<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 26, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------------
DTC COMMUNICATIONS CORP.
(Exact name of Registrant as Specified in its Charter)
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TENNESSEE 4813 62-1797005
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
<TABLE>
<S> <C>
WAYNE GASSAWAY
DTC COMMUNICATIONS CORP.
111 HIGH STREET 111 HIGH STREET
ALEXANDRIA, TENNESSEE 37012-0247 ALEXANDRIA, TENNESSEE 37012-0247
(615) 529-2151 (615) 464-2201
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone
Including Number,
Area Code, of Registrant's Principal Executive Offices) Including Area Code, of Agent for Service)
</TABLE>
PLEASE SEND COPIES OF COMMUNICATIONS TO:
GARY M. BROWN, ESQ.
TUKE YOPP & SWEENEY, PLC
BANK OF AMERICA PLAZA, SUITE 1100
NASHVILLE, TENNESSEE 37219
(615) 313-3325
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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Class A Voting Common Stock........ 2,400,000 shares $10.00 $30,000,000 $8,340
Class B Non-Voting Common Stock.... 600,000 shares $10.00
3,000,000 total shares
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(2) promulgated under the Securities Act of 1933, as
amended, and based upon the book value on June 30, 1999 of the capital
credits to be cancelled in the merger.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
DTC LETTERHEAD
November , 1999
Dear Member:
You are cordially invited to attend a special meeting of the members of
DeKalb Telephone Cooperative, Inc. to be held on December , 1999 at 9:00 a.m.
(local time) at the Cooperative's Maintenance and Operations Center located
between Highways 70 and 53 in Alexandria, Tennessee.
At this important meeting, you will be asked to vote on a plan and
agreement of merger between the Cooperative and DTC Communications Corp. DTC is
a newly formed for-profit corporation that is wholly owned by the Cooperative.
If the merger is approved, the Cooperative will be merged into DTC and DTC then
will carry on the business of the Cooperative. If the merger is approved, you
will own the same percentage of DTC that you now own in the Cooperative. In
essence, the merger is a way to convert the Cooperative to a for-profit
corporation for the benefit of the Cooperative and its members.
The management and Board of Directors of the Cooperative believe that the
merger creates a financial and operating structure that will allow us to best
continue to serve the needs of our members in a highly competitive and
technologically evolving industry. Your Board of Directors has carefully
reviewed and considered various operating alternatives that are available to the
Cooperative. Your Board of Directors believes that the merger is in the best
interests of the Cooperative and its members, has approved the merger and
unanimously recommends that members attend the special meeting and vote FOR
approval of the merger.
The accompanying information statement/prospectus describes the business of
the Cooperative, the merger, its effects upon the Cooperative and its members
and the risk factors associated with ownership of stock in DTC. These materials
also attempt to give answers to some of what we believe will be the most
frequently asked questions regarding the merger. Please give this information
careful attention.
Approval of the merger requires the affirmative vote of two-thirds of the
members voting at the meeting. Accordingly, your attendance and vote at the
meeting are important. PROXY VOTING IS NOT ALLOWED AND WE ARE NOT ASKING YOU FOR
A PROXY. ONLY THE PERSON(S) TO WHOM THIS INFORMATION STATEMENT/PROSPECTUS IS
ADDRESSED MAY ATTEND AND VOTE AT THE SPECIAL MEETING. NO ONE MAY REPRESENT YOU
AT THE MEETING. OWNERS OF BUSINESSES WHICH ARE MEMBERS MUST APPEAR WITH
SATISFACTORY PROOF THAT YOU ARE AUTHORIZED TO REPRESENT THE BUSINESS. If you are
planning to attend, we ask that you complete and return to us the enclosed card
in order that we may make appropriate plans for conducting the meeting. Please
be aware that due to space limitations, we may be able to admit only members (no
guests) at the meeting.
We appreciate your continuing support and look forward to seeing many of
you at the meeting.
Sincerely,
Wayne Gassaway
General Manager
<PAGE> 3
DEKALB TELEPHONE COOPERATIVE, INC.
111 HIGH STREET
ALEXANDRIA, TENNESSEE 37012-0247
------------------------
NOTICE OF SPECIAL MEETING OF MEMBERS
TO BE HELD AT 9:00 A.M. ON DECEMBER , 1999
---------------------
NOTICE IS HEREBY GIVEN that a special meeting of the members of DeKalb
Telephone Cooperative, Inc. will be held at the Cooperative's Maintenance and
Operations Center located between Highways 70 and 53 in Alexandria, Tennessee on
December , 1999 at 9:00 a.m. (local time) for the following purposes:
(1) to consider and vote on a proposal to approve the merger as described
in the plan and agreement of merger dated as of October 18, 1999,
between the Cooperative and its wholly owned subsidiary, DTC
Communications Corp., all as described in the accompanying information
statement/prospectus; and
(2) to consider any other matters that may properly come before the
meeting.
Only active members of record as of the close of business on November ,
1999 are entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof. Approval of the merger at the meeting requires the
affirmative vote of two-thirds of the active members voting at the meeting.
Accordingly, your attendance and vote at the meeting are important.
--------------------------------------
Charles D. Vinson
Secretary
November , 1999
THE BOARD OF DIRECTORS OF THE COOPERATIVE
UNANIMOUSLY RECOMMENDS THAT MEMBERS VOTE
FOR
APPROVAL OF THE MERGER.
<PAGE> 4
PROSPECTUS INFORMATION STATEMENT
DTC Communications Corp. DeKalb Telephone Cooperative, Inc.
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
DeKalb Telephone Cooperative, Inc. has agreed to a merger transaction with
its wholly owned subsidiary, DTC Communications Corp., in which the Cooperative
will be merged into DTC and the members of the Cooperative will receive shares
of DTC common stock. If the merger is completed, DTC will carry on the
Cooperative's businesses and be headquartered in Alexandria, Tennessee.
If the merger is completed, each Cooperative member (both active and
inactive) will receive one share of DTC stock for every $10.00 in capital
credits that a member has on the books of the Cooperative as of December 31,
1999. Fractional shares will not be issued and Cooperative members will receive
cash in lieu of any fractional share.
The receipt of DTC stock will be tax-free for United States federal income
tax purposes to members who have not deducted for United States federal income
tax purposes the amounts of their bills for telephone service from the
Cooperative. DTC stock received by members who have deducted for United States
federal income tax purposes the amounts of their bills for telephone service
from the Cooperative and cash paid in lieu of fractional shares, however, will
be taxable income to members.
Inactive members (members who no longer have telephone service with the
Cooperative) have no voting rights on Cooperative matters. Only active members
have voting rights. The merger cannot be completed unless it is approved by you,
the Cooperative's active members. We have scheduled a special meeting so you may
vote on the merger. Your attendance at the meeting and vote are very important.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU
ARE REQUESTED NOT TO SEND US A PROXY.
This joint information statement/prospectus provides you with detailed
information about the proposed merger, the Cooperative and DTC. In addition, you
may obtain information about the Cooperative and DTC from documents that we have
filed with the Securities and Exchange Commission. We encourage you to read this
entire document carefully.
Based on the number of capital credits existing as of June 30, 1999, DTC
will issue approximately 2,300,000 shares of DTC stock to members. The members
(both active and inactive) will own 100% of DTC after the merger. Because only
active members currently have voting rights, they will receive Class A voting
common stock and inactive members will receive Class B non-voting common stock.
DTC stock issued in the merger is expected to be listed, subject to official
notice of issuance, on the American Stock Exchange under the symbols
" " (Common Class A voting) and " " (Common Class B
non-voting).
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF VARIOUS FACTORS
YOU SHOULD CONSIDER WITH RESPECT TO THE DTC STOCK OFFERED BY THIS INFORMATION
STATEMENT/PROSPECTUS.
THE INFORMATION IN THIS INFORMATION STATEMENT/PROSPECTUS IS NOT COMPLETE
AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
INFORMATION STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT
IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
INFORMATION STATEMENT/PROSPECTUS OR DETERMINED IF THIS INFORMATION
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
November , 1999
Anticipated Mailing Date to Members: November , 1999.
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information......................... 1
Disclosure Regarding Forward-Looking Statements............. 1
Questions and Answers About the DTC Merger.................. 2
Summary..................................................... 6
The Companies............................................. 6
The Special Meeting....................................... 6
Reasons for the Merger; Possible Disadvantages............ 7
Recommendation to Cooperative Members..................... 7
Record Date; Quorum; Vote Required........................ 7
The Merger................................................ 8
Federal Income Tax Consequences........................... 9
Regulatory Approvals Required for the Merger.............. 11
Listing of DTC Common Stock............................... 11
Risk Factors................................................ 12
DeKalb Telephone Cooperative, Inc.
Selected Consolidated Financial Data...................... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Overview.................................................. 19
Results of Operations..................................... 20
Liquidity and Capital Resources........................... 23
Inflation................................................. 25
Recent Accounting Pronouncements.......................... 25
Year 2000 Considerations.................................. 25
Market Risk............................................... 26
The Special Meeting......................................... 27
Date, Time and Place...................................... 27
Purpose................................................... 27
Voting Rights and Record Date for the Merger.............. 27
Quorum; Abstentions....................................... 27
Expenses.................................................. 27
Recommendation of the Board of Directors.................. 27
Miscellaneous............................................. 27
The Merger.................................................. 28
General................................................... 28
The Plan and Agreement of Merger.......................... 28
Background of the Merger.................................. 30
Board Recommendation...................................... 30
Reasons for the Merger.................................... 30
Former Members of the Cooperative......................... 31
Federal Income Tax Consequences........................... 32
Regulatory Approvals Required for the Merger.............. 34
Resale of DTC Common Stock; Restrictions on DTC
Affiliates............................................. 34
Management and Operations Following the Merger............ 34
No Dissenters' Rights..................................... 34
</TABLE>
i
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PAGE
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Market and Dividend Information............................. 35
Market Information........................................ 35
Dividend Information...................................... 35
Number of Members/Shareholders............................ 36
DeKalb Telephone Cooperative, Inc........................... 37
Business.................................................. 37
Business Strategy......................................... 39
Services.................................................. 40
Strategic Alliance/Joint Venture.......................... 40
Competition............................................... 40
Regulation................................................ 42
Employees................................................. 48
Environmental and Other Matters........................... 48
Properties................................................ 48
Legal Proceedings......................................... 49
Financial Statements...................................... 49
Information Regarding DTC................................... 50
Business.................................................. 50
Properties and Legal Proceedings.......................... 50
Financial Statements...................................... 50
Management Information...................................... 51
Amount and Nature of Beneficial Ownership................. 51
Directors and Executive Officers.......................... 51
Compensation of Executive Officers and Directors of the
Cooperative............................................ 54
Summary Compensation Table................................ 54
Interests of Certain Persons.............................. 54
Description of DTC Capital Stock............................ 55
DTC Common Stock.......................................... 55
DTC Preferred Stock....................................... 55
Statutory Provisions Affecting Control of DTC............. 56
Other Provisions Affecting Control of DTC................. 59
Comparison of Rights of Cooperative Members and DTC
Shareholders.............................................. 61
Members Versus Shareholders............................... 61
Authorized Stock.......................................... 61
Transferability of Ownership Interests.................... 62
Required Vote for Mergers................................. 62
Board of Directors........................................ 63
Cumulative Voting for Directors........................... 63
Limitation of Liability of Directors and Officers......... 64
Indemnification of Directors and Officers................. 64
Amendments to Charter and Bylaws.......................... 65
Special Meetings of Members/Shareholders; Action Without
Meeting................................................ 67
Quorum Requirements....................................... 67
Dividends and Other Distributions......................... 67
Dissenters' Rights........................................ 68
Preemptive Rights......................................... 69
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Legal Matters............................................... 70
Experts..................................................... 70
Financial Statements........................................ F-1
Pro Forma Financial Statements............................ F-2
Historical Audited Financial Statements................... F-6
Historical Unaudited Financial Statements................. F-21
APPENDIX A -- Plan and Agreement of Merger.................. A-1
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iii
<PAGE> 8
WHERE YOU CAN FIND MORE INFORMATION
DTC has filed with the SEC a registration statement under the Securities
Act of 1933 that registers the DTC stock to be issued in the merger. The
registration statement, including the attached exhibits and schedules, contains
additional relevant information about DTC. SEC rules allow DTC to omit from this
information statement/prospectus some of the information in the registration
statement.
DTC currently is not subject to the information and reporting requirements
of the Securities Exchange Act of 1934. You may read and copy the registration
statement at any of the following locations of the SEC:
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Public Reference Room 7 World Trade Center Citicorp Center
450 Fifth Street, N.W. Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661
</TABLE>
You also may obtain copies of the registration statement by mail from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Further information on the
operation of the SEC's Public Reference Room in Washington, D.C. can be obtained
by calling the SEC at 800-SEC-0330.
The registration statement was filed with the SEC electronically via the
SEC's EDGAR system. The SEC maintains an internet world wide web site that
contains registration statements, reports and other information regarding
companies that file materials electronically with the SEC. The address of that
site is http://www.sec.gov.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This information statement/prospectus contains certain statements that are
"forward-looking" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. All statements
other than statements of historical fact included in this information
statement/prospectus, including, without limitation, statements regarding our
future financial position, business strategy, budgets, market position, future
operations, margins, profitability, liquidity and capital resources are
forward-looking statements. In addition, forward-looking statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "intend," "estimate," "anticipate," "believe," or "continue"
(or the negative thereof) or similar terminology. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we can
give no assurance that these expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from our
expectations ("cautionary statements") are disclosed under "Risk Factors" and
elsewhere in this information statement/prospectus. All forward-looking
statements are expressly qualified in their entirety by the cautionary
statements.
1
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE DTC MERGER
THE FOLLOWING ARE QUESTIONS WE BELIEVE YOU MIGHT HAVE ABOUT THE MERGER AND
OUR ANSWERS TO THOSE QUESTIONS. THESE QUESTIONS AND ANSWERS DO NOT ADDRESS ALL
QUESTIONS THAT YOU MAY HAVE ABOUT THE MERGER. YOU SHOULD CAREFULLY READ THIS
ENTIRE DOCUMENT, AS WELL AS ALL APPENDICES.
Q1: WHY IS THE COOPERATIVE MERGING? WILL I BENEFIT?
A: The Cooperative is merging with its wholly owned subsidiary, DTC
Communications Corp., in order to convert from a not-for-profit
cooperative to a for-profit business. Management of the Cooperative
believes that to remain a cooperative, with its attendant restrictions on
business, in a rapidly changing technological, regulatory and business
environment is not in the long-term best interests of the Cooperative and
its members. The merger allows all members to become and, if they choose
to do so, remain shareholders in DTC while providing them with the
opportunity to sell (assuming a market develops) the DTC stock that they
will receive in the merger. See "RISK FACTORS -- THERE MAY NOT BE A MARKET
FOR DTC STOCK AND IF ONE DEVELOPS, THE MARKET PRICE COULD BE VOLATILE."
Q2: HOW DID I BECOME A MEMBER OF THE COOPERATIVE?
A: You became a member of the Cooperative when you agreed to purchase
telephone service from the Cooperative.
Q3: WHAT WILL I RECEIVE IN THE MERGER?
A: If you are an active member (continue to have telephone service with the
Cooperative), you will receive one share of DTC Class A voting common
stock for each $10.00 in capital credits that you have on the books of the
Cooperative as of December 31, 1999.
Q4: HOW DID I OBTAIN MY CAPITAL CREDITS?
A: Your capital credits accumulated during the years that you have had
telephone service with the Cooperative. In essence, your capital credits
are your share of the accumulated undistributed margin or profits (the
excess of operating revenues over expenses) of the Cooperative. Each year,
profits (or, if applicable, losses) are accrued and allocated to members'
accounts. As of December 31, 1994, the accumulated capital credits of the
Cooperative were $13.4 million. During the past several years, however,
due to the efficient operation of the Cooperative, these accumulated
capital credits have grown to $22.0 million as of December 31, 1998.
Q5: I ALSO HAVE CELLULAR TELEPHONE SERVICE FROM ADVANTAGE CELLULAR; HAVE I
RECEIVED CAPITAL CREDITS FOR THAT TOO?
A: No. Capital credits are accrued and allocated only on telephone service
with the Cooperative. They are not accrued or allocated based upon
wireless service from the Cooperative's for-profit subsidiary, Advantage
Cellular.
Q6: HOW DO I FIND OUT THE AMOUNT OF MY CAPITAL CREDIT ACCOUNT?
A: Within the package containing this information statement/prospectus, the
page on which the mailing label appears shows the amount of your capital
credits as of December 31, 1998. That amount will change before the
expected closing date of the merger (January 1, 2000). Because
2
<PAGE> 10
of the timing of our year end audit, however, at this time we cannot
provide members (including members who first subscribed for telephone
service during 1999) with the amount of any capital credits accrued during
1999 until after February 10, 2000. The plan and agreement of merger
requires that DTC stock (and any cash that you receive in lieu of a
fractional share) be distributed to members within 60 days after the
effective date of the merger.
Q7: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO MEMBERS?
A: The receipt of DTC stock in exchange for your capital credits generally
will be tax-free except to the extent that you have deducted, for United
States federal income tax purposes, the amount of your telephone bills
from your taxable income. If you have deducted the amount of your
telephone bills from your taxable income, you will be deemed to receive
income in an amount equal to the amounts you previously have deducted (but
not more than the fair market value of the DTC stock that you receive).
Because it is unlikely that most residential customers have deducted the
amount of their telephone bills from their taxable income, we believe this
generally means that residential customers will receive their DTC stock
tax-free in the merger. Any member who receives cash in lieu of fractional
shares also will be deemed to have received income in the amount of that
cash. Any amount of income that you receive must be reported by you on
your tax return for the year in which the merger occurs. See
"SUMMARY -- FEDERAL INCOME TAX CONSEQUENCES" and "THE MERGER -- FEDERAL
INCOME TAX CONSEQUENCES."
Q8: CAN I RECEIVE CASH INSTEAD OF DTC STOCK FOR MY CAPITAL CREDITS?
A: No. The merger has been structured in a manner to afford the majority of
our members tax-free treatment upon the receipt of the DTC stock. Payment
of all cash would be taxable. Cash will be paid in lieu of fractional
shares to all persons receiving DTC stock.
Q9: WHAT IS A "FRACTIONAL SHARE"?
A: A fractional share is the amount that you would receive if your capital
credit account is an amount other than a multiple of $10.00.
Example: Your capital credit account, as of December 31, 1999, is
$24.75. In the merger, you will receive two shares of DTC stock and a
check for $4.75. The $4.75 payment represents your payment for a
fractional share.
Q10: WHO ARE "FORMER" OR "INACTIVE" MEMBERS OF THE COOPERATIVE?
A: Former or inactive members of the Cooperative are those persons or
entities that within the last ten years were members of (i.e., subscribed
for telephone service with) the Cooperative but no longer have telephone
service with the Cooperative. Inactive members have no voting rights on
Cooperative matters (e.g., the merger). See "THE MERGER -- FORMER MEMBERS
OF THE COOPERATIVE."
Q11: DO "FORMER" OR "INACTIVE" MEMBERS RECEIVE THE SAME THING IN THE MERGER AS
ACTIVE MEMBERS?
A: Yes, except that the stock received by inactive members is non-voting.
Inactive members currently have no voting rights on Cooperative matters
and the issuance of non-voting stock to them carries forward the
active/inactive member distinction in the merged companies. Otherwise, all
of the stock to be issued in the merger has all of the same rights to the
owners of the stock.
3
<PAGE> 11
Q12: WHY ARE INACTIVE MEMBERS RECEIVING DTC STOCK IN THE MERGER?
A: Some inactive members, as of December 31, 1999, will still have capital
credits on the books of the Cooperative. In addition, members (both active
and inactive) to whom capital credits have been allocated during the past
ten years have the right, if the Cooperative were being dissolved, to
receive their pro rata share of the net assets of the Cooperative. That
right, generally called a "property right," is being preserved for all
members (both active and inactive) by the issuance of DTC common stock
which carries with it a right, if DTC is dissolved in the future, to
receive a share of DTC's net assets.
Q13: WHAT HAPPENS IF BETWEEN NOW AND DECEMBER 31, 1999, I BECOME AN INACTIVE
MEMBER OF THE COOPERATIVE?
A: You will receive non-voting rather than voting DTC stock. Otherwise, there
will be no difference in the way you are treated in the merger.
Q14: WHAT WILL MY DTC STOCK BE WORTH AFTER THE MERGER?
A: We do not know and cannot predict with any certainty what your DTC stock
will be worth. A number of internal and external factors affect the
determination of the market price of a company's stock. We recommend that
you discuss your share holdings with your personal financial advisor prior
to selling your DTC stock.
Q15: WHEN CAN I SELL MY DTC STOCK?
A: As indicated previously, despite the expected listing of the DTC stock on
the American Stock Exchange, we cannot guarantee you that any market will
develop that will allow you to sell your DTC stock. If a market does
develop for the DTC stock following the merger, any shareholder would be
free to sell his/her stock. Again, we recommend that you discuss your
share holdings with your personal financial advisor prior to selling your
DTC stock.
Q16: WHAT RISKS SHOULD I CONSIDER IN DECIDING WHETHER TO VOTE FOR THE MERGER?
A: Although your present capital credits are not transferable, there will be
various risks from ownership of DTC stock. These are described in detail
in "Risk Factors," beginning at page 12.
Q17: WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
A: The Board of Directors believes that the merger will assist the
Cooperative in becoming a more effective competitor, and thus best serve
your needs, in its highly competitive and technologically evolving
industry. By removing the operating restrictions that accompany being a
telephone cooperative, DTC will be able to expand the range of services it
provides and to pursue opportunities in other markets. The Board of
Directors believes that the merger is in your and the Cooperative's best
interests and, therefore, recommends that you vote for the merger.
Q18: WHAT WILL HAPPEN TO MEMBERS' TELEPHONE SERVICE?
A: We intend to continue to improve the telephone and other services that you
receive through DTC. Also, one of the reasons for the merger and the
conversion to a for-profit entity is to
4
<PAGE> 12
have the ability to expand the range of services that we offer, both
inside and outside of our current service area, to our current and future
customers and to better compete with other companies that we believe may
enter our service area in the future.
Q19: WHAT CHANGES WILL I SEE FOLLOWING THE MERGER?
A: Other than converting to a for-profit corporation, we hope that you will
not see any changes in our day-to-day operations. Our employees, telephone
numbers and office locations will remain substantially identical.
Q20: WHAT DO I NEED TO DO NOW?
A: You should read the information statement/prospectus carefully and be sure
you understand what we are proposing to do. Then, if possible, we would
like for you to attend the special meeting on December , 1999 and cast
your vote for the merger.
Q21: WHAT AM I BEING ASKED TO VOTE UPON?
A: You are being asked to vote on the merger of the Cooperative into its
wholly owned subsidiary, DTC. If the merger is approved, you will own the
same percentage of DTC as you now own of the Cooperative.
Q22: WHY CAN'T I VOTE BY PROXY?
A: The law under which the Cooperative was formed provides that a quorum (for
the existence of a valid meeting) requires the presence in person of the
lesser of:
- 50 active members; or
- 2% of the active members.
In addition, the Cooperative's bylaws prohibit proxy voting.
This means, for all practical purposes, that if 50 active members
are present at the meeting, a quorum will exist and the merger can be
validly voted on.
Q23: WHO CAN HELP ANSWER FURTHER QUESTIONS?
A: If you have more questions about the merger, you should contact:
DTC Communications Corp.
Investor Relations
111 High Street
Alexandria, TN 37012-0247
(615) 529-9000
5
<PAGE> 13
SUMMARY
THE COMPANIES
DEKALB TELEPHONE COOPERATIVE, INC. (PAGE 37)
111 High Street
Alexandria, TN 37012-0247
(615) 529-2151
http://www.dtccom.net
The Cooperative is a membership-based Tennessee cooperative that was formed
on June 26, 1951. The Cooperative provides a broad range of telecommunications
services, including local telephone service, long-distance network access, and
dial-up and dedicated internet access over a state-of-the-art wireline network.
The Cooperative's local telephone service includes basic local, ISDN, DSL and
T-1 lines. The Cooperative also provides foreign exchange, private lines and
switched data services and installs and maintains Centrex, PBX and key systems
for its business customers. In addition, the Cooperative offers a wide range of
enhanced features such as voice mail, call waiting, caller identification,
automatic redial, call forwarding, three-way calling, speed calling and call
tracing. Advantage Cellular Systems, Inc., a wholly owned for-profit subsidiary
of the Cooperative, provides wireless telephone service. The Cooperative's
executive offices are in Alexandria, Tennessee at the address noted above.
DTC COMMUNICATIONS CORP. (PAGE 50)
111 High Street
Alexandria, TN 37012-0247
(615) 529-2151
DTC is a newly formed, wholly owned subsidiary of the Cooperative. DTC was
formed for the purpose of merging with the Cooperative in order to convert the
Cooperative into a for-profit corporation. DTC currently is not engaged in
operations. When the merger occurs, DTC will assume and carry on the business of
the Cooperative with the Cooperative's existing personnel. Advantage Cellular
will be a wholly owned subsidiary of DTC. DTC's executive offices currently are
and, after the merger, will remain in Alexandria, Tennessee at the address noted
above.
THE SPECIAL MEETING (PAGE 27)
The special meeting of the active members of the Cooperative will be held
on December , 1999 at 9:00 a.m. (local time) at the Cooperative's Maintenance
and Operations Center located between Highways 70 and 53 in Alexandria,
Tennessee. At the special meeting, you will be asked to:
- consider and approve the plan and agreement of merger that provides for
the merger of the Cooperative into its wholly owned subsidiary, DTC; and
- act on any other matters that properly may be submitted to a vote at the
special meeting.
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<PAGE> 14
REASONS FOR THE MERGER; POSSIBLE DISADVANTAGES (PAGE 30)
The Cooperative's Board of Directors, together with management and with the
advice of the Cooperative's financial and legal advisors, has been studying the
possibility of converting the Cooperative from a cooperative association into a
general for-profit business corporation in an effort to increase the
Cooperative's competitive position in its markets. The Board of Directors of the
Cooperative unanimously determined to recommend approval of the merger based on
a number of factors, including the following:
- review of recent trends in the telecommunications industry including
rapid changes in technology and increasing competition in the provision
of many services offered by the Cooperative;
- the risks associated with the Cooperative remaining a cooperative;
- the potential for enhanced liquidity and opportunity for the members to
realize the value of their investments in the Cooperative; and
- recent changes in the regulatory environment affecting the
telecommunications industry.
The Board of Directors of the Cooperative also considered possible
disadvantages of the merger, including:
- loss of the Cooperative's partial tax-exempt status; and
- increased competition that the merged companies will face resulting from
the pursuit of DTC's business strategy.
RECOMMENDATION TO COOPERATIVE MEMBERS (PAGE 30)
The Board of Directors of the Cooperative believes that the merger is fair
to the Cooperative and to you as a member of the Cooperative, and that the
merger is in your and the Cooperative's best interests. The Board believes that
the recent and expected changes in the technological and regulatory environment
surrounding the telecommunications industry make it imperative that the
Cooperative convert from a cooperative to a for-profit corporation. This change
will allow us to continue to offer services to our customers and, once free of
the operating restrictions that accompany being a telephone cooperative, expand
our range of services and pursue opportunities in other markets. The Board
believes that these steps will assist us in becoming more competitive in our
markets. The Board believes that it is in the best interests of you, the
members, that you be allowed the opportunity to realize, should you choose to do
so, the value of your capital credits by selling (assuming a market develops)
your DTC stock that you will receive in the merger. The Board also believes that
the merger and resulting conversion to a for-profit corporation may help to
provide us greater access to capital markets and increase our options in
connection with potential acquisitions, joint ventures and strategic alliances.
THE COOPERATIVE'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" THE PROPOSAL TO APPROVE THE MERGER.
RECORD DATE; QUORUM; VOTE REQUIRED (PAGE 27)
You may vote at the special meeting if you were an active member of the
Cooperative at the close of business on November , 1999. On that date, there
were approximately 15,000 active members of the Cooperative entitled to vote.
Each active member who attends the special meeting in person is entitled to one
vote on each issue voted on at the special meeting.
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<PAGE> 15
The presence in person of the lesser of: (1) 50 active members; or (2) 2%
of the active members constitutes a quorum for purposes of the vote required at
the special meeting of members. Approval of the merger requires the affirmative
vote of two-thirds of the active members of the Cooperative voting at the
special meeting.
THE MERGER
GENERAL (PAGE 28)
In the merger, the Cooperative will merge into DTC, and DTC will be the
surviving corporation. DTC will assume all of the operations, assets and
liabilities of the Cooperative and will have a consolidated financial position
substantially identical to that of the Cooperative immediately before the
merger. After the merger, members of the Cooperative will be shareholders of DTC
and the directors, officers, employees, businesses, properties and operations of
DTC will be substantially identical to those of the Cooperative, except as
otherwise indicated in this information statement/prospectus.
MERGER CONSIDERATION YOU WILL RECEIVE (PAGE 29)
As merger consideration, each member (both active and inactive) will
receive one share of DTC stock for every $10.00 in capital credits that the
member has on the books of the Cooperative as of December 31, 1999. Active
members will receive voting stock and inactive members will receive non-voting
stock. DTC will not issue any fractional shares. If a capital credit account is
an amount that is not a whole multiple of $10.00, that person or entity will be
paid cash for any fractional amount.
ACTIVE MEMBER EXAMPLE: A customer has capital credits of $12.00. That
customer will receive one share of DTC Class A voting common stock in
the merger for $10.00 of the capital credits. The customer also will
receive $2.00 in cash in satisfaction of the remainder of the capital
credits.
INACTIVE MEMBER EXAMPLE: A former customer who ceased to receive
telephone service in 1994 has capital credits of $12.00. That customer
will receive one share of DTC Class B non-voting common stock for $10.00
of the capital credits. The former customer also will receive $2.00 in
cash in satisfaction of the remainder of the capital credits.
NO DISSENTERS' RIGHTS FOR DISSENTING MEMBERS (PAGE 34)
Under Tennessee law, members do not have dissenters' rights with respect to
the merger. See "The Merger--No Dissenters' Rights."
THE PLAN AND AGREEMENT OF MERGER (PAGE 28)
The plan and agreement of merger is attached to this document as Appendix
A. Please read the plan and agreement of merger carefully, as it is the legal
document that governs the merger.
EFFECTIVE TIME (PAGE 28)
The merger will become effective on the date that articles of merger are
filed with the Secretary of State of the State of Tennessee or at a time that is
set forth in the articles of merger. The merger is anticipated to be completed
in the fourth quarter of 1999 and to become effective as of 12:01 a.m. on
January 1, 2000.
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<PAGE> 16
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 29)
The completion of the merger depends on a number of conditions being
satisfied, including the following:
- approval of the plan and agreement of merger by two-thirds of the active
members of the Cooperative voting at the special meeting;
- obtaining all required regulatory approvals and third party consents;
- there being no restraining order, injunction or court order preventing
the merger, or any proceeding seeking to prevent the merger or making the
merger illegal; and
- there being no statute, rule, regulation or governmental order that might
materially adversely affect or delay the merger.
TERMINATION OF PLAN AND AGREEMENT OF MERGER (PAGE 29)
The Cooperative and DTC may agree at any time to terminate the plan and
agreement of merger without completing the merger, even after the active members
have approved it.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 32)
Neither DTC nor the Cooperative has requested a private letter ruling from
the Internal Revenue Service as to the federal tax consequences of the merger
and, thus, there can be no assurance that the merger would constitute a tax-free
reorganization for federal income tax purposes. DTC's special counsel, Tuke Yopp
& Sweeney, PLC, has given certain advice to DTC regarding the federal income tax
consequences of the merger. It is the opinion of Tuke Yopp & Sweeney, PLC, based
on their review of rulings and court opinions involving transactions with
similar but not identical characteristics, that:
- Neither the Cooperative nor DTC will recognize any taxable gain or loss
as a result of the merger. DTC's tax basis and holding period of the
assets acquired in the merger will be the same as it currently is for the
Cooperative.
- Members (both active and inactive) receiving DTC stock in the merger who
have not deducted (as a miscellaneous itemized deduction or as a trade or
business expense) for federal income tax purposes the amounts of their
monthly telephone bills from the Cooperative, will not (except with
respect to cash received in lieu of fractional shares) recognize taxable
income or loss because of the merger. The DTC stock received by those
members in the merger will have the same basis and holding period as the
capital credits that those members previously had in the Cooperative.
EXAMPLE: A customer who has not deducted the amount of his/her
telephone bills for United States federal income tax purposes has
capital credits of $100.00, $10.00 of which was earned in each of the
years 1990 through 1999. That customer will receive ten shares of DTC
stock in the merger. No gain or loss will be recognized by the customer
upon receipt of the stock and the customer's tax basis (used to
calculate gain or loss upon a later sale of the stock) is $100.00. In
addition, the customer will be deemed (for purposes of the holding
period used to determine whether gain or loss on a later sale of the
stock is long-term or short-term) to have received one-tenth of each
share during each of the years 1990 through 1999.
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<PAGE> 17
- Members (both active and inactive) receiving DTC stock in the merger that
have deducted (as miscellaneous itemized deductions or as trade or
business expense) for federal income tax purposes the amounts of their
monthly telephone bills from the Cooperative, will not recognize income
because of the merger in excess of the amount previously deducted. If
those deductions produced a tax benefit for the member, the member may
recognize taxable income because of the merger in an amount up to the
amount of the previous deductions. The DTC stock received by those
members in the merger will have a tax basis equal to any income
recognized by the member because of the merger plus any remaining basis
in the member's capital credits. In addition, these shares will have the
same holding period as the capital credits that those members previously
had in the Cooperative.
EXAMPLE: A customer who has deducted the amount of his/her telephone
bills for United States federal income tax purposes has capital credits
of $100.00, $10.00 of which was earned in each of the years 1990 through
1999. That customer will receive ten shares of DTC stock in the merger.
If the DTC stock when received is worth $100.00, the customer will not
recognize income upon receipt of the stock in excess of the amounts
previously deducted; however, the amount of that income will not exceed
the fair market value of the DTC stock received (in this
example--$100.00). The tax basis (used to calculate gain or loss upon a
later sale of the stock) will be between zero (because of the previous
deduction) and $100.00, depending upon the amount, if any, that the
member is required to recognize as income as a result of receiving a tax
benefit. In addition, the customer will be deemed (for purposes of the
holding period used to determine whether gain or loss on a later sale of
the stock is long-term or short-term) to have received one-tenth of each
share during each of the years 1990 through 1999.
- Members receiving cash in lieu of fractional shares of DTC stock will be
treated as if the fractional shares had been distributed as part of the
merger and then redeemed by DTC. Such cash payments should be treated as
having been received as a distribution in full payment in exchange for
the fractional shares deemed redeemed. Gain or loss will be measured by
the difference between the cash received and the adjusted basis of the
fractional share. The gain or loss will be a capital gain or loss if the
capital credits were considered capital assets in the hands of the
member.
EXAMPLE: A customer has capital credits of $109.00. That customer will
receive ten shares of DTC stock in the merger for $100.00 of the capital
credits. The receipt of that stock will have the tax consequences
described above depending upon the situation of the customer. The
customer will receive $9.00 in cash in satisfaction of the remainder of
the capital credits.
That customer will recognize income in the year that the merger occurs
for United States federal income tax purposes equal to the difference
between the $9.00 received and the amount of the basis in the fractional
share deemed redeemed.
Because it is unlikely that most residential customers have deducted the
amount of their telephone bills for federal income tax purposes, we believe this
generally means that the receipt of DTC stock in the merger will be tax free to
residential customers and possibly taxable to business customers to the extent
of the amount of payments previously deducted.
The opinion of Tuke Yopp & Sweeney, PLC, indicates that the basis for their
opinion is derived from their review of previously issued private letter rulings
by the Internal Revenue Service and court opinions involving transactions with
similar but not identical characteristics. Because the Internal Revenue Service
has not previously ruled on a transaction involving the merger of a
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<PAGE> 18
Section 501(c)(12) cooperative, the opinion states that there is a lack of
direct precedent for the stated tax treatment. The opinion of Tuke Yopp &
Sweeney, PLC, states, however, that existing precedent involving transactions
with similar but not identical characteristics, if followed, would cause the
merger to be treated as and constitute a tax free exchange and that Tuke Yopp &
Sweeney, PLC, has no reason to believe that the Internal Revenue Service would
not follow this precedent.
Due to the complexities of federal, state and local income tax laws, it is
strongly recommended that members, particularly members who have previously
deducted their payments to the Cooperative, consult their own tax advisors
concerning the particular federal, state and local tax consequences of the
merger to them.
REGULATORY APPROVALS REQUIRED FOR THE MERGER (PAGE 34)
Consummation of the merger is subject to the approval of the Rural
Utilities Service of the United States Department of Agriculture pursuant to
certain loan agreements between the Cooperative and the RUS. The Cooperative has
received verbal assurances from the RUS that the merger will be approved.
DTC also must receive from the Tennessee Regulatory Authority a certificate
of public convenience and necessity to operate the Cooperative's system
following the effective date of the merger. The Cooperative currently is exempt
from most TRA regulation.
LISTING OF DTC COMMON STOCK (PAGE 35)
DTC stock issued in the merger is expected to be listed, subject to
official notice of issuance, on the American Stock Exchange under the symbols
" " (Common Class A voting) and " " (Common Class B
non-voting).
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<PAGE> 19
RISK FACTORS
In addition to the other information contained in this information
statement/prospectus, the following factors should be considered carefully in
evaluating the Cooperative and its business which will be assumed by DTC if the
merger is consummated. In this information statement/prospectus, "we" means the
Cooperative and its subsidiary before the merger and DTC and its subsidiary
after the merger.
A LARGE AMOUNT OF OUR BUSINESS IS AT RISK.
In 1996, 1997 and 1998, we received, respectively, 50.0%, 49.1% and 49.0%
of our operating revenue in the form of network access charges. During the first
six months of 1999, we received 52.3% of our operating revenue from these
charges. Because of the increasing competitive and regulatory pressures to lower
these charges, the amount of revenue that we receive from network access charges
likely will decline materially in the future. When it does, our financial
condition and results of operations may be materially and adversely affected.
This, in turn, could adversely affect the price of our stock.
WE ARE SUBJECT TO A COMPLEX AND UNCERTAIN REGULATORY ENVIRONMENT.
The telecommunications industry is regulated by the FCC, state regulatory
commissions and municipalities. Federal and state regulations and regulatory
trends in the direction of reduced regulation have had, and are likely to have,
both positive and negative effects on us and our ability to compete. For
example, the Cooperative during the six months ended June 30, 1999, received
approximately $1.1 million from the universal service fund, a fund established
by the FCC that provides monies to incumbent local exchange carriers in certain
rural areas in order to best assure that telecommunications services are
affordable and accessible to all citizens. Regulatory changes may restrict or
eliminate our receipt of these monies in the future. In addition, federal or
state regulatory changes and any resulting increase in competition may have a
material adverse effect on our businesses and on the price of our stock. For
more information, please refer to the "DeKalb Telephone Cooperative,
Inc.--Regulation" section in this information statement/prospectus.
WE EXPECT TO FACE INCREASING COMPETITION IN THE TELECOMMUNICATIONS INDUSTRY.
After the merger, we will operate in an increasingly competitive
environment. As a cooperative, we have been insulated to some extent from
competition. After the merger, we expect our competitors to include:
- competitive local exchange carriers ("CLECs");
- interexchange carriers;
- internet service providers;
- wireless telecommunications providers;
- cable television companies; and
- resellers of telecommunications services and enhanced services providers.
The trend toward business combinations, strategic alliances and joint
ventures within the telecommunications industry could further increase
competition. In addition, the development of new technologies could increase
competition. One of the primary purposes of the Telecommunications Act
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<PAGE> 20
of 1996 is to promote competition, particularly in the local telephone market.
After enactment of the Telecommunications Act, several telecommunications
companies have indicated their intention to aggressively expand their ability to
compete in many segments of the telecommunications industry, including segments
in which we participate and expect to participate. This expansion, should it
occur, may result in more participants than can ultimately be successful in a
given market. We expect that increased competition will result in more
competitive pricing. Some of the companies with whom we compete or may compete
are, or are affiliated with, major telecommunications companies. Companies that
have the resources to sustain losses for some time have an advantage over those
companies without access to these resources. We cannot assure you that we will
be able to achieve or maintain adequate market share or revenue or compete
effectively in any of our markets. Any of these factors could materially
adversely affect our business and the price of our stock.
WE MUST ADAPT TO RAPID TECHNOLOGICAL CHANGE.
The telecommunications industry is subject to rapid and significant changes
in technology, and we rely on third parties for the development of and access to
new technology. The effect of technological changes on our business cannot be
predicted. We believe our future success will depend, in part, on our ability to
anticipate or adapt to such changes and to offer, on a timely basis, services
that meet customer demands. We cannot assure you that we will obtain access to
new technology on a timely basis or on satisfactory terms. Our failure to obtain
affordable access to this new technology could have a material adverse effect on
our business and the price of our stock.
WE HAVE NOT PREVIOUSLY OPERATED AS A PUBLIC COMPANY.
After the merger, we will be subject to the reporting and other regulatory
requirements of the SEC. We have no prior experience meeting those requirements.
In addition, there will be additional increased costs associated with meeting
these requirements.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO MANAGE OUR EXPANSION.
Our ability to expand and develop our business will depend on whether we
can successfully do the following in a timely manner, at reasonable costs and on
satisfactory terms and conditions:
- acquire necessary equipment, software and facilities, and integrate them
into our systems;
- evaluate markets;
- monitor operations;
- control costs;
- maintain effective quality controls;
- hire and train qualified personnel;
- expand internal management;
- obtain favorable financing;
- enhance operating and accounting systems; and
- obtain any required government authorizations.
We have made significant operating and capital investments in order to
address numerous operating challenges. We will need to continue developing new
marketing initiatives and hiring and
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<PAGE> 21
training sales people responsible for selling our services. We also will need to
continue developing the billing and collection systems necessary to integrate
these services. We cannot assure you that we can design, install and implement
these products and systems in a timely manner to permit us to offer our new
services as planned. In order to expand and to be able to offer additional
communications services (e.g., cable television, CLEC), we may be required to
spend considerable amounts of capital before we generate related revenue. If
these services fail to be profitable or if we fail in any of these respects,
this failure may have a material adverse effect on our business and the price of
our stock.
WE ARE DEPENDENT ON OUR OPERATING SUPPORT SYSTEMS.
Sophisticated information and processing systems are vital to our growth
and our ability to monitor costs, bill customers, process customer orders and
achieve operating efficiencies. Billing and information systems have
historically been produced by outside vendors. These systems generally have met
our needs. As we continue providing more services, we will need more
sophisticated billing and information systems. Our failure, or the failure of
vendors, to adequately identify all of our information and processing needs or
to upgrade systems as necessary could have a material adverse effect on our
business and the price of our stock. See also "-- Our operations could be
adversely affected by data processing failures after December 31, 1999."
WE ARE DEPENDENT ON INTERCONNECTION AGREEMENTS, PERMITS AND RIGHTS-OF-WAY.
Our success will depend, in part, on our ability to implement existing
interconnection agreements and enter into and implement new interconnection
agreements as we expand into new markets. Interconnection agreements are subject
to negotiation and interpretation by the parties to the agreements and are
subject to state regulatory commission, FCC and judicial oversight. We cannot
assure you that we will be able to enter into interconnection agreements in a
timely manner on terms favorable to us. We also must maintain existing and
obtain new local permits, including rights to utilize underground conduit and
pole space and other rights-of-way. We cannot assure you that we will be able to
maintain our existing permits and rights or to obtain and maintain other permits
and rights needed to implement our business plan on acceptable terms.
Cancellation or non-renewal of our interconnection agreements, permits,
rights-of-way or other arrangements could materially adversely affect our
business and the price of our stock. In addition, the failure to enter into and
maintain any required arrangements for a new market may affect our ability to
develop that market.
OUR SUCCESS DEPENDS UPON OUR ABILITY TO HIRE AND RETAIN KEY PERSONNEL.
Because we are a relatively small company in the telecommunications
industry, the efforts of a small number of key management, particularly H. Wayne
Gassaway, and operating personnel will largely determine our success. Our
success also depends in part upon our ability to hire and retain highly skilled
and qualified operating, marketing, sales, financial and technical personnel.
The competition for qualified personnel in the telecommunications services
industry is intense and, accordingly, we cannot assure you that we will be able
to hire or retain necessary personnel. In addition, it may be difficult to
attract experienced telecommunications executives to our small, rural service
area. If we lose the services of key personnel or if we are unable to attract
additional qualified personnel, our business and the price of our stock could be
materially and adversely affected.
YOUR CURRENT OWNERSHIP PERCENTAGE MAY DECREASE IN THE FUTURE.
In the future, we may issue additional shares of stock to finance
acquisitions, to finance our internal growth or to compensate employees. Any
future issuance of stock will cause your percentage
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<PAGE> 22
ownership in DTC to decrease. We are not required to offer you the opportunity
to buy shares in any future offerings. See "Comparison of Rights of Cooperative
Members and DTC Shareholders--Preemptive Rights."
THERE MAY NOT BE A MARKET FOR DTC STOCK AND IF ONE DEVELOPS, THE MARKET PRICE
COULD BE VOLATILE.
We can give you no assurances that, following the merger, a market will
develop for your DTC stock. Even if a market were to develop, it could be one of
limited liquidity, low volume and high price volatility. If shareholders sell
large amounts of our common stock in the public market after the merger, the
market price of our common stock could decline. In addition, the following
factors, among others, may cause the price of our common stock to fluctuate:
- new legislation or regulation;
- variations in our revenue, net income and cash flows;
- the difference between our actual results and the results expected by
investors and analysts;
- announcements of new service offerings, marketing plans or price
reductions by us or our competitors;
- technological innovations; and
- mergers, acquisitions or strategic alliances.
OUR ACQUISITIONS, JOINT VENTURES AND STRATEGIC ALLIANCES MAY NOT BE SUCCESSFUL.
We may acquire other companies as a means of expanding into new markets,
developing new services or supplementing existing businesses. We cannot predict
whether or when any acquisitions may occur or the likelihood of a material
transaction being completed on favorable terms. These types of transactions
involve risks, including:
- difficulties assimilating acquired operations and personnel;
- disruptions of our ongoing businesses;
- diversion of resources and management time;
- the possibility that uniform management and operating systems and
procedures may not be maintained;
- increased regulatory burdens;
- new markets in which we may have limited or no experience; and
- possible impairment of relationships with employees or customers.
Also, we cannot assure you that we could obtain the necessary financing for
an acquisition on satisfactory terms or that the acquired business would perform
as expected. We have formed and may in the future form various strategic
alliances, joint ventures and other similar arrangements. The other parties to
these existing or future arrangements, however, may at times have economic,
business or legal interests or goals that are inconsistent with our goals or
those of the strategic alliance, joint venture or similar arrangement. In
addition, a joint venture partner may be unable to meet its economic or other
obligations to the venture. A disagreement with our strategic allies or joint
venture
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<PAGE> 23
partners over certain business actions or the failure of a partner to meet its
obligations to the venture could adversely affect our business and the price of
our stock.
OUR OPERATIONS COULD BE ADVERSELY AFFECTED BY DATA PROCESSING FAILURES AFTER
DECEMBER 31, 1999.
Many computer systems, software applications and other electronics
currently in use worldwide are programmed to accept only two digits in the
portion of the date field which designates the year. If these systems and
products are not modified or replaced, many will fail or create erroneous
results and may cause other related systems to fail. Our failure to correct a
material Year 2000 problem could result in an interruption in or failure of
certain of our normal business operations or activities. Year 2000 compliance
issues are of particular importance to us since our operations rely heavily upon
computer systems, software applications and other electronics which contain
date-sensitive embedded technology. These technologies are standard purchased
systems and may or may not have been customized for our particular application.
We rely heavily upon various vendors and suppliers that themselves are very
reliant on computer systems, software applications and other electronics which
contain date-sensitive embedded technology. We also rely heavily on other
telecommunications providers for facilities and technical capabilities and to
originate and terminate calls onto our network. Although we believe that,
through execution and satisfactory completion of our Year 2000 compliance
strategy, our computer systems, software applications and electronics will be
Year 2000 compliant by December 31, 1999, we cannot assure you until the Year
2000 occurs that all systems and all related technology when running jointly
will function adequately. Additionally, we cannot assure you that the
assumptions we made within our Year 2000 compliance strategy will prove to be
correct, that the strategy will succeed or that the remedial actions being taken
will be completed by the time necessary to avoid system or component failures.
In addition, disruptions in the computer systems of vendors, customers or
interconnecting carriers, which are outside of our control, could impair our
ability to obtain necessary products or services to sell to our customers. Any
of these disruptions, as well as the cost of avoiding them, could have a
material adverse effect on our business and the price of our stock.
ANTI-TAKEOVER PROVISIONS MAY LIMIT THE ABILITY OF SHAREHOLDERS TO EFFECT A
CHANGE IN CONTROL OF DTC.
Our charter and by-laws contain provisions for staggered terms of
directors, removal of directors for cause only, supermajority voting for certain
business combinations and the availability of authorized but unissued shares of
common and preferred stock. These provisions, together with certain provisions
of Tennessee corporate law, may have the effect of deterring transactions
involving a change in our control or management, including transactions in which
shareholders might receive a premium for their shares.
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<PAGE> 24
DEKALB TELEPHONE COOPERATIVE, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information for each of the
years in the five-year period ended December 31, 1998 has been derived from the
consolidated financial statements of DeKalb Telephone Cooperative, Inc., which,
for the years ended December 31, 1996, 1997 and 1998, have been audited by
Arthur Andersen LLP, independent public accountants, included elsewhere in this
information statement/prospectus. The selected historical financial data for the
years ended December 31, 1994 and 1995 and the six months ended June 30, 1998
and 1999 is derived from unaudited financial statements which, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for fair presentation of the financial condition and
results of operations. Operating results for the six months ended June 30, 1999
are not indicative of results for the full year. The selected historical
financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and notes thereto with respect to the Cooperative
included at pages F-2 through F-26 to this information statement/prospectus. No
historical financial statements of DTC are included in this information
statement/prospectus since DTC has no significant assets or liabilities and has
had no operating history.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- --------- --------- ---------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Local telephone services revenue..... $ 3,247 $ 3,500 $ 3,704 $ 3,942 $ 4,190 $ 2,069 $ 2,173
Network access services revenue...... 6,336 5,904 7,892 8,242 8,877 4,414 5,525
Wireless products and services
revenue............................ 2,418 2,707 2,859 3,085 3,463 1,467 2,052
Miscellaneous revenue................ 1,283 1,300 1,317 1,502 1,595 779 813
------- ------- ------- ------- --------- --------- ---------
Total operating revenue....... 13,284 13,411 15,772 16,771 18,125 8,729 10,563
------- ------- ------- ------- --------- --------- ---------
OPERATING EXPENSES:
Plant operations expense............. 2,528 3,208 3,686 3,345 3,900 1,867 1,928
Depreciation and amortization
expense............................ 3,418 3,815 3,727 4,879 4,586 2,321 2,446
Customer operations expense.......... 779 902 906 911 1,132 521 624
Corporate operations expense......... 2,281 2,636 2,658 3,319 3,403 1,536 1,564
Operating taxes...................... 493 492 425 404 380 218 248
------- ------- ------- ------- --------- --------- ---------
Total operating expenses...... 9,499 11,053 11,402 12,858 13,401 6,463 6,810
------- ------- ------- ------- --------- --------- ---------
Total operating income........ 3,785 2,358 4,370 3,913 4,724 2,266 3,753
------- ------- ------- ------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Loss on retirement of assets......... -- -- -- (1,107) (328) -- --
Interest expense..................... (1,443) (1,330) (1,187) (1,119) (1,109) (561) (540)
Interest income...................... 244 382 452 649 713 403 420
Other income......................... 299 231 124 234 510 75 172
------- ------- ------- ------- --------- --------- ---------
Total other income
(expense)................... (900) (717) (611) (1,343) (214) (83) 52
------- ------- ------- ------- --------- --------- ---------
Income before income taxes.... 2,885 1,641 3,759 2,570 4,510 2,183 3,805
INCOME TAXES........................... 117 221 256 197 107 42 152
------- ------- ------- ------- --------- --------- ---------
Net income.................... $ 2,768 $ 1,420 $ 3,503 $ 2,373 $ 4,403 $ 2,141 $ 3,653
======= ======= ======= ======= ========= ========= =========
PRO FORMA INFORMATION ASSUMING MERGER
WITH DTC(1):
Net income to common shareholders.... $ 2,792 $ 1,339 $ 2,373
========= ========= =========
Net income per common share:
Basic.............................. $ 1.58 $ .79 $ 1.12
========= ========= =========
Diluted............................ $ 1.58 $ .79 $ 1.12
========= ========= =========
Weighted average shares used in
calculating earnings per share(2):
Basic.............................. 1,770,309 1,689,596 2,128,011
========= ========= =========
Diluted............................ 1,770,309 1,689,596 2,128,011
========= ========= =========
</TABLE>
17
<PAGE> 25
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1999
AS OF DECEMBER 31, ---------------------
------------------------------------------------- PRO
1994 1995 1996 1997 1998 ACTUAL FORMA(3)
------- ------- ------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................... $ 5,031 $ 6,940 $ 9,505 $13,690 $ 13,406 $ 15,544 $ 13,072
Total assets......................... 43,649 43,479 45,241 45,919 49,868 52,061 49,589
Long-term debt, net of current
maturities......................... 26,476 25,339 24,510 23,665 22,845 22,330 22,330
Members' equity...................... 13,396 14,125 16,861 18,346 21,989 25,511 --
Shareholders' equity................. -- -- -- -- -- -- 23,039
</TABLE>
- ------------------------
(1) Pro forma gives effect to the merger of DeKalb Telephone Cooperative, Inc.
and DTC, as if such merger had occurred as of January 1, 1998 and January 1,
1999, respectively, and as if the combined entity had been a taxable
corporation during these respective periods.
(2) The computation of weighted average shares outstanding is based upon an
estimated number of common shares outstanding as a result of the proposed
merger at a conversion rate of one common share per $10.00 in capital
credits outstanding.
(3) Pro forma gives effect to the balance sheet data as though the merger of
DeKalb Telephone Cooperative, Inc. and DTC had occurred as of June 30, 1999.
18
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Cooperative's financial
condition and results of operations should be read in conjunction with our
historical financial information included elsewhere in this document.
OVERVIEW
DeKalb Telephone Cooperative, Inc., which presently operates under the
trade name of DTC Communications, provides telecommunications services,
including local telephone service, long distance network access and dial-up
internet access, as well as wireless telephone services. At June 30, 1999, the
Cooperative's incumbent local exchange carrier ("ILEC") services operated
approximately 19,000 access lines primarily in rural Middle Tennessee, and its
for-profit subsidiary, Advantage Cellular, offered wireless telephone services
to approximately 7,400 subscribers.
The Cooperative's operating revenue primarily is reported in four captions:
local telephone services revenue, network access services revenue, wireless
products and services revenue and miscellaneous revenue.
Local Telephone Services Revenue. Local telephone services revenue is
primarily derived from providing local service to customers. Local service
operations provide lines from telephone exchange offices to subscribers'
premises for the origination and termination of telecommunications, including
the following: basic local telephone service and internet service provided
through the regular switched network; dedicated private line facilities for
voice and special services, such as transport of data, radio and video;
switching services for customers' internal communications through facilities
owned by the Cooperative; services for data transport that include managing and
configuring special service networks; and dedicated low- or high-capacity public
or private digital networks. Other local service revenue is derived from
information and directory assistance and public payphone services. The
Cooperative also offers enhanced calling features, such as voice mail, call
waiting, caller identification, automatic redial, call forwarding, three-way
calling, speed calling and call tracing, on a monthly subscription or per-use
basis.
Network Access Services Revenue. The Cooperative provides network access
and interconnection services by connecting the equipment and facilities of its
subscribers with the communications networks of long distance carriers (e.g.,
AT&T, Sprint, MCI-Worldcom) in order to allow a long distance call to be either
originated or terminated within the Cooperative's network. These connections are
provided by linking these carriers and subscribers through the public switched
network or through dedicated private lines furnished by the Cooperative. Network
access charges, which are payable by long distance carriers and end-user
subscribers, are designed to recover the costs of the common and dedicated
facilities and equipment used to connect networks of long distance carriers with
the Cooperative's local network and to subsidize the cost of providing local
service to rural and other high-cost areas. In addition, the Cooperative
receives monies from the universal service fund ("USF"). The Cooperative
provides Wide Area Telecommunications Service (WATS or 800 services) for
customers with highly concentrated demand; and special services, such as
transport of data, radio and video as well as long distance directory assistance
services.
Wireless Products and Services Revenue. Wireless products and services
revenue is primarily derived from customers of Advantage Cellular, who purchase
wireless telephone products and services, and from roaming charges paid by
customers of other wireless companies for originating or terminating a wireless
call while traveling within Advantage Cellular's wireless network.
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<PAGE> 27
Miscellaneous Revenue. Miscellaneous revenue is primarily derived from
directory (i.e., advertising) and billing and collection services for long
distance carriers.
For the six months ended June 30, 1999, we had revenue of $10.6 million, of
which 20.6% was attributable to local telephone services revenue, 52.3% was
attributable to network access services revenue, 19.4% was attributable to
wireless products and services revenue and 7.7% was attributable to
miscellaneous revenue. For the year ended December 31, 1998, we had revenue of
$18.1 million, of which 23.1% was attributable to local telephone services
revenue, 49.0% was attributable to network access services revenue, 19.1% was
attributable to wireless products and services revenue and 8.8% was attributable
to miscellaneous revenue.
Plant Operations Expense. Plant operations expense consists primarily of
maintenance, repair and testing of the Cooperative's telephone network
facilities (e.g., switches, cable).
Customer Operations Expense. Customer operations expense consists
primarily of salaries and benefits of employees who respond to customer
inquiries, customer complaints and requests for service.
Corporate Operations Expense. Corporate operations expense consists
primarily of unallocated general and administrative expenses associated with
corporate operations (e.g., certain consulting and professional fees, salaries
and benefits of management and management information systems).
Operating Taxes Expense. Operating taxes expense consists of property
taxes, ad valorem and certain sales taxes.
RESULTS OF OPERATIONS
The following table sets forth selected income statement data and such data
as a percentage of operating revenue for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------- --------------------------------
1996 1997 1998 1998 1999
--------------- --------------- -------------- -------------- ---------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Local telephone services revenue..... $ 3,704 23.5% $ 3,942 23.5% $4,190 23.1% $2,069 23.7% $ 2,173 20.6%
Network access services revenue...... 7,892 50.0 8,242 49.1 8,877 49.0 4,414 50.6 5,525 52.3
Wireless products and services
revenue............................ 2,859 18.1 3,085 18.4 3,463 19.1 1,467 16.8 2,052 19.4
Miscellaneous revenue................ 1,317 8.4 1,502 9.0 1,596 8.8 779 8.9 813 7.7
------- ----- ------- ----- ------ ----- ------ ----- ------- -----
Total operating revenue...... 15,772 100.0 16,771 100.0 18,125 100.0 8,729 100.0 10,563 100.0
OPERATING EXPENSES:
Plant operations expense............. 3,686 23.4 3,345 19.9 3,900 21.5 1,866 21.4 1,928 18.3
Depreciation and amortization
expense............................ 3,727 23.6 4,879 29.1 4,586 25.3 2,321 26.6 2,446 23.2
Customer operations expense.......... 906 5.7 910 5.4 1,132 6.2 520 6.0 624 5.9
Corporate operations expense......... 2,658 16.9 3,319 19.8 3,403 18.8 1,536 17.6 1,564 14.8
Operating taxes...................... 426 2.7 404 2.4 381 2.1 218 2.5 248 2.3
------- ----- ------- ----- ------ ----- ------ ----- ------- -----
Total operating expenses..... 11,402 72.3 12,858 76.7 13,402 73.9 6,462 74.0 6,810 64.5
------- ----- ------- ----- ------ ----- ------ ----- ------- -----
Operating income..................... $ 4,370 27.7% $ 3,913 23.3% $4,724 26.1% $2,266 26.0% $ 3,753 35.5%
======= ===== ======= ===== ====== ===== ====== ===== ======= =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
Local telephone services revenue increased $104,000, or 5.0%, to $2.2
million for the six months ended June 30, 1999 from $2.1 million for the
comparable 1998 period. This increase was due primarily to growth in the number
of customers and sales of additional or enhanced calling features to
20
<PAGE> 28
existing customers. As a percentage of total operating revenue, local telephone
services revenue decreased to 20.6% for the six months ended June 30, 1999 from
23.7% for the comparable 1998 period. This decrease resulted primarily from the
large increase in network access services revenues that was attributable in
large part to the increase in USF monies.
Network access services revenue increased $1.1 million, or 25.2%, to $5.5
million for the six months ended June 30, 1999 from $4.4 million for the
comparable 1998 period. This increase was primarily due to an increase of $
million received from the USF, the majority of which resulted from certain
reclassifications of portions of the Cooperative's switching network. As a
percentage of total operating revenue, network access services revenue increased
to 52.3% for the six months ended June 30, 1999 from 50.6% for the comparable
1998 period.
Wireless products and services revenue increased by $585,000, or 39.9%, to
$2.1 million for the six months ended June 30, 1999 from $1.5 million for the
comparable 1998 period. This increase was primarily due to growth in number of
customers and increased usage by existing customers as well as an increase in
roaming charges (charges for calls made by wireless users from other areas while
travelling through our service area). As a percentage of total operating
revenue, wireless products and services revenue increased to 19.4% for the six
months ended June 30, 1999 from 16.8% for the comparable 1998 period.
Miscellaneous revenue increased by $34,000, or 4.4%, to $813,000 for the
six months ended June 30, 1999 from $779,000 for the comparable 1998 period. As
a percentage of total operating revenue, miscellaneous revenue decreased to 7.7%
for the six months ended June 30, 1999 from 8.9% for the comparable 1998 period.
Plant operations expense remained relatively constant during the comparable
periods, increasing by $62,000. As a percentage of total operating revenue,
plant operations expense decreased to 18.3% for the six months ended June 30,
1999 from 21.4% for the comparable 1998 period. This decrease was due primarily
to an increase in total revenues.
Depreciation and amortization expense increased by $124,000, or 5.4%, to
$2.4 million for the six months ended June 30, 1999 from $2.3 million for the
comparable 1998 period. As a percentage of total operating revenue, depreciation
and amortization expense decreased to 23.2% for the six months ended June 30,
1999 from 26.6% for the comparable 1998 period.
Customer operations expense increased by $104,000, or 20.0%, to $624,000
for the six months ended June 30, 1999 from $520,000 for the comparable 1998
period. As a percentage of total operating revenue, customer operations expense
decreased to 5.9% for the six month period ended June 30, 1999 from 6.0% for the
comparable 1998 period.
Corporate operations expense increased by $28,000, or 1.8%, to $1.6 million
for the six months ended June 30, 1999 from $1.5 million for the comparable 1998
period. As a percentage of total operating revenue, corporate operations expense
decreased to 14.8% for the six months ended June 30, 1999 from 17.6% for the
comparable 1998 period. This decrease was due primarily to an increase in total
revenues.
Operating taxes increased by $30,000, or 13.8%, to $248,000 for the six
months ended June 30, 1999 from $218,000 for the comparable 1998 period. As a
percentage of total operating revenue, operating taxes decreased to 2.3% for the
six months ended June 30, 1999 from 2.5% for the comparable 1998 period. This
decrease was due primarily to an increase in total revenues.
Operating income increased by $1.5 million, or 65.2%, to $3.8 million for
the six months ended June 30, 1999 from $2.3 million for the comparable 1998
period. As a percentage of total operating
21
<PAGE> 29
revenue, operating income increased to 35.5% for the six months ended June 30,
1999 from 26.0% for the comparable 1998 period.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Local telephone services revenue increased by $248,000, or 6.3%, to $4.2
million for 1998 from $3.9 million for 1997. This increase was primarily due to
increased revenues from the sale of custom calling features. As a percentage of
total operating revenue, local telephone services revenue decreased to 23.1% for
1998 from 23.5% for 1997.
Network access services revenue increased by $635,000, or 7.7%, to $8.9
million for 1998 from $8.2 million for 1997. This increase was due primarily to
interstate switched access revenues. As a percentage of total operating revenue,
network access services revenue remained relatively constant between 1998 and
1997.
Wireless products and services revenue increased by $378,000, or 12.2%, to
$3.5 million for 1998 from $3.1 million for 1997. This increase was due
primarily to an increase in the number of customers and usage. As a percentage
of total operating revenue, wireless products and services revenue increased to
19.1% for 1998 from 18.4% for 1997.
Miscellaneous revenue increased by $94,000, or 6.2%, to $1.6 million in
1998 from $1.5 million in 1997. This increase was due primarily to billing and
collections revenue. As a percentage of total operating revenue, miscellaneous
revenue remained relatively constant decreasing to 8.8% in 1998 from 9.0% in
1997.
Plant operations expense increased by $555,000, or 16.6%, to $3.9 million
for 1998 from $3.3 million for 1997. As a percentage of total operating revenue,
plant operations expense increased to 21.5% for 1998 from 19.9% for 1997. This
increase was due primarily to accelerated maintenance programs and increases in
roaming charges caused by Advantage Cellular customers originating or
terminating calls in another wireless network.
Depreciation and amortization expense decreased by $294,000, or 6.0%, to
$4.6 million for 1998 from $4.9 million for 1997. As a percentage of total
operating revenue, depreciation and amortization expense decreased to 25.3% for
1998 from 29.1% for 1997. This decrease was due primarily to an increase in
total operating revenues.
Customer operations expense increased by $221,000, or 24.3%, to $1.1
million for 1998 from $910,000 for 1997. As a percentage of total operating
revenue, customer operations expense increased to 6.2% for 1998 from 5.4% for
1997. This increase was due primarily to expansion of services offered and
related personnel costs.
Corporate operations expense increased by $85,000, or 2.5%, to $3.4 million
for 1998 from $3.3 million for 1997. As a percentage of total operating revenue,
corporate and other operations expense decreased to 18.8% for 1998 from 19.8%
for 1997. This decrease was due primarily to an increase in total revenues.
Operating taxes decreased by $23,000, or 5.8%, to $381,000 for 1998 from
$404,000 for 1997. This decrease resulted primarily from decreased property
taxes. As a percentage of total operating revenue, operating taxes decreased to
2.1% in 1998 from 2.4% in 1997.
Operating income increased by $811,000, or 20.8%, to $4.7 million for 1998
from $3.9 million in 1997. As a percentage of total operating revenue, operating
income increased to 26.1% in 1998 from 23.3% in 1997.
22
<PAGE> 30
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Local telephone services revenue increased by $238,000, or 6.4%, to $3.9
million for 1997 from $3.7 million for 1996. This increase was due primarily to
growth in customers and to offering enhanced calling features to existing
customers. As a percentage of total operating revenue, local telephone services
revenue remained relatively constant at 23.5%.
Network access services revenue increased by $350,000, or 4.4%, to $8.2
million for 1997 from $7.9 million for 1996. This increase was due primarily to
interstate switched access revenues. As a percentage of total operating revenue,
network access services revenue decreased to 49.1% in 1997 from 50.0% in 1996.
Wireless products and services revenue increased by $226,000, or 7.9%, to
$3.1 million for 1997 from $2.9 million for 1996. This increase was due
primarily to growth in number of customers and increased roaming service
revenues. As a percentage of total operating revenue, wireless products and
services revenue increased to 18.4% in 1997 from 18.1% in 1996.
Miscellaneous revenue increased by $185,000, or 14.0%, to $1.5 million in
1998 from $1.3 million in 1997. This increase resulted from interstate and
intrastate billing and collection revenue. As a percentage of total operating
revenue, miscellaneous revenue increased to 9.0% in 1998 from 8.4% in 1996.
Plant operations expense decreased by $340,000, or 9.2%, to $3.3 million
for 1997 from $3.7 million for 1996. As a percentage of total operating revenue,
plant operations expense decreased to 19.9% for 1997 from 23.4% for 1996. This
decrease was due primarily to a decrease in the amount of application software
expensed in 1997 from 1996.
Depreciation and amortization expense increased by $1.2 million, or 30.9%,
to $4.9 million for 1997 from $3.7 million for 1996. As a percentage of total
operating revenue, depreciation and amortization expense increased to 29.1% for
1997 from 23.6% for 1996. This increase was due primarily to an increase in
total operating revenue.
Customer operations expense remained relatively constant during 1997 and
1996. As a percentage of total operating revenue, customer operations expense
decreased to 5.4% for 1997 from 5.7% for 1996. This decrease was due primarily
to an increase in total revenue while customer operations expense remained
unchanged.
Corporate operations expense increased by $661,000, or 24.9%, to $3.3
million for 1997 from $2.7 million for 1996. As a percentage of total operating
revenue, corporate operations expense increased to 19.8% for 1997 from 16.9% for
1996. This increase was due primarily to an increase in the expensing of
application software and associated database development.
Operating taxes decreased by $22,000, or 5.1%, to $404,000 in 1997 from
$426,000 in 1996. This decrease resulted primarily from decreased property
taxes. As a percentage of total operating revenue, operating taxes decreased to
2.4% in 1997 from 2.7% in 1996.
Operating income decreased by $457,000, or 10.4%, to $3.9 million in 1997
from $4.4 million in 1996. As a percentage of total operating revenue, operating
income decreased to 23.3% in 1997 from 27.7% in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Cooperative had cash and marketable securities of
$15.5 million, working capital of $15.5 million and long-term indebtedness of
$22.3 million, net of current
23
<PAGE> 31
maturities. The Cooperative's primary sources of liquidity are cash flows from
operations and available borrowings from the Rural Utilities Service of the
United States Department of Agriculture ("RUS"). As of September 30, 1999, the
Cooperative had available from the RUS an additional $8.6 million in borrowing
capacity. Conversion to a for-profit corporation will not affect our ability to
borrow from the RUS.
Historically, the operations and growth of the Cooperative have been
financed through cash flow from operations and long-term indebtedness. These
borrowings generally are secured by substantially all of the assets of the
Cooperative. The Cooperative's existing long-term debt consists of a series of
loans from the RUS that impose numerous restrictive covenants on the Cooperative
and its operations. The weighted average interest rate on these loans at
September 30, 1999 was approximately 4.9%.
We anticipate that our cash flow from operations and the available
borrowings from the RUS will provide sufficient cash to enable us to meet our
working capital needs, debt service requirements and planned capital
expenditures for property and equipment for the foreseeable future.
Operating Activities
During the six months ended June 30, 1999, cash provided by operating
activities was $5.3 million. Net income plus non-cash charges provided $6.2
million of operating cash flow during this period. Reduction in accounts payable
reduced operating cash flow during this period by $1.1 million.
During the year ended December 31, 1998, cash provided by operating
activities was $9.9 million. Net income plus non-cash charges provided $9.4
million of operating cash flow during this period. Other items that
significantly affected cash flow during this period were increases in
receivables (which reduced cash flow) of $443,000 and in accounts payable (which
increased cash flow) of $1.2 million. The increase in receivables resulted from
an increase in the number of customers and customer services and the increase in
payables resulted from year-end timing differences.
Investing Activities
During the six months ended June 30, 1999, cash used by investing
activities was $5.3 million. Cash used on capital expenditures was $3.3 million
during this period. The capital expenditures were incurred to construct and
acquire property, plant and equipment. During the six months ended June 30,
1999, cash used for investments was $1.8 million. Our investments included
marketable securities, consisting primarily of government securities.
During the year ended December 31, 1998, cash used by investing activities
was $7.9 million. Cash used on capital expenditures was $7.9 million during this
period. The capital expenditures were incurred to construct and acquire
property, plant and equipment. In addition, we disposed of $333,000 in
marketable securities during this period.
Financing Activities
During the six months ended June 30, 1999, cash used by financing
activities was $605,000. Cash used for payments on long-term borrowings was
$474,000 during this period. In addition, the Cooperative used $131,000 of cash
to retire certain capital credits.
24
<PAGE> 32
During the year ended December 31, 1998, cash used by financing activities
was $1.6 million. Cash used for payments on long-term borrowings was $848,000
during this period. In addition, the Cooperative used $760,000 of cash to retire
certain capital credits.
The retirement of capital credits during 1998 and 1999 resulted from the
Cooperative's policy of retiring credits of members (both active and inactive)
that accrued more than ten years in the past. For administrative convenience and
in order to make the capital credit position of the Cooperative, at the time of
the merger, reflect the precise requirements of tax and cooperative law, we
expect to retire, effective as of December 31, 1999, all capital credits that
originated prior to 1990. Those credits total approximately $2.4 million and,
assuming the merger occurs, would be paid in fiscal year 2000.
INFLATION
Due to relatively low levels of inflation experienced in the years ended
December 31, 1996, 1997 and 1998, we believe inflation did not have a material
effect on the results of the Cooperative during these periods.
RECENT ACCOUNTING PRONOUNCEMENTS
We adopted SFAS 130, Reporting Comprehensive Income, which establishes
standards for displaying comprehensive income and its components in our
consolidated financial statements. Comprehensive income encompasses all changes
in stockholders equity with the exception of those transactions arising with
owners. The adoption of this pronouncement had no material effect on our results
of operations.
We adopted SFAS 131, Disclosures about Segments of an Enterprise and
Related Information, which establishes standards for reporting information about
operating segments in our consolidated financial statements. The standard also
establishes requirements for related disclosure about our products and services,
geographic areas and major customers. We operate in two industry segments;
wireline and wireless telephone services and accordingly, have disclosed
information for each of these segments in our consolidated financial statements.
The adoption of this pronouncement had no effect on our presentation of
operating results or financial position.
We have adopted the AICPA Statement of Position 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1").
As permitted, we have elected to adopt the provisions of SOP 98-1 during the
year ended December 31, 1998. Under the provisions of SOP 98-1, we began
capitalizing and amortizing the cost of our internal use software that we had
previously expensed as incurred. During 1998, we capitalized approximately
$500,000 of internal use software that previously would have been expensed.
YEAR 2000 CONSIDERATIONS
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, computer
systems and software used by many companies may need to be upgraded to comply
with such year 2000 ("Year 2000") requirements. Significant uncertainty exists
concerning the potential effects associated with such compliance, but systems
that do not properly recognize such information could generate erroneous data or
cause a system to fail.
25
<PAGE> 33
The Cooperative has made a preliminary review of both its information
technology and its non-information technology systems to determine whether they
are Year 2000 compliant. Although our billing systems currently are not
compliant, planned replacements and upgrades are approximately 95% complete. We
have not identified any material systems that are not Year 2000 compliant, other
than our billing systems. We currently expect to have all replacements or
upgrades for these systems operational by December 31, 1999, at an estimated
cost of $125,000, as part of our previously planned systems integration program.
The Cooperative has prepared a formal questionnaire for all significant
suppliers, customers and service providers to determine the extent to which the
Cooperative is vulnerable to those third parties' failure to remediate the Year
2000 problem. Based upon the response we have received to these questionnaires,
we believe that our operations will not be significantly disrupted even if third
parties with whom we have relationships are not Year 2000 compliant.
Except as described above, we believe that we will not be required to make
any material expenditures to address the Year 2000 problem as it relates to our
existing systems. While it is not possible at present to quantify the cost of
all corrective actions, we do not expect that these actions will materially
exceed the cost of previously planned capital expenditures as we integrate the
systems of the businesses we acquire and of normal software upgrades and
replacements expected to occur through the Year 2000. However, uncertainty
exists concerning the potential costs and effects associated with any Year 2000
compliance and we intend to continue to make efforts to ensure third parties
with whom we have relationships are Year 2000 compliant. Therefore, we cannot be
certain that unexpected Year 2000 compliance problems of either the Cooperative
or our vendors, customers and service providers would not materially and
adversely affect our business, financial condition or operating results. We will
continue to consider the likelihood of a material business interruption due to
the Year 2000 issue, and, if necessary, implement appropriate contingency plans.
MARKET RISK
The Cooperative has not been exposed to significant market risks in the
normal course of its business. To date, the interest rate on its long-term
indebtedness has been at fixed rates ranging from 2.0% to 5.0%, which are
significantly below market. Accordingly, to date, the Cooperative has not deemed
it necessary to employ any market or interest risk management strategies (e.g.,
interest rate swap agreements). In the future, as DTC pursues its business
strategy, these low cost borrowing sources may be unavailable for some business
activities. Accordingly, DTC may have to employ such strategies in the future.
In addition, as DTC pursues its market strategy, it may become subject to a
higher degree of interest rate sensitivity as it is required to borrow at higher
or at variable rates. This could significantly increase DTC's future sensitivity
to interest rate fluctuations and materially affect, in a negative manner, DTC's
future financial position and results of operations.
As of December 31, 1998, the Cooperative had $12.2 million in marketable
securities. As of June 30, 1999, the Cooperative had $14.0 million invested in
marketable securities. For the periods ended December 31, 1998 and June 30,
1999, the Cooperative had interest income of $713,000 and $420,000,
respectively. Accordingly, a large portion of the Cooperative's income depends
upon: (i) the Cooperative's ability to continue to invest monies in these
instruments and (ii) prevailing interest rates. The Cooperative does not believe
there is any other significant risk associated with its investment in marketable
securities. However, if DTC in the future invests in other income-producing
securities, it could subject DTC's income to greater risk and volatility.
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THE SPECIAL MEETING
DATE, TIME AND PLACE
The special meeting will take place on December , 1999 at 9:00 a.m.
(local time) at the Cooperative's Maintenance and Operations Center located
between Highways 70 and 53 in Alexandria, Tennessee.
PURPOSE
The special meeting of the Cooperative's active members will be held to
consider and vote upon a proposal to approve the plan and agreement of merger
that provides for the merger of the Cooperative with and into DTC, and to
transact any other business that may properly come before the meeting.
VOTING RIGHTS AND RECORD DATE FOR THE MERGER
Only active members of the Cooperative at the close of business on November
, 1999 are entitled to notice of and to vote at the meeting of the
Cooperative's members and at any adjournment of that meeting. At the close of
business on that date, there were approximately 15,000 active members of the
Cooperative. Each active member at the close of business on November , 1999
who attends the special meeting in person will be entitled to one vote on each
matter presented for a vote of the members at the meeting. As of November ,
1999, directors and executive officers of the Cooperative and their respective
affiliates and associates accounted for less than 1% of the total number of
members.
QUORUM; ABSTENTIONS
The presence in person of 50 active members constitutes a quorum for
purposes of the meeting. Accordingly, if a small number of persons attend the
meeting, the votes of the officers and directors who are members could have a
disproportionate effect upon the outcome of matters to be voted upon. If a
member attends the meeting and abstains, that abstention will be counted as a
vote against the merger.
The merger agreement must be approved by the affirmative vote of two-thirds
of the active members present in person and voting at the meeting.
EXPENSES
The Cooperative will pay all printing expenses and filing fees pertaining
to the registration statement and the information statement/prospectus,
including all expenses for postage, labor and materials.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Cooperative unanimously approved the plan and
agreement of merger. The Board of Directors also declared that the plan and
agreement of merger and the merger are advisable, and determined that the merger
is fair to and in the best interests of the Cooperative and the Cooperative's
members. Accordingly, the Board of Directors unanimously recommends that you
vote "FOR" approval of the merger. See "The Merger--Board Recommendation"
and--"Reasons for the Merger."
MISCELLANEOUS
The Board of Directors of the Cooperative is not aware of any matter to be
presented for action at the special meeting other than the matter described in
this information statement/prospectus. Only business within the purpose or
purposes described in the meeting notice may be conducted at a special meeting
of the members.
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THE MERGER
The discussion in this information statement/prospectus of the merger and
the principal terms of the plan and agreement of merger is subject to, and
qualified in its entirety by reference to, the plan and agreement of merger
which is attached as Appendix A to this information statement/prospectus and
incorporated herein by this reference.
GENERAL
At the special meeting, you will be asked to vote upon a proposal to
approve the plan and agreement of merger that provides for the merger of the
Cooperative with and into DTC. The surviving corporation would be DTC, which
would own all of the assets and be subject to all of the liabilities of the
Cooperative.
In the merger, each member (both active and inactive) will receive one
share of DTC stock for every $10.00 in capital credits that the member has on
the books of the Cooperative as of December 31, 1999, subject to payment in cash
for fractional shares. Active members (those still having telephone service with
the Cooperative) will receive Class A voting common stock. Inactive members
(those who no longer have telephone service with the Cooperative but still have
capital credits on the books of the Cooperative) will receive Class B non-voting
common stock. All DTC stock (owned by the Cooperative) issued and outstanding
immediately prior to the effective time of the merger will be canceled.
DTC will not issue fractional shares. Any member (both active and inactive)
who would otherwise be entitled to receive a fraction of a share of DTC stock in
the merger will receive instead cash for any fractional amount that is not a
whole multiple of $10.00.
The merger will become effective upon the time when the articles of merger
are accepted for record by the Secretary of State of the State of Tennessee or
at any other time established under the articles of merger. We expect that the
merger will become effective on January 1, 2000 after any required regulatory
approvals are received and the other conditions to closing are met if the merger
is approved by the members of the Cooperative.
THE PLAN AND AGREEMENT OF MERGER
Effective Time of the Merger
Following the approval of the merger by the members of the Cooperative at
the special meeting and the satisfaction of the other conditions to the merger,
the Cooperative will merge with and into DTC. DTC would be the surviving
corporation and the Cooperative would cease to exist.
The merger would be consummated on the date and time the articles of merger
are filed with the Secretary of the State of Tennessee in accordance with the
Tennessee Business Corporations Act ("TBCA") or at such other time as is set
forth in the articles of merger. If the members of the Cooperative approve the
merger at the special meeting and the other conditions to the merger are
satisfied, the effective time of the merger would occur as soon after the
special meeting as is possible (which may be the same date as the special
meeting), provided that the merger has not been abandoned prior to such time. It
is anticipated that the merger, if approved and consummated, would become
effective at 12:01 a.m. (Central Standard Time) on January 1, 2000.
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Conversion of Capital Credits
At the effective time of the merger, the Cooperative would be merged into
DTC and the Cooperative would cease to exist. As of the effective time of the
merger, members would cease to be members of the Cooperative and consequently
would have no rights as members. Instead, members of the Cooperative after the
merger would have rights as shareholders of DTC.
If the merger is consummated:
- each member (both active and inactive) will receive one share of DTC
stock for every $10.00 in capital credits that a member has on the books
of the Cooperative as of December 31, 1999;
- persons or entities that are active members as of December 31, 1999 will
receive shares of DTC's Class A voting common stock;
- persons or entities that are inactive members as of December 31, 1999
will receive shares of DTC's Class B non-voting common stock; and
- each member with capital credits in an amount other than in whole
multiples of $10.00 will receive cash for any fractional amount.
Based on the capital credits on the books of the Cooperative as of June 30,
1999, DTC expects to issue approximately 2,000,000 shares of Class A voting
common stock and approximately 300,000 shares of Class B non-voting common stock
in the merger.
Procedure for Issuance of Merger Consideration
If the merger is consummated, as soon as practicable, and in any event
within 60 days after the effective date of the merger, DTC is required to send
to each member certificates for the shares of DTC stock that the member is to
receive in the merger based upon that member's capital credit account as of
December 31, 1999. Each member also will receive a check for the amount of cash
required, if any, to pay that member for any fractional share to which the
member otherwise would be entitled.
Conditions to Completion of the Merger
The obligations of the Cooperative to consummate the merger are subject to
the fulfillment of the following conditions:
- approval of the plan and agreement of merger by two-thirds of the active
members of the Cooperative voting at the special meeting;
- obtaining all required regulatory approvals and third party consents;
- there being no restraining order, injunction or court order preventing
the merger or any proceeding seeking to prevent the merger or making the
merger illegal; and
- there being no statute, rule, regulation or governmental order that might
materially adversely affect or delay the merger.
The Board of Directors of the Cooperative and DTC by written mutual consent
may terminate the plan and agreement of merger and abandon the merger at any
time before the effective time of the merger, even after approval of the merger
by the members.
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BACKGROUND OF THE MERGER
The Cooperative's Board of Directors, together with management and with the
advice of the Cooperative's financial and legal advisors, has been studying the
strategic future of the Cooperative, particularly in view of the rapid
technological and regulatory changes that are affecting the telecommunications
industry. The Board of Directors has considered recent trends in the
telecommunications industry, including rapid changes in technology and
increasing competition in the provision of many services offered by the
Cooperative. The Board also considered recent changes in the regulatory
environment affecting the telecommunications industry that the Board believes
may significantly increase competition in the markets that the Cooperative
currently serves. The Board believes that the Cooperative must retain existing
customers and increase the markets served and services offered in order to
remain competitive in light of such technology changes, increased competition
and changes in the regulatory environment. After considering various
alternatives, the Board unanimously concluded that to continue under the
cooperative form of business was not in the best interests of the Cooperative or
its members and that the most advantageous plan for the Cooperative's members
was to convert to a for-profit corporation which would have no restrictions on
the services that could be offered. Accordingly, your Board has unanimously
approved the proposed plan and agreement of merger and recommends that the
merger be submitted for approval by the members at a special meeting.
BOARD RECOMMENDATION
The Board of Directors of the Cooperative believes that the merger is fair
to the Cooperative and to you as a member of the Cooperative, and that the
merger is in your and the Cooperative's best interests. As of the date of this
information statement/prospectus, the directors and executive officers of the
Cooperative, together with their respective affiliates and associates, as a
group, constituted less than one percent of the total number of members of the
Cooperative. These persons would be entitled to receive the same consideration
for their capital credits as any other member at the effective time of the
merger. After the merger, the Cooperative's directors, executive officers and
their respective affiliates and associates as a group would beneficially own
substantially less than one percent of the DTC stock issuable in the merger.
THE COOPERATIVE'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE
MEMBERS VOTE FOR APPROVAL OF THE MERGER.
REASONS FOR THE MERGER
In the course of reaching its decision to approve the proposed merger, the
Board consulted with various advisors to the Cooperative, as well as with
management of the Cooperative. Without assigning any relative or specific
weights, the Board considered numerous factors, including but not limited to the
following:
- the changing nature of the telecommunications industry generally;
- the desirability of the Cooperative having access to public capital
markets to potentially provide additional resources to promote growth and
support operating needs;
- the changing regulatory environment surrounding the telecommunications
services industry;
- the desirability of providing members with an opportunity for liquidity
and the ability to realize the value of their investments in the
Cooperative;
- historical and current financial and economic conditions;
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- attractive growth opportunities outside the Cooperative's current service
area;
- current restrictions upon the types of business that can be entered into
and services that can be provided by the Cooperative (e.g., cable
television);
- the limitations currently placed on members with respect to their
Cooperative capital credits by the Tennessee Telephone Cooperative Act
(the "Cooperative Act") and the Cooperative's Charter and Bylaws.
The Board does not believe that there are any material disadvantages to the
merger. The only potential material disadvantages of the merger identified by
the Board were:
- the loss of the Cooperative's partial tax exempt status; and
- the increased competition that the merged companies will face resulting
from the pursuit of DTC's business strategy.
The Cooperative is partially exempt from United States federal income
taxation by virtue of Section 501(c)(12) of the Internal Revenue Code, which
makes the exemption available to telephone cooperatives which do not receive
more than 15% of their revenues from non-member sources. The Board believes that
diversification and broadening of goods and services sold is essential to the
ability of the Cooperative to respond to competitive challenges. As the
Cooperative's revenues from non-member sources increase and the goods and
services offered by the Cooperative expand into other areas of
telecommunications, the Board believes the amount of member-sourced income will
decrease relative to total income and that any tax benefit of remaining a
nonexempt cooperative would be outweighed by increases in administrative costs
and burdens. As revenue sources diversify and broaden, the difficulties of
accounting for, and allocating among, various classes of members and non-members
and various levels and classes of goods and services sold intensify
significantly, with corresponding increases in administrative costs. The Board
believes, therefore, that the continued shift in the Cooperative's revenue
sources would further reduce any benefits of remaining a cooperative.
As a small rural telephone cooperative, the Cooperative has to some extent
been insulated from competition within its service area. Tennessee law provides
that companies may not receive licenses to operate telephone systems within the
service areas of carriers with fewer than 100,000 access lines (which includes
the Cooperative). A recent decision of the Federal Communication Commission,
however, cast doubt upon the validity of that Tennessee law. If the FCC's
decision is sustained, the Cooperative would lose its protection from
competition but would still be subject to the restrictions of a telephone
cooperative in the types of telecommunication services that it could offer and
the service area within which they could be offered. Accordingly, because the
Board believes that regulatory changes eventually would cause the Cooperative to
be subjected to competition by companies able to offer a wider choice of
telecommunications services, continuing to operate as a telephone cooperative
risks loss of members' capital credits in the event that the Cooperative, as a
result of the inability to anticipate or respond to competitive forces, failed
as a business entity.
FORMER MEMBERS OF THE COOPERATIVE
Former or inactive members of the Cooperative are those persons or entities
that at one time were members of (i.e., subscribed for telephone service with)
the Cooperative but no longer have telephone service with the Cooperative.
Inactive members have no voting rights on Cooperative matters (e.g., the
merger); however inactive members have rights to participate in the distribution
of the assets of the Cooperative in certain events.
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Some inactive members, as of December 31, 1999, will still have capital
credits on the books of the Cooperative. In addition, members (both active and
inactive) to whom capital credits have been allocated during the past ten years
have the right, if the Cooperative were being dissolved, to receive a share of
the net assets of the Cooperative. That right, generally called a "property
right," is being preserved for all members (both active and inactive) by the
issuance of DTC common stock which carries with it a right, if DTC is dissolved
in the future, to receive a share of DTC's net assets.
The stock received in the merger by inactive members is non-voting but the
stock received by active members has voting rights. Inactive members currently
have no voting rights on Cooperative matters and the issuance of non-voting
stock to them carries forward the active/inactive member distinction in the
merged companies. Otherwise, all of the stock to be issued in the merger has all
of the same rights to the owners of the stock.
FEDERAL INCOME TAX CONSEQUENCES
Tuke Yopp & Sweeney, PLC, special counsel to DTC, has rendered certain tax
advice in connection with the merger.
The following is a general summary of Tuke Yopp & Sweeney, PLC's opinion as
to the principal United States federal income tax consequences that should arise
from the merger to the Cooperative, DTC and members who are residents or
citizens of the United States. The following discussion does not address all the
federal tax considerations to members and also does not address state, local or
foreign tax consequences of the merger.
Members should note that this discussion is not binding upon the Internal
Revenue Service and that neither DTC nor the Cooperative has sought, nor do they
intend to seek, a ruling from the Internal Revenue Service as to the federal tax
consequences of the merger. In view of this and in view of the absence of
directly applicable legal precedent, there can be no assurance that the Internal
Revenue Service will agree with the treatment described below, or that any
challenge to such treatment would not be sustained. EACH MEMBER SHOULD CONSULT
THAT MEMBER'S OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF THE
MERGER AND THE RECEIPT OF SHARES OF DTC STOCK, INCLUDING THE APPLICATION OF
STATE, LOCAL AND FOREIGN LAW.
It is the opinion of Tuke Yopp & Sweeney, PLC that the proposed merger of
the Cooperative into DTC will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended. As a
consequence:
- Neither the Cooperative nor DTC will recognize any taxable gain or loss
as a result of the merger. DTC's tax basis and holding period of the
assets acquired in the merger will be the same as it currently is for the
Cooperative.
- Members (both active and inactive) receiving DTC stock in the merger who
have not deducted (as a miscellaneous itemized deduction or as a trade or
business expense) for federal income tax purposes the amounts of their
monthly telephone bills from the Cooperative, will not (except with
respect to cash received in lieu of fractional shares) recognize taxable
income or loss because of the merger. The DTC stock received by those
members in the merger will have the same basis and holding period as the
capital credits that those members previously had in the Cooperative.
EXAMPLE: A customer who has not deducted the amount of his/her
telephone bills for United States federal income tax purposes has
capital credits of $100.00, $10.00 of which was earned in each of the
years 1990 through 1999. That customer will receive ten shares of
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DTC stock in the merger. No gain or loss will be recognized by the
customer upon receipt of the stock and the customer's tax basis (used to
calculate gain or loss upon a later sale of the stock) is $100.00. In
addition, the customer will be deemed (for purposes of the holding
period used to determine whether gain or loss on a later sale of the
stock is long-term or short-term) to have received one-tenth of each
share during each of the years 1990 through 1999.
- Members (both active and inactive) receiving DTC stock in the merger that
have deducted (as miscellaneous itemized deductions or as trade or
business expense) for federal income tax purposes the amounts of their
monthly telephone bills from the Cooperative, will not recognize income
because of the merger in excess of the amount previously deducted. If
those deductions produced a tax benefit for the member, the member may
recognize taxable income because of the merger in an amount up to the
amount of the previous deductions. The DTC stock received by those
members in the merger will have a tax basis equal to any income
recognized by the member because of the merger plus any remaining basis
in the member's capital credits. In addition, the DTC stock will have the
same holding period as the capital credits that those members previously
had in the Cooperative.
EXAMPLE: A customer who has deducted the amount of his/her telephone
bills for United States federal income tax purposes has capital credits
of $100.00, $10.00 of which was earned in each of the years 1990 through
1999. That customer will receive ten shares of DTC stock in the merger.
If the DTC stock when received is worth $100.00, the customer will not
recognize income upon receipt of the stock in excess of the amounts
previously deducted; however, the amount of that income will not exceed
the fair market value of the DTC stock received (in this
example--$100.00). The tax basis (used to calculate gain or loss upon a
later sale of the stock) will be between zero (because of the previous
deduction) and $100.00, depending upon the amount, if any, that the
member is required to recognize as income as a result of receiving a tax
benefit. In addition, the customer will be deemed (for purposes of the
holding period used to determine whether gain or loss on a later sale of
the stock is long-term or short-term) to have received one-tenth of each
share during each of the years 1990 through 1999.
- Members receiving cash in lieu of fractional shares of DTC stock will be
treated as if the fractional shares had been distributed as part of the
merger and then redeemed by DTC. Such cash payments should be treated as
having been received as a distribution in full payment in exchange for
the fractional shares deemed redeemed. Gain or loss will be measured by
the difference between the cash received and the adjusted basis of the
fractional share. The gain or loss will be capital gain or loss if the
capital credits were consolidated capital assets in the hands of the
member.
EXAMPLE: A customer has capital credits of $109.00. That customer will
receive ten shares of DTC stock in the merger for $100.00 of the capital
credits. The receipt of that stock will have the tax consequences
described above depending upon the situation of the customer. The
customer will receive $9.00 in cash in satisfaction of the remainder of
the capital credits. That customer will recognize income in the year
that the merger occurs for United States federal income tax purposes
equal to the difference between the $9.00 received and the amount of the
basis in the fractional share deemed redeemed.
Because it is unlikely that most residential customers have deducted the
amount of their telephone bills for federal income tax purposes, we believe this
generally means that the receipt of DTC stock in the merger will be tax free to
residential customers and possibly taxable to business customers to the extent
of the amount of payments previously deducted.
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Tuke Yopp & Sweeney, PLC indicates that the basis for their opinion is
derived from their review of previously issued public and private letter rulings
by the Internal Revenue Service and court opinions involving transactions with
similar but not identical characteristics. Because the Internal Revenue Service
has not previously ruled on a transaction involving the merger of a Section
501(c)(12) cooperative, the opinion states that there is a lack of direct
precedent for the stated tax treatment. The opinion of Tuke Yopp & Sweeney, PLC,
states, however, that existing precedent involving transactions with similar but
not identical characteristics, if followed, would cause the merger to be treated
as and constitute a tax free exchange and that Tuke Yopp & Sweeney, PLC, has no
reason to believe that the Internal Revenue Service would not follow this
precedent.
Due to the complexities of federal, state and local income tax laws, it is
strongly recommended that members, particularly members who have previously
deducted their payments to the Cooperative, consult their own tax advisors
concerning the particular federal, state and local tax consequences of the
merger to them.
REGULATORY APPROVALS REQUIRED FOR THE MERGER
Consummation of the merger is subject to the approval of the RUS pursuant
to certain loan agreements between the Cooperative and the RUS. The Cooperative
has received verbal assurances from the RUS that the merger will be approved.
DTC also must receive from the Tennessee Regulatory Authority ("TRA") a
certificate of public convenience and necessity to operate the Cooperative's
system following the effective date of the merger. The Cooperative currently is
exempt from most TRA regulation.
RESALE OF DTC COMMON STOCK; RESTRICTIONS ON DTC AFFILIATES
Assuming that a market develops for the stock, DTC stock received in the
merger will be freely transferable, except for DTC stock received by any
"affiliate" of DTC. Affiliate shares will not be transferable except in
compliance with the Securities Act. The term "affiliate" is defined in the
Securities Act and generally includes directors, certain executive officers and
beneficial owners of 10% or more of a class of capital stock. This information
statement/prospectus does not cover sales of DTC stock by any person deemed an
affiliate.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Upon the consummation of the merger, members of the Cooperative will be
shareholders of DTC and the businesses, properties and operations of DTC would
be substantially identical to those of the Cooperative. The directors and
officers of DTC who were engaged immediately prior to the effective time of the
merger would continue immediately after the effective time of the merger as the
directors and officers of DTC. Upon consummation of the merger, the employees of
DTC would be the persons who were the employees of the Cooperative immediately
prior to the effective time of the merger.
As a result of the merger, DTC will assume all of the operations, assets
and liabilities of the Cooperative and will have a consolidated financial
position substantially identical to that of the Cooperative immediately before
the merger.
NO DISSENTERS' RIGHTS
Members of the Cooperative are not entitled to dissenters' rights under
either the Tennessee Nonprofit Corporation Act (the "TNPCA") or the Cooperative
Act in connection with the merger.
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MARKET AND DIVIDEND INFORMATION
MARKET INFORMATION
DeKalb Telephone Cooperative, Inc.
No public trading market currently exists for capital credits, and capital
credits currently are not transferable.
DTC Communications Corp.
No public trading market currently exists for DTC stock.
We have applied for the listing of the DTC stock to be issued in the merger
on the American Stock Exchange under the symbols " " (Common Class A
voting) and " " (Common Class B non-voting).
There can be no assurance that a trading market will develop or be
maintained for any DTC stock or, if it did, that it would provide the
shareholders of DTC a meaningful opportunity to liquidate their equity interests
in DTC at a fair value.
DIVIDEND INFORMATION
DeKalb Telephone Cooperative, Inc.
By law, the Cooperative has been required to make an annual refund or rate
reduction to its members to the extent its operating revenues exceeded operating
expenses, maintenance and interest. The law also allows any refund to take the
form of either cash or capital credits on the books of the Cooperative. This
refund customarily has taken the form of accumulation of capital credits for the
members on the books of the Cooperative. See "Comparison of Rights of
Cooperative Members to Rights of DTC Shareholders -- Dividends and Other
Distributions." The Cooperative previously has not paid dividends or interest on
capital credits.
The Cooperative's policy previously has been to pay the capital credits of
a member to the estate of that person upon death or to a business upon its
dissolution, when the Cooperative receives written application for payment and
proof of death or dissolution, as the case may be.
In addition, the Cooperative generally has elected to pay capital credits
to both active and inactive members within twelve years after the year in which
the capital credits were accumulated. This policy, however, is subject to the
discretion of the Board and to the financial ability of the Cooperative to make
the payments. During 1996, 1997 and 1998, the Cooperative retired $767,000,
$889,000 and $760,000, respectively, in capital credits. During 1999, it is
anticipated that the Cooperative will retire all capital credits that
accumulated in years prior to 1990. The amount of capital credits that the
Cooperative anticipates will be retired during 1999 is approximately $2.3
million.
DTC Communications Corp.
After the merger, DTC would be permitted by law to pay dividends to its
shareholders, although certain covenants in existing loan agreements between the
Cooperative and the RUS, as well as federal statutes and regulations which apply
to RUS borrowers, could limit the circumstances under which DTC would be
permitted to pay dividends or make other distributions to its shareholders. The
RUS must authorize distributions other than in shares of stock unless certain
financial ratio requirements are met. The amount and timing of future dividend
payments, if any, would be based on
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a number of factors, including the capital requirements of DTC's business and
the financial condition of DTC. There can be no assurance that DTC would pay any
dividends at any time and DTC has no intention of paying cash dividends in the
foreseeable future. In the future, it also is possible that agreements with
lenders would continue to limit or restrict, or could place additional
limitations or restrictions upon, DTC's ability to pay dividends or the amount
of dividends that DTC may pay to its shareholders. The dividend rights of DTC
stock also would be subject to the rights of any DTC preferred stock which may
be issued in the future.
NUMBER OF MEMBERS/SHAREHOLDERS
As of November , 1999, the Cooperative had approximately 15,000 active
members of record. In addition, there were approximately 29,000 inactive
members.
As of November , 1999, DTC had one shareholder of record, which was the
Cooperative. The Cooperative will remain the sole shareholder of DTC through the
effective date of the merger.
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DEKALB TELEPHONE COOPERATIVE, INC.
The following description of the Cooperative should be considered carefully
in evaluating the Cooperative and its businesses which will be assumed by DTC if
the merger is consummated.
BUSINESS
DeKalb Telephone Cooperative, Inc. (d/b/a "DTC Communications") provides
telecommunications services to residential and commercial customers primarily in
several counties in rural Middle Tennessee. The Cooperative offers high-quality,
low-cost telecommunications services, including local telephone service,
long-distance network access, and dial-up internet access over a
state-of-the-art wireline network, as well as wireless telephone services. In
addition, the Cooperative offers a wide range of enhanced calling features such
as voice mail, call waiting, caller identification, automatic redial, call
forwarding, three-way calling, speed calling and call tracing.
The Cooperative was formed in 1951 as a non-profit corporation with
assistance from the Alexandria, Tennessee Lions Club after an ice storm
destroyed much of the existing telephone service. The Cooperative obtained a
Rural Electrification Administration (which is now the RUS) loan to construct a
new telephone system and subsequently began operations in 1953 with 508 initial
subscribers. Following its incorporation, the Cooperative focused on acquiring
privately owned rural telephone companies in adjacent communities in an effort
to expand its operations to the service area the Cooperative currently covers.
Also, the Cooperative focused on continually upgrading and improving its
telecommunications equipment in order to provide the highest quality
telecommunications services to its customers. In doing so, the Cooperative
replaced eight-party lines with private and two-party lines in the 1960s, then
upgraded completely to one-party lines by 1972, and converted all ten of the
Cooperative's primary exchanges to digital switches by 1990.
In 1974, the Cooperative converted to a telephone cooperative under the
Cooperative Act. In 1991, the Cooperative formed a wholly owned for-profit
subsidiary, Advantage Cellular, to provide customers with wireless telephone
services. Advantage Cellular currently serves approximately 7,400 wireless
customers in eight Middle Tennessee counties. Advantage Cellular's wireless
customers are not members of the Cooperative solely by reason of their wireless
service.
Today, the Cooperative is the seventh largest telephone company and third
largest cooperative in Tennessee. The Cooperative's core service area
encompasses approximately 759 square miles in rural portions of Cannon, DeKalb,
Rutherford, Smith and Wilson counties in Tennessee. This area is located east of
Nashville along the Interstate 40 corridor, a major east/west connector between
Nashville and Knoxville, Tennessee. According to 1990 U.S. Census data,
Nashville is the 40th largest metropolitan statistical area ("MSA") in the
United States and has a compounded annual growth rate ("CAGR") of 2.0% from 1990
to 1998.
The Cooperative's core operations focus on providing ILEC services to
approximately 19,000 residential and commercial access lines in the Middle
Tennessee markets. The Cooperative's ILEC services are comprised of two primary
components: (i) local telephone service and (ii) long-distance network access
charges. The Cooperative believes its ILEC business encounters little or no
competition from alternative local exchange carriers primarily due to the low
population density of its service area, the topography of its service area,
quality of its service and its low basic service rates to both residential and
commercial customers.
The Cooperative's local telephone service includes basic local, ISDN, DSL,
and T-1 lines. The Cooperative also provides foreign exchange, private lines and
switched data services and installs and maintains Centrex, PBX and key systems
for its business customers. In addition, the Cooperative's
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digital switch platform enables it to offer enhanced services such as voice
mail, call waiting, caller identification, automatic redial, call forwarding,
three-way calling, speed calling and call tracing. In addition to its ILEC
services, the Cooperative offers internet and data services in its core service
area. The Cooperative began offering these services in the mid 1990's as demand
from its residential and commercial customers significantly increased. The
Cooperative provides dial-up internet access at speeds of up to 56Kbps through
basic telephone lines, 128Kbps through ISDN and various higher speeds through
dedicated and DSL lines. The Cooperative provides local telephone services to
residential, commercial and institutional customers, generally for a fixed
monthly charge. For the six months ended June 30, 1999, the Cooperative's local
telephone services revenue comprised 20.6% of total operating revenue.
The Cooperative's network access services relate to long distance or toll
calls that typically involve more than one company to complete the call. Since
toll calls generally are billed to the customer originating the call, a
mechanism is required to compensate each company providing services to complete
the call. The Cooperative bills access charges to the other company involved in
completing the call for the use of the Cooperative's facilities to access the
Cooperative's customer, whether that customer originated or received the call.
The Cooperative generates intrastate access revenue when an intrastate
long-distance call is originated within the same state but within different
local access and transport areas ("LATA"). The Cooperative generates intraLATA
access revenue when long distance calls are made within the same LATA ("short
long distance") that originate in the Cooperative's service area. The
Cooperative generates interstate access revenue when an interstate long distance
call is originated from a LATA in one state to a LATA in another state. For the
six months ended June 30, 1999, the Cooperative's network access services
revenue comprised 52.3% of total operating revenue.
Through its for-profit subsidiary, Advantage Cellular, the Cooperative
offers both analog and digital wireless telephone services to approximately
7,400 wireless subscribers throughout eight Middle Tennessee counties that
combine its core service area with adjacent counties. The Cooperative has
entered into roaming agreements with other wireless carriers to enable its
customers to utilize their wireless telephone services throughout the United
States. For the six months ended June 30, 1999, the Cooperative's wireless
products and services revenue comprised 19.4% of total operating revenue. In
addition, the Cooperative owns Local Multi-point Distribution System ("LMDS")
licenses to operate broadband wireless service in the Cookeville and
Clarksville, Tennessee, and Dalton, Georgia markets.
The Cooperative recently has experienced significant growth. The
Cooperative has grown the number of access lines it serves as an ILEC from
15,720 in 1994 to almost 19,000 in 1999, a CAGR of 4.3%. Total operating revenue
has increased from $13.3 million in 1994 to $18.1 million in 1998, a CAGR of
8.1%. Net income has increased from $2.8 million to $4.4 million, an annual
growth rate of 12.3%.
The Cooperative's principal executive offices are located at 111 High
Street, Alexandria, Tennessee 37012-0247 and its telephone number is (615)
529-2151. In addition, the Cooperative maintains a website at
http://www.dtccom.net where general information about the Cooperative is
available.
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BUSINESS STRATEGY
The Cooperative believes there are significant opportunities to increase
its revenues and improve profitability. The key elements of the Cooperative's
business strategy are:
Maintain Existing Customer Base. The Cooperative's primary business focus
is providing its existing customers with high-quality, low-cost
telecommunications services. The Cooperative believes its local market knowledge
provides a significant competitive advantage towards servicing its customers.
For example, the Cooperative offers a wide range of services, from leasing
old-fashioned, rotary-dial telephones to providing modern DSL lines, in an
attempt to meet each of its customer's specific needs or requests. The
Cooperative's ability to satisfy such customer requests historically has created
a loyal customer base in its ILEC market and has discouraged interest from
larger regional telephone companies and CLECs.
Add New Residential and Business Customers and Access Lines. Although the
Cooperative currently has an effective monopoly on its local wireline service,
the Cooperative believes it can add new residential and commercial customers to
the markets the Cooperative serves. The Cooperative believes the demand for
wireless services and for second lines to customers for internet, facsimile and
data services provides an effective opportunity to add new access lines.
Cross-Sell Enhanced Calling Features. The Cooperative intends to focus on
cross-selling enhanced calling features that are complementary to its local
telephone service. The Cooperative believes there are significant opportunities
to bundle enhanced calling features in its market area. Currently, the average
customer of the Cooperative buys only 1.17 enhanced services from the
Cooperative per access line. In addition, only 7% of customers maintain a voice
mailbox with the Cooperative and only 13% subscribe to the Cooperative's
internet access service. Because of the current low subscription percentages, we
believe that there are significant growth opportunities in this market segment.
Expand Into Selected Markets Through CLEC Services. The Cooperative
believes it is well-positioned to expand into adjacent markets to its ILEC
market by offering facilities-based CLEC services to customers near its existing
or future fiber nodes. Currently, the Cooperative holds the cellular license for
five counties outside of its ILEC area, as well as the "A" and "B" LMDS licenses
for the Cookeville, Tennessee market and the "B" licenses for Clarksville,
Tennessee and Dalton, Georgia markets. The Cooperative believes new customers
could be attracted either by offering wireless service as the customer's primary
telephone or by installing fixed broadband wireless technology when the
technology has matured.
Provision of Cable Television Services. The Cooperative has not been
allowed under Tennessee law to provide cable television service, although it has
made a limited effort to be a reseller of large C-band satellite dishes in prior
years. The Cooperative feels that many rural cable systems use outdated
technology to offer fewer than 30 channels at non-competitive prices. Once it
has converted to a for-profit company, DTC will be able to offer broadband video
services either using cable or, as the technology becomes available, enhanced
DSL lines. The Cooperative also believes that there will be opportunities to
cross-sell telephone service to television customers.
Offer Long-Distance Reselling Services. The Cooperative is considering
becoming a long-distance reseller in the same market areas served by its ILEC
market. The Cooperative believes the ability to offer long-distance reselling
services provides an attractive opportunity to expand its ILEC business because
many of the Cooperative's customers increasingly request a simpler
telecommunications package, including one-rate service. As network access
charges are reduced, long-distance reselling services provide the Cooperative
the ability to become a single-source provider with a more complete, competitive
telecommunications solution for its customers.
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Increase Geographic Presence and Market Penetration Through Strategic
Acquisitions. The Cooperative believes there are a number of companies that
offer telecommunications services either within or near the Cooperative's
service area that are, or may become, interested in potential acquisition or
joint venture opportunities. In evaluating potential acquisitions or joint
ventures, the Cooperative will evaluate opportunities based on a number of
criteria, including the attractiveness of its geographic market, experience in
the telecommunications industry, services and products offered and strength of
management.
SERVICES
The Cooperative offers a full suite of high-quality, low-cost
telecommunications services, including local telephone services, long-distance
network access, dial-up and dedicated internet access and wireless telephone
services over a state-of-the-art wireline network to residential, commercial and
institutional customers. In addition, Advantage Cellular provides wireless
service to its cellular customers.
The Cooperative primarily generates revenue through: (i) the provision of
local telephone service within its ILEC service area; (ii) the provision of
network access to inter-exchange carriers for origination and termination of
interLATA and intraLATA phone calls; (iii) the provision of access to internet
and data services; and (iv) the provision of wireless telephone services through
its subsidiary, Advantage Cellular.
The following chart summarizes the major components of the Cooperative's
total operating revenue for each of the years ended December 31, 1996 through
December 31, 1998 and the six-month periods ended June 30, 1998 and June 30,
1999:
<TABLE>
<CAPTION>
PERCENTAGE OF OPERATING REVENUE
-----------------------------------------------
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1996 1997 1998 1998 1999
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Local telephone services....................... 23.5% 23.5% 23.1% 23.7% 20.6%
Network access services........................ 50.0 49.1 49.0 50.6 52.3
Wireless products and services................. 18.1 18.4 19.1 16.8 19.4
Miscellaneous.................................. 8.4 9.0 8.8 8.9 7.7
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== =====
</TABLE>
STRATEGIC ALLIANCE/JOINT VENTURE
The Cooperative, along with nine other rural Tennessee local exchange
carriers, is a founding investor in Tennessee Independent Telecommunications
Group, LLC ("TITG"), a new fiber optic wholesale transport telecommunications
network. By laying new fiber optic cable where necessary to connect the existing
fiber of the ten founding companies, TITG intends to be a carrier's carrier and
lease fiber capacity in four initial loops between Nashville and Knoxville,
Nashville and Chattanooga, Nashville and Johnson City, and Nashville and
Huntsville, Alabama, including a Florence, Alabama connection with Telaplex (a
Mississippi transport carrier).
COMPETITION
The telecommunications industry is highly competitive and affected by rapid
regulatory and technological change. Regulatory trends have had, and may have in
the future, significant effects on competition in the Cooperative's industry.
(See "DeKalb Telephone Cooperative, Inc.--Regulation.") New technology is
continuing to expand the types of available communications services and
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equipment and the number of competitors offering such services. The Cooperative
faces actual and potential competition in all of its businesses. Many of the
Cooperative's competitors are large companies which have considerably greater
financial, technological, marketing and other resources than the Cooperative.
The Cooperative believes that the factors critical to a customer's choice
of a telecommunications services provider are cost, ease of use, speed of
installation, quality, reputation and, in some cases, geography and network
size. The Cooperative's objective is to be one of the most responsive service
providers in the telecommunications industry, particularly when providing
customized communications services. The Cooperative recognizes that it must grow
to be able to compete effectively in the changing telecommunications industry
and to avail itself of greater economies of scale and increased scope in its
transport and local access requirements and in its back office operations.
Local Service Competition
Until recently, the Cooperative was effectively insulated from competition
in providing local service. Although the Telecommunications Act mandated local
competition, any CLEC that desired to offer local service in the Cooperative's
area nevertheless was required to obtain a Certificate of Public Convenience and
Necessity ("CCN") from the TRA. Tennessee law, however, provides that no CCN
will be issued in any area served by an ILEC with fewer than 100,000 access
lines.
In May 1999, the FCC rendered a decision involving a request by a company
seeking to expand in Tennessee (as a CLEC) into an area already served by an
existing ILEC. The TRA denied the license on the basis that the ILEC was
protected from competition by Tennessee law. The proposed CLEC appealed the
TRA's decision to the FCC, requesting that the FCC preempt Tennessee law.
The FCC found the Tennessee law not competitively neutral as required by
the Telecommunications Act and, on the facts presented, preempted operation of
the Tennessee law insofar as it operated to deny the CCN request. The FCC
ordered the TRA to reevaluate the CCN request in view of the Telecommunications
Act and the FCC's decision. The TRA has filed a request with the FCC for it to
reconsider its order. If the FCC's order is not modified, we will be subject to
the threat of increasing competition in our service area.
Wireless Competition
Although Advantage Cellular, since 1991, has provided wireless telephone
service in the Cooperative's wireline service area and in several neighboring
counties, the Cooperative faces severe competition in the provision of such
service. The other wireless provider in the rural service area is GTE Cellular,
which has considerably greater financial, technological, marketing and other
resources than the Cooperative. Numerous other large wireless companies are able
to serve the Cooperative's customers through various arrangements with GTE
Wireless. The local providers are the Cooperative and GTE Wireless, who hold the
only wireless licenses for our eight county service area. Commercial Mobile
Radio Services (which include personal communication services ("PCS") and
Specialized Mobile Radio ("SMR")) also have grown rapidly in the area due to the
increased clarity, security and bandwidth of the new technology. Sprint, Nextel
and other companies hold the necessary PCS or SMR licenses to provide this
service in the Cooperative's area.
Internet Competition
The market for data communications services, including internet access
services, is extremely competitive. There are no substantial barriers to entry,
and the Cooperative expects that competition will intensify in the future. The
Cooperative believes that its ability to compete successfully will
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depend on a number of factors, including: (i) market presence; (ii) the ability
to execute a rapid expansion strategy; (iii) the capacity, reliability and
security of its network infrastructure; (iv) ease of access to and navigation of
the internet; (v) the pricing policies of its competitors and suppliers; (vi)
the timing of the introduction of new products and services by the Cooperative
and its competitors; (vii) the Cooperative's ability to support industry
standards; and (viii) industry and general economic trends. The Cooperative
believes that its success in the data communications services market will depend
heavily upon its ability to provide high-quality internet connectivity and
value-added internet services at competitive prices.
As a result of increased competition in the internet access services
industry, the Cooperative expects that it will continue to encounter significant
pricing pressure, which in turn could result in significant reductions in the
average selling price of its internet services. There can be no assurance that
the Cooperative will be able to offset the effects of any such price reductions
with an increase in the number of its customers, higher revenue from enhanced
services, cost reductions or otherwise. In addition, the Cooperative believes
that the data communications business, and in particular the internet access and
on-line services businesses, are likely to encounter consolidation in the near
future, which could result in increased price and other competition in the
industry. Increased price or other competition could erode the Cooperative's
market share and could have a material adverse effect on its business, financial
condition and results of operations. There can be no assurance that the
Cooperative will have the financial resources, technical expertise, marketing
and support capabilities or the expansion and acquisition possibilities to
continue to compete successfully in this or any market.
REGULATION
Overview
We operate in a highly regulated industry and our services are and will be
subject to varying degrees of federal, state and local regulation. The FCC
exercises jurisdiction over all facilities of, and services offered by,
telecommunications common carriers to the extent that they involve the
provision, origination or termination of interstate or international
communications. The TRA has had certain limited jurisdiction over the
Cooperative's telecommunications operations in Tennessee. Following the merger,
the TRA will have more jurisdiction over the activities of the merged companies.
The regulation of the telecommunications industry is changing rapidly and
the regulatory environment varies substantially from state to state. There can
be no assurance that recent or future regulatory changes will not have a
material adverse impact on the merged companies. Recent developments include,
without limitation (i) enactment of the Telecommunications Act which modifies
the AT&T Divestiture Decree (which required the divestiture by AT&T Corp. of its
22 Bell operating companies and divided the country into 201 LATAs) restrictions
on the provision of long distance services by Regional Bell Operating Companies
("Regional Bells") between LATAs as defined in the AT&T Divestiture Decree; (ii)
FCC and state public utilities commissions actions changing access rates charged
by ILECs and making other related changes to universal service, access and
interconnection policies, certain of which could have adverse consequences for
the merged companies' long distance and local service businesses; (iii) related
FCC and state regulatory proceedings considering additional deregulation of ILEC
access pricing; (iv) pending FCC "billed party preference" rules that could
affect the Cooperative's provision of operator services; (v) mandatory
deployment of advanced telecommunications services; and (vi) various legislative
and regulatory proceedings that would result in new local exchange competition.
As the following discussion illustrates, the regulation of the
telecommunications industries at the federal, state and local levels is subject
to the political process and has been in constant flux over the
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past decade. Material changes in the law and regulatory requirements must be
anticipated and there can be no assurance that the merged companies' business
will not be affected adversely by future legislation, new regulation or
deregulation.
Telecommunications Act of 1996
Among other things, this legislation: (i) permitted Regional Bells to
provide domestic and international long distance services in their own regions
upon a finding that the petitioning Regional Bell has satisfied certain criteria
for opening up its local exchange network to competition and that its provision
of long distance services would further the public interest; (ii) removed
existing barriers to entry into local service markets; (iii) significantly
changed the manner in which carrier-to-carrier interconnection arrangements are
regulated at the federal and state level; and (iv) established procedures to
revise universal service standards.
The Telecommunications Act has particular relevance to us in one area. The
Telecommunications Act creates a duty on our part to interconnect our networks
with those of our competitors and, in particular, creates a duty on the part of
our local exchange operations to negotiate in good faith the terms and
conditions of such interconnection. On August 8, 1996, the FCC released its FCC
Interconnection Order. In the FCC Interconnection Order, the FCC adopted a
national framework for interconnection but left to the individual states the
task of implementing the FCC's rules. Because implementation of the rules will
be at the state level, it is uncertain how these new requirements will affect
the merged companies.
On October 21, 1999, the FCC adopted new rules regarding the USF. The new
rules first set forth the FCC's completed cost model that will be used to
estimate the forward-looking cost of providing service. Second, the FCC adopted
a methodology that uses costs to calculate the appropriate level of support for
non-rural carriers serving high cost areas. The high-cost support mechanism for
rural carriers is not scheduled to be revised until January 1, 2001.
We cannot predict the effect that this legislation and the FCC's
implementing regulations, many of which are still forthcoming, will have on the
merged companies or the industry as a whole. However, we believe that the merged
companies will be better positioned to pursue business opportunities in the
rapidly changing telecommunications market.
Local Telephone Service Regulation
Historically, because it was a cooperative, the Cooperative's local
telephone operations have not been subject to most state regulation. When the
Cooperative converts to a private corporation, and if the TRA grants it a CCN
its operations will become subject to regulation and oversight of the TRA. The
TRA will then have primary jurisdiction over various matters including rates for
basic telephone service, intrastate toll and access rates, quality of service,
issuance of securities, depreciation rates, disposition of public utility
property and issuance of debt and accounting systems used by the merged
companies. The FCC historically has had primary jurisdiction over the interstate
toll and access rates of the Cooperative and issues related to interstate
telephone service.
The Telecommunications Act has substantially modified both the states' and
the FCC's jurisdictions in the regulation of local exchange telephone companies.
The Telecommunications Act prohibits any state legislative or regulatory
restrictions or barriers to entry regarding the provision of local telephone
service. The Telecommunications Act required the FCC to develop regulations to
implement various sections of the Telecommunications Act including: (i) the
obligations imposed on incumbent LECs to interconnect with the networks of other
telecommunications carriers (including competing telecommunications carriers);
(ii) unbundling of services into network elements;
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(iii) repricing of their services at wholesale rates for the purpose of
permitting resale of those services; (iv) allowing other telecommunications
carriers physically to collocate their equipment on the premises of the
incumbent LEC; and (v) requiring telecommunications carriers to compensate each
other based on their own costs for the transport and termination of calls on the
other carriers' networks.
The Telecommunications Act requires that the Cooperative offer telephone
number portability to the customers of any CLEC providing service in our area.
We must provide this service within six months after being requested by a CLEC
to do so. An estimated $200,000 of software will be required to provide this
service, which we believe will be installed and operational within an acceptable
period of time after the first request for portability.
In addition, pursuant to the Telecommunications Act, the FCC instituted and
referred to a federal-state joint board a proceeding to recommend changes to the
current method of subsidizing universal service to assure the availability of
quality telephone services at just, reasonable and affordable rates. The
federal-state joint board released an initial "recommended decision" on November
8, 1996, and on May 8, 1997, the FCC released a Report and Order substantially
adopting the Joint Board's recommendations. On October 21, 1999, the FCC adopted
new rules regarding the USF. The new rules first set forth the FCC's completed
cost model that will be used to estimate the forward-looking cost of providing
service. Second, the FCC adopted a methodology that uses costs to calculate the
appropriate level of support for non-rural carriers serving high cost areas. The
high-cost support mechanism for rural carriers is not scheduled to be revised
until January 1, 2001. We cannot predict the terms or the effect that the FCC's
actions will have on the merged companies or on the industry as a whole.
However, we believe that we are taking proper steps to reduce our exposure to
potential declines in universal service support.
The Telecommunications Act requires that all telecommunications providers
(including cable operators that provide telecommunications services) must
contribute equitably to a USF, although the FCC may exempt an interstate carrier
or class of carriers if their contribution would be minimal under the USF
formula. The Telecommunications Act allows states to determine which intrastate
telecommunications providers contribute to the USF. The purpose of the USF is to
provide consumers in all regions, including low-income consumers and those
consumers in rural, insular and high-cost areas, access to telecommunications
and information services that are reasonably comparable to those services in
urban areas at reasonably comparable rates.
After the merger, DTC will be subject to regulation of its local service by
the TRA. Such regulation covers prices, services, competition and other issues.
Traditionally, wireline rates were set in Tennessee at levels that were
anticipated to generate revenues sufficient to cover its allowed expenses and to
provide an opportunity to earn a fair rate of return on its capital investment.
Such a regulatory structure, generally known as rate of return regulation, was
acceptable in a less competitive era. However, the regulatory processes have
changed in response to the increasingly competitive telecommunications
environment.
Under the first generation of alternative regulation, generally known as
incentive regulation, economic incentives were provided to lower costs and
increase productivity through the potential availability of "shared" earnings
over a benchmark rate of return. Generally, when levels above targeted returns
were reached, earnings were "shared" by providing refunds or price reductions to
customers. Under the next generation of alternative regulation, generally known
as price regulation, the state authorities established maximum prices that could
be charged for certain telecommunications services. While such plans limit the
amount of increases in prices for specified services, they enhance a company's
ability to adjust prices and service options to respond more effectively to
changing market conditions and competition and provide an opportunity to benefit
more fully from
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productivity enhancements. The majority of these plans, during the early years,
have price cap provisions on basic local exchange services with provisions for
inflation-based price increases in later years. These plans are now operational
for certain carriers within Tennessee although appeals relating to these plans
are pending.
Upon the effectiveness of the merger, we plan to apply to the TRA to be
subject to incentive or rate of return regulation, although in the future we may
apply to be regulated based upon a price cap plan. No assurance can be given at
this time as to the type of plan that might be approved by the TRA or what the
terms will be.
Network Access Regulation
The FCC regulates rates and other aspects of interstate network access
services through its price cap and access charge rules. State regulatory
commissions have jurisdiction over the provision of network access to the long
distance carriers to complete intrastate telecommunications. Historically,
network access charges paid by long distance carriers have been set at levels
that subsidize the cost of providing local residential service. The 1996 Act
requires that the FCC identify the local service subsidy implicitly provided by
such network access charges; provide for the removal of such subsidy from
network access rates in order that network access charges reflect underlying
costs; arrange for a fund (the Universal Service Fund) to ensure the
continuation of universal service to high-cost, low-income service areas; and
develop the arrangements for payments into that fund by all carriers.
The FCC's 1997 network access charge reform order, which was upheld by the
United States Court of Appeals for the Eighth Circuit, resulted in several
changes to the existing interstate network access rate structure designed to
move network access charges, over time, to more economically efficient levels
and to create more efficient rate structures. Non-traffic-sensitive costs, that
were previously recovered on a per-minute-of-use basis, were changed to be
recovered on a flat-rate, per-line basis. As part of this plan, subscriber line
charges (SLCs) were increased and a new presubscribed long distance carrier
charge (PICC) was established. As SLC and PICC levels are increased over time,
usage charges are reduced. At January 1, 1999, SLCs for primary residence and
single-line business access lines remained unchanged at $3.50 per line, per
month.
Beginning in January 1999, SLCs for non-primary (or "additional") residence
access lines increased from $5.00 to $6.07 per line, per month, and SLCs for
multi-line business customers increased from $8.17 to $8.25 per line, per month.
PICCs were established on January 1, 1998 and are charged to long distance
carriers for recovery of non-traffic-sensitive costs not recovered through SLCs.
These charges were established for primary residence and single-line business
access lines, non-primary residence access lines and multi-line business access
lines and were initially set at $.53, $1.50 and $2.75, respectively, per line,
per month, beginning January 1998. We believe that the net effect of these
changes has been substantially revenue-neutral.
The Universal Service Order, which has been substantially upheld by the
U.S. Court of Appeals for the Fifth Circuit, established new funding mechanisms
for high-cost, low-income service areas. We began contributing to the new funds
on January 1, 1998 and are allowed recovery of our contributions through
increased interstate network access charges. Major changes to the support
mechanism to subsidize the provision of services to high-cost areas are under
consideration by regulatory bodies. The new support mechanism, when implemented,
is expected to be based on forward-looking economic costs. The order also
established significant discounts to be provided to eligible schools and
libraries for all telecommunications services, internal connections and Internet
access. It also established support for rural health care providers so that they
may pay rates comparable to those that urban health care providers pay for
similar services. Industry-wide annual costs of the program, estimated at
approximately $1.9 billion, through June 1999, are to be funded
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out of the USF. Local and long distance carriers' contributions to the education
and health care funds would be assessed by the fund administrator on the basis
of their interstate and intrastate end-user revenues.
As a result of litigation challenging a number of the FCC's rulings under
the 1996 Act, the U.S. Supreme Court has ruled that the FCC has considerable
authority to establish many pricing, interconnection and other policies that
have been considered within the exclusive jurisdiction of the state public
service commissions. We expect the FCC to accelerate the growth of local service
competition by aggressively utilizing such power to require interconnection with
competing carriers and the sale of network elements to competitors who wish to
provide communications services to customers in our region.
Wireless Services
As discussed below, the FCC regulates, among other things, the licensing,
construction, operation, interconnection arrangements, sale and acquisition of
wireless telephone systems. Competition between providers of wireless
communications service in each market is conducted principally on the basis of
price, services and enhancements offered, the technical quality and coverage of
the system, and the quality and responsiveness of customer service. As discussed
below, competition has intensified in recent years in our markets and is
expected to continue to intensify.
Wireless Licensing Process.
During the 1980's and early 1990's, the FCC awarded two 10-year licenses to
provide wireless service in each Metropolitan Statistical Area ("MSA") and Rural
Service Area ("RSA") market. Initially, one license was reserved for companies
offering local telephone service in the market (the wireline carrier) and one
license was available for firms unaffiliated with the local telephone company
(the non-wireline carrier).
Since mid-1986, the FCC has permitted telephone companies or their
affiliates to acquire control of non-wireline licenses in markets in which they
do not hold interests in the wireline license. The FCC has issued a decision
that grants a renewal expectancy during the license renewal period to incumbent
licensees that substantially comply with the terms and conditions of their
wireless authorizations and the FCC's regulations. The license for the operated
RSA initially granted to Advantage Cellular expires in October 2000. We expect
that license to be renewed for an additional ten years.
The completion of an acquisition involving the transfer of control or
assignment of a wireless system as contemplated by the merger requires prior FCC
approval. The acquisition of a minority interest generally does not require FCC
approval. Whenever FCC approval is required, any interested party may file a
petition to dismiss or deny the application for approval of the proposed
transfer or assignment. In addition to regulation by the FCC, wireless systems
are subject to certain Federal Aviation Administration tower height regulations
concerning the siting and construction of wireless transmitter towers and
antennas.
Wireless operators are also subject to state and local regulation in some
instances. Although the FCC has pre-empted the states from exercising
jurisdiction in the areas of entry and rate regulation. States may regulate
quality of service and areas not related to entry into the market or rates
charged by the operator. The siting and construction of the wireless facilities
may also be subject to state or local zoning, land use and other local
regulations. State approval also is required for interconnection arrangements
made between the wireless operator and landline networks.
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Developments Affecting Wireless Competition.
Competition in the wireless communications industry has increased due to
continued and rapid technological advances in the communications field, coupled
with legislative and regulatory changes. Several recent FCC initiatives over the
past several years have resulted in the allocation of additional radio spectrum
or the issuance of licenses for emerging mobile communications technologies that
are competitive with our wireless operations, including PCS.
Although there is no universally recognized definition of PCS, the term is
generally used to refer to wireless services to be provided by licensees
operating in the 1850 MHz to 1990 MHz radio frequency band using microcells and
high-capacity digital technology. From 1996 to 1997 the FCC auctioned six PCS
licenses per market. Two 30 MHz frequency blocks were awarded for each of the 51
Rand McNally Major Trading Areas ("MTAs"), while one 30 MHz and three 10 MHz
frequency blocks were awarded for each of the 493 Rand McNally Basic Trading
Areas ("BTAs"). PCS technology permits PCS operators to offer wireless voice,
data, image and multimedia services.
The largest PCS providers commenced initial operations in late 1996 and
since then have aggressively expanded their operations. These providers have
initially focused on larger markets, and have generally marketed PCS as being a
competitive service to cellular. Many of these companies have aggressively
competed for customers on the basis of price, which has placed downward pressure
on cellular prices. There is at least one PCS competitor in our service area. In
addition to PCS, users and potential users of cellular systems may find their
communication needs satisfied by other current and developing technologies.
Several years ago the FCC authorized the licensees of certain specialized mobile
radio service ("SMR") systems (which historically have generally been used by
taxicabs and tow truck operators) to configure their systems into digital
networks that operate in a manner similar to cellular systems. Such systems are
commonly referred to as enhanced specialized mobile radio service ("ESMR")
systems.
We believe that ESMR systems are operating in a few cellular markets. One
well-established ESMR provider has constructed a nationwide digital mobile
communications system to compete with cellular systems. Other similar
communication services that have the technical capability to handle wireless
telephone calls may provide competition in certain markets, although these
services currently lack the subscriber capacity of cellular systems. Paging or
beeper services that feature text message and data display as well as tones may
be adequate for potential subscribers who do not need to converse directly with
the caller. Mobile satellite systems, in which transmissions are between mobile
units and satellites, may ultimately be successful in obtaining market share
from cellular systems that communicate directly to land-based stations.
In recent years, several large cellular providers have merged with other
companies or formed joint ventures. Several of these joint ventures pooled their
resources to develop extensive PCS systems. Many of our current or potential
competitors have substantially greater financial and marketing resources than
we. Although it is uncertain how PCS, SMR, ESMR, mobile satellites and other
emerging technologies will ultimately affect us, we anticipate that it will
continue to face increased competition in its operating markets. However,
management believes that providing digital services and applying new
microcellular technologies will permit its cellular systems to provide services
comparable with the emerging technologies described above, although no
assurances can be given that this will happen or that future technological
advances or legislative or regulatory changes will not create additional sources
of competition.
We anticipate that regulatory changes and competitive pressures may result
in future revenue reductions in our telephone operations. However, we anticipate
that such reductions may be
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minimized by increases in revenues attributable to the continued demand for
enhanced services and new product offerings.
Regulation of Internet Access Services
In the United States, internet access is not currently subject to direct
regulation other than pursuant to laws applicable to businesses generally.
Adverse changes in the legal or regulatory environment relating to the
interactive online services and Internet industry in the United States could
have a material adverse effect on our business, financial condition and
operating results. A number of legislative and regulatory proposals from various
international bodies and foreign and domestic governments in the areas of
telecommunication regulation, access charges, encryption standards, content
regulation, consumer protection, intellectual property, privacy, electronic
commerce, and taxation, among others, are now under consideration. We are unable
at this time to predict which, if any, of such proposals may be adopted and, if
adopted, whether such proposals would have an adverse effect on our business,
financial condition and operating results.
Summary Only
The foregoing is only a summary of some of the present and proposed
federal, state and local regulations and legislation relating to the
Cooperative's businesses. Other existing federal regulations, copyright
licensing and, in many jurisdictions, state and local regulatory requirements,
currently are the subject of a variety of judicial proceedings, legislative
hearings and administrative and legislative proposals which could change, in
varying degrees, the manner in which the Cooperative operates. Neither the
outcome of these proceedings nor their impact upon the merged companies can be
predicted at this time.
EMPLOYEES
As of June 30, 1999, the Cooperative employed approximately 100 employees,
none of whom were subject to any collective bargaining agreements.
ENVIRONMENTAL AND OTHER MATTERS
Except for site-specific issues, environmental issues tend to impact
members of the telecommunications industry in consistent ways. The United States
Environmental Protection Agency ("EPA") and other agencies regulate a number of
chemicals and substances that may be present in facilities used in the provision
of telecommunications services. These include preservatives which may be present
in certain wood poles, asbestos which may be present in certain underground duct
systems and lead which may be present in certain cable sheathing. Components of
the Cooperative's network may include one or more of these chemicals or
substances. We believe that in our present uses, none of our facilities poses
any significant environmental or health risk that derives from EPA regulated
substances. If EPA regulation of any such substance is increased, or if any
facilities are disturbed or modified in such a way as to require removal of the
substance(s), special handling, storage and disposal may be required for any
such facilities removed from use. At this time, we are not subject to any
environmental litigation.
PROPERTIES
The net book value of the Cooperative's property, plant and equipment in
service was $29.5 million at December 31, 1998 and $ 29.0 million at June 30,
1999.
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The Cooperative owns four principal facilities:
- its principal executive office (approximately 10,000 square feet) on
approximately four acres of land in Alexandria, Tennessee;
- its maintenance and operations facility (approximately 20,000 square
feet) on approximately five acres of land in Alexandria, Tennessee;
- a business office and switching building (approximately 7,500 square
feet) on approximately 1 1/2 acres of land in Smithville, Tennessee; and
- a business office and remote switch (approximately 4,000 square feet) on
approximately 1 1/2 acres of land in Woodbury, Tennessee.
The remaining properties of the Cooperative do not lend themselves to
simple description by character and location. The tangible assets of the
Cooperative include a substantial investment in its telecommunications property,
plant and equipment. The Cooperative's telecommunications property, plant and
equipment consists primarily of:
- numerous switching and transmission equipment and related facilities;
- aerial and underground cable;
- poles and cellular towers;
- conduit and wiring;
- public pay telephones;
- telephone equipment (including PBXs) leased by the Cooperative to
customers;
- office equipment and furniture; and
- vehicles (approximately 50).
The Cooperative believes that it follows standard practices prevailing in
the telecommunications industry in the construction and maintenance of plant and
facilities, and that all properties presently being used for operations of the
Cooperative are suitable, well maintained and adequately equipped for the
purposes for which they are used. Substantially all of the Cooperative's
properties are subject to mortgage liens held by the RUS.
LEGAL PROCEEDINGS
There are no material pending legal proceedings against the Cooperative.
FINANCIAL STATEMENTS
The audited consolidated financial statements of DeKalb Telephone
Cooperative, Inc. and subsidiary as of December 31, 1997 and 1998 and for the
years ended December 31, 1996, 1997 and 1998, together with the notes thereto
and the report of Arthur Andersen, LLP, dated September 1, 1999 (except with
respect to the matter discussed in Note 11 as to which the date is October 18,
1999), are included at pages F-6 through F-20 of this information
statement/prospectus. The unaudited consolidated financial statements of DeKalb
Telephone Cooperative, Inc. as of June 30, 1998 and 1999 and for the six months
ended June 30, 1998 and 1999, together with the notes thereto, are included at
pages F-21 through F-25 of this information statement/prospectus.
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INFORMATION REGARDING DTC
BUSINESS
DTC is a Tennessee for-profit business corporation incorporated on October
4, 1999 and currently is a wholly owned subsidiary of the Cooperative. Before
the merger, DTC will have had no operating history. If the merger is
consummated, the Cooperative would be merged with and into DTC, and DTC would be
the surviving corporation; the business of DTC initially would be identical to
the business of the Cooperative. For a description of the business of the
Cooperative, see "DeKalb Telephone Cooperative, Inc. -- Business."
PROPERTIES AND LEGAL PROCEEDINGS
If the merger is approved and consummated, the properties and legal
proceedings of DTC would be identical to those of the Cooperative. (See "DeKalb
Telephone Cooperative, Inc.-Properties" and " -- Legal Proceedings.")
FINANCIAL STATEMENTS
DTC has no operating assets or liabilities and no income. If the merger is
approved and consummated, DTC would assume all of the operations, assets and
liabilities of the Cooperative and DTC's financial position would be
substantially identical to that of the Cooperative immediately prior to the
merger. For this reason, historical consolidated financial statements of DTC
have not been included in this information statement/prospectus. See pages F-6
through F-25 of this information statement/prospectus for historical
consolidated financial statements of the Cooperative and pages F-2 through F-5
for pro forma financial statements that give effect to the merger. DTC recently
was formed as a wholly owned subsidiary of the Cooperative for purposes of
effecting the merger. As such, DTC has no assets or liabilities and has had no
operating history. After the merger, DTC will continue to carry on the
Cooperative's businesses and succeed to all of the Cooperative's assets and
liabilities. The directors, officers, employees, business and properties of DTC
will be substantially identical after the merger as those of the Cooperative
immediately prior to the merger.
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MANAGEMENT INFORMATION
The following table shows the number of shares of DTC stock that each of
the Cooperative's directors and executive officers would receive based upon the
capital credits of the Cooperative as of December 31, 1998 and the receipt of
certain awards of DTC stock that are described below. No director or executive
officer would receive more than 1% of the DTC stock to be issued in the merger.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
NUMBER OF SHARES OF DTC
STOCK
THAT WOULD BE RECEIVED BASED
NAME OF BENEFICIAL OWNER UPON 12/31/98 CREDIT(2)
- ------------------------ ----------------------------
<S> <C>
H. Wayne Gassaway........................................... 1,170
Denise J. Brown............................................. 105
Phyllis McKinney............................................ 66
James Paul Cantrell......................................... 674
Billy Chumbley.............................................. 590
James C. Hale............................................... 771
Danny Lattimore............................................. 743
Royce N. Martin............................................. 634
David L. Parker............................................. 710
Robert B. Parton............................................ 605
Roy N. Pugh................................................. 622
Eddie Thomas................................................ 589
Charles Dwight Vinson....................................... 568
All directors & executive officers as a group (13
persons)(1)............................................... 6,847
</TABLE>
- ------------------------
(1) All directors and officers, as a group, own less than 1% of the
Cooperative's capital credits and, following the merger, will own less than
1% of DTC's stock.
(2) Includes grants of DTC stock to directors and officers that will become
effective upon completion of the merger.
DIRECTORS AND EXECUTIVE OFFICERS
The Cooperative's current Board and DTC's Board of Directors following the
merger would be divided into three classes, which will be as nearly equal in
number as possible. Each class of directors serves a successive three-year term
of office.
Biographical information concerning the persons who now are or would be
directors or executive officers of DTC after the consummation of the merger is
presented below. Except as otherwise indicated, all of the named individuals
have had the same principal employment for over five years. Executive officers
are and would be appointed annually and serve at the pleasure of the Board of
Directors of the Cooperative or DTC (as applicable).
Directors with Terms Expiring in 2002
Billy Chumbley Age: 61 Director since 1990
Mr. Chumbley, since retiring from General Electric in 1993, has been self
employed in the farming business.
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Robert B. Parton Age: 47 Director since 1987
Mr. Parton is the Director of Motor Vehicle Management (overseeing
procurement, maintenance and disposal of vehicles and motorized vehicles)
for the Department of General Services of the State of Tennessee.
Charles D. Vinson Age: 48 Director since 1987
Mr. Vinson is the Chief of Food Production and Service of the Alvin C. York
V.A. Medical Center in Murfreesboro, Tennessee. He also, since 1997, has
been an affiliate broker and auctioneer with Durham Realty and Auction Co.
Directors with Terms Expiring in 2001
Royce Martin Age: 57 Director since 1989
Mr. Martin is retired.
David L. Parker Age: 47 Director since 1976
Mr. Parker is the owner-operator of DKM Farms in Woodland, Tennessee.
Roy N. Pugh Age: 48 Director since 1983
Mr. Pugh is a vice president of the Liberty State Bank in Liberty,
Tennessee.
Eddie Thomas Age: 46 Director since 1989
Mr. Thomas is a lineman for the Upper Cumberland Electric Cooperative
(electricity supplier).
Directors with Terms Expiring in 2000
Paul Cantrell Age: 61 Director since 1994
Mr. Cantrell is a letter carrier for the United States Postal Service.
James C. Hale Age: 47 Director since 1988
Mr. Hale, since January 1, 1996, has served as Vice President at Large and
Regional Manager (Southeast Region) of the Laborers International Union of
North America. Prior to 1996, he was the Business Manager of the Laborers
District Council of Tennessee.
Danny Lattimore Age: 54 Director since 1991
Mr. Lattimore is retired.
Executive Officers
Mr. Gassaway has been the general manager of the Cooperative since 1989.
Ms. Brown has been the controller of the Cooperative since 1991.
Ms. McKinney has been the office manager of the Cooperative since 1997.
Prior to 1997, Ms. McKinney was the administrative services supervisor of the
Cooperative.
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Board Committees
DTC has standing Audit, Compensation and Nominating Committees.
The Audit Committee, composed of Messrs. Parton, Chumbley and Vinson, will
provide assistance to the Board in fulfilling its responsibilities relating to
oversight of DTC's financial reporting and internal controls. Some of the Audit
Committee's specific duties include:
- Reviewing DTC's annual and quarterly reports and periodic filings with
the SEC;
- Determining the accounting principles and practices to be followed in the
preparation of DTC's financial statements;
- Determining the scope of and procedures to be used in DTC's annual audit;
- Analyzing the strength of DTC's internal accounting and financial
controls to ensure fair reporting in accordance with generally accepted
accounting principles of DTC's publicly released financial statements;
- Reviewing with management and the external and internal auditors DTC's
major financial risk exposures and assessing the necessary steps to
minimize those risks.
The Compensation Committee, composed of Messrs. Hale, Parker and Cantrell,
will assist the Board in establishing policies with respect to compensation and
all pension and retirement plans for which DTC may have responsibility. The
Compensation Committee will review and make recommendations to the Board
concerning the following:
- Annual salary, bonus and other benefits of the directors, senior officers
and employees and the overall compensation philosophy;
- Executive contracts and management perquisites;
- Stock based plans and other incentive plans; and
- Policy regarding all pension and retirement plans for which DTC may have
responsibility. The Committee also directs the administration of those
plans and reviews the investment performance of funds held in the plans.
The Nominating Committee, composed of Messrs. Martin, Thomas and Lattimore,
will assist the Board in determining matters relating to the composition of the
Board and in developing effective corporate governance policies. Some of the
Nominating Committee's specific duties include:
- Recommending the size of the Board;
- Recommending committee members and candidates for the Board;
- Assessing the performance of the Chief Executive Officer and senior
officers in consultation with the Compensation Committee; and
- Monitoring and recommending changes to DTC's corporate governance
policies.
DTC has adopted a policy that the Chairman of the Board and Chief Executive
Officer should be different persons. Accordingly, the DTC Board has elected Mr.
Pugh as the Chairman of the Board. Mr. Pugh's receives no additional
compensation for his service as Chairman.
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COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS OF THE COOPERATIVE
The following table shows certain information concerning the compensation
paid to H. Wayne Gassaway, General Manager (equivalent to Chief Executive
Officer) of the Cooperative, for services rendered during the years ended
December 31, 1998, 1997 and 1996. No other officer of the Cooperative earned
cash compensation in excess of $100,000 during 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)
- --------------------------- ---- --------- --------
<S> <C> <C> <C>
H. Wayne Gassaway.......................................... 1998 91,135 7,379
General Manager 1997 81,885 4,731
1996 78,827 3,038
</TABLE>
During 1998, the Cooperative compensated its directors at the rate of $50
per board meeting attended. This rate of pay has been in place since 1951. In
addition, board members are provided medical coverage under the Cooperative's
group insurance plan generally applicable to all Cooperative employees.
INTERESTS OF CERTAIN PERSONS
As of the date of this information statement/prospectus, directors and
executive officers of the Cooperative are entitled to a total of 13 votes on
matters presented for member action, or less than 1% of the total member votes.
(See "Management Information.")
As of the date of this information statement/prospectus, directors and
executive officers of DTC would hold less than 1% of DTC stock to be issued in
the merger, assuming that the merger was consummated as of such date. (See
"Management Information.")
After the merger, DTC intends to pay its directors a quarterly retainer of
$2,000. Members of committees would receive a fee of $100 (plus travel expenses)
for each committee meeting attended. All board members also will be eligible for
medical coverage under DTC's group medical insurance that will be applicable to
all DTC employees. In addition, each person who is a DTC director upon the
effectiveness of the merger will receive a grant of 500 shares of DTC Class A
voting common stock and an option to buy 1,000 shares of DTC Class A voting
common stock at an exercise price of $10.00 per share. Afterwards, at each
annual meeting of the shareholders of DTC, each person who continues to serve as
a member of the Board following that annual meeting will receive an option to
buy 1,000 shares of DTC Class A voting common stock at the then current fair
market value of the shares.
The Board of Directors has provided that upon the effectiveness of the
merger, Mr. Gassaway will receive a grant of 1,000 shares of DTC Class A voting
common stock and an option to buy 10,000 shares of DTC Class A voting common
stock at an exercise price of $10.00 per share.
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<PAGE> 62
DESCRIPTION OF DTC CAPITAL STOCK
DTC's authorized capital stock consists of 200,000,000 shares of DTC common
stock and 20,000,000 shares of preferred stock. Of the common stock, 199,000,000
shares are designated as Class A voting common stock ("Class A Shares") and
1,000,000 shares are designated as Class B non-voting common stock ("Class B
Shares"). Class A Shares will be issued to persons or entities that, as of
December 31, 1999, are active members of the Cooperative. Class B Shares will be
issued to those persons or entities who, as of December 31, 1999, are inactive
members of the Cooperative as a result of their ceasing to have telephone
service with the Cooperative. Also, 250,000 Class A Shares are reserved for
issuance pursuant to certain DTC stock compensation plans.
DTC has no plans at this time to issue any of the 20,000,000 authorized
shares of preferred stock.
As of the date of this information statement/prospectus, there are 100
outstanding Class A Shares, all of which are held by the Cooperative, and no
outstanding Class B Shares or shares of DTC preferred stock.
DTC expects that no more than 2,000,000 Class A Shares and 500,000 Class B
Shares would be issued in the merger.
DTC COMMON STOCK
DTC Class A Voting Common Stock
The holders of Class A Shares are entitled to one vote per share. The
Charter of DTC does not provide for cumulative voting in the election of
directors. The DTC Board may declare dividends on the Class A Shares in its
discretion, if funds are legally available for that purpose. Certain covenants
in existing loan agreements between the Cooperative and the RUS to which DTC
would be subject following the merger, as well as federal statutes and
regulations which apply to RUS borrowers, would limit the circumstances under
which DTC would be permitted to pay dividends or make other distributions to
Class A shareholders. Under these agreements, the RUS must authorize
distributions other than in shares of stock unless certain financial ratio
requirements are met. On liquidation, holders of Class A Shares are entitled to
receive pro rata any remaining assets of DTC after DTC satisfies or provides for
the satisfaction of all of its liabilities and the obligations on its preferred
stock, if any. Holders of Class A shares do not have preemptive rights to
subscribe for or purchase any shares of capital stock or other securities of
DTC. All Class A Shares issued in the merger would be fully paid and
nonassessable.
DTC Class B Non-Voting Common Stock
With the exception of the right to vote, holders of Class B Shares have the
same rights and preferences as the holders of Class A Shares. The holders of
Class B Shares have no voting rights as to any matter affecting DTC.
DTC PREFERRED STOCK
DTC's Charter authorizes the Board to issue, without further shareholder
approval, up to 20,000,000 shares of DTC preferred stock from time to time in
one or more series with such designations, powers, preferences and relative
voting, distribution, dividend, liquidation, transfer, redemption, merger and
other rights, preferences, qualifications, limitations or restrictions as may be
provided for the issue of such series by resolution and amendment to DTC's
Charter adopted by DTC's Board. This generally is referred to as "blank check"
preferred stock. The DTC preferred
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stock could have priority over Class A Shares or Class B Shares as to dividends
and as to the distribution of DTC's assets upon any liquidation, dissolution or
winding up of DTC.
STATUTORY PROVISIONS AFFECTING CONTROL OF DTC
The following discussion concerns the provisions of the TBCA which would
affect control of DTC if the merger is approved and consummated.
The matters discussed below may have an anti-takeover impact and may make
tender offers, proxy contests and certain mergers more difficult to consummate.
Control Share Acquisition Act
Under Sections 48-103-301 through 48-103-312 of the TBCA (the "Control
Share Acquisition Act"), the "control shares" of stock acquired by an acquiring
person in a "control share acquisition" that exceed certain thresholds of voting
power do not have voting rights unless the holders of the other voting shares
vote to grant voting rights to the acquiring person's shares. The Control Share
Acquisition Act also contains other provisions applicable to a control share
acquisition. A corporation is not subject to the Control Share Acquisition Act
unless it affirmatively elects in its charter or bylaws to be so subject.
Neither the Charter nor the Bylaws of DTC elect to be subject to the Control
Share Acquisition Act, and therefore such Act is not be applicable to DTC unless
DTC's Charter or Bylaws are subsequently amended to "opt in" to the Control
Share Acquisition Act as provided in the TBCA.
Business Combination Act
Under Sections 48-103-201 through 48-103-209 of the TBCA (the "Business
Combination Act"), a "resident domestic corporation" (such as DTC) may not
engage in a "business combination" with an "interested shareholder" for a
five-year period following such interested shareholder's acquisition date and
may engage in a "business combination" with an "interested shareholder" after
the expiration of such five-year period only if certain conditions specified in
the statute are met. Generally, an "interested shareholder" is one that (i)
directly or indirectly beneficially owns 10% or more of the outstanding voting
shares of the corporation or (ii) is an affiliate or associate of the
corporation and at any time within the last five years prior to the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
corporation's voting stock. A "business combination" means any of the following:
- any merger or consolidation of the resident domestic corporation or any
subsidiary with (A) the interested shareholder or any affiliate or
associate of the interested shareholder or (B) any other corporation
(whether or not itself an interested shareholder) that is, or after the
merger or consolidation would be, an affiliate or associate of the
interested shareholder;
- any exchange of shares or securities convertible into shares of the
resident domestic corporation with (A) the interested shareholder or any
affiliate or associate of the interested shareholder or (B) any other
corporation, whether or not itself an interested shareholder of the
resident domestic corporation, that is, or after the exchange would be,
an affiliate or associate of the interested shareholder;
- any sale, lease, exchange, mortgage, pledge, transfer or other
disposition, in one transaction or a series of transactions, to, with or
proposed by or on behalf of the interested shareholder, or any affiliate
or associate of the interested shareholder, of assets of the resident
domestic corporation or any subsidiary: (A) having an aggregate market
value equal to 10% or more of
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the aggregate market value of all the assets, determined on a
consolidated basis, of the resident domestic corporation; (B) having an
aggregate market value equal to 10% or more of the aggregate market value
of all of the outstanding shares of the resident domestic corporation or
(C) representing 10% or more of the net income, determined on a
consolidated basis, of the resident domestic corporation;
- any transaction which results in the issuance or transfer by the resident
domestic corporation or any subsidiary, in one or more transactions, of
any shares or securities convertible into shares of the resident domestic
corporation or any subsidiary to such interested shareholder or any
affiliate or associate of such interested shareholder except pursuant to
the exercise of warrants or rights to purchase shares or securities
convertible into shares, or a dividend or distribution paid or made pro
rata to all shareholders of the resident domestic corporation, or in
connection with the exercise or merger of securities exercisable for or
convertible into shares of the resident domestic corporation or any
subsidiary which securities were issued outstanding prior to the
interested shareholder's share acquisition date;
- the adoption of any plan or proposal for the liquidation or dissolution
of the resident domestic corporation, or any reincorporation of the
resident domestic corporation in another state or jurisdiction, proposed
by or on behalf of, or pursuant to any written or unwritten agreement,
arrangement or understanding with, the interested shareholder or any
affiliate or associate of the interested shareholder;
- any transaction (whether or not with or into or otherwise involving the
interested shareholder), proposed by or on behalf of, or pursuant to any
agreement, arrangement or understanding (whether or not in writing) with,
an interested shareholder or any affiliate or associate of such
interested shareholder, which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
or series of shares or securities convertible into shares entitled to
vote or securities that are exchangeable for, convertible into, or carry
a right to acquire shares entitled to vote, of such resident domestic
corporation or any subsidiary which are, directly or indirectly, owned or
controlled by the interested shareholder or any affiliate or associate of
the interested shareholder, except as a result of immaterial changes due
to fractional share adjustments; or
- any receipt by the interested shareholder or any affiliate or associate
of the interested shareholder of the benefit, directly or indirectly,
except proportionately as a shareholder of the resident domestic
corporation, of any loans, advances, guarantees, pledges, financial
assistance, security arrangements, restrictive covenants or any tax
credits or other tax advantages provided by, through or to the resident
domestic corporation or any subsidiary.
Certain business combinations are excluded from the Business Combination
Act, including:
- unless the charter provide otherwise, a business combination of a
resident domestic corporation with, or proposed by or on behalf of, an
interested shareholder or any associate or affiliate of the interested
shareholder (A) if the resident domestic corporation did not have, on the
interested shareholder's acquisition date, a class of voting stock
registered or traded on a national securities exchange or registered with
the SEC pursuant to Section 12(g) of the Exchange Act; or (B) regardless
of such registration, if the resident domestic corporation was, on the
interested shareholder's share acquisition date, a holding company whose
principal subsidiary was a domestic life insurance company;
- unless the charter provides otherwise, a business combination of a
resident domestic corporation with, or proposed by or on behalf of, an
interested shareholder who was an interested shareholder prior to March
11, 1988, unless subsequent to such date the interested
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shareholder increased such interested shareholder's proportion of the
voting power of the resident domestic corporation's outstanding voting
stock to a proportion in excess of the proportion of voting power such
interested shareholder held prior to March 11, 1988, without prior board
approval;
- a business combination of a resident domestic corporation, the original
charter or original bylaws of which contain a provision, or whose board
of directors or shareholders adopt an amendment to the resident domestic
corporation's bylaws within 90 days of March 11, 1988, or, if no class or
series of its voting stock is registered or traded on a national
securities exchange or registered with the SEC pursuant to Section 12(g)
of the Exchange Act within 90 days of March 11, 1988, prior to the
issuance of any voting stock registered or traded on a national
securities exchange or registered with the SEC pursuant to Section 12(g)
of the Exchange Act, expressly electing not to be governed by Sections
205 and 206 of the Business Combination Act;
- a business combination of a resident domestic corporation with, or
proposed by or on behalf of, the interested shareholder who became an
interested shareholder inadvertently, if the interested shareholder (A)
as soon as practicable divests itself of a sufficient amount of the
voting stock of the resident domestic corporation so that it no longer is
the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the outstanding voting stock of such corporation and (B)
would not at any time within the five-year period preceding the
announcement date with respect to the business combination have been an
interested shareholder but for such inadvertent acquisition; or
- a business combination or the transaction which resulted in the
shareholder becoming an interested shareholder that is approved by the
board of directors of the resident domestic corporation prior to the
interested shareholder's share acquisition date, as long as the proposed
business combination satisfies any additional applicable requirements
imposed by law and by the charter or bylaws of the resident domestic
corporation.
In addition, a resident domestic corporation otherwise subject to the
Business Combination Act shall not be subject to Sections 48-103-205 and
48-103-206 if an amendment to the charter or bylaws of the resident domestic
corporation is approved by a majority of the outstanding shares to expressly
provide that the resident domestic corporation shall not be subject to Sections
48-103-205 and 48-103-206, and further expressly provide that it is not to be
effective until two years after the vote.
The Board of Directors has no present intention to opt out of the
provisions of the Business Combination Act and neither DTC's current Charter nor
Bylaws opt out of such provisions.
Greenmail Act
Pursuant to the provisions of Sections 48-103-501 through 48-103-505 of the
TBCA (the "Greenmail Act"), it is unlawful for any Tennessee corporation which
has a class of voting stock registered or traded on a national securities
exchange or registered with the SEC pursuant to Section 12(g) of the Exchange
Act (like DTC) to purchase, directly or indirectly, any of its shares at a price
above the market value of such shares from any person who holds more than 3% of
the class of the securities to be purchased if such person has held such shares
for less than two years, unless (i) the purchase has been approved by the
affirmative vote of a majority of the outstanding shares of each class of voting
stock issued by the corporation or (ii) the corporation makes an offer, of at
least equal value per share, to all holders of shares of such class.
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OTHER PROVISIONS AFFECTING CONTROL OF DTC
If the merger is approved and consummated, certain provisions of DTC's
Charter and Bylaws also may affect control of DTC. The following provisions may
have an anti-takeover impact and may make tender offers, proxy contests and
certain mergers more difficult to consummate.
Provisions Regarding The Board of Directors
- Classified Board. A classified board is one for which a certain number,
but not all, of the directors are elected on a rotating basis each year.
A classified board makes changes in the composition of the board of
directors more difficult and thus a potential change in control of a
corporation more difficult. The TBCA permits, but does not require, a
classified board of directors, divided into as many as three classes.
DTC's Charter provides that the Board of Directors is classified into
three classes serving staggered, three-year terms. Thus, in any given
year, only one-third of the directors would be elected by the
shareholders. Classification of the Board could have the effect of
extending the time during which the existing Board of Directors could
control the operating policies of DTC even though opposed by the holders
of a majority of the outstanding DTC stock. The Cooperative currently has
a classified Board of Directors.
- Nomination of Directors. Under the Bylaws of DTC, all nominations for
directors by shareholders would be required to be delivered to DTC in
writing at least 60 days prior to the first anniversary of the preceding
year's annual meeting of shareholders or, in the case of a special
meeting of shareholders at which a director or directors would be
elected, at least 60 days before the special meeting. A nomination that
is not received prior to these deadlines would not be placed on the
ballot and such nominee would not be eligible for election. The Board
believes that advance notice of nominations by shareholders would afford
a meaningful opportunity to consider the qualifications of the proposed
nominees and, to the extent deemed necessary or desirable by the Board of
Directors, would provide an opportunity to inform shareholders about such
qualifications. Although this nomination procedure would not give the
Board of Directors any power to approve or disapprove shareholder
nominations for the election of directors, the nomination procedure could
have the effect of precluding a nomination for the election of directors
at a particular meeting if the proper procedures were not followed.
- Removal of Directors. Under the TBCA, unless the charter provides that a
director may be removed only for cause, a director of a corporation
generally may be removed, with or without cause, by the shareholders if
the number of votes cast to remove the director exceeds the number of
votes cast not to remove the director. If a director is elected by a
voting group of shareholders, only the shareholders of that voting group
may participate in the vote to remove the director without cause. If
cumulative voting is authorized, a director may not be removed if the
number of votes sufficient to elect the director under cumulative voting
is voted against the director's removal. If so provided by the charter,
any or all of the directors may be removed for cause by a vote of a
majority of the entire board of directors. Under DTC's Charter, any
director may be removed from office, but only for cause and only by the
affirmative vote of 80% of the outstanding shares entitled to vote at an
election of directors, voting together as a single voting class. DTC's
Charter does not provide for cumulative voting.
Supermajority Vote Provisions
DTC's Charter contains "supermajority" vote requirements for certain
business combinations. Article 9 provides that, in addition to any vote required
by law or other provisions of the Charter or Bylaws, the affirmative vote of not
less than 80% of the outstanding shares of "voting stock" (which
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is defined as all shares of DTC stock that are entitled to vote generally in the
election of directors, voting as a single class) would be required for the
approval of certain "business combinations" between DTC, or its subsidiaries,
and an "interested person" or an "affiliate" of an "interested person."
A "business combination" is generally defined for purposes of Article 9 as
including mergers, sales of all or substantially all of the assets of the
corporation and certain other transactions. An "interested person" is defined as
a person (other than DTC or its majority owned subsidiaries), who, alone or
together with affiliated persons, beneficially own 5% or more of the voting
stock of the corporation, as well as certain other persons that are affiliated
with an interested person.
These requirements would not apply when the transaction was approved by
66 2/3% of the directors who are not affiliates of an interested person and who
were directors before the time the interested person became an interested person
(these directors are called the "Continuing Directors").
Restrictions on Amendments to Charter and Bylaws of DTC
Several provisions of DTC's Charter require a greater-than-majority vote to
be amended. Specifically, Article 7 provides that no amendment to the Charter
could alter, modify, change or repeal any or all of the provisions of Article 6
(authorized capital stock and blank check preferred stock), 7 (amendments to the
Charter and the Bylaws), 8 (Board of Directors classification, removal, etc.),
10 (indemnification and limitation of certain director liability) or 11
(shareholder action), unless the amendment is adopted by the affirmative vote of
not less than 80% of the outstanding shares of voting stock held by shareholders
who are otherwise entitled to vote on the matter, voting together as a single
voting group. In addition, Article 7 of the Charter requires a greater-than
majority vote to alter, modify, change or repeal Section 2.2 of Article 2 (board
of directors number and tenure), Sections 4.4 (removal of directors) and 4.5
(director vacancies) of Article 4, Sections 6.7 (notice of shareholder business
and nominations) and 6.8 (procedure for election of directors) of Article 6,
Article 9 (indemnification) and Article 12 (amendment of Bylaw) of the Bylaws.
However, the provisions of Article 7 would not apply to, and such 80% vote would
not be required for, any amendment, alteration, modification or repeal which has
first been approved by the affirmative vote of 66 2/3% of the number of
directors then in office. Also, Article 9.4 of the Charter requires the
affirmative vote of at least 80% of the votes entitled to be cast, voting as a
single class, to make, alter, amend, change, add to or repeal any provision
inconsistent with Article 9 (supermajority vote for certain business
combinations).
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COMPARISON OF RIGHTS OF COOPERATIVE MEMBERS AND DTC SHAREHOLDERS
At the special meeting, members of the Cooperative will vote on a plan and
agreement of merger which provides for the merger of the Cooperative into DTC.
The Cooperative is organized as a cooperative association, and is deemed a
not-for-profit corporation, under Tennessee law. DTC is regulated as a
for-profit business corporation under Tennessee law. The following discussion
describes certain significant differences between the rights of a cooperative's
members under provisions of Tennessee law relating to cooperatives as compared
to the rights of shareholders under provisions of Tennessee law relating to
for-profit business corporations.
MEMBERS VERSUS SHAREHOLDERS
Cooperative
A Tennessee cooperative is owned by its members. Under the provisions of
Tennessee law applicable to telephone cooperatives, no person, other than an
incorporator, may become a member of the cooperative unless that person agrees
to use telephone service furnished by the cooperative when telephone service is
available through its facilities. A cooperative's bylaws may provide that any
person, including an incorporator, must cease to be a member if that person
fails or refuses to use telephone service made available by the cooperative
within a specified time after having become a member. The Cooperative's Bylaws
provide that a member automatically shall cease to be a member if that member
fails or refuses to use telephone service furnished by the Cooperative within 30
days after service is available to that member. A member of a Tennessee
cooperative is entitled to only one vote on matters on which members must vote,
regardless of the number of membership interests that the member owns. A member
who owns numerous membership interests is not entitled to any additional voting
power.
DTC
A Tennessee for-profit corporation is owned by its shareholders. A
Tennessee for-profit corporation must have at least one class of voting capital
stock and at least one class of stock (which may be the same class as the voting
stock) that is entitled to receive the net assets of the corporation upon
dissolution. However, the corporation may issue shares of capital stock divided
into different classes or series. In general, a holder of shares of voting stock
is entitled to one vote for each share of voting stock that the person owns.
This is significantly different from the law applicable to Tennessee
cooperatives, which, as discussed above, provides that each member may only have
one vote. The general rule for Tennessee cooperatives is one vote per member,
whereas the general rule for a for-profit corporation is one vote per share.
AUTHORIZED STOCK
Cooperative
The Cooperative's Charter does not authorize the issuance of stock, as the
Cooperative is a member-based, not-for-profit cooperative.
DTC
The DTC Charter authorizes stock consisting of 200,000,000 shares of common
stock (199,000,000 Class A Shares and 1,000,000 Class B Shares), no par value
per share, and 20,000,000 shares of preferred stock.
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TRANSFERABILITY OF OWNERSHIP INTERESTS
Cooperative
The owner of membership interests in a Tennessee cooperative generally is
not able to transfer those membership interests unless the bylaws so provide. If
the bylaws do so provide, the bylaws generally limit transferability to other
persons or entities that are eligible to become members in the cooperative, and
only when such transferees satisfy the cooperative's membership requirements.
The Cooperative's Bylaws do not provide for the transferability of Cooperative
membership interests.
DTC
Generally, shares of stock in a for-profit corporation generally are freely
transferable, unless the transferor has agreed in some way or is required by
applicable securities laws not to transfer the stock or to transfer it only in
certain circumstances.
REQUIRED VOTE FOR MERGERS
Cooperative
Telephone cooperatives may merge with other cooperatives or other
corporations, whether not-for-profit or for-profit. To do so, the board of
directors of each entity involved in the merger must approve the proposition for
the merger and the proposed articles of merger. Before the merger may take
place, the proposition for the merger and the proposed articles of merger must
be approved by the members of any telephone cooperative involved in the merger.
Member approval is obtained upon the affirmative vote of not less than
two-thirds of the active members of any telephone cooperative voting at a
meeting.
DTC
Under the TBCA generally, a corporation's board of directors and a majority
of the outstanding shares of common stock entitled to vote must approve a merger
or share exchange. In accordance with the TBCA, submission by a corporation's
board of directors of that action may be conditioned on any basis, including
conditions regarding a super-majority voting requirement or that no more than a
certain number of shares indicate that they will seek dissenters' rights, if the
rights are otherwise available.
Under the TBCA generally, the shareholders of a corporation need not vote
on a merger or share exchange if the corporation is the surviving corporation
and the following results occur:
- the charter remains unchanged after the transaction, subject to certain
exceptions;
- each shareholder of the corporation immediately before the transaction
holds an identical number of shares, with identical rights and
preferences, after the transaction;
- the number of voting shares outstanding immediately after the transaction
plus the number of voting shares issuable as a result of the transaction,
either by conversion of securities issued pursuant to the transaction or
the exercise of rights and warrants issued pursuant to the transaction,
does not exceed by more than 20% the number of voting shares of the
surviving corporation outstanding immediately before the transaction; and
- the number of participating shares outstanding immediately after the
transaction, plus the number of participating shares issuable as a result
of the transaction, either by conversion or securities issued pursuant to
the transaction or the exercise of rights and warrants issued
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pursuant to the transaction, does not exceed by more than 20% the total
number of participating shares outstanding immediately before the
transaction.
BOARD OF DIRECTORS
Cooperative
A director of a cooperative must be a member of the cooperative or of
another cooperative which is a member. A cooperative's board of directors may
not consist of less than five directors. Without the approval of the members, a
director of a Tennessee cooperative may not receive any salary for services as a
director and, except in emergencies, shall not be employed by the cooperative in
any capacity involving compensation. The bylaws of a Tennessee cooperative,
however, may provide that a fixed fee and expenses of attendance, if any, be
allowed to each director for attendance at each meeting of the board. The
Cooperative's Bylaws allow directors no more than $50 a day in compensation for
each day spent on the Cooperative's business (such as attendance at board
meetings).
DTC
A director of a Tennessee for-profit corporation is not required to be a
shareholder, unless the corporation's charter or bylaws require otherwise. There
generally are no minimum limits on the number of directors of a Tennessee
for-profit corporation (i.e., a board of directors may consist of one director)
except as the corporation may provide in its charter or bylaws. Shareholder
approval is not required for salary compensation for directors and directors may
be employed by the corporation in any capacity involving compensation.
The charter or bylaws of a Tennessee for-profit corporation may fix the
number of directors. Unless the charter or bylaws provide that the board of
directors have the power to fix or change the number of directors, including an
increase or decrease in the number of directors, only the shareholders may fix
or change the number of directors. The charter or bylaws may establish a
variable range for the size of the board of directors by fixing a minimum and
maximum number of directors. If a variable range is established, the number of
directors may be fixed or changed from time to time, within the minimum and
maximum, by the shareholders or the board of directors; provided, that unless
the charter or bylaws provided otherwise, only the shareholders may change the
range for the size of the board of directors or change from a fixed to a
variable-range size board or vice versa. If the charter or bylaws fix the number
of directors, the number of directors may be increased or decreased from time to
time by amendment to the charter or bylaws, as the case may be. DTC's Charter
allows the Board, from time to time by resolution adopted by at least 66 2/3% of
the Board, to fix the number of DTC directors within the ranges of one to
fifteen total directors. This Charter provision may not be amended, modified or
repealed unless such amendment, modification or repeal is adopted by the
affirmative vote of the holders of at least 80% of the outstanding shares of
DTC's outstanding capital stock entitled to vote, voting together as a single
class.
CUMULATIVE VOTING FOR DIRECTORS
Cooperative
The TNPCA provides that members do not have the right to cumulate their
votes in the election of directors unless authorized in the charter or bylaws.
Neither the Cooperative's Charter nor Bylaws provide for cumulative voting
rights.
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DTC
In an election of directors under cumulative voting, each share of stock
normally having one vote is entitled to a number of votes equal to the number of
directors to be elected. A shareholder may cast all such votes for a single
nominee or may allocate the votes among as many nominees as the shareholder may
choose. Without cumulative voting, a plurality of votes cast by the shares
entitled to vote at an annual meeting or any special meeting held to elect
directors would be necessary to elect all of the directors to be elected at that
meeting and no nominee could be elected without the support of a plurality of
the shares voting at the meeting. Under the TBCA, shareholders do not have
cumulative voting rights unless those rights are provided in the charter. DTC's
Charter does not provide for cumulative voting rights.
LIMITATION OF LIABILITY OF DIRECTORS AND OFFICERS
Cooperative
The TNPCA provides that all directors and members of the governing bodies
of Tennessee telephone cooperatives, such as the Cooperative, whether or not
compensated, shall be immune from suits arising from the conduct of the
cooperative's affairs. Such immunity will not be granted for willful or wanton
conduct or gross negligence.
DTC
The TBCA allows Tennessee for-profit corporations to adopt a provision in
its charter eliminating or limiting, with certain exceptions, the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of the director's fiduciary duty as a director. Under the
TBCA, a Tennessee for-profit corporation may not eliminate or limit director
monetary liability for: (i) breaches of the director's duty of loyalty to the
corporation or its shareholders; (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law; or (iii)
unlawful dividends, stock repurchases or redemptions. This provision also may
not limit a director's liability for violation of, or otherwise relieve a
corporation or its directors from the necessity of complying with, federal or
state securities laws, or affect the availability of non-monetary remedies such
as injunctive relief or rescission. DTC's Charter contains a provision stating
that directors shall not be personally liable for monetary damage to the
corporation or its shareholders, except to the extent required by the TBCA.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Cooperative
The TNPCA provision, applicable to cooperatives, for the indemnification of
directors and officers is substantially the same as the TBCA provision,
applicable to for-profit corporations, described below.
DTC
The TBCA provides that, unless the charter provides otherwise, a Tennessee
for-profit corporation shall indemnify a director or officer who was wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which that person was a party because that person is or was a director or
officer, as the case may be, of the corporation against reasonable expenses
incurred by that person in connection with the proceeding.
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In addition, a Tennessee for-profit corporation may indemnify a director,
officer, agent or employee made a party to a proceeding because of such person's
status as a director, officer, agent or employee, as the case may be, against
liability incurred in the proceeding if: (i) that person's conduct was in good
faith, (ii) that person reasonably believed (A) in the case of conduct in that
person's official capacity with the corporation, that such person's conduct was
in the corporation's best interests and (B) in all other cases, that such
person's conduct was at least not opposed to the corporation's best interests;
and (iii) in the case of any criminal proceeding, that person had no reasonable
cause to believe that the conduct was unlawful. However, a Tennessee for-profit
corporation may not indemnify a director, officer, agent or employee against
liability incurred in connection with a proceeding by or in the right of the
corporation in which that person was adjudged liable to the corporation or in
connection with any other proceeding charging improper personal benefit to that
person, whether or not involving action in such person's official capacity, in
which that person was found liable on the basis that personal benefit was
improperly received by that person.
A Tennessee for-profit corporation also may pay for or reimburse the
reasonable expenses incurred by a director, officer, agent or employee who is a
party to a proceeding in advance of final disposition of the proceeding if a
determination is made that the facts then known to those making the
determination would not preclude indemnification and that person furnishes the
corporation: (i) a written affirmation of that person's good faith belief that
such person has met the standard of conduct required by the TBCA for
indemnification; and (ii) a written undertaking to repay the advance if it is
ultimately determined that such person is not entitled to indemnification.
The TBCA allows a director or officer of a Tennessee for-profit corporation
to apply to a court for indemnification unless the corporation's charter
provides otherwise. Upon application, a court may order indemnification of such
person if the court determines that person is: (i) entitled to mandatory
indemnification; or (ii) fairly and reasonably entitled to indemnification in
view of all relevant circumstances, whether or not the director met the standard
of conduct set forth in the TBCA or was found liable in connection with a
proceeding by or in the right of the corporation or in connection with any other
proceeding charging improper personal benefit to that person, but if that person
was found liable in such proceedings, the indemnification must be limited to
reasonable expenses incurred.
DTC's Charter contains a provision that directors, officers, agents and
employees of DTC, as well as persons serving in such capacities for another
entity at the request of DTC, may be indemnified to the fullest extent provided
by law. DTC's Bylaws also contain a provision that such persons shall be
entitled to indemnification to the fullest extent provided by law. DTC's Charter
provides that DTC may purchase and maintain insurance to cover indemnification
expenses, whether or not indemnification would be permissible under the TBCA in
the absence of insurance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of DTC pursuant
to the foregoing provisions, or otherwise, DTC has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and, therefore, is unenforceable.
AMENDMENTS TO CHARTER AND BYLAWS
Cooperative
A Tennessee cooperative may amend: (i) its charter by adoption of a
resolution of the board of directors followed by an affirmative vote of not less
than two-thirds of the active members voting at a meeting; and (ii) its bylaws
by a majority vote of the members voting at a meeting, at which a quorum is
present.
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DTC
With certain exceptions, an amendment to the charter of a Tennessee
for-profit corporation must first be proposed by its board of directors to be
submitted to the shareholders at an annual or special meeting. The board must
recommend the amendment to the shareholders, unless the board determines that
because of conflict of interest or other special circumstances, it should make
no recommendation and it communicates the basis for its determination to the
shareholders with the amendment. The amendment is adopted upon receiving the
affirmative vote of a majority of the shares entitled to vote, unless the
charter, the TBCA or the board specify a higher percentage, or unless any class
of shares is entitled to vote as a class on the amendment, in which case the
amendment is adopted upon receiving the affirmative vote of a majority of votes
cast by holders of shares of each class entitled to vote as a class and of the
total number of shares entitled to vote.
The TBCA provides that shares of one class are entitled to vote as a class
if the amendment would do any of the following: (i) increase or decrease the
aggregate number of authorized shares of such class; (ii) effect an exchange or
reclassification of all or parts of the shares of such class into shares of
another class; (iii) effect an exchange or reclassification, or create a right
of exchange, of all or any part of the shares of another class into the shares
of such class; (iv) change the designations, preferences, limitations or
relative rights of all or part of the shares of such class; (v) change the
shares of all or part of the class into a different number of shares of the same
class; (vi) create a new class or change a class with subordinate and inferior
rights into a class of shares, having rights or preferences with respect to
distributions or dissolution that are prior, superior, or substantially equal to
the shares of the class, or increase the rights, preferences or number of
authorized shares of any class having rights or preferences with respect to
distributions or to dissolution that are prior, superior, or substantially equal
to the shares of the class; (vii) authorize the issuance as a share dividend of
shares of the class in respect of shares of another class; (viii) limit or deny
the existing preemptive rights of all or part of the shares of the class; or
(ix) cancel or otherwise affect rights to distributions or dividends that have
accumulated but not yet been declared on all or part of the shares of the class.
Also pursuant to the TBCA, the board of directors may amend the charter
without the approval of the shareholders with respect to: (i) the deletion of
the names and addresses of the initial directors; (ii) the deletion of the name
and address of the initial registered agent or registered office, if a statement
of change is on file with the secretary of state; (iii) the designation or
change of address of the principal office of the corporation; (iv) the change of
each issued and unissued authorized share of an outstanding class into a greater
number of whole shares if the corporation has only shares of that class
outstanding; (v) the change of the corporate name by substituting the word
"corporation," "incorporated," "company," or the abbreviation "corp.," inc.," or
"co." for a similar word or abbreviation in the name, or by adding deleting or
changing a geographical attribution for the name; (vi) the designation of the
street address and zip code of the corporation's current registered office, the
county in which the office is located, and the name of its current registered
agent at that office; (vii) the deletion of the initial principal office, if an
annual report is on file with the secretary of state; or (viii) any other change
expressly permitted by the TBCA to be made without shareholder action.
Under the TBCA, a corporation's bylaws may be amended or repealed by the
board of directors, unless: (i) the corporation's charter or the TBCA reserve
that power, in whole or in part, to the shareholders of the corporation; or (ii)
the shareholders in amending or repealing a particular bylaw provide expressly
that the board of directors may not amend or repeal that bylaw. In addition, a
corporation's shareholders may amend or repeal the corporation's bylaws even
though the bylaws may also be amended or repealed by the board of directors.
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DTC's Charter provides that the bylaws may be altered or repealed in
accordance with the TBCA. DTC's Charter requires a supermajority vote to amend
certain provisions of the Charter and of the Bylaws. (See "Description of DTC
Capital Stock -- Other Provisions Affecting Control of DTC -- Restrictions on
Amendments to Charter and Bylaws of DTC.")
SPECIAL MEETINGS OF MEMBERS/SHAREHOLDERS; ACTION WITHOUT MEETING
Cooperative
Special meetings of the members of a cooperative may be called by the board
of directors, by any three directors, by the president or by not less than 10%
of all the members.
The TNPCA allows any action which may be taken at a meeting of the members
to be taken without a meeting if all of the active members entitled to vote
thereon sign a written consent setting forth the action taken.
DTC
Special meetings of the shareholders of a Tennessee for-profit corporation
may be called by the board of directors, the person(s) authorized to do so by
the charter or bylaws or, unless the charter provides otherwise, by the holders
of at least 10% of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting. DTC's Charter provides that the
holders of at least 20% of all the votes entitled to be cast on any issue
proposed to be considered at a proposed special meeting are necessary to call
such a special meeting. DTC's Bylaws authorize a majority of the Board of
Directors to call a special meeting of shareholders.
Any action which may be taken at a meeting of the shareholders of a
Tennessee for-profit corporation may be taken without a meeting if all of the
shareholders entitled to vote thereon sign a written consent setting forth the
action taken.
QUORUM REQUIREMENTS
Cooperative
A quorum for a meeting of the members of a Tennessee cooperative is the
presence, in person, of the lesser of: (i) 2% of all members; or (ii) 50
members. Thus, in a Tennessee cooperative that has numerous members, such as the
Cooperative, 50 active members would constitute a quorum at a meeting of members
and the majority of a quorum may take action at the meeting (unless the charter
or other provisions of law require a higher percentage for member actions).
DTC
In general, under the TBCA, a quorum of shareholders in a for-profit
corporation is present when the holders of a majority of the shares entitled to
vote at the meeting are present in person or by proxy, although the
corporation's charter may specify a greater percentage. The TBCA does not
specify a maximum percentage of shares or number of shareholders that may
constitute a quorum.
DIVIDENDS AND OTHER DISTRIBUTIONS
Cooperative
The Cooperative Act provides that all operating revenues for a fiscal year
in excess of the amounts necessary to pay expenses of operating and maintaining
the cooperative's facilities and
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interest during the fiscal year shall be distributed to the cooperative's
members. The distribution may be, in the discretion of the board, either: (i) a
refund; or (ii) a general rate reduction. A refund may be: (i) a credit on the
cooperative's books as a capital credit; (ii) in cash; or (iii) a combination of
(i) and (ii). In addition, each member's refund amount (other than a refund
given as a general rate reduction) shall be the same percentage of the total
funds available for credit to members as such member contributed to the total
capital credits of the cooperative for the period involved.
Throughout its existence, the Cooperative has accounted for the equity of
its members through capital credits. Each year the Cooperative has mailed a
statement to each capital credit holder showing the holder's percentage of that
period's capital credit. Each member's capital credit account balance as of
December 31, 1998 appears on the page of that member's information
statement/prospectus on which the mailing label appears.
No capital credits are issued on initial membership. To determine a
member's capital credits, at the end of each year each member's total capital
credits (i.e. amounts paid to the Cooperative for wireline services rendered) is
calculated and then compared to total member capital credits for the year,
creating an allocation ratio which is then applied to the Cooperative's net
income. The resulting share of net income is then reflected on each member's
individual capital credit account and becomes part of that member's capital
credit account balance. Neither dividends nor interest has been or currently is
paid on capital credits. Such credits are accumulated on the books of the
Cooperative rather than paid in cash.
The Cooperative's Bylaws allow the Board to repay capital credits at any
time in full or in part in the order of priority according to the year in which
the capital was furnished, but only if the Cooperative's financial condition
would not be impaired.
The Bylaws also authorize the Board to repay to an estate the capital
credits of a deceased person at any time, if the Cooperative's financial
condition would not be impaired, upon written request by the deceased person's
legal representative. The Cooperative has refunded the capital credits
accumulated through June 30, 1999 to the estates of deceased persons and to
dissolved businesses which have made written application for a refund. If the
merger is approved and consummated, capital credits would cease to exist and,
accordingly, would not accumulate.
DTC
A Tennessee for-profit corporation is not required to pay dividends on
shares of its capital stock. Instead, except to the extent restricted in the
corporation's charter or by covenants in agreements with lenders or others,
dividends and distributions are within the discretion of the corporation's board
of directors, provided that the corporation is solvent at the time of paying the
dividend and that paying the dividend would not render the corporation
insolvent.
DISSENTERS' RIGHTS
Cooperative
The Cooperative Act does not provide dissenters' rights to members of a
Tennessee cooperative.
DTC
A shareholder of a Tennessee for-profit corporation participating in
certain major corporate transactions, may, under varying circumstances, be
entitled to dissenters' rights pursuant to which the shareholder may receive
cash in the amount of the fair value of the shareholder's shares in lieu of the
consideration the shareholder would otherwise receive in the transaction.
68
<PAGE> 76
Dissenters' rights generally are available to shareholders of a Tennessee
for-profit corporation if: (i) the corporation sells, leases, exchanges or
otherwise disposes of all or substantially all of its assets, but only if (a)
the sale, lease, exchange or other disposition is not in the usual and regular
course of business and (b) the shareholder is otherwise entitled to vote on the
sale, lease, exchange or other disposition; (ii) the corporation consummates a
merger, but only if (a) shareholder approval is required by the TBCA or the
charter and the shareholder is entitled to vote or (b) the corporation is a
subsidiary that is merged with its parent under Section 48-21-105 of the TBCA;
(iii) the corporation consummates a share exchange to which the corporation is a
party as the corporation whose shares will be acquired, but only if the
shareholder is entitled to vote; or (iv) the corporation takes any action
pursuant to a shareholder vote to the extent that the charter, bylaws or a
resolution of the board provides that voting or nonvoting shareholders are
entitled to dissenters' rights.
Shareholders of a Tennessee for-profit corporation also have dissenters'
rights if an amendment to the charter would materially and adversely affect
rights in respect of a dissenter's shares because it: (i) alters or abolishes a
preferential right of the shares; (ii) creates, alters or abolishes a right in
respect of redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares; (iii) alters or abolishes a preemptive
right of the holder of the shares to acquire shares or other securities; (iv)
excludes or limits the right of the shares to vote on any matter, or to cumulate
votes, other than a limitation by dilution through issuance of shares or other
securities with similar voting rights; or (v) reduces the number of shares owned
by the shareholder to a fraction of a share, if the factional share is to be
acquired for cash under Section 48-16-104 of the TBCA.
With respect to mergers, share exchanges, the sale, lease, exchange or
other disposition of all or substantially all of the assets of a corporation not
in the ordinary or regular course of business, and amendments to the charter
that materially and adversely affects rights in respect of a dissenter's shares,
dissenters' rights are not available under the TBCA as to shares that are (i)
listed on an exchange registered under Section 6 of the Exchange Act or (ii) a
"national market system security," as defined in the rules promulgated pursuant
to the Exchange Act.
PREEMPTIVE RIGHTS
Cooperative
The Cooperative Act does not provide for preemptive rights of members.
DTC
The TBCA does not provide for preemptive rights unless a corporation's
charter specifically so provides. The DTC Charter does not provide for
preemptive rights.
69
<PAGE> 77
LEGAL MATTERS
Certain legal matters in connection with the merger will be passed upon for
the Cooperative and DTC by their special legal counsel, Tuke Yopp & Sweeney, PLC
of Nashville, Tennessee.
EXPERTS
The consolidated financial statements of the Cooperative as of December 31,
1997 and 1998 and for each of the three years in the respective periods ended
December 31, 1996, 1997 and 1998 included in this information
statement/prospectus have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
70
<PAGE> 78
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PRO FORMA DATA
Pro Forma Consolidated Statement of Income Data for the
year ended December 31, 1998.......................... F-2
Pro Forma Consolidated Balance Sheet Data as of June
30, 1999.............................................. F-3
Pro Forma Consolidated Statement of Income Data for the
six months ended June 30, 1999........................ F-4
Notes to Pro Forma Selected Consolidated Financial
Data.................................................. F-5
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF DEKALB
TELEPHONE COOPERATIVE, INC.
Report of Independent Public Accountants............... F-6
Consolidated Balance Sheets as of December 31, 1997 and
1998.................................................. F-7
Consolidated Statements of Income for the years ended
December 31, 1996, 1997 and 1998...................... F-8
Consolidated Statements of Patronage Capital for the
years ended December 31, 1996, 1997 and 1998.......... F-9
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1997 and 1998................ F-10
Notes to Consolidated Financial Statements............. F-11
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF DEKALB
TELEPHONE COOPERATIVE, INC.
Consolidated Balance Sheets as of December 31, 1998 and
June 30, 1999......................................... F-21
Consolidated Statements of Income for the six months
ended June 30, 1998 and 1999.......................... F-22
Consolidated Statements of Cash Flows for the six
months ended June 30, 1998 and 1999................... F-23
Notes to Consolidated Financial Statements............. F-24
</TABLE>
F-1
<PAGE> 79
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ -----------
<S> <C> <C> <C>
OPERATING REVENUE:
Local telephone services revenue............... $ 4,189,939 $ -- $ 4,189,939
Network access services revenue................ 8,876,861 -- 8,876,861
Wireless products and services revenue......... 3,462,958 -- 3,462,958
Miscellaneous revenue.......................... 1,595,730 -- 1,595,730
----------- ------------ -----------
Total operating revenue................... 18,125,488 -- 18,125,488
----------- ------------ -----------
OPERATING EXPENSES:
Plant operations expense....................... 3,900,176 -- 3,900,176
Depreciation and amortization.................. 4,585,799 -- 4,585,799
Customer operations expense.................... 1,131,798 -- 1,131,798
Corporate operations expense................... 3,403,317 -- 3,403,317
Operating taxes................................ 380,676 -- 380,676
----------- ------------ -----------
Total operating expenses.................. 13,401,766 -- 13,401,766
----------- ------------ -----------
Total operating income.................... 4,723,722 -- 4,723,722
----------- ------------ -----------
OTHER INCOME (EXPENSE):
Loss on retirement of assets................... (327,605) -- (327,605)
Interest expense............................... (1,109,359) -- (1,109,359)
Interest income................................ 712,644 -- 712,644
Other income................................... 510,119 -- 510,119
----------- ------------ -----------
Total other income (expense).............. (214,201) -- (214,201)
----------- ------------ -----------
Income before income taxes................ 4,509,521 -- 4,509,521
PROVISION FOR INCOME TAXES....................... 106,845 1,610,445(a) 1,717,290
----------- ------------ -----------
Net income................................ $ 4,402,676 $ 1,610,445 $ 2,792,231
=========== ============ ===========
Weighted average shares outstanding............ 1,770,309
===========
Basic earnings per share.................... $ 1.58
===========
Diluted earnings per share.................. $ 1.58
===========
</TABLE>
The accompanying notes to pro forma selected consolidated financial data
are an integral part of this financial data.
F-2
<PAGE> 80
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEET DATA
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1,506,703 $ -- $ 1,506,703
Marketable securities..................................... 13,981,614 (128,101)(b) 11,509,772
(2,343,741)(c)
Telecommunications accounts receivable.................... 2,508,063 -- 2,508,063
Other receivables......................................... 184,593 -- 184,593
Materials and supplies.................................... 248,808 -- 248,808
Prepaids and other current assets......................... 190,454 -- 190,454
Deferred tax assets....................................... 66,366 -- 66,366
------------ ------------ ------------
Total current assets................................ 18,686,601 (2,471,842 16,214,759
------------ ------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost.................... 61,407,568 -- 61,407,568
Accumulated depreciation.................................. (32,377,374) -- (32,377,374)
------------ ------------ ------------
Net property, plant and equipment................... 29,030,194 -- 29,030,194
Property, plant and equipment under construction.......... 3,817,999 -- 3,817,999
------------ ------------ ------------
Total property, plant and equipment................. 32,848,193 -- 32,848,193
------------ ------------ ------------
OTHER ASSETS................................................ 526,486 -- 526,486
------------ ------------ ------------
$ 52,061,280 $ (2,471,842) $ 49,589,438
============ ============ ============
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 865,514 $ -- $ 865,514
Advance billings and payments............................. 81,348 -- 81,348
Customer deposits......................................... 178,906 -- 178,906
Current maturities of long-term debt...................... 859,171 -- 859,171
Accrued taxes............................................. 182,511 -- 182,511
Accrued salaries, wages and benefits...................... 438,155 -- 438,155
Other accrued liabilities................................. 537,413 -- 537,413
------------ ------------ ------------
Total current liabilities........................... 3,143,018 -- 3,143,018
LONG-TERM DEBT:
Rural Utilities Service, net of current maturities........ 22,329,851 -- 22,329,851
OTHER LIABILITIES:
Postretirement benefits other than pension................ 555,422 -- 555,422
Deferred tax liabilities.................................. 522,397 -- 522,397
------------ ------------ ------------
Total liabilities................................... 26,550,688 -- 26,550,688
------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY:
Patronage capital......................................... 25,510,592 (23,166,851)(b) --
(2,343,741)(c)
------------ ------------ ------------
Total members' equity............................... 25,510,592 (25,510,592) --
------------ ------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, Class A, voting............................. -- 18,431,000(b) 18,431,000
Common stock, Class B, non-voting......................... -- 4,607,750(b) 4,607,750
------------ ------------ ------------
Total stockholders' equity.......................... -- 23,038,750 23,038,750
------------ ------------ ------------
$ 52,061,280 $ (2,471,842) $ 49,589,438
============ ============ ============
</TABLE>
The accompanying notes to pro forma selected consolidated financial data
are an integral part of this financial data.
F-3
<PAGE> 81
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUE:
Local telephone services revenue........... $ 2,172,634 $ -- $ 2,172,634
Network access services revenue............ 5,525,233 -- 5,525,233
Wireless products and services revenue..... 2,052,323 -- 2,052,323
Miscellaneous revenue...................... 812,693 -- 812,693
----------- ----------- -----------
Total operating revenue............ 10,562,883 -- 10,562,883
----------- ----------- -----------
OPERATING EXPENSES:
Plant operations expense................... 1,927,959 -- 1,927,959
Depreciation and amortization.............. 2,445,884 -- 2,445,884
Customer operations expense................ 624,295 -- 624,295
Corporate operations expense............... 1,564,198 -- 1,564,198
Operating taxes............................ 247,804 -- 247,804
----------- ----------- -----------
Total operating expenses........... 6,810,140 -- 6,810,140
----------- ----------- -----------
Total operating income............. 3,752,743 -- 3,752,743
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense........................... (539,921) -- (539,921)
Interest income............................ 420,447 -- 420,447
Other income............................... 171,661 -- 171,661
----------- ----------- -----------
Total other income (expense)....... 52,187 -- 52,187
----------- ----------- -----------
Income before income taxes......... 3,804,930 -- 3,804,930
PROVISION FOR INCOME TAXES................... 152,011 1,279,587(a) 1,431,598
----------- ----------- -----------
Net income......................... $ 3,652,919 $ 1,279,587 $ 2,373,332
=========== =========== ===========
Weighted average shares outstanding........ 2,128,011
===========
Basic earnings per share................ $ 1.12
===========
Diluted earnings per share.............. $ 1.12
===========
</TABLE>
The accompanying notes to pro forma selected consolidated financial data
are an integral part of this financial data.
F-4
<PAGE> 82
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
(a) To record an income tax provision for both the year ended December 31,
1998 and the six months ended June 30, 1999 as if the Company had been a
taxable corporation.
(b) To record the conversion of outstanding capital credits into shares of
common stock at a conversion ratio of 10 - to - 1 and the cash payment of
fractional shares.
(c) To record the retirement of all capital credits earned prior to 1990.
NOTE: The pro forma consolidated statement of income data does not include
approximately $850,000 of non-recurring expenses that will be recorded by
the Company in connection with the reorganization of the Company. These
$850,000 of non-recurring expenses include expenses related to legal,
consulting, accounting and other professional service fees.
F-5
<PAGE> 83
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DeKalb Telephone Cooperative, Inc.:
We have audited the accompanying consolidated balance sheets of DeKalb
Telephone Cooperative, Inc., (a Tennessee cooperative) and subsidiary as of
December 31, 1997 and 1998 and the related statements of income, patronage
capital and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of DeKalb Telephone
Cooperative, Inc. and subsidiary as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Nashville, Tennessee
September 1, 1999 (except with respect to
the matter discussed in Note 11 as to which
the date is October 18, 1999)
F-6
<PAGE> 84
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1,660,085 $ 2,098,624
Marketable securities..................................... 12,485,539 12,152,700
Telecommunications accounts receivable, less allowance for
uncollectible accounts of $209,504 in 1997 and $257,018
in 1998................................................ 1,886,006 2,309,179
Other receivables......................................... 188,696 208,533
Materials and supplies.................................... 191,680 241,210
Prepaids and other current assets......................... 374,318 404,661
Deferred tax assets....................................... 44,393 75,525
------------ ------------
Total current assets.............................. 16,830,717 17,490,432
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost.................... 55,567,145 59,505,122
Accumulated depreciation.................................. (28,199,391) (29,995,236)
------------ ------------
Net property, plant and equipment................. 27,367,754 29,509,886
Property, plant and equipment under construction.......... 1,580,555 2,450,920
------------ ------------
Total property, plant and equipment............... 28,948,309 31,960,806
------------ ------------
OTHER ASSETS................................................ 140,136 416,270
------------ ------------
$ 45,919,162 $ 49,867,508
============ ============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 804,506 $ 2,009,225
Advance billings and payments............................. 50,952 68,081
Customer deposits......................................... 139,923 160,023
Current maturities of long-term debt...................... 845,394 818,258
Accrued taxes............................................. 665,844 378,367
Accrued salaries, wages and benefits...................... 404,515 442,535
Other accrued liabilities................................. 230,027 208,095
------------ ------------
Total current liabilities......................... 3,141,161 4,084,584
LONG-TERM DEBT:
Rural Utilities Service, net of current maturities........ 23,665,197 22,844,766
OTHER LIABILITIES:
Postretirement benefits other than pension................ 532,288 562,272
Deferred tax liabilities.................................. 234,593 387,025
------------ ------------
Total liabilities................................. 27,573,239 27,878,647
------------ ------------
COMMITMENTS AND CONTINGENCIES
MEMBERS' EQUITY:
Patronage capital......................................... 18,345,923 21,988,861
------------ ------------
$ 45,919,162 $ 49,867,508
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-7
<PAGE> 85
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUE:
Local telephone services revenue............. $ 3,704,232 $ 3,942,016 $ 4,189,939
Network access services revenue.............. 7,891,713 8,241,547 8,876,861
Wireless products and services revenue....... 2,859,073 3,085,127 3,462,958
Miscellaneous revenue........................ 1,317,077 1,501,896 1,595,730
----------- ----------- -----------
Total operating revenue.............. 15,772,095 16,770,586 18,125,488
----------- ----------- -----------
OPERATING EXPENSES:
Plant operations expense..................... 3,685,576 3,345,253 3,900,176
Depreciation and amortization................ 3,726,916 4,879,396 4,585,799
Customer operations expense.................. 906,029 910,398 1,131,798
Corporate operations expense................. 2,657,818 3,318,639 3,403,317
Operating taxes.............................. 425,518 403,971 380,676
----------- ----------- -----------
Total operating expenses............. 11,401,857 12,857,657 13,401,766
----------- ----------- -----------
Total operating income............... 4,370,238 3,912,929 4,723,722
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Loss on retirement of assets................. -- (1,107,149) (327,605)
Interest expense............................. (1,186,667) (1,119,355) (1,109,359)
Interest income.............................. 452,147 649,553 712,644
Other income................................. 123,546 234,212 510,119
----------- ----------- -----------
Total other income (expense)......... (610,974) (1,342,739) (214,201)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES..................... 3,759,264 2,570,190 4,509,521
PROVISION FOR INCOME TAXES..................... 256,139 196,900 106,845
----------- ----------- -----------
Net income........................... 3,503,125 2,373,290 4,402,676
PRO FORMA INFORMATION ASSUMING MERGER WITH DTC
(NOTE 11) (UNAUDITED)
ADDITIONAL PROVISION FOR INCOME TAXES.......... 1,223,050 833,435 1,610,445
----------- ----------- -----------
PRO FORMA NET INCOME........................... 2,280,075 1,539,855 2,792,231
=========== =========== ===========
Weighted average shares outstanding.......... 1,302,411 1,514,019 1,770,309
=========== =========== ===========
Basic earnings per share.................. $ 1.75 $ 1.02 $ 1.58
=========== =========== ===========
Diluted earnings per share................ $ 1.75 $ 1.02 $ 1.58
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-8
<PAGE> 86
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PATRONAGE CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
PATRONAGE CAPITAL, beginning of year............... $14,124,948 $16,861,484 $18,345,923
Net income....................................... 3,503,125 2,373,290 4,402,676
Capital credits retired.......................... (766,589) (888,851) (759,738)
----------- ----------- -----------
PATRONAGE CAPITAL, end of year..................... $16,861,484 $18,345,923 $21,988,861
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-9
<PAGE> 87
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 3,503,125 $ 2,373,290 $ 4,402,676
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 3,726,916 4,879,396 4,585,799
Deferred taxes.............................. 254,260 8,200 121,300
Loss on retirement of fixed assets.......... -- 1,107,149 327,605
Changes in assets and liabilities:
Receivables.............................. 16,058 (244,999) (443,010)
Materials and supplies................... 143,742 58,471 (49,530)
Prepaids and other current assets........ (295,890) 4,036 (30,343)
Accounts payable......................... (266,958) 111,197 1,204,719
Advance billings and payments............ (1,076) 3,732 17,129
Customer deposits........................ 17,125 18,700 20,100
Accrued liabilities...................... (90,067) 257,656 (271,389)
Postretirement benefits other than
pension............................... (22,689) (318,051) 29,984
----------- ----------- -----------
Net cash provided by operating
activities.......................... 6,984,546 8,258,777 9,915,040
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (purchase) of marketable securities, net.... (1,842,015) (4,034,650) 332,839
Construction and acquisition of property, plant
and equipment, net............................ (3,263,597) (2,123,369) (7,925,901)
(Increase) decrease in other assets, net......... (92,385) 2,246 (276,134)
----------- ----------- -----------
Net cash used in investing
activities.......................... (5,197,997) (6,155,773) (7,869,196)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt....................... (847,498) (877,542) (847,567)
Retirement of capital credits.................... (766,589) (888,851) (759,738)
----------- ----------- -----------
Net cash used in financing
activities.......................... (1,614,087) (1,766,393) (1,607,305)
----------- ----------- -----------
NET INCREASE IN CASH............................... 172,462 336,611 438,539
CASH, beginning of year............................ 1,151,012 1,323,474 1,660,085
----------- ----------- -----------
CASH, end of year.................................. $ 1,323,474 $ 1,660,085 $ 2,098,624
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for income taxes................... $ 1,879 $ 92,500 $ 252,398
=========== =========== ===========
Cash payments for interest....................... $ 1,278,228 $ 1,229,349 $ 1,191,819
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-10
<PAGE> 88
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
DeKalb Telephone Cooperative, Inc. ("the Company") was formed under the
laws of the State of Tennessee in 1951 for the purpose of providing
telecommunications services to a rural region of eastern middle Tennessee. The
Company formed Advantage Cellular Systems, Inc. ("Advantage"), a wholly owned
subsidiary, in 1991 for the purpose of providing cellular telecommunications
services.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant intercompany transactions and
balances have been eliminated.
MARKETABLE SECURITIES
In accordance with Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities ("FAS 115"),
the Company considers its investment in debt securities as held-to-maturity. The
securities are reflected in the consolidated balance sheets at amortized cost,
and interest income is included in the consolidated statements of income as
earned.
MATERIALS AND SUPPLIES
Materials and supplies are stated at the lower of cost or market with cost
determined by the average cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, including labor and other
direct costs associated with installation. The Company capitalizes interest
costs incurred during construction in the cost of property, plant and equipment.
Those capitalized interest charges were $88,530, $114,847, and $69,947 in 1996,
1997, and 1998, respectively. Improvements that significantly add to productive
capacity or extend the useful life are capitalized, while repairs and
maintenance are expensed as incurred.
Depreciation is calculated on a straight-line basis at annual rates that
will amortize the depreciable property over its estimated useful life.
Individual depreciation rates are as follows:
<TABLE>
<S> <C>
Buildings................................................... 3.3%
Central office equipment.................................... 8.0 - 10.0%
Poles, cables, wire and towers.............................. 5.0%
Public telephone equipment.................................. 10.0%
Furniture and office equipment.............................. 10.0 - 12.5%
Vehicles and other work equipment........................... 10.0 - 20.0%
</TABLE>
F-11
<PAGE> 89
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
When depreciable property, plant and equipment is retired in the normal
course of business, the amount of such property, plant and equipment is deducted
from the property, plant and equipment account and the accumulated depreciation
account. Gains or losses on disposition are amortized with the remaining net
investment in property, plant and equipment. When specifically identifiable
depreciable property, plant and equipment is retired outside the normal course
of business, the Company recognizes any gains or losses in the consolidated
statements of income. During 1997 and 1998, the Company recorded losses on
retirements of property, plant and equipment of $1,107,149 and $327,605,
respectively.
HEALTH INSURANCE
The Company has assumed self-insured risks for employee health insurance.
The Company has purchased stop-loss coverage that insures all benefits up to a
maximum of $400,000 per participant per year. The Company's deductible is
$35,000 per participant per year.
The Company has established a trust fund to administer the processing and
payment of all health care claims. The Company contributes an amount monthly to
the trust fund representing an estimate of the health care costs expected to be
incurred, which amount is expensed as incurred. Management has evaluated the
adequacy of the contributions to the trust fund for each of the three years
ended December 31, 1998 and believes that the contributions are sufficient to
cover all claims relating to those years.
INCOME TAXES
The Company is organized and operates as a cooperative. As such, the
Company is not subject to federal or state income taxes provided it meets the
requirements of the Internal Revenue Code to continue to qualify as a
cooperative. The Company is, however, subject to income taxes on income
unrelated to the provision of telephone service.
The Company's wholly owned subsidiary, Advantage, is a taxable corporation.
Income taxes of Advantage are accounted for using Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("FAS 109"). Under FAS
109, Advantage recognizes deferred tax assets and liabilities for future tax
consequences of events that have been previously recognized in its financial
statements or tax returns. The measurement of deferred tax assets and
liabilities is based on provisions of the enacted tax law.
MEMBERSHIP FEES AND PATRONAGE CAPITAL
The Company does not charge its members membership fees. Patronage capital
is the net income retained by the Company and is allocated to members based on
their respective purchases of services from the Company. The Company's board of
directors approves all capital credit retirements, which are paid in the year
approved.
REVENUE RECOGNITION
Revenue for telecommunications services is recognized as services are
provided. Due to the timing of the Company's billing cycles, at any point in
time certain services have been provided to customers but not yet billed.
Revenue that has been earned but not yet billed to customers amounts
F-12
<PAGE> 90
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to $197,673 and $280,527 at December 31, 1997 and 1998, respectively, and is
included in telecommunications accounts receivable in the consolidated balance
sheets. Additionally, the Company invoices customers one month in advance for
certain recurring charges, resulting in advance billings and payments of $50,952
and $68,081 at December 31, 1997 and 1998, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the certain reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
To meet the reporting requirements of Statement of Financial Accounting
Standards No. 107, Disclosures About Fair Value of Financial Instruments ("FAS
107"), the Company calculates the fair value of financial instruments using
quoted market prices and the present value of future cash flows. At December 31,
1997 and 1998, the fair value of the Company's long-term debt was $22,171,213
and $21,462,612, respectively, compared to carrying values of $24,510,591 and
$23,663,024, respectively. For the Company's other financial instruments, there
were no material differences between fair values and carrying amounts.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income ("FAS 130"). FAS
130 requires that the changes in the amounts of certain items, including gains
and losses on certain securities, be shown in the financial statements. For
1996, 1997 and 1998, the Company's comprehensive income was equal to net income.
Effective December 31, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information, ("FAS 131"). FAS 131 establishes standards for reporting
information about operating segments in the Company's consolidated financial
statements and requirements for related disclosure about the Company's products
and services, geographic areas and major customers. The Company has two
reportable segments-- Wireline Services and Wireless Products and Services-- and
has disclosed information for each of these segments in these consolidated
financial statements.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). As permitted, the Company
has elected to adopt the provisions of SOP 98-1 during the year-ended December
31, 1998. Under the provisions of SOP 98-1, the Company began capitalizing and
amortizing the cost of its internal use software that it had previously expensed
as incurred. During 1998, the Company capitalized approximately $500,000 of
internal use software that previously would have been expensed.
F-13
<PAGE> 91
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. MARKETABLE SECURITIES
Total investment earnings for December 31, 1996, 1997 and 1998 were
$452,147, $649,553 and $712,644, respectively, and consisted solely of interest
income.
Marketable securities as of December 31, 1997 and 1998 are comprised of the
following:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
U.S. Treasury Securities, interest ranging from 5.5% to
6.4%, maturing 1999....................................... $11,745,539 $11,337,700
Certificates of Deposit, interest ranging from 4.5% to 5.5%,
maturing 1999............................................. 740,000 815,000
----------- -----------
$12,485,539 $12,152,700
=========== ===========
</TABLE>
3. OTHER ASSETS
Other assets as of December 31, 1997 and 1998 are comprised of the
following:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Local multipoint distribution service ("LMDS") license cost,
net of accumulated amortization of $8,677 in 1998......... $ -- $199,560
Prepaid lease costs......................................... -- 83,334
Investment in Co Bank Stock................................. 89,501 82,741
Cash surrender value of life insurance policy............... 50,000 50,000
Deposits.................................................... 635 635
-------- --------
$140,136 $416,270
======== ========
</TABLE>
The investment in LMDS license is being amortized using the straight-line
method over a ten-year useful life.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Listed below are the major
classes of the property, plant and equipment as of December 31, 1997 and 1998.
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Land........................................................ $ 493,746 $ 493,746
Buildings................................................... 4,088,422 4,436,081
Leasehold improvements...................................... 108,374 116,277
Central office equipment.................................... 12,897,832 13,552,529
Poles, cables and wire...................................... 31,376,577 34,215,424
Furniture and office equipment.............................. 1,821,853 1,770,099
Vehicles and other work equipment........................... 2,355,085 2,608,917
Paystation, internet and customer services equipment and
towers.................................................... 2,425,256 2,312,049
----------- -----------
$55,567,145 $59,505,122
=========== ===========
</TABLE>
F-14
<PAGE> 92
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt is represented by mortgage notes payable to the Rural
Utilities Service, a U.S. governmental agency. Following is a summary of
outstanding long-term debt.
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Notes payable to Rural Utilities Service, principal and
interest (at 2%) payable quarterly through 2007........... $ 1,177,245 $ 977,667
Notes payable to Rural Utilities Service, principal and
interest (at 5%) payable quarterly through 2023........... 23,333,346 22,685,357
----------- -----------
24,510,591 23,663,024
Less current maturities..................................... 845,394 818,258
----------- -----------
$23,665,197 $22,844,766
=========== ===========
</TABLE>
The notes payable to Rural Utilities Service provide for various
restrictions on the retirement of capital credits by the Company. Substantially
all assets of the Company are pledged as security for the outstanding debt.
The maturities of long-term debt for each of the five years after 1998 are
as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- -----------
<S> <C>
1999........................................................ $ 818,258
2000........................................................ 859,171
2001........................................................ 902,130
2002........................................................ 947,236
2003........................................................ 994,598
Thereafter.................................................. 19,141,631
-----------
$23,663,024
===========
</TABLE>
6. BENEFIT PLAN
The Company has adopted the defined contribution retirement and security
program of the National Telephone Cooperative Association plan covering all
employees meeting certain age and length of service requirements. The Company
funds the plan by making quarterly contributions into the program based upon
salaries. The Company's contributions were $215,795 in 1996, $225,742 in 1997,
and $244,066 in 1998.
7. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company has adopted Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits other than Pensions ("FAS
106"). FAS 106 requires accrual accounting for all postretirement benefits other
than pensions. Under the prescribed accrual method, the Company's obligation for
these postretirement benefits is to be fully accrued by the date employees
attain full eligibility for such benefits. Prior to the adoption of FAS 106, the
cost of health and life insurance benefits for retirees was recognized by
charging claims to expense as they were
F-15
<PAGE> 93
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
incurred. The cost of health benefits for current and future associate retirees
was recognized as determined under the projected unit credit cost method.
In conjunction with the adoption of FAS 106, for financial reporting
purposes, the Company elected to amortize the cost for the initial obligation
over twenty years.
Substantially all of the Company's employees are covered under
postretirement health and life insurance plans. The determination of
postretirement benefit cost for postretirement health benefit plans is based on
comprehensive hospital, medical, surgical and dental benefit provisions.
All of the following information is presented in accordance with the
revised disclosure requirements of Statement of Financial Accounting Standards
No. 132, Employers' Disclosures about Pensions and Other Postretirement
Benefits.
The following tables set forth the plan's funded status and the amount
recognized in the Company's consolidated financial statements as of December 31,
1997 and 1998.
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Reconciliation of benefit obligation:
Obligation at January 1................................... $1,927,479 $2,092,739
Service cost.............................................. 75,536 95,161
Interest cost............................................. 132,862 151,770
Liability (gain) or loss.................................. (3,841) 260,065
Benefits paid............................................. (39,297) (37,545)
---------- ----------
Obligation at December 31.............................. $2,092,739 $2,562,190
========== ==========
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1.................... $ 215,913 $ 778,033
Actual return on plan assets.............................. 101,417 113,304
Employer contributions.................................... 500,000 200,000
Benefits paid............................................. (39,297) (37,545)
---------- ----------
Fair value of plan assets at December 31............... $ 778,033 $1,053,792
========== ==========
Funded status
Funded status at December 31.............................. $1,314,706 $1,508,398
Unrecognized transition obligation........................ (963,356) (894,568)
Unrecognized prior service cost........................... (108,723) (99,383)
Unrecognized gain......................................... 289,661 47,825
---------- ----------
Net amount recognized.................................. $ 532,288 $ 562,272
========== ==========
</TABLE>
F-16
<PAGE> 94
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Periodic postretirement benefit cost is composed of the following for the
years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Service cost............................................... $ 60,036 $ 75,536 95,161
Interest cost.............................................. 113,768 132,862 151,770
Expected return on plan assets............................. (8,734) (55,842) (86,572)
Net amortization........................................... 61,416 72,196 78,128
-------- -------- --------
Postretirement benefit cost...................... $226,486 $224,752 $238,487
======== ======== ========
</TABLE>
For measurement purposes of the postretirement benefit obligation, the
Company used discount rates of 7.0%, 7.0% and 6.5% for the years ended December
31, 1996, 1997 and 1998, respectively. For each of the years ended December 31,
1996, 1997 and 1998, the assumed rate of future increases in compensation levels
was 6.0%. The medical cost trend rate in 1998 was approximately 8.5%, decreasing
to an ultimate rate in 2005 of 5.5%. A one percentage point increase (decrease)
in the assumed health care cost trend rates for each future year would have
increased (decreased) the aggregate of the service and interest cost components
of 1998 net periodic postretirement benefit cost by approximately $60,000 and
would have increased (decreased) the accumulated postretirement benefit
obligation as of December 31, 1998 by approximately $480,000.
8. INCOME TAXES
The provision for income taxes consisted of the following for the three
years ended December 31, 1998:
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Current provision (benefit)
Federal.................................................. $ 1,681 $168,830 $(12,993)
State.................................................... 198 19,870 (1,462)
-------- -------- --------
1,879 188,700 (14,455)
======== ======== ========
Deferred provision
Federal.................................................. 227,486 7,337 108,532
State.................................................... 26,774 863 12,768
-------- -------- --------
254,260 8,200 121,300
-------- -------- --------
$256,139 $196,900 $106,845
======== ======== ========
</TABLE>
The deferred tax assets and liabilities, at the respective income tax
rates, are as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Current deferred tax asset
Allowance for uncollectible accounts receivable........... $ 44,393 $ 75,525
======== ========
Noncurrent deferred tax liability
Tax depreciation in excess of financial reporting
depreciation........................................... $234,593 $387,025
======== ========
</TABLE>
F-17
<PAGE> 95
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions for income taxes differ from the amounts computed using
statutory rates as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Provision at statutory rates................................ 38% 38% 38%
Deduction for income allocated to cooperative members..... (31%) (30%) (36%)
--- --- ---
Effective tax rate.......................................... 7% 8% 2%
=== === ===
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company currently has a five-year noncancellable operating lease with
IBM for computer equipment. Rent expense for the years ended December 31, 1996,
1997 and 1998 amounted to $37,716, $75,432, and $75,432, respectively.
The following is a schedule of future minimum lease payments under the
noncancellable operating lease:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1999........................................................ $ 75,432
2000........................................................ 75,432
2001........................................................ 37,716
--------
Total....................................................... $188,580
========
</TABLE>
TELECOMMUNICATIONS LEGISLATION
The Telecommunications Act of 1996 (the "96 Act") was passed in February
1996. The 96 Act is intended to promote competition in all sectors of the
telecommunications marketplace, while preserving and advancing telephone
service. As a result of the 96 Act, the Federal Communications Commission
("FCC") is in the process of issuing revised rules governing telecommunications
services. Presently, competition has not had a significant adverse impact on the
Company. However, as the regulations required by the 96 Act have not yet been
finalized, management cannot predict the ultimate effects that the 96 Act and
future competition will have on the Company.
LITIGATION
The Company is also subject to various legal proceedings and claims that
arise in the ordinary course of its business. In the opinion of management, the
amount of ultimate liabilities with respect to these actions will not materially
affect the Company.
10. SEGMENT AND SIGNIFICANT CUSTOMER INFORMATION
SEGMENT INFORMATION
In accordance with FAS 131, the Company has two reportable segments -
Wireline Services and Wireless Products and Services.
F-18
<PAGE> 96
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Wireline Services include local telephone service and toll calls as well as
access services that enable long-distance carriers to complete calls to or from
locations outside of the Company's wireline operating area. Wireline Services
also provides billing and collection services to other telecommunications
companies.
Wireless Products and Services includes wireless communications services
and the sale of cellular telephones and accessories.
Segment results for the years ended December 31, 1996, 1997 and 1998 are as
follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
WIRELINE SERVICES
Revenue.......................................... $12,913,022 $13,685,459 $14,662,530
Operating income................................. 3,797,075 3,530,519 4,374,720
Total assets..................................... 41,986,321 40,907,884 42,541,522
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
WIRELESS PRODUCTS AND SERVICES
Revenue.......................................... $ 2,859,073 $ 3,085,127 $ 3,462,958
Operating income................................. 573,163 382,410 349,002
Total assets..................................... 3,932,841 5,011,278 7,325,986
</TABLE>
SIGNIFICANT CUSTOMER INFORMATION
A single long-distance carrier provides a significant portion of the
Company's network access services and billing and collection revenue. For the
years ended December 31, 1996, 1997 and 1998, this customer provided $1,992,680,
$1,943,850 and $1,707,239, respectively, of the Company's total operating
revenues. Revenues from this significant customer are included in the Wireline
Services segment.
11. SUBSEQUENT EVENT
On October 18, 1999, the board of directors of the Company approved a plan
of merger that effectively results in a reorganization of the Company. To effect
the transaction, the Company has formed a wholly-owned, taxable subsidiary, DTC
Communications Corp. ("DTC"), into which the Company will merge via an exchange
of all accumulated capital credits of the Company for shares of common stock of
DTC. In accordance with the Company's bylaws, the plan of merger must be voted
on and approved by the membership of the Company, which is expected to occur in
December 1999. If approved, the Company will be merged into DTC and DTC will
continue to carry on the Company's business activities.
Prior to the merger, DTC has had no substantive operations, therefore the
financial position and results of operations immediately subsequent to the
merger will be identical to those of the Company.
The following unaudited pro forma data is provided for information purposes
only and is subject to completion of the merger transaction described above.
F-19
<PAGE> 97
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company, as a cooperative, does not have outstanding shares of stock.
Rather the Company has accumulated capital credits due to its active and
inactive members. For purposes of the pro forma data below, ten dollars of
capital credits are equal to one share of common stock.
Pursuant to Statement of Financial Accounting Standards No. 128, Earnings
per Share, basic earnings per share is computed by dividing net income available
to common stockholders by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by dividing
net income by the weighted average number of common and common equivalent shares
outstanding during the year, which includes the additional dilution related to
conversion of convertible debt and/or preferred stock and the exercise of stock
options as computed under the treasury stock method. Because there were no
convertible securities outstanding during the years ended December 31, 1996,
1997 and 1998, diluted earnings per share was equal to basic earnings per share.
As mentioned above, DTC is a taxable entity. The Company, except for the
Advantage subsidiary, has not been subject to federal or state income taxes. The
following unaudited pro forma amounts present basic earnings per share and
diluted earnings per share as if the Company had been a taxable corporation for
all three years in the period ended December 31, 1998:
<TABLE>
<CAPTION>
PRO FORMA -- UNAUDITED
------------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net income, as reported............................... $3,503,125 $2,373,290 $4,402,676
Additional tax provision.............................. 1,223,050 833,435 1,610,445
---------- ---------- ----------
Pro forma net income............................. $2,280,075 $1,539,855 $2,792,231
========== ========== ==========
Weighted average shares outstanding.............. 1,302,411 1,514,019 1,770,309
========== ========== ==========
Basic earnings per share......................... $ 1.75 $ 1.02 $ 1.58
========== ========== ==========
Diluted earnings per share....................... $ 1.75 $ 1.02 $ 1.58
========== ========== ==========
</TABLE>
The pro forma net income above does not include approximately $850,000 of
one-time non-recurring expenses that will be recorded by the Company in
connection with this proposed merger transaction. These costs consist of legal,
consulting, accounting and other professional service fees.
F-20
<PAGE> 98
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND JUNE 30, 1999
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 2,098,624 $ 1,506,703
Marketable securities..................................... 12,152,700 13,981,614
Telecommunications accounts receivable, less allowance for
uncollectible accounts of $257,018 in 1998 and $212,387
in 1999................................................ 2,309,179 2,508,063
Other receivables......................................... 208,533 184,593
Materials and supplies.................................... 241,210 248,808
Prepaids and other current assets......................... 404,661 190,454
Deferred tax assets....................................... 75,525 66,366
------------ ------------
Total current assets.............................. 17,490,432 18,686,601
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost.................... 59,505,122 61,407,568
Accumulated depreciation.................................. (29,995,236) (32,377,374)
------------ ------------
Net property, plant and equipment................. 29,509,886 29,030,194
Property, plant and equipment under construction.......... 2,450,920 3,817,999
------------ ------------
Total property, plant and equipment............... 31,960,806 32,848,193
------------ ------------
OTHER ASSETS................................................ 416,270 526,486
------------ ------------
$ 49,867,508 $ 52,061,280
============ ============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 2,009,225 $ 865,514
Advance billings and payments............................. 68,081 81,348
Customer deposits......................................... 160,023 178,906
Current maturities of long-term debt...................... 818,258 859,171
Accrued taxes............................................. 378,367 182,511
Accrued salaries, wages and benefits...................... 442,535 438,155
Other accrued liabilities................................. 208,095 537,413
------------ ------------
Total current liabilities......................... 4,084,584 3,143,018
LONG-TERM DEBT:
Rural Utilities Service, net of current maturities........ 22,844,766 22,329,851
OTHER LIABILITIES:
Postretirement benefits other than pension................ 562,272 555,422
Deferred tax liabilities.................................. 387,025 522,397
------------ ------------
Total liabilities................................. 27,878,647 26,550,688
------------ ------------
COMMITMENTS AND CONTINGENCIES:
MEMBERS' EQUITY:
Patronage capital......................................... 21,988,861 25,510,592
------------ ------------
$ 49,867,508 $ 52,061,280
============ ============
</TABLE>
F-21
<PAGE> 99
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
---------- -----------
<S> <C> <C>
OPERATING REVENUE:
Local telephone services revenue.......................... $2,068,878 $ 2,172,634
Network access services revenue........................... 4,414,242 5,525,233
Wireless products and services revenue.................... 1,466,906 2,052,323
Miscellaneous revenue..................................... 778,793 812,693
---------- -----------
Total operating revenue........................... 8,728,819 10,562,883
---------- -----------
OPERATING EXPENSES:
Plant operations expense.................................. 1,866,447 1,927,959
Depreciation and amortization............................. 2,321,414 2,445,884
Customer operations expense............................... 520,453 624,295
Corporate operations expense.............................. 1,536,350 1,564,198
Operating taxes........................................... 217,682 247,804
---------- -----------
Total operating expenses.......................... 6,462,346 6,810,140
---------- -----------
Total operating income............................ 2,266,473 3,752,743
---------- -----------
OTHER INCOME (EXPENSE):
Interest expense.......................................... (560,675) (539,921)
Interest income........................................... 402,742 420,447
Other income.............................................. 74,464 171,661
---------- -----------
Total other income (expense)...................... (83,469) 52,187
---------- -----------
Income before income taxes........................ 2,183,004 3,804,930
PROVISION FOR INCOME TAXES.................................. 41,795 152,011
---------- -----------
Net income........................................ 2,141,209 3,652,919
PRO FORMA INFORMATION ASSUMING MERGER WITH DTC:
ADDITIONAL PROVISION FOR INCOME TAXES....................... 802,585 1,279,587
---------- -----------
Pro forma net income.............................. $1,338,624 $ 2,373,332
========== ===========
Weighted average shares outstanding....................... 1,689,596 2,128,011
========== ===========
Basic earnings per share............................... $ .79 $ 1.12
========== ===========
Diluted earnings per share............................. $ .79 $ 1.12
========== ===========
</TABLE>
F-22
<PAGE> 100
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 2,141,209 $ 3,652,919
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 2,321,414 2,445,884
Deferred taxes......................................... (39,178) 144,531
Changes in assets and liabilities:
Receivables.......................................... (511,365) (174,944)
Materials and supplies............................... (44,164) (7,598)
Prepaids and other current assets.................... 117,509 214,207
Accounts payable..................................... 23,070 (1,143,711)
Advance billings and payments........................ 7,500 13,267
Customer deposits.................................... 7,254 18,883
Accrued liabilities.................................. 22,462 129,082
Postretirement benefits other than pension........... (106,850) (6,850)
----------- -----------
Net cash provided by operating activities......... 3,938,861 5,285,670
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities, net.................... (385,921) (1,828,914)
Construction and acquisition of property, plant and
equipment, net......................................... (3,424,684) (3,333,271)
Increase in other assets, net............................. (137,306) (110,216)
----------- -----------
Net cash used in investing activities............. (3,947,911) (5,272,401)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt................................ (446,847) (474,002)
Retirement of capital credits............................. (112,536) (131,188)
----------- -----------
Net cash used in financing activities............. (559,383) (605,190)
----------- -----------
NET DECREASE IN CASH........................................ (568,433) (591,921)
CASH, beginning of period................................... 1,660,085 2,098,624
----------- -----------
CASH, end of period......................................... $ 1,091,652 $ 1,506,703
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for income taxes............................ $ 137,995 $ 152,011
=========== ===========
Cash payments for interest................................ $ 588,619 $ 571,444
=========== ===========
</TABLE>
F-23
<PAGE> 101
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1999 and the consolidated
statements of operations and cash flows for the periods ended June 30, 1998 and
June 30, 1999 have been prepared by the Company in accordance with the
accounting policies described in its annual financial statements for the year
ended December 31, 1998 and should be read in conjunction with the notes
thereto.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position at
June 30, 1999 and results of operations and changes in cash flows for all
periods presented have been made. The results of operations for the period ended
June 30, 1999 are not necessarily indicative of the operating results for the
full year.
2. PRO FORMA NET INCOME AND PER SHARE AMOUNTS
As discussed in note 11 to the consolidated financial statements, the Board
of Directors of the Company approved a plan of merger with DTC Communications
Corporation ("DTC").
The Company, as a cooperative, does not have outstanding shares of stock.
Rather the Company has accumulated capital credits due to its current and former
members. For purposes of the pro forma data below, ten dollars of capital
credits are equal to one share of common stock.
Pursuant to Statement of Financial Accounting Standards No. 128, Earnings
per Share ("FAS 128"), basic earnings per share is computed by dividing net
income available to common stockholders by the weighted average number of common
shares outstanding during the year. Diluted earnings per share is computed by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the year, which includes the additional
dilution related to conversion of convertible debt and/or preferred stock and
the exercise of stock options as computed under the treasury stock method.
Because there were no convertible securities outstanding during each of the six
months ended June 30, 1998 and 1999, diluted earnings per share was equal to
basic earnings per share.
F-24
<PAGE> 102
DEKALB TELEPHONE COOPERATIVE, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DTC is a taxable entity. The Company, except for its wholly owned
subsidiary, has not been subject to federal or state income taxes. The following
unaudited pro forma amounts present basic earnings per share and diluted
earnings per share as if the Company had been a taxable corporation for the six
months ended June 30, 1998 and 1999, respectively:
<TABLE>
<CAPTION>
PRO FORMA -- UNAUDITED
-----------------------------
JUNE 30, 1998 JUNE 30, 1999
------------- -------------
<S> <C> <C>
Net income, as reported..................................... $2,141,209 $3,652,919
Additional tax provision.................................... 802,585 1,279,587
---------- ----------
Pro forma net income...................................... $1,338,642 $2,373,332
========== ==========
Weighted average shares outstanding....................... 1,689,596 2,128,011
========== ==========
Basic earnings per share.................................. $ .79 $ 1.12
========== ==========
Diluted earnings per share................................ $ .79 $ 1.12
========== ==========
</TABLE>
F-25
<PAGE> 103
APPENDIX A
PROPOSED PLAN AND AGREEMENT OF MERGER
BY AND BETWEEN
DEKALB TELEPHONE COOPERATIVE, INC.
AND
DTC COMMUNICATIONS CORP.
A-1
<PAGE> 104
AGREEMENT AND PLAN OF MERGER
OF
DEKALB TELEPHONE COOPERATIVE, INC
(A TENNESSEE COOPERATIVE)
AND
DTC COMMUNICATIONS CORP.
(A TENNESSEE CORPORATION)
THIS AGREEMENT AND PLAN OF MERGER dated as of October 18, 1999 (the
"Agreement") is between DeKalb Telephone Cooperative, Inc., a Tennessee
cooperative ("Cooperative") and DTC Communications Corp., a Tennessee
corporation ("DTC"). The Cooperative and DTC are sometimes referred to herein as
the "Constituent Corporations."
RECITALS
A. DTC is a corporation duly organized and existing under the laws of the
State of Tennessee, with an authorized capital of 220,000,000 shares,
199,000,000 of which are designated "Class A Voting Common Stock" ("Class A
Common"), 1,000,000 of which are designated as "Class B Non-Voting Common Stock"
("Class B Common") (the Class A Common and the Class B Common being sometimes
herein referred to as the "Common Stock") and 20,000,000 of which are designated
"Preferred Stock." The Preferred Stock of DTC is undesignated as to series,
rights, preferences, privileges or restrictions. As of the date hereof, 100
shares of Class A Common were issued and outstanding, all of which were held by
the Cooperative, and no shares of either Class B Common or Preferred Stock were
issued and outstanding.
B. The Cooperative is a corporation duly organized and existing under the
laws of the State of Tennessee, having in 1974 elected to convert to a rural
telephone cooperative under the provisions of the Telephone Cooperative Act,
presently found at T.C.A. Sections 65-29-101 et seq. The Cooperative has no
authorized capital; however, as a cooperative owned by its members, it has
patronage capital which, as of June 30, 1999, was approximately $25.5 million.
C. The Board of Directors of the Cooperative has determined that, for the
purpose of effecting the conversion of the Cooperative to a for profit
corporation subject to the provisions of the Tennessee Business Corporation Act,
T.C.A. Sections 48-11-101 et seq., it is advisable and in the best interests of
the Cooperative and its members that the Cooperative merge with and into DTC
upon the terms and conditions herein provided.
D. The respective Boards of Directors of DTC and the Cooperative have
approved this Agreement and have directed that this Agreement be submitted to a
vote of their respective sole shareholder and members and executed by the
undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, DTC and the Cooperative hereby agree as follows:
A-2
<PAGE> 105
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Tennessee Business Corporation Act, the Tennessee Nonprofit Corporation Act and
the Telephone Cooperative Act, the Cooperative shall be merged with and into DTC
(the "Merger"), the separate existence of the Cooperative shall cease and DTC
shall survive the Merger and shall continue to be governed by the laws of the
State of Tennessee. DTC shall be, and is herein sometimes referred to as, the
"Surviving Corporation." The name of the Surviving Corporation shall be DTC
Communications Corp.
1.2 Conditions Precedent. Neither the Cooperative or DTC shall be
required to consummate the Merger if all of the following conditions have not
been satisfied or waived:
(a) this Agreement and Merger shall have been adopted and approved by
the sole shareholder of DTC and the members of the Cooperative in
accordance with the requirements of the Tennessee Business Corporation Act,
the Tennessee Nonprofit Corporation Act and the Telephone Cooperative Act;
(b) the Cooperative and DTC shall have received all material licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Cooperative and
its subsidiaries necessary for consummation of the Merger (other than those
which, if not obtained, would not have a material adverse effect upon: (1)
the Merger; (2) the financial condition or results of operations of the
Cooperative and it subsidiaries taken as a whole; or (3) the continuation
by DTC of the business and operations of the Cooperative and its
subsidiaries after the consummation of the Merger);
(c) no litigation or other proceeding shall have been instituted that
seeks to prevent consummation of the Merger or to obtain material damages
as a result of consummation of the Merger, and no restraining order or
injunction issued by any court of competent jurisdiction shall be in effect
prohibiting the consummation of the Merger; and
(d) there shall not have been proposed, enacted or deemed applicable
to the Merger any statute, rule, regulation or order by any governmental
agency or other regulatory or administrative authority which, in the sole
judgment of the Cooperative, might materially adversely affect or
materially delay the Merger.
1.3 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) all of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived; and
(b) executed Articles of Merger meeting the requirements of the
Tennessee Business Corporation Act and the Tennessee Nonprofit Corporation
Act shall have been filed with the Secretary of State of the State of
Tennessee.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
1.4 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of the Cooperative shall cease and DTC, as the Surviving
Corporation, (i) shall continue to possess all of its assets, rights, powers and
property as constituted immediately prior to the Effective Date of the Merger,
(ii) shall be subject to all actions previously taken by its and the
Cooperative's Boards of Directors, (iii) shall succeed, without other transfer,
to all of the assets, rights, powers and property of the Cooperative in the
manner more fully set forth in Section 48-21-108 of the Tennessee Business
A-3
<PAGE> 106
Corporation Act and Section 48-61-105 of the Tennessee Nonprofit Corporation
Act, (iv) shall continue to be subject to all of the debts, liabilities and
obligations of the Cooperative as constituted immediately prior to the Effective
Date of the Merger, and (v) shall succeed, without other transfer, to all of the
debts, liabilities and obligations of the Cooperative in the same manner as if
DTC had itself incurred them, all as more fully provided under the applicable
provisions of the Tennessee Business Corporation Act and the Tennessee Nonprofit
Corporation Act.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Charter. The Charter of DTC as in effect immediately prior to the
Effective Date of the Merger shall continue in full force and effect as the
Charter of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of DTC as in effect immediately prior to the
Effective Date of the Merger shall continue in full force and effect as the
Bylaws of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of DTC immediately
prior to the Effective Date of the Merger shall be the directors and officers of
the Surviving Corporation until their successors shall have been duly elected
and qualified or until as otherwise provided by law or the Charter or Bylaws of
the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK AND
MEMBERSHIP INTERESTS
3.1 DTC Common Stock. Upon the Effective Date of the Merger, each share of
Common Stock of DTC issued and outstanding immediately prior thereto, by virtue
of the Merger and without any action by DTC, the holder of such shares or any
other person, shall be canceled and returned to the status of authorized but
unissued shares.
3.2 Cooperative Patronage Capital. Upon the Effective Date of the Merger,
the patronage capital of the Cooperative as of the Effective Date of the Merger,
by virtue of the Merger and without any action by the Constituent Corporations,
the members or any other person, shall be converted into and exchanged for the
right to receive the following (the "Merger Consideration"):
(a) each person or entity who, as of the Effective Date of the Merger,
is an active member of (i.e., one who has standard telephone service with)
the Cooperative shall receive one (1) fully paid and nonassessable share of
Class A Common of the Surviving Corporation for each ten dollars ($10.00)
in patronage capital that the member has on the books of the Cooperative as
of the Effective Date of the Merger;
(b) each person or entity who, as of the Effective Date of the Merger,
is an inactive member of (i.e., one who previously had, but as of the
Effective Date of the Merger no longer has standard telephone service with)
the Cooperative shall receive one (1) fully paid and nonassessable share of
Class B Common of the Surviving Corporation for each ten dollars ($10.00)
in patronage capital that the member has on the books of the Cooperative as
of the Effective Date of the Merger; and
(c) each person or entity that receives either Class A Common or Class
B Common of the Surviving Corporation under subparagraphs (a) or (b) above
shall receive cash for any fractional share that results from that person
or entity's patronage capital account being an amount other than exact
multiples of $10.00.
A-4
<PAGE> 107
3.3 Issuance of Certificates. After the Effective Date of the Merger, and
in no event later than sixty (60) days after the Effective Date of the Merger,
DTC shall issue to each person or entity entitled to receive the Merger
Consideration any cash and certificates representing any Common Stock that the
person or entity is entitled to receive pursuant to Section 3.2.
Until the certificates for such Common Stock shall have been issued by the
Surviving Corporation, the registered owner on the books and records of the
Cooperative of any patronage capital which, pursuant to the Merger, has been
converted into Common Stock of the Surviving Corporation shall have and be
entitled to exercise any voting and other rights with respect to and to receive
dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation to which holders of the Common Stock would be entitled.
IV. GENERAL
4.1 Further Assurances. From time to time, as and when required by DTC or
by its successors or assigns, there shall be executed and delivered on behalf of
the Cooperative such deeds and other instruments, and there shall be taken or
caused to be taken by DTC and the Cooperative such further and other actions as
shall be appropriate or necessary in order to vest or perfect in or conform of
record or otherwise by DTC the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of the Cooperative and otherwise to carry out the purposes of this
Agreement. The officers and directors of DTC are fully authorized in the name
and on behalf of the Cooperative or otherwise to take any and all such action
and to execute and deliver any and all such deeds and other instruments.
4.2 Abandonment. At any time before the Effective Date of the Merger,
this Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either the Cooperative or of DTC, or of
both, notwithstanding the approval of this Agreement by the members of the
Cooperative or by the sole shareholder of DTC, or by both.
4.3 Amendment. The Boards of Directors of the Constituent Corporations
may amend this Agreement at any time prior to the filing of this Agreement (or
articles of merger with respect thereto) with the Secretary of State of the
State of Tennessee, provided that an amendment made subsequent to the adoption
of this Agreement by the members of the Cooperative and the sole shareholder of
DTC shall not: (a) alter or change the amount or kind of shares, securities,
cash, property and/or rights to be received in exchange for or on conversion of
all or any of the patronage capital of the Cooperative; (b) alter or change any
term of the Charter of the Surviving Corporation to be effected by the Merger;
or (c) alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the members of the Cooperative or
the holders of any class or series of capital stock of DTC.
4.4 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 111 High Street,
Alexandria, Tennessee 37012 and copies thereof will be furnished to any
shareholder or member of either Constituent Corporation, upon request and
without cost.
4.5 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Tennessee and, so far as applicable, the merger provisions of the
Tennessee Business Corporation Act and the Tennessee Nonprofit Corporation Act.
[Signatures appear on following page]
A-5
<PAGE> 108
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of DTC Communications Corp., a Tennessee
corporation, and DeKalb Telephone Cooperative, Inc., a Tennessee cooperative, is
hereby executed on behalf of each of such two corporations by their respective
officers thereunto duly authorized.
DEKALB TELEPHONE COOPERATIVE, INC.
By: /s/ ROY N. PUGH
-------------------------------------
Title: President
------------------------------------
DTC COMMUNICATIONS CORP.
By: /s/ H. WAYNE GASSAWAY
-------------------------------------
Title: President & CEO
------------------------------------
A-6
<PAGE> 109
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS INFORMATION STATEMENT/PROSPECTUS IN
CONNECTION WITH THE OFFERING AND SOLICITATION MADE HEREBY. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS INFORMATION STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY
THIS INFORMATION STATEMENT/PROSPECTUS IN ANY JURISDICTION TO OR FROM ANY PERSON
TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS INFORMATION STATEMENT/PROSPECTUS NOR
ANY DISTRIBUTION OF THE SECURITIES THIS INFORMATION STATEMENT/PROSPECTUS OFFERS
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A
CHANGE IN THE INFORMATION CONTAINED HEREIN OR IN THE AFFAIRS OF THE COOPERATIVE
OR DTC SINCE THE DATE HEREOF.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 110
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
DTC is subject to the Tennessee Business Corporation Act (the "TBCA"). For
a description of the provisions of the TBCA relating to indemnification of a
director or officer of a Tennessee for profit business corporation, see "THE
MERGER -- Indemnification and Limitation of Liability." DTC's Charter and Bylaws
contain provisions regarding the indemnification of DTC's directors and
officers. (See "THE MERGER -- Indemnification and Limitation of Liability.")
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. See the Exhibit Index located on page II-5 for a list of
exhibits that are filed as part of this Registration Statement
(b) FINANCIAL STATEMENT SCHEDULES. The required financial statement
schedule is filed as Schedule II (pages II-7 and II-8) to this Registration
Statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation form the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price present no more than a 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) For determining liability under the Securities Act, to treat each
post-effect amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
II-1
<PAGE> 111
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Information
statement/prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) The undersigned registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section (10)(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alexandria, State of
Tennessee, on October 25, 1999.
DTC COMMUNICATIONS CORP.
By: /s/ H. WAYNE GASSAWAY
------------------------------------
Name: H. Wayne Gassaway
Title: President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby severally constitutes and appoints Wayne Gassaway, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement and all documents
relating thereto and to file the same with all exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission
and each state securities regulatory authority, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act and
thing necessary or advisable to be done in and about the premises as fully to
all intents and purposes as he might or could do in person hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities on this 25th of October, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ H. WAYNE GASSAWAY President and Chief Executive Officer
- --------------------------------------------------------
H. Wayne Gassaway
/s/ DENISE J. BROWN Controller (principal financial and
- -------------------------------------------------------- accounting officer)
Denise J. Brown
/s/ PHYLLIS MCKINNEY Secretary
- --------------------------------------------------------
Phyllis McKinney
/s/ JAMES PAUL CANTRELL Director
- --------------------------------------------------------
James Paul Cantrell
/s/ BILLY CHUMBLEY Director
- --------------------------------------------------------
Billy Chumbley
Director
- --------------------------------------------------------
James C. Hale
/s/ DANNY LATTIMORE Director
- --------------------------------------------------------
Danny Lattimore
</TABLE>
II-3
<PAGE> 113
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROYCE N. MARTIN Director
- --------------------------------------------------------
Royce N. Martin
/s/ DAVID L. PARKER Director
- --------------------------------------------------------
David L. Parker
/s/ ROBERT B. PARTON Director
- --------------------------------------------------------
Robert B. Parton
/s/ ROY N. PUGH Director
- --------------------------------------------------------
Roy N. Pugh
/s/ EDDIE THOMAS Director
- --------------------------------------------------------
Eddie Thomas
/s/ CHARLES DWIGHT VINSON Director
- --------------------------------------------------------
Charles Dwight Vinson
</TABLE>
II-4
<PAGE> 114
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
3.1 -- Amended and Restated Charter of DTC Communications Corp.....
3.2 -- Bylaws of DTC Communications Corp. .........................
5 -- Opinion of Tuke Yopp & Sweeney, PLC re: legality*...........
8 -- Opinion of Tuke Yopp & Sweeney, PLC re: tax matters*........
10.1 -- DTC Communications Corp. Incentive Plan.....................
10.2 -- DTC Communications Corp. Share Compensation Plan for
Non-employee directors......................................
10.3 -- Telephone Loan Contract, dated as of October 15, 1951,
between DeKalb Telephone Cooperative and United States of
America.....................................................
10.4 -- Amendment, dated as of March 9, 1953, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.5 -- Amendment, dated as of February 15, 1954, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.6 -- Amendment, dated as of November 15, 1954, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.7 -- Amendment, dated as of November 15, 1957, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.8 -- Amendment, dated as of November 9, 1959, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.9 -- Amendment, dated as of June 20, 1961, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.10 -- Amendment, dated as of June 8, 1964, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.11 -- Amendment, dated as of March 23, 1966, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.12 -- Amendment, dated as of July 1, 1968, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America*.........
10.13 -- Amendment, dated as of February 13, 1970, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.14 -- Amendment, dated as of December 15, 1971, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.15 -- Amendment, dated as of August 5, 1973, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
</TABLE>
II-5
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.16 -- Amendment, dated as of July 15, 1974, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.17 -- Amendment, dated as of January 27, 1976, to Telephone Loan
Contract, dated as of October 15, 1951, between DeKalb
Telephone Cooperative and United States of America..........
10.18 -- Telephone Loan Contract Amendment, dated as of March 17,
1980, between DeKalb Telephone Cooperative and United States
of America..................................................
10.19 -- Agreement, dated as of June 24, 1986, between United States
of America and DeKalb Telephone Cooperative.................
10.20 -- Telephone Loan Contract Amendment, dated as of July 29,
1988, between DeKalb Telephone Cooperative and United States
of America..................................................
10.21 -- Promissory Note, dated as of May 23, 1994, made by DeKalb
Telephone Cooperative, Inc. in favor of the Federal
Financing Bank*.............................................
10.22 -- Mortgage Note, dated as of November 28, 1988, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.23 -- Mortgage Note, dated as of June 23, 1980, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.24 -- Mortgage Note, dated as of April 27, 1976, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.25 -- Mortgage Note, dated as of September 23, 1974, made by
DeKalb Telephone Cooperative in favor of United States of
America.....................................................
10.26 -- Mortgage Note, dated as of October 24, 1973, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.27 -- Mortgage Note, dated as of February 14, 1972, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.28 -- Mortgage Note, dated as of March 25, 1970, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.29 -- Mortgage Note, dated as of October 11, 1968, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.30 -- Mortgage Note, dated as of August 3, 1966, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.31 -- Mortgage Note, dated as of June 21, 1965, made by DeKalb
Telephone Cooperative in favor of United States of
America.....................................................
10.32 -- Mortgage Note, dated as of August 17, 1964, made by DeKalb
Telephone Cooperative in favor of United State of America...
23.1 -- Consent of Tuke Yopp & Sweeney, PLC (included in Exhibit
5)*.........................................................
23.2 -- Consent of Arthur Andersen LLP, independent public
accountants.................................................
24 -- Power of Attorney (set forth on signature page hereto)......
27 -- Financial Data Schedule.....................................
</TABLE>
- ------------
* To be filed by amendment.
II-6
<PAGE> 116
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DeKalb Telephone Cooperative, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of DeKalb Telephone Cooperative, Inc. and
subsidiary for the three years ended December 31, 1998 included in the Form S-4
and have issued our report thereon dated September 1, 1999 (except with respect
to the matter discussed in Note 11 as to which the date is October 18, 1999).
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The accompanying financial
statement schedule is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth herein in relation to the basic consolidated financial statements taken as
a whole.
ARTHUR ANDERSEN LLP
Nashville, Tennessee
September 1, 1999
II-7
<PAGE> 117
SCHEDULE II
DEKALB TELEPHONE COOPERATIVE AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
BEGINNING OF CHARGED TO COSTS DEDUCTIONS BALANCE AT
PERIOD AND EXPENSES(1) (CHARGE OFFS)(1) END OF PERIOD
------------ ---------------- ---------------- -------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for uncollectible accounts......... $209,504 $143,381 $ (95,867) $257,018
======== ======== ========= ========
Year ended December 31, 1997:
Allowance for uncollectible accounts......... $207,939 $128,401 $(126,836) $209,504
======== ======== ========= ========
Year ended December 31, 1996:
Allowance for uncollectible accounts......... $119,435 $156,442 $ (67,938) $207,939
======== ======== ========= ========
</TABLE>
- ---------------
(1) Additions to the allowance for uncollectible accounts are included in
corporate operations expense. All deductions or charge offs are charged
against the allowance for uncollectible accounts.
II-8
AMENDED AND RESTATED CHARTER
OF
DTC COMMUNICATIONS CORP.
Pursuant to the Tennessee Business Corporation Act ("TBCA"), the
undersigned Corporation hereby amends and restates its Charter in its
entirety and adopts the following as its Charter:
ARTICLE I
NAME
The name of this Corporation is DTC Communications Corp.
ARTICLE 2
INITIAL REGISTERED OFFICE/AGENT AND PRINCIPAL OFFICE
The address of the Corporation's registered office in the State of
Tennessee is Tuke Yopp & Sweeney, PLC, Bank of America Plaza Suite 1100, 414
Union Street, Nashville, Davidson County, Tennessee 37219. The name of the
registered agent at such address is Gary M. Brown. The Corporation's
principal office is located at 111 High Street, Alexandria, DeKalb County,
Tennessee 37012-0247.
ARTICLE 3
INCORPORATOR
The name and address of the incorporator is Christine L. Connolly,
Tuke Yopp & Sweeney, PLC, Bank of America Plaza Suite 1100, 414 Union Street,
Nashville, Tennessee 37219.
ARTICLE 4
FOR PROFIT
The Corporation is for profit.
ARTICLE 5
POWERS
The Corporation shall have the power and authority to carry on any
business permitted by, and to have and exercise all of the powers and rights
conferred by, the TBCA, as amended from time to time, or any successor
provisions.
ARTICLE 6
SHARES
The maximum number of shares of stock that the Corporation shall have
the authority to issue is one hundred ninety-nine million (199,000,000)
shares of Class A Voting Common Stock, one million (1,000,000) shares of
Class B Non-Voting Common Stock and twenty million (20,000,000) shares of
Preferred Stock.
6.1. The Class A Voting Common Stock shall have no par value per
share, and when issued and outstanding, shall have unlimited voting rights,
and shall be entitled to receive equally with the Class B Non-Voting Common
Stock the net assets of the Corporation upon dissolution.
6.2. The Class B Non-Voting Common Stock shall have no par value
per share, and when issued and outstanding, shall have no voting rights,
except as may be required by the TBCA as it exists on the date hereof, and
shall be entitled to receive equally with the Class A Voting Common Stock the
net assets of the Corporation upon dissolution.
6.3. With respect to shares designated and classified as Preferred
Stock, the Board of Directors of the Corporation, pursuant to Section 48-16-
102 of the TBCA, are authorized to establish and to determine, in whole or in
part, to the full extent permitted by Tennessee law and within the limits set
forth in Section 48-16-101 of the TBCA, the preferences, limitations and
relative rights of the Preferred Stock or any series of Preferred Stock. The
Board of Directors may authorize one or more series of Preferred Stock with
preferences, limitations and relative rights, including, but not limited to:
(i) special, conditional or limited voting rights, or no right to vote,
except to the extent limits or conditions are prohibited by the TBCA; (ii)
characteristics as redeemable or convertible; (iii) distributions to the
shareholders calculated in any manner, including, but not limited to,
dividends that may be cumulative, noncumulative, or partially cumulative;
(iv) preferences over any class of shares with respect to distributions,
including, but not limited to, dividends and distributions, upon dissolution
of the Corporation; or (v) specification and changes in the specification of
par values. In accordance with Section 48-16-101 of the TBCA, the foregoing
list of designations, preferences, limitations and relative rights is not
exhaustive.
6.4. Before issuing any shares or any series of Preferred Stock
pursuant to Article 6.3 of this Charter, the Corporation must deliver to the
Secretary of State of the State of Tennessee for filing articles of
amendment, which are effective without shareholder action, that set forth:
(i) the name of the Corporation; (ii) the text of the amendment fixing the
terms of the class or series of shares; (iii) a statement that the amendment
was duly adopted by the Board of Directors; and (iv) the date it was adopted.
6.5. The Board of Directors may declare and issue a share dividend
consisting of one class or series of stock of the Corporation with respect to
the shares of the same or another class or series of stock of the
Corporation.
ARTICLE 7
AMENDMENT OF CHARTER AND BYLAWS
7.1. This Charter and any Article contained herein may be amended,
altered, changed or repealed in the manner now or hereafter prescribed by
statute, and all rights conferred upon shareholders herein are granted
subject to this reservation. Notwithstanding the foregoing, any reduction in
the maximum number of shares the Corporation may issue under Article 6 of
this Charter and any amendment, alteration, change or repeal of Articles 6.3,
7, 8, 10 or 11 of this Charter may only be taken by the affirmative vote of
the holders of at least eighty percent (80%) of the outstanding shares of the
Corporation's outstanding capital stock entitled to vote on such matters,
voting together as a single class (it being understood that for purposes of
this Article 7, each share of voting stock shall be entitled to the number of
votes granted to it by law or pursuant to Article 6 of this Charter), unless
such amendment, alteration, change or repeal has previously been expressly
approved by the Board of Directors by the affirmative vote or consent of at
least sixty-six and two-thirds percent (66-2/3%) of the number of directors
then in office. In addition, and notwithstanding the foregoing, Article 9 of
this Charter only may be amended, altered, changed or repealed as provided in
Article 9.4.
7.2. The Board of Directors shall have the power to make, amend,
alter, change or repeal the by-laws (except in so far as the by-laws adopted
by the shareholders shall otherwise provide). Any by-laws made by the
directors under the powers conferred hereby may be amended, altered, changed
or
2
repealed by the directors or by the shareholders. Notwithstanding the
foregoing or anything contained in this Charter to the contrary, Section 2.2
of Article 2, Sections 4.4 and 4.5 of Article 4, Sections 6.7 and 6.8 of
Article 6, Article 9 and Article 12 of the by-laws (or the successor
provisions to such sections of the by-laws) shall not be amended, altered,
changed or repealed and no provision inconsistent therewith shall be adopted
without the affirmative vote of the holders of at least eighty percent (80%)
of the shares of the Corporation's outstanding capital stock entitled to
vote, voting together as a single class (it being understood that for
purposes of this Article 7, each share of voting stock shall be entitled to
the number of votes granted to it by law or pursuant to Article 6 of this
Charter), unless such amendment, alteration, change or repeal has previously
been expressly approved by the Board of Directors by the affirmative vote or
consent of at least sixty-six and two-thirds percent (66-2/3%) of the number
of directors then in office.
ARTICLE 8
DIRECTORS
8.1. The number of directors to constitute the Board of Directors
shall be fixed, from time to time, at not less than one (1) nor more than
fifteen (15), by resolution of the Board of Directors adopted by the vote or
consent of at least sixty-six and two-thirds percent (66-2/3%) of the number
of directors then in office. The directors shall be divided into three
classes: Class I, Class II and Class III; and the number of directors in
such classes shall be as nearly equal as possible. The term of office of the
initial Class I directors shall expire at the annual meeting of shareholders
of the Corporation in 2000; the term of office of the initial Class II
directors shall expire at the annual meeting of shareholders of the
Corporation in 2001; and the term of office of the initial Class III
directors shall expire at the annual meeting of shareholders of the
Corporation in 2002; or in each case until their respective successors were
duly elected and qualified. At each annual election held after 2000 the
directors chosen to succeed those whose terms then expire shall be identified
as being of the same class as the directors they succeed and shall be elected
for a term of three (3) years expiring at the third succeeding annual meeting
or thereafter until their respective successors are duly elected and
qualified. If the number of directors is changed, any increase or decrease
in the number of directors shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible.
8.2. Any vacancy on the Board of Directors (whether such vacancy
is caused by death, resignation or removal for cause, or is the result of a
newly created directorship) shall be filled by a majority of the directors
then in office. Any director elected to fill a vacancy in any class (whether
such vacancy is caused by death, resignation or removal for cause, or it the
result of an increase in the number of directors in such class) shall hold
office for a term which shall expire with the term of the directors in such
class.
8.3. No director may be removed without cause from office during
such director's term of office. At a meeting called expressly for that
purpose, any director may be removed by the shareholders for cause by the
affirmative vote of the holders of at least eighty percent (80%) of the
shares entitled to vote at an election of directors, voting together as a
class.
ARTICLE 9
BUSINESS COMBINATIONS
9.1. In addition to any affirmative vote required by law, this
Charter or the by-laws of the Corporation, and except as otherwise expressly
provided in Article 9.2 of this Charter, a Business Combination (as
hereinafter defined) may not be consummated or effected unless such
transaction shall first have received the affirmative vote of the holders of
at least eighty percent (80%) of the voting power of the then outstanding
shares of capital stock of the Corporation, voting together as a single class
(the
3
"Voting Stock") (it being understood that for the purposes of this Article 9,
each share of Voting Stock shall be entitled to the number of votes granted
to it by law or pursuant to Article 6 of this Charter). Such affirmative
vote shall be required notwithstanding the fact that no vote may be required,
or that a lesser percentage or separate class vote may be specified, by or
pursuant to law, this Charter, the by-laws or any agreement.
9.2. Article 9.1 of this Charter shall not be applicable to a
Business Combination, and such Business Combination shall require only the
affirmative vote (if any) as required by law or otherwise, if the Business
Combination shall have been expressly approved by the affirmative vote or
consent of at least sixty-six and two-thirds percent (66-2/3%) of the
Continuing Directors (as hereinafter defined). In determining whether or not
to approve any such Business Combination, the Board of Directors shall give
due consideration to all factors the Board may consider relevant, including,
but not limited to:
(a) the legal and economic effects on the
customers of the Corporation and its subsidiaries, on the communities
and geographic areas in which the Corporation and its subsidiaries
operate or are located, and on any of the businesses and properties
of the Corporation and its subsidiaries; and
(b) the adequacy of the consideration offered
in relation not only to the current market price of the outstanding
securities of the Corporation, but also to the current value of the
Corporation in a freely negotiated transaction and the Board of
Directors' estimate of the future value of the Corporation
(including, but not limited to, the unrealized value of its
properties and assets) as an independent going concern.
9.3. For the purposes of this Article 9:
(a) A "Business Combination" shall mean:
(1) any merger, consolidation or exchange of
shares of capital stock of the Corporation or any Subsidiary
(as hereinafter defined) with or into any Interested Person
(as hereinafter defined) or any other corporation or entity
(whether or not it is an Interested Person) which is, or
after such merger, consolidation or exchange of shares would
be, an Interested Person or an Affiliate (as hereinafter
defined) of an Interested Person, regardless of the
surviving entity;
(2) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition to or with an
Interested Person of any Affiliate of any Interested Person
(in a single transaction or a series of related
transactions) other than in the ordinary course of business,
of all or a substantial part of the assets of the
Corporation or of any Subsidiary, or both;
(3) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition to or with the
Corporation or any Subsidiary (in a single transaction or a
series of related transactions) other than in the ordinary
course of business, of all or a substantial part of the
assets of an Interested Person or any Affiliate of an
Interested Person, or both;
(4) any issuance or transfer by the Corporation
or any Subsidiary of any securities of the Corporation or
any Subsidiary to an Interested Person or any Affiliate of
an Interested Person (other than an issuance or transfer of
securities which is effected on a pro rata basis to all
shareholders of the Corporation);
4
(5) any acquisition by the Corporation or any
Subsidiary, other than in the ordinary course of business,
of any securities of an Interested Person or any Affiliate
of an Interested Person;
(6) any recapitalization or reclassification of
shares of any class of capital stock of the Corporation or
any Subsidiary, or any merger or consolidation of the
Corporation with any Subsidiary (whether or not involving an
Interested Person), which transaction would have the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of capital
stock of the Corporation (or any securities convertible into
any class of such capital stock) with respect to which an
Interested Person or an Affiliate of an Interested Person is
the Beneficial Owner (as hereinafter defined);
(7) any merger or consolidation of the
Corporation with any Subsidiary, if the provisions of this
Article 9 shall not be contained in the charter of the
surviving entity;
(8) any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of
an Interested Person of an Affiliate of an Interested
Person; or
(9) any agreement, contract, plan, proposal or
other arrangement providing for any of the foregoing.
(b) An "Interested Person" shall mean any individual,
partnership, firm, corporation or other entity (other than the
Corporation or any Subsidiary, or any profit-sharing employee stock
ownership or other employee benefit plan established by the
Corporation or any Subsidiary, or any trustee of, or fiduciary with
respect to, any such plan when acting in such capacity) who or which,
directly or indirectly, together with any of his or its Affiliates
and Associates (as hereinafter defined), is, or at any time within
the one-year period immediately prior to the date in question was,
the Beneficial Owner of five percent (5%) or more of the voting power
of the outstanding Voting Stock (it being understood that for the
purposes of this Article 9, each share of the Voting Stock shall be
entitled to the number of votes granted to it by law or pursuant to
Article 6 of this Charter).
(c) A "Subsidiary" shall mean any corporation of which
a majority of its capital stock is directly or indirectly owned by
the Corporation.
(d) The term "Beneficial Owner" shall have the meaning
ascribed to such term by Rule 13d-3 promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
(e) The terms "Affiliate" or "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 promulgated
by the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
(f) The term "Continuing Director" shall mean any member
of the Board of Directors of the Corporation, while such person is
a member of the Board, who is not an Affiliate or Associate or
representative of the Interested Person and was a member of the Board
prior to the time that the Interested Person became an Interested
Person, and any successor of a Continuing Director, while such
successor is a member of the Board, who is not an Affiliate or
5
Associate or representative of the Interested Person and is
recommended or elected to succeed the Continuing Director by a
majority of Continuing Directors.
9.4. Notwithstanding any other provision of this Charter or the
by-laws of the Corporation (and notwithstanding the fact that a lesser
percentage or separate class vote may be specified by law, this Charter or
the by-laws of the Corporation), the affirmative vote of the holders of not
less than eighty percent (80%) of the votes entitled to be cast by the
holders of all then outstanding shares of Voting Stock, voting together as a
single class, shall be required to make, alter, amend, change, add to or
repeal any provisions inconsistent with this Article 9; provided, however,
that such eighty percent (80%) vote shall not be required for any amendment,
repeal or addition unanimously recommended by the Board if not less than
three-fourths of those directors who have voted in favor thereof are persons
who would be eligible to serve as Continuing Directors.
ARTICLE 10
EXCULPATION; INDEMNIFICATION
10.1. A director of the Corporation shall not be personally liable
to the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law or (iii) under Section 48-18-304 of the TBCA.
If the TBCA later is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation, in addition to the limitation on personal liability
initially provided in this Charter, shall be limited to the fullest extent
permitted by the amended TBCA. This Article 11 shall not eliminate or limit
the liability of a director for any act or omission occurring prior to the
date when this Charter became effective, if such a limitation or elimination
of liability of a director for those acts or omissions is prohibited by the
TBCA as then in effect. Any repeal or modification of this Article 11 by the
shareholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
10.2. (a) The Corporation shall have the power to indemnify
any director, officer, employee, agent of the Corporation or any
other person who is serving at the request of the Corporation in any
such capacity with another corporation, partnership, joint venture,
trust or other enterprise (including, but not limited to, any
employee benefit plan) to the fullest extent permitted by the TBCA,
as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said
law permitted the Corporation to provide prior to such amendment),
and such indemnification may continue as to any person who has ceased
to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of the affected
person.
(b) By action of the Board of Directors, notwithstanding
any interest of the directors in the action, the Corporation may
purchase and maintain insurance, in amounts the Board of Directors
deems appropriate, to protect itself and any director, officer,
employee or agent of the Corporation or any other person who is
serving at the request of the Corporation in any such capacity with
another corporation, partnership, joint venture, trust or other
enterprise (including, but not limited to, any employee benefit plan)
against any expense, liability or loss asserted against or incurred
by such person in such capacity or arising out of such status
(including, but not limited to, expenses, judgments, fines, any
excise taxes assessed on a person with respect to any employee
benefit plan, and amounts paid in settlement) to the fullest extent
permitted by the TBCA as it exists or later may be amended, and
whether or not the Corporation would have the
6
power to indemnify such person against such expense, liability or
loss under the terms of any agreement or bylaw or the TBCA.
ARTICLE 11
SHAREHOLDERS
11.1. Any action required or permitted to be taken by the
shareholders of the Corporation shall be effected at a duly called annual or
special meeting of shareholders.
11.2. In addition to the ability of the Board of Directors to call
a special meeting as provided in the Bylaws of this Corporation, the holders
of at least twenty percent (20%) of all of the votes entitled to be cast on
any issue to be considered at a proposed special meeting may sign, date and
deliver to the Corporation's Secretary one (1) or more written demands for
the special meeting describing the purpose or purposes for which it is to be
held. Upon receipt by the Secretary of such a demand(s), the Secretary shall
call a special meeting in accordance with the by-laws of the Corporation and
Tennessee law.
IN WITNESS WHEREOF, the undersigned, for the purpose of amending and
restating the Charter of the Corporation in accordance with the laws of the
State of Tennessee, does make, file and record this Amended and Restated
Charter and does certify that the facts herein stated are true, as of this 21
--
day of October, 1999.
DTC COMMUNICATIONS CORP.
By: /s/ Wayne Gassaway
------------------------
Wayne Gassaway, Chief Executive Officer
7
CERTIFICATE
Pursuant to Section 48-20-107 of the Tennessee Business Corporation
Act, DTC Communications Corp. (the "Corporation") hereby certifies that the
attached Amended and Restated Charter contains an amendment to the Charter
requiring shareholder approval and that the Amended and Restated Charter was
duly adopted by an action by joint written consent of the board of directors
and sole shareholder of the Corporation on October 21, 1999.
--
Witness my hand this 21 day of October, 1999.
--
DTC COMMUNICATIONS CORP.
By: /s/ Wayne Gassawy
-------------------------
Wayne Gassaway, Chief Executive Officer
8
BYLAWS
OF
DTC COMMUNICATIONS CORP.
ARTICLE 1
OFFICES
Section 1.1.Tennessee Office. The principal office of the
Corporation in the State of Tennessee shall be located in the City of
Alexandria, County of DeKalb.
Section 1.2.Other Offices. The Corporation may have such other
offices, either within or without the State of Tennessee, as the Board of
Directors may designate or as the business of the Corporation may from time
to time require.
ARTICLE 2
BOARD OF DIRECTORS
Section 2.1 Qualification and Election. The business and
affairs of the Corporation shall be managed by a Board of Directors.
Directors need not be shareholders or residents of the State of Tennessee but
must be of legal age. At an annual meeting of the shareholders (or a special
meeting called for that purpose), a plurality of the votes cast which were
entitled to vote shall elect the directors. Each director shall hold office
until the expiration of the term for which he or she is elected, and
thereafter until a successor has been elected and qualified.
Section 2.2 Number and Tenure. The number of directors shall be
fixed from time to time exclusively pursuant to a resolution adopted by at
least sixty-six and two thirds percent (66-2/3%) of the Board of Directors.
The directors shall be divided, with respect to the time for which they
severally hold office, into three (3) classes, as nearly equal in size as
possible, with the term of office of the first class to expire at the 2000
annual meeting of shareholders, the term of office of the second class to
expire at the 2001 annual meeting of shareholders and the term of office of
the third class to expire at the 2002 annual meeting of shareholders, with
each director to hold office until his or her successor shall have been duly
elected and qualified. At each meeting of shareholders, commencing with the
2000 annual meeting, (i) directors elected to succeed those directors whose
terms then expire shall be elected for a three-year term of office to expire
at the third succeeding annual meeting of shareholders after their election,
with each director to hold office until his or her successor shall have been
duly elected and qualified, and (ii) if authorized by a resolution of the
Board of Directors, directors may be elected to fill any vacancy on the Board
of Directors, regardless of how such vacancy shall have been created.
Section 2.3 Executive and Other Committee. The Board of
Directors, by a resolution adopted by a majority of the directors, may
designate committees consisting of two (2) or more persons, who may or may
not be directors, and the Board of Directors may delegate to any committee
any authority that the Board of Directors deems desirable, including the
right to delegate to an Executive Committee the power to exercise all the
authority of the Board of Directors in the management of the affairs and
property of the Corporation. All members of committees that exercise powers
of the Board of Directors must be members of the Board of Directors.
Section 2.4 Compensation. Unless otherwise restricted by the
Charter or these Bylaws, the Board of Directors shall have the authority to
fix the compensation of directors. Without limiting the generality of the
foregoing, the directors may be paid their expenses, if any, of attendance at
each meeting of the Board of
1
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as a director. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
ARTICLE 3
OFFICERS
Section 3.1 Number. The Corporation shall have a Chairman of
the Board, a President and a Secretary, and any other officers that the Board
of Directors from time to time considers necessary. The same person may hold
any two (2) or more offices, except that the offices of President and
Secretary shall not be held by the same person. The Corporation shall have
such other officers (e.g., vice presidents, controller and assistants) as the
Board of Directors from time to time may determine to be necessary or
appropriate.
Section 3.2 Election and Term. The Board of Directors shall
elect the officers at its annual meeting (or at a special meeting called for
that purpose). Each officer shall hold office until his successor shall have
been duly elected and shall have qualified or until his death or until he
shall resign, but any officer may be removed from office at any time, with or
without cause, by the affirmative vote of a majority of the Board of
Directors. Such removal shall be without prejudice to the contractual
rights, if any, of the person so removed.
Section 3.3 Duties. All officers shall have the authority and
perform those duties in the management of the Corporation which are normally
incident to their offices and as the Board of Directors provides from time to
time, including those duties specified below.
A. Chairman of the Board. The Chairman of the Board
shall, when present, preside at meetings of the Board of Directors and
shareholders and shall exercise all powers and perform all other duties
assigned by the Board of Directors.
B. President. Subject to any supervisory powers given
by the Board of Directors to the Chairman of the Board, the President shall
be the chief operating officer of the Corporation and shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and the officers and employees of the Corporation.
In the absence of the Chairman of the Board, or if there is no Chairman of
the Board, the President shall preside at meetings of the Board of Directors
or shareholders. Until reassigned by the Board of Directors, the President
shall be the chief executive officer of the Corporation
C. Vice Presidents. In the absence or disability of
the President, the Vice Presidents, in order of their rank as fixed by the
Board of Directors, or if not ranked, a Vice President designated by the
Board of Directors, shall perform all the duties of the President, and when
so acting shall have all the powers of, and be subject to all the
restrictions upon, the President. The Vice Presidents shall have the other
powers and perform the other duties prescribed for them respectively by the
Board of Directors, by the President, or by the Chairman of the Board.
D. Chief Financial Officer. The Chief Financial
Officer (who may be either the controller or a vice president or both) shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of
the Corporation, including amounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The
books of account shall be open at all reasonable times for inspection by any
directors. The Chief Financial Officer shall arrange for deposit of all
moneys and other valuables in the name and to the credit of the Corporation
with the depositories designated generally by the Board of
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Directors, shall disburse the funds of the Corporation as provided by the
Board of Directors, shall render to the Chairman of the Board, President and
directors, whenever requested, an account of all transactions as Chief
Financial Officer and an account of the financial condition of the
Corporation.
E. Secretary. The Secretary shall keep or cause to be
kept a corporate minute book. The minute book shall contain minutes of all
meetings and actions of directors, committees of directors and shareholders.
The Secretary shall keep or cause a transfer agent to keep a share register
or a duplicate share register showing the names of all shareholders and their
addresses, the number and classes of shares held by each, the number and date
of certificates issued for shares, and the number and date of cancellation of
certificates surrendered for cancellation. The Secretary shall give, or
cause to be given, notice of all meetings of the shareholders and of the
Board of Directors, as required by law or these Bylaws, and shall keep the
seal of the Corporation, if any.
Section 3.4 Bonds of Officers. The Board of Directors shall
determine which officers of the Corporation, if any, shall give bond, and the
bond terms and amount, the expense of the bond to be paid by the Corporation.
ARTICLE 4
RESIGNATIONS, REMOVALS AND VACANCIES
Section 4.1 Resignations. Any officer or director may resign at
any time by giving written notice to the Chairman of the Board of Directors,
the President or the Secretary. The resignation shall take effect at the time
specified in the notice, or, if no time is specified, then upon its
acceptance by the Board of Directors.
Section 4.2 Removal of Officers. The Board of Directors may
remove any officer or agent whenever in the judgment of the Board the best
interests of the Corporation will be served by the removal.
Section 4.3 Officer Vacancies. If any office becomes vacant by
reason of the death, resignation, disqualification or removal of the
incumbent, or from any other cause, the Board of Directors may, by the vote
of a majority, elect a successor to hold office for the unexpired term in
respect to which the vacancy occurred or was created. In case of the absence
of any officer of the Corporation, or for any reason that the Board of
Directors considers sufficient, the Board, for the time being, may delegate
the powers of the absent officer to any other officer or to any director,
except where otherwise provided by these Bylaws or by statute.
Section 4.4 Removal of Directors. Any director, or the entire
Board of Directors, may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all of the then outstanding shares
entitled to vote, voting together as a single class.
Section 4.5 Director Vacancies. Unless the Board of Directors
otherwise determines, vacancies resulting from the death, resignation,
retirement, disqualification, removal from office or other cause, and newly
created directorships resulting from any increase in the authorized number of
directors, may be filled only by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors,
and directors so chosen shall hold office for a term expiring at the annual
meeting of shareholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified.
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ARTICLE 5.
MEETINGS OF DIRECTORS
Section 5.1 Meetings. The annual meeting of the Board of
Directors shall be held at the same place as, and immediately following, the
annual meeting of the shareholders, at which time the Board of Directors
shall elect the officers of the Corporation. The Board also may designate
more frequent intervals for regular meetings. Special meetings may be called
at any time by the Chairman of the Board, by the President or by any two (2)
directors. The directors shall designate the place of any meeting.
Section 5.2 Notice of Directors' Meeting. The annual and all
regular meetings of the Board of Directors may be held without notice.
Special meetings shall be held upon notice of time, date and place sent by
any usual means of communication not less than one (1) day before the special
meeting. A director may waive the right to notice in writing before, during
or after a meeting. Unless a director promptly objects to holding the meeting
for lack of notice, any meeting at which all of the directors are present
shall be a valid meeting whether or not notice of the meeting was given, and
any business may be transacted at that meeting.
Section 5.3 Quorum and Vote. The presence of a majority of the
directors constitutes a quorum for the transaction of business. A meeting may
be adjourned despite the absence of a quorum, and notice of an adjourned
meeting is not necessary if the time and place to which the meeting is
adjourned are fixed at the meeting at which the adjournment is taken, and if
the period of adjournment does not exceed one (1) month in any one (1)
adjournment. The vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors, unless
the vote of a greater number is required by the Charter, these Bylaws or the
laws of the State of Tennessee.
Section 5.4 Presence through Communications Equipment. Meetings
of the Board of Directors, and any meeting of any committee of the Board of
Directors, may beheld through any communications equipment if all persons
participating can hear each other, and participation in a meeting pursuant to
this subparagraph shall constitute presence at that meeting.
Section 5.5 Meetings and Actions of Committees. Meetings and
actions of committees shall be governed by, and held and taken in accordance
with, the provisions of this Article 5. The context of those Sections changes
as necessary to substitute the committee and its members for the Board of
Directors and its members. The time of regular meetings of committees may be
determined either by resolution of the Board of Directors or by resolution of
the committee. Special meetings of committees also may be called by the
Chairman of the Board, by the President, or by resolution of the Board of
Directors, and notice of special meetings of committees shall also be given
to any alternative members who have the right to attend meetings of the
committee
ARTICLE 6
MEETINGS OF SHAREHOLDERS
Section 6.1 Annual Meeting. The annual meeting of the
shareholders of the Corporation shall be held at the time and place, either
within or without the State of Tennessee, designated by the Board of
Directors in the month of May, in each year, or at such other date or time as
shall be determined by the Chairman of the Board or by the Board of
Directors, for the purpose of electing directors and for the transaction of
such other business as properly may come before the meeting.
Section 6.2 Special Meetings. Special meetings of the
shareholders may be called by a majority of the Board of Directors. The
directors shall designate the time, date and place, either within or
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without the State of Tennessee, of a special meeting. Shareholders may call
a special meeting in accordance with the Charter of the Corporation.
Section 6.3 Notice of Shareholder Meetings. Written or printed
notice stating the place, date and time of the meeting, and, in the case of
a special meeting, the purpose or purposes for which the special meeting is
called and identifying those calling the special meeting, shall be delivered
either personally or by mail by or at the direction of the President, the
Secretary or the person calling the meeting, to each shareholder entitled to
vote at the meeting. The notice shall be delivered not less than ten (10)
days nor more than two (2) months before the date of the meeting. If mailed,
the notice shall be considered delivered when deposited in the United States
mail, postage prepaid, addressed to the shareholder at the address which
appears on the stock transfer books of the Corporation; if delivered
personally, the notice shall be considered delivered when actually received
by the shareholder. Such further notice shall be given as may be required by
law. Only such business shall be conducted at a special meeting of
shareholders as shall have been brought before the meeting pursuant to the
notice of meeting. The person giving the notice shall certify that the
required notice has been given. Any shareholder may, in writing, waive the
right to notice of annual or special meetings either before, during or after
the meeting. Any previously scheduled meeting of the shareholders may be
postponed by resolution of the Board of Directors upon public notice given
prior to the date previously scheduled for such meeting of shareholders.
Section 6.4 Quorum and Adjournment. Except as otherwise
provided by law or by the Charter, the holders of a majority of the
outstanding shares of the Corporation entitled to vote generally in the
election of directors, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders, except that when specified business is
to be voted on by a class or series voting as a class, the holders of a
majority of the shares of such class or series shall constitute a quorum of
such class or series for the transaction of such business. The Chairman of
the meeting or a majority of the shares so represented may adjourn the
meeting from time to time, whether or not there is such a quorum. No notice
of the time and place of adjourned meetings need be given except as required
by law. The shareholders present at a duly called meeting at which a quorum
is present may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 6.5 Voting and Proxies. Every shareholder entitled to
vote at a meeting may do so either in person or by written proxy. The written
proxy shall be filed with the Secretary of the Corporation or other officer
or agent authorized to tabulate votes before being voted. A proxy entitles
the holder of that proxy to vote at any adjournment of the meeting, but shall
not be valid after the final adjournment of that meeting. No proxy shall be
valid after the expiration of eleven (11) months from the date of its
execution, unless the proxy provides otherwise.
Section 6.6 Record Date for Shareholder Notice and Voting. To
determine the shareholders entitled to notice of any meeting, or entitled to
vote at a meeting, the Board of Directors may fix a record date in advance.
The record date shall not be more than seventy (70) days nor less than ten
(10) days before the date of any meeting. Only shareholders of record on the
specified date are entitled to notice and to vote, notwithstanding any
transfer of shares on the books of the Corporation after the record date. If
the Board of Directors does not fix a record date, the record date for
determining shareholders entitled to notice of or to vote at a shareholders'
meeting is the close of business on the business day immediately preceding
the day on which notice is given.
Section 6.7 Notice of Shareholder Business and Nominations.
A. Annual Meetings of Shareholders. (1) Nominations of
persons for election to the Board of Directors of the Corporation and the
proposal of business to be considered by the shareholders
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may be made at an annual meeting of shareholders (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any shareholder of the Corporation who was a shareholder
of record at the time of giving of notice provided for in this Bylaw, who is
entitled to vote at the meeting and who has complied with the notice
procedures set forth in this Bylaw.
(2) For nominations or other business to properly be
brought before an annual meeting by a shareholder pursuant to clause (c) of
subdivision (A)(1) of this Bylaw, the shareholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely,
a shareholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not less than sixty (60) days nor more
than ninety (90) days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced by more than thirty (30) days or delayed by more
than sixty (60) days from such anniversary date, notice by the shareholder to
be timely must be so delivered not earlier than the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the Corporation. Such shareholder's notice shall
set forth (a) as to each person whom the shareholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such shareholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the shareholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such shareholder,
as they appear on the Corporation's books, and of such beneficial owner and
(ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
subdivision (A)(2) of this Bylaw to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the
Corporation is increased and there is no public announcement naming all of
the nominees for director or specifying the size of the increased Board of
Directors made by the Corporation at least seventy (70) days prior to the
first anniversary of the preceding year's annual meeting, a shareholder's
notice required by this Bylaw also shall be considered timely, but only with
respect to nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is made by the Corporation.
B. Special Meetings of Shareholders. Only such business shall
be conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the notice of meeting. Nominations of persons
for election to the Board of Directors may be made at a special meeting of
shareholders at which directors are to be elected pursuant to the notice of
meeting (a) by or at the direction of the Board of Directors or (b) by any
shareholder of the Corporation who is a shareholder of record at the time of
giving of notice provided for in this Bylaw, who shall be entitled to vote at
the meeting and who complies with the notice procedures of this Bylaw.
Nominations by shareholders of persons for election to the Board of Directors
may be made at such a special meeting of shareholders if the shareholder's
notice required by subdivision (A)(2) of this Bylaw shall be delivered to the
Secretary at the principal executive offices of the Corporation not earlier
than the ninetieth (90th) day prior to such special meeting and not later than
the close of business on the later of the sixtieth (60th) day prior to such
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special meeting or the tenth (10th) day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
C. General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this Bylaw shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Bylaw. Except as otherwise provided by law,
the Charter or these Bylaws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set
forth in this Bylaw and, if any proposed nomination or business is not in
compliance with this Bylaw, to declare that such defective proposal or
nomination shall be disregarded.
(2) For purposes of this Bylaw, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Bylaw, a shareholder also shall comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to
affect any rights (i) of shareholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act or (ii) of the holders of any series of Preferred Stock to elect
directors under specified circumstances.
Section 6.8 Procedure for Election of Directors. Election of
directors at all meetings of the shareholders at which directors are to be
elected shall be by ballot (which may be represented by properly executed
proxies), and, subject to the rights of the holders of any class or series of
Preferred Stock to elect additional directors under specified circumstances,
a plurality of the votes cast thereat shall elect directors. All other
matters submitted to a vote of shareholders at any meeting shall be
determined by the vote required by the Charter or these Bylaws or, if the
Charter or these Bylaws impose no voting requirement, by the Board of
Directors or by applicable law.
ARTICLE 7
ACTION BY WRITTEN CONSENT
Whenever the directors or shareholders are required or permitted to
take any action by vote, the action may be taken without a meeting by
unanimous written consent. The written consent shall (i) set forth the action
taken, (ii) be signed by all the persons entitled to vote on that action,
(iii) indicate each person's vote or abstention and (iv) be filed with the
minutes of proceedings of the Board of Directors, committee or shareholders,
as the case may be, in the minute book.
ARTICLE 8
CAPITAL STOCK
Section 8.1 Stock Certificates. The Board of Directors may
determine to issue to each shareholder a certificate or certificates of
capital stock of the Corporation in the form prescribed by the Board of
Directors. Unless otherwise decided by the Board of Directors, all
certificates shall be signed in the name of the Corporation by the Chairman
of the Board or the President and by the Chief Financial Officer or the
Secretary of the Corporation. Any or all of the signatures on the
certificates may be facsimile. If any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been
7
placed on a certificate ceases to be an officer, transfer agent, or registrar
before that certificate is issued, it may be issued by the Corporation with
the same effect as if that person were an officer, transfer agent, or
registrar at the date of issue. The Board of Directors also may elect, in
lieu of issuing certificates, to provide for the issuance of uncertificated
shares of the capital stock of the Corporation; however, all shares of the
same class must be either certificated or uncertificated.
Section 8.2 Transfer of Shares. Subject to any restrictions on
transfer imposed by either the applicable securities laws or any shareholder
agreement, shares of stock may be transferred on the books of the Corporation
by delivery and surrender of the properly assigned certificate, or with
respect to a transfer of uncertificated shares, a written order to the
Corporation, in a form acceptable to the Corporation and its transfer agent,
authorizing and instructing the Corporation to effect the transfer.
Section 8.3 Loss of Certificates. In case of loss, mutilation
or destruction of a certificate of stock, a duplicate certificate may be
issued upon the terms prescribed by the Board of Directors, including
provision for indemnification of the Corporation secured by a bond or other
security sufficient to protect the Corporation against any claim that may be
made against it, including any expense or liability, on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
ARTICLE 9
INDEMNIFICATION
Section 9.1 Right to Indemnification. The Corporation, to the
fullest extent permitted by applicable law as then in effect, shall indemnify
any person (an "Indemnitee") who was or is involved in any manner (including,
without limitation, as a party or a witness), or is threatened to be
involved, in any threatened, pending or completed investigation, claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including without limitation, any action, suit, or proceeding
by or in the right of the corporation to procure a judgment in its favor
(each, a "Proceeding"), by reason of the fact that he or she is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, or employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her
in connection with any Proceedings. This indemnification shall be a contract
right and shall include the right to receive payment in advance of any
expenses incurred by an Indemnitee in connection with Proceedings, consistent
with the provisions of applicable law as then in effect.
Section 9.2 Contracts and Funding. The Corporation may enter
into contracts with any director, officer, employee or agent of the
Corporation in furtherance of the provisions of this Article 9, and may
create a trust fund, grant a security interest, or use other means
(including, without limitation, a letter of credit) to ensure the payment of
all amounts necessary to effect indemnification as provided in this Article9.
Section 9.3 Employee Benefit Plans. For purposes of this Article
9, references to "other enterprises" shall include employee benefit plans and
employee welfare benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "serving at the request of the Corporation" shall include
any service as a director, officer, employee or agent of the Corporation
which imposes duties on, or involves services by, that director, officer,
employee or agent with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner he or
she reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner not opposed to the best interests of the Corporation.
8
Section 9.4 Indemnification Not Exclusive Right. The right of
indemnification and advancement of expenses provided in this Article 9 is not
exclusive of any other rights to which a person seeking indemnification may
otherwise be entitled, under any statute, bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in
his or her official capacity and as to action in another capacity while
holding the office. The provisions of this Article 9 shall benefit the heirs
and legal representatives of any person entitled to indemnity under this
Article 9 and shall be applicable to Proceedings commenced or continuing
after the adoption of this Article 9, whether arising from acts or omissions
occurring before or after adoption.
Section 9.5 Advancement of Expenses and Procedures. In
furtherance, but not in limitation, of the provisions in this Article 9, the
following procedures and remedies apply with respect to advancement of
expenses and the right to indemnification:
A. Advancement of Expenses. All reasonable expenses
incurred by or on behalf of an Indemnitee in connection with Proceedings
shall be advanced from time to time to the Indemnitee by the Corporation
within twenty (20) days after the receipt by the Corporation of a statement
or statements from the Indemnitee requesting the advance, whether prior to or
after final disposition of a Proceeding. Each statement shall reasonably
evidence the expenses incurred by the Indemnitee, and if required by law at
the time of the advance, shall include or be accompanied by an undertaking by
or on behalf of the Indemnitee to repay the amounts advanced if it should
ultimately be determined that the Indemnitee is not entitled to be
indemnified against those expenses.
B. Written Request for Indemnification. To obtain
indemnification under this Article 9, an Indemnitee shall submit to the
Secretary of the Corporation a written request, including all documentation
and information reasonably available to the Indemnitee and reasonably
necessary to determine whether and to what extent the Indemnitee is entitled
to indemnification (the "Supporting Documentation"). The determination of the
Indemnitee's entitlement to indemnification shall be made within a reasonable
time after receipt by the Corporation of the written request for
indemnification together with the Supporting Documentation. The Secretary of
the Corporation, promptly upon receipt of a request for indemnification,
shall advise the Board of Directors in writing of that request.
C. Procedure for Determination. An Indemnitee's
entitlement to indemnification shall be determined: (1) by the Board of
Directors by majority vote of a Board quorum consisting of directors not at
the time parties to the Proceeding; (2) if a quorum cannot be obtained under
subdivision (C)(1), by a majority vote of a committee duly designated by the
Board of Directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not at the time
parties to the Proceeding; (3) by independent special legal counsel selected
by the Board of Directors or its committee in the manner prescribed in
subdivision (C)(1) or (C)(2); or if those subdivisions cannot be satisfied,
selected by majority vote of the full Board (in which selection directors who
are parties may participate); or (4) by the shareholders, but shares owned by
or voted under the control of directors who are at the time parties to the
Proceeding may not be voted on the determination.
ARTICLE 10
RECORDS AND REPORTS
Section 10.1 Maintenance of Certain Records. The Corporation
shall keep at its principal executive office, or at the office of its
transfer agent or registrar, and as otherwise determined by resolution of the
Board of Directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by
each.
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Section 10.2 Inspection of Records by Shareholders. A shareholder
may, during regular business hours on five (5) business days prior written
demand on the Corporation, inspect and copy: (i) the Charter or Restated
Charter and all amendments currently in effect; (ii) the Bylaws or Restated
Bylaws and all amendments currently in effect; (iii) resolutions adopted by
the Board of Directors creating one or more classes or series of shares, and
fixing their relative rights, preferences, and limitations, if shares issued
pursuant to those resolutions are outstanding; (iv) the minutes of all
shareholders' meetings for the past three (3) years; (v) all written
communications to shareholders generally within the past three (3) years,
including certain financial statements prepared for the past three (3) years;
(vi) a list of the names and business addresses of the current directors and
officers; and (vii) the most recent annual report delivered to the Tennessee
Secretary of State. Shareholders may inspect other specified corporate
records pursuant to Section 48-26-102 of the Tennessee Business Corporation
Act.
Section 10.3 Inspection of Records by Directors. Every director
has the right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the Corporation and
each of its subsidiary corporations. Inspection by a director may be made in
person or by an agent or attorney duly designated by the director, and the
right of inspection includes the right to copy and make extracts.
ARTICLE 11
GENERAL CORPORATE MATTERS
Section 11.1 Record Date for Purposes Other than Notice and
Voting.
A. For purposes of determining the shareholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
other lawful action (other than notice of a meeting or voting, the Board of
Directors may fix, in advance, a record date, which shall not be more than
seventy (70) days before that action, and only shareholders of record on the
date fixed are entitled to receive the dividend, distribution, or allotment
of rights or to exercise the rights, notwithstanding any transfer of any
shares on the books of the Corporation after the specified record date,
except as otherwise provided in the Tennessee Business Corporation Act.
B. If the Board of Directors does not fix a record
date, the record date for determining shareholders for any of these purposes
shall be the close of business on the day on which the Board of Directors
adopts the applicable resolution.
Section 11.2 Seal. The Corporation may adopt a corporate seal
and may modify it from time to time. The seal, if any, shall contain the name
of the Corporation, the year of its incorporation, and the word "Tennessee."
ARTICLE 12
AMENDMENT OF BYLAWS
These Bylaws may be amended, supplemented or repealed as provided by
the laws of the State of Tennessee and the Charter of the Corporation.
ARTICLE 13
MISCELLANEOUS PROVISIONS
Section 13.1 Fiscal Year. The fiscal year of the Corporation
shall be determined by resolution of the Board of Directors.
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Section 13.2 Dividends. The Board of Directors may from time to
time declare, and the Corporation may pay, dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and
the Charter.
Section 13.3.Audits. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board of Directors,
and it shall be the duty of the Board of Directors to cause such audit to be
made annually.
Section 13.4 Gender. Whenever the personal pronoun he, she or
its is used herein, it shall mean an appropriate gender.
Section 13.5 Unclaimed Property. Any stock or other certificate of
ownership, or any dividend, profit, distribution, interest, payment on
principal, or other sum held or owing any person or entity who, as of December
31, 1998, was a former member of DeKalb Telephone Cooperative, Inc., who has
not claimed it or corresponded in writing either to the cooperative or to the
Corporation concerning it, within four (4) years after the date prescribed for
payment or delivery is presumed abandoned and shall revert to the Corporation.
The failure to claim such property or correspond with respect to it shall
constitute an irrevocable assignment and contribution by the former member of
the property to the capital of the Corporation.
ARTICLE 14
CONTRACTS, PROXIES, ETC.
Section 14.1 Contracts. Except as otherwise required by law, the
Charter or these Bylaws, any contracts or other instruments may be executed
and delivered in the name and on behalf of the Corporation by such officer or
officers (including any assistant officer) of the Corporation as the Board of
Directors may from time to time direct. Such authority may be general or
confined to specific instances as the Board of Directors may determine. The
Chairman of the Board, the President or any Vice President may execute bonds,
contracts, deeds, leases and other instruments to be made or executed for or
on behalf of the Corporation. Subject to any restrictions imposed by the
Board of Directors or the Chairman of the Board, the President or any Vice
President of the Corporation may delegate contractual power to others under
his jurisdiction, it being understood, however, that any such delegation of
power shall not relieve such officer of responsibility with respect to the
exercise of such delegated power.
Section 14.2 Proxies. Unless otherwise provided by resolution
adopted by the Board of Directors, the Chairman of the Board, the President
or any Vice President may from time to time appoint an attorney or attorneys
or agent or agents of the Corporation, in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be entitled to cast
as the holder of stock or other securities in any other corporation, any of
whose stock or other securities may be held by the Corporation, at meetings
of the holders of the stock or other securities of such other corporation, or
to consent in writing, in the name of the Corporation as such holder, to any
action by such other corporation, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and
may execute or cause to be executed in the name and on behalf of the
Corporation and under its corporate seal, if any, or otherwise, all such
written proxies or other instruments as he may deem necessary or proper in
the premises.
11
DTC COMMUNICATIONS CORP.
STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the DTC Communications Corp. Stock Incentive Plan (the
"Plan") is to enable DTC Communications Corp. (the "Company") to attract,
retain and reward key employees of and consultants to the Company and its
Subsidiaries and Affiliates, and directors who are not also employees of the
Company, and to strengthen the mutuality of interests between such key
employees, consultants, and directors by awarding such key employees,
consultants, and directors performance-based stock incentives and/or other
equity interests or equity-based incentives in the Company, as well as
performance-based incentives payable in cash. The creation of the Plan shall
not diminish or prejudice other compensation programs approved from time to
time by the Board.
For purposes of the Plan, the following terms shall be defined as set
forth below:
A. "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board as a
participating employer under the Plan, provided that the
Company directly or indirectly owns at least 20% of the
combined voting power of all classes of stock of such entity
or at least 20% of the ownership interests in such entity.
B. "Board" means the Board of Directors of the Company.
C. "Cause" has the meaning provided in Section 5(j) of the Plan.
D. "Change in Control" has the meaning provided in Section 10(b)
of the Plan.
E. "Change in Control Price" has the meaning provided in Section
10(d) of the Plan.
F. "Common Stock" means the Company's Common Stock, no par value
per share.
G. "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor thereto.
H. "Committee" means the Committee referred to in Section 2 of
the Plan.
I. "Company" means DTC Communications Corp., a cooperative
organized under the laws of the State of Tennessee or any
successor cooperative.
J. "Disability" means disability as determined under the
Company's insurance plans.
K. "Early Retirement" means retirement, for purposes of this Plan
with the express consent of the Company at or before the time
of such retirement, from active employment with the Company
and any Subsidiary or Affiliate prior to age 65, in accordance
with any applicable early retirement policy of the Company
then in effect or as may be approved by the Committee.
L. "Effective Date" has the meaning provided in Section 14 of the
Plan.
M. "Equity Issuance" means an issuance of Common Stock by the
Company following the Effective Date of this Plan in
connection with a public or private offering, including in
connection with an acquisition, merger or similar transaction,
but excluding issuances of Common Stock under this Plan or in
any other compensatory transaction with an officer, employee,
or director of, or consultant to, the Company or its
Subsidiaries or Affiliates.
N. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
O. "Fair Market Value" means with respect to the Common Stock, as of
any given date or dates, unless otherwise determined by the Committee
in good faith, the reported closing price of a share of Common Stock
on such automated quotation system or other market or exchange as is
the principal trading market for the Common Stock, or, if no such
sale of a share of Common Stock is reported on such automated
quotation system or other exchange or principal trading market on
such date, the fair market value of a share of Common Stock as
determined by the Committee in good faith.
P. "Incentive Stock Option" means any Stock Option intended to be
and designated as an "Incentive Stock Option" within the
meaning of Section 422 of the Code.
Q. "Immediate Family" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-
law, father-in-law, son-in-law, daughter-in-law, brother-in-
law, or sister-in-law, and shall include adoptive
relationships.
R. "Non-Employee Director" means a member of the Board who is a
Non-Employee Director within the meaning of Rule 16b-3(b)(3)
promulgated under the Exchange Act and an outside director
within the meaning of Treasury Regulation Sec. 162-27(e)(3)
promulgated under the Code.
S. "Non-Qualified Stock Option" means any stock option that is
not an incentive Stock Option.
T. "Normal Retirement" means retirement from active employment
with the Company and any Subsidiary or Affiliate on or after
age 65.
U. "Other Stock-Based Award" means an award under Section 8 below
that is valued in whole or in part by reference to, or is
otherwise based on, the Common Stock.
V. "Outside Director" means a member of the Board who is not an
officer or employee of the Company or any Subsidiary or
Affiliate of the Company.
W. "Outside Director Option" means an award to an Outside
Director under Section 9 below.
X. "Plan" means this DTC Communications Corp. 1999 Stock
Incentive Plan, as amended from time to time.
2
Y. "Restricted Stock" means an award of shares of Common Stock
that is subject to restrictions under Section 7 of the Plan.
Z. "Restriction Period" has the meaning provided in Section 7 of
the Plan.
AA. "Retirement" means Normal or Early Retirement.
BB. "Section 162(m) Maximum" has the meaning provided in Section
3(a) hereof.
CC. "Stock Appreciation Right" means the right pursuant to an
award granted under Section 6 below to surrender to the
Company all (or a portion) of a Stock Option in exchange for
an amount equal to the difference between (i) the Fair Market
Value, as of the date such Stock Option (or such portion
thereof) is surrendered, of the shares of Common Stock covered
by such Stock Option (or such portion thereof), subject, where
applicable, to the pricing provisions in Section 6(b)(ii), and
(ii) the aggregate exercise price of such Stock Option (or
such portion thereof).
DD. "Stock Option" or "Option" means any option to purchase shares
of Common Stock (including Restricted Stock, if the Committee
so determines) granted pursuant to Section 5 below.
EE. "Subsidiary" means any corporation or cooperative (other than
the Company) in an unbroken chain of corporations or
cooperatives beginning with the Company if each of the
corporations or cooperatives (other than the last corporation
or cooperatives in the unbroken chain) owns stock possessing
50% or more of the total combined voting power of all classes
of stock in one of the other corporations or cooperatives in
the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two Non-
Employee Directors, who shall be appointed by the Board and who shall serve at
the pleasure of the Board. The functions of the Committee specified in the Plan
may be exercised by an existing Committee of the Board composed exclusively of
Non-Employee Directors. The initial Committee shall be the Compensation
Committee of the Board. In the event there are not at least two Non-Employee
Directors on the Board, the Plan shall be administered by the Board and all
references herein to the Committee shall refer to the Board.
The Committee shall have authority to grant, pursuant to the terms of
the Plan, to officers, other key employees and consultants eligible under
Section 4: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted
Stock, and/or (iv) Other Stock-Based Awards.
3
In particular, the Committee, or the Board, as the case may be, shall
have the authority, consistent with the terms of the Plan:
(a) to select the officers, key employees of and consultants to
the Company and its Subsidiaries and Affiliates to whom Stock
Options, Stock Appreciation Rights, Restricted Stock, and/or
Other Stock-Based Awards may from time to time be granted
hereunder;
(b) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock, and/or Other Stock-Based Awards, or
any combination thereof, are to be granted hereunder to one or
more eligible persons;
(c) to determine the number of shares to be covered by each such
award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any
restriction or limitation, or any vesting acceleration or
waiver of forfeiture restrictions regarding any Stock Option
or other award and/or the shares of Common Stock relating
thereto, based in each case on such factors as the Committee
shall determine, in its sole discretion); and to amend or
waive any such terms and conditions to the extent permitted by
Section 11 hereof;
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash or Restricted Stock under
Section 5(m), as applicable, instead of Common Stock;
(f) to determine whether, to what extent, and under what
circumstances Option grants and/or other awards under the Plan
are to be made, and operate, on a tandem basis vis-a-vis other
awards under the Plan and/or cash awards made outside of the
Plan;
(g) to determine whether, to what extent, and under what
circumstances shares of Common Stock and other amounts payable
with respect to an award under this Plan shall be deferred
either automatically or at the election of the participant
(including providing for and determining the amount (if any)
of any deemed earnings on any deferred amount during any
deferral period);
(h) to determine whether to require payment of tax withholding
requirements in shares of Common Stock subject to the award;
and
(i) to impose any holding period required to satisfy Section 16
under the Exchange Act. The Committee shall have the authority
to adopt, alter, and repeal such rules, guidelines, and
practices governing the Plan as it shall, from time to time,
deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements
relating thereto); and to otherwise supervise the
administration of the Plan; provided, however, that, to the
extent that this Plan otherwise requires the approval of the
Board or the shareholders of the Company, all decisions of the
Committee shall be subject to such Board or shareholder
approval. Subject to the foregoing, all decisions made by the
Committee pursuant to the provisions of the Plan shall be made
in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan
participants. Notwithstanding the foregoing, the Committee
shall have
4
no authority to determine terms or conditions of awards to
Outside Directors, which shall be governed solely by Section
9 hereof.
SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) As of the Effective Date, the aggregate number of shares of Common
Stock that may be issued under the Plan shall be 150,000 shares plus an annual
increase to be added on each anniversary date of the adoption of the Plan equal
to the lesser of (i) 25,000 shares or (ii) one percent of the outstanding
shares on such date. The shares of Common Stock issuable under the Plan may
consist, in whole or in part, of authorized and unissued shares or treasury
shares. No officer of the Company or other person whose compensation may be
subject to the limitations on deductibility under Section 162(m) of the Code
shall be eligible to receive awards pursuant to this Plan relating to in excess
of 100,000 shares of Common Stock in any fiscal year (the "Section 162(m)
Maximum").
(b) If any shares of Common Stock that have been optioned cease to be
subject to a Stock Option, or if any shares of Common Stock that are subject
to any Restricted Stock or Other Stock-Based Award granted hereunder are
forfeited prior to the payment of any dividends, if applicable, with respect
to such shares of Common Stock, or any such award otherwise terminates without
a payment being made to the participant in the form of Common Stock, such
shares shall again be available for distribution in connection with future
awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, extraordinary cash dividend, stock dividend, stock split or
other change in corporate structure affecting the Common Stock, an appropriate
substitution or adjustment shall be made in the maximum number of shares that
may be awarded under the Plan, in the number and option price of shares subject
to outstanding Options granted under the Plan, in the number of shares
underlying Outside Director Options to be granted under Section 9 hereof, the
Section 162(m) Maximum and in the number of shares subject to other outstanding
awards granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number of shares subject
to any award shall always be a whole number. An adjusted option price shall
also be used to determine the amount payable by the Company upon the exercise
of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY.
Officers, other key employees, Outside Directors of and consultants to
the Company and its Subsidiaries and Affiliates who are responsible for or
contribute to the management, growth and/or profitability of the business of
the Company and/or its Subsidiaries and Affiliates are eligible to be granted
awards under the Plan. Outside Directors are eligible to receive awards
pursuant to Section 9 and not pursuant to any other provisions of the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the
Plan. Any Stock Option granted under the
5
Plan shall be in such form as the Committee may from time to time approve.
Stock Options granted under the Plan may be of two types:
(i) Incentive Stock Options and
(ii) Non-Qualified Stock Options.
Incentive Stock Options may be granted only to individuals who are
employees of the Company or any Subsidiary of the Company. The Committee shall
have the authority to grant to any optionee Incentive Stock Options, Non-
Qualified Stock Options, or both types of Stock Options (in each case with or
without Stock Appreciation Rights). Options granted to officers, key employees,
Outside Directors and consultants under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable.
(a) Option Price. The option price per share of Common Stock
purchasable under a Stock Option shall be determined by the
Committee at the time of grant but shall be not less than 100%
(or, in the case of any employee who owns stock possessing
more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its Subsidiaries,
not less than 110%) of the Fair Market Value of the Common
Stock at grant, in the case of Incentive Stock Options, and
not less than 85% of the Fair Market Value of the Common Stock
at grant, in the case of Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Incentive Stock Option shall be
exercisable more than ten (10) years (or, in the case of an
employee who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company
or any of its Subsidiaries or parent corporations or
cooperatives, more than five years) after the date the Option
is granted.
(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as
shall be determined by the Committee at or after grant;
provided, however, that except as provided in Section 5(g) and
(h) and Section 10, unless otherwise determined by the
Committee at or after grant, no Stock Option shall be
exercisable prior to the first anniversary date of the
granting of the Option. The Committee may provide that a Stock
Option shall vest over a period of future service at a rate
specified at the time of grant, or that the Stock Option is
exercisable only in installments. If the Committee provides,
in its sole discretion, that any Stock Option is exercisable
only in installments, the Committee may waive such installment
exercise provisions at any time at or after grant, in whole or
in part, based on such factors as the Committee shall
determine in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
restrictions apply under Section 5(c), Stock Options may be
exercised in whole or in part at any time during the option
period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price,
either by check, note, or such other instrument as the
Committee may accept. As determined by the Committee, in its
sole discretion, at or (except in the case of an Incentive
Stock Option) after grant, payment in full or in part may also
be made in the
6
form of shares of Common Stock already owned by the optionee
or, in the case of a Non-Qualified Stock Option, shares of
Restricted Stock or shares subject to such Option or another
award hereunder (in each case valued at the Fair Market Value
of the Common Stock on the date the Option is exercised). If
payment of the exercise price is made in part or in full with
Common Stock, the Committee may award to the employee a new
Stock Option to replace the Common Stock which was
surrendered. If payment of the option exercise price of a Non-
Qualified Stock Option is made in whole or in part in the form
of Restricted Stock, such Restricted Stock (and any
replacement shares relating thereto) shall remain (or be)
restricted in accordance with the original terms of the
Restricted Stock award in question, and any additional Common
Stock received upon the exercise shall be subject to the same
forfeiture restrictions, unless otherwise determined by the
Committee, in its sole discretion, at or after grant. No
shares of Common Stock shall be issued until full payment
therefor has been made. An optionee shall generally have the
rights to dividends or other rights of a shareholder with
respect to shares subject to the Option when the optionee has
given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation
described in Section 13(a).
(e) Transferability of Options. No Non-Qualified Stock Option
shall be transferable by the optionee without the prior
written consent of the Committee other than (i) transfers by
the Optionee to a member of his or her Immediate Family or a
trust for the benefit of the optionee or a member of his or
her Immediate Family, or (ii) transfers by will or by the laws
of descent and distribution. No Incentive Stock Option shall
be transferable by the optionee otherwise than by will or by
the laws of descent and distribution and all Incentive Stock
Options shall be exercisable, during the optionee's lifetime,
only by the optionee.
(f) Bonus for Taxes. In the case of a Non-Qualified Stock Option
or an optionee who elects to make a disqualifying disposition
(as defined in Section 422(a)(1) of the Code) of Common Stock
acquired pursuant to the exercise of an Incentive Stock
Option, the Committee in its discretion may award at the time
of grant or thereafter the right to receive upon exercise of
such Stock Option a cash bonus calculated to pay part or all
of the federal and state, if any, income tax incurred by the
optionee upon such exercise.
(g) Termination by Death. Subject to Section 5(k), if an
optionee's employment by the Company and any Subsidiary or
(except in the case of an Incentive Stock Option) Affiliate
terminates by reason of death, any Stock Option held by such
optionee may thereafter be exercised, to the extent such
option was exercisable at the time of death or (except in the
case of an Incentive Stock Option) on such accelerated basis
as the Committee may determine at or after grant (or except in
the case of an Incentive Stock Option, as may be determined in
accordance with procedures established by the Committee) by
the legal representative of the estate or by the legatee of
the optionee under the will of the optionee, for a period of
one year (or such other period as the Committee may specify at
or after grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever
period is the shorter.
(h) Termination by Reason of Disability. Subject to Section 5(k),
if an optionee's employment by the Company and any Subsidiary
or (except in the case of an Incentive Stock Option) Affiliate
terminates by reason of Disability, any Stock Option held by such
7
optionee may thereafter be exercised by the optionee, to the
extent it was exercisable at the time of termination or
(except in the case of an Incentive Stock Option) on such
accelerated basis as the Committee may determine at or after
grant (or, except in the case of an Incentive Stock Option, as
may be determined in accordance with procedures established by
the Committee), for a period of (i) three years (or such other
period as the Committee may specify at or after grant) from
the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever
period is the shorter, in the case of a Non-Qualified Stock
Option and (ii) one year from the date of termination of
employment or until the expiration of the stated term of such
Stock Option, whichever period is shorter, in the case of an
Incentive Stock Option; provided however, that, if the
optionee dies within the period specified in (i) above (or
other such period as the committee shall specify at or after
grant), any unexercised Non-Qualified Stock Option held by
such optionee shall thereafter be exercisable to the extent to
which it was exercisable at the time of death for a period of
twelve months from the date of such death or until the
expiration of the stated term of such Stock Option, whichever
period is shorter. In the event of termination of employment
by reason of Disability, if an Incentive Stock Option is
exercised after the expiration of the exercise period
applicable to Incentive Stock Options, but before the
expiration of any period that would apply if such Stock Option
were a Non-Qualified Stock Option, such Stock Option will
thereafter be treated as a NonQualified Stock Option.
(i) Termination by Reason of Retirement. Subject to Section 5(k),
if an optionee's employment by the Company and any Subsidiary
or (except in the case of an Incentive Stock Option) Affiliate
terminates by reason of Normal or Early Retirement, any Stock
Option held by such optionee may thereafter be exercised by
the optionee, to the extent it was exercisable at the time of
such Retirement or (except in the case of an Incentive Stock
Option) on such accelerated basis as the Committee may
determine at or after grant (or, except in the case of an
Incentive Stock Option, as may be determined in accordance
with procedures established by the Committee), for a period of
(i) three years (or such other period as the Committee may
specify at or after grant) from the date of such termination
of employment or the expiration of the stated term of such
Stock Option, whichever period is the shorter, in the case of
a Non-Qualified Stock Option and (ii) three months from the
date of such termination of employment or the expiration of
the stated term of such Stock Option, whichever period is the
shorter, in the event of an Incentive Stock Option; provided
however, that, if the optionee dies within the period
specified in (i) above (or other such period as the Committee
shall specify at or after grant), any unexercised Non-
Qualified Stock Option held by such optionee shall thereafter
be exercisable to the extent to which it was exercisable at
the time of death for a period of twelve months from the date
of such death or until the expiration of the stated term of
such Stock Option, whichever period is shorter. In the event
of termination of employment by reason of Retirement, if an
Incentive Stock Option is exercised after the expiration of
the exercise period applicable to Incentive Stock Options, but
before the expiration of the period that would apply if such
Stock Option were a Non-Qualified Stock Option, the option
will thereafter be treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 5(k), unless otherwise
determined by the Committee (or pursuant to procedures established
by the Committee) at or (except in the case of an Incentive Stock
Option) after grant, if an optionee's employment by the
8
Company and any Subsidiary or (except in the case of an
Incentive Stock Option) Affiliate is involuntarily terminated
for any reason other than death, Disability or Normal or Early
Retirement, or if optionee voluntarily terminates employment,
the Stock Option shall thereupon terminate, except that such
Stock Option may be exercised, to the extent otherwise then
exercisable, for the lesser of three months or the balance of
such Stock Option's term if the involuntary termination is
without Cause. The Committee has the option to extend the
exercise period until the lesser of six months or the balance
of such Stock Option's term if the involuntary termination is
without Cause. However, any Incentive Stock Option not
exercised within three months will be treated as a Non-
Qualified Stock Option. For purposes of this Plan, "Cause"
means (i) a felony conviction of a participant or the failure
of a participant to contest prosecution for a felony, or (ii)
a participant's willful misconduct or dishonesty, which is
directly and materially harmful to the business or reputation
of the Company or any Subsidiary or Affiliate. If an optionee
voluntarily terminates employment with the Company and any
Subsidiary or (except in the case of an Incentive Stock
Option) Affiliate (except for Disability, Normal or Early
Retirement), the Stock Option shall thereupon terminate;
provided, however, that the Committee at grant or (except in
the case of an Incentive Stock Option) thereafter may extend
the exercise period in this situation for the lesser of three
months or the balance of such Stock Option's term.
(k) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive
Stock Options shall be interpreted, amended, or altered, nor
shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify the Plan under Section 422 of
the Code, or, without the consent of the optionee(s) affected,
to disqualify any Incentive Stock Option under such Section
422. No Incentive Stock Option shall be granted to any
participant under the Plan if such grant would cause the
aggregate Fair Market Value (as of the date the Incentive
Stock Option is granted) of the Common Stock with respect to
which all Incentive Stock Options are exercisable for the
first time by such participant during any calendar year (under
all such plans of the Company and any Subsidiary) to exceed
$100,000. To the extent permitted under Section 422 of the
Code or the applicable regulations thereunder or any
applicable Internal Revenue Service pronouncement: (i) if (x)
a participant's employment is terminated by reason of death,
Disability, or Retirement and (y) the portion of any Incentive
Stock Option that is otherwise exercisable during the post-
termination period specified under Section 5(g), (h) or (i),
applied without regard to the $100,000 limitation contained in
Section 422(d) of the Code, is greater than the portion of
such Option that is immediately exercisable as an "Incentive
Stock Option" during such post-termination period under
Section 422, such excess shall be treated as a Non-Qualified
Stock Option; and (ii) if the exercise of an Incentive Stock
Option is accelerated by reason of a Change in Control, any
portion of such Option that is not exercisable as an Incentive
Stock Option by reason of the $100,000 limitation contained in
Section 422(d) of the Code shall be treated as a Non-Qualified
Stock Option.
(l) Buyout Provisions. The Committee may at any time offer to buy
out for a payment in cash, Common Stock, or Restricted Stock
an Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to
the optionee at the time that such offer is made.
9
(m) Settlement Provisions. If the option agreement so provides at
grant or (except in the case of an Incentive Stock Option) is
amended after grant and prior to exercise to so provide (with
the optionee's consent), the Committee may require that all or
part of the shares to be issued with respect to the spread
value of an exercised Option take the form of Restricted
Stock, which shall be valued on the date of exercise on the
basis of the Fair Market Value (as determined by the
Committee) of such Restricted Stock determined without regards
to the forfeiture restrictions involved.
(n) Performance and Other Conditions. The Committee may condition
the exercise of any Option upon the attainment of specified
performance goals or other factors as the Committee may
determine, in its sole discretion. Unless specifically
provided in the option agreement, any such conditional Option
shall vest six months prior to its expiration if the
conditions to exercise have not theretofore been satisfied.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of the grant of such
Stock Option. A Stock Appreciation Right or applicable portion thereof granted
with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number of
shares covered by a related Stock Option. A Stock Appreciation Right may be
exercised by an optionee, subject to Section 6(b), in accordance with the
procedures established by the Committee for such purpose. Upon such exercise,
the optionee shall be entitled to receive an amount determined in the manner
prescribed in Section 6(b). Stock Options relating to exercised Stock
Appreciation Rights shall no longer be exercisable to the extent that the
related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions, not inconsistent with the provisions of the Plan,
as shall be determined from time to time by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to
which they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash and/or shares
of Common Stock equal in value to the excess of the Fair
Market Value of one share of Common Stock over the option
price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
When payment is to be made in shares, the number of shares to
be paid shall be calculated on the basis of the Fair Market
Value of the shares on the date of exercise. When payment is
to be made in cash, such
10
amount shall be calculated on the basis of the Fair Market
Value of the Common Stock on the date of exercise.
(iii)Stock Appreciation Rights shall be transferable only when and
to the extent that the underlying Stock Option would be
transferable under Section 5(e) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right
is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan
on the number of shares of Common Stock to be issued under the
Plan.
(v) The Committee, in its sole discretion, may also provide that,
in the event of a Change in Control and/or a Potential Change
in Control, the amount to be paid upon the exercise of a Stock
Appreciation Right shall be based on the Change in Control
Price, subject to such terms and conditions as the Committee
may specify at grant.
(vi) The Committee may condition the exercise of any Stock
Appreciation Right upon the attainment of specified
performance goals or other factors as the Committee may
determine, in its sole discretion.
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside the Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares of Restricted Stock to be awarded to
any person, the price (if any) to be paid by the recipient of Restricted Stock
(subject to Section 7(b)), the time or times within which such awards may be
subject to forfeiture, and the other terms, restrictions and conditions of the
awards in addition to those set forth in Section 7(c). The Committee may
condition the grant of Restricted Stock upon the attainment of specified
performance goals or such other factors as the Committee may determine, in its
sole discretion. The provisions of Restricted Stock awards need not be the same
with respect to each recipient.
(b) Awards and Certificates. The prospective recipient of a Restricted
Stock award shall not have any rights with respect to such award, unless and
until such recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock shall be
established by the Committee and may be zero.
(ii) Awards of Restricted Stock must be accepted within a period of
60 days (or such shorter period as the Committee may specify
at grant) after the award date, by executing a Restricted
Stock Award Agreement and paying whatever price (if any) is
required under Section 7(b)(i).
11
(iii)Each participant receiving a Restricted Stock award shall be
issued a stock certificate in respect of such shares of
Restricted Stock. Such certificate shall be registered in the
name of such participant (or a transferee permitted by Section
13(h) hereof), and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such
award.
(iv) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until
the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award, the participant shall
have delivered a stock power, endorsed in blank, relating to
the shares of Common Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) In accordance with the provisions of this Plan and the award
agreement, during a period set by the Committee commencing
with the date of such award (the "Restriction Period"), the
participant shall not be permitted to sell, transfer, pledge,
assign, or otherwise encumber shares of Restricted Stock
awarded under the Plan. Within these limits, the Committee, in
its sole discretion, may provide for the lapse of such
restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on service,
performance, such other factors or criteria as the Committee
may determine in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i),
the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a shareholder of the
Company, including the right to vote the shares, and the right
to receive any cash dividends. The Committee, in its sole
discretion, as determined at the time of award, may permit or
require the payment of cash dividends to be deferred and, if
the Committee so determines, reinvested, subject to Section
14(e), in additional Restricted Stock to the extent shares are
available under Section 3, or otherwise reinvested. Pursuant
to Section 3 above, stock dividends issued with respect to
Restricted Stock shall be treated as additional shares of
Restricted Stock that are subject to the same restrictions and
other terms and conditions that apply to the shares with
respect to which such dividends are issued. If the Committee
so determines, the award agreement may also impose
restrictions on the right to vote and the right to receive
dividends.
(iii)Subject to the applicable provisions of the award agreement
and this Section 7, upon termination of a participant's
employment with the Company and any Subsidiary or Affiliate
for any reason during the Restriction Period, all shares still
subject to restriction will vest, or be forfeited, in
accordance with the terms and conditions established by the
Committee at or after grant.
(iv) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction
Period, certificates for an appropriate number of unrestricted
shares shall be delivered to the participant (or a transferee
permitted by Section 13(h) hereof) promptly.
12
(d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Common Stock to the recipient of a restricted stock award, subject
to such performance, future service, deferral, and other terms and conditions
as may be specified by the Committee.
SECTION 8. OTHER STOCK-BASED AWARDS.
(a) Administration. Other Stock-Based Awards, including, without
limitation, performance shares, convertible preferred stock, convertible
debentures, exchangeable securities and Common Stock awards or options valued
by reference to earnings per share or Subsidiary performance, may be granted
either alone, in addition to, or in tandem with Stock Options, Stock
Appreciation Rights, or Restricted Stock granted under the Plan and cash awards
made outside of the Plan; provided that no such Other Stock-Based Awards may
be granted in tandem with Incentive Stock Options if that would cause such
Stock Options not to qualify as Incentive Stock Options pursuant to Section 422
of the Code. Subject to the provisions of the Plan, the Committee shall have
authority to determine the persons to whom and the time or times at which such
awards shall be made, the number of shares of Common Stock to be awarded
pursuant to such awards, and all other conditions of the awards. The Committee
may also provide for the grant of Common Stock upon the completion of a
specified performance period. The provisions of Other Stock-Based Awards need
not be the same with respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to
this Section 8 shall be subject to the following terms and conditions:
(i) Shares subject to awards under this Section 8 and the award
agreement referred to in Section 8(b)(v) below, may not be
sold, assigned, transferred, pledged, or otherwise encumbered
prior to the date on which the shares are issued, or, if
later, the date on which any applicable restriction,
performance, or deferral period lapses.
(ii) Subject to the provisions of this Plan and the award agreement
and unless otherwise determined by the Committee at grant, the
recipient of an award under this Section 8 shall be entitled
to receive, currently or on a deferred basis, interest or
dividends or interest or dividend equivalents with respect to
the number of shares covered by the award, as determined at
the time of the award by the Committee, in its sole
discretion, and the Committee may provide that such amounts
(if any) shall be deemed to have been reinvested in additional
shares of Common Stock or otherwise reinvested.
(iii)Any award under Section 8 and any shares of Common Stock
covered by any such award shall vest or be forfeited to the
extent so provided in the award agreement, as determined by
the Committee in its sole discretion.
(iv) In the event of the participant's Retirement, Disability, or
death, or in cases of special circumstances, the Committee
may, in its sole discretion, waive in whole or in part any or
all of the remaining limitations imposed hereunder (if any)
with respect to any or all of an award under this Section 8.
13
(v) Each award under this Section 8 shall be confirmed by, and
subject to the terms of, an agreement or other instrument by
the Company and the participant.
(vi) Common Stock (including securities convertible into Common
Stock) issued on a bonus basis under this Section 8 may be
issued for no cash consideration. Common Stock (including
securities convertible into Common Stock) purchased pursuant
to a purchase right awarded under this Section 8 shall be
priced at least 85% of the Fair Market Value of the Common
Stock on the date of grant.
SECTION 9. AWARDS TO OUTSIDE DIRECTORS.
(a) The provisions of this Section 9 shall apply only to awards to
Outside Directors in accordance with this Section 9. The Committee shall have
no authority to determine the timing of or the terms or conditions of any award
under this Section 9.
(b) At the date of the effectiveness of Company's first registration
statement under the Securities Act of 1933, each person serving as an Outside
Director on such date will receive a non-qualified stock option to purchase
1,000 shares of Common Stock at a per share exercise price equal to $10.00.
Such option shall vest and become exercisable with respect to all 1,000 shares
immediately.
(c) If any person who was not previously a member of the Board is
elected or appointed an Outside Director following the effectiveness of the
Company's first registration statement under the Securities Act of 1933 but
prior to the date of the Annual Meeting of Shareholders of the Company in the
year 2000, such Outside Director will receive a non-qualified stock option to
purchase 1,000 shares of Common Stock. The exercise price per share of each
option granted pursuant to this Section 9(c) shall equal the Fair Market Value
per share of Common Stock on the date of grant. Options granted under this
Section 9(c) shall vest and become exercisable in five equal annual
installments beginning on the first anniversary of the date of grant.
(d) On the date of each Annual Meeting of Shareholders of the Company
beginning with the Annual Meeting of Shareholders in 2000, unless this Plan has
been previously terminated, each Outside Director who will continue as a
director following such meeting will receive a non-qualified stock option to
purchase 1,000 shares of Common Stock. The exercise price per share of each
option granted pursuant to this Section 9(d) shall equal the Fair Market Value
per share of Common Stock on the date of grant. Such option shall vest and
become exercisable in five equal annual installments beginning on the first
anniversary of the date of the grant.
(e) No Outside Director Option shall be exercisable prior to vesting.
Each Outside Director Option shall expire, if unexercised, on the tenth
anniversary of the date of grant. The exercise price may be paid in cash or
in shares of Common Stock, including shares of Common Stock subject to the
Outside Director Option.
(f) Outside Director Options shall not be transferable without the
prior written consent of the Board other than (i) transfers by the optionee to
a member of his or her Immediate Family or a trust for the benefit of the
optionee or a member of his or her Immediate Family, (ii) transfers by will or
14
by the laws of descent and distribution, or (iii) transfers by the optionee to
a fund affiliated with the optionee.
(g) Grantees of Outside Director Options shall enter into a stock
option agreement with the Company setting forth the exercise price and other
terms as provided herein.
(h) Upon termination of an Outside Director's service as a director of
the Company, (i) all Outside Director Options theretofore exercisable and held
by such Outside Director will remain vested and exercisable through the
expiration date and (ii) all remaining Outside Director Options held by such
Outside Director will become exercisable and vested and remain so through the
expiration date to the extent of any shares that would have become exercisable
and vested within a period of less than twelve months following the date of
termination of service. Any unvested Outside Director Options held by the
Outside Director on the date of termination of service will be forfeited to the
extent of any shares that would not have become vested and exercisable until
at least twelve months from the date of termination of service. The Board may,
in its sole discretion, elect to accelerate the vesting of any Outside Director
Options in connection with the termination of service of any individual Outside
Director.
(i) Outside Director Options shall be subject to Section 10. The number
of shares and the exercise price per share of each Outside Director Option
theretofore awarded shall be adjusted automatically in the same manner as the
number of shares and the exercise price for Stock Options under Section 3(c)
hereof at any time that Stock Options are adjusted as provided in Section 3(c).
The number of shares underlying Outside Director Options to be awarded in the
future shall be adjusted automatically in the same manner as the number of
shares underlying outstanding Stock Options are adjusted under Section 3(c)
hereof at any time that Stock Options are adjusted under Section 3(c) hereof.
(j) The Board, in its sole discretion, may determine to reduce the size
of any Outside Director Option prior to grant or to postpone the vesting and
exercisability of any Outside Director Option prior to grant.
SECTION 10. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of: (1) a "Change in Control" as
defined in Section 10(b); or (2) a "Potential Change in Control" as defined in
Section 10(c), but only if and to the extent so determined by the Committee or
the Board at or after grant (subject to any right of approval expressly
reserved by the Committee or the Board at the time of such determination), (i)
Subject to the limitations set forth below in this Section 10(a), the following
acceleration provisions shall apply: (a) Any Stock Appreciation Rights, any
Stock Option or Outside Director Option awarded under the Plan not previously
exercisable and vested shall become fully exercisable and vested. (b) The
restrictions applicable to any Restricted Stock and Other Stock-Based Awards,
in each case to the extent not already vested under the Plan, shall lapse and
such shares and awards shall be deemed fully vested. (ii) Subject to the
limitations set forth below in this Section 10(a), the value of all outstanding
Stock Options, Stock Appreciation Rights, Restricted Stock, Outside Director
Options and Other Stock-Based Awards, in each case to the extent vested, shall,
unless otherwise determined Board or by the Committee in its sole discretion
prior to any Change in Control, be cashed out on the basis of the "Change in
Control Price" as defined in Section 10(d) as of the date such Change in
15
Control or such Potential Change in Control is determined to have occurred or
such other date as the Board or Committee may determine prior to the Change in
Control. (iii) The Board or the Committee may impose additional conditions on
the acceleration or valuation of any award in the award agreement.
(b) Definition of Change in Control. For purposes of Section 10(a), a
"Change in Control" means the happening of any of the following: (i) any person
or entity, including a "group" as defined in Section 13(d)(3) of the Exchange
Act, other than the Company or a wholly-owned subsidiary thereof or any
employee benefit plan of the Company or any of its Subsidiaries, becomes the
beneficial owner of the Company's securities having 50% or more of the combined
voting power of the then outstanding securities of the Company that may be cast
for the election of directors of the Company (other than as a result of an
issuance of securities initiated by the Company in the ordinary course of
business); or (ii) as the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sales of assets or
contested election, or any combination of the foregoing transactions, less than
a majority of the combined voting power of the then outstanding securities of
the Company or any successor corporation or cooperative or entity entitled to
vote generally in the election of the directors of the Company or such other
corporation or cooperative or entity after such transaction are held in the
aggregate by the holders of the Company's securities entitled to vote generally
in the election of directors of the Company immediately prior to such
transaction; or (iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's shareholders, of each director of the
Company first elected during such period was approved by a vote of at least
two-thirds of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period.
(c) Definition of Potential Change in Control. For purposes of Section
10(a), a "Potential Change in Control" means the happening of any one of the
following: (i) The approval by shareholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the Company as
defined in Section 10(b); or (ii) The acquisition of beneficial ownership,
directly or indirectly, by any entity, person or group (other than the Company
or a Subsidiary or any Company employee benefit plan (including any trustee of
such plan acting as such trustee)) of securities of the Company representing
5% or more of the combined voting power of the Company's outstanding securities
and the adoption by the Committee of a resolution to the effect that a
Potential Change in Control of the Company has occurred for purposes of this
Plan.
(d) Change in Control Price. For purposes of this Section 10, "Change
in Control Price" means the highest price per share paid in any transaction
reported on such automated quaotation system or other exchange or market as is
the principal trading market for the Common Stock, or paid or offered in any
bona fide transaction related to a Potential or actual Change in Control of the
Company at any time during the 60 day period immediately preceding the
occurrence of the Change in Control (or, where applicable, the occurrence of
the Potential Change in Control event), in each case as determined by the
Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee
exercises such Stock Appreciation Rights or, where applicable, the date on
which a cash out occurs under Section 10(a)(ii).
16
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may at any time amend, alter or discontinue the Plan;
provided, however, that, without the approval of the Company's shareholders,
no amendment or alteration may be made which would
(a) increase the maximum number of shares that may be issued under
the Plan or increase the Section 162(m) Maximum,
(b) change the provisions governing Incentive Stock Options except
as required or permitted under the provisions governing
incentive stock options under the Code,
(c) amend Section 9 hereof so as to increase the size of any award
or otherwise materially increase the benefits to Outside
Directors under Section 9 hereof, or
(d) make any change for which applicable law or regulatory
authority (including the regulatory authority of any automated
quotation system or any other market or exchange on which the
Common Stock is traded) would require shareholder approval or
for which shareholder approval would be required to secure
full deductibility of compensation received under the Plan
under Section 162(m) of the Code. No amendment, alteration, or
discontinuation shall be made which would impair the rights of
an optionee or participant under a Stock Option, Stock
Appreciation Right, Restricted Stock, Other Stock-Based Award
or Outside Director Option theretofore granted, without the
participant's consent. The Committee may amend the terms of
any Stock Option or other award theretofore granted,
prospectively or retroactively, but, subject to Section 3
above, no such amendment shall impair the rights of any holder
without the holder's consent. The Committee may also
substitute new Stock Options for previously granted Stock
Options (on a one for one or other basis), including
previously granted Stock Options having higher option exercise
prices. Solely for purposes of computing the Section 162(m)
Maximum, if any Stock Options or other awards previously
granted to a participant are canceled and new Stock Options or
other awards having a lower exercise price or other more
favorable terms for the participant are substituted in their
place, both the initial Stock Options or other awards and the
replacement Stock Options or other awards will be deemed to be
outstanding (although the canceled Stock Options or other
awards will not be exercisable or deemed outstanding for any
other purposes).
SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu of or with
respect to awards hereunder; provided, however, that, unless the Committee
otherwise determines with the consent of the affected
17
participant, the existence of such trusts or other arrangements is consistent
with the "unfunded" status of the Plan.
SECTION 13. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares pursuant
to a Stock Option or other award under the Plan to represent to and agree with
the Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates for shares of Common Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock
exchange upon which the Common Stock is then listed, and any applicable Federal
or state securities law, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of the
Company or any Subsidiary or Affiliate any right to continued employment with
the Company or a Subsidiary or Affiliate, as the case may be, nor shall it
interfere in any way with the right of the Company or a Subsidiary or Affiliate
to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay
to the Company, or make arrangements satisfactory to the Committee regarding
the payment of, any Federal, state, or local taxes of any kind required by law
to be withheld with respect to such amount. The Committee may require
withholding obligations to be settled with Common Stock, including Common Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and its Subsidiaries or Affiliates shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or other types of Plan awards) at
the time of any dividend payment shall only be permissible if sufficient shares
of Common Stock are available under Section 3 for such reinvestment (taking
into account then outstanding Stock Options and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Tennessee.
(g) The members of the Committee and the Board shall not be liable to
any employee or other person with respect to any determination made hereunder
in a manner that is not inconsistent with their legal obligations as members
of the Board. In addition to such other rights of
18
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any option granted thereunder, and against all amounts paid
by them in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member is liable for negligence or misconduct
in the performance of his duties; provided that within 60 days after
institution of any such action, suit or proceeding, the Committee member shall
in writing offer the Company the opportunity, at its own expense, to handle and
defend the same.
(h) In addition to any other restrictions on transfer that may be
applicable under the terms of this Plan or the applicable award agreement, no
Stock Option, Stock Appreciation Right, Restricted Stock award, or Other Stock-
Based Award or other right issued under this Plan is transferable by the
participant without the prior written consent of the Committee, or, in the case
of an Outside Director, the Board, other than (i) transfers by an optionee to
a member of his or her Immediate Family or a trust for the benefit of the
optionee or a member of his or her Immediate Family or (ii) transfers by will
or by the laws of descent and distribution. The designation of a beneficiary
will not constitute a transfer.
(i) The Committee may, at or after grant, condition the receipt of any
payment in respect of any award or the transfer of any shares subject to an
award on the satisfaction of a six-month holding period, if such holding period
is required for compliance with Section 16 under the Exchange Act.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective upon the date of the effectiveness of the
Company's initial registration statement under the Securities Act of 1933 (the
"Effective Date").
SECTION 15. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock Award,
Other Stock-Based Award or Outside Director Option award shall be granted
pursuant to the Plan on or after the tenth anniversary of the Effective Date
of the Plan, but awards granted prior to such tenth anniversary may be extended
beyond that date.
SHARE COMPENSATION ARRANGEMENT FOR
NON-EMPLOYEE DIRECTORS OF DTC COMMUNICATIONS CORP.
(October 1999)
(Pursuant to the DTC Communications Corp. Stock Incentive Plan)
Eligibility: All directors of DTC Communications Corp. (the "Corporation")
- ------------ who are not full time employees of the Corporation
("Participating Directors") shall participate to the extent of
the minimum specified below and may participate further at
his/her election. For the purposes of this Share Compensation
Arrangement, "aggregate fees" in respect of any director shall
include: (i) such director's quarterly retainer; (ii) if such
director is the Chairman of a committee of the Board, the
quarterly retainer, if any, paid to such director in respect
of such service; (iii) all quarterly fees paid to such
director in respect of attendance at regular meetings of the
Board or committees thereof; and (iv) if such director is also
Chairman of the Board, to the extent such director elects to
receive compensation for services performed as Chairman in
lieu of any retainers or fees to which he/she is entitled by
virtue of his/her services as a director, all such
compensation.
Amount of Participating Directors shall receive at least twenty-five
Participation: percent (25%) and, at their election, may receive up to one
- -------------- hundred percent of their aggregate fees in shares of the
Corporation's no par value common stock ("Shares") instead of
cash. At or prior to the first regular directors' meeting
held in a calendar year, each Participating Director must make
an election, which will be irrevocable during the remaining
portion of that year, to receive a specified percentage up to
100% of such directors' aggregate fees in Shares. Any
director who does not make such an election will be deemed to
have elected to receive twenty-five percent (25%) of such
director's aggregate fees in Shares during the applicable
year.
Method Notice of a director's election to receive a specified
of Election: percentage of such Director's aggregate fees in Shares
- ------------ instead of cash must be provided in writing to the Secretary
of the Corporation at or prior to the first regular directors'
meeting in a calendar year.
Number of The number of Shares which a Participating Director will be
Shares: issued following each regular quarterly board meeting will be
- --------- equal to: the amount of aggregate fees then due for which such
director has elected to be paid in Shares, divided by the
average closing price of the Shares during the last five
trading days preceding such board meeting.
Form of Compensation in the form of a share certificate will be sent
Payment: to the Participating Directors as soon as practicable
- -------- following each regular quarterly meeting of the Corporation's
board of directors.
Termination: The Share Compensation Arrangement will expire on the earlier
- ----------- of: (i) its termination by the board of directors, or (ii)
25,000 Shares having been issued to directors pursuant to the
Arrangement.
REA Project Designation:
TENNESSEE 521-A
---------------
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held December 17, 1951.
/s/ M.D. Robinson
----------------------
Secretary of Meeting
DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. A
-----
AGREEMENT, made as of October 15, 1951, pursuant to
the Rural Electrification Act of 1936, as amended (7 U.S.C.
901 et seq.) (hereinafter called the "Act"), between DeKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"),
a non-profit cooperative association existing under the laws
of the State of Tennessee, and UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the
Administrator of the Rural Electrification Administration
(hereinafter called the "Administrator").
WHEREAS, it is intended that the Government shall lend and
the Borrower shall borrow an amount not in excess of $180,000 to finance
partially the construction and operation of a telephone system in rural areas
to bring telephone service to approximately 530 subscribers, upon the terms
and conditions contained in this agreement, as from time to time amended; and
WHEREAS, it is contemplated that the amount of such loan may
be increased from time to time for purposes permitted by the provisions of
the Act, as from time to time amended, and upon the terms and conditions
contained in this agreement, as from time to time amended (such loan and any
such increases in the amount thereof being hereinafter collectively called
the "Loan"); and
WHEREAS, the Administrator, in determining to enter into this
agreement, has relied upon the representation of the Borrower to him that it
is willing to furnish adequate telephone service to the widest practicable
number of persons in rural areas whom it is possible to serve, and the
Borrower has agreed to do so as hereinafter provided;
NOW, THEREFORE, for and in consideration of the mutual
agreements herein contained, the Borrower and the Government agree as
follows:
ARTICLE I
LOAN, NOTES AND SECURITY
SECTION 1.1 Amount and Purpose. For the purpose of furnishing
telephone service in rural areas, the Government shall lend and the Borrower
shall borrow an amount not in excess of $180,000 which, together with the sum
of $7,950 to be deposited by the Borrower in the "Special Construction
Account" hereinafter defined and provided for in section 2.4 shall be used to
finance, pursuant to the provisions of the Act, the construction and
operation of telephone lines and facilities (hereinafter called the
"Project") to be located in the Counties of DeKalb, Smith and Wilson and in
counties contiguous thereto, all in the State of Tennessee.
SEC. 1.2. Notes. The debt created by the Loan shall be evidenced
by notes (such notes and any notes executed and delivered to refund, or in
substitution for, such notes being hereinafter collectively called the
"Notes") to be executed by the Borrower when and as the Administrator shall
determine, payable to the order of the Government. The Notes shall bear
interest at rates prescribed by applicable Federal statutes, and shall
otherwise be in form and substance satisfactory to the Administrator.
Interest shall accrue on the principal of each Note only in respect of
amounts which shall have been advanced to the Borrower from time to time on
account of the Loan and charged against such Note.
SEC. 1.3. Loan Closing. The Administrator may from time to time
determine the amount required to enable the Borrower to perform its
obligations hereunder. Upon notification by the Administrator to the Borrower
in respect of any such determination, any reduction in the maximum amount of
the loan herein provided for resulting therefrom shall be conclusive and
binding upon both the Government and the Borrower, and the Administrator
shall cause such one or more of the Notes as he shall select to be
appropriately credited with an amount equal to such reduction, and the
principal amount of such Note or Notes shall, for the purposes of this
agreement, be deemed to be correspondingly reduced. When the Administrator
shall determine that no further funds are required to be advanced by the
Government hereunder in order to enable the Borrower to
perform its obligations hereunder, the Administrator shall, at such time
thereafter as he shall elect, execute and deliver to the Borrower a loan
closing certificate (hereinafter called the "loan closing certificate") which
shall, among other things, specify the date of the closing of the Loan and
the amount of the unpaid principal of and the accrued and unpaid interest on
each of the Notes.
SEC. 1.4. Security. The Notes shall be secured by a deed of trust
made by and between the Borrower and a trustee satisfactory to the
Administrator (such deed of trust being hereinafter called the "Mortgage"),
as supplemented by such supplemental deeds of trust made by and between the
Borrower and such trustee as the Administrator shall from time to time
require, and the Notes shall also be secured by such chattel mortgages and
such supplemental or additional chattel mortgages, made by the Borrower to
the Government, as the Administrator shall from time to time require (any
such supplemental deed of trust, and any such chattel mortgage, supplemental
or additional chattel mortgage, as the case may be, being hereinafter called
a "supplemental mortgage"). The Borrower shall also take such other action
as the Administrator shall from time to time require to perpetuate or renew
the lien of the Mortgage, or any supplemental mortgage, so long as any part
of the Loan or the interest thereon shall remain unpaid. The Mortgage and all
supplemental mortgages, if any, shall be in form and substance satisfactory
to the Administrator and collectively shall cover all the property of the
Borrower now owned or hereafter acquired.
ARTICLE II
ADVANCES AND DISPOSITION OF FUNDS
SECTION 2.1. Prerequisites to Advances.
(A) The Borrower shall deliver to the Government, when directed by
the Administrator and in form and substance satisfactory to him, the following:
(1) one or more of the Notes, the Mortgage and such
supplemental mortgages as the Administrator shall require, all duly
executed and accompanied by proof of the due recordation and filing
of the Mortgage and any supplemental mortgage in every appropriate
office specified by the Administrator;
(2) evidence of appropriate corporate action authorizing
the execution and delivery of the Notes, the Mortgage, and any
supplemental mortgage and amendment to this agreement;
(3) evidence that the Borrower has duly registered when
and where required by law with all State and Federal authorities and
obtained therefrom all authorizations, permits, and approvals to the
extent required by law in order to enable the Borrower to enter into
this agreement, and to execute and deliver the Notes, the Mortgage,
and any supplemental mortgage and amendment to this agreement;
(4) evidence that there has been no substantial adverse
change in the Borrower's financial condition or plant since the date
of the last financial statement submitted by the Borrower to the
Administrator;
(5) evidence that the Borrower is not involved in or
threatened with any litigation which may substantially and adversely
affect the Borrower's financial condition and that there are no liens
or clouds on title except the lien of the Mortgage and any
supplemental mortgage on any of its property;
(6) evidence that the Borrower has duly adopted articles
of incorporation and bylaws in form and substance satisfactory to the
Administrator; and
(7) such opinions as the Administrator may require, by
counsel who shall have been previously approved by the Administrator.
(B) No funds shall be advanced on account of the Loan unless and
until the Borrower shall have submitted evidence, satisfactory to the
Administrator, that:
(1) it has obtained all franchises required by law from
any incorporated
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municipality or municipalities in which lines are, or will be located;
(2) the Alexandria Home Telephone Company and the
Liberty Home Telephone Company have taken all necessary action to
abandon their operations and dissolve their organizations when
telephone service is made available to their members by the Borrower;
(3) the Borrower has obtained commitments or contracts,
in form and substance satisfactory to the Administrator, covering all
necessary toll traffic and operator services to be furnished by
connecting companies and all necessary joint use of facilities with
other companies;
(4) it has complied with all regulations applicable to
the sale of membership certificates in the Borrower;
(5) it has adopted a schedule of rates, for the
furnishing of telephone service, satisfactory to the Administrator;
and
(6) the Borrower has obtained a total $1,175 in equity
funds through the collection of $5.00 from each of 235 members and
has deposited said $1,175 in the Special Construction Account
provided for in section 2.4 hereof all in accordance with section
4.22 hereof.
SEC. 2.2. Requisitions. The Borrower shall from time to time submit
to the Administrator requisitions in such form and detail as the
Administrator shall prescribe requesting the Government to make advances on
account of the Loan. Each requisition shall be accompanied by the following:
(a) evidence satisfactory to the Administrator that the
construction of the Project effected to the date of the requisition
complies with the provisions hereof;
(b) a certificate signed by such officers or employees of
the Borrower as shall be acceptable to the Administrator, which shall
specify all payments not previously accounted for theretofore made
by the Borrower from funds in the Special Construction Account
provided for in section 2.4 hereof;
(c) a statement, in such form and detail as the
Administrator shall prescribe, setting forth the purposes for which
it is intended the requested advance will be used by the Borrower;
and
(d) such information, opinions, documents and proofs, of
whatever kind and nature, in addition to the foregoing, as may
reasonably be requested by the Administrator.
SEC. 2.3. Advances. The Government, upon receipt of a requisition
and accompanying documents complying with the provisions of section 2.2
hereof shall, within a reasonable time thereafter, if the Borrower has
complied with the provisions of section 2.1 hereof and all other conditions
precedent to the advance of funds on account of the Loan to the satisfaction
of the Administrator, make an advance to the Borrower sufficient for such of
the purposes specified in the statement of purposes accompanying the
requisition as the Administrator shall approve. The Administrator may at any
time, as a condition to making any advance on account of the Loan, require
compliance by the Borrower with any one or more of the terms and conditions
of this agreement to be performed by the Borrower. Advances made by the
Government pursuant to this section 2.3 shall be charged by the Government
against any one or more of the Notes in such manner and in such amounts as
the Administrator shall determine. The Government shall be under no
obligation to make advances on account of the Loan after the date of the
closing of the Loan specified in the loan closing certificate.
SEC. 2.4. Special Construction Account. The Borrower shall hold all
moneys advanced to it by the Government hereunder in trust for the Government
and shall deposit such moneys promptly after the receipt thereof in a bank or
banks which shall meet the requirements specified in section 4.4 hereof. Any
account (hereinafter called "Special Construction Account") in which any such
moneys shall be deposited
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shall be designated by the corporate name of the Borrower followed by the
words "Trustee, REA Construction Fund Account". Moneys in any Special
Construction Account shall be used solely for the construction and operation
of the Project. The Borrower shall also deposit in the Special Construction
Account on the same terms and conditions, subject to the same requirements
regarding requisitions and for the same purposes as funds advanced on account
of the Loan the sum of $7,950 (hereinafter called the "equity funds"). Until
the aggregate amount of withdrawals from the Special Construction Account
shall equal or exceed the amount of the equity funds, they shall be deemed to
have been made from the equity funds and not from funds advanced by the
Government to the Borrower. Subject to the provisions of section 5.2(c)
hereof, moneys in any Special Construction Account may be withdrawn only upon
checks, drafts or orders signed on behalf of the Borrower and countersigned
by an executive officer thereof.
SEC. 2.5. Unexpended Loss Funds. Any funds advanced on account of
the Loan remaining unexpended in any Special Construction Account upon the
closing of the Loan shall be forthwith remitted by the Borrower to the
Government and a credit in respect thereof allowed against any one or more of
the Notes to be designated by the Administrator.
SEC. 2.6. Compliance with Restrictions On Use of Materials. No
advances will be made on account of the Loan for the construction of any part
of the System with respect to which the Borrower shall have failed to submit
to the Government evidence satisfactory to the Administrator that the
Borrower has obtained from the appropriate agency or agencies of the
Government all necessary orders or approvals with respect to the use of the
materials required for the construction of such part of the System. No
construction shall be undertaken except in accordance with authorizations or
regulations of the Office of Defense Mobilization or any other Federal agency
having jurisdiction in the premises.
SEC. 2.7. Termination of Advances. If, within two years from the
date hereof, or, in case this agreement is amended to provide for an increase
in the amount of the Loan, then within two years from the date of the latest
such amendment, the Borrower has not complied with all conditions precedent
to the advance of the maximum amount of the Loan, including the submission of
requisitions therefor in compliance with section 2.2 of Article II hereof,
the Administrator may, at any time or times thereafter, request the Borrower
in writing to advise the Administrator whether the Borrower will require any
further advances on account of the Loan and if so, to submit evidence to the
Administrator, within thirty days, of the Borrower's need for additional time
for compliance with such conditions. Upon consideration of such evidence, if
any, and all other relevant circumstances, the Administrator may, in his
discretion, by written notice to the Borrower, terminate any obligation to
advance all or any part of the funds on account of the Loan not previously
advanced to the Borrower, and such action by the Administrator shall be
conclusive.
ARTICLE III
CONSTRUCTION
SECTION 3.1. Contract and Force Account. The Borrower shall cause
the Project to be constructed under contract by a responsible contractor or
contractors approved by the Administrator, except to the extent that the
Administrator shall permit the Borrower to construct by force account any
portion of the Project. The term "force account" shall mean construction by
the Borrower and the furnishing by the Borrower of all labor, transportation,
materials, tools, supplies, and equipment used in connection therewith. Force
account construction shall be prosecuted subject to such terms and conditions
as the Administrator shall prescribe and the Borrower shall keep accurate and
detailed records of all costs and expenses in connection therewith. The
Project shall be constructed in such sections as the Administrator shall
direct.
SEC. 3.2. Commencement and Completion. The Project shall be
constructed in accordance with the approved plans and specifications
hereinafter provided for,
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the provisions of this agreement and all contracts and subcontracts made
pursuant hereto. Construction of the respective sections of the Project shall
be commenced promptly after the Government shall have notified the Borrower
to commence such construction, and the Borrower shall cause such construction
to be prosecuted diligently and to be completed within such reasonable time
as the Administrator shall prescribe, unless prevented from so doing by
causes beyond the control and without the fault or negligence of the
Borrower, including fires, floods, strikes, and unusually severe weather
conditions. The Borrower shall cause the Project to be completed in such
manner that it shall be free and clear of all liens and lawful claims for
liens except the liens of the Mortgage and any supplemental mortgage.
SEC. 3.3. Bidding. The Borrower shall, if the Administrator shall
so require, invite bids for construction work pertaining to the Project, and
for materials, equipment, or supplies to be used therein, and the Borrower
shall include all persons designated by the Administrator among those invited
to submit bids. If the Administrator shall so require, the Borrower shall
open bids in the presence of a representative of the Administrator and, in
any event the Borrower shall open all bids publicly at the time and place
which shall have been specified in the notice to bidders. The Borrower shall
award each contract to the lowest responsible bidder, unless all bids are
rejected or the Administrator shall approve the award of the contract to
another responsible bidder upon a showing that the award of the contract to
such bidder is in the best interests of the Borrower.
SEC. 3.4. Inspection by Administrator. The Administrator may
supervise the construction and equipment of the Project, and shall have the
right to inspect, examine, and test all work and materials, and the Borrower
shall provide reasonable facilities therefor for the use of the Administrator
and his agents. The Administrator may reject any defective material or
workmanship and require that any such material shall be replaced with proper
material and that any such workmanship shall be corrected.
SEC. 3.5. Certificates and Maps. The Borrower shall at such times
as the Administrator shall determine, furnish to the Government (a) such
certificates of the approved engineer and of the officers and employees of
the Borrower as the Administrator shall require with respect to construction
of the Project, or any section thereof, and the cost thereof; (b) a complete
and detailed inventory and description of the Project, or any section
thereof; and (c) a map or maps, in form satisfactory to the Administrator,
showing the location and classification of all exchanges, lines and other
properties of the Borrower except those, if any, not directly connected with
the Project.
ARTICLE IV
PARTICULAR COVENANTS
SECTION 4.1. Appointments by Borrower. The Borrower shall designate,
subject to the Administrator's approval: (a) one or more engineers (who may
be a member or members of the Borrower's engineering staff, if any, or an
engineer or engineers regularly employed by the Borrower) who shall perform
the engineering services involved in the construction of the Project or the
several parts thereof, and execute all certificates and other instruments
pertaining to engineering details required hereunder to be delivered to the
Government; and (b) a person (who may be regularly employed by the Borrower)
who, subject to the general policies fixed by the board of directors for the
conduct of the Borrower's business, shall have active charge of the
management and operations of the Borrower (the person so approved being
hereinafter called the "Manager").
SEC. 4.2. Submission of Plans, Specifications and Contracts With
Third Parties. The Borrower shall submit, when the Administrator shall so
require and subject to the Administrator's approval:
(a) plans and specifications for the construction of
each section of the
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Project as shall be designated by the Administrator, identified by
the signature of the approved engineer for such section or sections,
and, if the Administrator shall so require, certified by the
secretary of the Borrower as having been approved by the board of
directors thereof;
(b) a contract or contracts for the construction of the
section of the Project designated by the Administrator;
(c) a contract or contracts with an approved engineer
for all necessary engineering services in connection with the
construction of the several sections of the Project;
(d) a contract or contracts for the interchange of
traffic and the division of toll revenues;
(e) an option or options or contract or contracts, as
the case may be, for the purchase, lease or other acquisition of land
for use in connection with the construction or operation of the
Project or any part thereof;
(f) a contract for the employment of a Manager and such
other managerial personnel as the Administrator shall specify.
SEC. 4.3. Contracts Subject to the Administrator's Approval. Unless
the effectiveness of each such contract shall be conditioned upon the
approval of the Administrator, the Borrower shall not enter into any
contracts for:
(a) the construction of any portion of the Project;
(b) engineering services pertaining to the construction
of the Project;
(c) the interchange of traffic and the division of toll
revenues;
(d) the joint use of telephone, telegraph or electric
facilities;
(e) the purchase in excess of $2,000 in any one instance
of materials, equipment or supplies for use in connection with the
construction of the Project or operation of the System;
(f) the acquisition of existing facilities to be
included in the Project;
(g) management, accounting or other like services; and
(h) operating service assistance.
SEC. 4.4. Deposit of Funds. The Borrower shall not deposit or allow
to remain on 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. The Borrower shall inform the Administrator of the
names of the banks which it has selected for deposit of its funds.
SEC. 4.5. Easements and Permits. The Borrower shall submit to the
Government, when required by the Administrator, evidence satisfactory to the
Administrator that the Borrower has obtained such easements from landowners
and releases from lienors and such franchises, authorizations, permits,
licenses, certificates of public convenience and necessity, approvals, and
orders from public bodies and others, as the Administrator shall deem
necessary or advisable in connection with the Project or the Loan. If
required so to do by the Administrator, the Borrower shall cause such
easements and releases to be recorded in appropriate offices of record.
Except with the consent of the Administrator, none of the funds advanced on
account of the Loan and none of the equity funds shall be used by the
Borrower to pay for easements obtained from landowners, or for releases of
liens affecting easements.
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SEC. 4.6. Area Coverage. The Borrower shall furnish adequate
telephone service to the widest practacable number of persons in rural areas,
and, subject to applicable laws, rules, regulations and orders of regulatory
bodies, shall, in the performance of such obligation, use the funds in the
Special Construction Account and such other funds as may from time to time be
available to it, either from surplus earnings, from additional loans made to
the Borrower by the Government, from increased capital derived through the
sale of additional memberships, or otherwise as the Borrower may elect, to
extend service, except as otherwise provided in section 4.21 hereof, to all
persons (hereinafter called "applicants") in rural areas in the Borrower's
telephone service area (as such area is shown on the map which is a part of
the Borrower's application for the loan, and which map, as revised by
agreement between the Borrower and the Administrator is incorporated herein
by reference hereto) who shall (a) desire such service and (b) shall meet all
reasonable requirements established by the Borrower as a condition of
service. The extension of service to all applicants in the telephone service
area is of the essence of the Borrower's obligations under this agreement,
and the failure or neglect of the Borrower to perform such obligation shall
be deemed to be an event of default hereunder and under the Mortgage and any
supplemental mortgage.
SEC. 4.7. Books and Records. The Borrower shall at all times keep,
in accordance with methods of accounting prescribed by the Administrator, but
subject to applicable laws and rules and regulations of regulatory bodies,
and shall safely preserve, books, records and accounts in which full and true
entries shall be made of all the dealings, business and affairs of the
Borrower. The Government, through its agents, or through certified public
accountants approved by the Administrator, to be employed by the Borrower at
its expense when so requested by the Administrator, shall at all times during
reasonable business hours have access to and the right to inspect and make
copies of all such books, records, and accounts and all invoices, contracts,
leases, payrolls, canceled checks, statements, plans, specifications,
drawings, and other documents and papers of every kind belonging to or in the
possession of the Borrower in any wise pertaining to the Project. The
Borrower, at such times as the Administrator may designate, shall submit to
the Government financial and operating reports in such form as shall be
acceptable to the Administrator.
SEC. 4.8. Mortgage Covenants. The Borrower shall perform all
covenants by it to be performed under the Mortgage and any supplemental
mortgage.
SEC. 4.9. Contractor's Bonds. The Borrower shall forthwith, upon
receipt thereof, deliver to the Administrator any contractor's or
subcontractor's bond relating to the construction of the Project.
SEC. 4.10. Representations and Warranties. The Borrower represents
and warrants as follows:
(a) it is a corporation duly organized, existing and in
good standing under the laws of the State specified in the
introductory paragraph of this agreement and has corporate power to
enter into this agreement and perform every act required to be
performed by it hereunder;
(b) all proceedings prerequisite to the valid execution
of this agreement by it have been duly taken and all required
authorizations therefor have been secured;
(c) it has not entered into any contract (except such
contracts, if any, as may have been entered into and been completely
performed prior to the date hereof) for the construction of any
portion of the Project, or for engineering or for other services
pertaining to the construction or operation of the Project, or for
the purchase of materials, equipment or supplies for use in
connection with the construction or operation of the Project, unless
such contract (1) has been approved by the Administrator (2) will be
submitted for the approval of the Administrator; or (3) the
effectiveness thereof has been made subject to the approval of the
Administrator; and
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(d) every statement contained in this agreement and in
every other document, statement, certificate and opinion submitted
to the Government by it or in its behalf is true and correct.
SEC. 4.11. Fees and Commissions. No fee or commission has been or
shall be paid and no agreement therefor or has been or shall be entered into
by the Borrower or any of its officers, employees, agents, or representatives
in order to obtain the Loan.
SEC. 4.12. "Buy American" Clause. The Borrower shall use or cause
to be used in connection with the expenditures of funds advanced on account
of the Loan only such unmanufactured articles, materials, and supplies as
have been mined or produced in the United States, and only such manufactured
articles, materials, and supplies as have been manufactured in the United
States substantially all from articles, materials, or supplies mined,
produced, or manufactured, as the case may be, in the United States, except
to the extent the Administrator shall determine that such use shall be
impracti-cable or that the cost thereof shall be unreasonable.
SEC. 4.13. Non-Discrimination Clause. The Borrower, in the
performance of this agreement, shall not discriminate against any employee or
applicant for employment in regard to hire, tenure, terms or conditions of
employment because of race, creed, color or national origin. The Borrower
shall include in every contract involving the employment of persons hereafter
negotiated or renegotiated with any third party or parties a provision
obligating such party or parties not to discriminate in performing the work
required by such contract against any employee or applicant for employment in
regard to hire, tenure, terms or conditions of employment because of race,
creed, color or national origin.
SEC. 4.14. Evidence of Feasibility. The Borrower shall, whenever
requested so to do by the Administrator, submit evidence satisfactory to the
Administrator of the economic and engineering feasibility of each part of the
Project designated by the Administrator. If the Borrower shall fail to submit
such evidence with respect to any such part, the Government may refuse to
make any advance or further advances hereunder (in which case the
Administrator may execute and deliver to the Borrower a loan closing
certificate as described in section 1.3 hereof) or the Administrator may
determine that such part shall not be constructed and in such event the
Borrower shall not construct such part. Any determination by the
Administrator hereunder shall be conclusive and binding upon both the
Government and the Borrower.
SEC. 4.15. Proof of Title. No funds shall be advanced on account
of the Loan to finance the acquisition of any real property by the Borrower,
or any construction thereon, until the Borrower shall have submitted evidence
satisfactory to the Administrator that it has acquired or will acquire such
right, title or interest in such real property as the Administrator may
require.
SEC. 4.16. Commencement of Operation. The Borrower shall not operate
any portion of the Project until the Borrower shall have furnished evidence
satisfactory to the Administrator that (a) such portion of the Project has
been properly constructed and is ready to be operated, (b) there are
sufficient subscribers ready to take service to permit the economical
operation of such portion of the Project, and (c) the Borrower has complied
with the provisions of the Mortgage concerning insurance in respect of such
portion of the Project. The Borrower shall not serve any subscriber through
the Project until the Borrower shall have furnished evidence satisfactory to
the Administrator that the telephone wiring and equipment installed in such
subscriber's premises are of a type and quality, and have been installed, in
accordance with the approved plans and specifications.
SEC. 4.17. Operating and Maintenance Procedures. The Borrower shall,
subject to applicable laws, rules, regulations and orders of regulatory
bodies, operate and maintain the Project in accordance with operating and
maintenance procedures and practices satisfactory to the Administrator. The
Borrower shall inaugurate and carry out such personnel training programs,
office procedures and equipment maintenance programs as the Administrator may
specify.
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SEC. 4.18. Minutes. The Borrower shall promptly submit to the
Government certified copies of the minutes of all meetings of its members and
of its directors.
SEC. 4.19. Signs and Pole Marking. The Borrower shall erect and
maintain during the construction of the Project, in an appropriate place
where construction work on the Project is being prosecuted, a sign which
shall be subject to the approval of the Administrator, bearing the legend
"Rural Electrification Administration Telephone Project under Federal
Government Loan", or such other legend of similar import as the Administrator
may designate. The Borrower shall at all times identify all poles owned by it
in such manner as the Administrator shall direct.
SEC. 4.20. Supervisor: Appointment and Powers. If the construction
or operation of the Project, or any parts thereof shall not proceed in
accordance with the terms hereof, or if, in the opinion of the Administrator,
action is necessary to protect the Government's security for the Loan or is
essential to achieve the objectives for which the Loan is made, the
Administrator may appoint, as the representative of the Government a
supervisor (hereinafter called the "Supervisor") for the Project or other
property of the Borrower necessary to the construction or operation of the
Project and shall notify the Borrower of such appointment and the duration
thereof and of the salary of the Supervisor. The Supervisor shall take such
steps as he deems necessary to assure construction or operation of the
Project in accordance with the terms hereof, or such portion or portions
thereof as may be designated by the Administrator, or any extensions thereto
which the Borrower may be obligated to construct and operate pursuant to the
provisions of section 4.6 hereof, or to preserve the security of the Loan and
shall have power to operate the Project and do all things reasonably incident
to the exercise of the powers herein granted, including, without limitation,
directing the conservation of any funds of the Borrower, the collection of
all debts due it, directing the payment of all expenses of the Borrower from
any of its funds, termination of the employment of such employees of the
Borrower as he shall determine upon and the employment of such persons, on
such terms and conditions as he may designate, as he shall deem necessary to
assist him in carrying out his functions. The salaries, fees, disbursements
and expenses of the Supervisor, and of any employee appointed by him, shall
be paid by the Borrower, except that the salary of the Supervisor and of any
assistants who shall be employees of the Government shall not be chargeable
to the Borrower for a period of thirty (30) days after the appointment of the
Supervisor. So long as the appointment of the Supervisor shall be in effect,
all checks, drafts, and orders drawn on any bank account maintained by the
Borrower shall be countersigned by the Supervisor, except that, if the proper
officers or employees of the Borrower shall refuse to sign any such check,
draft or order, the Supervisor shall have full power and authority to sign
such check, draft or order for the Borrower without the requirement of any
other signature thereon, if the Supervisor shall certify to the bank upon
which such check, draft or order is drawn that the same is required to carry
out the obligations of the Borrower hereunder. The Borrower hereby
constitutes the Administrator its agent for the purpose of notifying any bank
in which any account of the Borrower shall be maintained of the appointment
of a Supervisor and of the provisions hereunder with respect thereto, and
agrees that such notice shall include a direction to any such bank with
respect to the signing or countersigning of the checks, drafts or orders
drawn on any such account as in this section provided. The Borrower shall
comply with all reasonable instructions of the Supervisor incident to
carrying out the obligations of the Borrower hereunder the performance of the
functions of the Supervisor.
SEC 4.21. Nonduplication of Facilities. The Borrower will not use any
part of the Loan nor any of the equity funds for the construction of telephone
facilities to furnish or improve service to persons receiving telephone service
from any other telephone company at the time the Borrower proposes to furnish
telephone service to such persons, except with regard to service by the
Borrower to persons receiving service through facilities acquired or to be
acquired by the Borrower, and except to the extent that the Administrator, on
the basis of evidence submitted to him by the Borrower, shall have determined
that service by the Borrower to such persons will not result in duplication of
lines, facilities or systems providing reasonably adequate service.
SEC 4.22. Equity Funds. The Borrower shall obtain its equity funds,
in a total amount of not less than $7,950.00, by the collection from each
subscriber of the Borrower of a full equity payment of $15.00 before
telephone service to such subscriber
- 9 -
is provided or improved by the Borrower. The Borrower shall submit to the
Administrator, at such times and in such form as may be required by him,
evidence that it has collected and deposited in the Special Construction
Account provided for in section 2.4 hereof, a full equity payment of $15.00
for each subscriber for whom telephone service has been furnished or
improved, until the total of $7,950 in funds has been collected and
deposited.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.1 Events of Default. The happening of any of the
following events (hereinafter called "events of default") shall constitute a
default by the Borrower hereunder:
(a) any failure to perform, or any violation of, any
term, covenant, premise, condition, or agreement on the part of the
Borrower to be performed hereunder at the time and in the manner
herein provided;
(b) any breach of any warranty or any material or
substantial inaccuracy in any representation on the part of the
Borrower; or
(c) any event of default which is specified in the
Mortgage or any supplemental mortgage.
SEC. 5.2. Remedies Upon Default. Upon the happening of any event of
default, as specified in section 5.1, the Government or the holder or holders
of any one or more of the Notes, as their respective interests may appear,
may exercise any one or more of the following rights, privileges, powers, and
remedies, to the extent that the exercise thereof is not prohibited by law:
(a) refuse to make any advance or any further advances
on account of the Loan, but any advance thereafter made by the
Government shall not constitute a waiver of such default;
(b) declare all unpaid principal of and all interest
accrued on any or all of the Notes held by such holder or holders
(which may include the Government) to be due and payable immediately
and upon such declaration all such principal and interest shall
become due and payable immediately, anything herein or in any other
agreement to which the Borrower shall be a party, or in the Notes or
in the Mortgage or any supplemental mortgage to the contrary
notwithstanding;
(c) enter upon and take possession of the Project, take
possession of and utilize any and all equipment, materials, tools,
supplies, and appliances wherever located belonging to the Borrower,
take possession of any funds in any Special Construction Account,
take possession of all books, papers, records, documents, accounts,
and plans and specifications of the Borrower re1ating to the Project,
and complete or cause to be completed, by contract or otherwise, the
construction of the Project, or such portion thereof as the
Administrator may select, for the account of the Borrower, and the
amount paid therefor by the Government shall be considered an advance
on account of the Loan and if said amount, together with prior
advances, is in excess of the maximum amount which the Government
would otherwise be required to advance hereunder, the Borrower shall
immediately pay to the Government the amount of such excess; or
(d) appoint a Supervisor pursuant to section 4.20
hereof; or
(e) exercise any and all rights, privileges, remedies,
powers, claims, and demands which the Borrower may have against third
persons in any way relating or pertaining to the construction of the
Project and, for such purpose, the
- 10 -
Borrower does hereby assign, transfer, and set over to the Government
any and all such rights, privileges, remedies, powers, claims, and
demands, except such as by law are not transferable or assignable,
which the Borrower hereby agrees to hold, together with any and all
proceeds resulting therefrom, in trust for the benefit of the
Government and the holder or holders of the Notes, as their
respective interests may appear.
SEC. 5.3. Remedies Cumulative. Every right, privilege, power or
remedy herein or in the Notes or in the Mortgage or in any supplemental
mortgage conferred upon or reserved to the Government or any holder or
holders of the Notes shall be cumulative and shall be in addition to every
other right, privilege, power, and remedy now or hereafter existing at law or
in equity or by statute. The pursuit .of any right, privilege, power, or
remedy shall not be construed as an election.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Members of Congress. No Member of or Delegate to the
Congress of the United States shall be admitted to any share or part of this
agreement or to any benefit to arise herefrom other than the receiving of
telephone service through the Project on the same terms accorded others
served through the Project.
SEC. 6.2. False Claims and the "Kick Back" Statute. The Borrower
and each of the officers signing this agreement respectively acknowledge that
they have received copies of sections 286, 287, 641, 1001 and 1361 of Title
18, United States Code, Crimes and Criminal Procedure, and regulations issued
pursuant to Public Act No. 734, 73d Congress (40 U.S.C. 276(b) (c)), commonly
called the "Kick Back" Statute.
SEC 6.3. Definitions. Whenever the following terms are used in this
agreement, unless the context indicates another or different meaning or
intent, they shall be construed to have meanings as follows:
(a) "Administrator" means the Administrator of the Rural
Electrification Administration or his duly authorized representative
or any other person or authority in whom may be vested the duties and
functions relating to loans for telephone service in rural areas made
pursuant to the Act which the Administrator is new or may hereafter
be authorized by law to perform;
(b) "plans and specifications" means the plans and
specifications for the Project originally approved by the
Administrator and shall include such changes and modifications
thereof as may from time to time be agreed upon by the Borrower and
the Government;
(c) "note" includes bond;
(d) "section", as used in the phrase "section of the
Project", or "section of the System" or the like, means any part of
the Project or System; and
(e) "construction" includes "acquisition", and the word
"construct" includes the word "acquire".
SEC. 6.4. Approvals in Writing. No counsel, engineer, manager or
other person, or instrument, or act of the Borrower, who or which shall be
subject to the approval of the Administrator, shall be deemed to be approved
unless and until the Administrator shall have given such approval in writing.
SEC. 6.5. Waiver. The Administrator, in his absolute discretion and
upon such terms and conditions as he may determine, may waive the performance
or doing of any one or more of the acts to be performed or things to be done
by the Borrower, and any
- 11 -
provision hereof may be modified or amended by mutual consent of the Borrower
and the Administrator. The Borrower shall not claim any modification,
amendment, rescission, release, or annulment of any part hereof except
pursuant to a written instrument subscribed by the Administrator. The
approval by or on behalf of the Administrator of any advance of funds on
account of the Loan shall constitute a finding of sufficient performance by
the Borrower of all acts prerequisite to such advance, or a waiver thereof;
provided, however, that any such waiver shall be effective only with
reference to such advance and shall not preclude the Administrator from
requiring full performance of the acts so waived as a prerequisite to any
subsequent advance.
SEC. 6.6. Non-Assignability. The Borrower shall not assign
agreement this or any part hereof or any moneys due or to become due
hereunder.
SEC. 6.7 Descriptive Headings; Separability. The descriptive
headings of the various articles and sections hereof were formulated and
inserted for convenience only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof. The invalidity of any one
or more phrases, clauses, sentences, paragraphs, or provisions of this
agreement shall not affect any remaining portion or portions hereof.
SEC. 6.8. Notices. All demands, notices, approvals, designations,
or directions permitted or required to be made upon or given to the Borrower
hereunder shall be mailed to the Borrower at Alexandria, Tennessee, or such
other address as the Borrower shall designate in writing to the
Administrator. All notices, designations, or communications permitted or
required to be given or sent to the Government or the Administrator hereunder
shall be mailed to the Administrator at Washington 25, D.C., or such other
address as the Administrator shall designate in writing to the Borrower.
SEC. 6.9. Duration of Agreement. Except where otherwise required
by the context, all provisions of this agreement shall continue in full force
and effect until all amounts owing by the Borrower to the Government on
account of the Loan shall have been paid, and upon such payment, this
agreement shall be deemed to have be been fully performed.
SEC. 6.10. Counterparts. This agreement may be simultaneously
executed and delivered in two or more counterparts, each of which so executed
and delivered shall be deemed to be an original, and all shall constitute but
one and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed, all as of the day and year
first above written.
DeKALB TELEPHONE COOPERATIVE
(Seal) by: /s/ Clay Avant
President
Attest: /s/ M.D. Robinson
Secretary
UNITED STATES OF AMERICA
by:
Administrator
of
Rural Electrification Administration
- 12 -
REA Project Designations
TENNESSEE 521-A
TENNESSEE 521-B
AMENDMENT
Dated as of March 9, 1953
to
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. 2
AGREEMENT, made as of March 9, 1953, pursuant to the
Rural Electrification Act of 1936, as amended (7 U. S. C.
901 et seq.) (hereinafter called the "Act"), between DEKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"),
a corporation existing under the laws of the State of
Tennessee, and UNITED STATES OF AMERICA (hereinafter called
the "Government"), acting through the Administrator of the
Rural Electrification Administration (hereinafter called the
"Administrator").
WHEREAS, the Government and the Borrower have entered into a certain
telephone loan contract (hereinafter called the "Loan Contract"), dated as of
October 15, 1951, providing for the lending by the Government and the
borrowing by the Borrower of an amount not in excess of $180,000 to finance,
partially, the construction and operation of a telephone system in rural
areas to bring telephone service to approximately 530 subscribers, and intend
by this agreement to amend the Loan Contract by increasing the amount of the
loan therein provided for by an amount not in excess of $172,000, by
subscribers, and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is
amended to read as follows:
SECTION 1.1. Amount and purpose. For the purpose of
furnishing telephone service in rural areas, the Government shall
lend and the Borrower shall borrow an amount not in excess of
$352,000 which, together with the sum of $10,365, to be deposited by
the Borrower in the "Special Construction Account" hereinafter
defined and provided for in section 2.4, shall be used to finance,
pursuant to the provision of the Act, the construction and operation
of telephone lines and facilities (hereinafter called the "Project")
to serve approximately 691 subscribers and to be located in the
Counties of Cannon, DeKalb, Smith and Wilson, and in counties
contiguous thereto, all in the State of Tennessee.
SEC. 2. The fourth sentence of section 2.4 of Article II of the Loan
Contract is amended to read as follows:
The Borrower shall also deposit in the Special Construction Account
on the same terms and conditions, subject to the same requirements
regarding requisitions and for the same purposes as funds advanced
on account of the Loan, the sum of $10,365 (hereinafter called the
"equity funds").
SEC. 3. Section 4.20 of article IV of the Loan Contract is amended
to read as follows:
SEC. 4.20 Supervisor: Appointment and Powers. If the
construction of the Project, or any part thereof, shall not proceed
in accordance with the terms hereof, or if, in the opinion of the
Administrator, action is necessary to protect the Government's security
security for the Loan or is essential to achieve the objectives for which
the Loan is made, the Administrator may appoint, as the representative
of the Government, a supervisor (hereinafter called the "Supervisor") for
the Project or other property of the Borrower necessary for the
construction or operation of the Project and notify the Borrower of such
appointment and the duration thereof. The Supervisor shall take such
steps as he deems necessary to assure construction or operation of the
Project in accordance with the terms hereof, or such portion or portions
thereof as may be designated by the Administrator, or to assure
performance of any obligations which the Borrower may be obligated to
perform pursuant to the provisions of section 4.6 hereof, or to preserve
the security of the Loan, and shall have power to operate the Project
and other property of the Borrower necessary to the operation of the
Project, and do all things reasonably incident to the exercise of the
powers herein granted, including, without limitation, directing the
conservation of any funds of the Borrower, the collection of all debts
due it, directing the payment of all expenses of the Borrower from any
of its funds, termination of the employment of such employees of the
Borrower as he shall determine upon and the employment of such persons,
on such terms and conditions as he may designate, as he shall deem
necessary to assist him in carry out his functions.
The salaries, fees, disbursements and expenses of the Supervisor and
of any employee appointed by him shall be paid by the Borrower,
provided, however, that the salaries, fees, disbursements and
expenses of any Supervisor who shall be an employee of the Government
and of any assistants who shall be employees of the Government shall
not be payable by the Borrower unless and to the extent that the
Administrator, upon written notification to the Borrower, shall so
require. So long as the appointment of the Supervisor shall be in
effect, all checks, drafts, and orders drawn on any bank account
maintained by the Borrower, shall be countersigned by the Supervisor,
except that, if the proper officers or employees of the Borrower
shall refuse to sign any such check, draft, or order, the Supervisor
shall have full power and authority to sign such check, draft or
order for the Borrower without the requirement of any other signature
thereon, if the Supervisor shall certify to the bank upon which such
check, draft or order is drawn that the same is required to carry out
the obligations of the Borrower hereunder. The Borrower hereby
constitutes the Administrator its agent for the purpose of notifying
any bank in which any account of the Borrower shall be maintained of
the appointment of a Supervisor and of the provisions hereunder with
respect thereto, and agrees that such notice shall include a
direction to any such bank with respect to the signing or
countersigning of the checks, drafts or orders drawn on any such
account as in this section provided. The Borrower shall comply with
all reasonable instructions of the Supervisor incident to carrying
out the obligations of the Borrower hereunder of the performance of
the functions of the Supervisor.
SEC. 4. Section 4.22 of article IV of the Loan Contract is amended
to read as follows:
SEC. 4.22. Equity Funds. The Borrower shall submit to the
Administrator, with each requisition submitted by the Borrower
pursuant to section 2.2 hereof, evidence that it has collected and
deposited in the Special Construction Account equity payments
averaging $15.00 for each of the subscribers for whom telephone
service has been improved or furnished until a total of $10,365 in
equity funds on behalf of a total of 691 subscribers has been
collected and deposited.
SEC. 5. Section 6.2 of article VI of the Loan Contract is amended
to read as follows:
SEC. 6.2 False Claims Statute. The Borrower and each of
the officers signing a certain agreement, dated as of November 21,
1952, made between the Borrower and the Government, respectively
acknowledge that they have received copies of sections 286, 287, 641,
1001 and 1361 of Title 18, United States Code, Crimes and Criminal
Procedure.
SEC. 6. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and all shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto authorized, and the Government has
caused this agreement to be duly executed, all as of the day and year first
above written.
DEKALB TELEPHONE COOPERATIVE
by
/s/ Clay Avant
(Seal) President
Attest: UNITED STATES OF AMERICA
by
/s/ M.D. Robinson
- ----------------------
Secretary Administrator
of
Rural Electrification Administration
REA Project Designation
TENNESSEE 521-C
---------------
AMENDMENT
Dated as of February 15, 1954
to
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951, as amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and
approved by the board of directors of the above
named corporation at a meeting held May 6, 1954
/s/ M. Robinson
-------------------------
Secretary of Meeting
DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. A
AGREEMENT, made as of February 15, 1954, pursuant to the
Rural Electrification Act of 1936, as amended (7 U.S.C. 901
et seq.) (hereinafter called the "Act"), between DEKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"),
a corporation existing under the laws of the State of
Tennessee, and UNITED STATES OF AMERICA (hereinafter call
the "Government"), acting through the Administrator of the
Rural Electrification Administration (hereinafter called the
"Administrator").
WHEREAS, the Government and the Borrower have entered into a certain
telephone loan contract dated as of October 15, 1951, and a certain amendment
thereto dated as of March 9, 1953 (said telephone loan contract as so
amended, being hereinafter called the "Loan Contract"), providing for the
lending by the Government and the borrowing by the Borrower of an amount not
in excess of $352,000, to finance, partially, the construction and operation
of a telephone system in rural areas to bring telephone service to
approximately 691 subscribers, and intend by this agreement to amend the Loan
Contract by increasing the aggregate amount and intend by this agreement to
amend the Loan Contract by increasing the aggregate amount of the loan
therein provided for by an amount not in excess of $106,000, by increasing
the number of subscribers to be served by approximately 230 additional
subscribers, and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1. Amount and Purpose. For the purpose of furnishing
telephone service in rural areas, the Government shall lend and the Borrower
shall borrow an amount not in excess of $458,000 which, together with the sum
of $18,255, to be deposited by the Borrower in the "Special Construction
Account" hereinafter defined and provided for in Section 2.4, shall be used
to finance, pursuant to the provisions of the Act, the acquisition,
construction and operation of telephone lines and facilities (hereinafter
called the "Project") to serve approximately 921 subscribers and to be
located in the Counties of Cannon, DeKalb, Smith and Wilson, and in counties
contiguous thereto, all in the State of Tennessee.
SEC. 2. Section 2.1 of article II of the Loan Contract is amended
by adding thereto a new subsection lettered and reading as follows:
(C) Prerequisites to Advances on Account of Additional Loan of
$106,000. The Government shall be under no obligation to advance any portion
of the increase of $106,000 in the amount of the Loan provided for in an
agreement, dated as of February 15, 1954, made by and between the Borrower
and the Government (said increase in the amount of the loan being hereinafter
called the "C Loan") unless and until the Borrower shall have submitted
evidence, satisfactory to the Administrator, that:
(1) it has adopted a revised rate schedule
satisfactory to the Administrator, which will provide
revenues sufficient to meet all necessary expenditures,
including all interest and principal payments under the
notes;
(2) it has obtained all franchises required by law
from incorporated municipalities in which the Project is or
will be located;
(3) it has obtained commitments or contracts, in
form and substance satisfactory to the Administrator,
covering all necessary toll traffic, operator assistance and
extended area services, to be furnished by connecting
companies, as well as all necessary joint use of facilities
with other companies as may be necessary for the
construction or proper operation of the Project;
(4) it has amended its bylaws, in form and
substance satisfactory to the Administrator;
(5) it has complied with all laws and regulations
applicable to the issuance or sale of membership
certificates in the Borrower and of equity certificates,
such certificates to be in form and substance satisfactory
to the Administrator;
(6) it has entered into a binding written
agreement, in form and substance satisfactory to the
Administrator, for the acquisition by the Borrower of all
telephone lines and facilities (excluding real estate) used
or useful in the telephone business operated as the
Gordonsville Home Telephone Company by B. D. Haynes and Floy
Heston Haynes, his wife, of Gordonsville, Tennessee;
(7) it has a total of 160 subscribers for service
from the facilities to be constructed with C Loan funds,
including subscribers from the Gordonsville Home Telephone
company facilities to be acquired, and held orders or signed
applicants; and
(8) it has obtained the sum of $1600 in equity
payments, on behalf of subscribers to receive service as a
result of the C Loan, in addition to the $7,970 of equity
funds shown, on the Borrower's Financial Requirement
Statement numbered 9, dated November 27, 1953, to have been
collected from or on behalf of subscribers to service from
facilities financed with funds from loans made prior to the
C Loan, and has deposited said additional equity funds in
the Special Construction Account provided for in section 2.4
hereof.
The first advance of funds on account of the C Loan, in an amount not in
excess of $4,000, shall be made by the Government (upon compliance by the
Borrower with all conditions of this agreement precedent to the advance of C
Loan funds) only for the purpose of enabling the Borrower to consummate the
acquisition of the telephone lines and facilities described in subsection (C)
(6) of this section 2.1. The Government shall be under no obligation to make
any further advances on account of the C Loan until the Borrower shall have
submitted evidence, satisfactory in form and substance to the Administrator,
that: (1) such acquisition has been duly consummated in accordance with the
terms and conditions of the sales agreement, previously approved by the
Administrator; and (2) the Borrower has obtained a total of $3,945 in equity
payments on behalf of subscribers to receive service as a result of the C
Loan, including the $1600 initial equity deposit required under section 2.1
(C) (8) hereof, and deposited said additional equity funds in the Special
Construction Account provided for in section 2.4 hereof.
SEC. 3. Section 2.4 of article II of the Loan Contract is amended
by changing the amount "$10,365" appearing in the fourth sentence thereof, to
$18,255" and by adding at the end of said section 2.4 a sentence reading as
follows:
The Borrower shall expend each advance on account of the
Loan or equity funds only for such of the purposes specified
in the statement of purposes accompanying the requisition
for such advance or equity funds as shall have been approved
by the Administrator.
SEC. 4. Article IV of the Loan Contract is amended by deleting
therefrom section 4.19 (relating to "Signs and Pole Marking") and by
renumbering the remaining sections of article IV of the Loan Contract
accordingly.
SEC. 5. Section 4.21 (formerly section 4.22) of article IV of the
Loan Contract is amended to read as follows:
SEC. 4.21. Equity Funds. The Borrower shall submit to the
Administrator, with each requisition submitted by the Borrower pursuant
to section 2.2 hereof, evidence that the Borrower has collected and
deposited in the Special Construction Account, equity funds in an
amount equal to the product of $15.00 times the number of subscribers
for whom telephone service has been furnished or improved as a result
of funds from loans
made prior to the C Loan, plus the product of $12.00 times
the number of acquired subscribers for whom telephone
service has been improved as a result of the C Loan, plus
the product of $50.00 times the number of new subscribers
for whom telephone service has been furnished initially as
a result of the C Loan, until a total of $18,255.00,
including the initial equity funds previously deposited by
the Borrower pursuant to the provisions of section 2.1
hereof, has been collected and deposited.
SEC. 6. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and all shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto authorized, and the Government has
caused this agreement to be duly executed, all as of the day and year first
above written.
DEKALB TELEPHONE COOPERATIVE
by: /s/ Clay Avant
________________________________
President
(Seal)
Attest: /s/ M.D. Robinson
________________________
Secretary
UNITED STATES OF AMERICA
by: ________________________________
Administrator
of
Rural Electrification Administration
REA Project Designation
TENNESSEE 521-D
---------------
AMENDMENT
Dated as of November 15, 1954
to
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951, as amended
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors of the above named corporation
at a meeting held November 29, 1954.
/s/ M. D. Robinson
----------------------------
Secretary of Meeting
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. A
AGREEMENT, made as of November 15, 1954, pursuant to the
Rural Electrification Act of 1936, as amended (7.U.S.C. 901
et seq.) (hereinafter called the "Act"), between DEKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"),
a corporation existing under the laws of the State of
Tennessee, and UNITED STATES OF AMERICA (hereinafter called
the "Government"), acting through the Administrator of the
Rural Electrification Administration (hereinafter called the
"Administrator").
WHEREAS, the Government and the Borrower have entered into a certain
telephone loan contract dated as of October 15, 1951, and two certain
amendments thereto, dated as of March 9, 1953 and as of February 15, 1954
(said telephone loan contract, as so amended, being hereinafter called the
"Loan Contract"), providing for the lending by the Government and the
borrowing by the Borrower of an amount not in excess of $458,000, to finance,
partially, the construction and operation of a telephone system in rural
areas to bring telephone service to approximately 921, subscribers and intend
by this agreement to amend the Loan Contract by increasing the aggregate
amount of the loans therein provided for by an amount, not in excess of
$461,000, by increasing the number of subscribers to be served by
approximately 1,040 additional subscribers, and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1. Amount and Purpose.
For the purpose of furnishing telephone service in rural
areas, the Government shall lend and the Borrower shall
borrow an amount not in excess of $919,000 which, together
with the sum of $57,983 to be deposited by the Borrower in
the "Special Construction Account" hereinafter defined and
provided for in section 2.4, shall be used to finance,
pursuant to the provision of the Act, the acquisition,
construction and operation of telephone lines and facilities
(hereinafter called the "Project") to serve approximately
1,961 subscribers and to be located in the Counties of
Cannon, DeKalb, Smith and Wilson, and in counties contiguous
thereto, all in the State of Tennessee.
SEC. 2. Section 2.1 of article II of the Loan Contract is amended
by adding thereto a new subsection lettered and reading as follows:
(D) Prerequisites to Advances on Account of Additional Loan
of $461,000. The Government shall be under no obligation to
advance any portion of the increase of $461,000 in the
amount of the Loan provided for in the agreement, dated as
of November 15, 1954, made by and between the Borrower and
the Government (said increase in the amount of the loan
between hereinafter called the "D Loan") unless and until
the Borrower shall have submitted evidence, satisfactory to
the Administrator, that:
(1) it has obtained all franchises required by law from
any municipality or municipalities in which the Project
is or will be located;
(2) it has submitted a Certificate of Deposit of Equity Cash
indicating that it has obtained the sum of $6,500 in initial
equity funds, including the $6,240 already deposited on
behalf of the D Loan subscribers, in addition to the $10,640
of equity funds already deposition on behalf of subscribers
to service from facilities financed with funds from loans
made prior to the D Loan, and has deposited such additional
equity funds in the Special Construction Account provided for
in section 2.4 hereof;
(3) it has used approximately $5,500 of equity funds so deposited
to obtain good and sufficient title to the existing telephone
facilities (excluding real estate and subscriber-owned
telephone instruments) owned by the Auburntown Telephone
Company and by the Hickman
Home Telephone Company and located in the vicinities of
Auburntown, Tennessee, and Hickman, Tennessee, respectively,
under terms and conditions satisfactory to the Administrator,
and in compliance with all applicable laws and regulations; and
(4) it has submitted a binding written agreement, in form and
substance satisfactory to the Administrator, for the
acquisition by the Borrower of all telephone lines and
facilities (excluding real estate and subscriber-owned
telephone instruments) used or useful in the telephone business
operated as the Smithville Telephone Company by the estate
of J. E. Evins, deceased, located at and in the vicinity of
Smithville, Tennessee.
The first advance of funds on account of the D Loan, in an amount not in
excess of $23,500, shall be made by the Government (upon compliance by the
Borrower with all conditions of this agreement precedent to the advance of D
Loan funds) only for the purpose of enabling the Borrower (by the use of
equity funds in the amount of $1,000 to supplement such first advance) to
consummate the acquisition of the telephone lines and facilities described in
subsection (D) (4) of this section 2.1. The Government shall be under no
obligation to make any further advances on account of the D Loan until the
Borrower shall have submitted evidence, satisfactory in form and substance to
the Administrator, that such acquisition has been duly consummated in
accordance with the terms and conditions of the sales agreement, previously
approved by the Administrator. Thereafter, advances of loan funds will be
restricted to amounts required for purposes other than the purchase or
construction of central office equipment, outside plant, station equipment,
land and buildings, until the Borrower has collected and deposited at least
$19,864, in equity funds on behalf of the D Loan subscribers, including the
initial equity funds of $6,500, which were required to have been deposited
previously on behalf of the D Loan subscribers.
SEC. 3. Section 2.4 of article II of the Loan Contract is amended
by changing the amount "$18,225" appearing in the fourth sentence thereof, to
$57,983 (hereinafter called the "equity funds").
SEC. 4. Section 4.2 of article IV of the Loan Contract is amended
by adding thereto a new section numbered and reading as follows:
(g) a contract or contracts for the joint use of facilities
of other companies as may be necessary for the construction
or proper operation of the Project.
SEC 5. Section 4.21 (formerly 4.22) of article IV of the Loan
Contract is amended to read as follows:
Section 4.21 Equity Funds. The Borrower shall
submit to the Administrator, with each requisition submitted by the
Borrower pursuant to section 2.2 hereof, evidence that the Borrower
has collected and deposited in the Special Construction Account,
equity funds in an amount equal to the product of $15 times the
number of subscribers for whom telephone service has been furnished
or improved as a result of funds from loans made prior to the C Loan,
plus the product of $12 times the number of acquired subscribers for
whom telephone service has been improved as a result of the C Loan,
plus the product of $50 times the number of new subscribers for whom
telephone service has been furnished initially as a result of the C
Loan, plus the product of $24 times the number of acquired
subscribers for whom telephone service has been improved as a result
of the D Loan, plus the product of $50 times the number of new
subscribers for whom telephone service has been furnished initially
as a result of the D Loan, until a total of $57,983, including the
initial equity funds previously deposited by the Borrower pursuant
to the provisions of section 2.1 hereof, has been collected and
deposited.
SEC. 6. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and all shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto authorized, and the Government has caused
this agreement to be duly executed, all as of the day and year first above
written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Clay Avant
-------------------------------
President
(Seal)
Attest: /s/ M. D. Robinson
--------------------------
Secretary
UNITED STATES OF AMERICA
by /s/
Acting Administrator
of
Rural Electrification Administration
REA Project Designation:
TENNESSEE 521-E DEKALB
AMENDMENT
Dated as of November 15, 1957
to
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951, as amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No.2
-------
AGREEMENT, made as of November 15, 1957, pursuant to
the Rural Electrification Act of 1936, as amended (7 U.S.C.
901 et seq.) between DEKALB TELEPHONE COOPERATIVE
(hereinafter called the "Borrower"), a corporation existing
under the laws of the State of Tennessee, and UNITED STATES
OF AMERICA (hereinafter called the "Government"), acting
through the Administrator of the Rural Electrification
Administration.
WHEREAS, the Government and the Borrower have entered into a certain
telephone loan contract, dated as of October 15, 1951, and three certain
amendments thereto, dated, respectively, as of March 9, 1953, as of February
15, 1954, and as of November 15, 1954 (said telephone loan contract, as so
amended, being hereinafter called the "Loan Contract"), providing for the
lending by the Government and the borrowing by the Borrower of an amount not
in excess of $919,000, to finance, partially, the construction and operation
of a telephone system to bring telephone service to approximately 1,961
subscribers, and intend by this agreement to amend the Loan Contract by
increasing the aggregate amount of the loans therein provided for by an
amount not in excess of $1,261,000, by increasing the number of subscribers
to be served by approximately 1,870 additional subscribers, and in certain
other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1. Amount and Purpose. For the purpose of
furnishing telephone service in rural areas, the Government
shall lend and the Borrower shall borrow an amount not in
excess of $2,180,000 which, together with the sum of $57,983
to be deposited by the Borrower in the "Special Construction
Account" hereinafter defined and provided for in section
2.4, shall be used to finance, pursuant to the provisions of
the Act, the acquisition, construction and operation of
telephone lines and facilities (hereinafter called the
"Project") to serve approximately 3,831 subscribers and to
be located in the Counties of Cannon, DeKalb, Rutherford,
Smith and Wilson, and in counties contiguous thereto, all in
the State of Tennessee.
SEC. 2. Section 2.1 of article II of the Loan Contract is amended
by adding thereto two new subsections lettered and reading as follows:
(E) Prerequisites to Advances on Account of
Additional Loan of $1,261,000. Notwithstanding
anything in this agreement, the Government shall be under no
obligation to advance any portion of the increase of
$1,261,000 in the amount of the Loan provided for in the
agreement, dated as November 15, 1957, made by and between
the Borrower and the Government (said increase in the amount
of the loan being hereinafter called the "E Loan") unless
and until the Borrower shall have submitted evidence,
satisfactory to the Administrator, that it has:
(1) obtained all franchises required by law from any municipality
or municipalities in which the Project is or will be located;
(2) executed, recorded and indexed a supplemental mortgage, in form
and substance satisfactory to the Administrator, providing for
revised dividend and managerial controls;
(3) obtained signed applications for service, or has existing
subscribers on facilities to be acquired in a total number
equal to 70% of the subscribers to be served as a result of the
E Loan, and has collected at least $10 from each unserved
person who has signed an application for service;
(4) obtained commitments covering all toll traffic, operator
assistance, and extended area services to be provided by,
or for, connecting or other companies, as may be necessary
for the proper operation of the Project;
(5) adopted schedules of rates for the furnishing of dial service
in the Milton, Morans and Woodbury exchanges, satisfactory
to the Administrator;
(6) obtained, through the use of its general funds in the amount of
$2,000 and a note in the amount of $7,000, good and sufficient
title to the existing telephone facilities (excluding real
estate) owned by Ira L. Knight doing business as the Milton
Telephone Company, located at and in the vicinity of Milton,
Tennessee; and
(7) obtained binding sales agreements for the acquisition by the
Borrower of: (1) all telephone lines and facilities (excluding
real estate) owned or operated by (a) J.A. Jones doing business
as the Norene Telephone Company, located at, and in the
vicinity of Norene, Tennessee, (b) W.R. Ingram doing business
as the Statesville Telephone Company, located at, and in the
vicinity of Statesville, Tennessee; and (c) Home Telephone
Company of Readyville, located at and in the vicinity of
Readyville, Tennessee; and (2) all telephone lines and
facilities (including real estate) owned or operated by the
Home Telephone Company of Woodbury, located at, and in the
vicinity of Woodbury, Tennessee.
The first advance of funds on account of the E loan, in the amount of
approximately $68,200, shall be made by the Government (upon compliance by
the Borrower with all conditions of this agreement precedent to the advance
of E Loan funds) only for the purpose of enabling the Borrower (with the use
of its general funds in the amount $300 to supplement such first advance) to
consummate the acquisitions of the telephone lines and facilities described
in subsection (E)(7) of this section 2.1, to pay and discharge the note in
the principal amount of $7,000 described in subsection (E)(6) of this section
2.1, and to reimburse the Borrower's general funds in the amount of $2,000,
plus an amount of E Loan funds to be approved by the Administrator for the
purpose of paying for pre-loan engineering services. The Government shall be
under no obligation to make any further advances on account of the E Loan
until the Borrower shall have submitted evidence, satisfactory in form and
substance to the Administrator, that such acquisitions have been duly
consummated in accordance with the terms and conditions of the sales
agreements previously approved by the Administrator, that the $7,000
obligation mentioned in subsection (E)(6) above has been paid, and that the
Mortgage and supplemental mortgage constitute the first and only lien against
the Project.
(F) Prerequisites to Advances for Certain Toll Facilities. No
loan funds shall be advanced for the construction and operation by the
Borrower of toll facilities within the Woodbury exchange area until the
Borrower has submitted, in form and substance satisfactory to the
Administrator, evidence of satisfactory toll arrangements with the Southern
Bell Telephone and Telegraph Company, and evidence that no duplication of
toll facilities will result from the use of loan funds for that purpose.
SEC. 3. Section 4.19 of article IV (originally 4.20) of the Loan
Contract is amended to read as follows:
SEC. 4.19. Supervisor: Appointment and
Powers. If the construction of the Project or any section
or sections thereof, shall not proceed in accordance
with the terms hereof, or if default shall be made in the
payment of any installment of or on account of interest on
or principal of any Note when and as the same shall be
required to be made and such default shall continue for
thirty (30) days, the Administrator may appoint a supervisor
(hereinafter called the "Supervisor") for the
- 2 -
Project or such section or sections thereof as the Administrator shall
designate, as the representative of the Government and notify the
Borrower of such appointment and the duration thereof. The Supervisor
shall take such steps as he deems necessary to assure construction or
operation of the Project in accordance with the terms hereof, or such
portion or portions thereof as may be designated by the Administrator,
or to assure performance of any other obligations of the Borrower pursuant
to the provisions of this agreement or of the Notes, and shall have power to
operate the Project and other property of the Borrower necessary to the
operation of the Project, and do all things reasonably incident to the
exercise of the powers herein granted, including, without limitation,
directing the conservation of any funds of the Borrower, the collection of
all debts due it, the payment of all expenses of the Borrower from any of
its funds, the termination of the employment of such employees of the
Borrower as he shall determine upon and the employment of such persons, on
such terms and conditions as he may designate, as he shall deem necessary
to assist him in carrying out his functions. The salaries, fees,
disbursements and the expenses of the Supervisor and of any employee
appointed by him shall be paid by the Borrower, provided, however, that
the salaries, fees, disbursements and expenses of any Supervisor who shall
be an employee of the Government and of any assistants who shall be
employees of the Government, shall not be payable by the Borrower unless
and to the extent that the Administrator, upon written notification to the
Borrower, shall so require. So long as the appointment of the Supervisor
shall be in effect, all checks, drafts, and orders drawn on any bank
account maintained by the Borrower shall be countersigned by the Supervisor,
except that, if the proper officers or employees of the Borrower shall
refuse to sign any such check, draft or order, the Supervisor shall have
full power and authority to sign such check, draft or order for the Borrower
without the requirement of any other signature thereon, if such check, draft
or order is required to carry out the obligations of the Borrower hereunder.
The Borrower hereby constitutes the Administrator its agent for the purpose
of notifying any bank in which any account of the Borrower shall be
maintained of the appointment of a Supervisor and of the provisions hereunder
with respect thereto, and agrees that such notice shall include a direction
to any such bank with respect to the signing or countersigning of the checks,
drafts or orders drawn on any such account as in this section provided. The
Borrower shall comply with all reasonable instructions of the Supervisor
incident to carrying out the obligations of the Borrower hereunder or the
performance of the functions of the Supervisor.
SEC. 4. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and all shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this Agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed, all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by: /s/ James E. Simpson
President
(Seal)
Attest: /s/ James Bass
Secretary
UNITED STATES OF AMERICA
by: /s/
Administrator
of
Rural Electrification Administration
- 3 -
REA Project Designation
TENNESSEE 521-F DEKALB
----------------------
AMENDMENT
Dated as of November 9, 1959
to
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951, as amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and
approved by the board of directors trustees of
the above named corporation at a meeting held
December 7, 1959.
/s/ Paul Bass
---------------------
Secretary of Meeting
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
NO. A
AGREEMENT, made as of November 9, 1959, pursuant to the
Rural Electrification Act of 1936, as amended (7 U.S.C. 901
et seq.) between DEKALB TELEPHONE COOPERATIVE (hereinafter
called the "Borrower"), a corporation existing under the
laws of the State of Tennessee, and UNITED STATES OF AMERICA
(hereinafter called the "Government") acting through the
Administrator of the Rural Electrification Administration
WHEREAS, the Government and the Borrower have heretofore entered into
a certain telephone loan contract, dated as of October 15, 1951, and four
certain amendments thereto, dated, respectively, as of March 9, 1953, as of
February 15, 1954, as of November 15, 1954, and as of November 15, 1957 (said
telephone loan contract, as so amended, being hereinafter called the "Loan
Contract"), providing for the lending by the Government and the borrowing by
the borrower of an amount not in excess of $2,180,000, to finance, partially,
the construction and operation of a telephone system, and intend by this
agreement to amend the Loan Contract by increasing the aggregate amount of
the loans therein provided for by an amount not in excess of $299,000, and in
certain other respects; and
WHEREAS, the parties also desire, in order to avoid possible
misinterpretation, to confirm their original intention that interest payable
on all notes executed pursuant to the Loan Contract, as amended from time to
time, shall be at the rate of two (2) per centum per annum, the rate
presently provided for under the Rural Electrification Act of 1936, as
amended;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1 Amount and Purpose. For the purpose of
furnishing telephone service in rural areas, the Government
shall lend and the Borrower shall borrow an amount not in
excess of $2,479,000 which together with the sum of $57,983
of equity funds to be deposited by the Borrower in the "Special
Construction Account" hereinafter defined and provided for in
section 2.4, shall be used to finance, pursuant to the provisions
of the Act, the acquisition, construction and operation of
telephone lines and facilities (hereinafter called the "Project")
to serve approximately 4,338 subscribers and to be located in the
Counties of Cannon, DeKalb, Rutherford, Smith and Wilson, and in
counties contiguous thereto, all in the state of Tennessee.
SECTION 2. The second sentence of section 1.2 article I of the Loan
Contract is amended to read as follows:
The Notes shall bear interest at the rate
of (2) per centum per annum, and shall
otherwise be in form and substance
satisfactory to the Administrator.
SECTION 3. Section 2.1 of article II of the Loan Contract is amended
by adding thereto a new subsection lettered and reading as follows:
(F) Prerequisites to Advances on Account of
Additional Loan of $299,000. Notwithstanding anything in
this agreement, the Government shall be under no obligation
to advance any portion of the increase of $299,000 in the
amount of the loan provided for in the agreement, dated as
November 9, 1959, made by and between the Borrower and the
Government unless and until the Borrower shall have
submitted evidence, satisfactory to the Administrator, that
it has executed, recorded and indexed an additional
supplemental mortgage, in form and substance satisfactory to
the Administrator.
SECTION 4. This agreement may be simultaneously executed and
delivered in two or more counterparts, each of which so executed and
delivered shall be deemed to be an original, and all shall constitute but one
and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this Agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed, all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
BY /s/ W. Odum
------------------------------
President
(SEAL)
ATTEST: /s/ Paul Bass
-------------------------
Secretary
UNITED STATES OF AMERICA
BY_________________________________
Administrator
of
Rural Electrification Administration
REA Project Designation:
TENNESSEE 521-G DEKALB
------------------------
AMENDMENT
Dated as of June 20, 1961
to
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951, so amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. 2
----
AGREEMENT, made as of June 20, 1961, pursuant to the Rural
Electrification Act of 1936, as amended (7 U.S.C. 901 et seq.) between DEKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"), a corporation
existing under the laws of the State of Tennessee, and UNITED STATES OF
AMERICA (hereinafter called the "Government"), acting through the
Administrator of the Rural Electrification Administration.
WHEREAS, the Government and the Borrower have heretofore entered into
a certain telephone loan contract, dated as of October 15, 1951, and five
certain amendments thereto, dated, respectively, as of March 9, 1953, as of
February 15, 1954, as of November 15, 1954, as of November 15, 1957, and as
of November 9, 1959 (said telephone loan contract, as so amended, being
hereinafter called the "Loan Contract"), and intend by this agreement to
amend the Loan Contract by increasing the aggregate amount of the loans
therein provided for by an amount not in excess of $115,000, and in certain
other respects; and
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is
amended to read as follows:
SECTION 1.1. Amount and Purpose. For the purpose of furnishing
telephone service in rural areas, the Government shall lend and the
Borrower shall borrow an amount not in excess of $2,594,000 which,
together with the sum of $57,983 of equity funds to be deposited by the
Borrower in the "Special Construction Account" hereinafter defined and
provided for in section 2.4, shall be used to finance, pursuant to the
provisions of the Act, the acquisition, construction and operation of
telephone lines and facilities (hereinafter called the "Project") to
serve approximately 3,889 subscribers and to be located in the Counties
of Cannon, DeKalb, Rutherford, Smith and Wilson, and in counties
contiguous thereto, all in the State of Tennessee.
SEC. 2. Section 2.1 of article II of the Loan Contract is amended
by adding thereto a new subsection lettered and reading as follows:
(G) Prerequisites to Advances on Account of Additional Loan
of $115,000. Notwithstanding anything in this agreement, the Government
shall be under no obligation to advance any portion of the increase of
$115,000 in the amount of the Loan provided for in the agreement, dated
as of June 20, 1961, made by and between the Borrower and the Government
unless and until the Borrower shall have submitted evidence, satisfactory
to the Administrator, that it has obtained good and sufficient title to
the existing telephone facilities owned by the New Middleton Telephone
Company, located at and in the vicinity of New Middleton, Tennessee.
SEC. 3. This agreement may be simultaneously executed and
delivered in two or more counterparts, each of which so executed and
delivered shall be deemed to be an original, and all shall constitute but one
and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed, all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ W. Odum
President
(Seal)
Attest: /s/ Paul Bass
Secretary UNITED STATES OF AMERICA
by /s/ Richard H. Wood
Acting Administrator
of
Rural Electrification Administration
REA Project Designation:
TENNESSEE 521-H DEKALB
------------------------
AMENDMENT
Dated as of June 8, 1964
to
TELEPHONE LOAN CONTRACT
Dated as of October 15, 1951, as amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held August 17, 1964.
/s/ Paul Bass
----------------------
Secretary of Meeting
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. A
---
AGREEMENT, made as of June 8, 1964, pursuant to the
Rural Electrification Act of 1936, as amended (7 U. S. C.
901 et seq.) between DeKALB TELEPHONE COOPERATIVE
(hereinafter called the "Borrower"), a corporation existing
under the laws of the State of Tennessee, and UNITED STATES
OF AMERICA (hereinafter called the "Government"), acting
through the Administrator of the Rural Electrification
Administration.
WHEREAS, the Government and the Borrower have heretofore entered
into
a certain telephone loan contract, dated as of October 15, 1951, and six
certain amendments thereto, dated, respectively, as of March 9, 1953, as of
February 15, 1954, as of November 15, 1954, as of November 15, 1957, as of
November 9, 1959, and as of June 20, 1961 (said telephone loan contract, as
so amended, being hereinafter called the "Loan Contract"), and intend by this
agreement to amend the Loan Contract by increasing the aggregate amount of
the loans therein provided for by an amount not in excess of $1,351,000, and
in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1. Amount and Purpose. For the purpose of
furnishing telephone service in rural areas, the Government shall
lend and the Borrower shall borrow an amount not in excess of
$3,945,000 which, together with the sum of $57,983 of equity funds
to be deposited by the Borrower in the "Special Construction
Account" hereinafter defined and provided for in section
2.4, shall be used to finance, pursuant to the provisions of
the Act, the acquisition,construction and operation of
telephone lines and facilities (hereinafter called the
"Project") to serve approximately 5,604 subscribers and to
be located in the Counties of Cannon, DeKalb, Rutherford,
Smith and Wilson, and in counties contiguous thereto, all
in the State of Tennessee.
SEC. 2. Article II of the Loan Contract is amended by adding
thereto two new sections numbered and reading as follows:
SEC. 2.8. Prerequisites to Advances on Account of
Additional Loan of $1,351,000. Notwithstanding anything in this
agreement, the Government shall be under no obligation to advance
any portion of the increase of $1,351,000 in the amount of the Loan
provided for in the agreement, dated as of June 8, 1964, made by and
between the Borrower and the Government (such increase of $1,351,000
being hereinafter called the "H Loan") unless and until the Borrower
shall have submitted evidence, satisfactory to the Administrator,
that it has duly executed, recorded and filed a mortgage in form and
substance satisfactory to the Adminis-trator, providing for revised
financial controls.
SEC. 2.9. Special Prerequisites to Advances of H Loan funds
for Brush Creek Area. The Government shell be under no obligation to
advance any portion of the $76,300 of the H Loan intended for
construction by the Borrower of telephone facilities within the
Brush Creek Telephone Company Area unless and until the Borrower, in
addition to complying with all other conditions of this agreement
precedent to the advance of the H Loan, shall have submitted
evidence, satisfactory to the Administrator, that no duplication of
telephone facilities providing reasonably adequate service will
result from such construction.
SEC. 3. Section 4.13 of Article IV of the Loan Contract is deleted
and in lieu thereof there is inserted the following:
SEC. 4.13. Equal Opportunity Clause. The Borrower hereby
agrees that it will incorporate or cause to be incorporated into any
contract for construction work, or modification thereof, as defined
in the rules and regulations of the
President's Committee on Equal Employment Opportunity which is paid
for in whole or in part with funds obtained from the Federal
Government or borrowed on the credit of the Federal Government
pursuant to a grant, contract, loan, insurance or guarantee, or
undertaken pursuant to any Federal program involving such grant,
contract, loan, insurance or guarantee, the following equal
opportunity clause:
During the performance of this contract, the contractor agrees as
follows:
(1) The contractor will not discriminate against any employee or
applicant for employment because of race, creed, color or national origin.
The contractor will take affirmative action to ensure that applicants are
employed, and that employees are treated during employment without regard to
their race, creed, color or national origin. Such action shall include, but
not be limited to the following: employment, upgrading, demotion or transfer;
recruitment or recruitment advertising; layoff or termination; rates of pay
or other forms of compensation; and selection for training, including
apprenticeship. The contractor agrees to post in conspicuous places,
available to employees and applicants for employment, notices to be provided
setting forth the provisions of this nondiscrimination clause.
(2) The contractor will, in all solicitations or advertisements
for employees placed by or on behalf of the contractor, state that all
qualified applicants will receive consideration for employment without regard
to race, creed, color or national origin.
(3) The contractor will send to each labor union or
representative of workers with which he has a collective bargaining agreement
or other contract or understanding, a notice to be provided advising the said
labor union or workers' representative of the contractor's commitments under
this section, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.
(4) The contractor will comply with all provisions of Executive
Order No. 10925 of March 6, 1961, as amended by Executive Order 11114 of June
22, 1963, and of the rules, regulations and relevant orders of the
President's Committee on Equal Employment Opportunity created thereby.
(5) The contractor will furnish all information and reports
required by Exe-cutive Order 10925 of March 6, 1961, as amended by Executive
Order 11114 of June 22, 1963, and by the rules, regulations and orders of the
said Committee, or pur-suant thereto, and will permit access to his books,
records and accounts by the administering agency and the Committee for
purposes of investigation to ascertain compliance with such rules,
regulations and orders.
(6) In the event of the contractor's noncompliance with the
nondiscrimination clauses of this contract or with any of the said rules,
regulations or orders, this contract may be
cancelled, terminated or suspended in whole or in part and the contractor may
be declared ineligible for further Government contracts or federally assisted
construction contracts in
accordance with procedures authorized in Executive Order No. 10925 of March
6, 1961, as amended by Executive Order 11114 of June 22, 1963, and such other
sanctions may be imposed and remedies invoked as provided in the said
Executive Order or by rule, regulation or order of the President's Committee
on Equal Employment Opportunity, or as otherwise provided by law.
(7) The contractor will include the provisions of paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by rules,
regulations or orders of the President's Committee on Equal Employment
Opportunity issued pursuant to section 303 of Executive Order 10925 of March
6, 1961, as amended by Executive Order 11114 of June 22, 1963, so that such
provisions will be binding upon each subcontractor or vendor. The contractor
will take such action with respect to any subcontract or purchase order as
the administering agency may direct as a means of enforcing such provisions,
including sanctions for noncompliance: Provided, however, That in the event
a contractor becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction by the agency, the
contractor may request the United States to enter into such litigation to
protect the interests of the United States.
- 2 -
The Borrower further agrees that it will be bound by the above equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly employed
by an agency of government.
The Borrower agrees that it will cooperate actively with the
administering agency and the President's Committee on Equal Employment
Opportunity in obtaining the compliance of contractors and subcontractors
with the equal opportunity clause and the rules, regulations and relevant
orders of the Committee, that it will furnish the administering agency and
the Committee such information as they may require for the supervision of
such compliance, and that it will otherwise assist the administering agency
in the discharge of the agency's primary responsibility for securing
compliance. The Borrower further agrees that it will refrain from entering
into any contract or contract modification subject to Executive Order 11114
with a contractor debarred from, or who has not demonstrated eligibility for,
Government contracts and federally assisted construction contracts pursuant
to Part III, Subpart D of Executive Order 10925 and will carry out such
sanctions and penalties for violation of the equal opportunity clause as may
be imposed upon contractors and subcontractors by the administering agency or
the Committee pursuant to Part III, Subpart D of Executive Order 10925. In
addition, the Borrower agrees that if it fails or refuses to comply with
these undertakings the administering agency may cancel, terminate or suspend
in whole or in part this contract, may refrain from extending any further
assistance under any of its programs subject to Executive Order 11114 until
satisfactory assurance of future compliance has been received from such
Borrower, or may refer the case to the Department of Justice for appropriate
legal proceedings.
SEC. 4. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and all shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed, all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ W. N. Odum
President
(Seal)
Attest: /s/ Paul Bass
Secretary
UNITED STATES OF AMERICA
by /s/ Richard A. Dell
Acting Administrator
of
Rural Electrification Administration
- 3 -
REA Project Designation:
TENNESSEE 521-K DEKALB
----------------------
AMENDMENT
Dated as of March 23, 1966
to
TELEPHONE
LOAN CONTRACT
Dated as of October 15, 1951, as amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held August 3, 1966
/s/ Raymond Duke
--------------------------
Secretary of Meeting
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. A
-----
AGREEMENT, made as of March 23, 1966, pursuant to the Rural
Electrification Act of 1936, as amended (7 U. S. C. 901 et
seq.) between DEKALB TELEPHONE COOPERATIVE (hereinafter
called the "Borrower"), a corporation existing under the
laws of the State of Tennessee, and UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the
Administrator of the Rural Electrification Administration.
WHEREAS, the Government and the Borrower have heretofore entered into
a certain telephone loan contract, dated as of October 15, 1951, and seven
certain amendments thereto, dated, respectively, as of March 9, 1953, as of
February 15, 1954, as of November 15, 1954, as of November 15, 1957, as of
November 9, 1959, as of June 20, 1961 and as of June 8, 1964, (said telephone
loan contract, as so amended, being hereinafter called the "Loan Contract"),
and intend by this agreement to amend the Loan Contract by increasing the
aggregate amount of the loans therein provided for by an amount not in excess
of $276,000, and in certain other respects:
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1. Amount and Purpose. For the purpose
of furnishing telephone service in rural areas, the
Government shall lend and the Borrower shall borrow an
amount not in excess of $4,221,000 which, together with the
sum of $57,983 of equity funds to be deposited by the
Borrower in the "Special Construction Account" hereinafter
defined and provided for in section 2.4, shall be used to
finance, pursuant to the provisions of the Act, the
acquisition, construction and operation of telephone lines
and facilities (hereinafter called the "Project") to serve
approximately 5,604 subscribers and to be located in the
Counties of Cannon, Dekalb, Rutherford, Smith and Wilson,
and in counties contiguous thereto, all in the State of
Tennessee.
SECTION 2. Article II of the Loan Contract is amended by adding
thereto a new section numbered and reading as follows:
SEC. 2.8. Prerequisites to Advances on Account of
Additional Loan of $276,000. Notwithstanding anything in
this agreement, the Government shall be under no obligation
to advance any portion of the increase of $276,000 in the
amount of the Loan provided for in the agreement, dated as
of March 23, 1966, made by and between the Borrower and the
Government unless and until the Borrower shall have
submitted evidence, satisfactory to the Administrator, that
it has duly executed, recorded, and filed a supplemental
mortgage in form and substance satisfactory to the
Administrator, providing, for, amount other things, for
controls over the level of general funds.
SEC. 3. Section 2.1(A) of article II of the Loan Contract is amended
to read as follows:
(a) evidence that the Borrower has duly adopted a
tariff which does not include mileage or zone charges for
the lowest grade of services provided in each central office
area and which will provide revenues sufficient to meet all
necessary expenditures, including all interest and principal
payments under the Notes;
SEC. 4. Article II of the Loan Contract is further amended by adding
thereto a new section numbered and reading as follows:
SEC. 2.9. Relation of General Funds Level to
Advances. The Borrower covenants and agrees that it will
not, without the approval of the Administrator, submit a
requisition for the advance of any funds on account of the
Loan, nor use any funds advanced on account of the Loan to
reimburse its general funds, at any time or times when the
amount of its general funds either exceeds twenty percent of
its total telephone plant, or would exceed twenty percent of
its total telephone plant as a result of the intended use of
such advance to reimburse its general funds.
Notwithstanding anything contained in this agreement, the
Government shall not be obligated at any time or times to
make an advance on account of the Loan if the amount of the
Borrower's general funds at such time or times either
exceeds twenty percent of its total telephone plant, or
would exceed twenty percent of its total telephone plant as
a result of the intended use of such advance to reimburse
the Borrower's general funds. As used in this section: (a)
the term "general funds" means the sum of the following
accounts: "Investments in Affiliated Companies", "Advances
to Affiliated Companies", "Other Investments",
"Miscellaneous Physical Property", "Sinking Funds", "Cash"
(except for cash in the "Cash - REA Construction Fund -
Trustee Account"), "Special Cash Deposits", "Working Funds",
and "Temporary Cash Investments"; and (b) the term "total
telephone plant" means the sum of the following accounts:
"Telephone Plan in Service", "Telephone Plan Under
Construction", "Property Held for Future Telephone Use",
"Telephone Plant Acquisition Adjustment", and "Telephone
Plant Adjustment". Titles of accounts used in the foregoing
definitions shall have the meanings prescribed for them by
the Federal Communications Commission in its prevailing
uniform system of accounts for Class A telephone companies.
These titles and definitions shall also apply to accounts of
the Borrower which have substantially the same meanings as
those referred to in such uniform system of accounts
regardless of the account title or the system of accounts
actually used by the Borrower.
- 2 -
SEC. 5. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
ahs caused this agreement to be duly executed, all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ W. N. Odum
President
(Seal)
Attest: /s/ Raymond Duke
Secretary
UNITED STATES OF AMERICA
by
Administrator
of
Rural Electrification Administration
- 3 -
REA Project Designation:
TENNESSEE 521-M DEKALB
------------------------
AMENDMENT
Dated as of February 13, 1970
to
TELEPHONE
LOAN CONTRACT
Dated as of October 15, 1951, as amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held March 25, 1970
/s/ Raymond Duke
-------------------------
Secretary of Meeting
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. A
-----
AGREEMENT, made as of February 13, 1970, pursuant to
the Rural Electrification Act of 1936, as amended (7 U. S.
C. 901 et seq.) between DEKALB TELEPHONE COOPERATIVE
(hereinafter called the "Borrower"), a corporation existing
under the laws of the State of Tennessee, and UNITED STATES
OF AMERICA (hereinafter called the "Government"), acting
through the Administrator of the Rural Electrification
Administration.
WHEREAS, the Government and the Borrower have heretofore entered into
a certain telephone loan contract, dated as of October 15, 1951, and nine
certain amendments thereto, dated, respectively, as of March 9, 1953, as of
February 15, 1954, as of November 15, 1954, as of November 15, 1957, as of
November 9, 1959, as of June 20, 1961, as of June 8, 1964, as of March 23,
1966 and as of July 1, 1968, (said telephone loan contract, as so amended,
being hereinafter called the "Loan Contract"), and intend by this agreement
to amend the Loan Contract by increasing the aggregate amount of the loans
therein provided for by an amount not in excess of $500,000, and in certain
other respects.
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1. Amount and Purpose. For the purpose of
furnishing telephone service in rural areas, the Government shall
lend and the Borrower shall borrow an amount not in excess of
$6,571,000 which, together with the sum of $57,983 of equity funds
to be deposited by the Borrower in the "Special Construction Account"
hereinafter defined and provided for in section 2.4, shall be used
to finance, pursuant to the provisions of the Act, the acquisition,
construction and operation of telephone lines and facilities
(hereinafter called the "Project") to serve approximately 6,609
subscribers and to be located in the Counties of Cannon, Dekalb,
Rutherford, Smith and Wilson, and in counties contiguous thereto, all
in the State of Tennessee.
SEC. 2. Article II of the Loan Contract is amended by deleting
therefrom section 2.9 (relating to "Relation of General Funds Level to
Advances") and section 2.11 (relating to "Construction Schedule").
SEC. 3. Article II of the Loan Contract is further amended by adding
thereto a new section numbered and reading as follows:
SEC. 2.12. Prerequisites to Advances on Account of
Additional Loan of $500,000. Notwithstanding anything in this
agreement, the Government shall be under no obligation to advance any
portion of the increase of $500,000 in the amount of the Loan
provided for in the agreement, dated as of February 13, 1970,
(hereinafter called the "M-Loan"), made by and between the Borrower
and the Government unless and until the Borrower shall have submitted
evidence, satisfactory to the Administrator that the Board of
Directors has adopted a revised tariff or rate schedule which
provides for 2-party rural rates without a mileage charge and zone
rates for 1-party service outside the base rate area for the
Auburntown, Milton and Norene exchanges (being upgraded under the M
Loan) and which rates shall be satisfactory to the Administrator.
SEC. 4. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and all shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed, all as of the day and year
first above written.
(Seal) DEKALB TELEPHONE COOPERATIVE
Attest: /s/ Raymond Duke by /s/ Jim Amonett
Secretary President
UNITED STATES OF AMERICA
by /s/
Administrator
of
Rural Electrification Administration
- 2 -
REA Project Designation:
TENNESSEE 521-N1 DEKALB
-----------------------
AMENDMENT
Dated as of December 15, 1971
to
TELEPHONE
LOAN CONTRACT
Dated as of October 15, 1951, as amended,
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
UNITED STATES DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
No. 2
-----
AGREEMENT, made as of December 15, 1971, pursuant to
the Rural Electrification Act of 1936, as amended (7 U.S.C.
901 et seq.) between DEKALB TELEPHONE COOPERATIVE (herein-
after called the "Borrower"), a corporation existing under
the laws of the State of Tennessee, and UNITED STATES OF
AMERICA (hereinafter called the "Government"), acting
through the Administrator of the Rural Electrification
Admini-stration.
WHEREAS, the Government and the Borrower have heretofore entered into
a certain telephone loan contract, dated as of October 15, 1951, and ten
certain amendments thereto, dated, respectively, as of March 9, 1953, as of
February 15, 1954, as of November 15, 1954, as of November 15, 1957, as of
November 9, 1959, as of June 20, 1961, as of June 8, 1964, as of March 23,
1966, as of July 1, 1968, and as of February 13, 1970 (said telephone loan
contract, as so amended, being hereinafter called the "Loan Contract"), and
intend by this agreement to amend the Loan Contract by increasing the
aggregate amount of the loans therein provided for by an amount not in excess
of $1,250,000, and in certain other respects.
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Borrower agree as follows:
SECTION 1. Section 1.1 of article I of the Loan Contract is amended
to read as follows:
SECTION 1.1. Amount and Purpose. For the purpose of
furnishing telephone service in rural areas, the Government shall
lend and the Borrower shall borrow an amount not in excess of
$7,821,000 which, together with the sum of $57,983 of equity funds
to be deposited by the Borrower in the "Special Construction Account"
hereinafter defined and provided for in sec-tion 2.4, shall be used
to finance, pursuant to the provisions of the Act, the acquisition,
construction and operation of telephone lines and facilities
(hereinafter called the "Project") to serve approximately 7,286
subscribers and to be located in the Counties of Cannon, DeKalb,
Rutherford, Smith and Wilson, and in counties contiguous thereto, all
in the State of Tennessee.
SEC. 2. Article II of the Loan Contract is amended by adding thereto
a new section numbered and reading as follows:
SEC. 2.13. Prerequisites to Advances on Account of
Additional Loan of $1,250,000. Notwithstanding anything in this
agreement contained, the Government shall be under no obligation to
advance any portion of the increase of not to exceed $1,250,000 in
the amount of the Loan (herein-after called the "N1 Loan"), provided
for in that certain agreement, dated as of December 15, 1971, made
by and between the Borrower and the Government, unless and until the
Borrower, in addition to complying with all other con-ditions of this
agreement precedent to the advance of Loan funds, shall have
delivered to the Administrator, in form and substance satisfactory
to him, evidence that the Board of Directors has adopted revised
tariffs or rate schedules for its entire system (including the
Woodbury exchange which is being upgraded under the N1 Loan) which
provide for 2-party rural rates without a mileage charge and zone
rates for l-party service outside the base rate area, and which rates
shall be satisfactory to the Administrator.
SEC. 3. Section 4.l3 of article IV of the Loan Contract is deleted
and in lieu thereof there is inserted the following:
SEC. 4.13. Equal Opportunity Clause. The Borrower hereby
agrees that it will incorporate or cause to be incorporated into any
contract for construc-tion work, or modification thereof, as defined
in Executive Order 11246 or in the rules and regulations of the
Secretary of Labor, which is paid for in whole or in part with funds
obtained from the Federal Government or borrowed on the credit of the
Federal Government pursuant to a grant, contract, loan, insurance or
guarantee, or undertaken pursuant to any Federal program involving
such grant, contract, loan, insurance or guarantee, the following
equal opportunity clause:
During the performance of this contract, the contractor agrees as
follows:
(1) The contractor will not discriminate against any
employee or applicant for employment because of race, color,
religion, sex or national origin. The con-tractor will take
affirmative action to ensure that applicants are employed, and that
employees are treated during employment without regard to their race,
color, religion, sex or national origin. Such action shall include,
but not be limited to the following: employment, upgrading, demotion
or transfer; recruitment or recruitment advertising; layoff or
termination; rates of pay or other forms of compensation; and
selection for training, including apprenticeship. The con-tractor
agrees to post in conspicuous places, available to employees and
applicants for employment, notices to be provided setting forth the
provisions of this nondiscrimination clause.
(2) The contractor will, in all solicitations or
advertisements for employees placed by or on behalf of the
contractor, state that all qualified applicants will receive
consideration for employment without regard to race, color, religion,
sex or national origin.
(3) The contractor will send to each labor union or
representative of workers with which he has a collective bargaining
agreement or other contract or understanding, a notice to be provided
advising the said labor union or workers' representative of the
contractor's commitments under this section, and shall post copies
of the notice in conspicuous places available to employees and
applicants for employment.
- 2 -
(4) The contractor will comply with all provisions of
Executive Order 11246 of September 24, 1965, and of the rules,
regulations and relevant orders of the Secretary of Labor.
(5) The contractor will furnish all information and
reports required by Executive Order 11246 of September 24, 1965, and
by the rules, regulations and orders of the Secretary of Labor, or
pursuant thereto, and will permit access to his books, records and
accounts by the administering agency and the Secretary of Labor for
purposes of investigation to ascertain compliance with such rules,
regulations and orders.
(6) In the event of the contractor's noncompliance with
the nondiscrimi-nation clauses of this contract or with any of the
said rules, regulations or orders, this contract may be cancelled,
terminated or suspended in whole or in part and the contractor may
be declared ineligible for further Government con-tracts or federally
assisted construction contracts in accordance with procedures
authorized in Executive Order 11246 of September 24, 1965, and such
other sanctions may be imposed and remedies invoked as provided in
the said Executive Order or by rule, regulation or order of the
Secretary of Labor, or as otherwise provided by law.
(7) The contractor will include the provisions of
paragraphs (1) through (7) in every subcontract or purchase order
unless exempted by rules, regulations or orders of the Secretary of
Labor issued pursuant to section 204 of Executive Order 11246 of
September 24, 1965, so that such provisions will be binding upon each
subcontractor or vendor. The contractor will take such action with
respect to any subcontract or purchase order as the administering
agency may direct as a means of enforcing such provisions, including
sanctions for noncompliance: Provided, however, That in the event
a contractor becomes involved in, or is threatened with, litigation
with a subcontractor or vendor as a result of such direction by the
agency, the contractor may request the United States to enter into
such litigation to protect the interests of the United States.
The Borrower further agrees that it will be bound by the above equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly employed
by an agency of government.
The Borrower agrees that it will cooperate actively with the
administering agency and the Secretary of Labor in obtaining the compliance
of contractors and subcontractors with the equal opportunity clause and the
rules, regulations and relevant orders of the Secretary of Labor, that it
will furnish the administering agency and the Secretary of Labor such
information as they may require for the supervision of such compliance, and
that it will otherwise assist the administering agency in the discharge of
the agency's primary responsibility for securing compliance. The Borrower
further agrees that it will refrain from entering into any contract or
contract modification subject to Executive Order 11246 with a contractor
debarred from, or who has not demonstrated eligibility for, Government
contracts and federally assisted construction contracts pursuant to Part II,
Subpart D of Executive Order 11246 and will carry out such sanctions and
penalties for violation of the equal opportunity clause as may be imposed
upon contractors and subcontractors by the administering agency or the
Secretary of Labor pursuant to Part II, Subpart D of Executive Order 11246.
In addition, the Borrower agrees that if it fails or refuses to comply with
these undertakings the administering agency may cancel, terminate or suspend
in whole or in part this contract, may refrain from extending any further
assistance under any of its programs subject to Executive Order 11246 until
satisfactory assurance of future compliance has been received from such
Borrower, or may refer the case to the Department of Justice for appropriate
legal proceedings.
- 3 -
SEC. 4. Article IV of the Loan Contract is further amended by adding
at the end thereof the following two new sections numbered and reading as
follows:
SEC. 4.22. General Funds to be Deposited in Special
Construction Account for Construction Purposes. The Borrower
covenants and agrees that it will make deposits from its
general funds into the Special Construction Account,
provided for in section 2.4 hereof, at the times and in the
amounts hereinafter specified, and that it will submit
evidence to the Administrator, at such times as he shall
request and in form and substance satisfactory to him, that
such deposits have been made:
(a) a minimum of $90,000 by December
31, 1972;
(b) a minimum additional amount of
$90,000 by December 31, 1973; and
(c) a minimum additional amount of
$85,000 by December 31, 1974;
until the Borrower has so deposited at least $265,000 of its general funds in
said Special Construction Account.
None of the funds mentioned in (a), (b), or (c) above shall be withdrawn from
said Account without prior approval of the Administrator and all such funds
so deposited shall be subject to the same controls as Loan funds deposited in
said Account. The Administrator may, in his discretion, allow credits against
amounts to be so deposited, based upon amounts which have been or may be
expended by the Borrower from its general funds after December 31, 1970 for
REA-approved construction of the Project, exclusive of overhead, office,
vehicle and work equipment, legal and similar miscellaneous costs. No such
credits will be allowed, however, for any such construction which does not
meet construction requirements acceptable to the Administrator.
SEC. 4.23. Compliance with Environmental Requirements. The
Borrower shall, with respect to all facilities which may be part of
the Project, comply with applicable water and air pollution control
standards and other environmental requirements imposed by federal or
state statutes or regulations.
- 4 -
SEC. 5. This agreement may be simultaneously executed and delivered
in two or more counterparts, each of which so executed and delivered shall be
deemed to be an original, and all shall constitute but one and the same
instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed, all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Jim Amonett
President
(Seal)
Attest: /s/ Raymond Duke
Secretary
UNITED STATES OF AMERICA
by /s/
Administrator
of
Rural Electrification Administration
- 5 -
REA Project Designation:
TENNESSEE 521-P8 DEKALB
TELEPHONE LOAN
CONTRACT AMENDMENT
Dated as of August 5, 1973
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held October 24, 1973.
/s/ Kenneth Lawrence
--------------------------
Secretary of Meeting
No. A
-------
AGREEMENT, made as of August 5, 1973, between DEKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"),
a corporation existing under the laws of the State of
Tennessee, and UNITED STATES OF AMERICA (hereinafter called
the "Government"), acting through the Administrator of the
Rural Electrification Administration (hereinafter called the
"Administrator").
WHEREAS, the Government and the Borrower have heretofore
entered into a telephone loan contract, amending telephone loan contract,
consolidating telephone loan contract, or consolidating and amending
telephone loan contract, dated as of October 15, 1951 (such agreement, as it
may have been amended, being hereinafter called the "Loan Contract"); and
WHEREAS, it is intended by this agreement to amend the Loan
Contract by increasing the amount of the loan therein provided for through a
loan from the Government to the Borrower of not to exceed $ 1,031,000
(hereinafter called the "Loan Increase"), and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual
agreements herein contained, the Borrower and the Government agree as
follows:
SECTION 1. The definition of "Project" in the Loan Contract
is amended by changing to 7,545 the approximate number of subscribers to be
served thereby (aside from those served by "Existing Facilities", if any, as
defined in the Loan Contract).
SEC. 2. Section 1.1 of the Loan Contract is amended by (a)
increasing the maximum amount which the Government shall lend and the
Borrower shall borrow, by the amount of the Loan Increase, and (b) adding the
following to the counties listed in said Section:
None
SEC. 3. The provisions set forth in Exhibit I hereto, pages
1-1 through I-5, and by this reference made a part hereof, shall amend and
supersede all provisions of the Loan Contract inconsistent therewith. If the
Loan Contract does not include "System" as a defined term, any reference to
"System" in this agreement, including Exhibit I, shall be read as "Project".
If the Loan Contract does not include "Project" as a defined term, any
reference to "Project" in this agreement, including Exhibit I, shall be read
as "System".
SEC. 4. The debt created by the Loan Increase shall be
evidenced by additional notes to be executed by the Borrower pursuant to the
Loan Contract, as amended hereby, which shall bear interest at the rate of
five (5) per centum per annum.
SEC. 5. Notwithstanding anything contained in this agreement
or the Loan Contract, the Government shall be under no obligation to advance
to the Borrower any portion of the Loan Increase unless and until the
following condition(s), in addition to all other conditions of the Loan
Contract and this agreement which are precedent to the advance of loan funds,
shall have been satisfied:
(a) the Borrower shall have delivered to the
Administrator, in form and substance satisfactory to him,
evidence that the Borrower has duly authorized, executed,
recorded and filed a security instrument, in form and
substance satisfactory to the Administrator.
(b) the Borrower shall have delivered evidence
satisfactory to the Administrator of approval by its board
of directors of elimination of mileage or zone charges for
one-party service in the Woodbury exchange and one-party
rates satisfactory to REA for the Woodland exchange which
exclude mileage or zone charges.
The first advance of loan funds will be limited to the amount then owing for
interim construction subsequent to June 13, 1973, as approved by REA.
Thereafter, the Government shall not be obligated to make any further
advances on account of the loan until the Borrower shall have submitted
evidence, in form and substance satisfactory to the Administrator, that all
indebtedness incurred for the interim construction referred to above in this
subsection has been paid and discharged and all liens (if any) connected
therewith have been duly discharged of record.
- 2 -
SEC. 6. Counterparts. This agreement may be simultaneously
executed and delivered in two or more counterparts, each of which so executed
and delivered shall be deemed to be an original, and all shall constitute but
one and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to
be signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Jim O. Amonett
(Seal) President
Attest: /s/ Kenneth Lawrence
Secretary
UNITED STATES OF AMERICA
by
Administrator
of
Rural Electrification Administration
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EXHIBIT I
1. Definitions.
-----------
Each term defined in the Loan Contract and in the agreement
("Underlying Agreement") of which this Exhibit is a part shall have the same
meaning when used in this Exhibit I. As used in this Exhibit I, "this
Agreement" shall mean the Underlying Agreement together with this Exhibit I.
2. Interest on Notes.
------------------
The Notes with respect to any portion of the Loan shall bear
interest at the rate specified in the loan agreement relating thereto, and
shall other-wise be in form and substance satisfactory to the Administrator.
3. Prerequisites to Advances.
-------------------------
The Government shall be under no obligation to advance funds from
time to time on account of the Loan, unless and until the Borrower shall have
(a) complied with the provisions of section 2.1 of the Loan Contract (or such
other section thereof as is headed "Prerequisites to Advances"), and (b)
delivered to the Administrator, in form and substance satisfactory to him,
evidence that the Borrower has duly adopted a tariff which (1) will provide
for such grades of service as the Administrator may approve, (2) does not
include mileage or zone charges for the lowest grade of service provided in
each central office area and (3) is designed to produce revenues sufficient
to meet all necessary expendi-tures, including all interest and principal
payments under the Notes.
4. Special Construction Account.
----------------------------
The Borrower shall promptly deposit all moneys advanced to it by the
Government hereunder in a special construction account (hereinafter called
"Special Construction Account") in a bank or banks, which shall meet the
requirements specified in section 4.3 of the Loan Contract (or such other
section thereof as is headed "Deposit of Funds"), and shall hold such moneys
in trust for the Government until disbursed. Any Special Construction Account
shall be designated by the corporate name of the Borrower, followed by the
words "Trustee, REA Construction Fund Account." All loan funds in any Special
Construction Account shall be used solely for the purposes specified in
section 1.1 of the Loan Contract, as amended by this Agreement and any
subsequent amendment. If the Borrower is required to obtain equity funds by
the terms of the Loan Contract, as amended by this Agreement or any
subsequent amendment, the Borrower shall also deposit all such equity funds
in the Special Construction Account on the same terms and conditions and for
the same purposes as funds advanced on account of the Loan. Equity funds may
be withdrawn from the Special Construction Account only upon approval by the
Administrator of requisitions therefor submitted by the Borrower in
accordance with the requirements applicable to the requisitioning of loan
funds, as set forth in section 2.2 of the Loan Contract (or such other
section thereof as is headed "Requisitions") except that to the extent equity
funds (if required to be obtained) arc expressly required to be used for
other purposes under the Loan Contract, as amended by this Agreement and any
subsequent amendment, they shall be used for such other purposes. Until the
aggregate amount of withdrawals from the Special Construction Account shall
equal or exceed the amount of the equity funds, they shall be deemed to have
been made from equity funds and not from funds advanced by the Government to
the Borrower. The Borrower shall expend each advance on account of the Loan
or equity funds, if any, only for such of the purposes specified in the
statement of purposes accompanying the requisition for such advance or equity
funds, if any, as shall have been approved by the Administrator.
5. Particular Covenants.
--------------------
(A) Submission of Contracts with Third Parties. The Borrower
shall submit, when requested by the Administrator and subject to the
Administrator's approval:
I-1
(1) a contract or contracts for the joint use of
facilities of other companies, as may be necessary for the
construction or proper operation of the System;
(2) a contract or contracts for the purchase, lease, or
other acquisition of land for use in connection with the construction
or operation of the System; and
(3) a contract or contracts for extended area service to
be provided by or for other companies, as may be necessary for the
proper operation of the System.
(B) Evidence of Tariff. The Borrower shall deliver, when
requested by, and in form and substance satisfactory to, the Administrator,
evidence that the Borrower has in effect a tariff which will provide for such
grades of service as the Administrator may approve and which does not include
mileage or zone charges for the lowest grade of service provided in each
central office area.
(C) Easements and Permits - Equity Funds. If the Borrower is
required to obtain equity funds by the terms of the Loan Contract, as amended
by this Agreement or any subsequent amendment, none of such funds shall be
used by the Borrower to pay for easements obtained from land owners, or for
releases of lien affecting easements.
(D) Area Coverage. The Borrower shall furnish adequate
telephone service to the widest practicable number of rural users in the
Borrower's telephone service area, as such area is shown on the map which is
a part of the Borrower's application for the loan, and which map, as revised
by agreement between the Borrower and the Administrator, is incorporated
herein by reference thereto. In the performance of this obligation, the
Borrower shall (except to the extent that the Administrator, upon request of
the Borrower, may in writing authorize deviations therefrom):
(1) furnish service to all applicants for
service included in the Project, without payment by such
applicants of any extra charge as a contribution to the cost
of construction of facilities to provide such service; and
(2) take all action that may be required to
enable it to extend service, with the use of such funds as
may from time to time be available to it, either from
surplus earnings, increased equity capital, additional loans
made by lenders other than the Government, or otherwise as
the Borrower may elect, and without payment to the Borrower
of any extra charge as a contribution to construction of
facilities to provide such service, to every other unserved
rural applicant for service in its telephone service area if
the cost of constructing the required line extension for
such applicant will not exceed seven times the estimated
annual local service revenues from such applicant. Such
service shall be furnished pursuant to terms and conditions
set forth in the Borrower's tariff, as duly filed with or
approved by regulatory bodies having jurisdiction in the
premises, or in the absence of any such regulatory body, as
adopted by the Borrower; provided that the Borrower shall
not file with or submit for approval of appropriate
regulatory bodies or adopt any proposed tariff, or continue
in effect any existing tariff not required to be continued
by any regulatory body, unless under such tariff the
Borrower will be obligated to serve unserved rural
applicants as provided herein.
(E) Equal Opportunity Clause. The Borrower hereby agrees that
it will incorporate or cause to be incorporated into any contract for
construction work, or modification thereof, as defined in Executive Order
11246 or in the rules and regulations of the Secretary of Labor, which is
paid for in whole or in part with funds obtained from the Federal Government
or borrowed on the credit of the Federal Government pursuant to a grant,
contract, loan, insurance or guarantee, or undertaken pursuant to any Federal
program involving such grant, contract, loan, insurance or guarantee, the
following equal opportunity clause:
I-2
During the performance of this contract, the contractor agrees as
follows:
(1) The contractor will not discriminate against any
employee or applicant for employment because of race, color,
religion, sex or national origin. The contractor will take
affirmative action to ensure that applicants are employed, and that
employees are treated during employment without regard to their
race, color, religion, sex or national origin. Such action shall
include, but not be limited to the following: employment,
upgrading, demotion or transfer; recruitment or recruitment
advertising; layoff or termination; rates of pay or other forms of
compensation; and selection for termination, including
apprenticeship. The contractor agrees to post in conspicuous places,
available to employees and applicants for employment, notices to be
provided setting forth the provisions of this nondiscrimination
clause.
(2) The contractor will, in all solicitations or
advertisements for employees placed by or on behalf of the
contractor, state that all qualified applicants will receive
consideration for employment without regard to race, color,
religion, sex or national origin.
(3) The contractor will send to each labor union or
representative of workers with which be has a collective bargaining
agreement or other contract or understanding, a notice to be provided
advising the said labor union or workers' representative of the
contractor's commitments under this section, and shall post copies
of the notice in conspicuous places available to employees and
applicants for employment.
(4) The contractor will comply with all provisions of
Executive Order 11246 of September 24, 1965, and of the rules,
regulations and relevant orders of the Secretary of Labor.
(5) The contractor will furnish all information and
reports required by Executive Order 11246 of September 24, 1965, and
by the rules, regulations and orders of the Secretary of Labor, or
pursuant thereto, and will permit access to his books, records and
accounts by the administering agency and the Secretary of Labor for
purposes of investigation to ascertain compliance with such rules,
regulations and orders.
(6) In the event of the contractor's noncompliance with
the nondiscrimination clauses of this contract or with any of the
said rules, regulations or orders, this contract may be cancelled,
terminated or suspended in whole or in part and the contractor may
be declared ineligible for further Government contracts or federally
assisted construction contracts in accordance with procedures
authorized in Executive Order 11246 of September 24, 1965, and such
other sanctions may be imposed and remedies invoked as provided in
the said Executive Order or by rule, regulation or order of the
Secretary of Labor, or as otherwise provided by law.
(7) The contractor will include the provisions of
paragraphs (1) through (7) in every subcontract or purchase order
unless exempted by rules, regulations or orders of the Secretary of
Labor issued pursuant to section 204 of Executive Order 11246 of
September 24, 1965, so that such provisions will be binding upon each
subcontractor or vendor. The contractor will take such action with
respect to any subcontract or purchase order as the administering
agency may direct as a means of enforcing such provisions) including
sanctions for noncompliance: Provided, however, That in the event
a contractor becomes involved in, or is threatened with, litigation
with a subcontractor or vendor as a result of such direction by the
agency, the contractor may request the United States to enter into
such litigation to protect the interests of the United States.
The Borrower further agrees that it will be bound by the above equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly employed
by an agency of government.
I-3
The Borrower agrees that it will cooperate actively with the
administering agency and the Secretary of Labor in obtaining the compliance
of contractors and subcontractors with the equal opportunity clause and the
rules, regulations and relevant orders of the Secretary of Labor, that it
will furnish the administering agency and the Secretary of Labor such
information as they may require for the supervision of such compliance, and
that it will otherwise assist the administering agency in the discharge of
the agency's primary responsibility for securing compliance. The Borrower
further agrees that it will refrain from entering into any contract or
contract modification subject to Executive Order 11246 with a contractor
debarred from, or who has not demonstrated eligibility for, Government
contracts and federally assisted construction contracts pursuant to Part II,
Subpart D of Executive Order 11246. In addition, the Borrower agrees that if
it fails or refuses to comply with these undertakings the administering
agency may cancel, terminate or suspend in whole or in part this contract,
may refrain from extending any further assistance under any of its programs
subject to Executive Order 11246 until satisfactory assurance of future
compliance has been received from such Borrower, or may refer the case to the
Department of Justice for appropriate legal proceedings.
(F) Environment. The Borrower shall, with respect to all
facilities which may be part of the System, comply with applicable water and
air pollution control standards and other environmental requirements imposed
by federal or state statutes or regulations.
(G) Historic Preservation. The Borrower shall not, without
approval in writing by the Administrator, use any portion of the Loan to
construct any facilities which will involve any district, site, building,
structure or object which is included in the National Register of Historic
Places, maintained by the Secretary of the Interior pursuant to the Historic
Sites Act of 1935 and the National Historic Preservation Act.
(H) Deletion of Provisions Relating to the Level of General
Funds. If the Loan Contract contains provisions in section 2.8, or
elsewhere, relating to the level of the Borrower's general funds, such
provisions are deleted.
(I) Deletion of Provisions Relating to Construction Schedules.
If the Loan Contract contains provisions in section 2.9, or elsewhere,
relating to the Borrower's construction schedules, such provisions are
deleted.
I-4
6. Countersignature.
----------------
Subject to the provisions of paragraph 7 of this Exhibit I and
section 5.2(c) of the Loan Contract (or subsection (c) of such other section
of the Loan Contract as is headed "Remedies upon Default"), moneys in any
Special Construction Account may be withdrawn only upon checks, drafts or
orders signed on behalf of the Borrower and countersigned by an executive
officer thereof.
7. Supervisor: Appointment and Powers.
-----------------------------------
If the construction of the Project or any section or sections
thereof, shall not proceed in accordance with the terms of the Loan Contract,
as amended by this Agreement or any subsequent amendment to the Loan
Contract, or if default shall be made in the payment of any installment of or
on account of interest on or principal of any Note when and as the same shall
be required to be made and such default shall continue for thirty (30) days,
the Administrator may appoint a supervisor (hereinafter called the
"Supervisor") for the System, or such section or sections thereof as the
Administrator shall designate, as the representative of the Government and
notify the Borrower of such appointment and the duration thereof. The
Supervisor shall take such steps as he deems necessary to assure construction
or operation of the Project in accordance with the terms hereof, or such
portion or portions thereof as may be designated by the Administrator, or to
assure performance of any other obligations of the Borrower pursuant to the
provisions of the Loan Contract, as amended by this Agreement and any
subsequent amendment, or of the Notes, and shall have power to operate the
System and other property of the Borrower necessary to the operation of the
System, and do all things reasonably incident to the exercise of the powers
herein granted, including, without limitation, directing the conservation of
any funds of the Borrower, the collection of all debts due it, the payment of
all expenses of the Borrower from any of its funds, the termination of the
employment of such employees of the Borrower as he shall determine upon and
the employment of such persons, on such terms and conditions as he may
designate, as he shall deem necessary to assist him in carrying out his
functions. The salaries, fees, disbursements and the expenses of the
Supervisor and of any employee appointed by him shall be paid by the
Borrower; provided, however, that the salaries, fees, disbursements and
expenses of any Supervisor who shall be an employee of the Government, and of
any assistants who shall be employees of the Government, shall not be payable
by the Borrower unless and to the extent that the Administrator, upon written
notification to the Borrower, shall so require. So long as the appointment of
the Supervisor shall be in effect, all checks, drafts, and orders drawn on
any bank account maintained by the Borrower shall be countersigned by the
Supervisor, except that, if the proper officers or employees of the Borrower
shall refuse to sign any such check, draft or order, the Supervisor shall
have full power and authority to sign such check, draft or order for the
Borrower without the requirement of any other signature thereon, if such
check, draft or order is required to carry out the obligation of the Borrower
hereunder. The Borrower hereby constitutes the Administrator its agent for
the purpose of notifying any bank in which any account of the Borrower shall
be maintained of the appointment of a Supervisor and of the provisions
hereunder with respect thereto, and agrees that such notice shall include a
direction to any such bank with respect to the signing or countersigning of
the checks, drafts or orders drawn on any such account as in this section
provided. The Borrower shall comply with all reasonable instruction of the
Supervisor incident to carrying out the obligations of the Borrower hereunder
or the performance of the functions of the Supervisor.
I-5
REA Project Designation:
TENNESSEE 521-R8 DEKALB
TELEPHONE LOAN
CONTRACT AMENDMENT
Dated as of July 15, 1974
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
No. A
-----
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held September 23, 1974
/s/ Kenneth Lawrence
-------------------------
Secretary of Meeting
AGREEMENT, made as of July 15, 1974, between DEKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"),
a corporation existing under the laws of the State of
Tennessee, and UNITED STATES OF AMERICA (hereinafter called
the "Government"), acting through the Administrator of the
Rural Electrification Administration (hereinafter called the
"Administrator").
WHEREAS, the Government and the Borrower have heretofore entered into
a telephone loan contract, amending telephone loan contract, consolidating
telephone loan contract, or consolidating and amending telephone loan
contract, dated as of October 15, 1951 (such agreement, as it may have been
amended, being hereinafter called the "Loan Contract"); and
WHEREAS, it is intended by this agreement to amend the Loan Contract
by increasing the amount of the loan therein provided for through a loan from
.the Government to the Borrower of not to exceed $ 3,499,000 (hereinafter
called the "Loan Increase"), and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Borrower and the Government agree as follows:
SECTION 1. The definition of "Project" in the Loan Contract is
amended by changing to 9,208 the approximate number of subscribers to be
served thereby (aside from those served by "Existing Facilities", if any, as
defined in the Loan Contract).
SEC. 2.Section 1.1 of the Loan Contract is amended by (a) increasing
the maximum amount which the Government shall lend and the Borrower shall
borrow, by the amount of the Loan Increase, and (b) adding the following to
the counties listed in said Section:
None
SEC. 3. The provisions set forth in Exhibit I hereto, pages I-1
through I-5, and by this reference made a part hereof, shall amend and
supersede all provisions of the Loan Contract inconsistent therewith. If the
Loan Contract does not include "System" as a defined term, any reference to
"System" in this agreement, including Exhibit I, shall be read as "Project".
If the Loan Contract does not include "Project" as a defined term, any
reference to "Project" in this agreement, including Exhibit I, shall be read
as "System".
SEC. 4. The debt created by the Loan Increase shall be evidenced by
additional notes to be executed by the Borrower pursuant to the Loan
Contract, as amended hereby, which shall bear interest at the rate of five
(5.0 ) per centum per annum.
SEC. 5. Notwithstanding anything contained in this agreement or the
Loan Contract, the Government shall be under no obligation to advance to the
Borrower any portion of the Loan Increase unless and until the following con-
dition(s), in addition to all other conditions of the Loan Contract and this
agreement which are precedent to the advance of loan funds, shall have been
satisfied:
(a) the Borrower shall have delivered to the
Administrator, in form and substance satisfactory to him, evidence
that the Borrower has duly authorized, executed, recorded and filed
a security instrument, in form and substance satisfactory to the
Administrator
- 2 -
SEC. 6. Counterparts. This agreement may be simultaneously
executed and delivered in two or more counterparts, each of which so executed
and delivered shall be deemed to be an original, and all shall constitute but
one and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by
(Seal) President
Attest:
Secretary
UNITED STATES OF AMERICA
by
Administrator
of
Rural Electrification Administration
- 3 -
EXHIBIT 1
1. Definitions.
-----------
Each term defined in the Loan Contract and in the agreement
("Underlying Agreement") of which this Exhibit is a part shall have the same
meaning when used in this Exhibit I. As used in this Exhibit I, "this
Agreement" shall mean the Underlying Agreement together with this Exhibit I.
2. Interest on Notes.
-----------------
The Notes with respect to any portion of the Loan shall bear interest
at the rate specified in the loan agreement relating thereto, and shall
otherwise be in form and substance satisfactory to the Administrator.
3. Prerequisites to Advances.
-------------------------
The Government shall be under no obligation to advance funds from
time to time on account of the Loan, unless and until the Borrower shall have
(a) complied with the provisions of section 2.1 of the Loan Contract (or such
other section thereof as is headed "Prerequisites to Advances"), and (b)
delivered to the Administrator, in form and substance satisfactory to him,
evidence that the Borrower has duly adopted a tariff which (1) will provide
for such grades of service as the Administrator may approve, (2) does not
include mileage or zone charges for the lowest grade of service provided in
each central office area and (3) is designed to produce revenues sufficient
to meet all necessary expendi-tures, including all interest and principal
payments under the Notes.
4. Special Construction Account.
----------------------------
The Borrower shall promptly deposit all moneys advanced to it by the
Government hereunder in a special construction account (hereinafter called
"Special Construction Account") in a bank or banks, which shall meet the
requirements specified in section 4.3 of the Loan Contract (or such other
section thereof as is headed "Deposit of Funds"), and shall hold such moneys
in trust for the Government until disbursed. Any Special Construction Account
shall be designated by the corporate name of the Borrower, followed by the
words "Trustee, REA Construction Fund Account." All loan funds in any Special
Construction Account shall be used solely for the purposes specified in
section 1.1 of the Loan Contract, as amended by this Agreement and any
subsequent amendment. If the Borrower is required to obtain equity funds by
the terms of the Loan Contract, as amended by this Agreement or any
subsequent amendment, the Borrower shall also deposit all such equity funds
in the Special Construction Account on the same terms and conditions and for
the same purposes as funds advanced on account of the Loan. Equity funds may
be withdrawn from the Special Construction Account only upon approval by the
Administrator of requisitions therefor submitted by the Borrower in
accordance with the requirements applicable to the requisitioning of loan
funds, as set forth in section 2.2 of the Loan Contract (or such other
section thereof as is headed "Requisitions") except that to the extent equity
funds (if required to be obtained) are expressly required to be used for
other purposes under the Loan Contract, as amended by this Agreement and any
subsequent amendment, they shall be used for such other purposes. Until the
aggregate amount of withdrawals from the Special Construction Account shall
equal or exceed the amount of the equity funds, they shall be deemed to have
been made from equity funds and not from funds advanced by the Government to
the Borrower. The Borrower shall expend each advance on account of the Loan
or equity funds, if any, only for such of the purposes specified in the
statement of purposes accompanying the requisition for such advance or equity
funds, if any, as shall have been approved by the Administrator.
5. Particular Covenants.
--------------------
(A) Submission of Contracts with Third Parties. The Borrower
shall submit, when requested by the Administrator and subject to the
Administrator's approval:
I-1
(1) a contract or contracts for the joint use of
facilities of other companies, as may be necessary for the
construction or proper operation of the System;
(2) a contract or contracts for the purchase, lease, or
other acquisition of land for use in connection with the construction
or operation of the System; and
(3) a contract or contracts for extended area service to
be provided by or for other companies, as may be necessary for the
proper operation of the System.
(B) Evidence of Tariff. The Borrower shall deliver, when
requested by, and in form and substance satisfactory to, the Administrator,
evidence that the Borrower has in effect a tariff which will provide for such
grades of service as the Administrator may approve and which does not include
mileage or zone charges for the lowest grade of service provided in each
central office area.
(C) Easements and Permits - Equity Funds. If the Borrower is
required to obtain equity funds by the terms of the Loan Contract, as amended
by this Agreement or any subsequent amendment, none of such funds shall be
used by the Borrower to pay for easements obtained from land owners, or for
releases of lien affecting easements.
(D) Area Coverage. The Borrower shall furnish adequate telephone
service to the widest practicable number of rural users in the Borrower's
telephone service area, as such area is shown on the map which is a part of
the Borrower's application for the loan, and which map, as revised by
agreement between the Borrower and the Administrator, is incorporated herein
by reference thereto. In the performance of this obligation, the Borrower
shall (except to the extent that the Administrator, upon request of the
Borrower, may in writing authorize deviations therefrom):
(1) furnish service to all applicants for service
included in the Project, without payment by such applicants of any
extra charge as a contribution to the cost of construction of
facilities to provide such service; and
(2) take all action that may be required to enable it to
extend service, with the use of such funds as may from time to time
be available to it, either from surplus earnings, increased equity
capital, additional loans made by lenders other than the Government,
or otherwise as the Borrower may elect, and without payment to the
Borrower of any extra charge as a contribution to construction of
facilities to provide such service, to every other unserved rural
applicant for service in its telephone service area if the cost of
constructing the required line extension for such applicant will not
exceed seven times the estimated annual local service revenues from
such applicant. Such service shall be furnished pursuant to terms
and conditions set forth in the Borrower's tariff, as duly filed with
or approved by regulatory bodies having jurisdiction in the premises,
or in the absence of any such regulatory body, as adopted by the
Borrower; provided that the Borrower shall not file with or submit
for approval of appropriate regulatory bodies or adopt any proposed
tariff, or continue in effect any existing tariff not required to be
continued by any regulatory body, unless under such tariff the
Borrower will be obligated to serve unserved rural applicants as
provided herein.
(E) Equal Opportunity Clause. The Borrower hereby agrees that
it will incorporate or cause to be incorporated into any contract for
construction work, or modification thereof, as defined in Executive Order
11246 or in the rules and regulations of the Secretary of Labor, which is
paid for in whole or in part with funds obtained from the Federal Government
or borrowed on the credit of the Federal Government pursuant to a grant,
contract, loan, insurance or guarantee, or undertaken pursuant to any Federal
program involving such grant, contract, loan, insurance or guarantee, the
following equal opportunity clause:
I-2
During the performance of this contract, the contractor agrees as
follows:
(1) The contractor will not discriminate against any employee or
applicant for employment because of race, color, religion, sex or national
origin. The contractor will take affirmative action to ensure that applicants
are employed, and that employees are treated during employment without regard
to their race, color, religion, sex or national origin. Such action shall
include, but not be limited to the following: employment, upgrading, demotion
or transfer; recruitment or recruitment advertising; layoff or termination;
rates of pay or other forms of compensation; and selection for training,
including apprenticeship. The contractor agrees to post in conspicuous
places, available to employees and applicants for employment, notices to be
provided setting forth the provisions of this nondiscrimination clause.
(2) The contractor will, in all solicitations or advertisements
for employees placed by or on behalf of the contractor, state that all
qualified applicants will receive consideration for employment without regard
to race, color, religion, sex or national origin.
(3) The contractor will send to each labor union or
representative of workers with which he has a collective bargaining agreement
or other contract or understanding, a notice to be provided advising the said
labor union or workers' representative of the contractor's commitments under
this section, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.
(4) The contractor will comply with all provisions of Executive
Order 11246 of September 24, 1965, and of the rules, regulations and relevant
orders of the Secretary of Labor.
(5) The contractor will furnish all information and reports
required by Executive Order 11246 of September 24, 1965, and by the rules,
regulations and orders of the Secretary of Labor, or pursuant thereto, and
will permit access to his books, records and accounts by the administering
agency and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations and orders.
(6) In the event of the contractor's noncompliance with the
nondiscrimination clauses of this contract or with any of the said rules,
regulations or orders, this contract may be cancelled, terminated or
suspended in whole or in part and the contractor be declared ineligible for
further Government contracts or federally assisted construction contracts in
accordance with procedures authorized in Executive Order 11246 of September
24, 1965, and such other sanctions may be imposed and remedies invoked as
provided in the said Executive Order or by rule, regulation or order of the
Secretary of Labor, or as otherwise provided by law.
(7) The contractor will include the provisions of paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by rules,
regulations or orders of the Secretary of Labor issued pursuant to section
204 of Executive Order 11246 of September 24, 1965, so that such provisions
will be binding upon each subcontractor or vendor. The contractor will take
such action with respect to any subcontract or purchase order as the
administering agency may direct as a means of enforcing such provisions,
including sanctions for noncompliance: Provided, however, That in the event
a contractor becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction by the agency, the
contractor may request the United States to enter into such litigation to
protect the interests of the United States.
The Borrower further agrees that it will be bound by the above equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly employed
by an agency of government.
I-3
The Borrower agrees that it will cooperate actively with the
administering agency and the Secretary of Labor in obtaining the compliance
of contractors and subcontractors with the equal opportunity clause and the
rules, regulations and relevant orders of the Secretary of Labor, that it
will furnish the administering agency and the Secretary of Labor such
information as they may require for the supervision of such compliance, and
that it will otherwise assist the administering agency in the discharge of
the agency's primary responsibility for securing compliance. The Borrower
further agrees that it will refrain from entering into any contract or
contract modification subject to Executive Order 11246 with a contractor
debarred from, or who has not demonstrated eligibility for, Government
contracts and federally assisted construction contracts pursuant to Part II,
Subpart D of Executive Order 11246 and will carry out such sanctions and
penalties for violation of the equal opportunity clause as may be imposed
upon contractors and subcontractors by the administering agency or the
Secretary of Labor pursuant to Part II, Subpart D of Executive Order 11246.
In addition, the Borrower agrees that if it fails or refuses to comply with
these undertakings the administering agency may cancel, terminate or suspend
in whole or in part this contract, may refrain from extending any further
assistance under any of its programs subject to Executive Order 11246 until
satisfactory assurance of future compliance has been received from such
Borrower, or may refer the case to the Department of Justice for appropriate
legal proceedings.
(F) Environment. The Borrower shall, with respect to all
facilities which may be part of the System, comply with applicable water and
air pollution control standards and other environmental requirements imposed
by federal or state statutes or regulations.
(G) Historic Preservation. The Borrower shall not, without
approval in writing by the Administrator, use any portion of the Loan to
construct any facilities which will involve any district, site, building,
structure or object which is included in the National Register of Historic
Places, maintained by the Secretary of the Interior pursuant to the Historic
Sites Act of 1935 and the National Historic Preservation Act.
(H) Deletion of Provisions Relating to the Level of General
Funds. If the Loan Contract contains provisions in section 2.8, or elsewhere,
relating to the level of the Borrower's general funds, such provisions are
deleted.
(I) Deletion of Provisions Relating to Construction Schedules.
If the Loan Contract contains provisions in section 2.9, or elsewhere,
relating to the Borrower's construction schedules, such provisions are
deleted.
I-4
6. Countersignatures.
-----------------
Subject to the provisions of paragraph 7 of this Exhibit I and
section 5.2(c) of the Loan Contract (or subsection (c) of each other section
of the Loan Contract as is headed "Remedies upon Default"), moneys in any
Special Construction Account may be withdrawn only upon checks, drafts or
orders signed on behalf of the Borrower and countersigned by an executive
officer thereof.
7. Supervisor: Appointment and Powers.
----------------------------------
If the construction of the Project or any section or sections
thereof, shall not proceed in accordance with the terms of the Loan Contract,
as amended by this Agreement or any subsequent amendment to the Loan
Contract, or if default shall be made in the payment of any installment of or
on account of interest on or principal of any Note when and as the same shall
be required to be made and such default shall continue for thirty (30) days,
the Administrator may appoint a supervisor (hereinafter called the
"Supervisor") for the System, or such section or sections thereof as the
Administrator shall designate, as the representative of the Government and
notify the Borrower of such appointment and the duration thereof. The
Supervisor shall take such steps as he deems necessary to assure construction
or operation of the Project in accordance with the terms hereof, or such
portion or portions thereof as may be designated by the Administrator, or to
assure performance of any other obligations of the Borrower pursuant to the
provisions of the Loan Contract, as amended by this Agreement and any
subsequent amendment, or of the Notes, and shall have power to operate the
System and other property of the Borrower necessary to the operation of the
System, and do all things reasonably incident to the exercise of the powers
herein granted, including, without limitation, directing the conservation of
any funds of the Borrower, the collection of all debts due it, the payment of
all expenses of the Borrower from any of its funds, the termination of the
employment of such employees of the Borrower as he shall determine upon and
the employment of such persons, on such terms and conditions as he may
designate, as he shall deem necessary to assist him in carrying out his
functions. The salaries, fees, disbursements and the expenses of the
Supervisor and of any employee appointed by him shall be paid by the
Borrower; provided, however, that the salaries, fees, disbursements and
expenses of any Supervisor who shall be an employee of the Government, and of
any assistants who shall be employees of the Government, shall not be payable
by the Borrower unless and to the extent that the Administrator, upon written
notification to the Borrower, shall so require. So long as the appointment of
the Supervisor shall be in effect, all checks, drafts, and orders drawn on
any bank account maintained by the Borrower shall be countersigned by the
Supervisor, except that, if the proper officers or employees of the Borrower
shall refuse to sign any such check, draft or order, the Supervisor shall
have full power and authority to sign such check, draft or order for the
Borrower without the requirement of any other signature thereon, if such
check, draft or order is required to carry out the obligations of the
Borrower hereunder. The Borrower hereby constitutes the Administrator its
agent for the purpose of notifying any bank in which any account of the
Borrower shall be maintained of the appointment of a Supervisor and of the
pro-visions hereunder with respect thereto, and agrees that such notice shall
include a direction to any such bank with respect to the signing or
countersigning of the checks, drafts or orders drawn on any such account as
in this section provided. The Borrower shall comply with all reasonable
instruction of the Supervisor incident to carrying out the obligations of the
Borrower hereunder or the performance of the functions of the Supervisor.
I-5
REA Project Designation:
TENNESSEE 521-S8 DEKALB
-----------------------
TELEPHONE LOAN
CONTRACT AMENDMENT
Dated as of January 27, 1976
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
No. 1
------
AGREEMENT, made as of January 27, 1976, between
DEKALB TELEPHONE COOPERATIVE (hereinafter called the
"Borrower"), a corporation existing under the laws of the
State of Tennessee, and UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the
Administrator of the Rural Electrification Administration
(hereinafter called the "Administrator").
WHEREAS, the Government and the Borrower have heretofore entered into
a telephone loan contract, amending telephone loan contract, consolidating
telephone loan contract, or consolidating and amending telephone loan
contract, dated as of October 15, 1951 (such agreement, as it may have been
amended, being hereinafter called the "Loan Contract"); and
WHEREAS, it is intended by this agreement to amend the Loan Contract
by increasing the amount of the loan therein provided for through a loan from
the Government to the Borrower of not to exceed $ 1,100,000 (herein-after
called the "Loan Increase") , and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Borrower and the Government agree as follows:
SECTION 1. The definition of "Project" in the Loan Contract is
amended by changing to 9,322 the approximate number of subscribers to be
served thereby (aside from those served by "Existing Facilities", if any, as
defined in the Loan Contract).
SEC. 2. Section 1.1 of the Loan Contract is amended by (a) increasing
the maximum amount which the Government shall lend and the Borrower shall
borrow, by the amount of the Loan Increase, and (b) adding the following to
the counties listed in said Section:
NONE
SEC. 3. The provisions set forth in Exhibit I hereto, pages I-1
through I- 5, and by this reference made a part hereof, shall amend and
supersede all provisions of the Loan Contract inconsistent therewith. If the
Loan Contract does not include "System" as a defined term, any reference to
"System" in this agreement, including Exhibit I, shall be read as "Project".
If the Loan Contract does not include "Project" as a defined term, any
reference to "Project" in this agreement, including Exhibit I, shall be read
as "System".
SEC. 4. The debt created by the Loan Increase shall be evidenced by
additional notes to be executed by the Borrower pursuant to the Loan
Contract, as amended hereby, which shall bear interest at the rate of five
(5.0) per centum per annum.
SEC. 5. Notwithstanding anything contained in this agreement or the
Loan Contract, the Government shall be under no obligation to advance to the
Borrower any portion of the Loan Increase unless and until the following
condition(s), in addition to all other conditions of the Loan Contract and
this agreement which are precedent to the advance of loan funds, shall have
been satisfied:
(a) the Borrower shall have delivered to the Administrator, in
form and substance satisfactory to him, evidence that the Borrower has duly
authorized, executed, recorded and filed a security instrument, in form and
substance satisfactory to the Administrator.
- 2 -
SEC. 6. Counterparts. This agreement may be simultaneously executed
and delivered in two or more counterparts, each of which so executed and
delivered shall be deemed to be an original, and all shall constitute but one
and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Jim Amonett
President
(Seal)
Attest: /s/ Kenneth Lawrence
Secretary
UNITED STATES OF AMERICA
by /s/
Acting Administrator
of
Rural Electrification Administration
- 3 -
EXHIBIT I
1. Definitions.
-----------
Each term defined in the Loan Contract and in the agreement
("Underlying Agreement") of which this Exhibit is a part shall have the same
meaning when used in this Exhibit I. As used in this Exhibit I, "this
Agreement" shall mean the Underlying Agreement together with this Exhibit I.
2. Interest on Notes.
-----------------
The Notes with respect to any portion of the Loan shall bear interest
at the rate specified in the loan agreement relating thereto, and shall
otherwise be in form and substance satisfactory to the Administrator.
3. Prerequisites to Advances.
-------------------------
The Government shall be under no obligation to advance funds from
time to time on account of the Loan, unless and until the Borrower shall have
(a) complied with the provisions of section 2.1 of the Loan Contract (or such
other section thereof as is headed "Prerequisites to Advances"), and (b)
delivered to the Administrator, in form and substance satisfactory to him,
evidence that the Borrower has duly adopted a tariff which (1) will provide
for such grades of service as the Administrator may approve, (2) does not
include mileage or zone charges for the lowest grade of service provided in
each central office area and (3) is designed to produce revenues sufficient
to meet all necessary expenditures, including all interest and principal
payments under the Notes.
4. Special Construction Account.
----------------------------
The Borrower shall promptly deposit all moneys advanced to it by the
Government hereunder in a special construction account (hereinafter called
"Special Construction Account") in a bank or banks, which shall meet the
requirements specified in section 4.3 of the Loan Contract (or such other
section thereof as is headed "Deposit of Funds"), and shall hold such moneys
in trust for the Government until disbursed. Any Special Construction Account
shall be designated by the corporate name of the Borrower, followed by the
words "Trustee, REA Construction Fund Account." All loan funds in any Special
Construction Account shall be used solely for the purposes specified in
section 1.1 of the Loan Contract, as amended by this Agreement and any
subsequent amendment. If the Borrower is required to obtain equity funds by
the terms of the Loan Contract, as amended by this Agreement or any
subsequent amendment, the Borrower shall also deposit all such equity funds
in the Special Construction Account on the same terms and conditions and for
the same purposes as funds advanced on account of the Loan. Equity funds may
be withdrawn from the Special Construction Account only upon approval by the
Administrator of requisitions therefor submitted by the Borrower in
accordance with the requirements applicable to the requisitioning of loan
funds, as set forth in section 2.2 of the Loan Contract (or such other
section thereof as is headed "Requisitions") except that to the extent equity
funds (if required to be obtained) are expressly required to be used for
other purposes under the Loan Contract, as amended by this Agreement and any
subsequent amendment, they shall be used for such other purposes. Until the
aggregate amount of withdrawals from the Special Construction Account shall
equal or exceed the amount of the equity funds, they shall be deemed to have
been made from equity funds and not from funds advanced by the Government to
the Borrower. The Borrower shall expend each advance on account of the Loan
or equity funds, if any, only for such of the purposes specified in the
statement of purposes accompanying the requisition for such advance or equity
funds, if any, as shall have been approved by the Administrator.
5. Particular Covenants.
--------------------
(A) Submission of Contracts with Third Parties. The Borrower
shall submit, when requested by the Administrator and subject to the
Administrator's approval:
I-1
(1) a contract or contracts for the joint use of
facilities of other companies, as may be necessary for the
construction or proper operation of the System;
(2) a contract or contracts for the purchase, lease, or
other acquisition of land for use in connection with the construction
or operation of the System; and
(3) a contract or contracts for extended area service to
be provided by or for other companies, as may be necessary for the
proper operation of the System.
(B) Evidence of Tariff. The Borrower shall deliver, when
requested by, and in form and substance satisfactory to, the Administrator,
evidence that the Borrower has in effect a tariff which will provide for such
grades of service as the Administrator may approve and which does not include
mileage or zone charges for the lowest grade of service provided in each
central office area.
(C) Easements and Permits - Equity Funds. If the Borrower is
required to obtain equity funds by the terms of the Loan Contract, as amended
by this Agreement or any subsequent amendment, none of such funds shall be
used by the Borrower to pay for easements obtained from land owners, or for
releases of lien affecting easements.
(D) Area Coverage. The Borrower shall furnish adequate telephone
service to the widest practicable number of rural users in the Borrower's
telephone service area, as such area is shown on the map which is a part of
the Borrower's application for the loan, and which map, as revised by
agreement between the Borrower and the Administrator, is incorporated herein
by reference thereto. In the performance of this obligation, the Borrower
shall (except to the extent that the Administrator, upon request of the
Borrower, may in writing authorize deviations therefrom):
(1) furnish service to all applicants for service
included in the Project, without payment by such applicants of any
extra charge as a contribution to the cost of construction of
facilities to provide such service; and
(2) take all action that may be required to enable it to
extend service, with the use of such funds as may from time to time
be available to it, either from surplus earnings, increased equity
capital, additional loans made by lenders other than the Government,
or otherwise as the Borrower may elect, and without payment to the
Borrower of any extra charge as a contribution to construction of
facilities to provide such service, to every other unserved rural
applicant for service in its telephone service area if the cost of
constructing the required line extension for such applicant will not
exceed seven times the estimated annual local service revenues from
such applicant. Such service shall be furnished pursuant to terms
and conditions set forth in the Borrower's tariff, as duly filed with
or approved by regulatory bodies having jurisdiction in the premises,
or in the absence of any such regulatory body, as adopted by the
Borrower; provided that the Borrower shall not file with or submit
for approval of appropriate regulatory bodies or adopt any proposed
tariff, or continue in effect any existing tariff not required to be
continued by any regulatory body, unless under such tariff the
Borrower will be obligated to serve unserved rural applicants as
provided herein.
(E) Equal Opportunity Clause. The Borrower hereby agrees that
it will incorporate or cause to be incorporated into any contract for
construction work, or modification thereof, as defined in Executive Order
11246 or in the rules and regulations of the Secretary of Labor, which is
paid for in whole or in part with funds obtained from the Federal Government
or borrowed on the credit of the Federal Government pursuant to a grant,
contract, loan, insurance or guarantee, or undertaken pursuant to any Federal
program involving such grant, contract, loan, insurance or guarantee, the
following equal opportunity clause:
I-2
During the performance of this contract, the contractor agrees as
follows:
(1) The contractor will not discriminate against any employee or
applicant for employment because of race, color, religion, sex or national
origin. The contractor will take affirmative action to ensure that applicants
are employed, and that employees are treated during employment without regard
to their race, color, religion, sex or national origin. Such action shall
include, but not be limited to the following: employment, upgrading, demotion
or transfer; recruitment or recruitment advertising; layoff or termination;
rates of pay or other forms of compensation; and selection for training,
including apprenticeship. The contractor agrees to post in conspicuous
places, available to emp1oyees and applicants for employment, notices to be
provided setting forth the provisions of this nondiscrimination clause.
(2) The contractor will, in all solicitations or advertisements
for employees placed by or on behalf of the contractor, state that all
qualified applicants will receive consideration for employment without regard
to race color, religion, sex or national origin.
(3) The contractor will send to each labor union or
representative of workers with which he has a collective bargaining agreement
or other contract or understanding, a notice to be provided advising the said
labor union or workers' representative of the contractor's commitments under
this section, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.
(4) The contractor will comply with all provisions of Executive
Order 11246 of September 24, 1965, and of the rules, regulations and relevant
orders of the Secretary of Labor.
(5) The contractor will furnish all information and reports
required by Executive Order 11246 of September 24, 1965, and by the rules,
regulations and orders of the Secretary of Labor, or pursuant thereto, and
will permit access to his books, records and accounts by the administering
agency and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations and orders.
(6) In the event of the contractor's noncompliance with the
nondiscrimination clauses of this contract or with any of the said rules,
regulations or orders, this contract may be cancelled, terminated or
suspended in whole or in part and the contractor may be declared ineligible
for further Government contracts or federally assisted construction contracts
in accordance with procedures authorized in Executive Order 11246 of
September 24, 1965, and such other sanctions may be imposed and remedies
invoked as provided in the said Executive Order or by rule, regulation or
order of the Secretary of Labor, or as otherwise provided by law.
(7) The contractor will include the provisions of paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by rules,
regulations or orders of the Secretary of Labor issued pursuant to section
204 of Executive Order 11246 of September 24, 1965, so that such provisions
will be binding upon each subcontractor or vendor. The contractor will take
such action with respect to any subcontract or purchase order as the
administering agency may direct as a means of enforcing such provisions,
including sanctions for noncompliance: Provided, however, That in the event
a contractor becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction by the agency, the
contractor may request the United States to enter into such litigation to
protect the interests of the United States.
The Borrower further agrees that it will be bound by the above equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly employed
by an agency of government.
I-3
The Borrower agrees that it will cooperate actively with the
administering agency and the Secretary of Labor in obtaining the compliance
of contractors and subcontractors with the equal opportunity clause and the
rules, regulations and relevant orders of the Secretary of Labor, that it
will furnish the administering agency and the Secretary of Labor such
information as they may require for the supervision of such compliance, and
that it will otherwise assist the administering agency in the discharge of
the agency's primary responsibility for securing compliance. The Borrower
further agrees that it will refrain from entering into any contract or
contract modification subject to Executive Order 11246 with a contractor
debarred from, or who has not demonstrated eligibility for, Government
contracts and federally assisted construction contracts pursuant to Part II,
Subpart D of Executive Order 11246 and will carry out such sanctions and
penalties for violation of the equal opportunity clause as may be imposed
upon contractors and subcontractors by the administering agency or the
Secretary of Labor pursuant to Part II, Subpart D of Executive Order 11246.
In addition, the Borrower agrees that if it fails or refuses to comply with
these undertakings the administering agency may cancel, terminate or suspend
in whole or in part this contract, may refrain from extending any further
assistance under any of its programs subject to Executive Order 11246 until
satisfactory assurance of future compliance has been received from such
Borrower, or may refer the case to the Department of Justice for appropriate
legal proceedings.
(F) Environment. The Borrower shall, with respect to all
facilities which may be part of the System, comply with applicable water and
air pollution control standards and other environmental requirements imposed
by federal or state statutes or regulations.
(G) Historic Preservation. The Borrower shall not, without
approval in writing by the Administrator, use any portion of the Loan to
construct any facilities which will involve any district, site, building,
structure or object which is included in the National Register of Historic
Places, maintained by the Secretary of the Interior pursuant to the Historic
Sites Act of 1935 and the National Historic Preservation Act.
(H) Deletion of Provisions Relating to the Level of General
Funds. If the Loan Contract contains provisions in section 2.8, or elsewhere,
relating to the level of the Borrower's general funds, such provisions are
deleted.
(I) Deletion of Provisions Relating to Construction Schedules.
If the Loan Contract contains provisions in section 2.9, or elsewhere,
relating to the Borrower's construction schedules, such provisions are
deleted.
I-4
6. Countersignature.
----------------
Subject to the provisions of paragraph 7 of this Exhibit I and
section 5.2(c) of the Loan Contract (or subsection (c) of such other section
of the Loan Contract as is headed "Remedies upon Default"), moneys in any
Special Construction Account may be withdrawn only upon checks, drafts or
orders signed on behalf of the Borrower and countersigned by an executive
officer thereof.
7. Supervisor: Appointment and Powers.
----------------------------------
If the construction of the Project or any section or sections
thereof, shall not proceed in accordance with the terms of the Loan Contract,
as amended by this Agreement or any subsequent amendment to the Loan
Contract, or if default shall be made in the payment of any installment of or
on account of interest on or principal of any Note when and as the same shall
be required to be made and such default shall continue for thirty (30) days,
the Administrator may appoint a supervisor (hereinafter called the
"Supervisor") for the System, or such section or sections thereof as the
Administrator shall designate, as the representative of the Government and
notify the Borrower of such appointment and the duration thereof. The
Supervisor shall take such steps as he deems necessary to assure construction
or operation of the Project in accordance with the terms hereof, or such
portion or portions thereof as may be designated by the Administrator, or to
assure performance of any other obligations of the Borrower pursuant to the
provisions of the Loan Contract, as amended by this Agreement and any
subsequent amendment, or of the Notes, and shall have power to operate the
System and other property of the Borrower necessary to the operation of the
System, and do all things reasonably incident to the exercise of the powers
herein granted, including, without limitation, directing the conservation of
any funds of the Borrower, the collection of all debts due it, the payment of
all expenses of the Borrower from any of its funds, the termination of the
employment of such employees of the Borrower as he shall determine upon and
the employment of such persons, on such terms and conditions as he may
designate, as he shall deem necessary to assist him in carrying out his
functions. The salaries, fees, disbursements and the expenses of the
Supervisor and of any employee appointed by him shall be paid by the
Borrower; provided, however, that the salaries, fees, disbursements and
expenses of any Supervisor who shall be an employee of the Government, and of
any assistants who shall be employees of the Government, shall not be payable
by the Borrower unless and to the extent that the Administrator, upon written
notification to the Borrower, shall so require. So long as the appointment of
the Supervisor shall be in effect, all checks, drafts, and orders drawn on
any bank account maintained by the Borrower shall be countersigned by the
Supervisor, except that, if the proper officers or employees of the Borrower
shall refuse to sign any such check, draft or order, the Supervisor shall
have full power and authority to sign such check, draft or order for the
Borrower without the requirement of any other signature thereon, if such
check, draft or order is required to carry out the obligations of the
Borrower hereunder. The Borrower hereby constitutes the Administrator its
agent for the purpose of notifying any bank in which any account of the
Borrower shall be maintained of the appointment of a Supervisor and of the
provisions hereunder with respect thereto, and agrees that such notice shall
include a direction to any such bank with respect to the signing or
countersigning of the checks, drafts or orders drawn on any such account as
in this section provided. The Borrower shall comply with all reasonable
instruction of the Supervisor incident to carrying out the obligations of the
Borrower hereunder or the performance of the functions of the Supervisor.
I-5
REA Project Designation:
TENNESSEE 521-T8 DEKALB
TELEPHONE LOAN
CONTRACT AMENDMENT
Dated as of March 17, 1980
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
No. 1
------
AGREEMENT, made as of March 17, 1980, between DEKALB
TELEPHONE COOPERATIVE (hereinafter called the "Borrower"),
a corporation existing under the laws of the State of
TENNESSEE, and UNITED STATES OF AMERICA (hereinafter called
the "Government"), acting through the Administrator of the
Rural Electrification Administration (hereinafter called the
"Administrator").
WHEREAS, the Government and the Borrower have heretofore entered into
a telephone loan contract, amending telephone loan contract, consolidating
telephone loan contract, or consolidating and amending telephone loan
contract, dated as of October 15, 1951 (such agreement, as it may have been
amended, being hereinafter called the "Loan Contract"); and
WHEREAS, it is intended by this agreement to amend the Loan Contract
by increasing the amount of the loan therein provided for through a loan from
the Government to the Borrower of not to exceed $7,327,000 (hereinafter
called the "Loan Increase"), and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Borrower and the Government agree as follows:
SECTI ON 1. The definition of "Project" in the Loan Contract is
amended by changing to 12,884 the approximate number of subscribers to be
served thereby (aside from those served by "Existing Facilities", if any, as
defined in the Loan Contract).
SEC. 2. Section 1.1 of the Loan Contract is amended by (a)
increasing the maximum amount which the Government shall lend and the
Borrower shall borrow, by the amount of the Loan Increase, and (b) adding the
following to the counties listed in said Section:
NONE
SEC. 3. The provisions set forth in Exhibit I hereto, pages 1-1
through I- 5, and by this reference made a part hereof, shall amend and
supersede all provisions of the Loan Contract inconsistent therewith. If the
Loan Contract does not include "System" as a defined term, any reference to
"System" in this agreement, including Exhibit I, shall be read as "Project".
If the Loan Contract does not include "Project" as a defined term, any
reference to "Project" in this agreement, including Exhibit I, shall be read
as "System".
SEC. 4. The debt created by the Loan Increase shall be evidenced by
additional notes to be executed by the Borrower pursuant to the Loan
Contract, as amended hereby, which shall bear interest at the rate of five
(5.0%) per centum per annum.
SEC. 5. (A) Notwithstanding anything contained in this agreement or
the Loan Contract, the Government shall be under no obligation to advance to
the Borrower any portion of the Loan Increase unless and until the following
con-dition(s), in addition to all other conditions of the Loan Contract and
this agreement which are precedent to the advance of loan funds, shall have
been satisfied:
(a) the Borrower shall have delivered to the
Administrator, in form and substance satisfactory to him, evidence
that the Borrower has duly authorized, executed, recorded and filed
a security instrument, in form and substance satisfactory to the
Administrator.
(B) The first advance of loan funds on account of
the loan increase shall be limited to: (1) an amount then owing for
interim construction pursuant to REA letters of September 27, 1979,
and December 17, 1979; and (2) the cost of preloan engineering
services in an amount to be approved by the Administrator.
Thereafter, the Government shall not be
obligated to make any further advances on account of the Government
loan increase until the borrower shall have submitted evidence, in
form and substance satisfactory to the Administrator, that all
indebtedness incurred for interim construction referred to above in
this subsection and all liens, if any, connected therewith have been
duly discharged of record.
(C) The Borrower covenants and agrees that it will
spend $750,000 of its general funds for station installations
sufficient to meet the subscriber projection in the "T8" loan.
- 2 -
SEC. 6. Counterparts. This agreement may be simultaneously
executed and delivered in two or more counterparts, each of which so executed
and delivered shall be deemed to be an original, and all shall constitute but
one and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Raymond Duke
President
(Seal)
Attest: /s/ Joseph Crosby
Secretary
UNITED STATES OF AMERICA
by /s/
Administrator
of
Rural Electrification Administration
- 3 -
EXHIBIT I
1. Definitions.
-----------
Each term defined in the Loan Contract and in the agreement
("Underlying Agreement") of which this Exhibit is a part shall have the same
meaning when used in this Exhibit I. As used in this Exhibit I, "this
Agreement" shall mean the Underlying Agreement together with this Exhibit I.
2. Interest on Notes.
-----------------
The Notes with respect to any portion of the Loan shall bear interest
at the rate specified in the loan agreement relating thereto, and shall
other-wise be in form and substance satisfactory to the Administrator.
3. Prerequisites to Advances.
-------------------------
The Government shall be under no obligation to advance funds from
time to time on account of the Loan, unless and until the Borrower shall have
(a) complied with the provisions of section 2.1 of the Loan Contract (or such
other section thereof as is headed "Prerequisites to Advances"), and (b)
delivered to the Administrator, in form and substance satisfactory to him,
evidence that the Borrower has duly adopted a tariff which (1) will provide
for such grades of service as the Administrator may approve, (2) does not
include mileage or zone charges for the lowest grade of service provided in
each central office area and (3) is designed to produce revenues sufficient
to meet all necessary expendi-tures, including all interest and principal
payments under the Notes.
4. Special Construction Account.
----------------------------
The Borrower shall promptly deposit all moneys advanced to it by the
Government hereunder in a special construction account (hereinafter called
"Special Construction Account") in a bank or banks, which shall meet the
requirements specified in section 4.3 of the Loan Contract (or such other
section thereof as is headed "Deposit of Funds"), and shall hold such moneys
in trust for the Government until disbursed. Any Special Construction Account
shall be designated by the corporate name of the Borrower, followed by the
words "Trustee, REA Construction Fund Account." All loan funds in any Special
Construction Account shall be used solely for the purposes specified in
section 1.1 of the Loan Contract, as amended by this Agreement and any
subsequent amendment. If the Borrower is required to obtain equity funds by
the terms of the Loan Contract, as amended by this Agreement or any
subsequent amendment, the Borrower shall also deposit all such equity funds
in the Special Construction Account on the same terms and conditions and for
the same purposes as funds advanced on account of the Loan. Equity funds may
be withdrawn from the Special Construction Account only upon approval by the
Administrator of requisitions therefor submitted by the Borrower in
accordance with the requirements applicable to the requisitioning of loan
funds, as set forth in section 2.2 of the Loan Contract (or such other
section thereof as is headed "Requisitions") except that to the extent equity
funds (if required to be obtained) arc expressly required to be used for
other purposes under the Loan Contract, as amended by this Agreement and any
subsequent amendment, they shall be used for such other purposes. Until the
aggregate amount of withdrawals from the Special Construction Account shall
equal or exceed the amount of the equity funds, they shall be deemed to have
been made from equity funds and not from funds advanced by the Government to
the Borrower. The Borrower shall expend each advance on account of the Loan
or equity funds, if any, only for such of the purposes specified in the
statement of purposes accompanying the requisition for such advance or equity
funds, if any, as shall have been approved by the Administrator.
5. Particular Covenants.
--------------------
(A) Submission of Contracts with Third Parties. The Borrower
shall submit, when requested by the Administrator and subject to the
Administrator's approval:
I-1
(1) a contract or contracts for the joint use of
facilities of other companies, as may be necessary for the
construction or proper operation of the System;
(2) a contract or contracts for the purchase, lease, or
other acquisition of land for use in connection with the construction
or operation of the System; and
(3) a contract or contracts for extended area service to
be provided by or for other companies, as may be necessary for the
proper operation of the System.
(B) Evidence of Tariff. The Borrower shall deliver, when
requested by, and in form and substance satisfactory to, the Administrator,
evidence that the Borrower has in effect a tariff which will provide for such
grades of service as the Administrator may approve and which does not include
mileage or zone charges for the lowest grade of service provided in each
central office area.
(C) Easements and Permits - Equity Funds. If the Borrower is
required to obtain equity funds by the terms of the Loan Contract, as amended
by this Agreement or any subsequent amendment, none of such funds shall be
used by the Borrower to pay for easements obtained from land owners, or for
releases of lien affecting easements.
(D) Area Coverage. The Borrower shall furnish adequate telephone
service to the widest practicable number of rural users in the Borrower's
telephone service area, as such area is shown on the map which is a part of
the Borrower's application for the Loan, and which map, as revised by
agreement between the Borrower and the Administrator, is incorporated herein
by reference thereto. In the performance of this obligation, the Borrower
shall (except to the extent that the Administrator, upon request of the
Borrower, may in writing authorize deviations therefrom):
(1) furnish service to all applicants for service
included in the Project, without payment by such applicants of any
extra charge as a contribution to the cost of construction of
facilities to provide such service; and
(2) take all action that may be required to enable it to
extend service, with the use of such funds as may from time to time
be available to it, either from surplus earnings, increased equity
capital, additional loans made by lenders other than the Government,
or otherwise as the Borrower may elect, and without payment to the
Borrower of any extra charge as a contribution to construction of
facilities to provide such service, to every other unserved rural
applicant for service in its telephone service area if the cost of
constructing the required line extension for such applicant will not
exceed seven times the estimated annual local service revenues from
such applicant. Such service shall be furnished pursuant to terms and
conditions set forth in the Borrower's tariff, as duly filed with or
approved by regulatory bodies having jurisdiction in the premises,
or in the absence of any such regulatory body, as adopted by the
Borrower; provided that the Borrower shall not file with or submit
for approval of appropriate regulatory bodies or adopt any proposed
tariff, or continue in effect any existing tariff not required to be
continued by any regulatory body, unless under such tariff the
Borrower will be obligated to serve unserved rural applicants as
provided herein.
(E) Equal Opportunity Clause. The Borrower hereby agrees that it
will incorporate or cause to be incorporated into any contract for
construction work, or modification thereof, as defined in Executive Order
11246 or in the rules and regulations of the Secretary of Labor, which is
paid for in whole or in part with funds obtained from the Federal Government
or borrowed on the credit of the Federal Government pursuant to a grant,
contract, loan, insurance or guarantee, or undertaken pursuant to any Federal
program involving such grant, contract, loan, insurance or guarantee, the
following equal opportunity clause:
I-2
During the performance of this contract, the contractor agrees as
follows:
(1) The contractor will not discriminate against any employee or
applicant for employment because of race, color, religion, sex or national
origin. The contractor will take affirmative action to ensure that
applicants are employed, and that employees are treated during employment
without regard to their race, color, religion, sex or national origin. Such
action shall include, but not be limited to the following: employment,
upgrading, demotion or transfer; recruitment or recruitment advertising;
layoff or termination; rates of pay or other forms of compensation; and
selection for training, including apprenticeship. The contractor agrees to
post in conspicuous places, available to employees and applicants for
employment, notices to be provided setting forth the provisions of this
nondiscrimination clause.
(2) The contractor will, in all solicitations or advertisements
for employees placed by or on behalf of the contractor, state that all
qualified applicants will receive consideration for employment without regard
to race, color, religion, sex or national origin.
(3) The contractor will send to each labor union or
representatives of workers with which he has a collective bargaining
agreement or other contract or understanding, a notice to be provided
advising the said labor union or workers' representative of the contractor's
commitments under this section, and shall post copies of the notice in
conspicuous places available to employees and applicants for employment.
(4) The contractor will comply with all provisions of Executive
Order 11246 of September 24, 1965, and of the rules, regulations and relevant
orders of the Secretary of Labor.
(5) The contractor will furnish all information and reports
required by Executive Order 11246 of September 24, 1965, and by the rules,
regulations and orders of the Secretary of Labor, or pursuant thereto, and
will permit access to his books, records and accounts by the administering
agency and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations and orders.
(6) In the event of the contractor's noncompliance with the
nondiscrimination clauses of this contract or with any of the said rules,
regulations or orders, this contract may be cancelled, terminated or
suspended in whole or in part and the contractor may be declared ineligible
for further Government contracts or federally assisted construction contracts
in accordance with procedures authorized in Executive Order 11246 of
September 24, 1965, and such other sanctions may be imposed and remedies
invoked as provided in the said Executive Order or by rule, regulation or
order of the Secretary of Labor, or as otherwise provided by law.
(7) The contractor will include the provisions of paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by rules,
regulations or orders of the Secretary of Labor issued pursuant to section
204 of Executive Order 11246 of September 24, 1965, so that such provisions
will be binding upon each subcontractor or vendor. The contractor will take
such action with respect to any subcontract or purchase order as the
administering agency may direct as a means of enforcing such provisions,
including sanctions for noncompliance: Provided, however, That in the event
a contractor becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction by the agency, the
contractor may request the United States to enter into such litigation to
protect the interests of the United States.
The Borrower further agrees that it will be bound by the above equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly employed
by an agency of government.
I-3
The Borrower agrees that it will cooperate actively with the
administering agency and the Secretary of Labor in obtaining the compliance
of contractors and subcontractors with the equal opportunity clause and the
rules, regulations and relevant orders of the Secretary of Labor, that it
will furnish the administering agency and the Secretary of Labor such
information as they may require for the supervision of such compliance, and
that it will otherwise assist the administering agency in the discharge of
the agency's primary responsibility for securing compliance. The Borrower
further agrees that it will refrain from entering into any contract or
contract modification subject to Executive Order 11246 with a contractor
debarred from, or who has not demonstrated eligibility for, Government
contracts and federally assisted construction contracts pursuant to Part II,
Subpart D of Executive Order 11246 and will carry out such sanctions and
penalties for violation of the equal opportunity clause as may be imposed
upon contractors and subcontractors by the administering agency or the
Secretary of Labor pursuant to Part II, Subpart D of Executive Order 11246.
In addition, the Borrower agrees that if it fails or refuses to comply with
these undertakings the administering agency may cancel, terminate or suspend
in whole or in part this contract, may refrain from extending any further
assistance under any of its programs subject to Executive Order 11246 until
satisfactory assurance of future compliance has been received from such
Borrower, or may refer the case to the Department of Justice for appropriate
legal proceedings.
(F) Environment. The Borrower shall, with respect to all
facilities which may be part of the System, comply with applicable water and
air pollution control standards and other environmental requirements imposed
by federal or state statutes or regulations.
(G) Historic Preservation. The Borrower shall not, without
approval in writing by the Administrator, use any portion of the Loan to
construct any facilities which will involve any district, site, building,
structure or object which is included in the National Register of Historic
Places, maintained by the Secretary of the Interior pursuant to the Historic
Sites Act of 1935 and tile National Historic Preservation Act.
(H) Deletion of Provisions Relating to the Level of General
Funds. If the Loan Contract contains provisions in section 2.8, or elsewhere,
relating to the level of the Borrower's general funds, such provisions are
deleted.
(I) Deletion of Provisions Relating to Construction Schedules.
If the Loan Contract contains provisions in section 2.9, or elsewhere,
relating to the Borrower's construction schedules, such provisions are
deleted.
I-4
6. Countersignature.
----------------
Subject to the provisions of paragraph 7 of this Exhibit I and
section 6.2(c) of the Loan Contract (or subsection (c) of such other section
of the Loan Contract as in headed "Remedies upon Default"), moneys in any
Special Construction Account may be withdrawn only upon checks, drafts or
orders signed on behalf of the Borrower and countersigned by an executive
officer thereof.
7. Supervisor: Appointment and Powers.
-----------------------------------
If the construction of the Project or any section or sections
thereof, shall not proceed in accordance with the terms of the Loan Contract,
as amended by this Agreement
or any subsequent amendment to the Loan Contract, or if default shall be made
in the payment of any installment of or on account of interest on or
principal of any Note when and as the same shall be required to be made and
such default shall continue for thirty (30) days, the Administrator may
appoint a supervisor (hereinafter called the "Supervisor") for the System, or
such section or sections thereof as the Administrator shall designate, as the
representative of the Government and notify the Borrower of such appointment
and the duration thereof. The Supervisor shall take such steps as he deems
necessary to assure construction or operation of the Project in accordance
with the terms hereof, or such portion or portions thereof as may be
designated by the Administrator, or to assure performance of any other
obligations of the Borrower pursuant to the provisions of the Loan Contract,
as amended by this Agreement and any subsequent amendment, or of the Notes,
and shall have power to operate the System and other property of the Borrower
necessary to the operation of the System, and do all things reasonably
incident to the exercise of the powers herein granted, including, without
limitation, directing the conservation of any funds of the Borrower, the
collection of all debts due it, the payment of all expenses of the Borrower
from any of its funds, the termination of the employment of such employees of
the Borrower as he shall determine upon and the employment of such persons,
on such terms and conditions as he may designate, as he shall deem necessary
to assist him in carrying out his functions. The salaries, fees,
disbursements and the expenses of the Supervisor and of any employee
appointed by him shall be paid by the Borrower; provided, however, that the
salaries, fees, disbursements and expenses of any supervisor who shall be an
employee of the Government, and of any assistants who shall be employees of
the Government, shall not be payable by the Borrower unless and to the extent
that the Administrator, upon written notification to the Borrower, shall so
require. So long as the appointment of the Supervisor shall be in effect, all
checks, drafts, and orders drawn on any bank account maintained by the
Borrower shall be countersigned by the Supervisor, except that, if the proper
officers or employees of the Borrower shall refuse to sign any such check,
draft or order, the Supervisor shall have full power and authority to sign
such check, draft or order for the Borrower without the requirement of any
other signature thereon, if such check, draft or order is required to carry
out the obligations of the Borrower hereunder. The Borrower hereby
constitutes the Administrator its agent for the purpose of notifying any bank
in which any account of the Borrower shall be maintained of the appointment
of a Supervisor and of the provisions hereunder with respect thereto, and
agrees that such notice shall include a direction to any such bank with
respect to the signing or countersigning of the checks, drafts or orders
drawn on any such account as in this section provided. The Borrower shall
comply with all reasonable instruction of the Supervisor incident to carrying
out the obligations of the Borrower hereunder or the performance of the
functions of the Supervisor.
I-5
REA Project Designation:
Tennessee 521-T8 DeKalb
AGREEMENT
between
UNITED STATES OF AMERICA
and
DeKalb Telephone Cooperative
Dated as of June 24, 1986
DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
N0:1
------
AGREEMENT, made as of June 24, 1986 ,pursuant to the
Rural Electrification Act of 1936, as amended (7 U.S.C. 901
et seq.), between UNITED STATES OF AMERICA (hereinafter
called the "Government"), acting through the Administrator
of the Rural Electrification Administration (hereinafter
called the "Administrator"), and DeKalb Telephone
Cooperative (hereinafter called the "Corporation"), a
corporation existing under the laws of the State of
Tennessee
WHEREAS, the Corporation, to evidence a loan made by the Government
to the Corporation pursuant to a loan contract (hereinafter called the "Loan
Contract") between the Government and the Corporation, executed and delivered
the following-described mortgage note or bond payable to the order of the
Government:
DATE PRINCIPAL AMOUNT FINAL MATURITY DATE
---- ---------------- -------------------
June 23, 1980 $7,327,000 June 23, 2015
and
WHEREAS, the terms of payment of the said note or bond may have been
extended by an agreement or agreements entered into by and between the
Corporation and the Government and other parties (the above-mentioned
mortgage note or bond, as heretofore extended by any such agreement or
agreements being hereinafter called the "Note"); and
WHEREAS, a portion of the principal amount of the Note has not been
advanced to the Corporation as of the date of this Agreement (such portion of
the principal amount of the Note not advanced to the Corporation prior to the
date of this Agreement being hereinafter called the "Principal Balance"); and
WHEREAS, it is desired that the Principal Balance, when advanced to
the Corporation, shall be repayable, with interest thereon, in installments
as here-inafter provided, within thirty-five (35) years from the date of this
Agreement;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Government and the Corporation agree as follows:
SECTION 1. Interest on the Principal Balance advanced pursuant to
the Loan Contract and remaining unpaid shall be payable quarterly in each
year for a period ending on a date three (3) years after the date of this
Agreement. Thereafter, to and including a date thirty-five (35) years after
the date of this Agreement, the Corporation shall make quarterly payments in
each year at the rate of $15.70 per $1,000 of the Principal Balance advanced
pursuant to the Loan Con-tract and unpaid three (3) years after the date of
this Agreement. Each such payment shall be applied first to the payment of
interest on the Principal Balance and then on account of the Principal
Balance. Thirty-five (35) years after the date of this Agreement, the
Principal Balance advanced pursuant to the Loan Contract remaining unpaid, if
any, and interest thereon, shall become due and payable.
SECTION 2. This Agreement shall not be effective unless and until the
Corporation has obtained all authorizations required by law in order to
permit the Corporation validly and lawfully to execute this Agreement.
SECTION 3. All of the terms and conditions of the Note, of any
mortgage, deed of trust or other instrument securing the Note, and of any
other agreement to which the Government and the Corporation are parties,
shall stand and remain unchanged and in full force and effect except only as
specifically varied or amended by this Agreement.
SECTION 4. The invalidity of any one or more phrases, clauses,
sentences, paragraphs, or provisions of this Agreement shall not affect any
remaining portions thereof.
SECTION 5. This Agreement may be simultaneously executed and
delivered in two or more counterparts, each of which so executed and
delivered shall be deemed to be an original, and all shall constitute but one
and the same instrument.
IN WITNESS WHEREOF the Government has caused this Agreement to be
duly executed and the Corporation has caused this Agreement to be signed in
its corporate name and its corporate seal to be hereunto affixed and attested
by its officers thereunto duly authorized, all as of the day and year first
above written.
UNITED STATES OF AMERICA
by /s/
Deputy Assist. Adm., for
Administrator
of
Rural Electrification Administration
Executed by the Government in the
presence of:
/s/________________________________
/s/________________________________
Witnesses
DeKalb Telephone Cooperative
by /s/ Kenneth Lawrence
President
(Seal)
Attest: /s/ Roy N. Pugh
Secretary
Executed by the Corporation in
the presence of:
/s/______________________________
/s/_____________________________
Witnesses
- 2 -
REA Project Designation:
Tennessee 521-U8 DeKalb
TELEPHONE LOAN
CONTRACT AMENDMENT
Dated as of July 29, 1988
between
DEKALB TELEPHONE COOPERATIVE
and
UNITED STATES OF AMERICA
No. 1
-----
AGREEMENT, made as of July 29, 1988, between DeKalb
Telephone Cooperative (hereinafter called the "Borrower"),
a corporation existing under the laws of the State of
Tennessee, and UNITED STATES OF AMERICA (hereinafter called
the "Government"), acting through the Administrator of the
Rural Electrification Administration (hereinafter called the
"Administrator").
WHEREAS, the Government and the Borrower have heretofore entered into
a telephone loan contract, amending telephone loan contract, consolidating
telephone loan contract, or consolidating and amending telephone loan
contract, dated as of October 15, 1951, (such agreement, as it may have been
amended by agreements between the Borrower and the Government, being
hereinafter called the "Loan Contract"); and
WHEREAS, it is intended by this agreement to amend the Loan Contract
by increasing the amount of the loan therein provided for through a loan from
the Government to the Borrower of not to exceed $15,559,000 (hereinafter
called the "Loan Increase"), and in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Borrower and the Government agree as follows:
SECTION 1. The definition of "Project" in the Loan Contract is
amended by changing to 13,573 the number of subscribers to be served thereby
(aside from those served by the "Existing Facilities", if any, as defined in
the Loan Contract).
SECTION 2. Section 1.1 of the Loan Contract is amended by (a)
increasing the maximum amount which the Government shall lend and the
Borrower shall borrow, by the amount of the Loan Increase, and (b) adding the
following to the counties listed in said section:
NONE.
SECTION 3. The provisions set forth in Exhibit I hereto, pages I-1
through I- 5, and by this reference made a part hereof, shall amend and
supersede all provisions of the Loan Contract inconsistent herewith. If the
Loan Contract does not include "System" as a defined term, any reference to
"System" in this agreement, including Exhibit I, shall be read as "Project".
If the Loan Contract does not include "Project" as a defined tern, any
reference to "Project" as a defined term, any reference to "Project" in this
agreement, including Exhibit I, shall be read as "System".
SECTION 4 (A). Notwithstanding anything contained in this agreement
or the Loan Contract, the Government shall be under no obligation to advance
to the Borrower any portion of the Loan Increase unless and until the
following conditions, in addition to all other conditions of the Loan
Contract and this agreement which are precedent to the advance of loan funds,
shall have been satisfied:
(1) The Borrower shall have delivered to the
Administrator, in form and substance satisfactory to him, evidence
that neither the Flood Protection Act of 1973 (the "Flood Act"), nor
any rule, regulation or order issued to implement the Flood Act,
restricts financial assistance.
(2) The Borrower shall have delivered to the
Administrator, in form and substance satisfactory to him, evidence
that all necessary local, state and Federal approvals including a
construction permit and operating license from the Federal
Communications Commission have been obtained and that an agreement
between the Borrower and the connecting company has been obtained in
connection with the construction of microwave toll facilities to meet
the carrier in Nashville.
SECTION 4 (B). The first advance of funds on account of the Loan
Increase shall be limited to:
(1) an amount to be approved by the Administrator for the cost of
pre-loan engineering services; and
(2) an amount then owing for interim construction pursuant to REA
letter dated December 28, 1987, as approved by REA.
Thereafter, the Government shall be under no obligation to make any further
advances on account of the Loan Increase until the Borrower shall have
submitted evidence, in form and substance satisfactory to the Administrator,
that all indebtedness incurred for the interim construction referred to above
in this subsection shall have been paid in full and all liens, if any,
connected therewith shall have been duly discharged of record.
- 2 -
SECTION 5. The following provision, which is hereby made a part of
the Loan Contract, shall amend and supersede all provisions of the Loan
Contract, as amended by this agreement, inconsistent therewith:
Tariff. The Borrower shall, as soon as possible after
completing the construction of any major portion of those facilities financed
by the Loan Increase provided for in this agreement, or sooner if requested
by the Administrator, (a) seek and use its diligent best efforts to obtain
all necessary regulatory body approvals for a tariff which (1) will provide
for such grades of service as the Administrator may approve, (2) does not
include mileage or zone charges on the lowest grade of service provided in
any exchange, and (3) is designed to produce revenues sufficient to meet all
necessary expenditures, including all interest and principal payments under
the Notes, and (b) to place such tariff into effect as soon as permitted by
applicable laws and regulations.
SECTION 6. The following provision is hereby made a part of the Loan
Contract, as amended by this agreement:
Historic Preservation. The Borrower shall not, without
approval in writing by the Administrator, use any portion of the Loan
Increase to construct any facilities which will involve any district, site,
building, structure, or object which is included in the National Register of
Historic Places, maintained by the Secretary of the Interior pursuant to the
Historic Sites Act of 1935 and the National Historic Preservation Act.
SECTION 7. The following provision is hereby made a part of the Loan
Contract, as amended by this agreement:
Electronic Funds Transfer. Except as otherwise prescribed by
the Administrator, the Borrower shall make payments of all principal of and
interest on all notes issued by the Borrower pursuant to the Loan Contract,
as amended by this agreement and any subsequent amendment, which payments, in
the aggregate, exceed $10,000, by Electronic Funds Transfer (EFT) utilizing
the Treasury Financial Communications System/Federal Reserve Communications
System through the United States Department of the Treasury account
(021030004) at the Federal Reserve Bank of New York, all in the manner
prescribed by REA Bulletin 20-9; 320-12.
- 3 -
SECTION 8. Notes. The debt created by the Loan Increase
shall be evidenced by additional notes to be executed by the Borrower
pursuant to the Loan Contract, as amended hereby, which shall bear interest
at the rate of five (5.0) per centum per annum.
SECTION 9. Counterparts. This agreement may be simultaneously
executed and delivered in two or more counterparts, each of which so executed
and delivered shall be deemed to be an original, and all shall constitute but
one and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be
signed in its corporate name and its corporate seal to be hereunto affixed
and attested by its officers thereunto duly authorized, and the Government
has caused this agreement to be duly executed all as of the day and year
first above written.
DEKALB TELEPHONE COOPERATIVE
(Seal) by /s/ Roy N. Pugh
President
Attest: /s/ David L. Parker
Secretary
UNITED STATES OF AMERICA
by /s/ Jack Van Mark
Acting
Administrator
of
Rural Electrification Administration
- 4 -
EXHIBIT I
1. Definition.
----------
Each term defined in the Loan Contract and in the agreement
("Underlying Agreement") of which this Exhibit is a part shall have the same
meaning when used in this Exhibit I. As used in this Exhibit I, "this
Agreement" shall mean the Underlying Agreement together with this Exhibit I.
2. Interest on Notes.
-----------------
The Notes with respect to any portion of the Loan shall bear interest
at the rate specified in the loan agreement relating thereto, and shall
otherwise be in form and substance satisfactory to the Administrator.
3. Prerequisites to Advances.
-------------------------
The Government shall be under no obligation to advance funds from
time to time on account of the Loan, unless and until the Borrower shall have
(a) complied with the provisions of section 2.1 of the Loan Contract (or such
other section thereof as is headed "Prerequisites to Advances"), and (b)
delivered to the Administrator, in form and substance satisfactory to him,
evidence that the Borrower has duly adopted a tariff which (1) will provide
for such grades of service as the Administrator may approve, (2) does not
include mileage or zone charges for the lowest grade of service provided in
each central office area and (3) is designed to produce revenues sufficient
to meet all necessary expenditures, including all interest and principal
payments under the Notes.
4. Special Construction Account.
----------------------------
The Borrower shall promptly deposit all moneys advanced to it by the
Government hereunder in a special construction account (hereinafter called
"Special Construction Account") in a bank or banks, which shall meet the
requirements specified in section 4.3 of the Loan Contract (or such other
section thereof as is headed "Deposit of Funds"), and shall hold such moneys
in trust for the Government until disbursed. Any Special Construction Account
shall be designated by the corporate name of the Borrower, followed by the
words "Trustee, REA Construction Fund Account." All loan funds in any Special
Construction Account shall be used solely for the purposes specified in
section 1.1 of the Loan Contract, as amended by this Agreement and any
subsequent amendment. If the Borrower is required to obtain equity funds by
the terms of the Loan Contract, as amended by this Agreement or any
subsequent amendment, the Borrower shall also deposit all such equity funds
in the Special Construction Account on the same terms and conditions and for
the same purposes as funds advanced on account of the Loan Equity funds may
be withdrawn from the Special Construction Account only upon approval by the
Administrator of requisitions therefor submitted by the Borrower in
accordance with the requirements applicable to the requisitioning of loan
funds, as set forth in section 2.2 of the Loan Contract (or such other
section thereof as is headed "Requisitions") except that to the extent equity
funds (if required to be obtained) are expressly required to be used for
other purposes under the Loan Contract, as amended by this Agreement and any
subsequent amendment, they shall be used for such other purposes. Until the
aggregate amount of withdrawals from the Special Construction Account shall
equal or exceed the amount of the equity funds, they shall be deemed to have
been made from equity funds and not from funds advanced by the Government to
the Borrower. The Borrower shall expend such advance on account of the Loan
or equity funds if any, only for such of the purposes specified in the
statement of purposes accompanying the requisition for such advance or equity
funds, if any, as shall have been approved by the Administrator.
5. Particular Covenants.
--------------------
(A) Submission of Contracts with Third Parties. The Borrower
shall submit, when requested by the Administrator and subject to the
Administrator's approval:
I-1
(1) a contract or contracts for the joint use of
facilities of other companies, as may be necessary for the
construction or proper operation of the System;
(2) a contract or contracts for the purchase, lease, or
other acquisition of land for use in connection with the construction
or operation of the System; and
(3) a contract or contracts for extended area service to
be provided by or for other companies, as may be necessary for proper
operation of the System.
(B) Evidence of Tariff. The Borrower shall deliver, when
requested by, and in form and substance satisfactory to, the Administrator,
evidence that the Borrower has in effect a tariff which will provide for such
grades of service as the Administrator may approve and which does not include
mileage or zone charges for the lowest grade of service provided in each
central office area.
(C) Easements and Permits - Equity Funds. If the Borrower is
required to obtain equity funds by the terms of the Loan Contract, as amended
by this Agreement or any subsequent amendment, none of such funds shall be
used by the Borrower to pay for easements obtained from land owners, or for
releases of lien affecting easements.
(D) Area Coverage. The Borrower shall furnish adequate telephone
service to the widest practicable number of rural users in the Borrower's
telephone service area, as such area is shown on the map which is a part of
the Borrower's application for the Loan, and which map, as revised by
agreement between the Borrower and the Administrator, is incorporated herein
by reference thereto. In the performance of this obligation, the Borrower
shall (except to the extent that the Administrator, upon request of the
Borrower, may in writing authorize deviations therefrom):
(1) furnish service to all applicants for service
included in the Project, without payment by such applicants of any
extra charge as a contribution to the cost of construction of
facilities to provide such service; and
(2) take all action that may be required to enable it to
extend service, with the use of such funds as may from time to time
be available to it, either from surplus earnings, increased equity
capital, additional loans made by lenders other than the Government,
or otherwise as the Borrower may elect, and without payment to the
Borrower of any extra charge as a contribution to construction of
facilities to provide such service, to every other unserved rural
applicant for service in its telephone service area if the cost of
constructing the required line extension for such applicant will not
exceed seven times the estimated annual local service revenues from
such applicant. Such service shall be furnished pursuant to terms and
conditions set forth in the Borrower's tariff, as duly filed with or
approved by regulatory bodies having jurisdiction in the premises,
or in the absence of any such regulatory body, as adopted by the
Borrower; provided that the Borrower shall not file with or submit
for approval of appropriate regulatory bodies or adopt any proposed
tariff, or continue in effect any existing tariff not required to be
continued by any regulatory body, unless under such tariff the
Borrower will be obligated to serve unserved rural applicants as
provided herein.
(E) Equal Opportunity Clause. The Borrower hereby agrees that it
will incorporate or cause to be incorporated into any contract for
construction work, or modification thereof, as defined in Executive Order
11246 or in the rules and regulations of the Secretary of Labor, which is
paid for in whole or in part with funds obtained from the Federal Government
or borrowed on the credit of the Federal Government pursuant to a grant,
contract, loan, insurance or guarantee, or undertakes pursuant to any Federal
program involving such grant, contract, loan, insurance or guarantee, the
following equal opportunity clause:
I-2
During the performance of this contract, the contractor agrees as
follows:
(1) The contractor will not discriminate against any employee or
applicant for employment because of race, color, religion, sex or national
origin. The contractor will take affirmative action to ensure that applicants
are employed, and that employees are treated during employment without regard
to their race, color, religion, sex or national origin. Such action shall
include, but not be limited to the following: employment, upgrading, demotion
or transfer; rates of pay or other forms of compensation; and selection for
training, including apprenticeship. The contractor agrees to post in
conspicuous placed, available to employees and applicants for employment,
notices to be provided setting forth the provisions of this nondiscrimination
clause.
(2) The contractor will, in all solicitations or advertisements
for employees place by or on behalf of the contractor, state that all
qualified applicants will receive consideration for employment without regard
to race, color, religion, sex or national origin.
(3) The contractor will send to each labor union or
representative of workers with which he has a collective bargaining agreement
or other contract or understanding, a notice to be provided advising the said
labor union or workers' representative of the contractor's commitments under
this section, and shall post copies of the notice in conspicuous placed
available to employees and applicants for employment.
(4) The contractor will comply with all provisions of Executive
Order 11246 of September 24, 1965, and of the rules, regulations and relevant
orders of the Secretary of Labor.
(5) The contractor will furnish all information and reports
required by Executive Order 11246 of September 24, 1965, and by the rules,
regulations and orders of the Secretary of Labor, or pursuant thereto, and
will permit access to his books, records and accounts by the administering
agency and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations and orders.
(6) In the event of the contractor's noncompliance with the
nondiscrimination clauses of this contract or with any of the said rules,
regulations or orders, this contract may be cancelled, terminated or
suspended in whole or in part and the contractor may be declared ineligible
for further Government contracts of federally assisted construction contracts
in accordance with procedures authorized in Executive Order 11246 or
September 24, 1965, and such other sanctions may be imposed and remedies
invoked as provided in the said Executive Order or by rule, regulation or
order of the Secretary of Labor, or as otherwise provided by law.
(7) The Contractor will include the provisions of paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by rules,
regulations or orders of the Secretary of Labor issued pursuant to section
204 of Executive Order 11246 of September 24, 1965, so that such provisions
will be binding upon each subcontractor or vendor. The contractor will take
such action with respect to any subcontract or purchase order as the
administering agency may direct as a means of enforcing such provisions,
including sanctions for noncompliance: Provided, however, that in the event
a contractor becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction by the agency, the
contractor may request the United States to enter into such litigation to
protect the interests of the United States.
The Borrower further agrees that it will be bound by the above equal
opportunity clause in any federally assisted construction work which it
performs itself other than through the permanent work force directly employed
by an agency of government.
I-3
The Borrower agrees that it will cooperate actively with the
administering agency and the Secretary of Labor in obtaining the compliance
of contractors and subcontractors with the equal opportunity clause and the
rules, regulations and relevant orders of the Secretary of Labor, that it
will furnish the administering agency and the Secretary of Labor such
information as they may require for the supervision of such compliance, and
that it will otherwise assist the administering agency in the discharge of
the agency's primary responsibility for securing compliance. The Borrower
further agrees that it will refrain from entering into any contract or
contract modification subject to Executive Order 11246 with a contractor
debarred from, or who has not demonstrated eligibility for, Government
contracts and federally assisted construction contracts pursuant to Part II,
Subpart D of Executive Order 11246 and will carry out such sanctions and
penalties for violation of the equal opportunity clause as may be imposed
upon contractors and subcontractors by the administering agency or the
Secretary of Labor pursuant to Part II, Subpart D or Executive Order 11246.
In addition, the Borrower agrees that if it fails or refuses to comply with
these undertakings the administering agency may cancel, terminate or suspend
in whole or in part this contract, may refrain from extending any further
assistance under any of its programs subject to Executive Order 11246 until
satisfactory assurance of future compliance has been received from such
Borrower, or may refer the case to the Department of Justice for appropriate
legal proceedings.
(F) Environment. The Borrower shall, with respect to all
facilities which may be part of the System, comply with applicable water and
air pollution control standards and other environmental requirements imposed
by federal or state statutes or regulations.
(G) Historic Preservation. The Borrower shall not, without
approval in writing by the Administrator, use any portion of the Loan to
construct any facilities which will involve any district, site, building,
structure or object which is included in the National Register of Historic
Places, maintained by the Secretary of the Interior pursuant to the Historic
Sites Act of 1935 and the National Historic Preservation Act.
(H) Deletion of Provisions Relating to the Level of General
Funds. If the Loan Contract contains provisions in section 2.8, or elsewhere,
relating to the level of the Borrower's general funds, such provisions are
deleted.
(I) Deletion of Provisions Relating to Construction Schedules.
If the Loan Contract contains provisions in section 2.9, or elsewhere,
relating to the Borrower's construction schedules, such provisions are
deleted.
(J) Electronic Funds Transfer. Except as otherwise prescribed by
the Administrator, the Borrower shall make payments of all principal of and
interest on all notes issued by the Borrower pursuant to the Loan Contract,
as amended by this agreement and any subsequent amendment, which payments, in
the aggregate, exceed $10,000, by Electronic Funds Transfer utilizing the
Treasury Financial Communications System/Federal Reserve Communications
System through the United States Department of the Treasury account
(021030004) at the Federal Reserve Bank of New York, all in the manner
prescribed by REA Bulletin 20-9; 320-12.
I-4
6. Countersignature.
----------------
Subject to the provisions of paragraph 7 of this Exhibit I and
section 5.2(c) of the Loan Contract (or subsection (c) of such other section
of the Loan Contract as is headed "Remedies upon Default"), moneys in any
Special Construction Account my be withdrawn only upon checks, drafts or
orders signed on behalf of the Borrower and countersigned by an executive
officer thereof.
7. Supervisor: Appointment and Powers.
-----------------------------------
If the construction of the Project or any section or sections
thereof, shall not proceed in accordance with the terms of the Loan Contract,
as amended by this Agreement or any subsequent amendment to the Loan
Contract, or if default shall be made in the payment of any installment of or
on account of interest on or principal of any Note when and as the same shall
be required to be made and such default shall continue for thirty (30) days,
the Administrator may appoint a supervisor (hereinafter called the
"Supervisor") for the System, or such section or sections thereof as the
Administrator shall designate, as the representative of the Government and
notify the Borrower of such appointment and the duration thereof. The
Supervisor shall take such steps as he deems necessary to assure construction
or operation of the Project in accordance with the terms hereof, or such
portion or portions thereof as may be designated by the Administrator, or to
assure performance of any other obligations of the Borrower pursuant to the
provisions of the Loan Contract, as amended by this Agreement and any
subsequent amendment, or of the Notes, and shall have power to operate the
System and other property of the Borrower necessary to the operation of the
System, and do all things reasonably incident to the exercise of the powers
herein granted, including, without limitation, directing the conservation of
any funds of the Borrower, the collection of all debts due it, the payment of
all expenses of the Borrower from any of its funds, the termination of the
employment of such employees of the Borrower as he shall determine upon and
the employment of such persons, on such terms and conditions as he my
designate, as he shall deem necessary to assist him in carrying out his
functions. The salaries, fees, disbursements and the expenses of the
Supervisor and of any employee appointed by him shall be paid by the
Borrower; provided, however, that the salaries, fees, disbursements and
expenses of any Supervisor who shall be an employee of the Government, and of
any assistants who shall be employees of the Government, shall not be payable
by the Borrower unless and to the extent that the Administrator, upon written
notification to the Borrower, shall so require. So long as the appointment of
the Supervisor shall be in effect, all checks, drafts, and orders drawn on
any bank account maintained by the Borrower shall be countersigned by the
Supervisor, except that, if the proper officers or employees of the Borrower
shall refuse to sign any such check, draft or order, the Supervisor shall
have full power and authority to sign such check, draft or order for the
Borrower without the requirement of any other signature thereon, if such
check, draft or order is required to carry out the obligations of the
Borrower hereunder. The Borrower hereby constitutes the Administrator its
agent for the purpose of notifying any bank in which any account of the
Borrower shall be maintained of the appointment of a Supervisor and of the
provisions hereunder with respect thereto, and agrees that such notice shall
include a direction to any such bank with respect to the signing or
countersigning of the checks, drafts or orders drawn on any such account as
in this section provided. The Borrower shall comply with all reasonable
instruction of the Supervisor incident to carrying out the obligations of the
Borrower hereunder or the performance of the functions of the Supervisor.
I-5
PROJECT DESIGNATION:
TENNESSEE 521-U8 DEKALB
------------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
MORTGAGE NOTE
Alexandria, Tennessee
November 28, 1888
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"), a
corporation organized and existing under the laws of the State of Tennessee,
for value received, promises to pay to the order of UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the Administrator of
the Rural Electriciation Administration, at the United States Treasury,
Washington, D. C., at the times and in the manner hereinafter provided, the
sum of fifteen million five hundred fifty-nine thousand dollars
($15,559,000), with interest on the amount thereof advanced by the
Government, pursuant to a certain telephone loan contract, dated as of
October 15, 1951, between the Government and the Corporation, as the same may
have been amended from time to time (said loan contract, as it may have been
amended, being hereinafter called the "Loan Contract"), and remaining unpaid
from time to time, at the rate of five (5.0) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and
remaining unpaid shall be payable on the last day of each month of each year
for a period ending on a date three (3) years after the date hereof.
Thereafter, to and including a date thirty-five (35) years after the date
hereof, the Corporation shall make a payment on each of said monthly dates in
each year at the rate of $5.23 per $1,000 of the principal amount hereof
advanced pursuant to the Loan Contract and unpaid three (3) years after the
date hereof.
Interest on principal advanced pursuant to the Loan Contract between
a date three (3) years and a date six (6) years after the date hereof and
remaining unpaid shall be payable on each of said monthly payment dates for
a period ending six (6) years after the date hereof. Thereafter, to and
including a date thirty-five (35) years after the date hereof, the
Corporation shall make a payment on each of said monthly payment dates at the
rate of $5.45 per $1,000 of the principal amount advanced pursuant to the
Loan Contract between three (3) and six (6) years after the date hereof and
unpaid six (6) years after the date hereof. This payment shall be in
addition to the payment made on the principal amount advanced and unpaid
three (3) years after the date hereof.
Each payment made on this Note shall be applied first to the payment
of interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay
all or any part of the principal hereof then advanced pursuant to the Loan
Contract and remaining unpaid, but so long as any of the principal hereof
advanced pursuant to the Loan Contract shall remain unpaid, the Corporation
shall be obligated to make the monthly payment on account of principal and
interest, in the amount hereinabove provided, unless the Corporation and the
holder of this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured
by a certain mortgage, dated as of April 27, 1976, made by the Corporation to
the Government, as the same may have been amended or supplemented by any
supplemental mortgage or supplemental mortgages (said mortgage and any such
supplemental mortgage or supplemental mortgages being hereinafter
collectively called the "Mortgage"), and is one of several notes (hereinafter
called the "notes") permitted to be executed and delivered by the Corporation
pursuant to the Mortgage. The Mortgage provides that all notes shall be
equally and ratable secured thereby and reference is hereby made to the
Mortgage for a description of the property mortgaged and pledged, the nature
and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage,
all principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
This Note evidences indebtedness created by a loan made under the
Rural Electrification Act of 1936, as amended, including Public Law 93-32.
If the Government shall at any time assign this Note and insure the
payment hereof, the Corporation shall continue to make payments hereunder to
the Government as collection agent for the insured holder, and, for purposes
of the Mortgage, the Government, and not each insured holder, shall be
considered to be, and shall have the rights of, the noteholder.
If the Government, at any time prior to the advance of the entire
principal amount hereof on account of this Note, shall make a written
endorsement hereon stating the amount advanced on account of the principal
hereof, and shall notify the Corporation, in writing, of such endorsement,
then the principal amount of this Note shall be deemed to be and shall become
reduced to the amount specified in such endorsement, and the Corporation
shall then execute and deliver to the Government one or more additional
notes, in an amount or amounts designated by the Government which in the
aggregate shall be equal to the then unadvanced portion of the original
principal amount of this Note, such additional notes to be dated currently
when executed, to be in the same form, and to bear the same interest rate, as
this Note. The Corporation, upon the request therefor in writing by the
Government, shall execute and deliver to the Government two or more notes, in
substitution for this Note, in the same form and bearing the same interest
rate and date (except that any such substitute note which will evidence only
an unadvanced portion of this Note may, at the discretion of the Government,
be dated currently when executed), in an aggregate principal amount which
shall be equal to the principal amount of this Note, but in such individual
principal amounts as the Government shall request; provided that (i) all
payments which shall have been made on account of the principal of and
interest on this Note shall be credited on account of such substitute notes
and (ii) the Government shall return this Note to the Corporation upon
receipt of such substitute notes.
IN WITNESS WHEREOF the Corporation has caused this Note to be signed
in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, all as of the day and
year first above written.
DEKALB TELEPHONE COOPERA
by /s/ Roy N. Pugh
President
(SEAL)
Attest: /s/ David L. Parker
Secretary
- 2 -
PROJECT DESIGNATION:
TENNESSEE 521-T8 DEKALB
------------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
MORTGAGE NOTE
Alexandria, Tennessee
June 23, 1980
------- --
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"), a
corporation organized and existing under the laws of the State of Tennessee,
for value received, promises to pay to the order of UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the Administrator of
the Rural Electrification Administration, at the United States Treasury,
Washington, D. C., at the times and in the manner hereinafter provided, the
sum of seven million three hundred twenty-seven thousand dollars
($7,327,000), with interest on the amount thereof advanced by the Government,
pursuant to a certain telephone loan contract, dated as of October 15, 1951,
between the Government and the Corporation, as the same may have been amended
from time to time (said loan contract, as it may have been amended, being
hereinafter called the "Loan Contract"), and remaining unpaid from time to
time, at the rate of five (5) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and
remaining unpaid shall be payable quarterly, on the last day of January,
April, July, and October, of each year for a period ending on a date three
(3) years after the date hereof. Thereafter, to and including a date thirty-
five (35) years after the date hereof, the Corporation shall make a payment
on each of said quarterly dates in each year at the rate of $15.70 per $1,000
of the principal amount hereof advanced pursuant to the Loan Contract and
unpaid three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between
a date three (3) years and a date six (6) years after the date hereof and
remaining unpaid shall be payable on each of said quarterly payment dates for
a period ending six (6) years after the date hereof. Thereafter, to and
including a date thirty-five (35) years after the date hereof, the
Corporation shall make a payment on each of said quarterly payment dates at
the rate of $16.38 per $1,000 of the principal amount advanced pursuant to
the Loan Contract between three (3) and six (6) years after the date hereof
and unpaid six (6) years after the date hereof. This payment shall be in
addition to the payment made on the principal amount advanced and unpaid
three (3) years after the date hereof.
Each payment made on this Note shall be applied first to the payment
of interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay
all or any part of the principal hereof then advanced pursuant to the Loan
Contract and remaining unpaid, but so long as any of the principal hereof
advanced pursuant to the Loan Contract shall remain unpaid, the Corporation
shall be obligated to make the quarterly payment on account of principal and
interest, in the amount hereinabove provided, unless the Corporation and the
holder of this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured
by a certain mortgage, dated as of April 27, 1976, made by the Corporation to
the Government, as the same may have been amended or supplemented by any
supplemental mortgage or supplemental mortgages (said mortgage and any such
supplemental mortgage or supplemental mortgages being hereinafter
collectively called the "Mortgage"), and is one of several notes (hereinafter
called the "notes") permitted to be executed and delivered by the Corporation
pursuant to the Mortgage. The Mortgage provides that all notes shall be
equally and ratably secured thereby and reference is hereby made to the
Mortgage for a description of the property mortgaged and pledged, the nature
and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage,
all principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
This Note evidences indebtedness created by a loan made under the
Rural Electrification Act of 1936, as amended, including Public Law 93-32.
If the Government shall at any time assign this Note and insure the
payment hereof, the Corporation shall continue to make payments hereunder to
the Government as collection agent for the insured holder, and, for purposes
of the Mortgage, the Government, and not such insured holder, shall be
considered to be, and shall have the rights of, the noteholder.
If the Government, at any time prior to the advance of the entire
principal amount hereof on account of this Note, shall make a written
endorsement hereon stating the amount advanced on account of the principal
hereof, and shall notify the Corporation, in writing, of such endorsement,
then the principal amount of this Note shall be deemed to be and shall become
reduced to the amount specified in such endorsement, and the Corporation
shall then execute and deliver to the Government one or more additional
notes, in an amount or amounts designated by the Government which in the
aggregate shall be equal to the then unadvanced portion of the original
principal amount of this Note, such additional notes to be dated currently
when executed, to be in the same form, and to bear the same interest rate, as
this Note. The Corporation, upon the request therefor in writing by the
Government, shall execute and deliver to the Government two or more notes, in
substitution for this Note, in the same form and bearing the same interest
rate and date (except that any such substitute note which will evidence only
an unadvanced portion of this Note may, at the discretion of the Government,
be dated currently when executed), in an aggregate principal amount which
shall be equal to the principal amount of this Note, but in such individual
principal amounts as the Government shall request; provided that (i) all
payments which shall have been made on account of the principal of and
interest on this Note shall be credited on account of such substitute notes
and (ii) the Government shall return this Note to the Corporation upon
receipt of such substitute notes.
IN WITNESS WHEREOF the Corporation has caused this Note to be signed
in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, all as of the day and
year first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Raymond Duke
President
(SEAL)
Attest: /s/ Joseph Crosby
Secretary
- 2 -
PROJECT DESIGNATION:
TENNESSEE 521-S8 DEKALB
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held April 27, 1976.
/s/ Kenneth Lawrence
---------------------------
Secretary of Meeting
MORTGAGE NOTE
Alexandria, Tennessee
________________, 19__
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"), a
corporation organized and existing under the laws of the State of Tennessee,
for value received, promises to pay to the order of UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the Administrator of
the Rural Electrification Administration, at the United States Treasury,
Washington, D. C., at the times and in the manner hereinafter provided, the
sum of one million one hundred thousand dollars ($1,100,000), with interest
on the amount thereof advanced by the Government, pursuant to a certain
telephone loan contract, dated as of October 15, 1951, between the Government
and the Corporation, as the same may have been amended from time to time
(said loan contract, as it may have been amended, being hereinafter called
the "Loan Contract"), and remaining unpaid from time to time, at the rate of
five (5) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and
remaining unpaid shall be payable quarterly, on the last day of January,
April, July, and October, of each year for a period ending on a date three
(3) years after the date hereof. Thereafter, to and including a date thirty-
five (35) years after the date hereof, the Corporation shall make a payment
on each of said quarterly dates in each year the rate of $15.70 per $1,000 of
the principal amount hereof advanced pursuant to the Loan Contract and unpaid
three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between
a date three (3) years and a date six (6) years after the date hereof and
remaining unpaid shall be payable on each of said quarterly payment dates for
a period ending six (6) years after the date hereof. Thereafter, to and
including a date thirty-five (35) years after the date hereof, the
Corporation shall make a payment on each of said quarterly payment dates at
the rate of $16.38 per $1,000 of the principal amount advanced pursuant to
the Loan Contract between three (3) and six (6) years after the date hereof
and unpaid six (6) years after the date hereof. This payment shall be in
addition to the payment made on the principal amount advanced and unpaid
three (3) years after the date hereof.
Each payment made on this Note shall be applied first to the payment
of interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay
all or any part of the principal hereof then advanced pursuant to the Loan
Contract and remaining unpaid, but so long as any of the principal hereof
advanced pursuant to the Loan Contract shall remain unpaid, the Corporation
shall be obligated to make the quarterly payment on account of principal and
interest, in the amount hereinabove provided, unless the Corporation and the
holder of this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured
by a certain mortgage, dated as of even date herewith made by the corporation
to the Government as the same may have been amended or supplemented by any
supplemental mortgage or supplemental mortgages (said mortgage and any such
supplemental mortgage or supplemental mortgages being hereinafter
collectively called the "Mortgage"), and is one of several notes (hereinafter
called the "notes") permitted to be executed and delivered by the Corporation
pursuant to the Mortgage. The Mortgage provides that all notes shall be
equally and ratably secured thereby and reference is hereby made to the
Mortgage for a description of the property mortgaged and pledged, the nature
and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage,
all principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
This Note evidences indebtedness created by a loan made under the
Rural Electrification Act of 1936, as amended, including Public Law 93-32.
If the Government shall at any time assign this Note and insure the
payment hereof, the Corporation shall continue to make payments hereunder to
the Government as collection agent for the insured holder, and, for purposes
of the Mortgage, the Government, and not such insured holder, shall be
considered to be, and shall have the rights of, the noteholder.
If the Government, at any time prior to the advance of the entire
principal amount hereof on account of this Note, shall make a written
endorsement hereon stating the amount advanced on account of the principal
hereof, and shall notify the Corporation, in writing, of such endorsement,
then the principal amount of this Note shall be deemed to be and shall become
reduced to the amount specified in such endorsement, and the Corporation
shall then execute and deliver to the Government one or more additional
notes, in an amount or amounts designated by the Government which in the
aggregate shall be equal to the then unadvanced portion of the original
principal amount of this Note, such additional notes to be dated currently
when executed, to be in the same form, and to bear the same interest rate, as
this Note. The Corporation, upon the request therefor in writing by the
Government, shall execute and deliver to the Government two or more notes, in
substitution for this Note, in the same form and bearing the same interest
rate and date (except that any such substitute note which will evidence only
an unadvanced portion of this Note may, at the discretion of the Government,
be dated currently when executed), in an aggregate principal amount which
shall be equal to the principal amount of this Note, but in such individual
principal amounts as the Government shall request; provided that (i) all
payments which shall have been made on account of the principal of and
interest on this Note shall be credited on account of such substitute notes
and (ii) the Government shall return this Note to the Corporation upon
receipt of such substitute notes.
IN WITNESS WHEREOF the Corporation has caused this Note to be signed
in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, all as of the day and
year first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Jim Amonett
President
(SEAL)
Attest: /s/ Kenneth Lawrence
Secretary
- 2 -
PROJECT DESIGNATION:
TENNESSEE 521-R8 DEKALB
-----------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
cooperation at a meeting held September 23, 1974.
/s/ Kenneth Lawrence
--------------------------
Secretary of Meeting
MORTGAGE NOTE
Alexandria, Tennessee
_____________, 19____
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"), a
corporation organized and existing under the laws of the State of Tennessee,
for value received, promises to pay to the order of UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the Administrator of
the Rural Electrification Administration, at the United States Treasury,
Washington, D. C., at the times and in the manner hereinafter provided, the
sum of three million four hundred ninety-nine thousand dollars ($3,499,000),
with interest on the amount thereof advanced by the Government, pursuant to
a certain telephone loan contract, dated as of October 15, 1951, between the
Government and the Corporation, as the same may have been amended from time
to time (said loan contract, as it may have been amended, being hereinafter
called the "Loan Contract"), and remaining unpaid from time to time, at the
rate of five (5) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and
remaining unpaid shall be payable quarterly, on the last day of January,
April, July, and October, of each year for a period ending on a date three
(3) years after the date hereof. Thereafter, to and including a date thirty-
five (35) years after the date hereof, the Corporation shall make a payment
on each of said quarterly dates in each year at the rate of $15.70 per $1,000
of the principal amount hereof advanced pursuant to the Loan Contract and
unpaid three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between
a date three (3) years and a date six (6) years after the date hereof and
remaining unpaid shall be payable on each of said quarterly payment dates for
a period ending six (6) years after the date hereof. Thereafter, to and
including a date thirty-five (35) years after the date hereof, the
Corporation shall make a payment on each of said quarterly payment dates at
the rate of $16.38 per $1,000 of the principal amount advanced pursuant to
the Loan Contract between three (3) and six (6) years after the date hereof
and unpaid six (6) years after the date hereof. This payment shall be in
addition to the payment made on the principal amount advanced and unpaid
three (3) years after the date hereof.
Each payment made on this Note shall be applied first to the payment
of interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay
all of any part of the principal hereof then advanced pursuant to the Loan
Contract and remaining unpaid, but so long as any of the principal hereof
advanced pursuant to the Loan Contract shall remain unpaid, the Corporation
shall be obligated to make the quarterly payment on account of principal and
interest, in the amount hereinabove provided, unless the Corporation and the
holder of this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured
by a certain mortgage, dated as of even date herewith made by the corporation
to the Government, as the same may have been amended or supplemented by any
supplemental mortgage or supplemental mortgages (said mortgage and any such
supplemental mortgage or supplemental mortgages being hereinafter
collectively called the "Mortgage") , and is one of several notes
(hereinafter called the "notes") permitted to be executed and delivered by
the Corporation pursuant to the Mortgage. The Mortgage provides that all
notes shall be equally and ratably secured thereby and reference is hereby
made to the Mortgage for a description of the property mortgaged and pledged,
the nature and extent of the security and the rights of the holders of notes
with respect thereto.
In case of default by the Corporation, as provided in the Mortgage,
all principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
This Note evidences indebtedness created by a loan made under the
Rural Electrification Act of 1936, as amended, including Public Law 93-32.
If the Government shall at any time assign this Note and insure the
payment hereof, the Corporation shall continue to make payments hereunder to
the Government as collection agent for the insured holder, and, for purposes
of the Mortgage, the Government, and not such insured holder, shall be
considered to be, and shall have the rights of, the noteholder.
If the Government, at any time prior to the advance of the entire
principal amount hereof on account of this Note, shall make a written
endorsement hereon stating the amount advanced on account of the principal
hereof, and shall notify the Corporation, in writing, of such endorsement,
then the principal amount of this Note shall be deemed to be and shall become
reduced to the amount specified in such endorsement, and the Corporation
shall then execute and deliver to the Government one or more additional
notes, in an amount or amounts designated by the Government which in the
aggregate shall be equal to the then unadvanced portion of the original
principal amount of this Note, such additional notes to be dated currently
when executed, to be in the same form, and to bear the same interest rate, as
this Note. The Corporation, upon the request therefor in writing by the
Government, shall execute and deliver to the Government two or more notes, in
substitution for this Note, in the same form and bearing the same interest
rate and date (except that any such substitute note which will evidence only
an unadvanced portion of this Note may, at the discretion of the Government,
be dated currently when executed), in an aggregate principal amount which
shall be equal to the principal amount of this Note, but in such individual
principal amounts as the Government shall request; provided that (i) all
payments which shall have been made on account of the principal of and
interest on this Note shall be credited on account of such substitute notes
and (ii) the Government shall return this Note to the Corporation upon
receipt of such substitute notes.
IN WITNESS WHEREOF the Corporation has caused this Note to be signed
in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, all as of the day and
year first above written.
DEKALB TELEPHONE COOPERATIVE
by
President
(SEAL)
Attest:
Secretary
- 2-
PROJECT DESIGNATION:
TENNESSEE 521-P8 DEKALB
------------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held October 24, 1973.
/s/ Kenneth Lawrence
-----------------------------
Secretary of Meeting
MORTGAGE NOTE
Alexandria, Tennessee
No. 1
--------
October 24, 1973
---------- --
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"), a
corporation organized and existing under the laws of the State of Tennessee,
for value received, promises to pay to the order of UNITED STATES OF AMERICA
(hereinafter called the "Government"), acting through the Administrator of
the Rural Electrification Administration, at the United States Treasury,
Washington, D. C., at the times and in the manner hereinafter provided, the
sum of One million thirty-one thousand dollars ($1,031,000.00), with interest
on the amount thereof advanced by the Government, pursuant to a certain
telephone loan contract, dated as of October 15, 1951 between the Government
and the Corporation, as the same may have been amended from time to time
(said loan contract, as it may have been amended, being hereinafter called
the "Loan Contract"), and remaining unpaid from time to time, at the rate of
five (5) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and
remaining unpaid shall be payable quarterly, on the last day of January,
April, July, and October, of each year for a period ending on a date three
(3) years after the date hereof. Thereafter, to and including a date thirty-
five (35) years after the date hereof, the Corporation shall make a payment
on each of said quarterly dates in each year at the rate of $15.70 per $1,000
of the principal amount hereof advanced pursuant to the Loan Contract and
unpaid three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between
a date three (3) years and a date six (6) years after the date hereof and
remaining unpaid shall be payable on each of said quarterly payment dates for
a period ending six (6) years after the date hereof. Thereafter, to and
including a date thirty-five (35) years after the date hereof, the
Corporation shall make a payment on each of said quarterly payment dates at
the rate of $16.38 per $1,000 of the principal amount advanced pursuant to
the Loan Contract between three (3) and six (6) years after the date hereof
and unpaid six (6) years after the date hereof. This payment shall be in
addition to the payment made on the principal amount advanced and unpaid
three (3) years after the date hereof.
Each payment made on this Note shall be applied first to the payment
of interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay
all or any part of the principal hereof then advanced pursuant to the Loan
Contract and remaining unpaid, but so long as any of the principal hereof
advanced pursuant to the Loan Contract shall remain unpaid, the Corporation
shall be obligated to make the quarterly payment on account of
principal and interest, in the amount hereinabove provided, unless the
Corporation and the holder of this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured
by a certain indenture of deed of trust, dated as of August 17, 1964, made by
the Corporation to The Hamilton National Bank of Chattanooga, as Trustee as
the same may have been amended or supplemented by any supplemental indenture
or supplemental indentures (said indenture and any such supplemental
indenture or supplemental indentures being hereinafter collectively called
the "Mortgage"), and is one of several notes (hereinafter called the "notes")
permitted to be executed and delivered by the Corporation pursuant to the
Mortgage. The Mortgage provides that all notes shall be equally and ratably
secured thereby and reference is hereby made to the Mortgage for a
description of the property mortgaged and pledged, the nature and extent of
the security and the rights of the holders of notes with respect thereto.
In case of default by the Corporation, as provided in the Mortgage,
all principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
This Note evidences indebtedness created by a loan made under the
Rural Electrification Act of 1936, as amended, including Public Law 93-32.
If the Government shall at any time assign this Note and insure the
payment hereof, the Corporation shall continue to make payments hereunder to
the Government as collection agent for the insured holder, and, for purposes
of the Mortgage, the Government, and not such insured holder, shall be
considered to be, and shall have the rights of, the noteholder.
If the Government, at any time prior to the advance of the entire
principal amount hereof on account of this Note, shall make a written
endorsement hereon stating the amount advanced on account of the principal
hereof, and shall notify the Corporation, in writing, of such endorsement,
then the principal amount of this Note shall be deemed to be and shall become
reduced to the amount specified in such endorsement, and the Corporation
shall then execute and deliver to the Government one or more additional
notes, in an amount or amounts designated by the Government which in the
aggregate shall be equal to the then unadvanced portion of the original
principal amount of this Note, such additional notes to be dated currently
when executed, to be in the same form, and to bear the same interest rate, as
this Note. The Corporation, upon the request therefor in writing by the
Government, shall execute and deliver to the Government two or more notes, in
substitution for this Note, in the same form and bearing the same interest
rate and date (except that any such substitute note which will evidence only
an unadvanced portion of this Note may, at the discretion of the Government,
be dated currently when executed), in an aggregate principal amount which
shall be equal to the principal amount of this Note, but in such individual
principal amounts as the Government shall request; provided that (i) all
payments which shall have been made on account of the principal of and
interest on this Note shall be credited on account of such substitute notes
and (ii) the Government shall return this Note to the Corporation upon
receipt of such substitute notes.
IN WITNESS WHEREOF the Corporation has caused this Note to be signed
in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, all as of the day and
year first above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Jim O. Amonett
President
(SEAL)
Attest: /s/ Kenneth Lawrence
Secretary
- 2 -
REA Project Designation:
TENNESSEE 521-N1 DEKALB
-----------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held on February 14, 1972
/s/ Raymond Duke
---------------------------
Secretary of Meeting
No. A
-----
MORTGAGE NOTE
Alexandria, Tennessee
February 14, 1972
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"), a
corporation organized and existing under the laws of the State of Tennessee,
for value received, promises to pay to the order of UNITED STATES OF AMERICA,
at the United States Treasury, Washington, D. C., at the times and in the
manner hereinafter provided, the sum of one million two hundred fifty thousand
dollars ($1,250,000), with interest on the amount thereof advanced by United
States of America, pursuant to a certain telephone loan contract, dated as of
October 15, 1951, between United States of America and the Corporation, as the
same may have been amended from time to time (said telephone loan contract, as
it may have been amended, being hereinafter called the "Loan Contract"), and
remaining unpaid from time to time, at the rate of two (2) per centum per
annum.
Interest on principal advanced pursuant to the Loan Contract and remaining
unpaid shall be payable quarterly, on the last day of January, April, July and
October, of each year for a period ending on a date three (3) years after the
date hereof. Thereafter, to and including a date thirty-five (35) years after
the date hereof, the Corporation shall make a payment on each of said quarterly
dates in each year at the rate of $10.60 per $1,000 of the principal amount
hereof advanced pursuant to the Loan Contract and unpaid three (3) years after
the date hereof.
Interest on principal advanced pursuant to the Loan Contract between a date
three (3) years and a date six (6) years after the date hereof and remaining
unpaid shall be payable on each of said quarterly payment dates for a period
ending six (6) years after the date hereof. Thereafter, to and including a
date thirty-five (35) years after the date hereof, the Corporation shall make a
payment on each of said quarterly payment dates at the rate of $11.38 per
$1,000 of the principal amount advanced pursuant to the Loan Contract between
three (3) and six (6) years after the date hereof and unpaid six (6) years
after the date hereof. This payment shall be in addition to the payment made
on the principal amount advanced and unpaid three (3) years after the date
hereof.
Each payment made on this Note shall be applied first to the payment of
interest on principal and then on account of principal. Thirty-five (35) years
after the date hereof, the principal hereof advanced pursuant to the Loan
Contract remaining unpaid, if any, and interest thereon, shall become due and
payable.
The Corporation on any payment date, as hereinabove provided, may pay all or
any part of the principal hereof then advanced pursuant to the Loan Contract
and remaining unpaid, but so long as any of the principal hereof advanced
pursuant to the Loan Contract shall remain unpaid, the Corporation shall be
obligated to make the quarterly payment on account of principal and interest,
in the amount hereinabove provided, unless the Corporation and the holder of
this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured by a
certain indenture of deed of trust, dated as of August 17, 1964, made by the
Corporation to The Hamilton National Bank of Chattanooga, as trustee, as said
indenture of deed of trust may have been amended or supplemented (said
indenture of deed of trust as amended or supplemented being hereinafter
called the "Mortgage"), and is one of several notes (hereinafter called the
"notes"), limited to the aggregate principal amount of fifteen million
dollars ($15,000,000), permitted to be executed and delivered by the
Corporation pursuant to the Mortgage. The Mortgage provides that all notes
shall be equally and ratably secured thereby and reference is hereby made to
the Mortgage for a description of the property mortgaged and pledged, the
nature and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage, all
principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
[Remainder on this page in original]
IN WITNESS WHEREOF the Corporation has caused this Note to be signed in its
corporate name and its corporate seal to be hereunto affixed and attested by
its officers thereunto duly authorized, all as of the day and year first
above written.
DEKALB TELEPHONE COOPERATIVE
(SEAL) by /s/ Jim Amonett
President
Attest: /s/ Raymond Duke
Secretary
REA Project Designation:
TENNESSEE 521-M DEKALB
------------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held March 25, 1970
/s/ Raymond Duke
---------------------------
Secretary of Meeting
No. A
-----
MORTGAGE NOTE
Alexandria, Tennessee
March 25, 1970
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"),
a corporation organized and existing under the laws of the State of
Tennessee, for value received, promises to pay to the order of UNITED STATES
OF AMERICA, at the United States Treasury, Washington, D. C., at the times
and in the manner hereinafter provided, the sum of five hundred thousand
dollars ($500,000), with interest on the amount thereof advanced by United
States of America, pursuant to a certain telephone loan contract, dated as of
October 15, 1951, between United States of America and the Corporation, as
the same may have been amended from time to time (said telephone loan
contract, as it may have been amended, being hereinafter called the "Loan
Contract"), and remaining unpaid from time to time, at the rate of two (2)
per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and remaining
unpaid shall be payable quarterly, on the last day of January, April, July
and October, of each year for a period ending on a date three (3) years after
the date hereof. Thereafter, to and including a date thirty-five (35) years
after the date hereof, the Corporation shall make a payment on each of said
quarterly dates in each year at the rate of $10.60 per $1,000 of the
principal amount hereof advanced pursuant to the Loan Contract and unpaid
three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between a date
three (3) years and a date six (6) years after the date hereof and remaining
unpaid shall be payable on each of said quarterly payment dates for a period
ending six (6) years after the date hereof. Thereafter, to and including a
date thirty-five (35) years after the date hereof, the Corporation shall make
a payment on each of said quarterly payment dates at the rate of $11.38 per
$1,000 of the principal amount advanced pursuant to the Loan Contract between
three (3) and six (6) years after the date hereof and unpaid six (6) years
after the date hereof. This payment shall be in addition to the payment made
on the principal amount advanced and unpaid three (3) years after the date
hereof.
Each payment made on this Note shall be applied first to the payment of
interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay all or
any part of the principal hereof then advanced pursuant to the Loan Contract
and remaining unpaid, but so long as any of the principal hereof advanced
pursuant to the Loan Contract shall remain unpaid, the Corporation shall be
obligated to make the quarterly payment on account of principal and interest,
in the amount hereinabove provided, unless the Corporation and the holder of
this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured by a
certain indenture of deed of trust, dated as of August 17, 1964, made by the
Corporation to The Hamilton National Bank of Chattanooga, as trustee, as said
indenture of deed of trust may have been amended or supplemented (said
indenture of deed of trust as amended or supplemented being hereinafter
called the "Mortgage"), and is one of several notes (hereinafter called the
"notes"), limited to the aggregate principal amount of fifteen million
dollars ($15,000,000), permitted to be executed and delivered by the
Corporation pursuant to the Mortgage. The Mortgage provides that all notes
shall be equally and ratably secured thereby and reference is hereby made to
the Mortgage for a description of the property mortgaged and pledged, the
nature and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage, all
principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
[Remainder on this page in original]
IN WITNESS WHEREOF the Corporation has caused this Note to be signed in its
corporate name and its corporate seal to be hereunto affixed and attested by
its officers thereunto duly authorized, all as of the day and year first
above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ Jim Amonett
(SEAL) President
Attest: /s/ Raymond Duke
Secretary
REA Project Designation:
TENNESSEE 521-D DEKALB
------------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held October 11, 1968
/s/ Raymond Duke
----------------------------
Secretary of Meeting
No. A
-----
MORTGAGE NOTE
Alexandria, Tennessee
October 11, 1968
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"),
a corporation organized and existing under the laws of the State of
Tennessee, for value received, promises to pay to the order of UNITED STATES
OF AMERICA, at the United States Treasury, Washington, D. C., at the times
and in the manner hereinafter provided, the sum of one million eight hundred
fifty thousand dollars ($1,850,000), with interest on the amount thereof
advanced by United States of America, pursuant to a certain telephone loan
contract, dated as of October 15, 1951, between United States of America and
the Corporation, as the same may have been amended from time to time (said
telephone loan contract, as it may have been amended, being hereinafter
called the "Loan Contract"), and remaining unpaid from time to time, at the
rate of two (2) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and remaining
unpaid shall be payable quarterly, on the last day of January, April, July
and October, of each year for a period ending on a date three (3) years after
the date hereof. Thereafter, to and including a date thirty-five (35) years
after the date hereof, the Corporation shall make a payment on each of said
quarterly dates in each year at the rate of $10.60 per $1,000 of the
principal amount hereof advanced pursuant to the Loan Contract and unpaid
three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between a date
three (3) years and a date six (6) years after the date hereof and remaining
unpaid shall be payable on each of said quarterly payment dates for a period
ending six (6) years after the date hereof. Thereafter, to and including a
date thirty-five (35) years after the date hereof, the Corporation shall make
a payment on each of said quarterly payment dates at the rate of $11.38 per
$1,000 of the principal amount advanced pursuant to the Loan Contract between
three (3) and six (6) years after the date hereof and unpaid six (6) years
after the date hereof. This payment shall be in addition to the payment made
on the principal amount advanced and unpaid three (3) years after the date
hereof.
Each payment made on this Note shall be applied first to the payment of
interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay all or
any part of the principal hereof then advanced pursuant to the Loan Contract
and remaining unpaid, but so long as any of the principal hereof advanced
pursuant to the Loan Contract shall remain unpaid, the Corporation shall be
obligated to make the quarterly payment on account of principal and interest,
in the amount hereinabove provided, unless the Corporation and the holder of
this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured by a
certain indenture of deed of trust, dated as of August 17, 1964, made by the
Corporation to The Hamilton National Bank of Chattanooga, as trustee, as said
indenture of deed of trust may have been amended or supplemented (said
indenture of deed of trust as amended or supplemented being hereinafter
called the "Mortgage"), and is one of several notes (hereinafter called the
"notes"), limited to the aggregate principal amount of fifteen million
dollars ($15,000,000), permitted to be executed and delivered by the
Corporation pursuant to the Mortgage. The Mortgage provides that all notes
shall be equally and ratably secured thereby and reference is hereby made to
the Mortgage for a description of the property mortgaged and pledged, the
nature and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage, all
principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
[Remainder on this page in original]
IN WITNESS WHEREOF the Corporation has caused this Note to be signed in its
corporate name and its corporate seal to be hereunto affixed and attested by
its officers thereunto duly authorized, all as of the day and year first
above written.
DEKALB TELEPHONE COOPERATIVE
by
(SEAL) President
Attest:
Secretary
REA Project Designation:
TENNESSEE 521-K DEKALB
-----------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
No. C
---
MORTGAGE NOTE
Alexandria, Tennessee
August 3, 1966
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"),
a corporation organized and existing under the laws of the State of
Tennessee, for value received, promises to pay to the order of UNITED STATES
OF AMERICA, at the United States Treasury, Washington, D. C., at the times
and in the manner hereinafter provided, the sum of two hundred seventy-six
thousand dollars ($276,000), with interest on the amount thereof advanced by
United States of America, pursuant to a certain telephone loan contract,
dated as of October 15, 1951, between United States of America and the
Corporation, as the same may have been amended from time to time (said
telephone loan contract, as it may have been amended, being hereinafter
called the "Loan Contract"), and remaining unpaid from time to time, at the
rate of two (2) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and remaining
unpaid shall be payable quarterly, on the last day of January, April, July
and October, of each year for a period ending on a date three (3) years after
the date hereof. Thereafter, to and including a date thirty-five (35) years
after the date hereof, the Corporation shall make a payment on each of said
quarterly dates in each year at the rate of $10.60 per $1,000 of the
principal amount hereof advanced pursuant to the Loan Contract and unpaid
three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between a date
three (3) years and a date six (6) years after the date hereof and remaining
unpaid shall be payable on each of said quarterly payment dates for a period
ending six (6) years after the date hereof. Thereafter, to and including a
date thirty-five (35) years after the date hereof, the Corporation shall make
a payment on each of said quarterly payment dates at the rate of $11.38 per
$1,000 of the principal amount advanced pursuant to the Loan Contract between
three (3) and six (6) years after the date hereof and unpaid six (6) years
after the date hereof. This payment shall be in addition to the payment made
on the principal amount advanced and unpaid three (3) years after the date
hereof.
Each payment made on this Note shall be applied first to the payment of
interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay all or
any part of the principal hereof then advanced pursuant to the Loan Contract
and remaining unpaid, but so long as any of the principal hereof advanced
pursuant to the Loan Contract shall remain unpaid, the Corporation shall be
obligated to make the quarterly payment on account of principal and interest,
in the amount hereinabove provided, unless the Corporation and the holder of
this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured by a
certain indenture of deed of trust, dated as of August 17, 1964, made by the
Corporation to The Hamilton National Bank of Chattanooga, as trustee, as said
indenture of deed of trust may have been amended or supplemented (said
indenture of deed of trust as amended or supplemented being hereinafter
called the "Mortgage"), and is one of several notes (hereinafter called the
"notes"), limited to the aggregate principal amount of fifteen million
dollars ($15,000,000), permitted to be executed and delivered by the
Corporation pursuant to the Mortgage. The Mortgage provides that all notes
shall be equally and ratably secured thereby and reference is hereby made to
the Mortgage for a description of the property mortgaged and pledged, the
nature and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage, all
principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
[Remainder on this page in original]
IN WITNESS WHEREOF the Corporation has caused this Note to be signed in its
corporate name and its corporate seal to be hereunto affixed and attested by
its officers thereunto duly authorized, all as of the day and year first
above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ W. N. Odum
(SEAL) President
Attest: /s/ Raymond Duke
Secretary
REA Project Designation:
TENNESSEE 521-H DEKALB
-----------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held June 21, 1965
/s/ Raymond Duke
----------------------------
Secretary of Meeting
No. A
-----
MORTGAGE NOTE
Alexandria, Tennessee
June 21, 1965
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"),
a corporation organized and existing under the laws of the State of
Tennessee, for value received, promises to pay to the order of UNITED STATES
OF AMERICA, at the United States Treasury, Washington, D. C., at the times
and in the manner hereinafter provided, the sum of eight hundred fifty-one
thousand dollars ($851,000), with interest on the amount thereof advanced by
United States of America, pursuant to a certain telephone loan contract,
dated as of October 15, 1951, between United States of America and the
Corporation, as the same may have been amended from time to time (said
telephone loan contract, as it may have been amended, being hereinafter
called the "Loan Contract"), and remaining unpaid from time to time, at the
rate of two (2) per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and remaining
unpaid shall be payable quarterly, on the last day of January, April, July
and October, of each year for a period ending on a date three (3) years after
the date hereof. Thereafter, to and including a date thirty-five (35) years
after the date hereof, the Corporation shall make a payment on each of said
quarterly dates in each year at the rate of $10.60 per $1,000 of the
principal amount hereof advanced pursuant to the Loan Contract and unpaid
three (3) years after the date hereof.
Interest on principal advanced pursuant to the Loan Contract between a date
three (3) years and a date six (6) years after the date hereof and remaining
unpaid shall be payable on each of said quarterly payment dates for a period
ending six (6) years after the date hereof. Thereafter, to and including a
date thirty-five (35) years after the date hereof, the Corporation shall make
a payment on each of said quarterly payment dates at the rate of $11.38 per
$1,000 of the principal amount advanced pursuant to the Loan Contract between
three (3) and six (6) years after the date hereof and unpaid six (6) years
after the date hereof. This payment shall be in addition to the payment made
on the principal amount advanced and unpaid three (3) years after the date
hereof.
Each payment made on this Note shall be applied first to the payment of
interest on principal and then on account of principal. Thirty-five (35)
years after the date hereof, the principal hereof advanced pursuant to the
Loan Contract remaining unpaid, if any, and interest thereon, shall become
due and payable.
The Corporation on any payment date, as hereinabove provided, may pay all or
any part of the principal hereof then advanced pursuant to the Loan Contract
and remaining unpaid, but so long as any of the principal hereof advanced
pursuant to the Loan Contract shall remain unpaid, the Corporation shall be
obligated to make the quarterly payment on account of principal and interest,
in the amount hereinabove provided, unless the Corporation and the holder of
this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured by a
certain indenture of deed of trust, dated as of August 17, 1964, made by the
Corporation to The Hamilton National Bank of Chattanooga, as trustee, as said
indenture of deed of trust may have been amended or supplemented (said
indenture of deed of trust as amended or supplemented being hereinafter
called the "Mortgage"), and is one of several notes (hereinafter called the
"notes"), limited to the aggregate principal amount of fifteen million
dollars ($15,000,000), permitted to be executed and delivered by the
Corporation pursuant to the Mortgage. The Mortgage provides that all notes
shall be equally and ratably secured thereby and reference is hereby made to
the Mortgage for a description of the property mortgaged and pledged, the
nature and extent of the security and the rights of the holders of notes with
respect thereto.
In case of default by the Corporation, as provided in the Mortgage, all
principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
[Remainder on this page in original]
IN WITNESS WHEREOF the Corporation has caused this Note to be signed in its
corporate name and its corporate seal to be hereunto affixed and attested by
its officers thereunto duly authorized, all as of the day and year first
above written.
DEKALB TELEPHONE COOPERATIVE
by /s/ W. N. Odum
(SEAL) President
Attest: /s/ Raymond Duke
Secretary
REA Project Designation:
TENNESSEE 521-H DEKALB
------------------------
MORTGAGE NOTE
made by
DEKALB TELEPHONE COOPERATIVE
to
UNITED STATES OF AMERICA
Identified as form of document presented to and approved
by the board of directors trustees of the above named
corporation at a meeting held August 17, 1964
/s/ Paul Bass
----------------------
Secretary of Meeting
No. A
-----
DEKALB TELEPHONE COOPERATIVE
MORTGAGE NOTE
Alexandria, Tennessee
August 17, 1964
--------- --
DEKALB TELEPHONE COOPERATIVE (hereinafter called the "Corporation"),
a corporation organized and existing under the laws of the State of
Tennessee, for value received, promises to pay to the order of UNITED STATES
OF AMERICA, at the United States Treasury, Washington, D. C., at the times
and in the manner hereinafter provided, the sum of five hundred thousand
dollars ($500,000), with interest on the amount thereof advanced by United
States of America, pursuant to a certain telephone loan contract, dated as of
October 15, 1951, between United States of America and the Corporation, as
the same may have been amended from time to time (said telephone loan
contract, as it may have been amended, being hereinafter called the "Loan
Contract"), and remaining unpaid from time to time, at the rate of two (2)
per centum per annum.
Interest on principal advanced pursuant to the Loan Contract and
remaining unpaid shall be payable quarterly, on the last day of January,
April, July and October, of each year for a period ending on a date three (3)
years after the date hereof. Thereafter, to and including a date thirty-five
(35) years after the date hereof, the Corporation shall make a payment on
each of said quarterly dates in each year at the rate of $10.60 per $1,000 of
the principal amount hereof advanced pursuant to the Loan Contract and unpaid
three (3) years after the date hereof. Each such payment shall be applied
first to the payment of interest on principal and then on account of
principal. Thirty-five (35) years after the date hereof, the principal
hereof advanced pursuant to the Loan Contract remaining unpaid, if any, and
interest thereon, shall become due and payable.
The Corporation on any payment date, as hereinabove provided, may pay
all or any part of the principal hereof then advanced pursuant to the Loan
Contract and remaining unpaid, but so long as any of the principal hereof
advanced pursuant to the Loan Contract shall remain unpaid, the Corporation
shall be obligated to make the quarterly payment on account of principal and
interest, in the amount hereinabove provided, unless the Corporation and the
holder of this Note shall otherwise agree.
This Note has been executed and delivered pursuant to and is secured
by a certain indenture of deed of trust, dated as of even date herewith, made
by the Corporation to The Hamilton National Bank of Chattanooga, as trustee
(said indenture of deed of trust being hereinafter called the "Mortgage"),
and is one of several notes (hereinafter called the "notes"), limited to the
aggregate principal amount of fifteen million dollars ($15,000,000),
permitted to be executed and delivered by the Corporation pursuant to the
Mortgage. The Mortgage provides that all notes shall be equally and ratably
secured thereby and reference is hereby made to the Mortgage for a
description of the property mortgaged and pledged, the nature and extent of
the security and the rights of the holders of notes with respect thereto.
In case of default by the Corporation, as provided in the Mortgage,
all principal advanced pursuant to the Loan Contract and remaining unpaid, on
this Note and any other notes at the time outstanding, and all interest
thereon, may be declared or may become due and payable in the manner and with
the effect provided in the Mortgage.
IN WITNESS WHEREOF the Corporation has caused this Note to be signed
in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, all as of the day and
year first above written.
DEKALB TELEPHONE COOPERATIVE
by
President
(SEAL)
Attest:
Secretary
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports dated September 1, 1999, except for Note 11, as to which the date is
October 18, 1999, included in or made a part of the DTC Communications Corp.
registration statement, and to all references made to our Firm.
/s/ Arthur Andersen LLP
Nashville, Tennessee
October 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL
STATEMENTS OF DEKALB TELEPHONE
COOPERATIVE, INC. FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,506,703
<SECURITIES> 13,981,614
<RECEIVABLES> 2,905,043
<ALLOWANCES> 212,387
<INVENTORY> 248,808
<CURRENT-ASSETS> 18,686,601
<PP&E> 61,407,568
<DEPRECIATION> 32,377,374
<TOTAL-ASSETS> 52,061,280
<CURRENT-LIABILITIES> 3,143,018
<BONDS> 22,329,851
0
0
<COMMON> 0
<OTHER-SE> 25,510,592
<TOTAL-LIABILITY-AND-EQUITY> 52,061,280
<SALES> 0
<TOTAL-REVENUES> 10,562,883
<CGS> 0
<TOTAL-COSTS> 6,810,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 539,921
<INCOME-PRETAX> 3,804,930
<INCOME-TAX> 152,011
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,652,919
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
