8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): February 17, 2016

Otelco Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-32362	52-2126395
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

505 Third Avenue East, Oneonta, AL	35121
(Address of Principal Executive Offices)	(Zip Code)

(205) 625-3574
(Registrant’s telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

On February 17, 2016, Otelco Inc. (the “Company”) and the other parties to that certain Subordinated Loan Agreement, dated as of January 25, 2016 (the “Subordinated Loan Agreement”), by and among the Company and the subsidiaries of the Company set forth on Appendix I thereto, as borrowers, the investors party thereto from time to time, as investors, and NewSpring Mezzanine Capital III, L.P., as an investor and as collateral agent for the investors, entered into an amendment to the Subordinated Loan Agreement (the “Amendment”). The Amendment increased the aggregate principal amount of the term loans available under the Subordinated Loan Agreement from $15,000,000 to $15,300,000. Except as set forth in the previous sentence, all of the original terms and provisions of the Subordinated Loan Agreement remain in full force and effect. For a description of the Subordinated Loan Agreement, and its terms and provisions, see Item 1.01 of the Company’s Current Report on Form 8-K filed on January 25, 2016, which is incorporated herein by reference.

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.

Item 1.02. Termination of a Material Definitive Agreement.

On February 17, 2016, in connection with the funding of the term loans under that certain Loan Agreement, dated as of January 25, 2016 (the “Senior Loan Agreement”), by and among the Company, as borrower, each subsidiary of the Company listed as a guarantor on the signature pages thereto, as guarantors, the lenders from time to time party thereto, as lenders, and Cerberus Business Finance, LLC, as collateral agent and administrative agent for the lenders, and the Subordinated Loan Agreement, (i) the Company paid all amounts due in respect of principal, interest and fees, and satisfied in full all of its obligations (including with respect to the cash collateralization of outstanding letters of credit), under that certain Third Amended and Restated Credit Agreement, dated as of May 24, 2013 (the “Prior Credit Agreement”), among the Company, as borrower, the other credit parties signatory thereto, as credit parties, the lenders signatory thereto from time to time, as lenders, and Antares Capital LP (as successor to General Electric Capital Corporation), as agent, (ii) all commitments of the lenders under the Prior Credit Agreement were terminated in accordance with the provisions of Section 7 of the Prior Credit Agreement and (iii) the Prior Credit Agreement was terminated.

Other than disclosed in Item 3.02 of this Current Report on Form 8-K, which is incorporated herein by reference, there is no material relationship between the Company or its affiliates and the other parties to the Prior Credit Agreement other than in respect of the Prior Credit Agreement.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On February 17, 2016, the Company borrowed $85,000,000 under the term loan facility of the Senior Loan Agreement and $15,300,000 under the Subordinated Loan Agreement to, among other things, refinance its indebtedness under the Prior Credit Agreement and fund transaction-related expenses. For a description of the Senior Loan Agreement and the Subordinated Loan Agreement, and their respective terms and provisions, see Item 1.01 of this Current Report on Form 8-K and Item 1.01 of the Company’s Current Report on Form 8-K filed on January 25, 2016, which are each incorporated herein by reference.

Item 3.02. Unregistered Sales of Equity Securities.

On February 17, 2016, as a result of the satisfaction in full of all of the outstanding obligations of the Company (including with respect to the cash collateralization of outstanding letters of credit) under the Prior Credit Agreement and the termination of all of the commitments of the lenders under the Prior Credit Agreement in accordance with the provisions of Section 7 thereof, 232,780 shares of Class A common stock, par value $0.01 per share, of the Company (the “Class A Common Stock”) were issued upon the automatic conversion of all 232,780 then outstanding shares of the Company’s Class B common stock, par value $0.01 per share (the “Class B Common Stock”), pursuant to Section IV.C.4 of the Company’s Amended and Restated Certificate of Incorporation. No shares of the Class B Common Stock remain outstanding. All of the shares of Class B Common Stock were held by, and all of the shares of Class A Common Stock issued upon the automatic conversion thereof were issued to, the lenders under the Prior Credit Agreement. The shares of Class A Common Stock issued upon the automatic conversion of all of the outstanding shares of the Class B Common Stock were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended.

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Item 8.01. Other Events.

On February 17, 2016, the Company issued a press release announcing the funding of the term loans under the Senior Loan Agreement and the Subordinated Loan Agreement and the automatic conversion of all outstanding shares of Class B Common Stock into Class A Common Stock. A copy of that press release is attached hereto as Exhibit 99.1, which is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

Exhibit No.	Description
10.1	Amendment No. 1, dated as of February 17, 2016, to Subordinated Loan Agreement, dated as of January 25, 2016, by and among Otelco Inc. and the subsidiaries of Otelco Inc. set forth on Appendix I thereto, as borrowers, the investors party thereto from time to time, as investors, and NewSpring Mezzanine Capital III, L.P., as an investor and as collateral agent
99.1	Press Release of Otelco Inc., dated as of February 17, 2016

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	OTELCO INC.
Date: February 17, 2016	By:	/s/ Curtis L. Garner, Jr.
		Curtis L. Garner, Jr. Chief Financial Officer

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 1 TO

SUBORDINATED LOAN AGREEMENT

This Amendment No. 1 to Subordinated Loan Agreement (this “Amendment”), is dated as of February 17, 2016, by and among OTELCO INC., a Delaware corporation (the “Company”), and the Subsidiaries of the Company set forth on Appendix I hereto (together with Company, each a “Borrower” and collectively the “Borrowers”) and NEWSPRING MEZZANINE CAPITAL III, L.P., a Delaware limited partnership (the “Investor”).

WHEREAS, the Borrowers and the Investor have entered into a Subordinated Loan Agreement, dated as of January 25, 2016 (as amended, restated, supplemented or otherwise modified from time to time in accordance with its provisions, the “Loan Agreement”).

WHEREAS, the parties hereto desire to amend the Loan Agreement on the terms and subject to the conditions set forth herein; and

WHEREAS, the Borrowers has requested, and the Lenders have agreed, to amend the Loan Agreement to increase the principal amount to be advanced by the Investor to the Borrowers to Fifteen Million Three Hundred Thousand Dollars ($15,300,000.00); and

WHEREAS, pursuant to Section 12.3 of the Loan Agreement, the amendments requested by the Borrowers must be contained in a written agreement signed by the Borrowers and the Investor.

NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.           Definitions. Capitalized terms used and not defined in this Amendment shall have the respective meanings given them in the Loan Agreement.

2.           Amendments to the Loan Agreement. The Loan Agreement is hereby amended by deleting Appendix II to the Loan Agreement in its entirety and replacing it with a new Appendix II as set forth on Schedule 1 hereto.

3.           Limited Effect. Except as expressly provided hereby, all of the terms and provisions of the Loan Agreement and the other Loan Documents are and shall remain in full force and effect and are hereby ratified and confirmed by the Borrowers. The amendments contained herein shall not be construed as a waiver or amendment of any other provision of the Loan Agreement or the other Loan Documents or for any purpose except as expressly set forth herein or a consent to any further or future action on the part of the Borrowers that would require the waiver or consent of the Investor.

4.           Conditions Precedent. This Amendment shall become effective upon the date (the “Effective Date”) on which the Investor shall have received:

(a)          This Amendment, duly executed and delivered by the Borrowers;

(b)          Satisfactory evidence that all corporate and other proceedings that are necessary in connection with this Amendment have been taken to the Investor’s and its counsel’s satisfaction, and the Investor and such counsel shall have received all such counterpart originals or certified copies of such documents as the Investor may request.

(c)          Favorable opinions of counsel to Borrowers, in form and substance reasonably satisfactory to the Investor and its counsel, and addressing such matters in connection with this Amendment as the Investor and its counsel may reasonably request.

(d)          Such other information and documents as may reasonably be required by the Investor and its counsel in connection with this Amendment.

5.           Representations and Warranties. The Borrower hereby represents and warrants to the Investor (before and after giving effect to this Amendment) that:

(a)          Each Borrower has the corporate/limited liability company (as applicable) power and authority, and the legal right, to execute, deliver and perform this Amendment and to obtain extensions of credit under the Loan Agreement as amended by this Amendment (the “Amended Loan Agreement”).

(b)          Each Borrower has taken all necessary corporate and limited liability company action, as applicable, to authorize the execution, delivery and performance of this Amendment and to authorize the extensions of credit on the terms and conditions of the Amended Loan Agreement.

(c)          No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is required in connection with this Amendment, the extensions of credit under the Amended Loan Agreement or the execution, delivery, performance, validity or enforceability of this Amendment, or the performance, validity or enforceability of the Amended Loan Agreement, except consents, authorizations, filings and notices which have been obtained or made and are in full force and effect.

(d)          This Amendment has been duly executed and delivered on behalf of each Borrower. This Amendment and the Amended Loan Agreement constitute the legal, valid and binding obligations of each Borrower and are enforceable against such Borrower in accordance with their terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

(e)          Each of the representations and warranties made by any Borrower herein or in or pursuant to the Loan Documents is true and correct on and as of the Effective Date as if made on and as of such date (except that any representation or warranty which by its terms is made as of an earlier date shall be true and correct as of such earlier date).

(f)           No Default or Event of Default has occurred and is continuing, or will result from this Amendment or any extension of credit under the Amended Loan Agreement.

(g)          Each Borrower has performed all agreements and satisfied all conditions which this Amendment and the other Loan Documents provide shall be performed or satisfied by such Borrower on or before the Effective Date.

6.           Successors and Assigns. This Amendment shall inure to the benefit of and be binding upon the Borrowers, the Investor, and the other investors from time to time parties to the Loan Agreement, and each of their respective successors and assigns.

7.           Governing Law. This Agreement and all questions relating to its validity, interpretation and performance shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws principles.

8.           Counterparts. This Amendment may be executed in any number of counterparts, all of which shall constitute one and the same agreement, and any party hereto may execute this Amendment by signing and delivering one or more counterparts. Delivery of an executed counterpart of this Amendment electronically or by facsimile shall be effective as delivery of an original executed counterpart of this Amendment.

9.           Costs and Expenses. The Borrower agrees to pay or reimburse the Investor for all of its reasonable out-of-pocket costs and expenses incurred in connection with this Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Investor.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

BORROWERS:
OTELCO INC.
BLOUNTSVILLE TELEPHONE LLC
BRINDLEE MOUNTAIN TELEPHONE LLC
CRC COMMUNICATIONS LLC
GRANBY TELEPHONE LLC
HOPPER TELECOMMUNICATIONS LLC
I-LAND INTERNET SERVICES LLC
MID-MAINE TELECOM LLC
MID-MAINE TELPLUS LLC
OTELCO MID-MISSOURI LLC
OTELCO TELECOMMUNICATIONS LLC
OTELCO TELEPHONE LLC
PINE TREE TELEPHONE LLC
SACO RIVER TELEPHONE LLC
SHOREHAM TELEPHONE LLC
By:	/s/ Curtis L. Garner, Jr.
Name:	Curtis L. Garner, Jr.
Title:	Chief Financial Officer and Secretary

(Signature Page to Amendment No. 1 to Subordinated Loan Agreement)

iNVEstor:
NewSpring Mezzanine Capital III, L.P.
By:   NSM III GP, L.P.
Its General Partner
By:   NSM III GP, LLC
Its General Partner
By:	/s/ Steven D. Hobman
Name:	Steven D. Hobman
Title:	President

(Signature Page to Amendment No. 1 to Subordinated Loan Agreement)

Schedule I

(See attached)

APPENDIX II

INVESTORS AND NOTE AMOUNTS

INVESTOR	ORIGINAL PRINCIPAL NOTE AMOUNT
NEWSPRING MEZZANINE CAPITAL III, L.P.	$15,300,000.00
	Total:  $15,300,000.00

EX-99.1

Exhibit 99.1

 

Contact: Curtis Garner

Chief Financial Officer

Otelco Inc.

205-625-3580

Curtis@otelcotel.com

Otelco Announces Funding of New Credit Facilities

ONEONTA, Alabama (February 17, 2016) – Otelco Inc. (NASDAQ: OTEL), a wireline telecommunication services provider in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia, announced previously on January 25, 2016, the execution of new credit facilities totaling $105 million in aggregate. Today, funding took place on $100 million of term loans under the new credit facilities. The funding proceeds were used to repay in full all amounts outstanding under the Company’s existing bank-syndicated credit facility and to fund transaction related expenses. The $5 million revolving credit facility provided for in one of the new credit facilities remained undrawn at the time the new term loans were funded.

Concurrent with the repayment of all amounts outstanding under the Company’s existing bank-syndicated credit facility, the 232,780 outstanding shares of the Company’s Class B common stock, which were held by the lenders under that credit facility, were automatically exchanged for an equal number of shares of the Company’s Class A common stock, as required under the Company’s certificate of incorporation.

“The plans we announced last month to utilize new credit facilities to repay our bank-syndicated loan have been executed,” said Rob Souza, President and Chief Executive Officer of Otelco. “The new facilities support Otelco’s ability to efficiently provide existing and new telecommunications capabilities to our customers while we continue to reduce our leverage.”

Investor questions can be addressed on the Company’s quarterly results conference call scheduled for 11:30 a.m. Eastern on Tuesday, March 8, 2016. To listen to the call, participants should dial (785) 830-1926 approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 2:30 p.m. (Eastern Time) on March 8, 2016 through March 22, 2016, by dialing (719) 457-0820 and entering Confirmation Code 596007.

ABOUT OTELCO

Otelco Inc. provides wireline telecommunications services in Alabama, Maine, Massachusetts, Missouri, New Hampshire, Vermont and West Virginia. The Company’s services include local and long distance telephone, digital high-speed data lines, transport services, network access, cable television and other related services. With more than 97,000 voice and data access lines, which are collectively referred to as access line equivalents, Otelco is among the top 25 largest local exchange carriers in the United States based on number of access lines. Otelco operates eleven incumbent telephone companies serving rural markets, or rural local exchange carriers. It also provides competitive retail and wholesale communications services and technology consulting, managed services and private/hybrid cloud hosting services through several subsidiaries. For more information, visit the Company’s website at www.OtelcoInc.com.

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