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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1998
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the
transition period from __________ to __________
Commission File Number: 0-19179
CT COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
North Carolina 56-1837282
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization
68 Cabarrus Avenue, East, Concord, North Carolina 28025
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 722-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of exchange on which registered:
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Rights to Purchase Common Stock
Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that
the Company was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates of the Company is approximately
$343,544,640 (based on the March 12, 1999 closing price of the Common Stock of $40.00 per share). As of March
12, 1999, there were 9,381,049 shares of the Company's Common Stock outstanding.
Documents Incorporated by Reference
Document of the Company Form 10-K Reference Location
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Certain portions of the PARTS I and II
Annual Report to Shareholders for
the fiscal year ended December 31, 1998
1999 Annual Meeting Proxy Statement PART III
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CT COMMUNICATIONS, INC.
AND CONSOLIDATED SUBSIDIARIES
Form 10-K for the Fiscal Year ended December 31, 1998
TABLE OF CONTENTS
PART I
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Item 1. Business................................................................................................3
Item 2. Properties.............................................................................................15
Item 3. Legal Proceedings......................................................................................17
Item 4. Submission of Matters to a Vote of Security Holders....................................................17
Item 4A. Executive Officers of the Company......................................................................17
PART II
Item 5. Market for the Company's Common Equity and Related Shareholder Matters.................................18
Item 6. Selected Financial Data................................................................................20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................................21
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.............................................29
Item 8. Financial Statements and Supplementary Data............................................................30
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure.............................................................................................30
PART III
Item 10. Directors and Executive Officers of the Company........................................................30
Item 11. Executive Compensation.................................................................................30
Item 12. Security Ownership of Certain Beneficial Owners and Management.........................................30
Item 13. Certain Relationships and Related Transactions.........................................................31
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K .......................................31
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PART I
Item 1. Business
The following discussion contains certain forward-looking statements
that involve risks and uncertainties that could cause actual results to differ
materially from those in the forward- looking statements. Words such as
"expects," "anticipates," "believes," "estimates," variations of such words and
other similar expressions are intended to identify such forward- looking
statements. Information concerning certain factors that could impact expected
results is included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations-- Forward-Looking Statements."
General. CT Communications, Inc. (the "Company") is a holding
company providing telecommunications services and communications systems and
products through seven principal operating subsidiaries, each of which is wholly
owned: The Concord Telephone Company ("CTC"); CTC Long Distance Services, Inc.
("CTC LDS"); Carolina Personal Communications, Inc. (doing business as "CT
Wireless, Inc.") ("CPC"); CT Wireless Cable, Inc. ("CT Wireless Cable"); CTC
Exchange Services, Inc. ("CTC Exchange"); CT Global Telecommunications, Inc.
("CTGT"); and CTC Internet Services, Inc. ("CTC Internet"). The Company also
owns various minority interests in telecommunications companies through two
subsidiaries--CT Communications Northeast Trust ("CTC Trust") and CT Cellular,
Inc. ("CT Cellular").
CTC provides local and toll telephone service and network access
services in a territory covering approximately 705 square miles in Cabarrus,
Stanly and Rowan Counties, North Carolina (the "CTC Service Area"). CTC LDS
provides long distance telephone service to residential and business subscribers
throughout the CTC Service Area, as well as in various other markets surrounding
the CTC Service Area. CPC manages the Company's ongoing efforts to operate a
personal communication service ("PCS") system. CPC also markets and sells PCS
services in a specified Major Trading Area on behalf of BellSouth Carolinas PCS
Limited Partnership (the "BellSouth Partnership"). CT Wireless Cable holds the
Company's interest in Wireless One of North Carolina, LLC ("WONC"), a limited
liability company formed to provide wireless cable television service in North
Carolina. CTC Exchange provides local telephone service in small- to
medium-sized markets beyond the CTC Service Area. CTGT holds an approximate 16%
equity interest in, and provides certain management services to, Amaritel, S.A.
de C.V. (doing business as "Maxcom"), a Mexican entity that proposes to provide
telephone services in Mexico. Finally, CTC Internet provides internet access and
related services to business and residential subscribers throughout the CTC
Service Area and in Charlotte, Greensboro and Raleigh, North Carolina.
The operations of CTC are the Company's primary business segment.
CTC accounted for approximately 77% of the Company's operating revenues and
approximately 94% of the Company's operating profit in 1998. Despite the
anticipated growth of other products and services offered by the Company, as
described below, the Company anticipates that CTC will continue to account for a
significant portion of the Company's earnings in 1999. Certain business,
financial and competitive information about the Company and CTC is discussed
below.
For certain other information regarding operating segments, see the Note
entitled "Segment
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Information" of the Notes to Consolidated Financial Statements in the 1999
Annual Report, which information is incorporated herein by reference.
Effective January 28, 1999, the Company's Voting Common Stock and
Class B Nonvoting Common Stock were converted into a single class of Common
Stock (the "Recapitalization"). Pursuant to the Recapitalization, the Company's
Articles of Incorporation were amended to (i) provide for one class of Common
Stock, consisting of 100 million authorized shares, and (ii) reclassify each
issued and outstanding share of Voting Common Stock into 4.4 shares of Common
Stock and each issued and outstanding share of Class B Nonvoting Common Stock
into 4.0 shares of Common Stock. Cash was paid in lieu of issuing any fractional
shares. All share and per share amounts in this Annual Report on Form 10-K have
been adjusted to reflect the Recapitalization, unless otherwise indicated.
The Company is incorporated under the laws of North Carolina and was
organized in 1993 pursuant to the corporate reorganization of CTC into a holding
company structure. At December 31, 1998, the Company and its subsidiaries had
total consolidated assets of $183.6 million and had 503 employees. The Company
has its principal executive offices at 68 Cabarrus Avenue East, Concord, North
Carolina 28205 (telephone number: 704-722-2500).
Legislative and Regulatory Developments. The Company's business
continued to undergo significant changes during 1998. These changes are
primarily the result of the Company's efforts to take advantage of fundamental
statutory, regulatory and technological developments currently taking place in
the telecommunications industry.
The Telecommunications Act of 1996 (the "Telecom Act") was enacted
on February 8, 1996. The Telecom Act mandates significant changes in existing
regulation of the telecommunications industry to promote competitive development
of new service offerings, to expand public availability of telecommunications
services and to streamline regulation of the industry.
The Telecom Act provides that implementing its legislative
objectives will be the task of the Federal Communications Commission (the
"FCC"), the state public utilities commissions and a federal-state joint board.
Simultaneous proceedings are in process to address issues and proposals already
before the FCC in pending rule making proceedings. Two significant proceedings
currently in process relate to access charge reform and universal service. The
results of such proceedings and the timing of implementation is uncertain at
this time, and the Company cannot currently estimate the impact of such
proceedings on its business or results of operations.
The primary purpose and effect of the new law is to open all
telecommunications markets to competition--including local telephone service.
The Telecom Act makes all state and local barriers to competition unlawful,
whether they are direct or indirect. It directs the FCC to hold notice and
comment proceedings and to preempt all inconsistent state and local laws and
regulations.
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Each state retains the power to impose "competitively neutral"
requirements that are both consistent with the Telecom Act's universal service
provision and necessary for universal service, public safety and welfare,
continued service quality and consumer rights. Although a state may not impose
requirements that effectively function as barriers to entry or create a
competitive disadvantage, the scope of state authority to maintain existing or
adopt new requirements under this section is not clearly spelled out. In
addition, before it preempts a state or local requirement as violating the entry
barrier prohibition, the FCC must hold a notice and comment proceeding.
The FCC is required to forbear from applying any statutory or
regulatory provision that is not necessary to keep telecommunications rates and
terms reasonable or to protect consumers. A state may not apply a statutory or
regulatory provision that the FCC decides to forbear from applying. In addition,
the FCC must review its telecommunications regulations every two years and
repeal or modify any that it deems no longer necessary in the public interest.
The Telecom Act establishes a general duty of all telecommunications
carriers to interconnect with other carriers. Congress has also developed a
detailed list of requirements with respect to the interconnection obligations of
local exchange carriers ("LECs"). These interconnection obligations include
resale, number portability, dialing parity, access to rights-of-way and
reciprocal compensation.
LECs that are designated "incumbents" ("ILECs") have additional
obligations: to negotiate in good faith; to interconnect on terms that are
reasonable and non-discriminatory; to provide non-discriminatory access to
"facilities, equipment, features, functions and capabilities" on an unbundled
basis so that they can be combined in a manner that a requesting
telecommunications carrier sees fit; to offer for resale at wholesale rates any
service that LECs provide on a retail basis and not subject to unreasonable or
discriminatory conditions; and to provide actual collocation of equipment
necessary for interconnection or access.
The Telecom Act establishes a framework for state commissions to
mediate and arbitrate negotiations between ILECs and carriers requesting
interconnection, services or network elements. The Telecom Act establishes
deadlines, policy guidelines for state commission decision making and recourse
to the FCC in the event a state commission fails to act.
In addition to opening up local exchange markets, the Telecom Act
contains provisions for (i) updating and expanding telecommunications service
guarantees, (ii) removing certain restrictions relating to AT&T former operating
companies resulting from the antitrust consent decree issued by the federal
courts in 1984, (iii) the entry of telephone companies into video services, (iv)
the entry of cable television operators into other telecommunications
industries, (v) changes in the rules for ownership of broadcasting and cable
television operations, and (vi) changes in the regulations governing cable
television.
In 1996, the FCC adopted a number of interconnection obligations
that require LECs to provide physical or virtual collocation of equipment
necessary for interconnection, as well as a technically feasible method of
interconnection requested by a competitive telephone service
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provider. LECs are also obligated to enter into reciprocal cost-based
compensation arrangements with competitive service providers for the transport
and termination of "local" traffic. If the LEC refuses to enter into such an
agreement with a competitor, the competitor may require the state government to
serve as an arbitrator. The FCC also adopted specific methodologies to determine
resale discounts and pricing for unbundled network elements in transactions
between incumbent LECs and competing service providers. The FCC's new
interconnection rules are currently being challenged in court by several LECs
and state regulatory authorities, and the outcome of those challenges cannot be
predicted.
On January 25, 1999, the United States Supreme Court concluded that
the FCC has exclusive jurisdiction to implement the competitive interconnection
provisions of the Telecom Act. This resulted in a shift in supervision and
control over the transition to competition from state regulatory agencies to the
FCC. It is too early to predict the impact of this decision on the Company. It
is likely that FCC supervision will result in greater uniformity in the approach
applied to the terms of interconnection agreements between competitors. However,
the decision may adversely impact smaller telecommunication providers, such as
the Company, because states may be better able than the FCC to understand and
react to local conditions.
On February 25, 1999, the FCC issued a declaratory rule that dial-up
calls to Internet service providers are interstate calls for purposes of
determining compensation for carriers that terminate such calls. Previously, 29
states, including North Carolina, have ruled that such calls are local and,
therefore, are subject to the reciprocal compensation provisions of local
network interconnection agreements. However, the FCC stated that its ruling does
not overturn these states' decisions. The FCC has tentatively concluded that
parties may negotiate such compensation arrangements or have them arbitrated by
state regulators under the Telecom Act. Competitive local exchange carriers
("CLECs") generally benefit from the states' position, while ILECs are expected
to request that states reverse their position in light of the new FCC rule. The
Company cannot predict the outcome of this regulatory development, but does not
expect it to have a materially adverse effect on the Company.
Although certain interpretive issues under the Telecom Act have not
yet been resolved, it is apparent that the requirements of the Telecom Act have
led to increased competition among providers of local telecommunications
services and have simplified the process of switching from ILEC services to
those offered by competitive access providers and CLECs. In light of the
foregoing, the Company continued its efforts in 1998 to improve its competitive
position in the local telephone service business and to take advantage of
opportunities that are developing with other emerging telecommunications
technologies.
Competition. The telecommunications industry is highly competitive.
Customers increasingly desire new services and new technologies and regulatory
reform and business alliances are accelerating the rate of change in the
industry, creating intense competition.
The Company faces competitors in virtually every aspect of its
business, including from regional holding companies, long distance service
providers, cable television companies, internet service providers, wireless
service providers, CLECs, switchless resellers and satellite carriers.
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In the second quarter of 1998, the Company entered into interconnection
agreements with Time Warner Communications of North Carolina, L.P. and US LEC of
North Carolina, LLC, pursuant to which the Company now provides access to its
local telephone service market, as mandated by the Telecom Act and the Rate Plan
(discussed below). This is expected to create significant competitive pressure
regarding the Company's largest business customers. Competition also has
increased significantly among PCS providers. Sprint began PCS service in several
North Carolina metropolitan areas in 1998. PCS competition has led to intense
pressure on the pricing of services, and prices have declined significantly
recently. Several providers introduced "flat rate" pricing in 1998, which
eliminated roaming charges and further reduced prices.
In addition, in early 1999, AT&T and Time Warner entered into a
joint venture to offer AT&T-branded cable telephony service to residential and
small business customers over Time Warner's existing cable television systems in
33 states. The two companies expect to begin broad operations in 2000, to
jointly market communications services and to develop other broadband
communications services. The joint venture, along with other AT&T acquisitions,
reportedly will enable AT&T to reach more than 40% of U.S. households over the
next four or five years. This joint venture may eventually compete directly with
the Company.
Many of the Company's competitors have substantially greater
financial, personnel, technical, marketing and other resources, larger numbers
of customers, more prominent name recognition and utilize more extensive
transmission networks than the Company. The Company competes primarily on the
basis of customer service, reliability, variety of product offerings,
transmission quality and price. The ability of the Company to continue to
compete effectively will depend on its ability to maintain high quality service
and products at prices equal to or below those charged by its competitors.
THE CONCORD TELEPHONE COMPANY
General. CTC, the Company's principal subsidiary, was originally
organized in 1897 and provides local telephone and intra-LATA (Local Access and
Transport Area) toll service, access service to other carriers, and telephone
and equipment sales and leasing to customers residing primarily in Cabarrus,
Stanly and Rowan Counties in North Carolina. As of December 31, 1998, CTC served
109,147 access lines within the CTC Service Area. This figure represents a 6.4 %
increase from December 31, 1997.
To support the ongoing growth in the CTC Service Area, CTC invested
more than $7 million in circuit and digital switching technology. In addition,
the Company expanded the total fiber network in 1998 to more than 11,000 fiber
miles. In addition, CTC continued implementing state-of-the-art Nortel DMS
digital switching equipment as its next generation switching platform.
Implementation began in 1997 and is expected to continue for approximately three
to five years.
CTC is empowered by provisions of the North Carolina Public
Utilities Law and its Articles of Incorporation to construct and maintain its
lines and is authorized by the North Carolina Utilities Commission to operate
the territory that CTC now serves. In addition, CTC
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has municipal franchises for constructing and maintaining its lines in the
Cities of Albemarle, Badin, China Grove, Concord, Harrisburg, Kannapolis,
Landis, Mt. Pleasant, New London, Oakboro and Richfield, North Carolina.
New Rate Plan. On September 1, 1997, CTC implemented a price
regulation rate plan (the "Rate Plan") approved by the North Carolina Utilities
Commission ("NCUC") pursuant to which CTC is now regulated based on prices
rather than traditional rate base rate of return regulation. As a result of the
Rate Plan, the rates charged by CTC for local, state access and toll plans are
controlled by the parameters specified by the NCUC in the Rate Plan.
A driving force behind the Rate Plan is customer demand for expanded
calling options to areas beyond their home communities. The Rate Plan expanded
the area in which customers can call without paying long distance charges by
including all of CTC's exchanges in its toll-free area. The Rate Plan also
expanded CTC's metro area, which already included Charlotte, to include
Matthews, Huntersville, Davidson and other surrounding communities. A
residential customer now may select one of four metro calling packages, which
provide a flat monthly fee (ranging from no charge to $24.00) for specified
monthly minutes of use (ranging from 30 minutes to unlimited minutes). The
customer may pay $.10 per minute for usage in excess of the monthly purchased
amounts. In addition, the Rate Plan eliminated the separate charge for
touch-tone calling and reduced charges for long-distance calls into a broader
calling zone that extends into Western North Carolina.
Under the rate structure implemented under the Rate Plan, CTC's
residential customers, except those in the Harrisburg exchange, now pay $10.50
per month for basic local service, including touch-calling. Harrisburg customers
now pay a slightly higher charge of $12.00 per month because these customers are
able to call more customers under that community's basic plan. Under the prior
rate structure, CTC's residential customers paid approximately $7.00 per month
for basic local service, plus a separate charge of $.50 per month for
touch-calling. Under the Rate Plan, the Company may rebalance rates to keep
prices in line with underlying costs. Residential rates are frozen until
September 2000, at which time the Company may begin rebalancing residential
rates.
Although the new rate structure reflects an increased charge for
basic service, other changes in the Rate Plan offset these increases for many
customers. The new rate structure did not materially impact the Company's
revenues in 1998 and is not expected to materially impact revenues in 1999 or
future years.
Under the North Carolina H.B. 161, "An Act to Provide the Public
with Access to Low- Cost Telecommunication Service in a Changing Competitive
Environment" (the "NC Act"), which took effect in July 1996, telephone companies
are given the option to file for price regulation. In exchange for greater
flexibility in setting prices, however, local telephone companies must agree to
open their markets to competition for local dial tone service -- the last area
of telecommunications services to be deregulated. Although the Rate Plan
requires that CTC open its markets to competition for local dial-tone services,
management believes CTC can compete in emerging markets by rebalancing rates and
still sustain local rates that are affordable.
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As a result of the effectiveness of the Rate Plan, CTC is no longer
regulated according to a traditional rate base rate of return scheme of
regulation. CTC continues to be considered a Rural Telephone Company as defined
in the Telecom Act.
CTC LONG DISTANCE SERVICES, INC.
Organized in 1992, CTC LDS is engaged in the business of purchasing
long distance capacity in bulk from interexchange carriers and reselling it to
subscribers on a retail basis.
In 1993, CTC offered its customers equal access to the interexchange
(long distance) carriers who elected to market their services in the CTC Service
Area. This enables customers to preselect their carrier and to use this carrier
by dialing 1. CTC LDS received the largest number of selections in the balloting
process and has retained more than half of CTC's customers. However, these
customers are typically the smaller toll users, and CTC LDS bills less than half
of the total originating minutes of long distance used by customers in the CTC
Service Area. CTC LDS is actively seeking new methods to increase its market
share and make new products available to its customers, including expanding
service outside its traditional service area. CTC LDS was successful in these
efforts in 1998, as it added more than 3,239 new lines for a total of 72,578.
Management expects the easy-to-understand, competitively-priced, long-distance
plans offered by CTC LDS will continue to attract new customers to CTC LDS in
1999. During 1996, CTC LDS successfully introduced the new CTC Calling Card,
which the Company believes has enhanced CTC LDS's ongoing efforts to market and
sell long distance services.
During 1996, CTC LDS purchased and installed a Nortel DMS 500 switch
at a cost of $2.2 million. This switch is located in the downtown area of
Charlotte, and its purchase is indicative of the Company's commitment to
increase market presence by offering services outside of its traditional market
area. The addition of the Nortel DMS 500 switch makes CTC LDS a facilities based
interexchange carrier in North Carolina.
In 1997, CTC LDS received regulatory approval to market long
distance telephone service in the surrounding states of Georgia, South Carolina,
Tennessee and Virginia. However, CTC LDS concentrated its efforts in 1997 and
1998 on expanding its operations in the North Carolina counties contiguous to
its current five-county service area and proposes to expand concentrically from
that area in 1999. CTC LDS does not expect to have significant operations
outside of the Carolinas in 1999.
The Telecom Act is not expected to have an immediate impact on CTC
LDS because it addresses competition in the local service area of operations. In
the future, however, a Regional Bell Operating Company may be able to offer long
distance service to CTC LDS customers. This effectively exposes the long
distance service to additional competitive pressures. CTC LDS' principal methods
of responding to competitive pressures in the long distance telephone service
market include its ability to maintain aggressive marketing initiatives and its
ability to provide simple pricing plans, high quality customer service, robust
product and service lines, easy to understand pricing and accurate bills.
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CTC EXCHANGE SERVICES, INC.
CTC Exchange Services was organized on January 23, 1997 and began
operations in the fourth quarter of 1997. This business unit was created to
enable CTC to offer local telephone service to markets beyond the CTC Service
Area.
In September 1997, CTC Exchange Services entered into an
interconnection agreement with BellSouth Telecommunications, Inc. ("BellSouth")
allowing CTC Exchange Services to access BellSouth's facilities and equipment,
for a fee, in order to provide local telephone service in all of BellSouth's
serving areas in North Carolina. CTC Exchange Services began limited operations
in December 1997, primarily for the purpose of testing its processes, facilities
and equipment. Current operations consist primarily of resale of BellSouth's
existing products and services.
The Company is expanding incrementally from CTC Service Area into
adjacent markets. CTC Services began marketing its services in the second
quarter of 1998 in Salisbury, northern Charlotte and Statesville, North Carolina
and continues to evaluate new markets in which to expand beyond those areas. CTC
Services' business strategy focuses on providing facility based services to
small and medium-sized businesses in these service areas. Services include local
and long distance telephone service. To that end, the Company has expanded its
DMS 500 switching equipment to include local switching. Although CTC Services
continued in 1998 to offer local telephone service generally in certain markets
outside the CTC Service Area on a resale basis through its BellSouth
interconnection agreement, such resale services are expected to be de-
emphasized in 1999 and beyond.
CTC Services sold over 2,000 lines in 1998. CTC Exchange Services
expects its capital needs in 1999 to be between $4 million and $5 million and
expects losses in 1999 to be not more than $2 million.
CAROLINA PERSONAL COMMUNICATIONS, INC.
In 1994, the Company purchased a limited partnership interest in
BellSouth Carolinas PCS Limited Partnership. The BellSouth Partnership's
business is to design, develop, construct and operate a personal communication
system in a specified Major Trading Area ("MTA") and to market and provide PCS
services in the MTA. As a limited partner, the Company's investment includes the
Company's pro rata share of the license fee and expenditures to construct the
system. The Company owns 1.95% of the BellSouth Partnership, which interest is
held by CTC.
PCS is a digital wireless telecommunications service. New PCS
devices incorporate various communications methods in a single device, including
voice, data interface and paging. With PCS, a user is able to customize their
telecommunications service to best suit their particular requirements. The cost
of this new service to the customer is competitive with cellular technology.
However, like cellular telephone service, capital requirements are substantial
and aggressive marketing is necessary.
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On March 31, 1995, the BellSouth Partnership received a 30 MHZ PCS
license from the FCC covering North Carolina and South Carolina (MTA 006). AT&T
Wireless purchased a second 30 MHZ PCS license for the same MTA in the March
1995 FCC auction and began offering PCS services in major markets, including MTA
006, during 1997. The FCC completed the auction of licenses for PCS services in
1997. This sale of spectrum to additional PCS providers, combined with
competition from cellular providers, has resulted in competition from six
wireless competitors in the general Charlotte, North Carolina market. In the
face of such competitive pressures, CPC's principal methods of competition
include its ability to provide extensive geographical coverage, high quality
technology and service, competitive pricing, as well as CPC's ability to
capitalize on the strength of customers' loyalty to other well-known partners in
the BellSouth Partnership, such as BellSouth, Duke Power and Carolina Power and
Light.
Funding of the BellSouth Partnership's operations began in the
second quarter of 1995, and during 1995 the Company invested approximately $3.9
million in the BellSouth Partnership. The Company invested an additional $2.8
million, $1.1 million and $1.0 million in 1996, 1997, and 1998, respectively.
Its 1999 commitments are approximately $565,500, and its 2000 commitments are
approximately $89,700. Construction of towers and transmitters began during
1996, and PCS service was first offered to the public by the Bell Partnership in
July 1996.
The Company experienced pre-tax losses in 1996, 1997 and 1998 of
$1.8 million, $2.9 million, and $2.9 million, respectively, due to expected
start-up costs. Losses associated with such start-up costs are currently
projected to continue through 1999. Such projections are based on estimates of
how long it will take to attract enough customers to cover start-up and
operating expenses associated with the PCS network. Notwithstanding such losses,
the Company believes the long-term outlook for PCS is positive.
Each telephone company limited partner in the BellSouth Partnership
has the option to partition its pre-defined service area. The Company's service
area consists of Cabarrus, Stanly, Rowan and parts of Iredell Counties in North
Carolina (the "PCS Service Area"). Partitioning will involve CTC (the current
holder of the partition option) purchasing the license for the PCS Service Area
and any assets, including customers of the BellSouth Partnership, in place
within that area at a purchase price expected to be between $15 million and $18
million, payable in full on the date of partition. BellSouth is expected to
offer the Company the right to partition in the second quarter of 1999. The
Company would then have up to twelve months in which to exercise its right to
partition, if it so chooses. If it so elects, the Company expects to pay the
partition fee by borrowing against current lines of credit. However, there can
be no assurance that the Company will elect to exercise its partition right.
Following partition, if any, CPC would operate as a provider of PCS products and
services within the PCS Service Area. At the time of partitioning, CPC's PCS
network will be substantially built out throughout the PCS Service Area.
During 1996, CPC opened retail outlets to sell PCS telephones in
Concord and Statesville, a third store began operations in Salisbury, North
Carolina during the first quarter of
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1997, and a fourth store is expected to open in the fourth quarter of 1999. PCS
telephones are also being marketed and sold through CTC's offices.
CT WIRELESS CABLE, INC.
On October 9, 1995, the Company organized CT Wireless Cable as a
wholly owned subsidiary to participate in the wireless cable television market
in North Carolina. CT Wireless Cable owns approximately 49% of Wireless One of
North Carolina L.L.C. ("WONC"). WONC was formed to develop and launch wireless
cable systems in North Carolina. In October 1995, WONC entered into contracts
with approximately 45 community colleges in North Carolina to provide wireless
cable services in connection with leases between the schools and the FCC
pertaining to certain educational channel rights within North Carolina.
Beginning in 1996, WONC has regularly participated as a bidder in Multi Channel
Multipoint Distribution Service ("MMDS") auctions and has been awarded MMDS
channels in several markets throughout North Carolina. WONC plans to obtain
additional channels in 1999.
During January 1997, WONC and the University of North Carolina
("UNC") Center for Public Television entered into a contract granting WONC the
exclusive rights to lease UNC's 40 granted channel frequencies, as well as
frequencies to be granted pursuant to UNC's pending applications with the FCC
(the "UNC Lease Agreement"). In consideration for the UNC channel leasing
rights, WONC paid UNC $2.5 million upon execution of the UNC Lease Agreement, as
well as a $500,000 advance on future royalty payments to be paid to UNC. Royalty
payments are based on fees developed for the various markets served and applied
to subscriber accounts. The UNC Lease Agreement is a key component of WONC's
efforts to implement a statewide system of wireless cable television
programming, and this contract improves WONC's competitive position in the North
Carolina wireless cable television market. Wireless One, Inc. has estimated that
the channel frequencies represented by all of the channel rights controlled by
WONC, including the UNC channel rights, enable WONC to reach a total of 3
million line of site households in 13 markets throughout North Carolina.
Wireless cable uses microwave technology to deliver line of sight
transmission from a central broadcast tower to a receiver at the customer's
premise. It is expected to be a lower cost competitor to traditional hardwired
cable systems. With respect to direct broadcast satellite services that are
currently being marketed to consumers, wireless cable with digitalization will
offer a comparable number of channels and digital audio and picture quality, and
will also have the advantage of offering local programming. There can be no
assurance, however, that consumers will choose to subscribe for wireless cable
service instead of hardwired cable or direct broadcast satellite television
services.
In 1997, BellSouth launched digital wireless cable systems in New
Orleans, Orlando and Atlanta. The digital system offers more than 100 channels
of high quality digital video and audio. In addition, during 1997 several
wireless cable operators announced high-speed Internet services using wireless
cable frequencies. WONC launched its high-speed Internet service in Jackson,
Mississippi in the first quarter of 1998. In the fourth quarter of 1998, the FCC
issued
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<PAGE>
an order allowing WONC to expand the use of wireless cable frequencies
for telephony and two-way data services.
WONC continuously evaluates potential uses of its frequency
spectrum, including digital video, high speed Internet and other traditional
telephony services. The Company's capital requirements in connection with its
WONC investment were $1.4 million in 1996, $3.2 million in 1997, and $800,000 in
1998. Additional capital requirements associated with the WONC network are
expected to be approximately $1 million in 1999.
CT GLOBAL TELECOMMUNICATIONS, INC.
In 1997, the Company acquired an 80% interest (increased to 100% in
March 1998) in CTGT, which holds the Company's equity interest in Maxcom
(formerly named Amaritel). Maxcom was formed early in 1997 for the purpose of
constructing and operating domestic and international long-distance services, as
well as local telephone services. Its primary geographic focus is on the Gulf of
Mexico, Mexico City and Puebla. Maxcom expects to use a wide spectrum of
technology, ranging from microwave to wired fiber distribution networks.
Build-out of the system is expected to be approximately 300,000 lines over a
five-year period, and Maxcom expects to begin offering commercial services in
Mexico City and Puebla, Mexico in the second quarter of 1999.
Maxcom has entered into a $100 million bank credit facility with
Nissho Iwai, which Maxcom intends to use to fund a portion of its facilities
build-out and operations. The credit facility is secured in part by the Maxcom
common stock held by CTGT, but is not otherwise secured or guaranteed by CTGT or
the Company. In 1998, Maxcom also raised approximately $50 million of additional
equity capital. In addition, CTGT provided approximately $1.6 million of
additional capital to Maxcom in 1998. CTGT now owns approximately 16% of the
equity securities of Maxcom.
CTGT entered into an Operating Agreement with Maxcom pursuant to
which it provides personnel and other services for the purpose of supervising
and advising Maxcom on its day-to-day operations (e.g., network operation and
maintenance, customer billing, sales and marketing, customer service, general
administration and management). Under the Operating Agreement, CTGT is
reimbursed for its expenses incurred in providing management services. In
addition, CTGT may receive a management fee of up to $900,000 per year and
options to acquire up to 250,000 shares of Maxcom common stock if certain
performance goals are met. The Operating Agreement is for a three-year term,
expiring in 2001, subject to a one-year extension in the discretion of Maxcom's
shareholders. The fees paid to CTGT under the Operating Agreement are expected
to offset CTGT's expenses related to providing those services.
CTGT was originally 80% owned by the Company and 20% owned by US
Telecom Holdings, Inc. ("US Telecom"). On March 31, 1998, CTGT acquired and
canceled the CTGT shares held by US Telecom, which resulted in CTGT becoming a
wholly owned subsidiary of the Company. The $1.4 million purchase price was paid
through the cancellation of a note in principal amount of $800,000 previously
owed by US Telecom to the Company and the delivery
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<PAGE>
of cash. The Company has an additional note receivable from US Telecom in the
principal amount of $1,513,500, which is secured by a first priority interest in
4,950.50 shares of Telco Investors II, Inc. owned by US Telecom and is due April
1, 1999. CTGT believes that the note is adequately collateralized.
CTC INTERNET, INC.
On April 2, 1998, the Company organized CTC Internet as a wholly
owned subsidiary to provide internet access and related services to residential
and business subscribers. CTC Internet's operations initially were limited to
the CTC Service Area. However, on May 8, 1998, CTC Internet acquired G.A.
Technologies, Inc., an internet provider based in Charlotte, North Carolina and
doing business as Vnet. As a result, CTC Internet now does business in the CTC
Service Area and in Charlotte, North Carolina, and intends to expand into
Greensboro and Raleigh, North Carolina in 1999.
CTC Internet's primary focus is to provide Internet services to
business customers, including high speed Internet services, Web site
development, Web site hosting and other value added services. In addition, CTC
Internet provides dial up Internet service to approximately 12,500 residential
customers in its market area.
INVESTMENTS
CT Cellular, Inc. Effective January 1, 1998, CT Cellular exchanged
its general partnership interests in RSA 4/5 and RSA 15 with Palmetto MobileNet,
L.P., a South Carolina limited partnership ("Palmetto"), in a tax free
transaction. RSA 4/5 and RSA 15 each provided cellular mobile telephone services
in an aggregate of eight counties in North Carolina. In exchange for its general
partnership interests, CT Cellular received a 19% limited partnership interest
in Palmetto and a 19.5% interest in the Common Stock of Palmetto's general
partner. Palmetto's other limited partners consist of 19 South Carolina
independent telephone companies. Palmetto owns a 50% general partnership
interest in ten North Carolina and South Carolina RSAs, with Alltel Mobile
(which acquired 360 communications in 1998) owning the other 50%.
Palmetto had earnings in 1998 of approximately $25.8 million.
CT Communications Northeast Trust. In December 1998, the Company
transferred substantially all of its portfolio of investment securities (the
"Investment Securities") to CT Trust, a Massachusetts business trust located in
Bedford, Massachusetts. The trustees of CTC Trust are Michael R. Coltrane and
the Company. Ownership of CTC Trust is represented by transferable shares of
beneficial interest, all of which are currently held by the Company. CTC Trust
subsequently transferred a substantial majority of the Investment Securities to
CT Communications Northeast, Inc., a Massachusetts corporation located in
Bedford, Massachusetts ("CTC Northeast"), which is wholly owned by CTC Trust.
The Investment Securities consist of a variety of public and private
equity securities. Approximately 95% of the Investment Securities consist of
common stock of ITC Holding Company, Inc. ("ITC Holding") and ITC DeltaCom, Inc.
("ITC DeltaCom"). In October 1997,
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<PAGE>
ITC Holding completed a corporate reorganization in which it transferred all of
its assets and liabilities other than the stock of its then wholly owned
subsidiary, ITC DeltaCom to another subsidiary. The former ITC Holding then
merged with and into ITC DeltaCom, and the other subsidiary was renamed ITC
Holding Company, Inc., which is the parent of a group of companies involved in a
wide range of telecommunications activities. ITC DeltaCom is a provider of
local, long distance and other telecommunications services to mid-sized and
major regional businesses in the southern United States, and also provides
wholesale long-haul services to other telecommunications companies using its
owned, operated and managed fiber optic network. As part of ITC Holding's
reorganization, stockholders of the former ITC Holding received, in exchange for
their shares of ITC Holding stock, shares of stock of the new ITC Holding and of
ITC DeltaCom. Immediately after the reorganization was consummated, ITC DeltaCom
completed its initial public offering of common stock. The Company owns
approximately 3.8% and 3.1% of the outstanding equity securities of ITC Holding
and ITC DeltaCom, respectively. At December 31, 1998, the Company's ownership
interest in ITC DeltaCom was recorded on the Company's financial statements at a
market value of $24.4 million, with a tax basis of $3.2 million. The Company has
recorded its equity interest in ITC Holding as of the same date at a cost basis
of $2.7 million.
Item 2. Properties
The properties of the Company consist of land, buildings, central
office equipment, exchange and toll switches, data transmission equipment,
underground conduits and cable, aerial cable, poles, wires, telephone
instruments, and other equipment. The Company's principal operations are
conducted in a building owned by the Company at 68 Cabarrus Avenue East,
Concord, North Carolina 28025. This headquarters facility was built in 1956 and
expanded in 1967. More recently, in 1991 the Company made substantial interior
renovations to the Cabarrus Avenue facility. This headquarters building has
approximately 53,000 square feet of floor space.
The Company's general warehouse is also owned by the Company and is
located in Concord. This facility was completely renovated in 1991 and has
approximately 12,300 square feet of floor space. The Company has enlarged its
warehouse storage facilities by the addition of approximately 9,760 square feet
of warehouse space in 1995. Approximately 3,800 square feet of warehouse space
that was renovated in 1995 is currently occupied by the Company's outside plant
engineering group.
During 1994, the Company acquired 14.7 acres of property north of
Concord adjoining Interstate 85 for use as a future campus-style business office
center. The Company purchased an additional acre of property at this site during
1996. The first of several buildings to be constructed at this site was
completed in the fourth quarter of fiscal 1996. This building is currently
occupied by the Company's customer service personnel and has approximately
12,000 square feet of floor space (the "Customer Care Center"). In the second
quarter of 1998, the Company completed construction of the second building on
this tract of property. It is identical to the building completed there during
1996. It was occupied primarily by the Company's sales and marketing group,
which freed office space at the Cabarrus Avenue headquarters facility.
15
<PAGE>
There is significant room on this property for construction of additional
facilities as needed in the future.
In November 1997, the Company purchased a one-third interest in
22.424 acres of undeveloped property located on Weddington Road Extension and
Speedway Boulevard in the King's Grant Development. This property may be used
for future development if needed. The cost of this acquisition was $597,096.
In the three years ended December 31, 1998, the Company has acquired
property and built remote switching units in its exchange areas. During 1996,
the Company installed a new Nortel DMS 500 digital switch in downtown Charlotte,
North Carolina at a cost of $2.2 million. The new switch was placed in service
in October 1996, and has expanded the array of service offerings available from
CTC LDS and reduce CTC LDS's monthly operating expenses. All of the Company's
central office switching equipment is digital. In mid-1997, the Company began
replacing CTC's digital switching platform by changing from AG switches to
state-of-the-art Nortel DMS switches. This replacement process is expected to
last approximately five years. In 1997, the Company also replaced the DOTS
operator workstations used by CTC with TOPS workstations from Nortel. In 1998,
CTC Exchange Services installed and co-located a Reltec digital loop carrier at
the BellSouth central office in Salisbury, North Carolina.
In connection with CPC's PCS operations, the Company has entered
into three real property leases to house CPC's retail outlets in Concord,
Statesville and Salisbury, North Carolina. The Company expects to enter into a
fourth lease in the fourth quarter of 1999. The Company also leases office space
on West Cabarrus Avenue in Concord, North Carolina. None of these leases are
material to the Company, its operations or financial condition.
As of December 31, 1998, 18% of the Company's telephone plant in
service was represented by land, buildings and general equipment; 35% by central
office equipment; and 47% by wires, cables, conduits, poles and related
equipment. The connecting lines, poles, wires, cables and conduits and related
equipment referred to above are located on streets and public highways owned by
persons other than the Company, pursuant to consents of various governmental
bodies or to leases, permits, easements, agreements, or licenses, express or
implied through use without objection by the owners.
In addition to the foregoing, the Company uses approximately 110
motor vehicles in its operations.
During 1997, a portion of the Company's physical property was
subject to a certain Indenture of Mortgage and Deed of Trust dated August 1,
1958, as supplemented and amended, securing the Company's First Mortgage Bonds.
This debt was retired on March 1, 1997, and the related liens were released.
16
<PAGE>
Item 3. Legal Proceedings
(a) In December 1992, the Company was notified that it was a
potentially responsible party ("PRP") by the Environmental Protection Agency
("EPA") under the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") at the Bypass 601 Groundwater Contamination Superfund
Site (the "Site") in Concord, North Carolina. The Company, along with
approximately 70 other companies (the "PRP Group"), has entered into a Consent
Decree with the United States. Pursuant to the Consent Decree, the PRP Group is
conducting a cleanup of the Site. The companies also have reimbursed the EPA for
approximately $4.3 million in costs that the agency has incurred at the Site.
Under the allocation system adopted by the PRP Group, the Company has paid a
total of $53,128. Based on the progress of the cleanup thus far and the funds
available from other sources to pay for the cleanup, the PRP Group does not
expect that its members will be required to pay any additional amounts.
(b) The Company, CTC and Michael R. Coltrane have been named as
defendants, in addition to numerous other named defendants, in a lawsuit filed
by six former employees of US Telecom and US Telecom East, Inc. The Company,
through its subsidiaries, previously participated in a joint venture with US
Telecom Holdings, Inc., and Mr. Coltrane served as a member of its board of
directors. See "Item 1: Business; CT Global Telecommunications, Inc." The
Company believes that the claims are without merit and is vigorously defending
the suit. The Company further believes that the outcome of this litigation will
not be material to the Company's financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of 1998.
Item 4A. Executive Officers of the Company
The following list sets forth with respect to each of the current
executive officers of the Company, his or her name, age, positions and offices
held with the Company, the period served in such positions or offices and, if
such person served in such position or office for less than five year, the prior
employment of such person.
L.D. Coltrane, III, age 80, has served as Chairman of the Board
since 1986, when he was also named President of the Company to succeed his
father, L.D. Coltrane, Jr.
Michael R. Coltrane, age 52, has served as President and Chief
Executive Officer of the Company since 1988.
Thomas A. Norman, age 58, has served as Senior Vice President and
Assistant Secretary of the Company since 1995. He was the Vice President of
Sprint/Centel of Illinois from 1994 to 1995.
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<PAGE>
Barry R. Rubens, age 39, has served as Senior Vice President, Chief
Financial Officer, Secretary and Treasurer of the Company since 1995. He was
Vice President-External Affairs of the Company from 1992 to 1995.
Kenneth R. Argo, age 64, has served as the Vice President-Chief
Information Officer of the Company since 1995. From 1983 to 1995, he was the
Vice President-Controller of the Company.
Catherine A. Duda, age 46, has served as the Senior Vice President
and Assistant Secretary of the Company since 1996. From 1995 to 1996, she was
the Vice President- Marketing of the Company. Prior to 1995, she was the Vice
President of Frontier Communications of New York, Inc.
Richard L. Garner, Jr., age 52, has served as the Vice
President-Human Resources of the Company since June 1998. From 1979 to January
1998, he was the Senior Vice President of Personnel and Real Estate at Pic N'
Pay Stores (a retail specialty company).
Michael R. Nash, age 46, has served as a Senior Vice President of
the Company since January 1999. From 1995 to January 1999, he was a Vice
President of Standard Telephone Company. From 1974 to 1995, he was the
Operations Director of BellSouth Telecommunications.
Charlotte S. Walsh, age 52, has served as a Vice President of the
Company since January 1999. From August 1996 to August 1998, she was the Vice
President-Chief Information Officer of Thorn America (retail furniture company).
From 1992 to April 1996, she was the Division Vice President-Information
Services of Heleberg Diamonds (retail jewelry company).
PART II
Item 5. Market for the Company's Common Equity and Related Shareholder
Matters
Prior to January 29, 1999, both the Voting Common Stock and the
Class B Nonvoting Common Stock of the Company traded principally in local
transactions without the benefit of an established public trading market,
although a Charlotte-based brokerage firm made a market as shares of the Class B
Nonvoting Common Stock were offered for sale.
On July 24, 1997, the Board of Directors of the Company declared a
stock split in the form of a one-for-two stock dividend payable August 29, 1997
to holders of record on August 1, 1997.
Effective January 28, 1999, the issued and outstanding shares of
Voting Common Stock and Class B Nonvoting Common Stock were converted into a
single class of Common Stock. Pursuant to the Recapitalization, each issued and
outstanding share of Voting Common Stock was converted into 4.4 shares of Common
Stock and each issued and outstanding share of Class B Nonvoting Common Stock
was converted into 4.0 shares of Common Stock. Cash was paid in
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<PAGE>
lieu of issuing any fractional shares. Effective January 29, 1999, the Common
Stock began trading on the Nasdaq National Market under the symbol "CTCI."
During 1998, a known range of selling prices for the Class B
Nonvoting Common Stock was $32.75 to $37 per share, as adjusted to reflect the
Recapitalization. The closing price of the Common Stock on the Nasdaq National
Market on March 12, 1999 was $40.00.
Dividends per share were declared quarterly and paid on both Voting
Common Stock and Class B Nonvoting Common Stock for the two previous years. The
dividends per share set forth below have been adjusted to reflect the
one-for-two stock dividend in July 1997 and the Recapitalization in January
1999.
<TABLE>
<CAPTION>
1998 1997
Quarter Dividend Dividend
- ------- -------- --------
<S> <C> <C>
First $ .12 $ .11
Second .12 .12
Third .12 .12
Fourth .12 .12
$ .48 $ .47
</TABLE>
The number of holders of record of the Common Stock as of March 12,
1999, was 1,691.
19
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
---------------- --------------- ---------------- --------------- -----------
Condensed Statements of Income(1):
<S> <C> <C> <C> <C> <C>
Operating revenues $ 91,725,394 $ 78,483,514 $ 67,054,006 $ 60,417,351 $ 55,129,895
Operating expenses 70,272,414 58,390,372 51,349,967 43,201,065 43,760,298
---------------- --------------- --------------- -------------- --------------
Net Operating Revenues 21,452,980 20,093,142 15,704,039 17,216,286 11,369,597
Other income (expense)(2) 855,899 1,645,866 1,341,053 2,561,081 1,663,687
Income taxes (8,926,469) (7,898,159) (6,583,671) (6,760,624) (4,688,936)
---------------- --------------- --------------- -------------- --------------
Net income 13,382,410 13,840,849 10,461,421 13,016,743 8,344,348
Dividends on preferred stock 28,457 73,073 92,535 93,135 93,948
---------------- --------------- --------------- -------------- --------------
Earnings for common stock $ 13,353,953 $ 13,767,776 $ 10,368,886 $ 12,923,608 $ 8,250,400
================ =============== =============== ============== ==============
Common Stock Data: (3)
Shares of common stock
Basic weighted average 9,227,016 9,076,211 9,051,731 8,974,728 8,967,826
Diluted weighted average 9,276,504 9,111,439 9,078,385 8,990,336 8,983,422
Per share of common stock
Basic earnings $ 1.45 $ 1.52(2) $ 1.15 $ 1.44 $ .92
Diluted earnings $ 1.44 $ 1.51(2) $ 1.14 $ 1.44 $ .92
Dividends $ .48 $ .47 $ .46 $ .45 $ .44
Book value - year end $ 12.86 $ 10.82 $ 9.02 $ 9.04 $ 7.36
Total Assets $ 183,634,358 $ 147,339,429 $ 115,063,963 $ 107,765,477 $ 99,886,639
Long-Term Debt (excluding
current maturities) $ 20,000,000 $ 11,239,000 $ 2,014,000 $ 4,074,000 $ 4,714,000
Redeemable Preferred Stock with
Sinking Fund Requirements $ 125,000 $ 137,500 $ 150,000 $ 162,500 $ 175,000
</TABLE>
(1) During 1996, the Company reclassified access and settlement charges
from an offsetting revenue account to an expense category on its 1996
consolidated statement of income. Amounts previously reported in the
1995 and 1994 consolidated statements of income have been reclassified
to conform with the 1996 consolidated statement of income in this
regard. Such reclassification has no effect on net income as
previously reported.
(2) Other income in 1997 includes an extraordinary item of $2,239,045, net
of income taxes of $1,493,312 (or $.25 per share), relating to the
discontinuance of SFAS No. 71.
(3) Per share data is based on the weighted average number of shares
outstanding during the respective periods after giving retroactive
effect to the 25% stock distribution granted on September 1, 1994, the
2-for-1 split effective May 3, 1996, the 1-for-2 split effective
August 1, 1997, and the Recapitalization effective January 28, 1999.
Dividends declared per common share have been restated to give
retroactive effect to these events.
20
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis should be read in conjunction
with the consolidated financial statements of the Company and the notes thereto
incorporated by reference in this Report.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net cash provided by its operating activities of $23.7
million, $21.2 million and $22.4 million in 1998, 1997 and 1996, respectively.
In 1998, the Company used cash flows from operations and existing cash, cash
equivalents, short-term investments and borrowing on a line of credit to fund
(i) capital expenditures of $24.8 million pertaining to ongoing plant
construction projects, (ii) purchases of investments in affiliates of $4.4
million, (iii) purchases of investment securities of $100,919, (iv) dividends of
$4.4 million, (v) principal payments of $21.3 million to retire long-term debt,
and (vi) repurchases of Common Stock and Preferred Stock of $385,863.
Working capital as of December 31, 1998 and 1997 was $6.0 million and
$(1.6) million, respectively. The increase from 1997 to 1998 is due primarily to
a $3.4 million increase in accounts receivable and a $1.1 million increase in
other account receivable, which arose due primarily to a receivable from Maxcom
($700,000). In addition, cash and cash equivalents increased $2.8 million due
primarily to the sale of 100,000 shares of ITC Deltacom ($1.5 million). Also,
current portion of long-term debt and redeemable preferred stock fell by
$620,000, accounts payable fell by $1.1 million (due primarily to the 1997
overdraft of $200,000 reclassified to accounts payable) and income taxes payable
fell by $592,000. The increase in working capital was offset in part by an
increase of $1.3 million in accrued payroll, due to 24% increase in employees, a
3% average increase in salaries and wages and higher benefits and bonus
accruals.
The Company has significant cash requirements due to growth in its
service area and the need to modernize its existing plant and equipment. Capital
expenditures in 1998 included over $18 million in network enhancements,
including upgrades to the switching platform, and substantial investment in the
outside plant including poles, aerial cable and buried cable. The remaining $6.8
million of capital expenditures in 1998 included the completion of a new
operations building in Concord, North Carolina and information technology
upgrades. The Company's planned capital expenditures in 1999 are approximately
$24.5 million. Of this amount, $6 million is planned for primarily the
replacement of certain elements of the CTC switching platform with a new Nortel
DMS switch. This replacement process began in mid-1997 and will continue through
2002. Approximately $4.8 million of the total amount planned is for CTC Exchange
Services and CTC LDS switching and other network facilities. Another $5.9
million of the Company's capital expenditures is for outside plant and circuit
additions and improvements to include the placement of five Nortel remote
switching nodes, and another $10.3 million is for other switching assets and
network facilities. The remainder is made up of $900,000 for additional Internet
capacity and another $2.6 million for other telecommunications and other assets.
Actual capital expenditures were $24.8 million in 1998, $21.6 million in 1997
and $24.1 million in 1996.
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<PAGE>
Other anticipated uses of cash in 1999 include additional investments
in affiliates. The Company expects to spend approximately $1 million in 1999 for
wireless cable investments and plant and equipment associated with WONC related
to maintaining wireless cable television frequencies. See "Item 1. Business; CT
Wireless Cable, Inc."
If CTC elects during 1999 to exercise its right to partition out
certain territories for which the Company has invested in the BellSouth
Partnership, the resulting cost is expected to be between $15 million and $18
million. See "Item 1. Business; Carolina Personal Communications, Inc." The
Company expects to fund any such costs through additional borrowings under its
existing credit facility, as discussed below.
During 1998, the Company generated $23.7 million in cash from
operations and $3.6 million from financing activities. During the same period,
approximately $24.5 million was utilized for plant additions and other
investment activities, resulting in positive working capital of $2.8 million at
year-end. As of December 31, 1998, the Company had short-term investments of
$116,681, and one unsecured available line of credit for $60 million with First
Union National Bank, as Administrative Agent (the "FUNB Credit Facility"). At
December 31, 1998, the Company had used $20 million of the line of credit with
First Union National Bank to pay down and close the lines of credit at Rural
Telephone Finance Corporation and First Charter National Bank, which was an
increase of $8,761,000 in long-term debt from December 31, 1997 to 1998. The
interest rate on the FUNB Credit Facility is variable based on three-month
LIBOR, and the credit spread added to LIBOR is .50%. The interest rate at
December 31, 1998 was 5.57%. The FUNB Credit Facility provides for quarterly
payments of principal and interest until 2000 and is renewable for two separate
two-year extensions through December 31, 2004. Upon approval of the NCUC, the
terms of the FUNB Credit Facility will automatically convert to five years, due
December 31, 2003. The Company entered into an interest rate swap transaction
with First Union Capital Markets in March 1999 to fix $10 million of the
outstanding principal at a rate of 5.9% plus the credit spread described above.
Management intends to use the FUNB Credit Facility to fund certain activities in
1999, as described above.
As a limited partner of the BellSouth Partnership, the Company has
committed to make certain payments to the BellSouth Partnership for its pro rata
share of PCS license fee and network expenditures for the purpose of
constructing and operating PCS Services. The Company's obligations in this
regard were approximately $8.8 million over the four-year period ended on
December 31, 1998. During 1998, the Company expended approximately $1.0 million
in connection with its limited partner status in the BellSouth Partnership. The
Company's 1999 commitments are approximately $565,500. See "Item 1. Business;
Carolina Personal Communications, Inc."
The Company anticipates that all of the capital requirements in 1999
associated with its construction program, payments associated with long-term
debt and investments as summarized above will be provided by cash flows from
operations, existing cash, cash equivalents and short-term investments and the
FUNB Credit Facility.
22
<PAGE>
RESULTS OF OPERATIONS
1998 Compared to 1997
Operating revenues increased $13,241,880 or 16.9% for the year ended
December 31, 1998 compared to 1997. This increase was primarily attributable to
revenues from local service, Internet services and PCS services. However, all
categories showed increases.
Local service revenues, from the provision of telephone exchange
services, increased $6,463,997 or 22.1% during 1998 compared to 1997. This
growth arose primarily from increased demand for local service due to growth in
the CTC Service Area, coupled with the implementation of the price regulation
plan as adopted by the Company in September 1997. Over 6,500 new access lines
were connected to the network in 1998, bringing the total number of local access
lines in CTC's three-county area service area to 109,147. Due to access line
growth and increased customer demand, this area of operations is expected to
continue to grow.
Access and toll revenues increased $1,756,245 or 5.0% during 1998
compared to 1997. Long distance service revenues are derived principally from
providing long distance communication between designated areas. Network access
service revenues are derived from other carriers for their use of the Company's
local network to complete long distance calls. This increase is the result of
increased sales and marketing efforts by CTC LDS and increased calling volume by
the interexchange carriers. Toll revenues in the intralata markets were flat
compared with 1997, primarily due to the full year impact of the new Rate Plan
implemented in September 1997. This was expected due to the rate structure,
which moved many toll revenues to the local revenue area. Compared to total
revenues, this category has a relatively small impact.
Other and unregulated revenues increased $5,073,628 or 34.3% during
1998 compared to 1997. This increase is made up of primarily increased Internet
service revenues of approximately $2,789,088 due to the May 1998 acquisition of
Vnet, increased PCS service revenues of $1,673,704, and increased directory
advertising of approximately $383,299.
Operating expenses, exclusive of depreciation, increased $8,653,566 or
17.7% during 1998 compared to 1997.
Plant specific expenditures increased $3,436,533 or 13.7%. This
increase results from an increase of $914,342 in interlata access expense due to
additional sales of toll services, an increase of $691,453 in contracted
services due to telephone plant growth, an increase of $679,385 in internet
network expense due to growth in internet sales and the acquisition of Vnet, and
$669,931 in CLEC service resell and access expense relating to the start up of
CTC Exchange Services. The remaining increase primarily relates to DCS resell
expense attributable to growth in CT Wireless Cable.
Customer operations expense increased $2,932,239 or 29.2% during 1998
compared to 1997. Approximately $981,162 of the increase consists of marketing
and advertising expense associated with additional sales efforts in long
distance services, CLEC services, and PCS services. Salaries and wages of sales
and marketing personnel also contribute to the increase.
23
<PAGE>
Corporate operations expense increased $3,304,794 or 26.2% during 1998
compared to 1997. A majority of the increase is related to salaries and wages
and the expenses associated with the growth in operations.
Additionally, in January 1997, the Company offered an early retirement
program to 29 CTC employees. Twenty-eight of those eligible accepted the early
retirement package and the Company recorded an additional expense of $1,020,000
in connection with its obligations under this program.
Depreciation expense increased $3,228,476 or 33.6% during 1998
compared to 1997. This arose from a 1997 reduction in depreciation expense of
$736,971 due to a reclassification of circuit equipment to central office
switching equipment and the goodwill amortization expense of approximately
$400,000 related to the Vnet acquisition. Without this prior year
reclassification, depreciation expenses would have increased $2,491,505 due to
increased depreciable assets.
Other income increased $1,955,438 in 1998, compared to 1997. This
increase was attributable primarily to a $1,654,987 increase in dividend income,
interest income and gain on sale of investment contributed to the total
increase. The increase was also attributable to a $300,451 increase in equity in
income of affiliates driven by the earnings of the Company's investment in the
Palmetto MobileNet partnership providing cellular communications services in
North Carolina and South Carolina, partially offset by the Company's pro rata
share of losses related to the BellSouth Partnership. Losses associated with
start-up costs in connection with the BellSouth Partnership PCS network are
currently projected to continue through 2000. Management expects losses
associated with the BellSouth Partnership to begin to decline in 1999.
Other expense, principally interest, increased $506,360 in 1998
compared to 1997, due primarily to additional interest paid on loans
outstanding.
For the reasons set forth above, the Company's net income before
extraordinary items in 1998 increased $1,780,606 or 15.3% compared to 1997.
Considering the 1997 extraordinary item arising from the discontinuance of SFAS
71, 1998 net income decreased $458,439 or 3.3%. With the rapid pace of change in
the telecommunications industry caused by deregulation and advancing technology,
management expects operating expenses to increase. It also expects operating
losses in newly established business ventures to continue, but at a reduced
rate. Management believes that expenditures in telephone plant construction,
switching, marketing and advertising will continue to cause increases in
operating costs, but it believes these expenditures are necessary to its
long-term profitability and growth.
1997 Compared to 1996
Operating revenues increased $11,429,508 or 17.05% for the year ending
December 31, 1997 compared to 1996. This increase was primarily attributable to
local service, long distance service, PCS service and business system sales.
However, all categories showed increases.
Local service revenues, from the provision of telephone exchange
services, increased $4,482,363 or 18.1% during 1997 compared to 1996. This
growth arose primarily from
24
<PAGE>
increased demand for local services due to growth in the CTC Service Area.
Nearly 5,700 new access lines were connected to the network in 1997, bringing
the total number of local access lines in CTC's three-county service area to
102,221. Due to access line growth and increased customer demand, this area of
operations is expected to continue to grow.
Access and toll revenues increased $3,224,489 or 10.2% during 1997
compared to 1996. This increase is the result of increased sales and marketing
efforts by CTC LDS and increased calling volume by the interexchange carriers.
Toll revenues in the intralata markets decreased due to the new Rate Plan
implemented in September. This was expected due to the rate structure which
moved toll revenues to the local revenues area. This reduction, however, is
unquantifiable and is relatively small when compared to total revenues.
Other and unregulated revenues increased $3,781,338 or 34.4% during
1997 compared to 1996. This increase is made up of increased directory
advertising of approximately $603,545, increased Internet revenues of
approximately $411,437, a $1,424,580 increase in business system sales, a
$282,808 increase in PCS telephone system sales and a $473,518 increase in
inside wire maintenance revenue.
Operating expenses, exclusive of depreciation, increased $7,533,122 or
18.3% during 1997 compared to 1996. Plant specific expenditures increased
$5,061,789 or 25.3%. This increase results from an increase of $1,478,813 in DCS
service expense and cost of goods sold associated with the CT Wireless Cable,
Inc. subsidiary; an increase in access expense of $1,648,041 due to additional
sales of toll services; and an increase of $697,164 relating to business systems
cost of goods sold. The remaining increase is primarily expenses associated with
an increase in outside contractor cost relating to the replacement of SPN poles
and increased expenditures in telephone plant due to growth.
Corporate and customer operations expense increased $1,451,333 or 6.8%
during 1997 compared to 1996. Approximately $793,824 or 54.7% relates to costs
associated with additional sales and marketing efforts in long distance services
and $587,313 or 40.5% related to PCS sales and marketing efforts. Another
$201,626 of this amount related to additional expenditures in customer service
operations.
Other income decreased $1,654,069 or 81% in 1997, compared to 1996.
This decrease was primarily attributable to the Company's pro rata share of the
BellSouth Partnership's losses experienced in connection with start-up costs
associated with the PCS network, which became operational during the third
quarter of 1996. These losses were partially offset by higher income in 1997
over 1996 as a result of the equity in earnings of the Company's investment in
the Alltel Mobile Partnership providing cellular communications services in
North Carolina RSAs 4/5 and 15.
Other expenses, principally interest, increased $280,163 in 1997
compared to 1996. This increase was primarily from additional interest paid on
loans outstanding.
As discussed above, in January 1997, the Company offered an early
retirement program to 29 CTC employees. Twenty-eight of those eligible accepted
the early retirement package and the Company recorded an additional expense of
$1,020,000 in connection with its obligations under this program.
25
<PAGE>
Depreciation expense decreased $492,717 during 1997 compared to 1996.
This decrease resulted from a reclassification of circuit equipment amounts into
the Central Office switching category and recalculating previously recorded
depreciation expense at the lower rates used for switching equipment. The
reduction of depreciation expense due to reclassification is $736,971. The
Company also recorded additional depreciation of $600,000 during the same period
of the prior year, as authorized by the NCUC. Without these factors, this
expense would have increased by $844,254, which would be expected due to the
increased depreciable plant balances.
For the reasons set forth above, the Company's net income before
extraordinary item in 1997 increased $1,140,383 or 10.9% compared to 1996.
Considering the extraordinary item arising from the discontinuance of SFAS 71,
1997 net income increased $3,379,428 compared to 1996.
OTHER EVENTS
Vnet Acquisition
Effective May 8, 1998, the Company acquired G-A Technologies, Inc.,
doing business as Vnet Access ("Vnet"). Vnet is a regional provider of Internet
services headquarters in Charlotte, North Carolina. The acquisition was effected
through the tax-free merger of Vnet into a wholly owned subsidiary of the
Company and was accounted for as a purchase. The resulting subsidiary of the
Company continues to offer services under the Vnet brand name. All consideration
was paid to the Vnet shareholders in the form of Common Stock. The acquisition
was not material to the Company's operations or financial condition.
New Rate Plan
Effective September 1, 1997, CTC began operation under the new Rate
Plan. Although the Company's new rate structure under the Rate Plan reflects an
increase for the cost of basic service, other changes in the Rate Plan offset
these increases for many customers. Overall, the new rate structure did not
materially impact the Company's revenues in 1997 or 1998 and is not expected to
materially impact revenues in 1999 or future years. By submitting its price
regulation filing, the Company has agreed to open its markets to competition for
local dial tone service, on the condition that the Company is allowed to
"rebalance" or adjust its rates at the same time. Although the competitive
pressures of opening its markets to competition from other local telephone
service providers may lead to reductions in the Company's future local service
revenues, management believes that by rebalancing its local service rates, it
can compete in emerging markets and continue to sustain local rates at levels
that are affordable for customers. See "Item 1. Business" for additional
information regarding the Rate Plan.
1996 Telecommunications Act
On February 8, 1996, the Telecom Act was enacted into law. Among its
numerous other effects, the Telecom Act opens local telephone markets to
competition. Although the precise impact of the Telecom Act will not be known
until additional progress is made by the FCC in its ongoing rule making efforts,
it is clear that the Company will encounter increasing competition in virtually
all of its markets, including local dial tone and long distance service through
the
26
<PAGE>
remainder of the 1990s. By implementing the new Rate Plan, the Company has
taken a proactive step towards opening its markets to competition for local dial
tone service. While there can be no assurances that the Company will be able to
maintain its present levels of profitability in this emerging competitive
environment, management believes that its ongoing investments in its network,
including the installation of digital switches and other equipment, combined
with greater flexibility in setting prices, will enable the Company to compete
more effectively by providing enhanced services at affordable rates. See "Item
1. Business" for additional information regarding the Telecom Act.
ACCOUNTING CONSIDERATIONS
As described in Note 14 to the Consolidated Financial Statements of
the Company, the Company discontinued applying Statement of Financial Accounting
Standards No. 71 (FAS 71), "Accounting for the Effects of Certain Types of
Regulation," as of April 1, 1997. The Company determined that it no longer met
the criteria for following FAS 71 due to changes in the manner in which the
Company is regulated and the heightened competitive environment. The accounting
impact was an extraordinary non-cash gain of $2,239,045, net of applicable
income taxes of $1,493,212. The effect on future charges for depreciation is not
expected to differ materially from what would have been recorded under FAS 71.
Effective December 31, 1998, the Company adopted FAS 131, "Disclosures
about Segments of an Enterprise and Related information." CTC is the Company's
only reportable segment. CTC evaluates performance based on operating profit
before other income (expenses) and income taxes. Intersegment sales are
accounted for as if the transactions were to third parties. See Note 15 to the
Consolidated Financial Statements of the Company for additional information.
YEAR 2000 CONSIDERATIONS
The Company has developed and is implementing a company-wide project
that addresses the business issues associated with the Year 2000 problem. The
Company's Year 2000 project is a top corporate priority and has the full support
and commitment of its executive management team.
In January 1998, the Company identified a Year 2000 Project Team, with
members representing all significant areas of the Company's business operations.
An initial study of the Company's capabilities and needs was completed, and
awareness of Year 2000 issues was established across the Company's management
team. The Company retained DMR Consulting Group ("DMR") to help the Project Team
coordinate the initial phases of the Year 2000 project. DMR established a
project office at the Company's offices and met regularly with members of the
Project Team during the first three quarters of 1998 to coordinate overall
project needs. DMR completed substantially all of its services for the Company
during the fourth quarter of 1998 and no longer maintains an on-site project
office.
The Year 2000 Project Team continues to focus on addressing the impact
of the Year 2000 problem on the Company's telecommunications network, internal
information systems and business operations generally. Fourteen individual
business unit teams have been established, each having responsibility to address
Year 2000 issues within the business units, but with direct
27
<PAGE>
reporting to and coordination with the Company's Year 2000 Project Team. The
Year 2000 Project Team is implementing an overall compliance process consisting
of four phases: (1) Inventory; (2) Assessment; (3) Remediation/Replacement; and
(4) Testing.
The Company has completed the inventory and assessment phases of the
Year 2000 project. The Company estimates that as of March 1, 1999, remediation
and replacement efforts company-wide were 90% complete. The testing phase is
also well underway. The Company expects testing to continue throughout 1999 as
the functionality and interoperability of systems and devices is checked and
rechecked.
The Year 2000 Project Team has created a test lab for validating
internal information systems, including all management information systems,
billing functions and financial systems. The Company supplements this test data
with Year 2000 compliance inquiries to application vendors. The Company writes
very little original software code, typically purchasing third-party software
for its major business applications. Routine upgrades of systems pursuant to
maintenance agreements have enhanced the progress of the Company's Year 2000
project effort.
A significant aspect of the Company's Year 2000 project focuses on
local and long-distance service delivery, network access and network
interoperability. The Company identified its critical system and network
component suppliers during the inventory and assessment process. The Company has
continuously communicated with these critical suppliers through correspondence,
and in many instances through direct contact, to obtain reliable information
regarding the Year 2000 readiness of key system hardware and software
components. This information is updated regularly so that the Project Team
remains aware of any status changes. In addition, the Company participates in
important telecommunications forums, such as the United States Telephone
Association and the Alliance for Telecommunications Industry Solutions ("ATIS"),
both of which are devoting significant attention to the Year 2000 problem in the
telecommunications industry. Interoperability testing information generated by
the ATIS' National Testing Committee, of which the Company is a member, is an
important aspect of the Company's effort to maintain the integrity of its
network, and its ability to interconnect with other systems. Although the
Company is not independently testing network system hardware and software
components for Year 2000 readiness, the Company believes that reliance on
testing information generated by vendors and the ATIS' National Testing
Committee is appropriate.
Another component of the Company's business is the sale of advanced
business systems, such as voice mail systems and PBX switches, as an authorized
distributor for several manufacturers. The Company has been proactive in
communicating with customers who have purchased advanced business systems from
the Company to distribute Year 2000 readiness information made available by the
manufacturers of those systems.
The Company believes that it is implementing a sound plan that
anticipates and resolves potential Year 2000 issues in a timely manner. The
Company estimates that its critical business applications, network systems and
components will be Year 2000 ready by June 1999, although the Company plans to
continue testing and coordination with other network and system operators
throughout the year.
The Company has existing standard contingency plans in place for
handling outages and other emergencies; however, the Company is in the process
of supplementing its existing
28
<PAGE>
contingency plans and developing additional contingency plans to address the
potential impact of Year 2000 problems on its network and information systems.
The Company has targeted June 1999 for completion of additional contingency
plans.
In 1998, out-of-pocket expenses for the Year 2000 project were
approximately $500,000. The Company has budgeted an additional $500,000 for
completion of the Year 2000 project effort during 1999. The cost of the Year
2000 project has been favorably affected by the impact of routine yearly
maintenance agreements with application and component vendors.
Failure to accurately assess or remedy the Company's Year 2000 issues
prior to the end of 1999, including failure of third parties on whom the Company
depends, could significantly disrupt the Company's business and materially
adversely affect the Company's financial condition, liquidity and business
operations. A majority of the Company's services rely heavily on technology that
could cease to operate, or could operate much less efficiently, if affected by
the Year 2000 problem. In addition, Year 2000-related problems could lead to
potential third-party claims, the impact of which cannot be estimated reliably.
FORWARD-LOOKING STATEMENTS
The foregoing discussion contains forward-looking statements about the
Company's financial condition and results of operations, which are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those reflected in the forward-looking statements. Words such as
"expects," "anticipates," "believes," "estimates," variations of such words and
other similar expressions are intended to identify such forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's judgment only as of the
date hereof. The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events and circumstances that arise after
the date hereof.
Factors that may cause actual results to differ materially from these
forward-looking statements are (1) the Company's ability to respond effectively
to the sweeping changes in industry conditions created by the Telecom Act, and
related state and federal legislation and regulations, (2) the Company's ability
to successfully manage the Rate Plan, (3) the Company's ability to recover the
substantial costs to be incurred in connection with the implementation of its
PCS business, (4) the Company's ability to retain its existing customer base
against local and long distance service competition, and to market such services
to new customers, (5) the Company's ability to effectively manage rapid changes
in technology, (6) whether the Company can effectively respond to the actions of
its competitors and (7) whether the Company can successfully and timely
implement its Year 2000 plan.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company has outstanding an unsecured credit facility for $60
million with First Union National Bank, as Administrative Agent. There was $20
million outstanding under the FUNB Credit Facility as of December 31, 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations; Liquidity and Capital Resources."
29
<PAGE>
Pursuant to the terms of the FUNB Credit Facility, the interest rate
on borrowed funds is variable based on three-month LIBOR. Therefore, if interest
rates increase generally, the rate paid by the Company under the FUNB Credit
Facility will increase; likewise, if interest rates fall generally, the
Company's rate will fall. On March 5, 1999, the Company entered into an interest
rate swap transaction with First Union Capital Markets to establish a fixed rate
of interest on $10 million of the outstanding principal under the FUNB Credit
Facility at December 31, 1998. The interest rate swap will protect the Company,
to the extent of $10 million of outstanding principal amount, against an upward
movement in interest rates, but subjects the Company to higher interest costs if
interest rates decline. The Company believes that reasonably foreseeable
movements in interest rates will not have a material adverse effect on the
financial condition or operations of the Company.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements of the Company, the financial
statement schedules required to be filed herewith and the Report of Independent
Public Accountants thereon are incorporated by reference to the Company's 1999
Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Company
The information called by Item 10 with respect to directors and
Section 16 matters is set forth in the Company's Proxy Statement for its 1999
Annual Meeting of Shareholders under the captions "Election of Directors," and
"Section 16(a) Beneficial Ownership Reporting Compliance," respectively, and is
hereby incorporated by reference. The information called for by Item 10 with
respect to executive officers is set forth in Part I, Item 4A hereof.
Item 11. Executive Compensation
The information called for by Item 11 is set forth in the Company's
Proxy Statement for its 1999 Annual Meeting of Shareholders under the captions
"Election of Directors - Compensation of Directors," "Executive Compensation"
and "Compensation Committee Interlocks and Insider Participation in Compensation
Decisions," respectively, and is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 is set forth in the Company's
Proxy Statement for its 1999 Annual Meeting of Shareholders under the captions
"Principal Shareholders" and "Management Ownership of Common Stock,"
respectively, and is hereby incorporated by reference.
30
<PAGE>
Item 13. Certain Relationships and Related Transactions
The information called for by Item 13 is set forth in the Company's
Proxy Statement for its 1999 Annual Meeting of Shareholders under the captions
"Certain Relationships and Related Transactions" and is hereby incorporated by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report
(1) Financial Statements: The following financial statements,
together with the report thereon of independent auditors,
are incorporated herein by reference to the Company's 1999
Annual Report:
<TABLE>
<CAPTION>
<S> <C>
o Consolidated balance sheets as of December 31, 1998 and 1997
o Consolidated statements of income for the years ended
December 31, 1998, 1997, and 1996
o Consolidated statements of cash flows for the years ended
December 31, 1998, 1997, and 1996
o Consolidated statements of stockholders' equity for the years
ended December 31, 1998, 1997, and 1996
o Consolidated statements of comprehensive income for the years ended
December 31, 1998, 1997 and 1996
o Notes to consolidated financial statements for the years ended
December 31, 1998, 1997, and 1996
o Report of Independent Public Accountants
(2) Consolidated Financial Statement Schedules: The following
financial statement schedule, together with the report
thereon of independent auditors, is incorporated herein by
reference to the Company's 1999 Annual Report:
o Schedule II - Valuation and Qualifying Accounts
Other schedules are omitted because the required information
is included in the financial statements or is not
applicable.
(3) Financial Statements of Palmetto MobileNet, L.P. (To be
filed as an amendment to this Report on Form 10-K.)
</TABLE>
32
<PAGE>
(4) The exhibits filed as part of this Report and exhibits
incorporated herein by reference to other documents are
listed in the Index to Exhibits to this Report.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
months ended December 31, 1998.
(c) Exhibits
See (a)(4), above.
(d) Financial statement schedules See (a)(2), above.
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CT COMMUNICATIONS, INC.
By: /s/ Michael R. Coltrane
Michael R. Coltrane
President and Chief
Executive Officer
Date: March 26, 1999
/s/ Barry R. Rubens
Barry R. Rubens
Senior Vice President, Treasurer and Chief
Financial Officer
(Principal Financial and Principal
Accounting Officer)
Date: March 26, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Company in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ L.D. Coltrane III Chairman of the Board March 26, 1999
L.D. Coltrane III and Director
/s/ Michael R. Coltrane President, Chief Executive March 26, 1999
Michael R. Coltrane Officer and Director
(Principal Executive Officer)
/s/ John R. Boger, Jr. Director March 26, 1999
John R. Boger, Jr.
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ O. Charlie Chewning Director March 26, 1999
O. Charlie Chewning
/s/ William A. Coley Director March 26, 1999
William A. Coley
/s/ Samuel E. Leftwich Director March 26, 1999
Samuel E. Leftwich
/s/ Jerry H. McClellan Director March 26, 1999
Jerry H. McClellan
/s/ Ben F. Mynatt Director March 26, 1999
Ben F. Mynatt
/s/ Phil W. Widenhouse Director March 26, 1999
Phil W. Widenhouse
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Exhibit No. Description
<S> <C>
3.1 Articles of Incorporation of the Company, as amended. (Incorporated by reference
to Exhibit 3.1 of the Company's Registration Statement on Form 8-A filed on
January 28, 1999.)
3.2 Bylaws of the Company, as amended.
4.2 Amended and Restated Rights Agreement, dated as of January 28, 1999 and
effective as of August 27, 1998, between the Company and First Union National
Bank, including the Rights Certificate attached as an exhibit thereto. (Incorporated
by reference to Exhibit 4.2 of the Company's Registration Statement on Form 8-A
filed on January 28, 1999).
4.3 Specimen of Common Stock Certificate. (Incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form 8-A filed on January 28, 1999.)
4.4 Credit Agreement, dated as of December 31, 1998, by and among the Company,
the Subsidiary Borrowers referred to therein, the Lenders referred to therein and
First Union National Bank, as administrative agent.
4.5 The Company has certain long-term debt, but has not filed the instruments
evidencing such debt as part of Exhibit 4 because such instruments do not
authorize the issuance of debt exceeding 10% of the total consolidated assets of the
Company. The Company agrees to furnish a copy of such instruments to the
Commission upon request.
10.1 BellSouth Carolinas PCS Limited Partnership Agreement dated December 8, 1994.
(Incorporated by reference to Exhibit 10(h) to the Company's Amendment No. 1 to
Annual Report Form 10-K/A dated July 14, 1995.)
10.2 Limited Liability Company Agreement of Wireless One of North Carolina, L.L.C.
dated October 10, 1995 by and among CT Wireless Cable, Inc., Wireless One, Inc.
and O. Gene Gabbard. (Incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K dated March 31, 1997.)
10.3 1989 Executive Stock Option Plan dated April 26, 1989. (Incorporated by
reference to Exhibit 10(d) to the Company's Annual Report Form 10-K dated
March 29, 1994.)*
10.4 Comprehensive Stock Option Plan dated April 27, 1995. (Incorporated by
reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8
(No. 33-59645) dated May 26, 1995.)*
10.5 Employee Stock Purchase Plan dated April 27, 1995. (Incorporated by reference
to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (No. 33-
59643) dated May 26, 1995.)*
<PAGE>
Exhibit No. Description
10.6 Restricted Stock Award Program dated April 27, 1995. (Incorporated by reference
to Exhibit 99.1 to the Company's Registration Statement on Form S-8 (No. 33-
59641) dated May 26, 1995.)*
10.7 Omnibus Stock Compensation Plan dated April 24, 1997. (Incorporated by
reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K dated
April 9, 1998).*
10.8 1997 Employee Stock Purchase Plan dated April 24, 1997. (Incorporated by
reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K dated
April 9, 1998).*
10.9 Change in Control Agreement, dated October 1, 1997, between the Company and
Michael R. Coltrane. (Incorporated by reference to Exhibit 10.12 to the
Company's Annual Report on Form 10-K dated April 9, 1998).*
10.10 Change in Control Agreement, dated October 1, 1997, between the Company and
Barry R. Rubens. (Incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K dated April 9, 1998).*
10.11 Change in Control Agreement, dated October 1, 1997, between the Company and
Nicholas L. Kottyan. (Incorporated by reference to Exhibit 10.14 to the
Company's Annual Report on Form 10-K dated April 9, 1998).*
10.12 Change in Control Agreement, dated October 1, 1997, between the Company and
Thomas A. Norman. (Incorporated by reference to Exhibit 10.15 to the
Company's Annual Report on Form 10-K dated April 9, 1998).*
10.13 Change in Control Agreement, dated October 1, 1997, between the Company and
Catherine A. Duda. (Incorporated by reference to Exhibit 10.16 to the Company's
Annual Report on Form 10-K dated April 9, 1998).*
10.14 Change in Control Agreement, dated as of June 22, 1998, between the Company
and Richard L. Garner, Jr.*
10.15 Change in Control Agreement, dated as of December 12, 1998, between the
Company and Michael R. Nash.*
10.16 Change in Control Agreement, dated as of December 30, 1998, between the
Company and Charlotte S. Walsh.*
10.17 Form of Supplemental Executive Retirement Plan, dated June 27, 1997.
(Incorporated by reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K dated April 9, 1998).*
10.18 Contribution Agreement by and among Palmetto MobileNet, L.P., PMN, Inc., the
Company and Ellerbe Telephone Co., dated as of January 1, 1998. (Incorporated
by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K
dated April 9, 1998).
<PAGE>
Exhibit No. Description
10.19 Separation Agreement and Release, dated as of January 18, 1999, between the
Company and Nicholas L. Kottyan.
10.20 Employment Agreement, dated September 10, 1998, among the Company, CT
Global Telecommunications, Inc. and Thomas A. Norman.
21 Subsidiaries of the Company.
23 Consent of KPMG LLP.
27 Financial Data Schedule.
- ----------
* Indicates management contract or compensatory plan required to be filed as an Exhibit.
</TABLE>
EXHIBIT 3.2
BYLAWS
OF
CT COMMUNICATIONS, INC.
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I. OFFICE................................................................................................4
ARTICLE II. SHAREHOLDERS.........................................................................................4
Section 1. Annual Meeting. .......................................................................4
Section 2. Substitute Annual Meeting. .............................................................4
Section 3. Special Meetings. ......................................................................4
Section 4. Place of Meeting.........................................................................4
Section 5. Notice of Meeting. ....................................................................4
Section 6. Closing of Transfer Books or Fixing of Record Date. ....................................5
Section 7. Voting Lists. .................................................................5
Section 8. Quorum...................................................................................6
Section 9. Proxies. ..............................................................................6
Section 10. Voting of Shares. ......................................................................6
Section 11. Voting for Directors. ..................................................................6
Section 12. Informal Action by Shareholders..........................................................6
ARTICLE III. BOARD OF DIRECTORS..................................................................................7
Section 1. General Powers. ........................................................................7
Section 2. Number, Tenure and Qualifications. .....................................................7
Section 3. Removal..................................................................................7
Section 4. Regular Meetings. ......................................................................7
Section 5. Special Meetings. ......................................................................7
Section 6. Notice. ................................................................................7
Section 7. Quorum. ................................................................................8
Section 8. Manner of Acting.........................................................................8
Section 9. Vacancies. .............................................................................8
Section 10. Presumption of Assent. .................................................................8
Section 11. Informal Action by Directors. ..........................................................8
Section 12. Executive Committee......................................................................9
Section 13. Committees...............................................................................9
ARTICLE IV. OFFICERS.............................................................................................9
Section 1. Number. ................................................................................9
Section 2. Election of Officers. ................................................................10
Section 3. Removal. ...............................................................................10
Section 4. Chief Executive Officer. ..............................................................10
Section 5. Chairman of the Board. ................................................................10
Section 6. President. ............................................................................10
Section 7. Executive Vice President. ............................................................11
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Section 8. Vice Presidents.........................................................................11
Section 9. Secretary. ...........................................................................11
Section 10. Treasurer. ............................................................................11
Section 11. Assistant Secretaries and Assistant Treasurers. .......................................11
Section 12. Salaries. .............................................................................11
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS...............................................................12
Section 1. Contracts. ............................................................................12
Section 2. Loans...................................................................................12
Section 3. Checks and Drafts. ....................................................................12
Section 4. Deposits. ............................................................................12
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER.........................................................12
Section 1. Certificate for Shares. ...............................................................12
Section 2. Transfer of Shares. ...................................................................12
ARTICLE VII. FISCAL YEAR.......................................................................................13
ARTICLE VIII. DIVIDENDS........................................................................................13
ARTICLE IX. SEAL...............................................................................................13
ARTICLE X. WAIVER OF NOTICE....................................................................................13
ARTICLE XI. AMENDMENTS.........................................................................................13
ARTICLE XII. INDEMNIFICATION....................................................................................14
Section 1. Extent. ..............................................................................14
Section 2. Determination. ........................................................................14
Section 3. Advanced Expenses. ....................................................................14
Section 4. Indemnified Officer. ..................................................................15
Section 5. Reliance and Consideration. ..........................................................15
Section 6. Insurance. ...........................................................................15
</TABLE>
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ARTICLE I. OFFICE
The principal office of the Corporation shall be located in the City
of Concord, State of North Carolina. The Corporation may have such other
offices, either within or without the State of North Carolina, as the Board of
Directors may designate or as the business of the Corporation may require from
time to time.
The registered office of the Corporation required by the North
Carolina Business Corporation Act to be maintained in the State of North
Carolina may be, but need not be, identical with the principal office of the
Corporation, and the address of the registered office may be changed from time
to time by the Board of Directors.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders
shall be held on the fourth Thursday in April of each year at a time to be fixed
by the Chief Executive Officer for the purpose of electing Directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the annual meeting shall be a legal holiday in the State of North
Carolina, such meeting shall be held on the next succeeding business day.
Section 2. Substitute Annual Meeting. If the annual meeting shall
not be held within the period designated by these Bylaws, a substitute annual
meeting may be called in accordance with the provisions of Section 5 of this
Article. A meeting so called shall be designated and treated for all purposes as
the annual meeting.
Section 3. Special Meetings. Special meetings of the share-holders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the Chief Executive Officer, or by the Secretary acting under his
instructions, or by the Board of Directors.
Section 4. Place of Meeting. The Board of Directors may designate
any place, either within or without the State of North Carolina, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of North
Carolina, as the place for holding such meeting. If no designation is made, or
if a special meeting be otherwise called, the place of meeting shall be the
principal office of the Corporation in the State of North Carolina.
Section 5. Notice of Meeting. Written or printed notice stating the
place, day and hour of the meeting shall be delivered not less than ten nor more
than 60 days before the date of the meeting, either personally or by mail, by or
at the direction of the Chief Executive Officer, or the Secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. In the case of an annual or
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substitute annual meeting, the notice of meeting need not specifically state the
business to be transacted thereat unless it is a matter, other than election of
Directors, on which the vote of shareholders is expressly required by the
provisions of the North Carolina Business Corporation Act. In the case of a
special meeting, the notice of meeting shall state the purpose or purposes for
which the meeting is called.
When a meeting is adjourned for 120 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. When a
meeting is adjourned for less than 120 days in any one adjournment, it is not
necessary to give nay notice of the adjourned meeting other than by announcement
at the meeting at which the adjournment is taken.
Section 6. Closing of Transfer Books or Fixing of Record Date. For
the purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, 70 days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled to
notice of or to vote at a meeting of shareholders, such books shall be closed
for at least ten days immediately preceding such meeting. In lieu of closing the
stock transfer books the Board of Directors may fix in advance a date in any
case to be not more than seventy days and, in case of a meeting of shareholders,
not less than ten days prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If the stock
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of Directors declaring such dividend is adopted, as the case may be, shall be
the recorded date for such determination of shareholders. When a determination
of shareholders entitled to vote at any meeting of shareholder has been made as
provided in this section, such determination shall apply to any adjournment
thereof except where the determination has been made through the closing of the
stock transfer books and the stated period of closing has expired.
Section 7. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, within two days
after notice of the meeting is given for which the list was prepared, a complete
list of the shareholders entitled to vote at such meeting, or any adjournment
thereof, arranged in alphabetical order, with the address of and the number of
shares held by each. Such list, for a period beginning two business days after
notice of the meeting is given for which the list was prepared and continuing
through the meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours, and such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholder during the whole time of the meeting; provided, however, that it
shall not be necessary to prepare or produce such list in any case where the
record of shareholders readily shows in alphabetical order or by alphabetical
index, and by classes or series if such there be, the names of the shareholders
entitled to vote, with their addresses and the amounts of their holdings. The
original stock transfer books shall be
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prima facie evidence as to who are the shareholders entitled to examine such
list or transfer books or to vote at any meeting of shareholders.
Section 8. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 9. Proxies. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 10. Voting of Shares. Each outstanding share of the
Corporation entitled to vote shall be entitled to one vote upon each matter
submitted to a vote at a meeting of shareholders. The vote of a majority of the
shares voted on any matter at a meeting of shareholders at which a quorum is
present shall be the act of the shareholders on that matter unless the vote of a
greater number is required by law, by the Articles of Incorporation of the
Corporation or by a bylaw adopted by the shareholders of the Corporation.
Voting on all matters shall be by voice vote or by a show of hands
unless the holders of more than ten percent of the shares represented at the
meeting shall, prior to the voting on any matter, demand a ballot vote on that
matter.
Section 11. Voting for Directors. Unless otherwise provided in the
Articles of Incorporation or in an agreement valid under the Act, the directors
of the Corporation shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present. The shareholders do not have a right to cumulate their votes for
directors.
Section 12. Informal Action by Shareholders. Any action which is
required or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if consent in writing, setting forth the action so taken,
shall be signed by all the persons who would be entitled to vote upon such
action at a meeting, and filed with the Secretary of the Corporation in the
minute book of the Corporation, whether done before or after the action so
taken.
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ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the
Corporation shall be directed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of
Directors constituting the whole Board shall be not more than nine nor less than
six as determined by the Board. The authorized number of Directors, within the
limits above specified, may be changed by the affirmative vote of a majority of
the whole Board given at a regular or special meeting of the Board of Directors;
provided, however, that if the number so determined is to be increased, or
decreased, notice of proposed increase or decrease shall be included in the
notice of the such meeting, or all of the Directors at the time in office shall
be present at such meeting, or those not present at any time shall waive or have
waived notice thereof in writing; and provided, further, that the number of
Directors which shall constitute the whole Board shall not be less than six nor
shall it be reduced to a number less than the number of Directors then in office
unless such reduction shall become effective only at and after the next ensuing
meeting of shareholders for the election of Directors. Any directorships not
filled by the shareholders shall be treated as vacancies to be filled by and in
the discretion of the Board of Directors. Each Director shall hold office until
the next annual meeting of shareholders and until his successor shall have been
elected and qualified. Directors need not be residents of the State of North
Carolina. Each Director must own directly at least five shares of the voting
common stock of the Corporation.
Section 3. Removal. Unless otherwise provided in the Articles of
Incorporation, any director may be removed at any time only for cause by a vote
of the shareholders if the number of votes cast to remove such director exceeds
the number of votes cast not to remove him or her. 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 such director. A director may not be removed
by the shareholders at a meeting unless the notice of the meeting states that
the purpose, or one of the purposes, of the meeting is removal for cause of the
director. If any directors are so removed, new directors may be elected at the
same meeting.
Section 4. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice at the same date and place as the
annual meeting of the shareholders. The Board of Directors may provide, by
resolution, the time, date and place, either within or with out the State of
North Carolina, for the holding of additional regular meetings.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be held at any date, time and place upon the call of the Chief
Executive Officer or the Secretary acting under instructions from the Chief
Executive Officer, or upon the call of any two Directors.
Section 6. Notice. Notice of any special meeting shall be given at
least two days prior thereto by written notice delivered personally or mailed to
each Director at his business
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address, by telegram or facsimile machine or telephone or other usual means of
communication; provided, however, that special meetings may be held at any date,
time and place without notice by unanimous consent of the Directors. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with postage thereon prepaid. If notice is given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company. If notice is transmitted by facsimile machine, such
notice shall be deemed to be delivered when sent. The attendance of a Director
at a meeting shall constitute a waiver of notice of such meeting, except where a
Director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. Notice of an adjourned meeting need not be given if the time and place
are fixed at the meeting adjourning and if the period of adjournment does not
exceed ten days in any one adjournment.
Section 7. Quorum. A majority of the number of Directors fixed as
provided in Section 2 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if less
than such majority is present at a meeting, a majority of the Directors present
may adjourn the meeting from time to time without further notice.
Section 8. Manner of Acting. The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, except as otherwise provided in this Section. The vote
of a majority of the number of Directors fixed as provided in Section 2 of this
Article III shall be required for the adoption of a resolution designating the
Directors to constitute the Executive Committee. The vote of a majority of the
Directors then holding office shall be required for the adoption, amendment or
repeal of a bylaw which is a proper subject for such action by the Board of
Directors, or for the adoption of a resolution dissolving the Corporation
without action by the shareholders.
Section 9. Vacancies. Except as otherwise expressly required by the
provisions of the North Carolina Business Corporation Act, any vacancy occurring
in the Board of Directors may be filled by the affirmative vote of a majority of
the remaining Directors though less than a quorum of the Board of Directors. A
Director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office.
Section 10. Presumption of Assent. A Director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be deemed to have assented to the action taken
unless he objects at the beginning of the meeting (or promptly upon his arrival)
to holding the meeting or transacting business thereat, or unless his dissent or
abstention from the action shall be entered in the minutes of the meeting or
unless he shall file his written dissent or abstention to such action with the
presiding officer of the meeting before the adjournment thereof or with the
Corporation immediately after the adjournment of the meeting. Such right to
dissent or abstention shall not apply to a Director who voted in favor of such
action.
Section 11. Informal Action by Directors. Action taken by a majority
of the Directors without a meeting is nevertheless action of the Board of
Directors if written consent to the action
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in question is signed by all the Directors and filed with the minutes of the
proceedings of the Board of Directors, whether done before or after the action
so taken.
Section 12. Executive Committee. The Board of Directors, by
resolution adopted by a majority of the number of Directors fixed as provided in
Section 2 of this Article III, may designate two or more Directors to constitute
an Executive Committee. The Executive Committee, between meetings of the Board
of Directors and subject to such limitations as may be required by law or
imposed by resolution of the Board of Directors, shall have and may exercise all
of the authority of the Board of Directors in the management of the Corporation.
The designation of the Executive Committee and delegation thereto of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility or liability imposed upon it or him by law.
Meetings of the Executive Committee may be held at any time on call
of the Chief Executive Officer or of any two members of the Committee. No notice
of a meeting need be given if a majority of the Executive Committee is present,
but whenever notice is given, a notice of one day given by mail, telephone,
telegraph or telecopy shall be sufficient. A majority of the members shall
constitute a quorum of all meetings. The Executive Committee shall keep minutes
of its proceedings and submit them to the next succeeding meeting of the Board
of Directors for approval.
Section 13. Committees. Unless otherwise provided in the Articles of
Incorporation, the Board of Directors may create one or more committees, in
addition to the Executive Committee, which may include a Corporate Governance
Committee, Audit Committee, Compensation Committee, or such other committees as
the Board of Directors may determine, and may appoint members of the Board of
Directors to serve on such committees. Each committee must have two or more
members, who serve at the pleasure of the Board of Directors. The creation of a
committee and appointment of members of the Board of Directors to it must be
approved by the greater of a majority of all of the Directors in office when the
action is taken or the number of Directors required by the Articles of
Incorporation for the taking of action by the Board of Directors. The provisions
of the North Carolina Business Corporation Act and these Bylaws that govern
meetings, action without meetings, notice and waiver of notice, and quorum and
voting requirements of the Board of Directors, shall apply to committees and
their members as well. To the extent specified by the Board of Directors or in
the Article of Incorporation, each committee may exercise the authority of the
Board of Directors, except as to the matters which the North Carolina Business
Corporation Act specifically accepts from the authority of such committees.
Nothing contained in this Section shall preclude the Board of Directors from
establishing and appointing any committee, whether of Directors or otherwise,
not having or exercising the authority of the Board of Directors.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the Corporation shall be the
Chief Executive Officer, the President, one or more Vice Presidents (one or two
of whom may be designated Executive Vice President), a Treasurer, one or more
Assistant Treasurers, a Secretary, and one or more Assistant Secretaries, and a
Chairman of the Board of Directors if and when such Chairman of the Board shall
be deemed necessary or desirable, and such other officers and assistant officers
as the Board of Directors shall deem necessary or desirable. Any two or more
offices may be held by the same person, but no officer may act in more than one
capacity where action of two or more officers is required.
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Section 2. Election of Officers. The officers of the Corporation
shall be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders or at such
time or times as the Board of Directors shall determine.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors at any time with or
without cause.
Section 4. Chief Executive Officer. If the Board of Directors shall
appoint a Chairman of the Board and shall designate the Chairman of the Board as
the Chief Executive Officer, the Chairman of the Board shall serve as the Chief
Executive Officer of the Corporation. If a Chairman of the Board is not
appointed by the Board of Directors or if the Chairman of the Board is not
designated as the Chief Executive Officer, the President (or such other person
as shall be named by the Board of Directors) shall be the Chief Executive
Officer of the Corporation. The Chief Executive Officer shall, subject to the
direction and control of the Board of Directors, supervise and control the
business and affairs of the Corporation. Such officer shall, when present,
preside at all meetings of the shareholders. The Chief Executive Officer may
sign, with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds mortgages, bonds, contracts or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed; and in general
the Chief Executive Officer shall perform all duties incident to the position of
Chief Executive Officer and such other duties as may be prescribed by the Board
of Directors from time to time. The title of the Chairman of the Board or the
President, as the case may be, serving as the Chief Executive Officer may also
refer to such officer's position as Chief Executive Officer, but such additional
designation shall not be required.
Section 5. Chairman of the Board. The Chairman of the Board, if and
when elected, shall be chosen by and from among the Directors, shall preside at
all meetings of the Board of Directors if present, and shall, in general,
perform all duties incident to the office of Chairman of the Board and such
other duties as, from time to time, may be assigned to him by the Board of
Directors.
Section 6. President. Unless a Chairman of the Board has been
appointed and also designated as the Chief Executive Officer, the President (or
such other person as shall be named by the Board of Directors) shall be the
Chief Executive Officer of the Corporation and shall have all of the duties and
authority of that office. If the President is not the Chief Executive Officer,
the President, in the absence of the Chief Executive Officer or in the event of
such person's death or inability or refusal to act, shall perform the duties and
exercise the powers of that office and, in
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addition, the President shall perform such other duties and shall have such
other authority as the Board of Directors shall prescribe. Unless the Board of
Directors shall otherwise provide, the President shall also be the Chief
Operating Officer of the Corporation and, subject to the control of the Board of
Directors, shall have all the duties and authority of that office.
Section 7. Executive Vice President. The Executive Vice President,
if and when elected, shall familiarize himself with the affairs of the
Corporation, and, in the absence or disability of the President, shall possess
all the powers of and perform all the duties of that officer, and shall have
such other powers and duties as may be prescribed from time to time by the Board
of Directors.
Section 8. Vice Presidents. Each Vice President shall have such
powers and perform such duties as may be prescribed from time to time by the
Board of Directors. At the request of the President (or, if and when elected,
the Executive Vice President), any Vice President may act temporarily in the
place of the President.
Section 9. Secretary. The Secretary shall: (a) keep the minutes of
the shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all documents the execution of which on behalf
of the Corporation under its seal is duly authorized; (d) keep a register of the
post office address of each shareholder which shall be furnished to the
Secretary by such shareholder; (e) sign with the Chief Executive Officer, or
president, or a Vice President, certificates for shares of the Corporation, the
issuance of which shall have been authorized by resolution of the Board of
Directors; (f) have general charge of the stock transfer books of the
Corporation; and (g) in general perform all duties incident to the office of the
Secretary and such other duties as from time to time may be assigned to him by
the Chief Executive Officer, or by the President or by the Board of Directors.
Section 10. Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the Corporation;
receive and give receipts for moneys due and payable to the Corporation from any
source whatsoever, and deposit all such moneys in the name of the Corporation in
such banks, trust companies or other depositaries as shall be selected in
accordance with the provisions of Article V of these Bylaws; and (b) in general
perform all of the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him by the Chief Executive
Officer, or President or by the Board of Directors.
Section 11. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform such
duties as shall be assigned to them by the Board of Directors or by senior
officers.
Section 12. Salaries. The salaries of the officers shall be fixed
from time to time by the Board of Director and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a Director of
the Corporation.
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ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any con- tract or execute
and deliver any instruments in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 3. Checks and Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificate for Shares. Certificates representing shares
of the Corporation shall be in such form, including non-certificated shares, as
shall be determined by the Board of Directors. Certificated shares shall be
signed by, or bear the facsimile signature of, the Chief Executive Officer, the
President or a Vice President and the Secretary or an Assistant Secretary. All
certificates for certificated shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates for certificated shares surrendered to the Corporation for transfer
shall be cancelled and no new certificate for certificated shares shall be
issued until the former certificate for certificated shares for a like number of
shares shall have been surrendered and cancelled, except that in case of a lost,
destroyed or mutilated certificate, a new one may be issued therefor upon such
terms and indemnity to the Corporation as the Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only (a) on the stock transfer books of the Corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and (b) on surrender for cancellation of the certificate for
such certificated shares. The person in whose name shares stand on the books of
the Corporation shall be deemed by the Corporation to be the owner thereof for
all purposes.
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ARTICLE VII. FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year unless
otherwise determined by the Board of Directors.
ARTICLE VIII. 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 its Articles of Incorporation.
ARTICLE IX. SEAL
The corporate seal shall be in the form as it now exists, unless
otherwise provided by the Board of Directors.
ARTICLE X. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
Director of the Corporation under the provisions of the North Carolina Business
Corporation Act or under the provisions of the Articles of Incorporation or
Bylaws of the Corporation, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be equivalent to the giving of such notice.
ARTICLE XI. AMENDMENTS
Except as hereinafter otherwise provided, these Bylaws may be
amended or repealed and new Bylaws may be adopted by the affirmative vote of a
majority of the Directors then holding office at any regular or special meeting
of the Board of Directors.
The Board of Directors shall have no power to adopt a Bylaw:
1. requiring more than a majority of the voting shares for
a quorum at a meeting of shareholders or more than a
majority of the votes cast to constitute action by the
shareholders, except where higher percentages are
required by law;
2. providing for the management of the Corporation
otherwise than by the Board of Directors or its
Executive Committee;
3. increasing or decreasing the number of Directors; or
4. classifying and staggering the election of Directors.
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The Board of Directors shall have no power to readopt, amend or
repeal a bylaw adopted, amended or repealed by the shareholders if such bylaw
does not so authorize the Board of Directors.
ARTICLE XII. INDEMNIFICATION
Section 1. Extent. In addition to the indemnification otherwise
provided by law, the Corporation shall indemnify and hold harmless its Directors
and Indemnified Officers (as hereinafter defined) against all liability and
litigation expense, including reasonable attorneys' fees, arising out of their
status as Directors or officers, or in their activities in any of the foregoing
capacities. The Corporation shall also and to the same extent indemnify its
Directors and Indemnified Officers from activities in any capacity in which they
are or were serving at the Corporation's request, in another corporation,
partnership, joint venture, trust or other enterprise; provided, however, that
the Corporation shall not indemnify a Director or Indemnified Officer against
liability or litigation expense that he may incur on account of his activities
which at the time taken were known or believed by him to be clearly in conflict
with the best interests of the Corporation. The Corporation shall also indemnify
the Director or Indemnified Officer for reasonable costs, expenses and
attorneys' fees in connection with the enforcement of rights to indemnification
granted herein, if it is determined in accordance with Section 2 of this Article
that the Director or Indemnified Officer is entitled to indemnification
hereunder.
Section 2. Determination. Any indemnification under Section I shall
be paid by the Corporation in any specific case only after a determination that
the Director or Indemnified Officer did not act in a manner, at the time the
activities were taken, that was known or believed by him to be clearly in
conflict with the best interests of the Corporation. Such determination shall be
made (a) by the affirmative vote of a majority (but not less than two) of all
the Directors of the Corporation who are not or were not parties to the action,
suit or proceeding out of which the liability or expense for which
indemnification is to be determined arose, or against whom the claim out of
which such liability or expense arose is not asserted ("Disinterested
Directors"), even though less than a quorum, or (b) if a majority (but not less
than two) of Disinterested Directors so direct, by independent legal counsel in
a written opinion, or (c) if there are less than two Disinterested Directors, by
the affirmative vote of all of the Directors, or (d) by the vote of a majority
of all of the voting shares other than those owned or controlled by Directors or
Indemnified Officers who were parties to such action, suit or proceeding or
against whom such claim is asserted, or by a unanimous vote of all of the voting
shares, or (e) by a court of competent jurisdiction.
Section 3. Advanced Expenses. Expenses incurred by a Director or
Indemnified Officer in defending a civil or criminal claim, action, suit or
proceeding may, upon approval of a majority (but not less than two) of the
Disinterested Directors, even though less than a quorum, or, if there are less
than two Disinterested Directors upon approval of the Board of Directors, be
paid by the Corporation in advance of the final disposition of such claim,
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
Director or Indemnified Officer to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified against such expenses by the
Corporation.
14
<PAGE>
Section 4. Indemnified Officer. For purposes of this Article,
"Indemnified Officer" shall mean (a) each officer of the Corporation who is also
a Director of the Corporation or (b) each other officer who is designated by the
Board of Directors from time to time as an Indemnified Officer; provided,
however, that if any person ceases to be an Indemnified Officer, then such
cessation shall have no effect with respect to actions arising prior to such
time of cessation.
Section 5. Reliance and Consideration. Any Director or Indemnified
Officer who at any time after the adoption of this Article serves or has served
in any of the aforesaid capacities for or on behalf of the Corporation shall be
deemed to be doing or to have done so in reliance upon, and as consideration
for, the right of indemnification provided herein. Such right shall inure to the
benefit of the legal representatives of any such person and shall not be
exclusive of any other rights to which such person may be entitled apart from
the provisions of this Article. No amendment, modification or repeal of this
Article XII shall adversely affect the right of any Director or Indemnified
Officer to indemnification hereunder with respect to any activities occurring
prior to the time of such amendment, modification or repeal.
Section 6. Insurance. The Corporation may purchase and maintain
insurance on behalf of its Directors, officers, employees and agents and those
persons who were serving at the request of the Corporation in any capacity in
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article or otherwise. Any full or partial payment made by an
insurance company under any insurance policy covering any Director, officer,
employee or agent made to or on behalf of a person entitled to indemnification
under this Article shall relieve the Corporation of its liability for
indemnification provided for in this Article or otherwise to the extent of such
payment, and no insurer shall have a right of subrogation against the
Corporation with respect to such payment.
Last Amended: February 25, 1999
15
EXHIBIT 4.4
CREDIT AGREEMENT
dated as of December 31, 1998
by and among
CT COMMUNICATIONS, INC.,
and
the Subsidiary Borrowers referred to herein
as Borrowers,
the Lenders referred to herein,
and
FIRST UNION NATIONAL BANK,
as Administrative Agent
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1 Definitions.......................................................................1
SECTION 1.2 General..........................................................................14
SECTION 1.3 Other Definitions and Provisions.................................................15
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Revolving Credit Loans...........................................................15
SECTION 2.2 Procedure for Advances of Revolving Credit Loans.................................15
SECTION 2.3 Repayment of Revolving Credit Loans..............................................16
SECTION 2.4 Revolving Credit Notes...........................................................17
SECTION 2.5 Permanent Reduction of the Aggregate Commitment..................................18
SECTION 2.6 Termination of Credit Facility...................................................18
SECTION 2.7 Use of Proceeds..................................................................19
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment...................................................................20
SECTION 3.2 Procedure for Issuance of Letters of Credit......................................20
SECTION 3.3 Commissions and Other Charges....................................................21
SECTION 3.4 L/C Participations...............................................................21
SECTION 3.5 Reimbursement Obligation of the Borrowers........................................22
SECTION 3.6 Obligations Absolute.............................................................22
SECTION 3.7 Effect of Application............................................................23
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.........................................................................23
SECTION 4.2 Notice and Manner of Conversion or Continuation of Loans ........................26
SECTION 4.3 Fees.............................................................................27
SECTION 4.4 Manner of Payment................................................................27
SECTION 4.5 Crediting of Payments and Proceeds...............................................28
SECTION 4.6 Adjustments......................................................................28
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of Credit;
Assumption by the Administrative Agent...........................................28
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SECTION 4.8 Changed Circumstances............................................................29
SECTION 4.9 Indemnity........................................................................31
SECTION 4.10 Capital Requirements.............................................................32
SECTION 4.11 Taxes............................................................................32
SECTION 4.12 Change in Lending Office.........................................................34
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing..........................................................................34
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit ..........................34
SECTION 5.3 Conditions to All Extensions of Credit...........................................37
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
SECTION 6.1 Representations and Warranties...................................................38
SECTION 6.2 Year 2000 Compatibility..........................................................46
SECTION 6.3 Survival of Representations and Warranties, Etc..................................46
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
SECTION 7.1 Financial Statements and Projections.............................................47
SECTION 7.2 Officer's Compliance Certificate.................................................48
SECTION 7.3 Accountants' Certificate.........................................................48
SECTION 7.4 Other Reports....................................................................48
SECTION 7.5 Notice of Litigation and Other Matters...........................................49
SECTION 7.6 Accuracy of Information..........................................................50
ARTICLE VIII
AFFIRMATIVE COVENANTS
SECTION 8.1 Preservation of Corporate Existence and Related Matters .........................50
SECTION 8.2 Maintenance of Property..........................................................51
SECTION 8.3 Insurance........................................................................51
SECTION 8.4 Accounting Methods and Financial Records.........................................51
SECTION 8.5 Payment and Performance of Obligations...........................................51
SECTION 8.6 Compliance With Laws and Approvals...............................................51
SECTION 8.7 Environmental Laws...............................................................51
SECTION 8.8 Compliance with ERISA............................................................52
SECTION 8.9 Compliance With Agreements.......................................................52
65008446.1 32599 1449E 042
ii
<PAGE>
SECTION 8.10 Conduct of Business..............................................................52
SECTION 8.11 Visits and Inspections...........................................................52
SECTION 8.12 Additional Subsidiaries..........................................................53
SECTION 8.13 Year 2000 Compatibility..........................................................53
SECTION 8.14 Further Assurances...............................................................53
SECTION 8.15 CoBank Participation Certificates................................................53
SECTION 8.16 Merger of Pop-Net, Inc...........................................................53
ARTICLE IX
FINANCIAL COVENANTS
SECTION 9.1 Leverage Ratio...................................................................54
SECTION 9.2 Fixed Charge Coverage Ratio......................................................54
SECTION 9.3 Total Debt to Total Capitalization Coverage Ratio................................54
ARTICLE X
NEGATIVE COVENANTS
SECTION 10.1 Limitations on Debt..............................................................55
SECTION 10.2 Limitations on Guaranty Obligations..............................................56
SECTION 10.3 Limitations on Liens.............................................................56
SECTION 10.4 Limitations on Loans, Advances, Investments and Acquisitions ....................57
SECTION 10.5 Limitations on Mergers and Liquidation...........................................59
SECTION 10.6 Limitations on Sale of Assets....................................................59
SECTION 10.7 Limitations on Dividends and Distributions.......................................60
SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock ...........................60
SECTION 10.9 Transactions with Affiliates.....................................................61
SECTION 10.10 Certain Accounting Changes.......................................................61
SECTION 10.11 Amendments; Payments and Prepayments of Subordinated Debt61
SECTION 10.12 Restrictive Agreements...........................................................61
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default................................................................61
SECTION 11.2 Remedies.........................................................................64
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc..................................65
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment......................................................................65
SECTION 12.2 Delegation of Duties.............................................................66
iii
<PAGE>
SECTION 12.3 Exculpatory Provisions...........................................................66
SECTION 12.4 Reliance by the Administrative Agent.............................................66
SECTION 12.5 Notice of Default................................................................67
SECTION 12.6 Non-Reliance on the Administrative Agent and Other Lenders ......................67
SECTION 12.7 Indemnification..................................................................68
SECTION 12.8 The Administrative Agent in Its Individual Capacity .............................68
SECTION 12.9 Resignation of the Administrative Agent; Successor Administrative
Agent............................................................................69
SECTION 12.10 The Administrative Agent.........................................................69
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices..........................................................................69
SECTION 13.2 Expenses; Indemnity..............................................................71
SECTION 13.3 Set-off..........................................................................71
SECTION 13.4 Governing Law....................................................................72
SECTION 13.5 Consent to Jurisdiction..........................................................72
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial........................................72
SECTION 13.7 Reversal of Payments.............................................................74
SECTION 13.8 Injunctive Relief; Punitive Damages..............................................74
SECTION 13.9 Accounting Matters...............................................................74
SECTION 13.10 Successors and Assigns; Participations...........................................75
SECTION 13.11 Amendments, Waivers and Consents.................................................78
SECTION 13.12 Performance of Duties............................................................79
SECTION 13.13 All Powers Coupled with Interest.................................................79
SECTION 13.14 Survival of Indemnities..........................................................79
SECTION 13.15 Titles and Captions..............................................................79
SECTION 13.16 Severability of Provisions.......................................................79
SECTION 13.17 Counterparts.....................................................................79
SECTION 13.18 Term of Agreement................................................................79
SECTION 13.19 CT as Agent for Borrowers; Obligations Joint and Several. .......................80
SECTION 13.20 Inconsistencies with Other Documents; Independent Effect
of Covenants.....................................................................80
SECTION 13.21 Trust Obligations................................................................80
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT, dated as of the 31st day of December, 1998, by and
among CT COMMUNICATIONS, INC. ("CT"), a North Carolina corporation and each of
the Subsidiaries of CT listed on the signature pages hereto and each additional
Subsidiary of CT which hereafter becomes a Borrower pursuant to Section 8.12
(collectively, the "Subsidiary Borrowers" and, together with CT, the
"Borrowers"), the Lenders who are or may become a party to this Agreement, and
FIRST UNION NATIONAL BANK, as Administrative Agent for the Lenders.
STATEMENT OF PURPOSE
The Borrowers have requested, and the Lenders have agreed, to extend
certain credit facilities to the Borrowers on the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms when used in this
Agreement shall have the meanings assigned to them below:
"Administrative Agent" means First Union in its capacity as
Administrative Agent hereunder, and any successor thereto appointed pursuant to
Section 12.9.
"Administrative Agent's Office" means the office of the
Administrative Agent specified in or determined in accordance with the
provisions of Section 13.1(c).
"Affiliate" means, with respect to any Person, any other Person
(other than a Subsidiary) which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such first Person or any of its Subsidiaries. The term "control" means (a) the
power to vote twenty percent (20%) or more of the securities or other equity
interests of a Person having ordinary voting power, or (b) the possession,
directly or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.
"Aggregate Commitment" means the aggregate amount of the Lenders'
Commitments hereunder, as such amount may be reduced or modified at any time or
from time to time pursuant to the terms hereof. On the Closing Date, the
Aggregate Commitment shall be Sixty Million Dollars ($60,000,000).
"Agreement" means this Credit Agreement, as amended, restated or
otherwise modified.
<PAGE>
"Applicable Law" means all applicable provisions of constitutions,
laws, statutes, ordinances, rules, treaties, regulations, permits, licenses,
approvals, interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in
Section 4.1(c).
"Application" means an application, in the form specified by the
Issuing Lender from time to time, requesting the Issuing Lender to issue a
Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto
in Section 13.10(b)(iii).
"Available Commitment" means, as to any Lender at any time, an
amount equal to (a) such Lender's Commitment less (b) such Lender's Extensions
of Credit.
"Base Rate" means, at any time, the higher of (a) the Prime Rate and
(b) the sum of (i) the Federal Funds Rate plus (ii) 1/2 of 1%; each change in
the Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Revolving Credit Loan bearing interest at
a rate based upon the Base Rate as provided in Section 4.1(a).
"Borrowers" shall have the meaning assigned thereto in the preamble
hereof.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and New York, New York, are open for
the conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in Dollar
deposits in the London interbank market.
"Capital Asset" means, with respect to the Borrowers and their
Subsidiaries, any asset that should, in accordance with GAAP, be classified and
accounted for as a capital asset on a Consolidated balance sheet of the
Borrowers and their Subsidiaries.
"Capital Expenditures" means, with respect to the Borrowers and
their Subsidiaries for any period, the aggregate cost of all Capital Assets
acquired by the Borrowers and their Subsidiaries during such period, determined
in accordance with GAAP.
2
<PAGE>
"Capital Lease" means, with respect to the Borrowers and their
Subsidiaries, any lease of any property that should, in accordance with GAAP, be
classified and accounted for as a capital lease on a Consolidated balance sheet
of the Borrowers and their Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in
Section 11.1(i).
"Closing Date" means the date of this Agreement.
"CoBank" shall have the meaning assigned thereto in Section 8.15.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended, supplemented or otherwise modified.
"Commitment" means, as to any Lender, the obligation of such Lender
to make Revolving Credit Loans to and issue or participate in Letters of Credit
issued for the account of the Borrowers hereunder in an aggregate principal or
face amount at any time outstanding not to exceed the amount set forth opposite
such Lender's name on Schedule 1 hereto, as the same may be reduced or modified
at any time or from time to time pursuant to the terms hereof.
"Commitment Percentage" means, as to any Lender at any time, the
ratio of (a) the amount of the Commitment of such Lender to (b) the Aggregate
Commitment.
"Communications Law" means the Communications Act of 1934, as
amended, and all rules and regulations thereunder, or any successor statute or
statutes thereto (including, without limitation, the Telecommunications Act of
1996) and all rules and regulations thereunder, and all rules and regulations of
the FCC, any applicable PUC or any other applicable Governmental Authority
related to the provision of telecommunication or broadcast services, each as
amended or supplemented from time to time.
Communications License" means any license for the provision of
telecommunication services, and any other license, permit, consent, certificate
of compliance, franchise, approval, waiver or authorization granted or issued by
the FCC or any other applicable Governmental Authority, including without
limitation, any of the foregoing authorizing or permitting the acquisition,
construction or operation of Network Facilities or any other system for the
provision of telecommunication services.
"Consolidated" means, when used with reference to financial
statements or financial statement items of the Borrowers and their Subsidiaries,
such statements or items on a consolidated basis in accordance with applicable
principles of consolidation under GAAP.
"Credit Facility" means the collective reference to the Revolving
Credit Facility and the L/C Facility.
3
<PAGE>
"Debt" means, with respect to the Borrowers and their Subsidiaries
at any date and without duplication, the sum of the following calculated in
accordance with GAAP: (a) all liabilities, obligations and indebtedness for
borrowed money including but not limited to obligations evidenced by bonds,
debentures, notes or other similar instruments of any such Person, (b) all
obligations to pay the deferred purchase price of property or services of any
such Person, except trade payables arising in the ordinary course of business
not more than ninety (90) days past due, (c) all obligations of any such Person
as lessee under Capital Leases, (d) all Debt of any other Person secured by a
Lien on any asset of any such Person; provided that, so long as recourse to such
Person is limited solely to the assets so encumbered, the amount of such Debt
shall be deemed to equal the lesser of (i) the fair market value of such assets
and (ii) the amount of such Debt, (e) all Guaranty Obligations of any such
Person, (f) all obligations, contingent or otherwise, of any such Person
relative to the face amount of letters of credit, whether or not drawn,
including without limitation any Reimbursement Obligation, and banker's
acceptances issued for the account of any such Person, (g) all obligations of
any such Person to redeem, repurchase, exchange, defease or otherwise make
payments in respect of capital stock or other securities of such Person and (h)
all termination payments which would be due and payable by any such Person
pursuant to Hedging Agreements.
"Default" means any of the events specified in Section 11.1 which
with the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Dollars" or "$" means, unless otherwise qualified, dollars in
lawful currency of the United States.
"Eligible Assignee" means, with respect to any assignment of the
rights, interest and obligations of a Lender hereunder, a Person that is at the
time of such assignment (a) a commercial bank organized under the laws of the
United States or any state thereof, having combined capital and surplus in
excess of $500,000,000, (b) a commercial bank organized under the laws of any
other country that is a member of the Organization of Economic Cooperation and
Development, or a political subdivision of any such country, having combined
capital and surplus in excess of $500,000,000, (c) a finance company, insurance
company or other financial institution which in the ordinary course of business
extends credit of the type extended hereunder and that has total assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender), (e) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially all
of the commercial lending business of the assigning Lender, or (f) any other
Person that has been approved in writing as an Eligible Assignee by the
Borrowers and the Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees of any
Borrower or any ERISA Affiliate or (b) has at any time within the preceding six
years been maintained for the employees of any Borrower or any current or former
ERISA Affiliate.
4
<PAGE>
"Environmental Laws" means any and all federal, state and local
laws, statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974,
and the rules and regulations thereunder, each as amended, supplemented or
otherwise modified.
"ERISA Affiliate" means any Person who together with any Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"Eurodollar Reserve Percentage" means, for any day, the percentage
(expressed as a decimal and rounded upwards, if necessary, to the next higher
1/100th of 1%) which is in effect for such day as prescribed by the Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without limitation any basic, supplemental or emergency reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal Reserve System in New York City.
"Event of Default" means any of the events specified in Section
11.1, provided that any requirement for passage of time, giving of notice, or
any other condition, has been satisfied.
"Extensions of Credit" means, as to any Lender at any time, an
amount equal to the sum of (a) the aggregate principal amount of all Revolving
Credit Loans made by such Lender then outstanding and (b) such Lender's
Commitment Percentage of the L/C Obligations then outstanding.
"FCC" means the Federal Communications Commission or any successor
Governmental Authority.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Funds Rate" means the rate per annum (rounded upwards, if
necessary, to the next higher 1/100th of 1%) representing the daily effective
federal funds rate as quoted by the Administrative Agent and confirmed in
Federal Reserve Board Statistical Release H.15 (519) or any successor or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not available, then "Federal Funds Rate" shall mean a daily rate
which is determined, in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national federal funds
market at 9:00 a.m. (Charlotte time). Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.
5
<PAGE>
"First Union" means First Union National Bank, a national banking
association, and its successors.
"Fiscal Year" means the fiscal year of the Borrowers and their
Subsidiaries ending on December 31.
"Fixed Charges" means, for any period, the sum of the following
determined on a consolidated basis, without duplication, for the Borrowers and
their Subsidiaries in accordance with GAAP: (a) scheduled principal and interest
payments with respect to Debt during such period, (b) Capital Expenditures
during such period (excluding all amounts paid by CT or any Subsidiary thereof
to purchase BellSouth Carolinas PCS, LP's ownership interest in the PSC
Communications License jointly owned by CT and BellSouth Carolinas PCS, LP,
including its customers, assets, and pro rata share of spectrum clearing costs
associated with the area to be serviced, so long as such amount does not exceed
$20,000,000), (c) cash taxes paid or due during such period and (d) cash
dividends paid or due during such period.
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Borrowers and their Subsidiaries throughout the period indicated
and consistent with the prior financial practice of the Borrowers and their
Subsidiaries.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"Governmental Authority" means any nation, province, state or
political subdivision thereof, and any government or any Person exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" means, with respect to the Borrowers and their
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other payment
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement condition or otherwise) or (b) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); provided, that the term Guaranty
Obligation shall not include endorsements for collection or deposit in the
ordinary course of business.
6
<PAGE>
"Hazardous Materials" means any substances or materials (a) which
are or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Applicable Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Applicable Law, (d) the discharge or emission or release of which requires a
permit or license under any Applicable Law or other Governmental Approval, (e)
which are deemed to constitute a nuisance, a trespass or pose a health or safety
hazard to persons or neighboring properties, (f) which consist of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance, or (g) which contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic
gas.
"Hedging Agreement" means any agreement with respect to an interest
rate swap, collar, cap, floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of any Borrower, and any confirming letter
executed pursuant to such hedging agreement, all as amended, restated or
otherwise modified.
"Intercompany Debt" means any Debt among any Borrowers.
"Interest Expense" means, for any period, total interest expense
(including, without limitation, interest expense attributable to Capital Leases)
determined on a Consolidated basis, without duplication, for the Borrowers and
their Subsidiaries in accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in Section
4.1(b).
"Issuing Lender" means First Union, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"L/C Commitment" means One Million Dollars ($1,000,000).
"L/C Facility" means the letter of credit facility established
pursuant to Article III hereof.
"L/C Obligations" means at any time, an amount equal to the sum of
(a) the aggregate undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants" means the collective reference to all the Lenders
other than the Issuing Lender.
7
<PAGE>
"Lender" means each Person executing this Agreement as a Lender set
forth on the signature pages hereto and each Person that hereafter becomes a
party to this Agreement as a Lender pursuant to Section 13.10(b).
"Lending Office" means, with respect to any Lender, the office of
such Lender maintaining such Lender's Commitment Percentage of the Revolving
Credit Loans.
"Letters of Credit" shall have the meaning assigned thereto in
Section 3.1.
"Leverage Ratio" means the ratio determined in accordance with
Section 9.1.
"LIBOR" means the rate of interest per annum determined on the basis
of the rate for deposits in Dollars in minimum amounts of at least $2,000,000
for a period equal to the applicable Interest Period which appears on the
Telerate Page 3750 at approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day of the applicable Interest Period). If, for any
reason, such rate does not appear on Telerate Page 3750, then "LIBOR" shall be
determined by the Administrative Agent to be the arithmetic average (rounded
upward, if necessary, to the nearest one-sixteenth of one percent (1/16%)) of
the rate per annum at which deposits in Dollars would be offered by first class
banks in the London interbank market to the Administrative Agent approximately
11:00 a.m. (London time) two (2) Business Days prior to the first day of the
applicable Interest Period for a period equal to such Interest Period and in an
amount substantially equal to the amount of the applicable Revolving Credit
Loan.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary,
to the next higher 1/100th of 1%) determined by the Administrative Agent
pursuant to the following formula:
LIBOR Rate = LIBOR
1.00-Eurodollar Reserve Percentage
"LIBOR Rate Loan" means any Revolving Credit Loan bearing interest
at a rate based upon the LIBOR Rate as provided in Section 4.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan Documents" means, collectively, this Agreement, the Revolving
Credit Notes, the Applications, any Hedging Agreement with any Lender (which
Hedging Agreement is permitted or required hereunder), and each other document,
instrument and agreement executed and delivered by any Borrower or its
Subsidiaries in connection with this Agreement or otherwise referred to herein
or contemplated hereby, all as may be amended, restated or otherwise modified.
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"Material Adverse Effect" means, with respect to the Borrowers and
their Subsidiaries, taken as a whole, a material adverse effect on the
properties, business, prospects, operations or condition (financial or
otherwise) of such Persons or the ability of such Persons to perform their
respective obligations under the Loan Documents or Material Contracts, in each
case to which they are a party.
"Material Contract" means (a) any contract or other agreement,
written or oral, of any Borrower or any of its Subsidiaries involving monetary
liability of or to any such Person in an amount in excess of $500,000 per annum,
or (b) any other contract or agreement, written or oral, of any Borrower or any
of its Subsidiaries the failure to comply with which could reasonably be
expected to have a Material Adverse Effect.
"Minority Interests" means any shares of stock of any class of a
Subsidiary or Affiliate of any Borrower (other than directors' qualifying shares
as required by law ) that are not owned by such Borrower and/or one or more
Wholly-Owned Subsidiaries. Minority Interests shall be valued by valuing
Minority Interests constituting preferred stock at the voluntary or involuntary
liquidation value of such preferred stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of capital and
surplus applicable thereto adjusted, if necessary, to reflect any changes from
the book value of such common stock required by the foregoing method of valuing
Minority Interests in preferred stock.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate is
making, or is accruing an obligation to make, contributions within the preceding
six years.
"Net Cash Proceeds" means, as applicable, (a) with respect to any
sale or other disposition of assets, the gross cash proceeds received by any
Borrower or any of its Subsidiaries from such sale less the sum of (i) all
income taxes and other taxes assessed by a Governmental Authority as a result of
such sale and any other fees and expenses incurred in connection therewith and
(ii) the principal amount of, premium, if any, and interest on any Debt secured
by a Lien on the asset (or a portion thereof) sold, which Debt is required to be
repaid in connection with such sale, (b) with respect to any offering of capital
stock or issuance of Debt, the gross cash proceeds received by any Borrower or
any of its Subsidiaries therefrom less all legal, underwriting and other fees
and expenses incurred in connection therewith and (c) with respect to any
payment under an insurance policy, the amount of cash proceeds received by any
Borrower or its Subsidiaries from an insurance company or Governmental
Authority, as applicable, net of all expenses of collection.
"Net Earnings" for any period shall mean the gross revenues of the
Borrowers and their Subsidiaries for such period less all expenses and other
proper charges, determined on a Consolidated basis in accordance with GAAP,
excluding: (a) any extraordinary gains or losses as determined in accordance
with GAAP and (b) losses attributable to Minority Interests and earnings
attributable to Minority Interests (unless such earnings shall have actually
been received by any Borrower or a Wholly-Owned Subsidiary in the form of cash
distributions).
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"Net Income" means, with respect to the Borrowers and their
Subsidiaries, for any period of determination, the net income (or loss) of the
Borrowers and their Subsidiaries for such period, determined on a Consolidated
basis in accordance with GAAP; provided that there will be excluded (a) the net
income (or loss) of any Person, other than a Subsidiary, in which any Borrower
or any of its Subsidiaries has a joint interest with a third party except to the
extent of the amount of dividends or distributions actually paid to such
Borrower or such Subsidiary during such period, (b) except to the extent
included pursuant to the foregoing clause (a), the net income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of such Person or is
merged into or consolidated with such Person or any of its Subsidiaries or that
Person's assets are acquired by such Person or any of its Subsidiaries, (c) the
net income (if positive) of any Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary to any Borrower
or any of its Subsidiaries thereof of such net income (i) is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute rule or governmental regulation applicable to
such Subsidiary or (ii) would be subject to any taxes payable on such dividends
or distributions and (d) any gains or losses attributable to asset sales, as
determined in accordance with GAAP, including any related tax effects on such
Person.
"Net Worth" means, at any date of determination, the total
stockholder's equity (including capital stock, additional paid-in capital and
retained earnings after deducting the treasury stock) of the Borrowers and their
Subsidiaries appearing on a Consolidated balance sheet of the Borrowers and
their Subsidiaries prepared in accordance with GAAP.
"Network Agreement" means any document or agreement entered into by
any Borrower or any of its Subsidiaries regarding the use, operation or
maintenance of, or otherwise concerning, any of the Network Facilities.
"Network Facility" means the switches and network of digital and
analog facilities owned or leased by any Borrower or any of its Subsidiaries for
use in the provision of telecommunication services.
"Notice of Account Designation" shall have the meaning assigned
thereto in Section 2.2(b).
"Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto in
Section 2.3(f).
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or
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similar petition) the Revolving Credit Loans, (b) the L/C Obligations, (c) all
payment and other obligations owing by any Borrower to any Lender or the
Administrative Agent under any Hedging Agreement with any Lender (which Hedging
Agreement is permitted or required hereunder), and (d) all other fees and
commissions (including attorney's fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing
by any Borrower to the Lenders or the Administrative Agent, of every kind,
nature and description, direct or indirect, absolute or contingent, due or to
become due, contractual or tortious, liquidated or unliquidated, and whether or
not evidenced by any note, in each case under or in respect of this Agreement,
any Revolving Credit Note, any Letter of Credit or any of the other Loan
Documents.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 7.2.
"Operating Cash Flow" means, for any period, the sum of the
following determined on a consolidated basis, without duplication, for the
Borrowers and their Subsidiaries in accordance with GAAP: (a) Net Income for
such period plus (b) the sum of the following to the extent deducted in
determining Net Income: (i) income and franchise taxes, (ii) Interest Expense,
(iii) amortization, depreciation and other non-cash charges less (c) the sum of
interest income and any extraordinary gains to the extent added in determining
Net Income.
"Other Taxes" shall have the meaning assigned thereto in Section
4.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
"Participation Certificates" shall have the meaning assigned thereto
in Section 8.15.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees of any
Borrower or any ERISA Affiliates or (b) has at any time within the preceding six
years been maintained for the employees of any Borrower or any of its current or
former ERISA Affiliates.
"Permitted Holders" means Michael R. Coltrane, a North Carolina
resident and L.D. Coltrane, III, a North Carolina resident.
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"Person" means an individual, corporation, limited liability
company, partnership, association, trust, business trust, joint venture, joint
stock company, pool, syndicate, sole proprietorship, unincorporated
organization, Governmental Authority or any other form of entity or group
thereof.
"Prime Rate" means, at any time, the rate of interest per annum
publicly announced from time to time by First Union as its prime rate. Each
change in the Prime Rate shall be effective as of the opening of business on the
day such change in the Prime Rate occurs. The parties hereto acknowledge that
the rate announced publicly by First Union as its Prime Rate is an index or base
rate and shall not necessarily be its lowest or best rate charged to its
customers or other banks.
"PUC" means any state, provincial or other local regulatory agency
or body that exercises jurisdiction over the rates or services or the ownership,
construction or operation of any Network Facility or over Persons who own,
construct or operate a Network Facility, in each case by reason of the nature or
type of the business subject to regulation and not pursuant to laws and
regulations of general applicability to Persons conducting business in any such
jurisdiction.
"PUC Authorizations" means all applications, filings, reports,
documents, recordings and registrations with, and all validations, exemptions,
franchises, waivers, approvals, orders or authorizations, consents, licenses,
certificates and permits from, any PUC.
"Recapitalization" means the recapitalization as more particularly
described in that certain proxy statement delivered to the shareholders of CT
during the month of December, 1998, to be voted on at the January 28, 1999
Shareholders' Meeting.
"Register" shall have the meaning assigned thereto in Section
13.10(d).
"Reimbursement Obligation" means the obligation of the Borrowers to
reimburse the Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit.
"Required Lenders" means, at any date, any combination of holders of
at least sixty-six and two-thirds percent (66-2/3%) of the aggregate unpaid
principal amount of the Revolving Credit Notes, or if no amounts are outstanding
under the Revolving Credit Notes, any combination of Lenders whose Commitment
Percentages aggregate at least sixty-six and two-thirds percent (66-2/3%).
"Responsible Officer" means any of the following: the chief
executive officer or chief financial officer of CT or any other officer of CT
reasonably acceptable to the Administrative Agent.
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"Revolving Credit Facility" means the revolving credit facility
established pursuant to Article II hereof.
"Revolving Credit Loans" means any revolving loan made to the
Borrowers pursuant to Section 2.1, and all such revolving loans collectively as
the context requires.
"Revolving Credit Notes" means the collective reference to the
Revolving Credit Notes made by the Borrowers payable to the order of each
Lender, substantially in the form of Exhibit A hereto, evidencing the Revolving
Credit Facility, and any amendments and modifications thereto, any substitutes
therefor, and any replacements, restatements, renewals or extension thereof, in
whole or in part; "Revolving Credit Note" means any of such Revolving Credit
Notes.
"Solvent" means, as to the Borrowers and their Subsidiaries, taken
as a whole, on a particular date, that such Persons (a) have capital sufficient
to carry on their business and transactions and all business and transactions in
which they are about to engage and are able to pay their debts as they mature,
(b) own property having a value, both at fair valuation and at present fair
saleable value, greater than the amount required to pay their probable
liabilities (including contingencies), and (c) do not believe that they will
incur debts or liabilities beyond their ability to pay such debts or liabilities
as they mature.
"Subordinated Debt" means the collective reference to Debt on
Schedule 6.1(t) hereof designated as Subordinated Debt and any other Debt of any
Borrower or any Subsidiary thereof subordinated in right and time of payment to
the Obligations on terms satisfactory to the Required Lenders.
"Subsidiary" means as to any Person, any corporation, partnership,
limited liability company or other entity of which more than fifty percent (50%)
of the outstanding capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other managers of
such corporation, partnership, limited liability company or other entity is at
the time, directly or indirectly, owned by or the management is otherwise
controlled by such Person (irrespective of whether, at the time, capital stock
or other ownership interests of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have
voting power by reason of the happening of any contingency). Unless otherwise
qualified references to "Subsidiary" or "Subsidiaries" herein shall refer to
those of the Borrowers.
"Taxes" shall have the meaning assigned thereto in Section 4.11(a).
"Termination Date" means the earliest of the dates referred to in
Section 2.6.
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA (other than a Reportable Event as to which the provision
of thirty (30) days notice has
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been waived by the PBGC under applicable regulations) or (b) the withdrawal of
any Borrower or any ERISA Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
or (c) the termination of a Pension Plan, the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as a
distress termination under Section 4041(c) of ERISA, or (d) the institution of
proceedings to terminate, or the appointment of a trustee with respect to, any
Pension Plan by the PBGC, or (e) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or (f) the partial or
complete withdrawal of any Borrower or any ERISA Affiliate from a Multiemployer
Plan, or (g) the imposition of a Lien pursuant to Section 412 of the Code
or Section 302 of ERISA, or (h) any event or condition which results in the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA, or (i) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of
proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA.
"Total Capitalization" means, as of any date of determination, Total
Debt plus Consolidated Net Worth, each as of such date.
"Total Debt" means, as of any date of determination, the aggregate
amount of Debt of the Borrowers and their Subsidiaries determined on a
Consolidated basis.
"Uniform Customs" the Uniform Customs and Practice for Documentary
Credits (1994 Revision), International Chamber of Commerce Publication No. 500.
"UCC" means the Uniform Commercial Code as in effect in the State of
North Carolina, as amended, restated or otherwise modified.
"United States" means the United States of America.
"Wholly-Owned" means, with respect to a Subsidiary, that all of the
shares of capital stock or other ownership interests of such Subsidiary are,
directly or indirectly, owned or controlled by any Borrower and/or one or more
of its Wholly-Owned Subsidiaries. For purposes of this Agreement, Concord
Telephone shall be deemed to be a Wholly-Owned Subsidiary of CT.
SECTION 1.2 General. Unless otherwise specified, a reference in this
Agreement to a particular section, subsection, Schedule or Exhibit is a
reference to that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the masculine, feminine or neuter gender shall include the masculine, the
feminine and the neuter. Any reference herein to "Charlotte time" shall refer to
the applicable time of day in Charlotte, North Carolina.
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SECTION 1.3 Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings when
used in this Agreement, the Revolving Credit Notes and the other Loan Documents
or any certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
REVOLVING CREDIT FACILITY
SECTION 2.1 Revolving Credit Loans. Subject to the terms and
conditions of this Agreement, each Lender severally agrees to make Revolving
Credit Loans to the Borrowers on a joint and several basis from time to time
from the Closing Date through the Termination Date as requested by CT on behalf
of the Borrowers in accordance with the terms of Section 2.2; provided, that (a)
the aggregate principal amount of all outstanding Revolving Credit Loans (after
giving effect to any amount requested) shall not exceed the Aggregate Commitment
less the sum of all outstanding L/C Obligations and (b) the principal amount of
outstanding Revolving Credit Loans from any Lender to the Borrowers shall not at
any time exceed such Lender's Available Commitment. Each Revolving Credit Loan
by a Lender shall be in a principal amount equal to such Lender's Commitment
Percentage of the aggregate principal amount of Revolving Credit Loans requested
on such occasion. Subject to the terms and conditions hereof, the Borrowers may
borrow, repay and reborrow Revolving Credit Loans hereunder until the
Termination Date.
SECTION 2.2 Procedure for Advances of Revolving Credit Loans.
(a) Requests for Borrowing. CT, on behalf of the Borrowers, shall
give the Administrative Agent irrevocable prior written notice in the form
attached hereto as Exhibit B (a "Notice of Borrowing") not later than 11:00 a.m.
(Charlotte time) (i) on the same Business Day as each Base Rate Loan and (ii) at
least three (3) Business Days before each LIBOR Rate Loan, of its intention to
borrow, specifying (A) the date of such borrowing, which shall be a Business
Day, (B) the amount of such borrowing, which shall be in an amount equal to the
amount of the Aggregate Commitment then available to the Borrowers, or if less,
(x) with respect to Base Rate Loans in an aggregate principal amount of
$1,000,000 or a whole multiple of $250,000 in excess thereof and (y) with
respect to LIBOR Rate Loans in an aggregate principal amount of $2,000,000 or a
whole multiple of $500,000 in excess thereof, (C) whether the Revolving Credit
Loans are to be LIBOR Rate Loans or Base Rate Loans, and (D) in the case
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of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto.
Notices received after 11:00 a.m. (Charlotte time) shall be deemed received on
the next Business Day. The Administrative Agent shall promptly notify the
Lenders of each Notice of Borrowing.
(b) Disbursement of Revolving Credit Loans. Not later than 2:00 p.m.
(Charlotte time) on the proposed borrowing date, (i) each Lender will make
available to the Administrative Agent, for the account of the Borrowers, at the
office of the Administrative Agent in funds immediately available to the
Administrative Agent, such Lender's Commitment Percentage of the Revolving
Credit Loans to be made on such borrowing date. The Borrowers hereby irrevocably
authorize the Administrative Agent to disburse the proceeds of each borrowing
requested pursuant to this Section 2.2 in immediately available funds by
crediting or wiring such proceeds to the deposit account of the Borrowers
identified in the most recent notice substantially in the form of Exhibit C
hereto (a "Notice of Account Designation") delivered by the Borrowers to the
Administrative Agent or as may be otherwise agreed upon by the Borrowers and the
Administrative Agent from time to time. Subject to Section 4.7 hereof, the
Administrative Agent shall not be obligated to disburse the portion of the
proceeds of any Revolving Credit Loan requested pursuant to this Section 2.2 to
the extent that any Lender has not made available to the Administrative Agent
its Commitment Percentage of such Revolving Credit Loan.
SECTION 2.3 Repayment of Revolving Credit Loans.
(a) Repayment on Termination Date. The Borrowers shall repay the
outstanding principal amount of all Revolving Credit Loans in full on the
Termination Date together with all accrued but unpaid interest thereon.
(b) Mandatory Repayment of Excess Revolving Credit Loans. If at any
time the outstanding principal amount of all Revolving Credit Loans exceeds the
Aggregate Commitment less the sum of all outstanding L/C Obligations, the
Borrowers shall repay immediately upon notice from the Administrative Agent, by
payment to the Administrative Agent for the account of the Lenders, an amount
equal to such excess with each such repayment applied first, to the principal
amount of outstanding Revolving Credit Loans and second, with respect to any
Letters of Credit then outstanding, a payment of cash collateral into a cash
collateral account opened by the Borrowers with the Administrative Agent, for
the benefit of the Lenders (such cash collateral to be applied in accordance
with Section 11.2(b)).
(c) Insurance Proceeds. Each Borrower shall make mandatory
prepayments of the Revolving Credit Loans in amounts equal to 100% of the Net
Cash Proceeds received by such Borrower or any of its Subsidiaries under any
policy of insurance, unless, so long as no Default or Event of Default has
occurred and is continuing, such proceeds are used or contractually committed to
be used by such Borrower or such Subsidiary, as applicable, within one hundred
eighty (180) days of the receipt of such Net Cash Proceeds to replace or repair
any of its assets damaged in connection with the related claims.
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(d) Asset Sale Proceeds. Each Borrower shall make mandatory
prepayments of the Revolving Credit Loans in amounts equal to 100% of the Net
Cash Proceeds received by such Borrower or any of its Subsidiaries in connection
with the sale or disposition of any asset not permitted by Sections 10.6(a)-(d),
unless, so long as no Default or Event of Default has occurred and is
continuing, such proceeds are used or contractually committed to be used by such
Borrower or such Subsidiary, as applicable, within one hundred eighty (180) days
of the receipt of such Net Cash Proceeds to (A) make an acquisition or Capital
Expenditure which is otherwise permitted pursuant to the terms of this Agreement
or (B) pay any accrued tax liability incurred in connection with such asset
disposition.
(e) Debt and Equity Proceeds. Unless otherwise agreed in writing by
the Required Lenders, each Borrower shall make mandatory prepayments of the
Revolving Credit Loans in amounts equal to 100% of the Net Cash Proceeds
received by such Borrower or any of its Subsidiaries in connection with the
issuance of any Debt or equity securities by such Borrower.
(f) Optional Repayments. The Borrowers may at any time and from time
to time repay the Revolving Credit Loans, in whole or in part, upon at least
three (3) Business Days' irrevocable notice to the Administrative Agent with
respect to LIBOR Rate Loans and one (1) Business Day irrevocable notice with
respect to Base Rate Loans in the form attached hereto as Exhibit D (a "Notice
of Prepayment") specifying the date and amount of repayment and whether the
repayment is of LIBOR Rate Loans, Base Rate Loans or a combination thereof, and,
if of a combination thereof, the amount allocable to each. Upon receipt of such
notice, the Administrative Agent shall promptly notify each Lender. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date set forth in such notice. Partial repayments shall be in an aggregate
amount of $1,000,000 or a whole multiple of $250,000 in excess thereof with
respect to Base Rate Loans and $2,000,000 or a whole multiple of $500,000 in
excess thereof with respect to LIBOR Rate Loans. Each such repayment shall be
accompanied by any amount required to be paid pursuant to Section 4.9 hereof.
(g) Limitation on Repayment of LIBOR Rate Loans. The Borrowers may
not repay any LIBOR Rate Loan on any day other than on the last day of the
Interest Period applicable thereto unless such repayment is accompanied by any
amount required to be paid pursuant to Section 4.9 hereof.
SECTION 2.4 Revolving Credit Notes. Each Lender's Revolving Credit
Loans and the obligation of the Borrowers to repay such Revolving Credit Loans
shall be evidenced by a separate Revolving Credit Note executed by the Borrowers
payable to the order of such Lender representing the obligation of the Borrowers
to pay such Lender's Commitment or, if less, the aggregate unpaid principal
amount of all Revolving Credit Loans made and to be made by such Lender to the
Borrowers hereunder, plus interest and all other fees, charges and other amounts
due thereon. Each Revolving Credit Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable interest
rate per annum specified in Section 4.1.
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SECTION 2.5 Permanent Reduction of the Aggregate Commitment. The
Borrowers shall have the right at any time and from time to time, upon at least
five (5) Business Days prior written notice to the Administrative Agent, to
permanently reduce, without premium or penalty, (i) the entire Aggregate
Commitment at any time or (ii) portions of the Aggregate Commitment, from time
to time, in an aggregate principal amount not less than $2,000,000 or any whole
multiple of $1,000,000 in excess thereof. Each permanent reduction permitted or
pursuant to this Section 2.5 shall be accompanied by a payment of principal
sufficient to reduce the aggregate outstanding Extensions of Credit of the
Lenders after such reduction to the Aggregate Commitment as so reduced and if
the Aggregate Commitment as so reduced is less than the aggregate amount of all
outstanding Letters of Credit, the Borrowers shall be required to deposit in a
cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. Any
reduction of the Aggregate Commitment to zero shall be accompanied by payment of
all outstanding Obligations (and furnishing of cash collateral satisfactory to
the Administrative Agent for all L/C Obligations) and shall result in the
termination of the Commitments and Credit Facility. Such cash collateral shall
be applied in accordance with Section 11.2(b). If the reduction of the Aggregate
Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall
be accompanied by any amount required to be paid pursuant to Section 4.9 hereof.
SECTION 2.6 Termination of Credit Facility. Until such date as the
Borrowers secure the appropriate Governmental Approvals to permit the Credit
Facility to have a stated maturity date of five (5) years or more after the
Closing Date, the Credit Facility shall terminate on the earliest of (a)
December 31, 2000, (b) the date of termination by the Borrowers pursuant to
Section 2.5, and (c) the date of termination by the Administrative Agent on
behalf of the Lenders pursuant to Section 11.2(a); provided, that CT, on behalf
of the Borrowers may request two (2) separate two-year extensions of the date
set forth in clause (a) of the first paragraph of this Section 2.6 by providing
the Administrative Agent and each of the Lenders with a written request for such
extension not more than ninety (90) days and not fewer than sixty (60) days
prior to the then existing Termination Date; provided further, that (A) CT shall
not request more than two (2) extensions, (B) the Termination Date shall not in
any event extend beyond December 31, 2004 and (C) each such extension shall be
subject to the satisfaction of the Borrowers of each of the conditions set forth
in Section 5.3 on the then existing Termination Date. Each of the Lenders shall
provide written notice to the Administrative Agent on or prior to the thirtieth
(30th) day (the "Consent Date") before the then existing Termination Date of its
desire to extend (any such Lender, a "Consenting Lender") or not to so extend
(any such Lender, a "Non-Consenting Lender") such date.
No Lender shall be under any obligation or commitment to extend such
date and no such obligation or commitment on the part of any Lender shall be
inferred from the provisions of this
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Section 2.6. Failure on the part of any Lender to respond to such request by the
required date set forth above shall be deemed to be a denial by such Lender of
such request and all Revolving Credit Loans of such Non-Consenting Lender shall
be subject to the then existing Termination Date. If Lenders holding Commitment
Percentages aggregating less than one hundred percent (100%) of the Commitments
consent to such extension, CT, on behalf of the Borrowers, may elect by written
notice to the Administrative Agent and Lenders to (i) continue the Revolving
Credit Facility for such additional period with an Aggregate Commitment equal to
the then effective Aggregate Commitment less the total Commitments of the
Non-Consenting Lenders or (ii) require any such Non-Consenting Lender to
transfer and assign without recourse (in accordance with the provisions of
Section 13.10) its Commitment and other interests, rights and obligations under
this Agreement to an Eligible Assignee (who consents thereto), which shall
assume such obligations upon its consent to assume such obligations; provided
that (A) no such assignment shall conflict with any Applicable Law, (B) such
assignment shall be at the cost and expense of the Borrowers and (C) the
purchase price to be paid to such Non-Consenting Lender shall be an amount equal
to the outstanding principal amount of the Loans of such NonConsenting Lender
plus all interest accrued and unpaid thereon and all other amounts owing to such
Non-Consenting Lender thereon. The Administrative Agent shall provide a written
list of the Consenting Lenders and Non-Consenting Lenders to the Borrowers and
the Lenders promptly following the Consent Date (but in no event less than
twenty (20) days prior to the existing Termination Date). If the extension is
granted, upon the then existing Termination Date, such Termination Date shall be
extended to the date which is two years thereafter.
Notwithstanding the foregoing, upon the date the Borrowers receive
Governmental Approval to permit the Credit Facility to have a stated maturity
date of five (5) years or more after the Closing Date, (a) all right of the
Borrowers to request extensions of the Termination Date pursuant to this section
2.6 shall be immediately and automatically terminated (including all such
pending requests which have not yet been fully consummated by the date of such
Governmental Approval) and (b) the date referred to in clause (a) of the first
paragraph at this Section 2.6 shall be deemed to be December 31, 2003.
SECTION 2.7 Use of Proceeds. The Borrowers shall use the proceeds of
the Extensions of Credit (a) to finance Capital Expenditures and acquisitions
which are otherwise permitted pursuant to the terms of this Agreement, (b) to
refinance existing indebtedness, and (c) for working capital and general
corporate requirements of the Borrowers and their Subsidiaries, including the
payment of certain fees and expenses incurred in connection with the
transactions contemplated hereby.
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ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1 L/C Commitment. Subject to the terms and conditions
hereof, the Issuing Lender, in reliance on the agreements of the other Lenders
set forth in Section 3.4(a), agrees to issue standby letters of credit ("Letters
of Credit") for the account of the Borrowers on a joint and several basis on any
Business Day from the Closing Date through but not including the Termination
Date in such form as may be approved from time to time by the Issuing Lender;
provided, that the Issuing Lender shall have no obligation to issue any Letter
of Credit if, after giving effect to such issuance, (a) the L/C Obligations
would exceed the lesser of (i) the Aggregate Commitment less the sum of all
outstanding Revolving Credit Loans and (ii) the L/C Commitment or (b) the
Available Commitment of any Lender would be less than zero. Each Letter of
Credit shall (i) be denominated in Dollars in a minimum amount of $100,000, (ii)
be a standby letter of credit issued to support obligations of the Borrowers or
any of their Subsidiaries, contingent or otherwise, incurred in the ordinary
course of business, (iii) expire on a date reasonably satisfactory to the
Issuing Lender, which date shall be no later than the Termination Date and (iv)
be subject to the Uniform Customs and, to the extent not inconsistent therewith,
the laws of the State of North Carolina. The Issuing Lender shall not at any
time be obligated to issue any Letter of Credit hereunder if such issuance would
conflict with, or cause the Issuing Lender or any L/C Participant to exceed any
limits imposed by, any Applicable Law. References herein to "issue" and
derivations thereof with respect to Letters of Credit shall also include
extensions or modifications of any existing Letters of Credit, unless the
context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit. The
Borrowers may from time to time request that the Issuing Lender issue a Letter
of Credit by delivering to the Issuing Lender at the Administrative Agent's
Office an Application therefor, completed to the satisfaction of the Issuing
Lender, and such other certificates, documents and other papers and information
as the Issuing Lender may request. Upon receipt of any Application, the Issuing
Lender shall process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accordance
with its customary procedures and shall, subject to Section 3.1 and Article V
hereof, promptly issue the Letter of Credit requested thereby (but in no event
shall the Issuing Lender be required to issue any Letter of Credit earlier than
three (3) Business Days after its receipt of the Application therefor and all
such other certificates, documents and other papers and information relating
thereto) by issuing the original of such Letter of Credit to the beneficiary
thereof or as otherwise may be agreed by the Issuing Lender and the Borrowers.
The Issuing Lender shall promptly furnish to the Borrowers a copy of such Letter
of Credit and promptly notify each Lender of the issuance and upon request by
any Lender, furnish to such Lender a copy of such Letter of Credit and the
amount of such Lender's participation therein.
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SECTION 3.3 Commissions and Other Charges.
(a) The Borrowers shall pay to the Administrative Agent, for the
account of the Issuing Lender and the L/C Participants, a letter of credit
commission with respect to each Letter of Credit in an amount equal to 1.00%
percent on a per annum basis on the face amount of such Letter of Credit. Such
commission shall be payable quarterly in arrears on the last Business Day of
each calendar quarter and on the Termination Date. The Administrative Agent
shall, promptly following its receipt thereof, distribute to the Issuing Lender
and the L/C Participants all commissions received by the Administrative Agent in
accordance with their respective Commitment Percentages.
(b) In addition to the foregoing commission, the Borrowers shall pay
to the Issuing Lender an issuance fee of 0.125% percent per annum on the face
amount of each Letter of Credit, payable quarterly in arrears on the last
Business Day of each calendar quarter and on the Termination Date.
(c) In addition to the foregoing commissions, the Borrowers shall
pay or reimburse the Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by the Issuing Lender in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
SECTION 3.4 L/C Participations.
(a) The Issuing Lender irrevocably agrees to grant and hereby grants
to each L/C Participant, and, to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby accepts and purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C Participant's own account and risk
an undivided interest equal to such L/C Participant's Commitment Percentage in
the Issuing Lender's obligations and rights under each Letter of Credit issued
hereunder and the amount of each draft paid by the Issuing Lender thereunder.
Each L/C Participant unconditionally and irrevocably agrees with the Issuing
Lender that, if a draft is paid under any Letter of Credit for which the Issuing
Lender is not reimbursed in full by the Borrowers in accordance with the terms
of this Agreement, such L/C Participant shall pay to the Issuing Lender upon
demand at the Issuing Lender's address for notices specified herein an amount
equal to such L/C Participant's Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) Upon becoming aware of any amount required to be paid by any L/C
Participant to the Issuing Lender pursuant to Section 3.4(a) in respect of any
unreimbursed portion of any payment made by the Issuing Lender under any Letter
of Credit, the Issuing Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C Participant shall pay to the
Issuing Lender the amount specified on the applicable due date.
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If any such amount is paid to the Issuing Lender after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand, in addition
to such amount, the product of (i) such amount, times (ii) the daily average
Federal Funds Rate as determined by the Administrative Agent during the period
from and including the date such payment is due to the date on which such
payment is immediately available to the Issuing Lender, times (iii) a fraction
the numerator of which is the number of days that elapse during such period and
the denominator of which is 360. A certificate of the Issuing Lender with
respect to any amounts owing under this Section 3.4(b) shall be conclusive in
the absence of manifest error. With respect to payment to the Issuing Lender of
the unreimbursed amounts described in this Section 3.4(b), if the L/C
Participants receive notice that any such payment is due (A) prior to 1:00 p.m.
(Charlotte time) on any Business Day, such payment shall be due that Business
Day, and (B) after 1:00 p.m. (Charlotte time) on any Business Day, such payment
shall be due on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its
Commitment Percentage of such payment in accordance with this Section 3.4, the
Issuing Lender receives any payment related to such Letter of Credit (whether
directly from any Borrower or otherwise), or any payment of interest on account
thereof, the Issuing Lender will distribute to such L/C Participant its pro rata
share thereof; provided, that in the event that any such payment received by the
Issuing Lender shall be required to be returned by the Issuing Lender, such L/C
Participant shall return to the Issuing Lender the portion thereof previously
distributed by the Issuing Lender to it.
SECTION 3.5 Reimbursement Obligation of the Borrowers. The Borrowers
joint and severally agree to reimburse the Issuing Lender on each date on which
the Issuing Lender notifies the Borrowers of the date and amount of a draft paid
under any Letter of Credit for the amount of (a) such draft so paid and (b) any
taxes, fees, charges or other costs or expenses incurred by the Issuing Lender
in connection with such payment. Each such payment shall be made to the Issuing
Lender at its address for notices specified herein in lawful money of the United
States and in immediately available funds. Interest shall be payable on any and
all amounts remaining unpaid by the Borrowers under this Article III from the
date such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate which would be payable on any
outstanding Base Rate Loans which were then overdue. If the Borrowers fail to
timely reimburse the Issuing Lender on the date the Borrowers receive the notice
referred to in this Section 3.5, the Borrowers shall be deemed to have timely
given a Notice of Borrowing hereunder to the Administrative Agent requesting the
Lenders to make a Base Rate Loan on such date in an amount equal to the amount
of such drawing and, regardless of whether or not the conditions precedent
specified in Article V have been satisfied, the Lenders shall make Base Rate
Loans in such amount, the proceeds of which shall be applied to reimburse the
Issuing Lender for the amount of the related drawing and costs and expenses.
SECTION 3.6 Obligations Absolute. The obligations of the Borrowers
under this Article III (including without limitation the Reimbursement
Obligation) shall be absolute and
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unconditional under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrowers may have or have had
against the Issuing Lender or any beneficiary of a Letter of Credit. The
Borrowers also agree with the Issuing Lender that the Issuing Lender shall not
be responsible for, and the Reimbursement Obligation of the Borrowers under
Section 3.5 shall not be affected by, among other things, the validity or
genuineness of documents or of any endorsements thereon, even though such
documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Borrowers and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or
any claims whatsoever of the Borrowers against any beneficiary of such Letter of
Credit or any such transferee. The Issuing Lender shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Lender's gross
negligence or willful misconduct. The Borrowers agree that any action taken or
omitted by the Issuing Lender under or in connection with any Letter of Credit
or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct and in accordance with the standards of care specified in
the Uniform Customs and, to the extent not inconsistent therewith, the UCC,
shall be binding on the Borrowers and shall not result in any liability of the
Issuing Lender to the Borrowers. The responsibility of the Issuing Lender to the
Borrowers in connection with any draft presented for payment under any Letter of
Credit shall, in addition to any payment obligation expressly provided for in
such Letter of Credit, be limited to determining that the documents (including
each draft) delivered under such Letter of Credit in connection with such
presentment are in conformity with such Letter of Credit.
SECTION 3.7 Effect of Application. To the extent that any provision
of any Application related to any Letter of Credit is inconsistent with the
provisions of this Article III, the provisions of this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1 Interest.
(a) Interest Rate Options. Subject to the provisions of this Section
4.1, at the election of CT on behalf of the Borrowers, the aggregate principal
balance of the Revolving Credit Notes or any portion thereof shall bear interest
at (i) the Base Rate plus the Applicable Margin as set forth in Section 4.1(c)
or (ii) the LIBOR Rate plus the Applicable Margin as set forth in Section
4.1(c); provided that the LIBOR Rate shall not be available until three (3)
Business Days after the Closing Date. The Borrowers shall select the rate of
interest and Interest Period, if any, applicable to any Revolving Credit Loan at
the time a Notice of Borrowing is given pursuant to Section 2.2 or at the time a
Notice of Conversion/Continuation is given pursuant to Section 4.2. Each
Revolving Credit Loan or portion thereof bearing interest based on the
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Base Rate shall be a "Base Rate Loan", each Revolving Credit Loan or portion
thereof bearing interest based on the LIBOR Rate shall be a "LIBOR Rate Loan."
Any Revolving Credit Loan or any portion thereof as to which the Borrowers have
not duly specified an interest rate as provided herein shall be deemed a Base
Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate Loan, CT on
behalf of the Borrowers, by giving notice at the times described in Section
4.1(a), shall elect an interest period (each, an "Interest Period") to be
applicable to such Revolving Credit Loan, which Interest Period shall be a
period of one (1), two (2), three (3), or six (6) months with respect to each
LIBOR Rate Loan; provided that:
(i) the Interest Period shall commence on the date of
advance of or conversion to any LIBOR Rate Loan and, in the case of
immediately successive Interest Periods, each successive Interest
Period shall commence on the date on which the next preceding
Interest Period expires;
(ii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day; provided, that if any Interest
Period with respect to a LIBOR Rate Loan would otherwise expire on a
day that is not a Business Day but is a day of the month after which
no further Business Day occurs in such month, such Interest Period
shall expire on the next preceding Business Day;
(iii) any Interest Period with respect to a LIBOR Rate
Loan that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of the relevant calendar month at the end of such
Interest Period;
(iv) no Interest Period shall extend beyond the
Termination Date; and
(v) there shall be no more than eight (8) Interest
Periods outstanding at any time.
(c) Applicable Margin. The Applicable Margin provided for in Section
4.1(a) with respect to the Revolving Credit Loans (the "Applicable Margin")
shall (i) on the Closing Date equal the percentages set forth in the certificate
delivered pursuant to Section 5.2(d)(ii) and (ii) for each fiscal quarter
thereafter be determined by reference to the Leverage Ratio as of the end of the
fiscal quarter immediately preceding the delivery of the applicable Officer's
Compliance Certificate as follows:
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<TABLE>
<CAPTION>
Applicable Margin Per Annum
Leverage Ratio Base Rate LIBOR Rate
-------------- ------------------------------
<S> <C> <C>
Greater than or equal to
3.50 to 1.00 0.150% 1.150%
Greater than or equal to
3.00 to 1.00, but less than
3.50 to 1.00 0.000% 1.000%
Greater than or equal to
2.50 to 1.00, but less than
3.00 to 1.00 0.000% 0.875%
Greater than or equal to
2.00 to 1.00, but less than
2.50 to 1.00 0.000% 0.750%
Less than
2.00 to 1.00 0.000% 0.500%
</TABLE>
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the fifth (5th) Business Day after receipt by the
Administrative Agent of quarterly financial statements for the Borrowers and
their Subsidiaries and the accompanying Officer's Compliance Certificate setting
forth the Leverage Ratio of the Borrowers and their Subsidiaries as of the most
recent fiscal quarter end. Subject to Section 4.1(d), in the event the Borrowers
fail to deliver such financial statements and certificate within the time
required by Section 7.2 hereof, the Applicable Margin shall be the highest
Applicable Margin set forth above until the fifth (5th) Business Day after
receipt by the Administrative Agent of such financial statements and
certificate.
(d) Default Rate. At the discretion of the Administrative Agent and
Required Lenders, upon the occurrence and during the continuance of an Event of
Default, (i) the Borrowers shall no longer have the option to request LIBOR Rate
Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a rate per
annum two percent (2%) in excess of the rate then applicable to LIBOR Rate
Loans, as applicable, until the end of the applicable Interest Period and
thereafter at a rate equal to two percent (2%) in excess of the rate then
applicable to Base Rate Loans, and (iii) all outstanding Base Rate Loans shall
bear interest at a rate per annum equal to two percent (2%) in excess of the
rate then applicable to Base Rate Loans. Interest shall continue to accrue on
the Revolving Credit Notes after the filing by or against any Borrower of any
petition seeking
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any relief in bankruptcy or under any act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign.
(e) Interest Payment and Computation. Interest on each Base Rate
Loan shall be payable in arrears on the last Business Day of each calendar
quarter commencing December 31, 1998; and interest on each LIBOR Rate Loan shall
be payable on the last day of each Interest Period applicable thereto, and if
such Interest Period extends over three (3) months, at the end of each three (3)
month interval during such Interest Period. Interest on LIBOR Rate Loans and all
fees payable hereunder shall be computed on the basis of a 360-day year and
assessed for the actual number of days elapsed and interest on Base Rate Loans
shall be computed on the basis of a 365/66-day year and assessed for the actual
number of days elapsed.
(f) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Revolving
Credit Notes charged or collected pursuant to the terms of this Agreement or
pursuant to any of the Revolving Credit Notes exceed the highest rate
permissible under any Applicable Law which a court of competent jurisdiction
shall, in a final determination, deem applicable hereto. In the event that such
a court determines that the Lenders have charged or received interest hereunder
in excess of the highest applicable rate, the rate in effect hereunder shall
automatically be reduced to the maximum rate permitted by Applicable Law and the
Lenders shall at the Administrative Agent's option (i) promptly refund to the
Borrowers any interest received by the Lenders in excess of the maximum lawful
rate or (ii) shall apply such excess to the principal balance of the
Obligations. It is the intent hereof that the Borrowers not pay or contract to
pay, and that neither the Administrative Agent nor any Lender receive or
contract to receive, directly or indirectly in any manner whatsoever, interest
in excess of that which may be paid by the Borrowers under Applicable Law.
SECTION 4.2 Notice and Manner of Conversion or Continuation of
Loans. Provided that no Event of Default has occurred and is then continuing,
the Borrowers shall have the option to (a) convert at any time following the
third Business Day after the Closing Date all or any portion of its outstanding
Base Rate Loans in a principal amount equal to $2,000,000 or any whole multiple
of $500,000 in excess thereof into one or more LIBOR Rate Loans and (b) upon the
expiration of any Interest Period, (i) convert all or any part of its
outstanding LIBOR Rate Loans in a principal amount equal to $1,000,000 or a
whole multiple of $250,000 in excess thereof into Base Rate Loans or (ii)
continue such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the Borrowers
desire to convert or continue Revolving Credit Loans as provided above, CT on
behalf of the Borrowers shall give the Administrative Agent irrevocable prior
written notice in the form attached as Exhibit E (a "Notice of Conversion/
Continuation") not later than 11:00 a.m. (Charlotte time) three (3) Business
Days before the day on which a proposed conversion or continuation of such
Revolving Credit Loan is to be effective specifying (A) the Revolving Credit
Loans to be converted or continued, and, in the case of any LIBOR Rate Loan to
be converted or continued, the last day of the Interest Period therefor, (B) the
effective date of such conversion or continuation (which shall be a Business
Day), (C) the principal amount of such Revolving Credit Loans to be converted or
continued, and (D) the Interest Period to be applicable to such converted or
continued LIBOR Rate Loan. The Administrative Agent shall promptly notify the
Lenders of such Notice of Conversion/Continuation.
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SECTION 4.3 Fees.
(a) Commitment Fee. The Borrowers shall pay to the Administrative
Agent, for the account of the Lenders, a non-refundable commitment fee at a rate
per annum equal to 0.25% on the average daily unused portion of the Aggregate
Commitment. The commitment fee shall be payable in arrears on the last Business
Day of each calendar quarter during the term of this Agreement commencing
December 31, 1998, and on the Termination Date. Such commitment fee shall be
distributed by the Administrative Agent to the Lenders pro rata in accordance
with the Lenders' respective Commitment Percentages.
(b) Administrative Agent's and Other Fees. In order to compensate
the Administrative Agent for structuring and syndicating the Revolving Credit
Loans and for its obligations hereunder, the Borrowers agree to pay to the
Administrative Agent, for its account, the fees set forth in the separate fee
letter agreement executed by CT, on behalf of itself and the other Borrowers and
the Administrative Agent dated October 6, 1998.
SECTION 4.4 Manner of Payment. Each payment by the Borrowers on
account of the principal of or interest on the Revolving Credit Loans or of any
fee, commission or other amounts (including the Reimbursement Obligation)
payable to the Lenders under this Agreement or any Revolving Credit Note shall
be made not later than 1:00 p.m. (Charlotte time) on the date specified for
payment under this Agreement to the Administrative Agent at the Administrative
Agent's Office for the account of the Lenders (other than as set forth below)
pro rata in accordance with their respective Commitment Percentages (except as
specified below), in Dollars, in immediately available funds and shall be made
without any set-off, counterclaim or deduction whatsoever. Any payment received
after such time but before 2:00 p.m. (Charlotte time) on such day shall be
deemed a payment on such date for the purposes of Section 11.1, but for all
other purposes shall be deemed to have been made on the next succeeding Business
Day. Any payment received after 2:00 p.m. (Charlotte time) shall be deemed to
have been made on the next succeeding Business Day for all purposes. Upon
receipt by the Administrative Agent of each such payment, the Administrative
Agent shall distribute to each Lender at its address for notices set forth
herein its pro rata share of such payment in accordance with such Lender's
Commitment Percentage (except as specified below) and shall wire advice of the
amount of such credit to each Lender. Each payment to the Administrative Agent
of the Issuing Lender's fees or L/C Participants' commissions shall be made in
like manner, but for the account of the Issuing Lender or the L/C Participants,
as the case may be. Each payment to the Administrative Agent of Administrative
Agent's fees or expenses shall be made for the account of the Administrative
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Agent and any amount payable to any Lender under Sections 4.8, 4.9, 4.10, 4.11
or 13.2 shall be paid to the Administrative Agent for the account of the
applicable Lender. Subject to Section 4.1(b)(ii) if any payment under this
Agreement or any Revolving Credit Note shall be specified to be made upon a day
which is not a Business Day, it shall be made on the next succeeding day which
is a Business Day and such extension of time shall in such case be included in
computing any interest if payable along with such payment.
SECTION 4.5 Crediting of Payments and Proceeds. In the event that
the Borrowers shall fail to pay any of the Obligations when due and the
Obligations have been accelerated pursuant to Section 11.2, all payments
received by the Lenders upon the Revolving Credit Notes and the other
Obligations and all net proceeds from the enforcement of the Obligations shall
be applied first to all expenses then due and payable by the Borrowers
hereunder, then to all indemnity obligations then due and payable by the
Borrowers hereunder, then to all Administrative Agent's and Issuing Lender's
fees then due and payable, then to all commitment and other fees and commissions
then due and payable, then to accrued and unpaid interest on the Revolving
Credit Notes, the Reimbursement Obligation and any termination payments due in
respect of a Hedging Agreement with any Lender (which Hedging Agreement is
permitted or required hereunder) (pro rata in accordance with all such amounts
due), then to the principal amount of the Revolving Credit Notes and
Reimbursement Obligation (pro rata in accordance with all such amounts due) and
then to the cash collateral account described in Section 11.2(b) hereof to the
extent of any L/C Obligations then outstanding, in that order.
SECTION 4.6 Adjustments. If any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the Obligations owing to it,
or interest thereon, or if any Lender shall at any time receive any collateral
in respect to the Obligations owing to it (whether voluntarily or involuntarily,
by set-off or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of the Obligations
owing to such other Lender, or interest thereon, such Benefitted Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Extensions of Credit, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, that if all
or any portion of such excess payment or benefits is thereafter recovered from
such Benefitted Lender, such purchase shall be rescinded, and the purchase price
and benefits returned to the extent of such recovery, but without interest. The
Borrowers agree that each Lender so purchasing a portion of another Lender's
Extensions of Credit may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
SECTION 4.7 Nature of Obligations of Lenders Regarding Extensions of
Credit; Assumption by the Administrative Agent. The obligations of the Lenders
under this Agreement to make the Revolving Credit Loans and issue or participate
in Letters of Credit are several and are not joint or joint and several. Unless
the Administrative Agent shall have received notice from a Lender prior to a
proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent
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on the proposed borrowing date in accordance with Section 2.2(b) and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrowers on such date a corresponding amount. If such amount is made
available to the Administrative Agent on a date after such borrowing date, such
Lender shall pay to the Administrative Agent on demand an amount, until paid,
equal to the product of (a) the amount not made available by such Lender in
accordance with the terms hereof, times (b) the daily average Federal Funds Rate
during such period as determined by the Administrative Agent, times (c) a
fraction the numerator of which is the number of days that elapse from and
including such borrowing date to the date on which such amount not made
available by such Lender in accordance with the terms hereof shall have become
immediately available to the Administrative Agent and the denominator of which
is 360. A certificate of the Administrative Agent with respect to any amounts
owing under this Section shall be conclusive, absent manifest error. If such
Lender's Commitment Percentage of such borrowing is not made available to the
Administrative Agent by such Lender within three (3) Business Days of such
borrowing date, the Administrative Agent shall be entitled to recover such
amount made available by the Administrative Agent with interest thereon at the
rate per annum applicable to Base Rate Loans hereunder, on demand, from the
Borrowers. The failure of any Lender to make available its Commitment Percentage
of any Revolving Credit Loan requested by the Borrowers shall not relieve it or
any other Lender of its obligation, if any, hereunder to make its Commitment
Percentage of such Revolving Credit Loan available on the borrowing date, but no
Lender shall be responsible for the failure of any other Lender to make its
Commitment Percentage of such Revolving Credit Loan available on the borrowing
date.
SECTION 4.8 Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If with respect
to any Interest Period the Administrative Agent or any Lender (after
consultation with Administrative Agent) shall determine that, by reason of
circumstances affecting the foreign exchange and interbank markets generally,
deposits in eurodollars, in the applicable amounts are not being quoted via
Telerate Page 3750 or offered to the Administrative Agent or such Lender for
such Interest Period, then the Administrative Agent shall forthwith give notice
thereof to the Borrowers. Thereafter, until the Administrative Agent notifies
the Borrowers that such circumstances no longer exist (which notification shall
be given promptly, but in any event within thirty (30) days after the
Administrative Agent obtains actual knowledge that such circumstances no longer
exist), the obligation of the Lenders to make LIBOR Rate Loans and the right of
the Borrowers to convert any Revolving Credit Loan to or continue any Revolving
Credit Loan as a LIBOR Rate Loan shall be suspended, and the Borrowers shall
repay in full (or cause to be repaid in full) the then outstanding principal
amount of each such LIBOR Rate Loan together with accrued interest thereon, on
the last day of the then current Interest Period applicable to such LIBOR Rate
Loan or convert the then outstanding principal amount of each such LIBOR Rate
Loan to a Base Rate Loan as of the last day of such Interest Period.
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(b) Laws Affecting LIBOR Rate Availability. If, after the date
hereof, the introduction of, or any change in, any Applicable Law or any change
in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Lending Office) with
any request or directive (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency, shall make it
unlawful or impossible for any of the Lenders (or its Lending Office) to honor
its obligations hereunder to make or maintain any LIBOR Rate Loan, such Lender
shall promptly give notice thereof to the Administrative Agent and the
Administrative Agent shall promptly give notice to the Borrowers and the other
Lenders. Thereafter, until the Administrative Agent notifies the Borrowers that
such circumstances no longer exist (which notification shall be given promptly,
but in any event within thirty (30) days after the Administrative Agent obtains
actual knowledge that such circumstances no longer exist), (i) the obligations
of the Lenders to make LIBOR Rate Loans and the right of the Borrowers to
convert any Revolving Credit Loan or continue any Revolving Credit Loan as a
LIBOR Rate Loan shall be suspended and thereafter the Borrowers may select only
Base Rate Loans hereunder, and (ii) if any of the Lenders may not lawfully
continue to maintain a LIBOR Rate Loan to the end of the then current Interest
Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan
shall immediately be converted to a Base Rate Loan for the remainder of such
Interest Period.
(c) Increased Costs. If, after the date hereof, the introduction of,
or any change in, any Applicable Law, or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any of the
Lenders (or its Lending Office) with any request or directive (whether or not
having the force of law) of such Governmental Authority, central bank or
comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with
respect to any Revolving Credit Note, Letter of Credit or
Application or shall change the basis of taxation of payments to any
of the Lenders (or its Lending Office) of the principal of or
interest on any Revolving Credit Note, Letter of Credit or
Application or any other amounts due under this Agreement in respect
thereof (except for changes in the rate of tax on the overall net
income of any of the Lenders or its Lending Office imposed by the
jurisdiction in which such Lender is organized or is or should be
qualified to do business or such Lending Office is located); or
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(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit, insurance
or capital or similar requirement against assets of, deposits with
or for the account of, or credit extended by any of the Lenders (or
its Lending Office) or shall impose on any of the Lenders (or its
Lending Office) or the foreign exchange and interbank markets any
other condition affecting any Revolving Credit Note; and the result
of any of the foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or issuing or
participating in Letters of Credit or to reduce the yield or amount
of any sum received or receivable by any of the Lenders under this
Agreement or under the Revolving Credit Notes in respect of a LIBOR
Rate Loan or Letter of Credit or Application, then such Lender shall
promptly notify the Administrative Agent, and the Administrative
Agent shall promptly notify the Borrowers of such fact and demand
compensation therefor and, within fifteen (15) days after such
notice by the Administrative Agent, the Borrowers shall pay to such
Lender such additional amount or amounts as will compensate such
Lender or Lenders for such increased cost or reduction. The
Administrative Agent will promptly notify the Borrowers of any event
of which it has knowledge which will entitle such Lender to
compensation pursuant to this Section 4.8(c); provided, that the
Administrative Agent shall incur no liability whatsoever to the
Lenders or the Borrowers in the event it fails to do so. The amount
of such compensation shall be determined, in the applicable Lender's
sole discretion, based upon the assumption that such Lender funded
its Commitment Percentage of the LIBOR Rate Loans in the London
interbank market and using any reasonable attribution or averaging
methods which such Lender deems appropriate and practical. A
certificate of such Lender setting forth the basis for determining
such amount or amounts necessary to compensate such Lender shall be
forwarded to the Borrowers through the Administrative Agent and
shall be conclusively presumed to be correct save for manifest
error.
SECTION 4.9 Indemnity. The Borrowers hereby indemnify each of the
Lenders against any loss or expense which may arise or be attributable to each
Lender's obtaining, liquidating or employing deposits or other funds acquired to
effect, fund or maintain any Revolving Credit Loan (a) as a consequence of any
failure by the Borrowers to make any payment when due of any amount due
hereunder in connection with a LIBOR Rate Loan, (b) due to any failure of the
Borrowers to borrow on a date specified therefor in a Notice of Borrowing or
Notice of Conversion/Continuation or (c) due to any payment, prepayment or
conversion of any LIBOR Rate Loan on a date other than the last day of the
Interest Period therefor. The amount of such loss or expense shall be
determined, in the applicable Lender's sole discretion, based upon the
assumption that such Lender funded its Commitment Percentage of the LIBOR Rate
Loans in the London interbank market and using any reasonable attribution or
averaging methods which such Lender deems appropriate and practical. A
certificate of such Lender setting forth the basis for determining such amount
or amounts necessary to compensate such Lender shall be forwarded to the
Borrowers through the Administrative Agent and shall be conclusively presumed to
be correct save for manifest error.
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SECTION 4.10 Capital Requirements. If either (a) the introduction
of, or any change in, or in the interpretation of, any Applicable Law or (b)
compliance with any guideline or request from any central bank or comparable
agency or other Governmental Authority (whether or not having the force of law),
has or would have the effect of reducing the rate of return on the capital of,
or has affected or would affect the amount of capital required to be maintained
by, any Lender or any corporation controlling such Lender as a consequence of,
or with reference to the Commitments and other commitments of this type, below
the rate which the Lender or such other corporation could have achieved but for
such introduction, change or compliance, then within five (5) Business Days
after written demand by any such Lender, the Borrowers shall pay to such Lender
from time to time as specified by such Lender additional amounts sufficient to
compensate such Lender or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrowers and the Administrative Agent by such
Lender, shall, in the absence of manifest error, be presumed to be correct and
binding for all purposes.
SECTION 4.11 Taxes.
(a) Payments Free and Clear. Any and all payments by the Borrowers
hereunder or under the Revolving Credit Notes or the Letters of Credit shall be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholding, and all liabilities
with respect thereto excluding, (i) in the case of each Lender and the
Administrative Agent, income and franchise taxes imposed by the jurisdiction
under the laws of which such Lender or the Administrative Agent (as the case may
be) is organized or is or should be qualified to do business or any political
subdivision thereof and (ii) in the case of each Lender, income and franchise
taxes imposed by the jurisdiction of such Lender's Lending Office or any
political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrowers shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Revolving Credit Note or
Letter of Credit to any Lender or the Administrative Agent, (A) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.11) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the amount such party would have received had no
such deductions been made, (B) the Borrowers shall make such deductions, (C) the
Borrowers shall pay the full amount deducted to the relevant taxing authority or
other authority in accordance with Applicable Law, and (D) the Borrowers shall
deliver to the Administrative Agent evidence of such payment to the relevant
taxing authority or other authority in the manner provided in Section 4.11(d).
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(b) Stamp and Other Taxes. In addition, the Borrowers shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes, levies of the United
States or any state or political subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
Revolving Credit Loans, the Letters of Credit, the other Loan Documents, or the
perfection of any rights or security interest in respect thereto (hereinafter
referred to as "Other Taxes").
(c) Indemnity. The Borrowers shall indemnify each Lender and the
Administrative Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.11) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Such indemnification shall be made within thirty (30) days from the date such
Lender or the Administrative Agent (as the case may be) makes written demand
therefor. The Administrative Agent and the Lenders hereby agree to use
reasonable efforts, at the expense of the Borrowers, to obtain a refund of any
such Taxes or Other Taxes which were not correctly or legally asserted.
(d) Evidence of Payment. Within thirty (30) days after the date of
any payment of Taxes or Other Taxes, the Borrowers shall furnish to the
Administrative Agent, at its address referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment reasonably satisfactory to the Administrative Agent.
(e) Delivery of Tax Forms. Each Lender organized under the laws of a
jurisdiction other than the United States or any state thereof shall deliver to
the Borrowers, with a copy to the Administrative Agent, on the Closing Date or
concurrently with the delivery of the relevant Assignment and Acceptance, as
applicable, (i) two United States Internal Revenue Service Forms 4224 or Forms
1001, as applicable (or successor forms) properly completed and certifying in
each case that such Lender is entitled to a complete exemption from withholding
or deduction for or on account of any United States federal income taxes, and
(ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form,
as the case may be, to establish an exemption from United States backup
withholding taxes. Each such Lender further agrees to deliver to the Borrowers,
with a copy to the Administrative Agent, a Form 1001 or 4224 and Form W-8 or
W-9, or successor applicable forms or manner of certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrowers, certifying in the case of a Form
1001 or 4224 that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes (unless in any such case an event (including without limitation any change
in treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders such forms inapplicable or
the exemption to which such forms relate unavailable and such Lender notifies
the Borrowers and the Administrative Agent that it is not entitled to receive
payments without deduction or withholding of United States federal income taxes)
and, in the case of a Form W-8 or W-9, establishing an exemption from United
States backup withholding tax.
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(f) Survival. Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in this Section 4.11 shall survive the payment in full of
the Obligations and the termination of the Commitments.
SECTION 4.12 Change in Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Sections 4.8, 4.9,
4.10 or 4.11 with respect to such Lender, it will use its best efforts to
designate another lending office as its Lending Office for any Loans affected by
such event with the intent of avoiding the consequence of the event giving rise
to the operation of any such Section; provided, that such designation is made on
such terms that such Lender and its Lending Office suffer no economic, legal or
regulatory disadvantage as a consequence thereof.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1 Closing. The closing shall take place at the offices of
Kennedy, Covington, Lobdell & Hickman, L.L.P. at 10:00 a.m. on December 31,
1998, or on such other date as the parties hereto shall mutually agree.
SECTION 5.2 Conditions to Closing and Initial Extensions of Credit.
The obligation of the Lenders to close this Agreement and to make the initial
Revolving Credit Loan or issue the initial Letter of Credit is subject to the
satisfaction of each of the following conditions:
(a) Executed Loan Documents. This Agreement, the Revolving Credit
Notes, and the other Loan Documents shall have been duly authorized, executed
and delivered to the Administrative Agent by the parties thereto, shall be in
full force and effect and no default shall exist thereunder, and the Borrowers
shall have delivered original counterparts thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officer's Certificate of the Borrowers. The
Administrative Agent shall have received a certificate from a
Responsible Officer, in form and substance reasonably satisfactory
to the Administrative Agent, to the effect that all
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representations and warranties of the Borrowers contained in this
Agreement and the other Loan Documents are true, correct and
complete; that the Borrowers are not in violation of any of the
covenants contained in this Agreement and the other Loan Documents;
that, after giving effect to the transactions contemplated by this
Agreement, no Default or Event of Default has occurred and is
continuing; and that the Borrowers have satisfied each of the
closing conditions.
(ii) Certificate of Secretary of each Borrower. The
Administrative Agent shall have received a certificate of the
secretary or assistant secretary of each Borrower certifying as to
the incumbency and genuineness of the signature of each officer of
such Borrower executing Loan Documents to which it is a party and
certifying that attached thereto is a true, correct and complete
copy of (A) the articles of incorporation of such Borrower and all
amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of incorporation, (B) the
bylaws of such Borrower as in effect on the date of such
certification, (C) resolutions duly adopted by the Board of
Directors of such Borrower authorizing the borrowings contemplated
hereunder and the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party, and
(D) each certificate required to be delivered pursuant to Section
5.2(b)(iii).
(iii) Certificates of Good Standing. To the extent
requested by the Administrative Agent, the Administrative Agent
shall have received long-form certificates as of a recent date of
the good standing of each Borrower under the laws of its
jurisdiction of organization and each other jurisdiction where such
Borrower is qualified to do business and a certificate of the
relevant taxing authorities of such jurisdictions certifying that
such Borrower has filed required tax returns and owes no delinquent
taxes.
(iv) Opinions of Counsel. The Administrative Agent shall
have received favorable opinions of counsel to the Borrowers
addressed to the Administrative Agent and the Lenders with respect
to the Borrowers, the Loan Documents and such other matters as the
Lenders shall reasonably request.
(v) Tax Forms. The Administrative Agent shall have
received copies of the United States Internal Revenue Service forms
required by Section 4.11(e) hereof.
(c) Consents; Defaults.
(i) Governmental and Third Party Approvals. The
Borrowers shall have obtained all necessary approvals,
authorizations and consents of any Person and of all Governmental
Authorities and courts having jurisdiction with respect to the
transactions contemplated by this Agreement and the other Loan
Documents.
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(ii) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any Governmental Authority to enjoin,
restrain, or prohibit, or to obtain substantial damages in respect
of, or which is related to or arises out of this Agreement or the
other Loan Documents or the consummation of the transactions
contemplated hereby or thereby.
(iii) No Event of Default. No Default or Event of
Default shall have occurred and be continuing.
(d) Financial Matters.
(i) Financial Statements. The Administrative Agent shall
have received the most recent audited Consolidated financial
statements of the Borrowers and their Subsidiaries, all in form and
substance reasonably satisfactory to the Administrative Agent.
(ii) Financial Condition Certificate. The Borrowers
shall have delivered to the Administrative Agent a certificate, in
form and substance reasonably satisfactory to the Administrative
Agent, and certified as accurate by a Responsible Officer, that (A)
the Borrowers and their Subsidiaries are Solvent, (B) the material
payables of the Borrowers are current and not past due, (C) attached
thereto is a pro forma balance sheet of the Borrowers and their
Subsidiaries setting forth on a pro forma basis the financial
condition of the Borrowers and their Subsidiaries on a Consolidated
basis as of the Closing Date, reflecting a pro forma basis the
effect of the transactions contemplated herein, including all fees
and expenses in connection therewith, and evidencing compliance on a
pro forma basis with the covenants contained in Articles IX and X
hereof, (D) attached thereto are the financial projections
previously delivered to the Administrative Agent representing the
good faith opinions of the Borrowers and senior management thereof
as to the projected results contained therein and (E) attached
thereto is a calculation of the Applicable Margin pursuant to
Section 4.1(c).
(iii) Payment at Closing; Fee Letters. The Borrowers
shall have paid the fees set forth or referenced in Section 4.3 and
any other accrued and unpaid fees or commissions due hereunder
(including, without limitation, reasonable legal fees and expenses)
to the Administrative Agent and Lenders, and to any other Person
such amount as may be due thereto in connection with the
transactions contemplated hereby, including all taxes, fees and
other charges in connection with the execution, delivery, recording,
filing and registration of any of the Loan Documents. The
Administrative Agent shall have received duly authorized and
executed copies of the fee letter agreement referred to in Section
4.3(b).
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(e) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall
have received from CT on behalf of the Borrowers a Notice of
Borrowing in accordance with Section 2.2(a), and a Notice of Account
Designation specifying the account or accounts to which the proceeds
of any Revolving Credit Loans made after the Closing Date are to be
disbursed.
(ii) Proceedings and Documents. All opinions,
certificates and other instruments and all proceedings in connection
with the transactions contemplated by this Agreement shall be
reasonably satisfactory in form and substance to the Lenders. The
Lenders shall have received copies of all other instruments and
other evidence as the Lender may reasonably request, in form and
substance reasonably satisfactory to the Lenders, with respect to
the transactions contemplated by this Agreement and the taking of
all actions in connection therewith.
(iii) Due Diligence and Other Documents. The Borrowers
shall have delivered to the Administrative Agent such other
documents, certificates and opinions as the Administrative Agent may
reasonably request.
SECTION 5.3 Conditions to All Extensions of Credit. The obligations
of the Lenders to make any Extensions of Credit is subject to the satisfaction
of the following conditions precedent on the relevant borrowing or issuance
date, as applicable:
(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and correct
on and as of such borrowing or issuance date with the same effect as if made on
and as of such date; except for any representation and warranty made as of an
earlier date, which representation and warranty shall remain true and correct as
of such earlier date.
(b) No Existing Default. No Default or Event of Default shall have
occurred and be continuing hereunder (i) on the borrowing date with respect to
such Revolving Credit Loan or after giving effect to the Revolving Credit Loans
to be made on such date or (ii) or the issuance date with respect to such Letter
of Credit to be issued or after giving affect to such Letters of Credit on such
date.
(c) Officer's Compliance Certificate; Additional Documents. The
Administrative Agent shall have received the current Officer's Compliance
Certificate and each additional document, instrument, legal opinion or other
item of information reasonably requested by it.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
SECTION 6.1 Representations and Warranties. To induce the
Administrative Agent and the Lenders to enter into this Agreement and to induce
the Lenders to make Extensions of Credit, each Borrower hereby represents and
warrants to the Administrative Agent and the Lenders that:
(a) Organization; Power; Qualification. Each Borrower and each
Subsidiary thereof is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation, has the
power and authority to own its properties and to carry on its business as now
being conducted and is duly qualified and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification and authorization except where the failure
to be so qualified could not reasonably be expected to have a Material Adverse
Effect. The jurisdictions in which each Borrower and each Subsidiary thereof are
organized and qualified to do business as of the Closing Date are described on
Schedule 6.1(a).
(b) Ownership. Each Subsidiary of each Borrower as of the Closing
Date is listed on Schedule 6.1(b). As of the Closing Date, the capitalization of
each Borrower and each Subsidiary thereof consists of the number of shares,
authorized, issued and outstanding, of such classes and series, with or without
par value, described on Schedule 6.1(b). All outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
shareholders of the Subsidiaries of each Borrower and the number of shares owned
by each as of the Closing Date are described on Schedule 6.1(b). As of the
Closing Date, there are no outstanding stock purchase warrants, subscriptions,
options, securities, instruments or other rights of any type or nature
whatsoever, which are convertible into, exchangeable for or otherwise provide
for or permit the issuance of capital stock of any Borrower or any Subsidiary
thereof, except as described on Schedule 6.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing. Each
Borrower and each Subsidiary thereof has the right, power and authority and has
taken all necessary corporate and other action to authorize the execution,
delivery and performance of this Agreement and each of the other Loan Documents
to which it is a party in accordance with their respective terms. This Agreement
and each of the other Loan Documents have been duly executed and delivered by
the duly authorized officers of each Borrower and each Subsidiary thereof party
thereto, and each such document constitutes the legal, valid and binding
obligation of each Borrower or its Subsidiary party thereto, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar state or federal
debtor relief laws from time to time in effect which affect the enforcement of
creditors' rights in general and the availability of equitable remedies.
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(d) Compliance of Agreement, Loan Documents and Borrowing with Laws,
Etc. The execution, delivery and performance by each Borrower and each
Subsidiary thereof of the Loan Documents to which each such Person is a party,
in accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any Governmental Approval or
violate any Applicable Law relating to any Borrower or any Subsidiary thereof,
(ii) conflict with, result in a breach of or constitute a default under the
articles of incorporation, bylaws or other organizational documents of any
Borrower or any Subsidiary thereof or any Material Contract to which such Person
is a party or by which any of its properties may be bound or any Governmental
Approval relating to such Person, or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any material property now owned
or hereafter acquired by such Person other than Liens arising under the Loan
Documents.
(e) Compliance with Law; Governmental Approvals. Each Borrower and
each Subsidiary thereof (i) has all material Governmental Approvals required by
any Applicable Law for it to conduct its business, each of which is in full
force and effect, is final and not subject to review on appeal and is not the
subject of any pending or, to the best of such Borrower's knowledge, threatened
attack by direct or collateral proceeding, and (ii) is in material compliance
with each material Governmental Approval applicable to each Borrower and each
Subsidiary thereof and is in material compliance with all other material
Applicable Laws relating to it or any of its respective properties.
(f) Tax Returns and Payments. Each Borrower and each Subsidiary
thereof has duly filed or caused to be filed all federal, state, local and other
tax returns required by Applicable Law to be filed, and has paid, or made
adequate provision for the payment of, all federal, state, local and other
taxes, assessments and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable, except where the payment
of such tax is being disputed in good faith and adequate reserves have been
established in accordance with GAAP. No Governmental Authority has asserted any
Lien or other claim against any Borrower or any Subsidiary thereof with respect
to material unpaid taxes which has not been discharged or resolved or is not
being contested in good faith and for which adequate reserves have been
established in accordance with GAAP. The charges, accruals and reserves on the
books of each Borrower and each Subsidiary thereof in respect of federal, state,
local and other taxes for all Fiscal Years and portions thereof since the
organization of such Borrower and each Subsidiary thereof are in the judgment of
each such Borrower adequate, and each such Borrower does not anticipate any
additional material taxes or assessments for any of such years.
(g) Intellectual Property Matters. Each Borrower and each Subsidiary
thereof owns or possesses rights to use all material franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, trade
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names, trade name rights, copyrights and rights with respect to the foregoing
which are required to conduct its business. No event has occurred which permits,
or after notice or lapse of time or both would permit, the revocation or
termination of any such rights, and no Borrower nor any Subsidiary thereof is
liable to any Person for infringement under Applicable Law with respect to any
such rights as a result of its business operations.
(h) Environmental Matters.
(i) The properties of each Borrower and each Subsidiary
thereof do not contain, and to their knowledge have not previously
contained, any Hazardous Materials in amounts or concentrations
which (A) constitute or constituted a violation of applicable
Environmental Laws or (B) could give rise to liability under
applicable Environmental Laws, except where such violation or
liability could not reasonably be expected to result in a Material
Adverse Effect;
(ii) Such properties and all operations conducted in
connection therewith are in compliance, and have been in compliance,
with all applicable Environmental Laws, and there is no
contamination at, under or about such properties or such operations
which could interfere with the continued operation of such
properties, except where the failure to so comply or the existence
of such contamination could not reasonably be expected to result in
a Material Adverse Effect;
(iii) No Borrower nor any Subsidiary thereof has
received any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of their
properties or the operations conducted in connection therewith, nor
does any Borrower or any Subsidiary thereof have knowledge or reason
to believe that any such notice will be received or is being
threatened, except where such notice could not reasonably be
expected to result in a Material Adverse Effect;
(iv) To the best knowledge of the Borrowers and their
Subsidiaries, Hazardous Materials have not been transported or
disposed of from the properties of any Borrower or any Subsidiary
thereof in violation of, or in a manner or to a location which could
give rise to liability under, Environmental Laws, nor since the date
of acquisition of such property by any Borrower or its Subsidiary
thereof, have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of such properties in
violation of, or in a manner that could give rise to liability
under, any applicable Environmental Laws, except where any such
event could not reasonably be expected to result in a Material
Adverse Effect;
(v) No judicial proceedings or governmental or
administrative action is pending, or, to the knowledge of any
Borrower, threatened, under any Environmental
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Law to which any Borrower or any Subsidiary thereof is or is
expected to be named as a party with respect to such properties or
operations conducted in connection therewith, nor are there any
consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect to
such properties or such operations, except where any such event
could not reasonably be expected to result in a Material Adverse
Effect; and
(vi) Since the date of the acquisition of any property,
there has been no release, or to the best of any Borrower's
knowledge, the threat of release, of Hazardous Materials at or from
such properties, in violation of or in amounts or in a manner that
could give rise to liability under Environmental Laws, except where
such release could not reasonably be expected to result in a
Material Adverse Effect.
(i) ERISA.
(i) As of the Closing Date, no Borrower nor any ERISA
Affiliate maintains or contributes to, or has any obligation under,
any Employee Benefit Plans other than those identified on Schedule
6.1(i);
(ii) Each Borrower and each ERISA Affiliate is in
material compliance with all applicable provisions of ERISA and the
regulations and published interpretations thereunder with respect to
all Employee Benefit Plans except for any required amendments for
which the remedial amendment period as defined in Section 401(b) of
the Code has not yet expired. Each Employee Benefit Plan that is
intended to be qualified under Section 401(a) of the Code (A) has
been determined by the Internal Revenue Service to be so qualified,
and each trust related to such plan has been determined to be exempt
under Section 501(a) of the Code or (B) is within the remedial
amendment period as defined in Section 401(b) of the Code as to the
initial adoption of such Employee Benefit Plan. No liability has
been incurred by any Borrower or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the
Code) been incurred (without regard to any waiver granted under
Section 412 of the Code), nor has any funding waiver from the
Internal Revenue Service been received or requested with respect to
any Pension Plan, nor has any Borrower or any ERISA Affiliate failed
to make any contributions or to pay any amounts due and owing as
required by Section 412 of the Code, Section 302 of ERISA or the
terms of any Pension Plan prior to the due dates of such
contributions under Section 412 of the Code or Section 302 of ERISA,
nor has there been any event requiring any disclosure under Section
4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan;
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(iv) No Borrower nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code, (B) incurred any liability
to the PBGC which remains outstanding other than the payment of
premiums and there are no premium payments which are due and unpaid,
(C) failed to make a required contribution or payment to a
Multiemployer Plan, or (D) failed to make a required installment or
other required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably
expected to occur; and
(vi) No material proceeding, claim, lawsuit and/or
investigation is existing or, to the best knowledge of any Borrower
after due inquiry, threatened concerning or involving any (A)
employee welfare benefit plan (as defined in Section 3(1) of ERISA)
currently maintained or contributed to by any Borrower or any ERISA
Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(j) Margin Stock. No Borrower nor any Subsidiary thereof is engaged
principally or as one of its activities in the business of extending credit for
the purpose of "purchasing" or "carrying" any "margin stock" (as each such term
is defined or used in Regulation U of the Board of Governors of the Federal
Reserve System). No part of the proceeds of any of the Revolving Credit Loans or
Letters of Credit will be used for purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation T, U or X of such Board of Governors.
(k) Government Regulation. No Borrower nor any Subsidiary thereof is
an "investment company" or a company "controlled" by an "investment company" (as
each such term is defined or used in the Investment Company Act of 1940, as
amended) and no Borrower nor any Subsidiary thereof is, or after giving effect
to any Extension of Credit will be, subject to regulation under the Public
Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as
amended, or any other Applicable Law which materially limits its ability to
incur or consummate the transactions contemplated hereby.
(l) Material Contracts. Schedule 6.1(l) sets forth a complete and
accurate list of all Material Contracts of the Borrowers and their Subsidiaries
in effect as of the Closing Date not listed on any other Schedule hereto; other
than as set forth in Schedule 6.1(l), each such Material Contract is, and after
giving effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms
thereof. The Borrowers have delivered to the Administrative Agent a true and
complete copy of each Material Contract required to be listed on Schedule
6.1(l).
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(m) Employee Relations. Each Borrower and each Subsidiary thereof
has a stable work force in place and is not, as of the Closing Date, party to
any collective bargaining agreement nor has any labor union been recognized as
the representative of its employees except as set forth on Schedule 6.1(m). No
Borrower knows of no pending, threatened or contemplated strikes, work stoppage
or other collective labor disputes involving its employees or those of its
Subsidiaries.
(n) Burdensome Provisions. No Borrower nor any Subsidiary thereof is
a party to any indenture, agreement, lease or other instrument, or subject to
any corporate or partnership restriction, Governmental Approval or Applicable
Law which is so unusual or burdensome as in the foreseeable future could be
reasonably expected to have a Material Adverse Effect. No Borrower nor any
Subsidiary thereof presently anticipates that future expenditures needed to meet
the provisions of any statutes, orders, rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse Effect.
(o) Financial Statements. The (i) audited Consolidated balance
sheets of the Borrowers and their Subsidiaries as of December 31, 1997 and the
related statements of income and retained earnings and cash flows for the Fiscal
Years then ended and (ii) unaudited Consolidated balance sheet of the Borrowers
and their Subsidiaries as of September 30, 1998 and related unaudited interim
statements of income and retained earnings, copies of which have been furnished
to the Administrative Agent and each Lender, are complete and correct and fairly
present the assets, liabilities and financial position of the Borrowers and
their Subsidiaries as at such dates, and the results of the operations and
changes of financial position for the periods then ended (except in the case of
unaudited statements to changes resulting from normal year-end adjustments and
items that would be disclosed in footnotes to the audited statements). All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP. The Borrowers and their Subsidiaries have
no Debt, material obligation or other unusual material forward or long-term
commitment which is not fairly reflected in the foregoing financial statements
or in the notes thereto.
(p) No Material Adverse Change. Since December 31, 1997, there has
been no material adverse change in the properties, business, operations,
prospects, or condition (financial or otherwise) of the Borrowers and their
Subsidiaries and no event has occurred or condition arisen that could reasonably
be expected to have a Material Adverse Effect.
(q) Solvency. As of the Closing Date and after giving effect to each
Extension of Credit made hereunder, the Borrowers and their Subsidiaries, taken
as a whole, will be Solvent.
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(r) Titles to Properties. Each Borrower and each Subsidiary thereof
has such title to the real property owned by it as is necessary or desirable to
the conduct of its business and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the
balance sheets of the Borrowers and their Subsidiaries delivered pursuant to
Section 6.1(o), except those which have been disposed of by any Borrower or any
Subsidiary thereof subsequent to such date which dispositions have been in the
ordinary course of business or as otherwise expressly permitted hereunder.
(s) Liens. None of the properties and assets of any Borrower or any
Subsidiary thereof is subject to any Lien, except Liens permitted pursuant to
Section 10.3. No financing statement under the Uniform Commercial Code of any
state which names any Borrower or any Subsidiary thereof or any of their
respective trade names or divisions as debtor and which has not been terminated,
has been filed in any state or other jurisdiction and no Borrower nor any
Subsidiary thereof has signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens permitted by Section 10.3 hereof.
(t) Debt and Guaranty Obligations; Subordinated Debt. Schedule
6.1(t) is a complete and correct listing of all Debt (including Subordinated
Debt) and Guaranty Obligations of each Borrower and each Subsidiary thereof as
of the Closing Date in excess of $250,000. Each Borrower and each Subsidiary
thereof have performed and are in material compliance with all of the terms of
such Debt and Guaranty Obligations and all instruments and agreements relating
thereto, and no default or event of default, or event or condition which with
notice or lapse of time or both would constitute such a default or event of
default on the part of any Borrower or any Subsidiary thereof exists with
respect to any such Debt or Guaranty Obligation.
(u) Litigation. Except for matters existing on the Closing Date as
set forth on Schedule 6.1(u), there are no actions, suits or proceedings pending
nor, to the knowledge of any Borrower, threatened against or in any other way
relating adversely to or affecting any Borrower or any Subsidiary thereof or any
of their respective properties in any court or before any arbitrator of any kind
or before or by any Governmental Authority which is reasonably likely to have a
Material Adverse Effect.
(v) Absence of Defaults. No event has occurred or is continuing (i)
which constitutes a Default or an Event of Default, or (ii) which constitutes,
or which with the passage of time or giving of notice or both would constitute,
a default or event of default by any Borrower or any Subsidiary thereof under
any Material Contract or judgment, decree or order to which any Borrower or any
Subsidiary thereof is a party or by which any Borrower or any Subsidiary thereof
or any of their respective properties may be bound or which would require any
Borrower or any Subsidiary thereof to make any payment thereunder prior to the
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scheduled maturity date therefor which, with respect to the matters set forth in
clause (ii) could reasonably be expected to result in a Material Adverse Effect.
(w) Communications Regulatory Matters.
(i) Each Network Agreement has been duly executed and
delivered by the respective parties thereto, is in full force and
effect and no Borrower, any Subsidiary thereof nor, to the best
knowledge of the Borrowers, any of the other parties thereto, is in
default of any of the material provisions thereof.
(ii) Schedule 6.1(w) hereto sets forth, as of the
Closing Date, a true and complete list of the following information
for each Communications License or PUC Authorization issued to any
Borrower or any Subsidiary thereof: (A) for all Communications
Licenses, the name of the licensee, the type of service and the
expiration dates; and (B) for each PUC Authorization, the geographic
area covered by such PUC Authorization, the services that may be
provided thereunder and the expiration date, if any.
(iii) No Borrower nor any Subsidiary thereof is in
material violation of any Communications Law applicable thereto. As
of the Closing Date, the Communications Licenses and PUC
Authorizations specified on Schedule 6.1(w) hereto are valid and in
full force and effect without conditions except for such conditions
as are generally applicable to holders of such Communications
Licenses and PUC Authorizations. No event has occurred and is
continuing which could reasonably be expected to (A) result in the
imposition of a material forfeiture or the revocation, termination
or adverse modification of any such Communications License or PUC
Authorization or (B) materially and adversely affect any rights of
any Borrower or any Subsidiary thereof. The Borrowers have no reason
to believe and have no knowledge that Communications Licenses and
PUC Authorizations will not be renewed in the ordinary course.
(iv) All of the Network Facilities and other material
properties, equipment and systems owned, leased or managed by any
Borrower and any Subsidiary thereof are, and to the knowledge of the
Borrowers, all such property, equipment and systems to be acquired
or added in connection with any contemplated system expansion or
construction will be, in good repair, working order and condition
(reasonable wear and tear excepted) and are and will be in
compliance with all material terms and conditions of the
Communications Licenses and PUC Authorizations and all material
standards or rules imposed by applicable Communications Law and any
Governmental Authority or as imposed under any agreements with
telephone companies and customers.
(v) Each Borrower and each Subsidiary thereof have paid
all franchise, license or other fees and charges which have become
due pursuant to any
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Governmental Approval in respect of their business (or are
contesting the same in good faith after establishing appropriate
reserves required by GAAP) and have made appropriate provision as is
required by GAAP for any such fees and charges which have accrued.
(x) Accuracy and Completeness of Information. All written
information, reports and other papers and data produced by or on behalf of each
Borrower and each Subsidiary thereof and furnished to the Lenders were, at the
time the same were so furnished, complete and correct in all material respects
to the extent necessary to give the recipient a true and accurate knowledge of
the subject matter. No document furnished or written statement made to the
Administrative Agent or the Lenders by any Borrower or any Subsidiary thereof in
connection with the negotiation, preparation or execution of this Agreement or
any of the Loan Documents contains or will contain, at the time furnished, any
untrue statement of a material fact to the creditworthiness of any Borrower or
any Subsidiary thereof or omits or will omit, at the time furnished, to state a
material fact necessary in order to make the statements contained therein not
misleading. No Borrower is aware of any facts which it has not disclosed in
writing to the Administrative Agent having a Material Adverse Effect, or insofar
as any Borrower can now foresee, could reasonably be expected to have a Material
Adverse Effect.
SECTION 6.2 Year 2000 Compatibility. The Borrowers are aware of the
problem that may be presented for certain computer systems by using date fields
and the like on and after January 1, 2000 and have developed and are
implementing a plan to help assure that their computer systems (including
systems and equipment supplied by others or with which the Borrowers' systems
interface) will be unaffected by such problems except where such problem
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect. The cost of such development and implementation is not
anticipated to result in a Default or materially adversely affect the ability of
the Borrowers to perform their obligations under this Agreement.
SECTION 6.3 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this Agreement. All representations and warranties
made under this Agreement shall be made or deemed to be made at and as of the
Closing Date, shall survive the Closing Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.
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ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and
the Commitments terminated, unless consent has been obtained in the manner set
forth in Section 13.11 hereof, each Borrower will furnish or cause to be
furnished to the Administrative Agent and to the Lenders at their respective
addresses as set forth on Schedule 1, or such other address as may be designated
by the Administrative Agent and Lenders from time to time:
SECTION 7.1 Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in
any event within forty-five (45) days after the end of the first three (3)
fiscal quarters of each Fiscal Year, an unaudited Consolidated and consolidating
balance sheet of the Borrowers and their Subsidiaries as of the close of such
fiscal quarter and unaudited Consolidated and consolidating statements of
income, retained earnings and cash flows for the fiscal quarter then ended and
that portion of the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and prepared by the Borrowers in accordance with
GAAP and, if applicable, containing disclosure of the effect on the financial
position or results of operations of any change in the application of accounting
principles and practices during the period, and certified by a Responsible
Officer of CT to present fairly in all material respects the financial condition
of the Borrowers and their Subsidiaries as of their respective dates and the
results of operations of the Borrowers and their Subsidiaries for the respective
periods then ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and in any
event within ninety (90) days after the end of each Fiscal Year, an audited
Consolidated (and unaudited consolidating) balance sheet of the Borrowers and
their Subsidiaries as of the close of such Fiscal Year and audited Consolidated
(and unaudited consolidating) statements of income, retained earnings and cash
flows for the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year and prepared by an independent certified public
accounting firm of nationally recognized standing in accordance with GAAP and,
if applicable, containing disclosure of the effect on the financial position or
results of operation of any change in the application of accounting principles
and practices during the year, and accompanied by a report thereon by such
certified public accountants that is not qualified with respect to scope
limitations imposed by any Borrower or any of its Subsidiaries or with respect
to accounting principles followed by any Borrower or any Subsidiary thereof not
in accordance with GAAP.
(c) Annual Business Plan and Financial Projections. As soon as
practicable and in any event within thirty (30) days after the beginning of each
Fiscal Year, a business plan the
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Borrowers and their Subsidiaries for the ensuing four (4) fiscal quarters, such
plan to be prepared in accordance with GAAP and to include, on a quarterly
basis, the following: a quarterly operating and capital budget, a projected
income statement, statement of cash flows and balance sheet and a report
containing management's discussion and analysis of such projections, accompanied
by a certificate from a Responsible Officer of CT to the effect that, to the
best of such officer's knowledge, such projections are good faith estimates of
the financial condition and operations of the Borrowers and their Subsidiaries
for such four (4) quarter period.
SECTION 7.2 Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Section 7.1 (a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of a
Responsible Officer of CT in the form of Exhibit F attached hereto (an
"Officer's Compliance Certificate").
SECTION 7.3 Accountants' Certificate. At each time financial
statements are delivered pursuant to Section 7.1(b), a certificate of the
independent public accountants certifying such financial statements addressed to
the Administrative Agent for the benefit of the Lenders:
(a) stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature and period of existence; and
(b) including the calculations prepared by such accountants required
to establish whether or not the Borrowers and their Subsidiaries are in
compliance with the financial covenants set forth in Article IX hereof as at the
end of each respective period.
SECTION 7.4 Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to any Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto;
(b) As soon as available and in any event within forty-five (45)
days after the end of each Fiscal Year of the Borrowers, an updated Schedule
6.1(w) identifying any material Communications License or material PUC
Authorization lost, surrendered or canceled during such period, and within ten
(10) Business Days after the receipt by any Borrower or any Subsidiary thereof
of written notice that any Communications License or PUC Authorization has been
lost or canceled, copies of any such notice accompanied by a report describing
the measures undertaken by any Borrower or any Subsidiary thereof to prevent
such loss or
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cancellation (and the anticipated impact, if any, that such loss or cancellation
will have upon the business of the Borrowers and their Subsidiaries); and
(c) Such other information regarding the operations, business
affairs and financial condition of any Borrower or any Subsidiary thereof as the
Administrative Agent or any Lender may reasonably request.
SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in
no event later than ten (10) days after any Responsible Officer obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all material proceedings and investigations
by or before any Governmental Authority and all material actions and proceedings
in any court or before any arbitrator against or involving any Borrower or any
Subsidiary thereof or any of their respective properties, assets or businesses;
(b) any notice of any material violation received by any Borrower or
any Subsidiary thereof from any Governmental Authority including, without
limitation, any notice of material violation of Environmental Laws which in any
such case could reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in, or threatens to
result in, a strike or other work action against any Borrower or any Subsidiary
thereof;
(d) any attachment, judgment, lien, levy or order exceeding $500,000
that may be assessed against any Borrower or any Subsidiary thereof;
(e) (i) any Default or Event of Default, or (ii) any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default under any Material Contract to which
any Borrower or any Subsidiary thereof is a party or by which such Borrower or
such Subsidiary or any of their respective properties may be bound;
(f) (i) any unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code (along with a copy thereof), (ii) all notices
received by any Borrower or any ERISA Affiliate of the PBGC's intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (iii) all notices received by any Borrower or any ERISA Affiliate
from a Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA and (iv) any Borrower
obtaining knowledge or reason to know that such Borrower or any ERISA Affiliate
has filed or intends
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to file a notice of intent to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA;
(g) the enactment or promulgation after the date hereof of any
federal, state, provincial or local statute, regulation or ordinance or judicial
or administrative decision or order (or, to the extent that any Borrower has
knowledge thereof, any such proposed statute, regulation, ordinance, decision or
order, whether by the introduction of legislation or the commencement of
rulemaking or similar proceedings or otherwise) having a material effect or
relating to the operation of the Network Facilities by any Borrower or any
Subsidiary thereof (including, without limitation, any statutes, decisions or
orders affecting local exchange carriers generally and not directed against any
Borrower or any Subsidiary thereof specifically) which have been issued or
adopted (or, to the extent any Borrower has knowledge thereof, which have been
proposed) and which could reasonably be expected to have a Material Adverse
Effect; or
(h) any event which makes any of the representations set forth in
Section 6.1 inaccurate in any material respect.
SECTION 7.6 Accuracy of Information. All written information,
reports, statements and other papers and data furnished by or on behalf of any
Borrower to the Administrative Agent or any Lender (other than financial
forecasts) whether pursuant to this Article VII or any other provision of this
Agreement shall be, at the time the same is so furnished, complete and correct
in all material respects to the extent necessary to give the Administrative
Agent or any Lender complete, true and accurate knowledge of the subject matter
based on the Borrowers' knowledge thereof.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full
and the Commitments terminated, unless consent has been obtained in the manner
provided for in Section 13.11, each Borrower will, and will cause each of its
Subsidiaries to:
SECTION 8.1 Preservation of Corporate Existence and Related Matters.
Except as permitted by Section 10.5, preserve and maintain its separate
corporate existence and all material rights, franchises, licenses and privileges
necessary to the conduct of its business, and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction where the
nature and scope of its activities require it to so qualify under Applicable
Law, except where the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect.
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SECTION 8.2 Maintenance of Property. Protect and preserve all
properties useful in and material to its business, including material
copyrights, patents, trade names and trademarks; maintain in good working order
and condition (reasonable wear and tear and obsolescence excepted) all
buildings, equipment and other tangible real and personal property; and from
time to time make or cause to be made all renewals, replacements and additions
to such property necessary in the reasonable judgment of the Borrowers for the
conduct of its business, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
SECTION 8.3 Insurance. Maintain insurance with financially sound and
reputable insurance companies against such risks (including hazard and business
interruption coverage) and in such amounts as are customarily maintained by
similar businesses and as may be required by Applicable Law, and on the Closing
Date and from time to time thereafter deliver to the Administrative Agent upon
its request a detailed list of the insurance then in effect, stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.
SECTION 8.4 Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental Authority having
jurisdiction over it or any of its properties.
SECTION 8.5 Payment and Performance of Obligations. Pay and perform
all Obligations under this Agreement and the other Loan Documents, and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness (including, without limitation, Intercompany Debt), obligations and
liabilities in accordance with customary trade practices; provided, that such
Borrower or such Subsidiary may contest any item described in clauses (a) or (b)
of this Section 8.5 in good faith so long as adequate reserves are maintained
with respect thereto in accordance with GAAP.
SECTION 8.6 Compliance With Laws and Approvals. Observe and remain
in material compliance with all Applicable Laws and maintain in full force and
effect all material Governmental Approvals, in each case applicable to the
conduct of its business.
SECTION 8.7 Environmental Laws. In addition to and without limiting
the generality of Section 8.6, (a) comply in all material respects with, and use
its best efforts to ensure such compliance by all of its tenants and subtenants
with all applicable Environmental Laws and obtain and comply with and maintain,
and ensure that all tenants and subtenants obtain and comply with and maintain,
and use its best efforts to ensure that all of its tenants and subtenants obtain
and comply with and maintain any and all material licenses, approvals,
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notifications, registrations or permits required by applicable Environmental
Laws, (b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws, and promptly comply with all lawful orders and directives of
any Governmental Authority regarding Environmental Laws, and (c) defend,
indemnify and hold harmless the Administrative Agent and the Lenders, and their
respective parents, Subsidiaries, Affiliates, employees, agents, officers and
directors, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature known or
unknown, contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental Laws
applicable to the operations of such Borrower or such Subsidiary, or any orders,
requirements or demands of Governmental Authorities related thereto, including,
without limitation, reasonable attorney's and consultant's fees, investigation
and laboratory fees, response costs, court costs and litigation expenses, except
to the extent that any of the foregoing directly result from the gross
negligence or willful misconduct of the party seeking indemnification therefor.
SECTION 8.8 Compliance with ERISA. In addition to and without
limiting the generality of Section 8.6, (a) comply with all applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans, (b) not take any action or fail to
take action the result of which could be a liability to the PBGC or to a
Multiemployer Plan, (c) not participate in any prohibited transaction that could
result in any civil penalty under ERISA or tax under the Code, (d) operate each
Employee Benefit Plan in such a manner that will not incur any tax liability
under Section 4980B of the Code or any liability (other than for benefits in
accordance with the terms of such Employee Benefit Plan) to any qualified
beneficiary as defined in Section 4980B of the Code and (e) furnish to the
Administrative Agent upon the Administrative Agent's request such additional
information about any Employee Benefit Plan as may be reasonably requested by
the Administrative Agent.
SECTION 8.9 Compliance With Agreements. Comply in all material
respects with each term, condition and provision of all Material Contracts;
provided, that such Borrower or such Subsidiary may contest any such Material
Contract in good faith through applicable proceedings so long as adequate
reserves are maintained in accordance with GAAP.
SECTION 8.10 Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date
and in lines of business reasonably related thereto.
SECTION 8.11 Visits and Inspections. Upon reasonable notice and
during normal business hours, permit representatives of the Administrative Agent
or any Lender, from time to time, to visit and inspect its properties; inspect,
audit and make extracts from its books, records and files, including, but not
limited to, management letters prepared by independent accountants; and discuss
with its principal officers, and its independent accountants, its business,
assets, liabilities, financial condition, results of operations and business
prospects.
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SECTION 8.12 Additional Subsidiaries. At such time as any Subsidiary
of CT or any other Borrower is created or acquired after the Closing Date, cause
to be executed and delivered to the Administrative Agent (i) a Joinder Agreement
such that such Subsidiary shall become a Borrower hereunder and (ii) favorable
legal opinions addressed to the Administrative Agent and Lenders in form and
substance satisfactory thereto with respect to such Joinder Agreement and such
other documents and closing certificates as consistent with Article V as may be
reasonably requested by the Administrative Agent.
SECTION 8.13 Year 2000 Compatibility. Take all actions reasonably
necessary to assure that Borrowers' computer based systems are able to operate
and effectively process data which includes dates on and after January 1, 2000.
At the request of the Administrative Agent, the Borrowers shall provide
reasonable assurances satisfactory to the Administrative Agent of the Borrowers'
Year 2000 compatibility.
SECTION 8.14 Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender may reasonably require to document and consummate the
transactions contemplated hereby and to vest completely in and insure the
Administrative Agent and the Lenders their respective rights under this
Agreement, the Revolving Credit Notes, the Letters of Credit and the other Loan
Documents.
SECTION 8.15 CoBank Participation Certificates. If CT elects to have
its Obligations to CoBank, ACB ("CoBank") as a Lender hereunder be eligible for
patronage from CoBank, then CT shall acquire and maintain non-voting
participation certificates in CoBank (the "Participation Certificates") in such
amounts and at such times as CoBank may from time to time require in accordance
with its bylaws and capital plan (as each may be amended from time to time);
provided, however, that the maximum amount of Participation Certificates that CT
may be required to purchase may not exceed the maximum amount required by
CoBank's bylaws as in effect on the date hereof. The rights and obligations of
the parties with respect to the Participation Certificates and any other
patronage or other distributions shall be governed by CoBank's bylaws.
SECTION 8.16 Merger of Pop-Net, Inc. Within thirty (30) days of the
Closing Date, cause the merger of Pop-Net, Inc. into CTC Internet Services,
Inc., with the surviving entity to be CTC Internet Services, Inc.; provided that
if such merger does not occur within thirty (30) days of the Closing Date, the
Borrowers will cause Pop-Net, Inc. to become a Borrower hereunder pursuant to
Section 8.12.
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ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full
and the Commitments terminated, unless consent has been obtained in the manner
set forth in Section 13.11 hereof, the Borrowers and their Subsidiaries on a
Consolidated basis will not:
SECTION 9.1 Leverage Ratio: As of any fiscal quarter end, permit the
ratio of (a) Total Debt as of such date to (b) Operating Cash Flow for the
period of four (4) consecutive fiscal quarters ending on or immediately prior to
such date to be greater than the following ratios for the corresponding period:
Period Ratio
------ -----
Closing Date through and including
6/30/2001 4.00 to 1.00
Thereafter 3.50 to 1.00
SECTION 9.2 Fixed Charge Coverage Ratio: As of any fiscal quarter
end, permit the ratio of (a) Operating Cash Flow for the period of four (4)
consecutive fiscal quarters ending on or immediately prior to such date to (b)
Fixed Charges for the period of four (4) consecutive fiscal quarters ending on
or immediately prior to such date to be less than the following ratios for the
corresponding period:
Period Ratio
------ -----
12/31/99 through and including
3/30/2000 0.70 to 1.00
3/31/2000 through and including
6/30/2001 0.85 to 1.00
Thereafter 1.10 to 1.00
SECTION 9.3 Total Debt to Total Capitalization Coverage Ratio: As of
any fiscal quarter end, permit the ratio of (a) Total Debt on such date to (b)
Total Capitalization on such date to be greater than 0.50 to 1.00.
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ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full
and the Commitments terminated, unless consent has been obtained in the manner
set forth in Section 13.11 hereof, each Borrower has not and will not permit any
of its Subsidiaries to:
SECTION 10.1 Limitations on Debt. Create, incur, assume or suffer to
exist any Debt except:
(a) the Obligations;
(b) Debt incurred in connection with a Hedging Agreement with (i) a
Lender or (ii) any Person meeting the qualifications of an Eligible Assignee and
(with respect to (ii) only) upon standard market terms and conditions (including
interest rate) as reasonably determined by the Administrative Agent;
(c) Debt existing on the Closing Date and not otherwise permitted
under this Section 10.1, as set forth on Schedule 6.1(t) (or specifically
permitted to be excluded from such Schedule) and the renewal and refinancing
(but not the increase of the aggregate principal amount thereof) thereof;
(d) Debt of the Borrowers and their Subsidiaries incurred in
connection with Capitalized Leases in an aggregate amount not to exceed
$5,000,000 on any date of determination;
(e) purchase money Debt of the Borroers and their Subsidiaries in an
aggregate amount not to exceed $2,500,000 on any date of determination;
(f) Debt consisting of Guaranty Obligations permitted by Section
10.2;
(g) Debt and Capital Leases assumed or continued in connection with
acquisitions permitted pursuant to Section 10.4 in an aggregate amount not to
exceed $10,000,000;
(h) Subordinated Debt; and
(i) Intercompany Debt; provided, that none of the Debt permitted to
be incurred by this Section shall restrict, limit or otherwise encumber (by
covenant or otherwise) the ability of any Subsidiary of any Borrower to make any
payment to any such Borrower or any other Subsidiary (in the form of dividends,
intercompany advances or otherwise) for the purpose of enabling such Borrower to
pay the Obligations.
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SECTION 10.2 Limitations on Guaranty Obligations. Create, incur,
assume or suffer to exist any Guaranty Obligations except:
(a) Guaranty Obligations in favor of the Administrative Agent for
the benefit of the Administrative Agent and the Lenders;
(b) Guaranty Obligations existing on the Closing Date and not
otherwise permitted under this Section 10.2, as set forth on Schedule 6.1(t) (or
as specifically permitted to be excluded from such Schedules) and the renewal
and refinancing (but not the increase of the guaranteed amount thereof) thereof;
(c) Guaranty Obligations with respect to Debt permitted pursuant to
Section 10.1; and
(d) Guaranty Obligations in an amount not to exceed $2,500,000 to
secure payment or performance of customer service contracts incurred in the
ordinary course of business.
SECTION 10.3 Limitations on Liens. Create, incur, assume or suffer
to exist, any Lien on or with respect to any of its assets or properties
(including without limitation shares of capital stock or other ownership
interests), real or personal, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental Laws) not yet due or as to which the period of grace (not to
exceed thirty (30) days), if any, related thereto has not expired or which are
being contested in good faith and by appropriate proceedings if adequate
reserves are maintained to the extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers, warehousemen,
processors or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, (i) which are not overdue for a period of more
than thirty (30) days or (ii) which are being contested in good faith and by
appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation;
(d) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case, materially detract from the value of such property or impair the
use thereof in the ordinary conduct of business;
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(e) Liens of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;
(f) Liens not otherwise permitted by this Section 10.3 and in
existence on the Closing Date and described on Schedule 10.3;
(g) Liens securing Debt permitted under Sections 10.1(d) and (e);
provided that (i) such Liens shall be created substantially simultaneously with
the acquisition or lease of the related asset, (ii) such Liens do not at any
time encumber any property other than the property financed by such Debt, (iii)
the amount of Debt secured thereby is not increased and (iv) the principal
amount of Debt secured by any such Lien shall at no time exceed one hundred
percent (100%) of the original purchase price or lease payment amount of such
property at the time it was acquired or leased;
(h) Liens securing Debt permitted pursuant to Section 10.1(g), so
long as such Liens are in existence at the time the assets are acquired by any
Borrower or any Subsidiary thereof pursuant to Section 10.4 and such Liens are
not created in contemplation of such acquisition;
(i) Liens securing Debt permitted pursuant to Section 10.1(i);
(j) Statutory liens in the Participation Certificates in CoBank
purchased pursuant to Section 8.15; and
(k) Liens arising under or in connection with that certain Joint
Operating Agreement among BellSouth Carolinas, PCS, L.P., BellSouth Personal
Communications, Inc., and certain rural telephone companies identified on the
signature pages thereto (the "Joint Operating Agreement").
SECTION 10.4 Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture
(including without limitation the creation or capitalization of any Subsidiary),
evidence of Debt or other obligation or security, substantially all or a
material portion of the business or assets of any other Person or any other
investment or interest whatsoever in any other Person, or make or permit to
exist, directly or indirectly, any loans, advances or extensions of credit to,
or any investment in cash or by delivery of property in, any Person except:
(a) investments not otherwise permitted by this Section 10.4 in
another Borrower or Subsidiary thereof (including without limitation the
creation or capitalization of any Subsidiary), and the other existing loans,
advances and investments not otherwise permitted by this Section 10.4 described
on Schedule 10.4;
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(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition thereof, (ii) commercial
paper maturing no more than 120 days from the date of creation thereof and
currently having the highest rating obtainable from either Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's
Investors Service, Inc., (iii) certificates of deposit maturing no more than 120
days from the date of creation thereof issued by commercial banks incorporated
under the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having a rating
of "A" or better by a nationally recognized rating agency; provided, that the
aggregate amount invested in such certificates of deposit shall not at any time
exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for
any one such bank; provided further that the Borrowers may make investments in
certificates of deposit maturing no later than one hundred and twenty (120) days
from the date of creation thereof, issued by other commercial banks not to
exceed $1,000,000, (iv) time deposits maturing no more than 30 days from the
date of creation thereof with commercial banks or savings banks or savings and
loan associations each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding the maximum amounts
of insurance thereunder or (v) Participation Certificates pursuant to Section
8.15;
(c) investments by any Borrower or any Subsidiary thereof in the
form of acquisitions of all or substantially all of the business or a line of
business (whether by the acquisition of capital stock, assets or any combination
thereof) which are consummated in accordance with the following requirements of
this Section 10.4(c) (any such acquisition, a "Permitted Acquisition"): (i) the
acquired Person shall be engaged in and substantially all of the acquired assets
shall be utilized in a similar line of business as any Borrower or Subsidiary as
described in Section 8.10 or as otherwise approved in writing by the Required
Lenders, (ii) no Default or Event of Default shall have occurred and be
continuing or be created by the relevant Permitted Acquisition, and (iii) for
any single Permitted Acquisition, or series of related Permitted Acquisitions
having an aggregate consideration equal to or in excess of $10,000,000, and at
all times after the aggregate consideration paid for all Permitted Acquisitions
since the Closing Date (including the proposed Permitted Acquisition ) equals or
exceeds $20,000,000, (A) the Borrowers shall deliver a certificate to the
Administrative Agent and the Required Lenders, in form and substance reasonably
satisfactory to the Administrative Agent, demonstrating pro forma compliance
with the financial covenants set forth in Article IX and the other terms of the
Loan Documents prior to the closing of such Permitted Acquisition, (B) a
description of the relevant Permitted Acquisition in reasonable detail and the
corresponding documentation shall be furnished by the Borrowers to the Lenders
at least ten (10) Business Days prior to the closing date thereof (to be
followed by any changed pages and fully executed copies promptly after the
creation thereof) and (C) the Borrowers shall have received the prior written
approval of the Required Lenders;
(d) loans, advances and any other investments by any Borrower or any
Subsidiary thereof in any other Person in an aggregate amount not to exceed (i)
Five Million Dollars
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($5,000,000) during any Fiscal Year; provided, however, that any portion of such
$5,000,000 not used in any such Fiscal Year may be applied to the next
succeeding Fiscal Year or Fiscal Years on a cumulative basis, and (ii) Twenty
Million Dollars ($20,000,000) since the Closing Date;; provided further that the
dollar limitations set forth in the foregoing clauses (i) and (ii) shall not
apply to each loan, advance or other investment made by CT Communications
Northeast Trust ("CT Trust") utilizing the proceeds of sales of assets of CT
Trust as of the date hereof, which assets are identified on Schedule 10.4(d)
hereto, or any subsequent loan, advance or other investment thereof.
(e) investments in the form of deposits for utilities, security
deposits, deposits for leases, and similar prepaid expenses incurred in the
ordinary course of business;
(f) loans or advances to employees of any Borrower or any Subsidiary
thereof made in the ordinary course of business that do not in the aggregate
exceed $1,000,000 at any time outstanding; and
(g) investments in the form of trade accounts created in the
ordinary course of business.
SECTION 10.5 Limitations on Mergers and Liquidation. Merge,
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution)
except:
(a) any Wholly-Owned Subsidiary of any Borrower may merge with any
Borrower or any other Wholly-Owned Subsidiary of any Borrower;
(b) any Wholly-Owned Subsidiary may merge into the Person such
Wholly-Owned Subsidiary was formed to acquire in connection with an acquisition
permitted by Section 10.4(c); and
(c) any Wholly-Owned Subsidiary of any Borrower may wind-up into any
Borrower or any other Wholly-Owned Subsidiary of any Borrower.
SECTION 10.6 Limitations on Sale of Assets. Convey, sell, lease,
assign, transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, the sale of any receivables and leasehold
interests and any sale-leaseback or similar transaction), whether now owned or
hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of assets no longer used or usable in the business of
any Borrower or any Subsidiaries thereof;
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(c) the transfer, sale, lease, assignment or other disposition of
assets to any Borrower or any Wholly-Owned Subsidiary of any Borrower;
(d) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof; and
(e) other sales and transfers not otherwise permitted hereunder;
provided, that the Net Cash Proceeds therefrom are applied as required pursuant
to Section 2.3.
(f) the transfer of its Operating Assets, Repurchase Additions, and
Partitioned Licenses (as each such term is defined in the Joint Operating
Agreement) pursuant to the Joint Operating Agreement.
SECTION 10.7 Limitations on Dividends and Distributions. Declare or
pay any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares of
its capital stock, or make any change in its capital structure that could
reasonably be expected to have a Material Adverse Effect; provided that:
(a) any Borrower or any Subsidiary thereof may pay dividends in
shares of its own capital stock;
(b) any Subsidiary may pay dividends or make distributions to any
Borrower;
(c) CT may pay cash dividends to its equity holders; provided that
(i) such dividends shall not exceed in any Fiscal Year one hundred percent
(100%) of Consolidated Net Earnings for the immediately preceding Fiscal Year
and (ii) the Borrowers shall have delivered to the Administrative Agent evidence
reasonably satisfactory thereto demonstrating compliance with Articles IX and X
hereof both before and after giving effect to such dividend payment;
(d) CT may consummate the Recapitalization; and
(e) any Borrower or any Subsidiary thereof may redeem equity
securities in an amount not to exceed One Million Dollars ($1,000,000) over the
term of this Agreement issued pursuant to incentive stock option plans of any
Borrower or any Subsidiary from employees upon the termination of the employment
of such employees, so long as any such redemption is made in accordance with the
terms and conditions of such incentive stock option plans.
SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock.
Issue, sell or otherwise dispose of any class or series of capital stock that,
by its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event
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or passage of time would be, (a) convertible or exchangeable into Debt (other
than Intercompany Debt) or (b) required to be redeemed or repurchased, including
at the option of the holder, in whole or in part, for cash or property other
than capital stock, or has, or upon the happening of an event or passage of time
would have, a cash redemption or similar payment due (any such capital stock
"Convertible/Redeemable Equity"); provided that the foregoing restriction shall
not apply to any Convertible/ Redeemable Equity which cannot under any
circumstances be converted, exchanged, redeemed or repurchased at any time prior
to one (1) year after the Termination Date.
SECTION 10.9 Transactions with Affiliates. Except as otherwise
permitted herein, directly or indirectly (a) make any loan or advance to, or
purchase or assume any note or other obligation to or from, any of its officers,
directors, shareholders or other Affiliates other than Borrowers, or to or from
any member of the immediate family of any of its officers, directors,
shareholders or other Affiliates other than Borrowers, or subcontract any
operations to any of its Affiliates other than Borrowers or (b) enter into, or
be a party to, any other transaction with any of its Affiliates other than
Borrowers, except pursuant to the reasonable requirements of its business and
upon terms which are no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not its Affiliate.
SECTION 10.10 Certain Accounting Changes. Change its Fiscal Year
end, or make any material change as reasonably determined by the Administrative
Agent in its accounting treatment and reporting practices except as required by
GAAP.
SECTION 10.11 Amendments; Payments and Prepayments of Subordinated
Debt. Amend or modify (or permit the modification or amendment of) any of the
terms or provisions of any Subordinated Debt, or cancel or forgive, make any
voluntary or optional payment or prepayment on, or redeem or acquire for value
(including without limitation by way of depositing with any trustee with respect
thereto money or securities before due for the purpose of paying when due) any
Subordinated Debt.
SECTION 10.12 Restrictive Agreements. Enter into or permit to exist
any Debt which contains any negative pledge on assets or any covenants more
restrictive than the provisions of Articles VIII, IX and X hereof, or which
restricts, limits or otherwise encumbers its ability to incur Liens on or with
respect to any of its assets or properties other than the assets or properties
securing such Debt.
ARTICLE XI
DEFAULT AND REMEDIES
SECTION 11.1 Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary
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or be effected by operation of law or pursuant to any judgment or order of any
court or any order, rule or regulation of any Governmental Authority or
otherwise:
(a) Default in Payment of Principal of Loans and Reimbursement
Obligations. Any Borrower shall default in any payment of principal of any
Revolving Credit Loan, Revolving Credit Note or Reimbursement Obligation when
and as due (whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. Any Borrower shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest on any Revolving Credit Loan, Revolving Credit Note or Reimbursement
Obligation or the payment of any other Obligation, and such default shall
continue unremedied for three (3) Business Days.
(c) Misrepresentation. Any representation or warranty made or deemed
to be made by any Borrower or any Subsidiary thereof under this Agreement, any
Loan Document or any amendment hereto or thereto, shall at any time prove to
have been incorrect or misleading in any material respect when made or deemed
made.
(d) Default in Performance of Certain Covenants. Any Borrower shall
default in the performance or observance of any covenant or agreement contained
in Section 7.5(e)(i) or Articles IX or X of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any
Borrower or any Subsidiary thereof shall default in the performance or
observance of any term, covenant, condition or agreement contained in this
Agreement (other than as specifically provided for otherwise in this Section
11.1) or any other Loan Document and such default shall continue for a period of
thirty (30) days after written notice thereof has been given to the Borrowers by
the Administrative Agent.
(f) Hedging Agreement. Any termination payment shall be due by any
Borrower under any Hedging Agreement and such amount is not paid within thirty
(30) Business Days of the due date thereof.
(g) Debt Cross-Default. Any Borrower or any Subsidiary thereof shall
(i) default in the payment of any Debt (other than the Revolving Credit Notes or
any Reimbursement Obligation) the aggregate outstanding amount of which Debt is
in excess of $1,000,000 beyond the period of grace if any, provided in the
instrument or agreement under which such Debt was created, or (ii) default in
the observance or performance of any other agreement or condition relating to
any Debt (other than the Revolving Credit Notes or any Reimbursement Obligation)
the aggregate outstanding amount of which Debt is in excess of $1,000,000 or
contained in any instrument or agreement evidencing, securing or relating
thereto or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit
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the holder or holders of such Debt (or a trustee or agent on behalf of such
holder or holders) to cause, with the giving of notice if required, any such
Debt to become due prior to its stated maturity (any applicable grace period
having expired).
(h) Other Cross-Defaults. Any Borrower or any Subsidiary thereof
shall default in the payment when due, or in the performance or observance, of
any material obligation or material condition of any Material Contract unless,
but only as long as, the existence of any such default is being contested by
such Borrower or such Subsidiary in good faith by appropriate proceedings and
adequate reserves in respect thereof have been established on the books of such
Borrower or such Subsidiary to the extent required by GAAP.
(i) Change in Control. Any person or group of persons (within the
meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended)
other than Permitted Holders shall obtain ownership or control in one or more
series of transactions of more than twenty-five percent (25%) of the common
stock or twenty-five percent (25%) of the voting power of any Borrower entitled
to vote in the election of members of the board of directors of any Borrower or
there shall have occurred under any indenture or other instrument evidencing any
Debt in excess of $2,500,000 any "change in control" (as defined in such
indenture or other evidence of Debt) obligating any Borrower to repurchase,
redeem or repay all or any part of the Debt or capital stock provided for
therein (any such event, a "Change in Control").
(j) Voluntary Bankruptcy Proceeding. Any Borrower or any Subsidiary
thereof shall (i) commence a voluntary case under the federal bankruptcy laws
(as now or hereafter in effect), (ii) file a petition seeking to take advantage
of any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest within sixty (60) days after the filing thereof any
petition filed against it in an involuntary case under such bankruptcy laws or
other laws, (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property, domestic or foreign, (v) admit in writing its inability to pay
its debts as they become due, (vi) make a general assignment for the benefit of
creditors, or (vii) take any corporate action for the purpose of authorizing any
of the foregoing.
(k) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against any Borrower or any Subsidiary thereof in any court
of competent jurisdiction seeking (i) relief under the federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or
the like for any Borrower or any Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and such case
or proceeding shall continue without dismissal or stay for a period of sixty
(60) consecutive days, or an order granting the relief
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requested in such case or proceeding (including, but not limited to, an order
for relief under such federal bankruptcy laws) shall be entered.
(l) Failure of Agreements. Any provision of this Agreement or of any
other Loan Document shall for any reason cease to be valid and binding on any
Borrower or Subsidiary party thereto or any such Person shall so state in
writing.
(m) Termination Event. The occurrence of any of the following
events: (i) any Borrower or any ERISA Affiliate fails to make full payment when
due of all amounts which, under the provisions of any Pension Plan or Section
412 of the Code, any Borrower or any ERISA Affiliate is required to pay as
contributions thereto, (ii) an accumulated funding deficiency in excess of
$500,000 occurs or exists, whether or not waived, with respect to any Pension
Plan, (iii) a Termination Event or (iv) any Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or partial
withdrawal from any such Multiemployer Plan and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$500,000.
(n) Judgment. A judgment or order for the payment of money which
causes the aggregate amount of all such judgments to exceed $500,000 in any
Fiscal Year shall be entered against any Borrower or any Subsidiary thereof by
any court and such judgment or order shall continue without discharge or stay
for a period of thirty (30) days.
(o) Loss of License. Any Communications License or PUC Authorization
of any Borrower or any Subsidiary thereof shall expire, terminate, be canceled
or otherwise lost or any application therefor be rejected, which event could
reasonably be expected to have a Material Adverse Effect.
SECTION 11.2 Remedies. Upon the occurrence of an Event of Default,
with the consent of the Required Lenders, the Administrative Agent may, or upon
the request of the Required Lenders, the Administrative Agent shall, by notice
to the Borrowers:
(a) Acceleration; Termination of Facilities. Declare the principal
of and interest on the Revolving Credit Loans, the Revolving Credit Notes and
the Reimbursement Obligations at the time outstanding, and all other amounts
owed to the Lenders and to the Administrative Agent under this Agreement or any
of the other Loan Documents (other than any Hedging Agreement) (including,
without limitation, all L/C Obligations, whether or not the beneficiaries of the
then outstanding Letters of Credit shall have presented the documents required
thereunder) and all other Obligations (other than obligations owing under any
Hedging Agreement), to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or the other Loan Documents to the contrary notwithstanding, and
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terminate the Credit Facility and any right of the Borrowers to request
borrowings or Letters of Credit thereunder; provided, that upon the occurrence
of an Event of Default specified in Section 11.1(j) or (k), the Credit Facility
shall be automatically terminated and all Obligations (other than obligations
owing under any Hedging Agreement) shall automatically become due and payable.
(b) Letters of Credit. With respect to all Letters of Credit with
respect to which presentment for honor shall not have occurred at the time of an
acceleration pursuant to the preceding paragraph, require the Borrowers at such
time to deposit in a cash collateral account opened by the Administrative Agent
an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
other Obligations. After all such Letters of Credit shall have expired or been
fully drawn upon, the Reimbursement Obligation shall have been satisfied and all
other Obligations shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrowers.
(c) Rights of Collection. Exercise on behalf of the Lenders all of
its other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Obligations of the Borrowers.
SECTION 11.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default.
ARTICLE XII
THE ADMINISTRATIVE AGENT
SECTION 12.1 Appointment. Each of the Lenders hereby irrevocably
designates and appoints First Union as Administrative Agent of such Lender under
this Agreement and the
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other Loan Documents for the term hereof and each such Lender irrevocably
authorizes First Union as Administrative Agent for such Lender, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and such
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Administrative Agent. Any reference to the Administrative Agent in
this Article XII shall be deemed to refer to the Administrative Agent solely in
its capacity as Administrative Agent and not in its capacity as a Lender.
SECTION 12.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by the Administrative Agent with reasonable care.
SECTION 12.3 Exculpatory Provisions. Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or the other Loan Documents (except for actions occasioned solely by
its or such Person's own gross negligence or willful misconduct), or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by any Borrower or any Subsidiary thereof or
any officer thereof contained in this Agreement or the other Loan Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by the Administrative Agent under or in connection with,
this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of any Borrower or any Subsidiary
thereof to perform its obligations hereunder or thereunder. The Administrative
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement, or to inspect the properties, books or records of
the Borrowers or any of their Subsidiaries.
SECTION 12.4 Reliance by the Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice
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and statements of legal counsel (including, without limitation, counsel to the
Borrowers), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Revolving Credit Note as the owner thereof for all purposes unless such
Revolving Credit Note shall have been transferred in accordance with Section
13.10 hereof. The Administrative Agent shall be fully justified in failing or
refusing to take any action under this Agreement and the other Loan Documents
unless it shall first receive such advice or concurrence of the Required Lenders
(or, when expressly required hereby or by the relevant other Loan Document, all
the Lenders) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action
except for its own gross negligence or willful misconduct. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Revolving Credit Notes in accordance with a
request of the Required Lenders (or, when expressly required hereby, all the
Lenders), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Revolving Credit Notes.
SECTION 12.5 Notice of Default. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless it has received notice from a Lender or the
Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, it shall promptly give notice
thereof to the Lenders. The Administrative Agent shall take such action with
respect to such Default or Event of Default as shall be reasonably directed by
the Required Lenders; provided that unless and until the Administrative Agent
shall have received such direction, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders, except to the extent that other provisions of
this Agreement expressly require that any such action be taken or not be taken
only with the consent and authorization or the request of the Lenders or
Required Lenders, as applicable.
SECTION 12.6 Non-Reliance on the Administrative Agent and Other
Lenders. Each Lender expressly acknowledges that neither the Administrative
Agent nor any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates has made any representations or
warranties to it and that no act by the Administrative Agent hereinafter taken,
including any review of the affairs of the Borrowers or any of their
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and their Subsidiaries and made
its own decision to make its Revolving Credit Loans and issue
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or participate in Letters of Credit hereunder and enter into this Agreement.
Each Lender also represents that it will, independently and without reliance
upon the Administrative Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers and their Subsidiaries. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or by the other Loan Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Borrowers or
any of their Subsidiaries which may come into the possession of the
Administrative Agent or any of its respective officers, directors, employees,
agents, attorneys-in-fact, Subsidiaries or Affiliates.
SECTION 12.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such and (to the extent not reimbursed
by the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably according to the respective amounts of their Commitment Percentages,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever which may at any time (including, without limitation, at any
time following the payment of the Revolving Credit Notes or any Reimbursement
Obligation) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of this Agreement or the other Loan
Documents, or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's bad faith, gross negligence or willful misconduct. The agreements in
this Section 12.7 shall survive the payment of the Revolving Credit Notes, any
Reimbursement Obligation and all other amounts payable hereunder and the
termination of this Agreement.
SECTION 12.8 The Administrative Agent in Its Individual Capacity.
The Administrative Agent and its respective Subsidiaries and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Borrowers as though the Administrative Agent were not an Administrative
Agent hereunder. With respect to any Revolving Credit Loans made or renewed by
it and any Revolving Credit Note issued to it and with respect to any Letter of
Credit issued by it or participated in by it, the Administrative Agent shall
have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not an
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
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SECTION 12.9 Resignation of the Administrative Agent; Successor
Administrative Agent. Subject to the appointment and acceptance of a successor
as provided below, the Administrative Agent may resign at any time by giving
notice thereof to the Lenders and the Borrowers. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Administrative
Agent, which successor shall have minimum capital and surplus of at least
$500,000,000 and so long as no Default or Event of Default has occurred and is
continuing be consented to by the Borrowers. If no successor Administrative
Agent shall have been so appointed by the Required Lenders and shall have
accepted such appointment within thirty (30) days after the Administrative
Agent's giving of notice of resignation, then the Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent, which successor
shall have minimum capital and surplus of at least $500,000,000 and so long as
no Default or Event of Default has occurred and is continuing be consented to by
the Borrowers. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 12.9 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Administrative Agent.
SECTION 12.10 The Administrative Agent. The Administrative Agent
hereby agrees that with respect to any amendment, modification or waiver of this
Agreement and the other Loan Documents, the Administrative Agent shall be
responsible for the preparation, documentation and execution thereof. In
addition, with respect to any action or decision requiring consent or approval
of any Lenders, the Administrative Agent shall be responsible for requesting
such consent or approval from the Lenders.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the
Administrative
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Agent as understood by the Administrative Agent will be deemed to be the
controlling and proper notice in the event of a discrepancy with or failure to
receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to it
at the following addresses, or any other address as to which all the other
parties are notified in writing.
<TABLE>
<CAPTION>
<S> <C>
If to the Borrowers: CT Communications, Inc.
68 Cabarrus Avenue East
Post Office Box 227
Concord, North Carolina 28026-0227
Attention: Mr. Barry Rubens, Senior Vice President
Telephone No.: (704) 782-7000
Telecopy No.: (704) 722-2558
With copies (which Hogan & Hartson.
shall not constitute Columbia Square
notice) to: 555 13th Street, N.W.
Washington, DC 20004-1109
Attention: Benton R. Hammond, Esq.
Telephone No.: (202) 637-5600
Telecopy No.: (202) 637-5910
If to First Union as First Union National Bank
Administrative Agent: One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
Attention: Mr. Mark Hedrick
Telephone No.: (704) 383-0297
Telecopy No.: (704) 374-4092
If to any Lender: To the Address set forth on Schedule
1 hereto
</TABLE>
(c) Administrative Agent's Office. The Administrative Agent hereby
designates its office located at the address set forth above, or any subsequent
office which
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shall have been specified for such purpose by written notice to the Borrowers
and Lenders, as the Administrative Agent's Office referred to herein, to which
payments due are to be made and at which Revolving Credit Loans will be
disbursed and Letters of Credit issued.
SECTION 13.2 Expenses; Indemnity. The Borrowers will (a) pay all
out-of-pocket expenses of the Administrative Agent in connection with (i) the
preparation, execution and delivery of this Agreement and each other Loan
Document, whenever the same shall be executed and delivered, including without
limitation all out-of-pocket syndication and due diligence expenses and
reasonable fees and disbursements of counsel for the Administrative Agent and
(ii) the preparation, execution and delivery of any waiver, amendment or consent
by the Administrative Agent or the Lenders relating to this Agreement or any
other Loan Document, including without limitation reasonable fees and
disbursements of counsel for the Administrative Agent, (b) pay all reasonable
out-of-pocket expenses of the Administrative Agent and each Lender actually
incurred in connection with the enforcement of any rights and remedies of the
Administrative Agent and Lenders under the Credit Facility, including consulting
with appraisers, accountants, engineers, attorneys and other Persons concerning
the nature, scope or value of any right or remedy of the Administrative Agent or
any Lender hereunder or under any other Loan Document or any factual matters in
connection therewith, which expenses shall include without limitation the
reasonable fees and disbursements of such Persons, and (c) indemnify and hold
harmless the Administrative Agent and the Lenders, and their respective parents,
Subsidiaries, Affiliates, employees, agents, officers and directors (each such
Person or entity referred to hereafter in this paragraph as an "Indemnified
Party"), from and against any losses, penalties, fines, liabilities, damages,
costs and expenses, for which any Indemnified Person may become liable to any
third party in connection with any claim, investigation, litigation or other
proceeding (whether or not the Administrative Agent or any Lender is a party
thereto) and the prosecution and defense thereof, arising out of or in any way
connected with this Agreement, any other Loan Document or the Revolving Credit
Loans, including without limitation reasonable attorney's and consultant's fees,
except to the extent that any of the foregoing result from the gross negligence
or willful misconduct of the party seeking indemnification therefor.
SECTION 13.3 Set-off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the continuance
thereof, the Lenders and any assignee or participant of a Lender in accordance
with Section 13.10 are hereby authorized by the Borrowers at any time or from
time to time, without notice to the Borrowers or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits (general or special, time or demand, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether matured
or unmatured) and any other indebtedness at any time held or owing by
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the Lenders, or any such assignee or participant to or for the credit or the
account of the Borrowers against and on account of the Obligations irrespective
of whether or not (a) the Lenders shall have made any demand under this
Agreement or any of the other Loan Documents or (b) the Administrative Agent
shall have declared any or all of the Obligations to be due and payable as
permitted by Section 11.2 and although such Obligations shall be contingent or
unmatured.
SECTION 13.4 Governing Law. This Agreement, the Revolving Credit
Notes and the other Loan Documents, unless otherwise expressly set forth
therein, shall be governed by, construed and enforced in accordance with the
laws of the State of North Carolina, without reference to the conflicts or
choice of law principles thereof.
SECTION 13.5 Consent to Jurisdiction. The Borrowers hereby
irrevocably consent to the personal jurisdiction of the state and federal courts
located in Mecklenburg County, North Carolina, in any action, claim or other
proceeding arising out of any dispute in connection with this Agreement, the
Revolving Credit Notes and the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations. The
Borrowers hereby irrevocably consent to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the
Administrative Agent or any Lender in connection with this Agreement, the
Revolving Credit Notes or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner specified in Section 13.1.
Nothing in this Section 13.5 shall affect the right of the Administrative Agent
or any Lender to serve legal process in any other manner permitted by Applicable
Law or affect the right of the Administrative Agent or any Lender to bring any
action or proceeding against the Borrowers or their properties in the courts of
any other jurisdictions.
SECTION 13.6 Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. Upon demand of any party, whether made
before or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Revolving Credit
Notes or any other Loan Documents ("Disputes"), between or among parties to the
Revolving Credit Notes or any other Loan Document shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims, counterclaims, claims brought as
class actions, claims arising from Loan Documents executed in the future, or
claims concerning any aspect of the past, present or future relationships
arising out of or connected with the Loan Documents. Arbitration shall be
conducted under and governed by the Commercial Financial Disputes Arbitration
Rules (the "Arbitration Rules") of the American Arbitration Association and
Title 9 of the U.S.
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Code. All arbitration hearings shall be conducted in Charlotte, North Carolina.
The expedited procedures set forth in Rule 51, et seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000. All applicable statutes
of limitation shall apply to any Dispute. A judgment upon the award may be
entered in any court having jurisdiction. Notwithstanding anything foregoing to
the contrary, any arbitration proceeding demanded hereunder shall begin within
ninety (90) days after such demand thereof and shall be concluded within
one-hundred and twenty (120) days after such demand. These time limitations may
not be extended unless a party hereto shows cause for extension and then such
extension shall not exceed a total of sixty (60) days. The panel from which all
arbitrators are selected shall be comprised of licensed attorneys. The single
arbitrator selected for expedited procedure shall be a retired judge from the
highest court of general jurisdiction, state or federal, of the state where the
hearing will be conducted. The parties hereto do not waive any applicable
Federal or state substantive law except as provided herein. Notwithstanding the
foregoing, this paragraph shall not apply to any Hedging Agreement that is a
Loan Document.
(b) Jury Trial. THE ADMINISTRATIVE AGENT, EACH LENDER AND
THE BORROWERS HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY
HAVE IRREVOCABLY WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO
ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, THE REVOLVING CREDIT NOTES OR THE OTHER LOAN DOCUMENTS, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS
AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the Administrative Agent, the Lenders and the
Borrowers each preserve, without diminution, certain remedies that such Persons
may employ or exercise freely, either alone, in conjunction with or during a
Dispute. Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or prosecute the
following remedies: (i) all rights to foreclose against any real or personal
property or other security by exercising a power of sale granted in the Loan
Documents or under applicable law or by judicial foreclosure and sale, (ii) all
rights of self help including peaceful occupation of property and collection of
rents, set off, and peaceful possession of property, (iii) obtaining provisional
or ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary bankruptcy
proceeding, and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
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SECTION 13.7 Reversal of Payments. To the extent the Borrowers make
a payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment which payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment repaid, the Obligations or
part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been received by the Administrative
Agent.
SECTION 13.8 Injunctive Relief; Punitive Damages.
(a) The Borrowers recognize that, upon an Event of Default, any
remedy of law may prove to be inadequate relief to the Lenders. Therefore, the
Borrowers agree that the Lenders, at the Lenders' option, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
(b) The Administrative Agent, each Lender and each Borrower (on
behalf of itself and its Subsidiaries) hereby agree that no such Person shall
have a remedy of punitive or exemplary damages against any other party to a Loan
Document and each such Person hereby waives any right or claim to punitive or
exemplary damages that they may now have or may arise in the future in
connection with any Dispute, whether such Dispute is resolved through
arbitration or judicially.
SECTION 13.9 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by any
Borrower or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Administrative Agent to the
contrary agreed to by the Borrowers, be performed in accordance with GAAP as in
effect on the Closing Date. In the event that changes in GAAP shall be mandated
by the Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the certified public accountants
of the Borrowers, to the extent that such changes would modify such accounting
terms or the interpretation or computation thereof, such changes shall be
followed in defining such accounting terms only from and after the date the
Borrowers and the Lenders shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants and other terms
and conditions of this Agreement.
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SECTION 13.10 Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of the Borrowers, the Administrative Agent and the Lenders,
all future holders of the Revolving Credit Notes, and their respective
successors and assigns, except that the Borrowers shall not assign or transfer
any of its rights or obligations under this Agreement without the prior written
consent of each Lender.
(b) Assignment by Lenders. Each Lender may, with the consent of the
Borrowers (so long as no Default or Event of Default has occurred and is
continuing) and the consent of the Administrative Agent, which consents shall
not be unreasonably withheld, assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Extensions of Credit at
the time owing to it and the Revolving Credit Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) if less than all of the assigning Lender's
Commitment is to be assigned, the Commitment so assigned shall not
be less than $5,000,000;
(iii) the parties to each such assignment shall execute
and deliver to the Administrative Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance in the form
of Exhibit G attached hereto (an "Assignment and Acceptance"),
together with any Revolving Credit Note or Revolving Credit Notes
subject to such assignment;
(iv) such assignment shall not, without the consent of
the Borrowers, require any Borrower to file a registration statement
with the Securities and Exchange Commission or apply to or qualify
the Revolving Credit Loans or the Revolving Credit Notes under the
blue sky laws of any state; and
(v) the assigning Lender shall pay to the Administrative
Agent an assignment fee of $3,000 upon the execution by such Lender
of the Assignment and Acceptance; provided that no such fee shall be
payable upon any assignment by a Lender to an Affiliate thereof.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business Days after the execution thereof, (A) the
assignee thereunder shall be a party
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hereto and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereby and (B) the Lender thereunder shall,
to the extent provided in such assignment, be released from its obligations
under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and delivering
an Assignment and Acceptance, the assigning Lender thereunder and the assignee
thereunder confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.
(d) Register. The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amount of the Extensions of
Credit with respect to each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrowers, the Administrative Agent and the Lenders may treat each
person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrowers or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Issuance of New Revolving Credit Notes. Upon its receipt of an
Assignment and Acceptance executed by an assigning Lender and an Eligible
Assignee together with any Revolving Credit Note or Revolving Credit Notes
subject to such assignment and the written consent to such assignment as
provided in Section 13.10(b), the Administrative Agent shall, if such Assignment
and Acceptance has been completed and is substantially in the form of Exhibit G:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the Register;
(iii) give prompt notice thereof to the Lenders and the
Borrowers; and
(iv) promptly deliver a copy of such Assignment and Acceptance
to the Borrowers.
Within five (5) Business Days after receipt of such copy of such Assignment and
Acceptance, the Borrowers shall execute and deliver to the Administrative Agent,
in exchange for the surrendered Revolving Credit Note or Revolving Credit Notes,
a new Revolving Credit Note or Revolving Credit Notes to the order of such
Eligible Assignee in amounts equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and a new Revolving Credit Note or Revolving
Credit Notes to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder.
76
<PAGE>
Such new Revolving Credit Note or Revolving Credit Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Revolving Credit Note or Revolving Credit Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the assigned Revolving Credit Notes delivered to the
assigning Lender. Each surrendered Revolving Credit Note or Revolving Credit
Notes shall be canceled and returned to the Borrowers.
(f) Participations. Each Lender may sell participations to one or
more banks or other entities in all or a portion of its rights and obligations
under this Agreement (including, without limitation, all or a portion of its
Extensions of Credit and the Revolving Credit Notes held by it); provided that:
(i) each such participation shall be in an amount not
less than $5,000,000;
(ii) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain
unchanged;
(iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the
Revolving Credit Notes held by it for all purposes of this
Agreement;
(v) the Borrowers, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under
this Agreement;
(vi) such Lender shall not permit such participant the
right to approve any waivers, amendments or other modifications to
this Agreement or any other Loan Document other than waivers,
amendments or modifications which would reduce the principal of or
the interest rate on any Revolving Credit Loan or Reimbursement
Obligation, extend the term or increase the amount of the
Commitment, reduce the amount of any fees to which such participant
is entitled, or extend any scheduled payment date for principal of
or interest on any Revolving Credit Loan or Reimbursement
Obligation; and
(vii) any such disposition shall not, without the
consent of the Borrowers, require any Borrower to file a
registration statement with the Securities and Exchange Commission
to apply to qualify the Revolving Credit Loans or the Revolving
Credit Notes under the blue sky law of any state.
77
<PAGE>
(g) Disclosure of Information; Confidentiality. The Administrative
Agent and the Lenders shall hold all non-public information with respect to the
Borrowers obtained pursuant to the Loan Documents in accordance with their
customary procedures for handling confidential information; provided, that the
Administrative Agent may disclose information relating to this Agreement to Gold
Sheets and other similar bank trade publications, such information to consist of
deal terms and other information customarily found in such publications and
provided further, that the Administrative Agent and Lenders may disclose any
such information to the extent such disclosure is required by law or requested
by any regulatory authority. Any Lender may, in connection with any assignment,
proposed assignment, participation or proposed participation pursuant to this
Section 13.10, disclose to the assignee, participant, proposed assignee or
proposed participant, any information relating to the Borrowers furnished to
such Lender by or on behalf of the Borrowers; provided, that prior to any such
disclosure, each such assignee, proposed assignee, participant or proposed
participant shall agree with the Borrowers or such Lender (which in the case of
an agreement with only such Lender, the Borrowers shall be recognized as a third
party beneficiary thereof) to preserve the confidentiality of any confidential
information relating to the Borrowers received from such Lender.
(h) Certain Pledges or Assignments. Nothing herein shall prohibit
any Lender from pledging or assigning any Revolving Credit Note to any Federal
Reserve Bank in accordance with Applicable Law.
SECTION 13.11 Amendments, Waivers and Consents. Except as set forth
below, any term, covenant, agreement or condition of this Agreement or any of
the other Loan Documents (other than any Hedging Agreement, the terms and
conditions of which may be amended, modified or waived by the parties thereto)
may be amended or waived by the Lenders, and any consent given by the Lenders,
if, but only if, such amendment, waiver or consent is in writing signed by the
Required Lenders (or by the Administrative Agent with the consent of the
Required Lenders) and delivered to the Administrative Agent and, in the case of
an amendment, signed by the Borrowers; provided, that no amendment, waiver or
consent shall (a) increase the amount or extend the time of the obligation of
the Lenders to make Revolving Credit Loans or issue or participate in Letters of
Credit, (b) extend the originally scheduled time or times of payment of the
principal of any Revolving Credit Loan or Reimbursement Obligation (except for
any waiver of prepayments required pursuant to Section 2.3) or the time or times
of payment of interest on any Revolving Credit Loan or Reimbursement Obligation,
(c) reduce the rate of interest or fees payable on any Revolving Credit Loan or
Reimbursement Obligation, (d) reduce the principal amount of any Revolving
Credit Loan or Reimbursement Obligation, (e) permit any subordination of the
principal or interest on any Revolving Credit Loan or Reimbursement Obligation,
(f) permit any assignment (other than as specifically permitted or contemplated
in this Agreement) of any of the Borrowers' rights and obligations hereunder, or
(g) amend the provisions of this Section
78
<PAGE>
13.11 or the definition of Required Lenders, without the prior written consent
of each Lender. In addition, no amendment, waiver or consent to the provisions
of (a) Article XIIshall be made without the written consent of the
Administrative Agent and (b) Article III without the written consent of the
Issuing Lender.
SECTION 13.12 Performance of Duties. The obligations of the
Borrowers under this Agreement and each of the Loan Documents shall be performed
by the Borrowers at their sole cost and expense.
SECTION 13.13 All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Lenders, the Administrative
Agent and any Persons designated by the Administrative Agent or any Lender
pursuant to any provisions of this Agreement or any of the other Loan Documents
shall be deemed coupled with an interest and shall be irrevocable so long as any
of the Obligations remain unpaid or unsatisfied or the Credit Facility has not
been terminated.
SECTION 13.14 Survival of Indemnities. Notwithstanding any
termination of this Agreement, the indemnities to which the Administrative Agent
and the Lenders are entitled under the provisions of this Article XIII and any
other provision of this Agreement and the Loan Documents shall continue in full
force and effect and shall protect the Administrative Agent and the Lenders
against events arising after such termination as well as before.
SECTION 13.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 13.16 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 13.17 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
SECTION 13.18 Term of Agreement. This Agreement shall remain in
effect from the Closing Date through and including the date upon which all
Obligations shall
79
<PAGE>
have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 13.19 CT as Agent for Borrowers; Obligations Joint and
Several.
(a) The Borrowers hereby irrevocably appoint and authorize CT (i) to
provide the Administrative Agent with all notices with respect to Loans and
Letters of Credit obtained for the benefit of any Borrower and all other notices
and instructions under this Agreement and (ii) to take such action on behalf of
the Borrowers as CT deems appropriate on its behalf to obtain Loans and Letters
of Credit and to exercise such other powers as are reasonably incidental thereto
to carry out the purposes of this Agreement.
(b) All of the Borrowers shall be jointly and severally liable for
the Obligations, however incurred. References to the Borrowers with respect to
the Obligations or any portion thereof shall mean each Borrower on a joint and
several basis.
SECTION 13.20 Inconsistencies with Other Documents; Independent
Effect of Covenants.
(a) In the event there is a conflict or inconsistency between this
Agreement and any other Loan Document, the terms of this Agreement shall
control.
(b) The Borrowers expressly acknowledge and agree that each covenant
contained in Articles VIII, IX, or X hereof shall be given independent effect.
Accordingly, no Borrower shall engage in any transaction or other act otherwise
permitted under any covenant contained in Articles VIII, IX, or X if, before or
after giving effect to such transaction or act, such Borrower shall or would be
in breach of any other covenant contained in Articles VIII, IX, or X.
SECTION 13.21 Trust Obligations. Neither the trustees nor the
shareholders of CT Communications Northeast Trust shall be held to any personal
liability in their capacity as trustee or shareholder, as applicable, under this
Agreement, any Revolving Credit Note or any other Loan Document.
[Signature pages to follow]
79
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal by their duly authorized officers, all as of the day and
year first written above.
<TABLE>
<CAPTION>
<S> <C>
[CORPORATE SEAL] CT COMMUNICATIONS, INC., as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
-------------------------------------
[CORPORATE SEAL] CTC LONG DISTANCE SERVICES, INC.,
as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
------------------------------------
[CORPORATE SEAL] CT WIRELESS CABLE, INC., as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
------------------------------------
Title: Senior VP, Secretary and Treasurer
------------------------------------
[CORPORATE SEAL] CT CELLULAR, INC., as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
-----------------------------------
[CORPORATE SEAL] CAROLINA PERSONAL COMMUNICATIONS,
INC., as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
-------------------------------------
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[CORPORATE SEAL] THE CONCORD TELEPHONE COMPANY,
as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
------------------------------------
[CORPORATE SEAL] CTC INTERNET SERVICES, INC., as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
------------------------------------
[CORPORATE SEAL] CTC EXCHANGE SERVICES, INC., as Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
------------------------------------
[CORPORATE SEAL] CT GLOBAL TELECOMMUNICATIONS, INC., as
Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Senior VP, Secretary and Treasurer
------------------------------------
[CORPORATE SEAL] CT COMMUNICATIONS NORTHEAST TRUST,
Neither the Trustees nor the as Borrower
Shareholders of CT Communications By: CT Communications, Inc., as Trustee and not
Northeast Trust shall be held Individually
to any personal liability in
their capacity as Trustee or By: /s/ Barry R. Rubens
Shareholder, as applicable, under --------------------------------------------
thie Credit Agreement. Name: Barry R. Rubens
--------------------------------------
Title: Senior VP, Secretary and Treasurer
-------------------------------------
[CORPORATE SEAL] CT COMMUNICATIONS NORTHEAST, INC., as
Borrower
By: /s/ Barry R. Rubens
--------------------------------------------
Name: Barry R. Rubens
-------------------------------------
Title: Treasurer
------------------------------------
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[CORPORATE SEAL] THE CONCORD TELEPHONE COMPANY,
as Borrower
By:
--------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[CORPORATE SEAL] CTC INTERNET SERVICES, INC., as Borrower
By:
--------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[CORPORATE SEAL] CTC EXCHANGE SERVICES, INC., as Borrower
By:
--------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[CORPORATE SEAL] CT GLOBAL TELECOMMUNICATIONS, INC., as
Borrower
By: /s/ Thomas A. Norman
--------------------------------------------
Name: Thomas A. Norman
-------------------------------------
Title: President
------------------------------------
[CORPORATE SEAL] CT COMMUNICATIONS NORTHEAST TRUST,
as Borrower
By:
--------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[CORPORATE SEAL] CT COMMUNICATIONS NORTHEAST, INC., as
Borrower
By:
--------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
</TABLE>
83
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
[CORPORATE SEAL] CT COMMUNICATIONS NORTHEAST TRUST,
as Borrower
Neither the Trustees nor the
Shareholders of CT Communications By /s/ Michael R. Coltrane
Northeast Trust shall be held --------------------------------------------
to any personal liability under as Trustee and not Individually
this Revolving Credit Note. Name: Michael R. Coltrane
-------------------------------------
Title: Trustee
------------------------------------
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
FIRST UNION NATIONAL BANK,
as Administrative Agent and Lender
By: /s/ C. Mark Hedrick
--------------------------------------------
Name: C. Mark Hedrick
-------------------------------------
Title: Vice President
------------------------------------
</TABLE>
85
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
COBANK, ACB, as Lender
By: /s/ John P. Cole
--------------------------------------------
Name: John P. Cole
-------------------------------------
Title: Vice President
------------------------------------
</TABLE>
86
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
WACHOVIA BANK, N.A., as Lender
By: /s/ M.L. McNair III
--------------------------------------------
Name: M.L. McNair III
-------------------------------------
Title: VP
------------------------------------
</TABLE>
87
<PAGE>
Schedule 1
(Lenders and Commitments)
<TABLE>
<CAPTION>
LENDER COMMITMENT COMMITMENT
PERCENTAGE
- ----------------------------------------------- ------------------------------------- -----------------------
<S> <C> <C>
First Union National Bank
One First Union Center, TW-10
301 South College Street 41.666666667% $25,000,000
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 374-2698
Telecopy No.: (704) 383-0288
- ----------------------------------------------- ------------------------------------- -----------------------
Wachovia Bank,N.A. 38.333333333% $23,000,000
Corporate Banking, 6th Floor
400 South Tryon Street
Charlotte, North Carolina 28202
Telephone No.: (704) 378-5424
Telecopy No.: (704) 378-5181
- ----------------------------------------------- ------------------------------------- -----------------------
CoBank, ACB 20.00% $12,000,000
200 Galleria Parkway, Suite 1900
Atlanta, Georgia 30339
Telephone No.: (770) 618-3213
Telecopy No.: (303) 224-2676
- ----------------------------------------------- ------------------------------------- -----------------------
</TABLE>
88
<PAGE>
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Account Designation
Exhibit D - Form of Notice of Prepayment
Exhibit E - Form of Notice of Conversion/Continuation
Exhibit F - Form of Officer's Compliance Certificate
Exhibit G - Form of Assignment and Acceptance
SCHEDULES
Schedule 1 - Lenders and Commitments
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(m) - Labor and Collective Bargaining Agreements
Schedule 6.1(t) - Debt and Guaranty Obligations; Subordinated Debt
Schedule 6.1(u) - Litigation
Schedule 6.1(w) - Communications Licenses/PUC Authorizations
Schedule 10.3 - Existing Liens
Schedule 10.4 - Existing Loans, Advances and Investments
89
EXHIBIT 10.14
AGREEMENT
THIS AGREEMENT is made and entered into as of the 22nd day of June,
1998 by and between CT COMMUNICATIONS, INC. (the "Company"), a North Carolina
corporation, and RICHARD L. GARNER, JR. ("Employee"), an individual residing in
_________ County, North Carolina;
WHEREAS, the Employee is a valued employee of the Company or one of
the Company's subsidiaries, and in order to induce the Employee to continue
employment with the Company and to enhance the Employee's job security, the
Company desires to provide compensation to the Employee in the event the
Employee's employment is terminated following a change in control of the
Company, as hereinafter provided; and
WHEREAS, because the Employee has or will become familiar with the
Company's products, relationships, trade secrets and confidential information
relating to both the Company's and its customers' business, products, processes
and development and may generate or have generated confidential information, the
Company wishes to protect its long-term interests by having the Employee enter
into non-disclosure and non-competition covenants;
NOW, THEREFORE, in consideration of the terms contained herein,
including the compensation the Company agrees to pay to the Employee upon
certain events, the Employee's continued employment with the Company, the
Employee's covenants and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Employee agree
as follows:
I. TERMINATION FOLLOWING A CHANGE IN CONTROL
A. If a Change in Control (as defined in Section IA(iii) hereof)
occurs and if, within two years following the Change in Control, the employment
of the Employee is terminated (A) by the Company other than for Cause (as
defined in Section IA(i) hereof), or (B) by the Employee for Good Reason (as
defined in Section IA(ii) hereof), the Employee's Compensation (as defined in
Section IA(iv) hereof) shall continue to be paid in monthly installments,
subject to applicable withholdings, by the Company for a period of twelve (12)
months following such termination of employment. In lieu of receiving payment of
Compensation for such 12-month period in installments, the Employee may elect,
at any time prior to the earlier to occur of a Change in Control or action by
the Board of Directors of the Company (the "Board") with respect to an event
which would, upon consummation, result in a Change in Control (which election
shall be evidenced by notice filed with the Company), to be paid the present
value of any such Compensation in a lump sum within 30 days of termination of
the Employee's employment under circumstances entitling such Employee to
Compensation hereunder. The calculation of the amount due shall be made by the
independent accounting firm then performing the Company's independent audit, and
such calculation, including but not limited to any discount factor used to
determine present value, shall be conclusive.
<PAGE>
For purposes of this Agreement, the following terms shall have the
meanings indicated:
(i) Cause. Termination by the Company for "Cause" shall mean
termination with the approval of the Board (A) because
of willful misconduct of a material nature by the
Employee in connection with the performance of his
duties as an employee; (B) because of the Employee's use
of alcohol or illegal drugs that affects his ability to
perform his assigned duties as an employee; (C) because
of the Employee's conviction of a felony or serious
misdemeanor involving moral turpitude; (D) because of
the Employee's embezzlement or theft from the Company;
(E) because of the Employee's gross inattention to or
dereliction of duty; or (F) because of performance by
the Employee of any other willful act(s) which the
Employee knew or reasonably should have known would be
materially detrimental to the Company; provided,
however, that prior to the determination by the Board
that "Cause" as described in A, E or F above has
occurred, the Board shall (1) provide to the Employee in
writing, in reasonable detail, the reasons for the
Board's determination that such "Cause" exists, (2)
afford the Employee a reasonable opportunity to remedy
any such breach, (3) provide the Employee an opportunity
to be heard at the Board meeting where the final
decision to terminate the Employee's employment
hereunder for such "Cause" is to be considered, and (4)
make any decision that such "Cause" exists in good
faith.
(ii) Good Reason. Termination by the Employee for "Good
Reason" shall mean (A) a material reduction in the
Employee's position, duties, responsibilities or status
as in effect immediately preceding the Change in
Control, or a change in the Employee's title resulting
in a material reduction in his responsibilities or
position with the Company as in effect immediately
preceding the Change in Control, in either case without
the Employee's consent, but excluding for this purpose
any isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied promptly by the
Company after receiving notice from the Employee and
further excluding any such reductions or changes made in
good faith to conform with generally accepted industry
standards for the Employee's position; (B) a reduction
in the rate of the Employee's base salary as in effect
immediately preceding the Change in Control or a
decrease in any bonus amount to which the Employee was
entitled pursuant to the Company's bonus or incentive
plans at the end of the fiscal year immediately
preceding the Change in Control, in either case without
the Employee's consent; provided, however, that a
decrease in the Employee's bonus amount shall not
constitute "Good Reason" and nothing herein shall be
construed to guarantee such bonus awards if performance,
either by the Company or the Employee, is below such
targets as may reasonably and in good faith be set forth
in such bonus or incentive plans; or (C) the relocation
of the Employee, without his consent, to a location
outside a 30 mile radius of Concord, North Carolina,
following a Change in Control.
2
<PAGE>
(iii) Change in Control. For purposes of this Agreement,
"Change in Control" shall mean (A) the consummation of a
merger, consolidation, share exchange or similar
transaction of the Company with any other corporation,
entity or group, as a result of which the holders of the
voting capital stock of the Company as a group would
receive less than 50% of the voting capital stock of the
surviving or resulting corporation; (B) the consummation
of an agreement providing for the sale or transfer
(other than as security for obligations of the Company)
of substantially all the assets of the Company; or (C)
in the absence of a prior expression of approval by the
Board, the acquisition except by inheritance or devise
of more than 20% of the Company's voting capital stock
by any person within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, other
than a person, or group including a person, who
beneficially owned, as of the date of this Agreement,
more than 5% of the Company's voting stock or equity,
except that transactions between the Company and any
affiliate or subsidiary of the Company and transactions
between the Company and any employee stock ownership
plan shall not be deemed a "Change in Control" as
described in A, B or C above.
(iv) Compensation. The Employee's Compensation shall consist
of the following: (A) the Employee's annual base salary,
as paid by the Company, in effect immediately preceding
the Change in Control plus (B) an annual bonus equal to
the average bonus (calculated as a percentage of base
salary, without regard to vesting schedules or
restrictions on the bonus compensation and converting
all post-employment payments in stock and stock options
to a cash present value) paid by the Company for each
one-year performance period (often referred to as the
"annual incentive program") to the Employee for the
three (3) most recent fiscal years ending prior to such
Change in Control pursuant to the Company's incentive
and bonus plans or, if the relevant bonus program has
not existed for three (3) years preceding the Change of
Control, an amount equal to the estimated average bonus
as calculated by the independent accounting firm then
performing the Company's independent audit, which
calculation shall be conclusive.
B. Upon termination of the Employee's employment entitling the
Employee to Compensation set forth in Section IA hereof, and for the 12-month
period following such termination of employment (unless terminated sooner as
provided herein), the Company shall:
(i) maintain in full force and effect for the continued
benefit of the Employee medical insurance (including
coverage for the Employee's dependents to the extent
dependent coverage is provided by the Company for its
employees generally) under such medical insurance plans
and programs in which the Employee was entitled to
participate immediately prior to the date of such
termination of employment, provided that the Employee's
continued participation is possible under the general
terms and provisions of such plans and programs. During
such period, the Company will pay the Employee's
portion, if any, of such medical insurance premiums that
may be required, and the Employee's termination
3
<PAGE>
of employment at the beginning of the period shall not
constitute a "qualifying event" under the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA"). At
the conclusion of such period, the Employee shall be
entitled to full rights to continued medical insurance
coverage as provided under COBRA, if eligible. In the
event that the Employee's participation in any such plan
or program is barred for any reason, the Company shall
arrange to provide the Employee with medical insurance
benefits for such 12-month period substantially similar
to those which the Employee would otherwise have been
entitled to receive under such plans and programs from
which his continued participation is barred; provided,
however, in no event will the Employee receive from the
Company the medical insurance contemplated by this
Section IB if the Employee receives comparable insurance
from any other source;
(ii) permit the Employee to participate in all qualified
retirement plans, including without limitation the
Company's pension plan and salary-reduction defined
contribution plan;
(iii) maintain in full force and effect for the continued
benefit of the Employee the
Employee's life insurance (both basic and
supplemental, if applicable);and
(iv) maintain in full force and effect for the continued
benefit of the Employee the Employee's short term
disability and long term disability insurance policies.
C. Upon termination of the Employee's employment entitling the
Employee to Compensation as set forth in Section IA hereof, the Employee will
become immediately vested in any and all stock options and shares of restricted
stock previously granted to him by the Company notwithstanding any provision to
the contrary of any plan under which the options or restricted stock are
granted. Any accrued but ungranted stock options or restricted stock shall also
be fully vested upon grant to the Employee. The Employee may exercise such
options only at the times and in the method described in such options. All
restrictions on shares of the Company's stock granted under any plan shall lapse
upon a Change of Control. The Company will amend such options or plans in any
manner necessary to facilitate the provisions of this Section IC.
D. It is the intention of the Company and the Employee that no
portion of the payment made under this Agreement, or payments to or for the
Employee under any other agreement or plan, be deemed to be an excess parachute
payment as defined in the Internal Revenue Code of 1986, as amended (the "Code")
section 280G or any successor provision. The Company and the Employee agree that
the present value of any payment hereunder and any other payment to or for the
benefit of the Employee in the nature of compensation, receipt of which is
contingent on a Change in Control of the Company, and to which Code section 280G
or any successor provision thereto applies, shall not exceed an amount equal to
one dollar less than the maximum amount that the Employee may receive without
becoming subject to the tax imposed by Code section 4999 or any successor
provision or which the Company may pay without loss of deduction under Code
section 280G or any successor provisions. Present value for purposes
4
<PAGE>
of this Agreement shall be calculated in accordance with Code section 1274(b)(2)
or any successor provision. In the event that the provisions of Code sections
280G and 4999 or any successor provisions are repealed without succession, this
Section ID shall be of no further force or effect.
E. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date the Employee's employment was terminated. As used in this
Agreement, "Company" shall mean the Company as defined herein and any successor
to its business and/or assets as aforesaid that executes and delivers the
agreement provided for in this Section IE or that otherwise becomes bound by the
all terms and provisions of this Agreement by operation of law.
F. Except as elected by the Employee with the prior consent of the
Company, all payments provided for under this Section I shall be paid in cash
(including the cash values of stock options or restricted stock, if any) from
the general funds of the Company, and no special or separate fund shall be
established, and no other segregation of assets shall be made to assure payment,
except as provided to the contrary in funded benefits plans. The Employee shall
have no right, title or interest whatsoever in or to any investments that the
Company may make to aid the Company in meeting its obligations under this
Section I. Nothing contained herein, and no action taken pursuant to the
provisions hereof, shall create or be construed to create a trust of any kind or
a fiduciary relationship between the Company and the Employee or any other
person. To the extent that any person acquires a right to receive payments from
the Company hereunder, such right shall be no greater than the right of an
unsecured creditor of the Company.
G. Following the Employee's termination as a result of a Change in
Control, the Corporation agrees (i) to indemnify, defend and hold harmless the
Employee from and against any liabilities other than those contained in Section
II and III hereof and crimes committed by the Employee against the Company to
which he may be subject as a result of his service as an officer or director of
the Company or as an officer or director of any of the Company's subsidiaries or
affiliates, and (ii) to indemnify the Employee for all costs, including
attorney's fees and other professional fees and disbursements, of (a) any legal
action brought or threatened against him as a result of such employment, or (b)
any legal action in which the Employee is compelled to give testimony as a
result of his employment hereunder, to the fullest extent permitted by, and
subject to the limitations of, the laws of the state of North Carolina.
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H. In the event that any dispute shall arise between the Employee
and the Company relating to his rights under this Agreement following a Change
in Control, and it is determined by agreement between the parties, or by a final
judgment of a court of competent jurisdiction that is no longer subject to
appeal, that the Employee has been substantially successful in his claims, then
reasonable legal fees and disbursements of the Employee in connection with such
dispute shall be paid by the Company.
I. Following the employee's termination as a result of a Change in
Control, the Employee shall be entitled to receive outplacement assistance for a
period of six (6) months at the Company's expense.
II. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION
A. The Employee understands that his position with the Company is
one of trust and confidence because of the Employee's access to trade secrets
and confidential and proprietary business information. The Employee pledges his
best efforts and utmost diligence to protect and keep confidential the trade
secrets and confidential or proprietary business information of the Company.
B. Unless required by the Company in connection with his employment
or with the Company's express written consent, the Employee agrees that he will
not, either during his employment or afterwards, directly or indirectly, use,
misappropriate, disclose or aid anyone else in disclosing to any third party for
the Employee's own benefit or the benefit of another all or any part of any of
the Company's trade secrets or confidential or proprietary information, whether
or not the information is acquired, learned, or developed by the Employee alone
or in conjunction with others. The Employee makes the same pledge with regard to
the confidential information of the Company's customers, contractors, or others
with whom the Company has a business relationship.
C. The Employee understands that trade secrets and confidential or
proprietary information, for purposes of this Agreement, shall include, but not
be limited to, any and all versions of the Company's computer software,
hardware, and documentation; all methods, processes, techniques, practices,
product designs, pricing information, billing histories, customer requirements,
customer lists, employee lists and salary/commission information, personnel
matters, financial data, operating results, plans, contractual relationships,
and projections for business opportunities for new or developing business of the
Company; and all other confidential or proprietary information, patents, ideas,
know-how and trade secrets which are in the possession of the Company, no matter
what the source, including any such information that the Company obtains from a
customer, contractor or another party or entity and that the Company treats or
designates as confidential or proprietary information, whether or not such
information is owned or was developed by the Company.
D. The Employee also agrees that all notes, records (including all
computer and electronic records), software, drawings, handbooks, manuals,
policies, contracts, memoranda,
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sales files, customer lists, employee lists or other documents that are made or
compiled by the Employee, or which were available to the Employee while he was
employed at the Company, in whatever form, including but not limited to all such
documents and data concerning any processes, inventions, services or products
used or developed by the Employee during his employment, shall be the property
of the Company. The Employee further agrees to deliver and make available all
such documents and data to the Company, regardless of how stored or maintained
and including all originals, copies and compilations thereof, upon the
separation of his employment, for any reason, or at any other time at the
Company's request.
E. The Employee understands that the Company expects him to respect
any trade secrets or confidential information of any of the Employee's former
employers, business associates, or other business relationships. The Employee
also agrees to respect the Company's express direction to the Employee not to
disclose to the Company, its officers, or any of its employees any such
information so long as it remains confidential.
F. The Employee understands that the secrecy of certain
communications is protected by state and federal laws, and that violations of
the Federal Communications Act may subject the Employee to fines of up to
$10,000, or imprisonment for up to ten years, or both. Therefore, the Employee
agrees that the following restrictions apply to all modes of communications
during the duration of the Employee's employment with the Company:
1. The Employee will not divulge to any unauthorized
person any knowledge that he may have regarding communication
arrangements between the Company and its customers.
2. Except as required by the daily performance of his
duties, the Employee will not give to any individual or group any
information whatsoever regarding the location of telecommunications
equipment, trunks, cables, circuits, etc., or regarding the
installation of the Company's central office equipment, or any
information regarding the Company's plant or facilities.
3. Except as required in the performance of his duties
with the Company, the Employee will not listen in on any telephone
conversation in any form, nor disclose to any unauthorized
individual or group any part of any telephone conversation which the
Employee may overhear in the performance of his duties.
4. The Employee will not discuss with his family,
friends or acquaintances any information gained through his
employment with the Company regarding military installations,
communications, filter centers or other communication procedures and
equipment relating to national security.
5. The Employee will not divulge to any unauthorized
individual or group the existence, substance, purport, effect of
meaning of any communication between the Company's customers.
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6. The Employee will promptly refer to his supervisor
any unauthorized request regarding telephone communications.
III. COVENANT NOT TO COMPETE
A. For and in consideration of this Agreement, the change in control
protection contained herein and the Employee's continued employment with the
Company, the Employee agrees that, unless specifically authorized by the Company
in writing, the Employee will not during his employment with the Company and for
a period of one year after his employment with the Company has terminated or
ended (whatever the reason for the end of the employment relationship):
1. Engage in any "Competitive Activity" (as defined
below) within the "Restricted Territory" (as defined below); and/or
2. Serve as an employee, director, owner, partner,
contractor, consultant or agent of, or own any interest in (except
for ownership of a minor percentage of stock in a "public"
competitor), any person, firm or corporation that engages in
"Competitive Activity" within the "Restricted Territory"; and/or
3. Engage in any "Competitive Activity" with, for or
towards or divert, attempt to divert or direct others to divert any
business of the Company from an existing Company customer, a joint
venturer or other business partner of the Company (hereinafter
referred to as an "affiliate"), or from a potential customer
identified through leads or relationships developed during the
Employee's employment with the Company, within the "Restricted
Territory".
B. Furthermore, the Employee will not during his employment with the
Company and for a period of two years after his employment with the Company has
terminated or ended (whatever the reason for the end of the employment
relationship) solicit or hire for employment or as an independent contractor any
employee of the Company, or solicit, assist, induce, recruit, or assist or
induce anyone else to recruit or cause another person in the employ of the
Company or any of the Company's affiliates to leave his employment with the
Company or affiliate for the purpose of joining, associating, or becoming
employed with any business or activity with which the Employee is or expects to
be directly or indirectly associated or employed.
C. "Competitive Activity" means: (1) the business activities engaged
in by the Company during the Employee's employment with the Company, including
the sales, marketing, distribution and provision of telecommunications services,
equipment or other products of the type of which the Employee sold or was
involved during his employment with the Company; and/or (2) the performance of
any other business activities competitive with the Company for or on behalf of
any telecommunications entity.
D. "Restricted Territory" means: (1) the geographic area
encompassing a seventy-five (75) mile radius of Concord, North Carolina; and/or
(2) any Metropolitan Statistical Area (as
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defined by the United States Department of Commerce) from which the Company
generated at least two percent (2%) of its gross annual revenue during the last
two calendar years before the end of the Employee's employment with the Company
IV. ACKNOWLEDGMENTS BY EMPLOYEE
A. The Employee acknowledges that the restrictions placed upon him
by this Agreement are reasonable given the nature of the Employee's position
with the Company, the area in which the Company markets its products and
services, and the consideration provided by the Company to the Employee pursuant
to this Agreement. Specifically, the Employee acknowledges that the length of
the Covenant Not to Compete in Section III is reasonable and that the
definitions of "Competitive Activity" and "Restricted Territory" are reasonable.
B. The Employee agrees that in the event of any breach or threatened
breach of the provisions of Section II and III hereof by the Employee, the
Company's remedies at law would be inadequate, and the Company shall be entitled
to an injunction (without any bond or other security being required),
restraining such breach, and costs and attorneys' fees relating to any such
proceeding or any other legal action to enforce the provisions of this
Agreement, but nothing herein shall be construed to preclude the Company from
pursuing any other remedies at law or in equity available to it for any such
breach or threatened breach. Moreover, the Employee also agrees that if the
Employee breaches any of Sections II or III above, the Employee shall be
required to refund to the Company and the Company shall be entitled to recover
of the Employee 90% of the amount of the Employee's Compensation (as defined in
Section IA(iv) herein) for a Change in Control already paid to the Employee by
the Company under this Agreement at the time of the breach, and the Employee
shall forfeit at the time of the breach the right to any additional payments or
benefits under this Agreement, except that if the breach occurs before the
payments set forth in Section IA are made, the Employee shall be entitled to
receive the first monthly payment set forth in Section IA, if generally eligible
under Section I, and nothing more. In such case, the Employee and the Company
agree that the confidential information and non-compete obligations contained in
this Agreement shall remain valid and enforceable based upon the consideration
actually paid.
C. The Employee acknowledges that all of the provisions of the
Agreement are fair and necessary to protect the interests of the Company.
Accordingly, the Employee agrees not to contest the validity or enforceability
of Section II or Section III hereof and agrees that if any court should hold any
provision of Section II or Section III hereof to be unenforceable, the remaining
provisions will nonetheless be enforceable according to their terms. Further, if
any provision or subsection is held to be overly broad as written, the Employee
agrees that a court should view the above provisions and subsections as
separable and uphold those separable provisions and subsections deemed to be
reasonable.
D. The Employee understands that every provision of this Agreement
is severable from each other provision of this Agreement. Therefore, if any
provision of this Agreement is held invalid or unenforceable, every other
provision of this Agreement will continue to be fully valid and enforceable. In
the event that any provision of this Agreement is determined by a
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court of competent jurisdiction to be void or unenforceable, the Employee and
the Company agree that such provision shall be enforced to the extent reasonable
under the circumstances and that all other provisions shall be enforceable to
the fullest extent permissible by law. The Employee and the Company further
agree that, if any court makes such a determination, such court shall have the
power to reduce the duration, scope and/or area of such provisions and/or delete
specific words and phrases by "blue penciling" and, in its reduced or blue
penciled form, such provisions shall then be enforceable as allowed by law.
V. MISCELLANEOUS
A. The Employee shall have no right to receive any payment hereunder
except following a Change of Control as determined pursuant to Section I.
Nothing contained in this Agreement shall confer upon the Employee any right to
continued employment by the Company or shall interfere in any way with the right
of the Company to terminate his employment at any time for any/or no reason. The
provisions of this Agreement shall not affect in any way the right or power of
the Company to change its business structure or to effect a merger,
consolidation, share exchange or similar transaction, or to dissolve or
liquidate, or sell or transfer all or part of its business or assets.
B. The Employee understands that his obligations under this
Agreement will continue whether or not his employment with the Company is
terminated voluntarily or involuntarily, or with or without cause.
C. This Agreement replaces any previous agreement relating to the
same or similar subject matter which the Employee and the Company may have
entered into with the Company with respect to the Employee's employment by the
Company. This Agreement may not be changed in any detail by any verbal
statement, representation, or other agreement made by any other Company
employee, or by any written document signed by any Company employee, other than
a Company officer.
D. The Employee agrees that the Company's waiver of any default by
the Employer shall not constitute a waiver of its rights under this Agreement
with respect to any subsequent default by the Employee. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by all
parties.
E. This Agreement shall be binding upon, and inure to the benefit
of, the Employee and the Company and their respective permitted successors and
assigns. Neither this Agreement nor any right or interest hereunder shall be
assignable by the Employee, his beneficiaries, or legal representatives without
the Company's prior written consent.
F. Where appropriate as used in this Plan, the masculine shall
include the feminine.
G. This Agreement has been executed and delivered in the State of
North Carolina, and the laws of the State of North Carolina shall govern its
validity, interpretation, performance and enforcement.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the day and year first above stated.
CT COMMUNICATIONS, INC.
By: /s/ Michael R. Coltrane
---------------------------
EMPLOYEE:
/s/ Richard L. Garner, Jr. (Seal)
---------------------------
Richard L. Garner, Jr.
11
EXHIBIT 10.15
AGREEMENT
THIS AGREEMENT is made and entered into as of the 29th day of
December, 1998 by and between CT COMMUNICATIONS, INC. (the "Company"), a North
Carolina corporation, and MICHAEL R. NASH ("Employee"), an individual residing
in _________ County, North Carolina;
WHEREAS, the Employee is a valued employee of the Company or one of
the Company's subsidiaries, and in order to induce the Employee to continue
employment with the Company and to enhance the Employee's job security, the
Company desires to provide compensation to the Employee in the event the
Employee's employment is terminated following a change in control of the
Company, as hereinafter provided; and
WHEREAS, because the Employee has or will become familiar with the
Company's products, relationships, trade secrets and confidential information
relating to both the Company's and its customers' business, products, processes
and development and may generate or have generated confidential information, the
Company wishes to protect its long-term interests by having the Employee enter
into non-disclosure and non-competition covenants;
NOW, THEREFORE, in consideration of the terms contained herein,
including the compensation the Company agrees to pay to the Employee upon
certain events, the Employee's continued employment with the Company, the
Employee's covenants and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Employee agree
as follows:
I. TERMINATION FOLLOWING A CHANGE IN CONTROL
A. If a Change in Control (as defined in Section IA(iii) hereof)
occurs and if, within two years following the Change in Control, the employment
of the Employee is terminated (A) by the Company other than for Cause (as
defined in Section IA(i) hereof), or (B) by the Employee for Good Reason (as
defined in Section IA(ii) hereof), the Employee's Compensation (as defined in
Section IA(iv) hereof) shall continue to be paid in monthly installments,
subject to applicable withholdings, by the Company for a period of twelve (12)
months following such termination of employment. In lieu of receiving payment of
Compensation for such 12-month period in installments, the Employee may elect,
at any time prior to the earlier to occur of a Change in Control or action by
the Board of Directors of the Company (the "Board") with respect to an event
which would, upon consummation, result in a Change in Control (which election
shall be evidenced by notice filed with the Company), to be paid the present
value of any such Compensation in a lump sum within 30 days of termination of
the Employee's employment under circumstances entitling such Employee to
Compensation hereunder. The calculation of the amount due shall be made by the
independent accounting firm then performing the Company's independent audit, and
such
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calculation, including but not limited to any discount factor used to determine
present value, shall be conclusive.
For purposes of this Agreement, the following terms shall have the
meanings indicated:
(i) Cause. Termination by the Company for "Cause" shall mean
termination with the approval of the Board (A) because of
willful misconduct of a material nature by the Employee in
connection with the performance of his duties as an
employee; (B) because of the Employee's use of alcohol or
illegal drugs that affects his ability to perform his
assigned duties as an employee; (C) because of the
Employee's conviction of a felony or serious misdemeanor
involving moral turpitude; (D) because of the Employee's
embezzlement or theft from the Company; (E) because of the
Employee's gross inattention to or dereliction of duty; or
(F) because of performance by the Employee of any other
willful act(s) which the Employee knew or reasonably should
have known would be materially detrimental to the Company;
provided, however, that prior to the determination by the
Board that "Cause" as described in A, E or F above has
occurred, the Board shall (1) provide to the Employee in
writing, in reasonable detail, the reasons for the Board's
determination that such "Cause" exists, (2) afford the
Employee a reasonable opportunity to remedy any such
breach, (3) provide the Employee an opportunity to be heard
at the Board meeting where the final decision to terminate
the Employee's employment hereunder for such "Cause" is to
be considered, and (4) make any decision that such "Cause"
exists in good faith.
(ii) Good Reason. Termination by the Employee for "Good Reason"
shall mean (A) a material reduction in the Employee's
position, duties, responsibilities or status as in effect
immediately preceding the Change in Control, or a change in
the Employee's title resulting in a material reduction in
his responsibilities or position with the Company as in
effect immediately preceding the Change in Control, in
either case without the Employee's consent, but excluding
for this purpose any isolated, insubstantial and
inadvertent action not taken in bad faith and which is
remedied promptly by the Company after receiving notice
from the Employee and further excluding any such reductions
or changes made in good faith to conform with generally
accepted industry standards for the Employee's position;
(B) a reduction in the rate of the Employee's base salary
as in effect immediately preceding the Change in Control or
a decrease in any bonus amount to which the Employee was
entitled pursuant to the Company's bonus or incentive plans
at the end of the fiscal year immediately preceding the
Change in Control, in either case without the Employee's
consent; provided, however, that a decrease in the
Employee's bonus amount shall not constitute "Good Reason"
and nothing herein shall be construed to guarantee such
bonus awards if performance, either by the Company or the
Employee, is
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below such targets as may reasonably and in good faith be
set forth in such bonus or incentive plans; or (C) the
relocation of the Employee, without his consent, to a
location outside a 30 mile radius of Concord, North
Carolina, following a Change in Control.
(iii) Change in Control. For purposes of this Agreement, "Change
in Control" shall mean (A) the consummation of a merger,
consolidation, share exchange or similar transaction of the
Company with any other corporation, entity or group, as a
result of which the holders of the voting capital stock of
the Company as a group would receive less than 50% of the
voting capital stock of the surviving or resulting
corporation; (B) the consummation of an agreement providing
for the sale or transfer (other than as security for
obligations of the Company) of substantially all the assets
of the Company; or (C) in the absence of a prior expression
of approval by the Board, the acquisition except by
inheritance or devise of more than 20% of the Company's
voting capital stock by any person within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than a person, or group including a person,
who beneficially owned, as of the date of this Agreement,
more than 5% of the Company's voting stock or equity,
except that transactions between the Company and any
affiliate or subsidiary of the Company and transactions
between the Company and any employee stock ownership plan
shall not be deemed a "Change in Control" as described in
A, B or C above.
(iv) Compensation. The Employee's Compensation shall consist of
the following: (A) the Employee's annual base salary, as
paid by the Company, in effect immediately preceding the
Change in Control plus (B) an annual bonus equal to the
average bonus (calculated as a percentage of base salary,
without regard to vesting schedules or restrictions on the
bonus compensation and converting all post-employment
payments in stock and stock options to a cash present
value) paid by the Company for each one-year performance
period (often referred to as the "annual incentive
program") to the Employee for the three (3) most recent
fiscal years ending prior to such Change in Control
pursuant to the Company's incentive and bonus plans or, if
the relevant bonus program has not existed for three (3)
years preceding the Change of Control, an amount equal to
the estimated average bonus as calculated by the
independent accounting firm then performing the Company's
independent audit, which calculation shall be conclusive.
B. Upon termination of the Employee's employment entitling the
Employee to Compensation set forth in Section IA hereof, and for the 12-month
period following such termination of employment (unless terminated sooner as
provided herein), the Company shall:
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(i) maintain in full force and effect for the continued benefit
of the Employee medical insurance (including coverage for
the Employee's dependents to the extent dependent coverage
is provided by the Company for its employees generally)
under such medical insurance plans and programs in which
the Employee was entitled to participate immediately prior
to the date of such termination of employment, provided
that the Employee's continued participation is possible
under the general terms and provisions of such plans and
programs. During such period, the Company will pay the
Employee's portion, if any, of such medical insurance
premiums that may be required, and the Employee's
termination of employment at the beginning of the period
shall not constitute a "qualifying event" under the
Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"). At the conclusion of such period, the Employee
shall be entitled to full rights to continued medical
insurance coverage as provided under COBRA, if eligible. In
the event that the Employee's participation in any such
plan or program is barred for any reason, the Company shall
arrange to provide the Employee with medical insurance
benefits for such 12-month period substantially similar to
those which the Employee would otherwise have been entitled
to receive under such plans and programs from which his
continued participation is barred; provided, however, in no
event will the Employee receive from the Company the
medical insurance contemplated by this Section IB if the
Employee receives comparable insurance from any other
source;
(ii) permit the Employee to participate in all qualified
retirement plans, including without limitation the
Company's pension plan and salary-reduction defined
contribution plan;
(iii) maintain in full force and effect for the continued benefit
of the Employee the Employee's life insurance (both basic
and supplemental, if applicable);and
(iv) maintain in full force and effect for the continued
benefit of the Employee the Employee's short term
disability and long term disability insurance policies.
C. Upon termination of the Employee's employment entitling the
Employee to Compensation as set forth in Section IA hereof, the Employee will
become immediately vested in any and all stock options and shares of restricted
stock previously granted to him by the Company notwithstanding any provision to
the contrary of any plan under which the options or restricted stock are
granted. Any accrued but ungranted stock options or restricted stock shall also
be fully vested upon grant to the Employee. The Employee may exercise such
options only at the times and in the method described in such options. All
restrictions on shares of the Company's stock granted under any plan shall lapse
upon a Change of Control. The Company will amend such options or plans in any
manner necessary to facilitate the provisions of this Section IC.
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D. It is the intention of the Company and the Employee that no
portion of the payment made under this Agreement, or payments to or for the
Employee under any other agreement or plan, be deemed to be an excess parachute
payment as defined in the Internal Revenue Code of 1986, as amended (the "Code")
section 280G or any successor provision. The Company and the Employee agree that
the present value of any payment hereunder and any other payment to or for the
benefit of the Employee in the nature of compensation, receipt of which is
contingent on a Change in Control of the Company, and to which Code section 280G
or any successor provision thereto applies, shall not exceed an amount equal to
one dollar less than the maximum amount that the Employee may receive without
becoming subject to the tax imposed by Code section 4999 or any successor
provision or which the Company may pay without loss of deduction under Code
section 280G or any successor provisions. Present value for purposes of this
Agreement shall be calculated in accordance with Code section 1274(b)(2) or any
successor provision. In the event that the provisions of Code sections 280G and
4999 or any successor provisions are repealed without succession, this Section
ID shall be of no further force or effect.
E. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date the Employee's employment was terminated. As used in this
Agreement, "Company" shall mean the Company as defined herein and any successor
to its business and/or assets as aforesaid that executes and delivers the
agreement provided for in this Section IE or that otherwise becomes bound by the
all terms and provisions of this Agreement by operation of law.
F. Except as elected by the Employee with the prior consent of the
Company, all payments provided for under this Section I shall be paid in cash
(including the cash values of stock options or restricted stock, if any) from
the general funds of the Company, and no special or separate fund shall be
established, and no other segregation of assets shall be made to assure payment,
except as provided to the contrary in funded benefits plans. The Employee shall
have no right, title or interest whatsoever in or to any investments that the
Company may make to aid the Company in meeting its obligations under this
Section I. Nothing contained herein, and no action taken pursuant to the
provisions hereof, shall create or be construed to create a trust of any kind or
a fiduciary relationship between the Company and the Employee or any other
person. To the extent that any person acquires a right to receive payments from
the Company hereunder, such right shall be no greater than the right of an
unsecured creditor of the Company.
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G. Following the Employee's termination as a result of a Change in
Control, the Corporation agrees (i) to indemnify, defend and hold harmless the
Employee from and against any liabilities other than those contained in Section
II and III hereof and crimes committed by the Employee against the Company to
which he may be subject as a result of his service as an officer or director of
the Company or as an officer or director of any of the Company's subsidiaries or
affiliates, and (ii) to indemnify the Employee for all costs, including
attorney's fees and other professional fees and disbursements, of (a) any legal
action brought or threatened against him as a result of such employment, or (b)
any legal action in which the Employee is compelled to give testimony as a
result of his employment hereunder, to the fullest extent permitted by, and
subject to the limitations of, the laws of the state of North Carolina.
H. In the event that any dispute shall arise between the Employee
and the Company relating to his rights under this Agreement following a Change
in Control, and it is determined by agreement between the parties, or by a final
judgment of a court of competent jurisdiction that is no longer subject to
appeal, that the Employee has been substantially successful in his claims, then
reasonable legal fees and disbursements of the Employee in connection with such
dispute shall be paid by the Company.
I. Following the employee's termination as a result of a Change in
Control, the Employee shall be entitled to receive outplacement assistance for a
period of six (6) months at the Company's expense.
II. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION
A. The Employee understands that his position with the Company is
one of trust and confidence because of the Employee's access to trade secrets
and confidential and proprietary business information. The Employee pledges his
best efforts and utmost diligence to protect and keep confidential the trade
secrets and confidential or proprietary business information of the Company.
B. Unless required by the Company in connection with his employment
or with the Company's express written consent, the Employee agrees that he will
not, either during his employment or afterwards, directly or indirectly, use,
misappropriate, disclose or aid anyone else in disclosing to any third party for
the Employee's own benefit or the benefit of another all or any part of any of
the Company's trade secrets or confidential or proprietary information, whether
or not the information is acquired, learned, or developed by the Employee alone
or in conjunction with others. The Employee makes the same pledge with regard to
the confidential information of the Company's customers, contractors, or others
with whom the Company has a business relationship.
C. The Employee understands that trade secrets and confidential or
proprietary information, for purposes of this Agreement, shall include, but not
be limited to, any and all versions of the Company's computer software,
hardware, and documentation; all methods,
6
<PAGE>
processes, techniques, practices, product designs, pricing information, billing
histories, customer requirements, customer lists, employee lists and
salary/commission information, personnel matters, financial data, operating
results, plans, contractual relationships, and projections for business
opportunities for new or developing business of the Company; and all other
confidential or proprietary information, patents, ideas, know-how and trade
secrets which are in the possession of the Company, no matter what the source,
including any such information that the Company obtains from a customer,
contractor or another party or entity and that the Company treats or designates
as confidential or proprietary information, whether or not such information is
owned or was developed by the Company.
D. The Employee also agrees that all notes, records (including all
computer and electronic records), software, drawings, handbooks, manuals,
policies, contracts, memoranda, sales files, customer lists, employee lists or
other documents that are made or compiled by the Employee, or which were
available to the Employee while he was employed at the Company, in whatever
form, including but not limited to all such documents and data concerning any
processes, inventions, services or products used or developed by the Employee
during his employment, shall be the property of the Company. The Employee
further agrees to deliver and make available all such documents and data to the
Company, regardless of how stored or maintained and including all originals,
copies and compilations thereof, upon the separation of his employment, for any
reason, or at any other time at the Company's request.
E. The Employee understands that the Company expects him to respect
any trade secrets or confidential information of any of the Employee's former
employers, business associates, or other business relationships. The Employee
also agrees to respect the Company's express direction to the Employee not to
disclose to the Company, its officers, or any of its employees any such
information so long as it remains confidential.
F. The Employee understands that the secrecy of certain
communications is protected by state and federal laws, and that violations of
the Federal Communications Act may subject the Employee to fines of up to
$10,000, or imprisonment for up to ten years, or both. Therefore, the Employee
agrees that the following restrictions apply to all modes of communications
during the duration of the Employee's employment with the Company:
1. The Employee will not divulge to any unauthorized
person any knowledge that he may have regarding communication
arrangements between the Company and its customers.
2. Except as required by the daily performance of his
duties, the Employee will not give to any individual or group any
information whatsoever regarding the location of telecommunications
equipment, trunks, cables, circuits, etc., or regarding the
installation of the Company's central office equipment, or any
information regarding the Company's plant or facilities.
7
<PAGE>
3. Except as required in the performance of his duties
with the Company, the Employee will not listen in on any telephone
conversation in any form, nor disclose to any unauthorized
individual or group any part of any telephone conversation which the
Employee may overhear in the performance of his duties.
4. The Employee will not discuss with his family,
friends or acquaintances any information gained through his
employment with the Company regarding military installations,
communications, filter centers or other communication procedures and
equipment relating to national security.
5. The Employee will not divulge to any unauthorized
individual or group the existence, substance, purport, effect of
meaning of any communication between the Company's customers.
6. The Employee will promptly refer to his supervisor
any unauthorized request regarding telephone communications.
III. COVENANT NOT TO COMPETE
A. For and in consideration of this Agreement, the change in control
protection contained herein and the Employee's continued employment with the
Company, the Employee agrees that, unless specifically authorized by the Company
in writing, the Employee will not during his employment with the Company and for
a period of one year after his employment with the Company has terminated or
ended (whatever the reason for the end of the employment relationship):
1. Engage in any "Competitive Activity" (as defined
below) within the "Restricted Territory" (as defined below); and/or
2. Serve as an employee, director, owner, partner,
contractor, consultant or agent of, or own any interest in (except
for ownership of a minor percentage of stock in a "public"
competitor), any person, firm or corporation that engages in
"Competitive Activity" within the "Restricted Territory"; and/or
3. Engage in any "Competitive Activity" with, for or
towards or divert, attempt to divert or direct others to divert any
business of the Company from an existing Company customer, a joint
venturer or other business partner of the Company (hereinafter
referred to as an "affiliate"), or from a potential customer
identified through leads or relationships developed during the
Employee's employment with the Company, within the "Restricted
Territory".
B. Furthermore, the Employee will not during his employment with the
Company and for a period of two years after his employment with the Company has
terminated or
8
<PAGE>
ended (whatever the reason for the end of the employment relationship) solicit
or hire for employment or as an independent contractor any employee of the
Company, or solicit, assist, induce, recruit, or assist or induce anyone else to
recruit or cause another person in the employ of the Company or any of the
Company's affiliates to leave his employment with the Company or affiliate for
the purpose of joining, associating, or becoming employed with any business or
activity with which the Employee is or expects to be directly or indirectly
associated or employed.
C. "Competitive Activity" means: (1) the business activities engaged
in by the Company during the Employee's employment with the Company, including
the sales, marketing, distribution and provision of telecommunications services,
equipment or other products of the type of which the Employee sold or was
involved during his employment with the Company; and/or (2) the performance of
any other business activities competitive with the Company for or on behalf of
any telecommunications entity.
D. "Restricted Territory" means: (1) the geographic area
encompassing a seventy-five (75) mile radius of Concord, North Carolina; and/or
(2) any Metropolitan Statistical Area (as defined by the United States
Department of Commerce) from which the Company generated at least two percent
(2%) of its gross annual revenue during the last two calendar years before the
end of the Employee's employment with the Company.
IV. ACKNOWLEDGMENTS BY EMPLOYEE
A. The Employee acknowledges that the restrictions placed upon him
by this Agreement are reasonable given the nature of the Employee's position
with the Company, the area in which the Company markets its products and
services, and the consideration provided by the Company to the Employee pursuant
to this Agreement. Specifically, the Employee acknowledges that the length of
the Covenant Not to Compete in Section III is reasonable and that the
definitions of "Competitive Activity" and "Restricted Territory" are reasonable.
B. The Employee agrees that in the event of any breach or threatened
breach of the provisions of Section II and III hereof by the Employee, the
Company's remedies at law would be inadequate, and the Company shall be entitled
to an injunction (without any bond or other security being required),
restraining such breach, and costs and attorneys' fees relating to any such
proceeding or any other legal action to enforce the provisions of this
Agreement, but nothing herein shall be construed to preclude the Company from
pursuing any other remedies at law or in equity available to it for any such
breach or threatened breach. Moreover, the Employee also agrees that if the
Employee breaches any of Sections II or III above, the Employee shall be
required to refund to the Company and the Company shall be entitled to recover
of the Employee 90% of the amount of the Employee's Compensation (as defined in
Section IA(iv) herein) for a Change in Control already paid to the Employee by
the Company under this Agreement at the time of the breach, and the Employee
shall forfeit at the time of the breach the right to any additional payments or
benefits under this Agreement, except that if the breach occurs before the
payments set forth
9
<PAGE>
in Section IA are made, the Employee shall be entitled to receive the first
monthly payment set forth in Section IA, if generally eligible under Section I,
and nothing more. In such case, the Employee and the Company agree that the
confidential information and non-compete obligations contained in this Agreement
shall remain valid and enforceable based upon the consideration actually paid.
C. The Employee acknowledges that all of the provisions of the
Agreement are fair and necessary to protect the interests of the Company.
Accordingly, the Employee agrees not to contest the validity or enforceability
of Section II or Section III hereof and agrees that if any court should hold any
provision of Section II or Section III hereof to be unenforceable, the remaining
provisions will nonetheless be enforceable according to their terms. Further, if
any provision or subsection is held to be overly broad as written, the Employee
agrees that a court should view the above provisions and subsections as
separable and uphold those separable provisions and subsections deemed to be
reasonable.
D. The Employee understands that every provision of this Agreement
is severable from each other provision of this Agreement. Therefore, if any
provision of this Agreement is held invalid or unenforceable, every other
provision of this Agreement will continue to be fully valid and enforceable. In
the event that any provision of this Agreement is determined by a court of
competent jurisdiction to be void or unenforceable, the Employee and the Company
agree that such provision shall be enforced to the extent reasonable under the
circumstances and that all other provisions shall be enforceable to the fullest
extent permissible by law. The Employee and the Company further agree that, if
any court makes such a determination, such court shall have the power to reduce
the duration, scope and/or area of such provisions and/or delete specific words
and phrases by "blue penciling" and, in its reduced or blue penciled form, such
provisions shall then be enforceable as allowed by law.
V. MISCELLANEOUS
A. The Employee shall have no right to receive any payment hereunder
except following a Change of Control as determined pursuant to Section I.
Nothing contained in this Agreement shall confer upon the Employee any right to
continued employment by the Company or shall interfere in any way with the right
of the Company to terminate his employment at any time for any/or no reason. The
provisions of this Agreement shall not affect in any way the right or power of
the Company to change its business structure or to effect a merger,
consolidation, share exchange or similar transaction, or to dissolve or
liquidate, or sell or transfer all or part of its business or assets.
B. The Employee understands that his obligations under this
Agreement will continue whether or not his employment with the Company is
terminated voluntarily or involuntarily, or with or without cause.
10
<PAGE>
C. This Agreement replaces any previous agreement relating to the
same or similar subject matter which the Employee and the Company may have
entered into with the Company with respect to the Employee's employment by the
Company. This Agreement may not be changed in any detail by any verbal
statement, representation, or other agreement made by any other Company
employee, or by any written document signed by any Company employee, other than
a Company officer.
D. The Employee agrees that the Company's waiver of any default by
the Employer shall not constitute a waiver of its rights under this Agreement
with respect to any subsequent default by the Employee. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by all
parties.
E. This Agreement shall be binding upon, and inure to the benefit
of, the Employee and the Company and their respective permitted successors and
assigns. Neither this Agreement nor any right or interest hereunder shall be
assignable by the Employee, his beneficiaries, or legal representatives without
the Company's prior written consent.
F. Where appropriate as used in this Plan, the masculine shall
include the feminine.
G. This Agreement has been executed and delivered in the State of
North Carolina, and the laws of the State of North Carolina shall govern its
validity, interpretation, performance and enforcement.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the day and year first above stated.
CT COMMUNICATIONS, INC.
By:/s/ Michael R. Coltrane
----------------------
EMPLOYEE:
/s/ Michael R. Nash (Seal)
------------------------
Michael R. Nash
11
EXHIBIT 10.16
AGREEMENT
THIS AGREEMENT is made and entered into as of the 30th day of
December 1998 by and between CT COMMUNICATIONS, INC. (the "Company"), a North
Carolina corporation, and CHARLOTTE S. WALSH ("Employee"), an individual
residing in _________ County, North Carolina;
WHEREAS, the Employee is a valued employee of the Company or one of
the Company's subsidiaries, and in order to induce the Employee to continue
employment with the Company and to enhance the Employee's job security, the
Company desires to provide compensation to the Employee in the event the
Employee's employment is terminated following a change in control of the
Company, as hereinafter provided; and
WHEREAS, because the Employee has or will become familiar with the
Company's products, relationships, trade secrets and confidential information
relating to both the Company's and its customers' business, products, processes
and development and may generate or have generated confidential information, the
Company wishes to protect its long-term interests by having the Employee enter
into non-disclosure and non-competition covenants;
NOW, THEREFORE, in consideration of the terms contained herein,
including the compensation the Company agrees to pay to the Employee upon
certain events, the Employee's continued employment with the Company, the
Employee's covenants and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Employee agree
as follows:
I. TERMINATION FOLLOWING A CHANGE IN CONTROL
A. If a Change in Control (as defined in Section IA(iii) hereof)
occurs and if, within two years following the Change in Control, the employment
of the Employee is terminated (A) by the Company other than for Cause (as
defined in Section IA(i) hereof), or (B) by the Employee for Good Reason (as
defined in Section IA(ii) hereof), the Employee's Compensation (as defined in
Section IA(iv) hereof) shall continue to be paid in monthly installments,
subject to applicable withholdings, by the Company for a period of twelve (12)
months following such termination of employment. In lieu of receiving payment of
Compensation for such 12-month period in installments, the Employee may elect,
at any time prior to the earlier to occur of a Change in Control or action by
the Board of Directors of the Company (the "Board") with respect to an event
which would, upon consummation, result in a Change in Control (which election
shall be evidenced by notice filed with the Company), to be paid the present
value of any such Compensation in a lump sum within 30 days of termination of
the Employee's employment under circumstances entitling such Employee to
Compensation hereunder. The calculation of the amount due shall be made by the
independent accounting firm then performing the Company's independent audit, and
such calculation, including but not limited to any discount factor used to
determine present value, shall be conclusive.
<PAGE>
For purposes of this Agreement, the following terms shall have the
meanings indicated:
(i) Cause. Termination by the Company for "Cause" shall mean
termination with the approval of the Board (A) because
of willful misconduct of a material nature by the
Employee in connection with the performance of his
duties as an employee; (B) because of the Employee's use
of alcohol or illegal drugs that affects his ability to
perform his assigned duties as an employee; (C) because
of the Employee's conviction of a felony or serious
misdemeanor involving moral turpitude; (D) because of
the Employee's embezzlement or theft from the Company;
(E) because of the Employee's gross inattention to or
dereliction of duty; or (F) because of performance by
the Employee of any other willful act(s) which the
Employee knew or reasonably should have known would be
materially detrimental to the Company; provided,
however, that prior to the determination by the Board
that "Cause" as described in A, E or F above has
occurred, the Board shall (1) provide to the Employee in
writing, in reasonable detail, the reasons for the
Board's determination that such "Cause" exists, (2)
afford the Employee a reasonable opportunity to remedy
any such breach, (3) provide the Employee an opportunity
to be heard at the Board meeting where the final
decision to terminate the Employee's employment
hereunder for such "Cause" is to be considered, and (4)
make any decision that such "Cause" exists in good
faith.
(ii) Good Reason. Termination by the Employee for "Good Reason"
shall mean (A) a material reduction in the Employee's
position, duties, responsibilities or status as in effect
immediately preceding the Change in Control, or a change in
the Employee's title resulting in a material reduction in
his responsibilities or position with the Company as in
effect immediately preceding the Change in Control, in
either case without the Employee's consent, but excluding
for this purpose any isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied promptly
by the Company after receiving notice from the Employee and
further excluding any such reductions or changes made in
good faith to conform with generally accepted industry
standards for the Employee's position; (B) a reduction in
the rate of the Employee's base salary as in effect
immediately preceding the Change in Control or a decrease in
any bonus amount to which the Employee was entitled pursuant
to the Company's bonus or incentive plans at the end of the
fiscal year immediately preceding the Change in Control, in
either case without the Employee's consent; provided,
however, that a decrease in the Employee's bonus amount
shall not constitute "Good Reason" and nothing herein shall
be construed to guarantee such bonus awards if performance,
either by the Company or the Employee, is below such targets
as may reasonably and in good faith be set forth in such
bonus or incentive plans; or (C) the relocation of the
Employee, without his consent, to a location outside a 30
mile radius of Concord, North Carolina, following a Change
in Control.
(iii) Change in Control. For purposes of this Agreement, "Change
in Control" shall mean (A) the consummation of a merger,
consolidation, share exchange or similar
<PAGE>
transaction of the Company with any other corporation,
entity or group, as a result of which the holders of the
voting capital stock of the Company as a group would receive
less than 50% of the voting capital stock of the surviving
or resulting corporation; (B) the consummation of an
agreement providing for the sale or transfer (other than as
security for obligations of the Company) of substantially
all the assets of the Company; or (C) in the absence of a
prior expression of approval by the Board, the acquisition
except by inheritance or devise of more than 20% of the
Company's voting capital stock by any person within the
meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended, other than a person, or group including
a person, who beneficially owned, as of the date of this
Agreement, more than 5% of the Company's voting stock or
equity, except that transactions between the Company and any
affiliate or subsidiary of the Company and transactions
between the Company and any employee stock ownership plan
shall not be deemed a "Change in Control" as described in A,
B or C above.
(iv) Compensation. The Employee's Compensation shall consist of
the following: (A) the Employee's annual base salary, as
paid by the Company, in effect immediately preceding the
Change in Control plus (B) an annual bonus equal to the
average bonus (calculated as a percentage of base salary,
without regard to vesting schedules or restrictions on the
bonus compensation and converting all post-employment
payments in stock and stock options to a cash present value)
paid by the Company for each one-year performance period
(often referred to as the "annual incentive program") to the
Employee for the three (3) most recent fiscal years ending
prior to such Change in Control pursuant to the Company's
incentive and bonus plans or, if the relevant bonus program
has not existed for three (3) years preceding the Change of
Control, an amount equal to the estimated average bonus as
calculated by the independent accounting firm then
performing the Company's independent audit, which
calculation shall be conclusive.
B. Upon termination of the Employee's employment entitling the
Employee to Compensation set forth in Section IA hereof, and for the 12-month
period following such termination of employment (unless terminated sooner as
provided herein), the Company shall:
(i) maintain in full force and effect for the continued benefit
of the Employee medical insurance (including coverage for
the Employee's dependents to the extent dependent coverage
is provided by the Company for its employees generally)
under such medical insurance plans and programs in which the
Employee was entitled to participate immediately prior to
the date of such termination of employment, provided that
the Employee's continued participation is possible under the
general terms and provisions of such plans and programs.
During such period, the Company will pay the Employee's
portion, if any, of such medical insurance premiums that may
be required, and the Employee's termination of employment at
the beginning of the period shall not constitute a
"qualifying event" under the Consolidated Omnibus Budget
Reconciliation Act of 1985
<PAGE>
("COBRA"). At the conclusion of such period, the Employee
shall be entitled to full rights to continued medical
insurance coverage as provided under COBRA, if eligible. In
the event that the Employee's participation in any such plan
or program is barred for any reason, the Company shall
arrange to provide the Employee with medical insurance
benefits for such 12-month period substantially similar to
those which the Employee would otherwise have been entitled
to receive under such plans and programs from which his
continued participation is barred; provided, however, in no
event will the Employee receive from the Company the medical
insurance contemplated by this Section IB if the Employee
receives comparable insurance from any other source;
(ii) permit the Employee to participate in all qualified
retirement plans, including without limitation the Company's
pension plan and salary-reduction defined contribution plan;
(iii) maintain in full force and effect for the continued benefit
of the Employee the Employee's life insurance (both basic
and supplemental, if applicable);and
(iv) maintain in full force and effect for the continued benefit
of the Employee the Employee's short term disability and
long term disability insurance policies.
C. Upon termination of the Employee's employment entitling the
Employee to Compensation as set forth in Section IA hereof, the Employee will
become immediately vested in any and all stock options and shares of restricted
stock previously granted to him by the Company notwithstanding any provision to
the contrary of any plan under which the options or restricted stock are
granted. Any accrued but ungranted stock options or restricted stock shall also
be fully vested upon grant to the Employee. The Employee may exercise such
options only at the times and in the method described in such options. All
restrictions on shares of the Company's stock granted under any plan shall lapse
upon a Change of Control. The Company will amend such options or plans in any
manner necessary to facilitate the provisions of this Section IC.
D. It is the intention of the Company and the Employee that no
portion of the payment made under this Agreement, or payments to or for the
Employee under any other agreement or plan, be deemed to be an excess parachute
payment as defined in the Internal Revenue Code of 1986, as amended (the "Code")
section 280G or any successor provision. The Company and the Employee agree that
the present value of any payment hereunder and any other payment to or for the
benefit of the Employee in the nature of compensation, receipt of which is
contingent on a Change in Control of the Company, and to which Code section 280G
or any successor provision thereto applies, shall not exceed an amount equal to
one dollar less than the maximum amount that the Employee may receive without
becoming subject to the tax imposed by Code section 4999 or any successor
provision or which the Company may pay without loss of deduction under Code
section 280G or any successor provisions. Present value for purposes of this
Agreement shall be calculated in accordance with Code section 1274(b)(2) or any
successor provision. In the event that the provisions of Code sections 280G and
4999 or any
<PAGE>
successor provisions are repealed without succession, this Section ID shall be
of no further force or effect.
E. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Company in the same amount
and on the same terms as he would be entitled to hereunder if he terminated his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the date the Employee's employment was terminated. As used in this
Agreement, "Company" shall mean the Company as defined herein and any successor
to its business and/or assets as aforesaid that executes and delivers the
agreement provided for in this Section IE or that otherwise becomes bound by the
all terms and provisions of this Agreement by operation of law.
F. Except as elected by the Employee with the prior consent of the
Company, all payments provided for under this Section I shall be paid in cash
(including the cash values of stock options or restricted stock, if any) from
the general funds of the Company, and no special or separate fund shall be
established, and no other segregation of assets shall be made to assure payment,
except as provided to the contrary in funded benefits plans. The Employee shall
have no right, title or interest whatsoever in or to any investments that the
Company may make to aid the Company in meeting its obligations under this
Section I. Nothing contained herein, and no action taken pursuant to the
provisions hereof, shall create or be construed to create a trust of any kind or
a fiduciary relationship between the Company and the Employee or any other
person. To the extent that any person acquires a right to receive payments from
the Company hereunder, such right shall be no greater than the right of an
unsecured creditor of the Company.
G. Following the Employee's termination as a result of a Change in
Control, the Corporation agrees (i) to indemnify, defend and hold harmless the
Employee from and against any liabilities other than those contained in Section
II and III hereof and crimes committed by the Employee against the Company to
which he may be subject as a result of his service as an officer or director of
the Company or as an officer or director of any of the Company's subsidiaries or
affiliates, and (ii) to indemnify the Employee for all costs, including
attorney's fees and other professional fees and disbursements, of (a) any legal
action brought or threatened against him as a result of such employment, or (b)
any legal action in which the Employee is compelled to give testimony as a
result of his employment hereunder, to the fullest extent permitted by, and
subject to the limitations of, the laws of the state of North Carolina.
H. In the event that any dispute shall arise between the Employee
and the Company relating to his rights under this Agreement following a Change
in Control, and it is determined by agreement between the parties, or by a final
judgment of a court of competent jurisdiction
<PAGE>
that is no longer subject to appeal, that the Employee has been substantially
successful in his claims, then reasonable legal fees and disbursements of the
Employee in connection with such dispute shall be paid by the Company.
I. Following the employee's termination as a result of a Change in
Control, the Employee shall be entitled to receive outplacement assistance for a
period of six (6) months at the Company's expense.
II. COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION
A. The Employee understands that his position with the Company is
one of trust and confidence because of the Employee's access to trade secrets
and confidential and proprietary business information. The Employee pledges his
best efforts and utmost diligence to protect and keep confidential the trade
secrets and confidential or proprietary business information of the Company.
B. Unless required by the Company in connection with his employment
or with the Company's express written consent, the Employee agrees that he will
not, either during his employment or afterwards, directly or indirectly, use,
misappropriate, disclose or aid anyone else in disclosing to any third party for
the Employee's own benefit or the benefit of another all or any part of any of
the Company's trade secrets or confidential or proprietary information, whether
or not the information is acquired, learned, or developed by the Employee alone
or in conjunction with others. The Employee makes the same pledge with regard to
the confidential information of the Company's customers, contractors, or others
with whom the Company has a business relationship.
C. The Employee understands that trade secrets and confidential or
proprietary information, for purposes of this Agreement, shall include, but not
be limited to, any and all versions of the Company's computer software,
hardware, and documentation; all methods, processes, techniques, practices,
product designs, pricing information, billing histories, customer requirements,
customer lists, employee lists and salary/commission information, personnel
matters, financial data, operating results, plans, contractual relationships,
and projections for business opportunities for new or developing business of the
Company; and all other confidential or proprietary information, patents, ideas,
know-how and trade secrets which are in the possession of the Company, no matter
what the source, including any such information that the Company obtains from a
customer, contractor or another party or entity and that the Company treats or
designates as confidential or proprietary information, whether or not such
information is owned or was developed by the Company.
D. The Employee also agrees that all notes, records (including all
computer and electronic records), software, drawings, handbooks, manuals,
policies, contracts, memoranda, sales files, customer lists, employee lists or
other documents that are made or compiled by the Employee, or which were
available to the Employee while he was employed at the Company, in whatever
form, including but not limited to all such documents and data concerning any
<PAGE>
processes, inventions, services or products used or developed by the Employee
during his employment, shall be the property of the Company. The Employee
further agrees to deliver and make available all such documents and data to the
Company, regardless of how stored or maintained and including all originals,
copies and compilations thereof, upon the separation of his employment, for any
reason, or at any other time at the Company's request.
E. The Employee understands that the Company expects him to respect
any trade secrets or confidential information of any of the Employee's former
employers, business associates, or other business relationships. The Employee
also agrees to respect the Company's express direction to the Employee not to
disclose to the Company, its officers, or any of its employees any such
information so long as it remains confidential.
F. The Employee understands that the secrecy of certain
communications is protected by state and federal laws, and that violations of
the Federal Communications Act may subject the Employee to fines of up to
$10,000, or imprisonment for up to ten years, or both. Therefore, the Employee
agrees that the following restrictions apply to all modes of communications
during the duration of the Employee's employment with the Company:
1. The Employee will not divulge to any unauthorized
person any knowledge that he may have regarding communication
arrangements between the Company and its customers.
2. Except as required by the daily performance of his
duties, the Employee will not give to any individual or group any
information whatsoever regarding the location of telecommunications
equipment, trunks, cables, circuits, etc., or regarding the
installation of the Company's central office equipment, or any
information regarding the Company's plant or facilities.
3. Except as required in the performance of his duties
with the Company, the Employee will not listen in on any telephone
conversation in any form, nor disclose to any unauthorized
individual or group any part of any telephone conversation which the
Employee may overhear in the performance of his duties.
4. The Employee will not discuss with his family,
friends or acquaintances any information gained through his
employment with the Company regarding military installations,
communications, filter centers or other communication procedures and
equipment relating to national security.
5. The Employee will not divulge to any unauthorized
individual or group the existence, substance, purport, effect of
meaning of any communication between the Company's customers.
6. The Employee will promptly refer to his supervisor
any unauthorized request regarding telephone communications.
<PAGE>
III. COVENANT NOT TO COMPETE
A. For and in consideration of this Agreement, the change in control
protection contained herein and the Employee's continued employment with the
Company, the Employee agrees that, unless specifically authorized by the Company
in writing, the Employee will not during his employment with the Company and for
a period of one year after his employment with the Company has terminated or
ended (whatever the reason for the end of the employment relationship):
1. Engage in any "Competitive Activity" (as defined
below) within the "Restricted Territory" (as defined below); and/or
2. Serve as an employee, director, owner, partner,
contractor, consultant or agent of, or own any interest in (except
for ownership of a minor percentage of stock in a "public"
competitor), any person, firm or corporation that engages in
"Competitive Activity" within the "Restricted Territory"; and/or
3. Engage in any "Competitive Activity" with, for or
towards or divert, attempt to divert or direct others to divert any
business of the Company from an existing Company customer, a joint
venturer or other business partner of the Company (hereinafter
referred to as an "affiliate"), or from a potential customer
identified through leads or relationships developed during the
Employee's employment with the Company, within the "Restricted
Territory".
B. Furthermore, the Employee will not during his employment with the
Company and for a period of two years after his employment with the Company has
terminated or ended (whatever the reason for the end of the employment
relationship) solicit or hire for employment or as an independent contractor any
employee of the Company, or solicit, assist, induce, recruit, or assist or
induce anyone else to recruit or cause another person in the employ of the
Company or any of the Company's affiliates to leave his employment with the
Company or affiliate for the purpose of joining, associating, or becoming
employed with any business or activity with which the Employee is or expects to
be directly or indirectly associated or employed.
C. "Competitive Activity" means: (1) the business activities engaged
in by the Company during the Employee's employment with the Company, including
the sales, marketing, distribution and provision of telecommunications services,
equipment or other products of the type of which the Employee sold or was
involved during his employment with the Company; and/or (2) the performance of
any other business activities competitive with the Company for or on behalf of
any telecommunications entity.
D. "Restricted Territory" means: (1) the geographic area
encompassing a seventy-five (75) mile radius of Concord, North Carolina; and/or
(2) any Metropolitan Statistical Area (as defined by the United States
Department of Commerce) from which the Company generated at least two percent
(2%) of its gross annual revenue during the last two calendar years before the
end of the Employee's employment with the Company.
<PAGE>
IV. ACKNOWLEDGMENTS BY EMPLOYEE
A. The Employee acknowledges that the restrictions placed upon him
by this Agreement are reasonable given the nature of the Employee's position
with the Company, the area in which the Company markets its products and
services, and the consideration provided by the Company to the Employee pursuant
to this Agreement. Specifically, the Employee acknowledges that the length of
the Covenant Not to Compete in Section III is reasonable and that the
definitions of "Competitive Activity" and "Restricted Territory" are reasonable.
B. The Employee agrees that in the event of any breach or threatened
breach of the provisions of Section II and III hereof by the Employee, the
Company's remedies at law would be inadequate, and the Company shall be entitled
to an injunction (without any bond or other security being required),
restraining such breach, and costs and attorneys' fees relating to any such
proceeding or any other legal action to enforce the provisions of this
Agreement, but nothing herein shall be construed to preclude the Company from
pursuing any other remedies at law or in equity available to it for any such
breach or threatened breach. Moreover, the Employee also agrees that if the
Employee breaches any of Sections II or III above, the Employee shall be
required to refund to the Company and the Company shall be entitled to recover
of the Employee 90% of the amount of the Employee's Compensation (as defined in
Section IA(iv) herein) for a Change in Control already paid to the Employee by
the Company under this Agreement at the time of the breach, and the Employee
shall forfeit at the time of the breach the right to any additional payments or
benefits under this Agreement, except that if the breach occurs before the
payments set forth in Section IA are made, the Employee shall be entitled to
receive the first monthly payment set forth in Section IA, if generally eligible
under Section I, and nothing more. In such case, the Employee and the Company
agree that the confidential information and non-compete obligations contained in
this Agreement shall remain valid and enforceable based upon the consideration
actually paid.
C. The Employee acknowledges that all of the provisions of the
Agreement are fair and necessary to protect the interests of the Company.
Accordingly, the Employee agrees not to contest the validity or enforceability
of Section II or Section III hereof and agrees that if any court should hold any
provision of Section II or Section III hereof to be unenforceable, the remaining
provisions will nonetheless be enforceable according to their terms. Further, if
any provision or subsection is held to be overly broad as written, the Employee
agrees that a court should view the above provisions and subsections as
separable and uphold those separable provisions and subsections deemed to be
reasonable.
D. The Employee understands that every provision of this Agreement
is severable from each other provision of this Agreement. Therefore, if any
provision of this Agreement is held invalid or unenforceable, every other
provision of this Agreement will continue to be fully valid and enforceable. In
the event that any provision of this Agreement is determined by a court of
competent jurisdiction to be void or unenforceable, the Employee and the Company
agree that such provision shall be enforced to the extent reasonable under the
circumstances and that all other provisions shall be enforceable to the fullest
extent permissible by law. The
<PAGE>
Employee and the Company further agree that, if any court makes such a
determination, such court shall have the power to reduce the duration, scope
and/or area of such provisions and/or delete specific words and phrases by "blue
penciling" and, in its reduced or blue penciled form, such provisions shall then
be enforceable as allowed by law.
V. MISCELLANEOUS
A. The Employee shall have no right to receive any payment hereunder
except following a Change of Control as determined pursuant to Section I.
Nothing contained in this Agreement shall confer upon the Employee any right to
continued employment by the Company or shall interfere in any way with the right
of the Company to terminate his employment at any time for any/or no reason. The
provisions of this Agreement shall not affect in any way the right or power of
the Company to change its business structure or to effect a merger,
consolidation, share exchange or similar transaction, or to dissolve or
liquidate, or sell or transfer all or part of its business or assets.
B. The Employee understands that his obligations under this
Agreement will continue whether or not his employment with the Company is
terminated voluntarily or involuntarily, or with or without cause.
C. This Agreement replaces any previous agreement relating to the
same or similar subject matter which the Employee and the Company may have
entered into with the Company with respect to the Employee's employment by the
Company. This Agreement may not be changed in any detail by any verbal
statement, representation, or other agreement made by any other Company
employee, or by any written document signed by any Company employee, other than
a Company officer.
D. The Employee agrees that the Company's waiver of any default by
the Employer shall not constitute a waiver of its rights under this Agreement
with respect to any subsequent default by the Employee. No waiver of any
provision of this Agreement shall be valid unless in writing and signed by all
parties.
E. This Agreement shall be binding upon, and inure to the benefit
of, the Employee and the Company and their respective permitted successors and
assigns. Neither this Agreement nor any right or interest hereunder shall be
assignable by the Employee, his beneficiaries, or legal representatives without
the Company's prior written consent.
F. Where appropriate as used in this Plan, the masculine shall
include the feminine.
G. This Agreement has been executed and delivered in the State of
North Carolina, and the laws of the State of North Carolina shall govern its
validity, interpretation, performance and enforcement.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto effective as of the day and year first above stated.
CT COMMUNICATIONS, INC.
By:/s/ Michael R. Coltrane
----------------------------------
EMPLOYEE:
/s/ Charlotte S. Walsh (Seal)
--------------------------------
Charlotte S. Walsh
EXHIBIT 10.19
SEPARATION AGREEMENT AND RELEASE
THIS SEPARATION AGREEMENT AND RELEASE (the "Agreement") is made and
entered into by and between Nicholas L. Kottyan (hereinafter the "Employee") and
CT Communications, Inc. (hereinafter the "Company") (collectively defined and
referred to as the "Parties");
W I T N E S S E T H:
WHEREAS, Employee is currently employed by the Company as Corporate
Senior Vice President at the Company's Concord, North Carolina offices;
WHEREAS, Employee's last day of employment with the Company shall be
December 31, 1998;
WHEREAS, the Parties desire to enter into this Agreement to conclude
their employment relationship and resolve all matters by and among them,
including but not limited to, any matters relating to Employee's employment
relationship with and separation from the Company;
NOW, THEREFORE, in consideration of the mutual provisions and
covenants contained herein, the sufficiency of which is hereby acknowledged, the
Parties agree as follows:
1. Termination of Employment. The Parties agree that Employee's last
day of employment with the Company shall be December 31, 1998, it being
expressly understood that this Agreement is and will be enforceable and the
Company will be in compliance with this provision 1 provided Employee is paid
his regular salary and benefits through December 31, 1998, whether or not he
actually performs any services for the Company during that period. The Parties
further agree that prior to Employee's separation from employment on December
31, 1998, Employee will reasonably cooperate with the Company in the transition
of his position responsibilities on an as-needed basis. Moreover, the Parties
also agree that during the period January 1, 1999 through March 31, 1999,
Employee agrees to consult with the Company on a limited, as-needed basis
concerning post-transition issues that may arise with respect to subject matters
that are within the current scope of his job duties and responsibilities.
Except for Employee's opportunity to obtain continuation medical
coverage as allowed by and pursuant to COBRA after December 31, 1998, Employee's
rights to his regular benefits shall cease effective December 31, 1998, except
that Employee shall not forfeit any bonus pay as set forth in provision 3 below,
vested Long Term Incentive Plan benefits for the period through December 31,
1998, or vested 401K benefits. The Parties further acknowledge and agree that
except for the confidentiality, non-compete and other post-employment
obligations of Employee under the Change in Control Agreement signed by Employee
on October 1, 1997 (the "Change
<PAGE>
in Control Agreement"), which obligations shall continue to remain in full force
and effect, the Change in Control Agreement shall be terminated, effective
December 31, 1998.
2. Vacation Pay. Regardless of whether Employee signs this
Agreement, Employee is entitled to receive eighty (80) hours of accrued but
unused vacation pay in a lump sum amount of $6,461.54, less appropriate
deductions required by law for the payment of wages, including for state and
federal taxes and FICA, payable by the Company to Employee on or before the next
available payday following December 31, 1998.
3. Bonus Pay. In exchange for the release set forth in provision 6
below and the other terms and conditions of this Agreement, the Company agrees
that, despite Employee's separation from employment effective December 31, 1998,
following the Effective Date of this Agreement (as defined in provision 13
below), Employee shall receive payment for: (a) his 1998 Annual Incentive
Program Bonus for the period through December 31, 1998; and (b) the vested
portion of his bonus and other compensation under the Company's Long Term
Incentive Plan ("LTIP") for the period through December 31, 1998. The Company
agrees that the vesting period for the outstanding, non-lapsed options and
outstanding, non-lapsed restricted shares granted to Employee under any Company
stock option agreement, the Company's 1998 Annual Incentive Program Bonus and
the LTIP prior to December 31, 1998 shall be extended through March 1, 1999.
Employee and the Company acknowledge and agree that no options or restricted
shares granted to Employee by the Company shall vest after March 1, 1999.
Employee further acknowledges and agrees that as set forth in Employee's Company
stock option plan documents, if he desires, Employee will be required to
exercise all outstanding, non-lapsed stock options with the Company within
ninety (90) days following his separation from employment with the Company,
effective December 31, 1998. Such bonus amounts shall be paid less appropriate
deductions required by law for the payment of wages, including for state and
federal taxes and FICA, payable to Employee pursuant to the terms of each such
plan at the same time and in the same manner as all other Annual Incentive
Program Bonus and LTIP payments are made by the Company to employees, if any.
The Company agrees that at the time of its payment of Employee's Annual
Incentive Program Bonus and LTIP compensation to him, the Company will provide
him with a compensation schedule detailing the Annual Incentive Program Bonus
and LTIP calculations, as applicable for each payment. In addition, a schedule
listing the outstanding, non-lapsed stock options and outstanding, non-lapsed
restricted shares granted to Employee under any Company stock option agreement,
the Company's 1998 Annual Incentive Program Bonus and the LTIP prior to December
31, 1998 is attached as Exhibit A.
4. Severance. In exchange for the release set forth in provision 6
below and the other terms and conditions of this Agreement, the Company agrees
that, following the Effective Date of this Agreement (as defined in provision 13
below), the Company shall pay salary continuation to Employee for a ninety (90)
day period from January 1, 1999 through March 31, 1999 based on Employee's
current base salary rate of $3,230.77 per week. The Company further agrees that
in the event that Employee has not accepted or begun work as an employee,
consultant, independent contractor or otherwise with another company, entity or
person, has not started his own business/company, or has not become
self-employed by March 31, 1999, the Company shall pay salary continuation to
Employee beginning on April 1, 1999 for an additional
2
<PAGE>
six (6) month period through September 30, 1999 or until Employee accepts or
begins other work, starts his own business/company or becomes otherwise
self-employed, whichever is earlier, based on Employee's current base salary
rate of $3,230.77 per week. All payments to Employee pursuant to this provision
4 shall be made by the Company at the same time and in the same manner as
Employee's prior salary payments, less appropriate deductions required by law
for the payment of wages, including for state and federal taxes and FICA.
As an additional condition precedent to Employee's eligibility to
receive the salary continuation payments set forth in this provision 4 after
March 31, 1999, Employee shall be required to provide written confirmation to
Vice President, Human Resources Richard Garner, Jr. to be received by Mr. Garner
on or before the 10th of each month beginning in April 1999 through September
1999, detailing his then work status and whether Employee has accepted or begun
work as an employee, consultant, independent contractor or otherwise with
another company, entity or person, has started his own business/company, or has
become self-employed following his separation from employment with the Company,
effective December 31, 1998. In the event that Employee fails to provide such
notice during the periods required or employee misrepresents or omits his actual
work status in such notices, Employee shall forfeit at the time of the breach
the right to any additional severance pay under this provision 4, and Employee
shall be required to refund to the Company and the Company shall be entitled to
recover of Employee the amount of severance pay already paid to or on behalf of
Employee by the Company under this Agreement for the period following the date
of Employee's breach by failure to provide timely notice or misrepresentation or
omission of his work status. Moreover, Employee agrees that in the event of any
such breach by Employee's failure to provide timely notice or misrepresentation
or omission of his work status, the Company shall be entitled to costs and
reasonable attorneys' fees incurred relating to any proceeding to enforce or
collect a refund of the amounts set forth in this provision.
5. No Other Payments or Benefits. As set forth in Employee's Company
stock option plan documents, Employee acknowledges that, if he desires, he will
be required to exercise all outstanding, non-lapsed stock options with the
Company within ninety (90) days following his separation from employment with
the Company, effective December 31, 1998. In addition, except for the payments
described above in this Agreement and Employee's general right to elect certain
coverage continuation under COBRA, Employee acknowledges that he is entitled to
no additional wages, pay, payments, commissions, bonuses, compensation,
consideration or benefits of any kind from the Company beyond December 31, 1998,
except that Employee shall not forfeit any vested 401K or vested LTIP benefits
with the Company.
6. Release. For and in consideration of the severance, bonus pay and
other benefits provided to Employee by the Company and the other terms and
conditions of this Agreement, Employee, being of lawful age, does release and
discharge, and by these presents does for himself, his heirs, executors,
administrators, personal representatives and assigns, release, acquit and
forever discharge the Company, its affiliates, parents, subsidiaries and
divisions, as well as such entities' respective officers, directors, employees,
shareholders, agents, administrators, successors, assigns and representatives
(collectively the "Releasees") of and from any and all claims, actions, causes
of action, charges, demands, losses and any other damages of every kind,
3
<PAGE>
nature and description whatsoever, whenever they arose, including but not
limited to, any claims that he has, may have or may have had arising from his
employment with or his separation of employment from the Company, any claims of
discrimination, any claims arising under Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, 29 U.S.C. ss. 621 et seq., the
Americans with Disabilities Act, the North Carolina Handicapped Persons
Protection Act and the North Carolina Equal Employment Practices Act, and any
and all other claims, whether under tort or contract, or under statute or
otherwise (collectively "Such Claims"). Employee further agrees not to sue the
Releasees on or for any Such Claims or to assert any Such Claims against the
Releasees in any administrative or court action or otherwise.
7. No Future Contact. Employee acknowledges and agrees that his
current employment relationship with the Company has been permanently and
irrevocably severed and that the Company and the Releasees have no obligation,
contractual or otherwise, to engage, hire, rehire or reemploy him for
employment, as an independent contractor or otherwise in the future. Employee
also agrees not to apply for employment or contract work with the Company or any
of its affiliates, parents, subsidiaries or divisions in the future.
8. Confidentiality. The Parties agree that the terms of this
Agreement shall remain confidential. The Company may disclose the terms of this
Agreement to officers, directors, shareholders and management level employees of
the Company, to professionals representing it, to its insurance agents and
carriers, and to affiliates and employees of the same with a need to know or in
order to give effect to this Agreement. The Company may also disclose the terms
of this Agreement in its proxy statement as required by law. Employee may
disclose this Agreement only to immediate family members, to professionals
representing him and to affiliates and employees of the same with a need to
know. Otherwise, the Parties shall not disclose the terms of this Agreement to
anyone, except as may be required by law. Employee agrees that following
Employee's separation from employment and the presentation of this Agreement to
him for consideration, he will not criticize or make any disparaging remarks
about the Company, its services or products, or any of its respective officers,
directors, agents or employees to any Company customer or other third party. The
Company agrees that following Employee's separation from employment and the
presentation of this Agreement to him for consideration, President and Chief
Executive Officer Michael Coltrane will not criticize or make any disparaging
remarks about Employee's performance with the Company to any Company customer or
other third party.
9. Additional Ongoing Obligations. Employee hereby acknowledges and
agrees that all confidentiality, non-compete and similar post-employment
obligations previously agreed to by the Parties during his employment with the
Company, if any, including but not limited to the terms of Sections II and III
of his Change In Control Agreement attached as Exhibit B, shall continue to
remain in full force and effect. Employee also acknowledges and agrees that any
breach by him of those post-employment obligations, including but not limited to
the terms of Sections II and III of his Change In Control Agreement attached as
Exhibit B, shall be deemed to be a breach by Employee of this Agreement.
4
<PAGE>
10. Breach. In the event of any breach or threatened breach of
provisions 8 or 9 of this Agreement by Employee, the Company shall be entitled
to an injunction, without bond, restraining such breach, and costs and
reasonable attorneys' fees relating to any such proceeding or any other legal
action to enforce those sections of the Agreement, but nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to if for such breach or threatened breach.
Moreover, Employee also agrees that if Employee breaches any of
provisions 6, 7, 8 or 9 above, Employee shall be required to refund to the
Company and the Company shall be entitled to recover of Employee 90% of the
amount of severance pay already paid to or on behalf of Employee by the Company
under this Agreement at the time of the breach, and Employee shall forfeit at
the time of the breach the right to any additional severance pay under the
Agreement, except that if the breach occurs before the outstanding severance
payments set forth in provision 4 are made, Employee shall be entitled to
receive 10% of the severance pay set forth in provision 4 and nothing more. In
such case, the Parties agree that the release contained in provision 4 and the
termination of Employee shall remain valid and enforceable based upon the
consideration actually paid. Moreover, Employee agrees that in the event of any
such breach, the Company shall be entitled to costs and reasonable attorneys'
fees relating to any proceeding to enforce or collect a refund of the amounts
set forth in this provision. The Company agrees that in the event the Company
breaches any of provisions 1, 2, 3 or 4 above, Employee shall be entitled to
costs and reasonable attorneys' fees relating to any proceeding to enforce those
sections of the Agreement.
11. Acknowledgment by Employee. The Company specifically advises
Employee to consult a lawyer before signing this Agreement concerning the terms
of this Agreement and his rights under the Age Discrimination in Employment Act,
29 U.S.C. ss. 621 et seq. Employee acknowledges that he has carefully read this
Agreement, that he knows and understands the contents of this Agreement, that he
has had ample opportunity to review the terms of this Agreement, that he is
under no pressure to execute this Agreement, that he has consulted with or had
the opportunity to consult with a lawyer regarding this Agreement, and that he
executes this Agreement of his own free will.
12. Waiting Period. Employee hereby acknowledges and understands
that after receiving this Agreement from the Company, he shall have at least
twenty-one (21) days to consider signing this Agreement, and is further aware of
his right to consult with an attorney prior to signing this Agreement. If
Employee elects not to take twenty-one (21) days to sign this Agreement,
Employee acknowledges that the period of time used by him prior to signing this
Agreement was ample time to consider and review this Agreement, it being
expressly understood that the Company is imposing no requirement or duress on
Employee to take less than twenty-one (21) days. If Employee does not sign this
Agreement within twenty-one (21) days of presentation by the Company, he further
acknowledges that the Company has the option to withdraw its offer set forth in
this Agreement.
13. Revocation Rights. Employee acknowledges and understands that he
shall have seven (7) days from the date this Agreement is signed by him to
revoke this Agreement by
5
<PAGE>
advising the Company in writing of the revocation. If the Agreement is not
revoked within seven (7) days from the signing of this Agreement by Employee,
this Agreement shall become effective and enforceable as to all Parties on the
eighth day following the signing of this Agreement by all Parties (the
"Effective Date"). If Employee revokes or elects not to sign this Agreement,
such revocation or election shall in no way alter or affect Employee's last day
of employment with the Company, which shall be December 31, 1998.
14. No Admissions. This Agreement does not constitute any admission
by the Company, the Releasees or Employee of any violation by them of any
contract, agreement, plan, statute, ordinance, constitutional provision or other
law, and this Agreement shall in no manner be deemed an admission, finding, or
indication for any purpose whatsoever that the Company, the Releasees or
Employee have at any time, including the present, committed any unlawful acts
against each other or treated each other unfairly or improperly in any way.
Employee, the Company and the Releasees further understand and acknowledge that
they enter into this Agreement solely to resolve all matters between the Parties
in an amicable fashion.
15. Governing Law. This Agreement shall be deemed to be a contract
made under, and for all purposes shall be governed by and construed in
accordance with, the internal laws and judicial decisions of the State of North
Carolina.
16. Counterparts. This Agreement may be executed in duplicate
counterparts, each of which shall be deemed an original and all of which shall
constitute but one and the same instrument.
17. Entire Agreement. This Agreement constitutes the entire
agreement among the Parties pertaining to the subject matter contained herein
and supersedes any and all prior and contemporaneous agreements, representations
and understandings of the Parties related to the subject matters hereof.
Moreover, this Agreement shall not be modified or amended unless executed in
writing by each of the Parties hereto. Notwithstanding the foregoing, nothing
contained herein shall prevent or restrain in any manner the Company from
instituting an action or claim in court, or such other forum as may be
appropriate, to enforce the terms of the post- employment confidentiality and
non-compete obligations of Employee set forth in the Change In Control Agreement
or any similar agreement relating to the Company's confidential or proprietary
business information or trade secrets, to protect the Company's proprietary or
confidential business information or trade secrets, to enforce or protect the
Company's patent, copyright, trademark or trade name rights, to redress claims
of product disparagement or trade libel, or to protect the Company's reasonable
business expectations or relations with third parties.
6
<PAGE>
IN WITNESS WHEREOF, the undersigned hereto set their hands and seals
as of the dates set forth below.
Signed and executed this the 14th day of January, 1999.
By: /s/ Nicholas L. Kottyan (SEAL)
-----------------------------
Nicholas L. Kottyan
Signed and executed this the 15th day of January, 1999.
CT COMMUNICATIONS, INC.
By: /s/ Richard L. Garner, Jr. (SEAL)
-----------------------------
7
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made this 10th day of
September, 1998, is entered into by and among CT Communications, Inc., a North
Carolina corporation with its principal place of business at 68 Cabarrus Avenue,
East, Concord, North Carolina 28025 ("CTC"), CT Global Telecommunications, Inc.,
a Delaware corporation with its principal place of business at 68 Cabarrus
Avenue, East, Concord, North Carolina 28025, and a wholly-owned subsidiary of
CTC ("CTGT"), and Thomas A. Norman, residing at 271 Ikerd Drive South East,
Concord, North Carolina 28025 (the "Executive"). Recitals:
1. CTC and CTGT desire to employ the Executive, and the Executive
desires to be employed by CTC and CTGT.
2. CTGT has entered into an Operating Agreement (the "Operating
Agreement") with Amaritel, S.A. de C.V. ("Amaritel") pursuant to which CTGT is
providing certain services to Amaritel.
Agreement:
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained in this Agreement, and other good and valuable consideration,
the receipt and sufficiency of which are acknowledged by the parties, the
parties agree as follows:
1. Term of Employment. CTC and CTGT agree to employ the Executive,
and the Executive accepts employment with CTC and CTGT, upon the terms set forth
in this Agreement, for the period commencing on the date hereof (the
"Commencement Date") and ending on August
<PAGE>
31, 2000 (the "Employment Period"), unless extended by mutual agreement or
sooner terminated in accordance with the provisions of Section 4.
2. Title; Reporting; Capacity; Travel Commitment.
2.1 The Executive shall serve as President of
CTGT and shall remain a Senior Vice President of CTC. Further, the Executive
shall serve on an interim basis as the CEO of Amaritel. The Executive shall
report directly to, and shall be subject to the supervision of, CTC's President
and CEO. In addition, the Executive shall be subject to the general supervision
of, and shall have such authority as is delegated to him by, CTGT's Board of
Directors (the "Board").
2.2 The Executive agrees to undertake the duties
and responsibilities inherent in such positions and such other duties and
responsibilities as CTC's President and CEO or the Board from time to time may
assign to him. Without limiting the foregoing, the Executive's specific duties
include:
o Assuming the leadership role and responsibility
for performance of CTGT's responsibilities under
the Operating Agreement and execution of the
Amaritel baseline plan and business plan.
o Overseeing CTGT's expatriate employees.
o Serving as CTGT's primary contact with Amaritel,
its stockholders, and third parties such as
Lucent.
o Serving as a CTGT representative on the Amaritel
board and Advisory Committee.
2.3 The Executive agrees to devote his entire
business time, attention and energies to the business and interests of CTGT and
Amaritel during the Employment Period, excepting periods of vacation, illness or
disability; provided, however, that CTC at any time may reassign the Executive
to a position with CTC comparable to his position prior to the assumption of
duties hereunder and at a like salary.
2
<PAGE>
2.4 The Executive shall spend at least 75% of his
working time in Mexico during the first six months of the Employment Period and
a substantial amount of his time thereafter. The Executive's working time in
Mexico may be reduced by mutual agreement of the Executive and CTC's President
and CEO if at any time after the first six months following the Commencement
Date they jointly determine that spending less time in Mexico would not reduce
the Executive's ability to effectively and fully perform his duties hereunder.
3. Compensation and Benefits.
3.1 Salary.
3.1.1 Base Salary. The Executive shall
continue on the CTC payroll at his annual base salary as of June 30, 1998 (the
"Base Salary"); provided, however, that so long as the Executive is serving as
the CEO of Amaritel, the amount of his Base Salary shall be increased to
$185,000. The amount of the Base Salary shall be deemed to include the amount of
any Christmas Bonus required to be paid under Mexican law.
3.1.2 Foreign Service Premium.
In addition to his Base Salary, the Executive shall be paid a "foreign service
premium" of $2,000 per week for each calendar week that he works at least four
full days during the week in Mexico (which shall not include travel time between
the United States and Mexico); provided, however, that so long as the Executive
is serving as the CEO of Amaritel, the amount of the foreign service premium
shall be reduced to $1,000 per week (the "Foreign Service Premium").
3.1.3 Payment. The Base Salary and
the Foreign Service Premium shall be paid to the Executive in accordance with
CTC's regular payroll procedures.
3
<PAGE>
3.2 Bonus and Other Compensation.
3.2.1 Signing Bonus. In recognition
of his new responsibilities and duties, the Executive shall be paid a one-time
bonus in the amount of $25,000, which shall be paid at CTC's next regular
payroll date after the Executive executes and delivers to CTC a copy of this
Agreement (in final, execution form).
3.2.2 One Time Performance Bonus. The
Executive shall be paid a one-time cash bonus in the amount of $100,000 if and
when CTGT earns the first 100,000 of options for which it is eligible under the
terms of the Operating Agreement.
3.2.3 Long-Term Incentive Program. The
Executive shall participate in a CTGT Long Term Incentive ("LTI") bonus program,
effective July 1, 1998. The form of compensation for which the Executive shall
be eligible under the CTGT LTI program shall be the same as under the CTC LTI
program (i.e., 20% cash, 40% restricted CTC common stock, and 40% options for
CTC common stock). Awards under the CTGT LTI program shall be made annually
pursuant to the same procedures used for the CTC LTI program. The performance
measures used under the CTC LTI program shall be modified for the CTGT LTI
program to be based on the achievement by CTGT of certain incentive compensation
under the Operating Agreement, as follows:
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Threshold: Target: Maximum:
Year 15% of Base Salary 70% of Base Salary 180% of Base Salary
- ---- ------------------ ------------------- --------------------
1998 CTGT earns 85,000 CTGT earns 92,500 options CTGT earns 100,000 options
options based on based on milestones based on milestones
milestones
1999 CTGT earns incentive CTGT earns 25,000 options CTGT earns 50,000 options
management fee (Amaritel meets 100% of (Amaritel meets 115% of
EBITDA objective) EBITDA objective)
2000 CTGT earns incentive CTGT earns 25,000 options CTGT earns 50,000 options
management fee (Amaritel meets 100% of (Amaritel meets 115% of
EBITDA objective) EBITDA objective)
2001 CTGT earns incentive CTGT earns 25,000 options CTGT earns 50,000 options
management fee (Amaritel meets 100% of (Amaritel meets 115% of
EBITDA objective) EBITDA objective)
</TABLE>
For 1998, the Executive shall be eligible to receive 5/6ths of the amounts he
otherwise would receive under the CTC LTI program for 1998 based on the existing
performance measures for the CTC 1996-1998 three year plan and his Base Salary
as of June 30, 1998. The Executive also shall be eligible to receive 50% of the
amount otherwise payable for 1998 under the CTGT LTI program based on the
modified (Amaritel) performance measures set forth above and the total amount of
Base Salary payments payable to the Executive with respect to the 1998 year
(excluding any foreign service premium). For each year after 1998, the Executive
shall be eligible only to receive amounts under the CTGT LTI program, which
shall be in lieu of all amounts under the CTC LTI program (including all
"runoff" amounts from prior years under the CTC LTI program), as determined
using the modified (Amaritel) performance measures set forth above and the total
amount of Base Salary payments payable to the Executive with respect to such
year (excluding any foreign service premium).
3.2.4 Annual Bonus Plan. For each
calendar year beginning with 1998, the Executive shall be eligible to receive an
annual bonus based on the performance of Amaritel (the "Annual Bonus"). The
Annual Bonus shall be in lieu of any annual bonus plan of CTC. The
5
<PAGE>
amount of the Annual Bonus shall be equal to a percentage of the total Base
Salary payments payable to the Executive with respect to the year (excluding any
foreign service premium). The terms and conditions of the Annual Bonus shall be
the same as the terms and conditions of the annual bonus provided in the CTC
Executive Incentive Compensation Plan, with the following modifications:
<TABLE>
<CAPTION>
Threshold: Target: Premium: Maximum:
Year 12% of Base 30% of Base 60% of Base 120% of Base
- ---- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
1998 Guaranteed If CTGT earns Same as Amaritel Same as Amaritel
incentive portion of Executive Executive
annual management fee Compensation Plan Compensation Plan
by 1/31/99
1999 Guaranteed if reqs. to If CTGT earns Same as Amaritel Same as Amaritel
avoid CTGT incentive management Executive Executive
termination met fee Compensation Plan Compensation Plan
2000 Guaranteed if reqs. to If CTGT earns Same as Amaritel Same as Amaritel
avoid CTGT incentive management Executive Executive
termination met fee Compensation Plan Compensation Plan
2001 Guaranteed if reqs. to If CTGT earns Same as Amaritel Same as Amaritel
avoid CTGT incentive management Executive Executive
termination met fee Compensation Plan Compensation Plan
</TABLE>
In the event the Executive is reassigned by CTC, the Executive shall be entitled
to a pro rata portion of the Annual Bonus for which he is eligible unless a
comparable bonus plan is substituted therefor.
3.3 Fringe Benefits and Vacation.
3.3.1 Vacation. The Executive shall
be entitled to paid vacation and holidays in accordance with CTC's policies for
its executives.
3.3.2 Living and Other Expenses. The
Executive shall be reimbursed for (or CTC or CTGT shall pay) 100% of his actual
reasonable living expenses incurred while in Mexico on behalf of CTGT and his
actual reasonable travel expenses for travel on behalf of CTGT that is booked by
CTC. The Executive shall be reimbursed for all reasonable and customary
entertainment and other expenses paid or incurred by the Executive in connection
with, or related
6
<PAGE>
to, the performance of his duties and responsibilities under this Agreement,
upon presentation by the Executive of reasonable documentation, expense
statements, voucher and/or such other supporting information as CTC or CTGT may
request.
3.3.3 Health Insurance. The Executive
shall be eligible for health insurance under CTC's health insurance plan for its
executives or, if such coverage cannot be continued, under a comparable plan
provided by CTC or CTGT.
3.3.4 Other Insurance and Benefits.
The Executive shall be eligible to continue to participate in the SERP, life
insurance, disability insurance, pension plan, and perquisites offered by CTC to
its executives, on the terms and conditions on which such benefits are offered
by CTC.
3.3.5 Tax Equalization. The Executive
shall be entitled to tax equalization benefits on the same terms and conditions
as CTGT provides tax equalization benefits to its executive employees located in
Mexico.
3.3.6 Office. CTC shall make an office
and administrative support at its headquarters available for use by the
Executive.
4. Employment Termination. The employment of the Executive hereunder
shall terminate upon the occurrence of any of the following:
4.1 Expiration of the Employment Period in accordance
with Section 1.
4.2 At the election of CTC, for cause, immediately upon
delivery of written notice by CTC to the Executive. For purposes of this Section
4.2, cause for termination shall be deemed to exist if (a) the Executive fails
to substantially perform his duties hereunder (other than any such failure
resulting from the Executive's inability to perform such duties as a result of
physical or mental illness or incapacity) or other breach of this Agreement
after notice to the Executive of such
7
<PAGE>
failure or breach and, if such failure or breach is capable of being cured
within a reasonable time period, a reasonable opportunity to cure; (b)
[intentionally omitted]; (c) the Executive engages in willful misconduct or
insubordination that, in the judgment of the President of CTC or the Board of
CTGT, causes or could cause material injury to the business and operations of
CTC or CTGT; or (d) the Executive is convicted of, or enters a plea of guilty or
nolo contendere to, any felony or any misdemeanor involving dishonesty or moral
turpitude.
4.3 Upon the death or disability of the Executive.
For purposes of this Section 4.3, the Executive shall be deemed to have a
disability where the Executive (a) has been unable, by reason of illness or
injury, to perform his normal duties under this Agreement on a full-time basis
for a period of 180 days, whether or not consecutive, within the preceding
360-day period, or (b) receives disability benefits for permanent and total
disability under any long-term disability income policy held by or on behalf of
the Executive.
4.4 At the election of CTC, without cause, upon
sixty days written notice by CTC to the Executive, subject to the provisions of
Section 5.3 below.
4.5 At the election of the Executive, upon sixty
days written notice to CTC.
5. Effect of Termination.
5.1 Termination for Cause. If the Executive's
employment is terminated for cause pursuant to Section 4.2, the Executive shall
be entitled to receive the compensation and other benefits otherwise payable to
him under Section 3 through the last day of his actual employment hereunder.
5.2 Termination for Death or Disability. If the
Executive's employment is terminated by death or because of disability pursuant
to Section 4.3, the estate of the Executive or the Executive, as the case may
be, shall be entitled to receive the compensation and benefits which
8
<PAGE>
would otherwise be payable to him under Section 3 up to the end of the month in
which the termination of his employment hereunder occurs.
5.3 Termination at the Election of the Company.
If the Executive's employment is terminated by CTC without cause pursuant to
Section 4.4, the Executive shall be entitled to receive (as his total severance
compensation) the compensation and benefits which would otherwise be payable to
him under Section 3 up to the end of the month in which the termination of his
employment hereunder occurs plus his Base Salary as of June 30, 1998, for the
remainder of the Employment Period.
6. Existing Agreement. The Executive, CTC and CTGT acknowledge that
the Executive and CTC are parties to that certain Agreement, dated October 1,
1997 (the "Existing Agreement"), pursuant to which, among other matters, CTC
agrees to make certain payments to the Executive upon the occurrence of certain
events and the Executive agrees to certain limitations on his use of
confidential information of CTC and activities that would or might be
competitive with the business of the Company. CTC, CTGT, and the Executive agree
that the Existing Agreement shall continue in effect following the execution and
delivery of this Agreement, with the following modifications: (i) all references
in the Existing Agreement to the "Company" shall be deemed to include CTC, CTGT,
and their subsidiaries; (ii) the term "affiliate," as used in Section III of the
Existing Agreement, shall be deemed to include, without limitation, Amaritel and
its subsidiaries and affiliates; and (iii) the term "Restricted Territory," as
used in Paragraph D of Section III of the Existing Agreement, shall be deemed to
include, in addition to the areas described therein, any geographic market in
which CTC, CTGT, or Amaritel is then doing business or that the Executive was
aware prior to the termination of his employment that CTC, CTGT, or Amaritel was
taking
9
<PAGE>
specific steps to prepare to do business. The Existing Agreement, as so
modified, is hereby incorporated in this Agreement by reference.
7. Notices. All notices required or permitted under this Agreement
shall be in writing and shall be effective upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, addressed to the other party at the address shown above, or at
such other address as either party may designate to the other in accordance with
this Section 7.
8. Entire Agreement. This Agreement (including the Existing
Agreement, as modified by this Agreement) constitutes the entire agreement
between the parties and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this Agreement.
9. Amendment. This Agreement may be amended or modified only by a
written instrument executed by CTC, CTGT, and the Executive.
10. Governing Law. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of North Carolina. The
Executive hereby irrevocably consents to, and waives any objection to the
exercise of, personal jurisdiction by the state and federal courts located in
the State of North Carolina with respect to any action or proceeding arising out
of this Agreement, including, without limitation, the Circuit Court of Cabarrus
County, North Carolina.
11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Executive are personal and shall not be assigned by him.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal
10
<PAGE>
and legal representatives, executors, administrators, assigns, heirs,
distributees, devisees and legatees.
12. Miscellaneous.
12.1 No delay or omission by CTC, CTGT, or the
Executive in exercising any right under this Agreement shall operate as a waiver
of that or any other right. A waiver or consent given by CTC, CTGT, or the
Executive on any one occasion shall be effective only in that instance and shall
not be construed as a bar or waiver of any right on any other occasion.
12.2 The captions of the sections of this
Agreement are for convenience of reference only and in no way define, limit or
affect the scope or substance of any section of this Agreement.
12.3 The unenforceability of any provision of
this Agreement shall not affect the enforceability of any other provision of
this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
or caused this Agreement to be executed by a duly authorized officer, to be
effective as of the date first above written.
CT COMMUNICATIONS, INC.
By: /s/ Richard L. Garner, Jr.
----------------------------------
Title: Vice President-Human Resources
CT GLOBAL TELECOMMUNICATIONS, INC.
By: /s/ Barry R. Rubens
----------------------------------
Title: Secretary
EXECUTIVE:
/s/ Thomas A. Norman
-------------------------------------
Thomas A. Norman
12
EXHIBIT 21
CT COMMUNICATIONS, INC.
AND SUBSIDIARIES
Subsidiaries of the Company
State of
Name Incorporation
-------- ---------------
The Concord Telephone Company North Carolina
CTC Long Distance Services, Inc. North Carolina
CT Cellular, Inc. North Carolina
Carolina Personal Communications, Inc. North Carolina
CT Wireless Cable, Inc. North Carolina
CTC Exchange Services, Inc. North Carolina
CT Global Telecommunications, Inc. Delaware
CTC Internet, Inc. North Carolina
CT Communications Northeast Trust Massachusetts
CT Communications Northeast, Inc. Massachusetts
EXHIBIT 23
Independent Auditors' Consent
The Board of Directors
CT Communications, Inc.:
We consent to incorporation by reference in the Registration Statements on Form
S-8 (Registration Nos. 33-59641, 33-59643, 33-59645, 333-15537, 333-30125, and
333-38895) of CT Communications, Inc. of our report dated March 5, 1999,
relating to the consolidated balance sheets of CT Communications, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1998, and related schedule,
which report is incorporated by reference in the December 31, 1998 Annual Report
on Form 10-K of CT Communications, Inc.
/s/ KPMG LLP
Charlotte, North Carolina KPMG LLP
March 5, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
Appendix A to Item 601(c) of Regulation S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<CIK> 0000023259
<NAME> CT COMMUNICATIONS
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 2,807,887 0
<SECURITIES> 116,681 168,979
<RECEIVABLES> 14,899,115 10,753,422
<ALLOWANCES> 107,500 100,000
<INVENTORY> 2,331,957 2,696,432
<CURRENT-ASSETS> 22,683,227 16,014,557
<PP&E> 194,501,417 173,378,861
<DEPRECIATION> 94,329,834 86,229,072
<TOTAL-ASSETS> 183,634,358 147,339,429
<CURRENT-LIABILITIES> 16,695,089 17,617,435
<BONDS> 20,000,000 11,239,000
125,000 137,500
406,800 484,900
<COMMON> 35,748,327 29,040,745
<OTHER-SE> 83,428,061 67,442,808
<TOTAL-LIABILITY-AND-EQUITY> 183,634,358 147,339,429
<SALES> 0 0
<TOTAL-REVENUES> 91,725,394 78,483,514
<CGS> 0 0
<TOTAL-COSTS> 70,272,414 58,390,372
<OTHER-EXPENSES> 855,899 593,179
<LOSS-PROVISION> 433,747 381,757
<INTEREST-EXPENSE> 1,491,635 985,275
<INCOME-PRETAX> 22,308,879 19,499,963
<INCOME-TAX> 8,926,469 7,898,159
<INCOME-CONTINUING> 13,382,410 11,601,804
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 2,239,045
<CHANGES> 0 0
<NET-INCOME> 13,382,410 13,840,849
<EPS-PRIMARY> 1.45 1.52<F1>
<EPS-DILUTED> 1.44 1.51
<FN>
EPS-BASIC
</FN>
</TABLE>
