As filed with the Securities and Exchange Commission on September 17, 1996
Registration No. 333-
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:
JOHN C. PARTIGAN JERRY V. ELLIOTT
NIXON, HARGRAVE, DEVANS & DOYLE LLP SHEARMAN & STERLING
CLINTON SQUARE 599 LEXINGTON AVENUE
POST OFFICE BOX 1051 NEW YORK, NEW YORK 10022
ROCHESTER, NEW YORK 14603-1051 (212) 848-4000
(716) 263-1000
____________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALES TO THE PUBLIC:
From time to time after this Registration Statement becomes effective as
determined by market conditions.
____________________
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. [X]
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. [ ]
___________________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Number of Maximum Maximum
Class of Shares to Offering Aggregate Amount of
Securities to be Price Per Offering Registration
be Registered Registered Share (1) Price (1) Fee
__________________________________________________________________________
<S> <C> <C> <C> <C>
Class A Common
Stock, par value
$.015 per share 1,227,753 $ 46.63 $57,250,122.39 $19,741.56
Warrants to
purchase Class A
Common Stock (2)
</TABLE>
(1) 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 National Market on
September 11, 1996.
(2) Warrants to purchase up to 195,000 shares of Class A Common Stock
are held by certain of the Selling Shareholders. Prior to the
closing of the offering, such warrants will be transferred to
Morgan Stanley & Co. Incorporated, Wheat, First Securities, Inc.
or other broker-dealers and exercised by the holders thereof upon
payment to the Company of the aggregate exercise price in the
amount of approximately $2.1 million. The shares issuable upon
exercise of the warrants are included in the Shares registered
hereunder.
____________________
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>
<PAGE>
PROSPECTUS (Subject to Completion)
Issued September 17, 1996
1,227,753 Shares
ACC CORP.
CLASS A COMMON STOCK
__________________
All of the 1,227,753 shares (the "Shares") of Class A Common Stock,
par value $.015, of ACC Corp. offered hereby are being offered by certain
shareholders of the Company named herein (collectively, the "Selling
Shareholders"). See "Selling Shareholders." The Company will not receive
any proceeds from the sale of the Shares. Immediately prior to the closing
of this Offering, certain of the Selling Shareholders will transfer
warrants to purchase up to 195,000 shares of Class A Common Stock (the
"Warrants") to Morgan Stanley & Co. Incorporated, Wheat, First Securities,
Inc. or other broker-dealers and the holders thereof will exercise the
Warrants and sell the Shares issuable thereunder in this Offering. The
aggregate exercise price payable to the Company upon exercise of the
Warrants is approximately $2.1 million.
The Shares may be sold from time to time by the Selling Shareholders
directly, in underwritten offerings or in ordinary brokerage transactions
through Morgan Stanley & Co. Incorporated, Wheat, First Securities, Inc. or
other underwriters or broker-dealers at prices at or near the market price
or in other privately negotiated transactions. Usual and customary or
specifically negotiated underwriting discounts, brokerage fees or
commissions may be paid by the Selling Shareholders in connection with such
sales. The Selling Shareholders and any broker-dealers that participate in
the distribution of any of the Shares may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commission received by them and any profit on
the Shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. See "Plan of Distribution."
The Company has agreed to bear all expenses (other than commissions or
discounts of underwriters, dealers or agents or the fees and expenses of
their counsel) in connection with the registration and sale of the Shares
being registered hereby. Expenses to be paid by the Company are estimated
at approximately $255,000. The Company has agreed to indemnify the Selling
Shareholders, and the Selling Shareholders have agreed to indemnify the
Company, against certain liabilities under the Securities Act.
The Company's Class A Common Stock is traded on the Nasdaq National
Market under the symbol "ACCC." On September 16, 1996, the reported last
sale price of the Class A Common Stock on the Nasdaq National Market was
$53.50 per share.
_______________
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS
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.
________________
The Shares may be offered by the Selling Shareholders directly,
through broker-dealers or through underwriters. Such broker-dealers or
underwriters may include Morgan Stanley & Co. Incorporated, Wheat, First
Securities, Inc. and/or others. See "Plan of Distribution." Any such
broker-dealers, and any underwriters, will be set forth in the Prospectus
Supplement. If any broker-dealer or underwriter is involved in the
offering of the Shares in connection with which this Prospectus is being
delivered, the brokerage fees or commissions or underwriter's discount will
be set forth in, or may be calculated from, the Prospectus Supplement and
the net proceeds to the Selling Shareholders from such sale will be the
purchase price of such securities less such commission in the case of a
broker-dealer, and the public offering price less such discount in the case
of an underwriter. See "Plan of Distribution" for possible indemnification
arrangements for broker-dealers and underwriters.
_______________
MORGAN STANLEY & CO. WHEAT FIRST BUTCHER SINGER
Incorporated
________________, 1996
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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 STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
***************************************************************************
<PAGE>
<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, THE SELLING
SHAREHOLDERS, ANY UNDERWRITER OR BROKER-DEALER. 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.
________________
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (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. Such material may also be accessed electronically by means of the
Commission's Web site on the Internet at http://www.sec.gov. Reports and
other information concerning the Company may be inspected at the offices of
the Nasdaq National 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.
________________<PAGE>
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the
Exchange Act are incorporated by reference in this Prospectus:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996 and June 30, 1996;
(3) the Company's Current Reports on Form 8-K dated February 22,
1996, April 15, 1996 and September 17, 1996; and
(4) the description of the Company's Class A 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
Sections 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 Office
of the Treasurer, ACC Corp., 400 West Avenue, Rochester, New York 14611
(telephone number (716) 987-3000).
________________
IN CONNECTION WITH THIS OFFERING, IF THE OFFERING IS UNDERWRITTEN, 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 NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
IN CONNECTION WITH THIS OFFERING, IF THE OFFERING IS UNDERWRITTEN,
CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS (IF ANY) MAY ENGAGE IN
PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE
NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "PLAN OF DISTRIBUTION."
<PAGE>
<PAGE>
THE COMPANY
The following is a summary of certain information incorporated by
reference in this Prospectus. This summary is not intended to be complete
and is qualified in its entirety by, and should be read in conjunction
with, the more detailed information incorporated by reference in this
Prospectus. 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
Canadian subsidiary ("ACC Canada") which is currently 70% owned by the
Company, and ACC Long Distance UK Limited ("ACC U.K.").
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
switched-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 telecommunications customer
base in its existing markets and to establish itself in deregulating
international markets that have high density telecommunications traffic,
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 offering of competitive prices which the Company
believes generally are lower than the 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 its ownership of switches reduces its reliance on
other carriers and enables it 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 have principally focused their
direct sales efforts on large commercial accounts and residential
customers.
ACC 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. 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.<PAGE>
RECENT DEVELOPMENTS
STOCK DIVIDEND
The Company recently completed a three-for-two share distribution with
respect to the Class A Common Stock, which was effected as a 50% stock
dividend distributed on August 8, 1996 to all of its holders of record of
Class A Common Stock on July 3, 1996. All share data presented herein has
been adjusted to reflect such stock dividend.
RECENT FINANCIAL RESULTS
The Company recently announced unaudited financial results for the
second quarter ended June 30, 1996. Total revenues for the quarter rose
92.5% to $80.1 million from $41.6 million for the three months ended
June 30, 1995. During the quarter the Company received revenue of
approximately $10.0 million from a carrier customer. As of the end of the
quarter the Company had reduced the services it was providing to this
customer to a rate of approximately $1.0 million per quarter. The Company
has since ceased providing any services to this customer. Net income
increased to $1.5 million for the quarter from a loss of $2.3 million for
the second quarter of fiscal 1995. The Company's income (loss) from
operations plus depreciation, amortization and asset write-down ("EBITDA")
increased to approximately $7.4 million for the quarter from approximately
$2.0 million for the second quarter of fiscal 1995. Earnings per common
and common equivalent share rose to $.05 from a loss of $.19 for the
comparable three months in 1995.
ACC CANADA CASH TENDER OFFER
The Company recently announced that it will make an all cash tender
offer (the "Tender Offer") for the repurchase of the minority shares of its
Canadian subsidiary, ACC Canada. The common shares of ACC Canada are
listed on the Toronto Stock Exchange and the Montreal Exchange. As of
August 1, 1996, the Company owned approximately 69.8% of the issued and
outstanding common shares of ACC Canada and the remaining common shares
were publicly held.
A newly formed Canadian subsidiary of the Company will offer to
purchase all of the shares publicly held by shareholders in Canada and in
the United States. The Company has proposed an aggregate price for the
Tender Offer of approximately Cdn. $49.4 million (the "Proposed Price").
The Proposed Price was negotiated by independent committees of the Boards
of Directors of ACC Corp. and ACC Canada after review of an independent
valuation. The Board of Directors of ACC Canada has (i) determined that
the Tender Offer, including the Proposed Price, is fair to and in the best
interests of shareholders of ACC Canada, and (ii) resolved to recommend
acceptance of the Tender Offer by ACC Canada's shareholders. This
recommendation of the Board of Directors of ACC Canada, however, may be
withdrawn, modified or amended, if required by the Board in the exercise of
its fiduciary duties.
The Tender Offer will be subject to certain conditions, any of which
may be waived by the Company. Such conditions may include a requirement
that holders of at least 90% of the publicly held shares (on a fully
diluted basis) accept the Tender Offer, and will include a requirement that
all necessary regulatory approvals be received. If holders of at least 90%
of the publicly held shares (on a fully diluted basis) accept the Tender
Offer, then the Company would have a statutory right of compulsory
acquisition of all shares held by non-tendering shareholders. If fewer
than 90% of the publicly held shares (on a fully diluted basis) are
tendered or the compulsory acquisition provisions are not available for any
other reason, the Company intends to consider other transactions that will
result in ACC Canada becoming a wholly-owned subsidiary of the Company.
Such a transaction may take the form of a merger or amalgamation between
ACC Canada and the newly formed subsidiary, which transaction must be
approved by two-thirds of the votes cast and by the holders of a simple or
two-thirds majority (depending on the nature of the transaction) of the
shares of ACC Canada (other than shares held by holders of common shares
who are "related parties" of or acting jointly or in concert with the
Company or ACC Canada or affiliates of any of the foregoing) subject to the
Tender Offer. For purposes of such votes, the Company expects to be
permitted to vote the shares acquired in the Tender Offer.
ACC Canada is the Company's largest operating subsidiary. Management
believes that, with adequate capital, ACC Canada is well positioned for
long term growth. Reacquiring the minority interest will enable the
Company to provide the additional capital needed by ACC Canada without
diluting the Company's interest. The proposed transaction is expected to
provide the following additional benefits to the Company: (1) leveraging
of ACC Canada's talented management team to assist the Company in expanding
other areas of its business; (2) an increase in the Company's earnings
per share in future periods as a result of the transaction; (3) access to
additional cash flow; (4) cost savings in 1997 of approximately $500,000
(before taking into account amortization charges as a result of the
additional goodwill acquired by the Company) as a result of the elimination
of Canadian disclosure and reporting requirements and the consolidation of
certain operating and financial resources; (5) increased flexibility for
the Company to optimize its tax position with regard to intercompany
transactions; and (6) simplification of the Company's capital structure.
The foregoing forward-looking statements are based upon expectations of
actions that may be taken by third parties, including Canadian regulatory
authorities and employees, shareholders, customers and competitors of ACC
Canada, as well as expectations with respect to growth of ACC Canada's
customer base and revenues. If such expectations are not realized, actual
results may differ materially from the foregoing discussion. There can be
no assurance that the Tender Offer will be consummated, or that the
anticipated benefits of the transaction will ultimately be realized if the
transaction is completed. Revenues of ACC Canada could be materially
adversely affected if ACC Canada is no longer perceived in the Canadian
market as a Canadian company as a result of the consummation of the
transaction. Management believes, however, that any such impact would
dissipate over time in view of the Company's significant continuing
presence in Canada by virtue of the employees, facilities and operations
which are located in Canada.
DAVID K. LANIAK ELECTED CHAIRMAN
David K. Laniak has been elected Chairman of the Board of Directors of
the Company, effective October 8, 1996. He will succeed Richard T. Aab who
resigned as Chairman to pursue other entrepreneurial interests. Mr. Aab
will remain a director and employee of the Company. Mr. Aab is entitled to
terminate his employment at any time. If Mr. Aab's employment with the
Company were to terminate, he would be entitled to receive from the Company
a payment of $1 million, payable in three equal, annual installments.
NETWORK EXPANSION
The Company is proceeding with its planned international and local
exchange expansion of its network. In the United Kingdom, the Company has
added an additional long distance switch in Bristol, England. In the
United States, the Company is expanding its local telephone operations to
selected metropolitan areas in New York and Massachusetts. The Company has
ordered local exchange switches for each of the following sites: New York,
New York; White Plains, New York; Boston, Massachusetts; and Springfield,
Massachusetts. In addition, the Company has ordered equipment to upgrade
its local exchange switches in Buffalo and Albany, New York.
NEW CREDIT FACILITY
The Company recently announced that it has signed a commitment letter
with First Union National Bank of North Carolina to provide a $100 million
Credit Facility to the Company amending the Company's current $35 million
Credit Facility. The Company expects to execute definitive credit
documents and close on the new Credit Facility this fall. The Company
anticipates that the new Credit Facility will be syndicated among several
banks, including Fleet Bank, an affiliate of certain of the Selling
Shareholders, and will provide additional working capital and generally
more flexible terms and conditions than the current Credit Facility. If
the new Credit Facility is closed in October 1996, the maximum aggregate
principal amount of the new Credit Facility would be required to be reduced
by $8 million per quarter commencing on December 31, 1998 until
September 30, 2000, and by $9 million per quarter commencing on December
31, 2000 until maturity of the loan in October 2001.
INTERNET CANADA ACQUISITION
As of May 13, 1996, the Company, through ACC Canada, purchased certain
assets of Internet Canada Corp., a company based in Toronto, Canada, which
is engaged in the business of providing Internet access and home page
design and development (the "Internet Canada Acquisition"). The purchase
price was Cdn. $3.0 million plus additional amounts to be calculated based
on the number of customer subscribers at various dates, with the total not
to exceed Cdn. $7.0 million. As of July 31, 1996, Cdn. $4.2 million has
been paid.
<PAGE>
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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. Certain of
the information contained in this Prospectus, including the documents
incorporated by reference herein, particularly with respect to the
Company's expansion plans and strategy and related financing and regulatory
requirements, are forward-looking statements. For a discussion of
important factors that could cause actual results to differ materially from
the forward-looking statements, see the "Risk Factors" described below and
the Company's periodic reports incorporated by reference herein.
RECENT LOSSES; POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
Although the Company has recently experienced revenue growth on an
annual basis and net income in the first two quarters of 1996, it has
incurred net losses and losses from continuing operations during each of
its last two fiscal years. The 1995 net loss of $5.4 million resulted
primarily from the expansion of operations in the U.K. (approximately
$6.8 million), increased net interest expense associated with additional
borrowings (approximately $4.9 million), increased depreciation and
amortization from the addition of equipment and costs associated with the
expansion of local service in New York State (approximately $1.6 million)
and management restructuring costs (approximately $1.3 million), offset by
positive operating income from the U.S. and Canadian long distance
subsidiaries of approximately $9.0 million. The 1994 net loss of
$11.3 million resulted primarily from operating losses due to expansion in
the U.K. (approximately $5.6 million), the recording of the valuation
allowance against deferred tax benefits (approximately $3.0 million),
implementation of equal access in Canada (approximately $2.2 million) and
operating losses due to expansion in local telephone service in the U.S.
(approximately $0.9 million). There can be no assurance that revenue
growth will continue or that the Company will be able to maintain the
profitability it attained in the first two quarters of 1996. The Company
intends to focus in the near term on the expansion of its service
offerings, including its local telephone business and Internet services,
and expanding its geographic markets to more locations in its existing
markets, and when conditions warrant, to deregulating international
markets. Such expansion, particularly the establishment of new operations
or acquisition of existing operations in deregulating international
markets, may adversely affect cash flow and operating performance and these
effects may be material, as was the case with the Company's U.K. operations
in 1994 and 1995. 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 has in the past and may in the future, reduce the
Company's gross margins as a percentage of revenue. In addition, to the
extent that these and other long distance carriers are less creditworthy
and/or create larger credit balances, such sales may represent a higher
credit risk to the Company.
SUBSTANTIAL INDEBTEDNESS; 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 income (loss) from operations plus
depreciation and amortization and asset write-down ("EBITDA"), minus
capital expenditures and changes in working capital, was $(7.0) million.
The amount of the Company's indebtedness will increase if the Tender Offer
is consummated. The Company's leverage may adversely affect its ability to
raise additional capital. In addition, the Company's indebtedness is
expected to require significant repayments over the next five years. See
"Recent Developments - New Credit Facility." 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 and
expansion into international markets, both of which will be capital
intensive, working capital needs, debt service obligations, and
contemplated capital expenditures. The Tender Offer will, if it closes, be
financed through cash on hand (which will use substantially all cash on
hand) and borrowings under the Company's senior credit facility (the
"Credit Facility"). As of July 31, 1996, the Company had approximately
$30.2 million of cash and cash equivalents on hand and approximately
$32.5 million was available for borrowing under the current Credit
Facility. The Company has also signed commitment letters with the
Company's senior lenders to provide a $100 million new Credit Facility.
See "Recent Developments - New Credit Facility." Availability under the
Credit Facility will be decreased to the extent that the actual price paid
by the Company exceeds the Proposed Price. 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 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.
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 of 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 on the operations of the RBOCs have
been dramatically reduced, which has brought 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. The
Company currently acquires switches used in its North American operations
from one vendor. The Company purchases switches from such vendor for its
convenience, and switches of comparable quality may be obtained from
several alternative suppliers. However, a failure by a supplier to deliver
quality products or service 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.
POTENTIAL ADVERSE EFFECTS OF 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 also opens all local service markets to
competition from any entity (including, for example, long distance
carriers, such as AT&T, cable television companies and utilities). Because
the legislation opens the Company's U.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
adopted, amended or modified, and any such adoption, 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. More recently,
the FCC has informally announced that it intends, in the near future, to
undertake a comprehensive review of its regulation of local exchange
carrier access charges to better account for increasing levels of local
competition. While the outcome of these proceedings is uncertain, if these
rates structures are adopted many small interexchange carriers, including
the Company, could be placed at a significant cost disadvantage to larger
competitors, because access charges for AT&T and other large interexchange
carriers could decrease, and access charges for small interexchange
carriers could increase.
The Company currently competes with the RBOCs and other local exchange
carriers such as the GTE Operating Companies ("GTOCs") in the provision of
"short haul" toll calls completed within a Local Access and Transport Area
("LATA"). Subject to a number of conditions, the U.S. Communications Act
eliminated many of the restrictions which prohibited the RBOCs and GTOCs
from providing long-haul, or inter-LATA, toll service, and thus the Company
will face additional competition. 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.
Under the U.S. Communications Act, local exchange carriers, must
permit resale of their bundled local services and unbundled network
elements. Pricing rules for those services were set forth in the U.S.
Communications Act, with states directed to approve specific tariffs. In
July, 1996, the New York PSC established wholesale discounts for resale of
bundled local services. These services generally involve a discount of 17%
on residential access lines and 11% on business access lines. However, the
New York PSC excluded Centrex, private line and PBX lines from the
wholesale discount, which could result in a limited ability of the Company
to resell those business services. The New York PSC also established
temporary rates for unbundled links at levels slightly below existing
rates, but also significantly above the New York Telephone rate for
complete, bundled local loops. The New York PSC is reviewing the
establishment of permanent wholesale discounts and permanent rates for
unbundled links rates, which are expected to be in place by October 1996.
If the permanent rates established by the New York PSC do not contain a
significant wholesale discount for bundled services, do not apply to
Centrex, private line, and PBX service, and do not reduce the rate for the
unbundled link to a level below the rate for bundled loops, the Company's
ability to compete in the provision of local service in New York may be
materially adversely affected.
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 and anticipated
regulations and rulings, its Canadian contribution charges will increase by
up to approximately Cdn. $2.0 million in 1997 over 1995 levels, which the
Company will seek to offset with increased volume efficiencies. 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 regulatory changes 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 operations 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. Oftel has imposed mandatory rate reductions on British
Telecom in the past, which are expected to continue for the foreseeable
future, and this has had and may have, the effect of reducing the prices
the Company can charge its customers. 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.
INCREASING DOMESTIC AND INTERNATIONAL 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, including the ability to provide both intra- and inter-LATA toll
service. 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%, 7% and 9% of the revenues of ACC U.S., ACC
Canada and ACC U.K., respectively, in 1995, 46%, 13% and 13% of the
revenues of ACC U.S., ACC Canada and ACC U.K., respectively, for the six
months ended June 30, 1996, and could 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, 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, AT&T, IDB WorldCom Services Inc. and Frontier Corp. ("Frontier")
in the U.K. 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 upstate New York, the Company
competes with New York Telephone Company ("New York Telephone"), Frontier,
Citizens Telephone Co., MFS Communications Co., Inc. ("MFS") and Time
Warner Cable and others, including cellular and other wireless providers.
Furthermore, the proposed merger of Bell Atlantic Corp. and Nynex Corp.,
the joint venture between MCI and Microsoft Corporation ("Microsoft"),
under which Microsoft will promote MCI's services, the joint venture among
Sprint, Deutsche Telekom AG and France Telecom, the proposed merger of MFS
and WorldCom Inc., and additional mergers, acquisitions and strategic
alliances which are likely to occur, 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
and GTOCs 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 both the local service and long
distance telecommunications markets. 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.
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 and during the first six months of 1996 were $1.35 million
and $1.7 million, respectively. 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.
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
international markets that have high density telecommunications traffic,
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. The Company has no experience in providing
telecommunications service outside the United States, Canada and the U.K.
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. The Company intends to focus in the near term on the expansion
of its service offerings, including its local telephone business and
Internet services, and expanding its geographic markets to more locations
in its existing markets, and when conditions warrant, to deregulating
international markets. Such expansion, particularly the establishment of
new operations or acquisition of existing operations in deregulating
international markets, may adversely affect cash flow and operating
performance and these effects may be material, as was the case with the
Company's U.K. operations in 1994 and 1995. 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 international
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 collecting accounts receivable, political risks,
fluctuations in currency exchange rates, foreign exchange controls which
restrict or prohibit repatriation of funds, technology export and import
restrictions or prohibitions, delays from customs 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. 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.
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. 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.
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 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.
TECHNOLOGICAL CHANGES MAY ADVERSELY AFFECT COMPETITIVENESS AND FINANCIAL
RESULTS
The telecommunications industry is characterized by rapid and
significant technological advances 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.
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, and the Company
anticipates that it will not pay any dividends on Class A Common Stock in
the foreseeable future. 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.
HOLDING COMPANY STRUCTURE; RELIANCE ON SUBSIDIARIES FOR DIVIDENDS
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 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. 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 securities analysts, "buy," "hold" and "sell" ratings by securities
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.
RISKS ASSOCIATED WITH DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Company uses various financial
instruments, including derivative financial instruments, to hedge its
foreign exchange and interest rate risks. The Company does not use
derivative financial instruments for speculative purposes. By their
nature, all such instruments involve risk, including the risk of
nonperformance by counterparties, and the Company's maximum potential loss
may exceed the amount recognized on the Company's balance sheet.
Accordingly, losses relating to derivative financial instruments could have
a material adverse effect upon the Company's business, financial condition
and results of operations.
ANTI-TAKEOVER PROVISIONS MAY ADVERSELY AFFECT STOCK PRICE
The Company's Board of Directors has the authority to issue up to
2,000,000 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, upon a change of control, the
Company's indebtedness under the Credit Facility is required to be repaid
and the salary continuation and employment agreements with executive
officers and directors of the Company require certain payments to be made
by the Company. Such provisions 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.
SHARES ELIGIBLE FOR FUTURE SALE
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.
Upon completion of this offering, the Company will have approximately
16,517,000 shares of Class A Common Stock outstanding, assuming no exercise
of options or warrants outstanding as of July 31, 1996, other than the
Warrants and options to purchase up to 95,253 Shares held by certain of the
Selling Shareholders which will be exercised in connection with the closing
of this offering. Of the Class A Common Stock outstanding upon completion
of this offering, the 1,227,753 shares of Class A Common Stock sold in this
offering as well as approximately 9,740,000 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 5,550,000 outstanding shares of Class A Common Stock are
currently eligible for sale under Rule 144 or Rule 144(k). The Company
expects that in connection with this Offering its directors and officers
will enter into 60-day lock-up agreements with Morgan Stanley & Co.
Incorporated, Wheat, First Securities, Inc. or other 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.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of Shares by the
Selling Shareholders. The Shares offered hereby include up to 195,000
shares of Class A Common Stock issuable upon the exercise of the Warrants
held by certain Selling Shareholders (the "Warrant Shares"). The Company
will receive approximately $2.1 million upon the exercise of the Warrants,
which amount will be used for working capital and general corporate
purposes, including possible future investments, acquisitions or strategic
alliances.
SELECTED CONSOLIDATED FINANCIAL AND OPERATIONS DATA
The following selected historical consolidated financial data for each
of the years in the five-year period ended December 31, 1995 have been
derived from the Company's audited consolidated financial statements. The
data provided as of and for the six months ended June 30, 1995 and 1996 is
unaudited, but in the opinion of management contains all adjustments,
consisting only of normal recurring adjustments, which are necessary for a
fair statement of the results of such periods. The unaudited pro forma
consolidated statement of operations data provided for the six months ended
June 30, 1996 has been prepared as if the Tender Offer had been consummated
at the Proposed Price, the Internet Canada Acquisition had been
consummated, the Series A Preferred Stock of the Company held by certain of
the Selling Shareholders had been converted and the Warrants held by
Selling Shareholders had been exercised (collectively, the "Transactions")
as of January 1, 1995. The unaudited pro forma consolidated balance sheet
data provided as of June 30, 1996 has been prepared as if the Transactions
(other than the Internet Canada Acquisition) had occurred as of June 30,
1996. The pro forma data provided does not purport to represent what the
Company's results of operations for the indicated periods would have been
had the Transactions in fact occurred on the aforementioned dates, or to
project the Company's results of operations for any future periods. Except
for the Internet Canada Acquisition, which was completed as of May 13,
1996, there can be no assurance that the Transactions will be consummated.
The pro forma adjustments are based upon available information and upon
certain assumptions that management believes are reasonable under the
circumstances.
The information set forth below is not necessarily indicative of the
results of future operations and should be read in conjunction with, and is
qualified by, the consolidated financial statements and related notes,
unaudited pro forma consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for the applicable period, which are incorporated by reference
herein.
<PAGE>
<TABLE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATIONS DATA
<CAPTION>
Actual Pro Forma
------ ---------
Six Months Six Months
-------------- --------------
Year Ended December 31, Ended June 30, Ended June 30,
1991 1992 1993 1994 1995(1) 1995 1996 1996
---------------------------------------------------------- ---------------------- ----------
(unaudited) (unaudited) (unaudited)
(Dollars in thousands, except per share and per minute data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue:
Toll revenue $ 49,563 $ 78,988 $ 100,646 $ 118,331 $ 175,269 $ 76,948 $ 136,137 $ 136,137
Leased lines and
other 1,563 2,692 5,300 8,113 13,597 4,387 10,805 10,805
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue 51,126 81,680 105,946 126,444 188,866 81,335 146,942 146,942
Network costs 32,343 52,314 70,286 79,438 114,841 51,060 94,988 94,988
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit 18,783 29,366 35,660 47,006 74,025 30,275 51,954 51,954
Other operating expenses:
Depreciation and
amortization 2,764 3,919 5,832 8,932 11,614 5,394 7,795 8,395 (2)
Selling, general and
administrative 12,573 19,659 28,807 44,228 60,865 26,192 37,989 37,989
Management restructuring - - - - 1,328 - - -
Equal access charges (3) - - - 2,160 - - - -
Asset write-down (4) - - 12,807 - - - - -
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total other operating
expenses 15,337 23,578 47,446 55,320 73,807 31,586 45,784 46,384
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
operations 3,446 5,788 (11,786) (8,314) 218 (1,311) 6,170 5,570
Other income (expense):
Interest income 39 276 205 124 198 88 457 359 (5)
Interest expense (240) (197) (420) (2,023) (5,131) (2,415) (2,891) (3,041) (6)
Terminated merger costs - - - (200) - - - -
Gain on sale of subsidiary
stock - - 9,344 - - - - -
Foreign exchange gain
(loss) - - (1,094) 169 (110) (95) 26 26
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Total other income
(expense) (201) 79 8,035 (1,930) (5,043) (2,422) (2,408) (2,656)
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
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) (3,733) 3,762 2,914
Provision for (benefit from)
income taxes 1,155 2,267 (3,743) 3,456 396 290 853 769 (7)
Minority interest in loss
(earnings) of consolidated
subsidiary - - 1,661 2,371 (133) 107 (596) - (8)
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations 2,090 3,600 1,653 (11,329) (5,354) (3,916) 2,313 2,145
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 $8,350in 1993) - - 11,531 - - - - -
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) $ 893 $ 1,940 $ 11,875 $ (11,329) $ (5,354) $ (3,916) $ 2,313 $ 2,145
========= ========== ========== ========== ========== ========== ========== ==========
</TABLE>
(table continued, and footnotes appear on subsequent
pages)<PAGE>
<PAGE>
(continued from previous page)
<TABLE>
<CAPTION>
Actual Pro Forma
------ ---------
Six Months Six Months
-------------- --------------
Year Ended December 31, Ended June 30, Ended June 30,
1991 1992 1993 1994 1995(1) 1995 1996 1996
---------------------------------------------------------- ---------------------- ----------
(unaudited) (unaudited) (unaudited)
(Dollars in thousands, except per share and per minute data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) per common
and common equivalent share
applicable to common stock
from continuing operations (9)$ .24 $ .35 $ .16 $ (1.07) $ (.51) $ (.35) $ .08 $ .14
Discontinued operations (9) (.14) (.16) (.12) - - - - -
Gain on disposal of
discontinued operations (9) - - 1.09 - - - - -
--------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per common
and common equivalent
share (9) $ .10 $ .19 $ 1.13 $ (1.07) $ (.51) $ (.35) $ .08 $ .14
========= ========== ========== ========== ========== ========== ========== ==========
Weighted average number of
common shares (9) 8,702,654 10,323,049 10,537,387 10,602,721 11,684,829 11,201,861 14,010,275 15,142,775 (10)
========= ========== ========== ========== ========== ========== ========== ==========
</TABLE>
(table continued, and footnotes appear on subsequent pages)<PAGE>
(continued from previous page)
<TABLE>
<CAPTION>
Actual Pro Forma
---------- ----------
Year Ended December 31, June 30, June 30,
1991 1992 1993 1994 1995(1) 1996 1996
---------------------------------------------------------- ---------- ----------
(unaudited) (unaudited)
(Dollars in thousands, except per share and per minute data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data (11):
Cash and cash equivalents $ 327 $ 353 $ 1,467 $ 1,021 $ 518 $ 30,380 $ - (12)
Current assets 11,120 16,251 22,476 28,045 45,726 85,804 55,424
Current liabilities 12,577 27,889 23,191 32,016 56,074 56,423 56,423
Net working capital
(deficit) (1,457) (11,638) (715) (3,971) (10,348) 29,381 (999)
Property, plant and
equipment, net 15,794 21,951 27,077 44,081 56,691 61,011 61,011
Total assets 29,292 45,450 61,718 84,448 123,984 171,351 174,787 (13)
Short-term debt, including
current maturities of
long term debt 3,071 11,525 2,424 1,613 4,885 3,086 3,086
Long-term debt, excluding
current maturities 6,111 12,747 1,795 29,914 28,050 5,948 9,695 (14)
Redeemable preferred stock - - - - 9,448 10,710 - (15)
Shareholders' equity 21,670 22,711 31,506 19,086 26,407 93,768 106,198 (16)
Other Financial and Operations Data:
Net cash provided by (used in)
operating activities $ 3,141 $ 7,761 $ (11,828) $ 1,093 $ 3,967 $ (481) $ (481)
========= ========== ========== ========== ========== ========== ==========
EBITDA (17)
United States $ 5,473 $ 6,184 $ 6,017 $ 5,847 $ 8,653 $ 5,913 $ 5,913
Canada 737 3,523 2,423 (203) 7,299 6,000 6,000
United Kingdom - - (1,587) (5,026) (4,120) 2,052 2,052
--------- ---------- ---------- ---------- ---------- ---------- ----------
Total $ 6,210 $ 9,707 $ 6,853 $ 618 $ 11,832 $ 13,965 $ 13,965
========= ========== ========== ========== ========== ========== ==========
Billable minutes of use
(in thousands) (18) 296,119 475,422 683,073 882,993 1,181,663 831,306 831,306
Customer accounts at
period end 25,846 50,318 98,400 202,991 310,815 325,000 325,000
Revenue per billable minute
of use $ .17 $ .17 $ .16 $ .14 $ .16 $ .18 $ .18
Network cost per billable
minute of use $ .11 $ .11 $ .10 $ .09 $ .10 $ .11 $ .11
Class A Common Stock cash
dividends declared (19) $ 628 $ 735 $ 4,233 $ 831 $ 243 $ - $ -
Cash dividends declared
per share of Class A
Common Stock (19) $ .07 $ .07 $ .41 $ .08 $ .02 $ - $ -
</TABLE>
____________
(1) Includes the results of operations of Metrowide Communications from
August 1, 1995, the date of acquisition.
(2) Reflects amortization of (i) $423 of goodwill associated with the
acquisition of the minority interest in ACC Canada assuming a 40-year
amortization life and (ii) $177 of goodwill and customer base
associated with the Internet Canada Acquisition assuming the
amortization life of the goodwill associated with the purchase is 20
years and that the amortization life of the customer base associated
with the purchase is 5 years.
(3) Reflects $2,160 of charges incurred in 1994 in connection with
enhancement of the Company's network to prepare for equal access for
its Canadian customers.
(4) In 1993, the Company recorded an asset write-down of $12,807.
(5) Adjusted to reverse interest income earned during the six months ended
June 30, 1996, which would not have been earned if the cash and cash
equivalents were used to repurchase the minority interest.
(6) Adjusted to include interest expense on debt used to repurchase the
minority interest (assuming an 8 percent interest rate).
(7) Adjusted for the tax effect of pro forma adjustments.
(8) Reflects elimination of the minority interest in earnings (loss) of
ACC Canada as a result of completion of the Tender Offer and related
transactions.
(9) Reflects the effect of the Company's recent stock dividend. See
"Recent Developments - Stock Dividend."
(10) Includes 1,132,500 shares relating to the conversion of the Company's
Series A Preferred Stock and exercise of the Warrants. Does not
include up to 95,253 shares of Class A Common Stock being registered
which relate to options which the Company anticipates will be
exercised by officers and directors of the Company. The option
exercise prices vary, with the lowest exercise price being $1.89 per
share and the highest exercise price being $28.83 per share.
(11) Balance sheet data from discontinued operations is excluded.
(12) Reflects cash payments associated with the acquisition of the minority
interest in ACC Canada and cash received upon exercise of the
Warrants.
(13) Includes $33,816 of goodwill associated with the acquisition of the
minority interest in ACC Canada.
(14) Adjusted for debt incurred to repurchase the minority interest.
(15) Represents conversion of the 10,000 shares of the Company's Series A
Preferred Stock into 937,500 shares of Class A Common Stock
immediately prior to the closing of this Offering by certain of the
Selling Shareholders.
(16) Includes additional stated capital of $17 and capital-in-excess of par
value of $12,773 as a result of conversion of the Company's Series A
Preferred Stock and the exercise of the Warrants, reduced by $360
associated with elimination of the minority shareholders' portion of
the cumulative translation adjustment for ACC Canada.
footnotes continued on next page)
(continued from previous page)
(17) 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. The Company has included information
concerning EBITDA herein because such information is commonly used in
the telecommunications industry 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, should not be used as a measure of operating income and
cash flows from operations as determined under generally accepted
accounting principles 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.
(18) Defined as billable voice long distance minutes of use.
(19) The Company's financing arrangements restrict the payment of dividends
on the Class A Common Stock. The Company anticipates that it will not
pay dividends in the foreseeable future.
<PAGE>
<PAGE>
SELLING SHAREHOLDERS
This Prospectus covers the offer and sale by each Selling Shareholder
of Class A Common Stock owned by such Selling Shareholder, including the
Warrant Shares. The Warrants will be transferred to Morgan Stanley & Co.
Incorporated and Wheat, First Securities, Inc. and exercised by such
broker-dealers immediately prior to the closing of the Offering. This
Prospectus also covers the offer and sale to such broker-dealers of the
Warrants held by certain of the Selling Shareholders. Set forth below are
the names of each Selling Shareholder, the nature of any position, office
or other material relationship that the Selling Shareholder has had within
the past three years with the Company or any of its predecessors or
affiliates, the number of shares of Class A Common Stock and (if one
percent or more) the percentage of Class A Common Stock beneficially owned
as of July 31, 1996 by each Selling Shareholder, the number of Shares that
may be offered and sold by or on behalf of each Selling Shareholder
hereunder, the amount and (if one percent or more) the percentage of
Class A Common Stock to be owned by each Selling Shareholder upon the
completion of the Offering if all Shares offered by such Selling
Shareholder are sold. Any or all of the Shares listed below under the
heading "Shares to be Sold" may be offered for sale by or on behalf of the
Selling Shareholders. The business address for each of the Company's
officers and directors is the Company's address.
<TABLE>
<CAPTION>
Shares Beneficially Shares Shares Beneficially
Owned Prior to to be Owned After
Selling Shareholders Offering (1) Sold Offering (1)
- --------------------- ------------------- ------ ---------------------
Number Percent Number Percent
------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Fleet Venture Resources,
Inc.(2) 685,125 4.29% 685,125 - -
Fleet Equity Partners
VI, L.P.(2) 293,625 1.88% 293,625 - -
Chisholm Partners II,
L.P.(2) 108,750 * 108,750 - -
Columbia Capital
Corporation (3) 45,000 * 45,000 - -
Christopher Bantoft (4) 39,450 * 5,918 33,532 *
Arunas A. Chesonis (5) 167,528 1.08% 25,129 142,399 *
Michael L. LaFrance (6) 52,683 * 7,902 44,781 *
John J. Zimmer (7) 22,629 * 3,000 19,629 *
Hugh F. Bennett (8) 12,000 * 1,800 10,200 *
Daniel D. Tessoni (9) 41,250 * 6,188 35,062 *
Mae Squier-Dow (10) 30,900 * 4,635 26,265 *
Sharon L. Barnes (11) 4,538 * 681 3,857 *
Richard T. Aab (12) 1,422,864 9.29% 40,000 1,382,864 9.03%
_______________________
*Represents beneficial ownership of less than 1% of the Class A Common
Stock outstanding.
(1) All shares not outstanding but which may be acquired by such
shareholder within 60 days are deemed to be outstanding for purposes
of calculating beneficial ownership and computing the percentage of
the class beneficially owned by such shareholder. Except as otherwise
noted, and subject to community property laws where applicable, the
persons named in the above table have sole voting and dispositive
power with respect to all shares of Class A Common Stock shown as
owned by them. All share data presented herein has been adjusted to
reflect the Company's recent stock dividend. See "Recent Developments
- Stock Dividend."
(2) Includes (i) 685,125 shares of Class A Common Stock beneficially owned
by Fleet Venture Resources, Inc. ("Fleet Venture Resources"), of which
590,625 shares are issuable upon the conversion of Series A Preferred
Stock and 94,500 shares are issuable upon the exercise of Warrants;
(ii) 293,625 shares of Class A Common Stock beneficially owned by
Fleet Equity Partners VI, L.P. ("Fleet Equity Partners"), of which
253,125 shares are issuable upon the conversion of Series A Preferred
Stock and 40,500 shares are issuable upon the exercise of Warrants;
and (iii) 108,750 shares of Class A Common Stock beneficially owned by
Chisholm Partners II, L.P. ("Chisholm"), of which 93,750 shares are
issuable upon the conversion of Series A Preferred Stock and 15,000
shares are issuable upon the exercise of Warrants. Mr. Robert M. Van
Degna, a Director of the Company, is the Chairman and Chief Executive
Officer of Fleet Venture Resources and of each general partner of
Fleet Equity Partners and Chisholm. Mr. Van Degna shares voting and
investment power with another officer of these entities. Mr. Van
Degna disclaims beneficial ownership of the shares held by these
entities, except for his limited partnership interest in Fleet Equity
Partners and in the general partner of Chisholm. The above table does
not include options to purchase 15,000 shares of Class A Common Stock
granted to Mr. Van Degna under the Company's Non-Employee Director's
Stock Option Plan.
Mr. Van Degna was elected to the Company's Board of Directors pursuant
to the terms of an investment in the Company by Fleet Venture
Resources, Fleet Equity Partners and Chisholm. The right of these
investors to vote as a separate class to elect one director will
terminate upon the sale of 625,000 or more Shares hereunder by such
investors. However, Mr. Van Degna will have the right to continue to
serve as a Director of the Company until the expiration of his current
term. The Company understands that fees received by Mr. Van Degna for
his services rendered as a Director of the Company are turned over to
Fleet Equity Partners. Fleet Equity Partners is an affiliate of Fleet
Financial Group, Inc. Fleet Bank, another affiliate of Fleet
Financial Group, Inc., is co-managing agent of the $35 million Credit
Facility that the Company entered into in July 1995, and is expected
to be a participant under the $100 million Credit Facility that the
Company expects to obtain. See "Recent Developments - New Credit
Facility." The address of Fleet Venture Resources, Fleet Equity
Partners and Chisholm is 111 Westminster Street, Providence, Rhode
Island 02903.
(3) All of such shares are issuable upon the exercise of a Warrant. The
address of Columbia Capital Corporation is 201 N. Union Street, Suite
300, Alexandria, Virginia 22314.
(footnotes continued on next page)
(continued from previous page)
(4) Consists of options to purchase 39,450 shares that are or will become
exercisable within the next 60 days. Does not include 65,550 shares
issuable upon the exercise of options which are not deemed to be
presently exercisable, nor stock incentive rights with respect to
15,000 shares granted on February 5, 1996 pursuant to the Company's
employee long term incentive plan. Mr. Bantoft is the Managing
Director of ACC U.K.
(5) Includes 732 shares owned by Mr. Chesonis's spouse, options to
purchase 151,087 shares that are or will become exercisable by Mr.
Chesonis within the next 60 days and options to purchase 10,425 shares
that are currently exercisable by Mr. Chesonis's spouse. Does not
include 84,713 shares issuable upon the exercise of options by Mr.
Chesonis nor 4,575 shares issuable upon the exercise of options held
by Mr. Chesonis's spouse, which are not deemed to be presently
exercisable. Mr. Chesonis is the President, Chief Operating Officer
and a Director of the Company.
(6) Includes options to purchase 48,188 shares that are or will become
exercisable by Mr. LaFrance within the next 60 days. Does not include
55,313 shares issuable upon the exercise of options by Mr. LaFrance
which are not deemed to be presently exercisable. Mr. LaFrance is the
President of ACC Global Corp., a wholly-owned subsidiary of the
Company, and Executive Vice President of the Company.
(7) Includes options to purchase 20,325 shares that are or will become
exercisable by Mr. Zimmer within the next 60 days. Does not include
22,425 shares issuable upon the exercise of options by Mr. Zimmer
which are not deemed to be presently exercisable. Mr. Zimmer is the
Vice President - Finance of the Company.
(8) Includes options to purchase 7,500 shares that are or will become
exercisable by Mr. Bennett within the next 60 days. Does not include
7,500 shares issuable upon the exercise of options by Mr. Bennett
which are not deemed to be presently exercisable. Mr. Bennett is a
Director of the Company.
(9) Includes options to purchase 7,500 shares that are or will become
exercisable by Mr. Tessoni within the next 60 days. Does not include
7,500 shares issuable upon the exercise of options by Mr. Tessoni
which are not deemed to be presently exercisable. Mr. Tessoni is a
Director of the Company.
(10) Includes options to purchase 30,000 shares that are or will become
exercisable by Ms. Squire-Dow within the next 60 days. Does not
include 81,450 shares issuable upon the exercise of options by Ms.
Squire-Dow which are not deemed to be presently exercisable. Ms.
Squire-Dow is the President of ACC Long Distance Corp. and ACC
National Telecom Corp., wholly-owned subsidiaries of the Company.
(11) All of such shares are issuable upon the exercise of options that are
or will become exercisable by Ms. Barnes within the next 60 days.
Does not include 16,612 shares issuable upon the exercise of options
by Ms. Barnes which are not deemed to be presently exercisable. Ms.
Barnes is Controller of the Company.
(12) Includes 209,250 shares that are owned by Melrich Associates, L.P., a
family partnership in which Mr. Aab is a general partner, and options
to purchase 25,008 shares of Class A Common Stock that are or will
become exercisable within the next 60 days. Does not include 38,058
shares issuable upon the exercise of options which are not deemed to
be presently exercisable. Mr. Aab is a Director of the Company and is
expected to continue as Chairman of the Company's Board of Directors
until October 8, 1996. See "Recent Developments - David K. Laniak
Elected Chairman." Mr. Aab is a general partner of the lessor of the
Company's principal executive offices located in Rochester, New York
and was formerly a controlling shareholder of a software developer
which has licensed certain software and entered into certain
transactions with the Company.
<PAGE>
<PAGE>
PLAN OF DISTRIBUTION
The Shares may be sold directly by the Selling Shareholders or their
successors in interest. Alternatively, the Shares may be offered to or
through broker-dealers or underwriters who may act solely as agents, or who
may acquire Shares as principals. The distribution of the Shares may be
effected in one or more transactions that may take place through the Nasdaq
National Market or any national securities exchange on which the Class A
Common Stock is approved for listing in the future, including block trades
or ordinary broker's transactions, or through privately negotiated
transactions, or through an underwritten public offering, or through a
combination of any such methods of sale, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices.
The Selling Shareholders have advised the Company that they intend to
sell the Shares offered hereby through Morgan Stanley & Co. Incorporated
("Morgan Stanley") and Wheat, First Securities, Inc. ("Wheat"). Morgan
Stanley and Wheat have provided investment banking services to the Company
from time to time, including the public offering of Class A Common Stock
completed in May 1996. Morgan Stanley and Wheat have agreed to purchase
the Warrants from certain of the Selling Shareholders and will resell to
the public the 195,000 shares of Class A Common Stock issuable upon the
exercise of such Warrants. The purchase price of such Warrants will be
equal to the public offering price of the Warrant Shares minus the exercise
price of such Warrants and any commissions or discounts. With respect to
the remaining Shares offered hereby, Morgan Stanley and Wheat may offer
such Shares in an underwritten offering or as broker-dealers acting either
as principal or as agent. Morgan Stanley and Wheat are expected to receive
compensation in the form of usual and customary underwriting discounts or
brokers' commissions.
The aggregate proceeds to the Selling Shareholders from the sale of
the Shares so offered will be the purchase price of the Shares sold less
the aggregate agents' commissions and underwriters' discounts, if any, and
other expenses of issuance and distribution not borne by the Company. Any
broker-dealers that participate with the Selling Shareholders in the
distribution of Shares may be deemed to the underwriters, and any
commissions received by them and any profit on the resale of the Shares
purchased by them might be deemed to be underwriting discounts and
commissions under the Securities Act. The Company has agreed to bear all
expenses (other than commissions or discounts of underwriters, dealers or
agents or brokers' fees and the fees and expenses of their counsel) in
connection with the registration of the Shares being offered by the Selling
Shareholders.
The Selling Shareholders may effect transactions by selling the
Shares to or through broker-dealers acting either as principal or as agent,
and such broker-dealers may receive compensation in the form of usual and
customary or specifically negotiated underwriting discounts, concessions or
commissions from the Selling Shareholders. To the extent that this
Offering is underwritten, the underwriters may propose to offer part of the
Shares directly to the public at the Price to Public set forth in the
Prospectus Supplement and part to certain dealers at a concession under the
Price to Public. The underwriters may allow, and such dealers may reallow,
a concession to other underwriters or to certain dealers. After the
initial offering of the Shares, the offering price and other selling terms
may from time to time be varied by the underwriters.
If Shares are sold in an underwritten offering, the Shares may be
acquired by the underwriters for their own account and may be further
resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The names of the underwriters with respect
to any such offering and the terms of the transactions, including any
underwriting discounts, concessions or commissions and other items
constituting compensation of the underwriters and broker-dealers, if any,
will be set forth in a Prospectus Supplement relating to such offering.
Any public offering price and any discounts, concessions or commissions
allowed or reallowed or paid to broker-dealers may be changed from time to
time. Unless otherwise set forth in a Prospectus Supplement, the
obligations of the underwriters to purchase the Shares will be subject to
certain conditions precedent and the underwriters will be obligated to
purchase all of the Shares specified in such Prospectus Supplement if any
such Shares are purchased.
If the Shares are sold in an underwritten offering, the underwriters
and selling group members (if any) may engage in passive market making
transactions in the Company's Class A Common Stock on the Nasdaq National
Market immediately prior to the commencement of the sale of shares in such
offering, in accordance with Rule 10b-6A under the Exchange Act. Passive
market making consists of displaying bids on the Nasdaq National Market
limited by the bid prices of market makers not connected with such 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 Selling Shareholders, and the
Selling Shareholders have agreed to indemnify the Company, from certain
damages or liabilities arising out of or based upon any untrue statement of
a material fact contained in, or material omission from the Registration
Statement, to the extent such untrue statement or omission was made in the
Registration Statement in reliance upon information furnished by the
indemnifying party. To the extent that this Offering is underwritten, the
Company and the Selling Shareholders will agree to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000
shares of Class A Common Stock, par value $.015 per share, 25,000,000
shares of Class B Common Stock, par value $.015 per share, and 2,000,000
shares of Preferred Stock, par value $1.00 per share. As of July 31, 1996,
15,289,440 shares of Class A Common Stock were issued and outstanding and
held by approximately 461 shareholders of record and 10,000 shares of
Series A Preferred Stock were issued and outstanding. The Series A
Preferred Stock will be converted into 937,500 shares of Class A Common
Stock prior to the closing of the Offering and the Series A Preferred Stock
will return to the status of authorized but unissued Preferred Stock. No
shares of Class B Common Stock have been issued by the Company. In
addition, as of July 31, 1996, there were outstanding options to purchase
an aggregate of up to approximately 1,772,017 shares of Class A Common
Stock, of which options with respect to 640,280 shares were exercisable at
a weighted average exercise price of approximately $11.60 per share.
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. 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 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 prohibits the payment of dividends and the Company does not intend
to pay dividends on the Class A Common Stock for the foreseeable future.
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 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 National Market under
the symbol "ACCC." The Company's transfer agent and registrar for its
Class A Common Stock is Key Corp. (formerly Society National Bank),
Cleveland, Ohio.
WARRANTS
As of July 31, 1996, Fleet Venture Resources, Fleet Equity Partners,
Chisholm and Columbia Capital Corporation held Warrants to purchase an
aggregate of 195,000 shares of Class A Common Stock at an exercise price of
$10.67 per share (subject to adjustment for stock splits, stock dividends
and the like and other antidilution adjustments). See "Selling
Shareholders". The shares issuable upon the exercise of the Warrants are
being registered hereunder pursuant to demand registration rights
previously granted by the Company to such investors. Immediately prior to
the closing of the Offering, the Warrants will be transferred to Morgan
Stanley, Wheat, or other broker-dealers and exercised by the holders
thereof. The Warrant Shares will be sold to investors. The Warrants will
not be transferable by such broker-dealers, except to original holders
thereof.
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, Rochester, New York. If the Offering is underwritten,
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 or incorporated by reference herein in reliance
upon the authority of said firm as experts in giving said reports.
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:
SEC Registration Fees . . . . . . . . . . $19,741.56
Printing and Engraving Expenses . . . . . 15,000.00
Legal Fees and Expenses . . . . . . . . . 75,000.00
Accounting Fees and Expenses. . . . . . . 75,000.00
Transfer Agent and Registrar Fees . . . . 5,000.00
Blue Sky Fees and Expenses. . . . . . . . 15,000.00
Miscellaneous . . . . . . . . . . . . . . 50,000.00
-----------
Total . . . . . . . . . . . . . . . . . . $254,741.56
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") permits
the Company to indemnify any director or officer of the Company against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, incurred in defense of any action (other than an action by or
in the right of the Company) arising by reason of the fact that he/she is
or was an officer or Director of the Company, if in any civil action or
proceeding it is determined that 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 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 permits the Company to indemnify any such
officer or Director against expenses incurred in an action by or in the
right of the Company 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.
If the offering is underwritten, reference is made to the Underwriting
Agreement to be incorporated by reference herein 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.
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:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.1 Specimen of Class A Common Stock Certificate(1)
4.2 First Restated Certificate of Incorporation of the Company(2)
4.3 Certificate of Designations of 10,000 Shares of Series A
Preferred Stock, par value $1.00 per share, of the Company(3)
4.4 By-laws of the Company, as amended(4)
4.5 Forms of Stock Purchase Warrants issued to Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P. and Chisholm
Partners II, L.P., each dated May 22, 1995(5)
4.6 Registration Agreement among the Company, Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P. and Chisholm
Partners II, L.P., dated May 22, 1995(6)
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 Consents of Arthur Andersen LLP
24.1 Powers of Attorney (contained in the signature page)
__________________
(1) Incorporated by reference from Exhibit 4-1 to the Company's
Registration Statement on Form S-2 (Commission file
No. 33-41588).
(2) 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).
(3) 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).
(4) Incorporated by reference from Exhibit 99.5 to the Company's
Current Report on Form 8-K dated September 17, 1996 (Commission
File No. 0-14567).
(5) Incorporated by reference from Exhibits 4.3(a), (b) and (c),
respectively, to the Company's Current Report on Form 8-K dated
June 22, 1995 (Commission File No. 0-14567).
(6) Incorporated by reference from Exhibit 4.6 to the Company's
Current Report on Form 8-K dated June 22, 1995 (Commission File
No. 0-14567).
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:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Exchange Act that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
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.<PAGE>
<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
this September 17, 1996.
ACC CORP.
By: /s/ David K. Laniak
---------------------------------
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:
Signature Title Date
/s/ David K. Laniak Chief Executive Officer September 17, 1996
- --------------------------- and Director
David K. Laniak (Principal Executive
Officer)
Chairman of the Board September __, 1996
- --------------------------- and Director
/s/ Arunas A.Chesonis President and Chief September 17, 1996
- --------------------------- Operating Officer,
Arunas A. Chesonis and Director
/s/ Michael R. Daley Executive Vice President September 17, 1996
- --------------------------- and Chief Financial
Michael R. Daley Officer
(Principal Financial and
Accounting Officer)
/s/ Hugh F. Bennett Director September 11, 1996
- ---------------------------
Hugh F. Bennett
Director September ___, 1996
- ---------------------------
Willard Z. Estey
/s/ Daniel D. Tessoni Director September 17, 1996
- ---------------------------
Daniel D. Tessoni
/s/ Robert M. Van Degna Director September 17, 1996
- ---------------------------
Robert M. Van Degna
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.1 Specimen of Class A Common Stock Certificate(1)
4.2 First Restated Certificate of Incorporation of the Company(2)
4.3 Certificate of Designations of 10,000 Shares of Series A
Preferred Stock, par value $1.00 per share, of the Company(3)
4.4 By-laws of the Company, as amended(4)
4.5 Forms of Stock Purchase Warrants issued to Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P. and Chisholm
Partners II, L.P., each dated May 22, 1995(5)
4.6 Registration Agreement among the Company, Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P. and Chisholm
Partners II, L.P., dated May 22, 1995(6)
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 Consents of Arthur Andersen LLP
24.1 Powers of Attorney (contained in the signature page)
__________________
(1) Incorporated by reference from Exhibit 4-1 to the Company's
Registration Statement on Form S-2 (Commission file
No. 33-41588).
(2) 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).
(3) 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).
(4) Incorporated by reference from Exhibit 99.5 to the Company's
Current Report on Form 8-K dated September 17, 1996 (Commission
File No. 0-14567).
(5) Incorporated by reference from Exhibits 4.3(a), (b) and (c),
respectively, to the Company's Current Report on Form 8-K dated
June 22, 1995 (Commission File No. 0-14567).
(6) Incorporated by reference from Exhibit 4.6 to the Company's
Current Report on Form 8-K dated June 22, 1995 (Commission File
No. 0-14567).
</TABLE>
EXHIBIT 5.1
Nixon, Hargrave, Devans & Doyle LLP
Attorneys and Counsellors at Law
Clinton Square
Post Office Box 1051
Rochester, New York 14603-1051
(716) 263-1000
September 17, 1996
ACC Corp.
400 West Avenue
Rochester, New York 14611
Ladies and Gentlemen:
We have acted as counsel to ACC Corp., a Delaware corporation
(the "Company"), in connection with a Registration Statement on Form S-3,
as amended (the "Registration Statement"), filed by the Company with the
Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), relating to the issuance and sale by
the Company of up to 1,227,753 shares of Class A Common Stock of the
Company, $.015 par value per share (the "Common Stock").
This opinion is being delivered to you in connection with the
Registration Statement.
In connection with the foregoing, we have examined the
Registration Statement and the Preliminary Prospectus contained in the
Registration Statement (the "Preliminary Prospectus"). We also have
examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, certificates and other documents
and have made such investigations of law as we have deemed necessary or
appropriate as a basis for the opinions expressed below.
As to questions of fact material to our opinions expressed
herein, we have, when relevant facts were not independently established,
relied upon certificates of, and information received from, the Company
and/or representatives of the Company. We have made no independent
investigation of the facts stated in such certificates or as to any
information received from the Company and/or representatives of the Company
and do not opine as to the accuracy of such factual matters. We also have
relied, without investigation, upon certificates and other documents from,
and conversations with, public officials.
In rendering the following opinions, we have assumed, without
investigation, the authenticity of any document or other instrument
submitted to us as an original, the conformity to the originals of any
document or other instrument submitted to us as a copy, the genuineness of
all signatures on such originals or copies, and the legal capacity of
natural persons who executed any such document or instrument at the time of
execution thereof.
Members of our firm involved in the preparation of this opinion
are licensed to practice law in the State of New York and we do not purport
to be experts on, or to express any opinion herein concerning, the laws of
any other jurisdiction other than the laws of the State of New York, the
laws of the United States of America and the General Corporation Law of the
State of Delaware.
Based upon and subject to the forgoing, and the other
qualifications and limitations contained herein, and after (a) the
Commission shall have entered an appropriate order declaring effective the
above-referenced Registration Statement, as amended, (b) the shares of
Common Stock have, if required, been duly qualified or registered, as the
case may be, for sale under applicable state securities laws, (c) the Board
of Directors of the Company has approved the issuance and delivery of the
Common Stock in accordance with the provisions of the Underwriting
Agreement, the proposed form of which has been or will be included as
Exhibit 1.1 to the Registration Statement, as amended, and (d) the Common
Stock has been appropriately issued and delivered in accordance with the
provisions of such Underwriting Agreement, and the consideration therefor
shall have been received by the Company, we are of the opinion that the
1,227,753 shares of Common Stock to be offered pursuant to the Preliminary
Prospectus will have been duly authorized and validly issued and will be
fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of our names as it appears under
the caption "Legal Matters" in the Preliminary Prospectus. In giving such
consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Act or the rules
and regulations of the Commission thereunder.
We further consent to the filing of this opinion as an exhibit to
applications to the securities commissioners of the various states of the
United States, to the extent so required, in connection with the
registration of the shares of Common Stock.
This opinion is intended solely for your benefit in connection
with the transactions described above and, except as provided in the two
immediately preceding paragraphs, may not be otherwise communicated to,
reproduced, filed publicly or relied upon by, any other person or entity
for any other purpose without our express prior written consent. This
opinion is limited to the matters stated herein, and no opinion or belief
is implied or may be inferred beyond the matters expressly stated herein.
Very truly yours,
Nixon, Hargrave, Devans & Doyle LLP
EXHIBIT 23.1
The consent of Nixon, Hargrave, Devans & Doyle LLP is included in
Exhibit 5.1 hereof.
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of
this registration statement.
/s/ Arthur Andersen LLP
Rochester, New York
September 17, 1996
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of
this registration statement.
/s/ Arthur Andersen & Co.
Mississauga, Canada
September 17, 1996
