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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
August 1, 2000
Date of Report (Date of earliest event reported)
CHOICE ONE COMMUNICATIONS INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-29279 16-1550742
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(State of other jurisdiction (Commission (IRS Employer
of incorporation or File No.) Identification No.)
organization)
100 Chestnut Street, Suite 700, Rochester, New York 14604
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(Address of principal executive offices and zip code)
(716) 246-4231
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of US Xchange, Inc.
On August 1, 2000, Choice One Communications Inc. (the "Company")
consummated the merger pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") (which was filed as Exhibit 99.2 to the Company's 8-K/A dated May
14, 2000) with US Xchange, Inc., a Delaware corporation ("US Xchange"), and the
stockholder of US Xchange, pursuant to which US Xchange merged with and into
Barter Acquisition Corporation, a wholly owned subsidiary of the Company (the
"Merger").
The Company issued approximately 6.74 million shares of its common stock
and paid approximately $303 million in net cash pursuant to the merger. The
Company granted registration rights to the holder of the shares of its common
stock issued in the Merger for the registration of such shares under the
Securities Act of 1933. The shareholder of US Xchange also received the right
to designate a representative to the Company's Board so long as he continues to
own at least 4.5 million shares of the Company's common stock, pursuant to an
amendment to the existing transaction agreement among the Company and its
principal management and institutional investors.
To finance the Merger, the Company entered into a $350 million Second
Amended and Restated Credit Agreement with First Union Investors Inc., as
Administrative Agent, General Electric Capital Corporation, as Syndication
Agent, and Morgan Stanley Senior Funding, Inc., as Documentation Agent,
approximately $145 million of which was used for the acquisition. In addition,
the Company issued to Morgan Stanley Dean Witter Capital Partners IV, L.P. and
related limited partnerships 200,000 shares of Series A Senior Cumulative
Preferred Stock, along with warrants to purchase 1,747,454 shares of common
stock of the Company at an exercise price of $.01 per share. The Company and
its principal management and institutional investors entered into an amendment
to their existing registration rights agreement in connection with the preferred
stock financing.
In addition, the Company entered into a $180 million Bridge Financing
Agreement with Morgan Stanley Senior Funding Inc. to finance additional market
expansion. As of August 1, 2000, the Company had not borrowed any money under
that facility.
Attached as Exhibit 99.1 is a press release issued by the Company dated
August 1, 2000 with respect to the Merger and related financings, which is
incorporated by reference herein.
Certain statements contained in this Current Report on Form 8-K are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and the Company intends that such forward-looking
statements be subject to the safe harbors created thereby. The words
"believes", "expects", "estimates", "anticipates", "will be" and "plans" and
similar words or expressions identify forward-looking statements made by or on
behalf of the Company. These forward-looking statements are subject to many
uncertainties and factors that may cause the actual results of the Company to be
materially different from any future results expressed or implied by such
forward-looking statements. Examples of such uncertainties and factors include,
but are not limited to, availability of financing and regulatory approvals, the
number of potential customers in a target market, the existence of strategic
alliances or
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relationships, technological, regulatory or other developments in
the Company's business, changes in the competitive climate in which the Company
operates and the emergence of future opportunities, all of which could cause
actual results and experiences of the Company to differ materially from
anticipated results and expectations expressed in the forward-looking statements
contained herein. These and other applicable risks are summarized under the
caption "Risk Factors" and elsewhere in the Company's Registration Statement on
Form S-1, Registration No. 333-91321, filed with the Securities and Exchange
Commission and declared effective on February 16, 2000.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of US Xchange, Inc. will be filed by an amendment to
this report, which amendment the Company expects to file on September 15,
2000.
(b) Pro Forma Financial Information will be filed by an amendment to this
report, which amendment the Company expects to file on September 15, 2000.
(c) Exhibits.
2.1 Agreement and Plan of Merger, dated as of May 14, 2000, among the
Company, US Xchange, Inc. and Barter Acquisition Corporation,
incorporated by reference to Exhibit 99.2 to the Company's Form 8-K/A
filed May 16, 2000.
3.1 Amended and Restated Certificate of Incorporation of the Company
incorporated by reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-1, (Commission file number 333-91321) and the
attached Certificate of Designations for the Choice One Communications
Inc. Series A Senior Cumulative Preferred Stock.
10.1 Amendment No. 4 to the Registration Rights Agreement dated as of
August 1, 2000 to the Registration Rights Agreement dated as of July
8, 1998 among Choice One Communications Inc., the Investor Holders and
the Management Holders.
10.2 Amendment No. 7 to the Transaction Agreement dated as of August 1,
2000 to the Transaction Agreement dated as of July 8, 1998 among
Choice One Communications, L.L.C. and holders of Investor Equity and
Management Equity.
10.3 Bridge Financing Agreement dated as of August 1, 2000 among Choice
One Communications Inc., the lender parties hereto and Morgan Stanley
Senior Funding Inc., as Administrative Agent, Morgan Stanley Senior
Funding, Inc., as Arranger and Book Runner.
10.4 Warrant No. 1 to purchase 1,570,907 shares of Common Stock of Choice
One Communications Inc.
10.5 Warrant No. 2 to Purchase 133,670 shares of Common Stock of Choice
One Communications Inc.
10.6 Warrant No. 3 to Purchase 42,877 shares of Common Stock of Choice One
Communications Inc.
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10.7 Securities Purchase Agreement dated as of August 1, 2000 among Morgan
Stanley Dean Witter Capital Partners IV, L.P., MSDW IV 892 Investors,
L.P., Morgan Stanley Dean Witter Capital Investors IV, and Choice One
Communications Inc. relating to the purchase and sale of securities of
Choice One Communications Inc.
10.8 Second Amended and Restated Credit Agreement, dated as of August 1,
2000, by and among Choice One Communications Inc., a Delaware
corporation, as Guarantor, its Subsidiaries listed on the signature
pages hereto and any additional Subsidiaries joined hereto, as
Borrowers, the Lenders who are or may become a party to this
Agreement, First Union Investors Inc., as Administrative Agent,
General Electric Capital Corporation, as Syndication Agent and Morgan
Stanley Senior Funding, Inc., as Documentation Agent.
10.9 Fiber Optic Agreement and Grant of IRU dated August 1, 2000, by and
between Choice One Communications Inc., and RVP Fiber Company, L.L.C.
10.10 Form of Executive Employment Agreement between former executives of
US Xchange, Inc. and Choice One Communications Inc.
99.1 Press Release, dated August 1, 2000, announcing the Company's
execution of a definitive agreement to acquire US Xchange.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHOICE ONE COMMUNICATIONS INC.
Dated: August 11, 2000 By: /s/ Ajay Sabherwal
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Name: Ajay Sabherwal
Title: Senior Vice President-Finance and
Chief Financial Officer
