Exhibit 10.5
AGREEMENT TO EXCHANGE INDEBTEDNESS
FOR PERSONAL PROPERTY
This AGREEMENT TO EXCHANGE INDEBTEDNESS FOR PERSONAL PROPERTY (the "AGREEMENT")
is entered into as of November 11, 2004, by and among DAVEL COMMUNICATIONS,
INC., a Delaware corporation (the "COMPANY"), DAVEL FINANCING COMPANY, L.L.C., a
Delaware limited liability company ("DAVEL FINANCING CO."), PHONETEL
TECHNOLOGIES, INC., an Ohio corporation ("PHONETEL") and CHEROKEE
COMMUNICATIONS, INC., a Texas corporation ("CHEROKEE," and collectively with the
Company, Davel Financing Co., PhoneTel and their subsidiaries that are parties
to the Credit Agreement identified below, the "CREDIT PARTIES"), each of the
lenders under the Amended, Restated and Consolidated Credit Agreement as listed
on Exhibit A hereto (collectively, the "LENDERS"), and Wells Fargo Foothill,
Inc., a California corporation, as agent for the Lenders ("AGENT").
RECITALS
A. The parties hereto have previously entered into (i) that certain
Amended, Restated and Consolidated Credit Agreement dated as of July
24, 2002 by and among Davel Financing Company, L.L.C., PhoneTel
Technologies, Inc., Cherokee Communications, Inc., Davel
Communications, Inc., the domestic subsidiaries of each of the
foregoing and Foothill Capital Corporation, as Agent, and the lenders
set forth therein, as amended by the First Amendment and Waiver to
Amended, Restated, and Consolidated Credit Agreement dated as of March
31, 2003, the Second Amendment and Waiver to Amended, Restated and
Consolidated Credit Agreement dated as of February 24, 2004, and the
Third Amendment and Waiver to Amended, Restated and Consolidated Credit
Agreement dated as of August 11, 2004 (collectively, the "CREDIT
AGREEMENT"), (ii) that certain Amended, Restated, and Consolidated
Security Agreement dated as of July 24, 2002 by and among Davel
Financing Company, L.L.C., PhoneTel Technologies, Inc., Cherokee
Communications, Inc., Davel Communications, Inc., the domestic
subsidiaries of each of the foregoing and Foothill Capital Corporation,
as Agent, and the lenders set forth therein (the "SECURITY AGREEMENT")
and (iii) all of the other documents, instruments and agreements
between the Company and the Selling Stockholders or made by the Company
for the benefit of the Selling Stockholders to evidence or secure the
obligations of the Company under the Credit Agreement (collectively and
with the Credit Agreement and Security Agreement, the "LOAN
DOCUMENTS"). Capitalized terms used but not defined in this Agreement
have the meanings given them in the Credit Agreement.
B. The loans made by the Lenders to the Credit Parties pursuant to the
Credit Agreement include Term Loan A, which has an outstanding
principal balance as of the date hereof in the amount of $61,262,550.76
and Term Loan B, which has an outstanding principal balance as of the
date hereof in the amount of $59,319,870.37. The obligations of the
Credit Parties in respect of the foregoing loans and otherwise under
the Loan Documents is referred to collectively as the "COMPANY DEBT."
C. The Credit Parties have requested that the Lenders forgive, and the
Lenders have agreed to forgive, $18,000,000 of the outstanding
principal balance of the Company Debt in exchange for the absolute
assignment of certain payments claimed by the Credit Parties in the
same amount.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and upon the terms and conditions set forth
herein, the Credit Parties, the Lenders and the Agent hereby agree as follows:
1. ASSIGNMENT OF REGULATORY RECEIPTS; EXCHANGE OF INDEBTEDNESS.
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1.1 By its execution of this Agreement and in exchange for the
forgiveness of indebtedness in the aggregate amount of $18,000,000, the Credit
Parties hereby irrevocably sell, transfer and assign to the Lenders Regulatory
Receipts to be collected by the Company in the aggregate amount of $18,000,000
(the "ASSIGNED REGULATORY RECEIPTS"). The parties intend that the foregoing
transfer of the Assigned Regulatory Receipts is, and this Agreement shall be
construed to effect, a sale of such Assigned Regulatory Receipts and not merely
an assignment for security. For purposes of this Agreement, the term "REGULATORY
RECEIPTS" means any and all payments (net of reasonable costs of recovery,
including, without limitation, reasonable attorneys' fees) received by the
Company or any of the other Credit Parties from any judgment or settlement with
respect to, or otherwise in connection with, those regulatory actions commonly
referred to as the Dial-Around Compensation Recovery Proceedings, the New
Service Test Proceedings and the End User Common Line Charge Proceedings. The
parties acknowledge and agree that "Regulatory Receipts" do not include the
underlying regulatory claims or actions that may give rise to the right of the
Company or any other Credit Party to receive payment of Regulatory Receipts
(collectively, the "REGULATORY ACTIONS"). All Regulatory Actions remain the
property of the Credit Parties.
1.2 By its execution of this Agreement, the Lenders hereby purchase and
take assignment of the Assigned Regulatory Receipts from the Credit Parties in
an aggregate amount of $18,000,000, and forgive Company Debt in the aggregate
amount of $18,000,000 effective as of the date hereof. Accordingly, the
outstanding principal amount of Term Loan B is hereby reduced to $41,319,870.37.
1.3 The Assigned Regulatory Receipts shall include all Regulatory
Receipts actually received by any of the Credit Parties from and after the date
of this Agreement until the total amount of Regulatory Receipts remitted to the
Lenders hereunder equals $18,000,000. Each of the Lenders acknowledges and
agrees that it shall have no rights in or claims to Regulatory Receipts in
excess of $18,000,000.
2. COLLECTION AND PAYMENT.
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2.1 The Company, for itself and on behalf of any other Credit Party
with an interest in any Regulatory Action, shall use all commercially reasonable
efforts to pursue the Regulatory Actions with the intended purpose of maximizing
the amount of Regulatory Receipts collected.
2.2 It is the intent of the parties that the Company shall also collect
any resulting payments in respect of judgments or settlements of such Regulatory
Actions, and to the extent
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such payments constitute Assigned Regulatory Receipts, the Company's collection
activities shall be undertaken on behalf of the Lenders. In furtherance of the
parties' intent, the Lenders hereby appoint the Company as its fiscal agent to
collect and receive the Assigned Regulatory Receipts and to deliver the Assigned
Regulatory Receipts to the Lenders. The Company shall proceed diligently using
all commercially reasonable efforts to collect the Assigned Regulatory Receipts
on behalf of the Lenders until the Assigned Regulatory Receipts are paid to the
Lenders in full. In addition, in the event that the Lenders are dissatisfied
with the Company's efforts to collect the Assigned Regulatory Receipts and
prosecute the Regulatory Actions, a majority-in-interest of the Lenders shall
have the right to appoint a representative (the "Representative"), who shall be
reasonably acceptable to the Company, to assist the Company in collecting the
Assigned Regulatory Receipts and prosecuting the Regulatory Actions, and the
Company shall take all commercially reasonable actions to collect the Assigned
Regulatory Receipts and prosecute the Regulatory Actions as the Representative
shall recommend.
2.3 Promptly following the payment to the Company (or any of the other
Credit Parties) of any Assigned Regulatory Receipts, but in any event within
five business days, the Company shall deliver the Assigned Regulatory Receipts
to each of the Lenders by wire transfer in accordance with the allocations set
forth on Exhibit A to this Agreement. Wire transfers shall be made pursuant to
the respective wire transfer instructions for each of the Lenders set forth on
Exhibit A to this Agreement. The Company and the other Credit Parties
acknowledge and agree that all Assigned Regulatory Receipts collected by the
Company shall be held in trust for the Lenders, subject at all times to the
Lenders' rights hereunder, until delivered to the Lenders as set forth herein.
2.4 The Company shall provide to the Lenders a quarterly report as to
the status of the Regulatory Actions and the collection of the Assigned
Regulatory Receipts, as well as such additional information with respect thereto
as may be reasonably requested by the Lenders from time to time.
2.5 The Credit Parties shall not take any action that would materially
adversely affect the Lenders' right to receive payment of the Assigned
Regulatory Receipts as set forth herein.
2.6 The Lenders' right to receive the Assigned Regulatory Receipts and
the covenants of the Credit Parties set forth herein in furtherance of such
right shall be binding on the successors and assigns of each of the Credit
Parties.
3. LIMITATION. Neither the Company nor any other Credit Party guarantees that
the aggregate amount of Regulatory Receipts collected by the Company from and
after the date hereof will be $18,000,000. None of the Credit Parties shall be
liable to the Lenders for any difference between the amount of Regulatory
Receipts actually collected and the Assigned Regulatory Receipts, provided that
the Company undertakes to collect the Regulatory Receipts in accordance with the
standards set forth in Section 2 of this Agreement.
4. TERM. This Agreement and the appointment of the Company as fiscal agent shall
continue until the earlier of (a) the aggregate amount of Assigned Regulatory
Receipts delivered to the Lender equals $18,000,000; or (b) all Regulatory
Actions have been finally resolved or
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settled and there is no reasonable likelihood that additional Regulatory
Receipts will be paid to any of the Credit Parties.
5. CONFIDENTIALITY. Each of the Lenders recognizes that it may receive
confidential information concerning the Credit Parties under this Agreement.
Accordingly, each Lender agrees (a) to use its respective reasonable best
efforts to prevent the unauthorized disclosure of any confidential information
concerning the Credit Parties that was or is disclosed during the term of this
Agreement and (b) to not make use of or permit to be used any such confidential
information other than for the purpose of enforcing the Lenders' rights
hereunder. Notwithstanding the preceding sentence, the Lenders may share such
confidential information with such of their employees, agents, consultants,
advisors and other representatives, as they shall engage to evaluate the
Company's collection of the Assigned Regulatory Receipts and prosecution of the
Regulatory Actions. The obligations of this section will not apply to
information that (i) is or becomes part of the public domain, (ii) is disclosed
by the disclosing party to third parties without restrictions on disclosure,
(iii) is received by the receiving party from a third party without breach of a
nondisclosure obligation to the other party or (iv) is required to be disclosed
by law. Upon the expiration or other termination of this Agreement, all copies
of documents containing confidential information shall be returned by the
Lenders to the Company; provided that any document that a Lender is required by
law to retain in its records may be retained subject to the continuing
obligation that it be maintained confidential. The obligations of the Lenders
under this Section 5 shall survive as to each disclosure of confidential
information for a period of two (2) years following the date of such disclosure.
6. NOTICES. Any notice or other communication required or permitted to be given
under this Agreement shall be in writing, will be delivered (i) upon receipt,
when delivered personally, (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party), or (iii) one (1) business day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same, to the following addresses (or to
such other address as a party may have furnished to the other parties in writing
pursuant to this Section 6):
6.1 If to the Company:
Davel Communications
200 Public Square
Suite 700
Cleveland, OH 44114
Attention: President
With a copy (which will not constitute notice) to:
Hahn Loeser & Parks LLP
3300 BP Tower
200 Public Square
Cleveland, Ohio 44114
Attention: F. Ronald O'Keefe, Esq.
Facsimile: 216) 241-2824
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6.2 If to the Lenders, to the names and addresses for each Lender as
set forth in Exhibit A to this Agreement or as subsequently provided by such
Lender to the other parties in writing.
7. MISCELLANEOUS.
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7.1 Governing Law. The internal laws of the State of Delaware
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
7.2 Assignment; Binding Upon Successors and Assigns. No party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other parties hereto. This Agreement will be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
7.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the economic, business and
other purposes of the void or unenforceable provision.
7.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument.
7.5 Amendment and Waivers. Any term or provision of this Agreement may
be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party or parties to be bound
thereby. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default.
7.6 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. This provision shall survive the
closing of the Transactions contemplated by this Agreement.
7.7 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including without limitation, costs, expenses and fees on
any appeal). The prevailing party will be entitled to recover its costs of suit,
regardless of whether such suit proceeds to final non-appealable judgment.
7.8 Construction of Agreement. This Agreement has been negotiated by
the respective parties hereto and their attorneys and the language hereof will
not be construed for or against any party. A reference to a Section or an
Exhibit will mean a Section in, or Exhibit to, this Agreement unless otherwise
explicitly set forth. The titles and headings herein are for
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reference purposes only and will not in any manner limit the construction of
this Agreement which will be considered as a whole.
7.9 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
[Signature pages begin on next page.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY:
DAVEL COMMUNICATIONS, INC.
By: /S/ WOODY M. MCGEE
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Name: Woody M. McGee
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Title: President
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[THE OTHER CREDIT PARTIES:]
PHONETEL TECHNOLOGIES, INC.,
an Ohio corporation
By: /S/ WOODY M. MCGEE
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Name: Woody M. McGee
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Title: President
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CHEROKEE COMMUNICATIONS, INC.,
a Texas corporation
By: /S/ WOODY M. MCGEE
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Name: Woody M. McGee
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Title: President
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DAVEL COMMUNICATIONS GROUP, INC.,
an Illinois corporation
ADTEC COMMUNICATIONS, INC.,
a Florida corporation
CENTRAL PAYPHONE SERVICES, INC.,
a Georgia corporation
COMMUNICATIONS CENTRAL, INC.,
a Georgia corporation
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COMMUNICATIONS CENTRAL OF GEORGIA, INC.,
a Georgia corporation
DAVEL MEDIA, INC.,
a Delaware corporation
DAVEL MEXICO, LTD.,
an Illinois corporation
DAVELTEL, INC.,
an Illinois corporation
INTERSTATE COMMUNICATIONS, INC.,
a Georgia corporation
INVISION TELECOM, INC.,
a Georgia corporation
PEOPLES ACQUISITION CORPORATION,
a Pennsylvania corporation
PEOPLES COLLECTORS, INC.,
a Delaware corporation
PEOPLES TELEPHONE COMPANY, INC.,
a New York corporation
PEOPLES TELEPHONE COMPANY, INC.,
a New Hampshire corporation
PTC CELLULAR, INC.,
a Delaware corporation
PTC SECURITY SYSTEMS, INC.,
a Florida corporation
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SILVERADO COMMUNICATIONS CORP.,
a Colorado corporation
TELALEASING ENTERPRISES, INC.,
an Illinois corporation
T. R. C. A., INC.,
an Illinois corporation
By: /S/ WOODY M. MCGEE
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Name: Woody M. McGee
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Title: President
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AGENT:
WELLS FARGO FOOTHILL, INC.
By: /S/ AMY LAM
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Name: Amy Lam
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Title: Vice President
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FOOTHILL PARTNERS III, L.P.
By: /S/ DENNIS R. ASCHER
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Name: Dennis R. Ascher
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Title: Managing General Partner
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ABLECO FINANCE LLC
By: /s/ Kevin Genda
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Name: Kevin Genda
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Title: S. V. P.
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CERBERUS PARTNERS, L.P.
By: Cerberus Associates, LLC, as General Partner
By: /s/ Kevin Genda
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Name: Kevin Genda
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Title: Managing Director
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ARK CLO 2000-1, LIMITED
By: Patriarch Partners, LLC
its Collateral Manager
By: /S/ LYNN TILTON
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Name: Lynn Tilton
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Title: Manager
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PNC BANK, NATIONAL ASSOCIATION
By: /S/ FRANK P. DEVINE
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Name: Frank P. Devine
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Title: Vice President
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U.S. BANK NATIONAL ASSOCIATION
By: /S/ JAMES P. CECIL
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Name: James P. Cecil
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Title: Vice President
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BNP PARIBAS
By: /S/ BROCK T. HARRIS /S/ FLETCHER DUKE
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Name: Brock T. Harris Fletcher Duke
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Title: Director Director
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MORGAN STANLEY PRIME INCOME
TRUST
By: /S/ KEVIN EGAN
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Name: Kevin Egan
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Title: Vice President
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AVENUE SPECIAL SITUATIONS FUND II, LP
By: /S/ SONIA E. GARDNER
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Name: Sonia E. Gardner
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Title: Member
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By: Avenue Capital Partners II, LLC, General
Partner
By: GL Partners II, LLC, Managing Member of
the General Partner
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