UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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or
( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-4996
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ALLTEL CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 34-0868285
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allied Drive, Little Rock, Arkansas 72202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (501) 905-8000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock New York and Pacific
$2.06 No Par Cumulative Convertible
Peferred Stock New York and Pacific
Securities registered pursuant to Section 12(g) of the Act:
NONE
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(Title of Class)
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 requirements for the past 90 days.
YES X NO
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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. (X)
Aggregate market value of voting stock held by non-affiliates as of
February 28, 1999 - $16,836,745,818
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Common shares outstanding, February 28, 1999 - 281,198,260
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DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated Into
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Proxy statement for the 1999 Annual Meeting
of stockholders Part III
The Exhibit Index is located on pages 69 to 74.
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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THE COMPANY
GENERAL
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ALLTEL Corporation ("ALLTEL" or the "Company") is a customer-focused information
technology company that provides wireline and wireless communications and
information services. The Company owns subsidiaries that provide wireline,
long-distance, network access and Internet services, wireless communications,
paging service, information processing management services, and advanced
application software. Telecommunications products are warehoused and sold by the
Company's distribution subsidiary. A subsidiary also publishes telephone
directories for affiliates and other independent telephone companies. The
Company is incorporated in the state of Delaware.
FORWARD LOOKING STATEMENTS
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This Form 10-K and future filings by the Company on Form 10-Q and Form 8-K and
future oral and written statements by the Company and its management may
include, certain forward-looking statements, including (without limitation)
statements with respect to anticipated future operating and financial
performance, growth opportunities and growth rates, acquisition and divestitive
opportunities, Year 2000 compliance and other similar forecasts and statements
of expectation. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," and "should," and variations of these words
and similar expressions, are intended to identify these forward-looking
statements. Forward-looking statements by the Company and its management are
based on estimates, projections, beliefs and assumptions of management and are
not guarantees of future performance. The Company disclaims any obligation to
update or revise any forward-looking statement based on the occurrence of future
events, the receipt of new information, or otherwise.
Actual future performance, outcomes and results may differ materially from those
expressed in forward-looking statements made by the Company and its management
as a result of a number of important factors. Representative examples of these
factors include (without limitation) rapid technological developments and
changes in the telecommunications and information services industries; ongoing
deregulation (and the resulting likelihood of significantly increased price and
product/service competition) in the telecommunications industry as a result of
the Telecommunications Act of 1996 and other similar federal and state
legislation and the federal and state rules and regulations enacted pursuant to
that legislation; regulatory limitations on the Company's ability to change its
pricing for communications services; the possible future unavailability of
Statement of Financial Accounting Standards No. 71 to the Company's wireline
subsidiaries; continuing consolidation in certain industries, such as banking,
served by the Company's information services business; the risks associated with
relatively large, multi-year contracts in the Company's information services
business; and higher than anticipated expenditures associated with the Company's
Year 2000 efforts. In addition to these factors, actual future performance,
outcomes and results may differ materially because of other, more general,
factors including (without limitation) general industry and market conditions
and growth rates, domestic and international economic conditions, governmental
and public policy changes and the continued availability of financing in the
amounts, at the terms and on the conditions necessary to support the Company's
future business.
1
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ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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THE COMPANY (continued)
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MERGER AGREEMENT
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On December 18, 1998, ALLTEL announced a definitive merger agreement with Aliant
Communications, Inc. ("Aliant"), a communications company which offers wireless,
wireline, paging, long-distance and Internet services in Nebraska. Under terms
of the agreement, each share of Aliant's common stock will be exchanged for .67
to .75 shares of ALLTEL common stock. The Company expects to account for this
transaction, which is valued at $1.5 billion, as a pooling-of-interests. The
merger is subject to approval by Aliant shareholders, as well as regulatory and
other approvals. The Company expects the merger to be completed by mid-1999.
ACQUISITIONS
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In January 1999, the Company completed its merger with Standard Group, Inc.
("Standard"), a communications company, that served more than 71,000 customer
lines in northeast Georgia. The customer lines acquired are in areas adjacent to
the Company's other wireline exchanges in Georgia and increase ALLTEL's total
wireline customers in the state to approximately 550,000. The transaction also
included Standard's cable television operations, which serve approximately
30,000 customers.
In July 1998, the Company completed its merger with 360 Communications
Company ("360"), a wireless communications company, that served more
than 2.6 million customers in 15 states. Through this merger, ALLTEL
significantly expanded its wireless presence and enhanced its ability to deliver
bundled communications services across its geographically focused markets.
During 1998, the Company acquired a 100 percent ownership interest in two
Georgia Rural Service Areas ("RSAs"), representing approximately 181,000
cellular "pops" or potential customers. In addition, the Company increased its
ownership interest in wireless properties in North Carolina and Texas.
In October 1997, the Company acquired Georgia Telephone Corporation, that served
more than 6,700 customer lines in southwest Georgia. The customer lines acquired
are in areas adjacent to the Company's wireline exchanges in Georgia and are
located within the Company's current wireless service area.
During 1997, the Company increased its ownership to 100 percent in two Alabama
RSAs, representing approximately 260,000 cellular "pops" or potential customers.
In addition, the Company and BellSouth Corporation ("BellSouth") combined their
interests in two partnerships that own and control cellular licenses and
operations in Richmond, Virginia and Orlando, Florida. The resulting partnership
is owned 75 percent by BellSouth and 25 percent by the Company. Also in 1997,
the Company acquired minority interests in 16 of its controlled markets, which
increased its ownership interest to 100 percent in ten of those markets.
In 1996, the Company acquired Independent Cellular Network, Inc. ("ICN"). ICN
owned and operated cellular systems serving more than 140,000 customers in Ohio,
Kentucky, Pennsylvania and West Virginia.
2
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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THE COMPANY (continued)
ACQUISITIONS (continued)
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During 1995, ALLTEL entered into a joint venture with BellSouth Mobility, Inc.
involving cellular properties in five states. As a result of this joint venture,
ALLTEL owns a 53.5 percent interest in the Columbia and Florence, South Carolina
market, an 11.1 percent interest in the Greensboro, North Carolina market, an
11.1 percent interest in a North Carolina RSA, and no longer owns a majority
interest in the Jackson, Mississippi market. In addition during 1995, ALLTEL
completed an exchange of certain assets in a West Virginia RSA and an Oklahoma
RSA for certain assets in a Georgia RSA and a North Carolina RSA owned by United
States Cellular Corp. ("U.S. Cellular"). The acquired properties are contiguous
to ALLTEL's Albany, Georgia and Charlotte, North Carolina markets. In January
1995, the Company purchased U.S. Cellular's 20 percent interest in the Fort
Smith, Arkansas MSA, thereby increasing ALLTEL's ownership interest in the Fort
Smith MSA to 100 percent.
In May 1995, ALLTEL Information Services, Inc. ("ALLTEL Information Services")
acquired Vertex Business Systems, Inc. ("Vertex"), a provider of international
banking software products and services. Vertex, headquartered in New York, has
clients located in Europe, Asia and the United States.
In November 1994, the Company completed its acquisition of Medical Data
Technology, Inc. ("MDT"). MDT provided information processing services to 14
hospitals in the northeastern United States. As further discussed below, the
Company sold its healthcare information services business in January 1997.
DISPOSITIONS
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During 1998, the Company sold its 27.9 percent ownership interest in a cellular
partnership serving the Omaha, Nebraska market for approximately $18 million in
cash.
In May 1997, the Company sold its wire and cable subsidiary, HWC Distribution
Corp. ("HWC") to Code, Hennessy & Simmons, Inc., an investment firm, for
approximately $45 million in cash. HWC was one of two companies that comprised
ALLTEL's product distribution operations.
In January 1997, the Company sold the healthcare portion of its information
services business to Integrated Healthcare Solutions, Inc. for approximately
$154 million consisting of cash and a continuing preferred stock interest.
During 1998, the preferred stock was converted into common stock representing a
15 percent interest in a new publicly held company, Eclipsys Corporation.
In November 1994, the Company signed definitive agreements to sell certain
wireline properties serving approximately 117,000 access lines in Arizona,
California, Nevada, New Mexico, Oregon, Tennessee, Utah and West Virginia to
Citizens Utilities Company ("Citizens") in exchange for approximately $250
million in cash, assumed debt and a wireline property serving 3,600 access lines
in Pennsylvania. The sale of all properties except for those in Nevada was
completed during 1995, and the sale of the Nevada properties was completed in
March 1996.
3
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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THE COMPANY (continued)
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DISPOSITIONS (continued)
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In 1995, as part of its agreement to sell certain telephone properties, the
Company also completed the sale of certain of its cable television properties to
Citizens. These cable television properties served approximately 6,800 customers
in Arizona, California, New Mexico and Utah. The Company also completed in 1995
the sale of its cable television properties in Texas, which served approximately
7,200 customers. Upon completion of these property sales, the Company provides
cable television service to approximately 3,600 customers, primarily to
residents of Bolivar and Stockton, Missouri. These remaining cable television
properties are not significant to the ongoing operations of the Company.
In 1995, ALLTEL Information Services sold all of the assets related to its check
processing operations, including substantially all of the customer contracts.
MANAGEMENT
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The Company's staff at its headquarters and regional offices supervise,
coordinate and assist subsidiaries in management activities, investor relations,
acquisitions, corporate planning, insurance, and technical research. They also
coordinate the financing program for the entire corporation.
EMPLOYEES
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At December 31, 1998, the Company had 21,504 employees. Some of the employees of
the Company's wireline subsidiaries are part of collective bargaining units. The
Company maintains good relations with all employee groups.
OPERATING SEGMENTS
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ALLTEL is organized based on the products and services that it offers. Under
this organizational structure, the Company operates in two principal areas:
communications and information services. The Company's communications operations
consist of its wireless, wireline and emerging business segments. Emerging
businesses consist of the Company's key new product offerings and include the
Company's long-distance, competitive local exchange carrier ("CLEC"), Internet
access, Personal Communications Services ("PCS"), and network management
operations. The Company also sells telecommunications products and publishes
telephone directories. For financial information about ALLTEL's operating
segments, refer to pages 58-61 of this Form 10-K.
COMMUNICATIONS SERVICES
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During the past two years, the Company has completed several strategic
initiatives designed to strengthen its communications business and to focus its
operations geographically in markets primarily located in the southeastern
portion of the United States and the eastern Great Lakes. As previously
discussed, the merger with 360 completed in 1998 significantly expanded
ALLTEL's wireless presence and enhanced its ability to provide bundled
communications services to its customers. In 1998, the Company began providing
local competitive access service offerings to business customers in select
markets. By mid-1999, the Company will complete construction of network
facilities to provide communications services in additional areas within its
geographically focused markets that are located outside its traditional
franchised service areas. In 1998, the Company also expanded its product
offerings to include PCS.
4
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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COMMUNICATIONS SERVICES (continued)
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In 1997, ALLTEL participated in the Federal Communications Commission's ("FCC")
"D" and "E" band PCS auctions, and ALLTEL was awarded the PCS licensing rights
for 73 markets in 12 states. The PCS licenses acquired increase the size of the
Company's potential wireless customer base to 50.6 million. Also during 1997,
ALLTEL converged its wireline and wireless businesses into a single operation
capable of delivering to customers one-stop shopping for a full range of
communications products and services including local wireline, long-distance,
wireless, paging and Internet services. Additionally, ALLTEL added wireline
products to its wireless retail stores and combined its wireline and wireless
call centers to better serve customers.
WIRELESS OPERATIONS
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GENERAL
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The Company provides wireless telephone service to more than 4 million customers
in 22 states. One measure of a wireless telephone market's potential is the
market's population times the percent of a company's ownership interest of the
wireless operations in that market ("pops"). At December 31, 1998, ALLTEL's
penetration rate (number of customers as a percentage of the total population in
the Company's service areas) was 12 percent. ALLTEL owns a majority interest in
wireless operations in 62 Metropolitan Statistical Areas ("MSAs"), representing
approximately 20.2 million wireless pops, and the Company owns a majority
interest in 103 RSAs, representing approximately 13.3 million wireless pops. In
addition, ALLTEL owns a minority interest in more than 70 other wireless
telephone markets including the New York, New York; Chicago, Illinois; Houston,
Texas and Orlando, Florida MSAs.
PRODUCT OFFERINGS AND PRICING
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ALLTEL seeks to stimulate additional usage, increase penetration and improve
customer retention rates through creative pricing strategies. The Company
creates local and expanded service territories designed to meet customer needs
and respond to prevailing market and competitive conditions. Airtime rate plans
are designed to attract users from all market segments. These plans typically
consist of a fixed monthly rate for network access, a package of airtime minutes
included in the monthly rate and a per minute rate for airtime used in excess of
the included airtime package. Customers who frequently use wireless service
generally prefer rate plans with a higher than average fixed monthly rate, a
larger package of included minutes and a lower than average per minute airtime
rate. Conversely, customers who use wireless service less frequently prefer a
lower monthly fixed rate and will pay a premium for airtime. The Company also
provides custom calling features to enhance its basic airtime product. These
features include call waiting, call forwarding, three-way calling, no-answer
transfer and voicemail.
ALLTEL has entered into roaming agreements with other domestic wireless
companies. These roaming agreements provide customers with the capability to use
their wireless telephones while traveling outside the Company's service
territories. As a result of these roaming agreements, ALLTEL customers, with few
exceptions, can place and receive calls from anywhere within the United States.
Roaming rates have been decreasing, which has resulted in increased roaming
volumes and overall network usage.
Primarily as a result of increased usage of ALLTEL's network facilities, average
revenue per customer per month increased slightly in 1998 to $48, as compared to
$47 for 1997. ALLTEL expects average monthly revenue per customer to continue to
be affected by decreased roaming rates and continued penetration into lower
market usage segments.
5
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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WIRELESS OPERATIONS (continued)
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DISTRIBUTION AND MARKETING
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ALLTEL utilizes four methods of distributing its wireless products and services
in each of its markets. These methods include Company retail stores, Company
retail kiosks, direct sales representatives, and dealers. The development of
multiple distribution channels in each of its markets enables the Company to
provide effective and extensive marketing of products and services and to reduce
its reliance on any single distribution source. ALLTEL continues to expand its
retail channels. Dealer and direct sales channels remain important components of
the Company's overall distribution strategy, with the primary objective for all
channels being to lower customer acquisition costs and to improve customer
retention rates.
ALLTEL currently conducts its retail operations through over 700 Company retail
locations. Stand-alone stores are strategically located in smaller local and
neighborhood retail centers as well as in large shopping malls to capitalize on
favorable demographics and retail traffic patterns. The Company's retail focus
is to attract new customers and to promote customer retention by providing new
customers with extensive assistance from dedicated sales representatives on the
use of a wireless telephone and on the various services that ALLTEL provides.
Many retail locations provide vehicle installation services and while-you-wait
wireless telephone troubleshooting and repair. For ALLTEL, the incremental cost
of obtaining a customer through a Company retail store is the lowest of any
distribution channel.
ALLTEL also sells wireless service directly through its own kiosks in large
national retail stores. The Company stations retail sales representatives at
kiosks in large retailers to take advantage of high traffic generated by the
retailers, to reduce the cost of the sale, and to ensure customers receive
proper training in the use of wireless equipment and services. Existing
customers can purchase wireless telephone accessories, pay bills or inquire
about ALLTEL's services and features while in retail stores or at kiosks.
Through dedicated customer service at its retail stores and kiosks, the
Company's goal is to build customer loyalty and increase the retention rate of
new and existing customers.
ALLTEL's direct sales force focuses its efforts on business customers with high
wireless telephone usage and multiple lines of service. This channel produces
the lowest churn and highest revenue per customer compared with any other
distribution channel.
The Company has entered into dealer agreements with several large electronics
retailers and discounters in its markets. ALLTEL also contracts with local
dealers who operate on a smaller scale and may offer other wireless services
like paging. In exchange for a commission payment, these dealers solicit
customers for the Company's wireless service. The commission payment is subject
to chargeback provisions if the customer fails to maintain service for a
specified period of time. This arrangement increases store traffic and sales
volume for the dealers, and provides a valuable source of new customers for the
Company. ALLTEL actively supports its dealers with regular training and
promotional support.
Maintaining low customer churn rates is a primary goal of the Company,
particularly as new competitors enter the marketplace. The Company experienced
an average monthly churn rate in its wireless service areas of 2.12 percent and
2.04 percent for the years ended December 31, 1998 and 1997, respectively. These
churn rates were comparable to industry averages.
6
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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WIRELESS OPERATIONS (continued)
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COMPETITION
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Wireless carriers face competition from a second carrier licensed to provide
wireless telephone services in the same geographic area, from resellers who buy
bulk wireless services from one of the two licensees and resell it to their
customers, from providers of PCS and other enhanced mobile services and from
Enhanced Specialized Mobile Radio ("ESMR") providers. PCS services generally
consist of wireless two-way communications services for voice, data and other
transmissions employing digital technology. Generally, in the absence of a
disaggregation of spectrum under FCC rules, there would be a maximum of six
broadband PCS providers in any given area. During the past two years, PCS
providers have begun operations within ALLTEL's wireless markets, and the
Company expects more PCS providers to begin operating within its markets during
1999. ALLTEL has prepared for this competitive environment by enhancing its
networks, expanding its service territories and local calling areas,
restructuring rates, and offering new products and services. ALLTEL intends to
capitalize on its position as an incumbent wireless service provider by
providing high capacity networks, strong distribution channels and superior
customer service.
ALLTEL believes that its networks have sufficient capacity to handle new
customer growth in the near term. In the future, the Company intends to meet any
capacity requirements through frequency planning, network organization and the
deployment of additional network infrastructure. As of December 31, 1998, ALLTEL
was providing digital service in 13 of its largest markets. ALLTEL plans to
continue its transition to digital technology on a market-by-market basis.
Digital technology improves call quality, lengthens the battery life of wireless
telephones and offers improved customer call privacy.
REGULATION
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The Company is subject to regulation by the FCC as a provider of wireless
communications services. The FCC has promulgated rules governing the
construction and operation of wireless communications systems as well as
licensing and technical standards for the provision of wireless telephone
service. Further, the FCC has issued various regulatory mandates requiring
wireless carriers to provide additional services and network functions including
wireless number portability, enhanced E-911 calling and various capabilities
under the Communications Assistance to Law Enforcement Act. The FCC also
regulates wireless service resale practices and the terms under which certain
ancillary services may be provided through wireless facilities. Wireless
carriers are also required to contribute to universal service support
mechanisms.
The Telecommunications Act of 1996 (the "96 Act") provides wireless carriers
numerous opportunities to emerge as full competitors to traditional telephone
companies, including the opportunity to provide local telephone services and to
be compensated by other telecommunications carriers for calls terminated on the
wireless carriers' networks. Wireless carriers are not subject to the enhanced
interconnection, resale, unbundling and other obligations that the 96 Act
imposed on the local exchange companies. The FCC has found that wireless
carriers should not be classified as local exchange carriers unless the FCC
makes a finding that such treatment is warranted. The 96 Act limits the
imposition on wireless carriers of equal access requirements without a detailed
FCC rulemaking. The 1993 Omnibus Budget Reconciliation Act preempted most state
regulation of wireless carriers.
PAGING
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ALLTEL operates wide-area computer-driven paging networks in Arkansas and
Florida. At December 31, 1998, ALLTEL provided paging service to approximately
27,000 customers in Arkansas and Florida through its facilities-based network.
The Company also resells paging services in other ALLTEL wireless service areas
to approximately 146,000 customers.
7
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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WIRELINE OPERATIONS
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LOCAL SERVICE
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General
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The Company's wireline subsidiaries provide local service to nearly 1.9 million
customer lines through 574 exchanges in 14 states. The wireline subsidiaries
also offer facilities for private line, data transmission and other
communications services.
Regulation
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Prior to 1996, the Company's wireline subsidiaries provided local telephone
service under exclusive franchises granted by state regulatory commissions and
have been subject to regulation by those regulatory commissions. These
regulatory commissions have had primary jurisdiction over various matters
including local and intrastate toll rates, quality of service, the issuance of
securities, depreciation rates, the disposition of public utility property, the
issuance of debt, and the accounting systems used by those subsidiaries. The FCC
has historically had primary jurisdiction over the interstate toll and access
rates of these companies and issues related to interstate telephone service.
The 96 Act has substantially modified certain aspects of the states' and the
FCC's jurisdictions in the regulation of local exchange telephone companies. The
96 Act prohibits state legislative or regulatory restrictions or barriers to
entry regarding the provision of local telephone service. The 96 Act also
requires incumbent local exchange carriers ("ILECs") to interconnect with the
networks of other telecommunications carriers, unbundle services into network
elements, offer their telecommunications services at wholesale rates to allow
resale of those services, and allow other telecommunications carriers to locate
their equipment on the premises of the incumbent local exchange carriers. The 96
Act requires all local exchange telephone companies to compensate one another
for the transport and termination of calls on one anothers' networks.
The Company's wireline subsidiaries are rural telephone companies and are exempt
from certain of the foregoing obligations unless, in response to a bona fide
request, a state regulatory commission removes that exemption. The 96 Act
requires the FCC to develop rules necessary to implement certain aspects of the
96 Act, and to revise the current Universal Service Fund in response to the
recommendations of a federal-state joint board.
In August 1996, the FCC issued regulations implementing the local competition
provisions of the 96 Act. These regulations established pricing rules for state
regulatory commissions to follow with respect to entry by competing carriers
into the local, intrastate markets of ILECs, and addressed interconnection,
unbundled network elements and resale rates. The FCC's authority to adopt such
pricing rules, including permitting new entrants to "pick and choose" among the
terms and conditions of approved interconnection agreements, was challenged in
federal court by various ILECs and state regulatory commissions. In July 1997,
the U.S. Eighth Circuit Court of Appeals (the "Eighth Circuit Court") issued its
decision and vacated the FCC's pricing rules including the "pick and choose"
provisions, finding, among other matters, that the FCC had exceeded its
jurisdiction in establishing pricing rules for intrastate communication
services. In responding to petitions for rehearing of its earlier decision, the
Eighth Circuit Court ruled in October 1997 that ILECs are not required by the 96
Act to recombine network elements that are purchased by requesting carriers on
an unbundled basis.
8
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ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
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WIRELINE OPERATIONS (continued)
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LOCAL SERVICE (continued)
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Regulation (continued)
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The FCC asked the U.S. Supreme Court to review two interconnection decisions of
the Eighth Circuit Court. In January 1999, the U.S. Supreme Court ruled that the
FCC has the jurisdiction to carry out certain local competition provisions of
the 96 Act. These provisions include designing a pricing methodology for states
to follow in determining rates to be charged by ILECs to competitors for
interconnection services and network elements, adopting rules regarding states'
review of pre-existing interconnection agreements and adopting rules relating
to dialing parity and standards for granting exemptions to rural ILECs. As part
of its ruling, the U.S. Supreme Court reinstated the FCC's "pick and choose"
rule. The U.S. Supreme Court remanded a portion of its decision to the Eighth
Circuit Court for it to rule on certain issues that it had not previously
decided, such as whether the FCC's pricing rules are consistent with the 96 Act.
Other issues were remanded to the FCC for further rulemaking.
In May 1997, the FCC issued regulations applicable to local exchange carriers
("LECs") relating to access charge reform and universal service. The access
charge reform regulations are discussed on page 10 within the section entitled
"Network Access Services-Regulation". Material changes in the universal service
funding for the Company's wireline subsidiaries are not currently expected to
occur prior to 2001. In 2001, the universal service subsidy for rural LECs may
change from being based on actual costs to being based on a proxy model. Since
the FCC has not yet defined the content of any proxy model, the impact of this
change, if any, in the universal service funding for the Company's wireline
subsidiaries cannot be determined at this time. The Company's wireline
subsidiaries received approximately $73 million from the current federal
universal service fund in 1998. ALLTEL is continuing to evaluate the impact of
the FCC's universal service order on its other telecommunications operations,
including their obligation for universal service contributions and the level of
those contributions. Appeals of certain aspects of the universal service order
are before the U.S. Fifth Circuit Court of Appeals.
Because resolution of the regulatory matters discussed above that are currently
under FCC or judicial review is uncertain and regulations to implement other
provisions of the 96 Act have yet to be issued, the Company cannot predict at
this time the specific effects that the 96 Act will have on its wireline
subsidiaries.
Periodically, the Company's wireline subsidiaries receive requests from wireless
communications providers for renegotiation of existing transport and termination
agreements. The Company's wireline subsidiaries, as requested, renegotiate the
appropriate terms and conditions in compliance with the 96 Act. The Company's
wireline subsidiaries have executed contracts for transport and termination
services with CLECs.
During 1998, wireline operations were affected by certain regulatory commission
orders designed to reduce earnings levels. These orders did not materially
affect the results of operations of the Company's wireline subsidiaries. Certain
states in which the Company's wireline subsidiaries operate have adopted
alternatives to rate-of-return regulation, either through legislative or
regulatory commission actions. The Company has elected to be regulated under
alternative regulation for its Georgia subsidiaries, as well as ALLTEL Alabama,
Inc., ALLTEL Arkansas, Inc., ALLTEL Kentucky, Inc., ALLTEL Carolina, Inc. in
North Carolina and Sugar Land Telephone Company in Texas. The Company also has
an Alternative Regulation application pending in Pennsylvania. As a result of
ALLTEL Carolina, Inc.'s election of alternative regulation, ALLTEL Carolina,
Inc. agreed not to exercise its rural exemption status under the 96 Act. The
Company continues to evaluate alternative regulation for its other wireline
subsidiaries.
9
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
- ------- --------
WIRELINE OPERATIONS (continued)
-------------------
LOCAL SERVICE (continued)
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Competition
- -----------
ALLTEL's wireline subsidiaries have not experienced significant competition in
their service areas. As a result of the passage of the 96 Act, the Supreme
Court's decision affirming FCC jurisdiction in the local competition arena, and
state telecommunications reform legislation, the Company's wireline subsidiaries
could begin to experience increased competition from various sources, including,
but not limited to, resellers of their local exchange services, large end users
installing their own networks, interexchange carriers, satellite transmission
services, cellular communications providers, cable television companies,
radio-based personal communications companies, competitive access providers and
other systems capable of completely or partially bypassing the local telephone
facilities. ALLTEL cannot predict the specific effects of competition on its
local telephone business, but is intent on taking advantage of the various
opportunities that competition should provide. The Company is currently
addressing potential competition by focusing on improved customer satisfaction,
reducing its costs, increasing efficiency, restructuring rates, offering new
products, and examining new markets for entry. To date, competition has not had
a significant adverse effect on the operations of the Company's wireline
subsidiaries.
NETWORK ACCESS SERVICES
- -----------------------
Long-distance companies pay access charges to the Company's wireline
subsidiaries for the use of their local networks to originate and terminate
their customers' long-distance calls.
Regulation
- ----------
Access charges concerning interstate services are regulated by the FCC. In May
1997, the FCC issued regulations relating to access charge reform that were
applicable mainly to price cap regulated LECs. Since ALLTEL's wireline
subsidiaries are not price cap regulated LECs, the access charge regulations,
with few exceptions, are not currently applicable to them. The FCC instituted a
rulemaking in June 1998 in which it proposed to amend the access charge rules
for rate-of-return LECs in a manner similar to that earlier adopted for price
cap LECs. The FCC's proposal involves the modification of the transport rate
structure, the reallocation of costs in the transport interconnection charge,
and amendments to reflect changes necessary to implement universal service. The
issue of additional pricing flexibility for rate-of-return LECs is expected to
be addressed in a subsequent phase of the proceeding. Once the access charge
rules for rate-of-return LECs are finalized, ALLTEL will assess the impact, if
any, the new rules will have on its wireline operations.
The Company's wireline subsidiaries have elected to remain under rate base
rate-of-return regulation with respect to interstate services. For companies
remaining under rate-of-return regulation, the FCC authorizes a rate-of-return
that telephone companies may earn on interstate services they provide. In
October 1998, the FCC began a proceeding to consider a represcription of the
authorized rate of return for the interstate access services of approximately
1,300 ILECs, including ALLTEL's wireline subsidiaries. The currently prescribed
rate of return is 11.25 percent. The purpose of the FCC's proceeding is to
determine whether the prescribed rate of return corresponds to current market
conditions and whether the rate should be changed. A decision by the FCC related
to this matter may be issued later this year. However, ALLTEL and other ILECs
have asked the FCC to address other important issues relating to universal
service, interconnection, and access reform before considering any
represcription of the authorized return. The Company's wireline subsidiaries
currently receive compensation from long-distance companies for intrastate,
intraLATA services through access charges or toll settlements that are subject
to state regulatory commission approval.
10
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
- ------- --------
COMMUNICATIONS-EMERGING BUSINESSES
----------------------------------
LONG-DISTANCE OPERATIONS
- ------------------------
The Company began offering long-distance telecommunications services during
1996. Long-distance services are provided on both a facilities-based and resale
basis by the Company's subsidiary, ALLTEL Communications, Inc. ("ACI"). ALLTEL
provides long-distance service in all of the states in which the Company
provides local exchange service. In addition, ALLTEL offers long-distance
service outside its franchised, local exchange service areas. As of December 31,
1998, ALLTEL provided long-distance service to more than 502,000 customers.
Regulation
- ----------
As a long-distance service provider, ALLTEL's intrastate long-distance business
is subject to limited regulation by state regulatory commissions and its
interstate business is subject to limited regulation by the FCC. State
regulatory commissions currently require long-distance service providers to
obtain a certificate of operating authority and the majority of states also
require long-distance service providers to file tariffs. Most state regulatory
commissions also require such companies to meet certain minimum service
standards.
Competition
- -----------
The long-distance marketplace is extremely competitive and continues to receive
relaxed regulation from both the FCC and state regulatory commissions. To meet
the competitive demands of the long-distance industry, ALLTEL has created
several business and residential service offerings necessary to attract
potential customers, such as volume price discounts, calling cards and
simplified one rate plans, to set itself apart from other competitors within the
long-distance marketplace.
CLEC OPERATIONS
- ---------------
During 1998, ALLTEL began offering local access telecommunications services to
business customers in select markets outside its wireline service areas. The
Company expects to expand this product offering to residential customers in
1999. Currently, ALLTEL has received approval to provide competitive local
access service in the states of Arkansas, Florida, North Carolina, Virginia and
Texas, and has an application pending in eleven other states. ALLTEL has
negotiated interconnection agreements with the appropriate incumbent local
exchange carriers in the states where it is currently offering CLEC service and
is negotiating those arrangements in other states. ALLTEL is installing state-
of-the-art networks that will enable it to provide services on both a
facilities-based and resale basis. ACI will provide local service in combination
with other services provided by subsidiaries of the Company, including long-
distance, wireless and Internet services.
PCS, INTERNET AND NETWORK MANAGEMENT OPERATIONS
- -----------------------------------------------
ALLTEL has offered PCS in Jacksonville, Florida, since March 1998, and in the
Birmingham and Mobile, Alabama service areas, which include Tuscaloosa, Alabama
and Pensacola, Florida, since February 1999. Internet access services are
currently marketed to residential and business customers in the majority of
states in which ALLTEL provides communications services. Network management
services are currently marketed to business customers in select areas. These new
service offerings are start-up operations, and as such, are not yet significant
components of ALLTEL's communications operations.
11
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
- ------- --------
INFORMATION SERVICES
--------------------
GENERAL
- -------
ALLTEL Information Services provides a wide range of information processing
services primarily to the financial services and telecommunications industries
through information processing centers that it staffs, equips and operates.
Information processing contracts are generally for a multi-year period. ALLTEL
Information Services also develops and markets software worldwide to financial
services and telecommunications companies operating their own information
processing departments. The principal operating units of the Company's
information services business consist of the Financial Services Division and the
Telecommunications Division.
The Financial Services Division markets software and services that have been
developed and improved continuously over the last three decades and are designed
to fulfill substantially all of the retail and wholesale information processing
and management information requirements of financial institutions. In addition,
the Financial Services Division also provides data processing and related
computer software and systems to financial institutions originating and/or
servicing single family mortgage loans. This division's software products and
processing services, combined with its team of consultants, are intended to
offer a cost-effective alternative to the extensive technical support staff and
the enlarged group of mortgage bankers which would otherwise have to be
assembled in-house by each customer. The Financial Services Division's on-line
systems automate processing functions required in the origination of mortgage
loans, the management of such loans while in inventory before they are sold in
the secondary market, and their subsequent servicing.
The Telecommunications Division is primarily engaged in the development and
marketing of billing services and customer care software, including its
state-of-the-art Virtuoso II billing and customer care product, to local
telephone, wireless and PCS companies. In addition, the Telecommunications
Division provides data processing and outsourcing services to both wireline and
wireless telecommunications service providers.
CUSTOMERS
- ---------
The Financial Services Division's primary markets for its financial products and
services are the nation's commercial banks and savings institutions and
financial institutions throughout the world. Financial software and services are
also marketed to credit unions and to financial institutions originating or
servicing single family mortgage loans. These financial institutions, which
include many of the largest servicers of residential mortgages, are located
throughout the United States. In total, more than 20 million mortgage loans
representing over $1.8 trillion are processed using the Financial Services
Division's software.
The Telecommunications Division's primary markets for its telecommunications
products and services consist of the top 40 telephone companies and the top 50
cellular companies in the United States, and certain PCS companies in the United
States, and approximately 100 international telecommunications companies. The
roll out of the wireless companies that will operate within the PCS spectrum
bandwidths in the United States has significantly increased the potential
customer base of the Telecommunications Division.
12
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
- ------- --------
INFORMATION SERVICES (continued)
--------------------
COMPETITION
- -----------
The Financial Services Division's competition primarily comes from "in-house"
bank information processing departments and other companies engaged in active
competition for financial institution outsourcing contracts. Numerous large
financial institutions provide information processing for smaller institutions
in their respective geographic areas, along with other companies that perform
such services for small institutions. The Telecommunications Division also faces
strong competition from internal information technology departments. In
addition, there are also other information services companies that provide
information processing and management services to the telecommunications
industry.
ALLTEL Information Services competes in each of its markets by providing a high
level of service and support. ALLTEL Information Services substantially relies
upon and vigorously enforces contract and trade secret laws and internal
non-disclosure safeguards to protect the proprietary nature of its computer
software and service methodologies.
REGULATION AND EXAMINATION
- --------------------------
The Financial Services Division is regulated by the federal agencies that have
supervisory authority over banking, thrift, and credit union operations. The
Financial Services Division is also classified as one of 12 national vendors
that, as a result of their market share, process a significant portion of the
financial industry's assets. These industry leaders are also examined by the
federal Financial Institutions Examination Council on an ongoing basis. ALLTEL
Information Services' management practices, policies, procedures, standards, and
overall financial condition are components of these reviews.
In addition to these corporate examinations, individual processing sites are
subject to examination, as if they were departments of their respective clients,
by federal and state regulators, as well as the clients' internal audit
departments and their independent auditing firms. The same standards of
performance are applied to those information processing centers as are applied
to the client financial institutions. Reports of the individual data center
performance are furnished to the Board of Directors of ALLTEL Information
Services and to the Board of Directors of the examined client. The supervisory
agencies include applicable state banking departments, the Federal Deposit
Insurance Corporation, the Office of Thrift Supervision, the Office of the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, and the National Credit Union Administration. ALLTEL Information
Services' processing contracts include a commitment to install all necessary
changes in its computer software that are required by changes in regulations.
The Company operates transmitters at the network's information processing
facility hub and operates very small aperture technology ("VSAT") earth stations
at numerous customer locations. Prior to initiation, construction or operation
of the transmitters used in a VSAT satellite network, operators of these
transmitters are required by the Communications Act of 1934 to be authorized by
the FCC. The FCC grants licenses to VSAT operators for a predetermined number of
earth stations that may be placed at unspecified locations in the United States.
The Company holds five VSAT licenses to operate its domestic earth station
satellite network, consisting of one 8.1m license for its VSAT hub located in
Jacksonville, Florida and four other VSAT licenses ranging from 1.0m to 2.4m.
Three of the VSAT licenses, including the 8.1m license, were renewed during 1997
and will expire in 2007, while the remaining two VSAT licenses will expire in
2003.
13
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
- ------- --------
INFORMATION SERVICES (continued)
--------------------
PRODUCT DEVELOPMENT AND SUPPORT
- -------------------------------
In the past five years, ALLTEL Information Services has spent approximately $523
million ($111 million in 1998) on mainframe and client/server software design
and development. ALLTEL Information Services is also developing products that
are utilized in a UNIX based environment, including the Telecommunications
Division's Virtuoso II billing and customer care product. Changes in regulatory
requirements of both state and federal authorities, increasing competition, and
the development of new products and markets create the need to continually
update or modify existing software and systems offered to customers. ALLTEL
Information Services intends to continue to maintain, improve, and expand the
functions and capabilities of its software products over the next several years.
OTHER OPERATIONS
----------------
PRODUCT DISTRIBUTION
- --------------------
ALLTEL Supply, Inc. ("ALLTEL Supply"), with 9 warehouses and 24 counter-sales
showrooms across the United States, is a major distributor of telecommunications
equipment and materials. It supplies equipment to affiliated and non-affiliated
communications companies, business systems suppliers, railroads, governments,
and retail and industrial companies.
Competition
- -----------
ALLTEL Supply experiences substantial competition throughout its sales
territories from other distribution companies and from direct sales by
manufacturers. Competition is based primarily on quality, product availability,
service, price, and technical assistance. Since the products distributed by
ALLTEL Supply are also offered by other competitors, ALLTEL Supply
differentiates itself from competitors by providing value-added services such as
offering expert technical assistance, maintaining extensive inventories in
strategically located warehouses and counter-sales showrooms to facilitate
single supplier sourcing and "just-in-time" delivery, maintaining a full range
of alternative product lines, and by providing staging, assembly and other
services. The Company is continually evaluating and implementing policies and
strategies which will meet customer expectations and position ALLTEL Supply in
the market as a quality customer-focused distributor.
Products
- --------
ALLTEL Supply offers more than 50,000 products for sale. Of these, ALLTEL Supply
inventories single and multi-line telephone sets, local area networks ("LANs"),
switching equipment modules, interior cable, pole line hardware, and various
other telecommunications supply items. ALLTEL Supply has not encountered any
material shortages or delays in delivery of products from their suppliers.
DIRECTORY PUBLISHING
- --------------------
ALLTEL Publishing coordinates advertising, sales, printing, and distribution for
329 telephone directory contracts in 39 states. Under terms of an agreement with
GTE Directories, ALLTEL Publishing provides all directory publishing services
including contract management, production and marketing. As subcontractor, GTE
Directories provides directory sales and printing services through a separate
contract with ALLTEL Publishing.
14
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 1. Business
- ------- --------
INVESTMENTS
-----------
MCI WORLDCOM, INC.
- ------------------
The Company currently owns approximately 12.7 million shares of MCI WorldCom,
Inc. common stock, representing less than a 1 percent ownership interest in this
publicly-held company. MCI WorldCom, Inc. is a large long-distance company in
the United States and is a full service provider of international
telecommunications and specialized broadcasting services. During 1998 and 1997,
the Company sold a portion of its investment in MCI WorldCom, Inc.
APEX GLOBAL INFORMATION SERVICES, INC.
- --------------------------------------
The Company has made an approximate $15 million investment in Apex Global
Information Services, Inc. ("AGIS"), a global provider of Internet access
services. As a result, the Company owns approximately a 9 percent interest in
AGIS.
HORIZON TELECOM, INC.
- ---------------------
The Company owns a 19.8 percent interest in Horizon Telecom, Inc., which serves
approximately 37,000 telephone access lines in Ohio. Frederick G. Griech, Senior
Advisor, and Dennis Mervis, Vice President-Sales and Marketing of ALLTEL
Communications Northeast Market Group, are members of Horizon Telecom, Inc.'s
Board of Directors.
HUGHES ISPAT LIMITED
- --------------------
During 1997, the Company made an approximate $21 million investment in Hughes
Ispat Limited ("HIL"), a start-up, limited liability company in India. HIL has
received a license to provide basic telephone and other enhanced communications
services in the state of Maharashtra, India. Currently, HIL is constructing
network facilities and began operations in late 1998. As a result of its
investment, the Company owns approximately a 13 percent interest in HIL. Francis
X. Frantz, Executive Vice President-External Affairs, General Counsel and
Secretary, is a member of HIL's Board of Directors.
15
<PAGE>
ALLTEL Corporation
Form 10-K, Part I
Item 2. Properties
- ------- ----------
WIRELINE PROPERTY
- -----------------
The Company's wireline subsidiaries own property in their respective operating
territories which consists primarily of land and buildings, central office
equipment, telephone lines, and related equipment. The telephone lines include
aerial and underground cable, conduit, poles and wires. Central office equipment
includes digital switches and peripheral equipment. The gross investment by
category in wireline property as of December 31, 1998, was as follows:
(Thousands)
-----------
Wireline-
Land, buildings and leasehold improvements $ 206,463
Central office equipment 1,432,606
Outside plant 2,196,123
Furniture, fixtures, vehicles and other 255,599
----------
Total $4,090,791
==========
Certain properties of the Company and its wireline subsidiaries are pledged as
collateral for long-term debt.
OTHER PROPERTY
- --------------
Other properties of the Company in service consist primarily of property, plant
and equipment used in providing wireless communications services, information
services and product distribution operations. The total investment by category
for the non-wireline operations of the Company as of December 31, 1998, was as
follows:
(Thousands)
-----------
Land, buildings and leasehold improvements $ 621,320
Wireless plant and equipment 2,031,512
Data processing equipment 436,968
Furniture, fixtures and miscellaneous 429,332
----------
Total $3,519,132
==========
All of the Company's property is considered to be in reasonably sound operating
condition.
16
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 3. Legal Proceedings
- ------- -----------------
On July 12, 1996, the Georgia Public Service Commission ("Georgia PSC")
issued an order requiring that ALLTEL's wireline subsidiaries which
operate within its jurisdiction reduce their annual network access
charges by $24 million, prospectively, effective July 1, 1996. As
further discussed in Note 14 to the Consolidated Financial Statements
(refer to page 58 of this Form 10-K), the Company appealed the Georgia
PSC order and received a favorable decision from the Superior Court of
Fulton County, Georgia (the "Superior Court"). The Georgia PSC appealed
the Superior Court's decision, and in July 1997, the Georgia Court of
Appeals reversed the Superior Court's decision. In August 1997, the
Company filed with the Georgia Supreme Court a petition for writ of
certiorari requesting that the Georgia Court of Appeals decision be
reversed. In October 1998, the Georgia Supreme Court, in a 4-3
decision, upheld the Appellate Court's ruling that the Georgia PSC had
the authority to order the rate reductions. The case has been returned
to the Superior Court for a hearing on the merits which will provide
ALLTEL the opportunity to challenge the Georgia PSC's order by
asserting a number of additional federal and state constitutional and
other legal grounds. At December 31, 1998, the maximum possible
liability to the Company related to this case is $60 million, plus
interest at 7 percent from July 1, 1996. Since the Company believes
that it will prevail in this case, the Company has not implemented any
revenue reductions or established any reserves for refund related to
this matter at this time.
The Company is not currently involved in any other material pending
legal proceedings, other than routine litigation incidental to its
business, and, to the knowledge of the Company's management, no
material legal proceedings, either private or governmental, are
contemplated or threatened.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
No matters were submitted to the security holders for a vote during the
fourth quarter of 1998.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- ------- -----------------------------------------------------------------
Matters
-------
The outstanding shares of the Company's Common Stock are listed and
traded on the New York Stock Exchange and the Pacific Exchange and
trade under the symbol AT. The following table reflects the range of
high, low and closing prices of the Company's Common Stock as reported
by Dow Jones & Company, Inc. for each quarter in 1998 and 1997:
Dividend
Year Qtr. High Low Close Declared
---- ---- ---- --- ----- --------
1998 4th 61 3/8 44 59 13/16 $.305
3rd 48 38 1/4 47 1/8 $.29
2nd 46 1/2 39 7/16 46 1/2 $.29
1st 48 13/16 39 9/16 43 11/16 $.29
1997 4th 41 5/8 33 3/16 41 1/16 $.29
3rd 35 1/2 30 15/16 34 1/2 $.275
2nd 34 3/8 29 3/4 33 7/16 $.275
1st 36 3/4 30 5/8 32 1/2 $.275
As of January 31, 1999, the approximate number of stockholders of
common stock including an estimate for those holding shares in brokers'
accounts was 230,000.
17
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 6. Selected Financial Data
- ------- -----------------------
<TABLE>
<CAPTION>
For the years ended December 31,
(Dollars in thousands,
except per share amounts) 1998 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues and Sales:
Service revenues $4,632,615 $4,033,811 $3,588,233 $3,246,666 $2,830,278 $2,202,071
Product sales 561,393 511,329 651,234 651,766 664,242 485,038
---------- ---------- ---------- ---------- ---------- ----------
Total revenues and sales 5,194,008 4,545,140 4,239,467 3,898,432 3,494,520 2,687,109
- ----------------------------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Operating expenses 3,290,853 2,871,936 2,736,761 2,544,536 2,320,678 1,783,440
Depreciation and amortization 707,129 635,464 570,956 524,530 454,398 364,821
Merger and integration expenses 252,000 - - - - -
Provision to reduce carrying
value of certain assets 55,000 16,874 120,280 - - -
---------- ---------- ---------- ---------- ---------- ----------
Total costs and expenses 4,304,982 3,524,274 3,427,997 3,069,066 2,775,076 2,148,261
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Income 889,026 1,020,866 811,470 829,366 719,444 538,848
Other income, net 50,832 15,278 6,792 8,043 (7,265) 9,241
Interest expense (263,669) (261,770) (237,196) (272,668) (235,557) (184,155)
Gain on disposal or exchange of assets
write-down of assets and other 296,150 209,651 (2,278) 30,775 (54,157) 27,390
---------- ---------- ----------- ---------- ---------- ----------
Income before income taxes 972,339 984,025 578,788 595,516 422,465 391,324
Income taxes 446,864 394,644 227,532 242,595 170,469 180,791
---------- ---------- ---------- ---------- ---------- ----------
Net income 525,475 589,381 351,256 352,921 251,996 210,533
Preferred dividends 938 1,008 1,071 1,158 1,232 1,578
---------- ---------- ---------- ---------- ---------- ----------
Net income applicable to
common shares $ 524,537 $ 588,373 $ 350,185 $ 351,763 $ 250,764 $ 208,955
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings per Share:
Basic $1.91 $2.13 $1.27 $1.28 $.91 $.77
Diluted $1.89 $2.11 $1.26 $1.27 $.91 $.76
Dividends per common share $1.175 $1.115 $1.055 $.98 $.90 $.82
Weighted average common shares:
Basic 274,305,000 276,590,000 276,637,000 275,232,000 274,141,000 272,017,000
Diluted 277,276,000 278,544,000 278,429,000 277,159,000 276,592,000 274,880,000
Total assets $9,374,226 $8,570,405 $8,168,174 $7,054,627 $6,454,239 $5,787,474
Total shareholders' equity $3,270,872 $2,717,807 $2,559,607 $1,937,633 $1,629,132 $1,578,228
Total redeemable preferred
stock and long-term debt $3,496,760 $3,705,144 $3,462,375 $3,286,411 $3,208,095 $2,851,481
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
Notes: A. Net income for 1998 includes pretax gains of $296.2 million from the sale of certain investments, principally consisting
of MCI WorldCom, Inc. common stock. These gains increased net income by $179.8 million or $.65 per share. Net income
also includes $252 million of merger and integration expenses related to the closing of the merger with 360
Communications Company. These merger and integration expenses decreased net income $201 million or $.73 per share. Net
income also includes a pretax charge of $55 million resulting from changes in a customer care and billing contract with
a major customer. This charge decreased net income $33.6 million or $.12 per share. (See Notes 9, 10 and 11.)
B. Net income for 1997 includes pretax gains of $209.6 million from the sale of certain investments, principally consisting
of MCI WorldCom, Inc. common stock and from the sale of the Company's healthcare operations. These gains increased net
income by $121.5 million or $.44 per share. Net income also includes a pretax write-down of $16.9 million to reflect the
fair value less cost to sell the Company's wire and cable operations. This write-down decreased net income $11.7 million
or $.04 per share. (See Notes 10 and 11.)
C. Net income for 1996 includes pretax write-downs of $120.3 million to adjust the carrying value of certain software and
other assets. The write-downs decreased net income $72.7 million or $.25 per share. (See Note 10.)
D. Net income for 1995 includes pretax gains of $49.8 million from the sale of certain wireline properties, partially
offset by termination fees of $14.0 million incurred due to the early retirement of long-term debt and by an additional
pretax write-down of $5.0 million in the carrying value of the Company's check processing operations. These transactions
increased net income $19.8 million or $.07 per share.
E. Net income for 1994 includes a pretax write-down of $54.2 million to reflect the estimated net realizable value of the
Company's community banking and check processing operations. The write-down decreased net income by $32.2 million or
$.12 per share.
F. On November 1, 1993, the Company purchased substantially all of the assets of the wireline operations of GTE Corporation
in the State of Georgia ("GTE Georgia"). This acquisition was accounted for as a purchase, and accordingly, GTE
Georgia's results have been included in the consolidated financial statements from the date of acquisition.
</FN>
</TABLE>
18
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
-------------
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations of ALLTEL Corporation ("ALLTEL" or the "Company") includes, and
future filings by the Company on Form 10-K, Form 10-Q and Form 8-K and future
oral and written statements by the Company and its management may include,
certain forward-looking statements, including (without limitation) statements
with respect to anticipated future operating and financial performance, growth
opportunities and growth rates, acquisition and divestitive opportunities, Year
2000 compliance and other similar forecasts and statements of expectation. Words
such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates," and "should," and variations of these words and similar
expressions, are intended to identify these forward-looking statements.
Forward-looking statements by the Company and its management are based on
estimates, projections, beliefs and assumptions of management and are not
guarantees of future performance. The Company disclaims any obligation to update
or revise any forward-looking statement based on the occurrence of future
events, the receipt of new information, or otherwise.
Actual future performance, outcomes and results may differ materially from
those expressed in forward-looking statements made by the Company and its
management as a result of a number of important factors. Representative examples
of these factors include (without limitation) rapid technological developments
and changes in the telecommunications and information services industries;
ongoing deregulation (and the resulting likelihood of significantly increased
price and product/service competition) in the telecommunications industry as a
result of the Telecommunications Act of 1996 and other similar federal and state
legislation and the federal and state rules and regulations enacted pursuant to
that legislation; regulatory limitations on the Company's ability to change its
pricing for communications services; the possible future unavailability of
accounting under Statement of Financial Accounting Standards No. 71 for the
Company's wireline subsidiaries; continuing consolidation in certain industries,
such as banking, served by the Company's information services business; the
risks associated with relatively large, multi-year contracts in the Company's
information services business; and higher than anticipated expenditures
associated with the Company's Year 2000 efforts. In addition to these factors,
actual future performance, outcomes and results may differ materially because of
other, more general, factors including (without limitation) general industry and
market conditions and growth rates, domestic and international economic
conditions, governmental and public policy changes and the continued
availability of financing in the amounts, at the terms and on the conditions
necessary to support the Company's future business.
Results of Operations
Overview
On July 1, 1998, ALLTEL completed its merger with 360 Communications Company
("360"). Through this merger, ALLTEL expanded its wireless presence and enhanced
its ability to deliver bundled communications services across its geographically
focused markets. The merger with 360 was accounted for as a pooling-of-
interests. Accordingly, all prior-period financial information presented has
been restated to include the 360 operations. (See Note 2 to the consolidated
financial statements for additional information regarding the merger
transaction.) As further discussed below, results for 1998 were affected
by merger and integration expenses and by other non-recurring and unusual items.
Revenues and sales increased $648.9 million or 14 percent in 1998, $305.7
million or 7 percent in 1997 and $341.0 million or 9 percent in 1996. Operating
income decreased $131.8 million or 13 percent in 1998, increased $209.4 million
or 26 percent in 1997 and decreased $17.9 million or 2 percent in 1996. Growth
in revenues and sales in all three years was affected by various asset
dispositions. In May 1997, the Company completed the sale of its wire and cable
subsidiary, HWC Distribution Corp. ("HWC"), and in January 1997, the Company
sold its information services' healthcare operations. During 1996 and 1995,
ALLTEL sold certain non-strategic wireline properties. In addition to these
asset dispositions, operating income in each of the three years in the period
ended December 31, 1998, was also affected by charges to write down the carrying
value of certain assets. Operating income for 1998 also reflects merger and
integration expenses related to the merger with 360.
19
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
Adjusted to exclude the results from operations for the asset dispositions
and the impact of the merger and integration expenses and asset write-downs,
revenues and sales would have increased $691.7 million or 15 percent in 1998,
$534.5 million or 13 percent in 1997 and $450.7 million or 13 percent in 1996,
and operating income would have increased $159.7 million or 15 percent in 1998,
$115.0 million or 12 percent in 1997 and $142.0 million or 18 percent in 1996.
Net income decreased $63.9 million or 11 percent in 1998, increased $238.1
million or 68 percent in 1997 and decreased $1.7 million or less than 1 percent
in 1996. Basic and diluted earnings per share both decreased 10 percent in 1998,
increased 68 percent and 67 percent, respectively, in 1997 and both decreased
1 percent in 1996. Reported net income and earnings per share include the
effects of the asset dispositions, asset write-downs and merger and integration
expenses, as well as several non-recurring and unusual items further discussed
below. Excluding the impact in each year of the asset dispositions and all
non-recurring and unusual items, net income would have increased $101.5 million
or 21 percent in 1998, $59.8 million or 14 percent in 1997 and $117.8 million or
39 percent in 1996, and basic and diluted earnings per share would both have
increased 22 percent in 1998, 15 percent in 1997 and 39 percent in 1996.
Net income and earnings per share adjusted for the asset dispositions and
all non-extraordinary, non-recurring and unusual items are summarized in the
following tables:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income, as reported $525,475 $589,381 $351,256
Disposition of healthcare, wire and cable
and wireline operations - (838) (6,429)
Non-recurring and unusual items, net of tax:
Merger and integration expenses 200,995 - -
Provision to reduce carrying value of certain assets 33,605 11,744 72,716
Gain on disposal of assets (179,770) (121,485) (8,465)
Termination fees on early retirement of long-term debt - - 9,946
-------- -------- --------
Net income, as adjusted $580,305 $478,802 $419,024
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Basic Diluted
----------------------------- -------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings per share, as reported $1.91 $2.13 $1.27 $1.89 $2.11 $1.26
Disposition of healthcare, wire and cable
and wireline operations - - (.02) - - (.02)
Non-recurring and unusual items:
Merger and integration expenses .73 - - .73 - -
Provision to reduce carrying
value of certain assets .12 .04 .25 .12 .04 .25
Gain on disposal of assets (.65) (.44) (.03) (.65) (.43) (.03)
Termination fees on early retirement
of long-term debt - - .04 - - .04
----- ----- ----- ----- ----- -----
Earnings per share, as adjusted $2.11 $1.73 $1.51 $2.09 $1.72 $1.50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The net income and earnings per share impact of the asset dispositions and
the non-recurring and unusual items have been presented as supplemental
information only. The non-recurring and unusual items reflected in the above
tables are discussed below in reference to the caption in the consolidated
statements of income in which they are reported.
20
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
-------------
Merger and Integration Expenses
In 1998, the Company recorded transaction costs and one-time charges totaling
$252 million on a pretax basis related to the closing of its merger with
360. The merger and integration expenses include professional and
financial advisors' fees of $31.5 million, employee-related expenses of $48.7
million and integration costs of $171.8 million. The integration costs include
several adjustments resulting from the redirection of a number of strategic
initiatives based on the merger with 360 and ALLTEL's expanded wireless
presence. These adjustments include a $60 million write-down in the carrying
value of certain in-process software development assets related to a customer
billing system with no alternative future use, $50 million of costs associated
with the early termination of certain service obligations, branding and signage
costs of $20.7 million, an $18 million write-down in the carrying value of
certain assets resulting from a revised Personal Communications Services (PCS)
deployment plan, and other integration costs of $23.1 million. The contract
termination fees primarily relate to a long-term contract with an outside vendor
for customer billing services to be provided to the 360 operations.
As part of its integration plan, the Company will convert the 360 operations to
its own internal billing system. The $50 million of costs recorded by the
Company represent the estimated cost of terminating the billing services
contract with the outside vendor prior to the expiration of its term. The $18
million write-down in the carrying value of certain PCS-related assets include
approximately $15 million related to cell site acquisition and improvement costs
and capitalized labor and engineering charges that were incurred during the
initial construction phase of the PCS buildout in three markets. As a result of
the merger with 360, the Company elected not to continue to complete
construction of its PCS network in these three markets. The remaining $3 million
of the PCS-related write-down represents cell site lease termination fees.
As a result of its integration efforts, ALLTEL expects to realize synergies
through a reduction in operating expenses of $80 million in 1999 and $100
million in 2000. Of the total syngeries expected to be realized each year,
ALLTEL estimates 40 percent of the cost savings will result from a reduction in
duplicative salaries and employee benefits, 20 percent from a reduction in
variable network expenses, 20 percent from volume purchase discounts, 10 percent
from a reduction in branding and advertising costs and 10 percent from a
reduction in information technology expenses. At December 31, 1998, the
Company's remaining unpaid liability related to its merger and integration
efforts was $91.3 million, consisting of $50 million of contract termination
fees, $31.9 million of employee-related expenses and $9.4 million of other
integration costs. Cash outlays for the employee-related expenses and other
integration costs are expected to be substantially completed by the end of
the first quarter of 1999. The Company expects to finalize amounts payable with
respect to certain contract termination fees by the end of 1999. Funding for
this liability will be internally financed from operating cash flows.
(See Note 9 to the consolidated financial statements for additional information
regarding the merger and integration expenses.)
Provision to Reduce Carrying Value of Certain Assets
During the third quarter of 1998, the Company recorded a $55 million
non-recurring operating expense related to its contract with GTE Corporation
("GTE"). This expense represents a reduction in the cumulative gross margin
earned under the GTE contract. Due to its pending merger with Bell Atlantic
Corporation, GTE has re-evaluated its billing and customer care requirements and
modified its billing conversion plans.
During 1997, ALLTEL recorded a pretax write-down of $16.9 million to
reflect the fair value less cost to sell its wire and cable subsidiary, HWC.
During 1996, the Company incurred non-cash, pretax charges of $120.3 million to
write down the carrying value of certain assets. In accordance with ALLTEL's
plan to dispose of HWC, the Company recorded a pretax write-down of goodwill in
the amount of $45.3 million. In addition, information services recorded a pretax
write-down of $53.0 million in the carrying value of certain assets primarily
consisting of capitalized software development costs. The write-down of software
resulted from performing a net realizability evaluation of software-related
products that have been impacted by changes in software and hardware
technologies. Information services also recorded a pretax write-down of $22.0
million to adjust the carrying value of its community banking operations to
their estimated fair value based upon projections of future cash flows. (See
Note 10 to the consolidated financial statements for additional information
regarding the asset write-downs discussed in this section.)
21
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
Gain on Disposal of Assets and Other
During 1998, the Company recorded pretax gains of $265.7 million, primarily from
the sale of a portion of its investment in MCI WorldCom, Inc. common stock.
The Company also recorded a pretax gain of $30.5 million resulting from the sale
of its ownership interest in an unconsolidated partnership.
During 1997, ALLTEL recorded a pretax gain of $156.0 million from the sale
of a portion of its investment in MCI WorldCom, Inc. common stock. In addition,
the Company recorded a pretax gain of $34.4 million primarily related to the
sale of its investment in a software company, a pretax gain of $16.2 million
from the sale of information services' healthcare operations and a pretax gain
of $3.0 million from the sale of its ownership interests in two unconsolidated
partnerships.
In 1996, the Company recorded a pretax gain of $15.3 million from the sale
of wireline properties in Nevada to Citizens Utilities Company. ALLTEL also
incurred $15.8 million of termination fees related to the early retirement of
$200 million of long-term debt. Additionally, ALLTEL realized a pretax loss of
$1.8 million related to the withdrawal of its investment in GO Communications
Corporation ("GOCC"). (See Note 11 to the consolidated financial statements for
additional information regarding these non-recurring and unusual items recorded
in 1998, 1997 and 1996.)
Results of Operations by Business Segment
As discussed in Note 15 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise and Related Information" in 1998. ALLTEL is organized
based on the products and services that it offers. Under this organizational
structure, the Company operates in two principal areas: communications and
information services. The Company's communications operations consist of its
wireless, wireline and emerging business segments. The Company also sells
telecommunications products and publishes telephone directories.
Communications-Wireless Operations
- ----------------------------------------------------------------------------
(Dollars in millions) 1998 1997 1996
- ----------------------------------------------------------------------------
Revenues and sales $2,137.2 $1,838.5 $1,544.5
Operating income $ 603.6 $ 460.4 $ 370.2
Total customers 4,008,660 3,523,839 2,951,548
Market penetration rate 12.0% 10.7% 9.1%
Churn 2.1% 2.0% 2.0%
- ----------------------------------------------------------------------------
Wireless revenues and sales increased $298.7 million or 16 percent in 1998,
$294.0 million or 19 percent in 1997 and $345.6 million or 29 percent in 1996.
Operating income increased $143.2 million or 31 percent in 1998, $90.2 million
or 24 percent in 1997 and $108.2 million or 41 percent in 1996.
Customer growth continued as the number of customers increased 14 percent
over 1997, compared to annual growth rates in customers of 19 percent in 1997
and 39 percent in 1996. ALLTEL placed more than 1,465,000 gross units in service
in 1998, compared to 1,374,000 units in 1997 and 1,220,000 units in 1996. While
the rate of customer growth has declined, the overall market penetration rate
(number of customers as a percentage of the total population in ALLTEL's service
areas) has increased.
Wireless revenues and sales increased in all periods primarily due to the
growth in ALLTEL's customer base including the acquisition of new wireless
properties and increased ownership interest in existing wireless properties.
Increases in local airtime, roaming and long-distance revenues, reflecting
higher volumes of network usage, also contributed to the growth in revenues and
sales in all periods. As a result of increased usage of the Company's network
facilities, average monthly revenue per customer increased slightly in 1998
to $48. Average monthly revenue per customer was $47 for 1997 and $52 for 1996.
Average monthly revenue per customer declined in 1997 primarily due to the
migration of existing customers to lower rate plans, increased penetration into
lower-usage market segments and a reduction in roaming revenue rates. During
1997, as a result of competition in its service areas, ALLTEL increased its
offering of monthly service plans which had lower base access rates and included
more packaged air time minutes. The Company expects average monthly revenue per
22
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
customer to continue to be affected by the industry-wide trends of decreased
roaming revenue rates and continued penetration into lower-usage market
segments. In addition, the growth rate of new customers is expected to decline
as the Company's wireless customer base grows. Accordingly, future revenue
growth will be dependent upon ALLTEL's success in maintaining customer growth in
existing markets, increasing customer usage of the Company's network and
providing customers with enhanced products and services.
Operating income increased in all periods primarily due to the growth in
revenues and sales. Improved margins realized on the sale of wireless equipment,
reductions in branding and other advertising costs and declines in losses
sustained from fraud contributed to the increases in operating income for 1998
and 1997. The reduction in branding and other advertising costs in 1998 reflects
savings realized as a result of the merger, as ALLTEL ceased promotion of the
360 brand name. Branding and other advertising costs declined in 1997 due to a
decrease in promotional activities. Losses sustained from fraud decreased in
1998 and 1997 primarily due to the Company's continuing efforts to control
unauthorized usage of its customers' wireless telephone numbers that results in
unbillable fraudulent roaming activity. Operating income in all periods was
affected by increases in sales commissions, customer service-related expenses
and general and administrative expenses consistent with the overall growth in
revenues and sales. Depreciation and amortization expense also increased in all
periods primarily due to growth in wireless plant in service.
The cost to acquire a new wireless customer represents sales, marketing and
advertising costs and losses on equipment sales for each new customer added. The
cost to acquire a new wireless customer was $284, $285 and $295 for the years
ended December 31, 1998, 1997 and 1996, respectively. The decreases in 1998 and
1997 were primarily due to the reductions in branding and other advertising
costs noted above, as well as distributing these costs over a larger number of
customers acquired, as compared to the corresponding prior-year period. Although
the Company intends to continue to utilize its large dealer network, ALLTEL has
expanded its internal sales distribution channels to include its own retail
stores and kiosks located in shopping malls and other retail outlets.
Incremental sales costs at a Company retail store or kiosk are significantly
lower than commissions paid to national dealers. Accordingly, ALLTEL intends to
manage the costs of acquiring new customers by continuing to expand and enhance
its internal distribution channels.
Communications-Wireline Operations
- -----------------------------------------------------------------------------
(Dollars in millions) 1998 1997 1996
- -----------------------------------------------------------------------------
Local service $ 583.1 $ 535.9 $ 487.1
Network access and long-distance 631.9 609.4 589.9
Miscellaneous 94.1 88.7 90.4
-------- -------- --------
Total revenues and sales $1,309.1 $1,234.0 $1,167.4
Operating income $ 471.6 $ 450.0 $ 409.3
Access lines in service 1,889,506 1,789,317 1,681,395
- -----------------------------------------------------------------------------
Wireline's revenues and sales increased $75.1 million or 6 percent in 1998,
increased $66.6 million or 6 percent in 1997 and decreased $41.3 million or 3
percent in 1996. Operating income increased $21.6 million or 5 percent in 1998,
increased $40.7 million or 10 percent in 1997 and decreased $9.3 million or 2
percent in 1996. ALLTEL sold certain wireline properties in eight states during
1996 and 1995, resulting in decreases in revenues and sales and operating income
in 1996 of $88.4 million and $31.7 million, respectively. Excluding the impact
of the sale of properties, wireline's revenues and sales would have increased
$47.1 million or 4 percent, and operating income would have increased $22.4
million or 6 percent in 1996.
Local service revenues increased $47.2 million or 9 percent in 1998, $48.8
million or 10 percent in 1997 and $13.1 million or 3 percent in 1996. The
increases in local service revenues in all periods reflect both growth in
customer access lines and growth in custom calling and other enhanced services
revenues. Customer access lines increased 6 percent in both 1998 and 1997
reflecting sales of residential and second access lines. Local service revenues
for 1997 also reflect the expansion of local calling areas in North Carolina and
Georgia, which reclassified certain revenues from network access and
long-distance revenues to local service revenues. Local service revenues for
23
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
1996 reflect 4 percent growth in customer access lines and increased revenues
from enhanced services, partially offset by lost revenues due to the property
sales. Future access line growth is expected to result from population growth
in the Company's service areas and sales of second access lines and through
strategic acquisitions.
Network access and long-distance revenues increased $22.5 million or 4
percent in 1998 and $19.5 million or 3 percent in 1997 and decreased $53.7
million or 8 percent in 1996. The increase in network access and long-distance
revenues in 1998 reflects higher volumes of access usage and growth in customer
access lines, partially offset by a reduction in intrastate toll revenues. The
increase in 1997 primarily reflects higher volumes of access usage, partially
offset by the reclassification of certain revenues to local service revenues, as
previously discussed. The decrease in network access and long-distance revenues
in 1996 primarily reflects the sale of properties, partially offset by higher
volumes of access usage.
Total wireline operating expenses increased $53.5 million or 7 percent in
1998 and $25.9 million or 3 percent in 1997 and decreased $32.0 million or 4
percent in 1996. Operating expenses for 1998 and 1997 reflect increases in data
processing charges, network-related expenses, depreciation and amortization and
general administrative expenses. Operating expenses for 1997 also include
additional costs incurred by ALLTEL in consolidating its customer service
operations. Operating expenses decreased in 1996 by approximately $56.7 million
as a result of the sale of properties. The decrease in operating expenses in
1996 attributable to the sale of properties was partially offset by increased
expense for maintenance and repair of cable, digital electronic switching and
circuit equipment and an increase in depreciation expense.
As more fully discussed in Note 14 to the consolidated financial
statements, the Georgia Public Service Commission ("Georgia PSC") issued an
order requiring that ALLTEL's wireline subsidiaries which operate within its
jurisdiction reduce their annual network access charges by $24 million,
prospectively, effective July 1, 1996. The Company appealed the Georgia PSC
order. In November 1996, the Superior Court of Fulton County, Georgia, (the
"Superior Court") rendered its decision and reversed the Georgia PSC order,
finding, among other matters, that the Georgia PSC had exceeded its authority by
ordering the rate reductions. The Superior Court did not rule on a number of
other assertions made by the Company as grounds for reversal of the Georgia PSC
order. The Georgia PSC appealed the Superior Court's decision, and in July 1997,
the Georgia Court of Appeals (the "Appellate Court") reversed the Superior
Court's decision. The Company appealed the Appellate Court's decision to the
Georgia Supreme Court. On October 5, 1998, the Georgia Supreme Court, in a 4-3
decision, upheld the Appellate Court's ruling that the Georgia PSC had the
authority to order the rate reductions. The case has been returned to the
Superior Court for a hearing on the merits, which will provide ALLTEL the
opportunity to challenge the Georgia PSC's order by asserting a number of
additional federal and state constitutional and other legal grounds. Since
ALLTEL believes that it will prevail in this case, the Company has not
implemented any revenue reductions or established any reserves for refund
related to this matter at this time.
ALLTEL's wireline subsidiaries follow the accounting for regulated
enterprises prescribed by Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" ("SFAS 71"). If
ALLTEL's wireline subsidiaries no longer qualified for the provisions of SFAS
71, the accounting impact to the Company would be an extraordinary non-cash
charge to operations of an amount that could be material. Criteria that would
give rise to the discontinuance of SFAS 71 include (1) increasing competition
that restricts the wireline subsidiaries' ability to establish prices to recover
specific costs and (2) significant change in the manner in which rates are set
by regulators from cost-based regulation to another form of regulation. The
Company periodically reviews these criteria to ensure the continuing application
of SFAS 71 is appropriate. As a result of the passage of the Telecommunications
Act of 1996 (the "96 Act") and state telecommunications reform legislation,
ALLTEL's wireline subsidiaries could begin to experience increased competition
in their local service areas. To date, competition has not had a significant
adverse effect on the operations of ALLTEL's wireline subsidiaries.
In August 1996, the FCC issued regulations implementing the local
competition provisions of the 96 Act. These regulations established pricing
rules for state regulatory commissions to follow with respect to entry by
competing carriers into the local, intrastate markets of incumbent local
exchange carriers ("ILECs") and addressed interconnection, unbundled network
24
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
elements and resale rates. The FCC's authority to adopt such pricing rules was
challenged in federal court by variou ILECs and state regulatory commissions.
In July 1997, the U.S. Eighth Circuit Court of Appeals (the "Eighth Circuit
Court") vacated the FCC's pricing rules, finding, among other matters, that the
FCC had exceeded its jurisdiction in establishing pricing rules for intrastate
communications services. In October 1997, the Eighth Circuit Court ruled that
ILECs are not required by the 96 Act to recombine network elements purchased by
requesting carriers on an unbundled basis. The FCC asked the U.S. Supreme Court
("Supreme Court") to review two interconnection decisions of the Eighth Circuit
Court. In January 1999, the Supreme Court ruled that the FCC, rather than the
individual states, has the jurisdiction to carry out the local competition
provisions of the 96 Act. These include designing a pricing methodology for
states to follow in determining rates to be charged by ILECs to competitors for
interconnection services and network elements, adopting rules regarding states'
review of pre-existing interconnection agreements between ILECs and other
carriers and adopting rules relating to dialing parity and standards for
granting exemptions to rural ILECs.
In May 1997, the FCC issued regulations applicable to local exchange
carriers ("LECs") relating to access charge reform and universal service. The
access charge reform regulations are applicable mainly to price cap regulated
local exchange companies. Since ALLTEL's wireline subsidiaries are not price cap
regulated companies, the access charge regulations, with few exceptions, are not
currently applicable to them. However, the FCC instituted a rulemaking in June
1998 in which it proposed to amend the access charge rules for rate-of-return
LECs in a manner similar to that earlier adopted for price cap LECs. The FCC's
proposal involves the modification of the transport rate structure, the
reallocation of costs in the transport interconnection charge and amendments to
reflect changes necessary to implement universal service. The issue of
additional pricing flexibility for rate-of-return LECs is expected to be
addressed in a subsequent phase of the proceeding. Once the access charge rules
for rate-of-return LECs are finalized, ALLTEL will assess the impact, if any,
the new rules will have on its wireline operations. Based upon ALLTEL's review
of the FCC's regulations concerning the universal service subsidy, it is
unlikely that material changes in the universal service funding for ALLTEL's
wireline subsidiaries will occur prior to 2001. In 2001, the universal service
subsidy may change from being based on actual costs to being based on a proxy
model. Since the FCC has not yet determined the content of any such proxy model,
the impact, if any, of this change in the universal service funding for ALLTEL's
wireline subsidiaries cannot be determined at this time. ALLTEL is continuing to
evaluate the impact of the FCC's universal service order on ALLTEL's other
telecommunications operations. Appeals of certain aspects of the universal
service order are before the U.S. Fifth Circuit Court of Appeals.
On October 5, 1998, the FCC began a proceeding to consider a represcription
of the authorized rate-of-return for the interstate access services of
approximately 1,300 ILECs, including ALLTEL's wireline subsidiaries. The
currently prescribed rate-of-return is 11.25 percent. The purpose of the FCC's
proceeding is to determine whether the prescribed rate-of-return corresponds to
current market conditions and whether the rate should be changed. A decision by
the FCC related to this matter may be issued later this year.
Because resolution of the regulatory matters discussed above that are
currently under FCC or judicial review is uncertain and regulations to implement
other provisions of the 96 Act have yet to be issued, ALLTEL cannot predict at
this time the specific effects that the 96 Act and future competition will have
on its wireline operations.
Communications-Emerging Businesses Operations
- ---------------------------------------------------------------------------
(Dollars in millions) 1998 1997 1996
- ---------------------------------------------------------------------------
Revenues and sales $ 99.9 $ 52.0 $10.2
Operating loss $(44.9) $(22.1) $(9.2)
- ---------------------------------------------------------------------------
Emerging businesses consist of the Company's long-distance, competitive local
exchange carrier ("CLEC"), Internet access, network management and PCS
operations. Long-distance and Internet access services are currently marketed
to residential and business customers in the majority of states in which ALLTEL
provides communications services. During 1998, ALLTEL began offering its CLEC,
PCS and network management services. Through its CLEC operations, the Company
25
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
offers local access services to business customers in select markets outside its
traditional service areas. ALLTEL expects to expand this product offering to
residential customers in the near term. In March 1998, the Company began
providing PCS service in Jacksonville, Fla., and ALLTEL expects to begin
offering PCS service in other markets in the near future. Network management
services are currently marketed to business customers in select areas.
Revenues and sales increased in all periods primarily due to growth in
long-distance operations. Long-distance revenues increased $26.4 million in
1998 primarily due to growth in its customer base. The start-up of the CLEC,
PCS and network management operations also contributed $15.6 million to the
overall growth in revenues and sales from emerging businesses in 1998. The
operating losses sustained by emerging businesses reflect the start-up nature
of these operations.
Information Services Operations
- ------------------------------------------------------------------------------
(Dollar in millions) 1998 1997 1996
- ------------------------------------------------------------------------------
Revenues and sales $1,161.8 $974.2 $960.1
Operating income $ 162.7 $144.9 $140.3
- ------------------------------------------------------------------------------
Information services' revenues and sales increased $187.6 million or 19 percent
in 1998, $14.1 million or 1 percent in 1997 and $30.4 million or 3 percent in
1996. Revenues and sales increased in 1998 primarily due to growth in the
financial services, international and telecommunications outsourcing operations.
Growth in revenues and sales for 1997 was impacted by the sale of healthcare
operations completed in January 1997. Excluding the sold healthcare operations,
information services' revenues and sales would have increased $123.7 million or
15 percent in 1997. Excluding the healthcare operations, revenues and sales
increased in 1997 primarily due to growth in the financial services and
telecommunications businesses, while revenues and sales increased in 1996
primarily due to growth in the telecommunications operations. The increases in
revenues and sales for all periods reflect volume growth in existing data
processing contracts, the addition of new outsourcing agreements and additional
software maintenance and service revenues. Additionally, the increases in
revenues and sales in all periods were partially offset by lost operations from
contract terminations due to merger and consolidation activity in the domestic
financial services market and a reduction in revenues collected for early
termination of facilities management contracts. The domestic financial services
industry continues to experience consolidation due to mergers.
Operating income increased $17.7 million or 12 percent in 1998, $4.6
million or 3 percent in 1997 and $9.7 million or 7 percent in 1996. Excluding
the impact of the sold healthcare operations, operating income would have
increased $6.2 million or 5 percent in 1997 and $16.1 million or 13 percent in
1996. Operating income increased in 1998 primarily due to the growth in revenues
and sales noted above, additional fees collected from the early termination of
contracts and improved profit margins realized from the international financial
services businesses, partially offset by lower margins realized by the
telecommunications operations. Telecommunications' operating margins decreased
due to higher operating costs, including depreciation and amortization expense.
Depreciation and amortization expense increased due to the acquisition of
additional data processing equipment and an increase in amortization of
internally developed software. Operating income for 1997 reflects the growth in
revenues and sales noted above, as well as improved profit margins realized from
the international financial services business, partially offset by the loss of
operations due to the sale of the healthcare business. Growth in operating
income for 1997 was adversely affected by start-up and product development costs
associated with several new business initiatives designed to expand the
Company's service offerings in existing markets. Operating income growth in 1996
primarily reflects the increase in revenues and sales. Growth in operating
income for 1997 and 1996 was affected by the loss of higher-margin operations
due to contract terminations, reductions in fees collected on the early
termination of facilities management contracts and an increase in operating
costs, corresponding with the growth in revenues and sales.
26
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
Other Operations
- ---------------------------------------------------------------------
(Dollars in millions) 1998 1997 1996
- ---------------------------------------------------------------------
Revenues and sales $601.3 $478.9 $589.9
Operating income $ 25.9 $ 21.9 $ 34.0
- ---------------------------------------------------------------------
Other operations consist of the Company's product distribution and directory
publishing operations. Revenues and sales increased $122.4 million or 26 percent
in 1998, decreased $111.0 million or 19 percent in 1997 and increased $1.8
million or less than 1 percent in 1996. Operating income increased $4.0 million
or 18 percent in 1998, decreased $12.1 million or 35 percent in 1997 and
increased $0.6 million or 2 percent in 1996. Growth in revenues and sales and
operating income for 1998 and 1997 was affected by the sale of the HWC
operations completed in May 1997. Excluding the sold HWC operations, revenues
and sales would have increased $165.3 million or 38 percent in 1998 and $3.2
million or 1 percent in 1997, and operating income would have increased $5.5
million or 27 percent in 1998 and would have decreased $5.8 million or 22
percent in 1997.
Revenues and sales increased in 1998 primarily due to growth in sales of
telecommunications and data products to both affiliated and non-affiliated
customers, including increased retail sales of these products at the Company's
counter showrooms. Sales to affiliates increased $140.0 million in 1998,
including additional purchases by the Company's wireless subsidiaries,
reflecting the merger with 360 and expansion of ALLTEL Supply's product lines to
include wireless equipment. The increase in revenues and sales in 1998
attributable to ALLTEL Supply's operations was partially offset by decreases in
directory publishing revenues, primarily reflecting the loss of one large
directory publishing contract. The decrease in revenues and sales for 1997
primarily reflects the sale of HWC and a decrease in directory publishing
revenues as a result of publishing 43 fewer directory contracts in 1997 as
compared to 1996. Sales of telecommunications and data products increased $21.1
million in 1997, primarily reflecting increased sales to affiliated and
non-affiliated customers and additional retail sales of these products at the
Company's counter showrooms. Revenues and sales increased slightly in 1996, as
growth in sales of telecommunications and data products was partially offset by
a reduction in directory publishing revenues, reflecting the loss of several
large independent directory contracts.
Operating income increased in 1998 primarily due to the increase in
revenues and sales noted above. Growth in operating income for 1998 continued to
be affected by lower gross profit margins realized by ALLTEL Supply, reflecting
a reduction in margins earned on affiliated sales and increased competition from
other distributors and direct sales by manufacturers. Operating income decreased
in 1997 primarily due to the decrease in revenues and sales noted above. Lower
gross profit margins realized on the sale of telecommunications and data
products, reflecting increased competition and a reduction in product cost
rebates received from vendors, also impacted operating income growth in 1997.
Operating income for 1997 also reflects increased selling expenses incurred by
the Company to open several new counter showroom facilities. The increase in
operating income in 1996 primarily reflects reduced expenses for advertising,
sales support, printing and other operating costs related to the directory
publishing operations, partially offset by lower profit margins realized by the
HWC operations. During 1996, HWC's gross profit margins were adversely affected
by sharp declines in copper prices and increased competition from manufacturers.
Interest Expense
Interest expense increased $1.9 million or 1 percent in 1998 and $24.6 million
or 10 percent in 1997 and decreased $35.5 million or 13 percent in 1996. The
increase in interest expense in 1997 reflects the issuance of $200 million of
debentures completed in March 1997 and the issuance of $122 million of
subordinated promissory notes issued in November 1996 in connection with an
acquisition. The decrease in interest expense in 1996 primarily reflects two
debt refinancings completed in March 1996 and October 1995, which resulted in
the retirement of three high-cost debt issues. Interest expense in 1996 also
reflects reduced borrowing rates resulting from the recapitalization of 360 at
the time of its spinoff from Sprint Corporation. (See Note 2 to the consolidated
financial statements for additional information regarding 360's spinoff.)
27
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
Income Taxes
Income tax expense increased $52.2 million or 13 percent in 1998 and
$167.1 million or 73 percent in 1997 and decreased $15.1 million or 6
percent in 1996. The changes in income tax expense for all periods
primarily reflect the tax-related impact of the various non-recurring
and unusual items, previously discussed. Excluding the impact on tax
expense of these items in each year, income tax expense would have
increased $91.3 million or 29 percent in 1998, $35.7 million or 13
percent in 1997 and $44.2 million or 19 percent in 1996, consistent
with the overall growth in ALLTEL's earnings from continuing operations
before non-recurring and unusual items.
Average Common Shares Outstanding
The average number of common shares outstanding decreased 1 percent in
1998, primarily due to the Company's repurchase of its common stock in
1997. During 1998, common shares issued through stock option plans
amounted to 1,703,000 shares, and preferred stock and debentures were
converted into 23,000 shares. The average number of common shares
outstanding decreased slightly in 1997. During 1997, 872,000 shares
were issued in connection with acquisitions, common shares issued
through stock option plans amounted to 618,000 shares, and preferred
stock and debentures were converted into 67,000 shares. These increases
were offset by the Company's repurchase on the open market of 6,594,000
of its common shares. The average number of common shares outstanding
increased slightly in 1996. During 1996, 4,810,000 shares were issued
in connection with acquisitions, common shares issued through stock
option plans amounted to 439,000 shares, and preferred stock and
debentures were converted into 28,000 shares. These increases were
offset by the Company's repurchase on the open market of 2,480,000 of
its common shares.
Financial Condition, Liquidity and Capital Resources
- --------------------------------------------------------------------------------
(Dollars in millions, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------
Cash provided from operations $1,247.1 $1,181.4 $1,189.8
Capital expenditures $ 868.6 $ 826.9 $ 763.8
Total capital structure $6,823.1 $6,471.0 $6,059.8
Percent equity to total capital 48.0% 42.1% 42.4%
Interest coverage ratio 4.73x 3.96x 3.45x
Book value per share $11.86 $9.91 $9.16
- --------------------------------------------------------------------------------
Cash provided from operations continues to be ALLTEL's primary source
of liquidity. The increase in cash provided from operations for 1998
primarily reflects growth in earnings of the Company and changes in
working capital requirements, including the timing of additional income
tax payments associated with gains realized from the sale of MCI
WorldCom, Inc. common stock. Cash provided from operations increased in
1996 primarily due to growth in earnings of the Company and changes in
working capital requirements mainly attributable to timing differences
in the payment of accounts payable.
Capital expenditures increased in 1998, reflecting construction of
additional network facilities and deployment of digital wireless
technology in select markets. Capital expenditures increased in 1997
primarily due to the start-up construction of ALLTEL's PCS network.
Capital expenditures decreased in 1996 primarily as a result of the
sale of wireline properties and a reduction in capital expenditures by
the remaining wireline subsidiaries. The Company financed the majority
of its capital expenditures through the internal generation of funds in
each of the past three years. Capital expenditures were incurred to
continue to modernize and upgrade ALLTEL's telecommunications network
and to expand into existing information services markets. In addition,
capital expenditures were incurred to construct additional network
facilities to provide PCS and digital wireless service and to offer
other communications services, including long-distance, Internet and
local competitive access services. Capital expenditures are forecast at
approximately $850 million for 1999 and are expected to be funded
primarily from internally generated funds.
28
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
Cash flows from investing activities for 1998 include cash outlays of $55.1
million for the purchase of property, consisting of $34.6 million for the
acquisition of two wireless properties in Georgia and $20.5 million for the
purchase of additional ownership interests in wireless properties in North
Carolina and Texas. Cash flows from investing activities for 1997 include a cash
outlay of $146.5 million related to the acquisition of PCS licensing rights for
73 markets in 12 states. The PCS licenses increase the size of ALLTEL's
potential wireless customer base to 50.6 million. Cash flows from investing
activities for 1997 also include a total cash outlay of $124.3 million for
additional investments in cellular partnerships in which the Company owns a
minority interest, including an $80 million investment in a cellular partnership
serving the Orlando, Fla., and Richmond, Va., markets. Cash flows from investing
activities for 1997 also include total cash outlays of $112.9 million for
various acquisitions, including a wireline property in Georgia, two wireless
properties in Alabama and the purchase of additional ownership interests in 16
wireless properties in which the Company owns a controlling interest. Cash flows
from investing activities for 1996 include a cash outlay of $352.5 million
primarily related to the acquisition of Independent Cellular Network, Inc.
("ICN"). ICN owned and operated cellular systems serving more than 140,000
customers in Ohio, Kentucky, Pennsylvania and West Virginia.
Cash flows from investing activities for 1998 and 1997 include proceeds
from the sale of a portion of ALLTEL's investment in MCI WorldCom, Inc. common
stock of $288.2 million and $185.9 million, respectively. In addition, proceeds
from the sale of investments in 1998 and 1997 include $20.2 million and $3.9
million, respectively, primarily received from the sale of the Company's
ownership interest in wireless partnerships. Cash flows from investing
activities for 1997 include proceeds of $202.3 million received from the sale of
property, principally consisting of three non-strategic operations. In September
1997, the Company received cash proceeds of $48.7 million in connection with the
sale of an investment in a software company. In May 1997, ALLTEL completed the
sale of its wire and cable subsidiary, HWC, for approximately $45.0 million in
cash; and in January 1997, the Company received cash proceeds of $104.9 million
in connection with the sale of its healthcare operations. The proceeds from the
sales of investments and other assets were used primarily to reduce borrowings
under the Company's revolving credit agreement. Cash flows from investing
activities for 1996 include proceeds totaling $38.7 million received principally
from the sale of certain wireline properties in Nevada. Cash flows from
investing activities for 1996 also include proceeds of $30.4 million related to
the withdrawal of ALLTEL's investment in GOCC.
Cash flows from financing activities include dividend payments and the
repurchase by the Company of its common stock. Common and preferred dividend
payments amounted to $240.4 million in 1998, $206.3 million in 1997 and $198.1
million in 1996. The increases in each year primarily reflect growth in the
annual dividend rates on ALLTEL's common stock. Dividend payments on common
shares also increased in 1998 as a result of additional shares outstanding due
to the merger with 360. Under a share repurchase program initiated by the
Company in 1996 and expanded in 1997, the Company repurchased 6.6 million and
2.5 million of its shares at a total cost of $212.0 million and $79.1 million in
1997 and 1996, respectively. Distributions to minority investors were $92.8
million in 1998, $45.1 million in 1997 and $35.4 million in 1996. The increase
in distributions for 1998 reflects the improved operating results of the
wireless properties managed by ALLTEL.
Currently, the Company has a $1 billion line of credit under a revolving
credit agreement. Borrowings outstanding under this agreement at December 31,
1998, were $578.5 million, with a weighted average interest rate of 5.7 percent.
At December 31, 1997, ALLTEL and 360 had separate lines of credit under
revolving credit agreements. Borrowings outstanding under these agreements at
December 31, 1997 and 1996 were $847.9 million and $763.7 million, respectively.
Upon completion of its merger with 360, ALLTEL refinanced borrowings of
approximately $495 million that were outstanding under 360's revolving credit
agreement through ALLTEL's existing credit facilities, and 360's revolving
credit agreement was terminated. Additional borrowings under the revolving
credit agreements in 1997 were incurred primarily to fund the stock repurchase
program and to acquire PCS licensing rights. As previously noted, proceeds from
the sales of MCI WorldCom, Inc. common stock, the HWC and healthcare operations
and the sale of investments in a software company were used primarily to reduce
borrowings outstanding under the revolving credit agreements in 1998 and 1997.
29
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
Long-term debt issued was $107.3 million in 1998, $282.6 million in 1997
and $1,948.9 million in 1996, while retirements of long-term debt amounted to
$312.2 million in 1998, $42.6 million in 1997 and $1,642.5 million in 1996. In
January 1998, the Company issued $100 million of 6.65 percent notes, which
represents substantially all the long-term debt issued in 1998. Long-term debt
issued in 1997 includes the net increase in revolving credit agreement
borrowings from December 31, 1996, and the issuance of $200 million of 7.6
percent notes. In 1996, ALLTEL issued $300 million of 7.0 percent debentures to
refinance $200 million of 9.5 percent debentures and to reduce borrowings under
its revolving credit agreement. Also in 1996, in connection with its spinoff
from Sprint, 360 repaid $1.4 billion of intercompany debt. The repayment was
funded by proceeds from the issuance of $900 million of senior notes and from
$500 million of initial borrowings under 360's revolving credit agreement. In
addition, the Company issued $122 million of subordinated promissory notes in
connection with the ICN acquisition. The net reduction in revolving credit
agreement borrowings from December 31, 1997, represents substantially all the
long-term debt retired in 1998. The repayment of intercompany debt to Sprint and
the refinanced debt issue represent substantially all the long-term debt retired
in 1996. In connection with the debt refinancing completed in 1996, the Company
was required to pay termination fees in the amount of $15.8 million. Following
its merger with 360, ALLTEL's bond ratings with Moody's Investors Service and
Standard & Poor's Corporation were A2 and A-, respectively, compared to A2 and
A+, respectively, prior to the merger. (See Note 5 to the consolidated financial
statements for additional information regarding the Company's long-term debt.)
The Company believes it has adequate internal and external capital
resources available to finance its ongoing operating requirements including
capital expenditures, business development and the payment of dividends. ALLTEL
has access to the capital markets, including the private placement market,
public issuance and the Rural Utilities Service financing programs for wireline
companies. The Company and its subsidiaries expect these sources to continue to
be available for future borrowings.
Other Financial Information
Management is currently not aware of any environmental matters which, in the
aggregate, would have a material adverse effect on the financial condition or
results of operations of the Company.
On December 18, 1998, ALLTEL announced a definitive merger agreement with
Aliant Communications, Inc. ("Aliant"), a communications company which offers
wireless, wireline, paging, long-distance and Internet services in Nebraska.
Under terms of the agreement, each share of Aliant's common stock will be
exchanged for .67 to .75 shares of ALLTEL common stock. The Company expects to
account for this transaction, which is valued at $1.5 billion, as a pooling-of-
interests. The merger is subject to approval by Aliant shareholders, as well as
regulatory and other approvals. The merger is expected to be completed by
mid-1999.
Year 2000 Compliance
The Year 2000 issue affects the Company's internal computer systems and
infrastructure, as well as certain software, systems and services that the
Company provides to its customers. The Company began its Year 2000 efforts
several years ago and plans to be substantially completed with those efforts by
June 30, 1999 and fully completed by August 31, 1999. The Company's Year 2000
plan consists of eight phases: (i) Awareness; (ii) Inventory; (iii) Third-Party
Strategies; (iv) Risk Assessment; (v) Planning; (vi) Remediation; (vii) Testing;
and (viii) Implementation.
For the Company's internal computer systems and software, systems and
services that the Company provides to its customers and for which the Company is
responsible, the Awareness, Inventory and Third-Party Strategies phases have
been completed. For these systems, software and services, the Company has
commenced work on and plans to complete the Risk Assessment Phase by March 15,
1999; the Planning phase by March 31, 1999; the Remediation and Testing phases
by June 30, 1999; and the Implementation phase by June 30, 1999, except the
Implementation phase for the Company's Savannah, Albany and Augusta, Ga., and
Columbia, S.C., wireless markets, which constitute approximately 8 percent of
the Company's wireless customers, which is scheduled to be completed by
August 31, 1999.
30
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
For the Company's facilities infrastructure, the Company has completed the
Awareness phase and has commenced work on and plans to complete the Inventory
phase by January 31, 1999; the Third-Party Strategies, Risk Assessment and
Planning phases by March 31, 1999; and the Remediation, Testing and
Implementation phases by June 30, 1999. For the Company's remaining
infrastructure, the Company has completed the Awareness, Inventory, Third-Party
Strategies and Risk Assessment phases and has commenced work on and plans to
complete the Planning phase by March 31, 1999; and the Remediation, Testing and
Implementation phases by June 30, 1999.
As part of its Year 2000 plan, the Company has implemented a third-party
management process and is continuing to contact its vendors, suppliers and other
third parties upon which the Company depends regarding their plans for making
their products, services and systems Year 2000 compliant. The Company's ability
to meet its target completion dates is dependent upon the timely provision of
upgrades or other solutions from its vendors and suppliers. Some third-party
upgrades and other solutions are not yet available, resulting in delays in the
Company's completion of the Risk Assessment and Planning phases and potential
delays in completion of the Remediation, Testing and Implementation phases. The
Company is also dependent upon other third parties who provide essential
services (such as utilities, interexchange carriers, etc.) to make their
critical systems Year 2000 compliant in a timely manner. Generally, the Company
does not have the ability to test those systems for Year 2000 compliance and,
instead, must rely on the third parties' representations.
Contingency planning to maintain and restore service in the event of a
natural disaster, power failure or software-related interruption has long been
part of the Company's standard business practices. The Company is working to
leverage this experience in the development and implementation of its Year 2000
contingency plans, which assess the potential for business disruption in various
scenarios. Those contingency plans address possible, but unlikely, "worst case"
scenarios involving the interruption of telecommunications and information
technology services and/or interruption of customer billing, operating and other
information systems, and provide for key-operation back-up and alternative
solutions for recovery. The Company has developed high-level contingency plans
for its critical systems and plans to augment, modify and test those contingency
plans throughout 1999, as appropriate.
The Company estimates the total cost of its Year 2000 efforts to be
approximately $80 million. As of December 31, 1998, the Company has incurred
approximately $58 million of that amount. The Company has and will capitalize
and subsequently amortize approximately one-half of the total Year 2000 cost,
including costs relating to the remediation of the Company's software products.
Some of the Company's Year 2000 costs are not incremental, but rather represent
the redeployment of existing resources. As for the estimated costs associated
with making the Company's customers' systems Year 2000 compliant in those
situations where the Company is obligated to do so, the Company has treated
those costs as contract costs and has not included them in the Company's Year
2000 costs. The Company continues to evaluate the estimated costs associated
with its Year 2000 efforts based on actual experience. The Company believes,
based on available information, that its Year 2000 costs will not have a
material adverse effect on its results of operations.
The above information is based on the Company's current best estimates
using numerous assumptions of future events. Given the complexity of the Year
2000 issues and possible unidentified risks, actual results may vary from those
anticipated and discussed above.
Recently Issued Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and for Hedging Activities," ("SFAS 133"). This Statement
establishes accounting and reporting standards requiring that every derivative
instrument be recorded on the balance sheet as either an asset or liability
measured at fair value. SFAS 133 requires that changes in a derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. SFAS 133 is effective for fiscal years beginning after
June 15, 1999, and cannot be applied retroactively. Because ALLTEL does not
have significant derivative financial instruments, the Company does not expect
the adoption of SFAS 133 to have a material impact on its reported earnings
and/or other comprehensive income.
31
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations, (continued):
--------------
Market Risk
The Company is exposed to market risk from changes in marketable equity
security prices and from changes in interest rates on its credit
facility and long-term debt obligations that affect the fair value of
these obligations. The Company's financial instruments are described
further in Notes 3 and 5 to the consolidated financial statements. The
Company has estimated its market risk using sensitivity analysis.
Market risk has been defined as the potential loss in fair value of a
financial instrument due to a hypothetical adverse change in market
prices or interest rates. Fair value for investments was determined
using quoted market prices, if available, or the carrying amount of the
investment if no quoted market price was available. Fair value of
long-term debt obligations was determined based on a discounted cash
flows analysis, using the overall weighted rates and maturities of
these obligations compared to terms and rates currently available in
the long-term markets. The results of the sensitivity analysis are
presented below. Actual results may differ.
At December 31, 1998 and 1997, investments of the Company are
recorded at fair value of $1,668.2 million and $1,228.7 million,
respectively. Marketable equity securities, consisting principally of
MCI WorldCom, Inc. common stock, amounted to $965.7 million and $575.5
million and included unrealized holding gains of $551.6 million and
$300.7 million at December 31, 1998 and 1997, respectively. A
hypothetical 10 percent decrease in quoted market prices would result
in a $90.6 million and $57.6 million decrease in the fair value of
these securities at December 31, 1998 and 1997, respectively.
The Company has no material future earnings or cash flow exposures
from changes in interest rates on its long-term debt obligations, as
substantially all the Company's long-term debt obligations are fixed
rate obligations. At December 31, 1998 and 1997, the fair value of the
Company's long-term debt was estimated to be $3,723.8 million and
$3,804.6 million, respectively. A hypothetical increase of 70 basis
points (10 percent of the Company's overall weighted average borrowing
rate) would result in approximately a $133.3 million and $113.7 million
decrease in the fair value of the Company's long-term debt at December 31,
1998 and 1997, respectively.
Although the Company conducts business in foreign countries,
international operations are not material to the Company's operations,
financial condition and liquidity. Additionally, the foreign currency
translation gains and losses were not material to the Company's results
of operations for the years ended December 31, 1998 and 1997. Accordingly,
the Company is not currently subject to material foreign currency exchange
rate risk from the effects that exchange rate movements of foreign currency
would have on the Company's future costs or on future cash flows it would
receive from its foreign subsidiaries. To date, the Company has not entered
into any significant foreign currency forward exchange contracts or other
derivative financial instruments to hedge the effects of adverse fluctuations
in foreign currency exchange rates. The Company is evaluating the future use of
such financial instruments.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk:
- -------- ----------------------------------------------------------
See the discussion above included in Management's Discussion and
Analysis of Financial Condition and Results of Operation for
information pertaining to the Company's market risk disclosures.
32
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
Report of Independent Public Accountants
To the Shareholders of ALLTEL Corporation:
We have audited the accompanying consolidated balance sheets
of ALLTEL Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the years in
the period ended December 31, 1998. We did not audit the financial
statements of 360 Communications Company, a company acquired
during 1998 in a transaction accounted for as a pooling-of-interests,
as discussed in Note 2, as of December 31, 1997, and for each of the
two years in the period ended December 31, 1997. Such statements are
included in the consolidated financial statements of ALLTEL Corporation
and reflect total assets and total revenues of 34 percent and 30
percent, respectively, of the related consolidated totals in 1997; and
26 percent of total revenues for the year ended December 31, 1996.
These statements were audited by other auditors whose report has been
furnished to us and our opinion, insofar as it relates to the amounts
included for 360 Communications Company, is based solely upon
the report of the other auditors. 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 and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other
auditors, the financial statements referred to above present fairly, in
all material respects, the financial position of ALLTEL Corporation and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ARTHUR ANDERSEN LLP
Little Rock, Arkansas,
January 28, 1999
33
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareowners
360 Communications Company
We have audited the accompanying consolidated balance sheets of
360 Communications Company and Subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations,
shareowners' equity, and cash flows for each of the three years in the
period ended December 31, 1997. Our audits also included the financial
statement schedule listed in the index at Item 14 (a). These financial
statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits. We did not audit
the financial statements of GTE Mobilnet of South Texas Limited
Partnership, New York SMSA Limited Partnership, Orlando SMSA Limited
Partnership and Chicago MSA Limited Partnership, equity investees of
the Company, for which the Company's investment in these partnerships
is $191,275,000 and $121,654,000 at December 31, 1997 and 1996,
respectively, and the Company's equity in the net income of these
partnerships is $48,344,000, $39,644,000 and $32,753,000 for the years
ended December 31, 1997, 1996 and 1995, respectively. Those financial
statements were audited by other auditors whose reports have been
furnished to us. Our opinion, insofar as it relates to data included
for such partnerships, is based solely on the reports of the other
auditors.
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
our audits and the reports of other auditors provide a reasonable basis
for our opinion.
In our opinion, based on our audits and the reports of other auditors,
the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
360 Communications Company and Subsidiaries at December 31,
1997 and 1996, and the consolidated results of its operations and cash
flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
/s/Ernst & Young LLP
Chicago, Illinois
March 6, 1998
34
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
REPORT OF OTHER INDEPENDENT PUBLIC ACCOUNTANTS
To GTE Mobilnet of South Texas Limited Partnership:
We have audited the accompanying balance sheets of the GTE Mobilnet of
South Texas Limited Partnership (a Delaware limited partnership) as of
December 31, 1997 and 1996, and the related statements of operations,
changes in partners' capital, and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership'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 GTE
Mobilnet of South Texas Limited Partnership as of December 31, 1997,
and 1996, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
principles.
/s/ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 13, 1998
35
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
REPORT OF OTHER INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of the
Chicago SMSA Limited Partnership:
We have audited the balance sheets of the CHICAGO SMSA LIMITED
PARTNERSHIP (an Illinois partnership) as of December 31, 1997 and 1996,
and the related statements of income, partners' capital and cash flows
for the years then ended; such financial statements are not included
separately herein. These financial statements are the responsibility of
the Partnership'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 the Chicago
SMSA Limited Partnership as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years then ended,
in conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
Chicago, Illinois
January 16, 1998
36
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
REPORT OF OTHER INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of the New York SMSA Limited Partnership
We have audited the accompanying balance sheets of the New York SMSA
Limited Partnership (the Partnership) as of December 31, 1997 and 1996, and
the related statements of income, changes in partners' capital and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership'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 the New York SMSA Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
/s/Coopers & Lybrand L.L.P.
New York, New York
February 13, 1998
37
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
REPORT OF OTHER INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of the Orlando SMSA Limited Partnership
We have audited the accompanying consolidated balance sheet of the Orlando SMSA
Limited Partnership as of December 31, 1997, and the related consolidated
statements of income, changes in partners' capital and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Orlando SMSA
Limited Partnership as of December 31, 1997, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/Coopers & Lybrand L.L.P.
Atlanta, Georgia
March 6, 1998
38
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
CONSOLIDATED BALANCE SHEETS
- ------------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands)
- ------------------------------------------------------------------------------
ASSETS 1998 1997
- ------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and short-term investments $ 55,472 $ 19,683
Accounts receivable (less allowance
for doubtful accounts of $29,121
and $25,164, respectively) 776,720 723,999
Materials and supplies 10,539 14,237
Inventories 88,467 85,631
Prepaid expenses and other 49,633 37,241
---------- ----------
Total current assets 980,831 880,791
- ------------------------------------------------------------------------------
Investments 1,668,171 1,228,712
Goodwill and other intangibles 1,625,617 1,637,393
- ------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Wireline 4,090,791 3,909,756
Wireless 2,658,822 2,303,215
Information services 678,244 608,953
Other 182,066 169,754
Under construction 623,415 398,063
---------- ----------
Total property, plant and equipment 8,233,338 7,389,741
Less accumulated depreciation 3,405,270 2,904,507
---------- ----------
Net property, plant and equipment 4,828,068 4,485,234
- ------------------------------------------------------------------------------
Other assets 271,539 338,275
- ------------------------------------------------------------------------------
TOTAL ASSETS $9,374,226 $8,570,405
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 55,484 $ 48,028
Accounts and notes payable 486,047 497,142
Advance payments and customer deposits 129,092 115,994
Accrued taxes 130,675 92,527
Accrued dividends 84,388 55,012
Other current liabilities 320,822 195,789
---------- ----------
Total current liabilities 1,206,508 1,004,492
- ------------------------------------------------------------------------------
Long-term debt 3,491,755 3,699,519
Deferred income taxes 933,485 710,723
Other liabilities 466,601 432,239
Preferred stock, redeemable 5,005 5,625
- ------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Preferred stock 9,121 9,155
Common stock 275,137 273,411
Additional capital 846,647 801,936
Unrealized holding gain on investments 551,615 300,671
Retained earnings 1,588,352 1,332,634
---------- ----------
Total shareholders' equity 3,270,872 2,717,807
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $9,374,226 $8,570,405
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated balance
sheets.
39
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands, except per share amounts)
- -------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
Revenues and Sales:
Service revenues $4,632,615 $4,033,811 $3,588,233
Product sales 561,393 511,329 651,234
---------- ---------- ----------
Total revenues and sales 5,194,008 4,545,140 4,239,467
- -------------------------------------------------------------------------------
Costs and Expenses:
Operations 2,740,273 2,377,399 2,150,110
Cost of products sold 550,580 494,537 586,651
Depreciation and amortization 707,129 635,464 570,956
Merger and integration expenses 252,000 - -
Provision to reduce carrying
value of certain assets 55,000 16,874 120,280
--------- ---------- ----------
Total costs and expenses 4,304,982 3,524,274 3,427,997
- -------------------------------------------------------------------------------
Operating Income 889,026 1,020,866 811,470
Equity earnings in unconsolidated
partnerships 114,859 92,087 77,500
Minority interest in consolidated
partnerships (102,177) (87,966) (80,073)
Other income, net 38,150 11,157 9,365
Interest expense (263,669) (261,770) (237,196)
Gain on disposal of assets and other 296,150 209,651 (2,278)
---------- ---------- ----------
Income before income taxes 972,339 984,025 578,788
Income taxes 446,864 394,644 227,532
---------- ---------- ----------
Net income 525,475 589,381 351,256
Preferred dividends 938 1,008 1,071
---------- ---------- ----------
Net income applicable to common shares $ 524,537 $ 588,373 $ 350,185
- -------------------------------------------------------------------------------
Earnings per Share:
Basic $1.91 $2.13 $1.27
Diluted $1.89 $2.11 $1.26
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
40
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- -------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------
For the years ended December 31,
(Dollars in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Provided from Operations:
Net income $ 525,475 $ 589,381 $ 351,256
Adjustments to reconcile net income to
net cash provided from operations:
Depreciation and amortization 707,129 635,464 570,956
Merger and integration expenses and
provision to reduce carrying value
of certain assets, gain on disposal
of assets and other 54,830 (109,741) 74,197
Other, net (20,980) 93,887 85,268
Increase in deferred income taxes 72,828 41,523 83,386
Changes in operating assets and liabilities:
Accounts receivable (95,479) (137,077) (76,841)
Inventories and materials and supplies 1,062 6,558 (15,225)
Accounts payable (11,283) 13,297 181,939
Other current liabilities (441) 45,288 (24,765)
Other, net 13,953 2,837 (40,358)
---------- ---------- ----------
Net cash provided from operations 1,247,094 1,181,417 1,189,813
- ----------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Additions to property, plant and equipment (868,578) (826,886) (763,824)
Additions to capitalized software
development costs (90,136) (74,225) (78,319)
Additions to other intangible assets - (146,526) -
Additions to investments (17,254) (124,295) (44,263)
Purchase of property, net of cash acquired (55,073) (112,852) (352,533)
Proceeds from the sale of investments 308,443 189,759 30,371
Proceeds from the return on investments 58,324 13,878 16,786
Proceeds from the sale of assets - 202,300 38,687
Other, net (54,790) (86,707) (63,044)
---------- ---------- ----------
Net cash used in investing activities (719,064) (965,554) (1,216,139)
- ----------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Dividends on preferred and common stock (240,384) (206,312) (198,095)
Reductions in long-term debt (312,156) (42,647) (1,642,468)
Purchase of common stock - (212,012) (79,126)
Preferred stock redemptions and purchases (545) (873) (704)
Distributions to minority investors (92,788) (45,063) (35,426)
Contributions from minority investors - - 5,636
Long-term debt issued 107,304 282,611 1,948,874
Common stock issued 46,328 11,688 3,619
---------- ---------- ----------
Net cash (used in) provided from
financing activities (492,241) (212,608) 2,310
- ----------------------------------------------------------------------------------------
Increase (decrease) in cash and
short-term investments 35,789 3,255 (24,016)
Cash and Short-term Investments:
Beginning of the year 19,683 16,428 40,444
---------- ---------- ----------
End of the year $ 5,472 $ 19,683 $ 16,428
- ----------------------------------------------------------------------------------------
Supplemental Cash Flow Disclosures:
Interest paid $ 250,079 $ 250,360 $ 202,478
Income taxes paid $ 294,911 $ 270,635 $ 206,282
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
41
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized
Preferred Common Additional Holding Gain Retained
Stock Stock Capital on Investments Earnings Total
--------- -------- ---------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $9,241 $275,651 $641,799 $208,681 $ 802,261 $1,937,633
- ----------------------------------------------------------------------------------------------------------------------------------
Net income - - - - 351,256 351,256
Other comprehensive income, net of tax:
Unrealized holding gains on investments
arising during the period (See Note 13) - - - 143,186 - 143,186
------ -------- --------- --------- --------- ----------
Comprehensive income - - - 143,186 351,256 494,442
------ -------- --------- --------- --------- ----------
Acquisition of subsidiaries - 4,810 145,503 - - 150,313
Employee plans, net - 439 3,180 - - 3,619
Conversion of preferred stock and debentures (43) 28 100 - - 85
Repurchase of stock - (2,480) (76,646) - - (79,126)
Capital contributions by Sprint Corporation
in connection with spinoff of a subsidiary - - 253,160 - - 253,160
Other, net - - 867 - - 867
Dividends:
Common - - - - (200,315) (200,315)
Preferred - - - - (1,071) (1,071)
------ -------- --------- --------- --------- ----------
Balance at December 31, 1996 $9,198 $278,448 $967,963 $351,867 $ 952,131 $2,559,607
- ----------------------------------------------------------------------------------------------------------------------------------
Net income - - - - 589,381 589,381
Other comprehensive loss, net of tax:
Unrealized holding gains on investments,
net of reclassification
adjustments (See Note 13) - - - (51,196) - (51,196)
------ -------- --------- --------- --------- ----------
Comprehensive income - - - (51,196) 589,381 538,185
------ -------- --------- --------- --------- ----------
Acquisition of subsidiaries - 872 26,348 - - 27,220
Employee plans, net - 618 11,070 - - 11,688
Conversion of preferred stock and
debentures (43) 67 266 - - 290
Repurchase of stock - (6,594) (205,418) - - (212,012)
Other, net - - 1,707 - - 1,707
Dividends:
Common - - - - (207,870) (207,870)
Preferred - - - - (1,008) (1,008)
------ -------- --------- --------- ---------- ----------
Balance at December 31, 1997 $9,155 $273,411 $801,936 $300,671 $1,332,634 $2,717,807
- ----------------------------------------------------------------------------------------------------------------------------------
Net income - - - - 525,475 525,475
Other comprehensive income, net of tax:
Unrealized holding gains on investments,
net of reclassification
adjustments (See Note 13) - - - 250,944 - 250,944
------ -------- --------- --------- --------- -----------
Comprehensive income - - - 250,944 525,475 776,419
------ -------- --------- --------- --------- -----------
Employee plans, net - 1,703 44,625 - - 46,328
Conversion of preferred stock and debentures (34) 23 86 - - 75
Dividends:
Common - - - - (268,819) (268,819)
Preferred - - - - (938) (938)
------ -------- --------- --------- --------- ----------
Balance at December 31, 1998 $9,121 $275,137 $846,647 $551,615 $1,588,352 $3,270,872
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
42
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Description of Business - ALLTEL Corporation ("ALLTEL" or the "Company") is
a customer-focused information technology company that provides wireline and
wireless communications and information services. The Company owns
subsidiaries that provide wireline local, long-distance, network access and
Internet services, wireless communications and information processing
management services and advanced application software. (See Note 15 for
information regarding ALLTEL's business segments.)
Basis of Presentation - ALLTEL prepares its consolidated financial
statements in accordance with generally accepted accounting principles, which
requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses and disclosure
of contingent assets and liabilities. The estimates and assumptions used in
the accompanying consolidated financial statements are based upon
management's evaluation of the relevant facts and circumstances as of the
date of the financial statements. Actual results may differ from the
estimates and assumptions used in preparing the accompanying consolidated
financial statements.
The consolidated financial statements include the accounts of ALLTEL, its
subsidiary companies and majority-owned partnerships. Investments in 20% to
50% owned entities and all unconsolidated partnerships are accounted for
using the equity method. Investments in less than 20% owned entities and in
which the Company does not exercise significant influence over operating and
financial policies are accounted for under the cost method. All intercompany
transactions, except those with certain affiliates described below, have been
eliminated in the consolidated financial statements. Certain prior-year
amounts have been reclassified to conform with the 1998 financial statement
presentation.
Service revenues consist of local service, network access, long-distance
and miscellaneous wireline operating revenues, wireless access and network
usage revenues, information services' data processing and software
maintenance revenues. Product sales primarily consist of the product
distribution and directory publishing operations and information services'
software licensing revenues and equipment sales.
Transactions with Certain Affiliates - ALLTEL Supply, Inc. sells equipment
and materials to wireline subsidiaries of the Company ($185.7 million in
1998, $115.8 million in 1997 and $109.2 million in 1996) as well as to other
affiliated and non-affiliated communications companies and related
industries. The cost of equipment and materials sold to the wireline
subsidiaries is included, principally, in wireline plant in the consolidated
financial statements. ALLTEL Information Services, Inc. provides the data
processing services for the Company's wireline operations ($118.9 million in
1998, $103.9 million in 1997 and $103.2 million in 1996) in addition to other
affiliated and non-affiliated companies. Directory publishing services are
provided to the wireline subsidiaries by ALLTEL Publishing Corporation
("Publishing"). Wireline revenues and sales include directory royalties
received from Publishing ($34.5 million in 1998, $33.5 million in 1997 and
$32.2 million in 1996). These intercompany transactions have not been
eliminated because the directory royalties received from Publishing and the
prices charged by the supply and information services subsidiaries are
included in the wireline subsidiaries' rate base and/or are recovered through
the regulatory process.
Regulatory Accounting - The Company's wireline subsidiaries follow the
accounting for regulated enterprises prescribed by Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" ("SFAS 71"). This accounting recognizes the economic effects of
rate regulation by recording costs and a return on investment as such amounts
are recovered through rates authorized by regulatory authorities. Accordingly,
SFAS 71 requires the Company's wireline subsidiaries to depreciate wireline
plant over useful lives as approved by regulators, which could be longer than
the useful lives that would otherwise be determined by management. SFAS 71
also requires deferral of certain costs and obligations based upon approvals
received from regulators to permit recovery of such amounts in future years.
The Company's wireline subsidiaries periodically review the applicability
of SFAS 71 based on the developments in their current regulatory and
competitive environments.
43
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- -------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
- -------------------------------------------
Cash and Short-term Investments - Cash and short-term investments consist
of highly liquid investments with original maturities of three months or less.
Inventories - Inventories are stated at the lower of cost or market value.
Cost is determined using the first-in, first-out method of valuation.
Investments - Investments in equity securities are recorded at fair value
in accordance with Statement of Financial Accounting Standards No. 115 (See
Note 3.) Investments in unconsolidated partnerships are accounted for using
the equity method (See Note 4.) All other investments are accounted for using
the cost method. Investments were as follows at December 31:
- --------------------------------------------------------------------------------
(Thousands)
-------------------------
1998 1997
- --------------------------------------------------------------------------------
Equity securities $ 965,738 $ 575,501
Investments in unconsolidated partnerships 633,989 580,029
Other cost investments 68,444 73,182
---------- ----------
$1,668,171 $1,228,712
- --------------------------------------------------------------------------------
Investments in unconsolidated partnerships include the excess of the purchase
price over the underlying net book value of wireless partnerships of $299.9
million and $300.7 million as of December 31, 1998 and 1997, respectively.
Amortization expense for the years ended December 31, 1998, 1997 and 1996 was
$7.2 million, $6.5 million and $5.8 million, respectively, and is included in
equity earnings in unconsolidated partnerships in the accompanying consolidated
statements of income.
Goodwill and Other Intangibles - Goodwill represents the excess of cost
over the fair value of net assets acquired and is amortized on a straight-line
basis for periods up to 40 years. The Company has acquired identifiable
intangible assets through its acquisitions of interests in various wireless
systems and acquisitions of wireline properties. The cost of acquired entities
is allocated to identifiable assets at the date of the acquisition, and the
excess of the total purchase price over the amounts assigned to identifiable
assets is recorded as goodwill. Intangible assets related to the acquisition of
entities in which the Company does not have a controlling interest are included
in investments in unconsolidated partnerships. At December 31, 1998 and 1997,
goodwill, net of amortization, was $1,462.8 million and $1,483.4 million,
respectively. Amortization expense amounted to $44.4 million in 1998,
$44.7 million in 1997 and $39.6 million in 1996.
Other intangibles consist of the cost of Personal Communications Services
("PCS") licenses and capitalized interest. The PCS licenses are amortized
upon commencement of operations on a straight-line basis over 40 years. At
December 31, 1998 and 1997, other intangibles, net of amortization, were
$162.8 million and $153.9 million, respectively. Amortization expense amounted
to $260,000 in 1998. The carrying value of goodwill and other intangibles is
periodically evaluated by the Company for the existence of impairment on the
basis of whether the intangible assets are fully recoverable from projected,
undiscounted net cash flows of the related business unit. If not fully
recoverable from projected undiscounted cash flows, an impairment loss would be
recognized for the difference between the carrying value of the intangible asset
and its estimated fair value based on discounted net future cash flows.
Property, Plant and Equipment - Property, plant and equipment are stated at
original cost. Depreciation is computed using the straight-line method for
financial reporting purposes. Depreciation expense amounted to $620.1 million
in 1998, $565.7 million in 1997 and $503.3 million in 1996. The composite
depreciation rates by class of property as a percent of average depreciable
plant and equipment were:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Wireline 6.4% 6.3% 6.2%
Wireless 10.6% 10.2% 10.1%
Information services 17.4% 17.0% 16.8%
Other 5.5% 6.2% 6.8%
- --------------------------------------------------------------------------------
44
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
The Company capitalizes interest during periods of construction. Capitalized
interest during construction amounted to $23.1 million in 1998, $14.0 million
in 1997 and $7.4 million in 1996 and is included in other income, net in the
accompanying consolidated statements of income.
Revenue Recognition - Communications revenues are recognized when billed as
determined by contractual arrangements with customers and are primarily derived
from usage of the Company's networks and facilities or under revenue-sharing
arrangements with other telecommunications carriers. Information services
revenues consist of data processing revenue recognized as services are
performed, software licensing revenue recognized when delivery of the software
occurs, and software maintenance revenue recognized ratably over the maintenance
period. Certain long-term contracts are accounted for using the percentage-of-
completion method. Under this method, revenue and profit are recognized
throughout the term of the contract, based upon estimates of the total costs to
be incurred and revenues to be generated throughout the term of the contract.
Changes in estimates for revenues, costs and profits are recognized in the
period in which they are determinable. For all other operations, revenue is
recognized when products are delivered or services are rendered to customers.
Included in accounts receivable and other assets are unbilled receivables
primarily related to the information services segment totaling $91.6 million
and $185.9 million at December 31, 1998 and 1997, respectively. Included in
these unbilled receivables are amounts totaling $55.0 million and $94.5
million at December 31, 1998 and 1997, respectively, which represent costs and
estimated earnings in excess of billings related to long-term contracts
accounted for under the percentage-of-completion method.
Computer Software Development Costs - For the Company's information services
operations, research and development expenditures related to internally
developed computer software are charged to expense as incurred. The development
costs of software to be marketed are charged to expense until technological
feasibility is established. After that time, the remaining software development
costs are capitalized and recorded in plant and other assets in the accompanying
consolidated balance sheets. As of December 31, 1998 and 1997, capitalized
software development costs, net of amortization, were $259.5 million and $206.6
million, respectively. Amortization of the capitalized amounts is computed on a
product-by-product basis using the straight-line method over the remaining
estimated economic life of the product, not exceeding six years. Amortization
expense amounted to $36.5 million in 1998, $25.1 million in 1997 and $28.1
million in 1996.
The carrying value of capitalized software development costs is periodically
evaluated by the Company. If the net realizable value of the capitalized
software development costs is less than its carrying value, an impairment loss
is recognized for the difference. The determination of net realizable value
requires considerable judgment by management with respect to certain external
factors, including, but not limited to, anticipated future revenues generated
by the software, the estimated economic life of the software and changes in
software and hardware technologies. Accordingly, it is reasonably possible that
estimates of anticipated future revenues generated by the software, the
remaining economic life of the software, or both, could be reduced in the near
term, materially impacting the carrying value of capitalized software
development costs. As a result of this periodic evaluation, the Company recorded
a write-down of software in 1996. (See Note 9.)
Earnings Per Share - Basic earnings per share of common stock was determined
by dividing net income applicable to common shares by the weighted average
number of common shares outstanding during each year. Diluted earnings per
share reflects the potential dilution that could occur assuming conversion or
exercise of all outstanding preferred stocks and issued and unexercised stock
options. No options were excluded from the computation of diluted earnings per
share at December 31, 1998, while options to purchase approximately 2,447,000
and 1,326,000 shares of common stock at December 31, 1997 and 1996,
respectively, were excluded from the computation of diluted earnings per share
because the effect was anti-dilutive.
45
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
A reconciliation of the net income and numbers of shares used in computing basic
and diluted earnings per share was as follows:
- --------------------------------------------------------------------------------
(Thousands, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------
Basic earnings per share:
Net income applicable to common shares $524,537 $588,373 $350,185
Weighted average common shares outstanding
for the year 274,305 276,590 276,637
- --------------------------------------------------------------------------------
Basic earnings per share of common stock $1.91 $2.13 $1.27
- --------------------------------------------------------------------------------
Diluted earnings per share:
Net income applicable to common shares $524,537 $588,373 $350,185
Adjustments for convertible securities:
Preferred stocks 174 206 220
Net income applicable to common shares, -------- -------- --------
assuming conversion of above securities $524,711 $588,579 $350,405
- --------------------------------------------------------------------------------
Weighted average common shares outstanding
for the year 274,305 276,590 276,637
Increase in shares which would result from:
Exercise of stock options 2,503 1,431 1,233
Conversion of convertible preferred stocks 468 523 559
Weighted average common shares, ------- ------- -------
assuming conversion of above securities 277,276 278,544 278,429
- --------------------------------------------------------------------------------
Diluted earnings per share of common stock $1.89 $2.11 $1.26
- --------------------------------------------------------------------------------
2. Merger:
On July 1, 1998, the Company completed its merger with 360
Communications Company ("360") under a definitive merger agreement
entered into on March 16, 1998. Under the terms of the merger agreement,
360 became a wholly-owned subsidiary of the Company. In connection with
the merger, each outstanding share of 360 common stock was converted
into the right to receive .74 shares of the Company's common stock, 92.1 million
common shares in the aggregate. The merger qualified as a tax-free
reorganization and has been accounted for as a pooling-of-interests.
Accordingly, the accompanying consolidated financial statements have been
restated to include the accounts and results of operations of 360 for
all periods presented. The combined results include certain eliminations and
reclassification adjustments to conform the accounting and financial reporting
policies of ALLTEL and 360. Separate and combined results of operations
are as follows:
- --------------------------------------------------------------------------------
(Unaudited)
Six Months For the Years Ended
Ended June 30, December 31,
-------------- ------------------------
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------------------
Revenues and sales:
ALLTEL $1,781,454 $3,263,563 $3,192,418
360 753,448 1,347,172 1,095,872
Eliminations and
reclassifications (46,454) (65,595) (48,823)
---------- ---------- ----------
Combined $2,488,448 $4,545,140 $4,239,467
- --------------------------------------------------------------------------------
Net income:
ALLTEL $ 320,449 $ 507,886 $ 291,737
360 81,239 81,495 59,519
---------- ---------- ----------
Combined $ 401,688 $ 589,381 $ 351,256
- --------------------------------------------------------------------------------
46
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- -------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Summarized financial information for 360 was as follows for the
years ended December 31:
- ----------------------------------------------------------------------------
(Thousands)
-----------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------
Revenues and sales $1,602,095 $1,347,172 $1,095,872
---------- ---------- ----------
Operations 846,929 772,172 624,859
Cost of products sold 104,929 116,456 104,327
Depreciation and amortization 205,284 184,702 146,841
Merger and integration expenses 136,579 - -
---------- ---------- ----------
Total operating expenses 1,293,721 1,073,330 876,027
---------- ---------- ---------
Operating income 308,374 273,842 219,845
Interest expense (132,517 (131,589) (106,364)
Other income, net 41,750 13,071 3,867
---------- ---------- ----------
Income before income taxes 217,607 155,324 117,348
Income taxes 136,870 73,829 57,829
---------- ---------- ----------
Net income $ 80,737 $ 81,495 $ 59,519
- ----------------------------------------------------------------------------
December 31,
------------------------
1998 1997
- ----------------------------------------------------------------------------
Assets:
Current assets $ 248,519 $ 230,167
Non-current assets 2,789,432 2,711,757
---------- ----------
Total assets $3,037,951 $2,941,924
- ----------------------------------------------------------------------------
Liabilities and equity:
Current liabilities $ 868,723 $ 367,211
Long-term liabilities 1,478,277 1,892,164
Minority interests in consolidated partnerships 165,718 173,248
Equity 525,233 509,301
---------- ----------
Total liabilities and equity $3,037,951 $2,941,924
- ----------------------------------------------------------------------------
Prior to March 7, 1996, 360 was a subsidiary of Sprint Corporation ("Sprint").
On March 7, 1996, Sprint effected a tax-free spinoff of 360 to Sprint
shareholders. In conjunction with the spinoff, 360 repaid $1.4 billion of
intercompany debt to Sprint, and Sprint contributed the remaining intercompany
debt, net of receivables from affiliates, to 360 as additional paid-in capital.
In addition, a recapitalization of 360's common stock was effected pursuant to
which 360 split its 10 shares of issued and outstanding common stock into 116.7
million new shares of common stock to allow for the pro rata distribution of
360 stock to Sprint shareholders. This distribution was effected as a tax-free
dividend.
3. Financial Instruments and Investment Securities:
The carrying amount of cash and short-term investments approximates fair value
due to the short maturity of the instruments. The fair value of investments was
$1,668.2 million in 1998 and $1,228.7 million in 1997 based on quoted market
prices and the carrying value of investments for which there were no quoted
market prices. The fair value of the Company's long-term debt, after deducting
current maturities, was estimated to be $3,723.8 million in 1998 and $3,804.6
million in 1997 compared to a carrying value of $3,491.8 million in 1998 and
$3,699.5 million in 1997. The fair value estimates were based on the overall
weighted rates and maturities of the Company's long-term debt compared to rates
and terms currently available in the long-term financing markets. The fair value
of the Company's redeemable preferred stock was estimated to be $22.3 million in
1998 and $17.5 million in 1997 compared to a carrying amount of $5.0 million in
47
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
1998 and $5.6 million in 1997. The fair value estimates were based on the
conversion of the Series D convertible redeemable preferred stock to common
stock of the Company and the carrying value of the Series A redeemable preferred
stock for which there is no quoted market price. The fair value of all other
financial instruments was estimated by management to approximate the carrying
value.
Equity securities owned by the Company have been classified as available-
for-sale and are reported at fair value, with unrealized gains and losses
reported, net of tax, as a separate component of shareholders' equity. The
Company had unrealized gains, net of tax, on investments in equity securities of
$551.6 million, $300.7 million and $351.9 million at December 31, 1998, 1997 and
1996, respectively, principally derived from ALLTEL's investment in MCI
WorldCom, Inc. common stock. The unrealized gains, including the related tax
impact, are non-cash items and accordingly have been excluded from the
accompanying consolidated statements of cash flows. During 1998 and 1997, the
Company sold a portion of its investment in MCI WorldCom, Inc. common stock.
(See Note 11.)
4. Investments in Unconsolidated Partnerships:
The Company has investments in 52 wireless partnerships in which it holds a
minority ownership interest. The interest owned in each unconsolidated
partnership ranges from approximately 1% to 49%. Unaudited condensed combined
financial information for investments in unconsolidated partnerships was as
follows for the years ended December 31:
- ----------------------------------------------------------------------------
(Thousands)
--------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------
Revenues and sales $3,120,715 $2,779,253 $2,706,525
---------- ---------- ----------
Operations 1,664,365 1,660,192 1,603,794
Cost of products sold 152,128 81,234 97,691
Depreciation and amortization 358,850 298,653 281,126
---------- ---------- ----------
Total operating expenses 2,175,343 2,040,079 1,982,611
---------- ---------- ----------
Operating income 945,372 739,174 723,914
Non-operating income (expense) (18,414) 12,622 883
---------- ---------- ----------
Income before cumulative effects
of changes in accounting
principles 926,958 751,796 724,797
Cumulative effects of changes in
accounting principles, net - (19,278) -
---------- ---------- ----------
Net income $ 926,958 $ 732,518 $ 724,797
- ----------------------------------------------------------------------------
December 31,
------------------------
1998 1997
- ----------------------------------------------------------------------------
Assets:
Current assets $ 634,073 $ 609,737
Non-current assets 2,432,535 2,287,621
---------- ----------
Total assets $3,066,608 $2,897,358
- ----------------------------------------------------------------------------
Liabilities and equity:
Current liabilities $ 49,602 $ 276,276
Long-term liabilities 19,166 15,025
Equity 2,997,840 2,606,057
---------- ----------
Total liabilities and equity $3,066,608 $2,897,358
- ----------------------------------------------------------------------------
48
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
5. Debt:
Long-term debt, after deducting current maturities, was as follows at
December 31:
- -------------------------------------------------------------------------------
(Thousands)
------------------------
1998 1997
---- ----
Debentures and notes, without collateral,
Weighted rate 7.3% in 1998 and 1997
Weighted maturity 9 years in 1998 and 10
years in 1997 $2,584,869 $2,512,312
Revolving credit agreements,
Weighted rate 5.7% in 1998 and 6.5% in 1997
Weighted maturity 5 years in 1998 and 1997 578,520 847,920
Rural Telephone Bank and Federal Financing Bank notes,
Weighted rate 7.7% in 1998 and 1997
Weighted maturity 16 years in 1998 and 1997 252,240 255,006
Rural Utilities Service notes,
Weighted rate 4.6% in 1998 and 4.5% in 1997
Weighted maturity 16 years in 1998 and 1997 57,498 61,917
First mortgage bonds and collateralized notes,
Weighted rate 8.0% in 1998 and 8.4% in 1997
Weighted maturity 4 years in 1998 and 1997 12,778 15,864
Industrial revenue bonds,
Weighted rate 5.4% in 1998 and 1997
Weighted maturity 9 years in 1998 and 10
years in 1997 5,850 6,500
---------- ----------
Total long-term debt $3,491,755 $3,699,519
- -------------------------------------------------------------------------------
Weighted rate 7.0% 7.1%
Weighted maturity 9.0 years 9.5 years
- -------------------------------------------------------------------------------
The Company has a $1 billion revolving credit agreement, which has a
termination date of October 1, 2003, with provision for annual extensions. It
is the Company's intention to continue to renew this agreement. The revolving
credit agreement provides for a variety of pricing options. In connection with
its merger with 360, in July 1998, the Company repaid all borrowings outstanding
under a separate $1 billion revolving credit facility of 360.
The indentures and agreements, as amended, provide, among other things,
for various restrictions on the payment of dividends by the Company. Retained
earnings unrestricted as to payment of dividends by the Company amounted to
$1,634.0 million at December 31, 1998. Certain properties have been pledged as
collateral on $328.4 million of obligations.
Interest expense on long-term debt amounted to $262.9 million in 1998,
$260.6 million in 1997 and $235.8 million in 1996. Maturities and sinking fund
requirements for the four years after 1999 for long-term debt outstanding,
excluding the revolving credit agreement, as of December 31, 1998, were $45.5
million, $48.5 million, $48.4 million and $490.4 million for the years 2000
through 2003, respectively.
49
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
6. Common Stock:
There are 1 billion shares of $1 par value common stock authorized of which
275,136,743 and 273,410,553 shares were outstanding at December 31, 1998 and
1997, respectively. At December 31, 1998, the Company had 26,030,940 common
shares reserved for issuance in connection with convertible preferred stock
(828,812) and stock options (25,202,128).
The Company has stock-based compensation plans. Under these plans, the
Company may grant fixed and performance-based incentive and non-qualified stock
options to officers and other key employees. The maximum number of shares of the
Company's common stock that may be issued to officers and other key employees
under all stock options plans in effect at December 31, 1998 is 26,736,688
shares. Fixed options granted under the stock option plans generally become
exercisable in one to five years from the date of grant. Certain fixed options
granted in 1997 become exercisable in equal increments over a six-year period
beginning three years from the date of grant. Performance-based options were
granted in 1997, and such options become exercisable one year from the date in
which certain performance goals related to operating income growth and return on
invested capital are achieved for the four most recent consecutive calendar
quarters. Four separate levels of performance goal targets have been
established, each specifying different minimum growth and return rates.
Depending upon which of the four performance goal target levels is attained,
25%, 50%, 75% or 100% of the option award will vest and become exercisable.
Under the 1994 Stock Option Plan for Non-employee Directors (the Directors'
Plan), the Company grants fixed, non-qualified stock options to directors for
up to 1,000,000 shares of common stock. Under the Directors' Plan, directors
receive a one-time grant to purchase 10,000 shares of common stock. Directors
are also granted each year, on the date of the annual meeting of stockholders,
an option to purchase a specified number of shares of common stock (currently
3,500 shares). Options granted under the Directors' Plan become exercisable the
day immediately preceding the date of the first annual meeting of stockholders
following the date of grant.
For all plans, the exercise price of the option equals the market value of
the Company's common stock on the date of grant. For fixed stock options, the
maximum term for each option granted is 10 years. Any performance-based option
that remains unvested as of January 29, 2003, will expire.
For stock options granted subsequent to January 1, 1995, the fair value
of each option was estimated on the grant date using the Black-Scholes
option-pricing model and the following weighted average assumptions:
- ------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------
Expected life 5.2 years 5.6 years 5.5 years
Expected volatility 23.8% 21.6% 23.8%
Dividend yield 1.9% 2.9% 2.0%
Risk-free interest rate 5.5% 6.2% 6.1%
- ------------------------------------------------------------------------------
50
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
The following is a summary of stock options outstanding, granted, exercised,
forfeited and expired under the Company's stock-based compensation plans:
- --------------------------------------------------------------------------------
Weighted Average Price
Shares Per Share
--------------------- -------------------------------
1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------
Outstanding at beginning
of period 9,645,180 6,526,562 5,659,152 $28.68 $24.75 $22.28
Granted 2,842,420 4,411,398 1,459,214 40.50 32.75 31.75
Exercised (1,827,967) (892,854) (436,588) 24.00 20.30 14.95
Forfeited (566,343) (354,892) (155,216) 33.90 28.67 27.93
Expired (10,553) (45,034) - 38.99 25.79 -
---------- --------- --------- ------ ------ ------
Outstanding at end
of period 10,082,737 9,645,180 6,526,562 $32.55 $28.68 $24.75
- --------------------------------------------------------------------------------
Exercisable at end
of period 3,637,202 3,814,026 3,628,833 $26.24 $23.56 $21.55
Non-vested at end
of period:
Fixed 6,189,035 5,544,654 2,897,729
Performance-based 256,500 286,500 -
Weighted average fair
value of stock options
granted during
the year $10.21 $7.56 $8.93
- --------------------------------------------------------------------------------
The following is a summary of stock options outstanding as of December 31,
1998:
- --------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ----------------------------------------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Remaining Exercise Exercise
Range of Number of Contractual Price Number of Price
Exercise Prices Options Life Per Share Options Per Share
- --------------- --------- ----------- --------- --------- ---------
$11.41 - $16.12 294,446 1.8 years $13.95 294,446 $13.95
$20.00 - $26.94 1,649,428 5.1 years 23.64 1,308,957 22.83
$27.12 - $32.52 3,945,482 5.6 years 30.99 1,979,918 30.02
$33.88 - $41.81 2,252,041 8.8 years 34.62 42,041 35.41
$43.13 - $52.94 1,941,340 9.2 years 43.75 11,840 45.27
--------- --------- ----- --------- ------
10,082,737 6.8 years $32.55 3,637,202 $26.24
- -------------------------------------------------------------------------------
The Company applies the provisions of Accounting Principles Board Opinion
No. 25 and related Interpretations in accounting for its stock-based
compensation plans. Accordingly, no compensation cost has been recognized by the
Company in the accompanying consolidated statements of income for any of the
fixed stock options granted. Compensation cost for performance-based options is
recognized as expense over the expected vesting period and is adjusted for
changes in the market value of the Company's common stock. Compensation cost for
the performance-based options amounted to $2.8 million in 1998 and $547,000 in
1997. Had compensation cost for options granted been determined on the basis of
the fair value of the awards at the date of grant, consistent with the
methodology prescribed by Statement of Financial Accounting Standards No. 123,
the Company's net income and earnings per share would have been reduced to the
following pro forma amounts for the years ended December 31:
51
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------
Net income:
As reported $525,475 $589,381 $351,256
Pro forma $516,798 $583,749 $346,985
Basic earnings per share:
As reported $1.91 $2.13 $1.27
Pro forma $1.88 $2.11 $1.25
Diluted earnings per share:
As reported $1.89 $2.11 $1.26
Pro forma $1.86 $2.09 $1.24
- --------------------------------------------------------------------------------
The pro forma net income and earnings per share amounts reflect only the
effect of stock options granted subsequent to January 1, 1995. Accordingly, the
pro forma amounts may not be representative of the future effects on reported
net income and earnings per share that will result from the future granting of
stock options, since the pro forma compensation expense is allocated over the
periods in which options become exercisable, and new option awards may be
granted each year.
7. Employee Benefit Plans and Postretirement Benefits Other Than Pensions:
The Company has a trusteed, non-contributory defined benefit pension plan which
provides retirement benefits for eligible employees of the Company. Assets of
the plan include common stock of the Company amounting to $37.7 million and
$25.3 million at December 31, 1998 and 1997, respectively. Pension (credit)
expense, including provision for executive compensation agreements, totaled
$(8.1) million in 1998, $(5.3) million in 1997 and $0.6 million in 1996.
The Company provides postretirement healthcare and life insurance benefits
for eligible employees. Employees share in the cost of these benefits. The
Company funds the accrued costs of these plans as benefits are paid.
Postretirement expense totaled $4.2 million in 1998, $4.1 million in 1997 and
$4.3 million in 1996.
The components of the pension and postretirement expense (credit) were
as follows for the years ended December 31:
- --------------------------------------------------------------------------------
(Thousands)
----------------------------------------------------
Postretirement
Pension Benefits Benefits
------------------------- -----------------------
1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------
Benefits earned during
the year $11,263 $10,415 $12,589 $ 70 $ 387 $ 427
Interest cost on benefit
obligation 25,655 24,401 23,597 3,023 2,817 2,868
Amortization of transition
(asset) obligation (1,183) (1,183) (1,183) 976 976 976
Amortization of prior
service (credit) cost (1,117) (1,117) (1,117) 40 40 40
Recognized net actuarial
(gain) loss (3,378) (2,979) (702) 111 (155) -
Expected return on plan
assets (39,303) (34,864) (32,607) - - -
------- ------- ------- ------ ------ ------
Net periodic (credit)
expense $(8,063) $(5,327) $ 577 $4,220 $4,065 $4,311
- --------------------------------------------------------------------------------
52
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
The following table presents a summary of plan assets, projected benefit
obligation and funded status of the plans at December 31:
- --------------------------------------------------------------------------------
(Thousands)
------------------------------------------------
Pension Benefits Postretirement Benefits
--------------------- -----------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------
Fair value of plan assets at
beginning of year $444,326 $394,533 $ - $ -
Employer contributions - - 4,549 5,675
Participant contributions - - 2,354 2,500
Actual return on plan assets 61,572 65,702 - -
Benefits paid (17,561) (15,909) (6,903) (8,175)
-------- ------- ------- -------
Fair value of plan assets
at end of year 488,337 444,326 - -
- --------------------------------------------------------------------------------
Projected benefit obligation
at beginning of year 352,405 313,878 46,646 38,392
Benefits earned 11,263 10,415 70 387
Interest cost on projected
benefit obligation 25,655 24,401 3,023 2,817
Participant contributions - - 2,354 2,500
Actuarial loss 25,823 19,620 6,644 10,725
Benefits paid (17,561) (15,909) (6,903) (8,175)
-------- ------- ------- --------
Projected benefit obligation
at end of year 397,585 352,405 51,834 46,646
- --------------------------------------------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation 90,752 91,921 (51,834) (46,646)
Unrecognized actuarial
(gain) loss (41,581) (50,665) 9,573 4,333
Unrecognized prior service
(credit) cost (2,081) (3,198) 633 235
Unrecognized net transition
(asset) obligation (5,917) (7,100) 13,662 14,638
-------- ------- -------- --------
Prepaid (accrued) benefit cost $ 41,173 $ 30,958 $(27,966) $(27,440)
- --------------------------------------------------------------------------------
Actuarial assumptions used to calculate the projected benefit obligations
were as follows for the years ended December 31:
- --------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
--------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
Discount rate 6.75% 7.25% 6.75% 7.25%
Expected return on plan assets 8.50% 9.00% - -
Rate of compensation increase 5.00% 5.00% - -
Healthcare cost trend rate - - 8.00% 9.00%
- --------------------------------------------------------------------------------
The healthcare cost trend rate is expected to decrease on a graduated basis
to an ultimate rate of 6 percent in the year 2000. A one percent change in
the assumed healthcare cost trend rate for each future year would affect the
postretirement benefit cost by approximately $190,000 for the year ended
December 31, 1998, and the postretirement benefit obligation as of December 31,
1998, by approximately $3.5 million.
The Company has a non-contributory defined contribution plan in the form
of profit-sharing arrangements for eligible employees, except bargaining unit
employees. The amount of profit-sharing contributions to the plan is determined
annually by the Company's Board of Directors. Profit-sharing expense amounted
to $19.4 million in 1998, $22.8 million in 1997 and $20.4 million in 1996.
The Company also sponsors employee savings plans under section 401(k) of the
Internal Revenue Code. The plans cover substantially all full-time employees,
except bargaining unit employees. Employees may elect to contribute to the plans
a portion of their eligible pretax compensation up to certain limits as
specified by the plans. The Company also makes annual contributions to the
plans. Amounts contributed by the Company to the plans amounted to $10.5 million
in 1998, $14.4 million in 1997 and $14.7 million in 1996.
53
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
8. Lease Commitments:
Minimum rental commitments for all non-cancelable operating leases, consisting
principally of leases for office space, office equipment, real estate and tower
space, were as follows as of December 31, 1998:
- --------------------------------------------------------------------------------
(Thousands)
-----------
Year Amount
- --------------------------------------------------------------------------------
1999 $ 54,234
2000 43,812
2001 37,466
2002 30,164
2003 20,912
Thereafter 76,525
--------
Total $263,113
- --------------------------------------------------------------------------------
Rental expense totaled $54.9 million in 1998, $47.3 million in 1997 and $44.4
million in 1996.
9. Merger and Integration Expenses:
During the third quarter of 1998, the Company recorded transaction costs and
one-time charges totaling $252 million on a pretax basis related to the closing
of its merger with 360. The merger and integration expenses include
professional and financial advisors' fees of $31.5 million, severance and
employee-related expenses of $48.7 million and integration costs of $171.8
million. The Company's merger and integration plan, as approved by ALLTEL's
Board of Directors, provides for a reduction of 521 employees, primarily in the
corporate support functions, to be substantially completed by the first quarter
of 1999. As of December 31, 1998, the Company had paid $16.8 million in
severance and employee-related expenses and 144 out of the total 521 employee
reductions had been completed. The integration costs include several adjustments
resulting from the redirection of a number of strategic initiatives based on the
merger with 360 and ALLTEL's expanded wireless presence. These adjustments
include a $60 million write-down in the carrying value of certain in-process
software development assets, $50 million of costs associated with the early
termination of certain service obligations, branding and signage costs of $20.7
million, a $18 million write-down in the carrying value of certain assets
resulting from a revised PCS deployment plan, and other integration costs of
$23.1 million.
The contract termination fees primarily relate to a long-term contract with
an outside vendor for customer billing services to be provided to the 360
operations. As part of its integration plan, the Company will convert the
360 operations to its own internal billing system. The $50 million of costs
recorded by the Company represent the estimated cost of terminating the billing
services contract with the outside vendor prior to the expiration of its term.
The $18 million write-down in the carrying value of certain PCS-related
assets include approximately $15 million related to cell site acquisition and
improvement costs and capitalized labor and engineering charges that were
incurred during the initial construction phase of the PCS buildout in three
markets. As a result of the merger with 360, the Company elected not to
continue to complete construction of its PCS network in these three markets. The
remaining $3 million of the PCS-related write-down represents cell site lease
termination fees.
The Company expects to complete its integration plan by the end of 1999. The
major actions steps of the plan include: (1) the immediate stoppage of further
development of a customer billing system which has no alternative use or
functionality, (2) the immediate negotiation with a vendor of an early
termination of a customer billing contract, and (3) the immediate abandonment of
the PCS buildout in three markets.
54
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
The following is a summary of activity related to the Company's merger and
integration accrual:
- --------------------------------------------------------------------------------
(Millions)
- --------------------------------------------------------------------------------
Total merger and integration costs $252.0
Cash outlays (85.9)
Non-cash write-down of assets (74.8)
------
Accrued reserve balance at December 31, 1998 $ 91.3
- --------------------------------------------------------------------------------
The merger and integration expenses decreased net income $201.0 million.
10. Provision to Reduce Carrying Value of Certain Assets:
During the third quarter, the Company recorded a non-recurring operating expense
associated with a contingency reserve on an unbilled receivable of $55 million
related to its contract with GTE Corporation ("GTE"). This expense represents a
reduction in the cumulative gross margin earned under the GTE contract. Due to
its pending merger with Bell Atlantic Corporation, GTE has re-evaluated its
billing and customer care requirements and modified its billing conversion
plans. This charge decreased net income $33.6 million.
During the second quarter of 1997, the Company recorded a pretax write-down
of $16.9 million to reflect the fair value less cost to sell its product
distribution segment's wire and cable subsidiary, HWC Distribution Corp. (HWC).
The sale of HWC was completed in May 1997. This write-down resulted in a
decrease in net income of $11.7 million for the year ended December 31, 1997.
In 1996, the Company incurred non-cash, pretax charges of $120.3 million to
write down the carrying value of certain assets. In accordance with the
Company's plan to dispose of its wire and cable subsidiary, the Company
recorded a pretax write-down of $45.3 million in the carrying value of goodwill
related to HWC. In addition, the information services segment recorded a pretax
write-down of $53.0 million, primarily consisting of an adjustment to the
carrying value of certain capitalized software development costs. The write-down
of software resulted from performing a net realizability evaluation of
software-related products that have been impacted by changes in software and
hardware technologies. Finally, due to current and projected future operating
losses sustained by its community banking operations, information services also
recorded a pretax write-down of $22.0 million to adjust the carrying value of
these operations to their estimated fair value based upon projections of future
cash flows. These write-downs resulted in a decrease in net income of $72.7
million for the year ended December 31, 1996.
11. Gain on Disposal of Assets and Other:
During the third quarter of 1998, the Company recorded a pretax gain of $80.9
million from the sale of a portion of its investment in MCI WorldCom, Inc.
common stock. Proceeds from this sale amounted to $87.6 million. This
transaction increased net income $49.2 million. During the second quarter of
1998, the Company recorded a pretax gain of $148.2 million from the sale of a
portion of its investment in MCI WorldCom, Inc. common stock. Proceeds from this
sale amounted to $162.6 million. This transaction increased net income $90.2
million. During the first quarter of 1998, the Company recorded a pretax gain of
$36.6 million primarily from the sale of a portion of its investment in MCI
WorldCom, Inc. common stock. Proceeds from the sale of stock amounted to $40.7
million. In addition, the Company recorded a pretax gain of $30.5 million from
the sale of its ownership interest in a cellular partnership serving the Omaha,
Neb. market. The gains from these first quarter transactions resulted in an
increase of $40.4 million in net income.
During the third quarter of 1997, the Company recorded a pretax gain of
$34.4 million primarily related to the sale of its investment in a software
company. During the second quarter of 1997, the Company recorded a pretax gain
of $156.0 million from the sale of a portion of its investment in MCI WorldCom,
Inc. common stock. Proceeds from the sale of this stock amounted to $185.9
million. During the first quarter of 1997, the Company recorded a pretax gain of
55
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
$16.2 million from the sale of information services' healthcare operations; and
the Company recorded a pretax gain of $3.0 million from the divestiture of its
ownership interests in two unconsolidated partnerships. These transactions
resulted in an increase of $121.5 million in net income for the year ended
December 31, 1997.
In 1996, the Company recorded a pretax gain of $15.3 million from the
sale of wireline properties in Nevada to Citizens Utilities Company. The Company
also incurred $15.8 million of termination fees related to the early retirement
of $200 million of long-term debt, and the Company realized a pretax loss of
$1.8 million related to the withdrawal of its investment in GO Communications
Corporation. These transactions resulted in a decrease in net income of $1.5
million for the year ended December 31, 1996.
12. Income Taxes:
Income tax expense was as follows:
- ----------------------------------------------------------------------------
(Thousands)
------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------
Federal $394,303 $343,460 $181,246
State and other 52,561 51,184 46,286
-------- -------- --------
$446,864 $394,644 $227,532
- ----------------------------------------------------------------------------
The federal income tax expense consists of the following:
- ----------------------------------------------------------------------------
(Thousands)
-------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------
Currently payable $373,176 $242,809 $158,089
Deferred 24,887 105,574 32,090
Investment tax credit amortized (3,760) (4,923) (8,933)
-------- -------- --------
$394,303 $343,460 $181,246
- ----------------------------------------------------------------------------
Deferred income tax expense results principally from temporary differences
between depreciation expense for income tax purposes and depreciation expense
recorded in the financial statements. Deferred tax balances are adjusted to
reflect tax rates, based on currently enacted tax laws, that will be in effect
in the years in which the temporary differences are expected to reverse. For
the Company's regulated operations, the adjustment in deferred tax balances for
the change in tax rates is reflected as a regulatory asset or liability. These
regulatory assets and liabilities are amortized over the lives of the related
depreciable asset or liability concurrent with recovery in rates.
Differences between the federal income tax statutory rates and effective
income tax rates, which include both federal and state income taxes, were as
follows:
- ----------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------
Statutory income tax rates 35.0% 35.0% 35.0%
Increase (decrease):
Investment tax credit (0.4) (0.5) (1.5)
State income taxes, net of federal benefit 3.5 3.4 5.2
Amortization of intangibles 1.4 1.3 1.9
Merger and integration expenses 4.5 - -
Other items 2.0 0.9 (1.3)
---- ----- -----
Effective income tax rates 46.0% 40.1% 39.3%
- ----------------------------------------------------------------------------
56
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
The significant components of the Company's net deferred income tax
liability were as follows at December 31:
- --------------------------------------------------------------------------------
(Thousands)
-------------------
1998 1997
- -------------------------------------------------------------------------------
Property, plant and equipment $558,312 $539,856
Capitalized computer software 110,547 80,466
Unrealized holding gain on investments 335,871 196,634
Operating loss carryforwards (20,805) (39,200)
Other, net (65,787) (86,595)
-------- --------
918,138 691,161
Valuation allowance 15,347 19,562
-------- --------
Total $933,485 $710,723
- --------------------------------------------------------------------------------
At December 31, 1998 and 1997, total deferred tax assets were $216.8
million and $275.8 million, respectively, and total deferred tax liabilities
were $1,150.3 million and $986.5 million, respectively.
As of December 31, 1998 and 1997, the Company had available tax benefits
associated with federal and state operating loss carryforwards of $20.8
million and $39.2 million, respectively, which expire annually in varying
amounts to 2012. The valuation allowance primarily represents tax benefits of
certain state operating loss carryforwards and other deferred tax assets which
may expire unutilized.
13. Other Comprehensive Income:
In 1997, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130"). As required, the Company adopted the provisions of SFAS 130 in its
year-end 1998 financial statements and has reclassified its prior-year financial
statements to conform to SFAS 130's presentation requirements. For the Company,
other comprehensive income consists of unrealized holding gains on its
investments in equity securities, principally consisting of its investment in
MCI WorldCom, Inc. common stock. The components of other comprehensive income
were as follows for the years ended December 31:
- --------------------------------------------------------------------------------
(Thousands)
--------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------
Unrealized holding gains arising in
the period $ 679,262 $ 69,449 $225,008
Income tax expense 266,873 32,540 81,822
--------- --------- --------
412,389 36,909 143,186
--------- --------- --------
Less: reclassification adjustments
for gains included in net
income for the period (265,644) (155,993) -
Income tax expense 104,199 67,888 -
--------- -------- --------
(161,445) (88,105) -
--------- -------- --------
Other comprehensive income (loss) before tax 413,618 (86,544) 225,008
Income tax expense (benefit) 162,674 (35,348) 81,822
--------- -------- --------
Other comprehensive income (loss) $ 250,944 $(51,196) $143,186
- --------------------------------------------------------------------------------
57
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 8. Financial Statements and Supplementary Data, (continued):
- ------- --------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
14. Litigation-Claims and Assessments:
On July 12, 1996, the Georgia Public Service Commission ("Georgia PSC") issued
an order requiring that ALLTEL's wireline subsidiaries which operate within its
jurisdiction reduce their annual network access charges by $24 million,
prospectively, effective July 1, 1996. The Georgia PSC's action was in response
to the Company's election to move from a rate-of-return method of pricing to an
incentive rate structure, as provided by a 1995 Georgia telecommunications law.
The Company appealed the Georgia PSC order. On November 6, 1996, the Superior
Court of Fulton County, Georgia, (the "Superior Court") rendered its decision
and reversed the Georgia PSC order, finding, among other matters, that the
Georgia PSC had exceeded its authority by conducting a rate proceeding after the
Company's election of alternative regulation.
The Superior Court did not rule on a number of other assertions made by
the Company as grounds for reversal of the Georgia PSC order. The Georgia PSC
appealed the Superior Court's decision, and on July 3, 1997, the Georgia Court
of Appeals (the "Appellate Court") reversed the Superior Court's decision. On
August 5, 1997, the Company filed with the Georgia Supreme Court a petition for
writ of certiorari requesting that the Appellate Court's decision be reversed.
On October 5, 1998, the Georgia Supreme Court, in a 4-3 decision, upheld the
Appellate Court's ruling that the Georgia PSC had the authority to order the
rate reductions. The case has been returned to the Superior Court for a hearing
on the merits, which will provide ALLTEL the opportunity to challenge the
Georgia PSC's order by asserting a number of additional federal and state
constitutional and other legal grounds.
At December 31, 1998, the maximum possible liability to the Company
related to this case is $60 million plus interest at 7 percent from July 1,
1996. Since the Company believes that it will prevail in this case, the Company
has not implemented any revenue reductions or established any reserves for
refund related to this matter at this time.
15. Business Segments:
In 1997, the FASB issued Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"), which requires reporting segment information consistent with the way
management internally disaggregates an entity's operations to assess performance
and to allocate resources. As required, the Company adopted the provisions of
SFAS 131 in its year-end 1998 financial statements and has restated its
prior-year segment information to conform to SFAS 131's requirements.
ALLTEL disaggregates its business operations based upon differences in
products and services. The Company's communications operations consist of its
wireless, wireline and emerging businesses segments. Wireless communications and
paging services are provided in 22 states in four major markets: Southeast,
Mid-Atlantic, Midwest and West. The Company's wireline subsidiaries provide
primary local service and network access in 14 states. Emerging businesses
include the Company's long-distance, local competitive access, Internet access,
network management and PCS operations. Long-distance and Internet access
services are marketed in 22 states. The Company is currently providing local
competitive access, PCS and network management services in select areas within
its geographically focused communications markets. Information services provides
information processing, outsourcing services and application software primarily
to financial and telecommunications customers. The principal markets for
information services' products and services are commercial banks, financial
institutions and telecommunications companies in the United States and major
international markets. Other operations consist of the Company's product
distribution and directory publishing operations. Corporate items represent
general corporate expenses, headquarters facilities and equipment, investments,
goodwill and other non-recurring and unusual items not allocated to the
segments.
The accounting policies used in measuring segment assets and operating
results are the same as those described in Note 1. The non-recurring and unusual
items discussed in Notes 9, 10 and 11 are not allocated to the segments and are
included in corporate operations. The Company evaluates performance of the
segments based on segment operating income, excluding non-recurring and unusual
items. The Company accounts for intersegment sales at current market prices or
in accordance with regulatory requirements.
58
<PAGE>
Information about the Company's business segments was as follows for the year
ended December 31, 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Communications
-------------------------------------------
(Dollars in Emerging Information Other Total Corporate Intercompany Consolidated
thousands) Wireless Wireline Businesses Total Services Operations Segments Operations Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and sales
from unaffiliated
customers:
Domestic $2,137,161 $1,274,597 $ 99,947 $3,511,705 $ 850,841 $338,115 $4,700,661 $ - $ - $4,700,661
International - - - - 154,300 - 154,300 - - 154,300
---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- ----------
2,137,161 1,274,597 99,947 3,511,705 1,005,141 338,115 4,854,961 - - 4,854,961
Intersegment
revenues
and sales - 34,467 - 34,467 156,627 263,235 454,329 - (115,282)a 339,047
---------- --------- -------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Total revenues
and sales 2,137,161 1,309,064 99,947 3,546,172 1,161,768 601,350 5,309,290 - (115,282) 5,194,008
---------- --------- -------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Operating
expenses 1,241,443 583,217 135,337 1,959,997 860,385 573,685 3,394,067 12,068 (115,282)a 3,290,853
Depreciation and
amortization 292,105 254,283 9,486 555,874 138,732 1,739 696,345 10,784 - 707,129
Merger and
integration
expenses - - - - - - - 252,000 - 252,000
Provision to
reduce carrying
value of
certain assets - - - - - - - 55,000 - 55,000
---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Total costs
and expenses 1,533,548 837,500 144,823 2,515,871 999,117 575,424 4,090,412 329,852 (115,282) 4,304,982
---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Operating income
(loss) 603,613 471,564 (44,876) 1,030,301 162,651 25,926 1,218,878 (329,852) - 889,026
Equity earnings in
unconsolidated
partnerships 114,859 - - 114,859 - - 114,859 - - 114,859
Minority interest
in consolidated
partnerships (102,177) - - (102,177) - - (102,177) - - (102,177)
Other income, net 20,099 4,374 2,331 26,804 10,646 235 37,685 465 - 38,150
Interest expense (158,262) (54,598) (10,941) (223,801) (12,268) (1,259) (237,328) (26,341) - (263,669)
Gain on disposal
of assets
and other - - - - - - - 296,150 - 296,150
---------- ---------- --------- ----------- ---------- -------- ---------- ---------- ---------- ----------
Income before
income taxes 478,132 421,340 (53,486) 845,986 161,029 24,902 1,031,917 (59,578) - 972,339
Income tax
expense
(benefit) 214,054 152,138 (20,637) 345,555 67,602 9,631 422,788 24,076 - 446,864
---------- ---------- -------- ---------- ---------- -------- ---------- ---------- ---------- ----------
Net income
(loss) $ 264,078 $ 269,202 $(32,849) $ 500,431 $ 93,427 $ 15,271 $ 609,129 $ (83,654) $ - $ 525,475
- ------------------------------------------------------------------------------------------------------------------------------------
Assets $4,193,579 $2,784,218 $132,112 $7,109,909 $ 872,845 $179,850 $8,162,604 $1,258,385b $ (46,763)c $9,374,226
Investments in
unconsolidated
partnerships $ 633,989 $ - $ - $ 633,989 $ - $ - $ 633,989 $ - $ - $ 633,989
Capital
expenditures $ 303,567 $ 280,782 $143,332 $ 727,681 $ 111,257 $ 1,489 $ 840,427 $ 28,151 $ - $ 868,578
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
Notes:
a)Elimination of intersegment revenues and sales. See "Transactions with Certain Affiliates" in Note 1 for a discussion of
intersegment revenues and sales not eliminated in preparing the consolidated financial statements.
b)Corporate assets consist of headquarters fixed assets ($141,432), investments ($954,601), goodwill ($104,259) and other assets
($58,093) not allocated to the segments.
c)Elimination of intersegment receivables.
</FN>
</TABLE>
59
<PAGE>
Information about the Company's business segments was as follows for the year
ended December 31, 1997:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Communications
-------------------------------------------
(Dollars in Emerging Information Other Total Corporate Intercompany Consolidated
thousands) Wireless Wireline Businesses Total Services Operations Segments Operations Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and
sales from
unaffiliated
customers:
Domestic $1,838,544 $1,200,472 $ 52,002 $3,091,018 $ 730,386 $355,605 $4,177,009 $ - $ - $4,177,009
International - - - - 114,918 - 114,918 - - 114,918
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
1,838,544 1,200,472 52,002 3,091,018 845,304 355,605 4,291,927 - - 4,291,927
Intersegment
revenues
and sales - 33,496 - 33,496 128,847 123,317 285,660 - (32,447)a 253,213
---------- --------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Total revenues
and sales 1,838,544 1,233,968 52,002 3,124,514 974,151 478,922 4,577,587 - (32,447) 4,545,140
---------- --------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Operating
expenses 1,111,042 542,144 72,856 1,726,042 716,907 454,922 2,897,871 6,512 (32,447)a 2,871,936
Depreciation and
amortization 267,049 241,839 1,295 510,183 112,316 2,068 624,567 10,897 - 635,464
Provision to
reduce carrying
value of
certain assets - - - - - - - 16,874 - 16,874
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Total costs
and expenses 1,378,091 783,983 74,151 2,236,225 829,223 456,990 3,522,438 34,283 (32,447) 3,524,274
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Operating income
(loss) 460,453 449,985 (22,149) 888,289 144,928 21,932 1,055,149 (34,283) - 1,020,866
Equity earnings in
unconsolidated
partnerships 92,087 - - 92,087 - - 92,087 - - 92,087
Minority interest
in consolidated
partnerships (87,966) - - (87,966) - - (87,966) - - (87,966)
Other income
expense 6,751 2,557 865 10,173 (1,152) (21) 9,000 2,157 - 11,157
Interest expense (155,436) (54,626) (1,702) (211,764) (12,330) (782) (224,876) (36,894) - (261,770)
Gain on disposal
of assets
and other - - - - - - - 209,651 - 209,651
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Income before
income taxes 315,889 397,916 (22,986) 690,819 131,446 21,129 843,394 140,631 - 984,025
Income tax
expense
(benefit) 130,737 141,087 (3,317) 268,507 55,400 7,530 331,437 63,207 - 394,644
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Net income
(loss) $ 185,152 $ 256,829 $(19,669) $ 422,312 $ 76,046 $ 13,599 $ 511,957 $ 77,424 $ - $ 589,381
- ------------------------------------------------------------------------------------------------------------------------------------
Assets $3,990,529 $2,744,745 $ 39,343 $6,774,617 $ 809,242 $129,973 $7,713,832 $ 874,718b $ (18,145)c $8,570,405
Investments in
unconsolidated
partnerships $ 580,029 $ - $ - $ 580,029 $ - $ - $ 580,029 $ - $ - $ 580,029
Capital
expenditures $ 372,975 $ 271,305 $ 66,915 $ 711,195 $ 87,937 $ 1,620 $ 800,752 $ 26,134 $ - $ 826,886
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
Notes:
a)Elimination of intersegment revenues and sales. See "Transactions with Certain Affiliates" in Note 1 for a discussion of
intersegment revenues and sales not eliminated in preparing the consolidated financial statements.
b)Corporate assets consist of headquarters fixed assets ($116,532), investments ($628,912), goodwill ($107,930) and other assets
($21,344) not allocated to the segments.
c)Elimination of intersegment receivables.
</FN>
</TABLE>
60
<PAGE>
Information about the Company's business segments was as follows for the year
ended December 31, 1997:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Communications
-------------------------------------------
(Dollars in Emerging Information Other Total Corporate Intercompany Consolidated
thousands) Wireless Wireline Businesses Total Services Operations Segments Operations Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and
sales
from unaffiliated
customers:
Domestic $1,544,537 $1,135,231 $ 10,221 $2,689,989 $ 741,476 $470,066 $3,901,531 $ - $ - $3,901,531
International - - - - 93,338 - 93,338 - - 93,338
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
1,544,537 1,135,231 10,221 2,689,989 834,814 470,066 3,994,869 - - 3,994,869
Intersegment
revenues
and sales - 32,177 - 32,177 125,261 119,874 277,312 - (32,714)a 244,598
---------- --------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Total revenues
and sales 1,544,537 1,167,408 10,221 2,722,166 960,075 589,940 4,272,181 - (32,714) 4,239,467
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Operating
expenses 958,869 530,037 19,403 1,508,309 706,817 552,626 2,767,752 1,723 (32,714)a 2,736,761
Depreciation and
amortization 215,440 228,054 15 443,509 112,911 3,347 559,767 11,189 - 570,956
Provision to
reduce carrying
value of
certain assets - - - - - - - 120,280 - 120,280
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Total costs
and expenses 1,174,309 758,091 19,418 1,951,818 819,728 555,973 3,327,519 133,192 (32,714) 3,427,997
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Operating income
(loss) 370,228 409,317 (9,197) 770,348 140,347 33,967 944,662 (133,192) - 811,470
Equity earnings in
unconsolidated
partnerships 77,500 - - 77,500 - - 77,500 - - 77,500
Minority interest
in consolidated
partnerships (80,073) - - (80,073) - - (80,073) - - (80,073)
Other income
expense 1,232 3,857 - 5,089 (1,132) (153) 3,804 5,561 - 9,365
Interest expense (123,030) (55,025) (138) (178,193) (17,728) (1,027) (196,948) (40,248) - (237,196)
Gain on disposal
of assets
and other - - - - - - - (2,278) - (2,278)
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Income before
income taxes 245,857 358,149 (9,335) 594,671 121,487 32,787 748,945 (170,157) - 578,788
Income tax
expense
(benefit) 108,011 125,862 (2,023) 231,850 50,666 11,864 294,380 (66,848) - 227,532
---------- ---------- -------- ---------- ---------- -------- ---------- ----------- ---------- ----------
Net income
(loss) $ 137,846 $ 232,287 $ (7,312) $ 362,821 $ 70,821 $ 20,923 $ 454,565 $ (103,309) $ - $ 351,256
- ------------------------------------------------------------------------------------------------------------------------------------
Assets $3,581,312 $2,680,116 $ 1,505 $6,262,933 $ 786,662 $192,513 $7,242,108 $ 939,503b $ (13,437)c $8,168,174
Investments in
unconsolidated
partnerships $ 449,184 $ - $ - $ 449,184 $ - $ - $ 449,184 $ - $ - $ 449,184
Capital
expenditures $ 395,055 $ 278,119 $ 1,503 $ 674,677 $ 83,530 $ 1,066 $ 759,273 $ 4,551 $ - $ 763,824
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
Notes:
a)Elimination of intersegment revenues and sales. See "Transactions with Certain Affiliates" in Note 1 for a discussion of
intersegment revenues and sales not eliminated in preparing the consolidated financial statements.
b)Corporate assets consist of headquarters fixed assets ($95,615), investments ($715,440), goodwill ($96,161) and other assets
($32,287) not allocated to the segments.
c)Elimination of intersegment receivables.
</FN>
</TABLE>
61
<PAGE>
16. QUARTERLY FINANCIAL INFORMATION - (Unaudited):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, 1998 1997
----------------------------------------------------------------- -------------------------------------------
except for per
- ------------------
share amounts) Total 4th 3rd 2nd 1st Total 4th 3rd 2nd 1st
- ------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues and sales $5,194,008 $1,373,393 $1,332,167 $1,304,130 $1,184,318 $4,545,140 $1,182,269 $1,145,509 $1,141,717 $1,075,645
Operating income $ 889,026 $ 302,784 $ 13,644 $ 300,693 $ 271,905 $1,020,866 $ 272,682 $ 276,227 $ 248,019 $ 223,938
Net income (loss) $ 525,475 $ 151,762 $ (27,975) $ 234,017 $ 167,671 $ 589,381 $ 131,588 $ 150,943 $ 195,697 $ 111,153
Preferred dividends 938 228 239 231 240 1,008 243 251 256 258
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income (loss)
applicable to
common shares $ 524,537 $ 151,534 $ (28,214) $ 233,786 $ 167,431 $ 588,373 $ 131,345 $ 150,692 $ 195,441 $ 110,895
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $1.91 $.55 $(.10) $.85 $.61 $2.13 $.48 $.55 $.70 $.40
Diluted $1.89 $.55 $(.10) $.84 $.61 $2.11 $.47 $.54 $.70 $.40
- ------------------------------------------------------------------------------------------------------------------------------------
From current
businesses(1):
Revenues and sales $5,194,008 $1,373,393 $1,332,167 $1,304,130 $1,184,318 $4,502,293 $1,182,269 $1,145,509 $1,130,400 $1,044,115
Operating income $1,196,026 $ 302,784 $ 320,644 $ 300,693 $ 271,905 $1,036,324 $ 272,682 $ 276,227 $ 264,573 $ 222,842
Net income $ 580,305 $ 151,762 $ 157,392 $ 143,828 $ 127,323 $ 478,802 $ 131,588 $ 128,374 $ 119,155 $ 99,685
Basic earnings
per share $2.11 $.55 $.57 $.52 $.47 $1.73 $.48 $.46 $.43 $.36
Diluted earnings
per share $2.09 $.55 $.57 $.52 $.46 $1.72 $.47 $.46 $.43 $.36
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
1)Excludes the sold wire and cable operations, merger and integration expenses and provision to reduce carrying value of certain
assets, gain on disposal of assets and other.
Notes: A. Third quarter 1998 operating income includes transaction costs and one-time charges totaling $252 million related to the
closing of the merger with 360. These transaction and one-time charges decreased net income $201.0 million or $.73 per
share. The Company also recorded a pretax charge of $55 million resulting from changes in a customer care and billing
contract with a major customer. This charge decreased net income $33.6 million or $.12 per share. In addition, the Company
recorded a pretax gain of $80.9 million from the sale of a portion of its investment in MCI WorldCom, Inc. common stock.
This gain increased net income by $49.2 million or $.18 per share. (See Notes 9, 10 and 11.)
B. Second quarter 1998 net income includes a pretax gain of $148.2 million from the sale of a portion of the Company's
investment in MCI WorldCom, Inc. common stock. This gain increased net income $90.2 million or $.33 per share.
(See Note 11.)
C. First quarter 1998 net income includes a pretax gain of $36.6 million primarily from the sale of a portion of the
Company's investment in MCI WorldCom, Inc. common stock. In addition, the Company recorded a pretax gain of $30.5 million
from the sale of its ownership interest in one unconsolidated partnership. These gains increased net income by
$40.4 million or $.14 per share. (See Note 11.)
D. Third quarter 1997 net income includes a pretax gain of $34.4 million primarily related to the sale of the Company's
investment in a software company. This gain increased net income by $22.6 million or approximately $.09 per share.
(See Note 11.)
E. Second quarter 1997 operating income includes a pretax write-down of $16.9 million to reflect the fair value less cost to
sell the Company's wire and cable operations. This write-down decreased net income $11.7 million or $.04 per share. In
addition, the Company recorded a pretax gain of $156.0 million from the sale of a portion of its investment in MCI
WorldCom, Inc. common stock. This gain increased net income by $88.1 million or $.31 per share. (See Notes 10 and 11.)
F. First quarter 1997 net income includes a pretax gain of $16.2 million from the sale of information services' healthcare
operations. In addition, the Company recorded a pretax gain of $3.0 million from the divestiture of its ownership
interests in two unconsolidated partnerships. These transactions increased net income by $10.8 million or $.04 per share.
(See Note 11.)
G. In the opinion of management, all adjustments necessary for a fair presentation of results for each period have been
included.
62
</FN>
</TABLE>
<PAGE>
ALLTEL Corporation
Form 10-K, Part II
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
During the two most recent fiscal years or the subsequent interim
period up to the date of this Form 10-K, there were no disagreements
with the Company's independent certified public accountants on any
matter of accounting principles or practices, financial statement
disclosures or auditing scope or procedures. In addition, none of the
"kinds of events" described in item 304(a)(1)(v)(A), (B), (C) and (D)
of Regulation S-K have occurred.
Part III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
For information pertaining to Directors of ALLTEL Corporation refer to
"Election of Directors" in ALLTEL's Proxy Statement for its 1999 Annual
Meeting of Stockholders, which is incorporated herein by reference.
Executive officers of the Company are as follows:
Name Age Position
---- --- --------
Joe T. Ford 61 Chairman and Chief Executive Officer
Dennis E. Foster 58 Vice Chairman
Scott T. Ford 36 President and Chief Operating Officer
Kevin L. Beebe 39 Group President - Communications
Michael T. Flynn 50 Group President - Communications
Jeffrey H. Fox 36 Group President - Information Services
Francis X. Frantz 45 Executive Vice President - External Affairs,
General Counsel and Secretary
Dennis J. Ferra 45 Senior Vice President and Chief
Administrative Officer
Jeffery R. Gardner 39 Senior Vice President - Finance and Treasurer
John S. Haley 43 Senior Vice President and Chief Technology
Officer
John L. Comparin 46 Vice President - Human Resources
John M. Mueller 48 Controller
Jerry M. Green 51 Assistant Treasurer
Laura S. Hall 36 Assistant Treasurer
There are no arrangements between any officer and any other person
pursuant to which he was selected as an officer. Except for Dennis E.
Foster, Scott T. Ford, Kevin L. Beebe, Jeffrey H. Fox, and Jeffrey R.
Gardner, each of the officers named above has been employed by ALLTEL
or a subsidiary for the last five years.
Prior to joining ALLTEL, Messrs. Foster, Beebe and Gardner were
executive officers of 360. Mr. Foster was President and Chief
Executive Officer of 360 since February 1996. Mr. Foster had
been elected President of 360 in March 1993. Mr. Foster also
served as President and Chief Operating Officer of the Cellular and
Wireless Division of Sprint Corporation from March 1993 to January
1996. Mr. Beebe was Executive Vice President-Operations of 360
since February 1996. Mr. Beebe joined 360 in February 1994 as
Vice President-Marketing and Administration, and in February 1995, he
became Vice President-Operations. Mr. Gardner was Senior Vice
President-Finance of 360 since July 1997. Mr. Gardner served
as President of 360's Mid-Atlantic regional operations from
February 1994 to June 1997.
Prior to joining ALLTEL, Scott T. Ford served as Assistant to the
Chairman of Stephens Group, Inc. of Little Rock, Arkansas. Scott T.
Ford is the son of Joe T. Ford. Prior to joining ALLTEL, Mr. Fox
served as Vice President at Stephens Group, Inc. of Little Rock,
Arkansas.
63
<PAGE>
ALLTEL Corporation
Form 10-K, Part III
Item 11. Executive Compensation
- -------- ----------------------
For information pertaining to Executive Compensation, refer to
"Management Compensation" in ALLTEL's Proxy Statement for its 1999
Annual Meeting of Stockholders, which is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
For information pertaining to beneficial ownership of ALLTEL
securities, refer to "Security Ownership of Certain Beneficial Owners
and Management" in ALLTEL's Proxy Statement for its 1999 Annual
Meeting of Stockholders, which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
For information pertaining to Certain Relationships and Related
Transactions, refer to "Certain Transactions" in ALLTEL's Proxy
Statement for its 1999 Annual Meeting of Stockholders, which is
incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- -------- ---------------------------------------------------------------
(a) The following documents are filed as a part of this report:
1. Financial Statements:
--------------------
The following Consolidated Financial Statements of
ALLTEL Corporation and subsidiaries for the year ended
December 31, 1998:
Form 10-K
Page Number
-----------
Reports of Independent Public Accountants 33-38
Consolidated Balance Sheets - December 31,
1998 and 1997 39
Consolidated Statements of Income -
for the years ended December 31, 1998,
1997 and 1996 40
Consolidated Statements of Cash Flows -
for the years ended December 31, 1998,
1997 and 1996 41
Consolidated Statements of Shareholders'
Equity - for the years ended December 31,
1998, 1997 and 1996 42
Notes to Consolidated Financial Statements 43-62
Form 10-K
Page Number
-----------
2. Financial Statement Schedules:
-----------------------------
Report of Independent Public Accountants 67
Schedule II. Valuation and Qualifying
Accounts 68
3. Exhibits:
--------
See "Exhibit Index" located on page 69-74
of this document.
64
<PAGE>
ALLTEL Corporation
Form 10-K, Part III
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K,
- -------- ---------------------------------------------------------------
(continued):
(b) Reports on Form 8-K:
Current Report on Form 8-K dated December 2, 1998, reporting under
Item 7, Financial Statements and Exhibits, ALLTEL filed restated
audited financial statements for the three years in the period
ended December 31, 1997, to reflect the Company's July 1, 1998
merger with 360 Communications Company. The merger had been
accounted for as a pooling-of-interests.
On January 29, 1999, ALLTEL filed under Form 8-K/A, Amendment
No. 1 to its Current Report on Form 8-K dated December 2, 1998,
reporting under Item 7, Financial Statements and Exhibits. This
amendment included certain revisions to the restated audited
financial statements previously filed with the Securities and
Exchange Commission.
On March 2, 1999, ALLTEL filed under Form 8-K/A, Amendment No. 2 to
its Current Report on Form 8-K dated December 2, 1998, reporting
under Item 7, Financial Statements and Exhibits. This amendment
included certain additional revisions to the restated audited
financial statements previously filed with the Securities and
Exchange Commission.
No other reports on Form 8-K were filed during the fourth quarter of
1998.
Separate condensed financial statements of ALLTEL Corporation have been
omitted since the Company meets the tests set forth in Regulation S-X
Rule 4-08(e)(3). All other schedules are omitted since the required
information is not present or is not present in amounts sufficient to
require submission of the schedule, or because the information required
is included in the consolidated financial statements and notes thereto.
65
<PAGE>
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.
ALLTEL Corporation
------------------
Registrant
By /s/ Joe T. Ford Date: March 24, 1999
-------------------------------------------------
Joe T. Ford, Chairman and Chief Executive Officer
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.
By /s/ Dennis J. Ferra Date: March 24, 1999
-------------------------------------------------
Dennis J. Ferra, Senior Vice President and
Chief Administrative Officer
(Principal Financial Officer)
By /s/ Jeffery R. Gardner Date: March 24, 1999
-------------------------------------------------
Jeffery R. Gardner, Senior Vice President
Finance and Treasurer
(Principal Accounting Officer)
* Joe T. Ford, Chairman, Chief Executive Officer and
Director
* Dennis E. Foster, Vice Chairman and Director
* Scott T. Ford, President, Chief Operating
Officer and Director By /s/ Dennis J. Ferra
--------------------
* John R. Belk, Director * (Dennis J. Ferra,
Attorney-in-fact)
* Lawrence L. Gellerstedt III, Director
Date: March 24, 1999
* Charles H. Goodman, Director
* Michael Hooker, Director
* W. W. Johnson, Director
* Emon A. Mahony, Jr., Director
* John P. McConnell, Director
* Josie C. Natori, Director
* Frank E. Reed, Director
* Ronald Townsend, Director
* William H. Zimmer, Jr., Director
66
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
ALLTEL Corporation:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in this Form 10-K, and have issued our report
thereon dated January 28, 1999. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule on page 68 is the
responsibility of the company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ARTHUR ANDERSEN LLP
Little Rock, Arkansas,
January 28, 1999.
67
<PAGE>
ALLTEL CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
---------------------
Balance at Charged Charged Balance at
Beginning to Cost and to Other Deductions End of
Description of Period Expenses Accounts Describe Period
----------- --------- ----------- -------- ---------- ----------
Allowance for
doubtful accounts,
subscribers and
others:
For the years ended:
December 31, 1998 $25,164 $ 72,879 $ - $68,922(A) $29,121
December 31, 1997 $27,001 $ 59,258 $ (227) $60,868(A) $25,164
December 31, 1996 $20,809 $ 62,723 $ 845 $57,376(A) $27,001
Valuation allowance for deferred tax assets:
For the years ended:
December 31, 1998 $19,562 $ (4,215) $ - $ - $15,347
December 31, 1997 $10,149 $ (1,478) $10,891 $ - $19,562
December 31, 1996 $ 5,305 $ (276) $ 5,120 $ - $10,149
Merger and integration expense accrual:
For the year ended:
December 31, 1998 $ - $252,000(B) $ - $160,663(C) $91,337
Notes:
(A) Accounts charged off less recoveries of amounts previously charged
off.
(B) During the third quarter of 1998, the Company recorded merger and
integration expenses related to the closing of its merger with
360 Communications Company. See Note 9 on page 35 of ALLTEL's
1998 Annual Report to Stockholders, which is incorporated herein by
reference, for additional information regarding the merger and
integration expenses recorded by the Company.
(C) Includes cash outlay of $85,863 for expenses paid for as of December 31,
1998 and a non-cash charge of $74,800 resulting from the write-down in
the carrying value of certain in-process software development assets
with no alternative future use or functionality and a write-down in the
carrying value of certain assets resulting from the immediate
abandonment of the buildout of three PCS markets.
68
<PAGE>
EXHIBIT INDEX
-------------
Number and Name Page
- --------------- ----
(3)(a) Amended and Restated Certificate of Incorporation *
of ALLTEL Corporation (incorporated herein by
reference to Exhibit B to Proxy Statement,
dated March 9, l990).
(a)(1) Amendment No. 1 to Amended and Restated Certificate of *
Incorporation of ALLTEL Corporation (incorporated
herein by reference to Annex F of ALLTEL Corporation
Registration Statement (File No. 333-51915) on Form S-4
dated May 6, 1998).
(b) By-Laws of ALLTEL Corporation (As amended as of January 29, *
1998) (incorporated herein by reference to Exhibit 3(b)
to Form 10-K for the fiscal year ended December 31, 1997).
(4)(a) Rights Agreement dated as of January 30, l997, between ALLTEL *
Corporation and First Union National Bank of North Carolina
(incorporated herein by reference to Form 8-K dated
February 3, l997, filed with the Commission on
February 4, l997).
(b) The Company agrees to provide to the Commission, upon --
request, copies of any agreement defining rights of
long-term debt holders.
(10)(a)(1) Executive Compensation Agreement and amendments thereto *
by and between the Company and Joe T. Ford
(incorporated herein by reference to Exhibit 10(b)
to Form 10-K for the fiscal year ended December 31, 1983).
(a)(2) Modification to Executive Compensation Agreement by and *
between the Company and Joe T. Ford effective as of
January 1, 1987 (incorporated herein by reference
to Exhibit 10(b)(2) to Form 10-K for the fiscal year ended
December 31, 1986).
(a)(3) Modification to Executive Compensation Agreement by and *
between ALLTEL Corporation and Joe T. Ford, effective as
of January 1, 1991 (incorporated herein by reference to
Exhibit 10 of ALLTEL Corporation Registration Statement
(File No. 33-44736) on Form S-4 dated December 23, 1991).
(a)(4) Split-dollar Life Insurance Agreement by and between the *
Corporation and Joe T. Ford effective as of March 1, 1994
(incorporated herein by reference to Exhibit 10(a)(4) to
Form 10-K for the fiscal year ended December 31, 1994).
(b) Amended and Restated Employment Agreement by and between the 85
Company and Dennis E. Foster.
(c)(1) Change in Control Agreement by and between the Company and *
Scott T. Ford effective as of April 25, 1996 (incorporated
herein by reference to Exhibit 10(c)(6) to Form 10-Q for the
period ended June 30, 1996).
(c)(2) Change in Control Agreement by and between the Company and 114
Kevin L. Beebe effective as of July 23, 1998.
* Incorporated herein by reference as indicated.
69
<PAGE>
EXHIBIT INDEX, Continued
Number and Name Page
- --------------- ----
(10)(c)(3) Change in Control Agreement by and between the Company and 128
Michael T. Flynn effective as of July 23, 1998.
(c)(4) Change in Control Agreement by and between the Company and 142
Jeffrey H. Fox effective as of January 30, 1997.
(c)(5) Change in Control Agreement by and between the Company and *
Francis X. Frantz effective as of October 24, 1994
(incorporated herein by reference to Exhibit 10(c)(4)
to Form 10-K for the fiscal year ended December 31, 1994).
(c)(6) Change in Control Agreement by and between the Company and *
Tom T. Orsini effective as of October 24, 1994 (incorporated
herein by reference to Exhibit 10(c)(5) to Form 10-K for the
fiscal year ended December 31, 1994).
(c)(7) Change in Control Agreement by and between the Company and *
Dennis J. Ferra effective as of October 24, 1994
(incorporated herein by reference to Exhibit 10(c)(3) to
Form 10-K for the fiscal year ended December 31, 1994).
(c)(8) Change in Control Agreement by and between the Company and 162
Jeffrey R. Gardner effective as of January 28, 1999.
(c)(9) Change in Control Agreement by and between the Company and *
John L. Comparin effective as of October 24, 1994
(incorporated herein by reference to Exhibit 10(c)(2) to
Form 10-K for the fiscal year ended December 31, 1994).
(d)(1) Split-dollar Life Insurance Agreement by and between the *
Corporation and Francis X. Frantz effective as of March 1,
1994 (incorporated herein by reference to Exhibit 10(d)(2)
to Form 10-K for the fiscal year ended December 31, 1994).
(d)(2) Split-dollar Life Insurance Agreement by and between the *
Corporation and Tom T. Orsini effective as of March 1, 1994
(incorporated herein by reference to Exhibit 10(d)(3) to
Form 10-K for the fiscal year ended December 31, 1994).
(d)(3) Split-dollar Life Insurance Agreement by and between the *
Corporation and Dennis J. Ferra effective as of March 1,
1994 (incorporated herein by reference to Exhibit 10(d)(1)
to Form 10-K for the fiscal year ended December 31, 1994).
(e)(1) ALLTEL Corporation Supplemental Executive Retirement Plan, *
effective October 24, 1994 (incorporated herein by reference
to Exhibit 10(e)(1) to Form 10-K for the fiscal year ended
December 31, 1994).
(f)(1) ALLTEL Corporation 1998 Management Deferred Compensation *
Plan, effective June 23, 1998 (incorporated herein by
reference to Exhibit 10(f)(5) to Form 10-Q for the
period ended June 30, 1998).
* Incorporated herein by reference as indicated.
70
<PAGE>
EXHIBIT INDEX, Continued
- -------------
Number and Name Page
- --------------- ----
(10)(f)(2) ALLTEL Corporation 1998 Directors' Deferred Compensation *
Plan, effective June 23, 1998 (incorporated herein by
reference to Exhibit 10(f)(6) to Form 10-Q for the period
ended June 30, 1998).
(g)(1) ALLTEL Corporation 1975 Incentive Stock Option Plan (as *
amended and restated effective July 26, 1988) (incorporated
herein by reference to Exhibit 10(i) to Form 10-K for the
fiscal year ended December 31, 1988).
(g)(2) ALLTEL Corporation 1991 Stock Option Plan (incorporated *
herein by reference to Exhibit A to Proxy Statement, dated
March 8, 1991).
(g)(3) ALLTEL Corporation l994 Stock Option Plan for Employees *
(incorporated herein by reference to Exhibit A to Proxy
Statement dated March 4, l994).
(g)(4) ALLTEL Corporation l994 Stock Option Plan for Nonemployee *
Directors incorporated herein by reference to Exhibit B to
Proxy Statement dated March 4, l994).
(g)(5) First Amendment to ALLTEL Corporation l994 Stock Option Plan *
for Nonemployee Directors (incorporated herein by reference
to Exhibit 10(g)(5) to Form 10-K for the fiscal year ended
December 31, 1996).
(g)(6) ALLTEL Corporation l998 Equity Incentive Plan (incorporated *
herein by reference to Annex G of ALLTEL Corporation
Registration Statement (File No. 333-51915) on Form S-4
dated May 6, 1998).
(h) Systematics, Inc. 1981 Incentive Stock Option Plan and *
Amendment No. 1 thereto (incorporated herein by reference
to Form S-8 (File No. 33-35343) of ALLTEL Corporation filed
with the Commission on June 11, 1990).
(i) ALLTEL Corporation Performance Incentive Compensation Plan *
as amended, effective January 1, 1993 (Exhibit 10(i) to Form SE
dated February 17, 1993).
(i)(1) Amendment No. 1 to ALLTEL Corporation Performance Incentive *
Compensation Plan (January 1, 1993 Restatement), amendment
effective January 29, 1998, (incorporated herein by reference
to Exhibit 10(i)(1) to Form 10-K for the fiscal year ended
December 31, 1997).
(j) ALLTEL Corporation Long-Term Performance Incentive *
Compensation Plan, as amended and restated effective January 1,
1993 (Exhibit 10(j) to Form SE dated February 17, 1993).
(j)(1) Amendment No. 1 to ALLTEL Corporation Long-Term Performance *
Incentive Compensation Plan as amended and restated effective
January 1, 1993, (incorporated herein by reference to Exhibit
10(j)(1) to Amendment No. 1 to Form 10-K for the fiscal year
ended December 31, 1993).
* Incorporated herein by reference as indicated.
71
<PAGE>
EXHIBIT INDEX, Continued
- -------------
Number and Name Page
- --------------- ----
(10)(j)(2) Amendment No. 2 to ALLTEL Corporation Long-Term Performance *
Incentive Compensation Plan (January 1, 1993 Restatement),
effective January 29, 1998, (incorporated herein by reference
to Exhibit 10(j)(2) to Form 10-K for the fiscal year ended
December 31, 1997).
(k) ALLTEL Corporation Pension Plan (January 1, 1994 Restatement) *
(incorporated herein by reference to Exhibit 10(k) to Form 10-K
for the fiscal year ended December 31, 1994).
(k)(1) Amendment No. 1 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by reference
to Exhibit 10(k)(1) to Form 10-Q for the period ended
March 31, 1995).
(k)(2) Amendments No. 2 and 3 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by reference
to Exhibit 10(k)(2) to Form 10-Q for the period ended
June 30, 1995).
(k)(3) Amendments No. 4 and 5 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by reference
to Exhibit 10(k)(3) to Form 10-K for the fiscal year ended
December 31, 1995).
(k)(4) Amendments No. 6 and 7 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by reference
to Exhibit 10(k)(4) to Form 10-Q for the period ended
September 30, 1996).
(k)(5) Amendments No. 8 and 9 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by reference
to Exhibit 10(k)(5) to Form 10-Q for the period ended
March 31, 1997).
(k)(6) Amendment No. 10 to ALLTEL Corporation Pension Plan *
(January 1, 1994 Restatement) (incorporated herein by reference
to Exhibit 10(k)(6) to Form 10-K for the fiscal year ended
December 31, 1997).
(k)(7) Amendments No. 11 and 12 to ALLTEL Corporation Pension Plan 176
(January 1, 1994 Restatement).
(l) ALLTEL Corporation Profit-Sharing Plan (January 1, 1994 *
Restatement) (incorporated herein by reference to Exhibit 10(l)
to Form 10-K for the fiscal year ended December 31, 1994).
(l)(1) Amendments No. 1 and 2 to ALLTEL Corporation Profit-Sharing *
Plan (January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(l)(1) to Form 10-Q for the period
ended June 30, 1995).
(l)(2) Amendments No. 3 and 4 to ALLTEL Corporation Profit-Sharing *
Plan (January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(l)(2) to Form 10-K for the fiscal year
ended December 31, 1995).
* Incorporated herein by reference as indicated.
72
<PAGE>
EXHIBIT INDEX, Continued
- -------------
Number and Name Page
- --------------- ----
(10)(l)(3) Amendment No. 5 to ALLTEL Corporation Profit-Sharing Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(l)(3) to Form 10-Q for the period
ended September 30, 1996).
(l)(4) Amendment No. 6 to ALLTEL Corporation Profit-Sharing Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(l)(4) to Form 10-Q for the period
ended March 31, 1997).
(l)(5) Amendment No. 7 to ALLTEL Corporation Profit-Sharing Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(l)(5) to Form 10-K for the fiscal
year ended December 31, 1997).
(l)(6) Amendment No. 8 to ALLTEL Corporation Profit-Sharing Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(l)(6) to Form 10-Q for the period
ended March 31, 1998).
(l)(7) Amendments No. 9 and 10 to ALLTEL Corporation Profit-Sharing 182
Plan (January 1, 1994 Restatement).
(m) ALLTEL Corporation Benefit Restoration Plan (January 1, 1996 *
Restatement) (incorporated herein by reference to Exhibit 10(m)
to Form 10-K for the fiscal year ended December 31, 1995).
(n) Amended and Restated ALLTEL Corporation Supplemental Medical *
Expense Reimbursement Plan (incorporated herein by reference
to Exhibit 10(p) to Form 10-K for the fiscal year ended
December 31, 1990).
(o) ALLTEL Corporation Thrift Plan (January 1, 1994 Restatement) *
(incorporated herein by reference to Exhibit 10(p) to Form
10-K for the fiscal year ended December 31, 1994).
(o)(1) Amendments No. 1 and 2 to ALLTEL Corporation Thrift Plan *
(January 1, 1994 Restatement) (incorporated herein by reference
to Exhibit 10(p)(1) to Form 10-Q for the period ended
June 30, 1995).
(o)(2) Amendment No. 3 ALLTEL Corporation Thrift Plan (January 1, *
1994 Restatement) (incorporated herein by reference to
Exhibit 10(o)(2) to Form 10-K for the fiscal year ended
December 31, 1995).
(o)(3) Amended and Restated Amendment No. 4 and Amendment No. 5 to *
ALLTEL Corporation Thrift Plan (January 1, 1994 Restatement)
(incorporated herein by reference to Exhibit 10(o)(3) to
Form 10-K for the fiscal year ended December 31, 1996).
(o)(4) Amendment No. 6 to ALLTEL Corporation Thrift Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(o)(4) to Form 10-Q for the period
ended March 31, 1997).
* Incorporated herein by reference as indicated.
73
<PAGE>
EXHIBIT INDEX, Continued
- -------------
Number and Name Page
- --------------- ----
(10)(o)(5) Amendment No. 7 to ALLTEL Corporation Thrift Plan (January *
1, 1994 Restatement) (incorporated herein by reference to
Exhibit 10(o)(5) to Form 10-K for the fiscal year ended
December 31, 1997).
(o)(6) Amendments No. 8 and 9 to ALLTEL Corporation Thrift Plan *
(January 1, 1994 Restatement) (incorporated herein by
reference to Exhibit 10(o)(6) to Form 10-Q for the period
ended March 31, 1998).
(o)(7) Amendments No. 10, 11 and 12 to ALLTEL Corporation Thrift 191
Plan (January 1, 1994 Restatement).
(11) Statement re computation of per share earnings. 75
(21) Subsidiaries of the ALLTEL Corporation. 76
(23)(a) Consent of Arthur Andersen LLP. 79
(23)(b) Consent of Ernst & Young LLP. (Financial statements of 80
360 Communications Company are not included
separately in this Form 10-K)
(23)(c) Consent of Arthur Andersen LLP. (Financial statements of 81
GTE Moblinet of South Texas Limited Partnership are not
included separately in this Form 10-K)
(23)(d) Consent of Arthur Andersen LLP. (Financial statements of 82
Chicago SMSA Limited Partnership are not included separately
in this Form 10-K)
(23)(e) Consent of PricewaterhouseCoopers LLP. (Financial statements 83
of New York SMSA Limited Partnership are not included
separately in this Form 10-K)
(23)(f) Consent of PricewaterhouseCoopers LLP. (Financial statements 84
of Orlando SMSA Limited Partnership are not included
separately in this Form 10-K)
(24) Powers of attorney. 201
(27) Financial Data Schedule for the year ended December 31, 1998. 202
(99)(a) Annual report on Form 11-K for the ALLTEL Corporation Thrift --
Plan for the year ended December 31, 1998, will be filed by
amendment.
* Incorporated herein by reference as indicated.
74
<TABLE>
<CAPTION>
EXHIBIT 11
ALLTEL CORPORATION
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Dollars and Shares in Thousands, except per share amounts)
For the Years Ended December 31, 1998 1997 1996 1995 1994
------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income applicable to common shares $524,537 $588,373 $350,185 $351,763 $250,764
Adjustments for convertible securities:
preferred stocks 174 206 220 236 258
-------- -------- -------- -------- --------
Net income applicable to common
shares, assuming conversion
of above securities $524,711 $588,579 $350,405 $351,999 $251,022
======== ======== ======== ======== ========
Average common shares outstanding
for the year 274,305 276,590 276,637 275,232 274,141
Increase in shares which would
result from:
exercise of stock options 2,503 1,431 1,233 1,324 1,781
conversion of convertible preferred stocks 468 523 559 603 670
------- ------- ------- -------- -------
Average common shares, assuming
conversion of the above securities 277,276 278,544 278,429 277,159 276,592
======= ======= ======= ======== =======
Earnings per share of common stock:
Basic $1.91 $2.13 $1.27 $1.28 $.91
===== ===== ===== ===== ====
Diluted $1.89 $2.11 $1.26 $1.27 $.91
===== ===== ===== ===== ====
</TABLE>
75
EXHIBIT 21
ALLTEL Corporation
Subsidiaries of the Registrant
State of
Incorporation
COMMUNICATIONS COMPANIES: --------------
ALLTEL Alabama, Inc. Alabama
ALLTEL Arkansas, Inc. Arkansas
ALLTEL Carolina, Inc. North Carolina
ALLTEL Florida, Inc. Florida
ALLTEL Georgia, Inc. Georgia
ALLTEL Georgia Communications Corp. Georgia
ALLTEL Kentucky, Inc. Kentucky
ALLTEL Mississippi, Inc. Mississippi
ALLTEL Missouri, Inc. Missouri
ALLTEL New York, Inc. New York
ALLTEL Ohio, Inc. Ohio
ALLTEL Oklahoma, Inc. Arkansas
ALLTEL Pennsylvania, Inc. Pennsylvania
ALLTEL South Carolina, Inc. South Carolina
Georgia ALLTEL Communicon Co. Illinois
Georgia ALLTELCOM Co. Indiana
Georgia ALLTEL Telecom Inc. Michigan
Georgia Telephone Corporation Georgia
Missouri Telephone Cellular Systems, Inc. Missouri
Oklahoma ALLTEL, Inc. Oklahoma
Sugar Land Telephone Company Texas
Texas ALLTEL, Inc. Texas
The Western Reserve Telephone Company Ohio
ALLTEL Communications, Inc. Delaware
ALLTEL Communications Group, Inc. Delaware
ALLTEL Communications Services Corporation Ohio
ALLTEL Mobile Communications, Inc. Delaware
ALLTEL Mobile Communications of the Carolinas, Inc. North Carolina
360 Communications Company Delaware
360 Communications Company Investment Company Delaware
360 Communications Company Investment Company of Delaware Delaware
360 Communications Company Investment Company of Florida Delaware
360 Communications Company Investment Company of Greensboro North Carolina
76
<PAGE>
EXHIBIT 21
ALLTEL Corporation
Subsidiaries of the Registrant, continued
State of
Incorporation
COMMUNICATIONS COMPANIES: (continued) --------------
360 Communications Company of Alabama Delaware
360 Communications Company of Charlottsville Virginia
360 Communications Company of Florida Delaware
360 Communications Company of Hickory No. 1 Delaware
360 Communications Company of Indiana No. 1 Delaware
360 Communications Company of Iowa Delaware
360 Communications Company of Missouri No. 1 Delaware
360 Communications Company of Nebraska Delaware
360 Communications Company of New Mexico Delaware
360 Communications Company of North Carolina No. 1 Delaware
360 Communications Company of Ohio No. 1 Delaware
360 Communications Company of Ohio No. 2 Delaware
360 Communications Company of Ohio No. 3 Delaware
360 Communications Company of Ohio No. 4 Delaware
360 Communications Company of Peoria Illinois
360 Communications Company of Pennsylvania No. 1 Delaware
360 Communications Company of Pennsylvania No. 2 Delaware
360 Communications Company of Pennsylvania No. 3 Delaware
360 Communications Company of South Carolina No. 1 Delaware
360 Communications Company of South Carolina No. 2 Delaware
360 Communications Company of Tennessee No. 1 Delaware
360 Communications Company of Tennessee No. 2 Delaware
360 Communications Company of Texas No. 1 Delaware
360 Communications Company of Texas No. 2 Delaware
360 Communications Company of Texas No. 3 Delaware
360 Communications Company of Virginia Virginia
360 Communications Company of Lynchburg Virginia
360 Communications Company of Petersburg Virginia
360 Long Distance, Inc. Iowa
360 Paging, Inc. Delaware
Centel Cellular Company of Laredo Delaware
Empire Cellular, Inc. Kansas
Petersburg Cellular Telephone Company, Inc. Virginia
TeleSpectrum, Inc. Kansas
TeleSpectrum of Virginia, Inc. Virginia
Virginia Metronet, Inc. Delaware
77
<PAGE>
EXHIBIT 21
ALLTEL Corporation
Subsidiaries of the Registrant, continued
Country or
State of
Incorporation
OTHER COMPANIES: --------------
ALLTEL Business Services, Inc. Delaware
ALLTEL Corporate Services, Inc. Delaware
ALLTEL Distribution, Inc. Delaware
ALLTEL Holding, Inc. Delaware
ALLTEL International Holdings, Inc. Delaware
ALLTEL Mauritius Holdings, Inc. Delaware
ALLTEL Publishing Corporation Ohio
ALLTEL Publishing Listing Management Corporation Pennsylvania
ALLTEL Supply, Inc. Ohio
ALLTEL Supply International, Inc. Ohio
CP National Corporation California
Control Communications Industries, Inc. Delaware
Dynalex, Inc. California
FC Paramount, Inc. Arkansas
Ocean Technology, Inc. California
OTI International, Inc. California
Sygnis, Inc. Arkansas
ALLTEL Information Services, Inc. Arkansas
ALLTEL Information Services International, Ltd. Delaware
ALLTEL Information Services International Holdings, Inc. Delaware
ALLTEL Information Services, Limited United Kingdom
ALLTEL Information Services Canada Limited Canada
ALLTEL Information Services (France) SARL France
ALLTEL Information Services (Germany) GmbH Germany
ALLTEL Information Services (Greece) S.A. Greece
ALLTEL Information Services (Hong Kong) Limited Hong Kong
ALLTEL Information (India) Private Limited India
ALLTEL Information (Mauritius) Inc. Mauritius
ALLTEL Information Services (Netherlands) B.V. Amsterdam
ALLTEL Information Services (New Zealand) Limited New Zealand
ALLTEL Information Services (Poland) Sp.z.o.o. Poland
ALLTEL Information Services (Thailand) Limited Thailand
ALLTEL International, Limited Jamaica
ALLTEL International Resource Management, Inc. Delaware
ALLTEL Servicios de Informacion (Costa Rica) S.A. Costa Rica
ALLTEL Wholesale Banking Solutions, Inc. New York
Computer Power, Inc. Florida
Vertex Banking Systems, Limited United Kingdom
78
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
ALLTEL Corporation:
As independent public accountants, we hereby consent to the use of our report
dated January 28, 1999 included in this Form 10-K, into ALLTEL Corporation's
previously filed Registration Statements, File Nos. 2-99523, 33-35343, 33-48476,
33-54175, 33-56291 and 33-65199.
/s/ARTHUR ANDERSEN LLP
Little Rock, Arkansas
March 24, 1999
79
Report of Independent Auditors
We consent to the incorporation by reference in the Post-Effective Amendment
No. 2 to Form S-8 Registration Statement for the ALLTEL Corporation Incentive
Stock Option Plan (No. 2-99523); Form S-8 Registration Statement for
Systematics, Inc. 1981 Incentive Stock Option Plan (No. 33-35343); Form S-8
Registration Statement for the ALLTEL Corporation 1991 Stock Option Plan (No.
33-48476); Form S-8 Registration Statement for the ALLTEL Corporation 1994
Stock Option Plan (No. 33-54175); Form S-8 Registration Statement for the
ALLTEL Corporation Thrift Plan (No. 33-56291); and Form S-8 Registration
Statement for the ALLTEL Corporation 1994 Stock Option Plan for Employees (No.
33-65199) of our report dated March 6, 1998, with respect to the consolidated
financial statements and schedule of 360 Communications Company,
included in ALLTEL Corporation's Annual Report on Form 10-K the year ended
December 31, 1998.
/s/Ernst & Young LLP
Chicago, Illinois
March 24, 1999
80
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
ALLTEL Corporation:
As independent public accountants, we hereby consent to the use of our report
dated February 13, 1998, with respect to the GTE Mobilnet of South Texas Limited
Partnership, included in this Form 10-K, into ALLTEL Corporation's previously
filed Registration Statements, File Nos. 2-99523, 33-35343, 33-48476, 33-54175,
33-56291 and 33-65199. Such GTE Mobilnet of South Texas Limited Partnership
financial statement are not included separately in this Form 10-K.
/s/ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 24, 1999
81
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
ALLTEL Corporation:
As independent public accountants, we hereby consent to the use of our report
dated January 16, 1998, with respect to the Chicago SMSA Limited Partnership,
included in this Form 10-K, into ALLTEL Corporation's previously filed
Registration Statements, File Nos. 2-99523, 33-35343, 33-48476, 33-54175,
33-56291 and 33-65199. Such Chicago SMSA Limited Partnership financial
statements are not included separately in this Form 10-K.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
March 24, 1999
82
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
ALLTEL Corporation on Forms S-8 (File Nos. 2-99523, 33-35343, 33-48476,
33-54175, 33-56291, and 33-65199) of our report dated February 13, 1998, on our
audits of the financial statements of the New York SMSA Limited Partnership (the
"Partnership") as of and for the years ended December 31, 1997 and 1996, which
report is included in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 24, 1999
83
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration of
ALLTEL Corporation on Form S-8 (File Nos. 2-99523, 33-35343, 33-48476, 33-54175,
33-56291, and 33-65199) of our report dated March 6, 1998, on our audit of the
consolidated financial statements of the Orlando SMSA Limited Partnership as of
December 31, 1997 and for the year then ended, which report is included in this
annual report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
March 24, 1999
84
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
FOR
DENNIS E. FOSTER
85
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TABLE OF CONTENTS
Page No.
--------
RECITALS
Section 1. Term of Employment...............................................2
Section 2. Position and Responsibilities....................................2
Section 3. Standard of Care.................................................2
Section 4. Compensation.....................................................3
4.1. Base Salary................................................3
4.2. Short-Term Incentives......................................3
4.3. Long-Term Incentives.......................................3
4.4. Bonuses....................................................4
4.5. Supplemental Retirement Benefits...........................4
4.6. Employee Benefits..........................................6
4.7. Retiree Medical Benefits...................................6
4.8. Perquisites................................................7
4.9. Right to Change Plans......................................7
4.10. Effect on Other Arrangements...............................7
Section 5. Expenses.........................................................7
Section 6. Employment Terminations..........................................8
6.1. Termination by Reason of Expiration of Term................8
6.2. Termination Due to Death...................................8
6.3. Termination Due to Disability..............................9
6.4. Termination by ALLTEL Other Than for Cause.................10
6.5. Termination by the Executive for Good Reason...............12
6.6. Voluntary Termination by the Executive Other
Than for Good Reason.....................................12
6.7. Termination for Cause......................................13
6.8. Protective Covenants By the Executive......................15
(i) Return of Property................................15
(ii) Non-Disclosure....................................15
(iii) Non-Interference..................................15
(iv) Non-Competition...................................16
(v) Harmful Statements................................16
(vi) Resignations......................................16
(vii) Challenge to Validity.............................16
6.9. Specific Performance; Other Remedies.......................17
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Section 7. Excise Taxes.....................................................17
Section 8. Consulting Services..............................................20
Section 9. Assignment.......................................................21
9.1. Assignment by the Company and ALLTEL.......................21
9.2. Assignment by the Executive................................22
Section 10. Dispute Resolution and Notice...................................22
10.1 Dispute Resolution.........................................22
10.2 Notice ..................................................23
Section 11. Miscellaneous ..................................................23
11.1. Entire Agreement...........................................23
11.2. Modification...............................................23
11.3. Severability...............................................23
11.4. Counterparts...............................................23
11.5. Withholding................................................23
11.6. Assumption by ALLTEL.......................................24
11.7. Matters Related to Prior Agreement.........................24
Section 12. Construction....................................................24
Section 13. Governing Law...................................................24
EXHIBIT A....................................................................26
-ii-
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT FOR DENNIS E. FOSTER
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (hereinafter referred to
as this "Agreement") is made, entered into, and is effective as of August 1,
1998, by and among 360 Communications Company, a Delaware corporation
(hereinafter referred to as the "Company"), ALLTEL Corporation, a Delaware
corporation (hereinafter referred to as "ALLTEL"), and Dennis E. Foster
(hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company pursuant to
an Employment Agreement dated March 9, 1996, as amended (hereinafter referred to
as the "Prior Agreement"); and
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of
March 16, 1998 among ALLTEL, Pinnacle Merger Sub, Inc. (hereinafter referred to
as "Merger Sub"), and the Company (hereinafter referred to as the "Merger
Agreement"), Merger Sub has merged with and into the Company (hereinafter
referred to as the "Merger"), and the Company has become a wholly-owned
subsidiary of ALLTEL; and
WHEREAS, in connection with the Merger Agreement and the Merger, ALLTEL
has assumed and agreed to perform the Company's obligations under the Prior
Agreement; and
WHEREAS, the Executive possesses considerable experience and an
intimate knowledge of the business and affairs of the Company and its industry,
its policies, methods, personnel, and operations; and
WHEREAS, ALLTEL recognizes that the Executive has demonstrated unique
qualifications to act in an executive capacity; and
WHEREAS, ALLTEL believes that the retention of the Executive in the
employ of the Company, or ALLTEL, or one of ALLTEL's other affiliates, is of
great importance to the accomplishment of ALLTEL's objectives and that Executive
has had and will have access to confidential and proprietary information and any
disclosure thereof or competition by the Executive would be detrimental to the
best interests of ALLTEL and its affiliates; and
WHEREAS, ALLTEL is desirous of assuring the continued employment of the
Executive, and the Executive is desirous of continued employment, on the terms
set forth herein, and the Executive has agreed to the relocation of his
principal office to Little Rock, Arkansas;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree
that the Prior Agreement is hereby amended and restated in its entirety,
effective beginning as of August 1, 1998, to provide as follows:
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Section 1. Term of Employment
ALLTEL shall employ the Executive, and may cause the Company or another
direct or indirect subsidiary of ALLTEL (ALLTEL and the Company and all other
entities that are direct or indirect subsidiaries of ALLTEL from time to time
are hereinafter sometimes referred to collectively as the "ALLTEL Group") to
employ the Executive, for a term of twenty-three months beginning as of
August 1, 1998 and ending on June 30, 2000, and the Executive shall continue his
employment for such term in accordance with the terms and conditions set forth
herein (subject to earlier termination as provided in Section 6 (Employment
Terminations)).
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive shall perform those
duties for and have those responsibilities with the ALLTEL Group that are
consistent with the duties of a senior executive of ALLTEL as may be determined
from time to time by ALLTEL's Chief Executive Officer. During the term of this
Agreement, the Executive shall be and hold the title of Vice Chairman of ALLTEL.
Section 3. Standard of Care
During the term of his employment under this Agreement, the Executive
agrees to devote substantially his full business time, attention, and energies
to the business of the ALLTEL Group and agrees that he shall not be engaged in
any other business activity, if such business activity is pursued for gain,
profit, or other pecuniary advantage. (Notwithstanding the preceding sentence,
it is understood that the Executive has interests in race horses, and the
maintenance of such interests and the pursuit of business activities related
thereto shall not be deemed a violation of the preceding sentence if it does not
interfere with the performance of his duties hereunder.) The Executive may serve
as a director of such civic, charitable and educational boards as do not
interfere with the performance of his duties hereunder. The Executive may serve
as a director of other businesses so long as such service is not injurious to
the ALLTEL Group, does not violate any provision of Section 6.8 (Protective
Covenants By the Executive), and is preapproved by ALLTEL's Chief Executive
Officer. Membership on the board of directors of Salient 3 Communications, Inc.
shall be deemed to satisfy the requirements of the immediately preceding
sentence. The Executive covenants, warrants, and represents that during the term
of his employment hereunder he shall:
(i) Devote his full and best efforts to the fulfillment
of his employment obligations hereunder;
(ii) Exercise the highest degree of loyalty to the ALLTEL Group and
the highest standards of conduct in the performance of his
duties; and
(iii) Do nothing which intentionally harms, in any way, the business
or reputation of any member of the ALLTEL Group.
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Subject to the limitations contained in Section 6.8 (Protective
Covenants By the Executive), this Section 3 shall not be construed as preventing
the Executive from investing assets in such form or manner as will not require
his services on the board of directors or in the daily operations of the affairs
of the entities in which such investments are made.
Section 4. Compensation
As remuneration for all services to be rendered by the Executive during
the term of this Agreement, and as consideration for complying with the
covenants herein, and except as otherwise provided in this Agreement, ALLTEL
shall pay or provide, or cause the Company or another member of the ALLTEL Group
to pay or provide, to the Executive the following:
4.1. Base Salary. Executive shall receive a base salary at a rate which
shall be established from time to time by ALLTEL's Board of Directors
(hereinafter referred to as "ALLTEL's Board") or the Compensation Committee of
ALLTEL's Board (hereinafter referred to as "ALLTEL's Compensation Committee") in
its sole and complete discretion, except that the Executive's base salary shall
be at a rate of not less than Six Hundred Thousand Dollars ($600,000) per annum.
This base salary shall be paid to the Executive in installments throughout the
year, consistent with the normal payroll practices of ALLTEL. The Executive's
base salary may be reviewed periodically to ascertain whether, in the judgment
of ALLTEL's Board or ALLTEL's Compensation Committee, the Executive's base
salary should be increased. If so increased, the base salary as stated above
shall, likewise, be increased for all purposes of this Agreement. Once so
increased, the Executive's rate of base salary shall not be decreased.
4.2. Short-Term Incentives. ALLTEL shall provide the Executive the
opportunity to earn an annual incentive for the incentive plan years ending
December 31, 1998 and December 31, 1999, respectively, payable in cash or such
other form as may be available to senior executives of the ALLTEL Group
generally, at a level which is commensurate with the then-current compensation
philosophies of ALLTEL's Board or ALLTEL's Compensation Committee. The
Executive's annual target incentive opportunity shall not be less than 75
percent of the Executive's then-current annual rate of base salary. The
performance goals on which the annual incentive is based will be established and
communicated in the manner provided in the corresponding incentive plan. The
goals shall be established at levels that are thought to be reasonably
ascertainable, though not certain of attainment. For the period August 1, 1998
through December 31, 1998, the Executive's annual incentive award shall be
prorated to reflect the fact that he was not a participant in the ALLTEL
Corporation Performance Incentive Compensation Plan for the entire 1998 calendar
year by multiplying the award he would otherwise be entitled to receive by 41.67
percent. Nothing in this Section 4.2 shall be construed as obligating ALLTEL to
refrain from changing or amending the underlying annual incentive plan, so long
as such changes are similarly applicable to senior executives of ALLTEL
generally, and so long as the Executive's annual target incentive percentage
opportunity is not decreased.
4.3. Long-Term Incentives. ALLTEL shall provide the Executive an annual
opportunity to earn a long-term incentive award under the ALLTEL Corporation
Long-Term Performance Incentive Plan for the plan cycles ending December 31,
1998 and December 31, 1999, respectively, with a target incentive opportunity of
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not less than 60 percent of average year-end base salary. The Executive shall
not be subject to any eligibility requirements or waiting periods for the plan
cycles 1996 through 1998 and 1997 through 1999 and shall be treated as if he
were a participant in the ALLTEL Corporation Long-Term Performance Incentive
Plan beginning January 1, 1996 and January 1, 1997, respectively. Nothing in
this Section 4.3 shall be construed as obligating ALLTEL to refrain from
changing or amending the underlying long-term incentive plan, so long as such
changes are similarly applicable to senior executives of ALLTEL generally and
the Executive's target incentive percentage opportunity is not decreased.
4.4. Bonuses. ALLTEL shall pay or cause one of the other members of the
ALLTEL Group to pay to the Executive a bonus in the amount of $1,000,000 on or
before August 31, 1998. If the Executive has remained an employee of one or more
members of the ALLTEL Group continuously from the date hereof through August 1,
1999, ALLTEL also shall pay or cause one of the other members of the ALLTEL
Group to pay to the Executive a bonus in the amount of $2,000,000 on August 1,
1999.
4.5. Supplemental Retirement Benefits. The Executive has been provided
under the Prior Agreement with supplemental retirement benefits (and
Supplemental Retirement Credits as defined under the Prior Agreement), for which
he is fully vested and to which he retains all rights in accordance with this
Agreement and which shall be taken into account for purposes of this Section
4.5, and the Executive will be provided with supplemental retirement benefits as
described in this Section 4.5. On no less than an annual basis for each calendar
year (prior to 2000) during all of which the Executive has remained an employee
of one or more members of the ALLTEL Group, and in any event by March 31
following each calendar year end (prior to 2000) on which the Executive has
remained an employee of one or more members of the ALLTEL Group, the Executive
shall be credited with a "Supplemental Retirement Credit." The amount of the
Supplemental Retirement Credit shall be determined in accordance with the
provisions of Exhibit A hereto and shall be credited to an account (hereinafter
referred to as the "Supplemental Retirement Account") on the records of the
Company. On June 30, 2000, if the Executive has remained an employee of one or
more members of the ALLTEL Group continuously from the date hereof through June
30, 2000, or on the date of the Executive's employment termination, if the
Executive's employment terminates prior to June 30, 2000, as provided in Section
6.2 (Termination Due to Death) or as provided in Section 6.3 (Termination Due to
Disability), in addition to the other credits under this Section 4.5, the
Supplemental Retirement Account shall be credited on June 30, 2000 or, on the
date of the Executive's employment termination under Section 6.2 (Termination
Due to Death), Section 6.3 (Termination Due to Disability), Section 6.4
(Termination by ALLTEL Other than For Cause), or Section 6.5 (Termination by
Executive for Good Reason), as the case may be, with a Supplemental Retirement
Credit in the amount of $5,000,000 less the total amount of the other
Supplemental Retirement Credits occurring after June 30, 1998 (hereinafter
referred to as the "Additional Supplemental Retirement Credit"). At the time of
each Supplemental Retirement Credit occurring after June 30, 1998 under this
Section 4.5, the Company or ALLTEL shall deposit or cause to be deposited in a
so-called "rabbi trust" (as described below), which has been established by the
Company under the Prior Agreement, an amount equal to that Supplemental
Retirement Credit. The Supplemental Retirement Account shall be credited with
earnings through the date of payment or forfeiture at a rate designated in
advance by the Executive from among at least four alternate rates designated by
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the Company or ALLTEL. The Executive shall be permitted to change his
designation of earnings rates, subject to such terms and conditions as the
Company or ALLTEL may impose, except that the Executive shall be permitted to
change such designation at least once per calendar quarter.
Any tax obligations (FICA or otherwise) arising from the crediting,
vesting, or payments of the Supplemental Retirement Account shall be the
responsibility of the Executive, except as may otherwise be provided in Section
7 (Excise Taxes).
The obligation to pay the Executive the amount in his Supplemental
Retirement Account shall be an unfunded, unsecured obligation of the Company and
ALLTEL, and the Company has established and the Company or ALLTEL will continue
to maintain a so-called "rabbi trust" as described in Revenue Procedure 92-64 to
which it has contributed, and the Company or ALLTEL will continue to contribute,
amounts when and as such amounts are credited to the Executive's Supplemental
Retirement Account as Supplemental Retirement Credits. The Executive shall take
any action with respect to the "rabbi trust" as may be reasonably requested by
ALLTEL, including but not limited to, amendments to the "rabbi trust" agreement,
to reflect changes to the Prior Agreement made by this Agreement, the Company
having become a wholly-owned subsidiary of ALLTEL, or to ensure that ALLTEL or
the Company can receive any assets remaining in the "rabbi trust" after the
supplemental retirement benefits provided for under this Agreement have been
fully paid or are no longer payable in accordance with this Agreement.
In the event of a termination of the Executive's employment prior to
June 30, 2000 under Section 6.4 (Termination by ALLTEL Other Than for Cause) or
under Section 6.5 (Termination by the Executive for Good Reason), the Company or
ALLTEL shall, within 60 days thereafter, deposit in the "rabbi trust" an amount
required to make the value of the assets held in the rabbi trust equal to the
balance of the Executive's Supplemental Retirement Account based upon actual
compensation through the date of termination of the Executive's employment for
Good Reason or the date of termination of Executive's employment other than for
Cause, as applicable.
Except as provided below, the payment of the balance in the
Supplemental Retirement Account shall be made in five substantially equal annual
installments, calculated as set forth in the following paragraph, with the first
payment being made within 90 calendar days after the Executive's termination of
employment under this Agreement, and subsequent annual installments shall be
made on successive anniversary dates of the first payment.
The first payment will be in the amount of the entire balance in the
Supplemental Retirement Account, determined as of immediately prior to such
payment, multiplied by one-fifth. The second annual payment will be in the
amount of the balance in the Supplemental Retirement Account, determined as of
immediately prior to such payment, multiplied by one-fourth, with the third,
fourth, and fifth payments computed similarly using the respective ratios of
one-third, one-half, and one.
A written election may be made by the Executive any time, but more than
one year prior to commencement of the payment, to elect to receive benefits in a
cash lump sum payment or in any other form of cash payment reasonably acceptable
to ALLTEL, except that the Company or ALLTEL reserves the right to make payment
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of all or any portion of the Executive's Supplemental Retirement Account balance
in a lump sum in the event of the Executive's death or Disability.
Notwithstanding the foregoing provisions of this Section 4.5 or any
other provision of this Agreement, unless the Executive remains an employee of
one or more members of the ALLTEL Group continuously from the date hereof
through June 30, 2000, the Executive's employment terminates under Section 6.2
(Termination Due to Death), the Executive's employment terminates under Section
6.3 (Termination Due to Disability), the Executive's employment terminates under
Section 6.4 (Termination by ALLTEL Other Than for Cause), or the Executive's
employment terminates under Section 6.5 (Termination by the Executive for Good
Reason), the Executive's supplemental retirement benefits under this Section 4.5
shall be determined, calculated, and paid as if no Supplemental Retirement
Credits, including but not limited to the Additional Supplemental Retirement
Credit, occurring after June 30, 1998, had been credited to the Supplemental
Retirement Account.
The supplemental retirement benefits provided for in this Section 4.5
are in full replacement and cancellation of the Executive's benefits under the
Sprint Key Management Benefit Plan.
4.6. Employee Benefits. During the term of this Agreement, and subject
to the terms of each of the respective plans, the Executive shall be eligible
for all benefits for which other persons who were senior executives of the
Company on August 1, 1998 are eligible based on employment with the ALLTEL Group
and for other benefit plans, if any, that ALLTEL's Compensation Committee or
ALLTEL's Board, in its sole discretion, considers appropriate, except that the
Executive shall not participate in the ALLTEL Corporation Pension Plan and the
Executive shall not have any entitlement by reason of this Agreement to
participate in any plan intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (hereinafter referred to as the
"Code"), or any other plan providing for deferred compensation, or any plan
providing for stock options or restricted or phantom stock or other equity based
incentives.
The Executive shall be entitled to paid vacation in accordance with the
policy of the ALLTEL Group with regard to vacations of senior executives of
ALLTEL. In applying this policy, the Executive shall be given credit for prior
service with the Company and with Sprint Corporation.
4.7. Retiree Medical Benefits.
(i) In the event the Executive's employment under this Agreement is
terminated under Section 6.1 (Termination by Reason of Expiration of Term),
Section 6.2 (Termination Due to Death), Section 6.3 (Termination Due to
Disability), Section 6.4 (Termination By ALLTEL Other Than for Cause), or
Section 6.5 (Termination by the Executive for Good Reason), then upon the
Executive's termination of employment, ALLTEL shall provide, or cause another
member of the ALLTEL Group to provide, the medical benefits described below.
(Retiree medical benefits will not be provided in the event the Executive's
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employment hereunder is terminated under Section 6.6 (Voluntary Termination by
the Executive Other Than for Good Reason) or Section 6.7 (Termination for
Cause)).
(ii) The retiree medical benefits will be provided to the Executive
and the spouse to whom he was married on March 9, 1996, for his life and the
life of the foregoing spouse, except that such benefits will not be provided to
the spouse (other than as may be required under Sections 601 through 607 of the
Employee Retirement Income Security Act of 1974, as amended, ("ERISA"))
following a divorce or legal separation.
(iii) Such retiree medical benefits will be provided at the same
coverage levels and cost to the Executive and his spouse for the employee-paid
portion of the premium and co-payments as may from time to time be made
available to senior executive employees of the ALLTEL Group who are actively
employed (with a reduction in such amount equal to the amount paid, or expected
to be paid, by Medicare). Thus, the Executive's benefits and those of his spouse
may be changed (or even terminated) to the extent that the active employees'
plan(s) is (are) modified (or terminated).
(iv) ALLTEL reserves the right to provide or cause one of the other
members of the ALLTEL Group to provide the Executive a cash equivalent benefit
for the Executive to obtain independently the retiree medical benefits to which
he would otherwise be entitled under this Section 4.7. In such case, ALLTEL in
good faith shall make the determination of the amount of this cash equivalent on
the basis consistent with Financial Accounting Standards Board Statement No.
106. ALLTEL's determination shall be conclusive. Any tax consequences of
providing the retiree medical benefits described in this Section 4.7 shall be
the responsibility of the Executive, except as may otherwise be provided in
Section 7 (Excise Taxes).
4.8. Perquisites. During the term of the Executive's employment under
this Agreement, ALLTEL shall provide to or cause to be provided by one of the
ALLTEL Group members to the Executive, at the cost of the ALLTEL Group,
perquisites substantially equivalent to those which other senior executives of
ALLTEL are entitled to receive.
4.9. Right to Change Plans. Nothing herein shall require the ALLTEL
Group to institute, maintain, or refrain from changing, amending, reducing, or
discontinuing any benefit plan, program, or perquisite available to senior
executives, so long as Executive is not treated less favorably than senior
executives of ALLTEL generally.
4.10. Effect on Other Arrangements. Nothing herein shall require any
payment to the Executive provided for under this Agreement to be taken into
account under any employee benefit plans or other arrangements in which the
Executive participates, and any such payment(s) shall be taken into account only
to the extent, if any, expressly provided for under the terms of those plans as
amended from time to time or other arrangements as amended from time to time.
Section 5. Expenses
ALLTEL shall pay or reimburse, or cause one of the other members of the
ALLTEL Group to pay or reimburse, the Executive, in accordance with the ALLTEL
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Group's policies and procedures applicable to senior executives of ALLTEL
generally, for all ordinary and necessary business expenses which the Executive
incurs during the term of his employment under this Agreement including, but not
limited to, travel, entertainment, trade association dues and subscriptions, and
all dues, fees, and expenses associated with membership in appropriate trade,
business, and civic associations and societies where the Executive's
participation is in the best interests of the ALLTEL Group. Subject to
modification by ALLTEL's Board, ALLTEL's Compensation Committee, or ALLTEL's
Chief Executive Officer, membership in trade, business, and civic associations
and societies maintained by the Executive on August 1, 1998 shall be deemed
appropriate.
Section 6. Employment Terminations
6.1. Termination by Reason of Expiration of Term. In the event the
Executive's employment under this Agreement terminates by reason of expiration
of the term hereof on June 30, 2000, ALLTEL shall pay or cause another member of
the ALLTEL Group to pay to the Executive, in full satisfaction of the amounts
due under Section 4 (Compensation), (i) his full base salary, at the rate then
in effect as provided in Section 4.1 (Base Salary), through the date of
termination and (ii) all other compensation and benefits to which the Executive
has a vested right at that time, including but not limited to, any benefits
provided for under this Agreement to the extent vested. Such base salary and any
other amounts to be paid a single cash sum shall be paid in a single lump sum
within 30 days following the Executive's termination of employment (except as
otherwise required by ERISA or the terms of any applicable employee benefit
plan).
6.2. Termination Due to Death. In the event of the death of the
Executive while employed under and during the term of this Agreement, ALLTEL
shall pay or cause another member of the ALLTEL Group to pay to the Executive's
Beneficiary, in full satisfaction of the amounts due under Section 4
(Compensation), (i) the Executive's full base salary, at the rate then in effect
as provided in Section 4.1 (Base Salary), earned through the date of death, (ii)
a prorated incentive equal to the full annual incentive payment that would have
been made pursuant to Section 4.2 (Short-Term Incentives) for the year in which
death occurred, assuming the achievement of preestablished performance goals at
the target level, multiplied by a fraction, the numerator of which is the number
of calendar months (counting a partial calendar month as a full month) that have
elapsed (in the calendar year in which the Executive's death occurs) prior to
the Executive's death, and the denominator of which is twelve, (iii) a prorated
incentive equal to the full incentive payment that would have been made pursuant
to Section 4.3 (Long-Term Incentives) for the plan cycle ending in the year in
which death occurred, assuming the achievement of preestablished performance
goals at the target level, multiplied by a fraction, the numerator of which is
the number of calendar months (counting a partial calendar month as a full
month) that have elapsed from the beginning of the plan cycle prior to the
Executive's death, and the denominator of which is 36, and (iv) all other
compensation and benefits to which the Executive had a vested right at his
death, including but not limited to, any benefits provided for under this
Agreement to the extent vested. Not in limitation of the other provisions
contained in this Agreement, if the Executive dies prior to August 1, 1999,
neither the Company nor ALLTEL nor any other member of the ALLTEL Group shall be
obligated to pay the $2,000,000 bonus payment provided for under Section 4.4
(Bonuses). Not in limitation of the other provisions contained in this
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Agreement, if the Executive dies prior to June 30, 2000, neither the Company nor
ALLTEL nor any other member of the ALLTEL Group shall be obligated to pay the
$2,000,000 consulting fee provided for under Section 8 (Consulting Services).
Such base salary, prorated incentive, and any other amounts to be paid as a
single cash sum shall be paid in a single lump sum within 30 days after the
Executive's death (except as otherwise required by ERISA or the terms of any
applicable employee benefit plan).
Except where otherwise required by ERISA or the terms of an applicable
employee benefit plan, the Executive's Beneficiary with respect to each payment
shall be the person so designated by the Executive in writing provided to the
Company or ALLTEL prior to his death. Subject to such exception, in the absence
of such written beneficiary designation, the Executive's Beneficiary shall be
his surviving spouse, or if he has no surviving spouse, his estate.
6.3. Termination Due to Disability. In the event the Executive becomes
Disabled during the term of this Agreement, ALLTEL may terminate or cause to be
terminated the Executive's employment under this Agreement by written notice
from ALLTEL's Board or ALLTEL's Compensation Committee to the Executive of the
termination of the Executive's employment for Disability in accordance with this
Section 6.3 given at least 30 calendar days prior to the effective date of such
termination.
A termination for Disability shall become effective upon the end of the
30 day notice period. Upon the effective date of the Executive's termination of
employment on account of Disability, ALLTEL shall pay or cause another member of
the ALLTEL Group to pay to the Executive, in full satisfaction of the amounts
due under Section 4 (Compensation), (i) his full base salary, at the rate then
in effect as provided in Section 4.1 (Base Salary), earned through the date of
termination, (ii) a prorated incentive equal to the full annual incentive
payment that would have been made pursuant to Section 4.2 (Short-Term
Incentives) for the year in which termination on account of Disability occurred,
assuming achievement of preestablished performance goals at the target level,
multiplied by a fraction, the numerator of which is the number of calendar
months (counting a partial calendar month as a full month) that have elapsed (in
the calendar year in which the Executive's termination of employment for
Disability occurs) prior to the Executive's termination of employment for
Disability, and the denominator of which is twelve, (iii) a prorated incentive
equal to the full incentive payment that would have been made pursuant to
Section 4.3 (Long-Term Incentives) for the plan cycle ending in the year in
which termination of employment for Disability occurred, assuming the
achievement of preestablished performance goals at the target level, multiplied
by a fraction, the numerator of which is the number of calendar months (counting
a partial calendar month as a full month) that have elapsed from the beginning
of the plan cycle prior to the Executive's termination of employment for
Disability, and the denominator of which is 36, and (iv) all other compensation
and benefits to which the Executive has a vested right at his termination of
employment due to Disability, including but not limited to, any benefits
provided for under this Agreement to the extent vested. Not in limitation of the
other provisions contained in this Agreement, if the Executive's employment with
the ALLTEL Group terminates for Disability prior to August 1, 1999, neither the
Company or ALLTEL nor any other member of the ALLTEL Group shall be obligated to
pay the $2,000,000 bonus payment provided for under Section 4.4 (Bonuses). Not
in limitation of the other provisions contained in this Agreement, if the
Executive's employment with the ALLTEL Group terminates for Disability prior to
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June 30, 2000, neither the Company nor ALLTEL nor any other member of the ALLTEL
Group shall be obligated to pay the $2,000,000 consulting fee provided for under
Section 8 (Consulting Services). Such base salary, prorated incentive, and any
other amounts to be paid as a single cash sum shall be paid in a single lump sum
within 30 days of the Executive's termination of employment for Disability
(except as otherwise required by ERISA or the terms of any applicable employee
benefit plan).
The term "Disability" shall mean, for all purposes of this Agreement,
the incapacity of the Executive, due to injury, illness, disease, or bodily or
mental infirmity, to engage in the performance of substantially all of his usual
duties as contemplated by Section 2 (Position and Responsibilities), such
Disability to be determined by ALLTEL's Board or ALLTEL's Compensation Committee
upon receipt of and in reliance on competent medical advice from one or more
individuals, selected by ALLTEL's Board or ALLTEL's Compensation Committee, who
are qualified to give such professional medical advice. In all cases for
ALLTEL's Board or ALLTEL's Compensation Committee to make a termination for
Disability hereunder, such "Disability" must be of the type that would, with the
lapse of time, qualify for benefits under any long-term disability program of
the ALLTEL Group applicable to senior executives of the Company or ALLTEL.
It is expressly understood that the Disability of the Executive for a
period of 90 calendar days or less in the aggregate during any period of 12
consecutive months, in the absence of any reasonable expectation that the
Executive's Disability will exist for more than 90 calendar days, shall not
constitute a failure by the Executive to perform his duties hereunder and shall
not be deemed a breach or default and the Executive shall receive full
compensation for any such period of Disability or for any other temporary
illness or incapacity during the term of this Agreement.
6.4. Termination by ALLTEL Other Than for Cause. ALLTEL may terminate
or cause to be terminated the Executive's employment under this Agreement other
than for "Cause" (as defined in Section 6.7 (Termination for Cause)) at any time
(for any reason other than death or Disability) by written notice from ALLTEL's
Chief Executive Officer to the Executive specifying the effective date of
termination.
Upon a termination under this Section 6.4, or upon a termination by the
Executive under Section 6.5 (Termination by the Executive for Good Reason),
ALLTEL shall pay or cause another member of the ALLTEL Group to pay to the
Executive and provide the Executive with the following, in full satisfaction of
the amounts due under Section 4 (Compensation) and Section 8 (Consulting
Services):
(a) A lump-sum cash amount equal to the Executive's
unpaid base salary, annual incentive in accordance
with Section 4.2 (Short-Term Incentives) for the
year prior to the year in which termination
occurred (to the extent not yet paid at the time of
such termination), long-term incentive in
accordance with Section 4.3 (Long-Term Incentives)
for any plan cycle ended prior to the year in which
termination occurred (to the extent not yet paid at
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the time of such termination), accrued vacation
pay, unreimbursed business expenses, and all other
items earned by the Executive through and including
the effective date of termination (to the extent
not yet paid at the time of such termination), in
full satisfaction for these amounts owed to the
Executive, which shall be paid upon the effective
date of the termination of employment;
(b) Full annual incentive payment(s) in accordance with
Section 4.2 (Short-Term Incentives) for any year
ending during or after the year in which
termination occurred and prior to January 1, 2000,
assuming the achievement of the performance goal(s)
at the target level, which shall be paid at the
time such payment(s) otherwise would have been paid
in the absence of the termination of employment;
(c) Full long-term incentive payment(s) in accordance
with Section 4.3 (Long-Term Incentives) for any
plan cycle ending during or after the year in which
termination occurred and prior to January 1, 2000,
assuming achievement of the performance goal(s) at
the target level, which shall be paid at the time
such payment(s) otherwise would have been paid in
the absence of the termination of employment;
(d) The remainder of the base salary that otherwise would
have been payable to Executive hereunder through
June 30, 2000 had such termination not occurred
during the term of Agreement, which shall be paid
upon the effective date of the termination of
employment;
(e) The bonuses to Executive provided for under Section
4.4 (Bonuses), to the extent not yet paid at the time
of such termination, which shall be paid upon the
effective date of the termination of employment;
(f) The $2,000,000 consulting fee provided for under
Section 8 (Consulting Services), which shall be paid
upon the effective date of the termination of
employment;
(g) All other compensation and benefits to which the
Executive has a vested right at that time, which
shall be paid upon the effective date of the
termination of employment, except to the extent the
Executive elects to receive payment of such
compensation or benefits at a later date, including
but not limited to, retiree medical benefits under
Section 4.7 (Retiree Medical Benefits); and
the Company or ALLTEL shall also immediately make the Additional Supplemental
Retirement Credit to Executive's Supplemental Retirement Account and the
corresponding rabbi trust contribution provided for under Section 4.5
(Supplemental Retirement Benefits), to the extent not yet made.
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Any amounts or benefits or credits provided under this Section 6.4
shall be in lieu of all other benefits provided to the Executive under the
provisions of this Agreement, excepting only those benefits provided under
Section 7 (Excise Taxes).
6.5. Termination by the Executive for Good Reason. The Executive may
terminate this Agreement for Good Reason by giving ALLTEL's Board 30 calendar
days' written notice of such intent to terminate for Good Reason, which sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for such termination. "Good Reason" shall mean, without the Executive's
prior written consent, the occurrence of any one or more of the following:
(i) The assignment to the Executive of any duties materially and
adversely inconsistent in any respect with the Executive's
position (including status, offices, title, and reporting
requirements), authorities, duties, or other
responsibilities as contemplated by Section 2 (Position and
Responsibilities), or any other action of the ALLTEL Group,
which results in a material adverse change in such position,
authority, duties, or responsibilities, that is not remedied
by the Company or ALLTEL promptly after receipt of written
notice thereof given by the Executive to ALLTEL's Board.
(ii) A required relocation of the Executive's principal office to
an area outside of the Little Rock, Arkansas metropolitan
area.
(iii) A material reduction or elimination of any component of the
Executive's compensation (other than reduction or elimination
resulting from the failure to meet performance goals under any
incentive programs) as provided for in Section 4
(Compensation), other than as permitted under that Section.
(iv) A material breach by the Company or ALLTEL, as the case may
be, of any provision of this Agreement that is not remedied by
the Company or ALLTEL promptly after receipt of written notice
thereof given by the Executive to ALLTEL's Board.
Upon the lapse of the 30 calendar day notice period, the Good Reason
termination shall take effect and the Executive's obligation to be employed, and
the obligations to employ the Executive, under the terms of this Agreement shall
terminate simultaneously. For purposes of determining the rights and obligations
of the parties under this Agreement upon any such termination, the termination
shall be treated as if it were a termination other than for Cause under Section
6.4 (Termination by ALLTEL Other Than for Cause).
6.6. Voluntary Termination by the Executive Other Than for Good Reason.
The Executive may terminate this Agreement at any time other than for Good
Reason (as defined in Section 6.5 (Termination by the Executive for Good
Reason)) by giving ALLTEL's Board written notice of intent to terminate,
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delivered at least 90 calendar days prior to the effective date of such
termination (such period not to include vacation). The termination automatically
shall become effective upon the expiration of the notice period.
Upon the effective date of such termination by the Executive other than
for Good Reason, the Company or ALLTEL, as the case may be, shall pay to the
Executive, in full satisfaction of the amounts due under Section 4
(Compensation), his full base salary, at the rate then in effect as provided in
Section 4.1 (Base Salary), earned through the effective date of termination (but
no incentive payments pursuant to Section 4.2 (Short-Term Incentives) or Section
4.3 (Long-Term Incentives) for any incentive period not previously ended, plus
all other compensation and benefits to which the Executive has a vested right at
the effective date of such termination. Not in limitation of the other
provisions contained in this Agreement, if the Executive terminates employment
under this Section 6.6 prior to August 1, 1999, neither the Company nor ALLTEL
nor any other member of the ALLTEL Group shall be obligated to pay the
$2,000,000 bonus payment provided for under Section 4.4 (Bonuses). Not in
limitation of the other provisions contained in this Agreement, if the Executive
terminates employment under this Section 6.6 prior to June 30, 2000, neither the
Company nor ALLTEL nor any other member of ALLTEL Group shall be obligated to
make the Additional Supplemental Retirement Credit to the Executive's
Supplemental Retirement Account or the corresponding rabbi trust contribution
provided for under Section 4.5 (Supplemental Retirement Benefits) or to pay the
$2,000,000 consulting fee provided for under Section 8 (Consulting Services).
6.7. Termination for Cause. Nothing in this Agreement shall be
construed to prevent ALLTEL's Board from terminating or causing to be terminated
the Executive's employment under this Agreement for "Cause." Upon the effective
date of a termination for Cause, ALLTEL shall pay or cause another member of the
ALLTEL Group to pay to the Executive his full base salary, at the rate then in
effect as provided in Section 4.1 (Base Salary), earned through the effective
date of such termination for Cause. The Executive shall not be paid any
incentive payments pursuant to Section 4.2 (Short-Term Incentives) or Section
4.3 (Long-Term Incentives) for any incentive period ending during or after the
year in which the effective date of the termination for Cause occurs. The
Executive shall be entitled to all other accrued compensation and accrued
benefits to which the Executive has a vested right at that time. The foregoing
payments shall be in full satisfaction of all amounts due under Section 4
(Compensation). Not in limitation of the other provisions contained in this
Agreement, if the Executive's employment is terminated for Cause prior to
August 1, 1999, neither the Company nor ALLTEL nor any other member of the
ALLTEL Group shall be obligated to pay the $2,000,000 bonus payment provided for
under Section 4.4 (Bonuses). Not in limitation of the other provisions contained
in this Agreement, if the Executive's employment is terminated for Cause prior
to June 30, 2000, neither the Company nor ALLTEL nor any other member of the
ALLTEL Group shall be obligated to make the Additional Supplemental Retirement
Credit to the Executive's Supplemental Retirement Account or the corresponding
rabbi trust contribution provided for under Section 4.5 (Supplemental Retirement
Benefits) or to pay the $2,000,000 consulting fee provided for under Section 8
(Consulting Services).
"Cause" shall be determined by ALLTEL's Board in the exercise of good
faith and reasonable judgment, and shall be defined as: (i) the Executive's
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conviction for committing an act of fraud, embezzlement, theft, or any other act
constituting a felony involving moral turpitude or causing material harm,
financial or otherwise, to the ALLTEL Group, or (ii) a demonstrably willful and
deliberate act or failure to act which is committed in bad faith, without
reasonable belief that such action or inaction is in the best interests of the
ALLTEL Group, which causes material harm, financial or otherwise, to the ALLTEL
Group, (iii) the consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder; or (iv) the material
breach by the Executive of the terms of this Agreement.
A termination of Executive's employment shall not be deemed to be for
Cause unless each of the following conditions is satisfied:
(i) Written notice is provided to the Executive not less than 15
days prior to the date of termination setting forth the
intention of the ALLTEL Group to consider terminating the
Executive, including a statement of the intended date of
termination and a detailed description of the specific facts
believed to constitute Cause;
(ii) None of the acts or omissions of the Executive that ALLTEL's
Board believes to constitute Cause shall have occurred more
than 12 months before the earliest date on which any member of
ALLTEL's Board who is not a party to the act or omission, knew
or should have known of such act or omission;
(iii) The Executive is offered an opportunity to respond to such
statement by appearing in person, together with the
Executive's legal counsel, before ALLTEL's Board prior to the
date of termination;
(iv) By the affirmative vote of at least 75 percent of the
non-employee members of ALLTEL's Board present at the Board
meeting at which the determination is made, ALLTEL's Board
determines that the specified actions of the Executive
constituted Cause and that the Executive's employment should
accordingly be terminated for Cause; and
(v) ALLTEL provides the Executive a copy of ALLTEL's Board's
written determination setting forth in full specificity the
basis of such termination for Cause.
By determination of ALLTEL's Board, ALLTEL (and any other member of the
ALLTEL Group then employing the Executive) may suspend the Executive from his
duties for a period of up to 30 days with full pay and benefits hereunder during
the period of time in which ALLTEL's Board is making a determination as to
whether to terminate the Executive for Cause. Any purported termination for
Cause which does not satisfy each substantive and procedural requirement of this
definition shall be treated for all purposes under this Agreement as a
termination of the Executive's employment under Section 6.4 (Termination by
ALLTEL Other Than for Cause).
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6.8. Protective Covenants By The Executive
(i) Return of Property. Within five days after the date of
termination of the Executive's employment under this Agreement, the Executive
shall deliver to ALLTEL all of the ALLTEL Group's property in his possession,
custody or control, including, without limitation, all keys and credit cards,
all computers and fax machines, and all files, documents, data and information
in any medium relating in any way to the ALLTEL Group or its employees,
suppliers, customers or business.
(ii) Non-Disclosure. The Executive acknowledges that in the course of
his employment with the ALLTEL Group he has had and will have access to
confidential information and trade secrets proprietary to ALLTEL Group,
including but not limited to, information relating to the ALLTEL Group's
products, suppliers, and customers, the sources, nature, processes, costs and
prices of the ALLTEL Group's products, the names, addresses, contact persons,
purchasing and sales histories, and preference of the ALLTEL Group's suppliers
and customers, the ALLTEL Group's business plans and strategies, and the names
and addresses of, amounts of compensation paid to, and the trading and sales
performance of the ALLTEL Group's employees and agents, not including any
information that becomes publicly available otherwise than as a result of a
disclosure by the Executive in breach of this covenant (hereinafter referred to
as the "Confidential Information"). The Executive further acknowledges that the
Confidential Information is proprietary to the ALLTEL Group, that the
unauthorized disclosure of any of the Confidential Information to any person or
entity will result in immediate and irreparable competitive injury to the ALLTEL
Group, and that such injury cannot adequately be remedied by an award of
monetary damages. Accordingly, the Executive shall, during the term of his
employment with the ALLTEL Group and during the first 36 months immediately
following the calendar month in which occurs his termination of employment under
this Agreement, not disclose any Confidential Information to any person or
entity other than any person or entity reasonably believed by the Executive to
be properly authorized by ALLTEL to receive the information, without the prior
written permission of ALLTEL's Chief Executive Officer.
(iii) Non-Interference. The Executive shall not during the term of his
employment with the ALLTEL Group and during the first 60 calendar months
immediately following the calendar month in which occurs his termination of
employment under this Agreement employ, or assist any person or entity in
employing, any employee of any member of the ALLTEL Group. The Executive shall
not during the term of his employment with the ALLTEL Group and during the first
60 calendar months immediately following the calendar month in which occurs his
termination of employment under this Agreement solicit, or assist any person or
entity to solicit, any employee of any member of the ALLTEL Group to leave the
ALLTEL Group's employment or to become employed by any entity that is not a
member of the ALLTEL Group. The provisions of this Section 6.8(iv) shall not,
however, apply with respect to any person who was an employee of the Company
prior to August 1, 1998 and whose employment with the ALLTEL Group has been
involuntarily terminated by the ALLTEL Group or who, on or before August 1,
1998, had indicated the intent not to remain in the employ of the ALLTEL Group
on a long-term basis.
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(iv) Non-Competition. The Executive shall not during the term of his
employment with the ALLTEL Group and during the first 60 calendar months
immediately following the calendar month in which occurs his termination of
employment under this Agreement (hereinafter referred to as the "Non-Competition
Period"), directly or indirectly (whether as an officer, director, employee,
sales representative, agent, principal, proprietor, consultant, advisor,
partner, lender, investor or otherwise) engage in, assist or have any interest
in any person, firm, entity, business or enterprise that (1) is engaged in any
aspect of the communications or telecommunications business or industry in which
any member of the ALLTEL Group is engaged as a material portion of its business
as of the date of the Executive's termination of employment under this
Agreement, (2) is engaged in any aspect of the information or data processing
management, outsourcing services or application software business or industry in
which any member of the ALLTEL Group is engaged as a material portion of its
business as of the date of the Executive's termination of employment under this
Agreement, or (3) is engaged in any other business in which any member of the
ALLTEL Group is engaged as a material portion of its business as of the date of
the Executive's termination of employment under this Agreement; except that the
foregoing provisions of this paragraph (iv) shall not prevent the Executive from
(1) owning, solely for investment purposes, up to five percent of the issued and
outstanding capital stock of any publicly traded company, or (2) serving on the
board of directors of any other company that the Chief Executive Officer of
ALLTEL approves, which approval shall not be unreasonably withheld.
(v) Harmful Statements. The Executive shall not disseminate any
information or make any statements, whether written, oral or otherwise, that are
negative, disparaging or critical of any member of ALLTEL Group or its business
or operations or that place any member of the ALLTEL Group or its business or
operations in a bad light, except to the extent reasonably necessary to enforce
the terms of this Agreement or as otherwise required by applicable law. Subject
to the Executive's compliance with the terms of this Agreement, ALLTEL shall
not, and shall cause each other member of the ALLTEL Group to not, disseminate
any information or make any statements, whether written, oral or otherwise, that
are negative, disparaging or critical of the Executive or that place the
Executive in a bad light, except to the extent reasonably necessary to enforce
the terms of this Agreement or as otherwise required by applicable law.
(vi) Resignations. Within five days after the termination of his
employment under this Agreement, the Executive shall execute and deliver to the
Chief Executive Officer of ALLTEL such resignations as a director and officer of
ALLTEL and any other members of the ALLTEL Group, in such form, as may be
reasonably requested by ALLTEL's Chief Executive Officer.
(vii) Challenge to Validity. The Executive shall not commence any
action, suit or proceeding to invalidate or limit the enforceability of any of
the covenants in this Section 6.8, and the Executive shall not assert, in any
action, suit or proceeding against the Executive by any ALLTEL Group member for
a breach by the Executive of any of the covenants in this Section 6.8 that any
provision of the covenants in this Section 6.8 is invalid or unenforceable in
any respect or to any extent, irrespective of the outcome of any such action,
suit or proceeding.
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6.9. Specific Performance; Other Remedies. The Executive acknowledges
that each and every covenant contained in Section 6.8 (Protective Covenants By
The Executive) (hereinafter referred to as the "Protective Covenants") is
reasonable and is necessary to protect the trade secrets, confidential
information, and other business interests of the ALLTEL Group and that his
compliance with each of the Protective Covenants is necessary to protect the
ALLTEL Group from unfair injury. The Executive further acknowledges that a
breach of any of the Protective Covenants will result in irreparable and
continuing harm and damage to the ALLTEL Group for which there will be no
adequate remedy at law. In the event of a breach of any of the Protective
Covenants, each and every member of the ALLTEL Group shall be entitled to
injunctive relief and to such other relief (whether at law or in equity) as a
court of competent jurisdiction deems proper in the circumstances, in addition
to any other remedy or relief to which any of them may be entitled.
Notwithstanding any other provision of this Agreement to the contrary and not in
limitation of any other provision of this Agreement, the obligations of each
member of the ALLTEL Group under this Agreement set forth below in this Section
6.9 are conditioned upon compliance by the Executive with each of the Protective
Covenants, and failure by the Executive to comply with any of the Protective
Covenants shall entitle each ALLTEL Group member to forfeit, terminate payment
of, and recover immediately from the Executive any of the following that may
have been paid to or vested in the Executive: (i) the $1,000,000 and $2,000,000
bonus payments provided for under Section 4.4 (Bonuses), (ii) the $2,000,000
consulting fee provided for under Section 8 (Consulting Services), (iii) all
retiree medical benefits provided for under Section 4.7 (Retiree Medical
Benefits) paid (or to be paid) from and after the date of the breach, and (iv)
that portion of any Supplemental Retirement Benefits under Section 4.5
(Supplemental Retirement Benefits) attributable to the Additional Supplemental
Retirement Credit to the Executive's Supplemental Retirement Account provided
for under Section 4.5 (Supplemental Retirement Benefits) (including earnings
thereon). Notwithstanding the foregoing provisions of this Section 6.9, except
as otherwise provided in Section 10.1 (Dispute Resolution), in any action by any
member of the ALLTEL Group for breach of any of the Protective Covenants, the
Executive shall have no liability for monetary damages (except for the loss of
the payments and benefits provided for under the immediately preceding
sentence). The Executive acknowledges that the Protective Covenants are a
principal inducement for the willingness of ALLTEL and the Company to enter into
this Agreement and make the payments and provide the benefits to the Executive
under this Agreement and that ALLTEL, the Company, and the Executive intend the
Protective Covenants to be binding upon and enforceable against the Executive in
accordance with their terms, notwithstanding any common or statutory law to the
contrary. The Executive acknowledges that any forfeiture resulting under the
provisions of this Agreement is reasonably related and proportional to the harm
that the ALLTEL Group would sustain if he were to violate any of the Protective
Covenants.
Section 7. Excise Taxes
(i) If any portion of the amount of any payment or benefit
heretofore or hereafter provided under this Agreement, or the Prior
Agreement, or under any other agreement with or plan of the Company or
an ALLTEL Group Member, including, but not limited to, stock options,
restricted stock, and other long-term incentives (each a "Payment")
would constitute an "Excess Parachute Payment" in connection with the
"Change in Control" of the Company (as defined in the Prior Agreement)
that occurred on June 23, 1998 in connection with the Merger Agreement,
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such that an excise tax is triggered under Section 4999 of the Code in
respect of such amounts, then ALLTEL shall pay or cause Company to pay
to Executive, in cash, an additional amount equal to such excise tax
and any interest or penalties incurred by Executive with respect
thereto (collectively, "Excise Tax"), together with any federal and
state income, employment and other excise taxes payable by Executive in
respect of such payment (and to cover the resulting income, employment,
and other excise taxes resulting from each successive payment, and so
on as necessary to completely offset the Excise Tax impact) (a"Gross-Up
Payment"). For this purpose, Executive shall be deemed to be subject to
the highest marginal rate of federal and state taxes.
(ii) Subject to the provisions of this Section 7(ii), all
determinations required to be made under this Section 7(ii), including
whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at the
determination, shall be made by a nationally recognized certified
public accounting firm reasonably acceptable to ALLTEL designated by
the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to ALLTEL and the Executive within 30 days
after the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by ALLTEL. All fees and
expenses of the Accounting Firm shall be borne solely by ALLTEL. Any
Gross-Up Payment, as determined in accordance with this Section 7(ii),
shall be paid by the Company or ALLTEL to the Executive within five
days after the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall so indicate to the Executive in writing. Any
determination by the Accounting Firm shall be binding upon ALLTEL, the
Company, and the Executive. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm, it is possible that Gross-Up
Payments that should have made will not have been made (an
"Underpayment"), consistent with the calculations required to be made
hereunder. In the event ALLTEL exhausts ALLTEL's remedies in accordance
with Section 7(iii) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the
amount of Underpayment that has occurred and the Underpayment shall be
promptly paid by the Company or ALLTEL to or for the benefit of
Executive.
(iii) The Executive shall notify ALLTEL in writing of any
claim by the Internal Revenue Service that, if successful, would
require a Gross-Up Payment (that has not already been paid by the
Company or ALLTEL). The notification shall be given as soon as
practicable but no later than ten business days after the Executive is
informed in writing of the claim and shall apprise ALLTEL of the nature
of the claim and the date on which the claim is requested to be paid.
The Executive shall not pay the claim prior to the expiration of the
30-day period following the date on which the Executive gives notice to
ALLTEL or any shorter period ending on the date that any payment of
taxes with respect to the claim is due. If ALLTEL notifies the
Executive in writing prior to the expiration of the 30-day period that
it desires to contest the claim, the Executive shall:
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(a) give ALLTEL any information reasonably requested
by ALLTEL relating to the claim;
(b) take any action in connection with contesting the
claim as ALLTEL shall reasonably request in writing from time
to time, including, but not limited to, accepting legal
representation with respect to the claim by an attorney
reasonably selected by ALLTEL;
(c) cooperate with the ALLTEL Group in good faith in
order effectively to contest the claim; and
(d) permit any member of the ALLTEL Group to
participate in any proceedings relating to the claim.
The Company or ALLTEL shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with the contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of the representation and payment of costs and expenses. Without
limiting the foregoing provisions of this Section 7(iii), one or more
members of the ALLTEL Group shall control all proceedings taken in
connection with the contest and, at its or their sole option, may
pursue or forego any and all administrative appeals, proceedings,
hearings, and conferences with the taxing authority in respect of the
claim and may, at its or their sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive shall prosecute the contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as ALLTEL shall
determine. If ALLTEL directs the Executive to pay the claim and sue for
a refund, the Company or ALLTEL shall advance the amount of the payment
to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax
or other tax (including interest or penalties with respect thereto)
imposed with respect to the advance or with respect to any imputed
income with respect to the advance; and any extension of the statue of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which the contested amount is claimed to be
due shall be limited solely to the contested amount. The ALLTEL Group's
control of the contest shall be limited to issues with respect to which
a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
If, after the receipt by the Executive of an amount advanced by the
Company or ALLTEL pursuant to this Section 7(iii), the Executive
becomes entitled to receive any refund with respect to the claim, the
Executive shall, subject to the Company's or ALLTEL's compliance with
the requirements of this Section 7(iii), promptly pay to the Company or
ALLTEL the amount of the refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company or ALLTEL
pursuant to this Section 7(iii), a determination is made that the
Executive shall not be entitled to any refund with respect to the claim
and ALLTEL does not notify the Executive in writing of its intent to
contest the denial of refund prior to the expiration of 30 days after
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the determination, then the advance shall be forgiven and shall not be
required to be repaid and the amount of the advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid.
(iv) Without limitation of the foregoing provisions of this
Section 7, the Executive, the Company, and ALLTEL shall each use their
reasonable best efforts to cooperate with each other in resolving any
matter arising under this Section 7.
Section 8. Consulting Services
Except as otherwise provided in this Agreement, if the Executive's
employment hereunder has not terminated prior to June 30, 2000, or, at the
option of ALLTEL, if Executive's employment hereunder has terminated prior to
June 30, 2000 pursuant to Section 6.4 (Termination by ALLTEL Other Than for
Cause), Section 6.5 (Termination by the Executive for Good Reason), or Section
6.6 (Voluntary Termination by the Executive Other Than for Good Reason), ALLTEL
shall engage the Executive as a consultant for a one-year term commencing July
1, 2000 and ending June 30, 2001 (hereinafter referred to as the "Consulting
Term"), and, subject to the provisions contained in this Section 8, the
Executive shall accept such engagement. In addition to the foregoing, the
following provisions shall govern the performance of Executive's engagement as a
consultant.
(i) During the Consulting Term, the Executive shall provide
the ALLTEL Group with such consulting services appropriate to his
experience and expertise regarding the ALLTEL Group's business as are
reasonably requested by ALLTEL's Chief Executive Officer. The Executive
shall not, however, be required to provide consulting services for more
than 80 hours per calendar month. The Executive shall remain free to
undertake other consulting assignments and employment or business
activities with other third parties (subject to the provisions of
Section 6.8 (Protective Covenants By the Executive)) if those
activities are not in conflict with the Executive's duties or
obligations under this Section 8.
(ii) The Executive shall provide such consulting services as
an independent contractor (and not as an employee or agent of any
member of the ALLTEL Group) and the Executive shall not have any right
or authority to commit or bind any member of the ALLTEL Group in any
way. Without limitation of the immediately preceding sentence, no
member of the ALLTEL Group shall direct or control the Executive in the
performance of the consulting services provided to the ALLTEL Group.
The consulting services shall be provided at commercially reasonable
times and locations, both to be mutually agreed upon between the
Executive and ALLTEL's Chief Executive Officer. The ALLTEL Group shall
provide the Executive with reasonable support to facilitate the
Executive's performance of the consulting services.
(iii) In consideration of the consulting services to be
provided under this Section 8, ALLTEL shall pay the Executive the sum
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of $2,000,000 within five business days following June 30, 2000, unless
that amount has previously been paid to the Executive in accordance
with Section 6.4 (Termination by ALLTEL Other Than for Cause) or
Section 6.5 (Termination by the Executive for Good Reason). This
payment shall be the sole consideration to be paid by any member of the
ALLTEL Group for the Executive's services as a consultant, and the
Executive shall not have or accrue with respect to the consulting
services any entitlement to ALLTEL Group employee compensation or
benefits, including but not limited to, unemployment compensation,
health benefits, retirement benefits, severance benefits, insurance,
profit sharing, vacation, workers' compensation, sick leave, disability
leave, and paid holidays.
(iv) The ALLTEL Group shall compensate the Executive for his
reasonable travel, food, and lodging expenses related to those
consulting services, upon proper invoice therefor, but only to the
extent those expenses have been approved by ALLTEL's Chief Executive
Officer prior to being incurred. If the Executive performs consulting
services at the request of ALLTEL's Chief Executive Officer that
necessitate the Executive incurring expenses in connection therewith
not described in the immediately preceding sentence, not including
travel, food, or lodging expenses, ALLTEL shall reimburse the Executive
upon proper invoice therefor, but only to the extent that such expenses
have been approved by ALLTEL's Chief Executive Officer prior to being
incurred.
(v) Where required by law, one or more members of the ALLTEL
Group shall report amounts paid by a member or members of the ALLTEL
Group to the Executive for consulting services on IRS Form 1099 (or its
successor or equivalent). The Executive shall retain all responsibility
and liability for taxes, including but not limited to, income taxes and
Social Security/Medicare taxes on amounts paid to the Executive under
this Section 8, excepting only those benefits provided by Section 7
(Excise Taxes). The Executive shall retain all responsibility for
compliance with laws pertaining to self-employment, including without
limitation, laws relating to workers' compensation, with respect to
consulting services under this Section 8.
(vi) The provisions of Section 6.8(iii) (Non-Disclosure) And
Section 6.9 (Specific Performance; Other Remedies) with respect thereto
shall apply in respect of the Consulting Term in the same manner as
they apply during the Executive's employment with the ALLTEL Group.
Section 9. Assignment
9.1. Assignment by the Company and ALLTEL. This Agreement shall be
binding upon, and shall inure to the benefit of, and be enforceable by the
Company and ALLTEL and their respective successors. Any such successor shall be
deemed to be the Company or ALLTEL, as the case may be, for all purposes of this
Agreement. As used in this Agreement, the term "successor" shall mean any
surviving corporation in a merger or consolidation, or any person, corporation,
partnership, or other business entity which, whether by purchase or otherwise,
acquires all or substantially all of the assets of the Company or ALLTEL, as the
case may be. Notwithstanding such assignment, the Company or ALLTEL, as the case
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may be, shall remain, with such successor, jointly and severally liable for all
its obligations hereunder.
The Company or ALLTEL, as the case may be, shall require any successor
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company or ALLTEL, as the case may be, would be
required to perform if no such succession where to take place.
Except as provided in this Section 9.1, this Agreement may not be
assigned by the Company or ALLTEL.
9.2. Assignment by the Executive. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, and administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive should die while any
amounts payable to the Executive hereunder remain outstanding, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's Beneficiary, determined in accordance with
Section 6.2 (Termination Due to Death).
Section 10. Dispute Resolution and Notice
10.1. Dispute Resolution. The Executive shall have the right and option
to have any good faith dispute or controversy arising under or in connection
with this Agreement settled by litigation or by arbitration.
If arbitration is selected, such proceeding shall be conducted before a
panel of three arbitrators sitting in the Little Rock, Arkansas Metropolitan
Area in accordance with the rules of the American Arbitration Association then
in effect. Judgment may be entered on the award of the arbitrator in any court
having jurisdiction.
Except as otherwise provided in this Section 10.1, all expenses of such
litigation or arbitration including, but not limited to, the reasonable fees and
expenses of the legal representative for the Executive, and necessary costs and
disbursements incurred as a result of such dispute or legal proceeding, and any
prejudgment interest, shall be borne by the Company or ALLTEL, whether or not
the Executive prevails in such litigation or arbitration. The Company or ALLTEL
shall pay (or reimburse the Executive for) such fees and expenses on a monthly
basis within ten days after the Executive's submission of a written request for
payment or reimbursement, as applicable, together with reasonable evidence that
the fees and expenses were incurred. If the Executive does not prevail (after
exhaustion of all available judicial or arbitral remedies, as applicable), and a
court of competent jurisdiction decides that the Executive had no reasonable
basis for bringing an action or arbitration hereunder or lacked good faith in
doing so, no further reimbursement for legal fees and expenses shall be due to
the Executive, and the Executive shall repay the Company or ALLTEL for any
amounts previously paid by it hereunder pursuant to this Section 10.1. With
respect to any dispute regarding the provisions of Section 6.8 (Protective
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Covenants by the Executive) or Section 6.9 (Specific Performance; Other
Remedies), if the Executive does not prevail (after exhaustion of all available
judicial or arbitral remedies, as applicable), no further reimbursement for
legal fees and expenses shall be due to the Executive, and the Executive shall
repay the Company or ALLTEL for any amounts previously paid by it hereunder
pursuant to this Section 10.1 in respect of such dispute.
10.2. Notice. Any notices, requests, demands, or other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he has filed
in writing with ALLTEL or, in the case of the Company or ALLTEL, to ALLTEL's
Board, or ALLTEL's Compensation Committee, at ALLTEL's principal corporate
executive offices.
Section 11. Miscellaneous
11.1. Entire Agreement. Except as otherwise expressly provided herein
with respect to the Prior Agreement, this Agreement supersedes any prior
agreements or understandings, oral or written, between the parties hereto or
between the Executive and the Company or ALLTEL, with respect to the subject
matter hereof and constitutes the entire agreement of the parties with respect
thereto.
11.2. Modification. This Agreement shall not be varied, altered,
modified, canceled, changed, or in any way amended, or any provision of this
Agreement waived, except by mutual agreement of the parties in a written
instrument executed by the parties hereto or their legal representatives. No
waiver by any party to this Agreement at any time of any breach by any party to
this Agreement of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
11.3. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect. In the event any provision of this Agreement is
held unenforceable, such provision shall be reformed so as to be enforced to the
maximum extent possible, and if it is determined that it is not possible to
reform any such provision of this Agreement, such provision shall be severed
from this Agreement and the remainder of this Agreement shall be enforced to the
full extent permitted by law.
11.4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
11.5. Withholding. Any member of the ALLTEL Group may withhold from any
amounts payable under this Agreement all federal, state, city, or other taxes or
payments as may be required pursuant to any law or governmental regulation or
ruling or as may be expressly authorized by the Executive to be withheld,
deducted or reduced from those amounts.
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11.6. Assumption by ALLTEL. ALLTEL has assumed and agreed to perform
the Company's obligations under this Agreement. ALLTEL shall be entitled to take
any and all action with respect to this Agreement that could be taken by the
Company pursuant to this Agreement, and the Executive shall be bound thereby to
the same extent as though such action (or inaction) had been by the Company.
ALLTEL shall also be entitled to have the Company take any action contemplated
by this Agreement, other than any action specifically to be taken by ALLTEL's
Board, ALLTEL's Compensation Committee, or ALLTEL's Chief Executive Officer, and
the Executive shall be bound by any action (or inaction) of the Company taken
(or omitted) in accordance with this Agreement.
11.7. Matters Related to Prior Agreement. None of the provisions
contained in the Prior Agreement shall continue to apply in respect of any
period subsequent to July 31, 1998, except as otherwise expressly provided
herein. Without limitation of the immediately preceding sentence, no event,
fact, or circumstance, whenever it occurred or occurs, has been, is, or shall be
a "Qualifying Termination" (as defined in the Prior Agreement) for any purpose
under the Prior Agreement. The Executive acknowledges and agrees that as of the
close of business on July 31, 1998 neither the Company nor ALLTEL was in
(anticipatory or other) breach or default of any provision of the Prior
Agreement.
Section 12. Construction
The provisions of this Agreement have been mutually created with the
assistance of counsel for each party, and no provision of this Agreement shall
be construed against any party as the drafter thereof. Paragraph and Section
titles herein are for ease of reference purposes only and shall not be
considered in the construction of this Agreement.
Section 13. Governing Law
To the extent not preempted by federal law, the provisions of this
Agreement shall be construed and enforced in accordance with the laws of the
State of Delaware.
IN WITNESS WHEREOF, ALLTEL, the Company, and the Executive have
executed this Agreement as of the date first above written.
ATTEST ALLTEL CORPORATION
By:/s/Francis X. Frantz By:/s/Scott T. Ford
------------------------ ------------------------
Name: Francis X. Frantz Name: Scott T. Ford
Title: Secretary Title: President
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ATTEST 360 COMMUNICATIONS
COMPANY
By:/s/Kevin C. Gallagher By:/s/Debra L. Ferrari
------------------------ ------------------------
Name: Kevin C. Gallagher Name: Debra L. Ferrari
Title: Secretary Title: SVP - HR
WITNESS DENNIS E. FOSTER
/s/Francis X. Frantz /s/Dennis E. Foster
- --------------------------- --------------------------
Name: Francis X. Frantz
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EXHIBIT A
The amount of the annual Supplemental Retirement Credit to the Executive's
Supplemental Retirement Account shall be equal to the actuarially computed value
necessary to provide an annual replacement beginning at age 65 of 40 percent of
the Executive's final annual base salary and target incentive bonus opportunity
under Section 4.2 (Short-Term Incentives) and Section 4.3 (Long-Term Incentives)
at age 65, for the Executive's expected life (using the 83 GATT mortality
table), offset by the age 65 pension benefit provided by the Executive's former
employers (i.e., Sprint Corporation, AT&T, and GTE). For purposes of this
calculation, it will be assumed that the Executive will retire at age 65, that
pay will increase by six percent each year, and that all past and future
Supplemental Retirement Credits (including those as defined in and occurring
under the Prior Agreement) will be credited with a level eight percent rate of
return, regardless of the actual return credited to the Executive's Supplemental
Retirement Account (i.e., the Executive will obtain a greater benefit if the
amount of earnings credited to his Supplemental Retirement Account pursuant to
Section 4.5 (Supplemental Retirement Benefits) (and under the Prior Agreement)
exceeds an annualized eight percent rate of return, and a lower benefit if the
amount so credited fails to achieve an annualized eight percent rate of return).
This actuarial calculation shall be performed annually for each year (prior to
2000) for which the Supplemental Retirement Credit is to be made in accordance
with Section 4.5 (Supplemental Retirement Benefits), substituting actual base
salary and target incentive bonus amounts under Section 4.2 (Short-Term
Incentives) and Section 4.3 (Long-Term Incentives) for estimated projections as
such actual amounts become known, and adjusting the percentage of pay required
as an annual funding contribution, such that the percentage of base salary
required as an annual funding contribution shall be projected to be the same for
all future years (based on the then-available actual historical compensation
history and assumed projected increases as set forth above), in the percentage
required to produce the 40 percent replacement ratio. The Schedule attached to
the Prior Agreement provides the calculation for the initial year of operation.
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AGREEMENT
This Agreement, dated July 23, 1998, is made by and between ALLTEL
Corporation, a Delaware corporation (as hereinafter defined, the "Corporation"),
and Kevin L. Beebe (as hereinafter defined, the "Executive").
WHEREAS, the Board of Directors of the Corporation (as hereinafter
defined, the "Board") recognizes that the possibility of a Change in Control (as
hereinafter defined) of the Corporation exists and that such possibility, and
the uncertainty it may cause, may result in the departure or distraction of key
management employees of the Corporation or of a Subsidiary to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Executive is a key management employee of the
Corporation or of a Subsidiary; and
WHEREAS, the Board has determined that the Corporation should encourage
the continued employment of the Executive by the Corporation or a Subsidiary and
the continued dedication of the Executive to his assigned duties without
distraction as a result of the circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Defined Terms. For purposes of this Agreement, the
-------------
following terms shall have the meanings indicated below:
(A) "Board" shall mean the Board of Directors of
the Corporation, as constituted from time to time.
(B) "Cause" for termination by the Corporation
of the Executive's employment shall mean (i) the willful failure by the
Executive substantially to perform the Executive's duties with the Corporation
or a Subsidiary, other than any failure resulting from the Executive's
incapacity due to physical or mental illness or any actual or anticipated
failure after the issuance of a Notice of Termination for Good Reason by the
Executive in accordance with paragraph (A) of Section 6, that continues for at
least 30 days after the Board delivers to the Executive a written demand for
performance that identifies specifically and in detail the manner in which the
Board believes that the Executive willfully has failed substantially to perform
the Executive's duties or (ii) the willful engaging by the Executive in
misconduct that is demonstrably and materially injurious to the Corporation or
any Subsidiary, monetarily or otherwise. For purposes of this definition, no
act, or failure to act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was in the best
interest of the Corporation and its Subsidiaries:
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(C) A "Change in Control" shall mean, if subsequent
to the date of this Agreement:
(i) Any "person," as defined in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Corporation, any of its subsidiaries, or any
employee benefit plan maintained by the Corporation or any of its subsidiaries,
becomes the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act)
of (A) l5% or more, but no greater than 50%, of the outstanding voting capital
stock of the Corporation, unless prior thereto, the Continuing Directors approve
the transaction that results in the person becoming the beneficial owner of 15%
or more, but no greater than 50%, of the outstanding voting capital stock of the
Corporation or (B) more than 50% of the outstanding voting capital stock of the
Corporation, regardless whether the transaction or event by which the foregoing
50% level is exceeded is approved by the Continuing Directors;
(ii) At any time Continuing Directors no
longer constitute a majority of the directors of the Corporation; or
(iii) A record date is fixed for
determining stockholders entitled to vote upon (A) a merger or consolidation of
the Corporation, statutory share exchange, or other similar transaction with
another corporation, partnership, or other entity or enterprise in which either
the Corporation is not the surviving or continuing corporation or shares of
common stock of the Corporation are to be converted into or exchanged for cash,
securities other than common stock of the Corporation, or other property, (B) a
sale or disposition of all or substantially all of the assets of the
Corporation, or (C) the dissolution of the Corporation; or
(iv) The Corporation enters into an
agreement with any Person, the consummation of which would result in the
occurrence of an event described in clause (i), (ii) or (iii) above of this
paragraph (C)
(D) "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(E) "Continuing Directors" means directors who
were directors of the Corporation at the beginning of the 24-month period ending
on the date the determination is made or whose election, or nomination for
election by the Corporation's stockholders, was approved by at least a majority
of the directors who are in office at the time of the election or nomination and
who either (i) were directors at the beginning of the period, or (ii) were
elected, or nominated for election, by at least a majority of the directors who
were in office at the time of the election or nomination and were directors at
the beginning of the period.
(F) "Corporation" shall mean ALLTEL Corporation
and any successor to its business or assets, by operation of law or otherwise.
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(G) "Date of Termination" shall have the meaning
stated in paragraph (B) of Section 6 hereof.
(H) "Disability" shall be deemed the reason for
the termination by the Corporation of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or a Subsidiary for a period of six
consecutive months, the Corporation shall have given the Executive a Notice of
Termination for Disability, and, within 20 business days after the Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive's duties.
(I) "Executive" shall mean the individual
named in the first paragraph of this Agreement.
(J) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the occurrence, without the
Executive's express written consent, of any one of the following:
(i) the assignment to the Executive
of any duties inconsistent with the Executive's status as an executive officer
of the Corporation or of a Subsidiary or a substantial adverse alteration in the
nature or status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) a reduction by the Corporation
in the Executive's annual base salary to any amount less than the Executive's
annual base salary as in effect immediately prior to the Change in Control;
(iii) the relocation of the principal
executive offices of the Corporation or of a Subsidiary, as the case may be, to
a location more than 35 miles from the location of such offices immediately
prior to the Change in Control or the Corporation's requiring the Executive to
be based anywhere other than the principal executive offices of the Corporation
or of a Subsidiary as the case may be, except for required business travel to an
extent substantially consistent with the Executive's business travel obligations
immediately prior to the Change in Control;
(iv) the failure by the Corporation
to pay to the Executive any portion of the Executive's current compensation, or
to pay to the Executive any deferred compensation under any deferred
compensation program of the Corporation, within five days after the date the
compensation is due or to pay or reimburse the Executive for any expenses
incurred by him for required business travel;
(v) the failure by the Corporation
to continue in effect any compensation plan in which the Executive participates
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immediately prior to the Change in Control that is material to the Executive's
total compensation, including but not limited to, stock option, restricted
stock, stock appreciation right, incentive compensation, bonus, and other plans,
unless an equitable alternative arrangement embodied in an ongoing substitute or
alternative plan has been made, or the failure by the Corporation to continue
the Executive's participation therein (or in a substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
compensation provided and the level of the Executive's participation relative to
other participants, than existed immediately prior to the Change in Control;
(vi) the failure by the Corporation
to continue to provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Corporation's pension,
profit-sharing, life insurance, medical, health and accident, disability, or
other employee benefit plans in which the Executive was participating
immediately prior to the Change in Control; the failure by the Corporation to
continue to provide the Executive any material fringe benefit or perquisite
enjoyed by the Executive immediately prior to the Change in Control; or the
failure by the Corporation to provide the Executive with the number of paid
vacation days to which the Executive is entitled in accordance with the
Corporation's normal vacation policy in effect immediately prior to the Change
in Control; or
(vii) any purported termination by the
Corporation of the Executive's employment that is not effected in accordance
with a Notice of Termination satisfying the requirements of paragraph (A) of
Section 6 hereof.
(K) "Notice of Termination" shall have the
meaning stated in paragraph (A) of Section 6 hereof.
(L) "Payment Trigger" shall mean the
occurrence of a Change in Control during the term of this Agreement coincident
with or followed (i) at any time before the end of the 12th month immediately
following the month in which the Change in Control occurred, by the termination
of the Executive's employment with the Corporation or a Subsidiary for any
reason other than (A) by the Executive without Good Reason, (B) by the
Corporation as a result of the Disability of the Executive or with Cause or, (C)
as a result of the death of the Executive or (ii) in the event the Executive
remains continuously employed by the Corporation or a Subsidiary until the end
of the 12th month immediately following the month in which the Change in Control
occurred, the termination of the Executive's employment with the Corporation or
a Subsidiary, at any time during the three month period immediately following
the expiration of such 12-month period, for any reason other than (A) by the
Corporation as a result of the Disability of the Executive or (B) as a result of
the death of the Executive.
(M) "Person" shall have the meaning given in
Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to
time, as modified and used in Sections 13(d) and 14(d) thereof; except that, a
Person shall not include (i) the Corporation or any Subsidiary, (ii) a trustee
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or other fiduciary holding securities under an employee benefit plan of the
Corporation or any Subsidiary, or (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities.
(N) "Subsidiary" shall mean any corporation or
other entity or enterprise, whether incorporated or unincorporated, of which at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
serving similar functions with respect to such corporation or other entity or
enterprise is owned by the Corporation or other entity or enterprise of which
the Corporation directly or indirectly owns securities or other interests having
all the voting power.
2. Term of Agreement. This Agreement shall become effective on the date
-----------------
hereof and, subject to the second sentence of this Section 2, shall continue in
effect until the earliest of (i) a Date of Termination in accordance with
Section 6 or the death of the Executive shall have occurred prior to a Change in
Control, (ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Corporation of all its obligations, and the
satisfaction by the Corporation of all its obligations and liabilities, under
this Agreement, (iii) the ten year anniversary of the date of this Agreement if,
as of that ten year anniversary, a Change in Control shall not have occurred and
be continuing, or (iv) in the event, as of the ten year anniversary of the date
of this Agreement, a Change in Control shall have occurred and be continuing,
either the expiration of such period thereafter within which a Payment Trigger
does not or can not occur or the ensuing occurrence of a Payment Trigger and the
performance by the Corporation of all of its obligations and liabilities under
this Agreement. Any Change in Control during the term of this Agreement that for
any reason ceases to constitute a Change in Control or is not followed by a
Payment Trigger shall not effect a termination or lapse of this Agreement. Any
transfer of the Executive's employment from the Corporation to a Subsidiary,
from a Subsidiary to the Corporation, or from one Subsidiary to another
Subsidiary shall not constitute a termination of the Executive's employment for
purposes of this Agreement.
3. General Provisions.
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(A) The Corporation hereby represents and warrants to the
Executive as follows: The execution and delivery of this Agreement and the
performance by the Corporation of the actions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Corporation.
This Agreement is a legal, valid and legally binding obligation of the
Corporation enforceable in accordance with its terms. Neither the execution or
delivery of this Agreement nor the consummation by the Corporation of the
actions contemplated hereby (i) will violate any provision of the certificate of
incorporation or bylaws (or other charter documents) of the Corporation, (ii)
will violate or be in conflict with any applicable law or any judgment, decree,
injunction or order of any court or governmental agency or authority, or (iii)
will violate or conflict with or constitute a default (or an event of which,
with notice or lapse of time or both, would constitute a default) under or will
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the assets or properties of the Corporation under, any term or provision of
the certificate of incorporation or bylaws (or other charter documents) of the
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Corporation or of any contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which the Corporation is a
party or by which the Corporation or any of its properties or assets may be
bound or affected.
(B) No amount or benefit shall be payable under this
Agreement unless there shall have occurred a Payment Trigger during the term of
this Agreement. In no event shall payments in accordance with this Agreement be
made in respect of more than one Payment Trigger.
(C) This Agreement shall not be construed as creating an
express or implied contract of employment and, except as otherwise agreed in
writing between the Executive and the Corporation, the Executive shall not have
any right to be retained in the employ of the Corporation or of a Subsidiary.
Notwithstanding the immediately preceding sentence or any other provision of
this Agreement, no purported termination of the Executive's employment that is
not effected in accordance with a Notice of Termination satisfying paragraph (A)
of Section 6 shall be effective for purposes of this Agreement. The Executive's
right, following the occurrence of a Change in Control, to terminate his
employment under this Agreement for Good Reason shall not be affected by the
Executive's Disability or incapacity. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason under this Agreement.
4. Payments Due Upon a Payment Trigger.
-----------------------------------
(A) The Corporation shall pay to the Executive the payments
described in this Section 4 upon the occurrence of a Payment Trigger during the
term of this Agreement.
(B) Upon the occurrence of a Payment Trigger during the term
of this Agreement, the Corporation shall pay to the Executive a lump sum
payment, in cash, equal to the product of:
(i) three multiplied by
(ii) the sum of --
(a) the higher of the Executive's annual base salary
in effect immediately prior to the occurrence of the Change in
Control or the Executive's annual base salary in effect
immediately prior to the Payment Trigger, plus
(b) the higher of the aggregate maximum amounts
payable to the Executive pursuant to all incentive
compensation plans for the fiscal year or other measuring
period commencing coincident with or most recently prior to
the date on which the Change in Control occurs or the
aggregate maximum amounts payable to the Executive pursuant to
all incentive compensation plans for the fiscal year or other
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measuring period commencing coincident with or most recently
prior to the date on which the Payment Trigger occurs, in each
case, assuming that the Executive were continuously employed
by the Corporation or a Subsidiary on the terms and
conditions, including, without limitation, the terms of the
incentive plans, in effect immediately prior to the Change in
Control or Payment Trigger, whichever applies, until the last
day of that fiscal year or other measuring period.
The amount determined under the foregoing provisions of this paragraph (B) shall
be reduced by any cash severance benefit otherwise paid to the Executive under
any applicable severance plan or other severance arrangement. For purposes of
this paragraph (B), amounts payable to the Executive pursuant to an incentive
compensation plan for the fiscal year or other measuring period commencing
coincident with or most recently prior to the date on which the Change of
Control or Payment Trigger, as applicable, occurs (the "applicable year/period")
shall not include amounts attributable to a fiscal year or other measuring
period that commenced prior to the applicable year/period and that become
payable during the applicable year/period. For purposes of this paragraph (B),
incentive compensation plans shall include, without limitation, the ALLTEL
Corporation Performance Incentive Compensation Plan as in effect from time to
time, the ALLTEL Corporation Long-Term Performance Incentive Compensation Plan
as in effect from time to time, and any incentive bonus plan or arrangement that
provides for payment of cash compensation, and shall exclude, without
limitation, the ALLTEL Corporation Executive Deferred Compensation Plan as in
effect from time to time, any plan qualified or intended to be qualified under
Section 401(a) of the Code and any plan supplementary thereto, executive fringe
benefits, and any plan or arrangement under which stock, stock options, stock
appreciation rights, restricted stock or similar options, stock, or rights are
issued.
(C) Notwithstanding any provision of any incentive
compensation plan, including, without limitation, any provision of any incentive
plan requiring continued employment after the completed fiscal year or other
measuring period, the Corporation shall pay to the Executive a lump sum amount,
in cash, equal to the amount of any incentive compensation that has been
allocated or awarded to the Executive for a completed fiscal year or other
measuring period preceding the occurrence of a Payment Trigger under any
incentive compensation plan but has not yet been paid to the Executive.
(D) The payments provided for in paragraphs (B) and (C) of
this Section 4 shall be made not later than the fifth day following the
occurrence of a Payment Trigger, unless the amounts of such payments cannot be
finally determined on or before that day, in which case, the Corporation shall
pay to the Executive on that day an estimate, as reasonably determined in good
faith by the Corporation, of the minimum amount of the payments to which the
Executive is clearly entitled and shall pay the remainder of the payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth day after the occurrence of a Payment Trigger. In the event the
amount of the estimated payments exceeds the amount subsequently determined to
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have been due, the excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth business day after demand by the Corporation
(together with interest at the rate provided in Section l274(b)(2)(B) of the
Code). At the time that payments are made under this Section 4, the Corporation
shall provide the Executive with a written statement setting forth the manner in
which the payments were calculated and the basis for the calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any opinions or advice that
are in writing shall be attached to the statement).
5. Gross-Up Payments.
-----------------
(A) This Section 5 shall apply if a Payment Trigger shall
have occurred during the term of this Agreement.
(B) In the event it shall be determined that any payment or
distribution by the Corporation or other amount with respect to the Corporation
to or for the benefit of the Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
5 (a "Payment"), is (or will be) subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are (or will be) incurred by the
Executive with respect to the excise tax imposed by Section 4999 of the Code
with respect to the Corporation (the excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), the
Executive shall be entitled to receive an additional cash payment (a "Gross-Up
Payment") from the Corporation in an amount equal to the sum of the Excise Tax
and an amount sufficient to pay the cumulative Excise Tax and all cumulative
income taxes (including any interest and penalties imposed with respect to such
taxes) relating to the Gross-Up Payment so that the net amount retained by the
Executive is equal to all payments received pursuant to the terms of this
Agreement or otherwise less income taxes (but not reduced by the Excise Tax).
(C) Subject to the provisions of paragraph (D) of this
Section 5, all determinations required to be made under this Section 5,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at the
determination, shall be made by a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Corporation and the
Executive within 30 days after the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Corporation. In the event that at any time relevant to this Agreement the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group or Person effecting the Change in Control, the Executive shall appoint
another nationally recognized certified public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as
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determined in accordance with this Section 5, shall be paid by the Corporation
to the Executive within five days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall so indicate to the Executive in writing. Any
determination by the Accounting Firm shall be binding upon the Corporation and
the Executive. As a result of uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm, it is
possible that Gross-Up Payments that the Corporation should have made will not
have been made (an "Underpayment"), consistent with the calculations required to
be made hereunder. In the event the Corporation exhausts its remedies in
accordance with paragraph (D) of this Section 5 and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of Underpayment that has occurred and the Underpayment
shall be promptly paid by the Corporation to or for the benefit of the
Executive.
(D) The Executive shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful, would require a
Gross-Up Payment (that has not already been paid by the Corporation). The
notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of the claim and shall
apprize the Corporation of the nature of the claim and the date on which the
claim is requested to be paid. The Executive shall not pay the claim prior to
the expiration of the 30-day period following the date on which the Executive
gives notice to the Corporation or any shorter period ending on the date that
any payment of taxes with respect to the claim is due. If the Corporation
notifies the Executive in writing prior to the expiration of the 30-day period
that it desires to contest the claim, the Executive shall:
(i) give the Corporation any information
reasonably requested by the Corporation relating to the claim;
(ii) take any action in connection with
contesting the claim as the Corporation shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to the claim by an attorney reasonably selected by the Corporation;
(iii) cooperate with the Corporation in good
faith in order effectively to contest the claim; and
(iv) permit the Corporation to participate in
any proceedings relating to the claim.
The Corporation shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with the contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of the representation and payment of costs and expenses.
Without limitation of the foregoing provisions of this Section 5, the
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Corporation shall control all proceedings taken in connection with the contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with the taxing authority in
respect of the claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute the contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Corporation shall determine. If the
Corporation directs the Executive to pay the claim and sue for a refund, the
Corporation shall advance the amount of the payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to the advance or with
respect to any imputed income with respect to the advance; and any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due
shall be limited solely to the contested amount. The Corporation's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(E) If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, the
Executive becomes entitled to receive any refund with respect to the claim, the
Executive shall, subject to the Corporation's compliance with the requirements
of paragraph (D) of this Section 5, promptly pay to the Corporation the amount
of the refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, a
determination is made that the Executive shall not be entitled to any refund
with respect to the claim and the Corporation does not notify the Executive in
writing of its intent to contest the denial of refund prior to the expiration of
30 days after the determination, then the advance shall be forgiven and shall
not be required to be repaid and the amount of the advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
(F) Notwithstanding any other provision of this Section 5,
to the extent that the Executive is entitled to a tax "gross-up" payment with
respect to a Payment from the Corporation, any Subsidiary, or any affiliate of
the Corporation under any other agreement, the foregoing provisions of this
Section 5 shall not apply to that Payment.
6. Termination Procedures.
----------------------
(A) During the term of this Agreement, any purported
termination of the Executive's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a written notice that indicates
the specific termination provision in this Agreement relied upon, and, if
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applicable, the notice shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause shall include a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board at a
meeting of the Board that was called and held for the purpose of considering the
termination finding that, in the informed, reasonable, good faith judgment of
the Board, the Executive was guilty of conduct set forth in the definition of
Cause in Section 1(B), and specifying the particulars thereof in detail.
(B) "Date of Termination" with respect to any purported
termination of the Executive's employment during the term of this Agreement
(other than by reason of death) shall mean (i) if the Executive's employment is
terminated for Disability, 20 business days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during that 20 business day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination, which, in the case of a termination by
the Corporation, shall not be less than ten business days except in the case of
a termination for Cause, and, in the case of a termination by the Executive,
shall not be less than ten business days nor more than 20 business days,
respectively, after the date such Notice of Termination is given.
7. No Mitigation. The Executive shall not be required to seek other
-------------
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to this Agreement. Further, the amount of
any payment or benefit provided for in this Agreement shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Corporation or a Subsidiary, or otherwise.
8. Disputes.
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(A) If a dispute or controversy arises out of or in
connection with this Agreement, the parties shall first attempt in good faith to
settle the dispute or controversy by mediation under the Commercial Mediation
Rules of the American Arbitration Association before resorting to arbitration or
litigation. Thereafter, any remaining unresolved dispute or controversy arising
out of or in connection with this Agreement shall, upon a written notice from
the Executive to the Corporation either before suit thereupon is filed or within
20 business days thereafter, be settled exclusively by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association in
a city located within the continental United States designated by the Executive.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The Executive shall, however, be entitled to seek specific
performance of the Corporation's obligations hereunder during the pendency of
any dispute or controversy arising under or in connection with this Agreement.
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(B) Any legal action concerning this Agreement, other than a
mediation or an arbitration described in paragraph (A) of this Section 8,
whether instituted by the Corporation or the Executive, shall be brought and
resolved only in a state court of competent jurisdiction located in the
territory that encompasses the city, county, or parish in which the Executive's
principal residence is located at the time such action is commenced. The
Corporation hereby irrevocably consents and submits to and shall take any action
necessary to subject itself to the personal jurisdiction of that court and
hereby irrevocably agrees that all claims in respect of the action shall be
instituted, heard, and determined in that court. The Corporation agrees that
such court is a convenient forum, and hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of the action. Any final judgment in the action may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(C) The Corporation shall pay all costs and expenses,
including attorneys' fees and disbursements, of the Corporation and, at least
monthly, the Executive in connection with any legal proceeding (including
arbitration), whether or not instituted by the Corporation or the Executive,
relating to the interpretation or enforcement of any provision of this
Agreement, provided that if the Executive instituted the proceeding and the
judge, arbitrator, or other individual presiding over the proceeding
affirmatively finds that the Executive instituted the proceeding in bad faith,
the Executive shall pay all costs and expenses, including attorney's fees and
disbursements, of Executive and the Corporation. The Corporation shall pay
prejudgment interest on any money judgment obtained by Executive as a result of
such proceeding, calculated at the rate provided in Section 1274(b)(2)(B) of the
Code.
9. Successors; Binding Agreement.
-----------------------------
(A) In addition to any obligations imposed by law upon any
successor to the Corporation, the Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business or assets of the Corporation
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place. Failure of the Corporation to obtain the
assumption and agreement prior to the effectiveness of any succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Corporation in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate his employment for
Good Reason immediately after a Change in Control and during the term of this
Agreement, except that, for purposes of implementing the foregoing, the date on
which any succession becomes effective shall be deemed the Payment Trigger
occasioned by the foregoing deemed termination of employment for Good Reason
immediately following a Change in Control. The provisions of this Section 9
shall continue to apply to each subsequent employer of Executive bound by this
Agreement in the event of any merger, consolidation, or transfer of all or
substantially all of the business or assets of that subsequent employer.
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(B) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If the
Executive shall die while any amount would be payable to the Executive hereunder
(other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, the amount, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives, or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all other
-------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Corporation:
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72202
Attention: Chairman of the Board
To the Executive:
Kevin L. Beebe
18 Bretagne Circle
Little Rock, Arkansas 72211
11. Miscellaneous. No provision of this Agreement may be modified,
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waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by the Executive and an officer of the Corporation
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of Delaware. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state, or
local law and any additional withholding to which the Executive has agreed.
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12. Validity. The invalidity or unenforceability of any provision of
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this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date set forth above.
ALLTEL CORPORATION
Attest:
/s/ John L. Comparin By/s/ Joe T. Ford
- ----------------------- ---------------------
Name: Name:
Title: Title:
Witness:
By /s/Kevin L. Beebe
- ----------------------- ---------------------
Kevin L. Beebe
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AGREEMENT
This Agreement, dated July 23, 1998, is made by and between ALLTEL
Corporation, a Delaware corporation (as hereinafter defined, the "Corporation"),
and Michael T. Flynn (as hereinafter defined, the "Executive").
WHEREAS, the Board of Directors of the Corporation (as hereinafter
defined, the "Board") recognizes that the possibility of a Change in Control (as
hereinafter defined) of the Corporation exists and that such possibility, and
the uncertainty it may cause, may result in the departure or distraction of key
management employees of the Corporation or of a Subsidiary to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Executive is a key management employee of the
Corporation or of a Subsidiary; and
WHEREAS, the Board has determined that the Corporation should encourage
the continued employment of the Executive by the Corporation or a Subsidiary and
the continued dedication of the Executive to his assigned duties without
distraction as a result of the circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Defined Terms. For purposes of this Agreement, the
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following terms shall have the meanings indicated below:
(A) "Board" shall mean the Board of Directors
of the Corporation, as constituted from time to time.
(B) "Cause" for termination by the Corporation
of the Executive's employment shall mean (i) the willful failure by the
Executive substantially to perform the Executive's duties with the Corporation
or a Subsidiary, other than any failure resulting from the Executive's
incapacity due to physical or mental illness or any actual or anticipated
failure after the issuance of a Notice of Termination for Good Reason by the
Executive in accordance with paragraph (A) of Section 6, that continues for at
least 30 days after the Board delivers to the Executive a written demand for
performance that identifies specifically and in detail the manner in which the
Board believes that the Executive willfully has failed substantially to perform
the Executive's duties or (ii) the willful engaging by the Executive in
misconduct that is demonstrably and materially injurious to the Corporation or
any Subsidiary, monetarily or otherwise. For purposes of this definition, no
act, or failure to act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was in the best
interest of the Corporation and its Subsidiaries:
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(C) A "Change in Control" shall mean, if subsequent
to the date of this Agreement:
(i) Any "person," as defined in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Corporation, any of its subsidiaries, or any
employee benefit plan maintained by the Corporation or any of its subsidiaries,
becomes the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act)
of (A) l5% or more, but no greater than 50%, of the outstanding voting capital
stock of the Corporation, unless prior thereto, the Continuing Directors approve
the transaction that results in the person becoming the beneficial owner of 15%
or more, but no greater than 50%, of the outstanding voting capital stock of the
Corporation or (B) more than 50% of the outstanding voting capital stock of the
Corporation, regardless whether the transaction or event by which the foregoing
50% level is exceeded is approved by the Continuing Directors;
(ii) At any time Continuing Directors no
longer constitute a majority of the directors of the Corporation; or
(iii) A record date is fixed for
determining stockholders entitled to vote upon (A) a merger or consolidation of
the Corporation, statutory share exchange, or other similar transaction with
another corporation, partnership, or other entity or enterprise in which either
the Corporation is not the surviving or continuing corporation or shares of
common stock of the Corporation are to be converted into or exchanged for cash,
securities other than common stock of the Corporation, or other property, (B) a
sale or disposition of all or substantially all of the assets of the
Corporation, or (C) the dissolution of the Corporation; or
(iv) The Corporation enters into an
agreement with any Person, the consummation of which would result in the
occurrence of an event described in clause (i), (ii) or (iii) above of this
paragraph (C)
(D) "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(E) "Continuing Directors" means directors who
were directors of the Corporation at the beginning of the 24-month period ending
on the date the determination is made or whose election, or nomination for
election by the Corporation's stockholders, was approved by at least a majority
of the directors who are in office at the time of the election or nomination and
who either (i) were directors at the beginning of the period, or (ii) were
elected, or nominated for election, by at least a majority of the directors who
were in office at the time of the election or nomination and were directors at
the beginning of the period.
(F) "Corporation" shall mean ALLTEL Corporation and
any successor to its business or assets, by operation of law or otherwise.
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(G) "Date of Termination" shall have the
meaning stated in paragraph (B) of Section 6 hereof.
(H) "Disability" shall be deemed the reason
for the termination by the Corporation of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or a Subsidiary for a period of six
consecutive months, the Corporation shall have given the Executive a Notice of
Termination for Disability, and, within 20 business days after the Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive's duties.
(I) "Executive" shall mean the individual
named in the first paragraph of this Agreement.
(J) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the occurrence, without the
Executive's express written consent, of any one of the following:
(i) the assignment to the Executive
of any duties inconsistent with the Executive's status as an executive officer
of the Corporation or of a Subsidiary or a substantial adverse alteration in the
nature or status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) a reduction by the Corporation
in the Executive's annual base salary to any amount less than the Executive's
annual base salary as in effect immediately prior to the Change in Control;
(iii) the relocation of the principal
executive offices of the Corporation or of a Subsidiary, as the case may be, to
a location more than 35 miles from the location of such offices immediately
prior to the Change in Control or the Corporation's requiring the Executive to
be based anywhere other than the principal executive offices of the Corporation
or of a Subsidiary as the case may be, except for required business travel to an
extent substantially consistent with the Executive's business travel obligations
immediately prior to the Change in Control;
(iv) the failure by the Corporation
to pay to the Executive any portion of the Executive's current compensation, or
to pay to the Executive any deferred compensation under any deferred
compensation program of the Corporation, within five days after the date the
compensation is due or to pay or reimburse the Executive for any expenses
incurred by him for required business travel;
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(v) the failure by the Corporation
to continue in effect any compensation plan in which the Executive participates
immediately prior to the Change in Control that is material to the Executive's
total compensation, including but not limited to, stock option, restricted
stock, stock appreciation right, incentive compensation, bonus, and other plans,
unless an equitable alternative arrangement embodied in an ongoing substitute or
alternative plan has been made, or the failure by the Corporation to continue
the Executive's participation therein (or in a substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
compensation provided and the level of the Executive's participation relative to
other participants, than existed immediately prior to the Change in Control;
(vi) the failure by the Corporation
to continue to provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Corporation's pension,
profit-sharing, life insurance, medical, health and accident, disability, or
other employee benefit plans in which the Executive was participating
immediately prior to the Change in Control; the failure by the Corporation to
continue to provide the Executive any material fringe benefit or perquisite
enjoyed by the Executive immediately prior to the Change in Control; or the
failure by the Corporation to provide the Executive with the number of paid
vacation days to which the Executive is entitled in accordance with the
Corporation's normal vacation policy in effect immediately prior to the Change
in Control; or
(vii) any purported termination by the
Corporation of the Executive's employment that is not effected in accordance
with a Notice of Termination satisfying the requirements of paragraph (A) of
Section 6 hereof.
(K) "Notice of Termination" shall have the
meaning stated in paragraph (A) of Section 6 hereof.
(L) "Payment Trigger" shall mean the
occurrence of a Change in Control during the term of this Agreement coincident
with or followed (i) at any time before the end of the 12th month immediately
following the month in which the Change in Control occurred, by the termination
of the Executive's employment with the Corporation or a Subsidiary for any
reason other than (A) by the Executive without Good Reason, (B) by the
Corporation as a result of the Disability of the Executive or with Cause or, (C)
as a result of the death of the Executive or (ii) in the event the Executive
remains continuously employed by the Corporation or a Subsidiary until the end
of the 12th month immediately following the month in which the Change in Control
occurred, the termination of the Executive's employment with the Corporation or
a Subsidiary, at any time during the three month period immediately following
the expiration of such 12-month period, for any reason other than (A) by the
Corporation as a result of the Disability of the Executive or (B) as a result of
the death of the Executive.
(M) "Person" shall have the meaning given in
Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to
time, as modified and used in Sections 13(d) and 14(d) thereof; except that, a
Person shall not include (i) the Corporation or any Subsidiary, (ii) a trustee
or other fiduciary holding securities under an employee benefit plan of the
Corporation or any Subsidiary, or (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities.
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(N) "Subsidiary" shall mean any corporation or
other entity or enterprise, whether incorporated or unincorporated, of which at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
serving similar functions with respect to such corporation or other entity or
enterprise is owned by the Corporation or other entity or enterprise of which
the Corporation directly or indirectly owns securities or other interests having
all the voting power.
2. Term of Agreement. This Agreement shall become effective on the date
-----------------
hereof and, subject to the second sentence of this Section 2, shall continue in
effect until the earliest of (i) a Date of Termination in accordance with
Section 6 or the death of the Executive shall have occurred prior to a Change in
Control, (ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Corporation of all its obligations, and the
satisfaction by the Corporation of all its obligations and liabilities, under
this Agreement, (iii) the ten year anniversary of the date of this Agreement if,
as of that ten year anniversary, a Change in Control shall not have occurred and
be continuing, or (iv) in the event, as of the ten year anniversary of the date
of this Agreement, a Change in Control shall have occurred and be continuing,
either the expiration of such period thereafter within which a Payment Trigger
does not or can not occur or the ensuing occurrence of a Payment Trigger and the
performance by the Corporation of all of its obligations and liabilities under
this Agreement. Any Change in Control during the term of this Agreement that for
any reason ceases to constitute a Change in Control or is not followed by a
Payment Trigger shall not effect a termination or lapse of this Agreement. Any
transfer of the Executive's employment from the Corporation to a Subsidiary,
from a Subsidiary to the Corporation, or from one Subsidiary to another
Subsidiary shall not constitute a termination of the Executive's employment for
purposes of this Agreement.
3. General Provisions.
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(A) The Corporation hereby represents and warrants to the
Executive as follows: The execution and delivery of this Agreement and the
performance by the Corporation of the actions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Corporation.
This Agreement is a legal, valid and legally binding obligation of the
Corporation enforceable in accordance with its terms. Neither the execution or
delivery of this Agreement nor the consummation by the Corporation of the
actions contemplated hereby (i) will violate any provision of the certificate of
incorporation or bylaws (or other charter documents) of the Corporation, (ii)
will violate or be in conflict with any applicable law or any judgment, decree,
injunction or order of any court or governmental agency or authority, or (iii)
will violate or conflict with or constitute a default (or an event of which,
with notice or lapse of time or both, would constitute a default) under or will
result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the assets or properties of the Corporation under, any term or provision of
the certificate of incorporation or bylaws (or other charter documents) of the
Corporation or of any contract, commitment, understanding, arrangement,
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agreement or restriction of any kind or character to which the Corporation is a
party or by which the Corporation or any of its properties or assets may be
bound or affected.
(B) No amount or benefit shall be payable under this
Agreement unless there shall have occurred a Payment Trigger during the term of
this Agreement. In no event shall payments in accordance with this Agreement be
made in respect of more than one Payment Trigger.
(C) This Agreement shall not be construed as creating an
express or implied contract of employment and, except as otherwise agreed in
writing between the Executive and the Corporation, the Executive shall not have
any right to be retained in the employ of the Corporation or of a Subsidiary.
Notwithstanding the immediately preceding sentence or any other provision of
this Agreement, no purported termination of the Executive's employment that is
not effected in accordance with a Notice of Termination satisfying paragraph (A)
of Section 6 shall be effective for purposes of this Agreement. The Executive's
right, following the occurrence of a Change in Control, to terminate his
employment under this Agreement for Good Reason shall not be affected by the
Executive's Disability or incapacity. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason under this Agreement.
4. Payments Due Upon a Payment Trigger.
-----------------------------------
(A) The Corporation shall pay to the Executive the payments
described in this Section 4 upon the occurrence of a Payment Trigger during the
term of this Agreement.
(B) Upon the occurrence of a Payment Trigger during the term
of this Agreement, the Corporation shall pay to the Executive a lump sum
payment, in cash, equal to the product of:
(i) three multiplied by
(ii) the sum of --
(a) the higher of the Executive's annual base salary
in effect immediately prior to the occurrence of the Change in
Control or the Executive's annual base salary in effect
immediately prior to the Payment Trigger, plus
(b) the higher of the aggregate maximum amounts
payable to the Executive pursuant to all incentive
compensation plans for the fiscal year or other measuring
period commencing coincident with or most recently prior to
the date on which the Change in Control occurs or the
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aggregate maximum amounts payable to the Executive pursuant to
all incentive compensation plans for the fiscal year or other
measuring period commencing coincident with or most recently
prior to the date on which the Payment Trigger occurs, in each
case, assuming that the Executive were continuously employed
by the Corporation or a Subsidiary on the terms and
conditions, including, without limitation, the terms of the
incentive plans, in effect immediately prior to the Change in
Control or Payment Trigger, whichever applies, until the last
day of that fiscal year or other measuring period.
The amount determined under the foregoing provisions of this paragraph (B) shall
be reduced by any cash severance benefit otherwise paid to the Executive under
any applicable severance plan or other severance arrangement. For purposes of
this paragraph (B), amounts payable to the Executive pursuant to an incentive
compensation plan for the fiscal year or other measuring period commencing
coincident with or most recently prior to the date on which the Change of
Control or Payment Trigger, as applicable, occurs (the "applicable year/period")
shall not include amounts attributable to a fiscal year or other measuring
period that commenced prior to the applicable year/period and that become
payable during the applicable year/period. For purposes of this paragraph (B),
incentive compensation plans shall include, without limitation, the ALLTEL
Corporation Performance Incentive Compensation Plan as in effect from time to
time, the ALLTEL Corporation Long-Term Performance Incentive Compensation Plan
as in effect from time to time, and any incentive bonus plan or arrangement that
provides for payment of cash compensation, and shall exclude, without
limitation, the ALLTEL Corporation Executive Deferred Compensation Plan as in
effect from time to time, any plan qualified or intended to be qualified under
Section 401(a) of the Code and any plan supplementary thereto, executive fringe
benefits, and any plan or arrangement under which stock, stock options, stock
appreciation rights, restricted stock or similar options, stock, or rights are
issued.
(C) Notwithstanding any provision of any incentive
compensation plan, including, without limitation, any provision of any incentive
plan requiring continued employment after the completed fiscal year or other
measuring period, the Corporation shall pay to the Executive a lump sum amount,
in cash, equal to the amount of any incentive compensation that has been
allocated or awarded to the Executive for a completed fiscal year or other
measuring period preceding the occurrence of a Payment Trigger under any
incentive compensation plan but has not yet been paid to the Executive.
(D) The payments provided for in paragraphs (B) and (C) of
this Section 4 shall be made not later than the fifth day following the
occurrence of a Payment Trigger, unless the amounts of such payments cannot be
finally determined on or before that day, in which case, the Corporation shall
pay to the Executive on that day an estimate, as reasonably determined in good
faith by the Corporation, of the minimum amount of the payments to which the
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Executive is clearly entitled and shall pay the remainder of the payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth day after the occurrence of a Payment Trigger. In the event the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, the excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth business day after demand by the Corporation
(together with interest at the rate provided in Section l274(b)(2)(B) of the
Code). At the time that payments are made under this Section 4, the Corporation
shall provide the Executive with a written statement setting forth the manner in
which the payments were calculated and the basis for the calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any opinions or advice that
are in writing shall be attached to the statement).
5. Gross-Up Payments.
-----------------
(A) This Section 5 shall apply if a Payment Trigger shall
have occurred during the term of this Agreement.
(B) In the event it shall be determined that any payment or
distribution by the Corporation or other amount with respect to the Corporation
to or for the benefit of the Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
5 (a "Payment"), is (or will be) subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are (or will be) incurred by the
Executive with respect to the excise tax imposed by Section 4999 of the Code
with respect to the Corporation (the excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), the
Executive shall be entitled to receive an additional cash payment (a "Gross-Up
Payment") from the Corporation in an amount equal to the sum of the Excise Tax
and an amount sufficient to pay the cumulative Excise Tax and all cumulative
income taxes (including any interest and penalties imposed with respect to such
taxes) relating to the Gross-Up Payment so that the net amount retained by the
Executive is equal to all payments received pursuant to the terms of this
Agreement or otherwise less income taxes (but not reduced by the Excise Tax).
(C) Subject to the provisions of paragraph (D) of this
Section 5, all determinations required to be made under this Section 5,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at the
determination, shall be made by a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Corporation and the
Executive within 30 days after the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Corporation. In the event that at any time relevant to this Agreement the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group or Person effecting the Change in Control, the Executive shall appoint
another nationally recognized certified public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as
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determined in accordance with this Section 5, shall be paid by the Corporation
to the Executive within five days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall so indicate to the Executive in writing. Any
determination by the Accounting Firm shall be binding upon the Corporation and
the Executive. As a result of uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm, it is
possible that Gross-Up Payments that the Corporation should have made will not
have been made (an "Underpayment"), consistent with the calculations required to
be made hereunder. In the event the Corporation exhausts its remedies in
accordance with paragraph (D) of this Section 5 and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of Underpayment that has occurred and the Underpayment
shall be promptly paid by the Corporation to or for the benefit of the
Executive.
(D) The Executive shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful, would require a
Gross-Up Payment (that has not already been paid by the Corporation). The
notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of the claim and shall
apprize the Corporation of the nature of the claim and the date on which the
claim is requested to be paid. The Executive shall not pay the claim prior to
the expiration of the 30-day period following the date on which the Executive
gives notice to the Corporation or any shorter period ending on the date that
any payment of taxes with respect to the claim is due. If the Corporation
notifies the Executive in writing prior to the expiration of the 30-day period
that it desires to contest the claim, the Executive shall:
(i) give the Corporation any information
reasonably requested by the Corporation relating to the claim;
(ii) take any action in connection with
contesting the claim as the Corporation shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to the claim by an attorney reasonably selected by the Corporation;
(iii) cooperate with the Corporation in good
faith in order effectively to contest the claim; and
(iv) permit the Corporation to participate in
any proceedings relating to the claim.
The Corporation shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with the contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of the representation and payment of costs and expenses.
Without limitation of the foregoing provisions of this Section 5, the
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Corporation shall control all proceedings taken in connection with the contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with the taxing authority in
respect of the claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute the contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Corporation shall determine. If the
Corporation directs the Executive to pay the claim and sue for a refund, the
Corporation shall advance the amount of the payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to the advance or with
respect to any imputed income with respect to the advance; and any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due
shall be limited solely to the contested amount. The Corporation's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(E) If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, the
Executive becomes entitled to receive any refund with respect to the claim, the
Executive shall, subject to the Corporation's compliance with the requirements
of paragraph (D) of this Section 5, promptly pay to the Corporation the amount
of the refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, a
determination is made that the Executive shall not be entitled to any refund
with respect to the claim and the Corporation does not notify the Executive in
writing of its intent to contest the denial of refund prior to the expiration of
30 days after the determination, then the advance shall be forgiven and shall
not be required to be repaid and the amount of the advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
(F) Notwithstanding any other provision of this Section 5,
to the extent that the Executive is entitled to a tax "gross-up" payment with
respect to a Payment from the Corporation, any Subsidiary, or any affiliate of
the Corporation under any other agreement, the foregoing provisions of this
Section 5 shall not apply to that Payment.
6. Termination Procedures.
----------------------
(A) During the term of this Agreement, any purported
termination of the Executive's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a written notice that indicates
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the specific termination provision in this Agreement relied upon, and, if
applicable, the notice shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause shall include a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board at a
meeting of the Board that was called and held for the purpose of considering the
termination finding that, in the informed, reasonable, good faith judgment of
the Board, the Executive was guilty of conduct set forth in the definition of
Cause in Section 1(B), and specifying the particulars thereof in detail.
(B) "Date of Termination" with respect to any purported
termination of the Executive's employment during the term of this Agreement
(other than by reason of death) shall mean (i) if the Executive's employment is
terminated for Disability, 20 business days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during that 20 business day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination, which, in the case of a termination by
the Corporation, shall not be less than ten business days except in the case of
a termination for Cause, and, in the case of a termination by the Executive,
shall not be less than ten business days nor more than 20 business days,
respectively, after the date such Notice of Termination is given.
7. No Mitigation. The Executive shall not be required to seek other
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employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to this Agreement. Further, the amount of
any payment or benefit provided for in this Agreement shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Corporation or a Subsidiary, or otherwise.
8. Disputes.
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(A) If a dispute or controversy arises out of or in
connection with this Agreement, the parties shall first attempt in good faith to
settle the dispute or controversy by mediation under the Commercial Mediation
Rules of the American Arbitration Association before resorting to arbitration or
litigation. Thereafter, any remaining unresolved dispute or controversy arising
out of or in connection with this Agreement shall, upon a written notice from
the Executive to the Corporation either before suit thereupon is filed or within
20 business days thereafter, be settled exclusively by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association in
a city located within the continental United States designated by the Executive.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The Executive shall, however, be entitled to seek specific
performance of the Corporation's obligations hereunder during the pendency of
any dispute or controversy arising under or in connection with this Agreement.
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(B) Any legal action concerning this Agreement, other than a
mediation or an arbitration described in paragraph (A) of this Section 8,
whether instituted by the Corporation or the Executive, shall be brought and
resolved only in a state court of competent jurisdiction located in the
territory that encompasses the city, county, or parish in which the Executive's
principal residence is located at the time such action is commenced. The
Corporation hereby irrevocably consents and submits to and shall take any action
necessary to subject itself to the personal jurisdiction of that court and
hereby irrevocably agrees that all claims in respect of the action shall be
instituted, heard, and determined in that court. The Corporation agrees that
such court is a convenient forum, and hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of the action. Any final judgment in the action may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(C) The Corporation shall pay all costs and expenses,
including attorneys' fees and disbursements, of the Corporation and, at least
monthly, the Executive in connection with any legal proceeding (including
arbitration), whether or not instituted by the Corporation or the Executive,
relating to the interpretation or enforcement of any provision of this
Agreement, provided that if the Executive instituted the proceeding and the
judge, arbitrator, or other individual presiding over the proceeding
affirmatively finds that the Executive instituted the proceeding in bad faith,
the Executive shall pay all costs and expenses, including attorney's fees and
disbursements, of Executive and the Corporation. The Corporation shall pay
prejudgment interest on any money judgment obtained by Executive as a result of
such proceeding, calculated at the rate provided in Section 1274(b)(2)(B) of the
Code.
9. Successors; Binding Agreement.
-----------------------------
(A) In addition to any obligations imposed by law upon any
successor to the Corporation, the Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business or assets of the Corporation
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place. Failure of the Corporation to obtain the
assumption and agreement prior to the effectiveness of any succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Corporation in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate his employment for
Good Reason immediately after a Change in Control and during the term of this
Agreement, except that, for purposes of implementing the foregoing, the date on
which any succession becomes effective shall be deemed the Payment Trigger
occasioned by the foregoing deemed termination of employment for Good Reason
immediately following a Change in Control. The provisions of this Section 9
shall continue to apply to each subsequent employer of Executive bound by this
Agreement in the event of any merger, consolidation, or transfer of all or
substantially all of the business or assets of that subsequent employer.
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(B) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If the
Executive shall die while any amount would be payable to the Executive hereunder
(other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, the amount, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives, or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all other
-------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Corporation:
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72202
Attention: Chairman of the Board
To the Executive:
Michael T. Flynn
100 Hickory Creek Circle
Little Rock, Arkansas 72212
11. Miscellaneous. No provision of this Agreement may be modified,
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waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by the Executive and an officer of the Corporation
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of Delaware. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state, or
local law and any additional withholding to which the Executive has agreed.
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12. Validity. The invalidity or unenforceability of any provision of
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this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date set forth above.
ALLTEL CORPORATION
Attest:
/s/ John L. Comparin By/s/ Joe T. Ford
- ----------------------- ---------------------
Name: Name:
Title: Title:
Witness:
By /s/Michael T. Flynn
---------------------
- ----------------------- Michael T. Flynn
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AGREEMENT
This Agreement, dated January 30, 1997 is made by and between ALLTEL
Corporation, a Delaware corporation (as hereinafter defined, the "Corporation"),
and Jeffrey H. Fox (as hereinafter defined, the "Executive").
WHEREAS, the Board of Directors of the Corporation (as hereinafter
defined, the "Board") recognizes that the possibility of a Change in Control (as
hereinafter defined) of the Corporation exists and that such possibility, and
the uncertainty it may cause, may result in the departure or distraction of key
management employees of the Corporation or of a Subsidiary to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Executive is a key management employee of the Corporation
or of a Subsidiary; and
WHEREAS, the Board has determined that the Corporation should encourage
the continued employment of the Executive by the Corporation or a Subsidiary and
the continued dedication of the Executive to his assigned duties without
distraction as a result of the circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Defined Terms. For purposes of this Agreement,
-------------
the following terms shall have the meanings indicated below:
(A) "Board" shall mean the Board of Directors of
the Corporation, as constituted from time to time.
(B) "Cause" for termination by the Corporation of
the Executive's employment shall mean (i) the willful failure by the Executive
substantially to perform the Executive's duties with the Corporation or a
Subsidiary, other than any failure resulting from the Executive's incapacity
due to physical or mental illness or any actual or anticipated failure after
the issuance of a Notice of Termination for Good Reason by the Executive in
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accordance with paragraph (A) of Section 6, that continues for at least 30 days
after the Board delivers to the Executive a written demand for performance that
identifies specifically and in detail the manner in which the Board believes
that the Executive willfully has failed substantially to perform the Executive's
duties or (ii) the willful engaging by the Executive in misconduct that is
demonstrably and materially injurious to the Corporation or any Subsidiary,
monetarily or otherwise. For purposes of this definition, no act, or failure to
act, on the Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best interest of the
Corporation and its Subsidiaries:
(C) A "Change in Control" shall mean, if
subsequent to the date of this Agreement:
(i) Any "person," as defined in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than the Corporation, any of its subsidiaries, or any
employee benefit plan maintained by the Corporation or any of its
subsidiaries, becomes the "beneficial owner" (as defined in Rule l3d-3
under the Exchange Act) of (A) l5% or more, but no greater than 50%, of
the outstanding voting capital stock of the Corporation, unless prior
thereto, the Continuing Directors approve the transaction that results
in the person becoming the beneficial owner of 15% or more, but no
greater than 50%, of the outstanding voting capital stock of the
Corporation or (B) more than 50% of the outstanding voting capital
stock of the Corporation, regardless whether the transaction or event
by which the foregoing 50% level is exceeded is approved by the
Continuing Directors;
(ii) At any time Continuing Directors no longer
constitute a majority of the directors of the Corporation; or
(iii) A record date is fixed for determining
stockholders entitled to vote upon (A) a merger or consolidation of the
Corporation, statutory share exchange, or other similar transaction
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with another corporation, partnership, or other entity or enterprise in
which either the Corporation is not the surviving or continuing
corporation or shares of common stock of the Corporation are to be
converted into or exchanged for cash, securities other than common
stock of the Corporation, or other property, (B) a sale or disposition
of all or substantially all of the assets of the Corporation, or (C)
the dissolution of the Corporation; or
(iv) The Corporation enters into an agreement with
any Person, the consummation of which would result in the occurrence
of an event described in clause (i), (ii) or (iii) above of this
paragraph (C).
(D) "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(E) "Continuing Directors" means directors
who were directors of the Corporation at the beginning of the 24-month period
ending on the date the determination is made or whose election, or nomination
for election by the Corporation's stockholders, was approved by at least a
majority of the directors who are in office at the time of the election or
nomination and who either (i) were directors at the beginning of the period, or
(ii) were elected, or nominated for election, by at least a majority of the
directors who were in office at the time of the election or nomination and were
directors at the beginning of the period.
(F) "Corporation" shall mean ALLTEL Corporation
and any successor to its business or assets, by operation of law or otherwise.
(G) "Date of Termination" shall have the
meaning stated in paragraph (B) of Section 6 hereof.
(H) "Disability" shall be deemed the reason
for the termination by the Corporation of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of the
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Executive's duties with the Corporation or a Subsidiary for a period of six
consecutive months, the Corporation shall have given the Executive a Notice of
Termination for Disability, and, within 20 business days after the Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive's duties.
(I) "Executive" shall mean the individual named
in the first paragraph of this Agreement.
(J) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the occurrence, without the
Executive's express written consent, of any one of the following:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's status as an executive officer of the
Corporation or of a Subsidiary or a substantial adverse alteration in
the nature or status of the Executive's responsibilities from those in
effect immediately prior to the Change in Control;
(ii) a reduction by the Corporation in the
Executive's annual base salary to any amount less than the Executive's
annual base salary as in effect immediately prior to the Change in
Control;
(iii) the relocation of the principal executive
offices of the Corporation or of a Subsidiary, as the case may be, to a
location more than 35 miles from the location of such offices
immediately prior to the Change in Control or the Corporation's
requiring the Executive to be based anywhere other than the principal
executive offices of the Corporation or of a Subsidiary as the case may
be, except for required business travel to an extent substantially
consistent with the Executive's business travel obligations immediately
prior to the Change in Control;
(iv) the failure by the Corporation to pay to the
Executive any portion of the Executive's current compensation, or to
pay to the Executive any deferred compensation under any deferred
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compensation program of the Corporation, within five days after the
date the compensation is due or to pay or reimburse the Executive for
any expenses incurred by him for required business travel;
(v) the failure by the Corporation to continue in
effect any compensation plan in which the Executive participates
immediately prior to the Change in Control that is material to the
Executive's total compensation, including but not limited to, stock
option, restricted stock, stock appreciation right, incentive
compensation, bonus, and other plans, unless an equitable alternative
arrangement embodied in an ongoing substitute or alternative plan has
been made, or the failure by the Corporation to continue the
Executive's participation therein (or in a substitute or alternative
plan) on a basis not materially less favorable, both in terms of the
amount of compensation provided and the level of the Executive's
participation relative to other participants, than existed immediately
prior to the Change in Control;
(vi) the failure by the Corporation to continue to
provide the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Corporation's pension,
profit-sharing, life insurance, medical, health and accident,
disability, or other employee benefit plans in which the Executive was
participating immediately prior to the Change in Control; the failure
by the Corporation to continue to provide the Executive any material
fringe benefit or perquisite enjoyed by the Executive immediately prior
to the Change in Control; or the failure by the Corporation to provide
the Executive with the number of paid vacation days to which the
Executive is entitled in accordance with the Corporation's normal
vacation policy in effect immediately prior to the Change in Control;
or
(vii) any purported termination by the Corporation
of the Executive's employment that is not effected in accordance with a
Notice of Termination satisfying the requirements of paragraph (A) of
Section 6 hereof.
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(K) "Notice of Termination" shall have the
meaning stated in paragraph (A) of Section 6 hereof.
(L) "Payment Trigger" shall mean the occurrence
of a Change in Control during the term of this Agreement coincident with or
followed (i) at any time before the end of the 12th month immediately
following the month in which the Change in Control occurred, by the termination
of the Executive's employment with the Corporation or a Subsidiary for any
reason other than (A) by the Executive without Good Reason, (B) by the
Corporation as a result of the Disability of the Executive or with Cause or, (C)
as a result of the death of the Executive or (ii) in the event the Executive
remains continuously employed by the Corporation or a Subsidiary until the end
of the 12th month immediately following the month in which the Change in Control
occurred, the termination of the Executive's employment with the Corporation or
a Subsidiary, at any time during the three month period immediately following
the expiration of such 12-month period, for any reason other than (A) by the
Corporation as a result of the Disability of the Executive or (B) as a result of
the death of the Executive.
(M) "Person" shall have the meaning given in
Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to
time, as modified and used in Sections 13(d) and 14(d) thereof; except that, a
Person shall not include (i) the Corporation or any Subsidiary, (ii) a trustee
or other fiduciary holding securities under an employee benefit plan of the
Corporation or any Subsidiary, or (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities.
(N) "Subsidiary" shall mean any corporation or
other entity or enterprise, whether incorporated or unincorporated, of which
at least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
serving similar functions with respect to such corporation or other entity or
enterprise is owned by the Corporation or other entity or enterprise of which
the Corporation directly or indirectly owns securities or other interests having
all the voting power.
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2. Term of Agreement. This Agreement shall become
-----------------
effective on the date hereof and, subject to the second sentence of this Section
2, shall continue in effect until the earliest of (i) a Date of Termination in
accordance with Section 6 or the death of the Executive shall have occurred
prior to a Change in Control, (ii) if a Payment Trigger shall have occurred
during the term of this Agreement, the performance by the Corporation of all its
obligations, and the satisfaction by the Corporation of all its obligations and
liabilities, under this Agreement, (iii) the ten year anniversary of the date of
this Agreement if, as of that ten year anniversary, a Change in Control shall
not have occurred and be continuing, or (iv) in the event, as of the ten year
anniversary of the date of this Agreement, a Change in Control shall have
occurred and be continuing, either the expiration of such period thereafter
within which a Payment Trigger does not or can not occur or the ensuing
occurrence of a Payment Trigger and the performance by the Corporation of all of
its obligations and liabilities under this Agreement. Any Change in Control
during the term of this Agreement that for any reason ceases to constitute a
Change in Control or is not followed by a Payment Trigger shall not effect a
termination or lapse of this Agreement. Any transfer of the Executive's
employment from the Corporation to a Subsidiary, from a Subsidiary to the
Corporation, or from one Subsidiary to another Subsidiary shall not constitute a
termination of the Executive's employment for purposes of this Agreement.
3. General Provisions.
------------------
(A) The Corporation hereby represents and
warrants to the Executive as follows: The execution and delivery of this
Agreement and the performance by the Corporation of the actions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Corporation. This Agreement is a legal, valid and legally binding
obligation of the Corporation enforceable in accordance with its terms. Neither
the execution or delivery of this Agreement nor the consummation by the
Corporation of the actions contemplated hereby (i) will violate any provision of
the certificate of incorporation or bylaws (or other charter documents) of the
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Corporation, (ii) will violate or be in conflict with any applicable law or any
judgment, decree, injunction or order of any court or governmental agency or
authority, or (iii) will violate or conflict with or constitute a default (or an
event of which, with notice or lapse of time or both, would constitute a
default) under or will result in the termination of, accelerate the performance
required by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the assets or properties of the Corporation under, any
term or provision of the certificate of incorporation or bylaws (or other
charter documents) of the Corporation or of any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character to
which the Corporation is a party or by which the Corporation or any of its
properties or assets may be bound or affected.
(B) No amount or benefit shall be payable under
this Agreement unless there shall have occurred a Payment Trigger during the
term of this Agreement. In no event shall payments in accordance with this
Agreement be made in respect of more than one Payment Trigger.
(C) This Agreement shall not be construed as
creating an express or implied contract of employment and, except as otherwise
agreed in writing between the Executive and the Corporation, the Executive shall
not have any right to be retained in the employ of the Corporation or of a
Subsidiary. Notwithstanding the immediately preceding sentence or any other
provision of this Agreement, no purported termination of the Executive's
employment that is not effected in accordance with a Notice of Termination
satisfying paragraph (A) of Section 6 shall be effective for purposes of this
Agreement. The Executive's right, following the occurrence of a Change in
Control, to terminate his employment under this Agreement for Good Reason shall
not be affected by the Executive's Disability or incapacity. The Executive's
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason under this
Agreement.
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4. Payments Due Upon a Payment Trigger.
-----------------------------------
(A) The Corporation shall pay to the Executive
the payments described in this Section 4 upon the occurrence of a Payment
Trigger during the term of this Agreement.
(B) Upon the occurrence of a Payment Trigger
during the term of this Agreement, the Corporation shall pay to the Executive a
lump sum payment, in cash, equal to the product of:
(i) three multiplied by
(ii) the sum of --
(a) the higher of the Executive's annual base
salary in effect immediately prior to the occurrence of the
Change in Control or the Executive's annual base salary in
effect immediately prior to the Payment Trigger, plus
(b) the higher of the aggregate maximum amounts
payable to the Executive pursuant to all incentive
compensation plans for the fiscal year or other measuring
period commencing coincident with or most recently prior to
the date on which the Change in Control occurs or the
aggregate maximum amounts payable to the Executive pursuant to
all incentive compensation plans for the fiscal year or other
measuring period commencing coincident with or most recently
prior to the date on which the Payment Trigger occurs, in each
case, assuming that the Executive were continuously employed
by the Corporation or a Subsidiary on the terms and
conditions, including, without limitation, the terms of the
incentive plans, in effect immediately prior to the Change in
Control or Payment Trigger, whichever applies, until the last
day of that fiscal year or other measuring period.
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The amount determined under the foregoing provisions of this paragraph (B) shall
be reduced by any cash severance benefit otherwise paid to the Executive under
any applicable severance plan or other severance arrangement. For purposes of
this paragraph (B), amounts payable to the Executive pursuant to an incentive
compensation plan for the fiscal year or other measuring period commencing
coincident with or most recently prior to the date on which the Change of
Control or Payment Trigger, as applicable, occurs (the "applicable year/period")
shall not include amounts attributable to a fiscal year or other measuring
period that commenced prior to the applicable year/period and that become
payable during the applicable year/period. For purposes of this paragraph (B),
incentive compensation plans shall include, without limitation, the ALLTEL
Corporation Performance Incentive Compensation Plan as in effect from time to
time, the ALLTEL Corporation Long-Term Performance Incentive Compensation Plan
as in effect from time to time, and any incentive bonus plan or arrangement that
provides for payment of cash compensation, and shall exclude, without
limitation, the ALLTEL Corporation Executive Deferred Compensation Plan as in
effect from time to time, any plan qualified or intended to be qualified under
Section 401(a) of the Code and any plan supplementary thereto, executive fringe
benefits, and any plan or arrangement under which stock, stock options, stock
appreciation rights, restricted stock or similar options, stock, or rights are
issued.
(C) Notwithstanding any provision of any
incentive compensation plan, including, without limitation, any provision of any
incentive plan requiring continued employment after the completed fiscal year or
other measuring period, the Corporation shall pay to the Executive a lump sum
amount, in cash, equal to the amount of any incentive compensation that has been
allocated or awarded to the Executive for a completed fiscal year or other
measuring period preceding the occurrence of a Payment Trigger under any
incentive compensation plan but has not yet been paid to the Executive.
(D) The payments provided for in paragraphs (B)
and (C) of this Section 4 shall be made not later than the fifth day following
the occurrence of a Payment Trigger, unless the amounts of such payments cannot
be finally determined on or before that day, in which case, the Corporation
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shall pay to the Executive on that day an estimate, as reasonably determined in
good faith by the Corporation, of the minimum amount of the payments to which
the Executive is clearly entitled and shall pay the remainder of the payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth day after the occurrence of a Payment Trigger. In the event
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, the excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth business day after demand by the Corporation
(together with interest at the rate provided in Section l274(b)(2)(B) of the
Code). At the time that payments are made under this Section 4, the Corporation
shall provide the Executive with a written statement setting forth the manner
in which the payments were calculated and the basis for the calculations
including, without limitation, any opinions or other advice the Corporation has
received from outside counsel, auditors or consultants (and any opinions or
advice that are in writing shall be attached to the statement).
5. Gross-Up Payments.
-----------------
(A) This Section 5 shall apply if a Payment
Trigger shall have occurred during the term of this Agreement.
(B) In the event it shall be determined that any
payment or distribution by the Corporation or other amount with respect to
the Corporation to or for the benefit of the Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5 (a "Payment"), is (or will be) subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are (or will
be) incurred by the Executive with respect to the excise tax imposed by Section
4999 of the Code with respect to the Corporation (the excise tax, together with
any interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), the Executive shall be entitled to receive an additional cash
payment (a "Gross-Up Payment") from the Corporation in an amount equal to the
sum of the Excise Tax and an amount sufficient to pay the cumulative Excise Tax
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and all cumulative income taxes (including any interest and penalties imposed
with respect to such taxes) relating to the Gross-Up Payment so that the net
amount retained by the Executive is equal to all payments received pursuant to
the terms of this Agreement or otherwise less income taxes (but not reduced by
the Excise Tax).
(C) Subject to the provisions of paragraph (D)
of this Section 5, all determinations required to be made under this Section 5,
including whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at the
determination, shall be made by a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Corporation and the
Executive within 30 days after the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Corporation. In the event that at any time relevant to this Agreement the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group or Person effecting the Change in Control, the Executive shall appoint
another nationally recognized certified public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as
determined in accordance with this Section 5, shall be paid by the Corporation
to the Executive within five days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall so indicate to the Executive in writing. Any
determination by the Accounting Firm shall be binding upon the Corporation and
the Executive. As a result of uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm, it is
possible that Gross-Up Payments that the Corporation should have made will not
have been made (an "Underpayment"), consistent with the calculations required to
be made hereunder. In the event the Corporation exhausts its remedies in
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accordance with paragraph (D) of this Section 5 and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of Underpayment that has occurred and the Underpayment
shall be promptly paid by the Corporation to or for the benefit of the
Executive.
(D) The Executive shall notify the Corporation in
writing of any claim by the Internal Revenue Service that, if successful, would
require a Gross-Up Payment (that has not already been paid by the Corporation).
The notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of the claim and shall
apprise the Corporation of the nature of the claim and the date on which the
claim is requested to be paid. The Executive shall not pay the claim prior to
the expiration of the 30-day period following the date on which the Executive
gives notice to the Corporation or any shorter period ending on the date that
any payment of taxes with respect to the claim is due. If the Corporation
notifies the Executive in writing prior to the expiration of the 30-day period
that it desires to contest the claim, the Executive shall:
(i) give the Corporation any information
reasonably requested by the Corporation relating to the claim;
(ii) take any action in connection with contesting
the claim as the Corporation shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to the claim by an attorney reasonably
selected by the Corporation;
(iii) cooperate with the Corporation in good faith
in order effectively to contest the claim; and
(iv) permit the Corporation to participate in any
proceedings relating to the claim.
The Corporation shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with the contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
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Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of the representation and payment of costs and expenses.
Without limitation of the foregoing provisions of this Section 5, the
Corporation shall control all proceedings taken in connection with the contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with the taxing authority in
respect of the claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute the contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Corporation shall determine. If the
Corporation directs the Executive to pay the claim and sue for a refund, the
Corporation shall advance the amount of the payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to the advance or with
respect to any imputed income with respect to the advance; and any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due
shall be limited solely to the contested amount. The Corporation's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(E) If, after the receipt by the Executive of an
amount advanced by the Corporation pursuant to paragraph (D) of this Section 5,
the Executive becomes entitled to receive any refund with respect to the claim,
the Executive shall, subject to the Corporation's compliance with the
requirements of paragraph (D) of this Section 5, promptly pay to the Corporation
the amount of the refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Corporation pursuant to paragraph (D) of this Section 5,
a determination is made that the Executive shall not be entitled to any refund
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with respect to the claim and the Corporation does not notify the Executive in
writing of its intent to contest the denial of refund prior to the expiration of
30 days after the determination, then the advance shall be forgiven and shall
not be required to be repaid and the amount of the advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
6. Termination Procedures.
----------------------
(A) During the term of this Agreement, any
purported termination of the Executive's employment (other than by reason of
death) shall be communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with Section 10 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice that indicates the specific termination provision in this Agreement
relied upon, and, if applicable, the notice shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. Further, a Notice of
Termination for Cause shall include a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board that was called and held for the purpose of
considering the termination finding that, in the informed, reasonable, good
faith judgment of the Board, the Executive was guilty of conduct set forth in
the definition of Cause in Section 1(B), and specifying the particulars thereof
in detail.
(B) "Date of Termination" with respect to any
purported termination of the Executive's employment during the term of this
Agreement (other than by reason of death) shall mean (i) if the Executive's
employment is terminated for Disability, 20 business days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during that 20 business day
period) and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination, which, in the case of a
termination by the Corporation, shall not be less than ten business days except
in the case of a termination for Cause, and, in the case of a termination by the
Executive, shall not be less than ten business days nor more than 20 business
days, respectively, after the date such Notice of Termination is given.
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7. No Mitigation. The Executive shall not be
-------------
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Corporation pursuant to this Agreement. Further,
the amount of any payment or benefit provided for in this Agreement shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Corporation or a Subsidiary, or
otherwise.
8. Disputes.
--------
(A) If a dispute or controversy arises out of or
in connection with this Agreement, the parties shall first attempt in good
faith to settle the dispute or controversy by mediation under the Commercial
Mediation Rules of the American Arbitration Association before resorting to
arbitration or litigation. Thereafter, any remaining unresolved dispute or
controversy arising out of or in connection with this Agreement shall, upon a
written notice from the Executive to the Corporation either before suit
thereupon is filed or within 20 business days thereafter, be settled exclusively
by arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association in a city located within the continental United
States designated by the Executive. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. The Executive shall, however, be
entitled to seek specific performance of the Corporation's obligations hereunder
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
(B) Any legal action concerning this Agreement,
other than a mediation or an arbitration described in paragraph (A) of this
Section 8, whether instituted by the Corporation or the Executive, shall be
brought and resolved only in a state court of competent jurisdiction located
in the territory that encompasses the city, county, or parish in which the
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Executive's principal residence is located at the time such action is commenced.
The Corporation hereby irrevocably consents and submits to and shall take any
action necessary to subject itself to the personal jurisdiction of that court
and hereby irrevocably agrees that all claims in respect of the action shall be
instituted, heard, and determined in that court. The Corporation agrees that
such court is a convenient forum, and hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of the action. Any final judgment in the action may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(C) The Corporation shall pay all costs and
expenses, including attorneys' fees and disbursements, of the Corporation and,
at least monthly, the Executive in connection with any legal proceeding
(including arbitration), whether or not instituted by the Corporation or the
Executive, relating to the interpretation or enforcement of any provision of
this Agreement, provided that if the Executive instituted the proceeding and the
judge, arbitrator, or other individual presiding over the proceeding
affirmatively finds that the Executive instituted the proceeding in bad faith,
the Executive shall pay all costs and expenses, including attorney's fees and
disbursements, of Executive and the Corporation. The Corporation shall pay
prejudgment interest on any money judgment obtained by Executive as a result of
such proceeding, calculated at the rate provided in Section 1274(b)(2)(B) of the
Code.
9. Successors; Binding Agreement.
-----------------------------
(A) In addition to any obligations imposed by law
upon any successor to the Corporation, the Corporation shall require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business or assets of the
Corporation expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required to perform
it if no such succession had taken place. Failure of the Corporation to obtain
the assumption and agreement prior to the effectiveness of any succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Corporation in the same amount and on the same terms as the Executive
would be entitled to hereunder if the Executive were to terminate his employment
for Good Reason immediately after a Change in Control and during the term of
this Agreement, except that, for purposes of implementing the foregoing, the
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date on which any succession becomes effective shall be deemed the Payment
Trigger occasioned by the foregoing deemed termination of employment for Good
Reason immediately following a Change in Control. The provisions of this Section
9 shall continue to apply to each subsequent employer of Executive bound by this
Agreement in the event of any merger, consolidation, or transfer of all or
substantially all of the business or assets of that subsequent employer.
(B) This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If the Executive shall die while any amount would be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon
the death of the Executive) if the Executive had continued to live, the amount,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives, or administrators of
the Executive's estate.
10. Notices. For the purpose of this Agreement,
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notices and all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
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To the Corporation:
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72202
Attention: Chairman of the Board
To the Executive:
Jeffrey H. Fox
1810 Shadow Lane
Little Rock, Arkansas 72207
11. Miscellaneous. No provision of this Agreement
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may be modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing and signed by the Executive and an officer of
the Corporation specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
Delaware. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state, or local law and any additional withholding to which the
Executive has agreed.
12. Validity. The invalidity or unenforceability
--------
of any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
13. Counterparts. This Agreement may be executed
------------
in several counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have signed this
Agreement as of the date set forth above.
ALLTEL CORPORATION
Attest:
/s/ Scott T. Ford By/s/ Joe T. Ford
- ----------------------------- ------------------------
Name: Scott T. Ford Name: Joe T. Ford
Title: Executive Vice President Title: Chairman and CEO
Witness:
John L. Comparin /s/Jeffrey H. Fox
- ----------------------------- -----------------------
John L. Comparin Jeffrey H. Fox
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EXHIBIT A
AGREEMENT
This Agreement, dated January 28, 1999, is made by and between ALLTEL
Corporation, a Delaware corporation (as hereinafter defined, the "Corporation"),
and Jeffery R. Gardner (as hereinafter defined, the "Executive").
WHEREAS, the Board of Directors of the Corporation (as hereinafter
defined, the "Board") recognizes that the possibility of a Change in Control (as
hereinafter defined) of the Corporation exists and that such possibility, and
the uncertainty it may cause, may result in the departure or distraction of key
management employees of the Corporation or of a Subsidiary to the detriment of
the Corporation and its stockholders; and
WHEREAS, the Executive is a key management employee of the
Corporation or of a Subsidiary; and
WHEREAS, the Board has determined that the Corporation should encourage
the continued employment of the Executive by the Corporation or a Subsidiary and
the continued dedication of the Executive to his assigned duties without
distraction as a result of the circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Corporation and the Executive hereby agree as
follows:
1. Defined Terms. For purposes of this Agreement, the
-------------
following terms shall have the meanings indicated below:
(A) "Board" shall mean the Board of Directors of
the Corporation, as constituted from time to time.
(B) "Cause" for termination by the Corporation
of the Executive's employment shall mean (i) the willful failure by the
Executive substantially to perform the Executive's duties with the Corporation
or a Subsidiary, other than any failure resulting from the Executive's
incapacity due to physical or mental illness or any actual or anticipated
failure after the issuance of a Notice of Termination for Good Reason by the
Executive in accordance with paragraph (A) of Section 6, that continues for at
least 30 days after the Board delivers to the Executive a written demand for
performance that identifies specifically and in detail the manner in which the
Board believes that the Executive willfully has failed substantially to perform
the Executive's duties or (ii) the willful engaging by the Executive in
misconduct that is demonstrably and materially injurious to the Corporation or
any Subsidiary, monetarily or otherwise. For purposes of this definition, no
act, or failure to act, on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to act, was in the best
interest of the Corporation and its Subsidiaries:
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(C) A "Change in Control" shall mean, if subsequent
to the date of this Agreement:
(i) Any "person," as defined in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than the Corporation, any of its subsidiaries, or any
employee benefit plan maintained by the Corporation or any of its subsidiaries,
becomes the "beneficial owner" (as defined in Rule l3d-3 under the Exchange Act)
of (A) l5% or more, but no greater than 50%, of the outstanding voting capital
stock of the Corporation, unless prior thereto, the Continuing Directors approve
the transaction that results in the person becoming the beneficial owner of 15%
or more, but no greater than 50%, of the outstanding voting capital stock of the
Corporation or (B) more than 50% of the outstanding voting capital stock of the
Corporation, regardless whether the transaction or event by which the foregoing
50% level is exceeded is approved by the Continuing Directors;
(ii) At any time Continuing Directors no
longer constitute a majority of the directors of the Corporation; or
(iii) A record date is fixed for
determining stockholders entitled to vote upon (A) a merger or consolidation of
the Corporation, statutory share exchange, or other similar transaction with
another corporation, partnership, or other entity or enterprise in which either
the Corporation is not the surviving or continuing corporation or shares of
common stock of the Corporation are to be converted into or exchanged for cash,
securities other than common stock of the Corporation, or other property, (B) a
sale or disposition of all or substantially all of the assets of the
Corporation, or (C) the dissolution of the Corporation; or
(iv) The Corporation enters into an
agreement with any Person, the consummation of which would result in the
occurrence of an event described in clause (i), (ii) or (iii) above of this
paragraph (C)
(D) "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(E) "Continuing Directors" means directors who
were directors of the Corporation at the beginning of the 24-month period ending
on the date the determination is made or whose election, or nomination for
election by the Corporation's stockholders, was approved by at least a majority
of the directors who are in office at the time of the election or nomination and
who either (i) were directors at the beginning of the period, or (ii) were
elected, or nominated for election, by at least a majority of the directors who
were in office at the time of the election or nomination and were directors at
the beginning of the period.
(F) "Corporation" shall mean ALLTEL Corporation
and any successor to its business or assets, by operation of law or otherwise.
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(G) "Date of Termination" shall have the
meaning stated in paragraph (B) of Section 6 hereof.
(H) "Disability" shall be deemed the reason
for the termination by the Corporation of the Executive's employment, if, as a
result of the Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of the
Executive's duties with the Corporation or a Subsidiary for a period of six
consecutive months, the Corporation shall have given the Executive a Notice of
Termination for Disability, and, within 20 business days after the Notice of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive's duties.
(I) "Executive" shall mean the individual
named in the first paragraph of this Agreement.
(J) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the occurrence, without the
Executive's express written consent, of any one of the following:
(i) the assignment to the Executive
of any duties inconsistent with the Executive's status as an executive officer
of the Corporation or of a Subsidiary or a substantial adverse alteration in the
nature or status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(ii) a reduction by the Corporation
in the Executive's annual base salary to any amount less than the Executive's
annual base salary as in effect immediately prior to the Change in Control;
(iii) the relocation of the principal
executive offices of the Corporation or of a Subsidiary, as the case may be, to
a location more than 35 miles from the location of such offices immediately
prior to the Change in Control or the Corporation's requiring the Executive to
be based anywhere other than the principal executive offices of the Corporation
or of a Subsidiary as the case may be, except for required business travel to an
extent substantially consistent with the Executive's business travel obligations
immediately prior to the Change in Control;
(iv) the failure by the Corporation
to pay to the Executive any portion of the Executive's current compensation, or
to pay to the Executive any deferred compensation under any deferred
compensation program of the Corporation, within five days after the date the
compensation is due or to pay or reimburse the Executive for any expenses
incurred by him for required business travel;
(v) the failure by the Corporation
to continue in effect any compensation plan in which the Executive participates
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immediately prior to the Change in Control that is material to the Executive's
total compensation, including but not limited to, stock option, restricted
stock, stock appreciation right, incentive compensation, bonus, and other plans,
unless an equitable alternative arrangement embodied in an ongoing substitute or
alternative plan has been made, or the failure by the Corporation to continue
the Executive's participation therein (or in a substitute or alternative plan)
on a basis not materially less favorable, both in terms of the amount of
compensation provided and the level of the Executive's participation relative to
other participants, than existed immediately prior to the Change in Control;
(vi) the failure by the Corporation
to continue to provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Corporation's pension,
profit-sharing, life insurance, medical, health and accident, disability, or
other employee benefit plans in which the Executive was participating
immediately prior to the Change in Control; the failure by the Corporation to
continue to provide the Executive any material fringe benefit or perquisite
enjoyed by the Executive immediately prior to the Change in Control; or the
failure by the Corporation to provide the Executive with the number of paid
vacation days to which the Executive is entitled in accordance with the
Corporation's normal vacation policy in effect immediately prior to the Change
in Control; or
(vii) any purported termination by the
Corporation of the Executive's employment that is not effected in accordance
with a Notice of Termination satisfying the requirements of paragraph (A) of
Section 6 hereof.
(K) "Notice of Termination" shall have the
meaning stated in paragraph (A) of Section 6 hereof.
(L) "Payment Trigger" shall mean the
occurrence of a Change in Control during the term of this Agreement coincident
with or followed (i) at any time before the end of the 12th month immediately
following the month in which the Change in Control occurred, by the termination
of the Executive's employment with the Corporation or a Subsidiary for any
reason other than (A) by the Executive without Good Reason, (B) by the
Corporation as a result of the Disability of the Executive or with Cause or (C)
as a result of the death of the Executive or (ii) in the event the Executive
remains continuously employed by the Corporation or a Subsidiary until the end
of the 12th month immediately following the month in which the Change in Control
occurred, the termination of the Executive's employment with the Corporation or
a Subsidiary, at any time during the three month period immediately following
the expiration of such 12-month period, for any reason other than (A) by the
Corporation as a result of the Disability of the Executive or (B) as a result of
the death of the Executive.
(M) "Person" shall have the meaning given in
Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to
time, as modified and used in Sections 13(d) and 14(d) thereof; except that, a
Person shall not include (i) the Corporation or any Subsidiary, (ii) a trustee
or other fiduciary holding securities under an employee benefit plan
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of the Corporation or any Subsidiary, or (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities.
(N) "Subsidiary" shall mean any corporation or
other entity or enterprise, whether incorporated or unincorporated, of which at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
serving similar functions with respect to such corporation or other entity or
enterprise is owned by the Corporation or other entity or enterprise of which
the Corporation directly or indirectly owns securities or other interests having
all the voting power.
2. Term of Agreement. This Agreement shall become effective on the date
-----------------
hereof and, subject to the second sentence of this Section 2, shall continue in
effect until the earliest of (i) a Date of Termination in accordance with
Section 6 or the death of the Executive shall have occurred prior to a Change in
Control, (ii) if a Payment Trigger shall have occurred during the term of this
Agreement, the performance by the Corporation of all its obligations, and the
satisfaction by the Corporation of all its obligations and liabilities, under
this Agreement, (iii) the ten year anniversary of the date of this Agreement if,
as of that ten year anniversary, a Change in Control shall not have occurred and
be continuing, or (iv) in the event, as of the ten year anniversary of the date
of this Agreement, a Change in Control shall have occurred and be continuing,
either the expiration of such period thereafter within which a Payment Trigger
does not or can not occur or the ensuing occurrence of a Payment Trigger and the
performance by the Corporation of all of its obligations and liabilities under
this Agreement. Any Change in Control during the term of this Agreement that for
any reason ceases to constitute a Change in Control or is not followed by a
Payment Trigger shall not effect a termination or lapse of this Agreement. Any
transfer of the Executive's employment from the Corporation to a Subsidiary,
from a Subsidiary to the Corporation, or from one Subsidiary to another
Subsidiary shall not constitute a termination of the Executive's employment for
purposes of this Agreement.
3. General Provisions.
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(A) The Corporation hereby represents and warrants to the
Executive as follows: The execution and delivery of this Agreement and the
performance by the Corporation of the actions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Corporation.
This Agreement is a legal, valid and legally binding obligation of the
Corporation enforceable in accordance with its terms. Neither the execution or
delivery of this Agreement nor the consummation by the Corporation of the
actions contemplated hereby (i) will violate any provision of the certificate of
incorporation or bylaws (or other charter documents) of the Corporation, (ii)
will violate or be in conflict with any applicable law or any judgment, decree,
injunction or order of any court or governmental agency or authority, or (iii)
will violate or conflict with or constitute a default (or an event of which,
with notice or lapse of time or both, would constitute a default) under or will
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result in the termination of, accelerate the performance required by, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the assets or properties of the Corporation under, any term or provision of
the certificate of incorporation or bylaws (or other charter documents) of the
Corporation or of any contract, commitment, understanding, arrangement,
agreement or restriction of any kind or character to which the Corporation is a
party or by which the Corporation or any of its properties or assets may be
bound or affected.
(B) No amount or benefit shall be payable under this
Agreement unless there shall have occurred a Payment Trigger during the term of
this Agreement. In no event shall payments in accordance with this Agreement be
made in respect of more than one Payment Trigger.
(C) This Agreement shall not be construed as creating an
express or implied contract of employment and, except as otherwise agreed in
writing between the Executive and the Corporation, the Executive shall not have
any right to be retained in the employ of the Corporation or of a Subsidiary.
Notwithstanding the immediately preceding sentence or any other provision of
this Agreement, no purported termination of the Executive's employment that is
not effected in accordance with a Notice of Termination satisfying paragraph (A)
of Section 6 shall be effective for purposes of this Agreement. The Executive's
right, following the occurrence of a Change in Control, to terminate his
employment under this Agreement for Good Reason shall not be affected by the
Executive's Disability or incapacity. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason under this Agreement.
4. Payments Due Upon a Payment Trigger.
-----------------------------------
(A) The Corporation shall pay to the Executive the payments
described in this Section 4 upon the occurrence of a Payment Trigger during the
term of this Agreement.
(B) Upon the occurrence of a Payment Trigger during the term
of this Agreement, the Corporation shall pay to the Executive a lump sum
payment, in cash, equal to the product of:
(i) three multiplied by
(ii) the sum of --
(a) the higher of the Executive's annual base salary
in effect immediately prior to the occurrence of the Change in
Control or the Executive's annual base salary in effect
immediately prior to the Payment Trigger, plus
(b) the higher of the aggregate maximum amounts
payable to the Executive pursuant to all incentive
compensation plans for the fiscal year or other measuring
period commencing coincident with or most recently prior to
the date on which the Change in Control occurs or the
aggregate maximum amounts payable to the Executive pursuant to
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all incentive compensation plans for the fiscal year or other
measuring period commencing coincident with or most recently
prior to the date on which the Payment Trigger occurs, in each
case, assuming that the Executive were continuously employed
by the Corporation or a Subsidiary on the terms and
conditions, including, without limitation, the terms of the
incentive plans, in effect immediately prior to the Change in
Control or Payment Trigger, whichever applies, until the last
day of that fiscal year or other measuring period.
The amount determined under the foregoing provisions of this paragraph (B) shall
be reduced by any cash severance benefit otherwise paid to the Executive under
any applicable severance plan or other severance arrangement. For purposes of
this paragraph (B), amounts payable to the Executive pursuant to an incentive
compensation plan for the fiscal year or other measuring period commencing
coincident with or most recently prior to the date on which the Change of
Control or Payment Trigger, as applicable, occurs (the "applicable year/period")
shall not include amounts attributable to a fiscal year or other measuring
period that commenced prior to the applicable year/period and that become
payable during the applicable year/period. For purposes of this paragraph (B),
incentive compensation plans shall include, without limitation, the ALLTEL
Corporation Performance Incentive Compensation Plan as in effect from time to
time, the ALLTEL Corporation Long-Term Performance Incentive Compensation Plan
as in effect from time to time, and any incentive bonus plan or arrangement that
provides for payment of cash compensation, and shall exclude, without
limitation, the ALLTEL Corporation 1998 Management Deferred Compensation Plan as
in effect from time to time, any plan qualified or intended to be qualified
under Section 401(a) of the Code and any plan supplementary thereto, executive
fringe benefits, and any plan or arrangement under which stock, stock options,
stock appreciation rights, restricted stock or similar options, stock, or rights
are issued.
(C) Notwithstanding any provision of any incentive
compensation plan, including, without limitation, any provision of any incentive
plan requiring continued employment after the completed fiscal year or other
measuring period, the Corporation shall pay to the Executive a lump sum amount,
in cash, equal to the amount of any incentive compensation that has been
allocated or awarded to the Executive for a completed fiscal year or other
measuring period preceding the occurrence of a Payment Trigger under any
incentive compensation plan but has not yet been paid to the Executive.
(D) The payments provided for in paragraphs (B) and (C) of
this Section 4 shall be made not later than the fifth day following the
occurrence of a Payment Trigger, unless the amounts of such payments cannot be
finally determined on or before that day, in which case, the Corporation shall
pay to the Executive on that day an estimate, as reasonably determined in good
faith by the Corporation, of the minimum amount of the payments to which the
Executive is clearly entitled and shall pay the remainder of the payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth day after the occurrence of a Payment Trigger. In the event the
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amount of the estimated payments exceeds the amount subsequently determined to
have been due, the excess shall constitute a loan by the Corporation to the
Executive, payable on the fifth business day after demand by the Corporation
(together with interest at the rate provided in Section l274(b)(2)(B) of the
Code). At the time that payments are made under this Section 4, the Corporation
shall provide the Executive with a written statement setting forth the manner in
which the payments were calculated and the basis for the calculations including,
without limitation, any opinions or other advice the Corporation has received
from outside counsel, auditors or consultants (and any opinions or advice that
are in writing shall be attached to the statement).
5. Gross-Up Payments.
-----------------
(A) This Section 5 shall apply if a Payment Trigger shall
have occurred during the term of this Agreement.
(B) In the event it shall be determined that any payment or
distribution by the Corporation or other amount with respect to the Corporation
to or for the benefit of the Executive, whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
5 (a "Payment"), is (or will be) subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are (or will be) incurred by the
Executive with respect to the excise tax imposed by Section 4999 of the Code
with respect to the Corporation (the excise tax, together with any interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), the
Executive shall be entitled to receive an additional cash payment (a "Gross-Up
Payment") from the Corporation in an amount equal to the sum of the Excise Tax
and an amount sufficient to pay the cumulative Excise Tax and all cumulative
income taxes (including any interest and penalties imposed with respect to such
taxes) relating to the Gross-Up Payment so that the net amount retained by the
Executive is equal to all payments received pursuant to the terms of this
Agreement or otherwise less income taxes (but not reduced by the Excise Tax).
(C) Subject to the provisions of paragraph (D) of this
Section 5, all determinations required to be made under this Section 5,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at the
determination, shall be made by a nationally recognized certified public
accounting firm designated by the Executive (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Corporation and the
Executive within 30 days after the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the
Corporation. In the event that at any time relevant to this Agreement the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group or Person effecting the Change in Control, the Executive shall appoint
another nationally recognized certified public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
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Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as
determined in accordance with this Section 5, shall be paid by the Corporation
to the Executive within five days after the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall so indicate to the Executive in writing. Any
determination by the Accounting Firm shall be binding upon the Corporation and
the Executive. As a result of uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm, it is
possible that Gross-Up Payments that the Corporation should have made will not
have been made (an "Underpayment"), consistent with the calculations required to
be made hereunder. In the event the Corporation exhausts its remedies in
accordance with paragraph (D) of this Section 5 and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of Underpayment that has occurred and the Underpayment
shall be promptly paid by the Corporation to or for the benefit of the
Executive.
(D) The Executive shall notify the Corporation in writing of
any claim by the Internal Revenue Service that, if successful, would require a
Gross-Up Payment (that has not already been paid by the Corporation). The
notification shall be given as soon as practicable but no later than ten
business days after the Executive is informed in writing of the claim and shall
apprize the Corporation of the nature of the claim and the date on which the
claim is requested to be paid. The Executive shall not pay the claim prior to
the expiration of the 30-day period following the date on which the Executive
gives notice to the Corporation or any shorter period ending on the date that
any payment of taxes with respect to the claim is due. If the Corporation
notifies the Executive in writing prior to the expiration of the 30-day period
that it desires to contest the claim, the Executive shall:
(i) give the Corporation any information
reasonably requested by the Corporation relating to the claim;
(ii) take any action in connection with
contesting the claim as the Corporation shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to the claim by an attorney reasonably selected by the Corporation;
(iii) cooperate with the Corporation in good
faith in order effectively to contest the claim; and
(iv) permit the Corporation to participate in
any proceedings relating to the claim.
The Corporation shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with the contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of the representation and payment of costs and expenses.
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Without limitation of the foregoing provisions of this Section 5, the
Corporation shall control all proceedings taken in connection with the contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings, and conferences with the taxing authority in
respect of the claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute the contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Corporation shall determine. If the
Corporation directs the Executive to pay the claim and sue for a refund, the
Corporation shall advance the amount of the payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to the advance or with
respect to any imputed income with respect to the advance; and any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which the contested amount is claimed to be due
shall be limited solely to the contested amount. The Corporation's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(E) If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, the
Executive becomes entitled to receive any refund with respect to the claim, the
Executive shall, subject to the Corporation's compliance with the requirements
of paragraph (D) of this Section 5, promptly pay to the Corporation the amount
of the refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Corporation pursuant to paragraph (D) of this Section 5, a
determination is made that the Executive shall not be entitled to any refund
with respect to the claim and the Corporation does not notify the Executive in
writing of its intent to contest the denial of refund prior to the expiration of
30 days after the determination, then the advance shall be forgiven and shall
not be required to be repaid and the amount of the advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
(F) Notwithstanding any other provision of this Section 5,
to the extent that the Executive is entitled to a tax "gross-up" payment with
respect to a Payment from the Corporation, any Subsidiary, or any affiliate of
the Corporation under any other agreement, the foregoing provisions of this
Section 5 shall not apply to that Payment.
6. Termination Procedures.
----------------------
(A) During the term of this Agreement, any purported
termination of the Executive's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a written notice that indicates
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the specific termination provision in this Agreement relied upon, and, if
applicable, the notice shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause shall include a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the entire membership of the Board at a
meeting of the Board that was called and held for the purpose of considering the
termination finding that, in the informed, reasonable, good faith judgment of
the Board, the Executive was guilty of conduct set forth in the definition of
Cause in Section 1(B), and specifying the particulars thereof in detail.
(B) "Date of Termination" with respect to any purported
termination of the Executive's employment during the term of this Agreement
(other than by reason of death) shall mean (i) if the Executive's employment is
terminated for Disability, 20 business days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during that 20 business day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination, which, in the case of a termination by
the Corporation, shall not be less than ten business days except in the case of
a termination for Cause, and, in the case of a termination by the Executive,
shall not be less than ten business days nor more than 20 business days,
respectively, after the date such Notice of Termination is given.
7. No Mitigation. The Executive shall not be required to seek other
-------------
employment or to attempt in any way to reduce any amounts payable to the
Executive by the Corporation pursuant to this Agreement. Further, the amount of
any payment or benefit provided for in this Agreement shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Corporation or a Subsidiary, or otherwise.
8. Disputes.
--------
(A) If a dispute or controversy arises out of or in
connection with this Agreement, the parties shall first attempt in good faith to
settle the dispute or controversy by mediation under the Commercial Mediation
Rules of the American Arbitration Association before resorting to arbitration or
litigation. Thereafter, any remaining unresolved dispute or controversy arising
out of or in connection with this Agreement shall, upon a written notice from
the Executive to the Corporation either before suit thereupon is filed or within
20 business days thereafter, be settled exclusively by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration Association in
a city located within the continental United States designated by the Executive.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The Executive shall, however, be entitled to seek specific
performance of the Corporation's obligations hereunder during the pendency of
any dispute or controversy arising under or in connection with this Agreement.
11
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<PAGE>
(B) Any legal action concerning this Agreement, other than a
mediation or an arbitration described in paragraph (A) of this Section 8,
whether instituted by the Corporation or the Executive, shall be brought and
resolved only in a state court of competent jurisdiction located in the
territory that encompasses the city, county, or parish in which the Executive's
principal residence is located at the time such action is commenced. The
Corporation hereby irrevocably consents and submits to and shall take any action
necessary to subject itself to the personal jurisdiction of that court and
hereby irrevocably agrees that all claims in respect of the action shall be
instituted, heard, and determined in that court. The Corporation agrees that
such court is a convenient forum, and hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of the action. Any final judgment in the action may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.
(C) The Corporation shall pay all costs and expenses,
including attorneys' fees and disbursements, of the Corporation and, at least
monthly, the Executive in connection with any legal proceeding (including
arbitration), whether or not instituted by the Corporation or the Executive,
relating to the interpretation or enforcement of any provision of this
Agreement, provided that if the Executive instituted the proceeding and the
judge, arbitrator, or other individual presiding over the proceeding
affirmatively finds that the Executive instituted the proceeding in bad faith,
the Executive shall pay all costs and expenses, including attorney's fees and
disbursements, of Executive and the Corporation. The Corporation shall pay
prejudgment interest on any money judgment obtained by Executive as a result of
such proceeding, calculated at the rate provided in Section 1274(b)(2)(B) of the
Code.
9. Successors; Binding Agreement.
-----------------------------
(A) In addition to any obligations imposed by law upon any
successor to the Corporation, the Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business or assets of the Corporation
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place. Failure of the Corporation to obtain the
assumption and agreement prior to the effectiveness of any succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Corporation in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate his employment for
Good Reason immediately after a Change in Control and during the term of this
Agreement, except that, for purposes of implementing the foregoing, the date on
which any succession becomes effective shall be deemed the Payment Trigger
occasioned by the foregoing deemed termination of employment for Good Reason
immediately following a Change in Control. The provisions of this Section 9
shall continue to apply to each subsequent employer of Executive bound by this
Agreement in the event of any merger, consolidation, or transfer of all or
substantially all of the business or assets of that subsequent employer.
12
173
<PAGE>
(B) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees. If the
Executive shall die while any amount would be payable to the Executive hereunder
(other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, the amount, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives, or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all other
-------
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Corporation:
ALLTEL Corporation
One Allied Drive
Little Rock, Arkansas 72202
Attention: Chairman of the Board
To the Executive:
Jeffery R. Gardner
17 Bretagne Circle
Little Rock, Arkansas 72223
11. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived, or discharged unless such waiver, modification, or discharge is agreed
to in writing and signed by the Executive and an officer of the Corporation
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction, and performance of this
Agreement shall be governed by the laws of the State of Delaware. All references
to sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state, or
local law and any additional withholding to which the Executive has agreed.
13
174
<PAGE>
12. Validity. The invalidity or unenforceability of any provision of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
date set forth above.
ALLTEL CORPORATION
Attest:
/s/ John L. Compain By /s/ Joe T. Ford
- ----------------------- ----------------------
Name: Name: Joe T. Ford
Title: V.P. Human Resources Title: Chairman and CEO
Witness:
Glenda L. Benz By /s/Jeffery R. Gardner
- ----------------------- ----------------------
JEFFERY R. GARDNER
14
175
AMENDMENT NO. 11
TO
ALLTEL CORPORATION PENSION PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the
ALLTEL Corporation Pension Plan, as amended and restated effective January 1,
1994, and as subsequently further amended (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW THEREFORE, BE IT RESOLVED, that the Company hereby amends
the Plan, effective as set forth herein, in the respects hereinafter set forth.
1. Subsection (b) of Section 11.06 is amended by adding
immediately preceding the first comma thereof the following: "or subsection (c)
of this Section 11.06".
2. Section 11.06 of the Plan is amended by adding the
following new subsection (c) at the end thereof:
(c) Notwithstanding any other provision of the
Plan (including, but not limited to, any
Appendix) to the contrary, except that
subsection (b) of this Section 11.06,
subsection (c) of Section 5 of Table A to
Appendix I to Section 13.09, and
subsection (c) of Section 6 of Article VI
of Appendix T to Section 13.19 shall apply
without regard to this subsection (c),
effective as soon as reasonably
practicable following December 31, 1998,
but with respect only to a Participant
whose Termination of Employment occurs
after December 31, 1993 and who is not a
Bargaining Participant (as hereinafter
defined), each reference in the Plan
(including, but not limited to, any
Appendix) to "$3,500", but only as such
dollar amount pertains to the payment of
small pensions in a single sum (or lump
sum) distribution, shall be changed to a
reference to "$5,000", and with respect to
any such Participant whose Termination of
Employment occurs prior to December 31,
1998, the provisions of the Plan providing
for the timing of a single sum (or lump
sum) distribution to such Participant
shall be applied to provide for the timing
(only) of such distribution by
substituting December 31, 1998 for the
date on which occurred the Participant's
Termination of Employment that otherwise
would have caused such distribution. For
purposes of this subsection (c), a
"Bargaining Participant" shall mean a
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<PAGE>
Participant who, on the last date on which
he was an employee of a member of the
Controlled Group, was covered by a
collective bargaining agreement that
provided for his participation in the
Plan.
3. Effective as of July 1, 1998, Section 13 of the Plan is
amended by adding the following Section 13.28 thereto:
13.28 Employees of The Georgia Independent RSA Nos. 7 and 10 Cellular
---------------------------------------------------------------------
Partnership
-----------
(a) Effective Date - July 1, 1998.
--------------
(b) Account - None.
-------
(c) Minimum Normal Retirement Pension - None.
---------------------------------
(d) Minimum Early Retirement Pension - None.
--------------------------------
(e) Minimum Disability Retirement Pension - None.
-------------------------------------
(f) Minimum Deferred Vested Pension - None.
-------------------------------
(g) Minimum Death Benefit - None.
---------------------
(h) Prior Plan Offset - Not Applicable.
-----------------
(i) Provision Relative to Section 401(a)(12) of the Code - Not
----------------------------------------------------
Applicable.
-----------
(j) Miscellaneous - See APPENDIX CC - SPECIAL PROVISIONS
-------------
APPLICABLE TO CERTAIN EMPLOYEES OF THE GEORGIA INDEPENDENT RSA
NOS. 7 AND 10 CELLULAR PARTNERSHIP which follows immediately
hereafter.
2
177
<PAGE>
APPENDIX CC
SPECIAL PROVISIONS APPLICABLE TO CERTAIN EMPLOYEES
OF
THE GEORGIA INDEPENDENT RSA NOS. 7 AND 10 CELLULAR PARTNERSHIP
Effective as of July 1, 1998, certain employees of The Georgia Independent RSA
Nos. 7 and 10 Cellular Partnership ("Cell Plus") became employees of the
Controlled Group.
Notwithstanding any other provision of the Plan, the Plan is modified as set
forth below with respect to active employees of Cell Plus who became employees
of the Controlled Group on July 1, 1998.
A. Section 1.07 is modified by adding to the definition thereof the
following:
1.07CC "Basic Compensation" shall include only amounts
earned after June 30, 1998.
B. Section 1.14 is modified by adding to the definition thereof the
following:
1.14CC "Compensation" shall include only amounts earned
after June 30, 1998.
C. Section 1.37(g) is modified as follows:
1.37(g)CC Vesting Service
---------------
(a) A Participant's eligibility for benefits
under the Plan shall be determined by his
period of Vesting Service, in accordance
with the following:
(i) Service Prior to July 1,
1998: An Employee's
period(s) of employment with
Cell Plus prior to July 1,
1998, shall be counted as
Vesting Service to the
extent that such periods
would have counted under the
Plan if such employment had
been with the Company.
(ii) Service From and After July 1,
1998: In accordance with the
provisions of Section 1.37(g).
3
178
<PAGE>
D. Section 1.37(d) is modified as follows:
1.37(d)CC Benefit Service
---------------
(a) The amount of the benefit payable to or
on behalf of a Participant shall be
determined on the basis of his Benefit
Service, in accordance with the
following:
(i) Benefit Service Prior to
July 1, 1998: None.
(ii) Benefit Service From and
After July 1, 1998: In
accordance with the
provisions of Section 1.37(d).
E. Section 1.37(f) is modified as follows:
1.37(f)CC Eligibility Year of Service
---------------------------
(a) A Participant's Eligibility Years of
Service under the Plan shall be
determined in accordance with the
following:
(i) Service Prior to July 1,
1998: An Employee's
period(s) of employment with
Cell Plus prior to July 31,
1998, shall be counted as
Eligibility Years of Service
to the extent that such
periods would have counted
under the Plan if such
employment had been with the
Company.
(ii) Service From and After July 1,
1998: In accordance with the
provisions of Section 1.37(f).
IN WITNESS WHEREOF, the Company, by its duly
authorized officer, has caused this Amendment to be executed on this 30th day of
December, 1998.
ALLTEL CORPORATION
By: /s/ Joe T. Ford
--------------------------------------
Title:
4
179
<PAGE>
AMENDMENT NO. 12
TO
ALLTEL CORPORATION PENSION PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the
ALLTEL Corporation Pension Plan, as amended and restated effective January 1,
1994 and subsequently further amended (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, BE IT RESOLVED, that the Company hereby amends
the Plan in the respects hereinafter set forth:
1. Effective as of January 1, 1999, the first two sentences of
Section 1.07 are amended to provide as follows:
The total wages or earnings payable to the Participant by the Employer
during the Plan Year, including any amounts the payment of which is
deferred under the ALLTEL Corporation Executive Deferred Compensation
Plan, any base salary the payment of which is deferred under the ALLTEL
Corporation 1998 Management Deferred Compensation Plan, and
commissions, but excluding bonuses, overtime compensation, shift
differentials, in charge premiums, and similar forms of additional
compensation. Compensation which a Participant elects to defer under
the ALLTEL Corporation Executive Deferred Compensation Plan shall, for
purposes of the Plan, be credited to the Participant as compensation
during the period when such deferred amounts would have been paid (in
the absence of the deferral election) rather than during the period
when such deferred amounts are earned or actually paid. Base salary
which a Participant elects to defer under the ALLTEL Corporation 1998
Management Deferred Compensation Plan shall, for purposes of the Plan,
be credited to the Participant as compensation during the period when
such deferred amounts would have been paid (in the absence of the
deferral election) rather than during the period when such deferred
amounts are earned or actually paid.
2. Effective as of January 1, 1999, the first two sentences of
Section 1.14 are amended to provide as follows:
The total wages or earnings payable to a Participant during a Plan Year
by the Employer consisting of his Basic Compensation, together with
cash bonuses, overtime compensation, shift differentials, in-charge
premiums, any amount the payment of which is deferred under the ALLTEL
Corporation Performance Incentive Compensation Plan or the ALLTEL
Corporation Long-Term Performance Incentive Plan, and any incentive
compensation (not including salary), the payment of which is deferred
under the ALLTEL Corporation 1998 Management Deferred Compensation
Plan, but excluding non-wage taxable fringe benefits. Compensation
which a Participant elects to defer under the ALLTEL Corporation
180
<PAGE>
Performance Incentive Compensation Plan or the ALLTEL Corporation
Long-Term Performance Incentive Plan shall, for purposes of the Plan,
be credited to the Participant as compensation during the period when
such deferred amounts would have been paid (in the absence of the
deferral election) rather than during the period when such deferred
amounts are earned or actually paid. Incentive compensation which a
Participant elects to defer under the ALLTEL Corporation 1998
Management Deferred Compensation Plan shall, for purposes of the Plan,
be credited to the Participant as compensation during the period when
such deferred amounts would have been paid (in the absence of the
deferral election) rather than during the period when such deferred
amounts are earned or actually paid.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment to be executed on this 28 day of
January, 1999.
ALLTEL CORPORATION
By:/s/ John L. Comparin
--------------------------------
Title: V.P. Human Resources
181
AMENDMENT NO. 9
TO
ALLTEL CORPORATION PROFIT-SHARING PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains
the ALLTEL Corporation Profit-Sharing Plan, as amended and restated effective
January 1, 1994, and subsequently further amended, (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, the Company hereby amends the Plan in
the respects hereinafter set forth.
1. Effective as of February 2, 1998, Section 9.04 of
the Plan is amended by adding a new subsection (t) at the end thereof to
provide as follows:
(t) In determining Years of Eligibility Service for an
Employee who was an employee of CSC Intelicom, Inc.
("CSC") immediately prior to February 2, 1998, and
became an Employee on February 2, 1998, the Employee's
period or periods of employment with CSC prior to
February 2, 1998 that would have been taken into
account under the Plan if such period or periods of
employment were service with a member of the Controlled
Group, shall be counted as Years of Eligibility
Service. Notwithstanding any other provision of the
Plan, there shall be no duplication of Years of
Eligibility Service under the Plan by reason of service
(or hours of service) in respect of any single period
or otherwise.
2. Effective as of February 28, 1998, Section 9.04 of
the Plan is amended by adding a new subsection (u) at the end thereof to
provide as follows:
(u) In determining Years of Eligibility Service for an
Employee who was an employee of CSC Intelicom, Inc.
("CSC") immediately prior to February 28, 1998, and
became an Employee on February 28, 1998, the Employee's
period or periods of employment with CSC prior to
February 28, 1998 that would have been taken into
account under the Plan if such period or periods of
employment were service with a member of the Controlled
Group, shall be counted as Years of Eligibility
Service. Notwithstanding any other provision of the
Plan, there shall be no duplication of Years of
Eligibility Service under the Plan by reason of service
(or hours of service) in respect of any single period
or otherwise.
3. Effective as of March 27, 1998, Section 9.04 of the
Plan is amended by adding a new subsection (v) at the end thereof to provide as
follows:
(v) In determining Years of Eligibility Service for an
Employee who was an employee of CSC Intelicom, Inc.
("CSC") immediately prior to March 27, 1998, and became
182
<PAGE>
an Employee on March 27, 1998, the Employee's period or
periods of employment with CSC prior to March 27, 1998
that would have been taken into account under the Plan
if such period or periods of employment were service
with a member of the Controlled Group, shall be counted
as Years of Eligibility Service. Notwithstanding any
other provision of the Plan, there shall be no
duplication of Years of Eligibility Service under the
Plan by reason of service (or hours of service) in
respect of any single period or otherwise.
4. Effective as of December 7, 1998, Section 9.04 of
the Plan is amended by adding a new subsection (w) at the end thereof to
provide as follows:
(w) In determining Years of Eligibility Service for an
Employee who was an employee of United Companies
Financial Corporation ("UCFC") immediately prior to
December 7, 1998, and became an Employee on December 7,
1998, the Employee's period or periods of employment
with UCFC prior to December 7, 1998 that would have
been taken into account under the Plan if such period
or periods of employment were service with a member of
the Controlled Group, shall be counted as Years of
Eligibility Service. Notwithstanding any other
provision of the Plan, there shall be no duplication of
Years of Eligibility Service under the Plan by reason
of service (or hours of service) in respect of any
single period or otherwise.
5. Effective as of December 30, 1998, Section 9.04 of
the Plan is amended by adding a new subsection (x) at the end thereof to
provide as follows:
(x) In determining Years of Eligibility Service for
an Employee who was not an employee of 360
Communications Company ("360") on or after July 1,
1998, who was an employee of 360 prior to July 1, 1998,
and who became an Employee prior to January 1, 1999,
the Employee's period or periods of employment with 360
prior to July 1, 1998 that would have been taken into
account under the Plan if such period or periods of
employment were service with a member of the Controlled
Group, shall be counted as Years of Eligibility
Service. Notwithstanding any other provision of the
Plan, there shall be no duplication of Years of
Eligibility Service under the Plan by reason of service
(or hours of service) in respect of any single period
or otherwise.
6. Effective as of February 2, 1998, Section 9.05 of
the Plan is amended by adding a new subsection (u) at the end thereof to
provide as follows:
(u) In determining Years of Vesting Service for an Employee
who was an employee of CSC Intelicom, Inc. ("CSC")
immediately prior to February 2, 1998, and became an
Employee on February 2, 1998, the Employee's period or
periods of employment with CSC prior to February 2,
1998, that would have been taken into account under the
Plan if such period or periods of employment were
service with a member of the Controlled Group, shall be
counted as Years of Vesting Service. Notwithstanding
2
183
<PAGE>
any other provision of the Plan, there shall be no
duplication of Years of Vesting Service under the Plan
by reason of service (or hours of service) in respect
of any single period or otherwise.
7. Effective as of February 28, 1998, Section 9.05 of
the Plan is amended by adding a new subsection (v) at the end thereof to
provide as follows:
(v) In determining Years of Vesting Service for an Employee
who was an employee of CSC Intelicom, Inc. ("CSC")
immediately prior to February 28, 1998, and became an
Employee on February 28, 1998, the Employee's period or
periods of employment with CSC prior to February 28,
1998 that would have been taken into account under the
Plan if such period or periods of employment were
service with a member of the Controlled Group, shall be
counted as Years of Vesting Service. Notwithstanding
any other provision of the Plan, there shall be no
duplication of Years of Vesting Service under the Plan
by reason of service (or hours of service) in respect
of any single period or otherwise.
8. Effective as of March 27, 1998, Section 9.05 of the
Plan is amended by adding a new subsection (w) at the end thereof to provide as
follows:
(w) In determining Years of Vesting Service for an Employee
who was an employee of CSC Intelicom, Inc. ("CSC")
immediately prior to March 27, 1998, and became an
Employee on March 27, 1998, the Employee's period or
periods of employment with CSC prior to March 27, 1998
that would have been taken into account under the Plan
if such period or periods of employment were service
with a member of the Controlled Group, shall be counted
as Years of Vesting Service. Notwithstanding any other
provision of the Plan, there shall be no duplication of
Years of Vesting Service under the Plan by reason of
service (or hours of service) in respect of any single
period or otherwise.
9. Effective as of December 7, 1998, Section 9.05 of
the Plan is amended by adding a new subsection (x) at the end thereof to
provide as follows:
(x) In determining Years of Vesting Service for an Employee
who was an employee of United Companies Financial
Corporation ("UCFC") immediately prior to December 7,
1998, and became an Employee on December 7, 1998, the
Employee's period or periods of employment with UCFC
prior to December 7, 1998 that would have been taken
into account under the Plan if such period or periods
of employment were service with a member of the
Controlled Group, shall be counted as Years of Vesting
Service. Notwithstanding any other provision of the
Plan, there shall be no duplication of Years of Vesting
Service under the Plan by reason of service (or hours
of service) in respect of any single period or
otherwise.
10. Effective as of July 1, 1998, Section 13.05 of the
Plan is amended by adding a new subsection (ee) at the end thereof to provide as
follows:
3
184
<PAGE>
(ee) Each person who
(i) was an active employee of The Georgia
Independent RSA Nos. 7 and 10 Cellular
Partnership and became an Employee on
July 1, 1998;
(ii) met the eligibility requirements to become a
Participant on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
Employer Contribution for the 1998 Plan Year
under Section 13.04;
shall receive an allocation of Employer Contribution for
the 1998 Plan Year as provided in this subsection (ee),
if the Participant is credited with at least such number
of Hours of Service as the number determined by
multiplying 1,000 by a fraction the numerator of which is
the number of days of employment with the Controlled
Group completed by the Participant in the 1998 Plan Year
and the denominator of which is three hundred sixty-five
(365). Subject to the last sentence of Section 13.01, the
portion of Employer Contribution assigned to the Region
including such Participants shall be specified on the
Schedule for the 1998 Plan Year and shall be allocated
among the Participants in such Region as provided in
Section 13.04, but without regard to the requirement that
a Participant have a Year of Participation.
Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer
Contribution under this subsection (ee) but for his
transfer of employment prior to December 31, 1998, shall
be deemed to be in the Region including the Participants
eligible under this subsection (ee) for the 1998 Plan
Year.
11. Effective as of December 7, 1998, Section 13.05 of
the Plan is amended by adding a new subsection (ff) at the end thereof to
provide as follows:
(ff) Each person who
(i) was an active employee of United Companies
Financial Corporation and became an Employee
on December 7, 1998;
(ii) met the eligibility requirements to become a
Participant on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
Employer Contribution for the 1998 Plan Year
under Section 13.04;
shall receive an allocation of Employer Contribution for
the 1998 Plan Year as provided in this subsection (ff),
if the Participant is credited with at least such number
of Hours of Service as the number determined by
multiplying 1,000 by a fraction the numerator of which is
the number of days of employment with the Controlled
4
185
<PAGE>
Group completed by the Participant in the 1998 Plan Year
and the denominator of which is three hundred sixty-five
(365). Subject to the last sentence of Section 13.01, the
portion of Employer Contribution assigned to the Region
including such Participants shall be specified on the
Schedule for the 1998 Plan Year and shall be allocated
among the Participants in such Region as provided in
Section 13.04, but without regard to the requirement that
a Participant have a Year of Participation.
Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer
Contribution under this subsection (ff) but for his
transfer of employment prior to December 31, 1998, shall
be deemed to be in the Region including the Participants
eligible under this subsection (ff) for the 1998 Plan
Year.
12. Effective as of January 19, 1998, Section 13.05 of
the Plan is amended by adding a new subsection (gg) at the end thereof to
provide as follows:
(gg) Each person who
(i) was an active employee of Harris Trust &
Savings Bank and became an Employee on
January 19, 1998;
(ii) met the eligibility requirements to become a
Participant on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
Employer Contribution for the 1998 Plan Year
under Section 13.04;
shall receive an allocation of Employer Contribution for
the 1998 Plan Year as provided in this subsection (gg),
if the Participant is credited with at least such number
of Hours of Service as the number determined by
multiplying 1,000 by a fraction the numerator of which is
the number of days of employment with the Controlled
Group completed by the Participant in the 1998 Plan Year
and the denominator of which is three hundred sixty-five
(365). Subject to the last sentence of Section 13.01, the
portion of Employer Contribution assigned to the Region
including such Participants shall be specified on the
Schedule for the 1998 Plan Year and shall be allocated
among the Participants in such Region as provided in
Section 13.04, but without regard to the requirement that
a Participant have a Year of Participation.
Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer
Contribution under this subsection (gg) but for his
transfer of employment prior to December 31, 1998, shall
be deemed to be in the Region including the Participants
eligible under this subsection (gg) for the 1998 Plan
Year.
13. Effective as of August 31, 1998, Section 13.05 of
the Plan is amended by adding a new subsection (hh) at the end thereof to
provide as follows:
5
186
<PAGE>
(hh) Each person who
(i) was an active employee of AMCORE Financial
Inc. and became an Employee on August 31,
1998;
(ii) met the eligibility requirements to become a
Participant on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
Employer Contribution for the 1998 Plan Year
under Section 13.04;
shall receive an allocation of Employer Contribution for
the 1998 Plan Year as provided in this subsection (hh),
if the Participant is credited with at least such number
of Hours of Service as the number determined by
multiplying 1,000 by a fraction the numerator of which is
the number of days of employment with the Controlled
Group completed by the Participant in the 1998 Plan Year
and the denominator of which is three hundred sixty-five
(365). Subject to the last sentence of Section 13.01, the
portion of Employer Contribution assigned to the Region
including such Participants shall be specified on the
Schedule for the 1998 Plan Year and shall be allocated
among the Participants in such Region as provided in
Section 13.04, but without regard to the requirement that
a Participant have a Year of Participation.
Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer
Contribution under this subsection (hh) but for his
transfer of employment prior to December 31, 1998, shall
be deemed to be in the Region including the Participants
eligible under this subsection (hh) for the 1998 Plan
Year.
14. Effective as of September 16, 1998, Section 13.05
of the Plan is amended by adding a new subsection (ii) at the end thereof to
provide as follows:
(ii) Each person who
(i) was an active employee of AMCORE Financial
Inc. and became an Employee on September 16,
1998;
(ii) met the eligibility requirements to become a
Participant on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
Employer Contribution for the 1998 Plan Year
under Section 13.04;
shall receive an allocation of Employer Contribution for
the 1998 Plan Year as provided in this subsection (ii),
if the Participant is credited with at least such number
of Hours of Service as the number determined by
multiplying 1,000 by a fraction the numerator of which is
the number of days of employment with the Controlled
Group completed by the Participant in the 1998 Plan Year
and the denominator of which is three hundred sixty-five
6
187
<PAGE>
(365). Subject to the last sentence of Section 13.01, the
portion of Employer Contribution assigned to the Region
including such Participants shall be specified on the
Schedule for the 1998 Plan Year and shall be allocated
among the Participants in such Region as provided in
Section 13.04, but without regard to the requirement that
a Participant have a Year of Participation.
Notwithstanding the provisions of Section 13.04, any
Participant who would receive an allocation of Employer
Contribution under this subsection (ii) but for his
transfer of employment prior to December 31, 1998, shall
be deemed to be in the Region including the Participants
eligible under this subsection (ii) for the 1998 Plan
Year.
15. Effective as hereinafter set forth, Section 15.03
of the Plan is amended by adding a new paragraph at the end thereof to provide
as follows:
Notwithstanding the preceding provisions of this Section 15.03 or
any other provision of the Plan to the contrary: Effective with
respect to any Participant whose Settlement Date occurs afer
December 31, 1998, any reference in the Plan to "$3,500" as such
reference relates to the timing or form of distribution shall be
replaced with a reference to "$5,000".
16. Effective as hereinafter set forth, the Plan is
amended by adding immediately following Article XXII thereof the following new
Article XXIII:
ARTICLE XXIII
EXTENSION OF COVERAGE
TO
CERTAIN EMPLOYEES
23.01 Extension of Coverage to Certain Georgia Exchange
Employees
Effective beginning June 1, 1998 and as more specifically
hereinafter provided, the proviso to paragraph (a)(1) of
Section 1.12 shall not apply to and coverage under the Plan
shall be extended to a person who on or after June 1,1998
is an Employee and who on or before June 1, 1998 was in the
bargaining unit described in National Labor Relations Board
Case 10-RD-1309 (a "Decertified Employee"): For purposes of
Sections 13.01, 13.02, 13.03, 13.04, and 13.06, for the
Plan Year ending December 31, 1998, a Decertified Employee
who would have been an Eligible Employee at relevant times
during the Plan Year ending December 31, 1998 but for
paragraph (a)(1) of Section 1.12 shall be treated as an
Eligible Employee at such relevant times during the Plan
Year ending December 31, 1998.
7
188
<PAGE>
23.02 Extension of Coverage to Certain Ohio Employees
Effective beginning December 16, 1998 and as more
specifically hereinafter provided, the proviso to paragraph
(a)(1) of Section 1.12 shall not apply to and coverage
under the Plan shall be extended to a person who on or
after December 16,1998 is an Employee and who on or before
December 16, 1998 was in the bargaining unit described in
National Labor Relations Board Case 8-RD-1819 (a
"Decertified Employee"): For purposes of Sections 13.01,
13.02, 13.03, 13.04, and 13.06, for the Plan Year ending
December 31, 1998, a Decertified Employee who would have
been an Eligible Employee at relevant times during the Plan
Year ending December 31, 1998 but for paragraph (a)(1) of
Section 1.12 shall be treated as an Eligible Employee at
such relevant times during the Plan Year ending December
31, 1998.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment to be executed on this 30th day of
December, 1998.
ALLTEL CORPORATION
By: /s/ Joe T. Ford
-----------------------------
Title:
8
189
<PAGE>
AMENDMENT NO. 10
TO
ALLTEL CORPORATION PROFIT-SHARING PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the
ALLTEL Corporation Profit-Sharing Plan, as amended and restated effective
January 1, 1994 and subsequently further amended (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, BE IT RESOLVED, that the Company hereby amends
the Plan in the respects hereinafter set forth:
Effective as of January 1, 1999, the first two sentences of
Section 1.07 are amended to provide as follows:
The amount paid by the Employer during the Plan Year directly
to the Employee, including basic wages, cash bonuses, overtime
compensation, commissions, shift differentials, in-charge
premiums, any amount the payment of which is deferred under
the ALLTEL Corporation Executive Deferred Compensation Plan,
the ALLTEL Corporation Performance Incentive Compensation
Plan, or the ALLTEL Corporation Long-Term Performance
Incentive Plan, or the ALLTEL Corporation 1998 Management
Deferred Compensation Plan, but excluding any other forms of
additional compensation and further excluding non-wage taxable
fringe benefits. Compensation which a Participant elects to
defer under the above-specified plans shall, for purposes of
the Plan, be credited to the Participant as compensation
during the period when such deferred amounts would have been
paid (in the absence of the deferral election) rather than
during the period when such deferred amounts are earned or
actually paid.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment to be executed on this 28 day of
January, 1999.
ALLTEL CORPORATION
By: /s/ John L. Comparin
--------------------------------------
Title: V.P. Human Resources
190
AMENDMENT NO. 10
TO
ALLTEL CORPORATION THRIFT PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the
ALLTEL Corporation Thrift Plan, as amended and restated effective January 1,
1994 and subsequently further amended (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, the Company hereby amends the Plan in the
respects hereinafter set forth:
Effective with respect to payroll periods beginning after
December 19, 1998, the first sentence of Section 12.02 of the Plan is amended by
deleting therefrom "10%" and by substituting therefor "14%".
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment to be executed on this 18th day of
December, 1998.
ALLTEL CORPORATION
By: /s/ Joe T. Ford
--------------------
Title:
191
<PAGE>
AMENDMENT NO. 11
TO
ALLTEL CORPORATION THRIFT PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the
ALLTEL Corporation Thrift Plan, as amended and restated effective January 1,
1994, and subsequently further amended, (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, the Company hereby amends the Plan in the
respects hereinafter set forth:
1. Effective as of February 2, 1998, Section 9.04 of the Plan
is amended by adding a new subsection (q) at the end thereof to provide as
follows:
(q) In determining Years of Eligibility Service for an Employee
who was an employee of CSC Intelicom, Inc. ("CSC")
immediately prior to February 2, 1998, and became an
Employee on February 2, 1998, the Employee's period or
periods of employment with CSC prior to February 2, 1998
that would have been taken into account under the Plan if
such period or periods of employment were service with a
member of the Controlled Group, shall be counted as Years of
Eligibility Service. Notwithstanding any other provision of
the Plan, there shall be no duplication of Years of
Eligibility Service under the Plan by reason of service (or
hours of service) in respect of any single period or
otherwise.
2. Effective as of February 28, 1998, Section 9.04 of the Plan
is amended by adding a new subsection (r) at the end thereof to provide as
follows:
(r) In determining Years of Eligibility Service for an Employee
who was an employee of CSC Intelicom, Inc. ("CSC")
immediately prior to February 28, 1998, and became an
Employee on February 28, 1998, the Employee's period or
periods of employment with CSC prior to February 28, 1998
that would have been taken into account under the Plan if
such period or periods of employment were service with a
member of the Controlled Group, shall be counted as Years of
Eligibility Service. Notwithstanding any other provision of
the Plan, there shall be no
192
<PAGE>
duplication of Years of Eligibility Service under the Plan by
reason of service (or hours of service) in respect of any
single period or otherwise.
3. Effective as of March 27, 1998, Section 9.04 of the Plan is
amended by adding a new subsection (s) at the end thereof to provide as follows:
(s) In determining Years of Eligibility Service for an Employee
who was an employee of CSC Intelicom, Inc. ("CSC")
immediately prior to March 27, 1998, and became an Employee
on March 27, 1998, the Employee's period or periods of
employment with CSC prior to March 27, 1998 that would have
been taken into account under the Plan if such period or
periods of employment were service with a member of the
Controlled Group, shall be counted as Years of Eligibility
Service. Notwithstanding any other provision of the Plan,
there shall be no duplication of Years of Eligibility
Service under the Plan by reason of service (or hours of
service) in respect of any single period or otherwise.
4. Effective as of December 7, 1998, Section 9.04 of the Plan
is amended by adding a new subsection (t) at the end thereof to provide as
follows:
(t) In determining Years of Eligibility Service for an Employee
who was an employee of United Companies Financial
Corporation ("UCFC") immediately prior to December 7, 1998,
and became an Employee on December 7, 1998, the Employee's
period or periods of employment with USFC prior to December 7,
1998 that would have been taken into account under the
Plan if such period or periods of employment were service
with a member of the Controlled Group, shall be counted as
Years of Eligibility Service. Notwithstanding any other
provision of the Plan, there shall be no duplication of
Years of Eligibility Service under the Plan by reason of
service (or hours of service) in respect of any single
period or otherwise.
5. Effective as of December 30, 1998, Section 9.04 of the Plan
is amended by adding a new subsection (u) at the end thereof to provide as
follows:
(u) In determining Years of Eligibility Service for an Employee
who was not an employee of 360 Communications Company
("360") on or after July 1, 1998, who was an employee
of 360 prior to July 1, 1998, and who became an Employee
prior to January 1, 1999, the Employee's period or periods
of employment with 360 prior to July 1, 1998 that would
have been taken into account under the Plan if such
period or periods of
2
193
<PAGE>
employment were service with a member of the Controlled Group,
shall be counted as Years of Eligibility Service.
Notwithstanding any other provision of the Plan, there shall
be no duplication of Years of Eligibility Service under the
Plan by reason of service (or hours of service) in respect of
any single period or otherwise.
6. Effective as of July 1, 1998, Section 13.11 of the Plan is
amended by adding a new subsection (w) at the end of thereof to provide as
follows:
(w) Each person who
(i) was an active employee of The Georgia Independent
RSA Nos. 7 and 10 Cellular Partnership and became
an Employee on July 1, 1998;
(ii) met the eligibility requirements to become a
Participant as provided in subsection (b) of Section
10.01 on or before the last day of the 1998 Plan
Year; and
(iii) is not otherwise eligible for an allocation of the
Employer Qualified Nonelective Contribution for the
1998 Plan Year under Section 13.04;
shall receive an allocation of the Employer Qualified
Nonelective Contribution for the 1998 Plan Year, as provided
in this subsection (w) if the Participant is credited with at
least such number of Hours of Service as the number determined
by multiplying 1,000 by a fraction the numerator of which is
the number of days of employment with the Controlled Group
completed by the Participant in the 1998 Plan Year and the
denominator of which is three hundred sixty-five (365). Such a
Participant shall receive an allocation of the Employer
Qualified Nonelective Contribution as provided in Section
13.04, but without regard to the requirement that a
Participant have a Year of Participation.
7. Effective as of December 7, 1998, Section 13.11 of the Plan
is amended by adding a new subsection (x) at the end thereof to provide as
follows:
(x) Each person who
(i) was an active employee of United Companies
Financial Corporation and became an Employee on
December 7, 1998;
3
194
<PAGE>
(ii) met the eligibility requirements to become a
Participant as provided in subsection (b) of Section
10.01 on or before the last day of the 1998 Plan
Year; and
(iii) is not otherwise eligible for an allocation of the
Employer Qualified Nonelective Contribution for the
1998 Plan Year under Section 13.04;
shall receive an allocation of the Employer Qualified
Nonelective Contribution for the 1998 Plan Year, as provided
in this subsection (x) if the Participant is credited with at
least such number of Hours of Service as the number determined
by multiplying 1,000 by a fraction the numerator of which is
the number of days of employment with the Controlled Group
completed by the Participant in the 1998 Plan Year and the
denominator of which is three hundred sixty-five (365). Such a
Participant shall receive an allocation of the Employer
Qualified Nonelective Contribution as provided in Section
13.04, but without regard to the requirement that a
Participant have a Year of Participation.
8. Effective as of January 19, 1998, Section 13.11 of the Plan
is amended by adding a new subsection (y) at the end thereof to provide as
follows:
(y) Each person who
(i) was an active employee of Harris Trust &
Savings Bank and became an Employee on
January 19, 1998;
(ii) met the eligibility requirements to become a
Participant as provided in subsection (b) of
Section 10.01 on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
the Employer Qualified Nonelective
Contribution for the 1998 Plan Year under
Section 13.04;
shall receive an allocation of the Employer Qualified
Nonelective Contribution for the 1998 Plan Year, as
provided in this subsection (y) if the Participant is
credited with at least such number of Hours of Service as
the number determined by multiplying 1,000 by a fraction
the numerator of which is the number of days of
employment with the Controlled Group completed by the
Participant
4
195
<PAGE>
in the 1998 Plan Year and the denominator of which is
three hundred sixty-five (365). Such a Participant shall
receive an allocation of the Employer Qualified
Nonelective Contribution as provided in Section 13.04,
but without regard to the requirement that a Participant
have a Year of Participation.
9. Effective as of August 31, 1998, Section 13.11 of
the Plan is amended by adding a new subsection (z) at the end thereof to
provide as follows:
(z) Each person who
(i) was an active employee of AMCORE Financial,
Inc. and became an Employee on August 31,
1998;
(ii) met the eligibility requirements to become a
Participant as provided in subsection (b) of
Section 10.01 on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
the Employer Qualified Nonelective
Contribution for the 1998 Plan Year under
Section 13.04;
shall receive an allocation of the Employer Qualified
Nonelective Contribution for the 1998 Plan Year, as
provided in this subsection (z) if the Participant is
credited with at least such number of Hours of Service as
the number determined by multiplying 1,000 by a fraction
the numerator of which is the number of days of
employment with the Controlled Group completed by the
Participant in the 1998 Plan Year and the denominator of
which is three hundred sixty-five (365). Such a
Participant shall receive an allocation of the Employer
Qualified Nonelective Contribution as provided in Section
13.04, but without regard to the requirement that a
Participant have a Year of Participation.
10. Effective as of September 16, 1998, Section 13.11
of the Plan is amended by adding a new subsection (aa) at the end thereof to
provide as follows:
(aa) Each person who
(i) was an active employee of AMCORE Financial,
Inc. and became an Employee on September 16,
1998;
5
196
<PAGE>
(ii) met the eligibility requirements to become a
Participant as provided in subsection (b) of
Section 10.01 on or before the last day of the
1998 Plan Year; and
(iii) is not otherwise eligible for an allocation of
the Employer Qualified Nonelective
Contribution for the 1998 Plan Year under
Section 13.04;
shall receive an allocation of the Employer Qualified
Nonelective Contribution for the 1998 Plan Year, as
provided in this subsection (aa) if the Participant is
credited with at least such number of Hours of Service as
the number determined by multiplying 1,000 by a fraction
the numerator of which is the number of days of
employment with the Controlled Group completed by the
Participant in the 1998 Plan Year and the denominator of
which is three hundred sixty-five (365). Such a
Participant shall receive an allocation of the Employer
Qualified Nonelective Contribution as provided in Section
13.04, but without regard to the requirement that a
Participant have a Year of Participation.
11. Effective as hereinafter set forth, Section 15.04
of the Plan is amended by adding a new paragraph at the end thereof to provide
as follows:
Notwithstanding the preceding provisions of this Section 15.04 or
any other provision of the Plan to the contrary: Effective with
respect to any Participant whose Settlement Date occurs afer
December 31, 1998, any reference in the Plan to "$3,500" as such
reference relates to the timing or form of distribution shall be
replaced with a reference to "$5,000".
12. Effective as hereinafter set forth, the Plan is
amended by adding immediately following Article XXVII thereof the following new
Article XXVIII:
ARTICLE XXVIII
EXTENSION OF COVERAGE
TO
CERTAIN EMPLOYEES
28.01 Extension of Coverage to Certain Georgia Exchange Employees
-----------------------------------------------------------
Effective beginning June 1, 1998 and as more specifically
hereinafter provided, the proviso to paragraph (1) of
6
197
<PAGE>
Section 1.11 shall not apply to and coverage under the Plan
shall be extended to a person who on or after June 1,1998
is an Employee and who on or before June 1, 1998 was in the
bargaining unit described in National Labor Relations Board
Case 10-RD-1309 (a "Decertified Employee"): Effective for
payroll periods commencing after June 1, 1998, a
Decertified Employee who on or after June 1, 1998 would be
an Eligible Employee but for the proviso to paragraph (1)
of Section 1.11 may elect to become an Electing Participant
and to have Salary Deferral Contributions made to the Plan
on his behalf by his Employer as provided under Article
XII. For purposes of the provisions of the Plan relating to
the Employer Qualified Nonelective Contribution for the
Plan Year ending December 31, 1998, the Compensation for
the Plan Year ending December 31, 1998 of a Decertified
Employee who would have been an Eligible Employee at
relevant times during the Plan Year ending December 31,
1998 but for paragraph (1) of Section 1.11 shall be
determined as though such Decertified Employee had been an
Eligible Employee at such relevant times during the Plan
Year ending December 31, 1998.
28.02 Extension of Coverage to Certain Ohio Employees
-----------------------------------------------
Effective beginning December 16, 1998 and as more
specifically hereinafter provided, the proviso to paragraph
(1) of Section 1.11 shall not apply to and coverage under
the Plan shall be extended to a person who on or after
December 16,1998 is an Employee and who on or before
December 16, 1998 was in the bargaining unit described in
National Labor Relations Board Case 8-RD-1819 (a
"Decertified Employee"): Effective as soon as practicable
after December 16,1998 for payroll periods commencing
thereafter , a Decertified Employee who on or after
December 16, 1998 would be an Eligible Employee but for the
proviso to paragraph (1) of Section 1.11 may elect to
become an Electing Participant and to have Salary Deferral
Contributions made to the Plan on his behalf by his
Employer as provided under Article XII. For purposes of the
provisions of the Plan relating to the Employer Qualified
Nonelective Contribution for the Plan Year ending
December 31, 1998, the Compensation for the Plan year
ending December 31, 1998 of a Decertified Employee who
would have been an Eligible Employee at relevant times
during the Plan Year ending December 31, 1998 but for
paragraph (1) of Section 1.11 shall be determined as
though such Decertified
7
198
<PAGE>
Employee had been an Eligible Employee at such relevant
times during the Plan Year ending December 31, 1998.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment to be executed on this 30th day of
December, 1998.
ALLTEL CORPORATION
By:/s/ Joe T. Ford
-----------------------------------------
Title:
8
199
<PAGE>
AMENDMENT NO. 12
TO
ALLTEL CORPORATION THRIFT PLAN
(January 1, 1994 Restatement)
WHEREAS, ALLTEL Corporation (the "Company") maintains the
ALLTEL Corporation Thrift Plan, as amended and restated effective January 1,
1994 and subsequently further amended (the "Plan"); and
WHEREAS, the Company desires further to amend the Plan;
NOW, THEREFORE, BE IT RESOLVED, that the Company hereby amends
the Plan in the respects hereinafter set forth:
Effective as of January 1, 1999, clause (a) of Section 1.08 is
amended to provide as follows:
(a) the amounts actually paid to an Eligible
Employee by the Employer for services
rendered as reported on the Eligible
Employee's federal income tax withholding
statement (Form W-2) or its subsequent
equivalent for the applicable calendar
year; exclusive, however, of any such
amounts that would not be subject to tax
(for purposes of the Federal Insurance
Contributions Act) under Section 3101(a)
of the Internal Revenue Code without the
dollar limitation of Section 3121(a)(1) of
said Code, exclusive of relocation pay,
any non-cash compensation, and allowances
for cost-of-living other than allowances
for international cost-of-living, and
exclusive of deferred compensation whether
in the year deferred or in the year earned
or actually paid; and
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Amendment to be executed on this 28 day of
January, 1999.
ALLTEL CORPORATION
By:/s/ John L. Comparin
--------------------------------------
Title: V.P. Human Resources
200
Exhibit 24
United States
Securities and Exchange Commission
Washington, D.C. 20549
Re: ALLTEL Corporation
Commission File No. 1-4996
1934 Act Filings on Form 10-K
Authorized Representatives
Gentlemen:
The above Company is the issuer of securities registered under Section 12
of the Securities Exchange Act of 1934 (The "Act"). Each of the persons
signing his name below confirms, as of the date appearing opposite his
signature, that each of the "Authorized Representatives" named below is
authorized on his behalf to sign and submit to the Securities and Exchange
Commission such filings on Form 10-K as are required by the Act. Each person
so signing also confirms the authority of each of the Authorized
Representatives to do and perform on his behalf, any and all acts and things
requisite or necessary to assure compliance by the signing person with the
Form 10-K requirements. The authority confirmed herein shall remain in
effect as to each person signing his name below until such time as the
Commission shall receive from such person a written communication terminating
or modifying the authority. Each person signing his name below expressly
revokes all authority heretofore given or executed by him with respect to
such filings under the Act.
Authorized Representatives
Scott T. Ford
Dennis J. Ferra
Francis X. Frantz
Jeffrey R. Gardner
Date Date
/s/ Joe Ford 10/22/98 /s/ W. W. Johnson 10/22/98
- ------------------------------------------ -------------------------------
/s/ Dennis Foster 10/22/98 /s/ Scott Ford 10/22/98
- ------------------------------------------ -------------------------------
/s/ Lawrence L. Gellerstedt, III 10/22/98 /s/ Michael Hooker 10/22/98
- ------------------------------------------ -------------------------------
/s/ Ronald Townsend 10/22/98
- ------------------------------------------
/s/ Josie C. Natori 10/22/98
- ------------------------------------------
/s/ John McConnell 10/22/98
- ------------------------------------------
/s/ Charles H. Goodman 10/22/98
- ------------------------------------------
/s/ William H. Zimmer 10/22/98
- ------------------------------------------
/s/ Frank E. Reed 10/22/98
- ------------------------------------------
/s/ John R. Belk 10/22/98
- ------------------------------------------
/s/ Emon A. Mahony, Jr. 10/22/98
- ------------------------------------------
201
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA
FROM THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
CONTAINED IN THE COMPANY'S FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000065873
<NAME> ALLTEL CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 55,472
<SECURITIES> 0
<RECEIVABLES> 776,720
<ALLOWANCES> 29,121
<INVENTORY> 88,467
<CURRENT-ASSETS> 980,831
<PP&E> 8,233,338
<DEPRECIATION> 3,405,270
<TOTAL-ASSETS> 9,374,226
<CURRENT-LIABILITIES> 1,206,508
<BONDS> 3,491,755
5,005
9,121
<COMMON> 275,137
<OTHER-SE> 2,986,614
<TOTAL-LIABILITY-AND-EQUITY> 9,374,226
<SALES> 561,393
<TOTAL-REVENUES> 5,194,008
<CGS> 550,580
<TOTAL-COSTS> 4,304,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 55,000
<INTEREST-EXPENSE> 263,669
<INCOME-PRETAX> 972,339
<INCOME-TAX> 446,864
<INCOME-CONTINUING> 525,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 524,537
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.89
</TABLE>
