographic Area and providing such data to Davel, together with any
other raw operational data as is necessary to permit Davel to pay the proper
commissions to Davel location owners (the "Davel Commission Amounts"); and
(iii) Reporting the collections of the coin from Davel's
payphones in those designated PhoneTel Geographic Areas, counting the coin and
paying the same to Davel by wire transfer on a weekly basis.
1.3 PHONETEL SERVICES. Subject to the other terms and provisions of
this Servicing Agreement and subject to mutually agreed upon modifications
hereof reflecting specific or unique operating circumstances, in such Geographic
Areas (as defined below) as are hereafter mutually (and irrevocably during the
term of this Agreement) determined in writing by Davel and PhoneTel to be a
Geographic Area (each, a "Davel Geographic Area" and, together with all such
Davel Geographic Areas and all PhoneTel Geographic Areas, the "Geographic
Areas") in which Davel shall be responsible for the following services with
respect to PhoneTel:
(i) Assuming responsibility for all field operation, including
the collection, repair, maintenance, service, installation/de-installation and
modification of PhoneTel's payphones and booths, in those designated Davel
Geographic Areas;
(ii) Collecting "polling" data on PhoneTel's payphones in each
Davel Geographic Area and providing such data to PhoneTel, together with any
other raw operational data as is necessary to permit PhoneTel to pay the proper
commissions to location owners (the "PhoneTel Commission Amounts"); and
(iii) Reporting the collections of the coin from PhoneTel's
payphones in those designated Davel Geographic Areas, counting the coin and
paying the same to PhoneTel by wire transfer on a weekly basis.
1.4 OVERSIGHT. It is the intent of the Parties that mutual operating
efficiencies will result from the actions undertaken pursuant to Sections 1.2
and 1.3, which will benefit Davel, PhoneTel and the combined entity. Each Party
shall (promptly after the date hereof) designate one member of its senior
management, and the two individuals so designated shall cooperate with one
another and proceed to develop a plan and timetable for the implementation of
the matters contemplated by this Agreement consistent with such intent of the
parties and in a manner reasonably calculated to maximize the level of overall
operating efficiencies that can be achieved by the Parties. In connection with
the foregoing, such two designated individuals shall receive and consider
recommendations from the senior management and boards of directors of Davel and
PhoneTel.
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1.5 RETAINED FUNCTIONS. Subject to the other terms and provisions of
this Servicing Agreement, each Party shall, absent subsequent mutual agreement
by the Parties, be separately responsible for any services not specifically
designated to one Party hereunder, including the following services for their
respective businesses:
(i) Preparing employee payroll, related taxes and employee
benefits, including medical, 401(k) amounts, vacation time, etc.;
(ii) Paying location owner commissions and telephone line
access and local service charges for its respective payphones;
(iii) Collecting all non-coin and dial-around revenue deriving
from its respective payphones;
(iv) Managing its respective corporate office and executive
functions (including accounting, financial services, tax, human resources,
customer service, sales and senior management functions);
(v) Maintaining commercial insurance coverage on, and all
necessary permits and licenses for the operation of, its respective payphones;
and
(vi) Paying all costs associated with field office operations,
vehicle operations, including leases, fuel, and maintenance, solely in the
Geographic Areas in which it has primary operational responsibility.
1.6 PERFORMANCE.
(i) Each Party shall perform its duties in a reasonably
prudent and businesslike manner.
(ii) Nothing herein shall constitute a representation,
warranty, covenant or guaranty by either Party concerning the future performance
of the other Party's business.
1.7 OTHER MATTERS TO BE DETERMINED. With respect to each PhoneTel
Geographic Area and each Davel Geographic Area, the following (except as may
otherwise be mutually agreed upon by the Parties at such time as each such
Geographic Area is so allocated to either Party) shall apply:
(i) As the owned and/or leased real property of Davel in any
PhoneTel Geographic Area shall cease to serve any incremental purpose upon the
implementation of this Servicing Agreement (with the operations or activities at
such Davel locations being integrated into the PhoneTel location(s) in such
Geographic Area), Davel shall use reasonable best efforts to sell, sublet or
negotiate a lease termination for such real property, on as favorable terms as
is reasonably practicable.
(ii) As the owned and/or leased real property of PhoneTel in
any Davel Geographic Area shall cease to serve any incremental purpose upon the
implementation of this
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Servicing Agreement (with the operations or activities at such PhoneTel
locations being integrated into the Davel location(s) in such Geographic Area),
PhoneTel shall use reasonable best efforts to sell, sublet or negotiate a lease
termination for such real property, on as favorable terms as is reasonably
practicable.
(iii) All employees of Davel whose positions are eliminated as
a result of this Servicing Agreement shall be dismissed by Davel, with Davel
paying all severance costs associated therewith. With respect to Davel employees
proposed to be dismissed, the Parties shall cooperate in such manner as to avoid
or minimize, to the extent possible, any severance costs that may otherwise
apply.
(iv) All employees of PhoneTel whose positions are eliminated
as a result of this Servicing Agreement shall be dismissed by PhoneTel, with
PhoneTel paying all severance costs associated therewith. With respect to
PhoneTel employees proposed to be dismissed, the Parties shall cooperate in such
manner as to avoid or minimize, to the extent possible, any severance costs that
may otherwise apply.
1.8 NON-SOLICIT. During the term of this Servicing Agreement, neither
Party will, without the consent of the other Party, solicit or cause to be
solicited for employment, or employ, any person who is now employed by the other
Party.
ARTICLE II
PAYMENTS
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2.1 ALLOCATION OF COSTS. It is the intent of the Parties to share all
costs of field operations within each Geographic Area pro rata based on the
number of payphones of each Party located therein. For purposes of determining
the allocation of costs in each Geographic Area, the aggregate costs of field
operations (excluding, for purposes of this Agreement, selling, general and
administrative expenses of either Party) of both Parties in such Geographic Area
for each calendar month shall be determined on the following basis: Such costs
and the timing of their recognition shall consist of (i) costs incurred in the
field for ongoing operations (as determined on the accrual basis in accordance
with generally accepted accounting principles) PLUS (ii) cash disbursements for
employee severance, for lease termination costs with respect to vehicles or
operating facilities that cease to be utilized and for other out-of-pocket costs
of discontinuing operations (as and when such expenses are actually paid).
Within seven days following the end of each calendar month, each Party shall
exchange with the other Party a written calculation of its costs for each
Geographic Area for the prior month (in a format mutually agreed upon by the
Parties) and shall permit the other Party reasonable opportunity to review all
books and records and other financial information relating thereto.
2.2 MANNER AND TIMING OF PAYMENTS. Based upon the exchange and review
of information set forth in Section 2.1 and consistent with the terms of such
Section, the Parties shall (prior to the 15th day following the end of each
calendar month) mutually agree upon the aggregate net amount owing from one
Party to the other Party with respect to the Parties sharing of all costs for
those Geographic Areas in which consolidation of operations has occurred. Based
on such
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determination, the applicable Party shall make a wire transfer payment (on such
15th day following the end of the applicable calendar month) to the other Party
in the net aggregate amount so determined to be owing. The Parties will
cooperate in good faith to resolve any disputes that may arise in the completion
of the cost calculations and netting process described herein.
ARTICLE III
TERM
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3.1 TERM. The term of this Servicing Agreement shall commence as of the
date hereof, and shall terminate on the earlier of:
(i) the mutual agreement of both Parties;
(ii) a termination effected in accordance with Article VI
hereof;
(iii) consummation of the Merger;
(iv) termination of the Merger Agreement in accordance with
its terms;
(v) December 31, 2001; or
(vi) Failure of the parties to execute the Merger Agreement by
July 31, 2001.
3.2 EXTENSION OF TERM. Notwithstanding Section 3.1, in the event of a
termination of this Agreement pursuant to any of Section 3.1(ii), (iv), (v) or
(vi) hereof, neither Party shall cease (and either or both Parties shall
continue), as and to the extent requested by the other Party, to provide Davel
Services in any one or more PhoneTel Geographic Areas or PhoneTel Services in
any one or more Davel Geographic Areas, as the case may be, for up to an
additional six-month period following the date of any such termination, with
this Agreement continuing in effect with respect thereto for the limited purpose
of providing a transitional period for each such Party.
ARTICLE IV
RETENTION OF CONSULTANTS: ADDITIONAL SERVICES
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Each Party shall be permitted to retain, at its own expense, such third
party consultants and professional advisors as such Party shall reasonably deem
necessary in order to enable such Party to perform the services undertaken
hereunder and the other duties, obligations or responsibilities imposed on such
Party hereunder.
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ARTICLE V
RELATIONSHIP AND AUTHORITY; REPRESENTATIONS
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Davel and PhoneTel shall not, by virtue of this Servicing Agreement or
the performance thereof by either party, constitute a partnership, joint venture
or joint enterprise in the performance of either of their respective duties
hereunder. All debts and liabilities arising in the course of the operations of
either Party's business are and shall be the obligations of such Party, and the
other Party shall not be liable for any such obligations by reason of its
services provided hereunder.
5.1 REPRESENTATIONS.
(i) Davel hereby represents and warrants to PhoneTel that:
(A) Approval of Third Parties. No approval of any
third party is required as a condition to the execution and
delivery of this Servicing Agreement by Davel or its
consummation of the transactions contemplated hereby. The
obligation for the obtaining and receipt of any such approvals
shall rest solely with Davel.
(B) No Prohibition Against Transaction. Davel is not
a party to, or otherwise subject to, any agreement, indenture,
instrument, lease, judgment or any other decree or any other
regulation or demand of any government bureau, board or agency
which would prohibit the consummation of the transactions
contemplated by this Servicing Agreement or which would
otherwise be breached or impaired by such consummation.
(C) Authority. This Servicing Agreement and the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action by Davel. This
Servicing Agreement constitutes a valid and binding obligation
of Davel duly enforceable against Davel 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.
(ii) PhoneTel hereby represents and warrants to Davel that:
(A) Approval of Third Parties. No approval of any
third party is required as a condition to the execution and
delivery of this Servicing Agreement by PhoneTel or its
consummation of the transactions contemplated hereby. The
obligation for the obtaining and receipt of any such approvals
shall rest solely with PhoneTel.
(B) No Prohibition Against Transaction. PhoneTel is
not a party to, or otherwise subject to, any agreement,
indenture, instrument, lease, judgment or any other decree or
any other regulation or demand of any government bureau, board
or agency which would prohibit the consummation of the
transactions contemplated by this Servicing Agreement or which
would otherwise be breached or impaired by such consummation.
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(C) Authority. This Servicing Agreement and the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action by PhoneTel. This
Servicing Agreement constitutes a valid and binding obligation
of PhoneTel duly 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.
ARTICLE VI
EVENTS OF DEFAULT: TERMINATION
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6.1 DEFAULTS. Each of the following events shall constitute an "Event
of Default" by either Party under this Servicing Agreement:
(i) The failure by such Party to perform any material duty or
obligation imposed upon it under this Servicing Agreement or any other material
breach of this Servicing Agreement by such Party; provided, however, that no
such failure or breach shall be deemed to constitute an Event of Default unless
such failure or breach continues for a period of thirty (30) days after such
Party's receipt of written notice from the other Party of such failure or breach
or, if such failure or breach is not capable of being cured within said thirty
(30)-day period, such noticed Party shall have failed diligently and in good
faith to commence to cure the same within said thirty (30)-day period and to
have diligently continued to prosecute the same during such thirty (30)-day
period;
(ii) The commitment by such Party of any act of fraud, willful
misconduct or gross negligence in connection with the performance of its duties
hereunder.
6.2 RIGHT OF TERMINATION. The occurrence of an Event of Default by
either party shall entitle the non-defaulting party to terminate this Servicing
Agreement upon thirty (30) days prior written notice to the defaulting party,
without any further obligation or liability to the defaulting party (other than
the non-defaulting party's liability for any compensation accrued or otherwise
payable under Article II hereof through the date of termination only and any
liability under Article VII below or Section 3.2).
ARTICLE VII
INDEMNIFICATION
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7.1 GENERAL. Each Party shall indemnify the other Party and any present
or former officer, member, director, employee or agent of such other Party or
the personal representatives thereof (or any direct or indirect subsidiary)
("Affiliates") made or threatened to be made a party in any civil or criminal
action or proceeding by any person, arising out of or in connection with the
execution and performance of this Servicing Agreement by such other Party and/or
any of its Affiliates, against judgments, fines, amounts paid in settlement and
reasonable expenses, including court costs, attorneys' fees and disbursements
and those of accountants and other experts and consultants incurred as a result
of such action or proceeding or any appeal therein. Each Party shall
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also provide such indemnification to the other Party or any of its Affiliates
and the heirs, successors or assigns of such Affiliate and his or her
representatives brought by reason of, arising out of in connection with, or by
virtue of the fact that such person or entity is or was deemed to be a director
or officer of the indemnifying Party (including indemnification in respect of
any excise tax assessed on such a person in connection with service to an
employee benefit plan), or served any other trust, partnership, corporation,
limited liability company, joint venture, or other entity or enterprise in any
capacity at the request of the indemnifying Party in connection with the
services provided hereunder. Such required indemnification shall be subject only
to the exception that no indemnification may be made to or on behalf of either
Party or any of its Affiliates in the event and to the extent that a judgment or
other final adjudication adverse to such person or entity establishes that his
or its acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
or that he or it personally gained a financial profit or other advantage to
which he or it was not legally entitled (provided, however, that indemnification
shall be made upon any successful appeal of any such adverse judgment or final
adjudication).
7.2 SETTLEMENTS. In no event shall any party to any such proceeding be
entitled to effect a settlement thereof without the written consent of all other
parties to such proceeding, which consent shall not be unreasonably withheld or
delayed, unless such settlement:
(i) results in a dismissal with prejudice as to all of the
claims in such proceeding with respect to a non-consenting party, and
(ii) does not require the non-consenting party to take any
affirmative action (other than ministerial steps in connection with such
settlement) and does not require the payment of any money by the non-consenting
party.
7.3 NON-EXCLUSIVE REMEDIES. The foregoing right of indemnification
shall not be deemed exclusive of any other rights to which any party, or their
successors, assigns or the heirs or representatives, may be entitled apart from
this Article VII.
7.4 DISCLAIMER. Neither Party nor any of their respective Affiliates
shall be liable to the other Party or any of the shareholders of such other
Party for any acts or omissions or for any error of judgment or mistake of fact
or law, except for willful misconduct.
7.5 SURVIVAL. The provisions of this Article VII shall survive the
termination of this Servicing Agreement for a period of five (5) years.
ARTICLE VIII
WAIVER AND INVALIDITY
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8.1 WAIVER. The failure of either party to insist upon a strict
performance of any of the terms or provisions of this Servicing Agreement or to
exercise any option, right or remedy herein contained, shall not be construed as
a waiver or as a relinquishment for the future of such term, provision, option,
right or remedy, but the same shall continue and remain in full force and
effect.
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No waiver by either party of any term or provision hereof shall be deemed to
have been made unless expressed in writing and signed by such party.
8.2 PARTIAL INVALIDITY. In case any one or more of the provisions
contained in this Servicing Agreement should be determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable in any respect
against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
ARTICLE IX
NOTICES
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All notices provided for in this Servicing Agreement shall be in
writing and shall be delivered personally or by postage-prepaid registered or
certified mail, at the following address of each party:
TO DAVEL:
Davel Communications, Inc.
10120 Windhorst Road
Tampa, Florida 33619
Attention: Bruce W. Renard, Esq.
COPIES OF ALL NOTICES TO DAVEL TO BE SENT TO:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: R. Scott Falk, Esq.
TO PHONETEL:
PhoneTel Technologies, Inc.
1001 Lakeside Avenue, 7th Floor
Cleveland, Ohio 44114
Attention: John D. Chichester
COPIES OF ALL NOTICES TO PHONETEL TO BE SENT TO:
Hahn Loeser & Parks LLP
3300 BP Tower
200 Public Square
Cleveland, Ohio 44114
Attention: F. Ronald O'Keefe, Esq.
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Notice shall be deemed given upon receipt thereof. Any party hereto may
change the address herein specified for notice purposes by ten (10) days prior
written notice to the other party. With the exception of default notices or a
notice of the exercise of any right by a party to another party, copies of
notices to attorneys are an accommodation only and are not necessary for the
validity of a notice.
ARTICLE X
APPLICABLE LAW; ARBITRATION
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10.1 GOVERNING LAW. This Servicing Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principles.
10.2 ARBITRATION. Any dispute or controversy between PhoneTel or any of
its employees or Affiliates, and Davel or any of its employees or Affiliates,
arising in connection with this Servicing Agreement, any amendment thereof, or
the breach hereof or thereof shall be determined and settled by arbitration in
Wilmington, Delaware, by a panel of three arbitrators in accordance with the
rules of the American Arbitration Association. Any award rendered therein shall
be final and binding upon the Parties and their respective Affiliates and their
respective legal representatives and judgment may be entered in any court having
jurisdiction thereof. The expenses of such arbitration shall be shared equally
by the Parties.
ARTICLE XI
CONFIDENTIALITY
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11.1 MAINTENANCE OF CONFIDENTIALITY. Each of the parties shall, during
the term of this Servicing Agreement and at all times thereafter, maintain in
confidence all proprietary information provided by one party to the other party
in connection with this Servicing Agreement, except to the extent required by
law. Each of the parties further agrees that it shall not use the proprietary or
confidential information during the term of this Servicing Agreement or at any
time thereafter for any purpose other than the performance of its obligations
under this Servicing Agreement. Each party shall take all reasonable measures
necessary to prevent any unauthorized disclosure of the proprietary or
confidential information by any of its employees, agents or consultants, except
to the extent required by law. Further, prior to public announcement of this
Servicing Agreement, the parties shall keep the terms hereof in confidence. 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 a letter of intent regarding a proposed business combination
between the Parties.
11.2 PERMITTED DISCLOSURES. Nothing herein shall prevent any party, or
any employee, agent or consultant of any party from using, disclosing, or
authorizing disclosure of any information it receives in connection with this
Servicing Agreement which is disclosed in order to comply with a judicial order
issued by a court of competent jurisdiction or with government laws or
regulations, in which event, the disclosing party shall obtain the prior written
consent of the non-disclosing party of the content of the disclosure, which
consent shall not be unreasonably withheld or delayed.
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ARTICLE XII
MISCELLANEOUS
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12.1 MODIFICATIONS; COUNTERPARTS. Any change or modification of this
Servicing Agreement must be in writing signed by both parties hereto. This
Servicing Agreement shall be executed in one or more counterparts, each of which
shall be deemed an original.
12.2 HEADINGS; INTERPRETATION. Headings of Articles and Sections are
inserted only for convenience and are in no way to be construed as a limitation
of the scope of the particular Articles or Sections to which they refer. The
term "including" shall mean "including without limitation".
12.3 ENTIRE AGREEMENT. This Servicing Agreement constitutes the entire
agreement with respect to the subject matter hereof between the parties and
supersedes all prior understandings and writings, and may be changed only by a
writing signed by the parties hereto.
12.4 CONSENTS. All consents to be given by either party must be in
writing.
12.5 ASSIGNMENT. Neither party shall assign or transfer or permit the
assignment or transfer this Servicing Agreement without the prior written
consent of the other party.
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IN WITNESS WHEREOF, the parties hereto have executed this Servicing
Agreement as of the date first above written.
PHONETEL TECHNOLOGIES, INC.
By: /s/ John D. Chichester
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Its: Chief Executive Officer
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DAVEL COMMUNICATIONS, INC.
By: /s/ Raymond A. Gross
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Its: Chief Executive Officer
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