EXHIBIT 10.4
PHONETEL TECHNOLOGIES, INC.
CONSULTING AND NON-COMPETITION AGREEMENT
THIS CONSULTING AND NON-COMPETITION AGREEMENT is entered into as
of June 11, 1998, by and between Mr. Xxxxx Xxxx ("Consultant") and
PhoneTel Technologies, Inc., an Ohio corporation (the "Company"). The
Company and Consultant are sometimes collectively referred to herein as the
"Parties" and individually as a "Party".
Consultant has been Chairman of the Board and Chief Executive
Officer and a stockholder of the Company and, as such, possesses special
knowledge, abilities and experience regarding the business of the Company.
The Company, Davel Communications Group, Inc., an Illinois corporation
("Davel"), Davel Holdings, Inc., a Delaware corporation ("New Davel"), and
PT Merger Corp., an Ohio corporation and a wholly owned subsidiary of Davel
("Merger Corp."), are parties to an Agreement and Plan of Merger, of even
date herewith (the "Merger Agreement"), whereby Merger Corp. shall merge
with and into the Company and the Company shall be the surviving
corporation in the merger (the "Merger").
WHEREAS, the Consultant has served as Chairman of the Board and
Chief Executive Officer of the Company and possesses intimate knowledge of
the Business of the Company and its Subsidiaries, which consists of
providing coin-operated, customer-owned telephones and related services
(the "Business"), and its policies, methods, personnel and problems;
WHEREAS, in connection with the Merger, Parent and the Company
wish to be assured that, following the Merger, the Company will have the
benefit of the Consultant's advice and counsel concerning the Business and
that the Consultant will be restricted from competing with or disclosing
certain information concerning the Business;
WHEREAS, Consultant and the Company intend that this Agreement
shall become effective as of the Closing Date (as defined in the Merger
Agreement) and, if the transactions contemplated by the Merger Agreement
are not consummated, this Agreement shall have no force or effect; and
WHEREAS, as a further inducement to Parent entering into the
Merger Agreement, the Consultant is willing to enter into this Agreement.
In consideration of the mutual covenants and agreements set forth
herein, the Parties agree as follows:
1. Consulting Services. During the period from the Closing
Date to the third anniversary of the Closing Date (the "Consulting
Period"), the Consultant shall serve as a consultant to the Company and
shall be available to render such advisory or consulting services as and
when the Chairman of the Board or President of the Company may reasonably
request of him from time to time with respect to the Business, including,
without limitation, advice and consultation regarding the operations of the
Business and integration of the Business with the businesses of Parent and
its subsidiaries. In asking the Consultant to render consulting services
hereunder, the Company will have due regard for the Consultant's personal
convenience, health and other activities. The Consultant's failure or
inability, by reason of temporary illness, scheduling conflicts or absences
for reasonable periods, to respond to any request by the Company to render
consulting services during any such period shall not be deemed to
constitute a default on his part in the performance of his obligations to
render such services. The Consultant will perform consulting services
hereunder as an independent contractor to, and not as an agent or employee
of, the Company and, unless specifically authorized in writing by the
Chairman of the Board or President of the Company, the Consultant shall
have no authority under this Agreement to obligate the Company, or to enter
into any agreement on its behalf.
2. Compensation; Reimbursement. In consideration of
Consultant's agreement to provide consulting services set forth in
paragraph 1 above, the Company shall pay to Consultant $200,000 in cash in
equal quarterly installments in arrears (the "Consulting Payment"), and in
consideration of the non-competition covenant set forth in paragraph 5
below, the Company shall pay to Consultant $2,350,000 in cash on the next
business day following the Closing Date (the "Non-Compete Payment").
Consultant shall not be entitled to any fringe benefits or perquisites from
the Company. Consultant shall be entitled to continue his participation in
the PhoneTel Technologies, Inc. 1997 Stock Incentive Plan, or any successor
thereto (the "Option Plan"). The Company agrees that Consultant's
services to the Company (or any successor thereto) during the Consulting
Period shall be treated as continuous employment for all purposes under the
Option Plan and that Consultant's employment or service with the Company
(or any successor thereto) shall not be deemed to have terminated for
purposes of the Option Plan by reason of the change in the Consultant's
status from an employee to a consultant. The Company shall reimburse
Consultant promptly for all reasonable expenses incurred by him in the
course of performing his duties under this Agreement which are consistent
with the Company's policies in effect from time to time with respect to
travel, entertainment and other business expenses, subject to the Company's
requirements with respect to reporting and documentation of such expenses.
3. Confidential Information. Consultant acknowledges that the
information, observations and data relating to the Business or the business
of the Company's affiliates (including, following the Merger, New Davel)
which Consultant has obtained or will obtain as an employee, officer,
director and stockholder of the Company, or shall obtain during the course
of his association with the Company and its affiliates and his performance
under this Agreement are the property of the Company and its affiliates.
Consultant agrees that he shall not use for his own benefit or disclose to
any third party, except in furtherance of the Business, any of such
information, observations or data without the prior written consent of the
Board of Directors of the Company (the "Board"), unless and to the extent
that the aforementioned matters become generally known to or available for
use by the public other than as a result of disclosure by him that is
prohibited hereunder.
4. Inventions and Patents. Consultant acknowledges that all
inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether
patentable or not) which relate to the actual or anticipated business,
research and development or existing or future products or services of the
Company and its subsidiaries and which are conceived, developed or made by
him during the Consulting Period ("Work Product") belong to the Company.
Consultant shall promptly disclose such Work Product to the Company and
perform all actions reasonably requested by the Company (whether during or
after the Consulting Period) to establish and confirm such ownership
(including, without limitation, assignments, powers of attorney and other
instruments).
5. Non-Competition.
(a) Consultant agrees that during the period from the Closing
Date to the fifth anniversary of the Closing Date (the "Non-Competition
Period"), he shall not, directly or indirectly, either for himself or for
any other person, partnership, corporation or company, permit his name to
be used by or participate in any business or enterprise which competes with
the Business as conducted on the date of this Agreement by the Company and
which is located in the United States. For purposes of this Agreement, the
term "participate" includes any direct or indirect interest in any
enterprise, whether as an officer, director, employee, partner, sole
proprietor, agent, representative, independent contractor, consultant,
franchisor, franchisee, creditor, owner or otherwise; provided that the
term "participate" shall not include ownership of less than 5% of the stock
of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market. Consultant agrees
that this covenant is reasonable with respect to its duration, geographical
area and scope.
(b) During the period from the Closing Date to the fifth
anniversary of the Closing Date (the "Nonsolicitation Period"), Consultant
shall not (i) solicit, induce or attempt to induce any employee of the
Company or any of its subsidiaries to leave the employ of the Company or
(ii) solicit, induce or attempt to induce any supplier, licensee, licensor,
franchisee or other business relation of the Company or any of its
subsidiaries to cease doing business with them or in any way interfere with
the relationship between the Company or any of its subsidiaries and any
such person or business relation (including, without limitation, making any
negative statements or communications about the Company or its
subsidiaries).
(c) The Parties hereto agree that the Company would suffer
irreparable harm from a breach by Consultant of any of the covenants or
agreements contained herein. In the event of an alleged or threatened
breach by the Consultant of any of the provisions of this paragraph 5, the
Company or its successors or assigns may, in addition to all other rights
and remedies existing in its favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in
order to enforce or prevent any violations of the provisions hereof
(including the extension of the Non-Competition Period by a period equal to
the length of the violation of this paragraph 5). In the event of a breach
or violation by Consultant of any of the provisions of this paragraph 5,
the Non-Competition Period described above shall be tolled until such
breach or violation has been duly cured. Consultant agrees that these
restrictions are reasonable.
(d) If, at the time of enforcement of any of the provisions of
paragraph 5, a court holds that the restrictions stated therein are
unreasonable under the circumstances then existing, the Parties hereto
agree that the maximum period, scope or geographical area reasonable under
such circumstances shall be substituted for the stated period, scope or
area.
(e) Consultant agrees that the covenants made in paragraph 5(a)
shall be construed as an agreement independent of any other provision of
this Agreement and shall survive any order of a court of competent
jurisdiction terminating any other provision of this Agreement.
6. Taxes. Each of New Davel and the Company shall not take a
position (a) on any return, report, information return or other document
(including, without limitation, any related or supporting information) with
respect to taxes of the Company, (b) in any proceeding, formal or informal,
before any taxing authority, or (c) otherwise, in each case, that is
inconsistent with the position that (i) no payment made pursuant to this
Agreement will constitute an "excess parachute payment" within the meaning
of Section 280G(b) of the Code and (ii) no tax is required to be paid or
withheld in respect of any payment made pursuant to this Agreement under
Section 4999 of the Code.
7. Other Remedies. In the event that it is finally judicially
determined (without any further rights of appeal) that Consultant has
materially breached paragraph 5 of this Agreement after having been
provided notice and a reasonable opportunity to cure, then Consultant shall
promptly return to the Company the full amount of the Non-Compete Payment
as liquidated damages in full satisfaction of any liability resulting from
such breach.
8. Tax Returns. New Davel, Consultant, the Company and each
member of New Davel's consolidated group shall file all tax returns and
reports required to be filed by them on the basis that Consultant is an
independent contractor, rather than an employee, as defined in Treasury
Regulation section31.3121(d)-1(c)(2), and Consultant shall indemnify the
Company for the amount of any employment taxes paid by the Company (other
than as a result of the Company withholding such employment taxes) as the
result of Consultant not paying employment taxes from the Consulting
Payment. None of New Davel, any member of its consolidated group or the
Company shall withhold any amounts from payments made to Consultant on
account of employment taxes.
9. Termination.
(a) Notwithstanding any provision of this Agreement to the
contrary, the Consulting Period shall terminate on the first to occur of
the following date (each of which, to the extent applicable, the "Date of
Termination"):
(i) the date that the Company and Consultant mutually agree
to such termination;
(ii) the date of Consultant's death or adjudicated
incompetency;
(iii) the date on which the Company shall give
Consultant notice of termination on account of Disability (as
defined below);
(iv) the date on which the Company shall give Consultant
notice of termination for Cause; or
(v) the expiration of the Consulting Period.
(b) Upon termination of Consultant's engagement after the
Closing, Consultant shall be entitled to the following:
(i) upon termination pursuant to clause (a)(i), (iv) or (v)
above, Consultant or Consultant's heirs, as the case may be,
shall be entitled to receive any earned but unpaid consulting
fees and expenses to the Date of Termination.
(ii) upon termination pursuant to clause (a) (ii) or (iii)
above, Consultant or Consultant's heirs, as the case may be,
shall be entitled to receive (A) any unpaid consulting fees and
expenses to the Date of Termination, and (B) all consulting fees
and expenses payable pursuant to Section 2 hereof as if earned,
within 30 days of such Date of Termination.
(c) For purposes of this Agreement, "Disability" shall mean an
illness, injury or other incapacity condition as a result of which
Consultant is unable to perform the services required to be performed under
this Agreement for (i) ninety (90) consecutive days during the Consulting
Period, or (ii) a period or periods aggregating more than thirty (30) days
in any three (3) consecutive months during the Consulting Period. In any
such event, Parent, in its sole discretion, may terminate this Agreement by
giving notice to Consultant of termination for Disability.
(d) For purposes of this Agreement, "Cause" shall mean the
occurrence of any of the following:
(i) the willful and continued failure or refusal by
Consultant to perform his duties hereunder after receiving
written notice from the Company or New Davel specifying in
reasonable detail such failure or refusal and after being given a
reasonable time and opportunity to remedy such alleged failure or
refusal; or
(ii) Consultant's conviction of any felony or a misdemeanor
involving moral turpitude (including entry of a nolo contendere
plea).
(e) The obligations of the Consultant under Section 5 hereof
shall survive any Date of Termination, except in the event of any Date of
Termination arising under Sections 8(a)(ii) hereof, in which event each of
the Non-Compete Period and the Non-Solicitation Period shall terminate on
such Date of Termination.
(f) The Company agrees that, (A) except as set forth in clauses
(i) through (v) of Section 8(a), the Company may not terminate the
Consulting Period, (B) no purported termination of the Consulting Period by
the Company other than pursuant to clauses (i) through (v) of Section 8(a)
shall be effective for purposes of this Agreement or the Option Plan, and
(C) the Company will not purport to terminate the Consulting Period or
Consultant's status as a non-employee independent contractor of the Company
for "Cause" other than as such term is defined herein.
10. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company and its affiliates, successors
and assigns and shall be binding upon and inure to the benefit of
Consultant and his legal representatives and assigns; provided that in no
event shall Consultant's obligations to perform future services for the
Company be delegated or transferred by Consultant without the prior written
consent of the Company (which consent may be withheld in its sole
discretion). The Company may assign or transfer its rights hereunder to
any of its affiliates or to a successor corporation in the event of merger,
consolidation or transfer or sale of all or substantially all of the assets
or stock of the Company.
11. Modification of Waiver. No amendment, modification or
waiver of this Agreement shall be binding or effective for any purpose
unless it is made in a writing signed by the Party against whom enforcement
of such amendment, modification or waiver is sought. No course of dealing
between the Parties to this Agreement shall be deemed to affect or to
modify, amend or discharge any provision or term of this Agreement. No
delay on the part of the Company or Consultant in the exercise of any of
their respective rights or remedies shall operate as a waiver thereof, and
no single or partial exercise by the Company or Consultant of any such
right or remedy shall preclude other or further exercises thereof. A
waiver of right or remedy on any one occasion shall not be construed as a
bar to or waiver of any such right or remedy on any other occasion.
12. GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
AND THE EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER
OF THE STATE OF OHIO, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
13. Severability. Whenever possible each provision and term of
this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision or term of this Agreement
shall be held to be prohibited by or invalid under such applicable law,
then such provision or term shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining
provisions or terms of this Agreement; provided that if a court having
competent jurisdiction shall find that the covenant contained in paragraph
5(a) hereof is not reasonable, such court shall have the power to reduce
the duration and/or geographic area and/or scope of such covenant, and the
covenant shall be enforceable in this reduced form.
14. No Strict Construction. The language used in this Agreement
shall be deemed to be the language chosen by the Parties hereto to express
their mutual intent, and no rule of strict construction shall be applied
against any Party.
15. Consultant's Representations. Consultant represents and
warrants to the Company that (i) his execution, delivery and performance of
this Agreement does not conflict with, or result in the breach of or
violation of, any other agreement, instrument, order, judgment or decree to
which he is a party or by which he is bound, (ii) he is not a party to or
bound by any employment agreement, noncompete agreement or confidentiality
agreement with any other person or entity and (iii) upon the execution and
delivery of this Agreement by the Company, this Agreement shall be the
valid and binding obligation of his, enforceable in accordance with its
terms.
16. Notice. 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 the Company, to:
PhoneTel Technologies, Inc.
c/o Davel Communications Group, Inc.
000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: R. Xxxxx Xxxx
Facsimile: (000) 000-0000
If to Consultant, to:
00 Xxxxx Xxxxx
Xxxxxxxxxx Xxxxx, XX 00000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
or such other address, telecopy or telex number as such party may hereafter
specify for the purpose by notice to the other party 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 paragraph.
17. Captions. The captions used in this Agreement are for
convenience of reference only and do not constitute a part of this
Agreement and shall not be deemed to limit, characterize or in any way
affect any provision of this Agreement, and all provisions of this
Agreement shall be enforced and construed as if no caption had been used in
this Agreement.
18. Counterparts. This Agreement may be executed in
counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one
and the same instrument..
19. Effectiveness of Agreement. This Agreement shall become
effective as of the Closing Date and if the transactions contemplated by
the Merger Agreement are not consummated, this Agreement shall have no
force or effect.
* * * *
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first above written.
PHONETEL TECHNOLOGIES, INC.
By:________________________________
Its:_______________________________
CONSULTANT
___________________________________
Xxxxx Xxxx
