(Mark One) | ||
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2007 | ||
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
Delaware
(State or Other Jurisdiction of Incorporation or Organization) |
02-0636095
(I.R.S. Employer Identification No.) |
(Title of Each Class)
|
(Name of Each Exchange on Which Registered)
|
|
Common Stock, $0.01 par value per share
|
NASDAQ Global Market |
Large accelerated filer
o
|
Accelerated filer þ |
Non-accelerated
filer
o
(Do not check if a smaller reporting company) |
Smaller reporting Company o |
Part of Form 10-K
|
Document Incorporated by Reference
|
|
Part II, Item 5, Part III, Items 10, 11, 12, 13, and 14
|
Portion of the Registrants proxy statement to be filed in connection with the Annual Meeting of the Stockholders of the Registrant to be held on May 6, 2008. |
APB
|
Accounting Principals Board | |
ARPU
|
Average revenue per user | |
COSO
|
Committee of Sponsoring Organization of the Treadway Commission | |
CLEC
|
Competitive Local Exchange Carrier | |
DDTL
|
Delayed draw term loan facility | |
DGCL
|
Delaware general corporation law | |
DSL
|
Digital subscriber line | |
DSLAMs
|
Digital subscriber line access multiplexers | |
EBITDA
|
Earnings before interest, taxes, depreciation and amortization | |
ETCs
|
Eligible telecommunications carriers | |
ETFL
|
East Texas Fiber Line, Inc. | |
FASB
|
Financial Accounting Standards Board | |
FCC
|
Federal Communications Commission | |
FIN
|
Financial interpretation number | |
FTC
|
Federal Trade Commission | |
GAAP
|
Generally Accepted Accounting Principles | |
ICC
|
Illinois Commerce Commission | |
ICTC
|
Illinois Consolidated Telephone Company | |
ILEC
|
Independent local exchange carrier | |
IP
|
Internet protocol | |
IPO
|
Initial public offering | |
IPTV
|
Internet protocol digital television | |
LIBOR
|
London interbank offer rate | |
MD&A
|
Management discussion & analysis | |
MOU
|
Minutes of Use | |
MPLS
|
Multi-Protocol Label Switching | |
NECA
|
National Exchange Carrier Association | |
NOC
|
Network operations center | |
NOL
|
Net operating loss | |
PAPUC
|
Pennsylvania Public Utility Commission | |
PAUSF
|
Pennsylvania Universal Service Fund | |
PUCT
|
Public Utility Commission of Texas | |
PURA
|
Public utilities regulatory act | |
RBOC
|
Regional bell operating company | |
RLEC
|
Rural local exchange carrier | |
SAB
|
Staff accounting bulletin | |
SFAS
|
Statement of financial accounting standards | |
SFAS 71
|
SFAS No. 71, Accounting for the Effects of Certain Types of Regulation | |
SFAS 109
|
SFAS No. 109, Accounting for Income Taxes | |
SFAS 123
|
SFAS No. 123, Accounting for Stock Based Compensation | |
SFAS 123R
|
SFAS No. 123 revised, Share Based Payment | |
SFAS 131
|
SFAS No. 131, Disclosure about Segments of an Enterprise and Regulated Information | |
SFAS 133
|
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activity | |
SFAS 141
|
SFAS No. 141, Business Combinations | |
SFAS 142
|
SFAS No. 142, Goodwill and Other Intangible Assets | |
SFAS 144
|
SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets | |
SFAS 155
|
SFAS No. 155, Accounting for Certain Hybrid Instruments | |
SFAS 157
|
SFAS No. 157, Fair Value Measurements |
1
SFAS 158
|
SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans | |
SFAS 159
|
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities | |
SFAS 160
|
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements | |
SKL
|
SKL Investment Group, LLC | |
SPCOA
|
Service provider certificate of operating authority | |
TXUCV
|
TXU Communications Ventures Company | |
UNE-P
|
Unbundled network element platform | |
VOIP
|
Voice over Internet protocol |
2
3
40
43
90
100
119
Item 1.
Business
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particular expertise in providing superior quality services to
rural customers in a regulated environment;
a proven track record of successful business integrations and
acquisitions, including the integration of ICTC and several
related businesses into McLeodUSA in 1997, the acquisition of
ICTC in 2002 and the TXUCV acquisition and related integration
in 2004 and 2005; and
a proven track record of launching and growing of new services,
such as DSL and IPTV, along with managing CLEC businesses and
complementary services, such as operator, telemarketing and
order fulfillment services and directory publishing.
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attractiveness of the markets;
quality of the network;
our ability to integrate the acquired company efficiently;
potential operating synergies; and
cash flow accretive from day one.
Year Ended December 31,
2007
2006
% of Total
% of Total
$ (millions)
Revenues
$ (millions)
Revenues
$
82.8
25.2
%
$
85.1
26.6
%
70.2
21.3
68.1
21.2
46.0
14.0
47.6
14.8
14.0
4.3
15.2
4.7
38.0
11.5
30.9
9.6
35.8
10.9
33.5
10.5
286.8
87.1
280.4
87.4
42.4
12.9
40.4
12.6
$
329.2
100.0
%
$
320.8
100.0
%
223,787 local access lines in service, of which approximately
65% served residential customers and 35% served business
customers;
148,376 total long distance lines, including 131,640 lines from
within our service areas, which represented 58.8% penetration of
our local access lines;
66,624 DSL lines, which represented approximately 47.7%
penetration of our primary residential access lines.
Approximately 95% of our total local access lines are
DSL-capable; and
12,241 IPTV subscribers.
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GTE Mobilnet of South Texas, which serves the greater Houston
metropolitan area. We own approximately 2.3% of this
partnership. Because of our minor ownership interest and our
inability to influence the operations of this partnership, we
account for this investment using the cost basis. As a result,
income is recognized only on cash distributions paid to us up to
our proportionate earnings in the partnership. We recognized
income on cash distributions of $4.2 million and
$4.0 million from this partnership for the years ended
December 31, 2007 and 2006, respectively.
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GTE Mobilnet of Texas RSA #17, which serves areas in and
around Conroe, Texas. We own approximately 17.0% of the equity
of this partnership. Because of our ownership interest in this
partnership, we account for this investment under the equity
method. As a result, we recognize income based on the proportion
of the earnings generated by the partnership that would be
allocated to us. Cash distributions are recorded as a reduction
in our investment amount. For the year ended December 31,
2007, we recognized income of $2.2 million and received
cash distributions of $1.9 million from this partnership.
In 2006, we recognized income of $2.8 million and received
cash distributions of $1.0 million from this partnership.
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positioning ourselves as a single point of contact for our
customers communications needs;
providing our customers with a broad array of voice and data
services and bundling services where possible;
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providing excellent customer service, including providing
24-hour,
7-day
a week
centralized customer support to coordinate installation of new
services, repair and maintenance functions;
developing and delivering new services; and
leveraging our history and involvement with local communities
and expanding Consolidated Communications and
Consolidated brand recognition.
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allow other carriers to resell their services;
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where feasible, provide number portability;
ensure dialing parity, whereby consumers can choose their local
or long distance telephone company over which their calls will
automatically route without having to dial additional digits;
ensure that competitors customers receive
nondiscriminatory access to telephone numbers, operator service,
directory assistance and directory listing;
afford competitors access to telephone poles, ducts, conduits
and rights-of-way;
and establish reciprocal compensation arrangements with other
carriers for the transport and termination of telecommunications
traffic.
negotiate interconnection agreements with other carriers in good
faith;
interconnect their facilities and equipment with any requesting
telecommunications carrier, at any technically feasible point,
at nondiscriminatory rates and on nondiscriminatory terms and
conditions;
provide other carriers nondiscriminatory access to unbundled
network elements, commonly known as UNEs, such as local loops
and transport facilities, at any technically feasible point, at
nondiscriminatory rates and on nondiscriminatory terms and
conditions;
offer their retail services to other carriers for resale at
discounted wholesale rates;
provide reasonable notice of changes in the information
necessary for transmission and routing of services over the
incumbent telephone companys facilities or in the
information necessary for interoperability;
and provide, at rates, terms and conditions that are just,
reasonable and nondiscriminatory, for the physical co-location
of other carriers equipment necessary for interconnection
or access to UNEs at the premises of the incumbent telephone
company.
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Item 1A.
Risk
Factors
the state of our business, the environment in which we operate
and the various risks we face, including, but not limited to,
competition, technological change, changes in our industry,
regulatory and other risks summarized in this Annual Report on
Form 10-K;
changes in the factors, assumptions and other considerations
made by our board of directors in reviewing and adopting the
dividend policy, as described under Dividend Policy and
Restrictions in Item 5 of this Annual Report on
Form 10-K;
our future results of operations, financial condition, liquidity
needs and capital resources;
our various expected cash needs, including interest and any
future principal payments on our indebtedness, capital
expenditures, taxes, pension and other post-retirement
contributions and certain other costs; and
potential sources of liquidity, including borrowing under our
revolving credit facility or possible asset sales.
either reduce or eliminate dividends;
fund dividends by incurring additional debt (to the extent we
were permitted to do so under the agreements governing our then
existing debt), which would increase our leverage, debt
repayment obligations and interest expense and decrease our
interest coverage, resulting in, among other things, reduced
capacity to incur debt for other purposes, including to fund
future dividend payments;
amend the terms of our credit agreement or indenture, if our
lenders agreed, to permit us to pay dividends or make other
payments if we are otherwise not permitted to do so;
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fund dividends from future issuances of equity securities, which
could be dilutive to our stockholders and negatively effect the
price of our common stock;
fund dividends from other sources, such as such as by asset
sales or by working capital, which would leave us with less cash
available for other purposes; and
reduce other expected uses of cash, such as capital expenditures.
Our credit agreement and our indenture restrict our ability to
pay dividends. Based on the results of operations from
October 1, 2005 through December 31, 2007, we would
have been able to pay a dividend of $60.6 million based on
the restricted payment covenants contained in our credit
agreement and indenture. This is based on the ability of the
borrowers under the credit facility (Consolidated
Communications, Inc, Consolidated Communications Acquisition
Texas, Inc. and North Pittsburgh Systems, Inc.) to pay to the
Company $60.6 million in dividends and the ability of the
Company to pay to its stockholders $101.1 million in
dividends under the general formula under the restricted
payments covenants of the indenture, commonly referred to as the
build-up
amount. After giving effect to the dividend of
$11.4 million which was declared in November of 2007 and
paid on February 1, 2008, we could pay a dividend of
$49.2 million under the credit facility and
$89.7 million under the indenture. The amount of dividends
we will be able to pay under the
build-up
amount will be based, in part, on the amount of cash that may be
distributed by the borrowers under the credit agreement to us.
In addition, based on the indenture provision relating to public
equity offerings, which includes our IPO that was completed
July 27, 2005, we expect that we will be able to pay
approximately $4.1 million annually in dividends, subject
to specified conditions. This means that we could pay
approximately $4.1 million in dividends under this
provision in addition to whatever we may be able to pay under
the
build-up
amount, although a dividend payment under this provision will
reduce the amount we otherwise would have available to us under
the
build-up
amount for restricted payments, including dividends.
Under Delaware law, our board of directors may not authorize
payment of a dividend unless it is either paid out of our
surplus, as calculated in accordance with the Delaware General
Corporation law, or the DGCL, or if we do not have a surplus, it
is paid out of our net profits for the fiscal year in which the
dividend is declared
and/or
the
preceding fiscal year. The Illinois Business Corporation Act
also imposes limitations on the ability of our subsidiaries that
are Illinois corporations, including ICTC, to declare and pay
dividends. The Pennsylvania Business Corporation law imposes
similar limitation on our subsidiaries that are Pennsylvania
corporations, including North Pittsburgh.
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State Commissions could require our rural telephone companies to
make minimum amounts of capital expenditures and could limit the
amount of cash available to transfer from our rural telephone
companies to us. Our Illinois, Pennsylvania and Texas ILECs are
ICTC, Consolidated Communications of Pennsylvania Company,
Consolidated Communications of Fort Bend Company and
Consolidated Communications of Texas Company. The ICC imposed
various conditions on its approval of the reorganization
consummated in connection with the completion of our IPO,
including (1) prohibitions on the payment of dividends or
other cash transfers from ICTC, our Illinois rural telephone
company, to us if it fails to meet or exceed agreed benchmarks
for a majority of seven service quality metrics for the prior
reporting year and (2) the requirement that our Illinois
rural telephone company have access to the higher of
$5.0 million or its currently approved capital expenditure
budget for each calendar year through a combination of available
cash and amounts available under credit facilities. In addition,
the Illinois Public Utilities Act prohibits the payment of
dividends by ICTC, except out of earnings and earned surplus, if
ICTCs capital is or would become impaired by payment of
the dividend, or if payment of the dividend would impair
ICTCs ability to render reasonable and adequate service at
reasonable rates, unless the ICC otherwise finds that the public
interest requires payment of the dividend, subject to any
conditions imposed by the ICC. The PAPUC has placed debt and
transaction cost recovery restrictions for a three year period
that could have an impact to the payment of dividends.
28
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dividing our board of directors into three classes, which
results in only approximately one-third of our board of
directors being elected each year;
requiring the affirmative vote of holders of not less than 75%
of the voting power of our outstanding common stock to approve
any merger, consolidation or sale of all or substantially all of
our assets;
providing that directors may only be removed for cause and then
only upon the affirmative vote of holders of not less than
two-thirds of the voting power of our outstanding common stock;
requiring the affirmative vote of holders of not less than
two-thirds of the voting power of our outstanding common stock
to amend, alter, change or repeal specified provisions of our
amended and restated certificate of incorporation and bylaws
(other than provisions regarding stockholder approval of any
merger, consolidation or sale of all or substantially all of our
assets, which shall require the affirmative vote of 75% of the
voting power of our outstanding common stock);
requiring stockholders to provide us with advance notice if they
wish to nominate any persons for election to our board of
directors or if they intend to propose any matters for
consideration at an annual stockholders meeting; and
authorizing the issuance of so-called blank check
preferred stock without stockholder approval upon such terms as
the board of directors may determine.
the election of directors;
significant corporate transactions, such as a merger or other
sale of our company or its assets, or to prevent any such
transaction;
acquisitions that increase our amount of indebtedness or sell
revenue-generating assets;
corporate and management policies;
amendments to our organizational documents; and
other matters submitted to our stockholders for approval.
29
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requiring us to dedicate a substantial portion of our cash flow
from operations to make interest payments on our debt, which
payments we currently expect to be approximately $64.0 to
$67.0 million in 2008, thereby reducing funds available for
operations, future business opportunities and other purposes
and/or
dividends on our common stock;
limiting our flexibility in planning for, or reacting to,
changes in our business and the industry in which we operate;
making it more difficult for us to satisfy our debt and other
obligations;
limiting our ability to borrow additional funds, or to sell
assets to raise funds, if needed, for working capital, capital
expenditures, acquisitions or other purposes;
increasing our vulnerability to general adverse economic and
industry conditions, including changes in interest
rates; and
placing us at a competitive disadvantage compared to our
competitors that have less debt.
our business will generate sufficient cash flow from operations
to service and repay our debt, pay dividends on our common stock
and to fund working capital and planned capital expenditures;
future borrowings will be available under our credit facilities
or any future credit facilities in an amount sufficient to
enable us to repay our debt and pay dividends on our common
stock; or
we will be able to refinance any of our debt on commercially
reasonable terms or at all.
30
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incur additional debt and issue preferred stock;
make restricted payments, including paying dividends on,
redeeming, repurchasing or retiring our capital stock;
make investments and prepay or redeem debt;
enter into agreements restricting our subsidiaries ability
to pay dividends, make loans or transfer assets to us;
create liens;
sell or otherwise dispose of assets, including capital stock of
subsidiaries;
engage in transactions with affiliates;
engage in sale and leaseback transactions;
make capital expenditures;
engage in business other than telecommunications
businesses; and
consolidate or merge.
limit our ability to plan for or react to market conditions,
meet capital needs or otherwise restrict our activities or
business plans; and
adversely affect our ability to finance our operations, enter
into acquisitions or to engage in other business activities that
would be in our interest.
31
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substantial regulatory change due to the passage and
implementation of the Telecommunications Act, which included
changes designed to stimulate competition for both local and
long distance telecommunications services;
rapid development and introduction of new technologies and
services;
increased competition within established markets from current
and new market entrants that may provide competing or
alternative services;
the blurring of traditional dividing lines between, and the
bundling of, different services, such as local dial tone, long
distance, wireless, cable, data and Internet services; and
an increase in mergers and strategic alliances that allow one
telecommunications provider to offer increased services or
access to wider geographic markets.
32
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33
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demographic trends;
in Illinois, the strength of the agricultural markets and the
light manufacturing and services industries, continued demand
from universities and hospitals and the level of government
spending;
in Pennsylvania, the strength of small to medium sized
businesses, health care and education spending; and
in Texas, the strength of the manufacturing, health care, waste
management and retail industries and continued demand from
schools and hospitals.
physical damage to our central offices or local access lines;
disruptions beyond our control;
power surges or outages; and
software defects.
includes provisions that allow the respective state agency to
terminate the contract without cause and without penalty under
some circumstances;
34
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is subject to decisions of state agencies that are subject to
political influence on renewal;
gives the State of Illinois the right to renew the contract at
its option but does not give us the same right; and
could be cancelled if state funding becomes unavailable.
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Under certain environmental laws, we could be held liable,
jointly and severally and without regard to fault, for the costs
of investigating and remediating any actual or threatened
environmental contamination at currently and formerly owned or
operated properties, and those of our predecessors, and for
contamination associated with disposal by us or our predecessors
of hazardous materials at third party disposal sites. Hazardous
materials may have been released at certain current or formerly
owned properties as a result of historic operations.
The presence of contamination can adversely affect the value of
our properties and our ability to sell any such affected
property or to use it as collateral.
We could be held responsible for third party property damage
claims, personal injury claims or natural resource damage claims
relating to any such contamination.
38
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The cost of complying with existing environmental requirements
could be significant.
Adoption of new environmental laws or regulations or changes in
existing laws or regulations or their interpretations could
result in significant compliance costs or as yet identified
environmental liabilities.
Future acquisitions of businesses or properties subject to
environmental requirements or affected by environmental
contamination could require us to incur substantial costs
relating to such matters.
In addition, environmental laws regulating wetlands, endangered
species and other land use and natural resource issues may
increase costs associated with future business or expansion
opportunities, delay, alter or interfere with such plans, or
otherwise adversely affect such plans.
Item 1B.
Unresolved
Staff Comments
Item 2.
Properties
Approximate
Square
Owned/Leased
Operating Segment
Feet
Headquarters Complex)
Office and Switching
Owned
Telephone & Other
111,931
Regional Office
Owned
Telephone & Other
51,900
Order Fullfillment
Leased
Other Operations
50,000
Corporate Headquarters
Leased
Telephone & Other
49,100
Operator Services and Operations
Owned
Telephone & Other
36,300
Communications Center and Office
Leased
Telephone & Other
34,000
Operations and Distribution
Center
Leased
Telephone & Other
30,900
Sales and Administration Office
Leased
Telephone & Other
30,700
Regional Office
Owned
Telephone & Other
30,100
Warehouse and Plant
Owned
Telephone & Other
28,500
Office
Owned
Telephone & Other
23,200
Warehouse and Office
Owned
Telephone & Other
19,716
Office and Switching
Owned
Telephone & Other
18,564
Office and Communications Center
Owned
Telephone & Other
15,900
Operations and Distribution
Center
Leased
Telephone & Other
14,700
Warehouse
Owned
Telephone & Other
14,200
Office
Leased
Telephone & Other
13,970
Office and Switching
Owned
Telephone & Other
13,110
Office and Data Center
Owned
Telephone & Other
11,900
Office
Owned
Telephone & Other
10,650
39
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Approximate
Square
Owned/Leased
Operating Segment
Feet
Office
Owned
Telephone & Other
10,100
Item 3.
Legal
Proceedings
Item 4.
Submission
of Matters to a Vote of Security Holders
Dividends
Low
High
Declared
$
12.41
$
16.33
$
0.39
$
14.50
$
17.00
$
0.39
$
14.68
$
19.55
$
0.39
$
16.61
$
21.19
$
0.39
$
18.71
$
23.00
$
0.39
$
19.30
$
23.71
$
0.39
$
15.72
$
23.11
$
0.39
$
15.50
$
21.45
$
0.39
Table of Contents
Nothing requires us to pay dividends.
While our current dividend policy contemplates the distribution
of a substantial portion of the cash generated by our business
in excess of our expected cash needs, this policy could be
changed or revoked by our board of directors at any time, for
example, if it were to determine that we had insufficient cash
to take advantage of other opportunities with attractive rates
of return.
Even if our dividend policy is not changed or revoked, the
actual amount of dividends distributed under this policy, and
the decision to make any distributions, is entirely at the
discretion of our board of directors.
The amount of dividends distributed will be subject to covenant
restrictions in the agreements governing our debt, including our
indenture and our credit agreement, and in agreements governing
any future debt.
We might not have sufficient cash in the future to pay dividends
in the intended amounts or at all. Our ability to generate this
cash will depend on numerous factors, including the state of our
business, the environment in which we operate and the various
risks we face, changes in the factors, assumptions and other
considerations made by our board of directors in reviewing and
adopting the dividend policy, our future results of operations,
financial condition, liquidity needs and capital resources and
our various expected cash needs.
The amount of dividends distributed may be limited by state
regulatory requirements.
The amount of dividends distributed is subject to restrictions
under Delaware, Illinois and Pennsylvania law.
Our stockholders have no contractual or other legal right to
receive dividends.
Total Number of
Maximum Number
Shares Purchased
of Shares that May
Total Number of
Average Price Paid
as Part of Publically
Yet be Purchased
Shares Purchased
per Share
Announced Plans
Under the Plans
2,646
$
20.65
Not applicable
Not applicable
2,286
$
16.89
Not applicable
Not applicable
2,329
$
16.44
Not applicable
Not applicable
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Item 6.
Selected
Financial Data
CCI Holdings
Year Ended December 31,
2007
2006
2005
2004
2003
($s In millions except per share amounts)
$
286.8
$
280.4
$
282.3
$
230.4
$
90.3
42.4
40.4
39.1
39.2
42.0
329.2
320.8
321.4
269.6
132.3
107.3
98.1
101.1
80.6
46.3
89.6
94.7
98.8
87.9
42.5
11.3
11.6
65.7
67.4
67.4
54.5
22.5
66.6
49.3
54.1
35.0
21.0
(56.8
)
(42.9
)
(53.4
)
(39.6
)
(11.9
)
6.3
7.3
5.7
3.7
0.1
16.1
13.7
6.4
(0.9
)
9.2
(4.7
)
(0.4
)
(10.9
)
(0.2
)
(3.7
)
11.4
13.3
(4.5
)
(1.1
)
5.5
(10.2
)
(15.0
)
(8.5
)
$
11.4
$
13.3
$
(14.7
)
$
(16.1
)
$
(3.0
)
$
0.44
$
0.48
$
(0.83
)
$
(1.79
)
$
(0.33
)
$
0.44
$
0.47
$
(0.83
)
$
(1.79
)
$
(0.33
)
$
82.1
$
84.6
$
79.3
$
79.8
$
28.9
(305.3
)
(26.7
)
(31.1
)
(554.1
)
(296.1
)
230.9
(62.7
)
(68.9
)
516.3
277.4
33.5
33.4
31.1
30.0
11.3
$
1.55
$
1.55
$
0.80
$
$
$
34.3
$
26.7
$
31.4
$
52.1
$
10.1
99.6
74.2
79.0
98.9
39.6
411.6
314.4
335.1
360.8
104.6
1,304.6
889.6
946.0
1,006.1
317.6
892.6
594.0
555.0
629.4
180.4
205.5
101.5
155.4
115.0
199.2
(18.8
)
(3.5
)
42
Table of Contents
CCI Holdings
Year Ended December 31,
2007
2006
2005
2004
2003
($s In millions except per share amounts)
$
143.8
$
139.8
$
136.8
$
115.8
$
45.5
183,070
155,354
162,231
168,778
58,461
98,958
78,335
79,793
86,430
32,426
282,028
233,689
242,024
255,208
90,887
68,874
12,241
6,954
2,146
101
81,337
52,732
39,192
27,445
7,951
444,480
293,375
283,362
282,754
98,838
(1)
Interest expense includes amortization and write-off of deferred
financing costs totaling $13.5 million, $3.3 million,
$5.5 million, $6.4 million and $0.5 million for
the years ended December 31, 2007, 2006, 2005, 2004 and
2003, respectively.
(2)
We recognized $0.3 million and $2.8 million of net
proceeds in other income due to the receipt of key-man life
insurance proceeds relating to the passing of former TXUCV
employees in 2007 and 2005, respectively.
(3)
Property, plant and equipment are recorded at cost. The cost of
additions, replacements and major improvements is capitalized,
while repairs and maintenance are charged to expenses. When
property, plant and equipment are retired from our regulated
subsidiaries, the original cost, net of salvage, is charged
against accumulated depreciation, with no gain or loss
recognized in accordance with composite group life remaining
methodology used for regulated telephone plant assets.
(4)
In connection with the TXUCV acquisition on April 14, 2004,
we issued $200.0 million in aggregate principal amount of
senior notes and entered into credit facilities. In connection
with the IPO, we retired $70.0 million of senior notes and
amended and restated our credit facilities. In connection with
the acquisition of North Pittsburgh on December 31, 2007,
we issued $296.0 million new term debt, net of payoffs of
existing debt.
(5)
In July 2006, we repurchased and retired approximately
3.8 million shares of our common stock for approximately
$56.7 million, or $15.00 per share. We financed this
transaction using approximately $17.7 million of cash on
hand and $39.0 million of additional term-loan borrowings.
(6)
We present Consolidated EBITDA because we believe it is a useful
indicator of our historical debt capacity and our ability to
service debt and pay dividends and because it provides a measure
of consistency in our financial reporting. We also present
Consolidated EBITDA because covenants in our credit facilities
contain ratios based on Consolidated EBITDA.
Consolidated EBITDA is defined in our current credit facility
as: Consolidated Net Income, which is defined in our credit
facility, (a) plus the following to the extent deducted in
arriving at Consolidated Net Income (i) interest expense,
amortization or write-off of debt discount and non-cash expense
incurred in connection with equity compensation plans;
(ii) provision for income taxes; (iii) depreciation
and amortization; (iv) non-cash charges for asset
impairment; all charges, expenses and other extraordinary,
non-recurring and unusual integration costs or losses related to
the acquisition of North Pittsburgh, including all severance
payments in connection with the acquisition, so long as such
costs or losses are incurred prior to December 31, 2009 and
do not exceed $12 million in the aggregate; (vi) all
non-recurring transaction fees, charges and other amounts
related to the acquisition of North Pittsburgh (excluding all
amounts otherwise included in accordance with GAAP in
determining Consolidated EBITDA), so long as such fees, charges
and other amounts do not exceed $18 million in the
aggregate; (b) minus (in the case of gains) or plus (in the
case of losses) gain or loss on sale of assets; (c) minus
(in the case of gains) or plus (in the
Table of Contents
case of losses) non-cash income or charges relating to foreign
currency gains or losses; (d) plus (in the case of losses)
and minus (in the case of income) non-cash minority interest
income or loss; (e) plus (in the case of items deducted in
arriving at Consolidated Net Income) and minus (in the case of
items added in arriving at Consolidated Net Income) non-cash
charges resulting from changes in accounting principles;
(f) plus, extraordinary losses and minus extraordinary
gains as defined by GAAP; (g) plus, in the case of any
period ending on December 31, 2007 and any period ending
during the seven immediately succeeding fiscal quarters of the
Company, to the extent not otherwise included in Consolidated
EBITDA, cost savings to be realized by the Company and its
subsidiaries in connection with the acquisition of North
Pittsburgh and which are attributable to the integration of the
operations and businesses of the Illinois and Texas operations,
on the one hand, and the Pennsylvania operations, on the other
hand, which cost savings are deemed to be the amounts set forth
on a schedule to the credit agreement for each such fiscal
quarter; and (h) minus interest income. If our Consolidated
EBITDA were to decline below certain levels, covenants in our
credit facilities that are based on Consolidated EBITDA,
including our total net leverage, and interest coverage ratios
covenants, may be violated and could cause, among other things,
a default or mandatory prepayment under our credit facilities,
or result in our inability to pay dividends.
We believe that net cash provided by operating activities is the
most directly comparable financial measure to Consolidated
EBITDA under generally accepted accounting principles.
Consolidated EBITDA should not be considered in isolation or as
a substitute for consolidated statement of operations and cash
flows data prepared in accordance with GAAP. Consolidated EBITDA
is not a complete measure of an entitys profitability
because it does not include costs and expenses identified above;
nor is Consolidated EBITDA a complete net cash flow measure
because it does not include reductions for cash payments for an
entitys obligation to service its debt, fund its working
capital, make capital expenditures and make acquisitions or pay
its income taxes and dividends.
CCI Holdings
Year Ended December 31,
2007
2006
2005
2004
2003
$
82.1
$
84.6
$
79.3
$
79.8
$
28.9
(4.0
)
(2.5
)
(8.6
)
(3.8
)
(8.1
)
(18.0
)
(22.0
)
(7.3
)
2.8
6.7
10.2
(4.4
)
6.4
56.8
42.9
53.4
39.6
11.8
4.7
0.4
10.9
0.2
3.7
138.6
124.0
127.2
93.2
43.5
1.2
3.7
7.4
7.0
2.9
4.1
2.0
(6.6
)
(7.1
)
(3.0
)
(3.7
)
6.6
5.5
1.6
3.6
(7.9
)
11.2
11.6
4.0
2.5
8.6
$
143.8
$
139.8
$
136.8
$
115.8
$
45.5
44
Table of Contents
(a)
Other adjustments, net includes $11.2 million and
$11.6 million of asset impairment charges for years ended
December 31, 2006 and December 31, 2004, respectively.
Upon completion of our 2006 annual impairment review and as a
result of a decline in estimated future cash flows in the
telemarketing and operator services business, we determined that
the value of the customer lists associated with these businesses
was impaired. As a result of our 2004 impairment testing we
determined that the goodwill of our operator services business
and the tradenames of our telemarketing and mobile services
business were impaired. Non-cash impairment charges are excluded
in arriving at Consolidated EBITDA under our credit facility.
(b)
Historical EBITDA is defined as net earnings (loss) before
interest expense, income taxes, depreciation and amortization on
a historical basis.
(c)
These adjustments reflect those required or permitted by the
lenders under the credit facility in place at the end of each of
the years included in the periods presented.
(d)
In connection with the TXUCV acquisition, we have incurred
certain expenses associated with integrating and restructuring
the businesses. These expenses include severance, employee
relocation expenses, Sabanes-Oxley
start-up
costs, costs to integrate our technology, administrative and
customer service functions, billing systems and other
integration costs.
(e)
Represents the aggregate professional service fees paid to
certain large equity investors prior to our initial public
offering. Upon closing of the initial public offering, these
agreements terminated.
(f)
Other, net includes the equity earnings from our investments,
dividend income and certain other miscellaneous non-operating
items. Key man life insurance proceeds of $0.3 million and
$2.8 million received in 2007 and 2005, respectively, are
not deducted to arrive at Consolidated EBITDA.
(g)
For purposes of calculating Consolidated EBITDA, we include all
cash dividends and other cash distributions received from our
investments.
(h)
Represents a $7.9 million curtailment gain associated with
the amendment of our Texas pension plan. The gain was recorded
in general and administrative expenses. However, because the
gain is non-cash, it is excluded from Consolidated EBITDA.
(i)
Represents compensation expenses in connection with our
Restricted Share Plan, which because of the non-cash nature of
the expenses, are being excluded from Consolidated EBITDA.
(7)
Other data for 2007 includes access lines, CLEC access line
equivalents, and DSL subscribers for our North Pittsburgh
operations which were acquired on December 31, 2007.
Item 7.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
45
Table of Contents
repay in full outstanding borrowings under our term loan A and C
facilities, together with accrued but unpaid interest through
the date of repayment and associated fees and expenses;
redeem $70.0 million of the aggregate principal amount of
our senior notes and pay the associated redemption premium of
$6.8 million, together with accrued but unpaid interest
through the date of redemption; and
partially fund integration and restructuring costs relating to
the 2004 TXUCV acquisition.
a reduction in our annual dividend obligation of
$5.9 million;
an increase in our after tax net cash interest of
$2.9 million due to the increased borrowings incurred net
of, an increase in the interest rate on our credit facility of
25 basis points and a decrease of cash on hand.
a $50.0 million revolving credit facility that is currently
undrawn;
a $760.0 million term loan, the proceeds of which were
drawn at closing of the acquisition; and
a delayed draw term loan in the amount of $140.0 million
which is available to the company until May 1, 2008, the
proceeds of which can be used for the sole purpose of redeeming
our $130.0 million of outstanding senior notes along with
the payment of any accrued interest and fees.
46
Table of Contents
pay off the Companys previous credit facility of
$464.0 million plus accrued interest;
fund the cash portion of the acquisition; and
pay fees and expenses related to the acquisition and new
financing.
aggressively promoting DSL service, including selling DSL as a
stand-alone service;
bundling value-adding services, such as DSL or IPTV, with a
combination of local service, custom calling features, voicemail
and Internet access;
maintaining excellent customer service standards, particularly
as we introduce new services to existing customers; and
keeping a strong local presence in the communities we serve.
47
Table of Contents
December 31,
2007
2006
2005
146,659
155,354
162,231
77,128
78,335
79,793
223,787
233,689
242,024
12,241
6,954
2,146
66,624
52,732
39,192
78,865
59,686
41,338
302,652
293,375
283,362
148,376
148,181
143,882
6,734
11,942
15,971
45,971
43,175
36,627
48
Table of Contents
operating expenses relating to plant costs, including those
related to the network and general support costs, central office
switching and transmission costs and cable and wire facilities;
general plant costs, such as testing, provisioning, network,
administration, power and engineering; and
the cost of transport and termination of long distance and
private lines outside our rural telephone companies
service area.
selling and marketing expenses;
expenses associated with customer care;
billing and other operating support systems; and
corporate expenses, including professional service fees, and
non-cash stock compensation.
49
Table of Contents
Years
15-35
5-30
3-17
11
Year Ended December 31,
2007
2006
2005
% of Total
% of Total
% of Total
$ (millions)
Revenues
$ (millions)
Revenues
$ (millions)
Revenues
$
82.8
25.2
%
$
85.1
26.6
%
$
88.2
27.4
%
70.2
21.3
68.1
21.2
64.4
20.0
46.0
14.0
47.6
14.8
53.9
16.8
14.0
4.3
15.2
4.7
16.3
5.1
38.0
11.5
30.9
9.6
25.8
8.0
35.8
10.9
33.5
10.5
33.7
10.5
286.8
87.1
280.4
87.4
282.3
87.8
42.4
12.9
40.4
12.6
39.1
12.2
329.2
100.0
320.8
100.0
321.4
100.0
153.4
46.6
152.4
47.5
161.8
50.3
43.5
13.2
51.7
16.1
38.1
11.9
65.7
20.0
67.4
21.0
67.4
21.0
262.6
79.8
271.5
84.6
267.3
83.2
66.6
20.2
49.3
15.4
54.1
16.8
(56.8
)
(17.3
)
(42.9
)
(13.4
)
(53.4
)
(16.6
)
6.3
1.9
7.3
2.3
5.7
1.8
(4.7
)
(1.4
)
(0.4
)
(0.1
)
(10.9
)
(3.4
)
$
11.4
3.5
%
$
13.3
4.1
%
$
(4.5
)
(1.4
)%
50
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51
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52
Table of Contents
53
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54
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55
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a change in the use or perceived value of our tradenames;
significant underperformance relative to expected historical or
projected future operating results;
significant regulatory changes that would impact future
operating revenues;
significant changes in our customer base;
significant negative industry or economic trends; or
significant changes in the overall strategy in which we operate
our overall business.
56
Table of Contents
December 31,
Percentage Point
2007 Obligation
2007 Expense
Change
Higher
Lower
Higher
Lower
(In millions)
+ or − 0.5 pts
$
(10.0
)
$
10.9
$
(0.1
)
$
0.1
+ or − 1.0 pts
$
$
$
(1.0
)
$
1.0
+ or − 0.5 pts
$
(1.9
)
$
2.1
$
(0.1
)
$
0.1
57
Table of Contents
Year Ended December 31,
2007
2006
2005
(In millions)
$
82.1
$
84.6
$
79.3
(305.3
)
(26.7
)
(31.1
)
230.9
(62.7
)
(68.9
)
58
Table of Contents
Balance
Maturity Date
Rate (1)
(In millions)
$
2.6
July 1, 2011
7.40
%
December 31, 2013
LIBOR + 2.50
%
760.0
December 31, 2014
LIBOR + 2.50
%
130.0
April 1, 2012
9.75
%
(1)
As of December 31, 2007, the
90-day
LIBOR
rate was 4.83%.
(2)
On February 26, 2008 we delivered notice of our intention
to redeem all of the outstanding notes on April 1, 2008.
59
Table of Contents
60
Table of Contents
61
Table of Contents
Payments Due by Period
Less than
1 - 3
3 - 5
More than
Total
1 Year
Years
Years
5 Years
(In thousands)
$
1,342,150
$
65,000
$
129,050
$
259,050
$
889,050
2,925
1,178
1,706
41
11,896
3,713
5,769
1,655
759
6,951
4,993
1,216
525
217
61,769
11,980
12,766
11,546
25,477
$
1,425,691
$
86,864
$
150,507
$
272,817
$
915,503
(a)
This item consists of interest and principal payments under our
credit facilities and our senior notes. The credit facilities
consist of a $760.0 million term loan facility maturing on
December 31, 2014 and a $50.0 million revolving credit
facility, which was fully available but undrawn as
December 31, 2007. The senior notes total
$130.0 million and mature on March 31, 2012.
(b)
Represents payments of principal and interest on a capital lease
entered into by North Pittsburgh for equipment used in its
operations.
(c)
North Pittsburgh has two contracts to outsource a majority of
its operational support systems. We have provided notice of our
intent to cancel one of the contracts effective no later than
May 15, 2008. Also, in the ordinary course of business, we
enter into various contractual arrangements and purchase
commitments for items such as network maintenance, Internet
backbone services and advertising sponsorships.
(d)
Pension funding is an estimate of our minimum funding
requirements to provide pension benefits for employees based on
service through December 31, 2007. Obligations relating to
other post retirement benefits are based on estimated future
benefit payments. Our estimates are based on forecasts of future
benefit payments which may change over time due to a number of
factors, including life expectancy, medical costs and trends and
on the actual rate of return on the plan assets, discount rates,
discretionary pension contributions and regulatory rules.
62
Table of Contents
Item 7A.
Quantitative
and Qualitative Disclosures about Market Risk
63
Table of Contents
64
Table of Contents
Item 8.
Financial
Statements and Supplementary Data
65
Table of Contents
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
66
Table of Contents
67
Table of Contents
December 31,
2007
2006
$
34,341
$
26,672
44,001
34,396
6,364
4,170
4,551
2,081
10,358
6,898
99,615
74,217
411,647
314,381
94,142
40,314
526,439
316,034
146,411
110,273
14,291
14,291
12,046
20,069
$
1,304,591
$
889,579
LIABILITIES AND STOCKHOLDERS EQUITY
$
1,010
$
8,765
17,386
11,004
18,167
15,303
11,361
10,040
28,254
29,399
84,943
65,746
1,636
890,000
594,000
97,289
55,893
56,729
54,187
14,306
1,100
1,144,903
770,926
4,322
3,695
294
260
278,175
199,858
(117,452
)
(87,362
)
(5,651
)
2,202
155,366
114,958
$
1,304,591
$
889,579
68
Table of Contents
Year Ended December 31,
2007
2006
2005
$
329,248
$
320,767
$
321,429
107,290
98,093
101,159
89,662
94,693
98,791
11,240
65,659
67,430
67,379
66,637
49,311
54,100
893
974
1,066
(57,673
)
(43,873
)
(54,509
)
7,034
7,691
3,215
(627
)
(721
)
(683
)
(167
)
290
3,284
16,097
13,672
6,473
4,674
405
10,935
11,423
13,267
(4,462
)
(10,263
)
$
11,423
$
13,267
$
(14,725
)
$
0.44
$
0.48
$
(0.83
)
$
0.44
$
0.47
$
(0.83
)
$
1.55
$
1.55
$
0.41
69
Table of Contents
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
EQUITY
Year Ended December 31, 2007, 2006 and 2005
(Dollars in thousands, except share amounts)
Accumulated
Other
Common Stock
Additional
Accumulated
Comprehensive
Comprehensive
Shares
Amount
Paid in Capital
Deficit
Income (Loss)
Total
Income (Loss)
10,000,000
$
$
58
$
(19,111
)
$
258
$
(18,795
)
(4,462
)
(4,462
)
$
(4,462
)
(10,263
)
(10,263
)
(23,697
)
(23,697
)
13,692,510
237
177,997
178,234
6,000,000
60
67,529
67,589
87,500
8,590
8,590
(5,000
)
(12
)
(12
)
(144
)
(144
)
(144
)
2,188
2,188
2,188
29,775,010
297
254,162
(57,533
)
2,302
199,228
$
(2,418
)
13,267
13,267
$
13,267
(43,096
)
(43,096
)
13,841
2,482
2,482
(3,786,979
)
(37
)
(56,786
)
(56,823
)
427
427
(324
)
(324
)
49
49
49
(252
)
(252
)
(252
)
26,001,872
260
199,858
(87,362
)
2,202
114,958
$
13,064
11,423
11,423
$
11,423
(41,513
)
(41,513
)
3,319,142
34
74,376
74,410
126,834
4,034
4,034
(7,261
)
(131
)
(131
)
38
38
2,785
2,785
2,785
(10,638
)
(10,638
)
(10,638
)
29,440,587
$
294
$
278,175
$
(117,452
)
$
(5,651
)
$
155,366
$
3,570
70
Table of Contents
Year Ended December 31,
2007
2006
2005
$
11,423
$
13,267
$
(4,462
)
65,659
67,430
67,379
4,734
5,059
4,480
(4,271
)
(9,305
)
10,232
11,240
(7,880
)
(2,205
)
(2,892
)
(1,809
)
4,034
2,482
8,590
627
721
683
6,825
13,451
3,260
5,482
(4,563
)
(3,952
)
(6,166
)
(228
)
(750
)
109
7,416
(2,080
)
156
1,258
(739
)
567
(15,266
)
852
(4,886
)
82,069
84,593
79,300
10,625
5,921
815
(10,625
)
(271,780
)
(33,495
)
(33,388
)
(31,094
)
(305,275
)
(26,652
)
(31,094
)
12
67,589
760,000
39,000
5,688
(464,000
)
(86,934
)
(15,426
)
(400
)
(8,988
)
(262
)
(5,552
)
(131
)
(56,823
)
(12
)
(37,500
)
(40,192
)
(44,593
)
(12,160
)
230,875
(62,678
)
(68,881
)
7,669
(4,737
)
(20,675
)
26,672
31,409
52,084
$
34,341
$
26,672
$
31,409
$
44,343
$
44,509
$
53,065
$
13,976
$
8,237
$
613
71
Table of Contents
1.
Description
of Business
2.
Initial
Public Offering
3.
Summary
of Significant Accounting Policies
72
Table of Contents
73
Table of Contents
Years
15-35
5-30
3-17
11
74
Table of Contents
75
Table of Contents
76
Table of Contents
77
Table of Contents
4.
Acquisition
$
17,729
117,134
49,000
214,389
53,360
(105,034
)
$
346,578
78
Table of Contents
December 31
2007
2006
$
424,917
$
424,232
$
59,752
$
67,696
$
5,592
$
26,888
$
0.19
$
0.87
$
0.19
$
0.85
5.
Prepaids
and other current assets
December 31,
2007
2006
$
1,334
$
992
7,864
4,702
1,160
1,204
$
10,358
$
6,898
6.
Property,
plant and equipment
December 31,
2007
2006
$
75,921
$
49,346
915,811
670,791
88,766
74,082
6,032
10,226
4,124
1,096,756
798,343
(685,109
)
(483,962
)
$
411,647
$
314,381
79
Table of Contents
7.
Investments
December 31,
2007
2006
$
2,566
$
1,376
21,450
21,450
22,950
2,388
2,251
18
18
15,359
15,080
7,102
21,949
167
193
139
$
94,142
$
40,314
80
Table of Contents
2007
2006
$
180,412
$
49,298
41,682
15,161
42,680
15,633
42,680
15,633
31,049
14,409
64,173
34,399
8,869
1,844
468
246
85,885
46,097
8.
Minority
Interest
9.
Goodwill
and Other Intangible Assets
81
Table of Contents
Telephone
Other
Operations
Operations
Total
$
305,289
$
8,954
$
314,243
1,791
1,791
1,770
(1,770
)
308,850
7,184
316,034
(3,984
)
(3,984
)
214,389
214,389
$
519,255
$
7,184
$
526,439
December 31,
2007
2006
$
205,648
$
156,648
(59,237
)
(46,375
)
$
146,411
$
110,273
82
Table of Contents
10.
Affiliated
Transactions
Year Ended December 31,
2007
2006
2005
$
10
$
10
$
6
81
100
69
174
206
443
465
542
514
83
Table of Contents
11.
Income
Taxes
Year Ended December 31,
2007
2006
2005
$
7,790
$
10,152
$
240
1,155
1,632
1,042
8,945
11,784
1,282
(1,523
)
(4,568
)
4,972
(2,748
)
(6,811
)
4,681
(4,271
)
(11,379
)
9,653
$
4,674
$
405
$
10,935
Year Ended December 31,
2007
2006
2005
35.0
%
35.0
%
35.0
%
2.5
2.1
5.7
4.7
6.4
46.4
16.6
(15.0
)
1.9
3.3
4.6
4.9
(10.7
)
(45.8
)
(5.4
)
2.0
71.3
1.0
(0.6
)
29.0
%
3.0
%
168.9
%
84
Table of Contents
Year Ended December 31,
2007
2006
$
877
$
739
1,258
1,013
2,415
329
4,550
2,081
5,968
6,322
25,161
19,972
158
4,657
2,441
768
(2,871
)
(5,349
)
35,514
21,713
(50,483
)
(29,353
)
(1,488
)
(22,096
)
(5,470
)
(60,223
)
(41,295
)
(132,802
)
(77,606
)
(97,288
)
(55,893
)
$
(92,738
)
$
(53,812
)
85
Table of Contents
86
Table of Contents
Liability For
Unrecognized
Tax Benefits
$
5,623
407
$
6,030
12.
Accrued
Expenses
December 31,
2007
2006
$
10,350
$
10,255
5,180
10,399
3,614
4,228
9,110
4,517
$
28,254
$
29,399
13.
Pension
Costs and Other Postretirement Benefits
87
Table of Contents
88
Table of Contents
Pension Benefits
Other Benefits
December 31,
December 31,
2007
2006
2005
2007
2006
2005
$
126,910
$
124,334
$
117,640
$
26,994
$
27,831
$
35,747
61,651
13,165
1,802
2,024
2,699
809
842
910
7,378
7,012
7,003
1,527
1,346
1,638
246
109
196
916
(2,851
)
(4,728
)
(7,881
)
(7,743
)
(6,666
)
(6,722
)
(1,792
)
(1,150
)
(1,882
)
(141
)
(2,147
)
206
8,442
(970
)
(1,984
)
2,095
$
187,851
$
126,910
$
124,334
$
40,895
$
26,994
$
27,831
$
180,003
$
125,377
$
115,630
$
103,790
$
100,446
$
94,292
$
$
$
54,912
10,870
9,685
7,757
4,809
402
5,372
1,546
1,041
1,827
246
109
196
(77
)
(253
)
(141
)
(7,743
)
(6,666
)
(6,722
)
(1,792
)
(1,150
)
(1,882
)
$
166,638
$
103,790
$
100,446
$
$
$
$
(187,851
)
$
(126,910
)
$
(124,334
)
$
(40,895
)
$
(26,994
)
$
(27,831
)
166,638
103,790
100,446
339
136
158
(21,213
)
(23,120
)
(23,888
)
(40,556
)
(26,858
)
(27,673
)
(151
)
(164
)
(131
)
(1,758
)
(2,469
)
(3,640
)
1,376
3,368
49
1,064
2,988
$
(25,004
)
$
(21,908
)
$
(20,520
)
$
(40,638
)
$
(27,552
)
$
(27,154
)
89
Table of Contents
Pension Benefits
Other Benefits
December 31,
December 31,
2007
2006
2005
2007
2006
2005
$
(5,924
)
$
$
$
(2,841
)
$
$
(15,289
)
(23,120
)
(21,250
)
(37,715
)
(26,858
)
(27,154
)
$
(21,213
)
$
(23,120
)
$
(21,250
)
$
(40,556
)
$
(26,858
)
$
(27,154
)
(151
)
(164
)
(131
)
(1,758
)
(3,640
)
1,376
730
49
1,064
$
(3,791
)
$
1,212
$
730
$
(82
)
$
(694
)
$
December 31,
2007
2006
38.3
%
56.3
%
24.3
%
35.9
%
37.4
%
7.8
%
100.0
%
100.0
%
Table of Contents
Pension
Other
Benefits
Benefits
$
17,116
$
2,841
11,297
3,090
11,576
3,170
11,745
3,295
12,058
3,398
44,693
17,228
Pension Benefits
Other Benefits
2007
2006
2005
2007
2006
2005
$
1,802
$
2,024
$
2,699
$
809
$
842
$
910
7,378
7,012
7,003
1,527
1,346
1,638
(8,034
)
(7,790
)
(7,383
)
(7,880
)
22
544
48
(667
)
(772
)
(471
)
$
1,168
$
1,790
$
2,367
$
1,669
$
1,416
$
(5,803
)
91
Table of Contents
Pension Benefits
Other Benefits
2007
2006
2005
2007
2006
2005
6.3
%
6.0
%
5.9
%
6.3
%
6.0
%
5.9
%
3.5
%
3.3
%
3.3
%
8.0
%
8.0
%
8.0
%
10.0
%
10.0
%
10.5
%
5.0
%
5.0
%
5.0
%
2012 to 2013
2011 to 2012
2011 to 2012
Pension
Other
Benefits
Benefits
6.4
%
6.1
%
4.3
%
4.3
%
8.0
%
10.0
%
5.0
%
2013
1% Increase
1% Decrease
$
291
$
(233
)
$
3,509
$
(3,070
)
92
Table of Contents
Prior to
Effect of
Adopting
Adopting
SFAS 158
SFAS 158
As Reported
$
53,669
$
518
$
54,187
56,087
(194
)
55,893
770,602
324
770,926
2,526
(324
)
2,202
115,282
(324
)
114,958
14.
Employee
401k Benefit Plans and Deferred Compensation
Agreements
93
Table of Contents
15.
Long-Term
Debt
December 31,
2007
2006
$
$
760,000
464,000
2,646
130,000
130,000
892,646
594,000
(1,010
)
$
891,636
$
594,000
$
1,010
1,087
509
40
130,000
760,000
$
892,646
94
Table of Contents
95
Table of Contents
16.
Restricted
Share Plan
2007
2006
2005
248,745
422,065
750,000
136,584
18,000
87,500
(246,277
)
(187,000
)
(408,662
)
(1,773
)
(9,750
)
(4,320
)
(5,000
)
129,302
248,745
422,065
96
Table of Contents
17.
Accumulated
Other Comprehensive Income (Loss)
December 31,
2007
2006
$
(12,769
)
$
4,008
3,873
(518
)
(8,896
)
3,490
3,245
(1,288
)
$
(5,651
)
$
2,202
18.
Environmental
Remediation Liabilities
19.
Commitments
and Contingencies
97
Table of Contents
20.
Share
Repurchase
98
Table of Contents
21.
Net
Income (Loss) per Common Share
December 31,
2007
2006
2005
$
11,423
$
13,267
$
(14,725
)
25,764,380
27,739,697
17,821,609
358,104
430,804
26,122,484
28,170,501
17,821,609
$
0.44
$
0.48
$
(0.83
)
$
0.44
$
0.47
$
(0.83
)
22.
Business
Segments
99
Table of Contents
Telephone
Other
Operations
Operations
Total
$
286,774
$
42,474
$
329,248
78,139
29,151
107,290
208,635
13,323
221,958
75,260
14,402
89,662
63,213
2,446
65,659
$
70,162
$
(3,525
)
$
66,637
$
32,245
$
1,250
$
33,495
$
280,334
$
40,433
$
320,767
68,938
29,155
98,093
211,396
11,278
222,674
83,393
11,300
94,693
11,240
11,240
62,064
5,366
67,430
$
65,939
$
(16,628
)
$
49,311
$
32,698
$
690
$
33,388
$
282,285
$
39,144
$
321,429
72,769
28,390
101,159
209,516
10,754
220,270
89,043
9,748
98,791
62,254
5,125
67,379
$
58,219
$
(4,119
)
$
54,100
$
30,464
$
630
$
31,094
$
519,255
$
7,184
$
526,439
$
1,281,011
$
23,580
$
1,304,591
Table of Contents
23.
Quarterly
Financial Information (unaudited)
March 31
June 30
September 30
December 31
$
82,980
$
80,944
$
80,320
$
85,004
25,629
25,788
27,698
28,175
22,299
22,296
21,800
23,267
16,629
16,606
16,350
16,074
64,557
64,690
65,848
67,516
18,423
16,254
14,472
17,488
10,117
9,704
10,119
20,600
8,306
6,550
4,353
(3,112
)
3,687
1,057
2,012
(2,082
)
$
4,619
$
5,493
$
2,341
$
(1,030
)
$
0.18
$
0.21
$
0.09
$
(0.04
)
$
79,426
$
79,340
$
80,323
$
81,678
24,673
23,951
24,140
25,329
22,512
24,671
23,764
23,746
11,240
17,071
16,844
16,961
16,554
64,256
65,466
64,865
76,869
15,170
13,874
15,458
4,809
8,694
8,738
9,530
8,677
6,476
5,136
5,928
(3,868
)
2,928
(3,089
)
3,913
(3,347
)
$
3,548
$
8,225
$
2,015
$
(521
)
$
0.12
$
0.28
$
0.08
$
(0.02
)
$
0.12
$
0.28
$
0.07
$
(0.02
)
101
Table of Contents
Item 9.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 10.
Directors,
Executive Officers and Corporate Governance
Item 11.
Executive
Compensation
Item 12.
Security
Ownership of Certain Beneficial Owners and
Management
Item 13.
Certain
Relationships and Related Transactions, and Director
Independence
102
Table of Contents
Item 14.
Principal
Accounting Fees and Services
Item 15.
Exhibits
and Financial Statement Schedules
103
Table of Contents
December 31,
2007
2006
2005
$
2,110
$
2,825
$
2,613
471
4,734
5,059
4,480
(4,875
)
(5,774
)
(4,268
)
$
2,440
$
2,110
$
2,825
$
429
$
630
$
549
264
171
125
70
(325
)
(201
)
(253
)
$
400
$
429
$
630
$
5,349
$
16,040
$
17,136
1,530
(1,413
)
(3,984
)
(5,021
)
(24
)
(283
)
317
(5,387
)
$
2,871
$
5,349
$
16,040
104
Table of Contents
105
Table of Contents
December 31, 2007 and 2006
(Dollars in thousands)
106
Table of Contents
Years Ended December 31, 2007, 2006 and 2005
(Dollars in thousands)
2007
2006
2005
$
48,096
$
45,295
$
38,399
4,341
4,003
3,633
52,437
49,298
42,032
15,028
13,536
12,316
5,085
3,709
3,336
14,142
12,401
11,417
5,020
4,491
4,004
39,275
34,137
31,073
13,162
15,161
10,959
550
472
301
550
472
301
$
13,712
$
15,633
$
11,260
$
10,970
$
12,504
$
9,007
$
2,742
$
3,129
$
2,253
107
Table of Contents
Years Ended December 31, 2007, 2006 and 2005
(Dollars in thousands)
General
Partner
Limited Partners
San
Eastex
Consolidated
ALLTEL
San
Antonio
Telecom
Telecom
Communications
Communications
Antonio
Total
MTA,
Investments,
Supply,
Transport
Investments,
MTA,
Partners
L.P.
L.P.
Inc.
Company
Inc.
L.P.
Capital
$
5,439
$
4,631
$
4,631
$
4,631
$
4,631
$
3,241
$
27,204
(400
)
(341
)
(341
)
(341
)
(341
)
(236
)
(2,000
)
2,253
1,917
1,917
1,917
1,917
1,339
11,260
7,292
6,207
6,207
6,207
6,207
4,344
36,464
(1,201
)
(1,021
)
(1,021
)
(1,021
)
(1,021
)
(715
)
(6,000
)
3,129
2,660
2,660
2,660
2,660
1,864
15,633
9,220
7,846
7,846
7,846
7,846
5,493
46,097
(2,200
)
(1,872
)
(1,872
)
(1,872
)
(1,872
)
(1,312
)
(11,000
)
2,742
2,334
2,334
2,334
2,334
1,634
13,712
$
9,762
$
8,308
$
8,308
$
8,308
$
8,308
$
5,815
$
48,809
108
Table of Contents
Years Ended December 31, 2007, 2006 and 2005
(Dollars in thousands)
2007
2006
2005
$
13,712
$
15,633
$
11,260
5,020
4,491
4,004
887
717
931
(1,291
)
(937
)
(1,252
)
95
(138
)
(197
)
5
1
(3
)
(149
)
76
283
152
4
77
24
109
137
18,455
19,956
15,240
(10,799
)
(10,044
)
(10,064
)
3,344
(3,912
)
(3,176
)
(7,455
)
(13,956
)
(13,240
)
(11,000
)
(6,000
)
(2,000
)
(11,000
)
(6,000
)
(2,000
)
$
$
$
$
242
$
214
$
879
109
Table of Contents
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 2007, 2006 and 2005
(Dollars in Thousands)
1.
Organization
and Management
20.0000
%
17.0213
%
17.0213
%
17.0213
%
17.0213
%
11.9148
%
*
San Antonio MTA, L.P. (General Partner) is a
wholly-owned subsidiary of Cellco Partnership
(Cellco) doing business as Verizon Wireless.
2.
Significant
Accounting Policies
110
Table of Contents
111
Table of Contents
112
Table of Contents
3.
Property,
Plant and Equipment
Useful lives
2007
2006
10-40 years
$
16,290
$
13,921
3-15 years
51,268
44,850
2-5 years
75
106
5 years
3,118
2,411
70,751
61,288
30,689
26,889
$
40,062
$
34,399
113
Table of Contents
4.
Accounts
Payable and Accrued Liabilities
2007
2006
$
749
$
964
618
640
212
240
$
1,579
$
1,844
5.
Transactions
with Affiliates and Related Parties
2007
2006
2005
$
13,035
$
15,819
$
12,758
(259
)
(278
)
(53
)
11,909
10,838
9,558
1,037
531
368
8,330
6,712
5,648
(a)
Service revenues include roaming revenues relating to customers
of other affiliated markets, long distance, paging, data and
allocated contra-revenues including revenue concessions.
(b)
Equipment and other revenues include sales of handsets and
accessories and allocated contra-revenues including equipment
concessions and coupon rebates.
(c)
Cost of service includes roaming costs relating to customers
roaming in other affiliated markets, paging, switch usage and
allocated cost of telecom, long distance and handset
applications.
(d)
Cost of equipment includes handsets, accessories, and allocated
warehousing and freight.
(e)
Selling, general and administrative expenses include commissions
and billing, and allocated office telecom, customer care,
billing, salaries, sales and marketing, advertising, and
commissions.
114
Table of Contents
6.
Commitments
Amount
$
1,800
1,769
905
614
480
1,597
$
7,165
7.
Contingencies
115
Table of Contents
8.
Reconciliation
of Allowance for Doubtful Accounts
Balance at
Additions
Write-offs
Balance at
Beginning
Charged to
Net of
End of
of the Year
Operations
Recoveries
the Year
$
329
$
887
$
(843
)
$
373
385
717
(773
)
329
268
931
(814
)
385
116
Table of Contents
(Registrant)
By:
President , Chief Executive Officer and Director
(Principal Executive Officer)
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Chairman of the Board of Directors
Director
Director
Director
117
Table of Contents
Exhibit
Description
2
.1
Agreement and Plan of Merger, dated as of July 1, 2007, by
and among Consolidated Communications Holdings, Inc., North
Pittsburgh Systems, Inc. and Fort Pitt Acquisition Sub Inc.
(incorporated by reference to Exhibit 2.1 to Current Report
on
Form 8-K
dated July 12, 2007).
3
.1
Form of Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to Amendment
No. 7 to
Form S-1
dated July 19, 2005).
3
.2
Form of Amended and Restated Bylaws, as amended (incorporated by
reference to Exhibit 3.2 to Current Report on
Form 8-K
dated September 11, 2007).
4
.1
Specimen Common Stock Certificate (incorporated by reference to
Exhibit 3.1 to Amendment No. 7 to
Form S-1
dated July 19, 2005).
4
.2
Indenture, dated April 14, 2004, by and among Consolidated
Communications Illinois Holdings, Inc., Consolidated
Communications Texas Holdings, Inc., Homebase Acquisition, LLC
and Wells Fargo Bank, N.A., as Trustee, with respect to the
9
3
/
4
% Senior
Notes due 2012 (incorporated by reference to Exhibit 4.1 to
Form S-4
dated October 26, 2004).
10
.1
Credit Agreement, dated December 31, 2007, among
Consolidated Communications Holdings, Inc., as Parent Guarantor,
Consolidated Communications, Inc., Consolidated Communications
Acquisition Texas, Inc. and Fort Pitt Acquisition Sub Inc.,
as Co-Borrowers, the lenders referred to therein, Wachovia Bank,
National Association, as administrative agent, issuing bank and
swingline lender, CoBank, ACB, as syndication agent, General
Electric Capital Corporation, as co-documentation agent, The
Royal Bank of Scotland PLC, as co-documentation agent, and
Wachovia Capital Markets, LLC, as sole lead arranger and sole
bookrunner (incorporated by reference to Exhibit 10.1 to
Current Report on
Form 8-K
dated December 31, 2007).
10
.2
Form of Collateral Agreement, dated December 31, 2007, by
and among Consolidated Communications Holdings, Inc.,
Consolidated Communications, Inc., Consolidated Communications
Acquisition Texas, Inc., Fort Pitt Acquisition Sub Inc.,
certain subsidiaries of Consolidated Communications Holdings,
Inc. identified on the signature pages thereto, in favor of
Wachovia Bank, National Association, as Administrative Agent
(filed herewith).
10
.3
Form of Guaranty Agreement, dated December 31, 2007, made
by Consolidated Communications Holdings, Inc. and certain
subsidiaries of Consolidated Communications Holdings, Inc.
identified on the signature pages thereto, in favor of Wachovia
Bank, National Association, as Administrative Agent (filed
herewith).
10
.4
Lease Agreement, dated December 31, 2002, between LATEL,
LLC and Consolidated Market Response, Inc. (incorporated by
reference to Exhibit 10.11 to
Form S-4
dated October 26, 2004).
10
.5
Lease Agreement, dated December 31, 2002, between LATEL,
LLC and Illinois Consolidated Telephone Company (incorporated by
reference to Exhibit 10.12 to
Form S-4
dated October 26, 2004).
10
.6
Master Lease Agreement, dated February 25, 2002, between
General Electric Capital Corporation and TXU Communications
Ventures Company (incorporated by reference to
Exhibit 10.13 to
Form S-4
dated October 26, 2004).
10
.7
Amendment No. 1 to Master Lease Agreement, dated
February 25, 2002, between General Electric Capital
Corporation and TXU Communications Ventures Company, dated
March 18, 2002 (incorporated by reference to
Exhibit 10.14 to
Form S-4
dated October 26, 2004).
10
.8
Amended and Restated Consolidated Communications Holdings, Inc.
Restricted Share Plan (incorporated by reference to
Exhibit 3.1 to Amendment No. 7 to
Form S-1
dated July 19, 2005).
10
.9
Form of 2005 Long-term Incentive Plan (incorporated by reference
to Exhibit 3.1 to Amendment No. 7 to
Form S-1
dated July 19, 2005).
10
.10
Stock Repurchase Agreement, dated July 13, 2006, by and
among Consolidated Communications Holdings, Inc., Providence
Equity Partners IV L.P. and Providence Equity Operating
Partners IV L.P. (incorporated by reference to
Exhibit 10.1 to
Form 8-K
dated July 17, 2006).
10
.11
Form of Employment Security Agreement with certain of the
Companys executive officers (incorporated by reference to
Exhibit 10.1 to
Form 8-K
dated February 20, 2007).
118
Table of Contents
Exhibit
Description
10
.12
Form of Employment Security Agreement with the Companys
and its subsidiaries vice president and director level employees
(filed herewith).
10
.13
Executive Long-Term Incentive Program, as revised March 12,
2007 (incorporated by reference to Exhibit 10.1 to
Form 8-K
dated March 12, 2007).
10
.14
Form of 2005 Long-Term Incentive Plan Performance Stock Grant
Certificate (incorporated by reference to Exhibit 10.2 to
Form 8-K
dated March 12, 2007).
10
.15
Form of 2005 Long-Term Incentive Plan Restricted Stock Grant
Certificate (incorporated by reference to Exhibit 10.3 to
Form 8-K
dated March 12, 2007).
10
.16
Form of 2005 Long-Term Incentive Plan Restricted Stock Grant
Certificate for Directors (incorporated by reference to
Exhibit 10.4 to
Form 8-K
dated March 12, 2007).
10
.17
Description of the Consolidated Communications Holdings, Inc.
Bonus Plan (incorporated by reference to Exhibit 10.5 to
Form 8-K
dated March 12, 2007).
21
List of Subsidiaries of Consolidated Communications Holdings,
Inc.
23
.1
Consent of Independent Registered Public Accounting Firm.
23
.2
Consent of Independent Registered Public Accounting Firm.
31
.1
Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31
.2
Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32
.1
Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Page | ||||||
ARTICLE I DEFINED TERMS | 2 | |||||
SECTION 1.1
|
Terms Defined in the Uniform Commercial Code | 2 | ||||
SECTION 1.2
|
Definitions | 2 | ||||
SECTION 1.3
|
Other Definitional Provisions | 6 | ||||
ARTICLE II SECURITY INTEREST | 7 | |||||
SECTION 2.1
|
Grant of Security Interest | 7 | ||||
SECTION 2.2
|
Partnership/LLC Interests | 8 | ||||
SECTION 2.3
|
Grantors Remain Liable | 9 | ||||
ARTICLE III REPRESENTATIONS AND WARRANTIES | 10 | |||||
SECTION 3.1
|
Organization, etc | 10 | ||||
SECTION 3.2
|
Due Authorization, Non-Contravention, etc | 10 | ||||
SECTION 3.3
|
Government Approval, Regulation, etc | 10 | ||||
SECTION 3.4
|
Perfected First Priority Liens | 10 | ||||
SECTION 3.5
|
Title, No Other Liens | 10 | ||||
SECTION 3.6
|
State of Organization; Location of Inventory, Equipment and Fixtures; other Information | 11 | ||||
SECTION 3.7
|
Accounts | 11 | ||||
SECTION 3.8
|
Chattel Paper | 11 | ||||
SECTION 3.9
|
Commercial Tort Claims | 11 | ||||
SECTION 3.10
|
Deposit Accounts and Securities Accounts | 11 | ||||
SECTION 3.11
|
Intellectual Property | 11 | ||||
SECTION 3.12
|
Inventory | 12 | ||||
SECTION 3.13
|
Investment Property; Partnership/LLC Interests | 12 | ||||
SECTION 3.14
|
Instruments | 12 | ||||
SECTION 3.15
|
Government Contracts | 12 | ||||
SECTION 3.16
|
Aircraft | 12 | ||||
|
||||||
ARTICLE IV COVENANTS | 12 | |||||
SECTION 4.1
|
Maintenance of Perfected Security Interest; Further Information | 13 | ||||
SECTION 4.2
|
Maintenance of Insurance | 13 | ||||
SECTION 4.3
|
Changes in Locations; Changes in Name or Structure | 13 | ||||
SECTION 4.4
|
Required Notifications | 13 | ||||
SECTION 4.5
|
Delivery Covenants | 13 | ||||
SECTION 4.6
|
Control Covenants | 14 | ||||
SECTION 4.7
|
Filing Covenants | 15 | ||||
SECTION 4.8
|
Accounts | 15 | ||||
SECTION 4.9
|
Intellectual Property | 15 | ||||
SECTION 4.10
|
Investment Property; Partnership/LLC Interests | 16 | ||||
SECTION 4.11
|
Equipment | 16 | ||||
SECTION 4.12
|
Vehicles | 17 | ||||
SECTION 4.13
|
Government Contracts | 17 | ||||
SECTION 4.14
|
Special Property | 17 | ||||
SECTION 4.15
|
Further Assurances | 17 | ||||
|
||||||
ARTICLE V REMEDIAL PROVISIONS | 17 | |||||
SECTION 5.1
|
General Remedies | 17 |
i
Page | ||||||
SECTION 5.2
|
Specific Remedies | 19 | ||||
SECTION 5.3
|
Registration Rights | 21 | ||||
SECTION 5.4
|
Application of Proceeds | 22 | ||||
SECTION 5.5
|
Waiver, Deficiency | 23 | ||||
|
||||||
ARTICLE VI THE ADMINISTRATIVE AGENT | 23 | |||||
SECTION 6.1
|
Appointment of Administrative Agent as Attorney-In-Fact | 23 | ||||
SECTION 6.2
|
Duty of Administrative Agent | 24 | ||||
SECTION 6.3
|
Authority of Administrative Agent | 25 | ||||
SECTION 6.4
|
Intercreditor Agreements | 25 | ||||
SECTION 6.5
|
Limitations on Responsibility of Administrative Agent | 26 | ||||
SECTION 6.6
|
Reliance by Administrative Agent | 28 | ||||
SECTION 6.7
|
Resignation and Removal of the Administrative Agent | 28 | ||||
|
||||||
ARTICLE VII MISCELLANEOUS | 29 | |||||
SECTION 7.1
|
Notices | 29 | ||||
SECTION 7.2
|
Amendments in Writing | 29 | ||||
SECTION 7.3
|
Expenses, Indemnification, Waiver of Consequential Damages, etc | 29 | ||||
SECTION 7.4
|
Right of Set Off | 29 | ||||
SECTION 7.5
|
Governing Law; Jurisdiction; Venue; Service of Process | 30 | ||||
SECTION 7.6
|
Waiver of Jury Trial | 30 | ||||
SECTION 7.7
|
Injunctive Relief | 31 | ||||
SECTION 7.8
|
No Waiver by Course of Conduct, Cumulative Remedies | 31 | ||||
SECTION 7.9
|
Successors and Assigns | 31 | ||||
SECTION 7.10
|
Survival of Indemnities | 31 | ||||
SECTION 7.11
|
Titles and Captions | 31 | ||||
SECTION 7.12
|
Severability of Provisions | 31 | ||||
SECTION 7.13
|
Counterparts | 32 | ||||
SECTION 7.14
|
Integration | 32 | ||||
SECTION 7.15
|
Advice of Counsel; No Strict Construction | 32 | ||||
SECTION 7.16
|
Acknowledgements | 32 | ||||
SECTION 7.17
|
Releases | 33 | ||||
SECTION 7.18
|
Additional Grantors | 33 | ||||
SECTION 7.19
|
Powers of Attorney | 33 |
ii
SCHEDULES: | ||
Schedule 3.6
|
Exact Legal Name; Jurisdiction of Organization; Taxpayer Identification Number; Registered Organization Number; Mailing Address; Chief Executive Office and other Locations | |
Schedule 3.9
|
Commercial Tort Claims | |
Schedule 3.10
|
Deposit Accounts | |
Schedule 3.11
|
Intellectual Property | |
Schedule 3.13
|
Investment Property and Partnership/LLC Interests | |
Schedule 3.14
|
Instruments |
iii
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC., as Grantor | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS ACQUISITION TEXAS, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
FORT PITT ACQUISITION SUB INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven J. Shirar | |||||||
|
Steven J. Shirar | |||||||
|
Vice President | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS PUBLIC SERVICES, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer |
[Consolidated Communications Collateral Agreement]
CONSOLIDATED COMMUNICATIONS MARKET RESPONSE, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS OPERATOR SERVICES, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS NETWORK SERVICES, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS MOBILE SERVICES, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS BUSINESS SYSTEMS, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer |
[Consolidated Communications Collateral Agreement]
CONSOLIDATED COMMUNICATIONS VENTURES COMPANY, as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS SERVICES COMPANY, as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS TELECOM SERVICES OF TEXAS COMPANY, as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS OF FORT BEND COMPANY, as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
CONSOLIDATED COMMUNICATIONS OF TEXAS COMPANY, as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer |
[Consolidated Communications Collateral Agreement]
CONSOLIDATED COMMUNICATIONS TRANSPORT COMPANY, as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
NORTH PITTSBURGH SYSTEMS, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
NORTH PITTSBURGH TELEPHONE COMPANY, as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
PENN TELECOM, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer | |||||||
|
||||||||
PINNATECH, INC., as Grantor and Issuer | ||||||||
|
||||||||
By: | /s/ Steven L. Childers | |||||||
|
Steven L. Childers | |||||||
|
Chief Financial Officer |
[Consolidated Communications Collateral Agreement]
WACHOVIA BANK, NATIONAL ASSOCIATION, as
Administrative Agent |
||||||||
|
||||||||
By: | /s/ Marc Birenbaum | |||||||
|
Marc Birenbaum | |||||||
|
Director |
[Consolidated Communications Collateral Agreement]
Page | ||||||||
ARTICLE I DEFINED TERMS | 1 | |||||||
|
SECTION 1.1 | Definitions | 1 | |||||
|
SECTION 1.2 | Other Definitional Provisions | 2 | |||||
|
||||||||
ARTICLE II GUARANTY | 2 | |||||||
|
SECTION 2.1 | Guaranty | 2 | |||||
|
SECTION 2.2 | Bankruptcy Limitations on Guarantors | 2 | |||||
|
SECTION 2.3 | Agreements for Contribution | 3 | |||||
|
SECTION 2.4 | Nature of Guaranty | 4 | |||||
|
SECTION 2.5 | Waivers | 5 | |||||
|
SECTION 2.6 | Modification of Loan Documents, etc | 6 | |||||
|
SECTION 2.7 | Demand by the Administrative Agent | 6 | |||||
|
SECTION 2.8 | Remedies | 7 | |||||
|
SECTION 2.9 | Benefits of Guaranty | 7 | |||||
|
SECTION 2.10 | Termination; Reinstatement | 7 | |||||
|
SECTION 2.11 | Payments | 8 | |||||
|
||||||||
ARTICLE III REPRESENTATIONS AND WARRANTIES | 8 | |||||||
|
SECTION 3.1 | Organization, etc | 8 | |||||
|
SECTION 3.2 | Due Authorization; Non-Contravention, etc | 8 | |||||
|
SECTION 3.3 | Governmental Approval, Regulation, etc | 8 | |||||
|
SECTION 3.4 | Validity, etc | 8 | |||||
|
SECTION 3.5 | Litigation | 9 | |||||
|
SECTION 3.6 | Solvency | 9 | |||||
|
||||||||
ARTICLE IV MISCELLANEOUS | 9 | |||||||
|
SECTION 4.1 | Notices | 9 | |||||
|
SECTION 4.2 | Amendments in Writing | 9 | |||||
|
SECTION 4.3 | Expenses; Indemnification; Waiver of Consequential Damages, etc | 9 | |||||
|
SECTION 4.4 | Right of Set-off | 10 | |||||
|
SECTION 4.5 | Governing Law; Jurisdiction; Venue; Service of Process | 10 | |||||
|
SECTION 4.6 | Waiver of Jury Trial | 11 | |||||
|
SECTION 4.7 | No Waiver by Course of Conduct, Cumulative Remedies | 11 | |||||
|
SECTION 4.8 | Successors and Assigns | 11 | |||||
|
SECTION 4.9 | Survival of Indemnities | 11 | |||||
|
SECTION 4.10 | Titles and Captions | 11 | |||||
|
SECTION 4.11 | Severability of Provisions | 11 | |||||
|
SECTION 4.12 | Counterparts | 11 | |||||
|
SECTION 4.13 | Integration | 12 | |||||
|
SECTION 4.14 | Advice of Counsel, No Strict Construction | 12 | |||||
|
SECTION 4.15 | Acknowledgements | 12 | |||||
|
SECTION 4.16 | Releases | 12 | |||||
|
SECTION 4.17 | Additional Guarantors | 12 |
i
2
3
4
5
6
7
8
9
10
11
12
CONSOLIDATED COMMUNICATIONS HOLDINGS, INC., as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS PUBLIC SERVICES, INC., as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS MARKET RESPONSE, INC., as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS OPERATOR SERVICES, INC., as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS NETWORK SERVICES, INC., as Guarantor
|
||||
/s/ Steven L. Childers | ||||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS MOBILE SERVICES, INC., as Guarantor
|
||||
/s/ Steven L. Childers | ||||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS BUSINESS SYSTEMS, INC., as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS VENTURES COMPANY, as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS SERVICES COMPANY, as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS TELECOM SERVICES OF TEXAS COMPANY, as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS OF FORT BEND COMPANY, as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS OF TEXAS COMPANY, as Guarantor
|
||||
/s/ Steven L. Childers | ||||
Steven L. Childers | ||||
Chief Financial Officer | ||||
CONSOLIDATED COMMUNICATIONS TRANSPORT COMPANY, as Guarantor
|
||||
/s/ Steven L. Childers | ||||
Steven L. Childers | ||||
Chief Financial Officer | ||||
NORTH PITTSBURGH TELEPHONE COMPANY, as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
PENN TELECOM, INC., as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
PINNATECH, INC., as Guarantor
|
||||
By: | /s/ Steven L. Childers | |||
Steven L. Childers | ||||
Chief Financial Officer | ||||
WACHOVIA BANK, NATIONAL ASSOCIATION, as
Administrative Agent
|
||||
By: | /s/ Marc Birenbaum | |||
Marc Birenbaum | ||||
Director | ||||
1. | Payments and Benefits Upon a Change in Control. If within two (2) years after a Change in Control (as defined below), (i) the Company shall terminate Employees employment with the Company without Cause (as defined below), or (ii) Employee shall voluntarily terminate such employment with Good Reason (as defined below), the Company shall provide the benefits and, within thirty (30) days of Employees Employment Termination (as defined below), make the payments, described below. |
(a) | Cash Payment . The Company shall make a lump sum cash payment to Employee equal to [for Vice President-level employees, insert: Employees annual base salary ] [for Director-level employees, insert: one-half of Employees annual base salary] at the rate in effect on the date of Employment Termination. | ||
(b) | Short-Year Bonus . The Company shall make a lump sum cash payment to Employee equal to a pro rata portion (based on the date on which Employees Employment Termination occurs) of the average of the annual amounts paid to Employee under all annual cash-based incentive or bonus plans or arrangements of the Company, with respect to the last three full fiscal years of Employees participation in such plans or arrangements prior to Employment Termination. If Employees number of full fiscal years of participation in any such plan or arrangement is less than three, the average amount shall be calculated as the average of the annual amounts paid to Employee over the number of full fiscal years of Employees participation in the plan or arrangement. | ||
(c) | Welfare Benefit Plans . With respect to each Welfare Benefit Plan (as defined below), for the period beginning on Employees Employment Termination and ending on the earlier of (i) [for Vice President-level employees, insert: one year ] [for Director-level employees, insert: six months ] following Employees Employment Termination, or (ii) the date Employee becomes covered by a welfare benefit plan or program maintained by an entity other than the Company which provides coverage or benefits at least equal, in all respects, to such Welfare Benefit Plan, Employee shall continue to participate in such Welfare Benefit Plan on the same basis and at the same cost to Employee as was the case immediately prior to the Change in Control, or, if any benefit or coverage cannot be provided under a Welfare Benefit Plan because of applicable law or contractual provisions, |
-1-
Employee shall be provided with substantially similar benefits and coverage for such period. Immediately following the expiration of the continuation period required by the preceding sentence, Employee shall be entitled to continued group health benefit plan coverage (so-called COBRA coverage) in accordance with Section 4980B of the Internal Revenue Code of 1986, as amended (the Code), it being intended that COBRA coverage shall be consecutive to the benefits and coverage provided for in the preceding sentence. |
(d) | Salary to Date of Employment Termination . The Company shall pay to Employee any unpaid salary or other compensation of any kind earned with respect to any period prior to Employees Employment Termination and a lump sum cash payment for accumulated but unused vacation earned through such Employment Termination. |
2. | Definitions. For purposes of this Agreement: |
(a) | Cause shall mean: (i) the conviction of, pleading guilty to, or confessing or otherwise admitting to any felony or any act of fraud, misappropriation or embezzlement; (ii) the act or omission by Employee involving malfeasance or gross negligence in the performance of Employees duties and responsibilities to the material detriment of the Company; or (iii) the breach of any provision of any code of conduct adopted by the Company which applies to the Company if the consequence to such violation for any Employee subject to such code of conduct ordinarily would be a termination of his or her employment by the Company. | ||
(b) | (i) Good Reason shall exist if: |
a. | there is any reduction after the Change Effective Date (as defined below) in Employees base salary and/or bonus opportunity without Employees express written consent; | ||
b. | there is any reduction after the Change Effective Date in the scope, importance or prestige of Employees duties, responsibilities or powers at the Company without Employees express written consent; or | ||
c. | the Company transfers Employees primary work site to a new primary work site which is more than 30 miles (measured along a straight line) from Employees then current primary work site unless such new primary work site is closer (measured along a straight line) to Employees primary residence than Employees then current primary work site. |
(ii) | Notwithstanding the foregoing, no such act or omission shall be treated as Good Reason under this Agreement unless: |
a. | (1) within 90 days of such act, Employee delivers to the Director Human Resources a detailed, written statement of the basis for |
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Employees belief that such act or omission constitutes Good Reason, (2) Employee gives the Company a thirty (30) day period after the delivery of such statement to cure the basis for such belief and (3) Employee actually submits his or her written resignation to the Director Human Resources during the sixty (60) day period which begins immediately after the end of such thirty (30) day period; or | |||
b. | the Company states in writing to Employee that Employee has the right to treat any such act or omission as Good Reason under this Agreement and Employee actually submits his or her written resignation to the Director Human Resources during the sixty (60) day period which starts on date such statement is actually delivered to Employee. |
(c) | Change in Control shall mean a change in control of the Company of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the 1934 Act as in effect at the time of such change in control, provided that such a change in control shall be deemed to have occurred on the earliest to occur of any of the following: |
(i) | any person (as that term is used in Sections 13(d) and 14(d)(2) of the 1934 Act), other than an affiliate (as that term is defined in Section 5 of Article IV of the Companys amended and restated certificate of incorporation) of Richard A. Lumpkin, is or becomes the beneficial owner (as defined in Rule 13d-3 under the 1934 Act) directly or indirectly, of securities representing a majority of the combined voting power for election of directors of the then outstanding securities of the Company or any successor to the Company; | ||
(ii) | during any period of two consecutive years or less, individuals who at the beginning of such period constitute the Board cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for election of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period; | ||
(iii) | the shareholders of the Company approve any reorganization, merger, consolidation or share exchange as a result of which the common stock of the Company shall be changed, converted or exchanged into or for securities of another corporation (other than a merger with a wholly-owned subsidiary of the Company) or any dissolution or liquidation of the Company or any sale or the disposition of 50% or more of the assets or business of the Company; or | ||
(iv) | shareholders of the Company approve any reorganization, merger, consolidation or share exchange unless (A) the persons who were the |
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beneficial owners of the outstanding shares of the common stock of the Company immediately before the consummation of such transaction beneficially own at least a majority of the outstanding shares of the common stock of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (B) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in § 2(c)(iv)(A) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of the Company common stock immediately before the consummation of such transaction, provided (C) the percentage described in § 2(c)(iv)(A) of the beneficially owned shares of the successor or survivor corporation and the number described in § 2(c)(iv)(B) of the beneficially owned shares of the successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of the Company by the persons described in § 2(c)(iv)(A) immediately before the consummation of such transaction. |
(d) | Change Effective Date shall mean either the date which includes the closing of the transaction which makes a Change in Control effective if the Change in Control is made effective through a transaction which has a closing or the date a Change in Control is reported in accordance with applicable law as effective to the Securities and Exchange Commission if the Change in Control is made effective other than through a transaction which has a closing. | ||
(e) | Employment Termination shall mean the effective date of: (i) Employees voluntary termination of employment with the Company with Good Reason; or (ii) the termination of Employees employment by the Company without Good Cause. | ||
(f) | Welfare Benefit Plan shall mean each welfare benefit plan maintained or contributed to by the Company, including, but not limited to a plan that provides health (including medical and dental), life, accident or disability benefits or insurance, or similar coverage, in which Employee was participating immediately prior to the date of the Change in Control. |
3. | Payment Delayed in Certain Circumstances. Notwithstanding anything in this Agreement to the contrary, if at Employees Employment Termination Employee is a Key Employee as defined in Section 416(i) of the Internal Revenue Code (without reference to paragraph 5 thereof), to the extent any amounts payable to Employee pursuant to this Agreement are subject to Section 409A of the Internal Revenue Code, payment of such amounts shall not be made until six months following Employees Employment Termination. |
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4. | Mitigation and Set-Off. Employee shall not be required to mitigate Employees damages by seeking other employment or otherwise. Except as provided in Section 1(c) of this Agreement, the Companys obligations under this Agreement shall not be reduced in any way by reason of any compensation or benefits received (or foregone) by Employee from sources other than the Company after Employees Employment Termination, or any amounts that might have been received by Employee in other employment had Employee sought such other employment. Employees entitlement to benefits and coverage under this Agreement shall continue after, and shall not be affected by, Employees obtaining other employment after his Employment Termination, provided that any such benefit or coverage shall not be furnished if Employee expressly waives the specific benefit or coverage by giving written notice of waiver to the Company. | |
5. | Restrictive Covenants. While Employee is employed by the Company and for one year following any Employment Termination, Employee shall not be associated, directly or indirectly, as an employee, proprietor, stockholder, partner, agent, representative, officer, or otherwise, with the operation of any business that is competitive with any line of business of the Company for which Employee has provided substantial services, in any geographic area in which such line of business was active at the time of Employees Employment Termination, without the prior written consent of the Company, which shall not unreasonably be withheld. | |
6. | No Solicitation of Customers, Representatives, Agents or Employees. Employee agrees that he shall not, while Employee is employed by the Company and for one year following any Employment Termination, directly or indirectly, in his individual capacity or otherwise, induce, cause, persuade, or attempt to do any of the foregoing in order to cause, any customer, representative, agent or employee of the Company to terminate such persons relationship with the Company or to violate the terms of any agreement between said customer, representative, agent or employee and the Company. | |
7. | Confidentiality. Employee acknowledges that preservation of a continuing business relationship between the Company and its customers, representatives, and employees is of critical importance to the continued business success of the Company and that it is the active policy of the Company to guard as confidential the identity of its customers, trade secrets, pricing policies, business affairs, representatives and employees. In view of the foregoing, Employee agrees that he shall not, while employed by the Company and thereafter, without the prior written consent of the Company (which consent shall not be withheld unreasonably), disclose to any person or entity any information concerning the business of, or any customer, representative, agent or employee of, the Company which was obtained by Employee in the course of his employment by the Company. This section shall not be applicable if and to the extent Employee is required to testify in a legislative, judicial or regulatory proceeding pursuant to an order of Congress, any state or local legislature, a judge, or an administrative law judge. | |
8. | Assignment; Successors. This Agreement may not be assigned by the Company without the written consent of Employee but the obligations of the Company under this Agreement shall be the binding legal obligations of any successor to the Company by |
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merger, consolidation or otherwise, and in the event of any business combination or transaction that results in the transfer or substantially all of the assets or business of the Company, the Company will cause the transferee to assume the obligations of the Company under this Agreement. This Agreement may not be assigned by Employee during Employees life, and upon Employees death will inure to the benefit of Employees heirs, legatees and legal representatives of Employees estate. | ||
9. | Withholding. The Company may withhold from any payment that it is required to make under this Agreement amounts sufficient to satisfy applicable withholding requirements under any federal, state or local law. | |
10. | Amendment or Termination. This Agreement may be amended or terminated at any time by written agreement between the Company and Employee. | |
11. | Financing. Cash and benefit payments under this Agreement shall constitute general obligations of the Company. Employee shall have only an unsecured right to payment thereof out of the general assets of the Company. Notwithstanding the foregoing, the Company may, by agreement with one or more trustees to be selected by the Company, create a trust on such terms as the Company shall determine to make payments to Employee in accordance with the terms of this Agreement. | |
12. | Interpretation. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Illinois, without regard to the conflict of law principles thereof. | |
13. | 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. | |
14. | Other Agreements. This Agreement supersedes and cancels any prior written or oral agreements and understandings relating to the terms of this Agreement. |
Consolidated Communications Holdings, Inc.
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Illinois
Illinois
Delaware
Delaware
Texas
Texas
Texas
Texas
Texas
Delaware
Delaware
Delaware
Delaware
Illinois
Illinois
Pennsylvania
Pennsylvania
Pennsylvania
Pennsylvania
Texas
1. | I have reviewed this annual report on Form 10-K of Consolidated Communications Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared, |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information, and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
1. | I have reviewed this annual report on Form 10-K of Consolidated Communications Holdings, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared, |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and |
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and |
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information, and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |