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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 22, 1996
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ACC Corp.
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(Exact name of registrant as specified in its charter)
Delaware 0-14567 16-1175232
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
400 West Avenue, Rochester, New York 14611
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 987-3000
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Not Applicable
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(Former name or former address, if changed since last report)
Exhibit Index Appears at Page 6
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ITEM 5. OTHER EVENTS
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As used herein, unless the context otherwise requires, the "Company"
and "ACC" refer to ACC Corp. and its subsidiaries, including ACC Long Distance
Corp. ("ACC U.S."), ACC TelEnterprises Ltd., the Company's 70% owned Canadian
subsidiary ("ACC Canada"), and ACC Long Distance UK Ltd. ("ACC U.K."). In this
Form 8-K references to "dollar" and "$" are to United States dollars, references
to "Cdn. $" are to Canadian dollars, references to "(Pounds)" are to English
pounds sterling, the terms "United States" and "U.S." mean the United States of
America and, unless the context otherwise requires, its states, territories and
possessions and all areas subject to its jurisdiction, and the terms "United
Kingdom" and "U.K." mean England, Scotland and Wales.
The Company's Registration Statement on Form S-3 to be filed by the
Company with the Securities and Exchange Commission (the "Commission") on or
about the date hereof (the "Registration Statement") is incorporated herein in
its entirety by reference, including, without limitation, the following portions
of the Prospectus included therein: Risk Factors ("Risk Factors"); Management's
Discussion and Analysis of Financial Condition and Results of Operations
("Management's Discussion and Analysis"); and Report of Independent Public
Accountants, Consolidated Balance Sheets, Consolidated Statements of Operations,
Consolidated Statements of Changes in Shareholders' Equity, Consolidated
Statements of Cash Flow and Notes to Consolidated Financial Statements of the
Company (collectively, the "Consolidated Financial Statements").
Certain of the information contained or incorporated by reference in
this Form 8-K, including under Management's Discussion and Analysis, including
information with respect to the Company's plans and strategies for its business
and related financing, are forward-looking statements. For a discussion of
important factors that could cause actual results to differ materially from the
forward-looking statements, see "Recent Losses; Potential Fluctuations in
Operating Results," "Dependence on Transmission Facilities-Based Carriers and
Suppliers," "Regulation," "Competition," "Need for Additional Capital," "Risks
of Growth and Expansion," "Risks Associated with International Operations,"
"Dependence on Effective Information Systems," "Risks Associated With
Acquisitions, Investments and Strategic Alliances," "Technological Changes,"
"Dependence on Key Personnel," "Risks Associated with Financing Arrangements;
Dividend Restrictions," "Holding Company Structure," "Potential Volatility of
Stock Price," "Anti-takeover Provisions" and "Shares Eligible for Future Sale;
Registration Rights" included under the caption "Risk Factors" in the Prospectus
contained in the Registration Statement incorporated herein by reference and
the Company's periodic reports filed with the Commission.
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A copy of the Registration Statement, which contains the Risk Factors,
Management's Discussion and Analysis and Consolidated Financial Statements of
the Company is attached hereto as Exhibit 99.24.
On May 22, 1995, Mr. Aab, the Company's Chairman of the Board and then
Chief Executive Officer, entered into a Participation Agreement with Fleet
Venture Resources, Inc., Fleet Equity Partners VI, L.P. and Chisholm Partners
II, L.P. (collectively, the "Fleet Investors") in connection with purchase by
the Fleet Investors of $10 million in aggregate principal amount of 12%
convertible subordinated notes of the Company, which notes were subsequently
converted into 10,000 shares of Series A Preferred Stock. The Participation
Agreement requires Mr. Aab to notify the Fleet Investors and the Company of
certain proposed transfers of his Class A Common Stock of the Company and, if
any of the Fleet Investors elect to participate in the proposed transaction, Mr.
Aab is required to obtain the agreement of the purchaser to acquire from any
participating Fleet Investor, at the same price and on the same terms offered to
Mr. Aab, a pro rata portion of the shares proposed to be purchased from Mr. Aab.
The Participation Agreement does not apply to certain transfers of shares by Mr.
Aab, including pursuant to a public offering registered under the Securities Act
of 1933, as amended (the "Act"), pursuant to Rule 144 adopted under the Act,
certain charitable transfers and transfers resulting from any foreclosure upon
shares which have been pledged, and the transfer restrictions are extinguished
if Mr. Aab ceases to be a director or employee of the Company or if the Series A
Preferred Stock and certain warrants issued to the Fleet Investors are no longer
outstanding.
During 1994 and early 1995, the Company initiated efforts to obtain
new telecommunications software programs from AMBIX Systems Corp. ("AMBIX"), a
software development company. The Company's Chairman of the Board and then
Chief Executive Officer, Richard T. Aab, was a controlling shareholder of AMBIX
during such period. In May of 1995, anticipating material agreements with
AMBIX and desiring to eliminate a conflict of interest situation, all of the
common shares owned by Mr. Aab in AMBIX were placed in escrow under the
direction of a Special Committee of the Company's Board of Directors with the
option of the Special Committee to authorize the Company to accept the transfer
and delivery of the shares in exchange for the release or indemnification of Mr.
Aab of his personal guarantee of certain obligations of AMBIX to its lender and
the substitution of the Company as the guarantor of such obligations. The
Special Committee, its outside consultants and the Company's management then
proceeded to review and evaluate the software technology and the terms and
conditions of proposed transactions with AMBIX.
On February 21, 1996, pursuant to approval of the Special Committee, a
software license agreement was entered into by and between the Company and AMBIX
Acquisition Corp., which is the purchaser of AMBIX's intellectual property and
other assets and is an affiliate of AMBIX. Immediately prior thereto, the shares
of AMBIX held in escrow were returned to AMBIX and the related party nature of
the Company's relationship with AMBIX was thereby extinguished. In connection
with the return of Mr. Aab's shares to AMBIX, the Company paid approximately
$200,000 to AMBIX's lender to release Mr. Aab's personal guarantee of certain
obligations of AMBIX to its lender. Such benefit to Mr. Aab was the only
consideration he received from the Company for the return of his shares to
AMBIX, and, to the Company's knowledge, Mr. Aab did not receive any additional
consideration from AMBIX for the return of his shares nor did he receive any
cash distributions from AMBIX during his ownership of such shares.
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For an aggregate consideration of $1.8 million (including the payment
by the Company of certain obligations of AMBIX to its lender) paid to or for the
benefit of AMBIX or AMBIX Acquisition Corp., the Company in return has received
a perpetual right to use the newly developed telecommunications software
programs. In making a business judgment as to the amount of such consideration,
the Special Committee considered a number of factors including, among other
matters, the opinion of its independent software consultants with respect to the
estimated cost of developing the major software program covered by the license,
the recommendations of management of the Company who were experienced with
oversight responsibilities for the development of software programs, and the
known benefit to the Company of the software programs as demonstrated by their
preliminary testing and use by the Company. The Company does not know the full
costs incurred by AMBIX in developing the software programs.
The software programs and the Company's license to use them are
considered by the Company to be material and integral to its operations. During
1995 the Company paid AMBIX $1.2 million, of which $700,000 relating to the
purchase of certain hardware and acquisition of certain software licenses, was
capitalized and recorded on the balance sheet as a component of property, plant
and equipment, and $500,000 relating to software development was expensed.
During 1994 the Company paid AMBIX $132,000, all of which related to software
development which was expensed. The Company anticipates that it will attempt to
negotiate and enter into an arrangement with AMBIX Acquisition Corp. to provide
maintenance and support for the software programs. There can be no assurance
that the Company will negotiate or enter into any such arrangements or regarding
the terms thereof.
Copies of the agreements between the Company and AMBIX or AMBIX
Acquisition Corp., and the letter agreement between the Company and Mr. Aab
relating to his interest in AMBIX, are attached hereto as Exhibits 99.5, 99.6,
99.7 and 99.8.
On January 19, 1996, subject to obtaining shareholder approval, the
Company's Board of Directors adopted a Non-Employee Directors' Stock Option Plan
(the "Directors Stock Option Plan"), and Messrs. Bennett, Estey, Tessoni and Van
Degna each received options to purchase 5,000 shares of Class A Common Stock at
an exercise price of $23.00 per share pursuant to the Directors Stock Option
Plan. The Directors Stock Option Plan provides for annual grants of options to
purchase 5,000 shares of Class A Common Stock at an exercise price equal to 100%
of the fair market value of the stock on the date of grant, which options vest
at the first anniversary of the date of grant. The maximum number of shares with
respect to which options may be granted under the Directors Stock Option Plan is
250,000, subject to adjustment for stock splits, stock dividends and the like. A
copy of the Directors Stock Option Plan is attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBIT
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See Exhibit Index
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SIGNATURES
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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 thereunto duly authorized.
ACC Corp.
Dated: February 22, 1996
By:/s/ David K. Laniak
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David K. Laniak
Chief Executive Officer
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EXHIBIT INDEX
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Exhibit
Number Title or Description Location
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3.1 By-Laws of the Company, as amended through
December 13, 1995
23.1 Consent of Arthur Andersen LLP
99.1 ACC Corp. Non-Employee Directors' Stock
Option Plan
99.2 Release and Settlement Agreement between the
Company and Francis Coleman, dated
December 29, 1995
99.3 Form of Employment Continuation Incentive
Agreement
99.4 Warrant to Purchase 7,500 Shares of Class A
Common Stock dated October 30, 1995
99.5 Software License Agreement dated March 30,
1995 by and between AMBIX Systems Corp. and
the Company
99.6 Software License Agreement dated February 21,
1996 between AMBIX Acquisition Corp. and the
Company
99.7 Bill of Sale from AMBIX Systems Corp. to the
Company dated February 6, 1996
99.8 Letter Agreement dated April 27, 1995 between
the Special Committee of the Board of Directors
of the Company and Richard T. Aab
99.9 Lease dated January 25, 1994 between the Hague
Corporation and the Company, as modified by a
Lease Modification Agreement No. 1 dated
May 31, 1994 and a Lease Modification
Agreement No. 2 dated May 31, 1994, relating to
the Company's leased premises located at
400 West Avenue, Rochester, New York
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99.10 Amended and Restated Lease Agreement dated
March 1, 1994 between ACC Long Distance
Inc./Interurbains ACC Inc. and Coopers &
Lybrand relating to the leased premises located at
5343 Dundas Street West, Etobicoke, Ontario,
Canada
99.11 Underlease Agreement dated December 23, 1993
between ACC Long Distance UK Limited, IBM
United Kingdom Limited, and the Company
relating to the leased premises located on the
tenth floor at The Chiswick Centre 414 Chiswick
High Road, London, England
99.12 Underlease Agreement dated June 6, 1995
between ACC Long Distance UK Limited, IBM
United Kingdom Limited, and the Company
relating to the leased premises located on the first
floor at The Chiswick Centre 414 Chiswick High
Road, London, England
99.13 Supplemental Lease Agreement dated June 3,
1994 between ACC Long Distance UK Limited,
IBM United Kingdom Limited, and the Company
relating to the leased premises located on the
ninth floor at The Chiswick Centre 414 Chiswick
High Road, London, England
99.14 Contingent Interest Agreement dated July 21,
1995 in favor of First Union National Bank of
North Carolina and Shawmut Bank of
Connecticut, N.A.
99.15 Leasehold Mortgage dated July 21, 1995 between
the Company and First Union National Bank of
North Carolina relating to the leased premises
located at 400 West Avenue, Rochester, New
York
99.16 Leasehold Mortgage dated July 21, 1995 between
the Company and First Union National Bank of
North Carolina relating to the leased premises
located at Suite 206, State Tower Building,
109 South Warren Street, Syracuse, New York
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99.17 Leasehold Mortgage dated July 21, 1995 between
the Company and First Union National Bank of
North Carolina relating to the leased premises
located at Suite 2200, Suite 204 and Suite 205,
State Tower Building, 109 South Warren Street,
Syracuse, New York
99.18 Mortgage of Leasehold Interest dated July 21,
1995 between the Company and ACC Long
Distance Inc./Interurbains ACC Inc. relating to
the leased premises located at 5343 Dundas Street
West, Etobicoke, Ontario, Canada
99.19 Pledge Agreement dated July 21, 1995 by the
Company in favor of First Union National Bank
of North Carolina
99.20 Pledge Agreement dated July 21, 1995 by ACC
National Long Distance Corp. in favor of First
Union National Bank of North Carolina
99.21 Security Agreement dated July 21, 1995 between
the Company, certain Domestic Subsidiaries of
the Company and First Union National Bank of
North Carolina
99.22 Trademark Security Agreement dated July 21,
1995 between the Company and First Union
National Bank of North Carolina
99.23 License Agreement dated July 1, 1993 between
Hudson's Bay Company and ACC Long Distance
Inc.
99.24 Registration Statement on Form S-3 of the
Company to be filed with the Securities and
Exchange Commission on or about the date hereof
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Exhibit 3.1
As amended by action of the Board of
Directors of this Corporation on
December 13, 1995
/s/ Thomas P. Young
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Thomas P. Young, Acting Secretary
BYLAWS
OF
ACC CORP.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meeting. The Annual Meeting of the stockholders
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of this Corporation, for the purpose of electing Directors and transacting such
other business as may come before the meeting, shall be held on such date, at
such time and at such place as may be designated by the Board of Directors.
Section 1.02 Special Meetings. Special Meetings of the stockholders
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may be called at any time by the Chairman of the Board, or by the Chief
Executive Officer, or by the President and Chief Operating Officer, or by a
majority of the entire Board of Directors acting with or without a meeting.
Special Meetings may be called for any purpose(s); however, the business
transacted at any such Special Meeting shall be confined to the purposes set
forth in the notice thereof.
Section 1.03 Place of Meetings. Meetings of stockholders shall be
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held at such place as the person or persons calling the meetings shall decide,
unless the Board of Directors decides that a meeting shall be held at some other
place and causes the notice thereof to so state.
Section 1.04 Notices of Meetings. Unless waived, a written, printed,
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or typewritten notice of each Annual or Special meeting, stating the date, hour
and place and the purpose or purposes thereof shall be delivered or mailed to
each stockholder of record entitled to vote or entitled to notice, not more than
60 days nor less than 10 days before any such meeting. If mailed, such notice
shall be directed to a stockholder at his or her address as the same appears on
the records of the Corporation. Notice shall not be required to be given to any
stockholder who submits a signed waiver of notice, in person or by proxy,
whether before or after such meeting. The attendance of any stockholder at a
meeting
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without protesting, prior to the conclusion of the meeting, the lack of notice
of such meeting, shall constitute a waiver of notice by him or her. If a
meeting is adjourned to another time or place and such adjournment is for 30
days or less and no new record date is fixed for the adjourned meeting, no
further notice as to such adjourned meeting need be given if the time and place
to which it is adjourned are fixed and announced at such meeting. If, however,
such adjournment exceeds 30 days or if, after the adjournment, a new record date
is fixed for the adjourned meeting, a notice of such adjourned meeting must be
given to each stockholder of record entitled to vote at such meeting. In the
event of a transfer of shares after notice has been given and prior to the
holding of the meeting, it shall not be necessary to serve notice on the
transferee. Such notice shall specify the place where the stockholders list
will be open for examination prior to the meeting if required by Section 1.08
hereof.
Section 1.05 Fixing Date for Determination of Stockholders of Record.
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In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. If the Board shall not fix such a
record date, (i) the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be the close of business on the
date next preceding the day on which notice is given, or, if notice is waived,
at the close of business on the day next preceding the day on which the meeting
is held, and (ii) in any case involving the determination of stockholders for
any purpose other than notice of or voting at a meeting of stockholders, the
record date for determining stockholders for such purpose shall be the close of
business on the day on which the Board of Directors shall adopt the resolution
relating thereto. Determination of stockholders entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of such
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 1.06 Organization. At each meeting of the stockholders, the
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Chairman of the Board, or in the absence of the Chairman of the Board, the Chief
Executive Officer, or in the absence of both the Chairman of the Board and the
Chief Executive Officer, the President and Chief Operating Officer, or, in the
absence of all such officers, a Chairman chosen by a majority in interest of the
stockholders present in person or by proxy and entitled to vote, shall act as
Chairman, and the Secretary of the Corporation, or, if the Secretary of the
Corporation not be present, the Assistant Secretary, or, in the absence of both
such officers, any person whom the Chairman of the Meeting shall appoint, shall
act as Secretary of the Meeting.
Section 1.07 Quorum. A stockholders' meeting duly called shall not
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be organized for the transaction of business unless a quorum is present. Except
as otherwise expressly provided by law, the Certificate of Incorporation or
these Bylaws, the presence in
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person or by proxy of holders of record of shares of stock of the Corporation
entitling them to exercise at least a majority of the voting power of the
Corporation shall constitute a quorum for such meeting. The stockholders
present at a duly organized meeting can continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum. If a meeting cannot be organized because a quorum has not
attended, a majority in voting interest of the stockholders present may adjourn,
or, in the absence of a decision by the majority, any officer entitled to
preside at such meeting may adjourn the meeting from time to time to such time
(not more than 30 days after the previously adjourned meeting) and place as they
(or he/she) may determine, without notice other than by announcement at the
meeting of the time and place of the adjourned meeting. At any such adjourned
meeting at which a quorum is present any business may be transacted which might
have been transacted at the meeting as originally called.
Section 1.08 List of Stockholders. The Secretary of the Corporation
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shall prepare and make a complete list of the stockholders of record as of the
applicable record date entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number and class or
series of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least 10 days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. This list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The
Corporation shall be entitled for all purposes to rely on the address for any
stockholder appearing on the records of its duly appointed transfer agent(s),
unless a stockholder shall specifically file with the Secretary of the
Corporation a written request that notices intended for such stockholder be
mailed to a different address, in which case all notices shall be mailed to the
address specified in such request.
Section 1.09 Order of Business and Procedure. The order of business
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at all meetings of the stockholders and all matters relating to the manner of
conducting the meeting shall be determined by the Chairman of the Meeting, whose
decisions may be overruled only by majority vote of the stockholders present and
entitled to vote at the meeting in person or by proxy. Meetings shall be
conducted in a manner designed to accomplish the business of the meeting in a
prompt and orderly fashion and to be fair and equitable to all stockholders, but
it shall not be necessary to follow any manual of parliamentary procedure.
Section 1.10 Voting.
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(a) Each stockholder of any class or series of the capital stock of
the Corporation shall, at each meeting of the stockholders, be entitled to such
number of votes for each such share of capital stock as provided by the
Certificate of Incorporation with respect to each such class or series of
capital stock as shall have been held by and registered
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in the name of such stockholder on the books of the Corporation on the date
fixed pursuant to these Bylaws as the record date for the determination of
stockholders entitled to notice of and to vote at such meeting, except as may
otherwise be provided by statute or the Certificate of Incorporation.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes.
(c) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by such stockholder's proxy appointed by an
instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized and delivered to the Secretary of the Meeting in sufficient
time to permit the necessary examination and tabulation thereof before the vote
is taken; provided, however, that no proxy shall be valid after the expiration
of three years after the date of its execution, unless the stockholder executing
it shall have specified therein the length of time it is to continue in force.
At any meeting of the stockholders at which a quorum is present, all matters,
except as otherwise expressly required by law, the Certificate of Incorporation
or these Bylaws, shall be decided by the vote of a majority of the shares
present in person or by proxy and entitled to vote thereat and thereon. The
vote at any meeting of the stockholders on any questions need not be by ballot,
unless so directed by the Chairman of the Meeting or required by the Certificate
of Incorporation; provided, however, that with respect to the election of
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Directors, any stockholder shall have the right to demand that such vote be
taken by written ballot. On a vote by ballot, each ballot shall be signed by
the stockholder voting, or by such stockholder's proxy, as the case may be, and
it shall state the number of shares voted. Each proxy shall be revocable at the
pleasure of the person executing it, or of such person's personal
representative(s) or assign(s), except as otherwise provided by statute. The
authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the stockholder who executed the proxy unless, before
the authority is exercised, valid and sufficient written notice of an
adjudication of such incompetence or of such death is received by the Secretary
of the Corporation.
Section 1.11 Inspectors. The Board of Directors, in advance of any
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meeting of the stockholders, may appoint one or more inspectors to act at the
meeting. If inspectors are not so appointed, the person presiding at the
meeting may appoint one or more inspectors. If any person so appointed fails to
appear or act, the vacancy may be filled by appointment made by the Board of
Directors in advance of the meeting or at the meeting by the person presiding
thereat. The inspectors so appointed shall determine the number of shares
outstanding, the shares represented at the meeting, the existence of a quorum
and the authenticity, validity and effect of proxies and shall receive votes,
ballots, waivers, releases, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, waivers, releases, or consents, determine
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and announce the results and do such acts as are proper to conduct the election
or vote with fairness to all stockholders. On request of the person presiding
at the meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated and of the vote as certified by them.
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 General Powers of Board. The powers of the Corporation
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shall be exercised, its business and affairs conducted, and its property
controlled by the Board of Directors, except as otherwise provided by the law of
Delaware or in the Certificate of Incorporation. Each Director shall be at
least 21 years of age.
Section 2.02 Number of Directors. The number of Directors of the
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Corporation shall not be less than three, with the exact number of Directors to
be such number as may be set from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors; provided,
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however, that no decrease in the size of the Board shall serve to reduce the
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term of any Director then in office. As used in these Bylaws, the term "entire
Board" means the total number of Directors which the Corporation would have if
there were no vacancies. The initial number of Directors and the persons
appointed as the initial Directors shall be as selected by the incorporator.
Section 2.03 Election of Directors. At each Annual Meeting of the
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stockholders, and except as may otherwise be provided by the Certificate of
Incorporation, Directors shall be elected by a plurality of the votes cast by
the holders of shares of the Corporation's capital stock entitled to vote
thereon for a term of one year, and shall hold office until the election and
qualification of their successors, or until their earlier resignation or
removal.
Section 2.04 Nominations. Nominations for the election of Directors
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may be made by the Board of Directors or a committee thereof or by any
stockholder entitled to vote for the election of Directors.
Section 2.05 Resignations. Any Director of the Corporation may
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resign at any time by giving written notice to the Chairman of the Board, the
Chief Executive Officer, the President and Chief Operating Officer or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
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Section 2.06 Vacancies. In the event that any vacancy shall occur in
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the Board of Directors, whether because of death, resignation, removal, newly
created directorships resulting from any increase in the authorized number of
Directors, the failure of the stockholders to elect the whole authorized number
of Directors, or for any other reason, such vacancy shall be filled by the vote
of a majority of the Directors then in office, although less than a quorum. A
Director elected to fill a vacancy shall hold office until the next Annual
Meeting of stockholders for the election of Directors, and until the election
and qualification of his or her successor.
Section 2.07 Removal of Directors. Any or all of the Directors may
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be removed for cause or without cause only by a majority vote of all outstanding
shares of stock.
Section 2.08 Place of Meeting, etc. The Board of Directors may hold
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any of its meetings at the principal office of the Corporation or at such other
place or places as the Board of Directors may from time to time designate.
Directors may participate in any regular or special meeting of the Board of
Directors or of any committee thereof by means of conference telephone or
similar communications equipment pursuant to which all persons participating in
any such meeting can hear each other and such participation shall constitute
presence in person at any such meeting.
Section 2.09 Regular Meetings. A Regular Meeting of the Board of
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Directors shall be held following each Annual Meeting of Stockholders for the
purpose of organizing the Corporation's affairs and the transaction of such
other business as may properly come before such meeting. Other Regular Meetings
of the Board of Directors may be held at such intervals and at such time as
shall from time to time be determined by the Board of Directors. Once such
determination has been made and notice thereof has been once given to each
person then a member of the Board of Directors, such Regular Meetings may be
held at such intervals and at the time(s) and place(s) so designated without
further notice being given.
Section 2.10 Chairman of the Board. At the regular meeting of the
---------------------
Board of Directors held following each Annual Meeting of the stockholders, the
Board shall elect one of its members as Chairman of the Board, to serve at the
pleasure of the Board. The Chairman of the Board shall preside at all meetings
of the stockholders and of the Board of Directors. The Chairman of the Board
shall also perform such duties and may exercise such other powers as from time
to time may be assigned by these Bylaws or by the Board of Directors.
Section 2.11 Special Meetings. Special meetings of the Board of
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Directors may be called at any time by the Chairman of the Board, by the Chief
Executive Officer, by the President and Chief Operating Officer, or by a
majority of Directors then in office, to be held on such day and at such time as
shall be specified by the person or persons calling the meeting.
<PAGE>
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Section 2.12 Notice of Meetings. Notice of each Special Meeting or,
------------------
where required, each Regular Meeting of the Board of Directors shall be deemed
properly given to each Director either: (a) when mailed by first class mail,
postage prepaid, to each Director, addressed to him or her at his or her
residence or usual place of business, at least two days before the day on which
such meeting is to be held; or (b) when sent to him or her at such address by
telegraph, cable, telex, telecopier, facsimile or other similar means, or when
delivered to him or her personally, or when given to him or her by telephone or
other similar means, in any event at least 24 hours before the time at which
such meeting is to be held. Such notice shall specify the place, date and time
of the meeting; however, except as otherwise specifically required by these
Bylaws, notice of any Regular or Special Meeting of the Board of Directors need
not state the purpose or purposes of such meeting and, at any such meeting duly
held, any business may be transacted. At any meeting of the Board of Directors
at which every Director shall be present, even though without such notice, any
business may be transacted. Any acts or proceedings taken at a meeting of the
Board of Directors not validly called or convened may be made valid and fully
effective by ratification at a subsequent meeting that has been validly called
or convened. A written waiver of notice of a Special or Regular Meeting, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed the equivalent of such notice, and
attendance of a Director at any meeting shall constitute a waiver of notice of
such meeting except when the Director attends the meeting and prior to or at the
commencement thereof protests the lack of proper notice to him or her, or that
the meeting is not lawfully called or convened.
Section 2.13 Quorum and Voting. At all meetings of the Board of
-----------------
Directors, the presence of a majority of the Directors then in office shall
constitute a quorum for the transaction of business; provided, however, that
-------- -------
such number may not be less than one-third of the entire Board. Except as
otherwise required by law, the Certificate of Incorporation, or these Bylaws,
the vote of a majority of the Directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors. At all meetings of the
Board of Directors, each Director shall have one vote.
Section 2.14 Committees. The Board of Directors may appoint an
----------
Executive Committee, an Audit Committee, an Executive Compensation Committee, a
Nominating and Organizational Development Committee, a Strategic Planning
Committee and any other committee of the Board of Directors, each to consist of
three or more Directors of the Corporation. Each such committee shall have and
may exercise all of the powers and authority of the Board of Directors necessary
and appropriate to the carrying out of its functions, except that no such
------
committee shall have the power or authority:
(a) To amend the Certificate of Incorporation or these Bylaws;
(b) To adopt an agreement of merger or consolidation;
<PAGE>
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(c) To recommend to the stockholders the sale, lease or exchange of
all or substantially all the Corporation's property and assets;
(d) To recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution; nor
(e) To declare a dividend or to authorize the issuance of stock unless
the resolution creating such committee expressly so provides.
The Executive Committee of the Board shall have the power and
authority to act in lieu of the full Board of Directors as may be necessary in
the intervals between Board meetings and as otherwise requested by the full
Board, except as otherwise specifically circumscribed by the Delaware General
Corporation Law, the Corporation's Certificate of Incorporation or these Bylaws.
The Audit Committee of the Board shall periodically review the
Corporation's auditing practices and procedures, make recommendations to
management or to the Board of Directors as to any changes to such practices and
procedures deemed necessary from time to time to comply with applicable auditing
rules, regulations and practices, and recommend independent auditors for the
Corporation to be elected by the stockholders. This Committee shall at all
times consist solely of Directors who are not also employees or officers of the
Corporation.
The Executive Compensation Committee of the Board shall meet from time
to time to set and review the compensation and benefits payable to the
Corporation's officers and other senior executives, and, acting under the terms
of the Corporation's Employee Long Term Incentive Plan and the Corporation's
Employee Stock Purchase Plan, shall have exclusive authority to administer said
Plans in all respects in accordance with their terms. This Committee shall at
all times consist solely of Directors who are not also employees or officers of
the Corporation.
The Nominating and Organizational Development Committee of the Board
shall meet from time to time to review the qualifications of and recommend to
the Board the names of candidates both (1) to stand for election as Directors of
the Corporation and (2) to fill vacancies that occur on the Board of Directors,
as well as to develop long range management succession plans for the Corporation
and to review the qualifications of and make recommendations to the Board of the
names of candidates for Chief Executive Officer of the Corporation. The Chief
Executive Officer shall be an ex officio member of this Committee.
----------
The Strategic Planning Committee of the Board shall meet from time to
time to develop and review the Corporation's long range strategic business plans
and goals and to recommend the same to the Board as necessary for approval and
implementation. The Chairman of the Board shall be the Chairman of this
Committee.
<PAGE>
- 9 -
Each such committee shall serve at the pleasure of the Board of
Directors and shall be subject to the control and direction of the Board of
Directors. In the absence of any member of any such committee, the members
thereof present at any meeting may appoint a member of the Board of Directors
previously designated by the Board of Directors as a committee alternate to act
in the place of such absent member. Any such committee shall keep written
minutes of its meetings and report the same to the Board of Directors at the
next Regular Meeting of the Board of Directors.
Section 2.15 Compensation. The Board of Directors may, by resolution
------------
passed by a majority of those in office, fix the compensation of Directors for
service in any capacity and may fix fees for attendance at meetings and may
authorize the Corporation to pay the traveling and other expenses of Directors
incident to their attendance at meetings, or may delegate such authority to a
committee of the Board of Directors. The Board of Directors shall fix the
compensation of all officers of the Corporation who are appointed by the Board
of Directors. The Board of Directors may authorize the Chief Executive Officer
or the President and Chief Operating Officer to fix the compensation of such
assistant and subordinate officers and agents as either of them is authorized to
appoint and remove.
Section 2.16 Action by Consent. Any action required or permitted to
-----------------
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if a written consent thereto is signed by all
members of the Board of Directors or of such committee, as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or such committee.
Section 2.17 Director Emeritus. From time to time, the Board may in
-----------------
its discretion designate a Director who elects to retire from the Board, on or
after reaching age 70, as a Director Emeritus. A Director Emeritus shall be
invited to attend all Board meetings as an ex officio member of the Board
----------
without a vote and shall be entitled to receive the annual retainer fees then
paid to the Directors of this Corporation, until reaching age 75.
ARTICLE III
OFFICERS
Section 3.01 General Provisions. The officers of the Corporation
------------------
shall be the Chief Executive Officer, the President and Chief Operating Officer,
such number of Vice Presidents as the Board of Directors may from time to time
determine, a Secretary and a Treasurer. Any person may hold any two or more
offices and perform all the duties thereof. The Board of Directors may also
elect a Chief Financial Officer, a Controller and such other officers as it may
determine.
<PAGE>
- 10 -
Section 3.02 Election, Terms of Office, and Qualification. The
--------------------------------------------
officers of the Corporation named in Section 3.01 of this Article III shall be
elected by the Board of Directors for an indeterminate term and shall hold
office at the pleasure of the Board of Directors.
Section 3.03 Additional Officers, Agents, etc. In addition to the
--------------------------------
officers mentioned in Section 3.01 of this Article III, the Corporation may have
such other officers or agents as the Board of Directors may deem necessary and
may appoint, each of whom shall hold office for such period, have such authority
and perform such duties as may be provided in these Bylaws as the Board of
Directors may from time to time determine. The Board of Directors may from time
to time delegate to the Chief Executive Officer or the President and Chief
Operating Officer the power to appoint any subordinate officers or agents and
prescribe the powers and duties thereof. In the absence of any officer of the
Corporation, or for any other reason the Board of Directors may deem sufficient,
the Board of Directors may delegate the powers and duties of such officer, in
whole or in part, to any other officer, or to any Director.
Section 3.04 Removal. Any officer of the Corporation may be removed,
-------
either with or without cause, at any time, by resolution adopted by the Board of
Directors at any meeting. Any officer appointed not by the Board of Directors
but by an officer or committee to which the Board of Directors shall have
delegated the power of appointment may be removed, with or without cause, by the
Board of Directors, by the committee that or superior officer (including
successors) who made the appointment, or by any committee or officer upon whom
such power of removal may be conferred by the Board of Directors.
Section 3.05 Resignations. Any officer may resign at any time by
------------
giving written notice to the Board of Directors, or to the Chairman of the
Board, the Chief Executive Officer, the President and Chief Operating Officer,
or the Secretary of the Corporation. Any such resignation shall take effect at
the time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 3.06 Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or otherwise, shall be filled in the
manner prescribed in these Bylaws for regular appointments or elections to such
office.
<PAGE>
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ARTICLE IV
DUTIES OF THE OFFICERS
Section 4.01 Chief Executive Officer. The Chief Executive Officer
-----------------------
shall have general charge of and be primarily responsible for the conduct of the
business of the Corporation, including long-range planning and strategic
analyses of the Corporation's future growth and direction, and subject to the
Board's approval, establishing the general business policies and goals of the
Corporation. During the absence or disability of the Chairman of the Board, the
Chief Executive Officer shall preside at all meetings of the stockholders and of
the Board of Directors. Except where by law the signature of the President and
Chief Operating Officer is required, the Chief Executive Officer shall possess
the same power as the President and Chief Operating Officer to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. During the absence or disability of the
President and Chief Operating Officer, the Chief Executive Officer shall
exercise all the powers and discharge all the duties of the President and Chief
Operating Officer. The Chief Executive Officer shall also perform such duties
and may exercise such other powers as from time to time may be assigned by these
Bylaws or by the Board of Directors.
Section 4.02 President and Chief Operating Officer. The President
-------------------------------------
and Chief Operating Officer shall, subject to the control of the Board and the
Chief Executive Officer, have general supervision of the day-to-day operation
and administration of the business of the Corporation, together with such other
duties and such other powers as from time to time may be assigned by the Board
of Directors or the Chief Executive Officer. He shall execute all bonds,
mortgages, contracts and other instruments of the Corporation requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except that the other officers of the
Corporation may sign and execute documents when so authorized by these Bylaws,
the Board of Directors, or the Chief Executive Officer. In the absence or
disability of both the Chairman of the Board and of the Chief Executive Officer,
the President and Chief Operating Officer shall preside at all meetings of the
shareholders and the Board of Directors.
Section 4.03 Vice Presidents. The Vice Presidents shall perform such
---------------
duties as are conferred upon them by these Bylaws or as may from time to time be
assigned to them by the Board of Directors, the Chief Executive Officer or the
President and Chief Operating Officer. Any one of the Vice Presidents may be
designated by the Board of Directors as an Executive Vice President, and the
Board may also from time to time designate one or more of the Vice Presidents as
Senior Vice Presidents in the exercise of its sole discretion. At the request
of the Chief Executive Officer, in the absence or disability of the President
and Chief Operating Officer, the Executive Vice President shall perform all the
duties and have all the powers of the President and Chief Operating Officer. If
there be no Executive Vice President, the Vice President designated by the Board
of Directors shall
<PAGE>
- 12 -
perform such duties and exercise such functions. Each Vice President shall have
such other powers and duties as may from time to time be properly prescribed by
the Board of Directors, the Chief Executive Officer, or the President and Chief
Operating Officer.
Section 4.04 Treasurer. The Treasurer shall keep correct and
---------
complete books and records of account for the Corporation. Subject to the
control and supervision of the Board of Directors and the Chief Executive
Officer, or such other officer as any of them may designate, the Treasurer shall
establish programs for the provision of the capital required by the Corporation,
including negotiating the procurement of capital and maintaining adequate
sources for the Corporation's current borrowings from lending institutions. He
shall maintain banking arrangements to receive, have custody of and disburse the
funds and securities of the Corporation. He shall invest the funds of the
Corporation as required, and establish and coordinate policies for investment in
pension and other similar accounts due the Corporation. The Treasurer shall
have such other powers and duties as may from time to time be properly
prescribed by the Board of Directors, the Chief Executive Officer, the President
and Chief Operating Officer, or the Chief Financial Officer.
Section 4.05 Secretary. The Secretary shall attend all meetings of
---------
the Board of Directors and of the stockholders, and shall record all votes in
the Minutes of all such proceedings in a book to be maintained for such purpose.
The Secretary shall give or cause to be given a notice of all meetings of
stockholders and of the Board of Directors. The Secretary shall be the
custodian of the seal of the Corporation and shall affix the seal to any
instrument when authorized by the Board of Directors. The Secretary shall keep
all the documents and records of the Corporation, as required by law or
otherwise, in a proper and safe manner. The Secretary shall have such other
powers and duties as may from time to time be properly prescribed by the Board
of Directors, the Chief Executive Officer or the President and Chief Operating
Officer.
Section 4.06 Chief Financial Officer. The Board of Directors may
-----------------------
appoint a Chief Financial Officer. Subject to the control and supervision of
the Board of Directors and the Chief Executive Officer, the Chief Financial
Officer shall have general charge of establishing and overseeing all financial
and accounting policies and matters of the Corporation. The Chief Financial
Officer shall also have such other powers and duties as may from time to time be
properly prescribed by the Board of Directors or the Chief Executive Officer.
Section 4.07 Controller. The Board of Directors may appoint a
----------
Controller. Subject to the control and supervision of the Board of Directors,
the Chief Executive Officer, or such officer as either of them may designate,
the Controller shall establish, coordinate and administer an adequate plan for
the financial control of operations, including profit planning, programs for
capital investing and for financing, sales forecasts, expense budgets and cost
standards, together with the necessary procedures to effectuate such plans. The
Controller shall compare performance with operating plans and standards and
shall report and interpret the results of operations to all levels of
management.
<PAGE>
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ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 5.01 Mandatory Indemnification. The Corporation shall
-------------------------
indemnify any officer or Director of the Corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceedings, whether civil, criminal, administrative or investigative
(including, without limitation, any action threatened or instituted by or in the
right of the Corporation), by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit), partnership,
joint venture, trust or other enterprise, against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was unlawful.
A person claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for indemnification, to
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to any
criminal matter, to have had no reasonable cause to believe his conduct was
unlawful, and the termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, rebut such presumption.
Section 5.02 Court-Approved Indemnification. Anything contained in
------------------------------
these Bylaws or elsewhere to the contrary notwithstanding:
(a) The Corporation shall not indemnify any officer or Director of the
Corporation who was a party to any completed action or suit instituted by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, trustee, officer, employee or agent of another Corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or other
enterprise, in respect of any claim, issue or matter asserted in such action or
suit as to which he shall have been adjudged to be liable for gross negligence
or intentional misconduct in the performance of his duty to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite such adjudication of liability, and in view of
all the circumstances of the case, he is fairly and reasonably entitled to such
indemnity as such Court of Chancery or such other court shall deem proper; and
<PAGE>
- 14 -
(b) The Corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as contemplated by this
Section 5.02.
Section 5.03 Indemnification for Expenses. Anything contained in
----------------------------
these Bylaws or elsewhere to the contrary notwithstanding, to the extent that an
officer or Director of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the Corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
Section 5.04 Determination Required. Any indemnification required
----------------------
under Section 5.01 and not precluded under Section 5.02 shall be made by the
Corporation only upon a determination that such indemnification of the officer
or Director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (a) by a majority vote of a quorum consisting of Directors of the
Corporation who were not and are not parties to any such action, suit or
proceedings, or (b) if such a quorum is not obtainable or if a majority of a
quorum of disinterested Directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders, or (d) by the Court of Chancery of
the State of Delaware or (if the Corporation is a party thereto) the court in
which such action, suit or proceeding was brought, if any. Any such
determination may be made by a court under division (d) of this Section 5.04 at
any time (including, without limitation, any time before, during or after the
time when any such determination may be requested of, be under consideration by
or have been denied or disregarded by the disinterested Directors under division
(a) or by independent legal counsel under division (b) or by the stockholders
under division (c) of this Section 5.04); and no failure for any reason to make
any such determination, and no decision for any reason to deny any such
determination, by the disinterested Directors under division (a) or by
independent legal counsel under division (b) or by stockholders under division
(c) of this Section 5.04 shall be evidence in rebuttal of the presumption
recited in Section 5.01. Any determination made by the disinterested Directors
under division (a) or by independent legal counsel under division (b) of this
Section 5.04 to make indemnification in respect of any claim, issue or matter
asserted in an action or suit threatened or brought by or in the right of the
Corporation shall be promptly communicated to the person who threatened or
brought such action or suit, and within twenty days after receipt of such
notification such person shall have the right to petition the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought,
if any, to review the reasonableness of such determination.
Section 5.05 Advances for Expenses. Expenses (including, without
---------------------
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding to or on
<PAGE>
- 15 -
behalf of the officer or Director promptly as such expenses are incurred by him,
but only if such officer or Director shall first agree, in writing, to repay all
amounts so paid in respect of any claim, issue or other matter asserted in such
action, suit or proceeding in defense of which he shall not have been successful
on the merits or otherwise:
(a) If it shall ultimately be determined as provided in Section 5.04
that he is not entitled to be indemnified by the Corporation as provided under
Section 5.01; or
(b) If, in respect of any claim, issue or other matter asserted by or
in the right of the Corporation in such action or suit, he shall have been
adjudged to be liable for gross negligence or intentional misconduct in the
performance of his duty to the Corporation, unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite such
adjudication of liability, and in view of all the circumstances, he is fairly
and reasonably entitled to all or part of such indemnification.
Section 5.06 Article V Not Exclusive. The indemnification provided
-----------------------
by this Article V shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under the Certificate of
Incorporation or any Bylaw, agreement, vote of stockholders or disinterested
Directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be an officer or Director of the Corporation and shall
inure to the benefit of the heirs, executors, and administrators of such a
person.
Section 5.07 Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any person who is or was a Director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a Directors, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article V.
Section 5.08 Certain Definitions. For purposes of this Article
-------------------
V, and as examples and not by way of limitation:
(a) A person claiming indemnification under this Article V shall be
deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 5.01, or in defense of any
claim, issue or the matter therein, if such action, suit or proceeding shall be
terminated as to such person, with or without prejudice, without the entry of a
judgment or order against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based upon
a
<PAGE>
- 16 -
judicial or other determination of the lack of merit of the claims made against
him or otherwise results in his vindication); and
(b) References to an "other enterprise" shall include employee benefit
plans; references to a "fine" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the Corporation" shall include any service as a Director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such Director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" within the meaning of that term as used in this Article V.
Section 5.09 Venue. Any action, suit or proceeding to determine a
-----
claim for indemnification under this Article V may be maintained by the person
claiming such indemnification, or by the Corporation, in the Court of Chancery
of the State of Delaware. The Corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Chancery of the State of Delaware in any such
action, suit or proceeding.
Section 5.10 Contractual Nature. The foregoing provisions of this
------------------
Article V shall be deemed to be a contract between the Corporation and each
Director and officer who serves in such capacity at any time while this Section
5.10 is in effect, and any repeal or modification thereof shall not affect any
rights or obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or thereafter
brought based in whole or in part upon any such state of facts.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01 Certificate for Shares. Every owner of one or more
----------------------
shares in this Corporation shall be entitled to a certificate, which shall be in
such form as the Board of Directors shall prescribe, certifying the number and
class of shares in the Corporation owned by such person. When such certificate
is countersigned by an incorporated transfer agent or registrar, the signature
of any of said officers may be facsimile, engraved, stamped or printed. The
certificates for the respective classes of such shares shall be numbered in the
order in which they shall be issued and shall be signed in the name of the
Corporation by the Chairman of the Board, the Chief Executive Officer, the
President and Chief Operating Officer, or a Vice President and by the Secretary
or the Treasurer. A record shall be kept of the name of the person, firm, or
corporation owning the shares represented by each such
<PAGE>
- 17 -
certificate and the number of shares represented thereby, the date thereof and
in case of cancellation, the date of cancellation. Every certificate
surrendered to the Corporation for exchange or transfer shall be canceled and no
new certificate or certificates shall be issued in exchange for any existing
certificates until such certificates shall have been so canceled. In case any
officer who has signed, or whose facsimile signature has been placed upon a
certificate, shall have ceased to be such officer before such certificate is
issued, such certificate may be issued by the Corporation with the same effect
as if such person were such officer at the date of issue.
Section 6.02 Lost, Destroyed or Mutilated Certificates. If any
-----------------------------------------
certificates for shares in this Corporation become worn, defaced, or mutilated
but are still substantially intact and recognizable, the Directors, upon
production and surrender thereof, shall order the same canceled and shall issue
a new certificate in lieu of same. The holder of any shares in the Corporation
shall immediately notify the Corporation if a certificate therefor shall be
lost, destroyed, or mutilated beyond recognition, and the Corporation may issue
a new certificate in the place of any certificate theretofore issued by it which
is alleged to have been lost or destroyed or mutilated beyond recognition.
Unless otherwise provided by the Board of Directors or an officer of the
Corporation, the owner of the certificate which has been lost, destroyed, or
mutilated beyond recognition, or his legal representative, shall give the
Corporation a bond in such sum and with such surety or sureties as may be
required to adequately indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, destruction, or mutilation of
any such certificate. The Board of Directors may, however, in its discretion,
refuse to issue any such new certificate pending the resolution of any legal
proceedings involving such certificate or the loss, destruction or mutilation
thereof.
Section 6.03 Transfers of Shares. Transfers of shares in the
-------------------
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, his or its legal guardian, executor, or administrator, or by his
or its attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation or with a transfer agent appointed
by the Board of Directors, and on surrender of the certificate or certificates
for such shares properly endorsed or accompanied by properly executed stock
powers (and any requested signature guarantees) and evidence of the payment of
all taxes imposed upon such transfer. The person in whose name shares stand on
the books of the Corporation shall, to the full extent permitted by law, be
deemed the owner thereof for all purposes as regards the Corporation, and the
Corporation shall not be bound to recognize any equitable or other claim or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as expressly provided by statute.
Section 6.04 Stock Ledgers. The stock ledgers of the Corporation
-------------
containing the names and addresses of the stockholders and the number of shares
held by them respectively shall be maintained at the principal offices of the
Corporation, or, if there
<PAGE>
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be a transfer agent, at the office of such transfer agent as the Board of
Directors shall determine.
Section 6.05 Regulations. The Board of Directors may make such rules
-----------
and regulations as it may deem expedient and not inconsistent with these Bylaws
concerning the issue, transfer, and registration of certificates for shares in
the Corporation. It may appoint one or more transfer agents or one or more
registrars, or both, and may require all certificates for shares to bear the
signature of either or both.
ARTICLE VII
FINANCES
Section 7.01 Dividends. Subject to any statutory provisions,
---------
dividends upon the capital stock of the Corporation may be declared by the Board
of Directors, payable on such dates as the Board of Directors may designate.
Section 7.02 Reserves. Before the payment of any dividend, there may
--------
be set aside out of the funds of the Corporation available for dividends, such
sum or sums as the Board of Directors may from time to time in its absolute
discretion deem proper as a reserve to meet contingencies or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board shall deem conducive to the interests of the
Corporation. The Board of Directors may modify or abolish any such reserve in
the manner in which it was created.
Section 7.03 Bills, Notes, etc. All checks or demands for money and
-----------------
notes or other instruments evidencing indebtedness or obligations of the
Corporation shall be made in the name of the Corporation and shall be signed by
such officer or officers or such other person or persons as the Board of
Directors may from time to time designate.
ARTICLE VIII
DIVISIONS
Section 8.01 Creation of Divisions. The Board of Directors may from
---------------------
time to time create Divisions of the Corporation as operational units of the
Corporation, and may set apart to such Divisions such aspects or portions of the
business, affairs and properties of the Corporation as the Board of Directors
may from time to time determine.
<PAGE>
- 19 -
Section 8.02 Division Officers. The Board of Directors of the
-----------------
Corporation may appoint as officers of a Division a President, one or more Vice
Presidents, a Secretary, a Treasurer and any other officers, all of whom shall
serve at the pleasure of the Board of Directors. The same person may hold two
or more offices of a Division, and any person holding an office of a Division
may also be elected an officer of the Corporation. The officers and all other
persons who shall serve a Division in the capacities set forth in this Article
are hereby appointed agents of the Corporation with the powers and duties herein
set forth; provided, however, that the authority of said agents shall be limited
to matters related to the properties, business and affairs of the Division and
shall not extend to any other portion of the properties, business and affairs of
the Corporation. The Board of Directors may from time to time authorize the
Chief Executive Officer or the President and Chief Operating Officer of the
Corporation to appoint and remove all such Divisional officers and agents and to
prescribe their respective powers and duties.
Section 8.03 Division President. The President of a Division shall
------------------
be the Chief Executive Officer of the Division and shall have the responsibility
for the general management of the affairs of the Division, subject to the
direction of the Board of Directors and the President and Chief Operating
Officer of the Corporation. He shall see that all orders, instructions,
policies and resolutions of the Board of Directors, the Chief Executive Officer
and the President and Chief Operating Officer of the Corporation relating to the
business and affairs of the Division are carried into effect.
Section 8.04 Division Secretary. The Division Secretary shall have
------------------
the custody of such books and papers, shall maintain such records and shall have
such other powers and duties as may from time to time be properly prescribed by
the Board of Directors, the Chief Executive Officer and the President and Chief
Operating Officer of the Corporation and by the Division President.
Section 8.05 Division Treasurer. Subject to the direction of the
------------------
Treasurer of the Corporation and the Division President, the Division Treasurer
shall have custody of the funds and securities of the Division, shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
Division, shall deposit all monies and other valuable effects in the name and to
the credit of the Division in such depositories as may be designated by the
Board of Directors and shall have such other powers and duties as may from time
to time be properly prescribed by the Board of Directors, the Chief Executive
Officer, the President and Chief Operating Officer of the Corporation and by the
Division President.
<PAGE>
- 20 -
ARTICLE IX
SEAL
Section 9.01 Seal. The Board of Directors may provide a corporate
----
seal, which shall be circular and contain the name of the Corporation engraved
around the margin and the words "corporate seal," the year of its organization,
and the word "Delaware."
ARTICLE X
AMENDMENTS
Section 10.01 Power to Amend. These Bylaws may be adopted, altered,
--------------
amended or repealed by the affirmative vote of the holders of at least 80% of
the issued and outstanding shares of this Corporation's Common Stock. The Board
of Directors shall also have the power to adopt, alter, amend or repeal these
Bylaws by a majority vote of the entire Board of Directors at any meeting
thereof, subject to the right of the holders of this Corporation's Class A
Common Stock to adopt, alter, amend or repeal these Bylaws as aforesaid.
<PAGE>
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 6, 1996 (except with respect to the matters discussed in
Notes 10 and 11.A., as to which the dates are February 20, 1996 and February 8,
1996, respectively) incorporated by reference in this Form 8-K into ACC Corp.'s
previously filed Form S-8 (Registration Statements No. 33-30817, No. 33-36546,
No. 33-52174, No. 33-87056, and No. 33-75558) and into the Form S-3 filed on
the date hereof.
Arthur Andersen LLP
Rochester, New York,
February 22, 1996
<PAGE>
Exhibit 99.1
ACC CORP.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
As Adopted on January 19, 1996
1. Purpose. The purpose of this Non-Employee Directors' Stock
-------
Option Plan (the "Plan") is to secure for ACC CORP., a Delaware corporation (the
"Company"), and its shareholders the benefits of the incentive inherent in
increased stock ownership by members of the Company's Board of Directors (the
"Board") who are not also employees of the Company or any of its subsidiaries (a
"Non-Employee Director"). Options to purchase shares of the Company's Class A
Common Stock, $.015 par value, or such other shares as are substituted pursuant
to Paragraphs 5(e) or 5(f) below (the "Common Stock"), shall be granted to Non-
Employee Directors of the Company pursuant to the terms of this Plan.
2. Eligibility. Each Non-Employee Director shall be eligible to
-----------
receive grants of non-qualified stock options in accordance with the specific
provisions of Paragraph 4 below ("Options"). The adoption of this Plan shall
not be deemed to give any Director any right to be granted an Option to purchase
Common Stock except to the extent and upon such terms and conditions consistent
with this Plan as may be determined by the Executive Compensation Committee of
the Board (the "Committee").
3. Limitation on Aggregate Shares. The maximum number of shares
------------------------------
of Common Stock with respect to which Options may be granted under this Plan and
which may be issued upon the exercise thereof shall not exceed, in the
aggregate, 250,000 shares, subject to adjustment pursuant to Paragraph 5(e)
below; provided, however, that if any Options granted under this Plan expire
unexercised or are cancelled, terminated or forfeited in any manner without the
issuance of Common Stock thereunder, the shares with respect to which such
Options were granted shall resume the status of being available for issuance
under this Plan. Such shares of Common Stock may be either authorized and
unissued shares, treasury shares or a combination thereof, as the Committee
shall determine.
4. Terms and Conditions of Options. Options granted under this
-------------------------------
Plan shall be subject to such terms and conditions and evidenced by written
agreements in such form as shall be determined from time to time by the
Committee and shall in any event be subject to the terms and conditions set
forth in this Plan. In the event of any conflict between a written agreement
and the Plan, the terms of the Plan shall govern.
(a) Options to Current Directors. Each Non-Employee Director as of
----------------------------
January 19, 1996 shall receive, as of such date, an Option (an "Initial Option")
to purchase 5,000 shares of Common Stock.
<PAGE>
- 2 -
(b) Annual Options. Each year on the date of the Annual Meeting of
--------------
the Company's Shareholders (the "Annual Meeting"), commencing with the 1996
Annual Meeting, each Non-Employee Director elected at such meeting shall
automatically receive an Option to purchase 5,000 shares of Common Stock.
(c) Option Price. The Option price per share of Common Stock shall be
------------
100% of the "Fair Market Value" of a share of Common Stock as of the date of
grant (the "Option Price"). The Fair Market Value of the Common Stock on any
given date means (i) the Closing Price quoted for the Company's Common Stock in
the National Association of Securities Dealers Automated Quotation System
("Nasdaq System") National Market List on the last business day immediately
preceding the date of grant of the Option; or (ii) if there are no reported
sales on such date, then the mean between the closing high bid and low asked
prices as reported by the Nasdaq System for such date (or, if not so reported,
then as reported for that date by the system then regarded as the most reliable
source of such quotations); or (iii) if there are no reported sales or
quotations, as the case may be, on the given date, the value determined pursuant
to (i) or (ii) using the reported sale prices or quotations on the last previous
date on which so reported; or (iv) if none of the foregoing clauses apply, the
fair market value as determined in good faith by the Committee.
(d) Term of Options. Each Option shall be exercisable for ten
---------------
years and one day after its date of grant.
(e) Exercise of Options. Options shall be exercised by written notice
-------------------
to the Company (to the attention of the Treasurer of the Company) accompanied by
payment in full of the Option Price with respect to the number of Options being
exercised. Payment of the Option Price may be made, at the discretion of the
Non-Employee Director: (i) in cash (including check, bank draft or money
order); (ii) by delivery of Common Stock already owned for at least six months
by the Non-Employee Director, which shall be valued at the Fair Market Value
thereof on the date of exercise; or (iii) by delivery of a combination of cash
and Common Stock; provided, however, that the Committee may, in the exercise of
its discretion, require the Option Price to be paid in cash.
(f) Rights as a Shareholder. No Non-Employee Director shall have any
-----------------------
rights as a shareholder with respect to any shares covered by an Option until
the date a stock certificate for such shares is issued to him or her. Except as
otherwise provided herein, no adjustments shall be made for dividends or
distributions of other rights for which the record date is prior to the date
such stock certificate is issued.
5. Additional Provisions.
---------------------
(a) Conditions and Limitations on Exercise. The Initial Options
--------------------------------------
granted hereunder shall be exercisable in full immediately upon their date of
grant. All other Options granted hereunder shall be exercisable in full
("vest") on the first anniversary of their date of grant. Notwithstanding the
foregoing, (i) no Option shall be exercisable prior to
<PAGE>
- 3 -
the adoption of the Plan by the Company's shareholders at the Company's 1996
Annual Meeting, as provided in Paragraph 9 below, and (ii) no shares of Common
Stock issuable upon the exercise of an Option may be sold, assigned, pledged or
otherwise transferred for a period of six months after the later to occur of (x)
the adoption of the Plan by the Company's shareholders and (y) the grant of the
Option, as specified in Rule 16b-3 (or other period of time specified in such
rule as it may be amended from time to time) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) Termination of Service as a Director. Any vested Option shall be
------------------------------------
exercisable during the holder's term as a Director of the Company in accordance
with its terms and, except if the Director is removed from office for cause,
shall remain exercisable for one year following the date of his/her termination
of service as a Director regardless of the reason therefor, including, but not
limited to, his/her resignation or retirement from the Board, disability as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), or death, subject to the earlier expiration of the term of such
Option as defined in Paragraph 4(d) above.
(c) Registration and Compliance with Laws and Regulations. It shall
-----------------------------------------------------
be a further condition to any exercise of an Option and the purchase of shares
of Common Stock pursuant thereto that the Company's counsel be satisfied that
the issuance of such shares will be in compliance with the Securities Act of
1933, as amended, and any other laws applicable thereto, and the Company shall
be entitled to receive such other information, assurances, documents,
representations or warranties as it or its counsel may reasonably require with
respect to such compliance. Additionally, if deemed necessary by Company
counsel, appropriate restrictive legends may be placed on any certificate for
shares received by an optionee pursuant to the exercise of an Option and the
Company may cause stop transfer orders to be placed against such certificate(s).
The Committee may at any time impose any limitations upon the exercise of an
Option or the sale of the Common Stock issued upon exercise of an Option that,
in the Committee's discretion, are necessary or desirable in order to comply
with Section 16 of the Exchange Act and the rules and regulations thereunder.
(d) Nontransferability of Options. Options may not be transferred,
-----------------------------
assigned, pledged or hypothecated (whether by operation of law or otherwise)
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order, as defined by Section 414(p) of the Code,
Section 206(d)(3)(B) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder, and, during the lifetime of the
person to whom they are granted, may be exercised only by such person (or his or
her guardian or legal representative).
(e) Adjustment for Change in Common Stock. If the outstanding Common
-------------------------------------
Stock is hereafter changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination, exchange of
shares, or the like, or dividends payable in shares of the Common Stock or other
securities or assets, an appropriate adjustment shall be made by the Committee
in the aggregate number of shares
<PAGE>
- 4 -
available under the Plan, in the number of shares subject to Options to be
granted thereafter pursuant to Paragraphs 4(a) and 4(b), and in the number of
shares and price per share subject to outstanding Options. Any adjustment in
the number of shares shall apply proportionately to only the unexercised portion
of any Option granted hereunder. If fractions of a share would result from any
such adjustment, the adjustment shall be revised to the next higher whole number
of shares.
(f) Change in Control of the Company. All unvested Options then
--------------------------------
outstanding under this Plan shall automatically become exercisable in full upon
the occurrence of any of the following events, each of which shall be deemed a
"change in control" of the Company: (1) a merger or other business combination
approved by the Company's shareholders; (2) the acquisition by a third party of
more than 50% of the total outstanding shares of the Company's Common Stock; or
(3) a change in the composition of the Company's Board of Directors such that a
majority of the Board consists of Directors other than the incumbent Directors
and the nominees of the incumbent Directors; provided, however, that in all
--------
events the Committee shall have the discretion to determine that a particular
transaction does not constitute a "change in control" for purposes of this
subparagraph. In the event of a change in control of the Company, the Options
may be assumed by the successor corporation or a parent of such successor
corporation or substantially equivalent options may be substituted by the
successor corporation or a parent of such successor corporation. However, if
the successor corporation does not assume the Options or substitute options,
then, if not exercised prior to the effective date of the change in control of
the Company, the value of each unexercised Option, as measured by (i) the
difference between the Fair Market Value of the Company's Common Stock as of the
date that is five trading days prior to the effective date of the change in
control less the Option Price of each Option, multiplied by (ii) the number of
shares of Common Stock covered by each such Option, shall be paid in cash to the
Option holder no later than the effective date of the change in control of the
Company, and each such Option shall thereupon be cancelled.
(g) Liquidation or Dissolution. In the event of the liquidation or
--------------------------
dissolution of the Company, the Options shall terminate immediately prior to the
liquidation or dissolution if not exercised prior to such date.
(h) Taxes. The Company shall, to the extent it is required to do so
-----
under applicable federal, state or local rules or regulations, withhold (or
secure payment from the Non-Employee Director in lieu of withholding) the amount
of all withholding and other taxes due with respect to the exercise of any
Options under this Plan, and the Company may defer such issuance unless
indemnified to its satisfaction. To satisfy such obligations, the Company shall
withhold that number of shares issuable pursuant to the exercise of any Option
hereunder as shall have a Fair Market Value (as of the date of exercise) equal
to the amounts required to be withheld, unless the Non-Employee Director shall
first pay the Company the amount of such obligations in cash or by surrendering
to the Company previously-acquired shares of Common Stock that have such a Fair
Market Value.
<PAGE>
- 5 -
6. Administration. This Plan shall be administered by the
--------------
Committee. It is intended that the Plan will constitute a "formula plan" within
the meaning of Rule 16b-3 under the Exchange Act. The provisions of the Plan
and of any Option agreement made pursuant to the Plan will be interpreted and
applied accordingly.
The Committee shall have full power to construe and interpret this
Plan and Options granted hereunder, to establish and amend rules for its
administration and to correct any defect or omission and to reconcile any
inconsistency in this Plan or in any Option granted hereunder to the extent the
Committee deems desirable to carry this Plan or any Option granted hereunder
into effect. All actions taken and interpretations and determinations made by
the Committee in good faith shall be final and binding upon the Company, all
Non-Employee Directors who have received grants under the Plan and all other
interested parties.
7. Termination and Amendment of Plan. At any time the Committee
---------------------------------
may suspend or terminate this Plan and make such changes or amendments as it
deems advisable; provided, however, that all such changes and amendments are
--------
made in compliance with Rule 16b-3 of the Exchange Act (as such rule may be
amended from time to time); that no such change or amendment shall be effective
without the prior approval of the shareholders of the Company that would: (i)
except as provided in Paragraph 5(e) hereof, increase the maximum number of
Shares for which Options may be granted under this Plan; (ii) change the
eligibility requirements for those entitled to participate in this Plan; or
(iii) materially increase the benefits accruing to participants in this Plan;
and further provided, that Paragraphs 4, 5(a) and 5(b) shall not be amended more
----------------
than once every six months (other than to comply with the federal securities
laws, the Code, or ERISA). No Options shall be granted hereunder after January
19, 2006. Notwithstanding any termination of the Plan, the terms of the Plan
shall continue to apply to Options granted prior to any such termination.
8. Notices. Notices required or permitted to be made under the
-------
Plan shall be sufficiently made if personally delivered to the Non-Employee
Director or sent by regular mail addressed (a) to the Non-Employee Director's
address as set forth in the books and records of the Company, or (b) to the
Company or the Committee at the principal office of the Company clearly marked
"Attention: Executive Compensation Committee."
9. Effective Date of Plan. The Plan shall be effective as of
----------------------
January 19, 1996, provided that the adoption of the Plan shall have been
approved by the Company's shareholders at the Company's 1996 Annual Meeting. If
the Plan is not so approved by the Company's shareholders, the Plan and all
Options granted hereunder shall automatically terminate.
10. Governing Law. The Plan, all Options granted hereunder and
-------------
all actions taken hereunder shall be governed by and construed in accordance
with the laws of the State of Delaware.
<PAGE>
Exhibit 99.2
December 29, 1995
Francis D.R. Coleman, Esq.
7132 Gillis Road
Victor, New York 14564
Dear Mr. Coleman:
Upon your acceptance of the terms and conditions set forth in this
Release and Settlement Agreement ("Agreement"), ACC Corp. ("ACC") will provide
you with the specified consideration. For purposes of this Agreement, "ACC"
shall also mean and include any subsidiary or affiliate of ACC Corp.
Your signing of this Agreement is an acknowledgment that pursuant to
this Agreement, you have received, or will receive, benefits from ACC to which
you were not otherwise entitled, the receipt and sufficiency of which you
acknowledge by signing this Agreement. This Agreement is intended to settle
fully and finally all claims, controversies, disputes and other matters between
you and ACC, its officers, directors, employees and agents.
Effective as of December 21, 1995, your employment with ACC ended.
You will thereafter no longer be authorized to act on behalf of ACC or to incur
any expenses or obligations in the name of ACC. As of December 21, 1995, no
other payment will be due to you from ACC, except as expressly provided for in
this Agreement.
1. SEVERANCE PACKAGE:
------------------
(a) SALARY:
-------
In consideration of your release, your covenants and the other
terms of this Agreement, ACC will, upon the effective date of this
Agreement, pay you the sum of $165,000, representing one year's salary
of $130,000 plus an additional sum of $35,000. ACC will pay $9,500 of
the foregoing amount into your account under ACC's 401(k) Plan. The
balance will be paid directly to you.
This payment is and shall be treated as severance pay, and shall be
paid in the same manner and in the same amounts as the salary that you
received for the year immediately preceding the termination of your
employment. ACC shall withhold from your severance pay federal,
state, local and FICA taxes. No
<PAGE>
- 2 -
taxes, except FICA, will be withheld with respect to the $9,500
contributed to your 401(k) account. This severance pay includes all
your accrued vacation pay.
(b) BENEFITS:
---------
ACC will make an additional contribution to your 401(k) account in
the amount of $3,900 (3% of your total base salary of $130,000).
In lieu of your health/dental insurance, cellular telephone
allowance, long distance allowance, officer reimbursement allowance
and all other employee benefits of any nature, including disability
insurance, ACC shall pay to you the sum of $13,800. Said payment
shall be reported to the applicable taxing authorities as compensation
to the same extent as it had been previously (with $6,100 being the
total cost for one year of COBRA coverage equivalent to the
health/dental coverage you now have, $2,400 cellular telephone
allowance, $300 long distance allowance and $5,000 officer
reimbursement allowance and compensation for disability insurance
premiums).
(c) SUPPLEMENTARY BENEFITS:
-----------------------
In addition to the foregoing benefits set forth in subparagraph (b)
above, you will be entitled to the following benefits without regard
to any new employment you may obtain:
i. Outplacement Allowance of $15,000, payable upon the effective
date of this Agreement
ii. Annual incentive plan - 1995 - $52,000.00 payable upon the
effective date of this Agreement
iii. Transfer of Company Car (Volvo) - Prior to 12/27/96, the
Company will buy out the existing lease and purchase the 1995
Volvo company car for you. Until such time as that buy-out is
accomplished, ACC will continue to pay the lease, insurance and
service payments in place at this time. The decision as to when
prior to 12/27/96 the buy-out will be accomplished shall rest
exclusively with ACC
iv. Accelerated vesting of all current unvested stock options that
would otherwise have vested through 1/3/97. These options will
vest as of the effective date of this Agreement and you may
exercise them at any time through March 31, 1996. (See attached
Schedule "A.")
(d) ENTIRE PACKAGE:
---------------
You acknowledge and represent that you have received or will
receive pursuant to this Agreement all compensation, both monetary and
<PAGE>
- 3 -
non-monetary, including but not limited to wages, bonuses, benefits,
overtime pay, supplements, vacation and holiday pay, sick pay,
disability pay and all other sums of money, stock options, stock
appreciation rights or similar rights to which you are entitled from
ACC through December 21, 1995, except as may be specifically set forth
or provided for in this Agreement. This Agreement shall not operate
to waive any benefits due to you as a result of retirement, the New
York Workers' Compensation Law and the New York Unemployment Insurance
Law. You will also be reimbursed for authorized expenses incurred
before December 21, 1995.
(e) PAYMENT:
--------
All payments required by ACC shall be made on the eighth (8th) day
(or first business day thereafter) after your execution and delivery
of this Agreement.
2. RETURN OF PROPERTY:
-------------------
Upon your receipt of the sums set forth in paragraph 1(a) above, you will
return all property and materials which belong to ACC (whether or not such
materials were prepared by ACC) and which are in your possession or over
which you exercise any control, including, but not limited to all
proprietary documents, data, records, computer hardware, computer software
and documentation, notebooks, or other information pertaining to ACC's
business and operations, and you agree not to keep copies thereof in any
form. ACC will make available such non-confidential records and documents
as you may reasonably request from time to time as may be necessary for you
to file any tax returns, applications, or reports or to respond to any
litigation in which you may be involved against third parties.
Notwithstanding the foregoing, for the sum of $1.00 you may purchase from
ACC your (i) personal computer equipment; (ii) Casio and software; and
(iii) dictaphone.
3. FUTURE CONDUCT:
---------------
(a) FUTURE CONDUCT:
---------------
Except to the extent required by law, you agree that you will not,
at any time after the date hereof, disclose to any person,
corporation, partnership or other entity whatsoever any non-public
business plans, procedures, pricing and marketing structure and
strategies, programs, forms, confidential information, trade secrets
or other data and information relating to ACC learned by you at any
time during your employment with ACC.
<PAGE>
- 4 -
(b) CONFIDENTIALITY:
----------------
Except to the extent required by law, you understand and agree that
as a condition of the payment and agreements described in this
Agreement, the terms of this Agreement shall be kept confidential by
you, except that you may disclose the terms of this Agreement to your
spouse, attorney and/or accountant if he or she also agrees to keep
this Agreement and its terms confidential.
(c) DISPARAGEMENT:
--------------
You and ACC agree to refrain from making any statements, whether
verbal or written, which disparage you or ACC or any subsidiary or
affiliate thereof, its employees, management, products, policies or
services.
(d) RE-EMPLOYMENT:
--------------
You covenant and agree at any time after the date of this
Agreement, not to apply for or otherwise seek employment with ACC or
any wholly-owned subsidiary or affiliate thereof and do hereby waive
any and all rights you may have to do so.
4. MISCELLANEOUS:
--------------
(a) Notwithstanding the release provided in paragraphs 5(a) and (b)
below, if either party breaches this Agreement, the other party
retains all rights or remedies provided in law or in equity by reason
of said breach.
(b) You acknowledge that this is our entire agreement and supersedes all
prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with
respect thereto, including any rights of the parties under the
Employment Continuation Incentive Agreement in effect on the date of
your termination, but does not supersede the agreements between you
and ACC concerning indemnification. You further acknowledge that the
headings in this Agreement are for convenience only and have no
bearing on the meaning of this Agreement.
(c) This Agreement shall not in any way be construed as an admission by
ACC that it or its officers, directors, employees or advisors have
acted wrongfully with respect to you or that you have any rights
whatsoever against ACC, its officers, directors employees, or
advisors. Similarly, this Agreement shall not in any way be construed
as an admission by you of any wrongdoing.
<PAGE>
- 5 -
(d) You have consulted with the law firm of Sullivan & Cromwell, New
York, New York, regarding this Agreement before signing it.
(e) You have carefully read and fully understand all the terms of this
Agreement and are freely and voluntarily entering into this
Agreement without coercion. In addition, you have been given a draft
of this Agreement and will have at least twenty-one (21) days to
consider its terms although you may sign it at any time during the
21 day period. You have carefully considered the terms set forth in
this Agreement. You understand that this Agreement may be revoked by
you within seven (7) days of its execution by you and that this
Agreement shall not become effective or enforceable until this
revocation period has passed.
5. RELEASES:
---------
(a) As a material inducement to ACC to enter into this Agreement and in
consideration for the above, you agree to forever release, acquit,
covenant not to sue and discharge ACC, and its subsidiaries,
affiliates, employees, officers, representatives, attorneys,
directors and shareholders and their predecessors, successors and
assigns from and against any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies,
damages, actions, causes of action, suits, rights, demands, costs,
losses, debts and expenses of any nature whatsoever, known or
unknown, suspected or unsuspected and all claims for attorney's
fees, costs, disbursements, and expert witness fees which you now
have, own or hold or claim to have, own or hold or which you owned
or claimed to have owned or held, including, but not limited to
those relating to or arising out of:
(1) your employment with ACC;
(2) your termination of employment with ACC;
(3) claims relating to wages, payments and benefits except as
excluded herein;
(4) the New York Labor Law, the New York State Human Rights Law,
the New York State Lawful Activities Act (section 201-d of the
New York Labor Law), Section 740 of the New York Labor Law
("Whistleblower Statute"), Title VII of the Civil Rights Act of
1964, Title IX of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Equal Pay Act, the Employee Retirement
Income Security Act of 1974, the Age Discrimination in
Employment Act of 1967, as amended, the Older Workers Benefit
Protection Act of 1990, the Rehabilitation Act of 1973, the
Fair Labor Standards Act, the Occupational Safety and
<PAGE>
- 6 -
Health Act, the Americans with Disabilities Act, Federal
Executive Order 11246 and all amendments thereto, the Family and
Medical Leave Act, New York Civil Rights Law (S)(S) 70-a, and all
regulations pertaining to all such laws;
(5) any other federal, state or local law, rule or regulation; and
(6) all tort claims and all claims of wrongful or unjust
termination, defamation, prima facie tort, breach of or
interference with contract, promissory estoppel, intentional
infliction of emotional distress or breach of any express or
implied covenant of good faith and fair dealings.
You agree that ACC shall not have any obligation to you other than as set forth
in this Agreement or as set forth in any employee benefit plan in which you are
a participant for any other monies or benefits including, but not limited to,
salary, benefits, bonus, or vacation or any obligation set forth in any
agreement of employment or other agreement with ACC, whether such agreement
shall be express or implied. Provided, however, that this release shall not
affect or diminish your rights, as a matter of law or contract, to
indemnification from ACC.
(b) As a material inducement to you to enter into this Agreement and in
consideration for the above, ACC and its subsidiaries and affiliates
agree to forever release, acquit, covenant not to sue and discharge
you, and your predecessors, successors and assigns from and against
any and all charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses of
any nature whatsoever, known or unknown, suspected or unsuspected
and all claims for attorney's fees, costs, disbursements, and expert
witness fees which ACC now has, owns or holds or claims to have, own
or hold or which ACC owned or claimed to have owned or held,
including, but not limited to those relating to or arising out of:
(1) your employment with ACC;
(2) your termination of employment with ACC;
(3) claims relating to wages, payments and benefits except as
excluded herein;
(4) the New York Labor Law, the New York State Human Rights Law,
the New York State Lawful Activities Act (section 201-d of the
New York Labor Law), Section 740 of the New York Labor Law
("Whistleblower Statute"), Title VII of the Civil Rights Act of
1964, Title IX of the
<PAGE>
- 7 -
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal
Pay Act, the Employee Retirement Income Security Act of 1974,
the Age Discrimination in Employment Act of 1967, as amended, the
Older Workers Benefit Protection Act of 1990, the Rehabilitation
Act of 1973, the Fair Labor Standards Act, the Occupational
Safety and Health Act, the Americans with Disabilities Act,
Federal Executive Order 11246 and all amendments thereto, the
Family and Medical Leave Act, New York Civil Rights Law (S)(S)
70-a, and all regulations pertaining to all such laws;
(5) any other federal, state or local law, rule or regulation; and
(6) all tort claims and all claims of wrongful or unjust
termination, defamation, prima facie tort, breach of or
interference with contract, promissory estoppel, intentional
infliction of emotional distress or breach of any express or
implied covenant of good faith and fair dealings.
6. ERISA CONTINGENCIES/COMPLIANCE:
-------------------------------
(a) Nothing herein contained, and no action taken pursuant to this
Agreement by either party hereto, shall create, or be construed to
create, a trust of any kind, or a fiduciary relationship between ACC
and you or any other employee except as provided below.
(b) In the event that this Agreement is deemed to be a welfare benefit
plan under the Employee Retirement Income Security Act of 1974
("ERISA"), then:
(1) ACC is hereby designated as the named fiduciary under the
Agreement. The named fiduciary shall have authority to control
and manage the operation and administration of the Agreement,
and it shall be responsible for establishing and carrying out
any funding policy and method consistent with the objectives of
the Agreement;
(2) ACC shall make all determinations as to eligibility rights and
benefits under the Agreement as to any individual other than
you. Any decision by ACC denying a claim by an employee for
benefits under the Agreement shall be stated in writing and
delivered or mailed to such employee. Such decision shall set
forth the specific reasons for the denial, written to the best
of ACC's ability in a manner that may be understood without
legal counsel. In addition, ACC shall afford a reasonable
opportunity to such employee for a full and fair review of the
decision denying such claims;
<PAGE>
- 8 -
(3) Subject to the foregoing, ACC shall have full power and
authority to interpret, construe and administer the Agreement
as it may apply to individuals other than you. The
interpretation and construction of the Agreement by ACC, and
any action taken under it, shall be binding and conclusive upon
all parties in interest other than you. No officer, director,
or employee of ACC shall, in any event, be liable to any person
for any action taken or omitted to be taken in connection with
the interpretation, construction or administration of the
Agreement with respect to individuals other than you, so long
as such action or omission to act is made in good faith.
(4) All parties to the Agreement or claiming any interest under the
Agreement other than you shall be bound by such amendments or
termination.
(5) Provided that no interpretation, amendment or termination of
this Agreement shall reduce or affect in any way your rights
hereunder, ACC shall have the right to terminate any plan
created by this Agreement at any time as it may apply to anyone
other than you.
Please review this Agreement carefully. Please consult with your
attorney, if you wish. We would like it returned to us signed by no later than
the 22nd day after it is provided to you. If you do not return it to us,
signed, by that date, we shall assume that you have elected not to accept the
terms and conditions of this Agreement.
Your signature below indicates your acceptance of this Agreement and
shall cause this Agreement to be binding upon you, your heirs, representatives
and assigns. Your signature shall also signify that you have read and
understood the Agreement, have reviewed it with your attorney or have elected
not to do so.
Very truly yours,
ACC Corp.
By: /s/ David K. Laniak
------------------------
Accepted and Agreed to on this
29th day of December, 1995.
/s/ Francis D.R. Coleman
- ------------------------------
Francis D.R. Coleman
<PAGE>
- 9 -
Schedule "A"
------------
The following schedule sets forth those options that currently are unvested but
that, as of the effective date of this Agreement, will be vested:
1996 Stock Option Vesting Schedule
----------------------------------
<TABLE>
<CAPTION>
Shares Granted Grant Date Grant Price 96 Vesting
<S> <C> <C> <C>
12,300 01/03/95 14.75 3,075
7,500 06/03/92 10.9167 1,875
7,500 11/30/92 18.75 1,875
25,000 08/11/94 14.75 6,250
------
13,075
97 Vesting
12,300 01/03/95 14.75 3,075
------
16,150
</TABLE>
<PAGE>
Exhibit 99.3
SCHEDULE OF
EMPLOYMENT CONTINUATION INCENTIVE AGREEMENTS
--------------------------------------------
ACC Corp. has executed or will execute Employment Continuation Incentive
Agreements ("Agreements") with a number of its officers. Some officers have
executed Agreements with a one year term, while others have executed Agreements
with a six month term. The provisions of these two Agreements differ only
with respect to the term which mentioned in paragraphs 2, 4, 6, 9 and 13. The
Agreement with a term for one year is attached hereto. The selection of officers
to receive Agreements with a one year term are based on several criteria: (a)
minimum of one year service; (b) performance is judged to be above expectations;
(c) loss of officer introduces high risk to the organization. All other officers
not meeting all three criteria were or will be extended the Agreement with a six
month term./1/ The schedule that follows lists the name and title of each
officer who has executed an Agreement, the type of Agreement executed and the
date when the Agreement was executed.
<TABLE>
<CAPTION>
ONE YEAR AGREEMENTS:
- --------------------
TITLE NAME DATE EXECUTED
----- ---- -------------
<S> <C> <C>
Chief Operating Officer Arunas A. Chesonis 9/20/89
Chief Financial Officer Michael R. Daley 7/15/92
President USLD Michael L. LaFrance 2/24/94
President TelEnterprises Steve Dubinik 8/4/94
President UK Ltd. Christopher Bantoft 7/7/95
V.P. Operations TelEnterprises Maggs Barrett 1/1/94
Finance Director UK Ltd. Raj Raithatha 7/7/95
General Counsel UK Ltd. Michael Taylor 7/3/95
Commercial Svcs. Director - UK Ltd. Mae Squier - Dow 7/27/92
Corporate General Counsel Daniel Venuti 1/26/94
SIX MONTH AGREEMENTS:
- ---------------------
TITLE NAME DATE EXECUTED
----- ---- -------------
Controller Sharon L. Barnes 10/12/94
V.P. Human Resources George H. Murray 8/22/94
V.P. Finance - ACC Corp. John J. Zimmer 7/28/92
V.P. Sales & Marketing - USLD Jack Baron unexecuted as of this date
V.P. Carrier Sales Tab Hebert 11/10/94
V.P. Finance - USLD Michael Tubre unexecuted as of this date
V.P. Operations Alex Volta unexecuted as of this date
V.P. & General Manager - ANTC Richard Ottalagana unexecuted as of this date
Controller - TelEnterprises Felicity Guest 8/4/94
V.P. Sales - TelEnterprises Stuart MacMillan 1/96
Corporate Counsel - TelEnterprises Barry Singer 4/28/94
Director of Marketing John Bush 1/96
Director of Facility Planning Joe LaBell 8/21/92
Director of Engineering & Operations Richard Padulo 8/19/92
Assistant Corporate Counsel Sarah Ayer-Gudell 7/23/92
Assistant to the Chairman & CEO Amy L. Cave 7/14/92
Operations Director - UK Ltd. David Conner 4/5/95
</TABLE>
- --------------------
/1/ Further, although there are slight variations to these agreements by
country (i.e., Canada and the United Kingdom), the basic terms of these
agreements are the same as those executed in the United States and attached
hereto.
<PAGE>
EMPLOYMENT CONTINUATION
INCENTIVE AGREEMENT
(ONE YEAR)
AGREEMENT made by and between ACC CORP., with its principal executive
offices at 400 West Avenue, Rochester, New York 14611, and
________________________, residing at
____________________________________________________, ("Employee").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Employee is either commencing employment or has been a key
employee of ACC Corp. and/or of one or more of its subsidiaries; and
WHEREAS, the business environment in which ACC Corp. and its
subsidiaries operate is an extremely competitive and constantly changing one,
often involving mergers, acquisitions, hostile takeovers and corporate
restructurings that can occur with little notice; and
WHEREAS, in view of this business environment and in view of the
valuable contributions that the Employee makes or will make to the business of
the Company (as defined below), ACC Corp. desires, through this Agreement, to
provide some measure of security to the Employee as an incentive to the Employee
to become or remain a key employee of the Company (as defined below) and to
labor diligently on its behalf;
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
<PAGE>
- 2 -
1. DEFINITIONS. The following terms shall have the following
-----------
meanings in this Agreement:
(a) "Acquiring Entity" shall mean any entity, whether a corporation,
----------------
partnership, joint venture, etc., that, as a result of a Change In Control,
either directly or indirectly has effective control over the business plans,
direction and operations of ACC Corp. This term shall also include any
subsidiaries or related entities over which the Acquiring Entity has control,
and shall also include any entity that, within one year following a Change In
Control of ACC Corp., acquires control over the entity that acquired control of
ACC Corp.
(b) "Benefits" shall mean any and all employee benefits, both taxable
--------
and non-taxable, including but not limited to: life, health and dental
insurance; automobile allowance or leased automobile; cellular telephone;
officer's reimbursement fund; relocation reimbursement fund; long distance
calling allowance, payment of professional association dues, fees, and licenses;
401(k) Plan matching contributions, or the equivalent dollar value of each such
employee benefit. If required by the context, Benefits shall also mean the
value or cost to the Company of such Benefits. The term "Benefits" does not
include any amounts deemed Compensation, nor the continuation of any disability,
health, dental or life insurance coverage beyond the terms of the policies for
such insurance as the same may exist on the effective date of an Event of
Termination.
(c) "Change In Control" shall mean a change in control of ACC Corp. 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 Securities Exchange Act of
1934 as in effect on the
<PAGE>
- 3 -
date of this Agreement or, if in the future Item 6(e) is no longer in effect,
any regulations issued by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934 which serve similar purposes; provided that,
without limitation, a Change In Control shall be deemed to have occurred if and
when: (x) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934), other than the Employee, is or becomes a
beneficial owner, directly or indirectly, of securities of ACC Corp.
representing a majority of the combined voting power of ACC Corp.'s then
outstanding securities (excluding, however, the transfer of any shares
beneficially owned by the Employee); or (y) individuals who were members of the
Board of Directors of ACC Corp. immediately prior to a meeting of the
shareholders of ACC Corp. involving a contest for the election of Directors
shall not constitute a majority of the Board of Directors following such
election. The effective date of any such Change in Control shall be the closing
date of the transaction that results in the Change in Control. The terms of
this subparagraph (c) shall also apply to any change in control of any entity
that acquires control of an Acquiring Entity within one year following the
acquisition by the Acquiring Entity of control of ACC Corp.
(d) "Company" shall mean ACC Corp. and/or any of its subsidiaries and/or
-------
affiliates as the same may exist from time to time anywhere in the world,
regardless of the laws under which incorporated.
(e) "Compensation" shall mean the Employee's salary, accrued bonuses, if
------------
any, and any stock options held by or awards granted to Employee under the
Company's
<PAGE>
- 4 -
Employee Long-Term Incentive Plan or other stock option or similar Company plan
in effect from time to time, but shall exclude any Benefits.
(f) "Disability" shall mean the Employee's total inability, due to a
----------
mental or physical illness, incapacity or injury, to render his/her full-time
services to the Company for any period of 60 consecutive days or, if longer,
such period of time as is necessary for the Employee to be deemed "totally
disabled" within the meaning of any long-term disability insurance provided by
the Company and covering the Employee.
(g) "Event of Termination" shall mean the termination of Employee's
--------------------
employment, whether due to a Termination For Cause, a Termination Without Cause,
a Change In Control or a Voluntary Termination of Employment by Employee, such
that Employee is no longer employed by the Company.
(h) "Termination For Cause" shall mean that the Company, in its sole
---------------------
discretion, terminates Employee's employment due to Employee's personal
dishonesty (in relation to his/her employment and duties with the Company),
incompetence, willful misconduct, breach of a fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, regulation or final cease and desist order, the penalty for which
constitutes a felony under applicable law; or any breach of Paragraphs 6 or 7 of
this Agreement. For purposes of this paragraph 1(h), no act or failure to act
on Employee's part shall be considered "intentionally done" or "willfully done"
unless done or omitted to be done by Employee in bad faith and without
reasonable belief that such act or omission was in the best interests of the
Company. Notwithstanding the foregoing, Employee shall not be deemed to have
been Terminated For Cause unless and
<PAGE>
- 5 -
until there shall have been delivered to him/her a copy of a resolution duly
adopted by the affirmative vote of a majority of the entire Board of Directors
of ACC Corp. (or, in the event that Employee is a Director of ACC Corp., then by
the affirmative vote of a majority of the non-employee Directors of ACC Corp.
then in office) at a meeting of the ACC Corp. Board of Directors duly called and
held for that purpose (after reasonable notice to Employee and an opportunity
for Employee, together with his/her counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, Employee was guilty of
conduct set forth in this paragraph 1(h) and specifying the particulars thereof
in reasonable detail.
(i) "Termination Without Cause" shall mean that the Company, in its sole
-------------------------
discretion, terminates the Employee's employment not for any reason that would
constitute a Termination For Cause, nor as a result of any Change In Control,
nor as a result of a Voluntary Termination of Employment by the Employee.
(j) "Voluntary Termination of Employment by the Employee" shall mean
---------------------------------------------------
that the Employee, at his/her volition, leaves his/her employment with the
Company not under a circumstance involving a Termination Without Cause, a
Termination For Cause, nor a Change In Control.
2. VOLUNTARY TERMINATION OF EMPLOYMENT BY EMPLOYEE. In the event
-----------------------------------------------
of a Voluntary Termination of Employment by the Employee, he/she shall not be
entitled to receive any payments hereunder. Under such circumstances, the
Employee shall only be entitled to receive: (a) his/her accrued but unpaid
salary and any other nonforfeitable Compensation and Benefits accrued as of the
effective date of such Event of Termination; and (b) for the one year period
following the effective date of Employee's Voluntary
<PAGE>
- 6 -
Termination of Employment, Employee will be deemed to be an "employee" of the
Company for purposes of any stock option or similar plans of the Company then in
effect, and any stock options that Employee holds under any such plan(s) on the
effective date of his/her Voluntary Termination of Employment will continue to
vest and be exercisable in accordance with their terms for such one year period.
3. TERMINATION OF EMPLOYMENT FOR CAUSE. In the event that the
-----------------------------------
Employee's employment is Terminated For Cause, he/she shall not be entitled to
receive any payments hereunder. Under these circumstances, the Employee shall
only be entitled to receive his/her accrued but unpaid salary and any other
nonforfeitable Compensation and Benefits accrued as of the effective date of
such Event of Termination.
4. TERMINATION OF EMPLOYEE'S EMPLOYMENT WITHOUT CAUSE. In the
--------------------------------------------------
event that the Company terminates Employee's employment Without Cause, the
Employee shall be entitled to receive his/her then-current Compensation and
Benefits for one year following the effective date of such Event of Termination;
provided, however, that the Employee is and at all times hereunder remains in
- --------
compliance with Paragraph 7 hereof. For purposes of this Paragraph 4, the term
"Compensation" shall also include the payment (in a lump sum at the end of such
year or in equal monthly installments over the course of the next succeeding
year, at the Company's election and in either case without interest) of the pro-
rated amount of the bonus, if any, that Employee would receive for the calendar
year in which this Event of Termination occurs as determined under the Company's
Annual Incentive Plan as established by the Executive Compensation Committee of
the Company's Board of Directors in advance for that calendar year; such amount
to be pro-rated by multiplying the
<PAGE>
- 7 -
amount of such bonus for the full year by a fraction the numerator of which is
the number of months worked by the Employee during that calendar year through
the effective date of this Event of Termination and the denominator of which is
12. Such payments shall be made on the Company's normal payroll schedule,
except that at any time during such one year period, Employee may give notice to
- -----------
the Company or an Acquiring Entity, as the case may be, requesting payment of
the remaining amount of his/her Compensation and Benefits in a lump sum payment,
which request the Company or the Acquiring Entity may, at their sole discretion,
agree to or reject. If this request is agreed to by the Company or the
Acquiring Entity, as the case may be, then such lump sum payment shall be paid
to Employee within 30 days following receipt of such notice, subject to the
Company's receipt of an executed release from the Employee, substantially in the
form attached as Exhibit A hereto, prior to the payment of any such lump sum
payment. In any event, should Employee commence other employment within such
one year period, he/she shall promptly notify the Company or the Acquiring
Entity of such event and the Company or the Acquiring Entity may at its option,
within 30 days following receipt of such notice, pay the Employee the remaining
amount of his/her Compensation and Benefits in a lump sum payment. If the
Employee's employment is Terminated Without Cause at any time within one year
following a Change in Control, such termination shall automatically be deemed to
be a Termination in the Event of a Change in Control, and the Employee shall be
entitled to all rights set forth in Paragraph 5 hereof. If Employee should
commence other employment with an entity that the Company deems a competitor as
described in subparagraph 6(c) below, then the Company shall have the right to
stop further payment of any and all Compensation and Benefits that may be
<PAGE>
- 8 -
payable to the Employee hereunder. Further, in the event of Employee's
Termination Without Cause, for so long as Employee is receiving payments of
his/her Compensation and Benefits under the terms of this Paragraph 4, Employee
will continue to be deemed an "employee" of the Company in all respects (e.g.,
for life and health insurance, income tax and other such purposes) and any
options that Employee holds on the effective date of his/her Termination Without
Cause under any stock option plan of the Company will continue to vest and be
exercisable in accordance with their terms. At such time as all payments under
this Paragraph cease for whatever reason, Employee will no longer be deemed an
"employee" of the Company for any such purposes.
5. TERMINATION OF EMPLOYEE'S EMPLOYMENT IN THE EVENT OF A CHANGE
-------------------------------------------------------------
IN CONTROL. If, in connection with preparing for, or within one year following,
- ----------
a Change In Control: (i) the Employee's employment with the Company or the
Acquiring Entity is Terminated Without Cause by the Company or the Acquiring
Entity; or (ii) the Employee resigns his/her employment with the Company or with
the Acquiring Entity upon the occurrence of any of the following:
(a) A significant change in the nature or scope of Employee's employment
duties or authority including, but not limited to, without Employee's prior
written consent assigning Employee duties inconsistent with his/her status
within the Company or substantially altering Employee's duties and
responsibilities so as to render his/her position to be of less dignity,
responsibility or scope;
<PAGE>
- 9 -
(b) Employee being required by the Company or the Acquiring Entity, as a
condition of employment, to take up permanent residence outside of or to
spend more than 25% of his/her time in any location that is more than a 50
mile radius from the Rochester, New York metropolitan area (except for
required travel on Company business to an extent substantially consistent
with Employee's customary business travel obligations);
(c) A reduction in Employee's Compensation or Benefits as in effect on
the execution date hereof or as the same may be increased from time to
time, excluding, however, (i) reductions in bonuses paid from year to year
when such bonuses are based upon objective performance criteria (e.g.,
----
increases in earnings per share, return on equity, etc.) established in
advance by the Board of Directors or Executive Compensation or comparable
Committee of the Board of ACC Corp. or an Acquiring Entity, as the case may
be; and (ii) proportional across-the-board Compensation or Benefits
reductions similarly affecting all executives and/or key employees of the
Company or the Acquiring Entity, as the case may be; provided, however,
that in no event shall Employee's Compensation be reduced below its current
annual amount as in effect on the execution date hereof without Employee's
prior written consent;
(d) Failure to grant Employee an annual salary increase reasonably
necessary to maintain such salary as comparable to salaries
<PAGE>
- 10 -
of key employees holding positions equivalent to Employee's in the
industry in which the Company's then-principal business activity is
conducted;
(e) Failure by the Company or an Acquiring Entity, as the case may be,
to continue in effect any compensation plan, program or arrangement in
which Employee then participates unless an equitable arrangement reasonably
acceptable to Employee and embodied in an ongoing substitute or alternative
plan, program or arrangement has been made with respect to such plan, or
the failure to continue Employee's participation therein;
(f) Any material reduction by the Company or an Acquiring Entity, as the
case may be, of any of the Benefits enjoyed by Employee under any of the
Company's pension, retirement, profit sharing, savings, life insurance,
medical, health and accident, disability or other employee benefit plans,
programs or arrangements as in effect from time to time, the taking of any
action by the Company or an Acquiring Entity, as the case may be, that
would directly or indirectly materially reduce any of such Benefits or
deprive Employee of any such Benefits, or the failure by the Company or an
Acquiring Entity, as the case may be, to provide Employee with the number
of paid vacation days to which he/she is entitled on the basis of years of
service with the Company in accordance with its normal vacation policy;
provided, however, that this subparagraph shall not apply to any
proportional across-the-board reduction or action similarly affecting all
<PAGE>
- 11 -
executives and/or key employees of the Company or an Acquiring Entity, as
the case may be;
(g) Failure of the Company to obtain a satisfactory agreement from any
Acquiring Entity to assume and agree to perform this Agreement;
then the Employee shall be entitled to receive his/her then-current Compensation
and Benefits as were in effect immediately prior to any such Change In Control
for one year following the effective date of such resignation or Termination
Without Cause; provided, however, that the Employee is and at all times
--------
hereunder remains in compliance with Paragraph 7 hereof. For purposes of this
Paragraph 5, the term "Compensation" shall also include the payment (in a lump
sum by the end of such year or in equal monthly installments over the course of
the next succeeding year, at Employee's election and in either case without
interest) of the amount of the bonus that Employee would receive for the full
calendar year in which this Event of Termination occurs based on the "Maximum"
amount of such bonus as determined under the Company's Annual Incentive Plan as
established by the Executive Compensation Committee of the Company's Board of
Directors in advance for that calendar year. Such payments shall be made on the
normal payroll schedule of the Company or the Acquiring Entity, as the case may
be, except that at any time during such one year period, Employee shall have the
-----------
right, upon notice to the Company or an Acquiring Entity, as the case may be, to
elect to be paid the remaining amount of his/her Compensation and Benefits in a
lump sum payment, which the Company or the Acquiring Entity must then pay to
Employee within 30 days following receipt of such notice, subject to receipt by
the Company or the Acquiring
<PAGE>
- 12 -
Entity of an executed release from the Employee, substantially in the form
attached as Exhibit A hereto, prior to the payment of such lump sum payment. In
no event shall the compensation to which the Employee is entitled under this
Paragraph be less than the greater of (i) Employee's then-current Compensation
and Benefits as were in effect immediately prior to the effective date of such
resignation or Termination Without Cause, or (ii) Employee's then-current
Compensation and Benefits as were in effect immediately prior to the date of the
Change In Control. Additionally, Employee shall be entitled to receive the same
treatment with respect to any options that he/she may hold under the ACC Corp.
Employee Long- Term Incentive Plan at the time that such a Change In Control
occurs as that accorded to other similarly situated key employees of the Company
regardless of whether they remain employees of the Company or the Acquiring
Entity or are deemed to be Terminated due to a Change In Control.
6. COVENANT NOT TO COMPETE. Employee hereby covenants and agrees
-----------------------
that, while employed by the Company during the term of this Agreement, and for
one year following a Termination For Cause or a Voluntary Termination of
Employment by the Employee:
(a) He/she will not, for himself/herself or on behalf of any other
person, firm, partnership or corporation call upon any customer of the Company
for the purpose of soliciting or providing to such customer any products or
services which are the same as or substantially similar to those provided to
customers by the Company. For purposes of this Agreement, "Customers of the
Company" shall include, but not be limited to, all customers
<PAGE>
- 13 -
contacted or solicited by the Company or the Employee within twelve months prior
to any termination of this Agreement;
(b) Employee will not, directly or through another person or entity, for
himself/herself or on behalf of any other person, firm, partnership or
corporation, directly or indirectly, seek to persuade any director, officer, or
employee of the Company to discontinue that individual's status or employment
with the Company; and
(c) Employee will not, directly or indirectly, alone or as an employee,
independent contractor of any type, partner, officer, director, creditor,
substantial (i.e., 5% or greater) stockholder or holder of any option or right
to become a substantial stockholder in any entity or organization, engage (i)
within the Company's principal geographic area(s) of operation or (ii) in
substantial and direct competition with any other business operation actively
conducted by the Company, in any business pertaining to the sale, distribution,
manufacture, marketing, production or provision of products or services similar
to or in competition with any products or services produced, designed,
manufactured, sold, distributed or rendered, as the case may be, by the Company;
nor for the same period of time, within the same areas and under the same
conditions as previously set forth, shall the Employee advance credit, lend
money, furnish quarters or give advice, directly or indirectly, to any person,
corporation or business entity of any kind (other than the Company) which is
engaged in any such business or operation, nor shall he/she, directly or
indirectly, ship or cause to be shipped or have any part in the shipping of such
products to any point within said areas for the purposes of resale; provided,
however, that nothing contained in this paragraph shall prevent the Employee
from investing in corporate securities which are traded on a
<PAGE>
- 14 -
recognized stock exchange. It shall not be a breach or a threat of a breach of
subparagraphs 6(b) or 6(c) of this Agreement for Employee to explore or seek
employment, including employment with a business of a type described in this
subparagraph, for him or herself.
(d) If any of the restrictions on competitive activities contained in
this Paragraph 6 shall for any reason be held by a court of competent
jurisdiction to be excessively broad as to duration, geographical scope,
activity or subject, such restrictions shall be construed so as to thereafter be
limited or reduced to be enforceable to the extent compatible with applicable
law as it shall then exist; it being understood that by the execution of this
Agreement the parties hereto regard such restrictions as reasonable and
compatible with their respective rights and expectations.
(e) Additionally, if any conduct prohibited by this Paragraph 6 is
approved by ACC Corp.'s Board of Directors, then such conduct shall not
constitute a breach of this Agreement.
7. TRADE SECRETS; NON DISPARAGEMENT. Except as may be required
--------------------------------
by his/her employment with the Company, the Employee will not at any time or in
any manner, directly or indirectly, divulge, disclose or communicate to any
person, firm, corporation, organization or entity any information concerning
matters affecting or relating to the services, marketing, contractual
relationships, long range plans, products, processes, formulas, inventions,
discoveries, devices or other business of the Company or of its customers. The
Employee will likewise hold inviolate and keep secret all knowledge or
information acquired by him/her concerning the names of the Company's customers,
their addresses, the prices the Company obtains or has obtained from them for
its goods or
<PAGE>
- 15 -
services, all knowledge or information acquired by him/her concerning the
products, formulas, processes, methods of manufacture and distribution and all
other trade secrets of such customers. In addition, the Employee shall make no
disclosure, directly or indirectly, of any financial information, contractual
relationships, policies, past or contemplated future actions or policies of the
Company, personnel matters, marketing or sales data, technical data or
specifications and written or oral communications of any sort of the Company or
any of its customers which have not previously been disclosed to the general
public with the Company's consent or without first obtaining the consent of the
Company for such disclosure. Upon the occurrence of any Event of Termination,
the Employee or his/her representatives shall immediately deliver to the Company
all notes, notebooks, letters, papers, drawings, memos, communications,
blueprints or other writings or data relating to the business of the Company or
its customers. Additionally, Employee shall not in any way publicly disparage
the Company at any time or he/she shall not be entitled to receive payment of
any further Compensation and Benefits otherwise payable hereunder. Likewise,
neither the Company nor any Acquiring Entity shall in any way publicly disparage
the Employee at any time. (For purposes of this Agreement, however, the
commencement of any legal proceedings involving matters such as Employee's
performance, conduct, etc., shall not constitute "disparagement.")
8. INJUNCTIVE RELIEF.
-----------------
(a) Because the Employee shall acquire by reason of his/her employment
and association with the Company an extensive knowledge of the Company's trade
secrets, customers, procedures, and other confidential information, the parties
hereto recognize that
<PAGE>
- 16 -
in the event of a breach or threat of breach by the Employee of the terms and
provisions contained in Paragraphs 6 or 7 hereof, compensation alone to the
Company would not be a adequate remedy for a breach of those terms and
provisions. Therefore, it is agreed that in the event of a breach or threat of a
breach of the provisions of Paragraphs 6 or 7 by the Employee, the Company shall
be entitled, in addition to (i) terminating further payment of any Compensation
and Benefits that may be payable to the Employee hereunder and (ii) provable
damages, to an immediate injunction from any court of competent jurisdiction
restraining the Employee from committing or continuing to commit a breach of
such provisions without the showing or proving of actual damages. Any
preliminary injunction or restraining order shall continue in full force and
effect until any and all disputes between the parties regarding this Agreement
have been finally resolved on the merits by settlement or by a court of law.
(b) In the event of a breach or threat of a breach of the provisions of
Paragraphs 6 or 7 by the Employee, the Company can, upon ten days' advance
notice to Employee, terminate further payment of any and all Compensation and
Benefits that may be payable to the Employee hereunder, regardless of whether
the Company seeks or obtains injunctive relief under subparagraph 8(a) above.
9. SPECIAL PROVISIONS IN EVENT OF DISABILITY OR DEATH.
--------------------------------------------------
(a) During the term hereof, in the event that the Employee becomes
Disabled as defined in this Agreement, but for meeting the requirement that such
a condition persist for a minimum of 60 consecutive days, then the Company
agrees that it will not, except in a situation constituting a Termination For
Cause, terminate the Employee's
<PAGE>
- 17 -
employment or otherwise act so as to deprive the Employee of his/her eligibility
to receive benefits under any Company-provided disability insurance policy. In
all such circumstances, however, the Company retains the right to Terminate the
Employee For Cause, at any time.
(b) If the Employee is Terminated Without Cause after he/she begins
receiving disability insurance payments under any Company-provided disability
insurance policy, then he/she shall also be entitled to receive the one year of
Compensation and Benefits payable in the event of a Termination Without Cause,
limited, however, to the net amount, if any, by which such termination payments,
- ------- -------
on a monthly basis, exceed the monthly benefits payable to the Employee under
such disability insurance policy.
(c) In the event that the Employee is Terminated Without Cause while
Disabled as described in subparagraph (b) above, or in the event that the
Employee dies during the term hereof, then the Employee or his/her estate, as
the case may be, shall be entitled to the following benefit. Upon the
occurrence of either such event, all unexercised stock options that the Employee
may hold on that date under ACC Corp.'s Employee Long-Term Incentive Plan shall
automatically be deemed fully exercisable for a period of one year following the
occurrence of such event, subject, however, to the original term of the option
grant(s), if shorter (the "Exercisability Period"). If at any time or from time
to time during this Exercisability Period the Employee or his/her estate, as the
case may be, desires to exercise any of such stock options, then he/she or
his/her estate shall so notify ACC Corp., stating specifically the number of
options being exercised, and shall comply with the other requirements of such
Plan in effecting such exercise(s).
<PAGE>
- 18 -
(d) The provisions of this Paragraph 9 shall not apply, except as
provided above in this Paragraph 9, in the event that any Event of Termination
under this Agreement shall first occur. Additionally, the Employee shall only
be entitled to receive the Benefits provided by this Paragraph 9 if he/she is
and at all times hereunder remains in compliance with Paragraphs 6 and 7 hereof.
10. SUPERSEDING OF OTHER OUTSTANDING EMPLOYMENT OR CONTINUATION
-----------------------------------------------------------
AGREEMENTS. Upon its execution, this Agreement shall be in full force and
- ----------
effect and shall automatically supersede any prior employment agreements or
prior Employment Continuation Incentive Agreements then in effect between the
Company and the Employee. Each party hereto also hereby waives and releases any
claims it may have against the other arising under any such agreement that is
superseded hereby. However, if the Employee is a party to an Indemnification
Agreement with ACC Corp., that agreement is unaffected by this Paragraph and
remains in full force and effect in accordance with its terms.
11. TERM. The term of this Agreement shall begin on the later to
----
occur of the date of execution hereof or the date on which the Employee
commences his/her full-time employment with the Company (the "Effective Date")
and shall terminate on the last day of the calendar month which is twelve
calendar months following the month in which the Effective Date falls, unless
further extended as follows: Commencing on the last day of the calendar month
next following the month in which the Effective Date falls, and on the last day
of each succeeding calendar month thereafter, the term of this Agreement shall
automatically be extended, without further action by either party hereto, for
one additional month unless one party provides the other with at least 30 days
notice that it does not wish to
<PAGE>
- 19 -
extend the term of this Agreement. In the event that such termination notice is
given, this Agreement shall then terminate on the last day of the calendar month
that is twelve calendar months following the date such notice is effective. The
undersigned Employee who is a party to this Agreement shall have the sole
discretion to deem a termination of this Agreement by the Company or an
Acquiring Entity, as the case may be, to constitute a Termination Without Cause
hereunder, unless all such Agreements with all key employees are collectively
and simultaneously terminated. No rights to receive any Compensation or
Benefits accrued under this Agreement shall be extinguished by its termination.
12. AUTOMATIC RESIGNATION. By signing this Agreement, the
---------------------
Employee specifically agrees that without further action on the part of either
party hereto, upon the occurrence of any Event of Termination hereunder, the
Employee shall automatically be deemed to have resigned as an officer and
director of ACC Corp. and all of its subsidiaries and affiliates.
13. SURVIVAL. The provisions of Paragraph 6, Covenant Not To
-------- ---------------
Compete, shall survive for one year following any Termination For Cause or
- -------
Voluntary Termination of Employment by the Employee; the provisions of Paragraph
7, Trade Secrets, shall indefinitely survive the termination of this Agreement,
-------------
and the provisions of Paragraphs 8, Injunctive Relief, and 15, General Terms,
----------------- -------------
shall survive the termination of this Agreement for so long as necessary to
enable the Company to enforce any of the provisions of Paragraphs 6, 7 or 8
hereof.
14. BASE SALARY AND BENEFITS. During the term of this Agreement,
------------------------
the Employee's Compensation shall not be reduced, nor shall the Employee's
Company-provided
<PAGE>
- 20 -
Benefits be reduced, except as part of a Company-wide proportional reduction of
Compensation or of such Benefits for all key employees of the Company.
15. GENERAL TERMS.
-------------
(a) Notices. Any notice required or desired to be given hereunder shall
-------
be in writing and shall be deemed to have been duly given (i) upon hand
delivery, or (ii) on the third day following delivery to the U.S. Postal Service
as certified mail, return receipt requested and postage prepaid, or (iii) on the
first day following delivery to a recognized overnight courier service, fee
prepaid, return receipt or other confirmation of delivery requested. Any such
notice shall be delivered or directed to a party at its address previously set
forth in this Agreement or to such other address as a party may specify by
notice given to the other party hereto in accordance with the provisions of this
paragraph.
(b) Binding Effect. This Agreement and the rights and obligations
--------------
contained herein shall be binding upon and inure to the benefit of the Company,
its successors and assigns, including any Acquiring Entity, and upon the
Employee, his/her legal representatives, heirs and distributees.
(c) Modifications; Waiver. Any modification or waiver of this Agreement
---------------------
must be in writing and signed by both parties to be effective. No waiver of any
breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of like or different nature.
No course of dealing between the parties hereto will be deemed effective to
modify, amend or discharge any part of this Agreement or the rights or
obligations of either party hereunder.
<PAGE>
- 21 -
(d) Entire Agreement. This Agreement contains the entire understanding
----------------
between the parties hereto and supersedes any prior understanding, memoranda or
other written or oral agreements between them respecting the within subject
matter. There are no representations, agreements, arrangements or
understandings, oral or written, between the parties relating to the subject
matter of this Agreement which are not fully expressed herein.
(e) Partial Invalidity. The invalidity or unenforceability of any
------------------
particular provision of this Agreement shall not affect the other provisions
hereof and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
(f) Applicable Law. This Agreement shall be construed and enforced in
--------------
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within New York State, without giving effect to
conflict of laws principles.
(g) Jurisdiction and Venue. In the event that any legal proceedings are
----------------------
commenced in any court with respect to any matter arising under this Agreement,
the parties hereto specifically consent and agree that the courts of the State
of New York and/or the Federal Courts located in the State of New York shall
have jurisdiction over each of the parties hereto and over the subject matter of
any such proceedings, and the venue of any such action shall be in Monroe
County, New York and/or the U.S. District Court for the Western District of New
York.
(h) Headings. The headings contained in this Agreement are inserted for
--------
convenience only and do not constitute a part of this Agreement.
<PAGE>
- 22 -
(i) Counterparts. This Agreement may be executed in more than one
------------
counterpart, each one of which will be deemed an original and all of which shall
constitute one and the same instrument.
(j) Assignment. The Employee may not assign any of his/her rights,
----------
duties or obligations hereunder without the prior written consent of ACC Corp.
However, ACC Corp. may assign any of its rights, duties or obligations hereunder
to any of its subsidiaries or affiliates from time to time in its sole
discretion.
(k) Remedies. All rights and remedies of the Company or the Employee,
--------
whether provided for herein or by operation of law, are cumulative and may be
exercised singularly or concurrently, and the exercise of any such remedy shall
not be deemed an election of remedies so as to preclude the election of any
other remedy.
(l) Named Fiduciary. The Board of Directors of ACC Corp. or of an
---------------
Acquiring Entity, as the case may be, is hereby designated as the named
fiduciary ("Named Fiduciary") under this Agreement. The Named Fiduciary shall
have authority to operate and administer this Agreement, and it shall be
responsible for establishing and carrying out a funding policy, if any, and
method consistent with the objectives of this Agreement.
(m) Claims Procedure. The Named Fiduciary shall make all determinations
----------------
regarding disputes between the Company or the Acquiring Entity, as the case may
be, and the Employee as to the Employee's rights under this Agreement. Any such
determination by the Named Fiduciary shall be stated in writing and delivered or
mailed to the Employee or his/her estate, as the case may be, within 30 days
following the Company or the Acquiring Entity becoming aware of such dispute.
This communication shall set forth the specific
<PAGE>
- 23 -
reason(s) for the determination, written to the best of the Named Fiduciary's
ability in a manner that can be understood without legal or actuarial counsel.
In addition, the Named Fiduciary shall afford a reasonable opportunity to the
Employee or his/her estate, as the case may be, for a full and fair review of
the determination. If Employee or his/her estate disagrees with the
determination, or any part thereof, or if a determination is not received by the
Employee or his/her estate within the 30 day period set forth above, then
Employee or his/her estate may seek judicial relief.
(n) Disputes. Notwithstanding anything to the contrary contained
--------
herein, in the event of a dispute over Employee's entitlement to or level of
Compensation and/or Benefits under this Agreement, the Company or the Acquiring
Entity, as the case may be, shall be required to commence and continue providing
to the Employee until final resolution of such dispute all Compensation and
Benefits contemplated by Paragraph 5 hereof as if there were no dispute;
provided, however, that Employee is and at all times hereunder remains in
- --------
compliance with Paragraph 7 hereof. Neither the Company nor the Acquiring
Entity shall have any right to require Employee or his/her estate, as the case
may be, to repay or reimburse the Company or the Acquiring Entity for any
Compensation or Benefits received by the Employee.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of ___________________, 199_.
<PAGE>
- 24 -
EMPLOYEE: ACC CORP.
_______________________________ By: __________________
Name
Title: _______________
<PAGE>
- 25 -
EXHIBIT A
[Date]
[Name and Address
of Employee]
Dear_________________:
You and ACC Corp. (the "Company") are parties to an Employment
Continuation Incentive Agreement ("ECIA") dated ___________, 199_. You have
requested a lump-sum payment of all remaining Compensation and Benefits (as
those terms are defined in your ECIA) payable to you under the terms of your
ECIA, pursuant to either Paragraph 4 or Paragraph 5 thereof. In consideration
for the receipt of such lump-sum payment from the Company, you hereby agree to
the following:
1) This Agreement is intended to settle fully and finally all
claims, controversies, disputes and other matters between you and the Company.
Accordingly, as a material inducement to the Company to enter into this
Agreement and in consideration for the above lump-sum payment, you agree to
forever release, acquit and discharge the Company, and its employees, officers,
representatives, attorneys, directors and shareholders and their predecessors,
successors and assigns from and against any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts and expenses of
any nature whatsoever, known or unknown, suspected or unsuspected and all claims
for attorney's fees, costs, disbursements, and expert witness fees which you now
have, own or hold or claim to have, own or hold or which you owned or claimed to
have, own or hold, including, but not limited to those relating to or arising
out of:
(a) your employment with the Company;
(b) your termination of employment with the Company;
(c) claims relating to wages, payments and benefits except as set
forth herein;
(d) the New York Labor Law, the New York State Human Rights Law, the
New York State Lawful Activities Act, Title VII of the Civil
Rights Act of 1964, Title IX of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Equal Pay Act, the Employee
Retirement Income Security Act of 1974, the Age Discrimination in
Employment Act of 1967, as amended, the Older Workers Benefit
Protection Act of 1990, the Rehabilitation Act of 1973, the Fair
Labor Standards Act, the
<PAGE>
- 26 -
Occupational Safety and Health Act, the Americans with
Disabilities Act, Federal Executive Order 11246 and all
amendments thereto, the Family and Medical Leave Act, New York
Civil Rights Law (S)(S) 70-a, and all regulations pertaining to
all such laws;
(e) any other federal, state or local law, rule or regulation; and
(f) all tort claims and all claims of wrongful or unjust termination,
defamation, prima facia tort, breach of or interference with
contract, promissory estoppel, intentional infliction of
emotional distress or breach of any express or implied covenant
of good faith and fair dealings.
You agree that the Company shall not have any obligation to you other than as
set forth in your ECIA for any other monies or benefits including, but not
limited to, salary, benefits, bonus, or vacation or any obligation set forth in
any agreement of employment or other agreement with the Company, whether such
agreement may be express or implied.
2. This Agreement shall not in any way be construed as an
admission by the Company that it or its officers, directors or employees have
acted wrongfully with respect to you or that you have any rights whatsoever
against the Company or its officers, directors or employees. This Agreement
shall not in any way be construed as an admission by you of any wrongdoing.
3. If you breach this Agreement, you acknowledge that all monies
to be paid by the Company hereunder shall immediately cease, and you shall
immediately return all monies paid pursuant to this Agreement and your ECIA.
These rights are in addition to all other rights or remedies provided to the
Company in law or in equity by reason of your breach.
4. You are hereby advised of your right to consult with an
attorney before signing this Agreement and acknowledge that you have been given
the opportunity to consult with an attorney before signing it. Further, you
acknowledge that, as this Agreement was an Exhibit to your ECIA at the time you
signed your ECIA, you have had a draft of this Agreement for more than 21 days
to review it and consider its terms. Additionally, you understand that you can
revoke this Agreement at any time within seven days following your execution of
it, by written revocation notice to the Company sent certified mail, return
receipt requested. Therefore, you understand and agree that the Company will
not make any payment of the lump-sum you have hereby requested until 28 days
have passed from the date the Company receives this Agreement signed by you.
<PAGE>
- 27 -
Your signature below indicates your acceptance of this Agreement and
shall cause this Agreement to be binding upon you, your heirs, representatives
and assigns. Your signature shall also signify that you have read and
understand the Agreement, and that you either have reviewed it with your
attorney or have elected not to do so.
Very truly yours,
ACC Corp.
By: ____________________
Title: _________________
Accepted and Agreed to on this
__________ day of __________________________________, 199_
_________________________
Employee
<PAGE>
Exhibit 99.4
PURCHASE WARRANT
7,500 SHARES OF ACC CORP. $.015 PAR VALUE
CLASS A COMMON STOCK
FOR VALUE RECEIVED, ACC Corp. , a Delaware corporation (the "Company"),
hereby grants to Peter H. Meyer (the "Holder"), the right, subject to the
further terms and conditions set forth herein, to purchase from the Company
7,500 whole, fully paid and nonassessable shares (the "Shares") of its $.015 par
value Class A Common Stock at a purchase price per Share of $18.75 (the
"Purchase Price"). This Warrant shall be fully exercisable on its date of
issuance and in all events shall expire and be of no further force or effect at
the earlier of the time when it has been exercised with respect to all Shares
which the Holder is entitled to purchase hereunder or 11:59 P.M., New York City
time, on October 31, 1999 (the "Expiration Date"). The number and character of
the Shares and the Purchase Price are subject to adjustment as hereinafter
provided. As used herein, this "Warrant" means and includes this Warrant and
any Class A Common Stock purchase warrant of the Company hereafter issued in
substitution for or in replacement of this Warrant or to evidence to continuing
effect of any part of this Warrant after any partial exercise hereof:
1. EXERCISE. This Warrant may be exercised in whole, or in part from
time to time, by the Holder by delivering this Warrant together with an executed
Subscription Agreement in the form annexed hereto as Exhibit A to the Company or
such person as the Company may have appointed as warrant agent, as its principal
office ( or at the office of the agency maintained for such purpose),
accompanied by payment by certified or bank check payable to the order of the
Company, in an aggregate amount equal to the per share Purchase Price as then
adjusted multiplied by the number of Shares as to which this Warrant is then
being exercised. The Company or such agent shall cancel this Warrant on any
such exercise, and if such exercise is partial, shall issue and deliver to the
Holder a new Warrant upon the same terms as contained herein with respect to the
unexercised portion of this Warrant. Anything in this Warrant to the contrary
notwithstanding, this Warrant may not be exercised after the Expiration Date and
may be exercised only with respect to whole Shares.
The Company will, or will direct its transfer agent to, issue a
certificate or certificates for the number of fully paid and nonassessable
Shares as to which this Warrant is so exercised, and in lieu of any fractional
shares to which the Holder would otherwise be entitled, pay cash equal to such
fraction multiplied by the Purchase Price as then adjusted, as soon as
practicable after any exercise of this Warrant, and in any event within five
business days thereafter, at the Company's expense (including the payment by it
of any applicable issue taxes), in the name of, and deliver the same to, the
Holder (on payment by the Holder of any applicable transfer taxes).
Notwithstanding the proceeding paragraph, any Shares as to which this
Warrant is exercised shall be deemed issued on and as of the date of such
exercise in accordance with
<PAGE>
the first paragraph of this Section and the Holder shall thereupon be deemed to
be the owner of record thereof.
All shares issued pursuant to any exercise of this Warrant shall be
"restricted securities" within the meaning of the Securities Act of 1933, as
amended (the "Act") and the rules and regulations thereunder, and shall bear the
standard restrictive legend under the Act. Upon any exercise of this Warrant,
the Holder shall also execute the form of representation letter attached as
Exhibit B hereto making the representations regarding the status of the Shares
contained therein.
2. ADJUSTMENTS.
(a) STOCK DIVIDENDS, SPLITS, ETC. The number of Shares that may be
purchased on exercise of this Warrant and the Purchase Price therefor shall be
proportionately increased or decreased, as the case may be, for any stock
dividend, stock split, combination, subdivision or other changes made with
respect to the Class A Common Stock of the Company at any time prior to the
Expiration Date. An adjustment made pursuant to this paragraph shall, in the
case of a stock dividend or distribution, be made as of the record date therefor
and, in the case of subdivision or combination, be made as of the effective date
thereof.
(b) REORGANIZATION, RECAPITALIZATION, CONSOLIDATION, MERGER OR SALE OF
ASSETS. In the event of any reorganization or recapitalization of the Company
or in the event of the Company consolidates with or merges into another
corporation or transfers all or substantially all of its assets to another
entity, the Holder, at any time after the consummation of such event, upon the
exercise of this Warrant and payment of the Purchase Price as provided herein,
shall be entitled to receive the stock to which the Holder would have been
entitled on such consummation if the Holder had exercised this Warrant
immediately prior thereto. In such case, the terms of this Warrant shall
survive the consummation of any such event and shall be applicable to the shares
of stock receivable on the exercise of this Warrant after such consummation.
3. NOTICES OF RECORD DATES, ETC. The Company shall mail or cause to
be mailed to the Holder all notices specifying any record date for shareholders
of its Class A Common Stock with respect to any dividend, distribution or right,
or with respect to any shareholder meeting to be held at which a vote is to be
taken for the purpose of approving any reorganization, recapitalization,
reclassification, consolidation, merger, transfer, dissolution, liquidation or
winding up of the affairs of the Company. The Company also shall provide to the
Holder all reports that it normally provides to its shareholders.
4. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, and, in the case of any such loss, theft or destruction, on
delivery of a bond or other indemnity reasonably satisfactory to the Company,
or, in the case of any such mutilation, or surrender and cancellation of this
Warrant, the Company shall issue a new Warrant, of like tenor in lieu of such
lost, stolen, destroyed or mutilated Warrant.
<PAGE>
5. TRANSFERS. The Holder represents by his acceptance hereof that the
Holder shall transfer or assign this Warrant only in accordance with all of the
requirements of the Act or an applicable exemption from registration thereunder.
The Company shall cause to be kept a register of the Holder of this Warrant (the
"Warrant Register"). In the event of any transfer permitted by this Section,
the Company shall or shall cause its agent to register the transfer or
assignment on its Warrant Register on surrender of this Warrant, duly endorsed,
or accompanied by a written instrument or instruments of transfer in form
reasonably satisfactory to the Company, duly executed by the Holder or by the
duly appointed legal representative or attorney-in-fact hereof. On any such
registration of transfer, the Company shall issue a new Warrant or Warrants, of
like tenor, in lieu of the transferred or assigned Warrant. Notwithstanding the
foregoing provisions of this Section, this Warrant may be surrendered to the
Company, together with a written request for exchange, and thereupon the Company
shall issue and exchange therefor one or more new Warrants, of like tenor as
requested by Holder, and the Company shall cancel this Warrant on such surrender
for exchange. In no event, however, will the Company be required to effect any
registration of transfer, assignment or exchange that would result in the
issuance of a fraction of a share. For purposes of this Warrant, the term
"Holder" shall refer to all persons who any time are listed in the Warrant
Register as holding a Warrant representing any portion of the rights hereunder.
6. RESERVATION OF SHARES. The Company shall at all times reserve, for
the purpose of issuance on exercise of this Warrant, such number of its duly
authorized and unissued and/or treasury shares of Class A Common Stock or such
class or classes of capital stock or other securities as shall from time to time
be sufficient to comply with this Warrant. If, at anytime, the authorized and
unissued and/or treasury shares of Class A Common Stock or such other class or
classes of capital stock or other securities are not sufficient for the exercise
of this Warrant, the Company shall take such corporate action as may in the
opinion of its counsel be necessary to increase its authorized and unissued
and/or treasury shares of Class A Common Stock or such other class or classes of
capital stock or other securities to such number as shall be sufficient for that
purpose.
7. SURVIVAL. All agreements, covenants, representations and
warranties herein shall survive the execution and delivery of this Warrant and
any investigation at any time made by or on behalf of any party hereto and the
exercise, sale and purchase of this Warrant and the Class A Common Stock
issuable on exercise hereof.
8. SHAREHOLDER RIGHTS. This Warrant shall not entitle the Holder, as
such, to any voting rights or other rights as a shareholder of the Company, or
to any other rights except the rights stated herein.
9. NOTES. All demands, notices, consents and other communications to
be given hereunder shall be in writing and shall be deemed duly given when
delivered personally or three days after being mailed by certified first class
mail, postage prepaid, return receipt requested, properly addressed, if to the
Company at: 400 West Avenue, Rochester, New York 14611, or if to the Holder, at
its address set forth above. The Company and the Holder may change their
respective addresses at any time or times by notice given hereunder to the
other.
<PAGE>
10. AMENDMENTS; WAIVERS; TERMINATIONS; GOVERNING LAW; HEADINGS. This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change waiver, discharge or termination is sought. The corporation laws
of the State of Delaware shall govern all issues concerning the relative rights
of the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by and construed and interpreted in accordance with the internal laws
of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule of any jurisdiction. The headings of the Warrant are
for convenience of reference only and are not part of this Warrant.
Dated: October 30, 1995 ACC CORP.
---------------------------
Witness: /s/ Catherine St. George By: /s/ David K. Laniak
------------------------- ----------------------
Secretary: /s/ Francis Coleman Title: CEO
----------------------- -------------------
<PAGE>
EXHIBIT A.
SUBSCRIPTION
(To be completed and signed only on an exercise of the Warrant.)
TO ACC CORP.:
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _____ shares of the Class A Common Stock of ACC CORP. to
which such Holder is entitled thereunder, and herewith makes payment of $_______
therefor in cash or by certified or official bank check. The undersigned hereby
requests that the Certificate(s) for such shares be issued in his name and
delivered to the following address:
If the foregoing Subscription evidences an exercise of the within
Warrant to purchase fewer than all of the Shares to which the undersigned is
entitled under such Warrant, please issue a new warrant, of like tenor, for
remaining Shares in his name, and deliver the same to the same address as set
forth above.
Dated: ________, 19 .
(Name of Holder)
___________________________
(Signature of Holder or
Authorized Signatory)
<PAGE>
EXHIBIT B
TO: ACC CORP.
400 West Avenue
Rochester, New York 14611
Gentlemen:
In connection with the issuance to me of ______ shares of the Class A
Common Stock (the "Shares") of ACC CORP. (the "Company"), I hereby represent to
the Company that all of the Shares are being acquired by the undersigned for my
own investment account and not with a view to, or for resale in connection with,
any distribution of the Shares nor with any intention of dividing my
participation with others.
I understand that the Shares have not been registered under the
Securities Act of 1933, as amended, (the "Act") by reason of a specific
exemption under the provisions of the Act which depends upon my representations
contained in this letter and that you are relying on such representations as a
condition precedent to permitting the issuance of the Shares to me. I also
understand that any sales made by me publicly under Rule 144 can only be made
after I have held the Shares for two years, and then only in limited quantities
and only under the terms and conditions of said Rule; and that any other public
resale of the Shares may require registration under the Act or compliance with
an exemption from the registration requirements of the Act.
I agree that the Shares my not be transferred unless and until the
Company shall have been informed of the proposed transfer and:
1. A registration statement with respect to the Shares shall be
effective under the Act, and I shall have furnished satisfactory proof of
compliance with any other applicable law; or
2. I have obtained an opinion of counsel, in form and content
satisfactory to the Company and its counsel, that no violation of the Act or any
other applicable law will be involved in such transfer, and/or such other
documentation in connection therewith as counsel for the Company may in its
reasonable discretion require as a condition precedent in order to make a
determination that the transfer will involve no such violation.
I agree that appropriate legends may be placed on any certificates
delivered to me representing the Shares in order to give notice of the transfer
restrictions set forth in this letter and that the Company may cause stop
transfer orders to be placed on my account.
I further acknowledge and agree that neither the Company nor any of its
agents, officers or directors have made any representations concerning the
Company or its prospects and that I have based my decision to acquire the
Company's stock upon information furnished to me by persons other than the
Company, its officers, directors or agents.
<PAGE>
In consideration of the transfer of the Shares to me, I hereby agree to
indemnify and hold harmless the Company, its officers, directors, employees and
agents, from and against any and all liability, losses, damages, expenses and
attorneys' fees which any of them may hereafter incur, suffer or be required to
pay by reason of the falsity of, or my failure to comply with, any
representations contained in this letter.
Very truly yours,
_________________________
(Signature of Holder)
(Date)
<PAGE>
Exhibit 99.5
AMBIX SYSTEMS CORP.
SOFTWARE LICENSE AGREEMENT
FOR
Implementation of Components of the Ambix
Global Vista Telemanagement Framework
AMBIX SYSTEMS CORP.
400 West Ave.
Rochester, New York 14611
Version 10.006
A. McIntosh
March 22, 1995
<PAGE>
SOFTWARE LICENSE AGREEMENT
AGREEMENT between Ambix Systems Corp. of 400 West Ave, Rochester, New
York ("Ambix") and ACC Corp., its current majority-owned subsidiaries, ACC
TelEnterprises Ltd., and each of its current majority-owned subsidiaries, and
the successors and assigns of each of the foregoing "Customer"), with its
principal office and place of business at 400 West Ave., Rochester, New York
14611.
RECITALS
--------
I. Ambix has developed certain computer and systems software in which
it possesses copyrights and/or rights in the nature of trade secrets and
confidential know-how.
II. Ambix and Customer desire to enter into a License Agreement for
such computer and systems software.
NOW, THEREFORE the parties agree as follows:
1. Ambix hereby licenses and Customer agrees to license from
Ambix under the terms and conditions contained herein the Software, as defined
in Schedules I and II attached hereto.
2. Customer agrees to abide by the terms and conditions contained
in this Agreement.
3. The following schedules are part of the Agreement:
SCHEDULE I: License Agreement Definitions, Terms and
Conditions.
SCHEDULE II: "The Software": Statement of Intent,
Overview of Components and Look and Feel,
Data Model Descriptions, and Milestones.
SCHEDULE III: Locations and entities of installation
and use.
SCHEDULE IV: Delivery
SCHEDULE V: Fees and Payments
SCHEDULE VI: Escrow Agreement and Agency
4. Customer acknowledges that it has read and agrees to all terms
and conditions set forth in this Agreement and the attached Schedules.
IN WITNESS WHEREOF the parties have executed this Software License
Agreement as of the dates below:
<PAGE>
AMBIX SYSTEMS CORP CUSTOMER:
Authorized Officer Authorized Officer
By: /s/ Andrew P. McIntosh BY: /s/ Arunas A. Chesonis
--------------------------- -----------------------------
TITLE: President TITLE: President
------------------------- -----------------------------
DATE: March 30, 1995 DATE:March 30, 1995
-------------------------- -----------------------------
<PAGE>
SCHEDULE 1
----------
GENERAL TERMS
- -------------
1.0 DEFINITIONS. When used in this Agreement, the capitalized terms listed
-----------
below shall have the following meanings:
1.1 "CODE" shall mean computer programming code. If not otherwise
specified, Code shall include only object code and not source code.
(a) "Object Code" shall mean code which is directly machine readable
and executable by a computer after suitable processing and is in a form that is
not generally understandable by humans.
(b) "Source Code" shall mean code other than Object Code and related
system documentation, comments, and procedural code which may be printed out or
displayed in a form readable and understandable by a human programmer of
ordinary or pertinent skill.
1.2 "DOCUMENTATION" shall mean user manuals and other written
materials that relate to particular Code, including materials useful for design
(for example, logic descriptions, flow charts, class definitions, principles of
operation, and the like), and machine readable text or graphic files subject to
display or printout.
1.3 "ENHANCEMENTS" shall mean changes or additions to Code and
related Documentation available in all new releases that improve
functions/classes/objects, add new functions/classes/objects or improve
performance by changes in system coding without changes to current overall
system architecture. Further, ENHANCEMENTS as defined under this Agreement
shall pertain solely to those components of the Global Vista system herein
licensed by Customer, regardless of any availability of new features,
components, classes or objects to other Ambix customers, and do not pertain to
any components or features not licensed by Customer.
1.4 "SOFTWARE" shall mean the computer software, including Code as
defined above, set forth in Schedule II and licensed hereunder, including any
Enhancements as may be provided under this Agreement and any supplements or
addendums hereto.
2.0 LICENSE OF SOFTWARE. Ambix grants and Customer accepts a personal,
-------------------
perpetual, non-exclusive, non-transferable and non-sublicensable license to use
the computer software programs described in Schedule II attached hereto ("the
SOFTWARE"). The Software is licensed solely for Customer's own use for the
purposes as set forth in Schedule II at the locations and by the business
entities set forth in Schedule III. Except as set forth in Schedule II and
Schedule III, use of the Software in any manner other than as set forth herein
and use of the Software by third parties for any purpose whatsoever, are
expressly prohibited. This license shall be for an indefinite duration, subject
to termination as provided herein. Customer acknowledges, understands and
agrees that the Software is not hereby sold to Customer; and Customer does not
by virtue of this Agreement acquire any
<PAGE>
ownership rights in the Software or the intellectual property (including
copyrights, trademarks, trade secrets and know-how) embodied in the Software or
in any accompanying Documentation.
3.0 DELIVERY. Pursuant to Schedule IV, Ambix shall deliver the Software on, or
--------
as soon thereafter is practical, to Customer's requested delivery date, at the
location designated by Customer. Customer shall be responsible for assisting
Ambix in the installation of the Software and shall provide all equipment,
supplies, personnel and computer resource necessary to complete such
installation. Ambix shall not be responsible for delays or failure of
installation resulting directly or indirectly from causes beyond the reasonable
control of Ambix.
4.0 LICENSE FEE. Customer shall pay and Ambix shall accept the amount(s) set
-----------
forth in Schedule V in full payment for this license to use the Software. In
addition, Customer shall pay or reimburse Ambix for all shipping and handling
charges and all taxes or assessments of any government in the nature of taxes,
however designated, relating to this license of the Software; including, but not
limited to, sales, use, privilege, excise, withholding, value-added, or property
taxes; excluding, however, taxes based upon the net income of Ambix.
5.0 TERMS OF PAYMENT. Ambix shall bill Customer for the amount(s) as set forth
----------------
in Schedule V and Customer shall pay such amount(s) as billed. Ambix shall
assess and the Customer shall pay a late payment fee of one and one-half percent
(1.5%) per month on all past due amounts together with all costs of collection,
including reasonable attorney's fees with respect to any collection efforts by
Ambix for amounts due to it hereunder. This provision excludes however any late
payment fee for the final installment payment withheld by Customer until
Acceptance of the Software in accordance with the provisions of Section 13.
6.0 RIGHT TO AUDIT. Ambix may, at Ambix's cost, from time to time during
--------------
Customer's normal business hours, have one of its employees or representatives
confIRM at Customer's offices that Customer is in compliance with the terms and
conditions of this Agreement. In addition, Ambix may from time to time perform
an on-line audit of the Global Vista system to assess Customer's compliance with
Intellectual Property, copyright and trade secret provisions of this Agreement.
Customer may, at Customer's cost, from time to time during Ambix's
normal business hours, have one of its employees or representatives confirm at
Ambix's offices, from Ambix's records, the amounts due Customer as Royalty Fees
from Ambix. After each such audit, Customer shall promptly provide Ambix with a
detailed calculation of any amounts due Customer if the amount claimed by
Customer shall differ from that previously calculated and paid by Ambix.
7.0 DOCUMENTATION. Ambix shall provide Customer with Documentation for the
-------------
Software. Customer may copy all or any part of the Documentation provided that
such copies shall be solely for Customer's own use at Customer's own facilities
at the locations permitted in Schedule III. Customer shall reproduce on all
such copies all copyright,
<PAGE>
trademark, trade secret, and/or proprietary rights notices or legends which were
on the copies delivered to Customer by Ambix.
8.0 SOFTWARE SUPPORT. For so long as this License Agreement shall remain in
----------------
effect and so long as Customer has complied with all of its terms and
conditions, Ambix shall provide Customer with any Enhancements (defined in
Section 1.3 of this Agreement) to the Software and related Documentation
necessary to use the software with these enhancements. Such enhancements when
made to the software (as defined in Schedule II, "the Software") will not
include significant re-writes of the Software. Upon request, Ambix will provide
additional support by telephone and/or on-site consultation at Customer's
expense (as defined in any Support Services Agreement between the parties).
Customer shall pay Ambix's then prevailing charges for the time spent in
servicing such Software, including portal to portal travel time and reasonable
transportation, food, and lodging expenses.
9.0 TRAINING. If requested by Customer, Ambix shall provide training in the
--------
use of the Software for Customer's personnel. Ambix will provide such training
at mutually agreeable times and at mutually agreeable locations, subject to the
availability of Ambix personnel. Customer shall pay Ambix's then-current
standard charges for training and shall reimburse Ambix for reasonable travel,
lodging, and food expenses incurred in providing such training at locations
other than those used by Ambix for such purposes. Ambix shall submit a separate
invoice to Customer for training services which invoice shall be paid in
accordance with the payment terms contained in Schedule I (above) Section 5.
10.0 CONFIDENTIALITY AND NON-DISCLOSURE OF INTELLECTUAL PROPERTY. Customer
-----------------------------------------------------------
acknowledges that Ambix has expended substantial effort and incurred great
expense in designing and developing the Software and Documentation. Customer
further acknowledges that the Software and Documentation incorporates
information, concepts, ideas, know-how, techniques, and functional
characteristics which are confidential and constitute proprietary information
and trade secrets of Ambix. Customer agrees and covenants the following:
(10.1) it will hold the Software and Documentation in the strictest confidence
and will not assign, license, sublicense, market, transfer, or otherwise
disclose all or any portion of the Software or Documentation to any person or
entity without the prior written consent of Ambix, which may be withheld in
Ambix's sole discretion, except in accordance with Section 18.b; (10.2) it will
take all reasonable steps to prevent inadvertent or unauthorized disclosure,
transfer, or reproduction in any form of the Software or Documentation; (10.3)
it will notify its employees and agents of the confidentiality of the Software
and Documentation as well as notify its employees of the prohibitions on
disclosure, transfer, and reproduction contained herein; (10.4) it will make its
best effort short of litigation, to identify those employees or agents who may
become cognizant of intellectual property of Ambix and request those employees
or agents to sign an employee-employer Confidentiality Agreement (10.5) it will
make Source Code, if Source Code is provided by Ambix, of the Software available
only to those of its employees who are required to use such Source Code in order
to perform the duties of their employment with Customer; and (10.6) it will not
remove or alter any copyright, trademark, trade secret and/or proprietary rights
notice and/or legend placed on the Software and/or Documentation by Ambix, and
will reproduce all such notices and/or legends on all copies (including partial
copies) of the Software or Documentation. Customer shall immediately notify
Ambix of any
<PAGE>
breach of the confidentiality of the Software or Documentation and shall assist
Ambix in any efforts to control or prosecute any such breach.
11.0 MODIFICATION OF SOFTWARE. Customer may request modifications to the
------------------------
Software for reasonable purposes consistent with Schedule II of this Agreement
including modifications to merge the Software with other software programs or
systems which incorporate the Software into an overall business or information
systems process. Customer shall pay Ambix its then-current fees for any
modification. Customer may not modify or cause to be modified the Software
except as assisted by Ambix. Any modifications made in violation of this
Agreement shall belong to Ambix. Any modified version of the Software, or any
system which incorporates the Software in modified form, just as in its original
form as defined under this Agreement, shall be for Customer's own use as
specified under this Agreement in Schedules II and III. The modified version or
newly merged version of the Software shall remain subject to all of the terms
and conditions of this Agreement. In addition to the notices required by
Section 10 of Schedule I (above), Customer shall include the following notice in
both machine readable form and on all Documentation for the modified version of
the Software or merged system comprising any part or all of the Software:
"This program or system includes information, concepts, ideas, know-
how, and techniques which are confidential and constitute proprietary
information and trade secrets of Ambix Systems Corp. of Rochester, New
York and are protected by copyright or pending copyright;
@ 1995 Ambix Systems Corp."
In the event this Agreement is terminated, the Software shall be completely
removed from any system containing the software and from any information systems
process using the Software, whether as a modified program or modified system
integrating Ambix programs in modified or unmodified form. and treated as if
permission to modify had never been granted and all copies of all Documentation
shall be returned to Ambix.
12.0 WARRANTY. Ambix warrants that it is the rightful owner of the Software
--------
and that it has the right to license the Software to Customer. After completion
of the Acceptance test outlined in Section 13, and while Customer continues to
license the Software, Ambix warrants that the Software will be free of
programming errors which significantly affect the performance of the Software
from the standards and specifications contained in Schedule II. Further, upon
Customer signing a Software Support Agreement, and as part of this Support
Agreement and at no additional charge to Customer, Ambix will immediately
correct any programming errors reported to Ambix. Ambix's only obligation under
this Warranty shall be to amend, revise, modify, or replace the Software at
Ambix's then-current rates for programming and support services. The warranty
contained in this Section 12 shall apply to unmodified versions of the Software,
and Ambix makes no warranty as to any version of the Software modified by anyone
other than Ambix. Amendment, revision, modification, or replacement of the
Software will be performed at Customer's request at Ambix's then-current rates
for such services, subject to availability of Ambix personnel. AMBIX MAKES NO
OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO
<PAGE>
ANY MATTER WHATSOEVER, AND DISCLAIMS ALL SUCH WARRANTIES INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
13.0 ACCEPTANCE. Customer will use the software during the thirty (30)
----------
business days immediately following installation (the "Acceptance Period") of
the Software to determine whether or not it conforms to the functional and
performance specifications attached as Schedule II (the "Specifications"). Any
failures of the Software to conform to the Specifications discovered by
Customer, during the Acceptance Period, will be reported promptly to Ambix.
Ambix will immediately make any corrections necessary to make the Software
conform with the Specifications. Upon satisfactory completion of the Acceptance
Testing process, Customer shall provide Ambix with written notification of
acceptance and shall pay to Ambix the final $44,000 monthly installment payment.
14.0 LIMITATION OF LIABILITY. Ambix's liability under this Agreement for
-----------------------
damages, regardless of the form of action, shall be limited to money damages
which shall not exceed the total amount paid by Customer for the License granted
hereunder. This shall be Customer's exclusive remedy. In no event shall either
party be liable for any loss of product, loss of profit, loss of use or any
other actual, special, incidental, consequential damages, or other damages of
any kind whether foreseeable or unforeseeable, resulting from or arising out of
the license or use of the Software, even if such party shall have been advised
of possibility of such loss or damages.
15.0 INTELLECTUAL PROPERTY INFRINGEMENT. If notified promptly in writing of
----------------------------------
any action (and all prior claims relating to such action) brought against
Customer, based on a claim that the Customer's use of the Software infringes a
United States patent, copyright, trademark or a trade secret (hereafter
collectively "intellectual property rights") of a third party, Ambix will defend
such action at its expense and pay the costs and damages awarded in any such
action. Ambix will have the sole control of the defense of any such action and
all negotiations for its settlement or compromise. At any time during the
course of any litigation arising out of a claim of infringement of an
intellectual property right, or if, in Ambix's opinion, the intellectual
property or any part thereof is likely to become the subject of a claim of
infringement, Ambix will, at its sole option and at its expense, either procure
for Customer the right to continue using the Software, replace or modify the
same with a compatible, functionally equivalent, non-infringing product, or
grant Customer a full refund of the License Fees specified in Schedule V, and
accept its return. The depreciation will be an equal amount per year over the
lifetime of the Software as established by Ambix. Ambix will not have any
liability to Customer under any provision of this paragraph if the infringement,
or claim thereof, is based upon (a) the use of the Software in combination with
other software not furnished by Ambix; or (b) the use of other than the latest
supportable version of the Software made available to Customer.
Customer will hold Ambix harmless from and against any expense, cost,
damage, judgment, or loss or other liability of any kind, for infringement of
any intellectual property right which result from Ambix's compliance with
Customer's designs, specifications, instructions or from the use of the Software
as altered or modified by anyone other than Ambix.
<PAGE>
Customer is obligated hereby to promptly notify Ambix of any instance
of infringement or attempted infringement upon the intellectual property rights
of Ambix which comes to Customer's attention.
The foregoing states the entire liability of Ambix with respect to
infringement of an intellectual property right by the Software or any part
thereof or by its operation.
16.0 TERMINATION OF LICENSE. The license granted to Customer hereunder may be
----------------------
terminated by Ambix upon not less than two months (2 months) notice if Customer
fails to perform any of its material obligations or duties under this Agreement,
unless within such period Customer cures such failure. If however, Customer
cannot in good faith cure such failure within the two month period, then
Customer must commence cure immediately and continue to diligently pursue such
cure of any such failure(s). Upon termination of this Agreement, Customer shall
immediately cease using the Software and, at the option of Ambix, Customer shall
destroy or return to Ambix all tangible forms of the Software and the
Documentation and Customer shall erase the Software from all storage media in
which it has been installed or copied. Within (30) thirty days after
termination of this Agreement, Customer shall certify to Ambix in writing that
it has destroyed or delivered to Ambix all tangible forms of the Software and
that it has erased the Software from all storage media.
17.0 EXPORT REGULATIONS. Customer agrees, regardless of permissions granted by
------------------
Ambix, not to export, either directly or indirectly, any Ambix Software or
systems incorporating such Software without first obtaining any required license
to export or re-export from the United States Government or appropriate foreign
government as may be required and to comply with all United States and
international export regulations as applicable.
18.0 MISCELLANEOUS.
-------------
18.A Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto, their personal representatives, and
permitted successors and assigns.
18.B No Assignment. Customer may not assign nor sublicense this
-------------
Agreement, in whole or in part, without the prior written consent of Ambix,
which may be withheld in Ambix's sole discretion. Customer may without the
prior written consent of Ambix assign its fights under this Agreement so far as
those rights constitute part of the sale, merger, consolidation, reorganization
or transfer of any part of Customer's business or assets in which the Software
is used. Any assignee of Customer shall have all of the rights and obligations
set forth in this Agreement.
18.C Entire Agreement. This Agreement contains the entire
----------------
understanding between or among the parties hereto and supersedes any prior
understanding, memoranda or other written or oral agreements between or among
any of them with respect to the Agreement's subject matter. There are no
representations, agreements, arrangements or understandings, oral or written,
between or among any of the parties relating to the subject matter of this
Agreement which are not fully expressed herein.
<PAGE>
18.D Modifications or Waiver. No modification or waiver of this
-----------------------
Agreement or any part of this Agreement shall be effective unless in writing and
signed by the party or parties sought to be charged therewith. No waiver of any
breach of condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of like or different nature.
No waiver of any breach or condition of this Agreement by or with respect to any
party hereto shall be deemed to be a waiver of the same breach or condition with
respect to any other party hereto. No course of dealing between or among any of
the parties hereto will be deemed effective to modify, amend, or discharge any
part of this Agreement or the rights or obligations of any party hereunder.
18.E No Third Party Beneficiary. None of the provisions of this
--------------------------
Agreement shall be for the benefit of, or enforceable by, any person or entity
not a party hereto.
18.F Partial Invalidity. If any provision of this Agreement shall be
------------------
held invalid or unenforceable by competent authority, such provision shall be
construed so as to be limited or reduced to be enforceable to the maximum extent
compatible with the law as it shall then appear. The total invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
18.G Notices. Any notice or other communication required or
-------
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given (a) upon hand delivery, or (b) on the third day following
delivery to the U.S. Postal Service as certified or registered mail, return
receipt requested and postage prepaid, or (c) on the first day following
delivery to a nationally recognized U.S. or foreign overnight courier service,
fee prepaid, return receipt requested or other confirmation of delivery
requested, or (d) when telecopied or sent by facsimile transmission if an
additional notice is also given under (a), (b), and (c) above within three days
thereafter. Any such notice or communication shall be delivered or directed to
a party at its address set forth below or at other address as may be designated
by a party in a notice given to all other parties hereto in accordance with the
provisions of this section.
Notice to Ambix shall be sent to...
Ambix System Corp.
400 West Ave,
Rochester, New York 14611
Attn: Andrew McIntosh, President
Notice to ACC CORP shall be sent to...
ACC Corp.
400 West Ave.
Rochester, New York 14611
Attn: Arunas Chesonis, Chief Operating Officer
<PAGE>
18.H Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the United States and the State of New
York without reference to any New York conflict or choice of law principle.
18.I Jurisdiction and Venue. In the event that any legal proceedings
----------------------
are commenced in any court with respect to any matter arising under this
Agreement, the parties hereto specifically consent and agree that:
18.1.a the courts of the State of New York and/or the United States
Federal Courts located in the State of New York shall have exclusive
jurisdiction over each of the parties hereto and over the subject matter of any
such proceedings; and
18.1.b the venue of any such action shall be in Monroe County, New
York and/or the United States District Court for the Western District of New
York.
18.J Injunctive Relief. In the event of a breach or threatened
-----------------
breach of any of the terms of Sections 10, 11 or 15 of this Agreement, Ambix
shall be entitled to an injunction restraining Customer from committing any
breach of this Agreement without showing or proving any actual damages and
without diminishing any other right or remedy which Ambix may have at law or in
equity to enforce the provisions of this Agreement. Customer waives any right
it may have to require Ambix to post a bond or other security with respect to
obtaining or continuing any injunction or temporary restraining order, and
releases Ambix and its officers, directors, and shareholders from, and waives
any claim to, damages against them which Customer may have with respect to Ambix
obtaining any injunction or restraining order pursuant to this Agreement.
18.K Effect of Termination. Unless otherwise specifically agreed in
---------------------
writing, the terms of Sections 10, 11, 14, 15, and 18(all) shall survive any
termination, cancellation, repudiation or rescission of this Agreement by either
party for a period of three years after termination, whether or not for cause,
and under such circumstances either party may continue to enforce such terms as
if this Agreement were otherwise in full force and effect. In addition, the
terms of SECTION 6.0 shall remain in effect for a period of one (1) year after
termination.
18.L Confidentiality. Except as contemplated by this Agreement or as
---------------
necessary to carry out the transactions contemplated by this Agreement, the
terms of this Agreement, and all information or documents furnished by any party
to the other, shall be kept confidential by the party to whom furnished and
shall not be otherwise used or disclosed by the recipient except to recipient's
accountants or attorneys, or as may be required by law, without the prior
written consent of the other party. If this transaction is not consummated,
each party shall return to the other all such documents furnished hereunder,
including all copies, and shall continue to keep confidential, and neither use
nor disclose, any such information.
18.M Expenses of Parties. All expenses involved in the preparation,
-------------------
authorization, execution and delivery of this Agreement, including, without
limitation, all
<PAGE>
fees and expenses of agents, representatives, counsel, and accountants, shall be
borne solely by the party that incurred same.
18.N Headings. The headings contained in this Agreement are inserted
--------
for convenience only and do not constitute a part of this Agreement.
18.O Fair Meanings. This Agreement shall be construed according to
-------------
its fair meaning. The language used shall be deemed the language chosen by the
parties hereto to express their mutual intent, and no presumption or rule of
strict construction will be applied against any party hereto.
18.P Gender. Whenever the context may require, any pronoun used
------
herein shall include the corresponding masculine, feminine or neuter forms and
the singular of nouns, pronouns and verbs shall include the plural and vice
versa.
18.Q Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, and all of said
counterparts together shall constitute but one and the same instrument.
18.R Further Assurances. The parties hereto shall execute and
------------------
deliver any and all additional writings, instruments and other documents and
shall take all such further actions as shall be reasonably required to effect
the terms and conditions of this Agreement.
19.0 SOURCE CODE DEPOSIT. Concurrently with each delivery of software to
-------------------
Customer, Ambix shall deposit a copy of the Source Code to the version of the
Software then being delivered to Customer with the Escrow Agent named in
Schedule VI. Such Source Code shall be held and delivered by the Escrow Agent
in accordance with the terms and conditions of the Escrow Agreement which forms
Schedule VI of this Agreement. Ambix shall pay all industry comparable fees of
the Escrow Agent. Upon request, Customer may compare and verify each deposit of
Source Code to ensure that it corresponds to the Object Code version of the
Software then being delivered to Customer. Such comparison and verification
shall take place upon not less than two business days notice, and shall be
performed at such place and by such persons as Customer shall reasonably
designate according to all terms and conditions of this Agreement. Customer may
elect at its option to retain a third party consultant to perform comparison and
verification of the Software, upon first having such consultant execute a
confidentiality agreement with Customer regarding the Software.
20.0 RIGHT OF DEMONSTRATION ON CUSTOMER PREMISES: Ambix, upon reasonable
-------------------------------------------
notice to Customer, may have access to Customer's operations facilities for
purposes of demonstrating the use of the Software to prospective customers of
Ambix. During the term of this Agreement, such visits will be limited to once
per month unless otherwise agreed by the parties. During such visits, Customer
at its sole option may withhold information it deems proprietary from any
visitors. Ambix will take precautions not to disturb or incumber the operations
during such visits. Customer agrees to make an employee available to answer
questions should questions arise during a site visit.
<PAGE>
SCHEDULE V
----------
LICENSE FEES AND PAYMENTS
- -------------------------
1.0 License Fees for NetOps Application Components and Data Models
1.1 A total of $328,540.00 to be paid in monthly installments
through the implementation of NetOps Phase II. The final monthly installment
payment of $44,000 will be withheld until acceptance of the Software in
accordance with the provisions contained in Schedule I, Section 13.
2.0 Royalty return payments to ACC from Ambix.
2.1 For a period of five years after the Acceptance of the Software,
Customer shall be entitled to receive royalty payments from Ambix based upon all
revenues derived from parties other than Customer from the sale of the Software
(NetOps components) licensed in this Agreement ("Ambix Revenue"). During this
period, Ambix shall pay to Customer a royalty in the amount equal to fifteen
percent (15%) of all such Ambix Revenue within thirty days of receipt by Ambix.
This royalty shall be paid at the rate of 15% of sales until such time at which
Ambix has paid to ACC a total equal to the sum paid to Ambix by ACC in
implementation and license fees for NetOps programs licensed under this
Agreement. At the conclusion of Phase II, this sum will be $328,540.00 (U.S.).
If within the five year royalty period Ambix should pay to ACC an
amount in royalty payments equal to the amount that Ambix has received from ACC
in implementation and license fees of NetOps programs, then at that time Ambix
shall continue to pay to ACC royalty fees in amounts equal to seven percent (7%)
of Ambix Revenue until such time as Ambix has paid to ACC a total aggregate sum
of one million dollars ($1,000,000.00 U.S.) in royalty fees. Except for accrued
but unpaid royalty fees, Ambix's obligation to pay royalty fees to ACC
terminates five years from the acceptance date of the Software, or at such time
is Ambix has paid to ACC a total aggregate sum of one million dollars in royalty
fees.
Ambix Systems Corp. Customer
Signed: /s/ Andrew P. McIntosh Signed: /s/ Arunas A. Chesonis
---------------------------- ----------------------------
Date: March 30, 1995 Date: March 30, 1995
------------------------------- ---------------------------------
<PAGE>
EXHIBIT 99.6
SOFTWARE LICENSE AGREEMENT
BY AND BETWEEN
AMBIX ACQUISITION CORP.
AND
ACC CORP.
FEBRUARY 21, 1996
<PAGE>
SOFTWARE LICENSE AGREEMENT
THE PARTIES
-----------
AGREEMENT between Ambix Acquisition Corp. ("Ambix") of 400 West Ave.,
Rochester, New York 146111, and ACC Corp. ("ACC"), with its principal office and
place of business at 400 West Ave., Rochester, New York 14611.
RECITALS
--------
I. Ambix has developed and owns certain computer and systems software in which
it possesses copyrights and/or rights in the nature of trade secrets and
confidential know-how. This Software is referred to herein as the "Software."
II. Ambix and ACC desire to enter into a License Agreement for the Software on
the terms and conditions set forth herein.
NOW, THEREFORE the parties agree as follows:
1. Ambix hereby licenses and ACC agrees to license from Ambix under
the terms and conditions contained herein, the Software, as defined in Schedule
II attached hereto.
2. Each party agrees to abide by the terms and conditions contained
in this Agreement.
3. The following schedules are part of this Agreement:
SCHEDULE I: License Agreement Definitions, Terms and
Conditions.
SCHEDULE II: "The Software"
4. ACC acknowledges that it has read and agrees to all terms and
conditions set forth in this Agreement and the attached Schedules.
IN WITNESS WHEREOF the parties have executed this Software License
Agreement this 21th day of February, 1996.
AMBIX ACQUISITION CORP. ACC CORP.
By:/s/ Andrew P. McIntosh By:/s/ David K. Laniak
---------------------- --------------------
Andrew P. McIntosh David K. Laniak
President Chief Executive Officer
<PAGE>
- 2 -
SCHEDULE 1
----------
GENERAL TERMS
- -------------
1.0 DEFINITIONS. When used in this Agreement, the capitalized terms listed
-----------
below shall have the following meanings:
1.1 "AFFILIATE" shall mean any majority-owned subsidiary of ACC or
any joint venture entity, whether in corporate or partnership form, in which ACC
owns or controls, directly or indirectly, fifty percent or more of the aggregate
stock or other interest entitled to vote on general decisions reserved to the
stockholders, partners, or other owners of such entity, provided that any such
entity shall be deemed an AFFILIATE for so long, and only so long, as ACC
continues to hold such interest and only so long as any such entity owns and
operates a business or businesses substantially similar to ACC's line(s) of
business as conducted at any time during the term of this Agreement.
1.2 "CODE" shall mean computer programming code pertaining solely to
the SOFTWARE. If not otherwise specified, CODE shall include only OBJECT CODE
and not SOURCE CODE.
(a) "OBJECT CODE" shall mean code which is directly machine readable
and executable by a computer after suitable processing and is in a form that is
not generally understandable by humans.
(b) "SOURCE CODE" shall mean code other than Object Code and related
system documentation, comments, and procedural programming statements which may
be printed out or displayed in a form readable and understandable by a human
programmer of ordinary or pertinent skill.
1.3 "DELIVERABLE" shall mean any tangible material procured or
prepared by Ambix and delivered or licensed to ACC pursuant to this Agreement,
including the SOFTWARE and DOCUMENTATION.
1.4 "DERIVATIVE WORK" shall have the meaning set forth in the
Copyright Act (Title 17 U.S.C. (S) 101 et seq.). AMBIX shall own all DERIVATIVE
WORKS as described in Section 11.
1.5 "DOCUMENTATION" shall mean user manuals and other written
materials that relate to the SOFTWARE, CODE, or other DELIVERABLE, including
materials useful for design (for example, logic descriptions, flow charts, class
definitions, principles of operation, and the like).
1.6 "ENHANCEMENTS" shall mean changes or additions to CODE and
related DOCUMENTATION made available by Ambix to Ambix
<PAGE>
- 3 -
customers in new releases that improve functions/classes/objects, add new
functions/classes/objects or improve performance by changes to previously
released CODE without changes to system architecture, general design methodology
or method of execution of the object code (e.g. single-threaded or multiple-
threaded). Further, ENHANCEMENTS as defined under this Agreement shall pertain
to improvements upon, or new releases to, the SOFTWARE and do not refer to any
components, classes or objects licensed to any other Ambix customer which are
not licensed by ACC pursuant to this Agreement.
1.7 "ERROR" shall mean any error, problem, or defect resulting from
(1) an incorrect functioning of the SOFTWARE, or (2) an incorrect or incomplete
statement or diagram in the DOCUMENTATION, if such an error, problem, or defect
renders the SOFTWARE inoperable, causes the SOFTWARE materially to (i) fail to
meet the applicable SPECIFICATIONS or the acceptance criteria therefor, (ii) be
inaccurate or incomplete in any material respect, or (iii) cause incorrect
functions to occur when any such materials are used.
1.8 "IP RIGHTS" shall mean all intellectual property rights,
including inventions, discoveries, improvements, copyrights, patents, trade
secrets, trademarks, and other proprietary rights that are embodied in or used
in connection with the SOFTWARE, the DOCUMENTATION, or other DELIVERABLE.
1.9 "LICENSE FEE" shall mean the fee referred to in Section 4.0.
1.10 "SOFTWARE" shall mean the computer software, including OBJECT
CODE as defined above, set forth in Schedule II and licensed hereunder,
including any ENHANCEMENTS, modifications to, and other DERIVATIVE WORKS of, the
SOFTWARE as provided under this Agreement. SOFTWARE shall include any
applicable CODE.
1.11 "SPECIFICATIONS" shall mean the detailed design and functional
specifications related to the design and performance of the SOFTWARE and any
other DELIVERABLE hereunder.
2.0 LICENSE OF SOFTWARE. (a) Ambix grants and ACC accepts a personal,
-------------------
perpetual, non-exclusive license to use the SOFTWARE pursuant to the terms of
this Agreement. Such license is granted to ACC for its own use at an ACC-site
location as designated by ACC, and at any AFFILIATE or AFFILIATE-site location
as designated by ACC, and for purposes substantially similar to the business of
ACC. The license is for a term commencing on the date hereof and extending for
an indefinite period, subject to termination by Ambix pursuant to Section 16.
ACC acknowledges and agrees that the SOFTWARE is not hereby sold to ACC and that
ACC does not by virtue of this Agreement acquire any ownership
<PAGE>
- 4 -
rights in the SOFTWARE or the IP RIGHTS (including copyrights, trademarks, trade
secrets and know-how) embodied in the SOFTWARE, the CODE or in any accompanying
DOCUMENTATION.
(b) ACC shall have the right to grant sublicenses in the SOFTWARE and
other DELIVERABLES to its AFFILIATES pursuant to written sublicense agreements,
provided:
(I) ACC provides Ambix with prior written notice of each sublicense,
and delivers a copy of the sublicense agreement to Ambix promptly after the same
is executed (provided that ACC may delete any information which is confidential
or proprietary to ACC from such sublicense);
(II) Under the terms of the sublicense agreement, the sublicensee is
barred from transferring or further sublicensing the SOFTWARE without the prior
written consent of Ambix (which Ambix may withhold in its sole discretion); the
sublicense contains provisions comparable to Section 10, 11, 14, and 15 hereof
and grants Ambix audit rights comparable to those set forth in Section 6 hereof;
and otherwise such sublicense grants to the sublicensee no rights more extensive
than those granted to ACC hereunder.
(III) The term of such sublicense is made co-extensive with the term
of this Agreement and subject to earlier termination by Ambix in the event the
sublicensee ceases to be an AFFILIATE of ACC and at that time fails to execute a
separate license agreement and a support and maintenance agreement with Ambix;
and
(IV) ACC either includes the sublicensee in its then current support
and maintenance agreement with Ambix or causes the sublicensee to enter into a
separate support and maintenance agreement for the SOFTWARE.
(c) Ambix will deposit with ACC all SOURCE CODE and all DOCUMENTATION
and other materials useful or necessary to facilitate the use by ACC or its
contractors of the SOURCE CODE as described in Section 19. If Ambix reasonably
cannot perform its obligations under this Agreement as provided in Section 16,
Ambix grants to ACC the license and right to use the SOURCE CODE of any or all
SOFTWARE pursuant to the terms of this Agreement, and "SOFTWARE" (as defined
herein) shall include both OBJECT CODE and SOURCE CODE. Should ACC exercise its
rights to use the SOURCE CODE, all provisions of this Agreement remain in effect
with respect to limitations upon commercial transfer, licensing, sub-licensing
and disclosure of IP RIGHTS. ACC's use of the SOURCE CODE shall include all
rights and uses reasonably necessary to maintain, support, modify, and enhance
the SOFTWARE and to develop new works or DERIVATIVE WORKS from the SOFTWARE and
other DELIVERABLES.
<PAGE>
- 5 -
(d) If there is a good faith dispute between Ambix and ACC whether
Ambix has not performed as provided in Section 16, ACC shall be entitled to
exercise its rights under Section 2.0(c) with respect to the SOURCE CODE. If it
is determined in the resolution of such dispute that Ambix had performed and
will continue to perform all of its obligations in this Agreement, ACC shall
return the SOURCE CODE and related DOCUMENTATION to the repository identified in
Section 19; however, if it is determined that Ambix cannot perform, ACC's right
to use the SOURCE CODE under Section 2.0(c) continues.
3.0 DELIVERY. Ambix shall deliver the SOFTWARE and other DELIVERABLES on, or
---------
as soon thereafter as is practical, ACC's requested delivery date and to the
locations designated by ACC. ACC shall be responsible for assisting Ambix in
the installation of the SOFTWARE and shall provide all on-site equipment,
supplies, personnel and computer resource necessary to complete such
installation. Ambix shall not be responsible for delays or failure of
installation resulting directly or indirectly from causes beyond the reasonable
control of Ambix.
4.0 LICENSE FEE. ACC shall pay and Ambix shall accept a one time LICENSE FEE
------------
in the amount of $1,600,000 in full payment for this license to use the SOFTWARE
and other DELIVERABLES and all other rights granted hereunder. In addition, ACC
shall pay or reimburse Ambix for all shipping and handling charges and all
taxes, assessments, fees or charges of any kind imposed by any government,
however designated, relating to this license of the SOFTWARE; including, but not
limited to, sales, use, privilege, excise, withholding, value-added, or property
taxes; excluding, however, taxes based upon the net income of Ambix.
5.0 TERMS OF PAYMENT. ACC shall pay Ambix immediately upon execution of this
-----------------
Agreement.
6.0 RIGHT TO AUDIT. Ambix may, at Ambix's cost, from time to time (but not
---------------
more than twice in any calendar year) during ACC's or an AFFILIATE's normal
business hours, have one of its employees or representatives confirm at ACC's
offices, or the offices of any AFFILIATE, that ACC is in compliance with the
terms and conditions of this Agreement, including performing an on-line audit of
the SOFTWARE and its related databases to assess compliance with IP RIGHTS,
copyright and trade secret provisions of this Agreement.
7.0 DOCUMENTATION. At the time of the delivery of the applicable SOFTWARE,
--------------
Ambix shall provide ACC with DOCUMENTATION
<PAGE>
- 6 -
for each application or other component or module of the SOFTWARE. ACC may copy
and create DERIVATIVE WORKS from all or any part of the DOCUMENTATION provided
that (a) such items shall be solely for ACC or the applicable AFFILIATE's own
use at ACC's own facilities or the facilities of an AFFILIATE, and (b) such
items shall be created only in connection with changes in the applicable
SOFTWARE or for ease of use and instruction with the SOFTWARE. ACC or AFFILIATE
shall reproduce on all such copies all copyright, trademark, trade secret,
and/or proprietary rights notices or legends which were on the copies delivered
to ACC or AFFILIATE by Ambix.
8.0 SOFTWARE SUPPORT. For so long as this License Agreement shall remain in
-----------------
effect, Ambix shall provide ACC with support and maintenance of the SOFTWARE
under a separate agreement. Except as otherwise subject to a fixed fee
agreement (as planned for the SOFTWARE), ACC shall pay Ambix's then prevailing
charges for the time spent in servicing such SOFTWARE, including portal to
portal travel time and reasonable transportation, food, and lodging expenses.
Such charges shall not be greater than the amounts charged by Ambix to its most
favored customer for similar or comparable services.
9.0 TRAINING. If requested by ACC, Ambix shall provide training in the use of
---------
the SOFTWARE for ACC's personnel for up to fifteen (15) days. Thereafter, Ambix
will provide such training at mutually agreeable times, at mutually agreeable
locations (subject to the availability of Ambix personnel), and at mutually
agreed rates.
10.0 IP RIGHTS AND CONFIDENTIALITY. ACC acknowledges that Ambix has expended
------------------------------
substantial effort and incurred great expense in designing and developing the
SOFTWARE and DOCUMENTATION. ACC further acknowledges that the SOFTWARE and
DOCUMENTATION incorporate information, concepts, ideas, know-how, techniques,
and functional characteristics which are confidential and constitute proprietary
information and trade secrets of Ambix. Ambix acknowledges that it has and will
learn of and about confidential business, financial, operating, and technical
information of ACC and its AFFILIATES, which could include patents, copyrights,
trade secrets and other proprietary rights. Each party therefore acknowledges
that it will become privy to the confidential information ("CONFIDENTIAL
INFORMATION") of the other.
10.1 The recipient of such CONFIDENTIAL INFORMATION of the discloser
covenants and agrees the following:
<PAGE>
- 7 -
(a) the recipient will hold the CONFIDENTIAL INFORMATION in the
strictest confidence and will not assign, license, sublicense, market, transfer,
or otherwise disclose all or any portion of the CONFIDENTIAL INFORMATION to any
person or entity without the prior written consent of the discloser, which may
be withheld in the discloser's sole discretion, except in accordance with
Section 18.B or as permitted under this Agreement;
(b) the recipient will take all reasonable steps to prevent
inadvertent or unauthorized disclosure, transfer, or reproduction in any form of
the CONFIDENTIAL INFORMATION;
(c) the recipient will notify its employees and agents of the
confidentiality of the CONFIDENTIAL INFORMATION as well as notify its employees
of the prohibitions on disclosure, transfer, and reproduction contained herein;
(d) the recipient will make its best effort to identify those
employees or agents who may become cognizant of the CONFIDENTIAL INFORMATION of
the discloser and request those employees or agents to sign an employee-employer
Confidentiality Agreement;
(e) the recipient will not remove or alter any copyright, trademark,
trade secret and/or proprietary rights notice and/or legend placed on the
CONFIDENTIAL INFORMATION by the discloser, and will reproduce all such notices
and/or legends on all copies (including partial copies) of the CONFIDENTIAL
INFORMATION. The recipient shall immediately notify the discloser of any breach
of the confidentiality of the CONFIDENTIAL INFORMATION and shall assist the
discloser in any efforts to control or prosecute any such breach; and
(f) All right, title, and interest to the IP RIGHTS remain with
Ambix. ACC obtains only the license and other rights as specified herein with
respect to the SOFTWARE and the other DELIVERABLES subject to all the terms and
conditions hereof.
10.2 Notwithstanding anything in this Section 10 to the contrary, the
confidentiality provisions shall not apply to any CONFIDENTIAL INFORMATION which
(a) enters the public domain through no fault of the recipient, (b) is
observable based on the operation of any OBJECT CODE, (c) was developed by the
recipient without reliance on such CONFIDENTIAL INFORMATION, (d) was disclosed
to the recipient by a third party with no known obligation to the discloser to
keep it confidential, or (e) in the good faith belief of the recipient should be
disclosed pursuant to operation of law, regulation, or order or rule of any
court or governmental agency; provided that in the last instance,
<PAGE>
- 8 -
the recipient shall notify the discloser before such disclosure and cooperate in
good faith to limit such disclosure.
10.3 Ambix represents and warrants that it possesses all the rights,
licenses, or other authority to use all IP RIGHTS reasonably necessary or
desirable to conduct its business as presently conducted and to grant ACC the
license and other rights herein. Ambix has not received any notice with respect
to any alleged infringement or unlawful or improper use of any IP RIGHT or other
intellectual property owned or alleged to be owned by others, and Ambix has no
knowledge of any infringement (or suspected infringement) of any of the IP
RIGHTS. Ambix has no any knowledge of any claim asserted by any other person or
entity with respect to the use of any IP RIGHT, and Ambix knows of no valid
basis for any such claim. No director, officer or employee of Ambix has any
interest in any IP RIGHT, all of which are free and clear of any lien, security
interest, claim or encumbrance of any kind.
10.4 Exhibit A sets forth the form and placement of the proprietary
legends and trademark and copyright notices displayed in or on the SOFTWARE. In
no instance has the eligibility of the SOFTWARE or any component thereof for
protection under applicable patent,copyright, or other law protecting
proprietary rights been forfeited to a third party or the public domain by
omission of any required notice or any other action or inaction.
10.5 Ambix has used its best efforts to keep Ambix's trade secrets
secret, with disclosures being made on a need-to-know basis. As far as Ambix
knows there has been no violation of this policy, and all Ambix employees and
contractors have been advised of the policy. The SOURCE CODE, DOCUMENTATION,
and all other trade secrets and confidential information of Ambix related to the
SOFTWARE (1) have at all times been maintained in confidence and (2) have been
disclosed only to Ambix employees and contractors in connection with the
performance of their duties to Ambix.
10.6 All personnel, including employees, agents, consultants, and
contractors, who have contributed to or participated in the conception and
development of the IP RIGHTS (including any component thereof), the
DOCUMENTATION, or the SOFTWARE on behalf of Ambix either (1) have been party to
a "work-for-hire" arrangement with Ambix, in accordance with applicable law,
that has accorded Ambix full, effective, exclusive, and original ownership of
all tangible and intangible property thereby arising (including IP RIGHTS), or
(2) have executed appropriate instruments of assignment in favor of Ambix as
assignee that have conveyed to Ambix full, effective, exclusive, and original
ownership of all tangible and intangible property thereby arising (including IP
RIGHTS).
<PAGE>
- 9 -
10.7 Ambix has validly and effectively obtained the right and license
to use, copy, modify, and distribute any third-party programming and materials
contained in or used in connection with the SOFTWARE. Except as identified in
Exhibit B, the SOFTWARE, the DOCUMENTATION, and the other DELIVERABLES contain
no other programming or materials in which any third party may claim superior,
joint, or common ownership, including any right or license, nor do they contain
derivative works of any programming or materials not owned in their entirety by
Ambix.
11.0 MODIFICATION OF SOFTWARE. ACC may request from Ambix modifications to or
-------------------------
DERIVATIVE WORKS of the SOFTWARE, including modifications or new versions of the
SOFTWARE to merge with other software programs or systems, thereby incorporating
the SOFTWARE into an overall business or information systems process. ACC shall
negotiate in good faith with Ambix to prepare such ENHANCEMENTS, modifications,
versions, or other DERIVATIVE WORKS, of the SOFTWARE. If ACC and Ambix cannot
agree on terms for such services, ACC shall be free to seek others to perform
such work who may use the SOURCE CODE and other DELIVERABLES for such purpose.
As a condition to any such work, any third party contractor shall agree to keep
the SOURCE CODE and other DELIVERABLES confidential and shall agree not to use
or disclose the intellectual property embodied in the SOURCE CODE in competition
with either ACC or Ambix. Further, any such modifications to, or other
DERIVATIVE WORKS of, the SOFTWARE shall belong to Ambix. Any modified version
of the SOFTWARE, or any system which incorporates the SOFTWARE in modified form,
just as in its original form as defined under this Agreement, shall be for ACC
or its AFFILIATE's own use as specified under this Agreement. The modified
version, the newly merged version, or other DERIVATIVE WORK of the SOFTWARE
shall remain subject to all of the terms and conditions of this Agreement. In
addition to the notices required by Section 10 of Schedule I (above), ACC or
AFFILIATE shall include the following notice in both machine readable form and
on all DOCUMENTATION for the modified version of the SOFTWARE or merged system
comprising any part or all of the SOFTWARE:
"This program or system includes information, concepts, ideas,
know-how, and techniques which are confidential and constitute
proprietary information and trade secrets of Ambix Acquisition
Corp. of Rochester, New York and are protected by copyright.
(C) 1995 Ambix Acquisition Corp."
In the event this Agreement is terminated for ACC's default, after any permitted
transition period, the SOFTWARE shall be completely removed from any system
containing the SOFTWARE and
<PAGE>
- 10 -
from any information systems process using the SOFTWARE, whether as a modified
program or modified system integrating Ambix programs in modified or unmodified
form, and treated as if permission to modify had never been granted and all
copies of all DOCUMENTATION shall be returned to Ambix.
12.0 WARRANTY. Ambix warrants that it is the rightful owner of the SOFTWARE
---------
and DOCUMENTATION and that it has the right to license the same to ACC. During
the term of this license, Ambix warrants that the SOFTWARE will be free of
ERRORS. Ambix further warrants that the SOFTWARE will not contain any CODE that
would disable or impair its operation. Ambix, at its expense, will immediately
correct any ERRORS reported to Ambix. Ambix's only other obligation under this
Warranty shall be to amend, revise, modify, or replace the SOFTWARE at Ambix's
then-current rates for programming and support services, unless Ambix and ACC
have an agreement for a fixed-price or other reimbursement for such services, in
which case the latter agreement shall control. ACC agrees that Ambix shall have
no other liability of any kind, whether actual, direct, indirect, consequential
or otherwise. The warranty contained in this Section 12 shall apply to Ambix
versions of the SOFTWARE, and Ambix makes no warranty as to any version of the
SOFTWARE to the extent modified by anyone other than Ambix. Subject to Ambix's
warranty obligations or the terms of another agreement with ACC for maintenance,
support, or other development services, amendment, revision, modification, or
replacement of the SOFTWARE will be performed at ACC's request at Ambix's then-
current rates for such services, subject to availability of Ambix personnel.
AMBIX MAKES NO OTHER WARRANTIES. WHETHER EXPRESS, IMPLIED OR STATUTORY, AS TO
ANY MATTER WHATSOEVER, AND DISCLAIMS ALL SUCH WARRANTIES INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
13.0 ACCEPTANCE. ACC will use the SOFTWARE during the sixty (60) business days
-----------
immediately following installation (the "ACCEPTANCE PERIOD") of the SOFTWARE to
determine whether or not it conforms to the SPECIFICATIONS and is free from any
ERROR. Any failure of the SOFTWARE to conform to the SPECIFICATIONS or to be
free from ERROR discovered by ACC, during the Acceptance Period, will be
reported promptly to Ambix. Ambix will immediately make any corrections
necessary to make the SOFTWARE conform with the SPECIFICATIONS and to be free
from ERROR. The SOFTWARE shall be deemed accepted by ACC upon completion of
such sixty (60) business day period, unless Ambix shall have been provided
written notice by ACC of the failure of the SOFTWARE, setting forth the
particular matters in which the SOFTWARE so fails to conform. Following receipt
of any such notice, the SOFTWARE shall be deemed accepted upon the correction of
any such
<PAGE>
- 11 -
non-conformity by Ambix and the lapse of a similar sixty-day period without a
report to Ambix by ACC.
14.0 LIMITATIONS OF AMBIX'S LIABILITY. Ambix's liability under this Agreement
---------------------------------
for damages, regardless of the form of action, shall be limited to money damages
which shall not exceed the total amount paid by ACC for the License and other
rights granted hereunder. This shall be ACC's exclusive remedy. In no event
shall Ambix be liable for any loss of product, loss of profit, loss of use or
any other actual, special, incidental, consequential damages, or other damages
of any kind whether foreseeable or unforeseeable, resulting from or arising out
of the license or use of the SOFTWARE, even if Ambix shall have been advised of
possibility of such loss or damages.
15.0 INTELLECTUAL PROPERTY INFRINGEMENT. If notified promptly in writing of
-----------------------------------
any action brought against ACC or any AFFILIATE based on a claim that ACC or any
AFFILIATE's use of the SOFTWARE or other DELIVERABLE infringes the IP RIGHTS of
a third party, Ambix will defend such action at its expense and pay the costs,
expenses (including attorneys' fees, whether incurred as the result of such
action or a claim to enforce this Agreement), and damages awarded in any such
action. Ambix will have the sole control of the defense of any such action and
all negotiations for its settlement or compromise, except that if any right of
ACC hereunder shall be limited as the result of such settlement or compromise,
ACC shall have the right to approve such settlement or compromise, but such
approval cannot be unreasonably withheld. At any time during the course of any
litigation arising out of a claim of infringement of an IP RIGHT, or if, in
Ambix's opinion, an IP RIGHT or any part thereof is likely to become the subject
of a claim of infringement, Ambix will, at its sole option and at its expense,
either procure for ACC the right to continue using the DELIVERABLE, replace or
modify the same with a compatible, functionally equivalent, noninfringing
product, or grant ACC a full refund of the LICENSE FEE paid herewith, and accept
its return. Ambix will not have any liability to ACC under any provision of
this paragraph to the extent the infringement, or claim thereof, is based upon
(a) the use of the SOFTWARE in combination with other software not furnished by
Ambix; or (b) the use of other than the latest supportable version of the
DELIVERABLE made available to ACC.
ACC will hold Ambix harmless from and against any expense, cost,
damage, judgment, or loss or other liability of any kind, for infringement of
any IP RIGHT to the extent it results from Ambix's compliance with ACC's
designs, specifications, instructions or from the use of the DELIVERABLE as
altered or modified by anyone other than Ambix.
<PAGE>
- 12 -
ACC is obligated hereby to promptly notify Ambix of any instance of
infringement or attempted infringement of any IP RIGHTS of Ambix which comes to
ACC's attention.
The foregoing states the entire liability of Ambix with respect to
infringements of an IP RIGHT by a DELIVERABLE or any part thereof or by its
operation.
16.0 TERMINATION FOR FAILURE TO PERFORM. The rights and obligations of the
-----------------------------------
parties if the other party defaults or otherwise fails to perform its
obligations hereunder shall be governed by this Section 16.
16.1 The license granted to ACC hereunder may be terminated by Ambix
upon not less than sixty (60) days written notice if ACC fails to perform any of
its material obligations or duties under this Agreement, unless within such
period ACC cures such failure. If ACC cannot in good faith cure such failure,
other than monetary defaults, within the sixty (60) day period, then ACC shall
be given an additional thirty (30) days in which to cure, provided that ACC must
commence cure immediately and continue to diligently pursue such cure of any
such failure(s). Upon termination of this Agreement, ACC shall immediately
cease using the SOFTWARE and, at the option of Ambix, ACC shall destroy or
return to Ambix all tangible forms of the SOFTWARE and the DOCUMENTATION and ACC
shall erase the SOFTWARE from all storage media in which it has been installed
or copied; provided, however, if ACC notifies Ambix in writing within 30 days
after the expiration of any permitted cure period hereunder, ACC shall have a
transition period not to exceed one year from the date of such notice in which
to shift from using the SOFTWARE and other DELIVERABLES to new software or other
computer system. During such transition period, ACC shall pay the support and
maintenance fees, and Ambix shall continue to provide support and maintenance.
Within (30) thirty days after termination of this Agreement, ACC shall certify
to Ambix in writing that it has destroyed or delivered to Ambix all tangible
forms of the SOFTWARE and that it has erased the SOFTWARE from all storage
media. ACC shall upon request by Ambix permit Ambix such access as shall be
necessary for Ambix to verify to its satisfaction that ACC has complied with the
foregoing requirements.
16.2 If Ambix (a) reasonably cannot perform its obligations under
this Agreement or does not provide support and maintenance for the SOFTWARE, (b)
does not enter into an agreement for the development of ENHANCEMENTS, DERIVATIVE
WORKS, modifications, or new versions of the SOFTWARE or other DELIVERABLE
requested by ACC pursuant to Section 11, or (c) makes an assignment for the
benefit of creditors, or commences or has commenced against it any proceeding in
bankruptcy, insolvency, or reorganization pursuant to bankruptcy laws, laws of
debtor's
<PAGE>
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moratorium, or similar laws, Ambix shall deliver the most current version of the
SOURCE CODE to ACC, and ACC shall have the right to use, modify, and create
DERIVATIVE WORKS of, the SOURCE CODE and other DELIVERABLES provided that ACC
continues to observe the obligations contained in Sections 2, 6, 10, 15, and 17.
17.0 EXPORT REGULATIONS. ACC agrees, regardless of permissions granted by
-------------------
Ambix, not to export, either directly or indirectly, any SOFTWARE or systems
incorporating the SOFTWARE without first obtaining any required license to
export or re-export from the United States Government or appropriate foreign
government as may be required and to comply with all United States and
international export regulations as applicable.
18.0 MISCELLANEOUS.
--------------
18.A Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties hereto, their personal representatives, and
permitted successors and assigns.
18.B Assignment. Either party may, without the prior written consent
----------
of the other, assign its rights under this Agreement so far as those rights
constitute part of the sale, merger, consolidation, reorganization, or transfer
of substantially all of the assigning party's business or assets.
18.C Entire Agreement. This Agreement, the related maintenance and
----------------
support agreement between the parties, and the Software License Agreement, dated
March 30, 1995, between ACC and Ambix Systems Corp. (the "NetOps Agreement"),
contain the entire understanding between or among the parties and supersede any
prior understanding, memoranda or other written or oral agreements between or
among any of them with respect to the Agreement's subject matter. To the extent
there are conflicts, ambiguities, or inconsistencies between this Agreement and
the NetOps Agreement, the terms and conditions of this Agreement shall control.
There are no representations, agreements, arrangements or understandings, oral
or written, between or among any of the parties relating to the subject matter
of this Agreement which are not fully expressed herein.
18.D Modifications or Waiver. No modification or waiver of this
-----------------------
Agreement or any part of this Agreement shall be effective unless in writing and
signed by the party or parties sought to be charged therewith. No waiver of any
breach of condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of like or different nature.
No waiver of any breach or condition of this Agreement by or with respect to any
party hereto shall be deemed to be a waiver of the same breach or condition with
respect to
<PAGE>
- 14 -
any other party hereto. No course of dealing between or among any of the
parties hereto will be deemed effective to modify, amend, or discharge any part
of this Agreement or the rights or obligations of any party hereunder.
18.E No Third Party Beneficiary. None of the provisions of this
--------------------------
Agreement shall be for the benefit of, or enforceable by, any person or entity
not a party hereto, except an AFFILIATE.
18.F Partial Invalidity. If any provision of this Agreement shall be
------------------
held invalid or unenforceable by competent authority, such provision shall be
construed so as to be limited or reduced to be enforceable to the maximum extent
compatible with the law as it shall then appear. The total invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision were omitted.
18.G Notices. Any notice or other communication required or permitted
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) upon hand delivery, or (b) on the third day following delivery to the
U.S. Postal Service as certified or registered mail, return receipt requested
and postage prepaid, or (c) on the first day following delivery to a nationally
recognized U.S. or foreign overnight courier service, fee prepaid, return
receipt requested or other confirmation of delivery requested, or (d) when
telecopied or sent by facsimile transmission if an additional notice is also
given under (a), (b), or (c) above within three days thereafter. Any such
notice or communication shall be delivered or directed to a party at its address
set forth below or at other address as may be designated by a party in a notice
given to all other parties hereto in accordance with the provisions of this
section.
Notice to Ambix shall be sent to:
Ambix Acquisition Corp.
400 West Ave.
Rochester, New York 14611
Attn: Andrew McIntosh, President
Notice to ACC shall be sent to:
ACC Corp.
400 West Ave.
Rochester, New York 14611
Attn: Mr. David K. Laniak, Chief Executive Officer
<PAGE>
- 15 -
18.H Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the United States and the State of New
York without reference to any New York conflict or choice of law principle.
18.I Jurisdiction and Venue. In the event that any legal proceedings
----------------------
are commenced in any court with respect to any matter arising under this
Agreement, the parties hereto specifically consent and agree that:
18.I.a the courts of the State of New York and/or the United States
Federal Courts located in the State of New York shall have exclusive
jurisdiction over each of the parties hereto and over the subject matter of any
such proceedings; and
18.I.b the venue of any such action shall be in Monroe County, New
York and/or the United States District Court for the Western District of New
York.
18.J Injunctive Relief. In the event of a breach or threatened
-----------------
breach of any of the terms of Sections 2, 10, 11, 15 or 17 of this Schedule I by
a party, the other party shall be entitled to an injunction restraining the
breaching party from committing any breach of this Agreement without showing or
proving any actual damages and without diminishing any other right or remedy
which the nonbreaching party may have at law or in equity to enforce the
provisions of this Agreement. The breaching party waives any right it may have
to require the nonbreaching party to post a bond or other security with respect
to obtaining or continuing any injunction or temporary restraining order, and
releases the nonbreaching party and its officers, directors, and shareholders
from, and waives any claim to, damages against them which the breaching party
may have with respect to the breaching party's obtaining any injunction or
restraining order pursuant to this Agreement. All out-of-pocket expenses
incurred by the nonbreaching party in a successful application for an injunction
shall be borne by the breaching party, including without limitation, all fees
and expenses for agents, representatives, counsel and accountants.
18.K Effect of Termination. Unless otherwise specifically agreed in
---------------------
writing, the terms of Sections 6, 10, 11, 14, 15, 16, 17 and 18 shall survive
any termination, cancellation, repudiation or rescission of this Agreement by
either party for a period of three years after termination, whether or not for
cause, and under such circumstances either party may continue to enforce such
terms as if this Agreement were otherwise in full force and effect.
18.L Confidentiality. Except as contemplated by this Agreement or as
---------------
necessary to carry out the transactions contemplated by this Agreement, the
terms of this Agreement, and all information or documents furnished by any party
to the other,
<PAGE>
- 16 -
shall be kept confidential by the party to whom furnished and shall not be
otherwise used or disclosed by the recipient except to recipient's accountants
or attorneys, or as may be required, in the good faith judgment of the
disclosing party, by law or rule or regulation of any governmental agency,
without the prior written consent of the other party. If this transaction is
not consummated, each party shall return to the other all such documents
furnished hereunder, including all copies, and shall continue to keep
confidential, and neither use nor disclose, any such information.
18.M Headings. The headings contained in this Agreement are inserted
--------
for convenience only and do not constitute a part of this Agreement.
18.N Fair Meaning. This Agreement shall be construed according to
------------
its fair meaning. The language used shall be deemed the language chosen by the
parties hereto to express their mutual intent, and no presumption or rule of
strict construction will be applied against any party hereto.
18.O Gender. Whenever the context may require, any pronoun used
------
herein shall include the corresponding masculine, feminine or neuter forms and
the singular of nouns, pronouns and verbs shall include the plural and vice
versa.
18.P Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, and all of said
counterparts together shall constitute but one and the same instrument.
18.Q Further Assurances. The parties hereto shall execute and
------------------
deliver any and all additional writings, instruments and other documents and
shall take all such further actions as shall be reasonably required to effect
the terms and conditions of this Agreement.
19.0 SOURCE CODE DEPOSIT WITH ACC. ACC shall provide at its headquarters a
----------------------------
fireproof vault or safe reasonably satisfactory to Ambix to serve as ACC's
depository for the SOURCE CODE and related DOCUMENTATION. Immediately upon
execution of this Agreement, and thereafter each time a new release of the
SOURCE CODE is made executable into OBJECT CODE (whether or not made available
in a commercial release) or as ACC may request but not more than twice per
calendar year, Ambix shall deliver to ACC a complete copy of all SOFTWARE in
both OBJECT CODE and SOURCE CODE form and with all applicable DOCUMENTATION and
other tools and materials (e.g., proprietary workbenches, compilers, lists of
third party software, etc.), which a reasonably skilled programmer would find
necessary or useful to maintain, support, enhance, and create DERIVATIVE WORKS
from the SOFTWARE (the
<PAGE>
- 17 -
foregoing are referred to as the "SOURCE MATERIAL"). ACC shall deposit the
SOURCE MATERIAL into such vault or safe for safekeeping, and such deposit shall
be witnessed by a representative of Ambix, if requested. ACC shall have the
right, but not more than twice per year, to engage a consultant to verify the
accuracy of the SOURCE MATERIAL, provided such consultant executes a
confidentiality agreement with ACC regarding the SOURCE MATERIAL. Except for
such verification and as otherwise contemplated by the terms of this Agreement,
ACC shall keep the SOURCE MATERIAL in the vault or safe at all times. If ACC
removes the SOURCE MATERIAL to exercise its rights under this Agreement, ACC
shall continue to observe its obligations under Sections 2, 10, 11, and 15 of
this Agreement.
20.0 RIGHT OF DEMONSTRATION ON ACC PREMISES. Upon reasonable notice and with
--------------------------------------
the mutual agreement of ACC, Ambix may have access to ACC's operations
facilities for purposes of demonstrating the use of the SOFTWARE to prospective
customers of Ambix. During such visits, ACC at its sole option may withhold
information it deems proprietary from any visitors. Ambix will take precautions
not to disturb or encumber the operations during such visits. ACC agrees to
make an employee available to answer questions should questions arise during a
site visit.
21.0 COMMISSION. Ambix shall pay ACC a commercially reasonable and customary
-----------
commission upon the sale or license by Ambix or any affiliate of any system
which uses a significant portion of the CODE or any DERIVATIVE WORK thereof.
<PAGE>
- 18 -
SCHEDULE II: THE SOFTWARE
1.0 Intermediation SOFTWARE (Installed at ACC Corp.)
Full design and operational documentation is already developed.
Intermediation is the automated or semi-automated process of acquiring Call Data
Records and other data records from telephone switches. This system includes
both general purpose data communications SOFTWARE as well as SOFTWARE which
embodies special knowledge of DSC switches and the operating software of DSC
which controls those switches.
The SOFTWARE written in C++, using object-oriented design and programming
methods with easily maintainable class hierarchies and identificatory
declaration and enumeration of all data types. Current Version operates on
commercially available Sun MicroSystems micro computers under the Solaris
operating system.
2.0 Rating SOFTWARE (Installed in ACC UK Long Distance Ltd)
Full design and operational documentation is already developed.
3.0 RIT Call Accounting SOFTWARE (Installed for RIT)
Currently being documented to customer specifications.
4.0 Network Operations SOFTWARE (In Beta Test)
Currently being documented to customer specification.
5.0 Graphic User Interface Class Library (to be placed in escrow)
Full design and implementation documentation is proprietary.
6.0 Network Modeling SOFTWARE (final development stage)
Full design and implementation documentation is proprietary.
7.0 Various ADABASE natural programs (installed in ACC UK Long Distance Ltd).
Already documented and delivered.
<PAGE>
EXHIBIT 99.7
BILL OF SALE
Seller: Ambix Systems Corp. February 6, 1996
400 West Avenue
Rochester, NY 14611
Buyer: ACC Corp.
400 West Avenue
Rochester, NY 14611
Hardware and software modifications to
configure the Ambix rates to the ACC
UK Long Distance Ltd. billing systems. $221,000
Ambix "Net Ops" Application, Version 1.0,
release 1.0. $310,470
Software modifications to configure the
Ambix rates for RIT call processing, and
RIT call processing system (Version 1.0,
Release 1.0, modification level 0). $176,000
Ambix "AIA" Intermediation System (Version 2.0,
Release 1.3, modification level 2). $ 65,000
--------
TOTAL $772,470
========
Acknowledgement: Seller, Ambix Systems Corp., a New York corporation, having
its principal place of business at 400 West Avenue, Rochester, NY 14611, in
consideration of the above amounts, does hereby sell, assign, and transfer to
Buyer, ACC Corp., the indefinite right to use the above property (Object code
only) the Seller further acknowledges that all amounts due Seller from the Buyer
related to the above have been received prior to December 31, 1995. Buyer
acknowledges that the above object code and related systems have substantially
met the conditions for approval and acceptance for their intended use by Buyer
subject to the terms of acceptance set forth in Section 13 of a Software License
Agreement between each company dated on or about February 6, 1996.
ATTEST:
/s/ Andrew McIntosh /s/ David K. Laniak
- ------------------------- -----------------------
Andrew McIntosh, President David K. Laniak
Ambix Systems Corp. Chief Executive Officer
ACC Corp.
<PAGE>
EXHIBIT 99.8
Rochester
April 27, 1995
Mr. Richard T. Aab
29 Woodstone Rise
Pittsford, New York 14534
Re: Proposal/Ambix Systems, Inc.
Dear Mr. Aab:
The Special Committee (the "Committee") has reviewed the proposal, dated
April 13, 1995, submitted by you to the Committee with respect to the
disposition of your interest in Ambix Systems, Inc. ("Ambix"). The Committee is
pleased that your proposal recognizes the need and desirability of disposing of
your interest in Ambix because of your interest in and duties to ACC Corp. (the
"Corporation"). The Committee also appreciates the difficult decision you have
been asked to make and your cooperation in this matter. The Committee would
like, however, to suggest certain modifications to your proposal in the event
you decide to transfer your interests to the Corporation and to reach an
understanding with you on such changes in order to resolve the pending matters.
The purpose, therefore, of this letter is to set forth our mutual
understanding as to the manner of disposition of your interest in Ambix to the
Corporation and the resolution of any subsequent issues related thereto as
follows:
All interests transferred All of your ownership rights and
to the Corporation: interests in Ambix will be assigned
- ------------------- and transferred to the Corporation
for nominal consideration in the
manner provided for herein as soon as
practicable after your execution and
delivery of a copy of this letter
agreement. Based on your proposal
dated April 13, 1995, it is
contemplated that the Corporation
will receive a 67% interest in and to
all of the issued and outstanding
shares of capital stock of Ambix free
and clear of all encumbrances and
restrictions on transfer; all of your
ownership rights and interests in and
to the capital stock of Ambix will be
referred to hereinafter as the
"Shares." (It is anticipated with
respect to debt obligations of Ambix
to you and in connection with the
transfer of Shares to the Corporation
that (i) you will convert all debt
obligations of Ambix to you into
capital stock and that such resulting
shares along with all of the other
shares of Ambix capital stock that
you own of record or beneficially
will be the shares transferred to the
Corporation; or (ii) your rights, if
any, to convert Ambix debt
obligations into shares of capital
stock will be transferred to
the
<PAGE>
Mr. Richard T. Aab
April 27, 1995
Page 2
Corporation and may be exercisable by
the Corporation at any time without
restriction; or (iii) you will
release and discharge Ambix of all of
its debt obligations to you.)
Escrow: The documents executed and delivered
- ------- by you to effect the transfer of the
Shares will be held in escrow by
counsel to the Committee or by
independent escrow agent, as mutually
determined by you and the Committee.
The documents will remain in escrow
pending the Committee's completion of
its due diligence as to whether the
Corporation should accept the
transfer and delivery of the Shares.
The Committee will examine with
respect to Ambix, among other things,
the corporate records, shareholder
agreements and arrangements,
financial statements, quality
performance of its products and
services, markets, status of
technology and intellectual property
rights and other matters deemed
relevant by the Committee to its
decision as to whether to accept the
transfer and delivery of the Shares.
During the escrow period, you agree
to take such further action, execute
and deliver such further documents,
instruments and agreements and
furnish such information, as may be
necessary or desirable in connection
with the Committee's due diligence,
its consideration as to whether to
accept delivery of the Shares and the
proper transfer of the Shares to the
Corporation. The Committee shall
also be entitled to vote or direct
the voting of the Shares during the
escrow period for all purposes.
Guaranty: In the event the Corporation elects
- -------- to accept delivery of the Shares, the
Corporation will guarantee loans to
Ambix by M&T Bank up to approximately
$400,000 and will cause you to be
released from your current personal
guarantee to M&T Bank for such loans
or will fully indemnify you and hold
you harmless with respect to your
guarantee.
Dealings with Ambix: Upon delivery of the Shares in escrow
- ------------------- and the bona fide disposition of all
of your interest in Ambix in
accordance therewith, the Corporation
in the prudent judgment of its
management may work with Ambix (in
addition to or separate from any
other vendors with which management
so chooses to work) to resolve the
current and anticipated software
issues and concerns in the United
Kingdom. The understanding of the
Special Committee is that
any
<PAGE>
Mr. Richard T. Aab
April 27, 1995
Page 3
arrangements with Ambix will be at
minimal cost to the Corporation and
without any liability to the
Corporation until such time as
management has satisfied itself that
the Ambix software performs properly.
At such time, management, by prior
agreement with Ambix, will have the
opportunity to exercise the
Corporation's rights to complete the
terms of a contractual arrangement
with Ambix relating to the
Corporation's needs in the United
Kingdom at a price and on other terms
and conditions thereupon considered
to be satisfactory and fair to the
Corporation and as approved by the
Committee.
Nonacceptance In the event the Committee elects not
- -------------- to accept delivery of the Shares for
of Delivery of Shares: any reason, then the Shares may be
- --------------------- disposed of in a manner approved by
the Committee after consultation with
you. In the event the Shares are
returned to you, then any proposals
for additional business with Ambix
after such date may not be entered
into by the Corporation unless and
until you have otherwise disposed of
your interest in Ambix in a bona fide
manner approved by the Committee.
Acceptance of Upon acceptance by the Committee of
- ------------- the delivery of the Shares, then
Delivery of Shares: subsequent dealings with Ambix shall
- ------------------ be left to the prudent judgment of
management unless there is thereafter
any personal interest in Ambix by you
or any other officer or employee of
the Corporation.
If the proposal set forth in this letter meets with your approval and
agreement, then would you please sign where indicated below and return a duly
executed copy of this letter to the Special Committee.
Very truly yours,
SPECIAL COMMITTEE
/s/ David K. Laniak
By: _____________________________
David K. Laniak
Chairman of the Special Committee
<PAGE>
Mr. Richard T. Aab
April 27, 1995
Page 4
ACCEPTED AND AGREED TO:
/s/ Richard T. Aab
__________________________
Richard T. Aab
Dated: May 15, 1995
<PAGE>
Exhibit 99.9
LEASE
LANDLORD
THE HAGUE CORPORATION
TENANT
ACC CORP.
DATE: JANUARY 25, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
TERM SHEET............................................... T-1
1. DEFINITIONS......................................... 1
2. PREMISES............................................ 3
3. RIGHT OF FIRST REFUSAL.............................. 4
4. TERM OF LEASE; COMPLETION OF IMPROVEMENTS........... 5
5. EXTENSION OF TERM................................... 6
6. RENT, ADDITIONAL RENT............................... 7
7. COMPLIANCE WITH LAWS/USE OF PREMISES................ 9
8. SERVICES AND UTILITIES.............................. 9
9. PARKING............................................. 11
10. ACCESS TO THE PREMISES.............................. 12
11. COMMON AREA MAINTENANCE............................. 12
12. IMPROVEMENTS........................................ 13
13. REPAIRS............................................. 13
14. RIGHT OF ENTRY BY LANDLORD.......................... 14
15. INDEMNIFICATION..................................... 14
16. INSURANCE........................................... 15
17. SUBROGATION......................................... 16
18. LIENS AND ENCUMBRANCES.............................. 16
19. HOLDING OVER........................................ 16
20. ASSIGNMENT AND SUBLETTING........................... 17
21. DEFAULT AND RE-ENTRY................................ 18
22. CONDEMNATION........................................ 20
23. DESTRUCTION OF LEASED PREMISES...................... 21
24. PROPERTY TAXES...................................... 21
25. QUIET ENJOYMENT..................................... 23
26. SUBORDINATION....................................... 23
27. ESTOPPEL CERTIFICATE BY TENANT...................... 24
28. CONSENT BY LANDLORD................................. 24
29. HAZARDOUS SUBSTANCES................................ 25
30. MICROWAVE DISHES, RADIO ANTENNAS and
OTHER TRANSMISSION/RECEIVING EQUIPMENT.............. 26
31. BROKERS............................................. 26
32. NOTICES............................................. 26
33. RELATIONSHIP........................................ 27
34. COMPLETE AGREEMENT.................................. 27
35. AUTHORITY FOR EXECUTION............................. 28
36. BINDING EFFECT...................................... 28
37. EXECUTION........................................... 28
38. RULES............................................... 28
39. FORCE MAJEURE....................................... 29
40. AMERICANS WITH DISABILITIES ACT OF 1990............. 29
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
41. MEMORANDUM OF LEASE................................. 31
42. CONTINGENT ON SPECIAL USE PERMIT.................... 31
43. SECURITY............................................ 31
</TABLE>
-ii-
<PAGE>
Exhibit
- -------
A Buildings
B Premises
C Confirmation of Commencement Date and Termination Date
D Janitorial Services
E Estoppel Certificate
F Landlord's Work
-iii-
<PAGE>
TERM SHEET
----------
<TABLE>
<CAPTION>
Basic Lease Provisions
- ----------------------
<S> <C>
1. Date: January 25, 1994
2. Landlord: The Hague Corporation
Suite 400, 39 State Street
Rochester, New York 14614
3. Tenant: ACC Corp.
4. Section 1(b) Building Address:
400 West Avenue
Rochester, NY 14614
5. Section 1(d) Business Hours:
8:00 a.m. - 5:00 p.m. Monday through
Friday
8:00 a.m. - 12:00 p.m. Saturday
6. Section 1(g) Floors: Parts of 2nd and 3rd Floors
in Buildings 1, 2, 16, 16A
7. Section 1(h) Exhibits: A, B, C, D, E, F, G.
8. Section 1(k) Tenant's Percentage Share: 27.24%
for Property Taxes and Operating
Expenses, except 62% for Operating
Expenses of snow removal and 50%
security costs.
9. Section 2 Premises
--------
Rentable Square Feet: 76,000; Tenant
shall be provided 2500 square feet of
contiguous space on the 2nd floor at
no additional Base Rent or Additional
Rent charges.
Buildings
---------
Rentable Square Feet: 266,292 (for
Tenant's Percentage share calculation
of Operating Expenses except for snow
removal and security costs, for which
the Rentable square feet for Tenant's
Percentage share of security costs
calculation shall be 112,952)
10. Section 3 Term Commencement Date: 5/1/94
Rent Commencement Date: 7/1/94
11. Section 3 Term Expiration Date: 6/30/04
</TABLE>
T-1
<PAGE>
- 2 -
<TABLE>
<S> <C>
12. Section 4 Extended Term Commencement Date:
7/1/04
13. Section 4 Extended Term Expiration Date:
6/30/09
14. Section 5(a) Base Rent:
$507,682.00/yr. years 1-2 (based on
$7.00 p.s.f.)
$616,471.00/yr. years 3-5 (based on
$8.50 p.s.f.)
$688,997.00/yr. years 6-10 (based on
$9.50 p.s.f.)
Monthly Installment Amount:
$42,306.83/mo. years 1-2
$51,372.58/mo. years 3-5
$57,416.42/mo. years 6-10
15. Section 6 Extended Term Base Rent:
$761,523.00/yr.
(based on $10.50 p.s.f.)
$63,460.25/mo.
16. Section 7 Use: general office use and related
telecommunications use (see Lease)
17. Section 8 Parking: Landlord to provide 3
spaces per 1,000 square feet of the
Premises; 150 initially
18. Section 32 Broker: None
19. Paragraph 33 Landlord's Address for Notice:
Suite 400, 39 State Street
Rochester, New York 14614
Tenant's Address for Notice:
400 West Avenue
Rochester, New York
Additional Provisions: See Exhibits "F" & "G" - Landlord's
Work, Tenant's Plans
Landlord's Work: Those items of work set forth in
Exhibit "F"
</TABLE>
T-2
<PAGE>
- 3 -
IN WITNESS WHEREOF, Landlord and Tenant have executed the Lease to
which this Term Sheet is attached by signing and dating this Term Sheet and the
first page of the Lease.
TENANT: LANDLORD:
ACC CORP. THE HAGUE CORPORATION
By: /s/ Michael R. Daley By: /s/ David M. Flaum
------------------------------ -------------------------------
Its: VP - Finance Its: President
------------------------------ -------------------------------
T-3
<PAGE>
- 4 -
LANDLORD
--------
STATE OF NEW YORK )
COUNTY OF MONROE )
The foregoing instrument was acknowledged before me this 25th day of
January, 1994, by DAVID M. FLAUM, President of THE HAGUE CORPORATION, a New York
corporation, on behalf of the corporation.
/s/ Marcia A. Benwitz
---------------------
Notary Public
TENANT
------
STATE OF NEW YORK )
COUNTY OF MONROE )
The foregoing instrument was acknowledged before me this 25th day of
January, 1994, by MICHAEL R. DALEY, of ACC CORP., a Delaware corporation, on
behalf of the corporation.
/s/ Marcia A. Benwitz
---------------------
Notary Public
T-4
<PAGE>
LEASE
-----
THIS LEASE, dated as of the 25th day of January, 1994, between THE
HAGUE CORPORATION, a New York Corporation with offices for the transaction of
business located at Suite 400, 39 State Street, Rochester, New York 14614
(herein called "Landlord") and ACC CORP., a Delaware corporation with offices
for the transaction of business located at 39 State Street, Rochester, New York
14614 (herein called "Tenant").
W I T N E S S E T H:
Landlord hereby leases to Tenant, and Tenant hereby takes and hires
from Landlord, the Premises as defined in Paragraph 1(g) below, for the term and
subject to the terms, covenants, agreements and conditions hereinafter set
forth, to each and all of which Landlord and Tenant hereby mutually agree.
1. DEFINITIONS
-----------
Unless the context otherwise specifies or requires, the following
terms shall have the meanings herein specified:
(a) "Additional Rent" shall mean any payment due Landlord under the
terms of this Lease except for Base Rent and Extended Term Rent. All remedies
applying to the non-payment of Base Rent and Extended Term Rent shall be
applicable to Additional Rent.
(b) "Buildings" shall mean all of the buildings and the land and other
real property in the parcel more particularly described on Exhibit "A" hereto,
excluding Lot J, all easements and rights of way affecting Tenant's Premises,
and all other improvements on or appurtenances to said parcel, as presently
exist and may change from time to time.
(c) "Business Day" shall mean Monday through Friday and Saturday
[only as noted in (d) below], but excludes the following holidays or the days
on which the holidays are designated for observance: New Year's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
(d) "Business Hours" shall be the hours of 8:00 a.m. to 5:00 p.m.
Monday through Friday, and 8:00 a.m. to 12:00 p.m. Saturday.
(e) "Calendar Year" shall mean any period during the Initial Term or
any Extended Term of this Lease commencing on January 1 and ending on the next
following December 31.
<PAGE>
- 2 -
(f) "Common Areas" shall mean all interior and exterior common areas,
including, but not limited to, parking areas, driveways, building's signs,
landscaping, paving, sidewalks, hallways, stairways, escalators, elevators,
common entrances, lobbies, restrooms and other similar public areas and access
ways.
(g) "Premises" shall mean the following: (i) the portion of the
Buildings 1, 2, 16, and 16A located on parts of the second and third floor(s),
which is outlined on the floor plan attached hereto as Exhibit "B"; (ii) all
fixtures, improvements and other property now installed or located in the
Premises plus any improvements described in Section 4(b); and (iii) together
with the appurtenances including the right to use the Common Areas.
(h) This "Lease" shall mean and include this instrument, the Term
Sheet, Landlord's Worksheet, Exhibits A, B, C, D, E, F and G and all other
Exhibits, if any, made a part of this Lease.
(i) "Operating Expenses" shall mean any and all of Landlord's costs
and expenses paid or incurred in operating, managing and maintaining the Common
Areas, as defined in Section 1(f) of this Lease, for each Lease Year or partial
Lease Year, as determined by Landlord in accordance with generally accepted
accounting principles, consistently applied, including by way of illustration
and not limitation: insurance premiums pursuant to Section 16 of this Lease,
water, sewer, electrical and other utility charges (e.g., lighting in the Common
Area parking lots) other than the separately billed electrical and other
charges, if any, paid by Tenant as provided in this Lease; service and other
charges incurred in the maintenance of the elevator; refuse disposal, snow
removal, cleaning and other janitorial services; tools and supplies; repair
costs, landscape maintenance costs; security services in the Common Areas (if
any); license, permit and inspection fee(s); Landlord's cost of wages and
related employee benefits payable for the maintenance and operation of the
Common Areas; and in general all other costs and expenses which would, under
generally accepted accounting principles, be regarded as operating and
maintenance costs and expenses for the Common Areas.
(j) "Property Taxes" shall mean the total of all real property taxes
and currently due installments of assessments, special or otherwise, levied
upon, or with respect to or reasonably allocable to the Buildings, imposed by
any taxing authority having jurisdiction. Property Taxes also shall include all
taxes, levies and charges which may be assessed, levied or imposed in
replacement of or in addition to all or any part of ad valorem real property
taxes as revenue sources, and which in whole or in part are measured or
calculated by, based upon or allocable to the Buildings, the leasehold estate of
Landlord or Tenant, or the rent and other charges payable hereunder, and shall
include sewer and water charges, pollution, pure water, and other environmental
control charges, if any.
<PAGE>
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If Landlord shall enter into any payment in lieu of tax or other
similar agreement with any taxing entity, in lieu of or as a substitute in whole
or part for any Property Taxes, such payments shall be deemed included in
Property Taxes.
(k) "Rent Commencement Date" shall mean the date Tenant's Base Rent
and Additional Rent shall commence being due and owing, which will be July 1,
1994 or two months after delivery of possession of the Premises to Tenant with
Landlord's Work substantially completed.
(l) "Tenant's Percentage Share" shall mean the percentage figure which
is equal to the rentable square footage of the Premises divided by the rentable
square footage of the Buildings. Initially, such percentage shall be 27.24% for
Property Taxes and Operating Expenses (based on 72,526 rentable square feet of
the Premises), except that it shall be 62% for Tenant's share of snowplowing
costs and 50% for Tenant's share of security services.
(m) "Term Sheet" shall mean the terms set forth in the foregoing
paragraphs delineated as "Term Sheet," which terms are hereby incorporated in
this Lease as if set forth in full. In the event of any conflict between any
provision of the Term Sheet and this Lease, the Lease shall control.
2. PREMISES
--------
(a) Landlord has caused the Premises to be measured by architects,
David R. Cassara & Associates, and the Premises contain approximately 72,526
rentable square feet.
Either party may at any time prior to the Rent Commencement Date cause
the Premises to be measured, at the cost of the electing party, and if the area
of the Premises as so measured, is more or less than the number of square feet
set forth above, then the Base Rent and Additional Rent charges payable herein
shall be adjusted in proportion to the square footage of the Premises as so
measured.
Tenant represents that Tenant is familiar with the condition of the
Premises. Tenant shall accept possession of the Premises subject to the
completion of Landlord's work as described in this Lease in Exhibit "F". Tenant
has received and reviewed Landlord's environmental and engineering studies and
surveys for the Buildings, prior to the execution of this Lease, to make
independent assessments of the issues contained therein.
Tenant and its agents, employees and invitees have the non-exclusive
right with others designated by Landlord to the free use of the Common Areas and
the land on which the Buildings is located for the Common Areas' intended and
normal purpose, subject to Landlord's reasonable regulation. Landlord may
change the Common Areas if the
<PAGE>
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changes do not materially and unreasonably interfere with Tenant's access to the
Premises or use of them.
3. RIGHT OF FIRST REFUSAL
----------------------
(a) Receipt of Offer; Exercise.
--------------------------
If at any time from and after the date hereof the Landlord shall
receive a bona fide offer from a third party ("Lease Offer") to lease any part
of or all of the remainder of the second floor of buildings 16 and 16A and not
included in the Demised Premises ("Adjacent Space") as shown on Exhibit A which
Lease Offer the Landlord shall desire to accept, the Landlord will immediately
notify Tenant pursuant to Section 3 of this Lease of all the terms and
conditions of the Lease Offer, enclosing a copy of the Lease Offer, and Tenant
shall have the right or option for a period of thirty (30) days after receipt of
such notice to elect to lease the Adjacent Space for the same consideration and
upon the same terms and conditions set forth in this Lease. Such election shall
be in writing and shall be delivered to the Landlord either personally or by
certified or express mail before the end of the thirty (30) day period.
(b) Failure to Exercise Right.
-------------------------
If such election shall not be exercised within the thirty (30) day
period, the Landlord shall have the right to lease the Adjacent Space to any
tenant but only upon the terms and conditions set forth in the Lease Offer and
within one (1) year of the receipt of the notice by Tenant.
(c) Failure of Landlord to Lease.
----------------------------
If the Adjacent space is not leased as provided in 3(b) above, then
upon the receipt of any further Lease Offer which the Landlord desires to
accept, the provisions of Section 3(a) hereof shall be and remain effective.
(d) Compliance.
----------
It is agreed that an Affidavit by the Landlord's attorney, showing
compliance with the provisions hereof with a copy of the Lease Offer attached
and a failure on the part of Tenant to exercise this first refusal option shall
be sufficient proof that this option is terminated.
<PAGE>
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4. TERM OF LEASE; COMPLETION OF IMPROVEMENTS
-----------------------------------------
(a) The term of this Lease (hereinafter referred to as the "Initial
Term") shall commence on May 1, 1994 or the date of delivery of possession of
the Premises to Tenant with Landlord's Work substantially complete as certified
by the supervisory engineer of Tenant set forth in (b) below, and, unless sooner
terminated as hereinafter provided, shall end on June 30, 2004 (hereinafter,
respectively, the "Term Commencement Date" and the "Term Expiration Date").
Notwithstanding the above, Tenant's Base Rent and Additional Rent obligations
shall commence on July 1, 1994 or 2 months following the date of delivery of
possession of the Premises to Tenant with Landlord's Work substantially
complete. Landlord shall deliver the Premises free from all tenancies and
occupancies and free from all suits, complaints, reports, notices or orders with
respect to violations of any federal, state, municipal, or other governmental
laws and regulations.
On the expiration date, or earlier termination date of this Lease,
Tenant shall quit and surrender the Premises, broom clean, and in good condition
and repair, excepting only reasonable wear and tear, together with all
alterations, fixtures, installations and improvements which may have been made
in or attached on or to the Premises, or the Buildings (as provided for
elsewhere in this Lease), except for damages caused by fire or other casualty or
the elements, and except for improvements, installations, etc., which Tenant is
required to remove in accordance with other provisions of this Lease. Upon
surrender, Tenant may remove any of its trade fixtures, provided that it repairs
any structural damage to the Premises, or Buildings, as the case may be, caused
by such removal.
(b) Prior to the Term Commencement Date, Landlord shall construct or
install in the Premises the improvements to be constructed or installed by
Landlord, at Landlord's cost and expense, as set forth in the Term Sheet in
accordance with plans and specifications to be attached hereto as Exhibit "F"
(It is understood by Tenant and Landlord that after the execution of this Lease,
the Landlord will furnish the plans and specifications which will be attached
hereto as Exhibit "F" upon approval of the supervisory engineer of Tenant as set
forth below.) The improvements shall be completed in a good and workmanlike
manner and comply with all applicable laws, ordinances, rules and regulations of
government authority. Landlord agrees to expend not less than $2.4 million
dollars for improvements and alterations to be completed in accordance with the
plans and specifications to be attached hereto as Exhibit "F" above described.
To the extent that $2.4 million is not expended for such improvements and
alterations, the Base Rent set forth in Section 6 of this Lease shall be reduced
and prorated proportionately by the amount of the difference between actual
expenditures and the sum of $2.4 million over the first six (6) years of the
Lease Term. A supervisory engineer designated by Tenant and selected by the
Special Committee of Tenant shall, at Tenant's sole cost and expense, audit and
monitor the expenditures of Landlord for the purposes of determining and
certifying the total dollar amount expended by Landlord for the improvements and
alterations set forth in Exhibit "F" attached hereto. Landlord shall fully
cooperate in furnishing all information needed by the supervisory engineer of
Tenant for the purposes of said engineer's certification to the Special
Committee.
<PAGE>
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This Lease is contingent upon approval by the supervisory engineer of
Tenant, within a reasonable period of time following receipt, of plans and
specifications to be furnished by Landlord and to be attached hereto as Exhibit
"F" as above described.
Said Supervisory engineer shall be authorized to review and monitor
the work being performed by the Landlord, its agents and contractors, and said
supervisory engineer shall report to the Special Committee with respect to the
compliance of the work being performed in accordance with said plans and
specifications to be attached hereto as Exhibit "F", and, where required, that a
certificate of occupancy from the City of Rochester has been issued. The
supervisory engineer of Tenant shall have the authority to approve substantial
completion of the Premises prior to commencement of the Lease term, provided
that a "punch list" of items remaining to be performed by Landlord has been
approved by said supervisory engineer, and a completion date has been agreed
upon by both the supervisory engineer and Landlord for completion of all items
on said "punch list".
(c) Tenant agrees to perform or cause to be performed all other work
necessary for the completion of the Premises, at Tenant's cost and expense,
including those items set forth in the Term Sheet, in a good and workmanlike
manner and in compliance with all applicable laws, ordinances, rules and
regulations of Landlord and of governmental authorities, and in accordance with
plans and specifications submitted and approved by Landlord. Such plans shall
be annexed hereto as Exhibit "G".
(d) Landlord and Tenant agree, upon demand of the other, to execute a
declaration in the form attached hereto as Exhibit C and made a part hereof by
reference, expressing the Term Commencement Date and Term Expiration Date.
5. EXTENSION OF TERM BEYOND INITIAL TERM
-------------------------------------
Provided: Tenant shall not be in default of any material terms or
conditions of this Lease beyond any applicable cure periods; this Lease is in
full force and effect; and Tenant is in possession of the Premises, Tenant shall
have the option to extend this Lease (hereinafter the "Extended Term")
commencing July 1, 2004 and, unless sooner terminated as herein provided, ending
on June 30, 2009 (hereinafter, respectively, the "Extended Term Commencement
Date" and the "Extended Term Expiration Date") by giving Landlord written notice
of its intention to do so at least six (6) months prior to the end of the
Initial Term, upon the same terms and conditions as herein stated and at the
rental rate of $10.50 per square foot of the Premises ("Extended Term Base
Rent").
5(A). EARLY TERMINATION OF INITIAL TERM
---------------------------------
Provided Tenant shall not be in default of any of the material terms
or conditions of this Lease beyond any applicable cure periods, Tenant shall
have the option to terminate this Lease effective the end of any month after the
end of the 61st month of the
<PAGE>
- 7 -
Initial Term, by giving Landlord written notice of its intention to do so at
least six (6) months in advance of the applicable termination date.
The payment due Landlord by Tenant required to exercise an early
termination of this Lease shall be reduced by twenty percent (20%) for
terminations effective the seventy-fourth (74th) month of the term of this
Lease, and an additional twenty percent (20%) after each twelve (12) month
period thereafter. To be effective, Tenant must forward to Landlord, at the
time of any such election, payment equal to twelve (12) months' Base Rent
together with an additional payment equal to the Additional Rent for the
immediately preceding twelve months, both subject to the cumulative percentage
annual reduction referred to in this section. Such notice of termination shall
not be effective unless accompanied by said payments. Notwithstanding anything
to the contrary contained in this section, Tenant shall not be required to make
any early termination payment if Tenant terminates this Lease pursuant to
Sections 8 or 13 of this Lease.
6. RENT, ADDITIONAL RENT
---------------------
(a) Tenant shall pay to Landlord throughout the Initial Term and
Extension Term, if any, of this Lease, as rental for the Premises, the Base Rent
as follows:
Base Rent:
$507,682.00/yr. years 1-2 (based on $7.00 p.s.f.)
$616,471.00/yr. years 3-5 (based on $8.50 p.s.f.)
$688,997.00/yr. years 6-10 (based on $9.50 p.s.f.)
Monthly Installment Amount:
$42,306.83/mo. years 1-2
$51,372.58/mo. years 3-5
$57,416.42/mo. years 6-10
Extended Term Base Rent: $761,523.00/yr. (based on $10.50 p.s.f.)
$63,460.25/mo.
in the manner and on the terms specified in this Lease, without deduction or
set-off, and without prior notice or demand. Notwithstanding the above, Base
Rent for the initial two (2) months of the term shall be waived.
(b) Tenant shall pay, as Additional Rent to Landlord, throughout the
Initial and Extension Term, if any, of this Lease, Tenant's Percentage Share (as
determined in accordance with Section 1(1)) of this Lease) of Operating Expenses
and Property Taxes, (as
<PAGE>
- 8 -
such terms are defined in this Lease), in the manner and on the terms specified
in this Lease, without deduction or setoff, and without prior notice or demand.
Notwithstanding any of the above provisions, Landlord represents that
Tenant's Additional Rent for Property Taxes and operating expenses shall not
exceed the sum of $1.25 per square foot for Lease Year 1 and $1.60 per square
foot for Lease Year 2, exclusive of janitorial costs for Tenant's Premises
(which are detailed in Section 8 of this Lease) and Security Costs (which are
detailed in Section 43 of this Lease). Any increase in the amount of Property
Taxes based upon any improvements or additions made by future tenants to the
Buildings shall not be included in determining Tenant's share of Property Taxes.
Tenant's Percentage Share of Property Taxes shall be payable on the
later of the last day of the month in which Landlord renders a statement for
same, or thirty days after Tenant's receipt of such statement. A copy of the
property tax bill for the Property Taxes submitted to Landlord shall be
conclusive evidence of the Property Taxes levied against the property.
Tenant's Percentage Share of Operating Expenses shall be payable in
monthly installments, at the time and in the manner payments of Base Rent are
made. For the initial Lease Year, Landlord shall bill Tenant an amount
reasonably estimated to equal Tenant's pro-rata share of Operating Expenses for
the first Lease Year. Within 60 days after the end of the first Lease Year,
Landlord shall determine the actual Operating Expenses for that period. Any
excess amounts paid by Tenant shall be refunded by Landlord, and any shortfalls
shall be paid by Tenant with the next due installment of base rent. Thereafter,
Tenant's pro-rata share of Operating Expenses shall be paid in equal and
consecutive monthly installments, at the time and in the manner payment of Base
Rent are made, and shall be based on the actual year's payments, with reasonable
estimates for increases.
Provided Tenant is not in default of any of the material terms and
conditions of this Lease, Tenant shall have the right, on reasonable advance
notice to Landlord, to review Operating Expenses upon which Tenant's percentage
share have been calculated. The Operating Expenses shall be subject to audit by
Tenant for a period of two (2) lease years after the lease year in question,
after which time Landlord's statement shall be final and conclusive. Such audit
shall be conducted at Tenant's sole expense.
(c) The installment of the Base Rent first due for the Initial Term of
the Lease shall be paid by Tenant to Landlord on the Rent Commencement Date.
Base Rent shall be paid to Landlord on or before the first day of each and every
successive calendar month after the Rent Commencement Date month during the
Initial Term and any Extension Term of this Lease. In the event the Rent
Commencement Date is other than the first day of a calendar month or the Term
Expiration Date is other than the last day of a calendar month, then the monthly
Rent first due for the first and last fractional months of the Initial Term or
any applicable Extended Term shall be prorated by multiplying the monthly Rent
by a fraction, the numerator of which is the number of days of the partial month
included in the
<PAGE>
- 9 -
Initial Term or any applicable Extended Term and the denominator of which is the
total number of days in the full calendar month.
(d) Rent shall be paid to Landlord at Landlord's address for notices
hereunder or to such other person or entity or at such other place as Landlord
may from time to time designate in writing.
7. COMPLIANCE WITH LAWS/USE OF PREMISES
------------------------------------
The Premises shall be used by Tenant for general office use, as well
as use for telecommunications operations and related services (including, but
not limited to, transmissions, switching, and testing) for a telephonic
switching center and voice, data and other telecommunications services,
including also the use of data processing equipment required for the successful
operation of such center and services, as well as the use of various
transmission mediums including, but not limited to, fiber optic, metallic, and
radio transmission mediums, including the installation of any business system or
systems necessary or incident to the support of such switching and/or
transmission systems and services, including facilities for the maintenance,
storage, and repair of such transmission systems and services, as well as all
other business uses of Tenant incident to Tenant's use of the Premises, all
subject to governmental regulations, as applicable. During the Initial Term and
any Extended Term of the Lease, Landlord and Tenant shall comply with all
governmental regulations regarding Tenant's use and occupancy of the Premises
and the Buildings.
8. SERVICES
--------
Landlord agrees to furnish to the Premises and/or Buildings the
following utilities and services: (a) heating and cooling units required for
the use and occupation of the Premises during normal Business Days and Business
Hours which Landlord represents can be operated at temperature levels sufficient
to maintain interior temperatures as set forth in Exhibit "F" (subject to the
precision air references in Exhibit "F") (Landlord's Work) compatible with
normal standards of comfort, together with necessary control devices to regulate
the same in the Premises; (b) hot and cold water suitable for drinking,
lavatory, toilet and ordinary cleaning purposes; (c) gas and electricity
suitable for the intended use of the Premises; (d) janitorial services in and
about the Premises, pursuant to specifications set out in Exhibit D attached
hereto and made a part hereof by reference; and elevator service. Additionally,
Landlord shall manage, operate and administer the Buildings of which the
Premises are a part. At Landlord's cost and expense, Landlord shall cause
separate water, electric, steam, and gas meters to be installed for the
Premises. Tenant shall be responsible for maintaining the meters and for
paying, before delinquency, all utility bills for the Premises.
<PAGE>
- 10 -
Tenant shall have the right from time to time, subject to Landlord's
reasonable approval, at Tenant's sole expense, to install additional connection
lines for its telecommunication operation, systems, and services, as defined in
Section 7 above, and to perforate foundation or other walls (provided such
perforation does not affect the structural integrity of the building and/or
Buildings of Landlord of which the Premises form a part), and continue said
connections to the Premises, provided that such connections are safely and
properly installed, do not adversely interfere with any other services and
utilities which Landlord provides to other Tenants; further provided that said
connections comply with all state and municipal codes and any other governmental
requirements, and further provided that Landlord receives and approves, without
any unreasonable delay, all of Tenants plans for such work. Tenant shall be
responsible for installing such connections in a safe, proper and workmanlike
manner, and Tenant shall hold Landlord harmless and indemnity Landlord for any
liabilities of any kind resulting from such installation and use of such lines,
etc. Nothing herein shall be deemed to imply a right of access through another
Tenant's premises.
In the event that the connections, lines and receiving devices for
Tenant's business operations and systems, as defined in Section 6 above, are
interfered with by the Landlord, its agents, employees or servants, the Landlord
shall correct the interference within two (2) business days of receipt of notice
of such interference from the Tenant. In the event that the Landlord is unable
or unwilling to correct the interference, the Tenant may terminate the Lease and
all Rent shall abate as of the date of termination. Any termination of the
Lease by the Tenant must be exercised within sixty (60) days of the date of the
notice informing the Landlord of the interference or else the right of
termination shall be deemed to have been waived by the Tenant. The Tenant shall
vacate the Premises within sixty (60) days of the date of termination of the
Lease. As of that date which the Tenant vacates the Leased Premises, the Lease
shall be null and void and neither party shall have any liability or
responsibility to the other.
Notwithstanding the above, Tenant shall be responsible for any heating
and cooling equipment requirements for computer rooms, equipment rooms and other
special, non-general office areas.
Tenant shall maintain and operate the heating and cooling units
properly. Tenant may operate the heating and cooling units before and after
normal Business Days and Business Hours, provided Tenant is responsible for the
payment of all utilities incurred as a result of such use.
Tenant shall pay to Landlord, as Additional Rent, for the janitorial
services set forth in Exhibit D, the sum presently estimated at $.52 per square
foot of the Premises per year, in equal and consecutive monthly installments of
$3,142.80 due and payable at the time and in the manner Base Rent and Extended
Term Rent, if any, are due and payable. Said sum shall be increased or
decreased to reflect increases or decreases in the cost to Landlord for
janitorial services. Tenant, on at least sixty (60) days' written notice to
Landlord, may
<PAGE>
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elect to provide janitorial services for the Premises, in which case: (i) the
charge for such services billed to Tenant by Landlord shall discontinue
effective the latter of sixty (60) days after notice is received by Landlord or
when Landlord is no longer responsible to provide and pay for said janitorial
services for the Premises; and (ii) Tenant warrants and represents that the
replacement janitorial services in Exhibit D, provide them in a commercially
reasonable manner, and provide them solely at Tenant's cost and expense; and
(iii) Tenant shall provide Landlord with a copy of the executed service contract
with Tenant's janitorial service for the Premises for the period such services
are rendered/to be rendered; and (iv) Tenant agrees to indemnify and hold
Landlord harmless from and against any and all claims, damages, suits, etc. of
any kind whatsoever related in any way to the contracting with or performance of
services by Tenant's janitorial services; and (v) Tenant shall provide Tenant's
janitorial service's insurance certificate naming Tenant and Landlord as
additional insureds with coverages reasonably acceptable to Landlord.
Landlord shall be liable for, and Tenant shall be entitled to, a
reduction in Rent or any applicable Extended Term Rent due hereunder by reason
of Landlord's failure to provide such utilities and services resulting from the
negligent or willful misconduct of Landlord or its employees. Any failure or
delay within Landlord's control which shall materially adversely affect Tenant's
business or prohibit Tenant's use of the Premises for a continuous period
exceeding seventy-two (72) hours, excluding weekends and holidays, shall be
subject to an abatement of Rent by the percentage of the Premises reasonably
deemed unusable, and this abatement shall continue until Landlord shall cause
the same to be repaired and the Premises become usable by Tenant. Landlord
shall not be responsible for any failure or delay outside of its control such as
a failure of a public utility to provide services to the Buildings.
Except as specifically provided for in this Lease, Landlord shall not
be liable for any interruption or failure in the supply of utilities services to
the Premises unless the interruption or failure is caused by Landlord's
negligence or willful misconduct. If the interruption or failure is caused by
Landlord's willful misconduct, and as a result thereof Tenant is unable to
conduct business at the Premises, Landlord's liability shall be limited to the
actual damages incurred by Tenant, but not for any consequential or incidental
damages.
9. PARKING
-------
Landlord shall provide to Tenant access to common parking facilities
including, initially, 150 parking spaces for Tenant's use. Parking spaces shall
be provided as follows: 3 spaces per 1,000 square feet of the Premises. Tenant
acknowledges that Landlord will provide Tenant up to a total of 240 spaces
(based on 3 per 1,000 square feet of the Premises), but that construction of any
spaces over the initial 150 shall be subject to advance notice by Tenant and
availability of paving weather.
<PAGE>
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10. ACCESS TO THE PREMISES
----------------------
Tenant and its employees shall have access to the Premises twenty-four
(24) hours a day, seven (7) days a week. During non-Business Hours Landlord may
restrict access to only those individuals designated by Tenant to Landlord.
Landlord may require such individuals to show a badge or identification card
issued by Tenant.
11. COMMON AREA MAINTENANCE
-----------------------
Landlord shall use reasonable diligence to maintain or cause to be
maintained the Common Areas. Landlord shall operate, manage, equip, light,
repair and maintain each Common Area for its intended purpose. Tenant, its
agents, customers, employees and invitees, shall have the non-exclusive right in
common with Landlord and all others to whom Landlord has granted or may
hereafter grant rights to use the Common Areas subject to such reasonable rules
and regulations as Landlord may from time to time impose. Landlord shall be
solely responsible for compliance with all Applicable Laws, including, but not
limited to, the Americans with Disabilities Act and any regulations promulgated
thereunder, with respect to the Common Areas. Landlord shall not make any
changes to the access, parking configuration, or design of the common areas at
the time of the execution of this Lease, which materially, adversely affects
access to or visibility from the Premises, without the express written consent
of Tenant.
Notwithstanding any of the other terms contained in this paragraph or
in the definition of Operating Expenses under Term Sheet 9.2. the Tenant
reserves the right, upon sixty (60) days' written notice to Landlord, to elect
to provide its own snowplowing for its designated parking area, in which case
(i) the charge for such services billed to Tenant by Landlord shall discontinue
effective the latter of sixty (60) days after notice is received by Landlord or
when Landlord is no longer responsible to provide and pay for said snowplowing
services for the Premises; and (ii) Tenant warrants and represents that the
snowplowing services which it will provide will be done solely at Tenant's sole
cost and expense; and (iii) Tenant shall provide Landlord with a copy of the
executed Service Contract with Tenant's snowplowing contractor for the period
such services are rendered/to be rendered; and (iv) Tenant agrees to indemnify
and hold Landlord harmless from and against any and all claims, damages, suits,
etc. of any kind whatsoever related in any way to the contracting with or
performance of services by Tenant's snowplowing services; and (v) Tenant shall
provide Tenant's contractor's insurance certificate naming Tenant and Landlord
as additional insureds with coverage reasonably acceptable to Landlord. To the
extent that future tenants use the designated parking area. Landlord shall
provide snowplowing services, and Tenant will receive a pro-rata reduction for
the cost of said snowplowing services.
<PAGE>
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12. IMPROVEMENTS
------------
Except for the initial improvements to the Premises pursuant to
Exhibits F and G, Tenant, at Tenant's sole expense, may make, with the consent
of Landlord, non-structural alterations and improvements to the interior of the
Premises and shall retain title to anything it may place or install in the
Premises, including, without limitation, drapes, furniture, counters, shelving,
fixtures, work stations, removable partitions, equipment or business machines.
Tenant shall give notice to Landlord of all proposed alterations and
improvements to the interior of the Premises at least twenty (20) days prior to
the commencement of any such work for Landlord's review and comments, which
approval shall not be unreasonably withheld or delayed. If Landlord fails to
consent or otherwise comment to Tenant within fifteen (15) days after receipt of
Tenant's complete plans and specifications, Tenant may proceed with such work as
if Landlord had consented. All such work by Tenant shall be performed in a good
and workmanlike manner and in accordance with all applicable codes and
regulations.
Except as otherwise provided elsewhere in this Lease, at the
expiration or termination of this Lease as herein provided, Tenant may remove
all such improvements, excluding permanent Leasehold improvements, fixtures, and
wiring, piping, etc., installed and paid for by Tenant in accordance with this
Lease, and deliver the Premises to Landlord in as near as reasonably possible to
the condition as of the date of possession, except for ordinary wear and tear.
Any improvements or alterations (see Section 30, for example) by Tenant not in
the Premises shall be removed by Tenant, and the Buildings shall likewise be
repaired. If Tenant leaves any such removable items on the Premises after
termination of its occupancy without the written consent of Landlord, they shall
at the option of Landlord become the property of the Landlord, or Landlord may
cause such items to be removed, at Tenant's sole cost and expense.
13. REPAIRS
-------
Landlord shall maintain the Buildings in a good state of repair,
including, but not limited to: (a) repairs and replacements to the structural
portions of the Buildings, including the roof foundation and exterior walls of
the Buildings, (b) repairs and replacements necessitated by Landlord's acts or
negligence, (c) damage or destruction caused by fire or any other perils that
normally are insured under extended coverage endorsements issued in the area
where the Premises are located, whether or not due to Tenant's negligence, (d)
repairs and replacements to the parking lot areas and landscaped areas, and (e)
repairs and replacements, though non-structural, necessitated by Landlord's acts
or negligence, (f) repairs and replacements directly resulting from Landlord's
failure to repair as required hereunder and (g) repairs and replacements caused
by ordinary wear and tear to the Common Areas.
<PAGE>
- 14 -
Except as otherwise provided in Section 23 hereof, in the event a
repair or replacement cannot be accomplished by Landlord within a period of
ninety (90) days from the date of notice from Tenant, or in the event Landlord
fails to complete the repair or replacement within a period of ninety (90) days
from the date of notice from Tenant, Tenant may, at its option, either (i) prior
to completion of any such repair or replacement, cancel this Lease by giving
Landlord written notice, and thereafter neither party shall have any rights,
duties or obligations hereunder, or (ii) Tenant may take such steps as may be
necessary to cure Landlord's default, in which event Tenant shall be entitled to
recover from Landlord the monies so reasonably expended by Tenant together with
reasonable interest thereon from the date such monies were expended by Tenant
until the date paid. Notwithstanding the foregoing, if the nature of Landlord's
obligation is such that more than ninety (90) days are required for performance,
Landlord shall not be in default if Landlord commences performance within such
ninety (90) day period and thereafter diligently proceeds to completion.
Notwithstanding the above, if Tenant cannot reasonably, substantially operate
Tenant's business from the Premises because of a failure of repair or
replacement by Landlord for a period of 150 days or more from the date Landlord
commences performance, then Tenant can terminate this Lease on ten (10) days'
written notice to Landlord, after such 150 days.
14. RIGHT OF ENTRY BY LANDLORD
--------------------------
Landlord and its agent may enter the Premises during Business Hours to
inspect the same; to make repairs, alterations, improvements or additions or to
perform such maintenance as required by the Lease or advisable to preserve the
integrity, safety and good order of part or all of the Premises or the
Buildings. Entry by Landlord is conditioned upon Landlord giving at least
twenty-four (24) hours advance notice to a Manager of Tenant located at the
Premises, except in an emergency; promptly finishing any work for which it
entered; and causing the least practical interference to Tenant's business. In
the event Landlord enters the Premises in an emergency without advance notice to
Tenant, Landlord shall promptly thereafter notify a Manager of Tenant located at
the Premises of the reason for such entry and the corrective or necessary action
taken with respect to such emergency.
15. INDEMNIFICATION
---------------
Landlord shall indemnity and save harmless Tenant and its parent,
subsidiaries and affiliates and their respective officers, directors, employees
and agents (herein collectively referred to as the "Indemnitees") from and
against any and all suits, liabilities, obligations, damages, penalties, claims,
costs, charges and expenses, including reasonable attorneys' fees, which may be
imposed upon or incurred by or asserted against Indemnitees as a result of or
arising out of Landlord's failure to perform any covenant or agreement required
to be performed by Landlord under this Lease Agreement or caused by the
negligence or willful misconduct of Landlord, its agents or employees.
<PAGE>
- 15 -
Tenant shall indemnify and save harmless Landlord, its officers,
directors, employees and agents, from and against any and all suits,
liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including reasonable attorneys' fees, which may be imposed upon or
incurred by or asserted against Landlord by reason of any occurrence caused by
the negligence or willful misconduct of Tenant, its agents, employees,
directors, servants, contractors or invitees which arises out of Tenant's lease
of the Premises and its operations thereon.
Notwithstanding the foregoing two paragraphs of this Section 15,
Landlord and Tenant release each other from any claims either party ("Injured
Party") has against the other to the extent the claim is covered by the
insurance the Injured Party is required to carry under Section 15 of the Lease
16. INSURANCE
---------
Landlord during the Initial Term of this Lease and any applicable
Extended Term of this Lease shall insure the Buildings, including improvements,
by means of an insurance policy covering at least the perils of fire, lightning,
explosion, windstorm, hail, smoke, aircraft damage, vehicular damage, riot,
civil commotion and vandalism in the amount of the full replacement value of the
Buildings (exclusive of the cost of excavation, foundations and footings), as
the value may exist from time to time. Landlord shall, at Tenant's request,
furnish a certificate of insurance evidencing the above coverage. Such
certificate shall contain a clause that such policy and the coverage evidenced
thereby shall be primary with respect to any policies carried by Tenant, and
that any coverage carried by Tenant shall be excess insurance.
Tenant, during the Initial Term of this Lease and any applicable
Extended Term of this Lease, shall keep its personal property and trade fixtures
in the Premises insured for at least the perils of fire, lightning, explosion,
windstorm, hail, smoke, aircraft damage, vehicular damage, riot, civil commotion
and vandalism. Such certificate shall contain a clause that such policy and the
coverage evidenced thereby shall be primary with respect to any policies carried
by Landlord, and that any coverage carried by Landlord shall be excess
insurance.
Each party shall maintain during the Initial Term of this Lease and
any applicable Extended Term of this Lease commercial general liability
insurance (which includes, but is not limited to, contractual liability
coverage) covering claims for bodily injury and property damage occurring on, in
or about the Premises, with limits of at least $2,000,000 combined single limit
per occurrence.
Each policy or a certificate therefor required under this Section 16
shall name the other party as an additional insured as respects the Premises and
the provisions of Section 15 of this Lease, and shall contain an agreement by
the insurer that such policies
<PAGE>
- 16 -
shall not be canceled without at least thirty (30) days' prior written notice to
the other party. Certificates evidencing such policies shall be delivered by
Tenant to Landlord and by Landlord to Tenant upon the other party's written
request.
All policies required herein shall be procured from insurance
companies licensed in the state where the Premises are located and shall be
listed in the current "Best's Insurance Guide" as possessing a minimum
policyholder's rating of "A" and a financial category no lower than "VI" ($25
million to $50 million of adjusted policyholder's surplus).
17. SUBROGATION
-----------
Each party releases and waives on behalf of itself and on behalf of
the insurers of such party's property, any and all claims and any rights of
subrogation of any such insurer against the other party, its employees and
agents for loss (other than loss or damage resulting from the willful act of
such other party, its employees and agents) sustained from any peril to property
required to be insured against herein, whether or not such insurance is actually
in force, or from any peril to property actually insured against, though not
required to be under this Lease. The policies of the respective parties shall
contain an express waiver of subrogation to this effect.
18. LIENS AND ENCUMBRANCES
----------------------
Tenant shall promptly pay for all improvements installed on the
Premises by Tenant and shall cause no mechanic's or construction lien to be
imposed on the Premises, provided, however, that if Tenant shall, in good faith,
contest any charge of a laborer, mechanic, subcontractor or materialman, Tenant
may contest such charge after paying the claimed amount into an escrow account
to protect Landlord from any adverse decision.
19. HOLDING OVER
------------
It is expressly understood by Tenant that Tenant's right to possession
of the Premises under this Lease shall terminate on the expiration or earlier
termination of the Initial Term or, if applicable, any Extended Term, and should
Tenant continue thereafter to remain in possession Landlord shall be entitled to
the benefits of all provisions of law with respect to summary recovery of
possession from a holdover Tenant. Tenant shall indemnify and save harmless
Landlord from any claim, damage, expense, cost or loss, which Landlord may incur
by reason of such holding over, including, without limitation, any claim of a
succeeding Tenant, or any loss by Landlord with respect to a lost opportunity to
re-lease the Premises.
<PAGE>
- 17 -
Any holding over by Tenant beyond the Initial Term or, if applicable,
any Extended Term, shall give rise to a tenancy from month to month at a monthly
rent equal to one hundred fifty percent (150%) of the monthly Rent during the
last year of the Initial Term or applicable Extended Term, and all other
provisions of this Lease shall continue.
20. ASSIGNMENT AND SUBLETTING
-------------------------
Provided Tenant is not in material default of this Lease, Tenant may
assign this Lease, sublet the Premises or permit any other party to occupy the
Premises provided Landlord consents to same in writing, which consent shall not
be unreasonably withheld or delayed. Notwithstanding the preceding sentence,
Tenant may, without the prior approval of Landlord, assign this Lease or sublet
the Premises or any portion thereof to any corporation or entity which controls,
is controlled by, or is under common control with Tenant, or to any corporation
resulting from the merger or consolidation with Tenant, or to any person or
entity which acquires substantially all of the assets of Tenant; provided that
no such assignment or sublease shall act as a release of Tenant from any of the
provisions, covenants and conditions on the part of Tenant to be kept or
performed under this Lease.
No transfer or subletting, including one to which Landlord has
consented, shall be effective unless and until:
A. Tenant gives notice thereof to Landlord; and
B. The transferee, assignee or sublessee shall deliver to Landlord:
(i) a written agreement in the form and substance reasonably
satisfactory to Landlord pursuant to which the transferee,
assignee or sublessee assumes all of the obligations and
liabilities of Tenant under this Lease; and
(ii) a copy of the assignment, agreement or sublease.
The withholding of consent by Landlord shall not be deemed
unreasonable if:
(i) the creditworthiness of the proposed assignee or sub-
tenant is unsatisfactory, in Landlord's reasonable
opinion;
(ii) the proposed use and operation of the Premises by the
proposed assignee or sublessee is, in the reasonable
opinion of the Landlord, not compatible with the character
and use of the Buildings; and
<PAGE>
- 18 -
(iii) such assignment or subletting would violate any
provisions of any other lease with Landlord in the
Buildings, or with any financial or insurance
obligations of Landlord with respect to the Buildings.
The granting of consent by Landlord to any assignment or subletting
shall apply only to the specific transaction thereby authorized and shall not
relieve Tenant from the requirement of obtaining prior written consent of
Landlord to any further assignment or sublease, nor shall the granting of
consent in one instance imply or confer any right or obligation to grant consent
again.
21. DEFAULT AND RE-ENTRY
--------------------
If, during the term of this Lease, Tenant shall:
(a) fail to pay any installment of the Rent or Extended Term Rent as
and when the same becomes due and payable, and such default shall
continue for a period of ten (10) Business Days following
Landlord's written notice of same, or
(b) default in its performance of or compliance with any of the other
agreements, terms or conditions of this Lease, and such default
shall continue for a period of thirty (30) Business Days after
notice by Landlord to Tenant; provided that if the nature of
Tenant's obligation is such that more than thirty (30) Business
Days are required for performance, Tenant shall not be in default
if Tenant commences performance within the thirty (30) Business
Day period and thereafter diligently proceeds to completion;
(c) transfer this Lease or Tenant's interest therein in violation of
Section 20 of this Lease;
then Landlord may at its option, by written notice to Tenant, terminate this
Lease effective the date of the giving of such notice, on which the Initial Term
or any applicable Extended Term of this Lease shall terminate; and thereupon, on
such date, unless such default shall have been cured, all rights of Tenant under
this Lease shall terminate in all respects as if the date fixed in such notice
were the date originally fixed in this Lease for the termination or expiration
thereof.
This Lease and the term are expressly subject to conditional
limitation that upon the happening of any one or more of the aforementioned
events of default, Landlord, in addition to the other rights and remedies it may
have, shall have the right to immediately declare this Lease terminated and the
term ended, in which event, all of the right, title and
<PAGE>
- 19 -
interest of Tenant hereunder shall wholly cease and expire upon receipt by
Tenant of a notice of termination. Tenant shall then quit and surrender the
Premises to Landlord in the manner and under the conditions as provided for
under this Lease, but Tenant shall remain liable as hereinafter provided.
If this Lease is terminated as aforesaid, Tenant nevertheless
covenants and agrees notwithstanding any entry or re-entry by Landlord whether
by summary proceeding, termination or otherwise, to pay and be liable for on the
days originally fixed herein for the payment thereof, amounts equal to the
several installments of Base Rent (and Extended Term Rent, if any) and any other
rents and charges called for under this Lease, as they would, under the terms of
this Lease, become due if this Lease had not been terminated or Landlord had not
entered or re-entered as aforesaid, and whether the Premises be relet or remain
vacant in whole or in part or for a period less than the remainder of the term,
and for the whole thereof. Landlord shall use reasonable efforts to attempt to
relet the Premises. However, this shall not be construed as a condition
precedent of leasing other space in the Buildings. In the event the Premises be
relet by Landlord, Tenant shall be entitled to a credit (but not in excess of
the Base Rent, and Extended Term Rent, if any) and any other rent and charges
due pursuant to the terms of this Lease in the net amount received by Landlord
in reletting the Premises after deduction of all expenses and costs incurred or
paid as aforesaid in reletting the Premises and collecting the rent in
connection therewith.
In the event Landlord commences any proceedings for the recovery of
possession of the Premises or to recover for non-payment of Base Rent (or
Extended Term Rent, if any), or other rent and charges due pursuant to the terms
of this Lease, Tenant shall not interpose any non-compulsory counterclaim in any
such proceeding. This may not, however, be construed as a waiver of Tenant's
right to assert such claim in any separate action or actions initiated by
Tenant. Further, Tenant expressly waives any right to trial by jury in
consideration of Landlord entering into this agreement with Tenant.
In the absence of any written agreement to the contrary, if Tenant
should remain in occupancy of the Premises after the expiration, termination or
any renewal of this Lease, it shall so remain as a Tenant, from month to month,
and all provisions of this Lease applicable to such tenancy, shall remain in
full force and effect, except that the Base Rent shall be an amount equal to 1.5
times the Base Rent then in effect for the Premises.
No failure by Landlord to insist upon the strict performance of any
covenant, agreement, term or condition of this Lease or to exercise any right or
remedy consequent upon a breach thereof, and no acceptance of full or partial
rent during the continuance of any such breach, shall constitute a waiver of any
such breach or of such covenant, agreement, term and condition, and this Lease
shall continue in full force and affect with respect to any other then existing
or subsequent breach thereof.
<PAGE>
- 20 -
Each right and remedy of Landlord provided for in this Lease shall be
cumulative and shall be in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or in equity by statute or
otherwise.
22. CONDEMNATION
------------
The term "Taking" shall mean a taking during the Initial Term or any
applicable Extended Term of this Lease of all or part of the premises as the
result of condemnation or eminent domain. The term "Date of Taking" shall mean
the date on which the condemning authority is entitled to possession.
In the event of a Taking of either the fee of, or the temporary use
of, or a perpetual easement upon, all of the Premises, this Lease shall expire
as of the Date of Taking. In the event of a Taking of either the fee of, or the
temporary use of, or a perpetual easement upon, less than all of the Premises,
this Lease shall continue in full force and effect for the remainder of the
Premises, except that the Rent or any applicable Extended Term Rent shall be
reduced by an amount proportionate to the total area of the Premises so taken as
against the total area demised hereunder; provided that if Tenant shall
reasonably determine that the remaining portions of the Premises cannot be
suitably used for its intended purposes, and shall forward a notice to Landlord
of such determination within thirty (30) days after the Date of Taking, this
Lease shall expire as of the Date of Taking, and Tenant shall promptly vacate
the Premises.
Landlord reserves the right to make a claim directly to the condemning
authority for damages sustained by Landlord as a result of such Taking.
Further, Landlord shall refund to Tenant any unearned Rent paid in advance as of
the Date Tenant vacates the Premises due to Taking and all of Tenant's liability
hereunder shall cease from and after the date Tenant vacates the Premises.
Tenant shall be entitled to make a separate claim directly to the
condemning authority for damage sustained by Tenant due to such Taking,
including but not limited to, compensation for the value of the unamortized cost
of improvements paid for by Tenant, personal property of Tenant, and Tenant's
lost good will and relocation costs.
Each party shall seek its own award, at its own expense, and neither
shall have any right to the award made to the other. Nothing herein shall
prevent Tenant from recovering directly from the condemning authority any
damages sustained by Tenant due to such Taking.
<PAGE>
- 21 -
23. DESTRUCTION OF LEASED PREMISES
------------------------------
If the Premises shall be totally destroyed by fire, casualty, or other
cause or happening, or if any lawful authority shall order demolition or removal
of the Buildings or Premises, so as to render them unfit for Tenant's proposed
use, then this Lease shall terminate as of the date of such destruction and all
of Tenant's liability hereunder shall cease from and after such date and any
unearned Rent paid in advance by Tenant to Landlord shall be refunded to Tenant.
If the Buildings or Premises shall be partially destroyed by fire,
casualty, demolition, removal or other cause or happening, or be declared unsafe
by any lawful authority, then they shall be promptly restored or made safe by
Landlord and a just portion of the Rent or any applicable Extended Term Rent
specified shall abate until they shall have been restored and put in proper
condition for Tenant's use and occupancy, except that Landlord shall not be
required to expend any sums in excess of the net proceeds of any insurance
policy carried by Landlord, and if such sums, in Landlord's reasonable opinion,
are inadequate to rebuild or restore the Buildings or Premises, then Landlord
may elect not to rebuild or restore and this Lease shall terminate on five (5)
days written notice from Landlord. Landlord shall notify Tenant promptly, and
no later than forty-five (45) days after any such partial destruction, if
Landlord elects to terminate this Lease because of a determination of inadequate
insurance proceeds. If the Buildings or Premises shall not be restored or made
safe within one hundred twenty (120) days after partial destruction or
declaration of unsafe condition, then Tenant, at its option, may cancel and
terminate this Lease in its entirety, and all of Tenant's liability hereunder
shall cease from and after the date of such destruction or declaration of unsafe
condition and any unearned Rent or Extended Term Rent paid in advance by Tenant
to Landlord shall be refunded to Tenant.
24. PROPERTY TAXES
--------------
(a) Landlord will pay in the first instance all Property Taxes (as
such term is defined in Section 1(j)) of this Lease) which may be levied or
assessed by any lawful authority against land or improvements constituting the
Buildings and adjacent land for parking and landscaping. The amounts required
to be paid by Landlord pursuant to any payment in lieu of tax agreement entered
into with a taxing authority having jurisdiction over the Buildings shall be
considered for the purposes of this Lease to be included within the definition
of Property Taxes.
(b) During the term of this Lease, Tenant shall pay to Landlord, as
Additional Rent, Tenant's pro-rata share of all Property Taxes. Tenant's
initial pro-rata share shall be 27.24% of the Property Taxes as of the first day
of the Rent Commencement Date.
<PAGE>
- 22 -
Tenant's pro-rata share of Property Taxes shall be payable on the last
day of the month in which Landlord render's a statement of Tenant's pro-rata
share for any Property Taxes for which Landlord has received a bill, or 30 days
after Tenant's receipt of such statement, whichever shall occur later. A copy
of the appropriate bill for the Property Taxes submitted to Landlord shall be
conclusive evidence of the property taxes levied against the buildings.
(c) Landlord may in good faith seek a reduction in the assessed
valuation (for Property Tax purposes) of the Buildings or any portion thereof by
administrative or legal proceeding. Tenant shall pay to Landlord Tenant's pro-
rata share of Landlord's reasonable costs for said proceedings, including
counsel fees, appraisal fees and other similar expenses, within twenty (20) days
after Tenant's receipt of a statement from Landlord therefore. Tenant's initial
pro-rata share of such costs shall be 27.24% (based on 72,526 rentable square
feet). Landlord shall reimburse Tenant for Tenant's pro-rata share of any
refund of Property Taxes (after deducting any unpaid portion of Tenant's pro-
rata share of Landlord's cost for such proceedings) resulting from any
proceeding for which Tenant has paid Tenant's pro-rata share of Property Taxes.
(d) Tenant may elect, at its sole expense, to contest any reassessment
affecting the Premises or any tax, levy or special assessment on the Premises,
and Landlord agrees to cooperate in such action or contest to the extent
Landlord's participation may be necessary, but without any cost to Landlord. If
such contesting results in a reduction of Property Taxes on the Buildings or a
refund, Landlord shall share pro-rata in such refund and pay a pro-rata share of
Tenant's expenses in obtaining such refund or reduction. Nothing herein
contained shall be construed, however, to permit Tenant to withhold payment of
Property Taxes during the pendency of any such review, it being understood that
Tenant must pay taxes pursuant to this Lease.
(e) Should any alteration or improvement performed by or for Tenant
during the term of this Lease cause an increase in assessment, Tenant shall pay
to Landlord the full cost of all Property Taxes resulting from such increase in
assessment. Any amount paid separately hereunder by Tenant to Landlord shall be
in addition to any amounts paid by Tenant pursuant to the above. Any increase
in the amount of Property Taxes based upon any improvements or additions made by
future tenants to the Buildings shall not be included in determining Tenant's
share of Property Taxes.
(f) Should any governmental taxing authority acting under any present
or future law, ordinance or regulation, levy, assess or impose a tax, excise,
surcharge or assessment upon or against the rent payable by Tenant to Landlord,
or upon or against the Common Areas, whether by way of substitution for or in
addition to any existing Property Tax or otherwise, such amount shall be deemed
included in the term "Property Taxes" as used in this Lease.
<PAGE>
- 23 -
(g) Tenant shall have the right, upon reasonable advance notice, to
review Landlord's calculations pertaining to estimated Property Taxes, and
actual annual Operating Expenses and Property Taxes, and the books and records
supporting such calculations at the offices of Landlord.
25. QUIET ENJOYMENT
---------------
(a) Tenant, subject to the terms and provisions of this Lease and on
payment of the rent and other charges due and owing pursuant to this Lease, and
observing, keeping and performing all of the terms and provisions of this Lease
on its part to be observed, kept and performed, shall lawfully, peaceably and
quietly have, hold and enjoy the Premises during the Initial Term and any
applicable Extended Term hereof on and after the commencement of this Lease
without hinderance or rejection by any persons lawfully claiming under Landlord,
but it is understood and agreed that this covenant, and any all other covenants
of Landlord contained in this Lease shall be binding upon Landlord and its
successors only with respect to breaches occurring during its and the respective
ownership of Landlord's interest hereunder.
(b) With respect to any services to be furnished by Landlord to
Tenant, Landlord shall in no event be liable for failure to furnish the same
when prevented from doing so by strike, lock-out, breakdown, accident, order or
regulation of or by any governmental authority, or failure of supply, or
inability by the exercise of reasonable diligence to obtain supplies, parts or
employees necessary to furnish such services, or because of war or other
emergency, or for any cause beyond Landlord's control. In no event shall
Landlord ever be liable to Tenant for any indirect or consequential damages by
reason of Landlord's breach or default of the terms of this Lease.
26. SUBORDINATION
-------------
Except as set forth in this Section 26, this Lease shall at all times
be and remain subject and subordinate to the lien of all mortgages, ground
leases and deeds of trust on all or any portion of the Buildings and/or
Premises.
If Tenant is not in default hereunder, Landlord shall cause:
(a) Any party holding a mortgage, ground lease or deed of trust on
any portion of the Buildings or Premises as of the date hereof to
execute and deliver to Tenant, a non-disturbance agreement in a
form agreeable to Landlord and Tenant pursuant to which the
holder of such mortgage or deed of trust will agree not to
disturb the possession of Tenant under this Lease upon any
foreclosure or exercise of power of sale under such mortgage,
ground lease or deed of trust, if Tenant is not then in default
<PAGE>
- 24 -
thereunder, and that the mortgagee, ground lessor, beneficiary or
other person claiming under such mortgage, ground lease or deed
of trust will accept the attornment of Tenant thereafter, as long
as Tenant is not then in default; and
(b) Any party acquiring a mortgage, ground lease or deed of trust on
any portion of the Buildings or Premises after the date hereof to
execute and deliver to Tenant a commercially reasonable non-
disturbance agreement within thirty (30) days of such party's
acquiring such mortgage, ground lease or deed of trust pursuant
to which the holder of such mortgage, ground lease or deed of
trust will agree not to disturb the possession of Tenant under
this Lease upon any foreclosure or exercise of power of sale
under such mortgage, ground lease or deed of trust, if Tenant is
not then in default thereunder, and that the mortgagee,
beneficiary or other person claiming under such mortgage, ground
lease or deed of trust will accept the attornment of Tenant
thereafter, as long as Tenant is not then in default.
Tenant agrees that as to the mortgagee, ground lessor beneficiary
or any other person claiming under a mortgage or deed of trust to
which Tenant has subordinated to Landlord's interest under this
Lease, Tenant will recognize such mortgagee, ground lessor
beneficiary or other person as its Landlord under the provisions
of this Lease, provided that such mortgagee, ground lessor
beneficiary or other person, during the period in which it shall
be in possession of the Premises, and thereafter its successors
in interest, shall assume all of the obligations of Landlord
hereunder and shall have executed and delivered the non-
disturbance agreement referred to above.
27. ESTOPPEL CERTIFICATE BY TENANT
------------------------------
Upon not less than thirty (30) days' prior written notice by Landlord,
Tenant shall execute, acknowledge and deliver to Landlord an estoppel
certificate in substantially the form attached hereto as Exhibit E and made a
part hereof by reference.
28. CONSENT BY LANDLORD
-------------------
Landlord covenants with Tenant that any consent or approval required
of Landlord herein shall not be withheld or delayed unreasonably.
<PAGE>
- 25 -
29. HAZARDOUS SUBSTANCES
--------------------
Landlord has provided Tenant with copies of Landlord's environmental
reports of the condition of the Buildings, and to the best of Landlord's
knowledge and belief, there are no present hazardous or toxic substances at the
Buildings which require remedial action. If hazardous or toxic substances or
contaminants are discovered in, on or beneath the land or in or on any
improvements located on the land of which the Premises is a part, unless placed
or caused to be placed by Tenant, its employees, servants or its agents (in
which case Tenant shall promptly cause the removal and other necessary remedial
action at Tenant's sole cost) Landlord, at Landlord's cost, shall promptly
perform appropriate remedial action, to be completed in any event within sixty
(60) days of the identification of the contamination. Upon failure so to
complete, Tenant shall have the right, without further cost or obligation, to
terminate this Lease upon written notice to Landlord stating the effective date
of termination, and all of Tenant's liability hereunder shall cease from and
after the date of termination and any unearned Rent or Extended Term Rent paid
in advance by Tenant to Landlord shall be refunded to Tenant. Landlord also
agrees to hold harmless, indemnify and defend Tenant, and any services of Tenant
with equipment and/or materials within the Premises, for any damage to said
equipment, property and/or persons, involved in the administration, maintenance
and operating of said equipment, as well as injuries to said persons or property
caused by any hazardous or toxic substances at the Buildings (unless placed or
caused to be placed by Tenant, its employees, servants or agents) and/or caused
by Landlord's remedial activities in regard to said hazardous or toxic
substances as set forth above.
Tenant shall not use, store, or bring into the Premises any "hazardous
and toxic substances" other than in accordance with applicable law and
regulations. For purposes of this section, "hazardous and toxic substances"
includes, without limit, any flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances or related
materials defined in the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, the Hazardous Materials Transportation Act,
as amended, the New York State Environmental Conservation Law, the Resource
Conservation and Recovery Act, as amended, and in the regulations adopted and
publications promulgated pursuant thereto. Tenant shall not use any equipment
or devices which cause or create health risks or hazards as presently known or
as determined in the future other than in accordance with applicable law and
regulations. Tenant agrees to hold Landlord harmless, indemnify and defend
Landlord from and against any claims, actions, suits, etc. made by reason of
Tenant's installation and/or use of any such equipment or devices.
<PAGE>
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30. MICROWAVE DISHES, RADIO ANTENNAS AND
OTHER TRANSMISSION/RECEIVING EQUIPMENT
--------------------------------------
Tenant shall have the right to install a microwave dish, radio
antenna, or any other form of transmission or receiving equipment incident to
Tenant's use as defined in Section 7 above on the roof of the Buildings at
Tenant's sole cost and expense. The installation, size and location of such
dish, radio antenna, or any other form of transmission or receiving equipment
incident to Tenant's use as defined in Section 7 above shall meet the reasonable
requirements of Landlord and comply with all governmental requirements (local,
state and federal), but prior to any such installation, such specifications and
location shall be reviewed and approved by Landlord. Tenant shall in no event
be charged any rent for the maintenance of such microwave dish, radio antenna,
or any other form of transmission or receiving equipment incident to Tenant's
use as defined in Section 6 above on the roof of the Buildings, and shall remove
such microwave dish, radio antenna, or any other form of transmission or
receiving equipment incident to Tenant's use as defined in Section 6 above at
the expiration (or earlier termination) of the Lease, and repair any damage
caused.
Tenant is solely responsible for the maintenance and repair of any
microwave dish, radio antenna, or any other form of transmission or receiving
equipment incident to Tenant's use as defined in Section 7 above, and Tenant
shall be responsible for any damage or deterioration to the Building caused by
the installation, operation and use of such equipment. Tenant shall indemnify
and hold Landlord and its officers, directors, employees, agents and invitees
harmless from and against any and all suits, liabilities, claims, damages,
charges and expenses of any kind whatsoever, including reasonable attorneys'
fees, which may be imposed upon or incurred by or asserted against Landlord, its
officers, directors, employees, agents and invitees as a result of or arising
out of Tenant's installation, use and operation of the microwave dish, radio
antenna, or any other form of transmission or receiving equipment incident to
Tenant's use as defined in Section 6 above.
31. BROKERS
-------
Landlord and Tenant hereto represent and warrant to each other that it
has dealt with no broker or agent in connection with the negotiations or the
consummation of this Lease or any arrangements with respect thereto.
32. NOTICES
-------
All notices provided for or desired to be sent by the parties shall be
in writing, and shall be deemed to have been fully given when deposited in the
United States mail, certified or registered, postage prepaid, or by prepaid
overnight mail delivery service providing written evidence of delivery, and
addressed as follows:
<PAGE>
- 27 -
to Tenant at: 400 West Avenue, Rochester, New York, or to such other
place as Tenant may from time to time designate in a notice to Landlord; with a
copy to: Underberg & Kessler, Attn: Frank Crego, Esq., 1800 Lincoln First
Tower, Rochester, New York 14604;
to Landlord at: Suite 400, 39 State Street, Rochester, New York
14614, or to such other place as Landlord may from time to time designate in a
notice to Tenant.
All notices personally delivered shall be deemed received on the date
of delivery. The date of notice by certified mail shall be deemed to be the
date of certification thereof. The date of notice by overnight mail service
shall be the date the airbill is signed by the recipient.
33. RELATIONSHIP
------------
The relationship between the parties hereto is solely that of landlord
and tenant and nothing contained herein shall constitute or be construed as
establishing any other relationship between the parties, including, without
limitation, the relationship of principal and agent, employer and employee or
parties engaged in a partnership or joint venture. Without limiting the
foregoing, it is specifically understood that neither party is the agent of the
other and neither is in any way empowered to bind the other to use the name of
the other in connection with the construction, maintenance or operation of the
Premises, except as otherwise specifically provided herein.
34. COMPLETE AGREEMENT
------------------
It is hereby mutually agreed and understood that this Lease contains
all agreements, promises and understandings between Landlord and Tenant and that
no verbal or oral agreements, promises or understandings shall or will be
binding upon either the Landlord or Tenant in any dispute, controversy or
proceeding at law, and any addition, variation or modification to this Lease
shall be void and ineffective unless in writing signed by the parties hereto.
If any term or provision of this Lease or the application thereof to
any person or circumstance is, to any extent, invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
<PAGE>
- 28 -
35. AUTHORITY FOR EXECUTION
-----------------------
(a) If Landlord signs as a corporation, the person or persons
executing this Lease on behalf of Landlord do hereby covenant and warrant that
Landlord is a fully authorized and existing corporation, that Landlord has and
is qualified to do business in the state where the Premises are located, that
the corporation has full right and authority to enter into this Lease, and that
the person or persons signing on behalf of the corporation were authorized to do
so. If Landlord signs as a partnership, the person or persons executing the
Lease on behalf of Landlord do hereby covenant and warrant that Landlord is a
valid and existing partnership and that the person or persons so executing and
initialing as required in this Section 35 have authority to do so on behalf of
Landlord in accordance with the Partnership Agreement, and that this Lease is
binding upon Landlord in accordance with its terms and enforceable against the
assets of the partnership and the general partners, individually.
(b) This Lease shall not be binding upon the Tenant unless the Term
Sheet is executed and the first page of Landlord's Worksheet and the first page
of this Lease Agreement is initialed by the President, a Vice President,
Secretary or an Assistant Secretary of the Tenant, or by any other person to
whom authority to execute or initial any such instrument shall be delegated in
writing by any of such officers.
36. BINDING EFFECT
--------------
The covenants and agreements contained in this Lease are binding upon
and shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors, legal representatives and assigns.
37. EXECUTION
---------
Landlord and Tenant have executed this Lease by signing and dating the
Term Sheet, and by initialling the first page of this Lease Agreement.
38. RULES
-----
Tenant, its employees and invitees, shall comply with the reasonable
rules of Landlord, posted from time to time, provided:
(a) Tenant is given at least ten (10) days' advance notice of such
changes;
(b) they are for the safety, care, order, or cleanliness of the
Common Areas;
<PAGE>
- 29 -
(c) they do not unreasonably and materially interfere with Tenant's
conduct of its business or Tenant's use and enjoyment of the
Premises; and
(d) they do not require payment of additional moneys.
39. FORCE MAJEURE
-------------
The period of time during which either party is prevented or delayed
in any performance or the making of any improvements or repairs or fulfilling
any obligation under this Lease, other than the payment of Base Rent, Extended
Term Rent, or any other rent or charges due pursuant to this Lease, due to
unavoidable delays caused by fire, catastrophe, strikes or labor trouble, civil
commotion, Acts of God, the public enemy, governmental prohibitions or
regulations or inability to obtain materials by reason thereof, or any other
causes beyond such party's reasonable control, shall be added to such party's
time for performance, and such parties shall have no liability by reason of such
delay.
40. AMERICANS WITH DISABILITIES ACT OF 1990
---------------------------------------
The Landlord represents and warrants that:
A. Landlord and the property of which the Premises form a part are
in compliance with the Americans With Disabilities Act of 1990, 42 U.S.C. (S)(S)
12101 et seq. (1992), as amended, and with all applicable rules and regulations
promulgated pursuant to the Act, hereinafter referred to as the "ADA".
B. Covenants and agrees with the Tenant that, so long as this Tenant
leases the Premises, the Landlord will:
1. Not cause or permit any activity to take place on or in the
property of which the Premises form a part in violation of the ADA;
2. Promptly comply with any and all amendments to the ADA
affecting the Landlord and the property of which the Premises may form a part;
3. Notify Tenant in writing of any violations of the ADA and will
forward to Tenant such additional information as to any violations as required
by Tenant;
4. Remedy all violations of the ADA on the property of which the
Premises form a part, in a timely manner, and in accordance with all applicable
requirements of the ADA, at the sole cost of the Landlord.
<PAGE>
- 30 -
If the Landlord fails to remedy such violations or otherwise fails to
comply with the regulations within a reasonable period of time, considering the
circumstances, the Tenant may declare this Lease to be terminated upon thirty
(30) days written notice to Landlord.
C. Notwithstanding anything to the contrary in this Section 40,
Tenant covenants and agrees with Landlord that, during the entire term of this
Lease and any extensions thereof:
(i) Tenant shall notify Landlord in writing of any violations
of the ADA and will forward to Landlord such additional
information as to any violations as required by Landlord;
(ii) Tenant shall remedy all violations of the ADA in the
Premises, including Tenant's entrance, in a timely manner
and in accordance with all applicable requirements of the
ADA, at the sole costs of Tenant; and
(iii) Tenant shall comply with all ADA requirements
applicable to the Premises, and Tenant agrees to indemnify,
defend and hold harmless Landlord from any and all
liabilities, claims, damages, penalties, expenditures,
losses, or charges, including but not limited to, all costs
of investigation, monitoring, legal representation, remedial
response, removal, restoration or permit acquisition, which
may now or in the future be undertaken, suffered, paid,
awarded, assessed, or otherwise incurred as a result of any
noncompliance with the requirements of the ADA with respect
to the Premises, or as a result of any investigation,
monitoring, remedial response, or remedial work undertaken
in the Premises.
If the Tenant fails to remedy such violations or otherwise fails to
comply with the regulations, Landlord may cause such remedial work to be done at
Tenant's sole cost and expense, or declare this Lease in default.
D. Landlord agrees to indemnify, defend and hold harmless Tenant
from any and all liabilities, claims, damages, penalties, expenditures, losses,
or charges, including but not limited to, all costs of investigation,
monitoring, legal representation, remedial response, removal, restoration or
permit acquisition, which may now or in the future be undertaken, suffered,
paid, awarded, assessed, or otherwise incurred as a result of any noncompliance
with the requirements of the ADA on the property of which the Premises form a
part, or as a result of any investigation, monitoring, remedial response, or
remedial work undertaken on the property of the Landlord of which the Premises
form a part.
<PAGE>
- 31 -
41. MEMORANDUM OF LEASE
-------------------
At the request of any party to this Lease, Landlord and Tenant shall
execute a memorandum of lease containing such information as shall be required
by the appropriate state statutes, and such other information as may reasonably
be required. The requesting party shall, at its sole cost, record the
memorandum of lease in the appropriate governmental offices for giving notice of
interests in real property for the city or county, as the case may be, where the
Property is located.
42. CONTINGENT ON SPECIAL USE PERMIT
--------------------------------
This Lease is expressly contingent on the issuance of a Special Use
Permit for the construction and operation of Tenant's office space. Landlord
shall promptly apply for and diligently pursue such Special Use Permit to
issuance.
43. SECURITY
--------
Security coverage for the Buildings shall be 24 hours a day, 365 days
per year with, at a minimum, one guard stationed at the new west entrance
security station. Escort services to Tenant's employees vehicles in the parking
lot will be provided upon request. Security services shall be provided at
reasonably necessary levels as determined by Landlord. Security services shall
be included in Operating Expenses, but Tenant's share of the costs of Security
services shall be 50%.
Landlord warrants and represents that the cost of said Security shall
not exceed $.60 per square foot per year for Years 1 and 2.
Notwithstanding any of the other terms contained in this paragraph or
in the definition of Operating Expenses including the definitions under Term
Sheet 9.2. the Tenant reserves the right, upon sixty (60) days' written notice
to Landlord, to elect to provide its own security services for its Premises, in
which case (i) the charge for such services billed to Tenant by Landlord shall
discontinue effective the latter of sixty (60) days after notice is received by
Landlord or when Landlord is no longer responsible to provide any pay for said
security services for the Premises; and (ii) Tenant warrants and represents that
the security services which it will provide will be done solely at Tenant's sole
costs and expense; and (iii) Tenant shall provide Landlord with a copy of the
executed Service Contract with Tenant's security agency for the period such
services are rendered/to be rendered: and Iv) Tenant agrees to indemnify and
hold Landlord harmless from the against any and all claims, damages, suits, etc.
of any kind whatsoever related in any way to the contracting with or performance
of said security services; and (v) Tenant shall provide Tenant's contractor's
insurance certificate naming Tenant and Landlord as additional insureds with
<PAGE>
- 32 -
coverage reasonably acceptable to Landlord. To the extent that future tenants
require Tenant will receive a pro-rata reduction for the cost of said security
services.
<PAGE>
- 33 -
EXHIBIT A
BUILDINGS:
SEE ATTACHED PLANS
<PAGE>
- 34 -
EXHIBIT B
Page 1 of 2
PREMISES:
[This Exhibit is described in Section 1(g) of this document.]
<PAGE>
- 35 -
EXHIBIT B
Page 2 of 2
[This Exhibit is described in Section 1(g) of this document.]
<PAGE>
- 36 -
EXHIBIT C
COMMENCEMENT DATE AGREEMENT
---------------------------
An Agreement made this _____ day of _______________, 19__, by and
between _______________ (hereinafter called "Landlord") and _______________
(hereinafter called "Tenant").
W I T N E S S E T H:
WHEREAS, on _______________, 19__, Landlord and Tenant entered into a
lease (the "Lease") relating to certain office premises located at
_______________; and
WHEREAS, the term of the Lease has commenced, pursuant to Section 3 of
the Lease; and
WHEREAS, the parties desire to confirm the Term Commencement Date and
Term Expiration Date;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, Landlord and Tenant agree as follows:
1. The Term Commencement Date of the Lease is _______________.
2. Tenant's obligation to pay Rent under the Lease will commence on
_______________.
3. The Term Expiration Date of the Lease is _______________, subject
to the Lease provisions relating to default and termination.
4. The execution of this Agreement shall not constitute the exercise
by Tenant of any option it may have to extend the term of the Lease.
5. The Lease is in full force and effect and is hereby ratified and
confirmed.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Agreement to
be duly executed on the date first above written.
LANDLORD
By:
----------------------------
<PAGE>
- 37 -
Its:
----------------------------
TENANT
By:
----------------------------
Its:
----------------------------
<PAGE>
- 38 -
EXHIBIT D
JANITORIAL SERVICES
1. Cleaning Services Performed Daily on Business Days:
--------------------------------------------------
A. Dust tile flooring or vacuum carpeted areas.
B. Empty and clean wastepaper baskets.
C. Clean and disinfect drinking fountains and water coolers.
D. Light dusting of furniture.
E. The following cleaning services in the Premises including the
lavatories, cafeteria and kitchen areas and in Common Areas:
i. Empty wastepaper receptacles.
ii. Sweep and wet mop flooring.
iii. Clean and disinfect all fixtures and wash and polish mirrors
and shelves.
iv. Fill toilet tissue, soap and towel dispensers.
F. Spot clean entrance doors.
2. Cleaning Services Performed Weekly on Business Days:
---------------------------------------------------
A. Dust baseboards, chair rails, file cabinets and desk equipment.
B. Machine buff resilient flooring.
C. Remove smudges and scuff marks from all painted surfaces and glass
partitions wherever possible.
3. Cleaning Services Performed Semi-annually on Business Days:
----------------------------------------------------------
A. Wash interior of all outside windows annually. (Exterior windows
will be washed at least every six months.)
B. Strip, as required, and wax all resilient flooring.
<PAGE>
- 39 -
4. Tenant understands that Landlord may substitute for any of the methods or
devices set forth in this Exhibit D, other methods or devices which achieve
comparable results.
<PAGE>
- 40 -
EXHIBIT E
ESTOPPEL CERTIFICATE
--------------------
_______________, of _______________, the Tenant, gives this estoppel
certificate to _______________, of _______________, the Purchaser. The Tenant
has entered into a Lease dated _______________, with _______________, as
Landlord, for the following space: .
The Purchaser has requested the information and representations in
this certificate with regard to the Lease because it wishes to acquire an
interest in the property known as _______________, which includes the property
that is the subject of the Lease. The Tenant acknowledges that the Purchaser
intends to rely on the information and representations the Tenant makes in this
certificate in Purchaser's acquisition of the property.
The Tenant stated as follows:
1. A copy of all documents that constitute its Lease are attached to
this certificate, and there are no understandings or verbal agreements that
affect or amend the terms of the Lease.
2. The monthly Base Rent payments under the Lease are $__________,
with Additional Rent due under the Lease as follows: .
3. The Lease term ends on _______________, with the following
renewal options: _______________, all subject to the Lease provisions relating
to default and termination.
4. To the best knowledge of Tenant, no notice has been received by
Tenant of any default which has not been cured.
5. The Lease is in full effect.
Dated:
---------------------------
Tenant
<PAGE>
- 41 -
EXHIBIT "F"
LANDLORD'S WORK
<PAGE>
- 42 -
EXHIBIT G
SEE ATTACHED PLANS OF TENANT
<PAGE>
LEASE MODIFICATION AGREEMENT
No. 1
THIS AGREEMENT, made this 31 day of May, 1994, by and between THE
------
HAGUE CORPORATION (hereinafter referred to as "Landlord") and ACC CORP.
(hereinafter referred to as "Tenant");
WHEREAS, Landlord and Tenant are parties to a certain Lease Agreement
dated January 25, 1994 (the "Lease") for premises (the "Premises") located in
the buildings (the "Buildings") located at 400 West Avenue, Rochester, New York;
and
WHEREAS, Landlord and Tenant desire to modify the Lease;
NOW, THEREFORE, in consideration of the above and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. Section 43 of the Lease, entitled "Security", shall be deleted in
its entirety, and in its place the following shall be inserted:
"43. Security-
Security coverage at the Buildings shall be twenty-four (24)
hours a day, three hundred sixty-five (365) days per year with,
at a minimum, one guard posted at the security guard house in the
parking lot area near Gate H, said guard house to be equipped
with, surveillance monitors for the interior and exterior of
Tenant's entryway to the Premises, electronic controls for Gate
H, and a buzzer and telephone system for Tenant's employees to
page the guard house from inside the entryway to Tenant's
Premises. After business hours, Tenant's employees may request
escort from the entrance to the Buildings to the parking lot.
Security services shall be provided at reasonably necessary
levels as determined by Landlord. Security services shall be
included in Operating expenses (as such item is defined in the
Lease), but Tenant's share of the costs of Security services
shall be 50%" Landlord warrants and represents that the costs of
said Security services shall not exceed $.60 per square foot for
years 1 and 2 of the Lease term.
2. Tenant, in executing this Lease Modification Agreement,
acknowledges that:
(i) The Lease is modified only as indicated herein;
<PAGE>
- 2 -
(ii) Tenant does not know of any default by Landlord of the
terms, covenants or conditions of the Lease;
(iii) As of the date of this Lease Modification Agreement, there
are no existing set-offs, counterclaims or defenses against Landlord whatsoever
to the enforcement of the provisions of the Lease or this Agreement;
(iv) Tenant, to its knowledge, is not in default of the Lease beyond
any applicable periods of grace and notice, nor does any set of any set of [sic]
facts exist which, with the passage of time, would constitute a default.
3. As modified and amended hereby, the parties hereto hereby ratify
and affirm the Lease.
4. This Agreement may not be modified or extended except in writing,
signed by the parties hereto.
5. This Agreement contains the entire agreement of the parties
hereto with respect to the matters contained herein.
THE HAGUE CORPORATION
By: /s/ David M. Flaum, President
-------------------------------
Authorized Signatory
ACC CORP.
By: /s/ Michael R. Daley
-------------------------------
Authorized Signatory
<PAGE>
LEASE MODIFICATION AGREEMENT
NO. 2
THIS AGREEMENT, made this 31st day of May, 1995, by and between
--------
THE HAGUE CORPORATION (hereinafter referred to as "Landlord") and ACC CORP.
(hereinafter referred to as "Tenant");
WHEREAS, Landlord and Tenant are parties to a certain Lease Agreement
dated January 25, 1994, as modified by a certain Lease Modification Agreement
No. 1 dated May 31, 1994, (hereinafter collectively referred to as the "Lease"),
for premises (hereinafter referred to as the "Premises") located in certain
buildings (hereinafter referred to as the "Buildings") located at 400 West
Avenue, Rochester, New York; and
WHEREAS, Tenant has occupied the Premises effective July 1, 1994,
following a substantial completion of Landlord's and Tenant's work; and
WHEREAS, Landlord and Tenant desire to modify the Lease to reflect the
rentable square footage and related rent and additional charges based on the
rentable square footage of the Premises;
NOW, THEREFORE, in consideration of the above and other good and
valuable consideration, the receipt and legal sufficiency of which is hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. Item number 8 of the Term Sheet shall be modified by deleting the
reference to "Section 1(k)" and changing it to "Section 1(l)", and by changing
Tenant's Percentage Share from "27.24%" to "28.54%".
2. Item number 9 of the Term Sheet shall be modified by changing the
rentable square feet from "72,526" to "76,000" or as per Exhibit "B".
3. Item number 10 of the Term Sheet shall be modified by changing
the reference to "Section 3" to "Section 4", and by changing the Term
Commencement Date from "5/1/94" to "7/1/94", and by changing the Rent
Commencement Date from "7/1/94" to "9/1/94".
4. Item number 11 of the Term Sheet shall be modified by changing
the reference to "Section 3" to "Section 4".
5. Item number 12 of the Term Sheet shall be modified by deleting
the reference to "Section 4" and changing it to "Section 5".
6. Item number 13 of the Term Sheet shall be modified by changing
the reference to "Section 4" to "Section 5".
<PAGE>
- 2 -
7. Item number 14 of the Term Sheet shall be modified as follows:
by changing the reference to "Section 5(a)" to "Section 6(a)", and by changing
the Base Rent and Monthly Installment Amount schedules to the following:
Base Rent:
$532,000.00/yr. years 1-2 (based on $7.00 p.s.f.)
$646,000.00/yr. years 3-5 (based on $8.50 p.s.f.)
$722,000.00/yr. years 6-10 (based on $9.50 p.s.f.)
Monthly Installment Amount:
$44,333.33/mo. years 1-2
$53,833.33/mo. years 3-5
$60,166.66/mo. years 6-10
8. Item number 15 of the Term Sheet shall be modified by changing
the Extended Term Base Rent from $761,523.00 per year and $63,460.25 per month
to $798,000.00 per year and $66,500.00 per month.
9. Item number 17 of the Term Sheet shall be modified by changing
the reference to "Section 8" to "Section 9".
10. Section 1(k) of the Lease, at page 2, shall be changed by
deleting the reference to "July 1" and inserting "September 1".
11. Section 1(l) of the Lease, at page 2, shall be modified by
deleting the reference to "27.24%" on line 3, and "72,526" on line 4, and
inserting "28.54%" and "76,000", respectively, or as per Exhibit "B".
12. Section 2(a) of the Lease, at page 3, shall be modified by
deleting the reference to "72,526" and inserting "76,000", or as per Exhibit
"B".
13. Section 4(a) of the Lease, at page 4, shall be modified by
deleting the reference to "May" on line 2 and inserting "July", and by deleting
the reference to "July" on the seventh line of the first paragraph and inserting
"September".
14. Section 6(a) of the Lease, at page 6, shall be modified by
deleting the Base Rent, Monthly Installment amount and Extended Term Base Rent
schedules and replacing them with the following:
<PAGE>
- 3 -
Base Rent:
$532,000.00/yr. years 1-2 (based on $7.00 p.s.f.)
$646,000.00/yr. years 3-5 (based on $8.50 p.s.f.)
$722,000.00/yr. years 6-10 (based on $9.50 p.s.f.)
Monthly Installment Amount:
$44,333.33/mo. years 1-2
$53,833.33/mo. years 3-5
$60,166.66/mo. years 6-10
Extended Term Base Rent: $761,523.00/yr.
(based on $10.50 p.s.f.) $63,460.25/mo.
15. Section 8 of the Lease, at page 9, shall be modified by deleting
the number "$3,142.80" on the third line of the last paragraph, and inserting
"$3,293.33" (referencing the monthly installment amount for janitorial
services).
16. Section 9 of the Lease, at page 10, shall be modified by deleting
the number "240" on the fourth line of the paragraph to "228".
17. Section 24 of the Lease, at page 19, shall be modified by
deleting the reference to "27.24%" in Section 24(b), and inserting "28.54%" and
also by deleting "27.24%" (based on 72,526 rentable square feet)" and inserting
"28.54" (based on 76,000 rentable square feet)." in paragraph 24(c).
18. Annexed hereto as Exhibit 1 are copies of the pages in the Lease
which show the changes made as agreed to above in the format of the original
Lease, although such pages are not intended for insertion into the Lease.
19. Exhibit "B" of the Lease is incorrect and shall be changed to
reflect the inclusion of all of the second floor of buildings 16 and 16A, to
become part of the demised premises. The revised Exhibit "B" shall be annexed
to the Lease Agreement at a future date.
20. Tenant, in executing this Lease Modification Agreement
acknowledges that the Lease is modified only as indicated herein, and that this
agreement contains the entire agreement of the parties hereto with respect to
the matters contained herein.
THE HAGUE CORPORATION
By: /s/ David M. Flaum, President
--------------------------------
Authorized Signatory
<PAGE>
- 4 -
ACC CORP.
By: /s/ Michael R. Daley
---------------------------
Authorized Signatory
ACKNOWLEDGMENTS
STATE OF NEW YORK )
COUNTY OF MONROE ) SS
On this 31 day of May , 1995, before me personally came
------ -------------
David M. Flaum, to me personally known, who, being by me duly sworn, did depose
and say that he resides at Rochester, New York; that he is the President of THE
HAGUE CORPORATION, the corporation described in, and which executed the within
Lease Modification Agreement as Landlord, and that the [sic] signed his name
thereto by order of the board of directors of said corporation.
/s/ Robert F. Redmond
----------------------------
Notary Public
STATE OF NEW YORK)
COUNTY OF MONROE)
On this 31st day of May , 1995, before me personally came
-------- ------------- -
Michael R. Daley , to me personally known, who being by me duly sworn, did
- ------------------
depose and say that (s)he resides at Rochester, NY ; that (s)he is the
----------------- ----
CFO of ACC CORP , the Corporation described in, and which executed
- -------- ------------------
the within Lease Modification Agreement as Tenant, and that (s)he signed her/his
name thereto by order of the directors of said corporation.
/s/ Karen F. Ferrini
------------------------------
Notary Public
<PAGE>
EXHIBIT 99.10
AMENDED AND RESTATED LEASE
BETWEEN
COOPERS & LYBRAND LIMITED
AS RECEIVER AND MANAGER FOR
DUNDAS KIPLING II INC.
Landlord
- and -
ACC LONG DISTANCE LTD.
Tenant
<PAGE>
SUMMARY OF AMENDED AND RESTATED LEASE
B E T W E E N:
COOPERS & LYBRAND LIMITED AS RECEIVER AND
MANAGER FOR DUNDAS KIPLING II INC.
(hereinafter referred to as "Landlord")
- and -
ACC LONG DISTANCE LTD.
(hereinafter referred to as "Tenant")
ARTICLE I
CERTAIN BASIC LEASE PROVISIONS
1.1 Certain Basic Lease Provisions
The following are certain basic lease provisions which are part of,
and are referred to in subsequent provisions of this Lease:
(1) Tenant's Trade Name and Style:
ACC LONG DISTANCE LTD.
(2) Address of Tenant:
5343 Dundas Street West
Suite 401
Etobicoke, Ontario
Attention: President
(3) Leased Premises: Part of the 4th floor and the entire 6th floor
as more particularly described and defined in Schedule "B" of the
Lease.
(4) Rentable Area of the Premises: 7,858 square feet - 4th floor and
17,624 square feet - 6th floor (but subject to revision as per
certification of the Landlord's Architect or Land Surveyor or
space planner).
(5) Fixturing Period: Nil days
(6) Term: 10 years, commencing March 1, 1994, subject to one (1)
right of renewal as provided for in the Lease at Rider No. 1.
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(7) Permitted Use of Leased Premises: Office as per Section 8.01.
(8) Minimum Rent: An annual minimum rent in equal monthly
instalments in advance on the first day of each month as follow:
Years 1, 2, 3 $10.50 per square foot
Years 4, 5, 6 $12.50 per square foot
Years 7, 8, 9, 10 $14.50 per square foot
(9) Additional Rent: As provided for in Section 1.01. Also see
Section 6.02.
ARTICLE 2
SCHEDULES, RIDERS AND DEFINITIONS
2.1 Schedules
The following schedules are annexed to and form part of the Lease:
Schedule "A" - Legal Description of the Building
Schedule "B" - Floor Plan
Schedule "C" - Landlord's and Tenant's Work
Schedule "D" - Rules and Regulations
Schedule "E" - Indemnity Agreement
2.2 Riders
The following riders are annexed to and form part of the Lease:
Rider No. 1 - Option to Extend the Term
Rider No. 2 - Free Rent Periods
Rider No. 3 - Lease Cancellation Provisions
Rider No. 4 - Option to Lease Additional Space
Rider No. 5 - Payment for Leasehold Improvements -Sixth Floor
Expansion Premises
2.3 Definitions
In the Lease the defined terms set forth in Article I have the
meanings therein indicated.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Definitions
Section 1.01 - "Additional Rent".................. 2
Section 1.02 - "Architect"........................ 2
Section 1.03 - "Building"......................... 3
Section 1.04 - "Commencement Date"................ 3
Section 1.05 - "Common Facilities"................ 3
Section 1.06 - "Fixturing Period"................. 4
Section 1.07 - "Fourth Floor Expansion Premises".. 4
Section 1.08 - "Indemnitor"....................... 4
Section 1.09 - "Land Surveyor".................... 4
Section 1.10 - "Landlord"......................... 4
Section 1.11 - "Landlord's Work".................. 4
Section 1.12 - "Leasable Premises"................ 4
Section 1.13 - "Manager".......................... 4
Section 1.14 - "Minimum Rent"..................... 4
Section 1.15 - "Mortgagee"........................ 4
Section 1.16 - "Normal Business Hours"............ 5
Section 1.17 - "Original Premises"................ 5
Section 1.18 - "Parking Facilities"............... 5
Section 1.19 - "Person"........................... 5
Section 1.20 - "Premises"......................... 5
Section 1.21 - "Proportionate Share".............. 5
Section 1.22 - "Rent"............................. 5
Section 1.23 - "Rentable Area of the Premises".... 5
Section 1.24 - "Rentable Area of the Building".... 6
Section 1.25 - "Rental Year"...................... 6
Section 1.26 - "Rules and Regulations"............ 6
Section 1.27 - "Sixth Floor Premises"............. 6
Section 1.28 - "Sixth Floor Expansion Premises"... 6
Section 1.29 - "Tenant"........................... 7
Section 1.30 - "Tenant's Work".................... 7
Section 1.31 - "Term"............................. 7
Section 1.32 - "Usable Floor Area"................ 7
ARTICLE II
Intent and Interpretation
Section 2.01 - Net Lease.......................... 8
Section 2.02 - Obligations as Covenants........... 8
Section 2.03 - Headings........................... 8
Section 2.04 - Extended Meanings.................. 8
Section 2.05 - Partial Invalidity................. 9
Section 2.06 - Entire Agreement................... 9
Section 2.07 - Governing Law...................... 10
Section 2.08 - Time of the Essence................ 10
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ARTICLE III
Grant and Term
Section 3.01 - Premises........................... 10
Section 3.02 - Use of Common Facilities........... 10
Section 3.03 - Commencement and Ending Date
of the Term...................... 10
Section 3.04 - Failure of Tenant to Open.......... 11
Section 3.05 - Certificates....................... 11
Section 3.06 - Early Occupancy.................... 12
Section 3.07 - Acceptance of Premises............. 12
Section 3.08 - Tenant's Work...................... 12
ARTICLE IV
Rent
Section 4.01 - Covenant to Pay.................... 13
Section 4.02 - Minimum Rent....................... 13
Section 4.03 - Deposit............................ 14
Section 4.04 - Security Deposit................... 14
Section 4.05 - Rent Past Due...................... 15
ARTICLE V
Taxes
Section 5.01 - Taxes - Definition................. 15
Section 5.02 - Taxes Payable by the Landlord...... 16
Section 5.03 - Taxes Payable by the Tenant........ 16
Section 5.04 - Business Taxes and Other
Taxes of Tenant.................. 17
Section 5.05 - Tenant's Indemnification With
Respect to Taxes under Sections
5.01, 5.03 and 5.04.............. 18
Section 5.06 - Landlord's Taxes................... 19
Section 5.07 - Per Diem Adjustment................ 19
ARTICLE VI
Building and Common Facilities - Control and Payment
Section 6.01 - Control of the Building by
the Landlord..................... 19
Section 6.02 - Tenant to Bear Share of Expense.... 21
Section 6.03 - Payment of Tenant's Share.......... 26
Section 6.04 - Landlord's Services................ 27
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ARTICLE VII
Utilities, Heating, Ventilating and Air Conditioning
Section 7.01 - Charges for Utilities.............. 28
Section 7.02 - Lighting........................... 30
Section 7.03 - Heating, Ventilating and
Air-Conditioning................. 31
Section 7.04 - After Hour Charges................. 31
ARTICLE VIII
Use of the Premises
Section 8.01 - Use of the Premises................ 31
Section 8.02 - Conduct of Business................ 32
Section 8.03 - Observance of Law.................. 34
ARTICLE IX
Insurance and Indemnity
Section 9.01 - Tenant's Insurance................. 35
Section 9.02 - Increase in Insurance Premiums..... 37
Section 9.03 - Cancellation of Insurance.......... 37
Section 9.04 - Insurance Risks.................... 38
Section 9.05 - Loss or Damage..................... 38
Section 9.06 - Landlord's Insurance............... 39
Section 9.07 - Indemnification of Landlord........ 40
ARTICLE X
Maintenance, Repairs and Alterations
Section 10.01 - Maintenance and Repairs by Tenant. 41
Section 10.02 - Landlord's Approval of
Tenant's Repairs................ 41
Section 10.03 - Maintenance by Landlord........... 42
Section 10.04 - Repair on Notice.................. 43
Section 10.05 - Surrender of the Premises......... 44
Section 10.06 - Repair Where Tenant at Fault...... 44
Section 10.07 - Tenant Not to Overload Facilities. 44
Section 10.08 - Tenant Not to Overload Floors..... 45
Section 10.09 - Removal and Restoration by Tenant. 45
Section 10.10 - Notice by Tenant.................. 46
Section 10.11 - Tenant to Discharge all Liens..... 46
Section 10.12 - Signs and Advertising............. 47
Section 10.13 - Directory Board................... 48
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ARTICLE XI
Damage and Destruction and Expropriation
Section 11.01 - Destruction of the Premises....... 48
Section 11.02 - Destruction of the Building....... 50
Section 11.03 - Expropriation..................... 51
Section 11.04 - Architect's Certificate........... 52
ARTICLE XII
Assignment, Subletting and Change of Control
Section 12.01 - Consent Required.................. 52
Section 12.02 - Conditions of Consent............. 55
Section 12.03 - No Advertising of Premises........ 56
Section 12.04 - Assignment by the Landlord........ 56
ARTICLE XIII
Access and Alterations
Section 13.01 - Right of Entry................... 57
ARTICLE IV
Status Statement, Attornment and Subordination
Section 14.01 - Status Statement.................. 58
Section 14.02 - Subordination and Attornment...... 59
Section 14.03 - Execution of Documents............ 59
Section 14.04 - Financial Information............. 60
ARTICLE XV
Default and Landlord's Remedies
Section 15.01 - Right to Re-Enter................. 60
Section 15.02 - Right to Relet.................... 62
Section 15.03 - Other Rights of the Landlord...... 63
Section 15.04 - Survival of Obligations........... 63
Section 15.05 - Expenses.......................... 63
Section 15.06 - Removal of Chattels............... 64
Section 15.07 - Waiver of Exemption from Distress. 64
Section 15.08 - Landlord May Cure Tenant's
Default or Perform Tenant's
Covenants....................... 64
Section 15.09 - Lien on Personal Property......... 65
Section 15.10 - Charges Collectible as Rent....... 65
Section 15.11 - Remedies Generally................ 66
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ARTICLE XVI
Miscellaneous
Section 16.01 - Rules and Regulations............. 66
Section 16.02 - Overholding - No Tacit Renewal.... 67
Section 16.03 - Successors........................ 67
Section 16.04 - Tenant Partnership................ 67
Section 16.05 - Waiver............................ 67
Section 16.06 - Accord and Satisfaction........... 68
Section 16.07 - Brokerage Commissions............. 68
Section 16.08 - No Partnership or Agency.......... 69
Section 16.09 - Agent............................. 69
Section 16.10 - Force Majeure..................... 69
Section 16.11 - Notices........................... 69
Section 16.12 - No Option......................... 70
Section 16.13 - Registration...................... 70
Section 16.14 - Compliance with The Planning Act.. 70
Section 16.15 - Metric Conversion................. 71
Section 16.16 - Limited Assets.................... 71
Section 16.17 - Bankruptcy and Insolvency Act..... 71
Section 16.18 - Parking Spaces.................... 71
Section 16.19 - Quiet Enjoyment................... 72
SCHEDULE A LEGAL DESCRIPTION OF THE BUILDING
SCHEDULE B FLOOR PLAN
SCHEDULE C LANDLORD'S AND TENANT'S WORK
SCHEDULE D RULES AND REGULATIONS
SCHEDULE E INDEMNITY AGREEMENT
RIDER NO. 1 OPTION TO EXTEND THE TERM
RIDER NO. 2 FREE RENT PERIODS
RIDER NO. 3 LEASE CANCELLATION PROVISIONS
RIDER NO. 4 OPTION TO LEASE ADDITIONAL SPACE
RIDER NO. 5 PAYMENT FOR LEASEHOLD IMPROVEMENTS -
SIXTH FLOOR EXPANSION PREMISES
<PAGE>
AMENDED AND RESTATED LEASE
OFFICE LEASE
THIS LEASE is dated the 1st day of March, 1994.
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT
B E T W E E N:
COOPERS & LYBRAND LIMITED AS RECEIVER AND
MANAGER FOR DUNDAS KIPLING II INC.
(hereinafter called the "Landlord"),
PARTY OF THE FIRST PART
- and -
ACC LONG DISTANCE LTD.
(hereinafter called the "Tenant")
PARTY OF THE SECOND PART
WHEREAS the Landlord and Tenant entered into a lease dated the 1st day
of August, 1991 (the "Original Lease") for premises comprised of 3,758 square
feet of Rentable Area (the "Original Premises") on the 4th floor of the building
(the "Building") municipally known as 5343 Dundas Street West, in the City of
Etobicoke;
AND WHEREAS the Landlord and the Tenant have entered into a lease
amending agreement (the "First Lease Amending Agreement") made as of the 6th day
of February, 1992 in respect of an additional 4,100 square feet of Rentable Area
(the "Fourth Floor Expansion Premises") on the 4th floor of the Building;
AND WHEREAS the Tenant has occupied an additional 7,946 square feet of
Rentable Area on the 6th floor of the Building (the "Sixth Floor Premises")
pursuant to a proposed second lease amending agreement (the "Second Lease
Amending Agreement");
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AND WHEREAS the Landlord and Tenant have entered into a lease amending
agreement made as of the 12th day of January, 1994 (the "January 1994 Lease
Amending Agreement") pursuant to which, inter alia, the Landlord and the Tenant
agreed that the Tenant would lease from the Landlord the balance of the 6th
floor of the Building comprising approximately 9,678 square feet of Rentable
Area (the "Sixth Floor Expansion Premises") and pursuant to which the term, the
rental rate and other provisions in respect of the Original Premises, the Fourth
Floor Expansion Premises and the Sixth Floor Premises, will be amended;
AND WHEREAS the Landlord and Tenant have entered into an agreement
with respect to Suite 606 of the Building pursuant to a letter agreement dated
August 10, 1993, as amended by letter dated October 5, 1993, and as further
amended pursuant to the January 1994 Lease Amending Agreement (collectively the
"Suite 606 Agreement");
AND WHEREAS all of the conditions pursuant to the January 1994 Lease
Amending Agreement have either been satisfied or waived by the parties;
AND WHEREAS the parties are entering into this Amended and Restated
Lease to incorporate the provisions of the Original Lease, the First Lease
Amending Agreement, the Second Lease Amending Agreement referred to above and
the January 1994 Lease Amending Agreement;
NOW THEREFORE this agreement witnesseth that in consideration of the
sum of Two Dollars ($2.00) and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto, the parties agree as follows:
ARTICLE I
Definitions
The parties hereto agree that when used in this Lease or in any
Schedule attached to this Lease the following words or expressions have the
meaning hereinafter set forth.
Section 1.01 - "Additional Rent" means any and all sums of money or charges
required to be paid by the Tenant under this Lease (except Minimum Rent) whether
or not designated as "Additional Rent" or whether or not payable to the Landlord
or to any other person.
Section 1.02 - "Architect" means the architect from time to time named by the
Landlord.
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Section 1.03 - "Building" means all those lands and premises located at 5343
Dundas Street West in the City of Etobicoke, in the Province of Ontario, which
lands are more particularly described in Schedule "A" attached hereto, as such
lands may be altered, expanded or reduced from time to time and the buildings,
improvements, equipment and facilities erected thereon or situate from time to
time therein.
Section 1.04 - "Commencement Date" means that date defined in the provisions of
Section 3.03 hereof.
Section 1.05 - "Common Facilities" means (a) those areas, facilities, utilities,
improvements, equipment and installations which, from time to time: (i) are not
designated or intended by the Landlord to be leased to tenants of the Building;
(ii) are designated by the Landlord to serve or benefit the Building, whether or
not located within, adjacent to, or near the Building; (iii) are designated by
the Landlord as part of the Common Facilities; (iv) are provided or designated
(and which may be changed from time to time) by the Landlord for the use or
benefit of the tenants, their employees, customers and other invitees in common
with others entitled to the use or benefit thereof in the manner and for the
purposes permitted by this Lease, excluding the Parking Facilities and excluding
any elevator, garbage, compactor, entrance or other facilities designated from
time to time by the Landlord for the exclusive use of any particular tenant or
tenants of the Building.
Without limiting the generality of the foregoing, Common Facilities
includes any facilities shared by the Building and other buildings or lands, the
roof and roof membrane, exterior wall assemblies including weather walls,
exterior and interior structural elements and bearing walls in the buildings and
improvements comprising the Building, and the foundations and footings of the
Building; all entrances and exits thereto and all structural elements thereof;
access roads; truck courts; driveways; truckways; delivery passages; manual,
mechanical, electrical or automatically operated doors; package pick-up
stations; loading docks and related areas; pedestrian sidewalks; landscaped and
planted areas; foyers and lobbies; public seating and service areas; corridors;
bus kiosks, if any, roadways and stops; equipment, furniture, furnishings and
fixtures; first aid stations; stairways, escalators, ramps, moving sidewalks and
elevators and other transportation equipment and systems; tenant common and
public washrooms; electrical, telephone, meter, valve, mechanical, mail,
storage, service and janitor rooms and galleries; music, fire prevention,
security and communication systems; pylon and other general signs; columns;
pipes; electrical, plumbing, drainage, lighting, ventilating, air conditioning,
mechanical, and all other installations, equipment or services located in the
Building or related thereto as well as the structures housing the same.
<PAGE>
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Section 1.06 - "Fixturing Period" means a period of Nil (0) days after the
Landlord gives notice to the Tenant that the Landlord's Work is completed to
such an extent that the Tenant's Work may be commenced.
Section 1.07 - "Fourth Floor Expansion Premises" means that part of the Premises
located on the 4th floor of the Building being composed of 3,930 square feet of
Useable Floor Area and 4,100 square feet of Rentable Area, as shown outlined in
blue on the plan attached as Schedule "B".
Section 1.08 - "Indemnitor" means the Person who/which has executed or agreed to
execute the Indemnity Agreement which is attached to this Lease as Schedule "E",
if applicable, and includes without limiting the generality of the foregoing,
the Indemnity Agreement executed by ACC TelEnterprises Ltd. and dated the 1st
day of March, 1994.
Section 1.09 - "Land Surveyor" means the accredited land surveyor from time to
time named by the Landlord.
Section 1.10 - "Landlord" means the Party of the First Part, and in any section
of this Lease that contains exculpatory language in favour of the Landlord,
"Landlord" also includes the directors, officers, servants, employees and agents
of the Landlord.
Section 1.11 - "Landlord's Work" means the work performed by the Landlord as
described in the provisions of Schedule "C" hereto as Landlord's Work.
Section 1.12 - "Leasable Premises" means those premises (including the Premises)
in the Building which are leased to tenants or which are designated or intended
by the Landlord from time to time to be leased or used and occupied by tenants,
but shall not include any Common Facilities and shall also not include storage
space in the Building leased to tenants or which is designated or intended by
the Landlord from time to time to be leased or occupied by tenants for storage
space in the Building.
Section 1.13 - "Manager" means the Person retained by the Landlord from time to
time to manage the Building, and until such time as it may be replaced means
Oxford Development Group Inc.
Section 1.14 - "Minimum Rent" means the annual rent payable by the Tenant
pursuant to Section 4.02 hereof.
Section 1.15 - "Mortgagee" means any mortgagee or hypothecary creditor
(including any trustee for bondholders) of the Building or any part thereof, and
any chargee or other secured creditor that holds the Building or any part of it
as security but a
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Mortgagee is not a creditor, chargee or security holder of a tenant of Leasable
Premises.
Section 1.16 - "Normal Business Hours" means the hours from 7:00 a.m. to 7:00
p.m. on Mondays to Fridays, and the hours from 9:00 a.m. to 1:00 p.m. on
Saturdays, unless any such day is a statutory holiday in the Province of
Ontario.
Section 1.17 - "Original Premises" means that part of the Premises located on
the 4th floor of the Building being composed of 3,419 square feet of Useable
Floor Area and 3,758 square feet of Rentable Area, as shown outlined in red on
the plan attached as Schedule "B".
Section 1.18 - "Parking Facilities" means the underground levels of parking and
other areas designated by the Landlord as parking areas, servicing the Building,
but excludes the elevator lobbies on each of such levels.
Section 1.19 - "Person" if the context allows, includes any person, firm,
partnership or corporation, or any group of persons, firms, partnerships or
corporations or any combination thereof.
Section 1.20 - "Premises" means collectively the Original Premises, the Fourth
Floor Expansion Premises, the Sixth Floor Premises and the Sixth Floor Expansion
Premises.
Section 1.21 - "Proportionate Share" means a fraction which has as its numerator
the Rentable Area of the Premises, and as its denominator, the Rentable Area of
the Building.
Section 1.22 - "Rent" means all Minimum Rent and Additional Rent payable
pursuant to this Lease.
Section 1.23 - "Rentable Area of the Premises" means (i) where a tenant has
leased or occupied an entire floor in the Building, all floor area measured from
the inside face of the outer building glass surfaces and from the inside face of
outer building masonry walls including the elevator lobby, service corridors,
electrical rooms, telephone rooms, janitors' closets, men's and women's
washrooms, mechanical rooms and vending areas, but shall exclude the lobby on
the ground floor of the Building in the case of a ground floor tenant leasing or
occupying such entire floor and shall exclude the elements of the Building that
penetrate through the floor to areas below, such as stairs, elevator shafts,
flues, stacks, pipe shafts and vertical ducts and their enclosing wall, provided
that no deduction from Rentable Area shall be made for columns or projections
necessary to the Building nor for any service areas which are for the specific
use of a particular tenant, such as special stairs and/or elevators, or, (ii)
where a floor is leased or occupied by
<PAGE>
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more than one (1) tenant, (except for a ground floor tenant), the Useable Floor
Area of the Premises multiplied by a fraction, the numerator of which shall be
the Rentable Area for that floor on which the Premises are located, determined
as if the Tenant had leased the entire floor for its lease purposes and the
denominator of which shall be the aggregate Useable Floor Area of the same floor
assuming a full corridor design for the floor upon which the Premises are
located, or, (iii) in the case of a ground floor tenant, where a floor is leased
or occupied by more than one (1) tenant, the Useable Floor Area of the Premises
plus a gross up factor based on assuming that the ground floor is a typical
multi-tenanted floor for office usage with a full corridor design for such
floor. The definitions in this paragraph are in accordance with the standard
method for measuring floor area in office buildings as sanctioned by the
Building Owners and Managers Association International (BOMA) as of June 21,
1989.
Section 1.24 - "Rentable Area of the Building" means the aggregate of the
individual Rentable Areas (measured in accordance with the method set out in
Section 1.23) of all Leasable Premises within the Building.
Section 1.25 - "Rental Year" means a period of time, the first Rental Year
commencing on the first day of the Term hereof, and ending on the last day of
the month of December immediately following. Each Rental Year thereafter shall
consist of consecutive periods of twelve (12) calendar months, but the last
Rental Year of the Term shall terminate on the expiration or earlier termination
of this Lease.
If, however, the Landlord considers it necessary or convenient for the
Landlord's purposes, the Landlord may at any time and from time to time, by
written notice to the Tenant, specify a date from which each subsequent Rental
Year is to commence, and in such event, the then current Rental Year shall
terminate on the day immediately preceding the commencement of such new Rental
Year, and the appropriate adjustments shall be made between the parties.
Section 1.26 - "Rules and Regulations" means the rules and regulations contained
in Schedule "D" of this Lease and such amendments and additions thereto which
may be adopted and promulgated by the Landlord from time to time, acting
reasonably.
Section 1.27 - "Sixth Floor Premises" means that part of the Premises located on
the 6th floor of the Building as shown outlined in green on the plan attached as
Schedule "B".
Section 1.28 - "Sixth Floor Expansion Premises" means that part of the Premises
located on the 6th floor of the Building as shown outlined in yellow on the plan
attached as Schedule "B".
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Section 1.29 - "Tenant" means the Party of the Second Part and is deemed to
include the word "lessee" and any Person mentioned as Tenant in this Lease
whether one or more.
Section 1.30 - "Tenant's Work" means the work completed or to be completed by
the Tenant, described in the provisions of Schedule "C" hereto.
Section 1.31 - "Term" means the period of time described in Section 3.03 hereof,
and any renewal or extension thereof, if applicable.
Section 1.32 - "Usable Floor Area" means (i) where a tenant has leased or
occupied an entire floor in the Building, the Rentable Area of the Premises, or,
(ii) where a floor is leased or occupied by more than one (1) tenant, all floor
area from the inside face of the outer building glass surfaces and from the
inside face of the outer building masonry walls to the tenant's side of
corridors and/or other permanent partitions and to the centre of partitions that
separate the Premises from adjoining tenants' premises (whether occupied or not)
but excluding elements of the Building that penetrate through the floor to areas
below, such as stairs, elevator shafts, flues, pipe shafts, and vertical ducts
and their enclosing walls. No deduction from Usable Floor Area shall be made
for columns or projections necessary for the Building nor for any service areas
which are for the specific use of a particular tenant, such as special stairs
and/or elevators. The definitions in this paragraph are in accordance with the
standard method of measuring floor area in office buildings as sanctioned by the
Building Owners and Managers Association International (BOMA) as of June 21,
1989.
SCHEDULES
"A" - legal description
"B" - sketch of the Premises outlined in red, blue, green and yellow, as
applicable
"C" - Landlord's Work and Tenant's Work
"D" - Rules and Regulations
"E" - Indemnity Agreement
RIDERS
No. 1 - Option to Extend the Term
No. 2 - Free Rent Periods
No. 3 - Lease Cancellation Provisions
<PAGE>
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No. 4 - Option to Lease Additional Space
No. 5 - Payment for Leasehold Improvements - Sixth Floor Expansion Premises
ARTICLE II
Intent and Interpretation
Section 2.01 - Net Lease
The Tenant acknowledges and agrees that it is intended that this Lease
is a completely carefree net lease to the Landlord, except as expressly herein
set out, that during the Term the Landlord is not responsible for any costs,
charges, expenses and outlays of any nature whatsoever arising from or relating
to the Premises, or the use and occupancy thereof, or the contents thereof or
the business carried on therein, and the Tenant shall pay all charges,
impositions, costs and expenses of every nature and kind, extraordinary as well
as ordinary and foreseen as well as unforeseen, relating to the Premises, the
use and occupancy thereof, the contents thereof, and the business carried on
therein, except as expressly herein set out.
Section 2.02 - Obligations as Covenants
Each obligation or agreement of the Landlord or the Tenant expressed
in this Lease, even though not expressed as a covenant, is considered to be a
covenant for all purposes.
Section 2.03 - Headings
The headings introducing Sections and Articles in this Lease are
inserted for convenience of reference only and in no way define, limit, construe
or describe the scope or intent of such Sections or Articles.
Section 2.04 - Extended Meanings
The words "hereof", "herein", "hereunder" and similar expressions used
in any Section or subsection of this Lease relate to the whole of this Lease and
not to that Section or subsection only, unless otherwise expressly provided.
The use of the neuter singular pronoun to refer to any party is deemed a proper
reference even though the party is an individual, a partnership, a corporation
or a group of two or more individuals, partnerships or corporations. The
necessary grammatical changes required to make the provisions of this Lease
apply in the plural sense where there is more than one Landlord or Tenant or
other party and to either corporations, associations, partnerships, or
<PAGE>
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individuals, males or females, shall in all instances be assumed as though in
each case fully expressed.
Section 2.05 - Partial Invalidity
If for any reason whatsoever any term, covenant or condition of this
Lease, or the application thereof to any person or circumstance, is to any
extent held or rendered invalid, unenforceable or illegal, then such term,
covenant or condition:
(a) is deemed to be independent of the remainder of this Lease and to
be severable and divisible therefrom and its invalidity, unenforceability or
illegality does not affect, impair or invalidate the remainder of this Lease or
any part thereof; and
(b) continues to be applicable to and enforceable to the fullest
extent permitted by law against any Person and circumstances other than those as
to which it has been held or rendered invalid, unenforceable or illegal.
Neither party is obliged to enforce any term, covenant or condition of
this Lease against any Person, if, or to the extent by so doing, such party is
caused to be in breach of any laws, rules, regulations or enactments from time
to time in force.
Section 2.06 - Entire Agreement
This Lease and Schedules "A", "B", "C", "D" and "E" and Riders 1, 2,
3, 4 and 5 attached hereto form a part hereof together with the Rules and
Regulations adopted and promulgated by the Landlord pursuant to Section 16.01
hereof, sets forth all the covenants, promises, agreements, conditions and
understandings between the Landlord and the Tenant concerning the Premises and
there are no covenants, promises, agreements, conditions or understandings,
either oral or written, between them other than are herein set forth. This
Lease, Schedules "A", "B", "C", "D" and "E" and Riders 1, 2, 3, 4 and 5 attached
hereto and the Rules and Regulations adopted and promulgated by the Landlord
pursuant to Section 16.01 hereof, supersede and replace the Original Lease, the
First Lease Amending Agreement, the Second Lease Amending Agreement, the January
1994 Lease Amending Agreement and the Suite 606 Agreement, and any other
proposals entered into in connection with the Premises or any part thereof;
provided that nothing herein shall prejudice the Landlord in the event that any
of the terms, conditions or covenants on the part of the Tenant to be performed
pursuant to the Original Lease, the First Lease Amending Agreement, the Second
Lease Amending Agreement, the January 1994 Lease Amending Agreement, and/or the
Suite 606 Agreement, have not been complied with in full, to the date hereof,
all of which rights and remedies are hereby
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expressly reserved in favour of the Landlord. Except as herein otherwise
provided, no subsequent alteration, amendment, change or addition to this Lease
shall be binding unless in writing and signed by the parties to be bound
thereby.
Section 2.07 - Governing Law
This Lease shall be construed in accordance with and governed by the
laws of the Province of Ontario.
Section 2.08 - Time of the Essence
Time is of the essence of this Lease and of every part hereof.
ARTICLE III
Grant and Term
Section 3.01 - Premises
In consideration of the rents, covenants and agreements herein
contained on the part of the Tenant to be paid, observed and performed, the
Landlord leases to the Tenant, and the Tenant leases from the Landlord, the
Premises. The space enclosed by the boundaries of the Premises extends
vertically from the top surface of the structural subfloor to the bottom surface
of the structural ceiling and horizontally to the limits of the Rentable Area of
the Premises determined in accordance with Section 1.23, but it is acknowledged
and agreed that the Common Facilities which are within the space enclosed by the
boundaries of the Premises do not form part of the Premises.
Section 3.02 - Use of Common Facilities
The use and occupation by the Tenant of the Premises includes the non-
exclusive and non-transferable right or licence to use the Common Facilities in
common with others entitled thereto for the purposes for which they are intended
and during such hours as the Building may be open for business as determined by
the Landlord from time to time, subject in each case to this Lease and to the
Rules and Regulations.
Section 3.03 - Commencement and Ending Date of the Term
The Tenant shall have and hold the Premises for and during the Term
which shall be, unless sooner terminated pursuant to the other provisions
hereof, the period of ten (10) years, from and including the 1st day of March,
1994 (the "Commencement
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Date") to and including the 29th day of February, 2004, subject to the
provisions hereof relating to earlier termination.
Section 3.04 - Failure of Tenant to Open
The Tenant represents and warrants to the Landlord that it is in
possession of that part of the Premises constituting the Original Premises, the
Fourth Floor Expansion Premises and the Sixth Floor Premises. The Tenant
covenants to take possession of that part of the Premises constituting the Sixth
Floor Expansion Premises and to open such part of the Premises for business
fully fixtured, stocked and staffed no later than March 1st, 1994, and in the
event that the Tenant fails to do so, then the Tenant acknowledges that the
Landlord shall have the right, notwithstanding the foregoing, to collect the
Minimum Rent and Additional Rent in this Lease provided for each and every day
that the Tenant shall fail to commence to do business as in this Lease provided.
In addition to any and all other remedies in this Lease provided, the Landlord
shall have the right, at its option, to terminate this Lease upon ten (10) days
notice to the Tenant of its election to do so in the event the Tenant is in
default of its covenant pursuant to this Section 3.04.
Section 3.05 - Certificates
(a) The Landlord and Tenant acknowledge that the Rentable Area and the
Usable Area of the Original Premises, the Fourth Floor Expansion Premises and
the Sixth Floor Premises have been certified and consist of the following:
(i) Original Premises: Usable Floor Area - 3,419 square feet
Rentable Area - 3,758 square feet
(ii) Fourth Floor Expansion
Premises: Usable Floor Area - 3,930 square feet
Rentable Area - 4,100 square feet
(iii) Sixth Floor Premises: Usable Floor Area -7,365 square feet
Rentable Area - 7,946 square feet,
and that such certificates are binding on the Landlord and the Tenant and form
part of this Lease.
(b) The Landlord agrees to provide at its expense a certificate from
its space planner certifying in writing the Rentable Area of that part of the
Premises constituting the Sixth
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Floor Expansion Premises expressed in square feet; the Tenant shall be bound by
such determination unless it shall within 30 days of receipt of such certificate
give written notice of its challenge to such certification and, in such event,
the Landlord and Tenant shall agree on an independent third party to determine
the Rentable Area of that part of the Premises constituting the Sixth Floor
Expansion Premises and, in the event there shall be a variation of 5% or more in
the subsequent certificate, the costs of obtaining the certification shall be
borne by the Landlord, and in every other case shall be borne by the Tenant.
The purposes of such certification shall be for the purposes of calculating the
Leasehold Improvement Allowance which the Landlord shall pay to the Tenant in
connection with the Sixth Floor Expansion Premises, as provided for in the
provisions of Rider No. 5, and for the purposes of calculating the Minimum Rent
and the Additional Rent payable in respect of the Sixth Floor Expansion
Premises.
Section 3.06 - Early Occupancy
If the Tenant begins to conduct business in all or any portion of the
Sixth Floor Expansion (except for Suite 606) Premises before the Commencement
Date, the Tenant shall pay to the Landlord on the Commencement Date a rental in
respect thereof for the period from the date the Tenant begins to conduct
business in all or any part of the Premises to the Commencement Date, which
rental shall be that proportion of Rent for one calendar year which the number
of days in such period is 365. Except where clearly inappropriate, the
provisions of this Lease shall be applicable during such period. The Tenant
shall not, however, conduct business from the Sixth Floor Expansion Premises
before the Commencement Date without the Landlord's prior written approval
except with respect to Suite 606 which shall be governed by the Suite 606
Agreement.
Section 3.07 - Acceptance of Premises
The Tenant acknowledges and agrees that the Premises including the
Landlord's Work are in good and satisfactory condition and that all
undertakings, if any, of the Landlord to alter, remodel or improve the Premises
or the Building and all representations, if any, by the Landlord respecting the
condition of the Premises or the Building have been fully satisfied and
performed by the Landlord.
Section 3.08 - Tenant's Work
The Tenant agrees to undertake and install the Tenant's Work.
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ARTICLE IV
Rent
Section 4.01 - Covenant to Pay
The Tenant shall pay Rent as herein provided which obligation shall
survive the expiration or earlier termination of this Lease.
Section 4.02 - Minimum Rent
The Tenant shall pay from and after the Commencement Date to the
Landlord at the office of the Landlord, or at such other place designated by the
Landlord, in lawful money of Canada, without any prior demand therefor and
without any deduction, abatement, setoff or compensation whatsoever, as annual
Minimum Rent, payable as outlined below, each instalment in advance on the first
day of each and every month in the following periods, subject to the provisions
of Rider No.2, Free Rent Periods, and Rider No.4, Option to Lease Additional
Space:
(a) From and including the 1st day of March, 1994, to and including
the 28th day of February, 1997, as annual Minimum Rent, the sum
of Two Hundred and Sixty-Seven Thousand, Five Hundred and Sixty-
One Dollars ($267,561.00) payable in equal consecutive monthly
instalments of Twenty-Two Thousand, Two Hundred and Ninety-Six
Dollars and Seventy-Five Cents ($22,296.75) based on an annual
Minimum Rent rate of Ten Dollars and Fifty Cents ($10.50) per
square foot of Rentable Area of the Premises;
(b) From and including the 1st day of March, 1997, to and including
the 29th day of February, 2000, as annual Minimum Rent, the sum
of Three Hundred and Eighteen Thousand, Five Hundred and Twenty-
Five Dollars ($318,525.00) payable in equal consecutive monthly
instalments of Twenty-Six Thousand, Five Hundred and Forty-Three
Dollars and Seventy-Five Cents ($26,543.75) based on an annual
Minimum Rent rate of Twelve Dollars and Fifty Cents ($12.50) per
square foot of Rentable Area of the Premises;
(c) From and including the 1st day of March, 2000, to and including
the 29th day of February, 2004, as annual Minimum Rent, the sum
of Three Hundred and Sixty-Nine Thousand, Four Hundred and
Eighty-Nine Dollars ($369,489.00) payable in equal consecutive
monthly instalments of Thirty Thousand, Seven Hundred and Ninety
Dollars and Seventy-Five Cents
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($30,790.75) based on an annual Minimum Rent rate of Fourteen
Dollars and Fifty Cents ($14.50) per square foot of Rentable Area
of the Premises.
As provided for in the provisions of Section 3.05, the Rentable Area of the
Original Premises and the Fourth Floor Expansion Premises have been determined.
When the Rentable Area of that part of the Premises constituting the Sixth Floor
Premises together with the Sixth Floor Expansion Premises is certified pursuant
to the provisions of Section 3.05 hereof, the Minimum Rent shall, if necessary,
be adjusted accordingly as of the Commencement Date. If the Tenant has paid in
excess of the amounts due on account of Minimum Rent as a result of such
adjustment, the excess shall be credited by the Landlord against Rent, then or
in the future owing by the Tenant under this Lease. If the amount the Tenant has
paid is less than the amounts due as a result of the adjustment, the Tenant
shall pay such additional amounts due within 30 days after demand therefor.
Section 4.03 - Deposit
The Tenant and Landlord acknowledge that the deposit paid by the
Tenant pursuant to the Original Lease in the amount of Eight Thousand One
Hundred and Sixty-Two Dollars ($8,162.00) (the "Deposit") was held without
interest by the Landlord and was applied on account of the first month Minimum
Rent as it fell due and Additional Rent as it fell due under the Original Lease
and that there is no further credit owing to the Tenant in respect of the
Deposit.
Section 4.04 - Security Deposit
The Tenant and Landlord acknowledge that the sum of Eight Thousand One
Hundred and Sixty-Two Dollars ($8,162.00) paid by the Tenant to the Landlord as
a security deposit (the "Security Deposit") pursuant to the Original Lease will
continue to be held by the Landlord without liability or interest as security
for the faithful performance by the Tenant of all the terms, covenants and
conditions of this Lease by the Tenant to be kept, observed and performed. The
Landlord shall not be required to keep the Security Deposit separate from its
general funds.
If at any time during the Term, the Rent or any other sums payable by
the Tenant hereunder are overdue and unpaid, or if the Tenant fails to keep and
perform any of the terms, covenants and conditions of this Lease to be kept,
observed and performed by the Tenant, the Landlord at its option may, in
addition to any and all other rights and remedies provided for in this Lease or
by law, appropriate and apply the entire Security Deposit, or so much thereof as
is necessary to compensate the Landlord for loss or damage sustained or suffered
by the Landlord due to such breach on the part of the Tenant. If the entire
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Security Deposit, or any portion thereof is appropriated and applied by the
Landlord for the payment of overdue Rent or any other sums due and payable by
the Tenant hereunder, then the Tenant shall, upon written demand of the Landlord
forthwith remit to the Landlord a sufficient amount in cash to restore the
Security Deposit to the original sum deposited, and the Tenant's failure to do
so within five (5) days after receipt of such demand shall constitute a breach
of this Lease. If the Tenant complies with all of the terms, covenants and
conditions and properly pays all of the Rent and any other sums herein provided
and payable by the Tenant, the Security Deposit shall be returned in full to the
Tenant without interest within sixty (60) days after the end of the Term or any
renewal thereof.
The Landlord may deliver the Security Deposit to any purchaser of the
landlord's interest in the Premises or in the Building, if such interest is sold
and thereupon the landlord shall be discharged from any liability with respect
to the Security Deposit.
Section 4.05 - Rent Past Due
If the Tenant fails to pay, when the same is due and payable, any Rent
or any other amount payable by the Tenant under this Lease, such unpaid amounts
shall bear interest (payable as Additional Rent) from the due date thereof to
the date of payment at a rate per annum which is equal to four (4) percentage
points in excess of the prime commercial lending rate (the "Prime Rate") per
annum charged by any Canadian bank designated by the Landlord from time to time
on loans made in Canadian funds to its most favoured commercial borrowers,
calculated and compounded monthly, with any adjustment in such rate to be
effective on the first day of the month next following such change in the Prime
Rate.
ARTICLE V
Taxes
Section 5.01 - Taxes - Definition
"Taxes" means all taxes, rates, duties, and assessments (including
local improvement taxes), impost charges or levies, whether general or special,
that are levied, rated, charged or assessed against the Building or any part
thereof from time to time (including, without limitation, the Common Facilities)
by any lawful taxing authority, whether federal, provincial, municipal, school
or otherwise, and any taxes or other amounts which are imposed in lieu of, or in
addition to, any of the foregoing whether of the foregoing character or not or
whether in existence at the Commencement Date or not, and any such taxes
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levied or assessed against the Landlord or any owner on account of its ownership
of or interest in the Building. Capital taxes shall be based on the amount of
taxable paid up capital employed by the owner of the Building as at the 1st day
of August, 1991.
Section 5.02 - Taxes Payable by the Landlord
The Landlord shall pay all Taxes which are levied, rated, charged or
assessed against the Building or any part thereof subject to Sections 5.03, 5.04
and, 6.02 hereof. However, the Landlord may defer payment of any such Taxes, or
defer compliance with any statute, law, by-law, regulation or ordinance in
connection with levying of any such Taxes, in each case to the fullest extent
permitted by law, so long as it diligently prosecutes any contest or appeal of
any such Taxes and so long as the same does not result in forfeiture by the
Tenant of its interest in this Lease or any disturbance of its right to quiet
possession hereunder.
Section 5.03 - Taxes Payable by the Tenant
(a) The Tenant shall pay, as Additional Rent, in each and every year
during the Term and within the times provided for by the taxing authorities, to
the Landlord or to the taxing authorities as the Landlord may direct, and
discharge, all Taxes that may be levied, rated, charged or assessed against the
Premises and against all leasehold improvements situate at the Premises, or any
part or parts thereof from time to time by any taxing authority whether federal,
provincial, municipal, school or otherwise. The Tenant agrees to provide the
Landlord upon receipt by the Tenant with a copy of any separate tax bills, and
separate notices of assessments for and in respect of the Premises and all
leasehold improvements situate at the Premises. In addition, the Tenant shall
pay to the Landlord, on demand, as Additional Rent, in each Rental Year, the
Tenant's Proportionate Share of the Taxes assessed against the lands described
in Schedule "A" and the Common Facilities.
(b) In the event that there shall not be a separate assessment for
Taxes made against the Premises, the Landlord may, at its option, with each tax
bill it receives, make an allocation of Taxes on a reasonable and equitable
basis between the lands described in Schedule "A", the Common Facilities, the
Leasable Premises, the different components of the Leasable Premises and other
premises available for leasing which do not constitute part of the Leasable
Premises and as between the Leasable Premises, the different components of the
Leasable Premises and the Premises, and as between the assessment relating to
the leasehold improvements made to the Premises and those made to other Leasable
Premises and such other premises, and the Landlord shall be entitled to charge
an administration fee of fifteen per cent (15%) of the amount of such Taxes so
allocated to the Tenant.
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The Tenant shall pay its share of Taxes so allocated against the Premises by the
Landlord together with the share of such administration charge within ten (10)
days after demand therefor by the Landlord and the Tenant in addition shall pay
to the Landlord, as Additional Rent, in each Rental Year, the Tenant's
Proportionate Share of the Taxes so allocated against the said lands and the
Common Facilities.
(c) In the event that there shall not be a separate assessment for
Taxes made against the Premises the Landlord at its option, may include all
Taxes for the lands described in Schedule "A", the Building, the Common
Facilities, the Leasable Premises and all other premises available for leasing
in the Building which do not constitute part of the Leasable Premises, in the
costs and expenses referred to in Section 6.02(a) and (b), and the Tenant shall
pay its Proportionate Share thereof in the manner and at the time set forth in
Section 6.03 hereof.
(d) Notwithstanding the provisions of this Lease, the Landlord shall
not, in calculating Additional Rent, include goods and services taxes paid or
payable to third parties for goods and services acquired by the Landlord which
would have the effect of the Tenant paying goods and services taxes on the goods
and services taxes which the Landlord has paid or which is payable to third
parties for such goods and services so acquired by the Landlord, unless the
Landlord is not entitled to claim an input tax credit in respect of such goods
and services taxes and unless law provides otherwise and requires the Landlord
so to do. Provided that the foregoing shall not be construed so as to prevent or
prohibit the Landlord from collecting goods and services taxes on Additional
Rent as required by law.
Section 5.04 - Business Taxes and Other Taxes of Tenant
(a) In addition to the Taxes payable by the Tenant pursuant to Section
5.03, the Tenant shall pay as Additional Rent to the lawful taxing authorities,
or to the Landlord, as it may direct, and shall discharge in each Rental Year
when the same become due and payable (i) all taxes, rates, duties, assessments
and other charges that are levied, rated, charged or assessed against or in
respect of all improvements, fixtures, personal property, equipment and
facilities on or in the Premises or any part thereof; and, (ii) every tax and
license fee which is levied, rated, charged or assessed against or in respect of
any and every business carried on in the Premises or in respect of the use or
occupancy thereof or any other part of the Building by the Tenant and every
subtenant or licensee of the Tenant, all of the foregoing described in
subsections (i) and (ii) aforesaid being collectively referred to as "Business
Taxes" and whether in any case, any such taxes, rates, duties, assessments or
license fees are rated, charged or assessed by any federal, provincial,
municipal, school or other body during the Term. If there are no
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separate bills provided for Business Taxes, the Tenant shall pay its
Proportionate Share of all Business Taxes with respect to the entire Building;
and, (iii) all taxes that are levied, charged, assessed or imposed wholly or
partially with respect to the Rent, or the rental of the Premises or the
provision of any goods, services or utilities whatsoever by the Landlord to the
Tenant under this Lease, whether imposed upon the Tenant or the Landlord,
whether the same exist as of the date hereof, as of the Commencement Date, or at
any time thereafter.
(b) The Tenant shall upon request of the Landlord promptly deliver to
the Landlord for inspection, receipts for payment of all taxes payable by the
Tenant pursuant to this Section 5.04, notices of any assessments of any taxes
referred to in this Section 5.04 received by the Tenant and such other
information in connection with any such taxes as the Landlord reasonably
determines from time to time.
(c) The Tenant hereby expressly agrees that it is not permitted to
contest or appeal any taxes referred to in Sections 5.01, 5.03 and 5.04, save
and except with respect to its own Business Taxes. The Tenant agrees to deliver
to the Landlord, at least ten (10) days prior to the last date permitted for
filing of an appeal, notice of any appeal or contestation that the Tenant
intends to institute with respect to its own Business Taxes and to consult with
and obtain the prior written approval of the Landlord to any such appeal or
contestation. If the Tenant obtains approval, the Tenant shall, upon demand,
deliver to the Landlord such security for the payment of such Business Taxes as
the Landlord deems advisable and the Tenant shall diligently prosecute any such
appeal or contestation to a speedy resolution and shall keep the Landlord
informed of its progress in that regard from time to time.
Section 5.05 - Tenant's Indemnification With Respect to Taxes
under Sections 5.01, 5.03 and 5.04
The Tenant shall promptly indemnify and hold harmless the Landlord
from and against payment for any and all losses, claims, actions, suits,
proceedings, causes of action, demands, damages, judgments, executions,
liabilities, responsibilities, costs, charges and expenses (collectively
referred to in this Lease as "Claims") occasioned by or arising from any and all
taxes payable by the Tenant hereunder including those which may in future be
levied in lieu of or in addition to such taxes referred to in Sections 5.01,
5.03 and 5.04 or which may be assessed against any Rent payable pursuant to this
Lease whether in lieu of such taxes or otherwise, whether against the Landlord
or the Tenant including, without limitation, any increase whensoever occurring
in such taxes arising directly or indirectly out of an appeal or contestation by
the Tenant of its own Business Taxes relating to the Premises or the Building or
any
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part thereof. The Tenant shall deliver to the Landlord on demand such security
for any such increase in such Business Taxes as the Landlord deems advisable.
Section 5.06 - Landlord's Taxes
Notwithstanding what is otherwise herein provided for in this Article
V, but subject to the provisions of Section 5.04(a)(iii) hereof, the Tenant
shall not be responsible for the payment of taxes on the income or profits of
the Landlord to the extent that they are not imposed in lieu of Taxes or any
other tax otherwise payable by the Tenant hereunder.
Section 5.07 - Per Diem Adjustment
If any Rental Year during the Term of this Lease is less than twelve
(12) calendar months, the taxes that the Tenant is required to pay pursuant to
Article V hereof shall be subject to a per diem adjustment on the basis of a
period of 365 days.
ARTICLE VI
Building and Common Facilities - Control and Payment
Section 6.01 - Control of the Building by the Landlord
The Landlord or its Manager shall operate and maintain the Building in
such manner as the Landlord determines from time to time, and in a first-class
and reputable manner as would a prudent landlord of a similar multiple tenancy
commercial office/retail building having regard to size, age and location.
The Building is at all times subject to the exclusive control and
management of the Landlord. Without limiting the generality of the foregoing,
the Landlord has the right, in its control, management and operation of the
Building and by the establishment of Rules and Regulations and general policies
with respect to the operation of the Building or any part thereof at all times
during the period of time that the Tenant's Work contemplated in Schedule "C"
hereto is being undertaken and throughout the Term, to:
(a) (i) obstruct or close off all or any part of the Building for
the purpose of maintenance, repair or construction;
(ii) close all or any portion of the Building to such extent
as may, in the opinion of the Landlord's counsel, be legally
sufficient to prevent a dedication thereof or the accrual
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of any rights to any Person or the public therein;
(iii) grant, modify and terminate easements and other
agreements pertaining to the use and maintenance of all or
any part of the Building;
(iv) employ all personnel including supervisory personnel and
managers necessary for the operation, maintenance and
control of the Building; the Tenant acknowledges that the
Building may be managed by the Landlord or by the Manager or
such other Person as the Landlord designates in writing from
time to time;
(v) from time to time, prohibit the Tenant and its employees
from parking anywhere in the Building; if the Landlord
designates tenant parking areas in the Building or
elsewhere, the Tenant and its employees shall park their
vehicles only in such parking areas; the Tenant shall
furnish the Landlord, upon request, with the current licence
numbers of all vehicles owned or used by the Tenant and its
employees and such other information concerning vehicles and
parking thereof as the Landlord may require and the Tenant
shall, thereafter, notify the Landlord of any changes within
five (5) days after such changes occur; if the Tenant or its
employees park their vehicles in any such prohibited parking
areas, the Landlord, in addition to all rights and remedies
hereunder, shall have the right to charge the Tenant a per
diem fee per vehicle parked in any area other than a
designated area; such fee is payable as Additional Rent on
demand; the Landlord reserves the right to impose charges
upon the Tenant and any person (including the general
public) for the use of parking facilities;
(vi) hire the services of a Manager which may be one of the
parties constituting the Landlord or which may be an
affiliate, associate, subsidiary or related Person to the
Landlord or any party constituting the Landlord;
(b) from time to time, change the area, level, location, arrangement
or use of the Building or any part thereof, make alterations, additions,
subtractions, or re-arrangements to
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the Building or any part thereof, and construct additional buildings,
structures, improvements or facilities in, adjoining or near to, the Building or
to construct other buildings, structures or improvements in the Building and
build additional stories on the Building; and
(c) do and perform such other acts in and to the Building as, in the
use of good business judgment, the Landlord determines to be advisable for the
more efficient and proper operation of the Building.
Notwithstanding anything contained in this Lease, it is understood and
agreed that if as a result of the exercise by the Landlord of its rights set out
in this Section 6.01, the Common Facilities or the Parking Facilities are
diminished or altered in any manner whatsoever, the Landlord is not subject to
any liability, nor is the Tenant entitled to any compensation or diminution or
abatement of Rent, nor is any alteration or diminution of the Common Facilities
or the Parking Facilities deemed constructive or actual eviction, or a breach of
any covenant for quiet enjoyment contained in this Lease.
If the Landlord is directly undertaking itself or through its
contractors any matter or any action, which will result in an interference with
the Tenant's use and enjoyment of the Building and the Premises for a period in
excess of 24 hours, then the Landlord shall first notify the Tenant of its
intention so to do, failing which, the Tenant shall have the right to give
written notice to the Landlord that it has breached the aforesaid covenant and
demanding that within 48 hours of receipt of such notice the Landlord ceases to
unreasonably interfere with the Tenant's use and enjoyment of the Building and
the Premises, and failing rectification within the aforesaid 48 hours, the
Minimum Rent shall abate in proportion to the use of the Premises that is not
usable for the purposes intended as determined by the Tenant, acting reasonably,
until such matters have been rectified. It is acknowledged by the Tenant that
notwithstanding the foregoing, it will be necessary for the Landlord from time
to time to construct or demolish tenants' improvements within the Building
(including the floor upon which the Premises are located) during Normal Business
Hours and that such activity may temporarily create some disruption to the
Tenant's normal quiet use and enjoyment of the Building and the Premises and the
Tenant acknowledges and agrees that in such instances there shall be no
abatement of Minimum Rent.
Section 6.02 - Tenant to Bear Share of Expense
(a) In each Rental Year, the Tenant shall pay to the Landlord, as
Additional Rent, its Proportionate Share or other share determined by the
Landlord as provided for herein, as the case may be, of the total costs and
expenses incurred, accrued,
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paid, payable or attributable, whether by the Landlord or others on behalf of
the Landlord: (1) for the operation, service, maintenance, repair, rebuilding,
replacement, insurance, policing, supervision, management, and administration of
the Building, and, (2) for the Landlord to discharge its obligations or actions
under this Lease or under other leases of premises in the Building or under any
arrangements entered into by the Landlord in respect of the Building and/or
other adjoining buildings to the extent of any rights accruing to the Building.
Any allocation of costs, charges or expenses which is determined by the Landlord
under this Lease shall be done on a reasonable and equitable basis.
(b) The costs and expenses as set out in Section 6.02(a) include,
without limitation and without duplication, the aggregate of:
(i) insurance on the Building and any improvements, equipment
and other property located thereon; the Landlord's insurance
may, without limitation, include loss of insurable gross
profits attributable to the perils insured against by the
Landlord or commonly insured against by landlords, including
loss of rent and other amounts receivable from tenants in
the Building, and third party liability coverage including
the exposure of personal injury, bodily injury, property
damage occurrence, including all contractual obligations
coverage and including actions of the employees,
contractors, subcontractors and agents working on behalf of
the Landlord;
(ii) landscaping, cleaning (including window cleaning),
painting, snow and ice removal (including without
limitation, line painting and curb installation), garbage
and waste collection and disposal, and all costs referred to
in Section 6.04;
(iii) lighting, utilities (including, without limitation,
electricity, water, gas, steam and other fuel and hook-up,
connection or service charges for utilities, and charges for
the use of the sewage disposal system), loudspeakers, and
any telephone answering service facilities and systems, used
in or serving the Building, and the cost of electricity for
any signs designated by the Landlord as part of the Common
Facilities;
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(iv) policing, security, security systems, supervision and
traffic control;
(v) in the event that the Landlord has not contracted for the
management services of the Manager or any Person for the
operation, supervision, management and administration of the
Building, remuneration (including, without limitation,
contributions and premiums towards fringe benefits,
unemployment and Worker's Compensation insurance, pension
plan contributions and similar premiums and contributions)
of Persons to the extent engaged in the operation,
maintenance, administration, management and supervision of
the Building;
(vi) the cost of the rental of any equipment and signs, and
the cost of building supplies used by the Landlord in the
maintenance of the Building;
(vii) reasonable auditing, accounting, bookkeeping, legal and
other professional and consulting fees and disbursements;
(viii) the reasonable cost of all repairs (including, without
limitation, major repairs) and replacements to and
maintenance and operation of the Building and the Common
Facilities and the systems, facilities and equipment serving
the Building (including, without limitation, all escalators,
elevators, moving sidewalks and other transportation
equipment and systems and all heating, ventilating and air
conditioning and climate control systems serving the
Building) except for the cost of repairing or replacing any
inherent structural defects or weaknesses;
(ix) depreciation or amortization (1) of the cost, including
repair and replacement, of all maintenance, cleaning and
operating equipment and master utility meters from the
Commencement Date, and, (2) of the costs incurred after the
Commencement Date for repairing or replacing all other
fixtures, equipment and facilities serving or comprising the
Building unless they are, pursuant to Section 6.02(b)(viii),
charged fully in the Rental Year in which they are
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incurred in accordance with sound accounting principles;
(x) all reasonable costs incurred in acquiring, installing,
maintaining, revising, repairing and replacing energy
conservation equipment and systems and life safety systems
for the Building and for effecting any improvements to the
Building made to comply with air pollution or environmental
control standards;
(xi) heating, ventilating and air conditioning costs of the
Building;
(xii) subject to the provisions of Article VII hereof, the
cost of water, fuel, power, telephone and other utilities
used or consumed in or with respect to the Building, subject
to reasonable increase thereof from time to time for
inflation of costs;
(xiii) reserves established by the Landlord for capital
expenditures based on $.20 per square foot, per annum, of
the Rentable Area of the Building, subject to reasonable
increase thereof from time to time for the inflation of
costs;
(xiv) subject to the provisions of Article V hereof, the
Business Taxes of the Landlord and Taxes, and all costs
incurred by the Landlord in contesting or appealing such
taxes or related assessments (including, without limitation,
legal, appraisal and other professional fees and
administration and overhead costs) on all or any part of the
Building;
(xv) sales, value added and excise or other taxes on goods and
services provided by or on behalf of the Landlord in
connection with the maintenance, repair, operation,
administration or management of the Building, whether or not
in existence at the Commencement Date;
(xvi) capital taxes, if applicable, being the amount of any
tax or taxes levied against the Landlord and owners of the
Building by any governmental authority having jurisdiction
based upon or computed by reference to the paid-up capital
or place of business of the
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Landlord and owners of the Building or other similar
criteria as determined for the purposes of such tax or
taxes, or any similar tax, rate, duty, levy, fee, charge or
assessment levied, imposed or assessed in the future in lieu
thereof or in addition thereto by any governmental
authority. For the purposes hereof such tax or taxes shall
mean the amount of tax that would be payable if the Building
were the only establishment of the Landlord and owners of
the Building and capital taxes shall be limited to the
extent that they do not exceed the taxes on the capital
employed by the owners of the Building in the Building as at
August 1, 1991;
(xvii) in the event that the Landlord has not contracted for
the management services of a Person for the operation,
supervision, management and administration of the
Building, an administration fee of fifteen per cent (15%) of
such total annual costs set out in Section 6.02(b)(i) to
Section 6.02(b)(viii) inclusive and Section 6.02(b)(x) to
Section 6.02(b)(xii) inclusive and Section 6.02(b)(xiv) to
Section 6.02(b)(xvi) (or such greater amount as shall be
standard from time to time in the property management
industry, as determined by the Landlord, acting reasonably);
(xviii) in the event that the Landlord has hired the services
of the Manager or any Person for the operation, supervision,
management and administration of the Building, all amounts
which the Landlord must pay to such Manager or any Person in
connection therewith, including without limitation,
management fees and disbursements incurred by such Manager
or any Person in carrying out its obligations to the
Landlord.
From the total of the above costs set out in Section 6.02(b)(i) to
Section 6.02(b)(xvi) inclusive, there shall be deducted net proceeds received by
the Landlord from insurance policies taken out by the Landlord to the extent
that such proceeds relate to the costs and expenses incurred in the maintenance
and operation of the Common Facilities.
Provided that in computing such costs and expenses described in
Section 6.02(a) and (b), if the Landlord from time
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to time determines that the use of any water, fuel, power, telephone or other
utilities used or consumed in or with respect to the Premises, or in the event
that any service to or in respect of the Premises is disproportionate to the use
of other tenants or occupants in the Building, the Landlord may adjust the
Tenant's share of the cost thereof from a date reasonably determined by the
Landlord to take into account such disproportionate use.
Provided further that in computing such costs and expenses described
in Section 6.02 (a) and (b), the Tenant acknowledges that certain of such costs
and expenses may not be incurred in respect of or for the benefit of all tenants
and occupants in the Building, and that the Landlord shall have the right to
allocate such costs and expenses in a reasonable and equitable manner amongst
the several components and areas of the Building, including the Common
Facilities and the Leasable Premises and amongst the various components of
Leasable Premises in the Building, and the Tenant shall pay its Proportionate
Share of such allocation to the Common Facilities plus a share of such costs and
expenses so allocated to other components of the Building wherein such cost or
expense relates to the Premises based upon the Rentable Area of the Premises and
the Rentable Area of those Leasable Premises in connection with which such
allocation has been made.
Section 6.03 - Payment of Tenant's Share
(a) Subject to the provisions of Articles V and VII hereof, the
amounts payable by the Tenant pursuant to Articles V, VI and VII hereof may be
estimated by the Landlord for such period as the Landlord determines from time
to time, and the Tenant agrees to pay to the Landlord the Tenant's Proportionate
Share, or other share thereof determined by the Landlord as provided for herein,
as the case may be, as so estimated, of such amounts in monthly installments in
advance during such period as Additional Rent. Notwithstanding the foregoing,
as soon as bills for all or any portion of the said amounts so estimated are
received, the Landlord may bill the Tenant for the Tenant's Proportionate Share
thereof or other share thereof determined by the Landlord as provided for
herein, as the case may be, and the Tenant shall pay the Landlord such amounts
so billed (less all amounts previously paid by the Tenant on the basis of the
Landlord's estimate as aforesaid) as Additional Rent on demand. Provided that
in the event that the Landlord does not provide a new estimate, notwithstanding
that the period for which such previous estimate has been given to the Tenant
has expired, the Tenant shall continue to pay its Proportionate Share, or other
share thereof determined by the Landlord as provided for herein, as the case may
be, based on the most recent estimate provided by the Landlord, until such time
as a new estimate is rendered by the Landlord therefor.
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(b) Within a reasonable period of time after the end of the period for
which such estimated payments have been made, the Landlord shall deliver to the
Tenant an audited statement issued by the Landlord's auditors, which statement
will set forth the amounts and costs referred to in Articles V, VI and VII
together with a statement of the Tenant's Proportionate Share thereof, as
provided for herein. In either case, if necessary, an adjustment shall be made
between the parties in the following manner. If the Tenant has paid in excess
of the amounts due, the excess shall be credited by the Landlord against Rent,
then or in the future owing by the Tenant under this Lease. If the amount the
Tenant has paid is less than the amounts due, the Tenant agrees to pay such
additional amounts due with the next monthly payment of Minimum Rent. If any
Rental Year during the Term is greater or less than any such period determined
by the Landlord as aforesaid, the Tenant's Proportionate Share or other share
thereof determined by the Landlord as provided for herein, as the case may be,
shall be subject to a per diem, pro rata adjustment. Failure of the Landlord to
provide any statement under this Section 6.03 shall not prejudice the Landlord's
right to provide such statement thereafter or with respect to any other period.
The providing of any such statement shall also not affect the Landlord's right
to subsequently provide an amended or corrected statement.
Section 6.04 - Landlord's Services
The Landlord covenants with the Tenant as follows:
(a) To provide climate control to the Premises during Normal Business
Hours to maintain a temperature adequate for occupancy, except during the making
of repairs, alterations or improvements and provided that the Landlord shall
have no responsibility or liability for failure to supply climate control
service when stopped as aforesaid or when prevented from so doing by strikes or
causes beyond the Landlord's reasonable control. The Tenant acknowledges that
the Landlord has installed in the Building a system for the purpose of climate
control, which system is designed to heat and cool during normal occupancy of
the Premises as general offices on the basis of one (1) Person to every one
hundred (100) to one hundred and fifty (150) square feet of space on an open
floor basis and based on the window shading being fully closed in those offices
having exterior windows exposed to the sun, without having regard to the
Tenant's specific use thereof or the installation of any heat generating
equipment in the Premises by the Tenant or by anyone on behalf of the Tenant.
Any use of the Premises not in accordance with the design standards or any
arrangement of partitioning which interferes with the normal operation of such
system may require changes or alterations in the system or duct through which
the same operates. Any changes or alterations so occasioned, if such changes
can be accommodated by the Landlord's equipment, shall be
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made by the Tenant at its cost and expense but only with the written consent of
the Landlord first had and obtained, and in accordance with drawings and
specifications and by a contractor first approved in writing by the Landlord.
If installations of partitions, equipment or fixtures by the Tenant necessitates
the rebalancing of the portion of the climate control equipment installed in the
Premises, the same will be performed by the Landlord at the Tenant's expense
payable by the Tenant upon demand as Additional Rent.
(b) Subject to the supervision of the Landlord, to furnish, during
Normal Business Hours, and during such extended hours as the Landlord may
determine, for use by the Tenant and its employees and invitees in common with
other persons entitled thereto, passenger elevator service to the Premises, and
to furnish upon written request for the use of the Tenant in common with others
entitled thereto at reasonable intervals and at such hours as the Landlord may
select, freight elevator service to the Premises for the carriage of furniture,
equipment, deliveries and supplies.
(c) To provide for the use of the Tenant and its employees and
invitees in common with others entitled thereto, washrooms on each floor of the
Building (except on the ground floor) upon which the Premises are located.
(d) To provide janitor and cleaning services when reasonably necessary
from time to time to the Premises and to the Building to be rendered
substantially in accordance with the standards of a similar first class office
building.
(e) To furnish appropriate facilities for bringing telephone services
by Bell Canada to a point on the floor on which the Premises are located, and
cold water to a point on the floor on which the Premises are located.
(f) To provide access, reasonable security and elevator service to the
Tenant, employees and invitees at all times, subject to the Rules and
Regulations for the Building.
ARTICLE VII
Utilities, Heating, Ventilating and Air Conditioning
Section 7.01 - Charges for Utilities
(a) The Tenant shall be solely responsible for and shall promptly pay
to the Landlord, or as it otherwise directs, in the manner hereinafter provided
as a charge with respect to
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the Premises (the "Charge") the aggregate, without duplication, of:
(i) the total cost of water, fuel, power, telephone and other
utilities (the "Utilities") used or consumed in or with
respect to the Premises at rates not in excess of public
utility rates for the same services if such utilities are
provided by public utilities; and
(ii) all costs reasonably incurred by the Landlord in
determining or allocating the Charge or determining the
Utilities including, without limitation, professional,
engineering and consulting fees and an administration fee of
fifteen per cent (15%) of the total cost hereinbefore set
out in this Section 7.01(a).
(b) The Landlord may determine in a reasonable and equitable manner
the Charge applicable to the Premises by allocating the Utilities for the
Building amongst the several components and areas of the Building, including the
Common Facilities, the Leasable Premises, and as between the various different
Leasable Premises in the Building, using as a basis, without limitation, (i)
check meters installed in the Common Facilities, and individual Leasable
Premises and other premises available for leasing which do not constitute part
of the Leasable Premises; (ii) the relevant rates of demand and consumption of
Utilities in the respective areas; and/or (iii) the connected load of the
respective areas comprising the Common Facilities, and those individual Leasable
Premises and such other leasable premises and other leasable premises for which
there are no check or other meters.
(c) Provided that notwithstanding the foregoing, the Landlord at its
option may include the cost of all Utilities for the Building, including for
Common Facilities, the Premises and all Leasable Premises and other premises
available for leasing which do not constitute a part of the Leasable Premises
which are not separately metered in the costs and expenses referred to in
Section 6.02(a) and subject to what is otherwise herein provided, the Tenant
shall pay its Proportionate Share thereof or other share thereof as provided in
Section 6.02, in the manner and at the times as set forth in Section 6.03
hereof.
(d) The Tenant agrees as follows:
(i) If the Landlord elects, for the more efficient and proper
operation of the Building, or is required by municipal by-
law or the suppliers of the Utilities to purchase
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the Utilities or any of them for the Building, the Tenant
shall purchase such Utilities and pay for such Utilities as
Additional Rent forthwith on demand to the Landlord at rates
not in excess of the rates charged by such suppliers for
such Utilities, if applicable;
(ii) If requested by the Landlord, the Tenant shall promptly
install a separate check meter indicating demand and
consumption of Utilities in the Premises at the Tenant's
expense and in a location designated by the Landlord;
(iii) If the Landlord elects, the Landlord shall be entitled
to install, at the Tenant's expense, a separate check meter
indicating demand and consumption of Utilities in the
Premises, in a location designated by the Landlord.
(e) If the suppliers of the Utilities require that the Tenant enter
into contracts or arrangements with such suppliers in connection with such
Utilities, the Tenant shall be responsible to enter into such contracts or other
arrangements and to pay whatever deposits or other amounts that are payable
under such contracts or other arrangements.
(f) In no event is the Landlord liable for, nor has the Landlord any
obligation with respect to, an interruption or cessation of, or a failure in the
supply of any such Utilities, services or systems in, to or serving the Building
or the Premises, whether or not supplied by the Landlord or others, and whether
the interruption or cessation is caused by the Landlord's fault or not.
Section 7.02 - Lighting
The Landlord shall have the exclusive right to attend to any
replacement of electric light bulbs, tubes and ballasts in the Premises
throughout the Term. The Landlord may adopt a system of relamping and
reballasting periodically on a group basis in accordance with good commercial
practice. The Tenant shall pay to the Landlord as Additional Rent on the first
day of each and every month during the Term a monthly charge per bulb, tube and
ballast on account of the cost of such replacement. If the cost of such
replacement shall increase or decrease during the Term, the Landlord shall
adjust the Additional Rent payable for such replacement hereunder on an
equitable basis and the Tenant agrees to pay such Additional Rent as adjusted.
The decision of the Landlord, acting reasonably, with respect to any such
adjustment, and Additional Rent based thereon shall be final
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and binding on the parties hereto. If the Landlord does not adopt a system of
relamping and reballasting as aforesaid, then replacement of electric light
bulbs, tubes and ballasts in the Premises shall be undertaken by the Landlord at
such time as they actually burn out and after notice from the Tenant that
replacement is required. In such event, the cost of such replacement and
installation shall be paid by the Tenant to the Landlord as Additional Rent.
Section 7.03 - Heating, Ventilating and Air-Conditioning
The Tenant shall, throughout the Term, operate, maintain and regulate
the heating, ventilating and air-conditioning equipment within, or installed by
or on behalf of the Tenant for the Premises in such a manner as to maintain such
reasonable conditions of temperature and humidity within the Premises as is
determined by the Landlord and its Architect and engineers so that no direct or
indirect appropriation of heating, ventilating or air-conditioning from the
Common Facilities or other leasable premises in the Building or the Parking
Facilities occurs. The Tenant shall comply with such stipulations and with all
Rules and Regulations of the Landlord pertaining to the maintenance and
operation of such equipment.
Section 7.04 - After Hour Charges
The Tenant shall be solely responsible for and shall promptly pay to
the Landlord, or as it may otherwise direct, an hourly charge with respect to
the Premises for the use of utilities, heating, ventilation and air-conditioning
after Normal Business Hours. The Landlord shall have the right to make
reasonable adjustments to the hourly charge each year of the Term of the Lease.
Such consumption shall be measured by a check meter, installed as provided for
herein.
ARTICLE VIII
Use of the Premises
Section 8.01 - Use of the Premises
The Tenant shall use the Premises solely for the purposes of office
premises for carrying on of the business of voice and data telecommunication
services and related purposes and the Tenant will not use or permit, or suffer
the use of the Premises or any part thereof for any other business or purpose.
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Section 8.02 - Conduct of Business
The Tenant shall occupy the Premises from and after the Commencement
Date and thereafter throughout the Term shall conduct continuously and actively
the business set out in Section 8.01 hereof in the whole of the Premises. In
the conduct of the Tenant's business pursuant to this Lease, the Tenant shall:
(a) own, install in the Premises and keep in good order and condition,
free from liens or rights of third parties, only fixtures and equipment of first
class quality. Notwithstanding the foregoing, the Landlord agrees that certain
business equipment may be leased or pledged or charged as security by the Tenant
in the normal course of business operations and further provided that,
notwithstanding the foregoing, the Tenant shall not be entitled to lease, pledge
or charge as security or otherwise any property in connection with which the
Landlord has provided to the Tenant a leasehold improvement allowance or
inducement, a cash payment, or other form of assistance whether prior to, on the
date hereof or hereafter;
(b) abide by all Rules and Regulations and general policies formulated
by the Landlord from time to time relating to the shipping and receiving of
goods, merchandise, materials and supplies;
(c) not commit or suffer or permit to be committed any waste upon, or
damage to, the Premises, or any nuisance or other act or thing which in the
Landlord's opinion disturbs the quiet enjoyment of any other tenant or occupant
of premises in the Building; and not perform any acts or carry on any practices
which may damage the Building or any part thereof;
(d) not do, nor suffer or permit to be done, any act in or about the
Building which, in the Landlord's opinion, hinders or interrupts the flow of
traffic to, in and from the Building and not do, nor suffer or permit anything
to be done which, in the Landlord's opinion, in any way obstructs the free
movement of Persons doing business in the Building;
(e) not solicit business, nor shall it suffer or permit its employees
or agents to solicit business in any part of the Building other than the
Premises, nor display any merchandise elsewhere within the Building outside of
the Premises at any time without in each case the prior written consent of the
Landlord;
(f) not install or allow on the Premises any transmitting device, nor
erect any aerial on the roof of any building forming part of the Building or on
any exterior walls of the Premises or in any of the Common Facilities without
written approval of the Landlord. It is agreed by the Landlord that a
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small digital type radio transmitter may be installed by the Tenant at the
Tenant's cost on the Building roof. The right of the Tenant hereinbefore
provided shall be subject to applicable codes and regulations of the City of
Etobicoke and the Municipality of Metropolitan Toronto and any other authorities
having jurisdiction. Such radio transmitter shall remain the property of the
Tenant and shall be maintained at the Tenant's cost and expense and at the
expiration of the Term or earlier termination of the Lease, the Tenant shall
remove such radio transmitter at the Tenant's expense and shall promptly repair
all damage caused by any such removal. The Tenant's obligation to observe and
perform these covenants shall survive the expiration of the Term or earlier
termination of the Lease;
(g) not use any travelling or flashing lights, or any signs,
television or other audio-visual or mechanical devices in a manner so that they
can be seen outside of the Premises, and not use any loudspeakers, television,
phonographs, radio or other audio-visual or mechanical devices in a manner so
that they can be heard outside of the Premises, without in each case the prior
written consent of the Landlord. If the Tenant uses any such equipment without
receiving the prior written consent of the Landlord, the Landlord shall be
entitled to remove such equipment without notice at any time and such removal
shall be done and all damage as a result thereof shall be made good, in each
case, at the cost of the Tenant, payable as Additional Rent forthwith on demand;
(h) not use, or permit to be used, any part of the Premises for any
activity or business which (in the reasonable opinion of the Landlord) is
dangerous, noxious or offensive;
(i) (i) cooperate with the Landlord in the conservation of all forms
of energy in the Building, including, without limitation, in the Premises; (ii)
comply with all laws, by-laws, regulations and orders relating to the
conservation of energy affecting the Building or any part thereof; and, (iii)
promptly comply, at the Tenant's expense, with all reasonable requests and
demands of the Landlord made with a view to such energy conservation. Any and
all costs and expenses paid or incurred by the Landlord in installing energy
conservation equipment and systems, so far as the same apply to or are
reasonably apportioned to the Building by the Landlord, shall be included in
Section 6.02(b)(x). The Landlord shall not be liable or responsible to the
Tenant in any way for any Claims whether direct or consequential, paid, suffered
or incurred by the Tenant due to any reduction in the services provided by the
Landlord to the Tenant or to the Building or any part thereof as a result of the
Landlord's compliance with such laws, by-laws, regulations or orders; and
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(j) not permit or allow any odours, vapours, steam, water, vibrations,
noises or other undesirable effects to emanate from the Premises or any
equipment or installation therein which, in the Landlord's opinion, are
objectionable or cause any interference with the safety, comfort or convenience
of the Building by the Landlord or any occupants thereof or their customers or
invitees. If the Tenant is in default of any of the foregoing, the Landlord
shall have the right to verbally inform the Tenant's manager in the Premises
thereof, whereupon the Tenant shall forthwith (i) take such steps as are
necessary to cure any such default, and, (ii) cease selling the offending item
or items, as the case may be.
Any business, conduct or practice promulgated, carried on or
maintained by the Tenant, whether through advertising or selling procedures or
otherwise, which in the opinion of the Landlord, acting reasonably, may harm or
tend to harm the business or reputation of the Landlord or reflect unfavourably
on the Building, the Landlord or other tenants in the Building, or which may
tend to confuse, mislead, deceive or be fraudulent to the public, shall be
immediately discontinued by the Tenant at the request of the Landlord.
Section 8.03 - Observance of Law
The Tenant shall, at its sole cost and expense and subject to Sections
10.01 and 10.02 hereof, promptly:
(a) observe and comply with all provisions of law including, without
limitation, all requirements of all governmental authorities, including federal,
provincial and municipal legislative enactments, by-laws and other regulations
now or hereafter in force which pertain to or affect the Premises, the Tenant's
use of the Premises or the conduct of any business in the Premises, or the
making of any repairs, replacements, alterations, additions, changes,
substitutions or improvements of or to the Premises; and
(b) carry out all modifications, alterations or changes of or to the
Premises and the Tenant's conduct of business in or use of the Premises which
are required by any such authorities as are set out above.
<PAGE>
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ARTICLE IX
Insurance and Indemnity
Section 9.01 - Tenant's Insurance
(a) The Tenant, at its expense, will maintain, throughout the Term and
any period when it is in possession of the Premises, the insurance (the
"Insurance") described below. The Tenant will cause each such insurance policy
to, a) be primary, non-contributing with and not in excess of any other
insurance available to the Landlord or the Mortgagees, b) contain a prohibition
against cancellation or material change that reduces or restricts the Insurance
except on thirty (30) days prior notice to the Landlord, acting reasonably, and
the Mortgagee. Upon request from the Landlord or upon the placement, renewal,
amendment or extension of all or any part of the Insurance, the Tenant will
immediately deliver to the Landlord evidence of the Insurance on the Landlord's
standard form of certificate or, if required by the Mortgagee, evidence in the
form of certified copies of the policies. The Insurance is as follows:
(i) all risks (including flood and earthquake) property
insurance, and broad comprehensive boiler and machinery
insurance on all objects owned or operated by the Tenant or
by others (other than the Landlord) or on behalf of the
Tenant in the Premises or relating to or serving the
Premises, insurance for all property owned by the Tenant or
for which the Tenant is legally liable, located within the
Building, and insurance for all Tenant's fixtures and all
leasehold improvements situate at the Premises, whether
installed by the Tenant, by the Landlord or on behalf of the
Tenant, whether prior to the date of this Lease or installed
hereafter, and whether it is the property of the Landlord or
the Tenant, in an amount of the full replacement cost
thereof, subject to an agreed amount clause, with reasonable
deductibles of up to three percent (3%) of the replacement
cost of property insured. This insurance will, 1) name the
Landlord and the Mortgagee, as insureds, 2) contain a waiver
of any subrogation rights that the insurers may have against
the Landlord or the Mortgagee and against those for whom any
of them is responsible in law, 3) (except with respect to
the Tenant's stock-in-trade, furniture and
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trade fixtures) incorporate the standard mortgage clause of
the Mortgagee;
(ii) Two Million Dollars ($2,000,000.00) inclusive limits
comprehensive general liability insurance. This insurance
will, 1) include owners' and contractors' protective,
products, completed operations, personal injury, employers',
contingent employers' and blanket contractual liability
coverages; provisions for cross liability, severability of
interests and occurrence property damage, 2) name the
Landlord as an additional insured, and 3) contain a
provision that precludes invalidation as respects the
interests of the Landlord and the Mortgagee, by reason of
any breach or violation of warranties, representations,
declarations, or conditions;
(iii) all risks tenant's legal liability insurance for the
replacement cost of the Premises;
(iv) One Million Dollars ($1,000,000.00) inclusive limits
automobile liability insurance on a non-owned form including
contractual liability, and on an owners form, covering all
licensed vehicles operated by or on behalf of the Tenant;
and
(v) any other form of insurance that the Tenant, or the
Landlord, acting reasonably, or that the Mortgagee requires,
in amounts and for insurance risks against which a prudent
tenant would insure.
(b) The Tenant agrees that if the Tenant fails to take out or keep any
such Insurance referred to in this Section 9.01, or should any such Insurance
not be approved by the Landlord or the Mortgagee and should the Tenant not
commence to diligently rectify (and thereafter proceed diligently to rectify)
the situation within forty-eight (48) hours after written notice by the Landlord
to the Tenant (stating if the Landlord or the Mortgagee does not approve of such
insurance, the reasons therefor) the Landlord has the right, without assuming
any obligation in connection therewith and without prejudice to any other rights
and remedies of the Landlord under this Lease, to effect such insurance at the
sole cost of the Tenant and all outlays by the Landlord shall be immediately
paid by the Tenant to the Landlord as Additional Rent on the first day of the
next month following such payment by the Landlord.
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Section 9.02 - Increase in Insurance Premiums
The Tenant shall not keep, use, sell or offer for sale in or upon the
Premises any article which may be prohibited by any fire insurance policy in
force from time to time covering the Premises or the Building. If (a) the
occupancy of the Premises; (b) the conduct of business in the Premises; or (c)
any acts or omissions of the Tenant in the Building or any part thereof, causes
or results in any increase in premiums or requires an increase in the amount of
insurance carried from time to time by the Landlord with respect to the
Building, the Tenant shall pay any such increase in premiums as Additional Rent
forthwith after invoices for such additional premiums are rendered by the
Landlord. In determining whether increased premiums are caused by or result
from the use or occupancy of the Premises, a schedule issued by the organization
computing the insurance rate on the Building showing the various components of
such rate shall be conclusive evidence of the several items and charges which
make up such rate. The Tenant shall comply promptly with all recommendations of
any insurance rating and inspection authority or of any insurer now or hereafter
in effect, pertaining to or affecting the Premises or the Building.
Section 9.03 - Cancellation of Insurance
If any insurance policy upon the Building or any part thereof shall be
cancelled or shall be threatened by the insurer to be cancelled, or the coverage
thereunder reduced in any way by the insurer by reason of the use and occupation
of the Premises or any part thereof by the Tenant or by any Transferee, or by
anyone permitted by the Tenant to be upon the Premises, and if the Tenant fails
to remedy the condition giving rise to cancellation, threatened cancellation, or
reduction of coverage within forty-eight (48) hours after notice thereof by the
Landlord, the Landlord may, at its option, either (a) re-enter and take
possession of the Premises forthwith by leaving upon the Premises a notice in
writing of its intention so to do and thereupon the Landlord shall have the same
rights and remedies as are contained in Article XV, or (b) enter upon the
Premises and remedy the condition giving rise to such cancellation, threatened
cancellation or reduction, and the Tenant shall forthwith pay the cost thereof
to the Landlord, as Additional Rent and the Landlord shall not be liable for any
loss or damage caused to any property of the Tenant or of others located on the
Premises as a result of any such entry. The Tenant agrees that any such entry
by the Landlord is not a re-entry or a breach of any covenant for quiet
enjoyment contained in this Lease.
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Section 9.04 - Insurance Risks
The Tenant shall not omit or permit to be done or omitted to be done
on or in the Building anything which would cause an increase in the Landlord's
cost of insurance or the cost of insurance of another tenant of the Building or
any property in the vicinity of the Building, against perils as to which the
Landlord, such other tenant or owners of such property in the vicinity of the
Building have insured or which shall cause any policy of such insurance to be
subject to cancellation.
Section 9.05 - Loss or Damage
(a) Except for the negligence of the Landlord, its agents, servants,
employees or those for whom it may in law be responsible, the Landlord shall not
be liable or responsible in any way to the Tenant or others for (i) any injury
or death arising from or out of any occurrence in, upon, at, or relating to the
Building or any loss or damage to property (including loss of use thereof) of
the Tenant or others located in the Building from any cause whatsoever, whether
or not any such injury, death, loss or damage results from the acts, omission or
fault of the Landlord, or its agents, servants, employees or other Persons for
whom it is in law responsible, (ii) (without limiting the generality of the
foregoing) any injury or death to Persons or loss or damage to property
resulting from fire, smoke, explosion, falling plaster, falling ceiling tiles,
falling fixtures, steam, gas, fumes, vapours, electricity, water, rain, flood,
snow, sleet, ice, or leaks from any part of the Building, or from any pipes,
sprinklers, appliances, electrical or other wiring, plumbing works, roof,
windows, or subsurface of any floor or ceiling of any part of the Building, or
from the street or any other place, or by dampness or by any other cause
whatsoever, or (iii) any such injury, death, loss or damage caused by other
tenants or Persons in the Building, or by occupants of adjacent property
thereto, or by the public, or by construction, or by any private, public or
quasi-public work, or by interruption, cessation or failure of any public or
other utility service or by Force Majeure. All property of the Tenant kept or
stored on the Premises shall be so kept or stored at the risk of the Tenant
only, and the Tenant shall promptly indemnify and hold harmless the Landlord
from any and all claims arising out of any loss of or damage to such property,
including loss of use thereof, and including without limitation, any subrogation
claims by the Tenant's insurers. Notwithstanding anything herein provided, the
liability of the Landlord pursuant to this Section 9.05 shall be limited to the
amount of insurance proceeds actually received by the Landlord in respect of the
foregoing.
(b) With respect to any liability which the Landlord may have arising
from the provisions of this Section 9.05, the Landlord shall promptly indemnify
and hold harmless the Tenant
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from and against all claims in connection therewith, including in connection
with any injury or death or any loss or damage to property; if the Tenant shall,
without fault on the Tenant's part, be made a party to any litigation commenced
by or against the Landlord in respect of the liability the Landlord may have
arising from this Section 9.05, and subject to the judgment or order of a Court,
the Landlord shall promptly indemnify and hold harmless the Tenant and shall pay
out costs, expenses and legal fees incurred or paid by the Tenant in connection
with such litigation forthwith on demand therefor. If the Landlord fails to
conduct its defence in a vigorous and effective manner, the Tenant may, at its
option and at the landlord's expense, participate in or assume carriage of any
such litigation in which the Tenant is a co-defendant or settlement discussions
relating to the foregoing, or any other matter for which the Landlord is
required to indemnify the Tenant thereunder. Alternatively, the Tenant may
require the Landlord, at the expense of the Landlord, to assume carriage of and
responsibility for all or any part of such litigation or discussions. Without
limiting the generality of the foregoing, the Landlord shall also pay all
reasonable costs and expenses, including, without limitation, any professional,
consultant, and legal fees (on a solicitor and its client basis) that may be
reasonably incurred or paid by the Tenant in enforcing the terms, covenants and
conditions in this Lease, unless a Court shall otherwise award. The provisions
of this Section 9.05(b) shall survive the expiration or earlier termination of
this Lease.
Section 9.06 - Landlord's Insurance
The Landlord shall, at all times throughout the Term, carry (a) all
risks property insurance on the Building and comprehensive boiler and machinery
insurance on the equipment of the Landlord situate at the Building and owned by
the Landlord (specifically excluding any property with respect to which the
Tenant and other tenants are obliged to insure pursuant to Section 9.01 or
similar sections of their respective leases) and on such boiler and machinery,
on a replacement cost basis, in such reasonable amounts and with such reasonable
deductions as would be carried by a prudent owner of a reasonably similar
building, having regard to size, age and location; (b) public liability and
property damage insurance with respect to the Landlord's operations in the
Building in such reasonable amounts and with such reasonable deductions as would
be carried by a prudent owner of a reasonably similar building, having regard to
size, age and location; and (c) such other form or forms of insurance as the
Landlord or the Mortgagee reasonably considers advisable. The cost of such
insurance shall be included in Section 6.02(b)(i) hereof. Notwithstanding the
Landlord's covenant contained in this Section 9.06 and notwithstanding any
contribution by the Tenant to the cost of insurance premiums provided herein,
the Tenant expressly acknowledges and agrees
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that: (i) the Tenant is not relieved of any liability arising from or
contributed to by its negligence or its acts or omissions, and (ii) no insurable
interest is conferred upon the Tenant under any policies of insurance carried by
the Landlord and the Tenant has no right to receive any proceeds of any such
insurance policies carried by the Landlord.
Section 9.07 - Indemnification of Landlord
Notwithstanding any other terms, covenants and conditions contained in
this Lease, the Tenant shall promptly indemnify and hold harmless the Landlord
from and against any and all claims in connection with any injury or death or
any loss or damage to property arising from or out of any occurrence in, upon or
at the Premises, or the occupancy or use by the Tenant of the Premises, or any
part thereof, or occasioned wholly or in part by any act, default, negligence or
omission of the Tenant or by anyone permitted to be on the Premises by the
Tenant. If the Landlord shall, without fault on the Landlord's part, be made a
party to any litigation commenced by or against the Tenant, then subject to the
judgment or order of a Court, the Tenant shall promptly indemnify and hold
harmless the Landlord and shall pay all costs, expenses and legal fees incurred
or paid by the Landlord in connection with such litigation, as Additional Rent,
on demand. If the Tenant fails to conduct its defence in a vigorous and
effective manner, the Landlord may, at its option and at the Tenant's expense,
participate in or assume carriage of any litigation in which the Landlord is a
co-defendant or settlement discussions relating to the foregoing, or any other
matter for which the Tenant is required to indemnify the Landlord under this
Lease. Alternatively, the Landlord may require the Tenant at the Tenant's
expense to assume carriage of and responsibility for all or any part of such
litigation or discussions. Without limiting the generality of the foregoing,
the Tenant shall also pay all reasonable costs and expenses, including without
limitation, any professional, consultant, and legal fees (on a solicitor and his
client basis) that may be reasonably incurred or paid by the Landlord in
enforcing the terms, covenants and conditions in this Lease, unless a Court
shall otherwise award. The provisions of this Section 9.07 shall survive the
expiration or earlier termination of this Lease.
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ARTICLE X
Maintenance, Repairs and Alterations
Section 10.01 - Maintenance and Repairs by Tenant
Subject to Section 10.03 and Article XI hereof, the Tenant, shall, at
all times during the Term, at its cost, keep and maintain in good order, first-
class condition and repair (which shall include, without limitation, periodic
painting and decorating) as determined by the Landlord, and shall, subject to
Sections 10.02 and 10.03, make all needed repairs and replacements with due
diligence and dispatch to (i) the whole of the Premises; (ii) all partitions,
doors, and fixtures located in or upon the Premises; and (iii) all equipment in,
appurtenances of and improvements to the Premises (including, without
limitation, electrical, lighting, wiring, plumbing fixtures and equipment and
the heating, ventilating and air-conditioning equipment within, or installed by
or on behalf of the Tenant within the Premises, and all telephone outlets and
conduits and special mechanical and electrical equipment within or serving the
Premises); and (iv) all damaged glass and plate glass serving the Premises. The
Tenant shall not be responsible for any repairs occasioned as a result of the
Landlord's, or anyone directly under the Landlord's control, negligent acts or
omissions.
Section 10.02 - Landlord's Approval of Tenant's Repairs
The Tenant shall not make any repairs, alterations, replacement,
decorations or improvements to any part of the Premises without first obtaining
the Landlord's written approval. The Tenant shall submit to the Landlord: (a)
details of the proposed work including drawings and specifications prepared by
qualified architects or engineers and conforming to good engineering practice;
(b) such indemnification against liens, costs, damages and expenses as the
Landlord requires; and (c) evidence satisfactory to the Landlord that the Tenant
has obtained, at its expense, all necessary consents, permits, licences and
inspections from all governmental and regulatory authorities having
jurisdiction. All such repairs, replacements, alterations, decorations or
improvements by the Tenant to the Premises approved by the Landlord shall be
performed: (i) at the sole cost of the Tenant; (ii) by competent workmen whose
labour union affiliations are compatible with others employed by the Landlord
and its contractors; (iii) in a good and workmanlike manner; (iv) in accordance
with the drawings and specifications approved by the Landlord; and (v) subject
to the reasonable regulations, controls and inspection of the Landlord. The
Tenant shall pay the fees of any architectural, engineering or other consultant
hired by the Landlord in connection with the foregoing plus a sum equal to
fifteen per cent (15%) of the total cost
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thereof representing the Landlord's overhead. Any such repair, replacement,
alteration, decoration or improvement made by the Tenant without the prior
written consent of the Landlord or which is not made in accordance with the
drawings and specifications approved by the Landlord shall, if requested by the
Landlord, be promptly removed by the Tenant at the Tenant's expense and the
Premises restored to their previous condition, failing which the Landlord may,
at its option, without notice to the Tenant and without liability on the
Landlord's part, remove same at the Tenant's expense which shall be paid by the
Tenant to the Landlord together with fifteen (15%) percent of the cost thereof,
as Additional Rent forthwith on demand.
Notwithstanding anything contained in this Lease including, without
limitation, Section 10.01, if any maintenance, repairs, alterations,
decorations, additions or improvements to the Premises or to any improvements
installed by or on behalf of the Tenant for the benefit of the Premises which
are approved by the Landlord (1) affect the structure of the Premises or any
part of the Building other than the Premises, or (2) are installed outside of
the Premises, or (3) are installed within the Premises but are part of the
Common Facilities, or affect any part of the Common Facilities, such work shall
be performed only by the Landlord at the Tenant's sole cost and expense. Upon
completion thereof, the Tenant shall pay to the Landlord, as Additional Rent
upon demand, both the Landlord's costs relating to any such repairs,
alterations, decorations, additions or improvements including the fees of any
architectural, engineering or other consultants plus a sum equal to fifteen
percent (15%) of the total cost thereof representing the Landlord's overhead.
No repairs, alterations, additions, decorations or improvements to the Premises
by or on behalf of the Tenant shall be permitted which may weaken or endanger
the structure or adversely affect the condition or operation of the Premises or
the Building or diminish the value thereof, or restrict or reduce the Landlord's
coverage for zoning purposes.
Section 10.03 - Maintenance by Landlord
Subject to Article XI hereof, the Landlord shall, at all times
throughout the Term, maintain and repair, or cause to be maintained and
repaired, as would a prudent owner of a reasonably similar building, the
structure of the Building including, without limitation, the foundations,
exterior wall assemblies including weather walls, subfloor, roof, bearing walls,
and structural columns and beams of the Building. The cost of such maintenance
and repairs (except for the cost of repairing and replacing any inherent
structural defects or weaknesses) shall be included in Section 6.02(b)(viii) or
shall be depreciated or amortized pursuant to Section 6.02(b)(ix) hereof, unless
the Landlord is required, due to the business carried on by the Tenant, to
perform such maintenance or make
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such repairs by reason of the application of laws or ordinances or the
direction, rules or regulations of any duly constituted regulatory body, or by
reason of any act, omission to act, neglect or default of the Tenant, or those
for whom the Tenant is in law responsible, in which event the Tenant shall be
liable and responsible for the total cost of any such maintenance and repairs
plus a sum equal to fifteen percent (15%) of the total cost of such repairs
representing the Landlord's overhead, which shall immediately become due and
payable to the Landlord as Additional Rent upon demand. Notwithstanding the
Landlord's obligations contained in this Section 10.03, the Tenant shall be
liable and responsible for the cost of any maintenance and repairs required to
be made by the Landlord and which result from any of the circumstances referred
to in the immediately preceding sentence plus a sum equal to fifteen per cent
(15%) of the total cost of the foregoing representing the Landlord's overhead.
If the Tenant refuses or neglects to carry out any maintenance,
repairs and replacements properly as required pursuant to Section 10.01 hereof,
and to the reasonable satisfaction of the Landlord, the Landlord may, but shall
not be obliged to, perform such maintenance, repairs and replacements without
being liable for any loss or damage that may result to the Tenant's merchandise,
fixtures or other property or to the Tenant's business by reason thereof, and
upon completion thereof, the Tenant shall pay to the Landlord the Landlord's
costs relating to any such maintenance, repairs and replacements plus a sum
equal to fifteen percent (15%) thereof representing the Landlord's overhead, as
Additional Rent upon demand.
If any elevator servicing the Building or any of the boilers, engines,
pipes, climate control equipment or other apparatus or any of them used for the
purpose of climate control or operating any elevator, or if the water pipes,
drainage pipes, electrical, lighting or other equipment servicing the Building
are damaged or destroyed or get out of repair, the Landlord shall have a
reasonable time in which to make such repairs or replacements as may be
reasonably required for the resumption of services to the Premises which the
Landlord has by this Lease expressly agreed to provide and the Tenant is not
entitled to any compensation or damages therefor, but if any such equipment,
facilities or systems servicing the Building or elevators become impaired,
damaged or destroyed in the circumstances referred to in Section 10.06, the
Tenant shall be responsible for the cost of repairing, restoring or making good
such damage in accordance with the provisions of Section 10.06.
Section 10.04 - Repair on Notice
In addition to the obligations of the Tenant contained in Section
11.01 hereof, the Tenant shall effect all work referred to therein according to
notice from the Landlord but
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failure to give notice shall not relieve the Tenant from its obligations under
either Sections 10.01 or 11.01 hereof.
Section 10.05 - Surrender of the Premises
At the expiration or earlier termination of this Lease, the Tenant
shall at its expense (i) peaceably surrender and yield up vacant possession of
the Premises to the Landlord in a clean, broom swept and tidy state, and in as
good condition and repair as the Tenant is required to maintain the Premises
throughout the Term, and (ii) surrender all keys for the Premises to the
Landlord at the place then fixed for the payment of Minimum Rent and shall
inform the Landlord of all combinations of locks, safes and vaults, if any, in
the Premises; (iii) remove all its trade fixtures and such of the alterations,
decorations, additions, erections, fixtures, improvements or appurtenances in,
on, to, for or which service the Premises as the Landlord shall at its option
upon notice to the Tenant require to be removed and the Tenant shall forthwith
repair, at its sole cost and expense, all damage to the Premises caused by their
installation or removal; and (iv) if the Tenant has filed or registered against
title of the Building lands or any part thereof, a caveat, notice, caution or
other document or instrument giving notice of this Lease, it shall promptly
cause the same to be discharged. The Tenant's obligation to observe and perform
the provisions of this Section 10.05 shall survive the expiration or earlier
termination of this Lease.
Section 10.06 - Repair Where Tenant at Fault
Notwithstanding any other terms, covenants and conditions contained in
this Lease, if the Building or any part thereof requires repair or becomes
damaged or destroyed through the negligence, carelessness or misuse of the
Tenant or due to the requirements of governmental authorities relating to the
Tenant's conduct of business or through the Tenant in any way damaging the
Building, the cost of the resulting repairs, replacements or alterations plus a
sum equal to fifteen percent (15%) of the cost thereof representing the
Landlord's overhead shall be paid by the Tenant to the Landlord as Additional
Rent forthwith upon presentation of an account of such expenses incurred by the
Landlord.
Section 10.07 - Tenant Not to Overload Facilities
The Tenant shall not install any equipment which will exceed or
overload the capacity of any utility, electrical or mechanical facilities in the
Premises and the Tenant will not bring into the Premises or install any utility,
electrical or mechanical facility or service which the Landlord does not
approve. The Tenant agrees that if any equipment installed by the Tenant
requires additional utility, electrical or mechanical
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facilities, the Landlord may, in its sole discretion, if they are available,
elect to install them at the Tenant's expense plus a sum equal to fifteen
percent (15%) of such costs representing the Landlord's overhead, payable by the
Tenant to the Landlord as Additional Rent, on demand, and in accordance with
plans and specifications prepared by the Tenant at the Tenant's expense to be
approved in advance in writing by the Landlord.
Section 10.08 - Tenant Not to Overload Floors
The Tenant shall not bring upon the Premises or any part thereof, any
machinery, equipment, article or thing that by reason of its weight, size or
use, might in the opinion of the Landlord damage the Premises and shall not at
any time overload the floors of the Premises. If any damage is caused to the
Premises by any machinery, equipment, object or thing or by overloading, or by
any act, neglect, or misuse on the part of the Tenant, or any of its servants,
agents, or employees, or any Person having business with the Tenant, the Tenant
will forthwith repair such damage, or at the option of the Landlord, pay the
Landlord the cost of repairing such damage plus a sum equal to fifteen percent
(15%) of such costs representing the Landlord's overhead, as Additional Rent
upon demand.
Section 10.09 - Removal and Restoration by Tenant
(a) All alterations, decorations, additions, erections, fixtures,
improvements and appurtenances made by the Tenant, or made by the Landlord on
the Tenant's behalf (other than the Tenant's trade fixtures), in, on, to, for or
which serve the Premises, shall immediately become the property of the Landlord
upon affixation or installation, without compensation therefor to the Tenant.
Such alterations, decorations, additions, erections, fixtures, improvements and
appurtenances shall not be removed from the Premises either during or at the
expiration or earlier of this Lease except that:
(i) The Tenant may during the Term in the usual or normal
course of its business remove its trade fixtures, provided
such trade fixtures have become excess for the Tenant's
purposes or the Tenant is substituting new and similar trade
fixtures therefor, and provided that in each case (1) the
Tenant is not in default under this Lease; and (2) such
removal is done at the Tenant's sole cost and expense; and
(ii) The Tenant shall, at the expiration or earlier
termination of this Lease, at its own cost, remove all its
trade fixtures and such of the alterations, decorations,
additions,
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erections, fixtures, improvements and appurtenances in, on,
to, for or which serve the Premises as the Landlord at its
option, upon notice to the Tenant requires to be removed.
Notwithstanding the foregoing in Section 10.09(a)(ii), the
Tenant's obligation shall be limited to restoring the
Premises to the condition that existed at the respective
dates upon which the Tenant took possession of the different
portions constituting the Premises.
(b) If the Tenant does not remove its trade fixtures at the expiration
or earlier termination of the Term, the trade fixtures shall, at the option of
the Landlord, thereupon become the property of the Landlord, without
compensation therefor to the Tenant, and may be removed from the Premises and
sold or disposed of by the Landlord in such manner as it deems advisable.
(c) The Tenant shall, in the case of every such installation or
removal either during or at the expiration of the Term, promptly make good any
damage caused to the Premises or the Building.
(d) For greater certainty, the Tenant's trade fixtures shall not
include (i) heating, ventilating and air-conditioning systems, facilities and
equipment in or serving the Premises; (ii) floor covering affixed to the floor
of the Premises; (iii) light fixtures or drapes or curtains; (iv) doors; (v)
internal stairways, escalators or elevators; and (vi) anything that would not
normally be considered a trade fixture; all of which are deemed to be leasehold
improvements.
Section 10.10 - Notice by Tenant
The Tenant shall, when it becomes aware of same, notify the Landlord
of any damage to, or deficiency or defect in any part of the Building, including
the Premises, any equipment or utility systems, or any installations located
therein, notwithstanding the fact that the Landlord may have no obligations with
respect to same.
Section 10.11 - Tenant to Discharge all Liens
The Tenant shall at all times promptly pay all its contractors,
material men, suppliers and workmen and all charges incurred by or on behalf of
the Tenant for any work, materials or services which may be done, supplied or
performed at any time in respect of the Premises and the Tenant shall do any and
all things necessary so as to ensure that no lien is registered against the
Building or any part thereof, against the Landlord's interest in the Building,
or against the Tenant's interest in the
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Premises, and if any such lien is made, filed or registered, the Tenant shall
discharge it or cause it to be discharged forthwith at the Tenant's expense.
If the Tenant fails to discharge or cause any such lien to be
discharged as aforesaid, then, in addition to any other right or remedy of the
Landlord, the Landlord may, but it shall not be obligated to, discharge the same
by paying the amount claimed to be due into Court or directly to any such lien
claimant and the amount so paid by the Landlord and all costs and expenses
including without limitation solicitor's fees (on a solicitor and his client
basis) incurred as a result of the registration of the lien, including the
discharge of the lien, shall be immediately due and payable by the Tenant to the
Landlord on demand as Additional Rent.
Section 10.12 - Signs and Advertising
(a) Subject to Section 10.12(b), the Tenant shall not paint, affix,
display or cause to be painted, affixed or displayed, any sign, picture,
advertisement, notice, lettering or decoration of any kind anywhere outside the
Premises (whether on the outside or inside of the Building) or within the
Premises so as to be visible from the outside of the Premises, without the prior
written approval of the Landlord.
(b) The Tenant, subject to the following terms and provisions, shall
have the right to affix prominent corporate signage on the north-west elevation
of the penthouse of the Building, being the uppermost part of the Building
facia, to be made up of the letters "ACC", together with the Tenant's corporate
logo, subject to reasonable approval of the Landlord, to applicable codes and
regulations of the City of Etobicoke and the Municipality of Metropolitan
Toronto and any other authorities having jurisdiction. Provided, however, that
the Tenant shall:
(i) on or before the 1st day of September, 1994, provide
evidence to the Landlord that the Tenant has applied for a
permit and any necessary variances, required, for the said
sign, and
(ii) the Tenant has erected such sign on or before the 1st day
of March, 1995,
failing which, the Tenant shall cease to have the rights to signage provided for
in this Section 10.12(b). Provided further that ACC Long Distance Ltd. or a
Related Company (as defined in Section 12.01(e) hereof) shall occupy the entire
Premises and the Additional Premises (as defined in Rider No. 4) if applicable,
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failing which the Tenant shall cease to have the rights to signage provided for
in this Section 10.12(b).
(c) The Landlord will prescribe a uniform pattern of identification
signs for tenants to be placed on the outside of the doors leading into the
Premises.
(d) Any signs shall remain the property of the Tenant and shall be
provided for, erected and maintained at the Tenant's cost and expense. At the
expiration of the Term or earlier termination of the Lease, or upon the Tenant
ceasing to have the rights provided for in Section 10.12(b), as the case may be,
the Tenant shall remove any such signs, pictures, advertisements, notices,
letterings or decorations from the Premises and the Building at the Tenant's
expense and shall promptly repair all damage caused by any such removal. The
Tenant's obligation to observe and perform this covenant shall survive the
expiration of the Term or earlier termination of the Lease.
Section 10.13 - Directory Board
The Tenant shall be entitled at its expense to have its name shown
upon the directory board of the Building and the Landlord shall design the style
of such identification and the directory board shall be located in an area
designated by the Landlord in the main lobby of the Building.
ARTICLE XI
Damage and Destruction and Expropriation
Section 11.01 - Destruction of the Premises
(a) If the Premises are at any time destroyed or damaged (including,
without limitation, smoke and water damage) as a result of fire, the elements,
accident or other casualty required to be insured against by the Landlord
pursuant to Section 9.06 hereof or otherwise insured against by the Landlord and
not caused by the Tenant, and if as a result of such occurrence:
(i) the Premises are rendered untenantable only in part, this
Lease shall continue in full force and effect and the
Landlord shall, subject to Section 11.02 hereof, commence
diligently to reconstruct, rebuild or repair the Premises to
the extent only of the Landlord's Work and exclusive of the
Tenant's Work and Minimum Rent and Additional Rent shall
abate proportionately to the portion of
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the Premises rendered untenantable from the date of the
destruction or damage and until the Premises have been
restored and rendered tenantable by the Landlord to the
extent of the Landlord's Work;
(ii) the Premises are rendered wholly untenantable, this Lease
shall continue in full force and effect and the Landlord
shall, subject to Section 11.02 hereof, commence diligently
to reconstruct, rebuild or repair the Premises to the extent
of the Landlord's Work and Minimum Rent and Additional Rent
shall abate entirely from the date of the destruction or
damage and until the Premises have been restored and
rendered tenantable in whole or in part by the Landlord to
the extent of the Landlord's Work;
(iii) the Premises are not rendered untenantable in whole or
in part, as provided in Section 11.01(a)(i) or (ii) above,
this Lease shall continue in full force and effect, the Rent
and other amounts payable by the Tenant shall not terminate,
be reduced or abate and the Landlord shall, subject to
Section 11.02 hereof, commence diligently to reconstruct,
rebuild or repair the Premises to the extent of the
Landlord's Work.
(b) Upon the Tenant being notified in writing by the Landlord that the
Landlord's Work has been completed to such an extent that the Tenant's Work can
be commenced, the Tenant shall forthwith complete all the Tenant's Work and all
work required to fully restore the Premises for business fully fixtured, stocked
and staffed (in any case, without the benefit of any capital allowance
inducement to lease, or other payments made at the time of or in conjunction
with, the original construction of the Premises by the Landlord to the Tenant in
connection with the Tenant's Work). The Tenant shall diligently complete the
Tenant's Work and, if the Premises have been closed for business, reopen for
business within ninety-five (95) days after notice from the Landlord that the
Landlord's Work has been completed to such an extent that the Tenant's Work can
be commenced.
(c) Nothing in this Section 11.01 requires the Landlord to (i) repair
or replace any improvements, equipment, furniture, chattels or trade fixtures in
the Premises which do not belong to the Landlord, or, (ii) repair, reconstruct
or rebuild the Building or any part thereof, or the Premises or any part
thereof, using the plans and specifications and working drawings used in the
original construction of the Building or any
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part thereof or in the Premises or any part thereof, provided that such plans
and specifications and working drawings so used by the Landlord in repairing,
reconstructing or rebuilding call for a quality equal to or better than that
called for in the plans and specifications and working drawings used in the
original construction.
Section 11.02 - Destruction of the Building
(a) If thirty-five per cent (35%) or more of the Rentable Area of the
Building is at any time destroyed or damaged (including, without limitation,
smoke and water damage) as a result of fire, the elements, accident or other
casualty, whether or not the Premises are affected by such occurrence, and if,
in the opinion of the Landlord, reasonably arrived at, the Rentable Area of the
Building so damaged or destroyed cannot be rebuilt or be made fit for the
purposes of the respective tenants of such space within one hundred and eighty
(180) days of the happening of the damage and destruction, then and so often as
any of such events occur, the Landlord may, at its option, to be exercised by
written notice to the Tenant within forty-five (45) days following any such
occurrence, elect to terminate this Lease.
(b) In the event that as a result of any damage or destruction to the
Building or to the Premises or any part or parts thereof, the Landlord, acting
reasonably, is of the opinion that it is not economically feasible to repair,
reconstruct or rebuild the Building and that it is advisable to demolish or
substantially renovate the Building, then the Landlord may, at its option, to be
exercised by written notice to the Tenant within forty-five (45) days following
any such occurrence, elect to terminate this Lease.
(c) In the case of such election being made by the Landlord pursuant
to either Sections 11.02(a) or 11.02(b) hereof, the Term and the tenancy hereby
created shall expire on the thirtieth (30th) day after such notice is given,
without indemnity or penalty payable or any other recourse by one party to or
against the other and the Tenant shall, within such thirty (30) day period,
vacate the Premises and surrender them to the Landlord with the Landlord having
the right to re-enter and repossess the Premises discharged of this Lease and to
expel all Persons and remove all property therefrom. All Rent shall be due and
payable without reduction or abatement up to the date of the Notice.
(d) If all or any part of the Building is at any time destroyed or
damaged as set out in Sections 11.02(a) and/or 11.02(b) hereof, and the Landlord
does not elect to terminate this Lease in accordance with the rights
hereinbefore granted, the Landlord shall, following such destruction or damage,
commence diligently to reconstruct, rebuild or repair, the
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Premises to the extent that the Landlord is obligated to repair the Premises as
set forth in the provisions of Section 11.01 hereof, and if necessary, that part
of the Building immediately adjacent to the Premises, but only to the extent of
the Landlord's responsibilities pursuant to the terms of the various leases for
the premises in the Building and exclusive of any tenant's responsibilities set
out therein. If the Landlord elects to repair, reconstruct or rebuild the
Building or any part thereof, the Landlord may use plans and specifications and
working drawings other than those used in the original construction of the
Building or any part thereof provided that such plans and specifications and
working drawings so used by the Landlord call for a quality equal to or better
than that called for in the plans and specifications and working drawings used
in the original construction.
(e) Notwithstanding any of the provisions hereinbefore set out in this
Lease: (1) in the event of damage or destruction occurring to the Building, the
Premises, or any part or parts thereof by reason of any cause in respect of
which there are no proceeds of insurance available to the Landlord or proceeds
of insurance are available but insufficient to pay the Landlord for the costs of
rebuilding or making fit the Building or the Premises or effecting the
Landlord's Work because any Mortgagee or other Person entitled thereto will not
consent to the payment to the Landlord of the proceeds of any insurance policy
for such purpose, or, (2) if any such damage or destruction is caused by the
Tenant, the Landlord may terminate this Lease on thirty (30) days' written
notice to the Tenant and all Rent shall be adjusted as of, and the Tenant shall
vacate and surrender the Premises on, such termination date.
Section 11.03 - Expropriation
Both the Landlord and the Tenant agree to cooperate with each other in
respect of any expropriation of all or any part of the Premises or any other
part of the Building, so that each may receive the maximum award in the case of
any expropriation to which they are respectively entitled at law. If and to the
extent that any portion of the Building other than the Premises is expropriated,
then the full proceeds accruing therefrom or awarded as a result thereof, shall
belong solely to the Landlord and the Tenant will abandon or assign to the
Landlord any rights which the Tenant may have or acquire by operation of law to
such proceeds or award and will promptly execute such documents as in the
opinion of the Landlord are or may be necessary to give effect to this
intention.
If at any time during the Term, (a) more than twenty per cent (20%) of
the Rentable Area of the Building, or, (b) more than twenty per cent (20%) of
the area of the Common Facilities, or, (c) more than ten per cent (10%) of the
area of those Common
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Facilities which are exterior or adjacent to the buildings forming part of the
Building, is acquired or expropriated by any lawful expropriating authority, or
if reasonable access to the Building is materially and adversely affected by any
such acquisition or expropriation, then in any of such events, at the option of
the Landlord, this Lease shall cease and terminate as of the date of the
interest acquired or expropriated vesting in such expropriating authority and
the Tenant shall have no claim against the Landlord for the value of any
unexpired Term or for damages or for any reason whatsoever. If the Landlord
does not so elect to cancel this Lease by notice as aforesaid, this Lease shall
continue in full force and effect without any reduction or abatement of Rent,
provided that if any part of the Premises is expropriated and as a result
thereof the area of the Premises is physically reduced, then from and after the
date of such physical reduction, the Rentable Area of the Premises shall be
adjusted to take into account any such reduction in area, and the Minimum Rent
payable by the Tenant pursuant to Section 4.02 shall be adjusted on the basis of
the rental rate set out therein, and the Tenant shall be entitled to claim from
the Expropriating Authority in respect to its leasehold interests that may be
expropriated.
Section 11.04 - Architect's Certificate
The certificate of the Architect shall bind the parties as to (a) the
percentage of the Rentable Area of the Building damaged or destroyed; (b)
whether or not the Premises are rendered untenantable and the extent of such
untenantability; (c) the date upon which the Landlord's Work is completed or
substantially completed and the date when the Premises are rendered tenantable;
(d) the state of completion of any work of either the Landlord or the Tenant
under this Lease; (e) whether reasonable access to the Building is materially
and adversely affected by any such acquisition or expropriation; and (f) the
percentage of the Rentable Area of the Building which is acquired or
expropriated pursuant to this Lease.
ARTICLE XII
Assignment, Subletting and Change of Control
Section 12.01 - Consent Required
(a) In this Article "Transfer" means (i) an assignment, a sublease, a
mortgage, charge or debenture (floating or otherwise) or other encumbrance of
this Lease or the Premises or any part of them, (ii) a parting with or sharing
of possession of all or part of the Premises, and, (iii) a transfer or issue by
sale, assignment, bequest, inheritance, operation of law or other
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disposition, or by subscription of all or part of the corporate shares of the
Tenant which results in a change in the effective voting control of the Tenant.
"Transferor" means the Person or Persons who is or will be making a Transfer and
"Transferee" means the Person or Persons to whom a Transfer is or is to be made
(it being understood that for a Transfer described in Section 12.01(a)(iii)
above the Transferor is the Person that has effective voting control before the
Transfer and the Transferee is the Person that has effective voting control
after the Transfer).
(b) The Tenant will not affect or permit a Transfer without in each
instance obtaining the prior written consent of the Landlord, which consent will
not be unreasonably withheld, except that despite any provisions of this Lease
or any statutory provision to the contrary the Tenant hereby acknowledges that
it shall not be unreasonable for the Landlord to withhold its consent to a
Transfer if:
(i) the Tenant is then in default under any of the terms,
covenants and conditions herein on its part to be observed
and performed;
(ii) covenants, restrictions, or commitments given by the
Landlord to other tenants in the Building or to Mortgagees
or other parties regardless of when given, prevent or
inhibit the Landlord from giving its consent to the Transfer
or any Mortgagee does not consent thereto;
(iii) the Transfer is a mortgage, charge, debenture (floating
or otherwise) of, or in respect of, this Lease or the
Premises or any part of them. Notwithstanding the foregoing
Section 12.01(b)(iii), the Landlord shall give consideration
to a request by the Tenant for the consent of the Landlord
to an assignment or subletting of the interest of the Tenant
in this Lease and in the Premises, as a security interest,
provided that the said security interest shall not interfere
with the Landlord's financing needs, shall not without
exception rank in priority to any security interests of the
Landlord hereunder and, the lender entering into a written
agreement with the Landlord on terms and conditions
satisfactory to the Landlord acting reasonably; and/or
(iv) the Landlord does not receive sufficient information,
material, books or records from
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the Tenant or the Transferee to enable the Landlord, in the
Landlord's opinion, acting reasonably, to make a
determination as to the credit worthiness, financial
responsibility, the nature of business, the business
history, the business experience and the integrity of the
Transferee and to make a determination as to whether or not
it should give its consent, and/or based on the aforesaid
information or otherwise, the Landlord is not satisfied with
those matters hereinbefore set forth.
(c) Section 12.01(b) does not apply to a Transfer described in Section
12.01(a)(iii) which occurs when the Tenant is a corporation whose shares are
traded and listed on a stock exchange in Canada or the United States.
(d) Section 12.01(b) does not apply to a Transfer consisting of an
assignment if the Transferee is a Related Company (as hereinafter described in
Section 12.01(e)), provided that the Tenant will not affect or permit such a
Transfer without in each instance fulfilling the following:
(i) The Tenant shall give at least ten (10) days' prior
written notice to the Landlord of its intention to effect
such a Transfer to a Related Company, which notice shall
provide particulars in reasonable detail as to how the
Transferee is a Related Company;
(ii) The Tenant and the Transferee have agreed in writing with
the Landlord that (i) the Transferee shall remain a Related
Company and, (ii) upon the Transferee ceasing to be a
Related Company, the event giving rise to the Transferee
ceasing to be a Related Company shall be deemed for the
purposes of this Lease to constitute a Transfer and the
provisions of Section 12.01(b) shall apply upon the
happening of such event;
(iii) The Tenant and the Transferee, as the case may be,
shall have complied with the provisions of Section 12.02(e),
(f), (g) and (h); and
(iv) The Tenant is not then in default under any of the terms,
covenants and conditions herein on its part to be observed
and performed.
(e) The term "Related Company" shall mean a corporation which directly
or indirectly controls, is controlled
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by, or is under common control with ACC Long Distance Ltd. or ACC Long Distance
Inc.; the term "control", "controls" and "controlled" shall mean that at least
51% of the voting shares are directly or beneficially held which are sufficient
to elect a sufficient number of directors to control the affairs of such
corporation.
Section 12.02 - Conditions of Consent
The following terms and conditions apply in respect of any Transfer
(but this shall not imply consent by the Landlord to any Transfer without the
Tenant first complying with the provisions of Section 12.01(b) hereof);
(a) the consent by the Landlord to any Transfer and the deemed consent
pursuant to Section 12.01(c) and/or (d) hereof is not a waiver of the
requirement for consent to any subsequent Transfer;
(b) no acceptance by the Landlord of Rent or other payments by a
Transferee is, (i) a waiver of the requirement for the Landlord to consent to
the Transfer, (ii) the acceptance of the Transferee as the Tenant, (subject
however to the provisions of Section 12.01(c) and (d) hereof), or, (iii) a
release of the Tenant from its obligations under this Lease;
(c) The Landlord may apply amounts collected from the Transferee to
any unpaid Rent;
(d) the Transferor, unless the Transferee is a sub-tenant of the
Tenant, will retain no rights under this Lease in respect of obligations to be
performed by the Landlord or in respect of the use or occupation of the Premises
after the Transfer and will execute an Indemnity Agreement on the Landlord's
standard form in respect of obligations to be performed after the Transfer by
the Transferee;
(e) the Transferor will cause the Transferee to promptly execute an
agreement (prepared by the Landlord at the Tenant's expense) directly with the
Landlord, (i) agreeing to be bound by all of the terms of this Lease (including,
without limitation, the provisions of Section 8.01 relating to the use of the
Premises) as if the Transferee had originally executed this Lease as the Tenant,
and, (ii) amending the Lease to incorporate any conditions imposed by the
Landlord in its consent or required by this Section 12.02; but the Transferor
will not be released from its obligations under this Lease and shall be (and
shall cause any Indemnitor to be) a party to such agreement, and the liability
of the Transferor and Transferee shall be joint and several;
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(f) if as a result of any such Transfer, the Tenant is entitled,
directly or indirectly, to receive in respect of any such Transfer, a bonus or
premium payable for any such Transfer which relates to the Tenant's interest in
the Lease or to the Premises (excluding any consideration for the Tenant's trade
fixtures) or a Rent (whether Minimum Rent or Additional Rent) greater than that
required to be paid to the Landlord pursuant to the provisions of this Lease,
the Tenant shall pay to the Landlord, as Additional Rent one hundred percent
(100%) of any such bonus, premium or increased Rent, as aforesaid, forthwith
upon receipt thereof by the Tenant from any such Transferee from time to time.
In this respect, the Tenant shall make available to the Landlord upon request
any and all books and records of the Tenant so as to enable the Landlord to
verify the receipt of the amount thereof, of any bonus, premium or greater Rent,
as aforesaid, which the Tenant has received from any such Transferee from time
to time, as aforesaid;
(g) any documents relating to a Transfer or relating to the Landlord's
consent will be prepared by the Landlord or its solicitors and all of the legal
costs of the Landlord with respect thereto together with a reasonable
administration charge for the Landlord shall be paid by the Tenant to the
Landlord on demand, as Additional Rent; and
(h) Notwithstanding the effective date of any permitted Transfer as
between the Tenant and any Transferee, all Rent for the month in which such
effective date occurs shall be paid in advance by the Tenant so that the
Landlord will not be required to accept partial payments of Rent for such month
from either the Tenant or any Transferee.
Section 12.03 - No Advertising of Premises
The Tenant shall not advertise the whole or any part of the Premises
or this Lease for the purpose of a Transfer and shall not print, publish, post,
display or broadcast any notice or advertisement to that effect and shall not
permit any broker or other Person to do any of the foregoing, unless the
complete text and format of any such notice, advertisement or offer is first
approved in writing by the Landlord. Without in any way restricting or limiting
the Landlord's right to refuse any text or format on other grounds, any text or
format proposed by the Tenant shall not contain any reference to the rental rate
of the Premises.
Section 12.04 - Assignment by the Landlord
In the event of the sale, lease or disposition by the Landlord of the
Building or any part thereof, or the assignment by the Landlord of this Lease or
any interest of the Landlord hereunder other than by way of security, the
Landlord shall,
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thereupon and without further agreement, be freed and relieved of all liability
with respect to all covenants and obligations to be performed or observed by the
Landlord. Provided that any funds in the hands of the Landlord at the time of
such sale, lease, disposition or assignment shall be turned over to the Person
in respect of which the Landlord is entering into the sale, lease, disposition
or assignment.
ARTICLE XIII
Access and Alterations
Section 13.01 - Right of Entry
(a) The Landlord and its agents have the right to enter the Premises
at all reasonable times to examine the same and to make such repairs,
alterations, changes, adjustments, improvements or additions to the Premises or
the Building or any part thereof or any adjacent property as the Landlord
considers necessary or desirable without this constituting a re-entry or a
breach of any covenant for quiet enjoyment contained in this Lease or implied by
law. The Rent required to be paid pursuant to this Lease shall not abate or be
reduced while any such repairs, alterations, changes, adjustments, improvements
or additions are being made due to loss or interruption of business of the
Tenant, inconvenience or otherwise, and the Landlord shall not be liable to the
Tenant for any injury or death caused to any Person or for any loss or damage to
the property of the Tenant or of others located on the Premises as a result of
such entry.
(b) The Landlord and its agents have the right to enter the Premises
at all reasonable times to show them to prospective purchasers, lessees,
insurers or mortgagees and during the twelve (12) months prior to the expiration
of the Term, the Landlord may place upon the Premises the usual "For Rent" or
"For Sale" notices which the Tenant shall permit to remain thereon without
molestation or complaint.
(c) If the Tenant is not personally present to open and permit an
entry into the Premises at any time when for any reason an entry therein is
necessary or permissible, the Landlord or its agents may forcibly enter the same
without rendering the Landlord or such agents liable therefor, and without in
any manner affecting the obligations and covenants of this Lease. The Tenant
agrees that no entry into the Premises or anything done in, to or for the
Premises by the Landlord pursuant to a right granted by this Lease shall
constitute a breach of any covenant for quiet enjoyment, or (except where
expressed by the Landlord in writing) shall constitute a re-entry or forfeiture,
or an actual or constructive eviction and the Landlord shall not
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be liable to the Tenant for any injury or death to any person or for any loss or
damage to any property of the Tenant or of others as a result of any such entry
of thing.
ARTICLE IV
Status Statement, Attornment and Subordination
Section 14.01 - Status Statement
Within ten (10) days after written request therefor by the Landlord,
or if upon any sale, assignment, lease or mortgage of the Premises or the land
thereunder or the Building by the Landlord, a status statement is required from
the Tenant, the Tenant shall deliver, in a form supplied by the Landlord, as the
Landlord may direct, a status statement or a certificate to any proposed
mortgagee or purchaser, or to the Landlord, stating (if such is the case):
(a) that this Lease is unmodified and in full force and effect (or if
there have been modifications, that this Lease is in full force and effect as
modified and identifying the modification agreements) or if this Lease is not in
full force and effect, the certificate shall so state;
(b) the Commencement Date;
(c) the date to which Rent has been paid under this Lease;
(d) whether or not there is any existing default by the Tenant in the
payment of any Rent or other sum of money under this Lease, and whether or not
there is any other existing or alleged default by either party under this
Lease with respect to which a notice of default has been served and if there is
any such default, specifying the nature and extent thereof;
(e) whether there are any setoffs, defences or counter claims against
enforcement or the obligations to be performed by the Tenant under this Lease;
and
(f) with reasonable particularity, details respecting the Tenant's and
any Indemnitor's financial standing and corporate organization;
or as otherwise required by the form supplied or directed to be used by the
Landlord.
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Section 14.02 - Subordination and Attornment
(a) This Lease and all of the rights of the Tenant hereunder are, and
shall at all times be, subject and subordinate to any and all mortgages, trust
deeds and the charge or lien resulting from, or any instruments of, any
financing, refinancing or collateral financing and any renewals or extensions
thereof from time to time in existence against the Building or any part thereof.
Upon request, the Tenant shall subordinate this Lease and all of its rights
hereunder in such form as the Landlord requires to any and all mortgages, trust
deeds or the charge or lien resulting from, any instrument of, any financing,
refinancing or collateral financing and to all advances made or hereafter to be
made upon the security thereof.
(b) The Tenant shall, if possession is taken under, or any proceedings
are brought for the foreclosure of, or in the event of the exercise of the power
of sale under any mortgage, charge, lease or sale and leaseback transaction,
deed of trust, or the lien resulting from any other method of financing,
refinancing or collateral financing made by the Landlord or otherwise in
existence against the Building, or any part thereof, attorn to the Mortgagee,
chargee, lessee, trustee, other encumbrancer or the purchaser upon any such
foreclosure or sale and recognize such Mortgagee, chargee, lessee, trustee,
other encumbrancer or the purchaser as the Landlord under this Lease.
(c) The obligation of the Tenant to subordinate this Lease and to
attorn to the Mortgagee as provided for in Section 14.02(a) and (b) is
conditional upon the Mortgagee providing a written acknowledgement in favour of
the Tenant, that so long as the Tenant is not in default under the covenants,
obligations and agreements on the part of the Tenant herein to be performed, the
Tenant may continue in possession of the Premises, without disturbance by the
Mortgagee.
Section 14.03 - Execution of Documents
The Tenant shall, upon request of the Landlord or the Mortgagee or any
other Person having an interest in the Building, or any part thereof, execute
and deliver promptly such instruments, acknowledgements, statements or
certificates to carry out the intent of Sections 14.01 and 14.02 or any other
provision of this Lease subject however to the provisions of Section 14.02(c) in
the case of any instruments of subordination or attornment required under the
provisions of Sections 14.01 and 14.02 hereof. If ten (10) days after the date
of a request by the Landlord to execute any such instruments, statements,
acknowledgements or certificates the Tenant has not executed and delivered the
same to the Landlord or to whomsoever the Landlord directs, the Tenant hereby
irrevocably appoints the Landlord as the Tenant's attorney with full power and
authority to execute
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and deliver in the name of the Tenant any such instruments, statements,
acknowledgements or certificates.
Section 1.4.04 - Financial Information
The Tenant shall, upon request, provide the Landlord with such public
information as to the Tenant's or the Indemnitor's financial standing and
corporate organization as the Landlord or the Mortgagee requires. Failure of
the Tenant to comply with the Landlord's request herein shall constitute a
default under the terms of this Lease and the Landlord shall be entitled to
exercise all of its rights and remedies provided for in this Lease.
ARTICLE XV
Default and Landlord's Remedies
Section 15.01 - Right to Re-Enter
Notwithstanding anything contained in any present or future laws to
the contrary, if and whenever:
(a) the Tenant fails to pay any Rent or other sums due hereunder on
the day or dates appointed for the payment thereof, (provided the Landlord first
gives five (5) days' written notice to the Tenant of any such failure); or
(b) the Tenant fails to observe or perform any other of the terms,
covenants or conditions of this Lease to be observed or performed by the Tenant
(other than the terms, covenants or conditions set out below in subparagraphs
(c) to (l), inclusive, for which no notice shall be required) provided the
Landlord first gives the Tenant fifteen (15) days, or such shorter period of
time as is otherwise provided herein, written notice of any such failure to
perform and the Tenant within such period of fifteen (15) days fails to commence
diligently and thereafter to proceed diligently and continuously to cure any
such failure to perform; or
(c) the Tenant or any Indemnitor of this Lease or any Person occupying
the Premises or any part thereof or any licensee, concessionaire or franchisee
operating business in the Premises becomes bankrupt or insolvent or takes
benefit of any act now or hereafter in force for bankrupt or insolvent debtors
or files any proposal or makes any assignment for the benefit of creditors or
any arrangement or compromise; or
(d) a receiver of a receiver and manager is appointed for all or a
portion of the Tenant's property or any such
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Indemnitor's, occupant's, licensee's, concessionaire's or franchisee's property;
or
(e) any steps are taken or any action or proceedings are instituted by
the Tenant or by any other party including, without limitation, any court or
governmental body of competent jurisdiction for the dissolution, winding-up or
liquidation of the Tenant or its assets; or
(f) the Tenant makes or attempts to make a sale in bulk of any of its
assets, wherever situated (other than a bulk sale made to a Transferee permitted
under this Lease); or
(g) the Tenant sells or disposes of the goods, trade fixtures,
equipment or chattels of the Tenant or removes or commences, attempts or
threatens to remove them from the Premises so that in the Landlord's opinion
there would not in the event of such sale, disposal or removal be sufficient
goods of the Tenant on the Premises subject to distress to satisfy all Rent due
or accruing hereunder for a period of at least twelve (12) months; or
(h) the Tenant abandons or attempts to abandon the Premises or any
part thereof, or the Landlord has reasonable cause to believe that the Tenant
intends to abandon or attempt to abandon the Premises or any part thereof; or
(i) the Premises or any part thereof become and remain vacant or
unoccupied for a period of five (5) consecutive days or more without the prior
written consent of the Landlord, or are used by any Persons other than such as
are entitled to use them; or
(j) the Tenant effects or attempts to effect a Transfer that is not
permitted by this Lease; or
(k) this Lease or any of the Tenant's assets on the Premises are taken
under any writ of execution, chattel mortgage, charge, debenture or other
security instrument; or
(l) re-entry is permitted under any other terms of this Lease,
then and in every such case the Landlord, in addition to any other rights or
remedies it has pursuant to this Lease or at law, or otherwise, shall have the
immediate right to terminate this lease by notice to the Tenant or to re-enter
the Premises and repossess the Premises and enjoy them as of its former estate,
and the Tenant hereby agrees that the Landlord may expel all Persons and remove
all property from the Premises and such property may be removed and sold or
disposed of by the Landlord by public auction or otherwise, and either in bulk
or by
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individual item, all as the Landlord in its sole discretion may decide (and the
Tenant acknowledges and agrees that the proceeds of such sale or disposition
shall be applied by the Landlord in the same manner as set out in the second
sentence of Section 15.02 hereof, insofar as applicable) or may be stored in a
public warehouse or elsewhere at the cost and for the account of the Tenant, all
without service of notice or resort to legal process and without the Landlord
being considered guilty of trespass or becoming liable for any loss or damage
which may be occasioned thereby or for any claim for damages. The Tenant hereby
irrevocably waives (i) the benefit of any present or future laws which in any
way may limit or diminish the Landlord's right to terminate this Lease or re-
enter into possession of the Premises in pursuance of its rights or remedies as
set forth in this Lease, and, (ii) any and all rights of redemption granted by
or under any present or future laws in the event of the Tenant being evicted or
dispossessed for any cause, or in the event of the Landlord obtaining possession
of the Premises by reason of the violation by the Tenant of any of the terms or
conditions of this Lease or otherwise.
Section 15.02 - Right to Relet
If the Landlord elects to re-enter the Premises as herein provided, or
if it takes possession pursuant to legal proceedings or pursuant to any notice
provided for by law, it may thereafter terminate this Lease, or, it may from
time to time without terminating this Lease make such alterations and repairs as
are necessary in order to relet the Premises or any part thereof and to relet
the Premises or part thereof as agent for the Tenant for such term or terms
(which may be for a term extending beyond the Term) and at such Rent and upon
such other terms, covenants and conditions as Landlord in its sole discretion
considers advisable. Upon each such reletting all Rent received by the Landlord
from such reletting shall be applied, first to the payment of any indebtedness
other than Rent due hereunder from the Tenant to the Landlord; second, to the
payment of any costs and expenses of such reletting including brokerage fees and
solicitor's fees and of costs of such alterations and repairs; third, to the
payment of Rent due and unpaid hereunder; and the residue, if any, shall be held
by the Landlord and applied in payment of future Rent as the same becomes due
and payable hereunder. If such Rent received from such reletting during any
month is less than that to be paid during that month by the Tenant hereunder,
the Tenant shall pay any such deficiency, which shall be calculated and paid
monthly in advance on or before the first day of each and every month. No such
re-entry or taking possession of the Premises by the Landlord shall be construed
as an election on its part to terminate this Lease unless a written notice of
such intention is given to the Tenant. Notwithstanding any such reletting
without
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termination the Landlord may at any time thereafter elect to terminate this
Lease for such previous breach.
Section 15.03 - Other Rights of the Landlord
The Landlord shall have the right to recover from the Tenant all
damages, costs and expenses incurred by the Landlord as a result of any default
by the Tenant including, if the Landlord terminates this Lease, any deficiency
between those amounts which would have been payable by the Tenant for the
portion of the Term following such termination and the net amounts actually
received by the Landlord during such period of time with respect to the
Premises. In any of the events referred to in Section 15.01 hereof, in addition
to any other rights of the Landlord, the Landlord shall have the right to
recover from the Tenant the full amount of the current month's Rent together
with the next three months instalments of Rent, all of which shall accrue on a
day to day basis and shall immediately become due and payable as accelerated
rent and the Landlord may immediately distrain for the same, together with any
Rent arrears then unpaid. If the Landlord at any time terminates this Lease for
any breach, in addition to any other remedies it may have, it may recover from
the Tenant all damages it incurs by reason of such breach, including without
limitation, the cost of recovering the Premises and solicitor's fees (on a
solicitor-client basis).
Section 15.04 - Survival of Obligations
The indemnity provisions of this Lease and the rights of the Landlord
in respect thereof and the rights of the Landlord in respect of any failure by
the Tenant to perform any of its obligations under this Lease shall remain in
full force and effect notwithstanding the expiration or earlier termination of
the Term.
Section 15.05 - Expenses
If legal action is brought for recovery of possession of the Premises,
for the recovery of Rent or any other amount due under this Lease, or because of
the breach of any other terms, covenants or conditions herein contained on the
part of the Tenant to be kept or performed, and a breach is established, the
Tenant shall pay to the Landlord as Additional Rent, upon demand, all costs and
expenses incurred therefor, including, without limitation, any professional,
consultant and legal fees (on a solicitor and his client basis), unless a Court
shall otherwise award.
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Section 15.06 - Removal of Chattels
In case of removal by the Tenant of the goods and chattels of the
Tenant from the Premises, the Landlord may follow same for thirty (30) days in
the same manner as is provided for in The Landlord and Tenant Act (Ontario) or
any like legislation in any other province in Canada.
Section 15.07 - Waiver of Exemption from Distress
The Tenant hereby waives and renounces the benefit of any present or
future laws purporting to limit or qualify the Landlord's right to distrain.
Notwithstanding any term or condition of this Lease or anything
contained in any present or future laws, none of the goods and chattels of the
Tenant at any time during the continuance of the Term shall be exempt from levy
by distress for Rent or other sums provided in this Lease to be paid by the
Tenant as Rent in arrears, and upon any claim being made by the Landlord, this
provision may be pleaded as an estoppel against the Tenant in any action brought
to test the rights to the levying upon any such goods as are named as exempted
in such legislation, the Tenant hereby waiving all and every benefit that it
could or might have with regard thereto.
Section 15.08 - Landlord May Cure Tenant's Default or Perform Tenant's Covenants
If the Tenant fails to pay, when due, any Rent or other charge
required to be paid pursuant to this Lease, the Landlord, after giving five (5)
days' notice in writing to the Tenant, may, but shall not be obligated to, pay
all or any part of the same. If the Tenant is in default in the performance of
any of its covenants or obligations hereunder (other than the payment of Rent or
other charge required to be paid pursuant to this Lease) the Landlord may from
time to time after giving such notice as it considers sufficient (or without
notice in the case of an emergency) having regard to the circumstances
applicable, perform or cause to be performed any of such covenants or
obligations, or any part thereof, and for such purpose may do such things as may
be required, including, without limitation, entering upon the Premises and doing
such things as may be required upon or in respect of the Premises or any part
thereof as the Landlord reasonably considers requisite or necessary. All
expenses incurred and expenditures made pursuant to this Section 15.08 plus a
sum equal to fifteen per cent (15%) thereof representing the Landlord's overhead
shall be paid by the Tenant as Additional Rent forthwith upon demand. The
Landlord shall have no liability to the Tenant for any loss or damages resulting
from any such action or entry by the Landlord upon the Premises.
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Section 15.09 - Lien on Personal Property
As security for the due payment by the Tenant of the Rent reserved
hereunder whether now due, accruing due or to fall due at any time during the
Term, and the performance by the Tenant of all covenants, agreements, provisoes
and conditions of the Tenant to be performed hereunder, the Tenant hereby grants
to the Landlord a first lien and charge on all of the personal property of the
Tenant on, in or about the Premises. The Tenant confirms the first lien and
charge granted pursuant to Section 15.09 of the Original Lease which provisions
shall remain in full force and effect and shall continue to bind the Tenant in
favour of the Landlord and its successors and assigns. All liens and charges
hereinbefore provided shall constitute a security agreement within the meaning
of the Personal Property Security Act (Ontario) or any like legislation in any
other province in Canada and on default of the Tenant hereunder the Landlord
shall have, in addition to any other rights and remedies it may be entitled to
under this Lease or otherwise, all the rights and remedies of a secured party
under the Personal Property Security Act. For greater clarity, the rights of
the Landlord hereunder shall be in addition to and not in substitution for any
other rights and remedies of the Landlord. Nothing contained herein shall
prevent the Tenant from disposing of its inventory in the ordinary course of
business and for the purpose of carrying on same. The provision of this Section
15.09 shall survive the expiration or earlier termination of this Lease.
Provided that the Tenant is not in default hereunder, the Landlord shall execute
its subordination of the Landlord's security hereby granted, in favour of
security granted by the Tenant in the normal course of its business operations
to facilitate the financing of the Tenant's equipment or the Tenant's business.
Section 15.10 - Charges Collectible as Rent
If the Tenant is in default in the payment of any amounts, monies or
charges required to be paid by the Tenant pursuant to this Lease, they shall, if
not paid when due, or when otherwise provided hereunder, be collectible as Rent
in arrears together with the next monthly instalment of Minimum Rent thereafter
falling due hereunder, but nothing herein contained is deemed to suspend or
delay the payment by the Tenant of any amount, money or charge at the time same
becomes due and payable hereunder, or limit any other remedy of the Landlord.
The Tenant agrees that the Landlord may, at its option, apply or allocate any
sums received from or due to the Tenant against any amounts due and payable
hereunder in such manner as the Landlord sees fit.
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Section 15.11 - Remedies Generally
Mention in this Lease of any particular remedy of the Landlord in
respect of the default by the Tenant does not preclude the Landlord from any
other remedy in respect thereof, whether available at law or in equity or by
statute or expressly provided for in this Lease. No remedy shall be exclusive
or dependent upon any other remedy, but the Landlord may from time to time
exercise any one or more of such remedies independently or in combination, such
remedies being cumulative and not alternative. Whenever the Tenant seeks a
remedy in order to enforce the observance or performance of one of the terms,
covenants and conditions contained in this Lease on the part of the Landlord to
be observed or performed, the Tenant's only remedy shall be for such damages as
the Tenant shall be able to prove in a court of competent jurisdiction that it
has suffered as a result of a breach (if established) by the Landlord in the
observance and performance of any of the terms, covenants and conditions
contained in this Lease on the part of the Landlord to be observed or performed,
except that where this Lease provides that the Landlord's consent or approval is
not to be unreasonably withheld, the Tenant's sole remedy if the Landlord
unreasonably withholds consent or approval, shall be an action for specific
performance and the Landlord shall not be liable for any damages.
ARTICLE XVI
Miscellaneous
Section 16.01 - Rules and Regulations
The Rules and Regulations adopted and promulgated by the Landlord from
time to time are hereby made a part of this Lease as if they were embodied
herein. The Rules and Regulations existing as at the Commencement Date are
those set out in Schedule "D" hereto. The Rules and Regulations may
differentiate between different types of businesses, but the Rules and
Regulations will be adopted and promulgated by the Landlord acting reasonably
and in such manner as would a prudent landlord of a reasonably similar building.
The Tenant's failure to keep and observe the Rules and Regulations constitutes a
default under this Lease in such manner as if the same were contained herein as
covenants. The Landlord reserves the right from time to time to amend or
supplement the Rules and Regulations applicable to the Premises or the Building.
The Landlord is not responsible to the Tenant in the event of the non-observance
or violation of any of such Rules and Regulations or of the terms, covenants or
conditions of any other lease of premises in the Building and is under no
obligation to enforce any such Rules and Regulations or terms, covenants or
conditions.
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Section 16.02 - Overholding - No Tacit Renewal
If the Tenant remains in possession of the Premises after the end of
the Term with the consent of the Landlord but without having executed and
delivered a new lease, there is no tacit or implied renewal of this Lease and
the Term hereby granted, notwithstanding any statutory provisions or legal
presumption to the contrary, and the Tenant shall be deemed to be occupying the
Premises as a Tenant from month-to-month at a monthly Minimum Rent payable in
advance on the first day of each month equal to 110% of the monthly amount of
Minimum Rent payable during the last month of the Term and otherwise, upon the
same terms, covenants and conditions as are set forth in this Lease (including
the payment of all Additional Rent), so far as these are applicable to a monthly
tenancy.
Section 16.03 - Successors
All rights and liabilities herein granted to or imposed upon the
respective parties hereto, extend to and bind the respective successors and
assigns of each party hereto constituting the Landlord and the heirs, executors,
administrators and permitted successors and assigns of the Tenant, as the case
may be. No rights, however, shall enure to the benefit of any Transferee of the
Tenant unless the Transfer to such Transferee is permitted under the terms of
this Lease. If there is more than one Tenant, they are all bound jointly and
severally by the terms, covenants and conditions herein.
Section 16.04 - Tenant Partnership
If at any time during the Term (i) there is more than one Tenant or
more than one Person constituting the Tenant hereunder then they shall each be
liable jointly and severally for all of the Tenant's obligations hereunder and
(ii) the Tenant is a partnership, joint venture or co-tenancy (the "Tenant
Partnership"), each Person who is presently a member of the Tenant Partnership,
and each Person who becomes a member of any successor Tenant Partnership
hereafter, shall be and continue to be liable jointly and severally for the full
and complete performance of, and shall be and continue to be subject to the
terms, covenants and conditions of this Lease, whether or not such Person ceases
to be a member of such Tenant Partnership or successor Tenant Partnership.
Section 16.05 - Waiver
The waiver by the Landlord of any breach of any term, covenant or
conditions herein contained is not deemed to be a waiver of such term, covenant
or condition or of any subsequent breach of the same or of any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by
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the Landlord is not deemed to be a waiver of any preceding breach by the Tenant
of any term, covenant or condition of this Lease, regardless of the Landlord's
knowledge of such preceding breach at the time of acceptance of such Rent. No
term, covenant or condition of this Lease is deemed to have been waived by the
Landlord unless such waiver is in writing by the Landlord.
All Rent to be paid by the Tenant to the Landlord hereunder shall be
paid without any deduction, abatement, set-off or compensation whatsoever except
for Minimum Rent and Additional Rent to the extent it may be abated pursuant to
Section 11.01, and the Tenant hereby waives the benefit of any statutory or
other rights in respect of abatement, set-off or compensation in its favour at
the time hereof or at any future time.
Section 16.06 - Accord and Satisfaction
No payment by the Tenant or receipt by the Landlord of a lesser amount
than the monthly payment of Minimum Rent herein stipulated is deemed to be other
than on account of the earliest stipulated Minimum Rent, nor is any endorsement
or statement on any cheque or any letter accompanying any cheque or payment as
Rent deemed an acknowledgement of full payment or an accord and satisfaction,
and the Landlord may accept and cash such cheque or payment without prejudice to
the Landlord's right to recover the balance of such Rent or pursue any other
remedy provided in this Lease.
No receipt of monies by the Landlord from the Tenant after the
termination of this Lease in any lawful manner shall re-instate, continue or
extend the Term, or affect any notice previously given to the Tenant, or operate
as a waiver of the right of the Landlord to enforce the payment of Rent then due
or thereafter falling due, or operate as a waiver of the right of the Landlord,
to recover possession of the Premises by proper suit, action, proceedings or
other remedy; it being agreed that, after the service of notice to terminate
this Lease and the expiration of the time therein specified, and after the
commencement of any suit, action, proceeding or other remedy, or after a final
order or judgment for possession of the Premises, the Landlord may demand,
receive and collect any monies due, or thereafter falling due without in any
manner affecting such notice, suit, action, proceeding, order or judgment; and
any and all such monies so collected shall be deemed payments on account of the
use and occupation of the Premises or at the election of the Landlord on account
of the Tenant's liability hereunder.
Section 16.07 - Brokerage Commissions
Any brokerage commission with respect to this Lease transaction shall
be borne exclusively by the Tenant and the Tenant shall promptly indemnify and
hold the Landlord harmless
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from any and all claims with respect thereto, except in respect of LNR
Corporation and the commission owing with respect to the January 1994 Lease
Amending Agreement.
Section 16.08 - No Partnership or Agency
Nothing in this Lease shall create any relationship between the
parties to this Lease other than that of Landlord and Tenant and it is
acknowledged and agreed that the Landlord does not in any way or for any purpose
become a partner of the Tenant in the conduct of its business, or otherwise, or
a joint venturer or a member of a joint enterprise with the Tenant, nor is the
relationship of principal and agent created.
Section 16.09 - Agent
The Landlord may perform all or any of its obligations hereunder by or
through such manager or other agency as it may from time to time determine, and
the Tenant shall, as from time to time directed by the Landlord in writing pay
to such manager or agent any monies payable hereunder to the Landlord.
Section 16.10 - Force Majeure
Notwithstanding anything to the contrary contained in this Lease, if
either party hereto is bona fide delayed or hindered in or prevented from the
performance of any term, covenant or act required hereunder by reason of
strikes; labour troubles; inability to procure materials or services; power
failure; restrictive governmental laws or regulations; riots; insurrection;
sabotage; rebellion; war; act of God; or other reason whether of a like nature
or not which is not the fault of the party delayed in performing work or doing
acts required under the terms of the Lease, (collectively referred to in this
Lease as "Force Majeure") then performance of such term, covenant or act is
excused for the period of the delay and the party so delayed shall be entitled
to perform such term, covenant or act within the appropriate time period after
the expiration of the period of such delay. However, the provisions of this
Section do not operate to excuse the Tenant from the prompt payment of Rent or
any other payments required under this Lease.
Section 16.11 - Notices
Any notice, demand, request or other instrument which may be or is
required to be given under this Lease shall be delivered in person or sent by
registered mail postage prepaid and shall be addressed (a) if to the Landlord
c/o Coopers & Lybrand Limited, 145 King Street West, Toronto, Ontario M5H IV8,
Attention: Mr. Tony Cancelliere, Senior Vice-President, with a copy to such
other Person or at such other address as the Landlord designates by written
notice, and (b) if to the Tenant,
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at the Premises, Suite 401, Attention: President. Any such notice, demand,
request or consent is conclusively deemed to have been given or made on the day
upon which such notice, demand, request or consent is delivered, or, if mailed,
then seventy-two (72) hours following the date of mailing, as the case may be,
and the time period referred to in the notice commences to run from the time of
delivery or seventy-two (72) hours following the date of mailing. Either party
may at any time give notice in writing to the other of any change of address of
the party giving such notice, and from and after the giving of such notice, the
address therein specified is deemed to be the address of such party for the
giving of notices hereunder. If the postal service is interrupted or is
substantially delayed, any notice, demand, request or other instrument shall
only be delivered in person.
Section 16.12 - No Option
The submission of this Lease for examination does not constitute a
reservation of or option to lease for the Premises and this Lease become
effective as a Lease only upon execution and delivery thereof by the Landlord
and the Tenant.
Section 16.13 - Registration
The Tenant will not register or permit the registration of this Lease
or any assignment or sublease or other document evidencing any interest of the
Tenant in this Lease or the Premises except that, at the Tenant's request,
subject to the Tenant paying the Landlord's costs and expenses, the Landlord
will enter into a short form of lease with the Tenant for registration purposes,
describing the parties, the Term, and the other minimum information required
under the applicable legislation but the short form of lease must be in a form
satisfactory to the Landlord, acting reasonably. Upon the expiration or earlier
termination of this Lease, the Tenant shall, at its expense, forthwith remove
and discharge such short form of lease, if any, from the title of the Building
lands.
Section 16.14 - Compliance with The Planning Act
It is an express condition of this Lease, that the provisions of
Section 50 of the Planning Act, Statutes of Ontario, 1990, as amended, be
complied with if applicable in law. Until any necessary consent to this Lease
is obtained, notwithstanding anything else contained herein, the Term (including
any extensions or renewals thereof) shall not extend for a period greater than
twenty-one (21) years less one (1) day from the Commencement Date. The Tenant
shall apply diligently to prosecute such application for such consent forthwith
upon the execution of this Lease by both the Landlord and the Tenant, and the
Tenant shall be responsible for all costs, expenses, taxes and levies imposed,
charged or levied as a result of such
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application and in order to obtain such consent. Notwithstanding the foregoing
provisions of this Section 16.14, the Landlord reserves the right at any time to
apply for such consent in lieu of the Tenant (at the Tenant's expense) and the
Tenant's application is hereby expressly made subject to any application which
the Landlord intends to make.
Section 16.15 - Metric Conversion
If measurements are expressed in metric measure in this Lease, the
following conversion factors apply: 1 metre = 3.2808 feet; 1 square metre =
10.7639 square feet; 1 foot = .3048 metres; and 1 square foot = .0929 square
metres.
Section 16.16 - Limited Assets
The Tenant shall look solely to the Landlord's interest in the
Building for the collection or satisfaction of any money or judgment which the
Tenant may recover against the Landlord, and the Tenant shall not look for the
collection or satisfaction of any such money or judgment to any other assets.
Section 16.17 - Bankruptcy and Insolvency Act
The Tenant hereby irrevocably waives any right it may have under
Section 65.2(1) of the Bankruptcy and Insolvency Act, S.C. 1992, or any
successor or similar legislation, to repudiate this Lease, and any such
purported repudiation of this Lease shall be of no force or effect.
Section 16.18 - Parking Spaces
The Landlord agrees to make available to the Tenant for the herein
Term sixty-three (63) parking spaces in the Parking Facilities on the P2 or P3
levels. The Tenant agrees to abide by the rules and regulations established
from time to time by the Landlord and/or the parking operator of the Parking
Facilities. The Tenant agrees to pay as part of the Rent, the monthly parking
charge of the Parking Facilities at the prevailing rates from time to time, on
or before the due dates thereof each month for each such underground parking
space. The parking spaces shall be on an "unreserved basis". The Tenant
acknowledges that the Landlord shall have no obligation to police the Parking
Facilities. Each parking space shall be used only for the parking of one motor
vehicle. The Tenant shall not be permitted to Transfer any of the parking
spaces and acknowledges that the entitlement may not be shared by any other
Person.
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Section 16.19 - Quiet Enjoyment
If the Tenant pays the Rent and other sums herein provided when due,
and punctually observes and performs all of the terms, covenants and conditions
on the Tenant's part to be observed and performed hereunder, the Tenant shall
peaceably and quietly hold and enjoy the Premises for the Term hereby demised
without hindrance or interruption by the Landlord or any other Person lawfully
claiming by, through or under the Landlord subject, nevertheless, to the terms,
covenants and conditions of this Lease.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed this
Lease.
SIGNED, SEALED AND DELIVERED )
in the presence of ) COOPERS & LYBRAND LIMITED AS
) RECEIVER AND MANAGER FOR
) DUNDAS KIPLING II INC.
)
) Per: Tony Cancelliere c/s
) ---------------------
) Senior Vice President
)
) ACC LONG DISTANCE LTD.
)
) Per: W. R. Schultz c/s
) --------------------
V. P. Finance
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SCHEDULE "A"
LEGAL DESCRIPTION OF THE BUILDING
Those lands and premises lying, situate and being in the City of
Etobicoke, in the Municipality of Metropolitan Toronto, consisting of Part of
Lot 7, Concession 5, Colonel Smith's Tract, designated as Parts 3 and 5 on 64R-
5004.
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SCHEDULE "B"
FLOOR PLAN
5343 Dundas Street West
Etobicoke, Ontario
4th Floor
The purpose of this plan is to identify the approximate location of
the Premises in the Building. The Landlord reserves the right at any time to
relocate, rearrange or alter the buildings and structures, other premises and
Common Facilities.
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SCHEDULE "B"
FLOOR PLAN
5343 Dundas Street West
Etobicoke, Ontario
6th Floor
The purpose of this plan is to identify the approximate location of
the Premises in the Building. The Landlord reserves the right at any time to
relocate, rearrange or alter the buildings and structures, other premises and
Common Facilities.
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SCHEDULE "C"
LANDLORD'S AND TENANT'S WORK
1. LANDLORD'S WORK (Base Building Standard)
The Landlord shall finish the Premises in the manner and standard to
the Building which, without limiting the generality of the foregoing, will
include the following:
(a) Supply and install a smooth concrete floor, ready for the Tenant's
floor covering.
(b) Supply and install standard Building ceiling system, including T-
Bar ceiling, ceiling tiles, and recessed fluorescent lighting based on a typical
open office floor area.
(c) Supply and install adequate heating and air-conditioning to the
Premises (and to be thermostat-controlled within the Premises) and to supply and
install all necessary duct work and diffusers within the Premises based on a
typical open office floor area.
Any additional diffusers or zones required within the Premises, over and above
what is being provided based on a typical open office floor area, will be at the
Tenant's expense.
Specialized Tenant needs, as for example, computer rooms, may require separate
mechanical systems at the Tenant's expense.
(d) Supply and install building standard window coverings.
(e) Power will be supplied to the Premises based on a general power
formula of one outlet per 200 square feet of floor area.
Outlet boxes will be provided in each floor ceiling space.
(f) (i) For multi-tenancy floors, dividing partitions between the
Premises and the remainder of the floor on which the
Premises are located, together with a standard entrance door
and such other standard door or doors from the public
corridor to the Premises as are required by the appropriate
municipal or other governmental authorities. The colour of
the interior surfaces of the dividing partitions will be
prime painted. It is understood that the location of the
demising partitions dividing the Premises
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from the balance of the floor on which the Premises are
located is subject to approval of the appropriate municipal
or other governmental authorities;
(ii) For single tenancy floors, two (2) Building standard
washrooms in a location to be chosen by the Landlord and
exterior wall surfaces primed for painting.
2. TENANT'S WORK
(a) Any changes desired by the Tenant which depart from the Base
Building standard or which involve the use of materials not standard to the
Building or which involve leasehold improvements are subject to the Landlord's
prior written approval, which approval may be subject to such terms and
conditions as the Landlord deems desirable, including without limiting the
generality of the foregoing choice of contractors, labour compatibility, and
bonding, and any extra expense above that of the Base Building standard and any
expense in installing leasehold improvements shall be made at the expense of the
Tenant including without limitation, the preparation of the space plan and the
working drawings. The Landlord has the right to retain the services of its
consultants to review the Tenant.s space plans and working drawings, at the
Tenant's expense. The Landlord has the right to request the Tenant to use
contractors of the Landlord's choice.
(b) All permits necessary for the installation of the Tenant's
leasehold improvements and approval of plans must be obtained by the Tenant from
the applicable authorities prior to the commencement of installations by the
Tenant, at its expense and a copy sent to the Landlord.
(c) The Tenant and its contractors are responsible for removing
garbage and debris from the Premises and the Building daily and to place same
into garbage containers for that purpose as provided. All tenants will be
assessed their proportionate share of the cost of providing empty garbage
containers on the job site during the construction of their premises. Any of
the Tenant's garbage or debris removed by the Landlord's forces will be charged
to the Tenant's account.
(d) The Tenant will pay to the Landlord forthwith upon demand (i) the
reasonable costs incurred by the Landlord in retaining consultants to review the
Tenant's space plan and working drawings, (ii) a fee equal to fifteen percent
(15%) of the cost of the Tenant's leasehold improvements toward the cost of the
Landlord's supervision and overhead during installation of the said leasehold
improvements; and (iii) all reasonable costs incurred by the Landlord during the
period the Tenant fixtures
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the Premises including without limitation the cost of elevators to vertically
transport workers and materials with respect to the carrying out of the Tenant's
Work in the Premises.
(e) All work shall be constructed in a good and workmanlike manner,
free and clear of liens, as expeditiously as possible, and so as to not
prejudice any warranties or affect any installations with respect to Base
Building work including without limitation the mechanical, electrical,
sprinkler, plumbing, and other systems servicing the Building or any part or
parts thereof, or affect the operation and balancing of the said systems.
(f) All plans and specifications and working drawings, showing details
of all the Tenant's leasehold improvements within the Premises, including the
location of plumbing and electrical outlets, must, prior to the commencement of
the work, be submitted by the Tenant to the Landlord for its written approval.
The work shall be done in accordance with the provisions of the Lease, and the
provisions of Section 10.02 of the Lease shall apply mutatis mutandis to work
undertaken by the Tenant.
(g) The cost of all leasehold improvements whether constructed by the
Tenant's own contractor or by the Landlord's contractor shall be paid promptly
by the Tenant in accordance with the provisions of the Construction Lien Act.
(h) The Tenant shall perform all work required to provide all
leasehold improvements so that the Premises are available for carrying on the
Tenant's business at the Premises.
(i) In undertaking Tenant's Work, the Tenant shall ensure that its
contractors, subcontractors and consultants co-operate with the Landlord while
the Landlord is undertaking the Landlord's Work.
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SCHEDULE "D"
RULES AND REGULATIONS
1. The Landlord shall permit the Tenant and the Tenant's employees and
all Persons lawfully requiring communication with them to have the use, during
Normal Business Hours in common with others entitled thereto, of the main
entrance and the stairways, corridors, elevators or other mechanical means of
access leading to the Premises. At times other than during Normal Business
Hours the Tenant and the employees of the Tenant shall have access to the
Building and to the Premises only in accordance with the Rules and Regulations
and shall be required to satisfactorily identify themselves and to register in
any book which may at the Landlord's option be kept by the Landlord for such
purpose. If identification is not satisfactory, the Landlord is entitled to
prevent the Tenant or the Tenant's employees or other Persons lawfully requiring
communication with the Tenant from having access to the Building. In addition,
the Landlord is not required to open the door to the Premises for the purpose of
permitting entry therein to any Person not having a key to the Premises.
2. The Tenant shall permit window cleaners to clean the windows of the
Premises during Normal Business Hours.
3. The sidewalks, entrances, passages, escalators, elevators and
staircases shall not be obstructed or used by the Tenant, its agents, servants,
contractors, invitees or employees for any purpose other than ingress to and
egress from the Premises and the Building. The Landlord reserves entire control
of all parts of the Building employed for the common benefit of the tenants and
without restricting the generality of the foregoing, the sidewalks, entrances,
corridors and passages not within the Premises, washrooms, lavatories, air
conditioning closets, fan rooms, janitors. closets, electrical closets and other
closets, stairs, escalators, elevator shafts, flues, stacks, pipe shafts and
ducts and shall have the right to place such signs and appliances therein, as it
deems advisable, provided that ingress and egress from the Premises is not
unduly impaired thereby.
4. The Tenant, its agents, servants, contractors, invitees or employees,
shall not bring in or take out, position, construct, install or move any safe,
business machinery or other heavy machinery or equipment or anything liable to
injure or destroy any part of the Building, including the Premises, without
first obtaining the consent in writing of the Landlord. In giving such consent,
the Landlord shall have the right in its sole discretion, to prescribe the
weight permitted and the
<PAGE>
- 80 -
position thereof, the use and design of planks, skids or platforms, and to
distribute the weight thereof. All damage done to the Building, including the
Premises, by moving or using any such heavy equipment or other office equipment
or furniture shall be repaired at the expense of the Tenant. The moving of all
heavy equipment or other office equipment or furniture shall occur only by prior
arrangement with the Landlord. Safes and other heavy office equipment and
machinery shall be moved through the halls and corridors only upon steel bearing
plates. No freight or bulky matter of any description will be received into the
Building, including the Premises, or carried in the elevators except during
hours approved by the Landlord.
5. The Tenant shall not place or cause to be placed any additional locks
upon any doors of the Premises without the approval of the Landlord and subject
to any conditions imposed by the Landlord. Two keys shall be supplied to the
Landlord for each entrance door to the Premises and all locks shall be standard
to permit access to the Landlord's master key. If additional keys are
requested, they must be paid for by the Tenant. No one, other than the
Landlord's staff, will have keys to the outside entrance doors of the Building.
6. The water closets and other water apparatus shall not be used for any
purpose other than those for which they were constructed, and no sweepings,
rubbish, rags, ashes or other substances shall be thrown therein. Any damage
resulting from misuse shall be borne by the Tenant by whom or by whose agents,
servants or employees the same is caused. The Tenant shall not, (1) let the
water run unless it is in actual use, (2) deface or mark any part of the
Building, including the Premises, (3) drive nails, spikes, hooks or screws into
the walls or woodwork of the Building, including the Premises, or, (4) bore,
drill or cut into the walls or woodwork of the Building, including the Premises,
in any manner or for any reason.
7. No one shall use the Premises for sleeping apartments or residential
purposes, or for the storage of personal effects or articles other than those
required for business purposes.
8. The Tenant shall not permit any cooking or any heating of any foods or
liquids in the Premises without the written consent of the Landlord, but this
shall not prevent the Tenant from having an electric coffee maker or electric
kettle on the Premises.
9. Canvassing, soliciting and peddling in or about the Building are
prohibited.
10. It shall be the duty of the Tenant to assist and cooperate with the
Landlord in preventing injury to the Premises.
<PAGE>
- 81 -
11. No inflammable oils or other inflammable, dangerous or explosive
materials save those approved in writing by the Landlord's insurers shall be
kept or permitted to be kept in the Premises.
12. No bicycles or other vehicles shall be brought within the Building
without the consent of the Landlord.
13. No animals or birds shall be brought into the Building without the
consent of the Landlord.
14. The Tenant shall not install or permit the installation or use of any
machine dispensing goods for sale in the Premises or the Building or permit the
delivery of any food or beverage to the Premises without the written approval of
the Landlord or in contravention of any Rules and Regulations fixed or to be
fixed by the Landlord. Only Persons authorized by the Landlord shall be
permitted to deliver or to use the stairs, elevators or escalators in the
Building for the purpose of delivering food or beverages to the Premises.
15. If the Tenant desires telegraphic or telephonic connections, the
Landlord will direct the electricians as to where and how the wires are to be
introduced. No gas pipe or electric wire will be permitted which has not been
ordered or authorized by the Landlord. No outside radio or television aerials
shall be allowed on any part of the Premises without authorization in writing by
the Landlord.
16. The Tenant shall not cover or obstruct any of the skylights and
windows that reflect or admit light into any part of the Building except for the
proper use of approved blinds and drapes.
17. Any hand trucks, carryalls or similar appliances used in the Building
with the consent of the Landlord shall be equipped with rubber tires, slide
guards and such other safeguards as the Landlord requires.
18. The Tenant shall not place or maintain any supplies, merchandise or
other articles in any vestibule or entry of the Premises, on the footwalks
adjacent thereto or elsewhere on the exterior of the Premises or elsewhere in
the Building.
19. The Tenant shall not do or permit anything to be done in the Premises,
or bring or keep anything therein which will in any way increase the risk of
fire or the rate of fire insurance on the Building or on property kept therein,
or obstruct or interfere with the rights of other tenants or in any way injure
or annoy them or the Landlord, or violate or act at variance with the laws
relating to fires or with the regulations of the Fire Department, or with any
insurance upon the Building or any part
<PAGE>
- 82 -
thereof, or violate or act in conflict with any of the rules and ordinances of
the Board of Health or with any statute or municipal by-law.
<PAGE>
- 83 -
SCHEDULE "E"
INDEMNITY AGREEMENT
THIS AGREEMENT is dated the 1st day of March, 1994.
BETWEEN:
COOPERS & LYBRAND LIMITED AS RECEIVER AND MANAGER FOR DUNDAS KIPLING
II INC.
(hereinafter called the "Landlord"),
PARTY OF THE FIRST PART
- and -
ACC TELENTERPRISES LTD.
(hereinafter called the "Indemnitor"),
PARTY OF THE SECOND PART
In order to induce the Landlord to enter into an amended and restated
lease dated the 1st day of March, 1994, and made between the Landlord and ACC
Long Distance Ltd., as Tenant, as may be supplemented by an agreement relating
to any and all Additional Premises (collectively, the "Lease"), and for other
good and valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged, the Indemnitor hereby makes the following indemnity and agreement
(the "Indemnity") with and in favour of the Landlord:
1. The Indemnitor hereby agrees with the Landlord that at all times
during the Term and any extension or renewal of the Lease it will, (a) make the
due and punctual payment of all Rent, monies, charges and other amounts of any
kind whatsoever payable under the Lease by the Tenant whether to the Landlord or
otherwise and whether the Lease has been disaffirmed or disclaimed; (b) effect
prompt and complete performance of all of the terms, covenants and conditions
contained in the Lease on the part of the Tenant therein to be kept, observed
and performed; and, (c) indemnify and save harmless the Landlord from any claims
for non-payment of Rent, money, charges or other amounts expressed to be due
under the Lease or resulting from any failure by the Tenant to observe and
perform any of the terms, covenants and conditions in the Lease.
2. This Indemnity is absolute and unconditional and the obligations of
the Indemnitor shall not be released, discharged,
<PAGE>
- 84 -
mitigated, impaired or affected by, (a) any extension of time, indulgences or
modifications which the Landlord extends to or makes with the Tenant in respect
of the performance of any of the obligations of the Tenant under the Lease; (b)
any waiver by or failure of the Landlord to enforce any of the terms, covenants
and conditions contained in the Lease; (c) any Transfer of the Lease by the
Tenant or by any Transferee or by any trustee, receiver or liquidator; (d) any
consent which the Landlord gives to any such Transfer; (e) any amendment to the
Lease or any waiver by the Tenant of any of its rights under the Lease; (f) the
expiration or other termination of the Term, or, (g) any overholding by the
Tenant of the Premises or any part thereof.
3. The Indemnitor hereby expressly waives notice of the acceptance of
this Agreement and all notice of non-performance, non-payment or non-observance
on the part of the Tenant of the terms, covenants and conditions in the Lease.
Without limiting the generality of the foregoing, any notice which the Landlord
desires to give to the Indemnitor shall be sufficiently given if delivered in
person to the Indemnitor or if mailed by prepaid registered or certified post
addressed to the Indemnitor at the Premises, and every such notice is deemed to
have been given upon the day it was delivered in person, or if mailed, seventy-
two (72) hours after it was mailed. The Indemnitor may designate by notice in
writing a substitute address for that set forth above and thereafter notices
shall be directed to such substitute address. If two or more parties are named
as Indemnitor, any notice given hereunder or under the Lease shall be
sufficiently given if delivered or mailed in the foregoing manner to any one of
such parties.
4. In the event of a default under the Lease or under this Indemnity, the
Indemnitor waives any right to require the Landlord to, (a) proceed against the
Tenant or pursue any rights or remedies against the Tenant with respect to the
Lease, (b) proceed against or exhaust any security of the Tenant held by the
Landlord, or, (c) pursue any other remedy whatsoever in the Landlord's power.
The Landlord has the right to enforce this Indemnity regardless of the
acceptance of additional security from the Tenant and regardless of any release
or discharge of the Tenant by the Landlord or by others or by operation of any
law.
5. Without limiting the generality of the foregoing, the liability of the
Indemnitor under this Indemnity is not and is not deemed to have been waived,
released, discharged, impaired, or affected by reason of the release or
discharge of the Tenant in any receivership, bankruptcy, winding-up or other
creditors' proceedings or the rejection, disaffirmance or disclaimer of the
Lease in any proceeding or the termination of the Lease for any reason
whatsoever and shall continue with respect to the periods prior thereto and
thereafter, for and with respect to the Term as if the Lease had not been
disaffirmed, disclaimed, or terminated,
<PAGE>
- 85 -
and in furtherance hereof, the Indemnitor agrees, upon any such disaffirmance,
disclaimer, or termination, that the Indemnitor shall, at the option of the
Landlord, become the Tenant of the Landlord upon the same terms and conditions
as are contained in the Lease, applied mutatis mutandis. The liability of the
Indemnitor shall not be affected by any repossession of the Premises by the
Landlord, provided, however, that the net payments received by the Landlord
after deducting all costs and expenses of repossessing and reletting the
Premises shall be credited from time to time by the Landlord against the
indebtedness of the Indemnitor hereunder and the Indemnitor shall pay any
balance owing to the Landlord form time to time immediately upon demand.
6. No action or proceedings brought or instituted under this Indemnity
and no recovery in pursuance thereof shall be a bar or defence to any further
action or proceeding which may be brought under this Indemnity by reason of any
further default hereunder or in the performance and observance of the terms,
covenants and conditions in the Lease.
7. No modification of this Indemnity shall be effective unless it is in
writing and is executed by both the Indemnitor and the Landlord.
8. The Indemnitor shall, without limiting the generality of the
foregoing, be bound by this Indemnity in the same manner as though the
Indemnitor were the Tenant named in the Lease.
9. If two or more individuals, corporations, partnerships or other
business associations (or any combination of two or more thereof) execute this
Indemnity as Indemnitor, the liability of each such individual, corporation,
partnership or other business association hereunder is joint and several. In
like manner, if the Indemnitor named in this Indemnity is a partnership or other
business association, the members of which are by virtue of statutory or general
law, subject to personal liability, the liability of each such member is joint
and several.
10. All of the terms, covenants and conditions of this Indemnity extend to
and are binding upon the Indemnitor, his or its heirs, executors,
administrators, successors and assigns, as the case may be, and enure to the
benefit of and may be enforced by the Landlord, its successors and assigns, as
the case may be, and any mortgagee, chargee, trustee under a deed of trust or
other encumbrancer of all or any part of the Building referred to in the Lease.
11. The expressions "Landlord," "Tenant," "Rent," "Term," "Premises,"
"Building," "Transfer" and "Additional Premises" and
<PAGE>
- 86 -
other terms or expressions where used in this Indemnity respectively, have the
same meaning as in the Lease.
12. This Indemnity shall be construed in accordance with the laws of the
province of Ontario.
13. Wherever in this Indemnity reference is made to either the Landlord or
the Tenant, the reference is deemed to apply also to the respective heirs,
executors, administrators, successors and assigns and permitted assigns,
respectively, of the Landlord and the Tenant, as the case may be, named in the
Lease. Any assignment by the Landlord of any of its interest in the Lease
operates automatically as an assignment to such assignee of the benefit of this
Indemnity.
IN WITNESS WHEREOF the Landlord and the Indemnitor have executed this
Indemnity.
SIGNED, SEALED AND DELIVERED )
in the presence of ) COOPERS & LYBRAND LIMITED AS
) RECEIVER AND MANAGER FOR
) DUNDAS KIPLING II INC.
)
) Per: c/s
) --------------------
) Name:
) Title:
)
) I have authority to bind the
) Corporation.
)
) ACC TELENTERPRISES LTD.
)
) Per:
) ------------------------
) Name:
) Title:
)
) Per: c/s
) --------------------
) Name:
) Title:
)
) We have authority to bind the
) Corporation
<PAGE>
- 87 -
RIDER NO. 1
OPTION TO EXTEND THE TERM
The Tenant, if not in material default under the Lease, either in
payment of Rent or observance of the covenants herein, shall have the option to
extend the Lease with respect to all of the Premises, together with all of the
Additional Premises, for a further term of five (5) years upon giving at least
twelve (12) months' written notice of the exercise of such right and subject to
the same provisions as are contained in this Lease except that there shall be no
further right of extension, the Rent for the extension term shall be the then
market rent for the Premises as determined by agreement between the Landlord and
the Tenant and any tenant inducements, (which includes without limitation, any
rent-free periods), improvement allowance, turnkey package and/or cash
inducements shall be negotiated between the Landlord and the Tenant at that time
which tenant inducements, (which includes without limitation, any rent-free
periods), improvement allowance, turnkey package and/or cash inducements, as
applicable, shall be taken into account for the purposes of determining the
market rent for the Premises during the extension term, provided that there
shall be no obligation by the Landlord to provide any tenant inducements, (which
includes without limitation, any rent-free periods), improvement allowance,
turnkey package and/or cash inducements). The Landlord shall advise the Tenant
as to the proposed extension rental rate at least ninety (90) days prior to the
last date upon which the option is required to be exercised. The Tenant and the
Landlord shall have ninety (90) days from the Tenant's notice to negotiate and
agree upon the rate of Minimum Rent payable during the extension term and any
other terms and conditions, failing which the matter shall be referred to
arbitration by a single arbitrator subject to the Arbitration Act (1990) and the
decision of the arbitrator shall be final and binding on the parties. In the
event that the rate of Minimum Rent has not been established either by agreement
or by arbitration by the commencement date of the extension term, then the
Tenant shall continue to pay to the Landlord on account of Minimum Rent, the
same Minimum Rent which the Tenant was obligated to pay during the last year of
the initial term hereof; once the Minimum Rent has been determined by agreement
or by arbitration for the extension term, any adjustment shall be made by the
parties with any underpayment having been made by the Tenant, payable to the
Landlord within thirty (30) days of the determination of the rate of Minimum
Rent applicable to the extension term, and with any overpayment which may have
been made by the Tenant to the Landlord, to be credited by the Landlord in
favour of the Tenant as the Minimum Rent next falls due, until such overpayment
has been fully credited to the Tenant.
<PAGE>
- 88 -
RIDER NO. 2
FREE RENT PERIODS
Notwithstanding the provisions of this Lease, the actual rent payable
in respect of portions of the Premises shall be adjusted as follows:
(a) for the period March 1, 1994, to February 28, 1995, the Tenant
shall not be obligated to pay Minimum Rent or Additional Rent
with respect to 5,678 square feet of the Sixth Floor Expansion
Premises;
(b) for the period of March 1, 1995 to February 29, 1996, the Tenant
shall not be obligated to pay Minimum Rent with respect to 1,678
square feet of the Sixth Floor Expansion Premises.
Notwithstanding the foregoing, Additional Rent as provided in the
Lease shall be due and payable on the entire Sixth Floor
Expansion Premises (9,678 square feet).
<PAGE>
- 89 -
RIDER NO. 3
LEASE CANCELLATION PROVISIONS
The Tenant, if not in default under the terms of this Lease, shall
have the one time right to terminate the Term of the Lease and to give up vacant
possession of the Premises, effective February 29, 2000, provided it gives at
least twelve (12) months' prior written notice to the Landlord and makes payment
of a cancellation fee to the Landlord at the rate of $35.00 per square foot of
Rentable Area of the Premises. In the event that the Tenant does not provide
written notice to the Landlord exercising its right of termination by February
28, 1999, the termination right shall become null and void. The Tenant shall be
obligated to perform all of the obligations of the Tenant, including without
limitation, the obligation to pay Rent up until the termination date of February
29, 2000, and shall, notwithstanding any such termination, remain responsible
for the performance of all covenants which survive termination. The
cancellation fee shall be due and payable on or before such termination date and
failure to pay such cancellation fee by such date shall, at the option of the
Landlord, entitle the Landlord to declare that the cancellation right is null
and void, in which case the Tenant shall be obligated to pay Rent during the
entire remainder of the Term, as well as remain liable for payment of the
cancellation fee.
<PAGE>
- 90 -
RIDER NO. 4
OPTION TO LEASE ADDITIONAL SPACE
If, during the Term, the Landlord becomes aware that any space
contiguous to the Premises situate on the 4th or 6th floors of the Building or
floors adjacent to the 4th or 6th floors of the Building (the "Additional
Premises") will become available for leasing, the Landlord shall by written
notice to the Tenant, offer to the Tenant the right to lease such Additional
Premises in an "as is" condition, provided that the Tenant is not in default
under this Lease. The Tenant shall have thirty (30) days from receipt of such
notice to exercise this right, failing which the Tenant shall have no further
rights in respect of the Additional Premises so offered by the Landlord to the
Tenant in such written notice, and the Landlord may lease the Additional
Premises on whatever terms it may determine.
If the Tenant accepts such offer, all the provisions of this Lease
(except for the rate of Minimum Rent per square foot of the Rentable Area of
such Additional Premises) shall apply and except for any tenant inducements
which form part of this Lease, shall apply with respect to the Additional
Premises. The Minimum Rent applicable to the Additional Premises shall be the
then market rent for similar premises in the vicinity of the Building. The term
of the Lease with respect to the Additional Premises shall commence on the later
of the date upon which the Tenant gives notice that it exercises its right with
respect to the Additional Premises and the date upon which the Additional
Premises are vacated by the former tenant, and shall be for the same length of
term as then remaining with respect to the Premises. The Landlord and Tenant
shall enter into a supplement to this Lease to include the Additional Premises,
mutatis mutandis, save and except with respect to the rate of the Minimum Rent
and for any tenant inducements which may form part of this Lease.
<PAGE>
- 91 -
RIDER NO. 5
PAYMENT FOR LEASEHOLD IMPROVEMENTS -
SIXTH FLOOR EXPANSION PREMISES
Provided the Tenant is not in default under this Lease, the Landlord
shall pay to the Tenant a leasehold improvement allowance (the "Improvement
Allowance") as a once only contribution applicable only to the Commencement
Date, equal to the actual cost to the Tenant of completing its leasehold
improvements in the Sixth Floor Expansion Premises, but not to exceed $20.00 per
square foot of Rentable Area of the Sixth Floor Expansion Premises. The
Improvement Allowance shall be paid, subject to compliance with the holdback
requirements of the Construction Lien Act, after presentation to the Landlord of
paid invoices from the Tenant's contractors and suppliers for completion of such
leasehold improvement work, upon the latest of:
(a) the Commencement Date of this Lease;
(b) the date of execution of this Lease; and
(c) the date the Tenant completes all of its leasehold improvement
work in the Sixth Floor Expansion Premises and takes occupancy
thereof.
The Landlord shall be entitled to holdback ten percent (10%) of the Improvement
Allowance, or such greater amount if required in order to comply with the
Construction Lien Act, until the expiry of all relevant periods for filing of
any construction lien claim relating to such work, and shall release such
holdback only if no notice of any claim for lien is received.
The Tenant acknowledges that it is accepting the Sixth Floor Expansion Premises
in an "as is" condition.
<PAGE>
EXHIBIT 99.11
DATED 23rd December 1993
-----------------------------------------------
(1) IBM UNITED KINGDOM LIMITED
- and -
(2) ACC LONG DISTANCE UK LIMITED
- and
(3) ACC CORP
__________
U N D E R L E A S E
of
Tenth Floor at The Chiswick Centre
414 Chiswick High Road London W4
__________
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 071-638-1111
Fax: 071-972-7990
REF: VTH/ID167
DATE: 17/11/93
<PAGE>
CONTENTS
--------
Clause Heading
- ------ -------
or Schedule
- -----------
PARTICULARS
1. DEFINITIONS
2. INTERPRETATION
3. DEMISE
4. THE TENANT'S COVENANTS
4.1. Rents
4.2. Outgoings and VAT
4.3. Repair, cleaning and decorating
4.4. User and Restrictions on Use
4.5. Waste and Alterations
4.6. Aerials Signs and Advertisements
4.7. Obstruction
4.8. Statutory Obligations and Fire Precautions
4.9. Access to Landlord and Notice of Repair
4.10. Dealings
4.11. Landlord's Costs
4.12. The Planning Acts
4.13. Plans, Documents and Information
4.14. Indemnities
4.15. Disposal Boards and Viewing
4.16. Encroachments
4.17. Yield Up
4.18. Interest on Arrears
4.19. Statutory Notices
4.20. Defective Premises
4.21. Compliance with Regulations
4.22. Outside Business Hours
4.23. Superior Lease Covenants
4.24. Option to Determine
5. THE LANDLORD'S COVENANTS
6. INSURANCE
6.1. Tenant's Insurance Covenants
6.2. Suspension of Principal Rent
7. PROVISOS
7.1. Re-Entry
7.2. Rights and Easements
7.3. Disputes with Adjoining Occupiers
7.4. Exclusion of Use Warranty
7.5. Representations
7.6. Tenant's Property
7.7. Compensation on Vacating
7.8. Covenants relating to Adjoining Premises
7.9. Service of Notices
-i-
<PAGE>
7.10. Value Added Tax
7.11. Exclusion of Landlord and Tenant Act 1954
7.12. Jurisdiction
THE FIRST SCHEDULE - Part 1 - Rights and Easements Granted
Part 2 - Rights and Easements Excepted and Reserved
THE SECOND SCHEDULE - Principal Rent and Rent Review
THE THIRD SCHEDULE - Covenants by the Surety
THE FOURTH SCHEDULE - The Regulations
-ii-
<PAGE>
PARTICULARS
-----------
DATE : 23rd December 1993
- --------------------------------------------------------------------------------
LEASE OR UNDERLEASE : UNDERLEASE
- --------------------------------------------------------------------------------
LANDLORD : IBM UNITED KINGDOM LIMITED whose registered office
is at P.O. Box 41 North Harbour Portsmouth
Hampshire PO6 3AU
TENANT : ACC LONG DISTANCE UK LIMITED (Company Registration
Number 2671855) whose registered office is at 2-3
Cursitor Street London EC4A 1NE
SURETY : ACC CORP whose registered office is at 39 State
Street City Rochester NY 14614 United States of
America
- --------------------------------------------------------------------------------
PREMISES : the tenth floor of the Building shown for the
purpose of identification only edged red on the
Floor Plan and being more particularly described
in Clause 1
- --------------------------------------------------------------------------------
CONTRACTUAL TERM : 10 years from and including the 29th day of
September 1993 until and including the 28th day of
September 2003
- --------------------------------------------------------------------------------
PRINCIPAL RENT : EIGHTY SIX THOUSAND FIVE HUNDRED AND EIGHTY POUNDS
((Pounds)86,580) per annum
- --------------------------------------------------------------------------------
RENT COMMENCEMENT DATE : the 24th day of June 1995
- --------------------------------------------------------------------------------
INITIAL PROVISIONAL
SERVICE CHARGE : TWENTY TWO THOUSAND TWO HUNDRED AND THIRTY POUNDS
((Pounds)22,230) per annum
- --------------------------------------------------------------------------------
PERMITTED USER : high class offices within Class II of the Schedule
to the Town and Country Planning (Use Classes)
Order 1972
- --------------------------------------------------------------------------------
INTERIOR DECORATING YEARS : 1998
- --------------------------------------------------------------------------------
<PAGE>
THIS UNDERLEASE made on the date and between the parties specified in the
Particulars
WITNESSES as follows:-
1. DEFINITIONS
-----------
In this Lease and the Schedules the following words and expressions have
the following meanings:-
"Accountant" means any person or firm appointed by the Landlord
(including an employee of the Landlord or a Group Company of the Landlord) to
perform the functions of the Accountant under this Lease
"Act of Insolvency" means:
in relation to a corporate body that:-
it is unable to pay its debts as defined in section 123 of the
Insolvency Act 1986 (referred to as "the Act" in the remainder of
this definition) (and for the purposes of interpreting that
section the words "if it is proved to the satisfaction of the
court that" in sub-sections 123(l)(e) and 123(2) shall be
ignored) or
a proposal is made for a voluntary arrangement under Part I of
the Act or
a petition is presented for an administration order under Part II
of the Act or
a receiver and (or) manager or administrative receiver is
appointed whether under Part III of the Act or otherwise or
it goes into liquidation as defined in Section 247(2) of the Act
(other than a voluntary winding up solely for the purpose of
amalgamation or reconstruction while solvent) or
a provisional liquidator is appointed under Section 135 of the
Act or
a proposal is made for a scheme of arrangement under Section 425
of the Companies Act 1985
and in relation to an individual that:-
<PAGE>
- 2 -
an application is made for an interim order or a proposal is made
for a voluntary arrangement under Part VIII of the Act or
a bankruptcy petition is presented to the Court or his
circumstances are such that a bankruptcy petition could be
presented under Part IX of the Act or
he enters into a deed of arrangement
"Adjoining Property" means any neighbouring or adjoining land or
premises now or at any time during the Term belonging to the Landlord or a Group
Company of the Landlord
"Building" means the land and building(s) known as The Chiswick Centre
Chiswick London W4 shown for the purpose of identification only edged red on
the Site Plan
"Business Day" means a day on which clearing banks in the City of
London are (or would be but for a strike lockout or other stoppage affecting
particular banks or banks generally) open during banking hours and "Business
Days" shall be interpreted accordingly
"Business Hours" means 8.30 a.m. to 6.30 p.m. Mondays to Fridays
(except Bank Holidays) or such other hours as the Landlord may determine
"Car Park" means the car parking areas shown for the purpose of
identification only edged green on the Site Plan
"Common Parts" means all areas which are from time to time during the
Term provided by the Landlord for common use and enjoyment by the general public
and (or) by tenants and the occupiers of the Building and all persons expressly
or by implication authorised by them including without limitation the pedestrian
areas and walkways forecourts car parking areas landscaped areas entrance halls
landings hoists lifts lift-shafts staircases escalators and passages
"Conduits" mean all conduits sewers drains mains ducts pipes gutters
watercourses wires cables fibres channels flues and all other conducting media
including any fixings louvres cowls and any other ancillary apparatus
"Contractual Term" has the meaning given in the Particulars
<PAGE>
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"Development" has the meaning given by Section 55 of the Town and
Country Planning Act 1990
"Exclusion Agreement" means an agreement contained or referred to in
an underlease of the Premises or any part thereof authorised by Order of the
Court under Section 38(4)(a) of the 1954 Act excluding in relation to that
underlease the provisions of Sections 24 to 28 of the Landlord and Tenant Act
"Floor Plan" means the plan annexed to this Lease and marked "Floor
Plan"
"Group Company" means any company which is for the time being a
subsidiary or a holding company or another subsidiary of the holding company in
each case within the meaning of Section 736 of the Companies Act 1985 which
Section shall for this purpose be deemed not to have been amended by subsequent
legislation
"Initial Provisional Service Charge" means the annual amount referred
to in the Particulars
"Insurance Rent" means the sums to be reimbursed by the Tenant to the
Landlord comprising a reasonable proportion of the cost to the Landlord from
time to time of:-
(a) insuring the Building or reimbursing the Superior Landlord therefor in
accordance with the Landlord's obligations contained in this Lease and
the Superior Lease and
(b) effecting insurance against loss of the Principal Rent for a period of
three years and
(c) insuring in such amount and on such terms as the Landlord or the
Superior Landlord shall reasonably consider appropriate against all
liability of the Landlord or the Superior Landlord to third parties
arising out of or in connection with any matter relating to the
Building
"Insured Risks" means fire storm tempest flood earthquake lightning
explosion impact aircraft (other than hostile aircraft) and other aerial devices
and articles dropped therefrom riot civil commotion and malicious damage
bursting or overflowing of water tanks apparatus or conduits subsidence heave
and such other risks as the Landlord may in its reasonable discretion from time
to time determine
"Interest" means interest (compounded at monthly rests) both before
and after any judgement at the Interest Rate then prevailing during the period
beginning on the date 14 days after the relevant payment is due and has been
demanded and ending on the date on which the relevant payment is received by way
of cleared funds
<PAGE>
- 4 -
"Interest Rate" means Four percentage points above the base lending
rate from time to time in force of National Westminster Bank PLC or such other
Bank whose Chairman is a member of the Committee of London Clearing Bankers as
the Landlord may from time to time nominate in writing or should such base
lending rate cease to exist such other rate of interest as the Landlord (acting
reasonably) shall deem to be most closely comparable with the said base lending
rate
"Interior Decorating Years" has the meaning given in the Particulars
"Landlord" means the party described as the Landlord in the
Particulars and includes the party for the time being entitled to the reversion
immediately expectant on the determination of the Term
"Landlord and Tenant Act" means the Landlord and Tenant Act 1954
"this Lease" means this Lease and any document which is made
supplemental to this Lease or which is entered into pursuant to or in accordance
with the terms of this Lease
"Lettable Areas" means all parts of the Building which from time to
time are either occupied or used by a tenant or tenants or capable or intended
of being so occupied or used
"Outside Business Hours Charge" means the whole of the cost incurred
by the Landlord in carrying out or providing any of the Services (which are not
normally provided by the Landlord outside the Business Hours) at the request of
the Tenant outside Business Hours (including but not limited to costs and
expenses in the nature of those set out in Part C of the Fourth Schedule) or in
the event of any of the Services being carried out or provided outside Business
Hours to the Tenant (at the request of the Tenant) and to any other tenant or
tenants of the Building a fair proportion thereof as reasonably and properly
determined by the Landlord
"Particulars" means the immediately preceding section of this Lease
headed "Particulars"
"Permitted Underlease" means an underlease of the whole of the
Premises which:-
(a) is granted without any fine or premium
(b) reserves a rent not less than the greater of the then open market rent
of the Premises and the Principal Rent then payable
<PAGE>
- 5 -
(c) incorporates provisions for the review of rent at the same times and
on the same basis as in this Lease and
(d) is (so far as is consistent with an underlease) in a form similar to
this Lease and
(e) incorporates an Exclusion Agreement
"Permitted User" has the meaning given in the Particulars
"Planning Acts" means the Town and Country Planning Act 1990 the
Planning (Listed Buildings and Conservation Areas) Act 1990 the Planning
(Hazardous Substances) Act 1990 the Planning (Consequential Provisions) Act 1990
and the Planning and Compensation Act 1991
"Plant" means all apparatus plant machinery and equipment within the
Building from time to time including without limitation lifts lift-shafts hoists
escalators stand-by generators and boilers and items relating to mechanical
ventilation heating cooling public address telephone and closed-circuit
television and building management systems the fire alarm system the sprinkler
system the security systems the smoke detection and heat detection equipment and
systems and the cleaning cradle equipment
"Premises" means the part of the Building described as the Premises in
the Particulars and includes:-
(a) the plasterwork and decorative finishes applied to the internal
surfaces of the external and load-bearing walls and columns of the
Building but not any other part of the external or load-bearing walls
and columns
(b) the floor finishes and floor trunking finishes
(c) the ceiling finishes any suspended ceiling and the void above any
suspended ceiling so that the upper limit of the Premises includes
such finishes suspended ceiling and void but does not extend to
anything above them
(d) the entirety of the non-load-bearing internal walls and glass
partitions wholly within the Premises
<PAGE>
- 6 -
(e) the plasterwork and decorative finishes applied to the internal
surfaces of the internal non-load-bearing walls and the internal
surface of partitioning or balustrading dividing the Premises from
other parts of the Building and the internal decorative surfaces of
the window frames and window furniture in the windows which form part
of the external envelope of the Building or which separate the
Premises from any atria within the Building
(f) the internal surfaces and door furniture of the doors and the door
frames
(g) all additions and improvements to the Premises
(h) all the Landlord's fixtures and fittings and fixtures of every kind
which shall from time to time be in or upon the Premises (whether
originally affixed or fastened to or upon the Premises or otherwise)
except any such fixtures installed by the Tenant
(i) all Conduits in on under or over and exclusively serving the Premises
except those belonging to a statutory undertaker or public utility
and references to the "Premises" in the absence of any provision to the
contrary include any and every part of the Premises
"Principal Rent" has the meaning given to it in the Particulars and in
paragraph 1 of the Second Schedule
"Rent Commencement Date" has the meaning given in the Particulars
"Rents" means the Principal Rent the Insurance Rent and the other
payments reserved as rent and referred to in Clause 3
"Replies to Preliminary Enquiries" means the replies given to the
enquiries raised by Hopkins and Wood, Solicitors for the Tenant on grant of a
Lease dated 16th August 1993 by Ashurst Morris Crisp, Solicitors for the
Landlord dated 12th October 1993 and their letter to Hopkins and Wood dated 5th
November 1993
"Service Charge" means the aggregate of the sums which the Landlord is
required to pay to the Superior Landlord pursuant to Clauses 1(1)(iii) and
1(1)(iv) of the Superior Lease
<PAGE>
- 7 -
"Services" means the services facilities and amenities to be provided
by the Superior Landlord for the benefit of the Building
"Site Plan" means the plan annexed to this Lease and marked "Site
Plan"
"Superior Lease" means a lease dated 8th March 1984 and made between
(1) Clerical Medical and General Life Assurance Society and (2) the Landlord and
the lease supplemental thereto dated 19th April 1985 and made between the same
parties and includes where the context admits any lease whether mediate or
immediate out of which that lease was created
"Superior Lease Covenants" means the covenants agreements and
provisions affecting the Premises contained in any Superior Lease and on the
part of the tenant to be performed and observed except the covenant for payment
of rent
"Surety" means the party (if any) described as the Surety in the
Particulars and includes:-
(a) any party who enters into covenants with the Landlord pursuant to sub-
clause 4.10 and
(b) in the case of an individual his personal representatives
"Tenant" means the party described as the Tenant in the Particulars
and includes the Tenant's successors in title and assigns
"Term" means the Contractual Term
"Utilities" means water sewage gas electricity telephone
telecommunications and other services and supplies of whatever nature now or at
any time during the Term serving the Premises
"Value Added Tax" means Value Added Tax or any other tax of a similar
nature that may be substituted for or levied in addition to it in each case at
the rate current from time to time
2. INTERPRETATION
--------------
2.1. The Particulars and the Schedules form part of this Lease
<PAGE>
- 8 -
2.2. The definitions contained in the Particulars have the meanings
appearing alongside them for the purposes of this Lease
2.3. Where the Landlord or the Tenant or the Surety for the time being are
two or more persons obligations expressed or implied to be made by or with such
party are deemed to be made by or with such persons jointly and severally
2.4. Words importing one gender include all other genders and words
importing the singular include the plural and vice versa
2.5.1. Rights expressed to be reserved in favour of the Landlord shall be
deemed to extend to any superior landlord and any mortgagee of the Premises and
all persons authorised by the Landlord and by any superior landlord or mortgagee
including its or their agents professional advisers contractors and workmen
2.5.2. Rights expressed to be granted in favour of the Tenant shall be
deemed to extend to all persons authorised by the Tenant or its mortgagee
including its or their agents professional advisers contractors and workman
2.6. Any covenants by the Tenant not to do an act or thing shall be deemed
to include an obligation not to permit or suffer such act or thing to be done
2.7. Any provisions in this Lease referring to the consent or approval of
the Landlord shall be construed as also requiring the consent or approval of any
superior landlord where such consent shall be required but nothing in this Lease
shall be construed as implying that any obligation is imposed upon any superior
landlord not unreasonably to refuse or delay any such consent or approval
2.8. Any references to a specific statute include any statutory extension
or modification amendment or re-enactment of such statute and any regulations
instruments or orders made under such statute and any general reference to
"statute" or "statutes" include any regulations instruments or orders made under
such statute or statutes
2.9. References in this Lease to any Clause sub-clause Schedule or
paragraph without further designation shall be construed as a reference to a
Clause sub-clause or paragraph of or Schedule to this Lease so numbered
<PAGE>
- 9 -
2.10. The Clause Paragraph and Schedule headings and the table of contents
are for ease of reference only and shall not be taken into account in the
construction or interpretation of this Lease or of the Clause Paragraph or
Schedule to which they refer
2.11. Any reference to a superior landlord includes the Landlord's
reversioner (whether mediate or immediate) at any time
2.12. References to "last year of the Term" include the last year of the
Term if the Term shall determine otherwise than by effluxion of time and
references to "expiry of the Term" include such other determination of the Term
2.13. The terms "parties" or "party" mean the Landlord and (or) the Tenant
and except where there is an express indication to the contrary include the
Surety
3. DEMISE
------
The Landlord at the request of the Surety demises to the Tenant the
Premises TOGETHER WITH the rights and easements set out in Part 1 of the First
Schedule but EXCEPTING AND RESERVING the rights and easements set out in Part
2 of the First Schedule TO HOLD the Premises to the Tenant for the Contractual
Term YIELDING AND PAYING to the Landlord:-
3.1 on and from the date hereof until the Review Date the Principal
Rent payable without any deduction by equal quarterly payments in
advance on the usual quarter days the first such payment being a
sum in respect of the period from and including the date hereof up
to and including the day before the first quarter day after the
date hereof and to be paid on the date hereof and
3.2. by way of further rent:-
3.2.1. the Insurance Rent payable at the times and in the manner provided
in Clause 6
3.2.2. the payments of Interest referred to in sub-clause 4.18
3.2.3. the Service Charge payable at the times and in the manner provided
in Clauses 1(2) 1(3) 1(4) 1(5) and 1(6) of the Superior Lease
<PAGE>
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4. THE TENANT'S COVENANTS
----------------------
The Tenant covenants with the Landlord throughout the Term:-
4.1. Rents
-----
To pay the Rents on the days and in the manner set out or referred to
in this Lease and not to exercise or seek to exercise any right or claim to
withhold rent or any right or claim to legal or equitable set-off
4.2. Outgoings and VAT
-----------------
4.2.1. To pay and to indemnify the Landlord against all rates taxes
assessments duties charges impositions and outgoings which are now or
during the Term shall be charged assessed or imposed upon the Premises
or upon the owner or occupier of them save and except:
(a) any tax charged on the Landlord in respect of rents and other
payments due under this Lease
(b) any tax occasioned by any disposition or deemed disposition of
or dealing with the reversion expectant on the Term
(c) such rates taxes charges assessments duties impositions and
outgoings as the Landlord is bound by law to pay
notwithstanding any contract to the contrary
4.2.2. To pay and to indemnify the Landlord against Value Added Tax
chargeable in respect of any taxable supplies made to the Tenant by
the Landlord under any of the terms of or in connection with this
Lease (whether or not at the Landlord's election or otherwise
howsoever arising) or in respect of any taxable supplies made by any
third party to the Landlord where the Tenant agrees in this Lease to
reimburse the Landlord for its costs in relation to those supplies and
such sums shall be deemed to be and shall be recoverable as rent in
arrear
4.2.3. To pay and to indemnify the Landlord for all charges including meter
rents for all Utilities consumed or used at or in relation to the
Premises
<PAGE>
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4.3. Repair, cleaning and decorating
-------------------------------
4.3.1. To keep the Premises in good and substantial repair and condition
(damage or destruction caused by any of the Insured Risks excepted
unless and to the extent that the insurance effected by the
Landlord is vitiated forfeited or avoided or the insurance money is
irrecoverable in consequence of any act or default of the Tenant or
any person deriving title under the Tenant or anyone at the
Premises expressly or by implication with the authority of the
Tenant or such person)
4.3.2. To replace from time to time with items of an equivalent standard
and commensurate with the nature of the Premises the Landlord's
fixtures and fittings in the Premises which may be or become beyond
repair at any time during or at the expiry of the Term
4.3.3. In each of the Interior Decorating Years and in the last year of
the Term to redecorate the interior of the Premises in a good and
workmanlike manner and with appropriate materials of good quality
to the reasonable satisfaction of the Landlord
4.3.4. As often as may be necessary throughout the Term to clean and treat
and wash in accordance with good standards and in a good and
workmanlike manner to the reasonable satisfaction of the Landlord
all materials surfaces and finishes of the interior of the Premises
which ought normally to be so cleaned treated or washed (subject to
the provisions of paragraph 4.3.5 below)
4.3.5. As often as may be reasonably necessary but no less frequently than
once in every month of the Term to clean the internal surfaces of
the glazing of the windows and other glazing which form part of the
external envelope of the Building or which separate the Premises
from any atria within the Building
4.3.6. Not to maintain repair replace or carry out any other works to or
otherwise interfere with or damage any plant machinery apparatus
and equipment relating to or connected with the air conditioning
and heating systems
4.3.7. To comply in all respects with all reasonable regulations and
requirements of or imposed by or on behalf of the Landlord in
relation to the collection and disposal of refuse from the Premises
and (or) from the Building
<PAGE>
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4.4. User and Restrictions on Use
----------------------------
4.4.1. Not to use the Premises for any purpose other than the Permitted
User
4.4.2. Not to keep or use or permit or suffer to be kept or used on the
Premises any materials of a dangerous inflammable or explosive
nature or any machinery engine safe or other thing which may attack
or in any way injure by percolation corrosion vibration excessive
eight or otherwise the structure of the demised premises or the
keeping or using whereof may contravene any statute or any local
regulation or bye-law for the time being affecting the demised
premises Provided that the Tenant may keep and use on the Premises
inflammable materials used in the normal course of using premises
as an office in such reasonable quantities only as may be necessary
in connection with such use and subject to observing all statutes
regulations and bye-laws relating to the keeping and using of such
substances and complying with the requirements of the insurers of
the Premises
4.4.3. Not to use the Premises for a sale by auction
4.4.4. Not to overload the existing electric wires and cables and in the
event of any additional or new wiring or cable becoming necessary
or of the Landlord being required by the Electricity Authority or
by the Insurers or the Building to provide the same the Tenant
shall pay the cost of all such additional or new wiring or cable
exclusively used by the Premises and of connecting the same to the
mains and a proportional part of the cost of any such wiring or
cable in respect of those parts of the Building used in common with
other tenants such proportion to be certified by the Landlord
4.4.5.1. Not to use or permit or suffer the Premises or any part thereof
to be used for any illegal or immoral purpose nor for the
manufacture sale or consumption on the premises of beer wine or
spirituous liquors nor as a school consular or diplomatic office
hotel club billiard-saloon restaurant snack-bar launderette sex-
shop betting shop or office gaming house bingo-hall discotheque
dance-hall funfair leisure-centre or amusement arcade nor for
the business of an undertaker nor for any noisy noxious or
offensive trade or business nor as a residence or sleeping place
for any person nor for any purpose which would constitute a
breach of any restrictive covenants affecting the Building
Provided that such prohibitions shall not prevent the use of the
Premises for instruction and lecture purposes
<PAGE>
- 13 -
and for a restaurant and snack-bar in each case as ancillary to
the Tenant's use of the Premises
4.4.5.2. Not to do or permit or suffer to be done on the demised premises
or any part thereof or in any communal part of the Building or
the curtilage thereof anything which may be or become or cause a
nuisance damage disturbance injury or danger of or to the
Landlord or any other tenants of the Building or the owners
lessees or occupiers of any premises in the neighbourhood and
(without prejudice to the generality of the foregoing) not to
use or permit or suffer to be used on the demised premises any
electrical instrument or device unless fitted with an effective
suppressor and properly earthed and insulated And to keep the
Landlord fully and effectually indemnified against all actions
proceedings damages costs expenses claims and demands whatsoever
arising out of or in consequence of any breach or non-observance
of this covenant
4.5. Waste and Alterations
---------------------
Not to:-
4.5.1. commit any waste on or at the Premises
4.5.2. make any addition or extension to the Premises
4.5.3. unite the Premises with any adjoining premises
4.5.4. make any structural alteration to the Premises or
4.5.5. make any other alterations to the Premises PROVIDED THAT no consent
shall be necessary for the erection removal and alteration of dry
movable partitions within the Premises subject to the Tenant
supplying full specifications and drawings within 7 days of
completing such works and complying with all necessary statutory
and other regulations whether relating to fire precautions or
otherwise and preserving the integrity and proper working of the
heating/air conditioning system for the Building and the Premises
in particular and subject to the Tenant if so required by the
Landlord removing the same at the end of the term and making good
all damage thereby occasioned and restoring the demised premises to
their former state and condition in all respects to the reasonable
satisfaction of the Landlord and PROVIDED FURTHER THAT if in the
<PAGE>
- 14 -
Landlord's opinion any partitioning fails to comply with such
regulations as aforesaid or interferes with or damages the said
heating/air conditioning system for the Building the Tenant shall at
the request of the Landlord remove the same and make good all damage
thereby occasioned without delay
4.6. Aerials Signs and Advertisements
--------------------------------
Not at any time to affix or exhibit or permit or suffer to be affixed
or exhibited to or upon any part of the exterior of the Premises or on
the inside surface of any windows of the Premises or elsewhere in the
Building any placard poster sign signboard notice or advertisement
except as permitted by the Regulations set out in the Fourth Schedule
substituted therefor by the Superior Landlord for the good management
and reputation of the said Building
4.7. Obstruction
-----------
Not to do anything whereby any road path forecourt or other area over
which the Tenant may have rights of access or use may be damaged or
the proper use thereof by others may be obstructed in any way
4.8. Statutory Obligations and Fire Precautions
------------------------------------------
4.8.1. At the Tenant's own expense to execute all works and provide and
maintain all arrangements upon or in respect of the Premises or the
use to which the Premises are being put that are required in order to
comply with the requirements of any statute or any government
department local authority other public or competent authority
environmental authority or court of competent jurisdiction regardless
of whether such requirements are imposed on the Landlord the Tenant or
the occupier and where such works or arrangements are required in
respect of the Premises and other parts of the Building to be carried
out by the Landlord to pay to the Landlord on demand a contribution
representing a proper and reasonable proportion of the cost of
implementing such works or arrangements
4.8.2. At the Tenant's own expense and without limiting the obligations set
out earlier in this sub-clause 4.8:-
<PAGE>
- 15 -
4.8.2.1. to comply in all respects with the provisions of any statutes and
any other obligations imposed by law or by any bye-laws
applicable to the Premises or in regard to carrying on the
business for the time being carried on at the Premises and
4.8.2.2. to comply with the requirements and recommendations of the fire
authority and the Landlord in relation to fire precautions
affecting the Demised Premises
4.9. Access to Landlord and Notice of Repair
---------------------------------------
4.9.1. To permit the Landlord on reasonable prior notice (except in case
of emergency in which case no notice shall be necessary) and during
reasonable times (or at any time in case of emergency):-
4.9.1.1. to enter upon the Premises for the purpose of ascertaining that
the covenants and conditions of this Lease have been observed and
performed
4.9.1.2. to inspect the state of repair and condition of the Premises
4.9.1.3. to give to the Tenant or leave upon the Premises a notice
specifying any breach by the Tenant of the terms of this Lease
and requesting the Tenant as soon as practicable to remedy the
same and
4.9.1.4. to exercise the rights and easements excepted and reserved in
Part 2 of the First Schedule
4.9.2. As soon as practicable to remedy the breach as required by such
notice
4.9.3. If within ten Business Days (or within such shorter period as the
Landlord may reasonably specify) of the service of such a notice
the Tenant shall not have commenced and be proceeding diligently
with the execution of the work referred to in the notice or shall
have failed to complete the work within a reasonable period of time
or if in the Landlord's reasonable opinion the Tenant is unlikely
to have completed the work within such period to permit the
Landlord to enter the Premises to execute such work as may be
necessary to comply with the notice and to pay to the Landlord the
proper cost of so doing and all proper expenses incurred by the
Landlord (including legal costs and surveyor's fees) within ten
Business Days of a written demand
<PAGE>
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4.10. Dealings
--------
4.10.1. Not to:-
4.10.1.1. hold the Premises expressly or impliedly on trust for
another person
4.10.1.2. part with possession of the Premises
4.10.1.3. share possession of the Premises with another person
4.10.1.4. allow anyone other than the Tenant its officers and
employees to occupy the Premises
4.10.2. Not to assign a part (as distinct from the whole) of the Premises
4.10.3. Not to assign the whole of the Premises:-
4.10.3.1. unless the proposed assignee has first covenanted by deed
with the Landlord in such form as the Landlord may
reasonably require that with effect from the date of the
assignment and for the remainder of the Term the assignee
will pay the Rents and observe and perform all the
provisions of this Lease to be observed and performed by
the Tenant nor
4.10.3.2. (where the proposed assignee is a corporate body and the
Landlord reasonably so requires) without first procuring
either covenants by deed in the form (mutatis mutandis)
------
set out in the Third Schedule with the Landlord from not
less than two individuals who are or a corporate body which
is acceptable to the Landlord as guarantor or some other
--
form of collateral security reasonably acceptable to the
Landlord nor
4.10.3.3. without the prior written consent of the Landlord (which
will not be unreasonably withheld)
4.10.3.4. The Tenant and the Surety shall be released from their
respective obligations contained in this Lease upon any
assignment of this Lease on the date two years after the
assignment has been completed
4.10.4. Not to charge a part (as distinct from the whole) of the Premises
<PAGE>
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4.10.5. Not to charge the whole of the Premises except to a bank or
similar financial institution for the purpose only of borrowing
money on the security of the Lease and with the prior written
consent of the Landlord (which will not be unreasonably withheld)
4.10.6. Not to underlet a part (as distinct from the whole) of the
Premises
4.10.7. Not to underlet the whole of the Premises:-
4.10.7.1. unless the proposed undertenant has first covenanted by deed
with the Landlord in such form as the Landlord may reasonably
require that with effect from the date of the underlease and
during the term of the underlease the undertenant will observe
and perform all the provisions of the underlease to be observed
and performed by the undertenant and the provisions of this
Lease (other than payment of the Principal Rent) to be observed
and performed by the Tenant nor
4.10.7.2. (where the proposed undertenant is a corporate body and the
Landlord reasonably so requires) without first procuring either
------
covenants by deed with the Landlord in the form (mutatis
mutandis) set out in the Third Schedule from two individuals who
are or a corporate body which is acceptable to the Landlord as
guarantor or an alternative form of security reasonably
--
acceptable to the Landlord nor
4.10.7.3. except by way of a Permitted Underlease nor
4.10.7.4. without the prior written consent of the Landlord (which will
not be unreasonably withheld)
4.10.8. To enforce and not to waive or vary the provisions of a Permitted
Underlease and to operate at the relevant dates of review the rent
review provisions contained in an underlease but not to agree the
rent upon such a review without the prior written approval of the
Landlord
4.10.9. Within fifteen Business Days of any assignment charge underlease
or sub-underlease or any transmission or other devolution relating
to the Premises to give written notice thereof to the Landlord's
solicitors together with three certified copies of the relevant
document and to pay the Landlord's and Superior Landlord's
solicitors' reasonable charges for the registration of every such
document plus Value Added Tax
<PAGE>
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4.11. Landlord's Costs
----------------
To pay to the Landlord and indemnify the Landlord against all
reasonable and proper costs fees charges disbursements and expenses on an
indemnity basis (including without prejudice to the generality of the above
those payable to counsel solicitors surveyors and bailiffs) reasonably and
properly incurred by the Landlord in relation to or incidental to:-
4.11.1. every application made by the Tenant for a consent approval or
licence required by the provisions of this Lease whether such
consent approval or licence is granted or lawfully refused or
proffered subject to any lawful qualification or condition or
whether the application is withdrawn
4.11.2. the preparation and service of a notice under Section 146 of the
Law of Property Act 1925 or incurred by or in contemplation of
proceedings under Sections 146 or 147 of that Act notwithstanding
that forfeiture is avoided otherwise than by relief granted by the
Court
4.11.3. the recovery or attempted recovery of arrears of the Rents or
other sums due from the Tenant and
4.11.4. any steps taken in contemplation of or in connection with the
preparation and service of a schedule of dilapidations during or
after the expiry of the Term but which relates to dilapidations
caused or occurring during the Term
4.12. The Planning Acts
-----------------
4.12.1. Not to commit any breach of the Planning Acts and to comply with
the provisions and requirements of the Planning Acts that affect
the Premises whether as to the Permitted User or otherwise and to
indemnify and keep the Landlord indemnified both during and after
the expiry of the Term against all liability whatsoever including
costs and expenses incurred as a result of any breach occurring
during the Term
4.12.2. At the expense of the Tenant to obtain all planning permissions and
to serve all such notices as may be required for the carrying out
of any operations or user on the Premises which may constitute
Development provided that no application for planning permission
shall be made without the prior written consent of the Landlord
such consent to be withheld or granted at the Landlord's absolute
discretion provided that the Landlord shall not unreasonably
withhold consent in relation to matters in respect of which it has
already granted consent pursuant to sub-clause 4.5 unless the
<PAGE>
- 19 -
implementation of such planning permission would or would be likely
to create or give rise to any tax or other fiscal liability for the
Landlord and the Tenant fails to indemnify the Landlord against
such liability having first been asked in writing to do so
4.12.3. Subject only to any statutory direction to the contrary to pay and
satisfy any charge or levy that may subsequently be imposed under
the Planning Acts in respect of the carrying out or maintenance of
any such operations or the commencement or continuance of any such
user
4.12.4. Notwithstanding any consent which may be granted by the Landlord
under this Lease not to carry out or make any alteration or
addition to the Premises or any change of use until:-
4.12.4.1. all necessary notices under the Planning Acts have been served
and copies produced to the Landlord
4.12.4.2. all necessary permissions and consents under or pursuant to the
Planning Acts have been obtained and produced to the Landlord
and
4.12.4.3. the Landlord has acknowledged that every necessary planning
permission is acceptable to it the Landlord being entitled to
refuse to acknowledge its acceptance of a planning permission on
the grounds that any condition contained in it or anything
omitted from it or any period referred to in it would be or be
likely to be prejudicial to the Landlord's interest in the
Premises whether during or after the expiry of the Term
4.12.5. Unless the Landlord shall otherwise direct to carry out and
complete before the expiry of the Term:-
4.12.5.1. any works stipulated to be carried out to the Premises by a date
subsequent to such expiry as a condition of any planning
permission granted for any Development commenced before the
expiry of the Term and
4.12.5.2. any Development commenced upon the Premises in respect of which
the Landlord shall or may be or become liable for any charge or
levy under the Planning Acts
<PAGE>
- 20 -
4.12.6. If required by the Landlord but at the cost of the Tenant to appeal
against any refusal of planning permission or the imposition of any
conditions on a planning permission relating to the Premises
following an application by the Tenant
4.12.7. Not to object to any application for planning permission that the
Landlord may make whether jointly or alone in respect of any
adjoining or neighbouring property
4.13. Plans, Documents and Information
--------------------------------
If reasonably called upon to do so to produce within a reasonable
period of demand:
4.13.1. to the Landlord all such plans documents and other evidence as the
Landlord may reasonably require in order to satisfy itself that the
provisions of this Lease have been complied with
4.13.2. to the Landlord or its agent full particulars of all occupants of
the Premises and the terms of their occupation
4.14. Indemnities
-----------
To be responsible for and to keep the Landlord fully indemnified
against all damage damages losses costs expenses actions demands proceedings
claims and liabilities made against or suffered or incurred by the Landlord and
for and against all damage occasioned to the Premises or to any other part of
the Building or any adjoining or neighbouring building arising directly or
indirectly out of:-
4.14.1. any act omission or negligence of the Tenant or any persons at the
Premises expressly or impliedly with the Tenant's authority or
4.14.2. any breach or non-observance by the Tenant of the covenants
conditions or other provisions of this Lease or any of the matters
to which this demise is subject
4.15. Disposal Boards and Viewing
---------------------------
To permit the Landlord upon reasonable notice and during the last
six months of the Contractual Term and at any time thereafter to permit upon
reasonable notice persons with the written authority of the Landlord
<PAGE>
- 21 -
or its agent at reasonable times of the day to view the Premises without
interruption provided they are accompanied by the Landlord or its agents
4.16. Encroachments
-------------
Not to stop up darken or obstruct any windows or light belonging to
the Premises.
4.17. Yield Up
--------
At the expiry of the Term:-
4.17.1. to yield up the Premises in accordance with the terms of this
Lease to the reasonable satisfaction of the Landlord
4.17.2. to remove all placards signs notices fascias boards name-plates and
advertisements fixed or exhibited by the Tenant in or upon the
Premises and immediately to make good to the reasonable
satisfaction of the Landlord any damage caused by such removal and
4.17.3. to give up all keys of the Premises to the Landlord
4.18. Interest on Arrears
-------------------
If the Tenant shall fail to pay the Rents or any other sum due
under or pursuant to this Lease within ten Business Days of the date on which
payment was due and formally demanded (except in the case of the Principal Rent)
the Tenant shall pay to the Landlord Interest on the Rents or other such sum and
such Interest shall be deemed to be and shall be recoverable as rent in arrear
4.19. Statutory Notices
-----------------
To give full particulars to the Landlord of any notice direction
order or proposal for the Premises made given or issued to the Tenant by any
local or public authority within three Business Days of receipt and if so
required by the Landlord to produce it to the Landlord and without delay and at
the cost of the Tenant to take all necessary steps to comply with such notice
direction or order
<PAGE>
- 22 -
4.20. Defective Premises
------------------
To give notice to the Landlord of any defect in the Premises which
might give rise to an obligation on the Landlord to do or refrain from doing any
act or thing in order to comply with the provisions of this Lease or the duty of
care imposed on the Landlord pursuant to the Defective Premises Act 1972 or
otherwise and at all times to display and maintain all necessary notices which
the Landlord may from time to time require to be displayed at the Premises
4.21. Compliance with Regulations
---------------------------
At all times during the term to observe perform and comply with the
conditions and regulations specified in the Fourth Schedule hereto and any
alterations or additions thereto which may from time to time be made by the
Landlord for the good management and reputation of the Building and the
curtilage thereof and the parking areas or the safety or convenience of the
tenants thereof And to take all reasonable steps to secure compliance with such
conditions and regulations by the Tenant's staff and visitors
4.22. Outside Business Hours
----------------------
To give to the Landlord reasonable prior notice if the Tenant
wishes to have access to the Premises outside the Business Hours for the
Building and to pay to the Landlord on demand from time to time the costs of
providing any of the services requited by the Tenant outside the Business Hours
4.23. Superior Lease Covenants
------------------------
4.23.1. To observe and perform the Superior Lease Covenants
4.23.2. Not to do or permit or suffer anything whereby the Superior Lease
may be avoided or forfeited
4.23.3. To keep the Landlord indemnified against all claims liabilities
costs and expenses for or in respect of any breach by the Tenant of
the Superior Lease Covenants
4.23.4. To permit the Landlord and any authorised person to enter the
Premises at reasonable times only and upon reasonable prior notice
(except in cases of emergency) in order to comply with any of the
Superior Lease Covenants which may be necessary to prevent a
forfeiture of the Superior Lease subject to the Landlord making
good without unreasonable delay any damage thereby caused
<PAGE>
- 23 -
4.24. Option to Determine
-------------------
If the Tenant shall desire to terminate the Term and to quit the
Premises on the date of expiry of the fifth year of the Term and shall give to
the Landlord not less than twelve months previous notice in writing to that
effect (in respect of which notice time shall be of the essence) then upon the
expiration of such notice the term of years created by this underlease shall
forthwith cease and determine but without prejudice to any remedy of either
party against the other in respect of any antecedent claims or breach of
covenant contained in this Lease and the Tenant shall deliver up vacant
possession of the Premises
5. THE LANDLORD'S COVENANTS
------------------------
The Landlord covenants with the Tenant that:-
5.1. the Tenant paying the Rents and performing and observing the
covenants and conditions on the part of the Tenant herein contained
the Landlord shall permit the Tenant peaceably and quietly to hold
and enjoy the Premises during the Term without any interruption or
disturbance from or by the Landlord or by any person lawfully
claiming through under or in trust for the Landlord
5.2. it will use best endeavours to procure the compliance by the
Superior Landlord with the covenants on the part of the Superior
Landlord contained in the Superior Lease
5.3. the Landlord shall during the Term pay the rent reserved by the
Superior Lease and perform and observe the covenants and conditions
contained in the Superior Lease and on the part of the Landlord as
tenant to be performed and observed except to the extent that they
fall to be performed and observed by the Tenant pursuant to this
Lease
6. INSURANCE
---------
6.1. Tenant's Insurance Covenants
----------------------------
The Tenant covenants with the Landlord:-
6.1.1. to pay the Insurance Rent within ten business days of a written
demand for the period from and including the date of this Lease up
to and including the day before the next policy renewal date and
subsequently to pay the Insurance Rent within ten Business Days of a
written demand and (if
<PAGE>
- 24 -
so demanded) in advance of the policy renewal date provided that any
such demand will be supported by proper evidence that the demand has
been properly made
6.1.2. to comply with all the requirements and recommendations of the
insurers of the Building that are notified to the Tenant
6.1.3. not to do or knowingly permit anything that could cause any policy
of insurance on or in relation to the Building to become void or
voidable wholly or in part nor (unless the Tenant shall have
previously notified the Landlord and agreed to pay the increased
premium) anything by which additional insurance premiums may become
payable
6.1.4. to keep the Premises supplied with such fire fighting equipment as
the insurer may require or as the Landlord may reasonably require
and to maintain such equipment to their satisfaction and in
efficient working order
6.1.5. to comply with the requirements and recommendations of the insurer
and the reasonable requirements of the Landlord as to fire
precautions relating to the Premises
6.1.6. not to obstruct the access to any fire equipment or the means of
escape from the Premises nor to lock any fire door while the
Premises are occupied
6.1.7. as soon as it reasonably comes to the attention of the Tenant to
give notice to the Landlord immediately upon the happening of any
event which might affect any insurance policy on or relating to the
Premises or upon the happening of any event against which the
Landlord may have insured under this Lease
6.1.8. not to effect any policy of insurance in relation to the Building
without the prior written consent of the Landlord PROVIDED THAT the
Tenant may insure the contents of the Premises and third party risks
without the consent of the Landlord
6.1.9. if at any time the Tenant shall be entitled to the benefit of any
insurance on the Premises except insurance of the contents of the
Premises and third party risks (which is not effected or maintained
in pursuance of any obligation contained in this Lease) to apply all
money received by virtue of such insurance in making good the loss
or damage in respect of which such money shall have been received
<PAGE>
- 25 -
6.1.10. if and whenever during the Term the Premises or any part ("the
relevant part") of the Building giving access to the Premises are
damaged or destroyed by any of the Insured Risks and the insurance
money under the policy of insurance effected by the Landlord
pursuant to its obligations contained in this Lease is by reason of
any act or default of the Tenant or anyone at the Premises
expressly or by implication with the Tenant's authority wholly or
partially irrecoverable immediately in every such case to pay to
the Landlord on demand the amount of such insurance money so
irrecoverable with Interest on such amount (from the date of demand
or (if earlier) the date on which the Landlord first suffered
financial loss because of the insurance money being irrecoverable
in whole or in part as aforesaid)
6.2. Suspension of Principal Rent
----------------------------
That if the Premises or any part thereof shall at any time during
the term be destroyed or damaged by any of the Insured Risks so as to be unfit
for occupation and use and any policy or policies of insurance effected by the
Landlord shall not have vitiated or payment of the policy monies refused in
consequence of some act or default of the Tenant the rents hereby reserved shall
be suspended and shall cease to be payable until the Premises shall again be
rendered fit for occupation and use or until the expiration of a period of three
years (whichever shall be the shorter period) and if the Premises are not
reinstated or rebuilt within the period of three years the Tenant may terminate
this Lease by giving written notice to the Landlord within one month after the
expiration of the period of three years and upon service of such notice this
Lease shall terminate but without prejudice to any claim the Landlord may have
against the Tenant for any earlier breach of covenant and any dispute concerning
this Clause shall be determined by a single arbitrator in accordance with the
Arbitration Acts 1950 and 1979
7. PROVISOS
--------
7.1. Re-Entry
--------
If and whenever during the Term:-
7.1.1. the Rents (or any of them or any part of them) under this
Lease are outstanding for more than ten Business Days after
becoming due whether formally demanded or not or
7.1.2. there is a breach by the Tenant or the Surety of any covenant
or other term of this Lease or any document expressed to be
supplemental to this Lease or
<PAGE>
- 26 -
7.1.3. the Tenant or the Surety commits or permits an Act of
Insolvency
the Landlord may re-enter the Premises or any part of them in the name
of the whole at any time and even if any previous right of re-entry
has been waived and then the Term will absolutely cease but without
prejudice to any rights or remedies which may have accrued to the
Landlord against the Tenant or the Surety in respect of any breach of
covenant or other term of this Lease including the breach in respect
of which the re-entry is made
7.2. Rights and Easements
--------------------
The operation of Section 62 of the Law of Property Act 1925 shall be
excluded from this Lease and the only rights granted to the Tenant are those
expressly set out in Part I of the First Schedule and the Tenant shall not by
virtue of this Lease be deemed to have acquired or be entitled to and the Tenant
shall not during the Term acquire or become entitled to by any means whatever
any easement from or over or affecting any other land or premises now or at any
time after the date of this Lease belonging to the Landlord or any Group Company
of the Landlord and not comprised in this Lease
7.3. Disputes with Adjoining Occupiers
---------------------------------
If any dispute arises between the Tenant and the tenants or occupiers
of other parts of the Building or the Adjoining Property as to any easement
right or privilege in connection with the use of the Premises and any other part
of the Building or the Adjoining Property or as to the boundary structures
separating the Premises from any other property it shall be decided by the
Landlord or in such manner as the Landlord shall direct
7.4. Exclusion of Use Warranty
-------------------------
Nothing in this Lease or in any consent granted by the Landlord under
this Lease shall imply or warrant that the Premises may lawfully be used under
the Planning Acts for the purpose authorised in this Lease or any purpose
subsequently authorised
7.5. Representations
---------------
The Tenant acknowledges that this Lease has not been entered into in
reliance wholly or partly on any statement or representation made by or on
behalf of the Landlord except any such statement or representation that is
expressly set out in this Lease and those contained in the Replies to
Preliminary Enquiries
<PAGE>
- 27 -
7.6. Tenant's Property
-----------------
If after the Tenant has vacated the Premises on the expiry of the Term any
property of the Tenant remains in or on the Premises and the Tenant fails to
remove it within ten Business Days after being requested in writing by the
Landlord to do so or if after using all reasonable endeavours the Landlord is
unable to make such a request to the Tenant within ten Business Days from the
first attempt so made by the Landlord:-
7.6.1. the Landlord may as the agent of the Tenant sell such property and
the Tenant shall indemnify the Landlord against any liability
incurred by it to any third party whose property shall have been
sold by the Landlord in the mistaken belief held in good faith
(which shall be presumed unless the contrary is proved) that such
property belonged to the Tenant
7.6.2. the Landlord shall (subject to paragraph 7.6.3 below) forthwith
after such sale pay to the Tenant the proceeds of such sale after
having deducted the reasonable fees and expenses incurred by or on
behalf of the Landlord in connection with such sale
7.6.3. if the Landlord having made reasonable efforts is unable to locate
the Tenant the Landlord shall be entitled to retain such proceeds
of sale absolutely unless the Tenant shall claim them within three
months of the date on which the Tenant vacated the Premises and
7.6.4. the Tenant shall indemnify the Landlord against any damage
occasioned to the Premises and any actions claims proceedings costs
expenses and demands made against the Landlord caused by or related
to the presence of the property in or on the Premises
7.7. Compensation on Vacating
------------------------
Any statutory right of the Tenant to claim compensation from the
Landlord on vacating the Premises shall be excluded to the extent that the law
allows
7.8. Covenants Relating to Adjoining Premises
----------------------------------------
Nothing contained in or implied by this Lease shall give the Tenant
the benefit of or the right to enforce or to prevent the release or
modifications of any covenant agreement or condition entered into by any tenant
of the Landlord in respect of any property not comprised in this Lease
<PAGE>
- 28 -
7.9. Service of Notices
------------------
7.9.1. The provisions of Section 196 of the Law of Property Act 1925 as
amended by the Recorded Delivery Service Act 1962 shall apply to
the giving and service of all notices and documents under or in
connection with this Lease except that Section 196 shall be deemed
to be amended as follows:-
the final words of Section 196(4)" . . . . and that service . .
. be delivered" shall be deleted and there shall be substituted
". . . and that service shall be deemed to be made on the second
Business Day after the registered letter has been posted"
7.9.2. Any notice or document shall also be sufficiently served if sent by
telex facsimile transmission or any other means of electronic
transmission to the party to be served and that service shall be
deemed to be made on the day of transmission if transmitted before
4 p.m. on a Business Day but otherwise on the next following
Business Day
and in this Clause "party" includes the Surety
7.10. Value Added Tax
---------------
7.10.1. Save as the context requires or as otherwise stated all references
to payments made in this Lease are references to such payments
exclusive of any Value Added Tax chargeable in respect of the
supply of goods or services for which the payment is consideration
and insofar as such payments fall to be made under this Lease such
Value Added Tax shall be added to the amount thereof and paid in
addition thereto
7.10.2. Without prejudice to and save as mentioned earlier in this sub-
clause 7.10 where any supply is made pursuant to this Lease the
recipient of such supply shall pay to the supplier any Value Added
Tax chargeable in respect thereof
7.10.3. Where any payment is required to be made pursuant to this Lease to
reimburse the payee for any expenditure which the payee may have
incurred such payment shall include an amount equal to any Value
Added Tax comprised in that expenditure which is not recoverable by
the payee as input tax under Section 14 of the Value Added Tax Act
1983
<PAGE>
- 29 -
7.11. Exclusion of Landlord and Tenant Act 1954
-----------------------------------------
Having been authorised to do so by Order of the Lambeth County
Court made on the 14th day of December 1993 under the provisions of Section
38(4) of the Landlord and Tenant Act (as amended by Section 5 of the Law of
Property Act 1969) the Landlord and the Tenant hereby agree that the provisions
of Section 24 to 28 (inclusive) of the Landlord and Tenant Act shall be excluded
in relation to this Lease
7.12. Jurisdiction
------------
7.12.1. This Deed shall be governed by and construed in accordance with
English Law
7.12.2. The parties hereto irrevocably submit to the non-exclusive
jurisdiction of the High Court of Justice in London for the purpose
of hearing and determining any dispute arising out of this Deed and
for the purpose of enforcement of any judgment against its assets
the Surety agrees that service of any writ notice or other document
for the purpose of any proceedings in such Court shall be duly
served upon it if delivered or sent by registered post to ACC Corp
at 39 State Street City Rochester NY 14614 United States of America
IN WITNESS of which this Lease has been executed as a Deed by the parties
and is delivered on the date appearing in the Particulars
THE FIRST SCHEDULE
------------------
Part 1
------
Rights and Easements Granted
----------------------------
1. The exclusive right to park private motor cars in eight parking spaces in
the Car Park and/or any adjoining parking area from time to time available to
the Landlord
2. The following rights (in common with the Landlord the Superior Landlord and
their lessees and tenants and all other persons expressly or impliedly
authorised by them respectively):-
2.1. the right at all times to use the common entrance halls (including the
approaches thereto from the public highway) staircases lift lobbies
corridors passages toilets and (during the hours when the same shall
be in operation) the lifts for the purpose of ingress to and egress
from the Premises:-
<PAGE>
- 30 -
(i) during the hours of 9.00 a.m. to 12.30 p.m. on Saturdays and 8.30
a.m. to 6.30 p.m. on all other weekdays except Bank and other
general Public Holidays
(ii) subject to the Tenant complying with the covenant contained in
Clause 4.22 during all other hours and days
2.2. the free and uninterrupted passage and running of water soil gas
electricity telephone telex air and other services from or to the
Premises through the sewers drains pipes cables conduits and ducts
which are now or may hereafter be in under over or upon the Building
2.3. the right to support shelter and protection for the Premises from the
remainder of the Building
THE FIRST SCHEDULE
------------------
Part 2
------
Rights and Easements Excepted and Reserved
------------------------------------------
1. The right at any time to alter or add to any adjoining adjacent or
neighbouring premises or building upon any adjoining adjacent or neighbouring
land or to build thereon notwithstanding that the access of light or air to any
windows of the Premises is thereby diminished but provided that any damage
caused in the exercise of such right is forthwith made good to the satisfaction
of the Tenant
2. The free and uninterrupted passage and running of water soil gas
electricity telephone telex air and other services from or to other parts of the
Building through the sewers drains pipes wires cables conduits and ducts which
are now or may hereafter be in under over or upon the Premises
3. The full and free right and liberty to enter upon the Premises after giving
the requisite notice (except in case of emergency or as otherwise provided) at
such times and for such purposes as the Tenant herein covenants to permit entry
or where the same is necessary for the purposes of enabling the Landlord to
comply with its obligations herein contained and perform the services set out in
the Fourth Schedule of the Superior Lease
4. Full right of support shelter and protection for the remainder of the
Building from the Premises
<PAGE>
- 31 -
THE SECOND SCHEDULE
-------------------
Principal Rent and Rent Review
------------------------------
1. In this Schedule the following expressions shall have the following
meanings:-
(a) "the Review Date" means the Twenty fifth day of December One thousand
nine hundred and ninety eight
(b) "the rent periods" means the initial period commencing with the date
on which rent commences to be payable hereunder until (but not
including) the Review Date and thereafter the final period to the end
of the term
(c) "the basic yearly rent" means the Principal Rent
(d) "commercial yearly rent" means the yearly rent at which the Premises
as a whole might reasonably be expected then to be let in the open
market with vacant possession by a willing landlord to a willing
tenant by a lease in the same terms in all respects as this Lease
(other than the amount of the basic yearly rent payable hereunder but
including the provisions for rent review and excluding the provisions
of Clause 4.24 of this Lease) for a term equal to the original term of
this Lease commencing on the Review Date and on the following
assumptions (whether or not such shall in fact be the case):-
(i) that the Premises are fitted out and equipped for
immediate occupation and use for the purpose or purposes required
by the willing tenant referred to in paragraph (d) above
(ii) that no work has been carried out thereon by the Tenant its sub-
tenants or their respective predecessors in title during the
Contractual Term which has diminished the rental value of the
Premises and that in case the Premises have been destroyed or
damaged they have been fully restored
(iii) that all the Tenant's covenants and conditions in this Lease
have been duly performed and observed
<PAGE>
- 32 -
(iv) that the Premises may be lawfully used by any person for the
purposes permitted under this Lease
(v) that the willing tenant referred to in paragraph (d) would
commence paying rent immediately on and from the Review Date and
that such rent would not be discounted in any way to reflect any
rent concession or other benefit
but disregarding
(i) any effect on rent of the fact that the Tenant its sub-tenants or
their respective predecessors in title have been in occupation of
the Premises or any part thereof
(ii) any goodwill attached to the Premises or any part thereof by
reason of the carrying on thereat of the business of the Tenant
its sub-tenants or their predecessors in title in their
respective businesses and
(iii) any effect on rent of any improvement of the Premises or any
part thereof completed not more than twenty one years prior to
the date at which the review is to take effect and carried out
with consent (where required) otherwise than in pursuance of an
obligation to the Landlord or its predecessors in title either
(a) by the Tenant its sub-tenants or their respective
predecessors in title during the term or (b) by any tenant or
sub-tenant of the Premises before the commencement of the term so
long as the Landlord or its predecessors in title have not since
the improvement was carried out had vacant possession of the
relevant part of the Premises
2. The Landlord shall be entitled by notice in writing given to the Tenant at
any time during the last year of any rent period to call for a review of the
basic yearly rent payable under this Lease and if upon any such review it shall
be found that the commercial yearly rent of the Premises at the end of such rent
period shall be greater than the Principal Rent hereinbefore reserved then as
from the end of such rent period the basic yearly rent payable under this Lease
shall on each such occasion be increased to the then commercial yearly rent as
aforesaid
3. If notwithstanding the provisions of the previous sub-clause a review of
the basic yearly rent shall not have been called for during the last year of any
rent period by notice as aforesaid the Landlord may at any time during the first
four years of the next rent period immediately following serve upon the Tenant a
notice calling for a review of the basic yearly rent payable under this Lease
and if upon any such review it shall be found that the commercial
<PAGE>
- 33 -
yearly rent of the demised premises at the end of the year of the term in which
or at the next usual quarter day following the date on which the notice was
actually served (whichever shall be the earlier) shall be greater than the
Principal Rent hereinbefore reserved or than the basic yearly rent then payable
hereunder owing to the operation of this present Schedule (as the case may be)
then as from the end of such year of the term or such quarter day (whichever
shall be the earlier) the basic yearly rent payable under this Lease shall on
each such occasion be increased to the then commercial yearly rent as aforesaid
Provided always that:-
(a) a review of the basic yearly rent shall (except in circumstances
arising under paragraph (b) of this proviso) only be called for once
in accordance with the provisions of this sub-clause and the previous
sub-clause of this Schedule during the period of five years commencing
with the last year of each rent period and
(b) if a review of the basic yearly rent shall have been called for at any
time in accordance with this sub-clause or the previous sub-clause of
this Schedule by notice as aforesaid but the right to review the basic
yearly rent or to recover an increased basic yearly rent is restrained
or restricted by or by virtue of any Act of Parliament coming into
force after the review has been called for as aforesaid so that either
the review cannot be carried out or the whole or any part of any
increase in the basic yearly rent arising upon that review cannot be
recovered with effect from the review date the Landlord may by notice
in writing to the Tenant require the previous sub-clause or this sub-
clause (as the case may be) to be construed as if the basic yearly
rent was to be reviewed at and any increased basic yearly rent found
to be payable was to be payable with effect from the date upon which
such restraint or restriction was first removed or relaxed and for the
purpose of operating the review procedure under sub-clause 4 of this
Schedule such notice shall be construed as the Landlord's notice
calling for review in lieu of the notice served by the Landlord under
this sub-clause or the previous sub-clause of this Schedule (as the
case may be)
4. Such review shall in the first instance be made by the Landlord and the
Tenant or their respective Surveyors in collaboration but if no agreement as to
the amount of the increase (if any) to be made in the said yearly rent shall
have been reached between the parties within three months after the date of the
Landlord's notice calling for such review (or any extension of such time agreed
in writing between the parties) the question whether there shall be an increase
in the said yearly rent (and if so what the amount of the revised yearly rent
shall be) shall be determined by an arbitrator such arbitrator to be nominated
in the absence of agreement by or on behalf of the President for the time being
of the Royal Institution of Chartered Surveyors on the application of either the
Landlord or the Tenant And in relation to the application for any such
nomination or the determination by the person nominated time shall not be of the
essence Provided always that if at any review date the revised basic yearly
rent to be
<PAGE>
- 34 -
payable as from such review date shall not then have been agreed between the
Landlord and the Tenant and if the parties shall not have made any application
to the President for the time being of the Royal Institution of Chartered
Surveyors as hereinbefore provided and shall not have agreed on the identity of
the arbitrator the Tenant may serve on the Landlord notice in writing containing
a proposal as to the amount of such revised basic yearly rent not being less
than the basic yearly rent payable immediately before such review date and the
amount so proposed shall be deemed to have been agreed by the parties as the
revised basic yearly rent to be payable from such review date and sub-clause 6
of this Schedule shall apply accordingly unless the Landlord shall make such
application as aforesaid within three months after service of such notice by the
Tenant
5. (a) In the case of an arbitration the arbitration shall be conducted in
accordance with the Arbitration Act 1950 to 1979
(b) When the amount of any basic yearly rent to be ascertained as
hereinbefore provided shall have been so ascertained memoranda specifying and
confirming the revised basic yearly rent to be payable shall forthwith be signed
by or on behalf of the Landlord and the Tenant and annexed to this Lease and the
Counterpart thereof and the parties shall bear their own costs in respect
thereof
6. If at any review date the revised basic yearly rent to be payable as from
such review date shall not then have been agreed or determined in the manner
aforesaid then until such agreement or determination shall have been made the
Tenant shall pay the said rent at such yearly rate at such times and in such
manner as shall have been applicable immediately prior to such review date and
any rent in excess of such rent which may later be found to be payable hereunder
in respect of the period from such review date until the quarter day next
following such agreement or determination shall be paid without any deduction
within twenty one days of the date on which the revised basic yearly rent shall
have been ascertained with interest thereon at four per cent below the Interest
Rate calculated on a day to day basis from the date at which the rent was to be
reviewed down to the date of payment
THE THIRD SCHEDULE
------------------
Covenants by the Surety
-----------------------
1.1. Covenant and indemnity by Surety
--------------------------------
(a) In consideration of the Landlord entering into this Lease the Surety
covenants with the Landlord that:-
<PAGE>
- 35 -
(i) the Tenant (failing whom the Surety) will at all times during the Term
duly perform and observe all the covenants on the part of the Tenant
contained in this Lease (including without limitation the payment of
the Rents and all other sums payable under this Lease) in the manner
and at the times specified in this Lease and
(ii) the Surety will indemnify and keep indemnified the Landlord against
all claims demands losses damages liability costs fees and expenses
whatsoever sustained by the Landlord by reason of or arising in any
way directly or indirectly out of any default by the Tenant in the
performance and observance of any of its obligations hereunder or the
payment of any Rents or other sums payable hereunder or arising as a
result of the Lease being disclaimed by a liquidator or trustee in
bankruptcy or similar officer appointed to or in respect of the Tenant
and having such power (each a "Relevant Disclaimer")
(b) For the purposes of Clause 1.1(a) above the Term will be deemed to
continue for the duration specified in this Lease notwithstanding that a
Relevant Disclaimer occurs
1.2. Nature of Surety's Obligations
------------------------------
(a) The obligations of the Surety hereunder are primary obligations
(b) The Surety is jointly and severally liable with the Tenant for the
fulfillment of all the obligations of the Tenant under this Lease
(c) Notwithstanding any legal limitation disability or incapacity on or of
the Tenant or any other fact or circumstance whether known to the Landlord or
not the Landlord may proceed against and recover from the Surety as if the
Surety was named as the Tenant in this Lease
(d) The Landlord shall not be obliged to make any demand on the Tenant
before enforcing its rights against the Surety hereunder
1.3. Waiver by Surety
----------------
The obligations of the Surety hereunder are to constitute a continuing
security in addition to and without prejudice to any other rights which the
Landlord may have and the Surety hereby waives any right to require the
<PAGE>
- 36 -
Landlord to proceed against the Tenant or to pursue any other remedy whatsoever
which may be available to the Landlord before proceeding against the Surety
1.4. Postponement of claims by Surety against Tenant
-----------------------------------------------
(a) Unless otherwise instructed by the Landlord the Surety will not claim
or accept any payment or property in any liquidation bankruptcy composition or
arrangement of the Tenant in competition with the Landlord nor seek to recover
(whether directly or by way of set off lien counter claim or otherwise) any
money or other property nor exercise any other right or remedy whatsoever in
respect of any sum which may be or become due to the Surety from the Tenant nor
exercise any rights of subrogation or indemnity against the Tenant until in each
such case all the Surety's obligations hereunder have been performed and
discharged in full
(b) The Surety will forthwith pay to the Landlord an amount equal to any
set-off in fact exercised by it and will promptly pay or transfer to the
Landlord any payment or distribution or benefit in fact received by it
notwithstanding the terms of Clause 1.4(a) above
(c) The Surety agrees that it will exercise any rights of subrogation
against the Tenant and any rights to prove in a liquidation of the Tenant which
it may have in accordance with the directions of the Landlord
1.5. Postponement of participation by Surety in security
---------------------------------------------------
The Surety confirms it has not taken and undertakes it will not take from
the Tenant any security in connection with its obligations hereunder and
declares that any security so taken shall be held on trust for the Landlord and
further the Surety agrees that it shall not be entitled to participate in any
security held by the Landlord in respect of the Tenant's obligations to the
Landlord under this Lease nor to stand in the place of the Landlord in respect
of any such security until all the obligations of the Tenant or the Surety to
the Landlord under this Lease have been performed or discharged in full
1.6. No release of Surety
--------------------
None of the following nor any combination thereof shall release determine
discharge or in any way lessen or affect the liability of the Surety hereunder
or otherwise prejudice or affect the right of the Landlord to recover from the
Surety to the full extent of its obligations hereunder:-
<PAGE>
- 37 -
(a) any neglect delay or forbearance of the Landlord in endeavouring to
obtain payment of the Rents or other amounts payable under this Lease
by the Tenant or in enforcing the performance or observance of any of
the obligations of the Tenant under this Lease
(b) any refusal by the Landlord to accept Rents tendered by or on behalf
of the Tenant
(c) any extension of time given by the Landlord to the Tenant
(d) any variation of the terms of this Lease (including any reviews of the
Principal Rent) or the transfer of the Landlord's reversion or the
assignment of this Lease or the surrender of any part thereof
(e) the release of any person for the time being jointly or severally
liable for the Tenant's obligations or liable as surety for the
Tenant's obligations
(f) any change in the constitution structure or powers of any of the
Tenant the Surety or the Landlord or the liquidation administration or
bankruptcy (as the case may be) of any of the Tenant the Surety or the
Landlord
(g) any legal limitation or any immunity disability or incapacity of the
Tenant (whether or not known to the Landlord) or the fact that any
dealings with the Landlord or the Tenant may be outside or in excess
of the powers of the Tenant or the Surety
(h) the taking variation compromise renewal release or refusal or neglect
to perfect or enforce any right remedies or securities against the
Tenant or any other person
(i) any Relevant Disclaimer
(j) any other act omission matter or thing whatsoever whereby but for this
provision the Surety would be exonerated or released either wholly or
in part (other than a release by Deed given by the Landlord)
1.7. Disclaimer or forfeiture of Lease
---------------------------------
(a) The Surety undertakes to the Landlord that:-
<PAGE>
- 38 -
(i) if a liquidator or trustee in bankruptcy or similar officer having
such power shall disclaim or surrender this Lease or
(ii) if this Lease shall be forfeited or
(iii) if the Tenant shall cease to have legal existence
THEN the Surety shall if the Landlord by notice in writing given to the Surety
within six (6) months after such disclaimer or other event occurs so requires
accept from and execute and deliver to the Landlord a counterpart of a new lease
of the Premises for a term commencing on the date of the disclaimer or other
event and continuing for the residue then remaining unexpired of the Term (as
specified in this Lease) such new lease to be at the cost of the Surety and to
be at the same rents and subject to the same covenants conditions and provisions
as are contained in this Lease
(b) If this Lease is disclaimed and for any reason the Landlord does not
require the Surety to accept a new lease of the Premises in accordance with this
Schedule the Landlord shall be entitled to require that the Surety pays to the
Landlord on demand an amount equal to the Rents for the period commencing with
the date of such disclaimer and ending on whichever is the earlier of:-
(i) the date six months after such disclaimer and
(ii) the date (if any) upon which the Premises are relet
1.8. Cumulative Powers and Avoidance of Payments
-------------------------------------------
(a) The powers conferred on the Landlord hereunder are cumulative without
prejudice to its powers under the general law and may be exercised as often as
the Landlord thinks appropriate The Landlord may in connection with the
exercise of its powers join or concur with any person in any transaction scheme
or arrangement whatsoever
(b) If the Landlord reasonably considers that any amount paid by the Surety
hereunder is capable of being avoided or set aside on the liquidation or
administration of the Surety or otherwise then for the purposes of this Lease
such amount shall not be considered to have been paid
<PAGE>
- 39 -
(c) Any settlement or discharge between the Landlord and the Tenant and/or
the Surety shall be conditional upon no security or payment to the Landlord by
the Tenant or the Surety or any other person being avoided or set aside or
ordered to be refunded or reduced by virtue of any provision or enactment
relating to bankruptcy insolvency or liquidation for the time being in force and
accordingly (but without limiting the Landlord's other rights hereunder) the
Landlord shall be entitled to recover from the Surety the value which the
Landlord has placed upon such security or the amount of any such payment as if
such settlement or discharge had not occurred
1.9. Representations
---------------
The Surety warrants and represents that it has full power to enter into
the obligations and covenants hereunder and has taken all necessary corporate or
other action required to authorise its execution of this Lease and that the
provisions of this Lease constitute the legal valid and binding obligations of
the Surety
1.10. Benefit of guarantee
--------------------
(a) The covenants undertakings and agreements of the Surety hereunder
shall enure for the benefit of the successors and assigns of the Landlord to
this Lease without the necessity for any assignment thereof to such successors
and assigns
(b) Without prejudice to Clause 1.10(a) above the Landlord may assign the
benefit of the provisions of this Lease and the covenants undertakings and
agreements of the Surety hereunder to any third party and the Surety shall join
in such documents as may be necessary to effect such assignment
1.11 Interest on Late Payment
------------------------
The Surety will pay Interest on all sums payable by it to the Landlord
hereunder
1.12. Costs and Expenses
------------------
The Surety will indemnify the Landlord against all the Landlord's legal
and other costs losses charges and expenses (on a full indemnity basis) arising
in connection with any modification amendment release and/or enforcement or
attempted enforcement of or preservation of the Landlord's rights under this
Lease
<PAGE>
- 40 -
1.13. Set-off
-------
All payments to be made by the Surety hereunder will be made in full
without any deduction for any set-off or counterclaim the Surety may have
against the Landlord
1.14. Waiver
------
No delay or omission by the Landlord in exercising any right power or
privilege hereunder shall impair such right power of privilege or be construed
as a waiver of such right power or privilege
1.15. Invalidity
----------
If at any time any one or more provisions of this Schedule is or becomes
invalid illegal or unenforceable in any respect under any law the validity
legality and enforceability of the remaining provisions hereof shall not be in
any way affected or impaired thereby
THE FOURTH SCHEDULE
-------------------
The Regulations
---------------
1. The Landlord (which term shall in this Fourth Schedule include the
Superior Landlord) or the Landlord's agents or staff shall be at liberty to
refuse to any person access to the Building if they shall think that such
refusal is for the benefit of the tenants or occupants of the Building
2. Tenants are not entitled to use the lifts for the carriage of articles
likely to cause damage to the lifts or the Building and the Landlord or the
Landlord's agents or staff shall be at liberty to refuse permission to use the
passenger lifts for the carriage of any goods whatsoever if this shall interfere
with the convenience of the other tenants or occupants of the said building or
be likely to cause damage to the passenger lifts or the Building
3. Tenants are not entitled to place deposit store or abandon any goods
articles or rubbish whatsoever in the common parts of the said building but
shall place all rubbish only in the bin stores or other areas designated for
that purpose by the Landlord from time to time
4. Tenants shall not misuse the communal toilet facilities and lifts and in
particular shall not empty tea leaves down the sinks or deposit solid or
obnoxious matter in the toilets
<PAGE>
- 41 -
5. Tenants shall not be entitled to erect nameboards or display notices in
the common parts of the Building but each tenant may have one entry only in
respect of the tenancy on the Landlord's nameboard in the entrance hall of the
Building by arrangement with the Landlord's agents The Landlord reserves the
right to vary the position of any entrance hall nameboard and to rearrange the
disposition of the lettering thereon Nameboards or display notices or lettering
on the entrance door or subsidiary entrance door of the Premises must conform to
the standard design for the Building to be notified to the tenant by the
Landlord or the Landlord's agents
6. Any services rendered to a tenant by staff employed by the Landlord other
than services referred to in the Fourth Schedule of the Superior Lease hereto
are to be deemed special services for which and for the consequences of which
that tenant shall be entirely responsible and tenants shall not be entitled to
any services from such staff which may in any way interfere with the performance
of their duties to the Landlord or the Landlord's agents
7. Tenants shall not play or permit or suffer the playing of any musical
instrument or the use of any radio television record-player or other similar
device for the reproduction of any music or sound on or in the Premises so as to
be audible outside the Premises
(THE COMMON SEAL of IBM UNITED KINGDOM
(LIMITED was hereunto affixed in the
(presence of:
Director NJH
Secretary [illegible]
<PAGE>
- 42 -
Annex A
Site Plan
[This document is a site plan that shows the Chiswick Centre bordered by
Chiswick High Road, Essex Place and Acton Lane. The Site plan also shows the
available parking spaces.]
<PAGE>
- 43 -
Annex B
Floor Plan
[This document is a floor plan that shows the office area that is subject to the
Lease.]
<PAGE>
Exhibit 99.12
DATED 6th June 1995
------------------------------------------------------------------------
(1) IBM UNITED KINGDOM LIMITED
- and -
(2) ACC LONG DISTANCE UK LIMITED
- and -
(3) ACC CORP
- --------------------------------------------------------------------------------
UNDERLEASE
of
First Floor at The Chiswick Centre
414 Chiswick High Road London W4
- --------------------------------------------------------------------------------
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171-638-1111
Fax: 0171-972-7990
<PAGE>
CONTENTS
Clause
- ------
or Schedule Heading
- ----------- -------
PARTICULARS
1. DEFINITIONS
2. INTERPRETATION
3. DEMISE
4. THE TENANT'S COVENANTS
4.1. Rents
4.2. Outgoings and VAT
4.3. Repair, cleaning and decorating
4.4. User and Restrictions on Use
4.5. Waste and Alterations
4.6 Aerials Signs and Advertisements
4.7. Obstruction
4.8. Statutory Obligations and Fire Precautions
4.9. Access to Landlord and Notice of Repair
4.10. Dealings
4.11. Landlord's Costs
4.12. The Planning Acts
4.13. Plans, Documents and Information
4.14. Indemnities
4.15. Disposal Boards and Viewing
4.16. Encroachments
4.17. Yield Up
4.18. Interest on Arrears
4.19. Statutory Notices
4.20. Defective Premises
4.21. Compliance with Regulations
4.22. Outside Business Hours
4.23. Superior Lease Covenants
4.24. Option to Determine
5. THE LANDLORD'S COVENANTS
6. INSURANCE3
6.1. Tenant's Insurance Covenants
6.2. Suspension of Principal Rent
7. PROVISOS
7.1. Re-Entry
7.2. Rights and Easements
7.3. Disputes with Adjoining Occupiers
7.4. Exclusion of Use Warranty
7.5. Representations
7.6. Tenant's Property
7.7. Compensation on Vacating
7.8. Covenants relating to Adjoining Premises
-i-
<PAGE>
7.9. Service of Notices
7.10. Value Added Tax
7.11. Exclusion of Landlord and Tenant Act of 1954
7.12. Jurisdiction
THE FIRST SCHEDULE - Part 1 Rights and Easements
Granted
THE FIRST SCHEDULE - Part 2 Rights and Easements
Excepted and Reserved
THE SECOND SCHEDULE - Principal Rent and Rent Review
THE THIRD SCHEDULE - Covenants by the Surety
THE FOURTH SCHEDULE - The Regulations
-ii-
<PAGE>
PARTICULARS
-----------
DATE : 6th June 1995
- --------------------------------------------------------------------------------
LEASE OR UNDERLEASE : UNDERLEASE
- --------------------------------------------------------------------------------
LANDLORD : IBM UNITED KINGDOM LIMITED whose
registered office is at P.O. Box 41 North
Harbour Portsmouth Hampshire PO6 3AU
TENANT : ACC LONG DISTANCE UK LIMITED
(Company Registration Number 2671855)
whose registered office is at 2-3
Cursitor Street London EC4A 1NE
SURETY : ACC CORP whose registered office is at 39
State Street City Rochester NY14614
United States of America
- --------------------------------------------------------------------------------
PREMISES : the first floor of the Building shown for
the purpose of identification only edged
red on the Floor Plan and being more
particularly described in Clause 1
- --------------------------------------------------------------------------------
CONTRACTUAL TERM : From and including the 7th day of April
1995 until and including the 28th day of
September 2003
- --------------------------------------------------------------------------------
PRINCIPAL RENT : ONE HUNDRED AND THIRTY FIVE
THOUSAND FOUR HUNDRED AND TWENTY
POUNDS ((Pounds)135,420) per annum
- --------------------------------------------------------------------------------
RENT COMMENCEMENT DATE : the 20th day of May 1996
- --------------------------------------------------------------------------------
INITIAL PROVISIONAL SERVICE CHARGE : THIRTY FOUR THOUSAND SEVEN HUNDRED
AND SEVEN POUNDS ((Pounds)34,707) per
annum
- --------------------------------------------------------------------------------
PERMITTED USER : high class offices within Class II of the
Schedule to the Town and Country Planning
(Use Classes) Order 1972
- --------------------------------------------------------------------------------
INTERIOR DECORATING YEARS : 1998
- --------------------------------------------------------------------------------
<PAGE>
THIS UNDERLEASE made on the date and between the parties specified in the
Particulars
WITNESSES as follows:-
1. DEFINITIONS
-----------
In this Lease and the Schedules the following words and expressions have
the following meanings:-
"Accountant" means any person or firm appointed by the Landlord (including
an employee of the Landlord or a Group Company of the Landlord) to perform the
functions of the Accountant under this Lease
"Act of Insolvency" means
in relation to a corporate body that:-
it is unable to pay its debts as defined in section 123 of the
Insolvency Act 1986 (referred to as "the Act" in the remainder of this
definition) (and for the purposes of interpreting that section the
must be proved to the satisfaction of the court that" in sub-
sections 123(1) and 123(2) shall be ignored) or
a proposal is made for a voluntary arrangement under Part I of the Act
or
a petition is presented for an administration order under Part II of
the Act or
a receiver and (or) manager or administrative receiver is appointed
whether under Part III of the Act or otherwise or
it goes into liquidation as defined in Section 247(2) of the Act
(other than a voluntary winding up solely for the purpose of
amalgamation or reconstruction while solvent) or
a provisional liquidator is appointed under Section 135 of the Act or
a proposal is made for a scheme of arrangement under Section 425 of
the Companies Act 1985
and in relation to an individual that:-
<PAGE>
- 2 -
an application is made for an interim order or a proposal is made for
a voluntary arrangement under Part VIII of the Act or
a bankruptcy petition is presented to the Court or his circumstances
are such that a bankruptcy petition could be presented under Part IX
of the Act or
he enters into a deed of arrangement
"Adjoining Property" means any neighbouring or adjoining land or premises
now or at any time during the Term belonging to the Landlord or a Group Company
of the Landlord
"Building" means the land and building(s) known as The Chiswick Centre
Chiswick London W4 shown for the purpose of identification only edged red on
the Site Plan
"Business Day" means a day on which clearing banks in the City of London
are (or would be but for a strike lockout or other stoppage affecting particular
banks or banks generally) open during banking hours and "Business Days" shall be
interpreted accordingly
"Business Hours" means 8.30 a.m. to 6.30 p.m. Mondays to Fridays (except
Bank Holidays) or such other hours as the Landlord may determine
"Car Park" means the car parking areas shown for the purpose of
identification only edged green on the Site Plan
"Common Parts" means all areas which are from time to time during the Term
provided by the Landlord for common use and enjoyment by the general public and
(or) by tenants and the occupiers of the Building and all persons expressly or
by implication authorised by them including without limitation the pedestrian
areas and walkways forecourts car parking areas landscaped areas entrance halls
landings hoists lifts lift-shafts staircases escalators and passages
"Conduits" mean all conduits sewers drains mains ducts pipes gutters
watercourses wires cables fibres channels flues and all other conducting media
including any fixings louvres cowls and any other ancillary apparatus
"Contractual Term" has the meaning given in the Particulars
<PAGE>
- 3 -
"Development" has the meaning given by Section 55 of the Town and Country
Planning Act 1990
"Exclusion Agreement" means an agreement contained or referred to in an
underlease of the Premises or any part thereof authorised by Order of the Court
under Section 38(4)(a) of the 1954 Act excluding in relation to that underlease
the provisions of Sections 24 to 28 of the Landlord and Tenant Act
"Floor Plan" means the plan annexed to this Lease and marked "Floor Plan"
"Group Company" means any company which is for the time being a subsidiary
or a holding company or another subsidiary of the holding company in each case
within the meaning of Section 736 of the Companies Act 1985 which Section shall
for this purpose be deemed not to have been amended by subsequent legislation
"Initial Provisional Service Charge" means the annual amount referred to in
the Particulars
"Insurance Rent" means the sums to be reimbursed by the Tenant to the
Landlord comprising a reasonable proportion of the cost to the Landlord from
time to time of:-
(a) insuring the Building or reimbursing the Superior Landlord therefor in
accordance with the Landlord's obligations contained in this Lease and
the Superior Lease and
(b) effecting insurance against loss of the Principal Rent for a period of
three years and
(c) insuring in such amount and on such terms as the Landlord or the
Superior Landlord shall reasonably consider appropriate against all
liability of the Landlord or the Superior Landlord to third parties
arising out of or in connection with any matter relating to the
Building
"Insured Risks" means fire storm tempest flood earthquake lightning
explosion impact aircraft (other than hostile aircraft) and other aerial devices
and articles dropped therefrom riot civil commotion and malicious damage
bursting or overflowing of water tanks apparatus or conduits subsidence heave
and such other risks as the Landlord may in its reasonable discretion from time
to time determine
"Interest" means interest (compounded at monthly rests) both before and
after any judgement at the Interest Rate then prevailing during the period
beginning on the date 14 days after the relevant payment is due and has been
demanded and ending on the date on which the relevant payment is received by way
of cleared funds
<PAGE>
- 4 -
"Interest Rate" means Four percentage points above the base lending rate
from time to time in force of National Westminster Bank PLC or such other Bank
whose Chairman is a member of the Committee of London Clearing Bankers as the
Landlord may from time to time nominate in writing or should such base lending
rate cease to exist such other rate of interest as the Landlord (acting
reasonably) shall deem to be most closely comparable with the said base lending
rate
"Interior Decorating Years" has the meaning given in the Particulars
"Landlord" means the party described as the Landlord in the Particulars and
includes the party for the time being entitled to the reversion immediately
expectant on the determination of the Term
"Landlord and Tenant Act" means the Landlord and Tenant Act 1954
"this Lease" means this Lease and any document which is made supplemental
to this Lease or which is entered into pursuant to or in accordance with the
terms of this Lease
"Lettable Areas" means all parts of the Building which from time to time
are either occupied or used by a tenant or tenants or capable or intended of
being so occupied or used
"Outside Business Hours Charge" means the whole of the cost incurred by the
Landlord in carrying out or providing any of the Services (which are not
normally provided by the Landlord outside the Business Hours) at the request of
the Tenant outside Business Hours (including but not limited to costs and
expenses in the nature of those set out in Part C of the Fourth Schedule) or in
the event of any of the Services being carried out or provided outside Business
Hours to the Tenant (at the request of the Tenant) and to any other tenant or
tenants of the Building a fair proportion thereof as reasonably and properly
determined by the Landlord
"Particulars" means the immediately preceding section of this Lease headed
"Particulars"
"Permitted Underlease" means an underlease of the whole of the Premises
which:-
(a) is granted without any fine or premium
(b) reserves a rent not less than the greater of the then open market rent
of the Premises and the Principal Rent then payable
<PAGE>
- 5 -
(c) incorporates provisions for the review of rent at the same times and
on the same basis as in this Lease and
(d) is (so far as is consistent with an underlease) in a form similar to
this Lease and
(e) incorporates an Exclusion Agreement
"Permitted User" has the meaning given in the Particulars
"Planning Acts" means the Town and Country Planning Act 1990 the Planning
(Listed Buildings and Conservation Areas) Act 1990 the Planning (Hazardous
Substances) Act 1990 the Planning (Consequential Provisions) Act 1990 and the
Planning and Compensation Act 1991
"Plant" means all apparatus plant machinery and equipment within the
Building from time to time including without limitation lifts lift-shafts hoists
escalators stand-by generators and boilers and items relating to mechanical
ventilation heating cooling public address telephone and closed-circuit
television and building management systems the fire alarm system the sprinkler
system the security systems the smoke detection and heat detection equipment and
systems and the cleaning cradle equipment
"Premises" means the part of the Building described as the Premises in the
Particulars and includes:-
(a) the plaster work and decorative finishes applied to the internal
surfaces of the external and load-bearing walls and columns of the
Building but not any other part of the external or load-bearing walls
and columns
(b) the floor finishes and floor trunking finishes
(c) the ceiling finishes any suspended ceiling and the void above any
suspended ceiling so that the upper limit of the Premises incudes
such finishes suspended ceiling and void but does not extend to
anything above them
(d) the entirety of the non-load-bearing internal walls and glass
partitions wholly within the Premises
(e) the plasterwork and decorative finishes applied to the internal
surfaces of the internal non-load-bearing walls and the internal
surface of partitioning or balustrading dividing the Premises from
other parts of the Building and the internal decorative surfaces of
the window frames and window
<PAGE>
- 6 -
furniture in the windows which form part of the external envelope of
the Building or which separate the Premises from any atria within the
Building
(f) the internal surfaces and door furniture of the doors and the door
frames
(g) all additions and improvements to the Premises
(h) all the Landlord's fixtures and fittings and fixtures of every kind
which shall from time to time be in or upon the Premises (whether
originally affixed or fastened to or upon the Premises or otherwise)
except any such fixtures installed by the Tenant
(i) all Conduits in on under or over and exclusively serving the Premises
except those belonging to a statutory undertaker or public utility
and references to the "Premises" in the absence of any provision to the
contrary include any and every part of the Premises
"Principal Rent" has the meaning given to it in the Particulars and in
paragraph 1 of the Second Schedule
"Rent Commencement Date" has the meaning given in the Particulars
"Rents" means the Principal Rent the Insurance Rent and the other payments
reserved as rent and referred to in Clause 3
"Service Charge" means the aggregate of the sums which the Landlord is
required to pay to the Superior Landlord pursuant to Clauses 1(1)(iii) and
1(1)(iv) of the Superior Lease
"Services" means the services facilities and amenities to be provided by
the Superior Landlord for the benefit of the Building
"Site Plan" means the plan annexed to this Lease and marked "Site Plan"
"Superior Lease" means a lease dated 8th March 1984 and made between (1)
Clerical Medical and General Life Assurance Society and (2) the Landlord and the
lease supplemental thereto dated 19th April 1985 and made
<PAGE>
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between the same parties and includes where the context admits any lease whether
mediate or immediate out of which that lease was created
"Superior Lease Covenants" means the covenants agreements and provisions
affecting the Premises contained in any Superior Lease and on the part of the
tenant to be performed and observed except the covenant for payment of rent
"Surety" means the party (if any) described as the Surety in the
Particulars and includes:-
(a) any party who enters into covenants with the Landlord pursuant to sub-
clause 4.10 and
(b) in the case of an individual his personal representatives
"Tenant" means the party described as the Tenant in the Particulars and
includes the Tenant's successors in title and assigns
"Term" means the Contractual Term
"Utilities" means water sewage gas electricity telephone telecommunications
and other services and supplies of whatever nature now or at any time during the
Term serving the Premises
"Value Added Tax" means Value Added Tax or any other tax of a similar
nature that may be substituted for or levied in addition to it in each case at
the rate current from time to time
2. INTERPRETATION
--------------
2.1. The Particulars and the Schedules form part of this Lease
2.2. The definitions contained in the Particulars have the meanings appearing
alongside them for the purposes of this Lease
2.3. Where the Landlord or the Tenant or the Surety for the time being are two
or more persons obligations expressed or implied to be made by or with such
party are deemed to be made by or with such persons jointly and severally
<PAGE>
- 8 -
2.4. Words importing one gender include all other genders and words importing
the singular include the plural and vice versa
2.5.1. Rights expressed to be reserved in favour of the Landlord shall be
deemed to extend to any superior landlord and any mortgagee of the Premises and
all persons authorised by the Landlord and by any superior landlord or mortgagee
including its or their agents professional advisers contractors and workmen
2.5.2. Rights expressed to be granted in favour of the Tenant shall be deemed
to extend to all persons authorised by the Tenant or its mortgagee including its
or their agents professional advisers contractors and workman
2.6. Any covenants by the Tenant not to do an act or thing shall be deemed to
include an obligation not to permit or suffer such act or thing to be done
2.7. Any provisions in this Lease referring to the consent or approval of the
Landlord shall be construed as also requiring the consent or approval of any
superior landlord where such consent shall be required but nothing in this Lease
shall be construed as implying that any obligation is imposed upon any superior
landlord not unreasonably to refuse or delay any such consent or approval
2.8. Any references to a specific statute include any statutory extension or
modification amendment or re-enactment of such statute and any regulations
instruments or orders made under such statute and any general reference to
"statute" or "statutes" include any regulations instruments or orders made under
such statute or statutes
2.9. References in this Lease to any Clause sub-clause Schedule or paragraph
without further designation shall be construed as a reference to a Clause sub-
clause or paragraph of or Schedule to this Lease so numbered
2.10. The Clause Paragraph and Schedule headings and the table of contents are
for ease of reference only and shall not be taken into account in the
construction or interpretation of this Lease or of the Clause Paragraph or
Schedule to which they refer
2.11. Any reference to a superior landlord includes the Landlord's reversioner
(whether mediate or immediate) at any time
2.12. References to "last year of the Term" include the last year of the Term
if the Term shall determine otherwise than by effluxion of time and references
to "expiry of the Term" include such other determination of the Term
<PAGE>
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2.13. The terms "parties" or "party" mean the Landlord and (or) the Tenant and
except where there is an express indication to the contrary include the Surety
3. DEMISE
------
The Landlord at the request of the Surety demises to the Tenant the
Premises TOGETHER WITH the rights and easements set out in Part 1 of the First
Schedule but EXCEPTING AND RESERVING the rights and easements set out in Part
2 of the First Schedule TO HOLD the Premises to the Tenant for the Contractual
Term YIELDING AND PAYING to the Landlord:-
3.1. on and from the date hereof until the Review Date the Principal Rent
payable without any deduction by equal quarterly payments in advance on the
usual quarter days the first such payment being a sum in respect of the
period from and including the date hereof up to and including the day
before the first quarter day after the date hereof and to be paid on the
date hereof and
3.2. by way of further rent:-
3.2.1. the Insurance Rent payable at the times and in the manner provided in
Clause 6
3.2.2. the payments of Interest referred to in sub-clause 4.18
3.2.3. the Service Charge payable at the times and in the manner provided in
Clauses 1(2) 1(3) 1(4) 1(5) and 1(6) of the Superior Lease
4. THE TENANT'S COVENANTS
----------------------
The Tenant covenants with the Landlord throughout the Term:-
4.1. Rents
-----
To pay the Rents on the days and in the manner set out or referred to in
this Lease and not to exercise or seek to exercise any right or claim to
withhold rent or any right or claim to legal or equitable set-off
<PAGE>
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4.2. Outgoings and VAT
-----------------
4.2.1. To pay and to indemnify the Landlord against all rates, taxes,
assessments, duties, charges, impositions and outgoings which are now or
during the Term shall be charged assessed or imposed upon the Premises
or upon the owner or occupier of them save and except:-
(a) any tax charged on the Landlord in respect of rents and other
payments due under this Lease
(b) any tax occasioned by any disposition or deemed disposition of or
dealing with the reversion expectant on the Term
(c) such rates taxes charges assessments duties impositions and
outgoings as the Landlord is bound by law to pay notwithstanding
any contract to the contrary
4.2.2. To pay and to indemnify the Landlord against Value Added Tax chargeable
in respect of any taxable supplies made to the Tenant by the Landlord
under any of the terms of or in connection with this Lease (whether or
not at the Landlord's election or otherwise howsoever arising) or in
respect of any taxable supplies made by any third party to the Landlord
where the Tenant agrees in this Lease to reimburse the Landlord for its
costs in relation to those supplies and such sums shall be deemed to be
and shall be recoverable as rent in arrear
4.2.3. To pay and to indemnify the Landlord for all charges including meter
rents for all Utilities consumed or used at or in relation to the
Premises
4.3. Repair, cleaning and decorating
-------------------------------
4.3.1. To keep the Premises in good and substantial repair and condition
(damage or destruction caused by any of the Insured Risks excepted
unless and to the extent that the insurance effected by the Landlord is
vitiated forfeited or avoided or the insurance money is irrecoverable in
consequence of any act or default of the Tenant or any person deriving
title under the Tenant or anyone at the Premises expressly or by
implication with the authority of the Tenant or such person)
4.3.2. To replace from time to time with items of an equivalent standard and
commensurate with the nature of the Premises the Landlord's fixtures and
fittings in the Premises which may be or become beyond repair at any
time during or at the expiry of the Term
<PAGE>
- 11 -
4.3.3. In each of the Interior Decorating Years and in the last year of the
Term to redecorate the interior of the Premises in a good and
workmanlike manner and with appropriate materials of good quality to the
reasonable satisfaction of the Landlord
4.3.4. As often as may be necessary throughout the Term to clean and treat and
wash in accordance with good standards and in a good and workmanlike
manner to the reasonable satisfaction of the Landlord all materials
surfaces and finishes of the interior of the Premises which ought
normally to be so cleaned treated or washed (subject to the provisions
of paragraph 4.3.5 below)
4.3.5. As often as may be reasonably necessary but no less frequently than once
in every month of the Term to clean the internal surfaces of the glazing
of the windows and other glazing which form part of the external
envelope of the Building or which separate the Premises from any atria
within the Building
4.3.6. Not to maintain repair replace or carry out any other works to or
otherwise interfere with or damage any plant machinery apparatus and
equipment relating to or connected with the air conditioning and heating
systems
4.3.7. To comply in all respects with all reasonable regulations and
requirements of or imposed by or on behalf of the Landlord in relation
to the collection and disposal of refuse from the Premises and (or) from
the Building
4.4. User and Restrictions on Use
----------------------------
4.4.1. Not to use the Premises for any purpose other than the Permitted User
4.4.2. Not to keep or use or permit or suffer to be kept or used on the
Premises any materials of a dangerous inflammable or explosive nature or
any machinery engine safe or other thing which may attack or in any way
injure by percolation corrosion vibration excessive weight or otherwise
the structure of the demised premises or the keeping or using whereof
may contravene any statute or any local regulation or bye-law for the
time being affecting the demised premises Provided that the Tenant may
keep and use on the Premises inflammable materials used in the normal
course of using premises as an office in such reasonable quantities only
as may be necessary in connection with such use and subject to observing
all statutes regulations and bye-laws relating to the keeping and using
of such substances and complying with the requirements of the insurers
of the Premises
<PAGE>
- 12 -
4.4.3. Not to use the Premises for a sale by auction
4.4.4. Not to overload the existing electric wires and cables and in the event
of any additional or new wiring or cable becoming necessary or of the
Landlord being required by the Electricity Authority or by the Insurers
or the Building to provide the same the Tenant shall pay the cost of
all such additional or new wiring or cable exclusively used by the
Premises and of connecting the same to the mains and a proportional
part of the cost of any such wiring or cable in respect of those parts
of the Building used in common with other tenants such proportion to be
certified by the Landlord
4.4.5.1. Not to use or permit or suffer the Premises or any part thereof to be
used for any illegal or immoral purpose nor for the manufacture sale or
consumption on the premises of beer wine or spirituous liquors nor as a
school consular or diplomatic office hotel club billiard-saloon
restaurant snack-bar launderette sex-shop betting shop or office gaming
house bingo-hall discotheque dance-hall funfair leisure-centre or
amusement arcade nor for the business of an undertaker nor for any
noisy noxious or offensive trade or business nor as a residence or
sleeping place for any person nor for any purpose which would
constitute a breach of any restrictive covenants affecting the Building
Provided that such prohibitions shall not prevent the use of the
Premises for instruction and lecture purposes and for a restaurant and
snack-bar in each case as ancillary to the Tenant's use of the Premises
4.4.5.2. Not to do or permit or suffer to be done on the demised premises or any
part thereof or in any communal part of the Building or the curtilage
thereof anything which may be or become or cause a nuisance damage
disturbance injury or danger of or to the Landlord or any other tenants
of the Building or the owners lessees or occupiers of any premises in
the neighbourhood and (without prejudice to the generality of the
foregoing) not to use or permit or suffer to be used on the demised
premises any electrical instrument or device unless fitted with an
effective suppressor and properly earthed and insulated And to keep the
Landlord fully and effectually indemnified against all actions
proceedings damages costs expenses claims and demands whatsoever
arising out of or in consequence of any breach or non-observance of
this covenant
4.5. Waste and Alterations
---------------------
Not to:-
4.5.1. commit any waste on or at the Premises
<PAGE>
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4.5.2. make any addition or extension to the Premises
4.5.3. unite the Premises with any adjoining premises
4.5.4. make any structural alteration to the Premises or
4.5.5. make any other alterations to the Premises PROVIDED THAT no consent
shall be necessary for the erection removal and alteration of dry
movable partitions within the Premises subject to the Tenant supplying
full specifications and drawings within 7 days of completing such works
and complying with all necessary statutory and other regulations whether
relating to fire precautions or otherwise and preserving the integrity
and proper working of the heating/air conditioning system for the
Building and the Premises in particular and subject to the Tenant if so
required by the Landlord removing the same at the end of the term and
making good all damage thereby occasioned and restoring the demised
premises to their former state and condition in all respects to the
reasonable satisfaction of the Landlord and PROVIDED FURTHER THAT if in
the Landlord's opinion any partitioning fails to comply with such
regulations as aforesaid or interferes with or damages the said
heating/air conditioning system for the Building the Tenant shall at the
request of the Landlord remove the same and make good all damage thereby
occasioned without delay
4.6 Aerials Signs and Advertisements
--------------------------------
4.6. Not at any time to affix or exhibit or permit or suffer to be affixed or
exhibited to or upon any part of the exterior of the Premises or on the
inside surface of any windows of the Premises or elsewhere in the
Building any placard poster sign signboard notice or advertisement
except as permitted by the Regulations set out in the Fourth Schedule
substituted therefor by the Superior Landlord for the good management
and reputation of the said Building
4.7. Obstruction
-----------
Not to do anything whereby any road path forecourt or other area over
which the Tenant may have rights of access or use may be damaged or the
proper use thereof by others may be obstructed in any way
<PAGE>
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4.8. Statutory Obligations and Fire Precautions
------------------------------------------
4.8.1. At the Tenant's own expense to execute all works and provide and
maintain all arrangements upon or in respect of the Premises or the use
to which the Premises are being put that are required in order to comply
with the requirements of any statute or any government department local
authority other public or competent authority environmental authority or
court of competent jurisdiction regardless of whether such requirements
are imposed on the Landlord the Tenant or the occupier and where such
works or arrangements are required in respect of the Premises and other
parts of the Building to be carried out by the Landlord to pay to the
Landlord on demand a contribution representing a proper and reasonable
proportion of the cost of implementing such works or arrangements
4.8.2. At the Tenant's own expense and without limiting the obligations set out
earlier in this sub-clause 4.8:-
4.8.2.1. to comply in all respects with the provisions of any statutes and any
other obligations imposed by law or by any bye-laws applicable to the
Premises or in regard to carrying on the business for the time being
carried on at the Premises and
4.8.2.2. to comply with the requirements and recommendations of the fire
authority and the Landlord in relation to fire precautions affecting
the Demised Premises
4.9. Access to Landlord and Notice of Repair
---------------------------------------
4.9.1. To permit the Landlord on reasonable prior notice (except in case of
emergency in which case no notice shall be necessary) and during
reasonable times (or at any time in case of emergency):-
4.9.1.1. to enter upon the Premises for the purpose of ascertaining that the
covenants and conditions of this Lease have been observed and
performed
4.9.1.2. to inspect the state of repair and condition of the Premises
4.9.1.3. to give to the Tenant or leave upon the Premises a notice specifying
any breach by the Tenant of the terms of this Lease and requesting
the Tenant as soon as practicable to remedy the same and
4.9.1.4. to exercise the rights and easements excepted and reserved in Part 2
of the First Schedule
<PAGE>
- 15 -
4.9.2. As soon as practicable to remedy the breach as required by such notice
4.9.3. If within ten Business Days (or within such shorter period as the
Landlord may reasonably specify) of the service of such a notice the
Tenant shall not have commenced and be proceeding diligently with the
execution of the work referred to in the notice or shall have failed
to complete the work within a reasonable period of time or if in the
Landlord's reasonable opinion the Tenant is unlikely to have completed
the work within such period to permit the Landlord to enter the
Premises to execute such work as may be necessary to comply with the
notice and to pay to the Landlord the proper cost of so doing and all
proper expenses incurred by the Landlord (including legal costs and
surveyor's fees) within ten Business Days of a written demand
4.10. Dealings
--------
4.10.1. Not to:-
4.10.1.1. hold the Premises expressly or impliedly on trust for another person
4.10.1.2. part with possession of the Premises
4.10.1.3. share possession of the Premises with another person
4.10.1.4. allow anyone other than the Tenant its officers and employees to
occupy the Premises
4.10.2. Not to assign a part (as distinct from the whole) of the Premises.
4.10.3. Not to assign the whole of the Premises:-
4.10.3.1. unless the proposed assignee has first covenanted by deed with the
Landlord in such form as the Landlord may reasonably require that with
effect from the date of the assignment and for the remainder of the
Term the assignee will pay the Rents and observe and perform all the
provisions of this Lease to be observed and performed by the Tenant
nor
4.10.3.2. (where the proposed assignee is a corporate body and the Landlord
reasonably so requires) without first procuring either covenants by
------
deed in the form (mutatis mutandis) set out in the Third Schedule with
the Landlord from not less than two individuals who are or a corporate
body which is acceptable
<PAGE>
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to the Landlord as guarantor or some other form of collateral security
--
reasonably acceptable to the Landlord nor
4.10.3.3. without the prior written consent of the Landlord (which will not be
unreasonably withheld)
4.10.3.4. The Tenant and the Surety shall be released from their respective
obligations contained in this Lease upon any assignment of this Lease
on the date two years after the assignment has been completed
4.10.4. Not to charge a part (as distinct from the whole) of the Premises
4.10.5. Not to charge the whole of the Premises except to a bank or similar
financial institution for the purpose only of borrowing money on the
security of the Lease and with the prior written consent of the
Landlord (which will not be unreasonably withheld)
4.10.6. Not to underlet a part (as distinct from the whole) of the Premises
4.10.7. Not to underlet the whole of the Premises:-
4.10.7.1. unless the proposed undertenant has first covenanted by deed with the
Landlord in such form as the Landlord may reasonably require that with
effect from the date of the underlease and during the term of the
underlease the undertenant will observe and perform all the provisions
of the underlease to be observed and performed by the undertenant and
the provisions of this Lease (other than payment of the Principal
Rent) to be observed and performed by the Tenant nor
4.10.7.2. (where the proposed undertenant is a corporate body and the Landlord
reasonably so requires) without first procuring either covenants by
------
deed with the Landlord in the form (mutatis mutandis) set out in the
Third Schedule from two individuals who are or a corporate body which
is acceptable to the Landlord as guarantor or an alternative form of
--
security reasonably acceptable to the Landlord nor
4.10.7.3. except by way of a Permitted Underlease nor
4.10.7.4. without the prior written consent of the Landlord (which will not be
unreasonably withheld)
<PAGE>
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4.10.8. To enforce and not to waive or vary the provisions of a Permitted
Underlease and to operate at the relevant dates of review the rent
review provisions contained in an underlease but not to agree the rent
upon such a review without the prior written approval of the Landlord
4.10.9. Within fifteen Business Days of any assignment charge underlease or
sub-underlease or any transmission or other devolution relating to the
Premises to give written notice thereof to the Landlord's solicitors
together with three certified copies of the relevant document and to
pay the Landlord's and Superior Landlord's solicitors' reasonable
charges for the registration of every such document plus Value Added
Tax
4.11. Landlord's Costs
----------------
To pay to the Landlord and indemnify the Landlord against all
reasonable and proper costs fees charges disbursements and expenses on
an indemnity basis (including without prejudice to the generality of
the above those payable to counsel solicitors surveyors and bailiffs)
reasonably and properly incurred by the Landlord in relation to or
incidental to:-
4.11.1 every application made by the Tenant for a consent approval or licence
required by the provisions of this Lease whether such consent approval
or licence is granted or lawfully refused or proffered subject to any
lawful qualification or condition or whether the application is
withdrawn
4.11.2. the preparation and service of a notice under Section 146 of the Law of
Property Act 1925 or incurred by or in contemplation of proceedings
under Sections 146 or 147 of that Act notwithstanding that forfeiture
is avoided otherwise than by relief granted by the Court
4.11.3. the recovery or attempted recovery of arrears of the Rents or other
sums due from the Tenant and
4.11.4. any steps taken in contemplation of or in connection with the
preparation and service of a schedule of dilapidations during or after
the expiry of the Term but which relates to dilapidations caused or
occurring during the Term
4.12. The Planning Acts
-----------------
4.12.1. Not to commit any breach of the Planning Acts and to comply with the
provisions and requirements of the Planning Acts that affect the
Premises whether as to the Permitted User or otherwise and to indemnify
and
<PAGE>
- 18 -
keep the Landlord indemnified both during and after the expiry of the
Term against all liability whatsoever including costs and expenses
incurred as a result of any breach occurring during the Term
4.12.2. At the expense of the Tenant to obtain all planning permissions and to
serve all such notices as may be required for the carrying out of any
operations or user on the Premises which may constitute Development
provided that no application for planning permission shall be made
without the prior written consent of the Landlord such consent to be
withheld or granted at the Landlord's absolute discretion provided that
the Landlord shall not unreasonably withhold consent in relation to
matters in respect of which it has already granted consent pursuant to
sub-clause 4.5 unless the implementation of such planning permission
would or would be likely to create or give rise to any tax or other
fiscal liability for the Landlord and the Tenant fails to indemnify the
Landlord against such liability having first been asked in writing to
do so
4.12.3. Subject only to any statutory direction to the contrary to pay and
satisfy any charge or levy that may subsequently be imposed under the
Planning Acts in respect of the carrying out or maintenance of any such
operations or the commencement or continuance of any such user
4.12.4. Notwithstanding any consent which may be granted by the Landlord under
this Lease not to carry out or make any alteration or addition to the
Premises or any change of use until:-
4.12.4.1. all necessary notices under the Planning Acts have been served and
copies produced to the Landlord
4.12.4.2. all necessary permissions and consents under or pursuant to the
Planning Acts have been obtained and produced to the Landlord and
4.12.4.3. the Landlord has acknowledged that every necessary planning permission
is acceptable to it the Landlord being entitled to refuse to
acknowledge its acceptance of a planning permission on the grounds
that any condition contained in it or anything omitted from it or any
period referred to in it would be or be likely to be prejudicial to
the Landlord's interest in the Premises whether during or after the
expiry of the Term
4.12.5. Unless the Landlord shall otherwise direct to carry out and complete
before the expiry of the Term:-
4.12.5.1. any works stipulated to be carried out to the Premises by a date
subsequent to such expiry as a condition of any planning permission
granted for any Development commenced before the expiry of the Term
and
<PAGE>
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4.12.5.2. any Development commenced upon the Premises in respect of which the
Landlord shall or may be or become liable for any charge or levy
under the Planning Acts
4.12.6. If required by the Landlord but at the cost of the Tenant to appeal
against any refusal of planning permission or the imposition of any
conditions on a planning permission relating to the Premises following
an application by the Tenant
4.12.7. Not to object to any application for planning permission that the
Landlord may make whether jointly or alone in respect of any adjoining
or neighbouring property
4.13. Plans, Documents and Information
--------------------------------
If reasonably called upon to do so to produce within a reasonable
period of demand:-
4.13.1. to the Landlord all such plans documents and other evidence as the
Landlord may reasonably require in order to satisfy itself that the
provisions of this Lease have been complied with
4.13.2. to the Landlord or its agent full particulars of all occupants of the
Premises and the terms of their occupation.
4.14. Indemnities
-----------
To be responsible for and to keep the Landlord fully indemnified against
all damage damages losses costs expenses actions demands proceedings
claims and liabilities made against or suffered or incurred by the
Landlord and for and against all damage occasioned to the Premises or to
any other part of the Building or any adjoining or neighbouring building
arising directly or indirectly out of:-
4.14.1. any act omission or negligence of the Tenant or any persons at the
Premises expressly or impliedly with the Tenant's authority or
4.14.2. any breach or non-observance by the Tenant of the covenants
conditions or other provisions of this Lease or any of the matters to
which this demise is subject
<PAGE>
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4.15. Disposal Boards and Viewing
---------------------------
To permit the Landlord upon reasonable notice and during the last six
months of the Contractual Term and at any time thereafter to permit upon
reasonable notice persons with the written authority of the Landlord or
its agent at reasonable times of the day to view the Premises without
interruption provided they are accompanied by the Landlord or its agents
4.16. Encroachments
-------------
Not to stop up darken or obstruct any windows or light belonging to the
Premises
4.17. Yield Up
--------
At the expiry of the Term:-
4.17.1. to yield up the Premises in accordance with the terms of this Lease
to the reasonable satisfaction of the Landlord
4.17.2. to remove all placards signs notices fascias boards name-plates and
advertisements fixed or exhibited by the Tenant in or upon the
Premises and immediately to make good to the reasonable satisfaction
of the Landlord any damage caused by such removal and
4.17.3. to give up all keys of the Premises to the Landlord
4.18. Interest on Arrears
-------------------
If the Tenant shall fail to pay the Rents or any other sum due under or
pursuant to this Lease within ten Business Days of the date on which
payment was due and formally demanded (except in the case of the
Principal Rent) the Tenant shall pay to the Landlord Interest on the
Rents or other such sum and such Interest shall be deemed to be and shall
be recoverable as rent in arrear
4.19. Statutory Notices
-----------------
To give full particulars to the Landlord of any notice direction order or
proposal for the Premises made given or issued to the Tenant by any local
or public authority within three Business Days of receipt and
<PAGE>
- 21 -
if so required by the Landlord to produce it to the Landlord and without
delay and at the cost of the Tenant to take all necessary steps to comply
with such notice direction or order
4.20. Defective Premises
------------------
To give notice to the Landlord of any defect in the Premises which might
give rise to an obligation on the Landlord to do or refrain from doing
any act or thing in order to comply with the provisions of this Lease or
the duty of care imposed on the Landlord pursuant to the Defective
Premises Act 1972 or otherwise and at all times to display and maintain
all necessary notices which the Landlord may from time to time require to
be displayed at the Premises
4.21. Compliance with Regulations
---------------------------
At all times during the term to observe perform and comply with the
conditions and regulations specified in the Fourth Schedule hereto and
any alterations or additions thereto which may from time to time be made
by the Landlord for the good management and reputation of the Building
and the curtilage thereof and the parking areas or the safety or
convenience of the tenants thereof And to take all reasonable steps to
secure compliance with such conditions and regulations by the Tenant's
staff and visitors
4.22. Outside Business Hours
----------------------
To give to the Landlord reasonable prior notice if the Tenant wishes to
have access to the Premises outside the Business Hours for the Building
and to pay to the Landlord on demand from time to time the costs of
providing any of the services required by the Tenant outside the Business
Hours
4.23. Superior Lease Covenants
------------------------
4.23.1. To observe and perform the Superior Lease Covenants
4.23.2. Not to do or permit or suffer anything whereby the Superior Lease may
be avoided or forfeited
4.23.3. To keep the Landlord indemnified against all claims liabilities costs
and expenses for or in respect of any breach by the Tenant of the
Superior Lease Covenants
<PAGE>
- 22 -
4.23.4. To permit the Landlord and any authorised person to enter the Premises
at reasonable times only and upon reasonable prior notice (except in
cases of emergency) in order to comply with any of the Superior Lease
Covenants which may be necessary to prevent a forfeiture of the
Superior Lease subject to the Landlord making good without unreasonable
delay any damage thereby caused
4.24. Option to Determine
-------------------
If the Tenant shall desire to terminate the Term and to quit the
Premises on the date 29th September 1998 and shall give to the Landlord
not less than twelve months previous notice in writing to that effect
(in respect of which notice time shall be of the essence) then upon the
expiration of such notice the term of years created by this underlease
shall forthwith cease and determine but without prejudice to any remedy
of either party against the other in respect of any antecedent claims
or breach of covenant contained in this Lease and the Tenant shall
deliver up vacant possession of the Premises
5. THE LANDLORD'S COVENANTS
------------------------
The Landlord covenants with the Tenant that:-
5.1. the Tenant paying the Rents and performing and observing the covenants and
conditions on the part of the Tenant herein contained the Landlord shall
permit the Tenant peaceably and quietly to hold and enjoy the Premises
during the Term without any interruption or disturbance from or by the
Landlord or by any person lawfully claiming through under or in trust for
the Landlord
5.2. it will use best endeavours to procure the compliance by the Superior
Landlord with the covenants on the part of the Superior Landlord contained
in the Superior Lease
5.3. the Landlord shall during the Term pay the rent reserved by the Superior
Lease and perform and observe the covenants and conditions contained in the
Superior Lease and on the part of the Landlord as tenant to be performed
and observed except to the extent that they fall to be performed and
observed by the Tenant pursuant to this Lease
<PAGE>
- 23 -
6. INSURANCE
---------
6.1. Tenant's Insurance Covenants
----------------------------
The Tenant covenants with the Landlord:-
6.1.1. to pay the Insurance Rent within ten business days of a written demand
for the period from and including the date of this Lease up to and
including the day before the next policy renewal date and subsequently
to pay the Insurance Rent within ten Business Days of a written demand
and (if so demanded) in advance of the policy renewal date provided that
any such demand will be supported by proper evidence that the demand has
been properly made
6.1.2. to comply with all the requirements and recommendations of the insurers
of the Building that are notified to the Tenant
6.1.3. not to do or knowingly permit anything that could cause any policy of
insurance on or in relation to the Building to become void or voidable
wholly or in part nor (unless the Tenant shall have previously notified
the Landlord and agreed to pay the increased premium) anything by which
additional insurance premiums may become payable
6.1.4. to keep the Premises supplied with such fire fighting equipment as the
insurer may require or as the Landlord may reasonably require and to
maintain such equipment to their satisfaction and in efficient working
order
6.1.5. to comply with the requirements and recommendations of the insurer and
the reasonable requirements of the Landlord as to fire precautions
relating to the Premises
6. 1.6. not to obstruct the access to any fire equipment or the means of escape
from the Premises nor to lock any fire door while the Premises are
occupied
6.1.7. as soon as it reasonably comes to the attention of the Tenant to give
notice to the Landlord immediately upon the happening of any event which
might affect any insurance policy on or relating to the Premises or upon
the happening of any event against which the Landlord may have insured
under this Lease
<PAGE>
- 24 -
6.1.8. not to effect any policy of insurance in relation to the Building
without the prior written consent of the Landlord PROVIDED THAT the
Tenant may insure the contents of the Premises and third party risks
without the consent of the Landlord
6.1.9. if at any time the Tenant shall be entitled to the benefit of any
insurance on the Premises except insurance of the contents of the
Premises and third party risks (which is not effected or maintained in
pursuance of any obligation contained in this Lease) to apply all money
received by virtue of such insurance in making good the loss or damage
in respect of which such money shall have been received
6.1.10. if and whenever during the Term the Premises or any part ("the relevant
part") of the Building giving access to the Premises are damaged or
destroyed by any of the Insured Risks and the insurance money under the
policy of insurance effected by the Landlord pursuant to its obligations
contained in this Lease is by reason of any act or default of the Tenant
or anyone at the Premises expressly or by implication with the Tenant's
authority wholly or partially irrecoverable immediately in every such
case to pay to the Landlord on demand the amount of such insurance money
so irrecoverable with Interest on such amount (from the date of demand
or (if earlier) the date on which the Landlord first suffered financial
loss because of the insurance money being irrecoverable in whole or in
part as aforesaid)
6.2. Suspension of Principal Rent
----------------------------
That if the Premises or any part thereof shall at any time during the term
be destroyed or damaged by any of the Insured Risks so as to be unfit for
occupation and use and any policy or policies of insurance effected by the
Landlord shall not have vitiated or payment of the policy monies refused in
consequence of some act or default of the Tenant the rents hereby reserved shall
be suspended and shall cease to be payable until the Premises shall again be
rendered fit for occupation and use or until the expiration of a period of three
years (whichever shall be the shorter period) and if the Premises are not
reinstated or rebuilt within the period of three years the Tenant may terminate
this Lease by giving written notice to the Landlord within one month after the
expiration of the period of three years and upon service of such notice this
Lease shall terminate but without prejudice to any claim the Landlord may have
against the Tenant for any earlier breach of covenant and any dispute concerning
this Clause shall be determined by a single arbitrator in accordance with the
Arbitration Acts 1950 and 1979
<PAGE>
- 25 -
7. PROVISOS
--------
7.1. Re-Entry
--------
If and whenever during the Term:-
7.1.1. the Rents (or any of them or any part of them) under this Lease are
outstanding for more than ten Business Days after becoming due whether
formally demanded or not or
7.1.2. there is a breach by the Tenant or the Surety of any covenant or other
term of this Lease or any document expressed to be supplemental to this
Lease or
7.1.3. the Tenant or the Surety commits or permits an Act of Insolvency
the Landlord may re-enter the Premises or any part of them in the name of the
whole at any time and even if any previous right of re-entry has been waived and
then the Term will absolutely cease but without prejudice to any rights or
remedies which may have accrued to the Landlord against the Tenant or the Surety
in respect of any breach of covenant or other term of this Lease including the
breach in respect of which the re-entry is made
7.2. Rights and Easements
--------------------
The operation of Section 62 of the Law of Property Act 1925 shall be
excluded from this Lease and the only rights granted to the Tenant are those
expressly set out in Part I of the First Schedule and the Tenant shall not by
virtue of this Lease be deemed to have acquired or be entitled to and the Tenant
shall not during the Term acquire or become entitled to by any means whatever
any easement from or over or affecting any other land or premises now or at any
time after the date of this Lease belonging to the Landlord or any Group Company
of the Landlord and not comprised in this Lease
7.3. Disputes with Adjoining Occupiers
---------------------------------
If any dispute arises between the Tenant and the tenants or occupiers of
other parts of the Building or the Adjoining Property as to any easement right
or privilege in connection with the use of the Premises and any other part of
the Building or the Adjoining Property or as to the boundary structures
separating the Premises from any other property it shall be decided by the
Landlord or in such manner as the Landlord shall direct
<PAGE>
- 26 -
7.4. Exclusion of Use Warranty
-------------------------
Nothing in this Lease or in any consent granted by the Landlord under this
Lease shall imply or warrant that the Premises may lawfully be used under the
Planning Acts for the purpose authorised in this Lease or any purpose
subsequently authorised
7.5. Representations
---------------
The Tenant acknowledges that this Lease has not been entered into in
reliance wholly or partly on any statement or representation made by or on
behalf of the Landlord except any such statement or representation that is
expressly set out in this Lease
7.6. Tenant's Property
-----------------
If after the Tenant has vacated the Premises on the expiry of the Term any
property of the Tenant remains in or on the Premises and the Tenant fails to
remove it within ten Business Days after being requested in writing by the
Landlord to do so or if after using all reasonable endeavours the Landlord is
unable to make such a request to the Tenant within ten Business Days from the
first attempt so made by the Landlord:-
7.6.1. the Landlord may as the agent of the Tenant sell such property and the
Tenant shall indemnify the Landlord against any liability incurred by it
to any third party whose property shall have been sold by the Landlord
in the mistaken belief held in good faith (which shall be presumed
unless the contrary is proved) that such property belonged to the Tenant
7.6.2. the Landlord shall (subject to paragraph 7.6.3 below) forthwith after
such sale pay to the Tenant the proceeds of such sale after having
deducted the reasonable fees and expenses incurred by or on behalf of
the Landlord in connection with such sale
7.6.3. if the Landlord having made reasonable efforts is unable to locate the
Tenant the Landlord shall be entitled to retain such proceeds of sale
absolutely unless the Tenant shall claim them within three months of the
date on which the Tenant vacated the Premises and
7.6.4. the Tenant shall indemnify the Landlord against any damage occasioned to
the Premises and any actions claims proceedings costs expenses and
demands made against the Landlord caused by or related to the presence
of the property in or on the Premises
<PAGE>
- 27 -
7.7. Compensation on Vacating
------------------------
Any statutory right of the Tenant to claim compensation from the Landlord
on vacating the Premises shall be excluded to the extent that the law allows
7.8. Covenants Relating to Adjoining Premises
----------------------------------------
Nothing contained in or implied by this Lease shall give the Tenant the
benefit of or the right to enforce or to prevent the release or modifications of
any covenant agreement or condition entered into by any tenant of the Landlord
in respect of any property not comprised in this Lease
7.9. Service of Notices
------------------
7.9.1. The provisions of Section 196 of the Law of Property Act 1925 as amended
by the Recorded Delivery Service Act 1962 shall apply to the giving and service
of all notices and documents under or in connection with this Lease except that
Section 196 shall be deemed to be amended as follows:
the final words of Section 196(4) . . . . and that service . . . be
delivered" shall be deleted and there shall be substituted ". . . and that
service shall be deemed to be made on the second Business Day after the
registered letter has been posted"
7.9.2. Any notice or document shall also be sufficiently served if sent by
telex facsimile transmission or any other means of electronic transmission to
the party to be served and that service shall be deemed to be made on the day of
transmission if transmitted before 4 p.m. on a Business Day but otherwise on the
next following Business Day
and in this Clause "Party" includes the Surety
7.10. Value Added Tax
---------------
7.10.1. Save as the context requires or as otherwise stated all references to
payments made in this Lease are references to such payments exclusive of any
Value Added Tax chargeable in respect of the supply of goods or services for
which the payment is consideration and insofar as such payments fall to be made
under this Lease such Value Added Tax shall be added to the amount thereof and
paid in addition thereto
<PAGE>
- 28 -
7.10.2. Without prejudice to and save as mentioned earlier in this sub-clause
7.10 where any supply is made pursuant to this Lease the recipient of such
supply shall pay to the supplier any Value Added Tax chargeable in respect
thereof
7.10.3. Where any payment is required to be made pursuant to this Lease to
reimburse the payee for any expenditure which the payee may have incurred such
payment shall include an amount equal to any Value Added Tax comprised in that
expenditure which is not recoverable by the payee as input tax under Section 14
of the Value Added Tax Act 1983
7.11. Exclusion of Landlord and Tenant Act of 1954
--------------------------------------------
Having been authorised to do so by Order of the Mayor's and City of
London Court made on the 18th day of April 1995 under the provisions of Section
38(4) of the Landlord and Tenant Act (as amended by Section 5 of the Law of
Property Act 1969) the Landlord and the Tenant hereby agree that the provisions
of Section 24 to 28 (inclusive) of the Landlord and Tenant Act shall be excluded
in relation to this Lease.
7.12. Jurisdiction
------------
7.12.1. This Deed shall be governed by and construed in accordance with English
Law
7.12.2. The parties hereto irrevocably submit to the non-exclusive jurisdiction
of the High Court of Justice in London for the purpose of hearing and
determining any dispute arising out of this Deed and for the purpose of
enforcement of any judgment against its assets, the Surety agrees that service
of any writ notice or other document for the purpose of any proceedings in such
Court shall be duly served upon it if delivered or sent by registered post to
ACC Corp at 39 State Street City Rochester NY 14614 United States of America
7.12.3 It is hereby agreed that there is no Agreement for Lease to which this
Lease gives effect
IN WITNESS of which this Lease has been executed as a Deed by the parties
and is delivered on the date appearing in the Particulars
<PAGE>
- 29 -
THE FIRST SCHEDULE
------------------
Part I
------
Rights and Easements Granted
----------------------------
1. The exclusive right to park private motor cars in twelve parking spaces in
the Car Park and/or any adjoining parking area from time to time available to
the Landlord
2. The following rights (in common with the Landlord the Superior Landlord and
their lessees and tenants and all other persons expressly or impliedly
authorised by them respectively):-
2.1. the right at all times to use the common entrance halls (including the
approaches thereto from the public highway) staircases lift lobbies
corridors passages toilets and (during the hours when the same shall be in
operation) the lifts for the purpose of ingress to and egress from the
Premises:-
(i) during the hours of 9.00 a.m. to 12.30 p.m. on Saturdays and 8.30 a.m.
to 6.30 p.m. on all other weekdays except Bank and other general Public
Holidays
(ii) subject to the Tenant complying with the covenant contained in Clause
4.22 during all other hours and days
2.2. the free and uninterrupted passage and running of water soil gas
electricity telephone telex air and other services from or to the Premises
through the sewers drains pipes cables conduits and ducts which are now or
may hereafter be in under over or upon the Building
2.3. the right to support shelter and protection for the Premises from the
remainder of the Building
THE FIRST SCHEDULE
------------------
Part 2
------
Rights and Easements Excepted and Reserved
------------------------------------------
1. The right at any time to alter or add to any adjoining adjacent or
neighbouring premises or building upon any adjoining adjacent or neighbouring
land or to build thereon notwithstanding that the access of light or air to any
windows of the Premises is thereby diminished but provided that any damage
caused in the exercise of such right is forthwith made good to the satisfaction
of the Tenant
<PAGE>
- 30 -
2. The free and uninterrupted passage and running of water soil gas
electricity telephone telex air and other services from or to other parts of the
Building through the sewers drains pipes wires cables conduits and ducts which
are now or may hereafter be in under over or upon the Premises
3. The full and free right and liberty to enter upon the Premises after giving
the requisite notice (except in case of emergency or as otherwise provided) at
such times and for such purposes as the Tenant herein covenants to permit entry
or where the same is necessary for the purposes of enabling the Landlord to
comply with its obligations herein contained and perform the services set out in
the Fourth Schedule of the Superior Lease
4. Full right of support shelter and protection for the remainder of the
Building from the Premises
THE SECOND SCHEDULE
-------------------
Principal Rent and Rent Review
------------------------------
1. In this Schedule the following expressions shall have the following
meanings:-
(a) "the Review Date" means the Twenty fifth day of December One thousand
nine hundred and ninety eight
(b) "the rent periods" means the initial period commencing with the date
on which rent commences to be payable hereunder until (but not
including) the Review Date and thereafter the final period to the end
of the term
(c) "the basic yearly rent" means the Principal Rent
(d) "commercial yearly rent" means the yearly rent at which the Premises
as a whole might reasonably be expected then to be let in the open
market with vacant possession by a willing landlord to a willing
tenant by a lease in the same terms in all respects as this Lease
(other than the amount of the basic yearly rent payable hereunder but
including the provisions for rent review and excluding the provisions
of Clause 4.24 of this Lease) for a term equal to the original term of
this Lease commencing on the Review Date and on the following
assumptions (whether or not such shall in fact be the case):-
(i) that the Premises are fitted out and equipped for immediate
occupation and use for the purpose or purposes required by the
willing tenant referred to in paragraph (d) above
<PAGE>
- 31 -
(ii) that no work has been carried out thereon by the Tenant its
sub-tenants or their respective predecessors in title during the
Contractual Term which has diminished the rental value of the
Premises and that in case the Premises have been destroyed or
damaged they have been fully restored
(iii) that all the Tenant's covenants and conditions in this Lease
have been duly performed and observed
(iv) that the Premises may be lawfully used by any person for the
purposes permitted under this Lease
(v) that the willing tenant referred to in paragraph (d) would
commence paying rent immediately on and from the Review Date and
that such rent would not be discounted in any way to reflect any
rent concession or other benefit
but disregarding
(i) any effect on rent of the fact that the Tenant its sub-tenants
or their respective predecessors in title have been in
occupation of the Premises or any part thereof
(ii) any goodwill attached to the Premises or any part thereof by
reason of the carrying on thereat of the business of the Tenant
its sub-tenants or their predecessors in title in their
respective businesses and
(iii) any effect on rent of any improvement of the Premises or any
part thereof completed not more than twenty one years prior to
the date at which the review is to take effect and carried out
with consent (where required) otherwise than in pursuance of an
obligation to the Landlord or its predecessors in title either
(a) by the Tenant its sub-tenants or their respective
predecessors in title during the term or (b) by any tenant or
sub-tenant of the Premises before the commencement of the term
so long as the Landlord or its predecessors in title have not
since the improvement was carried out had vacant possession of
the relevant part of the Premises
2. The Landlord shall be entitled by notice in writing given to the
Tenant at any time during the last year of any rent period to call for a review
of the basic yearly rent payable under this Lease and if upon any such
<PAGE>
- 32 -
review it shall be found that the commercial yearly rent of the Premises at the
end of such rent period shall be greater than the Principal Rent hereinbefore
reserved then as from the end of such rent period the basic yearly rent payable
under this Lease shall on each such occasion be increased to the then commercial
yearly rent as aforesaid
3. If notwithstanding the provisions of the previous sub-clause a review
of the basic yearly rent shall not have been called for during the last year of
any rent period by notice as aforesaid the Landlord may at any time during the
first four years of the next rent period immediately following serve upon the
Tenant a notice calling for a review of the basic yearly rent payable under this
Lease and if upon any such review it shall be found that the commercial yearly
rent of the demised premises at the end of the year of the term in which or at
the next usual quarter day following the date on which the notice was actually
served (whichever shall be the earlier) shall be greater than the Principal Rent
hereinbefore reserved or than the basic yearly rent then payable hereunder owing
to the operation of this present Schedule (as the case may be) then as from the
end of such year of the term or such quarter day (whichever shall be the
earlier) the basic yearly rent payable under this Lease shall on each such
occasion be increased to the then commercial yearly rent as aforesaid Provided
always that:-
(a) a review of the basic yearly rent shall (except in circumstances
arising under paragraph (b) of this proviso) only be called for once
in accordance with the provisions of this sub-clause and the previous
sub-clause of this Schedule during the period of five years commencing
with the last year of each rent period and
(b) if a review of the basic yearly rent shall have been called for at any
time in accordance with this sub-clause or the previous sub-clause of
this Schedule by notice as aforesaid but the right to review the basic
yearly rent or to recover an increased basic yearly rent is restrained
or restricted by or by virtue of any Act of Parliament coming into
force after the review has been called for as aforesaid so that either
the review cannot be carried out or the whole or any part of any
increase in the basic yearly rent arising upon that review cannot be
recovered with effect from the review date the Landlord may by notice
in writing to the Tenant require the previous sub-clause or this sub-
clause (as the case may be) to be construed as if the basic yearly
rent was to be reviewed at and any increased basic yearly rent found
to be payable was to be payable with effect from the date upon which
such restraint or restriction was first removed or relaxed and for the
purpose of operating the review procedure under sub-clause 4 of this
Schedule such notice shall be construed as the Landlord's notice
calling for review in lieu of the notice served by the Landlord under
this sub-clause or the previous sub-clause of this Schedule (as the
case may be)
<PAGE>
- 33 -
4. Such review shall in the first instance be made by the Landlord and
the Tenant or their respective Surveyors in collaboration but if no agreement as
to the amount of the increase (if any) to be made in the said yearly rent shall
have been reached between the parties within three months after the date of the
Landlord's notice calling for such review (or any extension of such time agreed
in writing between the parties) the question whether there shall be an increase
in the said yearly rent (and if so what the amount of the revised yearly rent
shall be) shall be determined by an arbitrator such arbitrator to be nominated
in the absence of agreement by or on behalf of the President for the time being
of the Royal Institution of Chartered Surveyors on the application of either the
Landlord or the Tenant And in relation to the application for any such
nomination or the determination by the person nominated time shall not be of the
essence Provided always that if at any review date the revised basic yearly
rent to be payable as from such review date shall not then have been agreed
between the Landlord and the Tenant and if the parties shall not have made any
application to the President for the time being of the Royal Institution of
Chartered Surveyors as hereinbefore provided and shall not have agreed on the
identity of the arbitrator the Tenant may serve on the Landlord notice in
writing containing a proposal as to the amount of such revised basic yearly rent
not being less than the basic yearly rent payable immediately before such review
date and the amount so proposed shall be deemed to have been agreed by the
parties as the revised basic yearly rent to be payable from such review date and
sub-clause 6 of this Schedule shall apply accordingly unless the Landlord shall
make such application as aforesaid within three months after service of such
notice by the Tenant
5. (a) In the case of an arbitration the arbitration shall be conducted in
accordance with the Arbitration Act 1950 to 1979
(b) When the amount of any basic yearly rent to be ascertained as
hereinbefore provided shall have been so ascertained memoranda specifying and
confirming the revised basic yearly rent to be payable shall forthwith be signed
by or on behalf of the Landlord and the Tenant and annexed to this Lease and the
Counterpart thereof and the parties shall bear their own costs in respect
thereof
6. If at any review date the revised basic yearly rent to be payable as from
such review date shall not then have been agreed or determined in the manner
aforesaid then until such agreement or determination shall have been made the
Tenant shall pay the said rent at such yearly rate at such times and in such
manner as shall have been applicable immediately prior to such review date and
any rent in excess of such rent which may later be found to be payable hereunder
in respect of the period from such review date until the quarter day next
following such agreement or determination shall be paid without any deduction
within twenty one days of the date on which the revised basic yearly rent shall
have been ascertained with interest thereon at four per cent below the Interest
Rate calculated on a day to day basis from the date at which the rent was to be
reviewed down to the date of payment
<PAGE>
- 34 -
THE THIRD SCHEDULE
------------------
Covenants by the Surety
-----------------------
1.1. Covenant and indemnity by Surety
--------------------------------
(a) In consideration of the Landlord entering into this Lease the Surety
covenants with the Landlord that:-
(i) the Tenant (failing whom the Surety) will at all times during
the Term duly perform and observe all the covenants on the part
of the Tenant contained in this Lease (including without
limitation the payment of the Rents and all other sums payable
under this Lease) in the manner and at the times specified in
this Lease and
(ii) the Surety will indemnify and keep indemnified the Landlord
against all claims demands losses damages liability costs fees
and expenses whatsoever sustained by the Landlord by reason of
or arising in any way directly or indirectly out of any default
by the Tenant in the performance and observance of any of its
obligations hereunder or the payment of any Rents or other sums
payable hereunder or arising as a result of the Lease being
disclaimed by a liquidator or trustee in bankruptcy or similar
officer appointed to or in respect of the Tenant and having such
power (each a "Relevant Disclaimer")
(b) For the purposes of Clause 1.l(a) above the Term will be deemed to
continue for the duration specified in this Lease notwithstanding that a
Relevant Disclaimer occurs
1.2. Nature of Surety's Obligations
------------------------------
(a) The obligations of the Surety hereunder are primary obligations
(b) The Surety is jointly and severally liable with the Tenant for the
fulfillment of all the obligations of the Tenant under this Lease
(c) Notwithstanding any legal limitation disability or incapacity on or of
the Tenant or any other fact or circumstance whether known to the Landlord or
not the Landlord may proceed against and recover from the Surety as if the
Surety was named as the Tenant in this Lease
<PAGE>
- 35 -
(d) The Landlord shall not be obliged to make any demand on the Tenant
before enforcing its rights against the Surety hereunder
1.3. Waiver by Surety
----------------
The obligations of the Surety hereunder are to constitute a continuing
security in addition to and without prejudice to any other rights which the
Landlord may have and the Surety hereby waives any right to require the Landlord
to proceed against the Tenant or to pursue any other remedy whatsoever which may
be available to the Landlord before proceeding against the Surety
1.4. Postponement of claims by Surety against Tenant
-----------------------------------------------
(a) Unless otherwise instructed by the Landlord the Surety will not claim
or accept any payment or property in any liquidation bankruptcy composition or
arrangement of the Tenant in competition with the Landlord nor seek to recover
(whether directly or by way of set off lien counter claim or otherwise) any
money or other property nor exercise any other right or remedy whatsoever in
respect of any sum which may be or become due to the Surety from the Tenant nor
exercise any rights of subrogation or indemnity against the Tenant until in each
such case all the Surety's obligations hereunder have been performed and
discharged in full
(b) The Surety will forthwith pay to the Landlord an amount equal to any
set-off in fact exercised by it and will promptly pay or transfer to the
Landlord any payment or distribution or benefit in fact received by it
notwithstanding the terms of Clause 1.4(a) above
(c) The Surety agrees that it will exercise any rights of subrogation
against the Tenant and any rights to prove in a liquidation of the Tenant which
it may have in accordance with the directions of the Landlord
1.5. Postponement of participation by Surety in security
---------------------------------------------------
The Surety confirms it has not taken and undertakes it will not take from
the Tenant any security in connection with its obligations hereunder and
declares that any security so taken shall be held on trust for the Landlord and
further the Surety agrees that it shall not be entitled to participate in any
security held by the Landlord in respect of the Tenant's obligations to the
Landlord under this Lease nor to stand in the place of the Landlord in respect
of any such security until all the obligations of the Tenant or the Surety to
the Landlord under this Lease have been performed or discharged in full
<PAGE>
- 36 -
1.6. No release of Surety
--------------------
None of the following nor any combination thereof shall release determine
discharge or in any way lessen or affect the liability of the Surety hereunder
or otherwise prejudice or affect the right of the Landlord to recover from the
Surety to the full extent of its obligations hereunder:-
(a) any neglect delay or forbearance of the Landlord in endeavouring to
obtain payment of the Rents or other amounts payable under this Lease
by the Tenant or in enforcing the performance or observance of any of
the obligations of the Tenant under this Lease
(b) any refusal by the Landlord to accept Rents tendered by or on behalf
of the Tenant
(c) any extension of time given by the Landlord to the Tenant
(d) any variation of the terms of this Lease (including any reviews of the
Principal Rent) or the transfer of the Landlord's reversion or the
assignment of this Lease or the surrender of any part thereof
(e) the release of any person for the time being jointly or severally
liable for the Tenant's obligations or liable as surety for the
Tenant's obligations
(f) any change in the constitution structure or powers of any of the
Tenant the Surety or the Landlord or the liquidation administration or
bankruptcy (as the case may be) of any of the Tenant the Surety or the
Landlord
(g) any legal limitation or any immunity disability or incapacity of the
Tenant (whether or not known to the Landlord) or the fact that any
dealings with the Landlord or the Tenant may be outside or in excess
of the powers of the Tenant or the Surety
(h) the taking variation compromise renewal release or refusal or neglect
to perfect or enforce any right remedies or securities against the
Tenant or any other person
(i) any Relevant Disclaimer
<PAGE>
- 37 -
(j) any other act omission matter or thing whatsoever whereby but for this
provision the Surety would be exonerated or released either wholly or
in part (other than a release by Deed given by the Landlord)
1.7. Disclaimer or forfeiture of Lease
---------------------------------
(a) The Surety undertakes to the Landlord that:-
(i) if a liquidator or trustee in bankruptcy or similar officer
having such power shall disclaim or surrender this Lease or
(ii) if this Lease shall be forfeited or
(iii) if the Tenant shall cease to have legal existence
THEN the Surety shall if the Landlord by notice in writing given to the
Surety within six (6) months after such disclaimer or other event occurs so
requires accept from and execute and deliver to the Landlord a counterpart
of a new lease of the Premises for a term commencing on the date of the
disclaimer or other event and continuing for the residue then remaining
unexpired of the Term (as specified in this Lease) such new lease to be at
the cost of the Surety and to be at the same rents and subject to the same
covenants conditions and provisions as are contained in this Lease
(b) If this Lease is disclaimed and for any reason the Landlord does not
require the Surety to accept a new lease of the Premises in accordance with this
Schedule the Landlord shall be entitled to require that the Surety pays to the
Landlord on demand an amount equal to the Rents for the period commencing with
the date of such disclaimer and ending on whichever is the earlier of:-
(i) the date six months after such disclaimer and
(ii) the date (if any) upon which the Premises are relet
1.8 Cumulative Powers and Avoidance of Payments
-------------------------------------------
(a) The powers conferred on the Landlord hereunder are cumulative without
prejudice to its powers under the general law and may be exercised as often as
the Landlord thinks appropriate The Landlord may in
<PAGE>
- 38 -
connection with the exercise of its powers join or concur with any person in any
transaction scheme or arrangement whatsoever
(b) If the Landlord reasonably considers that any amount paid by the Surety
hereunder is capable of being avoided or set aside on the liquidation or
administration of the Surety or otherwise then for the purposes of this Lease
such amount shall not be considered to have been paid
(c) Any settlement or discharge between the Landlord and the Tenant and/or
the Surety shall be conditional upon no security or payment to the Landlord by
the Tenant or the Surety or any other person being avoided or set aside or
ordered to be refunded or reduced by virtue of any provision or enactment
relating to bankruptcy insolvency or liquidation for the time being in force and
accordingly (but without limiting the Landlord's other rights hereunder) the
Landlord shall be entitled to recover from the Surety the value which the
Landlord has placed upon such security or the amount of any such payment as if
such settlement or discharge had not occurred
1.9. Representations
---------------
The Surety warrants and represents that it has full power to enter into the
obligations and covenants hereunder and has taken all necessary corporate or
other action required to authorise its execution of this Lease and that the
provisions of this Lease constitute the legal valid and binding obligations of
the Surety
1.10. Benefit of guarantee
--------------------
(a) The covenants undertakings and agreements of the Surety hereunder
shall enure for the benefit of the successors and assigns of the Landlord to
this Lease without the necessity for any assignment thereof to such successors
and assigns
(b) Without prejudice to Clause 1.10(a) above the Landlord may assign the
benefit of the provisions of this Lease and the covenants undertakings and
agreements of the Surety hereunder to any third party and the Surety shall join
in such documents as may be necessary to effect such assignment
1.11. Interest on Late Payment
------------------------
The Surety will pay Interest on all sums payable by it to the Landlord
hereunder
<PAGE>
- 39 -
1.12. Costs and Expenses
------------------
The Surety will indemnify the Landlord against all the Landlord's legal
and other costs losses charges and expenses (on a full indemnity basis) arising
in connection with any modification amendment release and/or enforcement or
attempted enforcement of or preservation of the Landlord's rights under this
Lease
1.13. Set-off
-------
All payments to be made by the Surety hereunder will be made in full
without any deduction for any set-off or counterclaim the Surety may have
against the Landlord
1.14. Waiver
------
No delay or omission by the Landlord in exercising any right power or
privilege hereunder shall impair such right power of privilege or be construed
as a waiver of such right power or privilege
1.15. Invalidity
----------
If at any time any one or more provisions of this Schedule is or becomes
invalid illegal or unenforceable in any respect under any law the validity
legality and enforceability of the remaining provisions hereof shall not be in
any way affected or impaired thereby
THE FOURTH SCHEDULE
-------------------
The Regulations
---------------
1. The Landlord (which term shall in this Fourth Schedule include the Superior
Landlord) or the Landlord's agents or staff shall be at liberty to refuse to any
person access to the Building if they shall think that such refusal is for the
benefit of the tenants or occupants of the Building
2. Tenants are not entitled to use the lifts for the carriage of articles
likely to cause damage to the lifts or the Building and the Landlord or the
Landlord's agents or staff shall be at liberty to refuse permission to use the
passenger lifts for the carriage of any goods whatsoever if this shall interfere
with the convenience of the other tenants or occupants of the said building or
be likely to cause damage to the passenger lifts or the Building
<PAGE>
- 40 -
3. Tenants are not entitled to place deposit store or abandon any goods
articles or rubbish whatsoever in the common parts of the said building but
shall place all rubbish only in the bin stores or other areas designated for
that purpose by the Landlord from time to time
4. Tenants shall not misuse the communal toilet facilities and lifts and in
particular shall not empty tea leaves down the sinks or deposit solid or
obnoxious matter in the toilets
5. Tenants shall not be entitled to erect nameboards or display notices in the
common parts of the Building but each tenant may have one entry only in respect
of the tenancy on the Landlord's nameboard in the entrance hall of the Building
by arrangement with the Landlord's agents The Landlord reserves the right to
vary the position of any entrance hall nameboard and to rearrange the
disposition of the lettering thereon Nameboards or display notices or lettering
on the entrance door or subsidiary entrance door of the Premises must conform to
the standard design for the Building to be notified to the tenant by the
Landlord or the Landlord's agents
6. Any services rendered to a tenant by staff employed by the Landlord other
than services referred to in the Fourth Schedule of the Superior Lease hereto
are to be deemed special services for which and for the consequences of which
that tenant shall be entirely responsible and tenants shall not be entitled to
any services from such staff which may in any way interfere with the performance
of their duties to the Landlord or the Landlord's agents
7. Tenants shall not play or permit or suffer the playing of any musical
instrument or the use of any radio television record-player or other similar
device for the reproduction of any music or sound on or in the Premises so as to
be audible outside the Premises
(THE COMMON SEAL of IBM UNITED KINGDOM
(LIMITED was hereunto affixed in the
(presence of:-
Director [illegible]
Secretary [illegible]
<PAGE>
- 41 -
Annex A
Site Plan
[This document is a site plan that shows the Chiswick Centre bordered by
Chiswick High Road, Essex Place and Acton Lane.]
<PAGE>
Exhibit 99.13
DATED 3rd June 1994
----------------------------------------------------
(1) IBM UNITED KINGDOM LIMITED
- and -
(2) ACC LONG DISTANCE UK LIMITED
- and -
(3) ACC CORP.
___________________________________
SUPPLEMENTAL LEASE
of the
Ninth Floor The Chiswick Centre
414 Chiswick High Road London W4
___________________________________
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 071-638-1111
Fax: 071-972-7990
REF: AXG/4179H
DATE: 18/03/94
<PAGE>
- 2 -
SUPPLEMENTAL LEASE PARTICULARS
------------------------------
DATE : 3rd June 1994
- --------------------------------------------------------------------------------
LANDLORD : IBM UNITED KINGDOM LIMITED whose registered office
is at P.O. Box 41 North Harbour Portsmouth
Hampshire P06 3AU
- --------------------------------------------------------------------------------
TENANT : ACC LONG DISTANCE UK LIMITED (Company Registration
Number 2671855) whose registered office is at 2-3
Cursitor Street London EC4A 1NE
- --------------------------------------------------------------------------------
SURETY : ACC CORP whose registered office is at 39 State
Street City Rochester NY14614 United States of
America
- --------------------------------------------------------------------------------
LEASE : a lease of the Tenth Floor, The Chiswick Centre, 414
Chiswick High Road, London W4 dated 23rd December
1993 made between (1) IBM United Kingdom Limited (2)
ACC Long Distance UK Limited and (3) ACC Corp for a
term of ten years from and including the 29th day of
September 1993 until and including the 28th day of
September 2003
- --------------------------------------------------------------------------------
SUPPLEMENTAL PREMISES : the land and buildings known as the Ninth Floor, The
Chiswick Centre, 414 Chiswick High Road, London W4
shown for the purpose of identification only edged
red on the Supplemental Plan
- --------------------------------------------------------------------------------
SUPPLEMENTAL RENT : EIGHTY SIX THOUSAND FIVE HUNDRED AND EIGHTY POUNDS
((Pounds)86,580.00) per annum
- --------------------------------------------------------------------------------
SUPPLEMENTAL PLAN : the plan attached to this Supplemental Lease
<PAGE>
- 3 -
THIS SUPPLEMENTAL LEASE made on the date and between the parties specified in
the Supplemental Lease Particulars
WITNESSES as follows:-
1. DEFINITIONS AND INTERPRETATIONS
-------------------------------
1.1. In this Supplemental Lease:
1.1.1. "Supplemental Lease Particulars" means the immediately preceding
section of this Supplemental Lease headed "Supplemental Lease
Particulars"
1.1.2. the words and expressions defined in the Supplemental Lease
Particulars have the meanings therein set out
1.1.3. the words and expressions defined in the Lease have the respective
meanings herein specified
1.2. The Supplemental Lease Particulars form part of this Supplemental
Lease
2. RECITALS
--------
2.1. The reversion expectant upon the determination of the Contractual Term
granted by the Lease is vested in the Landlord and the remainder of the
Contractual Term is vested in the Tenant
2.2. The Landlord has agreed to grant and the Tenant has agreed to accept
this Supplemental Lease
<PAGE>
- 4 -
3. DEMISE
------
3.1. The Landlord at the request of the Surety demises to the Tenant the
Supplemental Premises TOGETHER WITH the rights and easements granted by but
EXCEPTING AND RESERVING the rights excepted and reserved by the Lease TO HOLD
the Supplemental Premises from and including the date hereof for the residue of
the Contractual Term granted by the Lease SUBJECT TO the matters contained or
referred to in the Lease YIELDING AND PAYING to the Landlord the Supplemental
Rent on the dates and in the manner and subject to review as set out in the
Lease save for the first payment which shall be made on the 25th March 1995 in
respect of the period from the 25th March 1995 until the next following quarter
day
3.2. This Supplemental Lease is supplemental to the Lease
3.3. This Supplemental Lease is granted subject to the following covenants
and provisions which shall insofar as applicable operate to vary henceforth the
terms of the Lease
4. TERMS
-----
4.1. Incorporation of terms from the Lease
-------------------------------------
The Landlord and the Tenant and the Surety agree that save as to the
premises demised the term of years granted and the rent reserved the covenants
conditions agreements and other provisions contained in the Lease shall apply to
the Supplemental Premises and this demise as if they had been repeated herein in
full insofar as consistent with the other terms of this Supplemental Lease and
with such modifications as may be necessary to make them applicable to the
Supplemental Premises
<PAGE>
- 5 -
4.2. Landlord's Remedies
-------------------
The right of re-entry contained in the Lease shall extend to the
Supplemental Premises and apply in the event of non-payment of the Supplemental
Rent or breach of any of the other covenants or conditions contained in this
Supplemental Lease (whether set out herein in full or being covenants or
conditions in the Lease incorporated herein by reference) and similarly the
right of re-entry incorporated in this Supplemental Lease shall extend to the
Premises and apply in the event of non-payment of the Principal Rent or breach
of any of the other covenants or conditions contained in the Lease
4.3. Determination of Term
---------------------
If the term of years created by the Lease is determined then the term
of years granted by this Supplemental Lease shall automatically determine at the
same time and vice versa but without prejudice to the rights and remedies of
either party in respect of any antecedent breach by the other
4.4. Rent Review
-----------
The Supplemental Rent shall be reviewed at the same time in the same
manner and on the same terms as the Principal Rent under the Lease save that it
is agreed that on any review of the Principal Rent reserved by the Lease and any
review of the Supplemental Rent hereby reserved it shall be assumed that the
Premises and the Supplemental Premises are available to let as a whole by a
willing Landlord to a willing Tenant by one lease without a fine or premium
being paid by either party and the said rent agreed or determined on review
shall be apportioned as to 50% in respect of the reviewed Supplemental Rent for
the Supplemental Premises and 50% in respect of the reviewed Principal Rent in
respect of the Premises
<PAGE>
- 6 -
4.5. Variations to the Lease
-----------------------
The Lease shall henceforth be varied as set out in the Schedule hereto
5. TENANT'S COVENANTS
------------------
The Tenant covenants with the Landlord:-
5.1. To pay the Supplemental Rent on the days and in the manner set out in
the Lease
5.2. To observe and perform in relation to the Supplemental Premises the
covenants on the Tenant's part in the Lease so far as the same ought by virtue
of this Supplemental Lease to be performed and observed
5.3. Without prejudice to clauses 4.1 and 5.3 not to assign underlet or
charge the Premises or the Supplemental Premises or any part thereof
except in accordance with the terms of the Lease (as though the
Premises and the Supplemental Premises had together been demised
thereby)
6. LANDLORD'S COVENANTS
--------------------
The Landlord hereby covenants with the Tenant to observe and perform
in relation to the Supplemental Premises the covenants on the part of the
Landlord in the Lease so far as the same ought by virtue of this Supplemental
Lease to be observed and performed
<PAGE>
- 7 -
7. SURETY'S COVENANTS
------------------
The Surety hereby covenants with the Landlord to observe and perform
in relation to the Supplemental Premises the covenants on the part of the Surety
in the Lease so far as the same ought by virtue of this Supplemental Lease to be
observed and performed
8. EXCLUSION OF LANDLORD AND TENANT ACT 1954
-----------------------------------------
Having been authorised to do so by Order of the Lambeth County Court
made on the 29th day of March 1994 under the provisions of Section 38(4) of the
Landlord and Tenant Act (as amended by Section 5 of the Law of the Property Act
1969) the Landlord and the Tenant hereby agree that the provisions of Section 24
to 28 (inclusive) of the Landlord and Tenant Act shall be excluded in relation
to this Supplemental Lease
9. MEMORANDUM AND REGISTRATION
---------------------------
The parties shall each cause a memorandum of this Supplemental Lease
to be endorsed on the original or counterpart of the Lease (whichever is in
their possession) and shall supply a copy of such endorsement to the other
within fourteen days of the date hereof
10. JURISDICTION
------------
10.1 This Deed shall be governed by and construed in accordance with
English Law
10.2 The parties hereto irrevocably submit to the non-exclusive
jurisdiction of the High Court of Justice in London for the purpose of hearing
and determining any dispute arising out of this Deed and for the purpose of
enforcement of any judgment against its assets the Surety agrees that service of
any writ notice or other document for the purpose of any proceedings in such
Court shall be duly served upon it if delivered or sent by registered post to
ACC Corp at 39 State Street City Rochester NY14614 United States of America
<PAGE>
- 8 -
IN WITNESS of which this Supplemental Lease has been executed as a
deed by the parties and is delivered on the date appearing in the Supplemental
Lease Particulars
SCHEDULE
--------
Variations to the Lease
-----------------------
1. Clause 1 of Part 1 of the First Schedule shall be varied so that the word
"eight" in the first line of the clause is replaced by the word "sixteen"
2. The definition of "Service Charge" in Clause 1 shall be revised so that the
definition now reads "Service Charge" means the aggregate of the sums which the
Landlord is required to pay to the Superior Landlord pursuant to clauses
1(1)(iii) and 1(1)(iv) of the Superior Lease or should the Superior Lease be
terminated for any reason the aggregate of the sums the Landlord would have been
required to pay to the Superior Landlord pursuant to clauses 1(1)(iii) and
1(1)(iv) of the Superior Lease if it was still in existence.
THE COMMON SEAL of THE LANDLORD )
was hereunto affixed in the )
presence of: )
Director [illegible]
Secretary [illegible]
<PAGE>
- 9 -
Annex A
Floor Plan
[This document is a floor plan that shows the office area that is subject to the
Lease.]
<PAGE>
Exhibit 99.14
CONTINGENT INTEREST AGREEMENT
THIS CONTINGENT INTEREST AGREEMENT (this "Agreement"), dated as of
July 21, 1995 is made by ACC CORP., a Delaware corporation (the "Company"), in
favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association ("First Union") and SHAWMUT BANK CONNECTICUT, N.A. ("Shawmut", and
together with First Union, the "Managing Agents").
STATEMENT OF PURPOSE
--------------------
Pursuant to a Credit Agreement, dated as of even date herewith
(together with all amendments and other modifications, if any, from time to time
hereafter made thereto, the "Credit Agreement"), between the Company and certain
Subsidiaries of the Company as Borrowers thereunder (collectively, the
"Borrowers"), the Lenders party thereto (the "Lenders"), the Managing Agents and
First Union, as Administrative Agent for the Lenders, the Lenders will extend
Loans to the Borrowers as more specifically described in the Credit Agreement.
In connection with the transactions contemplated by the Credit Agreement and in
consideration of the structuring of and commitment to the credit facility
described therein, the Managing Agents have requested, and the Company has
agreed to execute and deliver, this Agreement to the Managing Agents to provide
a contingent interest payment to the Managing Agents on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and to induce the
Managing Agents to serve as Managing Agents under the Credit Agreement, the
parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
"Common Stock" shall mean the $.015 par value common stock of the
Company or any other capital stock of the Company into which such stock is
reclassified or reconstituted.
"Contingent Interest Payment" shall have the meaning assigned thereto
in paragraph 2.
"Trigger Date" shall mean the Business Day on which notice is received
by the Company from a Managing Agent of the election by such Managing Agent to
exercise its right to receive its Contingent Interest Payment hereunder at any
time after the occurrence of any Trigger Event or Trigger Events.
"Trigger Event" shall mean the earlier to occur of the following
events: (a) eighteen months shall have elapsed since the Closing Date, (b) the
Credit Agreement shall
<PAGE>
- 2 -
have been amended in any material respect as determined in the reasonable
discretion of the Managing Agents, (c) a letter of intent or definitive
agreement to sell at least 51% of the Common Stock or at least 51% of the assets
of the Company or any Material Subsidiary in any transaction or series of
transactions (including any letter of intent to merge or merger agreement having
the foregoing effect) shall have been executed by the Company or the
shareholders of the Company or any such sale of Common Stock or assets
(including any Change in Control or merger having the foregoing effect) shall
have occurred or (d) the Common Stock shall have ceased to be actively traded in
the national over-the-counter market and quoted on the national market system of
the National Association of securities Dealers Automated Quotation System
("NASDAQ"), other than on a temporary basis, as determined by the Managing
Agents in their sole discretion.
"Trigger Price" shall mean the difference between (a) the average of
the daily market price of the Common Stock as quoted by NASDAQ calculated for
each of the thirty consecutive Business Days immediately preceding the Trigger
Date less (b) the average of the daily market price of the Common Stock as
----
quoted by NASDAQ for each of the thirty consecutive Business Days immediately
preceding the date which is five days prior to the Closing Date (the "Closing
Price"); provided, that in no event shall the Trigger Price exceed the Closing
--------
Price plus $15.00. The "daily market price" for each such Business Day shall
----
mean the average of the last reported closing bid and asked prices on such day
in the over-the-counter market as formulated by NASDAQ.
2. Contingent Interest Payment. The Company agrees to pay to each
---------------------------
Managing Agent, within ten (10) Business Days following the Trigger Date for
such Managing Agent, a contingent interest payment (a "Contingent Interest
Payment") equal to the product of (a) the Trigger Price times (b) 140,000 shares
-----
of Common Stock (the "Share Factor") times (c) .5; provided, that in no event
----- --------
shall the Contingent Interest Payment to each Managing Agent be less than
$375,000.
3. Manner of Payment. Payment of the Contingent Interest Payment
-----------------
shall be made to the Managing Agents, (a) in cash or other immediately available
funds in Dollars, (b) by tender of shares of Common Stock having a then market
value equal to the portion of the Contingent Interest Payment to be paid in such
shares, at the election of the Company or (c) by a combination of cash and
tender of shares of Common Stock; provided, that such payment in shares shall
--------
not exceed fifty percent (50%) of the Contingent Interest Payment made to each
Managing Agent. Payment of the cash portion of the Contingent Interest Payment
shall be made to such accounts as the Managing Agents shall direct in writing to
the Company. Payment of the portion of the Contingent Interest Payment to be
paid by the tender of shares of Common Stock shall be made by delivery of the
certificates evidencing such shares (with appropriate stock powers executed in
blank) to the Managing Agents or such Affiliates thereof as the Managing Agents
shall direct in writing to the Company.
<PAGE>
- 3 -
4. Stock Dividends, Splits, Combinations, Reorganizations,
-------------------------------------------------------
Reclassifications, Dissolutions and Other Dilutive Events.
- ---------------------------------------------------------
(a) In case the Company shall, prior to payment in full of each
Contingent Interest Payment, (i) declare or pay a dividend or dividends on its
Common Stock payable in shares of its capital stock (including Common Stock or
any security convertible into or granting rights to purchase shares of Common
Stock), (ii) split or subdivide the then outstanding shares of its Common Stock
into a greater number of shares, (iii) combine the then outstanding shares of
its Common Stock into a smaller number of shares or (iv) issue any shares of its
capital stock in a reclassification of Common Stock or any other capital
adjustment, recapitalization or reorganization, or any consolidation of the
Company with, or merger of the Company into, any other corporation, or any sale,
lease or other transfer of all or a substantial portion (51% or more) of the
assets of the Company, or any share exchange, or any distribution by the Company
of its assets with respect to its Common Stock as a liquidating or partial
liquidating dividend or any similar transaction affecting the Common Stock (for
purposes of this paragraph 4, the transactions referred to in clause (iv) being
collectively referred to as the "Reorganization Transactions") , then, in each
such case, the Company and the Managing Agents (or the remaining Managing Agent
if a prior Contingent Interest Payment has been made to the other Managing
Agent) shall, in good faith and within ten Business Days after the record date
for such dividend or the effective date of such split, subdivision, combination
or Reorganization Transaction, make such proportionate and equitable adjustments
to the Trigger Price, the Share Factor and any other appropriate variable in the
determination of the Contingent Interest Payment as may be necessary so that the
Managing Agents (or Managing Agent) shall receive the same Contingent Interest
Payment after any such transaction as the Managing Agents (or Managing Agent)
would have received prior to any such transaction. In the event the Company and
the Managing Agents (or Managing Agent) are unable to agree on such adjustment
within such ten Business Day period, such dispute shall be resolved within
thirty Business Days after the end of such ten Business Day period by an
independent accounting firm of recognized national standing selected by the
Managing Agents (or Managing Agent) and the fees and expenses of such firm shall
be borne equally by the Company and the Managing Agents (or Managing Agent).
(b) Notwithstanding anything to the contrary contained herein, the
Company shall not effect any such Reorganization Transaction involving another
Person unless, upon or prior to the consummation thereof, the Company shall have
caused the successor Person or the Person to or with which the property of the
Company has been consolidated, merged, exchanged, leased or otherwise
transferred to assume by written instrument the obligation to deliver to each
Managing Agent the Contingent Interest Payment in accordance with the foregoing
provisions. Upon any Reorganization Transaction referred to in this paragraph
4, this Agreement shall continue in full force and effect and the terms hereof
shall be applicable to the shares of stock and other securities and property
receivable as part of a Contingent Interest Payment hereunder after the
consummation of such Reorganization Transaction.
<PAGE>
- 4 -
5. Subsequent Fundamental Transactions.
-----------------------------------
(a) The Company shall give the Managing Agents prior written notice in
accordance with Section 13.1 of the Credit Agreement of any of the following
transactions by the Company or any Material Subsidiary: any merger (other than
any merger effected solely to change the domicile of the Company or any Material
Subsidiary); consolidation, share exchange, sale that in the aggregate
constitutes the disposition of all or substantially all of its assets, any other
corporate transaction pursuant to which any holder of Common Stock receives
cash, securities or other property, or any transaction in which the Company or
any of its Subsidiaries is acquired by purchase of a majority of its common
equity (each, a "Fundamental Transaction").
(b) If at any time within three months after making any Contingent
Interest Payment hereunder, the Company or any Material Subsidiary (i) completes
a Fundamental Transaction or (ii) enters into any agreement or letter of intent
contemplating a Fundamental Transaction, the Company shall, simultaneously with
the closing of such transaction or at such later time as any payment in cash,
securities or other property is received by the Company, such Subsidiary or
their shareholders, make an additional payment to the applicable Managing Agent
in an amount equal to the excess (the "Excess") of (i) the Contingent Interest
Payment such Managing Agent would have received if such payment was made on or
after the closing of such Fundamental Transaction over (ii) the Contingent
Interest Payment previously received by such Managing Agent; provided, that the
--------
sum of such initial Contingent Interest Payment and such Excess shall not exceed
$1,000,500 with respect to any Managing Agent. Each payment to a Managing Agent
pursuant to this Section 5(b) shall be made in accordance with Section 3 hereof.
6. Certain Covenants. The Company covenants and agrees that, until
-----------------
each Contingent Interest Payment has been fully paid in accordance with this
Agreement:
(a) the Company will have at all times, free from preemptive rights, a
number of shares of authorized but unissued Common Stock sufficient to enable it
at any time to fulfill all its obligations hereunder; and
(b) the Common Stock deliverable pursuant to this Agreement shall be
(i) listed on NASDAQ or a national securities exchange (as defined in the
Securities Exchange Act of 1934, as amended), (ii) either (x) duly registered
under the Securities Act of 1933, as amended, and applicable securities laws of
North Carolina with respect to any Common Stock delivered to First Union and
applicable securities laws of Connecticut with respect to any Common Stock
delivered to Shawmut or (y) so registered by the Company at its sole expense as
expeditiously as possible after such delivery (but in no event later than sixty
(60) days thereafter), (iii) duly and validly issued, fully paid and non-
assessable, (iv) free from all taxes, liens and charges, and if any shares of
Common Stock to be delivered as part of a Contingent Interest Payment require
any additional registration with or approval of any governmental authority under
any applicable law before such shares may be
<PAGE>
- 5 -
issued in connection with receipt of such Contingent Interest Payment, the
Company will, at its sole expense, as expeditiously as possible, cause such
shares to be duly registered or approved, as the case may be. If for any reason
the Common Stock delivered to a Managing Agent pursuant to clause (ii)(y) above
is not so registered within such sixty (60) day period, the Borrower shall pay
in cash on the first Business Day after the expiration of such period to such
Managing Agent the market value of such Common Stock on the date of delivery
thereof plus interest thereon for such period at the Default Rate.
----
7. Default Rate. Any payment to a Managing Agent not made on the
------------
payment date applicable thereto under this Agreement shall bear interest from
such date until the Business Day on which such payment is made at a per annum
rate equal to the Base Rate as determined under the Credit Agreement plus four
----
percent (4%).
8. Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
9. Paragraph Headings. The paragraph headings used in this
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
10. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
None of the terms or provisions of this Agreement may be amended, supplemented
or otherwise modified except by a written instrument executed by the Company and
each Managing Agent to whom a Contingent Interest Payment may become owing
hereunder. This Agreement shall be binding upon the successors and assigns of
the Company and shall inure to the benefit of the Managing Agents and their
respective successors and assigns. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of North
Carolina.
11. Notices. All notices and communications hereunder shall be given
-------
to the addresses and otherwise in accordance with Section 13.1 of the Credit
Agreement.
12. Consent to Jurisdiction. The Company hereby irrevocably consents
-----------------------
to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of or any dispute in connection with this Agreement, any rights or
obligations hereunder, or the performance of such rights and obligations. The
Company hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the Managing
Agents in connection with this Agreement, any rights or obligations hereunder,
or the performance of such rights and obligations, on behalf of itself or its
property, in the manner provided in Section 13.1 of the Credit Agreement.
Nothing in this Section 11 shall
<PAGE>
- 6 -
affect the right of the Managing Agents to serve legal process in any other
manner permitted by Applicable Law or affect the right of the Managing Agents to
bring any action or proceeding against the Company or its properties in the
courts of any other jurisdictions.
13. Waiver of Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION
--------------------
CONTAINED HEREIN, IN THE EVENT ANY JUDICIAL PROCEEDING IS INSTITUTED IN
CONNECTION WITH THIS AGREEMENT, TO THE EXTENT PERMITTED BY LAW, THE MANAGING
AGENTS BY THEIR ACCEPTANCE OF THIS AGREEMENT OR THE BENEFITS HEREOF AND THE
COMPANY EACH HEREBY IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL
WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF OR ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER,
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
<PAGE>
- 7 -
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first above written.
[CORPORATE SEAL] ACC CORP.
By: /s/ John J. Zimmer
---------------------------
Name: John J. Zimmer
---------------------------
Title: Vice President - Finance
---------------------------
[CORPORATE SEAL] FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By: /s/ Jim F. Redman
---------------------------
Name: Jim F. Redman
---------------------------
Title: Sr. Vice President
---------------------------
[CORPORATE SEAL] SHAWMUT BANK OF CONNECTICUT, N.A.
By: /s/ Robert F. Nest
---------------------------
Name: Robert F. Nest
---------------------------
Title: Director
---------------------------
<PAGE>
Exhibit 99.15
SATISFACTION: The indebtedness
secured by this Leasehold Mortgage
has been satisfied in full.
By:_______________________
Name:_____________________
Title:____________________
Date:_____________________
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
LEASEHOLD MORTGAGE
[NEW YORK]
This Leasehold Mortgage is made and entered into as of this 21 day
------
of July, 1995, by and among ACC CORP., a Delaware corporation ("Mortgagor"), and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("Mortgagee"), as Administrative
Agent for the financial institutions (the "Lenders") as are, or may from time to
time become, parties to the Credit Agreement (as defined below).
WHEREAS, Mortgagor and certain Affiliates thereof are indebted to the
Lenders in the principal sum of up to Thirty-Five Million Dollars ($35,000,000),
as evidenced by the Notes of even date executed by the Mortgagor and such
Affiliates in favor of the Lenders, and such other documents as may have been
executed or given by Mortgagor in connection with the transactions contemplated
by the Credit Agreement of even date between the Mortgagor and such Affiliates
as Borrowers thereunder (collectively, the "Borrowers"), the Lenders and the
Mortgagee, as Administrative Agent for the Lenders (as amended or supplemented,
the "Credit Agreement", and collectively with the Notes and such other
documents, the "Loan Documents"), the terms and conditions of which are
incorporated herein by reference;
NOW, THEREFORE, as security for the payment and performance of up to
$750,000 of the Obligations (as defined in the Credit Agreement), the Mortgagor
has created a security interest in, bargained, sold, given, granted, assigned
and conveyed and does by these presents create a security interest in, bargain,
sell, give, grant, assign and convey unto the
<PAGE>
- 2 -
Mortgagee, its or his successors and assigns, all of Mortgagor's right, title
and interest in and to that certain leasehold estate under a lease agreement (as
amended or supplemented, the "Lease"), dated January 25, 1994, between the
Mortgagor and The Hague Corporation, of the Premises commonly known as 400 West
Avenue, Rochester, New York, 14614 (the "Leasehold Estate") , which is more
particularly described on Exhibit A attached hereto and incorporated herein by
---------
reference.
TO HAVE AND TO HOLD the Leasehold Estate described herein unto the
Mortgagee, its heirs and successors in interest forever.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if the Mortgagor
shall satisfy all Obligations secured hereby, and shall comply with all of the
covenants, terms and conditions of this Leasehold Mortgage and the Loan
Documents, then this conveyance shall be null and void and shall be canceled of
record at the request and cost of Mortgagor. But if at any time there shall be
any default in satisfaction of any Obligations or under this instrument or under
the terms and conditions of any instrument secured hereby, which default shall
not have been cured within any applicable grace period (if any) provided
therefor, then, at the option of Mortgagee, with the consent of the Required
Lenders, the entire indebtedness hereby secured shall immediately become due,
payable and collectible without further notice, regardless of maturity, and this
Mortgage may be foreclosed by judicial proceedings, or the Mortgagee is hereby
authorized and empowered to expose to sale and to sell the Leasehold Estate
described herein at public sale for cash in compliance with the requirements of
Article 14 of the New York Real Property Actions and Proceedings Laws, or any
subsequently enacted statute relating to nonjudicial foreclosure sales in effect
on the date foreclosure is commenced, and at the time and place fixed for the
sale to sell the Leasehold Estate described herein to the highest bidder for
cash, and Mortgagee shall execute a conveyance of said Leasehold Estate to and
deliver possession of same to the purchaser. Mortgagee may bid and become the
purchaser at any sale under this Leasehold Mortgage. The proceeds of the sale
shall, after the Mortgagee retains a reasonable compensation, together with
reasonable attorneys' fees incurred by Mortgagee in such proceeding, be applied
first to the payment of the costs and expenses of such sale; second, to the
payment to the whole amount of Obligations then owing by the Mortgagor to the
Lenders and secured hereby; and third to the payment of the surplus, if any, to
the Mortgagor or to whomever else may be lawfully entitled thereto.
This Leasehold Mortgage is made as additional collateral to secure the
payment and performance of the Obligations. Other terms capitalized but not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement.
MORTGAGOR ACKNOWLEDGES, COVENANTS AND AGREES WITH MORTGAGEE AS FOLLOWS:
1. Mortgagor represents and warrants that there have been no prior
encumbrances, conveyances or assignments of its interest in the Lease which are
still in effect, and that the Lease is a valid and enforceable agreement, that
neither Mortgagor nor, to its
<PAGE>
- 3 -
knowledge, any other party, is in material default thereunder and that all
covenants, conditions and agreements have been performed as required therein,
except those not due to be performed until after the date hereof.
2. No change in the terms of the Lease shall be valid without the
written approval of Mortgagee, with the consent of the Required Lenders, and
Mortgagor shall not assign, sell, pledge, mortgage or otherwise transfer or
encumber its interest in the Lease so long as this Leasehold Mortgage is in
effect except as permitted by the Credit Agreement.
3. Mortgagor shall give prompt notice to Mortgagee of any notice of
default received by it under the Lease, together with a complete copy of any
such notice of default.
4. Mortgagor shall perform each and all of the covenants and
obligations of the tenant under the Lease for so long as this Leasehold Mortgage
is in effect, including, without limitation, the obligations to maintain,
rebuild and insure the improvements which constitute a portion of the premises
thereunder.
5. Should Mortgagor fail to make any payment or to do any act as
herein provided, then Mortgagee may, but without obligation to do so and without
notice to or demand on Mortgagor and without releasing Mortgagor from any
obligation, make or do the same, including, without limitation, appearing in and
defending any action purporting to affect the security hereof or the rights or
powers of Mortgagee hereunder and performing any obligation of Mortgagor under
the Lease, and in exercising any such powers, paying all necessary costs and
expenses, including, without limitation, attorneys' fees. Mortgagor will pay
immediately upon demand all sums expended by Mortgagee under the authority
hereof, and the same shall be added to the Obligations and shall be secured
hereby and by the Loan Documents.
6. Upon the occurrence and continuation of an Event of Default,
Mortgagee may, with the consent of the Required Lenders, at its option, without
notice and without regard to the adequacy of security for the Obligations,
either in person or by agent and with or without bringing any action or
proceeding, or by a receiver to be appointed by a court, enter upon, take
possession of, and operate the premises which are the subject of the Lease,
make, enforce, modify and accept any provision of, or surrender, the Lease, and
do any other act or acts which Mortgagee deems proper to protect the security
hereof until all Obligations have been paid or performed in full. The entering
upon and taking possession of such premises shall not cure or waive any default
or waive, modify or affect any notice of default under the Credit Agreement or
any other security instrument, nor invalidate any act done pursuant to any such
notice.
7. Mortgagor hereby irrevocably constitutes and appoints Mortgagee
as its attorney-in-fact to demand, receive, and enforce Mortgagor's rights with
respect to the Lease for and on behalf of and in the name of Mortgagor or, with
the same force and effect as Mortgagor could do if this Leasehold Mortgage had
not been made. Mortgagee may, without affecting any of its rights or remedies
against Mortgagor under any other instrument, document or agreement, exercise
its rights under this Leasehold Mortgage as Mortgagor's attorney-in-fact
<PAGE>
- 4 -
in any other manner permitted by law, and in addition Mortgagee shall have and
possess, without limitation, any and all rights and remedies of a secured party
under the Uniform Commercial Code or otherwise as provided by law.
8. At Mortgagor's sole cost and expense, Mortgagor will appear in
and defend any action growing out of or in any manner connected with the Lease
or the obligations or liabilities of Mortgagor thereunder. In addition,
Mortgagor shall indemnify and hold Mortgagee harmless from and against any and
all claims, demands, liabilities, losses, lawsuits, judgments, and costs and
expenses, including, without limitation, reasonable attorneys' fees to which
Mortgagee may become exposed or which Mortgagee may incur in exercising any of
its rights under this Leasehold Mortgage.
9. This Leasehold Mortgage is for security purposes only.
Accordingly, Mortgagee shall not have the right under this Leasehold Mortgage to
enforce the provisions of said Lease or exercise rights hereunder unless and
until there shall have occurred an Event of Default.
10. Subject to the limitation on further assignment by Mortgagor
set forth above, this Leasehold Mortgage shall be binding upon and inure to the
benefit of the legal representatives, assigns and successors in interest of
Mortgagor and Mortgagee, including any subsequent holders of Notes.
11. All notices hereunder shall be sent to the addresses and pursuant
to the procedures set forth in Section 13.1 of the Credit Agreement.
12. Mortgagor warrants and represents that it is the Lessee of the
Leasehold Estate under the Lease; such Leasehold Estate is free and clear of all
liens, charges and encumbrances whatsoever, except those which have been
approved by Mortgagee; and Mortgagor has full right and power to make this
conveyance.
13. In addition to the rights and remedies set forth herein,
Mortgagee shall have all rights and remedies set forth in the Loan Documents.
IN WITNESS WHEREOF, Mortgagor has executed and sealed this Leasehold
Mortgage this 10 day of July, 1995.
------
ACC CORP.
[CORPORATE SEAL] By: John J. Zimmer
-----------------------------
Name: John J. Zimmer
---------------------
ATTEST: Daniel J. Venuti Title: Vice Pres-Finance
------------------------ ---------------------
Name: Daniel J. Venuti
----------------
Title: Asst. Secretary
---------------
<PAGE>
STATE OF NORTH CAROLINA)
--------------
)
COUNTY OF MECKLENBURG )
-------------
I, Betty G. Smith, a Notary Public of the county and state aforesaid,
---------------
certify that Daniel J. Venuti personally came before me this day and
----------------
acknowledged that (s)he is Assistant Secretary of ACC CORP., a Delaware
---------
corporation, and that by authority duly given and as the act of the corporation,
the foregoing instrument was signed in its name by its Vice President-Finance
----------------------
sealed with its corporate seal and attested by herself as its Assistant
---------
Secretary.
WITNESS my hand and official stamp, this 10th day of July, 1995.
--------
Betty G. Smith
-------------------------------
Notary Public
My commission expires:
August 5, 19997
<PAGE>
Exhibit A
---------
to
Leasehold Mortgage
between
ACC Corp.
and
First Union National Bank of North Carolina,
as Administrative Agent
Description of Leased Premises
------------------------------
400 West Avenue
Rochester, New York 14614
ALL THAT TRACT OR PARCEL OF LAND situate in the City of Rochester, County of
Monroe and State of New York being part of Town Lots 67 and 76 in the 20,000
Acre Tract and being Parcel "A" on a Resubdivision Map entitled "400 West Avenue
and 95 Ames Street" made by Earl F. Greer III, N.Y.S.P.L.S. No. 049115, dated
December 23, 1991 of Lozier Architects/Engineers, being Project #1990-36 and
File No. 39789, and bounded and described as follows:
Commencing at the intersection of the west street line of Ames Street with north
street line of West Avenue, said point having New York State Plan Coordinates of
N 1149136.12 and E 750584.00; thence (A) S 89 degrees 10' 15" W and along the
north street line of said West Avenue a distance of 667.59 feet to the point of
beginning of the parcel described herewith; thence (1) S 89 degrees 10' 15" W
and continuing along the north street line of said West Avenue a distance of
637.08 feet to a point, said point being 0.04 feet south of and 0.18 feet west
of a found stone monument, said point also having New York State Plane
Coordinates of N 1149117.23 and E 749279.47; thence (2) S 89 degrees 18' 15"
W and continuing along the north street line of West Avenue a distance of
850.28 feet to a point, said point being 0.03 feet north of a found drill hole;
thence (3) N 49 degrees 03' 28" W a distance of 31.24 feet to a point on the
east street line of Buffalo Road, said point being 0.23 feet south of and 0.17
feet east of a found P.K. nail; thence the following three courses along the
east street line of Buffalo Road; thence (4) N 04 degrees 56' 45" W a distance
of 390.45 feet to a point; thence (5) S 75 degrees 50' 26" W a distance of
4.51 feet; thence (6) N 14 degrees 08' 30" W a distance of 59.81 feet to a
point on the South line of lands now or formerly owned by the Chessie System,
formerly lands of the Buffalo, Rochester and Pittsburgh Railroad; thence
the following seven courses along lands now or formerly owned by the Chessie
System; thence (7) N 76 degrees 25' 54" E a distance of 236.15 feet to a point;
thence (8) N 81 degrees 16' 59" E a distance of 199.24 feet to a point; thence
(9) N 72 degrees 20' 16" E a distance of 515.88 feet to a point; thence (10)
N 00 degrees 41' 22" W a distance of 6.50 feet to a point; thence (11) N 75
degrees 52' 10" E a distance of 631.00 feet to a point; thence (12) N 00
degrees 35' 05" W a distance of 4.11 feet to a point; thence (13) N 75 degrees
47' 52" East a distance of 25.46 feet to a point in the centerline of the
former Hague Street; thence (14) S 00 degrees 35' 45" E and along the
centerline of the former Hague Street a distance of 859.89 feet to the point of
beginning.
<PAGE>
- 2 -
Hereby intending to describe a parcel of land containing 1,009,569 square feet
or 23.177+/- acres.
Together with the benefits of the Reciprocal Easement Agreement dated March 2,
1993 between Combustion Engineering, Inc. and The Hague Corporation which
agreement is to be recorded in the Monroe County Clerk's Office on even date
herewith.
<PAGE>
Exhibit 99.16
SATISFACTION: The indebtedness
secured by this Leasehold Mortgage
has been satisfied in full.
By: _______________________
Name: _____________________
Title:_____________________
Date: _____________________
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
LEASEHOLD MORTGAGE
[NEW YORK]
This Leasehold Mortgage is made and entered into as of this 21 day
------
of July, 1995, by and among ACC SYRACUSE TELECOM CORP., a New York corporation
("Mortgagor"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("Mortgagee"), as
Administrative Agent for the financial institutions (the "Lenders") as are, or
may from time to time become, parties to the Credit Agreement (as defined
below).
WHEREAS, certain Affiliates of Mortgagor are indebted to the Lenders
in the principal sum of up to Thirty-Five Million Dollars ($35,000,000), as
evidenced by the Notes of even date executed by such Affiliates in favor of the
Lenders, and such other documents as may have been executed or given by such
Affiliates in connection with the transactions contemplated by the Credit
Agreement of even date between such Affiliates as Borrowers thereunder
(collectively, the "Borrowers"), the Lenders and the Mortgagee, as
Administrative Agent for the Lenders (as amended or supplemented, the "Credit
Agreement", and collectively with the Notes and such other documents, the "Loan
Documents"), the terms and conditions of which are incorporated herein by
reference;
NOW, THEREFORE, as security for the payment and performance of up to
$250,000 of the Obligations (as defined in the Credit Agreement), the Mortgagor
has created a security interest in, bargained, sold, given, granted, assigned
and conveyed and does by these presents create a security interest in, bargain,
sell, give, grant, assign and convey unto the Mortgagee, its or his successors
and assigns, all of Mortgagor's right, title and interest in and to that certain
leasehold estate under a lease agreement (as amended or supplemented, the
"Lease"), dated December 28, 1993, between the Mortgagor and State Tower of
Syracuse
<PAGE>
- 2 -
Associates, L.P., of the Premises commonly known as Suite 206 State Tower
Building, 109 South Warren Street, Syracuse, New York (the "Leasehold Estate"),
which is more particularly described on Exhibit A attached hereto and
---------
incorporated herein by reference.
TO HAVE AND TO HOLD the Leasehold Estate described herein unto the
Mortgagee, its heirs and successors in interest forever.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if the
Affiliates of Mortgagor shall satisfy all Obligations secured hereby, and shall
comply with all of the covenants, terms and conditions of this Leasehold
Mortgage and the Loan Documents, then this conveyance shall be null and void and
shall be canceled of record at the request and cost of Mortgagor. But if at any
time there shall be any default in satisfaction of any Obligations or under this
instrument or under the terms and conditions of any instrument secured hereby,
which default shall not have been cured within any applicable grace period (if
any) provided therefor, then, at the option of Mortgagee, with the consent of
the Required Lenders, the entire indebtedness hereby secured shall immediately
become due, payable and collectible without further notice, regardless of
maturity, and this Mortgage may be foreclosed by judicial proceedings, or the
Mortgagee is hereby authorized and empowered to expose to sale and to sell the
Leasehold Estate described herein at public sale for cash, in compliance with
the requirements of Article 14 of the New York Real Property Actions and
Proceedings Laws, or any subsequently enacted statute relating to nonjudicial
foreclosure sales in effect on the date foreclosure is commenced, and at the
time and place fixed for the sale to sell the Leasehold Estate described herein
to the highest bidder for cash, and Mortgagee shall execute a conveyance of said
Leasehold Estate to and deliver possession of same to the purchaser. Mortgagee
may bid and become the purchaser at any sale under this Leasehold Mortgage. The
proceeds of the sale shall, after the Mortgagee retains a reasonable
compensation, together with reasonable attorneys' fees incurred by Mortgagee in
such proceeding, be applied first to the payment of the costs and expenses of
such sale; second, to the payment to the whole amount of Obligations then owing
by the Affiliates of Mortgagor to the Lenders and secured hereby; and third to
the payment of the surplus, if any, to the Mortgagor or to whomever else may be
lawfully entitled thereto.
This Leasehold Mortgage is made as additional collateral to secure the
payment and performance of the Obligations. Other terms capitalized but not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement.
MORTGAGOR ACKNOWLEDGES, COVENANTS AND AGREES WITH MORTGAGEE AS FOLLOWS:
1. Mortgagor represents and warrants that there have been no prior
encumbrances, conveyances or assignments of its interest in the Lease which are
still in effect, and that the Lease is a valid and enforceable agreement, that
neither Mortgagor nor, to its knowledge, any other party, is in material default
thereunder and that all covenants, conditions
<PAGE>
- 3 -
and agreements have been performed as required therein, except those not due to
be performed until after the date hereof.
2. No change in the terms of the Lease shall be valid without the
written approval of Mortgagee, with the consent of the Required Lenders, and
Mortgagor shall not assign, sell, pledge, mortgage or otherwise transfer or
encumber its interest in the Lease so long as this Leasehold Mortgage is in
effect except as permitted by the Credit Agreement.
3. Mortgagor shall give prompt notice to Mortgagee of any notice of
default received by it under the Lease, together with a complete copy of any
such notice of default.
4. Mortgagor shall perform each and all of the covenants and
obligations of the tenant under the Lease for so long as this Leasehold Mortgage
is in effect, including, without limitation, the obligations to maintain,
rebuild and insure the improvements which constitute a portion of the premises
thereunder.
5. Should Mortgagor fail to make any payment or to do any act as
herein provided, then Mortgagee may, but without obligation to do so and without
notice to or demand on Mortgagor and without releasing Mortgagor from any
Obligation, make or do the same, including, without limitation, appearing in and
defending any action purporting to affect the security hereof or the rights or
powers of Mortgagee hereunder and performing any obligation of Mortgagor under
the Lease, and in exercising any such powers, paying all necessary costs and
expenses, including, without limitation, attorneys' fees. Mortgagor will pay
immediately upon demand all sums expended by Mortgagee under the authority
hereof, and the same shall be added to the Obligations and shall be secured
hereby and by the Loan Documents.
6. Upon the occurrence and continuation of an Event of Default,
Mortgagee may, with the consent of the Required Lenders, at its option, without
notice and without regard to the adequacy of security for the Obligations,
either in person or by agent and with or without bringing any action or
proceeding, or by a receiver to be appointed by a court, enter upon, take
possession of, and operate the premises which are the subject of the Lease,
make, enforce, modify and accept any provision of, or surrender, the Lease, and
do any other act or acts which Mortgagee deems proper to protect the security
hereof until all Obligations have been paid or performed in full. The entering
upon and taking possession of such premises shall not cure or waive any default
or waive, modify or affect any notice of default under the Credit Agreement or
any other security instrument, nor invalidate any act done pursuant to any such
notice.
7. Mortgagor hereby irrevocably constitutes and appoints Mortgagee
as its attorney-in-fact to demand, receive, and enforce Mortgagor's rights with
respect to the Lease for and on behalf of and in the name of Mortgagor or, with
the same force and effect as Mortgagor could do if this Leasehold Mortgage had
not been made. Mortgagee may, without affecting any of its rights or remedies
against Mortgagor under any other instrument, document or agreement, exercise
its rights under this Leasehold Mortgage as Mortgagor's attorney-in-fact in any
other manner permitted by law, and in addition Mortgagee shall have and possess,
<PAGE>
- 4 -
without limitation, any and all rights and remedies of a secured party under the
Uniform Commercial Code or otherwise as provided by law.
8. At Mortgagor's sole cost and expense, Mortgagor will appear in
and defend any action growing out of or in any manner connected with the Lease
or the obligations or liabilities or Mortgagor thereunder. In addition,
Mortgagor shall indemnify and hold Mortgagee harmless from and against any and
all claims, demands, liabilities, losses, lawsuits, judgments, and costs and
expenses, including, without limitation, reasonable attorneys' fees to which
Mortgagee may become exposed or which Mortgagee may incur in exercising any of
its rights under this Leasehold Mortgage.
9. This Leasehold Mortgage is for security purposes only.
Accordingly, Mortgagee shall not have the right under this Leasehold Mortgage to
enforce the provisions of said Lease or exercise rights hereunder unless and
until there shall have occurred an Event of Default.
10. Subject to the limitation on further assignment by Mortgagor set
forth above, this Leasehold Mortgage shall be binding upon and inure to the
benefit of the legal representatives, assigns and successors in interest of
Mortgagor and Mortgagee, including any subsequent holders of Notes.
11. All notices hereunder shall be sent to the addresses and pursuant
to the procedures set forth in Section 13.1 of the Credit Agreement.
12. Mortgagor warrants and represents that it is the Lessee of the
Leasehold Estate under the Lease; such Leasehold Estate is free and clear of all
liens, charges and encumbrances whatsoever, except those which have been
approved by Mortgagee; and Mortgagor has full right and power to make this
conveyance.
13. In addition to the rights and remedies set forth herein,
Mortgagee shall have all rights and remedies set forth in the Loan Documents.
IN WITNESS WHEREOF, Mortgagor has executed and sealed this Leasehold
Mortgage this 10 day of July, 1995.
------
ACC SYRACUSE TELECOM CORP.
[CORPORATE SEAL] By: /s/ John J. Zimmer
----------------------------
Name: John J. Zimmer
---------------------
ATTEST:/s/ Daniel J. Venuti Title: Controller
------------------------- --------------------
Name: Daniel J. Venuti
-----------------
Title: Asst. Secretary
---------------
<PAGE>
- 5 -
STATE OF NORTH CAROLINA)
----------------
)
COUNTY OF MECKLENBURG )
--------------
I, Betty G. Smith, a Notary Public of the county and state aforesaid,
--------------
certify that Daniel J. Venuti personally came before me this day and
----------------
acknowledged that (s)he is Assistant Secretary of ACC SYRACUSE TELECOM CORP., a
---------
New York corporation, and that by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its Controller,
----------
sealed with its corporate seal and attested by himself as its Assistant
---------
Secretary.
WITNESS my hand and official stamp, this 10th day of July, 1995.
----
/s/ Betty G. Smith
----------------------------------
Notary Public
My commission expires:
August 5, 1997
<PAGE>
Exhibit A
---------
to
Leasehold Mortgage
between
ACC Syracuse Telecom Corp.
and
First Union National Bank of North Carolina,
as Administrative Agent
Description of Leased Premises
------------------------------
Suite 206
State Tower Building
109 South Warren Street
Syracuse, New York
ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, with the buildings and
improvements thereon created, situate, lying and being in the City of Syracuse,
County of Onondaga, and State of New York, known and designated as Lots Nos. 1,
------------
2, 3, 4, 5, 6, 7, part of 19 and Lot 20, the latter Lot also known as Lot A,
- ------------------ -- ------- -----
all being in Block 103 in said City, bounded and described as follows:
---------
Beginning at the intersection of the east line of South Warren Street and the
south line of East Water Street, thence south 0 degrees 03 30" west on the east
line of South Warren Street, 67.68 feet to the northerly line of East Genesee
Street; thence south 59 degrees 45' 20" east along the northeasterly line of
East Genesee Street, 196.49 feet; thence north 29 degrees 58' 40" east 79.51
feet to a point; thence north 0 degrees 26' 20" west 1.42 feet; thence north
30 degrees 14' 40" east 15.69 feet to a point; thence north 0 degrees 26'29"
east 0.67 feet to a point, thence south 89 degrees 33' 40" east 1.21 feet to a
point; thence south 0 degrees 26' 20" east 5.33 feet to a point in the south
line of Falker property; thence north 0 degrees 03' 40" west 75 feet to the
south line of East Water Street; thence north 89 degrees 33' 40" west along the
southerly line of East Water Street 217.83 feet to the point and place of
beginning.
<PAGE>
Exhibit 99.17
SATISFACTION: The indebtedness
secured by this Leasehold Mortgage
has been satisfied in full.
By:______________________
Name:____________________
Title:___________________
Date:____________________
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
LEASEHOLD MORTGAGE
[NEW YORK]
This Leasehold Mortgage is made and entered into as of this 21
-------
day of July, 1995, by and among ACC CORP., a Delaware corporation ("Mortgagor"),
and FIRST UNION NATIONAL BANK OF NORTH CAROLINA ("Mortgagee"), as Administrative
Agent for the financial institutions (the "Lenders") as are, or may from time to
time become, parties to the Credit Agreement (as defined below).
WHEREAS, Mortgagor and certain Affiliates thereof are indebted to the
Lenders in the principal sum of up to Thirty-Five Million Dollars ($35,000,000),
as evidenced by the Notes of even date executed by the Mortgagor and such
Affiliates in favor of the Lenders, and such other documents as may have been
executed or given by Mortgagor in connection with the transactions contemplated
by the Credit Agreement of even date between the Mortgagor and such Affiliates
as Borrowers thereunder (collectively, the "Borrowers"), the Lenders and the
Mortgagee, as Administrative Agent for the Lenders (as amended or supplemented,
the "Credit Agreement", and collectively with the Notes and such other
documents, the "Loan Documents"), the terms and conditions of which are
incorporated herein by reference;
NOW, THEREFORE, as security for the payment and performance of up to
$500,000 of the Obligations (as defined in the Credit Agreement), the Mortgagor
has created a security interest in, bargained, sold, given, granted, assigned
and conveyed and does by these presents create a security interest in, bargain,
sell, give, grant, assign and convey unto the
<PAGE>
- 2 -
Mortgagee, its or his successors and assigns, all of Mortgagor's right, title
and interest in and to that certain leasehold estate under (a) a lease agreement
(as amended or supplemented, and together with the lease referred to in
subparagraph (b) below, collectively, the "Lease"), dated January 10, 1989, as
extended by Lease Extension Agreement dated July 21, 1992, between the Mortgagor
and State Tower of Syracuse Associates, L.P., of the Premises commonly known as
Suite 2200 State Tower Building, 109 South Warren Street, Syracuse, New York and
(b) a lease agreement (as amended or supplemented, and together with the lease
referred to in subparagraph (a) above, collectively, the "Lease"), dated April
5, 1989, as extended by Lease Extension Agreement dated July 21, 1992 and by
Lease Addendum dated January 21, 1993, between the Mortgagor and State Tower of
Syracuse Associates, L.P., of the Premises commonly known as Suite 204 and Suite
205 State Tower Building, 109 South Warren Street, Syracuse, New York
(collectively, the "Leasehold Estate"), which is more particularly described on
Exhibit A attached hereto and incorporated herein by reference.
- ---------
TO HAVE AND TO HOLD the Leasehold Estate described herein unto the
Mortgagee, its heirs and successors in interest forever.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if the Mortgagor
shall satisfy all Obligations secured hereby, and shall comply with all of the
covenants, terms and conditions of this Leasehold Mortgage and the Loan
Documents, then this conveyance shall be null and void and shall be canceled of
record at the request and cost of Mortgagor. But if at any time there shall be
any default in satisfaction of any Obligations or under this instrument or under
the terms and conditions of any instrument secured hereby, which default shall
not have been cured within any applicable grace period (if any) provided
therefor, then, at the option of Mortgagee, with the consent of the Required
Lenders, the entire indebtedness hereby secured shall immediately become due,
payable and collectible without further notice, regardless of maturity, and this
Mortgage may be foreclosed by judicial proceedings, or the Mortgagee is hereby
authorized and empowered to expose to sale and to sell the Leasehold Estate
described herein at public sale for cash, in compliance with the requirements of
Article 14 of the New York Real Property Actions and Proceedings Laws, or any
subsequently enacted statute relating to nonjudicial foreclosure sales in effect
on the date foreclosure is commenced, and at the time and place fixed for the
sale to sell the Leasehold Estate described herein to the highest bidder for
cash, and Mortgagee shall execute a conveyance of said Leasehold Estate to and
deliver possession of same to the purchaser. Mortgagee may bid and become the
purchaser at any sale under this Leasehold Mortgage. The proceeds of the sale
shall, after the Mortgagee retains a reasonable compensation, together with
reasonable attorneys' fees incurred by Mortgagee in such proceeding, be applied
first to the payment of the costs and expenses of such sale; second, to the
payment to the whole amount of Obligations then owing by the Mortgagor to the
Lenders and secured hereby; and third to the payment of the surplus, if any, to
the Mortgagor or to whomever else may be lawfully entitled thereto.
This Leasehold Mortgage is made as additional collateral to secure the
payment and performance of the Obligations. Other terms capitalized but not
otherwise defined herein shall have the meanings ascribed thereto in the Credit
Agreement.
<PAGE>
- 3 -
MORTGAGOR ACKNOWLEDGES, COVENANTS AND AGREES WITH MORTGAGEE AS FOLLOWS:
1. Mortgagor represents and warrants that there have been no prior
encumbrances, conveyances or assignments of its interest in the Lease which are
still in effect, and that the Lease is a valid and enforceable agreement, that
neither Mortgagor nor, to its knowledge, any other party, is in material default
thereunder and that all covenants, conditions and agreements have been performed
as required therein, except those not due to be performed until after the date
hereof.
2. No change in the terms of the Lease shall be valid without the
written approval of Mortgagee, with the consent of the Required Lenders, and
Mortgagor shall not assign, sell, pledge, mortgage or otherwise transfer or
encumber its interest in the Lease so long as this Leasehold Mortgage is in
effect except as permitted by the Credit Agreement.
3. Mortgagor shall give prompt notice to Mortgagee of any notice of
default received by it under the Lease, together with a complete copy of any
such notice of default.
4. Mortgagor shall perform each and all of the covenants and
obligations of the tenant under the Lease for so long as this Leasehold Mortgage
is in effect, including, without limitation, the obligations to maintain,
rebuild and insure the improvements which constitute a portion of the premises
thereunder.
5. Should Mortgagor fail to make any payment or to do any act as
herein provided, then Mortgagee may, but without obligation to do so and without
notice to or demand on Mortgagor and without releasing Mortgagor from any
Obligation, make or do the same, including, without limitation, appearing in and
defending any action purporting to affect the security hereof or the rights or
powers of Mortgagee hereunder and performing any obligation of Mortgagor under
the Lease, and in exercising any such powers, paying all necessary costs and
expenses, including, without limitation, attorneys' fees. Mortgagor will pay
immediately upon demand all sums expended by Mortgagee under the authority
hereof, and the same shall be added to the Obligations and shall be secured
hereby and by the Loan Documents.
6. Upon the occurrence and continuation of an Event of Default,
Mortgagee may, with the consent of the Required Lenders, at its option, without
notice and without regard to the adequacy of security for the Obligations,
either in person or by agent and with or without bringing any action or
proceeding, or by a receiver to be appointed by a court, enter upon, take
possession of, and operate the premises which are the subject of the Lease,
make, enforce, modify and accept any provision of, or surrender, the Lease, and
do any other act or acts which Mortgagee deems proper to protect the security
hereof until all Obligations have been paid or performed in full. The entering
upon and taking possession of such premises shall not cure or waive any default
or waive, modify or affect any notice of default under the Credit Agreement or
any other security instrument, nor invalidate any act done pursuant to any such
notice.
<PAGE>
- 4 -
7. Mortgagor hereby irrevocably constitutes and appoints Mortgagee as
its attorney-in-fact to demand, receive, and enforce Mortgagor's rights with
respect to the Lease for and on behalf of and in the name of Mortgagor or, with
the same force and effect as Mortgagor could do if this Leasehold Mortgage had
not been made. Mortgagee may, without affecting any of its rights or remedies
against Mortgagor under any other instrument, document or agreement, exercise
its rights under this Leasehold Mortgage as Mortgagor's attorney-in-fact in any
other manner permitted by law, and in addition Mortgagee shall have and possess,
without limitation, any and all rights and remedies of a secured party under the
Uniform Commercial Code or otherwise as provided by law.
8. At Mortgagor's sole cost and expense, Mortgagor will appear in
and defend any action growing out of or in any manner connected with the Lease
or the obligations or liabilities of Mortgagor thereunder. In addition,
Mortgagor shall indemnify and hold Mortgagee harmless from and against any and
all claims, demands, liabilities, losses, lawsuits, judgments, and costs and
expenses, including, without limitation, reasonable attorneys' fees to which
Mortgagee may become exposed or which Mortgagee may incur in exercising any of
its rights under this Leasehold Mortgage.
9. This Leasehold Mortgage is for security purposes only.
Accordingly, Mortgagee shall not have the right under this Leasehold Mortgage to
enforce the provisions of said Lease or exercise rights hereunder unless and
until there shall have occurred an Event of Default.
10. Subject to the limitation on further assignment by Mortgagor
set forth above, this Leasehold Mortgage shall be binding upon and inure to the
benefit of the legal representatives, assigns and successors in interest of
Mortgagor and Mortgagee, including any subsequent holders of Notes.
11. All notices hereunder shall be sent to the addresses and pursuant
to the procedures set forth in Section 13.1 of the Credit Agreement.
12. Mortgagor warrants and represents that it is the Lessee of the
Leasehold Estate under the Lease; such Leasehold Estate is free and clear of all
liens, charges and encumbrances whatsoever, except those which have been
approved by Mortgagee; and Mortgagor has full right and power to make this
conveyance.
13. In addition to the rights and remedies set forth herein,
Mortgagee shall have all rights and remedies set forth in the Loan Documents.
IN WITNESS WHEREOF, Mortgagor has executed and sealed this Leasehold
Mortgage this 10 day of July, 1995.
------
<PAGE>
- 5 -
ACC CORP.
[CORPORATE SEAL] By: /s/ John J. Zimmer
----------------------------
Name: John J. Zimmer
---------------------
ATTEST: /s/ Daniel J. Venuti Title: Vice Pres-Finance
------------------------- ---------------------
Name: Daniel J. Venuti
-----------------
Title: Asst. Secretary
----------------
<PAGE>
STATE OF NORTH CAROLINA)
--------------
)
COUNTY OF MECKLENBURG )
-------------
I, Betty G. Smith, a Notary Public of the county and state aforesaid,
--------------
certify that Daniel J. Venuti personally came before me this day and
acknowledged that (s)he is Assistant Secretary of ACC CORP., a Delaware
----------
corporation, and that by authority duly given and as the act of the corporation,
the foregoing instrument was signed in its name by its Controller, sealed with
----------
its corporate seal and attested by himself as its Assistant Secretary.
---------
WITNESS my hand and official stamp, this 10th day of July, 1995.
--------
/s/ Betty G. Smith
-----------------------------------
Notary Public
My commission expires:
August 5, 1997
<PAGE>
Exhibit A
---------
to
Leasehold Mortgage
between
ACC Corp.
and
First Union National Bank of North Carolina,
as Administrative Agent
Description of Leased Premises
------------------------------
Suite 2200
Suite 204
and
Suite 205
State Tower Building
109 South Warren Street
Syracuse, New York
ALL THAT CERTAIN PLOT, PIECE OR PARCEL OF LAND, with the buildings and
improvements thereon created, situate, lying and being in the City of Syracuse,
County of Onondaga, and State of New York, known and designated as Lots Nos. 1,
2, 3, 4, 5, 6, 7, part of 19 and Lot 20, the latter Lot also known as Lot A, all
-----
being in Block 103 in said City, bounded and described as follows: Beginning at
---------
the intersection of the east line of South Warren Street and the south line of
East Water Street, thence south 0 degrees 03' 30" west on the east line of
South Warren Street, 67.68 feet to the northerly line of East Genesee Street;
thence south 59 degrees 45' 20" east along the northeasterly line of East
Genesee Street, 196.49 feet; thence north 29 degrees 58' 40" east 79.51 feet
to a point; thence north 0 degrees 26' 20" west 1.42 feet; thence north 30
degrees 14' 40" east 15.69 feet to a point; thence north 0 degrees 26'29" east
0.67 feet to a point; thence south 89 degrees 33' 40" east 1.21 feet to a
point; thence south 0 degrees 26' 20" east 5.33 feet to a point in the south
line of Falker property; thence north 0 degrees 03' 40" west 75 feet to the
south line of East Water Street; thence north 89 degrees 33' 40" west along
the southerly line of East Water Street 217.83 feet to the point and place of
beginning.
<PAGE>
Exhibit 99.18
MORTGAGE OF LEASEHOLD INTEREST
------------------------------
This agreement made as of the 21st day of July, 1995.
---- ----
BETWEEN:
ACC LONG DISTANCE INC./INTERURBAINS ACC INC., a corporation
incorporated under the laws of the province of Ontario
(hereinafter called the "Company")
OF THE FIRST PART
- and -
ACC CORP., a corporation incorporated under the laws of the State
of Delaware
(hereinafter called the "Mortgagee")
OF THE SECOND PART
WHEREAS ACC Long Distance Ltd./Interurbains ACC Ltee. ("ACC Ltd."), as
lessee, entered into an amended and restated lease dated as of March 1, 1994
between the Company, as tenant, and Coopers & Lybrand as receiver and manager
for Dundas Kipling II Inc., as landlord (such lease as the same may be amended,
extended or replaced from time to time being collectively called the "Lease"),
relating to the lands and premises municipally known as 5343 Dundas Street West,
Etobicoke, Ontario and more particularly described in Schedule "A" hereto (which
leased premises are hereinafter referred to as the "Lands");
AND WHEREAS the ACC ltd. assigned its right, title and interest in and
to the Lease and the obligations owing thereunder to the Company pursuant to an
assignment and assumption agreement dated as of March 1, 1994;
AND WHEREAS the Company has agreed to mortgage, charge and assign all
of its right, title and interest in and to all benefits arising under or in
respect of the Lease including without limitation its rights and interests in
the Lands (which rights, title, interests and benefits are hereinafter
collectively called the "Leasehold Interest") to the Mortgagee as security for
payment of the Indebtedness;
<PAGE>
- 2 -
NOW WITNESS that in consideration of the sum of TWO DOLLARS ($2.00)
now paid by the Mortgagee to the Company and other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the Company), the Company hereby agrees with the Mortgagee as follows:
1. Subject to the exception as to leasehold hereinafter contained,
the Company, as security for repayment of the sum of Forty-Five Million
($45,000,000 Cdn.) Canadian Dollars and all present and future indebtedness,
liabilities and other obligations of the Company under or pursuant to a certain
credit agreement dated July 21, 1995 between the Mortgagee, as lender, and the
Company, ACC Telenterprises Ltd./Telentreprises ACC Ltee. and ACC Long Distance
Inc./Interurbains ACC Inc., as borrowers (such credit agreement as may be
amended, supplemented, replaced or restated from time to time being herein
called the "Credit Agreement") and under and pursuant to a related grid
promissory note dated July 21, 1995 signed by the Company, ACC Telenterprises
Ltd./Telentreprises ACC Ltee. and ACC Long Distance Inc./Interurbains ACC Inc.
in favour of the Mortgagee in the principal amount of $29,000,000 U.S. (all of
the Company's foregoing indebtedness, liabilities and obligations to the
Mortgagee under the Credit Agreement and the aforesaid promissory note being
hereinafter called the "Credit Agreement Indebtedness") together with interest
thereon at the rate of twenty-five (25%) percent per annum calculated and
payable monthly not in advance, both before and after demand and before and
after default, judgment and execution from the date hereof until payment (all of
the foregoing hereinafter collectively referred to as the "Indebtedness"),
hereby mortgages, charges and assigns to the Mortgagee, and grants to the
Mortgagee a security interest in the Leasehold Interest.
TO HAVE AND TO HOLD the assets hereby mortgaged and charged to the
Mortgagee its successors and assigns, forever but subject to the terms and
conditions herein set forth.
2. It is hereby declared that the last day of any term of years
reserved by any lease, verbal or written, or any agreement therefor (including
without limitation the Lease), now held or hereafter acquired by the Company,
and whether falling within the general or particular description of the
mortgaged premises hereunder or otherwise shall be excepted out of the mortgage
and charge constituted hereby or by any other agreement, but the Company shall
stand possessed of the reversion of one day remaining in the Company in respect
of any such term of years, for the time being demised, as aforesaid, upon trust
to assign and dispose of the same as any purchaser of such term of years shall
direct.
3. The Company hereby covenants and agrees that it shall at all
times, at its own cost and expense, do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged or delivered all and singular every
such further act, deed, transfer, assignment and assurance as the Mortgagee may
reasonably require for the better mortgaging, charging, transferring, assigning
and confirming unto the Mortgagee the property and assets hereby mortgaged and
charged or intended so to be or which the Company may hereafter become bound
<PAGE>
- 3 -
to mortgage charge, transfer or assign in favour of the Mortgagee and for the
better accomplishing and effectuating of this mortgage.
4. The Mortgagee shall not in any way whatsoever be obligated to
perform any covenants or obligations of the Company under the Lease.
5. The Company represents and warrants to the Mortgagee that as of
the date hereof: (a) the Lease has not been surrendered or forfeited; (b) the
rents and covenants therein contained have been duly paid and performed by the
Company; (c) the Company has full right, power and authority to mortgage and
charge the Lease and the Leasehold Interest as contemplated hereby; and (d) the
Company has obtained the consent of the Landlord to the mortgaging and charging
of the Lease and the Leasehold Interest (if such consent is required to be
obtained from the Landlord).
6. The Company hereby covenants and agrees to and with the Mortgagee
that until the Indebtedness has been repaid in full, the Company:
(a) shall not without the prior written consent of the Mortgagee
create any lien upon or assign or transfer as security or
pledge or hypothecate any asset subject to the mortgage and
charge hereof except to the Mortgagee and the Company will
not, in the ordinary course of business or otherwise, sell,
transfer, assign, or otherwise dispose of any such asst
without the prior written consent of the Mortgagee;
(b) shall not without the prior written consent of the Mortgagee
merge or amalgamate with any other corporation;
(c) shall insure and keep insured the buildings, erections,
fixtures, improvements, premises and all other assets hereby
charged against loss or damage by fire and other insurable
hazards which such assets are commonly insured against in
the Province of Ontario to the full insurable value thereof;
the Company shall duly and promptly pay all premiums and
other sums of money payable for maintaining such insurance
and shall cause all insurance proceeds thereunder to be
payable in the case of loss to the Mortgagee as first
mortgagee and loss payee such insurance policy(ies) to
contain a standard mortgage clause and the Company shall,
upon request from the Mortgagee, provide to the Mortgagee
evidence of the payment of such premiums and the assignment
of such insurance proceeds to the Mortgagee; and
(f) shall strictly comply with every covenant and undertaking
heretofore or hereafter given by it to the Mortgagee.
<PAGE>
- 4 -
7. The Company covenants and agrees to and with the Mortgagee that:
(a) it shall at all times fully perform and comply with all of
its covenants and obligations contained in the Lease, and
imposed upon or assumed or agreed to by it pursuant to any
prior encumbrance of the Lands or any part thereof or its
Leasehold Interest therein and that, if the Company shall
fail to do so the Mortgagee may (but shall not be obligated
to) take any action the Mortgagee deems necessary or
desirable to cure any default by the Company in the
performance of or compliance with any of the obligations of
the Company pursuant to the Lease or imposed upon, assumed
by or agreed to by the Company pursuant to any such prior
encumbrance; upon receipt by the Mortgagee from the Landlord
or from any such prior encumbrancer of any written notice of
default by the Company, the Mortgagee may rely thereon and
take any action as aforesaid to cure such default even
though the existence of such default or the nature thereof
may be questioned or denied by the Company or by any party
on behalf of the Company; the Company hereby expressly
grants to the Mortgagee and agrees that the Mortgagee shall
have the absolute and immediate right to enter in and upon
the Lands or any part thereof to such extent and as often as
the Mortgagee, in its sole discretion, deems necessary or
desirable, in order to cure any such default by the Company;
the Mortgagee may pay and expend such sums of money as the
Mortgagee in its sole discretion, acting reasonably, deems
necessary or desirable for any such purpose, and the Company
hereby agrees to pay to the Mortgagee, immediately upon
notification by the Mortgagee and without demand, all such
sums so paid and expended by the Mortgagee, together with
interest thereon at the rate applicable to the Indebtedness
from time to time; all such sums so paid or expended by the
Mortgagee and such interest thereon, shall be secured hereby
in addition to the Indebtedness and in priority to all other
mortgages and charges;
(b) it shall not surrender the Lease or any rights of renewal
with respect thereto nor terminate nor cancel the Lease
without the prior written consent of the Mortgagee and that
the Company will not, without the prior written consent of
the Mortgagee, modify, revise, alter or amend the Lease,
either orally or in writing;
(c) no release or forbearance of any of the Company's covenants
and obligations contained in the Lease or pursuant to any
prior encumbrance of the Leasehold Interest or any part
thereof shall release the Company from any of its
obligations contained herein;
<PAGE>
- 5 -
(d) unless the Mortgagee shall otherwise expressly consent in
writing, the title in fee simple to the Lands and the
Leasehold Interest shall not merge but shall always remain
separate and distinct, notwithstanding the union of said
estates in either the Landlord or the Company, by purchase
or otherwise;
(e) if the Company shall, at any time prior to the repayment in
full of the Indebtedness, purchase or in any way acquire the
freehold title to the Lands, this mortgage and charge shall
attach, extend to and constitute a mortgage and charge of
such freehold estate;
(f) it will indemnify and save harmless the Mortgagee from and
against any and all losses, costs, claims, actions, damages
and expenses (including without limitation legal fees and
disbursements on a solicitor and client basis) incurred or
suffered by the Mortgagee or its agents or employees as a
result of or in connection with the presence, removal,
disposal or movement of any hazardous waste or substance on
the Lands which is not in compliance with Applicable Law;
(g) it will at any time and from time to time, upon request from
the Mortgagee, deliver to the Mortgagee a statement in
writing certifying that: the Lease is in full force and
effect; there are no defaults under the Lease; the Lease has
not been modified or amended; all amounts required to be
paid by the Company under the Lease have been paid to the
date of the certificate;
(h) upon the occurrence of a default hereunder, the Mortgagee
may peaceably and quietly enter upon and use, occupy,
possess and enjoy the Lands and the Leasehold Interest, free
from all encumbrances, liens and charges, without hindrance,
interruption or denial of the same by the Company or any
other person or persons, save only the rights of the
Landlord under the Lease;
(i) the Company hereby assigns and transfers to the Mortgagee
all of the Company's right, title and interest in and to the
benefit of any and all non-disturbance, attornment or like
agreements to which the Company is now or may hereafter
become a party (and the Company covenants and agrees to and
with the Mortgagee that the Company shall use its best
efforts at its own cost and expense to obtain from all
appropriate third parties non-disturbance, attornment or
other similar agreements in favour of the Mortgagee in form
and substance satisfactory to the Mortgagee); and
<PAGE>
- 6 -
(j) the Company shall not subordinate or postpone or agree to
subordinate or postpone the Leasehold Interest or the
Mortgagee's security interests, charges or rights therein,
to or in favour of any lien, charge or encumbrance without
the prior written consent of the Mortgagee.
8. The Indebtedness shall become payable and the security hereby
constituted shall become enforceable in each and every of the events following
(each of such events being hereinafter referred to as an "Event of Default"):
(a) if an Event of Default (as defined in the Credit Agreement)
occurs;
(b) if the Company defaults in the observance or performance in
any material respect of any of its covenants, agreements or
other obligations under this mortgage, provided however that
if such default is curable, such default has not been
remedied within 30 days after the Secured Party has given
notice to the Company to remedy the default;
(c) if an order is made or a resolution passed for the winding-
up of the Company, or if a petition is filed for the
winding-up of the Company;
(d) if the Company ceases or threatens to cease to carry on
business or if the Company commits or threatens to commit
any act of bankruptcy or if the Company becomes insolvent or
makes an assignment or proposal in bankruptcy or makes a
bulk sale of its assets or if a bankruptcy petition is filed
or presented against the Company;
(e) if any proceedings with respect to the Company are commenced
under the Companies' Creditors Arrangement Act or the
Bankruptcy and Insolvency Act or if the Company shall seek
relief or consent to the filing of a petition against it
under any law which involves any compromise of any
creditor's rights against the Company;
(f) if an execution or any other process of any court becomes
enforceable against the Company or if a distress or
analogous process is levied upon the property of the Company
or any part thereof; or
(g) if any licences, permits or approvals required by any law,
regulation or governmental policy or any governmental agency
or
<PAGE>
- 7 -
commission for the operation by the Company of its business
shall be withdrawn or cancelled.
9. No waiver by the Mortgagee of any of its rights or remedies
hereunder shall be considered a waiver of any other or subsequent right or
remedy of the Mortgagee, no delay or omission in the exercise or enforcement by
the Mortgagee of any right or remedy shall be considered as a waiver of such
right or remedy of the Mortgagee and no exercise or enforcement of such right or
remedy shall exhaust or preclude the exercise of any other right or remedy by
the Mortgagee.
10. Upon the occurrence and during the continuance of an Event of
Default the Mortgagee may: (a) take possession of all or part of the Lands and
the Leasehold Interest with the power to exclude the Company, its agents and
servants therefrom; and (b) enter upon and lease or sell the whole or any part
or parts of the property and assets charged hereby and any such sale may be made
hereunder by public auction, by public tender or by private contract, with or
without notice and with or without advertising and without any other formality,
all of which are hereby waived by the Company to the fullest extent permitted by
law and such sale shall be on such terms and conditions as to credit or
otherwise and as to upset or reserve bid or price as to the Mortgagee in its
sole discretion may seem advantageous and such sale may take place whether or
not the Mortgagee has taken possession of such property and assets.
11. Upon the occurrence of an Event of Default, the Mortgagee may
appoint by instrument in writing a receiver (including a receiver and manager)
or receivers of the Leasehold Interest or any part hereof (which receiver or
receivers may be any person or persons, whether an officer or officers or
employee or employees of the Mortgagee or not and the Mortgagee may remove any
receiver or receivers so appointed and appoint another or others in his or their
stead) and any receiver or receivers so appointed shall have the power to:
(a) take possession of and to use the Leasehold Interest or any
part thereof;
(b) preserve and maintain the Leasehold Interest as the receiver
shall deem advisable;
(c) borrow money required for the preservation or protection of
the Leasehold Interest or any part thereof;
(d) further charge the Leasehold Interest in priority to the
security interests of this mortgage as security for monies
so borrowed; and
(e) sell, lease or otherwise dispose of the whole or any part of
the Leasehold Interest on such terms and conditions and in
such manner as the receiver shall determine in its sole and
unfettered discretion.
<PAGE>
- 8 -
The Mortgagee shall not be responsible for any actions or errors of
omission by the receiver or receivers in exercising any such powers.
12. All rights and remedies of the Mortgagee contained herein shall
be cumulative, and all such rights and remedies may be pursued jointly and
separately, successively or concurrently at the sole discretion of the
Mortgagee.
13. The Company agrees to pay to the Mortgagee forthwith on demand
all costs, charges, expenses and fees (including without limitation all legal
fees and disbursements on a solicitor and client basis) of or incurred by the
Mortgagee and by any receiver or receivers or agent or agents appointed by the
Mortgagee in connection with the enforcement of this mortgage, whether by
realization, taking possession of the Tenant's Leasehold Interest or otherwise.
All such sums, together with interest thereon at the rate or rates applicable to
the Indebtedness shall be secured by the charges contained herein. The term
"receiver" as used in this mortgage includes a receiver and manager.
14. Upon payment by the Company, its successors or assigns, of the
Indebtedness hereby secured (including without limitation interest, costs and
expenses), the Mortgagee shall upon request in writing by the Company, its
successors or assigns, deliver up this mortgage to the Company, its successors
or assigns and, at the expense of the Company, cancel and discharge the charge
of this mortgage and execute and deliver to the Company, its successors or
assigns such deeds or other instruments as shall be requisite to discharge the
charge constituted hereby.
15. This security is in addition to and not in substitution for any
other security now or hereafter held by the Mortgagee.
16. In the event that any provision hereof is for any reason held by
a court of competent jurisdiction to be invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof and this mortgage shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
17. This mortgage shall be governed by the laws of the Province of
Ontario and the federal laws of Canada applicable therein and all disputes among
the parties hereto shall be submitted to the courts of the Province of Ontario
provided that the Mortgagee shall be entitled to commence actions in the courts
of any other jurisdiction at its discretion for the purpose of enforcing the
provisions hereof.
18. All notices, demands, requests, consents and other communications
required or permitted or otherwise to be given for any purpose hereunder shall
be in writing and shall be communicated by personal delivery or by facsimile
transmission to the respective addresses herein set forth, or such other
addresses which the parties hereto may from time to time designate by written
notice to the other as required herein. All notices, demands, requests,
consents and other communications shall be addressed as follows:
<PAGE>
- 9 -
(a) If to the Company, to it at:
5343 Dundas Street West
Suite 600
Etobicoke, Ontario
M9B 6K5
Attention: Barry Singer
Facsimile No.: (416) 236-7392
(b) If to the Mortgagee, to it at:
400 West Avenue
Rochester, New York 14611
Attention: Michael Daley
Facsimile No.: (716) 987-3335
Each communication given by personal delivery or by facsimile transmission shall
be deemed to have been received by the party to which it is so addressed on the
date of such personal delivery or facsimile transmission, provided that it is
delivered or faxed before 5:00 p.m. (Toronto, Ontario time) on a Business Day
(failing which, receipt shall be deemed to have occurred on the next following
Business Day). For the purposes of this mortgage, a "Business Day" means a day
on which Bank of Montreal's main Toronto, Ontario branch (at 1 First Canadian
Place) is open for normal banking business, but specifically excludes any
Saturday, Sunday or any other day which is a statutory holiday in Toronto,
Ontario.
19. This mortgage shall enure to the benefit of the Mortgagee and its
successors and assigns and it shall be binding upon the Company and its
successors and assigns. The Mortgagee shall be entitled in its sold and
unfettered discretion, without the consent of the Company, to assign the
indebtedness hereunder (and any and all security therefor or interest therein)
to any assignee or assignees and the Company shall, at the Mortgagee's request,
execute or cause to be executed all documents required by the Mortgagee to
facilitate such assignment. The Borrower shall not, without the Mortgagee's
prior written consent, assign any interest herein to any other person, firm,
corporation or other entity whatsoever.
20. Notwithstanding anything else herein contained, payment by
Company to the Mortgagee of the Credit Agreement Indebtedness and other costs
and expenses (and interest thereon) contemplated hereby shall constitute
satisfaction and payment of the Indebtedness owing by the Company to the
Mortgagee hereunder.
21. In the event of any of any conflict or inconsistency between the
terms and conditions contained herein and the terms and conditions contained in
Standard Charge Terms 911, the terms and conditions contained herein shall
govern to the extent of such conflict
<PAGE>
- 10 -
or inconsistency and the provisions of the Standard Charge Terms No. 911 shall
be deemed to be varied accordingly.
22. Unless otherwise stated herein, all dollar amounts referred to
herein are denominated in Canadian dollars.
IN WITNESS WHEREOF the Company has caused its corporate seal to be
affixed to this mortgage under the hands of by its proper officers duly
authorized in that behalf as of the 21st day of July, 1995.
ACC LONG DISTANCE INC/ INTERURBAINS ACC INC.
Per: /s/ John J. Zimmer
----------------------
Name: John J. Zimmer
Title: Assistant Controller
Per: /s/ Daniel J. Venuti
----------------------
Name: Daniel J. Venuti
Title: Authorized Signatory
<PAGE>
- 11 -
SCHEDULE "A"
Legal Description of Lands
--------------------------
Part of Lot 7, Concession 5, Colonel Smith's Tract, City of Etobicoke, in the
Municipality of Metropolitan Toronto, designated as Part 3 and 5 on Plan 64R-
5004.
City of Toronto, Municipality of Metropolitan Toronto.
<PAGE>
Exhibit 99.19
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of July 21,
--
1995 is made by ACC CORP., a Delaware corporation (the "Pledgor"), in favor of
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association (the
"Administrative Agent"), as Administrative Agent for the ratable benefit of
itself and the financial institutions (the "Lenders") as are, or may from time
to time become, parties to the Credit Agreement (as defined below).
STATEMENT OF PURPOSE
--------------------
Pursuant to a Credit Agreement, dated as of even date herewith
(together with all amendments and other modifications, if any, from time to time
hereafter made thereto, the "Credit Agreement"), between the Pledgor and certain
Subsidiaries of the Pledgor as Borrowers thereunder (collectively, the
"Borrowers"), the Lenders and the Administrative Agent, the Lenders will extend
Loans to the Borrowers as more specifically described in the Credit Agreement.
The Pledgor is the legal and beneficial owner of the shares of Pledged
Stock (as hereinafter defined) issued by the United States Subsidiaries and the
Foreign Subsidiaries as specified on Schedule 1 attached hereto and incorporated
----------
herein by reference (collectively, the "Issuers").
In connection with the transactions contemplated by the Credit
Agreement and as a condition precedent thereto, the Lenders have requested, and
the Pledgor has agreed to execute and deliver, this Pledge Agreement with the
Pledged Stock to the Administrative Agent for the ratable benefit of itself and
Lenders.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into and make available Loans
pursuant to the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent for the ratable benefit of itself and Lenders as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in
----
effect in the State of North Carolina.
"Collateral" means the Pledged Stock and all Proceeds.
----------
"Pledge Agreement" means this Pledge Agreement, as amended or
----------------
modified.
<PAGE>
- 2 -
"Pledged Stock" means the shares of capital stock of each Issuer
-------------
listed on Schedule I hereto, together with all stock certificates,
----------
options or rights of any nature whatsoever that may be issued or
granted by such Issuer to the Pledgor while this Pledge Agreement is
in effect.
"Proceeds" means all "proceeds" as such term is defined in
--------
Section 9-306(1) of the Code on the date hereof and, in any event,
shall include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon, proceeds of sale thereof or
distributions with respect thereto.
2. Pledge and Grant of Security Interest. The Pledgor hereby
-------------------------------------
delivers to the Administrative Agent, for the ratable benefit of itself and the
Lenders all the Pledged Stock and hereby grants to the Administrative Agent, for
the ratable benefit of itself and the Lenders, a first priority security
interest in the Pledged Stock and all other Collateral, as collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Obligations.
3. Stock Powers. Concurrently with the delivery to the
------------
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor with, if the Administrative
Agent so requests, signature guaranteed.
4. Representations and Warranties. To induce the Administrative
------------------------------
Agent and the Lenders to execute the Credit Agreement and make any Loans and to
accept the security contemplated hereby, the Pledgor hereby represents and
warrants that:
(a) the Pledgor has the corporate power, authority and legal
right to execute and deliver, to perform its obligations under, and to
grant the Lien on the Collateral pursuant to, this Pledge Agreement
and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Lien on the
Collateral pursuant to, this Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies;
(c) the execution, delivery and performance of this Pledge
Agreement will not violate any provision of any Applicable Law or
contractual obligation of the Pledgor and will not result in the
creation or imposition of any Lien on any of the properties or
revenues of the Pledgor pursuant to any Applicable Law or contractual
obligation, except as contemplated hereby;
<PAGE>
- 3 -
(d) except as contemplated in Section 11 hereof, no consent or
authorization of, filing with, or other act by or in respect of, any
arbitrator or Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder or creditor of
the Pledgor or any Issuer), is required in connection with the
execution, delivery, performance, validity or enforceability against
the Pledgor of this Pledge Agreement;
(e) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge
of the Pledgor, threatened by or against the Pledgor or against any of
its properties or revenues with respect to this Pledge Agreement or
any of the transactions contemplated hereby;
(f) the shares of Pledged Stock listed on Schedule I constitute
----------
all the issued and outstanding shares of all classes of the capital
stock of each of the United States Subsidiaries and constitute 66.66%
of all the issued and outstanding shares of all classes of capital
stock of each of the Foreign Subsidiaries;
(g) all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable;
(h) the Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock listed on Schedule I,
----------
free of any and all Liens or options in favor of, or claims of, any
other Person, except the Lien created by this Pledge Agreement; and
(i) upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock, the Lien granted pursuant
to this Pledge Agreement will constitute a valid, perfected first
priority Lien on the Pledged Stock and the Proceeds related thereto,
enforceable as such against all creditors of the Pledgor and any
Persons purporting to purchase any of the Pledged Stock from the
Pledgor.
5. Certain Covenants. The Pledgor covenants and agrees with the
-----------------
Administrative Agent for the ratable benefit of itself and the Lenders that,
from and after the date of this Pledge Agreement until the Obligations are paid
in full and the Commitments are terminated:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option
<PAGE>
- 4 -
or rights, whether in addition to, in substitution of, as a conversion
of, or in exchange for any shares of the Pledged Stock, or otherwise
in respect thereof, the Pledgor shall accept the same as the agent of
the Administrative Agent, hold the same in trust for the
Administrative Agent and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by the
Pledgor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank
by the Pledgor and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the
Obligations; provided that in no event shall more than 66.66% of all
--------
the issued and outstanding shares of all classes of capital stock of
each of the Foreign Subsidiaries constitute collateral security
hereunder. In addition, any sums paid upon or in respect of the
Pledged Stock upon the liquidation or dissolution of any Issuer shall
be held by the Administrative Agent as additional collateral security
for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, the Pledgor will not (i) vote to enable, or take any other
action to permit, any Issuer to issue any stock or other equity
securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of such Issuer, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Stock, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Collateral, or any interest
therein, except for the Lien provided for by this Pledge Agreement.
The Pledgor will defend the right, title and interest of the
Administrative Agent in and to the Collateral against the claims and
demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written request
of the Administrative Agent, and at the sole expense of the Pledgor,
the Pledgor will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and
of the rights and powers herein granted. If any amount payable under
or in connection with any of the Collateral shall be or become
evidenced by any promissory note, other instrument or chattel paper,
such note, instrument or chattel paper shall be immediately delivered
to the Administrative Agent, duly endorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this
Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp,
excise, sales or other
<PAGE>
- 5 -
similar taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the
transactions contemplated by this Pledge Agreement.
(e) On or prior to the formation or acquisition of any
Subsidiary of the Pledgor, the Pledgor agrees to execute such
amendments and supplements to this Pledge Agreement, including without
limitation the Pledge Agreement Supplement attached hereto, and such
other documents and instruments and to take any and all actions, all
as shall be necessary, in the reasonable judgment of the
Administrative Agent, to pledge the Pledgor's interest therein to the
Administrative Agent for the ratable benefit of itself and the
Lenders.
(f) Without the prior written consent of the Administrative
Agent, the Pledgor will not sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, or create,
incur or permit to exist any Lien or option in favor of, or any claim
of any Person with respect to, any of the shares of capital stock of
the Foreign Subsidiaries owned by the Pledgor but not pledged
hereunder, or any interest therein, except as otherwise permitted
pursuant to Section 9.3 or Section 9.4 of the Credit Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
-----------------------------
have occurred and be continuing and the Administrative Agent shall have given
notice to the Pledgor of the Administrative Agent's intent to exercise its
rights pursuant to Section 7 below, the Pledgor shall be permitted to receive
all cash dividends paid in accordance with the terms of the Credit Agreement in
respect of the Pledged Stock and to exercise all voting and corporate rights
with respect to the Pledged Stock; provided, that no vote shall be cast or
--------
corporate right exercised or other action taken which would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of the Credit Agreement, the Notes, any other Loan Documents or this
Pledge Agreement.
7. Rights of the Administrative Agent.
----------------------------------
(a) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the Pledgor, (i) the Administrative Agent shall have the right to receive any
and all cash dividends paid in respect of the Pledged Stock and make application
thereof to the Obligations in the order set forth in Section 10 of the Security
Agreement and (ii) all shares of the Pledged Stock shall be registered in the
name of the Administrative Agent or its nominee, and the Administrative Agent or
its nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
the applicable Issuer or otherwise and (B) any and all rights of conversion,
exchange, subscription and any other rights, privileges or options pertaining to
such shares of the Pledged Stock as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its discretion any and
all of the Pledged Stock upon the merger, consolidation, reorganization,
<PAGE>
- 6 -
recapitalization or other fundamental change in the corporate structure of the
applicable Issuer, or upon the exercise by the Pledgor or the Administrative
Agent of any right, privilege or option pertaining to such shares of the Pledged
Stock, and in connection therewith, the right to deposit and deliver any and all
of the Pledged Stock with any committee, depositary, transfer agent, registrar
or other designated agency upon such terms and conditions as it may determine),
all without liability except to account for property actually received by it,
but the Administrative Agent shall have no duty to the Pledgor to exercise any
such right, privilege or option and shall not be responsible for any failure
to do so or delay in so doing.
(b) The rights of the Administrative Agent and the Lenders hereunder
shall not be conditioned or contingent upon the pursuit by the Administrative
Agent or any Lender of any right or remedy against the Pledgor or against any
other Person which may be or become liable in respect of all or any part of the
Obligations or against any collateral security therefor, guarantee therefor or
right of offset with respect thereto. Neither the Administrative Agent nor any
Lender shall be liable for any failure to demand, collect or realize upon all or
any part of the Collateral or for any delay in doing so, nor shall the
Administrative Agent be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be continuing,
--------
with the consent of the Required Lenders, the Administrative Agent may, and upon
the request of the Required Lenders, the Administrative Agent shall, exercise on
behalf of itself and the Lenders, all rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, and in addition thereto, all rights and remedies of
a secured party under the Code. Without limiting the generality of the
foregoing with regard to the scope of the Administrative Agent's remedies, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Pledgor, any Issuer or any
other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, in the over-the-counter market, at any exchange, broker's board or office
of the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or equity is
hereby waived or released. The Administrative Agent shall apply any Proceeds
from time to time held by it and the net proceeds of any such collection,
recovery, receipt,
<PAGE>
- 7 -
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements of counsel
thereto, to the payment in whole or in part of the Obligations, in the order set
forth in Section 10 of the Security Agreement, and only after such application
and after the payment by the Administrative Agent of any other amount required
by any provision of law, including, without limitation, Section 9-504(1)(c) of
the Code, need the Administrative Agent account for the surplus, if any, to the
Pledgor. To the extent permitted by applicable law, the Pledgor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition. The Pledgor further waives and
agrees not to assert any rights or privileges which it may acquire under Section
9-112 of the Code.
9. Registration Rights; Private Sales.
----------------------------------
(a) If the Administrative Agent shall determine to exercise its right
to sell any or all of the Pledged Stock pursuant to Section 8 hereof, and if in
the opinion of the Administrative Agent it is necessary or advisable to have the
Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Pledgor will cause the applicable Issuer to (i) execute and deliver, and cause
the directors and officers of the applicable Issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts
as may be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) to use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) to make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. The Pledgor agrees to
cause the applicable Issuer to comply with the provisions of the securities or
"Blue Sky" laws of any and all jurisdictions which the Administrative Agent
shall designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Pledgor
<PAGE>
- 8 -
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that, in the event the Administrative
Agent is unable to effect a public sale, any such private sale shall be deemed
to have been made in a commercially reasonable manner. The Administrative Agent
shall be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to permit the applicable Issuer to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if the applicable Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this Section 9 valid and
binding and in compliance with any and all other Applicable Laws. The Pledgor
further agrees that a breach of any of the covenants contained in this Section 9
will cause irreparable injury to the Administrative Agent and the Lenders not
compensable in damages, that the Administrative Agent and the Lenders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 9 shall be specifically
enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred under the Credit
Agreement.
10. Amendments, etc. With Respect to the Obligations. The Pledgor
-------------------------------------------------
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby, notwithstanding that, without any reservation of rights
against the Pledgor, and without notice to or further assent by the Pledgor, any
demand for payment of any of the Obligations made by the Administrative Agent or
any Lender may be rescinded by the Administrative Agent or such Lender, and any
of the Obligations continued, and the Obligations, or the liability of the
Pledgor or any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered, or released by the Administrative
Agent or any Lender, and the Credit Agreement, the Notes, any other Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or part, as the
Lenders (or the Required Lenders, as the case may be) may deem advisable from
time to time, and any guarantee, right of offset or other collateral security at
any time held by the Administrative Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it as security for
the Obligations or any property subject thereto. The Pledgor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by the Administrative Agent or any Lender
upon this Pledge Agreement; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred in reliance upon this
Pledge Agreement; and all dealings between the Pledgor, on the one hand, and the
<PAGE>
- 9 -
Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Pledge Agreement. The Pledgor waives diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon the Pledgor with
respect to the Obligations.
11. Regulatory Approval. The Pledgor will, at its expense, promptly
-------------------
execute and deliver, or cause the execution and delivery of, all applications,
certificates, instruments, registration statements and all other documents and
papers the Administrative Agent may reasonably request or as may be required by
law in connection with the obtaining of any consent, approval, registration,
qualification or authorization of the FCC, CRTC, DTI, any PUC or of any other
Person necessary or appropriate for the effective exercise of any rights under
this Pledge Agreement. Without limiting the generality of the foregoing, if an
Event of Default shall have occurred and be continuing, the Pledgor shall take
any action which the Administrative Agent may reasonably request in order to
transfer and assign to the Administrative Agent, or to such one or more third
parties as the Administrative Agent may designate, or to a combination of the
foregoing, each Communications License and PUC Authorization. To enforce the
provisions of this Section, upon the occurrence and during the continuance of an
Event of Default, the Administrative Agent is empowered to request the
appointment of a receiver from any court of competent jurisdiction. Such
receiver shall be instructed to seek from the FCC, CRTC, DTI and any applicable
PUC an involuntary transfer of control of each such Communications License and
PUC Authorization for the purpose of seeking a bona fide purchaser to whom
control will ultimately be transferred. The Pledgor hereby agrees to authorize
such an involuntary transfer of control upon the request of the receiver so
appointed and, if the Pledgor shall refuse to authorize the transfer, its
approval may be required by the court. Upon the occurrence and during the
continuance of an Event of Default, the Pledgor shall further use its best
efforts to assist in obtaining approval of the FCC, CRTC, DTI and any applicable
PUC, if required, for any action or transactions contemplated by this Pledge
Agreement including, without limitation, the preparation, execution and filing
with the FCC, CRTC, DTI and any applicable PUC of the assignor's or transferor's
portion of any application or applications for consent to the assignment of any
Communications License and PUC Authorizations or transfer of control necessary
or appropriate under the rules and regulations of the FCC, CRTC, DTI or any PUC
for the approval of the transfer or assignment of any portion of the Collateral,
together with any Communications License and applicable PUC Authorizations. The
Pledgor acknowledges that the assignment or transfer of each Communications
License and applicable PUC Authorizations is integral to the Administrative
Agent's and the Lenders' realization of the value of the Collateral, that there
is no adequate remedy at law for failure by the Pledgor to comply with the
provisions of this Section and that such failure would cause irreparable injury
not adequately compensable in damages, and therefore agrees that each and every
covenant contained in this Section may be specifically enforced, and the Pledgor
hereby waives and agrees not to assert any defenses against an action for
specific performance of such covenants.
12. Limitation on Duties Regarding Collateral. The Administrative
-----------------------------------------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral
<PAGE>
- 10 -
in its possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Administrative Agent deals with similar
securities and property for its own account. Neither the Administrative Agent,
any Lender nor any of their respective directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Pledgor or
otherwise.
13. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral constitute irrevocable powers
coupled with an interest.
14. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Paragraph Headings. The paragraph headings used in this Pledge
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the Administrative Agent
------------------------------
nor any Lender shall by any act (except by a written instrument pursuant to
Section 17 hereof) be deemed to have waived any right or remedy hereunder or to
have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
17. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
None of the terms or provisions of this Pledge Agreement may be amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent; provided that any consent by the
--------
Administrative Agent to any waiver, amendment, supplement or modification hereto
shall be subject to approval thereof by the Lenders or Required Lenders, as
applicable, in accordance with Section 13.11 of the Credit Agreement. This
Pledge Agreement shall be binding upon the successors and assigns of the Pledgor
and shall inure to the benefit of the Administrative Agent and the Lenders and
their respective successors and assigns. This Pledge Agreement shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of North Carolina.
<PAGE>
- 11 -
18. Notices. All notices and communications hereunder shall be given
-------
to the addresses and otherwise in accordance with Section 13.1 of the Credit
Agreement.
19. Irrevocable Authorization and Instruction to Issuers. The
----------------------------------------------------
Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Pledge Agreement, without any
other or further instructions from the Pledgor, and the Pledgor agrees that such
Issuer shall be fully protected in so complying.
20. Authority of Administrative Agent. The Pledgor acknowledges that
---------------------------------
the rights and responsibilities of the Administrative Agent under this Pledge
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Pledgor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
itself and the Lenders with full and valid authority so to act or refrain from
acting, and neither the Pledgor nor any Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
21. Consent to Jurisdiction. The Pledgor hereby irrevocably consents
-----------------------
to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of or any dispute in connection with this Pledge Agreement, any
rights or obligations hereunder, or the performance of such rights and
obligations. The Pledgor hereby irrevocably consents to the service of a
summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this Pledge
Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations, on behalf of itself or its property, in the manner
provided in Section 13.1 of the Credit Agreement. Nothing in this Section 21
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
the Pledgor or its properties in the courts of any other jurisdictions.
22. Waiver of Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION
--------------------
CONTAINED HEREIN, IN THE EVENT ANY JUDICIAL PROCEEDING IS INSTITUTED IN
CONNECTION WITH THIS PLEDGE AGREEMENT, TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT AND EACH LENDER BY THEIR ACCEPTANCE OF THIS PLEDGE
AGREEMENT OR THE BENEFITS HEREOF AND THE PLEDGOR EACH HEREBY IRREVOCABLY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER
PROCEEDING ARISING OUT OF OR ANY DISPUTE
<PAGE>
- 12 -
IN CONNECTION WITH THIS PLEDGE AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER,
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.
[CORPORATE SEAL] ACC CORP.
By: /s/ John J. Zimmer
----------------------------------
Name: John J. Zimmer
--------------------------------
Title: Vice President - Finance
-------------------------------
<PAGE>
- 13 -
ACKNOWLEDGEMENT AND CONSENT
Each Issuer of Pledged Stock referred to in the foregoing Pledge
greement hereby acknowledges receipt of a copy thereof and agrees to be bound
hereby and to comply with the terms thereof insofar as such terms are
pplicable to it. Each Issuer agrees to notify the Administrative Agent
romptly in writing of the occurrence of any of the events described in Section
(a) of the Pledge Agreement. Each United States Subsidiary further agrees that
he terms of Section 9 of the Pledge Agreement shall apply to it, mutatis
-------
utandis, with respect to all actions that may be required of it under or
- -------
ursuant to or arising out of Section 9 of the Pledge Agreement.
ACC LONG DISTANCE CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-----------------------------
Title: Controller
-----------------------------
ACC NATIONAL TELECOM CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-----------------------------
Title: Controller
-----------------------------
ACC RADIO CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-----------------------------
Title: Controller
-----------------------------
ACC NATIONAL LONG DISTANCE CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-----------------------------
Title: Controller
-----------------------------
ACC TELENTERPRISES LTD.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-----------------------------
Title: Assisstant Controller
-----------------------------
<PAGE>
- 14 -
ACC LONG DISTANCE U.K. LTD.
By: /s/ John J. Zimmer
--------------------------------
Name: John J. Zimmer
------------------------------
Title: Attorney
-----------------------------
<PAGE>
SCHEDULE 1
To Pledge
Agreement
---------
DESCRIPTION OF PLEDGED STOCK
United States Subsidiaries
--------------------------
<TABLE>
<CAPTION>
Issuer Class of Stock Certificate No. No. of Shares
- --------------- -------------- --------------- -------------
<S> <C> <C> <C>
ACC Long
Distance
Corp. Common 1 200
ACC National
Telecom
Corp. Common 1 1
ACC Radio
Corp. Common 1 200
ACC National
Long Distance
Corp. Common 1 1
</TABLE>
Foreign Subsidiaries
--------------------
<TABLE>
<CAPTION>
Issuer Class of Stock Certificate No. No. of Shares
- ------------------------ -------------- --------------- -------------
<S> <C> <C> <C>
ACC Tel-
Enterprises
Ltd. Common C00135 460,000
Common C00136 920,000
Common C00137 920,000
Common C00138 920,000
Common C00139 1,121,699
Common C00141 58,300
ACC Long
Distance
U.K. Ltd. Common 6 2,000,001
</TABLE>
<PAGE>
PLEDGE AGREEMENT SUPPLEMENT
---------------------------
PLEDGE AGREEMENT SUPPLEMENT, dated as of __________, 199_ (the
"Supplement"), made by ACC Corp., a __________ corporation (the "Pledgor"), in
- ----------- -------
favor of First union National Bank of North Carolina, a national banking
corporation, as Administrative Agent (in such capacity, the "Administrative
--------------
Agent"), under the Credit Agreement (as defined in the Pledge Agreement referred
- -----
to below) for the benefit of itself and the Lenders (as so defined).
1. Reference is hereby made to that Pledge Agreement, dated as of
__________, 1995, made by the Pledgor in favor of the
Administrative Agent (as amended, supplemented or otherwise modified as of the
date hereof, the "Pledge Agreement"). This Supplement supplements the Pledge
----------------
Agreement, forms a part thereof and is subject to the terms thereof. Terms
defined in the Pledge Agreement are used herein as therein defined.
2. The Pledgor hereby confirms and reaffirms the security interest
in the Collateral granted to the Administrative Agent for the ratable benefit of
itself and the Lenders under the Pledge Agreement, and, as additional collateral
security for the prompt and complete payment when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations and in order to
induce the Lenders to make their Loans under the Credit Agreement, the Pledgor
hereby delivers to the Administrative Agent, for the benefit of the Lenders,
[all of the issued and outstanding shares of capital stock of [INSERT NAME OF
NEW UNITED STATES SUBSIDIARY]] or [66.66% of the issued and outstanding shares
of capital stock of [INSERT NAME OF NEW FOREIGN SUBSIDIARY]] (the "New Issuer")
----------
listed below, together with all stock certificates, options, or rights of any
nature whatsoever which may be issued or granted by the New Issuer in respect to
such stock which the Pledge Agreement, as supplemented hereby, is in force (the
"Additional Pledged Stock"; as used in the Pledge Agreement as supplemented by
------------------------
this Supplement, "Pledged Stock" shall be deemed to include the Additional
Pledged Stock) and hereby grants to the Administrative Agent, for the ratable
benefit of itself and the Lenders, a first priority security interest in the
Additional Pledged Stock and all Proceeds thereof.
3. The Pledgor hereby represents and warrants that the
representations and warranties contained in paragraph 5 of the Pledge Agreement
are true and correct on the date of this Supplement with references therein to
the "Pledged Stock" to include the Additional Pledged Stock, with references
therein to the "Issuer" to include the New Issuer, and with references to the
"Pledge Agreement" to mean the Pledge Agreement as supplemented by this
Supplement.
4. The Pledgor shall deliver to the Administrative Agent the
Acknowledgement and Consent attached hereto duly executed by the New Issuer.
The Additional Pledged Stock pledged hereby is as follows which Pledged Stock
shall be deemed part of Schedule I thereto:
----------
<PAGE>
- 2 -
DESCRIPTION OF PLEDGED STOCK
Issuer Class of Stock Certificate No. No. of Shares
- ------ -------------- --------------- -------------
New Issuer
5. The Pledgor hereby agrees to deliver to the Administrative Agent
such certificates and other documents and take such other action as shall be
reasonably requested by the Administrative Agent in order to effectuate the
terms hereof and the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
duly executed under seal and delivered as of the date first above written.
[CORPORATE SEAL]
By:
Name:
Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT OF NEW ISSUER
The undersigned hereby acknowledges receipt of a copy of the foregoing
Supplement and the Pledge Agreement referred to therein (the "Pledge
------
Agreement"). The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are applicable
to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5(a) of the
Pledge Agreement.
[3. The Issuer further agrees that the terms of Section 9 of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all
------- --------
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.] [ONLY INCLUDE FOR U.S. SUBSIDIARIES]
[NAME OF NEW ISSUER]
By:
Name:
Title:
<PAGE>
Exhibit 99.20
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of July 21,
--
1995 is made by ACC NATIONAL LONG DISTANCE CORP., a Delaware corporation (the
"Pledgor"), in favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association (the "Administrative Agent"), as Administrative Agent for
the ratable benefit of itself and the financial institutions (the "Lenders") as
are, or may from time to time become, parties to the Credit Agreement (as
defined below).
STATEMENT OF PURPOSE
--------------------
Pursuant to a Credit Agreement, dated as of even date herewith
(together with all amendments and other modifications, if any, from time to time
hereafter made thereto, the "Credit Agreement"), between the Pledgor and certain
Affiliates of the Pledgor as Borrowers thereunder (collectively, the
"Borrowers"), the Lenders and the Administrative Agent, the Lenders will extend
Loans to the Borrowers as more specifically described in the Credit Agreement.
The Pledgor is the legal and beneficial owner of the shares of Pledged
Stock (as hereinafter defined) issued by the United States Subsidiaries and the
Foreign Subsidiaries as specified on Schedule 1 attached hereto and incorporated
----------
herein by reference (collectively, the "Issuers").
In connection with the transactions contemplated by the Credit
Agreement and as a condition precedent thereto, the Lenders have requested, and
the Pledgor has agreed to execute and deliver, this Pledge Agreement with the
Pledged Stock to the Administrative Agent for the ratable benefit of itself and
Lenders.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into and make available Loans
pursuant to the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent for the ratable benefit of itself and Lenders as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in
----
effect in the State of North Carolina.
"Collateral" means the Pledged Stock and all Proceeds.
----------
"Pledge Agreement" means this Pledge Agreement, as amended or
----------------
modified.
<PAGE>
- 2 -
"Pledged Stock" means the shares of capital stock of each Issuer
--------------
listed on Schedule I hereto, together with all stock certificates,
----------
options or rights of any nature whatsoever that may be issued or
granted by such Issuer to the Pledgor while this Pledge Agreement is
in effect.
"Proceeds" means all "proceeds" as such term is defined in
--------
Section 9-306(1) of the Code on the date hereof and, in any event,
shall include, without limitation, all dividends or other income from
the Pledged Stock, collections thereon, proceeds of sale thereof or
distributions with respect thereto.
2. Pledge and Grant of Security Interest. The Pledgor hereby
-------------------------------------
delivers to the Administrative Agent, for the ratable benefit of itself and the
Lenders all the Pledged Stock and hereby grants to the Administrative Agent, for
the ratable benefit of itself and the Lenders, a first priority security
interest in the Pledged Stock and all other Collateral, as collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the obligations.
3. Stock Powers. Concurrently with the delivery to the
------------
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor with, if the Administrative
Agent so requests, signature guaranteed.
4. Representations and Warranties. To induce the Administrative
------------------------------
Agent and the Lenders to execute the Credit Agreement and make any Loans and to
accept the security contemplated hereby, the Pledgor hereby represents and
warrants that:
(a) the Pledgor has the corporate power, authority and legal
right to execute and deliver, to perform its obligations under, and to
grant the Lien on the Collateral pursuant to, this Pledge Agreement
and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the Lien on the
Collateral pursuant to, this Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by the
availability of equitable remedies;
(c) the execution, delivery and performance of this Pledge
Agreement will not violate any provision of any Applicable Law or
contractual obligation of the Pledgor and will not result in the
creation or imposition of any Lien on any of the properties or
revenues of the Pledgor pursuant to any Applicable Law or contractual
obligation, except as contemplated hereby;
<PAGE>
- 3 -
(d) except as contemplated in Section 11 hereof, no consent or
authorization of, filing with, or other act by or in respect of, any
arbitrator or Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder or creditor of
the Pledgor or any Issuer), is required in connection with the
execution, delivery, performance, validity or enforceability against
the Pledgor of this Pledge Agreement;
(e) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge
of the Pledgor, threatened by or against the Pledgor or against any of
its properties or revenues with respect to this Pledge Agreement or
any of the transactions contemplated hereby;
(f) the shares of Pledged Stock listed on Schedule I constitute
----------
all the issued and outstanding shares of all classes of the capital
stock of each of the United States Subsidiaries and constitute 66.66%
of all the issued and outstanding shares of all classes of capital
stock of each of the Foreign Subsidiaries;
(g) all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable;
(h) the Pledgor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock listed on Schedule I,
----------
free of any and all Liens or options in favor of, or claims of, any
other Person, except the Lien created by this Pledge Agreement; and
(i) upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock, the Lien granted pursuant
to this Pledge Agreement will constitute a valid, perfected first
priority Lien on the Pledged Stock and the Proceeds related thereto,
enforceable as such against all creditors of the Pledgor and any
Persons purporting to purchase any of the Pledged Stock from the
Pledgor.
5. Certain Covenants. The Pledgor covenants and agrees with the
-----------------
Administrative Agent for the ratable benefit of itself and the Lenders that,
from and after the date of this Pledge Agreement until the Obligations are paid
in full and the Commitments are terminated:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate
representing a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights,
whether in addition to, in substitution of, as a conversion of, or in
exchange for any shares
<PAGE>
- 4 -
of the Pledged Stock, or otherwise in respect thereof, the Pledgor
shall accept the same as the agent of the Administrative Agent, hold
the same in trust for the Administrative Agent and deliver the same
forthwith to the Administrative Agent in the exact form received, duly
indorsed by the Pledgor to the Administrative Agent, if required,
together with an undated stock power covering such certificate duly
executed in blank by the Pledgor and with, if the Administrative Agent
so requests, signature guaranteed, to be held by the Administrative
Agent, subject to the terms hereof, as additional collateral security
for the Obligations; provided that in no event shall more than 66.66%
--------
of all the issued and outstanding shares of all classes of capital
stock of each of the Foreign Subsidiaries constitute collateral
security hereunder. In addition, any sums paid upon or in respect of
the Pledged Stock upon the liquidation or dissolution of any Issuer
shall be held by the Administrative Agent as additional collateral
security for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, the Pledgor will not (i) vote to enable, or take any other
action to permit, any Issuer to issue any stock or other equity
securities of any nature or to issue any other securities convertible
into or granting the right to purchase or exchange for any stock or
other equity securities of any nature of such Issuer, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Stock, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Collateral, or any interest
therein, except for the Lien provided for by this Pledge Agreement.
The Pledgor will defend the right, title and interest of the
Administrative Agent in and to the Collateral against the claims and
demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written request
of the Administrative Agent, and at the sole expense of the Pledgor,
the Pledgor will promptly and duly execute and deliver such further
instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Pledge Agreement and
of the rights and powers herein granted. If any amount payable under
or in connection with any of the Collateral shall be or become
evidenced by any promissory note, other instrument or chattel paper,
such note, instrument or chattel paper shall be immediately delivered
to the Administrative Agent, duly endorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this
Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp,
excise, sales or other similar taxes which may be payable or
determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Pledge
Agreement.
<PAGE>
- 5 -
(e) On or prior to the formation or acquisition of any Subsidiary of
the Pledgor, the Pledgor agrees to execute such amendments and
supplements to this Pledge Agreement, including without limitation the
Pledge Agreement Supplement attached hereto, and such other documents
and instruments and to take any and all actions, all as shall be
necessary, in the reasonable judgment of the Administrative Agent, to
pledge the Pledgor's interest therein to the Administrative Agent for
the ratable benefit of itself and the Lenders.
(f) Without the prior written consent of the Administrative
Agent, the Pledgor will not sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, or create,
incur or permit to exist any Lien or option in favor of, or any claim
of any Person with respect to, any of the shares of capital stock of
the Foreign Subsidiaries owned by the Pledgor but not pledged
hereunder, or any interest therein, except as otherwise permitted
pursuant to Section 9.3 or Section 9.4 of the Credit Agreement.
6. Cash Dividends, Voting Rights. Unless an Event of Default shall
-----------------------------
have occurred and be continuing and the Administrative Agent shall have given
notice to the Pledgor of the Administrative Agent's intent to exercise its
rights pursuant to Section 7 below, the Pledgor shall be permitted to receive
all cash dividends paid in accordance with the terms of the Credit Agreement in
respect of the Pledged Stock and to exercise all voting and corporate rights
with respect to the Pledged Stock; provided, that no vote shall be cast or
--------
corporate right exercised or other action taken which would impair the
Collateral or which would be inconsistent with or result in any violation of any
provision of the Credit Agreement, the Notes, any other Loan Documents or this
Pledge Agreement.
7. Rights of the Administrative Agent.
----------------------------------
(a) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the Pledgor, (i) the Administrative Agent shall have the right to receive any
and all cash dividends paid in respect of the Pledged Stock and make application
thereof to the Obligations in the order set forth in Section 10 of the Security
Agreement and (ii) all shares of the Pledged Stock shall be registered in the
name of the Administrative Agent or its nominee, and the Administrative Agent or
its nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
the applicable Issuer or otherwise and (B) any and all rights of conversion,
exchange, subscription and any other rights, privileges or options pertaining to
such shares of the Pledged Stock as if it were the absolute owner thereof
(including, without limitation, the right to exchange at its discretion any and
all of the Pledged Stock upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate structure of the
applicable Issuer, or upon the exercise by the Pledgor or the Administrative
Agent of any right, privilege or option pertaining to such shares of the Pledged
Stock, and in connection therewith, the right to deposit and deliver any and all
of the Pledged Stock with any committee, depositary, transfer agent, registrar
or other designated agency upon
<PAGE>
- 6 -
such terms and conditions as it may determine), all without liability except to
account for property actually received by it, but the Administrative Agent shall
have no duty to the Pledgor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent and the Lenders hereunder
shall not be conditioned or contingent upon the pursuit by the Administrative
Agent or any Lender of any right or remedy against the Pledgor or against any
other Person which may be or become liable in respect of all or any part of the
Obligations or against any collateral security therefor, guarantee therefor or
right of offset with respect thereto. Neither the Administrative Agent nor any
Lender shall be liable for any failure to demand, collect or realize upon all or
any part of the Collateral or for any delay in doing so, nor shall the
Administrative Agent be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be continuing,
--------
with the consent of the Required Lenders, the Administrative Agent may, and upon
the request of the Required Lenders, the Administrative Agent shall, exercise on
behalf of itself and the Lenders, all rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the obligations, and in addition thereto, all rights and remedies of
a secured party under the Code. Without limiting the generality of the
foregoing with regard to the scope of the Administrative Agent's remedies, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Pledger, any Issuer or any
other Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, assign, give option or options to purchase or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels at public or private sale or
sales, in the over-the-counter market, at any exchange, broker's board or office
of the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Pledgor, which right or equity is
hereby waived or released. The Administrative Agent shall apply any Proceeds
from time to time held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys' fees and
disbursements of counsel thereto, to the payment in whole or in part of the
obligations, in the order set forth in Section 10 of the Security Agreement, and
only after such application and after
<PAGE>
- 7 -
the payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Pledgor. To the extent permitted by applicable law, the Pledgor waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder. If any
notice of a proposed sale or other disposition of Collateral shall be required
by law, such notice shall be deemed reasonable and proper if given at least 10
days before such sale or other disposition. The Pledgor further waives and
agrees not to assert any rights or privileges which it
may acquire under Section 9-112 of the Code.
9. Registration Rights; Private Sales.
----------------------------------
(a) If the Administrative Agent shall determine to exercise its right
to sell any or all of the Pledged Stock pursuant to Section 8 hereof, and if in
the opinion of the Administrative Agent it is necessary or advisable to have the
Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Pledgor will cause the applicable Issuer to (i) execute and deliver, and cause
the directors and officers of the applicable Issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts
as may be, in the opinion of the Administrative Agent, necessary or advisable to
register the Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) to use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the Pledged Stock, or that portion thereof to be sold, and (iii) to make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. The Pledgor agrees to
cause the applicable Issuer to comply with the provisions of the securities or
"Blue Sky" laws of any and all jurisdictions which the Administrative Agent
shall designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may be unable
to effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that, in the event the Administrative
Agent is unable to effect a public sale, any such private sale shall be deemed
to have been made in a commercially reasonable manner. The Administrative Agent
shall be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary
<PAGE>
- 8 -
to permit the applicable Issuer to register such securities for public sale
under the Securities Act, or under applicable state securities laws, even if the
applicable Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the Collateral pursuant to this Section 9 valid and
binding and in compliance with any and all other Applicable Laws. The Pledgor
further agrees that a breach of any of the covenants contained in this Section 9
will cause irreparable injury to the Administrative Agent and the Lenders not
compensable in damages, that the Administrative Agent and the Lenders have no
adequate remedy at law in respect of such breach and, as a consequence, that
each and every covenant contained in this Section 9 shall be specifically
enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred under the Credit
Agreement.
10. Amendments. etc. With Respect to the Obligations. The Pledgor
------------------------------------------------
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby, notwithstanding that, without any reservation of rights
against the Pledgor, and without notice to or further assent by the Pledgor, any
demand for payment of any of the Obligations made by the Administrative Agent or
any Lender may be rescinded by the Administrative Agent or such Lender, and any
of the Obligations continued, and the obligations, or the liability of the
Pledgor or any other Person upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered, or released by the Administrative
Agent or any Lender, and the Credit Agreement, the Notes, any other Loan
Documents and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or part, as the
Lenders (or the Required Lenders, as the case may be) may deem advisable from
time to time, and any guarantee, right of offset or other collateral security at
any time held by the Administrative Agent or any Lender for the payment of the
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any other Lien at any time held by it as security for
the Obligations or any property subject thereto. The Pledgor waives any and all
notice of the creation, renewal, extension or accrual of any of the Obligations
and notice of or proof of reliance by the Administrative Agent or any Lender
upon this Pledge Agreement; the Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred in reliance upon this
Pledge Agreement; and all dealings between the Pledgor, on the one hand, and the
Administrative Agent and the Lenders, on the other, shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Pledge Agreement. The Pledgor waives diligence, presentment, protest, demand
for payment and notice of default or nonpayment to or upon the Pledgor with
respect to the Obligations.
11. Regulatory Approval. The Pledgor will, at its expense, promptly
-------------------
execute and deliver, or cause the execution and delivery of, all applications,
certificates, instruments, registration statements and all other documents and
papers the Administrative Agent may
<PAGE>
- 9 -
reasonably request or as may be required by law in connection with the obtaining
of any consent, approval, registration, qualification or authorization of the
FCC, CRTC, DTI, any PUC or of any other Person necessary or appropriate for the
effective exercise of any rights under this Pledge Agreement. Without limiting
the generality of the foregoing, if an Event of Default shall have occurred and
be continuing, the Pledgor shall take any action which the Administrative Agent
may reasonably request in order to transfer and assign to the Administrative
Agent, or to such one or more third parties as the Administrative Agent may
designate, or to a combination of the foregoing, each Communications License and
PUC Authorization. To enforce the provisions of this Section, upon the
occurrence and during the continuance of an Event of Default, the Administrative
Agent is empowered to request the appointment of a receiver from any court of
competent jurisdiction. Such receiver shall be instructed to seek from the FCC,
CRTC, DTI and any applicable PUC an involuntary transfer of control of each such
Communications License and PUC Authorization for the purpose of seeking a bona
fide purchaser to whom control will ultimately be transferred. The Pledgor
hereby agrees to authorize such an involuntary transfer of control upon the
request of the receiver so appointed and, if the Pledgor shall refuse to
authorize the transfer, its approval may be required by the court. Upon the
occurrence and during the continuance of an Event of Default, the Pledgor shall
further use its best efforts to assist in obtaining approval of the FCC, CRTC,
DTI and any applicable PUC, if required, for any action or transactions
contemplated by this Pledge Agreement including, without limitation, the
preparation, execution and filing with the FCC, CRTC, DTI and any applicable PUC
of the assignor's or transferor's portion of any application or applications for
consent to the assignment of any Communications License and PUC Authorizations
or transfer of control necessary or appropriate under the rules and regulations
of the FCC, CRTC, DTI or any PUC for the approval of the transfer or assignment
of any portion of the Collateral, together with any Communications License and
applicable PUC Authorizations. The Pledgor acknowledges that the assignment or
transfer of each Communications License and applicable PUC Authorizations is
integral to the Administrative Agent's and the Lenders' realization of the value
of the Collateral, that there is no adequate remedy at law for failure by the
Pledgor to comply with the provisions of this Section and that such failure
would cause irreparable injury not adequately compensable in damages, and
therefore agrees that each and every covenant contained in this Section may be
specifically enforced, and the Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants.
12. Limitation on Duties Regarding Collateral. The Administrative
-----------------------------------------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. Neither the Administrative Agent, any Lender nor any of their
respective directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or otherwise.
13. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral constitute irrevocable powers
coupled with an interest.
<PAGE>
- 10 -
14. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Paragraph Headings. The paragraph headings used in this Pledge
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the Administrative Agent
------------------------------
nor any Lender shall by any act (except by a written instrument pursuant to
Section 17 hereof) be deemed to have waived any right or remedy hereunder or to
have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
17. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
None of the terms or provisions of this Pledge Agreement may be amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent; provided that any consent by the
--------
Administrative Agent to any waiver, amendment, supplement or modification hereto
shall be subject to approval thereof by the Lenders or Required Lenders, as
applicable, in accordance with Section 13.11 of the Credit Agreement. This
Pledge Agreement shall be binding upon the successors and assigns of the Pledgor
and shall inure to the benefit of the Administrative Agent and the Lenders and
their respective successors and assigns. This Pledge Agreement shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of North Carolina.
18. Notices. All notices and communications hereunder shall be given
-------
to the addresses and otherwise in accordance with Section 13.1 of the Credit
Agreement.
19. Irrevocable Authorization and Instruction to Issuers. The
----------------------------------------------------
Pledgor hereby authorizes and instructs each Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Pledge Agreement, without any
other or further instructions from the Pledgor, and the Pledgor agrees that such
Issuer shall be fully protected in so complying.
<PAGE>
- 11 -
20. Authority of Administrative Agent. The Pledgor acknowledges that
---------------------------------
the rights and responsibilities of the Administrative Agent under this Pledge
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Pledgor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
itself and the Lenders with full and valid authority so to act or refrain from
acting, and neither the Pledgor nor any Issuer shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
21. Consent to Jurisdiction. The Pledgor hereby irrevocably consents
-----------------------
to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of or any dispute in connection with this Pledge Agreement, any
rights or obligations hereunder, or the performance of such rights and
obligations. The Pledgor hereby irrevocably consents to the service of a
summons and complaint and other process in any action, claim or proceeding
brought by the Administrative Agent or any Lender in connection with this Pledge
Agreement, any rights or obligations hereunder, or the performance of such
rights and obligations, on behalf of itself or its property, in the manner
provided in Section 13.1 of the Credit Agreement. Nothing in this Section 21
shall affect the right of the Administrative Agent or any Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
the Pledgor or its properties in the courts of any other jurisdictions.
22. Waiver of Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION
---------------------
CONTAINED HEREIN, IN THE EVENT ANY JUDICIAL PROCEEDING IS INSTITUTED IN
CONNECTION WITH THIS PLEDGE AGREEMENT, TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT AND EACH LENDER BY THEIR ACCEPTANCE OF THIS PLEDGE
AGREEMENT OR THE BENEFITS HEREOF AND THE PLEDGOR EACH HEREBY IRREVOCABLY WAIVES
ITS RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER
PROCEEDING ARISING OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS PLEDGE
AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS.
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement
to be duly executed and delivered as of the date first above written.
[CORPORATE SEAL] ACC NATIONAL LONG DISTANCE CORP.
By: /s/ John J. Zimmer
-----------------------
<PAGE>
- 12 -
Name: John J. Zimmer
-------------------------
Title: Controller
------------------------
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Each Issuer of Pledged Stock referred to in the foregoing Pledge Agreement
hereby acknowledges receipt of a copy thereof and agrees to be bound thereby and
to comply with the terms thereof insofar as such terms are applicable to it.
Each Issuer agrees to notify the Administrative Agent promptly in writing of the
occurrence of any of the events described in Section 5(a) of the Pledge
Agreement. Each United States Subsidiary further agrees that the terms of
Section 9 of the Pledge Agreement shall apply to it, mutatis mutandis, with
------- --------
respect to all actions that may be required of it under or pursuant to or
arising out of Section 9 of the Pledge Agreement.
ACC LONG DISTANCE OF MASSACHUSETTS CORP.
By: /s/ John J. Zimmer
----------------------------
Name: John J. Zimmer
--------------------------
Title: Controller
-------------------------
<PAGE>
SCHEDULE 1
To Pledge
Agreement
---------
DESCRIPTION OF PLEDGED STOCK
United States Subsidiaries
--------------------------
Issuer Class of Stock Certificate No. No. of Shares
- ------ -------------- --------------- -------------
ACC Long
Distance
of
Massachusetts
Corp. Common 2 1
<PAGE>
PLEDGE AGREEMENT SUPPLEMENT
---------------------------
PLEDGE AGREEMENT SUPPLEMENT, dated as of _____________, 199_ (the
"Supplement"), made by ACC National Long Distance Corp., a Delaware corporation
- -----------
(the "Pledgor"), in favor of First Union National Bank of North Carolina, a
-------
national banking corporation, as Administrative Agent (in such capacity, the
"Administrative Agent"), under the Credit Agreement (as defined in the Pledge
- ---------------------
Agreement referred to below) for the benefit of itself and the Lenders (as so
defined).
1. Reference is hereby made to that Pledge Agreement, dated as of
___________, 1995, made by the Pledgor in favor of the Administrative Agent (as
amended, supplemented or otherwise modified as of the date hereof, the "Pledge
------
Agreement"). This Supplement supplements the Pledge Agreement, forms a part
- ---------
thereof and is subject to the terms thereof. Terms defined in the Pledge
Agreement are used herein as therein defined.
2. The Pledgor hereby confirms and reaffirms the security interest
in the Collateral granted to the Administrative Agent for the ratable benefit of
itself and the Lenders under the Pledge Agreement, and, as additional collateral
security for the prompt and complete payment when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations and in order to
induce the Lenders to make their Loans under the Credit Agreement, the Pledgor
hereby delivers to the Administrative Agent, for the benefit of the Lenders,
[all of the issued and outstanding shares of capital stock of [INSERT NAME OF
NEW UNITED STATES SUBSIDIARY]] or (66.66% of the issued and outstanding shares
of capital stock of (INSERT NAME OF NEW FOREIGN SUBSIDIARY]] (the "New Issuer")
----------
listed below, together with all stock certificates, options, or rights of any
nature whatsoever which may be issued or granted by the New Issuer in respect to
such stock which the Pledge Agreement, as supplemented hereby, is in force (the
"Additional Pledged Stock"; as used in the Pledge Agreement as supplemented by
------------------------
this Supplement, "Pledged Stock" shall be deemed to include the Additional
Pledged Stock) and hereby grants to the Administrative Agent, for the ratable
benefit of itself and the Lenders, a first priority security interest in the
Additional Pledged Stock and all Proceeds thereof.
3. The Pledgor hereby represents and warrants that the
representations and warranties contained in paragraph 5 of the Pledge Agreement
are true and correct on the date of this Supplement with references therein to
the "Pledged Stock" to include the Additional Pledged Stock, with references
therein to the "Issuer" to include the New Issuer, and with references to the
"Pledge Agreement" to mean the Pledge Agreement as supplemented by this
Supplement.
4. The Pledgor shall deliver to the Administrative Agent the
Acknowledgement and Consent attached hereto duly executed by the New Issuer.
The Additional Pledged Stock pledged hereby is as follows which Pledged Stock
shall be deemed part of Schedule 1 thereto:
----------
<PAGE>
- 2 -
DESCRIPTION OF PLEDGED STOCK
Issuer Class of Stock Certificate No. No. of Shares
- ------ -------------- --------------- -------------
New Issuer
5. The Pledgor hereby agrees to deliver to the Administrative Agent
such certificates and other documents and take such other action as shall be
reasonably requested by the Administrative Agent in order to effectuate the
terms hereof and the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
duly executed under seal and delivered as of the date first above written.
[CORPORATE SEAL]
By:
Name:
Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT OF NEW ISSUER
The undersigned hereby acknowledges receipt of a copy of the foregoing
Supplement and the Pledge Agreement referred to therein (the "Pledge
------
Agreement"). The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are applicable
to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5(a) of the
Pledge Agreement.
[3. The Issuer further agrees that the terms of Section 9 of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all
------- --------
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.] [ONLY INCLUDE FOR U.S. SUBSIDIARIES]
[NAME OF NEW ISSUER]
By:
Name:
Title:
<PAGE>
Exhibit 99.21
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this "Agreement"), dated as of July 21, 1995 by
--
and between ACC CORP., a corporation organized under the laws of Delaware
("ACC"), certain Domestic Subsidiaries of ACC listed on the signature pages
hereto (the "Subsidiary Grantors" and, collectively with ACC Corp., the
"Grantors") and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association organized under the laws of the United States, as Administrative
Agent (the "Administrative Agent") for the benefit of itself, and the financial
institutions (the "Lenders") as are, or may from time to time become, parties to
the Credit Agreement (as defined below).
STATEMENT OF PURPOSE
--------------------
Pursuant to a Credit Agreement dated as of even date herewith (together
with all amendments and other modifications, if any, from time to time hereafter
made thereto, the "Credit Agreement"), between the Grantors and certain Foreign
Subsidiaries of ACC as Borrowers thereunder (collectively, the "Borrowers"), the
Lenders and the Administrative Agent, the Lenders will extend Loans to the
Borrowers as more specifically described in the Credit Agreement. In order to
induce the Lenders and the Administrative Agent to enter into the Credit
Agreement, and as a condition to the making of the Loans thereunder, the Lenders
require that the Grantors grant a continuing security interest in and to the
"Collateral" (as hereinafter defined) to secure the "Secured Obligations" (as
hereinafter defined).
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Credit Agreement and not
-----------
otherwise defined herein, when used in this Agreement including its preamble and
recitals, shall have the respective meanings provided for in the Credit
Agreement. The following additional terms, when used in this Agreement, shall
have the following meanings:
"Account Debtor" means any Person who is or may become obligated to any
--------------
Grantor under, with respect to, or on account of, an Account.
"Accounts" means all "accounts" (as defined in the UCC) now or hereafter
--------
owned or acquired by any Grantor or in which any Grantor now or hereafter has or
acquires any right or interest, and, in any event, shall also include, without
limitation, all accounts receivable, contract rights, book debts, notes, drafts
and other obligations or indebtedness owing to any Grantor arising from the
sale, lease or exchange of goods or other property by it or property to be sold,
leased or exchanged, or the performance of services by it, or to be performed
(including, without limitation, any such obligation which might be characterized
as an account, contract right or general intangible under the Uniform Commercial
Code in effect in any jurisdiction) and all of any Grantor's rights in, to and
under all purchase orders for goods, services or other property,
<PAGE>
- 2 -
and all of any Grantor's rights to any goods, services or other property
represented by any of the foregoing (including returned or repossessed goods and
unpaid sellers' rights of rescission, replevin, reclamation and rights to
stoppage in transit) and all monies due to or to become due to any Grantor under
all contracts for the sale, lease or exchange of goods or other property or the
performance of services by it (whether or not yet earned by performance on the
part of such Grantor), in each case whether now in existence or hereafter
arising or acquired, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
"Accounts Aging Report" means a detailed aged trial balance of all Accounts
---------------------
existing as of a specified date, specifying the name, addresses, account number,
face value and dates of invoices of each Account Debtor obligated on any
Accounts so listed, which report may be requested from time to time by the
Administrative Agent.
"Collateral" means the collective reference to:
----------
(i) Accounts;
(ii) Inventory;
(iii) Documents;
(iv) Equipment;
(v) Fixtures;
(vi) Instruments;
(vii) General Intangibles;
(viii) The Collateral Account, all cash deposited therein from
time to time, the investments made pursuant to Section 6 and other monies
and property of any kind of any Grantor in the possession or under the
control of the Administrative Agent or any Lender;
(ix) All books and records (including, without limitation,
customer lists, credit files, computer programs, printouts and other
computer materials and records) of any Grantor pertaining to any of the
Collateral;
(x) All other goods and personal property of any Grantor whether
tangible or intangible;
<PAGE>
- 3 -
(xi) All products and Proceeds of all or any of the Collateral
described in clauses (i) through (x) hereof.
"Collateral Account" means a cash collateral account established by the
------------------
Grantors with the Administrative Agent, in the name and under the exclusive
dominion and control of the Administrative Agent, pursuant to Section 6.
"Copyright License" means any written agreement now or hereafter in
-----------------
existence granting to any Grantor any right to use any Copyright.
"Copyrights" means, collectively, all of the following now owned or
----------
hereafter created or acquired by any Grantor: (a) all copyrights, rights and
interests in copyrights, works protectable by copyright, copyright registrations
and copyright applications; (b) all renewals of any of the foregoing; (c) all
income, royalties, damages and payments now or hereafter due and/or payable
under any of the foregoing or with respect to any of the foregoing, including,
without limitation, damages or payments for past or future infringements of any
of the foregoing; (d) the right to sue for past, present and future
infringements of any of the foregoing; and (e) all rights corresponding to any
of the foregoing throughout the world.
"Documents" means all "documents" (as defined in the UCC) or other receipts
---------
covering, evidencing or representing goods or services, now or hereafter owned
or acquired by any Grantor or in which any Grantor now or hereafter has or
acquires any right or interest.
"Equipment" means all "equipment" (as defined in the UCC) of any Grantor,
---------
wherever located, and all other machinery, equipment and goods (other than
Inventory) of any Grantor used or bought for use primarily in the business of
such Grantor, including all accessions, additions, attachments, improvements,
substitutions and replacements thereto and therefor, in all such cases whether
now owned or hereafter acquired by any Grantor or in which any Grantor now has
or hereafter acquires any right or interest.
"Financing Statements" means the Uniform Commercial Code Form UCC-1
--------------------
Financing Statements executed by each Grantor with respect to the Collateral and
to be filed in the jurisdictions set forth in the Perfection Certificate.
"Fixtures" means all "fixtures" (as defined in the UCC) of any Grantor,
--------
whether now owned or hereafter acquired, or in which any Grantor now has or
hereafter acquires any right or interest.
"General Intangibles" means all "general intangibles" (as defined in the
-------------------
UCC) now or hereafter owned or acquired by any Grantor or in which any Grantor
now or hereafter has or acquires any right or interest, and, in any event, shall
mean and include, without limitation, all rights to indemnification, and all
rights, title and interest which any Grantor may now or hereafter have in or
under all contracts (other than contracts described in the definition of
Accounts), agreements (including without limitation, the Canadian Note Documents
and the
<PAGE>
- 4 -
Canadian Subsidiary Security Documents), permits, licenses (which contracts,
agreements, permits and licenses may be pledged pursuant to the terms thereof)
causes of action, franchises, tax refund claims, customer lists, Intellectual
Property, license royalties, goodwill, trade secrets, data bases, business
records and all other intangible property of every kind and nature.
"Instruments" means all "instruments," "chattel paper" or "letters of
-----------
credit" (each as defined in the UCC), including, without limitation,
instruments, chattel paper and letters of credit evidencing, representing,
arising from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Accounts, including (but not limited to)
promissory notes (including without limitation, the Canadian Note Documents),
drafts, bills of exchange and trade acceptances, now or hereafter owned or
acquired by any Grantor or in which any Grantor now or hereafter has or acquires
any right or interest.
"Intellectual Property" means, collectively, (a) all systems software and
---------------------
applications software, including, but not limited to, screen displays and
formats, program structures, sequence and organization, all documentation for
such software, including, but not limited to, user manuals, flowcharts,
programmer's notes, functional specifications, and operations manuals, all
formulas, processes, ideas and know-how embodied in any of the foregoing, and
all program materials, flowcharts, notes and outlines created in connection with
any of the foregoing, whether or not patentable or copyrightable, (b) concepts,
discoveries, improvements and ideas, (c) any useful information relating to the
items described in clause (a) or (b), including know-how, technology,
engineering drawings, reports, design information, trade secrets, practices,
laboratory notebooks, specifications, test procedures, maintenance manuals,
research, development, manufacturing, marketing, merchandising, selling,
purchasing and accounting, (d) Patents, Patent rights and Patent applications,
Copyrights and Copyright applications, Trademarks, Trademark rights, trade
names, trade name rights, service marks, service mark rights, applications for
registration of Trademarks, trade names and service marks, and Trademark, trade
name and service mark registrations and Patent Licenses, Trademark Licenses and
Copyright Licenses, and (e) other licenses to use any of the items described in
the foregoing clauses(a), (b), (c) and (d) or any other similar items of any
Grantor necessary for the conduct of its business.
"Inventory" means all "inventory" (as defined in the UCC) now or hereafter
---------
owned or acquired by any Grantor or in which any Grantor now or hereafter has or
acquires any right or interest, wherever located and, in any event, shall mean
and include, without limitation, all raw materials, inventory and other
materials and supplies, work-in-process, finished goods, all accessions thereto,
documents therefor and any products made or processed therefrom and all
substances, if any, commingled therewith or added thereto.
"Patent License" means any written agreement now or hereafter in existence
--------------
granting to any Grantor any right to use any invention on which a Patent is in
existence.
"Patents" means, collectively, all of the following now owned or hereafter
-------
created or acquired by any Grantor: (a) all patents and patent applications
including all patentable inventions; (b) all reissues, divisions, continuations,
renewals, extensions and continuations-in-
<PAGE>
- 5 -
part of any of the foregoing; (c) all income, royalties, damages or payments now
or hereafter due and/or payable under any of the foregoing or with respect to
any of the foregoing, including, without limitation, damages or payments for
past or future infringements of any of the foregoing; (d) the right to sue for
past, present and future infringements of any of the foregoing; and (e) all
rights corresponding to any of the foregoing throughout the world.
"Perfection Certificate" means a certificate dated as of even date
----------------------
herewith, setting forth the corporate names, chief executive office or principal
place of business in each state and other current locations of Collateral of
each Grantor and such other information as the Administrative Agent deems
pertinent to the perfection of security interests, completed and supplemented
with the schedules and attachments contemplated thereby to the satisfaction of
the Administrative Agent, and duly certified by the chief executive or chief
financial officer of each Grantor so authorized to act.
"Permitted Investments" means investments described in Section 9.4 of the
---------------------
Credit Agreement.
"Permitted Liens" means all such Liens respecting the Collateral permitted
---------------
pursuant to Section 9.3 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other profits, rentals or
--------
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or realization upon, Collateral,
including, without limitation, all claims of any Grantor against third parties
for loss of, damage to or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral and the following types of property acquired with cash proceeds:
Accounts, Inventory, Documents, Fixtures, Instruments, General Intangibles and
Equipment.
"Secured Obligations" means the Obligations as defined in the Credit
-------------------
Agreement and any renewals or extensions of any of the Obligations.
"Security Interests" means the security interests granted pursuant to
------------------
Section 2, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement.
"Trademark License" means any written agreement now or hereafter in
-----------------
existence granting to any Grantor any right to use any Trademark.
"Trademarks" means, collectively, all of the following now owned or
----------
hereafter created or acquired by any Grantor: (a) all Trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other business identifiers, prints and labels on
which any of the foregoing have appeared or appear, all registrations and
recordings thereof, and all applications in connection therewith, including
<PAGE>
- 6 -
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state thereof or any other country or any political subdivision of any thereof,
including without limitation any thereof referred to on Schedule I hereto; (b)
----------
all reissues, extensions and renewals of any of the foregoing; (c) all income,
royalties, damages and payments now or hereafter due and/or payable under any of
the foregoing or with respect to any of the foregoing, including, without
limitation, damages or payments for past or future infringements of any of the
foregoing; (d) the right to sue for past, present and future infringements of
any of the foregoing; and (e) all rights corresponding to any of the foregoing
throughout the world.
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
---
the State of North Carolina; provided that if by reason of mandatory provisions
--------
of law, the perfection or the effect of perfection or non-perfection of the
Security Interests in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than North Carolina, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. The Security Interests.
----------------------
(a) In order to secure the Credit Agreement in accordance with the terms
thereof, and to secure the payment and performance of all of the Secured
Obligations, each Grantor hereby grants to the Administrative Agent, for the
ratable benefit of itself and the Lenders, a continuing security interest in and
to all of such Grantor's estate, right, title and interest in and to all
Collateral whether now or hereafter owned or acquired by such Grantor or in
which such Grantor now has or hereafter has or acquires any rights, and wherever
located.
(b) The Security Interests are granted as security only and shall not
subject the Administrative Agent or any Lender to, or transfer to the
Administrative Agent or any Lender, or in any way affect or modify, any
obligation or liability of any Grantor with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 3. Representations and Warranties. Each Grantor represents and
------------------------------
warrants as follows:
(a) Such Grantor has the corporate power and authority and the legal right
to execute and deliver, to perform its obligations under, and to grant the
Security Interests in the Collateral pursuant to, this Agreement and has taken
all necessary corporate action to authorize its execution, delivery and
performance of, and grant of the Security Interests in the Collateral pursuant
to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding obligation of
such Grantor enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy,
<PAGE>
- 7 -
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally.
(c) The execution, delivery and performance of this Agreement will not
violate any provision of any Applicable Law or contractual obligation of such
Grantor and will not result in the creation or imposition of any Lien on any of
the properties or revenues of such Grantor pursuant to any Applicable Law or
contractual obligation of such Grantor, except as contemplated hereby.
(d) No consent or authorization of, filing with, or other act by or in
respect of, any arbitrator or Governmental Authority and no consent of any other
Person (including, without limitation, any stockholder or creditor of such
Grantor), is required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement.
(e) No litigation, investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the knowledge of such Grantor after
due inquiry, threatened by or against such Grantor or against any of its
properties or revenues with respect to this Agreement or any of the transactions
contemplated hereby.
(f) Such Grantor has good and marketable title to all of its respective
Collateral, free and clear of any Liens other than the Permitted Liens.
(g) Such Grantor has not performed or failed to perform any acts that would
prevent or hinder the Administrative Agent from enforcing any of the terms of
this Agreement. Other than financing statements or other similar or equivalent
documents or instruments with respect to Permitted Liens, no financing
statement, mortgage, security agreement or similar or equivalent document or
instrument covering all or any part of the Collateral of such Grantor is on file
or of record in any jurisdiction. No Collateral of such Grantor is in the
possession of any Person (other than such Grantor) asserting any claim thereto
or security interest therein, except that the Administrative Agent or its
designee may have possession of the Collateral as contemplated hereby.
(h) All of the information set forth in the Perfection Certificate with
respect to such Grantor is true and correct as of the date hereof.
(i) Such Grantor has, contemporaneously herewith, delivered to the
Administrative Agent possession of all originals of all negotiable Instruments,
documents and chattel paper constituting Collateral currently owned or held by
such Grantor, if any (duly endorsed in blank, if requested by the Administrative
Agent).
(j) With respect to any Intellectual Property of Grantor the loss,
impairment or infringement of which might have a Material Adverse Effect:
<PAGE>
- 8 -
(i) such Intellectual Property is subsisting and has not been adjudged
invalid or unenforceable, in whole or in part;
(ii) such Intellectual Property is valid and enforceable;
(iii) such Grantor has made all necessary filings and recordations to
protect its interest in such Intellectual Property, including, without
limitation, recordations of all of its interests in the Patents and
Trademarks included in such Intellectual Property in the United States
Patent and Trademark Office and its claims to the Copyrights included in
such Intellectual Property in the United States Copyright Office;
(iv) such Grantor is the exclusive owner of the entire and
unencumbered right, title and interest in and to such Intellectual Property
and no claim has been made that the use of such Intellectual Property does
or may violate the asserted rights of any third party; and
(v) such Grantor has performed and will continue to perform all acts
and has paid and will continue to pay all required fees and taxes to
maintain each and every such item of Intellectual Property in full force
and effect.
(k) The Financing Statements executed by such Grantor are in appropriate
form and when filed in the offices specified in the Perfection Certificate, the
Security Interests will constitute valid and perfected security interests in the
Collateral of such Grantor, prior to all other Liens and rights of others
therein except for the Permitted Liens (to the extent that a security interest
therein may be perfected by filing pursuant to the UCC) and all filings and
other actions necessary or desirable to perfect and protect such Security
Interests have been duly taken.
(l) The Inventory, Fixtures and Equipment of such Grantor are insured in
accordance with the requirements hereof and of the Credit Agreement.
SECTION 4. Further Assurances; Covenants.
-----------------------------
(a) General.
(i) Each Grantor agrees not to change the location of its chief
executive office or principal place of business in any state unless it
shall have given the Administrative Agent thirty (30) days prior written
notice thereof, executed and delivered to the Administrative Agent all
financing statements and financing statement amendments which the
Administrative Agent may request in connection therewith and, if requested
by the Administrative Agent, delivered an opinion of counsel with respect
thereto in accordance with Section 4(a)(vii) hereof. Each Grantor agrees
not to change the locations where it keeps or holds any Collateral or any
records relating thereto from the applicable location described in the
Perfection Certificate unless such Grantor shall have given the
<PAGE>
- 9 -
Administrative Agent thirty (30) days prior written notice of such change
of location, executed and delivered to the Administrative Agent all
financing statements and financing statement amendments which the
Administrative Agent may request in connection therewith and, if requested
by the Administrative Agent, delivered an opinion of counsel with respect
thereto in accordance with Section 4(a)(vii) hereof; provided, that such
--------
Grantor may keep Inventory at, or in transit to, any location described in
the Perfection Certificate. Each Grantor agrees not to, in any event,
change the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be perfected.
(ii) Each Grantor agrees not to change its name, identity or corporate
structure in any manner unless it shall have given the Administrative Agent
thirty (30) days prior written notice thereof, executed and delivered to
the Administrative Agent all financing statements and financing statement
amendments which the Administrative Agent may request in connection
therewith, and, if requested by Administrative Agent, delivered an opinion
of counsel with respect thereto in accordance with Section 4(a)(vii)
hereof.
(iii) Each Grantor will, from time to time, at its expense, execute,
deliver, file and record any statement, assignment, instrument, document,
agreement or other paper and take any other action (including without
limitation any filings of financing or continuation statements under the
UCC and any filings with the United States Patent and Trademark Office and
United States Copyright Office) that from time to time may be necessary, or
that the Administrative Agent may reasonably request, in order to create,
preserve, upgrade in rank (to the extent required hereby), perfect, confirm
or validate the Security Interests or to enable the Administrative Agent
and the Lenders to obtain the full benefits of this Agreement, or to enable
the Administrative Agent to exercise and enforce any of its rights, powers
and remedies hereunder with respect to any of the Collateral. Prior to the
irrevocable payment in full of the Secured Obligations, each Grantor hereby
authorizes the Administrative Agent, upon the failure of such Grantor to so
do within three Business Days after receipt of notice from the
Administrative Agent, to execute and file financing statements, financing
statement amendments or continuation statements without such Grantor's
signature appearing thereon. Each Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. Each Grantor
shall pay the costs of, or incidental to, any recording or filing of the
Financing Statements and any other financing statements, financing
statement amendments or continuation statements concerning the Collateral.
(iv) If any Collateral exceeding in value $50,000 in the aggregate is
at any time in the possession or control of any warehouseman, bailee (other
than a carrier transporting Inventory to a purchaser in the ordinary course
of business), or any Grantor's agents or processors, such Grantor shall
notify in writing such warehouseman, bailee, agent or processor of the
Security Interests created hereby, shall obtain such warehouseman's,
bailee's, agent's or processor's agreement in writing to hold all such
Collateral for the
<PAGE>
- 10 -
Administrative Agent's account subject to the Administrative Agent's
instructions, and shall cause such warehouseman, bailee, agent or processor
to issue and deliver to the Administrative Agent warehouse receipts, bills
of lading or any similar documents relating to such Collateral in the
Administrative Agent's name and in form and substance acceptable to the
Administrative Agent.
(v) Each Grantor will cause the Administrative Agent, for the ratable
benefit of itself and the Lenders, to be named as loss payee on each
insurance policy covering risks relating to any of its Inventory, Fixtures
and Equipment, as reasonably requested by the Administrative Agent. Each
Grantor will deliver to the Administrative Agent, upon request of the
Administrative Agent, the insurance policies for such insurance. Each such
insurance policy shall include effective waivers by the insurer of
subrogation, provide that all insurance proceeds shall be adjusted with and
payable to the Administrative Agent and provide that no cancellation or
termination thereof shall be effective until at least thirty (30) days
have elapsed after receipt by the Administrative Agent of written notice
thereof. Each Grantor shall arrange for appropriate certifications that
the requirements of this Section 4(a)(v) have been satisfied, to be made to
the Administrative Agent and each insured party, as soon as practicable, by
each insurer or its authorized representative with respect thereto.
(vi) Each Grantor will, promptly upon request, provide to the
Administrative Agent all information and evidence the Administrative Agent
may reasonably request concerning the Collateral, and in particular the
Accounts, to enable the Administrative Agent to enforce the provisions of
this Agreement.
(vii) If requested by the Administrative Agent or the Required
Lenders, prior to each date on which any Grantor proposes to take any
action contemplated by Section 4(a)(i) or Section 4(a)(ii) hereof, such
Grantor shall, at its cost and expense, cause to be delivered to the
Administrative Agent and the Lenders an opinion of counsel, in form and
content reasonably satisfactory to the Administrative Agent and the
Required Lenders.
(viii) From time to time upon request by the Administrative Agent,
each Grantor shall, at its cost and expense, cause to be delivered to the
Administrative Agent and the Lenders an opinion or opinions of counsel,
satisfactory to the Administrative Agent, as to the enforceability of the
Loan Documents and the Lien of the Administrative Agent and Lenders on the
Collateral and other property of such Grantor and such other matters
relating to the transactions contemplated hereby as the Administrative
Agent or the Required Lenders may reasonably request.
(ix) Each Grantor will comply in all material respects with all
Applicable Laws applicable to the Collateral or any part thereof or to the
operation of such Grantor's business.
<PAGE>
- 11 -
(x) Each Grantor will pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of
its income or profits therefrom, as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such charge need
be paid if (A) the validity thereof is being contested in good faith by
appropriate proceedings, (B) such proceedings do not involve any danger of
the sale, forfeiture or loss of or creation of a Lien on any of the
Collateral or any interest therein and (C) such charge is adequately
reserved against on such Grantor's books in accordance with GAAP.
(xi) No Grantor shall
(A) sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral, except as permitted by the Credit
Agreement; or
(B) create or suffer to exist any Lien or other charge or
encumbrance upon or with respect to any of the Collateral to secure
indebtedness of any Person or entity, except as permitted by the
Credit Agreement.
(b) Accounts, Etc.
--------------
(i) Each Grantor shall use all reasonable efforts to cause to be
collected from its Account Debtors, as and when due, any and all amounts
owing under or on account of each Account (including, without limitation,
Accounts which are delinquent, such Accounts to be collected in accordance
with lawful collection procedures) and to apply forthwith upon receipt
thereof all such amounts as are so collected to the outstanding balance of
such Account. The costs and expenses (including, without limitation,
attorney's fees), of collection of Accounts incurred by such Grantor or the
Administrative Agent shall be borne by such Grantor.
(ii) Upon the occurrence and during the continuance of any Event of
Default, upon request of the Administrative Agent or the Required Lenders,
each Grantor will promptly notify (and each Grantor hereby authorizes the
Administrative Agent so to notify) each Account Debtor in respect of any
Account that such Account has been assigned to the Administrative Agent
hereunder and that any payments due or to become due in respect of such
Account are to be made directly to the Administrative Agent or its
designee.
(iii) Each Grantor will perform and comply in all material respects
with all of its obligations in respect of Accounts and General Intangibles
and the exercise by the Administrative Agent of any of its rights hereunder
shall not release any Grantor from any of its duties or obligations.
<PAGE>
- 12 -
(iv) No Grantor will (A) amend, modify, terminate or waive any
material provision of any agreement giving rise to an Account in any manner
which could reasonably be expected to materially adversely affect the value
of such Account as Collateral, (B) fail to exercise promptly and diligently
each and every material right which it may have under each agreement giving
rise to an Account (other than any right of termination) or (C) fail to
deliver to the Administrative Agent a copy of each material demand, notice
or document received by it relating in any way to any agreement giving rise
to an Account.
(v) Other than in the ordinary course of business as generally
conducted by such Grantor over a period of time, no Grantor will grant any
extension of the time of payment of any of the Accounts to any one Account
Debtor with an aggregate face amount in excess of $25,000 or compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any Person liable for the payment thereof, or allow
any credit or discount whatsoever thereon.
(c) Inventory,Etc. Each Grantor hereby represents, warrants, covenants and
-------------
agrees as follows: (i) all Inventory is, and at shall be at all times,
located at places of business listed in the Perfection Certificate or as to
which such Grantor has complied with the provisions of Section 4(a)(i)
hereof, except Inventory in transit from one such location to another such
location; (ii) no Inventory is, nor shall at any time or times be, subject
to any Lien whatsoever, except for Permitted Liens; and (iii) no Inventory
in aggregate value exceeding $50,000 at any time is, nor shall at any time
or times be, kept, stored or maintained with a bailee, warehouseman,
carrier or similar party (other than a carrier delivering Inventory to a
purchaser in the ordinary course of such Grantor's business) unless the
Required Lenders have given their prior written consent and Grantor has
complied with the provisions of Section 4(a)(iv) hereof.
(d) Equipment, Etc. Each Grantor will maintain each item of Equipment in
--------------
the same condition, repair and working order as when acquired, ordinary
wear and tear and immaterial impairments of value and damage by the
elements excepted, and in accordance with any manufacturer's manual, and
will as quickly as practicable provide all maintenance, service and repairs
necessary for such purpose and will promptly furnish to the Administrative
Agent a statement respecting any material loss or damage to any of the
Equipment.
(e) Intellectual Property.
---------------------
(i) Each Grantor shall notify the Administrative Agent promptly (A) of
its acquisition after the Closing Date of any Patent, Patent License,
Trademark or Trademark License and (B) if it knows, or has reason to know
of any adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any court)
regarding such Grantor's ownership of any Patent or Trademark, its right to
<PAGE>
- 13 -
register the same, or to keep and maintain the same. In the event that any
Patent, Patent License, Trademark or Trademark License is infringed,
misappropriated or diluted by a third party, each Grantor shall notify the
Administrative Agent promptly after it learns thereof and shall, unless
such Grantor and the Administrative Agent shall jointly determine that any
such action would be of immaterial economic value, promptly sue for
infringement, misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution, and take such
other actions as may be appropriate under the circumstances to protect such
Patent, Patent License, Trademark or Trademark License. In no event shall
any Grantor, either itself or through any agent, employee or licensee, file
an application for the registration of any Patent or Trademark with the
United States Patent and Trademark Office or any similar office or agency
in any other country or any political subdivision thereof, unless
simultaneously therewith it informs the Administrative Agent, and, upon
issuance of such Patent or Trademark, executes and delivers any and all
agreements, instruments, documents and papers the Administrative Agent may
reasonably request to evidence the Security Interests in such Patent or
Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby. Each Grantor hereby constitutes the
Administrative Agent its attorney-in-fact to execute and file all such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed, and such power, being coupled with an interest,
shall be irrevocable until the Commitments have terminated and the Secured
Obligations are paid in full.
(ii) Each Grantor shall: (A) preserve and maintain in all material
respects rights in the Intellectual Property; and (B) upon and after the
occurrence of an Event of Default, use its best efforts to obtain any
consents, waivers or agreements necessary to enable Administrative Agent to
exercise its remedies with respect to the Intellectual Property. No
Grantor shall abandon any right to file a Copyright, Patent or Trademark
application that is material to the business of such Grantor nor shall any
Grantor abandon any such pending Copyright, Patent or Trademark
application, or Copyright, Copyright License, Patent, Patent License,
Trademark or Trademark License without the prior written consent of
Administrative Agent.
(iii) Each Grantor hereby Assigns, transfers and conveys to
Administrative Agent, effective upon the occurrence and during the
continuance of any Event of Default, the nonexclusive right and license to
use all Intellectual Property owned or used by such Grantor, together with
any goodwill associated therewith, all to the extent necessary to enable
Administrative Agent to realize on the Collateral (including, without
limitation, completing production of, advertising for sale and selling the
Collateral) and any successor or assign to enjoy the benefits of the
Collateral. This right and license shall inure to the benefit of all
successors, assigns and transferees of Administrative Agent and its
successors, assigns and transferees, whether by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of
charge, without requirement that any monetary payment whatsoever be made to
any Grantor by Administrative Agent.
<PAGE>
- 14 -
(f) Indemnification. Each Grantor agrees to pay, and to save the
---------------
Administrative Agent and the Lenders harmless from, any and all liabilities,
costs and expenses (including, without limitation, legal fees and expenses) (i)
with respect to, or resulting from, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, complying with any
Applicable Law applicable to any of the Collateral or (iii) in connection with
any of the transactions contemplated by this Agreement (except to the extent any
such liabilities, costs and expenses result from the gross negligence or willful
misconduct of the Administrative Agent or Lenders). In any suit, proceeding or
action brought by the Administrative Agent under any Account for any sum owing
thereunder, or to enforce any provisions of any Account, each Grantor will save,
indemnify and keep the Administrative Agent and the Lenders harmless from and
against all expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction or liability whatsoever of the Account
Debtor or any other obligor thereunder, arising out of a breach by such Grantor
of any obligation thereunder or arising out of any other agreement, indebtedness
or liability at any time owing to or in favor of such Account Debtor or obligor
or its successors from such Grantor (except to the extent any such expense, loss
or damage results from the gross negligence or willful misconduct of the
Administrative Agent or Lenders). The obligations of each Grantor under this
Section 4(f) shall survive the termination of the other provisions of this
Agreement.
SECTION 5. Reporting and Recordkeeping. Each Grantor respectively
---------------------------
covenants and agrees with the Administrative Agent and the Lenders that from and
after the date of this Agreement and until the Commitments have terminated and
all Secured Obligations have been fully satisfied:
(a) Maintenance of Records Generally. Such Grantor will keep and maintain
--------------------------------
at its own cost and expense complete and accurate records of the Collateral,
including, without limitation, a record of all payments received and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. All chattel paper given to such Grantor with respect to any
Accounts will be marked with the following legend: "This writing and the
obligations evidenced or secured hereby are subject to the security interest of
First Union National Bank of North Carolina, as Administrative Agent". For the
Administrative Agent's and the Lenders' further security, such Grantor agrees
that upon the occurrence and during the continuation of any Event of Default,
such Grantor shall deliver and turn over any such books and records directly to
the Administrative Agent or its designee. Such Grantor shall permit any
representative of the Administrative Agent to inspect such books and records in
accordance with Section 7.11 of the Credit Agreement and will provide
photocopies thereof to the Administrative Agent upon its reasonable request.
(b) Certain Provisions Regarding Maintenance of Records and Reporting Re:
---------------------------------------------------------------------
Accounts.
- --------
(i) In the event any amounts due and owing in excess of $75,000 are in
dispute between any Account Debtor and such Grantor, such Grantor shall
provide the Administrative Agent with written notice thereof promptly after
such Grantor's learning
<PAGE>
- 15 -
thereof, explaining in detail the reason for the dispute, all claims
related thereto and the amount in controversy; provided, that a monthly
--------
report of such items provided within ten (10) days after the end of each
calendar month shall be deemed to be prompt delivery of such notice.
(ii) Such Grantor will promptly notify the Administrative Agent in
writing if any Account arises out of a contract with the United States of
America, or any department, agency, subdivision or instrumentality thereof,
or of any state (or department, agency, subdivision or instrumentality
thereof) where such state has a state assignment of claims act or other law
comparable to the Federal Assignment of Claims Act, and will take any
action required or requested by the Administrative Agent or give notice of
the Administrative Agent's Security Interest in such Accounts under the
provisions of the Federal Assignment of Claims Act or any comparable law or
act enacted by any state or local governmental authority.
(c) Further Identification of Collateral. Such Grantor will, if so
------------------------------------
requested by the Administrative Agent, furnish to the Administrative Agent
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Administrative Agent
may reasonably request, all in reasonable detail.
(d) Notices. In addition to the notices required by Section 5(b) hereof,
-------
such Grantor will advise the Administrative Agent promptly, in reasonable
detail, (i) of any material Lien or claim made or asserted against any of the
Collateral, (ii) of any material adverse change in the composition of the
Collateral, and (iii) of the occurrence of any other event which could have a
material adverse effect on the Collateral or on the validity, perfection or
priority of the Security Interests.
SECTION 6. Collateral Account.
------------------
(a) There is hereby established with the Administrative Agent a Collateral
Account in the name and under the exclusive dominion and control of the
Administrative Agent. There shall be deposited from time to time into such
account the cash proceeds of the Collateral required to be delivered to the
Administrative Agent pursuant to Section 6(b) or any other provision of this
Agreement. Any income received by the Administrative Agent with respect to the
balance from time to time standing to the credit of the Collateral Account,
including any interest or capital gains on investments of amounts on deposit in
the Collateral Account, shall remain, or be deposited, in the Collateral Account
together with any investments from time to time made pursuant to subsection (c)
of this Section 6, shall vest in the Administrative Agent, shall constitute part
of the Collateral hereunder and shall not constitute payment of the Secured
Obligations until applied thereto as hereinafter provided.
(b) Upon the occurrence and during the continuance of an Event of Default,
if requested by the Administrative Agent, each Grantor shall instruct all
Account Debtors and other Persons obligated in respect of all Accounts to make
all payments in respect of the Accounts
<PAGE>
- 16 -
either (i) directly to the Administrative Agent (by instructing that such
payments be remitted to a post office box which shall be in the name and under
the exclusive dominion and control of the Administrative Agent) or (ii) to one
or more other banks in any state in the United States (by instructing that such
payments be remitted to a post office box which shall be in the name and under
the exclusive dominion and control of such bank) under arrangements, in form and
substance satisfactory to the Administrative Agent, pursuant to which such
Grantor shall have irrevocably instructed such other bank (and such other bank
shall have agreed) to remit all proceeds of such payments directly to the
Administrative Agent for deposit into the Collateral Account or as the
Administrative Agent may otherwise instruct such bank, and thereafter if the
proceeds of any Collateral shall be received by such Grantor, such Grantor will
promptly deposit such proceeds into the Collateral Account and until so
deposited, all such proceeds shall be held in trust by such Grantor for and as
the property of the Administrative Agent, for the benefit of itself and the
Lenders and shall not be commingled with any other funds or property of such
Grantor. At any time after the occurrence and during the continuance of an
Event of Default, the Administrative Agent may itself so instruct such Grantor's
Account Debtors and each Grantor hereby constitutes and appoints the
Administrative Agent (and the president, any vice president or any assistant
vice president of the Administrative Agent from time to time) as its attorney-
in-fact with full power and authority to so instruct such Grantor's Account
Debtors. All such payments made to the Administrative Agent shall be deposited
in the Collateral Account.
(c) The balance from time to time standing to the credit of the Collateral
Account shall, except upon the occurrence and continuation of an Event of
Default, be distributed to the Grantors upon the order of the Grantors. If
immediately available cash on deposit in the Collateral Account is not
sufficient to make any distribution to the Grantors referred to in the previous
sentence of this Section 6(c), the Administrative Agent shall liquidate as
promptly as practicable such investments as required to obtain sufficient cash
to make such distribution and, notwithstanding any other provision of this
Section 6, such distribution shall not be made until such liquidation has taken
place. Upon the occurrence and continuation of an Event of Default, the
Administrative Agent shall, if so instructed by the Required Lenders, apply or
cause to be applied (subject to collection) any or all of the balance from time
to time standing to the credit of the Collateral Account in the manner specified
in Section 10.
(d) Amounts on deposit in the Collateral Account shall be invested and
reinvested from time to time in Permitted Investments as the Grantors shall
determine, which investments shall be held in the name and be under the control
of the Administrative Agent; provided, that if an Event of Default has occurred
--------
and is continuing, the Administrative Agent may and, if instructed by the
Required Lenders, shall liquidate any such investments and apply or cause to be
applied the proceeds thereof to the payment of the Secured Obligations in the
manner specified in Section 10 hereof; and provided further, that (i) each such
----------------
investment shall mature within thirty (30) days after it is acquired by the
Administrative Agent and (ii) in order to provide the Administrative Agent, for
the ratable benefit of itself and the Lenders, with a perfected security
interest therein, each such investment shall be either:
<PAGE>
- 17 -
(A) evidenced by negotiable certificates or Instruments, or if non-
negotiable then issued in the name of the Administrative Agent, which
(together with any appropriate instruments of transfer) are delivered to,
and held by, the Administrative Agent or any agent thereof (which shall not
be any of the Grantors or any of their Affiliates) in the State of North
Carolina; or
(B) in book-entry form and issued by the United States and subject to
pledge under applicable state law and Treasury regulations and as to which
(in the opinion of counsel to the Administrative Agent) appropriate
measures shall have been taken for perfection of the Security Interests.
(e) Upon the occurrence of any Event of Default, the Administrative Agent
is authorized at any time and from time to time, and during the continuance
thereof, without notice to the Grantors, to set off, appropriate and apply any
and all amounts on deposit in the Collateral Account, and the proceeds thereof,
against all Secured Obligations.
SECTION 7. General Authority.
-----------------
(a) Each Grantor hereby irrevocably appoints the Administrative Agent its
true and lawful attorney, with full power of substitution, in the name of such
Grantor, the Administrative Agent, the Lenders or otherwise, for the sole use
and benefit of the Administrative Agent and the Lenders, but at such Grantor's
expense, to exercise, at any time from time to time all or any of the following
powers:
(i) to file the Financing Statements and any financing statements,
financing statement amendments and continuation statements referred to in
Sections 4(a)(i), 4(a)(ii), and 4(a)(iii) hereof,
(ii) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due with respect to any Collateral or by
virtue thereof,
(iii) to settle, compromise, compound, prosecute or defend any action
or proceeding with respect to any Collateral,
(iv) to sell, transfer, assign or otherwise deal in or with the
Collateral and the Proceeds thereof, as fully and effectually as if the
Administrative Agent were the absolute owner thereof, and
(v) to extend the time of payment and to make any allowance and other
adjustments with reference to the Collateral;
provided that the Administrative Agent shall not take any of the actions
- --------
described in this Section 7 except those described in clause (i) above unless an
Event of Default shall have occurred and be continuing and the Administrative
Agent shall give such Grantor not less than
<PAGE>
- 18 -
ten (10) days' prior written notice of the time and place of any sale or other
intended disposition of any of the Collateral, except any Collateral which is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market. Each Grantor agrees that any such notice
constitutes "reasonable notification" within the meaning of Section 9-504(3) of
the UCC (to the extent such Section is applicable).
(b) Each Grantor hereby ratifies all that said attorney shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(c) Each Grantor also authorizes the Administrative Agent at any time and
from time to time, to execute, in connection with the sale provided for in
Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
SECTION 8. Remedies Upon Event of Default.
------------------------------
(a) If any Event of Default has occurred and is continuing, the
Administrative Agent may exercise on behalf of itself and the Lenders all rights
of a secured party under the UCC (whether or not in effect in the jurisdiction
where such rights are exercised) and, in addition, the Administrative Agent may
(i) withdraw all cash, if any, in the Collateral Account and investments made
with amounts on deposit in the Collateral Account, and apply such monies,
investments and other cash, if any, then held by it as Collateral as specified
in Section 10 hereof and (ii) if there shall be no such monies, investments or
cash or if such monies, investments or cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at public
or private sale, for cash, upon credit or for future delivery, and at such price
or prices as the Administrative Agent may deem satisfactory. The Administrative
Agent or any Lender may be the purchaser of any or all of the Collateral so sold
at any public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations or if otherwise permitted under applicable law, at any
private sale) and thereafter hold the same, absolutely, free from any right or
claim of whatsoever kind. Each Grantor will execute and deliver such documents
and take such other action as the Administrative Agent deems reasonably
necessary or advisable in order that any such sale may be made in compliance
with law. Upon any such sale the Administrative Agent shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold
(without warranty). Each purchaser at any such sale shall hold the Collateral
so sold to it absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of any Grantor. To the extent
permitted by law, each Grantor hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice of such sale shall be given to the
applicable Grantor ten (10) days prior to such sale and (A) in case of a public
sale, state the time and place fixed for such sale, and (B) in the case of a
private sale, state the day after which sale may be consummated. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Administrative Agent may fix in the notice of
such sale. At any such sale the Collateral
<PAGE>
- 19 -
may be sold in one lot as an entirety or in separate parcels, as the
Administrative Agent may determine. The Administrative Agent shall not be
obligated to make any such sale pursuant to any such notice. The Administrative
Agent may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Administrative Agent until the selling price is paid by the
purchaser thereof, but the Administrative Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold upon
like notice. The Administrative Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction. The Grantors shall remain liable for any deficiency.
(b) For the purpose of enforcing any and all rights and remedies under this
Agreement, the Administrative Agent may if an Event of Default has occurred and
is continuing (i) require each Grantor to, and each Grantor agrees that it will,
at its expense and upon the request of the Administrative Agent, forthwith
assemble all or any part of the Collateral as directed by the Administrative
Agent and make it available at a place designated by the Administrative Agent
which is, in the Administrative Agent's opinion, reasonably convenient to the
Administrative Agent and such Grantor, whether at the premises of such Grantor
or otherwise, (ii) to the extent permitted by applicable law, enter, with or
without process of law and without breach of the peace, any premise where any of
the Collateral is or may be located and, without charge or liability to the
Administrative Agent, seize and remove such Collateral from such premises, (iii)
have access to and use such Grantor's books and records relating to the
Collateral and (iv) prior to the disposition of the Collateral, store or
transfer such Collateral without charge in or by means of any storage or
transportation facility owned or leased by such Grantor, process, repair or
recondition such Collateral or otherwise prepare it for disposition in any
manner and to the extent the Administrative Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
Trademark, trade name, Copyright, Patent or technical process used by such
Grantor.
(c) Without limiting the generality of the foregoing, if any Event of
Default has occurred and is continuing,
(i) the Administrative Agent may license, or sublicense, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any Patents or Trademarks included in the Collateral throughout the
world for such term or terms, on such conditions and in such manner as the
Administrative Agent shall in its sole discretion determine;
(ii) the Administrative Agent may (without assuming any obligations or
liability thereunder), at any time and from time to time, enforce (and
shall have the
<PAGE>
- 20 -
exclusive right to enforce) against any licensee or sublicensee all rights
and remedies of any Grantor in, to and under any Patent Licenses or
Trademark Licenses and take or refrain from taking any action under any
thereof, provided, that no such actions shall result in the failure of such
--------
Patent Licenses or Trademark Licenses to remain in compliance with all
Applicable Law, and each Grantor hereby releases the Administrative Agent
and each of the Lenders from and against any claims arising out of, any
lawful action so taken or omitted to be taken with respect thereto except
with respect to the gross negligence or willful misconduct of the
Administrative Agent or the Lenders; and
(iii) upon request by the Administrative Agent, each Grantor will
execute and deliver to the Administrative Agent a power of attorney, in
form and substance satisfactory to the Administrative Agent, for the
implementation of any lease, assignment, license, sublicense, grant or
option, sale or other disposition of a Patent or Trademark. In the event
of any such disposition pursuant to this Section, each Grantor shall supply
its know-how and expertise relating to the manufacture and sale of the
products bearing Trademarks or the products or services made or rendered in
connection with Patents, and its customer lists and other records relating
to such Patents or Trademarks and to the distribution of said products, to
the Administrative Agent.
SECTION 9. Limitation on Duty of Administrative Agent in Respect of
--------------------------------------------------------
Collateral. Beyond reasonable care in the custody thereof, the Administrative
- ----------
Agent shall have no duty as to any Collateral in its possession or control or in
the possession or control of any agent or bailee or any income thereon or as to
the preservation of rights against prior parties or any other rights pertaining
thereto. The Administrative Agent shall be deemed to have exercised reasonable
care in the custody of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property, and the Administrative Agent shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by the
Administrative Agent in good faith.
SECTION 10. Application of Proceeds. Upon the occurrence and during the
-----------------------
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied by the
Administrative Agent as follows:
first, to payment of the out-of-pocket expenses of such sale or other
-----
realization, including all reasonable out-of-pocket expenses, liabilities
and advances incurred or made by the Administrative Agent in connection
therewith, and any other unreimbursed expenses for which the Administrative
Agent or any Lender is to be reimbursed pursuant to Section 13.2 of the
Credit Agreement, or Section 4(f) or 13 hereof or any corresponding
provision of any of the other Loan Documents;
second, to payment of any fees owing to the Administrative Agent or
------
any Lender under the Credit Agreement in accordance with the
provisions of the Credit Agreement;
<PAGE>
- 21 -
third, to ratable payment of accrued but unpaid interest (including post-
-----
petition interest) on the Secured Obligations and any termination payments
due in respect of any Hedging Agreement with any Lender (pro rata in
--- ----
accordance with all such amounts due);
fourth, to the ratable payment of unpaid principal of the Secured
------
Obligations;
fifth, to the ratable payment of all other Secured Obligations, until
-----
all Secured Obligations shall have been paid in full; and
finally, to payment to the applicable Grantors or their respective
-------
successor or assigns, or as a court of competent jurisdiction may direct,
of any surplus then remaining from such proceeds.
The Administrative Agent may make distribution hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.
SECTION 11. Concerning the Administrative Agent. The provisions of
-----------------------------------
Article XI of the Credit Agreement shall inure to the benefit of the
Administrative Agent in respect of this Agreement and shall be binding upon the
parties to the Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the Administrative Agent
therein set forth:
(a) The Administrative Agent is authorized to take all such action as
is provided to be taken by it as Administrative Agent hereunder and all
other action incidental thereto. As to any matters not expressly provided
for herein, the Administrative Agent may request instructions from the
Lenders and shall act or refrain from acting in accordance with written
instructions from the Required Lenders (or, when expressly required by this
Agreement or the Credit Agreement, all the Lenders) or, in the absence of
such instructions, in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security Interests,
whether impaired by operation of law or by reason of any action or omission
to act on its part (other than any such action or inaction constituting
gross negligence or willful misconduct. The Administrative Agent shall
have no duty to ascertain or inquire as to the performance or observance of
any of the terms of this Agreement by any Grantor.
SECTION 12. Appointment of Collateral Agents. At any time or times, in
--------------------------------
order to comply with any legal requirement in any jurisdiction or in order to
effectuate any provision of the Loan Documents, the Administrative Agent may
appoint another bank or trust company or one or more other Persons, either to
act as collateral agent or agents, jointly with the Administrative Agent or
separately, on behalf of the Administrative Agent and the Lenders with such
power and authority as may be necessary for the effectual operation of the
provisions hereof
<PAGE>
- 22 -
and specified in the instrument of appointment (which may, in the discretion of
the Administrative Agent, include provisions for the protection of such
collateral agent similar to the provisions of Section 11 hereof).
SECTION 13. Expenses. In the event that any Grantor fails to comply with
--------
the provisions of the Credit Agreement, this Agreement or any other Loan
Document, such that the value of any Collateral or the validity, perfection,
rank or value of the Security Interests are thereby diminished or potentially
diminished or put at risk, the Administrative Agent if requested by the Required
Lenders may, but shall not be required to, effect such compliance on behalf of
such Grantor, and such Grantor shall reimburse the Administrative Agent for the
reasonable costs thereof on demand. All insurance expenses and all reasonable
expenses of protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral, any and all excise, stamp, intangibles, transfer,
property, sales, and use taxes imposed by any state, federal, or local authority
or any other Governmental Authority on any of the Collateral, or in respect of
the sale or other disposition thereof, shall be borne and paid by the Grantors;
and if any Grantor fails promptly to pay any portion thereof when due, the
Administrative Agent or any Lender may, at its option, but shall not be required
to, pay the same and charge such Grantor's account therefor, and such Grantor
agrees to reimburse the Administrative Agent or such Lender therefor on demand.
All sums so paid or incurred by the Administrative Agent or any Lender for any
of the foregoing and any and all other sums for which any Grantor may become
liable hereunder and all costs and expenses (including reasonable attorneys'
fees, legal expenses and court costs) incurred by the Administrative Agent or
any Lender in enforcing or protecting the Security Interests or any of their
rights or remedies thereon shall be payable by the Grantors on demand and shall
bear interest (after as well as before judgment) until paid at the rate then
applicable to Base Rate Loans under the Credit Agreement and shall be additional
Secured Obligations hereunder.
SECTION 14. Notices. All notices, communications and distributions
-------
hereunder shall be given or made in accordance with Section 13.1 of the Credit
Agreement.
SECTION 15. Waivers, Non-Exclusive Remedies. No failure on the part of
-------------------------------
the Administrative Agent or any Lender to exercise, and no delay in exercising
and no course of dealing with respect to, any right under the Credit Agreement,
this Agreement or any other Loan Document shall operate as a waiver thereof or
hereof; nor shall any single or partial exercise by the Administrative Agent or
any Lender of any right under the Credit Agreement, this Agreement or any other
Loan Document preclude any other or further exercise thereof, and the exercise
of any rights in this Agreement, the Credit Agreement and the other Loan
Documents are cumulative and are not exclusive of any other remedies provided by
law. This Agreement is a Loan Document executed pursuant to the Credit
Agreement.
SECTION 16. Successors and Assigns. This Agreement is for the benefit of
----------------------
the Administrative Agent and the Lenders and their successors and assigns (as
permitted by the Credit Agreement), and in the event of an assignment of all or
any of the Secured Obligations, the rights hereunder, to the extent applicable
to the indebtedness so assigned, may be transferred with such
<PAGE>
- 23 -
indebtedness. This Agreement shall be binding on each Grantor and its successor
and assigns; provided, that such Grantor may not assign any of its rights or
--------
obligations hereunder without the prior written consent of the Administrative
Agent and the Lenders.
SECTION 17. Changes in Writing. Neither this Agreement nor any provision
------------------
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each Grantor and the Administrative Agent with the consent of
the Required Lenders (or, when expressly required by this Agreement or the
Credit Agreement, all of the Lenders).
SECTION 18. Powers Coupled with an Interest. All authorizations and
-------------------------------
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT
REFERENCE TO THE CONFLICTS OR CHOICE OF LAW PRINCIPLES THEREOF.
SECTION 20. Consent to Jurisdiction. Each Grantor hereby irrevocably
-----------------------
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of or any dispute in connection with this Agreement, any rights or
obligations hereunder, or the performance of such rights and obligations. Each
Grantor hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by the
Administrative Agent or any Lender in connection with this Agreement, any rights
or obligations hereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner provided in Section 13.1 of the
Credit Agreement. Nothing in this Section 20 shall affect the right of the
Administrative Agent or any Lender to serve legal process in any other manner
permitted by Applicable Law or affect the right of the Administrative Agent or
any Lender to bring any action or proceeding against any Grantor or its
properties in the courts of any other jurisdictions.
SECTION 21. Waiver of Jury Trial. NOTWITHSTANDING ANY OTHER PROVISION
--------------------
CONTAINED HEREIN, IN THE EVENT ANY JUDICIAL PROCEEDING IS INSTITUTED IN
CONNECTION WITH THIS AGREEMENT, TO THE EXTENT PERMITTED BY LAW, THE
ADMINISTRATIVE AGENT AND EACH LENDER BY THEIR ACCEPTANCE OF THIS AGREEMENT OR
THE BENEFITS HEREOF AND EACH GRANTOR HEREBY IRREVOCABLY WAIVES ITS RESPECTIVE
RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF OR ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 22. Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(a) the other provisions hereof shall
<PAGE>
- 24 -
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Administrative Agent and the Lenders in order to carry
out the intentions of the parties hereto as nearly as may be possible; and (b)
the invalidity or unenforceability of any provisions hereof in any jurisdiction
shall not affect the validity or enforceability of such provision in any other
jurisdiction.
SECTION 23. Headings. The various headings of this Agreement are inserted
--------
for convenience only and shall not affect the meaning or interpretation of this
Agreement or any provisions hereof.
SECTION 24. Counterparts. This Agreement may be executed by the parties
-------------
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
<PAGE>
- 25 -
IN WITNESS WHEREOF, the parties hereto have caused this supplement to be
executed under seal by their duly authorized officers, all as of the day and
year first written above.
[CORPORATE SEAL] ACC CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-------------------------
Title: Vice President-Finance
-------------------------
[CORPORATE SEAL] ACC LONG DISTANCE CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-------------------------
Title: Controller
-------------------------
[CORPORATE SEAL) ACC NATIONAL TELECOM CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-------------------------
Title: Controller
-------------------------
[CORPORATE SEAL] ACC LONG DISTANCE OF
MASSACHUSETTS CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-------------------------
Title: Controller
-------------------------
[CORPORATE SEAL] ACC RADIO CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-------------------------
Title: Controller
-------------------------
[CORPORATE SEAL] ACC NATIONAL LONG DISTANCE CORP.
By: /s/ John J. Zimmer
-----------------------------
Name: John J. Zimmer
-------------------------
Title: Controller
-------------------------
<PAGE>
- 26 -
Administrative Agent:
[CORPORATE SEAL] FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Administrative Agent
By: /s/ Jim F. Redman
---------------------------
Name: Jim F. Redman
-----------------------
Title: Sr. Vice President
----------------------
<PAGE>
- 27 -
Schedule I
to
Security Agreement
Trademark Registrations
-----------------------
<TABLE>
<CAPTION>
Mark Reg. No. Date Goods
- ------------ --------- -------- ------------------
<S> <C> <C> <C>
Flying ACC 1,371,741 11/19/85 Telecomm. Services
Design 1,607,689 7/24/89 Telecomm. Services
</TABLE>
Trademark Applications
----------------------
<TABLE>
<CAPTION>
Mark Serial No. Goods
- -------------- ---------- ------------------
<S> <C> <C>
ACC &
Design (fed) 74/607003 Telecomm. Services
Digitrunk 74/499613 Telecomm. Services
</TABLE>
Trademark Licenses
------------------
None
<PAGE>
ANNEX I
(to Security Agreement)
SECURITY AGREEMENT SUPPLEMENT
-----------------------------
SECURITY AGREEMENT SUPPLEMENT, dated as of _____________________, (the
"Supplement"), made by [INSERT NAME OF NEW SUBSIDIARY], a ________________
- -----------
(the "New Grantor"), in favor of First Union National Bank of North
-----------
Carolina, as Administrative Agent (in such capacity, the "Administrative Agent")
--------------------
under the Credit Agreement (as defined in the Security Agreement referred to
below) for the ratable benefit of itself and the Lenders (as so defined).
1. Reference is hereby made to the Security Agreement dated
as of ___________, 1995, made by ACC Corp. and certain Subsidiaries
of ACC Corp. (collectively, the "Grantors"), in favor of the Administrative
Agent (as amended, supplemented or otherwise modified as of the date hereof, the
"Security Agreement"). This Supplement supplements the Security Agreement,
forms a part thereof and is subject to the terms thereof. Capitalized terms
used and not defined herein shall have the meanings given thereto or referenced
in the Security Agreement.
2. In order to secure the Credit Agreement, in accordance with the terms
thereof, and to secure the payment and performance of all of the Secured
Obligations, the New Grantor hereby grants to the Administrative Agent, for the
ratable benefit of itself and the Lenders, a continuing security interest in and
to all of the New Grantor's estate, right, title and interest in and to all
Collateral whether now or hereafter owned or acquired by the New Grantor or in
which the New Grantor now has or hereafter has or acquires any rights, and
wherever located (the "New Collateral").
3. The Security Interests are granted as security only and shall not
subject the Administrative Agent or any Lender to, or transfer to the
Administrative Agent or any Lender, or in any way affect or modify, any
obligation or liability of the New Grantor with respect to any of the New
Collateral or any transaction in connection therewith.
4. The New Grantor hereby agrees that it is a party to the Security
Agreement as if a signatory thereto on the Closing Date of the Credit Agreement,
and the New Grantor shall comply with all of the terms, covenants, conditions
and agreements and hereby makes each representation and warranty, in each case
set forth therein. The New Grantor agrees that "Collateral" as used therein
shall include all New Collateral pledged pursuant hereto and the Security
Agreement and "Security Agreement" or "Agreement" as used therein shall mean the
Security Agreement as supplemented hereby.
5. Attached hereto are (i) a Perfection Certificate in the form of the
Perfection Certificate delivered to the Administrative Agent on the Closing Date
and (ii) updated Schedules to the Security Agreement revised to include all
required information with respect to the New Grantor.
<PAGE>
- 2 -
6. The New Grantor hereby acknowledges it has received a copy of the
Security Agreement and that it has read and understands the terms thereof.
7. The New Grantor hereby agrees that it shall deliver to the
Administrative Agent such UCC Financing Statements and all other certificates or
other documents and take such action as the Administrative Agent shall
reasonably request in order to effectuate the terms hereof and the Security
Agreement.
IN WITNESS WHEREOF, the undersigned hereby causes this Supplement to be
executed and delivered as of the date first above written.
[CORPORATE SEAL [INSERT NAME OF NEW SUBSIDIARY]
By:_____________________________
Name: ________________________
Title: _______________________
<PAGE>
Exhibit 99.22
TRADEMARK SECURITY AGREEMENT
----------------------------
WHEREAS, ACC Corp., a corporation organized under the laws of Delaware
("Company"), owns the Trademarks and the Trademark registrations and Trademark
applications listed on Schedule 1 annexed hereto, and is a party to the
Trademark Licenses listed on Schedule 1 annexed hereto; and
WHEREAS, pursuant to a Credit Agreement (the "Credit Agreement") of
even date herewith among the Company and certain of its Subsidiaries as
Borrowers (collectively, the "Borrowers"), the financial institutions which are,
or may from time to time become, party thereto (collectively, the "Lenders") and
First Union National Bank of North Carolina, as administrative agent for the
Lenders (the "Administrative Agent"), the Lenders have agreed to extend certain
Loans according to the terms and conditions more particularly described in the
Credit Agreement; and
WHEREAS, pursuant to the terms of the Security Agreement of even date
(as said Agreement may be amended or modified from time to time, the "Security
Agreement;" all capitalized terms defined in the Credit Agreement or the
Security Agreement and not otherwise defined herein have the respective meanings
provided for in the Credit Agreement or the Security Agreement), between the
Borrowers (as grantors thereunder the "Grantors") and the Administrative Agent,
the Grantors have granted to the Administrative Agent for the benefit of itself
and the Lenders a security interest in certain assets of each of the Grantors,
including all right, title and interest of the Company in, to and under all now
owned and hereafter acquired Trademarks, Trademark registrations, Trademark
applications and Trademark Licenses, together with the goodwill of the business
symbolized by the Company's Trademarks, and all products and proceeds thereof,
to secure the payment of all amounts owing by the Borrowers under the Credit
Agreement and the other Secured Obligations;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company does hereby grant to
the Administrative Agent for the benefit of itself and the Lenders a continuing
security interest in all of Company's right, title and interest in, to and under
the following (all of the following items or types of property being herein
collectively referred to as the "Trademark Collateral"), whether now existing or
hereafter created or acquired in order to secure the Secured Obligations
referred to herein:
(1) each Trademark, Trademark registration and Trademark
application, together with any reissues, continuations or extensions
thereof including, without limitation, the Trademarks, Trademark
registrations (together with any reissues, continuations or extensions
thereof) and Trademark applications referred to in Schedule 1 annexed
hereto, and all of the goodwill of the business connected with the use
of, and symbolized by, each Trademark, Trademark registration and
Trademark application;
<PAGE>
- 2 -
(2) each Trademark License and all of the goodwill of the
business connected with the use of, and symbolized by, each Trademark
License; and
(3) all products and proceeds of the foregoing, including,
without limitation, any claim by the Company against third parties for
past, present or future (a) infringement or dilution of any Trademark
or Trademark registration including, without limitation, the
Trademarks and Trademark registrations referred to in Schedule 1
annexed hereto, the Trademark registrations issued with respect to the
Trademark applications referred to in Schedule 1 and the trademarks
licensed under any Trademark License, or (b) injury to the goodwill
associated with any Trademark, Trademark registration or trademark
licensed under any Trademark License.
This security interest is granted in conjunction with the security
interests granted to the Administrative Agent pursuant to the Security
Agreement. The Company hereby acknowledges and affirms that the rights and
remedies of the Administrative Agent with respect to the security interest in
the Trademark Collateral made and granted hereby are more fully set forth in the
Security Agreement, the terms and provisions of which are incorporated by
reference herein as if fully set forth herein.
<PAGE>
- 3 -
IN WITNESS WHEREOF, the Company has caused this Trademark Security
Agreement to be duly executed by its duly authorized officer thereunto as of the
21st day of July, 1995.
- ---- ---- --
[CORPORATE SEAL] ACC CORP.
ATTEST:
By: /s/ Daniel J. Venuti By: /s/ John J. Zimmer
------------------- -----------------------
Name: Daniel J. Venuti Name: John J. Zimmer
----------------- -------------------
Title: Asst. Secretary Title: Vice Pres-Finance
---------------- ------------------
Agreed and Accepted as of the
21st day of July, 1995
------ ---- --
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Administrative Agent
By: /s/ Jim F. Redman
--------------------
Name: Jim F. Redman
------------------
Title: Sr. Vice Pres.
-----------------
<PAGE>
- 4 -
ACKNOWLEDGMENT
STATE OF NORTH CAROLINA
----------------
COUNTY OF MECKLENBURG
---------------
I, Betty G. Smith, a Notary Public for said County and State, do hereby certify
--------------
that John J. Zimmer personally appeared before me this day and stated that (s)he
--------------
is Vice President-Finance of ACC Corp. and acknowledged, on behalf of ACC Corp.
----------------------
the due execution of the foregoing instrument.
Witness my hand and official seal, this 10th day of July , 1995.
-------- ------
/s/ Betty G. Smith
---------------------------
Notary Public
My commission expires:
August 5, 1997
---------------------
<PAGE>
- 5 -
Schedule 1
to Trademark
Security Agreement
------------------
Trademark Registrations
-----------------------
<TABLE>
<CAPTION>
Mark Reg. No. Date Goods
- ------------ --------- -------- ------------------
<S> <C> <C> <C>
Flying ACC 1,371,741 11/19/85 Telecomm. Services
Design 1,607,689 7/24/89 Telecomm. Services
</TABLE>
Trademark Applications
----------------------
<TABLE>
<CAPTION>
Mark Serial No. Goods
- -------------- ---------- ------------------
<S> <C> <C>
ACC &
Design (fed) 74/607003 Telecomm. Services
Digitrunk 74/499613 Telecomm. Services
</TABLE>
Trademark Licenses
------------------
None
<PAGE>
Exhibit 99.23
LICENCE AGREEMENT
-----------------
LICENSOR: HUDSON'S BAY COMPANY,
THE BAY DEPARTMENT STORES DIVISION
LICENSEE: ACC LONG DISTANCE INC.
Dated as of: July 1, 1993
------------
<PAGE>
ACC LONG DISTANCE INC. LICENCE AGREEMENT
----------------------------------------
INDEX
-----
Article Page
- ------- ----
Recitals
1.1 Definitions..................................... 1
"Activation Fee"................................ 1
"Agreement"..................................... 1
"Appendix"...................................... 1
"Business"...................................... 1
"Completion Date"............................... 1
"Contractor".................................... 1
"Customer"...................................... 1
"Department".................................... 2
"Department Area"............................... 2
"Gross Sales"................................... 2
"Licensor's Fee"................................ 2
"Long Distance Service"......................... 2
"Off Premises".................................. 2
"Period"........................................ 2
"Permitted Use"................................. 2
"Promotion and Advertising Material"............ 2
"Sales Contract"................................ 3
"Services"...................................... 3
"Store"......................................... 3
"Taxes"......................................... 3
"Toll Charges".................................. 3
"Trade-marks"................................... 3
"Trade Name".................................... 3
1.2 Interpretation.................................. 3
1.3 Currency........................................ 3
2.1 Grant of Licence................................ 4
2.2 Name............................................ 4
2.3 Rights of Ownership............................. 4
2.4 Becoming Registered User........................ 5
- i -
<PAGE>
2.5 No Objection.................................... 5
2.6 Standards....................................... 5
2.7 Standards: Trade-marks......................... 6
2.8 Use of Trade-Marks.............................. 6
2.9 Infringement: Passing-Off....................... 6
2.10 Disclaimer...................................... 7
3.1 Licence Fee..................................... 7
3.2 Term............................................ 8
3.3 Operation of Business........................... 8
3.4 Warranties...................................... 8
3.5 Compliance With Legislation..................... 9
3.6 Workers' Compensation Board..................... 9
3.7 Taxes........................................... 9
3.8 Taxes Indemnity................................. 10
3.9 Inspection...................................... 10
3.10 Hours........................................... 10
3.11 Employees of Licensee........................... 10
3.12 No Contractual Obligations...................... 11
4.1 Cash and Credit Sales........................... 11
4.2 Audit of Records................................ 12
4.3 Daily Report and Settlement..................... 12
4.4 Settlement by Licensor.......................... 12
4.5 Right to Deduct................................. 13
- ii -
<PAGE>
4.6 Sale of Services................................ 13
4.7 Discounts....................................... 13
5.1 Advertising..................................... 14
5.2 Store-Wide Campaigns............................ 14
5.3 No Publicity.................................... 14
6.1 Fixtures and Equipment.......................... 14
6.2 Ownership and Removal of Fixtures and Equipment. 15
6.3 Preparation of Department Area.................. 15
6.4 Renovation...................................... 15
6.5 Liens........................................... 15
6.6 Relocation of Department........................ 16
6.7 Utilities, Services & Telephone................. 16
6.8 Delivery and Returns............................ 17
7.1 Third Party Liability........................... 17
7.2 Automobile and All Risks Liability Insurance.... 18
7.3 Deductibles..................................... 18
7.4 Notification to Licensor........................ 18
7.5 General Indemnity and Assurance................. 18
7.6 Risk of Loss or Damage.......................... 20
7.7 Exception....................................... 20
8.1 Termination of Agreement or Department.......... 20
8.2 Termination on Notice........................... 20
8.3 Termination on Disruption....................... 20
- iii -
<PAGE>
8.4 Termination of Agreement on Destruction of Store 21
8.5 Discontinuance by Licensor...................... 21
8.6 Consequences On Termination or Expiry........... 21
8.7 Customer Service................................ 22
8.8 Holdback........................................ 22
8.9 Trade-mark Matters.............................. 22
8.10 Partial Termination............................. 23
8.11 Customer Lists.................................. 23
8.12 Confidentiality................................. 23
8.13 Condition of Licence............................ 24
9.1 Assignments; Binding Effect..................... 25
9.2 Corporate Ownership............................. 25
9.3 Partnership..................................... 25
9.4 No Goodwill..................................... 25
9.5 Relationship.................................... 25
9.6 Sales Contract.................................. 26
9.7 Severability.................................... 26
9.8 Waiver.......................................... 26
9.9 Notices......................................... 26
9.10 Language........................................ 27
9.11 Entirety of Agreement and Proper Law............ 27
- iv -
<PAGE>
LICENCE AGREEMENT
-----------------
THIS AGREEMENT made and entered into as of the 1st day of July, 1993,
between the Bay Department Stores Division of HUDSON'S BAY COMPANY ("Licensor")
and ACC LONG DISTANCE INC. ("Licensee").
WHEREAS Licensee wishes to obtain a licence from Licensor and
Licensor has agreed to grant a licence to Licensee subject to the terms and
conditions of this Agreement.
NOW THEREFORE in consideration of the premises and mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE ONE
INTERPRETATION
1.1 Definitions
-----------
In this Agreement the following terms have the following meanings unless
otherwise provided:
"Activation Fee" means the one time fee incurred by a Customer f or activation
----------------
of the Long Distance Service, including without limitation, the auto dialer and
express access fee, and charged to the Customer by Licensee or Licensor.
"Agreement" means this agreement, including without limitation all appendices
-----------
and schedules, and all instruments supplemental hereto, or in amendment or
confirmation hereof.
"Appendix" means the appendix, attached to and forming part of this Agreement,
- ----------
as amended from time to time.
"Business" means the sale and/or lease of Services by Licensee in a Department
----------
or Off-Premises upon and subject to the terms of this Agreement.
"Completion Date" means the date on which all Services have been delivered and
-----------------
installed pursuant to the Sales Contract. The Completion Date is to be
determined by Licensee and the customer under the applicable Sales Contract.
If there is a dispute as to the Completion Date between the customer and
Licensee, Licensor shall work with Licensee to determine the Completion Date.
"Contractor" means any direct or indirect sub-contractor of Licensee.
- ------------
"Customer" means a customer of Licensor who requests the Long Distance Service
- ----------
in a store of Licensor or by a mail or telephone arising directly or indirectly
out of Promotion and Advertising Material or referrals or recommendations of
another customer of the Long Distance Service.
<PAGE>
- 2 -
"Department" means each department in each store, in which Licensee is licensed
- ------------
under section 2.1 to sell and\or lease Services.
"Department Area" means the actual floor area of the Department as determined
- -----------------
under section 2.1 and specified in the Appendix.
"Gross Sales" means the aggregate of the Activation Fee and the Toll Charges
- -------------
but excluding therefrom (i) direct provincial retail sales and goods and
services taxes in respect of such sales; and (ii) the amount of any cash or
credit refund in respect of any sale and\or lease of Services where an
adjustment is made, with the consent of Licensor, as a result of a customer
complaint.
"Licensor's Fee" has the meaning set forth in section 3.1(a) below.
- ----------------
"Long Distance Service" means Licensee's service of providing discounted
- -----------------------
residential long distance telecommunication services to customers of Licensor.
"Off Premises" means premises other than those of Licensor, including without
- --------------
limitation, premises of customers of Licensor.
"Period" has the meaning set forth in section 4.4(a) below.
- --------
"Permitted Use" means:
- ---------------
(i) use of the Trade-marks only in association with the sale and\or
lease of Services in each case by Licensee in the Stores, Off-
Premises, or at such other locations as may be permitted by this
Agreement, including in Promotion and Advertising Material;
(ii) incidental to the foregoing, use of the Trade-marks in connection
with the promotion and acceptance by Licensee of Licensor's
credit card; and
(iii) to the extent permitted by this Agreement the use of the Trade-
marks as part or all of the Trade Name of Licensee.
"Promotion and Advertising Material" means labels, tags, packaging, displays,
- ------------------------------------
signs for use in or in connection with a Department or the Business, printed
materials, letterhead, advertising brochures, signs on vehicles, uniforms,
pamphlets, catalogues, standard forms and other written or graphic material and
all television, radio, newspaper or other promotion or advertising copy and any
other promotional or advertising materials or items prepared by or on behalf of
Licensee in connection with the sale and\or lease of Services or carrying on the
Business under this Agreement.
<PAGE>
- 3 -
"Sales Contract" means the contract between Licensee and the customer for the
- ----------------
Long Distance Service substantially in the form set out in
Schedule A to this Agreement as amended from time to time.
"Services" means the Long Distance Service and any other services which
- ----------
Licensor in writing permits Licensee to offer for sale in a
Department or Off-Premises or which are provided by Licensee in
connection with or incidental to the sale and\or lease of the
wares. Services may be varied or terminated by Licensee in its
sole discretion from time to time and upon notification to
Licensor.
"Store" means a store of Licensor in which Licensee is licensed under section
- -------
2.1(a) to operate a Department.
"Taxes" means all taxes, rates, duties, levies, fees, and interest and
- -------
penalties in respect thereof, contributions, premiums,
assessments and other charges imposed, collected, assessed,
levied or charged, directly or indirectly, after the date hereof,
by any federal, provincial, regional, municipal, local, school,
or other governmental body, corporation, agency or commission,
but excluding income or profit taxes payable upon the net income
of the person liable for such taxes.
"Toll Charges" means all monthly charges, including without limitation any
- --------------
minimum monthly charge and any charge for the use of long
distance toll charges, incurred by a Customer for the Long
Distance Service and charged to the Customer by Licensee or
Licensor, whether or not such charges are incurred before or
after termination of this Agreement.
"Trade-marks" means "THE BAY", "the Bay", "LA BAIE", and "la Baie" in both
- -------------
block letter and stylized form.
"Trade Name" means the use of the Trade-marks as part or all of the names under
- ------------
which Licensee shall carry on its business at or in connection
with the Stores or Off-Premises.
1.2 Interpretation
--------------
In case of conflict between the provisions of the Appendix and any other
provision of this Agreement, the provisions of the Appendix shall
prevail.
1.3 Currency
--------
All dollar amounts referred to in this Agreement are in Canadian funds.
<PAGE>
- 4 -
ARTICLE TWO
LICENCE AND TRADEMARKS
2.1 Grant of Licence
----------------
Licensor grants to Licensee:
(a) a licence to operate a department in each store specified
in the Appendix, or otherwise agreed to in writing by Licensee and
Licensor, upon and subject to the terms and conditions of this
Agreement;
(b) a licence to sell and\or lease Services to customers of Licensor Off-
Premises under the name set out in section 2.2(a), upon and subject to the
terms and conditions of this Agreement;
(c) a limited, non-exclusive, non-transferable, non-assignable licence to
use the Trade-marks in Canada only in accordance with the Permitted Use and
subject to the terms and conditions of this Agreement.
2.2 Name
----
(a) Each Department and the Business are to be operated under the name Bay
Long Distance, or such other name as Licensee requests and Licensor approves in
writing prior to the adoption or use of such name. If Licensor allows the
Trade-marks to be used as part of the business name or style by which Licensee
identifies the Business to the public, and if any applicable law requires
registration of such business name or style in any jurisdiction in which
Licensee is licensed to use the Trade-marks, Licensee shall, at its expense,
register such business name or style pursuant to all applicable laws and, in
any such registration, where required, show Licensor as owner and licensor to
Licensee of the Trade-marks in association with the Services. Licensee shall
forthwith provide Licensor with a copy of such registration.
(b) The name set forth in this section 2.2 shall be used only in connection
with the Department or the Business and shall not otherwise be used by Licensee
in connection with its business in Canada of elsewhere.
2.3 Rights of Ownership
-------------------
Licensee acknowledges that the Trade-marks are the sole and exclusive
property of Licensor. Nothing in this Agreement or otherwise shall give
Licensee any right, title or interest in or to the Trade-marks by themselves or
in combination with any other words, or any
<PAGE>
- 5 -
right to use the Trade-marks by themselves or in combination with any other
words, except in accordance with this Agreement. Any and all use, and any
goodwill generated through any use of the Trade-marks, whether alone or in
combination with other words, by Licensee shall enure to the benefit of Licensor
exclusively, and Licensee shall not obtain any separate property, right or
interest in the Trade-marks by themselves or in combination with any other
words, or any such goodwill, by reason of the licence granted under this
Agreement.
2.4 Becoming Registered User
------------------------
If required by applicable law, Licensee agrees to execute and
deliver to Licensor an application for registration as a registered user of the
Trade-marks.
Licensee further agrees, upon request of Licensor, to promptly execute and
deliver such documents and further assurances in form and substance satisfactory
to Licensor and otherwise to cooperate in taking such reasonable action as may
be deemed necessary by Licensor to protect Licensor's interest in the Trade-
marks, provided that Licensor shall pay all Licensee's costs reasonably
incurred.
2.5 No Objection
------------
Licensee agrees that it will not and will not assist any person to raise
directly or indirectly any objection or otherwise make any challenge, on any
grounds whatsoever to, the validity or distinctiveness of the Trade-marks, any
registrations under the Trade-marks Act (Canada) or otherwise of the Trade-
marks, the property of Licensor in the Trade-marks, the registration of any
other persons as licensees or registered users of the Trade-marks or any use by
Licensor or its licensees of the Trade-marks.
2.6 Standards
---------
Licensee agrees that it will display and use the Trade-marks only in
connection with the Permitted Use and only in association with the Services
conforming in nature and quality to standards set or approved pursuant to this
Agreement. Licensor shall use its best efforts to provide convenient advance
approval procedures in respect of the services which Licensee requests to
included as Services pursuant to this Agreement. Licensor may at any time,
during regular business hours, conduct random or other inspections of, or
request and receive samples for inspection of the Services in association with
which the Trade-marks are being or are to be used to ensure compliance with its
standards. Any Services not conforming to such standards shall be withheld or
immediately withdrawn from public sale or performance.
<PAGE>
- 6 -
2.7 Standards: Trade-marks
-----------------------
All display, use and advertising of the Trade-marks by Licensee shall be
subject to the prior written approval of Licensor and shall conform exactly
with the provisions of this Agreement. Licensor shall have the right to
determine in its sole discretion the nature of the Promotion and Advertising
Material upon which the Trade-marks can be displayed. Licensor shall use its
best efforts to provide convenient and expeditious advance approval procedures.
Licensor may at any time and from time to time, during regular business hours,
conduct random or other inspections of, or request and receive as samples for
inspection of, and Licensee shall provide to Licensor for approval before use
samples of, any and all Promotion and Advertising Material containing any
representation, display or use of Trade-marks, whether alone or in combination
with other words, to ensure compliance with Licensor's approval standards and
with the provisions of this Agreement. Any such Promotion and Advertising
Material not conforming to Licensor's approval or not in compliance with the
provisions of this Agreement shall not be used by the Licensee or if in use
shall be immediately withdrawn from exposure to the public.
Licensee shall accompany all display, advertising or use of any of the
Trade-marks by a notice (in a form to be prescribed by Licensor from time to
time) identifying Licensor as the owner of the Trade-marks and identifying
Licensee as licensee. Initially the prescribed form in English shall be: "The
Bay is a registered trade-mark of Hudson's Bay Company used under license by
ACC Long Distance Inc."
2.8 Use of Trade-Marks
------------------
Licensee shall limit its use of the Trade-marks to the Permitted Use and
shall not use, display or advertise the Trade-marks in any other manner or as
part of a corporate name. Licensee will not use any other mark, name or style,
including the word "Bay" or "la Baie", which is or could be confusing with any
of the Trade-marks, or which might impair or lessen the distinctiveness of the
Trade-marks or which might depreciate the goodwill of Licensor in the Trade-
marks.
2.9 Infringement: Passing-Off
-------------------------
Licensee shall notify Licensor promptly of any conflicting use or any act
of infringement, passing-off or unfair competition involving the Trade-marks or
any marks which may be confusing therewith which comes to its attention.
Licensor shall have the sole right to engage in, institute, defend and
settle litigation or proceedings involving any conflicting use, infringement,
passing-off or unfair competition with respect to the Trade-marks, and Licensee
waives any right of action it may have under S.50(3) of the Trade-marks Act.
Licensee agrees to cooperate with Licensor in any way requested by Licensor in
the prosecution or defence of any such litigation or proceeding.
<PAGE>
- 7 -
Licensor shall reimburse Licensee for any expenses reasonably incurred by
Licensee in connection with such cooperation.
2.10 Disclaimer
----------
Licensee accepts the licence granted by this Agreement on the following
conditions:
(a) Licensor makes no covenant, representation or warranty as to the
distinctiveness, validity or registrability of the Trade-marks or any of them,
generally or in connection with the Permitted Use, or that the Permitted Use of
the Trade-marks will not infringe the rights of any other person; and
(b) Licensor disclaims and will not be responsible for any liability,
statutory or otherwise, to which Licensee may be subjected by reason of its use
of the Trade-marks.
Notwithstanding the foregoing, Licensor represents to Licensee that
Licensor is not currently aware of any third person whose rights might be
infringed by a Permitted Use of the Trade-marks.
ARTICLE THREE
FEE, TERM OPERATION
3.1 Licence Fee
-----------
In consideration of the licence herein granted to Licensee to conduct and
operate under the terms, provisions and conditions of this Agreement, Licensee,
in addition to its other obligations under this Agreement, shall pay to Licensor
and Licensor shall be entitled to receive from Licensee, as a license fee the
aggregate of;
(a) 27% of the Gross Sales of Activation Fee paid by a Customer prior to
commencing to receive services in accordance with a Sales Contract.
(b) 7% of the Gross Sales of Long Distance Toll Charges for per-minute voice
calls to Canadian and U.S. destinations charged by Licensee to each
Customer under a Sales Contract for the twelve month period after each such
Customer's applicable activation date;
(c) 5% of the Gross Sales of Long Distance Toll Charges for per-minute voice
calls to Canadian and U.S. destinations charged by Licensee to each
customer under a Sales Contract thereafter; and
<PAGE>
- 8 -
(d) 1% of the Gross Sales of Long Distance Toll Charges for per-minute voice
calls to destinations other than Canada and the U.S. charged by Licensee to
each Customer under a Sales Contract.
3.2 Term
----
This Agreement shall commence on September 13, 1993 and unless terminated
earlier in accordance with its terms shall terminate on September 30, 1995.
Licensor shall give Licensee written notice of its intention to terminate this
Agreement at least 60 days prior to the termination date. If no such notice
is given, this Agreement shall remain in effect but shall be terminable by
either party at any time on 60 days written notice to the other party.
3.3 Operation of Business
---------------------
Licensee shall diligently and continuously conduct the operation of the
Department and the Business to the satisfaction of Licensor and in accordance
with Licensor's policy of "customer satisfaction" and other policies from time
to time in effect and disclosed to or known by Licensee and in accordance with
the operating practices of a first class department store. All Services (other
than the Services) shall be approved by Licensor before being offered for sale
and\or lease in a Department or the Business. Licensor shall use its best
efforts to provide convenient and expeditious advance approval procedures in
respect of the services which Licensee requests to have included as Services
pursuant to this Agreement.
In the event of a dispute with or complaint from any customer which
Licensee is unable to settle in accordance with Licensor's applicable policy
such dispute or complaint shall be referred to Licensee's Regional Manager and
Licensor's Regional
Manager for the region in which the Department is located, or the Services are
sold Off-Premises. If the Regional Managers are unable to reach a mutually
acceptable resolution, the dispute shall be referred to Licensor's General
Manager, Licensed Departments and After Sales Service and the Vice-President,
Sales of ACC Long Distance, and their decision shall be final and binding on
Licensee.
3.4 Warranties
----------
Licensee shall:
(i) endeavour at all times to provide uninterrupted Long Distance
telephone call service to each Customer. If, however, any call
is prevented, delayed, degraded, interrupted or discontinued
for any reason any Licensee liability to any customer shall not
exceed the amount paid by that customer to Licensee.
<PAGE>
- 9 -
This section 3.4 shall survive termination of this Agreement for as long as the
Customer receives billing for the Toll Charges by Licensee.
3.5 Compliance With Legislation
---------------------------
Licensee shall, operate the Department and the Business in compliance
with all applicable municipal, provincial and federal legislation including,
without limitation, workers' compensation, health and safety and building
construction legislation. Licensee represents and warrants to Licensor that it
has obtained all necessary licenses, permits and approvals for the operation of
the Business and that all such licenses, permits and approvals are in good
standing.
3.6 Workers' Compensation Board
---------------------------
Licensee shall at all times remain and shall ensure that its
Contractors remain in good standing with the Workers' Compensation Board or
similar authorities in the various provinces and territories in Canada. From
time to time, Licensee shall furnish to Licensor evidence of such good
standing, including without limitation, a valid certificate of clearance or
similar confirmation. Licensee shall indemnify and save harmless Licensor from
any and all liabilities resulting from Licensee's failure or the failure of its
Contractors to remain in good standing with the Workers' Compensation Board or
similar authorities in the various provinces and territories in Canada.
3. 7 Taxes
-----
Licensee shall pay to Licensor the amount determined by Licensor in
its sole discretion to be the amount of any Taxes
(a) payable directly or indirectly by Licensor, or
(b) payable by any owner or lessor of a store premises and
recoverable by such owner or lessor from Licensor,
to the extent that such Taxes are determined by Licensor in its sole discretion
to be
(c) attributable to a Department or Department Area in any
Store or the Business, and
(d) not otherwise actually recovered by or refunded to
Licensor.
<PAGE>
- 10 -
The amount payable by Licensee hereunder shall be determined from time to time
by Licensor in its sole discretion and such determination shall be conclusive
and binding on Licensee.
3.8 Taxes Indemnity
---------------
Licensee shall indemnify Licensor in respect of all Taxes including
any interest or penalties thereon, which may be charged or levied upon Licensor
by reason of anything performed under this Agreement, excluding, however, any
Taxes imposed on Licensor's net income. All payments made by Licensee under
this Agreement shall be made without withholding or deduction on account of any
Taxes unless such deduction or withholding is required by any government
authority. If Licensee is so required to deduct or withhold with respect to any
payment, such payment shall be increased as may be necessary so that, after all
such deductions or withholdings and increases (including deductions or
withholdings required in respect of additional amounts payable hereunder),
Licensor shall receive such amounts as it would have received had no such Taxes
been required to be withheld or deducted.
3.9 Inspection
----------
Licensor, its agents and employees have the right a t any time,
during regular business hours, for whatever reason, to inspect all Services
provided by Licensee Off-Premises or in a Department. If an inspection is made
as a result of a customer complaint, Licensee shall immediately repay or
reimburse Licensor
for all reasonable expenses incurred in connection with such inspection. If an
inspection is made for reasons other than a customer complaint, Licensor shall
pay all expenses incurred in connection with such inspection.
3.10 Hours
-----
Licensee shall operate each Department during the business hours of
the Store in which the Department is located. Licensee shall operate the
Business Off-Premises at the Licensee's address set out in section 9.9 during
the hours of 8:30 a.m. to 6:00 p.m. on Monday to Saturday or as may be agreed to
in writing by Licensor and Licensee.
3.11 Employees of Licensee
---------------------
(a) Licensee is and shall continue to be an independent contractor and
shall have sole authority and full control over its business operations and its
employees including, without limitation, wages, hours, working conditions,
hiring, discharge, promotion, assignment, discipline, transfer and lay-off of
such employees.
(b) Licensee, as an independent contractor, shall be solely responsible
for and shall fulfil all of its contractual, statutory and common law
obligations to its employees. Licensee
<PAGE>
- 11 -
shall be solely responsible for all acts and omissions of its employees that
arise out of the employment relationship with Licensee and shall cause its
employees to observe the rules, policies and regulations prescribed by Licensor
with respect to the Store from time to time in effect and which are disclosed in
writing to the Licensee. Licensee covenants and agrees that while working in
connection with this Agreement its employees shall comply with all laws, rules
and regulations applicable to Licensee.
(c) During the performance of any of the Services, Licensee's employees
shall wear in a visible manner the form of identification badge designated by
Licensor from time to time.
3.12 No Contractual Obligations
--------------------------
Licensee shall not make any purchases or incur any obligations or
expenses of any kind in the name of Licensor and shall make all purchases and
incur all such obligations and expenses in Licensee's own name. Neither the
name set forth in section 2.2(a) nor any of the Trade-marks shall be set out in
any purchase orders or other purchase documentation used by Licensee for the
purchase of Services.
ARTICLE FOUR
SALES AND REPORTING
4.1 Cash and Credit Sales
---------------------
(a) All sales of Services shall be for cash or cheque. In addition, a
customer may purchase Services on credit:
(i) by charging an account then currently maintained by the
customer directly with Licensor through Licensor's own
authorized credit card; or
(ii) with some other valid credit card accepted by Licensor in
its Stores.
(b) Credit card sales and sales paid by cheque in the Department
shall be made in accordance with the practices and procedures from time to time
prescribed by Licensor and communicated in writing to Licensee. Credit card
sales and sales paid by cheque in a Department shall identify Licensor as the
vendor and shall be subject to Licensor's pre-approval of credit procedures.
(c) Credit card sales and sales paid by cheque shall be without recourse
to Licensee in respect of delinquent customer accounts or the cost of their
collection and shall be the responsibility of Licensor if Licensee has followed
the credit and cheque authorization practices and procedures of Licensor which
have been communicated in writing to Licensee. If Licensee
<PAGE>
- 12 -
does not follow such credit and cheque authorization practices and procedures,
Licensee shall be responsible for collecting from the customer or the credit
card issuer, as the case may be. If any customer is delinquent in his/her
account, owing to any act or omission of Licensee which constitutes a
justifiable reason, as determined by Licensor in its sole discretion, Licensor
shall have recourse against Licensee.
4.2 Audit of Records
----------------
(a) Licensee shall keep in each Department or at the address
specified in the Appendix, complete and accurate records from which
Gross Sales may be readily and accurately determined. Licensor shall have
access to such records during regular business hours for the purpose of
examination or audit. Licensee shall provide Licensor with any additional
information relating to Gross Sales as Licensor may reasonably require. All
records and related information shall be retained by Licensee for at least seven
years from the expiration of the accounting period to which they relate.
(b) Licensor may at any time during the year following the accounting
period in question, have the records audited by a national firm of chartered
accountants designated by Licensor, and communicated to Licensee and the
findings of such firm shall be conclusive and binding on both Licensor and
Licensee. If the amount of Gross Sales in any period covered by such audit is
found to be one and one-half percent (1.5%) or more greater than the Gross
Sales shown in the statements for such period delivered by Licensee, the costs
and expenses of the audit shall be paid by Licensee, and Licensee shall
forthwith pay to Licensor any deficiency in the Licensor's Fee payable hereunder
relating to such period.
4.3 Daily Report and Settlement
---------------------------
(a) Licensee shall deliver daily to Licensor a report, in the form
prescribed from time to time by Licensor, of all sales of Services for such day,
including sales pursuant to mail and telephone orders made in connection with
each Department and the Business, but excluding Long Distance telephone
services.
(b) Licensee shall at the same time the report is delivered pay and remit
to Licensor, at a Store in each region to be designated from time to time by
Licensor, the gross proceeds of such sales in the form of cash, cheque or credit
card sales.
4.4 Settlement by Licensor
----------------------
(a) Licensor shall during the term of this Agreement pay to
Licensee, within 15 days after the end of each regular accounting
period of Licensor ("Period") the amount that is equal to the
<PAGE>
- 13 -
difference, if any, between:
(i) Gross Sales for the Period; and
(ii) the amount that is the sum of , (A) Licensor's Fee for the
Period; (B) the amount of any cash or credit refund made to a
customer by Licensor; and (C) all other amounts owing by
Licensee to Licensor hereunder, such amounts to be verified by
the presentation by Licensor of appropriate vouchers.
(b) All cash or credit refunds to customers shall be processed through
and paid by Licensor.
4.5 Right to Deduct
---------------
If Licensor is held responsible by a Provincial Workers Compensation
authority for employees of Licensee or a Contractor
of Licensee because Licensee or such Contractor has failed to fulfil its legal
obligations under the applicable Provincial Workers' Compensation laws or
regulations, any payments or costs associated with the default of Licensee or
any of its Contractors will be reimbursed to Licensor by Licensee and Licensor
is hereby entitled to withhold sufficient amounts to satisfy demands made by
the Provincial Workers Compensation authority from the amount otherwise payable
to Licensee pursuant to section 4.4 above.
4.6 Sale of Services
----------------
Licensee shall decide upon the selling and/or leasing price for
Services offered and sold in the Department and in the Business. Licensee shall
use Licensor's wrappings, boxes, bags, paper, price tags, display signs,
specialty supplies, invoices, purchase forms, business cards, receipts and
other sales stationery and paraphernalia. Licensor shall sell to Licensee any
such sales paraphernalia at Licensor's cost.
Licensee shall comply with all applicable municipal, provincial and
federal legislation pertaining to use of its corporate name. If the applicable
legislation requires Licensee's corporate name to appear on its contracts, the
name shall be indicated discretely.
4.7 Discounts
---------
Licensee shall, at its own expense, allow a point of sale
discount on Services as detailed in the Appendix. Licensee shall
also, at its own expense, allow to customers in the Department any
special promotional discounts.
<PAGE>
- 14 -
ARTICLE FIVE
PROMOTION
5.1 Advertising
-----------
Licensee shall use all reasonable efforts, including adequate advertising and
promotion, to sell and\or lease the Services to the best advantage of the
parties. All Promotion and Advertising Material shall comply with all
applicable legislation, shall be subject to the prior approval of Licensor (who
shall act reasonably) and shall be paid for by Licensee. Licensor shall use
its best efforts to provide convenient and expeditious advance approval
procedures. Notwithstanding any prior approval by Licensor any claims, actions,
damages or other liability or expense which result, for any reason whatsoever,
from the advertising, publicity or other promotional activities of Licensee
shall be the responsibility of Licensee.
5.2 Store-Wide Campaigns
--------------------
Licensor may from time to time conduct store-wide or national advertising
programs and Licensee shall, at Licensor's request, but at Licensee's expense,
participate in up to six of such store-wide or national advertising programs.
Details of each individual promotion to be reviewed between Licensee and
Licensor.
5.3 No Publicity
------------
Except where required by law, neither Licensee or Licensor will issue any
publicity or press release regarding any Department or the Business or its
contractual relations with Licensor under this Agreement and will refrain from
making any reference to this Agreement or to Licensor in the solicitation of
business without obtaining Licensor's prior written consent to such action.
Licensor shall use its best efforts to provide convenient and expeditious
advance approval procedures. Neither Licensee or Licensor shall state in any
Promotional and Advertising Material that it is going out of business or in any
other manner make public announcement of the expiration or earlier termination
of this Agreement.
ARTICLE SIX
DEPARTMENT AREA
6.1 Fixtures and Equipment
----------------------
Licensee shall at its sole cost furnish and install all free standing
counters, display cases and other selling fixtures and equipment required for
the proper operation of the Department. Licensee shall also provide all
facilities, vehicles, tools and equipment as may be
<PAGE>
- 15 -
necessary or desirable for the operation of the Business. Licensee shall at all
times maintain its fixtures and equipment, facilities, vehicles and tools in
good operating condition and repair, reasonable wear and tear, damage by fire,
smoke and\or water, and acts of God excepted.
6.2 Ownership and Removal of Fixtures and Equipment
-----------------------------------------------
Licensee's fixtures and equipment shall remain the property of Licensee
except for those fixtures not capable of removal without damage to the Store
which shall become the property of Licensor upon termination of this Agreement
at no cost to Licensor. Any damage to the Store or other property of Licensor
resulting from the removal of Licensee's fixtures or equipment shall be repaired
at the expense of Licensee. No fixtures or equipment shall be removed by
Licensee until all of its indebtedness to Licensor, arising under this Agreement
or otherwise, has been paid or settled to the satisfaction of Licensor.
6.3 Preparation of Department Area
------------------------------
Licensee shall at its sole cost perform all work specified in the Appendix.
All work shall be in accordance with plans and specifications previously
approved in writing by Licensor. Licensor shall use its best efforts to provide
convenient and expeditious advance approval procedures.
6.4 Renovation
----------
Licensee may, at its own expense, at any time and from time to time, with the
prior written approval of Licensor renovate the Department Area or replace or
repair any fixtures or equipment. All work performed shall be in accordance
with plans and specifications previously approved in writing by Licensor.
Licensor shall use its best efforts to provide convenient and expeditious
advance approval procedures. If Licensor renovates the Store, Licensee shall at
its own expense, at the request of Licensor, renovate the Department Area in
accordance with plans and specifications approved in writing by Licensor.
Licensor shall use its best efforts to advise Licensee of any planned
renovations for a Store prior to Licensee setting a Department in that Store.
6.5 Liens
-----
If any lien is registered against the Department Area relating to services or
materials supplied to Licensee or any of Licensee's employees, agents or
Contractors, Licensee shall notify Licensor of such lien within twenty-four (24)
hours of receipt of notice of filing. Licensee shall discharge such lien by
payment of the amount due the lien claimant within ten (10) days of receipt of
notice of filing. Alternatively, Licensee may in good faith contest such lien,
<PAGE>
- 16 -
provided that within such ten (10) day period, Licensee provides Licensor with a
surety bond acceptable to Licensor in an amount at least equal to one and one-
half (1 1/2) times the amount claimed as a lien. Licensor may, in its sole
discretion, discharge the lien by paying the amount claimed and the amount so
paid by Licensor and all costs and expenses incurred by Licensor, including
reasonable legal fees, shall be immediately due and payable by Licensee to
Licensor.
6.6 Relocation of Department
------------------------
Licensor shall have the right from time to time, upon not less than 60 days
prior written notice to Licensee, to relocate any Department to other suitable
space in the Store substantially equivalent in area and quality of locations but
in any event not less than the Department Area specified in the Appendix. If
Licensor relocates the Department, it shall pay the costs of moving Licensee's
fixtures, and equipment to the new Department Area and preparing and decorating
the new Department Area in a manner substantially equivalent to the original
Department Area. Licensor shall pay to repair all fixtures, equipment damaged
by such move. Licensor shall not be liable for any other costs, expenses or
losses or damages incurred by Licensee in connection with the relocation
including without limitation, loss of profits. If Licensee wishes to relocate a
Department to another space in the Store and if such relocation is agreed to by
Licensor, Licensee shall carry out such relocation at its expense and in
accordance with the plans and time schedule previously approved in writing by
Licensor. Licensor shall use its best efforts to provide convenient and
expeditious advance approval procedures.
6.7 Utilities, Services & Telephone
-------------------------------
a) Licensor shall be responsible for the cost of water,light, power,
heat, air conditioning and janitor services for the Department as usually
provided to other parts of the Store.
b) Licensor shall during the term of this Agreement provide Licensee
with the use of a telephone listing for each Store under the name specified in
section 2.2(a). Licensee shall be responsible for all charges relating to such
listing including all charges relating to installation, monthly charges and long
distance.
c) Licensee acknowledges that Licenser has an interest in all telephone
numbers of the Department and the Business and agrees to execute and deliver to
Licensor the agreement in the form of Schedule B attached to this Agreement to
protect such interest.
<PAGE>
- 17 -
6.8 Delivery and Returns
--------------------
Licensee shall be responsible for arranging and for the cost of transportation
and delivery and, where applicable, return of wares and other property of
Licensee to and from each Department and Off-Premises. All wares, if any,
including without limitation wares to be used for display purposes in the
Department Area, coming into a Store shall be processed through the Store's
receiving and return facilities. Licensee shall have the right to attend at
Licensor's receiving and return facilities and accompany all wares from such
facilities to the Department Area. Licensor shall not be liable for any loss or
damage whatsoever to the wares or other property of Licensee resulting from the
use of the Store' s receiving and return facilities or otherwise.
ARTICLE SEVEN
INSURANCE AND INDEMNITY
7.1 Third Party Liability
---------------------
Licensee shall obtain and maintain at its expense during the term of this
Agreement, a policy of insurance from an insurer or insurers acceptable to
Licensor. The policy of insurance shall insure Licensee and Licensor against
all claims, demands, actions or proceedings for sums of money, damages, costs,
penalties and losses (hereinafter, "Claims") and all liability which may be
imposed by law for loss of life, personal injury or damage to property arising
from or in any way connected with the operations of Licensee and including but
not limited to Claims:
(i) arising from or in connection with the sale of or the performance of
any Services by Licensee whether in the Department, Off Premises or
elsewhere in connection with the Business;
(ii) relating to or asserting a defect or omission in connection with the
sale of the Services by Licensee to any purchaser or user thereof;
and
(iii) relating to any act, error, omission or default, whether wilful or
negligent, of Licensee, Licensor or any of their respective
employees, Contractors, agents, visitors or customers
(collectively the "Insurable Matters").
The policy of insurance shall provide coverage of at least two million
dollars ($2,000,000) for each separate occurrence and shall contain cross
liability and severability of interest clauses.
<PAGE>
- 18 -
Licensee shall also obtain and maintain during the term of this
Agreement, at its own expense "all risks" insurance coverage (including flood
and earthquake) on a full replacement cost basis on its wares, fixtures and
equipment in the Store.
7.2 Automobile and All Risks Liability Insurance
--------------------------------------------
Licensee shall obtain from an insurer or insurers acceptable to
Licensor and maintain during the term of this Agreement at its own expense, a
policy of insurance covering all vehicles owned, leased, rented or otherwise
used by Licensee in the Business. Licensee shall also ensure that its employees
and Contractors comply with the obligations set forth in this section 7.1 with
respect to any vehicles owned, leased, rented or otherwise used by such
employees or Contractors, in connection with the Business.
7.3 Deductibles
-----------
Licensee is responsible for all deductibles under all policies of
insurance.
7.4 Notification to Licensor
------------------------
Licensee and Licensor shall both be named insureds for all policies of
insurance referred to in this Article Seven. Licensee shall furnish to Licensor
within ten (10) days after the execution of this Agreement and upon request
Certificates of Insurance for all policies of insurance required by this Article
Seven and shall not make any change to such insurance without the prior written
consent of Licensor. Certificates of Insurance shall also be furnished to
Licensor within ten (10) days after renewal of any of the insurance policies
required by this Article Seven or at any time upon request.
Licensee shall immediately notify Licensor of any changes to or
cancellation, termination or expiry of any such insurance policies required by
this Article Seven. Each insurance policy required under this Article Seven
shall bear an endorsement or condition by the insurer that the insurance shall
be changed or cancelled only upon thirty (30) days prior written notice by the
insurer to Licensor.
7.5 General Indemnity and Assurance
-------------------------------
(a) Licensee shall indemnify Licensor against and save it harmless from any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, claims, expenses or disbursements of any nature or kind
whatsoever including all legal fees, disbursements and other expenses relating
thereto, which arise from, are connected with or in any way relate to:
<PAGE>
- 19 -
(i) the acts or omission , s of Licensee whether or not in
compliance with this Agreement;
(ii) Insurable Matters;
(iii) manufacturers', suppliers' and Contractors' warranties, if
any, in respect of the Services;
(iv) the Sales Contract;
(v) Licensor's satisfaction of customer complaints in accordance
with the provisions of this Agreement; and
(vi) the enforcement of this Agreement or any Sales Contract by
Licensor.
For example, but without limitation, Licensee shall reimburse Licensor for all
costs, fines, penalties and damages, including out-of-pocket disbursements and
legal expenses incurred as a result of charges brought against Licensor for its
or Licensee's alleged failure to comply with all applicable legislation in
respect of the operation of each Department and the Business, or as a result of
claims made by customers of the Department and the Business in respect of the
goods or services ordered or purchased by such customers in the Department or
Off-Premises. It is the intention of both Licensee and Licensor that Licensee
bear entirely and protect Licensor entirely from all risk associated with
activities of Licensee in, through or in connection with Licensor.
(b) Licensee shall not be permitted to sue any customer of the Department
or the Business or defend or settle any matter, either directly or indirectly
related to a customer of a Department or the Business or both unless prior
written consent is granted by Licensor, such consent which may, notwithstanding
any statutory provision to the contrary, be unreasonably withheld.
(c) Licensor shall have the right to defend, compromise or settle any
matter that is subject to the foregoing indemnity (the "Indemnified Claim")
through its own legal counsel and Licensee shall immediately repay or reimburse
Licensor for all amounts paid in respect of such Indemnified Claim and all
expenses including all legal expenses incurred by Licensor in respect of such
Indemnified Claim.
If Licensor assumes carriage of the defence of any Indemnified Claim,
Licensor shall keep Licensee reasonably informed as to the progress of such
Indemnified Claim and shall advise Licensee prior to the settlement of any such
Indemnified Claim.
(d) The provisions set out in this section 7.5 shall survive indefinitely
the expiry or termination of this Agreement generally or in respect of any
Department.
<PAGE>
- 20 -
7.6 Risk of Loss or Damage
----------------------
Except as otherwise provided in this Agreement, including without
limitation section 7.5, each of the parties hereto assumes all risk of loss, or
destruction of or damage to its property in the Department or off-Premises and
arising from or in connection with the Business for any reason whatsoever,
excepting the wilful act, or omission or neglect of the other party or its
agents, employees or Contractors. This section 7.6 shall survive indefinitely
the expiry or termination of this Agreement generally or in respect of any
Department.
7.7 Exception
---------
Notwithstanding Section 7.5 of this Agreement, License shall not be
required to indemnify Licensor for expenses incurred by Licensor in approving
additional services pursuant to Section 3.3 of this Agreement.
ARTICLE EIGHT
TERMINATION
8.1 Termination of Agreement or Department
--------------------------------------
Licensor may at its option terminate this Agreement generally or in respect of
any Department and the Business immediately by written notice to Licensee (i) if
Licensee makes an assignment for the benefit of its creditors, is adjudged
bankrupt or becomes insolvent, if a receiver is appointed of Licensee or of a
substantial part of its property, if its property or a substantial part thereof
is seized in any process of execution or attachment, (ii) if Licensee breaches
sections 6.5, 7.1, 8.13, 9.1, 9.2 or 9.3; (iii) if Licensee fails to observe any
of the terms or conditions of this Agreement generally or in respect of any
Department or the Business and such failure continues for, or is repeated during
the ten (10) business days after written notice of such failure is given by
Licensor to Licensee.
8.2 Termination on Notice
---------------------
a) Notwithstanding section 3.2 of this Agreement, either party may, at
its option, from time to time, terminate this Agreement without cause in respect
of any one Department at any time on 90 days' prior written notice to Licensee.
8.3 Termination on Disruption
-------------------------
If Licensee's operation of its Business, whether in the Store or elsewhere,
for any reason whatsoever, including, without limitation, consumer protests or
other picketing or any
<PAGE>
- 21 -
strike or lockout, causes in the opinion of Licensor a disruption of the
business of the Store, Licensor will advise Licensee, and Licensee will take
immediate action to stop the disruption or Licensor may immediately and without
notice terminate this Agreement in respect of such Store. Licensee shall
thereupon cease its operations in and vacate the Store.
8.4 Termination of Agreement on Destruction of Store
------------------------------------------------
If any Store is destroyed or so substantially damaged as to be, in the
reasonable opinion of Licensor, inoperable and Licensor decides not to rebuild
or repair such Store, it shall notify Licensee of such decision as soon as
practicable and the licence for the Department in such Store shall terminate on
the third day after the giving of such notice. If notice is not given by
Licensor, the Agreement shall continue in effect with respect to such
Department.
8.5 Discontinuance by Licensor
--------------------------
In the event that Licensor determines or is required:
(a) to discontinue its operation of a Store for any reason whatsoever, or
(b) to transfer the operation of a Store to a different division of Licensor
or to an affiliate (as defined in the Canada Business Corporations Act) of
Licensor,
Licensor may, at its option, notwithstanding any other provision of this
Agreement terminate this Agreement in respect of such Store on 30 days' prior
written notice to Licensee.
8.6 Consequences On Termination or Expiry
-------------------------------------
On termination or expiry of this Agreement in respect of
any one or more Departments, Licensee shall surrender to Licensor all space in
its possession or control relating to such Departments, cease to use the
telephone numbers of the Department or the Business, in the case where there are
no remaining Department(s) return all Advertising and Promotion Material showing
or displaying any of the Trade-marks (except where at least one other Department
continues in operation, in which case, the Promotion and Advertising Material
may be used in another Department) and subject to section 6.2 remove all of its
property in such Departments from the Store within 10 days from the date of
termination or expiry. Except as otherwise provided in this Agreement, neither
party shall be liable to the other for any costs, claims, damages or expenses
whatsoever (including without limitation loss of future profits, revenue, cash
flow or, generally, goodwill) arising from termination or expiry of this
Agreement in accordance with its terms in respect of any one or more
Departments. Notwithstanding such termination or expiry, the provisions of this
Agreement requiring, payments to be made, including without limitation, costs or
expenses to be assumed or indemnities to be given, the
<PAGE>
- 22 -
provisions regarding confidentiality and handling of customer lists and other
information, and section 8.7 regarding customer service shall survive
indefinitely the termination or expiry of this Agreement in respect of any one
or more Departments.
8.7 Customer Service
----------------
On termination or expiry of this Agreement in respect of any one or more
Departments or any aspect of the Business, Licensee shall at its expense take
all steps and do all things, as considered reasonable by Licensor, in a timely
fashion to ensure that all pending, in process or outstanding customer
transactions are properly completed to the full satisfaction of the customer.
Licensee shall ensure that the customer is not (without the consent of Licensor)
made aware of such termination or expiry and that the customer is referred to
Licensor and not to Licensee or some other person, firm, corporation or other
business entity. For greater certainty, Licensee shall complete all Work in
Progress, subject to any written instructions from Licensor to the contrary.
Furthermore, Licensee shall not enter into any Sales Contracts after termination
date of this Agreement.
8.8 Holdback
--------
Notwithstanding section 4.4 of the Agreement, on termination or expiry of this
Agreement, Licensor shall be entitled to retain any amount owing by it to
Licensee for a period of 120 days after such termination or expiry and to deduct
from such amount any amount to be paid or owing to Licensor by Licensee.
8.9 Trade-mark Matters
------------------
If the license granted by this Agreement is terminated, then:
(a) Licensee shall immediately take all steps necessary to change its legal
name, business style, Trade Name or identification (including that, if any,
included in the Permitted Use) to names wholly unrelated to the Trade-marks and
provide Licensor with a copy of all documents effecting such change;
(b) Licensee shall immediately cease to carry on business under, to use,
display, advertise or to represent in any way that it has any interest in, the
Trade-marks, or any combination thereof with any other words;
(c) Licensee shall not thereafter make any use of the Trade Name, Trade-marks,
or any combination thereof with any other words, or any trade-mark or trade name
or trading style including any of the Trade-marks or confusing therewith;
<PAGE>
- 23 -
(d) As required by Licensor, Licensee shall return to Licensor or cause to be
destroyed, cancelled, obliterated or taken down all Promotion and Advertising
Material containing any representation or use of the Trade-marks or any
combination thereof with any other words;
(e) As required by Licensor, Licensee shall dispose of all wares bearing the
Trade-marks or otherwise modify the wares to remove such Trade-marks from the
wares and shall discontinue the performance or sale of all Services and
advertising of all Services in association with the Trade-marks;
(f) Licensee shall remove all representations, depictions or displays of the
Trade-marks or any of them, whether alone or in combination with any other
words, from all vehicles, uniforms, identification badges and equipment, and
from all other locations in which the Trade-marks were displayed or advertised;
(g) Licensee shall take all steps necessary to remove, amend or cancel any
public registration showing Licensee carrying on business under a name or style
including any of the Trade-marks or any combination thereof with any other words
and shall provide Licensor with a copy of the cancellation document.
8.10 Partial Termination
-------------------
If the licence granted by this Agreement is terminated for fewer than all of
the Departments, the provisions of section 8.9 shall apply only in respect of
those Departments in respect of which the licence has been terminated.
8.11 Customer Lists
--------------
All lists of customers of any Department, Store or Business, including without
limitation, lists developed by Licensee, its employees, agents, or Contractors
and any other information relating to such customers are the sole and exclusive
property of Licensor. Licensee agrees to provide to Licensor forthwith on
request all copies of all such customer lists and other information relating to
such customers whether in hard copy or machine readable form. Licensee shall
keep such customer lists and other customer information separately from any
customer lists or other information that Licensee may maintain that does not
relate to this Agreement.
8.12 Confidentiality
---------------
Licensee shall not, either directly or indirectly, make known or disclose to
any person, firm, corporation or other entity, or use or reproduce the customer
lists or other customer information of customers of any Department, Store or the
Business for purposes other than the sale and\or lease of Services in the
Department, Store or the Business. For greater certainty,
<PAGE>
- 24 -
Licensee shall not use such lists or other information to solicit customers
other than for the Department, Store or the Business. Licensee agrees to
request its employees, servants, agents and Contractors to execute such written
confidentiality and non-disclosure agreements relating to the customer lists or
other customer information of Licensor referred to in this section as may from
time to time be requested by Licensor.
8.13 Condition of Licence
--------------------
(a) Licensee and its employees, agents and Contractors shall only advertise or
offer for sale and\or lease the Services to Customers in accordance with this
Agreement. Licensee shall inform its employees, agents and Contractors who
perform work in connection with the Trade Name of this condition of licence,
breach of which condition by Licensee or its employees, agents and Contractors
is grounds for immediate termination, pursuant to section 8.1 of this Agreement.
(b) For the purposes of paragraph (a) above, "Customers" means customers of
Licensor or any persons of whom Licensee or its employees, agents or Contractors
became aware, directly or indirectly through Licensor.
(c) During the term of this Agreement, except as contemplated in this
Agreement, none of Licensee or any party controlling (whether though the
ownership of shares or otherwise) or under direct or indirect common control
(whether through the ownership of shares or otherwise) with Licensee shall
engage in Canada in the retail sale of the services;
(i) in any retail store (other than a store hereunder) in Canada and
known as a department store or junior department store including
without limitation any store of Eatons, Sears, K Mart, Woolco,
[G.W. Robinson's] and Oglivies;
(ii) in any Holt Renfrew retail store;
(iii) in any retail grocery or convenience store whose retail
square footage is 5,000 square feet or more.
(d) Except as set out in section 8.13 (c) nothing in this Agreement
shall be construed so as to prevent Licensee from conducting its business, aside
from the Business, in any manner whatsoever.
<PAGE>
- 25 -
ARTICLE NINE
------------
MISCELLANEOUS
-------------
9.1 Assignments; Binding Effect
---------------------------
Licensee acknowledges that the rights granted by Licensor and the obligations
assumed by Licensee under this Agreement are strictly personal in nature.
Except for any sub-contract for Services to a Contractor, Licensee shall not
assign this Agreement or any of its rights or obligations under this Agreement
or grant any sub-licence or sub-contract of this Agreement or otherwise transfer
or delegate any of its rights or obligations without the prior written consent
of Licensor which consent may, notwithstanding any statutory provision to the
contrary, be arbitrarily withheld. Licensor may at any time assign all or any
part of its rights or obligations under this Agreement, Licensor will notify
Licensee of it's intention to assign all or any part of its rights or
obligations under this Agreement. Subject to the foregoing, this Agreement
shall enure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.
9.2 Corporate Ownership
-------------------
No change in the direct or indirect voting control of the Licensee shall be
made without the written consent of Licensor which consent may, notwithstanding
any statutory provision to the contrary, be arbitrarily withheld.
9.3 Partnership
-----------
If Licensee is a partnership, no change in the members of the partnership or
if a partner is a corporation, the changes outlined in section 9.2 shall be made
without the prior written consent of Licensor which consent may, notwithstanding
any statutory provision to the contrary, be arbitrarily withheld.
9.4 No Goodwill
-----------
Licensee shall not obtain, develop or sell or purport to sell any goodwill
related to its operation of any one or more Departments, its right to occupy any
one or more Department Area or its operation of the Business.
9.5 Relationship
------------
Licensee is an independent contractor. Nothing contained in or done pursuant
to this Agreement shall be construed as creating a partnership, agency or joint
venture and, except as otherwise expressly provided in this Agreement, neither
party shall become bound by any representation, act or omission of the other
party.
<PAGE>
- 26 -
9.6 Sales Contract
--------------
Prior to the provision by Licensee of any Services to a Customer, the Sales
Contract must be properly executed. Licensee must use only the Sales Contract.
No supplement, modification or waiver of the terms and conditions of the
Sales Contract, other than the Services to be provided or the Completion Date
shall be binding unless executed in writing by the party to be bound thereby.
Neither the customer nor Licensee may assign the Sales Contract, without the
prior written consent of Licensor.
Licensee shall not bring any action, suit, claim or any proceeding against
Licensor, nor claim any damages, penalties, losses, expenses or disbursements of
any nature or kind whatsoever which arise from, are connected with or in any way
relate to the adequacy or enforcement of the Sales Contract.
Licensor shall not cancel, attempt to cancel, or otherwise interfere with
Licensee's relationship with the Sales Contract without the Licensee's prior
consent, such consent not to be unreasonably withheld. The prices, charges and
terms of sale of the Services shall be as set forth by Licensee in tariffs
and\or other Licensee authorized written documents and releases from time to
time.
9.7 Severability - All clauses, terms and conditions hereof are severable
------------
and the invalidity, illegality or unenforceability of any clause, term or
condition shall not affect the validity, enforceability or legality of the
remaining clauses, terms and conditions.
9.8 Waiver - No supplement, modification, waiver or termination of this
------
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provisions (whether or not similar)
nor shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
9.9 Notices - Any notice required or permitted to be given hereunder shall
-------
be in writing and may be given by delivery (by hand or courier), facsimile or
ordinary mail, addressed to the party to whom the notice is to be given at the
following addresses:
In the case of Licensor:
HUDSON'S BAY COMPANY
401 Bay Street
Toronto, Ontario
M5H 2Y4
<PAGE>
- 27 -
Attention: General Sales Manager,
Licensed Departments
Facsimile: 416-861-4646
In the case of Licensee:
ACC Long Distance Inc.
5343 Dundas Street West
Suite 401
Etobicoke, Ontario M9B 6K5
Attention: President
Facsimile: (416) 236-4749
Any notice shall be deemed to have been received at the time of delivery, if
delivered, on the next business day following transmission, if sent by
facsimile, or on the fourth day after mailing if mailed.
9.10 Language - At the request of both parties, this Agreement has been
--------
drawn in the English language. Le detenteur de permis et l'octroyeur de permis
demandent que ce contract de permit soit preparee et signe en anglais.
9.11 Entirety of Agreement and Proper Law - This Agreement constitutes the
------------------------------------
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings both formal and
informal. This Agreement shall be construed in accordance with the laws of the
Province of Ontario and the laws of Canada applicable therein.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date first above written.
Recommended by: ACC LONG DISTANCE INC.
[illegible] By: [illegible]
- ----------------------- --------------------
Regional Licensed Department
Manager By: [illegible]
--------------------
<PAGE>
- 28 -
HUDSON'S BAY COMPANY
By: [illegible]
-------------
By:
-------------
<PAGE>
- 29 -
APPENDIX
--------
To the Licence Agreement made as of the 1st day of July, 1993 between
the Bay Department Stores Division of Hudson's Bay company as Licensor and ACC
Long Distance Inc. as Licensee.
The terms and provisions of this Appendix shall form part of, and
shall be in addition to and not in substitution for the terms and provisions of,
the Licence Agreement, provided that where there is a conflict between
provisions of the Appendix and this Licence Agreement, the terms and provisions
of the Appendix shall prevail.
All references in the body of the Appendix to clause numbers are to
those clause numbers in the Licence Agreement unless otherwise stated.
The Licence Agreement is supplemented and amended by adding or
substituting the following terms and provisions:
1. Section 1.1.
(a) Store
Bloor Street
Yorkdale
Centrepoint
2. Section 4.2 (a)
5343 Dundas St. West
Suite 401
Etobicoke, Ontario M9B 6K5
3. Section 4.2 Discounts
---------
Licensee will offer a discount to be established and agreed to by
Licensee and Licensor to any person entitled to receive an employee discount
from Licensor.
4. Section 6.3 Preparation of Department Area
------------------------------
Licensee shall complete at its own cost and expense, in accordance
with plans, designs and specifications approved in writing by Licensor, in
accordance with section 6.3, all work necessary to finish and prepare each
Department Area and to open and operate each Department (including without
limitation all work relating to the shell and decoration of each
<PAGE>
Page 2 of 2
Department). All such work, together with any other work on a Department Area
undertaken by Licensee in accordance with the Licence Agreement, shall be
completed expeditiously and efficiently using new materials, shall be performed
by competent contractors, subcontractors and workmen approved by Licensor, shall
be of a uniformly high quality and shall be performed in accordance with all
laws, rules, regulations and codes applicable to such work.
5. Licensee shall furnish to Licensor copies of reseller registrations
filed by Licensee with the CRTC.
6. While this Agreement is in effect, and during any additional period
that Licensor's Fee is payable, Licensor shall use it's best efforts to not
target existing Bay Long Distance customers with marketing for a similar long
distance program. Licensee recognizes and acknowledges that the Licensor's
marketing approach is broad and encompasses all Bay card holders across the
country.
7. Sale of Services
----------------
Bay Long Distance Activation Fees and Long Distance Toll Charges will
be competitively priced with all other ACC programs. For greater clarity the
Bay Long Distance Activation Fees and Long Distance Toll Charges will be the
best total price package offered to any ACC customer.
<PAGE>
EXHIBIT 99.24
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 1996
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
ACC CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
DELAWARE 16-1175232
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
400 WEST AVENUE
ROCHESTER, NEW YORK 14611
(716) 987-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL R. DALEY
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
ACC CORP.
400 WEST AVENUE
ROCHESTER, NEW YORK 14611
(716) 987-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------
COPIES TO:
RICHARD F. LANGAN, JR. JERRY V. ELLIOTT
JOHN C. PARTIGAN SHEARMAN & STERLING
NIXON, HARGRAVE, DEVANS & DOYLE LLP 599 LEXINGTON AVENUE
437 MADISON AVENUE NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10022 (212) 848-4000
(212) 940-3000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALES TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
NUMBER OF PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SHARES MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING PRICE REGISTRATION
REGISTERED REGISTERED (1) PER SHARE (2) (2) FEE
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock,
par value $.015 per
share................ 2,012,500 $27.50 $55,343,750 $19,084.01
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Includes 262,500 shares the Underwriters may purchase from the Company to
cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 and based upon
prices reported on the Nasdaq Stock Market on February 20, 1996.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY THE SECURITIES DESCRIBED HEREIN, NOR +
+SHALL THERE BE ANY SALE OF SUCH SECURITIES IN ANY JURISDICTION IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued February 22, 1996
1,750,000 Shares
[LOGO] ACC(R)
CLASS A COMMON STOCK
-----------
ALL OF THE SHARES OF CLASS A COMMON STOCK, PAR VALUE $0.015 PER SHARE,
OFFERED HEREBY ARE BEING SOLD BY ACC CORP. THE CLASS A COMMON STOCK IS
TRADED ON THE NASDAQ STOCK MARKET UNDER THE SYMBOL "ACCC." ON FEBRUARY
20, 1996, THE REPORTED LAST SALE PRICE OF THE CLASS A COMMON STOCK ON
THE NASDAQ STOCK MARKET WAS $27.50 PER SHARE.
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
PRICE UNDERWRITING
TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
------ -------------- -----------
<S> <C> <C> <C>
Per Share....................................... $ $ $
Total(3)........................................ $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriters."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of 262,500
additional Shares of Class A Common Stock at the price to public less
underwriting discounts and commissions, for the purpose of covering over-
allotments, if any. If the Underwriters exercise such option in full, the
total price to public, underwriting discounts and commissions and
proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriters."
-----------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Shearman &
Sterling, counsel for the Underwriters. It is expected that delivery of the
Shares will be made on or about , 1996 at the office of Morgan Stanley &
Co. Incorporated, New York, N.Y., against payment therefor in immediately
available funds.
-----------
MORGAN STANLEY & CO. WHEAT FIRST BUTCHER SINGER
Incorporated
, 1996
<PAGE>
[Graphic indicating location of ACC Corp.'s switches and certain leased
facilities appears here.]
2
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF CLASS A COMMON STOCK OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY OR BY
ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE CLASS A COMMON
STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION
WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES.
PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE
COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
RESTRICTIONS AS TO THE OFFERING OF THE CLASS A COMMON STOCK AND THE
DISTRIBUTION OF THIS PROSPECTUS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain
Documents by Reference......... 4
Prospectus Summary.............. 5
Risk Factors.................... 8
Use of Proceeds................. 17
Price Range of Class A Common
Stock and Dividend Policy...... 18
Capitalization.................. 19
Selected Historical Consolidated
Financial and Operations Data.. 20
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 22
Business........................ 31
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management....................... 50
Principal Shareholders........... 52
Description of Capital Stock..... 53
Shares Eligible for Future Sale.. 58
Certain United States Federal Tax
Considerations for Non-U.S.
Holders of Class A Common Stock. 60
Underwriters..................... 62
Legal Matters.................... 63
Experts.......................... 63
Available Information............ 64
Index to Consolidated Financial
Statements...................... F-1
</TABLE>
----------------
The Company intends to continue to furnish to its stockholders annual
reports containing audited consolidated financial statements and a report
thereon by the Company's independent public accountants and quarterly reports
containing unaudited condensed consolidated financial information for each of
the first three quarters of each fiscal year.
In this Prospectus, references to "dollar" and "$" are to United States
dollars, references to "Cdn. $" are to Canadian dollars, references to
"(Pounds)" are to English pounds sterling, the terms "United States" and
"U.S." mean the United States of America and, unless the context otherwise
requires, its states, territories and possessions and all areas subject to its
jurisdiction, and the terms "United Kingdom" and "U.K." mean England, Scotland
and Wales.
----------------
The Company was originally incorporated in New York in 1982 under the name
A. C. Teleconnect Corp. and was reincorporated in Delaware in 1987 under the
name ACC Corp. As used herein, unless the context otherwise requires, the
"Company" and "ACC" refer to ACC Corp. and its subsidiaries, including ACC
Long Distance Corp. ("ACC U.S."), ACC TelEnterprises Ltd., the Company's 70%
owned Canadian subsidiary ("ACC Canada"), and ACC Long Distance UK Ltd. ("ACC
U.K."). The Company's principal executive offices are located at 400 West
Avenue, Rochester, New York 14611 and its telephone number at that address is
(716) 987-3000.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
("Commission") pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K (as amended on April 27, 1995)
for the year ended December 31, 1994;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995, June 30, 1995 and September 30, 1995;
(3) the Company's Current Reports on Form 8-K filed on April 13, 1995, June
22, 1995, October 27, 1995 (as amended on December 8, 1995) and February 22,
1996; and
(4) the description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A (as amended on November 14, 1995).
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
dates of the filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon written or oral request of any such person,
a copy of any and all of such documents (other than exhibits to such documents
which are not specifically incorporated by reference into such documents).
Requests for such copies should be directed to the Chief Financial Officer,
ACC Corp., 400 West Avenue, Rochester, New York 14611 (telephone number (716)
987-3000).
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS
A COMMON STOCK ON THE NASDAQ STOCK MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITERS."
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information, including risk factors, and
consolidated financial statements, and notes thereto, appearing elsewhere or
incorporated by reference in this Prospectus. Unless otherwise indicated, the
information in this Prospectus assumes that the Underwriters' over-allotment
option is not exercised. Certain of the information contained in this summary
and elsewhere in this Prospectus, including under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," including
information with respect to the Company's plans and strategy for its business
and related financing, are forward-looking statements. For a discussion of
important factors that could cause actual results to differ materially from the
forward-looking statements, see "Risk Factors" and the Company's periodic
reports incorporated by reference herein.
THE COMPANY
ACC is a switch-based provider of telecommunications services in the United
States, Canada and the United Kingdom. The Company primarily provides long
distance telecommunications services to a diversified customer base of
businesses, residential customers and educational institutions. As a result of
the Company's historical focus on providing long distance services in the
Northeastern United States and recent regulatory changes, ACC has begun to
provide local telephone service as a switch-based local exchange reseller in
upstate New York and as a reseller of local exchange services in Ontario,
Canada. ACC operates an advanced telecommunications network consisting of seven
long distance international and domestic switches located in the U.S., Canada
and the U.K., a local exchange switch located in the U.S., leased transmission
lines, and network management systems designed to optimize traffic routing.
The Company's objective is to grow its long distance telecommunications
customer base in its existing markets and to establish itself in deregulating
Western European markets that have high density telecommunications traffic,
such as France and Germany, when the Company believes that business and
regulatory conditions warrant. The key elements of the Company's business
strategy are: (1) to broaden ACC's penetration of the U.S., Canadian and U.K.
telecommunications markets by expanding its long distance, local and other
service offerings and geographic reach; (2) to utilize ACC's operating
experience as an early entrant in deregulating markets in the U.S., Canada and
the U.K. to penetrate other deregulating telecommunications markets that have
high density telecommunications traffic; (3) to achieve economies of scale and
scope in the utilization of ACC's network; and (4) to seek acquisitions,
investments or strategic alliances involving assets or businesses that are
complementary to ACC's current operations.
The Company's principal competitive strengths are: (1) ACC's sales and
marketing organization and the customized service ACC offers to its customers;
(2) ACC's ability to offer competitive prices which the Company believes
generally are lower than prices charged by the major carriers in each of its
markets; (3) ACC's position as an early entrant in the U.S., Canadian and U.K.
markets as an alternative carrier; (4) ACC's focus on more profitable
international telecommunications traffic between the U.S., Canada and the U.K.;
and (5) ACC's switched-based networking capabilities. The Company believes that
switch ownership reduces reliance on other carriers and enables the Company to
efficiently route telecommunications traffic over multiple leased transmission
lines and to control costs, call record data and customer information. The
availability of existing transmission capacity in its markets makes leasing of
transmission lines attractive to the Company and enables it to grow network
usage without having to incur the significant capital and operating costs
associated with the development and operation of a transmission line
infrastructure.
ACC primarily targets business customers with approximately $500 to $15,000
of monthly usage, selected residential customers and colleges and universities.
The Company believes that, in addition to being price-driven, these customers
tend to be focused on customer service, more likely to rely on a single carrier
for their telecommunications needs and less likely to change carriers than
larger commercial customers. The diversity of ACC's targeted customer base
enhances network utilization by combining business-driven workday traffic with
night and weekend off-peak traffic from student and residential customers. The
Company strives to be more cost effective, flexible, innovative and responsive
to the needs of its customers than the major carriers, which principally focus
their direct sales efforts on large commercial accounts and residential
customers.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock offered................. 1,750,000 shares
Class A Common Stock to be outstanding after
the offering (1)............................ 9,670,776 shares
Use of proceeds.............................. To repay bank indebtedness, fund capital
expenditures and for working capital and
other general corporate purposes, including
possible acquisitions. See "Use of
Proceeds."
Nasdaq Stock Market symbol................... ACCC
</TABLE>
- --------
(1) Based on the number of shares outstanding on January 31, 1996. Does not
include approximately (i) 1,485,394 shares of Class A Common Stock issuable
upon the exercise of options and warrants outstanding as of January 31,
1996 at a weighted average exercise price of $16.17 per share, (ii) 625,000
shares of Class A Common Stock issuable upon the conversion of the Series A
Preferred Stock outstanding as of January 31, 1996, which is convertible at
$16.00 per share or (iii) 20,000 shares of Class A Common Stock issuable
upon the exercise of additional options outstanding as of January 31, 1996
at an exercise price of $23.00 per share, which are subject to approval of
the Company's shareholders.
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER MINUTE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1991 1992 1993 1994 1995 (1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue:
United States........... $33,360 $39,278 $45,150 $54,599 $65,975
Canada.................. 17,766 42,402 60,643 67,728 84,421
United Kingdom.......... -- -- 153 4,117 38,470
--------- --------- --------- --------- ---------
Total................. 51,126 81,680 105,946 126,444 188,866
Gross profit:
United States........... $13,913 $15,587 $18,768 $23,568 $29,282
Canada.................. 4,870 13,779 17,046 22,010 32,025
United Kingdom.......... -- -- (154) 1,428 12,718
--------- --------- --------- --------- ---------
Total................. 18,783 29,366 35,660 47,006 74,025
Income (loss) from
operations (2).......... $3,446 $5,788 $(11,786) $(8,314) $218
Net income (loss) per
common and common
equivalent share
applicable to common
stock from continuing
operations (3).......... $.36 $.52 $.24 $(1.60) $(.76)
Weighted average number
of common
shares used in computing
net
income (loss) per common
share................... 5,801,769 6,882,033 7,024,925 7,068,481 7,789,886
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1991 1992 1993 1994 1995 (1)
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL AND
OPERATIONS DATA:
EBITDA (4):
United States.............. $ 5,473 $ 6,184 $ 6,017 $ 5,847 $ 8,653
Canada..................... 737 3,523 2,423 (203) 7,299
United Kingdom............. -- -- (1,587) (5,026) (4,120)
-------- -------- -------- -------- ----------
Total.................... 6,210 9,707 6,853 618 11,832
======== ======== ======== ======== ==========
Billable minutes of use (in
thousands) (5)............. 296,119 475,422 683,073 882,993 1,181,663
Customer accounts at period
end........................ 25,846 50,318 98,400 202,991 310,815
Revenue per billable minute
of use..................... $.17 $.17 $.16 $.14 $.16
Network cost per billable
minute of use.............. $.11 $.11 $.10 $.09 $.10
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED (6)
-------- ---------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 518 $ 23,903
Total assets......................................... 123,984 147,369
Short-term debt, including current maturities of long
term debt........................................... 4,885 4,885
Long-term debt, excluding current maturities......... 28,050 7,077
Redeemable preferred stock........................... 9,448 9,448
Shareholders' equity................................. 26,407 70,765
</TABLE>
- --------
(1) Includes the results of operations of Metrowide Communications from August
1, 1995, the date of acquisition.
(2) Reflects, in 1993, an asset write-down of $12,807. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
1994 Compared With 1993."
(3) Includes (i) in 1993, a gain on sale of common stock of the Company's
Canadian subsidiary of $1.33 per share and (ii) in 1995, a loss of $.07 per
share related to redeemable preferred stock dividends and accretion.
(4) Represents income (loss) from operations plus depreciation and amortization
and asset write-down ("EBITDA"). In 1993, the Company recorded an asset
write-down of $12,807. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--1994
Compared With 1993." The Company has included information concerning EBITDA
herein because it understands that such information is used by certain
investors as one measure of an issuer's operating performance and
historical ability to service debt. EBITDA is not determined in accordance
with generally accepted accounting principles, is not indicative of cash
used (provided) by operating activities and should not be considered in
isolation or as an alternative to, or more meaningful than, measures of
performance determined in accordance with generally accepted accounting
principles.
(5) Defined as billable voice long distance minutes of use.
(6) Adjusted to give effect to this offering at an assumed public offering
price of $27.50 per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Class A Common Stock should consider carefully
the following risk factors, as well as the other information contained or
incorporated by reference in this Prospectus, before purchasing shares of the
Class A Common Stock offered hereby.
RECENT LOSSES; POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
Although the Company has recently experienced revenue growth on an annual
basis, it has incurred net losses and losses from continuing operations during
each of its last two fiscal years. There can be no assurance that revenue
growth will continue or that the Company will achieve profitability in the
future. The Company intends to focus in the near term on the expansion of its
service offerings, including its local telephone business, and geographic
markets, which may adversely affect cash flow and operating performance. As
each of the telecommunications markets in which the Company operates continues
to mature, growth in the Company's revenues and customer base is likely to
decrease over time.
The Company's operating results have fluctuated in the past and may
fluctuate significantly in the future as a result of a variety of factors,
some of which are outside of the Company's control, including general economic
conditions, specific economic conditions in the telecommunications industry,
the effects of governmental regulation and regulatory changes, user demand,
capital expenditures and other costs relating to the expansion of operations,
the introduction of new services by the Company or its competitors, the mix of
services sold and the mix of channels through which those services are sold,
pricing changes and new service introductions by the Company and its
competitors and prices charged by suppliers. As a strategic response to a
changing competitive environment, the Company may elect from time to time to
make certain pricing, service or marketing decisions or enter into strategic
alliances, acquisitions or investments that could have a material adverse
effect on the Company's business, results of operations and cash flow. The
Company's sales to other long distance companies have been increasing. Because
these sales are at margins that are lower than those derived from most of the
Company's other revenues, this increase may reduce the Company's gross margins
as a percentage of revenue. See "--Risks Associated With Acquisitions,
Investments and Strategic Alliances" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
DEPENDENCE ON TRANSMISSION FACILITIES-BASED CARRIERS AND SUPPLIERS
The Company does not own telecommunications transmission lines. Accordingly,
telephone calls made by the Company's customers are connected through
transmission lines that the Company leases under a variety of arrangements
with transmission facilities-based long distance carriers, some of which are
or may become competitors of the Company, including AT&T Corp. ("AT&T"), Bell
Canada and British Telecommunications PLC ("British Telecom"). Most inter-city
transmission lines used by the Company are leased on a monthly or longer-term
basis at rates that currently are less than the rates the Company charges its
customers for connecting calls through these lines. Accordingly, the Company
is vulnerable to changes in its lease arrangements, such as price increases
and service cancellations. ACC's ability to maintain and expand its business
is dependent upon whether the Company continues to maintain favorable
relationships with the transmission facilities-based carriers from which the
Company leases transmission lines, particularly in the U.K., where British
Telecom and Mercury Communications Ltd. ("Mercury") are the two principal,
dominant carriers. The Company's U.K. operations are highly dependent upon the
transmission lines leased from British Telecom. The Company generally
experiences delays in billings from British Telecom and needs to reconcile
billing discrepancies with British Telecom before making payment. Although the
Company believes that its relationships with carriers generally are
satisfactory, the deterioration or termination in the Company's relationships
with one or more of those carriers could have a material adverse effect upon
the Company's business, results of operations and financial condition. Certain
of the vendors from whom the Company leases transmission lines, including 22
regional operating companies ("RBOCs") and other local exchange carriers,
currently are subject to tariff controls and other price constraints which in
the future may be changed. Under recently enacted U.S. legislation,
constraints
8
<PAGE>
on the operations of the RBOCs have been dramatically reduced, which will
bring additional competitors to the long distance market. In addition,
regulatory proposals are pending that may affect the prices charged by the
RBOCs and other local exchange carriers to the Company, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "--Regulation" and "Business--Regulation." The
Company currently acquires certain of its equipment from one vendor. A failure
by a supplier to deliver quality products on a timely basis, or the inability
to develop alternative sources if and as required, could result in delays
which could have a material adverse effect on the Company's business, results
of operations and financial condition.
REGULATION
Legislation that substantially revises the U.S. Communications Act of 1934
(the "U.S. Communications Act") was signed into law on February 8, 1996. The
legislation provides specific guidelines under which the RBOCs can provide
long distance services, which will permit the RBOCs to compete with the
Company in the provision of domestic and international long distance services.
The legislation opens all local service markets to competition from any entity
(including long distance carriers, such as AT&T, cable television companies
and utilities). Because the legislation opens the Company's markets to
additional competition, particularly from the RBOCs, the Company's ability to
compete is likely to be adversely affected. Moreover, as a result of and to
implement the legislation, certain federal and other governmental regulations
will be amended or modified, and any such amendment or modification could have
a material adverse effect on the Company's business, results of operations and
financial condition.
In the U.S., the Federal Communications Commission ("FCC") and relevant
state public service commissions ("PSCs") have the authority to regulate
interstate and intrastate rates, respectively, ownership of transmission
facilities, and the terms and conditions under which the Company's services
are provided. Federal and state regulations and regulatory trends have had,
and in the future are likely to have, both positive and negative effects on
the Company and its ability to compete. The recent trend in both Federal and
state regulation of telecommunications service providers has been in the
direction of lessened regulation. In general, neither the FCC nor the relevant
state PSCs currently regulate the Company's long distance rates or profit
levels, but either or both may do so in the future. However, the general
recent trend toward lessened regulation has also given AT&T, the largest long
distance carrier in the U.S., increased pricing flexibility that has permitted
it to compete more effectively with smaller interexchange carriers, such as
the Company. There can be no assurance that changes in current or future
Federal or state regulations or future judicial changes would not have a
material adverse effect on the Company.
In order to provide their services, interexchange carriers, including the
Company, must generally purchase "access" from local exchange carriers to
originate calls from and terminate calls in the local exchange telephone
networks. Access charges presently represent a significant portion of the
Company's network costs in all areas in which it operates. In the U.S., access
charges generally are regulated by the FCC and the relevant state PSCs. Under
the terms of the AT&T Divestiture Decree, a court order entered in 1982 which,
among other things, required AT&T to divest its 22 wholly-owned RBOCs from its
long distance division ("AT&T Divestiture Decree"), the RBOCs were required to
price the "local transport" portion of such access charges on an "equal price
per unit of traffic" basis. In November 1993, the FCC implemented new interim
rules governing local transport access charges while the FCC considers
permanent rules regarding new rate structures for transport pricing and
switched access competition. These interim rules have essentially maintained
the "equal price per unit of traffic" rule. However, under alternative access
charge rate structures being considered by the FCC, local exchange carriers
would be permitted to allow volume discounts in the pricing of access charges.
If these rate structures are adopted, access charges for AT&T and other large
interexchange carriers would decrease, and access charges for small
interexchange carriers would increase. While the outcome of these proceedings
is uncertain, should the FCC adopt permanent access charge rules along the
lines of the proposed structures it is currently considering, the Company
would be at a cost disadvantage with regard to access charges in comparison to
AT&T and larger interexchange carrier competitors.
9
<PAGE>
The Company currently competes with local exchange carriers in the provision
of "short haul" toll calls completed within a Local Access and Transport Area
("LATA"), and will in the future, under provisions of recently enacted federal
legislation, compete with such carriers in the long-haul, or inter-LATA, toll
business. To complete long-haul and short-haul toll calls, the Company must
purchase "access" from the local exchange carriers. The Company must generally
price its toll services at levels equal to or below the retail rates
established by the local exchange carriers for their own short-haul or long-
haul toll rates. To the extent that the local exchange carriers are able to
reduce the margin between the access costs to the Company and the retail toll
prices charged by local exchange carriers, either by increasing access costs
or lowering retail toll rates, or both, the Company will encounter adverse
pricing and cost pressures in competing against local exchange carriers in
both the short-haul and long-haul toll markets.
In Canada, services provided by ACC Canada are subject to or affected by
certain regulations of the Canadian Radio-Television and Telecommunications
Commission (the "CRTC"). The CRTC annually reviews the "contribution charges"
(the equivalent of access charges in the U.S.) it has assessed against the
access lines leased by Canadian long distance resellers, including the
Company, from the local telephone companies in Canada. The Company expects
that, based on existing regulations and rulings, its Canadian contribution
charges will increase by approximately Cdn. $1.5 million in 1997 over 1995
levels. Additional increases in these contribution charges could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Canadian long distance telecommunications industry is
the subject of ongoing regulatory change. These regulations and regulatory
decisions have a direct and material effect on the ability of the Company to
conduct its business. The recent trend of such regulations has been to open
the market to commercial competition, generally to the Company's benefit.
There can be no assurance, however, that any future changes in or additions to
laws, regulations, government policy or administrative rulings will not have a
material adverse effect on the Company's business, results of operation and
financial condition.
The telecommunications services provided by ACC U.K. are subject to and
affected by regulations introduced by the U.K. telecommunications regulatory
authority, The Office of Telecommunications ("Oftel"). Since the break up of
the U.K. telecommunications duopoly consisting of British Telecom and Mercury
in 1991, it has been the stated goal of Oftel to create a competitive
marketplace from which detailed regulation could eventually be withdrawn. The
regulatory regime currently being introduced by Oftel has a direct and
material effect on the ability of the Company to conduct its business.
Although the Company is optimistic about its ability to continue to compete
effectively in the U.K. market, there can be no assurance that future changes
in regulation and government will not have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business--Regulation."
COMPETITION
The long distance telecommunications industry is highly competitive and is
significantly influenced by the marketing and pricing decisions of the larger
industry participants. The industry has relatively insignificant barriers to
entry, numerous entities competing for the same customers and high churn rates
(customer turnover), as customers frequently change long distance providers in
response to the offering of lower rates or promotional incentives by
competitors. In each of its markets, the Company competes primarily on the
basis of price and also on the basis of customer service and its ability to
provide a variety of telecommunications services. The Company expects
competition on the basis of price and service offerings to increase. Although
many of the Company's university customers are under multi-year contracts,
several of the Company's largest customers (primarily other long distance
carriers) are on month-to-month contracts and are particularly price
sensitive. Revenues from other resellers accounted for approximately 22%, 8%
and 9%, of the revenues of ACC U.S., ACC Canada and ACC U.K., respectively, in
1995, and are expected to account for a higher percentage in the future. With
respect to these customers, the Company competes almost exclusively on price.
Many of the Company's competitors are significantly larger, have
substantially greater financial, technical and marketing resources and larger
networks than the Company, control transmission lines and have long-standing
relationships with the Company's target customers. These competitors include,
among others,
10
<PAGE>
AT&T, MCI Telecommunications Corporation ("MCI") and Sprint Corp. ("Sprint")
in the U.S.; Bell Canada, BC Telecom, Inc., Unitel Communications Inc.
("Unitel") and Sprint Canada (a subsidiary of Call-Net Telecommunications
Inc.) in Canada; and British Telecom, Mercury and IDB WorldCom Services Inc.
in the U.K. AT&T and other U.S. carriers are also expected to enter the U.K.
market. The Company also competes with numerous other long distance providers,
some of which focus their efforts on the same business customers targeted by
the Company and selected residential customers and colleges and universities,
the Company's other target customers. In addition, through its local telephone
service business in New York, the Company competes with New York Telephone
Company ("New York Telephone"), Frontier Corp., Citizens Telephone Co., MFS
Communications Co., Inc. and Time Warner Cable and others, including cellular
and other wireless providers. Furthermore, the recently announced joint
venture between MCI and Microsoft Corporation ("Microsoft"), under which
Microsoft will promote MCI's services, the recently announced joint venture
among Sprint, Deutsche Telekom AG and France Telecom, and other strategic
alliances, could also increase competitive pressures upon the Company and have
a material adverse effect on the Company's business, results of operations and
financial condition.
In addition to these competitive factors, recent and pending deregulation in
each of the Company's markets may encourage new entrants. For example, as a
result of legislation recently enacted in the U.S., RBOCs will be allowed to
enter the long distance market, AT&T, MCI and other long distance carriers
will be allowed to enter the local telephone services market, and any entity
(including cable television companies and utilities) will be allowed to enter
the telecommunications market. In addition, the FCC has, on several occasions
since 1984, approved or required price reductions by AT&T and, in October
1995, the FCC reclassified AT&T as a "non-dominant" carrier, which
substantially reduces the regulatory constraints on AT&T. As the Company
expands its geographic coverage, it will encounter increased competition.
Moreover, the Company believes that competition in non-U.S. markets is likely
to increase and become more similar to competition in the U.S. markets over
time as such non-U.S. markets continue to experience deregulatory influences.
Prices in the long distance industry have declined from time to time in recent
years and, as competition increases in Canada and the U.K., prices are likely
to continue to decrease. For example, Bell Canada substantially reduced its
rates during the first quarter of 1994. The Company's competitors may reduce
rates or offer incentives to existing and potential customers of the Company.
To maintain its competitive position, the Company believes that it must be
able to reduce its prices in order to meet reductions in rates, if any, by
others. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Competition."
The Company has only limited experience in providing local telephone
services, having commenced providing such services in 1994, and, although the
Company believes the local business will enhance its ability to compete in the
long distance market, to date the Company has experienced an operating cash
flow deficit in the operation of that business in the U.S. on a stand-alone
basis. The Company's revenues from local telephone services in 1995 were $1.35
million. In order to attract local customers, the Company must offer
substantial discounts from the prices charged by local exchange carriers and
must compete with other alternative local companies that offer such discounts.
The local telephone service business requires significant initial investments
in capital equipment as well as significant initial promotional and selling
expenses. Larger, better capitalized alternative local providers, including
AT&T and Time Warner Cable, among others, will be better able to sustain
losses associated with discount pricing and initial investments and expenses.
There can be no assurance that the Company will achieve positive cash flow or
profitability in its local telephone service business.
NEED FOR ADDITIONAL CAPITAL
The Company will need to continue to enhance and expand its operations in
order to maintain its competitive position, expand its service offerings and
geographic markets and continue to meet the increasing demands for service
quality, availability and competitive pricing. As of the end of its last five
fiscal years, the Company has experienced a working capital deficit. During
1995, the Company's EBITDA minus capital
11
<PAGE>
expenditures and changes in working capital was $(7.0) million. In addition,
the Company's indebtedness requires significant repayments over the next five
years. The Company may need to raise additional capital from public or private
equity or debt sources in order to finance its anticipated growth, including
local service expansion, which is capital intensive, working capital needs,
debt service obligations, contemplated capital expenditures and the optional
redemption of the Series A Preferred Stock if it is not converted. In
addition, the Company may need to raise additional funds in order to take
advantage of unanticipated opportunities, including more rapid international
expansion or acquisitions of, investments in or strategic alliances with
companies that are complementary to the Company's current operations, or to
develop new products or otherwise respond to unanticipated competitive
pressures. If additional funds are raised through the issuance of equity
securities, the percentage ownership of the Company's then current
shareholders would be reduced and, if such equity securities take the form of
Preferred Stock or Class B Common Stock, the holders of such Preferred Stock
or Class B Common Stock may have rights, preferences or privileges senior to
those of holders of Class A Common Stock. There can be no assurance that the
Company will be able to raise such capital on satisfactory terms or at all. If
the Company decides to raise additional funds through the incurrence of debt,
the Company would need to obtain the consent of its lenders under the Credit
Facility (as defined below) and would likely become subject to additional or
more restrictive financial covenants. In the event that the Company is unable
to obtain such additional capital or is unable to obtain such additional
capital on acceptable terms, the Company may be required to reduce the scope
of its presently anticipated expansion, which could materially adversely
affect the Company's business, results of operations and financial condition
and its ability to compete. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital Resources"
and "Description of Capital Stock."
RISKS OF GROWTH AND EXPANSION
The Company plans to expand its service offerings and principal geographic
markets in the United States, Canada and the United Kingdom. In addition, the
Company may establish a presence in deregulating Western European markets that
have high density telecommunications traffic, such as France and Germany, when
the Company believes that business and regulatory conditions warrant. There
can be no assurance that the Company will be able to add service or expand its
markets at the rate presently planned by the Company or that the existing
regulatory barriers will be reduced or eliminated. The Company's rapid growth
has placed, and in the future may continue to place, a significant strain on
the Company's administrative, operational and financial resources and
increased demands on its systems and controls. As the Company increases its
service offerings and expands its targeted markets, there will be additional
demands on the Company's customer support, sales and marketing and
administrative resources and network infrastructure. There can be no assurance
that the Company's operating and financial control systems and infrastructure
will be adequate to maintain and effectively monitor future growth. The
failure to continue to upgrade the administrative, operating and financial
control systems or the emergence of unexpected expansion difficulties could
materially adversely affect the Company's business, results of operations and
financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
A key component of the Company's strategy is its planned expansion in
international markets. To date, the Company has only limited experience in
providing telecommunications service outside the United States and Canada.
There can be no assurance that the Company will be able to obtain the capital
it requires to finance its expansion in international markets on satisfactory
terms or at all. In many international markets, protective regulations and
long-standing relationships between potential customers of the Company and
their local providers create barriers to entry. Pursuit of international
growth opportunities may require significant investments for an extended
period before returns, if any, on such investments are realized. In addition,
there can be no assurance that the Company will be able to obtain the permits
and operating licenses required for it to operate, to hire and train employees
or to market, sell and deliver high quality services in these markets. In
addition to the uncertainty as to the Company's ability to expand its
international presence, there are certain risks inherent to doing business on
an international level, such as unexpected changes in regulatory requirements,
tariffs, customs, duties and other trade barriers, difficulties in staffing
and managing foreign operations, longer payment cycles, problems in
12
<PAGE>
collecting accounts receivable, political risks, fluctuations in currency
exchange rates, foreign exchange controls which restrict or prohibit
repatriation of funds, technology exports and import restrictions or
prohibitions, delays from custom brokers or government agencies, seasonal
reductions in business activity during the summer months in Europe and certain
other parts of the world and potentially adverse tax consequences resulting
from operating in multiple jurisdictions with different tax laws, which could
materially adversely impact the success of the Company's international
operations. In many countries, the Company may need to enter into a joint
venture or other strategic relationship with one or more third parties in
order to successfully conduct its operations. As its revenues from its
Canadian and U.K. operations increase, an increasing portion of the Company's
revenues and expenses will be denominated in currencies other than U.S.
dollars, and changes in exchange rates may have a greater effect on the
Company's results of operations. There can be no assurance that such factors
will not have a material adverse effect on the Company's future operations
and, consequently, on the Company's business, results of operations and
financial condition. In addition, there can be no assurance that laws or
administrative practices relating to taxation, foreign exchange or other
matters of countries within which the Company operates will not change. Any
such change could have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON EFFECTIVE INFORMATION SYSTEMS
To complete its billing, the Company must record and process massive amounts
of data quickly and accurately. While the Company believes its management
information system is currently adequate, it has not grown as quickly as the
Company's business and substantial investments are needed. The Company has
made arrangements with a consultant and a vendor for the development of new
information systems and has budgeted approximately $6.0 million for this
purpose in 1996. The Company believes that the successful implementation and
integration of these new information systems is important to its continued
growth, its ability to monitor costs, to bill customers and to achieve
operating efficiencies, but there can be no assurance that the Company will
not encounter delays or cost-overruns or suffer adverse consequences in
implementing the systems. The principal vendor of the Company's software has a
unique knowledge of such software and the Company may be dependent on the
vendor for any modifications to the software. The Company believes that it
currently is the only customer of the vendor and, as a result, the vendor is
financially dependent on the Company. In addition, as the Company's suppliers
revise and upgrade their hardware, software and equipment technology, there
can be no assurance that the Company will not encounter difficulties in
integrating the new technology into the Company's business or that the new
systems will be appropriate for the Company's business. See "Business--
Information Systems."
RISKS ASSOCIATED WITH ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES
As part of its business strategy, the Company expects to seek to develop
strategic alliances both domestically and internationally and to acquire
assets and businesses or make investments in companies that are complementary
to its current operations. The Company has no present commitments or
agreements with respect to any such strategic alliance, investment or
acquisition. Any such future strategic alliances, investments or acquisitions
would be accompanied by the risks commonly encountered in strategic alliances
with or acquisitions of or investments in companies. Such risks include, among
other things, the difficulty of assimilating the operations and personnel of
the companies, the potential disruption of the Company's ongoing business, the
inability of management to maximize the financial and strategic position of
the Company by the successful incorporation of licensed or acquired technology
and rights into the Company's service offerings, the maintenance of uniform
standards, controls, procedures and policies and the impairment of
relationships with employees and customers as a result of changes in
management. In addition, the Company has experienced higher attrition rates
with respect to customers obtained through acquisitions, and may continue to
experience higher attrition rates with respect to any customers resulting from
future acquisitions. Moreover, to the extent that any such acquisition,
investment or alliance involved a business located outside the United States,
the transaction would involve the risks associated with international
expansion. See "--Risks Associated with International Expansion." There can be
no assurance that the Company would be successful in overcoming these risks or
any other problems encountered with such strategic alliances, investments or
acquisitions.
13
<PAGE>
In addition, if the Company were to proceed with one or more significant
strategic alliances, acquisitions or investments in which the consideration
consists of cash, a substantial portion of the Company's available cash
(including proceeds of this offering) could be used to consummate the
strategic alliances, acquisitions or investments. If the Company were to
consummate one or more significant strategic alliances, acquisitions or
investments in which the consideration consists of stock, shareholders of the
Company could suffer a significant dilution of their interests in the Company.
Many of the businesses that might become attractive acquisition candidates for
the Company may have significant goodwill and intangible assets, and
acquisitions of these businesses, if accounted for as a purchase, would
typically result in substantial amortization charges to the Company. The
financial impact of acquisitions, investments and strategic alliances could
have a material adverse effect on the Company's business, financial condition
and results of operations and could cause substantial fluctuations in the
Company's quarterly and yearly operating results. See "Business--Acquisitions,
Investments and Strategic Alliances."
TECHNOLOGICAL CHANGES
The telecommunications industry is characterized by rapid and significant
technological advancements and introductions of new products and services
utilizing new technologies. There can be no assurance that the Company will
maintain competitive services or that the Company will obtain appropriate new
technologies on a timely basis or on satisfactory terms.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continued
contributions of its management team and technical, marketing and sales
personnel. The Company's employees may voluntarily terminate their employment
with the Company at any time. Competition for qualified employees and
personnel in the telecommunications industry is intense and, from time to
time, there are a limited number of persons with knowledge of and experience
in particular sectors of the telecommunications industry. The Company's
success also will depend on its ability to attract and retain qualified
management, marketing, technical and sales executives and personnel. The
process of locating such personnel with the combination of skills and
attributes required to carry out the Company's strategies is often lengthy.
The loss of the services of key personnel, or the inability to attract
additional qualified personnel, could have a material adverse effect on the
Company's results of operations, development efforts and ability to expand.
There can be no assurance that the Company will be successful in attracting
and retaining such executives and personnel. Any such event could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management."
RISK ASSOCIATED WITH FINANCING ARRANGEMENTS; DIVIDEND RESTRICTIONS
The Company's financing arrangements are secured by substantially all of the
Company's assets and require the Company to maintain certain financial ratios
and restrict the payment of dividends. These financial arrangements will
require the repayment of significant amounts and significant reductions in
borrowing capacity thereunder during the next five years. The Company's
secured lenders would be entitled to foreclose upon those assets in the event
of a default under the financing arrangements and to be repaid from the
proceeds of the liquidation of those assets before the assets would be
available for distribution to the Company's other creditors and shareholders
in the event that the Company is liquidated. In addition, the collateral
security arrangements under the Company's existing financing arrangements may
adversely affect the Company's ability to obtain additional borrowings or
other capital. The Company may need to raise additional capital from equity or
debt sources to finance its projected growth and capital expenditures
contemplated for periods after 1996. See "--Need for Additional Capital" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
HOLDING COMPANY STRUCTURE
ACC Corp. is a holding company, the principal assets of which are its
operating subsidiaries in the U.S., Canada and the U.K. ACC Canada, a 70%
owned subsidiary of ACC Corp., is a public company listed on the Toronto Stock
Exchange and the Montreal Stock Exchange. The ability of ACC Canada to declare
and pay
14
<PAGE>
dividends is restricted by the terms of the agreement under which the
Company's Series A Preferred Stock was issued. In addition, ACC Canada's
ability to make other payments to ACC Corp. and its other subsidiaries may be
dependent upon the taking of action by ACC Canada's Board of Directors,
applicable Canadian and provincial law and stock exchange regulations, in
addition to the availability of funds. At the present time, three of ACC
Canada's seven directors are representatives of ACC Corp. ACC Corp.'s
percentage ownership interest in ACC Canada may decrease over time as a result
of stock issuances or sales or, alternatively, may increase over time as a
result of stock purchases, investments or other transactions. ACC U.S., ACC
Canada, ACC U.K. and other operating subsidiaries of the Company are subject
to corporate law restrictions on their ability to pay dividends to ACC Corp.
There can be no assurance that ACC Corp. will be able to cause its operating
subsidiaries to declare and pay dividends or make other payments to ACC Corp.
when requested by ACC Corp. The failure to pay any such dividends or make any
such other payments could have a material adverse effect upon the Company's
business, financial condition and results of operations.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the Class A Common Stock has been, and following this
offering may continue to be, highly volatile. See "Price Range of Class A
Common Stock and Dividend Policy." Factors such as variations in the Company's
revenue, earnings and cash flow, the difference between the Company's actual
results and the results expected by investors and analysts and announcements
of new service offerings, marketing plans or price reductions by the Company
or its competitors could cause the market price of the Class A Common Stock to
fluctuate substantially. In addition, the stock markets recently have
experienced significant price and volume fluctuations that particularly have
affected telecommunications companies and resulted in changes in the market
prices of the stocks of many companies that have not been directly related to
the operating performance of those companies. Such market fluctuations may
materially adversely affect the market price of the Class A Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Board of Directors has the authority to issue up to 1,990,000
additional shares of Preferred Stock and 25,000,000 shares of Class B Common
Stock, and to determine the price, rights, preferences and privileges of those
shares without any further vote or action by the shareholders. The rights of
the holders of any Class A Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock or
Class B Common Stock that may be issued in the future. While the Company has
no present intention to issue any additional shares of Preferred Stock or
Class B Common Stock, any such issuance or the perception that such issuances
may occur could have the effect of making it more difficult for a third party
to acquire control of the Company. The issuance of Preferred Stock or Class B
Common Stock could also decrease the amount of earnings and assets available
for distribution to holders of Class A Common Stock or could adversely affect
the rights and powers, including voting rights, of holders of Class A Common
Stock. In addition, the Company is and, subject to certain conditions, will
continue to be, subject to the anti-takeover provisions of the Delaware
General Corporation Law, which could have the effect of delaying or preventing
a change of control of the Company. Furthermore, the Company's Series A
Preferred Stock is required to be redeemed and the Company's indebtedness
under the Credit Agreement is required to be repaid upon a change in control,
and certain contractual arrangements with executive officers and directors of
the Company may have the effect of delaying or preventing changes in control
or management of the Company. All of these factors could materially adversely
affect the market price of the Company's Class A Common Stock. See
"Description of Capital Stock--Certain Charter, By-law and Statutory
Provisions and Other Anti-takeover Considerations."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Future sales of substantial numbers of shares of Class A Common Stock in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the Class A Common Stock and make it more difficult
for the Company to raise funds through equity offerings in the future. Several
of the Company's principal shareholders hold a significant portion of the
Company's outstanding Class A Common Stock and a decision by one or more of
these shareholders to sell their shares could materially adversely affect the
market price of the Class A Common Stock. See "Principal Shareholders."
15
<PAGE>
Upon completion of this offering, the Company will have approximately
9,700,000 shares of Class A Common Stock outstanding, assuming (i) no exercise
of the Underwriters' over-allotment option and (ii) no exercise of options or
warrants outstanding as of January 31, 1996. Of the Class A Common Stock
outstanding upon completion of this offering, the 1,750,000 shares of Class A
Common Stock sold in this offering as well as approximately 4,200,000 shares
previously issued by the Company will be freely tradeable without restriction
or further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares held by "affiliates" of the Company
or persons who have been affiliates within the preceding three months. The
remaining approximately 3,700,000 outstanding shares of Class A Common Stock
are currently eligible for sale under Rule 144 or Rule 144(k). Approximately
1,235,000 shares of Class A Common Stock or securities exercisable for or
convertible into Class A Common Stock held by directors, officers and certain
other shareholders are subject to 120-day lock-up agreements with the
Underwriters. See "Underwriters." The Commission has recently proposed
amendments to Rule 144 and Rule 144(k) that would shorten by one year the
applicable holding periods and could result in resales of restricted
securities sooner than would be the case under Rule 144 and Rule 144(k) as
currently in effect.
The holders of 10,000 shares of Series A Preferred Stock (which as of
January 31, 1996 are convertible into 625,000 shares of Class A Common Stock)
and warrants to purchase 130,000 shares of Class A Common Stock are entitled
to certain registration rights with respect to such shares. In addition, the
Company registered on Form S-8 under the Securities Act approximately
2,163,000 shares of Class A Common Stock, and intends to register on Form S-8
an additional 500,000 shares of Class A Common Stock, issuable under certain
options issued to employees as well as shares of Class A Common Stock issued
or reserved for issuance under the Company's Employee Stock Purchase Plan.
Subject to obtaining shareholder approval, the Company has adopted a stock
option plan for non-employee directors and has granted options to purchase
20,000 shares thereunder. The Company intends to register on Form S-8 the
250,000 shares of Class A Common Stock issuable under options granted pursuant
to such plan. See "Description of Capital Stock," "Shares Eligible for Future
Sale" and "Underwriters."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $44.4 million ($51.2 million if the Underwriters' over-allotment
option is exercised in full), after deduction of estimated underwriting
discounts and commissions and estimated offering expenses. The Company expects
to use the net proceeds of this offering to repay all of its existing
indebtedness under the Credit Facility ($19.0 million was outstanding as of
January 31, 1996), $10.0 million to finance capital expenditures and the
balance for working capital and general corporate purposes, including, as
described below, possible future investments, acquisitions or strategic
alliances.
The Company expects to use the net proceeds of this offering to repay
borrowings under its revolving credit facility with First Union National Bank
of North Carolina and Fleet Bank of Connecticut (formerly Shawmut Bank
Connecticut, N.A.), as agents (the "Agents"), which expires on July 1, 2000
(the "Credit Facility"), and thereafter to reborrow all or a portion of such
funds as required for working capital and general corporate purposes,
including investments, acquisitions and strategic alliances. Borrowings under
the Credit Facility were used to repay previously existing lines of credit, to
finance the Company's acquisition of Metrowide Communications, to pay
licensing fees to a software development company relating to information
systems, and to provide working capital and funding for general corporate
purposes. The Credit Facility bears interest at a floating rate, the weighted
average of which was 8.4% during 1995. In addition, the Company is obligated
to pay the Agents a contingent interest payment in an amount ranging from
$0.75 million to $2.1 million based on the appreciation in market value of
140,000 shares of Class A Common Stock from $14.92 per share. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The Company also expects to use approximately $10.0 million of the net
proceeds of this offering to finance proposed capital expenditures, including
expansion and upgrading of the Company's eight switches, further development
and integration of its billing and information systems, and new product
offerings, including frame relay and Internet services. The remainder of the
net proceeds will be used for working capital and general corporate purposes.
The Company's 1996 budget for capital expenditures is approximately $26.0
million and, therefore, the amount of net offering proceeds actually expended
by the Company for the foregoing types of capital expenditures and for working
capital and general corporate purposes may vary significantly depending on a
number of factors, including future revenue growth, the amount of cash
generated by the Company's operations and the progress of the Company's
product and service development efforts. The Credit Facility currently would
not allow the Company to make $26.0 million of capital expenditures in 1996.
The Company is seeking an amendment to the Credit Facility to, among other
things, permit increased capital expenditures.
Proceeds from this offering also could be used for possible future
investments, acquisitions or strategic alliances in companies that are
complementary to the Company's current operations. See "Risk Factors--Risks
Associated with Acquisitions, Investments and Strategic Alliances." While the
Company periodically evaluates investment, acquisition and strategic alliance
candidates, the Company has no present commitments or agreements with respect
to any such investment, acquisition or strategic alliance.
17
<PAGE>
PRICE RANGE OF CLASS A COMMON STOCK AND DIVIDEND POLICY
The Class A Common Stock is quoted on the Nasdaq National Market System
("Nasdaq Stock Market") under the symbol "ACCC." The following table sets
forth, for the periods indicated, the high and low sale prices of the Class A
Common Stock, as reported by the Nasdaq Stock Market, and the cash dividends
declared per share of Class A Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK PRICE CASH DIVIDENDS
------------------- DECLARED PER
HIGH LOW SHARE
--------- --------- --------------
<S> <C> <C> <C>
1994:
First Quarter....................... $26 1/4 $17 $0.03
Second Quarter...................... 24 1/4 13 0.03
Third Quarter....................... 19 3/4 12 3/4 0.03
Fourth Quarter...................... 19 13 3/4 0.03
1995:
First Quarter....................... $19 1/4 $14 $0.03
Second Quarter...................... 17 13 0.03
Third Quarter....................... 19 1/4 14 1/2 --
Fourth Quarter...................... 24 1/8 15 3/4 --
1996:
First Quarter (through February 20,
1996).............................. $29 1/2 $22 1/4 --
</TABLE>
For a recent last sale price reported on the Nasdaq Stock Market for the
Class A Common Stock see the cover page of this Prospectus. As of January 31,
1996, the Company had approximately 477 holders of record of the Class A
Common Stock.
The Company ceased paying quarterly cash dividends on its Class A Common
Stock in 1995 to use its cash to invest in the growth of its business. The
Company anticipates that all future earnings, if any, generated from
operations will be retained by the Company to develop and expand its business.
Any future determination with respect to the payment of dividends on the Class
A Common Stock will be at the discretion of the Board of Directors and will
depend upon, among other things, the Company's operating results, financing
condition and capital requirements, the terms of then-existing indebtedness
and preferred stock, general business conditions, Delaware corporate law
limitations and such other factors as the Board of Directors deems relevant.
The terms of the Company's Credit Facility prohibit the payment of dividends
without the Agents' consent. In addition, the Company is prohibited, under the
terms of the Company's Series A Preferred Stock, from paying or declaring any
dividend upon the Company's Class A Common Stock unless the prior written
consent of the holders of a majority of the outstanding shares of Series A
Preferred Stock is obtained. The Company's holding company structure may
adversely affect the Company's ability to obtain payments when needed from ACC
Corp.'s operating subsidiaries. See "Risk Factors--Holding Company Structure"
and Note 5 of Notes to Consolidated Financial Statements.
18
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1995 and as adjusted for the sale of shares of
Class A Common Stock offered hereby (at an assumed price of $27.50 per share)
and the application of the estimated net proceeds therefrom as described under
"Use of Proceeds."
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------
ACTUAL AS ADJUSTED (1)
------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Notes payable......................................... $ 1,966 $ 1,966
======= =======
Current maturities of long-term debt.................. $ 2,919 $ 2,919
======= =======
Long-term debt, including capital lease obligations
and Credit Facility.................................. $28,050 $ 7,077
Series A Preferred Stock, $1.00 par value, $1,000
liquidation value, cumulative, convertible; 10,000
shares authorized, issued and outstanding, actual and
as adjusted.......................................... 9,448 9,448
Minority interest..................................... 1,428 1,428
Shareholders' equity:
Preferred Stock, $1.00 par value; 1,990,000 shares
authorized, actual and as adjusted; and no shares
issued or outstanding, actual and as adjusted...... -- --
Class A Common Stock $.015 par value; 50,000,000
shares authorized, actual and as adjusted;
8,617,259 shares issued and 7,890,670 shares
outstanding, actual; and 10,367,259 shares issued
and 9,640,670 shares outstanding, as
adjusted (2)....................................... 129 155
Class B Common Stock, $.015 par value; 25,000,000
shares authorized, actual and as adjusted; and no
shares issued or outstanding, actual and as
adjusted........................................... -- --
Capital in excess of par value...................... 32,911 77,243
Cumulative translation adjustment................... (950) (950)
Retained earnings................................... (4,073) (4,073)
Treasury stock, 726,589 shares of Class A Common
Stock, actual and as adjusted...................... (1,610) (1,610)
------- -------
Total shareholders' equity........................ 26,407 70,765
------- -------
Total capitalization............................ $65,333 $88,718
======= =======
</TABLE>
- --------
(1) Following completion of this offering, the Company intends to use a
portion of the net proceeds received by it therefrom to repay all
indebtedness outstanding under the Credit Facility and, thereafter, will
reborrow funds under the Credit Facility as required to finance its
working capital requirements and for general corporate purposes. At
January 31, 1996, $19.0 million was outstanding under the Credit Facility.
See "Use of Proceeds."
(2) Does not include approximately (i) 1,485,394 shares of Class A Common
Stock issuable upon the exercise of options and warrants outstanding as of
January 31, 1996 at a weighted average exercise price of $16.17 per share,
(ii) 625,000 shares (as of January 31, 1996) of Class A Common Stock
issuable upon the conversion of the Series A Preferred Stock outstanding,
which is convertible at $16.00 per share or (iii) 20,000 shares of Class A
Common Stock issuable upon the exercise of additional options outstanding
as of January 31, 1996 at an exercise price of $23.00 per share, which are
subject to approval of the Company's shareholders. See "Description of
Capital Stock."
19
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATIONS DATA
The following selected historical consolidated financial data for each of
the years presented have been derived from the Company's audited consolidated
financial statements. The consolidated financial statements of the Company as
of December 31, 1994 and 1995 and for each of the three years in the period
ended December 31, 1995, together with the notes thereto and related report of
Arthur Andersen LLP, independent accountants, are included elsewhere in this
Prospectus. The following data should be read in conjunction with, and is
qualified by, the consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995 (1)
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER
MINUTE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenue:
Toll revenue.......... $ 49,563 $ 78,988 $ 100,646 $ 118,331 $ 175,269
Leased lines and
other................ 1,563 2,692 5,300 8,113 13,597
--------- --------- --------- --------- ---------
Total revenue....... 51,126 81,680 105,946 126,444 188,866
Network costs........... 32,343 52,314 70,286 79,438 114,841
--------- --------- --------- --------- ---------
Gross profit............ 18,783 29,366 35,660 47,006 74,025
Other operating
expenses:
Depreciation and
amortization......... 2,764 3,919 5,832 8,932 11,614
Selling expenses...... 2,295 3,350 8,726 14,497 21,617
General and
administrative....... 10,278 16,309 20,081 29,731 40,576
Other charges (2)..... -- -- -- 2,160 --
Asset write-down (3).. -- -- 12,807 -- --
--------- --------- --------- --------- ---------
Total other
operating expenses. 15,337 23,578 47,446 55,320 73,807
--------- --------- --------- --------- ---------
Income (loss) from
operations............. 3,446 5,788 (11,786) (8,314) 218
Other income (expense):
Interest income....... 39 276 205 124 198
Interest expense...... (240) (197) (420) (2,023) (5,131)
Terminated merger
costs................ -- -- -- (200) --
Gain on sale of
subsidiary stock..... -- -- 9,344 -- --
Foreign exchange gain
(loss)............... -- -- (1,094) 169 (110)
--------- --------- --------- --------- ---------
Total other income (201) 79 8,035 (1,930) (5,043)
(expense).......... --------- --------- --------- --------- ---------
Income (loss) from
continuing operations
before provision for
(benefit from) income
taxes and minority
interest............... 3,245 5,867 (3,751) (10,244) (4,825)
Provision for (benefit
from) income taxes..... 1,155 2,267 (3,743) 3,456 396
Minority interest in
loss (earnings) of
consolidated
subsidiary............. -- -- 1,661 2,371 (133)
--------- --------- --------- --------- ---------
Income (loss) from
continuing operations.. 2,090 3,600 1,653 (11,329) (5,354)
Loss from discontinued
operations (net of
income tax benefit of
$616 in 1991, $878 in
1992 and $667 in 1993). (1,197) (1,660) (1,309) -- --
Gain on disposal of
discontinued operations
(net of income tax
provision of $8,350 in
1993).................. -- -- 11,531 -- --
--------- --------- --------- --------- ---------
Net income (loss)....... $ 893 $ 1,940 $ 11,875 $ (11,329) $ (5,354)
========= ========= ========= ========= =========
Net income (loss) per
common and common
equivalent share
applicable to common
stock
from continuing opera-
tions (4)............. $ .36 $ .52 $ .24 $ (1.60) $ (.76)
Discontinued opera-
tions................ (.21) (.24) (.18) -- --
Gain on disposal of
discontinued
operations........... -- -- 1.64 -- --
--------- --------- --------- --------- ---------
Net income (loss)
per common and
common equivalent
share (4).......... $ .15 $ .28 $ 1.70 $ (1.60) $ (.76)
========= ========= ========= ========= =========
Weighted average number
of common shares....... 5,801,769 6,882,033 7,024,925 7,068,481 7,789,886
========= ========= ========= ========= =========
</TABLE>
(table continued, and footnotes appear, on next page)
20
<PAGE>
(continued from previous page)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1991 1992 1993 1994 1995 (1)
------- ------- -------- ------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AND PER MINUTE DATA)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL AND OPERATIONS
DATA:
Net cash provided by (used in)
operating activities.......... $ 3,141 $ 7,761 $(11,828) $ 1,093 $ 3,967
======= ======= ======== ======= =========
EBITDA(5)
United States................ $ 5,473 $ 6,184 $ 6,017 $ 5,847 $ 8,653
Canada....................... 737 3,523 2,423 (203) 7,299
United Kingdom............... -- -- (1,587) (5,026) (4,120)
------- ------- -------- ------- ---------
Total...................... $ 6,210 $ 9,707 $ 6,853 $ 618 $ 11,832
======= ======= ======== ======= =========
Billable minutes of use (in
thousands)(6)................. 296,119 475,422 683,073 882,993 1,181,663
Customer accounts at period
end........................... 25,846 50,318 98,400 202,991 310,815
Revenue per billable minute of
use........................... $ .17 $ .17 $ .16 $ .14 $ .16
Network cost per billable
minute of use................. $ .11 $ .11 $ .10 $ .09 $ .10
CONSOLIDATED BALANCE SHEET DATA
(7):
Cash and cash equivalents...... $ 327 $ 353 $ 1,467 $ 1,021 $ 518
Current assets................. 11,120 16,251 22,476 28,045 45,726
Current liabilities............ 12,577 27,889 23,191 32,016 56,074
Net working capital (deficit).. (1,457) (11,638) (715) (3,971) (10,348)
Property, plant and equipment,
net........................... 15,794 21,951 27,077 44,081 56,691
Total assets................... 29,292 45,450 61,718 84,448 123,984
Short-term debt, including
current maturities of long
term debt .................... 3,071 11,525 2,424 1,613 4,885
Long-term debt, excluding
current maturities............ 6,111 12,747 1,795 29,914 28,050
Redeemable preferred stock..... -- -- -- -- 9,448
Shareholders' equity........... 21,670 22,711 31,506 19,086 26,407
</TABLE>
- --------
(1) Includes the results of operations of Metrowide Communications from August
1, 1995, the date of acquisition.
(2) Represents $2.2 million of charges incurred in 1994 in connection with
conversion of the Company's network to equal access for its Canadian
customers. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--1995 Compared With 1994."
(3) In 1993, the Company recorded an asset write-down of $12,807. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Results of Operations--1994 Compared With 1993."
(4) Includes (i) in 1993, a gain on sale of common stock of the Company's
Canadian subsidiary of $1.33 per share and (ii) in 1995, a loss of $.07
per share related to redeemable preferred stock dividends and accretion.
(5) Represents income (loss) from operations plus depreciation and
amortization and asset write-down. In 1993, the Company recorded an asset
write-down of $12,807. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--1994
Compared With 1993." The Company has included information concerning
EBITDA herein because it understands that such information is used by
certain investors as one measure of an issuer's operating performance and
historical ability to service debt. EBITDA is not determined in accordance
with generally accepted accounting principles, is not indicative of cash
used (provided) by operating activities and should not be considered in
isolation or as an alternative to, or more meaningful than, measures of
performance determined in accordance with generally accepted accounting
principles.
(6) Defined as billable voice long distance minutes of use.
(7) Balance sheet data from discontinued operations is excluded.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion includes certain forward-looking statements. For a
discussion of important factors including, but not limited to continued
development of the Company's markets, actions of regulatory authorities and
competitors and dependence on management information systems, that could cause
actual results to differ materially from the forward-looking statements, see
"Risk Factors" and the Company's periodic reports incorporated herein by
reference.
GENERAL
The Company's revenue is comprised of toll revenue and leased lines and
other revenue. Toll revenue consists of revenue derived from ACC's long
distance and operator-assisted services. Leased lines and other revenue
consists of revenue derived from the resale of local exchange services, data
line services, direct access lines and monthly subscription fees. Network
costs consist of expenses associated with the leasing of transmission lines,
access charges and certain variable costs associated with the Company's
network. The following table shows the total revenue (net of intercompany
revenue) and billable minutes of use attributable to the Company's U.S.,
Canadian and U.K. operations during each of 1993, 1994 and 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1993 1994 1995
---------------- ---------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- --------- -------
(DOLLARS AND MINUTES IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
TOTAL REVENUE:
United States............... $ 45,150 42.6% $ 54,599 43.2% $ 65,975 34.9%
Canada...................... 60,643 57.2 67,728 53.6 84,421 44.7
United Kingdom.............. 153 .2 4,117 3.2 38,470 20.4
-------- ----- -------- ----- --------- -----
Total..................... $105,946 100.0% $126,444 100.0% $ 188,866 100.0%
======== ===== ======== ===== ========= =====
BILLABLE MINUTES OF USE:
United States............... 378,778 55.5% 445,619 50.5% 486,618 41.2%
Canada...................... 304,295 44.5 422,149 47.8 522,764 44.2
United Kingdom.............. -- -- 15,225 1.7 172,281 14.6
-------- ----- -------- ----- --------- -----
Total..................... 683,073 100.0% 882,993 100.0% 1,181,663 100.0%
======== ===== ======== ===== ========= =====
</TABLE>
The following table presents certain information concerning toll revenue per
billable minute and network cost per billable minute attributable to the
Company's U.S., Canadian and U.K. operations during each of 1993, 1994 and
1995:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
TOLL REVENUE PER BILLABLE MINUTE:
United States................................................ $.115 $.115 $.126
Canada....................................................... .187 .149 .146
United Kingdom............................................... -- .268 .220
NETWORK COST PER BILLABLE MINUTE:
United States................................................ $.070 $.070 $.075
Canada....................................................... .143 .108 .100
United Kingdom............................................... -- .177 .149
</TABLE>
The Company believes that its historic revenue growth as well as its
historic network costs and results of operations for each of its U.S.,
Canadian and U.K. operations generally reflect the state of development of the
Company's operations, the Company's customer mix and the competitive and
deregulatory environment in each of those markets. The Company entered the
U.S., Canadian and U.K. telecommunications markets in 1982, 1985 and 1993,
respectively.
22
<PAGE>
Deregulatory influences have affected the telecommunications industry in the
U.S. since 1984 and the U.S. market has experienced considerable competition
for a number of years. The competitive influences on the pricing of ACC U.S.'s
services and network costs have been stabilizing during the past few years.
This may change in the future as a result of recent U.S. legislation that
further opens the market to competition, particularly from RBOCs. The Company
expects competition based on price and service offerings to increase. See
"Risk Factors--Regulation" and "Risk Factors--Competition."
Because the deregulatory trend in Canada, which commenced in 1989, has
increased competition, ACC Canada experienced significant downward pressure on
the pricing of its services during 1994. The Company expects such downward
pressure to continue, although it is expected that the pricing pressure may
abate over time as the market matures. The impact of this pricing pressure on
revenues of ACC Canada is being offset, in part, by an increase in the
Canadian residential and student billable minutes of usage as a percentage of
total Canadian billable minutes of usage. Toll revenue per billable minute
attributable to residential and student customers in Canada generally exceeds
the toll revenue per billable minute attributable to commercial customers. The
Company expects that the net effect of changes to contribution charges will be
minimal in 1996 and will cause an increase of approximately Cdn $1.5 million
in the Company's 1997 network costs. However, additional reductions in
contribution rates may offset this increase. The Company also believes that
its network costs per billable minute in Canada may decrease during periods
after 1996 if there is an anticipated increase in long distance transmission
facilities available for lease from Canadian transmission facilities-based
carriers as a result of expected growth in the number and capacity of
transmission networks in that market. The foregoing forward-looking statements
are based upon expectations of actions that may be taken by third parties,
including Canadian regulatory authorities and transmission facilities-based
carriers. If such third parties do not act as expected, the Company's actual
results may differ materially from the foregoing discussion.
The Company believes that, because deregulatory influences have only
recently begun to impact the U.K. telecommunications industry, the Company
will continue to experience a significant increase in revenue from that market
during the next few years. The foregoing belief is based upon expectations of
actions that may be taken by U.K. regulatory authorities and the Company's
competitors; if such third parties do not act as expected, the Company's
revenues in the U.K. might not increase. If ACC U.K. were to experience
increased revenues, the Company believes it should be able to enhance its
economies of scale and scope in the use of the fixed cost elements of its
network. Nevertheless, the deregulatory trend in that market is expected to
result in competitive pricing pressure on the Company's U.K. operations which
could adversely affect revenues and margins. Since the U.K. market for
transmission facilities is dominated by British Telecom and Mercury, the
downward pressure on prices for services offered by ACC U.K. may not be
accompanied by a corresponding reduction in ACC U.K.'s network costs and,
consequently, could adversely affect the Company's business, results of
operations and financial condition, particularly in the event revenue derived
from the Company's U.K. operations accounts for an increasing percentage of
the Company's total revenue. Moreover, the Company's U.K. operations are
highly dependent upon the transmission lines leased from British Telecom. See
"Risk Factors--Dependence on Transmission Facilities-Based Carriers and
Suppliers." As each of the telecommunications markets in which it operates
continues to mature, growth in its revenue and customer base in each such
market is likely to decrease over time.
The Company believes that competition in non-U.S. markets is likely to
increase and become more like competition in the U.S. markets over time as
such non-U.S. markets continue to experience deregulatory influences. Prices
in the long distance industry have declined from time to time in recent years
and, as competition in Canada and the U.K. increases, prices are likely to
continue to decrease.
Since the commencement of the Company's operations, the Company has
undertaken a program of developing and expanding its service offerings,
geographic focus and network. In connection with this development and
expansion, the Company has made significant investments in telecommunications
circuits, switches, equipment and software. These investments generally are
made significantly in advance of anticipated customer growth and resulting
revenue. The Company also has increased its sales and marketing, customer
support, network operations and field services commitments in anticipation of
the expansion of its customer base and targeted geographic markets. The
Company expects to continue to expand the breadth and scale of its
23
<PAGE>
network and related sales and marketing, customer support and operations
activities. These expansion efforts are likely to cause the Company to incur
significant increases in expenses from time to time, in anticipation of
potential future growth in the Company's customer base and targeted geographic
markets.
The Company's operating results have fluctuated in the past and they may
continue to fluctuate significantly in the future as a result of a variety of
factors, some of which are beyond the Company's control. The Company expects
to focus in the near term on building and increasing its customer base,
service offerings and targeted geographic markets, which will require it to
increase significantly its expenses for marketing, and development of its
network and new services and may adversely impact operating results from time
to time. The Company's sales to other long distance carriers have been
increasing. Revenues from other resellers accounted for approximately 22%, 8%
and 9% of the revenues of ACC U.S., ACC Canada and ACC U.K., respectively, in
1995, and are expected to account for a higher percentage in the future. With
respect to these customers, the Company competes almost exclusively on price,
does not have long term contracts and generates lower gross margins as a
percentage of revenue. See "Risk Factors--Recent Losses; Potential
Fluctuations in Operating Results."
RESULTS OF OPERATIONS
The following table presents, for the three years ended December 31, 1995,
certain statement of income data expressed as a percentage of total revenue:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
-----------------------
1993 1994 1995 (1)
----- ----- --------
<S> <C> <C> <C>
Revenue:
Toll revenue......................................... 95.0% 93.6% 92.8%
Leased lines and other............................... 5.0 6.4 7.2
----- ----- -----
Total revenue...................................... 100.0 100.0 100.0
Network costs.......................................... 66.3 62.8 60.8
----- ----- -----
Gross profit........................................... 33.7 37.2 39.2
Other operating expenses:
Depreciation and amortization........................ 5.5 7.1 6.1
Selling expenses..................................... 8.2 11.5 11.4
General and administrative........................... 19.0 23.5 21.5
Other charges........................................ -- 1.7 --
Asset write-down..................................... 12.1 -- --
----- ----- -----
Total other operating expenses..................... 44.8 43.8 39.0
----- ----- -----
Income (loss) from operations.......................... (11.1) (6.6) .2
Total other income (expense)........................... 7.6 (1.5) (2.7)
Loss from continuing operations before provision for
(benefit from) income taxes and minority interest..... (3.5) (8.1) (2.5)
Provision for (benefit from) income taxes.............. (3.5) 2.7 .2
Minority interest in (earnings) loss of consolidated
subsidiary............................................ 1.6 1.9 (0.1)
----- ----- -----
Income (loss) from continuing operations............... 1.6% (8.9)% (2.8)%
===== ===== =====
</TABLE>
- --------
(1) Includes the results of operations of Metrowide Communications from August
1, 1995, the date of acquisition.
1995 COMPARED WITH 1994
Revenue. Total revenue for 1995 increased by 49.4% to $188.9 million from
$126.4 million in 1994, reflecting growth in both toll revenue and leased
lines and other revenue. Toll revenue for 1995 increased by 48.1% to $175.2
million from $118.3 million in 1994. In the United States, toll revenue
increased 19.3% as a result of a 9.2% increase in billable minutes of use and
a more favorable mix of toll services provided, offset slightly by a decrease
in prices per minute. The volume increases are a result of increased revenue
attributable to other carriers, large commercial customers and universities
and colleges, and an increased focus on small to medium-sized commercial
customers in the Company's service region. In Canada, toll revenue increased
20.9%, primarily as a result of a 23.8% increase in billable minutes
(primarily because of a 47.3% increase in the number
24
<PAGE>
of customer accounts), offset by a slight decline in prices. The price
declines are a result of the price competition, particularly in Canada, in
1994 which decreased rates in the middle of that year. Since the end of 1994,
ACC's average revenues per minute have been increasing slightly as a result of
the increasing percentage of U.K. revenues and the Company's successful
introduction of higher price per minute products. In the United Kingdom, toll
revenue increased 830.7%, due to significant volume increases (including a
310% increase in the number of customer accounts), offset by lower prices that
resulted from entering the commercial and residential markets and from
competitive pricing pressure. Exchange rates did not have a material impact on
revenue in either the U.K. or in Canada. At December 31, 1995, the Company had
approximately 311,000 customer accounts compared to approximately 203,000
customer accounts at December 31, 1994, an increase of 53%.
For 1995, leased lines and other revenue increased by 67.6% to $13.6 million
from $8.1 million in 1994. This increase was due to the Metrowide
Communications acquisition as of August 1, 1995, local service revenue
generated through the university program in the U.S. and the local exchange
operations in upstate New York, which generated nominal revenues in 1994.
Network Costs. Network costs increased to $114.8 million for 1995, from
$79.4 million in 1994, due to the increase in billable long distance minutes.
However, network costs, expressed as a percentage of revenue, decreased to
60.8% for 1995 from 62.8% in 1994 due to reduced access charges and increased
volume efficiencies in Canada and volume efficiencies in the U.K.
Other Operating Expenses. Depreciation and amortization expense increased to
$11.6 million for 1995 from $8.9 million in 1994. Expressed as a percentage of
revenue, these costs decreased to 6.1% in 1995 from 7.1% in 1994, reflecting
the increases in revenue realized during 1995. The $2.7 million increase in
depreciation and amortization expense was primarily attributable to assets
placed in service in the fourth quarter of 1994 and during 1995, particularly
equipment at U.S. university sites, switching centers in London and Manchester
in the U.K., and switch upgrades in Rochester, Syracuse, Vancouver and
Toronto. Amortization associated with the customer base and goodwill recorded
in the Metrowide Communications acquisition also contributed to the increase.
Selling expenses for 1995 increased by 49.1% to $21.6 million compared with
$14.5 million in 1994. Expressed as a percentage of revenue, selling expenses
were 11.4% for 1995 compared to 11.5% for 1994. The $7.1 million increase in
selling expenses was primarily attributable to increased marketing costs and
sales commissions associated with the rapid growth of the Company's operations
in Canada and the U.K. General and administrative expenses for 1995 were $40.6
million compared with $29.7 million in 1994. Expressed as a percentage of
revenue, general and administrative expenses were 21.5% for 1995, compared to
23.5% in 1994. The $10.9 million increase in general and administrative
expenses was primarily attributable to increased personnel costs and customer
service costs associated with the growth of the Company's customer bases and
geographic expansion in each country. Included in the 1995 costs was $1.3
million related to management restructuring costs. These costs consisted of a
$0.8 million payment in consideration of a non-compete agreement with the
Chairman of the Board in connection with his resignation as Chief Executive
Officer and $0.5 million related to severance expenses relating to three other
members of executive management. Also included in general and administrative
expenses for 1995 was approximately $1.8 million related to the Company's
local service market sector in New York State.
Other Charges. During the third quarter of 1994, the Company initiated the
process of converting its network to equal access for its Canadian customers.
Costs associated with this process included maintaining duplicate network
facilities during transition, recontacting customers and the administrative
expenses associated with accumulating the data necessary to convert the
Company's customer base to equal access. This process was completed during the
fourth quarter of 1994 at a total cost of $2.2 million, which has been
reflected as a charge to income from operations for 1994.
Other Income (Expense). Net interest expense increased to $4.9 million for
1995 compared to $1.9 million in 1994, due primarily to the Company's
increased borrowings on revolving lines of credit related to financing of
university projects in the U.S., expansion of the U.K. and the local service
businesses during 1995, write-off of deferred financing costs related to the
Company's lines of credit which were refinanced in July 1995, and
25
<PAGE>
debt service costs associated with 12% subordinated notes issued in May 1995.
On September 1, 1995, the subordinated notes were exchanged for Series A
Preferred Stock and, consequently, there will be no further interest expense
associated with the 12% subordinated notes. The Series A Preferred Stock
accrues dividends at the rate of 12% per annum. Upon any conversion of Series
A Preferred Stock, the accrued and unpaid dividends thereon will be
extinguished and no longer deemed payable. See "Description of Capital Stock."
Foreign exchange gains and losses reflect changes in the value of Canadian
and British currencies relative to the U.S. dollar for amounts lent to foreign
subsidiaries. Foreign exchange rate changes resulted in a net loss of $0.1
million for 1995, compared to a $0.2 million gain in 1994. The Company
continues to hedge all foreign currency transactions in an attempt to minimize
the impact of transaction gains and losses on the income statement. The
Company does not engage in speculative foreign currency transactions.
During 1994, the Company increased its income tax provision to provide for a
valuation allowance equal to 100% of the amount of the Company's foreign tax
benefits which had been recorded at December 31, 1993. No income tax benefits
have been recorded for the 1995 operating losses in Canada or the U.K. due to
the uncertainty of recognizing the income tax benefit of those losses in the
future.
Minority interest in loss of consolidated subsidiary reflects the portion of
the Company's Canadian subsidiary's income or loss attributable to the
approximately 30% of that subsidiary's common stock that is publicly traded in
Canada. For 1995, minority interest in earnings of the consolidated subsidiary
was a loss of $0.1 million compared to a gain of $2.4 million in 1994.
For the foregoing reasons, the Company's net loss for 1995 was $5.4 million,
compared to $11.3 million in 1994.
1994 COMPARED WITH 1993
Revenue. Total revenue for 1994 increased by 19.3% to $126.4 million from
$105.9 million in 1993, reflecting growth in toll revenue and leased lines and
other revenue. Toll revenue for 1994 increased by 17.6% to $118.3 million from
$100.6 million in 1993. This increase was due to the continued expansion of
the Company's university program in the U.S., Canada, and the U.K., and growth
in both the commercial and residential customer bases in Canada through
affinity programs and expansion throughout Western Canada. At December 31,
1994, the Company had approximately 203,000 customer accounts compared to
approximately 98,000 customer accounts at December 31, 1993, an increase of
more than 100%.
For 1994, leased lines and other revenue increased by 53.1% to $8.1 million
from $5.3 million in 1993. This increase was due to growth in data line sales
in Canada as well as increased local service revenue generated through the
university program in the U.S.
Network Costs. Network costs increased to $79.4 million for 1994, from $70.3
million in 1993, due to the increase in billable long distance minutes.
Network costs, as a percentage of revenue, decreased to 62.8% for 1994 from
66.3% in 1993 due to the Company's more efficient utilization of its leased
facilities through economies of scale, reduced contribution rates in Canada,
and a more favorable mix of traffic from increased residential and student
usage during off peak hours.
Other Operating Expenses. Depreciation and amortization expense increased to
$8.9 million for 1994, from $5.8 million in 1993. Expressed as a percentage of
revenue, these costs increased to 7.1% in 1994 from 5.5% in 1993, reflecting
the cost of investments in additional equipment in the U.S., Canada and the
U.K. incurred in advance of anticipated billable minute volume growth. The
$3.1 million increase in depreciation and amortization expense was primarily
attributable to assets placed in service in the fourth quarter of 1993 and the
first three quarters of 1994 related to the Company's continued expansion of
its network throughout Canada, the installation of additional switches and
increased on-site equipment at universities in the U.S.
Selling expenses for 1994 increased by 66.1% to $14.5 million from $8.7
million in 1993. Expressed as a percentage of revenue, selling expenses were
11.5% for 1994 compared to 8.2% in 1993. This increase was primarily
attributable to the aggressive expansion of the Company's marketing territory
into Western Canada,
26
<PAGE>
the expansion following the installation of a switch in Vancouver, British
Columbia, the opening of sales offices in Calgary, Alberta and Winnipeg,
Manitoba and the start-up of a nationwide marketing campaign in the U.K.
during the second half of 1994. During 1994, the Company added over 100,000
customers compared to approximately 46,000 added in 1993. The total costs of
the marketing effort related to these customers are reflected in the results
for the year while the revenue generated by the majority of these customers
(universities and students) did not begin until the end of the third quarter
corresponding to the beginning of the fall semester for most colleges and
universities. General and administrative expenses for 1994 increased by 48.1%
to $29.7 million from $20.1 million in 1993. Expressed as a percentage of
revenue, general and administrative expenses were 23.5% for 1994 compared to
19.0% in 1993. The increase was primarily attributable to increased personnel
costs and customer service costs associated with the growth of the Company's
customer bases in each country. Also included in general and administrative
expenses for 1994 was approximately $3.0 million in start-up costs related to
the Company's entry into the local service market sector in New York state
which occurred during the fourth quarter of 1994.
During 1993, the Company recorded a non-cash expense of $12.8 million
related to the write-down of the carrying value of certain assets of its U.S.
and Canadian operations. This charge included approximately $5.1 million
relating to certain fixed assets, including equipment used in connection with
a microwave network deemed obsolete due to technological changes, $1.2 million
related to the goodwill and customer bases from U.S. acquisitions, $2.8
million pertaining to an acquired customer base and accounts receivable
relating to acquisitions made by ACC Canada and $3.8 million relating to
autodialing equipment of ACC Canada resulting from the anticipated
implementation by the CRTC of equal ease of access regulations in July 1994.
Other Income (Expense). Net interest expense increased to $1.9 million for
1994 compared to $0.2 million in 1993, due primarily to the Company's
increased borrowings on lines of credit throughout 1994. During 1994, the
Company incurred terminated merger costs of $0.2 million resulting from a
transaction which was not completed. During 1993, the Company recognized gains
of $9.3 million from the sale of stock in its Canadian subsidiary and $10.2
million (net of provision for income taxes) from the sale of the Company's
cellular assets.
Foreign exchange gains and losses reflect changes in the value of Canadian
and British currencies relative to the U.S. dollar for amounts lent to these
foreign subsidiaries. Foreign exchange rate changes resulted in a net gain of
$0.2 million for 1994, compared to a $1.1 million loss in 1993 due to the
Company's program of hedging against foreign currency exposures for
intercompany indebtedness which began at the end of 1993.
During 1994, the Company increased its income tax provision to provide for a
valuation allowance equal to 100% of the amount of the Company's foreign tax
benefits which had been recorded at December 31, 1993. These benefits had been
accrued based on the Company's history of profitability in Canada. However,
given the magnitude of the Canadian subsidiary's losses in 1994, the Company
believed that a valuation allowance was necessary to reflect the uncertainty
of realizing the income tax benefits of those losses in the future.
Minority interest in loss of consolidated subsidiary reflects the portion of
the Company's Canadian subsidiary's income or loss attributable to the
approximately 30% of that subsidiary's common stock that is publicly traded in
Canada. For 1994, minority interest in loss of consolidated subsidiary
increased to $2.4 million from $1.7 million in 1993 due to the increase in net
losses generated by ACC Canada in 1994 when compared to 1993.
During the third quarter of 1993, the Company recognized a gain of $11.5
million, net of taxes, from the sale of the operating assets and liabilities
of its former cellular subsidiary, Danbury Cellular Telephone Co. The
operating loss from these discontinued operations was $1.3 million for 1993,
resulting in a net gain on the disposition of these operations of $10.2
million.
For the foregoing reasons, the Company's net loss for 1994 was $11.3 million
compared to net income of $11.9 million in 1993.
27
<PAGE>
QUARTERLY RESULTS
The following tables set forth certain unaudited quarterly financial data
for the preceding eight quarters through the quarter ended December 31, 1995.
In the opinion of management, the unaudited information set forth below has
been prepared on the same basis as the audited information set forth elsewhere
herein and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth herein. The
operating results for any quarter are not necessarily indicative of results
for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------
1994 1995
---------------------------------- ----------------------------------
MAR. 31 JUNE 30 SEP. 30 DEC. 31 MAR. 31 JUNE 30 SEP. 30 DEC. 31
------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $32,335 $28,807 $28,409 $36,893 $39,708 $41,633 $45,911 $61,607
Gross profit............ 11,970 9,933 10,660 14,443 14,963 15,319 17,806 25,929
Depreciation and
amortization........... 1,960 2,107 2,259 2,640 2,532 2,863 3,011 3,212
Income (loss) from
operations............. 955 (1,808) (6,005) (1,490) (446) (855) (364) 1,876
Total other income
(expense).............. (277) (243) (706) (670) (948) (1,473) (1,354) (1,265)
Net income (loss)....... $ 346 $(1,024) $(8,456) $(2,195) $(1,654) $(2,250) $(1,849) $ 395
</TABLE>
The Company's quarterly operating results have fluctuated and will continue
to fluctuate from period to period depending upon factors such as the success
of the Company's efforts to expand its geographic and customer base, changes
in, and the timing of expenses relating to, the expansion of the Company's
network, regulatory and competitive factors, the development of new services
and sales and marketing and changes in pricing policies by the Company or its
competitors. In view of the significant historic growth of the Company's
operations, the Company believes that period-to-period comparisons of its
financial results should not be relied upon as an indication of future
performance and that the Company may experience significant period-to-period
fluctuations in operating results in the future. See "Risk Factors--Recent
Losses; Potential Fluctuations in Operating Results."
Historically, a significant percentage of the Company's revenue has been
derived from university and college administrators and students, which caused
its business to be subject to seasonal variation. To the extent that the
Company continues to derive a significant percentage of its revenues from
university and college customers, the Company's results of operations could
remain susceptible to seasonal variation.
During the third quarter of 1994, the Company initiated the process of
converting its network to equal access for its Canadian customers. See "--1995
Compared With 1994--Other Charges."
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has satisfied its working capital requirements
through cash flow from operations, through borrowings and financings from
financial institutions, vendors and other third parties, and through the
issuance of securities. In addition, the Company used the proceeds from the
1993 sale of ACC Canada common stock and the 1993 sale of its cellular
operations to fund the expansion of its operations in Canada and the U.K.
During 1995, the Company raised $20.0 million, through the issuance of 825,000
shares of Class A Common Stock for $11.1 million (net of issuance expense) and
notes which were exchanged for 10,000 shares of Series A Preferred Stock for
$8.9 million (net of issuance expenses). In July 1995, the Company entered
into the five-year $35.0 million Credit Facility.
The Company's principal need for working capital is to meet its selling,
general and administrative expenses as its business expands. In addition, the
Company's capital resources have been used for the Metrowide Communications
acquisition, capital expenditures, various customer base acquisitions and,
prior to the termination thereof during the second quarter of 1995, payments
of dividends to holders of its Class A Common
28
<PAGE>
Stock. The Company has had a working capital deficit at the end of the last
several years and, at December 31, 1995, the Company had a working capital
deficit of approximately $10.3 million. This related to short term debt
associated with the Metrowide Communications acquisition and delays in
billings from, or the resolution of billing discussions with, vendors. The
Company has experienced delays from time to time in billings from carriers
from which it leases transmission lines. In addition, prior to making payment
to the carriers, the Company typically needs to resolve discrepancies between
the amount billed by the carriers and the Company's records concerning usage
of leased lines. The Company accrues an expense for the amount of its
estimated obligation to the carriers pending the resolution of such
discussions. During 1995, the Company's EBITDA minus capital expenditures and
changes in working capital was $(7.0) million.
The Company anticipates that, during 1996, its capital expenditures will be
approximately $26.0 million for the expansion of its network, the acquisition,
upgrading and development of switches and other telecommunications equipment
as conditions warrant, the development, licensing and integration of its
management information system and other software, the development and
expansion of its service offerings and customer programs and other capital
expenditures. ACC expects that it will continue to make significant capital
expenditures during future periods. The Company's actual capital expenditures
and cash requirements will depend on numerous factors, including the nature of
future expansion (including the extent of local exchange services, which is
particularly capital intensive) and acquisition opportunities, economic
conditions, competition, regulatory developments, the availability of capital
and the ability to incur debt and make capital expenditures under the terms of
the Company's financing arrangements. The Credit Facility currently would not
allow the Company to make $26.0 million of capital expenditures in 1996. The
Company is seeking an amendment to the Credit Facility to, among other things,
permit increased capital expenditures. Prior to 1995, the Company had funded
capital expenditures through its credit facilities and other short term debt
arrangements, which were refinanced in 1995 with the Credit Facility.
The Company is obligated to pay the lenders under the Credit Facility a
contingent interest payment based on the appreciation in market value of
140,000 shares of the Company's Class A Common Stock from $14.92 per share,
subject to a minimum of $0.75 million and a maximum of $2.1 million. The
payment is due upon the earlier of (i) January 21, 1997, (ii) any material
amendment to the Credit Facility, (iii) the signing of a letter of intent to
sell the Company or any material subsidiary, or (iv) the cessation of active
trading of the Company's Class A Common Stock on other than a temporary basis.
The Company is accruing this obligation over the 18-month period ending
January 21, 1997.
Any holder of Series A Preferred Stock has the right to cause the Company to
redeem such Series A Preferred Stock upon the occurrence of certain events,
including the entry of a judgment against the Company or a default by the
Company under any obligation or agreement for which the amount involved
exceeds $500,000. See "Description of Capital Stock--Preferred Stock--Series A
Preferred Stock."
As of January 31, 1996, the Company had approximately $0.9 million of cash
and cash equivalents and maintained the $35.0 million Credit Facility, subject
to availability under a borrowing base formula and certain other conditions
(including borrowing limits based on the Company's operating cash flow), under
which borrowings of approximately $19.0 million were outstanding,
approximately $13.0 million was available for borrowing and $3.0 million was
reserved for letters of credit. The maximum aggregate principal amount of the
Credit Facility is required to be reduced by $2.45 million per quarter
commencing on July 1, 1997 and by $2.91 million per quarter commencing on
January 1, 1999 until maturity on July 1, 2000. During 1995 the Company
entered into swap agreements with respect to $11.5 million of indebtedness
under the Credit Facility. The swap agreements expire at various times through
December 1998 and require the Company to pay interest at rates ranging from
5.98% to 6.02% per annum and permit the Company to receive interest at
variable rates. The Company also is obligated to pay, on demand commencing in
August of 1996, the remaining $0.9 million pursuant to a note issued in
connection with the Metrowide Communications acquisition. In addition, the
Company has $2.9 million, $2.6 million and $2.1 million of capital lease
obligations which mature during 1996, 1997 and 1998, respectively. The
Company's financing arrangements, which are secured by substantially all of
the Company's assets and the stock of certain subsidiaries, require the
Company to maintain certain financial ratios and prohibit the payment of
dividends.
29
<PAGE>
The Company believes that, under its present business plan, the net proceeds
from the sale by the Company of the Class A Common Stock offered hereby,
together with borrowings under the Credit Facility, vendor financing and cash
from operations will be sufficient to meet anticipated working capital and
capital expenditure requirements of its existing operations. The forward-
looking information contained in the previous sentence may be affected by a
number of factors, including the matters described in this paragraph and under
"Risk Factors." The Company may need to raise additional capital from public
or private equity or debt sources in order to finance its operations, capital
expenditures and growth for periods after 1996 and for the optional redemption
of Series A Preferred Stock if it is not converted. Moreover, the Company
believes that continued growth and expansion through acquisitions, investments
and strategic alliances is important to maintain a competitive position in the
market and, consequently, a principal element of the Company's business
strategy is to develop relationships with strategic partners and to acquire
assets or make investments in businesses that are complementary to its current
operations. The Company may need to raise additional funds in order to take
advantage of opportunities for acquisitions, investments and strategic
alliances or more rapid international expansion, to develop new products or to
respond to competitive pressures. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the Company's then
current shareholders may be reduced and such equity securities may have
rights, preferences or privileges senior to those of holders of Class A Common
Stock. There can be no assurance that the Company will be able to raise such
capital on acceptable terms or at all. In the event that the Company is unable
to obtain additional capital or is unable to obtain additional capital on
acceptable terms, the Company may be required to reduce the scope of its
presently anticipated expansion opportunities and capital expenditures, which
could have a material adverse effect on its business, results of operations
and financial condition and could adversely impact its ability to compete.
The Company may seek to develop relationships with strategic partners both
domestically and internationally and to acquire assets or make investments in
businesses that are complementary to its current operations. Such
acquisitions, strategic alliances or investments may require that the Company
obtain additional financing and, in some cases, the approval of the holders of
debt or preferred stock of the Company. The Company's ability to effect
acquisitions, strategic alliances or investments may be dependent upon its
ability to obtain such financing and, to the extent applicable, consents from
its debt or preferred stock holders.
SFAS NO. 123
The Company is required to adopt SFAS No. 123, "Accounting for Stock-Based
Compensation" in 1996. This Statement encourages entities to adopt a fair
value based method of accounting for employee stock option plans (whereby
compensation cost is measured at the grant date based on the value of the
award and is recognized over the employee service period) rather than the
current intrinsic value based method of accounting (whereby compensation cost
is measured at the grant date as the difference between market value and the
price for the employee to acquire the stock). If the Company elects to
continue using the intrinsic value method of accounting, pro forma disclosures
of net income and earnings per share, as if the fair value based method of
accounting had been applied, will need to be disclosed. Management has not
decided if the Company will adopt the fair value based method of accounting
for the Company's stock option plans. The Company believes that adopting the
fair value basis of accounting could have a material impact on the financial
statements and such impact is dependent upon future stock option activity.
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BUSINESS
ACC is a switch-based provider of telecommunications services in the United
States, Canada and the United Kingdom. The Company primarily provides long
distance telecommunications services to a diversified customer base of
businesses, residential customers and educational institutions. As a result of
the Company's historical focus on providing long distance services in the
Northeastern United States and recent regulatory changes, ACC has begun to
provide local telephone service as a switch-based local exchange reseller in
upstate New York and as a reseller of local exchange services in Ontario,
Canada. ACC operates an advanced telecommunications network consisting of
seven long distance international and domestic switches located in the U.S.,
Canada and the U.K., a local exchange switch located in the U.S., leased
transmission lines, and network management systems designed to optimize
traffic routing.
The Company's objective is to grow its long distance telecommunications
customer base in its existing markets and to establish itself in deregulating
Western European markets that have high density telecommunications traffic,
such as France and Germany, when the Company believes that business and
regulatory conditions warrant. The key elements of the Company's business
strategy are: (1) to broaden ACC's penetration of the U.S., Canadian and U.K.
telecommunications markets by expanding its long distance, local and other
service offerings and geographic reach; (2) to utilize ACC's operating
experience as an early entrant in deregulating markets in the U.S., Canada and
the U.K. to penetrate other deregulating telecommunications markets that have
high density telecommunications traffic; (3) to achieve economies of scale and
scope in the utilization of ACC's network; and (4) to seek acquisitions,
investments or strategic alliances involving assets or businesses that are
complementary to ACC's current operations.
The Company's principal competitive strengths are: (1) ACC's sales and
marketing organization and the customized service ACC offers to its customers;
(2) ACC's ability to offer competitive prices which the Company believes
generally are lower than prices charged by the major carriers in each of its
markets; (3) ACC's position as an early entrant in the U.S., Canadian and U.K.
markets as an alternative carrier; (4) ACC's focus on more profitable
international telecommunications traffic between the U.S., Canada and the
U.K.; and (5) ACC's switched-based networking capabilities. The Company
believes that switch ownership reduces reliance on other carriers and enables
the Company to efficiently route telecommunications traffic over multiple
leased transmission lines and to control costs, call record data and customer
information. The availability of existing transmission capacity in its markets
makes leasing of transmission lines attractive to the Company and enables it
to grow network usage without having to incur the significant capital and
operating costs associated with the development and operation of a
transmission line infrastructure.
ACC primarily targets business customers with approximately $500 to $15,000
of monthly usage, selected residential customers and colleges and
universities. The Company believes that, in addition to being price-driven,
these customers tend to be focused on customer service, more likely to rely on
a single carrier for their telecommunications needs and less likely to change
carriers than larger commercial customers. The diversity of ACC's targeted
customer base enhances network utilization by combining business-driven
workday traffic with night and weekend off-peak traffic from student and
residential customers. The Company strives to be more cost effective,
flexible, innovative and responsive to the needs of its customers than the
major carriers, which principally focus their direct sales efforts on large
commercial accounts and residential customers.
INDUSTRY OVERVIEW
The global telecommunications industry has dramatically changed during the
past several years, beginning in the U.S. with AT&T's divestiture of its 22
RBOCs in 1984 and culminating with the recently enacted amendments to the U.S.
Communications Act, and continuing in Canada, the U.K. and other countries
with various regulatory changes. Previously, the long distance
telecommunications industry in the U.S., Canada and the U.K. consisted of one
or a few large facilities-based carriers, such as AT&T, Bell Canada and
British Telecom. As a result of the AT&T divestiture and the recent
legislative changes in the U.S. and fundamental
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regulatory changes in Canada and the U.K., coupled with technological and
network infrastructure developments which increased significantly the voice
and data telecommunications transmission capacity of dominant carriers, the
long distance industry has developed into a highly competitive one consisting
of numerous alternative long distance carriers in each of these countries. In
addition, since the AT&T divestiture in 1984, competition has heightened in
the local exchange market in the U.S. and Canada. The Company anticipates that
deregulatory and economic influences will promote the development of
competitive telecommunications markets in other countries.
Long Distance Market. The U.S. long distance market has grown to
approximately $67 billion in annual revenues during 1994, according to FCC
estimates. AT&T has remained the largest long distance carrier in the U.S.
market, retaining slightly more than 55% of the market, with MCI and Sprint
increasing their respective market shares to approximately 17% and 10% of the
market during 1994. AT&T, MCI and Sprint constitute what generally is regarded
as the first tier in the U.S. long distance market. Large regional long
distance companies, some with national capabilities, such as Worldcom, Inc.
(formerly LDDS Metromedia Communications, Inc.), Cable & Wireless
Communications, Inc., Frontier Corp. and LCI International, constitute the
second tier of the industry. The remainder of the U.S. long distance market
share is comprised of several hundred smaller companies, including ACC U.S.,
known as third-tier carriers. In addition, recent U.S. legislation, which
removes certain long-standing restrictions on the ability of the RBOCs to
provide long distance services, will have a substantial impact on the long
distance market.
Since 1990, competition has existed in the Canadian long distance market.
The Canadian long distance market is dominated by a consortium of facilities-
based local and long distance telephone companies (e.g., Bell Canada, BC Tel,
Maritime Tel) operating as the "Stentor" group of companies. A second group of
long distance providers, consisting principally of Unitel, Sprint Canada and
fONOROLA Inc., own and operate transmission lines through which they provide
long distance voice and data services in the Canadian markets. Other long
distance providers, including ACC Canada, generally lease transmission lines
through which they resell long distance services in the Canadian market.
The international, national and local markets for voice telephone services
in the U.K. and Northern Ireland accounted for approximately (Pounds)1.4
billion, (Pounds)2.1 billion and (Pounds)2.2 billion, respectively, in
revenues during the 12 months ended March 31, 1995, accordingly to Oftel
estimates. In the U.K., British Telecom historically has dominated the
telecommunications market. British Telecom was the largest carrier during such
12 month period, with approximately 69%, 83% and 94% of the revenues from
international, national and local voice telephone services, respectively.
Mercury, which owns and operates interexchange transmission facilities, is the
second largest carrier of voice telecommunications in the U.K. The remainder
of the U.K. long distance market is comprised of emerging licensed public
telephone operators, such as Energis Communications Ltd., ("Energis") and
switched-based resellers such as ACC U.K., IDB Worldcom Services Inc., Esprit
Telecom of the U.K. Ltd. ("Esprit") and Sprint.
Long distance carriers in the U.S., Canada and the U.K. can be categorized
by several distinctions. One distinction is between transmission facilities-
based companies and non-transmission facilities-based companies, or resellers.
Transmission facilities-based carriers, such as AT&T, Bell Canada and British
Telecom, own their own long distance interexchange or transmission facilities
and originate and terminate calls through local exchange systems.
Profitability for transmission facilities-based carriers is dependent not only
upon their ability to generate revenues but also upon their ability to manage
complex networking and transmission costs. All of the first- and most of the
second-tier long distance companies in the U.S. markets are transmission
facilities-based carriers and generally offer service nationwide. Most
transmission facilities-based carriers in the third tier of the market offer
their service only in a limited geographic area. Some transmission facilities-
based carriers contract with other transmission facilities-based carriers to
provide transmission where they have geographic gaps in their facilities.
Switched-based resellers, such as the Company, carry their long distance
traffic over transmission lines leased from transmission facilities-based
carriers, originate and terminate calls through local exchange systems, and
contract with transmission facilities-based carriers to provide transmission
of long distance traffic either on a fixed rate lease basis or a call volume
basis. Profitability for non-transmission
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facilities-based carriers is dependent largely on their ability to generate
and retain sufficient revenue volume to negotiate attractive pricing with one
or more transmission facilities-based carriers.
A second distinction among long distance companies is that of switch-based
versus switchless resellers. Switch-based resellers, such as the Company, have
one or more switches, which are computers that direct telecommunications
traffic to form a transmission path between a caller and the recipient of a
call. All transmission facilities-based carriers are switch-based carriers, as
are many non-transmission facilities-based carriers, including ACC. Switchless
resellers depend on one or more transmission facilities-based carriers or
switch-based resellers for transmission and switching facilities. The Company
believes that switch ownership reduces reliance on other carriers and enables
the Company to efficiently route telecommunications traffic over multiple
leased transmission lines and to control costs, call record data and customer
information. The availability of existing transmission capacity in its markets
makes leasing of transmission lines attractive to the Company and enables it
to grow network usage without having to incur the significant capital and
operating costs associated with the development and operation of a
transmission line infrastructure.
Local Exchange Market. The U.S. local exchange market has given to
approximately $13 billion in annual revenues during 1994, according to FCC
estimates. In the U.S., the existing structure of the telecommunications
industry principally resulted from the AT&T divestiture. As part of the
divestiture, seven RBOCs were created to offer services in specified
geographic areas called LATAs. The RBOCs were separated from the long distance
provider, AT&T, resulting in the creation of distinct local exchange and long
distance markets. Since the AT&T divestiture, several factors have served to
promote competition in the local exchange market, including (i) the local
exchange carriers' monopoly position, which provided little incentive for the
local exchange companies to reduce prices, improve service or upgrade their
networks, and related regulations which required the local exchange carriers
to, among other things, lease transmission facilities to alternative carriers,
such as the Company, (ii) customer desire for an alternative to the local
exchange carriers, which developed in part as a result of competitive
activities in the long distance market and increasing demand for lower cost,
high quality, reliable services, and (iii) the advancement of fiber optic and
digital electronic technology, which combined the ability to transmit voice,
data and video at high speeds with increased capacity and reliability.
During the past several years, regulators in some states and at the federal
level issued rulings which favored competition and promoted the opening of
markets to new entrants. These rulings allowed competitive access providers of
telecommunications services to offer a number of new services, including, in
certain states, a broad range of local exchange services. The Company believes
the trend toward increased competition and deregulation of the
telecommunications industry is continuing, and will be accelerated by the
recently enacted U.S. legislation.
In Canada, similar factors promoting competition in the local exchange
market developed in response to regulatory developments in the Canadian long
distance telecommunications market and to technological advances in the
telecommunications industry. The CRTC has approved, in concept, the reduction
of the remaining restrictions on local exchange services in Canada and a
proceeding is being conducted to determine the appropriate timetable and terms
for implementation of its decision.
BUSINESS STRATEGY
The Company was an early entrant as an alternative carrier in the U.S.,
Canada and the U.K. The Company's objective is to grow its telecommunications
customer base in its existing markets and to establish itself in other
deregulating Western European markets with high density telecommunications
traffic. The key elements of the Company's business strategy are to increase
penetration of existing markets, enter new markets, improve operating
efficiency, and pursue acquisitions, investments and strategic alliances.
Increase Penetration of Existing Markets. ACC's consolidated revenue and
customer accounts have grown from $105.9 million and 98,400 to $188.9 million
and 310,815, respectively, over the three fiscal years ended December 31,
1995, although the Company expects its growth to decrease over time. The
Company plans to
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increase further its revenue and customer base in the U.S., Canadian and U.K.
markets by expanding its service offerings and geographic reach. The expansion
of the Company's service offerings is designed to reduce the effects of price
per minute decreases for long distance service and to decrease the likelihood
that customers will change telecommunications carriers. Through this strategy,
the Company will seek to build a broad base of recurring revenues in the U.S.,
Canada and the U.K. The Company also intends to offer local telephone services
in selected additional U.S. and Canadian markets, initially in New York,
Massachusetts and Ontario, as well as additional data communications services
in the U.S. and Canada. The Company believes that offering local services will
enhance its ability to attract and retain long distance customers and reduce
the Company's access charges as a percentage of revenues. In addition, the
Company is conducting feasibility studies to identify the market potential and
regulatory environment for adding or expanding distribution of video
conferencing, paging, domestic and international call back, Internet access,
smart card, facsimile and frame relay services in certain of its targeted
markets, and plans to introduce certain of those services in selected markets
during 1996.
Enter New Markets. The Company believes that its operating experience in
deregulating markets in the U.S., Canada and the U.K. and its experience as an
early entrant as an alternative carrier in those markets will assist ACC in
identifying opportunities in other deregulating countries with high density
telecommunications traffic. In particular, the Company believes that its
position in the U.S., Canadian and U.K. telecommunications markets and its
experience in providing international telecommunications service will assist
it in establishing a presence in France and Germany and other countries when
the Company believes that business and regulatory conditions warrant.
Improve Operating Efficiency. The Company strives to achieve economies of
scale and scope in the use of its network, which consists of leased
transmission facilities, seven international and domestic switches, a local
exchange switch and information systems. In order to enhance the efficiency of
the fixed cost elements of its network, the Company seeks to increase its
traffic volume and balance business-driven workday traffic with night and
weekend off-peak traffic from student and residential customers. The Company
anticipates that competition among transmission facilities-based providers of
telecommunications services in the U.S. and Canadian markets will afford ACC
opportunities for reductions in the cost of leased line facilities. The
Company seeks to reduce its network cost per billable minute of use by more
than any reduction in revenue per billable minute. The Company also intends to
acquire additional switches to enhance its network in anticipation of growth
in the Company's customer base and provide additional telecommunications
services. The Company believes that its network switches enable the Company to
efficiently route telecommunications traffic over multiple transmission
facilities to reduce costs, control access to customer information and grow
network usage without a corresponding increase in support costs.
Pursue Acquisitions, Investments and Strategic Alliances. As the Company
expands its service offerings and its network, the Company anticipates that it
will seek to develop strategic alliances both domestically and internationally
and to acquire assets and businesses or make investments in companies that are
complementary to the Company's current operations. The Company believes that
the pursuit of an active acquisition strategy is an important means toward
achieving growth and economies of scale and scope in its targeted markets.
Through acquisitions, the Company believes that it can further increase its
traffic volume to further improve the usage of the fixed cost elements of its
network.
SERVICES
Commercial Long Distance Services. The Company offers its commercial
customers in the U.S. and Canada an array of customized services and has
developed a similar range of service offerings for commercial customers in the
U.K.
In the U.S., although the Company historically has originated long distance
voice services principally in New York and Massachusetts, ACC is currently
authorized to originate long distance voice and data services in 44 states.
The Company's U.S. services include "1+" inter-LATA long distance service, and
private line service for which a customer is charged a fixed monthly rate for
transmission capacity that is reserved for that customer's
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traffic. The Company's U.S. business services also include toll-free "800" or
"888" services. In addition, the Company currently provides intra-LATA service
in certain areas for customers who make a large number of intra-LATA calls.
The Company installs automatic dialing equipment to enable customers to place
such calls over the Company's network without having to dial an access code.
However, various states, including New York, are moving to implement "equal
access" for intra-LATA toll calls, such that, the Company's customers in such
jurisdictions will be able to use the Company's network on a "1 +" basis to
complete intra-LATA toll calls. The Company's ability to compete in the intra-
LATA toll market depends upon the margin which exists between the access
charges it must pay to the local exchange company for originating and
terminating intra-LATA calls, and the retail toll rates established by the
local exchange carriers for the local exchange carriers' own intra-LATA toll
service. The Company's commercial services generally are priced below the
rates charged by the major carriers for similar services and are competitive
with those of other carriers. See "Risk Factors--Competition."
In Canada, ACC currently originates long distance voice and data services in
the Montreal, Toronto and Vancouver metropolitan areas as well as throughout
Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario and
Quebec. The Company offers its Canadian commercial customers both voice and
data telecommunications services. The Company's long distance voice services
are offered to its business customers in a nine-level discount structure
marketed under the name "Edge." Discounts are based on calling volume and call
destination and typically result in savings ranging from 10% to 20% when
compared to Stentor member rates. Calls to the U.S. are priced at a flat rate
regardless of the destination and international calls are priced at a
percentage discount to the rates charged by the Stentor group. The Company
also offers toll-free "800" services within Canada, as well as to and from the
U.S., and offers an ACC Travel Card providing substantial savings off Stentor
member "Calling Card" rates. ACC Canada has introduced a frame relay network
and Internet access services and now provides these services in all provinces
except Saskatchewan and Newfoundland.
ACC originates long distance voice services throughout the U.K. The Company
presently offers its U.K. customers voice telecommunications services. These
services include indirect access (known as "ACCess 1601") to the public
switched telephone network ("PSTN") and the use of direct access lines to the
Company's network (known as "ACCess Direct") for higher-volume business users.
Because ACCess 1601 is a mass market service, the prices offered are built
around a standard price list with volume discounts for high-volume users.
ACCess Direct is generally cost effective only for customers making at least
(Pounds)5,000 per month in calls.
The Company's U.S. and Canadian commercial customers are offered customized
services, such as comprehensive billing packages and its "Travel Service
Elite" domestic calling cards, which allow the customer to place long distance
calls at competitive rates from anywhere in the U.S. and Canada. The Company's
standard monthly statement includes a management summary report, a call detail
report recording every long distance call and facsimile call, and a pricing
breakdown by call destination. Optional calling pattern reports, which are
available at no extra cost, include call summaries by account code, area or
city code, LATA (for U.S. bound calls), international destination and time-of-
day. This information is available to customers in the form of hard copy,
magnetic tape or disk.
In the U.S., the Company is conducting feasibility studies to identify the
market potential and regulatory environment for offering additional services,
including video conferencing, paging, international call back, Internet
access, facsimile and frame relay services, and expects to introduce Internet
access, enhanced travel cards and video conferencing in 1996. In Canada, the
Company plans to expand frame relay and Internet access services in 1996. In
the U.K., the Company is also considering additional service offerings,
including teleconferencing, voice mail, calling cards, call-back and smart
card services and plans to introduce Internet access and prepaid calling cards
in 1996.
University Program. The Company's university program offers a variety of
telecommunications services to educational institutions ranging from long
distance service for administration and faculty, to integrated on-campus
services, including local and long distance service, voice mail, intercom
calling and operator services for
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students, administrators and faculty. The Company's sales, marketing and
engineering professionals work directly with college and university
administrators to design and implement integrated solutions for providing and
managing telecommunications equipment and services to meet the current and
prospective communications needs of their institutions. As part of its
program, the Company often installs telecommunications equipment which,
depending upon the circumstances, may include a switch or private branch
exchange, voice mail, cabling and, in the U.K., pay telephones. Pay phone
usage in the U.K., particularly at universities, is more prevalent than in the
U.S. and Canada. To access this market directly, the Company has established a
pay phone division in the U.K., which supplies pay phones that will
automatically route calls from universities and other institutions over ACC
U.K.'s network.
As of December 31, 1995, the Company had entered into a total of
approximately 140 contracts with colleges and universities in its three
geographic regions, of which approximately 75 were long-term agreements with
terms which generally range from three to 10 years in length. The Company
provided services to approximately 129,000 student accounts in the U.S.,
Canada and the U.K., as of December 31, 1995. The Company's long distance
rates in the U.S. for students generally are priced at a 10% discount from
those charged by the largest long distance carriers. The contracts in the U.S.
typically provide the Company with a right of first refusal to provide the
institution with any desired additional telecommunications services or
enhancements (based on market prices) during the term of the contract. The
Company's university contracts in Canada generally provide it with the
exclusive right, and in the U.K. the opportunity, to market to the school's
students, faculty and administration. Most of the Company's contracts in
Canada also provide for exclusive university support for marketing to alumni.
These arrangements allow the Company to market its services to these groups
through its affinity programs.
The Company offers university customers in the U.S., Canada and the U.K.
certain customized services. The Company offers academic institutions a
comprehensive billing package to assist them in reviewing and controlling
their telecommunications costs. For its university student customers in the
U.S. and Canada, the Company provides a billing format that indicates during
each statement period the savings per call (in terms of the discount from the
largest long distance carrier's rates) realized during the billing period, and
for all university customers the Company provides a call detail report
recording every long distance call. In addition, for university student
customers, the Company provides individual bills for each user of the same
telephone in a dormitory room or suite so that each student in the dormitory
room or suite can be billed for the calls he or she made.
Many of the Company's university customers in the U.S. are offered operator
services, which are available 24 hours per day, seven days per week. The
Company also offers its U.S. university customers its "Travel Service Elite"
domestic calling card. In addition, the Company sells a prepaid calling card
in the U.S., which allows customers to prepay for a predetermined number of
"units" representing long distance minutes. The rate at which the units are
used is determined by the destination of the calls made by the customer.
The Company's sales group targets university customers in the U.S., Canada
and in the U.K. In the U.S. university market, the Company generally targets
small to medium size universities and colleges with full time enrollments in
the range of 1,000 to 5,000 students. In Canada, the Company has been able to
establish relationships with several large universities. The Company believes
that, while its marketing approach in Canada is similar to that in the U.S.,
its nationwide presence in Canada assists it in marketing to larger academic
institutions. In the U.K., the Company has been able to establish long-term
relationships with several large universities. The Company believes that,
while its marketing approach in the U.K. is similar to that in the U.S., it is
able to access larger educational institutions because of its nationwide
presence and because transmission facilities-based carriers have not focused
on this market. The Company believes that competition in the university market
is based on price, as well as the marketing of unique programs and customizing
of telecommunications services to the needs of the particular institution and
that its ability to adapt to customer needs has enhanced its development of
relationships with universities.
Residential Long Distance Services. The Company offers its residential
customers in the U.S. and Canada a variety of long distance service plans and
is currently offering and developing similar plans for its residential
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customers in the U.K. In the U.S., the Company's "Save Plus" program provides
customers with competitively priced long distance service. In addition, U.S.
customers are provided with a "Phone Home" long distance service through
which, by dialing an 800 number plus an access code, callers can call home at
competitive rates. In general, the Company's residential services are priced
below AT&T's premium rates for similar services. In Canada, the Company offers
three different residential service plans. The basic offering is a discount
plan, with call pricing discounted from the Stentor companies' tariffed rates
for similar services depending on the time of day and day of the week. The
Company also offers its "Sunset Savings Plan," which allows calling across
Canada and to the continental U.S. at a flat rate per minute. In the Toronto
metropolitan area, the Company offers "Extended Metro Toronto" calling, which
provides flat rate calling within areas adjacent to Toronto that are long
distance from each other. Customized billing services are also offered to the
Company's U.S. and Canadian residential customers. In the U.K., all
residential customers use the Company's ACCess 1601 service, which provides
savings of as much as 28% off the standard rates charged for residential
service by British Telecom or Mercury, but requires the customer to dial a
four digit access code before dialing the area code and number.
International Long Distance Services. The Company offers international
products and services to both its existing customer base and to potential
customers in the U.S., Canada and the U.K. The Company's international simple
resale licenses (the "ISR Licenses") allow the Company to resell international
long distance service on leased international circuits connected to the PTSN
at both ends between the U.S. and U.K., Canada and the U.K., and certain other
countries. The Company believes it can compete effectively for international
traffic due to the ISR Licenses it has obtained for traffic between the U.S.,
Canada and the U .K. which allow it to price its services at cost-based rates
that are lower than the international settlement-based rates that would
otherwise apply to such traffic. However, numerous other carriers also have
international simple resale licenses. The Company has leased fixed cost
facilities between these countries and is developing services for customers
with high volumes of traffic between and among the U.S., Canada and the U.K.
Local Exchange Services. Building on its experience in providing local
telephone service to various university customers, the Company took advantage
of recent regulatory developments in New York State and in 1994 began offering
local telephone service to commercial customers in upstate New York. As a
result of its August 1995 acquisition of Metrowide Communications, the Company
provides local telephone service as a reseller in Ontario, Canada. The Company
believes that it can strengthen its relationships with existing commercial,
university and college and residential customers in New York State and in
Ontario, Canada and can attract new customers by offering them local and long
distance services, thereby providing a single source for comprehensive
telecommunications services. Providing local telephone service will also
enable the Company to serve new local exchange customers even if they are
already under contract with a different interexchange carrier for long
distance service. Commencing in 1996, the Company plans to expand its local
telephone operations to selected other metropolitan areas in New York and
Massachusetts.
The Company has only limited experience in providing local telephone
services, having commenced providing such services in 1994, and to date has
experienced an operating cash flow deficit in that business. In order to
attract local customers, the Company must offer substantial discounts from the
prices charged by local exchange carriers and must compete with other
alternative local companies that offer such discounts. Larger, better
capitalized alternative local providers, including AT&T and Time Warner Cable,
among others, will be better able to sustain losses associated with discount
pricing and initial investments and expenses. The local telephone service
business requires significant initial investments and expenses in capital
equipment, as well as significant initial promotional and selling expenses.
There can be no assurance that the Company will be able to lease transmission
facilities from local exchange carriers at wholesale rates that will allow the
Company to compete effectively with the local exchange carriers or other
alternative providers or that the Company will generate positive operating
margins or attain profitability in its local telephone service business.
SALES AND MARKETING
The Company markets its services in the U.S., Canada and the U.K. through a
variety of channels, including ACC's internal sales forces, independent sales
agents, co-marketing arrangements and affinity programs. The
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Company has a total of approximately 130 internal sales personnel and
approximately 200 independent sales agents serving its U.S., Canadian and U.K.
markets. Although it has not experienced significant turnover in recent
periods, a loss of a significant number of independent sales agents could have
a significant adverse effect on the Company's ability to generate additional
revenue. The Company maintains a number of sales offices in the Northeastern
U.S., Canada, and in London, Manchester and Cambridge, England. In addition,
with respect to its university and student customers in each country, the
Company has designated representatives to assist in customer enrollment,
dissemination of marketing information, complaint resolution and, in some
cases, collection of customer payments, with representatives located on some
campuses. The Company actively seeks new opportunities for business alliances
in the form of affinity programs and co-marketing arrangements to provide
access to alternative distribution channels.
The following table indicates the approximate number of commercial,
residential and student customer accounts maintained by the Company as of
December 31, 1994 and 1995 in the U.S., Canada and the U.K., respectively:
<TABLE>
<CAPTION>
CUSTOMER ACCOUNTS AS OF DECEMBER 31,
--------------------------------------------------------------
1994 1995
------------------------------ -------------------------------
UNITED UNITED 1994 UNITED UNITED 1995
STATES CANADA KINGDOM TOTAL STATES CANADA KINGDOM TOTAL
------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial...... 9,397 16,940 794 27,131 10,858 22,685 11,938 45,481
Residential..... 19,979 53,103 517 73,599 20,909 100,239 14,825 135,973
Student......... 59,213 33,492 9,556 102,261 81,950 29,580 17,831 129,361
------ ------- ------ ------- ------- ------- ------ -------
Total......... 88,589 103,535 10,867 202,991 113,717 152,504 44,594 310,815
====== ======= ====== ======= ======= ======= ====== =======
</TABLE>
United States. The Company markets its services in the U.S. through ACC's
internal sales personnel and independent sales agents as well as through
attendance and representation at significant trade association meetings and
industry conferences of target customer groups. The Company's sales and
marketing efforts in the U.S. are targeted primarily at business customers
with $500 to $15,000 of monthly usage, selected residential customers and
universities and colleges. The Company also markets its services to other
resellers and rebillers. The Company plans to leverage its market base in New
York and Massachusetts into other New England states and Pennsylvania and to
eventually extend its marketing focus in other states. ACC has obtained
authorization to originate long distance voice services in 44 states. The
Company plans to expand its local telephone service operations to selected
other New York and Massachusetts metropolitan areas.
Canada. The Company markets its long distance services in Canada through
internal sales personnel and independent sales agents, co-marketing
arrangements and affinity programs. The Company focuses its direct selling
efforts on medium-sized and large business customers. The Company also markets
its services to other resellers and rebillers. The Company uses independent
sales agents to target small to medium-sized business and residential
customers throughout Canada. These independent sales agents market the
Company's services under contracts that generally provide for the payment of
commissions based on the revenue generated from new customers obtained by the
representative. The use of an independent agent network allows the Company to
expand into additional markets without incurring the significant initial costs
associated with a direct sales force.
In addition to marketing its residential services in Canada through
independent sales agents, the Company has developed several affinity programs
designed to attract residential customers within specific target groups, such
as clubs, alumni groups and buying groups. The use of affinity programs allows
the Company to target groups with a nationwide presence without engaging in
costly nationwide advertising campaigns. For example, ACC Canada has
established affinity programs with such groups as the Home Service Club of
Canada, the University of Toronto and the University of British Columbia. In
addition, the Company has developed a co-marketing arrangement with Hudson's
Bay Company (a large Canadian retailer) through which the Company's
telecommunications services are marketed under the name "The Bay Long Distance
Program."
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United Kingdom. In the U.K., the Company markets its services to business
and residential customers, as well as other telecommunications resellers,
through a multichannel distribution plan including its internal sales force,
independent sales agents, co-marketing arrangements and affinity programs.
The Company generally utilizes its internal sales force in the U.K. to
target medium and large business customers which typically have enough volume
to warrant a direct access line to the Company's switch, thereby bypassing the
PSTN. The Company markets its services to small and medium-sized businesses
through independent sales agents. Telemarketers also are used to market
services to small business customers and residential customers and to generate
leads for the other members of the Company's internal sales force and
independent sales agents. ACC U.K. has established an internal marketing group
that is focused on selling its service to other telecommunications resellers
in the U.K. and other European countries on a wholesale basis. In October
1995, the Company entered into a co-marketing arrangement with London
Electricity PLC through which the electric utility offers long distance
telephone services to its London customers which are co-branded with ACC.
NETWORK
In the U.S., Canada and the U.K., the Company utilizes a network of lines
leased under volume discount contracts with transmission facilities-based
carriers, much of which is fiber optic cable. To maximize efficient
utilization, the Company's network in each country is configured with two-way
transmission capability that combines over the same network the delivery of
both incoming and outgoing calls to and from the Company's switches. The
selection of any particular circuit for the transmission of a call is
controlled by routing software, located in the switches, that is designed to
cause the most efficient use of the Company's network. The Company evaluates
opportunities to install switches in selected markets where the volume of its
customer traffic makes such an investment economically viable. Utilization of
the Company's switches allows ACC to route customer calls over multiple
networks to reduce costs. As of December 31, 1995, the Company operated
switches for its call traffic in eight locations and maintained 19 additional
points of presence ("POPs") in the U.S., Canada and the U.K.
Some of the Company's contracts with transmission facilities-based carriers
contain under-utilization provisions. These provisions require the Company to
pay fees to the transmission facilities-based carriers if the Company does not
meet minimum periodic usage requirements. The Company has not been assessed
with any underutilization charges in the past. However, there can be no
assurance that such charges would not be assessed in the future. Other
resellers generally contract with the Company on a month-to-month basis,
select the Company almost exclusively on the basis of price and are likely to
terminate their arrangements with the Company if they can obtain better
pricing terms elsewhere. The Company uses projected sales to other resellers
in evaluating the trade-offs between volume discounts and minimum utilization
rates it negotiates with transmission facilities-based carriers. If sales to
other resellers do not meet the Company's projected levels, the Company could
incur underutilization charges and be placed at a disadvantage in negotiating
future volume discounts.
ACC generally utilizes redundant, highly automated advanced
telecommunications equipment in its network and has diverse alternate routes
available in cases of component or facility failure. Automatic traffic re-
routing enables the Company to provide a high level of reliability for its
customers. Computerized automatic network monitoring equipment facilitates
fast and accurate analysis and resolution of network problems. The Company
provides customer service and support, 24-hour network monitoring, trouble
reporting and response, service implementation coordination, billing
assistance and problem resolution.
In the U.S., the Company maintains two long distance switches, one local
exchange switch and nine additional points of presence. These switches and
POPs provide an interface with the PSTN to service the Company's customers.
Lines leased from transmission facilities-based carriers link the Company's
U.S. POPs to its switches. ACC U.S. maintains a leased, direct trans-Atlantic
link with ACC U.K. that it established in 1994 following the Company's receipt
of its ISR License for U.K.-U.S. calls and international private line resale
authority in the U.S. The remaining term of the lease for the trans-Atlantic
link is 18 years.
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In Canada, the Company maintains switches in Toronto, Montreal and
Vancouver, together with seven POPs to provide an interface with the Canadian
PSTN. The Company also maintains frame relay nodes for switched data in
Toronto, Montreal, Vancouver and Calgary. The Company uses transmission lines
leased from transmission facilities-based carriers to link its Canadian POPs
to its switches. This network is also linked with the Company's switches in
the U.S. and the U.K. ACC Canada also maintains a leased, direct trans-
Atlantic link with ACC U.K. that it established in 1993 following the grant to
ACC U.K. of its ISR License. This transmission line enables ACC Canada to send
traffic to the U.K. at rates below those charged by Teleglobe Canada
("Teleglobe Canada"), the exclusive Canadian transmission facilities-based
carrier for international calls, other than those to and from the U.S. and
Mexico.
In the U.K., the Company maintains switches in London and Manchester,
England. ACC U.K. maintains three additional POPs providing interfaces with
the PSTN in the U.K., which are linked to its switches through transmission
lines leased from the major transmission facilities-based carriers. This
network is also linked with the Company's switches in the U.S. and Canada.
Customers can access the Company's U.K. network through direct access lines or
by dial-up access using either auto dialing equipment or indirect access code
dialing.
Network costs are the single largest expense incurred by the Company. The
Company strives to control its network costs and its dependence on other
carriers by leasing transmission lines on an economical basis. The Company
also has negotiated leases of private line circuits with carriers that operate
fiber optic transmission systems at rates independent of usage, particularly
on routes over which ACC carries high volumes of calls such as between the
U.S., Canada and the U.K. The Company attempts to maximize the efficient
utilization of its network in the U.S., Canada and the U.K. by marketing to
commercial and academic institution customers, who tend to use its services
most frequently on weekdays during normal business hours, and residential and
student customers, who use these services most often during night and weekend
off-peak hours.
INFORMATION SYSTEMS
The Company believes that maintaining sophisticated and reliable billing and
customer services information systems that integrate billing, accounts
receivables and customer support is a core capability necessary to record and
process the data generated by a telecommunications service provider. While the
Company believes its management information system is currently adequate, it
has not grown as quickly as the Company's business and substantial investments
are needed. In order to meet this challenge, ACC has made arrangements with
consultants and vendors to develop new proprietary information systems which
ACC has licensed to integrate customer services, management information,
billing and financial reporting. The Company has budgeted approximately $6.0
million for these systems, which are expected to be installed during 1996. The
systems are designed to (i) enhance the Company's ability to monitor and
respond to the evolving needs of its customers by developing new and
customized services, (ii) improve least-cost routing of traffic on ACC's
international network, (iii) provide sophisticated billing information that
can be tailored to meet the requirements of its customer base, (iv) provide
high quality customer service, (v) detect and minimize fraud, (vi) verify
payables to suppliers of telecommunications transmission facilities and (vii)
integrate additions to its customer base. A variety of problems are often
encountered in connection with the implementation of new information systems.
There can be no assurance that the Company will not suffer adverse
consequences or cost over-runs in the implementation of the new information
systems or that the new systems will be appropriate for the Company. See "Risk
Factors--Dependence on Effective Information Systems."
COMPETITION
The telecommunications industry is highly competitive and is significantly
influenced by the marketing and pricing decisions of the larger industry
participants. In each of its markets, the Company competes primarily on the
basis of price and also on the basis of customer service and its ability to
provide a broad array of telecommunications services. The industry has
relatively insignificant barriers to entry, numerous entities competing for
the same customers and a high average churn rate, as customers frequently
change long distance
40
<PAGE>
providers in response to the offering of lower rates or promotional incentives
by competitors. Although many of the Company's customers are under multi-year
contracts, several of the Company's largest customers (primarily other long
distance carriers) are on month-to-month contracts and are particularly price
sensitive. Revenues from other resellers accounted for approximately 22%, 8%
and 9% of the revenues of ACC U.S., ACC Canada and ACC U.K., respectively, in
1995, and are expected to account for a higher percentage in the future. With
respect to these customers, the Company competes almost exclusively on price
and does not have long term contracts. The industry has experienced and will
continue to experience rapid regulatory and technological change. Many
competitors in each of the Company's markets are significantly larger than the
Company, have substantially greater resources than the Company, control
transmission lines and larger networks than the Company and have long-standing
relationships with the Company's target customers. There can be no assurance
that the Company will remain competitive in this environment. Regulatory
trends have had, and may have in the future, significant effects on
competition in the industry. As the Company expands its geographic coverage,
it will encounter increased competition. Moreover, the Company believes that
competition in non-U.S. markets is likely to increase and become more like
competition in the U.S. markets over time as such non-U.S. markets continue to
experience deregulatory influences. See "Risk Factors--Regulation," "Risk
Factors--Competition" and "--Regulation."
Competition in the long distance industry is based upon pricing, customer
service, network quality and value-added services. The success of a non-
transmission facilities-based carrier such as the Company depends largely upon
the amount of traffic that it can commit to the transmission facilities-based
carrier and the resulting volume discount it can obtain. Subject to contract
restrictions and customer brand loyalty, resellers like the Company may
competitively bid their traffic among other national long distance carriers to
gain improvement in the cost of service. The relationship between resellers
and the larger transmission facilities-based carriers is twofold. First, a
reseller is a customer of the services provided by the transmission
facilities-based carriers, and that customer relationship is predicated
primarily upon the pricing strategies of the first tier companies. The
reseller and the transmission facilities-based carriers are also competitors.
The reseller will attract customers to the extent that its pricing for
customers is generally more favorable than the pricing offered the same size
customers by larger transmission facilities-based carriers. However,
transmission facilities-based carriers have been aggressive in developing
discount plans which have had the effect of reducing the rates they charge to
customers whose business is sought by the reseller. Thus, the business success
of a reseller is significantly tied to the pricing policies established by the
larger transmission facilities-based carriers. There can be no assurance that
favorable pricing policies will be continued by those larger transmission
facilities-based carriers.
United States. In the U.S., the Company is authorized to originate long
distance service in 44 states (although it currently derives most of its U.S.
revenues from a limited number of states). The Company competes for customers,
transmission facilities and capital resources with numerous long distance
telecommunications carriers and/or resellers, some of which are substantially
larger, have substantially greater financial, technical and marketing
resources, and own or lease larger transmission systems than the Company. AT&T
is the largest supplier of long distance services in the U.S. inter-LATA
market. The Company also competes within its U.S. call origination areas with
other national long distance telephone carriers, such as MCI, Sprint and
regional companies which resell transmission services. In the intra-LATA
market, the Company also competes with the local exchange carriers servicing
those areas. In its local service areas in New York State, the Company
presently competes or in the future will compete with New York Telephone,
Frontier Corp., AT&T, Citizens Telephone Co., MFS Communications Co., Inc.,
Time Warner Cable and with cellular and other wireless carriers. These local
exchange carriers all have long-standing relationships with their customers
and have financial, personnel and technical resources substantially greater
than those of the Company. Furthermore, the recently announced joint venture
between MCI and Microsoft, under which Microsoft will promote MCI's services,
the recently announced joint venture among Sprint, Deutsche Telekom AG and
France Telecom, to be called Global One, and other strategic alliances could
increase competitive pressures upon the Company.
In addition to these competitive factors, recent and pending deregulation in
each of the Company's markets may encourage new entrants. For example, as a
result of legislation recently enacted in the U.S., RBOCs will be
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allowed to enter the long distance market, AT&T, MCI and other long distance
carriers and utilities will be allowed to enter the local telephone services
market and cable television companies will be allowed to enter the
telecommunications market. In addition, the FCC has, on several occasions
since 1984, approved or required price reductions by AT&T and, in October
1995, the FCC reclassified AT&T as a "non-dominant" carrier, which
substantially reduces the regulatory constraints on AT&T. The Company believes
that the principal competitive factors affecting its market share in the U.S.
are pricing, customer service and variety of services. By offering high
quality telecommunications services at competitive prices and by offering a
portfolio of value-added services including customized billing packages, call
management and call reporting services, together with personalized customer
service and support, the Company believes that it competes effectively with
other local and long distance telephone carriers and resellers in its service
areas. The Company's ability to continue to compete effectively will depend on
its continued ability to maintain high quality, market-driven services at
prices generally below those charged by its competitors.
Canada. In Canada, the Company competes with facilities-based carriers,
other resellers and rebillers. The Company's principal transmission
facilities-based competitors are the Stentor group of companies, in
particular, Bell Canada, the dominant suppliers of long distance services in
Canada, Unitel, which provides certain facilities-based and long distance
services to business and residential customers, and Sprint Canada and fONOROLA
Inc., which provide certain transmission facilities-based services and also
acts as reseller of telecommunications services. The Company also competes
against CamNet, Inc., a reseller of telecommunications services. The Company
believes that, for some of its customers and potential customers, it has a
competitive advantage over other Canadian resellers as a result of its
operations in the U.S. and the U.K. In particular, the trans-Atlantic link
that it established in June 1993 between the U.K. and Canada allows ACC Canada
to sell traffic to the U.K. with a significantly lower cost structure than
many other resellers.
United Kingdom. In the U.K. the Company competes with facilities-based
carriers and other resellers. The Company's principal competitors in the U.K.
are British Telecom, the dominant supplier of telecommunications services in
the U.K., and Mercury. The Company also faces competition from emerging
licensed public telephone operators (who are constructing their own
facilities-based networks) such as Energis, and from other resellers including
IDB WorldCom Services Inc., Esprit and Sprint. The Company believes its
services are competitive, in terms of price and quality, with the service
offerings of its U.K. competitors primarily because of its advanced network-
related hardware and software systems and the network configuration and
traffic management expertise employed by it in the U.K.
REGULATION
United States
The services which the Company's U.S. operating subsidiaries provide are
subject to varying degrees of federal, state and local regulation. The FCC
exercises jurisdiction over all facilities of, and services offered by,
telecommunications common carriers to the extent that they involve the
provision, origination or termination of jurisdictionally interstate or
international communications. The state regulatory commissions retain
jurisdiction over the same facilities and services to the extent they involve
origination or termination of jurisdictionally intrastate communications. In
addition, many regulations may be subject to judicial review, the result of
which the Company is unable to predict.
Telecommunications Act of 1996. In February 1996, the "Telecommunications
Act of 1996" was enacted. The legislation is intended to introduce increased
competition in U.S. telecommunication markets. The legislation opens the local
services market by requiring local exchange carriers to permit interconnection
to their networks and by establishing local exchange carrier obligations with
respect to unbundled access, resale, number portability, dialing parity,
access to rights-of-way, mutual compensation and other matters. In addition,
the legislation codifies the local exchange carriers' equal access and
nondiscrimination obligations and preempts inconsistent state regulation. The
legislation also contains special provisions that eliminate the AT&T
Divestiture
42
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Decree (and similar antitrust restrictions on the GTE Operating Companies
("GTOCs")) which restricts the RBOCs from providing long distance services.
These new provisions permit an RBOC to enter the "out-of-region" long distance
market immediately and the "in-region" long distance market if it satisfies
several procedural and substantive requirements, including showing that
facilities-based competition is present in its market and that it has entered
into interconnection agreements which satisfy a 14-point "checklist" of
competitive requirements. The Company is likely to face significant additional
competition, including from NYNEX Corp., the regional RBOC in the Company's
Northeastern U.S. service area, which may be among the first RBOCs permitted
to offer in-region long distance services. The new legislation provides for
certain safeguards to protect against anticompetitive abuse by the RBOCs, but
whether these safeguards will provide adequate protection to alternative
carriers, such as the Company, and the impact of anticompetitive conduct if
such conduct occurs, is unknown.
Under the legislation, any entity, including long distance carriers such as
AT&T, cable television companies and utilities, may enter any
telecommunications market, subject to reasonable state consumer protection
regulations. The legislation also eliminates the statutory barrier which
prevented local telephone companies from providing video programming services
in their regions. The FCC may also forbear from regulating, in whole or in
part, certain types of carriers upon compliance with certain procedural
requirements. Such legislation, and the regulations that implement it will
subject the Company to increased competition and may have other, as yet
unknown, effects on the Company.
Federal. The FCC has classified ACC U.S. as a non-dominant interexchange
carrier. Generally, the FCC has chosen not to exercise its statutory power to
closely regulate the charges or practices of non-dominant carriers.
Nevertheless, the FCC acts upon complaints against such carriers for failure
to comply with statutory obligations or with the FCC's rules, regulations and
policies. The FCC also has the power to impose more stringent regulatory
requirements on the Company and to change its regulatory classification. The
Company believes that, in the current regulatory environment, the FCC is
unlikely to do so.
Until October 1995, AT&T was classified as a dominant carrier but AT&T
successfully petitioned the FCC for non-dominant status in the domestic
interstate and interexchange market. Therefore, certain pricing restrictions
that once applied to AT&T have been eliminated, which could result in
increased prices for services the Company purchases from AT&T and more
competitive retail prices offered by AT&T to customers. However, to date, the
Company has not found rate changes attributable to the price cap regulation of
AT&T and the local exchange carriers to have substantially adversely affected
its business. AT&T is, however, still classified as a dominant carrier for
international services. AT&T's application for reclassification as non-
dominant in the international market is currently pending.
Both domestic and international non-dominant carriers must maintain tariffs
on file with the FCC. Prior to a recent court decision which reversed the
FCC's "forbearance policy" that had excused non-dominant interexchange
carriers from filing tariffs with the FCC, domestic non-dominant carriers were
permitted by the FCC to file tariffs with a "reasonable range of rates"
instead of the detailed schedules of individual charges required of dominant
carriers. However, the Company must now file tariffs containing detailed
actual rate schedules. In reliance on the FCC's past relaxed tariff filing
requirements for non-dominant domestic carriers, the Company and most of its
competitors did not maintain detailed rate schedules for domestic offerings in
their tariffs. AT&T has filed suit against three of its major competitors for
failing to file tariffs during the period preceding the court decision. Until
the two year statute of limitations expires, the Company could be held liable
for damages for its past failure to file tariffs containing actual rate
schedules. Recent legislative changes may, however, result in the FCC's
adopting a new forbearance policy, and the FCC is expected to institute a
rule-making proceeding to consider the merits of reinstating a forbearance
policy. There can be no assurance in this regard, however.
In contrast to these recent developments affecting domestic long distance
service, the Company's U.S. subsidiaries have long been subject to
certification and tariff filing requirements for all international resale
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<PAGE>
operations. The Company's U.S. subsidiaries' international rates are not
subject to either rate-of-return or price cap regulation. The Company must
seek separate certification authority from the FCC to provide private line
service or to resell private line services between the U.S. and any foreign
country. The Company's ACC Global Corp. subsidiary has received authority from
the FCC to resell private lines on a switched service basis between the U.S.
and Canada, and was the first entity to file to obtain such authority between
the U.S. and the United Kingdom, which it received in September 1994.
Among domestic local carriers, only the incumbent local exchange carriers
are currently classified as dominant carriers. Thus, the FCC regulates many of
the local exchange carriers' rates, charges and services to a greater degree
than the Company's, although FCC regulation of the local exchange carriers is
expected to decrease over time, particularly in light of recent U.S.
legislation.
To date, the FCC has exercised its regulatory authority to supervise closely
the rates only of dominant carriers. However, the FCC has increasingly relaxed
its control in this area. For example, the FCC is in the process of repricing
local transport charges (the fee for the use of the local exchange carrier's
transmission facility connecting the local exchange carrier's central offices
and the interexchange carrier's access point). In addition, the local exchange
carriers have been afforded a degree of pricing flexibility in setting access
charges where adequate competition exists, and the FCC is considering certain
proposals which would relax further local exchange carriers access regulation.
Under interim rate structures adopted by the FCC, projected access charges for
AT&T, and possibly other large interexchange carriers, would decrease while
access charges for smaller interexchange carriers, including the Company,
would increase. While the outcome of these proceedings is uncertain, should
the FCC adopt permanent access charge rules along the lines of the interim
structures it has allowed to take effect, it could place the smaller
interexchange carriers, such as the Company, at a cost disadvantage, thereby
adversely affecting their ability to compete with AT&T and larger
interexchange carriers.
The FCC had previously required local exchange carriers to allow
"collocation" of "competitive access providers" ("CAPs") in or near the
central office switching areas of the local exchange carriers, to enable such
CAPs to provide transport service between a local exchange carrier's central
office switch and an interexchange carrier's point-of-presence or end user
location. However, a 1995 decision of the Federal Court of Appeals struck down
the FCC's Order as beyond its statutory authority. The FCC has replaced the
requirement of "collocation" with a requirement of "virtual collocation",
which similarly expands the authority and ability of CAPs to provide competing
transport service. The recently enacted Telecommunications Act of 1996
provides the FCC with additional statutory authority to mandate collocation.
In addition to its status as an access customer, the Company is now an
access provider in connection with its provision of local telephone service in
upstate New York. However, at present, the Company's provision of local
telephone service in New York State is not subject to most Federal access
rules and rate structure prescriptions applicable to the RBOCs and dominant
local exchange carriers.
State
The Company's intrastate long distance operations are subject to various
state laws and regulations including, in most jurisdictions, certification and
tariff filing requirements. The Company provides long distance service in all
or some portion of 40 states and has received the necessary certificate and
tariff approvals to provide intrastate long distance service in 44 states. All
states today allow some form of intrastate telecommunications competition.
However, some states restrict or condition the offering of intrastate/intra-
LATA long distance services by the Company and other interexchange carriers.
In the majority of those states that do permit interexchange carriers to offer
intra-LATA services, customers desiring to access those services are generally
required to dial special access codes, which puts the Company at a
disadvantage relative to the local exchange carrier's intrastate long distance
service, which generally requires no such access code dialing. Increasingly,
states are reexamining this policy and some states, such as New York, have
ordered that this disadvantage be removed. The Telecommunications Act of 1996
requires local exchange companies to adopt
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"intra-LATA equal access" as a pre-condition for the local exchange carriers
entering into the inter-LATA long distance business. Accordingly, it is
expected that the dialing disparity for intra-LATA toll calls will be removed
in the future. The Company expects to have "equal access", with respect to
intra-LATA calls, for over 90% of its New York State subscribers by the end of
1996. Implementation in other states may take longer. PSCs also regulate
access charges and other pricing for telecommunications services within each
state. The RBOCs and other local exchange carriers have been seeking reduction
of state regulatory requirements, including greater pricing flexibility. This
could adversely affect the Company in several ways. The regulated prices for
intrastate access charges that the Company must pay could increase both
relative to the charges paid by the largest interexchange carriers, such as
AT&T, and in absolute terms as well. Additionally, the Company could face
increased price competition from the RBOCs and other local exchange carriers
for intra-LATA long distance services, which may also be increased by the
removal of former restrictions on long distance service offerings by the RBOCs
as a result of recently enacted legislation.
New York State Regulation of Long Distance Service. Beginning in 1992, the
New York Public Service Commission ("NYPSC") commenced several proceedings to
investigate the manner in which local exchange carriers should be regulated.
In July 1995, the NYPSC ordered the acceptance of a Performance Regulation
Plan for New York Telephone. The terms of the plan, as ordered, included: (i)
a limitation on increases in basic local rates for the 5-year term of the
plan, (ii) implementation of intra-LATA equal access by no later than March
1996, (iii) reductions in the intrastate inter-LATA equal access charges which
the Company and other interexchange carriers pay over the next five years
totaling 33%, (iv) reductions in the intra-LATA toll rates charged to the end
user customer over the next five years totaling 21%, and (v) an intercarrier
compensation plan that reduced the rates paid by the competitive local
exchange carriers (including the Company's subsidiaries) by one-half. New York
Telephone does have some increased ability to restructure rates and to request
rate reductions, but all rate changes are still subject to NYPSC approval. New
York Telephone is also required to meet various service quality measurements,
and will be subject to financial penalties for failure to meet these
objectives.
In a manner similar to the FCC, the NYPSC has adopted revised rules
governing the manner in which intrastate local transport elements of access
charges are to be priced. These revisions accompanied its decision ordering
local exchange carriers to permit "collocation" for intrastate special access
and switched access transport services. In general, where CAPs have
established interconnections at the switches of individual local exchange
carriers, the local exchange carriers will be given expanded authority to
enter into individually negotiated contracts with interexchange carriers for
transport service. At the same time, the access charges to other interexchange
carriers located at the same switching facilities generally will be lowered.
If insufficient competition is present at that switching facility, the pre-
existing intrastate "equal price per unit of traffic" rule will remain in
effect. While the presence of switch interconnections may actually lower the
price the Company may pay for local transport services, the ability of
carriers that handle large traffic volumes, such as AT&T, to negotiate flat
rate direct transport charges may result in the Company paying more per unit
of traffic than its competitors for local transport service.
New York State Regulation of Local Telephone Service. The NYPSC has
determined that it will allow competition in the provision of local telephone
service in New York State, including "alternate access," private line services
and local switched services. The Company applied to the NYPSC for authority to
provide such services, and received certifications in early 1994 to offer
these services. The NYPSC has also authorized resale of local exchange
services, which may allow significant market entry by large toll carriers such
as AT&T and MCI.
The Company's ability to offer competing local services profitably will
depend on a number of factors. For the Company to compete effectively against
New York Telephone, Frontier Corp. and other local exchange carriers in the
Company's upstate New York service areas, it must be able to interconnect with
the network of local exchange carriers in the markets in which it plans to
offer local services, obtain direct telephone number assignments and, in most
cases, negotiate with those local exchange carriers for certain services such
as leased
45
<PAGE>
lines, directory assistance and operator services on commercially acceptable
terms. The order issued in the New York Telephone Performance Regulation Plan
(described above) established prices for interconnection and required New York
Telephone to tariff this service, making it generally available to all
competitors, including the Company. The actual monies paid by the Company to
New York Telephone for terminating the Company's traffic, and the monies
received by the Company from New York Telephone for terminating New York
Telephone traffic, are subject to NYPSC regulation and will depend upon the
Company's compliance with certain service obligations imposed by the NYPSC,
including the obligation to serve residential customers. The rates will also
affect the Company's competitive position in the intra-LATA toll market
relative to the local exchange carrier and major interexchange carriers such
as AT&T and MCI, which may offer intra-LATA toll services. The NYPSC has also
issued orders assuring local telephone service competitors access to number
resources, listing in the local exchange carrier's directory and the right to
reciprocal intercarrier compensation arrangements with the local exchange
carriers, and also establishing interim rules under which competitive
providers of local telephone service are entitled to comparable access to and
inclusion in local telephone routing guides and access to the customer
information of other carriers necessary for billing or other services. The
Company has obtained number assignments in 12 upstate New York markets and has
applications pending in 11 additional cities.
The NYPSC has also adopted interim rules that would subject competitive
providers of local telephone service to a number of rules, service standards
and requirements not previously applicable to "nondominant" competitors such
as the Company. These rules include requirements involving "open network
architecture," provision of reasonable interconnection to competitors, and
compliance with the NYPSC's service quality standards and consumer protection
requirements. As part of its "open network architecture" obligations, the
Company could be required to allow collocation with its local toll switch upon
receipt of a bona fide request by an interexchange carrier or other carrier.
Compliance with these rules in connection with the Company's provision of
local telephone service may impose new and significant operating and
administrative burdens on the Company. This proceeding will also determine the
responsibilities of new local service providers with respect to subsidies
inherent in existing local exchange carrier rates.
Local Telephone Service in Massachusetts. The Massachusetts Department of
Public Utilities ("DPU") has initiated a docket (currently in its briefing
stages) to determine the format for local competition in that state. The
format appears to be similar to the structure developing in New York State.
Pending the outcome of this proceeding, the DPU is allowing companies to apply
for certification as local exchange carriers and to begin operations under
interim agreements. The Company is in the process of applying for
certification.
The Company's ability to construct and operate competitive local service
networks for both local private line and switched services will depend upon,
among other things, implementation of the structural market reforms discussed
above, favorable determinations with respect to obligations by the state and
federal regulators, and the satisfactory implementation of interconnection
with the local exchange carriers.
Canada
Long distance telecommunications services in Canada generally are subject to
regulation by the CRTC. As a result of significant regulatory changes during
the past several years, the historical monopolies for long distance service
granted to regional telephone companies in Canada have been terminated. This
has resulted in a significant increase in competition in the Canadian long
distance telecommunications industry.
CRTC Decisions. In March 1990, the CRTC for the first time permitted non-
facilities-based carriers, such as ACC Canada, to aggregate the traffic of
customers on the same leased interexchange circuits in order to provide
discounted long distance voice services in the provinces of Ontario, Quebec
and British Columbia. In September 1990, the CRTC also authorized carriers in
addition to members of the Stentor consortium to interconnect their
transmission facilities with the Message Toll Service ("MTS") facilities of
Teleglobe Canada, for the purpose of allowing resellers, such as ACC Canada,
to resell international long distance MTS service. Prior to this decision,
Bell Canada and other members of Stentor were the exclusive long distance
carriers interconnected to Teleglobe Canada's MTS facilities.
46
<PAGE>
In June 1992, the CRTC effectively removed the monopoly rights of those
Stentor member companies that were parties to this proceeding with respect to
the provision of transmission facilities-based long distance voice services in
the territories in which they operate and opened the provision of these
services to substantial competition in all provinces of Canada other than
Alberta, Saskatchewan and Manitoba. Competition has subsequently been
introduced in Alberta and Manitoba, which are subject to CRTC regulation, and
Saskatchewan, which has not yet become subject to CRTC regulation. Among other
things, the CRTC also directed the telephone companies that were subject to
this decision to provide Unitel with "equal ease of access;" i.e., to allow
Unitel to directly connect its network to the telephone companies' toll and
end office switches to allow Unitel's customers to make long distance calls
without dialing extra digits. In July 1993, the CRTC ordered the same
telephone companies to provide resellers with equal ease of access upon
payment of contribution, network modification and ongoing access charges on
the same general basis as for transmission facilities-based carriers.
At the same time, the CRTC also required telephone company competitors to
assume certain financial obligations, including the payment of "contribution
charges" designed to ensure that each long distance carrier bears a fair
proportion of the subsidy that long distance services have traditionally
contributed to the provision of local telephone service. As a result,
contribution charges payable by resellers were increased. These charges are
levied on resellers as a monthly charge on leased access lines. The charges
vary for each telephone company based on that company's estimated loss on
local services. Contribution charges were reduced by a discount which was
initially 25%, and which declines over time to zero in 1998. Resellers, whose
access lines were connected only to end offices on a non-equal access basis,
initially paid contribution charges of 65% of the equal access contribution
rates, rising over a five-year period to an 85% rate thereafter. The CRTC also
established a mechanism under which contribution rates will be re-examined on
a yearly basis. In March 1995, the CRTC decreased the contribution charges
required to be paid by alternate long distance service providers to the local
telephone companies, and made such decreases retroactive to January 1, 1994.
Contribution charges payable to Bell Canada were reduced by 23%, and those
payable to BC Tel by 13%.
Transmission facilities-based competitors and resellers that obtained equal
ease of access also assumed approximately 30% of the estimated Cdn. $240
million cost required to modify the telephone companies' networks to
accommodate interconnection with competitors as well as a portion of the
ongoing costs of the telephone companies to provide such interconnection.
Initial modification charges are spread over a period of 10 years. These
charges and costs are payable on the basis of a specified charge per minute.
In September 1994, the CRTC established substantial changes to Canadian
telecommunications regulation, including: (i) initiation of a program of rate
rebalancing, which would entail three annual increases of Cdn. $2 per month in
rates for local service, with corresponding decreases in rates for basic toll
service, and an indication from the CRTC that there would be no price changes
which would result in an overall price increase for North American basic toll
schedules combined; (ii) the telephone companies' monopoly local and access
services, including charges for bundled services provided to competitors (the
Utility segment), would remain in the regulated rate base, and the CRTC would
replace earnings regulation for the Utility segment with price caps effective
January 1, 1998; (iii) other services (the Competitive segment) would not be
subject to earnings regulation after January 1, 1995, after which a Carrier
Access Tariff would become effective, which would include charges for
contribution, start-up cost recovery and charges for bundled services
applicable to the telephone companies' and competitors' traffic based on a per
minute calculation, rather than the per trunk basis previously used to
calculate contribution charges; (iv) while the CRTC considered it premature to
forebear from regulating interexchange services, it considered that the
framework set forth in the decision may allow forbearance in the future (such
forbearance has subsequently occurred in the case of certain non-dominant
transmission facilities-based carriers); (v) the CRTC concluded that barriers
to entry should be reduced for the local service market, including basic local
telephone service and switched network alternatives, and has subsequently
initiated proceedings to implement unbundled tariffs, co-location of
facilities and local number portability; and (vi) the intention to consider
applying contribution charges to other services using switched access, not
only to long distance voice services.
47
<PAGE>
Changes to these matters that were announced in October 1995 were the
following: (i) rate rebalancing, with Cdn. $2 per month local rate increases
commencing in each of January 1996 and January 1997 and another unspecified
increase in 1998 (the contribution component of the Carrier Access Tariff is
to be reduced correspondingly, but a corresponding reduction of basic North
American long distance rates ordered by the CRTC was reversed by the Federal
Cabinet in December 1995); (ii) reductions in contribution charges effective
January 1, 1995, with contribution charges payable to Bell Canada reduced from
1994 levels by 16%, and those payable to BC Tel by 27%; (iii) changes to the
costing methodology of the telephone companies including (a) the establishment
of strict rules governing telephone company investments in competitive
services involving broadband technology, (b) the requirement that the
Competitive segment pay its fair share of joint costs incurred by both the
Utility and Competitive segments, and (c) a directive specifying that revenues
for many unbundled items must be allocated to the Utility segment thereby
reducing the local shortfall and therefore contribution charges; (iv)
directory operations of the telephone companies will continue to remain
integral to the Utility segment, meaning that revenues from directory
operations will continue to be assigned to the Utility segment to help reduce
the local shortfall and therefore contribution payments; and (v) Stentor's
request to increase the allowed rate of return of the Utility segment was
denied and the CRTC restated its intention to retain the fifty basis point
downward adjustment to the total company rate of return used to derive the
Utility segment rates of return for the telephone companies.
In December 1995, the CRTC announced that the per trunk basis for
calculating contribution charges would be replaced by a per minute basis for
calculating contribution charges starting June 1, 1996. The off-peak
contribution rate will be one-half the peak rate, with the peak rate
applicable between 8 a.m. and 5 p.m., Monday through Friday. The Company
expects that the net effect of this change together with anticipated
contribution rate reductions will be minimal in 1996, and will cause an
increase of approximately Cdn. $1.5 million in the Company's 1997 network
costs. However, additional reductions in contribution rates may offset this
increase.
The Company cannot predict the timing or the outcome of any of the pending
and ongoing proceedings described above, or the impact they may have on the
competitive position of ACC Canada.
Telecommunications Act. In October 1993, the Telecommunications Act replaced
the Railway Act (Canada) as the principal telecommunications regulatory
statute in Canada. This Act provides that all federally-regulated
telecommunications common carriers as defined therein (essentially all
transmission facilities-based carriers) are under the regulatory jurisdiction
of the CRTC. It also gives the federal government the power to issue
directions to the CRTC on broad policy matters. The Act does not subject non-
facilities-based carriers, such as ACC Canada, to foreign ownership
restrictions, tariff filing requirements or other regulatory provisions
applicable to facilities-based carriers. However, to the extent that resellers
acquire their own facilities in order to better control the carriage and
routing of their traffic, certain provisions of this Act may be applicable to
them.
United Kingdom
Until 1981, British Telecom was the sole provider of public
telecommunications services throughout the U.K. This monopoly ended when, in
1981, the British government granted Mercury a license to run its own
telecommunications system under the British Telecommunications Act 1981. Both
British Telecom and Mercury are licensed under the subsequent
Telecommunications Act 1984 to run transmission facilities-based
telecommunications systems and provide telecommunications services. See "Risk
Factors--Dependence on Transmission Facilities-Based Carriers and Suppliers."
In 1991, the British government established a "multi-operator" policy to
replace the duopoly that had existed between British Telecom and Mercury.
Under the multi-operator policy, the U.K. Department of Trade and Industry
(the "DTI") will recommend the grant of a license to operate a
telecommunications network to any applicant that the DTI believes has a
reasonable business plan and where there are no other overriding
considerations not to grant such license. All public telecommunications
operators and international simple resellers operate under individual licenses
granted by the Secretary of State for Trade and Industry pursuant to the
Telecommunications Act 1984. Any telecommunications system with compatible
equipment that is
48
<PAGE>
authorized to be run under an individual license granted under this Act is
permitted to interconnect to British Telecom's network. Under the terms of
British Telecom's license, it is required to allow any such licensed operator
to interconnect its system to British Telecom's system, unless it is not
reasonably practicable to do so (e.g., due to incompatible equipment).
ACC U.K. was granted an ISR License in September 1992 by the DTI and, for a
period of approximately 18 months thereafter, was involved in protracted
negotiations with British Telecom concerning the terms and conditions under
which it could interconnect its leased line network and switching equipment
with British Telecom's network. The ISR License allows the Company to offer
domestic and international long distance services via connections to the PSTN
of certain originating and terminating countries at favorable leased-line
rates, rather than per call international settlement rates. Over time, larger
carriers will be able to match the Company's rates because they also have, or
are expected to obtain, international simple resale licenses. Although the ISR
License applies to service between Australia, Canada, Finland, New Zealand,
Sweden, the United Kingdom and the United States, the Company presently
utilizes the license primarily for traffic between the U.K. and the U.S. or
Canada.
ACQUISITIONS, INVESTMENTS AND STRATEGIC ALLIANCES
As the Company expands its service offerings, geographic focus and its
network, the Company anticipates that it will seek to acquire assets and
businesses of, make investments in or enter into strategic alliances with,
companies providing services complementary to ACC's existing business. The
Company believes that, as the global telecommunications marketplace becomes
increasingly competitive, expands and matures, such transactions will be
critical to maintaining a competitive position in the industry.
The Company's ability to effect acquisitions and strategic alliances and
make investments may be dependent upon its ability to obtain additional
financing and, to the extent applicable, consents from the holders of debt and
preferred stock of the Company. While the Company may in the future pursue an
active strategic alliance, acquisition or investment policy, no specific
strategic alliances, acquisitions or investments are currently in negotiation
and the Company has no immediate plans to commence such negotiations. If the
Company were to proceed with one or more significant strategic alliances,
acquisitions or investments in which the consideration consists of cash, a
substantial portion of the Company's available cash (including proceeds of
this offering) could be used to consummate the acquisitions or investments. If
the Company were to consummate one or more significant strategic alliances,
acquisitions or investments in which the consideration consists of stock,
shareholders of the Company could suffer a significant dilution of their
interests in the Company.
Many business acquisitions must be accounted for as purchases. Most of the
businesses that might become attractive acquisition candidates for the Company
are likely to have significant goodwill and intangible assets, and the
acquisitions of these businesses, if accounted for as a purchase, would
typically result in substantial amortization charges to the Company. In the
event the Company consummates additional acquisitions in the future that must
be accounted for as purchases, such acquisitions would likely increase the
Company's amortization expenses. In connection with acquisitions, investments
or strategic alliances, the Company could incur substantial expenses,
including the fees of financial advisors, attorneys and accountants, the
expenses of integrating the business of the acquired company or the strategic
alliance with the Company's business and any expenses associated with
registering shares of the Company's capital stock, if such shares are issued.
The financial impact of such acquisitions, investments or strategic alliances
could have a material adverse effect on the Company's business, financial
condition and results of operations and could cause substantial fluctuations
in the Company's quarterly and yearly operating results. See "Risk Factors--
Need for Additional Capital" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
EMPLOYEES
As of December 31, 1995, the Company had 631 full-time employees worldwide.
Of this total, 222 employees were in the U.S., 266 were in Canada and 143 were
in the U.K. The Company has never experienced a work stoppage and its
employees are not represented by a labor union or covered by a collective
bargaining agreement. The Company considers its employee relations to be good.
49
<PAGE>
MANAGEMENT
The following sets forth information concerning the directors and executive
officers of the Company and its principal operating subsidiaries as of January
31, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- ----------
<C> <C> <S>
Richard T. Aab...................... 46 Chairman of the Board of Directors
David K. Laniak..................... 60 Chief Executive Officer, Director
Arunas A. Chesonis.................. 33 President and Chief Operating
Officer, Director
Michael R. Daley.................... 34 Executive Vice President, Chief
Financial Officer and Treasurer
Steve M. Dubnik..................... 33 Chairman of the Board of Directors,
President and Chief Executive
Officer, ACC TelEnterprises Ltd.
Michael L. LaFrance................. 36 President, ACC Long Distance Corp.
Christopher Bantoft................. 48 Managing Director, ACC Long Distance
UK Ltd.
John J. Zimmer...................... 37 Vice President--Finance
George H. Murray.................... 49 Vice President--Human Resources and
Corporate Communications
Sharon L. Barnes.................... 29 Controller
Hugh F. Bennett..................... 38 Director
Willard Z. Estey.................... 76 Director
Daniel D. Tessoni................... 48 Director
Robert M. Van Degna................. 51 Director
</TABLE>
Richard T. Aab is a co-founder of the Company who has served as Chairman of
the Board of Directors since March 1983 and as a director since October 1982.
Mr. Aab also served as Chief Executive Officer from August 1983 through
October 1995, and as Chairman of the Board of Directors of ACC TelEnterprises
Ltd. from April 1993 through February 1994.
David K. Laniak was elected the Company's Chief Executive Officer in October
1995. Mr. Laniak has been a director of the Company since February 1989. Prior
to joining the Company, Mr. Laniak was Executive Vice President and Chief
Operating Officer of Rochester Gas and Electric Corporation, Rochester, New
York, where he worked in a variety of positions for more than 30 years. Mr.
Laniak also has served since October 1995 and from May 1993 through July 1994
served as a director of ACC TelEnterprises Ltd.
Arunas A. Chesonis was elected President and Chief Operating Officer of the
Company in April 1994. He previously served as President of the Company and of
its North American operations since April 1994, and as President of ACC Long
Distance Corp. from January 1989 through April 1994. From August 1990 through
March 1991, he also served as President of ACC TelEnterprises Ltd., and from
May 1987 through January 1989, Mr. Chesonis served as Senior Vice President of
Operations for ACC Long Distance Corp. Mr. Chesonis was elected a Director of
the Company in October 1994.
Michael R. Daley was elected the Company's Executive Vice President and
Chief Financial Officer in February 1994, and has served as Treasurer of the
Company since March 1991. He previously served as the Company's Vice
President-Finance from August 1990 through February 1994, as Treasurer and
Controller from August 1990 through March 1991, as Controller from January
1989 through August 1990, and various other positions with the Company from
July 1985 through January 1989. Mr. Daley has served as a director of ACC
TelEnterprises Ltd. since October 1994.
Steve M. Dubnik was elected the Chairman of the Board of Directors,
President and Chief Executive Officer of ACC TelEnterprises Ltd. in July 1994.
Previously, he served from 1992 through June 1994 as President, Mid-Atlantic
Region, of RCI Long Distance. For more than five years prior thereto, he
served in progressively senior positions with Rochester Telephone Corporation
(now Frontier Corp.) including assignments in engineering, operations,
information technology and sales.
50
<PAGE>
Michael L. LaFrance was elected the President of ACC Long Distance Corp. in
April 1994. From May 1992 through May 1994, he served as Executive Vice
President and General Manager of Axcess USA Communications Corp., from June
1990 through May 1992, as Director of Regulatory Affairs and Administration of
LDDS Communications, Inc. and from February 1987 through June 1990, as Vice
President of Comtel-TMC Telecommunications. Since April 1994, Mr. LaFrance has
served as the President of ACC National Telecom Corp., the Company's local
service subsidiary.
Christopher Bantoft was elected Managing Director of ACC Long Distance UK
Ltd. in February 1994. From 1986 through 1993, he served as Sales and
Marketing Director, Deputy Managing Director, and most recently as Managing
Director of Alcatel Business Systems Ltd., the U.K. affiliate of Alcatel, N.V.
John J. Zimmer, a certified public accountant, was elected the Company's
Vice President-Finance in September 1994. He previously served as the
Company's Controller from March 1991 through September 1994. Prior to March
1991, he served as a staff accountant and then as a manager of accounting with
Arthur Andersen LLP.
George H. Murray was elected the Company's Vice President-Human Resources
and Corporate Communications in August 1994. For more than five years prior to
his joining the Company, he served in various senior management positions with
First Federal Savings and Loan of Rochester, New York.
Sharon L. Barnes, a certified public accountant, was elected the Company's
Controller in September 1994. Previously, she served as Accounting Manager
from April 1993 through September 1994. Prior to joining the Company in 1993,
she served for more than four years as a staff and senior accountant with
Arthur Andersen LLP.
Hugh F. Bennett has been a director of the Company since June 1988. Since
March 1990, Mr. Bennett has been a Vice President, Director and Secretary-
Treasurer of Gagan, Bennett & Co., Inc., an investment banking firm.
The Hon. Willard Z. Estey, C.C., Q.C., was elected a director of the Company
at its 1994 Annual Meeting. Mr. Estey is Counsel to the Toronto, Ontario law
firm of McCarthy, Tetrault. After serving as Chief Justice of Ontario, Mr.
Estey was a Justice of the Supreme Court of Canada from 1977 through 1988.
From 1988 through 1990, Mr. Estey was Deputy Chairman of Central Capital
Corporation, Toronto, Ontario. Since May 1993, Mr. Estey has also served as a
director of ACC TelEnterprises Ltd.
Daniel D. Tessoni has been a director of the Company since May 1987. Mr.
Tessoni is an Associate Professor of Accounting at the College of Business of
the Rochester Institute of Technology, where he has taught since 1977. He
holds a Ph.D. degree, is a certified public accountant and is Treasurer of
several privately-held business concerns.
Robert M. Van Degna has been a director of the Company since May 1995. Mr.
Van Degna is Managing Partner of Fleet Equity Partners, an investment firm
affiliated with Fleet Financial Group, Inc. and based in Providence, Rhode
Island. Mr Van Degna joined Fleet Financial Group in 1971 and held a variety
of lending and management positions until he organized Fleet Equity Partners
in 1982 and became its general partner. Mr. Van Degna currently serves on the
Board of Directors of Orion Network Systems, Inc. as well as several
privately-held companies. Mr.Van Degna was initially elected to the Company's
Board of Directors pursuant to the terms of the investment in the Company by
Fleet Venture Resources, Inc. and affiliated entities described under
"Principal Shareholders" and "Description of Capital Stock--Series A Preferred
Stock."
For a description of certain employment arrangements which may have anti-
takeover effects, see "Description of Capital Stock--Certain Charter, By-law
and Statutory Provisions and Other Anti-takeover Considerations."
51
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Class A Common Stock as of January 31, 1996 and as adjusted
to reflect the sale of Class A Common Stock being offered hereby (i) by each
person known by the Company to beneficially own more than five percent of the
Class A Common Stock, (ii) by each director, (iii) by each executive officer
of the Company named in the Summary Compensation Table contained in the
Company's Proxy Statement dated June 12, 1995 and incorporated by reference
herein, and (iv) by all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING (1) OFFERING (1)
----------------------- -----------------------
BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
---------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Richard T. Aab (2)................. 931,904 11.8% 931,904 9.6%
400 West Avenue
Rochester, New York 14611
Robert M. Van Degna (3)............ 725,000 9.2 725,000 7.5
c/o Fleet Venture Resources, Inc.
111 Westminster Street
Providence, RI 02903
Fleet Venture Resources, Inc (4)... 456,750 5.8 456,750 4.7
111 Westminster Street
Arunas A. Chesonis (5)............. 90,883 1.1 90,883 *
Michael R. Daley (6)............... 46,021 * 46,021 *
David K. Laniak (7)................ 43,626 * 43,626 *
Christopher Bantoft (8)............ 22,550 * 22,550 *
Daniel D. Tessoni (9).............. 22,500 * 22,500 *
Hugh F. Bennett (10)............... 3,000 * 3,000 *
Willard Z. Estey (11).............. -- -- -- --
All Directors and Executive
Officers as a Group (14 persons,
including those named above)(12).. 1,237,058 15.6 1,237,058 12.8
</TABLE>
- --------
*Less than one percent.
(1) Except as otherwise indicated, and subject to community property laws
where applicable, the persons named in the table above have sole voting
and investment power with respect to all shares of Class A Common Stock
shown as owned by them.
(2) Includes options to purchase 16,672 shares of Class A Common Stock that
are or will become exercisable within the next 60 days. Excludes 15,000
shares directly owned by Mr. Aab's wife and 1,500 shares that she
controls as custodian for their minor children, as to which shares Mr.
Aab disclaims beneficial ownership. Does not include 25,372 shares
issuable upon the exercise of options which are not deemed to be
presently exercisable.
(3) Includes (i) 456,750 shares of Class A Common Stock beneficially owned by
Fleet Venture Resources, Inc. ("Fleet Venture Resources"), of which
393,750 shares are issuable upon the conversion of Series A Preferred
Stock and 63,000 shares are issuable upon the exercise of warrants; (ii)
195,750 shares of Class A Common Stock beneficially owned by Fleet Equity
Partners VI, L.P. ("Fleet Equity Partners"), of which 168,750 shares are
issuable upon the conversion of Series A Preferred Stock and 27,000
shares are issuable upon the exercise of warrants; and (iii) 72,500
shares of Class A Common Stock beneficially owned by Chisholm Partners
II, L.P. ("Chisholm"), of which 62,500 shares are issuable upon the
conversion of Series A Preferred Stock and 10,000 shares are issuable
upon the exercise of warrants. As of January 31, 1996, the conversion
price for the Series A Preferred Stock and the exercise price of such
warrants was $16.00 per share. Does not include a total of 625,000 shares
of Class A Common Stock
52
<PAGE>
issuable to Fleet Venture Resources, Fleet Equity Partners and Chisholm
upon the exercise of warrants, which warrants would become exercisable
upon an optional redemption of the Series A Preferred Stock by the Company
or an option to purchase 5,000 shares of Class A Common Stock granted to
him, subject to shareholder approval, under the non-employee directors'
stock option plan. See "Description of Capital Stock--Warrants." Mr. Van
Degna is the Chief Executive Officer of Fleet Venture Resources and the
Chief Executive Officer or President of each general partner of Fleet
Equity Partners and Chisholm. Mr. Van Degna disclaims beneficial ownership
of the shares held by these entities, except for his limited partnership
interest in the general partner of Chisholm.
(4) Does not include shares beneficially owned by Fleet Equity Partners or
Chisholm (see note (3) above).
(5) Includes 488 shares owned by Mr. Chesonis's spouse, options to purchase
80,725 shares that are or will become exercisable by Mr. Chesonis within
the next 60 days and options to purchase 6,950 shares that are currently
exercisable by Mr. Chesonis's spouse. Does not include 79,525 shares
issuable upon the exercise of options which are not deemed to be
presently exercisable.
(6) Includes options to purchase 42,850 shares that are or will become
exercisable within the next 60 days. Does not include 58,250 shares
issuable upon the exercise of options which are not deemed to be
presently exercisable.
(7) Includes options to purchase 37,627 shares that are or will become
exercisable within the next 60 days. Does not include 56,473 shares
issuable upon the exercise of options which are not deemed to be
presently exercisable.
(8) Includes options to purchase 22,550 shares that are or will become
exercisable within the next 60 days. Does not include 47,450 shares
issuable upon the exercise of options which are not deemed to be
presently exercisable or an option to purchase 5,000 shares of Class A
Common Stock granted to him, subject to shareholder approval, under the
non-employee directors' stock option plan.
(9) Mr. Tessoni and his wife share investment and voting power with respect
to all shares which he beneficially owns. Does not include an option to
purchase 5,000 shares of Class A Common Stock granted to him, subject to
shareholder approval, under the non-employee directors' stock option
plan.
(10) Mr. Bennett shares investment and voting power with his wife with respect
to 1,500 of these shares. Does not include an option to purchase 5,000
shares of Class A Common Stock granted to him, subject to shareholder
approval, under the non-employee directors' stock option plan.
(11) Does not include an option to purchase 5,000 shares of Class A Common
Stock granted to Mr. Estey, subject to shareholder approval, under the
non-employee directors' stock option plan.
(12) See notes (2), (3), (5), (6), (7), (8), (9), (10) and (11) above.
Includes options to purchase a total of 68,425 shares that are currently
or will become exercisable within the next 60 days by five executive
officers of the Company, in addition to those named above.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Class A Common Stock, par value $0.015 per share, 25,000,000 shares of Class B
Common Stock, par value $0.015 per share, and 2,000,000 shares of Preferred
Stock, par value $1.00 per share. As of January 31, 1996, 7,920,776 shares of
Class A Common Stock were issued and outstanding and held by approximately 477
shareholders of record and 10,000 shares of Series A Preferred Stock were
issued and outstanding. No shares of Class B Common Stock have been issued by
the Company. In addition, as of January 31, 1996, there were outstanding
options to purchase an aggregate of up to approximately 1,347,894 shares of
Class A Common Stock, of which options with respect to 544,974 shares were
exercisable at a weighted average exercise price of approximately $14.01 per
share, and, exclusive of the 625,000 Springing Warrants (defined below),
warrants to purchase an aggregate of up to 137,500 shares of Class A Common
Stock also were outstanding and exercisable as of such date. Subject to
obtaining shareholder approval, the Company has adopted a stock option plan
for non-employee directors and has granted options to purchase 20,000 shares
thereunder at an exercise price of $23.00 per share.
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CLASS A COMMON STOCK
The holders of shares of Class A Common Stock are entitled to one vote per
share on all matters to be voted on by shareholders. Except as described
below, the Series A Preferred Stock votes together with the Class A Common
Stock. The holders of shares of Class A Common Stock are not entitled to
cumulate their votes in the election of directors and, as a consequence,
minority shareholders will not be able to elect directors on the basis of
their votes alone. Subject to the dividend preferences of the Series A
Preferred Stock and any dividend preferences that may be applicable to any
shares of Preferred Stock or Class B Common Stock issued in the future,
holders of shares of Class A Common Stock are entitled to receive ratably such
dividends as may be declared from time to time by the Board of Directors, in
its discretion, from any assets legally available therefor. The Credit
Facility and the Series A Preferred Stock prohibit the payment of dividends
and the Company does not intend to pay dividends on the Class A Common Stock
for the foreseeable future. See "Price Range of Class A Common Stock and
Dividend Policy." In the event of a liquidation, dissolution or winding up of
the Company, holders of the Class A Common Stock are entitled to share ratably
in all assets remaining after payment of liabilities and the liquidation
preference of the Series A Preferred Stock and any liquidation preferences
that may be applicable to any shares of Preferred Stock or Class B Common
Stock issued in the future. The holders of Class A Common Stock are not
entitled to preemptive, subscription or conversion rights, and there are no
redemption or sinking fund provisions applicable to the Class A Common Stock.
The holders of Class A Common Stock are not subject to further calls or
assessments by the Company. All outstanding shares of Class A Common Stock are
validly issued, fully paid and non-assessable.
The Class A Common Stock is quoted on the Nasdaq Stock Market under the
symbol "ACCC." The Company's transfer agent and registrar for its Class A
Common Stock is Society National Bank, Cleveland, Ohio.
CLASS B COMMON STOCK
The Board of Directors has the authority to fix the rights, preferences,
privileges and restrictions of Class B Common Stock, including dividend
rights, conversion rights, terms of redemption, liquidation preferences and
sinking fund provisions, without any further vote or action by shareholders;
provided, however, that holders of Class B Common Stock shall not be entitled
to vote on any matters brought before the shareholders of the Company, shall
not be entitled to vote as a class upon any proposed increase or decrease in
the aggregate number of authorized shares of Class B Common Stock and shall be
subject to the rights, preferences and privileges of the Series A Preferred
Stock with respect to liquidation, dividends and redemptions and the rights,
preferences and privileges of any other series of Preferred Stock. The Class B
Common Stock was originally authorized for possible issuance to foreign
investors due to FCC limitations on foreign control of wireless communications
facilities.
PREFERRED STOCK
The Board of Directors has the authority to issue shares of Preferred Stock
in one or more series and to fix the relative rights and preferences of the
shares, including voting powers, dividend rights, liquidation provisions,
redemption provisions, sinking fund provisions and conversion privileges,
without any further vote or action by the shareholders. As a result, the Board
of Directors could, without shareholder approval, issue shares of Preferred
Stock with voting, dividend, liquidation, conversion or other rights that
could adversely affect the holders of Class A Common Stock and that may have
the effect of delaying, deferring or preventing a change of control of the
Company. In addition, because the terms of such Preferred Stock may be fixed
by the Board of Directors without shareholder action, the Preferred Stock
could be designated and issued quickly in the event the Company requires
additional equity capital. Under certain circumstances, this could have the
effect of decreasing the market price of the Class A Common Stock.
SERIES A PREFERRED STOCK
General. The Board has designated 10,000 shares of Preferred Stock as Series
A Preferred Stock. The holders of Series A Preferred Stock have the right to
vote, on all matters to be voted on by the Company's
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shareholders, on an as-converted basis with the shares of Class A Common Stock
and also have the right to vote as a separate class to elect one director so
long as at least 3,300 shares of Series A Preferred Stock remain outstanding.
The holders of Series A Preferred Stock are entitled to receive a dividend
payable at the rate of 12% per annum, which shall be cumulative and compounded
if not paid. No dividends have been paid to date on the Series A Preferred
Stock. The Company is not permitted to pay any dividends on the Class A or
Class B Common Stock, and no shares of Class A or Class B Common Stock may be
redeemed or repurchased by the Company without the prior written consent of
the holders of a majority of the outstanding shares of Series A Preferred
Stock. Upon the liquidation, distribution of assets, dissolution or winding up
of the Company, a holder of Series A Preferred Stock shall be entitled to
receive, prior to the holders of Class A and Class B Common Stock, $1,000 per
share plus all accrued and unpaid dividends thereon.
Conversion. At any time, any holder of Series A Preferred Stock may convert
all or any portion thereof into Class A Common Stock of the Company. As of
January 31, 1996, the shares of Series A Preferred Stock outstanding were
convertible into 625,000 shares of Class A Common Stock based on the
conversion price as of such date of $16.00 per share. The conversion price is
subject to certain antidilution adjustments, including (i) a ratchet
antidilution adjustment of the conversion price (a) if shares of Class A or
Class B Common Stock, or securities convertible into or exchangeable for Class
A or Class B Common Stock, are issued or sold (including, without limitation,
by way of consolidation, merger or sale of all or substantially all of the
Company's assets) for consideration which is less than the conversion price
then in effect, down to the aggregate consideration per share of Class A or
Class B Common Stock issued or sold pursuant to such transaction or issuable
upon the conversion or exchange of convertible or exchangeable securities
issued or sold pursuant to such transaction or (b) if options (other than
options or similar rights granted to employees or directors of the Company to
purchase an aggregate of up to 1,596,702 shares of Class A or Class B Common
Stock, subject to adjustment for stock splits, stock dividends,
recapitalizations and the like), warrants or similar rights to purchase Class
A or Class B Common Stock are issued having an exercise price less than the
conversion price then in effect, down to the aggregate consideration per share
of Class A or Class B Common Stock which would be paid upon the sale or grant
and exercise of such options, warrants or rights and (ii) upon stock splits,
stock dividends, recapitalizations and the like. The Series A Preferred Stock
will convert automatically into Class A Common Stock at any time after May 19,
1997 if (i) the daily trading volume of the Class A Common Stock in the public
market exceeds 5% of the number of shares of Class A Common Stock issuable
upon conversion of all shares of Series A Preferred Stock for a period of 45
consecutive trading days; (ii) the market price per share of Class A Common
Stock equals or exceeds the following levels (the "Target Prices"), subject to
adjustment for stock splits, stock dividends and the like, on any of the
following dates: $32.00 on May 22, 1997, $32.00 on May 22, 1998, $39.06 on May
22, 1999, $39.81 on May 22, 2000, $47.78 on May 22, 2001 and $57.33 on May 22,
2002, provided that, in the event that any measurement of the market price of
Class A Common Stock is to occur between any of the foregoing dates, the
Target Prices shall be prorated based upon the number of days elapsed from the
earlier date; and (iii) no holder of Series A Preferred Stock is subject to
any underwriters' lockup agreement with respect to the shares of Class A
Common Stock issuable upon the conversion thereof. Upon any conversion, the
accrued and unpaid dividends on the Series A Preferred Stock being converted
will be extinguished and no longer deemed payable. The dividend rate on the
Series A Preferred Stock will increase to 15%, and the conversion price then
in effect will be reduced by one-third, if certain defaults by the Company
occur, including the failure to make any redemption payment when due and the
Company's breach or failure to perform certain representations, warranties or
covenants set forth in the Certificate of Designations or the purchase
agreement under which the Series A Preferred Stock was issued ("Events of
Noncompliance").
Redemption. The Company has the option to redeem the Series A Preferred
Stock at any time for $1,000 per share plus all accrued and unpaid dividends
thereon, and is required to redeem the Series A Preferred Stock on May 19,
2002 at a price per share equal to the greater of $1,000 or the market price
of the Class A Common into which such shares of Series A Preferred Stock are
convertible as of 4 p.m., New York time, on May 14, 2002. Any holder of Series
A Preferred Stock has the option to cause the Company to redeem his shares in
the case of a change of control, certain merger or consolidation transactions,
a sale of more than 50% of the Company's assets, an Event of Noncompliance or
the entry of a judgment against the Company or default by the
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Company under any obligation or agreement for which the amount involved
exceeds $500,000. The Series A Preferred Stock is subject to immediate
redemption upon an assignment by the Company for the benefit of creditors or
voluntary or involuntary bankruptcy. Holders of Series A Preferred Stock have
preemptive rights to purchase on an as-converted basis a pro rata portion of
any Company issuance of Class A Common Stock or rights to purchase Class A
Common Stock, subject to certain exceptions, including the issuance of Class A
or Class B Common Stock pursuant to a public offering registered under the
Securities Act (which includes this offering), an acquisition of another
company or business, a strategic investment in the Company by other entities
in the telecommunications or other utilities business, stock options granted
to Company employees and stock issued in connection with the provision or
extension of senior debt financing to the Company or any of its subsidiaries.
WARRANTS
As of January 31, 1996, warrants to purchase an aggregate of 100,000 shares
of Class A Common Stock at an exercise price of $16.00 per share (subject to
adjustment for stock splits, stock dividends and the like and other
antidilution adjustments, including a ratchet antidilution adjustment similar
to that described in the preceding section with respect to the Series A
Preferred Stock), a warrant to purchase 30,000 shares of Class A Common Stock
at an exercise price of $16.00 per share (subject to adjustment for stock
splits, stock dividends and the like), and a warrant to purchase 7,500 shares
of Class A Common Stock at an exercise price of $18.75 per share (subject to
adjustment for stock splits, stock dividends and the like), were outstanding
and exercisable. As of January 31, 1996, the Company also had outstanding
springing warrants (the "Springing Warrants") to purchase an aggregate of up
to 625,000 additional shares of Class A Common Stock at an exercise price of
$16.00 per share (assuming a conversion price of $16.00 per share as of the
redemption date), which warrants become exercisable upon and to the extent of
an optional redemption of the Series A Preferred Stock by the Company. The
exercise price and number of shares issuable under the Springing Warrants are
subject to adjustment for stock splits, stock dividends and the like and other
antidilution adjustments, including a ratchet antidilution adjustment similar
to that described in the preceding section with respect to the Series A
Preferred Stock.
REGISTRATION RIGHTS
The holders of the Series A Preferred Stock (collectively, the "Holders")
are entitled to certain registration rights with respect to the shares of
Class A Common Stock issuable upon a conversion of the Series A Preferred
Stock, the exercise of the Springing Warrants and warrants to purchase up to
100,000 shares of Class A Common Stock (all such shares of Class A Common
Stock and certain other securities, the "Registrable Shares"). If the Company
proposes to register any of its securities under the Securities Act, the
Holders will be entitled to notice thereof and, subject to certain
restrictions, to include their Registrable Shares in such registration.
Holders of Registrable Shares may make up to two demands of the Company to
file a registration statement under the Securities Act, subject to certain
conditions and limitations and provided that any demand must be at an
aggregate offering price to the public of at least $7.5 million and no demand
may be made within 180 days after the effective date of a prior demand
registration. Furthermore, one or more Holders of Registrable Shares may
require the Company on up to five occasions to register their shares on Form
S-3 or similar short-form registration forms, subject to certain conditions
and limitations and provided that any such demand must be at an aggregate
offering price to the public of at least $5.0 million. A Holder's right to
include shares in an underwritten registration is subject to the right of the
underwriters to limit the number of shares included in the offering. Subject
to certain limitations, the Company is required to bear all registration,
legal (for no more than one independent legal counsel for all selling Holders)
and other expenses in connection with these registrations (other than
underwriting discounts and commissions) and must provide appropriate
indemnification.
The holders of warrants for the purchase of up to 30,000 shares of Class A
Common Stock are entitled to make one demand of the Company to file a
registration statement under the Securities Act with respect to all of such
30,000 shares of Class A Common Stock, subject to certain conditions and
limitations, including the
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Company's right to defer commencement of registration for up to 90 days if
such deferral is deemed necessary or appropriate by counsel to the Company.
The Company is required to bear all registration, legal and other expenses in
connection with the demand registration (other than underwriting discounts and
commissions and all legal and accounting fees of advisors for the selling
shareholders) and must provide appropriate indemnification.
CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS AND OTHER ANTI-TAKEOVER
CONSIDERATIONS
The Company's Certificate of Incorporation requires the affirmative vote of
the holders of at least 80% of all outstanding shares of Class A Common Stock
to alter, amend, adopt any provision inconsistent with or repeal certain
provisions of the Certificate of Incorporation, including the ability of the
shareholders to amend the Company's By-laws, the prohibition on shareholder
action by written consent, the prohibition on the calling of special meetings
by shareholders, and limitations on the personal liability of the Company's
directors for breach of their fiduciary duty as directors. The Company's By-
laws also provide that the Company's shareholders can only alter, amend, adopt
or repeal any provision of the Company's By-laws by the affirmative vote of
the holders of at least 80% of all outstanding shares of Class A Common Stock.
So long as any shares of the Series A Preferred Stock remain outstanding, the
Company will not be able to take any of the following actions without
obtaining the prior written consent of the holders of a majority of the Series
A Preferred Stock: (i) declare dividends on any class of capital stock other
than the Series A Preferred Stock; (ii) redeem any capital stock other than
Series A Preferred Stock; (iii) make any amendment to the Company's
Certificate of Incorporation or By-laws that would include or make any changes
to any anti-takeover provisions in the Company's Certificate of Incorporation
or By-laws; (iv) make any amendment to the Company's Certificate of
Incorporation or By-laws that would have an adverse effect on or impair the
rights or relative priority of the Series A Preferred Stock; (v) make any
changes in the nature of the Company's business beyond the telecommunications
field; or (vi) engage in any transactions with affiliates (except for
transactions with subsidiaries and compensation and benefit matters approved
by the Executive Compensation Committee of the Company's Board or other
transactions approved by an independent committee of the Board).
Under the Credit Facility, the lenders have the right to demand payment of
all loans outstanding upon a change in control of the Company, unless the
person or group of persons acquiring control are members of the Company's
current management. The Credit Facility also prohibits the Company from
engaging in certain merger or consolidation transactions, selling, leasing or
otherwise disposing of its property, business or assets other than the sale of
inventory in the ordinary course of business and certain other permitted
dispositions, or dissolving or liquidating the Company. In addition, any
holder of Series A Preferred Stock has the right, upon a change in control of
the Company, a sale of more than 50% of the assets of the Company or certain
mergers or consolidations, to require the Company to redeem all or any portion
of the Series A Preferred Stock owned by such holder at a price equal to the
greater of $1,000 per share or the market price or value (as of the
consummation of the transaction) of the Class A Common Stock into which such
shares of Series A Preferred Stock are convertible. It is possible that these
provisions may have the effect of delaying, deterring or preventing a change
in control of the Company. The Company's Employee Long Term Incentive Plan
provides that in the event of a change in control, as may be determined at the
discretion of the Compensation Committee of the Company, all options then
outstanding under such Plan shall automatically become exercisable in full.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, the statute prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder unless prior
to the date the stockholder became an interested stockholder the board
approved either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder or unless one of two
exceptions to the prohibitions are satisfied: (i) upon consummation of the
transaction that resulted in such person becoming an interested stockholder,
the interested stockholder owned at least 85% of the Company's voting stock
outstanding at the time the transaction commenced (excluding, for purposes of
determining the number of shares outstanding, shares owned by certain
directors or certain employee stock plans) or (ii) on or after the date the
stockholder became an interested stockholder, the
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business combination is approved by the board of directors and authorized by
the affirmative vote (and not by written consent) of at least two-thirds of
the outstanding voting stock excluding that stock owned by the interested
stockholder. A "business combination" includes a merger, asset sale or other
transaction resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is a person who (other than the corporation and any
direct or indirect majority-owned subsidiary of the corporation), together
with affiliates and associates, owns (or, as an affiliate or associate, within
three years prior, did own) 15% or more of the corporation's outstanding
voting stock. It is possible that these provisions may have the effect of
delaying, deterring or preventing a change in control of the Company.
The Company has entered into a salary continuation and deferred compensation
agreement dated October 6, 1995 with Mr. Aab which provides for a severance
payment of $1 million if, as a result of or within one year following a change
in control of the Company, Mr. Aab's employment is terminated with or without
cause by the Company or the acquiror, or Mr. Aab voluntarily terminates his
employment. The severance payment is payable in full within 30 days following
the change in control and is conditioned on Mr. Aab's agreement not to compete
with the Company during and for three years following termination of his
employment and to maintain confidentiality of trade secrets. The Company is
obligated to pay Mr. Aab the severance payment if his employment or his
position as Chairman of the Board of ACC Corp. terminates for any reason
(including his voluntary resignation) other than a termination by the Company
for cause, except that, if no change in control has occurred, the amount is
payable in three equal annual installments.
The Company has entered into an employment agreement dated October 6, 1995
with Mr. Laniak for a term of two years. The agreement with Mr. Laniak
provides for payment of his then current compensation and benefits for the
remainder of the term of the agreement and vesting of all outstanding stock
options if, as a result of or within one year following a change in control of
the Company, Mr. Laniak's employment is terminated without cause by the
Company or the acquiror or Mr. Laniak voluntarily terminates his employment as
a result of certain events, including a significant change in the nature or
scope of his duties, relocation outside of the Rochester, New York area or a
reduction in his compensation or benefits. The severance payment to Mr. Laniak
is conditioned on his agreement not to compete with the Company during and for
one year following termination of his employment and to maintain
confidentiality of trade secrets.
The Company has also entered into employment continuation and incentive
agreements with 27 officers and managers, which provide for continuation of
the employee's then current salary and benefits for up to 12 months following
termination if, as a result of or within one year following a change in
control of the Company, the Company or the acquiror terminates his employment
or the employee resigns due to a significant change in the nature or scope of
his duties or authority or a reduction in compensation. The agreements provide
for each employee's agreement not to compete with the Company so long as the
employee is receiving payments thereunder. It is possible that the agreements
described above may have the effect of delaying, deterring or preventing a
change in control or management of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have approximately
9,670,776 outstanding shares of Class A Common Stock, assuming (i) no exercise
of the Underwriters' over-allotment option, and (ii) no exercise of options or
warrants outstanding. Upon the consummation of this offering, assuming no
exercise of options or warrants outstanding as of January 31, 1996 except as
stated above, the Company will have outstanding options exercisable for an
aggregate of approximately 1,347,894 shares of Class A Common Stock, of which
options with respect to 544,974 shares will then be exercisable at a weighted
average exercise price of $14.01 per share, warrants to purchase up to 762,500
shares of Class A Common Stock, of which warrants to purchase 137,500 shares
will then be exercisable, and 625,000 shares of Class A Common Stock which
will be issuable upon conversion of the Series A Preferred Stock.
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Of the Class A Common Stock outstanding upon completion of this offering,
the 1,750,000 shares of Class A Common Stock sold in this offering as well as
approximately 4,200,000 shares previously issued by the Company will be freely
tradeable without restriction or further registration under the Securities
Act, except for any shares held by "affiliates" of the Company, as that term
is defined under the Securities Act and the regulations promulgated thereunder
(an "Affiliate"), or persons who have been Affiliates within the preceding
three months. The remaining approximately 3,700,000 outstanding shares of
Class A Common Stock are currently eligible for sale under Rule 144 or Rule
144(k). Approximately 1,235,000 shares of Class A Common Stock or securities
exercisable for or convertible into Class A Common Stock are subject to 120-
day lock-up agreements with the Underwriters. For a description of certain
120-day lock-up agreements, see "Underwriters."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially
owned "restricted securities" (defined generally in Rule 144 as unregistered
securities) for a period of at least two years from the later of the date such
restricted securities were acquired from the Company and the date they were
acquired from an Affiliate, is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of 1% of the then
outstanding shares of Class A Common Stock (approximately 96,708 shares
immediately after this offering) and the average weekly trading volume in the
Class A Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain provisions relating to the number
and notice of sale and the availability of current public information about
the Company.
Further, under Rule 144(k), if a period of at least three years has elapsed
between the later of the date restricted securities were acquired from the
Company and the date they were acquired from an Affiliate of the Company, a
holder of such restricted securities who is not an Affiliate at the time of
the sale and has not been an Affiliate for at least three months prior to the
sale would be entitled to sell the shares immediately without regard to the
volume and manner of sale limitations described above.
The Commission has recently proposed amendments to Rule 144 and Rule 144(k)
that would permit resales of restricted securities under Rule 144 after a one-
year, rather than a two-year holding period, subject to compliance with the
other provisions of Rule 144, and would permit resale of restricted securities
by non-Affiliates under Rule 144(k) after two-year, rather than a three-year
holding period. Adoption of such amendments could result in resales of
restricted securities sooner than would be the case under Rule 144 and Rule
144(k) as currently in effect.
In addition, the Company has registered on Forms S-8 under the Securities
Act a total of approximately 2,163,000 shares of Class A Common Stock, and
intends to register on Form S-8 an additional 500,000 shares of Class A Common
Stock, issuable under certain options issued to employees as well as shares of
Class A Common Stock issued or reserved for issuance pursuant to the Company's
Employee Stock Purchase Plan. Shares issued under the plans (other than shares
issued to Affiliates) generally may be sold immediately in the public market,
subject to vesting requirements and the lock-up agreements described above.
Subject to obtaining shareholder approval, the Company has adopted a stock
option plan for non-employee directors and has granted options to purchase
20,000 shares of Class A Common Stock thereunder. The Company intends to
register on Form S-8 the 250,000 shares of Class A Common Stock issuable under
such plan.
The holders of the Series A Preferred Stock (which is convertible into
625,000 shares of Class A Common Stock based on the conversion price in effect
on January 31, 1996) and warrants to purchase 130,000 shares of Class A Common
Stock are entitled to certain registration rights with respect to their
shares. See "Description of Capital Stock--Registration Rights."
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF CLASS A COMMON STOCK
The following discussion concerns the material United States federal income
and estate tax consequences of the ownership and disposition of shares of
Class A Common Stock applicable to Non-U.S. Holders of such shares of Class A
Common Stock. In general, a "Non-U.S. Holder" is any holder other than (i) a
citizen or resident, as specifically defined for U.S. federal income and
estate tax purposes, of the United States, (ii) a corporation, partnership or
any entity treated as a corporation or partnership for U.S. federal income tax
purposes created or organized in the United States or under the laws of the
United States or of any State thereof, or (iii) an estate or trust whose
income is includible in gross income for United States federal income tax
purposes regardless of its source. The discussion is based on current law,
which is subject to change retroactively or prospectively, and is for general
information only. The discussion does not address all aspects of United States
federal income and estate taxation and does not address any aspects of state,
local or foreign tax laws. The discussion does not consider any specific facts
or circumstances that may apply to a particular Non-U.S. Holder. Accordingly,
prospective investors are urged to consult their tax advisors regarding the
current and possible future United States federal, state, local and non-U.S.
income and other tax consequences of holding and disposing of shares of Class
A Common Stock.
Dividends. In general, dividends paid to a Non-U.S. Holder will be subject
to United States withholding tax at a 30% rate (or a lower rate as may be
specified by an applicable tax treaty) unless the dividends are (i)
effectively connected with a trade or business carried on by the Non-U.S.
Holder within the United States, and (ii) if a tax treaty applies,
attributable to a United States permanent establishment maintained by the Non-
U.S. Holder. Dividends effectively connected with such a trade or business or,
if a tax treaty applies, attributable to such permanent establishment will
generally not be subject to withholding (if the Non-U.S. Holder files certain
forms annually with the payor of the dividend) but will generally be subject
to United States federal income tax on a net income basis at regular graduated
individual or corporate rates. In the case of a Non-U.S. Holder which is a
corporation, such effectively connected income also may be subject to the
branch profits tax (which is generally imposed on a foreign corporation on the
deemed repatriation from the United States of effectively connected earnings
and profits) at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. The branch profits tax may not apply if the
recipient is a qualified resident of certain countries with which the United
States has an income tax treaty.
To determine the applicability of a tax treaty providing for a lower rate of
withholding, dividends paid to an address in a foreign country are presumed
under current Treasury Regulations to be paid to a resident of that country,
unless the payor has definite knowledge that such presumption is not warranted
or an applicable tax treaty (or United States Treasury Regulations thereunder)
requires some other method for determining a Non-U.S. Holder's residence.
Treasury Regulations proposed in 1984, if finally adopted, however, would
require Non-U.S. Holders to file certain forms to obtain the benefit of any
applicable tax treaty providing for a lower rate of withholding tax on
dividends. Such forms would be required to contain the holder's name and
address and, subject to a de minimis payment exception, an official statement
by the competent authority in the foreign country (as designated in the
applicable tax treaty) attesting to the holder's status as a resident thereof.
Under current regulations, the Company must report annually to the United
States Internal Revenue Service and to each Non-U.S. Holder the amount of
dividends paid to, and the tax withheld with respect to, each Non-U.S. Holder.
These reporting requirements apply regardless of whether withholding was
reduced or eliminated by an applicable tax treaty. Copies of these information
returns also may be made available under the provisions of a specific treaty
or agreement with the tax authorities of the country in which the Non-U.S.
Holder resides.
Sale of Class A Common Stock. Generally, a Non-U.S. Holder will not be
subject to United States federal income tax on any gain realized upon the sale
or other disposition of such holder's shares of Class A Common Stock unless
(i) the gain is effectively connected with a trade or business carried on by
the Non-U.S. Holder within the United States and, if a tax treaty applies, the
gain is attributable to a permanent establishment maintained by the Non-U.S.
Holder in the United States; (ii) the Non-U.S. Holder is an individual who
holds the shares of Class A Common Stock as a capital asset and is present in
the United States for 183 days or more in the taxable year of the disposition,
and either (a) such Non-U.S. Holder has a "tax home" (as specifically defined
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for U.S. federal income tax purposes) in the United States (unless the gain
from disposition is attributable to an office or other fixed place of business
maintained by such non-U.S. Holder in a foreign country and a foreign tax
equal to at least 10% of such gain has been paid to a foreign country), or (b)
the gain from the disposition is attributable to an office or other fixed
place of business maintained by such Non-U.S. Holder in the United States;
(iii) the Non-U.S. Holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to certain United States expatriates, or (iv) the Company
is or has been during certain periods a "U.S. real property holding
corporation" for U.S. federal income tax purposes (which the Company does not
believe that it has been, currently is or is likely to become) and, assuming
that the Class A Common Stock is deemed for tax purposes to be "regularly
traded on an established securities market," the Non-U.S. holder held, at any
time during the five-year period ending on the date of disposition (or such
shorter period that such shares were held), directly or indirectly, more than
five percent of the Class A Common Stock.
Estate Tax. Shares of Common stock owned or treated as owned by an
individual who is not a citizen or resident (as specially defined for United
States federal estate tax purposes) of the United States at the time of death
will be includible in the individual's gross estate for United States federal
estate tax purposes, unless an applicable tax treaty provides otherwise, and
may be subject to United States federal estate tax.
Backup Withholding and Information Reporting. Under current United States
federal income tax law, backup withholding tax (which generally is a
withholding tax imposed at the rate of 31 percent on certain payments to
persons that fail to furnish the information required under the U.S.
information reporting requirements) and information reporting requirements
apply to payments of dividends (actual and constructive) made to certain non-
corporate United States persons. The United States back-up withholding tax and
information reporting requirements generally will not apply to dividends paid
on Class A Common Stock to a Non-U.S. Holder at an address outside the United
States that are either subject to the 30% withholding discussed above or that
are not so subject because a tax treaty applies that reduces or eliminates
such 30% withholding, unless the payer has knowledge that the payee is a U.S.
person. Backup withholding and information reporting generally will apply to
dividends paid to addresses inside the United States on shares of Class A
Common Stock to beneficial owners that are not "exempt recipients" and that
fail to provide in the manner required certain identifying information.
The payment of the proceeds from the disposition of shares of Class A Common
Stock to or through the United States office of a broker will be subject to
information reporting and backup withholding unless the holder, under
penalties of perjury, certifies, among other things, its status as a Non-U.S.
Holder, or otherwise establishes an exemption. Generally, the payment of the
proceeds from the disposition of shares of Class A Common Stock to or through
a non-U.S. office of a broker will not be subject to backup withholding and
will not be subject to information reporting. In the case of the payment of
proceeds from the disposition of shares of Class A Common Stock to or through
a non-U.S. office of a broker that is a U.S. person or a "U.S.-related
person," existing regulations require information reporting on the payment
unless the broker receives a statement from the owner, signed under penalties
of perjury, certifying, among other things, its status as a Non-U.S. Holder,
or the broker has documentary evidence in its files that the owner is a Non-
U.S. Holder and the broker has no actual knowledge to the contrary. For this
purpose, a "U.S.-related person" is (i) a "controlled foreign corporation" for
United States federal income tax purposes or (ii) a foreign person 50% or more
of whose gross income from all sources for the three-year period ending with
the close of its taxable year preceding the payment (or for such part of the
period that the broker has been in existence) is derived from activities that
are effectively connected with the conduct of a United States trade or
business. The backup withholding and information reporting rules are currently
under review by the Treasury Department and their application to the shares of
Class A Common Stock is subject to change. Non-U.S. Holders should consult
their tax advisors regarding the application of these rules to their
particular situations, the availability of an exemption therefrom and the
procedure for obtaining such an exemption, if available.
Backup withholding is not an additional tax. Any amounts withheld from a
payment to a Non-U.S. Holder under the backup withholding rules will be
allowed as a credit against such holder's United States federal income tax
liability, if any, and may entitle such holder to a refund, provided that the
required information is furnished to the United States Internal Revenue
Service.
61
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the Underwriters named
below (the "Underwriters") have severally agreed to purchase, and the Company
has agreed to sell to them, severally, the respective number of shares of
Class A Common Stock set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
Wheat, First Securities, Inc. .....................................
-------
Total........................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated
to take and pay for all of the shares of Class A Common Stock offered hereby
(other than those covered by the Underwriters' over-allotment option described
below) if any such shares are taken.
The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the Price to Public set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $. per share under the Price to Public. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $. per share to other Underwriters or to certain dealers. After
the initial offering of the shares of Class A Common Stock, the offering price
and other selling terms may from time to time be varied by the Underwriters.
Pursuant to the Underwriting Agreement, the Company has granted to the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 262,500 additional shares of Class A Common
Stock at the Price to Public set forth on the cover page hereof, less
underwriting discounts and commissions. The Underwriters may exercise such
option to purchase solely for the purpose of covering over-allotments, if any,
made in connection with the offering of the shares of Class A Common Stock
hereby. To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares of Class A Common Stock as the number set
forth next to such Underwriter's name in the preceding table bears to the
total number of shares of Class A Common Stock offered by the Underwriters
hereby.
The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not for a
period of 120 days after the date of this Prospectus (A) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any shares of Class
A Common Stock or any securities convertible into or exercisable or
exchangeable for Class A Common Stock or (B) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Class A Common Stock, whether any such
transaction described in clause (A)
62
<PAGE>
or (B) above is to be settled by delivery of Class A Common Stock or such
other securities, in cash or otherwise, other than (i) the shares to be sold
hereunder, (ii) any shares of Class A Common Stock issued by the Company upon
the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof and described in this Prospectus and (iii) any
options or similar securities issued pursuant to the Company's Employee Long-
Term Incentive Plan or Employee Stock Purchase Plan as such plans are in
effect on the date hereof. In addition, certain executive officers, directors,
Fleet Venture Resources, Fleet Equity Partners and Chisholm have agreed to the
same restrictions (subject to certain additional exceptions) with respect to
an aggregate of 1,235,000 shares of Class A Common Stock or securities
exercisable for or convertible into Class A Common Stock held by them for 120
days after the date hereof without the prior written consent of Morgan Stanley
& Co. Incorporated. See "Shares Eligible For Future Sale."
Each of the Underwriters (i) has not offered or sold and will not offer or
sell any shares of Class A Common Stock to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purpose of their business or otherwise in circumstances which have not
resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the shares of Class A Common Stock in,
from or otherwise involving the United Kingdom; and (iii) has only issued or
passed on and will only issue or pass on to any person in the United Kingdom
any document received by it in connection with the issue of the shares of
Class A Common Stock if that person is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued or
passed on.
In connection with the offering of Class A Common Stock hereby, the
Underwriters and selling group members may engage in passive market making
transactions in the Company's Class A Common Stock on the Nasdaq Stock Market
immediately prior to the commencement of the sale of shares in this offering,
in accordance with Rule 10b-6A under the Exchange Act. Passive market making
consists of displaying bids on the Nasdaq Stock Market limited by the bid
prices of market makers not connected with this offering and purchases limited
by such prices and effected in response to order flow. Net purchases by a
passive market maker on each day are limited in amount to 30% of the passive
market maker's average daily trading volume in the Class A Common Stock during
the period of the two full consecutive calendar months prior to the filing
with the Commission of the Registration Statement of which this Prospectus is
a part and must be discontinued when such limit is reached. Passive market
making may stabilize the market price of the Class A Common Stock at a level
above that which might otherwise prevail and, if commenced, may be
discontinued at any time.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the shares of Class A Common Stock offered
hereby will be passed upon for the Company by Nixon, Hargrave, Devans & Doyle
LLP, New York, New York. Certain legal matters in connection with the Class A
Common Stock offered hereby will be passed upon for the Underwriters by
Shearman & Sterling, New York, New York.
EXPERTS
The consolidated financial statements and schedules of the Company included
or incorporated by reference in this Prospectus and elsewhere in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports.
63
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at its offices at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Reports and other information
concerning the Company may be inspected at the offices of the Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the shares
of Class A Common Stock offered hereby. This Prospectus, which forms a part of
the Registration Statement, does not contain all of the information set forth
in the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Statements contained
in this Prospectus as to the contents of any contract or other document are
not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by reference to
such contract or document. For further information regarding the Company and
the Class A Common Stock offered hereby, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto which can be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
64
<PAGE>
ACC CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets............................................. F-3
Consolidated Statements of Operations................................... F-5
Consolidated Statements of Changes in Shareholders' Equity.............. F-6
Consolidated Statements of Cash Flows................................... F-7
Notes to Consolidated Financial Statements.............................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of ACC Corp.:
We have audited the accompanying consolidated balance sheets of ACC Corp. (a
Delaware corporation) and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ACC Corp. and subsidiaries
as of December 31, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Rochester, New York
February 6, 1996
(Except with respect to the
matters discussed in Notes 10 and 11.A.,
as to which the dates are February 20, 1996 and
February 8, 1996, respectively)
F-2
<PAGE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 1,021 $ 518
Restricted cash.................................... 272 --
Accounts receivable, net of allowance for doubtful
accounts of $1,035 in 1994 and $2,085 in 1995..... 20,499 38,978
Other receivables.................................. 5,433 3,965
Prepaid expenses and other assets.................. 820 2,265
-------- --------
Total current assets............................. 28,045 45,726
-------- --------
Property, plant and equipment:
At cost............................................ 62,618 83,623
Less-accumulated depreciation and amortization..... (18,537) (26,932)
-------- --------
44,081 56,691
-------- --------
Other assets:
Restricted cash.................................... 157 --
Goodwill and customer base, net.................... 6,884 14,072
Deferred installation costs, net................... 1,639 3,310
Other.............................................. 3,642 4,185
-------- --------
12,322 21,567
-------- --------
Total assets..................................... $ 84,448 $123,984
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-3
<PAGE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Current liabilities:
Notes payable...................................... $ -- $ 1,966
Current maturities of long-term debt............... 1,613 2,919
Accounts payable................................... 10,498 7,340
Accrued network costs.............................. 10,443 28,192
Other accrued expenses............................. 9,254 15,657
Dividends payable.................................. 208 --
------- --------
Total current liabilities........................ 32,016 56,074
------- --------
Deferred income taxes................................ 2,170 2,577
------- --------
Long-term debt....................................... 29,914 28,050
------- --------
Redeemable Series A Preferred Stock, $1.00 par value,
$1,000 liquidation value, cumulative, convertible;
Authorized--10,000 shares; Issued--10,000 shares.... -- 9,448
------- --------
Minority interest.................................... 1,262 1,428
------- --------
Shareholders' equity:
Preferred Stock, $1.00 par value, Authorized--
1,990,000 shares;
Issued--no shares................................. -- --
Class A Common Stock, $.015 par value, Authorized--
50,000,000 shares; Issued-- 7,652,601 shares in
1994 and 8,617,259 shares in 1995................. 115 129
Class B Common Stock, $.015 par value, Authorized--
25,000,000 shares; Issued--no shares.............. -- --
Capital in excess of par value..................... 20,070 32,911
Cumulative translation adjustment.................. (1,013) (950)
Retained earnings (deficit)........................ 1,524 (4,073)
------- --------
20,696 28,017
Less--
Treasury stock, at cost (726,589 shares)........... (1,610) (1,610)
------- --------
Total shareholders' equity....................... 19,086 26,407
------- --------
Total liabilities and shareholders' equity..... $84,448 $123,984
======= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-4
<PAGE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Toll revenue.................................... $100,646 $118,331 $175,269
Leased lines and other.......................... 5,300 8,113 13,597
-------- -------- --------
Total revenue..................................... 105,946 126,444 188,866
Network costs..................................... 70,286 79,438 114,841
-------- -------- --------
Gross profit...................................... 35,660 47,006 74,025
Other Operating Expenses:
Depreciation and amortization................... 5,832 8,932 11,614
Selling expenses................................ 8,726 14,497 21,617
General and administrative...................... 20,081 29,731 40,576
Equal access costs.............................. -- 2,160 --
Asset write-down................................ 12,807 -- --
-------- -------- --------
Total other operating expenses.................... 47,446 55,320 73,807
-------- -------- --------
Income (loss) from operations..................... (11,786) (8,314) 218
Other Income (Expense):
Interest income................................. 205 124 198
Interest expense................................ (420) (2,023) (5,131)
Terminated merger costs......................... -- (200) --
Gain on sale of subsidiary stock................ 9,344 -- --
Foreign exchange gain (loss).................... (1,094) 169 (110)
-------- -------- --------
Total other income (expense)...................... 8,035 (1,930) (5,043)
-------- -------- --------
Loss from continuing operations before provision
for (benefit from) income taxes and minority
interest......................................... (3,751) (10,244) (4,825)
Provision for (benefit from) income taxes......... (3,743) 3,456 396
Minority interest in (earnings) loss of
consolidated subsidiary.......................... 1,661 2,371 (133)
-------- -------- --------
Income (loss) from continuing operations.......... 1,653 (11,329) (5,354)
Loss from discontinued operations (net of income
tax benefit of $667 in 1993)..................... (1,309) -- --
Gain on disposal of discontinued operations (net
of income tax provision of $8,350 in 1993)....... 11,531 -- --
-------- -------- --------
Net Income (Loss)................................. $ 11,875 $(11,329) $ (5,354)
======== ======== ========
Net income (loss) per common and common equivalent
share applicable to common stock from continuing
operations....................................... $ 0.24 $ (1.60) $ (.76)
Discontinued operations......................... (.18) -- --
Gain on disposal of discontinued operations..... 1.64 -- --
-------- -------- --------
Net Income (Loss) per Common and Common
Equivalent Share............................. $ 1.70 $ (1.60) $ (0.76)
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-5
<PAGE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
CAPITAL
IN
COMMON STOCK EXCESS CUMULATIVE RETAINED
---------------- OF PAR TRANSLATION EARNINGS TREASURY
SHARES AMOUNT VALUE ADJUSTMENT (DEFICIT) STOCK TOTAL
--------- ------ ------- ----------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... 7,450,120 $112 $18,798 $ (957) $ 6,042 $(1,283) $22,712
Stock options exercised. 87,352 1 759 -- -- -- 760
Dividends ($.62 per
common share).......... -- -- -- -- (4,233) -- (4,233)
Cumulative translation
adjustment............. -- -- -- 392 -- -- 392
Net income............ -- -- -- -- 11,875 -- 11,875
--------- ---- ------- ------- ------- ------- -------
Balance, December 31,
1993................... 7,537,472 $113 $19,557 $ (565) $13,684 $(1,283) $31,506
Stock options exercised. 102,375 2 363 -- -- -- 365
Employee stock purchase
plan shares issued..... 12,754 -- 150 -- -- -- 150
Repurchase of shares to
exercise options....... -- -- -- -- -- (327) (327)
Dividends ($.12 per
common share).......... -- -- -- -- (831) -- (831)
Cumulative translation
adjustment............. -- -- -- (448) -- -- (448)
Net loss.............. -- -- -- -- (11,329) -- (11,329)
--------- ---- ------- ------- ------- ------- -------
Balance, December 31,
1994................... 7,652,601 $115 $20,070 $(1,013) $ 1,524 $(1,610) $19,086
Stock options exercised. 33,525 1 479 -- -- -- 480
Sale of stock........... 825,000 12 11,084 -- -- -- 11,096
Employee stock purchase
plan shares issued..... 23,633 -- 297 -- -- -- 297
Stock warrants
exercised.............. 82,500 1 1,187 -- -- -- 1,188
Stock warrants issued... -- -- 200 -- -- -- 200
Accretion of Series A
Preferred Stock........ -- -- (139) -- -- -- (139)
Series A Preferred Stock
dividends.............. -- -- (401) -- -- -- (401)
Acceleration of stock
option vesting......... -- -- 134 -- -- -- 134
Dividends ($.03 per
common share).......... -- -- -- -- (243) -- (243)
Cumulative translation
adjustment............. -- -- -- 63 -- -- 63
Net loss.............. -- -- -- -- (5,354) -- (5,354)
--------- ---- ------- ------- ------- ------- -------
Balance, December 31,
1995................... 8,617,259 $129 $32,911 $ (950) $(4,073) $(1,610) $26,407
========= ==== ======= ======= ======= ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-6
<PAGE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
---------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... $ 11,875 $ (11,329) $ (5,354)
---------- ----------- ----------
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization.......... 5,832 8,932 11,614
Deferred income taxes.................. (3,826) 3,906 609
Minority interest in earnings (loss) of
consolidated subsidiary............... (1,661) (2,371) 133
Gain on sale of subsidiary stock....... (9,344) -- --
Unrealized foreign exchange loss....... 109 150 180
Amortization of deferred financing
costs................................. -- -- 263
Foreign exchange loss on repayment of
intercompany debt..................... 760 -- --
Gain on disposal of discontinued
operations............................ (11,531) -- --
Current income taxes on gain........... (7,575) -- --
Loss from discontinued operations...... 1,309 -- --
Asset write-down....................... 12,807 -- --
(Increase) decrease in assets:
Accounts receivable, net............. (3,184) (5,019) (17,437)
Other receivables.................... (666) (3,621) 1,782
Prepaid expenses and other assets.... (1,798) 1,030 (1,057)
Deferred installation costs.......... (1,037) (1,147) (2,983)
Other................................ (961) (2,206) 846
Increase (decrease) in liabilities:
Accounts payable..................... (607) 7,784 (7,013)
Accrued network costs................ 738 1,754 17,824
Other accrued expenses............... (3,068) 3,230 4,560
---------- ----------- ----------
Total adjustments.................. (23,703) 12,422 9,321
---------- ----------- ----------
Net cash provided by (used in)
operating activities.............. (11,828) 1,093 3,967
---------- ----------- ----------
Cash flows from investing activities:
Cash received from sale of discontinued
operations............................ 41,000 2,538 --
Capital expenditures, net.............. (17,594) (20,682) (12,424)
Payments on notes receivable........... 244 -- --
Payment for purchase of subsidiary, net
of cash acquired...................... -- -- (2,313)
Acquisition of customer base........... (2,786) (2,861) (557)
---------- ----------- ----------
Net cash provided by (used in)
investing activities.............. 20,864 (21,005) (15,294)
---------- ----------- ----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-7
<PAGE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Net (payments) borrowings under lines
of credit............................. (8,536) 25,102 (5,602)
Repayment of long-term debt, other than
lines of credit....................... (10,286) (1,591) (3,078)
Repurchase of minority interest........ -- (226) --
Proceeds from issuance of common stock. 15,815 189 13,261
Proceeds from issuance of convertible
debt.................................. -- -- 10,000
Financing costs........................ -- -- (2,876)
Dividends paid......................... (816) (4,241) (451)
----------- ---------- -----------
Net cash provided by (used in)
financing activities.............. (3,823) 19,233 11,254
----------- ---------- -----------
Effect of exchange rate changes on cash.. (20) 233 (430)
----------- ---------- -----------
Net increase (decrease) in cash from
continuing operations................... 5,193 (446) (503)
Cash used in discontinued operations..... (4,080) -- --
Cash and cash equivalents at beginning of
year.................................... 354 1,467 1,021
----------- ---------- -----------
Cash and cash equivalents at end of year. $ 1,467 $ 1,021 $ 518
=========== ========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest............................... $ 1,847 $ 1,656 $ 4,146
=========== ========== ===========
Income taxes........................... $ 8,633 $ 280 $ 203
=========== ========== ===========
Supplemental schedule of noncash
investing and financing activities:
Equipment purchased through capital
leases................................ $ 390 $ 3,077 $ 7,389
=========== ========== ===========
Fair value of Metrowide assets
acquired.............................. -- -- $ 10,800
Less-- cash paid at acquisition date. -- -- (1,500)
Less --short term notes payable...... -- -- (2,966)
----------- ---------- -----------
Metrowide liabilities assumed.......... -- -- $ 6,334
=========== ========== ===========
Other assets purchased with long-term
debt.................................. -- $ 540 --
=========== ========== ===========
Purchase of customer base with long-
term debt............................. $ 942 -- --
=========== ========== ===========
Conversion of convertible debt to
preferred stock....................... -- -- $10,000
=========== ========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-8
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include all accounts of ACC Corp. (a
Delaware Corporation) and its direct and indirect subsidiaries (the "Company"
or "ACC"). Principal operating subsidiaries include: ACC Long Distance Corp.
(U.S.), ACC TelEnterprises Ltd. (Canada), ACC Long Distance UK Ltd., and ACC
National Telecom Corp. All operating subsidiaries are wholly-owned, with the
exception of ACC TelEnterprises Ltd. (See B. below). All significant
intercompany accounts and transactions have been eliminated.
The accompanying consolidated financial statements reflect the results of
operations of acquired companies since their respective acquisition dates.
B. SALE OF SUBSIDIARY STOCK:
On July 6, 1993, the Company's then wholly-owned Canadian subsidiary, ACC
TelEnterprises Ltd., completed an initial public offering of 2 million common
shares for Cdn. $11.00 per share. The Company received net proceeds of
approximately Cdn. $20.7 million after underwriters' fees and before other
direct costs of the offering of Cdn. $1.3 million. As a result of the
offering, ACC Corp.'s ownership was reduced to approximately 70 percent.
The Company recognized a gain of $9.3 million after related expenses on this
transaction due to the increase in the carrying amount of the Company's
investment in ACC TelEnterprises Ltd. No deferred taxes have been provided for
on this gain as the Company has the ability to defer the recognition of
taxable income related to this transaction indefinitely.
Minority interest represents the approximately 30 percent non-Company owned
shareholder interest in ACC TelEnterprises Ltd.'s equity primarily resulting
from the 1993 public offering. Assuming the sale of subsidiary stock occurred
on January 1, 1993, then, on a pro forma basis, the minority interest in loss
of the consolidated subsidiary would have been approximately $1.6 million for
the year ended December 31, 1993. This pro forma information has been prepared
for comparative purposes only. During 1994, the Company repurchased 58,300
shares of ACC TelEnterprises Ltd. stock for approximately $3.69 per share.
C. REVENUE:
The Company records as revenue the amount of communications services
rendered, as measured by the related minutes of toll traffic processed or
flat-rate services billed, after deducting an estimate of the traffic or
services which will neither be billed nor collected.
D. PROPERTY, PLANT AND EQUIPMENT:
The Company's property, plant and equipment consisted of the following at
December 31, 1994 and 1995 (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Equipment................................................... $53,700 $69,174
Computer software and software licenses..................... 4,648 6,869
Other....................................................... 4,270 7,580
------- -------
TOTAL....................................................... $62,618 $83,623
======= =======
</TABLE>
F-9
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and amortization of property, plant and equipment is computed
using the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Leasehold improvements......................................... Life of lease
Equipment, including assets under capital leases............... 2 to 15 years
Computer software and software licenses........................ 5 to 7 years
Office equipment and fixtures.................................. 3 to 10 years
Vehicles....................................................... 3 years
</TABLE>
Equipment and computer software include assets financed under capital lease
obligations. A summary of these assets at December 31, 1994 and 1995 is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
------ -------
<S> <C> <C>
Cost........................................................ $7,360 $13,935
Less--accumulated amortization.............................. (3,482) (4,538)
------ -------
Total, net.................................................. $3,878 $ 9,397
====== =======
</TABLE>
Betterments, renewals, and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed. The cost
and accumulated depreciation applicable to assets retired are removed from the
accounts and the gain or loss on disposition is recognized in income.
E. DEFERRED INSTALLATION COSTS:
Costs incurred for the installation of local access lines are amortized on a
straight-line basis over a three-year period which represents the average
estimated useful life of these lines. Accumulated amortization of deferred
installation costs totaled approximately $3.3 million and $4.5 million at
December 31, 1994 and 1995, respectively.
F. GOODWILL AND CUSTOMER BASE:
All of the Company's acquisitions have been accounted for as purchases and,
accordingly, the purchase prices were allocated to the assets and liabilities
of the acquired companies based on their fair values at the acquisition date.
As of August 1, 1995, ACC TelEnterprises Ltd. acquired Metrowide
Communications ("Metrowide") in a business combination accounted for as a
purchase. Metrowide is based in Toronto, Canada, and provides local and long
distance services to Ontario, Canada based customers. The results of
operations of Metrowide are included in the accompanying financial statements
since the date of acquisition. The total cost of the acquisition was Cdn.
$14.7 million (U.S. $10.8 million) including Cdn. $8.7 million (U.S. $6.3
million) of liabilities assumed, of which Cdn. $2.0 million (U.S. $1.5
million) was paid at the date of purchase, with the remaining Cdn. $4.0
million (U.S. $3.0 million) due in installments through August 1, 1996.
Goodwill associated with the Metrowide purchase of Cdn. $7.0 million (U.S.
$5.0 million) is being amortized over 20 years, and customer base of Cdn. $4.2
million (U.S. $3.1 million) is being amortized over five years. Accumulated
amortization of goodwill approximated U.S. $108,000 at December 31, 1995.
The Company amortizes acquired customer bases on a straight-line basis over
five to seven years. Accumulated amortization of customer base totaled $1.7
million and $3.1 million at December 31, 1994 and 1995, respectively.
F-10
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This Statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable and
requires that an impairment loss be recognized based on the existence of
certain conditions. This Statement also requires that long-lived assets and
certain identifiable intangibles to be disposed of be reported at the lower of
their carrying amount or fair value less cost to sell.
The effect of adopting SFAS No. 121 was immaterial to the consolidated
financial statements. The Company continually evaluates its intangible assets
in light of events and circumstances that may indicate that the remaining
estimated useful life may warrant revision or that the remaining value may not
be recoverable. When factors indicate that intangible assets should be
evaluated for possible impairment, the Company uses an estimate of the
undiscounted cash flow over the remaining life of the intangible asset in
measuring whether that asset is recoverable.
G. COMMON AND COMMON EQUIVALENT SHARES:
Primary earnings per common share are based on the weighted average number
of common shares outstanding during the year and the assumed exercise of
dilutive stock options and warrants, less the number of treasury shares
assumed to be purchased from the proceeds using the average market prices of
the Company's Class A Common Stock.
The weighted average number of common shares outstanding for the fiscal
years ended December 31, 1993, 1994, and 1995 were approximately 7.025 million
shares, 7.068 million shares and 7.789 million shares, respectively.
Primary earnings per share were computed by adjusting net income (loss) for
dividends and accretion applicable to Series A Preferred Stock, as follows
(dollars in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- -------- -------
<S> <C> <C> <C>
Income (loss) from continuing operations............ $ 1,653 $(11,329) $(5,354)
Income from discontinued operations................. 10,222 -- --
------- -------- -------
Net income (loss)................................... 11,875 (11,329) (5,354)
Less Series A Preferred Stock dividend.............. -- -- (401)
Less Series A Preferred Stock accretion............. -- -- (139)
------- -------- -------
Income (loss) applicable to Common Stock............ $11,875 $(11,329) $(5,894)
======= ======== =======
</TABLE>
Fully diluted earnings per share are not presented for the year ended
December 31, 1995, because the effect of the assumed conversion of the Series
A Preferred Stock shares, which were authorized and issued during 1995, would
be anti-dilutive.
All references to common and common equivalent shares have been
retroactively restated to reflect a February 4, 1993 three-for-two stock
dividend.
F-11
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
H. FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of ACC TelEnterprises Ltd. and ACC Long Distance UK
Ltd., operating in Canada and the United Kingdom, respectively, are translated
into U.S. dollars using the exchange rates in effect at the balance sheet
date. Results of operations are translated using the average exchange rates
prevailing throughout the period. The effects of exchange rate fluctuations on
translating foreign currency assets and liabilities into U.S. dollars are
included as part of the cumulative translation adjustment component of
shareholders' equity, while gains and losses resulting from foreign currency
transactions are included in net income. In 1993, the Company recognized a
foreign exchange loss of approximately $0.8 million due to the repayment of
intercompany debt from its Canadian subsidiary. This debt had previously been
considered of a long-term investment nature and gains and losses had been
included in cumulative translation adjustment on the Company's balance sheet.
I. INCOME TAXES:
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes" in 1993. Deferred income taxes reflect the
future tax consequences of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each year-end. The
cumulative effect of this change was not material to the financial statements
of the Company.
J. CASH EQUIVALENTS AND RESTRICTED CASH:
The Company considers investments with a maturity of less than three months
to be cash equivalents.
In connection with an agreement described in Note 8, the Company had placed
approximately $0.6 million in an escrow account. During 1994 and 1995,
approximately $0.2 million and $0.4 million, respectively, was paid to an
officer of the Company in accordance with the agreement. The $0.4 million was
reflected as "restricted cash" on the balance sheet at December 31, 1994.
K. CURRENCY FORWARD CONTRACTS:
The Company enters into contracts to buy and sell foreign currencies in the
future in order to protect the U.S. dollar value of certain currency positions
and future foreign currency transactions. The gains and losses on these
contracts are included in income in the period in which the exchange rates
change. The discounts and premiums on the forward contracts are amortized over
the life of the contracts.
At December 31, 1995, the Company had foreign currency contracts outstanding
to sell forward the equivalent of Cdn. $37.9 million and 5.3 million pounds
sterling and to buy forward the U.S. dollar equivalent of Cdn. $10.0 million
and 2.7 million pounds sterling. These contracts mature throughout 1996.
At December 31, 1994, the Company had foreign currency contracts outstanding
to sell forward the equivalent of Cdn. $19.0 million and 7.9 million pounds
sterling and to buy forward the U.S. dollar equivalent of 2.4 million pounds
sterling.
The aggregate fair value, based on published market exchange rates, of
foreign currency contracts at December 31, 1994 and 1995, was $22.7 million
and $24.5 million, respectively.
L. USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-12
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
M. RECLASSIFICATIONS:
Certain reclassifications have been made to previously reported balances for
1994 and 1993 to conform to the 1995 presentation.
2. OPERATING INFORMATION
ACC is a switch-based provider of telecommunications services in the United
States, Canada and the United Kingdom. The Company primarily offers long
distance telecommunications services to a diversified customer base of
businesses, residential customers, and educational institutions. ACC has begun
to provide local telephone service as a switch-based local exchange reseller
in upstate New York and as a reseller of local exchange services in Ontario,
Canada. ACC primarily targets business customers with approximately $500 to
$15,000 of monthly long distance usage, selected residential customers and
colleges and universities. For the year ended December 31, 1995, long distance
revenues account for approximately 93% of total Company revenues, while local
exchange revenues and data-line sales are 2% and 3%, respectively, of total
Company revenues. Geographic area information is included in Note 9.
ACC operates an advanced telecommunications network consisting of seven long
distance international and domestic switches located in the United States,
Canada and the United Kingdom; a local exchange switch in the United States;
leased transmission lines; and network management systems designed to optimize
traffic routing.
At December 31, 1995, approximately $14.8 million of the Company's
telecommunications equipment was located on 50 university, college, and
preparatory school campuses in the Northeastern United States and in the
United Kingdom. Each of these institutions has signed agreements, with terms
ranging from three to eleven years, for the provision of a variety of services
by the Company.
In the United States, the Federal Communications Commission ("FCC") and
relevant state Public Service Commissions ("PSCs") have the authority to
regulate interstate and intrastate rates, respectively, ownership of
transmission facilities, and the terms and conditions under which the
Company's services are provided. In Canada, services provided by ACC
TelEnterprises Ltd. are subject to or affected by certain regulations of the
Canadian Radio-Television and Telecommunications Commission (the "CRTC"). The
telecommunications services provided by ACC Long Distance U.K. Ltd. are
subject to and affected by regulations introduced by The Office of
Telecommunications, the U.K. telecommunications regulatory authority
("Oftel").
In addition to regulation, the Company is subject to various risks in
connection with the operation of its business. These risks include, among
others, dependence on transmission facilities-based carriers and suppliers,
price competition and competition from larger industry participants. (See
"Risk Factors" in the Company's recently filed Registration Statement on Form
S-3).
Concentrations with respect to trade receivables are limited, except with
respect to resellers, due to the large number of customers comprising the
Company's customer base and their dispersion across many different industries
and geographic regions. At December 31, 1995, approximately 14% of the
Company's billed accounts receivable balance was due from resellers.
The Company has contracted with a vendor to purchase license rights to
certain software used in its operations. The Company believes that it is
currently the only customer of the vendor and, as a result, the vendor is
financially dependent on the Company. Any future modifications or enhancements
to such software are dependent on the continued viability of the vendor.
A. DISCONTINUED OPERATIONS:
In 1993, the Company recorded a gain of $11.5 million, or $1.64 per share,
net of a provision for income taxes of $8.4 million, related to the sale of
the operating assets and liabilities of its cellular subsidiary, Danbury
F-13
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cellular Telephone Co. The proceeds of the sale were approximately $43.0
million, of which $41.0 million was received in October, 1993 with the
remaining $2.0 million received in October, 1994. Revenue related to this
business segment for the nine months ended September 30, 1993 was $3.9
million. The results of the cellular business segment have been reported
separately as discontinued operations in the consolidated statements of
operations.
B. ASSET WRITE-DOWN:
In 1993, the Company recorded a non-cash pretax charge of $12.8 million
related to write-downs of certain assets of the Company's U.S. and Canadian
operations.
The U.S. write-down of intangibles amounted to approximately $1.2 million.
The intangibles written off resulted from the acquisition of a number of
businesses since 1985. Changes in the Company's operations since those
companies were acquired, as well as an evaluation of the future undiscounted
cash flow from those acquisitions, led the Company to the conclusion that the
purchased intangibles no longer had value.
The write-down of fixed assets in the U.S. totaled approximately $5.1
million which represented the excess of net book value over estimated
recoverable value for certain assets. These assets were written down due to
technological changes which made it uneconomical for the Company to continue
to use these assets in the production of revenue. Included in this amount was
approximately $3.0 million of equipment related to the Company's 180 mile
microwave network in New York State.
The Canadian write-down included approximately $2.8 million for acquired
customer base and accounts receivable and $3.8 million for autodialing
equipment. The write-down of the customer base and accounts receivable was due
to the future undiscounted cash flow from those acquisitions being
significantly less than originally anticipated.
The write-down of autodialing equipment reflected the excess of net book
value over estimated recoverable value for those assets as a direct effect of
the decision of the Canadian Radio-Television and Telecommunications
Commission on July 23, 1993, which resulted in the implementation, starting in
July, 1994, of equal access in Canada. These assets were fully depreciated at
December 31, 1994.
C. EQUAL ACCESS COSTS:
During 1994, the Company initiated the process of converting its network to
equal access for its Canadian customers. Costs associated with this process
were approximately $2.2 million and include maintaining duplicate network
facilities during transition, recontacting customers, and the administrative
expenses associated with accumulating the data necessary to convert the
Company's customer base to equal access.
3. DEBT, LINES OF CREDIT, AND FINANCING ARRANGEMENTS
A. DEBT:
The Company had the following debt outstanding as of December 31, 1994 and
1995 (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Senior Credit Facility/Lines of Credit.................... $26,602 $20,973
Capitalized lease obligations payable in total monthly
installments of $250 including interest rates ranging
from 8% to 21.5%, maturing through 2000, collateralized
by related equipment..................................... 4,925 9,996
Notes payable to previous Metrowide owners, interest rates
ranging from 7.5% to 9%.................................. -- 1,966
------- -------
$31,527 $32,935
Less current maturities................................... (1,613) (4,885)
------- -------
$29,914 $28,050
======= =======
</TABLE>
F-14
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR AMOUNT
---------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Maturities of debt, including capital lease
obligations, are as follows at December 31, 1995: 1996 $ 4,885
1997 2,563
1998 5,712
1999 13,248
2000 6,527
Thereafter --
-------
$32,935
=======
</TABLE>
Based on borrowing rates currently available to the Company for loans and
lease agreements with similar terms and average maturities, the fair value of
its debt approximates its recorded value.
B. SENIOR CREDIT FACILITY AND LINES OF CREDIT:
On July 21, 1995, the Company entered into an agreement for a $35.0 million
five year senior revolving credit facility with two financial institutions.
Borrowings are limited individually to $5.0 million for ACC Long Distance UK
Ltd. and $2.0 million for ACC National Telecom Corp., with total borrowings
for the Company limited to $35.0 million. Initial borrowings under the
agreement were used to pay down and terminate the Company's previously
existing lines of credit and to pay fees related to the transaction.
Subsequent borrowings have been, and will be, used to finance capital
expenditures and to provide working capital. Fees associated with obtaining
the financing are being amortized over the term of the agreement.
In conjunction with the closing, the Company issued to a financial advisor
warrants to purchase 30,000 shares of the Company's Class A Common Stock at an
exercise price of $16.00 per share. The warrants expire on January 21, 1999.
The agreement limits the amount that may be borrowed against this facility
based on the Company's operating cash flow. The agreement also contains
certain covenants including restrictions on the payment of dividends,
maintenance of a maximum leverage ratio, minimum debt service coverage ratio,
maximum fixed charge coverage ratio and minimum net worth, all as defined
under the agreement, and subjective covenants. Regarding a certain subjective
covenant related to transactions with affiliates (see Note 10), a waiver was
obtained covering such transactions through December 31, 1995. At December 31,
1995, the Company had available $8.7 million under this facility. The total
available facility will be reduced in quarterly increments of $2.450 million
from July 1, 1997 to October 1, 1998, $2.905 million from January 1, 1999 to
April 1, 2000 and by $2.870 million on maturity at July 1, 2000. Borrowings
under the facility are secured by certain of the Company's assets and will
bear interest at either the LIBOR rate or the base rate (base rate being the
greater of the prime interest rate or the federal funds rate plus 1/2%), with
additional percentage points added based on a ratio of debt to operating cash
flow, as defined in the facility agreement. The weighted average interest rate
for borrowings during 1995 was 8.4%.
Under the agreement, the Company is obligated to pay the financial
institutions an aggregate contingent interest payment based on the minimum of
$750,000 or the appreciation in value of 140,000 shares of the Company's Class
A Common Stock over the 18 month period ending January 21, 1997, but not to
exceed $2.1 million. The contingent interest is due upon the earlier of the
occurrence of a triggering event, as defined, or 18 months after the closing
date.
In connection with the agreement, the Company must enter into hedging
agreements with respect to interest rate exposure. The agreements have certain
conditions regarding the interest rates, are subject to minimum aggregate
balances of $10.0 million and must have durations of at least two years. The
Company entered into three interest rate swap agreements in 1995 to convert
the variable interest rate charged on $11.5 million of the outstanding credit
facility to a fixed rate. Under these agreements, the Company is required to
pay a fixed rate of
F-15
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
interest on a notional principal balance. In return, the Company receives a
payment of an amount equal to the variable rate calculated as of the beginning
of the month. The interest rate swap agreements in effect as of December 31,
1995, are as follows:
<TABLE>
<CAPTION>
NOTIONAL VARIABLE FIXED
BALANCE RATE RATE
-------- -------- -----
<S> <C> <C>
$2,000,000 5.938% 5.98%
$7,500,000 5.938% 6.25%
$2,000,000 5.938% 6.02%
</TABLE>
These agreements expire at various times through November, 1998.
At December 31, 1995, the Company has issued letters of credit totaling $1.4
million which reduce the available balance of the credit facility. The letters
of credit guarantee performance to third parties. Management does not expect
any material losses to result from these off-balance sheet instruments because
the Company will meet its obligations to the third parties, and therefore,
management is of the opinion that the fair value of these instruments is zero.
As of December 31, 1994, the Company had available up to $30.0 million under
two separate bank-provided line of credit agreements. During 1995, the Company
obtained a commitment letter to extend its then existing lines of credit for a
period greater than twelve months. In accordance with SFAS No. 6,
"Classification of Short-Term Obligations Expected to be Refinanced," the
outstanding lines of credit borrowings at December 31, 1994 were classified as
long-term debt.
Each agreement was an unsecured working capital line for up to $15.0 million
at the respective bank's prime rate. Outstanding principal under each line of
credit was due on demand. At December 31, 1994, the Company had available
approximately $3.1 million under one line of credit. The weighted average
interest rate for borrowings on this line during 1994 and 1995 was 7.4% and
8.9% respectively. At December 31, 1994, the Company had available $66,000
under the second line of credit. The weighted average interest rate for
borrowings on this line during 1994 and 1995 was 7.8% and 8.8%, respectively.
4. INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by SFAS
No. 109, "Accounting for Income Taxes." The cumulative effect of adopting this
Statement as of January 1, 1993 was immaterial to net income.
The following is a summary of the U.S. and non-U.S. income (loss) from
continuing operations before provision for (benefit from) income taxes and
minority interest, the components of the provision for (benefit from) income
taxes and deferred income taxes, and a reconciliation of the U.S. statutory
income tax rate to the effective income tax rate.
Income (loss) from continuing operations before provision for (benefit from)
income taxes and minority interest (dollars in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- -------- -------
<S> <C> <C> <C>
U.S. ............................................... $ 6,177 $ 1,301 $ 1,510
Non-U.S. ........................................... (9,928) (11,545) (6,335)
------- -------- -------
$(3,751) $(10,244) $(4,825)
======= ======== =======
</TABLE>
F-16
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Provision for (benefit from) income taxes (dollars in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------ -----
<S> <C> <C> <C>
Current:
U.S.................................................. $ -- $ (867) $581
Non-U.S.............................................. (410) -- --
------- ------ -----
$ (410) $ (867) $581
======= ====== =====
Deferred:
U.S.................................................. (865) 1,298 (185)
Non-U.S.............................................. (2,468) 3,025 --
------- ------ -----
(3,333) 4,323 (185)
------- ------ -----
$(3,743) $3,456 $ 396
======= ====== =====
</TABLE>
Provision for (benefit from) deferred income taxes (dollars in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Difference between tax and book depreciation and
amortization................................... $(2,023) $ 2,178 $ 772
Difference between tax and book basis of assets
written down................................... (1,298) -- --
Valuation allowance............................. 603 6,851 2,223
Software development costs...................... -- 502 (502)
Other temporary differences..................... (12) 171 (103)
Net operating loss.............................. (603) (5,379) (2,575)
------- ------- -------
$(3,333) $ 4,323 $ (185)
======= ======= =======
</TABLE>
Reconciliation of U.S. statutory income tax rate to effective income tax
rate:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
U.S. statutory income
tax rate............... (35.0%) (34.0%) (34.0%)
Non-deductible goodwill
and customer base...... 20.3 1.2 2.7
Foreign income taxes,
including valuation
allowance.............. (2.4) 66.6 44.6
Gain on sale of
subsidiary stock....... (87.2) -- --
State tax benefit....... -- -- (2.4)
Other................... 4.5 -- (2.7)
----- ----- -----
Effective income tax
rate................... (99.8%) 33.8% 8.2%
===== ===== =====
</TABLE>
Deferred income tax assets and liabilities reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
At December 31, 1995, the Company had unused tax benefits of approximately
$9.8 million related to non-U.S. net operating loss carryforwards totaling
$25.3 million for income tax purposes, of which $14.4 million have an
unlimited life, $2.6 million expire in 2000, $7.7 million expire in 2001, and
$0.6 million expire in 2002. In addition, the Company had $1.1 million of
deferred tax assets related to non-U.S. temporary differences. The valuation
allowance was increased by $3.5 million to approximately $10.9 million to
offset the related non-U.S. deferred tax assets due to the uncertainty of
realizing the benefit of the non-U.S. loss carryforwards.
F-17
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of December 31, (dollars in thousands):
<TABLE>
<CAPTION>
1994 1995
------- --------
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization--non-U.S................... $1,472 $ 1,122
Other non-deductible reserves and accruals............... 40 647
Non-U.S. operating loss carryforwards.................... 5,982 9,816
Less--valuation allowance for non-U.S. deferred tax
assets.................................................. (7,454) (10,938)
------- --------
Net deferred tax assets.................................. 40 647
Deferred tax liabilities:
Depreciation and amortization............................ (2,170) (2,577)
------- --------
$(2,130) $ (1,930)
======= ========
</TABLE>
5. REDEEMABLE PREFERRED STOCK
On May 22, 1995, the Company completed a $10.0 million private placement of
12% subordinated convertible debt to a group of investors. The notes were
converted into 10,000 shares of cumulative, convertible Series A Preferred
Stock on September 1, 1995. The Series A Preferred Stock has a liquidation
value of $1,000 per share, and accrues cumulative dividends, compounded on the
accumulated and unpaid balance, as defined, at a rate of 12% annually. The
dividends shall accrue whether or not the dividends have been declared and
whether or not there are profits, surplus or other funds of the Company
legally available for the payment of dividends. The dividends are payable upon
redemption unless the Series A Preferred Stock is converted into Class A
Common Stock at an initial conversion price of $16.00 per share, or 625,000
shares, subject to certain adjustments and conditions. The conversion price
can fluctuate if the Company, among other actions, grants or sells options at
prices less than the conversion price of the Series A Preferred Stock, or
issues or sells convertible securities at a price per share less than the
conversion price of the Series A Preferred Stock.
On the seventh anniversary of the private placement, all of the outstanding
shares of Series A Preferred Stock shall be redeemed in cash or in a
combination of cash and Class A Common Stock. Redemption may be made at the
price per share equal to the greater of (i) the liquidation value ($1,000 per
share) plus all accrued and unpaid dividends; or (ii) the fair market value of
the underlying Class A Common Stock into which the Series A Preferred Stock is
convertible. Optional redemptions of all or a portion of shares, as defined,
of the then outstanding shares are permitted at any time.
All of the issued and outstanding Series A Preferred Stock will be
automatically converted into Class A Common Stock if, after the second
anniversary of the closing: (i) the daily trading volume of the Class A Common
Stock exceeds 5% of the number of shares of Class A Common Stock issuable upon
conversion of the Series A Preferred Stock for 45 consecutive trading days;
(ii) the holders of the Series A Preferred Stock are not subject to any
underwriters' lockup agreement restricting transferability of the shares of
Class A Common Stock issuable upon conversion of such Series A Preferred
Stock; and (iii) the average closing price of the Class A Common Stock for 15
consecutive trading days, through July 2002, equals or exceeds the price, as
defined, ranging from $32.00 to $57.33 per share.
Noncompliance with the terms of the Series A Preferred Stock and the
agreement under which the Series A Preferred Stock was issued, can result
depending on the cause of the default in an increase of the dividend rate to
15 percent, a one-third reduction in the conversion price which existed prior
to the event of default, or immediate redemption at the liquidation value plus
accrued and unpaid dividends.
F-18
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Concurrent with the private placement, warrants to purchase 100,000 shares
of the Company's Class A Common Stock were issued at an initial exercise price
of $16.00 per share. These warrants expire in July 2002. In addition, the
Company issued warrants to purchase Class A Common Stock that will become
exercisable upon one or more optional repayments of the Series A Preferred
Stock at an exercise price of $16.00 per share, subject to adjustments, as
defined, and will permit each holder to acquire initially the same number of
shares of Class A Common Stock into which the Series A Preferred Stock is
convertible as of the relevant repayment date. These warrants expire in July
2002.
The Series A Preferred Stock is senior to all classes and series of
preferred stock and Class A Common Stock as to the payment of dividends and
redemptions, and upon liquidation at liquidation value, senior to all other
classes of the Company's capital stock. In certain circumstances, the holders
of the Series A Preferred Stock will have preemptive rights to purchase, on an
as-converted basis, a pro rata portion of certain Class A Common Stock
issuances by the Company. The holders of the Series A Preferred Stock are
entitled to elect one director to the Company's Board of Directors, so long as
at least 33% of the Series A Preferred Stock is outstanding. The holders also
have the right to approve certain transactions, as defined, including the
payment of dividends and acquisition of shares of treasury stock.
At December 31, 1995, the Series A Preferred Stock is reflected on the
accompanying balance sheet as redeemable preferred stock, and is shown
inclusive of cumulative unpaid dividends, and net of unamortized issuance
costs of approximately $1.1 million. The carrying value of the redeemable
preferred stock will be accreted to the liquidation value, as defined, over
the seven year term.
6. EQUITY
During 1995, the Company's shareholders approved an amendment to the
Company's Certificate of Incorporation that authorized the creation of
2,000,000 shares of Series A Preferred Stock, par value $1.00 per share,
authorized the creation of 25,000,000 shares of Class B non-voting Common
Stock, par value $.015 per share, and redesignated the 50,000,000 shares of
Common Stock, par value $.015 per share, that were previously authorized for
issuance as 50,000,000 shares of Class A Common Stock.
A. PRIVATE PLACEMENT:
During 1995, the Company made an offshore sale of 825,000 shares of its
Class A Common Stock at an average price of $14.53 per share. The sale raised
net proceeds of $11.1 million, after deduction of fees and expenses of $0.9
million. In conjunction with this transaction, warrants to purchase 82,500
shares of Class A Common Stock at an exercise price of $14.40 per share were
issued. These warrants were exercised prior to December 31, 1995.
B. EMPLOYEE STOCK OPTION PLAN:
In October, 1994, the Company's shareholders approved an amendment to the
Employee Stock Option Plan whereby options to purchase an aggregate of
2,000,000 shares of Class A Common Stock may be granted to officers and key
employees of the Company. In July, 1995, shareholders of the Company approved
an additional 500,000 shares of Class A Common Stock to be reserved for
issuance under this plan. The exercise price of the stock options must not be
less than the market value per share at the date of grant, and no options
shall be exercisable after ten years and one day from the date of grant.
Options generally become exercisable on a pro-rata basis over a four-year
period beginning on the date of grant and 25% on each of the three anniversary
dates thereafter.
F-19
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Changes in the status of the stock option plan during 1993, 1994, and 1995
are summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
<S> <C> <C> <C>
Options outstanding at beginning
of year.......................... 531,000 464,125 785,250
Options granted.................. 145,000 655,000 291,335
Options exercised................ (87,375) (102,375) (33,525)
Options forfeited................ (124,500) (231,500) (22,750)
------------ ------------ ------------
Options outstanding at end of
year............................. 464,125 785,250 1,020,310
============ ============ ============
Number of options at end of year:
Exercisable...................... 196,125 193,125 405,333
Available for grant.............. 375,803 302,303 533,717
Range of prices:
Granted during year.............. $15.00-19.75 $14.25-19.25 $13.75-17.25
Outstanding at end of year....... $ 2.83-19.75 $ 2.83-19.75 $ 2.83-19.75
Exercised during the year........ $ 2.83-10.92 $ 3.30-11.33 $ 9.67-18.75
</TABLE>
The Company is required to adopt SFAS No. 123, "Accounting for Stock-Based
Compensation" in 1996. This Statement encourages entities to adopt a fair
value based method of accounting for employee stock option plans (whereby
compensation cost is measured at the grant date based on the value of the
award and is recognized over the employee service period) rather than the
current intrinsic value based method of accounting (whereby compensation cost
is measured at the grant date as the difference between market value and the
price for the employee to acquire the stock). If the Company elects to
continue using the intrinsic value method of accounting, pro forma disclosures
of net income and earnings per share, as if the fair value based method of
accounting had been applied, will need to be disclosed. Management has not
decided if the Company will adopt the fair value based method of accounting
for their stock option plans. The Company believes that adopting the fair
value basis of accounting could have a material impact on the financial
statements and such impact is dependent upon future stock option activity.
C. EMPLOYEE STOCK PURCHASE PLAN:
In October, 1994, the Company's shareholders approved an employee stock
purchase plan which allows eligible employees to purchase shares of the
Company's Class A Common Stock at 85% of market value on the date on which the
annual offering period begins, or the last business day of each calendar
quarter in which shares are purchased during the offering period, whichever is
lower. Class A Common Stock reserved for future employee purchases aggregated
463,684 shares at December 31, 1995. There were 12,754 shares issued at an
average price of $11.89 per share during the year ended December 31, 1994 and
23,562 shares issued at an average price of $12.56 per share during the year
ended December 31, 1995. There have been no charges to income in connection
with this plan other than incidental expenses related to the issuance of
shares.
7. TREASURY STOCK
In January, 1994, an officer of the Company exercised stock options to
acquire 99,000 shares of the Company's Class A Common Stock at $3.30 per share
by delivering to the Company 16,542 common shares at the then current market
price of $19.75 per share.
The average cost of all treasury stock currently held by the Company is
$2.22 per share.
F-20
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
A. OPERATING LEASES:
The Company leases office space and other items under various agreements
expiring through 2004. At December 31, 1995, the minimum aggregate payments
under non-cancelable operating leases are summarized as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1996........................................... $ 3,804
1997........................................... 3,734
1998........................................... 3,314
1999........................................... 4,458
2000........................................... 1,924
Thereafter..................................... 7,134
-------
$24,368
=======
</TABLE>
B. EMPLOYMENT AND OTHER AGREEMENTS:
In October 1995, the Company's former Chief Executive Officer resigned his
position, but remains an employee and Chairman of the Company's Board of
Directors. A new Chief Executive Officer was hired. In conjunction with the
management changes, the Company entered into agreements with both executives.
The contract with the Chief Executive Officer has a two year term and provides
for continuation of salary and benefits for the term of the agreement, in the
event of a change in control of the Company. At December 31, 1995, the
Company's maximum potential liability under this agreement was approximately
$660,000. The contract with the Chairman of the Board provides for an annual
base salary, including an annual bonus and other benefits, and also for a
payment of $1.0 million, payable over a three year term, in the event that he
resigns or is terminated without cause. Payments under this agreement are
accelerated and are due in full within 30 days following a change in control
of the Company. In consideration for a non-compete agreement, the Chairman of
the Board received a payment of $750,000, which was expensed in 1995.
The Company has entered into employee continuation incentive agreements with
certain other key management personnel. These agreements provide for continued
compensation for a period equal to the lesser of one year or until the
individual finds new employment, in the event of termination without cause or
in the event of termination after a change in control of the Company. The
agreements also provide for continued participation in the Employee Long Term
Incentive Plan for a period of either six months or one year after termination
of employment for any reason. At December 31, 1995, the Company's maximum
potential liability under these agreements totaled approximately $2.5 million.
In connection with the sale of cellular assets, the Company entered into an
agreement with an officer. The agreement called for a fee of approximately
$0.6 million to be paid as a result of the closing of the sale of the
Company's cellular assets. This amount was placed in an escrow account at the
time of the sale. The agreement requires, among other things, that the officer
remain an employee of the Company through July 1, 1996. During 1994, the
officer had an outstanding loan from the Company in the amount of $0.2
million. Subsequent to December 31, 1994, the agreement was amended to
accelerate the vesting provisions and funds from the escrow account were used
to repay the loan.
F-21
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
C. PURCHASE COMMITMENT:
In 1993, ACC Long Distance Ltd., a subsidiary of ACC TelEnterprises Ltd.,
entered into an agreement with one of its vendors to lease long distance
facilities totaling a minimum of Cdn. $1.0 million per month for eight years.
The Company currently leases more than Cdn. $1.0 million per month of such
facilities from this vendor. This commitment allows the Company to receive up
to a 60 percent discount on certain monthly charges from this vendor.
D. DEFINED CONTRIBUTION PLANS:
The Company provides a defined contribution 401(k) plan to substantially all
U.S. employees. Amounts contributed to this plan by the Company were
approximately $137,000, $167,000, and $183,000 in 1993, 1994 and 1995,
respectively. The Company's Canadian subsidiary provides a registered
retirement savings plan to substantially all Canadian employees. Amounts
contributed to this plan by the Company were Cdn. $28,000, Cdn. $62,000 and
Cdn. $106,000 in 1993, 1994 and 1995, respectively.
E. ANNUAL INCENTIVE PLAN:
During 1995, the Company's Board of Directors authorized incentive bonuses
based upon the Company's sales, gross margin, operating expenses and operating
income. Prior to 1995, incentive bonuses were discretionary as determined by
the Company's management and approved by the Board of Directors. The amounts
included in operations for these incentive bonuses were approximately
$619,000, $633,000 and $1.4 million for the years ended December 31, 1993,
1994 and 1995, respectively.
F. LEGAL MATTERS:
The Company is subject to litigation from time to time in the ordinary
course of business. Although the amount of any liability with respect to such
litigation cannot be determined, in the opinion of management, such liability
as of December 31, 1995 will not have a material adverse effect on the
Company's financial condition or results of operations.
F-22
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. GEOGRAPHIC AREA INFORMATION (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1993:
<TABLE>
<CAPTION>
UNITED UNITED
STATES CANADA KINGDOM ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue from unaffiliated
customers................. $ 45,150 $60,643 $ 153 $ -- $105,946
Intercompany revenue...... 9,039 2,939 185 (12,163) --
-------- ------- ------- --------- --------
Total revenue............. $ 54,189 $63,582 $ 338 $ (12,163) $105,946
======== ======= ======= ========= ========
Income (loss) from
continuing operations
before income taxes...... $ 6,177 $(8,150) $(1,778) $ -- $ (3,751)
======== ======= ======= ========= ========
Identifiable assets at
December 31, 1993......... $142,821 $28,620 $ 1,832 $(111,555) $ 61,718
======== ======= ======= ========= ========
YEAR ENDED DECEMBER 31, 1994:
<CAPTION>
UNITED UNITED
STATES CANADA KINGDOM ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue from unaffiliated
customers................. $ 54,599 $67,728 $ 4,117 $ -- $126,444
Intercompany revenue...... 6,698 2,175 1,004 (9,877) --
-------- ------- ------- --------- --------
Total revenue............. $ 61,297 $69,903 $ 5,121 $ (9,877) $126,444
======== ======= ======= ========= ========
Income (loss) from
continuing operations
before income taxes...... $ 1,300 $(5,742) $(5,802) $ -- $(10,244)
======== ======= ======= ========= ========
Identifiable assets at
December 31, 1994......... $119,021 $30,073 $10,422 $( 75,068) $ 84,448
======== ======= ======= ========= ========
YEAR ENDED DECEMBER 31, 1995:
<CAPTION>
UNITED UNITED
STATES CANADA KINGDOM ELIMINATIONS CONSOLIDATED
-------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue from unaffiliated
customers................. $ 65,975 $84,421 $38,470 $ -- $188,866
Intercompany revenue...... 15,256 4,071 1,143 (20,470) --
-------- ------- ------- --------- --------
Total revenue............. $ 81,231 $88,492 $39,613 $(20,470) $188,866
======== ======= ======= ========= ========
Income (loss) from
continuing operations
before income taxes...... $ 1,512 $ 456 $(6,793) $ -- $ (4,825)
======== ======= ======= ========= ========
Identifiable assets at
December 31, 1995......... $105,995 $43,775 $31,593 $ (57,379) $123,984
======== ======= ======= ========= ========
</TABLE>
Intercompany revenue is recognized when calls are originated in one country
and terminated in another country over the Company's leased network. This
revenue is recognized at rates similar to those of unaffiliated companies.
Income from continuing operations before income taxes of the Canadian and
United Kingdom operations includes corporate charges for general corporate
expenses and interest.
Corporate general and administrative expenses are allocated to subsidiaries
based on actual time dedicated to each subsidiary by members of corporate
management and staff.
F-23
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. RELATED PARTY TRANSACTIONS
In February 1994, the Company's Board of Directors approved a plan to move
the Company's headquarters to a new facility in Rochester, New York. The new
location is in a building owned by a partnership in which the Company's
Chairman of the Board has a fifty percent ownership interest. A Special
Committee of the Company's Board of Directors reviewed the lease to ensure
that the terms and conditions were commercially reasonable and fair to the
Company prior to approval of the plan. Minimum monthly lease payments for this
space range from $44,000 to $60,000 over the ten year term of the lease, which
began on May 1, 1994. The Company also pays a pro-rata share of maintenance
costs. Total rent and maintenance payments under this lease were approximately
$0.2 million and $0.6 million during 1994 and 1995, respectively.
During 1994 and early 1995, the Company initiated efforts to obtain new
telecommunications software programs from a software development company. The
Company's Chairman of the Board and former Chief Executive Officer was a
controlling shareholder of the software development company during such
period. In May 1995, anticipating material agreements with the software
development company, all of the common shares owned by the Company's Chairman
of the Board were placed in escrow under the direction of a Special Committee
of the Company's Board of Directors. The Special Committee, its outside
consultants and the Company's management then proceeded to review and evaluate
the software technology and the terms and conditions of the proposed
transactions.
Subsequent to December 31, 1995, the Special Committee approved a software
license agreement between the Company and a newly formed company (the
purchaser of the software development company's intellectual property and
other assets and an affiliate of such company). Immediately prior to entering
into the agreement, the shares of the software development company held in
escrow were returned to such company and the related party nature of the
Company's relationship with the software development company was thereby
extinguished. Total amounts accrued at December 31, 1994 and 1995 relating to
this vendor were $0 and $44,000, respectively. For an aggregate consideration
of $1.8 million, the Company in return will receive a perpetual right to use
the newly developed telecommunications software programs. During 1995, the
Company paid the software development company $1.2 million, of which $772,000,
relating to the purchase of certain hardware and acquisition of certain
software licenses, was capitalized and recorded on the balance sheet as a
component of property, plant and equipment and $500,000 relating to software
development was expensed. During 1994, the Company paid the software
development company $132,000, all of which related to software development,
which was expensed.
11. SUBSEQUENT EVENTS
A. TELECOMMUNICATIONS LEGISLATION REVISIONS:
Legislation that substantially revises the U.S. Communications Act of 1934
(the "U.S. Communications Act") was recently enacted by Congress and was
signed into law on February 8, 1996. The legislation provides specific
guidelines under which the regional operating companies ("RBOCs") can provide
long distance services, which will permit the RBOCs to compete with the
Company in the provision of domestic and international long distance services.
Further, the legislation, among other things, opens local service markets to
competition from any entity (including long distance carriers, such as AT&T,
cable television companies and utilities).
Because the legislation opens the Company's markets to additional
competition, particularly from the RBOCs, the Company's ability to compete is
likely to be adversely affected. Moreover, as a result of and to implement the
legislation, certain federal and other governmental regulations will be
amended or modified, and any such amendment or modification could have a
material adverse effect on the Company's business, results of operations and
financial condition.
F-24
<PAGE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
B. NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN:
On January 19, 1996, subject to shareholder approval, the Company's Board of
Directors adopted a Non-Employee Directors' Stock Option Plan (the Directors'
Stock Option Plan). The Directors' Stock Option Plan provides for grants of
options to purchase 5,000 shares of Class A Common Stock at an exercise price
of 100% of the fair market value of the stock on the date of grant, which
options vest at the first anniversary of the date of grant. The maximum number
of shares with respect to which options may be granted under the Directors'
Stock Option Plan is 250,000 shares, subject to adjustment for stock splits,
stock dividends and the like. Options to purchase 20,000 shares of Class A
Common Stock were granted in January 19, 1996, pursuant to this plan.
Each option shall be exercisable for ten years and one day after its date of
grant. Any vested option is exercisable during the holder's term as a director
(in accordance with the option's terms) and remains exercisable for one year
following the date of termination as a director (unless the director is
removed for cause). Exercise of the options would involve payment in cash,
securities, or a combination of cash and securities, at the discretion of the
respective director.
F-25
<PAGE>
[Logo] ACC (R)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table is an itemized listing of expenses to be incurred by the
Company in connection with the issuance and distribution of the shares of
Class A Common Stock being registered hereby, other than underwriting
discounts and commissions. All amounts shown are estimates, except the SEC
registration fee and the NASD filing fee:
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 19,084
NASD Filing Fee.................................................. 6,035
Nasdaq Additional Listing Fee.................................... 7,500
Printing and Engraving Expenses.................................. 200,000
Legal Fees and Expenses.......................................... 300,000
Accounting Fees and Expenses..................................... 150,000
Transfer Agent and Registrar Fees and Expenses................... 5,000
Blue Sky Fees and Expenses....................................... 23,500
Miscellaneous.................................................... 288,881
----------
Total.......................................................... $1,000,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any director or officer against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, actually
and reasonably incurred in defense of any threatened, pending or completed
action, suit or proceeding whether civil, criminal or investigative (other
than an action by or in the right of the corporation) arising by reason of the
fact that he/she is or was an officer or director, if he/she acted in good
faith and in a manner he/she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, it is determined that he/she had no reasonable cause to believe
his/her conduct was unlawful. Section 145 also provides that a corporation may
indemnify any such officer or director against expenses incurred in an action
by or in the right of the corporation if he/she acted in good faith and in a
manner he/she reasonably believed to be in or not opposed to the best
interests of the Company, except in respect of any matter as to which such
person is adjudged to be liable to the Company, unless allowed by the court in
which such action is brought. This statute requires indemnification of such
officers and Directors against expenses to the extent they may be successful
in defending any such action. The statute also permits purchase of liability
insurance by the Company on behalf of its officers and Directors.
Article SEVEN, Section 2 of the Company's Certificate of Incorporation and
Article V of its By-laws (collectively its "charter documents") generally
provide for the mandatory indemnification of and advancement of litigation
expenses to the Company's Directors, officers and employees to the fullest
extent permitted by the DGCL against all liabilities, losses and expenses
incurred in connection with any action, suit or proceeding in which any of
them become involved by reason of their service rendered to the Company or, at
its request, to another entity; provided that it is determined, in connection
with any civil action, that the indemnitee acted in good faith and in a manner
that he/she reasonably believed to be in or not opposed to the Company's best
interests, and in connection with any criminal proceeding, that the indemnitee
had no reasonable cause to believe his/her conduct was unlawful. These
provisions of the Company's charter documents are not exclusive of any other
indemnification rights to which an indemnitee may be entitled, whether by
contract or otherwise. The Company may also purchase liability insurance on
behalf of its Directors and officers, whether or not it would have the
obligation or power to indemnify any of them under the terms of its charter
documents or the DGCL. The Company has acquired and maintains liability
insurance for the benefit of its Directors and officers for serving in such
capacities, and it also has entered into indemnification agreements with each
of its Directors and executive officers for serving in such capacities.
II-1
<PAGE>
Reference is made to the Underwriting Agreement filed as Exhibit 1.1 hereto
for provisions relating to the indemnification of the Underwriters and persons
who control the Underwriters within the meaning of Section 15 of the
Securities Act of 1933, and to indemnification of the Company by the
Underwriters.
The Company has entered into indemnification agreements with each of its
directors and executive officers pursuant to which the Company has agreed to
indemnify, subject to the terms thereof, each of them to the full extent (i)
authorized or permitted by the DGCL as well as any other law authorizing or
permitting such indemnification adopted after the respective dates of such
agreements and (ii) to the fullest extent permitted by law against litigation
costs and liabilities incurred in connection with any threatened, pending or
completed action, suit, proceeding or investigation by reason of the fact that
such director or executive officer is, was or at any time becomes a director,
officer, employee or agent of the Company or is or was serving or at any time
serves at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
See also the undertaking made with respect to indemnification matters
involving the Company's directors, officers and controlling persons, found in
Item 17 below.
ITEM 16. EXHIBITS.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
1.1 Form of Underwriting Agreement*
4.1 Specimen of Class A Common Stock Certificate+
4.2 First Restated Certificate of Incorporation of the Company++
4.3 Certificate of Designations of 10,000 Shares of Series A Preferred Stock, par value
$1.00 per share, of the Company+++
4.4 By-laws of the Company, as amended++++
5.1 Opinion of Nixon, Hargrave, Devans & Doyle LLP*
23.1 Consent of Nixon, Hargrave, Devans & Doyle LLP (contained in the opinion filed as
Exhibit 5)*
23.2 Consent of Arthur Andersen LLP
24.1 Powers of Attorney (contained in the signature page)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by Amendment.
+ Incorporated by reference from Exhibit 4-1 to the Company's Registration
Statement on Form S-2 (Commission File No. 33-41588).
++ Incorporated by reference from Exhibit 3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995 (Commission
File No. 0-14567).
+++ Incorporated by reference from Exhibit 4-1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995 (Commission
File No. 0-14567).
++++ Incorporated by reference from Exhibit 3.1 to the Company's Current
Report on Form 8-K dated February 22, 1996 (Commission File No. 0-14567).
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 ("Securities Act"),
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 ("Exchange Act") (and,
where applicable, each filing of an employee benefit plan's Annual Report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in that Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Rochester, State of New York, on February 22, 1996.
ACC CORP.
/s/ David K. Laniak
By___________________________________
David K. Laniak
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints David K. Laniak, Michael R.
Daley and John J. Zimmer, and each of them, his true and lawful attorneys-in-
fact and agent, with full power of substitution, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or
necessary fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David K. Laniak Chief Executive Officer and February 22, 1996
____________________________________ a Director (Principal
David K. Laniak Executive Officer)
/s/ Richard T. Aab Chairman of the Board and February 22, 1996
____________________________________ Director
Richard T. Aab
/s/ Arunas A. Chesonis President and Chief February 22, 1996
____________________________________ Operating Officer, and
Arunas A. Chesonis Director
/s/ Michael R. Daley Executive Vice President and February 22, 1996
____________________________________ Chief Financial Officer
Michael R. Daley (Principal Financial and
Accounting Officer)
/s/ Hugh F. Bennett Director February 22, 1996
____________________________________
Hugh F. Bennett
Director February , 1996
____________________________________
Hon. Willard Z. Estey
/s/ Daniel D. Tessoni Director February 22, 1996
____________________________________
Daniel D. Tessoni
/s/ Robert M. Van Degna Director February 22, 1996
____________________________________
Robert M. Van Degna
</TABLE>
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