UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________to
Commission File No. ___________
________________________________________
Lincoln Telecommunications Company
(Exact name of registrant as specified in its charter)
Nebraska 47-0632436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1440 M Street, Lincoln, Nebraska 68508
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 402-474-2211
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
($.25 par value)
Indicate by check mark whether the Registrant (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
Registrant was required to file such reports), and (2) has been subject to
such filing equirements 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 Registrant's voting stock held by non-
affiliates, based upon the closing price of such stock as of February 28,
1994, was $500,670,463.
Number of shares of common stock outstanding
on
February 28, 1994 -- 32,602,550
The Registrant's Annual Report to Shareholders for the calendar year 1993 is
incorporated by reference in Parts I, II, III and IV of this Form 10-K to the
extent stated herein. The Registrant's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on April 27, 1994 is incorporated by
reference in Parts III & IV of this Form 10-K to the extent stated herein.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Item Page
PART I
Description
<S> <C> <C>
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-6
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Submission of Matters to a Vote of Security Holders . . . . . . . . 7
PART II
Description
5. Market for Registrant's Equity and Related Stockholder Matters . . . 8
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 8
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 8
8. Financial Statements and Supplementary Data . . . . . . . . . . . . 9
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . 9
PART III
Description
10. Directors and Executive Officers of the Registrant . . . . . . . . . 10
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . 11
12. Security Ownership of Certain Beneficial Owners and Management . . . 11
13. Certain Relationships and Related Transactions . . . . . . . . . . . 11-12
PART IV
Description
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . 13-15
</TABLE>
Form 10-K
PART I
Item 1. Business
(a) General Development of Business.
Lincoln Telecommunications Company ("the Company") was incorporated on
November 24, 1980, as a Nebraska corporation, and is a holding company, with
The Lincoln Telephone and Telegraph Company ("LT&T"), a Delaware corporation,
as its principal subsidiary. The Company owns 100% of the issued and out-
standing common stock of LT&T. Other subsidiaries which are wholly-owned by
the Company are LinTel Systems Inc. ("LinTel") and Prairie Communications,
Inc. ("Prairie Communications"), both of which are Nebraska corporations. For
general development of business during the past five years and descriptions of
the subsidiaries, see 1993 Exhibit 13.1 Building On Our Strengths and Exhibit
13.3 Management's Discussion and Analysis of Financial Conditions and Results
of Operations (M D & A) which are included in Annual Report pages 2-5 and
31 - 37, respectively.
(b) Financial Information About Industry Segments.
See Exhibit 13.2 Auditors' Report and Financial Statements which are
included in Annual Report pages 14 - 18.
(c) Narrative Description of Business.
Subsidiary Operations.
LT&T, the Company's principal subsidiary, operates a telephone system
for both local and long distance service in the southeastern 22 counties of
Nebraska, having in service 238,142 landline customer access lines as of
December 31, 1993. This is a contiguous geographical area. There are a total
of 138 exchanges and 148 central offices (there being ten central offices in
Lincoln).
<TABLE>
The Lincoln Telephone and Telegraph Company
Statistics
<CAPTION>
As of December 31
ACCESS LINES IN SERVICE* 1993 1992
<S> <C> <C>
Residence 173,477 170,954
Business 64,665 61,194
------- -------
Total 238,142 232,148
</TABLE>
*The statistics in this table do not include cellular access lines and
Company access lines in service as of the dates shown.
TRAFFIC STATISTICS FOR 12 MONTHS ENDED DECEMBER 31, 1993
Long distance calls completed 98,569,280
Direct Distance Dialed 93,868,838
All other 4,700,442
Form 10-K
Item 1. cont'd.
LT&T provides access services by connecting the communications networks
of interexchange and cellular carriers with the equipment and facilities of
end users by use of its public switched networks or through private lines.
Access charges, payable by interexchange and cellular carriers, provided
$47,602,000, $44,513,000 and $43,620,000 of the Company's consolidated
revenues for the years ended December 31, 1993, 1992 and 1991 respectively.
Since 1986, telecommunications companies in Nebraska have been permitted
to increase local exchange rates up to 10% in any consecutive 12-month period
without review by the Nebraska Public Service Commission ("NPSC"). However,
LT&T must provide at least 60 days notice to affected customers and conduct
public informational meetings. If at least 3% of all affected subscribers
sign a formal complaint within 120 days from such notice, opposing the rate
increase, the NPSC must hold and complete a hearing with regard to the
complaint within 90 days to determine whether the proposed rates are fair,
just and reasonable, and within 60 days after the close of hearing, enter an
order adjusting the rates at issue.
Rates for all other services are not subject to regulation by the NPSC.
Rates for other services may be revised by a telecommunications company by
filing a rate list with the NPSC which is effective after ten days' notice to
the NPSC. Quality of service regulation over interexchange and local exchange
service is retained by the NPSC. Nebraska has completely deregulated the
provision of mobile radio services and radio paging services.
Regardless of whether a particular rate increase is subject to regulato-
ry review, the Company's ability to raise rates will be determined by various
factors, including economic and competitive circumstances in effect at the
time. See Exhibit 13.3 M D & A which is included in Annual Report
pages 35 and 36.
LT&T's wireless services include cellular operations and wide area
paging services. LT&T operates a cellular telecommunications system in the
Lincoln, Nebraska Metropolitan Statistical Area ("MSA"). LT&T also manages
the limited partnership which is the license holder for Iowa Rural Service
Area ("RSA") 1 which serves the southwestern six counties of Iowa.
On December 31, 1991, Prairie Communications acquired a 50% interest in
Omaha Cellular General Partnership (OCGP). The remaining 50% interest in OCGP
is owned by Centel Nebraska, Inc. (Centel-Neb). The Company purchased its 50
percent share from Centel Cellular Co. (Centel) for $11.9 million cash and a
discount note from OCGP that it holds for $23.8 million, which note proceeds
were paid to Centel and Centel Nebraska. For a two-year period beginning on
December 31, 1996, Prairie Communications will have an opportunity to purchase
Centel's remaining 50 percent interest in OCGP at fair market value. OCGP is
the general partner of and holds approximately 55% of the partnership inter-
ests in Omaha Cellular Limited Partnership, which provides cellular telecommu-
nications services in Douglas and Sarpy Counties in Nebraska and Pottawattamie
County, Iowa. Omaha Cellular Limited Partnership conducts business under the
trade name First Cellular Omaha. Prairie Communications is the managing
partner of OCGP.
Form 10-K
Item 1. cont'd.
The Company also owns 13.1% of the outstanding shares of Nebraska
Cellular Telephone Corporation ("NCTC"). NCTC is the holder of cellular
operating licenses issued by the Federal Communications Commission ("FCC") for
Nebraska RSA Nos. 533 through 542.
The following table sets forth certain information about the Company's
cellular operations.
<TABLE>
Cellular Operations
<CAPTION>
Pops December 31, 1993
Acquisition Percent Within Net Sub- Net Sub-
System (1) Date (2) Ownership Area (5) Pops scribers scribers
<S> <C> <C> <C> <C> <C> <C>
Lincoln MSA April 23, 1987 100.0 220,126 220,126 12,845 12,845
Omaha MSA December 31, 1991 27.6(3) 614,731(6) 169,666 21,635 5,971
Nebraska RSAs November 25, 1989 13.1 825,169 108,097 (7) (7)
Iowa RSA 1 June 30, 1989 11.0(4) 61,965 6,816 (7) (7)
</TABLE>
________________________
(1) Systems are as follows:
Lincoln MSA - Lancaster County, Nebraska
Omaha MSA - Douglas and Sarpy Counties in Nebraska and Pottawattamie
County in Iowa
Nebraska RSAs - 89 of the 90 Nebraska counties not in the Omaha and
Lincoln MSAs
Iowa RSA 1 - Southwestern six counties of Iowa
(2) The date LT&T's operating license was granted in the case of the Lincoln
MSA, and the date of the Company's initial acquisition of an interest in
the licensee in the case of other systems.
(3) In addition, Prairie Communications has an option to purchase an
additional 27.6% interest in the licensee of the Omaha MSA at fair
market value.
(4) Includes the allocable portion of the 14.1% interest in the licensee
held by the Omaha MSA licensee.
(5) Based upon Donnelley Marketing Information Services population data for
1992. Pops shown for Lincoln and Omaha MSAs are virtually all covered
by the networks of these systems. According to estimates available to
the Company, approximately 60% of the pops shown for Nebraska RSAs and
approximately 90% of the pops shown for Iowa RSA 1 are covered by the
networks of these systems.
(6) Does not include the Omaha MSA licensee's 14.1% interest in Iowa RSA 1
(which system has been separately included in the table) or the Omaha
MSA licensee's 8.3% interest in Iowa RSA 8 (representing 54,125 pops and
4,492 net pops).
Form 10-K
Item 1. cont'd.
(7) The data regarding the subscribers and net subscribers is not disclosed
herein because it is not considered material to the Company's
consolidated operations.
The licensing, ownership, construction, operation and sale of control-
ling interests in cellular telephone systems are subject to regulation by the
FCC. The FCC licenses for the Company's Lincoln MSA and Omaha MSA cellular
operations expire between October 1994 and October 1996, while FCC licenses
for the Company's Iowa RSA and Nebraska RSA cellular operations expire between
July 1999 and August 2000. All renewal applications for these licenses must
be received by the FCC not later than 30 and not more than 60 days in advance
of their respective expiration dates and must be approved by the FCC. It is
possible that there may be competition for these FCC licenses upon expiration,
and any such competitors may apply for such licenses within the same time
frame as the Company. However, incumbent cellular providers generally retain
their FCC licenses upon a demonstration of substantial compliance with FCC
regulations and substantial service to the public. The FCC will only consider
competitors' applications if it determines the Company has not made such a
demonstration. Although the Company has no reason to believe that the FCC
renewal applications will not be granted by the FCC, no assurance can be
given.
For a five-year period ending after the date of the grant of a cellular
license by the FCC (the "fill-in period"), the licensee has the exclusive
right to apply to serve areas within the RSA or the MSA. At the end of the
fill-in period, any person may apply to serve the unserved areas in the MSA or
RSA. The fill-in period for both the Lincoln and Omaha MSAs has expired and
no person has filed to serve any unserved areas in those locations. The fill-
in periods for the Nebraska RSAs and the Iowa RSA expire between November 1994
and May 1995.
LinTel is a "reseller" of long distance services, primarily in LT&T's
exchange service area, and provides this service by aggregating its customers'
traffic to take advantage of volume discounts offered by national networks.
During 1992, the Company had 105.8 million minutes of long distance traffic,
an increase of 2 million minutes from 1991. For 1993, the Company had 110.0
million minutes of long distance traffic, up 4.0% over 1992. The Company has
a variety of calling programs for both residential and business customers.
LinTel also sells and services a wide range of PBX, key system and other
communications equipment to large and small businesses, including products
manufactured by ROLM and Northern Telecom. These systems typically include a
variety of special features such as automatic call distribution, voice mail,
and LAN functionality.
Nebraska State Income and Local Property Taxes
In separate decisions during 1991, the Nebraska Supreme Court (the
Court) decided that the personal property tax system of the State as applied
in 1989 and in 1990 was unconstitutional. On January 22, 1993, the Court
affirmed a determination by the Nebraska State Board of Equalization and
Form 10-K
Item 1. cont'd.
Assessment whereby 18.81% of the taxes paid for 1990 should be refunded to the
Company and certain other taxpayers. In mid-1993, LT&T and LinTel entered
into agreements with the Nebraska Tax Commissioner pursuant to which LT&T and
LinTel agreed to accept a refund of 18.81% of the property taxes paid for the
1989 and 1990 tax years. Such agreements were subsequently approved by the
NPSC. As a result of these actions, the Company recorded refunds or credits
of approximately $1,359,000 and $1,494,000 in 1993 and 1992, respectively.
During 1991, the Nebraska Legislature responded to the 1991 Court
decisions by eliminating personal property taxes for 1991 only, substituting
increased rates for state corporate income taxes and creating a 4% surcharge
on depreciation deductions. In July 1992, the Nebraska Supreme Court declared
this action on taxes to be unconstitutional. Subsequently, the Nebraska
Legislature replaced the 1991 action on taxes with a similar bill enacted in
May 1992, including a 2% surcharge on depreciation deductions. The combina-
tion of these two actions lowered the Company's state income taxes by approxi-
mately $575,000 for 1992.
Due to a constitutional amendment approved by the voters in 1992, the
constitutional issues appear to have been resolved.
Also in 1991, the Legislature adopted a measure requiring the NPSC to
approve the disposition of tax reductions telephone companies might derive
from changes in tax laws. LT&T set aside $2,017,000 in 1992 and $24,000 in
1993 to meet this anticipated requirement. To accomplish these objectives,
LT&T has offered equipment for customers of Enhanced 911 services, frame relay
services to governmental agencies or equipment or services to educational
agencies, all at reduced rates.
Competition.
Competitors now offer private line and switched voice and data services
in or adjacent to the territory served by LT&T, thus permitting bypass of
local telephone facilities. In addition, satellite transmission services,
cellular communications and other services permit bypass of the local exchange
network. These alternatives to local exchange service represent a potential
threat to LT&T's long-term ability to provide local exchange service at
economical rates.
In order to meet this competition, LT&T has deployed new technology for
its local exchange network to increase operating efficiencies and to provide
new services to its customers. These new technologies include conversion of
all LT&T switches to digital technology, installation of over 1,250 miles of
fiber optic cable, and installation of SS7, an out-of-band signalling system,
to over 60 percent of its access lines.
LT&T faces competition in the market for customer premises telephone
equipment. LT&T offers state-of-the-art customer premises telephone equipment
through well-trained and experienced market representatives with long term
relationships with customers. In so doing, LT&T believes that it effectively
competes in this market segment.
Form 10-K
Item 1. cont'd.
With respect to cellular mobile communications service, the FCC has
granted two licenses to provide cellular service in each MSA or RSA. One
license was granted to a company that provides local telephone service in the
area or to a group affiliated with the local service company (the "Wireline
Carrier"). The other license was granted to a company that does not provide
local telephone service and is not affiliated with a local service company in
the area (the "Non-Wireline Carrier"). LT&T currently operates as the
Wireline Carrier in the Lincoln, Nebraska MSA and Prairie Communications is
the manager of the limited partnership which operates as the Wireline Carrier
in the Omaha, Nebraska, MSA.
The Company faces significant competition from the Non-Wireline Carrier
in such markets and from other communications technologies that now exist,
such as specialized mobile radio systems and paging services, or other
communications technologies that may be developed or perfected. In addition
to providing cellular mobile communications service, the Company sells and
leases cellular mobile equipment in competition with numerous equipment
retailers. The providers in each market compete for customers principally on
the basis of services offered, the quality of customer service and price. The
Company has designed and deployed cellular systemswith greater radio signal
coverage than competitive systems, particularly for portable cellular tele-
phone users. The Company believes it has benefited competitively from such
design.
In connection with provision of long distance telecommunications
services, LinTel competes with other long distance service providers such as
AT&T, MCI, and U.S. Sprint. This market is now competitive, and regulation by
the FCC and the NPSC has been substantially reduced since divestiture by AT&T
of the Bell Operating Companies and the advent of equal access. The prices
for long distance services offered by LinTel compare favorably with prices of
similar services offered by competitors. LinTel believes that pricing
contributed to an increase of its minutes of use from 105.8 million minutes in
1992 to 110.0 million minutes in 1993, a 4.0 percent increase.
Since the mid-1980's, the Company's business strategy has been to
position itself as a "one-stop" telecommunications services provider. Long-
term business relationships with its customers have strengthened the Company's
business position. The Company believes that its customers value the fact
that it is the "local company" whose goal is to meet the customers' total
communications needs.
The long-range effect of competition on the provision of telecommunica-
tions services and equipment will depend on technological advances, regulatory
actions at both the state and federal levels, court decisions, and possible
future state and federal legislation. See 1993 Annual Report to Stockholders,
pages 35, 36 and 37.
Employees.
The Company and its subsidiaries employed 1,618 persons (1,422 employed
by its principal subsidiary, LT&T) at the end of 1993. As of December 1993,
Form 10-K
Item 2. cont'd.
approximately 62 percent of the Company's and subsidiaries' employees were
represented by the Communications Workers of America ("CWA"), which is
affiliated with the AFL-CIO. New three-year contracts with the CWA were
signed in May 1992 as respects LinTel bargaining unit employees and October
1992 as respects LT&T bargaining unit employees. The LT&T contract with the
CWA will expire on October 14, 1995, and the LinTel contract with the CWA will
expire on May 19, 1995. The Company believes its relationship with its
employees is good and constructive. See Exhibit 13.4 Selected Financial
Data which is included in Annual Report pages 38 and 39.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
Not applicable.
Item 2. Properties
LT&T's telephone system consists of switching and transmission equipment,
cellular radio facilities, fiber optic systems and distribution plant, through
138 communities within the state of Nebraska. Among the larger exchanges
served are Lincoln, Hastings, Beatrice, York, Nebraska City, Plattsmouth and
Seward.
For fiscal year 1993, LT&T owned the equipment, plant and facilities
which were utilized in its telephone system. LT&T leases four locations on
which business offices are located. The total annual rentals for such leased
offices are less than $100,000 and the duration of such leases range from one
to six years. LT&T owns its remaining business office locations. Additional-
ly, LT&T leases the majority of the locations on which the sites of towers for
its Lincoln MSA cellular system are located. Annual rentals on the sites are
approximately $40,000, and the duration of the unexpired portions of such
leases range from four months to five years, with options to renew thereafter.
LinTel leases transmission facilities and switching facilities in
connection with its Lincoln Telephone Long Distance Division. All of its
office locations are leased. Annual rentals are approximately $135,000, and
the duration of the unexpired portions of such leases range from four months
to four years.
It is the opinion of Company management, including the Engineering
Director of LT&T, that the properties of LT&T are suitable and adequate to
provide modern and effective telecommunications services within its franchised
area, including both local and long distance service. The capacity for
furnishing these services, both currently and for forecast growth, are under
constant surveillance by the Engineering Director and his staff. Facilities
are put to full utilization after installation and appropriate testing,
according to two-, three- and five-year construction plans.
Form 10-K
Item 2. cont'd.
LT&T's continuing construction programs are divided between meeting
growth demands (population and service) and upgrading its telephone equipment
and plant. Conversion to digital switching systems was completed in 1992.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Form 10-K
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) Market Information
Company Common Stock is traded on the Nasdaq National Market under
the symbol "LTEC." The following table sets forth the high and
low bid quotations for the periods indicated, as reported in "The
Wall Street Journal." These quotations represent prices between
dealers without adjustments for markups, markdowns or commissions
and may not represent actual transactions. (All market
information and dividend amounts reflect adjustment for the
Company's 100% stock dividend paid January 6, 1994.)
<TABLE>
<CAPTION>
High Low Dividends Declared
<S> <C> <C> <C>
1992
First Quarter 14.25 11.625 .10
Second Quarter 13.125 10.625 .11
Third Quarter 12.125 10.625 .11
Fourth Quarter 13.50 11.25 .11
1993
First Quarter 13.50 12.00 .12
Second Quarter 14.50 12.50 .12
Third Quarter 18.75 13.625 .12
Fourth Quarter 20.50 17.50 .13
</TABLE>
(b) Holders
The approximate number of holders of the Company's Common Stock on
December 31, 1993 was 8,000.
(c) Dividends
The long-term debt agreements of LT&T contain various restric
tions, including those relating to payment of dividends by LT&T to
the Company and to holders of LT&T's 5% Preferred Stock. Notes
payable to banks also contain various restrictions. At December
31, 1993, approximately $22,050,000 of LT&T's retained earnings
were available for payment of cash dividends to the Company and to
holders of LT&T's 5% Preferred Stock under the most restrictive
provisions of such agreements.
Item 6. Selected Financial Data
See Exhibit 13.4 Selected Financial Data which is included in
Annual Report pages 38 and 39.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Form 10-K
Item 7. cont'd.
See Exhibit 13.3 M D & A which is included in Annual Report pages
31-37.
On March 17, 1993, the Board of Directors elected to expense the
entirety of the Company's post-retirement benefit obligation
accumulated as of January 1, 1993, of approximately $38,450,000 in
the first quarter of 1993 for financial reporting purposes. This
obligation, net of related income taxes, is approximately
$23,550,000. This one-time charge equals $1.45 per share of
Common Stock, net of tax impact. This action was taken in compli
ance with Statement of Financial Accounting Standards No. 106,
which imposes new accounting rules regarding insurance and other
benefits provided to retirees and allows employers to recognize
this obligation either immediately or on an amortized basis.
Recent Developments
On March 16, 1994, the Company announced that due to changes in
technology, customer growth and usage demand for cellular services
in their respective markets, Lincoln Telephone Cellular and First
Cellular Omaha have entered into an agreement with AT&T to
purchase digital cellular telephone systems to replace the
existing analog systems serving these markets. These digital
systems are expected to increase capacity and performance in these
markets. The new Omaha and Lincoln systems are expected to be
operational in April, 1994 and mid-1995, respectively.
The implementation of these system upgrades will cause the early
retirement of existing analog equipment prior to the expiration of
its anticipated useful life. As a result, Lincoln Telecommu-
nications will, in the first quarter of 1994, write down the value
of these assets. This write down is expected to result in a one-
time, non-cash reduction of first quarter 1994 earnings of
approximately $3.2 million, or $0.10 per share.
Item 8. Financial Statements and Supplementary Data
See Exhibit 13.2 Auditors' Report and Financial Statements and
Exhibit 13.4 Selected Financial Data which are included in
Annual Report, pages 15 - 30 and 38 - 39, respectively.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None
Form 10-K
PART III
Item 10. Directors and Executive Officers of the Registrant
See Proxy Statement for Annual Meeting of Stockholders, April 27,
1994, pages 3 - 7. See also Exhibit 13.5 Officers, Directors,
and Committees which is included in Annual Report page 40.
<TABLE>
<CAPTION>
Executive Officers of Registrant
<S> <C> <C> <C>
First Elected
Officer Age Position Held Present Office
Thomas C. Woods, III 48 Chairman of the Board 1993
(Vice Chairman of the Board-
Corporate Relations &
Communications (1990-1993);
V.P.-Corporate Relations, 1985-1990)
Frank H. Hilsabeck 49 President & Chief Executive Officer 1993
(President & Chief Operating Officer,
1991-1993; President-Telephone
Operations, 1990-1991; and Vice
President-Telephone Operations,
1986-1990)
James W. Strand 47 President-Diversified Operations 1990
(V.P.-Diversified Operations,
1987-1990)
Jack H. Geist 61 V.P.-Diversified Operations 1993
(President, Anixter-Lincoln,
a joint venture (1989-1993);
President-Lincoln Telephone
Service and Supply Co., 1986-1989)
Robert L. Tyler 58 Senior V.P. and Chief Financial 1991
Officer (V.P.-Controller, 1989-1991;
Accounting Director, LT&T, 1979-1989)
Michael J. Tavlin 47 V.P.-Treasurer and Secretary 1986
Robert C. Halvorsen 61 Assistant Secretary 1981
</TABLE>
Item 10. cont'd. Form 10-K
Term of office of above named executive officers: At the meeting of the Board
of Directors each year held immediately following the Annual Meeting of Stock-
holders, the officers are elected to serve for the ensuing year, or until
their successors are duly elected and qualified.
Compliance with Section 16(a) of the Exchange Act
See Proxy Statement for Annual Meeting of Stockholders,
April 27, 1994, page 16.
Item 11. Executive Compensation
See Proxy Statement for Annual Meeting of Stockholders,
April 27, 1994, page 14.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security ownership of certain beneficial owners.
See Proxy Statement for Annual Meeting of Stockholders,
April 27, 1994, pages 1 and 2.
(b) Security ownership of management.
See Proxy Statement for Annual Meeting of Stockholders,
April 27, 1994, pages 6 - 7.
(c) Changes in control.
None.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with management and others.
On February 1, 1994, the Company entered into an agreement
(Agreement) with Sahara Enterprises, Inc. (Sahara), then an
owner of approximately 16.6% of the issued and outstanding
common stock of the Company in connection with a firm commitment
underwritten public offering of shares of the Company's common
stock by Sahara (Offering). The Agreement provides (i) the
Company with a right of first refusal to purchase additional
shares of Company common stock from Sahara for 120 days following
the closing of the Offering; (ii) that, concurrently with the
closing of the Offering, the Company will purchase 250,000 shares
of Company common stock from Sahara at the Offering price less 2
percent for future use in funding the Company's stock obligations
under one or more of its employee benefit plans; and (iii) that
Sahara will indemnify and reimburse the Company against payment
of an amount not to exceed the first $200,000 of the Company's
out-of-pocket expenses in connection with the Offering.
Item 13. cont'd. Form 10-K
On February 1, 1994, the Company filed a Form S-3 Registration
Statement with the Securities and Exchange Commission in connec-
tion with the Offering. On March 24, 1994, the Offering was
closed and pursuant thereto, Sahara sold 1,850,000 shares of
Company common stock to the public, reducing its ownership of the
issued and outstanding Company common stock to approximately 10%.
Concurrently therewith and pursuant to the Agreement, the Company
purchased 250,000 shares of Company common stock from Sahara
for a purchased price of $15.68 per share, a transaction which
the Company financed with current assets. Exclusive of
shares of common stock received by Sahara pursuant to Company
stock dividends or stock splits, Sahara (or its wholly-owned
subsidiary) beneficially owned the shares sold in the Offering
and the 250,000 shares sold to the Company concurrently therewith
since the Company's formation as a holding company effective
February 23, 1981.
See Proxy Statement for Annual Meeting of Stockholders, April 27,
1994, pages 6 - 7.
(b) Certain business relationships.
See Proxy Statement for Annual Meeting of Stockholders, April 27,
1994, pages 3 and 4.
(c) Indebtedness of management.
Not applicable.
(d) Transactions with promoters.
Not applicable.
Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1993 and 1992
Consolidated Statements of Earnings, Years ended December 31, 1993,
1992, and 1991
Consolidated Statements of Common Stock Investment and Preferred Stock,
Years ended December 31, 1993, 1992, and 1991
Consolidated Statements of Cash Flows
Years ended December 31, 1993, 1992, and 1991
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements, December 31, 1993, 1992,
and 1991
Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Statements listed in (a) 1 are all incorporated by reference, see
Exhibit 13.2 Auditors' Report and Financial Statements,
Exhibit 13.3 M D & A, and Exhibit 13.4 Selected Financial
Data which are included in Annual Report pages 14 - 30,
pages 31-37, and pages 38-39, respectively.
2. Financial Statement schedules required by Item 8 of this form.
Schedule
Independent Auditors' Report
Temporary Investments and Cash Equivalents,
Years ended December 31, 1993, 1992
and 1991 I
Property and Equipment, Years ended
December 31, 1993, 1992, and 1991 V
Accumulated Depreciation and Amortization
of Property and Equipment -
Years ended December 31, 1993, 1992,
and 1991 VI
Valuation and Qualifying Accounts -
Years ended December 31, 1993, 1992,
and 1991 VIII
Short-Term Borrowings -
Years ended December 31, 1993, 1992,
and 1991 IX
Note Receivable from Related Party -
Years ended December 31, 1993, 1992, and 1991 X
Form 10-K
Item 14. (a) cont'd.
Schedule
Supplementary Statements of Earnings Information -
Years ended December 31, 1993, 1992, and 1991 XI
All other schedules are omitted because they are not applicable or the
information required is immaterial or is presented within the consoli-
dated financial statements and notes thereto.
3. Exhibits Required by Item 601 of Regulation S-K
Exhibit 3: Articles of Incorporation and By-Laws
(3.1) Articles of Incorporation with amendments (incorpo-
rated by reference to Exhibit 3 of the Company's Form
S-3 Registration Statement No. 33-21557).
(3.2) By-Laws as amended March 16, 1994
Exhibit 4: Instruments defining the rights of security holders,
including indentures
(4.1) Rights Agreement, dated as of June 21, 1989, between
the Company and Harris Trust and Savings Bank
(incorporated by reference to Exhibit 4.1 of the
Company's Current Report on Form 8-K dated
June 21, 1989).
(4.2) Amendment to Rights Agreement, dated as of
September 7, 1989, between the Company and Harris
Trust and Savings Bank (incorporated by reference to
Exhibit 4.2 to the Company's Current Report on Form
8-K dated September 7, 1989).
(4.3) Amendment No. 2 to Rights Agreement dated
June 15, 1993, between the Company and Mellon
Securities Trust Company (incorporated by reference
to Exhibit 4.5 of the Company's Form S-3 Registration
Statement No. 33-52117.)
(4.4) The Indenture issued by The Lincoln Telephone and
Telegraph Company (incorporated by reference to
LT&T's Form S-9, File 2-39373, effective
March 1, 1971).
(4.5) Supplemental Indenture Eleven dated June 1, 1990,
(incorporated by reference to the Company's Annual
Report on Form 10-K for the year ending
December 31, 1990).
Item 14. (a) cont'd. Form 10-K
Exhibit 10: Material Contracts
(10.1) The 1989 Stock and Incentive Plan approved by the
Corporation's stockholders on April 26, 1989, was
filed as an exhibit to Form S-8, File 33-39551,
effective March 22, 1991, and is incorporated
herein by this reference.
(10.2) A specimen of the Executive Benefit Plan agreement,
as amended through January 1, 1993, provided to the
executive officers and director-level managers of
the Corporation and its affiliates, and a specimen
of the Key Executive Employment and Severance
Agreement provided to the executive officers of the
Corporation and its affiliates on December 23,
1987, were filed as Exhibit 10 to the Company's
1992 Form 10-K Report and are incorporated herein
by reference.
Exhibit 13: Annual Report to Security Holders
(13.1) Building On Our Strengths
(13.2) Auditors' Report and Financial Statements
(13.3) Management's Discussion and Analysis of Financial
Conditions and Results of Operations (M D & A)
(13.4) Selected Financial Data
(13.5) Officers, Directors and Committees
Exhibit 21: Subsidiaries of the Registrant.
The Company owns all the outstanding common stock of The
Lincoln Telephone and Telegraph Company, LinTel Systems
Inc., and Prairie Communications, Inc. See Exhibit 13.3
M D & A which is included in Annual Report pages 35-36.
Exhibit 23: Accountants' Consent
(23.1) Accountants' consent is attached hereto.
Exhibits 9, 11, 12, 16, 18, 19, 22, 24 and 28 are not applicable.
(b) No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
(c) All exhibits required by Item 601 of Regulation S-K incorporated by
reference as indicated in paragraph (a) 3 above.
(d) Not applicable.
Form 10-K
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LINCOLN TELECOMMUNICATIONS COMPANY
By /s/ Michael J. Tavlin Date March 16, 1994
Michael J. Tavlin, Vice President-Treasurer
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
registrant and in the capacities and on the dates indicated.
Signature Title Date
President and Chief
Executive Officer
/s/ Frank H. Hilsabeck (Principal Executive Officer)
Frank H. Hilsabeck
Senior Vice President and
Chief Financial Officer
/s/ Robert L. Tyler (Principal Financial Officer)
Robert L. Tyler
Vice President - Treasurer
/s/ Michael J. Tavlin and Secretary
Michael J. Tavlin
/s/ Duane W. Acklie Director
Duane W. Acklie
/s/ William W. Cook, Jr. Director
William W. Cook, Jr.
/s/ Terry L. Fairfield Director March 16, 1994
Terry L. Fairfield
/s/ James E. Geist Director
James E. Geist
/s/ J. Taylor Greer Director
J. Taylor Greer
/s/ John Haessler Director
John Haessler
/s/ Charles R. Hermes Director
Charles R. Hermes
Form 10-K
Signatures. cont'd.
/s/ George Kelm Director
George Kelm
- ------------------------- Director
Donald H. Pegler, Jr.
/s/ Paul C. Schorr, III Director
Paul C. Schorr, III
/s/ William C. Smith Director
William C. Smith
/s/ James W. Strand Director
James W. Strand
/s/ Charles N. Wheatley Director
Charles N. Wheatley
/s/ Thomas C. Woods, III Director
Thomas C. Woods, III
/s/ Lyn Wallin Ziegenbein Director
Lyn Wallin Ziegenbein
KPMG PEAT MARWICK
ACCOUNTANTS' CONSENT
The Board of Directors
Lincoln Telecommunications Company:
We consent to the incorporation by reference in the registration statement
on Forms S-3 and S-8 of Lincoln Telecommunications Company of our report,
dated February 4, 1994, relating to the consolidated balance sheets of Lincoln
Telecommunications Company and subsidiaries as of December 31, 1993 and 1992,
and related consolidated statements of income, common stock investment and
preferred stock and cash flows and relating to the schedules to Form 10-K for
each of the years in the three-year period ended December 31, 1993, which
reports appear in the December 31, 1993 annual report on Form 10-K of Lincoln
Telecommunications Company.
/s/ KPMG Peat Marwick
March 15, 1994
Lincoln, Nebraska
LINCOLN TELECOMMUNICATIONS COMPANY
AND SUBSIDIARIES
Independent Auditors' Report and Schedules
Form 10-K Securities and Exchange Commission
December 31, 1993, 1992 and 1991
(With Independent Auditors' Report Thereon)
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Index to Schedules Filed
Schedule
Independent Auditors' Report
Temporary Investments and Cash Equivalents - Years ended
December 31, 1993, 1992 and 1991 I
Condensed Financial Information of Parent Company:
Balance Sheets - December 31, 1993 and 1992
Statements of Income - Years ended December 31, 1993, 1992
and 1991
Statements of Stockholders' Equity - Years ended December 31,
1993, 1992 and 1991
Statements of Cash Flows - Years ended December 31, 1993,
1992 and 1991 III
Property and Equipment - Years ended December 31, 1993, 1992
and 1991 V
Accumulated Depreciation and Amortization of Property and
Equipment - Years ended December 31, 1993, 1992 and 1991 VI
Valuation and Qualifying Accounts - Years ended December 31, 1993,
1992 and 1991 VIII
Short-term Borrowings - Years ended December 31, 1993,
1992 and 1991 IX
Note Receivable from Related Party - Years ended December 31, 1993,
1992 and 1991 X
Supplementary Statements of Earnings Information - Years ended
December 31, 1993, 1992 and 1991 XI
All other schedules are omitted because they are not applicable or the
information required is immaterial or is presented within the consolidated
financial statements and notes thereto.
KPMG Peat Marwick
Certified Public Accountants
1600 FirsTier Building
Lincoln, NE 68508
Two Central Park Plaza
Suite 1501
Omaha, NE 68102
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Lincoln Telecommunications Company:
Under date of February 4, 1994, we reported on the consolidated balance
sheets of Lincoln Telecommunications Company and Subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of income, common
stock investment and preferred stock and cash flows for each of the years in
the three-year period ended December 31, 1993, as contained in the 1993
annual report to stockholders. These consolidated financial statements and
our report thereon are incorporated by reference in the annual report on Form
10-K for the year ended December 31, 1993. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related financial statement schedules as listed in the accompanying index.
These financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ KPMG Peat Marwick
Lincoln, Nebraska
February 4, 1994
Schedule I
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Temporary Investments and Cash Equivalents
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1993:
Temporary investments
Government and agency:
Farm Credit System Financial
Assistance Corp. $ 250 295 291 250
Federal Loan Home Mortgage Corp 500 511 510 500
Federal National Mortgage
Association Mtn 1,000 1,003 1,011 1,000
Sallie Mae CDN & IMTN 800 820 779 800
------ ------ ------ ------
Total government and agency 2,550 2,629 2,591 2,550
====== ====== ====== ======
State or state agencies:
Colorado Housing & Financial Authority 540 540 533 540
Colorado Housing & Finance Auth. Tax bonds 175 175 173 175
Connecticut Municipal Electric Energy 500 490 545 500
Florida Housing Finance Agency Bonds 250 248 251 250
Illinois Health Fac. Auth. Variable Rate 5,000 5,000 5,000 5,000
Indianapolis Ins Loc Pub Impt 250 125 162 250
Louisiana Public Facility Authority 500 543 543 500
Utah State Housing Financial Agency 200 200 199 200
West VA Public Energy Auth. Rev. 500 500 561 500
------ ------ ------ ------
Total state or state agencies $ 7,915 7,821 7,967 7,915
====== ====== ====== ======
Political subdivisions and municipal bonds:
Gainesville Florida Utility Sys Rev.
Bonds 500 500 503 500
Hamilton County, Tennessee Indl. Dev. 100 105 104 100
Indianapolis, Indiana Local Public IMPT 150 86 97 86
Lincoln, Nebraska Electric System Rev. 500 531 545 500
New York City, NY General
Oblig. Note Fis 200 200 200 200
Nuveen, Florida Premium Mun. Fund, Inc. - 955 950 955
Nuveen, Florida Select Quality Mun. Fund - 1,002 1,000 1,000
------ ------ ------ ------
Total political subdivisions
and municipal bonds $ 1,450 3,379 3,399 3,341
====== ====== ====== ======
Total temporary investments, carried forward 13,806
(Continued) ------
2 Schedule I,cont.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Temporary Investments and Cash Equivalents
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
December 31, 1993, continued:
Temporary investments, continued
Total temporary investments,
brought forward $ 13,806
Corporate bonds:
Allstate Corporation Notes 225 225 228 225
Anadarko Petroleum Notes 300 299 307 300
Commonwealth Edison 199 212 205 199
Conagra MTN 100 109 109 100
Delta Airlines 1,250 1,250 1,255 1,250
Eastman Kodak Notes 250 270 262 250
FMCC MTN DTD 500 568 563 500
Ford Motor Credit Company Notes 1,000 999 1,142 1,000
GE Capital Corporation Notes 1,000 970 1,008 1,000
General Motors Acceptance Corp notes 1,100 1,100 1,110 1,100
GMAC MTN/Shelf 300 300 303 300
GMAC Notes 170 176 172 170
Household Finance Corp 250 264 256 250
Kemper Corporation Notes 1,000 999 1,102 1,000
Kroger Company Senior Sub. Notes 300 298 309 300
Marathon Oil Co. 295 308 297 295
Morgan Stanley Group Notes 1,250 1,359 1,368 1,250
New Jersey Bell Telephone 1,000 1,040 1,038 1,000
Prudential Funding Corp. Notes 255 263 262 255
Ralston Purina 1,100 1,261 1,174 1,100
RJR Nabisco Inc. 900 928 951 900
Scott Paper Co. Sinking Fund Debt 200 238 232 200
Sear Robuck Mtn 100 114 112 100
Southwestern Bell Telephone Co. Notes 300 309 303 300
Stop and Shop Finance Intl. 1,000 1,103 1,124 1,000
Time Warner Inc. Notes 1,000 1,045 1,068 1,000
Toyota Motor Credit CDA 200 200 212 200
Toyota Motor Credit GBP Swap 250 244 267 250
Turner Broadcasting System 750 824 820 750
United Telecommunications, Inc. 750 834 813 750
Van Kampen Merritt Mun Trust - 700 700 700
Van Kampen Merritt Tr Insd Mun - 500 500 500
Viacom International Inc. Snr Sub 500 500 500 500
------ ------ ------ ------
Total corporate bonds $ 17,794 19,809 20,072 18,994
====== ====== ====== ======
Total temporary investments, carried forward $ 32,800
(Continued) ------
3 Schedule I,cont.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Temporary Investments and Cash Equivalents
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
December 31, 1993, continued:
Temporary investments, continued
Total temporary investments,
brought forward $ 32,800
Preferred stock:
Citicorp 5 $ 93 99 93
Long Island LT Pfd. 5 125 132 125
USX Corp. Adjustable Rate Pfd. 5 235 240 235
UTS/ELF Pet UK PLC Series H - 1,019 1,019 1,019
------- ------- ------- -------
Total preferred stock 14 $ 1,472 1,490 1,472
======= ======= ======= =======
Common stock, American Health
Properties Inc. 7 $ 179 175 179
======= ======= ======= =======
Total temporary investments $ 34,451
=======
Cash Equivalents
Cash equivalents, GS Asset Management
Funds 11,581 $ 11,581 11,581 11,581
======= ======= ======= =======
</TABLE>
4 Schedule I,cont.
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Temporary Investments and Cash Equivalents
<CAPTION>
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1992:
Temporary investments
Government and agency:
Federal Home Loan Bank $ 800 818 807 800
Federal National Mortgage Association 1,000 1,003 1,054 1,000
Sallie Mae CDNS IMTN 500 530 474 500
------- ------- ------- -------
Total government and agency $ 2,300 2,351 2,335 2,300
======= ======= ======= =======
State or state agencies:
Alabama HFA Variable Rate 1,000 1,000 1,000 1,000
Connecticut Municipal Electric Energy Coop 1,000 1,001 1,000 1,000
Indianapolis Ins. Loc Pub. 250 125 143 250
Louisiana Public Facility Authority 500 542 495 500
Massachusetts Health and Education 3,000 3,000 3,000 3,000
New Hampshire Var-Rt Ind. Dev. Authority 900 900 900 900
Ohio Air Quality PCR Var-Rt 1,400 1,400 1,400 1,400
------- ------- ------- -------
Total state or state agencies $ 8,050 7,968 7,938 8,050
======= ======= ======= =======
Political subdivisions and municipal bonds:
Emmaus, Pennsylvania Var-Rt Gen. Auth. 800 800 800 800
Hamilton County, Tennessee Indl. Dev. 100 105 103 100
Lincoln, Nebraska Electric System Rev. 500 531 529 500
Sacramento, California Var-Rt Mun
Util Dist 2,000 2,000 2,000 2,000
West VA Public Energy Auth. Rev. 500 500 500 500
------- ------- ------- -------
Total political subdivisions and
municipal bonds $ 3,900 3,936 3,932 3,900
======= ======= ======= =======
Total temporary investments,
carried forward $ 14,250
-------
(Continued)
5 Schedule I,cont.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Temporary Investments and Cash Equivalents
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
December 31, 1992, continued:
Temporary investments, continued
Total temporary investments,
brought forward $ 14,250
-------
Corporate bonds:
Chevron Corporation Notes 500 521 504 500
Chrysler Financial Notes 200 201 202 200
Cleveland Electric 265 261 267 265
Commonwealth Edison 199 212 211 199
Ford Motor Credit Company Notes 1,000 999 1,095 1,000
GE Capital Corporation Notes 1,000 970 1,006 1,000
General Motors Accept Corp Notes 1,000 998 1,020 1,000
Household Finance Corporation 250 264 263 250
Kemper Corporation Notes 1,000 999 1,048 1,000
Kroger Company Sr. Subordinate 300 298 301 300
Merrill Lynch & Co. Notes 150 150 151 150
Morgan Stanley Group Notes 1,000 1,111 1,074 1,000
Morgan Stanley Group Inc. Notes 250 249 272 250
Paramount Communications, Inc. 500 517 509 500
Pennzoil Company 400 417 406 400
Ralston Purina 1,100 1,260 1,215 1,100
Scott Paper Company Sinking Fund Deb. 200 238 235 200
Stop and Shop Finance International 1,000 1,103 1,106 1,000
Van Kampen Marritt Tr Inst Mun - 500 500 500
Van Kampen Marritt Advantage "B" - 699 700 700
Viacon International Inc Snr Sub 500 500 504 500
------- ------- ------- -------
Total corporate bonds $ 10,814 12,467 12,589 12,014
======= ======= ======= =======
Preferred stock:
Cadbury Schweppes PLC Series 4 2 $ 1,000 1,000 1,000
U S X Corporation Adjustable Rate PFD 3,500 175 171 175
UTS/ELF Pet UK PLC Series F 2 1,000 1,000 1,000
Ford Holdings Inc. Series A 5 500 500 500
Long Island LT PFD 5,000 125 131 125
------- ------- ------- -------
Total preferred stock 8,509 $ 2,800 2,802 2,800
======= ======= ======= =======
Total temporary investments $ 29,064
=======
Cash equivalents, GS Asset Management Funds 1,540 $ 1,540 1,540 1,540
(Continued) ======= ======= ======= =======
</TABLE>
6 Schedule I,cont.
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Temporary Investments and Cash Equivalents
<CAPTION>
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
December 31, 1991:
<S> <C> <C> <C> <C>
Temporary investments
State or state agencies, Federal National
Mortgage Association $ 1,000 1,002 1,065 1,000
======= ======= ======= =======
Political subdivisions and municipal bonds:
Baltimore MD Var-Rt Port FAC-A 4,400 4,400 4,400 4,400
Massachusetts Comwlth Dedicated I/T BDS 200 203 202 200
Puerto Rico Ind. MED&ENV PCR 250 252 251 250
Sublette CO WY Var-Rt Poll CTL 3,600 3,600 3,600 3,600
Washington State Public PWR Supply System 250 288 271 250
------- ------- ------- -------
Total political subdivisions and
municipal bonds $ 8,700 8,743 8,724 8,700
======= ======= ======= ========
Corporate bonds:
Bank of Tokyo Holding bonds 100 103 101 100
Campbell Soup O/S Fin NV 500 474 494 500
Comdisco Mtn/Shlf 1,000 1,018 1,017 1,000
Detroit Ed Gnrl & Rfnd Sr. D MTG 1,000 1,026 1,023 1,000
Dillard Investments Co. Inc. Notes 500 503 500 500
Disc CR Caro MTN/SHF 500 502 503 500
Emerson Elec. MTN/Shlf 500 578 544 500
European Investment Bank 870 977 933 870
Ford Motor Credit Co. Notes 1,000 999 1,060 1,000
GE Capital Corp. Notes 1,000 970 1,015 1,000
GE Credit Corp. 300 302 301 300
General Motors Accept Corp Notes 1,000 998 1,032 1,000
Industrial Bank of Japan Finance Co. Notes 20 20 23 20
Kemper Corporation Notes 1,000 999 1,052 1,000
Merrill Lynch & Co. Notes 150 150 154 150
Mitsui Finance Asia Ltd Gtd 200 207 202 200
Morgan Stanley Group Inc. Notes 250 249 271 250
Nippon Cr Bk Fin. NV 90 93 91 90
Sears Overseas Fin N.V. 1,000 958 994 1,000
Sumitomo Bank Ltd NTT Branch 250 252 250 250
Viacom Inc. Sr Sub Disc. Deb. 500 542 530 500
Wells Fargo MIN/SH 1,000 1,001 1,014 1,000
Tennessee Valley/Auth 750 761 757 750
Time Mirror Company Notes 1,355 1,373 1,352 1,355
------- ------- ------- -------
Total corporate bonds $ 14,835 15,055 15,213 14,835
Temporary investments, carried forward $ 24,535
(Continued) -------
7 Schedule I,cont.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Temporary Investments and Cash Equivalents
Shares/ Cost of
principal each Market Carrying
Name of issuer and title of each issue amounts issue value value
(Dollars in thousands)
December 31, 1991, continued:
Temporary investments, continued
Temporary investments, brought
forward $ 24,535
-------
Preferred stocks:
Cadbury Schweppes PLC Series 4 2 $ 1,000 1,000 1,000
English China Clays PLC Series 5 1 1,000 1,000 1,000
Household Global FND 2 1,000 1,000 1,000
Redland PLC Series D Mkt Auc PFD 2 2,000 2,000 2,000
-- ------- ------- -------
Total preferred stocks 7 $ 5,000 5,000 5,000
== ======= ======= -------
Total temporary investments $ 29,535
=======
Cash equivalents
GS Asset Management Funds 2,216 2,216 2,216 2,216
Commercial paper:
General Motors Acceptance Corp. 550 550 550 550
G.E. Capital Corp. 500 500 500 500
------ ------ ------ ------
Total cash equivalents 3,266 $ 3,266 3,266 3,266
====== ====== ====== ======
</TABLE>
Schedule III
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Balance Sheets
(Parent Company Only)
December 31, 1993 and 1992
<CAPTION>
1993 1992
(Dollars in thousands)
<S> <C> <C>
Current assets:
Temporary investments $ 9,354 8,599
Cash and cash equivalents 2,376 378
Other current assets 6,506 5,748
-------- --------
Total current assets 18,236 14,725
Investment in subsidiaries 146,856 161,429
Note receivable from subsidiary 30,013 26,727
Other assets 7,817 7,247
-------- --------
$ 202,922 210,128
======== ========
Stockholders' equity:
Common stock 8,245 8,245
Premium on common stock 37,481 37,481
Retained earnings 142,859 149,008
Treasury stock (4,553) (5,299)
-------- --------
Total stockholders' equity 184,032 189,435
-------- --------
Current liabilities:
Notes payable to banks 11,500 14,000
Other current liabilities 6,385 5,209
-------- --------
Total current liabilities 17,885 19,209
-------- --------
Other liabilities 1,005 1,484
-------- --------
$ 202,922 210,128
======== ========
</TABLE>
<TABLE>
Statements of Income
(Parent Company Only)
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C>
Income:
Equity in earnings of subsidiaries $ 7,001 27,306 25,875
Interest income:
Subsidiary 3,286 2,926 -
(Continued)
2 Schedule III,cont.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Statements of Income
(Parent Company Only)
Years ended December 31, 1993, 1992 and 1991
1993 1992 1991
(Dollars in thousands)
Other investments 1,594 1,386 2,528
------ ------ ------
11,881 31,618 28,403
Interest expense and other deductions (870) (1,136) (467)
------ ------ ------
Income before income taxes and
cumulative effect of change in
accounting principle 11,011 30,482 27,936
Income tax expense (1,184) (1,211) (585)
------ ------ ------
Income before cumulative effect
of change in accounting principle 9,827 29,271 27,351
Cumulative effect of change in accounting
principle (27) - -
------ ------ ------
Net income $ 9,800 29,271 27,351
</TABLE>
<TABLE>
Statements of Stockholders' Equity
(Parent Company Only)
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C>
Common stock (note) $ 8,245 8,245 8,245
-------- -------- --------
Premium on common stock (note) 37,481 37,481 37,481
-------- -------- --------
Retained earnings:
Beginning of year 149,008 133,878 119,681
Net income 9,800 29,271 27,351
Premium on redemption of subsidiary's
preferred stock - (84) -
Dividends declared (15,949) (14,057) (13,154)
-------- -------- --------
End of year 142,859 149,008 133,878
-------- -------- --------
Treasury stock:
Beginning of year (5,299) (1,693) (592)
Net (purchases) sales 746 (3,606) (1,101)
-------- -------- --------
End of year (4,553) (5,299) (1,693)
-------- -------- --------
Total stockholders' equity $ 184,032 189,435 177,911
(Continued)
</TABLE>
3 Schedule III,cont.
Note: Effective January 6, 1994, the Company paid a 100% stock
dividend to stockholders of record on December 27, 1993,
which has been treated as a stock split for financial
reporting reporting purposes. Common stock, premium on
common stock and all per share information has been
retroactively adjusted to give effect to the stock dividend
for all periods presented.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Statements of Cash Flows
(Parent Company Only)
<TABLE>
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,800 29,271 27,351
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Increase in note receivable (3,286) (2,926) -
Equity in earnings of subsidiaries (7,001) (27,306) (25,875)
Changes in assets and liabilities resulting
from operating activities:
Other current assets (758) 682 (292)
Other current liabilities 665 1,045 47
Other liabilities (479) (90) (295)
------- ------- -------
Total adjustments (10,859) (28,595) (26,415)
Net cash provided by (used for) ------- ------- -------
operating activities (1,059) 676 936
------- ------- -------
Cash flows from investing activities:
Investment in general partnership - - (11,900)
Net purchases (sales) of temporary investments (755) 6,901 (15,500)
Issuance of note receivable to subsidiary - - (23,800)
Purchases of investments and other assets (570) (4,162) (1,054)
------- ------- -------
Net cash provided by (used for)
investing activities (1,325) 2,739 (52,254)
------- ------- -------
Cash flows from financing activities:
Dividends to stockholders (15,364) (13,688) (12,834)
Proceeds from (payments on) note payable (2,500) (2,000) 16,000
Net sales (purchases) of treasury stock 746 (3,606) (1,101)
Dividends from subsidiaries 21,500 16,000 22,000
------- ------- -------
Net cash provided by (used for)
financing activities 4,382 (3,294) 24,065
(Continued)
3 Schedule III,cont.
Statements of Cash Flows (Cont'd)
1993 1992 1991
(Dollars in thousands)
Increase (decrease) in cash and cash equivalents 1,998 121 (27,253)
Cash and cash equivalents at beginning of year 378 257 27,510
------- ------- -------
Cash and cash equivalents at end of year $ 2,376 378 257
======= ======= =======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 478 704 1
======= ======= =======
Income taxes $ 788 1,130 436
======= ======= =======
</TABLE>
Schedule V
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Property and Equipment
Years ended December 31, 1993, 1992 and 1991
<CAPTION
Balance at Balance
beginning Additions, Retire- at end
Classifications (note 1) of year at cost ments Transfers of year
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Used in telephone operations:
Land $ 2,746 28 - (2) 2,772
Buildings 24,860 1,054 193 (5) 25,716
Equipment 392,153 21,914 9,828 3,238 407,477
Motor vehicles and other
work equipment 9,651 1,004 567 28 10,116
------- ------- ------- ------- -------
Total in service 429,410 24,000 10,588 3,259 446,081
Under construction 4,376 491 - (3,259) 1,608
------- ------- ------- ------- -------
Total used in telephone
operations 433,786 24,491 10,588 - 447,689
Used in diversified operations 1,440 504 93 - 1,851
------- ------- ------- ------- -------
$435,226 24,995 10,681 - 449,540
======= ======= ======= ======= =======
Year ended December 31, 1992:
Used in telephone operations:
Land 2,732 14 - - 2,746
Buildings 24,122 705 123 156 24,860
Equipment 390,916 17,500 26,592 10,329 392,153
Motor vehicles and other
work equipment 9,256 928 533 - 9,651
------- ------- ------- ------- -------
Total in service 427,026 19,147 27,248 10,485 429,410
Under construction 6,974 7,887 - (10,485) 4,376
Acquisition adjustment 1,211 - 1,211 -
- -
------- ------- ------- ------- -------
Total used in telephone
operations 435,211 27,034 28,459 - 433,786
Used in diversified operations 1,285 306 151 - 1,440
------- ------- ------- ------- -------
$436,496 27,340 28,610 - 435,226
======= ======= ======= ======= =======
(Continued)
2 Schedule V,cont.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Property and Equipment
Balance at Balance
beginning Additions, Retire- at end
Classifications (note 1) of year at cost ments Transfers of year
(Dollars in thousands)
Year ended December 31, 1991:
Used in telephone operations:
Land $ 2,403 328 - 1 2,732
Buildings 23,203 989 70 - 24,122
Equipment 374,935 21,204 13,976 8,753 390,916
Motor vehicles and other
work equipment 8,699 1,180 623 - 9,256
------- ------- ------- ------- -------
Total in service 409,240 23,701 14,669 8,754 427,026
Under construction 6,265 9,463 - (8,754) 6,974
Acquisition adjustment 1,211 - - - 1,211
------- ------- ------- ------- -------
Total used in telephone
operations 416,716 33,164 14,669 - 435,211
Used in diversified operations 1,128 230 73 - 1,285
------- ------- ------- ------- -------
$417,844 33,394 14,742 - 436,496
======= ======= ======= ======= =======
</TABLE>
Note 1: Depreciation on property and equipment is determined by
using the straight-line method based on estimated service
and remaining lives. The composite depreciation rate for
telephone property was 6.5% in 1993, 6.9% in 1992 and 6.7%
in 1991.
Schedule VI
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Accumulated Depreciation and
Amortization of Property and Equipment
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
Additions
Charged to
clearing
Balance at Charged to accounts Retire- Balance
beginning costs and and ments at end
Description of year expenses others (note) of year
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Used in telephone operations:
Buildings $ 9,824 731 - 221 10,334
Equipment 171,090 26,811 - 9,948 187,953
Motor vehicles and other
work equipment 3,823 665 - 476 4,012
------- ------- --- ------- -------
Total used in telephone
operations 184,737 28,207 - 10,645 202,299
Used in diversified operations 924 251 - 38 1,137
------- ------- --- ------- -------
$185,661 28,458 - 10,683 203,436
======= ======= === ======= =======
Year ended December 31, 1992:
Used in telephone operations:
Buildings 9,305 711 - 192 9,824
Equipment 168,148 27,993 - 25,051 171,090
Motor vehicles and other
work equipment 3,623 641 - 441 3,823
------- ------- --- ------- -------
Total in service 181,076 29,345 - 25,684 184,737
Acquisition adjustment 1,211 - - 1,211 -
------- ------- --- ------- -------
Total used in telephone
operations 182,287 29,345 - 26,895 184,737
Used in diversified operations 841 188 - 105 924
------- ------- --- ------- -------
$183,128 29,533 - 27,000 185,661
2 Schedule VI,cont.
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Accumulated Depreciation and
Amortization of Property and Equipment
Additions
Charged to
clearing
Balance at Charged to accounts Retire- Balance
beginning costs and and ments at end
Description of year expenses others (note) of year
(Dollars in thousands)
Year ended December 31, 1991:
Used in telephone operations:
Buildings 8,743 686 - 124 9,305
Equipment 153,380 27,182 - 12,414 168,148
Motor vehicles and other
work equipment 3,566 616 - 559 3,623
------- ------- --- ------- -------
Total in service 165,689 28,484 - 13,097 181,076
Acquisition adjustment 1,151 - 60 - 1,211
------- ------- --- ------- -------
Total used in telephone
operations 166,840 28,484 60 13,097 182,287
Used in diversified operations 729 126 - 14 841
------- ------- --- ------- -------
$167,569 28,610 60 13,111 183,128
======= ======= === ======= =======
<FN>
Note: Retirements are net of salvage and cost of removal.
</TABLE>
Schedule VIII
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
Additions Deductions
Balance at charged to from Balance
beginning costs and allowance at end
Description of year expenses (note) of year
(Dollars in thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1993,
Allowance deducted from asset accounts,
allowance for doubtful receivables $ 419 474 511 382
=== === === ===
Year ended December 31, 1992,
Allowance deducted from asset accounts,
allowance for doubtful receivables $ 479 251 311 419
=== === === ===
Year ended December 31, 1991,
Allowance deducted from asset accounts,
allowance for doubtful receivables $ 494 300 315 479
=== === === ===
<FN>
Note: Customers' accounts written-off, net of recoveries.
</TABLE>
Schedule IX
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Short-term Borrowings
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
Average Weighted
Category of Maximum amount average
aggregate Weighted amount outstanding interest
short-term Balance average outstanding during rate during
borrowings at end interest during the year the year the year
(note 1) of year rate (note 2) (note 2) (note 3)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
1993
Bank notes payable $ 41,500 3.47% $ 48,500 29,214 3.54%
======= ===== ======= ======= =====
1992
Bank notes payable $ 14,000 4.39% $ 16,000 15,984 4.38%
======= ===== ======= ======= =====
1991
Bank notes payable $ 16,000 4.77% $ 16,000 219 4.77%
======= ===== ======= ======= =====
<FN>
Note 1: The Company had unused lines of credit established with
several commercial banks of $15,000,000 at December 31,
1992 and 1991.
Note 2: Maximum amount outstanding and average amount outstanding
during the year are based on daily balances.
Note 3: Interest expense divided by average amount outstanding
during the year.
</TABLE>
Schedule X
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Note Receivable from Related Party
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
Balance at Balance at
beginning end of
Name of debtor of period Additions Deductions period
(Dollars in thousands)
1993
<S> <C> <C> <C> <C>
Omaha Cellular General Partnership $ 26,727 3,286 - 30,013
======= ====== === =======
1992
Omaha Cellular General Partnership $ 23,800 2,927 - 26,727
======= ====== === =======
1991
Omaha Cellular General Partnership $ - 23,800 - 23,800
======= ====== === =======
<FN>
Note: Prairie Communications, Inc. purchased and holds a
discounted note from Omaha Cellular General Partnership in
the face amount of approximately $54 million. The note has
a stated interest rate of 11.94% and is due December 31,
1998.
</TABLE>
Schedule XI
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
Supplementary Statements of Earnings Information
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
Charged to costs and expenses
Item 1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C>
Maintenance and repairs $ 19,966 21,173 20,697
======= ======= =======
Taxes, other than payroll and income taxes:
Property 2,788 4,154 334
Other 135 (19) 112
------- ------- -------
$ 2,923 4,135 446
======= ======= =======
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
X Annual Report pursuant to Section 15(d)
of the SECURITIES EXCHANGE ACT of 1934
[Fee Requried]
For the Fiscal Year Ended December 31, 1993
OR
__ Transition Report pursuant to Section 15(d)
of the SECURITIES EXCHANGE ACT of 1934
[No Fee Required]
A. Full title of the Plan and the address of the Plan, if different
from that of the issuer named below:
LINCOLN TELECOMMUNICATIONS COMPANY EMPLOYEE AND STOCKHOLDER
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN, AS AMENDED
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
LINCOLN TELECOMMUNICATIONS COMPANY
1440 M Street
P.O. Box 81309
Lincoln, Nebraska 68501-1309
(402) 474-2211
KPMG PEAT MARWICK
LINCOLN TELECOMMUNICATIONS COMPANY
EMPLOYEE AND STOCKHOLDER DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Financial Statements
Form 11-K
Securities and Exchange Commission
December 31, 1993, 1992 and 1991
(With Independent Auditors' Report Thereon)
LINCOLN TELECOMMUNICATIONS COMPANY
EMPLOYEE AND STOCKHOLDER DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Index to Financial Statements
Independent Auditors' Report
Statements of Financial Condition - December 31, 1993 and 1992
Statements of Revenues and Common Stock Purchases -
Years ended December 31, 1993, 1992 and 1991
Notes to Financial Statements - December 31, 1993, 1992 and 1991
All schedules are omitted because they are not applicable.
KPMG Peat Marwick
Certified Public Accountants
1600 FirsTier Building
Lincoln, NE 68508
Two Central Park Plaza
Suite 1501
Omaha, NE 68102
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Lincoln Telecommunications Company:
We have audited the financial statements of Lincoln
Telecommunications Company Employee and Stockholder Dividend
Reinvestment and Stock Purchase Plan as listed in the accompanying
index. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Lincoln
Telecommunications Company Employee and Stockholder Dividend
Reinvestment and Stock Purchase Plan at December 31, 1993 and 1992,
and its revenues and common stock purchases for each of the years
in the three-year period ended December 31, 1993, in conformity
with generally accepted accounting principles.
/s/ KPMG Peat Marwick
Lincoln, Nebraska
February 4, 1994
</TABLE>
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY
EMPLOYEE AND STOCKHOLDER DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Statements of Financial Condition
December 31, 1993 and 1992
<CATION>
Assets 1993 1992
<S> <C> <C>
Due from Lincoln Telecommunications Company (note 2):
Contributions $ 177,653 257,428
Dividends 269,246 130,254
------- -------
$ 446,899 387,682
======= =======
Liabilities
Balance to be invested in common stock for participants
(notes 1 and 2) $ 446,899 387,682
======= =======
See accompanying notes to financial statements.
</TABLE>
<TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY
EMPLOYEE AND STOCKHOLDER DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Statements of Revenues and Common Stock Purchases
Years ended December 31, 1993, 1992 and 1991
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Revenues:
Cash dividends $ 925,269 502,839 471,230
Contributions 760,455 997,938 737,018
--------- --------- ---------
1,685,724 1,500,777 1,208,248
--------- --------- ---------
Assets held for purchases of common stock (note 2):
Beginning of year 387,682 308,622 284,134
Less end of year (446,899) (387,682) (308,622)
--------- --------- ---------
(59,217) (79,060) (24,488)
--------- --------- ---------
Common stock purchases $ 1,626,507 1,421,717 1,183,760
========= ========= =========
See accompanying notes to financial statements.
</TABLE>
LINCOLN TELECOMMUNICATIONS COMPANY
EMPLOYEE AND STOCKHOLDER DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Notes to Financial Statements
December 31, 1993, 1992 and 1991
(1) Statement of Purpose and Summary of Significant Accounting Policies
The Lincoln Telecommunications Company Employee and Stockholder
Dividend Reinvestment and Stock Purchase Plan (Plan) provides
stockholders and eligible employees of Lincoln Telecommuni-
cations Company (Company) and its subsidiaries with a
convenient and economical way to invest cash dividends and
optional cash contributions to purchase additional shares of
common stock of the Company.
Shares are offered for purchase to all stockholders and all
regular full-time and regular part-time employees of the
Company with not less than six months of service. Any
individual who owns 5 percent or more of the total combined
voting power of value of all classes of stock of the Company is
not eligible to participate in the Plan.
The Company paid, on January 6, 1994, a 100% stock dividend to
stockholders of record on December 27, 1993.
The accompanying financial statements have been prepared on an
accrual basis and present the financial condition of the Plan
and its revenues and common stock purchases. All assets are
held for the purchase of common stock of the Company.
Effective on June 15, 1993, Mellon Securities Trust Company
became the transfer agent, registrar, rights agent and Plan
administrator. Prior to that date, the Company was the
transfer agent, registrar and Plan administrator and Harris
Trust and Savings Bank was the rights agent.
(2) Participation
Stock for the Plan is purchased on the open market. The basis
for the purchase price of the stock allocated to the Plan
participants is the average price paid during the 5-day trading
period preceding and including the dividend payment date.
Employee purchases are at 95% of such price while purchases by
non-employee participants are at 100% of such price.
Participants in the Plan may use cash dividends declared on
stock owned and optional cash contributions to purchase
(Continued)
LINCOLN TELECOMMUNICATIONS COMPANY
EMPLOYEE AND STOCKHOLDER DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Notes to Financial Statements (Cont'd)
additional stock. Any contributions received by approximately
eight days before the end of each calendar quarter will be used
to purchase shares of stock as of the next dividend date.
Shares purchased in the open market for the Plan aggregated
57,604, 60,636 and 51,171 during 1993, 1992 and 1991,
respectively. At December 31, 1993, the agent for the Plan
held 628,534 shares registered for participants.
(3) Income Taxes
No provision is made for income taxes relating to the
operations of the Plan. Any income tax consequences of
participation in the Plan are that of the participants.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LINCOLN TELECOMMUNICATIONS COMPANY
EMPLOYEE AND STOCKHOLDER DIVIDEND
REINVESTMENT AND STOCK PRUCHASE PLAN
(Name of Plan)
By /s/ Michael J. Tavlin
Michael J. Tavlin
Vice President-Treasurer
Date March 16, 1994
EXHIBIT 3.2
LINCOLN TELECOMMUNICATIONS COMPANY
BY - LAWS
(As Amended Through March 16, 1994, Effective May 1, 1993)
- - -
OFFICES
1. The principal office shall be at 1440 M Street, in the
City of Lincoln, County of Lancaster, State of Nebraska. The
registered office shall be at the same address in said City of
Lincoln.
2. The corporation may also establish offices at such
other places as the Board of Directors may from time to time
designate or the business of the corporation may require.
SEAL
3. The corporate seal shall have inscribed thereon the
name of the corporation, and the words "Corporate Seal,
Nebraska." Said seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
STOCKHOLDERS' MEETINGS
4. All meetings of the stockholders for the election of
directors shall be held at the principal office of the
corporation in Lincoln, Nebraska or other location fixed by the
Board of Directors and stated in the notice of the meeting.
Special meetings of stockholders for any purpose may be held at
the principal office of the corporation in Lincoln, Nebraska or
other location fixed by the Board of Directors at a date, place
and time stated in the notice of the meeting.
5. An annual meeting of stockholders shall be held on the
fourth (4th) Wednesday of April following the end of each
calendar year at a time set by the Board of Directors, except
that the Board of Directors may set an earlier date or later date
in such subsequent calendar year for the annual meeting, or
postpone the annual meeting at any time prior to the originally
scheduled or postponed annual meeting date, subject to applicable
law, with any such earlier, later or postponed date disclosed
promptly by means of a public filing with the Securities and
Exchange Commission or a press release to Dow Jones & Company or
any similar service. At each annual meeting, the stockholders
shall elect, by ballot, successors to the class of directors
whose term expires at that annual meeting and any additional
director of any class nominated to fill a vacancy resulting from
an increase in such class determined by the Board of Directors in
an aggregate number fixed by the board pursuant to By-law
(13)(a), and transact such other business as may properly be
brought before the annual meeting.
To be properly brought before an annual meeting, business
must be (i) specified in the notice of the meeting (or any
supplement thereto) given by or at the direction of the Board of
Directors, (ii) brought before the meeting by or at the direction
of the Board of Directors, or (iii) otherwise properly brought
before the meeting by a stockholder of record where the
stockholder has complied with the requirements of this By-Law 5.
To bring business before an annual meeting, a stockholder must
have given written notice thereof, either by personal delivery or
by United States certified mail, postage prepaid, to the
secretary of the corporation not less than ninety (90) days in
advance of such meeting; provided that if the annual meeting of
stockholders is held earlier than said fourth (4th) Wednesday of
April, such notice must be given within ten (10) days after the
first public disclosure, which may include any public filing with
the Securities and Exchange Commission or a press release to Dow
Jones & Company or any similar service, of the earlier date of
the annual meeting.
Any such notice shall set forth the following as to each
matter a stockholder proposes to bring before the annual meeting:
(A) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business
at the meeting and, if such business includes a proposal to amend
the By-Laws of the corporation, the language of the proposed
amendment; (B) the class and number of shares of the corporation
which are beneficially owned by such stockholder; (C) the name
and address, as they appear on the corporation's records, of the
stockholder proposing such business, or the documents necessary
to constitute the stockholder a stockholder of record of the
stock beneficially owned; (D) a representation that the stock-
holder is a holder of record of stock of the corporation entitled
to vote at such meeting, and intends to appear in person or by
proxy at the meeting to propose such business; (E) any material
interest of the stockholder in such business. In the event the
chairman presiding at the annual meeting shall, if the facts
warrant, determine that business was not properly brought before
the meeting and in accordance with the provisions of these By-
Laws, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this By-Law 5, a
stockholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth
in this By-Law 5. Any action at an annual meeting to amend these
By-Laws to eliminate or modify the procedures set forth in this
By-Law 5 shall not operate to eliminate or modify such procedures
with respect to any business proposed to be brought before such
annual meeting.
6. The holders of a majority of the common stock issued
and outstanding, present in person, or represented by proxy,
shall be requisite and shall constitute a quorum at all meetings
of the stockholders for the transaction of business except as
otherwise provided by statute, by the Articles of Incorporation
or by these By-Laws. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the
stockholders present in person, or by proxy, shall have power to
adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. At
such adjourned meeting at which a quorum shall be present any
business may be transacted which might have been transacted at
the meeting as originally notified.
7. At any meeting of the stockholders every stockholder
having the right to vote shall be entitled to vote in person, or
by proxy appointed by an instrument in writing by such
stockholder or by his duly authorized attorney-in-fact. Each
stockholder shall have one vote for each share of stock having
voting power registered in the stockholder's name on the books of
the corporation. In all elections for directors every
stockholder having the right to vote at such elections shall have
the right to vote in person or by proxy the number of shares
owned by him for as many persons as there are directors to be
elected, or (unless no longer prescribed by the Nebraska Business
Corporation Act) to cumulate said shares and give one candidate
as many votes as the number of directors to be elected multiplied
by the number his shares shall equal, or to distribute them upon
the same principle among as many candidates as he shall think
fit. Directors shall be elected in no other manner.
In supplementation of By-Law 44, if the transfer books are
not closed, the Board of Directors may fix in advance a date not
exceeding fifty (50) and not less than fifteen (15) days prior to
the date of any annual meeting of stockholders as the record date
for the determination of stockholders entitled to notice of, and
to vote at, such meeting. In the event of any special meeting of
stockholders called by the president/CEO of the corporation or by
the Board of Directors, the Board of Directors may fix in advance
a date not exceeding fifty (50) days and not less than fifteen
(15) days prior to the date of such special meeting as the record
date for the determination of stockholders entitled to notice of,
and to vote at, such meeting. In the event of a special meeting
of stockholders called by a stockholder or stockholders, as
provided by By-Law 10, the Board of Directors may fix in advance
a date not more than fifteen (15) days after the date the
secretary of the corporation receives written notice of a call of
a special meeting of stockholders, delivered by the person or
persons entitled to call such a meeting, as the record date for
the determination of stockholders entitled to notice of, or to
vote at, such special meeting. If no record date is fixed by the
Board of Directors, the date on which notice of the annual
meeting or special meeting called by the president/CEO or the
board is mailed or the date fifteen (15) days after the date of
receipt by the secretary of notice of a special meeting of
stockholders called by a stockholder or stockholders, as the case
may be, shall be the record date for such determination of
stockholders. In any case, the date of a special meeting of
stockholders shall be a date not more than fifty (50) days and
not less than forty-five (45) days after the record date for such
meeting. When a determination of stockholders entitled to vote
at any meeting of stockholders has been made as provided in this
By-Law 7, such determination shall apply to any adjournment
thereof.
8. Written notice of the annual meeting shall be served
upon or mailed to each stockholder entitled to vote thereat at
such address as appears on the stock books of the corporation, at
least ten (10) days prior to the meeting.
9. A complete list of the stockholders entitled to vote at
the ensuing election, arranged in alphabetical order with the
address of and number of shares held by each, shall be prepared
by the secretary and filed in the corporation's principal office
at least ten (10) days before the election, and shall at all
times, during the usual hours for business during such ten (10)
day period at the principal office, and during the whole time of
said election at the place of election be open to the examination
of any stockholder.
10. Special meetings of the stockholders, for any purpose
or purposes, unless otherwise prescribed by statute, may be
called by the president/CEO or the Board of Directors, or by a
stockholder or stockholders owning not less than twenty-five
percent (25%) of the number of shares of common stock of the
corporation issued and outstanding and entitled to vote at the
meeting. Any stockholder or stockholders entitled to call a
special meeting shall do so by delivering written notice to the
secretary of the corporation stating that a special meeting has
been called and certifying to facts establishing that the person
or persons delivering the notice are entitled to call a special
meeting. Such written notice shall state the purpose or purposes
of the proposed meeting and shall state the information required
in By-Law 5 as respects the business proposed to be transacted at
the special meeting.
11. Business transacted at all special meetings shall be
confined to the objects stated in the notice of the meeting
delivered to the secretary of the corporation pursuant to By-Law
10 and in the notice of the meeting sent to stockholders pursuant
to By-Law 12.
12. Written notice stating the place, date, time and
purpose or purposes for which the special meeting is called and,
in the case of a special meeting called by a stockholder or
stockholders as provided by By-Law 10 the information that would
be required in the notice by the stockholder to the secretary of
the corporation described in By-Law 5, shall be served upon or
mailed to each stockholder entitled to vote at such special
meeting at such address as appears on the stock books of the
corporation not more than fifty (50) days and not less than ten
(10) days before the date of the special meeting. Notwith-
standing the foregoing provisions of this By-Law 12, a
stockholder or stockholders calling a special meeting shall also
comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this By-Law
12.
DIRECTORS
13(a). The number of directors which shall constitute the
whole board shall be not less than twelve (12) or more than
eighteen (18). The number of directors to serve during any year
shall be fixed by resolution of the Board of Directors at its
last regular meeting during the previous calendar year, but may
also be fixed by resolution of the Board of Directors or the
executive committee at a regular or special meeting of the board
or executive committee held prior to the annual meeting of
stockholders in the year of such annual meeting. In the event of
failure of the board or executive committee to fix the number of
directors at such meetings, the number shall be the same as last
fixed by the Board of Directors. Nominations of directors to be
elected may only be made by the Board of Directors, by any
committee of the Board of Directors designated by the board to
make such nominations, or by any stockholder of record entitled
to vote generally in elections of directors where the stockholder
complies with the requirements of this By-Law 13(a). Any stock-
holder of record entitled to vote generally in elections of
directors may nominate one or more persons for election as
directors at a meeting of stockholders only if written notice of
such stockholder's intent to make such nomination or nominations
has been given, either by personal delivery or by United States
certified mail, postage prepaid, to the secretary of the
corporation (i) with respect to an election to be held at an
annual meeting of stockholders, not less than ninety (90) days in
advance of such meeting; provided that if the annual meeting of
stockholders is held earlier than the fourth (4th) Wednesday of
April specified in By-Law 5, such notice must be given within ten
(10) days after the first public disclosure, which may include
any public filing with the Securities and Exchange Commission or
a press release to Dow Jones & Company or any similar service, of
the earlier date of the annual meeting, and (ii) with respect to
an election to be held at a special meeting of stockholders for
the election of directors (including a meeting to remove
directors and fill the vacancies thereby created or to fill
vacancies caused by an increase in the number of directors), not
later than the date on which the stockholder delivers his written
notice to the secretary calling such special stockholders'
meeting.
Each such notice of director nominations given to the
secretary shall set forth the following: (A) the class and
number of shares of the corporation which are beneficially owned
by the stockholder; (B) the name and address, as they appear on
the corporation's records, of the stockholder who intends to make
the nomination, or the documents necessary to constitute the
stockholder a holder of record of the stock beneficially owned,
and the name and residence address of the person or persons to be
nominated; (C) a representation that the stockholder is a holder
of record of stock of the corporation entitled to vote at such
meeting, and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the
notice; (D) a description of all arrangements or understandings
between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (E)
such other information regarding each nominee proposed by such
stockholder as would be required to be disclosed in solicitations
of proxies for election of directors, or would be otherwise
required, pursuant to Schedule 14B under the Securities
Exchange Act of 1934, as amended, including, but not limited to,
any information that would be required to be included in a proxy
statement filed pursuant to Regulation 14A had the nominee been
nominated by the Board of Directors; and (F) the written consent
of each nominee to his or her nomination and willingness to serve
as a director of the corporation if elected.
No person shall be eligible to serve as a director of the
corporation unless nominated in accordance with the procedures
set forth in this By-Law 13. In the event the chairman presiding
at the stockholders' meeting shall, if the facts warrant,
determine that a nomination was not made in accordance with the
procedures prescribed by this By-Law 13, he shall so declare to
the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this By-Law 13, a
stockholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth
in this By-Law 13. Any action at an annual or special meeting of
stockholders to eliminate or modify the procedures set forth in
this By-Law 13 shall not operate to eliminate or modify such
procedures with respect to any proposed nomination at such annual
or special meeting.
13(b). The directors shall be divided into three classes.
Each class shall consist, as nearly as may be possible, of one-
third of the total number of directors constituting the whole
Board of Directors. At each annual meeting of stockholders,
successors to the class of directors whose term expires at that
annual meeting shall be elected for a three-year term. A
director shall hold office until the annual meeting in the year
in which the director's term expires and until the director's
successor shall be elected and qualified, subject however, to
prior death, resignation, retirement, disqualification or removal
from office.
If the number of directors is changed, any increase or
decrease shall be appropriated among the classes so as to
maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to
fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining
term of that class, but in no case will a decrease in the number
of directors shorten the term of any director then in office.
The termination of employment other than by retirement of any
director who is an employee of the corporation shall be cause for
disqualification from further board membership unless waived by
the board.
14. The directors may hold their meetings and keep the
books of the corporation inside or outside of Nebraska at such
places as they may from time to time determine.
15. If the office of any director becomes vacant by reason
of death, resignation, disqualification, removal from office, or
otherwise, a majority of the remaining directors (or the sole
remaining director), though less than a quorum, shall appoint a
successor, who shall hold office for the unexpired term of the
director he or she succeeds. If there shall be no directors then
in office, the stockholders shall be entitled to fill the
vacancies on the Board of Directors.
16. The property and business of the corporation shall be
managed by its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things
as are not by statute or by the articles of incorporation or by
these by-laws directed or required to be exercised or done by the
stockholders.
COMMITTEES OF DIRECTORS
17. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees,
each committee to consist of three (3) or more of the directors
and shall have such functions and responsibilities as the board
shall prescribe in said resolution of appointment. Such
committee or committees shall have such name or names as may be
determined from time to time by resolution of the board.
There shall be an executive committee appointed annually by
the board at its first meeting following the annual meeting of
the stockholders in each year, consisting of not less than three
(3) nor more than seven (7) of the directors as fixed by the
board's resolution of appointment and shall include the
president/CEO.
The executive committee shall have and may exercise all
powers of the Board of Directors when the Board is not in
session. Meetings of the executive committee may be called by
the president/CEO or a member of the committee upon at least two
days' prior oral notice or written notice delivered personally or
by facsimile transmission. At all meetings of the executive
committee a majority of the number of directors as appointed to
the committee by the Board of Directors shall constitute a quorum
for the transaction of business.
18. The committees shall keep regular minutes of their
proceedings and report the same to the Board as required.
COMPENSATION OF DIRECTORS
19. Directors shall receive such compensation for their
services as may be determined by resolution of the Board from
time to time and, in addition, a fixed sum and expenses of
attendance, if any, at each regular or special meeting of the
Board; provided that nothing herein contained shall be construed
to preclude any director from serving the corporation in any
other capacity and receiving compensation therefor.
20. Members of special or standing committees may be
allowed compensation for attending committee meetings as
determined by the Board.
MEETINGS OF THE BOARD
21. The first meeting of each Board of Directors with newly
elected members shall be held at such place and time either
within or without the State of Nebraska as shall be fixed by the
vote of the stockholders at the annual meeting, and no notice of
such meeting shall be necessary to the members of the board in
order to legally constitute the meeting; provided a majority of
the whole board shall be present; or they may meet at such place
and time as shall be fixed by the consent in writing of all the
directors.
22. Regular meetings of the Board of Directors may be held
without notice at such time and place either within or without
the State of Nebraska as shall from time to time be determined by
the Board.
23. Special meetings of the Board of Directors may be
called by the president/CEO on three (3) days' notice to each
director by mail or forty-eight (48) hours' notice by personal
delivery of written notice, by telegram or by facsimile
transmission; special meetings shall be called by the
president/CEO or secretary in like manner and on like notice on
the written request of two directors. In all cases, notice shall
be addressed or otherwise delivered to the director at the
director's last known address.
24. At all meetings of the Board attendance of a majority
of directors in number shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute or by
the Articles of Incorporation or by these By-laws.
OFFICERS
25. The officers of the corporation shall be elected by the
directors and shall be a president and chief executive officer
(a/k/a president/CEO), one or more vice presidents, a secretary,
a treasurer and a controller. The Board of Directors may also
elect a chairman of the board, one or more presidents of
operating divisions, an executive vice president or executive
vice presidents, a chief financial officer, assistant
secretaries, assistant treasurers and such other officers as it
shall determine. Any two of the aforesaid offices, except those
of president/CEO or division president and vice president, may be
held by the same person.
26. The Board of Directors, at its first meeting after each
annual meeting of stockholders, shall elect a president/CEO, one
or more vice presidents, a secretary, a treasurer, and a
controller, and may also elect a chairman of the board and such
other officers that it shall determine as are provided for in By-
law 25, none of whom need to be a member of the board except for
the president/CEO and the chairman and all of whom shall hold
their offices for such terms and shall exercise such powers and
perform such duties as are prescribed in these By-laws and as
shall be determined from time to time by the Board of Directors.
27. The Board may appoint such other officers and agents as
it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as
are prescribed in these By-laws and as shall be determined from
time to time by the board.
28. The compensation, if any, of all officers and agents of
the corporation shall be fixed by the Board of Directors.
29. The officers of the corporation shall hold office until
their successors are elected and qualify in their stead. Any
officer elected or appointed by the Board of Directors may be
removed and his employment terminated at any time by the
affirmative vote of a majority of the whole Board of Directors,
and any officer may be removed and his employment terminated at
any time by the president/CEO. If the office of any officer
becomes vacant for any reason, the vacancy shall be filled by the
Board of Directors.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
30. The president and chief executive officer (a/k/a
president/CEO) shall be the chief executive officer of the
corporation. He shall be a member of the executive committee and
ex officio a member of all other committees of the board; he
shall have responsibility for the general and active management
of the business and affairs of the corporation, and shall see
that all orders and resolutions of the board are carried into
effect.
31. He shall execute conveyances of land, bonds, mortgages
and other contracts requiring a seal, under the seal of the
corporation, except where required by law to be otherwise signed
and executed and except where the signing and execution thereof
shall be delegated by the Board of Directors to some other
officer or agent of the corporation.
CHAIRMAN OF THE BOARD
32. The Board of Directors may elect a chairman of the
board. He shall preside at all meetings of the Board of
Directors and stockholders and shall have such other duties and
responsibilities in respect to the operations of the corporation
as the board and the president/CEO may from time to time
prescribe.
DIVISION PRESIDENTS
33. The Board of Directors may elect one or more presidents
of operating divisions of the corporation. Each such president
shall be the chief operating officer of his division of the
operations and business of the corporation and in such office
shall have such duties and authority as would normally inhere to
such office and as may be prescribed from time to time by the
board and the president/CEO.
EXECUTIVE VICE PRESIDENT
34. An executive vice president, when elected, shall in the
absence or disability of the president/CEO perform the duties and
exercise the powers of the president/CEO and shall perform such
other duties as the Board of Directors and the president/CEO may
from time to time prescribe.
VICE PRESIDENTS
35. The vice presidents in the order of their length of
service shall in the absence or disability of the president/CEO
or any previously-elected and serving executive vice president,
perform the duties and exercise the powers of the president/CEO
and shall perform such other duties as the Board of Directors,
and the president/CEO may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
36. The secretary shall attend all meetings of the board
and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose
and shall perform like duties for the committees of the board
when required. He shall give, or cause to be given, notice of
all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties as may be
prescribed from time to time by the Board of Directors and the
president/CEO, under whose supervision he shall be. He shall
keep in safe custody the seal of the corporation and, when
authorized by the board, affix the same to any instrument
requiring it, and, when so affixed, it shall be attested by his
signature or by the signature of the treasurer or an assistant
secretary.
37. The assistant secretaries in order of their length of
service shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and
shall perform such other duties as the Board of Directors, the
president/CEO or the secretary may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
38. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation
and shall deposit all moneys and other valuable effects in the
name and to the credit of the corporation in such depositories as
may be designated by the Board of Directors.
39. He shall disburse the funds of the corporation as may
be ordered by the board, taking proper vouchers for such
disbursements, and shall render to the president/CEO and
directors, at the regular meetings of the board, or whenever they
may require it, an account of all his transactions as treasurer.
40. If required by the Board of Directors, he shall give
the corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the board for the faithful
performance of the duties of his office and for the restoration
to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his
control belonging to the corporation.
41. The assistant treasurers in the order of their length
of service shall, in the absence or disability of the treasurer,
perform the duties and exercise the powers of the treasurer and
shall perform such other duties as the Board of Directors, the
president/CEO or the treasurer may from time to time prescribe.
THE CONTROLLER
42. The controller shall be the chief accounting officer of
the corporation and have full responsibility and control of the
accounting department, which department shall include all
accounting functions carried on in all of the corporation's
offices, plants, branches and subsidiaries. As such he shall,
subject to the approval of the Board of Directors, establish
accounting policies. He shall standardize and coordinate
accounting practices, supervise all accounting records and the
preparation of all financial statements and tax returns. The
controller shall also direct the internal auditing of the
corporation and keep the Audit Committee of the Board of
Directors and the president/CEO informed as to occurrences and
procedures that may need their attention. He shall have such
other powers and duties as, from time to time, may be prescribed
by the Board of Directors and the president/CEO.
CERTIFICATES OF STOCK
43. The certificates of stock of the corporation shall be
numbered and shall be entered in the books of the corporation or
the transfer agent and registrar of the corporation as they are
issued. They shall exhibit the holder's name and number of
shares held and shall be signed by the president/CEO, the
chairman of the board, an executive vice president, or a vice
president, and by the secretary, an assistant secretary, the
treasurer or an assistant treasurer, and the seal of the
corporation shall be affixed thereto. The signatures of any of
the aforesaid officers and the seal of the corporation, may be
facsimiles engraved, lithographed, stamped or printed. The
certificates shall be countersigned by the transfer agent and
registrar of the corporation.
If any officer who has signed or whose facsimile signature
has been used on any such certificate shall cease to be such
officer of the corporation, whether because of death,
resignation, or otherwise, before such certificate has been
delivered by the corporation, such certificate when countersigned
by the transfer agent and registrar of the corporation, shall
nevertheless be as effective in all respects as though the person
who signed such certificate or whose facsimile signature shall
have been used thereon had not ceased to be an officer of the
corporation. The procedures set forth in this By-Law 43 shall
apply to all certificates of stock of the corporation issued on
or after May 1, 1993.
TRANSFERS OF STOCK
44. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
CLOSING OF TRANSFER BOOKS
45. The Board of Directors shall have power to close the
stock transfer books of the corporation for a period not
exceeding fifty (50) days preceding the date of any meeting of
stockholders or the date for payment of any dividend or the date
for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect or
in connection with obtaining the consent of stockholders for any
purpose; provided, however, that in lieu of closing the stock
transfer books as aforesaid, the Board of Directors may fix in
advance a date, not exceeding fifty (50) days preceding the date
of any meeting of stockholders or the date for the payment of any
dividend, or the date for the allotment of rights, or the date
when any change or conversion or exchange of capital stock shall
go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of the
stockholders entitled to notice of, and to vote at, any such
meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights,
or to exercise the rights in respect of any such change,
conversion or exchange of capital stock, or to give such consent.
If no record date is fixed by the Board of Directors, the
date on which notice of any meeting of stockholders is mailed
(except as provided in By-Law 7 as respects any special meeting
of stockholders called by a stockholder or stockholders) seeking
stockholder approval of any allotment of rights, any change or
conversion or exchange of capital stock or other action requiring
stockholder consent, or the date on which a resolution of the
Board of Directors declaring such dividend is adopted, shall be
the record date for such determination of stockholders.
In any of such cases, only such stockholders as shall be
stockholders of record on the date so fixed or determined shall
be entitled to notice of, and to vote at, such meeting and any
adjournment thereof, or to receive payment of such dividend, or
to receive such allotment of rights, or to exercise such rights,
or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any
such record date fixed or determined as aforesaid.
REGISTERED STOCKHOLDERS
46. The corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
Nebraska.
LOST CERTIFICATES
47. The Board of Directors may direct a new certificate or
certificates be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to
have been lost or destroyed, upon the making of an affidavit of
that fact by the person claiming the earlier issued certificate
to be lost or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same
in such manner as it shall require and give the corporation a
bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the
certificate or certificates alleged to have been lost or
destroyed.
CHECKS
48. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time
to time designate.
FISCAL YEAR
49. The fiscal year shall be the calendar year unless
otherwise determined by the Board of Directors.
DIVIDENDS
50. Dividends upon the capital stock of the corporation,
subject to the provisions of the Articles of Incorporation, if
any, may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash,
in property, or in shares of capital stock.
51. Before payment of any dividend there may be set aside
out of any funds of the corporation available for dividends such
sum or sums as the directors may from time to time, in their
absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interests
of the corporation, and the directors may abolish any such
reserve in the manner in which it was created.
NOTICES
52. Whenever under the provisions of these By-laws notice
is required to be given to any director or stockholder, it shall
not be construed to require personal notice unless otherwise
expressly required in these By-laws, but such notice may be given
in writing, by mail, by depositing the same in the post office or
letter box, in a postpaid sealed wrapper, addressed to such
director or stockholder at such address as appears on the books
of the corporation, or in default of such address, to such
director or stockholder at the General Post Office in the City of
Lincoln, Nebraska, and such notice shall be deemed to be given at
the time when the same be thus mailed.
53. Whenever any notice whatever is required to be given
under the provisions of the Nebraska Business Corporation Act or
under the provisions of the Articles of Incorporation or these
By-laws, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the date
the notice is required shall be deemed equivalent to the giving
of such notice.
AMENDMENTS
54. These By-laws may be altered, amended or repealed at
any regular meeting of the stockholders or at any special meeting
of the stockholders at which a quorum is present or represented,
provided notice of the proposed alteration, amendment or repeal
be contained in the notice of such special meeting, by the
affirmative vote of a majority of the stock entitled to vote at
such meeting and present or represented thereat, or by the
affirmative vote of a majority of the Board of Directors at any
regular meeting of the Board or at any special meeting of the
Board if notice of the proposed alteration, amendment or repeal
be contained in the notice of such special meeting; provided,
however, that no change of the time or place for the election of
directors shall be made within sixty (60) days next before the
day on which such election is to be held, and that in case of any
change of such time or place, notice thereof shall be given to
each stockholder in person or by letter mailed to his last known
post office address at least twenty (20) days before the election
is held.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
55. (a) The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other
than an action by or in the right of the corporation, by reason
of the fact that he or she is or was a director or officer of the
corporation or is or was serving at the request (whether formal
or informal) of the corporation as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise against
expenses, including attorney's fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or her
in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
(b) The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director or officer of the
corporation or is or was serving at the request (whether formal
or informal) of the corporation as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise against
expenses, including attorney's fees, actually and reasonably
incurred by him or her in connection with the defense or
settlement of such action or suit if he or she acted in good
faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the corporation, except that
no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or
her duty to the corporation unless and only to the extent that
the court in which such action or suit was brought shall
determine upon application that despite the adjudication of
liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
(c) To the extent that a director or officer of the
corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in
paragraphs (a) and (b) of this By-law 55 or in defense of any
claim, issue or matter therein, he or she shall be indemnified by
the corporation, within ten (10) days of the corporation's
receipt of his or her written request therefor, against expenses,
including attorney's fees, actually and reasonably incurred by
him or her in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) of
this By-law 55, unless ordered by a court, shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director or officer is
proper in the circumstances because he or she has met the
applicable standard of conduct set forth in paragraphs (a) and
(b) of this By-law 55. Such determination shall be made, within
thirty (30) days of the corporation's receipt of the director's
or officer's request for indemnification hereunder, by the board
of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding
or, if such a quorum is not obtainable, or, even if obtainable,
if a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion or by the stockholders.
Payment of indemnification, if any, to a director or officer
shall be made by the corporation within ten (10) days after the
determination set forth in the preceding sentence.
(e) Expenses incurred in defending a civil or criminal
action, suit or proceeding shall be paid by the corporation in
advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in paragraph (d)
of this By-law 55 within ten (10) days after the corporation's
receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by the
corporation as authorized in this By-law 55.
(f) For purposes of this By-law 55, (i) the corporation
shall be deemed to have requested a director or officer to serve
an employee benefit plan when the performance by him or her of
his or her duties to the corporation also imposes duties on, or
otherwise involves services by, him or her to the plan or
participants or beneficiaries of the plan; (ii) the excise taxes
assessed on a director or officer with respect to an employee
benefit plan pursuant to applicable law shall be deemed fines;
and (iii) action taken or omitted by a director or officer with
respect to an employee benefit plan in the performance of his or
her duties for a purpose reasonably believed by him or her to be
in the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the
best interests of the corporation.
(g) This By-law 55 shall be deemed to be a contract between
the corporation and each of its directors and officers and any
repeal or other limitation of this By-law 55 shall not limit any
rights to indemnification or the advance of expenses then
existing or arising out of events, acts or omissions occurring
prior to such repeal or limitation, including, without
limitation, the right to indemnification or advance of expenses
for proceedings commenced after such repeal or limitation to
enforce this By-law 55 with regard to acts, omissions or events
arising prior to such repeal or limitation. The rights of a
director or officer granted under this By-law 55 shall not be
deemed exclusive of any other rights to indemnification or
advance of expenses which the director or officer may be entitled
to under any written agreement, board of directors' resolution,
vote of stockholders or otherwise.
(h) The terms and provisions of this By-law 55 shall
continue as to each director and officer of the corporation
subsequent to the date on which they are no longer such a
director or officer and such terms and provisions shall inure to
the benefit of the heirs, estate, personal representatives,
executors and administrators of each director and officer and the
successors and assigns of the corporation, including, without
limitation, any successor to the corporation by way of merger,
consolidation and/or sale or disposition of all or substantially
all of the assets or capital stock of the corporation.
(i) In order for the corporation to obtain and retain
qualified directors and officers, the foregoing provisions of
this By-law 55 shall be liberally construed and administered in
order to afford maximum indemnification of directors and officers
and, accordingly, the indemnification rights provided for above
shall be granted in all cases unless to do so would clearly
contravene applicable law, controlling precedent or public
policy. If any provision of this By-law 55 shall be deemed
invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this By-law 55
contravene public policy, this By-law 55 shall be construed so
that the remaining provisions shall not be affected, but shall
remain in full force and effect, and any such provisions which
are invalid or inoperative or which contravene public policy
shall be deemed, without further action or deed by or on behalf
of the corporation, to be modified, amended or limited, but only
to the extent necessary to render the same valid and enforceable.
INDENTURE OF MORTGAGE
-------------
THE LINCOLN TELEPHONE AND TELEGRAPH
COMPANY
TO
HARRIS TRUST AND SAVINGS BANK
TRUSTEE
--------------
DATED AS OF JANUARY 1, 1946
This Indenture. for convenience dated as of the first day of
January, 1946, by and between THE LINCOLN TELEPHONE AND TELEGRAPH
COMPANY, a corporation duly organized and existing under and by
virtue of the laws of the State of Delaware, hereinafter sometimes
termed the "Company," party of the first part, and HARRIS
TRUST AND SAVINGS BANK, a corporation duly organized and
existing under and by virtue of the laws of the State of Illinois and
having its principal office in the City of Chicago, in said State,
hereinafter sometimes termed the "Trustee," party of the second part,
WITNESSETH:
WHEREAS, the Company is duly authorized to own and operate
telephone plants, properties and systems, and has power to borrow
money and give its obligations therefor, and to secure the payment of
such obligations by mortgage of and upon its properties, rights,
privileges and franchises now owned or hereafter acquired;
WHEREAS, the Company desires to provide means where with to
pay indebtedness and wherewith to acquire plants, properties and
systems and to make physical property additions thereto, and
means wherewith underlying bonds and bonds issued hereunder may be
refunded;
WHEREAS, the bonds to be issued under this indenture are to be
issued in series designated by successive letters of the alphabet or
other suitable means, the initial series being designated First 2 3/4%
Bonds, Series A, the bonds of each series to be issued in coupon
form with interest coupons thereto attached and/or in fully registered
form without coupons;
WHEREAS, the general provisions of all bonds to be issued under this
indenture, and the special provisions of the bonds of Series A, are
hereinafter set out, and the bonds of each series subsequent to Series
A are to bear such date, mature on such date or dates, to bear
interest at such rate and payable at such times, and are to contain or
enjoy or be subject to such provisions in respect of medium of
payment, taxes, redemption, sinking fund, conversion and other
characteristics not inconsistent with the terms of this indenture, as shall
be determined for each series by the board of directors of the Company
prior to the authentication of any bonds of such series, and as shall be
expressed in the bonds of each particular series or in an indenture
supplemental hereto made and executed pursuant to the terms of this
indenture;
WHEREAS, the coupon bonds of Series A and the coupons
appertaining to such bonds and the fully registered bonds without
coupons of Series A and the Trustee's certificate to be endorsed on
all bonds are to be substantially in the following forms, to wit:
(Form of coupon bond of Series A)
THE LINCOLN TELEPHONE AND TELEGRAPH
COMPANY
First Mortgage 2 3/4% Bond, Series A
Due January 1, 1976
Number M - ............. $1,000
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY (hereinafter called the
"Company"), a corporation organized and existing under and by virtue
of the laws of the State of Delaware, for value received, acknowledges
itself indebted and hereby promises to pay to the bearer hereof, or, if
this bond be registered as to principal as hereinafter provided, to
the registered owner hereof, on the first day of January, 1976, one
thousand dollars ($1,000), and to pay interest thereon from the date
hereof at the rate of two and three-fourths per cent (2 3/4%) per
annum until the said principal sum shall have become due and payable, and
thereafter at the highest rate borne by any bonds at the time outstanding
under the indenture herein, after mentioned, payable semi-annually on the
first day of January and of July in each year, but until maturity hereof
only upon the presentation and surrender of the interest coupons hereto
appertaining as they severally mature.
The principal of and interest on this bond are payable in any coin or
currency of the United States of America which at the time of payment is
legal tender for public and private debts, at the office of Harris Trust
and Savings Bank, in the City of Chicago and State of Illinois, or, at the
option of the bearer hereof, at the principal office of Bankers Trust
Company, in the Borough of Manhattan, City and State of New York.
This bond is one of a series of bonds designated First Mortgage 2 3/4%
Bonds, Series A. The bonds of the said series are part of an issue of
bonds of the Company authorized, without limit as to aggregate principal
amount issued or outstanding, issued and to be issued under and pursuant of
and secured by an indenture of mortgage dated as of January 1, 1946 (herein
referred to as the "indenture"), duly executed and delivered by the
Company to Harris Trust and Savings Bank, as Trustee, to which indenture,
including all indentures supplemental thereto, reference is hereby made
for a description of the property rights and franchises thereby mortgaged,
the nature and extent of the security, the rights of the holders of the said
bonds in respect of such security and the rights and immunities of the
Trustee. Such bonds are issuable in successive series which may vary as to
date, date of maturity, rate of interest, medium of payment, and in
other respects as in the said indenture provided.
Upon at least thirty (30) days' notice given as provided in the
indenture, this bond is subject to redemption at any time prior to maturity,
at the option of the Company, upon payment of the principal amount
hereof, interest accrued hereon to the date of such redemption, and a
premium of three and one-half per cent (3 1/2%) of such principal amount,
less one-fourth of one per cent (1/4%) of such principal amount for each
twenty-four (24) months elapsed from January 1, 1946, to the
redemption date; and without premium if such redemption be effected after
December 31, 1973.
In case an event of default as defined in the indenture shall occur, the
principal of this bond may become or be declared due and payable at the
time or times, and in the manner and with the effect provided in the
indenture.
This bond shall pass by delivery unless it be registered as to principal
in the name of the owner on the books of the Company, at the office of the
Trustee, in the City of Chicago and State of Illinois, such registration
being noted hereon as provided in the indenture. After such registration no
transfer hereof shall be valid unless made on such books by the registered
owner hereof in person or by attorney duly authorized in writing and
similarly noted hereon, but this bond may be, discharged from registration by
transfer in like manner to bearer and thereupon transferability by delivery
shall be restored and it may again from time to time be registered or
transferred to bear as before. Such registration, however, shall not affect
the negotiability of the coupons hereto appertaining which shall continue to
be payable to bearer and transferable by delivery, and the payment thereof
to bearer shall fully discharge the Company in respect of the interest
therein mentioned. Coupon bonds and registered bonds without coupons of
Series A are interchangeable to the extent, in the manner and upon the
conditions prescribed in the indenture.
When proposed by the Company and to the extent permitted by and
as provided in the indenture, the rights and obligations of the Company
and of the holders of the bonds and coupons issued thereunder and the
provisions of the indenture, or of any indenture supplemental thereto, may be
modified in certain respects with the assent and authorization in writing,
given as in the indenture provided, of the holders of seventy-five per cent
(75%) in principal amount of the bonds then outstanding under the indenture
(exclusive of bonds disqualified by reason of the Company's interest
therein), including, if more than one series of bonds shall be at the time
outstanding, not less than seventy-five per cent (75%) in principal amount
of each series affected; provided, however, that no such modification shall
be made without the written approval or consent of the holder hereof
which will (a) extend the maturity of this bond or reduce the rate or
extend the time of payment of interest hereon or reduce the amount of the
principal hereof or reduce any premium payable on redemption hereof, or (b)
deprive the holder hereof of the benefit of the lien of the indenture for
the security hereof, or (c) reduce the percentage of the principal amount of
the bonds upon the approval or consent of the holders of which
modifications may be made as aforesaid.
No recourse shall be had for the payment of the principal of or the
interest on this bond or of any claim based hereon or in respect hereof or
of the indenture against any incorporator, stockholder, officer or director
as such of the Company, or of any corporation successor to it, either
directly or through any receiver or trustee, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any
assessment or penalty, or otherwise, all such liability being by the
acceptance hereof expressly released.
Neither this bond nor any coupon hereto appertaining shall become valid
or obligatory for any purpose until this bond shall have been authenticated
by the execution of the certificate hereon endorsed by Harris Trust and
Savings Bank, Trustee under the indenture, or its successor in the said
trust.
IN WITNESS WHEREOF, The Lincoln Telephone and Telegraph Company has
caused these presents to be signed in its name by its President or by one of
its Vice Presidents and its corporate seal to be hereunto affixed and
attested by its Secretary or by one of its Assistant Secretaries, and
coupons for the said interest bearing the facsimile signature of its
Treasurer or Assistant Treasurer to the attached hereto, and this bond to
be dated as of the first day of January, A. D. 1946.
THE LINCOLN TELEPHONE AND TELEGRAPH
COMPANY,
By..................................
President.
Attested:
..............................
Secretary.
(Form of Series A interest coupon)
Number.................... $13.75
On the first day of ................................19..... The Lincoln
Telephone and Telegraph Company will (unless the bond hereinafter mentioned
shall have been called for previous redemption) pay to bearer, at the office
of Harris Trust and Savings Bank, in the City of Chicago and State of
Illinois, or, at the option of the bearer hereof, at the principal office of
Bankers Trust Company, in the Borough of Manhattan, City and State of New
York, upon surrender of this coupon, thirteen and 75/100 dollars ($13.75) in
any coin or currency of the United States of America which at the time of
payment is legal tender for public and private debts, being semi-annual
interest then due on its First Mortgage 2 3/4% Bond, Series A, Number
M - ............
.........................
Treasurer
(Form of registered bond without
coupons of Series A)
THE LINCOLN TELEPHONE AND TELEGRAPH
COMPANY.
First Mortgage 2 3/4% Bond, Series A,
Due January 1, 1976.
Number.................... $.................
THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY (hereinafter called the
"Company"), a corporation organized and existing under and by virtue of the
laws of the State of Delaware, for value received, acknowledges itself
indebted and hereby promises to pay to.....................................
or registered assigns, on the first day of January, 1976 . ........
............................ dollars ($.......... and to pay interest
thereon from the date hereof at the rate of two and three-fourths per cent (2
3/4%) per annum until the said principal sum shall have become due and
payable, and thereafter at the highest rate borne by any bonds at the time
outstanding under the indenture hereinafter mentioned, payable semi-annually
on the first day of January and of July in each year.
The principal of and interest on this bond are payable in any coin or
currency of the United States of America which at the time of payment is
legal tender for public and private debts, at the office of Harris Trust and
Savings Bank, in the City, of Chicago and State of Illinois, or, at the
option of the registered owner hereof, at the principal office of Bankers
Trust Company, in the Borough of Manhattan, City and State of New York.
This bond is one of a series of bonds designated First Mortgage 2 3/4%
Bonds, Series, A. The bonds of the said series are part of an issue of bonds
of the Company authorized, without limit as to aggregate principal amount
issued or outstanding, issued and to be issued under and pursuant to and
secured by an indenture of mortgage dated as of January 1, 1946 (herein
referred to as the "indenture"), duly executed and delivered by the
Company to Harris Trust and Savings Bank, as Trustee, to which indenture,
including all indentures supplemental thereto, reference is hereby made for
a description of the property, rights and franchises thereby mortgaged,
the nature and extent of the security, the rights of the holders of the said
bonds in respect of such security and the rights and immunities of the
Trustee. Such bonds are issuable in successive series which may vary as to
date, date of maturity, rate of interest, medium of payment, and in other
respects as in the said indenture provided.
Upon at least thirty (30) days' notice given as provided in the
indenture, this bond is subject to redemption at any time prior to maturity,
at the option of the Company, upon payment of the principal amount hereof,
interest accrued hereon to the date of such redemption, and a premium of
three and one-half per cent (3 1/2%) of such principal amount, less
one-fourth of one per cent (1/4%) of such principal amount for each
twenty-four (24) months elapsed from January 1, 1946, to the redemption date;
and without premium if such redemption be effected after December 31, 1973.
In case an event of default as defined in the indenture shall occur, the
principal of this bond may become or be declared due and payable at the time
or times and in the manner and with the effect provided in the indenture.
This bond is transferable by the registered owner hereof, in person or
by attorney duly authorized in writing, at the office of the Trustee, in the
City of Chicago and State of Illinois, upon surrender and cancellation of
this bond, and thereupon a new registered bond or bonds without coupons of
the same aggregate principal amount in authorized denominations of the same
series will be issued to the transferee or transferees in exchange herefor.
Registered bonds without coupons and coupon bonds of Series A are
interchangeable to the extent, in the manner and upon the conditions
prescribed in the indenture.
When proposed by the Company and to the extent permitted by and as
provided in the indenture, the rights arid obligations of the Company
and of the holders of the bonds and coupons issued thereunder and the
provisions of the indenture, or of any indenture supplemental thereto, may
be modified in certain respects with the assent and authorization in
writing, given as in the indenture provided, of the holders of seventy-five
per cent (75%) in principal amount of the bonds then outstanding under the
indenture (exclusive of bonds disqualified by reason of the Company's
interest therein), including, if more than one series of bonds shall be at
the time outstanding, not less than seventy-five per cent (75%) in principal
amount of each series affected; provided, however, that no such modification
shall be made without the written approval or consent of the holder hereof
which will (a) extend the Maturity of this bond or reduce the rate or extend
the time of payment of interest hereon or reduce the amount of the
principal hereof or reduce any premium payable, on redemption hereof, or (b)
deprive the holder hereof of the benefit of the lien of the indenture for the
security hereof, or (c) reduce the percentage of the principal amount of the
bonds upon the approval or consent of the holders of which modifications
may be aforesaid.
No recourse shall be had for the payment of the principal of or the
interest on this bond or of any claim based hereon or in respect hereof or of
the indenture against any incorporator, stockholder, officer or director as
such of the Company, or of any corporation successor to it, either directly
or through any receiver or trustee, whether by virtue of any constitution,
statute or rule of law or by the enforcement of any assessment or penalty, or
otherwise, all such liability being by the acceptance hereof expressly
released.
This bond shall not become valid or obligatory for any purpose until it
shall have been authenticated by the execution of the certificate hereon
endorsed by Harris Trust and Savings Bank, Trustee under the indenture, or
its successor in said trust.
IN WITNESS WHEREOF, THE LINCOLN TELEPHONE AND TELEGRAPH COMPANY has
caused these presents to be signed in its name by its President or by one of
its Vice Presidents and its corporate seal to be hereunto affixed and
attested by its Secretary or by one of its Assistant Secretaries.
Dated.............................
THE LINCOLN TELEPHONE AND TELEGRAPH
COMPANY,
By.................................
President.
Attested:
.........................................
Secretary
(Form of Trustee's certificate on all bonds.)
This bond is one of the bonds, of the series designated therein, described
in the within mentioned indenture.
HARRIS TRUST AND SAVINGS BANK,
Trustee.
By...............................
Authorized officer.
WHEREAS, to secure the payment of the principal of and interest on all
such bonds so to be issued, equally and ratably, without preference, priority
or distinction as to participation in the lien, benefit and protection hereof
of any one bond over or from another, irrespective of the varying and
distinct provisions and maturities of the several series of such bonds,
except as herein otherwise provided, the holders of a sufficient majority of
the outstanding shares of capital stock entitled to vote of the Company and
the board of directors of the Company, at meetings duly called and held, did
respectively duly resolve and determine that an indenture of mortgage of and
upon all the real and personal property, rights, privileges and franchises
of the Company (except as otherwise herein expressly provided), whether
now owned or hereafter acquired, substantially in the form of this
indenture and containing in substance all of the covenants, conditions and
provisions herein contained, should be executed in the name and on behalf of
the Company by its president or one of its vice presidents under its
corporate seal, attested by its secretary or one of its assistant
secretaries, and delivered to the Trustee herein mentioned; and
WHEREAS, all acts, conditions and things necessary to make such bonds,
when executed by the Company and authenticated by the Trustee as in this
indenture provided, the valid, legal and binding obligations of the Company,
and this indenture a valid mortgage of and upon the real and personal
property, rights, privileges and franchises herein described and/or intended
to be subjected to the lien and charge hereof to secure the payment of such
bonds, have happened and have been done and performed, and the execution and
delivery of this indenture have been in all respects duly authorized.
NOW, THEREFORE, in order to secure the payment of the principal of and
interest on all bonds issued under this indenture according to their tenor
and effect and the terms of this indenture, and to secure the performance of
the covenants and obligations herein contained, and in consideration of the
acceptance by the Trustee of the trusts hereby created, of the purchase and
acceptance of such bonds by the holders thereof, and of one dollar ($1) in
hand paid by the Trustee to the Company upon the execution and delivery of
this indenture the receipt whereof is hereby acknowledged, the Company has
granted, bargained, sold, warranted, conveyed, transferred, mortgaged,
pledged and assigned, and by these presents does grant, bargain, sell,
warrant, convey, transfer, mortgage, pledge, and assign unto the Trustee and
its successors in the said trust, subject to the terms of this indenture,
all and singular the properties, rights, privileges, franchises and
interests of every kind of the Company, whether now owned or hereafter
acquired (except as herein otherwise expressly provided), including
particularly the following, but reference to or enumeration of any
particular kind, class or item of property of the Company shall not be
deemed to exclude from the operation of this indenture any kind, class or
item not so referred to or enumerated:
SUBDIVISION 1.
All and singular the telephone systems and properties of the Company
located in and connecting and serving the following municipalities and
territory adjacent thereto in the State of Nebraska: Hansen, Hastings,
Juniata and Prosser, in Adams County; Bellwood, Brainard, Bruno,
David City, Dwight, Garrison, Octavia, Rising City and Surprise, in
Butler County; Elmwood, Greenwood, Louisville, Murdock, Murray, Nehawka,
Plattsmouth, Union and Weeping Water, in Cass County; Clay Center,
Deweese, Edgar, Fairfield, Glenvil, Harvard, Ong, Saronville and Sutton,
in Clay County; Exeter, Fairmont, Geneva, Grafton, Milligan, Ohiowa and
Shickley, in Filmore County; Adams, Beatrice, Blue Springs, Clatonia,
Filley, Pickrell and Wymore, in Gage County; Daykin, Fairbury, Jansen,
Plymouth and Steele City, in Jefferson County; Cook, Crab Orchard, Elk
Creek, Sterling and Tecumseh, in Johnson County; Bennet, Davey, Denton,
Havelock, Lincoln, Malcolm, Panama, Raymond and Waverly, in Lancaster
County; Auburn, Brock, Brownville, Johnson, Julian, Nemaha and Peru, in
Nemaha County; Hardy, Nelson, Nora, Ruskin and Superior, in Nuckolls County;
Burr, Douglas, Dunbar, Nebraska City, Otoe, Syracuse and Talmage, in Otoe
County; Burchard, Steinauer and Table Rock, in Pawnee County; Osceola,
Polk, Shelby and Stromsburg, in Polk County; Dawson and Humboldt, in
Richardson County; Dewitt, Dorchester, Friend, Swanton, Tobias, Western and
Wilber, in Saline County; Ashland, Cedar Bluffs, Ceresco, Colon, Ithaca,
Mead, Valparaiso, Wahoo and Yutan, in Saunders County; Beaver Crossing,
Cordova, Garland, Milford, Pleasant Dale, Seward, Tamora and Utica, in
Seward County; Alexandria, Belvidere, Bruning, Carleton, Davenport, Gilead
and Hebron, in Thayer County; Guide Rock, in Webster County; and Benedict,
Bradshaw, Gresham, Lushton, McCool Junction, Thayer, Waco and York, in
York County; and all other telephone systems and properties of the Company;
wherever located, now owned or hereafter acquired, together with all
buildings, structures, telephone and/or telegraph lines, stations, exchanges,
poles, wires, cables, conduits, equipment, instruments, appliances, tools,
furniture, leases, rights of way, privileges, ordinances, franchises,
permits, patents, easements and property now owned or hereafter acquired, of
any kind, in anywise pertaining to said telephone systems and properties,
whether or not herein specifically described, or any of then or the operation
thereof.
SUBDIVISION 2.
The following described parcels of real estate, all located in the State
of Nebraska, together with all improvements thereon and all appurtenances
thereunto belonging:
In Adams County.
Lots One (1), Two (2), Three (3), Four (4), and Five (5) in Block
Sixteen (16) in the Original Town of Hastings.
In Butler County.
(1) Lot Twenty Three (23), Block Six (6), in the Original Town of Skull
Creek or Village of Bruno.
(2) Lot Five (5), Block Seven (7), 0. and R. V. Railway Company's First
Addition to Brainard.
(3) All of Lot Eighteen (18) in Block Twenty-six (26), except the West
eight (8) inches thereof, in David City.
(4) The East seventy-five (75) feet of Lots Thirty-one (31) and
Thirty-two (32) in Block Two (2) in Surprise.
In Cass County.
(1) The South twenty-five and three-tenths (25.3) feet of the West One
Hundred (100) feet of Lot Six (6), Block Fifteen (15), Village of Elmwood.
(2) Lot One Hundred Seventy Nine (179), in the Village of Louisville.
(3) Lot Eighteen (18), Block Sixteen (16), in Latta's First Addition
to Village of Murray.
(4) The South thirty (30) feet of Lots One (1) and Two (2) and the South
fifty (50) feet of Lot Three (3), in Block Twenty-seven (27), Plattsmouth.
(5) Lot Six (6) in Block Thirty-six (36), in Plattsmouth.
(6) The East One-third (1/3) of Lot Two (2), Block Seventy (70) in
Weeping Water.
In Clay County.
(1) Lot Fifteen (15) and the South twenty (20) feet of Lot Sixteen
(16), Block Six (6), in Clay Center.
(2) Lot Nine (9), Block Two (2), in Edgar.
(3) The West One-half (1/2) of Lots One Hundred Ninety-seven (197)
and One Hundred Ninety-eight, (198) in the Original Town of Harvard.
(4) Lots Three (3) and Four (4), Block Eight (8), in the Original
Village of Ong.
(5) The West One-half (1/2) of Lots Twenty (20), Twenty-one (21) and
Twenty-two (22), Block Twenty (20), in Clark's Subdivision of Sutton.
In Fillmore County.
(1) Lots Three Hundred Eighty-nine (389), Three Hundred Ninety
(390) and Three Hundred Ninety-one (391), except the cast ninety (90)
feet thereof, all in the Village of Exeter.
(2) Lot Five Hundred Ninety-five (595), in Fairmont, and the South Six
(6) feet of the East Thirty-Six (36) feet of Lot Five Hundred Ninety-four
(594) original plat of Fairmont, reserving however, to J. C. Wolford and Anna
Wolford such right of access as appears of record in Book 32 of Records,
Page 413, of Deeds of Fillmore County, Nebraska; and the South Six (6)
Feet of the West Twenty-five and One-half (25 1/2) feet of the East
sixty-one and one-half (61 1/2) feet of Lot Five Hundred Ninety-four (594)
original plat of the City of Fairmont, reserving whatever to Paul G. Held
and Katherine B. Weld such right of access as appears of record in Book 32 of
Records, page 418, of Deeds of Fillmore County, Nebraska.
(3) The North sixty-nine (69) Feet of Lots Sixty-three (63) and
Sixty-four (64), in Geneva.
(4) The South Ave (5) feet of Lot Eleven (11) and all of Lot Twelve
(12), in Block Fourteen (14), and Lot one (1), in Block Nineteen (19), in the
Village of Ohiowa.
(5) Lot Six (6), Block Two (2), in the Village of Shickley.
In Gage County.
(1) Part of Lot Three (3), Block Thirty-five (35), in Beatrice,
described as: Beginning at the Southwest corner of Lot Three (3), Block
Thirty-five (35), Beatrice, original, thence North along the West line of
said Lot three (3), twenty-five (25) feet, then East parallel with the South
line of said Lot Three (3), thirty-eight (38) feet, thence South parallel
with the West line of said Lot Three (3), twenty-five (25) feet, to the South
line of said Lot Three (3), thence west along the South line of said Lot
Three (3), to the place of beginning.
(2) Part of Lots Five (5) and Six (6), Block Thirty-five (35),
Beatrice, described as: South thirty (30) feet of Lots Five (5) and Six (6),
in Block Thirty-five (35) of the Original Town (now City) of Beatrice, except
ten (10) feet off the East end of Lot five (5) reserved as alley for
adjoining properties.
(3) Lot Seven (7), in Block Six (6), in Pickrell.
(4) Lot Six (6), Block Eighteen (18), in Wymore's Addition to Wymore.
In Jefferson County.
(1) Lots Four (4), Five (5) and Six (6), in Block Twenty (20), Original
Town of Daykin.
(2) Lot Nine (9), Block Twelve (12) of Fairbury.
(3) Lot Twenty-one (21), Block Eight (8), Original Town of Jansen.
(4) Lots Seventeen (17), Eighteen (18), Nineteen (19), Twenty (20) and
Twenty-one (21), Block Six (6), in the Original Town of Plymouth.
In Johnson County.
(1) Lot Ten (10), Block Seven (7) in the Original Town of Cook.
(2) The North forty-five (45) feet of Lot Seven (7), Block Ten (10), in
the Village of Crab Orchard.
(3) The North Sixty-six (66) feet of the East Forty-four (44) feet, and
the North Seventy-five (75)feet of the West Twenty-two (22) feet of Lot Ten
(10), Block Sixteen (16) in the original town of Tecumseh.
(4) The North ninety-two (92) feet of Lot Six (6), Block Seventeen (17),
Original Town of Tecumseh.
In Hall County.
Commencing at a point in the Southeast Quarter (SE 1/4) of Section 36,
Township 9, North, Range 10, West of the 6th P. M., where the West
right-of-way of Highway 281 (as part of the right-of-way for said highway
is deeded to the State of Nebraska by deed in Book 77, Page 494 of the deed
records of Hall County, Nebraska) intersects the North line of the
Adams-Hall County highway bordering said SE 1/4 on the South; said point of
beginning being approximately 33 feet North of and 523.3 feet West of the
Southeast corner of said Section 36; thence due West following a line
parallel with and 33 feet North of the center line of said Adams-Hall County
highway, for a distance of 60 feet; thence due North 50 feet, thence due East
on a line parallel with the center line of said Adams-Hall County highway
until said line so extended intersects the west right-of-way line of said
Highway 281; thence Southwesterly along said west right-of-way line to the
point of beginning.
In Lancaster County.
(1) Lot Twelve (12), Block Thirty-four(34),in Bennet.
(2) Lot Seven (7), Block Three (3), in Davey.
(3) Lot Thirty-one (31) in the Northwest quarter (NW1/4) of Section
Twenty-two (22), Township Nine (9) North, Range Five (5) East, formerly
known as Lots Three Hundred Seventy-six (376) and Three Hundred
Seventy-seven (377), all of the original plat of the Town of Denton.
(4) Lots Eleven (11) and Twelve (12), Block Sixty-five (65) in Lincoln.
(5) Lot Twenty-three (23) in Hazard's Addition to Lincoln.
(6) Lot One (1), Block Ninety-five (95), in Original Town of University
Place, now Lincoln.
(7) Lots Six (6) and Seven (7), Block One (1), Woods Brothers-Bryan
South Acres, in Lincoln.
(8) Lots Seven (7), Eight (8) and Nine (9), except that portion of the
Northeast corner of said Lot Nine (9) which is a part of the right-of-way of
the Rock Island Railway, all in Block Four (4), Avondale Addition to
Lincoln.
(9) Lots Five (5) and Six (6), Block Eighteen (18), in Panama.
(10) Lots One (1), Two (2) and Three (3), Block Seven (7), in Bowman's
Second Addition to Raymond.
(11) Beginning at a point one hundred ten (110) feet East of the
Southwest corner of Lot One Hundred Ten (110), thence North seventy-five (75)
feet thence East thirty (30) feet, thence South seventy-five (75) feet,
thence West thirty (30) feet to place of beginning, being part of Lots One
Hundred Nine (109) and One Hundred Ten (110) in Waverly.
In Nemaha County.
(1) Lots Eighteen (18) and nineteen (19), Block Twenty (20), Howe and
Nixon's Addition to Sheridan, now Auburn.
(2) Lots Nine (9), Ten (10), Eleven (11) and Twelve (12), in Block
Fourteen (14), Starr and Campbell's Addition to Clinton, now Brock.
(3) Lots Three (3) and Four (4), Block Three (3), in the Original Town
of Johnson.
In Nuckolls County.
(1) Lot Five (5), Block Thirteen (13), in the Original Town of Hardy.
(2) Lots Fourteen (14) and Fifteen (15), Block Seventeen (17) in the
Original Town of Nelson.
(3) Lot Ten (10), Block Four (4) in the Original Town of Ruskin.
(4) Lot 'A' in McCorkle's subdivision of Lots One (1), Two (2) and Three
(3), Block Thirty-six (36) in the Original Town of Superior.
In Otoe County.
(1) Lot Seven (7), Block Thirteen (13) in the Village of Burr.
(2) Lots Sixteen (16) and Seventeen (17), Block Six (6), in the Village
of Douglas.
(3) Lots Seven (7) and Eight (8) and the South One-half (S1/2) of Lot
Nine (9), Block Thirteen (13), in Dunbar proper.
(4) The West forty-eight (48) feet of Lots Four (4), Five (5) and Six
(6), Block Ten (10), in Nebraska City.
(5) Lot One (1), Block Thirteen (13)in the Original Village of Syracuse.
In Pawnee County.
(1) Lot Six (6), Block Fifteen (15), Original Town of Burchard.
(2) Eighty (80) feet off the East end of Lots One (1), Two (2) and Three
(3) of Block Four (4), in the Original plat of the Village of Steinauer.
In Polk County.
(1) Lots Seven (7) and Eight (8), Block Five (5), in the Original Town
of Polk.
(2) Lot Twelve (12), Block One (1), in the Original Town of Shelby.
(3) Lot Twenty four (24), in Block One (1), in the Original Town, now
City, of Stromsburg.
In Richardson County.
(1) Two and one-half (2 1/2) feet off the South side of Lot Thirteen
(13) and twenty (20) feet off the North side of Lot Fourteen (14), Block
Twenty-five (25), in Hagadorn's Addition to Dawson.
(2) Part of Lot Nine (9) in Block Seven (7), in the Original City of
Humboldt, described as follows: Commencing at the Southwest corner of said
Lot, thence running forty-five (45) feet in a Northernly line on the West
line of said Lot, thence running ninety (90) feet in an Easterly direction on
a line parallel to the South line of said Lot, thence running forty-five
(45) feet in a Southerly direction on a line parallel to the West line of
said Lot, thence running ninety (90) feet in a Westerly direction on the
South line of said Lot to the place of beginning.
In Saline County.
(1) Lots One Thousand Forty-seven (1047) and One Thousand
Forty-eight (1048) in the Village of Dewitt.
(2) Lot Eight Hundred Eighteen (818) in the Original Town of
Dorchester.
(3) Lot Fifteen (15), Block Seven (7), in the Village of Swanton.
(4) Lot Seven (7), Block Three (3), Original part of Caster, now
known as Tobias.
(5) Lots Twenty-one (21) and Twenty-two (22), Block Thirteen (13), in
the Town of Western.
In Saunders County.
(1) Lots Twelve (12) and Thirteen (13), in Block Two (2), in Cedar
Bluffs.
(2) Lot Nine (9), Block Five (5), in the Original Village of
Ceresco.
(3) The East nineteen (19) feet of Lot Fourteen (14), Block Three
(3), in the Village of Colon.
(4) The East twenty-five (25) feet of Lot Fourteen (14), Block
Thirty-two (32), in Mead.
(5) The South fifty (50) feet of Lots One (1), Two (2), Three (3), Four
(4) and Five (5), Block Seven (7), in Valparaiso.
(6) Lot Six (6), Block One Hundred Thirty-eight (138), in the
County Addition to Wahoo.
(7) The West sixteen (16) feet of the South thirty feet of Lot Five
(5), Block One Hundred Thirty-eight (138), in the County Addition to
Wahoo.
(8) Lot One (1), Block Twenty-one (21), in Yutan.
In Seward County.
(1) Tax Lot Twenty-three (23) and twenty (20) feet off the South
side of Tax Lot Twenty-two (22) all in Block Six (6), in the Original Town of
Beaver Crossing.
(2) Beginning at a point in the East Half (E1/2) of the Northeast
Quarter (NE 1/4) of Section Eight (8), Township Eleven (11), Range
Four (4), East of the 6th P. M., Seward County, thirty-three (33) feet
West and four hundred twelve and four-tenths (412.4) feet South of the
Northeast corner of the said Section Eight (8), thence South eighty-one
(81) feet, thence West one hundred fifty (150) feet, thence North
eighty-one (81) feet, thence East one hundred fifty (150) feet to place of
beginning (Garland).
(3) The North thirty (30) feet of the East thirty (30) feet of Lot
Twelve (12), Block Two (2), in the Village of Milford.
(4) The East forty (40) feet of Lots Seven (7), Ten (10) and Eleven
(11), Block Four (4), in the Original Town, now City, of Seward.
(5) Lot Five (5), Block Fourteen (14), in the Village of Tamora.
In Thayer County.
(1) Lot Eleven (11), in Block Six (6) in Alexandria.
(2) Lots One (1), Two (2) and Three (3). Block Sixteen (16), in
Bruning.
(3) Lot Twelve (12), Block Fifteen (15), in Carleton.
(4) That part of Lots One (1) and Two (2) in Block Eight (8) in
Davenport, described as: Commencing at a point sixteen (16) feet North of the
Southeast corner of said Lot One (1), thence West to First Street in
Davenport, thence Northwest along line of First Street thirty-two and
seventy-two hundredths (32.72) feet, thence East to East line of Lot One (1)
on B Street, thence South to the point of beginning, excepting the North
twenty-six (26) inches thereof.
(5) The South sixteen (16) feet of Lot One (1), Block Eight (8), in
Davenport.
(6) The North twelve (12) feet of Lot Thirteen (13) in Block Eleven
(11), in Gilead.
(7) The West one hundred ten (110) feet of Lot Six (6), Block Ten
(10) in the Original Town of Hebron.
In Webster County.
Lot Seventeen (17), Block One (1), in Vance's Addition to the Village of
Guide Rock.
In York County.
(1) Lot Six (6), Block Twenty-Six (26), in Benedict.
(2) Lot Fifteen (15), Block Seven (7), in Bradshaw.
(3) Lots One (1.) and Two (2), Block Seven (7), in the Original Town
of Poston, now Gresham.
(4) Lot Thirteen (13), Block Sixty-three (63), in McCool Junction.
(5) The East fifty (50) feet of Lot Six (6), Block Four (4), in Waco.
(6) The West thirty (30) feet of Lot Five (5) and the South fifty (50)
feet of the West thirty (30) feet of Lot Four (4), Block Fifty-one (51) in
York.
SUBDIVISION 3.
All of the income, revenues, contributions, receipts, rents, tolls,
contracts and leases, belonging to the Company, and all stores, repair
parts, materials and supplies and all other property, rights, privileges,
franchises, licenses, easements and permits of any and every kind and
description, whether real, personal or mixed, of the Company, wheresoever
the same may be situated and whenever acquired, and whether or not
hereinbefore described, together with all of the tenements, hereditaments
and appurtenances thereunto belonging or in anywise appertaining, and
the reversion and reversions, remainder and remainders, tolls, issues and
profits thereof; provided, however, that this indenture shall not be deemed
to apply to or create a lien upon stores, repair parts, materials and
supplies, vehicles, automobiles, trucks, trailers, cash, stocks and other
securities (other than cash, stocks or other securities specifically required
to be pledged hereunder, at any time), contracts, leases, claims, accounts,
demands, choses in action and books of account, except as follows, namely: if
after the happening of any of the events of default specified in Article
Nine hereof, the Trustee or any receiver or trustee appointed hereunder shall
enter upon and take possession of the mortgaged property, the Trustee or
such receiver or trustee may at the same time take possession of any and all
personal property referred to in this clause which is then on hand, which
personal property thereupon, so far as then permitted by law, shall be and
become subject to the lien of this indenture, and shall so continue unless
and until such event of default shall be remedied and possession of the
mortgaged property shall be restored to the Company, its successors or
assigns.
It is the intention hereof that all property, real, personal and mixed,
of any and every kind and character (except as otherwise herein expressly
provided), which the Company now owns, and all such property which it may
hereafter acquire, and the rents, issues and profits thereof, shall be
subject to the lien of this indenture with like effect as if now owned by the
Company and covered and conveyed hereby by specific and apt description.
TO HAVE AND TO HOLD the said properties, rights, privileges and
franchises hereby conveyed and assigned, or intended so to be, unto the
Trustee and its successors in trust, forever;
IN TRUST, NEVERTHELESS, for the equal and pro rata benefit and security
of each and every the persons and entities that may be or become holders of
the bonds and coupons issued hereunder, without preference, priority or
distinction as of participation in the lien, benefit and protection hereof of
one bond or coupon over or from the others, or of one series over or from any
other series, by reason of priority in the issue or negotiation thereof, or
by reason of the date or the date of maturity thereof, or for any other
reason Whatsoever, except as herein otherwise provided, so that each and
all of such bonds and coupons shall, subject to the terms hereof, have the
same right, lien and privilege under this indenture and the principal of
and interest on every such bond shall be equally and ratably secured
hereby, with the same effect as if the same had all been made, issued and
negotiated simultaneously with the delivery hereof.
THIS INDENTURE FURTHER WITNESSETH that the Company has agreed and
covenanted, and does hereby agree and covenant with the Trustee and with
the respective holders from time to time of such bonds and coupons, and each
thereof, as follows, that is to say:
ARTICLE ONE.
DEFINITIONS OF TERMS.
SECTION 1.01. In each and every place in and throughout this indenture
wherein the following terms, or any of them, are used, the same, unless the
context shall indicate another or different meaning or intent, shall be
construed, are used, and are intended to have meanings as follows:
(a) "Company"--The Lincoln Telephone and Telegraph Company, the
first party hereto, and its corporate successor or successors in title
to the properties vested in it or in its successor and at the time of
such succession subject to the lien hereof.
(b) "Trustee"--Harris Trust and Savings Bank, the second party
hereto, and its corporate successor or successors in the trusts hereby
created and reposed in it.
(c) "Mortgaged property"--the physical properties at the time
subject to the lien hereof, including franchises, if any, for the
operation thereof and pledged securities and pledged funds.
(d) "Underlying mortgages"--any and all instruments securing
bonds, notes, or other evidences of indebtedness and constituting liens upon
physical property additions subject to which such physical property additions
shall hereafter be acquired.
(e) "Underlying bonds"--any and all bonds, notes, or other
evidences of indebtedness at the time outstanding secured by underlying
mortgages.
(f) "President"--the president and each and every vice
president and each and every other officer of the corporation concerned
authorized to exercise the powers and authority customarily reposed in
the president of a corporation.
(g) "Secretary"--the secretary and each and every assistant
secretary and each and every other officer of the corporation concerned
authorized to exercise the powers and authority customarily reposed in
the secretary of a corporation.
(h) "Treasurer"--the treasurer and each and every assistant
treasurer and each and every other officer of the corporation concerned
authorized to exercise the powers and authority customarily reposed in
the treasurer of a corporation
(i) "Counsel"--any counsel appointed by the Company and approved by
the Trustee, including any counsel in the employ of the Company so
appointed and approved.
(j) "Accountant"--any accountant or firm of accountants
selected by the Company and approved by the Trustee.
(k) "Certified copy of a resolution"--a copy of a resolution
certified by the secretary of the Company to have been by the requisite
majority of the board of directors or stockholders entitled to vote duly
passed or adopted at a meeting of such board of directors or of such
stockholders entitled to vote duly called and convened and to be in fall
force and effect.
(l) "Physical property additions"--any and all bondable property,
as that term is defined in subparagraph (m) of this Section 1.01, acquired
or constructed by the Company after December 31, 1945.
(m) "Bondable property"--any property, plant or equipment
located within the limits of the State of Nebraska and adjoining States,
which the Company subsequent to December 31, 1945, shall construct or
acquire and which shall be used or useful as a part of its permanent and
fixed investment in the conduct by it of the business of providing telephone
service.
The term "bondable property" shall not include, however, (a) any
trucks, automobiles or other automotive transportation equipment, (b)
any office furniture, (c) any good will or going concern value, as
such, or any franchise or governmental permit, (d) any leasehold
interest in property or permanent improvements constructed on property
held by the Company under lease (but shall include rights-of-way and
easements and any telephone lines and equipment or appurtenances
thereto located on any such right-of-way or easement or located on any
street, alley or public place of any municipality or upon any public
highway).
(n) "Purchased property"--any bondable property which within six
(6) months prior to the date of its acquisition by the Company has been used
or operated by a person or persons other than the Company in the business of
furnishing telephone service, and shall be included in the term "bondable
property".
(o) "Fair value to the Company" or "fair value"--as applied to
property, the fair value to the Company or the fair value, as the case may
be, less allowances in either case for depreciation, as determined by an
engineer (except where some other method of determination, if any, is
specifically provided for in this indenture) and evidenced by a certificate
signed by such engineer and delivered to the Trustee.
(p) "Engineer"--any engineer, firm of engineers or engineering
corporation selected by the Company and satisfactory to the Trustee and who
or which may be in the employ of or under retainer by the Company, except
that, for the purpose of determining the fair value to the Company of
purchased property acquired by the Company, and in all other cases where the
indenture so provides, such engineer, firm of engineers or engineering
corporation shall be an independent engineer, firm of engineers or
engineering corporation.
The term "independent engineer" as used in this indenture, shall mean
and include any engineer, firm of engineers or engineering corporation
selected or approved by the Trustee in the exercise of reasonable care
and who or which shall not be in the employ of or under retainer by the
Company.
(q) "Gross expenditures"--cash payments actually made or agreed
to be made and for which liabilities shall have been actually incurred by
the Company with respect to the construction of bondable property and, in
the case of purchased property, (a) all cash payments actually made or
agreed to be made and with respect to which liabilities shall be actually
incurred by the Company for such purpose (including any expenditures made by
the Company in the payment or discharge of the principal of any mortgage
indebtedness existing on any purchased property at the time of its
acquisition by the Company) in excess of any current assets received by the
Company, or (b) the fair value to the Company of such purchased property at
the time of its acquisition by the Company, whichever shall be less. In
determining the amount of gross expenditures made for any bondable property
acquired subject to any lien securing any bonds, notes or other evidences of
indebtedness, the principal amount of such bonds, notes or other evidences
of indebtedness shall be considered as a part of and included in such gross
expenditures. In cases where purchased property is acquired by the Company
for a consideration not consisting wholly of cash payments made or agreed to
be made, the fair value to the Company (determined as in this section
provided) of such purchased property at the time of its acquisition by the
Company, shall, within the meaning of this indenture, be deemed to be a
gross expenditure for such property.
The "cost", as that term is used in this indenture, of any bondable
property, shall mean the aggregate of the gross expenditures therefor.
(r) "Net expenditures"--as applied to bondable, property, as
of any date, an amount determined as follows: from the total gross
expenditures for bondable property made by the Company during the period
beginning January 1, 1946, and ending on the date as of which the net
expenditures are to be determined, there shall be deducted the greater of
either (1) the excess of the aggregate amount of gross retirements of
property (as hereinafter in this section defined) made during said period
over the aggregate amount of all net considerations received by the Company
during said period as the avails of property released from the lien of this
indenture under the provisions of Article Ten hereof, or (2) the aggregate
amount of depreciation accrued during said period (determined as
hereinafter in this section provided). In making any determination of net
expenditures for the purpose of the authentication of bonds or the withdrawal
of any moneys under any of the provisions of this indenture, the net
expenditures shall be determined as of a date (to be selected by the
Company) not more than ninety (90) days prior to the authentication of such
bonds or the withdrawal of such moneys, as the case may be, and the
deductions required by this paragraph to be made from gross expenditures
shall be made for the period from January 1, 1946, to such date.
(s) "Gross retirements of property" for any period, all tangible
property, plant and equipment, owned by the Company at the date of this
indenture, or thereafter acquired by it, and, except as to the date of its
acquisition or construction, coming within the definition of bondable
property, retired by the Company through renewals, replacements,
abandonments, sales and/or releases of property made during such period; and
shall also include all reductions in the amount at which such tangible
property, plant and equipment are recorded from time to time on the books of
the Company, except any reduction resulting from the transfer of any such
tangible property, plant and equipment to some other property account of the
Company, until the property so transferred shall be retired from such other
account. Such retirements shall be stated at the amount at which the property
retired was recorded on the books of the Company at the close of business on
December 31, 1945, if owned by the Company at said date, or at the cost
thereof (as in this section defined) if acquired or constructed by the
Company after said date. Gross retirements of property shall not include for
the purpose of this indenture any intangible property of the Company except
as above provided.
(t) "Aggregate amount of depreciation accrued"--for any
period, the aggregate of all amounts charged to income and credited to any
reserve for depreciation, retirement, renewal, replacement or amortization
of property during said period, in accordance with the provisions of Section
7.08 hereof, as recorded on the books of the Company, in respect of the
depreciable property, which except as to the date of its acquisition or
construction comes within the definition of bondable property, owned by the
Company from time to time during said period.
(u) "Net earnings of the Company"--for any period, the earnings
of the Company computed in accordance with accepted principles of accounting,
determined by deducting from the total gross earnings and income of the
Company derived from all sources for such period (1) all operating expenses
of the Company for such period, including maintenance and repairs, rentals,
taxes (other than accruals for income and excess profits taxes levied under
any state or federal law) and insurance, and (2) the aggregate of all
amounts charged to income and credited to a reserve for depreciation,
retirements, renewals, replacements or amortization of property, as recorded
on the books of the Company (responsive to the provisions of Section 7.08 of
this indenture) applicable to said period, and by making such adjustments, if
any, of the resulting amount as may be necessary to comply with the
provisions as to net earnings hereinafter in this paragraph contained. Not
more than ten per cent (10%) of the net earnings as finally determined shall
consist in the aggregate of (a) net nonoperating, income, (b) not operating
revenues derived from the operation by the Company of any properties other
than telephone properties, and (c) net revenues from any properties not owned
by the Company. No dividends or interest received by the Company from
any subsidiary or affiliate shall be included in the net earnings of the
Company, except to the extent that such dividends or interest were earned by
the paying company in the current year or the next preceding fiscal year of
such company. No profits or losses resulting from the sale or other
disposition of capital assets shall be included in computing the net earnings
of the Company. In case any physical property owned by the Company at
the time of the authentication of bonds under this indenture shall not have
been owned by it during any part of any such period or shall have been owned
by it during a part only of such period, then and in every such case the net
earnings or net losses of such physical property during such period, or
during such part thereof as shall have preceded the acquisition of such
physical property by the Company, shall be included in computing the net
earnings or net losses of the Company for such period. In case any physical
property owned by the Company during any part of any such period shall
not be owned by the Company at the time of authentication of bonds
hereunder, the net earnings or the net losses of the Company on such
physical property during such period shall be excluded in computing the net
earnings or net losses of the Company.
(v) "Annual bond interest charge" - the interest for a period
of one year (a) on all bonds to be outstanding under this indenture
immediately after the authentication of any bonds then to be issued
(excepting any of such bonds for the payment or redemption of which the
necessary funds have been deposited with the Trustee hereunder with
instructions to apply such funds to the payment or redemption of such bonds
and, until so applied, to hold such funds irrevocably in trust for such
purpose), and (b) on all underlying bonds (excepting any such underlying
bonds which shall then be held in pledge by the Trustee hereunder or by the
trustee under any underlying mortgage and any such underlying bonds for the
payment of which the necessary funds shall have been deposited with the
Trustee hereunder, or with the trustee under the underlying mortgage
securing the same, together with instructions to apply such funds to the
payment or redemption of such underlying bonds and, until so applied, to
hold such funds irrevocably in trust for such purposes, but subject to any
applicable provision in such underlying mortgage for the return of any
unclaimed moneys to the Company).
(w) "Subsidiary, -- any corporation of which the Company,
directly or indirectly, owns, at the date of determination, more than fifty
per cent (50%) of the outstanding stock having ordinary voting power for
the election of directors, irrespective of whether or not at such time stock
of any other class or classes of such corporation might have voting power by
reason of the happening of any contingency, and any corporation of which
any subsidiary, directly or indirectly, owns, at the date of determination,
more than fifty per cent (50%) of the outstanding stock having ordinary
voting power for the election of directors, irrespective of whether or not
at such time stock of any other class or classes or such corporation might
have voting power by reason of the happening of any contingency.
(x) "Affiliate" -- any corporation other than a subsidiary, of
which the Company, directly or indirectly, owns, at the date of
determination, more than thirty-five per cent (35%) of the outstanding stock
having ordinary voting power for the election of directors, irrespective of
whether or not at such time stock of any other class or classes of such
corporation might have voting power by reason of the happening of any
contingency.
SECTION 1.02. Words of the masculine gender shall be deemed and
construed to include correlative words of the feminine and neuter genders.
SECTION 1.03. The words "bond, "owner," "holder" and "person" shall
include the plural as well as the singular number unless the context shall
otherwise indicate. The term "bondholders" means and contemplates, unless
the context otherwise indicates, the holders of the bonds at the time
issued and outstanding hereunder. Each of the words "person ... ..
corporation" and "association" shall include either or both of the others,
unless the context shall other wise indicate. The word "principal" when
used with respect to the principal amount of any bond shall also include
the premium, if any, payable with respect to such bond, where such inclusion
is appropriate.
SECTION 1.04. Whenever in this indenture it is provided that any facts
or opinions be evidenced to the Trustee by means of a certificate,
statement, opinion, or other document, it shall constitute compliance
herewith if the various facts and/or opinions intended so to be evidenced to
the Trustee be included in different certificates, statements, opinions, or
other documents signed by the same person or different persons of the same
qualifications.
ARTICLE TWO.
FORM, EXECUTION, REGISTRATION AND EXCHANGE OF BONDS.
SECTION 2.01. Save as is herein or as may be by law otherwise provided,
bonds may be issued and outstanding hereunder without limit as to aggregate
amount and without limit as to amount of any series. This indenture shall be
a continuing lien to secure the full and final payment of the principal of
and interest on all bonds executed, authenticated and delivered pursuant to
the terms hereof.
SECTION 2.02. The bonds issued under this indenture shall from time
to time be executed on behalf of the Company by its president under its
corporate seal, attested by its secretary, and shall be delivered to the
Trustee for authentication by it, and thereupon, if all pertinent
requirements provided in this indenture in respect of such authentication
shall have been fulfilled, the Trustee shall authenticate and shall deliver
the same upon the order of the Company, signed by its president. Only such
bonds as shall bear thereon endorsed a certificate of authentication
substantially in the form hereinbefore recited, executed by the Trustee,
shall be secured by this indenture or be entitled to any right or benefit
hereunder. Such authentication by the Trustee upon any such bond shall be
conclusive evidence and the only evidence that the bond so authenticated has
been duly issued hereunder and that the holder thereof is entitled to the
benefit of the trusts hereby created.
Except as in Section 2.11 hereof otherwise provided, prior to the
authentication of any coupon bond hereunder all coupons, if any, not
required to be attached to the bond being delivered shall be detached and
cancelled and incinerated by the Trustee.
SECTION 2.03. In case any person who shall have signed, sealed, or
attested any bond issuable under this indenture as an officer of the Company
shall have ceased to be such officer before the bond so signed, sealed or
attested shall have been actually authenticated and delivered by the Trustee
and/or issued, such bond nevertheless may be authenticated and delivered
and/or issued as though the person who signed, sealed or attested such
bond had not ceased to be such officer of the Company.
Any bond issuable hereunder may be signed, sealed or attested on behalf
of the Company by any person who at the actual date of the execution of such
bond shall be the proper officer of the Company, although at the date of such
bond such person shall not have been such officer of the Company.
The coupons to be attached to the coupon bonds issued hereunder shall
be signed by the facsimile signature of the present treasurer or of any
future treasurer of the Company, and the Company may adopt and use for that
purpose the facsimile signature of any person who shall have been such
treasurer, notwithstanding the fact that he may have ceased to be such
treasurer at the time when such bonds shall be actually authenticated and
delivered.
SECTION 2.04. At the option of the Company bonds issued hereunder may
be issued in one or more series, each such series to be identified by
successive letters of the alphabet or by other suitable means. The bonds of
each series shall be in the form of coupon bonds and/or registered bonds
without coupons. The general text of the bonds and the coupons and the
Trustee's certificate on all bonds, irrespective of series, shall be
respectively substantially of the tenor and purport of the forms hereinabove
set forth in respect of bonds of Series A; provided, nevertheless, that the
texts of various series of bonds may, as between series, but not as between
bonds of the same series, differ in respect of the following characteristics:
(a) Title, provided that the title of each series of bonds shall be
satisfactory to the Trustee;
(b) Date of issue, and date of maturity or dates of serial
maturities;
(c) Place or places of payment of principal and/or interest
additional to the office of the Trustee;
(d) Interest rate and interest payment dates;
(e) Limitation of maximum aggregate principal amount of series,
if any;
(f) Taxes without deduction for which principal and/or interest
shall be payable;
(g) Provisions for the reimbursement of the holders thereof for
taxes;
(h) Right of redemption, redemption premium and notice of
redemption;
(i) Provisions as to renewal fund or other analogous funds, if any,
and/or sinking fund; Privileges as to conversion into stock or other
securities;
(k) Provisions in respect of exchangeability of bonds;
(l) Provisions as to medium of payment, provided that the medium
of payment shall always be some coin or currency of the United States of
America which is lawful at the time of issuance of the pertinent bonds;
(m) Such other terms and provisions as are not in conflict with
the terms of this indenture.
All coupon bonds of the same series shall bear the same date which shall
be the recited date of execution thereof. Each registered bond without
coupons shall be dated as of the interest payment date next preceding the
date of issue unless (a) issued on an interest payment date, in which case it
shall be dated as of the date of issue, or (b) issued prior to the occurrence
of any interest payment date in which case it shall be dated as of the first
day of the interest period expiring on the next succeeding interest payment
date. Each bond issued hereunder shall bear interest from the late thereof.
The characteristics of the bonds of various series, other than Series A,
and provisions as to denominations, interchangeability and exchangeability
shall be set forth in the successive and respective supplemental indentures
responsive to Section 2.05 hereof.
Coupon bonds and registered bonds without coupons may be of the
denomination of one thousand dollars ($1,000) or any multiple or
multiples thereof, and the several bonds of each series shall bear
distinctive identifying numbers and letters or other symbols. Each order for
authentication and delivery of bonds responsive to Section 2.02 hereof shall
designate the identifying numbers and letters or other symbols and the
denominations of the bonds contemplated thereby. Except as otherwise in this
section permitted, all bonds of each series shall be identical except, in
case of any series of serial maturity, as to maturity.
SECTION 2.05. Except as hereinafter in Article Three hereof provided
in respect of bonds of Series A, prior to authentication by the Trustee of
bonds of any series whereof no bonds shall theretofore have been
authenticated, the Company shall execute and deliver to the Trustee an
indenture supplemental hereto creating such series, wherein shall be set
forth in respect of the bonds of such proposed series the title, date of
issue, date of maturity, or dates of serial maturity, place or places of
payment of principal and/or interest additional to the office of the
Trustee, if any, and dates and medium of payment thereof, maximum
aggregate principal amount of series, if any, taxes without deduction for
which principal and/or interest shall be payable, if any, provisions for the
reimbursement of the holder for taxes, if any, and any redemption, sinking
fund, renewal fund or other similar fund, or conversion provisions,
provisions, if any respect of exchangeability and interchangeability of
bonds, and any and all other provisions within the contemplation of
Section 2.04 hereof, and the text of the forms of coupon bonds and coupons
and registered bonds without coupons, if any of such series and such
supplemental indenture shall correctly set forth the special provisions
created or undertaken by the Company in respect of bonds of that series; and
each and every bond of each such series shall conform to the terms and
provisions of such supplemental indenture. Each place of payment of
principal and/or interest additional to the office of the Trustee shall be
a bank or office satisfactory to the Trustee. The execution and delivery of
each such supplemental indenture shall be authorized by a resolution adopted
by the board of directors of the Company, a certified copy whereof shall be
deposited with the Trustee. There shall be filed with the Trustee, with each
supplemental indenture in this section provided for, an opinion of counsel to
the effect that the bonds of the series proposed will, when and as issued
pursuant to the terms of such supplemental indenture and of this indenture,
be entitled to the benefit and security of this indenture in like manner
and to the same extent as bonds theretofore issued. If deemed desirable by
counsel each supplemental indenture responsive to this section shall be
recorded in each county herein any part of the mortgaged property shall be
located.
SECTION 2.06. The coupon bonds issued hereunder shall be negotiable
and pass by delivery unless registered as to principal for the time being as
herein and in such bonds respectively provided. The Company shall keep, at
the office of the Trustee hereunder, books for the registration and
transfer, as in this indenture provided, of bonds issued hereunder. Such
books shall show, in addition to the name of the owner of each registered
bond, the address of each such owner. The fact of registration, of any bond
shall be noted on such bond in such manner as to the Trustee shall seem
proper.
SECTION 2.07. Any coupon bond may be registered as to principal only on
the books of the Company, as herein and in such bonds respectively provided.
After such registration no transfer of such bond shall be valid unless made
on the said books by the registered owner in person or by his duly
authorized attorney and similarly noted on such bond. Upon presentation of
any such bond registered as to principal, accompanied by a written instrument
of transfer satisfactory to the Trustee executed by the registered owner
or by his duly authorized attorney such bond shall be transferred upon such
books. The registered owner of any which bond registered as to principal
shall also have the right to cause the same to be discharged from
registration by transfer to bearer, in which case transferability by delivery
shall be restored, and thereafter the principal of such bond, when we, shall
be payable to the person presenting such bond. Any such bond registered as
payable to bearer may be registered again in the name of the owner with the
same effect as the first registration thereof. Successive registrations and
transfers as aforesaid may be made from time to time as desired.
Registration as to principal of any bond, however, shall not affect the
negotiability of the coupons appertaining to such bond, but title to every
such coupon shall continue to pay by delivery and such coupon shall remain
payable to bearer.
SECTION 2.08. The Company, the Trustee and any paying agent may deem and
treat the bearer of any bond issued hereunder which shall not at the time
be registered otherwise than to bearer, and the bearer of any coupon
appertaining to any bond, whether or not such bond shall be registered, as
the absolute owner of such bond or coupon, as the case may be, for the
purpose of receiving payment thereof and for all other purposes, and neither
the Company nor the Trustee nor any paying agent shall be affected by any,
notice to the contrary.
The Company, the Trustee and any paying agent shall deem and treat
the person in whose name any bond issued hereunder shall be registered, as
hereinbefore provided, as the absolute owner of such bond for the purpose of
receiving payment of or on account of the principal of such bond and for all
other purposes, except to receive payment of interest represented by the
appurtenant coupons, if any.
SECTION 2.09. The holder of all coupon bond or bonds, all of the
same series and maturity, of any series in respect hereof the Company, by
indenture supplemental hereto responsive to Section 2.05 hereof or by a
supplemental indenture subsequent to the creation of the series, may have
determined to permit exchanges as provided for in this paragraph, may at
the office of the Trustee surrender the same, with all unmatured coupons,
for cancellation, and hereupon the Company shall supply and execute, and
the Trustee shall, upon cancellation of the surrendered bonds and all
appropriate coupons thereunto appertaining, authenticate and deliver, in
exchange therefore, a like aggregate principal amount of coupon bonds of the
same series, and maturity (and having all unmatured coupons attached) of
such other denomination or denominations wherein bonds of such series
shall be issuable, as such holder may request.
The holder of any coupon bond or bonds, all of the same series and
maturity, of Series A or of any series in respect whereof the Company by
indenture supplemental hereto responsive to Section 2.05 or by a
supplemental indenture subsequent to the creation of the series may have
determined to permit exchanges as provided in this paragraph, may at the
office of the Trustee surrender the same, with all unmatured coupons, for
cancellation; and thereupon the Company shall supply and execute, and the
Trustee shall, upon cancellation of the surrendered bond or bonds with
all unmatured coupons thereunto appertaining, authenticate and deliver in
exchange therefor, a registered bond or bonds without coupons, of aggregate
principal amount, of such authorized denomination or denominations as
such bolder may request, and of the same series and maturity, registered
in the name of such holder or his nominee.
Whenever the registered owner of any registered bond or bonds
without coupons shall in person or by duly authorized attorney surrender the
same for transfer it the office of the Trustee, accompanied by a written
instrument of transfer in form approved by the Trustee, the Company
shall issue and the Trustee shall authenticate in the name of the transferee
and shall deliver in exchange for such surrendered bond or bonds a new
registered bond or bonds without coupons of the same series and maturity
date as the surrendered bond or bonds and for a like aggregate principal
amount and of the denomination of one thousand dollars ($1,000) or some
authorized multiple thereof.
Whenever any registered bond without coupons, of Series A or of
any other series in respect whereof the Company by indenture supplemental
hereto responsive to Section 2.05 or by a supplemental indenture subsequent
to the creation of the series may have determined to permit exchanges as
provided in this paragraph, accompanied by a written instrument of transfer
in form approved by the Trustee, executed by the registered owner or his
duly authorized attorney, shall be surrendered at the office of the Trustee
for exchange for coupon bonds, the Company shall issue and the Trustee shall
authenticate and shall deliver a like principal amount of coupon bonds of
the same series and maturity date as the surrendered bond, of such
authorized denomination or denominations as such registered owner may
request, bearing all coupons maturing subsequent of the last date whereunto
interest was paid on such registered bond without coupons.
SECTION 2.10. New bonds issued in substitution for outstanding bonds
under any of the provisions of this indenture shall evidence the same debt as
the bonds in substitution for which the same are issued, and shall be
entitled to all the security, benefits, and protection hereof in like manner
and to the same extent as the bonds initially issued hereunder.
SECTION 2.11. Upon receipt by the Company and the Trustee of
evidence satisfactory to both of them that any outstanding bond has been
mutilated, destroyed, lost or stolen, and of indemnity satisfactory to both
of them, in their discretion, the Company, in its discretion, may execute,
and thereupon the Trustee shall authenticate and deliver, a new bond of the
same series and of like tenor (which may bear such notation as may be
required by the rules of any stock exchange upon which the bonds are listed
or are to be listed and having attached the same corresponding coupons, if
any, as the mutilated, destroyed, lost or stolen bond), in exchange and
substitution for, and upon Surrender and cancellation of, the mutilated bond
and coupons, or in lieu of and in substitution for the bond and coupons 90
destroyed, lost or stolen. Any bond or coupons issued under the provisions of
this section in lien of any bond or coupons alleged to be destroyed, lost or
Stolen shall constitute original additional contractual obligations on the
part of the Company whether or not the bonds or coupons so alleged to be
destroyed, lost or stolen be at any time enforceable by anyone; and, together
with any bond issued under the provisions of this section in substitution for
any mutilated bond, shall be equally and ratably entitled to the benefits of
this indenture with all other bonds and coupons issued under this indenture.
SECTION 2.12. For any exchange of bonds for other bonds is herein
provided, for any issuance of bonds or coupons in substitution for bonds or
coupons mutilated, lost, stole, or destroyed, for any registration of bonds,
and for any transfer of registered bonds, the Company at its option may
require the payment of a sum sufficient to reimburse it for any stamp tax or
other governmental charge, and in addition a further sum of not exceeding the
cost of the preparation of each new bond, if any issued upon such
substitution, transfer or exchange, and the charges of the Trustee.
SECTION 2.13. The Trust, forthwith shall cancel any bond surrendered
for exchange with all unmatured coupons, if any, thereto appertaining, and
incinerate the same.
SECTION 2.14. Until definitive bonds responsive to any order for
authentication shall be prepared the Company may execute and, upon the
request of the Company, the Trustee shall authenticate and deliver in lien
of such definitive bonds, and subject to the same provisions, limitations and
conditions, temporary typewritten or printed bonds of any denominations,
substantially of the tenor of the definitive bonds, payable to bearer and
without coupons, or with one or more coupons, or in registered form, and
with such appropriate omissions, insertions and variations as may be
required. Pending the preparation of the definitive bonds such temporary
bonds shall be exchangeable for other temporary bonds of the same series
and maturity of like aggregate principal amount and of different authorized
denominations.
Until exchanged for definitive bonds the temporary bonds in all
respects shall be entitled to the same lien and security of this indenture
as definitive bonds issued and authenticated hereunder, and interest, when
and as payable in respect of such temporary bonds, shall be paid upon
presentation and surrender of coupons evidencing such interest, or, if such
interest be not evidenced by coupons, upon presentation of such temporary
bonds at the office of the Trustee or at the office of any paying agent and
notation thereon of such payment.
The Company at its own expense shall prepare and execute definitive
bonds responsive to each order for authentication in respect hereof temporary
bonds shall have been authenticated, and deliver the same to the Trustee,
and upon surrender of such temporary bonds, or any of them, the Trustee
shall authenticate and deliver in exchange hereford definitive bonds for the
same aggregate principal amount as the temporary bonds surrendered, and of
like series and maturity as the said temporary bonds.
ARTICLE THREE.
SERIES A BONDS AND INITIAL ISSUE OF BONDS.
SECTION 3.01. There is hereby created and authorized a series of bonds
designated First Mortgage 2 3/4% Bonds, Series A. The bonds of Series A
may be issued in the form of coupon bonds and/or registered bonds without
coupons. Coupon bonds of Series A shall be dated January 1, 1946, shall bear
interest from the date thereof and shall be in the denomination of one
thousand dollars ($1,000) each, numbered M-1 and upwards. Each
registered bond Without coupons of Series A shall be dated as of the
interest payment date next preceding the date of issue unless (a) issued on
an interest payment date, in which case it shall be dated as of the date of
issue, or (b) issued prior to the occurrence of any interest payment date, in
which case it shall be dated January 1, 1946. Each registered bond without
coupons of Series A shall bear interest from the date thereof and shall be in
the denomination of one thousand dollars ($1,000) or any multiple of one
thousand dollars ($1,000) specified in any order for authentication
thereof. Registered bonds without Coupons shall be numbered R-1 and
upwards without regard to denominations. The coupon bonds of Series A
and the interest coupons thereto appertaining and the registered bonds
without coupons of Series A shall be respectively substantially in the
forms in this indenture set forth. All bonds of Series A shall mature on
January 1, 1976, shall bear interest at the rate of two and three-fourths
per cent (2 3/4%) per annum, payable on the first day of January and of July
in each year, both principal and interest being payable at the office of
Harris Trust and Savings Bank, in the City of Chicago and State of Illinois,
or, at the option of the bearers or registered owners thereof, at the
principal office of Bankers Trust Company, in the Borough of Manhattan, City
and State of New York, in any coin or currency of the United States of
America which at the time of payment is legal tender for public and private
debts.
The bonds of Series A shall be subject to redemption prior to maturity,
at the option of the Company, as a whole at any time or in part from time to
time, upon at least thirty (30) days' notice given as provided in Article
Eight hereof and upon payment of the principal amount of the bond or bonds to
be redeemed, interest accrued thereon to the date of such redemption, and a
premium of three and one-half per cent (3 1/2%) of such principal amount,
less one-fourth of one per cent (1 1/4%) of such principal amount for each
twenty-four (24) months elapsed from January 1, 1946, to the redemption
date; and without premium if such redemption be effected after December 31,
1973.
SECTION 3.02. Bonds of Series A in the aggregate principal amount of
three million five hundred thousand dollars ($3,500,000), in temporary or
definitive form, shall upon execution hereof be executed by the Company and
delivered to the Trustee and shall be by the Trustee authenticated and
delivered upon the written order of the Company, signed by its president. The
Trustee shall not, however, be required to authenticate said bonds until this
indenture be filed for record as a mortgage upon real estate in the several
counties wherein the mortgaged property is located.
SECTION 3.03. Additional bonds of Series A or of any other series
created pursuant to the terms of this indenture, in the aggregate principal
amount of one million dollars ($1,000,000), may from time to time be executed
by the Company and delivered to the Trustee, and the Trustee shall
authenticate and deliver such bonds to or upon the order of the Company
signed by its president, upon receipt of:
(a) If the bonds, authentication whereof is applied for, be the
initial bonds of any series, an indenture supplemental hereto and a
certified copy of a resolution responsive to the provisions of Section 2.05
hereof;
(b) Certified copy of a resolution adopted by the board of
directors of the Company authorizing the execution and authentication of
such bonds;
(c) Certified copy of a resolution, or an opinion, responsive to
subparagraph (c) of Section 4.01 hereof;
(d) Certified copy of an order or orders and/or an opinion
responsive to subparagraph (d) of Section 4.01 hereof;
(e) A certificate signed and sworn to by the president and by the
treasurer of the Company
(1) setting forth in reasonable detail each lien accrued or
created or imposed subsequent to January 1, 1946, upon any property at the
time constituting any part of the mortgaged property, or in case of property
acquired subsequent to January 1, 1946, accrued or created or imposed
subsequent to the acquisition thereof, and remaining undischarged, other than
the lien hereof and current taxes;
(2) setting forth in reasonable detail (i) the net earnings of
the Company, as defined in Section 1.01 hereof, for a period of twelve (12)
consecutive calendar months ending within ninety (90) days next preceding
the authentication of the bonds then applied for, and (ii) the annual bond
interest charge of the Company, as defined in Section 1.01 hereof, and a
computation showing that such net earnings have been for the period aforesaid
at least equal to two (2) times such annual bond interest charge;
(3) stating that no default exists in respect of any of the
covenants, agreements, or provisions of this indenture; and
(f) A receipt or other evidence responsive to subparagraph (g) of
Section 4.01 hereof and/or an opinion of counsel responsive to said
subparagraph; provided that it shall appear by the pertinent certificate
responsive to subparagraph (e) of this section that the net earnings of the
Company for the period covered by such certificate were not less than two (2)
times the annual bond interest charge.
The Trustee shall have the right, and shall be required, to demand an
opinion of counsel responsive to the provisions of Section 4.02 hereof in
relation to any lien revealed by any certificate responsive to this article,
or otherwise known to the Trustee.
ARTICLE FOUR.
BONDS FOR REFUNDING PURPOSES.
SECTION 4.01. Additional bonds of Series A and/or bonds of any other
series created pursuant to the terms of this indenture may from time to time,
for the purpose of refunding, principal amount for principal amount, any
outstanding underlying bonds, or any bonds of a different series outstanding
hereunder, theretofore or simultaneously paid or redeemed, be executed by
the Company and delivered to the Trustee, and the Trustee shall
authenticate and deliver such bonds to or upon the order of the Company
signed by its president, upon receipt of:
(a) If the bonds authentication whereof is applied for be the
initial bonds of any series, an indenture supplemental hereto and a
certified copy of a resolution responsive to the provisions of Section 2.05
hereof;
(b) Certified copy of a resolution adopted by the board of
directors of the Company authorizing the execution and authentication of
such additional bonds and stating the purpose thereof;
(c) Certified copy of a resolution adopted by the shareholders of
the Company entitled to vote thereon authorizing the issue of such additional
bonds, or, in the alternative, an opinion of counsel to the effect that in
such resolution is necessary for the validity of such additional bonds or to
entitle the same to the security and lien hereof;
(d) Certified copy of an order issued, by each such commission or
other body or official which at the time shall under any pertinent law have
power or authority over the issuance of bonds hereunder or the subjection of
the mortgaged property or any part thereof to Mortgage liens, authorizing the
issuance of such bonds, together with an opinion of counsel to the effect
that any order or orders tendered are sufficient, in respect of such
additional bonds and in respect of the hereof of for the security of such
bonds, to redeem such bonds the valid obligations of the Company and the
lien hereof effective for the security thereof, or in the alternative an
opinion of counsel to the effect that no such order is requisite in the
connections aforesaid;
(e) Underlying bonds and/or bonds theretofore issued and
outstanding hereunder, with all unmatured coupons, if any, attached thereto
or delivered there with, in aggregate principal amount equal to the principal
amount of the bonds authentication whereof if applied for; provided,
however, that in lieu of bonds issued hereunder or underlying bonds called
for redemption or in respect of which the Trustee shall have been
authorized to publish and otherwise give any requisite notice of
redemption, or then about to mature, it shall be sufficient if funds in an
amount sufficient to redeem or pay the same shall have been deposited with
the Trustee hereunder or with the trustee under the instrument whereunder
such underlying bonds are issued and secured, together with irrevocable
instructions to apply such funds to the redemption for payment of such bonds,
deposit of funds for the redemption or payment of underlying bonds otherwise
than with the Trustee to be evidenced by a certificate of the trustee
under the instrument whereunder such bonds are issued and secured, but
the Trustee shall not be required to accept or act upon any such
certificates unless it shall receive an opinion of counsel to the effect
that the indebtedness evidenced by such bonds is by the deposit of such
funds effectively paid and discharged, but may in its discretion waive any
such opinion; provided, further, that in lieu of any underlying bonds paid or
redeemed it shall be sufficient if there shall be deposited with the Trustee
hereunder a certificate of the trustee under the instrument whereunder such
bonds are issued to the effect that such bonds have been effectively retired
and cancelled; provided further, that bonds theretofore issued and
outstanding hereunder may be deposited with the Trustee under the provisions
of this section in cancelled or uncancelled form, and in the case of
underlying bonds the same if any be deposited in cancelled or uncancelled
form if at the time there are no other underlying bonds of the same issue,
outstanding (other than underlying bonds of the said issue then held by the
Trustee hereunder), and if at such time there are outstanding other
underlying bonds of the said issue (other than underlying bonds of the said
issue then held by the Trustee hereunder) the underlying bonds of the said
issue then to be deposited with the Trustee shall be deposited in un
cancelled form.
(f) A certificate signed and sworn to by the president and by the
treasurer of the Company
(1) stating that none of the underlying bonds, or bonds
issued hereunder tendered to the Trustee, were acquired, redeemed or paid out
of the proceeds of any property theretofore constituting part of the
mortgaged property, or out of any insurance moneys, or through the operation
of any fund set up in compliance with any provisions hereof or of any
indenture supplemental hereto, or were retired in order to comply with the
provisions of Section 7.10 hereof;
(2) stating that no bonds have been theretofore authenticated
or cash withdrawn or credit taken under any provision of this indenture or
of any indenture supplemental hereto on account of the acquisition,
redemption or payment of such bond;
(3) stating the aggregated amount of the underlying bonds, of
the issue of which those desired to be refunded are a part, outstanding at
the time of the acquisition by the Company of the properties on which the
same constitute a lien, the amount theretofore refunded and then desired to
be refunded through the operation of this section, the aggregate amount of
such bonds retired by other means, and the aggregate amount of such
bonds remaining outstanding;
(4) setting forth in reasonable detail each lien accrued or
created or imposed, subsequent to January 1, 1946, upon any property at the
time constitute any part of the mortgaged property, or, in the case of
property acquired subsequent to January 1, 1946, accrued or created or
imposed at the time of or subsequent to the acquisition thereof, and
remaining undischarged, other than current taxes and assessments and the
lien hereof;
(5) stating that no default exists in respect of any of the
covenants, agreements or provisions of this indenture;
(g) A receipt or other evidence satisfactory to the Trustee
establishing the payment of any recording or other tax required by law
to be paid in connection with the issues of such additional bonds or for the
effectiveness of the lien of this indenture for the security thereof,
together with all opinion of counsel to the effect that the taxes paid
constitute all taxes of any nature aforesaid, or, in the alternative, an
opinion of counsel to the effect that payment of no such tax is requisite
in this connection or for the purposes aforesaid; and
(h) If any of the bonds to be refunded are underlying bonds, an
opinion of counsel to the effect that good and valid title has been
acquired by the Company to the property which is subject to the mortgage
securing such underlying bonds, subject only to the lien of such underlying
mortgage, to the lien hereof and to other liens or charges in such
opinion described in reasonable detail, and that in the opinion of such
counsel such other liens and charges do not within the purview of this
indentures materially impair the security hereby afforded.
The Trustee may accept, in lieu of any certificate of any trustee under
any instrument required by any of the terms of this section, other evidence
to the effect contemplated satisfactory to the Trustee hereunder.
All bonds issued hereunder with accompanying coupons, if any, received
by the Trustee to be refunded pursuant to the terms of this section shall be
incinerated by the Trustee, and the Trustee shall make and deliver to the
treasurer of the Company a certificate describing such bonds and
accompanying coupons by series, denomination, and number, and certifying,
to the incineration thereof.
Underlying bonds received by the Trustee under the provisions of this
section in uncanceled form shall be canceled by the Trustee, and all
underlying bonds in canceled form shall be delivered to the treasurer of the
Company or upon this written order, for proper disposition, provided,
however, that whatever any uncancelled underlying bonds shall be received
by the Trustee under the provisions of this section and there shall be
outstanding other underlying bonds of the same issue (other than bonds of the
said issue then held by the Trustee hereunder), the Trustee shall not cancel
the said underlying bonds nor any of the unmatured coupons thereto
appertaining, but shall hold the same in pledge as part of the mortgaged
property, but if and when the Trustee shall be furnished until satisfactory
evidence that all underlying bonds of the said issue (other than bonds of
the said issue then held by the Trustee hereunder) have been effectively
paid, redeemed or otherwise retired, then the Trustee shall cancel the
underlying bonds of the said issue then held by it, together with all
interest coupons thereto attached.
SECTION 4.02. The Company shall furnish to the Trustee an opinion of
counsel revealing whether in the opinion of such counsel the existence of any
lien other than the lien hereof an liens of underlying mortgages set forth in
any certificate delivered to it in connection with any application for the
authentication of any bonds under any provision of this indenture, or
otherwise known to the Trustee (other than or in excess of liens hereafter in
this section provided to be regarded and considered as not materially
impairing the security hereby afforded), materially impairs the security
afforded hereby for the protection and benefit of the holders of the bonds
issued hereunder, including those authentication whereof is then applied for;
and in the even that any such lien does in the opinion of such counsel
materially impair the security hereby afforded, the Trustee shall not be
obliged to authenticate such bonds unless and until such lien be discharged,
released or removed, or such other proceedings as may be suggested by such
counsel be had, and such counsel shall render to the Trustee an opinion to
the effect that such lien does not at the date thereof materially impair the
security so afforded. Within the purview of this indenture the following
shall not be considered or regarded as materially impairing the security
hereby afforded:
(a) Taxes or assessments not in default, or taxes and assessments
in course of contest;
(b) Each lien by the Company voluntarily created or imposed on its
physical properties and by the terms of the instrument creating or evidencing
the same made and declared to be subject and subordinate to the lien hereof
for the security of all bonds at any time issued and outstanding hereunder;
and
(c) Judgments in respect of which the time for appeal has not
elapsed and judgements pending on appeal, not, however, in aggregate amount
exceeding three percent (3%) of the aggregate amount of bonds at the time
outstanding hereunder, including those authentication of which is then
applied for, in respect of which latter judgments appeal bonds in amounts
respectively equal at least to the amounts of the respective judgments have
been posted.
ARTICLE FIVE.
BONDS AGAINST PHYSICAL PROPERTY ADDITIONS.
SECTION 5.01. Additional bonds of Series A or of any other series
created pursuant to the terms of this indenture may from time to time be,
issued hereunder by the Company in the manner and subject to the limitations
provided in this section. In case the Company, subsequent to December 31,
1945, shall acquire bondable property, (as defined in Section 1.01 hereof),
through, construction, purchase, consolidation or otherwise, bonds may be
issued and authenticated hereunder to the extent in principal amount of sixty
per cent (60%) of all net expenditures (as defined in Section 1.01 hereof) so
made by the Company for such bondable property, after deducting from such
sixty per cent (60%) the aggregate principal amount of any underlying
bonds secured by any underlying mortgage on such bondable property at the
time of its acquisitions provided (1) that the principal amount of bonds
which may be authenticated under the provisions of this section on account of
net expenditures for the acquisition of bondable property shall not exceed
sixty percent (60%) of the fair value to the Company (determined as provided
in Section 1.01 hereof)of such bondable property, and (2) that no bonds shall
be issued and authenticated under the provisions of this section unless the
net earnings of the Company (as defined in Section 1.01 hereof) for a period
of twelve (12) consecutive calendar months ending within ninety (90) days
next preceding the authentication and delivery by the Trustee of any such
bonds under this section shall have been at least equal to two (2) times the
annual bond interest charge of the Company (as defined in Section 1.01
hereof), and (3) that no bonds shall be issued under the provisions of this
section for or on account of any expenditures for property which shall have
previously been used as a basis for the authentication of bonds or the
withdrawal of deposited cash or any other moneys or the release of any
property under any provisions of this indenture, or which shall have been
made out of any insurance moneys or moneys received from the condemnation,
sale or earlier disposition of any of the property of the Company subject to
the lien of this indenture, or which shall have been appropriated responsive
to the provisions of Section 7.10 hereof to off-set the excess of the amount
of indebtedness secured by liens subject to which any bondable property was
acquired over an amount equal to sixty per cent (60%) of the cost or fair
value, whichever is the smaller, of such bondable property, or which shall
have been certified or used to comply with the provisions of any sinking fund
or other analogous fund hereafter created within the limitations of this
indenture in respect of any series of bonds issued hereunder, if and to the
extent that the provisions relating to any such fund preclude the use of any
such expenditures as a basis for the authentication and delivery of bonds
hereunder.
No bonds shall be authenticated and delivered by the Trustee under the
provisions of this section, except upon receipt by, the Trustee of the
following:
(a) If the bonds authentication whereof is applied for be the
initial bonds of any series, an indenture supplemental hereto and a
certified copy of a resolution responsive to the provisions of Section 2.05
hereof;
(b) A certified copy of a resolution of the board of directors of
the Company authorizing the execution and authentication of such bonds;
(c) A certified copy of a resolution, or an opinion of counsel,
responsive to subparagraph (c) of Section 4.01 hereof;
(d) A certified copy of an order or orders and/or an opinion of
counsel responsive to subparagraph (d) of Section 4.01 hereof;
(e) A certificate signed by the President and by the treasurer of
the Company, setting forth (1) the gross expenditures for bondable property
other than purchased property(other than purchased property) made by the
Company in the period covered by the next preceding certificate (which, in
the case of the first certificate, shall begin on January 1, 1946, and in the
case of each subsequent certificate shall begin at the end of the period
covered by teh next preceding certificate), on account of which such bonds
are requested to be authenticated, briefly describing such bondable property,
and stating that said expenditures have been actually made, or a liability
therefor incurred, by the Company, and are not, in the opinion of the
officers signing the certificate, in excess of the value of such bondable
property at the time of construction, and that no part of such expenditures
has been charged by the Company or is properly chargeable to the cost of
maintenance or to other operating expense, and (2) the gross expenditures
for, and the value (as determined by engineer's certificate in accordance
with the provisions of this section) of any purchased property acquired by
the Company during the period covered by the certificate, on account of which
such bonds are requested to be authenticated, a brief description of such
purchased property (identifying the same purchased property within the
definition thereof contained in Section 1.01 hereof), the date of its
acquisition and the amount and character of the consideration paid therefor,
and (3) (a) the aggregate amount of gross retirements of property, as defined
in Section 1.01 hereof, made during said period, and (b) the aggregate amount
of all net considerations received by the Company during said period as the
avails from property released from the lien of this indenture under the
provisions of Article Ten hereof, and (4) the aggregate of all amounts
charged to income and credited to any reserve for depreciation, retirement,
renewal, replacement, or amortization of property during said period, as
recorded on the books of the Company, in respect of all depreciable property,
which except as to the date of its acquisition or construction would come
within the definition of bondable property, owned by the Company from time to
time during such period, and (5) a computation showing the net expenditures
for bondable property, as defined in Section 1.01 hereof, made by the Company
during such period which may be used as the basis for the authentication of
additional bonds, and (6) that all such bondable property, including such
purchased property, if any, has become subject to the lien of this indenture
and is not subject to the lien of mortgage equal or prior in lien to this
indenture, except in the case of bondable property acquired subject to any
underlying mortgage and in such case describing each such underlying mortgage
and stating the principal amount of underlying bonds secured thereby at the
time of acquisition, and further stating that the aggregate principal amount
of such underlying bonds does not exceed sixty per cent (60%) of the cost or
fair value, whichever is the smaller, of the bondable property subject to the
lien of shall underlying mortgage or, in the alternative, that the necessary
appropriation responsive to the provisions of Section 7.10 hereof has been
made to off-set any excess of the principal amount of such underlying bond
over an amount equal to sixty per cent (60%) of the cost or fair value,
whichever is the smaller, of such bondable property, and (7) that no part of
said net expenditures for bondable property has been previously used as a
basis for the authentication of any bonds under this indenture or as a basis
for the withdrawal of deposited cash or any other moneys or the release of
any property under any provision of this indenture or has been made out of
any insurance moneys or moneys received from the condemnation, sale or other
disposition of any property of the Company subject to the lien of this
indenture or has been appropriated or is required to be appropriated
responsive to the provisions of Section 7.10 hereof, or has been certified or
used to comply with the provisions respecting any sinking fund or analogous
fund created hereafter pursuant to the terms of this indenture or, in the
alternative, that the provisions relating to any such fund then existing do
not preclude the use of any such expenditures as a basis for the
authentication of bonds herein under, and (8) any, other facts and data (not
specifically required to be shown in some other manner) showing that the
Company is entitled under the foregoing provisions of this section to have
authenticated the bonds requested to be authenticated;
(f) A certificate of an independent engineer (conforming to the
requirements of this section) certifying to the fair value to the Company, at
the date of its acquisition, of any purchased property described in the
certificate required on subdivision (e) of this section and on account of
which bonds are requested to be authenticated;
(g) A certificate signed by the president and by the treasurer of
the Company setting forth in reasonable detail (i) the net earnings of the
Company, is defined in Section 1.01 hereof for a period of twelve (12)
consecutive calendar months ending within ninety (90) days next preceding the
authentication of the bonds then applied for, and (ii)
the annual bond interest charge of the Company, as defined in Section
1.01 hereof, and a computation showing that such not earnings have been for
the period aforesaid at least equal to two (2) times such annual bond
interest charge;
(h) A receipt or other evidence responsive to subparagraph (g) of
Section 4.01 hereof, and/or an opinion of counsel responsive to said
subparagraph;
(i) An opinion of counsel to the effect that good and valid title
to the bondable property mentioned in the pertinent certificate responsive to
subparagraph (e) of this section has been vested in the Company, and that
this indenture has been constituted a first and valid lien thereon, subject
only to the lien of current taxes and assessments not in default or taxes and
assessments in course of contest, underlying mortgages, if any, and such
liens as do not within the purview of the provisions of this indenture
materially impair the lien hereof on such property for the security of the
bonds issued and to be issued hereunder;
(j) An indenture supplemental hereto specifically subjecting the
bondable property described in the pertinent certificate responsive to
subparagraph (e) of this section to the lien of this indenture, or in the
alternative an opinion of counsel to the effect that such properties are
subject to the lien hereof without any such supplemental indenture; and
(k) A certificate signed by the president and by the treasurer of
the Company Stating that the Company is not then in default under any
provision of this indenture or of any indenture supplemental hereto.
Bondable property (other than purchased property) may be sufficiently
described for any purpose of this indenture by specifying the location
thereof and stating the descriptive name or title of the account or accounts
(and subdivisions thereof applicable thereto) under or pursuant to a standard
classification of accounts in general use, to which the expenditures made for
such property are applicable have been charged or allocated and the amounts
thereof.
SECTION 5.2. The Company shall furnish to the Trustee an opinion of
counsel responsive to the provisions of Section 4.02 hereof in relation to
any lien revealed by any certificate responsive to Section 5.01 hereof, or
otherwise known to the Trustee, and the Trustee shall not be obligated to
authenticate any bonds pursuant to Section 5.01 except subject to and in
accordance with the terms and provisions of said Section 4.02.
ARTICLE SIX.
BONDS AGAINST CASH.
SECTION 6.01. For the purpose of creating a cash fund available for
withdrawal from time to time for the purposes specified in Section 6.02
hereof, additional bonds of Series A and/or bonds of any other series created
pursuant to the terms of this indenture may from time to time, to the extent
of but not exceeding the amount of cash at the time deposited with the
Trustee (provided that the aggregate amount of cash anytime on deposit with
the Trustee under the provisions of this article shall not exceed two million
dollars ($2,000,000), or an amount equal to ten per cent (10%) of the
aggregate principal amount of all bonds at the time outstanding, hereunder
together with all underlying bonds outstanding, whichever shall be the
greater), be executed by the Company and delivered to the Trustee, and the
Trustee shall authenticate and deliver such bonds to or upon the written
order of the Company signed by its president, upon receipt of:
(a) If the bonds authentication whereof is applied for be the
initial bonds of any series, an indenture supplement hereto and a certified
copy of a resolution to the provisions of Section 2.05 hereof:
(b) Certified copy of a resolution of the board of directors of
the Company authorizing the execution, and authentication of such bonds and
directing the deposit with the Trustee of an amount of cash equal to the
principal amount of the bonds authentication whereof is applied for;
(c) Certified copy of a resolution, or an opinion, responsive to
subparagraph (c) of Section 4.01 hereof;
(d) Certified copy of an order or orders and/or an opinion,
responsive to subparagraph (d) of Section 4.01 hereof;
(e) A certificate signed bill the president and by the treasurer
of the Company setting forth in reasonable detail (i) the net earnings of
the Company, as defined in Section 1.01 of this indenture, for a period of
twelve (12) consecutive calendar, months ending within ninety (90) (days
next preceding the authentication of the bonds then applied for, and (ii)
the annual bond interest charge of the Company is defined in Section 1.01
hereof, and a computation showing that such net earnings have been for the
period aforesaid at least equal to two (2) times such annual bond interest
charge;
(f) A receipt or other evidence responsive to subparagraph (g) of
Section 4.01 hereof, and/or an opinion of counsel responsive to said
subparagraph;
(g) A certificate responsive to subparagraph (k) of Section 5.01
hereof; and
(h) Cash in the amount equal to the principal amount of the
bonds; authentication whereof is applied for;
provided that it shall appear by the pertinent certificate responsive to
subparagraph (e) of this section that the net earnings of the Company for the
period covered by such certificate were not less than two (2) times the
annual bond interest charge.
The Trustee shall have the right, and shall be required to demand an
opinion of counsel responsive to the provision of Section 4.02 hereof, in
relation to any lien revealed by any certificate responsive to this article
or otherwise known to the Trustee.
SECTION 6.02. Cash received by and on deposit with the Trustee under the
provisions of this article may, from time to time, be withdrawn on orders of
the Company signed by its president and treasurer for the purpose of paying
or redeeming bonds issued and outstanding hereunder or outstanding underlying
bonds, or for the making of physical property additions, upon receipt by the
Trustee of showings and of bonds responsive to Article Four, and/or showings
responsive to Article Five (exception however, matter or text in respect of
the net earnings of the Company and the annual bond interest charged)
adjusted to the withdrawal of such cash, in amount not in excess of the
limitations in each of said articles provided in respect of the amount of
bonds which may be authenticated thereunder, disregarding, however, all
limitations as to the relation of the net earnings of the Company to the
annual bond interest charge.
ARTICLE SEVEN.
GENERAL COVENANTS.
SECTION 7.01. The Company covenants, agrees and undertakes that it will
faithfully do and perform and at all times fully observe any and all
covenants, undertakings, stipulations and provisions contained in each and
every bond executed, authenticated and delivered hereunder, irrespective of
series, and in the several and successive indentures supplemental hereto and
in the resolutions adopted by its board of directors pursuant to or in
observance of the provisions of this indenture. The Company covenants that it
will promptly make, execute and deliver all indentures supplemental hereto or
otherwise, and take all such further action as may reasonably be deemed by
the Trustee or by counsel necessary or advisable for the better securing of
any bonds issued or to be issued hereunder, or for better assuring and
confirming unto the Trustee the mortgaged property or any part thereof.
SECTION 7.02. The Company further covenants that it will, not less than
Seventy-five (75) days before the expiration of five (5) years from and after
the date of this indenture, execute, acknowledge and deliver to chattel
mortgage, supplemental to this indenture, in form satisfactory to the
Trustee, mortgaging all of the personal property then owned by the Company
(other than personal property of the character specifically excepted from the
lien of this indenture) as security for the bonds issued and to be issued
under this indenture, and will cause such chattel mortgage to be filed as
such in the proper public office in each and every county wherein any of the
said personal property then owned by the Company is then located. The Company
further covenants that, not less than seventy-five (75) days before the
expiration of five (5) years from and after the earliest date of filing of
the first chattel mortgage executed and delivered pursuant to the foregoing
provisions of this section, and not less than seventy- five (75) days before
the expiration of five (5) years from and after the earliest date of filing,
of each other chattel mortgage executed and delivered pursuant to the
provisions of this section, it will execute, acknowledge and deliver a
further chattel mortgage supplemental to this indenture, in form satisfactory
to the Trustee, mortgaging all of the personal property then owned by the
Company (other than personal property of the character specifically excepted
from the lien of this indenture) as security for the bonds issued and to be
issued under this indenture, and will cause each such chattel mortgage to be
filed as such in the proper public office in each and every county wherein
any of the personal property then owned by the Company is then located. It is
the intention lieu of that a new chattel mortgage of the character above
specified shall be executed, acknowledged, delivered and filed not less than
seventy-five (75) days before the expiration of five (5) years from and after
the date of this indenture and not less than seventy-five (75) days before
the expiration of five (5) years from the earliest date of filing of each
subsequent chattel mortgage executed, acknowledged, delivered and filed
pursuant to the requirements of this section. The Company further covenants
that at the time of the execution and delivery and of the filing of each such
chattel mortgage the personal property therein described and intended to be
covered by the lien thereof and hereof shall be free of all liens and
encumbrances, excepting only (a) the lien of any underlying mortgage or
mortgages subject to which any of such personal property may have been
acquired after the date of this indenture, (b) the lien of this indenture, as
supplemented by the said chattel mortgage then filed, for the security of the
bonds issued and to be issued hereunder, and (c) the lien of current taxes
and assessments not in default; it being the intention hereof that this
indenture, as supplemented by the respective chattel mortgages to be executed
and filed as above provided and by any other supplemental indentures or
instruments of further assurance executed and delivered pursuant to the
provisions of this indenture, shall always be and constitute a first and
prior lien, subject only to the lien of current taxes and assessments not in
default, on all of the property, both real and personal, owned by the Company
at the date of this indenture (other than property of the character
specifically excepted from the lien of this indenture), and on all property
hereafter acquired by the Company (other than property of the character
specifically excepted from the lien of this indenture), subject only as to
such after-acquired property to such underlying mortgages as may constitute
a lien on such property at the time of its acquisition and to the lien of
current taxes and assessments not in default, all for the benefit and
security of the bonds issued and to be issued under this indenture. The
Company further covenants that if at the time any such chattel mortgage is to
be executed and filed there shall exist any lien or encumbrance upon any of
the property of the Company (other than property of the character
specifically excepted from the lien of this indenture), except the liens and
encumbrances mentioned under clauses (a), (b) and (c) of this paragraph, the
Company will, prior to the filing of such chattel mortgage. pay and discharge
all indebtedness, and obligations secured by any such lien or encumbrance
then existing, and will procure and cause to be recorded and/or filed in the
proper public office or offices an instrument duly releasing and discharging
each such lien or encumbrance.
SECTION 7.03. The Company covenants that it will promptly pay the
principal of and interest on every bond issued hereunder and secured hereby
in the medium of payment specified in each such bond, at the dates and
places, and in the manner prescribed in such bonds, and that it will, in apt
time prior to the maturity of each installment of interest and in apt time
prior to the maturity of every such bond, deposit with the Trustee (in cash
funds or in canceled coupons, in the case of interest rep- resented by such
coupons, or bonds maturing on the date of maturity then next approaching) the
par amount of such interest or interest and principal together with
sufficient additional funds to pay the reasonable fees of the several paying
agents, and to enable all bonds and/or coupons to be paid without deduction
of or for any tax as and to the extent in such bonds respectively provided.
The Trustee shall from time to time incinerate all bonds and/or coupons
issued hereunder which shall have been paid or redeemed and/or canceled, and
deliver to the treasurer of the Company a certificate wherein shall be set
forth descriptions of all such bonds and/or coupons by series, date of
execution or maturity, number and amount, and the fact of such incineration.
Any such certificate shall be deemed to be, and shall be accepted by the
Trustee and its successors hereunder as conclusive evidence of the payment
and cancellation of said bonds and coupons, for all purposes of this
indenture or any release thereof, to the same extent is if the bonds and
coupons so incinerated were themselves presented and surrendered.
SECTION 7.04. In order to prevent any accumulation of coupons or
installments of interest after their maturity, the Company covenants and
agrees that it will not directly or indirectly extend or assent to the
extension of the time for payment of any coupon or installment of interest
secured hereby be purchase or funding of coupons or otherwise. In case the
time for payment of any such coupon or installment of interest shall be so
extended, such coupon or instalment of interest shall not be entitled in case
of any default hereunder to the benefit or security of this indenture, except
subject to the prior payment in full of the principal of all bonds issued
and outstanding hereunder, and of so much of the accrued interest on such
bonds as shall not have been so extended.
SECTION 7.05. The Company covenants and it is a condition of this
indenture (a) that, except as to that part of the mortgaged property which
may be hereafter acquired, the Company is now well seized of the physical
properties hereby by it mortgaged or intended so to be, subject only to
current taxes and assessments which are not delinquent, and has good right,
full power and lawful authority to grant, bargain, sell, warrant, convey,
transfer, mortgage, pledge and assign such physical properties in the manner
and form herein respectively done or intended, and that it has, and, subject
to the provisions hereof, will preserve good and indefeasible title to all
the mortgaged property and will warrant and forever defend the same to the
Trustee against the claims of all persons whomsoever;(b) that the Company
will promptly pay or cause to be paid all lawful taxes, charges and
assessments at any time levied or assessed upon or against the mortgaged
property, and/or upon or against the interest therein of the Trustee and/or
of each bondholder, and/or upon or a against the debt at any time secured
hereby, and that the Company will pay any mortgage tax or mortgage recording
tax levied under the laws of the State of Nebraska upon or in respect of this
indenture or the debt secured hereby or any indenture supplemental hereto;
provided, however, that no such tax, charged or assessment shall be required
to be paid so long as the validity of the same shall in good faith be
contested, after at least ten (10) days' written notice to the Trustee, and
security for the payment of the same satisfactory to the Trustee shall, if
requested by the Trustee, be provided; (c) that there are not now
outstanding, and that the Company will not at any time create or allow to
accrue or exist, any liens prior to the lien of this indenture upon the
mortgaged property or any part thereof, save only any mortgage or mortgages
on any property hereafter acquired by the Company subject to which such
property may be acquired and liens for taxes and assessments which are not
delinquent; and (d) that neither the value of the mortgaged property nor the
lien of this indenture will be diminished or impaired in any way as a result
of any action or nonaction on the part of the Company. The Company further
covenants that it will cause this indenture and all indentures supplemental
hereto to be recorded and filed and re-recorded and refiled in such manner
and in such places and at such times as may be required by law in order fully
to preserve and protect the security of the bondholders and the rights of the
Trustee.
SECTION 7.06. The Company covenants that all underlying bonds which may
be secured by lien upon any part of the mortgaged property acquired by the
Company after January, 1946, will be paid, or refunded under and in
accordance with the provisions of this indenture, at or before the respective
maturities of such bonds; and that all of the covenants, conditions and
agreements of each underlying mortgage will in all respects be fully complied
with.
The Company further covenants that it will, forthwith upon the
acquisition of any property subject to the lien of any mortgage or other
indenture securing bonds or other evidences of indebtedness, cause each such
mortgage or other indenture to be closed and will file with the trustee or
mortgagee thereunder an instrument of closure, and will permit no additional
bonds or other evidences of indebtedness to be issued thereunder nor any
additional indebtedness in any manner to be secured thereby; but nothing
herein contained shall be taken to prevent the issuance of bonds or other
evidences of indebtedness under any such underlying mortgage for the purpose
of replacing any lost, mutilated, destroyed or stolen bonds or other
evidences of indebtedness or of effecting such exchanges as may be permitted
by such mortgage or other indenture.
The Company further covenants that it will acquire no properties subject
to the lien of any underlying mortgage if such acquisition would operate to
increase the aggregate principal amount of all then underlying bonds (other
than underlying bonds for the purchase, payment or redemption of which cash
in the necessary amount shall have been irrevocably deposited with the
trustee or mortgagee under the underlying mortgage or mortgages securing the
same and other than underlying bonds deposited with the Trustee hereunder) to
an amount greater than twenty per cent (20%) of the aggregate principal
amount of all bonds at the time issued an outstanding under this indenture.
SECTION 7.07. The Company covenants that it will, subject to the
provisions of this indenture, at all times maintains its corporate existence
and right to carry on business; that its business will be carried on and
conducted in an efficient manner; that all property, plants, appliances,
systems and equipment of the Company useful and necessary in the carrying on
of its business will be kept in thorough repair and maintained in a state of
high operating efficiency corresponding to the progress of the industry; that
it now has complete and lawful authority and privilege to maintain and
operate its entire plants and properties, and that no right, franchise or
privilege of the Company will be allowed to lapse or be forfeited so long as
the same shall be necessary for the carrying on of the business of the
Company, or any part thereof; provided, however, that the expiration by lapse
of time of any right, franchise or privilege shall not constitute a violation
of this covenant, but the Company hereby expressly covenants that the Company
will exercise its best endeavors and any and every proper means to procure
extension or renewal of each and every such right, franchise or privilege so
expiring and necessary or desirable for the maintenance and operation of any
of its plants or properties or any part thereof.
The Company further covenants that it will not go, or suffer itself to
be put, into bankruptcy or insolvency, or cause or permit a receiver or
trustee to be appointed of or for itself or its property, or any part
thereof, or cause or permit to be filed a petition for relief or
reorganization under any of the provisions of the Bankruptcy Act, as the same
may be from time to time amended.
SECTION 7.08. The Company covenants that it will include in its annual
operating expenses, in addition to reasonable and sufficient expenditures for
maintenance and repairs, a reasonable and sufficient provision for renewals,
replacements and depreciation, which amount shall not be less than a sum
computed at such annual rate of depreciation as may be fixed and determined
by any state or federal regulatory body or court having jurisdiction in the
premises, and compliance with any such order shall not constitute a default
hereunder, and in so far as amounts so provided are not actually expended for
renewals or replacements of its physical properties, the balance shall be
carried in a depreciation reserve or other similar account against which may
be charged actual expenditures for renewals, replacements and retirements.
SECTION 7.09. The Company covenants that it will not declare or pay any
dividend (except dividends payable in shares of stock of the Company) on any
shares of its stock of any class if the aggregated amount so distributed
after December 31, 1945, would exceed the aggregate amount of the net
earnings of the Company, properly available for the payment of dividends,
accrued subsequent to December 31, 1945, plus the sum of $250,000.
SECTION 7.10. The Company covenants that if it shall acquire any
property subject to any lien securing indebtedness in excess of sixty per
cent (60%) of the cost of such property including such indebtedness, or of
the fair value thereof, whichever shall be the smaller, it will at the time
of such acquisition cause such indebtedness in excess of such percentage to
be discharged or will offset such part of such indebtedness as shall exceed
such percentage by appropriation, net expenditures for bondable property in
an aggregate amount equal to one hundred sixty-six and two-thirds per cent
(166 2/3%) of such excess, such appropriating to be evidenced by resolution
of the board of directors of the Company, certified copy, whereof shall be
deposited with the Trustee, together with all certificates, opinions, and
other instruments necessary under the provisions of Article Five hereof to
constitute such expenditures the basis for the authentication of bonds
hereunder, not including certified copies of resolutions, order, opinions and
receipts pertinent to the issuance of bonds on account of such expenditures;
or will cause bonds issued hereunder or underlying bonds in aggregate
principal amount not less than the amount of such excess to be retired, which
bonds shall not be refundable hereunder.
SECTION 7.11. The Company covenants that proper books of record and
account will be kept in which full, true and correct entries will be made of
all dealings or transactions of or in relation to the plants, properties,
business and affairs of the Company, and that it will:
(a) Not later than forty-five (45) days after the expiration of
each calendar month, furnish to the Trustee a statement in reasonable detail
showing the income and surplus of the Company for the calendar month then
last expired and a balance sheet of the Company as of the last day of such
calendar month;
(b) From time to time furnish to the Trustee such data as to the
plants, properties and equipment of the Company as the Trustee shall
reasonably request;
(c) Not later than one hundred twenty (120) days after the
expiration of each fiscal year of the Company, furnish to the Trustee
statements of the income and of the surplus of the Company for such fiscal
year and a balance sheet of the Company as of the last day of such fiscal
year, and such income and surplus statements and balance sheets shall set
forth in reasonable detail the results of the operations and the financial
condition of the Company and shall be prepared by, and accompanied by the
certificate or opinion of, certified public accountants selected by the
Company and satisfactory to the Trustee (who may be the certified public
accountants regularly employed by the Company to audit and examine its
books).
The accountants making the successive audits in this section provided
for shall in and by each such audit state whether it appears to such
accountants from examination of the pertinent books and records that
compliance has been had during the period covered by such audit with the
covenants and conditions of this indenture in respect of this issuance of
bonds hereunder during such period and with the provisions of Sections 7.09
and 7.10 hereof; and if in any such audit it shall be stated that it appears
from such examination that bonds have been issued during such period under
any of the provisions hereof in excess of the amount properly issuable, or if
the provisions of Section 7.10 hereof have not been fully observed and
performed, the Trustee shall refuse to authenticate further bonds unless and
until by the appropriation of additional net expenditures for bondable
property as herein provided or by discharge of any excess indebtedness the
condition thus found shall have been rectified. As to whether any such
condition shall have been rectified the Trustee shall be protected in relying
upon an opinion of counsel, but may demand a supplemental audit made by such
accountants.
The Company further covenants that its plants and properties and all
books, documents and vouchers relating to the plants, properties,
business and affairs of the Company shall at all times be open to the
inspection of such accountants, engineers or other agents or exerts as the
Trustee may from time to time designate; but the Trustee shall have no duty
to make any such inspection.
SECTION 7.12. The Company covenants that it will not be a party to any
merger or consolidation nor will it sell, convey, transfer or lease, subject
to the lien of this indenture, all or substantially all of the mortgaged
property to any other entity, except in accordance with and upon the terms
and conditions specified in article twelve of this indenture.
SECTION 7-13. The Company covenants that it will at all times keep
insured such of its plants, buildings, stations, machinery, equipment and
apparatus as are usually insured by companies operating like properties to
the reasonable insurable value thereof against destruction or damage by fire
or other accident or hazard against which insurance is usually carried by
companies operating like properties in the same region; that all policies for
such insurance shall have attached thereto the New York standard mortgagee
clause (without contribution) and all losses thereunder shall be payable to
the Trustee hereunder; provided, however, that if any property so insured is
covered by any such mortgage or other instrument the lien of which on such
property shall be prior to that of this indenture, the losses under the
policies for such insurance, until final satisfaction and release of such
prior mortgage or other instrument, may be made payable to and such policies
may be deposited with the mortgagee or trustee under such prior mortgage or
other instrument, it being hereby stipulated and agreed that upon the
satisfaction and release of such prior mortgage or other instrument, it being
hereby stipulated and agreed that upon the satisfaction and release of such
prior mortgage or other instrument any insurance moneys then in the hands of
the mortgagee or trustee thereunder shall forthwith be paid over to the
Trustee hereunder. In the case of any loss covered by the policy of
insurance, any appraisement or adjustment of such loss and settlement and
payment of indemnity therefor which shall be agreed upon between the insured
and the insurance company and which shall be approved in writing by some
person appointed by the insured and approved by the Trustee hereunder shall,
upon the written request of the insured, be consented to by the Trustee.
Section 7.14. All insurance moneys received by the Trustee under the
provisions of Section 7.13 hereof shall be held by the Trustee as pledged
funds hereunder, and shall be paid out from time to time upon written orders
of the Company:
(a) For the purpose of paying the reasonable cost of replacing
part or all of the property destroyed or damaged, or
(b) To reimburse the Company for net expenditures for bondable
property as defined in Section 1.01 hereof, except that such insurance moneys
may be withdrawn for the full amount of such net expenditures, after deducing
from such amount the aggregate principal amount of any underlying bonds
secured by lien on any property acquired as an entirety or substantially as
an entirety by means of such net expenditures, and without regard to
earnings; provided, however, that such net expenditures shall not previously
have been made the basis for the issuance of bonds or the withdrawal of cash
or the taking of credit under any provision of this indenture; or
(c) For the purchase or redemption at not exceeding par and accrued
interest of bonds issued and outstanding hereunder or underlying bonds on
account of which no bonds shall have been or shall be issued or credit taken
or cash withdrawn under any provision of this indenture; all such bonds so
purchased shall, in the case of bonds issued hereunder, be incinerated by the
Trustee and a certificate of such incineration delivered to the treasurer of
the Company, and, in the case of underlying bonds, be cancelled and delivered
to the treasurer of the Company for proper disposition if there are no other
underlying bonds of the same issue then outstanding, and if at the time there
shall be outstanding other underlying bonds of the same issue, the underlying
bonds so purchased shall not be cancelled but shall be held by the Trustee as
a part of the mortgaged property until the Trustee shall be furnished with
satisfactory evidence that all other underlying bonds of the said issue have
been effectively paid, redeemed or otherwise retired.
All orders of the Company for the withdrawal of insurance moneys shall
be signed by the treasurer of the Company, and prior to the presentation
thereof to the Trustee the Company shall deliver to the Trustee sworn
statements of its president and its treasurer showing that such orders are
drawn for one or more of the purposes for which insurance moneys may be paid
out under the provisions of this section. The Trustee shall have the right,
but shall not be obliged, to require the Company to furnish such further
evidence in the premises as the Trustee may deem necessary in order to
establish the right of the Company to the payment of any such order.
Any insurance moneys received by the Trustee on account of any one loss
not exceeding five thousand dollars ($5,000) may be forthwith paid over to
the treasurer of the Company to be by the Company used for the purposes
aforesaid and in due time, not exceeding ninety (90) days after the date of
such payment, accounted for to the Trustee, otherwise to be returned to the
Trustee.
ARTICLE EIGHT.
PROVISIONS RELATING TO REDEMPTION OF BONDS.
SECTION 8.01. Whenever the Company shall by resolution of its board of
directors, certified copy of which shall be, filed with the Trustee,
determine to exercise its right to redeem any bonds issued hereunder and by
their terms subject to redemption, or whenever the Trustee shall have on hand
any sinking fund moneys at the time applicable to the redemption of any bonds
issued hereunder, notice of such redemption (including the series, date, and
maturity, and, if less than all bonds of any series, the numbers of the bonds
to be redeemed) shall be published by the Company or the Trustee (in the
discretion of the Trustee) in one daily newspaper published and of general
circulation in the City of Chicago and State of Illinois and in one daily
newspaper published and of general circulation in the Borough of Manhattan,
City and State of New York. Any such published notice shall be sufficiently
given if it shall have been published three (3) times in each such newspaper
at intervals of not less than seven (7) days between successive publications,
and the first such publication shall have been made in such newspaper at
least a number of days prior to the date fixed for such redemption equal to
the number of days' notice on which the bonds proposed to be redeemed are by
their terms or by the terms of any indenture supplemental hereto subject to
redemption. Copies of such notice of redemption shall (only for the
convenience of the holders of bonds register as to principal and fully
registered bonds) be mailed by the Company or the Trustee to the holder of
each bond registered as to principal and each fully registered bond so called
for redemption, at the last post office address of such holder shown on the
registration books of the Company at the office of the Trustee; provided,
however, that failure to give such notice by mailing shall not affect the
validity and effectiveness of any such published notice as against the
holders of bonds registered as to principal or fully registered bonds or
otherwise. The bonds to be redeemed, if less than all the outstanding bonds
of any series, shall in all cases be determined by the Trustee by lot. In
any determination by lot as herein provided, each bond of a denomination in
excess of one thousand dollars ($1,000) shall be represented by a separate
number for each one thousand dollars ($1,000) principal amount thereof. If
less than the entire principal amount of any such bond shall be called for
redemption, said notice shall also state the portion of the principal amount
thereof to be redeemed and that, upon presentation of such bond for
redemption, there will be issued in lieu of the unredeemed portion thereof a
new bond or bonds, of aggregate principal amount equal to such unredeemed
portion. All bonds so redeemed shall be cancelled by the Trustee and
incinerated.
The foregoing provisions are subject to these conditions, namely, (a)
that if all of the bonds then outstanding of any series to be partially
redeemed are either coupon bonds registered as to principal or fully
registered bonds without coupons, the numbers of the bonds so to be redeemed
need not be determined by the Trustee by lot but may be determined by the
Trustee in accordance with the provisions of any written agreement duly
executed by the registered owners of all bonds of such series then
outstanding and filed with the Trustee prior to the time of such determina-
tion, and (b) that if all of the bonds to be redeemed are either coupon bonds
registered as to principal or registered bonds without coupons, notice of
redemption need not be published but may be sent by registered mail to the
registered owners of the bonds to be redeemed at their addresses appearing
upon the registration books, and in such case such notice shall be mailed not
less than thirty (30) days prior to the date fixed for redemption.
SECTION 8.02. If the amount necessary to redeem any bonds called for
redemption as aforesaid shall have been deposited with the Trustee for the
account of the holder or holders of such bonds on or before the date
specified for such redemption, and all proper charges and expenses of the
Trustee in connection therewith shall have been paid, and the notice
hereinbefore mentioned shall have been duly given, the bonds called for
redemption shall upon the date fixed for redemption thereof cease to bear
further interest or to be secured hereby. The Trustee shall not be required
to give notice of any call for redemption unless the amount necessary to
redeem the bonds to be called and to pay all proper charges and expenses of
the Trustee in connection therewith shall have been deposited with the
Trustee as aforesaid. In case any question shall, arise as to whether any
such notice shall have been sufficiently given such question shall be decided
by the Trustee, and the decision of the Trustee shall be final and binding
upon all parties in interest.
ARTICLE NINE.
DEFAULT PROVISIONS.
SECTION 9.01. The following events are hereby defined as and are declared
to be and to constitute "events of default":
(a) Default in the due and punctual payment of any interest on
any bond hereby secured and outstanding and the continuance thereof for a
period of thirty (30) days; or
(b) Default in the due and punctual payment of the principal of
any bond hereby secured and outstanding, on maturity thereof by lapse of
time, by call for redemption, or by declaration as in Section 9.02
hereof provided; or
(c) Default in the due observance or performance of any
covenant, condition, agreement or undertaking in this indenture, or in any
indenture supplemental hereto, contained on the part of the Company, and the
continuance thereof for a period of sixty (60) days after written notice
thereof to the Company from the Trustee or from the holders of not less than
fifteen per cent (15%) in principal amount of the bonds at the time out-
standing; or
(d) The Company shall become insolvent or shall admit in writing
its inability to pay its debts generally as they become due or shall file a
petition in bankruptcy or shall make an assignment for the benefit of its
creditors or shall consent to the appointment of a receiver of itself or of
the whole or of any substantial part of the mortgaged property, or, on a
petition in bankruptcy filed against it, be adjudicated a bankrupt; or
(e) An order, judgment or decree shall be entered by any court
of competent jurisdiction appointing, without the consent of the Company, a
receiver of it or of the whole or any substantial part of the mortgaged
property and such order, judgment or decree shall not have been vacated or
set aside or stayed within ninety (90) days after the entry of such order,
judgment or decree; or
(f) A petition shall be filed by or against the Company under
the provisions of Chapter X of an Act to establish a uniform system of
bankruptcy throughout the United States, approved July 1, 1898, as amended,
or a court of competent jurisdiction shall enter an order, judgment or decree
approving a petition filed by or against the Company under the provisions of
said Chapter X, or if under the provisions of any other law for the relief or
aid of debtors any court of competent jurisdiction shall assume custody,
control or supervision of the Company or of the whole or any substantial part
of the mortgaged property and such order, judgment or decree or such custody,
control or supervision, as the case may be, shall not be vacated or set aside
or otherwise terminated or stayed within thirty (30) days after written
notice thereof to the Company from the Trustee, which in its discretion may
and upon the written request of the holders of fifteen per cent (15%) in
principal amount of the bonds at the time outstanding shall, give such
notice; or
(g) A judgment for the payment of money in excess of $50,000 shall
be rendered against the Company and such judgment shall remain unsatisfied
and execution thereon shall remain unstated for a period of sixty (60) days
after the entry of such judgment, or such judgment shall remain unsatisfied
for a period of sixty (60) days after the termination of any stay of execu-
tion thereon entered within such sixty (60) day period.
SECTION 9.02. In case any one or more of the events of default defined
in Section 9.01 hereof shall have occurred and be continuing, then in any
such case the Trustee may, and upon the written request of the holders of
twenty per cent (20%) in principal amount of the bonds then outstanding
hereunder and upon being indemnified to its satisfaction, shall, by notice in
writing to the Company, declare the principal of all bonds hereby secured and
then outstanding to be due and payable immediately, and, upon any such decla-
ration, the said principal shall become and be due and payable immediately,
anything in this indenture or in said bonds to the contrary notwithstanding.
SECTION 9.03. In case any one or more of the events of default defined
in Section 9.01 hereof shall have occurred and be continuing, then and in
every such case the Trustee (A) may enter upon and take possession of the
mortgaged property or any part or parts thereof, collect and receive all
rents, tolls, issues, income and profits therefrom and operate and conduct
the business of the Company to the same extent and in the same manner as the
Company might lawfully do; (B) may cause this indenture to be foreclosed and
the mortgaged property or any part or parts thereof to be sold; (C) may
proceed to protect and enforce the rights of the Trustee and the bondholders
hereunder, whether for the specific performance of any covenant, condition,
agreement or undertaking herein contained, or in aid of the execution of any
power herein granted, or for the enforcement of such other appropriate legal
or equitable remedy as may in the opinion of counsel be most effectual to
protect and enforce the rights aforesaid; and (D) shall be entitled upon or
at any time after the commencement of any legal proceedings instituted in
case of default, as a matter of strict right, without notice to the Company
or any one claiming under it, and without giving any bond to the Company or
any one claiming under it, to the appointment of a receiver of the mortgaged
property or any part thereof and of the rents, tolls, issues, income and
profits thereof and of each and every the rights and properties of the
Company, with power to operate and conduct the business of the Company; and
the Company does hereby expressly waive the giving of any bond by the
Trustee, and does waive all notice of application for such appointment, and
does hereby irrevocably consent to such appointment. The Company hereby
consents that any such receiver shall have all the usual powers and duties of
receivers in similar cases, with full power to lease the mortgaged property
or any part thereof for any term approved by the court, and shall apply the
moneys collected through rents and through the operation and management of
the mortgaged property to the payment of reasonable compensation for its
services and its attorneys' and counsels services and to the payment of the
expenses and charges of operating the mortgaged property, whether arising be-
fore or after judicial sale, including insurance, repairs and supplies, and
the balance, if any, toward the payment of the indebtedness hereby secured
and of any deficiency decree which may be entered in such proceedings. If in
any foreclosure proceeding the mortgaged property shall be sold for a sum
less than the total amount of the indebtedness for which judgment is therein
given, the judgment creditor shall be entitled to the entry of a deficiency
decree against the Company for the amount of such deficiency, and the Company
does hereby irrevocably consent to the appointment of a receiver of the
mortgaged property and of the rents, tolls, issues, income and profits
thereof after such sale, during the period or periods, if any, allowed by law
for redemption of the property so sold and during which the Company would
otherwise under the law be entitled to possession of the mortgaged property
and until such deficiency decree is satisfied in full.
The Trustee shall take any action authorized or contemplated by this
section if requested so to do by the holders of twenty per cent (20%) in
principal amount of the bonds then outstanding hereunder, or if such default
shall be primarily in respect of a part only of the bonds at the time
outstanding hereunder, which part shall constitute less than fifty per cent
(50%) in principal amount of the bonds at the time outstanding hereunder,
then the Trustee shall take any such action if requested so to do by the
holders of fifty per cent (50%) in principal amount of the bonds in respect
of which such default shall have occurred; provided, however, in each case
that the Trustee in its discretion may demand indemnity satisfactory to it as
a condition precedent to the taking of any such action, and provided further
that the Trustee shall not be required, except in its sole discretion, to
exercise any right of entry upon or possession of the mortgaged property or
any part thereof.
In case the Trustee shall enter upon and take possession of the
mortgaged property, or any part thereof, as in this section provided, it
shall be entitled to collect and to receive all income, rents, tolls, issues
and profits of the mortgaged property or such part thereof, as the case may
be, and after paying the expenses of operating such property and of
conducting the business thereof, and of repairs, renewals, replacements and
maintenance, and all sums which may be paid for taxes, assessments,
insurance, liens or charges upon such property, or any part thereof, as well
as just and reasonable compensation for the services of the Trustee, and for
the services of its agents, attorneys, receivers, employees and counsel,
shall apply the money arising as aforesaid as follows:
(1) In the event the principal of the bonds outstanding hereunder,
or any of them, shall not have become due, to the payment of interest in
default, with interest thereon at the highest rate borne by any bonds at the
time outstanding hereunder, such payments to be made ratably to the persons
entitled thereto, without discrimination or preference and without reference
to the date of maturity of the respective coupons evidencing any such
interest except as provided in Section 7.04 hereof;
(2) In the event the principal of the bonds outstanding
hereunder, or any of them, shall have become due by lapse of time, by call
for redemption or by declaration, to the payment of all accrued and unpaid
interest on all bonds outstanding hereunder, with interest on the overdue
installments thereof at the highest rate borne by any bonds at the time
outstanding hereunder, without reference to the date of maturity of the
respective coupons representing any such interest, and thereafter to the
payment of the principal amount of all such bonds so due; in each case such
payments to be made ratably to the persons entitled thereto, without
discrimination or preference whatever except as otherwise provided in Section
7.04 hereof.
Upon payment in full of whatever may be due for principal and interest
as aforesaid, or for other purposes, and after reserving an amount sufficient
to pay the then next accruing installment of interest on all bonds
outstanding hereunder, the mortgaged property shall be returned to the
Company, or to whomsoever shall be lawfully entitled thereto.
SECTION 9.04. The Trustee shall waive any default hereunder and its
consequences and rescind any declaration of maturity of principal upon the
written request of the holders of seventy-five per cent (75%) in principal
amount of the bonds at the time outstanding hereunder or, if the default to
be waived be primarily in respect of a part only of the bonds at the time
outstanding hereunder, upon the written request of the holders of seventy-
five per cent (75%) in principal amount of the bonds in respect of which such
default shall have occurred, if prior to waiver or rescission such default
shall be made good, and any arrears of interest, with interest on overdue
installments of interest, for each bond in respect of which default shall
have occurred, at the rate borne by such bond, and all expenses of the
Trustee shall have been paid or provided for; provided, however, that there,
shall not be waived any default in the payment of the principal of any bonds
issued and outstanding hereunder at the date of maturity specified therein;
and in case of any such waiver or rescission, or in case any proceedings
taken by the Trustee on account of any such default shall have been
discontinued or abandoned, or determined adversely, then and in every such
case the Company, the Trustee and the bondholders shall be restored to their
former positions and rights hereunder, respectively, but in such waiver or
rescission shall extend to any subsequent or other default, or impair any
right consequent thereon.
SECTION 9.05. The Company will not, at any time, insist upon or plead,
or in any manner whatever claim, or take the benefit or advantage of any stay
or extension otherwise available to it under any law now or at any time here-
after in force, nor claim, take or insist upon any benefit or advantage of or
from any law now or hereafter in force providing for the valuation or
appraisement of the mortgaged property, or any part thereof, prior to any
sale or sales thereof to be made pursuant to any provision herein contained,
or to any decree, judgment or order of any court of competent jurisdiction;
nor, after any such sale or sales, claim or exercise any right under any
statute now or hereafter made or enacted by any state, or otherwise, to
redeem the property so sold, or any part thereof, and hereby expressly waives
all benefit and advantage of any such law or laws, and covenants that it will
not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to the Trustee
but will suffer and permit, the execution of every such power as though no
such law or laws bad been made or enacted.
SECTION 9.06. The proceeds of any judicial sale of the mortgaged
property, together with any funds at the time held by the Trustee and not
otherwise appropriated, shall, subject to all the provisions of Section 7.04
hereof, be applied as follows: First-To the payment of all costs of such sale
and of the suit or suits wherein such sale may have been ordered, including
all reasonable fees and all expenses of the Trustee together with reasonable
counsel fees and all costs of advertising and conveyance; Second-To the
payment of all other expenses of the trust hereby created, including all
moneys advanced by the Trustee or the bondholders hereunder for taxes, tax
deeds, assessments, abstracts, maintenance, repairs, liens and insurance,
with interest thereon at the highest rate borne by any bonds at the time
outstanding hereunder; Third-To the payment of the whole amount then due and
unpaid either for principal or interest or for both principal and interest
upon the bonds issued hereunder old remaining unpaid with interest on the
overdue installments of interest at the highest rate borne by any bonds at
the time outstanding hereunder; and in case such proceeds shall be
insufficient to pay in full the whole amount so due and unpaid, then to the
payment of such principal and interest ratably according to the aggregate of
such principal and interest, without preference or priority of any one series
of bonds over any other series or of principal over interest or of interest
over principal or of any installment of interest over any other installment
of interest, except as to the difference, if any, in the respective rates of
such interest.
The overplus of the purchase money, if any, shall then be paid to the
Company or whatsoever shall be lawfully entitled thereto.
SECTION 9.07. Tn case of any such judicial sale of the mortgaged
property, or any part thereof, any bondholder or bondholders, any committee
of bondholders, or the Trustee any bid for and purchase such property, or any
part hereof, and, upon compliance with the terms of sale, may hold, retain,
possess and dispose of such property in their or its own absolute right,
without further accountability, and shall be entitled, for the purpose of
making settlement or payment for the property purchased, for use and apply my
bonds hereby secured, and any matured and unpaid coupons, by presenting such
bonds and coupons in order that there may be credited thereon the sum appor-
tionable and applicable thereto out of the net proceeds of such sale; and
thereupon each such purchaser shall be credited on account of such purchase
price with the sum apportionable and applicable out of such net proceeds to
the payment of or as credit on the bonds and coupons so presented.
SECTION 9.08. Upon any sale of the mortgaged property under any of the
provisions of this article, all bonds then outstanding, if not previously
due, shall forthwith be and become due and payable.
SECTION 9.09. The Company covenants that (a) in case default shall be
made in the payment of any interest on any bond or bonds at any time
outstanding hereunder and such default shall continue for a period of thirty
(30) days, or (b) in case default shall be made in the payment of the
principal of any such bonds when the same shall have become payable, whether
at the maturity of such bonds or by a declaration as authorized by this
indenture or otherwise, --then, upon demand of the Trustee, the Company will
pay the Trustee at its principal office, in the City of Chicago and State of
Illinois, for the benefit of the holders of the bonds and coupons issued
hereunder and then outstanding, the whole amount then due and payable on all
such bonds and coupons, for interest or principal or both, as the case may
be, with interest on the over-due principal and the over-due installments of
interest at the highest rate borne by any bonds at the time outstanding
hereunder, and in case the Company shall fail to pay the same forthwith upon
such demand, the Trustee in its own name, and as trustee of an express trust,
shall be entitled to recover judgment against the Company for the whole
amount so due and unpaid.
The Trustee shall be entitled to recover judgment as aforesaid either
before or after or during the pendency of any proceedings for the enforcement
of the lien of this indenture, and the right of the Trustee to recover such
judgment shall not be affected by any entry or sale hereunder or by the
exercise of any other right, power or remedy for the enforcement of the
provisions of this indenture or the foreclosure of the lien hereof, and in
the case of a sale of the mortgage property and of the application of the
proceeds of sale to the payment of the indebtedness hereby secured, The
Trustee in its own name, and as trustee of an express trust, shall be
entitled to enforce payment of and to receive all amounts then remaining due
and unpaid upon any and all of the bonds and coupons issued hereunder and
then outstanding, for the benefit of the holders thereof, and shall be
entitled to recover judgment for any portion of the indebtedness remaining
unpaid, with interest as aforesaid. No recovery, of any such judgement by
the Trustee nor any attachment or levy of execution under any such judgment
upon the mortgaged property, or any part thereof, or upon any other property,
shall in any manner or to any extent affect the lien of this indenture upon
the mortgaged property, or any part thereof or any liens, rights, powers or
remedies of the Trustee or the holders of the bonds, and coupons issued
hereunder, but such liens, rights, powers and remedies shall continue
unimpaired as before.
The Trustee in its own name and as trustee of an express trust, shall
also be entitled to make and/or file proof of debt or claim in any equity
receivership, insolvency, liquidation, bankruptcy, proceedings for the relief
of debtors, or other proceedings to which the Company shall be a party, for
the whole amount of the indebtedness represented by the outstanding bonds and
coupons, for interest or principal or both, as the case may be, and for all
other sums then secured by or payable under this indenture, to do and perform
all such acts and things as the Trustee may deem necessary or advisable in
order to have any such debt or claim allowed in any such proceeding and to
receive payment of or on account of any such debt or claim.
Any moneys collected by the Trustee under this section shall be applied
by the Trustee:
First. To the payment of the costs and expenses of the proceeding
resulting in the collection of such moneys, including counsel fees, and of
the charges, expenses and liabilities incurred and all advances made, by the
Trustee under this indenture or in executing any trust or power hereunder, as
well as just and reasonable compensation for the services of the Trustee;
Second. To the payment of the amounts then due and unpaid upon the
bonds and coupons in respect whereof such moneys shall have been collected,
ratably and without preference or priority of any kind (except as provided in
Section 7.04 hereof), according to the amounts due and payable upon such
bonds and coupons, respectively, at the date fixed by the Trustee for the
distribution of such moneys, upon presentation of the several bonds and
coupons and stamping such payment thereon if partly paid and upon surrender
and cancellation thereof if fully paid; and
Third. To the payment of the surplus, if any, to the Company, its
successors or assigns, or to whomsoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.
All rights of action under this indenture or under any of the bonds or
coupons, enforceable by the Trustee, may be enforced by the Trustee without
the possession of any of the said bonds or coupons or the production thereof
on any trial or other proceeding relative thereto.
SECTION 9.10. No holder of any bond or coupon hereby secured shall have
any right as such holder to institute any suit, action or proceeding in
equity or at law, for the foreclosure of this indenture or for the execution
of any trust hereof, or for the appointment of a receiver, or for any other
remedy hereunder, or by reason hereof, all rights of action hereunder being
vested exclusively in the Trustee, except in case of refusal or neglect of
the Trustee to act after default and after request by the holders of twenty
per cent (20%) in principal amount of the bonds outstanding hereunder and
tender of indemnity satisfactory to the Trustee: provided, however, that
nothing herein contained shall be deemed to prevent the holder of any bonds
issued and outstanding hereunder on the maturity of any installment of
interest or of principal from proceeding by judicial process on such bonds or
the appertaining interest coupons, but not on this indenture, to collect the
amount due thereon for principal and interest according to the terms thereof.
SECTION 9.11. No remedy herein conferred upon or reserved to the Trustee
is intended to be exclusive of any other remedy or remedies;but each and
every such remedy shall be cumulative, and shall be in addition to every
other remedy given hereunder, or now or hereafter existing at law or in
equity or by statute. No delay or omission to exercise any right or power
accruing upon any default continuing as aforesaid shall impair any such right
or power or shall be construed to be a waiver of any such default, or
acquiescence therein; and every such right and power may be exercised from
time to time and as often as may be deemed expedient.
SECTION 9.12. If any covenant, agreement or waiver in this article or
elsewhere in this indenture contained be forbidden by any pertinent law, or
under any pertinent law be effective to render this indenture invalid or
unenforceable or to impair the lien hereof, then each such covenant, agree-
ment and waiver shall itself be, and is hereby declared to be, wholly
inoperative and this indenture shall be construed as if the same were not
included herein.
ARTICLE TEN.
PARTIAL RELEASES.
SECTION 10.01. Whenever the Company shall have sold or exchanged or
contracted to sell or exchange any part or parts of the mortgaged property,
the Trustee upon and in accordance with a written request of the Company,
signed by its president and attested by its secretary, under its corporate
seal, shall execute a release of such property; provided, however, that
(a) This section shall not be construed to authorize the release
of the mortgaged property as an entirety, or substantially as an entirety;
(b) In the case of properties sold or contracted to be sold the
same shall be for cash and/or for evidences of indebtedness secured by
purchase money lien upon the property sold. The proceeds from the sale of
any such property (or an amount in cash equivalent thereto) shall on or
before delivery of the release of such property be deposited with the
Trustee; provided, however, that if any property so sold shall be covered by
any underlying mortgage the proceeds from the sale of such property may be
deposited with the trustee under such underlying, mortgage to be held and
applied in accordance with the provisions thereof, the Company hereby
agreeing and directing that upon the satisfaction or release of such prior
mortgage any such proceeds from the sale of the released property remaining
in the possession or control of such mortgagee or trustee shall be forthwith
paid to and deposited with the Trustee to be held and applied in accordance
with the provisions of this section. Any evidences of indebtedness as
aforesaid received by the Trustee shall be by it held under the provisions of
this article. Unless the Company shall be in default hereunder interest
collected by the Trustee shall upon receipt thereof be paid to the treasurer
of the Company and principal shall, when received, be applied in like manner
as cash proceeds of property released under the provisions of this article.
The cash proceeds of the sale of any released property deposited with the
Trustee under any of the provisions of this section shall constitute pledged
funds hereunder and may be withdrawn under the provisions of Section 7.14
hereof for any of the purposes set forth in subparagraphs (b) and (c) of said
Section 7.14 in like manner as if such proceeds were insurance moneys;
(c) In the case of property exchanged or contracted to be
exchanged, the property acquired by the Company in exchange therefor shall be
bondable property within the definition contained in Section 1.01 hereof,
and shall forthwith upon such acquisition be and become subject to the lien
of this indenture as a first lien thereon, subject only to current taxes and
assessments and liens, charges and exceptions within the purview of Section
4.02 hereof, and there shall be delivered to the Trustee an opinion of
counsel to the effect that such property is so subject; provided that if any
property so exchanged to be subject to the lien of any underlying mortgage
the property acquired may be likewise subjected to the lien of such mortgage;
In the case of evidences of indebtedness delivered to the Trustee
responsive to the provisions of subparagraph (b) of this section there shall
be delivered to the Trustee an opinion of counsel to the effect that such
evidences of indebtedness are secured by a valid purchase money lien upon the
property against the release of which such evidences of indebtedness were
delivered;
(d) Every request of the Company for the release of mortgaged
property under the provisions of this section shall be accompanied by a
certified copy of a resolution or resolutions of the board of directors of
the Company and a certificate of an engineer, showing the terms of the sale
or exchange of the property to be released, and also showing that in the
opinion of said board of directors and the said engineer (1) such property to
be released is not necessary for the efficient conduct of the business of the
Company: (2) the proceeds realized or to be realized from the sale of the
property to be released represent the full value thereof or that the value of
the property received in exchange therefor is at least equal to that of the
property to be released; (3) such sale or exchange is advisable from the
standpoint of the Company, the Trustee and the holders of the bonds hereby
secured; and (4) in the case of property exchanged, the property acquired or
to be acquired is bondable property within the definition contained in
Section 1.01 hereof; provided, however, that if the aggregate value of the
property to be released, as stated in the said resolution and certificate
furnished in connection with the release thereof, is ten per cent (10%) or
more of the aggregate principal amount of all bonds at the time outstanding
hereunder, or if any part of the consideration to be received by the Company
for the property to be released consists of property which, within six (6)
months prior to the date of acquisition thereof by the Company, has been used
or operated by a person or persons other than the Company, then the engineer
signing such certificate shall be an independent engineer; and provided,
further, that if the value of the property to be released shall in and by
such resolution be stated to be less than five thousand dollars ($5,000), the
sworn statement as to the facts aforesaid of a vice president or the
treasurer of the Company or a person appointed by the Company and approved by
the Trustee may be substituted for such certificate of an engineer.
The aggregate principal amount of evidences of indebtedness at any time
held by the Trustee hereunder and secured by purchase money liens on property
released from the lien of this indenture shall never exceed fifteen per cent
(15%) in principal amount of the bonds at the time issued and outstanding
under this indenture, and the Trustee shall refuse to release any property
upon the basis of evidences of indebtedness secured by purchase money lien on
such property if, as a result of the acceptance of such evidences of
indebtedness, the aggregate principal amount of such evidences of
indebtedness then in the hands of the Trustee would be increased to an amount
in excess of fifteen per cent (15%) in principal amount of the bonds then
outstanding hereunder.
In the event any underlying mortgage shall be outstanding, the Trustee
may from time to time execute releases in respect of physical property
subject to the lien of such underlying mortgage and of this indenture
subordinate thereto upon exhibit to the Trustee of a release of the same
property executed by the trustee or trustees under the underlying mortgage to
which such property is subject, or in its absolute discretion may require
compliance with the provisions of this section in respect of the release of
such property.
SECTION 10.02. The proceeds of any one release received by the Trustee
under the provisions of Section 10.01 hereof, not exceeding five thousand
dollars ($5,000), may be forthwith paid over to the treasurer of the Company,
to be used for the purposes aforesaid and in due time, not exceeding ninety
(90) days after the date of such payment, accounted for to the Trustee,
otherwise to be returned to the Trustee.
The Trustee may in its discretion and at the expense of the Company
require additional evidence in respect of any statement or representations
filed or made responsive to the provisions of Section 10.01 hereof. The
Trustee, however, shall be fully protected in acting upon the instruments
made and filed responsive to said section.
SECTION 10.03. In case any part or parts of the mortgaged property or
any interest therein shall be taken under any condemnation or eminent domain
proceedings, the net proceeds realized by the Company therefrom shall be
treated in the same manner as though realized from a voluntary sale of such
property under the provisions hereof.
SECTION 10.04. In favor of every purchaser from the Company and of every
person claiming any interest therein by, through or under it, every release
of property from the lien of this indenture by the Trustee under the provi-
sions of this article shall be valid, and no such purchaser or person need
inquire as to the power or authority of the Trustee to give any such release
or see to the application of the purchase money.
SECTION 10.05. In case the mortgaged premises shall be in the possession
of a receiver lawfully appointed, the powers in and by this article conferred
upon the Company may be exercised by such receiver, with the approval of the
Trustee, and if the Trustee shall be in possession of the mortgaged property
under any provision of this indenture, then all the powers by this article
conferred upon the Company may be exercised by the Trustee.
SECTION 10.06. At any time when there is no default hereunder the
Company, anything in this indenture to the contrary notwithstanding, may,
free from the lien hereof, sell, exchange, or otherwise dispose of any
materials or other movable property, including machinery, which may have
become worn out, disused or undesirable for use; provided, however, that upon
or before doing so the Company shall renew the same or substitute therefor
other property suitable to its business and of equal or greater value, and
shall subject such renewed or substituted property to the lien hereof.
ARTICLE ELEVEN.
CONCERNING THE TRUSTEE.
SECTION 11.01. The Trustee hereby accepts the trusts imposed upon it by
this indenture, but only upon and subject to the following express terms and
conditions:
(a) The Trustee in accepting the conveyance and assignment of the
mortgaged property, whatever it may be, and whether under this indenture or
some instrument supplemental hereto, acts solely as trustee hereunder and not
in its individual capacity, and all persons having any claim against the
Trustee arising by reason of such conveyance or transfer, shall look only to
the trust estate for payment or satisfaction thereof. The Trustee may
execute any of the trusts or powers hereof and perform any duties required of
it by or through attorneys, agents, receivers, or employees, and shall be
entitled to advice of counsel concerning all matters of trust hereof and its
duties hereunder, and may in all cases pay such reasonable compensation as it
shall deem proper to all such attorneys, agents, receivers and employees as
may reasonably be employed in connection with the trusts hereof, and the
Company covenants and agrees to repay upon demand all such outlays and
expenditures so incurred, together with interest thereon at the rate of six
per cent (6%) per annum from the date of any disbursement therefor.
(b) The Trustee shall not be responsible for any recitals herein
or in said bonds, or for insuring the mortgaged property or collecting any
insurance moneys, or for the execution, validity, sufficiency, recording or
registration of this indenture or of the lien intended to be created hereby,
or for the filing or refiling of this indenture or of any supplemental in-
denture or instrument of further assurance or for the validity thereof or for
the affixing or cancellation of any revenue stamps, or for the sufficiency of
the security for the bonds issued under or intended to be secured hereby, or
for the value, validity, or title of any of the mortgaged property, or for
the payment of or for keeping down taxes, charges, assessments or liens upon
the same, or otherwise as to the maintenance of the security thereof, and the
bearers or registered owners of all bonds issued hereunder or under any
indenture supplemental hereto hereby release the Trustee of and from any and
all liability and responsibility which may now or hereafter be imposed for
its failure to act in respect to such matters. The Trustee shall not be
bound to ascertain or inquire as to the performance or observance of any
covenants, conditions or agreements hereof on the part of the Company; but
the Trustee may require of the Company full information and advice as to the
performance of the covenants, conditions and agreements aforesaid and as to
the condition of the mortgaged property. The recitals and statements in this
indenture and in said bonds and coupons contained shall be taken as
statements by the Company and shall not be considered as made by or as
imposing any obligation or liability upon the Trustee.
(c) The Trustee shall not be accountable for the validity, sale,
disposition or other use of any bonds authenticated or delivered hereunder or
under any indenture supplemental hereto or of any of the proceeds of such
bonds. Any money received by the Trustee under any provision of this
indenture may be treated by it, until it is required to pay out the same
conformably herewith, as a deposit without any liability for interest save
such as it may agree to pay thereon. Holders of bonds and/or coupons shall
not be entitled to interest on funds deposited for payment of such bonds
and/or coupons. The Trustee or any company in which the Trustee may be
interested, or any officer, stockholder, director, or agent of the Trustee or
of any such company, in their respective individual or fiduciary capacities,
may acquire, hold or dispose of bonds and coupons, and may engage in or be
interested in any financial or other transaction with the Company or any
corporation in which the Company may be interested, and may act as depositary
or depositaries, trustee or trustees, agent or agents for any committee or
body of holders of bonds or securities, whether or not issued hereunder, each
with the same rights as though the Trustee were not trustee hereunder.
(d) The Trustee shall be protected and shall incur no liability to
anybody in acting upon any notice, request, resolution, consent, certificate,
order, report, affidavit, letter telegram, bond, coupon or other instrument,
paper or document believed by it to be genuine and correct and to have been
signed, sent or presented by the proper person or persons, and in taking any
action pursuant to any order, decree or judgement of any court in a
proceeding purporting to be instituted under Chapter X of the Bankruptcy Act
as the same may be amended from time to time, or any other proceeding, even
though such action may be later determined to be invalid, and shall incur no
liability for any such action. The Trustee shall not be bound to recognize
any person as a holder of any bond or coupon or to take any action at his
request unless such bond or coupon shall be deposited with the Trustee, or
submitted to it for inspection. Any action taken by the Trustee pursuant to
this indenture upon the request or authority or consent of any person who at
the time of making such request or giving such authority or consent is the
owner of any bond secured hereby, shall be conclusive and binding upon all
future owners of the same bond and upon bonds issued in exchange therefor or
in place thereof.
(e) The Trustee shall not be compelled to do any act hereunder, or
to take any action toward the execution or enforcement of the trusts hereby
created or to prosecute or to defend any suit in respect hereof unless
indemnified to its satisfaction against loss, cost, liability and expense.
(f) As to the existence or nonexistence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding the Trustee
shall be entitled to rely upon a certificate of the Company signed by its
president and attested by its treasurer or secretary as sufficient evidence
of the facts therein contained, and shall also be at liberty to accept a
similar certificate to the effect that any particular dealing, transaction or
action is necessary or expedient, but may, in its discretion, at the
reasonable expense of the Company in every case secure such further evidence
as it may think necessary or advisable, but shall in no case be bound to
secure the same. The Trustee may accept a certificate of the secretary of
any corporation under its corporate seal, to the effect that a resolution in
the form therein set forth has been adopted by the board of directors of said
corporation, as conclusive evidence that said resolution has been duly
adopted, and is in full force and effect. The Trustee may, except as herein
otherwise provided, in relation to this indenture act upon the opinion or
advice of any attorney, valuator, surveyor, engineer, accountant, or other
expert, whether retained or selected by the Trustee, the Company, or
otherwise, and shall not be responsible for any loss resulting from any
action or nonaction in accordance with any such opinion or advice.
(g) The Trustee shall not be liable for anything in connection
herewith except for its own willful default and, without limiting the
generality of the foregoing, shall not be liable for any action taken or
omitted to be taken in good faith and believed by it to be within the
discretion or power conferred upon it by this indenture, or be responsible
for the consequences of any oversight or error of judgment, and shall be
answerable only for its own defaults, and not for those of any person
employed and selected with reasonable care.
(h) The Trustee shall not be required to take notice or be deemed
to have notice of any default hereunder unless the Trustee shall be
specifically notified in writing of such default by the holders of at least
five per cent (5%) in principal amount of the bonds hereby secured and then
outstanding, and all notices or other instruments required by this indenture
to be delivered to the Trustee must, in order to be effective, be delivered
at the office of the Trustee.
(i) The Trustee shall not be personally liable for any debts
contracted or for damages to persons or to personal property injured or
damaged, or for salaries or nonfulfillment of contracts during any period in
which the Trustee may be in the possession of or manage the mortgaged
property as in this indenture provided.
(j) At any and all reasonable times, the Trustee and its duly
authorized agents, attorneys, experts, engineers, accountants and
representatives shall have the right fully to inspect any and all of the
mortgaged property, and all books, papers and contracts of the Company, and
to take such memoranda from and in regard thereto as may be desired, but
shall have no duty to make any such inspection.
(k) The Trustee shall not be required to give any bond or surety
in respect of the execution of the said trusts and powers or otherwise in
respect of the premises.
(l) The Trustee shall not be required to authenticate any bonds,
permit the withdrawal of any cash, release any property, or take any other
action, if at the time there exists to its knowledge any default in respect
of any of the covenants, agreements or provisions of this indenture.
(m) The duties and obligations of the Trustee to the Company and
to all others shall be determined solely by the express provisions of this
indenture and no duty, obligation, or covenant shall be implied or read into
this indenture against the Trustee. All questions or controversies as to the
liability of the Trustee hereunder shall be governed by the laws of the State
of Illinois, and no action, suit or any other legal proceeding against the
Trustee shall be instituted or conducted in any other state or country, ex-
cept with the written consent of the Trustee.
(n) The Trustee may, but shall have no obligation to, construe any
of the provisions of this indenture, in so far as the same may appear to be
ambiguous or inconsistent with any other provisions hereof; and the Trustee
may rely upon any such construction of any provision hereof made in good
faith and upon advice of counsel.
(o) Upon any application by the Company for the authentication and
delivery of bonds, or for the taking of any other action provided for herein
or in any indenture supplemental hereto, the resolutions, orders, receipts,
certificates, statements or other instruments required by any of the
provisions of this indenture or of any indenture supplemental hereto be
delivered to the Trustee as a condition to the taking or permitting by it of
such action may be received by the Trustee as conclusive evidence of all the
facts and matters therein set forth, and in such case the Trustee shall be
fully warranted, justified and protected in acting on the faith thereof, not
only in respect of the facts but also in respect of the matters of opinion or
judgment therein set forth; and before granting any such application, the
Trustee shall not be bound to make any further investigation into the facts
or matters stated in any such resolution, order, receipt, certificate,
statement or other instrument, unless requested in writing so to do by the
holders of not less than twenty per cent (20%) in principal amount of the
bonds then outstanding hereunder, and furnished with adequate security and
indemnity against the costs and expenses of such investigation; but it may do
so in its discretion. If the Trustee shall determine or shall be requested,
as aforesaid, to make such further investigation, it shall make or cause to
be made such independent investigation as it may see fit, and it shall be
either to examine the books, records and property of the Company, entitled
personally or by agent or attorney; and in such case if satisfied of the
truth and accuracy of the facts and matters stated in such resolution, order,
receipt, certificate, statement or other instrument, and that such action is
in accordance with the provisions of this indenture and of such supplemental
indenture, it shall be obliged to take or permit to be taken the action so
applied for. If after such investigation or other inquiry the Trustee shall
determine to take or permit to be taken the action so applied for, it shall
not be liable for any action by it taken or permitted to be taken in good
faith. The reasonable expense of every such investigation shall be paid by
the Company, or, if paid by the Trustee, shall be repaid by the Company upon
demand, with interest at the rate of six per cent (6%) per annum.
(p) The Trustee shall not be compelled to do any act or to make
any payment hereunder or in respect hereof unless put in funds for the
purpose. Wherever any provision is made herein for the payment of moneys by
the Trustee, at any time, the Trustee shall in no event be liable to anyone
beyond the amount of moneys deposited with it for any such purpose.
(q) The Trustee shall be under no duty in respect of any tax which
may be assessed against it or against the holders of bonds issued hereunder
in respect of the bonds.
SECTION 11.02. The Trustee shall have a first lien hereunder upon the
mortgaged property for reasonable compensation, expenses, advances,
liabilities, damages, and counsel fees, incurred in and about the execution
of the trusts hereby created and the exercise and performance of the powers
and duties of the Trustee hereunder and the cost and expense of defending the
Trustee against any liability in the premises of any character whatsoever,
other than liability arising from the negligence of the Trustee. The Company
hereby covenants and agrees to pay unto the Trustee reasonable compensation
for its services in the premises, to reimburse it for all advances, counsel
fees and other expenses reasonably made or incurred by it, and to indemnify
it and save it harmless against any and all liability and damage incurred in
and about the execution of the trusts hereby created, together with interest
thereon at the rate of six per cent (6%) per annum from the date of any
disbursement therefor. The compensation of the Trustee shall not be limited
to or by any provision of law in regard to the compensation of a trustee of
an express trust.
SECTION 11.03. The Trustee may at any time resign from the trust hereby
created by giving thirty (30) days' written notice to the Company, and such
resignation shall take effect at the end of said thirty (30) days, or upon
the earlier appointment of a successor Trustee by the bondholders or by the
Company. Such notice may be served personally or sent by registered mail.
SECTION 11.04. The Trustee may be removed at any time by an instrument
or concurrent instruments in writing, delivered to the Trustee, and to the
Company, and signed by the holders of a majority in principal amount of the
bonds hereby secured and then outstanding.
SECTION 11.05. In case the Trustee hereunder shall resign or be removed,
or be dissolved, or shall be in course of dissolution or liquidation or
otherwise become incapable of acting hereunder, or in case the Trustee shall
be taken under the control of any public officer or officers, or of a
receiver appointed by any court, a successor may be appointed by the holders
of a majority in principal amount of the bonds hereby secured and then
outstanding by an instrument or concurrent instruments in writing, signed by
such holders, or by their attorneys in fact, duly authorized; provided,
nevertheless, that in case of any such event the Company by an instrument
executed by order of its board of directors, and signed by its president and
attested by its secretary, under its corporate seal, any appoint a temporary
Trustee to fill such vacancy until a successor Trustee shall be appointed by
the bondholders in the manner above provided; and any such temporary Trustee
so appointed by the Company shall immediately and without further act be
superseded by the Trustee so appointed by such bondholders. Every such
successor or temporary Trustee shall be a trust company or bank in good
standing, duly qualified to act as trustee hereunder, having a capital and
surplus of not less than two million dollars ($2,000,000), if there be such
a trust company or bank willing, qualified and able to accept the trust upon
reasonable or customary terms.
SECTION 11.06. Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to its predecessor, and also to the Company,
an instrument in writing accepting such appointment hereunder, and thereupon
such successor Trustee, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, trusts,
duties and obligations of its predecessor; but such predecessor shall,
nevertheless, on the written request of the Company, or of its successor,
execute and deliver an instrument transferring to such successor Trustee all
the estate, properties, rights, powers, and trusts of such predecessor
hereunder; and every predecessor Trustee shall deliver all securities and
moneys held by it to its successor. Should any deed, conveyance or in-
strument in writing from the Company be required by any successor Trustee for
more fully and certainly vesting in such Trustee the estates, rights, powers
and duties hereby vested or intended to be vested in the predecessor Trustee,
any and all such deeds, conveyances and instruments in writing shall, on
request, be executed, acknowledged and delivered by the Company. The
resignation of any Trustee and the instrument or instruments removing any
Trustee and appointing a successor hereunder, together with all deeds,
conveyances, and other instruments provided for in this article, shall, by
and at the expense of the Company, be forthwith filed for record in each
county wherein any part of the mortgaged properties is located.
SECTION 11.07. Any corporation into which the Trustee or any successor
to it in the trusts created by this indenture may be merged, or with which it
or any successor to it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Trustee or any successor to it shall
be a party, shall be the successor Trustee under this indenture without the
execution or filing of any paper or any other act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
SECTION 11.08. The Trustee may raise and borrow money on the security of
the mortgaged property, or any part thereof, for the purpose of paying off or
discharging any mortgage or charge for the time being charged on the
mortgaged property, or any part thereof, in priority to this indenture. The
Trustee may raise and borrow such moneys as aforesaid at such rate of
interest and generally on such terms and conditions as the Trustee shall
think fit, and may secure the repayment of the moneys so raised or borrowed
with interest on the same, by mortgaging or otherwise charging the mortgaged
property, or any part thereof, in such manner and form as the Trustee shall
think fit.
SECTION 11.09. In case the Company shall fail seasonably to pay any tax,
assessment or governmental or other charge upon any part of the mortgaged
property, or shall fail to pay when due the principal or interest of any
indebtedness secured by a lien prior to this indenture on any part of the
mortgaged property, or to procure and maintain reasonable and proper
insurance thereon as aforesaid, the Trustee may, but shall have no duty to,
pay such tax, assessment or governmental charge or principal or interest, or
procure and maintain such insurance, without prejudice, however, to any
rights of the Trustee or the bondholders hereunder arising in consequence of
such failure; and any amount at any time so paid under this section, with
interest thereon from the date of payment at the highest rate borne by any
bonds at the time outstanding hereunder, shall be repaid by the Company upon
demand, and shall be secured by this indenture in preference and priority to
the lien hereof for the security of the bonds issued and to be issued
hereunder and the same shall be given a preference in payment over any of
said bonds, and shall be first paid out of the proceeds of any sale of the
mortgaged property, if not otherwise paid by the Company, but the Trustee
shall be under no obligation to make any such payment unless indemnified to
its satisfaction against the expense thereof or furnished with means
therefor.
SECTION 11.10. At any time or times, for the purpose of conforming to
any legal requirements, restrictions or conditions in any State or
jurisdiction in which any part of the mortgaged property then subject, or to
become subject, to this adventure may be located, the Company and the Trustee
shall have power to appoint, and, upon the request of the Trustee the Company
shall for such purposes join with the Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to appoint
another corporation or one or more persons approved by the Trustee either to
act as separate trustee or trustees, or co-trustee or co-trustees jointly
with the Trustee of all or any of the property subject to the lien hereof.
In the event that the Company shall not have joined in such appointment
within fifteen (15) days after the receipt by it of a request so to do, the
Trustee alone shall have power to make such appointment.
Every separate trustee and every co-trustee, other than any trustee
which may be appointed as successor to Harris Trust and Savings Bank, shall,
to the extent permitted by law, but to such extent only, be appointed subject
to the following provisions and conditions, namely:
(1) The rights, powers, duties and obligations conferred or
imposed upon trustees hereunder or any of them shall be conferred or imposed
upon and exercised or performed by the Trustee, or the Trustee and such
separate trustee or separate trustees or co-trustee or co-trustees jointly,
as shall be provided in the supplemental indenture appointing such separate
trustee or separate trustees or co-trustee or co-trustees, except to the
extent that under any law of any jurisdiction in which any particular act or
acts are to be performed the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations shall be exercised and performed by such separate trustee or
separate trustees or co-trustee or co-trustees;
(2) The bonds secured hereby shall be authenticated and delivered,
and all powers, duties, obligations and rights, conferred upon the Trustee in
respect of the custody of all bonds and other securities and of all cash
pledged or deposited hereunder, shall be exercised solely by Harris Trust and
Savings Bank or its successor in the trust hereunder;
(3) The Company and the Trustee, at any time by an instrument in
writing executed by them jointly, may accept the resignation of or remove any
separate trustee or co-trustee appointed under this section or otherwise,
and, upon the request of the Trustee, the Company shall, for such purpose,
join with the Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to make effective such
resignation or removal. In the event that the Company shall not have joined
in such action within fifteen (15) days after the receipt by it of a request
so to do, the Trustee alone shall have power to accept such resignation or to
remove any such separate trustee or co-trustee. A successor to a separate
trustee or co-trustee so resigned or removed may be appointed in the manner
provided in this Section; and
(4) No trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder.
Any notice, request or other writing, by or on behalf of the holders of
the bonds, delivered to Harris Trust and Savings Bank or its successors in
the trusts hereunder, shall be deemed to have been delivered to all of the
then separate trustees or co-trustees as effectually as if delivered to each
of them. Every instrument appointing any trustee or trustees other than a
successor to Harris Trust and Savings Bank shall refer to this indenture and
the conditions in this article expressed, and upon the acceptance in writing
by such separate trustee or trustees or co-trustee or co-trustees, he, they
or it shall be vested with the estates or property specified in such
instrument, either jointly with Harris Trust and Savings Bank or its
successor, or separately, as may be provided therein, subject to all the
trusts, conditions and provisions of this indenture; and every such
instrument shall be filed with Harris Trust and Savings Bank or its successor
in the trust hereunder. Any separate trustee or trustees, or any co-trustee
or co-trustees, may at any time by an instrument in writing constitute Harris
Trust and Savings Bank or its successor in the trust hereunder his, their or
its agent or attorney-in-fact, with full power and authority, to the extent
which may be permitted by law, to do any and all acts and things and exercise
all discretion authorized or permitted by him, them or it, for and in behalf
of him, then or it, and in his, their or its name. In case any separate
trustee or trustees or co-trustee or co-trustees, or a successor to any of
then, shall die, become incapable of acting, resign or be removed, all the
estate, property, rights, powers, trusts, duties and obligations of said
separate trustee or co-trustee, so far as permitted by law, shall be vested
in and be exercised by Harris Trust and Savings Bank or its successor in the
trust hereunder, without the appointment of a new trustee as successor to
such separate trustee or co-trustee.
ARTICLE TWELVE.
EFFECT OF MERGER CONSOLIDATION, ETC.
SECTION 12.01. Nothing in this indenture or any of the bonds contained
shall prevent any merger or consolidation of the Company (either singly or
with one or more other corporations) into or with, or any sale, conveyance,
transfer or lease, subject to the lien of this indenture, of all the
mortgaged property as, or substantially as, an entirety to, any corporation
lawfully entitled to acquire or lease and operate the same; provided,
however, and the Company covenants and agrees that, such consolidation,
merger, sale, conveyance, transfer or lease shall be upon such terms as in no
respect to impair the lien and security of this indenture or any of the
rights or powers of the Trustee or of the bondholders hereunder; and
provided, further, that any such lease shall contain a provision that, if any
event of default described in Section 9.01 shall exist which such lease is
made, or shall occur while it is in effect, such lease may be terminated at
any time while such event of default exists, by the Trustee or by the
purchaser of the property so leased at any sale hereunder; and provided,
further, that in case the Company shall be merged or consolidated as
aforesaid (either singly or with one or more other corporations) into or with
any other corporation, or shall sell, convey or transfer as aforesaid to
another corporation all the mortgaged property as, or substantially as, all
entirety (but not in case of any lease) the corporation resulting from such
merger or consolidation or into or with which the Company shall have been
merged or consolidated or which shall have received a conveyance or transfer
as aforesaid (such corporation being sometimes herein called the "successor
corporation") shall, prior to or contemporaneously with such merger,
consolidation, conveyance or transfer, execute, and promptly cause to be re-
corded, a supplemental indenture to and with the Trustee, satisfactory to the
Trustee, whereby the successor corporation shall assume and agree to pay duly
and punctually the principal of and interest on the bonds issued hereunder in
accordance with the provisions of said bonds and any coupons thereto
appertaining and this indenture, and shall agree to perform and fulfill all
the terms, covenants and conditions of this indenture binding upon the
Company.
SECTION 12.02. Upon the execution by any successor corporation of the
supplemental indenture provided for in Section 12.01, such successor
corporation shall thereupon succeed to the Company with the same effect as if
it had been named herein as the mortgagor company and in the bonds and
coupons as the obligor thereon or maker thereof, and the successor
corporation may thereupon use any bonds theretofore executed by the Company
or any intermediate successor corporation and may cause to be signed, issued
and delivered either in its own name or in the name of The Lincoln Telephone
and Telegraph Company or in the name of any intermediate successor
corporation any or all such bonds which shall not theretofore have been
signed by the Company or any intermediate successor corporation and
authenticated by the Trustee; and upon the application of the successor
corporation in lieu of the Company, and subject to all the terms, conditions
and restrictions in this indenture prescribed with respect to the
authentication and delivery of bonds, the Trustee shall authenticate and de-
liver any of such bonds which shall have been previously signed and delivered
by the officers of the Company or any intermediate successor corporation to
the Trustee for authentication, and any of such bonds which the successor
corporation shall thereafter, in accordance with the provisions of this
indenture, cause to be signed by its appropriate officers and delivered to
the Trustee for such purpose. All the bonds so issued shall in all respects
have the same legal rank and security as the bonds theretofore or thereafter
issued in accordance with the terms of this indenture as though all of said
bonds had been issued at the date of the execution hereof.
SECTION 12.03. In respect of property owned by the Company at the time
of any consolidation, merger, sale, conveyance or transfer as provided in
Section 12.01, and substitutions, replacements, accessions, additions,
alterations, improvements, betterments, developments, extensions and
enlargements thereto subsequently made, constructed or acquired, the rights
and duties of the successor corporation hereunder shall be the same as the
rights and duties of the Company would have been had such consolidation,
merger, sale, conveyance or transfer not taken place.
SECTION 12.04. In respect of property at the time of such consolidation,
merger, sale, conveyance or transfer owned by the successor corporation,
and/or owned by any other corporation or corporation merged or consolidated
into or with, or the property of other corporations which is conveyed or
transferred to, such successor corporation, and/or of property thereafter
acquired by the successor corporation, except said substitutions,
replacements, accessions, additions, alterations, improvements, betterments,
developments, extensions and enlargements to, of or upon the property owned
by the Company referred to in Section 12.03, this indenture or the
supplemental indenture to be recorded as above provided in Section 12.01
shall not become or be a lien upon any of such property except so much
thereof as shall be subjected to the lien hereof by supplemental indenture,
duly executed, subject, however, to the provisions of Section 12.01. Such
supplemental indenture may, but need not necessarily, form one and the same
instrument with the supplemental indenture provided for in said Section
12.01. Nothing herein shall be construed to prevent such supplemental
indenture, at the option of the Company or the successor corporation, from
subjecting to the lien hereof all or any part of the property of such
successor corporation then owned or thereafter acquired.
SECTION 12.05. In case any other corporation or corporations shall be
merged or consolidated into or with the Company under such circumstances that
the corporate identity of the Company is not changed, the rights and duties
of the Company, with respect to the property owned by such other corporation
or corporations at the time of such merger or consolidation which is acquired
by the Company by virtue of the merger or consolidation and charged to its
fixed property accounts, shall be the same as if such property had been
acquired by the Company by purchase and charged to its fixed property
accounts as of the date of such merger or consolidation.
SECTION 12.06 The Company covenants that if bonds at any time be issued
in any new name the Company will provide for the stamping or for the exchange
of any bonds previously issued for bonds of the same tenor and amounts issued
in any such new name, at the option of the holders and without expense to
them, and the Trustee shall also do such acts as may be necessary on its part
to that end, including authentication of the Bonds so to be issued in
exchange.
SECTION 12.07. In case of any such consolidation, merger, sale,
conveyance, transfer or lease the Trustee shall be furnished with an opinion
of counsel, which opinion the Trustee may receive as conclusive evidence that
the applicable provisions of Sections 12.01 to 12.04, inclusive, or any of
them, have been complied with or that any supplemental indenture made under
any of said sections of this Article Twelve complies with the conditions and
provisions hereof.
ARTICLE THIRTEEN.
MISCELLANEOUS PROVISIONS.
SECTION 13.01. Unless default shall have been made in the due and
punctual payment of the principal or interest of the bonds hereby secured, or
of some part thereof, or in the due and punctual performance and observance
of some covenant, condition, agreement or undertaking herein contained, and
unless such default shall have continued beyond the period of grace, if any,
hereinbefore provided in respect thereof, the Company shall be suffered and
permitted to retain actual possession and control of all the mortgaged
property, and to manage, operate and use the same and every part thereof,
with the rights and franchises appertaining thereto, and to collect, receive,
take, use and enjoy the tolls, earnings, income, rents, issues and profits
thereof.
SECTION 13.02. When all of the bonds and coupons hereby secured shall
have been paid or redeemed or the Company shall have provided for such
payment or redemption by depositing in cash with the Trustee the entire
amount necessary for such payment or redemption, and shall also have paid, or
caused to be paid, all sums accrued and payable hereunder by the Company,
then and in that case, all the mortgaged property shall revert to the
Company, and the estate, rights, title and interest of the Trustee in respect
thereof shall thereupon cease, determine and become void, and the Trustee
shall pay all moneys then held by it hereunder, except any moneys deposited
for the payment or redemption of bonds outstanding hereunder, and/or for the
payment of interest on any such bonds, to the Company, and shall deliver to
the Company all securities pledged by it hereunder and then held by the
Trustee, and the Trustee in such case, upon payment of all proper charges and
upon the cancellation of all bonds and coupons for the payment of which cash
shall not have been deposited in accordance with the provisions of this
indenture, shall, upon request, execute, acknowledge and deliver proper
instruments acknowledging satisfaction of this indenture. Cash deposited for
the payment of bonds and coupons under the provisions of this indenture shall
be held by the Trustee as a special trust fund for account of the holder or
holders of said bonds and coupons, and be applied to the payment of such
bonds and coupons upon presentation and surrender thereof. After the deposit
of such cash as aforesaid such bonds and coupons shall not be entitled to any
benefit of or from this indenture. Upon the expiration of a period of ten
(10) years from and after the date of deposit thereof, all cash deposited by
the Company with the Trustee under the provisions of this section and not
disbursed by the Trustee in payment of bonds and coupons shall be by the
Trustee. paid over to the Company and thereafter the Trustee shall be under
no duty or obligation whatsoever in respect of the bonds and coupons not
theretofore presented to it and paid, and the holders of such bonds and
coupons shall be entitled to look only to the Company for payment thereof.
SECTION 13.03. No recourse under or upon any obligation, covenant or
agreement contained in this indenture or in any bond or coupon, or under or
upon any indebtedness hereby secured, or because of the creation of any
indebtedness hereby secured, shall be had against any incorporator or past,
present or future stockholder, officer or director as such of the Company, or
of any predecessor or successor corporation, either directly or through the
Company, by the enforcement of any assessment, or through any receiver,
assignee or trustee in bankruptcy, or by any other legal or equitable
proceedings, or on the ground of any representation, implication or inference
arising from or concerning the capitalization of the Company, or of any
predecessor, assignee, grantee, or successor company, or otherwise, and
whether by virtue of any statute, constitution, contract, express or implied,
rule of law, or otherwise, it being expressly agreed and understood that this
indenture and the obligations hereby secured are solely corporate
obligations, and that no personal liability whatever shall attach to or, be
incurred by, the incorporators or past, present or future stockholders,
officers or directors as such of the Company, or of any predecessor or
successor company, or any of them, because of the incurring of the in-
debtedness hereby authorized, or under or by reason of any of the
obligations, covenants or agreements contained in this indenture or in any of
the bonds or coupons, or to be implied therefrom; and that any and all
personal liability of every name and nature, and any and all rights and
claims against every such incorporator and past, present or future
stockholder, officer or director, as such, whether arising at common law or
in equity, or created or to be created by statute or constitution, are hereby
expressly released and waived as a condition of, and as a part of the
consideration for, the execution of this indenture and the issue of bonds and
interest obligations hereby secured; provided that nothing herein shall
release any liability arising out of any unlawful abstraction or diminution
of the assets of the Company.
SECTION 13.04. Nothing expressed or mentioned in or to be implied from
this indenture, or the bonds issued hereunder, is intended or shall be
construed to give to any person or corporation, other than the parties hereto
and the holders of the bonds and coupons secured by this indenture, and legal
or equitable right, remedy or claim under or in respect of this indenture, or
any covenants, conditions and provisions herein contained, this indenture and
all the covenants, conditions and provisions hereof being intended to be and
being for the sole and exclusive benefit of the parties hereto and the
holders of the bonds and coupons hereby secured as herein provided.
SECTION 13.05. From time to time the holders of seventy-five per cent
(75%) in principal amount of all the bonds hereby secured and at the time
being outstanding (exclusive of bonds disqualified by reason of the Company's
interest therein), by an instrument or instruments in writing signed by such
holders and filed with the Trustee, shall, subject to the provisions
hereinafter set forth, have power to assent to and authorize any modification
of any of the provisions of this indenture or of any indenture supplemental
hereto that shall be proposed by the Company; and any action herein
authorized to be taken with the assent or authority given as aforesaid of the
holders of seventy-five per cent (75%) in principal amount of the bonds
hereby secured and at the time being outstanding shall be binding upon the
holders of all of the bonds hereby secured and upon the Trustee, as fully as
though such action were specifically and expressly authorized by the terms of
this indenture; provided, always, that, without the written approval or
consent of the holders of each bond affected thereby, (a) the date of
maturity of no bond shall be extended nor the rate of interest thereon
reduced nor the time for the payment of such interest extended nor the
principal thereof reduced nor any premium payable on redemption thereof
reduced, and (b) no such modification shall deprive the holder of any bond of
the benefit of the lien of this indenture for the security of such bond, and
(c) no such modification shall reduce the percentage of the principal amount
of the bonds the assent and authorization of the holders of which are
necessary to the making of modifications as herein set forth; and provided,
further, that no waiver or modification of any right which shall have been
specifically provided in respect of any particular series of bonds shall be
effective unless assented to by the holders of seventy-five per cent (75%) in
principal amount of the bonds of such particular series (exclusive of bonds
of such series disqualified by reason of the Company's interest therein).
Any modification of the provisions of this indenture so made as aforesaid
shall be set forth in a supplemental indenture between the Company and the
Trustee, which shall, if deemed advisable by counsel, be recorded in the same
manner as this indenture. For the purposes of this section, bonds shall be
deemed to be affected by any modification if such modification adversely
affects or diminishes the rights of the holders of such bonds against the
Company or against the mortgaged property. For the purposes of this section,
the Company shall be deemed to have a disqualifying interest in all bonds
owned or controlled, directly or indirectly, by the Company or by any
corporation which directly or indirectly controls the Company or is directly
or indirectly controlled by the Company or by any corporation which is under
direct or indirect common control with the Company.
SECTION 13.06. Without prejudice to the provisions of Section 13.05
hereof or to any other provision of this indenture and without compliance
with any of the provisions of said Section 13.05, the Company may from time
to time by a supplemental indenture executed by the Company pursuant to a
resolution of its board of directors and by the Trustee, and, if deemed
advisable by counsel, recorded in like manner as this indenture:
(a) Impose upon the Company conditions or restrictions additional
to, but not in diminution of, those contained in this indenture or in any
indenture supplemental hereto respecting the issuance of additional bonds,
the release of property from the lien of this indenture and/or the
application of the proceeds of insurance moneys and/or the proceeds of
released property; and/or
(b) Undertake covenants additional to but not inconsistent with
those contained in this indenture, cure any ambiguity, or cure, correct or
supplement any defective or inconsistent provision contained herein or in any
indenture supplemental hereto; and/or
(c) Amend this indenture to the extent necessary to bring the same
into compliance with the mandatory provisions of, and to permit the same to
be qualified under, the Trust Indenture Act of 1939.
SECTION 13.07. From and after the execution of any supplemental
indenture in accordance with the provisions of Section 2.05, Section 13.05 or
Section 13.06 hereof the covenants and provisions contained therein shall be
deemed a part of this indenture and shall bind and benefit the Company, the
Trustee and the bondholders as effectually as the covenants and provisions
contained in this indenture at the time of its execution, and the Trustee and
the bondholders shall have the same remedies for a breach thereof as are
provided in respect of a breach of the provisions and covenants now contained
in this indenture.
SECTION 13.08. Any request, direction or other instrument required by
this indenture to be signed and executed by the bondholders may be in any
number of concurrent writings of similar tenor and may be signed or executed
by such bondholders in person or by agent appointed in writing. Proof of the
execution of any such agent, direction or other instrument or of the writing
appointing any such request and of the ownership of bonds, if trade in the
following manner, shall be sufficient for any of the purposes of this
indenture, and shall be conclusive in favor of the Trustee with regard to any
action taken by it under such request or other instrument, namely:
(a) The fact and date of the execution by any person of any such
writing may be proved by the certificate of any officer in any jurisdiction
who by laws has power to take acknowledgements of deeds within such
jurisdiction, that the person signing such writing acknowledged before him
the execution thereof, or by an affidavit of any witness to such execution;
(b) The fact of the holding by any person of bonds and/or coupons
transferable by delivery and the amounts and numbers thereof, and the date of
the holding of the same, may be proved by a certificate executed by any trust
company, bank or bankers (wherever situated) stating that at the date thereof
the person named therein did exhibit to an officer of such trust company or
bank or to such bankers as the property of such person the bonds and/or
coupons therein mentioned, if such certificate shall be deemed by the Trustee
to be satisfactory.
The ownership of registered bonds shall be proved by the register of
such bonds.
The Trustee shall not be bound to recognize any person as a bondholder
unless and until his title to the bonds held by him is proved in the manner
in this Section 13.08 provided.
Any request, consent or waiver of the holder of any bond shall bind all
future holders of the same bond in respect of anything done or suffered by
the Company or the Trustee in pursuance thereof.
SECTION 13.09. All of the conveyances, stipulations, promises,
undertakings and agreements herein contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 13.10. The amount of obligations forthwith to be issued
hereunder is three million five hundred thousand dollars ($3,500,000).
IN WITNESS WHEREOF, the party of the first part has caused its corporate
name to be hereunto subscribed by its president or by one of its vice
presidents, and its corporate seal to be hereto affixed and said seal to be
attested and this indenture to be countersigned by its secretary or by one of
its assistant secretaries, and said Harris Trust and Savings Bank, to
evidence its acceptance of the trusts hereby created and vested in it, has
caused its corporate name to be hereto subscribed by one of its vice
presidents, and its corporate seal to be hereto affixed and said seal to be
attested and this indenture to be countersigned by its secretary or by one of
its assistant secretaries, all as of the first day of January, 1946, but
actually on this 4th day of February, 1946.
THE LINCOLN TELEPHONE AND TELEGRAPH
COMPANY,
By FRANK H. WOODS,
(Corporate Seal) President.
Attested:
Countersigned:
H.W. Potter,
Secretary.
Witnesses to the execution hereof by
The Lincoln Telephone and Tele-
graph Company:
GUY O. SEATON,
F.J. BETTENHAUSEN.
HARRIS TRUST AND SAVINGS BANK,
BY LYNN LLOYD,
(CORPORATE SEAL) Vice-President.
Attested:
Countersigned:
G. A. GLOW,
Assistant Secretary
Witnesses to the execution hereof by
Harris Trust and Savings Bank:
G. N. ASKEW,
LOUIS CHRISTIN
Three thousand eight hundred fifty dollars ($3,850) United States
internal revenue documentary stamps, denoting payment of tax on three million
five hundred thousand dollars ($3,500,000) bonds issued under this indenture,
are affixed to an executed original of this indenture on file with Harris
Trust and Savings Bank, Trustee, and have been duly canceled in accordance
with law.
State of Nebraska,
County of Lancaster. ss.
On this 4th day of February, 1946, before me, a notary public in and for
the said County, in the State aforesaid, personally appeared Frank H. Woods
and H. W. Potter, who are known to me to be the president and the secretary,
respectively, of The Lincoln Telephone and Telegraph Company, one of the
corporations described in and which executed the foregoing instrument, and
who are personally known to me to be the persons who, as such officers,
executed the foregoing instrument in the name and behalf of said corporation,
and acknowledged that the seal affixed to said instrument is the corporate
seal of said corporation, and that they signed, sealed and delivered the said
instrument in the name and behalf of said corporation by authority of its
stockholders and board of directors, and then and there acknowledged the
execution of said instrument to be their voluntary act and deed and the
voluntary act and deed of said The Lincoln Telephone and Telegraph Company.
WITNESS my hand and notarial seal the date last above written.
M. W. FRANKLIN,
Notary Public, Lancaster
(NOTARIAL SEAL) County, Nebraska.
My commission expires April 2, 1948.
STATE OF ILLINOIS,
COUNTY OF COOK. ss.
On this 5th day of February, 1946, before me, a notary public in and for
the said County, in the State aforesaid, personally appeared Lynn Lloyd and
G. A. Glow, who are known to me to be a vice president and an assistant
secretary, respectively, of Harris Trust and Savings Bank, one of the
corporations described in and which executed the foregoing, instrument, and
who are personally known to me to be the persons who, as such officers,
executed the foregoing instrument in the name and behalf of said corporation,
and acknowledged that the seal affixed to said instrument is the corporate
seal of said corporation, and that they signed, sealed and delivered the said
instrument in the name and behalf of said corporation by authority of its
board of directors, and then and there acknowledged the execution of said
instrument to be their voluntary act and deed and the voluntary act and deed
of said Harris Trust and Savings Bank.
WITNESS my hand and notarial seal the date last above written.
H. O. PALM
Notary Public, Cook County
(Notarial Seal) Illinois.
My commission expires September 18, 1948.
BUILDING
ON OUR
STRENGTHS
A report to stockholders on 1993's
performance and results.
1993 was a year of change and strategic importance for
Lincoln Telecommunications. James E. Geist, former chairman and
CEO, retired in May following an impressive 43-year career. We
continued to build on the value and strength of the company and
prepare for a new competitive arena. Before discussing our
strategic priorities, we will review our 1993 performance.
Financial Results
We achieved record earnings in 1993. Net income rose 12.1
percent to $33.2 million (before taking a one-time, non-cash
accounting charge of $23.2 million relating to retiree health
benefits required by the Financial Accounting Standards Board).
Earnings per share were $1.01 in 1993 before the one-time charge
and $0.30 after the accounting change, compared to $0.90 in 1992.
Per share amounts have been adjusted to reflect the 100 percent
stock dividend paid on January 6, 1994. Year-end revenues and
sales totaled $184.4 million, up from $175.4 million in 1992.
Based on these strong results, the Board of Directors
increased cash dividends twice in 1993. On December 15, 1993, the
company declared a 100 percent stock dividend to stockholders of
record on December 27, 1993. This stock dividend had the
practical effect of a two-for-one stock split.
Other important financial achievements included: about $25
million of net capital additions; early retirement of $35 million
in long-term debt which was converted to short-term debt at a
reduced interest rate; and Standard and Poor's reaffirmation of
our AAA rating on our $44 million Series K First Mortgage Bonds.
These results represent the benefits of diversification
efforts we began years ago. Our newer, faster growing businesses
are increasing their revenue and earnings contributions, adding
to solid returns from our landline telephone operations.
Landline Telephone Operations
Our telephone operations performed well throughout 1993.
Underlying business volumes and the demand for new services
continued on an upward trend. Access minutes of use grew nearly 9
percent. Customer access lines increased 2.6 percent to 238,142.
Business access lines, which account for more revenue per line
than residential, grew 5.7 percent.
More than 100 miles of fiber optic cable were installed in
1993, bringing the total to 1,300 miles. Much of this fiber has
been placed in fiber optic "rings" --redundant configurations to
assure uninterrupted communications--with broadband capabilities.
Marketing campaigns for our residential and small business
customers focused on increasing the penetration of enhanced
services like Caller ID, Voice Mail and Call Waiting. Direct mail
and telemarketing efforts helped us meet important revenue
objectives and build on our local marketing presence.
Our business customers continued to provide significant
growth opportunities. Their need for reliable network services,
including private networks, frame relay and LAN interconnection,
was a primary driver of revenue growth. Directory publishing
revenues, supported by both large and small business customers,
increased 5.4 percent.
We were the first in our industry to offer Business Search
USA, a new directory information service where customers can
obtain the name, address, phone number and specialized
information about businesses from coast to coast. The service was
launched at the end of 1993.
Wireless Telephone Operations
It was another impressive year for our wireless operations.
We made significant investments to increase network
capacity, improve service and ensure our leadership position.
Customer line growth for Lincoln Telephone Cellular, where
we are the 100 percent owner, jumped 70 percent and revenues rose
50 percent. We added four new cell sites in Lincoln.
At First Cellular Omaha, where we are the managing partner,
customer lines grew 61 percent. Seven cell sites, along with new
service and retail outlets, were added in the Omaha/Council
Bluffs area to accommodate this growing market.
We expanded our advertising and promotional programs in both
markets to attract new customers, while retaining existing
customers through strong retention programs, competitive prices
and new services.
Diversified Operations
Lincoln Telephone Long Distance, our long distance
business, also grew steadily in 1993. Long distance minutes of
use were up 4 percent. We introduced new calling programs for
residential and business customers to help us maintain strong
market share, especially among residential customers.
Sales in our business equipment division rose slightly over
1992. Revenue growth was achieved primarily through sales in the
Omaha market and through strong maintenance and repair programs.
Our Strategic Priorities
While 1993's accomplishments were impressive, future
challenges drive our energies. During this year of management
transition, we worked as a team to critically assess our ability
to continue producing strong results.
For any company to succeed, it must recognize its strengths
and endeavor to do its job better than its competitors. What we
do best is build and maintain networks that enable people to
connect with each other and the information they need. Our
landline and cellular networks are second to none.
We are also very good at providing products and services
that add value to those networks: software, equipment, and
directory and information services.
Other strengths include a favorable regulatory environment,
a loyal work force and a proven ability to compete in competitive
services.
We intend to build on these strengths. Our vision is to be
the leader in providing our customers with integrated
communications, entertainment and information services over wired
broadband and wireless networks. We will achieve this through
five strategic priorities.
Priority One: Grow our business. We will concentrate on our
existing customers--developing more customer-focused marketing
plans, deploying advanced technology, and delivering the
information-age services they expect. We will also pursue
acquisitions outside our traditional geographic markets,
but only those that meet our strategic vision of providing
integrated, flexible communications.
Priority Two: Increase productivity. We want to eliminate
complicated processes and procedures which not only cost money,
but interfere with the kind of service we need to provide.
Priority Three: Re-balance our prices. We will continue to
re-price our services to become the competitive price leader.
Priority Four: Achieve regulatory parity. Work with policy
makers at the local, state and federal levels of government. We
must be allowed to pursue new business opportunities and we
cannot be burdened with unnecessary regulations.
Priority Five: Strengthen our customer focus to meet the
demands of today's fast-paced communications world. We firmly
believe that if we are to be a truly customer-focused
organization, we must empower our employees and allow them to do
their jobs well. We also believe that successfully building this
atmosphere will make it easier to focus on building our business.
We are making great strides in implementing these
strategies. The results are gratifying. In the pages that follow,
you will learn more about some of our customers and how Lincoln
Telecommunications helps connect them with the people and
information they need.
/s/ Thomas C. Woods, III /s/ Frank H. Hilsabeck
Thomas C. Woods, III Frank H. Hilsabeck
Chairman of the Board President and
Chief Executive Officer
Independent Auditors' Report
The Stockholders and Board of Directors
Lincoln Telecommunications Company:
We have audited the accompanying consolidated balance sheets of Lincoln
Telecommunications Company and Subsidiaries as of December 31, 1993 and
1992, and the related consolidated statements of income, common stock
investment and preferred stock and cash flows for each of the years in
the three-year period ended December 31, 1993. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Lincoln Telecommunications Company and Subsidiaries at December 31, 1993
and 1992, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As discussed in note 7 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1993 to
adopt the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. As discussed in note 9 to the consolidated financial
statements, the Company also adopted the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits Other than
Pensions in 1993.
KPMG Peat Marwick
Lincoln, Nebraska
February 4, 1994
<TABLE>
Financial Statements
Consolidated Balance Sheets
<CAPTION>
Dollars in thousands December 31, 1993 1992
<S> <C> <C>
Assets
Property and equipment (note 2) $ 449,540 435,226
Less accumulated depreciation and amortization 203,436 185,661
-------- --------
Net property and equipment 246,104 249,565
-------- --------
Investments and other assets (note 3) 47,163 44,880
-------- --------
Current assets:
Cash and cash equivalents 15,341 9,585
Temporary investments, at cost, which approximates market 34,451 29,064
Receivables, less allowance for doubtful receivables of
$382,000 in 1993 and $419,000 in 1992 25,429 23,630
Materials, supplies and other assets 6,530 6,380
-------- --------
Total current assets 81,751 68,659
-------- --------
Deferred charges (note 7) 20,261 6,012
-------- --------
$ 395,279 369,116
======== ========
Capitalization and Liabilities
Capitalization:
Common stock investment (notes 1, 5, 6 and 10) 184,032 189,435
Preferred stock, 5%, cumulative, redeemable,
non-voting (note 4) 4,499 4,499
Long-term debt, excluding current installments
(notes 2 and 6) 44,000 73,550
-------- --------
Total capitalization 232,531 267,484
-------- --------
Current liabilities:
Current installments of long-term debt (note 6) - 5,325
Notes payable to banks (note 6) 41,500 14,000
Accounts payable and accrued expenses 19,989 21,801
Income taxes payable (note 7) 2,493 3,203
Dividends payable 4,345 3,685
Advance billings and customer deposits 6,058 5,746
-------- --------
Total current liabilities 74,385 53,760
-------- --------
Deferred credits:
Unamortized investment tax credits 4,892 6,252
Deferred income taxes (note 7) 22,974 34,725
Other (notes 7 and 9) 60,497 6,895
-------- --------
Total deferred credits 88,363 47,872
(Continued)
Consolidated Balance Sheets (Cont'd)
Dollars in thousands December 31, 1993 1992
Commitments (notes 8 and 9)
-------- --------
$ 395,279 369,116
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Income
<S> <C> <C>
Dollars in thousands except
per share data Years Ended December 31, 1993 1992 1991
Telephone operating revenues:
Local network services (note 11) $ 70,833 66,022 55,972
Long distance and access services (note 11) 62,775 60,491 64,293
Directory advertising, billing and other services 16,355 16,229 15,744
Other operating revenues 13,951 14,018 13,303
------- ------- -------
Total telephone operating revenues 163,914 156,760 149,312
------- ------- -------
Diversified operations revenues and sales:
Long distance services 19,622 18,933 18,884
Product sales 8,089 7,469 7,669
Other revenues 343 349 349
------- ------- -------
Total diversified operations revenues and sales 28,054 26,751 26,902
------- ------- -------
Intercompany revenues (7,618) (8,143) (8,121)
------- ------- -------
Total operating revenues 184,350 175,368 168,093
------- ------- -------
Operating expenses:
Depreciation 28,596 29,626 28,628
Cost of goods and services (note 11) 17,709 18,103 18,806
Other operating expenses 85,915 80,219 78,773
Taxes, other than payroll and income (note 15) 2,923 4,135 446
Intercompany expenses (7,618) (8,143) (8,121)
------- ------- -------
Total operating expenses 127,525 123,940 118,532
------- ------- -------
Operating income 56,825 51,428 49,561
------- ------- -------
Non-operating income and expense:
Income from interest and other investments 4,540 3,660 4,529
Interest expense and other deductions 8,556 9,378 9,433
------- ------- -------
Net non-operating expense 4,016 5,718 4,904
------- ------- -------
Income before income taxes and cumulative
effect of change in accounting principle 52,809 45,710 44,657
Income taxes (notes 7 and 15) 19,618 16,101 16,837
------- ------- -------
Income before cumulative effect of change
in accounting principle 33,191 29,609 27,820
Cumulative effect of change in accounting
principle (note 9) 23,166 - -
------- ------- -------
Net income 10,025 29,609 27,820
Preferred dividends 225 338 469
------- ------- -------
(Continued)
Consolidated Statement of Income (Cont'd)
Dollars in thousands except
per share data Years Ended December 31, 1993 1992 1991
Earnings available for common shares $ 9,800 29,271 27,351
======= ======= =======
Earnings per common share:
Earnings before cumulative effect of change
in accounting principle $ 1.01 .90 .83
Cumulative effect of change in accounting principle ( .71) - -
------ ------ ------
Earnings per common share $ .30 .90 .83
====== ====== ======
Weighted average common shares outstanding
(in thousands) 32,548 32,672 32,878
====== ====== ======
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Common Stock
Investment and Preferred Stock
<CAPTION>
Dollars in thousands Years Ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Common stock investment:
Common stock of $.25 par value per share. Authorized
100,000,000 shares; issued 32,980,376 shares
(notes 1 & 5) $ 8,245 8,245 8,245
-------- -------- --------
Premium on common stock (note 1) 37,481 37,481 37,481
-------- -------- --------
Retained earnings (note 6):
Beginning of year 149,008 133,878 119,681
Net income 10,025 29,609 27,820
Premium on redemption of preferred stock - (84) -
Dividends declared:
5% cumulative preferred - $5.00 per share (225) (225) (225)
7.64% cumulative preferred - $7.64 per share - (113) (244)
Common - $.49 per share in 1993, $.43 per
share in 1992 and $.40 per share in 1991 (15,949) (14,057) (13,154)
-------- -------- --------
End of year 142,859 149,008 133,878
-------- -------- --------
Treasury stock, at cost:
Beginning of year, 446,000, 136,000 and 46,000 shares (5,299) (1,693) (592)
Sales of 65,350 shares (note 10) 804 - -
Purchase of 4,376 shares in 1993; 310,000 shares
in 1992; 90,000 shares in 1991 (58) (3,606) (1,101)
-------- -------- --------
End of year, 385,026, 446,000 and 136,000 shares (4,553) (5,299) (1,693)
-------- -------- --------
Total common stock investment $ 184,032 189,435 177,911
======== ======== ========
Preferred stock:
Parent company, $.50 par value per share.
Authorized 20,000,000 shares; none issued $ - - -
======== ======== ========
Subsidiary, $100 par value per share.
Authorized 250,000 shares (note 4):
5% cumulative, non-voting, redeemable solely at
subsidiary's option for $105 per share (liquid-
ating amount of $4,724,000) plus accrued
dividends, 44,991 shares outstanding $ 4,499 4,499 4,499
======== ======== ========
7.64% cumulative redeemable with sinking fund
requirement, 29,600 shares outstanding in 1991:
Beginning of year - 2,960 3,440
Shares redeemed at par, 4,800 shares and 24,800
shares at $103 in 1992 and at par, 4,800
shares in 1991 - 2,960 480
-------- -------- --------
(Continued)
Consolidated Statements of Common Stock
Investment and Preferred Stock (Cont'd)
Dollars in thousands Years Ended December 31, 1993 1992 1991
End of year - - 2,960
Less current requirement to be redeemed at
par within one year (2,400 shares) - - 240
-------- -------- --------
$ - - 2,720
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Dollars in thousands Years Ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 10,025 29,609 27,820
-------- -------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 28,698 29,694 28,726
Cumulative effect of change in accounting principle 23,166 - -
Equity in undistributed earnings of joint venture
and general partnership 1,518 1,806 (103)
Provision for losses on receivables 474 251 300
Deferred income taxes (14,308) 2,261 236
Increase in note receivable from general partnership (3,286) (2,927) -
Changes in assets and liabilities resulting from
operating activities:
Receivables (2,273) (2,333) 308
Materials, supplies and other assets (150) (695) (640)
Deferred charges (11,788) (1,023) (438)
Accounts payable and accrued expenses (1,812) 6,492 (3,560)
Income taxes payable (710) (1,204) 3,378
Advance billings and customer deposits 312 88 580
Unamortized investment tax credits (1,360) (1,553) (1,821)
Other deferred credits 30,436 1,996 (1,466)
------- ------- -------
Total adjustments 48,917 32,853 25,500
------- ------- -------
Net cash provided by operating activities 58,942 62,462 53,320
------- ------- -------
Cash flows from investing activities:
Expenditures for property and equipment (24,995) (27,340) (33,394)
Net salvage on retirements (2) 1,610 1,631
------- ------- -------
Net capital additions (24,997) (25,730) (31,763)
Proceeds from sale of investments and other assets 85 192 276
Investment in and note receivable from general
partnership - - (35,700)
Purchases of investments and other assets (744) (4,945) (894)
Purchases of temporary investments (38,292) (60,764) (186,783)
Maturities and sales of temporary investments 32,905 61,235 207,813
------- ------- -------
Net cash used for investing activities (31,043) (30,012) (47,051)
------- ------- -------
Cash flows from financing activities:
Dividends to stockholders (15,514) (14,124) (13,386)
Proceeds from issuance of notes payable 35,000 - 16,000
Retireent of notes payable (7,500) (2,000) -
Debt issuance costs - - (9)
Purchase of treasury stock (58) (3,606) (1,101)
(Continued)
Consolidated Statements of Cash Flows (Cont'd)
Dollars in thousands Years Ended December 31, 1993 1992 1991
Sales of treasury stock 804 - -
Retirement and conversion of long-term debt and
redemption of preferred stock (34,875) (9,735) (13,799)
Premium paid on redemption of preferred stock - (84) -
------- ------- -------
Net cash used in financing activities (22,143) (29,549) (12,295)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 5,756 2,901 (6,026)
Cash and cash equivalents at beginning of year 9,585 6,684 12,710
------- ------- -------
Cash and cash equivalents at end of year $ 15,341 9,585 6,684
======== ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
Notes to
Consolidated Financial Statements
December 31, 1993, 1992 and 1991
(1) Summary of Significant Accounting Policies
Principles of Consolidation and Organization
The consolidated financial statements reflect the accounts of
Lincoln Telecommunications Company (the Company), a holding company, and
its wholly-owned subsidiaries, The Lincoln Telephone and Telegraph
Company (LT&T), LinTel Systems Inc. (LinTel) and Prairie Communications,
Inc. (Prairie).
LT&T, the Company's principal subsidiary, provides local and long
distance telephone service in 22 southeastern counties of Nebraska and
cellular telephone service in the Lincoln, Nebraska MSA. LinTel provides
telephone answering services, sales of non-regulated telecommunication
products and services and toll services beyond LT&T's local service
territory. Prairie has a 50% investment in a general partnership which
operates a limited partnership providing cellular telecommunications
services in the Omaha, Nebraska MSA. The investment in the partnership
is accounted for using the equity method of accounting (see note 3).
Net earnings applicable to intercompany transactions between
companies of different groups of operations have been eliminated.
The Company and its subsidiaries maintain their records in
accordance with generally accepted accounting principles. LT&T maintains
its telephone accounting records in accordance with the rules and
regulations of the Nebraska Public Service Commission (NPSC) which
substantially adheres to rules and regulations of the Federal
Communi-cations Commission (FCC).
The Company's telephone operations follow accounting for regulated
enterprises prescribed by Statement of Financial Accounting Standard
(SFAS) No. 71. Accounting for the Effects of Certain Types of
Regulation. The effect of SFAS No. 71 results in regulatory assets of
approximately $15,181,000 and regulatory liabilities of approximately
$12,736,000 at December 31, 1993.
Property and Equipment
Property and equipment is stated at cost. Replacements and renewals
of items considered to be units of property are charged to the property
and equipment accounts. Maintenance and repairs of units of property and
replacements and renewals of items determined to be less than units of
property are charged to expense. Telephone property and equipment
retired or otherwise disposed of in the ordinary course of business,
together with the cost of removal, less salvage, is charged to
accumulated depreciation. When non-telephone property and equipment is
sold or otherwise disposed of, the gain or loss is recognized in
operations. LT&T capitalizes estimated costs, during periods of
construction of more than one year, of debt and equity funds used for
construction purposes. No significant costs were capitalized during the
three years ended December 31, 1993. Depreciation on property and
equipment is determined by using the straight-line method based on
estimated service and remaining lives.
Income Taxes
The Company files a consolidated income tax return with its
subsidiaries.
Deferred income taxes arise primarily from reporting differences
for book and tax purposes related to depreciation and postretirement
benefits.
Investment tax credits applicable to telephone property and equip-
ment were deferred and taken into income over the estimated useful lives
of such property and equipment.
Retirement Benefits
The Company has a qualified defined benefit pension plan which
covers substantially all employees. The Company also has a qualified
defined contribution profit-sharing plan which covers nonunion eligible
employees. Costs of the pension and profit-sharing plans are funded as
accrued.
The Company adopted Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other than
Pensions, as of January 1, 1993. This establishes a new accounting
principle for the cost of retiree health care and other postretirement
benefits (see note 9). Prior to 1993, the Company recognized these
benefits on a cash basis.
Local Network Services
LT&T's local network service rates are filed with and, in certain
circumstances, are subject to review and approval by the NPSC. Billings
for local network service are rendered monthly in advance on a cyclical
basis. Advance billings are recorded as a liability and subsequently
taken into income in the appropriate periods.
Long Distance and Access Services Revenues
Long distance and access services revenues are derived from long
distance calls within the Company's service territory, carrier charges
for access to LT&T's local exchange network, subscriber line charges and
contractual arrangements with carriers for other services. Certain of
these revenues are realized under pooling arrangements with other
telephone companies and are divided among the companies based on
respective costs and investments to provide the services. Revenues
realized through the various pooling processes are initially based on
estimates. Adjustments are recorded in subsequent years as participating
companies finalize their respective costs and investments. The Company
elected to be subject to price cap regulation by the FCC effective July
2, 1993, pursuant to which limits are imposed on the Company's
interstate service rates. Prior to July 2, 1993, the Company operated
under rate-of-return regulation, which offered less pricing and earnings
flexibility than under price cap regulation.
Diversified Operations - Long Distance Services
Long distance services revenues included in Diversified Operations
are derived from toll services beyond LT&T's local service territory.
These revenues are recognized when earned regardless of the period in which
they are billed to the customer. Billing and access costs related to long
distance services are included as a cost of Diversified Opera- tions and as
revenues of the telephone operations, and are eliminated in consolidation.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the
Company considers all temporary investments with an original maturity of
three months or less when purchased to be cash equivalents. Cash
equivalents of approximately $11,581,000 and $1,540,000 at December 31,
1993 and 1992, respectively, consist of short-term fixed income
securities.
Common Stock and Earnings Per Common Share
Effective January 6, 1994, the Company paid a 100% stock dividend
to stockholders of record on December 27, 1993, which has been treated
as a stock split for financial reporting purposes. Common stock, premium
on common stock and all per share information has been retroactively
adjusted to give effect to the stock dividend for all periods presented.
(2) Property and Equipment
The following table summarizes the property and equipment at December
31, 1993 and 1992 used in the operations:
<TABLE>
<CAPTION>
1993 1992
Accumulated Accumulated
depreciation and depreciaton and
Cost amortization Cost amortization<S>
<C> <C> <C> <C>
Classifications
Used in telephone operations:
Land $ 2,772 - 2,746 -
Buildings 25,716 10,334 24,860 9,824
Equipment 407,477 187,953 392,153 171,090
Motor vehicles and
other work equipment 10,116 4,012 9,651 3,823
-------- -------- -------- --------
Total in service 446,081 202,299 429,410 184,737
Under construction 1,608 - 4,376 -
-------- -------- -------- --------
Total used in telephone
operations 447,689 202,299 433,786 184,737
Used in diversified
operations, non-regulated 1,851 1,137 1,440 924
-------- -------- -------- --------
$ 449,540 203,436 435,226 185,661
======== ======== ======== ========
</TABLE>
Included in "Equipment Used in Telephone Operations" are investments
of $10,986,000 and $10,033,000 in 1993 and 1992, respectively, that are
directly assigned to non-regulated operations. The corresponding
accumulated depreciation and amortization was $6,247,000 in 1993 and
$5,476,000 in 1992. In addition, other investments that are common to
both regulated and non-regulated operations are allocated in a manner
consistent with the FCC's rules and regulations.
The composite depreciation rate for telephone property was 6.5% in
1993, 6.9% in 1992 and 6.7% in 1991.
Construction expenditures for 1994 are expected to approximate
$33,434,000. The Company anticipates funding construction through
operations.
Substantially all telephone property and equipment, with the
exception of motor vehicles, is mortgaged or pledged to secure LT&T's
first mortgage bonds. Under certain circumstances, as defined in the
bond indenture, all assets become subject to the lien of the indenture.
(3) Equity Investments
The Company has a 50% interest in Anixter-Lincoln, a general
partnership and joint venture with Anixter Bros., Inc. of Skokie,
Illinois. Anixter-Lincoln is a distributor of telecommunications
equipment. The Company uses the equity method of accounting for this
investment.
On December 31, 1991, Prairie acquired a 50% interest in Omaha
Cellular General Partnership (OCGP). The remaining 50% interest in OCGP
is owned by Centel Nebraska, Inc. (Centel-Neb). OCGP is the general
partner of and holds approximately 55% of the partnership interests in
Omaha Cellular Limited Partnership, which provides cellular
telecommunications services in Douglas and Sarpy Counties in Nebraska
and Pottawattamie County, Iowa. Omaha Cellular Limited Partnership
conducts business under the trade name First Cellular Omaha. Prairie is
the managing partner of OCGP.
Prairie purchased its 50% interest in OCGP from Centel Cellular
Company (Centel) for $11.9 million. The carrying value of the investment
at equity in net assets was approximately $8.1 million at December 31,
1993. Also, Prairie purchased and holds a discounted note from OCGP in
the face amount of approximately $54 million, for which the purchase
price was $23.8 million. The note has a carrying value of approximately
$30 million at December 31, 1993. Such note has a stated interest rate
of 11.94% and is due December 31, 1998. The proceeds of the note were
distributed by OCGP in equal parts to Centel and Centel-Neb.
Commencing on December 31, 1996, and for the two-year period
thereafter, Prairie has the option to purchase from Centel-Neb the
remaining 50% interest in OCGP.
(4) Redeemable Preferred Stock
LT&T's preferred stock is cumulative, non-voting, non-convertible
and redeemable solely at subsidiary's option at $105 per share, for a
liquidating amount of $4,724,000, plus accrued dividends.
LT&T's 7.64% preferred stock required an annual sinking fund
payment to redeem 2,400 shares annually with an additional 2,400 shares
subject to redemption at par value. In June 1992, the Board of Directors
authorized the redemption of all outstanding shares of the 7.64%
preferred stock. This consisted of 4,800 shares at par value and 24,800
shares at $103 per share. The redemption was completed on July 10, 1992
with a total payment of $3,034,400.
(5) Dividend Reinvestment and Stock Purchase Plan
Stock for the Company's Employee and Stockholder Dividend Reinvest-
ment and Stock Purchase Plan (Plan) is purchased on the open market by
the Plan's Administrator. The basis for the purchase price of the stock
allocated to the Plan participants is the average price paid by the
Administrator during the 5-day trading period preceding and including
the dividend payment date. Employee purchases are at 95% of such price
while purchases by non-employee participants are at 100% of such price.
Participants in the Plan may use cash dividends declared on stock
owned and optional cash contributions to purchase additional stock. Any
contributions received by approximately eight days before the end of
each calendar quarter will be used to purchase shares of stock as of the
next dividend date.
Shares purchased in the open market for the Plan aggregated 57,604,
60,636 and 51,171 during 1993, 1992 and 1991, respectively. Expenses,
net of gains, incurred related to the Plan were approximately $22,500,
$2,700 and $74,000 in 1993, 1992 and 1991, respectively. There are no
shares reserved for issuance under the Plan.
(6) Long-Term Debt and Notes Payable
Long-term debt at December 31, 1993 and 1992 is shown below:
First mortgage bonds:
Interest Date final 1993 1992
rate payment due (Dollars in thousands)
9.910% June 1, 2000 $ 44,000 44,000
8.250 Paid in 1993 - 9,750
9.350 Paid in 1993 - 13,250
8.150 Paid in 1993 - 12,000
------- -------
Total long-term debt 44,000 79,000
Less current installments of long-term debt - 5,450
------- -------
Long-term debt, excluding current installments
and reacquired debt $ 44,000 73,550
======= =======
The long-term debt agreements contain various restrictions,
including those relating to payment of dividends by LT&T to its
stockholder (the Company). Notes payable to banks also contain various
restrictions. At December 31, 1993, approximately $22,050,000 of LT&T's
retained earnings were available for payment of cash dividends under the
most restrictive provisions of such agreements.
The long-term debt is due June 1, 2000 with interest payable
semi-annually.
The Company has notes payable to banks which have variable interest
rates ranging from 3.3% to 3.8% at December 31, 1993, which are due by
December 31, 1994.
(7) Income Taxes
In February 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes. Statement 109 requires a change in the method of account-
ing for deferred income taxes. Under the assets and liability method of
Statement 109, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the accounting period in which the enactment date occurs.
Generally accepted accounting principles for regulated enterprises
adopting Statement 109 required the recognition of deferred tax assets
and liabilities. The Company recognized deferred regulatory assets and
liabilities of approximately $17,096,000 and $14,743,000, respectively,
as a result of adopting Statement 109. The net effect of these deferred
regulatory assets and liabilities of approximately $2,353,000 was
recorded on the financial statements as of January 1, 1993 as an
increase to deferred income tax liabilities and will be amortized into
income tax expense on the financial statements over a ten-year period.
The December 31, 1992 financial statements have not been restated to
apply the provisions of Statement 109.
Shown below are the components of income taxes from continuing
operations before cumulative effect of change in accounting principle.
<TABLE>
<CAPTION>
1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C>
Current:
Federal $ 16,400 13,115 13,598
State 3,628 2,278 4,824
------- ------- -------
20,028 15,393 18,422
Investment tax credits (1,360) (1,553) (1,821)
------- ------- -------
Deferred:
Federal 490 1,831 172
State 460 430 64
------- ------- -------
950 2,261 236
------- ------- -------
Total income tax expense $ 19,618 16,101 16,837
======= ======= =======
</TABLE>
Total income tax expense attributable to income from continuing
operations in each year was less than that computed by applying U.S.
Federal income tax rates (35% in 1993 and 34% in 1992 and 1991) to
income before income taxes. The reasons for the differences are shown on
the following page.
<TABLE>
<CAPTION>
1993 1992 1991
% of % of % of
pretax pretax pretax
Amount income Amount income Amount income
<S> <C> <C> <C> <C> <C> <C>
Computed "expected"
income tax expense $18,483 35.0% $15,542 34.0% $15,184 34.0%
State income tax expense,
net of Federal income
tax benefit 2,658 5.0 1,787 3.9 3,226 7.2
Tax effect of items
capitalized for financial
statement purposes but
expensed for tax
purposes on which
deferred income taxes
were not provided - - 390 .9 418 .9
Nontaxable interest
income (75) (.1) (25) (.1) (365) (.8)
Amortization of
regulatory deferred
charge 1,914 3.6 - - - -
Amortization of
regulatory deferred
liability (2,006) (3.8) - - - -
Amortization of
investment tax credits (1,360) (2.6) (1,553) (3.4) (1,821) (4.0)
Effect of FASB No. 109
adoption on non-
regulated income (236) (.4) - - - -
Other 240 .4 (40) (.1) 195 .4
------- ---- ------- ---- ------- ----
Actual income tax
expense $ 19,618 37.1% $ 16,101 35.2% $ 16,837 37.7%
======= ==== ======= ==== ======= ====
</TABLE>
The significant components of deferred income tax expense attribut-
able to income from continuing operations for the year ended December
31, 1993 were as follows (dollars in thousands):
Deferred tax expense (exclusive of the effects of
amortization below) $ 1,042
Amortization of regulatory deferred charges 1,914
Amortization of regulatory deferred liability (2,006)
------
$ 950
======
For the years ended December 31, 1992 and 1991, deferred tax
expense was provided on certain timing differences in the recognition of
revenue and expense for tax and financial statement purposes. The
sources of these differences and the tax effect of each are shown below:
1992 1991
(Dollars in thousands)
Tax over financial statement depreciation $ 855 682
Other taxes 1,200 -
Other 206 (446)
------ ------
$ 2,261 236
====== ======
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1993 are presented below (dollars in
thousands):
Deferred tax assets:
Accumulated postretirement benefit cost $ 15,946
Regulatory deferred credits 5,884
Other 2,438
-------
Total gross deferred tax assets 24,268
Less valuation allowance -
-------
Net deferred tax assets 24,268
Deferred tax liabilities:
Plant and equipment, principally due to
depreciation differences 40,720
Regulatory deferred charges 4,036
Other 2,486
-------
Total gross deferred tax liabilities 47,242
-------
Net deferred tax liability $ 22,974
=======
As a result of the nature and amount of the temporary differences
which give rise to the gross deferred tax liabilities and the Company's
expected taxable income in future years, no valuation allowance for
deferred tax assets as of December 31, 1993 was necessary.
Prior to 1987, LT&T followed the practice of deducting for income
tax purposes, interest, sales taxes and certain payroll related costs,
which were capitalized in the financial statements. As the NPSC did not
permit deferred income taxes relating to such costs to be allowed for
rate-making purposes, deferred income taxes were not provided for these
timing differences. The cumulative net amount of income tax timing
differences for which deferred income taxes were not provided was
approximately $16,800,000 at December 31, 1992. The liability for the
income tax timing differences was recorded in the previously described
adoption of Statement 109 in 1993.
(8) Benefit Plans
The Company has a defined benefit pension plan covering substan-
tially all employees with at least one year of service. Annual
contributions to the plan are designed to fund current and past service
costs as determined by independent actuarial valuations. There is no
prior service liability associated with the basic benefits provided by
the plan.
The net periodic pension credit for 1993, 1992 and 1991 amounted to
$690,000, $971,000 and $477,000, respectively. The net periodic pension
credit is comprised of the following components (dollars in thousands).
1993 1992 1991
Service cost-benefits earned during the
period $ 3,408 3,160 3,099
Interest cost on projected benefit
obligations 8,441 7,744 7,446
Actual return on plan assets (25,849) (9,309) (22,507)
Amortization and deferrals, net 13,310 (2,566) 11,485
------- ------- -------
Net periodic pension credit $ (690) (971) (477)
======= ======= =======
The following table summarizes the funded status of the pension
plan at December 31, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
1993 1992
1991
(Dollars in
thousands)
<S> <C> <C> <C>
Actuarial present value of pension
benefit obligation:
Vested $ 97,040 89,485 86,701
Nonvested 14,108 12,174 11,453
------- ------- -------
Accumulated pension benefit obligation $ 111,148 101,659 98,154
======= ======= =======
Projected pension benefit obligation 127,884 117,510 113,147
Less, plan assets at market value 185,197 165,563 155,398
------- ------- -------
Excess of plan assets over projected
pension benefit obligation 57,313 48,053 42,251
Unrecognized prior service cost 5,924 2,705 2,901
Unrecognized net gain (49,088) (35,866) (29,799)
Unrecognized net asset being recognized
over 15.74 years (12,520) (13,953) (15,385)
------- ------- -------
Prepaid (accrued) pension cost recognized
in the consolidated balance sheets $ 1,629 939 (32)
======= ======= =======
</TABLE>
The assets of the pension plan are invested primarily in marketable
equity and fixed income securities and U.S. Government obligations.
The assumptions used in determining the funded status information and
pension expense for the three years were as follows:
1993 1992 1991
Discount rate 7.10% 7.10 7.10
Rate of salary progression 6.00 6.25 6.25
Expected long-term rate of return on assets 8.00 8.00 8.00
==== ==== ====
In addition to the defined benefit pension plan, the Company has a
defined contribution profit-sharing plan which covers nonunion eligible
employees who have completed one year of service. Participants may elect
to deposit a maximum of 15% of their wages up to certain limits. The
Company matches 25% of the participants' contributions up to 5% of their
wages. The profit-sharing plan also has a provision for an employee
stock ownership fund, to which the Company has contributed an additional
1.75% of each eligible participant's wage. The Company's matching
contributions and employee stock ownership fund contributions are used
to acquire common stock of the Company purchased on the open market. The
Company's combined contributions totaled $640,000, $601,000 and $561,000
for 1993, 1992 and 1991, respectively.
(9) Postretirement Benefits
The Company sponsors a health care plan that provides postretirem-
ent medical benefits and other benefits to employees who meet minimum
age and service requirements upon retirement. Currently, substantially
all of the Company's employees may become eligible for those benefits if
they have 15 years of service with normal or early retirement. The cost
of retiree health care, dental and life insurance benefits was
recognized as an expense as premiums were paid in 1992 and 1991. For
1992 and 1991, such expense totaled $2,290,000 and $2,131,000,
respectively.
The Company adopted Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, as of January 1, 1993. The new standard requires accounting
for these benefits during the active employment of the participants. The
Company elected to record the accumulated benefit obligation upon
adoption in the first quarter. After taxes, this one-time charge
amounted to $23,166,000, net of income tax benefit of $15,258,000.
Pursuant to Statement of Financial Accounting Standards No. 71,
Accounting for the Effects of Certain Types of Regulation, a regulatory
asset associated with the recognition of the transition obligation was
not recorded because of uncertainties as to the timing and extent of
recovery given the Company's assessment of its long-term competitive
environment.
The following table presents the plan's status reconciled with
amounts recognized in the Company's consolidated balance sheet at
December 31, 1993 (dollars in thousands):
Accumulated postretirement benefit obligation:
Retirees $ 29,851
Fully eligible active plan participants 10,202
Other active plan participants 7,328
-------
47,381
Plan assets at fair value -
Unrecognized net loss (7,054)
-------
Accrued postretirement benefit cost recognized
in consolidated balance sheets $ 40,327
=======
Net periodic postretirement benefit costs for the year ended
December 31, 1993 include the following components (dollars in
thousands):
Service cost $ 300
Interest cost 3,632
--------
Net periodic postretirement benefit costs $ 3,932
========
For purposes of measuring the benefit obligation, a discount rate
of 8.0% and an 11.7% annual rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) was assumed for
1993. This rate of increase was assumed to decrease gradually to 5.5% by
the year 2004.
For purposes of measuring the benefit cost, a discount rate of 9.5%
and a 12% annual rate of increase in the health care cost trend rate was
assumed for 1993. This rate of increase was assumed to decrease
gradually to 6.5% by the year 2002. The health care cost trend rate
assumptions have a significant effect on the amounts reported. For
example, a one percentage point increase in the assumed health care cost
trend rate would increase the aggregate service and interest cost by
approximately $350,000 and increase the accumulated postretirement
benefit obligation by approximately $4,200,000.
(10) Stock and Incentive Plan
The Company has a stock and incentive plan which provides for the
award of short-term incentives (payable in cash or restricted stock),
stock options, stock appreciation rights or restricted stock to certain
officers and key employees conditioned upon the Company's attaining
certain performance goals.
Under the plan, options may be granted for a term not to exceed ten
years from date of grant. The option price is the fair market value of
the shares on the date of grant. Such exercise price was $11.50 for the
1990 options and $12.75 for the 1992 options. The exercise price of a
stock option may be paid in cash, shares of Company common stock or a
combination of cash and shares.
Stock option activity under the Plan is summarized as follows:
1993 1992 1991
Outstanding at January 1 176,000 88,000 88,000
Granted - 88,000 -
Exercised (65,350) - -
Cancelled - - -
------- ------- -------
Outstanding at December 31 110,650 176,000 88,000
======= ======= =======
Exercisable at December 31 42,650 - -
======= ======= =======
All of the above information has been retroactively adjusted to
give effect to the 100% stock dividend.
The Plan also provides for the granting of stock appreciation
rights (SARs) to holders of options, in lieu of stock options, upon
lapse of stock options or independent of stock options. Such rights
offer optionees the alternative of electing not to exercise the related
stock option, but to receive instead an amount in cash, stock or a
combination of cash and stock equivalent to the difference between the
option price and the fair market value of shares of Company stock on the
date the SAR is exercised. No SARs have been issued under the plan.
In addition, 16,002 shares, 15,224 shares and 13,464 shares of
restricted stock were awarded from stock purchased on the open market by
the Company during 1993, 1992 and 1991, respectively. Recipients of the
restricted stock are entitled to cash dividends and to vote their
respective shares. Restrictions limit the sale or transfer of the shares
for two years subsequent to issuance unless employment is terminated
earlier due to death, disability or retirement.
Amounts charged against 1993, 1992 and 1991 net income for cash and
restricted stock awards were approximately $460,500, $388,500 and
$277,500, respectively. Pursuant to the Plan, 2,000,000 shares of
common stock are reserved for issuance under this Plan.
(11) Network Service Revenues
On May 28, 1991, the Nebraska Public Service Commission (NPSC)
ordered LT&T to implement several rate and service changes which became
effective August 16, 1991. Increased rates for basic local service,
together with reduced rates for long distance calls and other changes
included in the order, were intended to be revenue-neutral. Results were
monitored monthly and were reviewed with the NPSC after a full year of
operation. By its order dated February 16, 1993, the NPSC determined
that a one-time refund of $1 for each residential line and $2 for each
business line would be needed to achieve revenue neutrality. The refunds
were provided as credits on customers' March 1993 billing. In addition,
the NPSC ordered further reductions in rates for touch call service and
long distance service, estimated to total $1,589,000 annually. These
rate reductions were effective March 1, 1993.
Network service revenues include revenues received by LT&T for
billing and access services provided to LinTel, which were approximately
$6,746,000 for 1993, $7,214,000 for 1992 and $7,397,000 for 1991, and
are deducted as intercompany revenues and expenses.
(12) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
First Second Third Fourth
1993 quarter quarter quarter quarter
Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues and sales from continuing
operations:
Telephone $ 40,170 40,406 41,713 41,625 163,914
Diversified 6,463 6,828 7,224 7,539 28,054
Intercompany revenues (1,896) (1,955) (1,909) (1,858) (7,618)
------ ------ ------ ------ -------
Total $ 44,737 45,279 47,028 47,306 184,350
====== ====== ====== ====== =======
Income before cumulative effect of
change in accounting principle 8,072 7,970 8,276 8,873 33,191
Cumulative effect of change in
accounting principle (23,534) - 368 - (23,166)
------ ------ ------ ------ -------
Net income (loss) $(15,462) 7,970 8,644 8,873 10,025
====== ====== ====== ====== =======
Earnings per common share before
cumulative effect of change in
accounting principle .25 .24 .25 .27 1.01
Cumulative effect of change in
accounting principle (.72) - .01 - (.71)
------ ------ ------ ------ -------
Earnings (loss) per common share $ (.47) .24 .26 .27 .30
====== ====== ====== ====== =======
1992
Revenues and sales from continuing
operations:
Telephone $ 38,452 38,916 38,986 40,406 156,760
Diversified 6,157 6,353 7,321 6,920 26,751
Intercompany revenues (1,947) (2,062) (2,116) (2,018) (8,143)
------ ------ ------ ------ -------
Total $ 42,662 43,207 44,191 45,308 175,368
====== ====== ====== ====== =======
Net income $ 6,145 6,992 8,529 7,943 29,609
====== ====== ====== ====== =======
Earnings per common share $ .19 .21 .26 .24 .90
====== ====== ====== ====== =======
</TABLE>
(13) Supplemental Disclosures to Statements of Cash Flows
Cash paid for interest and income taxes for each of the years in
the three-year period ended December 31, 1993 are as shown below
(dollars in thousands):
1993 1992 1991
Interest $ 7,495 8,766 8,776
Income taxes $ 20,631 16,597 15,044
====== ====== ======
(14) Common Stock Purchase Rights
The Board of Directors declared a dividend of one common stock
purchase right for each common share outstanding as of June 30, 1989.
Under certain conditions, each right may be exercised to purchase for
$21.875 an amount of the Company's common stock, or an acquiring
company's common stock, having a market value of $43.75. The rights may
only be exercised after a person or group (except for certain
stockholders) acquires ownership of 10% or more of the Company's common
shares or announces a tender or exchange offer upon which consummation
would result in ownership of 10% or more of the common shares. The
rights expire on June 30, 1999 and may be redeemed by the Company at a
price of $.0025 per right, at any time until ten days after a public
announcement of the acquisition of 10% of the Company's common stock. At
December 31, 1993, 34,980,376 shares of common stock were reserved for
issuance in connection with these stock purchase rights.
(15) Property and State Income Taxes
In separate decisions during 1991, the Nebraska Supreme Court (the
Court) decided that the personal property tax system of the State as
applied in 1989 and in 1990 was unconstitutional. On January 22, 1993,
the Court affirmed a determination by the Nebraska State Board of
Equalization and Assessment whereby 18.81% of the taxes paid for 1990
should be refunded to the Company and certain other taxpayers. In
mid-1993, LT&T and LinTel entered into agreements with the Nebraska Tax
Commissioner pursuant to which LT&T and LinTel agreed to accept a refund
of 18.81% of the property taxes paid for the 1989 and 1990 tax years.
Such agreements were subsequently approved by the NPSC. As a result of
these actions, the Company recorded refunds or credits of approximately
$1,359,000 and $1,494,000 in 1993 and 1992, respectively.
Also in 1991, the Nebraska Legislature responded to the 1991 Court
decisions by eliminating personal property taxes for 1991 only,
substituting increased rates for state corporate income taxes and
creating a 4% surcharge on depreciation deductions. In July 1992, the
Court declared this legislative action to be unconstitutional.
Subsequently, the Nebraska Legislature enacted new tax legislation for
1992, similar to the 1991 legislation but with a 2% surcharge on
depreciation deductions. The combination of these two actions lowered
the Company's state income taxes by approximately $575,000 for 1992.
In view of a constitutional amendment approved by the voters in
1992, the constitutional issues concerning Nebraska property taxes
appear to have been resolved.
(16) Disclosures About the Fair Value of Financial Investments
Cash and Cash Equivalents, Receivables, Accounts Payable and
Notes Payable to Banks
The carrying amount approximates fair value because of the short
maturity of these instruments.
Temporary Investments
The fair values of the Company's marketable investment securities
are based on quoted market prices.
Investments and Other Assets
The fair value of the Company's note receivable from OCGP is based
on the amount of future cash flow associated with the instrument
discounted using the Company's current borrowing rate on similar
instruments of comparable maturity.
Long-Term Debt
The fair values of each of the Company's long-term debt instruments
are based on the amount of future cash flows associated with each
instrument discounted using the Company's current borrowing rate on
similar debt instruments of comparable maturity.
Estimated Fair Value
The estimated fair value of the Company's financial instruments are
summarized as follows (dollars in thousands):
At December 31, 1993 At December 31, 1992
Carrying Estimated Carrying Estimated
amount fair value amount fair value
Temporary investments $ 29,451 30,693 29,064 29,596
======= ======= ======= =======
Note receivable from OCGP $ 30,013 35,644 26,727 31,958
======= ======= ======= =======
Long-term debt $ 44,000 54,021 79,000 93,609
======= ======= ======= =======
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision. Changes in assumptions could significantly
affect the estimates.
(17) Reclassifications
Certain of the 1992 and 1991 financial statement amounts have been
reclassified to conform with the 1993 presentation.
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
Overview
Lincoln Telecommunications Company (the Company) is a holding
company headquartered in Lincoln, Nebraska, whose subsidiaries operate
primarily in the telecommunications industry. The Company owns all of
the issued and outstanding common stock of its subsidiaries: The Lincoln
Telephone and Telegraph Company (LT&T), LinTel Systems Inc. (LinTel),
and Prairie Communications, Inc. (Prairie). LT&T primarily provides
local, long distance, and data service, as well as telephone
directories, to 22 counties in southeast Nebraska. LT&T also operates a
cellular franchise in the Lincoln Metropolitan Service Area (MSA).
LinTel sells and services communications equipment to business customers
in eastern Nebraska. It also provides long distance service to points
outside of LT&T's service area. Prairie holds an ownership interest in
and manages the wireline cellular franchise in the Omaha MSA, which does
business as First Cellular Omaha. The revenues of LT&T, including its
cellular operations in the Lincoln MSA, are shown in the Consolidated
Statements of Income under telephone operating revenues. The revenues of
LinTel are shown in such Statements under diversified operations
revenues and sales. Income which the Company receives from First
Cellular Omaha and its other holdings are included in such Statements
under non-operating income and expense, which includes income from
interest and other investments.
Results of Operations
Net Earnings
Consolidated earnings available for common shares, before a
one-time accounting charge related to retirees' health benefits, made
effective January 1, 1993, were $32,966,000 in 1993, compared to
$29,271,000 in 1992 and $27,351,000 in 1991. The growth from 1992 to
1993 was 12.6% and was 7.0% from 1991 to 1992. After the one-time
accounting charge, 1993 earnings available for common shares were
$9,800,000.
Earnings per common share before the one-time accounting charge
were $1.01 in 1993, compared to $0.90 in 1992 and $0.83 in 1991, after
giving effect to the 100% stock dividend which was distributed on
January 6, 1994.
Operating Revenues
In 1993, total operating revenues grew by $8,982,000, an increase
of 5.1%, to a total of $184,350,000. In 1992, total operating revenues
grew by $7,275,000, an increase of 4.3% over 1991, to a total of
$175,368,000.
Telephone Operating Revenues
Led by growth in cellular network revenues, telephone operating
revenues increased by $7,154,000, or 4.6% over 1992, to a total of
$163,914,000. Growth in 1992 was $7,448,000 or 5.0% over 1991, to a
total of $156,760,000.
Local Network Services
Local network service revenues as shown in the Consolidated
Statements of Income reflect amounts billed to customers for local
exchange services, which include access to the network and secondary
central office services, such as custom calling features. It also
includes network revenues from cellular operations in the Lincoln MSA.
Local network service revenues in 1993 were $70,833,000, an increase of
$4,811,000 or 7.3% over the 1992 total of $66,022,000. In 1992, local
network service revenues increased $10,050,000 or 18.0% over the 1991
total of $55,972,000.
Each annual increase reflects the addition of telephone and
cellular access lines. Customer business telephone access lines
increased 3,471 (5.7%) in 1993 and 3,281 (5.7%) in 1992. Residence
telephone access lines increased 2,523 (1.5%) in 1993 and 2,790 (1.7%)
in 1992. Cellular access lines increased 5,654 (69.8%) in 1993 and 2,919
(56.4%) in 1992. The increase in 1992 local network service revenues is
also attributable to revenue shifts from long distance to local service
due to the introduction of Enhanced Local Calling Areas (ELCAs), and to
higher local service rates implemented in August 1991. Revenues derived
from calling within ELCAs (a radius of 25 miles around each exchange)
are classified as local service revenues.
Long Distance and Access Services
Long Distance Revenues
Long distance revenues as shown in the Consolidated Statements of
Income are received from providing long distance services within LT&T's
service area. These services include calls beyond the ELCAs; Wide Area
Telecommunications Service ("WATS" or "800" services) for customers with
highly concentrated demand; and special services, such as private lines.
Long distance revenues in 1993 were $15,244,000, a decrease of $790,000
or 4.9% from the 1992 total of $16,034,000. In 1992, long distance
revenues decreased $4,689,000 or 22.6% from the 1991 total of
$20,723,000. Long distance rates were reduced by approximately
$1,125,000 annually beginning on March 1, 1993, pursuant to an order of
the Nebraska Public Service Commission (NPSC). The 1992 decrease was due
primarily to the reclassification of calls 25 miles or less in length
(calls within ELCAs) to local network revenue. These calls were
classified as long distance calls prior to August 1991.
Access Revenues
Interstate access service revenues result from providing access
services to interexchange carriers in order to provide telecommuni-
cations services between LT&T's area and other states. Interstate access
service revenues were $29,178,000 in 1993, an increase of $1,584,000 or
5.7% over the 1992 total of $27,594,000. In 1992, interstate access
service revenues decreased $591,000 or 2.1% from the 1991 total of
$28,185,000. The 1993 increase was due primarily to increased volume of
access minutes. The 1992 decrease was due to regulatory rule changes
which reduced costs allocated to the interstate jurisdiction.
Intrastate access service revenues result from the provision of
access services to interexchange carriers which provide telecommu-
nications services between Local Access and Transport Areas (LATAs)
within Nebraska. Intrastate access revenues were $18,353,000 in 1993, an
increase of $1,489,000, or 8.8%, over the 1992 total of $16,864,000. In
1992, intrastate access revenues increased $1,478,000 or 9.6% over the
1991 total of $15,386,000. Both the 1993 and the 1992 increases were due
to increased volumes of access minutes.
Diversified Operations Revenues and Sales
Revenues and sales from diversified operations were $28,054,000 in
1993, up $1,303,000 or 4.9%. In 1992, revenues and sales from
diversified operations had decreased by $151,000, or 0.6%, from 1991.
Revenues are received from LinTel's Lincoln Telephone Long Distance
division which provides long distance services beyond LT&T's service
area. These services include long distance and WATS calls. Long distance
revenues were $19,622,000 in 1993, an increase of $689,000 or 3.6% over
the 1992 total of $18,933,000. In 1992, long distance revenues increased
$49,000 or 0.3% over the 1991 total of $18,884,000.
Revenues are also received by LinTel from sales and servicing of
telecommunications products and equipment. Product sales revenues were
$8,089,000 in 1993, an increase of $620,000 or 8.3% over the 1992 amount
of $7,469,000. In 1992, product sales revenues decreased $200,000 or
2.6% from the 1991 amount of $7,669,000.
Operating Expenses
Total operating expenses were $127,525,000 in 1993, an increase of
$3,585,000 or 2.9% from 1992. Total operating expenses increased
$5,408,000 or 4.6% from 1991 to 1992.
Depreciation expenses amounted to $28,596,000 in 1993, $29,626,000
in 1992, and $28,628,000 in 1991. The most recent depreciation rate
order by the NPSC allowed analog electronic and step-by-step switching
equipment, as well as microwave radio systems, to be fully amortized by
December 31, 1992. On November 10, 1993, LT&T filed an application with
the NPSC which would increase annual depreciation costs by $3,802,000
based upon December 1992 book balances. An NPSC decision is expected in
1994 to be retroactively effective to January 1, 1994.
Costs of goods and services were reduced by $394,000 or 2.2% in
1993 from 1992 to an amount of $17,709,000, and by $703,000 or 3.7% in
1992 from 1991, led by LinTel's reduced costs of providing long distance
services in each year.
Other operating expenses were $85,915,000 in 1993, $80,219,000 in
1992, and $78,773,000 in 1991. The 1993 increase was led by the
increased cost of employee benefits, including a change in accounting
for the costs of health care benefits after existing employees retire.
Sales commissions and other costs of acquiring cellular customers also
increased.
Taxes, other than payroll and income, are principally local
property taxes. The Company's tax obligations were significantly
modified by actions of the Nebraska Legislature and the Nebraska Supreme
Court, as described further under the heading "Operating Environment and
Trends in the Business." These taxes amounted to $2,923,000 in 1993,
compared to $4,135,000 in 1992 and $446,000 in 1991.
Non-Operating Income (Expenses)
Series G, I and J First Mortgage Bonds totalling $35,000,000 were
called on July 6, 1993, resulting in a call premium of $822,000.
Short-term borrowings at lower interest rates were used to fund the
call. This action led to a total of $8,556,000 for interest expense and
other deductions in 1993, compared to $9,378,000 in 1992 and $9,433,000
in 1991.
Income Taxes
Income tax expenses in 1993 were $19,618,000, compared to $16,101,-
000 in 1992 and $16,837,000 in 1991. In addition to increased taxable
income in 1993 over 1992, the federal income tax rate increased from 34%
to 35%.
In July 1992, the Nebraska Supreme Court issued a ruling which
invalidated the 1991 Legislature's LB 829. As a result, the Legislature
held a special session in November 1992. To recoup the lost revenue,
one-time measures were adopted which were similar to those of LB 829,
but which were less burdensome to telecommunications providers than was
the case under the 1991 legislation. The net change from these actions
was a reduction of the Company's state income taxes for 1992 by
approximately $575,000.
Liquidity and Capital Resources
Capitalization
LT&T reduced its long-term debt by $35,000,000 in 1993 and
$6,775,000 in 1992. Short-term borrowings were used to accomplish the
1993 reduction. In addition, LT&T retired all of its 7.64% preferred
stock in July 1992, including 4,800 shares at par and 24,800 shares at
$103 per share. A total of $3,034,400 was paid to retire the preferred
stock.
During 1991, the Board of Directors authorized the purchase of up
to 600,000 shares of the Company's common stock as warranted by market
conditions. Pursuant to this authorization, the Company purchased
270,000 shares in 1992 for $3,125,000, and 4,376 shares in 1993 for
$58,000. The foregoing common share information has been adjusted to
reflect the 100% stock dividend distributed on January 6, 1994.
Construction
The Company is continuing to invest in new technology. Net cash
expenditures for capital additions to property and equipment amounted to
$24,997,000 in 1993, $25,730,000 in 1992, and $31,763,000 in 1991. Cash
provided by operating activities, less dividends, exceeded capital
additions in each of those years. Gross additions to telephone property
and equipment are expected to approximate $33,434,000 in 1994. The
Company anticipates funding this construction from operating activities.
The Company's fiber optic system between major wire centers is complete.
The Company continues to monitor the economic feasibility and
technological advances in extending fiber beyond the wire centers. There
are no specific plans for this expansion at this point.
Cash and Cash Equivalents
The Company had cash, cash equivalents, and temporary investments
of $49,792,000 and $38,649,000 at December 31, 1993 and 1992,
respectively.
There were short-term borrowings of $41,500,000 and $14,000,000 at
December 31 of 1993 and 1992, respectively.
Dividends
Quarterly dividends on the Company's common stock were increased
from 9.25 cents per share to 10 cents per share, commencing with
dividends paid April 10, 1991, to 11 cents per share commencing July 10,
1992, to 12 cents per share commencing January 10, 1993, and to 13 cents
per share commencing January 10, 1994. In addition, a 100% stock
dividend was distributed on January 6, 1994. The total cash dividends
declared amounted to 49 cents per share in 1993, 43 cents per share in
1992 and 40 cents per share in 1991. The foregoing per share information
has been adjusted to reflect such 100% stock dividend.
Purchase of Shares for Employee Benefit Plans
On February 1, 1994, the Company filed a Form S-3 Registration
Statement with the Securities and Exchange Commission in connection with
the secondary offering of 2,130,000 shares of the Company's common stock
for sale by Sahara Enterprises, Inc. (Sahara). Sahara granted an option
to the underwriters to purchase up to 319,500 additional shares of
common stock to cover over-allotments. Concurrently with the sale of
such shares, Sahara has agreed to sell 250,000 shares of the Company's
common stock which it owns to the Company for future use in funding
employee benefit plans at a price equal to the public offering price,
less a discount of 2% of such price. The Company anticipates financing
this transaction through short-term debt.
Acquisition and Investments
On December 31, 1991, Prairie entered into a partnership that holds
a 55% interest in the Omaha Cellular Limited Partnership, now doing
business as First Cellular Omaha, which provides cellular communications
services in the Omaha MSA. Prairie is an equal partner with
Centel-Nebraska in the partnership and has the option to purchase
Centel's remaining 50% interest in the partnership during the two-year
period following December 31, 1996. The Company assumed management of
First Cellular Omaha on January 1, 1992. First Cellular Omaha's
operating results have exceeded the Company's forecast. First Cellular
Omaha increased its number of customer access lines 61% in 1993 and by
nearly 50% in 1992. Operating revenues increased by 40.0% in 1993 and by
26.5% in 1992. First Cellular Omaha invested $3,825,000 and $3,702,000
in additional equipment in 1993 and 1992, respectively.
During 1992, the Company purchased additional shares of the common
stock of Nebraska Cellular Telephone Corporation (NCTC) at a cost of
$2,632,000. NCTC provides cellular communications services in
non-metropolitan areas of Nebraska. As of December 31, 1993, the Company
owned approximately 13% of the outstanding shares of NCTC.
Operating Environment and Trends in the Business
State Tax Changes
During the period of 1991 through 1993, the most notable changes
among the Company's operating expenses were state and local taxes. In
1991, the Nebraska Supreme Court determined in separate actions that
Nebraska's personal property tax system as applied to businesses in 1989
and 1990 was unconstitutional. The Court determined that approximately
18.8% of taxes paid for 1990 should be refunded. The NPSC approved a
settlement whereby similar refunds were made applicable to 1989 taxes.
In 1991, the Nebraska Legislature adopted a temporary measure, LB 829,
which eliminated such personal property taxes for 1991, and substituted
increased corporate income tax rates including a 4% surcharge on
depreciation deductions.
In 1992, the Legislature adopted a new system of taxing business
equipment which was consistent with a constitutional amendment approved
by the voters in May. The Company's property tax under the new measure
amounted to approximately $3,483,000 for 1992 and $3,609,000 for 1993.
Also in 1991, the Legislature adopted a measure requiring the NPSC
to approve the disposition of tax reductions which telephone companies
might derive from a change in tax laws. The Company set aside $2,017,000
in 1992 and $24,000 in 1993 to meet this requirement. The Company has
agreed to offer equipment and facilities for Enhanced 911 emergency
services and frame relay services to various governmental and
educational entities at reduced rates to comply with the NPSC's order
concerning these matters.
All of these actions, together with partial refunds that were
received or accrued from 1989 and 1990 property tax payments, led to a
decrease in operating tax expense of $1,212,000 from 1992 to 1993, and
an increase in operating tax expense of $3,689,000 from 1991 to 1992.
The Company believes the adoption of the constitutional amendment should
serve to stabilize operating tax liabilities in the future.
Regulatory
In providing telecommunications services, LT&T and LinTel are
subject to regulation from both state and federal regulators with
respect to rates, services and other matters.
State Regulation
Nebraska does not have traditional rate-of-return regulation, but
instead allows telephone companies some flexibility in setting prices.
However, the types of service offered and service quality are still
regulated by the NPSC.
From time to time, including in January 1994, proposals have been
made by the Nebraska Legislature and the NPSC to re-regulate rates for
telecommunications services, including local and interexchange long
distance rates, offered in Nebraska. In addition, a bill was introduced
in the Nebraska Legislature in January 1994, which if it had been
approved, would have eliminated the Company's exclusive ability to
provide basic local exchange service in its certificated service area
(the southeastern 22 counties of Nebraska) and would have potentially
subjected the Company to competition from other providers of basic local
exchange service, interexchange service and extended area service. These
two 1994 proposals were rejected by the Legislature's Transportation
Committee, and did not advance for further consideration by the
Legislature. The Company cannot provide any assurance that the current
regulatory environment in Nebraska will continue without change in the
future or make any predictions as to what impact any change may have on
the Company's operations.
The NPSC ordered LT&T to adjust several rates and make service
changes which became effective on August 16, 1991, in connection with
the creation of ELCAs. The combined result of all of the rate changes
effected by the NPSC's order was intended to be revenue-neutral, and
results were monitored for 12 months following entry of the order. The
NPSC determined that the revised rate structure had exceeded
revenues-neutrality by approximately 2.0%, less costs of implementing
the revised rate structure.
On February 16, 1993, the NPSC issued an order intended to
accomplish revenue neutrality on a going forward basis, as well as to
refund excess revenues which LT&T earned during and following the
monitoring period. In March 1993, LT&T's customers received one-time
credits which totalled approximately $253,000. Further, rates for touch
call service were reduced by approximately $464,000 annually, beginning
March 1, 1993. Long distance rates were reduced by approximately
$1,125,000 annually, also beginning March 1, 1993.
Federal Regulation
The Federal Communication Commission (the "FCC") regulates
interstate telephone services provided by the Company. This regulation
primarily consists of the regulation of interstate access charges that
are billed to interexchange carriers for the origination and termination
of interstate long distance services by end-user customers over the
Company's local exchange network. The Company elected to be subject to
price cap regulation by the FCC effective July 2, 1993, pursuant to
which limits are imposed on the Company's interstate service rates.
Prior to July 2, 1993, the Company operated under rate-of-return
regulation, which offered less pricing and earnings flexibility than
under price cap regulation. From time to time, the FCC modifies existing
regulations and adopts new regulations concerning interstate telephone
services, and there can be no assurance as to what impact such
regulations may have.
Competition
The Company faces increasing competition in virtually all aspects
of its business. Advances in technology, as well as regulatory,
legislative and judicial actions, have expanded the types of services
and products available in the market as well as the number of
alternative providers offering such services. These trends are expected
to continue over the next decade and at an increasing rate in the near
future.
Competition in the wireless communications markets is expected to
eventually increase due to the FCC's assigning additional frequency
spectrum to Personal Communications Services (PCS), which could allow an
individual to place calls and be contacted at virtually any location.
During 1993, Congress amended the Communi-cations Act to authorize the
use of competitive bidding as a means of awarding licenses for spectrum
use for PCS and other services. The FCC issued rules and regulations for
the development of PCS. The FCC has allocated spectrum for a total of up
to seven possible PCS providers in each market. Due to the Company's
ownership of cellular licenses, it will be restricted to bidding on 10
Megahertz of frequency in the Lincoln, Omaha, and statewide markets. It
is not precluded from other markets outside of Nebraska.
Accounting Pronouncements
In December 1990, the Financial Accounting Standards Board issued
a new statement of accounting standards related to insurance and other
non-pension benefits provided to retirees (SFAS 106). Prior to 1993, the
Company accounted for these benefits as costs were incurred. Under the
new standards, recognition of these costs is accelerated and accrued
prior to retirement, similar to accounting for pension benefits.
Implementation of the new standards was required in 1993. The Company
elected to account for the accumulated post-retirement benefit
obligation as of January 1, 1993, taking a charge of $23,166,000, net of
income tax benefits.
In February 1992, the Financial Accounting Standards Board issued
a new statement of accounting standards relating to current and deferred
income taxes (SFAS 109). The Company applied this new standard in 1993.
The new standard did not have a significant impact on the financial
statements.
Labor Contracts
LT&T and Local 7470 of the Communications Workers of America,
AFL-CIO, (CWA) reached agreement on a three-year contract concerning
wages and working conditions, effective in October 1992. The contract
provides for wage increases of 11.2 percent over the three-year term of
the contract, increased pension benefits, changes in health and dental
care programs and changes in certain job classifications which allow for
increased work force flexibility. In addition, in May 1992, LinTel and
the CWA reached agreement on a three-year contract covering its
union-eligible employees. The LT&T and LinTel labor contracts with the
CWA expire on October 14, 1995, and May 19, 1995, respectively.
<TABLE>
<CAPTION>
Selected Financial Data (Not covered by Independent Auditors' Report)
Dollars in thousands except per
share data 1993 1992 1991 1990 1989 1988
Selected Consolidated Earnings
Statement Items
<S> <C> <C> <C> <C> <C> <C>
1. Telephone operating revenues...... $163,914 156,760 149,312 146,162 142,872 141,039
2. Diversified operations revenues
and sales (Note 1).............. 28,054 26,751 26,902 25,799 25,806 23,623
3. Intercompany revenues............. (7,618) (8,143) (8,121) (7,296) (6,724) (6,458)
4. Total revenues and sales.......... 184,350 175,368 168,093 164,665 161,954 158,204
5. Income before cumulative effect of
change in accounting principle
(Note 2)........................ 33,191 29,609 27,820 24,696 25,046 25,478
6. Cumulative effect of change in
accounting principle........... 23,166 - - - - -
7. Net Income........................ 10,025 29,609 27,820 24,696 25,046 25,478
8. Earnings available for common
shares......................... 9,800 29,271 27,351 24,190 24,503 24,899
9. Earnings before cumulative effect
of change in accounting principle 1.01 0.90 0.83 0.74 0.75 0.75
10. Cumulative effect of change in
accounting principle........... (0.71) - - - - -
11. Earnings per common share (Note 2) 0.30 0.90 0.83 0.74 0.75 0.75
Selected Consolidated Balance Sheet items
12. Total assets..................... $395,279 369,116 360,976 348,434 304,908 289,806
13. Property and equipment........... 449,540 435,226 436,496 417,844 397,630 386,421
14. Accumulated depreciation......... 203,436 185,661 183,128 167,569 152,867 147,794
15. Accumulated depreciation to
depreciable plant.............. 45.7% 43.4% 42.9% 41.0% 39.2% 38.9%
16. Current ratio.................... 1.1:1 1.3:1 1.3:1 2.2:1 1.3:1 1.7:1
17. Long-term debt and redeemable
preferred stock*............... $48,499 78,049 87,544 93,493 63,254 69,743
18. Long-term debt and redeemable
preferred stock as a percent of
total capitalization........... 20.9% 29.2% 33.0% 36.2% 29.2% 33.0%
19. Common stock, premium and
common stock subscribed
less treasury stock............ $41,173 40,427 44,033 45,134 45,726 45,726
20. Retained earnings................ 142,859 149,008 133,878 119,681 107,694 95,805
21. Total long-term debt and
stockholders' equity........... 232,531 267,484 265,455 258,308 216,674 211,265
Selected Financial Data (Not covered by Independent Auditors' Report)
(Continued)
Dollars in thousands except
per share data 1993 1992 1991 1990 1989 1988
Telephone Statistics
22. Access lines in service.......... 238,142 232,148 226,077 221,706 216,109 210,343
23. Number of employees.............. 1,422 1,429 1,459 1,474 1,500 1,525
24. Total salaries................... $48,066 46,211 45,570 44,828 44,472 44,352
Selected Common Stock Items
25. Pensions and other employee
benefits....................... 10,144 7,787 8,892 8,465 7,063 7,325
26. Dividends declared per common
share..................... $0.490 0.430 0.400 0.370 0.370 0.335
27. Shares of common stock out-
standing at end of year... 32,595,350 32,534,376 32,844,376 32,934,376 32,980,376 32,980,376
28. Market value common
stock-high/low............ $20.50/12.00 14.25/10.63 14.63/10.50 16.75/9.75 17.31/8.56 9.13/6.57
29. Price earnings
ratio-high/low............ 20.3x/11.9x 15.8x/11.8x 17.6x/12.7x 22.6x/13.2x 23.1x/11.4x 12.2x/8.8x
30. Book value per common share. $5.65 5.82 5.42 5.00 4.65 4.29
All shares and share data have been adjusted to reflect stock splits.
*Excludes current installments and redemptions due in subsequent years.
Note 1: Diversified operations revenues and sales have been restated to exclude discontinued operations.
Note 2: Net earnings and earnings per common share have not been restated to reflect the immaterial impact of discontinued
operations in 1989.
Selected Financial Data (Not covered by Independent Auditors' Report)
(Continued)
Dollars in thousands except per
share data 1987 1986 1985 1984 1983
Selected Consolidated Earnings
Statement Items
<S> <C> <C> <C> <C> <C>
1. Telephone operating revenues...... $134,681 137,608 123,344 129,145 122,463
2. Diversified operations revenues
and sales (Note 1).............. 19,900 8,163 7,244 4,941 3,644
3. Intercompany revenues............. (5,692) 0 0 0 0
4. Total revenues and sales.......... 148,889 145,771 130,588 134,086 126,107
5. Income before cumulative effect of
change in accounting principle
(Note 2)........................ 21,692 18,963 15,150 16,892 13,542
6. Cumulative effect of change in
accounting principle........... - - - - -
7. Net Income........................ 21,692 18,963 15,150 16,892 13,542
8. Earnings available for common
shares......................... 21,076 18,319 14,488 16,212 12,843
9. Earnings before cumulative effect
of change in accounting principle 0.61 0.56 0.44 0.50 0.40
10. Cumulative effect of change in
accounting principle........... - - - - -
11. Earnings per common share (Note 2) 0.61 0.56 0.44 0.50 0.40
Selected Consolidated Balance Sheet item
12. Total assets..................... $289,426 285,895 280,766 279,067 268,868
13. Property and equipment........... 398,605 384,338 369,407 363,043 361,338
14. Accumulated depreciation......... 157,373 144,584 130,171 122,558 116,615
15. Accumulated depreciation to
depreciable plant.............. 40.2% 37.8% 36.0% 34.6% 33.7%
16. Current ratio.................... 1.6:1 1.7:1 1.4:1 1.1:1 0.8:1
17. Long-term debt and redeemable
preferred stock*............... $71,714 86,391 88,190 90,776 93,198
18. Long-term debt and redeemable
preferred stock as a percent of
total capitalization........... 33.8% 40.8% 43.1% 45.1% 47.8%
19. Common stock, premium and
common stock subscribed
less treasury stock............ $41,816 36,500 37,126 36,497 35,161
20. Retained earnings................ 98,935 88,599 79,407 74,038 66,642
21. Total long-term debt and
stockholders' equity........... 212,465 211,490 204,723 201,311 195,001
Selected Financial Data (Not covered by Independent Auditors' Report)
(Continued)
Dollars in thousands except per
share data 1987 1986 1985 1984 1983
Telephone Statistics
22. Access lines in service.......... 204,561 201,182 199,576 198,284 196,922
23. Number of employees.............. 1,564 1,587 1,623 1,672 1,776
24. Total salaries................... 46,906 44,047 43,839 43,454 43,443
25. Pensions and other employee
benefits....................... 6,729 7,544 7,547 8,119 8,032
Selected Common Stock Items
26. Dividends declared per common
share..................... $0.295 0.275 0.275 0.270 0.250
27. Shares of common stock out-
standing at end of year... 34,673,576 33,189,624 33,189,624 33,002,736 32, 562,704
28. Market value common
stock-high/low............ $7.25/5.07 6.88/4.60 5.54/3.66 3.69/2.85 3.50/2.97
29. Price earnings
ratio-high/low............ 11.9x/8.3x 12.3x/8.2x 12.6x/8.3x 7.4x/5.7x 8.8x/7.4x
30. Book value per common share. 4.06 3.77 3.51 3.35 3.13
<FN>
All shares and share data have been adjusted to reflect stock splits.
*Excludes current installments and redemptions due in subsequent years.
Note 1: Diversified operations revenues and sales have been restated to exclude discontinued operations.
Note 2: Net earnings and earnings per common share have not been restated to reflect the immaterial impact of discontinued
operations in 1989.
</TABLE>
Officers, Directors and Committees
OFFICERS
Corporate Officers: Subsidiary Officers:
Thomas C. Woods, III The Lincoln Telephone LinTel Systems Inc.
Chairman of the Board & Telegraph Company
James W. Strand
Frank H. Hilsabeck Thomas C. Woods, III President
President and Chief Chairman of the Board
Executive Officer Jack H. Geist
Frank H. Hilsabeck Vice President
James W. Strand President and Chief
President-Diversified Executive Officer Michael J. Tavlin
Operations Vice President-
James W. Strand Treasurer and
Jack H. Geist Executive Vice President- Secretary
Vice President- Marketing and Customer
Diversified Operations Services
Robert L. Tyler Charles P. Arnold
Senior Vice President- Senior Vice President- Prairie Communications,
Chief Financial Officer Network Operations Inc.
Michael J. Tavlin Robert L. Tyler James W. Strand
Vice President-Treasurer Senior Vice President- President
and Secretary Chief Financial Officer
Michael J. Tavlin
Robert C. Halvorsen Michael J. Tavlin Vice President-Treasurer
Assistant Secretary Vice President-Treasurer and Secretary
and Secretary
Robert C. Halvorsen
Assistant Secretary
DIRECTORS
Duane W. Acklie John Haessler William C. Smith
Chairman President and Chief Retired Chairman
Crete Carrier Corporation Executive Officer FirsTier Financial, Inc.
Woodmen Accident and
William W. Cook, Jr. Life Company James W. Strand
President and Chief President-Diversified
Executive Officer Charles R. Hermes Operations
The Beatrice National President Lincoln
Telecommunications
Bank and Trust Company Dutton-Lainson Company Company
Officers, Directors and Committees
DIRECTORS (Cont'd)
Terry L. Fairfield Frank H. Hilsabeck Charles N. Wheatley
President and Chief President and Chief President and Chief
Executive Officer Executive Officer Executive Officer
University of Nebraska Lincoln Sahara Enterprises, Inc.
Foundation Telecommunications
Company Thomas C. Woods, III
James E. Geist Chairman of the Board
Retired Chairman and George Kelm Lincoln
Telecommunications
Chief Executive Chairman Company
Officer Sahara Enterprises, Inc.
Lincoln Telecommunications Lyn Wallin Ziegenbein
Company Donald H. Pegler, Jr. Executive Director
Chairman and Chief Peter Kiewitt Foundation
J. Taylor Greer Executive Officer
Partner Pegler-Sysco Food Services
Woods & Aitken Company
Paul C. Schorr, III
President and Chief
Executive Officer
Ebco-Commonwealth Inc.
COMMITTEES
Executive Committee: Audit Committee:
Frank H. Hilsabeck, George Kelm, Chairman
Chairman Terry L. Fairfield
William W. Cook, Jr. John Haessler
J. Taylor Greer Charles R. Hermes
George Kelm Charles N. Wheatley
William C. Smith
