SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 15, 2004
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Davel Communications, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 000-25207 59-3538257
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(State or Other Jurisdiction (Commission (IRS Employer
Of Incorporation) File Number) Identification No.)
200 Public Square, Suite 700 Cleveland, OH 44114
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (216) 241-2555
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Registrant under
any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b)
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c)
ITEM 1.01 ENTRY INTO MATERIAL AGREEMENTS
On November 11, 2004, Davel Communications, Inc. ("Davel " or the "Company")
executed an agreement with its former secured lenders (the "Exchange Agreement")
to assign its right to receive certain future payments relating to Regulatory
Receipts (defined as new service test refunds, end user common line charge
refunds, and dial-around compensation received pursuant to the an order from the
Federal Communications Commission) in exchange for an $18.0 million reduction in
the principal balance owed under the terms of the Amended, Restated and
Consolidated Credit Agreement dated as of July 24, 2002, by and among Davel
Financing Company, LLC, PhoneTel Technologies, Inc., Cherokee Communications,
Inc., Davel Communications, Inc., the domestic subsidiaries of each of the
foregoing and Wells Fargo Foothill, Inc, as Agent, and the lenders set forth
therein (the "Credit Agreement"). Following the receipt by the Company of the
proceeds from the settlement of a certain bankruptcy claim and after the Company
receives and retains for its own use $0.7 million of Regulatory Receipts, the
secured lenders have been assigned the right to receive the next $18.0 million
of Regulatory Receipts otherwise due the Company. The Company will recognize an
$18.0 million gain relating to the Exchange Agreement in the fourth quarter of
2004.
On September 3, 2004, the secured lenders of the Company entered into a Loan
Purchase Agreement and Transfer and Assignment of Shares (as amended by letter
agreement dated November 15, 2004, the "Purchase Agreement") with MobilePro
Corp., its wholly owned subsidiary, Davel Acquisition, Inc. (together with
MobilePro Corp., "MobilePro") and the Company. Under the Purchase Agreement,
MobilePro acquired from the secured lenders 100% of the Company's senior secured
debt in the approximate principal amount of $102 million, a $1.3 million note
payable by the Company to one of the secured lenders, and approximately 95.2% of
the Company's issued and outstanding common stock owned by the secured lenders,
for a cash purchase price of $14.0 million and warrants to purchase 5,000,000
shares of MobilePro common stock (the "MobilePro Transaction"). Pursuant to the
terms of the Purchase Agreement, subject to certain limitations, the secured
lenders have agreed to reimburse the Company for the litigation costs and any
losses resulting from a patent infringement lawsuit in which the Company is
named as a defendant. Reimbursements will be limited to amounts deposited to a
third party escrow account that will be funded from future Regulatory Receipts
assigned to the former secured lenders pursuant to the Exchange Agreement.
Additionally, the Company and the secured lenders have mutually agreed to
release each other from any and all existing claims, other than those existing
as a result of the Exchange Agreement. The closing of the MobilePro Transaction
occurred on November 15, 2004 and resulted in a change in control of the Company
as further described in Item 5.01.
Provision was also made in the Purchase Agreement for the holders of the
Company's common stock other than the secured creditors (the "Minority
Stockholders"), whose holdings comprise approximately 4.8% of the outstanding
Davel stock. MobilePro has agreed to purchase all of the shares of common stock
held by the Minority Stockholders within 180 days of the closing date of the
MobilePro Transaction. The purchase price to be offered to the Minority
Stockholders shall be an amount per share of not less than $0.015, which, at the
discretion of MobilePro, may be paid in cash or securities of MobilePro. The
form of such purchase could be through a tender offer, a short-form merger, or
some other means as MobilePro may determine. Prior to undertaking the purchase,
MobilePro must retain an investment banker or other financial advisor to render
an opinion that the terms of the purchase are fair, from a financial point of
view, to the Minority Stockholders. MobilePro has deposited into a third-party
escrow account at the closing of the transaction $450,000 of the purchase price,
which is the approximate amount necessary to purchase for $0.015 per share the
shares of Davel common stock currently held by the Minority Stockholders. In the
event that the purchase is not made within 180 days of the closing of the
MobilePro Transaction, the amount held in escrow would be distributed pro rata
to the Minority Shareholders as a special distribution from MobilePro.
MobilePro funded the purchase price paid pursuant to the Purchase Agreement from
the proceeds of a $15.2 million secured note payable to Airlie Opportunity
Master Fund, Ltd. (the "MobilePro Credit Agreement"). Immediately following the
closing of the MobilePro Transaction, the Company executed a joinder agreement
with Airlie Opportunity Master Fund, Ltd. in which the Company has agreed to
become jointly and severally liable with MobilePro under the MobilePro Credit
Agreement. The MobilePro Credit Agreement has become secured by substantially
all of the assets of the Company and is senior in right of payment to the
Credit Agreement pursuant to a security agreement executed by MobilePro. In
addition, the Company and its subsidiaries have agreed to guarantee certain
other loans in the amount of $13.2 million owed by MobilePro to Cornell Capital
Corporation.
The MobilePro Credit Agreement provides for an initial principal payment of $2.2
million which is to be paid by MobilePro following the closing of the MobilePro
Transaction. Interest on the outstanding principal balance is payable quarterly
in arrears at an annual rate of 15%. In addition, the MobilePro Credit Agreement
provides for payment-in-kind interest at a rate of 8% per annum which is added
to principal on a quarterly basis and is payable at maturity, along with the
outstanding principal balance, on November 15, 2005. MobilePro also has the
option to extend the maturity date of the note for an additional six months upon
payment of the lesser of (i) $1,315,582 or (ii) a 1.5% loan extension fee and
accelerated payment of the next two quarterly cash interest payments.
On November 15, 2004, the Company and MobilePro executed an amendment to the
Credit Agreement (the "Fourth Amendment"). MobilePro acquired the interest in
the Credit Agreement in connection with the MobilePro Transaction outlined
above. As of September 30, 2004, the Company was not in compliance with the
minimum EBITDA and Adjusted EBITDA covenants, as defined in the Credit
Agreement, and did not make the scheduled monthly payments of $100,000 each due
on October 1 and November 1, 2004. The Fourth Amendment waived all financial
covenant and payment defaults through November 15, 2004.
On November 15, 2004, the Company and MobilePro executed an amendment to the
Subordinated Promissory Note and Security Agreement dated November 17, 1999 (the
"Promissory Note"). MobilePro acquired the interest in the Promissory Note from
Cerberus Partners, LP in connection with the MobilePro Transaction outlined
above. The amendment of the $1.3 million Promissory Note extended the maturity
date of the note until September 29, 2005.
ITEM 5.01 CHANGE IN CONTROL OF REGISTRANT
On November 15, 2004, the Registrant completed the closing of the MobilePro
Transaction described in Item 1.01. In connection with the MobilePro
Transaction, MobilePro acquired approximately 95.2% of the Registrant's issued
and outstanding common stock previously owned by its secured creditors, which
resulted in a change in control of the Company.
The common stock acquired by MobilePro was owned by Wells Fargo Foothill, Inc.,
Foothill Partners III, L.P., AbleCo Finance LLC, Cerberus Partners, L.P., ARK
CLO 2000-1, Limited, PNC Bank, National Association, U.S. Bank National
Association, BNP Paribas, Morgan Stanley Prime Income Trust and Avenue Special
Situations Fund II, LP. Certain of the foregoing stockholders may be deemed to
have a material relationship with the Registrant due to their dual status as
secured lenders and as holders of more than 5% of the common stock of the
Registrant, determined as of March 19, 2004. These entities include ARK CLO
2000-1, Limited, which beneficially owned 53,621,855 shares of common stock of
the Registrant, or 8.72% of such class; Cerberus Partners, L.P., which is the
general partner of secured lender AbleCo Finance LLC, and is the holder of
225,907,083 shares of common stock of the Registrant, or 36.73% of such class;
Wells Fargo Foothill, Inc., which beneficially owned 76,747,150 shares of common
stock of the Registrant, or 12.48% of such class; and Foothill Partners III,
L.P., which beneficially owned of 76,747,150 shares of common stock of the
Registrant, or 12.48% of such class.
ITEM 5.02 RESIGNATION OF DIRECTORS - PRINCIPAL OFFICERS
Upon the closing of the MobilePro Transaction on November 15, 2004, as described
in Item 1.01, Andrew Barrett, James Chapman and Kevin Genda tendered their
resignations from the Board of Directors of Davel. Woody McGee remained a member
of the Board of Directors and Chief Executive Officer. Immediately following the
closing of the MobilePro Transaction, Jay O. Wright, Kurt Gordon, Kevin D.
Kuykendall and Geoffrey B. Amend were appointed to serve as directors of Davel.
Mr. Wright is a director of MobilePro and Messrs. Wright, Gordon, Kuykendall and
Amend are also officers of MobilePro. Geoffrey B. Amend was also named as the
Company's Executive Vice President.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 19, 2004
DAVEL COMMUNICATIONS, INC.
By: /S/ DONALD L. PALIWODA
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Name: Donald L. Paliwoda
Title: Chief Financial Officer
EXHIBIT LIST
Exhibit
No. Description
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10.1 Letter Agreement entered into as of November 15, 2004 by and among MobilePro Corp., its wholly-owned
subsidiary Davel Acquisition Corp., and certain stockholders of the Company
10.2 Escrow Agreement entered into as of November 15, 2004, by and among MobilePro Corp, Davel
Communications, Inc., certain stockholders of Davel Communications, Inc., Wells
Fargo Foothill, Inc. and Mellon Investor Services LLC
10.3 Second Amended and Restated Escrow Agreement entered into as of November 15, 2004, by and among
MobilePro Corp, MobilePro Acquisition Corp., Davel Communications, Inc., certain
stockholders of Davel Communications, Inc., Wells Fargo Foothill, Inc. and Mellon
Investor Services, LLC
10.4 Mutual Release entered into as of November 15, 2004, by and between Davel Communications, Inc. and
the person and entities listed on Exhibit A thereto
10.5 Agreement to Exchange Indebtedness for Personal Property entered into as of November 11, 2004, by and
among Davel Communications, Inc., Davel Financing Company, LLC, PhoneTel
Technologies, Inc., Cherokee Communications, Inc., each of the lenders under the
Amended Restated and Consolidated Credit Agreement and Wells Fargo Foothill,
Inc., as agent for the Lenders
10.6 Fourth Amendment and Waiver to Amended, Restated and Consolidated Credit Agreement entered into as of
November 15, 2004, by and among Davel Financing Company, LLC, PhoneTel
Technologies, Inc., Cherokee Communications, Inc., each of the guarantors under
the Amended, Restated and Consolidated Credit Agreement and MobilePro Acquisition
Corp.
10.7 First Amendment to Subordinated Promissory Note and Security Agreement entered into as of November
15, 2004, by and among PhoneTel Technologies, Inc., Cherokee Communications,
Inc., and Davel Acquisition Corp. as a successor in interest to Cerberus
Partners, LP
10.8 Credit Agreement entered into as of November 15, 2004, by and among MobilePro Corp., Davel Acquisition
Corp., and Airlie Opportunity Master Fund, Ltd.
10.9 Joinder Agreement dated as of November 15, 2004, among (A) MobilePro Corp. and Davel Acquisition
Corp., (B) Davel Communications, Inc., Davel Financing Company, LLC, PhoneTel
Technologies, Inc., Cherokee Communications, Inc., Davel Communications Group,
Inc., Adtec Communications, Inc., Central Payphone Services, Inc., Communications
Central, Inc., Communications Central of Georgia, Inc., Davel Media, Inc., Davel
Mexico, Ltd., Daveltel, Inc., Interstate Communications, Inc., Invision Telecom,
Inc., Peoples Acquisition Corporation, Peoples Collectors, Inc., Peoples
Telephone Company, Inc. (NY), Peoples Telephone Company, Inc. (NH), PTC Cellular, Inc.,
PTC Security Systems, Inc., Silverado Communication Corp., Telaleasing Enterprises,
Inc. and T.R.C.A., Inc. and (C) Airlie Opportunity Master Fund, Ltd.
10.10 Security Agreement dated as of November 15, 2004, by and among (A) Davel Communications, Inc.,
(B) Davel Financing Company, LLC (C) PhoneTel Technologies, Inc., and (D)
Cherokee Communications, Inc., and (E) Airlie Opportunity Master Fund, Ltd. and
(F) Cornell Capital Partners, L.P.
10.11 Guaranty Agreement dated as of November 15, 2004, made by each of the corporations and other
Persons who have executed this Guaranty on the signature page below, as one of the "Existing
MobilePro Subsidiaries" in favor of Airlie Opportunity Master Fund, Ltd. and Cornell Capital
Partners, L.P.