<PAGE>
=============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission File Number: 333-22025
DAKOTA TELECOMMUNICATIONS GROUP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE APPLIED FOR
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
and
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
SOUTH DAKOTA 46-0234208
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
29705 453RD AVENUE (605) 263-3301
IRENE, SOUTH DAKOTA 57037-0066 (Issuer's Telephone Number,
(Address of Principal Executive Offices) Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes _____ No __X__
There were 100 shares of Dakota Telecommunications Group, Inc. Common
Stock, without par value, outstanding as of June 30, 1997.
<PAGE>
There were 5,199 shares of Dakota Cooperative Telecommunications, Inc.
Common Stock, $5 par value, outstanding as of June 5, 1997.
Transitional Small Business Disclosure Format (check one):
Yes _____ No __X__
=============================================================================
<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC.
INDEX
- -----------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION PAGE NO.
Introductory Explanation. . . . . . . . . . . . . . . . . . . . . . 3
Item 1. FINANCIAL STATEMENTS
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet -
June 30, 1997 (Unaudited) and December 31, 1996 . . . . 5
Consolidated Statements of Operations -
Three Months Ended June 30, 1997 (Unaudited) and
1996 (Unaudited). . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Operations -
Six Months Ended June 30, 1997 (Unaudited) and
1996 (Unaudited). . . . . . . . . . . . . . . . . . . . 7
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 (Unaudited) and
1996 (Unaudited). . . . . . . . . . . . . . . . . . . . 8
Notes to Consolidated Financial Statements (Unaudited) . 9-12
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
Unaudited PRO FORMA Consolidated Balance Sheet -
June 30, 1997 . . . . . . . . . . . . . . . . . . . . . 13
Unaudited PRO FORMA Condensed Consolidated Statement of
Operations - Three Months Ended June 30, 1997 . . . . 14
Unaudited PRO FORMA Condensed Consolidated Statement of
Operations - Six Months Ended June 30, 1997 . . . . . . 15
Notes to the Unaudited PRO FORMA Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . . . . 16
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 17
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 24
Item 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . 24
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . 24
Item 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . 25
SIGNATURES. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 29
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<PAGE>
PART I. FINANCIAL INFORMATION
INTRODUCTORY EXPLANATION
On February 19, 1997, Dakota Telecommunications Group (Delaware),
Inc. (the "Company") and Dakota Cooperative Telecommunications, Inc. (the
"Cooperative") filed a Registration Statement on Form S-4 (Registration
Statement No. 333-22025) (the "Registration Statement") with respect to the
proposed conversion of the Cooperative into a South Dakota business
corporation (the "Conversion") and the proposed merger of the resulting
South Dakota business corporation with and into the Company (the "Merger").
The description of the Conversion set forth under the heading "The
Conversion" in the Registration Statement is here incorporated by
reference. The description of the Merger set forth under the heading "The
Merger" in the Registration Statement is here incorporated by reference.
At a special meeting of the members of the Cooperative held on July
21, 1997, the members of the Cooperative voted to approve and adopt the
amendment to the articles of incorporation of the Cooperative to effect the
Conversion. The Conversion became effective on July 22, 1997. In the
Conversion, (i) each share of common stock, $5 par value, of the Cooperative
issued and outstanding immediately prior to the effective time of the
Conversion became and was converted into the right to receive a validly
issued, fully paid and nonassessable share of common stock of the South
Dakota business corporation, (ii) each share of preferred stock, $100 par
value, of the Cooperative ("Preferred Stock") issued and outstanding
immediately prior to the effective time of the Conversion became and was
converted into the right to receive 80.8216445 validly issued, fully paid
and nonassessable shares of common stock of the South Dakota business
corporation and (iii) each dollar credited on the books of the Cooperative
to the capital account of each current and former member (a "Capital
Credit") immediately prior to the effective time of the Conversion was
retired in full and automatically became and was converted into the right
to receive 0.2 of a validly issued, fully paid and nonassessable share of
common stock of the South Dakota business corporation, all subject to
payment in cash for fractional shares.
Immediately following the special meeting of members of the
Cooperative, a special meeting of the shareholders of the resulting South
Dakota business corporation was held on July 21, 1997. At that meeting,
the shareholders of the South Dakota business corporation voted to approve
an Agreement and Plan of Merger pursuant to which the South Dakota business
corporation would be merged with and into the Company. In the Merger, each
right to receive a whole share of common stock of the South Dakota business
corporation issuable in the Conversion automatically became and was
converted into the right to receive one validly issued, fully paid and
nonassessable share of the Company's common stock, without par value. The
outstanding shares of common stock of the Company held by the South Dakota
business corporation were canceled in the Merger. The Merger became
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<PAGE>
effective on July 25, 1997. Pursuant to the Agreement and Plan of Merger,
the Company's name was changed to "Dakota Telecommunications Group, Inc."
Item 1. FINANCIAL STATEMENTS
Presented below are the following financial statements of the
Cooperative at June 30, 1997:
A. Consolidated Balance Sheets - June 30, 1997 (Unaudited) and
December 31, 1996.
B. Consolidated Statements of Operations - Three Months Ended
June 30, 1997 (Unaudited) and June 30, 1996 (Unaudited).
C. Consolidated Statements of Operations - Six Months Ended
June 30, 1997 (Unaudited) and June 30, 1996 (Unaudited).
D. Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1997 (Unaudited) and June 30, 1996 (Unaudited).
E. Notes to Consolidated Financial Statements (Unaudited).
In addition to the Cooperative's financial statements, the following PRO FORMA
financial statements of the Company are presented as if the Conversion and the
Merger had occurred on January 1, 1996:
A. Unaudited PRO FORMA Consolidated Balance Sheet - June 30,
1997.
B. Unaudited PRO FORMA Condensed Consolidated Statement of
Operations - Three Months Ended June 30, 1997.
C. Unaudited PRO FORMA Condensed Consolidated Statement of
Operations - Six Months Ended June 30, 1997.
D. Notes to the Unaudited PRO FORMA Condensed Consolidated
Financial Statements.
As of June 30, 1997 the Company had not acquired any operations
and had only $1,000 in cash assets and $1,000 in stated capital.
Therefore, no financial statements of the Company at June 30, 1997 are
presented.
-4-
<PAGE>
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
=============================================================================
<CAPTION>
ASSETS
JUNE 30, DECEMBER 31,
1997 1996
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,600,984 $ 2,121,444
Temporary Cash Investments 499,000 1,249,000
Accounts Receivable, Less Allowance for
Uncollectibles of $113,000 and $88,000 1,396,871 1,784,895
Deposits -- 274,889
Income Taxes Receivable 100,802 248,500
Materials and Supplies 1,511,220 694,097
Prepaid Expenses 255,218 168,078
------------ -------------
Total Current Assets 6,364,095 6,540,903
------------ -------------
INVESTMENTS AND OTHER ASSETS:
Excess of Cost Over Net Assets Acquired 1,769,587 1,830,959
Other Intangible Assets 571,607 509,559
Deposit 61,905 61,905
Other Investments 605,253 63,817
Deferred Charges 92,705 56,628
------------ -------------
Total Investments and Other Assets 3,101,057 2,522,868
------------ -------------
PROPERTY, PLANT AND EQUIPMENT, NET 18,121,786 14,441,104
------------ -------------
TOTAL ASSETS $ 27,586,938 $ 23,504,875
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
------------ -------------
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 1,730,000 $ 697,700
Accounts Payable 877,034 399,694
Other Current Liabilities 786,508 497,388
------------ -------------
Total Current Liabilities 3,393,542 1,594,782
------------ -------------
-5-
<PAGE>
LONG-TERM DEBT 18,434,818 15,338,395
------------ -------------
DEFERRED CREDITS 184,469 159,482
------------ -------------
STOCKHOLDERS' EQUITY:
Common Stock 26,135 26,185
Preferred Stock 1,172,000 1,172,000
Capital Credits 4,749,251 4,732,723
Retained Earnings (Accumulated Deficit) (373,277) 481,308
------------ -------------
Total Stockholders' Equity 5,574,109 6,412,216
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,586,938 $ 23,504,875
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-6-
<PAGE>
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
=============================================================================
<CAPTION>
JUNE 30, JUNE 30,
1997 1996
------------ -------------
<S> <C> <C>
REVENUES:
Local Network $ 308,591 $ 239,120
Network Access 1,024,618 679,090
Long Distance Network 797,084 464,016
Cable Television Service 391,218 263,545
Other 341,191 68,771
------------ -------------
Total Operating Revenues 2,862,702 1,714,542
------------ -------------
COSTS AND EXPENSES:
Plant Operations 836,051 351,709
Depreciation and Amortization 798,220 594,944
Customer 241,449 141,682
General and Administrative 1,242,550 379,039
Other Operating Expenses 319,312 226,155
------------ -------------
Total Operating Expenses 3,437,582 1,693,529
------------ -------------
OPERATING INCOME (LOSS) (574,880) 21,013
------------ -------------
OTHER INCOME (EXPENSES):
Interest and Dividend Income 103,913 82,018
Interest Expense (209,552) (138,979)
------------ -------------
Net Other Income (Expenses) (105,639) (56,961)
------------ -------------
LOSS BEFORE INCOME TAXES (680,519) (35,948)
INCOME TAX EXPENSE (BENEFIT) (23,597) 3,625
------------ -------------
NET LOSS $ (656,922) $ (39,573)
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-7-
<PAGE>
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
=============================================================================
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
REVENUES:
Local Network $ 615,502 $ 460,625
Network Access 1,907,168 1,368,176
Long Distance Network 1,569,376 949,190
Cable Television Service 780,520 477,159
Other 742,115 107,416
------------ -------------
Total Operating Revenues 5,614,681 3,362,566
------------ -------------
COSTS AND EXPENSES:
Plant Operations 1,653,873 728,961
Depreciation and Amortization 1,559,645 1,152,836
Customer 449,298 192,741
General and Administrative 1,960,731 766,876
Other Operating Expenses 649,111 419,528
------------ -------------
Total Operating Expenses 6,272,658 3,260,942
------------ -------------
OPERATING INCOME (LOSS) (657,977) 101,624
------------ -------------
OTHER INCOME AND (EXPENSES):
Interest and Dividend Income 151,985 150,284
Interest Expense (408,689) (282,297)
------------ -------------
Net Other Income and Expenses (256,704) (132,013)
------------ -------------
LOSS BEFORE INCOME TAXES (914,681) (30,389)
INCOME TAX EXPENSE (BENEFIT) (60,096) 9,125
------------ -------------
NET LOSS $ (854,585) $ (39,514)
============ =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-8-
<PAGE>
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
=============================================================================
<CAPTION>
JUNE 30, JUNE 30,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (854,585) $ (39,514)
Adjustments to Reconcile Net Loss to Net
Cash Provided By Operating Activities:
Depreciation and Amortization 1,559,645 1,152,836
Receivables 388,024 374,952
Income Taxes Receivable 147,698 --
Other Current Assets (87,140) (54,195)
Accounts Payable 477,340 18,922
Accrued Income Taxes -- (260,655)
Other Current Liabilities 131,900 229,180
Deferred Credits 24,987 33,016
----------- -----------
Net Cash Provided By Operating Activities 1,787,869 1,454,542
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property, Plant and Equipment, Net (5,159,245) (3,611,154)
Materials and Supplies (817,123) (424,442)
Purchase of Other Investments (541,436) --
Decrease (Increase) in Temporary Cash Investments 750,000 (749,000)
Decrease in Deposits 274,889 --
Purchase of Other Intangible Assets (81,759) (541,299)
Increase in Deferred Charges (36,077) (110,127)
----------- -----------
Net Cash Used In Investing Activities (5,610,751) (5,436,022)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt 2,500,000 3,623,270
Principal Payments of Long-Term Debt (442,256) (786,424)
Construction Contracts Payable 2,228,199 (282,787)
Retirement of Patronage Capital (5,519) (9,079)
Other 21,998 146
----------- -----------
Net Cash Provided by Financing Activities 4,302,422 2,545,126
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 479,540 (1,436,354)
-9-
<PAGE>
CASH AND CASH EQUIVALENTS at Beginning of Period 2,121,444 6,322,884
----------- -----------
CASH AND CASH EQUIVALENTS at End of Year $ 2,600,984 $ 4,886,530
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest Expense $ 405,312 $ 325,229
Income Taxes 18,000 272,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
-10-
<PAGE>
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
The balance sheets as of June 30, 1997 and December 31, 1996, statements of
operations for the three- and six-month periods ended June 30, 1997 and
1996 and the statements of cash flows for the six months ended June 30,
1997 and 1996 have been prepared by the Cooperative without audit. In the
opinion of management, all adjustments (consisting solely of normal
recurring accruals) necessary to present fairly the financial position,
results of operations and changes in cash flows have been made.
The Consolidated Financial Statements have been prepared in accordance with
the requirements of Item 310(b) of Regulation S-B and with the instructions
to Form 10-QSB. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
These condensed financial statements should be read in conjunction with the
financial statements and accompanying notes for the years ended December
31, 1996 and 1995. The results of operations for the three- and six-month
periods ended June 30, 1997 are not necessarily indicative of the operating
results to be expected for the year ending December 31, 1997.
NOTE 2 - ACQUISITIONS
In the first quarter of 1996, Dakota Telecom, Inc. purchased ten cable
service areas in two separate purchase transactions and one asset exchange
transaction. In the second quarter of 1996, Dakota Telecom, Inc. purchased
an additional nine cable service areas. Operations of the nineteen cable
service areas purchased are included in the consolidated statements of
operations for the three months ended June 30, 1996 and the six months
ended June 30, 1996 subsequent to their purchase. Operations of the
nineteen cable service areas are included in the consolidated statements of
operations for the three months ended June 30, 1997 and the six months
ended June 30, 1997.
In December 1996, the Company acquired I-Way Partners, Inc. and TCIC
Communications, Inc. in exchange for 1,172 shares of preferred stock valued
at $1,172,000. Operations of the companies acquired are included in the
consolidated statements of operations for the three months ended June 30,
1997 and the six months ended June 30, 1997.
-11-
<PAGE>
NOTE 3 - LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
6/30/97 12/31/96
------------ -------------
<S> <C> <C>
Rural Utilities Service ("RUS") mortgage notes:
2% payable in quarterly installments $ 2,468,512 $ 2,595,175
5% payable in monthly installments 10,599,768 10,756,343
------------ -------------
13,068,280 13,351,518
Rural Telephone Finance Cooperative ("RTFC")
Mortgage Note, matures 2006, variable
interest rate (6.65% at June 30, 1997) 1,472,603 1,537,537
Norwest Bank South Dakota, N.A. matures
May 1998, variable interest rate (prime plus
one percent, 9.5% at June 30, 1997)
payable upon maturity 330,000 330,000
Norwest Bank South Dakota, N.A. matures
May 1998, variable interest rate (prime plus
one percent, 9.5% at June 30, 1997)
payable upon maturity 650,469 650,469
Unsecured Note to a Preferred Shareholder,
matures May 1998, variable interest rate
(prime plus one percent, 9.5% at
December 31, 1996), payable upon maturity 45,000 45,000
RTFC variable rate (7.25% at June 30, 1997)
Lines of Credit:
$1,500,000 Limit Maturing May 2002 1,500,000 -
$7,000,000 Limit Maturing September 1997 1,000,000 -
Other - 4,661
Construction Contracts Payable 2,098,466 116,910
------------ -------------
20,164,818 16,036,095
Amount Due Within One Year (1,730,000) (697,700)
------------ -------------
Total Long-Term Debt $ 18,434,818 $ 15,338,395
============ =============
</TABLE>
-12-
<PAGE>
Substantially all telephone company assets are pledged as security for the
RUS mortgage notes. The RUS mortgage notes mature in 20 to 25 years at
various dates ranging from 1997 to 2021. No principal payments on the RUS
notes are required for the first two to three years after issuance. The
RTFC loan is collateralized by the cable plant located in ten cities in
southeastern South Dakota. The $330,000 Norwest Bank loan is secured by
the assets of Iway, Inc. and is guaranteed by the former shareholders of I-Way
Partners, Inc.; the $650,469 Norwest Bank loan is secured by the assets
of two of the former shareholders of TCIC Communications, Inc. and their
personal guarantees. The former shareholders of I-Way Partners, Inc. and
TCIC Communications, Inc. are preferred shareholders of the Cooperative.
Approximate annual principal payments on the existing debt for the next
five years are: 1998 - $1,730,000; 1999 - $890,000; 2000 - $910,000; 2001
- - $925,000; and 2002 - $940,000.
Unadvanced loan funds of $3,983,175 are available to the Cooperative on
loan commitments from the RUS. Loan proceeds will be used to refinance
current construction and to finance future construction.
The Cooperative received loan commitments of $14,737,000 and $13,684,000
from the RTFC for the purposes of refinancing its RUS debt and RTFC lines
of credit and to finance plant construction. The loans will be payable
quarterly, with full payment due in fifteen years. Subsequent to June 30,
1997, the Cooperative received $3,000,000 on the construction loan and has
retired its entire RUS debt with loan proceeds from the RTFC. The
Cooperative is required to maintain a debt service coverage of not less
than 1.25 and a times interest earned ratio of not less than 1.50, based on
the averages of the two highest ratios during the most recent fiscal years.
The Cooperative is restricted from incurring any additional unsecured debt
in excess of five percent of total assets from any other lender and from
declaring or paying any dividend or purchasing or redeeming any capital
stock in excess of 25 percent of the prior fiscal year-end cash margins
without written approval of the lender.
NOTE 4 - REORGANIZATION COSTS
Included in general and administrative expenses for the three months and
six months ended June 30, 1997 is $494,487 of costs related to the
reorganizing of the Cooperative as explained in Note 5. Included in
Network Access is $130,000 of revenue that the Cooperative expects to
recover through its cost separation studies filed with the National
Exchange Carriers Association for the reorganization costs.
NOTE 5 - SUBSEQUENT EVENT
A special meeting of the members of the Cooperative was held on July 21,
1997 for the purposes of voting on an amendment to the Cooperative's
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<PAGE>
articles of incorporation which would result in a conversion of the
Cooperative from a cooperative to a South Dakota business corporation.
Also on July 21, 1997, a special meeting of the shareholders of the South
Dakota business corporation was held for the purpose of voting on an
Agreement and Plan of Merger that provided for the subsequent merger of the
South Dakokta business corporation with and into the Company. The
conversion of equity in the Cooperative to equity in the South Dakota
business corporation and then into equity in the Company will be at the
rate of one share of common stock for each share of the Cooperative's
common stock, 80.8216445 shares of common stock for each share of preferred
stock and 0.2 of a share of common stock for each dollar of capital
credits. The proposals were approved by the members and shareholders,
respectively.
-14-
<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
=============================================================================================
<CAPTION>
ASSETS
PRO FORMA
HISTORICAL ADJUSTMENT PRO FORMA
------------ ---------- -------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 2,600,984 $ -- $ 2,600,984
Temporary Cash Investments 499,000 499,000
Accounts Receivable, Less Allowance for
Uncollectibles of $113,000 1,396,871 1,396,871
Income Taxes Receivable 100,802 100,802
Materials and Supplies 1,511,220 1,511,220
Prepaid Expenses 255,218 -- 255,218
------------ ---------- -------------
Total Current Assets 6,364,095 -- 6,364,095
------------ ---------- -------------
INVESTMENTS AND OTHER ASSETS:
Excess of Cost Over Net Assets Acquired 1,769,587 1,769,587
Other Intangible Assets 571,607 571,607
Deposit 61,905 61,905
Other Investments 605,253 605,253
Deferred Charges 92,705 -- 92,705
------------ ---------- -------------
Total Investments and Other Assets 3,101,057 -- 3,101,057
------------ ---------- -------------
PROPERTY, PLANT AND EQUIPMENT, NET 18,121,786 -- 18,121,786
------------ ---------- -------------
TOTAL ASSETS $ 27,586,938 $ -- $ 27,586,938
============ ========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
PRO FORMA
HISTORICAL ADJUSTMENT PRO FORMA
------------ ---------- -------------
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 1,730,000 $ -- $ 1,730,000
Accounts Payable 877,034 877,034
Other Current Liabilities 786,508 -- 786,508
------------ ---------- -------------
Total Current Liabilities 3,393,542 -- 3,393,542
------------ ---------- -------------
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<PAGE>
LONG-TERM DEBT 18,434,818 -- 18,434,818
------------ ---------- -------------
DEFERRED CREDITS 184,469 -- 184,469
------------ ---------- -------------
STOCKHOLDERS' EQUITY:
Common Stock, No Par Value 5,947,386 5,947,386
Common Stock 26,135 (26,135)
Preferred Stock 1,172,000 (1,172,000)
Capital Credits 4,749,251 (4,749,251)
Accumulated Deficit (373,277) -- (373,277)
------------ ---------- -------------
Total Stockholders' Equity 5,574,109 -- 5,574,109
------------ ---------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,586,938 $ -- $ 27,586,938
============ ========== =============
</TABLE>
The accompanying notes are an integral part of the unaudited PRO FORMA
condensed consolidated financial statements.
-16-
<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997
================================================================================
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENT PRO FORMA
------------ ---------- -------------
<S> <C> <C> <C>
REVENUES $ 2,862,702 $ -- $ 2,862,702
------------ ---------- -------------
COSTS AND EXPENSES 3,437,582 -- 3,437,582
------------ ---------- -------------
OPERATING LOSS (574,880) -- (574,880)
------------ ---------- -------------
OTHER INCOME (EXPENSES):
Interest and Dividend Income 103,913 103,913
Interest Expense (209,552) -- (209,552)
------------ ---------- -------------
Net Other Income (Expenses) (105,639) -- (105,639)
------------ ---------- -------------
LOSS BEFORE INCOME TAXES (680,519) -- (680,519)
INCOME TAX BENEFIT (23,597) -- (23,597)
------------ ---------- -------------
NET LOSS $ (656,922) -- $ (656,922)
============ ========== =============
LOSS PER SHARE $ (0.63)
=============
</TABLE>
The accompanying notes are an integral part of the unaudited PRO FORMA
condensed consolidated financial statements.
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<PAGE>
DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
<TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
================================================================================
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENT PRO FORMA
------------ ---------- -------------
<S> <C> <C> <C>
REVENUES $ 5,614,681 $ -- $ 5,614,681
------------ ---------- -------------
COSTS AND EXPENSES 6,272,658 -- 6,272,658
------------ ---------- -------------
OPERATING LOSS (657,977) -- (657,977)
------------ ---------- -------------
OTHER INCOME (EXPENSES):
Interest and Dividend Income 151,985 151,985
Interest Expense (408,689) -- (408,689)
------------ ---------- -------------
Net Other Income (Expenses) (256,704) -- (256,704)
------------ ---------- -------------
LOSS BEFORE INCOME TAXES 914,681 -- 914,681
INCOME TAX BENEFIT (60,096) -- (60,096)
------------ ---------- -------------
NET LOSS $ 854,585 -- $ 854,585
============ ========== =============
LOSS PER SHARE $ (0.81)
=============
</TABLE>
The accompanying notes are an integral part of the unaudited PRO FORMA
condensed consolidated financial statements.
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DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited PRO FORMA condensed consolidated balance sheet as of June 30,
1997 and the unaudited PRO FORMA condensed consolidated statements of
operations for the three months ended June 30, 1997 and the six months
ended June 30, 1997 give effect to the Conversion of the Cooperative from a
cooperative to a South Dakota business corporation and the subsequent
merger of the South Dakota business corporation with and into the Company.
The PRO FORMA information is based on the historical financial statements
of the Cooperative, giving effect to the Conversion and the Merger. The
PRO FORMA financial information gives effect to the Conversion and the
Merger as if the Conversion and the Merger occurred on June 30, 1997.
The PRO FORMA financial statements may not be indicative of the results
that actually would have occurred if the Conversion and the Merger had been
in effect on the dates indicated or which may be attained in the future.
The PRO FORMA financial statements should be read in conjunction with the
financial statements of the Cooperative for the years ended December 31,
1996 and 1995.
NOTE 2 - SUBSEQUENT EVENT
A special meeting of the members of the Cooperative was held on July 21,
1997 for the purposes of voting on an amendment to the Cooperative's
articles of incorporation which would result in a conversion of the
Cooperative from a cooperative to a South Dakota business corporation.
Also on July 21, 1997, a special meeting of the shareholders of the South
Dakota business corporation was held for the purpose of voting on an
Agreement and Plan of Merger that provided for the subsequent merger of the
South Dakota business corporation with and into the Company. The conversion
of equity in the Cooperative to equity in the South Dakota business
corporation and then into equity in the Company will be at the rate of one
share of common stock for each share of the Cooperative's common stock,
80.8216445 shares of common stock for each share of preferred stock and 0.2
of a share of common stock for each dollar of capital credits. The proposals
were approved by the members and shareholders, respectively.
NOTE 3 - LOSS PER SHARE INFORMATION
The PRO FORMA per share loss was computed by dividing the PRO
FORMA net loss by the PRO FORMA number of shares of common stock
outstanding (1,049,800 shares).
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is provided by management as its
analysis of the Cooperative's financial condition and results of operations
through June 30, 1997. No information is provided concerning the Company
because it did not commence operations until July 25, 1997 and had only
$1,000 in cash assets and stated capital as of June 30, 1997.
This analysis should be read in conjunction with the separate
consolidated financial statements of the Cooperative and the notes thereto
and the PRO FORMA financial information and notes thereto included above in
Item 1 of Part I of this Quarterly Report on Form 10-QSB. In this
discussion and analysis, the Cooperative and the resulting company after
the Conversion and the Merger are referred to as the "Company."
Certain information discussed below may constitute or include
forward-looking statements, such as information relating to the Company's
ongoing 1997 development plans, the effects of its June 1997 refinancing of
its long-term debt and statements regarding the Company's anticipated net
losses for 1997, 1998 and 1999. Such forward-looking information involves
important known and unknown risks and uncertainties and other factors that
may cause the actual results, performance or achievements of the Company to
be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
These risks and uncertainties include, but are not limited to,
uncertainties related to economic conditions, acquisitions and
divestitures, government and regulatory policies, the pricing and
availability of equipment, materials, inventories and software,
technological developments and change in the competitive environment in
which the Company operates. Readers are cautioned not to place undue
reliance on the forward-looking statements made below, which speak only as
of the date hereof.
OVERVIEW
The Company is a diversified telecommunications services company.
The Company, either directly or through wholly owned subsidiaries, provides
local telephone and network access services, long distance telephone
services, operator assisted calling services, telecommunications equipment
sales and leasing services, cable television services and Internet access
and related services in South Dakota and the surrounding states.
In 1996 the Company began a major reorganization and expansion
program. This program includes the redesign and rebuilding of the
Company's switching center and telecommunications network, a project which
is now in process and expected to conclude by the end of 1997, as well as
expansion of the Company's operations through selected acquisitions.
During 1996, the Company purchased the assets of nineteen cable television
systems from three companies that provided cable services to various
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communities in addition to the assets purchased by the Company. In
December 1996, the Company, through a wholly owned subsidiary, merged with
TCIC Communications, Inc. ("TCIC"), a South Dakota-based provider of long
distance and operator services. Also in December 1996, in a similar
transaction, the Company merged with I-way Partners, Inc. ("Iway"), one of
South Dakota's largest Internet service providers. Both TCIC and Iway
continue to operate as wholly owned subsidiaries of the Company. The
Company currently anticipates that additional acquisitions will form a part
of its continuing expansion plans, though no final agreements have been
concluded at this time.
As part of its reorganization plans, the Company also changed its
form of conducting business from a South Dakota cooperative into a public
Delaware business corporation. On February 19, 1997, the Company filed a
Registration Statement on Form S-4 (Registration Statement No. 333-22025)
with respect to the proposed conversion of the Company from a cooperative
into a South Dakota business corporation (the "Conversion") and the
proposed merger of the resulting South Dakota business corporation with and
into a wholly owned Delaware subsidiary of the Cooperative (the "Merger").
At a special meeting of the members of the Cooperative on July 21, 1997,
the Conversion was approved. The Conversion became effective on July 22,
1997 with the filing of the Amended Articles of Incorporation approved by
the members at the July 21, 1997 meeting. Immediately following the
special meeting of the Cooperative members, a special meeting of the
shareholders of the resulting South Dakota business corporation was held on
July 21, 1997. At that meeting, the shareholders voted to approve an
Agreement and Plan of Merger pursuant to which the South Dakota business
corporation would be merged with and into the Company. The Merger became
effective on July 25, 1997. As a result, the Company now operates as a
public Delaware corporation.
The Company's reorganization and expansion plans have had, and
will continue to have, significant impacts on the Company's financial
condition and results of operations. As part of its network rebuilding
project, in 1995 the Company reassessed the remaining useful life of its
old facilities. In 1996, the Company incurred approximately $5.8 million
in new capital expenditures and in 1997 anticipates spending an additional
$15 million for its network construction program. These changes will
combine to result in substantially higher depreciation expense with a
corresponding reduction in the Company's net income. In addition, to
implement its growth plans, in 1996 the Company completed the acquisitions
described above and increased its employee base from 34 employees at
December 31, 1995, to 76 employees at December 31, 1996 and to 102
employees at June 30, 1997, resulting in additional increases in
amortization expense and employee-related operating expenses. While the
Company anticipates that its revenue base will continue to grow in 1997
through 1999 as it completes its new facilities and markets new services,
the resultant higher expense levels from a combination of higher
depreciation, amortization and interest expense, as well as additional
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employee expenses, will likely cause the Company to recognize and report
net after-tax losses in those years.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
JUNE 30, 1997 COMPARED TO DECEMBER 31, 1996
Cash and cash equivalents increased from $2,121,444 at December
31, 1996 to $2,600,984 at June 30, 1997, an increase of $479,540, primarily
as a result of the reclassification of temporary cash investments which
reached current maturity status. Temporary cash investments declined by
$750,000 from $1,249,000 to $499,000 during the same period. Of this
difference $500,000 is due to the reclassification of a U.S. treasury bill as
a marketable debt security, reported in the other investments section of the
balance sheet at June 30, 1997. The remaining $250,000 was reclassified as
cash and cash equivalents.
Accounts receivable declined from $1,784,895 at December 31, 1996
to $1,396,871 at June 30, 1997 due to the adoption by the Company of more
stringent collections policies, especially in its cable television
operations. Materials and supplies increased from $694,097 at December 31,
1996 to $1,511,220 at June 30, 1997, an increase of $817,000 which was
primarily attributable to the purchase of materials for use in the
completion of the Company's 1997 network construction project.
Accounts payable increased from $399,694 at December 31, 1996 to
$877,034 at June 30, 1997, an increase of $477,340, or approximately 119%.
Approximately $285,000 of this increase was due to the accrual of one-time,
nonrecurring unbilled legal and accounting fees associated with the
Company's reorganization. The balance of the increase is primarily due to
additional accounts payable from the TCIC and Iway operations.
The Company's total capital structure, consisting of
stockholders' equity and long-term debt, was $25,738,927 at June 30, 1997
compared to $22,448,311 at December 31, 1996. The increase in total
capital structure at June 30, 1997 of $3,290,616 was composed primarily of
additional outstanding long-term debt of $4,128,723 used to finance the
Company's network rebuilding program less accumulated net losses from the
Company's operations from January 1, 1997 through June 30, 1997 (see the
discussion of Results of Operations below).
The Company believes that it has adequate internal financial
resources to finance its ongoing day-to-day operating requirements.
Operating cash flow for the six-month period ended June 30, 1997,
consisting of the Company's net loss of $854,585 plus its noncash
depreciation and amortization expenses of $1,559,645 and net of all of the
Company's operating expenses, totaled $705,060 for the period. Adjusted
for the one time, nonrecurring reorganization expenses of $364,487
associated with the Conversion and Merger (see Note 4 to the Consolidated
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Financial Statements), operating cash flow for the period totaled
$1,069,547, approximately equal to the $1,113,322 in operating cash flow
for the comparable period of 1996 (the net loss of $39,514 plus
depreciation and amortization expense of $1,152,836). See the discussion
of Results of Operations, below, for additional information.
While the Company believes it has adequate financial resources to
fund its day-to-day operations, it must rely on the availability of
additional long-term debt to finance its capital expenditures program. At
June 30, 1997, the Company's long-term debt consisted of approximately $13
million under a series of loans from the Rural Utilities Service (the
"RUS," formerly known as the Rural Electrification Association),
approximately $4 million from the Rural Telephone Finance Cooperative (the
"RTFC"), approximately $2.1 million due to various contractors in
connection with the Company's construction projects, and $1 million in
long-term financing associated with the acquisitions of TCIC and Iway (See
Note 3 to the Company's Consolidated Financial Statements). On June 24,
1997, the Company entered into a long-term loan arrangement with the RTFC
in the aggregate amount of $28,421,000. Of this amount, $13,092,089.25 was
used to refinance the outstanding RUS loans on July 15, 1997. The
remaining amounts are allocated to refinancing the $1 million in
acquisition debt from the TCIC and Iway acquisitions and to cover the
Company's 1997 capital expenditures program. Approximately $3 million of
the Company's $5.1 million of capital expenditures through June 30, 1997
were financed by the RTFC. The balance represents amounts due contractors
for the project. As of June 30, 1997, the Company's construction projects
were on schedule and approximately 5 percent under budget. Accordingly,
the Company currently believes that the balance of the RTFC loan facility
will be adequate to cover all of its remaining 1997 capital expenditures.
The Company further expects that the RFTC and other long-term financing
sources will continue to be available to fund future development and
expansion.
The refinancing of the RUS loans will result in an increase in
the Company's future interest expenses relating to the refinanced amounts.
The weighted average interest rate on the RUS loans at June 30, 1997 was
approximately 4.4 percent. Interest rates under the new RTFC financing
used to retire the RUS loans currently vary from approximately 6.5 percent
to 8.5 percent and will continue to vary in the future depending on
interest rate shifts during the quarterly loan periods and whether the
Company elects to continue with the variable rate currently being charged
or decides to fix the rate for the remaining 15 year term of the agreement.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1997
Revenues increased from $1,714,542 during the second quarter of
1996 to $2,862,702 in the second quarter of 1997, an increase of
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$1,148,160, or approximately 67 percent. Approximately $285,000 of this
increase reflects the impact of rate increases in the Company's telephone
operations put into effect during 1996, and $130,000 of the increase relates
to a one-time, noncurring adjustment to access revenues resulting from the
reorganization costs incurred by the Company. See Note 4 to the
Consolidated Financial Statements. The remaining increase reflects
additional revenues from the nineteen new cable systems purchased by the
Company during 1996 and additional revenues of $348,000 and $255,000 from the
TCIC and Iway operations, respectively.
Plant operations expense increased from $351,709 during the
second quarter of 1996 to $836,051 in the same period of 1997, an increase
of $484,342, or approximately 138 percent. Approximately $228,000 and
$83,000 of this increase were due to the additional costs and expenses from
the operations of TCIC and Iway, respectively. The remaining increase is
primarily due to increased operating costs associated with the 19
additional cable systems purchased by the Company during 1996.
Depreciation and amortization expense increased from $594,944 in
the second quarter of 1996 to $798,220 in the same period of 1997, an
increase of $203,276 or approximately 34 percent. Approximately $31,000 of
this increase was due to the amortization of the excess of cost over net
assets acquired in the acquisitions of TCIC and Iway. An additional
$24,266 of this increase is due to the depreciation of assets used in the
TCIC and Iway operations. The balance of this increase is due primarily to
the depreciation of additional assets used to operate the nineteen additional
cable systems acquired in 1996 and installed by the Company during 1996 and
the first half of 1997 as part of its network construction program.
Other costs and expenses, including customer, general and
administrative and other operating expenses increased from $746,876 during
the second quarter of 1996 to $1,803,311 in 1997, an increase of $1,056,435
or approximately 141 percent. Approximately one-half, or $494,487, of this
increase is due to the inclusion on one-time, nonrecurring charges
associated with the Conversion and Merger of the Company described above.
These reorganization expenses do not arise from and are not representative
of the Company's ongoing business expenses. See Note 4 to the Company's
Consolidated Financial Statements. Approximately $195,000 and $133,000 of
this increase are due to the additional costs and expenses from the
operations of TCIC and Iway, respectively. The remaining increase is
primarily due to increased employee costs in the Company's telephone and
cable television operations.
Interest expense increased from $138,979 for the second quarter
of 1996 to $209,552 during the second quarter of 1997, an increase of
$70,573, or approximately 51 percent. Approximately $23,885 of this
increase was attributable to the long-term debt assumed by the Company in
its acquisitions of TCIC and Iway in December 1996. The balance of this
increase is due to the increase in long-term debt incurred by the Company
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in 1996 to acquire nineteen additional cable television stations and to fund
its 1996 and 1997 capital expenditures.
Operating cash flow, consisting of the Company's net income or
loss plus noncash depreciation and amortization expenses, decreased
slightly from $555,371 for the second quarter of 1996 to $505,785 for the
same period of 1997, after adjustment for the one-time, nonrecurring
reorganization expenses associated with the Conversion and Merger in 1997.
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
also slightly decreased from $697,975 for the second quarter of 1996 to
$691,740 for the same period in 1997.
SIX MONTHS ENDED JUNE 30, 1996 AND 1997
Revenues increased from $3,362,566 during the first six months of
1996 to $5,614,681 in the first six months of 1997, an increase of
$2,252,115, or approximately 67 percent. Approximately $564,000 of this
increase reflects the impact of rate increases in the Company's telephone
operations put into effect during 1996, and $130,000 of the increase relates
to a one-time, nonrecurring adjustment to access revenues resulting from the
reorganization costs incurred by the Company. See Note 4 to the
Consolidated Financial Statements. The remaining increase reflects
additional revenues from the nineteen new cable systems purchased by the
Company during 1996, and additional revenues of $660,916 and $475,144 from
the TCIC and Iway operations, respectively.
Plant operations expense increased from $728,961 during the first
six months of 1996 to $1,653,873 in the first six months of 1997, an
increase of $924,912, or approximately 127 percent. Approximately $461,000
and $167,000 of this increase was due to the additional costs and expenses
from the operations of TCIC and Iway, respectively. The remaining increase
is primarily due to increased operating costs associated with the 19
additional cable systems purchased by the Company during 1996.
Depreciation and amortization expense increased from $1,152,836
in the first six months of 1996 to $1,559,645 during the first six months
of 1997, an increase of $406,809 or approximately 35 percent.
Approximately $62,000 of this increase was due to the amortization of the
excess of cost over net assets acquired in the acquisitions of TCIC and
Iway. An additional $43,790 of this increase is due to the depreciation of
assets used in the TCIC and Iway operations. The balance of this increase
is due primarily to the deprecation of additional assets used to operate
the nineteen additional cable systems acquired in 1996 and installed by the
Company during 1996 and the first half of 1997 as part of its network
construction program.
Other costs and expenses, including customer, general and
administrative and other operating expenses increased from $1,379,142
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during the first six months of 1996 to $3,059,140 in the first six months
of 1997, an increase of $1,679,995 or approximately 122 percent. Of this
increase, $494,487 is due to the inclusion of one-time, nonrecurring
charges associated with the Conversion and Merger of the Company described
above. These reorganization expenses do not arise from and are not
representative of the Company's ongoing business expenses. See Note 4 to
the Company's Consolidated Financial Statements. Approximately $327,000
and $235,000 of this increase are due to the additional costs and expenses
from the operations of TCIC and Iway, respectively. The remaining increase
is primarily due to increased employee costs in the Company's telephone and
cable television operations.
Interest expense increased from $282,297 for the first six months
of 1996 to $408,689 during the first six months of 1997, an increase of
$126,392, or approximately 45 percent. Approximately $46,500 of this
increase was attributable to the long-term debt assumed by the Company in
its acquisitions of TCIC and Iway in December 1996. The balance of this
increase is due to the increase in long-term debt incurred by the Company
in 1996 to acquire nineteen additional cable television stations and to fund
its 1996 and 1997 capital expenditures.
While the Company's net loss is an important measure of its
results of operations, because of the additional costs associated with
growing and acquiring additional operations as well as the increased
depreciation expenses associated with the change in the useful life of
facilities being replaced by the Company in 1996 and 1997, the Company
believes that it is also important to measure its revenues and earning
capacity in evaluating the results of its expansion plans. The increase in
revenues described above is one such measure. The Company also believes
that it is important to focus on revenue growth while maintaining its
operating cash flow and EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) for the relevant periods.
Operating cash flow, consisting of the Company's net loss plus
noncash depreciation and amortization expenses, was $1,113,322 for the
first six months of 1996 compared to $705,060 for the same period of 1997.
Adjusted for the one time, nonrecurring net reorganization expenses of
$364,487 ($494,486 minus the $130,000 in associated revenue from
adjustments in access rates resulting from these expenses described in Note
4 to the Consolidated Financial Statements) related to the Conversion and
Merger in 1997, operating cash flow for the period was $1,069,547 in 1997,
approximately the same as the comparable period in 1996.
EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) similarly remained approximately unchanged at $1,404,744 for
the first six months of 1996 compared to $1,418,080 for the first six
months of 1997.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On July 24, 1997, an action captioned as "Complaint/Shareholder
Derivative Action" was filed in the Circuit Court for the County of Clay,
South Dakota, First Judicial Circuit, by Ronald "Skip" Graff, on behalf of
the Cooperative, against the Cooperative and Ross Benson, Dale Bye, Edward
Christensen, Jr., Jeff Goeman, James Jibben, Palmer Larson, John Roth, John
Schaefer, Thomas Hertz and Craig Anderson (the "individual defendants").
The Complaint was filed against the individual defendants both individually
and in their capacities as members of the Board of Directors of the
Cooperative.
The description of the Complaint included in Item 1 of the
Current Report on Form 8-K filed by the Cooperative and the Company on
August 6, 1997 is here incorporated by reference.
Item 2. CHANGES IN SECURITIES
The description of the capital stock of Dakota Telecommunications
Group, Inc., a South Dakota corporation (the resulting corporation upon
completion of the Conversion) included in the Registration Statement under
the captions "THE CONVERSION--Description of DTG Capital Stock," "THE
CONVERSION--Statutory Provisions Affecting Control of DTG," and "THE
CONVERSION--Other Provisions Affecting Control of DTG" is here incorporated
by reference.
The description of the capital stock of the Company (the
resulting corporation as of the effective time of the Merger) included in
the Registration Statement under the captions "THE MERGER--Description of
DTG Delaware Capital Stock," "THE MERGER--Statutory Provisions Affecting
Control of DTG Delaware," and "THE MERGER--Other Provisions Affecting
Control of DTG Delaware" is here incorporated by reference.
The description contained in Part I of this Form 10-QSB under the
caption "Introductory Explanation" is here incorporated by reference.
As a result of the Conversion and the Merger, only Common Stock
of the Company remained outstanding after the effective time of the Merger
on July 25, 1997.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 22, 1997, the Cooperative held its 1997 Annual Meeting
of Members. The purpose of the meeting was to elect directors for District
7 and District 10 and to transact any other business that was properly
brought at the meeting. John Roth and Palmer O. Larson were re-elected as
directors by a voice vote of the members present at the Annual Meeting.
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Since action was conducted by voice vote, it is not possible to present a
statement of the number of votes for or withheld from each nominee. There
were no broker non-votes. The following persons remained as directors:
Ross Benson, Dale Q. Bye, Edward D. Christensen, Jr., Jeff Goeman, James H.
Jibben, and John Schaefer.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DOCUMENT
3.1 CERTIFICATE OF INCORPORATION OF DAKOTA TELECOMMUNICATIONS
GROUP, INC., a Delaware corporation.
3.2 BYLAWS OF DAKOTA TELECOMMUNICATIONS GROUP, INC., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Form S-4
Registration Statement that became effective on June 13,
1997 (the "Registration Statement").
4.1 CERTIFICATE OF INCORPORATION OF DAKOTA COOPERATIVE
TELECOMMUNICATIONS GROUP, INC., a Delaware corporation.
Included in Exhibit 3.1 above.
4.2 BYLAWS OF DAKOTA TELECOMMUNICATIONS GROUP, INC., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Registration
Statement.
4.3 STANDSTILL AGREEMENT DATED NOVEMBER 27, 1996, AMONG DAKOTA
COOPERATIVE TELECOMMUNICATIONS, INC. AND THE SELLING
SHAREHOLDERS OF TCIC COMMUNICATIONS, INC. Filed as Exhibit
4.7 to the Registration Statement.
4.4 STANDSTILL AGREEMENT DATED NOVEMBER 27, 1996, AMONG DAKOTA
COOPERATIVE TELECOMMUNICATIONS, INC. AND THE SELLING
SHAREHOLDERS OF I-WAY PARTNERS, INC. Filed as Exhibit 4.8
to the Registration Statement.
4.5 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. FORM OF WARRANT
AGREEMENT. Filed as Exhibit 4.11 to the Registration
Statement.
4.6 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. FORM OF OPTION
AGREEMENT. Filed as Exhibit 4.12 to the Registration
Statement.
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4.7 AGREEMENT REGARDING STOCK (I-WAY PARTNERS, INC.) DATED
NOVEMBER 27, 1996. Filed as Exhibit 4.13 to the
Registration Statement.
4.8 AGREEMENT REGARDING STOCK (TCIC COMMUNICATIONS, INC.) DATED
NOVEMBER 27, 1996. Filed as Exhibit 4.14 to the
Registration Statement.
4.9 DAKOTA TELECOMMUNICATIONS GROUP, INC. COMMON STOCK
CERTIFICATE. Filed as Exhibit 4.16 to the Registration
Statement.
4.10 TELEPHONE LOAN CONTRACT 515-A DATED SEPTEMBER 5, 1952.
Filed as Exhibit 4.17 to the Registration Statement.
4.11 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-B DATED AUGUST 11,
1955. Filed as Exhibit 4.18 to the Registration Statement.
4.12 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-C DATED OCTOBER 9,
1958. Filed as Exhibit 4.19 to the Registration Statement.
4.13 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-D DATED MARCH 8,
1961. Filed as Exhibit 4.20 to the Registration Statement.
4.14 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-E DATED AUGUST 20,
1964. Filed as Exhibit 4.21 to the Registration Statement.
4.15 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-F DATED JUNE 1,
1967. Filed as Exhibit 4.22 to the Registration Statement.
4.16 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-G DATED DECEMBER
20, 1968. Filed as Exhibit 4.23 to the Registration
Statement.
4.17 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-H DATED DECEMBER 8,
1970. Filed as Exhibit 4.24 to the Registration Statement.
4.18 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-K1 DATED OCTOBER 2,
1972. Filed as Exhibit 4.25 to the Registration Statement.
4.19 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-L8 DATED JUNE 4,
1973. Filed as Exhibit 4.26 to the Registration Statement.
4.20 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-M8 DATED AUGUST 29,
1973. Filed as Exhibit 4.27 to the Registration Statement.
4.21 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-N8 DATED MAY 13,
1976. Filed as Exhibit 4.28 to the Registration Statement.
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4.22 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-P8 DATED JULY 20,
1977. Filed as Exhibit 4.29 to the Registration Statement.
4.23 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-R8 DATED NOVEMBER
22, 1982. Filed as Exhibit 4.30 to the Registration
Statement.
4.24 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-S8 DATED FEBRUARY
4, 1986. Filed as Exhibit 4.31 to the Registration
Statement.
4.25 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-T8 DATED SEPTEMBER
25, 1991. Filed as Exhibit 4.32 to the Registration
Statement.
4.26 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. RESTATED
MORTGAGE, SECURITY AGREEMENT, AND FINANCING STATEMENT (515-S8)
AND SUPPLEMENT DATED APRIL 13, 1992. Filed as Exhibit
4.33 to the Registration Statement.
4.27 DAKOTA TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE
FINANCE COOPERATIVE DATED JANUARY 29, 1996. Filed as
Exhibit 4.34 to the Registration Statement.
4.28 DAKOTA TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE
FINANCE COOPERATIVE DATED JUNE 27, 1996. Filed as Exhibit
4.35 to the Registration Statement.
4.29 FINANCING COMMITMENT FROM RURAL TELEPHONE FINANCE
COOPERATIVE. Filed as Exhibit 4.37 to the Registration
Statement.
4.30 NOTICE OF APPROVAL OF FINANCING FROM RURAL TELEPHONE FINANCE
COOPERATIVE. Filed as Exhibit 4.38 to the Registration
Statement.
4.31 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE FINANCE
COOPERATIVE DATED JUNE 24, 1997.
4.32 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. MORTGAGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997.
4.33 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. PLEDGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997.
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<PAGE>
4.34 The Company has several classes of long-term debt
instruments outstanding in addition to those described in
Exhibits 4.10 through 4.33. The amount of these classes of
debt outstanding on June 30, 1997, does not exceed 10
percent of the Company's total consolidated assets. The
Company agrees to furnish copies of any agreement defining
the rights of holders of any such long-term indebtedness to
the Securities and Exchange Commission upon request.
4.35 AMENDED ARTICLES OF INCORPORATION OF DAKOTA
TELECOMMUNICATIONS GROUP, INC., a South Dakota corporation.
Attached as Appendix B to the Prospectus and Ballot/Proxy Statement
filed as part of the Registration Statement.
4.36 BYLAWS OF DAKOTA TELECOMMUNICATIONS GROUP, INC., a South Dakota
corporation. Attached as Appendix C to the Prospectus and
Ballot/Proxy Statement filed as part of the Registration Statement.
10.1 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE FINANCE
COOPERATIVE DATED JUNE 24, 1997. Included in Exhibit 4.31
above.
10.2 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. MORTGAGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997. Included
in Exhibit 4.32 above.
10.3 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. PLEDGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997. Included
in Exhibit 4.33 above.
27 Financial Data Schedule.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DAKOTA TELECOMMUNICATIONS
GROUP, INC.
Date: August 14, 1997 By /s/Thomas W. Hertz
Thomas W. Hertz
President and Chief Executive Officer
Date: August 14, 1997 By /s/Craig A. Anderson
Craig A. Anderson
Executive Vice President - Marketing
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
DAKOTA COOPERATIVE
TELECOMMUNICATIONS, INC.
Date: August 14, 1997 By /s/Thomas W. Hertz
Thomas W. Hertz
Chief Executive Officer and General
Manager
Date: August 14, 1997 By /s/Craig A. Anderson
Craig A. Anderson
Executive Vice President - Marketing
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
-32-
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENT
3.1 CERTIFICATE OF INCORPORATION OF DAKOTA TELECOMMUNICATIONS
GROUP, INC., a Delaware corporation.
3.2 BYLAWS OF DAKOTA TELECOMMUNICATIONS GROUP, INC., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Form S-4
Registration Statement that became effective on June 13,
1997 (the "Registration Statement").
4.1 CERTIFICATE OF INCORPORATION OF DAKOTA COOPERATIVE
TELECOMMUNICATIONS GROUP, INC., a Delaware corporation.
Included in Exhibit 3.1 above.
4.2 BYLAWS OF DAKOTA TELECOMMUNICATIONS GROUP, INC., a Delaware
corporation. Filed as Appendix F to the Prospectus and
Ballot/Proxy Statement filed as part of the Registration
Statement.
4.3 STANDSTILL AGREEMENT DATED NOVEMBER 27, 1996, AMONG DAKOTA
COOPERATIVE TELECOMMUNICATIONS, INC. AND THE SELLING
SHAREHOLDERS OF TCIC COMMUNICATIONS, INC. Filed as Exhibit
4.7 to the Registration Statement.
4.4 STANDSTILL AGREEMENT DATED NOVEMBER 27, 1996, AMONG DAKOTA
COOPERATIVE TELECOMMUNICATIONS, INC. AND THE SELLING
SHAREHOLDERS OF I-WAY PARTNERS, INC. Filed as Exhibit 4.8
to the Registration Statement.
4.5 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. FORM OF WARRANT
AGREEMENT. Filed as Exhibit 4.11 to the Registration
Statement.
4.6 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. FORM OF OPTION
AGREEMENT. Filed as Exhibit 4.12 to the Registration
Statement.
4.7 AGREEMENT REGARDING STOCK (I-WAY PARTNERS, INC.) DATED
NOVEMBER 27, 1996. Filed as Exhibit 4.13 to the
Registration Statement.
4.8 AGREEMENT REGARDING STOCK (TCIC COMMUNICATIONS, INC.) DATED
NOVEMBER 27, 1996. Filed as Exhibit 4.14 to the
Registration Statement.
<PAGE>
4.9 DAKOTA TELECOMMUNICATIONS GROUP, INC. COMMON STOCK
CERTIFICATE. Filed as Exhibit 4.16 to the Registration
Statement.
4.10 TELEPHONE LOAN CONTRACT 515-A DATED SEPTEMBER 5, 1952.
Filed as Exhibit 4.17 to the Registration Statement.
4.11 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-B DATED AUGUST 11,
1955. Filed as Exhibit 4.18 to the Registration Statement.
4.12 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-C DATED OCTOBER 9,
1958. Filed as Exhibit 4.19 to the Registration Statement.
4.13 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-D DATED MARCH 8,
1961. Filed as Exhibit 4.20 to the Registration Statement.
4.14 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-E DATED AUGUST 20,
1964. Filed as Exhibit 4.21 to the Registration Statement.
4.15 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-F DATED JUNE 1,
1967. Filed as Exhibit 4.22 to the Registration Statement.
4.16 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-G DATED DECEMBER
20, 1968. Filed as Exhibit 4.23 to the Registration
Statement.
4.17 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-H DATED DECEMBER 8,
1970. Filed as Exhibit 4.24 to the Registration Statement.
4.18 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-K1 DATED OCTOBER 2,
1972. Filed as Exhibit 4.25 to the Registration Statement.
4.19 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-L8 DATED JUNE 4,
1973. Filed as Exhibit 4.26 to the Registration Statement.
4.20 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-M8 DATED AUGUST 29,
1973. Filed as Exhibit 4.27 to the Registration Statement.
4.21 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-N8 DATED MAY 13,
1976. Filed as Exhibit 4.28 to the Registration Statement.
4.22 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-P8 DATED JULY 20,
1977. Filed as Exhibit 4.29 to the Registration Statement.
4.23 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-R8 DATED NOVEMBER
22, 1982. Filed as Exhibit 4.30 to the Registration
Statement.
-2-
<PAGE>
4.24 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-S8 DATED FEBRUARY
4, 1986. Filed as Exhibit 4.31 to the Registration
Statement.
4.25 AMENDMENT TO TELEPHONE LOAN CONTRACT 515-T8 DATED SEPTEMBER
25, 1991. Filed as Exhibit 4.32 to the Registration
Statement.
4.26 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. RESTATED
MORTGAGE, SECURITY AGREEMENT, AND FINANCING STATEMENT (515-S8)
AND SUPPLEMENT DATED APRIL 13, 1992. Filed as Exhibit
4.33 to the Registration Statement.
4.27 DAKOTA TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE
FINANCE COOPERATIVE DATED JANUARY 29, 1996. Filed as
Exhibit 4.34 to the Registration Statement.
4.28 DAKOTA TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE
FINANCE COOPERATIVE DATED JUNE 27, 1996. Filed as Exhibit
4.35 to the Registration Statement.
4.29 FINANCING COMMITMENT FROM RURAL TELEPHONE FINANCE
COOPERATIVE. Filed as Exhibit 4.37 to the Registration
Statement.
4.30 NOTICE OF APPROVAL OF FINANCING FROM RURAL TELEPHONE FINANCE
COOPERATIVE. Filed as Exhibit 4.38 to the Registration
Statement.
4.31 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE FINANCE
COOPERATIVE DATED JUNE 24, 1997.
4.32 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. MORTGAGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997.
4.33 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. PLEDGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997.
4.34 The Company has several classes of long-term debt
instruments outstanding in addition to those described in
Exhibits 4.10 through 4.33. The amount of these classes of
debt outstanding on June 30, 1997, does not exceed 10
percent of the Company's total consolidated assets. The
Company agrees to furnish copies of any agreement defining
the rights of holders of any such long-term indebtedness to
the Securities and Exchange Commission upon request.
-3-
<PAGE>
4.35 AMENDED ARTICLES OF INCORPORATION OF DAKOTA
TELECOMMUNICATIONS GROUP, INC., a South Dakota corporation.
Attached as Appendix B to the Prospectus and Ballot/Proxy Statement
filed as part of the Registration Statement.
4.36 BYLAWS OF DAKOTA TELECOMMUNICATIONS GROUP, INC., a South Dakota
corporation. Attached as Appendix C to the Prospectus and
Ballot/Proxy Statement filed as part of the Registration Statement.
10.1 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. LOAN AGREEMENT WITH RURAL TELEPHONE FINANCE
COOPERATIVE DATED JUNE 24, 1997. Included in Exhibit 4.31
above.
10.2 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. MORTGAGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997. Included
in Exhibit 4.32 above.
10.3 DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AND DAKOTA
TELECOM, INC. PLEDGE AND SECURITY AGREEMENT WITH RURAL
TELEPHONE FINANCE COOPERATIVE DATED JUNE 24, 1997. Included
in Exhibit 4.33 above.
27 Financial Data Schedule.
-4-
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
DAKOTA TELECOMMUNICATIONS GROUP, INC.
The undersigned, Craig A. Anderson, for the purposes of
incorporating and organizing a corporation under the General Corporation
Law of the State of Delaware, does execute this Certificate of
Incorporation and does hereby certify as follows:
ARTICLE I. The name of the corporation is DAKOTA
TELECOMMUNICATIONS GROUP, INC.
ARTICLE II. The address of the corporation's registered office
in the State of Delaware is 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is
The Corporation Trust Company.
ARTICLE III. The nature of the business or purposes to be
conducted or promoted by the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV. The total number of shares which the corporation
shall have authority to issue is five million two hundred fifty thousand
(5,250,000) shares, which shall be divided into two classes as follows:
(A) five million (5,000,000) shares of Common Stock without par value
("Common Stock"); and (B) two hundred fifty thousand (250,000) shares of
Preferred Stock without par value ("Preferred Stock"), of which 15,000
shall be designated as Series A Junior Participating Preferred Stock.
The designations, voting powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions of the above classes of stock and other general
provisions relating thereto shall be as follows:
A. PROVISIONS APPLICABLE TO COMMON STOCK
1. Except as otherwise required by law or by any amendment to
this Certificate of Incorporation, each holder of Common Stock shall
have one vote for each share of stock held by the stockholder on all
matters voted upon by the stockholders.
2. Subject to the preferential dividend rights, if any,
applicable to shares of Preferred Stock and subject to applicable
requirements, if any, with respect to the setting aside of sums for
purchase, retirement or sinking funds for Preferred Stock, the holders
<PAGE>
of Common Stock shall be entitled to receive, to the extent permitted
by law, such dividends as may be declared from time to time by the
Board of Directors.
3. In the event of the voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up of the corporation,
after distribution in full of the preferential amounts, if any, to be
distributed to the holders of shares of Preferred Stock, holders of
Common Stock shall be entitled to receive all of the remaining assets
of the corporation of whatever kind available for distribution to
stockholders ratably in proportion to the number of shares of Common
Stock held by them respectively. The Board of Directors may
distribute in kind to the holders of Common Stock such remaining
assets of the corporation or may sell, transfer or otherwise dispose
of all or any part of such remaining assets to any corporation, trust
or entity, or any combination thereof, and may sell all or any part of
the consideration so received and distribute any balance thereof in
kind to holders of Common Stock. The merger or consolidation of the
corporation into or with any other corporation, or the merger or
consolidation of any other corporation into it, or any purchase or
redemption of shares of stock of the corporation of any class, shall
not be deemed to be a dissolution, liquidation or winding up of the
corporation for the purposes of this paragraph.
4. The holders of Common Stock shall not have any preemptive or
other preferential right to additional or treasury shares of the
corporation.
5. Such numbers of shares of Common Stock as may from time to
time be required for such purpose shall be reserved for issuance (1)
upon conversion of any shares of Preferred Stock or any obligation of
the corporation convertible into shares of Common Stock which is at
the time outstanding or issuable upon exercise of any options or
warrants at the time outstanding and (2) upon exercise of any options
or warrants at the time outstanding to purchase shares of Common
Stock.
B. PROVISIONS APPLICABLE TO PREFERRED STOCK GENERALLY
1. Shares of Preferred Stock may be issued in one or more
series at such time or times and for such consideration or
considerations as the Board of Directors may determine. All shares of
any one series shall be of equal rank and identical in all respects
except that the dates from which dividends accrue or accumulate with
respect thereto may vary.
2. The Board of Directors is expressly authorized at any time,
and from time to time, to provide for the issuance of shares of
Preferred Stock in one or more series, each with such voting powers,
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<PAGE>
full or limited, or without voting powers, and with such designations,
preferences and relative participating, optional or other special
rights, and such qualifications, limitations or restrictions thereof,
as shall be stated in the resolution or resolutions providing for the
issue thereof adopted by the Board of Directors, and as are not stated
in this Certificate of Incorporation, or any amendment thereto,
including (without limiting the generality of the foregoing) the
following:
(a) The distinctive designation and number of shares
comprising such series, which number may (except where otherwise
provided by the Board of Directors in creating such series) be
increased or decreased (but not below the number of shares then
outstanding) from time to time by action of the Board of Directors.
(b) The stated value of the shares of such series.
(c) The dividend rate or rates on the shares of such series
and the relation which such dividends shall bear to the dividends
payable on any other class of capital stock or on any other series of
Preferred Stock, the terms and conditions upon which and the periods
in respect of which dividends shall be payable, whether and upon what
conditions such dividends shall be cumulative and, if cumulative, the
date or dates from which dividends shall accumulate.
(d) Whether the shares of such series shall be redeemable
and, if redeemable, whether redeemable for cash, property or rights,
including securities of any other corporation, and whether redeemable
at the option of the holder or the corporation or upon the happening
of a specified event, the limitations and restrictions with respect to
such redemption, the time or times when, the price or prices or rate
or rates at which, the adjustments with which and the manner in which
such shares shall be redeemable, including the manner of selecting
shares of such series for redemption if less than all shares are to be
redeemed.
(e) The rights to which the holders of shares of such
series shall be entitled, and the preferences, if any, over any other
series (or of any other series over such series), upon the voluntary
or involuntary liquidation, dissolution, distribution or winding up of
the corporation, which rights may vary depending on whether such
liquidation, dissolution, distribution or winding up is voluntary or
involuntary, and, if voluntary, may vary at different dates.
(f) Whether the shares of such series shall be subject to
the operation of a purchase, retirement or sinking fund and, if so,
whether and upon what conditions such fund shall be cumulative or
noncumulative, the extent to which and the manner in which such fund
shall be applied to the purchase or redemption of the shares of such
-3-
<PAGE>
series for retirement or to other corporate purposes and the terms and
provisions relative to the operation thereof.
(g) Whether the shares of such series shall be convertible
into or exchangeable for shares of any other class or of any other
series of any class of capital stock of the corporation, and, if so
convertible or exchangeable, the price or prices or the rate or rates
of conversion or exchange and the method, if any, of adjusting the
same, and any other terms and conditions of such conversion or
exchange.
(h) The voting powers, if any, of the shares of such
series, and whether and under what conditions the shares of such
series (alone or together with the shares of one or more of other
series having similar provisions) shall be entitled to vote separately
as a single class, for the election of one or more additional
directors of the corporation in case of dividend arrearages or other
specified events, or upon other matters.
(i) Whether the issuance of any additional shares of such
series, or of any shares of any other series, shall be subject to
restrictions as to issuance, or as to the powers, preferences or
rights of any such other series.
(j) Any other preferences, privileges and powers and
relative participating, optional or other special rights, and
qualifications, limitations or restrictions of such series, as the
Board of Directors may deem advisable and as shall not be inconsistent
with the provisions of this Certificate of Incorporation.
3. Shares of Preferred Stock redeemed, converted, exchanged,
purchased, retired or surrendered to the corporation, or which have
been issued and reacquired in any manner, may, upon compliance with
any applicable provisions of the General Corporation Law of the State
of Delaware, be given the status of authorized and unissued shares of
Preferred Stock and may be reissued by the Board of Directors as part
of the series of which they were originally a part or may be
reclassified into and reissued as part of a new series or as a part of
any other series, all subject to the protective conditions or
restrictions of any outstanding series of Preferred Stock.
C. PROVISIONS APPLICABLE TO SERIES A JUNIOR PARTICIPATING PREFERRED
STOCK
1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "Series A Junior Participating Preferred Stock" and
the number of shares constituting such series shall be 15,000.
-4-
<PAGE>
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders
of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Junior Participating Preferred
Stock with respect to the holders of shares of Series A Junior
Participating Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the
fifteenth day of March, June, September and December in each year
(each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (i) $10 or
(ii) subject to the provision for adjustment hereinafter set forth,
100 times the aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend
Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series A Junior Participating Preferred Stock. In the event the
corporation shall at any time after the declaration of rights to
purchase Series A Junior Participating Preferred Stock (a "Rights
Declaration Date") (x) declare any dividend on Common Stock payable in
shares of Common Stock, (y) subdivide the outstanding Common Stock or
(z) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount to which holders of shares
of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) The corporation shall declare a dividend or
distribution on the Series A Junior Participating Preferred Stock as
provided in paragraph (a) above immediately after it declares a
dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $10 per
share on the Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
-5-
<PAGE>
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock
from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series A Junior Participating Preferred Stock,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series A Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
no more than 30 days prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock
shall entitle the holder thereof to 100 votes on all matters submitted
to a vote of the stockholders of the corporation. In the event the
corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the
holders of shares of Series A Junior Participating Preferred Stock and
the holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of stockholders of the corporation.
-6-
<PAGE>
(c) (i) If at any time dividends on any Series A Junior
Participating Preferred Stock shall be in arrears in an amount equal
to six quarterly dividends thereon, the occurrence of such contingency
shall mark the beginning of a period (herein called a "default
period") which shall extend until such time when all accrued and
unpaid dividends for all previous quarterly dividend periods and for
the current quarterly dividend period on all shares of Series A Junior
Participating Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default
period, all holders of Preferred Stock (including holders of the
Series A Junior Participating Preferred Stock) with dividends in
arrears in an amount equal to six quarterly dividends thereon, voting
as a class, irrespective of series, shall have the right to elect two
Directors.
(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(c) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders
of any other series of Preferred Stock, if any, to increase, in
certain cases, the authorized number of Directors shall be exercised
unless the holders of 10% in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any meeting
at which the holders of Preferred Stock shall exercise such voting
right initially during an existing default period, they shall have the
right, voting as a class, to elect Directors to fill such vacancies,
if any, in the Board of Directors as may then exist up to two
Directors or, if such right is exercised at an annual meeting, to
elect two Directors. If the number which may be so elected at any
special meeting does not amount to the required number, the holders of
the Preferred Stock shall have the right to make such increase in the
number of Directors as shall be necessary to permit the election by
them of the required number. After the holders of the Preferred Stock
shall have exercised their right to elect Directors in any default
period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the
rights of any equity securities ranking senior to or PARI PASSU with
the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect Directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than 10%
of the total number of shares of Preferred Stock outstanding,
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<PAGE>
irrespective of series, may request, the calling of a special meeting
of the holders of Preferred Stock, which meeting shall thereupon be
called by the President, a Vice President or the Secretary of the
corporation. Notice of such meeting and of any annual meeting at
which holders of Preferred Stock are entitled to vote pursuant to this
subparagraph (iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to the holder at his
or her last address as the same appears on the books of the
corporation. Such meeting shall be called for a time not earlier than
20 days and not later than 60 days after such order or request or in
default of the calling of such meeting within 60 days after such order
or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than 10%
of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this subparagraph (iii), no such
special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of
the stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the corporation if applicable,
shall continue to be entitled to elect the whole number of Directors
until the holders of Preferred Stock shall have exercised their right
to elect two Directors voting as a class, after the exercise of which
right (x) the Directors so elected by the holders of Preferred Stock
shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period
and (y) any vacancy in the Board of Directors may (except as provided
in subparagraph (ii) of this Section 3(c)) be filled by vote of a
majority of the remaining Directors theretofore elected by the holders
of the class of stock which elected the Director whose office shall
have become vacant. References in this subparagraph to Directors
elected by the holders of a particular class of stock shall include
Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to
elect Directors shall cease, (y) the term of any Directors elected by
the holders of Preferred Stock as a class shall terminate and (z) the
number of Directors shall be such number as may be provided for in the
Certificate of Incorporation or Bylaws irrespective of any increase
made pursuant to the provisions of subparagraph (ii) of this Section
3(c) (such number being subject, however, to change thereafter in any
manner provided by law or in the Certificate of Incorporation or
Bylaws). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
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(d) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred
Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Junior Participating Preferred Stock
outstanding shall have been paid in full, the corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Participating Preferred Stock, except dividends paid
ratably on the Series A Junior Participating Preferred Stock and all
such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Junior Participating Preferred Stock, provided that the
corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of
the corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration
any shares of Series A Junior Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
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(b) The corporation shall not permit any subsidiary of the
corporation to purchase or otherwise acquire for consideration any
shares of stock of the corporation unless the corporation could, under
paragraph (a) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
5. REACQUIRED SHARES; SUBSEQUENT BOARD ACTIONS. Any shares of
Series A Junior Participating Preferred Stock purchased or otherwise
acquired by the corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on
issuance set forth herein. In addition, at any time that there are no
shares of Series A Junior Participating Preferred Stock or rights to
purchase the same outstanding, the Board of Directors, acting by
resolution duly adopted, may file a Certificate of Designation,
Preferences and Rights pursuant to Section 151 of the General
Corporation Law of the State of Delaware providing that the Series A
Junior Participating Preferred Stock shall become authorized but
unissued shares of Preferred Stock and may be reissued as part of a
new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the corporation, no distribution shall be
made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto,
the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued
and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series
A Liquidation Preference, no additional distributions shall be made to
the holders of shares of Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall
have received an amount per share (the "Common Adjustment") equal to
the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in
subparagraph (c) below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock)
(such number in clause (ii), the "Adjustment Number"). Following the
payment of the full amount of the Series A Liquidation Preference and
the Common Adjustment in respect of all outstanding shares of Series A
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Junior Participating Preferred Stock and Common Stock, respectively,
holders of Series A Junior Participating Preferred Stock and holders
of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to one with respect to such Series A
Junior Participating Preferred Stock and Common Stock, on a per share
basis, respectively.
(b) In the event, however, that there are no sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of
Preferred Stock, if any, which rank on the parity with the Series A
Junior Participating Preferred Stock, then such remaining assets shall
be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event,
however, that there are no sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets
shall be distributed ratably to the holders of Common Stock.
(c) In the event the corporation shall at any time after
the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number
in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
7. CONSOLIDATION, MERGER, ETC. In case the corporation shall
enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other property, then in any
such case the shares of Series A Junior Participating Preferred Stock
shall at the same time be similarly exchanged or changed in an amount
per share (subject to the provision for adjustment hereinafter set
forth) equal to 100 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be,
into which or for each share of Common Stock is changed or exchanged.
In the event the corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or
(iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A
Junior Participating Preferred Stock shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
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the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
8. NO REDEMPTION. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
9. RANKING. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms
of any such series shall provide otherwise.
10. AMENDMENT. The Certificate of Incorporation of the
corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights
of the Series A Junior Participating Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Junior
Participating Preferred Stock, voting separately as a class.
11. FRACTIONAL SHARES. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holders fractional shares, to exercise
voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Junior
Participating Preferred Stock.
ARTICLE V. The incorporator of the corporation is Craig A.
Anderson, whose mailing address is P.O. Box 66, 29705 453rd Avenue, Irene,
South Dakota 57037-0066.
ARTICLE VI. Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them and/or
between this corporation and its stockholders or any class of them, a court
of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under <Section>291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this corporation under <Section>279 of
Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three fourths in value
of the creditors or class of creditors, and/or of the stockholders or class
of stockholders of this corporation, as the case may be, agree to such
compromise or arrangement and to any reorganization of this corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court
to which the said application has been made, be binding on all the
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creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
ARTICLE VII. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
(A) To make, amend or repeal the Bylaws of the corporation.
(B) To authorize and cause to be executed mortgages and liens
upon the real and personal property of the corporation.
(C) To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper purpose
and to abolish any such reserve in the manner in which it was created.
(D) To designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board
may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any
meeting of the committee. The Bylaws may provide that in the absence
or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting,
whether or not the member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at
the meeting in place of any such absent or disqualified member. Any
such committee, to the extent provided in the resolution of the Board
of Directors, or in the Bylaws of the corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers
which may require it; but no such committee shall have the power or
authority in reference to the following matters: (1) approving or
adopting, or recommending to the stockholders, any action or matter
expressly required by the Delaware General Corporation Law to be
submitted to stockholders for approval or (2) adopting, amending or
repealing any Bylaw of the corporation.
(E) When and as authorized by the stockholders in accordance
with law, to sell, lease or exchange all or substantially all of the
property and assets of the corporation, including its goodwill and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or
property including shares of stock in, and/or other securities of, any
other corporation or corporations, as the Board of Directors shall
deem expedient and in the best interests of the corporation.
(F) To appoint and determine the duties of the officers of the
corporation and to establish the rights, powers, duties, rules and
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procedures that (1) govern the Board of Directors, including without
limitation the vote required for any action by the Board of Directors
and (2) affect the directors' power to manage the affairs of the
corporation.
(G) To create and issue, by way of distributions to
stockholders, as dividends or otherwise, rights or options entitling
the holders thereof to purchase from the corporation shares of any
class or series of the corporation's capital stock. Such rights or
options shall be evidenced in such manner as the Board shall approve
and shall set forth the terms upon which, the time within which and
the price at which such shares may be purchased from the corporation
upon the exercise of any such right or option. The terms and
conditions of such rights or options may include, without limitation,
provisions which adjust the option price or number of shares issuable
under such rights or options in the event of an acquisition of shares
or a reorganization, merger, consolidation, sale of assets or other
occurrence involving the corporation, and restrictions or conditions
that preclude or limit the entitlement, exercise or transfer of such
rights or options by any person or persons who, after the date of
creation or issuance of such rights or options, acquires, obtains the
right to acquire or offers to acquire, directly or indirectly,
beneficial ownership of a specified number or percentage of the
corporation's outstanding voting shares or other shares of the
corporation, or that invalidate or void such rights or options held by
any such person or persons.
(H) No Bylaw shall be adopted by stockholders which shall impair
or impede the implementation of the foregoing.
ARTICLE VIII. Members of the Board of Directors of the
corporation shall be elected, replaced and removed as follows:
(A) The number of directors shall be determined from time to
time by resolution of the Board of Directors, provided that a vacancy
in the Board of Directors need not be filled immediately, and until
filled, such lesser number shall constitute the entire Board of
Directors. Except as otherwise provided in this Article, directors
shall be elected at the annual meeting of stockholders, and each such
director elected shall hold office until the annual meeting for the
year in which the director's term expires and until the director's
successor is elected. A director need not be a stockholder, a citizen
of the United States or a resident of the State of Delaware.
(B) The Board of Directors shall be divided into three classes
as nearly equal in number as possible, with the term of office of one
class expiring each year. At each annual meeting of the stockholders,
the successors of the class of directors whose term expires at that
meeting shall be elected to hold office for a term expiring at the
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annual meeting of stockholders held in the third year following the
year of their election.
(C) Subject to the rights of holders of any classes or series of
Preferred Stock then outstanding, only persons who are nominated in
accordance with the following procedures shall be eligible for
election as directors:
(1) Nominations of candidates for election as
directors of the corporation at an annual meeting may be
made at the annual meeting of stockholders by or at the
direction of the Board of Directors by any nominating
committee or person appointed by the Board or by any
stockholder of the corporation entitled to vote for the
election of Directors at the annual meeting who complies
with any notice procedures contained in the corporation's
Bylaws.
(2) Nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely
notice in writing to the Secretary of the corporation. To
be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of
the corporation not less than 120 days prior to the date of
the meeting in the case of an annual meeting, and not more
than seven days following the date of notice of the meeting
in the case of a special meeting. Such stockholder's notice
to the Secretary shall set forth: (a) as to each person
whom the stockholder proposes to nominate for election or
re-election as a director, (i) the name, age, business
address and residence address of the person; (ii) the
principal occupation or employment of the person; (iii) the
class and number of shares of capital stock of the
corporation which are beneficially owned by the person and
(v) such other information relating to the person that is
required to be disclosed in solicitations for proxies for
election of directors pursuant to Rule 14a under the
Securities Exchange Act of 1934, as amended; and (b) as to
the stockholder giving the notice (i) the name and record
address of the stockholder and (ii) the class and number of
shares of capital stock of the corporation which are
beneficially owned by the stockholder. The corporation may
require any proposed nominee to furnish such other
information as may reasonably be required by the corporation
to determine the eligibility of such proposed nominee to
serve as director of the corporation. No person shall be
eligible for election as a director of the corporation
unless nominated in accordance with the procedures set forth
herein.
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(3) The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a
nomination was not made in accordance with the foregoing
procedure, and if the chairman so determines, the chairman
shall so declare to the meeting and the defective nomination
shall be disregarded.
(D) Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any vacancy occurring in the Board
of Directors caused by resignation, removal, death, disqualification
or other incapacity, and any newly created directorships resulting
from an increase in the number of directors, shall be filled by a
majority vote of directors then in office whether or not a quorum and
shall not be filled by the stockholders. When the number of directors
is changed, any newly created or eliminated directorship shall be so
apportioned among the classes of directors as to make all classes as
nearly equal in number as possible. Each director chosen to fill a
vacancy or newly created directorship shall hold office for the term
coinciding with the class of his or her directorship and until his
successor shall be elected and qualify. No decrease in the number of
directors constituting the Board of Directors shall shorten the term
of any incumbent director.
(E) Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any director may be removed from
office at any time by the holders of a majority of the shares entitled
to vote on the election of directors, but only for cause. "Cause" is
present when: (1) the director whose removal is proposed has been
convicted of a felony by a court of competent jurisdiction and such
conviction is no longer subject to direct appeal; (2) the director has
been adjudicated by a court of competent jurisdiction to be liable for
negligence, or misconduct, in the performance of the director's duty
to the corporation in a matter of substantial importance to the
corporation and such adjudication is no longer subject to a direct
appeal; (3) the director has become mentally incompetent, whether or
not so adjudicated, which mental incompetency directly affects the
director's ability as a director of the corporation or (4) the
director's actions or failure to act have been in derogation of the
director's duties, as provided in the Bylaws of the corporation or
otherwise provided by law. Any proposal for removal pursuant
to (3) or (4) that is initiated by the Board of Directors for
submission to the stockholders requires the affirmative vote of at
least two-thirds of the total number of directors then in office,
excluding the director who is the subject of the removal action and
who shall not be entitled to vote thereon.
(F) Any director may resign at any time and such resignation
shall take effect upon receipt thereof by the Chief Executive Officer
or the Secretary unless otherwise specified in the resignation.
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(G) Notwithstanding any provision to the contrary, the
provisions contained in this Section shall not be amended, altered,
modified or repealed, and no provision inconsistent with this Article
may be adopted, except upon either (1) the affirmative vote of the
holders of not less than two-thirds of the outstanding stock of the
corporation entitled to vote in elections of directors or (2) the
affirmative vote of a majority of the whole Board of Directors and the
affirmative vote of the holders of a majority of such outstanding
stock present in person or represented by proxy at any meeting of
stockholders.
(H) (1) No person who has asserted or hereafter asserts
any Claim against the corporation or any Subsidiary (a
"Plaintiff"), and no person who is or becomes an Affiliate
or Associate of any Plaintiff, so long as such person
continues to be such an Affiliate or Associate (a "Related
Person"), shall be eligible to be elected or to serve as a
director of the corporation until after such Claim is
Finally Resolved, PROVIDED, that a director of the
corporation who is validly nominated and elected a director
and who thereafter becomes a Plaintiff or Related Person
shall not solely by reason of becoming a Plaintiff or
Related Person cease to be a director, but rather shall
continue as a director for the remainder of the term for
which the person was elected or until the person's
resignation or removal; PROVIDED FURTHER, that it shall be
the duty of any such director promptly to notify the Board
of Directors that the person is or has become a Plaintiff or
Related Person and to either promptly take all steps as may
be necessary to cause himself or herself to be neither a
Plaintiff nor Related Person or, if all such steps cannot be
or have not been taken and the person continues to be either
a Plaintiff or Related Person and the pertinent Claim has
not been Finally Resolved within the pertinent Resolution
Period, resign as a director of the corporation, effective
immediately, at or before the end of such Resolution Period.
(2) For purposes of this Section, the definitions set
forth in Article X shall apply to such terms used in this
Article as if the definitions were fully restated in this
Article. In addition, the following terms shall have the
following respective meanings:
(a) In addition to the definition of "Control"
set forth in Article X, for purposes of this Article, a
controlling relationship between any person and another
person shall be deemed to exist whenever (but shall not
be limited to a situation in which) the former person
directly or indirectly holds or owns at least 15% of
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the outstanding securities of any class or series of
voting securities issued by, or at least 15% of the
aggregate voting power with respect to, the latter
person.
(b) "Claim" means any claim, cross-claim,
counterclaim or third-party claim pled in any action,
suit or proceeding (whether at law, in equity or
otherwise and regardless of the character of the relief
sought) before or subject to the jurisdiction of any
court, governmental agency or instrumentality,
arbitrator or similar body or authority, other than:
(i) one which, when aggregated with all
other claims, cross-claims, counterclaims and
third-party claims asserted by the pertinent
Plaintiff or any Related Person of such Plaintiff
against the corporation or any Subsidiary that
have not been Finally Resolved, if decided
adversely to the corporation or a Subsidiary,
along with all other aggregated claims, cross-claims,
counterclaims and third-party claims,
could not result in an order or orders compelling
the corporation and/or any of its Subsidiaries to
pay out or otherwise dispose of cash or any other
assets having an aggregate value in excess of 10%
of the consolidated current assets of the
corporation as of the quarter then most recently
ended or render the corporation insolvent; or
(ii) one arising pursuant to a contract
between the corporation and the pertinent
Plaintiff or Related Person that was approved by a
majority of the Continuing Directors (as defined
in Article X of this Certificate of
Incorporation), including without limitation
claims arising under any indemnity or employment
contract; or
(iii) one asserted in the right of the
corporation.
(c) When used with respect to any particular
Claim, the term "Finally Resolved" means that a final
order has been rendered with respect to such Claim and
all available appeals from such order have been
exhausted or the time for seeking such review has
expired.
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(d) "Resolution Period" means, in any case, the
30-day period beginning on the earlier of (i) the date
on which a director of the corporation notifies the
Board of Directors that such director has become a
Plaintiff or Related Person or (ii) the date on which
the Board of Directors determines that a director of
the corporation has become a Plaintiff or Related
Person; PROVIDED, that the Board of Directors may (but
is not required to) extend a Resolution Period for one
period not to exceed 15 additional days if the director
establishes to the Board's satisfaction a reasonable
likelihood that during such extended period the
pertinent Claim will be Finally Resolved or such
director will cease to be both a Plaintiff and a
Related Person.
(3) The Board of Directors of the corporation (acting
by at least a majority of all directors, excluding any who
have acknowledged themselves to be or have been determined
to be Plaintiffs or Related Persons at the time of such
Board action and excluding any director or directors whose
status as Plaintiff or Related Person is the subject of such
action) shall have the authority to determine whether any
director of the corporation is or is not or has ceased to be
a Plaintiff or Related Person, and the Board of Directors
(acting by at least a majority of all directors, excluding
any who have acknowledged themselves to be or have been
determined to be Plaintiffs or Related Persons and, if the
matter at issue relates to the next annual meeting of
stockholders of the corporation to occur after such Board
action, excluding any director whose term of office would
expire at such meeting and who at the time of such action
has not irrevocably decided not to stand for reelection)
shall have the authority to determine whether any person
nominated or proposed for nomination as a director or who is
the subject of a stockholder request as provided below is
ineligible to be so nominated and elected by virtue of being
a Plaintiff or Related Person. Each such Board
determination shall be based upon such information as has
been brought to the attention of the Board (whether in a
stockholder request or otherwise) at the time such
determination is made, and no Board determination that any
director or other person is or is not or has ceased to be a
Plaintiff or Related Person shall preclude the Board from
reconsidering the matter and making the contrary
determination in light of any facts or circumstances first
coming to the attention of the Board after the prior
determination was made.
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(4) The Board of Directors shall not nominate any
person for election as a director of the corporation unless
such prospective nominee has provided the Board with (i) all
such information as the Board (or any member thereof not
excluded from determining the status of such person as a
Plaintiff or Related Person) has deemed necessary or
appropriate to enable the Board to determine such status and
(ii) a signed statement by the prospective nominee that such
person, having reviewed this Section, is aware of no reason
not disclosed to the Board why he or she would or might be
considered a Plaintiff or Related Person (which statement
also shall include an undertaking by such person that if he
or she is nominated, such person promptly will inform the
Board, by written notice to the Chairman of the Board or the
Secretary of the corporation, if at any time prior to the
election to which such person's nomination relates he or she
becomes aware of any fact or circumstance, whether in
existence on the date such undertaking is given or arising
afterward, which has given such person any reason to believe
that the person is or might be considered a Plaintiff or
Related Person), and unless after receipt of such
information and such statement, the Board has determined
that the prospective nominee is not a Plaintiff or Related
Person.
(5) Any stockholder who is uncertain whether any
person the stockholder desires to nominate for election as a
director of the corporation (a "candidate") is a Plaintiff
or Related Person may request a determination from the Board
concerning that matter. Any such request must be in
writing, identify the candidate, set forth all reasons why
the stockholder has such uncertainty concerning the
candidate, explain why the stockholder believes that the
candidate should not be considered a Plaintiff or Related
Person and include an undertaking by or on behalf of the
stockholder that, if the candidate is determined not to be a
Plaintiff or Related Person, the stockholder promptly will
inform the Board in the manner specified in Paragraph (4)
above if any time prior to the election of directors next
occurring the stockholder learns of any fact or circumstance
(whether in existence on the date of the request or arising
afterward) which has given the stockholder any other reason
to believe that or to be uncertain whether the candidate is
or might be considered a Plaintiff or Related Person. Any
such request also must be accompanied by a signed statement
of the candidate to which the request relates stating that,
having reviewed this Section and the request, the candidate
knows of no reason not stated in the request why the
candidate would or might be considered a Plaintiff or
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Related Person and believes for the reasons stated in the
request that he or she should not be considered a Plaintiff
or Related Person, which statement also shall include an
undertaking by the candidate comparable to that of the
requesting stockholder. With respect to any meeting at which
directors are to be elected, a stockholder may submit
requests as to any number of candidates up to and including
five times the number of directors to be elected at such
meeting. A request may be submitted at any time at which
the stockholder properly may give notice of intent to
nominate a candidate for election as a director (other than
a time at which such giving of notice of intent is proper
only by virtue of the provisions of Paragraph (7) of this
Section) and no request may be submitted at any other time.
No request shall be deemed "submitted" for any purposes
hereunder unless and until it is delivered in person to the
Chairman of the Board or the Secretary of the corporation or
delivered to the principal offices of the corporation
addressed to the attention of the Chairman or the Secretary.
No request shall constitute a notice of intent to nominate
any candidate unless it expressly states that it is intended
as such a notice and it otherwise complies with all
applicable requirements for such a notice. Neither
submission of a request, nor any action taken thereafter
with respect to such request, shall operate as a waiver of
or otherwise relieve any stockholder of any otherwise
applicable procedural requirements respecting nomination of
director candidates, except as and to the extent
contemplated in Paragraph (7).
(6) If any request satisfying the requirements of
Paragraph (5) is timely and properly submitted, the Board of
Directors, within 10 days following the date such request is
submitted (or, if it is impossible or impracticable to do so
during such period, as soon as practicable thereafter),
shall consider the request and determine whether the
candidate who is the subject of the request is ineligible to
be nominated or elected a director by virtue of being a
Plaintiff or Related Person. As promptly as possible
following such action, the requesting stockholder shall be
notified in writing of the nature of such determination and,
if the determination made is that the candidate is a
Plaintiff or Related Person, the basis for such
determination. In any other case in which the Board
determines that any candidate as to which a notice of intent
to nominate has been given is ineligible to be nominated or
elected a director by virtue of being a Plaintiff or Related
Person (including any case in which a contrary determination
previously has been made in response to a stockholder
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request), the stockholder that gave such notice of intent
shall be notified in writing of such determination and the
basis therefor as promptly as possible thereafter.
(7) If a candidate who is the subject of a proper and
timely submitted request meeting the requirements of
Paragraph (5) is determined by the Board not to be a
Plaintiff or Related Person and the request was submitted at
least five days in advance of the last date on which the
requesting stockholder otherwise would have been entitled to
give notice of intent to nominate such candidate, then the
Board's determination shall operate as a waiver of the time
limits otherwise applicable to the giving of such notice of
intent to the extent, if any, necessary to afford the
stockholder a period of five days following the date on
which notice of the Board's determination is given to the
stockholder within which to give notice of intent to
nominate such candidate. If, in response to a timely and
properly submitted request, the Board determines that the
candidate who is the subject of the request is a Plaintiff
or Related Person and the request was submitted at least
five days in advance of the last date on which the
requesting stockholder otherwise would have been entitled to
give notice of intent to nominate, then the Board's
determination shall operate as a waiver of the time limits
otherwise applicable to the giving of notice of intent to
nominate to the extent, if any, necessary to afford the
requesting stockholder a period of 15 days following the
date on which notice of the Board's determination is given
to the stockholder within which to give notice of intent to
nominate another person in lieu of the ineligible candidate.
In any other case in which the Board determines that a
candidate is a Plaintiff or Related Person, such
determination shall operate as a waiver if and only to the
extent expressly so provided in the resolutions setting
forth such determination or subsequent Board resolution.
Whenever any stockholder is afforded an additional time
period within which to give notice of intention to nominate,
the Board may afford the other stockholders of the
corporation a comparable additional period of time within
which to give such notice.
ARTICLE IX. Any action required to be taken or which may be
taken at any annual or special meeting of stockholders of the corporation
may be taken without a meeting by written consents setting forth the action
so taken signed by the holders of all shares of stock of the corporation
entitled to vote thereon.
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ARTICLE X.
(A) In addition to any affirmative vote required by (1) law and
(2) this Certificate of Incorporation, including, without limitation,
Article XII, and except as otherwise expressly provided in Section (B)
of this Article, the affirmative vote of the holders of not less than
80% of the outstanding shares of Voting Stock shall be required for
the approval or authorization of any Business Combination of the
corporation or any Subsidiary of the corporation with any Interested
Stockholder (as these terms are defined below).
(B) The provisions of paragraph (A) of this Article shall not
apply to any transaction which shall have been approved by a majority
of the Continuing Directors (as defined below).
(C) For the purposes of this Article and Articles XI through XV,
the following definitions shall apply:
(1) An "Affiliate" of a specified person is any person
that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under
common control with, the specified person;
(2) An "Associate" of a specified person is:
(a) Any corporation, partnership, unincorporated
association or other entity of which such person is a
director, officer or partner or is, directly or
indirectly, the owner of 20% or more of any class of
Voting Stock;
(b) Any trust or other estate in which the person
has a beneficial interest of 20% or more or as to which
such specified person serves as trustee or in a similar
fiduciary capacity in connection with the trust or
estate; or
(c) Any relative or spouse of the person, or any
relative of the spouse, who has the same residence as
such person.
(3) The term "Business Combination" means:
(a) Any merger or consolidation of the
corporation or any Subsidiary with an Interested
Stockholder or any other corporation, partnership,
unincorporated association or other entity if the
merger or consolidation is caused by the Interested
Stockholder and as a result of such merger or
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consolidation Section 203(a) of the General Corporation
Law of the State of Delaware is not applicable to the
surviving entity;
(b) The sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of transactions), except proportionately as a
stockholder of such corporation, to or with an
Interested Stockholder, whether as part of a
dissolution or otherwise, of assets of the corporation
or of any Subsidiary which assets have an aggregate
market value equal to 10% or more of either the
aggregate market value of all the assets of the
corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of
the corporation;
(c) Any transaction which results in the issuance
or transfer by the corporation or by any Subsidiary of
any stock of the corporation or of such Subsidiary to
an Interested Stockholder, except (i) pursuant to the
exercise, exchange or conversion of securities
exercisable for, exchangeable for or convertible into
stock of such corporation or any such Subsidiary which
securities were outstanding prior to the time that the
Interested Stockholder became such; (ii) pursuant to a
merger under Section 251(g) of the General Corporation
Law of the State of Delaware; (iii) pursuant to a
dividend or distribution paid or made, or the exercise,
exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of such
corporation or any such Subsidiary which security is
distributed, pro rata to all holders of a class or
series of stock of such corporation subsequent to the
time the Interested Stockholder became such; (iv)
pursuant to an exchange offer by the corporation to
purchase stock made on the same terms to all holders of
said stock; or (v) any issuance or transfer of stock by
the corporation, PROVIDED, HOWEVER, that in no case
under (iii)-(v) above shall there be an increase in the
Interested Stockholder's proportionate share of the
stock of any class or series of the corporation or of
the voting stock of the corporation;
(d) Any transaction involving the corporation or
any Subsidiary which has the effect, directly or
indirectly, of increasing the proportionate share of
the stock of any class or series, or securities
convertible into the stock of any class or series, of
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the corporation or of any Subsidiary which is owned by
the Interested Stockholder, except as a result of
immaterial changes due to fractional share adjustments
or as a result of any purchase or redemption of any
shares of stock not caused, directly or indirectly, by
the Interested Stockholder; or
(e) Any receipt by the Interested Stockholder of
the benefit, directly or indirectly (except
proportionately as a stockholder of such corporation)
of any loans, advances, guarantees, pledges or other
financial benefits (other than those expressly
permitted in (a)-(d) above) provided by or through the
corporation or any Subsidiary.
As used in this definition, a "series of related
transactions" shall be deemed to include not only a series
of transactions with the same Interested Stockholder, but
also a series of separate transactions with an Interested
Stockholder or any Affiliate or Associate of such Interested
Stockholder.
(4) A "Continuing Director" is a member of the Board
of Directors who is not an Affiliate, Associate or a
representative of the Interested Stockholder and was either
(a) first elected as a director prior to the time that the
Interested Stockholder became an Interested Stockholder or
(b) was designated, before the person's initial election as
a director, as a Continuing Director by a majority of the
then Continuing Directors; PROVIDED, HOWEVER, that the term
"Continuing Director" specifically excludes any individual
whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as that
term is used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended) or
other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the
corporation's Board of Directors.
(5) "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of
the management and policies of a person, whether through the
ownership of voting stock, by contract or otherwise. A
person who is the owner of 20% or more of the outstanding
Voting Stock of any corporation, partnership, unincorporated
association or other entity shall be presumed to have
control of such entity, in the absence of proof by a
preponderance of the evidence to the contrary.
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(6) "Equity security" means any one of the following:
(a) Any stock or similar security, certificate of
interest or participation in any profit-sharing
agreement, voting trust certificate or voting share;
(b) Any security convertible, with or without
consideration, into an equity security or any warrant
or other security carrying any right to subscribe to or
purchase an equity security;
(c) Any put, call, straddle or other option or
privilege of buying an equity security from or selling
an equity security to another without being bound to do
so.
(7) The term "Interested Stockholder" means:
(a) Any person (other than the corporation and
any Subsidiary) that is the owner of 10% or more of the
corporation's outstanding voting stock; or
(b) Any person that is an Affiliate or Associate
of the corporation and was the owner of 10% or more of
the corporation's outstanding voting stock at any time
within the three-year period immediately prior to the
date on which it is sought to be determined whether
such person is an Interested Stockholder, and the
Affiliates and Associates of such person.
(8) A person shall be an "owner" of any Voting Stock
if the person individually or with or through any of its
Affiliates or Associates:
(a) beneficially owns such stock, directly or
indirectly;
(b) has (i) the right to acquire such stock
(whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, warrants or
options, or otherwise; PROVIDED, HOWEVER, that a person
shall not be deemed the owner of stock tendered
pursuant to a tender or exchange offer made by such
person or any of such person's Affiliates or Associates
until such tendered stock is accepted for purchase or
exchange or (ii) the right to vote such stock pursuant
to any agreement, arrangement or understanding,
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PROVIDED, HOWEVER, that a person shall not be deemed
the owner of any stock because of such person's right
to vote such stock if the agreement, arrangement or
understanding to vote such stock arises solely from a
revocable proxy or consent given in response to a proxy
or consent solicitation made to 10 or more persons; or
(c) has any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting (except voting pursuant to a revocable proxy or
consent as described in item (ii) of clause (b) of this
paragraph), or disposing of such stock with any other
person that beneficially owns, or whose affiliates or
associates beneficially own, directly or indirectly,
such stock.
(9) The term "person" means any individual,
corporation, partnership, unincorporated association or
other entity.
(10) The term "Subsidiary" means any corporation of
which a majority of any class of equity security is owned,
directly or indirectly, by the corporation; provided, that
for the purposes of the definition of Interested Stockholder
set forth in paragraph (7) of this Section (C), the term
"Subsidiary" shall mean only a corporation of which a
majority of each class of equity security is owned, directly
or indirectly, by the corporation.
(11) The term "Substantial Part" shall mean more than
10% of the total consolidated assets of the corporation in
question as of the end of the most recent fiscal year ended
prior to the time the determination is being made.
(12) The term "Voting Stock" shall mean stock of any
class or series entitled to vote generally in the election
of directors and, with respect to any entity that is not a
corporation, any equity interest entitled to vote generally
in the election of the governing body of such entity. Each
reference in this Article to a percentage of shares of
Voting Stock shall refer to the percentage of the votes
entitled to be cast by such shares.
(D) For purposes of determining whether a person is an
Interested Stockholder, the number of shares of Voting Stock deemed to
be outstanding shall include shares deemed owned by that person
through application of paragraph (C), defining "owner," but shall not
include any other shares of Voting Stock which may be issuable
pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options or otherwise.
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(E) A majority of the Continuing Directors shall have the power
and duty to determine, for purposes of this Article and Article XII,
on the basis of information known to them:
(1) The number of Voting Stock of which any person is
the beneficial owner;
(2) Whether a person is an Affiliate or Associate of
another;
(3) Whether a person has an agreement, arrangement or
understanding with another as to the matters referred to in
the definition of "owner" set forth above;
(4) Whether the assets subject to any Business
Combination constitute a "Substantial Part" as defined
above;
(5) Whether two or more transactions constitute a
"series of related transactions" as described above; and
(6) Such other matters with respect to which a
determination is required under this Article and Article
XII.
Any such determination shall be conclusive and binding for all
purposes of this Article and Article XII.
ARTICLE XI. The Board of Directors shall not initiate, approve,
adopt or recommend any offer of any party other than the corporation to
make a tender or exchange offer for any equity security of the corporation,
or to engage in any Business Combination, unless and until it shall have
first evaluated the proposed offer and determined in its judgment that the
proposed offer would be in compliance with all applicable laws. In
evaluating a proposed offer to determine whether it would be in compliance
with law, the Board of Directors shall consider all aspects of the proposed
offer, including the manner in which the offer is proposed to be made, the
documents proposed for the communication of the offer and the effects and
consequences of the offer if consummated, in the light of the laws of the
United States of America and affected states and foreign countries. In
connection with this evaluation, the Board may seek and rely upon the
opinion of independent legal counsel and it may test the legality of the
proposed offer in any state, federal or foreign court or before any state,
federal or foreign administrative agency which may have jurisdiction. If
the Board of Directors determines in its judgment that a proposed offer
would be in compliance with all applicable laws, the Board of Directors
shall then evaluate the proposed offer and determine whether the proposed
offer is in the best interests of the corporation and its stockholders; the
Board of Directors shall not initiate, approve, adopt or recommend any such
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offer which in its judgment would not be in the best interests of the
corporation and its stockholders. In evaluating a proposed offer to
determine whether it would be in the best interests of the corporation and
its stockholders, the Board of Directors shall consider all factors which
it deems relevant including, without limitation:
(A) The fairness of the consideration to be received by the
corporation and its stockholders under the proposed offer, taking into
account the trading price of the corporation's stock immediately prior
to the announcement of the proposed offer, the historical trading
prices of the corporation's stock, the price that might be achieved in
a negotiated sale of the corporation as a whole, premiums over the
trading price of their securities which have been proposed or offered
to other companies in the past in connection with similar offers and
the future prospects of the corporation;
(B) The possible social and economic impact of the proposed
offer and its consummation on the corporation and its employees,
customers and suppliers;
(C) The possible social and economic impact of the proposed
offer and its consummation on the communities in which the corporation
and its Subsidiaries operate or are located;
(D) The business and financial conditions and earnings prospects
of the offering party, including, without limitation, debt service and
other existing or likely financial obligations of the offering party;
(E) The competence, experience and integrity of the offering
party and its management; and
(F) The intentions of the offering party regarding the use of
the assets of the corporation to finance the transaction.
ARTICLE XII.
(A) In addition to any affirmative vote required by (1) law and
(2) the other provisions of this Certificate of Incorporation,
including without limitation Article X and except as otherwise
expressly provided in paragraph (B) of this Article, the affirmative
vote of not less than 80% of the outstanding shares of Voting Stock
held by stockholders who are not Interested Stockholders shall be
required for the approval or authorization of any Business Combination
of the corporation or any Subsidiary with any Interested Stockholder
(as these terms are defined in Article X).
(B) The provisions of paragraph (A) of this Article shall not
apply to any particular Business Combination, and such Business
Combination shall require only such affirmative vote as is required by
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law and any other provision of this Certificate of Incorporation, if
either of the following paragraphs (1) or (2) apply:
(1) The Business Combination shall have been approved
by a majority of the Continuing Directors; or
(2) All of the following conditions shall have been
met:
(a) The Business Combination will result in an
involuntary sale, redemption, cancellation or other
termination of ownership of shares of any class of
Voting Stock of the corporation owned by stockholders
who do not vote in favor of the Business Combination
and the aggregate amount of the cash and the market
value as of the valuation date of other readily
marketable consideration to be received by such
stockholders for such shares shall be at least equal to
the Minimum Price Per Share;
(b) The consideration to be received by holders
of a particular class of outstanding Voting Stock shall
be in cash or in the same form as the Interested
Stockholder has previously paid for shares of such
class of Voting Stock. If the Interested Stockholder
has paid for shares of any class of Voting Stock in
varying forms of consideration, the form of
consideration of such class of Voting Stock shall be
either cash or the form used to acquire the largest
number of shares of such class of Voting Stock
previously acquired by it;
(c) From the time the Interested Stockholder
became an Interested Stockholder:
(i) Such Interested Stockholder shall have
taken steps to insure that the corporation's Board
of Directors included at all times representation
by Continuing Directors proportionate to the stock
holdings of the corporation's holders of Voting
Stock not affiliated with such Interested
Stockholder (with a Continuing Director to occupy
any resulting fractional board position);
(ii) There shall have been no reduction in
the rate of dividends payable on the corporation's
stock except as may have been approved by
unanimous vote of the directors;
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(iii) The Interested Stockholder shall
not have acquired any newly issued shares of
stock, directly or indirectly, from the
corporation (except upon conversion of convertible
securities acquired by it prior to becoming an
Interested Stockholder or as a result of a
prorated stock dividend or stock split);
(iv) The Interested Stockholder shall not
have acquired any additional shares of the
corporation's outstanding stock or securities
convertible into stock except as a part of the
transaction which resulted in such person becoming
an Interested Stockholder; and
(v) The Interested Stockholder shall not
have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any
loans, advances, guarantees, pledges or other
financial assistance or tax credits provided by
the corporation, nor made any major change in the
corporation's business or equity capital structure
without the unanimous approval of the directors,
in either case prior to the consummation of the
Business Combination.
(d) A proxy statement responsive to the
requirements of the Securities Exchange Act of 1934, as
amended, shall have been mailed to all stockholders of
the corporation for the purpose of soliciting
stockholder approval of the Business Combination
containing at the front thereof in a prominent place
any recommendations as to the advisability (or
inadvisability) of the Business Combination which the
Continuing Directors, or any of them, may choose to
state and, if deemed advisable by a majority of the
Continuing Directors, an opinion of a reputable
investment banking firm as to the fairness (or not) of
the terms of the Business Combination, from the point
of view of the remaining public stockholders of the
corporation (such investment banking firm to be
selected by a majority of the Continuing Directors and
to be paid a reasonable fee for its services by the
corporation upon receipt of such opinion); and
(e) There has been five years between the date
that the Interested Stockholder became an Interested
Stockholder and the date that the Business Combination
is consummated.
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(C) For the purposes of this Article the following definitions shall
apply:
(1) All the definitions set forth in Article X(C)
shall apply as if fully restated here;
(2) "Minimum Price Per Share" means the sum of (a) the
highest per share price as determined below, and (b) the
aggregate amount, if any, by which 6% per year of such
highest per share price exceeds the aggregate amount of all
stock dividends per share paid in cash since the
Determination Date. For Common Stock, the highest per share
price is the highest of the following:
(a) The highest per share price, including any
brokerage commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Stockholder
within the five-year period immediately prior to the
Announcement Date, or in the transaction in which the
stockholder became an Interested Stockholder, whichever
is higher.
(b) The highest per share price bid in the public
market for such Common Stock during the five years
immediately preceding the Announcement Date.
For any class or series of outstanding stock other than
Common Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class or
series of stock, the highest per share price is the highest
of the following:
(a) The highest per share price, including any
brokerage, commissions, transfer taxes and soliciting
dealers' fees, paid by the Interested Stockholder for
any shares of the class or series of stock acquired by
it within the five-year period immediately prior to the
Announcement Date, or in the transaction in which the
stockholder became an Interested Stockholder, whichever
is higher.
(b) The highest preferential amount per share to
which the holders of shares of the class or series of
stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of
the corporation.
(c) The highest per share price bid in the public
market for such class or series of stock during the
five years immediately preceding the Announcement Date.
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The calculation of the Minimum Price Per Share shall
require appropriate adjustments for capital changes,
including without limitation stock splits, stock dividends
and reverse stock splits.
(3) "Announcement Date" means the first general public
announcement or the first communication generally to
stockholders of the corporation, whichever is earlier, of
the proposal or intention to make a proposal concerning a
Business Combination.
(4) "Determination Date" means the date on which an
Interested Stockholder first became an Interested
Stockholder.
(5) "Market Value" means either of the following:
(a) With respect to shares, the highest closing
sale price during the 30-day period immediately
preceding the date in question of a share:
(i) As listed on the composite tape for New
York Stock Exchange-listed securities.
(ii) If not listed pursuant to
subparagraph (i), as listed on the composite tape
for American Stock Exchange- listed securities.
(iii) If not listed pursuant to
subparagraph (i) or (ii), as listed on the
composite tape for the principal United States
security exchange registered under the Securities
Exchange Act of 1934, as amended.
(iv) If not listed pursuant to
subparagraph (i), (ii), or (iii), the highest
closing bid during the 30-day period preceding the
date in question as listed on the Nasdaq Stock
Market or any other system then in use.
(v) If a listing is not available pursuant
to sub-paragraphs (i) through (iv), then the fair
market value of the shares on the date in
question, as determined by the Continuing
Directors.
(b) With respect to property other than cash or
shares, the fair market value of the property on the
day in question, as determined by the Continuing
Directors.
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(6) "Valuation Date" means:
(a) In a Business Combination voted upon by
stockholders, the day prior to the date of the
stockholder vote or the day which is 20 calendar days
prior to the consummation of the Business Combination,
whichever is later.
(b) In a Business Combination not voted upon by
stockholders, the date of the consummation of the
Business Combination.
(D) A majority of the Continuing Directors shall have the
power and duty to determine, for purposes of this Article, on the
basis of information known to them:
(1) All the matters set forth in Article X(E);
(2) The market value of any consideration other than
cash to be received by stockholders;
(3) Whether or not any consideration other than cash
to be received by stockholders is readily marketable;
(4) The amount of the Minimum Price Per Share;
(5) Whether or not the consideration to be received by
stockholders is equal to the Minimum Price Per Share; and
(6) Such other matters with respect to which a
determination is required under this Article.
Any such determination shall be conclusive and binding for all
purposes of this Article.
(E) Nothing contained in this Article shall be construed to
relieve any Interested Stockholder from any fiduciary and other
standards of conduct and obligations imposed by law. The fact
that any Business Combination complies with the provisions of
paragraph (B)(2) of this Article shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business
Combination or recommend its adoption or approval to the
stockholders of the corporation, nor shall such compliance limit,
prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of,
or actions and responses taken with respect to, such Business
Combination.
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ARTICLE XIII. No director of the corporation shall be personally
liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty by such director as a director; PROVIDED, HOWEVER,
that his Article shall not eliminate or limit the liability of a director
to the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit. No amendment to or
repeal of this Article shall apply to or have any effect on the liability
or alleged liability of any director of the corporation for or with respect
to any acts or omissions of such director occurring prior to such amendment
or repeal.
ARTICLE XIV. Directors and executive officers of the
corporation shall be indemnified as of right, and shall be entitled to the
advancement of expenses, to the fullest extent now or hereafter permitted
by law in connection with any actual or threatened civil, criminal,
administrative or investigative action, suit or proceeding, (whether
brought by or in the name of the corporation, a subsidiary, or otherwise)
arising out of their service to the corporation or a subsidiary, or to
another organization at the request of the corporation or a subsidiary.
Persons who are not directors or executive officers of the corporation may
be similarly indemnified in respect of such service to the extent
authorized at any time by the Board of Directors of the corporation. The
corporation may purchase and maintain insurance to protect itself and any
such director, officer or other person against any liability asserted
against him or her and incurred by him or her in respect of such service
whether or not the corporation would have the power to indemnify him
against such liability by law or under the provisions of this Article. The
provisions of this Article shall be deemed contractual and shall be
applicable to actions, suits or proceedings, whether arising from acts or
omissions occurring before or after the adoption hereof, and to directors,
officers and other persons who have ceased to render such service, and
shall inure to the benefit of the heirs, executors and administrators of
the directors, officers and other persons referred to in this Article.
ARTICLE XV. The corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and
this Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
(A) No amendment to this Certificate of Incorporation shall
alter, modify or repeal any or all of the provisions of Article XII of
this Certificate of Incorporation, or this paragraph (A) of
Article XV, unless adopted by the affirmative vote of not less than
80% of the outstanding shares of Voting Stock held by stockholders who
are not Interested Stockholders.
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(B) No amendment to this Certificate of Incorporation shall
alter, modify or repeal any or all of the provisions of Articles VII,
VIII, IX, X, XI or XIII of this Certificate of Incorporation, or this
paragraph (B) of Article XV, and the stockholders of the corporation
shall not have the right to alter, modify or repeal any or all
provisions of the Bylaws of the corporation, unless such amendment,
alteration, modification or repeal is adopted by the affirmative vote
of the holders of not less than 80% of the outstanding shares of
Voting Stock; provided, that this paragraph (B) shall not apply to,
and such 80% vote shall not be required for, any amendment,
alteration, modification or repeal which has first been approved by
(1) the affirmative vote of 80 percent of the entire Board of
Directors, which shall include the affirmative vote of at least one
director of each class of the Board of Directors and (2) the
affirmative vote of two-thirds of the Continuing Directors.
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EXHIBIT 4.31
LOAN AGREEMENT
LOAN AGREEMENT ("AGREEMENT") MADE AS OF JUNE 24, 1997, BY AND
BETWEEN DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. A SOUTH DAKOTA
COOPERATIVE ASSOCIATION, AND DAKOTA TELECOM, INC., A SOUTH DAKOTA
CORPORATION, (COLLECTIVELY HEREINAFTER REFERRED TO AS "BORROWER"), AND RURAL
TELEPHONE FINANCE COOPERATIVE, A SOUTH DAKOTA COOPERATIVE ASSOCIATION
("LENDER").
RECITALS
WHEREAS, Borrower has requested Lender to make the Loan(s) to
Borrower described in Schedule 1 hereto; and
WHEREAS, Lender is willing to make the Loan(s) upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, Borrower and Lender do hereby agree as follows:
L. CONSTRUCTION AND DEFINITION OF TERMS
ALL ACCOUNTING TERMS NOT SPECIFICALLY DEFINED HEREIN SHALL
HAVE THE MEANINGS ASSIGNED TO THEM AS DETERMINED BY GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES. IN ADDITION TO THE TERMS DEFINED ELSEWHERE IN THIS
AGREEMENT, UNLESS THE CONTEXT OTHERWISE REQUIRES, WHEN USED HEREIN, THE
FOLLOWING TERMS SHALL HAVE THE FOLLOWING MEANINGS:
"ADJUSTMENT DATE" shall mean a date or dates, determined by
the Lender based on the term (or rate period) of the applicable Fixed Rate,
after the date of the initial Advance to the Maturity Date.
"ADVANCE" shall mean an Advance as defined in Section 2.02.
"BUSINESS DAY" shall mean any day that Lender is open for
business.
"CASH MARGINS" for any year shall mean net income plus
depreciation, amortization and any other non-cash charges, less any non-cash
credits and principal on long-term debt payable in such year, as calculated
on a consolidated basis for Borrower and all its Subsidiaries.
"CERTIFIED" shall mean that the information, statement,
schedule, report or other document required to be "Certified" shall contain a
representation of a duly authorized officer of Borrower that such
information, statement, schedule, report or other document is true and
correct and complete.
<PAGE>
"CLOSING" shall mean the first date on which funds are
advanced to Borrower hereunder.
"COLLATERAL" shall mean the Mortgaged Property, as such term
is defined in the Mortgage, and all proceeds, cash and non-cash, including
insurance proceeds, of the foregoing, whether in the possession of Borrower
or any other person, and certain stock and related proceeds and dividends
described in, and pledged to Lender pursuant to, a Pledge and Security
Agreement dated as of even date herewith (the "Pledge Agreement").
"COMMITMENT" shall have the meaning set forth in Schedule 1
hereto.
"DEBT SERVICE COVERAGE RATIO" OR "DSC" for any year shall mean
(a) total net income or margins plus depreciation and amortization expense,
and interest on long-term debt for such year, divided by (b) principal and
interest on long-term debt payable in such year, as calculated on a
consolidated basis for the Borrower and all its Subsidiaries.
"EVENT OF DEFAULT" shall mean any of the events described in
Section 8 hereof.
"FIXED RATE" shall mean the interest rate per annum provided
for in Section 2.03 of this Agreement.
"LEASES" shall mean any lease of property by which Borrower
shall be obligated for rental or other payments which in the aggregate are in
excess of $100,000 other than such equipment leases which are in form and
substance substantially in conformity with lease agreements in general use in
Borrower's industry by companies of size and character similar to Borrower.
"LIEN" shall mean any statutory or common law consensual or
non-consensual mortgage, pledge, security interest, encumbrance, lien, right
of set-off, claim or charge of any kind, including, without limitation, any
conditional sale or other title retention transaction, any lease transaction
in the nature thereof and any secured transaction under the Uniform
Commercial Code of any jurisdiction.
"LOAN" shall mean the loan or loans by the Lender to Borrower,
pursuant to this Agreement and the Note, in an aggregate principal amount not
to exceed the Commitment.
"MATURITY DATE" shall mean the maturity date defined in the
Note.
"MINIMUM NET WORTH TEST" shall be calculated on a consolidated
basis for the Borrower and all its Subsidiaries, and shall mean an equity to
total asset ratio of at least forty (40%) percent. Equity shall be
determined by subtracting total liabilities from total assets.
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"MORTGAGE" shall mean the mortgage and security agreement
described in Schedule 1.
"NET WORTH" shall be calculated on a consolidated
basis for the Borrower and all its Subsidiaries taken as a whole and arrived
at by subtracting total liabilities from total assets.
"NOTE" shall mean the note or notes executed and delivered by
Borrower at or prior to Closing pursuant to Subsection 5.02(a) hereof, and
all renewals, replacements and extensions thereof.
"OBLIGATIONS" shall include the full and punctual performance
of all present and future duties, covenants and responsibilities due to the
Lender by Borrower or any of Borrower's Subsidiaries under this Agreement, the
Note, the Other Agreements, all present and future obligations of Borrower or
any of Borrower's Subsidiaries to the Lender for the payment of money under
this Agreement, the Note, the Other Agreements, extending to all principal
amounts, interest, late charges and all other charges and sums, as well as
all costs and expenses payable by Borrower or any of Borrower's Subsidiaries,
under this Agreement, the Note, the Other Agreements, and any and all other
present and future monetary liabilities of Borrower or any of Borrower's
Subsidiaries to the Lender, whether direct or indirect, contingent or
noncontingent, matured or unmatured, accrued or not accrued, related or
unrelated to this Agreement, whether or not of the same character or class as
Borrower's or any of Borrower's Subsidiaries' obligations under this Agreement
and the Note, whether or not secured under any other document, instrument or
statutory or common law provision, as well as all renewals, refinancings,
consolidations, recastings and extensions of any of the foregoing.
"OTHER AGREEMENTS" shall mean any and all promissory notes,
security agreements, assignments, subordination agreements, pledge or
hypothecation agreements, stock powers, mortgages, deeds of trust, leases,
contracts, guaranties, instruments and documents now and hereafter existing
between the Lender and Borrower or any of Borrower's Subsidiaries, executed
and/or delivered pursuant to this Agreement or guaranteeing, securing or in
any other manner relating to any of the Obligations, including, the
instruments and documents referred to in Subsection 5.02 hereof.
"PAYMENT DATE" shall mean the last day of each of the months
referred to in Schedule 1 hereto.
"PAYMENT NOTICE" shall mean the notice furnished to the
Borrower at least quarterly indicating the precise amount of principal and/or
interest due on the next ensuing Payment Date, such notice to be sent to the
Borrower at least ten (10) days before such Payment Date.
"PERSON" shall include natural persons, corporations,
associations, partnerships, joint ventures, trusts, governments and agencies
and departments thereof, and every other entity of every kind.
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"SUBORDINATED CAPITAL CERTIFICATE" OR "SCC" shall mean a
subordinated certificate representing an investment in the Lender purchased
by the Borrower in connection with the Loan.
"SUBSIDIARY" at any time means any entity which is at the time
beneficially owned or controlled directly or indirectly by the Borrower, by
one or more such entities or by the Borrower and one or more such entities.
"TERMINATION DATE" shall mean that date which is four (4)
years from the date hereof for the A-01 loan and two (2) years from the date
hereof for the A-02 loan.
"TIMES INTEREST EARNED RATIO" OR "TIER" for any year shall
mean (a) total net income or margins plus income taxes plus interest payable
on long-term debt for such year, divided by (b) interest on long-term debt
payable in such year, as measured on a consolidated basis for the Borrower
and all its Subsidiaries.
"VARIABLE RATE" shall mean the variable rate established by
the Lender from time to time for loans similarly classified pursuant to
Lender's policies and procedures then in effect.
2. LOAN
2.01 LOAN. The Lender agrees to make the Loan to Borrower
subject to all of the terms and conditions of this Agreement and the Other
Agreements.
2.02 ADVANCES. The Lender agrees to make, and the Borrower
agrees to request, on the terms and conditions of this Agreement, Advances
from time to time at the office of the Lender in Herndon, Virginia, or at
such other place as the Lender may designate, not to exceed the Commitment.
The Borrower shall give the Lender at least one Business Day prior written
notice of the date on which each Advance is to be made. On the Termination
Date the Lender may stop advancing funds and reduce the Commitment to the
aggregate amount theretofore advanced. The obligation of the Borrower to
repay the Advances shall be evidenced by the Note.
2.03 PAYMENT, AMORTIZATION AND INTEREST RATE.
(a) Payment. The Borrower shall pay on each Payment Date
quarterly installments, in an amount as determined by the Lender, of
principal and/or interest as shown in the Payment Notice, except that, if not
sooner paid, any balance of the principal amount and interest accrued thereon
and all other amounts due hereunder shall be due and payable on the Maturity
Date. Payment of principal hereunder shall commence after the first full
quarter following the initial Advance of funds as set forth in Schedule 1 and
on each subsequent Payment Date until the Maturity Date or such earlier date
as all amounts due hereunder and on account of the Note shall have been paid
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in full. Payment of interest hereunder is due on each Payment Date in which
a principal balance is outstanding. Principal will be amortized in
accordance with the method stated in Schedule 1 hereto.
The Lender will use, for purposes of calculating the amortization of
principal, one of the following interest rates, as applicable:
(i) If the Borrower elects the Fixed Rate, the Fixed Rate in effect on
the Adjustment Date; or
(ii) If the Borrower elects the Variable Rate, the Variable Rate in
effect when amortization begins; or
(iii) If the Borrower elects to convert from one interest rate
program to another, the interest rate then in effect for the elected
program.
At the Lender's option, all payments shall be applied first to late payment
charges due, as hereinafter provided, then to interest accrued to the date of
such payment, and then to the reduction of principal balance outstanding.
No provision of this Agreement or the Note shall require the payment, or
permit the collection, of interest in excess of the highest rate permitted by
applicable law.
(b) Interest Rate. Each Advance shall be initially made at
the Variable Rate. Interest shall be computed from the actual number of days
elapsed on the basis of a year of 365 days until the first Payment Date
following the initial Advance. Thereafter, interest shall continue to be
computed for the actual number of days elapsed on the basis of a year of 365
days unless a Fixed Rate is applicable to the Loan, in which case interest
shall be computed on the basis of a 30-day month and 360-day year.
(i) Variable Rate. If Advances are made at the Variable Rate, it shall
apply until the Maturity Date, except as provided hereinbelow.
(ii) Fixed Rate. If the Borrower elects a Fixed Rate, such
Fixed Rate as is available and in effect for loans similarly
classified pursuant to Lender's policies and procedures then in
effect at the time of the election shall apply to such Advance
until the Adjustment Date. Upon notice given by the Borrower five
(5) Business Days prior to such Adjustment Date, Borrower may elect
to reset the interest rate to such Fixed Rate as is available and
in effect at the time of such Adjustment Date. Such reset Fixed
Rate shall apply to that portion of the outstanding principal
balance of the Loan elected to have a Fixed Rate from the
Adjustment Date until a new Adjustment Date or the Maturity Date.
If Borrower does not elect to reset the Fixed Rate, the Variable
Rate shall apply to the outstanding principal balance of the Loan
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<PAGE>
that had been bearing interest at the Fixed Rate prior to such
Adjustment Date, from such Adjustment Date to the Maturity Date.
(iii) Conversion to Different Interest Program.
(A) Variable Rate to Fixed Rate. Subject to the conditions set
forth herein, the Borrower may convert from the Variable Rate
to the Fixed Rate for any portion or all of the principal
amount of the Commitment then outstanding at any time provided
the Lender offers a Fixed Rate at such time.
(B) Fixed Rate to Variable Rate The Borrower may convert from a
Fixed Rate to the Variable Rate only on an Adjustment Date.
2.04 PREPAYMENT. In the event the Borrower prepays all or part
of the Loan, the Borrower shall pay such prepayment fee as the Lender may
prescribe from time to time in its policies in connection with any prepayment
of the Loan. All prepayments shall be accompanied by payment of accrued and
unpaid interest on the amount of and to the date of the prepayment. All
prepayments shall be applied first to fees, second to the payment of accrued
and unpaid interest, and then to the unpaid balance of the principal amount
of the Loan. If the Loan bears interest at the Variable Rate the Borrower
may prepay the Loan or any portion thereof, as the case may be, at any time
subject to the terms hereof and said prepayment fee shall be in an amount
equal to fifty (50) basis points times the amount being prepaid. If the Loan
bears interest at the Fixed Rate, the Borrower may prepay the Loan only on an
Adjustment Date or such other date as may be agreed upon by the parties
hereto, and in any such event, Borrower shall pay such prepayment fee as the
Lender may prescribe from time to time pursuant to its policies and
procedures.
2.05 5% SUBORDINATED CAPITAL CERTIFICATES. The Borrower
shall purchase SCCs which in the aggregate shall not exceed the amount
specified in Schedule 1 hereto. Unless otherwise requested in writing by the
Borrower prior to the initial Advance and approved by the Lender, the
Borrower agrees to purchase SCCs either (1) with each Advance in the amount
of five percent (5%) of each such Advance, and each such SCC shall be paid
for with proceeds of such Advance, or (2) by making payments with Borrower's
own funds in twenty (20) equal quarterly installments, commencing with the
first full quarter following the initial Advance. If the Borrower elects to
pay for SCCs other than from Loan funds, the amount of the Commitment will be
correspondingly reduced by said amount when the SCCs are fully paid. If the
Borrower obtains Advances hereunder other than for the purpose of purchasing
SCCs and fails to pay for the SCCs, then the Lender may make Advances for the
account of the Borrower to purchase the SCCs. The Lender agrees to deliver
the SCCs on or about the date on which the SCCs have been paid for in full.
The SCCs shall bear no interest and shall mature in accordance with the terms
thereof.
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3. SECURITY
As security for the payment and performance of all of the
Obligations, Borrower has (i) entered into the Mortgage pledging and granting
to the Lender a prior and continuing security interest in the Collateral that
may be secured by the Mortgage that shall continually exist until all
Obligations have been paid in full, and (ii) executed the Pledge Agreement
with Lender pursuant to which Borrower has pledged certain stock as described
therein. If reasonably required by the Lender at any time, Borrower shall
make notations, satisfactory to the Lender, on its books and records
disclosing the existence of the Lender's security interest in the Collateral.
Borrower agrees that, with respect to the Collateral which is subject to
Article 9 of the Uniform Commercial Code, the Lender shall have, but not be
limited to, all the rights and remedies of a secured party under the Uniform
Commercial Code. The Lender shall have no liability or duty, either before
or after the occurrence of an Event of Default hereunder, on account of loss
of or damage to, or to collect or enforce any of its rights against, the
Collateral, or to preserve any rights against account debtors or other
parties with prior interests in the Collateral.
4. REPRESENTATIONS AND WARRANTIES
TO INDUCE THE LENDER TO ENTER INTO THIS AGREEMENT, EACH
BORROWER REPRESENTS AND WARRANTS TO THE LENDER AS OF THE DATE OF THIS
AGREEMENT THAT:
4.01 GOOD STANDING. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation; has the power to own its property and to carry on its
business; is duly qualified to do business; and is in good standing in each
jurisdiction in which the transaction of its business makes such
qualification necessary.
4.02 AUTHORITY. Borrower has corporate power and authority to
enter into this Agreement, the Mortgage and the Pledge Agreement; to make the
borrowing hereunder; to execute and deliver all documents and instruments
required hereunder and to incur and perform the obligations provided for
herein, in the Mortgage, in the Pledge Agreement and in the Note, all of
which have been duly authorized by all necessary and proper corporate and
other action; and no consent or approval of any person, including, without
limitation, stockholders and members of Borrower and any public authority or
regulatory body, which has not been obtained is required as a condition to
the validity or enforceability hereof or thereof.
4.03 BINDING AGREEMENT. This Agreement has been duly and
properly executed by Borrower, constitutes the valid and legally binding
obligation of Borrower and is fully enforceable against Borrower in
accordance with its terms, subject only to laws affecting the rights of
creditors generally, the exercise of judicial discretion in accordance with
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general principles of equity or because waivers of statutory or common law
rights or remedies may be limited.
4.04 NO CONFLICTING AGREEMENTS. The execution, delivery of
and performance by Borrower of this Agreement, the Mortgage, the Pledge
Agreement and the Note, and the transactions contemplated hereby or thereby,
will not: (a) violate any provision of law, any order, rule or regulation of
any court or other agency of government, any award of any arbitrator, the
charter or by-laws of Borrower, or any indenture, contract, agreement,
mortgage, deed of trust or other instrument to which Borrower is a party or
by which it or any of its property is bound; or (b) be in conflict with,
result in a breach of or constitute (with due notice and/or lapse of time) a
default under, any such award, indenture, contract, agreement, mortgage, deed
of trust or other instrument, or result in the creation or imposition of any
Lien (other than contemplated hereby) upon any of the property or assets of
Borrower.
4.05 LITIGATION. There are no judgments, claims, actions,
suits or proceedings pending or, to the knowledge of Borrower, threatened
against or affecting Borrower or its properties, at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, which may result in any
material adverse change in the business, operations, prospects, properties or
assets or in the condition, financial or otherwise, of Borrower, and Borrower
is not, to its knowledge, in default with respect to any judgment, order,
writ, injunction, decree, rule or regulation of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, which would have a material adverse
effect on Borrower.
4.06 FINANCIAL CONDITION. The financial statements of
Borrower as at the date set forth in Schedule 1 hereto, heretofore delivered
to the Lender, are complete and correct, fairly present the financial
condition of Borrower and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. There are no
liabilities of Borrower, direct or indirect, fixed or contingent, as of the
date of such statements which are not reflected therein. There has been no
material adverse change in the financial condition or operations of the
Borrower from that set forth in said financial statements except changes
previously disclosed in writing to the Lender prior to the date hereof.
4.07 TAXES. Borrower has paid or caused to be paid all
federal, state and local taxes to the extent that such taxes have become due,
unless the Borrower is contesting in good faith any such tax. Borrower has
filed or caused to be filed all federal, state and local tax returns which
are required to be filed by Borrower.
4.08 TITLE TO PROPERTIES. Borrower has good and marketable
title to all of its real properties and owns all of its other properties
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and assets free and clear of any liens, except (i) the lien of this
Mortgage and taxes or assessments not yet due; (ii) deposits or pledges to
secure payment of workmen's compensation, unemployment insurance, old age
pensions or other social security; and (iii) deposits or pledges to secure
performance of bids, tenders, contracts (other than contracts for the
payment of borrowed money), leases, public or statutory obligations, surety
or appeal bonds, or other deposits or pledges for purposes of like general
nature in the ordinary course of business.
4.09 LICENSES AND PERMITS. Borrower has duly obtained and now
holds all licenses, permits, certifications, approvals and the like necessary
to own and operate its property and business that are required by federal,
state and local laws of the jurisdictions in which Borrower conducts its
business and each remains valid and in full force and effect.
4.10 SUBSIDIARIES. Borrower has no Subsidiaries other than
Subsidiaries heretofore disclosed to the Lender, or hereafter formed or
acquired with the prior written consent of the Lender.
4.11 CERTAIN INDEBTEDNESS. There is no indebtedness of
Borrower owing to any employee, officer, stockholder or director of the board
of Borrower other than accrued salaries, commissions and the like and any
indebtedness subordinated to the Obligations pursuant hereto.
4.12 LOCATION OF OFFICE. The chief place of business of the
Borrower and the office where its records concerning accounts and contract
rights are kept is identified in Schedule 1 hereto.
4.13 REQUIRED APPROVALS. No license, consent, permit or
approval of any governmental agency or authority is required to enable the
Borrower to enter into this Agreement or to perform any of its obligations
provided for herein except as disclosed on Schedule 1 hereto and except with
respect to regulatory approvals which may be required in connection with the
Lender's enforcement of certain remedies hereunder.
4.14 ERISA. Each pension plan of Borrower and its
Subsidiaries providing benefits for employees of Borrower or such Subsidiary
covered by Title IV of the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereto ("ERISA"), is in compliance with
ERISA in all material respects, and no material liability to the Pension
Benefit Guaranty Corporation ("PBGC") or to a multiemployer plan has been, or
is expected by Borrower or its Subsidiaries to be, incurred by Borrower or
such Subsidiaries.
5. CONDITIONS OF LENDING
THE LENDER SHALL HAVE NO OBLIGATION TO MAKE THE INITIAL
ADVANCE TO BORROWER HEREUNDER UNLESS, AS OF THE DATE OF CLOSING, EACH OF THE
FOLLOWING CONDITIONS PRECEDENT SHALL BE SATISFIED AS PROVIDED BELOW:
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5.01 LEGAL MATTERS. All legal matters incident to the
consummation of the transactions hereby contemplated shall be satisfactory to
counsel for the Lender and to such local counsel as counsel for the Lender
may retain.
5.02 DOCUMENTS. There shall have been delivered to the
Lender, fully completed and duly executed (when applicable), the following,
satisfactory to the Lender and its counsel:
(a) This Agreement and the Note.
(b) Certified copies, satisfactory to the Lender, of all
such corporate documents and proceedings of the Borrower
authorizing the transactions herein contemplated.
(c) A written opinion from Borrower's counsel addressing
such legal matters as the Lender or its counsel shall
reasonably require.
(d) The Borrower shall have (i) executed the Mortgage; (ii)
if any real property is owned by Borrower, recorded a
valid and binding Mortgage granting Lender a first lien
in all real property owned by Borrower; (iii) filed
financing statements in all jurisdictions necessary to
provide Lender a first priority, perfected security
interest in all Collateral which may be perfected by the
filing of financing statements; and (iv) delivered such
other documents as are necessary to create or continue a
perfected security interest in favor of the Lender in
the Collateral.
(e) The Pledge Agreement dated as of even date herewith and
related stock powers.
5.03 GOVERNMENT APPROVALS. The Borrower shall have furnished
to the Lender true and correct copies of all certificates, authorizations and
consents, including without limitation the consents referred to in Section
4.13 hereof, necessary for the execution, delivery or performance by the
Borrower of this Agreement, the Note, the Pledge Agreement and the Mortgage.
5.04 REPRESENTATIONS, WARRANTIES AND MATERIAL CHANGE. At
Closing and at the date of every subsequent Advance hereunder, all covenants,
representations and warranties set forth in this Agreement shall be true and
correct on and as of such time with the same effect as though such covenants,
representations and warranties had been made on and as of such date; no Event
of Default specified in Section 8 and no event which, with the lapse of time
or the notice and lapse of time specified in Section 8 would become such an
Event of Default, shall have occurred and be continuing or will have occurred
after giving effect to the Advance on the books of the Borrower; there shall
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have occurred no material adverse change in the business or condition,
financial or otherwise, of the Borrower; and nothing shall have occurred
which in the opinion of the Lender materially and adversely affects the
Borrower's ability to meet its obligations hereunder.
5.05 SPECIAL CONDITIONS. At Closing and at the time of every
subsequent Advance hereunder, the Lender and its counsel shall be fully
satisfied that the Borrower has complied and will continue to comply with any
special conditions identified in Schedule 1 hereto.
5.06 REQUISITIONS. The Borrower will request Advances in form
and substance satisfactory to the Lender. Pursuant to the terms and
conditions hereof, the Lender will wire the proceeds of the requested Advance
to an account as directed by the Borrower.
6. AFFIRMATIVE COVENANTS
EACH BORROWER COVENANTS AND AGREES WITH THE LENDER THAT, UNTIL
ALL OF THE OBLIGATIONS HAVE BEEN PAID IN FULL, BORROWER WILL:
6.01 MEMBERSHIP. Remain, or an affiliate thereof will remain,
a member in good standing of the Lender.
6.02 FINANCIAL STATEMENTS AND OTHER INFORMATION. Furnish to
the Lender: (a) financial statements as required by the Mortgage; (b) such
other information, reports or statements concerning the operations, business
affairs and/or financial condition of Borrower as the Lender may reasonably
request from time to time; and (c) promptly upon their becoming available
information, in form and substance satisfactory to Lender, evidence of any
and all changes or modification of licenses, permits, certifications,
approvals and the like necessary for Borrower to own or operate its business
or a substantial part of its business.
6.03 FINANCIAL RATIOS. Subject to applicable laws and rules
and orders of regulatory bodies, and to events which in the judgment of the
Lender are beyond the control of the Borrower, so operate and manage its
business as to achieve a DSC of not less than 1.25 and a TIER of not less
than 1.50, said ratios being determined by averaging each of the two highest
annual ratios during the three most recent fiscal years.
6.04 ANNUAL CERTIFICATE. Within one hundred twenty (120) days
after the close of each calendar year, commencing with the year in which the
initial Advance hereunder shall have been made, deliver to the Lender a
written statement signed by the general manager stating that to the best of
said person's knowledge, the Borrower has fulfilled all of its Obligations
under this Agreement, the Note, and the Mortgage throughout such year or, if
there has been a default in the fulfillment of any such Obligations,
specifying each such default known to said person and the nature and status
thereof.
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6.05 USE OF PROCEEDS. Use Advances made hereunder and under
the Note only for the purpose identified in Schedule 1 hereto and for the
payment of the costs, expenses and fees incident to this Agreement and for no
other purpose whatsoever without the prior written consent of the Lender.
6.06 SPECIAL AFFIRMATIVE COVENANTS. During the term hereof,
Lender and its counsel shall be fully satisfied that the Borrower has
complied and will continue to comply with any special affirmative covenants
identified in Schedule 1 hereto.
6.07 MORTGAGE FILING. Within ten (10) days of acquiring any
real property, the Borrower shall cause the Mortgage to be duly recorded as a
first mortgage on all real property and the Mortgage or other appropriate
documentation shall have been duly filed, recorded or indexed as a security
interest in personal property wherever the Lender shall have reasonably
requested, all in accordance with applicable law, and the Borrower shall have
caused satisfactory evidence thereof to be furnished to the Lender.
7. NEGATIVE COVENANTS.
7.01 NOTICE. Borrower covenants and agrees with the Lender
that Borrower will not, directly or indirectly, without giving written notice
to the Lender thirty (30) days prior to the effective date of any change:
(a) Change Location of Chief Place of Business. Change the
location of the Borrower's chief place of business.
(b) Change of Name. Change the name of Borrower.
7.02 CONSENT. Borrower covenants and agrees with the Lender
that Borrower and each of Borrower's Subsidiaries will not, directly or
indirectly, without the prior written consent of the Lender:
(a) Control. Alter or permit alteration of control of the
Borrower. Control shall be as defined by regulations
for telephone companies issued by the Federal
Communications Commission ("FCC").
(b) Subsidiaries. Form or acquire any Subsidiaries.
(c) Additional Indebtedness. Borrow money on a secured
basis from any other lender or incur any additional
secured indebtedness; borrow money or incur any
unsecured indebtedness in excess of five percent (5%) of
total assets; or enter into any Leases, unless at that
time Borrower meets the Minimum Net Worth Test. If
Borrower meets the Minimum Net Worth Test, then Borrower
and its Subsidiaries may incur additional indebtedness
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<PAGE>
or enter into Leases without prior written approval of
Lender provided the Borrower meets the Minimum Net Worth
Test after incurring such additional indebtedness or
entering into such Leases; provided, further, however,
Borrower must give at least thirty (30) days written
notice to Lender prior to incurring any additional
indebtedness or entering into such Leases.
7.03 DIVIDENDS AND OTHER CASH DISTRIBUTIONS. The Borrower
will not, in any one calendar year, without the prior approval in writing of
the Lender (i) declare or pay any dividends or make any other distribution to
its stockholders with respect to its capital stock; (ii) purchase or redeem
or retire any of its capital stock; or (iii) pay any management fees or if
already paying a management fee, pay an increase in management fees unless
with respect to any of the foregoing (after giving effect to such
transaction) (a) Borrower meets the Minimum Net Worth Test and (b) the
payment of such dividend, the making of such distribution, or the purchase,
redemption or retirement of such stock, individually or in the aggregate,
does not exceed twenty-five percent (25%) of the prior fiscal year-end Cash
Margins in any one calendar year. In no event may the Borrower make such a
distribution or payment when there is unpaid any due installment of principal
and/or interest on the Note or if the Borrower is otherwise in material
default of any provision of this Agreement or would be in material default
hereunder as a result of such distribution or payment.
7.04 SPECIAL NEGATIVE COVENANTS. During the term hereof,
Lender and its counsel shall be fully satisfied that the Borrower has
complied and will continue to comply with any special negative covenants
identified in Schedule 1 hereto.
8. EVENTS OF DEFAULT
The occurrence of any one or more of the following events
Shall constitute an "Event of Default":
(a) REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made herein, in any of the Other Agreements or
in any statement, report, certificate, opinion,
financial statement or other document furnished or to be
furnished in connection with this Agreement or the Other
Agreements shall be false or misleading in any material
respect.
(b) PAYMENT. Failure of Borrower or any of Borrower's
Subsidiaries to make any of the payment Obligations,
including, without limitation, any sum due the Lender
under this Agreement or any of the Other Agreements,
when and as the same shall become due, whether at the
due date thereof, by demand, by acceleration or
otherwise.
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<PAGE>
(c) OTHER COVENANTS. Failure of Borrower or any of
Borrower's Subsidiaries to observe or perform any
warranty, covenant or condition to be observed or
performed by Borrower under this Agreement or any of the
Other Agreements.
(d) CORPORATE EXISTENCE. The Borrower shall forfeit or
Otherwise be deprived of its corporate charter,
Franchises, permits, easements, consents or licenses
Required to carry on any material portion of its
Business.
(e) OTHER OBLIGATIONS. Default by the Borrower or any of
Borrower's Subsidiaries in the payment when due of any
money owed by the Borrower, whether principal, interest,
premium or otherwise, under any other agreement for
borrowing money in an amount in excess of five percent
(5%) of total assets, whether or not such borrowing is
secured.
(f) BANKRUPTCY. A court shall enter a decree or order for
relief with respect to the Borrower or any Subsidiary or
guarantor (if any) in an involuntary case under any
applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator
or similar official, or ordering the winding up or
liquidation of its affairs, and such decree or order
shall remain unstayed and in effect for a period of
sixty (60) consecutive days or the Borrower or any
Subsidiary or guarantor (if any) shall commence a
voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in
effect, or under any such law, or consent to the
appointment or taking of possession by a receiver,
liquidator, assignee, custodian or trustee, of a
substantial part of its property, or make any general
assignment for the benefit of creditors.
(g) DISSOLUTION OR LIQUIDATION. Other than as provided in
subsection (f) above, the dissolution or liquidation of
the Borrower or any Subsidiary or guarantor (if any), or
failure by the Borrower or any Subsidiary promptly to
forestall or remove any execution, garnishment or
attachment of such consequence as will impair its
ability to continue its business or fulfill its
obligations and such execution, garnishment or
attachment shall not be vacated within sixty (60) days.
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(h) FINAL JUDGMENT. A final non-appealable judgment in
excess of $100,000 shall be entered against the Borrower
and shall remain unsatisfied or without a stay for a
period of sixty (60) days.
9. RIGHTS AND REMEDIES
9.01 RIGHTS AND REMEDIES OF THE LENDER. Upon the occurrence
of an Event of Default, the Lender may, subject to:
(i) thirty (30) days prior written notice during which time
Borrower shall have the opportunity to cure said Event of
Default except with respect to Obligations pursuant to 8(b),
8(f) and 8(g) above which shall require no notice or demand
and shall have no period to cure; and
(ii) compliance, if required, with the rules and regulations of the FCC
and any state public service or utilities commission having
jurisdiction;
exercise in any jurisdiction in which enforcement hereof is sought, the
following rights and remedies, in addition to all rights and remedies
available to the Lender under applicable law, all such rights and remedies
being cumulative and enforceable alternatively, successively or concurrently:
(a) Declare all unpaid principal outstanding on the Note, all
accrued and unpaid interest thereon, and all other Obligations
to be immediately due and payable and the same shall thereupon
become immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby
expressly waived.
(b) Institute any proceeding or proceedings to enforce the
Obligations owed to, or any Liens in favor of the Lender.
(c) Pursue all rights and remedies available to the Lender that
are contemplated by the Mortgage in the manner, upon the
conditions, and with the effect provided in the Mortgage,
including but not limited to a suit for specific performance,
injunctive relief or damages.
(d) Pursue any other rights and remedies available to the Lender
at law or in equity.
9.02 CUMULATIVE NATURE OF REMEDIES. Nothing herein shall limit
the right of the Lender, subject to notice and right to cure provisions
contained herein, to pursue all rights and remedies available to a creditor
following the occurrence of an Event of Default subject to compliance, if
required, with the rules and regulations of the FCC and any state public
service or utilities commission having jurisdiction. Each right, power and
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remedy of the Lender in this Agreement and/or the Other Agreements shall be
cumulative and concurrent, and recourse to one or more rights or remedies
shall not constitute a waiver or any other right, power or remedy.
9.03 COSTS AND EXPENSES. Borrower agrees to pay and to be
liable for any and all reasonable expenses, including attorney's fees and
court costs, incurred by the Lender in exercising or enforcing any of its
rights hereunder or under the Other Agreements, together with interest
thereon at the rate and determined in the manner provided in the Mortgage.
Subject to the Mortgage and applicable law, the Lender may apply all
Collateral and proceeds of all Collateral to the Obligations in any manner
which the Lender, in its sole discretion, deems appropriate, and Borrower
will continue to be liable for any deficiency.
9.04 LATE PAYMENT CHARGES. If payment of any principal and/or
interest due under the terms of the Note is not received at the office of the
Lender in Herndon, Virginia, or as the Lender may otherwise designate to the
Borrower, within such time period as the Lender may prescribe from time to
time in its policies in connection with any late payment charges (such unpaid
amount of principal and/or interest being herein called the "delinquent
amount" and the period beginning after such due date until payment of the
delinquent amount being herein called the "late-payment period"), the
Borrower will pay to the Lender, in addition to all other amounts due under
the terms of the Note, the Mortgage, and this Agreement, any late-payment
charge as may be fixed by the Lender from time to time, on the delinquent
amount for the late-payment period.
9.05 LENDER'S SETOFF. The Lender shall have the right, in
addition to all other rights and remedies available to it, to setoff and to
recover against any or all of the Obligations due to Lender, any monies now
and hereafter owing to Borrower by the Lender. Borrower waives all rights of
setoff, deduction, recoupment or counterclaim.
10. MISCELLANEOUS
10.01 PERFORMANCE FOR BORROWER. Borrower agrees and hereby
authorizes that the Lender may, in its sole discretion, but the Lender shall
not be obligated to, advance funds on behalf of Borrower without prior notice
to Borrower, in order to insure Borrower's compliance with any material
covenant, warranty, representation or agreement of Borrower made in or
pursuant to this Agreement or any of the Other Agreements, to preserve or
protect any right or interest of the Lender in the Collateral or under or
pursuant to this Agreement or any of the Other Agreements, including without
limitation, the payment of any insurance premiums or taxes and the
satisfaction or discharge of any judgment or any Lien upon the Collateral or
other property or assets of Borrower; provided, however, that the making of
any such advance by the Lender shall not constitute a waiver by the Lender of
any Event of Default with respect to which such advance is made nor relieve
Borrower of any such Event or Default. Borrower shall pay to the Lender upon
demand all such advances made by the Lender with interest thereon at the rate
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and determined in the manner provided in the Note. All such advances shall
be deemed to be included in the Obligations and secured by the security
interest granted the Lender hereunder to the extent permitted by law.
10.02 EXPENSES AND FILING FEES. Whether or not any of the
transactions contemplated hereby shall be consummated, Borrower agrees to pay
to the Lender at Closing or thirty (30) days after the execution and delivery
hereof, whichever is earlier, all expenses of the Lender in connection with
the filing or recordation of all financing statements and instruments as may
be required by the Lender at the time of, or subsequent to, the execution of
this Agreement, including, without limitation, all documentary stamps,
recordation and transfer taxes and other costs and taxes incident to
recordation of any document or instrument in connection herewith. Borrower
agrees to save harmless and indemnify the Lender from and against any
liability resulting from the failure to pay any required documentary stamps,
recordation and transfer taxes, recording costs, or any other expenses
incurred by the Lender in connection with this Agreement. The provisions of
this Subsection 10.02 shall survive the execution and delivery of this
Agreement and the payment of all other Obligations.
10.03 WAIVERS BY BORROWER. Borrower hereby waives, to the
extent the same may be waived under applicable law: (a) in the event the
Lender seeks to repossess any or all of the Collateral by judicial
proceedings, any bond(s) or demand(s) for possession which otherwise may be
necessary or required; (b) presentment, demand for payment, protest and
notice of non-payment and all exemptions; and (c) substitution, impairment,
exchange or release of any collateral security for any of the Obligations.
Borrower agrees that the Lender may exercise any or all of its rights and/or
remedies hereunder and under the Other Agreements without resorting to and
without regard to security or sources of liability with respect to any of the
Obligations.
10.04 WAIVERS BY THE LENDER. Neither any failure nor any
delay on the part of the Lender in exercising any right, power or remedy
hereunder or under any of the Other Agreements shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
10.05 LENDER'S RECORDS. Every statement of account or
reconciliation rendered by the Lender to Borrower with respect to any of the
Obligations shall be presumed conclusively to be correct and shall constitute
an account stated between the Lender and Borrower unless, within ten (10)
Business Days after such statement or reconciliation shall have been mailed,
postage prepaid, to Borrower, the Lender shall receive written notice of
specific objection thereto.
10.06 MODIFICATIONS. No modification or waiver of any
provision of this Agreement, the Note or any of the Other Agreements, and no
consent to any departure by Borrower therefrom shall in any event be
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effective unless the same shall be in writing, and then such waiver or
consent shall be effective only in the specific instance and for the purpose
for which given. No notice to or demand upon Borrower in any case shall
entitle Borrower to any other or further notice or demand in the same,
similar or other circumstances.
10.07 NOTICES. All notices, requests and other communications
provided for herein including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement shall be given or made in
writing (including, without limitation, by telecopy) and delivered to the
intended recipient at the "Address for Notices" specified below; or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when
personally delivered or, in the case of a telecopied or mailed notice, upon
receipt, in each case given or addressed as provided for herein. The Address
for Notices of the respective parties are as follows:
Rural Telephone Finance Cooperative
Woodland Park
2201 Cooperative Way
Herndon, Virginia 20171-3025
Attention: Chief Executive Officer
Fax: 703-709-6776
The Borrower:
The address set forth in
Schedule 1 hereto
10.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL.
(a) THE PERFORMANCE AND CONSTRUCTION OF THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF VIRGINIA.
(b) BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES COURTS LOCATED IN VIRGINIA AND OF ANY STATE COURT SO
LOCATED FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. BORROWER IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE ESTABLISHING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL
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BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.09 HOLIDAY PAYMENTS. If any payment to be made by the
Borrower hereunder shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing any interest in respect of
such payment.
10.10 RESCISSION FEE. The Borrower may elect not to borrow all
or any portion of the Loan, in which event the Lender shall release the
Borrower from its obligations hereunder provided the Borrower complies with
such terms and conditions as the Lender may impose for such release
including, without limitation, payment of any rescission fee which shall not
exceed fifty (50) basis points times the amount of the Commitment being
rescinded.
10.11 SURVIVAL; SUCCESSORS AND ASSIGNS. All covenants,
agreements, representations and warranties made herein and in the Other
Agreements shall survive Closing and the execution and delivery to the Lender
of the Note, and shall continue in full force and effect until all of the
Obligations have been paid in full. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All covenants, agreements,
representations and warranties by or on behalf of Borrower which are
contained in this Agreement and the Other Agreements shall inure to the
benefit of the successors and assigns of the Lender.
10.12 USE OF TERMS. The use of any gender or the neuter
herein shall also refer to the other gender or the neuter and the use of the
plural shall also refer to the singular, and vice versa.
10.13 SEVERABILITY. If any term, provision or condition, or
any part thereof, of this Agreement or any of the Other Agreements shall for
any reason be found or held invalid or unenforceable by any court or
governmental agency of competent jurisdiction, such invalidity or
unenforceability shall not affect the remainder of such term, provision or
condition nor any other term, provision or condition, and this Agreement, the
Note, and the Other Agreements shall survive and be construed as if such
invalid or unenforceable term, provision or condition had not been contained
therein.
10.14 MERGER AND INTEGRATION. This Agreement and the attached
exhibits and matters incorporated by reference contain the entire agreement
of the parties hereto with respect to the matters covered and the
transactions contemplated hereby, and no other agreement, statement or
promise made by any party hereto, or by any employee, officer, agent or
attorney of any party hereto, which is not contained herein, shall be valid
or binding.
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<PAGE>
10.15 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all such counterparts shall together constitute one and the
same instrument.
10.16 HEADINGS. The headings and sub-headings contained in
this Agreement are intended to be used for convenience only and do not
constitute part of this Agreement.
10.17 ASSIGNMENT. The Lender may assign its rights and
obligations under this Agreement and the Other Agreements without the consent
of the Borrower; provided, however, that no such assignment shall result in
terms or conditions less favorable to Borrower. The Borrower may not assign
any of its rights of obligations under this Agreement or the Other Agreements
without the prior written consent of the Lender.
10.18 RIGHT TO INSPECT. The Borrower shall permit
representatives of the Lender at any time during normal business hours to
inspect and make abstracts from the books and records pertaining to the
Collateral, and permit representatives of the Lender to be present at
Borrower's place of business to receive copies of all communications and
remittances relating to the Collateral, all in such manner as the Lender may
reasonably require.
10.19 CONSENT TO PATRONAGE CAPITAL DISTRIBUTIONS. Borrower
hereby consents that the amount of any distributions with respect to
Borrower's patronage which are made in written notices of allocation (as
defined in Section 1388 of the Internal Revenue Code of 1986, as amended
("Code") including any other comparable successor provision) and which are
received from Lender will be taken into account by Borrower at their stated
dollar amounts in the manner provided in Section 1385(a) of the Code in the
taxable year in which such written notices of allocation are received.
10.20 FURTHER ASSURANCES. The Borrower will, upon demand of
the Lender, make, execute, acknowledge and deliver all such further and
supplemental indentures of mortgage, deeds of trust, mortgages, financing
statements, continuation statements, security agreements and/or any other
instruments and conveyances as may be reasonably requested by the Lender to
effectuate the intention of this Agreement and to provide for the securing
and payment of the principal of and interest on the Note according to the
terms thereof.
10.21 LENDER'S APPROVAL. Wherever prior written approval of
Lender is required under the terms and conditions of this Agreement, Lender
hereby agrees to not unreasonably withhold said approval.
10.22 SCHEDULE 1. Schedule 1 attached hereto is an integral
part of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed or caused to
be executed this Agreement under seal as of the date first above written.
DAKOTA COOPERATIVE TELECOMMUNICATIONS
By: /s/James H. Jibben
Title: President
(SEAL)
Attest: /s/John Schaefer
Secretary
DAKOTA TELECOM, INC.
By: /s/Jeff Goeman
Title: President
(SEAL)
Attest: /s/Palmer Larson
Secretary
RURAL TELEPHONE FINANCE COOPERATIVE
By: /s/Kenneth A. Fried
(SEAL) Title: Assistant Secretary-Treasurer
Attest: /s/Janelle M. Keefer
Assistant Secretary-Treasurer
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SCHEDULE 1
1. The "Commitment" shall mean $14,736,842 (A-01 loan) and $13,684,210 (A-02
loan).
2. The Mortgage defined in Section 1 is the Mortgage and Security Agreement
by and between Borrower and Lender dated as of even date herewith.
3. The months relating to the Payment Date are March, June, September, and
December.
4. The method of amortization referred to in Section 2.03 shall be based
upon the method indicated below.
_____ level principal
__X__ level debt service (no principal
deferral)
5. The amount referred to in Section 2.05 is $736,842 (for the A-01 loan)
and $684,210 (for the A-02 loan).
6. The date of Borrower's financial statement referred to in Section 4.06
is December 31, 1996.
7. The chief place of business referred to in Section 4.12 and address of
Borrower referred to in Section 10.07 is P.O. Box 66, 29705 453rd,
Irene, South Dakota 57037.
8. The government authorities referred to in Section 4.13 are the South
Dakota Public Utilities Commission and the Federal Communications
Commission.
9. The special conditions referred to in Section 5.06 are as follows:
Prior to the initial advance of any funds under the A-01 construction
loan, Borrower shall have advanced under the A-02 refinancing loan and
obtained all necessary releases of liens, as is further outlined in the
special affirmative covenants below.
10. The purpose referred to in Section 6.05 is to (i) modernize plant and
central office equipment and to install fiber optic transmission lines
and centralized switching operations (A-01); (ii) refinance all existing
debt with the Rural Utilities Service ("RUS"); and (iii) to purchase
SCCs.
11. The special affirmative covenants referred to in Section 6.06 are as
follows:
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A. Borrower hereby covenants and agrees that within thirty (30) days of
the initial advance of funds under the A-02 loan, it will file in the
appropriate public recording offices releases of all liens from the RUS.
B. Borrower hereby covenants and agrees that until all of the
Obligations have been satisfied, it will pledge the stock or other equity
interests of all after-acquired or formed Subsidiaries to Lender.
12. The special negative covenants referred to in Section 7.04 are as
follows:
Borrower hereby covenants and agrees that the declaration of an Event of
Default by Lender hereunder or under any of the Other Agreements will
not trigger any of the anti-takeover provisions under its Articles of
Incorporation and Bylaws, nor will Borrower take any action which would
preclude or otherwise hinder Lender from exercising any of its rights
and remedies hereunder or under any of the Other Agreements including
but not limited to the rights and remedies under the Pledge and Security
Agreement executed by Borrower and Lender pursuant to this Agreement.
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EXHIBIT 4.32
- -----------------------------------------------------------------------------
MORTGAGE
AND
SECURITY AGREEMENT
Made By and Between
DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC.
and
DAKOTA TELECOM, INC.
Mortgagors
and
RURAL TELEPHONE FINANCE COOPERATIVE
Mortgagee
Dated as of June 24, 1997
THIS INSTRUMENT SECURES FUTURE ADVANCES MADE BY THE MORTGAGEE TO THE
MORTGAGORS AND FUTURE OBLIGATIONS OF THE MORTGAGORS TO THE MORTGAGEE.
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
MORTGAGORS' FEDERAL TAX IDENTIFICATION NUMBERS ARE: 46-0234208 and 46-0374235.
THIS INSTRUMENT WAS DRAFTED BY MATT L. SPRINGER OF RURAL TELEPHONE FINANCE
COOPERATIVE, Woodland Park, 2201 Cooperative Way -Herndon, Virginia 20171.
Mortgagee's phone number is 1-800-346-7095.
=============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
SECURITY
SECTION 1.01 Granting Clause 1. . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
ADDITIONAL NOTES
SECTION 2.01 Additional Notes Secured by this Mortgage. . . . . . . . 3
SECTION 2.02 Supplemental Mortgages to Confirm Security . . . . . . . 4
ARTICLE III
PARTICULAR COVENANTS OF THE MORTGAGOR
SECTION 3.01 Authority to Execute and Deliver Notes and Mortgages;
All Action Taken; Enforceable Obligations . . . . . . . . 4
SECTION 3.02 Authority to Mortgage Property; No Liens;
Exception for Permitted Encumbrances; Mortgagor
To Defend Title and Remove Liens. . . . . . . . . . . . . 4
SECTION 3.03 Payment of Notes . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.04 Preservation of Corporate Existence and Franchises;
Compliance with Laws; Limitations on Mergers,
Transfers and Purchases . . . . . . . . . . . . . . . . . 5
SECTION 3.05 Maintenance of Mortgaged Property . . . . . . . . . . . . 5
SECTION 3.06 Purchase of Property Free of Liens . . . . . . . . . . . 5
SECTION 3.07 Insurance; Restoration of Damaged Mortgaged Property. . . 5
SECTION 3.08 Mortgagee's Right to Expend Money to
Protect Mortgaged Property . . . . . . . . . . . . . . . 6
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TABLE OF CONTENTS, CONTINUED
PAGE
SECTION 3.09 Limitations on Contracts; Deposits of Funds . . . . . . . 6
SECTION 3.10 Financial Books; Financial Reports;
Mortgagee Right of Inspection. . . . . . . . . . . . . . . 7
SECTION 3.11 Further Assurances to Confirm
Security of Mortgage . . . . . . . . . . . . . . . . . . . 7
SECTION 3.12 Limitation on Dividends, Patronage
Refunds and Other Cash Distributions . . . . . . . . . . . 8
SECTION 3.13 Application of Proceeds from Condemnation. . . . . . . . . 8
SECTION 3.14 Compliance with Loan Agreements . . . . . . . . . . . . . 8
SECTION 3.15 Notice of Change in Place of Business. . . . . . . . . . . 8
SECTION 3.16 Rights of Way, Etc., Necessary in Business . . . . . . . . 8
SECTION 3.17 Limitations on Loans, Investments
And Other Obligations. . . . . . . . . . . . . . . . . . . 8
SECTION 3.18 Sales of Assets. . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
REMEDIES OF THE MORTGAGEE
SECTION 4.01 Events of Default. . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.02 Remedies of Mortgagee. . . . . . . . . . . . . . . . . . . 11
SECTION 4.03 Right of Mortgagee to Bid on Mortgaged Property. . . . . . 12
SECTION 4.04 Application of Proceeds from Remedial Actions. . . . . . . 12
SECTION 4.05 Notice of Default. . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.06 Remedies Cumulative; No Election . . . . . . . . . . . . . 13
SECTION 4.07 Waiver of Appraisement Rights. . . . . . . . . . . . . . . 13
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TABLE OF CONTENTS, Continued
PAGE
ARTICLE V
POSSESSION UNTIL DEFAULT - DEFEASANCE CLAUSE
SECTION 5.01 Possession Until Default . . . . . . . . . . . . . . . . 13
SECTION 5.02 Defeasance . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Property Deemed Real Property. . . . . . . . . . . . . . 14
SECTION 6.02 Mortgage to Bind and Benefit Successors and Assigns. . . 14
SECTION 6.03 Headings . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.04 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.05 Regulatory Approvals . . . . . . . . . . . . . . . . . . 15
SECTION 6.06 Severability . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.07 Counterparts . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.08 Mortgage Deemed Security Agreement . . . . . . . . . . . 15
SECTION 6.09 Use of Terms . . . . . . . . . . . . . . . . . . . . . . 15
EXHIBIT I Instruments Recital
EXHIBIT II Property Schedule
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DEFINED TERMS
Page
Additional Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Existing Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . .1
First Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Fiscal Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Instruments Recital. . . . . . . . . . . . . . . . . . . . . . . . . . .1
Loan Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Mortgaged Property . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Mortgagee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Mortgagor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
RTFC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Second Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Total Plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Uniform Commercial Code. . . . . . . . . . . . . . . . . . . . . . . . .1
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MORTGAGE AND SECURITY AGREEMENT ("MORTGAGE"), DATED AS OF
JUNE 24, 1997, MADE BY AND BETWEEN DAKOTA COOPERATIVE
TELECOMMUNICATIONS, INC., A COOPERATIVE ASSOCIATION EXISTING UNDER THE
LAWS OF THE STATE OF SOUTH DAKOTA AND DAKOTA TELECOM, INC., A
CORPORATION EXISTING UNDER THE LAWS OF THE STATE OF SOUTH DAKOTA
(HEREINAFTER, COLLECTIVELY CALLED THE "MORTGAGOR"), A CORPORATION
EXISTING UNDER THE LAWS OF THE STATE OF SOUTH DAKOTA AND RURAL TELEPHONE
FINANCE COOPERATIVE (HEREINAFTER SOMETIMES CALLED THE "MORTGAGEE" AND
SOMETIMES CALLED THE "RTFC"), A SOUTH DAKOTA COOPERATIVE ASSOCIATION.
WHEREAS, the Mortgagor has determined to borrow funds from the
Mortgagee pursuant to a Loan Agreement (said Loan Agreement, as it may be
from time to time amended or supplemented, together with any other loan
agreement between the Mortgagor and RTFC in connection with any additional or
future loan intended to be secured hereby, being hereinafter collectively
called the "Loan Agreement"), identified in Exhibit I hereto (hereinafter
called the "Instruments Recital"), and has accordingly duly authorized and
executed, and delivered to the Mortgagee, two secured promissory notes and
(identified in the Instruments Recital as and hereinafter called the "First
Note and the Second Note") to be secured by this Mortgage of the property
hereinafter described; and
WHEREAS, it is contemplated that the First Note and the Second Note
shall be secured by this Mortgage as well as additional notes and refunding,
renewal and substitute notes (hereinafter collectively called the
"Additional Notes") which may from time to time be executed and delivered
by the Mortgagor to RTFC as hereinafter provided (the First Note, the
Second Note and any Additional Notes being hereinafter collectively called
the "Notes"); and
WHEREAS, the Mortgagor now operates and/or owns a communication and
information service and other facilities identified in the Property
Schedule attached as Exhibit II hereto (hereinafter called the "Existing
Facilities"); and
WHEREAS, to the extent that any of the property described or referred
to in this Mortgage is governed by the provisions of the Uniform Commercial
Code of any state (hereinafter called the "Uniform Commercial Code"), the
parties hereto desire that this Mortgage be regarded as a "Security
Agreement" and as a "Financing Statement" for said security agreement under
the Uniform Commercial Code;
NOW, THEREFORE, in consideration of the premises, the parties hereto agree
as follows:
ARTICLE I
SECURITY
SECTION 1.01. GRANTING CLAUSE: In order to secure the payment of the
principal of and interest on the Notes, according to their tenor and
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effect, and further to secure the due performance of the covenants,
agreements and provisions contained in this Mortgage and the Loan Agreement
and to declare the terms and conditions upon which the Notes are to be
secured, the Mortgagor, in consideration of the premises, has executed and
delivered this Mortgage, and has granted, bargained, sold, conveyed,
warranted, assigned, transferred, mortgaged, pledged and set over, and by
these presents does hereby grant, bargain, sell, convey, warrant, assign,
transfer, mortgage, pledge and set over, unto the Mortgagee, and assigns,
all and singular the following-described property whether now owned or
hereafter acquired by the Mortgagor, wherever located, and grants a
security interest therein for the purposes herein expressed (hereinafter
sometimes called the "Mortgaged Property"):
I
All right, title and interest of the Mortgagor in and to the Existing
Facilities and buildings, plants, works, improvements, structures, estates,
grants, franchises, easements, rights, privileges and properties real,
personal and mixed, tangible or intangible, of every kind or description,
now owned or leased by the Mortgagor or which may hereafter be owned,
leased, constructed or acquired by the Mortgagor, wherever located, and in
and to all extensions and improvements thereof and additions thereto,
including all buildings, plants, works, structures, improvements, fixtures,
apparatus, materials, supplies, machinery, tools, implements, poles, posts,
crossarms, conduits, ducts, lines, whether underground or overhead or
otherwise, wires, cables, exchanges, switches, including, without
limitation, host switches and remote switches, desks, testboards, frames,
racks, motors, generators, batteries and other items of central office
equipment, pay stations, subscriber equipment, including house wiring and
protectors, instruments, connections and appliances, office furniture and
equipment, work equipment and any and all other property of every kind,
nature and description, used, useful or acquired for use by the Mortgagor
in connection therewith and including, without limitation, the property
described in the Property Schedule attached as Exhibit II hereto;
II
ALL RIGHT, TITLE AND INTEREST OF THE MORTGAGOR IN, TO AND UNDER ANY
AND ALL GRANTS, PRIVILEGES, RIGHTS OF WAY AND EASEMENTS NOW OWNED, HELD,
LEASED, ENJOYED OR EXERCISED, OR WHICH MAY HEREAFTER BE OWNED, HELD, LEASED,
ACQUIRED, ENJOYED OR EXERCISED, BY THE MORTGAGOR FOR THE PURPOSES OF, OR IN
CONNECTION WITH, THE CONSTRUCTION OR OPERATION BY OR ON BEHALF OF THE
MORTGAGOR OF ALL PROPERTIES, FACILITIES, SYSTEMS OR BUSINESSES, WHETHER
UNDERGROUND OR OVERHEAD OR OTHERWISE, WHEREVER LOCATED;
III
ALL RIGHT, TITLE AND INTEREST OF THE MORTGAGOR IN, TO AND UNDER ANY
AND ALL LICENSES, FRANCHISES, ORDINANCES, PRIVILEGES AND PERMITS HERETOFORE
GRANTED, ISSUED OR EXECUTED, OR WHICH MAY HEREAFTER BE GRANTED, ISSUED OR
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EXECUTED, TO IT OR TO ITS ASSIGNORS BY THE UNITED STATES OF AMERICA, OR BY
ANY STATE, OR BY ANY COUNTY, TOWNSHIP, MUNICIPALITY, VILLAGE OR OTHER
POLITICAL SUBDIVISION THEREOF, OR BY ANY AGENCY, BOARD, COMMISSION OR
DEPARTMENT OF ANY OF THE FOREGOING, AUTHORIZING THE CONSTRUCTION,
ACQUISITION OR OPERATION OF ALL PROPERTIES, FACILITIES, SYSTEMS OR
BUSINESSES, INSOFAR AS THE SAME MAY BY LAW BE ASSIGNED, GRANTED, BARGAINED,
SOLD, CONVEYED, TRANSFERRED, MORTGAGED, OR PLEDGED;
IV
ALL RIGHT, TITLE AND INTEREST OF THE MORTGAGOR IN, TO AND UNDER ANY
AND ALL CONTRACTS HERETOFORE OR HEREAFTER EXECUTED BY AND BETWEEN THE
MORTGAGOR AND ANY PERSON, FIRM, OR CORPORATION RELATING TO THE MORTGAGED
PROPERTY TOGETHER WITH ANY AND ALL OTHER ACCOUNTS, CONTRACTS RIGHTS AND
GENERAL INTANGIBLES (AS SUCH TERMS ARE DEFINED IN THE APPLICABLE UNIFORM
COMMERCIAL CODE) HERETOFORE OR HEREAFTER ACQUIRED BY THE MORTGAGOR;
V
ALSO, ALL RIGHT, TITLE AND INTEREST OF THE MORTGAGOR IN AND TO ALL
OTHER PROPERTY, REAL OR PERSONAL, TANGIBLE OR INTANGIBLE, OF EVERY KIND,
NATURE AND DESCRIPTION, AND WHERESOEVER SITUATED, NOW OWNED OR HEREAFTER
ACQUIRED BY THE MORTGAGOR, IT BEING THE INTENTION HEREOF THAT ALL SUCH
PROPERTY NOW OWNED BUT NOT SPECIFICALLY DESCRIBED HEREIN OR ACQUIRED OR HELD
BY THE MORTGAGOR AFTER THE DATE HEREOF SHALL BE AS FULLY EMBRACED WITHIN AND
SUBJECTED TO THE LIEN HEREOF AS IF THE SAME WERE NOW OWNED BY THE MORTGAGOR
AND WERE SPECIFICALLY DESCRIBED HEREIN TO THE EXTENT ONLY, HOWEVER, THAT
THE SUBJECTION OF SUCH PROPERTY TO THE LIEN HEREOF SHALL NOT BE CONTRARY TO
LAW;
TOGETHER WITH ALL RENTS, INCOME, REVENUES, PROFITS, PROCEEDS AND
BENEFITS AT ANY TIME DERIVED, RECEIVED OR HAD FROM ANY AND ALL OF THE
ABOVE-DESCRIBED PROPERTY OF THE MORTGAGOR.
PROVIDED, HOWEVER, NO AUTOMOBILES, TRUCKS, TRAILERS, TRACTORS OR
OTHER VEHICLES (INCLUDING WITHOUT LIMITATION AIRCRAFT OR SHIPS, IF ANY) OWNED
OR USED BY THE MORTGAGOR SHALL BE INCLUDED IN THE MORTGAGED PROPERTY,
TO HAVE AND TO HOLD ALL AND SINGULAR THE MORTGAGED PROPERTY UNTO THE
MORTGAGEE AND ITS ASSIGNS FOREVER, TO SECURE EQUALLY AND RATABLY THE
PAYMENT OF THE PRINCIPAL OF AND INTEREST ON AND ANY OTHER AMOUNT DUE UNDER
THE NOTES, ACCORDING TO THEIR TENOR AND EFFECT, WITHOUT PREFERENCE,
PRIORITY OR DISTINCTION AS TO INTEREST OR PRINCIPAL (EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED HEREIN) OR AS TO LIEN OR OTHERWISE OF ANY NOTE OVER
ANY OTHER NOTE BY REASON OF THE PRIORITY IN TIME OF THE EXECUTION, DELIVERY
OR MATURITY THEREOF OR OF THE ASSIGNMENT OR NEGOTIATION THEREOF, OR
OTHERWISE, AND TO SECURE THE DUE PERFORMANCE OF THE COVENANTS, AGREEMENTS
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AND PROVISIONS HEREIN AND IN THE LOAN AGREEMENT CONTAINED, AND FOR THE USES
AND PURPOSES AND UPON THE TERMS, CONDITIONS, PROVISOS AND AGREEMENTS
HEREINAFTER EXPRESSED AND DECLARED.
ARTICLE II
ADDITIONAL NOTES
SECTION 2.01. ADDITIONAL NOTES SECURED BY THIS MORTGAGE: The
Mortgagor, when authorized by resolution of its board of directors, may from
time to time execute and deliver to the Mortgagee one or more Additional
Notes to evidence loans made by the Mortgagee to the Mortgagor. The
Mortgagor, when authorized by resolution of its board of directors, may also
from time to time execute and deliver one or more Additional Notes to refund
any Note at the time outstanding and secured hereby, or in renewal of, or in
substitution for, any such outstanding Note. Additional Notes shall
contain such provisions and shall be executed and delivered upon such terms
and conditions as the board of directors of the Mortgagor in the resolution
authorizing the execution and delivery thereof and the Mortgagee shall
prescribe. Additional Notes, including refunding, renewal and substitute
Notes, when and as executed and delivered, shall be secured by this
Mortgage, equally and ratably with all other Notes at the time outstanding,
without preference, priority, or distinction of any of the Notes over any
other of the Notes by reason of the priority of the time of the execution,
delivery or maturity thereof or of the assignment or negotiation thereof.
As used in this Mortgage, the term "directors" includes trustees.
SECTION 2.02. SUPPLEMENTAL MORTGAGES TO CONFIRM SECURITY: The
Mortgagor, when authorized by resolution of its board of directors, may from
time to time execute, acknowledge, deliver, record and file one or more
supplements to this Mortgage which thereafter shall form a part hereof for
the purpose of formally confirming this Mortgage as security for the Notes.
ARTICLE III
PARTICULAR COVENANTS OF THE MORTGAGOR
EACH MORTGAGOR COVENANTS WITH THE MORTGAGEE AS FOLLOWS:
SECTION 3.01. AUTHORITY TO EXECUTE AND DELIVER NOTES AND MORTGAGES;
ALL ACTION TAKEN; ENFORCEABLE OBLIGATIONS: The Mortgagor is duly authorized
under its articles of incorporation and by-laws and the laws of the State
of its incorporation and all other applicable provisions of law to execute
and deliver the Notes and this Mortgage and to execute and deliver
Additional Notes; and all corporate action on its part for the execution
and delivery of the Notes and this Mortgage has been duly and effectively
taken; and the Notes and this Mortgage are the valid and enforceable
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obligations of the Mortgagor in accordance with their respective terms,
except to the extent enforceability may be limited by laws affecting
creditors generally, by the exercise of judicial discretion in accordance
with general provisions of equity or because waivers of statutory or common
law rights or remedies may be limited.
SECTION 3.02. AUTHORITY TO MORTGAGE PROPERTY; NO LIENS; EXCEPTION
FOR PERMITTED ENCUMBRANCES; MORTGAGOR TO DEFEND TITLE AND REMOVE LIENS: The
Mortgagor warrants that it has good, right and lawful authority to mortgage
the property described in the granting clauses of this Mortgage for the
purposes herein expressed, and that the said property is free and clear of
any deed of trust, mortgage, lien, charge or encumbrance thereon or
affecting the title thereto, except (i) the lien of this Mortgage and taxes
or assessments not yet due; (ii) deposits or pledges to secure payment of
workmen's compensation, unemployment insurance, old age pensions or other
social security; and (iii) deposits or pledges to secure performance of
bids, tenders, contracts (other than contracts for the payment of borrowed
money), leases, public or statutory obligations, surety or appeal bonds, or
other deposits or pledges for purposes of like general nature in the
ordinary course of business.
The Mortgagor will, so long as any of the Notes shall be outstanding,
maintain and preserve the lien of this Mortgage superior to all other liens
affecting the Mortgaged Property, and will forever warrant and defend the
title to the property described as being mortgaged hereby to the Mortgagee
against any and all claims and demands whatsoever. Except to the extent
being contested by Mortgagor in good faith, Mortgagor will promptly pay or
discharge any and all obligations for or on account of which any such lien
or charge might exist or could be created and any and all lawful taxes,
rates, levies, assessments, liens, claims or other charges imposed upon or
accruing upon any of the Mortgagor's property, or the franchises, earnings
or business of the Mortgagor, as and when the same shall become due and
payable; and whenever called upon so to do the Mortgagor will furnish to
the Mortgagee adequate proof of such payment or discharge.
SECTION 3.03. PAYMENT OF NOTES: The Mortgagor will duly and
punctually pay the principal of and interest on the Notes in addition to any
other amounts due thereunder at the dates and places and in the manner
provided therein, according to the true intent and meaning thereof, and all
other sums becoming due hereunder.
SECTION 3.04. PRESERVATION OF CORPORATE EXISTENCE AND FRANCHISES;
COMPLIANCE WITH LAWS; LIMITATIONS ON MERGERS, TRANSFERS AND PURCHASES: The
Mortgagor will at all times, so long as any of the Notes shall be outstanding,
take or cause to be taken all such action as from time to time may be
necessary to preserve its corporate existence and to preserve and renew all
franchises, rights of way, easements, permits and licenses necessary to the
conduct of its business, and will materially comply with all valid laws,
ordinances, regulations and requirements applicable to it or its property.
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The Mortgagor will not, without the approval in writing of the Mortgagee,
take or suffer to be taken any steps to reorganize, or to consolidate with
or merge into any other corporation other than as provided for in the Loan
Agreement.
SECTION 3.05. MAINTENANCE OF MORTGAGED PROPERTY: The Mortgagor
will at all times maintain and preserve the Mortgaged Property in good repair,
working order and condition, ordinary wear and tear and disposition of
property in the ordinary course of business excepted, and will from time to
time make all needful and proper repairs, renewals and replacements, and
useful and proper alterations, additions, betterments and improvements in
accordance with prudent industry practice, and will, subject to contingencies
beyond its reasonable control, at all times keep its plant and properties in
continuous operation and use all reasonable diligence to furnish the
subscribers served by it through the Mortgaged Property with adequate
service.
SECTION 3.06. PURCHASE OF PROPERTY FREE OF LIENS: Except as
specifically authorized in writing in advance by the Mortgagee or in the case
of vehicles, the Mortgagor will purchase all materials, equipment, supplies
and replacements to be incorporated in or used in connection with or
otherwise constituting Mortgaged Property outright, and not subject to any
conditional sales agreement, chattel mortgage, bailment lease, or other
agreement reserving to the seller any right, title or lien except current
trade obligations incurred in the ordinary course of business.
SECTION 3.07. INSURANCE; RESTORATION OF DAMAGED MORTGAGED PROPERTY:
(a) The Mortgagor will at all times at its own expense maintain, with a
financially sound and reputable insurer, property and casualty insurance
(including fidelity bonds) with respect to its properties and business
against such casualties and contingencies of such types and in such amounts
as the Mortgagee reasonably determines is customary in the case of any entity
of established reputation engaged in the same or a similar business and
owning similar properties. The Mortgagor will cause the Mortgagee to be
named as loss-payee on all such insurance policies. The Mortgagor will,
upon request of the Mortgagee, submit a schedule of its insurance in effect
on the date specified in such request and shall, if so directed by the
Mortgagee, submit a certificate of its insurance coverages. If the
Mortgagor shall at any time fail or refuse to take out or maintain
insurance or to make changes in respect thereof upon appropriate request by
the Mortgagee, the Mortgagee may take out such insurance on behalf and in
the name of the Mortgagor, and the Mortgagor will pay the cost thereof; (b)
In the event of damage to or the destruction or loss of any portion of the
Mortgaged Property which shall be covered by insurance, unless the
Mortgagee shall otherwise agree, the Mortgagor shall replace or restore
such damaged, destroyed or lost portion so that the Mortgaged Property
shall be in substantially the same condition as it was in prior to such
damage, destruction or loss, and shall apply the proceeds of the insurance
for that purpose. The Mortgagor shall replace the loss or shall commence
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such restoration promptly after such damage, destruction or loss shall have
occurred and shall complete such replacement or restoration as
expeditiously as practicable, and shall pay or cause to be paid out of the
proceeds of such insurance all costs and expenses in connection therewith
so that such replacement or restoration shall be so completed that the
portion of the Mortgaged Property so replaced or restored shall be free and
clear of all mechanics' liens and other claims.
SECTION 3.08. MORTGAGEE'S RIGHT TO EXPEND MONEY TO PROTECT MORTGAGED
PROPERTY: In the event of the failure of the Mortgagor to comply with
material covenants and conditions herein contained with respect to the
procuring of insurance, the payment of taxes, assessments and other
charges, the keeping of the Mortgaged Property in repair and free of liens
and other claims or to comply with any other material covenant contained in
this Mortgage, Mortgagee shall have the right (without prejudice to any
other rights arising by reason of such default) to advance or expend moneys
for the purpose of procuring such insurance, or for the payment of
insurance premiums, taxes, assessments or other charges unless being
contested by Mortgagor in good faith, or to save the Mortgaged Property
from sale or forfeiture for any unpaid tax or assessment, or otherwise, or
to redeem the same from any tax or other sale, or to purchase any tax title
thereon unless being contested by Mortgagor in good faith, or to remove or
purchase any recorded mechanics' liens or other encumbrance thereon, or to
make repairs thereon or to comply with any other covenant herein contained
or to prosecute or defend any suit in relation to the Mortgaged Property or
in any manner to protect the Mortgaged Property and the title thereto, and
all sums so advanced for any of the aforesaid purposes with interest
thereon at the rate provided in the Note shall be deemed a charge upon the
Mortgaged Property in the same manner as the Notes at the time outstanding
are secured and shall be forthwith paid to Mortgagee making such advance or
advances upon demand; provided, however, that such interest rate shall not
be in excess of the rate permitted by law. It shall not be obligatory for
Mortgagee in making any such advances or expenditures to inquire into the
validity of any such tax title, or of any of such taxes or assessments or
sales therefor, or of any such mechanics' liens or other encumbrance.
SECTION 3.09. LIMITATIONS ON CONTRACTS; DEPOSITS OF FUNDS: Except
as set forth in the Loan Agreement, the Mortgagor will not, without the
approval in writing of the Mortgagee: (a) enter into any contract or
contracts (i) for management of its business or any part thereof; (ii) for
the operation or maintenance of all or any substantial part of its property,
(iii) for the use by others of any of the Mortgaged Property in excess of
$100,000; or (iv) with other companies; provided, however, that such approval
shall not be required for any contract which in form and substance
substantially conforms with contracts in general use in the Mortgagor's
industry by companies of size and character similar to Mortgagor or which
substantially conform to contracts which are currently in existence that
Mortgagor is a party to; or (b) deposit any of its funds, regardless of the
source thereof, in any bank which is not insured by the Federal Deposit
Insurance Corporation or the successor thereof.
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SECTION 3.10. FINANCIAL BOOKS; FINANCIAL REPORTS; MORTGAGEE RIGHT OF
INSPECTION: The Mortgagor will at all times keep, and safely preserve,
proper books, records and accounts in which full and true entries will be
made of all of the dealings, business and affairs of the Mortgagor, in
accordance with methods of accounting prescribed by the state regulatory
body having jurisdiction over the Mortgagor, or in the absence of such
regulatory body or such prescription, by the Federal Communications
Commission ("FCC") or in accordance with generally accepted accounting
principles. The Mortgagor will prepare and furnish Mortgagee not later
than 60 days from the six-month period ending June 30 and the twelve month
period ending December 31, or at more frequent intervals when reasonably
specified by the Mortgagee, financial and statistical reports on its and
any subsidiaries' condition and operation. The December year-end reports
shall include individual financial statements for the Mortgagor and
consolidated and consolidating financial statements for the Mortgagor and
each of its subsidiaries, in such detail as the Mortgagee may reasonably
prescribe. The Mortgagor will cause to be prepared and furnished to
Mortgagee at least once during each 12-month period during the term hereof,
a full and complete report of its and its subsidiaries' financial condition
as of a date (hereinafter called the "Fiscal Date") not more than one
hundred twenty days (120) after the close of the fiscal year, in form and
substance reasonably satisfactory to the Mortgagee, audited and certified
by independent certified public accountants reasonably satisfactory to
Mortgagee and accompanied by a report of such audit in form and substance
reasonably satisfactory to the Mortgagee. The Mortgagee, through its
representatives, shall at all times during reasonable business hours have
access to, and the right to inspect and make copies of, any or all books,
records and accounts, and any or all invoices, contracts, leases, payrolls,
cancelled checks, statements and other documents and papers of every kind
belonging to or in possession of the Mortgagor and its subsidiaries and
pertaining to the Mortgagor's and its subsidiaries' property or business.
SECTION 3.11. FURTHER ASSURANCES TO CONFIRM SECURITY OF MORTGAGE:
The Mortgagor will from time to time upon written demand of the Mortgagee make,
execute, acknowledge and deliver or cause to be made, executed,
acknowledged and delivered all such further and supplemental indentures of
mortgage, deeds of trust, mortgages, financing statements, continuation
statements, security agreements, instruments and conveyances as may
reasonably be requested by the Mortgagee and take or cause to be taken all
such further action as may reasonably be requested by the Mortgagee to
effectuate the intention of these presents and to provide for the securing
and payment of the principal of and interest on the Notes according to the
terms thereof and for the purpose of fully conveying, transferring and
confirming unto the Mortgagee the property hereby conveyed, mortgaged and
pledged, or intended so to be, whether now owned by the Mortgagor or
hereafter acquired by it and to reflect the assignment of the rights or
interest of the Mortgagee hereunder or under any Note. The Mortgagor will
cause this Mortgage and any and all supplemental indentures of mortgage,
mortgages and deeds of trust and every security agreement, financing
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statement, continuation statement and every additional instrument which
shall be executed pursuant to the foregoing provisions forthwith upon
execution to be recorded and filed and rerecorded and refiled as
conveyances and mortgages and deeds of trust of and security interests in
real and personal property in such manner and in such places as may be
required by law or reasonably requested by the Mortgagee in order fully to
preserve the security for the Notes and to perfect and maintain the
superior lien of this Mortgage and all supplemental indentures of mortgage,
mortgages and deeds of trust and the rights and remedies of Mortgagee.
SECTION 3.12. LIMITATIONS ON DIVIDENDS, PATRONAGE REFUNDS AND OTHER
CASH DISTRIBUTIONS: Except as allowed under the Loan Agreement, the Mortgagor
will not in any one calendar year without the prior approval in writing of
Mortgagee declare or pay any dividends or make any other distribution to
its stockholders with respect to its capital stock, or purchase or redeem
or retire any of its ca pital stock.
SECTION 3.13. APPLICATION OF PROCEEDS FROM CONDEMNATION: In the
event that the Mortgaged Property, or any part thereof, shall be taken under
the power of eminent domain, all proceeds and avails therefrom, except to the
extent that Mortgagee shall consent to other use and application thereof by
the Mortgagor, shall forthwith be applied by the Mortgagor: first, either to
acquire additional Mortgaged Property or to the ratable payment of any
indebtedness by this Mortgage secured other than principal of or interest
on the Notes; second, to the ratable payment of interest which shall have
accrued on the Notes and be unpaid; third, to the ratable payment of or on
account of the unpaid principal of the Notes; and fourth, the balance shall
be paid to Mortgagor or whosoever shall be entitled thereto.
SECTION 3.14. COMPLIANCE WITH LOAN AGREEMENTS: The Mortgagor will
well and truly observe and perform all of the covenants, agreements, terms
and conditions contained in the Loan Agreement on its part to be observed or
performed. In the event of any inconsistency between the terms and
conditions of the Mortgage and Loan Agreement, the more restrictive
provisions shall apply to the Mortgagor.
SECTION 3.15. NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICES: The
Mortgagor will promptly notify the Mortgagee in writing of any change in
location of its chief executive offices or the office where its records
concerning accounts and contract rights are kept.
SECTION 3.16. RIGHTS OF WAY, ETC., NECESSARY IN BUSINESS: The
Mortgagor will exercise reasonable efforts to obtain all such rights of way,
easements from landowners and releases from lienors as shall be necessary
or advisable in the conduct of its business, and, if requested by the
Mortgagee, deliver to the Mortgagee evidence satisfactory to the Mortgagee
of the obtaining of such rights of way, easements or releases.
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SECTION 3.17. LIMITATIONS ON LOANS, INVESTMENTS AND OTHER
OBLIGATIONS: (a) The Mortgagor shall not, without first obtaining the written
approval of Mortgagee, (i) purchase or make any commitment to purchase any
stock, bonds, notes, debentures or other securities or obligations of or
beneficial interests in, (ii) make any other investment in, (iii) make any
loan to, or (iv) guarantee, assume, or otherwise become liable for any
obligation of, any corporation, association, partnership, joint venture,
trust, government or any agency or department thereof, or any other entity
of any kind if the aggregate amount of all such purchases, investments,
loans and guarantees exceeds the greater of ten percent (10%) of Total
Plant or thirty percent (30%) of Net Worth. For purposes of this Mortgage,
"Total Plant" shall be calculated on a consolidated basis for the Mortgagor
and all its subsidiaries and shall mean the total of all assets included in
property, plant and equipment pursuant to generally accepted accounting
principles and shall exclude any goodwill or plant acquisition adjustments.
For purposes of this Mortgage, "Net Worth" shall be calculated on a
consolidated basis for the Mortgagor and all its subsidiaries, arrived at
by subtracting total liabilities from total assets.
(b) The following shall not be included in the limitation on
purchases, investments, loans and guarantees in (a) above: (i) bonds, notes,
debentures, stock, or other securities or obligations issued by or
guaranteed by the United States government or any agency or instrumentality
thereof; (ii) bonds, notes, debentures, stock, commercial paper,
subordinated capital certificates, or any other security or obligation of
institutions whose senior unsecured debt obligations are rated by at least
two nationally recognized rating organizations in either of its two highest
categories; (iii) investments incidental to loans made by RTFC; and (iv)
any deposit that is fully insured by the Federal Government.
SECTION 3.18. SALE OF ASSETS: The Mortgagor and any Subsidiary of
the Mortgagor may not, without prior written approval of the Mortgagee, sell,
lease or transfer any Mortgaged Property, unless the fair market value of
such asset is less than $150,000 and the aggregate value of assets sold,
leased or transferred in any 12-month period is less than $600,000. The
proceeds of such sale, lease or transfer, less ordinary and reasonable
expenses incident to such sale transaction, must be (i) immediately applied
as prepayment without penalty of the Notes (when permitted under the
respective terms of each Loan Agreement); or (ii) used to buy replacement
property as may be designated by Mortgagee at the time of any such
prepayment; or (iii) set aside as a deposit in an account selected by the
Mortgagor.
ARTICLE IV
REMEDIES OF THE MORTGAGEE AND NOTEHOLDERS
SECTION 4.01 EVENTS OF DEFAULT: THE OCCURRENCE OF ANY ONE OR MORE
OF THE FOLLOWING EVENTS SHALL CONSTITUTE AN "EVENT OF DEFAULT":
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(a) REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made herein, in any Loan Agreement, or in any
statement, report, certificate, opinion, financial
statement or other document furnished or to be furnished
in connection with this Mortgage or any Loan Agreement
shall be false or misleading in any material respect.
(B) PAYMENT. Failure of Mortgagor to make any payment of
interest on, or principal of, any Note or failure to make
payment of any other amount due thereunder including,
without limitation, any sum due the Mortgagee under any
Loan Agreement when and as the same shall become due,
whether at the due date thereof, by demand, by acceleration
or otherwise.
(C) OTHER COVENANTS. Failure of Mortgagor to observe or
perform any warranty, covenant, or condition to be observed
or performed by Mortgagor under this Mortgage, any Loan
Agreement or any Note.
(D) CORPORATE EXISTENCE. The Mortgagor shall forfeit or
otherwise be deprived of its corporate charter, franchises,
permits, easements, consents or licenses required to carry
on any material portion of its business.
(E) BANKRUPTCY. A court shall enter a decree or order for
relief with respect to the Mortgagor or any Subsidiary or
guarantor (if applicable) in an involuntary case under
any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or appoint a receiver,
liquidator, assignee, custodian, trustee, sequestrator or
similar official, or order the winding up or liquidation of
its affairs, and such decree or order shall remain unstayed
and in effect for a period of sixty (60) consecutive
days or the Mortgagor or any subsidiary shall commence a
voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or under
any such law, or consent to the appointment or taking of
possession by a receiver, liquidator, assignee, custodian
or trustee, of a substantial part of its property, or make
any general assignment for the benefit of creditors.
(F) DISSOLUTION OR LIQUIDATION. Other than as provided in
subsection (e) above, the dissolution or liquidation of the
Mortgagor or any Subsidiary or any guarantor (if
applicable), or failure by the Mortgagor or any
Subsidiary or any guarantor (if applicable) to promptly
forestall or remove any execution, garnishment or
attachment of such consequence as will impair its ability
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to continue its business or fulfill its obligations and
such execution, garnishment or attachment shall not be
vacated within sixty (60) days.
(G) FINAL JUDGMENT. A final nonappealable judgment in excess
of $100,000 shall be entered against the Mortgagor and
shall remain unsatisfied or Without a stay in respect
thereof for a period of sixty (60) days.
(H) OTHER OBLIGATIONS. Default by the Mortgagor in the payment
when due of any money owed by the Borrower, whether
principal, interest, premium or otherwise under any other
agreement for borrowing money in an amount in excess of
five percent (5%) of total assets, whether or not such
borrowing is secured.
SECTION 4.02 REMEDIES OF MORTGAGEE: Upon the occurrence of an
Event of Default, the Mortgagee may, subject to:
(i) thirty (30) days prior written notice during which time
Mortgagor shall have the opportunity to cure said Event of
Default except with respect to Events of Default pursuant to
Sections 4.01(b), 4.01(e) and 4.01(f) above which shall require
no notice or demand and shall have no period to cure; and
(ii) compliance, if required, with the rules and regulations of the
FCC and any state public service or utilities commission having
jurisdiction;
exercise in any jurisdiction in which enforcement hereof is sought, the
following rights and remedies, in addition to all rights and remedies
available to the Mortgagee under applicable law, all such rights and
remedies being cumulative and enforceable alternatively, successively or
concurrently:
(a) take immediate possession of the Mortgaged Property, collect and
receive all credits, outstanding accounts and bills receivable
of the Mortgagor and all rents, income, revenues and profits
pertaining to or arising from the Mortgaged Property, or any
part thereof, and issue binding receipts therefor; and manage,
control and operate the Mortgaged Property as fully as the
Mortgagor might do if in possession thereof, including, without
limitation, the making of all repairs or replacements deemed
necessary or advisable; Provided, However, that Mortgagee agrees
to abide by any notice requirement contained in FCC Rules, 47
C.F.R. 22.917(f), in connection with any of the Mortgaged
Property which is covered by such section or any successor
provision;
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(b) proceed to protect and enforce the rights of the Mortgagee under
this Mortgage by suits or actions in equity or at law in any
court or courts of competent jurisdiction, whether for specific
performance of any covenant or any agreement contained herein or
in aid of the execution of any power herein granted or for the
foreclosure hereof or hereunder or for the sale of the Mortgaged
Property, or any part thereof, or to collect the debts hereby
secured or for the enforcement of such other or additional
appropriate legal or equitable remedies as may be deemed most
effectual to protect and enforce the rights and remedies herein
granted or conferred, and in the event of the institution of any
such action or suit Mortgagee shall have the right to have
appointed a receiver of the Mortgaged Property and of all rents,
income, revenues and profits pertaining thereto or arising
therefrom derived, received or had from the time of the
commencement of such suit or action, and such receiver shall
have all the usual powers and duties of receivers, in like and
similar cases, to the fullest extent permitted by law, and if
application shall be made for the appointment of a receiver the
Mortgagor hereby expressly consents that the court to which such
application shall be made may make said appointment;
(c) sell or cause to be sold consistent with the applicable
commercial code all and singular the Mortgaged Property or any
part thereof, and all right, title, interest, claim and demand
of the Mortgagor therein or thereto, at public auction at such
place in any county in which the property to be sold, or any
part thereof is located, at such time and upon such terms as
may be specified in a notice of sale, which shall state the time
when and the place where the sale is to be held, shall contain a
brief general description of the property to be sold, and shall
be given by mailing a copy thereof to the Mortgagor at least
fifteen (15) days prior to the date fixed for such sale and by
publishing the same once in each week for two successive
calendar weeks prior to the date of such sale in a newspaper of
general circulation published in said county, or if no such
newspaper is published in such county, in a newspaper of general
circulation in such county, the first such publication to be not
less than fifteen (15) days nor more than thirty (30) days prior
to the date fixed for such sale. Any sale to be made under this
subparagraph (c) of this section 4.02 may be adjourned from time
to time by announcement at the time and place appointed for such
sale or for such adjourned sale and without further notice or
publication the sale may be had at the time and place to which
the same shall be adjourned; provided, however, that in the
event another or different notice of sale or another or
different manner of conducting the same shall be required by
law the notice of sale shall be given or the sale shall be
conducted, as the case may be, in accordance with the applicable
provisions of law; and
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(d) declare all unpaid principal outstanding on any Note, all
accrued and unpaid interest thereon, and all other amounts due
under the Loan Agreement and/or Notes to be immediately due and
payable and the same shall thereupon become immediately due and
payable without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived.
SECTION 4.03. RIGHT OF MORTGAGEE TO BID ON MORTGAGED PROPERTY: At
any sale hereunder Mortgagee shall have the right to bid for and purchase the
Mortgaged Property, or such part thereof as shall be offered for sale, and
Mortgagee may apply in settlement of the purchase price of the property so
purchased the portion of the net proceeds of such sale which would be
applicable to the payment on account of the principal of and interest on
and any other sum due pursuant to the Note held by Mortgagee and such
amount so applied shall be credited as a payment on account of principal of
and interest on and any other sum due pursuant to the Note held by
Mortgagee.
SECTION 4.04. APPLICATION OF PROCEEDS FROM REMEDIAL ACTIONS: Any
proceeds of funds arising from the exercise of any rights or the enforcement of
any remedies herein provided after the payment or provision for the payment of
any and all costs and expenses in connection with the exercise of such
rights or the enforcement of such remedies shall be applied first, to the
payment of indebtedness hereby secured other than the principal of or
interest on the Notes; second, to the ratable payment of interest which
shall have accrued on the Notes and which shall be unpaid; third, to the
ratable payment of or on account of the unpaid principal of the Notes, and
the balance, if any, shall be paid to Mortgagor or whosoever shall be
entitled thereto.
SECTION 4.05. NOTICE OF DEFAULT: The Mortgagor covenants that it
will give prompt written notice to Mortgagee of the occurrence of an Event of
Default or an event which, with the giving of notice or lapse of time or both,
would constitute an Event of Default.
SECTION 4.06. REMEDIES CUMULATIVE; NO ELECTION: Every right or
remedy herein conferred upon or reserved to Mortgagee shall be cumulative and
shall be in addition to every other right and remedy given hereunder or now
or hereafter existing at law, or in equity, or by statute. The pursuit of
any right or remedy shall not be construed as an election.
SECTION 4.07. WAIVER OF APPRAISEMENT RIGHTS: To the extent
permitted under applicable law, the Mortgagor, for itself and all who may claim
through or under it, covenants that it will not at any time insist upon or
plead, or in any manner whatever claim, or take the benefit or advantage of,
any appraisement, valuation, stay, extension or redemption laws now or
hereafter in force in any locality where any of the Mortgaged Property may
be situated, in order to prevent, delay or hinder the enforcement or
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foreclosure of this Mortgage, or the absolute sale of the Mortgaged
Property, or any part thereof, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchaser or
purchasers thereat, and the Mortgagor, for itself and all who may claim
through or under it, hereby waives the benefit of all such laws unless such
waiver shall be forbidden by law.
ARTICLE V
POSSESSION UNTIL DEFAULT-DEFEASANCE CLAUSE
SECTION 5.01. POSSESSION UNTIL DEFAULT: Until some one or more of
the Events of Default shall have happened, the Mortgagor shall be suffered and
permitted to retain actual possession of the Mortgaged Property, and to
manage, operate and use the same and any part thereof, with the rights and
franchises appertaining thereto, and to collect, receive, take, use and
enjoy the rents, revenues, issues, earnings, income, products and profits
thereof or therefrom, subject to the provisions of this Mortgage.
SECTION 5.02. DEFEASANCE: Upon payment of the full amount of the
principal of and interest on the Notes and upon payment of all other sums
payable hereunder by the Mortgagor, all property, rights and interests hereby
conveyed or assigned or pledged shall revert to the Mortgagor and the
estate, right, title and interest of the Mortgagee shall thereupon cease,
determine and become void and the Mortgagee, in such case, on written
demand of the Mortgagor, but at the Mortgagor's cost and expense, shall
enter satisfaction of this Mortgage upon the record.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. PROPERTY DEEMED REAL PROPERTY: It is hereby declared
to be the intention of the Mortgagor that all lines, or systems, embraced in
the Mortgaged Property, including, without limitation, all rights of way and
easements granted or given to the Mortgagor or obtained by it to use real
property in connection with the construction, operation or maintenance of
such lines, or systems, and all other property physically attached to any
of the foregoing-described property, shall be deemed to be real property.
SECTION 6.02. MORTGAGE TO BIND AND BENEFIT SUCCESSORS AND ASSIGNS:
All of the covenants, stipulations, promises, undertakings and agreements
herein contained by or on behalf of the Mortgagor shall bind its successors
and assigns, whether so specified or not, and all titles, rights and remedies
hereby granted to or conferred upon the Mortgagee shall pass to and inure
to the benefit of the successors and assigns of the Mortgagee and shall be
deemed to be granted or conferred for the ratable benefit and security of
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all who shall from time to time be the holders of Notes executed and
delivered as herein provided.
SECTION 6.03. HEADINGS: The descriptive headings of the various
articles of this Mortgage were formulated and inserted for convenience only
and shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 6.04. NOTICES: All notices, requests and other
communications provided for herein including, without limitation, any
modifications of, or waivers, requests or consents under, this Mortgage shall
be given or made in writing (including, without limitation, by telecopy) and
delivered to the intended recipient at the "Address for Notices" specified
below; or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in
this Mortgage, all such communications shall be deemed to have been duly given
when personally delivered or, in the case of a telecopied or mailed notice,
upon receipt, in each case given or addressed as provided for herein. The
Address for Notices of the respective parties are as follows:
The Mortgagee: Rural Telephone Finance Cooperative
Woodland Park
2201 Cooperative Way
Herndon, Virginia 20171-3025
Attention: Chief Executive Officer
Fax: 703-709-6776
The Mortgagor: Dakota Cooperative Telecommunications, Inc.
Dakota Telecom, Inc.
P.O. Box 66
29705 453rd Avenue
Irene, SD 57037
Fax: 605-263-3995
SECTION 6.05. REGULATORY APPROVAL: Notwithstanding anything to the
contrary contained in this Mortgage, the Loan Agreement, or in any related
agreement, instrument or document, mortgagee shall not take any action
requiring the prior approval of the FCC or any state public service or
utilities commission having jurisdiction without first obtaining such
approval.
SECTION 6.06. SEVERABILITY: The invalidity of any one or more
phrases, clauses, sentences, paragraphs or provisions shall not affect the
remaining portions of this Mortgage, nor shall any such invalidity as to any
holder of Notes hereunder affect the rights hereunder of any other holder of
Notes.
SECTION 6.07. COUNTERPARTS: This Mortgage may be simultaneously
executed in any number of counterparts, and all said counterparts executed and
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delivered, each as an original, shall constitute but one and the same
instrument.
SECTION 6.08. MORTGAGE DEEMED SECURITY AGREEMENT: To the extent that
any of the property described or referred to in this Mortgage is governed by
the provisions of the Uniform Commercial Code this Mortgage is hereby deemed a
"security agreement" under the Uniform Commercial Code, and a "financing
statement" under the Uniform Commercial Code for said security agreement.
The mailing addresses of the Mortgagor as debtor, and of the Mortgagee as
secured party are as s et forth in Section 6.04.
SECTION 6.09. USE OF TERMS: The use of any gender or the neuter
herein shall also refer to the other gender or the neuter and the use of the
plural shall also refer to the singular, and vice versa.
IN WITNESS WHEREOF, Mortgagor, has caused this Mortgage to be signed
in its name and its corporate seal to be hereunto affixed and attested by its
officers thereunto duly authorized, and Mortgagee, has caused this Mortgage
to be duly executed in its behalf, all as of the day and year first above
written.
DAKOTA COOPERATIVE TELECOMMUNICATIONS,
INC.
(SEAL)
By: /s/James H. Jibben
Title: President
ATTEST: /s/John Schaefer
Secretary
Executed by the Mortgagor in the presence of:
/s/Dale Q. Bye
/s/Ross Benson
Witnesses
DAKOTA TELECOM, INC.
(SEAL)
By: /S/Jeff Goeman
Title: President
ATTEST: /S/Palmer Larson
Secretary
Executed by the Mortgagor in the presence of:
/s/Dale Q. Bye
/s/Ross Benson
Witnesses
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RURAL TELEPHONE FINANCE COOPERATIVE
(SEAL) BY: /s/Kenneth A. Fried
Title: Assistant Secretary-Treasurer
Attest: /s/Janelle M. Keefer
Assistant Secretary-Treasurer
Executed by the Mortgagee in the presence of:
/s/Kelly M. Wilkins
/s/Tara Cromp
Witnesses
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EXHIBIT I
INSTRUMENTS RECITAL
THE INSTRUMENTS REFERRED TO IN THE PRECEDING RECITALS ARE AS FOLLOWS:
(1) "LOAN AGREEMENT" DATED AS OF EVEN DATE HEREWITH;
(2) "FIRST NOTE" DATED AS OF EVEN DATE HEREWITH IN THE PRINCIPAL AMOUNT
OF $14,736,842 WITH A FINAL PAYMENT DATE FIFTEEN (15) YEARS FROM THE
DATE HEREOF; AND
(3) "SECOND NOTE" DATED AS OF EVEN DATE HEREWITH IN THE PRINCIPAL AMOUNT
OF $13,684,210 WITH A FINAL PAYMENT DATE FIFTEEN (15) YEARS FROM THE
DATE HEREOF.
<PAGE>
EXHIBIT II
PROPERTY SCHEDULE
(a) The Existing Facilities are Located in the Counties of Clay, Lincoln,
Turner, Union and Yankton in the State of South Dakota.
(b) The property referred to in the last lines of paragraph 1 of the
Granting Clause includes the following described real estate:
CLAY COUNTY
IRENE
LOT "C" OF LOT 2 IN THE NE1/4 OF SECTION 6, TOWNSHIP 95, NORTH OF RANGE 53,
WEST OF THE 5TH P.M., CLAY COUNTY, SOUTH DAKOTA.
LOT "A" OF THE NORTHWEST QUARTER OF SECTION 5, TOWNSHIP 95 NORTH, RANGE 53,
WEST OF THE 5TH P.M., CLAY COUNTY, SOUTH DAKOTA.
LOTS ELEVEN (11), AND TWELVE (12), OF BLOCK EIGHT (8), OF THE ORIGINAL
PLAT, OF THE TOWN OF IRENE, IN CLAY COUNTY, SOUTH DAKOTA.
WAKONDA
LOT FOURTEEN (14), OF BLOCK SEVEN (7), BEING A PART OF OUTLOT "C" OF THE
TOWN OF WAKONDA, CLAY COUNTY, SOUTH DAKOTA.
LINCOLN COUNTY
SOUTH 150 FEET OF THE EAST 145 FEET OF THE SE1/4 OF THE SW1/4 OF THE SE1/4
(SE1/4SW1/4SE1/4) OF SECTION 28, TOWNSHIP 100 NORTH, RANGE 50 WEST OF THE 5TH
P.M., LINCOLN COUNTY, SOUTH DAKOTA.
LENNOX
THE NORTH 40 FEET OF LOT SEVENTEEN (17) AND THE WEST HALF (W1/2) OF LOT
EIGHTEEN (18), BLOCK ELEVEN (11), CITY OF LENNOX, LINCOLN COUNTY, SOUTH
DAKOTA.
LOT FIFTEEN (15), IN BLOCK ELEVEN (11), OF THE ORIGINAL PLAT OF THE CITY OF
LENNOX, LINCOLN COUNTY, SOUTH DAKOTA.
LOTS ONE (1) AND TWO (2), OF BLOCK FIVE (5) BEING PART OF TRACTS 1A AND 1B
IN INDUSTRIAL TRACT NO. 1, CITY OF LENNOX, LINCOLN COUNTY, SOUTH DAKOTA.
<PAGE>
RURAL BERESFORD
LOT "D-C" LOCATED IN THE NORTHWEST QUARTER (NW1/4) OF SECTION 33, TOWNSHIP 96
NORTH, RANGE 50, WEST OF THE 5TH P.M., IN LINCOLN COUNTY, SOUTH DAKOTA.
SIOUX FALLS (SOUTH SUNDOWNER)
THE EAST 323.4 FEET OF THE NORTH 478 FEET OF COUNTY AUDITORS TRACT 1 IN
ORIGINAL GOVERNMENT LOT 1 IN THE NORTHEAST QUARTER OF SECTION 12, TOWNSHIP
100 NORTH, RANGE 51 WEST OF THE 5TH P.M., LINCOLN COUNTY, SOUTH DAKOTA.
WORTHING
LOT SIXTEEN (16) AND THE WEST NINETY-TWO (92) FEET OF LOTS SEVENTEEN (17)
AND EIGHTEEN (18), ALL IN BLOCK EIGHT (8) OF THE ORIGINAL TOWN OF WORTHING,
LINCOLN COUNTY, SOUTH DAKOTA.
TURNER COUNTY
CHANCELLOR
LOTS THIRTEEN (13) AND FOURTEEN (14) BLOCK ONE (1) ORIGINAL TOWN OF
CHANCELLOR, BEING A PART OF THE NW1/4 OF SECTION 28, TOWNSHIP 99, RANGE 52,
TURNER COUNTY, SOUTH DAKOTA.
DAVIS
LOTS TWENTY FIVE (25) TWENTY SIX (26) AND TWENTY SEVEN (27) BLOCK SEVEN (7)
ORIGINAL TOWN OF DAVIS, BEING A PART OF THE W1/2 SE1/4 OF SECTION 33, TOWNSHIP
98, RANGE 52, TURNER COUNTY, SOUTH DAKOTA.
FLYGER
OUTLOT "A" OF THE SOUTHEAST QUARTER (SE 1/4) OF THE SOUTH EAST QUARTER (SE1/4),
OF SECTION TWENTY-THREE (23), TOWNSHIP NINETY-SEVEN (97) NORTH, RANGE
FIFTY-FIVE (55), WEST OF THE 5TH P.M., TURNER COUNTY, SOUTH DAKOTA.
HURLEY
THE NORTH EIGHTY (80') FEET OF LOTS EIGHT (8) AND NINE (9) BLOCK TWENTY
THREE (23) ORIGINAL TOWN, CITY OF HURLEY, SOUTH DAKOTA, BEING A PART OF THE
NE1/4 OF SECTION 27, TOWNSHIP 98, RANGE 53, TURNER COUNTY, SOUTH DAKOTA.
S 50' OF LOTS 8 & 9, BLOCK 23, ORIGINAL TOWN OF HURLEY, TURNER COUNTY,
SOUTH DAKOTA.
LOT TEN (10), OF BLOCK TWENTY-THREE (23), OF THE ORIGINAL PLAT OF THE TOWN
NOW CITY OF HURLEY, TURNER COUNTY, SOUTH DAKOTA.
<PAGE>
LOTS ELEVEN (11) AND TWELVE (12), BLOCK TWENTY-THREE (23) OF ORIGINAL TOWN
OF HURLEY, BEING PART OF THE NE1/4 OF SECTION 27, TOWNSHIP 98, RANGE 53,
TURNER COUNTY, SOUTH DAKOTA.
E 150' OF N1/2 S1/2 OF OUTLOT 17, TOWN OF HURLEY, TURNER COUNTY, SOUTH DAKOTA.
MONROE
LOTS OF TEN (10), ELEVEN (11), TWELVE (12) AND THIRTEEN (13), ALL IN BLOCK
1, TOWN OF MONROE (FORMERLY THE TOWN OF WARRINGTON) IN THE NORTHEAST
ONE-QUARTER (NE1/4) OF SECTION FIFTEEN 915), TOWNSHIP 100, RANGE 54, WEST OF
THE 5TH P.M., TURNER COUNTY, SOUTH DAKOTA.
PARKER
LOT FIFTEEN (15), OF BLOCK FOUR (4), OF THE ORIGINAL (PLAT) OF THE TOWN,
NOW CITY OF PARKER, TURNER COUNTY, SOUTH DAKOTA.
VIBORG
VIBORG INDUSTRIAL TRACT 6 LYING IN THE SOUTHWEST QUARTER OF THE SOUTHEAST
QUARTER (SW1/4 SE1/4) OF SECTION THIRTY-FIVE (35), TOWNSHIP NINETY-SEVEN (97)
NORTH, RANGE FIFTY-THREE (53) WEST OF THE 5TH P.M., TURNER COUNTY, SOUTH
DAKOTA.
YANKTON COUNTY
GAYVILLE
THE EAST 40 FEET OF THE SOUTH 30 FEET OF LOT 1, BLOCK 10, GAYVILLE, YANKTON
COUNTY, SOUTH DAKOTA.
THE NORTH FIFTY FEET (50') OF LOTS 8 AND 9, BLOCK 3, ORIGINAL TOWN OF
GAYVILLE, YANKTON COUNTY, SOUTH DAKOTA.
MAYFIELD
OUTLOT "A" OF THE NE 1/4, SECTION 27, TOWNSHIP 96, RANGE 55, YANKTON COUNTY,
SOUTH DAKOTA.
VOLIN
LOTS 17 AND 18, BLOCK 8, VOLIN'S ADDITION, VOLIN, YANKTON COUNTY, SOUTH
DAKOTA.
UNION COUNTY
ALSEN
A TRACT OF LAND DESCRIBED AS COMMENCING AT A POINT ONE HUNDRED FIFTY-SEVEN
(157') FEET NORTH OF THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER (NW1/4) OF
<PAGE>
SECTION EIGHTEEN (18), THENCE NORTH SIXTY-SIX (66') FEET, THENCE EAST
FIFTEEN (15) RODS, THENCE SOUTH SIXTY-SIX (66') FEET, THENCE WEST FIFTEEN
(15) RODS TO A PLACE OF BEGINNING, ALL LOCATED WITHIN THE NORTHWEST ONE-QUARTER
(NW1/4) OF SECTION EIGHTEEN (18), TOWNSHIP 94 NORTH, RANGE 50 WEST OF
THE 5TH P.M. IN UNION COUNTY, SOUTH DAKOTA.
<PAGE>
EXHIBIT 4.33
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT ("this Agreement") dated as of June 24, 1997,
between DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC., a cooperative
association duly organized and validly existing under the laws of the State
of South Dakota and DAKOTA TELECOM, INC., a corporation duly organized and
validly existing under the laws of South Dakota (hereinafter, collectively
called the "Pledgor"), and RURAL TELEPHONE FINANCE COOPERATIVE, a South
Dakota cooperative association (the "Lender").
Pledgor and the Lender are parties to a Loan Agreement dated as of June 24,
1997 (as modified and supplemented and in effect from time to time, the
"Loan Agreement"), providing, subject to the terms and conditions thereof,
for an extension of credit to be made by the Lender to Pledgor in the
principal amount of up to $28,421,052.
To induce the Lender to enter into the Loan Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor has agreed to pledge and grant a security interest in
the Collateral (as hereinafter defined). Accordingly, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS. To the extent not inconsistent herewith,
capitalized terms defined in the Loan Agreement are used herein as defined
therein. In addition, as used herein:
"BASIC DOCUMENTS" shall mean the Loan Agreement and the Note.
"COLLATERAL" shall have the meaning ascribed thereto in Section 2
hereof.
"SECURED OBLIGATIONS" shall mean, collectively, all obligations of
Pledgor to the Lender hereunder and under the Basic Documents.
"UNIFORM COMMERCIAL CODE" shall mean the Uniform Commercial Code as in
effect from time to time in the applicable jurisdiction.
SECTION 2. THE PLEDGE AND SECURITY INTEREST. As collateral
security for the prompt payment in full when due (whether at stated
maturity, by acceleration or otherwise) of the Secured Obligations, Pledgor
hereby pledges, grants, assigns, transfers, conveys and sets over to the
Lender a security interest in all of Pledgor's right, title and interest in
the property described in paragraph 1 of Schedule A hereto, whether now
owned by Pledgor or hereafter acquired and whether now existing or
hereafter coming into existence (all being collectively referred to herein
as "Collateral"). Schedule A attached hereto is an integral part of this
Pledge Agreement and contains both a description of and certain
<PAGE>
representations regarding the Collateral. Pledgor Covenants and agrees
with Lender that Pledgor will not, directly or indirectly, without prior
written consent of the Lender, transfer, issue or sell any stock of the
Pledgor, or any Subsidiary, or enter into any agreement which may result in
the transfer, issuance or sale of any stock of Pledgor, or of its
Subsidiaries, whether common or preferred.
SECTION 3. FURTHER ASSURANCES; REMEDIES. In furtherance of the
grant of the pledge and security interest pursuant to Section 2 hereof,
each Pledgor hereby agrees with the Lender as follows:
3.01 DELIVERY AND OTHER PERFECTION. Pledgor shall:
(i) deliver to the Lender, endorsed in blank for transfer or
accompanied by duly executed stock powers or other instruments of
assignment and transfers in such form and substance as the Lender may
request, all stock certificates or other securities representing any
of the Collateral;
(ii) give, execute, deliver, file and/or record any
financing statement, notice, instrument, document, agreement or other
papers that may be necessary or desirable (in the judgment of the
Lender) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Lender to exercise and
enforce its rights hereunder with respect to such pledge and security
interest; and
(iii) permit representatives of the Lender, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from the books and records pertaining to the Collateral, and
permit representatives of the Lender to be present at Pledgor's place
of business to receive copies of all communications and remittances
relating to the Collateral, all in such manner as the Lender may
require.
3.02 OTHER FINANCING STATEMENTS. Without the prior written consent of
the Lender, Pledgor shall not file or suffer to be on file, or authorize or
permit to be filed or to be on file, in any jurisdiction, any financing
statement or like instrument with respect to the Collateral in which the
Lender is not named as the sole secured party for the benefit of the
Lender.
3.03 PRESERVATION OF RIGHTS. The Lender shall not be required to take
steps necessary to enforce or preserve any rights under any contract,
instrument, or agreement included in the Collateral.
3.04 RIGHTS REGARDING COLLATERAL. So long as no Event of Default
under the Loan Agreement shall have occurred and be continuing, Pledgor
shall have the right to exercise all of its voting, consensual and other
-2-
<PAGE>
powers of ownership pertaining to the Collateral for all purposes not
inconsistent with the terms of this Agreement, or any of the Basic
Documents, and shall be entitled to receive, spend and otherwise utilize
all dividends and other distributions with respect to the Collateral;
provided, however, that Pledgor agrees that it will not vote the Collateral
in any manner that is inconsistent with the terms of this Pledge Agreement
or any of the Basic Documents. The Lender shall execute and deliver to
Pledgor or cause to be executed and delivered to Pledgor all such proxies,
powers of attorney, dividend checks (duly endorsed to Pledgor), and other
orders, and all such instruments, without recourse, as Pledgor may
reasonably request for the purpose of enabling it to exercise its rights
and powers which it is entitled to exercise pursuant to this Section 3.04.
3.05 EVENTS OF DEFAULT, ETC. If during the period an Event of Default
under the Loan Agreement (as such term is defined thereunder) occurs and is
continuing, then, subject to applicable law and approvals, if necessary, of
regulatory agencies:
(i) the Lender shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform
Commercial Code (and to the extent permitted by applicable law,
whether or not said Code is in effect in the jurisdiction where the
rights and remedies are asserted);
(ii) the Lender in its discretion may, in its name or in
the name of Pledgor or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of
or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(iii) the Lender may, upon 15 business days prior written notice
to Pledgor of the time and place, with respect to the Collateral or
any part thereof which shall then be or shall thereafter come into the
possession, custody or control of the Lender or any of its agents,
sell or otherwise dispose of all or any part of such Collateral, at
such place or places as the Lender deems best, and for cash or on
credit or for future delivery (without thereby assuming any credit
risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of time or place
of sale (except such notice as is required above, or as is required by
applicable statute and cannot be waived) and the Lender or anyone else
may be the purchaser or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at
any private sale), and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or equity
of redemption (statutory or otherwise) of Pledgor any such demand,
notice or right or equity being hereby expressly waived and released.
The proceeds of each collection, sale or other disposition under this
Section 3.05 shall be applied in accordance with Section 3.09.
-3-
<PAGE>
3.06 DEFICIENCY. If the proceeds of sale, collection or other
realization of or upon the Collateral are insufficient to cover the costs
and expenses of such realization and the payment in full of the Secured
Obligations, Pledgor shall remain liable for any and all deficiency for
which Pledgor is obligated under this Agreement.
3.07 PRIVATE SALE. The Lender shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private sale
conducted in a commercially reasonable manner in accordance with applicable
law. Pledgor hereby waives any claims against the Lender arising by reason
of the fact that the price at which the Collateral may have been sold at
such private sale was less than the price which might have been obtained at
a public sale or was less than the aggregate amount of the Secured
Obligations, unless the related sale was not conducted in a commercially
reasonable manner in accordance with applicable law.
3.08 REMOVALS, ETC. Without 30 days prior written notice to the
Lender, Pledgor shall not maintain any of its books and records with
respect to the Collateral at any office other than its office as provided
in Schedule A hereto as of the date hereof or maintain its office or its
principal place of business at any other place other than at such location.
3.09 APPLICATION OF PROCEEDS. Except as otherwise herein expressly
provided, the proceeds of any collection, sale or other realization of all
or any part of the Collateral, and any other cash at the time held by the
Lender under this Section 3, shall be applied by the Lender:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
compensation to the Lender and its agents and counsel, and all
expenses, and advances made or incurred by the Lender in connection
therewith;
Second, to the payment in full of the Secured Obligations
described in Section 1 hereof; and
Finally, to the payment to Pledgor, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus
then remaining.
As used in this Section 3, "proceeds" of Collateral shall mean cash,
securities and other property realized with respect to, and distributions
in kind of, Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of Pledgor or any issuer
of or obligor on any of the Collateral.
3.10 ATTORNEY-IN-FACT. Subject to the Lender having first obtained
any required approval from regulatory agencies, without limiting any rights
or powers granted by this Agreement to the Lender while no Event of Default
-4-
<PAGE>
under the Loan Agreement has occurred and is continuing, upon the
occurrence and during the continuance of any Event of Default under the
Loan Agreement the Lender is hereby appointed the attorney-in-fact of
Pledgor for the purpose of carrying out the provisions of this Section 3
and taking any action and executing any instruments which the Lender may
deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an
interest, provided that the Lender shall not take any action pursuant to
the authority granted to it in this Section 3.10 without first notifying
Pledgor in writing thereof. Without limiting the generality of the
foregoing, so long as the Lender shall be entitled under this Section 3 to
make collections in respect of the Collateral, the Lender shall have the
right and power to receive, endorse and collect all checks made payable to
the order of Pledgor representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give
full discharge for the same.
SECTION 4. MISCELLANEOUS.
4.01 INITIAL FINANCING STATEMENTS. Prior to or concurrently with the
execution and delivery of this Agreement, Pledgor shall file such financing
statements and other documents in such offices as the Lender may request to
perfect the pledge and security interest granted by this Agreement.
4.02 FURTHER ASSURANCES. Pledgor agrees that, from time to time upon
the written request of the Lender, Pledgor will execute and deliver such
further documents and do such other acts and things as the Lender may
reasonably request in order fully to effect the purposes of this Agreement.
4.03 NO WAIVER. No failure on the part of the Lender or any of its
agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Lender or
any of its agents of any right, power or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right, power
or remedy. The remedies herein are cumulative and are not exclusive of any
remedies provided by law.
4.04 EXPENSES. Pledgor agrees to pay to the Lender all reasonable
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of
this Agreement, or performance by the Lender of any obligations of Pledgor
with respect to the Collateral which Pledgor has failed or refused to
perform, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement with respect to any of the Collateral,
and for the care of the Collateral and defending or asserting rights and
claims of the Lender in respect thereof, by litigation or otherwise and all
such expenses shall be Secured Obligations to the Lender secured under
Section 2 hereof.
-5-
<PAGE>
4.05 TAXES. Pledgor agrees to pay before delinquency any tax or other
governmental charge which is or can become through assessment, distraint or
otherwise a lien on the Collateral and to pay any tax or other governmental
charge which may be levied on the transactions hereunder, provided that
nothing herein shall require Pledgor to pay any such tax or other
governmental charge with respect to which Pledgor is prosecuting in good
faith appeal or other proceedings shall have been fully bonded or otherwise
effectively stayed.
4.06 TERMINATION. When all Secured Obligations shall have been paid
in full and the Loan Agreement shall have terminated, this Agreement shall
terminate, and the Lender shall forthwith cause to be assigned, transferred
and delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral and money received in
respect thereof, to or on the order of Pledgor.
4.07 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, PROVIDED THAT
AS TO COLLATERAL LOCATED IN ANY JURISDICTION OTHER THAN THE COMMONWEALTH OF
VIRGINIA, THE LENDER SHALL HAVE ALL THE RIGHTS TO WHICH A SECURED PARTY
UNDER THE LAWS OF SUCH JURISDICTION IS ENTITLED.
4.08 NOTICES. All notices, requests and other communications provided
for herein including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement shall be given or made in
writing (including, without limitation, by telecopy) and delivered to the
intended recipient at the "Address for Notices" specified below; or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given
when personally delivered or, in the case of a telecopied or mailed notice,
upon receipt, in each case given or addressed as provided for herein. The
Address for Notices of the respective parties are on the last page of this
Agreement.
4.09 WAIVERS, ETC. The terms of this Agreement may be waived, altered
or amended only by an instrument in writing duly executed by Pledgor and
the Lender.
4.10 HEADINGS. The headings and sub-headings contained in this
Agreement are intended to be used for convenience only and do not
constitute part of this Agreement.
4.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of Pledgor,
the Lender and each subsequent holder of the Secured Obligations (provided,
however, that Pledgor shall not assign or transfer its rights hereunder
without the prior written consent of the Lender).
-6-
<PAGE>
4.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all of such counterparts taken together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Pledge and
Security Agreement to be duly executed as of the day and year first above
written.
(SEAL) DAKOTA COOPERATIVE TELECOMMUNICATIONS,
INC.
By: /s/James H. Jibben
Title: President
ATTEST: /s/John Schaefer
Secretary
ADDRESS: 29705 453rd Avenue
P.O. Box 66
Irene, South Dakota 57037
TELECOPY NUMBER: 605-263-3995
(SEAL) DAKOTA TELECOM, INC.
BY: /s/Jeff Goeman
Title: President
ATTEST: /s/Palmer Larson
Secretaru
ADDRESS: 29705 453rd Avenue
P.O. Box 66
Irene, South Dakota 57037
TELECOPY NUMBER: 605-263-3995
(SEAL) RURAL TELEPHONE FINANCE COOPERATIVE
BY: /s/Kenneth A. Fried
Assistant Secretary-Treasurer
ATTEST: /s/Janelle M. Keefer
Assistant Secretary-Treasurer
ADDRESS: Woodland Park
2201 Cooperative Way
Herndon, VA 20171-3025
TELECOPY: 703-709-6776
-7-
<PAGE>
SCHEDULE A TO PLEDGE AND SECURITY AGREEMENT
1. "COLLATERAL", AS DEFINED AND DESCRIBED IN SECTION 2 OF THE PLEDGE
AND SECURITY AGREEMENT, SHALL BE:
(a) (1) 9,303 Shares of Common Stock and 0 Shares of
Preferred Stock of Dakota Telecom Inc. As of the date hereof,
Dakota Telecom Inc. has issued and outstanding 9,303 Shares of
Common Stock and 0 Shares of Preferred Stock;
(a) (2) 1,000 Shares of Common Stock and 0 Shares of
Preferred Stock of Iway, Inc. As of the date hereof, Iway, Inc.
has issued and outstanding 1,000 shares of Common Stock and 0
shares of Preferred Stock.
(a) (3) 1,000 Shares of Common Stock and 0 shares of
Preferred Stock of TCIC Communications, Inc. as of the date hereof,
TCIC Communications, Inc. has issued and outstanding 1,000 shares
of Common Stock and 0 shares of Preferred Stock.
(a) (4) 43,500 Shares of Common Stock and 0 Shares of
Preferred Stock of Dakota Telecommunications Systems, Inc. As of
the date hereof, Dakota Telecommunications, Inc. has issued and
outstanding 43,500 shares of Common Stock and 0 shares of
Preferred Stock.
(a) (5) 1,700 Shares of Common Stock and 0 Shares of
Preferred Stock of Dakota Wireless Systems, Inc. As of the date
hereof, Dakota Wireless Systems, Inc. has issued and outstanding
1,700 shares of Common Stock and 0 shares of Preferred Stock.
(b) without affecting any provision prohibiting such action
hereunder or under the Loan Agreement, in the event of any
consolidation or merger in which Dakota Cooperative
Telecommunications, Inc. or any of its Subsidiaries is not the
surviving corporation, all shares of each class of the capital
stock of the successor corporation formed by or resulting from such
consolidation or merger distributed in respect of the Pledged
Stock; and
(c) all proceeds of and to any of the property described in
clauses (a) and (b) above in this Section 1 and, to the extent
related to any property described in said clauses or above in this
clause (c), all books, correspondence, credit files, records,
invoices and other papers.
(d) all dividends on Dakota Cooperative Telecommunications,
Inc. or Dakota Telecom, Inc. or its Subsidiaries' stock, and any
other distribution to its stockholders, relating to said stock;
provided, however, that prior to the occurrence of an Event of
Default under the Loan Agreement and so long as such an Event of
<PAGE>
Default is not continuing, the Pledgor shall be entitled to
receive, spend and otherwise utilize free of the security interest
granted hereby any and all cash dividends and other distributions
with respect to the pledged stock to the extent permitted by the
terms and conditions set-forth in the Loan Agreement and Pledge and
Security Agreement.
The Pledgor represents and warrants that the Collateral is owned by
the Pledgor free and clear of any lien or encumbrance and that such
Collateral is not subject to any restrictions as to transfer,
except those specifically disclosed in writing to Lender or such as
may be imposed by applicable law affecting transfers generally.
2. Pledgor's office, as referred to in Section 3.08 of the Pledge and
Security Agreement, is located at 29705 453rd Avenue, P.O. Box 66,
Irene, South Dakota 57037.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT
OF OPERATIONS OF DAKOTA COOPERATIVE TELECOMMUNICATIONS, INC. AT
AND FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,600,984
<SECURITIES> 0
<RECEIVABLES> 1,509,871
<ALLOWANCES> 113,000
<INVENTORY> 1,511,220
<CURRENT-ASSETS> 6,364,095
<PP&E> 31,322,463
<DEPRECIATION> 13,200,677
<TOTAL-ASSETS> 27,586,938
<CURRENT-LIABILITIES> 3,393,542
<BONDS> 18,434,818
<COMMON> 26,135
0
1,172,000
<OTHER-SE> 4,375,974
<TOTAL-LIABILITY-AND-EQUITY> 27,586,938
<SALES> 0
<TOTAL-REVENUES> 5,614,681
<CGS> 0
<TOTAL-COSTS> 6,272,658
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 408,689
<INCOME-PRETAX> (914,681)
<INCOME-TAX> (60,096)
<INCOME-CONTINUING> (854,585)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (854,585)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
