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
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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
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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:
(1) 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;
(2) 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
(3) 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
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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:
(1) 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;
(2) 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
(3) 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
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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
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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:
(1) Preparing employee payroll, related taxes and employee benefits,
including medical, 401(k) amounts, vacation time, etc.;
(2) Paying location owner commissions and telephone line access and
local service charges for its respective payphones;
(3) Collecting all non-coin and dial-around revenue deriving from its
respective payphones;
(4) Managing its respective corporate office and executive functions
(including accounting, financial services, tax, human resources, customer
service, sales and senior management functions);
(5) Maintaining commercial insurance coverage on, and all necessary
permits and licenses for the operation of, its respective payphones; and
(6) 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.
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(1) Each Party shall perform its duties in a reasonably prudent and
businesslike manner.
(2) 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
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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:
(1) 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.
(2) 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.
(3) 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.
(4) 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
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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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1.9 Allocation of Costs. It is the intent of the Parties to share all
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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
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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.
1.10 Manner and Timing of Payments. Based upon the exchange and review of
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information set forth in Section 2.1 and consistent with the terms of such
Section, the Parties shall (prior to the 15/th/ 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
15/th/ 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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1.11 Term. The term of this Servicing Agreement shall commence as of the
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date hereof, and shall terminate on the earlier of:
(1) the mutual agreement of both Parties;
(2) a termination effected in accordance with Article VI hereof;
(3) consummation of the Merger;
(4) termination of the Merger Agreement in accordance with its terms;
(5) December 31, 2001; or
(6) Failure of the parties to execute the Merger Agreement by July
31, 2001.
1.12 Extension of Term. Notwithstanding Section 3.1, in the event of a
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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.
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.
1.13 Representations.
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(1) Davel hereby represents and warrants to PhoneTel that:
(1) 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.
(2) 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.
(3) 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.
(2) PhoneTel hereby represents and warrants to Davel that:
(1) 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.
(2) 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.
(3) Authority. This Servicing Agreement and the transactions
contemplated hereby have been duly and validly authorized by all
necessary
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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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1.14 Defaults. Each of the following events shall constitute an "Event of
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Default" by either Party under this Servicing Agreement:
(1) 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;
(2) The commitment by such Party of any act of fraud, willful
misconduct or gross negligence in connection with the performance of its duties
hereunder.
1.15 Right of Termination. The occurrence of an Event of Default by either
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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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1.16 General. Each Party shall indemnify the other Party and any present
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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 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
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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).
1.17 Settlements. In no event shall any party to any such proceeding be
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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:
(1) results in a dismissal with prejudice as to all of the claims in
such proceeding with respect to a non-consenting party, and
(2) 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.
1.18 Non-Exclusive Remedies. The foregoing right of indemnification shall
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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.
1.19 Disclaimer. Neither Party nor any of their respective Affiliates
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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.
1.20 Survival. The provisions of this Article VII shall survive the
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termination of this Servicing Agreement for a period of five (5) years.
ARTICLE VIII
WAIVER AND INVALIDITY
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1.21 Waiver. The failure of either party to insist upon a strict
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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. 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.
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1.22 Partial Invalidity. In case any one or more of the provisions
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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.
00000 Xxxxxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Copies of all notices to Davel to be sent to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: R. Xxxxx Xxxx, Esq.
To PhoneTel:
PhoneTel Technologies, Inc.
0000 Xxxxxxxx Xxxxxx, 0/xx/ Xxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxxxx
Copies of all notices to PhoneTel to be sent to:
Xxxx Xxxxxx & Parks LLP
0000 XX Xxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: F. Xxxxxx X'Xxxxx, Esq.
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
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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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1.23 Governing Law. This Servicing Agreement shall be governed by and
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construed in accordance with the laws of the State of Delaware, without regard
to conflict of laws principles.
1.24 Arbitration. Any dispute or controversy between PhoneTel or any of
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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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1.25 Maintenance of Confidentiality. Each of the parties shall, during the
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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.
1.26 Permitted Disclosures. Nothing herein shall prevent any party, or any
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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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1.27 Modifications; Counterparts. Any change or modification of this
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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.
1.28 Headings; Interpretation. Headings of Articles and Sections are
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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".
1.29 Entire Agreement. This Servicing Agreement constitutes the entire
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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.
1.30 Consents. All consents to be given by either party must be in
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writing.
1.31 Assignment. Neither party shall assign or transfer or permit the
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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/ Xxxx X. Xxxxxxxxxx
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Its: CEO
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DAVEL COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
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Its: CEO
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