12A:25905
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR FISCAL YEAR ENDED DECEMBER 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 0-14567
ACC CORP.
400 West Avenue
Rochester, New York 14611
716-987-3000
Incorporated under the Employer Identification
Laws of the State of Delaware Number 16-1175232
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Class A Common Stock, par value $.015 per share
Indicate by check mark whether the Company (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Company was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Company's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of all Class A Common Stock held by non-
affiliates as of March 3, 1997, was $415,525,495.
16,672,121 shares of $.015 par value Class A Common Stock were
issued and outstanding as of March 3, 1997.
The Index of Exhibits filed with this Report begins at page 54.
PART I
Item 1. BUSINESS.
Certain of the information contained or incorporated by
reference in this Form 10-K, including the discussion which
follows in this Item 1 of the Company's plans and strategies for
its business and related financing, and the Management's
Discussion and Analysis incorporated by reference herein, contain
forward-looking statements. For a discussion of important
factors that could cause actual results to differ materially from
such forward-looking statements, please carefully review the
discussion of Risk Factors contained in this Item 1, as well as
the other information contained in this Report and in the
Company's periodic reports filed with the Securities and Exchange
Commission (the "SEC" or "Commission").
ACC Corp. 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 recent regulatory changes, ACC also provides local telephone
service as a switch-based local exchange reseller in upstate New
York and Massachusetts and as a reseller of local exchange
services in Ontario and Quebec, Canada. ACC operates an advanced
telecommunications network, consisting of seven long distance
international and domestic switches located in the U.S., Canada
and the U.K., a local exchange switch located in the U.S., leased
transmission lines, and network management systems designed to
optimize traffic routing.
The Company's objective is to grow its long distance
telecommunications customer base in its existing markets and to
establish itself in deregulating Western European markets that
have high density telecommunications traffic, such as Germany,
when the Company believes that business and regulatory conditions
warrant. The key elements of the Company's business strategy
are: (1) to broaden ACC's penetration of the U.S., Canadian and
U.K. telecommunications markets by expanding its long distance,
local and other service offerings and geographic reach; (2) to
utilize ACC's operating experience as an early entrant in
deregulating markets in the U.S., Canada and the U.K. to
penetrate other deregulating telecommunications markets that have
high density telecommunications traffic; (3) to achieve economies
of scale and scope in the utilization of ACC's network; and
(4) to seek acquisitions, investments or strategic alliances
involving assets or businesses that are complementary to ACC's
current operations.
The Company's principal competitive strengths are:
(1) ACC's sales and marketing organization and the customized
service ACC offers to its customers; (2) ACC's offering of
competitive prices which the Company believes generally are lower
than prices charged by the major carriers in each of its markets;
(3) ACC's position as an early entrant in the U.S., Canadian and
U.K. markets as an alternative carrier; (4) ACC's focus on more
profitable international telecommunications traffic between the
U.S., Canada and the U.K.; and (5) ACC's switched-based
networking capabilities. The Company believes that its ownership
of switches reduces its reliance on other carriers and enables
the Company to efficiently route telecommunications traffic over
multiple leased transmission lines and to control costs, call
record data and customer information. The availability of
existing transmission capacity in its markets makes leasing of
transmission lines attractive to the Company and enables it to
grow network usage without having to incur the significant
capital and operating costs associated with the development and
operation of a transmission line infrastructure.
ACC primarily targets business customers with approximately
$500 to $15,000 of monthly usage, selected residential customers
and colleges and universities. The Company believes that, in
addition to being price-driven, these customers tend to be
focused on customer service, more likely to rely on a single
carrier for their telecommunications needs and less likely to
change carriers than larger commercial customers. The diversity
of ACC's targeted customer base enhances network utilization by
combining business-driven workday traffic with night and weekend
off-peak traffic from student and residential customers. The
Company strives to be more cost effective, flexible, innovative
and responsive to the needs of its customers than the major
carriers, which principally focus their direct sales efforts on
large commercial accounts and residential customers.
The Company was originally incorporated in New York in 1982
under the name A.C. Teleconnect Corp. and was reincorporated in
Delaware in 1987 under the name ACC Corp. As used herein, unless
the context otherwise requires, the "Company" and "ACC" refer to
ACC Corp. and its subsidiaries, including ACC Long Distance Corp.
("ACC U.S."), ACC TelEnterprises Ltd., the Company's wholly-owned
Canadian subsidiary ("ACC Canada"), and ACC Long Distance UK
Limited ("ACC U.K."). The Company's principal executive offices
are located at 400 West Avenue, Rochester, New York 14611 and its
telephone number at that address is (716) 987-3000.
In this Report, references to "dollar" and "$" are to United
States dollars, references to "Cdn. $" are to Canadian dollars,
references to "pound symbol" are to British pounds sterling,
the terms "United States" and "U.S." mean the United States of America
and, unless the context otherwise requires, its states, territories
and possessions and all areas subject to its jurisdiction, and
the terms "United Kingdom" and "U.K." mean England, Scotland and
Wales.
For certain financial information concerning the Company's
foreign and domestic operations, see Note 9 to the Consolidated
Financial Statements incorporated by reference under Item 8 of
this Report.
Industry Overview
The global telecommunications industry has dramatically
changed during the past several years, beginning in the U.S. with
AT&T Corp's ("AT&T") divestiture of its 22 regional operating
companies ("RBOCs") in 1984 and culminating with the 1996
amendments to the U.S. Communications Act of 1934 (the "U.S.
Communications Act"), and continuing in Canada, the U.K. and
other countries with various regulatory changes. Previously, the
long distance telecommunications industry in the U.S., Canada and
the U.K. consisted of one or a few large facilities-based
carriers, such as AT&T, Bell Canada and British
Telecommunications PLC ("British Telecom"). As a result of the
AT&T divestiture and the recent legislative changes in the U.S.
and fundamental regulatory changes in Canada and the U.K.,
coupled with technological and network infrastructure
developments which increased significantly the voice and data
telecommunications transmission capacity of dominant carriers,
the long distance industry has developed into a highly
competitive one consisting of numerous alternative long distance
carriers in each of these countries. In addition, since the AT&T
divestiture in 1984, competition has heightened in the local
exchange market in the U.S. and Canada. The Company anticipates
that deregulatory and economic influences will promote the
development of competitive telecommunications markets in other
countries.
Long Distance Market. The U.S. long distance market has
grown to approximately $72 billion in annual revenues during
1995, according to Federal Communications Commission ("FCC")
estimates. AT&T has remained the largest long distance carrier
in the U.S. market, retaining slightly more than 53% of the
market, with MCI Telecommunications Corporation ("MCI") and
Sprint Corp. ("Sprint") increasing their respective market shares
to approximately 18% and 10% of the market during 1995. AT&T,
MCI and Sprint constitute what generally is regarded as the first
tier in the U.S. long distance market. Large regional long
distance companies, some with national capabilities, such as
WorldCom, Inc. (which in 1996 merged with MFS Communications,
Inc.) ("WorldCom"), Cable & Wireless Communications, Inc.,
Frontier Corp. and LCI International, constitute the second tier
of the industry. The remainder of the U.S. long distance market
share is comprised of several hundred smaller companies,
including ACC U.S., known as third-tier carriers. In addition,
recent U.S. legislation, which removes certain long-standing
restrictions on the ability of the RBOCs to provide long distance
services, and the World Trade Organization ("WTO") accord on
basic services, will have a substantial impact on the long
distance market.
Since 1990, competition has existed in the Canadian long
distance market. The Canadian long distance market is dominated
by a consortium of facilities-based local and long distance
telephone companies (e.g., Bell Canada, BC Tel, Maritime Tel)
operating as the "Stentor" group of companies. A second group of
long distance providers, consisting principally of AT&T Canada
Long Distance Services Company ("AT&T Canada"), Sprint Canada (a
subsidiary of Call-Net Telecommunications Inc.) and fONOROLA
Inc., own and operate transmission lines through which they
provide long distance voice and data services in the Canadian
markets. Other long distance providers, including ACC Canada,
generally lease transmission lines through which they resell long
distance services in the Canadian market.
The international, national and local markets for voice
telephone services in the U.K. and Northern Ireland accounted for
approximately l.4 billion pounds, 2.1 billion pounds and 2.2
billion pounds, respectively, in revenues during the 12 months
ended March 31, 1996, according to estimates from
The Office of Telecommunications ("Oftel"), the U.K.
telecommunications regulatory authority. In the U.K., British
Telecom historically has dominated the telecommunications market.
British Telecom was the largest carrier during such 12 month
period, with approximately 70%, 80% and 92% of the revenues
from international, national and local voice telephone services,
respectively. Mercury Communications Ltd. ("Mercury"), which
owns and operates interexchange transmission facilities, is the
second largest carrier of voice telecommunications in the U.K.
The remainder of the U.K. long distance market is comprised of an
emerging market of licensed public telephone operators, such as
Energis Communications Ltd., ("Energis"), WorldCom and various
cable companies, and switched-based resellers such as ACC U.K.,
AT&T, Esprit Telecom of the U.K. Ltd. ("Esprit") and Sprint.
Long distance carriers in the U.S., Canada and the U.K. can
be categorized by several distinctions. One distinction is
between transmission facilities-based companies and non-
transmission facilities-based companies, or resellers.
Transmission facilities-based carriers, such as AT&T, Bell Canada
and British Telecom, own their own long distance interexchange or
transmission facilities and originate and terminate calls through
local exchange systems. Profitability for transmission
facilities-based carriers is dependent not only upon their
ability to generate revenues but also upon their ability to
manage complex networking and transmission costs. All of the
first- and most of the second-tier long distance companies in the
U.S markets are transmission facilities-based carriers and
generally offer service nationwide. Most transmission facilities-
based carriers in the third tier of the market offer their
service only in a limited geographic area. Some transmission
facilities-based carriers contract with other transmission
facilities-based carriers to provide transmission where they have
geographic gaps in their facilities. Switched-based resellers,
such as the Company, carry their long distance traffic over
transmission lines leased from transmission facilities-based
carriers, originate and terminate calls through local exchange
systems or "competitive access providers" ("CAPs") such as
Teleport Communications Group ("Teleport"), and contract with
transmission facilities-based carriers to provide transmission of
long distance traffic either on a fixed rate lease basis or a
call volume basis. Profitability for non-transmission facilities-
based carriers is dependent largely on their ability to generate
and retain sufficient revenue volume to negotiate attractive
pricing with one or more transmission facilities-based carriers.
A second distinction among long distance companies is that
of switch-based versus switchless resellers. Switch-based
resellers, such as the Company, have one or more switches, which
are sophisticated computers that direct telecommunications
traffic to form a transmission path between a caller and the
recipient of a call. All transmission facilities-based carriers
are switch-based carriers, as are many non-transmission
facilities-based carriers, including ACC. Switchless resellers
depend on one or more transmission facilities-based carriers or
switch-based resellers for transmission and switching facilities.
The Company believes that its ownership of switches reduces its
reliance on other carriers and enables the Company to efficiently
route telecommunications traffic over multiple leased
transmission lines and to control costs, call record data and
customer information. The availability of existing transmission
capacity in its markets makes leasing of transmission lines
attractive to the Company and enables it to grow network usage
without having to incur the significant capital and operating
costs associated with the development and operation of a
transmission line infrastructure.
Local Exchange Market. In the U.S., the existing structure
of the telecommunications industry principally resulted from the
AT&T divestiture. As part of the divestiture, seven RBOCs were
created to offer services in specified geographic areas called
Local Access and Transport Areas ("LATAs"). The RBOCs were
separated from the long distance provider, AT&T, resulting in the
creation of distinct local exchange and long distance markets.
Since the AT&T divestiture, several factors have served to
promote competition in the local exchange market, including
(i) the local exchange carriers' monopoly position, which
provided little incentive for the local exchange companies to
reduce prices, improve service or upgrade their networks, and
related regulations which required the local exchange carriers
to, among other things, lease transmission facilities to
alternative carriers, such as the Company, (ii) customer desire
for an alternative to the local exchange carriers, which
developed in part as a result of competitive activities in the
long distance market and increasing demand for lower cost, high
quality, reliable services, and (iii) the advancement of fiber
optic and digital electronic technology, which combined the
ability to transmit voice, data and video at high speeds with
increased capacity and reliability.
During the past several years, regulators in some states and
at the federal level have issued rulings which favored
competition and promoted the opening of markets to new entrants.
These rulings have allowed competitive providers of
telecommunications services to offer a number of new services,
including, in certain states, a range of local exchange services.
In February 1996 legislation was enacted (the "Telecommunications
Act of 1996" or the "1996 Act") which was intended to introduce
increased competition in U.S. telecommunications markets,
especially in local markets. The 1996 Act opens the local
services market by requiring local exchange carriers to permit
interconnection to their networks and by establishing local
exchange carrier obligations with respect to unbundled access,
resale, number portability, dialing parity, nondiscriminatory
access to rights of way, mutual compensation for termination of
calls on other carriers' networks, and other matters. In
addition, the legislation codifies local exchange carriers' equal
access and nondiscrimination obligations and preempts state
regulation that prohibits or has the effect of prohibiting
competition for local telecommunication services.
As required by the 1996 Act, in August 1996 the FCC adopted
new rules implementing certain provisions of the 1996 Act (the
"Interconnection Orders"). These rules are designed to implement
the pro-competitive, deregulatory national policy framework of
the new statute by removing or minimizing the regulatory,
economic and operational impediments to competition for
facilities-based and resold local services, including switched
local exchange services. Although setting minimum, uniform,
national rules, the Interconnection Orders also rely heavily on
states to apply these rules and to exercise their own discretion
in implementing a pro-competitive regime in their local telephone
markets. Among other things, the Interconnection Orders
establish rules requiring incumbent LECs to interconnect with new
entrants such as the Company at specified network points; require
incumbent LECs to provide carriers nondiscriminatory access to
network elements on an unbundled basis; establish rules requiring
incumbent LECs to allow competitors to interconnect; require
states to set prices for interconnection and termination of local
calls; require incumbent LECs to offer their telecommunications
services at retail prices minus avoided costs; and require LECs
and utilities to provide new entrants with nondiscriminatory
access to poles, ducts, conduit and rights of way owned or
controlled by LECs or utilities. The Interconnection Orders also
require, among other things, that intraLATA presubscription
(pursuant to which LECs must allow customers to choose different
carriers for intraLATA toll service without having to dial extra
digits) be implemented no later than February 1999. Petitions
seeking reconsideration of one or more aspects of the
Interconnection Orders have been filed with the FCC and are
pending. Also, the Interconnection Orders have been appealed to
various U.S. Court of Appeals. These appeals have been
consolidated into proceedings currently pending before the U.S.
Eighth Circuit Court of Appeals. Certain of the rules adopted in
the Interconnection Orders, including rules that concern the
pricing of interconnection, have been stayed by the Court. There
can be no assurance of how the Interconnection Orders will be
implemented or enforced or what effect they will have on
competition within the telecommunications industry generally or
on the competitive position of the Company specifically.
Nonetheless, the Company believes the trend toward increased
competition and deregulation of the telecommunications industry
will be accelerated by the 1996 Act and subsequent developments.
In Canada, similar factors promoting competition in the
local exchange market developed in response to regulatory
developments in the Canadian long distance telecommunications
market and to technological advances in the telecommunications
industry. The Canadian Radio-television and Telecommunications
Commission ("CRTC") has approved, in concept, the reduction of
the remaining restrictions on local exchange services in Canada
and a proceeding is being conducted to determine the appropriate
timetable and terms for implementation of its decision.
Business Strategy
The Company was an early entrant as an alternative carrier
in the U.S., Canada and the U.K. The Company's objective is to
grow its telecommunications customer base in its existing markets
and to establish itself in other deregulating Western European
markets with high density telecommunications traffic. The key
elements of the Company's business strategy are to increase
penetration of existing markets, enter new markets, improve
operating efficiency, and pursue acquisitions, investments and
strategic alliances.
Increase Penetration of Existing Markets. ACC's
consolidated revenue has grown from $126.4 million to
$308.8 million over the three fiscal years ended December 31,
1996, although the Company expects its growth to decrease over
time. The Company plans to further increase its revenue and
customer base in the U.S., Canadian and U.K. markets by expanding
its service offerings and geographic reach. The expansion of the
Company's service offerings is designed to reduce the effects of
price per minute decreases for long distance service and to
decrease the likelihood that customers will change
telecommunications carriers. Through this strategy, the Company
will seek to build a broad base of recurring revenues in the
U.S., Canada and the U.K. The Company also offers local
telephone services in selected additional U.S. and Canadian
markets, including New York, Massachusetts, Quebec and Ontario,
as well as additional data communications services in the U.S.
and Canada. The Company believes that offering local services
will enhance its ability to attract and retain long distance
customers and reduce the Company's access charges as a percentage
of revenues.
Enter New Markets. The Company believes that its operating
experience in deregulating markets in the U.S., Canada and the
U.K. and its experience as an early entrant as an alternative
carrier in those markets will assist ACC in identifying
opportunities in other deregulating countries with high density
telecommunications traffic. In particular, the Company believes
that its position in the U.S., Canadian and U.K.
telecommunications markets and its experience in providing
international telecommunications service will assist it in
establishing a presence in Germany and other countries when the
Company believes that business and regulatory conditions warrant.
The Company has recently announced that it has formed a German
subsidiary in anticipation of deregulation in that marketplace in
1998. Successful entry into the German market, however, will
depend upon a number of factors, including negotiation of
interconnection agreements with Deutsche Telekom AG and
deregulation by governmental authorities.
Improve Operating Efficiency. The Company strives to
achieve economies of scale and scope in the use of its network,
which consists of leased transmission facilities, seven
international and domestic switches, a local exchange switch and
information systems. In order to enhance the efficiency of the
fixed cost elements of its network, the Company seeks to increase
its traffic volume and balance business-driven workday traffic
with night and weekend off-peak traffic from student and
residential customers. The Company anticipates that competition
among transmission facilities-based providers of
telecommunications services in the U.S. and Canadian markets will
afford ACC opportunities for reductions in the cost of leased
line facilities. The Company seeks to reduce its network cost
per billable minute by more than any reduction in revenue per
billable minute. The Company also intends to acquire additional
switches and upgrade its existing switches to enhance its network
in anticipation of growth in the Company's customer base and
provide additional telecommunications services. The Company
believes that its network switches enable the Company to
efficiently route telecommunications traffic over multiple
transmission facilities to reduce costs, control access to
customer information and grow network usage without a
corresponding increase in support costs.
Pursue Acquisitions, Investments and Strategic Alliances.
As the Company expands its service offerings and its network, the
Company anticipates that it will seek to develop strategic
alliances both domestically and internationally and to acquire
assets and businesses or make investments in companies that are
complementary to the Company's current operations. The Company
believes that the pursuit of an active acquisition strategy is an
important means toward achieving growth and economies of scale
and scope in its targeted markets. Through acquisitions, the
Company believes that it can further increase its traffic volume
to further improve the usage of the fixed cost elements of its
network.
Services
Commercial Long Distance Services. The Company offers its
commercial customers in the U.S. and Canada an array of
customized services and has developed a similar range of service
offerings for commercial customers in the U.K.
In the U.S., although the Company historically has
originated long distance voice services principally in New York
and Massachusetts, ACC is currently authorized to originate long
distance voice and data services in 45 states. The Company's
U.S. services include "1+" inter-LATA long distance service, and
private line service for which a customer is charged a fixed
monthly rate for transmission capacity that is reserved for that
customer's traffic. The Company's U.S. business services also
include toll-free "800" or "888" services. In addition, the
Company currently provides intra-LATA service in certain areas
for customers who make a large number of intra-LATA calls. The
Company installs automatic dialing equipment to enable customers
to place such calls over the Company's network without having to
dial an access code. However, various states, including New
York, are moving to implement "equal access" for intra-LATA toll
calls such that the Company's customers in such jurisdictions
will be able to use the Company's network on a "1 +" basis to
complete intra-LATA toll calls. The Company's ability to compete
in the intra-LATA toll market depends upon the margin which
exists between the access charges it must pay to the local
exchange company for originating and terminating intra-LATA
calls, and the retail toll rates established by the local
exchange carriers for the local exchange carriers' own intra-LATA
toll service. The Company's commercial services generally are
priced below the rates charged by the major carriers for similar
services and are competitive with those of other carriers. See
the Risk Factor discussion of "Increasing Domestic and
International Competition" in this Item 1 below.
In Canada, ACC currently originates long distance voice and
data services in the Montreal, Toronto and Vancouver metropolitan
areas as well as throughout Alberta, British Columbia, Manitoba,
New Brunswick, Nova Scotia, Ontario and Quebec. The Company
offers its Canadian commercial customers both voice and data
telecommunications services. The Company's long distance voice
services are offered to its business customers in a nine-level
discount structure marketed under the name "Edge." Discounts are
based on calling volume and call destination and typically result
in savings ranging from 10% to 20% when compared to Stentor
member rates. Calls to the U.S. are priced at a flat rate
regardless of the destination, and international calls are priced
at a percentage discount to the rates charged by the Stentor
group. The Company also offers toll-free "800" services within
Canada, as well as to and from the U.S., and offers an ACC Travel
Card providing substantial savings off Stentor member "Calling
Card" rates. ACC Canada has introduced a frame relay network and
Internet access services (including Web design/hosting) and now
provides these services in all provinces except Saskatchewan and
Newfoundland.
ACC originates long distance voice services throughout the
U.K. The Company presently offers its U.K. customers voice
telecommunications services. These services include indirect
access (known as "ACCess 1601") through the public switched
telephone network ("PSTN") and the use of direct access lines to
the Company's network (known as "ACCess Direct") for higher-
volume business users. Because ACCess 1601 is a mass market
service, the prices offered are built around a standard price
list with volume discounts for high-volume users. ACCess Direct
is generally cost effective only for customers making at least
5,000 pounds per month in calls.
The Company's U.S. and Canadian commercial customers are
offered customized services, such as comprehensive billing
packages and its "Travel Service Elite" domestic calling cards,
which allow the customer to place long distance calls at
competitive rates from anywhere in the U.S. and Canada. The
Company's standard monthly statement includes a management
summary report, a call detail report recording every long
distance call and facsimile call, and a pricing breakdown by call
destination. Optional calling pattern reports, which are
available at no extra cost, include call summaries by account
code, area or city code, LATA (for U.S. bound calls),
international destination and time-of-day. This information is
available to customers in the form of hard copy, magnetic tape or
disk.
In the U.S., the Company is conducting feasibility studies
to identify the market potential and regulatory environment for
offering additional services, including video conferencing,
paging, international call back, facsimile and frame relay
services, and expects to introduce broader Internet access,
enhanced travel cards and video conferencing in 1997. In Canada,
the Company plans to provide paging services and expand frame
relay services in 1997. In the U.K., the Company is also
considering additional service offerings, including
teleconferencing, voice mail, calling cards, call-back and smart
card services and plans to introduce Internet access and prepaid
calling cards in 1997.
University Program. The Company's university program offers
a variety of telecommunications services to educational
institutions ranging from long distance service for
administration and faculty, to integrated on-campus services,
including local and long distance service, voice mail, intercom
calling and operator services for students, administrators and
faculty. The Company's sales, marketing and engineering
professionals work directly with college and university
administrators to design and implement integrated solutions for
providing and managing telecommunications equipment and services
to meet the current and prospective communications needs of their
institutions. As part of its program, the Company often installs
telecommunications equipment which, depending upon the
circumstances, may include a switch or private branch exchange,
voice mail, cabling and, in the U.K., pay telephones. Pay phone
usage in the U.K., particularly at universities, is more
prevalent than in the U.S. and Canada. To access this market
directly, the Company has established a pay phone division in the
U.K., which supplies pay phones that will automatically route
calls from universities and other institutions over ACC U.K.'s
network.
The Company's long distance rates in the U.S. for students
generally are priced at a 10% discount from those charged by the
largest long distance carriers. The contracts in the U.S.
typically provide the Company with a right of first refusal to
provide the institution with any desired additional
telecommunications services or enhancements (based on market
prices) during the term of the contract. The Company's
university contracts in Canada generally provide it with the
exclusive right, and in the U.K. the opportunity, to market to
the school's students, faculty and administration. Most of the
Company's contracts in Canada also provide for exclusive
university support for marketing to alumni. These arrangements
allow the Company to market its services to these groups through
its affinity programs.
The Company offers university customers in the U.S., Canada
and the U.K. certain customized services. The Company offers
academic institutions a comprehensive billing package to assist
them in reviewing and controlling their telecommunications costs.
For its university student customers in the U.S. and Canada, the
Company provides a billing format that indicates during each
statement period the savings per call (in terms of the discount
from the largest long distance carrier's rates) realized during
the billing period, and for all university customers the Company
provides a call detail report recording every long distance call.
In addition, for university student customers, the Company
provides individual bills for each user of the same telephone in
a dormitory room or suite so that each student in the dormitory
room or suite can be billed for the calls he or she made.
Many of the Company's university customers in the U.S. are
offered operator services, which are available 24 hours per day,
seven days per week. The Company also offers its U.S. university
customers its "Travel Service Elite" domestic calling card. In
addition, the Company sells a prepaid calling card in the U.S.,
which allows customers to prepay for a predetermined number of
"units" representing long distance minutes. The rate at which
the units are used is determined by the destination of the calls
made by the customer.
The Company's sales group targets university customers in
the U.S., Canada and in the U.K. In the U.S. university market,
the Company generally targets small to medium size universities
and colleges with full time enrollments in the range of 1,000 to
5,000 students. In Canada, the Company has been able to
establish relationships with several large universities. The
Company believes that, while its marketing approach in Canada is
similar to that in the U.S., its nationwide presence in Canada
assists it in marketing to larger academic institutions. In the
U.K., the Company has been able to establish long-term
relationships with several large universities. The Company
believes that, while its marketing approach in the U.K. is
similar to that in the U.S., it is able to access larger
educational institutions because of its nationwide presence and
because transmission facilities-based carriers have not focused
on this market. The Company believes that competition in the
university market is based on price, as well as the marketing of
unique programs and customizing of telecommunications services to
the needs of the particular institution and that its ability to
adapt to customer needs has enhanced its development of
relationships with universities.
Residential Long Distance Services. The Company offers its
residential customers in the U.S. and Canada a variety of long
distance service plans and is currently offering and developing
similar plans for its residential customers in the U.K. In the
U.S., the Company's "Save Plus" program provides customers with
competitively priced long distance service. In addition, U.S.
customers are provided with a "Phone Home" long distance service
through which, by dialing an 800 number plus an access code,
callers can call home at competitive rates. In general, the
Company's residential services are priced below AT&T's premium
rates for similar services. In Canada, the Company offers three
different residential service plans. The basic offering is a
discount plan, with call pricing discounted from the Stentor
companies' tariffed rates for similar services depending on the
time of day and day of the week. The Company also offers its
"Sunset Savings Plan," which allows calling across Canada and to
the continental U.S. at a flat rate per minute. In the Toronto
metropolitan area, the Company offers "Extended Metro Toronto"
calling, which provides flat rate calling within areas adjacent
to Toronto that are long distance from each other. Customized
billing services are also offered to the Company's U.S. and
Canadian residential customers. In the U.K., all residential
customers use the Company's ACCess 1601 service, which provides
savings off the standard rates charged for residential service by
British Telecom or Mercury, but requires the customer to dial a
four digit access code before dialing the area code and number.
International Long Distance Services. The Company offers
international products and services to both its existing customer
base and to potential customers in the U.S., Canada and the U.K.
The Company's international simple resale licenses (the "ISR
Licenses") allow the Company to resell international long
distance service on leased international circuits connected to
the PSTN at both ends between the U.S. and Canada, the U.S. and
the U.K., Canada and the U.K., and, subject to certain safeguards
on non-competitive routes, all other countries and territories.
The Company believes it can compete effectively for international
traffic due to the ISR Licenses it has obtained for traffic
between the U.S., Canada and the U.K. which allow it to price its
services at cost-based rates that are lower than the
international settlement-based rates that would otherwise apply
to such traffic. However, numerous other carriers also have
international simple resale licenses. The Company has leased
fixed cost facilities between these countries and is developing
services for customers with high volumes of traffic between and
among the U.S., Canada and the U.K. In December 1996, ACC U.K.
was awarded an International Facilities License, and expects to
receive a Public Telecommunications Operator license, which
licenses will enable the Company to build and operate a microwave
network in the U.K. and to use the U.K. as a regional hub for
international telecommunications traffic.
Local Exchange Services. Building on its experience in
providing local telephone service to various university
customers, the Company took advantage of regulatory developments
in New York State and in 1994 began offering local telephone
service to commercial customers in upstate New York. As a result
of its August 1995 acquisition of Metrowide Communications, the
Company provides local telephone service as a reseller in
Ontario, Canada, and began providing such service in Quebec in
1996. The Company believes that it can strengthen its
relationships with existing commercial, university and college
and residential customers in New York State and Canada and can
attract new customers by offering them local and long distance
services, thereby providing a single source for comprehensive
telecommunications services. Providing local telephone service
may enable the Company to serve new local exchange customers even
if they are already under contract with a different interexchange
carrier for long distance service. Commencing in 1997, the
Company plans to expand its local telephone operations to New
York City, Albany and Buffalo, New York, and Boston and
Springfield, Massachusetts.
The Company has only limited experience in providing local
telephone services, having commenced providing such services in
1994. In order to attract local customers, the Company must
offer substantial discounts from the prices charged by local
exchange carriers and must compete with other alternative local
companies that offer such discounts. Larger, better capitalized
alternative local providers, including AT&T, among others, will
be better able to sustain losses associated with discount pricing
and initial investments and expenses. The local telephone
service business requires significant initial investments and
expenses in capital equipment, as well as significant initial
promotional and selling expenses. There can be no assurance that
the Company will be able to lease transmission facilities from
local exchange carriers at wholesale rates that will allow the
Company to compete effectively with the local exchange carriers
or other alternative providers or that the Company will generate
positive operating margins or attain profitability in its local
telephone service business.
Sales and Marketing
The Company markets its services in the U.S., Canada and the
U.K. through a variety of channels, including ACC's internal
sales forces, independent sales agents, co-marketing arrangements
and affinity programs, as described below. The Company has a
total of approximately 130 internal sales personnel and
approximately 200 independent sales agents serving its U.S.,
Canadian and U.K. markets. Although it has not experienced
significant turnover in recent periods, a loss of a significant
number of independent sales agents could have a significant
adverse effect on the Company's ability to generate additional
revenue. The Company maintains a number of sales offices in the
Northeastern U.S., Canada, and in London, Manchester and
Cambridge, England. In addition, with respect to its university
and student customers in each country, the Company has designated
representatives to assist in customer enrollment, dissemination
of marketing information, complaint resolution and, in some
cases, collection of customer payments, with representatives
located on some campuses. The Company actively seeks new
opportunities for business alliances in the form of affinity
programs and co-marketing arrangements to provide access to
alternative distribution channels.
During each of the last three years, no customer accounted
for 10% or more of the Company's total revenue.
United States. The Company markets its services in the U.S.
through ACC's internal sales personnel and independent sales
agents as well as through attendance and representation at
significant trade association meetings and industry conferences
of target customer groups. The Company's sales and marketing
efforts in the U.S. are targeted primarily at business customers
with $500 to $15,000 of monthly usage, selected residential
customers and universities and colleges. The Company also
markets its services to other resellers and rebillers. The
Company plans to leverage its market base in New York and
Massachusetts into other New England states and Pennsylvania and
to eventually extend its marketing focus in other states. ACC
has obtained authorization to originate long distance voice
services in 45 states.
Canada. The Company markets its long distance services in
Canada through internal sales personnel and independent sales
agents, co-marketing arrangements and affinity programs. The
Company focuses its direct selling efforts on medium-sized and
large business customers. The Company also markets its services
to other resellers and rebillers. The Company uses independent
sales agents to target small to medium-sized business and
residential customers throughout Canada. These independent sales
agents market the Company's services under contracts that
generally provide for the payment of commissions based on the
revenue generated from new customers obtained by the
representative. The use of an independent agent network allows
the Company to expand into additional markets without incurring
the significant initial costs associated with a direct sales
force.
In addition to marketing its residential services in Canada
through independent sales agents, the Company has developed
several affinity programs designed to attract residential
customers within specific target groups, such as clubs, alumni
groups and buying groups. The use of affinity programs allows
the Company to target groups with a nationwide presence without
engaging in costly nationwide advertising campaigns. For
example, ACC Canada has established affinity programs with such
groups as the Home Service Club of Canada, the University of
Toronto and McGill and Western Universities. In addition, the
Company has developed a co-marketing arrangement with Hudson's
Bay Company (a large Canadian retailer) through which the
Company's telecommunications services are marketed under the name
"The Bay Long Distance Program."
United Kingdom. In the U.K., the Company markets its
services to business and residential customers, as well as other
telecommunications resellers, through a multichannel distribution
plan including its internal sales force, independent sales
agents, co-marketing arrangements and affinity programs.
The Company generally utilizes its internal sales force in
the U.K. to target medium and large business customers, a number
of which have enough volume to warrant a direct access line to
the Company's switch, thereby bypassing the PSTN. The Company
markets its services to small and medium-sized businesses through
independent sales agents. Telemarketers also are used to market
services to small business customers and residential customers
and to generate leads for the other members of the Company's
internal sales force and independent sales agents. ACC U.K. has
established an internal marketing group that is focused on
selling its service to other telecommunications resellers in the
U.K. and certain European countries on a wholesale basis. ACC
U.K. has entered into co-marketing arrangements with utilities,
university alumni groups and other organizations.
Network
In the U.S., Canada and the U.K., the Company utilizes a
network of lines leased under volume discount contracts with
transmission facilities-based carriers, much of which is fiber
optic cable. To maximize efficient utilization, the Company's
network in each country is configured with two-way transmission
capability that combines over the same network the delivery of
both incoming and outgoing calls to and from the Company's
switches. The selection of any particular circuit for the
transmission of a call is controlled by routing software, located
in the switches, that is designed to cause the most efficient use
of the Company's network. The Company evaluates opportunities to
install switches in selected markets where the volume of its
customer traffic makes such an investment economically viable.
Utilization of the Company's switches allows ACC to route
customer calls over multiple networks to reduce costs. As of
December 31, 1996, the Company operated switches for its call
traffic in eight locations and maintained 19 additional points of
presence ("POPs") in the U.S., Canada and the U.K.
Some of the Company's contracts with transmission facilities-
based carriers contain under-utilization provisions. These
provisions require the Company to pay fees to the transmission
facilities-based carriers if the Company does not meet minimum
periodic usage requirements. The Company has not been assessed
with any underutilization charges in the past. However, there
can be no assurance that such charges would not be assessed in
the future. Other resellers generally contract with the Company
on a month-to-month basis, select the Company almost exclusively
on the basis of price and are likely to terminate their
arrangements with the Company if they can obtain better pricing
terms elsewhere. The Company uses projected sales to other
resellers in evaluating the trade-offs between volume discounts
and minimum utilization rates it negotiates with transmission
facilities-based carriers. If sales to other resellers do not
meet the Company's projected levels, the Company could incur
underutilization charges and be placed at a disadvantage in
negotiating future volume discounts.
ACC generally utilizes redundant, highly automated advanced
telecommunications equipment in its network and has diverse
alternate routes available in cases of component or facility
failure. Automatic traffic re-routing enables the Company to
provide a high level of reliability for its customers.
Computerized automatic network monitoring equipment facilitates
fast and accurate analysis and resolution of network problems.
The Company provides customer service and support, 24-hour
network monitoring, trouble reporting and response, service
implementation coordination, billing assistance and problem
resolution.
In the U.S., the Company maintains two long distance
switches, one local exchange switch and nine additional points of
presence. The Company plans to install local exchange switches
in New York City, Albany and Buffalo, New York and Boston and
Springfield, Massachusetts during 1997. These switches and POPs
provide an interface with the PSTN to service the Company's
customers. Lines leased from transmission facilities-based
carriers link the Company's U.S. POPs to its switches. ACC U.S.
maintains a leased, direct trans-Atlantic link with ACC U.K. that
it established in 1994 following the Company's receipt of its ISR
License for U.K.-U.S. calls and international private line resale
authority in the U.S. The Company is currently negotiating with
Mercury for the purchase of an indefeasible rights utilization
with respect to such trans-Atlantic link to the U.K. The Company
believes that the purchase of such rights will enable it to
reduce network costs.
In Canada, the Company maintains switches in Toronto,
Montreal and Vancouver, together with seven POPs to provide an
interface with the Canadian PSTN. The Company also maintains
frame relay nodes for switched data in Toronto, Montreal,
Vancouver and Calgary. The Company uses transmission lines
leased from transmission facilities-based carriers to link its
Canadian POPs to its switches. This network is also linked with
the Company's switches in the U.S. and the U.K. ACC Canada also
maintains a leased, direct trans-Atlantic link with ACC U.K. that
it established following the grant to ACC U.K. of its ISR
License. This transmission line enables ACC Canada to send
traffic to the U.K. at rates below those charged by Teleglobe
Canada ("Teleglobe Canada"), the exclusive Canadian transmission
facilities-based carrier for international calls, other than
those to and from the U.S. and Mexico.
In the U.K., the Company maintains switches in London and
Manchester, England, and plans to install an additional switch in
Bristol, England during 1997. ACC U.K. maintains three
additional POPs providing interfaces with the PSTN in the U.K.,
which are linked to its switches through transmission lines
leased from the major transmission facilities-based carriers.
This network is also linked with the Company's switches in the
U.S. and Canada. Customers can access the Company's U.K. network
through direct access lines or by dial-up access using auto
dialing equipment, indirect access code dialing or least cost
routing software integrated in the customer's telephone
equipment. In December 1996, ACC U.K. was awarded an
International Facilities License, and expects to receive a Public
Telecommunications Operator license, which licenses will enable
the Company to build and operate a microwave network in the U.K.
and to use the U.K. as a regional hub for international
telecommunications traffic.
Network costs are the single largest expense incurred by the
Company. The Company strives to control its network costs and
its dependence on other carriers by leasing transmission lines on
an economical basis. The Company is also considering ownership
of certain transmission facilities as a means of reducing its
network costs. The Company has negotiated leases of private line
circuits with carriers that operate fiber optic transmission
systems at rates independent of usage, particularly on routes
over which ACC carries high volumes of calls such as between the
U.S., Canada and the U.K. The Company attempts to maximize the
efficient utilization of its network in the U.S., Canada and the
U.K. by marketing to commercial and academic institution
customers, who tend to use its services most frequently on
weekdays during normal business hours, and residential and
student customers, who use these services most often during night
and weekend off-peak hours.
Information Systems
The Company believes that maintaining sophisticated and
reliable billing and customer services information systems that
integrate billing, accounts receivable and customer support is a
core capability necessary to record and process the data
generated by a telecommunications service provider. While the
Company believes its management information system is currently
adequate, it has not grown as quickly as the Company's business
and substantial investments are needed. The Company is
developing and implementing new systems designed to (i) enhance
the Company's ability to monitor and respond to the evolving
needs of its customers by developing new and customized services,
(ii) improve least-cost routing of traffic on ACC's international
network, (iii) provide sophisticated billing information that can
be tailored to meet the requirements of its customer base,
(iv) provide high quality customer service, (v) detect and
minimize fraud, (vi) verify payables to suppliers of
telecommunications transmission facilities and (vii) integrate
additions to its customer base. A variety of problems are often
encountered in connection with the implementation of new
information systems. There can be no assurance that the Company
will not suffer adverse consequences or cost overruns in the
implementation of the new information systems or that the new
systems will be appropriate for the Company. See the Risk Factor
discussion of "Dependence on Effective Information Systems" in
this Item 1 below.
Competition
The telecommunications industry is highly competitive and is
significantly influenced by the marketing and pricing decisions
of the larger industry participants. In each of its markets, the
Company competes primarily on the basis of price and also on the
basis of customer service and its ability to provide a broad
array of telecommunications services. The industry has
relatively insignificant barriers to entry, numerous entities
competing for the same customers and a high average churn rate,
as customers frequently change long distance providers in
response to the offering of lower rates or promotional incentives
by competitors. Although many of the Company's customers are
under multi-year contracts, several of the Company's largest
customers (primarily other long distance carriers) are on month-
to-month contracts and are particularly price sensitive.
Revenues from other resellers accounted for approximately 42%,
12% and 24% of the revenues of ACC U.S., ACC Canada and ACC U.K.,
respectively, in 1996. With respect to these customers, the
Company competes almost exclusively on price and does not have
long term contracts. The industry has experienced and will
continue to experience rapid regulatory and technological change.
Many competitors in each of the Company's markets are
significantly larger than the Company, have substantially greater
resources than the Company, control transmission lines and larger
networks than the Company and have longstanding relationships
with the Company's target customers. There can be no assurance
that the Company will remain competitive in this environment.
Regulatory trends have had, and may have in the future,
significant effects on competition in the industry. As the
Company expands its geographic coverage, it will encounter
increased competition. Moreover, the Company believes that
competition in non-U.S. markets is likely to increase and become
more like competition in the U.S. markets over time as such non-
U.S. markets continue to experience deregulatory influences. See
the Risk Factor discussions of "Potential Adverse Effects of
Regulation" and "Increasing Domestic and International
Competition" and the discussion of "Regulation" all in this
Item 1 below.
Competition in the long distance industry is based upon
pricing, customer service, network quality, value-added services
and customer relationships. The success of a non-transmission
facilities-based carrier such as the Company depends largely upon
the amount of traffic that it can commit to the transmission
facilities-based carrier and the resulting volume discount it can
obtain. Subject to contract restrictions and customer brand
loyalty, resellers like the Company may competitively bid their
traffic among other national long distance carriers to gain
improvement in the cost of service. The relationship between
resellers and the larger transmission facilities-based carriers
is twofold. First, a reseller is a customer of the services
provided by the transmission facilities-based carriers, and that
customer relationship is predicated primarily upon the pricing
strategies of the first tier companies. The reseller and the
transmission facilities-based carriers are also competitors. The
reseller will attract customers to the extent that its pricing
for customers is generally more favorable than the pricing
offered the same size customers by larger transmission facilities-
based carriers. However, transmission facilities-based carriers
have been aggressive in developing discount plans which have had
the effect of reducing the rates they charge to customers whose
business is sought by the reseller. Thus, the business success
of a reseller is significantly tied to the pricing policies
established by the larger transmission facilities-based carriers.
There can be no assurance that favorable pricing policies will be
continued by those larger transmission facilities-based carriers.
United States. In the U.S., the Company is authorized to
originate long distance service in 45 states (although it
currently derives most of its U.S. revenues principally from
calls originated in New York and Massachusetts). The Company
competes for customers, transmission facilities and capital
resources with numerous long distance telecommunications carriers
and/or resellers, some of which are substantially larger, have
substantially greater financial, technical and marketing
resources, and own or lease larger transmission systems than the
Company. AT&T is the largest supplier of long distance services
in the U.S. inter-LATA market. The Company also competes within
its U.S. call origination areas with other national long distance
telephone carriers, such as MCI, Sprint and regional companies
which resell transmission services. RBOCs from outside Nynex
Corp.'s region, including Southwest Bell, have, under the
authority contained in the 1996 Act, begun to offer long distance
services in Nynex Corp.'s region. In the intra-LATA market, the
Company also competes with the local exchange carriers servicing
those areas. In its local service areas in New York State, the
Company presently competes or in the future will compete with New
York Telephone Company ("New York Telephone"), Frontier Corp.,
AT&T, Citizens Telephone Co., WorldCom and with cellular and
other wireless carriers. These local exchange carriers all have
long-standing relationships with their customers and have
financial, personnel and technical resources substantially
greater than those of the Company. Furthermore, joint ventures
such as those 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, called Global One, the proposed merger of Cable Wireless
PLC and Global One, the recently announced merger of British
Telecom and MCI, and other strategic alliances could increase
competitive pressures upon the Company. The pending merger
between Nynex Corp. and Bell Atlantic is likely to strengthen the
financial resources of the new, combined company, and its
integrated networks may enhance its ability to offer long
distance services in the combined Nynex Corp./Bell Atlantic
region.
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 the 1996 Act, RBOCs will
be allowed to enter the long distance market upon a showing that
certain conditions related to competition have been met, and
AT&T, MCI and other long distance carriers, utilities and cable
television companies will be allowed to enter the
telecommunications market. In addition, the FCC has, on several
occasions since 1984, approved or required price reductions by
AT&T and, in 1995 and 1996, the FCC reclassified AT&T as a "non-
dominant"carrier for domestic and international long distance
services, which substantially reduces the regulatory constraints
on AT&T. In the recently-completed World Trade Organization
talks, the U.S. committed to allowing foreign carriers heretofore
prohibited from competing in U.S. markets, to enter the U.S.
local, long distance, and international markets. Although the
ability of large foreign carriers to compete in the U.S. market
will depend upon how the FCC implements this commitment, the WTO
accord will likely increase the level of competition in the U.S.
local, long distance, and international markets. The Company
believes that the principal competitive factors affecting its
market share in the U.S. are pricing, customer service and
variety of services. By offering high quality telecommunications
services at competitive prices and by offering a portfolio of
value-added services including customized billing packages, call
management and call reporting services, together with
personalized customer service and support, the Company believes
that it competes effectively with other local and long distance
telephone carriers and resellers in its service areas. The
Company's ability to continue to compete effectively will depend
on its continued ability to maintain high quality, market-driven
services at prices generally below those charged by its
competitors.
Canada. In Canada, the Company competes with facilities-
based carriers, other resellers and rebillers. The Company's
principal transmission facilities-based competitors are the
Stentor group of companies, in particular, Bell Canada, the
dominant suppliers of long distance services in Canada, AT&T
Canada, which provides certain facilities-based and long distance
services to business and residential customers, and Sprint Canada
and fONOROLA Inc., which provide certain transmission facilities-
based services and also act as reseller of telecommunications
services. The Company also competes against CamNet, Inc., a
reseller of telecommunications services. The Company believes
that, for some of its customers and potential customers, it has a
competitive advantage over other Canadian resellers as a result
of its operations in the U.S. and the U.K. In particular, the
trans-Atlantic link that it established in June 1993 between the
U.K. and Canada allows ACC Canada to sell traffic to the U.K.
with a significantly lower cost structure than many other
resellers.
United Kingdom. In the U.K. the Company competes with
facilities-based carriers and other resellers. The Company's
principal competitors in the U.K. are British Telecom, the
dominant supplier of telecommunications services in the U.K., and
Mercury. The Company also faces competition from emerging
licensed public telephone operators (who are constructing their
own facilities-based networks) such as Energis and WorldCom, and
from other resellers including Esprit and Sprint. The Company
believes its services are competitive, in terms of price and
quality, with the service offerings of its U.K. competitors
primarily because of its advanced network-related hardware and
software systems and the network configuration and traffic
management expertise employed by it in the U.K.
Regulation
United States
The services which the Company's U.S. operating subsidiaries
provide are subject to varying degrees of federal, state and
local regulation. The FCC exercises jurisdiction over all
facilities of, and services offered by, telecommunications common
carriers to the extent that they involve the provision,
origination or termination of jurisdictionally interstate or
international communications. The state regulatory commissions
retain jurisdiction over the same facilities and services to the
extent they involve origination or termination of
jurisdictionally intrastate communications. In addition, many
regulations may be subject to judicial review, the result of
which the Company is unable to predict.
Telecommunications Act of 1996 and the FCC's Interconnection
Orders. The 1996 Act is intended to introduce increased
competition in U.S. telecommunication markets. It opens the
local services market by requiring local exchange carriers to
permit interconnection to their networks and by establishing
local exchange carrier obligations with respect to unbundled
access, resale, number portability, dialing parity, access to
rights-of-way, mutual compensation and other matters. In
addition, the 1996 Act codifies the local exchange carriers'
equal access and nondiscrimination obligations and preempts
inconsistent state regulation. The legislation also contains
special provisions that eliminate the AT&T Divestiture Decree
(the "AT&T Divestiture Decree") (and similar antitrust
restrictions on the GTE Operating Companies) which restricts the
RBOCs from providing long distance services. These new
provisions permit an RBOC to enter the "out-of-region" long
distance market immediately and the "in-region" long distance
market if it satisfies several procedural and substantive
requirements, including showing that facilities-based competition
is present in its market and that it has entered into
interconnection agreements which satisfy a 14-point "checklist"
of competitive requirements. The Company is likely to face
significant additional competition from several companies,
including from Nynex Corp., the RBOC in the Company's
Northeastern U.S. service area, which may be among the first
RBOCs permitted to offer in-region long distance services. The
pending merger between Nynex Corp. and Bell Atlantic is likely to
strengthen the financial resources and competitive capabilities
of the new, combined company. The 1996 Act provides for certain
safeguards to protect against anticompetitive abuse by the RBOCS,
but whether these safeguards will provide adequate protection to
alternative carriers, such as the Company, and the impact of
anticompetitive conduct if such conduct occurs, is unknown.
As required by the 1996 Act, in August 1996 the FCC adopted
new rules implementing certain provisions of the 1996 Act (the
"Interconnection Orders"). These rules are designed to implement
the pro-competitive, deregulatory national policy framework of
the new statute by removing or minimizing the regulatory,
economic and operational impediments to competition for
facilities-based and resold local services, including switched
local exchange service. Although setting minimum, uniform,
national rules, the Interconnection Orders also rely heavily on
states to apply these rules and to exercise their own discretion
in implementing a pro-competitive regime in their local telephone
markets.
Among other things, the Interconnection Orders establish
rules requiring incumbent LECs to interconnect with new entrants
such as the Company at specified network points; require
incumbent LECs to provide carriers nondiscriminatory access to
network elements on an unbundled basis at any technically
feasible point at rates that are just, reasonable and
nondiscriminatory; establish rules requiring incumbent LECs to
allow interconnection via physical and virtual collocation;
require the states to set prices for interconnection, unbundled
elements, and termination of local calls that are
nondiscriminatory and cost-based (using a forward looking
methodology which excludes embedded costs but allows a reasonable
cost-of-capital profit); require incumbent LECs to offer for
resale any telecommunication service that the carrier provides at
retail to end users at prices to be established by the states but
which generally are at retail prices minus reasonably avoided
costs; and require LECs and utilities to provide new entrants
with nondiscriminatory access to poles, ducts, conduit and rights
of way owned or controlled by LECs or utilities. Exemptions to
some of these rules are available to LECs which qualify as rural
LECs under the 1996 Act. The Interconnection Orders also require
that intraLATA presubscription (pursuant to which LECs must allow
customers to choose different carriers for intraLATA toll service
without having to dial extra digits) be implemented no later than
February 1999; that LECs provide new entrants with
nondiscriminatory access to directory assistance services,
directory listings, telephone numbers, and operator services; and
that LECs comply with certain network disclosure rules designed
to ensure interoperability of multiple local switched networks.
Petitions seeking reconsideration of one or more aspects of
the Interconnection Orders have been filed with the FCC and are
pending. Also, the Interconnection Orders have been appealed to
various U.S. Court of Appeals which appeals have been
consolidated into proceedings currently pending before the U.S.
Eighth Circuit Court of Appeals. Certain of the rules adopted in
the Interconnection Orders, including rules that concern the
pricing of interconnection, have been stayed by the Court.
The 1996 Act provided the FCC with expansive authority to
effectively deregulate the local and long distance markets.
Specifically, the FCC was provided authority to forebear from
regulating, in whole or in part, carriers where the FCC
determines to that such forbearance is consistent with the public
interest. As a result, the FCC has engaged in a number of
additional rulemakings designed to effectively transition to the
increasingly deregulated local and long distance markets. Two of
the most prominent proceedings involved universal service and
access charge reform. Others are anticipated. There can be no
assurance of how the 1996 Act or the Interconnection Orders will
be implemented or enforced or to what effect they will have on
competition within the telecommunications industry generally or
on the competitive position of the Company.
Federal. The FCC has classified ACC U.S. as a non-dominant
interexchange carrier. Generally, the FCC has chosen not to
exercise its statutory power to closely regulate the charges or
practices of non-dominant carriers. Nevertheless, the FCC acts
upon complaints against such carriers for failure to comply with
statutory obligations or with the FCC's rules, regulations and
policies. The FCC also has the power to impose more stringent
regulatory requirements on the Company and to change its
regulatory classification. The Company believes that, in the
current regulatory environment, the FCC is unlikely to do so.
Until October 1995, AT&T was classified as a dominant
carrier but AT&T successfully petitioned the FCC for non-dominant
status in the domestic interstate and interexchange market.
Therefore, certain pricing restrictions that once applied to AT&T
have been eliminated, which could result in increased prices for
services the Company purchases from AT&T and more competitive
retail prices offered by AT&T to customers. However, to date,
the Company has not found rate changes attributable to the price
cap regulation of AT&T and the local exchange carriers to have
substantially adversely affected its business. In 1996, AT&T was
re-classified as a non-dominant carrier for international
services.
Carriers such as the Company have traditionally been
required to file tariffs with the FCC containing the rates, terms
and conditions of interstate service. Recently that has changed,
and following a transition period, which is currently scheduled
to conclude in November 1997, non-dominant carriers will no
longer be able to file tariffs with the FCC concerning their long
distance services. Such carriers will, however, be required to
maintain at their offices, and to provide to customers or
regulators upon request, information concerning their long
distance services. The FCC order eliminating tariffs has been
appealed to the U.S. Court of Appeals for the District of
Columbia. That appeal is pending. A motion requesting stay of
the FCC's detariffing order has been filed with the court. It
argued that tariffing establishes a legal binding relationship
between carriers and customers, and that detariffing eliminates
certainty with regard to those legal relationships. It also
argued that detariffing imposes costs upon carriers because
carriers will need to enter into alternative forms of legally
binding relationships with customers. That motion was granted in
February 1997. Therefore, carriers such as the Company must
continue to tariff interstate services until the appeal is
concluded or the stay is lifted. There can be no assurance of
whether the appeal will be successful, or if successful, what
effect it may have on the Company. However if detariffing
ultimately takes effect, the Company, like other long distance
companies, would likely incur some additional costs in
establishing legally binding relationships with customers.
In contrast to these recent developments affecting domestic
long distance service, the Company's U.S. subsidiaries have long
been subject to certification and tariff filing requirements for
all international operations. The Company's U.S. subsidiaries'
international rates are not subject to either rate-of-return or
price cap regulation. The Company must seek separate
certification authority from the FCC to provide private line or
switched services or to resell private line services between the
U.S. and any foreign country. The Company's ACC Global Corp.
subsidiary has received authority from the FCC to resell private
lines for switched services between the U.S. and Canada, and was
the first entity to file to obtain such authority between the
U.S. and the United Kingdom, which it received in September 1994.
The Company has sought authority to resell private lines on a
switched service basis between the U.S. and other countries.
Under recently adopted FCC policies and under proposals to
implement the WTO agreement, it may become easier, from a
regulatory perspective, to obtain such authority for additional
markets. The FCC has granted the Company global resale and
facilities-based authority.
Among domestic local carriers, only the incumbent local
exchange carriers are currently classified as dominant carriers.
Thus, the FCC regulates many of the local exchange carriers'
rates, charges and services to a greater degree than the
Company's, although FCC regulation of the local exchange carriers
is expected to decrease over time, particularly in light of
recent U.S. legislation.
The 1996 Act mandated several important federal regulatory
developments. The first concerns universal services. As
required by the 1996 Act, a joint board of federal and state
regulators was convened to consider possible changes to the FCC's
existing universal service support mechanisms -- mechanisms
designed to ensure affordable telephone service is available to
all consumers, including low-income consumers -- in light of the
procompetitive paradigm for local competition established by the
1996 Act. In November 1996 the FCC initiated a proceeding to
examine universal service issues, and has received comment on the
proposals set forth by the joint board. Any decision is expected
to comply with the policy principles for preservation and
advancement of universal telephone service set forth in the 1996
Act: quality service, affordable rates, access to advanced
services, access to service in rural and high-cost areas,
specific and predictable support mechanisms, equitable and non-
discriminatory contribution to support mechanisms, and access to
advanced telecommunications for schools, health care providers
and libraries. An initial decision is expected in May 1997.
An issue that may affect the Company is access charge
reform. Access charges are charges imposed by LECs on long
distance providers for access to the local exchange network, and
were designed to compensate the LEC for its investment in the
local network. In addition to economic considerations, when
adopted in 1984 at the time AT&T was divested from the RBOCs,
access charge rates reflected public policy considerations
related to universal service and the desirability of low local
rates. Interstate access charges are regulated by the FCC and
intrastate access charges are regulated by the state public
service commissions. As required by the 1996 Act, in December
1996 the FCC issued an order which, among other things, requests
comment on a number of access charge reform issues designed to
foster efficient pricing of access, competition for access
services, and to reflect the development for local services
prompted by the 1996 Act. The FCC has also sought comment on
whether Internet service providers and other information service
providers should be subject to access charges. An initial
decision is expected in May 1997.
There can be no assurance of how the 1996 Act will be
implemented or enforced or to what affect it or implementing
regulations will have on competition within the
telecommunications industry generally or on the competitive
position of the Company.
In addition to its status as an access customer, the Company
is now an access provider in connection with its provision of
local telephone service in upstate New York and Massachusetts.
Under the 1996 Act, the Company may become subject to many of the
same obligations to which the RBOCs and other telecommunications
providers are subject in their provision of local exchange
services, such as resale, dialing parity and reciprocal
compensation.
State
The Company's intrastate long distance operations are
subject to various state laws and regulations including, in most
jurisdictions, certification and tariff filing requirements. The
Company provides long distance service in all or some portion of
40 states and has received the necessary certificate and tariff
approvals to provide intrastate long distance service in
45 states. All states today allow some form of intrastate
telecommunications competition. However, some states restrict or
condition the offering of intrastate/intra-LATA long distance
services by the Company and other interexchange carriers. In the
majority of those states that do permit interexchange carriers to
offer intra-LATA services, customers desiring to access those
services are generally required to dial special access codes,
which puts the Company at a disadvantage relative to the local
exchange carrier's intrastate long distance service, which
generally requires no such access code dialing. Increasingly,
states are reexamining this policy and some states, such as New
York, have ordered that this disadvantage be removed. The 1996
Act requires local exchange companies to adopt "intra-LATA equal
access" as a pre-condition for the local exchange carriers
entering into the inter-LATA long distance business and
intra-LATA access must be implemented by no later than 1999.
Accordingly, it is expected that the dialing disparity for intra-
LATA toll calls will be removed in the future. With regard to
New York, the Company's largest U.S. market, intra-LATA equal
access is currently being implemented for over 90% of its New
York State subscribers. Implementation in other states may take
longer. Relevant state public service commissions ("PSCs") also
regulate access charges and other pricing for telecommunications
services within each state. The New York State PSC ("NYPSC") has
recently initiated a proceeding to examine intrastate access
charges. The RBOCs and other local exchange carriers have been
seeking reduction of state regulatory requirements, including
greater pricing flexibility. This could adversely affect the
Company in several ways. The regulated prices for intrastate
access charges that the Company must pay could increase both
relative to the charges paid by the largest interexchange
carriers, such as AT&T, and in absolute terms as well.
Additionally, the Company could face increased price competition
from the RBOCs and other local exchange carriers for intra-LATA
long distance services, which may also be increased by the
removal of former restrictions on long distance service offerings
by the RBOCs as a result of recently enacted legislation.
New York State Regulation of Long Distance Service.
Beginning in 1992, the NYSPSC commenced several proceedings to
investigate the manner in which local exchange carriers should be
regulated. In July 1995, the NYPSC ordered the acceptance of a
Performance Regulation Plan for New York Telephone. The terms of
the plan, as ordered, included: (i) a limitation on increases in
basic local rates for the 5-year term of the plan,
(ii) implementation of intra-LATA equal access by no later than
March 1996, (iii) reductions in the intrastate inter-LATA equal
access charges which the Company and other interexchange carriers
pay over the next five years totaling 33%, (iv) reductions in the
intra-LATA toll rates charged to the end user customer over the
next five years totaling 21%, and (v) an intercarrier
compensation plan that reduced the rates paid by the competitive
local exchange carriers (including the Company's subsidiaries) by
one-half. New York Telephone does have some increased ability to
restructure rates and to request rate reductions, but all rate
changes are still subject to NYPSC approval. New York Telephone
is also required to meet various service quality measurements,
and will be subject to financial penalties for failure to meet
these objectives.
In a manner similar to the FCC, the NYPSC has adopted
revised rules governing the manner in which intrastate local
transport elements of access charges are to be priced. These
revisions accompanied its decision ordering local exchange
carriers to permit "collocation" for intrastate special access
and switched access transport services. In general, where CAPs
have established interconnections at the switches of individual
local exchange carriers, the local exchange carriers will be
given expanded authority to enter into individually negotiated
contracts with interexchange carriers for transport service. At
the same time, the access charges to other interexchange carriers
located at the same switching facilities generally will be
lowered. If insufficient competition is present at that
switching facility, the pre-existing intrastate "equal price per
unit of traffic" rule will remain in effect. While the presence
of switch interconnections may actually lower the price the
Company may pay for local transport services, the ability of
carriers that handle large traffic volumes, such as AT&T, to
negotiate flat rate direct transport charges may result in the
Company paying more per unit of traffic than its competitors for
local transport service. The NYPSC has also instituted a
proceeding to review the manner in which universal service and
other subsidized services are funded, and whether access charges
and inter-carrier compensation plans should be restructured.
New York State Regulation of Local Telephone Service. The
NYPSC has determined that it will allow competition in the
provision of local telephone service in New York State, including
"alternate access," private line services and local switched
services. The Company applied to the NYPSC for authority to
provide such services, and received certifications in early 1994
to offer these services. The NYPSC has also authorized resale of
local exchange services, which may allow significant market entry
by large toll carriers such as AT&T and MCI.
The Company's ability to offer competing local services
profitably will depend on a number of factors. For the Company
to compete effectively against New York Telephone, Frontier Corp.
and other local exchange carriers in the Company's upstate New
York service areas, it must be able to interconnect with the
network of local exchange carriers in the markets in which it
plans to offer local services, obtain direct telephone number
assignments and, in most cases, negotiate with those local
exchange carriers for certain services such as leased lines,
directory assistance and operator services on commercially
acceptable terms. The order issued in the New York Telephone
Performance Regulation Plan (described above) established prices
for interconnection and required New York Telephone to tariff
this service, making it generally available to all competitors,
including the Company. The actual monies paid by the Company to
New York Telephone for terminating the Company's traffic, and the
monies received by the Company from New York Telephone for
terminating New York Telephone traffic, are subject to NYPSC
regulation and will depend upon the Company's compliance with
certain service obligations imposed by the NYPSC, including the
obligation to serve residential customers. The rates will also
affect the Company's competitive position in the intra-LATA toll
market relative to the local exchange carrier and major
interexchange carriers such as AT&T and MCI, which may offer
intra-LATA toll services. The NYPSC has also issued orders
assuring local telephone service competitors access to number
resources, listing in the local exchange carrier's directory and
the right to reciprocal intercarrier compensation arrangements
with the local exchange carriers, and also establishing interim
rules under which competitive providers of local telephone
service are entitled to comparable access to and inclusion in
local telephone routing guides and access to the customer
information of other carriers necessary for billing or other
services. The Company has obtained number assignments in 12
upstate New York markets and has applications pending in
11 additional cities.
The NYPSC has also adopted interim rules that would subject
competitive providers of local telephone service to a number of
rules, service standards and requirements not previously
applicable to "nondominant" competitors such as the Company.
These rules include requirements involving "open network
architecture," provision of reasonable interconnection to
competitors, and compliance with the NYPSC's service quality
standards and consumer protection requirements. As part of its
"open network architecture" obligations, the Company could be
required to allow collocation with its local toll switch upon
receipt of a bona fide request by an interexchange carrier or
other carrier. Compliance with these rules in connection with
the Company's provision of local telephone service may impose new
and significant operating and administrative burdens on the
Company. This proceeding will also determine the
responsibilities of new local service providers with respect to
subsidies inherent in existing local exchange carrier rates.
Under the 1996 Act, incumbent local exchange companies such
as New York Telephone and Frontier must allow the resale of both
bundled local exchange services (known as "loops") as well as
unbundled local exchange "elements" (known as "links" and
"ports"). The NYPSC is currently conducting a proceeding to
establish rates for those services under pricing formulas set
forth in the new federal legislation. The Company generally
intends to provide local service through the resale of unbundled
links rather than through the resale of bundled loops.
Accordingly, the outcome of the NYPSC proceeding, including
decisions regarding the pricing of bundled loops and unbundled
links, could affect the Company's competitive standing as a local
service provider in relation to larger companies, such as AT&T
and MCI, which may initially enter the local service market
through resale of bundled loops.
Local Telephone Service in Massachusetts. The Massachusetts
Department of Public Utilities ("DPU") has initiated a docket
(currently in its briefing stages) to determine the format for
local competition in that state. The format appears to be
similar to the structure developing in New York State. Pending
the outcome of this proceeding, the DPU is allowing companies to
apply for certification as local exchange carriers and to begin
operations under interim agreements. The Company is in the
process of applying for certification.
The Company's ability to construct and operate competitive
local service networks for both local private line and switched
services will depend upon, among other things, implementation of
the structural market reforms discussed above, favorable
determinations with respect to obligations by the state and
federal regulators, and the satisfactory implementation of
interconnection with the local exchange carriers.
Canada
Long distance telecommunications services in Canada
generally are subject to regulation by the CRTC. As a result of
significant regulatory changes during the past several years, the
historical monopolies for long distance service granted to
regional telephone companies in Canada have been terminated.
This has resulted in a significant increase in competition in the
Canadian long distance telecommunications industry. Competition
is also emerging in many other segments of the market. However,
despite the very impressive competitive in-roads that have been
made in the long distance market, the Stentor companies continue
to have a virtual monopoly in the local and calling card markets.
In addition to the proceedings referred to below, the CRTC
continues to take steps toward increased competition, including
proceedings relating to the convergence between
telecommunications and broadcasting.
CRTC Decisions. In March 1990, the CRTC for the first time
permitted non-facilities-based carriers, such as ACC Canada, to
aggregate the traffic of customers on the same leased
interexchange circuits in order to provide discounted long
distance voice services in the provinces of Ontario, Quebec and
British Columbia. In September 1990, the CRTC also authorized
carriers in addition to members of the Stentor consortium to
interconnect their transmission facilities with the Message Toll
Service ("MTS") facilities of Teleglobe Canada, for the purpose
of allowing resellers, such as ACC Canada, to resell
international long distance MTS service. Prior to this decision,
Bell Canada and other members of Stentor were the exclusive long
distance carriers interconnected to Teleglobe Canada's MTS
facilities.
In December 1991, the CRTC permitted the resale on a joint-
use basis of the international private line services of Teleglobe
Canada to provide interconnected voice services. Resellers are
subject to charges levied by Teleglobe Canada for the use of its
facilities and contribution charges payable to Teleglobe Canada
and remitted to the telephone companies. In September 1993, the
CRTC allowed Teleglobe Canada to restructure its overseas MTS to
allow domestic service providers (including resellers) who commit
to a minimum level of usage to interconnect with Teleglobe
Canada's international network at its gateways for the purpose of
providing outbound direct-dial telephone service. Overseas
inbound traffic would be allocated to Stentor and other domestic
service providers (including resellers) in proportion to their
outbound market shares.
In February 1996, the CRTC introduced a regime of price
regulation for Teleglobe Canada's services to be in effect from
April 1996 to December 1999, barring any exceptional changes to
Teleglobe Canada's operating environment. Under this regime,
Teleglobe Canada must reduce prices on an annual basis for its
telephone and Globeaccess VPN Services, and must adhere to a
price ceiling for most of its regulated non-telephone services.
These rate reductions will have the effect of reducing the price
the Company can charge its customers. In February 1997, the
Canadian government committed under the recently-completed WTO
negotiations to terminate Teleglobe Canada's status as the
monopoly transmission facilities-based provider of
Canada-overseas telecommunications services by October 1, 1998.
In June 1992, the CRTC effectively removed the monopoly
rights of certain Stentor member companies with respect to the
provision of transmission facilities-based long distance voice
services in the territories in which they operate and opened the
provision of these services to substantial competition in all
provinces of Canada other than Alberta, Saskatchewan and
Manitoba. Competition has subsequently been introduced in
Alberta and Manitoba, which are subject to CRTC regulation, and
Saskatchewan, which has not yet become subject to CRTC
regulation. Among other things, the CRTC also directed the
telephone companies that were subject to this decision to provide
AT&T Canada (then named Unitel Communications Inc.) with "equal
ease of access," i.e., to allow it to directly connect its
network to the telephone companies' toll and end office switches
to allow its customers to make long distance calls without
dialing extra digits. In July 1993, the CRTC ordered the same
telephone companies to provide resellers with equal ease of
access upon payment of contribution, network modification and
ongoing access charges on the same general basis as for
transmission facilities-based carriers.
The CRTC also required telephone company competitors to
assume certain financial obligations, including the payment of
"contribution charges" designed to ensure that each long distance
carrier bears a fair proportion of the subsidy that long distance
services have traditionally contributed to the provision of local
telephone service. As a result, contribution charges payable by
resellers were increased. These charges are levied on resellers
as a monthly charge on leased access lines. The charges vary for
each telephone company based on that company's estimated loss on
local services. Contribution charges were reduced by a discount
which was initially 25%, and which declines over time to zero in
1998. Resellers whose access lines were connected only to end
offices on a non-equal access basis initially paid contribution
charges of 65% of the equal access contribution rates, rising
over a five-year period to an 85% rate thereafter. The CRTC also
established a mechanism under which contribution rates will be re-
examined on a yearly basis. In March 1995, the CRTC decreased
the contribution charges required to be paid by alternate long
distance service providers to the local telephone companies, and
made such decreases retroactive to January 1, 1994. Contribution
charges payable to Bell Canada were reduced by 23%, and those
payable to BC Tel by 13%.
Transmission facilities-based competitors and resellers that
obtained equal ease of access also assumed approximately 30% of
the estimated Cdn. $240 million cost required to modify the
telephone companies' networks to accommodate interconnection with
competitors as well as a portion of the ongoing costs of the
telephone companies to provide such interconnection. Initial
modification charges are spread over a period of 10 years. These
charges and costs are payable on the basis of a specified charge
per minute.
As contemplated in the CRTC's June 1992 decision, initial
implementation of single carrier 800 number portability occurred
in Canada in January 1994 and 800 number multi-carrier selection
capability was subsequently approved on an interim basis.
In September 1994, the CRTC established substantial changes
to Canadian telecommunications regulation, including:
(i) initiation of a program of rate rebalancing, which would
entail three annual increases of Cdn. $2 per month in rates for
local service, with corresponding decreases in rates for basic
toll service, and an indication from the CRTC that there would be
no price changes which would result in an overall price increase
for North American basic toll schedules combined; (ii) the
telephone companies' monopoly local and access services,
including charges for bottleneck services (i.e., essential
services which competitors are required to obtain from Stentor
members) provided to competitors (the Utility segment), would
remain in the regulated rate base, and the CRTC would replace
earnings regulation for the Utility segment with price caps
effective January 1, 1998; (iii) other services (the Competitive
segment) would not be subject to earnings regulation after
January 1, 1995, after which a Carrier Access Tariff would become
effective, which would include charges for contribution, start-up
cost recovery and bottleneck services and would be applicable to
the telephone companies' and competitors' traffic based on a per
minute calculation, rather than the per trunk basis previously
used to calculate contribution charges; (iv) while the CRTC
considered it premature to forbear from regulating interexchange
services, it considered that the framework set forth in the
decision may allow forbearance in the future (such forbearance
has subsequently occurred in the case of certain non-dominant
transmission facilities-based carriers and certain telephone
company services); (v) the CRTC concluded that barriers to entry
should be reduced for the local service market, including basic
local telephone service and switched network alternatives, and
has subsequently initiated proceedings to implement unbundled
tariffs, co-location of facilities and local number portability;
and (vi) the intention to consider applying contribution charges
to other services using switched access, not only to long
distance voice services.
Changes to these matters that were announced in October 1995
were the following: (i) rate rebalancing, with Cdn. $2 per month
local rate increases commencing in each of January 1996 and
January 1997 and another unspecified increase in 1998 (the
contribution component of the Carrier Access Tariff is to be
reduced correspondingly, but a corresponding reduction of basic
North American long distance rates ordered by the CRTC was
reversed by the Federal Cabinet in December 1995);
(ii) reductions in contribution charges effective January 1,
1995, with contribution charges payable to Bell Canada reduced
from 1994 levels by 16%, and those payable to BC Tel by 27%;
(iii) changes to the costing methodology of the telephone
companies including (a) the establishment of strict rules
governing telephone company investments in competitive services
involving broadband technology, (b) the requirement that the
Competitive segment pay its fair share of joint costs incurred by
both the Utility and Competitive segments, and (c) a directive
specifying that revenues for many unbundled items must be
allocated to the Utility segment thereby reducing the local
shortfall and therefore contribution charges; (iv) directory
operations of the telephone companies will continue to remain
integral to the Utility segment, meaning that revenues from
directory operations will continue to be assigned to the Utility
segment to help reduce the local shortfall and therefore
contribution payments; and (v) Stentor's request to increase the
allowed rate of return of the Utility segment was denied and the
CRTC restated its intention to retain the fifty basis point
downward adjustment to the total company rate of return used to
derive the Utility segment rates of return for the telephone
companies.
In December 1995, the CRTC announced that the per trunk
basis for calculating contribution charges would be replaced by a
per minute basis for calculating contribution charges starting
June 1, 1996. The off-peak contribution rate is one-half the
peak rate, with the peak rate applicable between 8 a.m. and 5
p.m., Monday through Friday.
In October 1996 the CRTC ended the Stentor monopoly over
access to swipe readers found on the latest generation of pay
telephones and ordered the telephone companies to file a tariff
that would provide competitors with swipe access. The CRTC
agreed that lack of swipe access for their calling cards is a
major disadvantage for the Company and other competitors.
However, the new swipe access tariff, originally scheduled to be
implemented in early 1997, has been delayed.
During 1996 the CRTC conducted extensive proceedings for
local network unbundling and number portability, which examined
the barriers to competition in the local telephony market. The
CRTC is expected to announce the rules for local competition some
time in 1997 for implementation in 1998.
In December 1996, in Telecom Decision CRTC 96-11, the CRTC
established 1996 contribution rates retroactive to January 1,
1996. The contribution rates were reduced by up to 42% from 1995
levels, depending on the province. The CRTC also ruled in
Telecom Decision CRTC 96-12, that effective July 1, 1997,
contribution on line-side connections would be changed from a per
circuit to a per minute basis. This is consistent with the
ruling in 1995 which implemented per minute contribution for
trunk-side connections.
In 1996 Stentor requested that the CRTC cease regulating the
Stentor companies for long distance services. The CRTC began a
public proceeding in 1996 to examine and establish the
preconditions for such deregulation. The Company and the other
members of the Competitive Telecommunications Alliance have
proposed a timetable for deregulating the long distance market.
This timetable calls for the implementation of local competition
so that competitors can bundle local and long distance services
and provide their own customers with one-stop shopping --
currently the almost exclusive preserve of the Stentor companies.
Another important proposed prerequisite for deregulation is the
construction of a national fibre optic transmission network by
competing carriers.
The Company cannot predict the timing or the outcome of any
of the pending and ongoing proceedings described above, or the
impact they may have on the competitive position of ACC Canada.
Telecommunications Act. In October 1993, the
Telecommunications Act replaced the Railway Act (Canada) as the
principal telecommunications regulatory statute in Canada. This
Act provides that all federally-regulated telecommunications
common carriers as defined therein (essentially all transmission
facilities-based carriers) are under the regulatory jurisdiction
of the CRTC. It also gives the federal government the power to
issue directions to the CRTC on broad policy matters. The Act
does not subject non-facilities-based carriers, such as ACC
Canada, to foreign ownership restrictions, tariff filing
requirements or other regulatory provisions applicable to
facilities-based carriers. However, to the extent that resellers
acquire their own facilities in order to better control the
carriage and routing of their traffic, certain provisions of this
Act may be applicable to them.
United Kingdom
Until 1981, British Telecom was the sole provider of public
telecommunications services throughout the U.K. This monopoly
ended when, in 1981, the British government granted Mercury a
license to run its own telecommunications system under the
British Telecommunications Act 1981. Both British Telecom and
Mercury are licensed under the subsequent Telecommunications Act
1984 to run transmission facilities-based telecommunications
systems and provide telecommunications services. See the Risk
Factors discussion of "Dependence on Transmission Facilities-
Based Carriers and Suppliers" in this Item 1 below.
In 1991, the British government established a "multi-
operator" policy to replace the duopoly that had existed between
British Telecom and Mercury. Under the multi-operator policy,
the U.K Department of Trade and Industry (the "DTI") will
recommend the grant of a license to operate a telecommunications
network to any applicant that the DTI believes has a reasonable
business plan and where there are no other overriding
considerations not to grant such license. All public
telecommunications operators and international simple resellers
operate under individual licenses granted by the Secretary of
State for Trade and Industry pursuant to the Telecommunications
Act 1984. Any telecommunications system with compatible
equipment that is authorized to be run under an individual
license granted under this Act is permitted to interconnect to
British Telecom's network. Under the terms of British Telecom's
license, it is required to allow any such licensed operator to
interconnect its system to British Telecom's system, unless it is
not reasonably practicable to do so (e.g., due to incompatible
equipment).
Oftel has imposed mandatory price reductions on British
Telecom which are expected to continue through August 1997 and
this has had, and may have, the effect of reducing the prices the
Company can charge its customers in order to remain competitive.
Oftel is introducing a new access charge control regime, which is
expected to become effective in August 1997. Under the new
regime, British Telecom will have flexibility in setting access
charges, subject to certain safeguards. Oftel will set the
starting charges (which will be based on historical incremental
costs) and the rates charged by British Telecom to other carriers
will be subject to certain price ceilings established by Oftel
for competitive and non-competitive services.
ACC U.K. was granted an ISR License in September 1992 by the
DTI and, for a period of approximately 18 months thereafter, was
involved in protracted negotiations with British Telecom
concerning the terms and conditions under which it could
interconnect its leased line network and switching equipment with
British Telecom's network. The ISR License allows the Company to
offer domestic and international long distance services via
connections to the PSTN of all countries and territories (subject
to certain safeguards on non-competitive routes) at favorable
leased-line rates, rather than per call international settlement
rates. Over time, larger carriers will be able to match the
Company's rates because they also have, or are expected to
obtain, international simple resale licenses. As of December 31,
1996, the Company believes that over 30 ISR licenses have been
issued and there are over 150 licensed public telecommunications
operators in the U.K. In December 1996, ACC U.K. was one of 45
recipients of an International Facilities License and expects to
receive a Public Telecommunications Operator license, which
licenses will enable the Company to build and operate a microwave
network in the U.K. and to use the U.K. as a regional hub for
international telecommunications traffic.
Acquisitions, Investments and Strategic Alliances
As the Company expands its service offerings, geographic
focus and its network, the Company anticipates that it will seek
to acquire assets and businesses of, make investments in or enter
into strategic alliances with, companies providing services
complementary to ACC's existing business. The Company believes
that, as the global telecommunications marketplace becomes
increasingly competitive, expands and matures, such transactions
will be important in maintaining a competitive position in the
industry.
The Company's ability to effect acquisitions and strategic
alliances and make investments may be dependent upon its ability
to obtain additional financing and, to the extent applicable,
consents from the holders of debt and preferred stock of the
Company. While the Company may in the future pursue an active
strategic alliance, acquisition or investment policy, no specific
strategic alliances, acquisitions or investments are currently in
negotiation and the Company has no immediate plans to commence
such negotiations. If the Company were to proceed with one or
more significant strategic alliances, acquisitions or investments
in which the consideration consists of cash, a substantial
portion of the Company's available cash could be used to
consummate the acquisitions or investments. If the Company were
to consummate one or more significant strategic alliances,
acquisitions or investments in which the consideration consists
of stock, shareholders of the Company could suffer a significant
dilution of their interests in the Company.
Many business acquisitions must be accounted for as
purchases. Most of the businesses that might become attractive
acquisition candidates for the Company are likely to have
significant goodwill and intangible assets, and the acquisitions
of these businesses, if accounted for as a purchase, would
typically result in substantial amortization charges to the
Company. In the event the Company consummates additional
acquisitions in the future that must be accounted for as
purchases, such acquisitions would likely increase the Company's
amortization expenses. In connection with acquisitions,
investments or strategic alliances, the Company could incur
substantial expenses, including the fees of financial advisors,
attorneys and accountants, the expenses of integrating the
business of the acquired company or the strategic alliance with
the Company's business and any expenses associated with
registering shares of the Company's capital stock, if such shares
are issued. The financial impact of such acquisitions,
investments or strategic alliances could have a material adverse
effect on the Company's business, financial condition and results
of operations and could cause substantial fluctuations in the
Company's quarterly and yearly operating results. See the Risk
Factor discussion of "Substantial Indebtedness; Need for
Additional Capital" in this Item 1 below and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference under Item 7 of this
Report.
Employees
As of December 31, 1996, the Company had 913 full-time
employees worldwide. Of this total, 298 employees were in the
U.S., 385 were in Canada and 230 were in the U.K. The Company
has never experienced a work stoppage and its employees are not
represented by a labor union or covered by a collective
bargaining agreement. The Company considers its employee
relations to be good.
Risk Factors
Recent Losses; Potential Fluctuations in Operating Results
Although the Company has experienced revenue growth on an
annual basis and net income in fiscal 1996, it has incurred net
losses and losses from continuing operations during 1994 and
1995. 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 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. See the Risk Factor
discussion below of "Risks Associated With Acquisitions,
Investments and Strategic Alliances" in this Item 1 and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference under Item 7 of
this Report.
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.
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. 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. 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
Company's 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. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" incorporated by
reference under Item 7 of this Report.
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, Bell Canada
and 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 are the two principal, dominant
carriers. The Company's U.K. operations are highly dependent
upon the transmission lines leased from British Telecom.
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 the RBOCs and other local exchange
carriers, currently are subject to tariff controls and other
price constraints which in the future may be changed. Under the
1996 Act, constraints on the operations of the RBOCs have been
dramatically reduced, which will bring additional competitors to
the long distance market. In addition, regulatory proposals are
pending that may affect the prices charged by the RBOCs and other
local exchange carriers to the Company, which could have a
material adverse effect on the Company's business, financial
condition and results of operations. See the Risk Factor
discussion of "Potential Adverse Effects of Regulation" below and
the discussion of "Regulation" above in this Item 1. 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
The 1996 Act 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 markets
to additional competition, particularly from the RBOCs, the
Company's ability to compete may 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 FCC and relevant 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., as well as the RBOCs, increased
pricing flexibility that has permitted it to compete more
effectively with smaller interexchange carriers, such as the
Company. In addition, the commitments made by the U.S.
government in the recently-completed WTO negotiations will allow
foreign-affiliated carriers theretofore prohibited from providing
service in the U.S. market to compete with the Company in the
U.S. market. 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's
business, results of operations and financial condition.
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, 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 commenced 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 rate 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 1996 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. At the end of 1996, the NYPSC replaced
temporary wholesale discounts with permanent wholesale discounts
of 19.1% for New York Telephone (business and residential) and
17% for Frontier Corp. (business and residential). Discounts
were made applicable to centrex, private line and PBX lines. The
NYPSC has not yet established permanent rates for unbundled links
or other unbundled elements which the Company may seek to resell.
If the permanent rates established by the NYPSC 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 may be materially adversely affected.
In Canada, 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. 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.
In the U.K., 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. In addition, the new access
charge control regime to be implemented in 1997 could
substantially increase the Company's network costs in the U.K.
market, depending upon the levels at which starting charges and
price ceilings are set by Oftel. Although the Company is
optimistic about its ability to continue to compete effectively
in the U.K. market, there can be no assurance that future changes
in regulation and government will not have a material adverse
effect on the Company's business, results of operations and
financial condition. See the discussion "Business-Regulation"
above in this Item 1.
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, and 42%, 12% and 24% of the revenues of
ACC U.S., ACC Canada and ACC U.K. in 1996. 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 and Sprint in the U.S.; Bell Canada, BC
Telecom, Inc., AT&T Canada and Sprint Canada (a subsidiary of
Call-Net Telecommunications Inc.) in Canada; and British Telecom,
Mercury, AT&T and WorldCom 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 and Massachusetts, the Company competes with New York
Telephone, Frontier Corp., Citizens Telephone Co., WorldCom and
Time Warner and others, including cellular and other wireless
providers. Furthermore, joint ventures such as the proposed
merger of Bell Atlantic Corp. and Nynex Corp., the proposed
merger of MCI and British Telecom, the joint venture between MCI
and Microsoft under which Microsoft will promote MCI's services,
the joint venture among Sprint, Deutsche Telekom AG and France
Telecom called Global One, the proposed merger of Cable Wireless
PLC and Global One, 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 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 1995 and 1996, 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. The WTO
accord reached in February 1997 is likely to accelerate this
trend in some markets. 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 and British Telecom
substantially reduced its rates in 1996. The Company's
competitors may reduce rates or offer incentives to existing and
potential customers of the Company. To maintain its competitive
position, the Company believes that it must be able to reduce its
prices in order to meet reductions in rates, if any, by others.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" incorporated by reference under Item 7
of this Report and the discussion "Business -- Competition" above
in this Item 1.
The Company has only limited experience in providing local
telephone services, having commenced providing such services in
1994. The Company's revenues from local telephone and other
services in 1995 and 1996 were $13.6 million and $26.3 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, 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. The Company is
making preparations to enter the emerging German market in
anticipation of deregulation in 1998, and has recently
established a German subsidiary, ACC Telekommunikation GmbH.
There can be no assurance, however, 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. In the WTO accord reached in
February 1997, a number of countries agreed to accelerate or
initiate liberalization of their telecommunications markets by
allowing increased competition and foreign ownership of
telecommunications providers and by adopting measures to ensure
reasonable nondiscriminatory interconnection, effective
competitive safeguards, and an effective independent regulation.
This agreement may, therefore, expand the international
opportunity available to the Company. To date, the Company has
only limited experience in providing telecommunications service
outside the United States, Canada and the U.K. The Company is
making preparations to enter the emerging German market in
anticipation of deregulation in 1998. There can be no assurance,
however, 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. Where protective regulations are being
eliminated, the pro-competitive effect of this action could
substantially increase the number of entities competing with the
Company. 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 believes
that the successful implementation and integration of 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. See the
discussion "Business -- Information Systems" above in this Item
1.
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 discussed above
under "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. See the
discussion "Business --Acquisitions, Investments and Strategic
Alliances" above in this Item 1.
Technological Changes May Adversely Affect Competitiveness and
Financial Results
The telecommunications industry is characterized by rapid
and significant technological advancements and introductions of
new products and services utilizing new technologies. There can
be no assurance that the Company will maintain competitive
services or that the Company will obtain appropriate new
technologies on a timely basis or on satisfactory terms.
Dependence on Key Personnel
The Company's success depends to a significant degree upon
the continued contributions of its management team and technical,
marketing and sales personnel. The Company's employees may
voluntarily terminate their employment with the Company at any
time. Competition for qualified employees and personnel in the
telecommunications industry is intense and, from time to time,
there are a limited number of persons with knowledge of and
experience in particular sectors of the telecommunications
industry. The Company's success also will depend on its ability
to attract and retain qualified management, marketing, technical
and sales executives and personnel. The process of locating such
personnel with the combination of skills and attributes required
to carry out the Company's strategies is often lengthy. The loss
of the services of key personnel, or the inability to attract
additional qualified personnel, could have a material adverse
effect on the Company's results of operations, development
efforts and ability to expand. There can be no assurance that
the Company will be successful in attracting and retaining such
executives and personnel. Any such event could have a material
adverse effect on the Company's business, financial condition and
results of operations.
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. See
the Risk Factor discussion above under "Substantial Indebtedness;
Need for Additional Capital" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources" incorporated by reference under
Item 7 of this Report.
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
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 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. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" incorporated by reference under Item 7 of
this Report.
Item 2. PROPERTIES.
The Company's principal executive offices are located at 400
West Avenue, Rochester, New York in corporate office space leased
through June 2004. It also leases office space for its Canadian
headquarters in Toronto, Canada, and for its U.K. headquarters in
London, England, as well as office space at various other
locations. For additional information regarding these leases,
see Notes 8 and 10 to the Company's Consolidated Financial
Statements incorporated by reference herein.
The Company has eight switching centers worldwide. The
Company's switching equipment for the Rochester call origination
area is located at its headquarters at 400 West Avenue,
Rochester, New York with additional switching equipment located
in Syracuse, New York, in Toronto, Ontario, Montreal, Quebec, and
Vancouver, British Columbia, and in London and Manchester,
England, all of which sites are leased. Branch sales offices are
leased by the Company at various locations in the northeastern
U.S., Canada and the U.K. The Company also leases equipment and
space located at various sites in its service areas.
The Company's financing arrangements are secured by
substantially all of the Company's assets. The Company's secured
lenders would be entitled to foreclose upon those assets and to
be repaid from the proceeds of the liquidation of those assets in
the event of a default under the financing arrangements.
Item 3. LEGAL PROCEEDINGS.
There were no material legal proceedings pending at
December 31, 1996 involving the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Item 4-A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following sets forth information concerning the
Directors and executive officers of the Company and its principal
operating subsidiaries as of March 1, 1997:
Name Age Position(s)
David K. Laniak 61 Chairman of the Board of
Directors and Chief Executive
Officer
Christopher Bantoft 49 President and Managing
Director of European Operations
Arunas A. Chesonis 34 President and Director
Michael R. Daley 35 Executive Vice President and
Chief Financial Officer
Steve M. Dubnik 34 President of North American
Operations
Mae H. Squier-Dow 35 President of ACC Long Distance
Corp.
Michael L. LaFrance 37 Executive Vice President
George H. Murray 50 Vice President--Human
Resources and Corporate
Communications
Frank C. Szabo 44 Vice President and Controller
John J. Zimmer 38 Vice President and Treasurer
David K. Laniak was elected the Company's Chief Executive
Officer in October 1995 and Chairman of the Board of Directors in
October 1996. Mr. Laniak has been a Director of the Company
since February 1989. Prior to joining the Company, Mr. Laniak
was Executive Vice President and Chief Operating Officer of
Rochester Gas and Electric Corporation, Rochester, New York,
where he worked in a variety of positions for more than 30 years.
Mr. Laniak also has served from October 1995 through January
1997, and from May 1993 through July 1994, as a Director of ACC
TelEnterprises Ltd.
Christopher Bantoft was elected President of European
Operations of the Company in November 1996, and has served as
Managing Director of ACC Long Distance UK Ltd. since February
1994. From 1986 through 1993, he served as Sales and Marketing
Director, Deputy Managing Director, and most recently as Managing
Director of Alcatel Business Systems Ltd., the U.K. affiliate of
Alcatel, N.V.
Arunas A. Chesonis was elected President of the Company in
April 1994. He previously served as President of ACC Long
Distance Corp. from January 1989 through April 1994. From August
1990 through March 1991, he also served as President of ACC
TelEnterprises Ltd., and from May 1987 through January 1989,
Mr. Chesonis served as Senior Vice President of Operations for
ACC Long Distance Corp. Mr. Chesonis was elected a Director of
the Company in October 1994.
Michael R. Daley was elected the Company's Executive Vice
President and Chief Financial Officer in February 1994. He
previously served as the Company's Treasurer from March 1991
through February 1997, Vice President-Finance from August 1990
through February 1994, as Treasurer and Controller from August
1990 through March 1991, as Controller from January 1989 through
August 1990, and various other positions with the Company from
July 1985 through January 1989. Mr. Daley has served as a
Director of ACC TelEnterprises Ltd. from October 1994 through
January 1997.
Steve M. Dubnik was elected President of North American
Operations of the Company in November 1996, and has served as the
Chairman of the Board of Directors, President and Chief Executive
Officer of ACC TelEnterprises Ltd. since July 1994. Previously,
he served from 1992 through June 1994 as President, Mid-Atlantic
Region, of RCI Long Distance. For more than five years prior
thereto, he served in progressively senior positions with
Rochester Telephone Corporation (now Frontier Corp.) including
assignments in engineering, operations, information technology
and sales.
Mae H. Squier-Dow was elected President of ACC Long Distance
Corp. in June 1996, and served as Commercial Director of ACC Long
Distance U.K. Ltd. from April 1995 to June 1996. She previously
held a number of positions at ACC Long Distance U.K. Ltd. from
October 1993 to April 1995, including Director of Customer
Relations and Marketing, Vice President of International Planning
and Operations Director. She previously served as Vice President
of Customer Relations at ACC Long Distance Corp. from March 1992
to October 1993 and as its Director of Customer Relations from
January 1991 to March 1992.
Michael L. LaFrance was elected Executive Vice President of
the Company and President of ACC Global Corp. in June 1996. He
previously served as President of ACC Long Distance Corp. from
April 1994 through June 1996. From May 1992 through May 1994, he
served as Executive Vice President and General Manager of Axcess
USA Communications Corp., from June 1990 through May 1992, as
Director of Regulatory Affairs and Administration of LDDS
Communications, Inc. and from February 1987 through June 1990, as
Vice President of Comtel-TMC Telecommunications.
George H. Murray was elected the Company's Vice President-
Human Resources and Corporate Communications in August 1994. For
more than five years prior to his joining the Company, he served
in various senior management positions with First Federal Savings
and Loan of Rochester, New York.
Frank C. Szabo, a certified public accountant, was elected
the Company's Vice President and Controller in February 1997.
Prior to joining the Company, Mr. Szabo was the Vice President
and Controller of First Federal Savings and Loan, Rochester, New
York, for more than 10 years.
John J. Zimmer, a certified public accountant, was elected
the Company's Treasurer in February 1997 and has served as a Vice
President since September 1994. He previously served as the
Company's Controller from March 1991 through September 1994.
Prior to March 1991, he served as a staff accountant and then as
a manager of accounting with Arthur Andersen LLP.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
The Company's Class A Common Stock is quoted on The Nasdaq
Stock Market's National Market System under the symbol "ACCC."
The following table sets forth, for the periods indicated, the
high and low sale prices of the Class A Common Stock, as reported
by The Nasdaq Stock Market, and the cash dividends declared per
share of Class A Common Stock:
Cash
Dividends
Common Stock Price Declared
High Low Per Share
1995: First Quarter $12 53/64 $9 21/64 $0.02
Second Quarter 11 21/64 8 43/64 0.02
Third Quarter 12 53/64 9 43/64 ---
Fourth Quarter 16 5/64 10 1/2 ---
1996: First Quarter $20 11/64 $14 53/64 ---
Second Quarter 32 27/64 18 37/64 ---
Third Quarter 54 3/4 29 1/2 ---
Fourth Quarter 47 3/4 24 3/4 ---
On March 3, 1997, the closing price for the Company's
Class A Common Stock in trading on The Nasdaq Stock Market was
$27.50 share, as published in The Wall Street Journal. As of
March 3, 1997, the Company had approximately 490 holders of
record of its Class A Common Stock.
The Company ceased paying quarterly cash dividends on its
Class A Common Stock in 1995 to use its cash to invest in the
growth of its business. The Company anticipates that future
earnings, if any, generated from operations will be retained by
the Company to develop and expand its business. Any future
determination with respect to the payment of dividends on the
Class A Common Stock will be at the discretion of the Board of
Directors and will depend upon, among other things, the Company's
operating results, financial condition and capital requirements,
the terms of then-existing indebtedness and preferred stock,
general business conditions, Delaware corporate law limitations
and such other factors as the Board of Directors deems relevant.
The terms of the Company's Credit Facility prohibit the payment
of dividends without the lender's consent. The Company's holding
company structure may adversely affect the Company's ability to
obtain payments when needed from ACC Corp.'s operating
subsidiaries. See the Risk Factor discussion of "Holding Company
Structure; Reliance on Subsidiaries for Dividends" in Item 1 of
this Report .
Item 6. SELECTED FINANCIAL DATA.
The selected financial data for the five years ended
December 31, 1996, appearing in the Company's 1996 Annual Report
under the heading "Selected Consolidated Financial Data," is
incorporated by reference herein.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition
and results of operations appearing in the Company's 1996 Annual
Report under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is incorporated by
reference herein.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements and supplementary data are included
under Item 14(a).
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 of Form 10-K relating to
directors who are nominees for election as directors at the
Company's Annual Meeting of Shareholders to be held on May 15,
1997 will be set forth under the heading "Election of Directors"
in the Company's Definitive Proxy Statement for such Annual
Meeting, which is incorporated by reference herein.
The information required by Item 10 of Form 10-K with
respect to executive officers is, pursuant to Instruction 3 of
Paragraph (b) of Item 401 of Regulation S-K, set forth in Part I
as Item 4-A of this Form 10-K under the heading "Executive
Officers of the Registrant."
Item 11. EXECUTIVE COMPENSATION.
The information required by Item 11 of Form 10-K will be set
forth under the heading "Compensation of Executive Officers and
Directors" in the Company's Definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on May 15, 1997, which
is incorporated by reference herein.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by Item 12 of Form 10-K will be set
forth under the headings "Securities Owned by Company Management"
and "Principal Holders of Common Stock" in the Company's
Definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on May 15, 1997, which is incorporated by reference
herein.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 of Form 10-K will be set
forth under the heading "Certain Transactions" in the Company's
Definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on May 15, 1997, which is incorporated by reference
herein.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Financial Statements and Exhibits.
(1) Financial Statements. (a) The following Financial
Statements of the Company are incorporated by reference from the
Company's 1996 Annual Report under the headings "Consolidated
Statements of Operations", "Consolidated Balance Sheets",
"Consolidated Statements of Changes in Shareholders' Equity",
"Consolidated Statements of Cash Flow", "Notes to Consolidated
Financial Statements" and "Report of Independent Public
Accountants":
Consolidated Financial Statements:
Consolidated Balance Sheets, December 31, 1995 and 1996
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
(b) The following Financial Statements for ACC Corp.
Employee Stock Purchase Plan for Plan year ended December 31,
1996 are included herewith as follows:
Report of Independent Public Accountants
Statement of Financial Condition
Statement of Changes in Participants' Equity
Notes to Financial Statements
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the ACC Corp. Employee Stock
Purchase Plan:
We have audited the accompanying statements of financial
condition of the ACC Corp. Employee Stock Purchase Plan (the
"Plan") as of December 31, 1996 and 1995, and the related
statements of changes in participants' equity for the years then
ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial condition
of the Plan as of December 31, 1996 and 1995, and the results of
its changes in participants' equity for the years then ended in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Rochester, New York
February 24, 1997
ACC Corp.
Employee Stock Purchase Plan
Statements of Financial Condition
December 31, 1996 and 1995
ASSETS: 1996 1995
Receivable from ACC Corp. $1,627 $683
TOTAL ASSETS $1,627 $683
LIABILITIES AND PARTICIPANTS' EQUITY:
Participants' equity $1,627 $683
TOTAL LIABILITIES AND PARTICIPANTS' EQUITY $1,627 $683
The accompanying notes to financial statements are an integral
part of these statements.
ACC Corp.
Employee Stock Purchase Plan
Statements of Changes in Participants' Equity
For the Years Ended December 31, 1996 and 1995 and
For the Period From Adoption (February 8, 1994) to December 31, 19
94
ADDITIONS: 1996 1995 1994
Employee contributions $356,514 $331,256 $155,651
DEDUCTIONS:
Stock purchased 343,870 297,027 151,600
Employee withdrawals 11,700 34,103 3,494
Total deductions 355,570 331,130 155,094
NET INCREASE IN PARTICIPANTS' EQUITY 944 126 557
PARTICIPANTS' EQUITY, BEGINNING OF PERIOD 683 557 -
PARTICIPANTS' EQUITY, END OF PERIOD $ 1,627 $ 683 $ 557
The accompanying notes to financial statements are an integral
part of these statements.
ACC Corp.
Employee Stock Purchase Plan
Notes to Financial Statements
1. PLAN DESCRIPTION:
The ACC Corp. Employee Stock Purchase Plan (the "Plan") was
adopted by the Board of Directors on February 8, 1994 and was
ratified by the shareholders on October 13, 1994. The first
offering period began July 1, 1994. Officers did not participate
until the ratification by the shareholders occurred. The Plan
was established to provide employees with increased employment
and performance incentives and to enhance ACC Corp.'s (the
"Company") efforts to attract and retain employees of outstanding
ability. The Plan permits eligible Company employees to make
periodic purchases of shares of the Company's Class A Common
Stock through payroll deductions at prices below then-prevailing
market prices. As of December 31, 1996, 676,087 shares of the
Company's Class A Common Stock (which may be treasury shares,
authorized and unissued shares, or a combination thereof at the
Company's discretion) are reserved for future issuance under the
Plan. The Plan is administered by the Executive Compensation
Committee of the Board of Directors of ACC Corp. (the
"Committee"). None of the members of the Committee is eligible
to participate in the Plan. Reference should be made to the Plan
for more complete information.
Any employee of the Company or any of its subsidiaries who
is employed at least 20 hours per week is eligible to participate
in the Plan. Participants may enroll in the Plan prior to an
offering commencement date. Employees may authorize payroll
deductions of up to 15% of their then-current straight-time
earnings during the term of an offering, which will be applied to
the purchase of shares under the Plan. These payroll deductions
will begin on that offering commencement date and will end on the
last purchase date applicable to any offering in which he/she
holds any options to purchase shares of the Company's Class A
Common Stock, or if sooner, on the effective date of his/her
termination of participation in the Plan. Newly hired employees
hired subsequent to an offering commencement date may begin
participation in the Plan at the beginning of the next calendar
quarter following their date of hire.
Payroll deductions will be held by the Company as part of
its general funds for the credit of the participants and will not
accrue interest pending the periodic purchase of shares under the
Plan. On the last business day of each calendar quarter during
the term of an offering, a participant will automatically be
deemed to have exercised his/her options to purchase, at the
applicable purchase price, the maximum number of full shares that
can be purchased with the amounts deducted from the participant's
pay during that quarter, together with any excess funds from
preceding quarters. The purchase price at which shares may be
purchased under the Plan is 85% of the closing price of the
Company's Class A Common Stock in Nasdaq trading on either a) the
offering commencement date (or, in the case of interim
participation by newly hired employees, the date on which they
are permitted to begin participation in that offering) or b) the
date on which shares are purchased through the automatic exercise
of an option to purchase shares under the Plan, whichever is
lower. The maximum number of shares that a participant will be
permitted to purchase in any single offering is subject to
certain limitations, as set forth in the plan document.
A participant may, at any time and for any reason, withdraw
from further participation in any offering or from the Plan by
giving written notice. In such event, the participant's payroll
deductions which have been credited to his/her plan account and
not already expended to purchase shares under the Plan will be
refunded without interest. No further payroll deductions will be
made from his/her pay during the term of that offering. No
withdrawing participant will be permitted to re-commence his/her
participation in an offering, however, termination of
participation in an offering or in the Plan will not have any
effect upon subsequent eligibility to participate in the Plan. A
participant's retirement, death or other termination of
employment will be treated as a permanent withdrawal from
participation. In the event of a participant's death, his/her
estate or designated beneficiary shall have the right to elect,
no later than 60 days following his/her date of death, to receive
either the accumulated payroll deductions in the deceased
participant's plan account or to exercise, on the next subsequent
purchase date, the deceased participant's options to purchase the
number of full shares of Class A Common Stock that can be
purchased with the balance in the decedent's plan account as of
his/her date of death, together with the return of any excess
cash, without interest.
The Plan will expire on the first to occur of the following:
(1) the date as of which participants purchase a number of shares
equal to or greater than the number of shares authorized for
issuance under the Plan; or (2) the date as of which the Board of
Directors of the Company or the Committee terminates the Plan.
In either case, all funds accumulated in each participant's plan
account but not yet expended to purchase shares will be refunded
without interest. If the Plan is terminated by reason of the
exercise of rights to purchase a greater number of shares than
are authorized for issuance under the Plan, all remaining shares
available for issuance will be allocated to participants on a pro-
rata basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements are prepared using the accrual
basis of accounting. The Company pays all of the Plan's
administrative expenses.
3. INCOME TAX STATUS:
The Plan is intended to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code. In
order for favorable tax treatment to be available to the
participant, the participant cannot dispose of any shares
acquired under the Plan within two years following the date the
option to purchase was granted, nor within one year following the
date the shares were actually purchased.
4. STOCK PURCHASES:
Stock purchases by offering period are as follows:
Purchase price Number of
Offering Period Valuation Date per share shares purchased
July 1, 1994 - July 1, 1994 $ 9.08 13,022
December 31, 1994 December 31, 1994* $ 9.83 6,110
January 1, 1995 - December 31, 1994 $ 9.83 26,903
December 31, 1995 March 31, 1995* $11.17 105
June 30, 1995* $ 9.83 101
September 30, 1995* $11.00 77
July 1, 1995 - June 30, 1995 $ 9.83 7,746
December 31, 1995 September 30, 1995* $11.00 519
January 1, 1996 - December 30, 1995 $15.37 12,544
June 30, 1996 March 31, 1996* $19.75 158
July 1, 1996 - June 30, 1996 $32.42 2,834
December 31, 1996 December 31, 1996 $30.25 3,806
*For those employees who began participation during the
offering period.
The valuation date is the date during the offering period,
as defined, on which the stock price was the lowest, therefore
becoming the base for the calculation of shares to be purchased.
(2) Financial Statement Schedules. The following
Financial Statement Schedules and the accountant's report thereon
are included herewith as follows:
Report of Independent Public Accountants
II Consolidated Valuation and Qualifying Accounts for
the years ended December 31, 1996, 1995 and 1994
All other schedules are not submitted because they are not
applicable, not required or because the required information is
included in the consolidated financial statements or notes
thereto.
(3) Exhibits. The following constitutes the list of
exhibits required to be filed as a part of this Report pursuant
to Item 601 of Regulation S-K:
LIST OF EXHIBITS
Exhibit
Number Description Location
3-1 First Restated Certificate Incorporated by Reference
of Incorporation of ACC to Exhibit 3 to the
Corp. Company's Quarterly
Report on Form 10-Q for
its Quarter Ended
September 30, 1995
("September 30, 1995
10-Q")
3-2 Bylaws of ACC Corp., as Incorporated by Reference
amended on May 21, 1996 to Exhibit 99.5 to the
Company's Current Report
on Form 8-K filed on
September 17, 1996
("September 17, 1996
8-K")
4-1 Form of ACC Corp. Class A Incorporated by Reference
Common Stock Certificate to Exhibit 4-1 to the
Company's Registration
Statement on Form S-3,
No. 333-01157 declared
effective May 2, 1996
4-2 Form of Warrant to purchase Incorporated by Reference
7,500 Shares of Class A to Exhibit 99.4 to the
Common Stock dated October Company's Current Report
30, 1995 on Form 8-K filed on
February 22, 1996 8-K
("February 22, 1996 8-K")
10-1 Form of Employment Incorporated by Reference
Continuation Incentive to Exhibit 99.3 to the
Agreement between ACC Corp. Company's February 22,
and certain of its Key 1996 8-K
Employees
10-2 ACC Corp. Employee Long Term Incorporated by Reference
Incentive Plan, as amended to Exhibit 4-1 to the
through February 5, 1996 Company's Registration
Statement on Form S-8,
No. 333-01219, effective
February 26, 1996
10-3 Form of ACC Corp. Incorporated by Reference
Indemnification Agreement to Exhibit 10-29 to the
with its Directors and Company's Report on
certain of its Executive Form 10-K for its year
Officers ended December 31, 1987
10-4 ACC Corp. Employee Stock Incorporated by Reference
Purchase Plan to Exhibit 4-4 to the
Company's Registration
Statement on Form S-8,
No. 33-75558, effective
February 22, 1994
10-5 Employment Agreement between Incorporated by Reference
ACC Corp. and David K. to Exhibit 10-2 to the
Laniak, dated October 6, Company's September 30,
1995 1995 10-Q
10-6 Salary Continuation and Incorporated by Reference
Deferred Compensation to Exhibit 10-3 to the
Agreement between ACC Corp. Company's September 30,
and Richard T. Aab, dated 1995 10-Q
October 6, 1995
10-7 Non-Competition Agreement Incorporated by Reference
between ACC Corp. and to Exhibit 10-4 to the
Richard T. Aab, dated Company's September 30,
October 6, 1995 1995 10-Q
10-8 Release and Settlement Incorporated by Reference
Agreement between ACC Corp. to Exhibit 99.2 to the
and Francis Coleman, dated Company's February 22,
December 29, 1995 1996 8-K
10-9 Software License Agreement Incorporated by Reference
dated March 30, 1995 by and to Exhibit 99.5 to the
between AMBIX Systems Corp. Company's February 22,
and ACC Corp. 1996 8-K
10-10 Software License Agreement Incorporated by Reference
dated February 21, 1996 to Exhibit 99.6 to the
between AMBIX Acquisition Company's February 22,
Corp. and ACC Corp. 1996 8-K
10-11 Bill of Sale from AMBIX Incorporated by Reference
Systems Corp. to ACC Corp. to Exhibit 99.7 to the
dated February 6, 1996 Company's February 22,
1996 8-K
10-12 Letter Agreement dated Incorporated by Reference
April 27, 1995 between the to Exhibit 99.8 to the
Special Committee of the Company's February 22,
Board of Directors of ACC 1996 8-K
Corp. and Richard T. Aab
10-13 Lease dated January 25, 1994 Incorporated by Reference
between the Hague to Exhibit 99.9 to the
Corporation and ACC Corp., Company's February 22,
as modified by a Lease 1996 8-K
Modification Agreement No. 1
dated May 31, 1994 and a
Lease Modification Agreement
No. 2 dated May 31, 1994,
relating to the leased
premises located at 400 West
Avenue, Rochester, New York
10-14 Amended and Restated Lease Incorporated by Reference
Agreement dated March 1, to Exhibit 99.10 to the
1994 between ACC Long Company's February 22,
Distance Inc./Interurbains 1996 8-K
ACC Inc. and Coopers &
Lybrand relating to the
leased premises located at
5343 Dundas Street West,
Etobicoke, Ontario, Canada
10-15 Underlease Agreement dated Incorporated by Reference
December 23, 1993 between to Exhibit 99.11 to the
ACC Long Distance UK Company's February 22,
Limited, IBM United Kingdom 1996 8-K
Limited, and ACC Corp.
relating to the leased
premises located on the
tenth floor at The Chiswick
Centre 414 Chiswick High
Road, London, England
10-16 Underlease Agreement dated Incorporated by Reference
June 6, 1995 between ACC to Exhibit 99.12 to the
Long Distance UK Limited, Company's February 22,
IBM United Kingdom Limited, 1996 8-K
and ACC Corp. relating to
the leased premises located
on the first floor at The
Chiswick Centre 414 Chiswick
High Road, London, England
10-17 Supplemental Lease Agreement Incorporated by Reference
dated June 3, 1994 between to Exhibit 99.13 to the
ACC Long Distance UK Company's February 22,
Limited, IBM United Kingdom 1996 8-K
Limited, and ACC Corp.
relating to the leased
premises located on the
ninth floor at The Chiswick
Centre 414 Chiswick High
Road, London, England
10-18 Amended and Restated Credit Filed herewith
Agreement, dated as of
January 14, 1997, by and
among ACC Corp. and certain
Subsidiaries as Borrowers,
ACC Corp. as Guarantor,
First Union National Bank of
North Carolina as Managing
Agent and Administrative
Agent, and Fleet National
Bank, as Managing Agent and
Documentation Agent
10-19 Leasehold Mortgage dated Incorporated by Reference
July 21, 1995 between ACC to Exhibit 99.16 to the
Corp. and First Union Company's February 22,
National Bank of North 1996 8-K
Carolina relating to the
leased premises located at
400 West Avenue, Rochester,
New York ("Rochester
Leasehold Mortgage")
10-20 Modification to Rochester Filed herewith
Leasehold Mortgage dated
January 14, 1997
10-21 Leasehold Mortgage dated Incorporated by Reference
July 21, 1995 between ACC to Exhibit 99.16 to the
Corp. and First Union Company's February 22,
National Bank of North 2996 8-K
Carolina relating to the
leased premises located at
Suite 206, State Tower
Building, 109 South Warren
10-22 Street, Syracuse, New York Filed herewith
("Syracuse Leasehold
Mortgage")
Modification to Syracuse
Leasehold Mortgage dated
January 14, 1997
10-23 Leasehold Mortgage dated Incorporated by Reference
July 21, 1995 between ACC to Exhibit 99.17 to the
Corp. and First Union Company's February 22,
National Bank of North 1996 8-K
Carolina relating to the
leased premises located at
Suite 2200, Suite 204 and
Suite 205, State Tower
Building, 109 South Warren
Street, Syracuse, New York
("Additional Syracuse
Leasehold Mortgage")
10-24 Modification to Additional Filed herewith
Syracuse Leasehold Mortgage
dated January 14, 1997
10-25 Mortgage of Leasehold Filed herewith
Interest, dated as of
January 14, 1997, between
ACC TelEnterprises
Ltd./TelEnterprises ACC LTEE
and First Union National
Bank of North Carolina, as
Agent, relating to the
leased premises located at
One Toronto Street, Toronto,
Ontario, Canada
10-26 Mortgage of Leasehold Filed herewith
Interest, dated as of
January 14, 1997, between
ACC TelEnterprises
Ltd./TelEnterprises ACC LTEE
and First Union National
Bank of North Carolina, as
Agent, relating to the
leased premises located at
5343 Dundas Street West,
Etobicoke, Ontario, Canada
10-27 Amended and Restated Pledge Filed herewith
Agreement dated as of
January 14, 1997 by ACC
Corp. in favor of First
Union National Bank of North
Carolina as Administrative
Agent
10-28 Amended and Restated Pledge Filed herewith
Agreement dated as of
January 14, 1997 by ACC
National Long Distance Corp.
in favor of First Union
National Bank of North
Carolina as Administrative
Agent
10-29 Amended and Restated Filed herewith
Security Agreement dated as
of January 14, 1997 between
ACC Corp., certain Domestic
Subsidiaries of the Company
and First Union National
Bank of North Carolina as
Administrative Agent
10-30 Amended and Restated Filed herewith
Trademark Security Agreement
dated as of January 14, 1997
between ACC Corp. and First
Union National Bank of North
Carolina as Administrative
Agent
10-31 License Agreement dated Incorporated by Reference
July 1, 1993 between to Exhibit 99.23 to the
Hudson's Bay Company and ACC Company's February 22,
Long Distance Inc. 1996 8-K
10-32 Employment Agreement between Incorporated by Reference
Christopher Bantoft and ACC to Exhibit 10-29 of the
Long Distance UK Ltd. dated Company's Report on Form
November 16, 1993, as 10-K for its year ended
amended December 31, 1995
("December 31, 1995 10-
K")
10-33 Employment Agreement between Incorporated by Reference
Steve M. Dubnik and ACC to Exhibit 10-30 of the
TelEnterprises Ltd. dated Company's December 31,
August 4, 1994 1995 10-K
10-34 ACC Corp. Non-Employee Incorporated by Reference
Directors' Stock Option Plan to Exhibit 99.1 to the
Company's February 22,
1996 8-K
10-35 Rules of the ACC Corp. 1996
UK Sharesave Scheme dated Filed herewith
August 5, 1996
10-36 Net Settlement Agreement Incorporated by Reference
dated September 9, 1996 to Exhibit 99.6 to the
between Teletek, Inc. and Company's September 17,
ACC Long Distance Corp. 1996 8-K
10-37 License Agreement between Incorporated by Reference
EDS of Canada Ltd. and ACC to Exhibit 99.7 to the
TelEnterprises Ltd. dated Company's September 17,
June 24, 1996 1996 8-K
10-38 Amendment to Salary Incorporated by Reference
Continuation and Deferred to Exhibit 99.8 to the
Compensation Agreement Company's September 17,
between ACC Corp. and 1996 8-K
Richard T. Aab dated
September 13, 1996
10-39 License Granted by the Filed herewith
Secretary of State for Trade
and Industry to ACC Long
Distance UK Ltd. Under
Section 7 of the
Telecommunications Act 1984
10-40 Leasehold Mortgage dated as Filed herewith
of January 14, 1997 by and
among ACC National Telecom
Corp. and First Union
National Bank of North
Carolina as Administrative
Agent relating to the leased
premises located at One
Commerce Plaza, Albany, New
York
10-41 Leasehold Mortgage dated as Filed herewith
of January 14, 1997 by and
among ACC Long Distance
Corp. and First Union
National Bank of North
Carolina as Administrative
Agent relating to the leased
premises located at 69
Delaware Avenue, Buffalo,
New York
10-42 Leasehold Mortgage dated as Filed herewith
of January 14, 1997 by and
among ACC National Telecom
Corp. and First Union
National Bank of North
Carolina as Administrative
Agent relating to the leased
premises located at 32 Old
Slip, New York, New York
10-43 Mortgage of Leasehold Filed herewith
Interest, dated as of
January 14, 1997, between
ACC TelEnterprises
Ltd./TelEnterprises ACC LTEE
and First Union National
Bank of North Carolina as
Administrative Agent
relating to the leased
premises located in
Vancouver, British Columbia,
Canada
11 Statement re: Computation of See Note 1 to the Notes
Per Share Earnings to the Consolidated
Financial Statements
filed herewith
13 Excerpts from 1996 Annual Filed herewith
Report to Shareholders
incorporated by reference
herein
21 Subsidiaries of ACC Corp. Filed herewith
23 Accountant's Consent re: Filed herewith
Incorporation by Reference
27 Financial Data Schedule Filed only with EDGAR
filing, per Reg. S-K,
Rule 601(c)(1)(v)
(b) Reports on Form 8-K. No reports on Form 8-K were filed
for the quarter ended December 31, 1996.
(c) Exhibits. See Exhibit Index.
(d) Financial Statement Schedules. Financial Statement
Schedules, along with the report of the independent public
accountants thereon, are as follows:
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ACC Corp.:
We have audited in accordance with generally accepted auditing
standards, the financial statements of ACC Corp. included in this
Form 10-K and have issued our report thereon dated January 24,
1997. Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. The schedules listed in
the accompanying index are the responsibility of the Company's
management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of
the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
Rochester, New York
March 27, 1997
/s/ Arthur Andersen LLP
<TABLE>
SCHEDULE II
ACC CORP AND SUBSIDIARIES
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1996, 1995, 1994
(000's)
<CAPTION>
Balance Charged Net Balance
at to Costs Charged Accounts at
Beginning and to Other Written End of
of Period Expenses Accounts Off Period
YEAR ENDED DECEMBER 31, 1996
<S> <C> <C> <S> <C> <C>
Allowance for doubtful accounts $2,085 $5,143 - ($3,433) $3,795
Valuation allowance for deferred tax assets $10,938 ($3,269) - - $7,669
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts $1,035 $3,284 - ($2,234) $2,085
Valuation allowance for deferred tax assets $7,454 $2,223 $1,261(1) - $10,938
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts $1,008 $2,345 - ($2,318) $1,035
Valuation allowance for deferred tax assets $603 $6,851 - - $7,454
______________________________
(1) Represents valuation allowance associated with loss carryforwards
of Metrowide Communications which was purchased by ACC Canada on
August 1, 1995.
</TABLE>
All other schedules are not submitted because they are not applicable,
not required or because the required information is included in
the consolidated financial statements or notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ACC CORP.
Dated: March 27, 1997 By: /s/ David K. Laniak
David K. Laniak,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this Report has been signed below by the following
persons, on behalf of the Company and in the capacities and on
the dates indicated.
Dated: March 27, 1997 By: /s/ David K. Laniak
David K. Laniak,
Chief Executive
Officer and a Director
Dated: March 27, 1997 By: /s/ Michael R. Daley
Michael R. Daley,
Executive Vice
President and Chief Financial
Officer (Principal Financial
and Accounting Officer)
Dated: March 27, 1997 By: /s/ Hugh F. Bennett
Hugh F. Bennett, Director
Dated: March 27, 1997 By: /s/ Arunas A. Chesonis
Arunas A. Chesonis,
President and a Director
Dated: March 27, 1997 By: /s/ Willard Z. Estey
Willard Z. Estey,Director
Dated: March ____, 1997 By:
Richard T. Aab, Director
Dated: March ____, 1997 By:
Daniel D. Tessoni,Director
Dated: March 27, 1997 By: /s/ Robert M. VanDegna
Robert M. Van Degna,Director
LIST OF EXHIBITS
Exhibit
Number Description Location
3-1 First Restated Certificate Incorporated by Reference
of Incorporation of ACC to Exhibit 3 to the
Corp. Company's Quarterly
Report on Form 10-Q for
its Quarter Ended
September 30, 1995
("September 30, 1995
10-Q")
3-2 Bylaws of ACC Corp., as Incorporated by Reference
amended on May 21, 1996 to Exhibit 99.5 to the
Company's Current Report
on Form 8-K filed on
September 17, 1996
("September 17, 1996
8-K")
4-1 Form of ACC Corp. Class A Incorporated by Reference
Common Stock Certificate to Exhibit 4-1 to the
Company's Registration
Statement on Form S-3,
No. 333-01157 declared
effective May 2, 1996
4-2 Form of Warrant to purchase Incorporated by Reference
7,500 Shares of Class A to Exhibit 99.4 to the
Common Stock dated October Company's Current Report
30, 1995 on Form 8-K filed on
February 22, 1996 8-K
("February 22, 1996 8-K")
10-1 Form of Employment Incorporated by Reference
Continuation Incentive to Exhibit 99.3 to the
Agreement between ACC Corp. Company's February 22,
and certain of its Key 1996 8-K
Employees
10-2 ACC Corp. Employee Long Term Incorporated by Reference
Incentive Plan, as amended to Exhibit 4-1 to the
through February 5, 1996 Company's Registration
Statement on Form S-8,
No. 333-01219, effective
February 26, 1996
10-3 Form of ACC Corp. Incorporated by Reference
Indemnification Agreement to Exhibit 10-29 to the
with its Directors and Company's Report on
certain of its Executive Form 10-K for its year
Officers ended December 31, 1987
10-4 ACC Corp. Employee Stock Incorporated by Reference
Purchase Plan to Exhibit 4-4 to the
Company's Registration
Statement on Form S-8,
No. 33-75558, effective
February 22, 1994
10-5 Employment Agreement between Incorporated by Reference
ACC Corp. and David K. to Exhibit 10-2 to the
Laniak, dated October 6, Company's September 30,
1995 1995 10-Q
10-6 Salary Continuation and Incorporated by Reference
Deferred Compensation to Exhibit 10-3 to the
Agreement between ACC Corp. Company's September 30,
and Richard T. Aab, dated 1995 10-Q
October 6, 1995
10-7 Non-Competition Agreement Incorporated by Reference
between ACC Corp. and to Exhibit 10-4 to the
Richard T. Aab, dated Company's September 30,
October 6, 1995 1995 10-Q
10-8 Release and Settlement Incorporated by Reference
Agreement between ACC Corp. to Exhibit 99.2 to the
and Francis Coleman, dated Company's February 22,
December 29, 1995 1996 8-K
10-9 Software License Agreement Incorporated by Reference
dated March 30, 1995 by and to Exhibit 99.5 to the
between AMBIX Systems Corp. Company's February 22,
and ACC Corp. 1996 8-K
10-10 Software License Agreement Incorporated by Reference
dated February 21, 1996 to Exhibit 99.6 to the
between AMBIX Acquisition Company's February 22,
Corp. and ACC Corp. 1996 8-K
10-11 Bill of Sale from AMBIX Incorporated by Reference
Systems Corp. to ACC Corp. to Exhibit 99.7 to the
dated February 6, 1996 Company's February 22,
1996 8-K
10-12 Letter Agreement dated Incorporated by Reference
April 27, 1995 between the to Exhibit 99.8 to the
Special Committee of the Company's February 22,
Board of Directors of ACC 1996 8-K
Corp. and Richard T. Aab
10-13 Lease dated January 25, 1994 Incorporated by Reference
between the Hague to Exhibit 99.9 to the
Corporation and ACC Corp., Company's February 22,
as modified by a Lease 1996 8-K
Modification Agreement No. 1
dated May 31, 1994 and a
Lease Modification Agreement
No. 2 dated May 31, 1994,
relating to the leased
premises located at 400 West
Avenue, Rochester, New York
10-14 Amended and Restated Lease Incorporated by Reference
Agreement dated March 1, to Exhibit 99.10 to the
1994 between ACC Long Company's February 22,
Distance Inc./Interurbains 1996 8-K
ACC Inc. and Coopers &
Lybrand relating to the
leased premises located at
5343 Dundas Street West,
Etobicoke, Ontario, Canada
10-15 Underlease Agreement dated Incorporated by Reference
December 23, 1993 between to Exhibit 99.11 to the
ACC Long Distance UK Company's February 22,
Limited, IBM United Kingdom 1996 8-K
Limited, and ACC Corp.
relating to the leased
premises located on the
tenth floor at The Chiswick
Centre 414 Chiswick High
Road, London, England
10-16 Underlease Agreement dated Incorporated by Reference
June 6, 1995 between ACC to Exhibit 99.12 to the
Long Distance UK Limited, Company's February 22,
IBM United Kingdom Limited, 1996 8-K
and ACC Corp. relating to
the leased premises located
on the first floor at The
Chiswick Centre 414 Chiswick
High Road, London, England
10-17 Supplemental Lease Agreement Incorporated by Reference
dated June 3, 1994 between to Exhibit 99.13 to the
ACC Long Distance UK Company's February 22,
Limited, IBM United Kingdom 1996 8-K
Limited, and ACC Corp.
relating to the leased
premises located on the
ninth floor at The Chiswick
Centre 414 Chiswick High
Road, London, England
10-18 Amended and Restated Credit Filed herewith
Agreement, dated as of
January 14, 1997, by and
among ACC Corp. and certain
Subsidiaries as Borrowers,
ACC Corp. as Guarantor,
First Union National Bank of
North Carolina as Managing
Agent and Administrative
Agent, and Fleet National
Bank, as Managing Agent and
Documentation Agent
10-19 Leasehold Mortgage dated Incorporated by Reference
July 21, 1995 between ACC to Exhibit 99.16 to the
Corp. and First Union Company's February 22,
National Bank of North 1996 8-K
Carolina relating to the
leased premises located at
400 West Avenue, Rochester,
New York ("Rochester
Leasehold Mortgage")
10-20 Modification to Rochester Filed herewith
Leasehold Mortgage dated
January 14, 1997
10-21 Leasehold Mortgage dated Incorporated by Reference
July 21, 1995 between ACC to Exhibit 99.16 to the
Corp. and First Union Company's February 22,
National Bank of North 2996 8-K
Carolina relating to the
leased premises located at
Suite 206, State Tower
Building, 109 South Warren
Street, Syracuse, New York
("Syracuse Leasehold
Mortgage")
10-22 Modification to Syracuse Filed herewith
Leasehold Mortgage dated
January 14, 1997
10-23 Leasehold Mortgage dated Incorporated by Reference
July 21, 1995 between ACC to Exhibit 99.17 to the
Corp. and First Union Company's February 22,
National Bank of North 1996 8-K
Carolina relating to the
leased premises located at
Suite 2200, Suite 204 and
Suite 205, State Tower
Building, 109 South Warren
Street, Syracuse, New York
("Additional Syracuse
Leasehold Mortgage")
10-24 Modification to Additional Filed herewith
Syracuse Leasehold Mortgage
dated January 14, 1997
10-25 Mortgage of Leasehold Filed herewith
Interest, dated as of
January 14, 1997, between
ACC TelEnterprises
Ltd./TelEnterprises ACC LTEE
and First Union National
Bank of North Carolina, as
Agent, relating to the
leased premises located at
One Toronto Street, Toronto,
Ontario, Canada
10-26 Mortgage of Leasehold Filed herewith
Interest, dated as of
January 14, 1997, between
ACC TelEnterprises
Ltd./TelEnterprises ACC LTEE
and First Union National
Bank of North Carolina, as
Agent, relating to the
leased premises located at
5343 Dundas Street West,
Etobicoke, Ontario, Canada
10-27 Amended and Restated Pledge Filed herewith
Agreement dated as of
January 14, 1997 by ACC
Corp. in favor of First
Union National Bank of North
Carolina as Administrative
Agent
10-28 Amended and Restated Pledge Filed herewith
Agreement dated as of
January 14, 1997 by ACC
National Long Distance Corp.
in favor of First Union
National Bank of North
Carolina as Administrative
Agent
10-29 Amended and Restated Filed herewith
Security Agreement dated as
of January 14, 1997 between
ACC Corp., certain Domestic
Subsidiaries of the Company
and First Union National
Bank of North Carolina as
Administrative Agent
10-30 Amended and Restated Filed herewith
Trademark Security Agreement
dated as of January 14, 1997
between ACC Corp. and First
Union National Bank of North
Carolina as Administrative
Agent
10-31 License Agreement dated Incorporated by Reference
July 1, 1993 between to Exhibit 99.23 to the
Hudson's Bay Company and ACC Company's February 22,
Long Distance Inc. 1996 8-K
10-32 Employment Agreement between Incorporated by Reference
Christopher Bantoft and ACC to Exhibit 10-29 of the
Long Distance UK Ltd. dated Company's Report on Form
November 16, 1993, as 10-K for its year ended
amended December 31, 1995
("December 31, 1995 10-
K")
10-33 Employment Agreement between Incorporated by Reference
Steve M. Dubnik and ACC to Exhibit 10-30 of the
TelEnterprises Ltd. dated Company's December 31,
August 4, 1994 1995 10-K
10-34 ACC Corp. Non-Employee Incorporated by Reference
Directors' Stock Option Plan to Exhibit 99.6 to the
Company's September 17,
1996 8-K
10-35 Rules of the ACC Corp. 1996 Filed herewith
UK Sharesave Scheme dated
August 5, 1996
10-36 Net Settlement Agreement Incorporated by Reference
dated September 9, 1996 to Exhibit 99.6 to the
between Teletek, Inc. and Company's September 17,
ACC Long Distance Corp. 1996 8-K
10-37 License Agreement between Incorporated by Reference
EDS of Canada Ltd. and ACC to Exhibit 99.7 to the
TelEnterprises Ltd. dated Company's September 17,
June 24, 1996 1996 8-K
10-38 Amendment to Salary Incorporated by Reference
Continuation and Deferred to Exhibit 99.8 to the
Compensation Agreement Company's
between ACC Corp. and September 17, 1996 8-K
Richard T. Aab dated
September 13, 1996
10-39 License Granted by the Filed herewith
Secretary of State for Trade
and Industry to ACC Long
Distance UK Ltd. Under
Section 7 of the
Telecommunications Act 1984
10-40 Leasehold Mortgage dated as Filed herewith
of January 14, 1997 by and
among ACC National Telecom
Corp. and First Union
National Bank of North
Carolina as Administrative
Agent relating to the leased
premises located at One
Commerce Plaza, Albany, New
York
10-41 Leasehold Mortgage dated as Filed herewith
of January 14, 1997 by and
among ACC Long Distance
Corp. and First Union
National Bank of North
Carolina as Administrative
Agent relating to the leased
premises located at 69
Delaware Avenue, Buffalo,
New York
10-42 Leasehold Mortgage dated as Filed herewith
of January 14, 1997 by and
among ACC National Telecom
Corp. and First Union
National Bank of North
Carolina as Administrative
Agent relating to the leased
premises located at 32 Old
Slip, New York, New York
10-43 Mortgage of Leasehold Filed herewith
Interest, dated as of
January 14, 1997, between
ACC TelEnterprises
Ltd./TelEnterprises ACC LTEE
and First Union National
Bank of North Carolina as
Administrative Agent
relating to the leased
premises located in
Vancouver, British Columbia,
Canada
11 Statement re: Computation of See Note 1 to the Notes
Per Share Earnings to the Consolidated
Financial Statements
filed herewith
13 Excerpts from 1996 Annual Filed herewith
Report to Shareholders
incorporated by reference
herein
21 Subsidiaries of ACC Corp. Filed herewith
23 Accountant's Consent re: Filed herewith
Incorporation by Reference
27 Financial Data Schedule Filed only with EDGAR
filing, per Reg. S-K,
Rule 601(c)(1)(v)
Exhibit 10-18
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of January 14, 1997
by and among
ACC CORP.,
and certain Subsidiaries thereof designated herein,
as Borrowers,
ACC CORP.,
as Guarantor,
the Lenders referred to herein,
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Managing Agent and Administrative Agent,
and
FLEET NATIONAL BANK,
as Managing Agent and Documentation Agent
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. General . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 1.3. Other Definitions and Provisions. . . . . . . . . . . . . . . 22
ARTICLE II
CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans. . . . . . . . . . . . . . . . . . . . 23
SECTION 2.2. Swingline Loans.. . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.3. Procedure for Advances of Revolving Credit
and Swingline Loans.. . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.4. Repayment of Extensions of Credit . . . . . . . . . . . . . . 27
SECTION 2.5. Notes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.6. Permanent Reductions of the Aggregate
Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.7. Termination of Credit Facility. . . . . . . . . . . . . . . . 31
SECTION 2.8. Use of Proceeds.. . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.9. Nature of Obligations; Security.. . . . . . . . . . . . . . . 31
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1. L/C Commitment. . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.2. Procedure for Issuance of Letters of Credit . . . . . . . . . 32
SECTION 3.3. Fees and Other Charges. . . . . . . . . . . . . . . . . . . . 33
SECTION 3.4. L/C Participations. . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.5. Reimbursement Obligation of the Borrower. . . . . . . . . . . 35
SECTION 3.6. Obligations Absolute. . . . . . . . . . . . . . . . . . . . . 35
SECTION 3.7. Effect of Application . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.2. Notice and Manner of Conversion or Continuation
of Revolving Credit Loans . . . . . . . . . . . . . . . . . . 39
SECTION 4.3. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.4. Manner of Payment . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.5. Crediting of Payments and Proceeds. . . . . . . . . . . . . . 42
SECTION 4.6. Nature of Obligations of Lenders
Regarding Extensions of Credit; Assumption
by Administrative Agent . . . . . . . . . . . . . . . . . . . 43
SECTION 4.7. Regulatory Limitation . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.8. Changed Circumstances . . . . . . . . . . . . . . . . . . . . 44
SECTION 4.9. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.10.Capital Requirements . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.11.Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.2. Conditions to Closing and Initial Extensions
of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.3. Conditions to All Extensions of Credit. . . . . . . . . . . . 54
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BORROWERS
SECTION 6.1. Representations and Warranties. . . . . . . . . . . . . . . . 55
SECTION 6.2. Survival of Representations and Warranties,
Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
SECTION 7.1. Financial Statements and Projections. . . . . . . . . . . . . 64
SECTION 7.2. Officer's Compliance Certificate. . . . . . . . . . . . . . . 65
SECTION 7.3. Accountants' Certificate. . . . . . . . . . . . . . . . . . . 66
SECTION 7.4. Other Reports . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 7.5. Notice of Litigation and Other Matters. . . . . . . . . . . . 66
SECTION 7.6. Accuracy of Information . . . . . . . . . . . . . . . . . . . 68
SECTION 7.7. Revisions or Updates to Schedules . . . . . . . . . . . . . . 68
ARTICLE VIII
AFFIRMATIVE COVENANTS
SECTION 8.1. Preservation of Corporate Existence and
Related Matters . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.2. Maintenance of Property . . . . . . . . . . . . . . . . . . . 69
SECTION 8.3. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 8.4. Accounting Methods and Financial Records. . . . . . . . . . . 69
SECTION 8.5. Payment and Performance of Obligations. . . . . . . . . . . . 70
SECTION 8.6. Compliance With Laws and Approvals. . . . . . . . . . . . . . 70
SECTION 8.7. Environmental Laws. . . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.8. Employee Benefit, Pension and Retirement Laws . . . . . . . . 70
SECTION 8.9. Compliance With Agreements. . . . . . . . . . . . . . . . . . 71
SECTION 8.10.Conduct of Business. . . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.11.Visits and Inspections . . . . . . . . . . . . . . . . . . . . 71
SECTION 8.12.Material Subsidiaries; Additional Collateral . . . . . . . . . 71
SECTION 8.13.Hedging Agreement. . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 8.14.Further Assurances.. . . . . . . . . . . . . . . . . . . . . . 73
SECTION 8.15.Post-Closing Delivery. . . . . . . . . . . . . . . . . . . . . 73
ARTICLE IX
FINANCIAL COVENANTS
SECTION 9.1. Maximum Leverage Ratio. . . . . . . . . . . . . . . . . . . . 73
SECTION 9.2. Minimum Pro Forma Debt Service Coverage Ratio.. . . . . . . . 74
SECTION 9.3. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . 74
SECTION 9.4. Capital Expenditures. . . . . . . . . . . . . . . . . . . . . 74
SECTION 9.5. Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE X
NEGATIVE COVENANTS
SECTION 10.1. Limitations on Debt. . . . . . . . . . . . . . . . . . . 75
SECTION 10.2. Limitations on Contingent Obligations. . . . . . . . . . 75
SECTION 10.3. Limitations on Liens . . . . . . . . . . . . . . . . . . 76
SECTION 10.4. Limitations on Loans, Advances, Investments
and Acquisitions . . . . . . . . . . . . . . . . . . . . 77
SECTION 10.5. Limitations on Mergers and Liquidation . . . . . . . . . 79
SECTION 10.6. Limitations on Sale of Assets. . . . . . . . . . . . . . 79
SECTION 10.7. Limitations on Dividends and Distributions.. . . . . . . 80
SECTION 10.8. Limitations on Exchange and Issuance of
Capital Stock . . . . . . . . . . . . . . . . . . . . . 80
SECTION 10.9. Transactions with Affiliates . . . . . . . . . . . . . . 80
SECTION 10.10. Certain Accounting Changes . . . . . . . . . . . . . . . 81
SECTION 10.11. Amendments; Payments and Prepayments of
Subordinated Debt . . . . . . . . . . . . . . . . . . . 81
SECTION 10.12. Restrictive Agreements.. . . . . . . . . . . . . . . . . 81
SECTION 10.13. Hedging Agreements.. . . . . . . . . . . . . . . . . . . 81
ARTICLE XI
UNCONDITIONAL GUARANTY
SECTION 11.1. Guaranty of Obligations. . . . . . . . . . . . . . . . . 81
SECTION 11.2. Nature of Guaranty.. . . . . . . . . . . . . . . . . . . 82
SECTION 11.3. Demand by the Administrative Agent.. . . . . . . . . . . 83
SECTION 11.4. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 11.5. Modification of Loan Documents etc . . . . . . . . . . . 83
SECTION 11.6. Reinstatement. . . . . . . . . . . . . . . . . . . . . . 84
SECTION 11.7. No Subrogation . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1. Events of Default. . . . . . . . . . . . . . . . . . . . 85
SECTION 12.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 12.3. Rights and Remedies Cumulative; Non-Waiver; etc. . . . . 89
SECTION 12.4. Consents . . . . . . . . . . . . . . . . . . . . . . . . 90
SECTION 12.5. Judgment Currency. . . . . . . . . . . . . . . . . . . . 90
SECTION 12.6. Adjustments. . . . . . . . . . . . . . . . . . . . . . . 90
ARTICLE XIII
THE AGENTS
SECTION 13.1. Appointment. . . . . . . . . . . . . . . . . . . . . . . 91
SECTION 13.2. Delegation of Duties . . . . . . . . . . . . . . . . . . 91
SECTION 13.3. Exculpatory Provisions . . . . . . . . . . . . . . . . . 92
SECTION 13.4. Reliance by Agents . . . . . . . . . . . . . . . . . . . 92
SECTION 13.5. Notice of Default. . . . . . . . . . . . . . . . . . . . 93
SECTION 13.6. Non-Reliance on Such Agents and Other Lenders. . . . . . 93
SECTION 13.7. Indemnification. . . . . . . . . . . . . . . . . . . . . 94
SECTION 13.8. Each of the Agents in Its Individual Capacity. . . . . . 94
SECTION 13.9. Resignation of Agents; Successor Agents. . . . . . . . . 94
SECTION 13.10 Documentation Agent. . . . . . . . . . . . . . . . . . . 95
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 14.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 14.3. Set-off. . . . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 14.4. Governing Law. . . . . . . . . . . . . . . . . . . . . . 97
SECTION 14.5. Consent to Jurisdiction. . . . . . . . . . . . . . . . . 98
SECTION 14.6. Binding Arbitration; Waiver of Jury Trial. . . . . . . . 98
SECTION 14.7. Reversal of Payments . . . . . . . . . . . . . . . . . . 99
SECTION 14.8. Injunctive Relief. . . . . . . . . . . . . . . . . . . . 100
SECTION 14.9. Accounting Matters . . . . . . . . . . . . . . . . . . . 100
SECTION 14.10. Successors and Assigns; Participations . . . . . . . . . 100
SECTION 14.11. Amendments, Waivers and Consents; Renewal. . . . . . . . 105
SECTION 14.12. Performance of Duties. . . . . . . . . . . . . . . . . . 105
SECTION 14.13. Indemnification. . . . . . . . . . . . . . . . . . . . . 105
SECTION 14.14. All Powers Coupled with Interest . . . . . . . . . . . . 106
SECTION 14.15. Survival of Indemnities. . . . . . . . . . . . . . . . . 106
SECTION 14.16. Titles and Captions. . . . . . . . . . . . . . . . . . . 107
SECTION 14.17. Severability of Provisions . . . . . . . . . . . . . . . 107
SECTION 14.18. Counterparts . . . . . . . . . . . . . . . . . . . . . . 107
SECTION 14.19. ACC as Agent for Other Borrowers . . . . . . . . . . . . 107
SECTION 14.20. Term of Agreement. . . . . . . . . . . . . . . . . . . . 107
SECTION 14.21. Inconsistencies with Other Documents;
Independent Effect of Covenants . . . . . . . . . . . . 107
<PAGE>
EXHIBITS
Exhibit A-1 - Form of Domestic Revolving Credit Note
Exhibit A-2 - Form of U.K. Revolving Credit Note
Exhibit A-3 - Form of Canadian Revolving Credit Note
Exhibit A-4 - Form of Swingline Note
Exhibit B - Form of Notice of Borrowing
Exhibit C - Form of Notice of Prepayment
Exhibit D - Form of Notice of Conversion/Continuation
Exhibit E - Form of Officer's Certificate
Exhibit F - Form of Notice of Account Designation
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Pledge Agreement
Exhibit I - Form of Security Agreement
Exhibit J - Form of Landlord Consent
Exhibit K - Form of Modification to Leasehold Mortgage
Exhibit L - Form of Joinder Agreement
Exhibit M - Form of Intercompany Subordination Agreement
Exhibit N - Form of U.K. Guaranty Agreement
SCHEDULES
Schedule 1 - Lenders and Commitments
Schedule 1.2 - Sublimits
Schedule 1.3 - Canadian Security Documents
Schedule 6.1(a) - Jurisdictions of Organization and Qualification
Schedule 6.1(b) - Subsidiaries and Capitalization
Schedule 6.1(i) - ERISA Plans
Schedule 6.1(l) - Material Contracts
Schedule 6.1(m) - Labor and Collective Bargaining Agreements
Schedule 6.1(t) - Debt and Contingent Obligations
Schedule 6.1(u) - Litigation
Schedule 10.3 - Existing Liens
Schedule 10.4 - Existing Loans, Advances and Investments
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the 14th
day of January, 1997, by and among ACC CORP., a corporation organized
under the laws of Delaware ("ACC"), and the Subsidiaries thereof
designated as Borrowers herein, as Borrowers, ACC, as Guarantor, the
Lenders who are or may become a party to this Agreement, FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, a national banking association, as
Managing Agent and Administrative Agent and FLEET NATIONAL BANK, a
national banking association, as Managing Agent and Documentation Agent.
STATEMENT OF PURPOSE
The Borrowers have requested and the Lenders have agreed to
amend and restate the Original Credit Agreement (as hereinafter defined)
pursuant to the terms hereof in order to extend certain credit
facilities to the Borrowers. ACC, as parent of the other Borrowers,
will benefit directly and indirectly from the extension of such credit
facilities to such other Borrowers. As a precondition to making any
extensions of credit hereunder, the Lenders have required, and ACC has
agreed, to execute this Agreement as Guarantor.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties
hereto, such parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms when used in
this Agreement shall have the meanings assigned to them below:
"ACC" means ACC Corp., a corporation organized under the laws
of Delaware, and its successors.
"ACC Canada" means ACC TelEnterprises Ltd., a corporation
organized under the laws of Ontario, and its successors.
"ACC Global Corp." means ACC Global Corp., a corporation
organized under the laws of Delaware, and its successors.
"ACC LEC" means ACC National Telecom Corp., a corporation
organized under the laws of Delaware, and its successors.
"ACC Mass." means ACC Long Distance of Massachusetts Corp., a
corporation organized under the laws of Delaware, and its successors.
"ACC National" means ACC National Long Distance Corp., a
corporation organized under the laws of Delaware, and its successors.
"ACC National Pledge Agreement" means the Amended and Restated
Pledge Agreement of even date executed by ACC National in favor of the
Administrative Agent for the benefit of itself and the Lenders
substantially in the form of Exhibit H, as amended, restated or
otherwise modified.
"ACC Pledge Agreement" means the Amended and Restated Pledge
Agreement of even date executed by ACC in favor of the Administrative
Agent for the benefit of itself and the Lenders substantially in the
form of Exhibit H, as amended, restated or otherwise modified.
"ACC Radio" means ACC Radio Corp., a corporation organized
under the laws of New York, and its successors.
"ACC U.K." means ACC Long Distance U.K., Ltd., a corporation
organized under the laws of the United Kingdom, and its successors.
"ACC U.S." means ACC Long Distance Corp., a corporation
organized under the laws of New York, and its successors.
"Additional Borrower" means any Material Subsidiary which has
become a Borrower hereunder in accordance with Section 8.12.
"Administrative Agent" means First Union in its capacity as
administrative agent hereunder, and any successor thereto appointed
pursuant to Section 13.9.
"Administrative Agent's Correspondent" means First Union
National Bank, London Branch, or any other financial institution
designated by the Administrative Agent to act as its correspondent
hereunder with respect to distribution and payment of Extensions of
Credit denominated in Alternative Currencies.
"Administrative Agent's Office" means the office of the
Administrative Agent specified in or determined in accordance with the
provisions of Section 14.1.
"Affiliate" means, with respect to any Person and its
Subsidiaries, any other Person (other than a Subsidiary thereof) which
directly or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such first Person or
any of its Subsidiaries. The term "control" means (a) the power to vote
ten percent (10%) or more of the securities or other equity interests of
a Person having ordinary voting power, or (b) the possession, directly
or indirectly, of any other power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
voting securities, by contract or otherwise.
"Agents" means the collective reference to the Managing
Agents, Documentation Agent and Administrative Agent.
"Aggregate Commitment" means the aggregate amount of the
Lenders' Commitments hereunder, as such amount may be reduced or
modified at any time or from time to time pursuant to the terms hereof.
On the Closing Date, the Aggregate Commitment shall be One Hundred
Million Dollars ($100,000,000).
"Agreement" means this Amended and Restated Credit Agreement,
as further amended, restated or otherwise modified from time to time.
"Alternative Currency" means Sterling or Canadian Dollars, or
both such currencies, as the context requires.
"Alternative Currency Amount" means with respect to each
Extension of Credit made or continued (or to be made or continued) in an
Alternative Currency, the amount of such Alternative Currency which is
equivalent to the principal amount in Dollars of such Extension of
Credit at the most favorable spot exchange rate determined by the
Administrative Agent to be available to its London branch at
approximately 11:00 a.m. (London time) two (2) Business Days before such
Extension of Credit is made, continued or issued (or to be made,
continued or issued). When used with respect to any other sum expressed
in Dollars, "Alternative Currency Amount" shall mean the amount of such
Alternative Currency which is equivalent to the amount so expressed in
Dollars at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it at the relevant time.
"Applicable Law" means all applicable provisions of
constitutions, laws, statutes, treaties, rules, regulations and orders
of all Governmental Authorities and all orders and decrees of all courts
and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in
Section 4.1(c).
"Application" means an application, in the form specified by
the Issuing Lender from time to time, requesting the Issuing Lender to
issue a Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned
thereto in Section 14.10.
"Available Commitment" means, as to any Lender at any time, an
amount equal to the excess, if any, of (a) such Lender's Commitment
minus (b) such Lender's Extensions of Credit.
"Authorized Officer" means with respect to any Person, the
chief executive officer, chief financial officer, or vice president of
finance of such Person.
"Base Rate" means, at any time, the rate of interest per annum
which is the higher of (a) the Prime Rate or (b) the Federal Funds Rate
as determined by the Administrative Agent plus 1/2 of 1%; each change in
the Base Rate shall take effect simultaneously with the corresponding
change or changes in the Prime Rate or the Federal Funds Rate.
"Base Rate Loan" means any Loan denominated in Dollars bearing
interest at a rate determined with reference to the Base Rate as
provided in Section 4.1(a) hereof.
"Borrowers" means the collective reference to the Domestic
Borrowers, Canadian Borrowers and U.K. Borrowers party hereto on the
Closing Date and each Additional Borrower in its capacity as a Borrower
hereunder.
"Business Day" means (a) for all purposes other than as set
forth in clause (b) below, any day other than a Saturday, Sunday or
legal holiday on which banks in Charlotte, North Carolina are open for
the conduct of their domestic and international commercial banking
business, and (b) with respect to all notices and determinations in
connection with, and payments of principal and interest on, any
Extension of Credit to be denominated in an Alternative Currency or on
any LIBOR Rate Loan, any day (i) that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in
deposits for the applicable Permitted Currency in the London interbank
market and (ii) on which banks are open for the conduct of their
domestic and international banking business in the place where the
Administrative Agent or the Administrative Agent's Correspondent shall
make available Extensions of Credit in such Permitted Currency.
"Canadian Base Rate" shall mean, at any time, that annual rate
of interest quoted, published or announced by Royal Bank of Canada from
time to time or commonly known to be its Canadian Dollar base rate
(which may not necessarily be its lowest or best rate then in effect for
determining interest rates on commercial loans made in Canada by it), as
adjusted to conform to changes in such rate as of the opening of
business on the date of any such change in such rate the whole without
notice to any Borrower, plus the Applicable Margin with respect to Base
Rate Loans in effect at such time. Each Loan or portion thereof bearing
interest based on the Canadian Base Rate shall be a "Canadian Base Rate
Loan."
"Canadian Borrowers" means the collective reference to all
Borrowers and Additional Borrowers organized under the laws of Canada or
any province thereof.
"Canadian Dollars" means dollars in the lawful currency of
Canada.
"Canadian Law" means all applicable provisions of
constitutions, laws, statutes, treaties, rules, regulations and orders
of Canada and any political subdivision thereof and all orders and
decrees of all courts and arbitrators of such jurisdictions.
"Canadian Plan" means any employee benefit plan which ACC or
any Subsidiary thereof maintains or to which it is obligated to
contribute and which is subject to any Canadian federal or provincial
law relating to employee benefit plans, pension benefits or retirement
savings.
"Canadian Security Documents" means the collective reference
to documents set forth on Schedule 1.3 and any other agreement or
writing pursuant to which a Canadian Borrower or Canadian Subsidiary
pledges or grants a security interest in its assets in order to secure
the payment and/or performance of any Canadian Borrower under a Loan
Document, in each case as amended, restated or otherwise modified.
"Canadian Subsidiary" means a Subsidiary organized under the
laws of Canada or any province thereof.
"Canadian Termination Event" means any termination of a
Canadian Plan or any other event or condition which would constitute
grounds for or result in (a) the termination of a Canadian Plan; or (b)
the appointment of a trustee to administer any Canadian Plan; or (c) the
partial or complete withdrawal of ACC or any of its Subsidiaries from a
Canadian Plan; or (d) the imposition of a lien, charge or prior claim on
the assets of a Canadian Plan; or (d) the reorganization or insolvency
of a Canadian Plan; or (e) a material liability of any applicable
Borrower or Borrowers to a Canadian Plan or, in the reasonable opinion
of any firm of independent Canadian chartered accountants or actuaries,
a reasonable likelihood of such a material liability; or (f) a material
liability of any applicable Borrower or Borrowers to any federal or
provincial Governmental Authority with respect to a Canadian Plan or, in
the reasonable opinion of any firm of independent Canadian chartered
accountants or actuaries, a reasonable likelihood of such a material
liability.
"Capital Asset" means, with respect to ACC and its
Subsidiaries, any asset that would, in accordance with GAAP, be required
to be classified and accounted for as a capital asset on a Consolidated
balance sheet of ACC and its Subsidiaries.
"Capital Expenditures" means, with respect to ACC and its
Subsidiaries for any period, the aggregate cost of all Capital Assets
acquired by any such Person during such period, determined in accordance
with GAAP; provided, that the aggregate purchase price with respect to
any acquisition or Controlled Venture permitted under Section 10.4(c)
will not be included in Capital Expenditures.
"Capital Lease" means, with respect to ACC and its
Subsidiaries, any lease of any property that would, in accordance with
GAAP, be required to be classified and accounted for as a capital lease
on a Consolidated balance sheet of ACC and its Subsidiaries.
"Change in Control" shall have the meaning assigned thereto in
Section 12.1(i).
"Closing Date" means the date of this Agreement or such later
Business Day upon which each condition described in Article V shall be
satisfied or waived in all respects in a manner acceptable to the Agents
in their sole discretion.
"Code" means the Internal Revenue Code of 1986, and the rules
and regulations thereunder, each as amended or supplemented from time to
time.
"Collateral" means any assets pledged by ACC or any of its
Subsidiaries to the Lenders or to the Administrative Agent for the
ratable benefit of the Agents and the Lenders in order to secure the
Obligations or any portion thereof.
"Commitment" means, as to any Lender, the obligation of such
Lender to make Loans hereunder and issue or participate in Letters of
Credit hereunder in an aggregate outstanding principal amount not to
exceed at any time the amount set forth opposite such Lender's name on
Schedule 1.1, as the same may be reduced or modified at any time or from
time to time pursuant to the terms hereof.
"Commitment Percentage" means, as to any Lender at any time,
the ratio of (a) the amount of the Commitment of such Lender to (b) the
Aggregate Commitment of all of the Lenders.
"Communications License" means any long distance
telecommunications or other license, permit, consent, certificate of
compliance, franchise, approval, waiver or authorization granted or
issued by the FCC, CRTC, DTI or OFTEL including, without limitation, any
of the foregoing authorizing or permitting the acquisition, construction
or operation of Network Facilities or any other long distance
telecommunications system.
"Consolidated" means, when used with reference to financial
statements or financial statement items of ACC and its Subsidiaries,
such statements or items on a consolidated basis in accordance with
applicable principles of consolidation under GAAP.
"Contingent Interest Agreement" means the Contingent Interest
Agreement dated July 21, 1995 between ACC, First Union and Fleet, as
amended, restated or otherwise modified.
"Contingent Obligation" means, with respect to ACC and its
Subsidiaries, without duplication, any obligation, contingent or
otherwise, of any such Person pursuant to which such Person has directly
or indirectly guaranteed any Debt or other obligation of any other
Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of any such
Person (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising
by virtue of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into
for the purpose of assuring in any other manner the obligee of such Debt
or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part); provided, that
the term Contingent Obligation shall not include endorsements for
collection or deposit in the ordinary course of business.
"Controlled Venture" means any joint venture with respect to
which ACC beneficially owns a greater than 66.6% equity interest.
"Credit Facility" means the collective reference to the
revolving credit facility and swingline facility established pursuant to
Article II hereof and the L/C Facility.
"CRTC" means the Canadian Radio-Television and
Telecommunications Commission or any successor Governmental Authority.
"Debt" means, with respect to ACC and its Subsidiaries at any
date and without duplication, the sum of the following calculated in
accordance with GAAP: (a) all liabilities, obligations and indebtedness
for borrowed money including but not limited to obligations evidenced by
bonds, debentures, notes or other similar instruments of any such
Person, (b) all obligations to pay the deferred purchase price of
property or services of any such Person, except trade payables arising
in the ordinary course of business not more than ninety (90) days past
due, (c) all obligations of any such Person as lessee under Capital
Leases, (d) all Debt of any other Person secured by a Lien on any asset
of any such Person, (e) all Contingent Obligations of any such Person
and (f) all obligations, contingent or otherwise, of any such Person
relative to the face amount of letters of credit, whether or not drawn,
including without limitation any Reimbursement Obligation, and banker's
acceptances issued for the account of any such Person.
"Default" means any of the events specified in Section 12.1
which with the passage of time, the giving of notice or any other
condition, would constitute an Event of Default.
"Documentation Agent" means Fleet in its capacity as
Documentation Agent hereunder.
"Dollars" or "$" means, unless otherwise qualified, dollars in
lawful currency of the United States.
"Dollar Amount" means (a) with respect to each Loan made or
continued (or to be made or continued), or each Letter of Credit issued
(or to be issued), in Dollars, the principal amount thereof and (b) with
respect to each Loan made or continued (or to be made or continued), or
each Letter of Credit issued (or to be issued), in an Alternative
Currency, the amount of Dollars which is equivalent to the principal
amount of such Extension of Credit at the most favorable spot exchange
rate determined by the Administrative Agent at approximately 11:00 A.M.
(Charlotte time) two (2) Business Days before such Extension of Credit
is made, continued or issued (or to be made, continued or issued). When
used with respect to any other sum expressed in an Alternative Currency,
"Dollar Amount" shall mean the amount of Dollars which is equivalent to
the amount so expressed in such Alternative Currency at the most
favorable spot exchange rate determined by the Administrative Agent to
be available to it at the relevant time.
"Domestic Borrowers" means the collective reference to all
Borrowers and Additional Borrowers organized under the laws of any State
of the United States or the District of Columbia.
"Domestic Subsidiary" means a Subsidiary organized under the
laws of any State of the United States or the District of Columbia.
"DTI" means the Department of Trade and Industry of the United
Kingdom or any successor Governmental Authority.
"Eligible Assignee" means, with respect to any assignment of
the rights, interest and obligations of a Lender hereunder, a Person
that is at the time of such assignment (a) a commercial bank organized
under the laws of the United States or any state thereof, having
combined capital and surplus in excess of $500,000,000, (b) a finance
company, insurance company or other financial institution which in the
ordinary course of business extends credit of the type extended
hereunder and that has total assets in excess of $1,000,000,000, (c)
already a Lender hereunder (whether as an original party to this
Agreement or as the assignee of another Lender) or (d) the successor
(whether by transfer of assets, merger or otherwise) to all or
substantially all of the commercial lending business of the assigning
Lender, and, in the case of (a), (b) or any other Person, has been
approved in writing as an Eligible Assignee by ACC and the
Administrative Agent.
"Employee Benefit Plan" means any employee benefit plan within
the meaning of Section 3(3) of ERISA which (i) is maintained for
employees of ACC or any ERISA Affiliate or (ii) has at any time within
the preceding six years been maintained for the employees of ACC or any
current or former ERISA Affiliate.
"Environmental Laws" means any and all federal, state,
provincial and local laws, statutes, ordinances, rules, regulations,
permits, licenses, approvals, interpretations and orders of courts or
Governmental Authorities, relating to the protection of human health or
the environment, including, but not limited to, requirements pertaining
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, and the rules and regulations thereunder, each as amended,
restated or otherwise modified from time to time.
"ERISA Affiliate" means any Person who together with the ACC
is treated as a single employer within the meaning of Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b) of ERISA.
"Event of Default" means any of the events specified in
Section 12.1, provided that any requirement for passage of time, giving
of notice, or any other condition, has been satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Extensions of Credit" means, as to any Lender at any time, an
amount equal to the sum of (a) the aggregate principal Dollar Amount of
all Loans made by such Lender then outstanding and (b) such Lender's
Commitment Percentage of the L/C Obligations then outstanding.
"FCC" means the Federal Communications Commission or any
successor Governmental Authority.
"Federal Funds Rate" means, the rate per annum (rounded
upwards, if necessary, to the next higher 1/100th of 1%) representing
the daily effective federal funds rate as quoted by the Administrative
Agent and confirmed in Federal Reserve Board Statistical release H.15
(519) or any successor or substitute publication selected by such Agent.
If, for any reason, such rate is not available, then "Federal Funds
Rate" shall mean a daily rate which is determined, in the opinion of the
Administrative Agent, to be the rate at which federal funds are being
offered for sale in the national federal funds market at 9:00 a.m.
(Charlotte time). The rate for a weekend or holiday shall be the same
as the rate for the most immediate preceding Business Day.
"First Union" means First Union National Bank of North
Carolina, a national banking association, and its successors.
"Fiscal Year" means the fiscal year of ACC and its
Subsidiaries ending on December 31.
"Fixed Charges" means, with respect to ACC and its
Subsidiaries, for any period, the following without duplication, each
calculated for such period in accordance with GAAP: (a) all principal
payments or similar amounts required to be paid with respect to Total
Debt during such period plus (b) Interest Expense required to be paid
during such period plus (c) total cash dividends or distributions paid
or payable by ACC during such period plus (d) all payments in respect of
any retirement, redemption or other acquisition of the capital stock of
ACC and its Subsidiaries consummated during such period plus (e) all
Capital Expenditures during such period plus (f) all income and
franchise taxes paid or payable in cash during such period.
"Fleet" means Fleet National Bank, a national banking
association, and its successors.
"GAAP" means generally accepted accounting principles, as
recognized by the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board, consistently applied and
maintained on a consistent basis for ACC and its Subsidiaries throughout
the period indicated.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with,
and reports to, all Governmental Authorities, including without
limitation all Communications Licenses and PUC Authorizations.
"Governmental Authority" means any nation, province, state or
political subdivision thereof, and any government or any Person
exercising executive, legislative, regulatory or administrative
functions of or pertaining to government, and any corporation or other
entity owned or controlled, through stock or capital ownership or
otherwise, by any of the foregoing, including without limitation the
FCC, CRTC, DTI, OFTEL and any PUC.
"Guaranteed Obligations" shall have the meaning assigned
thereto in Section 11.1.
"Guarantor" means ACC in its capacity as guarantor under
Article XI.
"Guaranty" means the unconditional guaranty agreement of ACC
set forth in Article XI.
"Hazardous Materials" means any substances or materials
(a) which are or become defined as hazardous wastes, hazardous
substances, pollutants, contaminants or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to
human health or the environment and are or become regulated by any
Governmental Authority, (c) the presence of which require investigation
or remediation under any Environmental Law or common law, (d) the
discharge or emission or release of which requires a permit or license
under any Environmental Law or other Governmental Approval, (e) which
are deemed to constitute a nuisance, a trespass or pose a health or
safety hazard to persons or neighboring properties, (f) which are
materials consisting of underground or aboveground storage tanks,
whether empty, filled or partially filled with any substance or
(g) which contain, without limitation, asbestos, polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons,
petroleum derived substances or waste, crude oil, nuclear fuel, natural
gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an
interest rate swap, collar, cap, floor or a forward rate agreement or
other agreement regarding the hedging of interest rate or currency risk
exposure executed in connection with hedging the interest rate or
currency exposure of the Borrowers, and any confirming letter executed
pursuant to such hedging agreement, all as amended, restated or
otherwise modified.
"Intercompany Note" shall have the meaning assigned thereto in
Section 10.4(a).
"Intercompany Subordination Agreement" means the Amended and
Restated Subordination Agreement of even date substantially in the form
of Exhibit M, as amended, restated or otherwise modified, executed by
the Borrowers and other Subsidiaries party thereto with respect to the
loans by ACC to such Persons as described on Schedule 10.4.
"Interest Expense" means, with respect to ACC and its
Subsidiaries for any period, total interest expense of ACC and its
Subsidiaries (including without limitation, interest expense
attributable to Capital Leases and any other capitalized interest
expense) and, to the extent not included therein, fees and other charges
payable with respect to all Debt, (including fees and charges payable
with respect to Hedging Agreements, letters of credit and similar
investments), all determined on a Consolidated basis for such period in
accordance with GAAP.
"Interest Period" shall have the meaning assigned thereto in
Section 4.1(b).
"Issuing Lender" means First Union in its capacity as issuer
of any Letter of Credit.
"Joinder Agreement" means an Amended and Restated Joinder
Agreement substantially in the form of Exhibit L executed by each
Material Subsidiary in accordance with Section 8.12, as amended,
restated or otherwise modified.
"Landlord Consents" means the Landlord Agreements
substantially in the form of Exhibit J or any similar agreement
delivered by or on behalf of a Borrower and executed by the owner of the
parcels of real property with respect to which a Mortgage or other
Security Document has been executed in favor of the Administrative Agent
for the benefit of itself and the Lenders, as any such Agreement may be
amended, restated or otherwise modified.
"L/C Commitment" means the lesser of (a) Eight Million Dollars
($8,000,000) and (b) the Aggregate Commitment.
"L/C Facility" means the letter of credit facility established
pursuant to Article III hereof.
"L/C Obligations" means at any time, an amount equal to the
sum of (a) the aggregate undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been reimbursed pursuant to
Section 3.5.
"L/C Participants" means the collective reference to all the
Lenders other than the Issuing Lender.
"Lender" means each Person executing this Agreement as a
Lender set forth on the signature pages hereto and each Person that
hereafter becomes a party to this Agreement as a Lender pursuant to
Section 14.10.
"Lending Office" means, with respect to any Lender, the office
of such Lender maintaining such Lender's Extensions of Credit.
"Letters of Credit" shall have the meaning assigned thereto in
Section 3.1.
"Leverage Ratio" shall have the meaning assigned thereto in
Section 9.1.
"LIBOR" means the rate of interest per annum determined on the
basis of the rate for deposits in Dollars in minimum amounts of at least
$5,000,000 (or the Alternative Currency Amount thereof with respect to
a borrowing to be made in an Alternative Currency) for a period equal to
the applicable Interest Period appearing on Telerate Page 3750 as of
11:00 a.m. (London time) two Business Days prior to the first day of the
applicable Interest Period. In the event that such rate does not appear
on Telerate Page 3750, "LIBOR" shall be determined by the Administrative
Agent to be the arithmetic average (rounded upward, if necessary, to the
nearest one-sixteenth of one percent (1/16%)) of the rate per annum at
which deposits in the Permitted Currency in which the Loan bearing
interest based upon such rate is denominated would be offered by first
class banks in the London interbank market to the Administrative Agent
(or the Administrative Agent's Correspondent) at approximately 11:00
a.m. (London time) two Business Days prior to the first day of the
applicable Interest Period for a period equal to such Interest Period
and in an amount substantially equal to the amount of the applicable
Loan.
"LIBOR Rate" means the rate per annum equal to (a) LIBOR
divided by (b) one (1) less the Reserve Percentage.
"LIBOR Rate Loan" means any Loan bearing interest at a rate
determined with reference to the LIBOR Rate as provided in Section
4.1(a) hereof.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, hypothecation or encumbrance of any
kind in respect of such asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, Capital Lease or other title retention
agreement relating to such asset.
"Loan" means any Revolving Credit Loan or any Swingline Loan
made to any Borrower pursuant to Section 2.1 or 2.2, respectively, and
all such Loans collectively as the context requires.
"Loan Documents" means, collectively, this Agreement, the
Notes, the Applications, the Letters of Credit, the Contingent Interest
Agreement, any Joinder Agreement, the Security Documents and any
supplements thereto executed in connection with any Joinder Agreement,
any Hedging Agreement executed by any Lender, the Intercompany
Subordination Agreement and each other document, instrument and
agreement executed and delivered by any Borrower, a Subsidiary thereof
or their counsel in connection with this Agreement or otherwise referred
to herein or contemplated hereby, all as may be amended, restated or
otherwise modified from time to time.
"Managing Agents" means First Union and Fleet in their
capacity as managing agents hereunder, and any successor thereto in each
case appointed pursuant to Section 13.9; each, a "Managing Agent."
"Material Adverse Effect" means, with respect to the Domestic
Borrowers, Canadian Borrowers, or U.K. Borrowers, a material adverse
effect on the properties, business, prospects, operations or condition
(financial or otherwise) of any such group of Borrowers or the ability
of any such group of Borrowers to perform its obligations under the Loan
Documents to which it is a party.
"Material Contract" means (a) any contract or other agreement,
written or oral, of any Borrower or any of its Subsidiaries involving
monetary liability of or to any such Person in an amount in excess of
$500,000 per annum, or (b) any other contract or agreement, written or
oral, of any Borrower or any of its Subsidiaries the failure to comply
with which could reasonably be expected to have a Material Adverse
Effect.
"Material Subsidiary" means any direct or indirect Subsidiary
of ACC which Subsidiary has total assets equal to or in excess of
$1,000,000.
"Mortgage" means a Leasehold Mortgage delivered pursuant to
the Original Credit Agreement (as modified by the Modification to
Leasehold Mortgage substantially in the form of Exhibit K) or any other
real property security agreement delivered by a Borrower pursuant to
which a Borrower grants a Lien on its interest in a parcel of real
property to the Administrative Agent for the benefit of itself and the
Lenders.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which ACC or any ERISA Affiliate is
making, or is accruing an obligation to make, contributions within the
preceding six years.
"Net Cash Proceeds" means, as applicable, (a) with respect to
any sale of assets, the gross cash proceeds received by ACC or any of
its Subsidiaries from such sale less the sum of (i) all legal, title,
recording, transfer and income tax expenses, commissions and similar
fees and expenses incurred, and all other federal, state, provincial,
local and foreign taxes assessed in connection therewith and (ii) the
aggregate outstanding principal amount of, premium, if any, and interest
on any Debt secured by a Lien on the asset (or a portion thereof) sold,
which Debt is required to be repaid in connection with such sale of
assets, (b) with respect to any offering of debt or equity securities,
the gross cash proceeds received by ACC or any of its Subsidiaries
therefrom less all legal, underwriting and similar fees and expenses
incurred in connection therewith and (c) with respect to any payment
under an insurance policy, the amount of cash proceeds received by ACC
or its applicable Subsidiary from the related insurance company.
"Net Income" means, with respect to ACC and its Subsidiaries
for any period, the Consolidated net income (or loss) of ACC and its
Subsidiaries for such period determined in accordance with GAAP;
provided, that there shall be excluded from net income (or loss) (a) if
the ability of ACC to receive, recover or repatriate cash or receive
economic benefits (other than any increase in value of ACC's stock or
ownership interest in a Subsidiary thereof) from any of its Subsidiaries
is materially limited or restricted for a material period of time at any
date of determination by operation of the terms of the charter of such
Subsidiary or any agreement, instrument, or Applicable Law, the portion
of the income of each such Subsidiary so restricted and (b) the effect
of any currency translation adjustments.
"Network Agreement" means any document or agreement entered
into by ACC or any of its Subsidiaries regarding the use, operation or
maintenance of, or otherwise concerning, any of the Network Facilities.
"Network Facilities" means the network of digital and analog
facilities owned or leased by ACC or any of its Subsidiaries.
"Net Worth" means, at any date of determination thereof, the
sum of the capital stock (excluding treasury stock, cumulative
translation adjustments and capital stock subscribed and unissued) and
retained earnings (including earned surplus, capital surplus and the
balance of the current profit and loss account not transferrable to
retained earnings) accounts of ACC and its Subsidiaries appearing on a
Consolidated balance sheet of ACC and its Subsidiaries prepared in
accordance with GAAP.
"Notes" means (a) the separate Amended and Restated Revolving
Credit Notes made by the applicable Borrower or Borrowers payable to the
order of each Lender, substantially in the form of Exhibit A-1 hereto
with respect to the Domestic Borrowers and Exhibit A-2 hereto with
respect to the U.K. Borrowers, (b) the separate Revolving Credit Notes
made by the applicable Borrower or Borrowers payable to the order of
each Lender, substantially in the form of Exhibit A-3 hereto with
respect to the Canadian Borrowers, (c) the separate Swingline Note and
(d) any amendments and modifications thereto, any substitutes therefor,
and any replacements, restatements, renewals or extension thereof, in
whole or in part; "Note" means any of such Notes.
"Notice of Account Designation" shall have the meaning
assigned thereto in Section 5.2(f)(i).
"Notice of Borrowing" shall have the meaning assigned thereto
in Section 2.3(a).
"Notice of Conversion/Continuation" shall have the meaning
assigned thereto in Section 4.2.
"Notice of Prepayment" shall have the meaning assigned thereto
in Section 2.4(d).
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the aggregate outstanding principal amount of and
interest on (including interest accruing after the filing of any
bankruptcy or similar petition) the Loans, (b) all payment and other net
obligations owing by a Borrower to any Lender or Agent under any Hedging
Agreement permitted pursuant to Section 10.13, (c) the L/C Obligations,
(d) the obligations of the Guarantor pursuant to Article XI, (e) the
obligations of the U.K. Borrowers as guarantors pursuant to the U.K.
Guaranty Agreement and (f) all other fees and commissions (including
attorney's fees), charges, indebtedness, loans, liabilities, financial
accommodations, obligations, covenants and duties owing by a Borrower or
the Guarantor to the Lenders or to any Agent, of every kind, nature and
description, direct or indirect, absolute or contingent, due or to
become due, contractual or tortious, liquidated or unliquidated, and
whether or not evidenced by any note, and whether or not for the payment
of money under or in respect of this Agreement, any Note, any Letter of
Credit or any of the other Loan Documents.
"Officer's Compliance Certificate" shall have the meaning
assigned thereto in Section 7.2.
"OFTEL" means the United Kingdom Office of Telecommunications
or any successor Governmental Authority.
"Operating Cash Flow" means, with respect to ACC and its
Subsidiaries for any period, the following, each calculated on a
Consolidated basis for such period without duplication in accordance
with GAAP: (a) Net Income, plus (b) to the extent deducted in
determining Net Income (i) income and franchise taxes, (ii) Interest
Expense and (iii) amortization and depreciation and other similar non-
cash charges less (c) the sum of (i) interest income, (ii) non-cash
income, (iii) capitalized internally generated software costs and
expenses (provided that capitalized software costs relating to billing
systems shall be amortized over a period not to exceed 7 years) and (iv)
any items of gain (or plus any non-cash items of loss) which were
included in determining Net Income and were not realized in the ordinary
course of business. For purposes of calculating compliance with Article
IX, Operating Cash Flow shall be adjusted in a manner reasonably
satisfactory to the Managing Agents to include as of the first day of
any calculation period any acquisition consummated during such period in
accordance with this Agreement and exclude as of the first day of any
calculation period any Subsidiary or assets sold in accordance with this
Agreement during such period.
"Original Credit Agreement" means the Credit Agreement dated
as of July 21, 1995, by and among ACC, and certain Subsidiaries thereof
designated therein, as Borrowers, ACC, as Guarantor, the lenders
referred to therein (the "Original Lenders"), First Union as Managing
Agent and Administrative Agent, and Fleet National Bank (as successor to
Shawmut Bank Connecticut, N.A.), as Managing Agent, as amended by a
First Amendment dated as of October 31, 1995 and a Second Amendment
dated as of March 29, 1996, and as modified by certain waiver letters.
"Original Letters of Credit" means letters of credit issued
pursuant to the Original Credit Agreement.
"Other Taxes" shall have the meaning assigned thereto in
Section 4.11(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of
ERISA or Section 412 of the Code and which (a) is maintained for
employees of ACC or any ERISA Affiliates or (b) has at any time within
the preceding six years been maintained for the employees of ACC or any
of their current or former ERISA Affiliates.
"Permitted Currency" means Dollars or an Alternative Currency,
or each such currency, as the context requires.
"Person" means an individual, corporation, partnership,
association, trust, business trust, limited liability company, joint
venture, joint stock company, pool, syndicate, sole proprietorship,
unincorporated organization, Governmental Authority or any other form of
entity or group thereof.
"Pledge Agreements" means the collective reference to the ACC
Pledge Agreement and ACC National Pledge Agreement.
"Prime Rate" means, at any time, the rate of interest per
annum publicly announced from time to time by the Administrative Agent
as its prime rate. Each change in the Prime Rate shall be effective as
of the opening of business on the day such change in the Prime Rate
occurs. The parties hereto acknowledge that the rate announced publicly
by the Administrative Agent as its Prime Rate is an index or base rate
and shall not necessarily be its lowest or best rate charged to its
customers or other banks.
"Pro Forma Debt Service" means, with respect to ACC and its
Subsidiaries at any date of determination, the sum of the following
calculated without duplication on a Consolidated pro forma basis for the
period of four (4) consecutive fiscal quarters immediately succeeding
such date of determination in accordance with GAAP: (a) all payments of
principal or similar amounts required to be paid with respect to Total
Debt during such period based upon the aggregate amount of outstanding
Debt on such date of determination and (b) Interest Expense required to
be paid during such period based upon rates of interest in effect on
such date of determination.
"Projections" shall have the meaning assigned thereto in
Section 7.1(c).
"PUC" means any state, provincial or other local regulatory
agency or body that exercises jurisdiction over the rates or services or
the ownership, construction or operation of any Network Facility or long
distance telecommunications systems or over Persons who own, construct
or operate a Network Facility or long distance telecommunications
systems, in each case by reason of the nature or type of the business
subject to regulation and not pursuant to laws and regulations of
general applicability to Persons conducting business in any such
jurisdiction.
"PUC Authorizations" means all applications, filings, reports,
documents, recordings and registrations with, and all validations,
exemptions, franchises, waivers, approvals, orders or authorizations,
consents, licenses, certificates and permits from any PUC.
"Register" shall have the meaning assigned thereto in Section
14.10(d).
"Reimbursement Obligation" means the obligation of the
Borrowers to reimburse the Issuing Lender pursuant to Section 3.5 for
amounts drawn under Letters of Credit.
"Required Lenders" means, at any date, the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the Revolving Credit Loans
and L/C Obligations, or if no Loans or L/C Obligations are outstanding,
any combination of Lenders whose Commitment Percentages aggregate at
least sixty-six and two-thirds percent (66-2/3%).
"Reserve Percentage" means the maximum daily arithmetic
reserve requirement imposed by the Board of Governors of the Federal
Reserve System (or any successor) under Regulation D on Eurocurrency
liabilities (as defined in Regulation D) for the applicable Interest
Period as of the first day of such Interest Period, but subject to any
changes in such reserve requirement becoming effective during the
Interest Period. For purposes of calculating the Reserve Percentage,
the reserve requirement shall be as set forth in Regulation D without
benefit of credit for prorations, exemptions or offsets under Regulation
D, and further without regard to whether or not any Lender elects to
actually fund any Loan or portion thereof with Eurocurrency liabilities.
Each calculation by the Administrative Agent of the LIBOR Rate shall be
conclusive and binding for all purposes, absent manifest error.
"Revolving Credit Loans" means the collective reference to
revolving credit loans established pursuant to Section 2.1.
"Revolving Credit Termination Date" means the earliest of the
dates referred to in Section 2.7.
"Security Agreement" means the Amended and Restated Security
Agreement of even date substantially in the form of Exhibit I executed
by the Domestic Borrowers in favor of the Administrative Agent for the
benefit of itself and the Lenders, as amended, restated or otherwise
modified.
"Security Documents" means the collective reference to the
Security Agreement, the Trademark Assignment, the Pledge Agreements, the
Landlord Consents, the Mortgages, the Canadian Security Documents, the
U.K. Security Documents, the U.K. Guaranty Agreement and each other
agreement or writing pursuant to which ACC or any Subsidiary thereof
pledges or grants a security interest in the Collateral or such Person
guaranties the payment and/or performance of the Obligations or any
portion thereof.
"Solvent" means, as to ACC and its Subsidiaries taken on a
Consolidated basis on a particular date, that such Persons (a) have
capital sufficient to carry on their business and transactions and all
business and transactions in which they are about to engage and are able
to pay their debts as they mature, (b) own property having a value at
fair valuation greater than the amount required to pay their probable
liabilities (including contingencies), and (c) do not believe that they
will incur debts or liabilities beyond their ability to pay such debts
or liabilities as they mature.
"Sterling" means pounds sterling in the lawful currency of the
United Kingdom.
"Sterling Base Rate" shall mean, at any time, that rate per
annum announced by Midland Bank plc to be its Sterling base rate (which
may not necessarily be its lowest or best rate), as adjusted to conform
to changes as of the opening of business on the date of any such change
in such rate, plus the sum of (a) the Applicable Margin with respect to
Base Rate Loans in effect at such time and (b) two percent (2%). Each
Loan or portion thereof bearing interest based on the Sterling Base Rate
shall be a "Sterling Base Rate Loan."
"Sublimit" means the maximum aggregate principal Dollar Amount
of Extensions of Credit available at any time to the applicable Borrower
or group of Borrowers hereunder as set forth on Schedule 1.2. If a
Sublimit on such Schedule applies to more than one Borrower, such
Sublimit shall be in the aggregate amount available to all such
Borrowers taken together, and not an amount available to each such
Borrower individually.
"Subordinated Debt" means any Debt designated as Subordinated
Debt on Schedule 6.1(t) hereof and any other Debt of ACC or any
Subsidiary subordinated in right and time of payment to the Obligations
on terms reasonably satisfactory to the Required Lenders.
"Subsidiary" means as to any Person, any corporation,
partnership or other entity of which more than fifty percent (50%) of
the outstanding capital stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other managers of such corporation, partnership or other entity is at
the time, directly or indirectly, owned by or the management is
otherwise controlled by such Person (irrespective of whether, at the
time, capital stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency). Unless otherwise qualified, references to "Subsidiary" or
"Subsidiaries" herein shall refer to those of ACC.
"Swingline Commitment" means the lesser of (a) Three Million
Dollars ($3,000,000) and (b) the Aggregate Commitment.
"Swingline Lender" means First Union in its capacity as
swingline lender hereunder.
"Swingline Loan" means any swingline loan made by the
Swingline Lender to a Borrower pursuant to Section 2.2, and all such
Loans collectively as the context requires.
"Swingline Note" means the separate Note made by the Domestic
Borrowers payable to the order of the Swingline Lender, substantially in
the form of Exhibit A-4 hereto and any amendments and modifications
thereto, any substitutes therefor, and any replacements, restatements,
renewals or extension thereof, in whole or in part.
"Swingline Termination Date" means the earlier to occur of (a)
the resignation of First Union as Administrative Agent in accordance
with Section 13.9 and (b) the Revolving Credit Termination Date.
"Taxes" shall have the meaning assigned thereto in Section
4.11(a).
"Termination Event" means: (a) a "Reportable Event" described
in Section 4043 of ERISA (other than a Reportable Event as to which the
provision of 30 days notice has been waived by the PBGC under applicable
regulations); or (b) the withdrawal of ACC or any ERISA Affiliate from
a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA; or (c) the
termination of a Pension Plan, the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as
a distress termination under Section 4041(c) of ERISA; or (d) the
institution of proceedings to terminate, or the appointment of a trustee
with respect to, any Pension Plan by the PBGC; or (e) any other event or
condition which would constitute grounds under Section 4042(a) of ERISA
for the termination of, or the appointment of a trustee to administer,
any Pension Plan; or (f) the partial or complete withdrawal of ACC or
any ERISA Affiliate from a Multiemployer Plan; or (g) the imposition of
a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or
(h) any event or condition which results in the reorganization or
insolvency of a Multiemployer Plan under Sections 4241 or 4245 of ERISA;
or (i) any event or condition which results in the termination of a
Multiemployer Plan under Section 4041A of ERISA or the institution by
PBGC of proceedings to terminate a Multiemployer Plan under Section 4042
of ERISA.
"Total Debt" means, with respect to ACC and its Subsidiaries
at any date of determination and without duplication, all Debt of ACC
and its Subsidiaries on a Consolidated basis.
"Trademark Assignment" means the Amended and Restated
Trademark Assignment of even date executed by ACC in favor of the
Administrative Agent for the benefit of itself and the Lenders, as
amended, restated or otherwise modified.
"UCC" means the Uniform Commercial Code as in effect in the
State of North Carolina.
"U.K. Borrowers" means the collective reference to all
Borrowers and Additional Borrowers organized under the laws of the
United Kingdom or any political subdivision thereof.
"U.K. Guaranty Agreement" means the U.K. Guaranty Agreement of
even date executed by ACC U.K. and any other U.K. Borrowers in favor of
the Administrative Agent for the benefit of itself and the Lenders
substantially in the form of Exhibit N, as amended, restated or
otherwise modified.
"U.K. Security Documents" means the collective reference to
the Amended and Restated Debenture of even date executed by ACC U.K. in
favor of the Administrative Agent for the benefit of itself and the
Lenders, the Pledge Agreement of even date governed by English law and
signed by ACC Corp. in favor of the Administrative Agent for the benefit
of itself and the Lenders, and any other agreement or writing pursuant
to which a U.K. Borrower or U.K. Subsidiary, pledges or grants a
security interest in the Collateral or any such Person guarantees or
otherwise secures the payment and/or performance of any obligation of a
U.K. Borrower under any Loan Document, in each case as amended, restated
or otherwise modified.
"U.K. Subsidiary" means a Subsidiary organized under the laws
of the United Kingdom or any political subdivision thereof.
"United States" means the United States of America.
"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as amended, restated or otherwise modified.
"Wholly-Owned" means, with respect to a Subsidiary, a
Subsidiary all of the shares of capital stock or other ownership
interests of which are, directly or indirectly, owned or controlled by
ACC and/or one or more of its Wholly-Owned Subsidiaries.
SECTION 1.2. General. All terms of an accounting nature not
specifically defined herein shall have the meaning assigned thereto by
GAAP. Unless otherwise specified, a reference in this Agreement to a
particular section, subsection, Schedule or Exhibit is a reference to
that section, subsection, Schedule or Exhibit of this Agreement.
Wherever from the context it is appropriate, each term stated in either
the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, the feminine and the neuter. Any reference
herein to "Charlotte time" shall refer to the applicable time of day in
Charlotte, North Carolina.
SECTION 1.3. Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined
therein, all capitalized terms defined in this Agreement shall have the
defined meanings when used in this Agreement, the Notes and the other
Loan Documents or any certificate, report or other document made or
delivered pursuant to this Agreement.
(b) Miscellaneous. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
ARTICLE II
CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans. Subject to the terms
and conditions of this Agreement, each Lender severally agrees to make
Revolving Credit Loans in a Permitted Currency to the applicable
Borrower or Borrowers from time to time from the Closing Date through
the Revolving Credit Termination Date as requested by such Borrower or
Borrowers in accordance with the terms of Sections 2.1 and 2.3;
provided, that, based upon the Dollar Amount of all Extensions of
Credit, (a) the maximum amount of Revolving Credit Loans available to
each Borrower or Borrowers at any time hereunder shall not exceed the
Sublimit applicable to such Borrower or Borrowers, (b) the aggregate
outstanding principal amount of all outstanding Revolving Credit Loans
(after giving effect to any amount requested) shall not exceed the
Aggregate Commitment less the sum of the aggregate outstanding principal
amount of all outstanding Swingline Loans and the L/C Obligations and
(c) the aggregate outstanding principal amount of Revolving Credit Loans
from any Lender to the Borrowers shall not at any time exceed such
Lender's Commitment. Each Revolving Credit Loan by a Lender shall be in
a principal amount equal to such Lender's Commitment Percentage of the
aggregate outstanding principal amount of Revolving Credit Loans
requested on such occasion. Revolving Credit Loans to be made in an
Alternative Currency shall be funded in an amount equal to the
Alternative Currency Amount of such Loan. Revolving Credit Loans to the
Domestic Borrowers shall be denominated in Dollars, Revolving Credit
Loans to the U.K. Borrowers shall be denominated in Sterling and
Revolving Credit Loans to the Canadian Borrowers shall be denominated in
Canadian Dollars. Subject to the terms and conditions hereof, the
Borrowers may borrow, repay and reborrow Revolving Credit Loans
hereunder until the Revolving Credit Termination Date.
SECTION 2.2. Swingline Loans.
(a) Availability. Subject to the terms and conditions of
this Agreement, the Swingline Lender agrees to make Swingline Loans to
the Domestic Borrowers from time to time from the Closing Date through
the Swingline Termination Date; provided, that (i) all Swingline Loans
shall be denominated in Dollars and (ii) the aggregate outstanding
principal amount of all Swingline Loans (after giving effect to any
amount requested), shall not exceed the lesser of (A) the Aggregate
Commitment less the sum of the Dollar Amount of the aggregate
outstanding principal amount of all Revolving Credit Loans and the L/C
Obligations and (B) the Swingline Commitment.
(b) Refunding.
(i) Swingline Loans (except with respect to any
Swingline Loan extended after the occurrence and during the continuance
of an Event of Default of which the Administrative Agent has received
notice which has not been waived by the Required Lenders or the Lenders,
as applicable) shall be refunded to the Swingline Lender by the Lenders
on demand by the Swingline Lender. Such refundings shall be made by the
Lenders in accordance with their respective Commitment Percentages and
shall thereafter be reflected as Revolving Credit Loans of the Lenders
on the books and records of the Administrative Agent. Each Lender shall
fund its respective Commitment Percentage of Revolving Credit Loans as
required to repay Swingline Loans outstanding to the Swingline Lender
upon demand by the Swingline Lender but in no event later than 2:00 p.m.
(Charlotte time) on the next succeeding Business Day after such demand
is made. No Lender's obligation to fund its respective Commitment
Percentage of a Swingline Loan shall be affected by any other Lender's
failure to fund its Commitment Percentage of a Swingline Loan, nor shall
any Lender's Commitment Percentage be increased as a result of any such
failure of any other Lender to fund its Commitment Percentage.
(ii) The Domestic Borrowers shall pay to the Swingline
Lender on demand the amount of such Swingline Loans to the extent that
the Lenders fail to repay in full the outstanding Swingline Loans
requested or required to be refunded. In addition, the Domestic
Borrowers hereby authorize the Administrative Agent to charge any
account maintained by it with the Swingline Lender (up to the amount
available therein) in order to immediately pay the Swingline Lender the
amount of such Swingline Loans to the extent amounts received from the
Lenders are not sufficient to repay in full the outstanding Swingline
Loans requested or required to be refunded. If any portion of any such
amount paid to the Swingline Lender shall be recovered by or on behalf
of the Domestic Borrowers from the Swingline Lender in bankruptcy or
otherwise, the loss of the amount so recovered shall be ratably shared
among all the Lenders in accordance with their respective Commitment
Percentages.
(iii) Each Lender acknowledges and agrees that its
obligation to refund Swingline Loans (except any Swingline Loan extended
after the occurrence and during the continuance of an Event of Default
which has not been waived by the Required Lenders or the Lenders, as
applicable) in accordance with the terms of this Section 2.2 is absolute
and unconditional and shall not be affected by any circumstance
whatsoever; provided, that if prior to the refunding of any outstanding
Swingline Loans pursuant to this Section 2.2, one of the events
described in Section 12.1(j) or (k) shall have occurred, each Lender
will, on the date the applicable Revolving Credit Loan would have been
made, purchase an undivided participating interest in the Swingline Loan
to be refunded in an amount equal to its Commitment Percentage of the
aggregate amount of such Swingline Loan. Each Lender will immediately
transfer to the Swingline Lender, in immediately available funds, the
amount of its participation and upon receipt thereof the Swingline
Lender will deliver to such Lender a certificate evidencing such
participation dated the date of receipt of such funds and for such
amount. Whenever, at any time after the Swingline Lender has received
from any Lender such Lender's participating interest in a Swingline
Loan, the Swingline Lender receives any payment on account thereof, the
Swingline Lender will distribute to such Lender its participating
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender's
participating interest was outstanding and funded).
SECTION 2.3. Procedure for Advances of Revolving Credit and
Swingline Loans.
(a) Requests for Borrowing. The applicable Borrower or
Borrowers shall give the Administrative Agent irrevocable prior written
notice in the form attached hereto as Exhibit B (a "Notice of
Borrowing") (i) not later than 11:00 a.m. (Charlotte time) (A) on or
prior to the same Business Day for each Swingline Loan, (B) at least one
Business Day before each Base Rate Loan denominated in Dollars, (C) at
least three (3) Business Days before each Base Rate Loan denominated in
an Alternative Currency and (D) at least three (3) Business Days before
each LIBOR Rate Loan denominated in Dollars and (ii) not later than 9:00
a.m. (London time) at least three (3) Business Days before each LIBOR
Rate Loan to be denominated in an Alternative Currency of its intention
to borrow, specifying (A) the date of such borrowing, which shall be a
Business Day, (B) whether such Loan is to be a Revolving Credit Loan or
a Swingline Loan, (C) if such Loan is to be a Revolving Credit Loan,
whether such Loan shall be denominated in Dollars or an Alternative
Currency, (D) the amount of such borrowing, which shall be with respect
to LIBOR Rate Loans denominated in Dollars in an aggregate principal
amount of $3,000,000 or a whole multiple of $1,000,000 in excess thereof
(and with respect to LIBOR Rate Loans denominated in an Alternative
Currency, the Dollar Amount in each case thereof), with respect to Base
Rate Loans in an aggregate principal amount of $1,500,000 or a whole
multiple of $500,000 in excess thereof, and with respect to Swingline
Loans in an aggregate principal amount of $100,000 or a whole multiple
thereof, (E) if denominated in Dollars, whether the Revolving Credit
Loans are to be LIBOR Rate Loans or Base Rate Loans and (F) in the case
of a LIBOR Rate Loan, the duration of the Interest Period applicable
thereto. Notices received after 11:00 a.m. (London time) shall be
deemed received on the next Business Day. The Administrative Agent
shall promptly notify (and in any event provide same day notice to) the
Lenders of each Notice of Borrowing with respect to a Revolving Credit
Loan.
(b) Disbursement of Revolving Credit Loans Denominated in
Dollars and Swingline Loans. Not later than 2:00 p.m. (Charlotte time)
on the proposed borrowing date for any Loan denominated in Dollars, (i)
each Lender will make available to the Administrative Agent, for the
account of the applicable Borrower or Borrowers, at the office of the
Administrative Agent in Dollars in funds immediately available to the
Administrative Agent, such Lender's Commitment Percentage of the
requested borrowing to be made on such borrowing date and (ii) the
Swingline Lender will make available to the Administrative Agent, for
the account of the Borrower, at the office of the Administrative Agent
in funds immediately available to the Administrative Agent, the
Swingline Loans to be made to any Borrower or Borrowers on such
borrowing date. The Borrowers hereby irrevocably authorize the
Administrative Agent to disburse the proceeds of each borrowing
requested pursuant to this Section 2.3(b) in immediately available funds
by crediting such proceeds to a deposit account of the applicable
Borrower or Borrowers maintained with the Administrative Agent or by
wire transfer from such deposit account to another account as may be
requested by such Borrower or Borrowers by prior written notice to the
Administrative Agent. Subject to Section 4.6 hereof, the Administrative
Agent shall not be obligated to disburse the portion of the proceeds of
any Loan requested pursuant to this Section 2.3 to the extent that any
Lender has not made available to the Administrative Agent its Commitment
Percentage of such Loan. Revolving Credit Loans to be made for the
purpose of refunding Swingline Loans shall be made by the Lenders as
provided in Section 2.2(b) hereof.
(c) Disbursement of Revolving Credit Loans Denominated in an
Alternative Currency. Not later than 11:00 a.m. (the time of the
Administrative Agent's Correspondent) on the proposed borrowing date for
any Revolving Credit Loan denominated in an Alternative Currency, each
Lender will make available to the Administrative Agent at the office of
the Administrative Agent's Correspondent in the requested Alternative
Currency in funds immediately available to the Administrative Agent,
such Lender's Commitment Percentage of the requested borrowing to be
denominated in such Alternative Currency. The Borrowers hereby
irrevocably authorize the Administrative Agent to disburse the proceeds
of each borrowing requested pursuant to this Section 2.3(c) in
immediately available funds by crediting such proceeds to an account of
the applicable Borrower maintained with the Administrative Agent's
Correspondent or by wire transfer from such deposit account to another
account as may be requested by such Borrower by prior written notice to
the Administrative Agent.
(d) Availability. The Administrative Agent shall not be
obligated to disburse the proceeds of any Revolving Credit Loan
requested pursuant to this Section 2.3 until each Lender shall have made
available to the Administrative Agent its Commitment Percentage of such
Loan.
SECTION 2.4. Repayment of Extensions of Credit.
(a) Repayment. (i) The applicable Borrower or Borrowers
shall repay the aggregate outstanding principal amount of all Revolving
Credit Loans on the Revolving Credit Termination Date in the applicable
Permitted Currency, if not sooner repaid, and (ii) the Domestic
Borrowers shall repay the aggregate outstanding principal amount of all
Swingline Loans in accordance with Section 2.2(b), together, in each
such case, with all accrued but unpaid interest thereon.
(b) Mandatory Repayment of Excess Extensions of Credit.
(i) Aggregate Commitments. If at any time (as
determined by the Administrative Agent under Section 2.4(b)(v)), and for
any reason, the aggregate outstanding principal Dollar Amount of all
Revolving Credit Loans exceeds the Aggregate Commitment less the sum of
the Dollar Amount of the L/C Obligations and the aggregate outstanding
principal amount of the Swingline Loans, the applicable Borrower or
Borrowers shall (A) if (and to the extent) necessary to eliminate such
excess, immediately repay outstanding Revolving Credit Loans that are
Base Rate Loans, if any, by the Dollar Amount of such excess (and/or
reduce any pending request for a Base Rate Loan on such day by the
Dollar Amount of such excess), and (B) if (and to the extent) necessary
to eliminate such excess, immediately repay LIBOR Rate Loans (and/or
reduce any pending requests for a borrowing or continuation or
conversion of such Loans submitted in respect of such Loans on such day)
by the Dollar Amount of such excess.
(ii) Excess Swingline Loans. If at any time and for any
reason the aggregate outstanding principal amount of all Swingline Loans
exceeds the lesser of (A) the Aggregate Commitment less the sum of the
aggregate outstanding principal Dollar Amount of all Revolving Credit
Loans and Dollar Amount of the L/C Obligations and (B) the Swingline
Commitment, such excess shall be immediately repaid upon notice from the
Administrative Agent by the Domestic Borrowers to the Administrative
Agent for the account of the Swingline Lender.
(iii) Excess L/C Obligations. If at any time and for any
reason the aggregate outstanding principal Dollar Amount of all L/C
Obligations exceeds the lesser of (A) the Aggregate Commitment less the
aggregate outstanding principal Dollar Amount of all Revolving Credit
Loans and Swingline Loans and (B) the L/C Commitment, the Dollar Amount
of such excess shall be immediately paid upon notice from the
Administrative Agent by the applicable Borrower or Borrowers by means of
a payment of cash collateral into a cash collateral account opened by
such Borrower or Borrowers with the Administrative Agent for the benefit
of the Lenders in accordance with Section 12.2(b).
(iv) Sublimits. If at any time (as determined by the
Administrative Agent under Section 2.4(b)(v)), and for any reason, the
Extensions of Credit to any Borrower or Borrowers exceeds the Sublimit
applicable to such Borrower or Borrowers, such Borrower or Borrowers
shall (A) immediately repay Base Rate Loans outstanding to such Borrower
or Borrowers (and/or reduce on such day any pending request for a Base
Rate Loan submitted by such Borrower or Borrowers) by the amount of such
excess, (B) immediately repay LIBOR Rate Loans (and/or reduce any
pending requests for a borrowing or continuation or conversion submitted
in respect of such Loans on such day), by the Dollar Amount of any
remaining excess, and (C) if necessary, cash collateralize any L/C
Obligations outstanding to such Borrower or Borrowers in accordance with
paragraph (iii) of this Section 2.4(b).
(v) Compliance and Payments. Each Borrower's compliance
with this Section 2.4(b) shall be tested from time to time by the
Administrative Agent at its sole discretion, but in any event on each
day an interest payment is due under Section 4.1(e). All payments
pursuant to this Section 2.4(b) shall be accompanied by any amount
required to be repaid under Section 4.9.
(c) Other Mandatory Prepayments.
(i) Offering Proceeds. If on any such date of receipt
the Leverage Ratio is less than or equal to 3.00 to 1.00, the Net Cash
Proceeds received by any Borrower or Subsidiary from any offering of
debt or equity securities shall be used within three (3) Business Days
of receipt thereof to prepay all Extensions of Credit in the order of
priority specified in Section 2.6(d) (and any such repayment shall not
result in a reduction to the Aggregate Commitment).
(ii) Commitment Reductions. The Borrowers shall prepay
the Extensions of Credit in accordance with Section 2.6(d) in connection
with any permanent reduction in the Aggregate Commitment.
(d) Optional Repayments. Any Borrower may at any time and
from time to time repay the Revolving Credit Loans made thereto, in
whole or in part, upon at least three (3) Business Days' irrevocable
notice to the Administrative Agent with respect to LIBOR Rate Loans and
one (1) Business Day irrevocable notice with respect to Base Rate Loans
(other than Swingline Loans) in the form attached hereto as Exhibit C (a
"Notice of Prepayment"), specifying the date and amount of repayment and
whether the repayment is of LIBOR Rate Loans or Base Rate Loans or a
combination thereof, and, if of a combination thereof, the amount
allocable to each. Upon receipt of such notice with respect to any
Revolving Credit Loan, the Administrative Agent shall promptly notify
each Lender. If any such notice is given, the amount specified in such
notice shall be due and payable on the date set forth in such notice.
Any applicable Borrower may at any time and from time to time repay the
Swingline Loans made thereto, in whole or in part, upon same Business
Day irrevocable notice to the Administrative Agent (subject to Section
2.2(b)(ii)). Partial repayments shall be in an aggregate amount of
$3,000,000 or a whole multiple of $1,000,000 in excess thereof with
respect to LIBOR Rate Loans (or with respect to Loans denominated in an
Alternative Currency, the Alternative Currency Amount thereof), a whole
multiple of $100,000 with respect to Swingline Loans and $1,500,000 or
a whole multiple of $500,000 in excess thereof with respect to other
Base Rate Loans. Each such repayment shall be accompanied by any amount
required to be paid pursuant to Section 4.9 hereof.
(e) Limitation on Repayment of LIBOR Rate Loans. No Borrower
may repay any LIBOR Rate Loan (including, without limitation, any Loan
denominated in an Alternative Currency) hereunder on any day other than
on the last day of the Interest Period applicable thereto unless such
repayment is accompanied by any amount required to be paid pursuant to
Section 4.9.
SECTION 2.5. Notes.
(a) Revolving Credit Notes. Each Lender's Revolving Credit
Loans and the obligation of each Borrower to repay the Revolving Credit
Loans made thereto shall be evidenced by the Note executed by such
Borrower payable to the order of such Lender. Each Note shall be dated
the date hereof and shall bear interest on the unpaid principal amount
thereof at the applicable interest rate specified in Section 4.1.
(b) Swingline Notes. The Swingline Loans and the obligation
of each Borrower to repay such Swingline Loans shall be evidenced by the
Swingline Note executed by the Domestic Borrowers payable to the order
of the Swingline Lender. The Swingline Note shall be dated the date
hereof and shall bear interest on the unpaid principal amount thereof at
the applicable interest rate specified in Section 4.1.
SECTION 2.6. Permanent Reductions of the Aggregate
Commitment.
(a) Voluntary Reduction. The Borrowers shall have the right
at any time and from time to time, upon at least five (5) Business Days
prior written notice to the Administrative Agent, to permanently reduce,
in whole at any time or in part from time to time, without premium or
penalty, the Aggregate Commitment in an aggregate principal amount not
less than $2,500,000 or any whole multiple of $1,000,000 in excess
thereof.
(b) Quarterly Reduction. The Aggregate Commitment shall be
permanently reduced according to the following schedule:
Aggregate
Date Commitment
Dec. 31, 1998 $92,000,000
Mar. 31, 1999 84,000,000
June 30, 1999 76,000,000
Sep. 30, 1999 68,000,000
Dec. 31, 1999 60,000,000
Mar. 31, 2000 52,000,000
June 30, 2000 44,000,000
Sep. 30, 2000 36,000,000
Dec. 31, 2001 27,000,000
Mar. 31, 2001 18,000,000
June 30, 2001 9,000,000
Sep. 30, 2001 -0-
(c) Other Permanent Reductions. The Aggregate Commitment
shall be permanently reduced as follows by an amount equal to:
(i) Offering Proceeds. If after prepayment of all
Extensions of Credit with Net Cash Proceeds from any offering by any
Borrower or Subsidiary of debt or equity securities pursuant to Section
2.4(c)(i), the Leverage Ratio exceeds 3.00 to 1.00, an amount equal to
the portion of such proceeds required to be applied to outstanding
Obligations in order to reduce the Leverage Ratio on such prepayment
date to 3.00 to 1.00.
(ii) Sale of Assets. The Net Cash Proceeds received by
any Borrower or Subsidiary in connection with any asset sale described
in Section 10.6(e), within three (3) Business Days of receipt thereof.
(iii) Sale of Interest in Subsidiary. The Net Cash
Proceeds received by any Borrower in connection with the sale of an
ownership interest in any Material Subsidiary, within three (3) Business
Days of receipt thereof.
(iv) Insurance Proceeds. Any insurance proceeds received
by any Borrower or Subsidiary in excess of $250,000 in the aggregate,
within three (3) Business Days of receipt thereof; provided, that if any
Authorized Officer of ACC delivers a certificate to the Administrative
Agent that insurance proceeds are to be reinvested in replacement
Capital Assets within 180 days of their receipt and such proceeds are so
reinvested, such proceeds need not be used to permanently reduce the
Aggregate Commitment.
(d) Additional Payments. Each permanent reduction permitted
or required pursuant to this Section 2.6 shall be accompanied by a
payment of principal (and with respect to L/C Obligations, furnishing of
cash collateral in accordance with Section 12.2(b)) sufficient to reduce
the Extensions of Credit of the Lenders after such reduction to the
Sublimits and Aggregate Commitment as so reduced. At any time after the
Aggregate Commitment has been permanently reduced pursuant to this
Section 2.6 by an aggregate amount in excess of $8,000,000, the amount
of each additional partial permanent reduction under this Section 2.6
shall be applied (i) pro rata to reduce each Sublimit rounded to the
nearest $1,000,000 and (ii) to reduce the remaining mandatory reduction
amounts required under Section 2.6(b) on a pro rata basis. All
prepayments required by this Section 2.6(d) shall be applied first to
the aggregate outstanding principal amount of Swingline Loans, second to
the aggregate outstanding principal amount of Revolving Credit Loans,
and third, with respect to any L/C Obligations, by furnishing cash
collateral in accordance with Section 12.2(b). Any permanent reduction
of the Aggregate Commitment to zero shall be accompanied by payment of
all outstanding Obligations and termination of the Commitments and
Credit Facility. If the reduction of the Aggregate Commitment requires
the repayment of any LIBOR Rate Loan, such reduction shall be
accompanied by any amount required to be paid pursuant to Section 4.9.
SECTION 2.7. Termination of Credit Facility. The Credit
Facility (subject to Section 2.2(a) with respect to Swingline Loans)
shall terminate on the earliest of (a) September 30, 2001, (b) the date
of termination by the Borrowers pursuant to Section 2.6(a) and (c) the
date of termination by the Administrative Agent on behalf of the Lenders
pursuant to Section 12.2(a).
SECTION 2.8. Use of Proceeds. The Borrowers shall use the
proceeds of the Extensions of Credit (a) to finance investments,
acquisitions and Capital Expenditures permitted by the terms hereof and
(b) for working capital and general corporate requirements of the
Borrowers, and including payment of fees and expenses incurred in
connection with the transactions contemplated hereby.
SECTION 2.9. Nature of Obligations; Security. The
obligations of the Domestic Borrowers under the Note or Notes executed
thereby and the other Obligations of such Borrowers (other than the
obligations of ACC as Guarantor) shall be joint and several among such
Borrowers. The obligations of the U.K. Borrowers under the Note or
Notes executed thereby and the other Obligations of such Borrowers
hereunder shall be joint and several among such Borrowers, but in
relation to the Domestic Borrowers and Canadian Borrowers, shall be
several and not joint and several. The obligations of the Canadian
Borrowers under the Note or Notes executed thereby and the other
Obligations of such Borrowers shall be joint and several to the fullest
extent permitted by Canadian Law as set forth in the applicable Joinder
Agreement or Joinder Agreements joining such Canadian Subsidiary or
Subsidiaries to this Agreement as Canadian Borrowers. The Obligations
of the Canadian Borrowers in relation to the Domestic Borrowers and the
U.K. Borrowers shall be several and not joint and several. The
Obligations of each Borrower shall be secured in accordance with the
terms of the applicable Security Documents.
ARTICLE III
LETTER OF CREDIT FACILITY
SECTION 3.1. L/C Commitment. Subject to the terms and
conditions hereof, the Issuing Lender, in reliance on the agreements of
the other Lenders set forth in Section 3.4(a), agrees to issue letters
of credit ("Letters of Credit") denominated in Dollars for the account
of the Domestic Borrowers, denominated in Canadian Dollars for the
account of the Canadian Borrowers, and denominated in Sterling for the
account of the U.K. Borrowers, in each case on any Business Day from the
Closing Date through but not including the Revolving Credit Termination
Date in such form as may be approved from time to time by the Issuing
Lender; provided, that the Issuing Lender shall have no obligation to
issue any Letter of Credit if, after giving effect to such issuance, (a)
the Dollar Amount of the L/C Obligations would exceed the L/C
Commitment, (b) the Available Commitment of any Lender would be less
than zero or (c) the aggregate principal Dollar Amount of Extensions of
Credit to the applicable Borrower or Borrowers would exceed the Sublimit
thereof. Each Letter of Credit shall (i) be denominated in a Permitted
Currency in a minimum of $100,000 (other than the Original Letters of
Credit) or the applicable Alternative Currency Amount thereof, (ii) be
a standby letter of credit issued to support obligations of the
applicable Borrower or Borrowers, contingent or otherwise, incurred in
the ordinary course of business, (iii) expire on a date satisfactory to
the Issuing Lender, which date shall be no later than the Revolving
Credit Termination Date and (iv) be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of North
Carolina. The Issuing Lender shall not at any time be obligated to
issue any Letter of Credit hereunder if such issuance would conflict
with, or cause the Issuing Lender or any L/C Participant to exceed any
limits imposed by, any Applicable Law. References herein to "issue" and
derivations thereof with respect to Letters of Credit shall also include
extensions or modifications of any existing Letters of Credit, unless
the context otherwise requires.
SECTION 3.2. Procedure for Issuance of Letters of Credit.
Any Borrower or Borrowers may from time to time request that the Issuing
Lender issue a Letter of Credit by delivering to the Issuing Lender at
the Administrative Agent's Office an Application therefor, completed to
the satisfaction of the Issuing Lender, and such other certificates,
documents and other papers and information as the Issuing Lender may
request. Upon receipt of any Application, the Issuing Lender shall
process such Application and the certificates, documents and other
papers and information delivered to it in connection therewith in accor-
dance with its customary procedures and shall, subject to Section 3.1
and Article V hereof, promptly issue the Letter of Credit requested
thereby (but in no event shall the Issuing Lender be required to issue
any Letter of Credit earlier than three Business Days after its receipt
of the Application therefor and all such other certificates, documents
and other papers and information relating thereto) by issuing the
original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the applicable
Borrower or Borrowers. The Issuing Lender shall furnish to the
applicable Borrower or Borrowers a copy of such Letter of Credit and
furnish to each Lender a copy of such Letter of Credit and the amount of
each Lender's participation therein pursuant to Section 3.4(a), all
promptly following the issuance of such Letter of Credit.
SECTION 3.3. Fees and Other Charges.
(a) The applicable Borrower or Borrowers shall pay to the
Administrative Agent, for the account of the Issuing Lender and the L/C
Participants, a letter of credit fee with respect to each Letter of
Credit in an amount equal to the product of (i) the Applicable Margin
with respect to LIBOR Rate Loans (on a per annum basis) and (ii) an
amount equal to the daily average Dollar Amount available to be drawn
under such Letter of Credit during the period for which such fee is
payable. Such fee shall be payable quarterly in arrears on the last
Business Day of each calendar quarter and on the Revolving Credit
Termination Date.
(b) The applicable Borrower or Borrowers shall pay to the
Administrative Agent, for the account of the Issuing Lender, a facing
fee with respect to each Letter of Credit in an amount equal to the
product of (i) 0.125% (on a per annum basis) and (ii) the face amount of
such Letter of Credit. Such fee shall be payable quarterly in arrears
on the last Business Day of each calendar quarter and on the Termination
Date.
(c) The applicable Borrower or Borrowers shall pay or
reimburse the Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter
of Credit.
SECTION 3.4. L/C Participations.
(a) The Issuing Lender irrevocably agrees to grant and hereby
grants to each L/C Participant, and, to induce the Issuing Lender to
issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from the
Issuing Lender, on the terms and conditions hereinafter stated, for such
L/C Participant's own account and risk an undivided interest equal to
such L/C Participant's Commitment Percentage in the Issuing Lender's
obligations and rights under each Letter of Credit issued hereunder and
the amount of each draft paid by the Issuing Lender thereunder. Each
L/C Participant unconditionally and irrevocably agrees with the Issuing
Lender that, if a draft is paid under any Letter of Credit for which the
Issuing Lender is not reimbursed in full by the Borrowers in accordance
with the terms of this Agreement, such L/C Participant shall pay to the
Issuing Lender upon demand, with respect to Letters of Credit
denominated in Dollars, and within three (3) Business Days after demand,
with respect to Letters of Credit denominated in Canadian Dollars or
Sterling, at the Issuing Lender's address for notices specified herein
an amount equal to such L/C Participant's Commitment Percentage of the
amount of such draft, or any part thereof, which is not so reimbursed
and such payments shall thereafter be reflected as Extensions of Credit
of the Lenders on the books and records of the Administrative Agent.
(b) Upon becoming aware of any amount required to be paid by
any L/C Participant to the Issuing Lender pursuant to Section 3.4(a) in
respect of any unreimbursed portion of any payment made by the Issuing
Lender under any Letter of Credit, the Issuing Lender shall notify each
L/C Participant of the Dollar Amount thereof and due date of such
required payment and such L/C Participant shall pay to the Issuing
Lender the Dollar Amount specified on the applicable due date. If any
such amount is paid to the Issuing Lender after the date such payment is
due, such L/C Participant shall pay to the Issuing Lender on demand, in
addition to such amount, the product of (i) such amount, times (ii) the
daily average Federal Funds Rate as determined by the Administrative
Agent during the period from and including the date such payment is due
to the date on which such payment is immediately available to the
Issuing Lender, times (iii) a fraction the numerator of which is the
number of days that elapse during such period and the denominator of
which is 360. A certificate of the Issuing Lender with respect to any
amounts owing under this Section shall be conclusive in the absence of
manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section 3.4(b), if the L/C
Participants receive notice that any such payment is due (A) prior to
1:00 p.m. (Charlotte time) on any Business Day, such payment shall be
due that Business Day, and (B) after 1:00 p.m. (Charlotte time) on any
Business Day, such payment shall be due on the following Business Day.
(c) Whenever, at any time after the Issuing Lender has made
payment under any Letter of Credit and has received from any L/C
Participant its Commitment Percentage of such payment in accordance with
this Section 3.4, the Issuing Lender receives any payment related to
such Letter of Credit (whether directly from the Borrowers or
otherwise), or any payment of interest on account thereof, the Issuing
Lender will distribute to such L/C Participant its pro rata share
thereof; provided, that in the event that any such payment received by
the Issuing Lender shall be required to be returned by the Issuing
Lender, such L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing Lender to it.
SECTION 3.5. Reimbursement Obligation of the Borrower. The
applicable Borrower or Borrowers agree to reimburse the Issuing Lender
on each date on which the Issuing Lender notifies such Borrower or
Borrowers of the date and amount of a draft paid under any Letter of
Credit for the amount of (a) such draft so paid and (b) any taxes, fees,
charges or other costs or expenses incurred by the Issuing Lender in
connection with such payment. Each such payment shall be made to the
Issuing Lender at its address for notices specified herein in the
applicable Permitted Currency and in immediately available funds.
Interest shall be payable on any and all amounts remaining unpaid by the
Borrowers under this Article III from the date such amounts become
payable (whether at stated maturity, by acceleration or otherwise) until
payment in full at the rate which would be payable on any outstanding
Base Rate Loans which were then overdue. If the Borrowers fail to
timely reimburse the Issuing Lender on the date the Borrowers receive
the notice referred to in this Section 3.5, the Borrowers shall be
deemed to have timely given a Notice of Borrowing hereunder to the
Administrative Agent requesting the Lenders to make a Base Rate Loan on
such date in an amount equal to the amount of such drawing and, subject
to the satisfaction or waiver of the conditions precedent specified in
Article V, the Lenders shall make Base Rate Loans in such amount, the
proceeds of which shall be applied to reimburse the Issuing Lender for
the amount of the related drawing and costs and expenses.
SECTION 3.6. Obligations Absolute. The Borrowers'
obligations under this Article III (including without limitation the
Reimbursement Obligation) shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or
defense to payment which the Borrowers may have or have had against the
Issuing Lender, any L/C Participant, any Agent or any beneficiary of a
Letter of Credit. The Borrowers also agree with the Issuing Lender and
each L/C Participant that neither the Issuing Lender nor any L/C
Participant shall be responsible for, and the Borrowers' Reimbursement
Obligation under Section 3.5 shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrowers and
any beneficiary of any Letter of Credit or any other party to which such
Letter of Credit may be transferred or any claims whatsoever of the
Borrowers against any beneficiary of such Letter of Credit or any such
transferee. The Issuing Lender shall not be liable for any error,
omission, interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions caused by the Issuing
Lender's gross negligence or willful misconduct. The Borrowers agree
that any action taken or omitted by the Issuing Lender or any L/C
Participant under or in connection with any Letter of Credit or the
related drafts or documents, if done in the absence of gross negligence
or willful misconduct and in accordance with the standards of care
specified in the Uniform Customs and, to the extent not inconsistent
therewith, the UCC, shall be binding on the Borrowers and shall not
result in any liability of the Issuing Lender or any L/C Participant to
the Borrowers. The responsibility of the Issuing Lender to the
Borrowers in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly
provided for in such Letter of Credit, be limited to determining that
the documents (including each draft) delivered under such Letter of
Credit in connection with such presentment are in conformity with such
Letter of Credit.
SECTION 3.7. Effect of Application. To the extent that any
provision of any Application related to any Letter of Credit is
inconsistent with the provisions of this Article III, the provisions of
this Article III shall apply.
ARTICLE IV
GENERAL LOAN PROVISIONS
SECTION 4.1. Interest.
(a) Interest Rate Options. Subject to the provisions of this
Section 4.1, at the election of the applicable Borrower or Borrowers,
Revolving Credit Loans denominated in Dollars shall bear interest at a
rate equal to the Base Rate or the LIBOR Rate plus, in each case, the
Applicable Margin as set forth below and Revolving Credit Loans
denominated in an Alternative Currency shall bear interest at a rate
equal to the LIBOR Rate plus the Applicable Margin as set forth below;
provided that, in accordance with Sections 4.1(d) and 4.8, Loans
denominated in Canadian Dollars shall bear interest at the Canadian Base
Rate, and Loans denominated in Sterling shall bear interest at the
Sterling Base Rate. However, the LIBOR Rate shall not be available
until three (3) Business Days after the Closing Date. Any Swingline
Loan shall bear interest at the Base Rate plus the Applicable Margin as
set forth below. The applicable Borrower or Borrowers shall select the
rate of interest and Interest Period, if any, applicable to any
Revolving Credit Loan at the time a Notice of Borrowing is given
pursuant to Section 2.3 or at the time a Notice of
Conversion/Continuation is given pursuant to Section 4.2. Each Loan or
portion thereof bearing interest based on the Base Rate shall be a "Base
Rate Loan", and each Loan or portion thereof bearing interest based on
the LIBOR Rate shall be a "LIBOR Rate Loan". Any Loan or any portion
thereof to be denominated in Dollars as to which the applicable Borrower
or Borrowers have not duly specified an interest rate as provided herein
shall be deemed a Base Rate Loan.
(b) Interest Periods. In connection with each LIBOR Rate
Loan, the applicable Borrower or Borrowers, by giving notice at the
times described in Section 4.1(a), shall elect an interest period (each,
an "Interest Period") to be applicable to such Loan, which Interest
Period shall be a period of one, two, three, or six months; provided
that:
(i) the Interest Period shall commence on the date of
advance of or conversion to any LIBOR Rate Loan and, in the case of
immediately successive Interest Periods, each successive Interest Period
shall commence on the date on which the next preceding Interest Period
expires;
(ii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided, that if any Interest Period
would otherwise expire on a day that is not a Business Day but is a day
of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the Revolving
Credit Termination Date and no Interest Period shall be selected by any
Borrower which, in connection with mandatory reductions of the Aggregate
Commitment pursuant to Section 2.6, would cause the early termination of
such Interest Period; and
(v) with respect to Revolving Credit Loans denominated
in Dollars, there shall be no more than five (5) Interest Periods
outstanding at any time and with respect to Revolving Credit Loans
denominated in an Alternative Currency, there shall be no more than two
(2) Interest Periods for each such Alternative Currency.
(c) Applicable Margin. The Applicable Margin provided for in
Section 4.1(a) with respect to the Loans (the "Applicable Margin") shall
(i) on the Closing Date equal the percentages set forth in the
certificate delivered pursuant to Section 5.2(e)(ii) and (ii) for each
fiscal quarter thereafter be determined by reference to the Leverage
Ratio as of the end of the fiscal quarter immediately preceding the
delivery of the applicable Officer's Compliance Certificate as follows:
Applicable Margin
Leverage Ratio Base Rate + LIBOR Rate +
Greater than 3.0 0.500% 2.000%
to 1.0.
Greater than 2.5 to 1.0 0.125% 1.625%
but less than or equal to
3.0 to 1.0.
Greater than 2.0 to 1.0 but -0- 1.375%
less than or equal to 2.5 to 1.0
Less than or equal to -0- 1.000%
2.0 to 1.0
Adjustments, if any, in the Applicable Margin shall be made by the
Administrative Agent on the tenth (10th) Business Day after receipt by
the Administrative Agent of quarterly financial statements for ACC and
its Subsidiaries and the accompanying Officer's Compliance Certificate
setting forth the Leverage Ratio of ACC and its Subsidiaries as of the
most recent fiscal quarter end. Subject to Section 4.1(d), in the event
the Borrowers fail to deliver such financial statements and certificate
within the time required by Section 7.2(c) hereof, the Applicable Margin
shall be the highest Applicable Margin set forth above until ten (10)
Business Days after receipt of such financial statements and certificate
by the Administrative Agent.
(d) Default Rate. Upon the occurrence and during the
continuance of an Event of Default, (i) the Borrowers shall no longer
have the option to request LIBOR Rate Loans or Loans in an Alternative
Currency, (ii) at the option of the Managing Agents, all outstanding
LIBOR Rate Loans shall bear interest at a rate per annum two percent
(2%) in excess of the rate then applicable to LIBOR Rate Loans until the
end of the applicable Interest Period and convert on such date to Base
Rate Loans if denomiated in Dollars, Sterling Bse Rate Loans if
denominated in Sterling and Canadian Base Rate Loans if denominated in
Canadian Dollars, and each shall bear interest, thereafter at a rate
equal to two percent (2%) in excess of the rate then applicable to Base
Rate Loans, or Canadian Base Rate Loans, as applicable, and (iii) at the
option of the Managing Agents, all outstanding Base Rate Loans shall
bear interest at a rate per annum equal to two percent (2%) in excess of
the rate then applicable to Base Rate Loans. Interest shall continue to
accrue on the Notes after the filing by or against any Borrower of any
petition seeking any relief in bankruptcy or under any act or law
pertaining to insolvency or debtor relief, whether state, federal or
foreign.
(e) Interest Payment and Computation. Interest on each Base
Rate Loan shall be payable in arrears on the last Business Day of each
calendar quarter commencing March 31, 1997 and interest on each LIBOR
Rate Loan shall be payable on the last day of each Interest Period
applicable thereto, and if such Interest Period extends over three (3)
months, at the end of each three month interval during such Interest
Period. All interest rates, fees and commissions provided hereunder
shall be computed on the basis of a 365/366-day year, except that (i)
interest with respect to each LIBOR Rate Loan denominated in Dollars or
Canadian Dollars shall be computed on the basis of a 360-day year and
assessed for the actual number of days elapsed, and (ii) interest with
respect to each LIBOR Rate Loan denominated in Sterling shall be
computed on the basis of a 365-day year and assessed for the actual
number of days elapsed.
(f) Maximum Rate. In no contingency or event whatsoever
shall the aggregate of all amounts deemed interest hereunder or under
any of the Notes charged or collected pursuant to the terms of this
Agreement or pursuant to any of the Notes exceed the highest rate
permissible under any Applicable Law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto.
In the event that such a court determines that the Lenders have charged
or received interest hereunder in excess of the highest applicable rate,
the rate in effect hereunder shall automatically be reduced to the
maximum rate permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option promptly refund to the applicable Borrower
or Borrowers any interest received by Lenders in excess of the maximum
lawful rate or shall apply such excess to the principal balance of the
Obligations. It is the intent hereof that the Borrowers not pay or
contract to pay, and that no Agent or any Lender receive or contract to
receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may be paid by the Borrowers under Applicable Law.
SECTION 4.2. Notice and Manner of Conversion or Continuation
of Revolving Credit Loans. Provided that no Default or Event of Default
has occurred and is then continuing, the Borrowers shall have the option
to (a) convert at any time all or any portion of its outstanding Base
Rate Loans that are Revolving Credit Loans in a principal amount equal
to $3,000,000 or any whole multiple of $1,000,000 in excess thereof into
one or more LIBOR Rate Loans denominated in Dollars, (b) upon the
expiration of any Interest Period, convert all or any part of its
outstanding LIBOR Rate Loans denominated in Dollars in a principal
amount equal to $1,500,000 or a whole multiple of $500,000 in excess
thereof into Base Rate Loans that are Revolving Credit Loans or (c) upon
the expiration of any Interest Period, continue any LIBOR Rate Loan in
a principal amount of $3,000,000 or any whole multiple of $1,000,000 in
excess thereof (or with respect to LIBOR Rate Loans denominated in an
Alternative Currency, the Alternative Currency Amount in each case
thereof) as a LIBOR Rate Loan denominated in the same Permitted
Currency. Whenever the Borrowers desire to convert or continue Loans as
provided above, the applicable Borrower or Borrowers shall give the
Administrative Agent irrevocable prior written notice in the form
attached as Exhibit D (a "Notice of Conversion/Continuation") not later
than 11:00 a.m. (Charlotte time) three (3) Business Days before the day
on which a proposed conversion or continuation of such Loan is to be
effective specifying (i) the Loans to be converted or continued, and, in
the case of a LIBOR Rate Loan to be converted or continued, the
Permitted Currency in which such Loan is denominated and the last day of
the Interest Period therefor, (ii) the effective date of such conversion
or continuation (which shall be a Business Day), (iii) the principal
amount of such Loans to be converted or continued and (iv) the Interest
Period to be applicable to such converted or continued LIBOR Rate Loan.
The Administrative Agent shall promptly notify the Lenders of such
Notice of Conversion/Continuation. If the Canadian Borrowers or U.K.
Borrowers fail to notify the Administrative Agent as provided in this
Section 4.2 of the continuation of any LIBOR Rate Loan denominated in
the corresponding Alternative Currency at the end of the Interest Period
of such LIBOR Rate Loan, such Loan upon the expiration of the applicable
Interest Period shall be deemed a Sterling Base Rate Loan or a Canadian
Base Rate Loan, as applicable.
SECTION 4.3. Fees.
(a) Commitment Fee. The Borrowers shall pay to the
Administrative Agent, for the account of the Lenders, a non-refundable
commitment fee on the average daily amount of the Aggregate Commitment
less the aggregate outstanding principal Dollar Amount of all Revolving
Credit Loans (and, with respect to First Union, all Swingline Loans) and
the aggregate outstanding Dollar Amount of all L/C Obligations at a rate
per annum determined by reference to the Leverage Ratio as of the end of
the fiscal quarter immediately preceding the delivery of the applicable
Officer's Compliance Certificate as follows:
Leverage Ratio Commitment Fee
Greater than 2.5 to 1.00 0.500%
Less than or equal to
2.5 to 1.0, but greater
than 2.0 to 1.0 0.375%
Less than or equal to 0.250%
2.0 to 1.0
The commitment fee shall be payable in arrears on the last Business Day
of each calendar quarter during the term of this Agreement commencing
March 31, 1997 and on the Revolving Credit Termination Date. Such
commitment fee shall be distributed promptly by the Administrative Agent
to each Lender pro rata according to the aggregate principal Dollar
Amount of Extensions of Credit held by such Lender.
(b) Administrative Agent's Fees. In order to compensate the
Administrative Agent for its obligations hereunder, the Borrowers agree
to pay to the Administrative Agent for its own account the
administrative fee set forth in the fee letter executed by ACC dated
August 15, 1996, which fee shall be payable in advance on the Closing
Date and on each anniversary of such date.
SECTION 4.4. Manner of Payment.
(a) Loans Denominated in Dollars. Each payment (including
repayments described in Article II) by any Borrower on account of the
principal of or interest on the Loans denominated in Dollars or of any
fee, commission or other amounts (including the Reimbursement
Obligation) payable to the Lenders under this Agreement or any Note
(except as set forth in Section 4.4(b)) shall be made in Dollars not
later than 1:00 p.m. (Charlotte time) on the date specified for payment
under this Agreement to the Administrative Agent for the account of the
Lenders in accordance with Section 4.4(c) at the Administrative Agent's
Office, in immediately available funds, and shall be made without any
set-off, counterclaim or deduction whatsoever. Any payment received
after such time but before 2:00 p.m. (Charlotte time) on such day shall
be deemed a payment on such date for the purposes of Section 12.1, but
for all other purposes shall be deemed to have been made on the next
succeeding Business Day. Any payment received after 2:00 p.m.
(Charlotte time) shall be deemed to have been made on the next
succeeding Business Day for all purposes.
(b) Loans Denominated in Alternative Currencies. Each
payment (including repayments described in Article II) by any Borrower
on account of the principal of or interest on the Loans denominated in
any Alternative Currency shall be made in such Alternative Currency not
later than 11:00 a.m. (the time of the Administrative Agent's
Correspondent) on the date specified for payment under this Agreement to
the Administrative Agent's account with the Administrative Agent's
Correspondent for the account of the Lenders in accordance with Section
4.4(c) in immediately available funds, and shall be made without any
set-off, counterclaim or deduction whatsoever. Any payment received
after such time but before 12:00 noon (the time of the Administrative
Agent's Correspondent) on such day shall be deemed a payment on such
date for the purposes of Section 12.1, but for all other purposes shall
be deemed to have been made on the next succeeding Business Day. Any
payment received after 12:00 noon (the time of the Administrative
Agent's Correspondent) shall be deemed to have been made on the next
succeeding Business Day for all purposes.
(c) Pro Rata Treatment. Upon receipt by the Administrative
Agent of each such payment, the Administrative Agent shall distribute to
each Lender at its address for notices set forth herein its pro rata
share of such payment in accordance with such Lender's Commitment
Percentage and shall wire advice of the amount of such credit to each
Lender. Each payment to the Administrative Agent of the Swingline
Lender's or the Issuing Lender's or L/C Participants' fees or
commissions shall be made in like manner, but for the account of the
Swingline Lender, the Issuing Lender or the L/C Participants, as the
case may be. Each payment to any Agent of such Agent's fees or expenses
shall be made for the account of such Agent and any amount payable to
any Lender under Section 2.4(b) and Sections 4.8 through 4.11 and 14.2
and 14.13 shall be paid to the Administrative Agent for the account of
the applicable Lender. Subject to Section 4.1(b)(ii), if any payment
under this Agreement or any Note shall be specified to be made upon a
day which is not a Business Day, it shall be made on the next succeeding
day which is a Business Day and such extension of time shall in such
case be included in computing any interest if payable along with such
payment.
SECTION 4.5. Crediting of Payments and Proceeds. Unless
otherwise provided in the Security Agreement, in the event that any
Borrower shall fail to pay any of the Obligations when due and the
Obligations have been accelerated pursuant to Section 12.2, all payments
received by the Lenders upon the Notes and the other Obligations and all
net proceeds from the enforcement of the Obligations shall be applied
first to all Administrative Agent's fees and expenses then due and
payable by the Borrowers hereunder, then to all other expenses then due
and payable by the Borrowers hereunder, then to all indemnity
obligations then due and payable by the Borrowers hereunder, then to all
commitment and other fees and commissions then due and payable, then to
accrued and unpaid interest on the Swingline Note to the Swingline
Lender, then to the principal amount outstanding under the Swingline
Note to the Swingline Lender, then to accrued and unpaid interest on the
Revolving Credit Notes, the Reimbursement Obligation and any termination
payments due in respect of a Hedging Agreement with any Lender permitted
pursuant to Section 10.13 (pro rata in accordance with all such amounts
due), then to the aggregate outstanding principal amount of the
Revolving Credit Notes and Reimbursement Obligation and then to the cash
collateral account described in Section 12.2(b) hereof to the extent of
any L/C Obligations then outstanding, in that order.
SECTION 4.6. Nature of Obligations of Lenders Regarding
Extensions of Credit; Assumption by Administrative Agent. The
obligations of the Lenders under this Agreement to make the Loans and
issue or participate in Letters of Credit are several and are not joint
or joint and several. Unless the Administrative Agent shall have
received notice from a Lender prior to a proposed borrowing date that
such Lender will not make available to the Administrative Agent such
Lender's ratable portion of the amount to be borrowed on such date
(which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has
made such portion available to the Administrative Agent on the proposed
borrowing date in accordance with Section 3.2 and the Administrative
Agent may, in reliance upon such assumption, make available to the
applicable Borrower or Borrowers on such date a corresponding amount.
If such amount is made available to the Administrative Agent on a date
after such borrowing date, such Lender shall pay to the Administrative
Agent on demand an amount, until paid, equal to (a) with respect to a
Loan denominated in Dollars the amount of such Lender's Commitment
Percentage of such borrowing and interest thereon at a rate equal to the
daily average Federal Funds Rate during such period as determined by the
Administrative Agent and (b) with respect to a Loan denominated in an
Alternative Currency, such Lender's Commitment Percentage of such
borrowing at a rate per annum equal to the Administrative Agent's
aggregate marginal cost (including the cost of maintaining any required
reserves or deposit insurance and of any fees, penalties, overdraft
charges or other costs or expenses incurred by the Administrative Agent
as a result of the failure to deliver funds hereunder) of carrying such
amount. A certificate of the Administrative Agent with respect to any
amounts owing under this Section shall be conclusive, absent manifest
error. If such Lender's Commitment Percentage of such borrowing is not
made available to the Administrative Agent by such Lender within three
(3) Business Days of such borrowing date, the Administrative Agent shall
be entitled to recover such amount made available by the Administrative
Agent with interest thereon at the rate then applicable to such Loan
hereunder, on demand, from the applicable Borrower or Borrowers. The
failure of any Lender to make its Commitment Percentage of any Loan
available shall not relieve it or any other Lender of its obligation, if
any, hereunder to make its Commitment Percentage of such Loan available
on such borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Commitment Percentage of such
Loan available on the borrowing date.
SECTION 4.7. Regulatory Limitation. In the event, as a
result of increases in the value of Alternative Currencies against the
Dollar or for any other reason, the obligation of any of the Lenders to
make Loans or issue or participate in Letters of Credit (taking into
account the Dollar Amount of the Obligations and all other indebtedness
required to be aggregated under 12 U.S.C.A. 84, as amended, the
regulations promulgated thereunder and any other Applicable Law) is
determined by such Lender to exceed its then applicable legal lending
limit under 12 U.S.C.A. 84, as amended, and the regulations promulgated
thereunder, or any other Applicable Law, the amount of additional
Extensions of Credit such Lender shall be obligated to make or issue or
participate in hereunder shall immediately be reduced to the maximum
amount which such Lender may legally advance (as determined by such
Lender), the obligation of each of the remaining Lenders hereunder shall
be proportionately reduced, based on their applicable Commitment
Percentages, and, to the extent necessary under such laws and
regulations (as determined by each of the Lenders, with respect to the
applicability of such laws and regulations to itself), the Borrowers
shall reduce, or cause to be reduced, complying to the extent
practicable with the remaining provisions hereof, the Obligations
outstanding hereunder by an amount sufficient to comply with such
maximum amounts.
SECTION 4.8. Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate Availability. If with
respect to any Interest Period the Administrative Agent or any Lender
(after consultation with the Administrative Agent) shall determine that
(i) by reason of circumstances affecting the foreign exchange and
interbank markets generally, deposits in eurodollars or an Alternative
Currency in the applicable amounts are not being quoted via Telerate
Page 3750 or offered to the Administrative Agent or such Lender for such
Interest Period, (ii) a fundamental change has occurred in the foreign
exchange or interbank markets with respect to any Alternative Currency
(including, without limitation, changes in national or international
financial, political or economic conditions or currency exchange rates
or exchange controls) or (iii) it has become otherwise materially
impractical for the Administrative Agent or any Lender, as applicable,
to make such Loan in an Alternative Currency, then the Administrative
Agent shall forthwith give notice thereof to the Borrowers. Thereafter,
until the Administrative Agent notifies the Borrowers that such
circumstances no longer exist, the obligation of the Lenders to make
LIBOR Rate Loans, and the right of the Borrowers to convert any Loan to
or continue any Loan as a LIBOR Rate Loan, shall be suspended, and the
applicable Borrower or Borrowers shall repay in full (or cause to be
repaid in full) the then outstanding principal amount of each such LIBOR
Rate Loan, together with accrued interest thereon, on the last day of
the then current Interest Period applicable to such LIBOR Rate Loan or
convert the then outstanding principal amount of each such LIBOR Rate
Loan denominated in Dollars to a Base Rate Loan, each such LIBOR Rate
Loan denominated in Sterling to a Sterling Base Rate Loan, and each such
LIBOR Rate Loan denominated in Canadian Dollars to a Canadian Base Rate
Loan, as of the last day of such Interest Period.
(b) Laws Affecting LIBOR Rate Availability. If, after the
date hereof, the introduction of, or any change in, any Applicable Law
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any
Lender (or any of their respective Lending Offices) with any request or
directive (whether or not having the force of law) of any such
Authority, central bank or comparable agency, shall make it unlawful or
impossible for any of the Lenders (or any of their respective Lending
Offices) to honor its obligations hereunder to make or maintain any
LIBOR Rate Loan, such Lender shall promptly give notice thereof to the
Administrative Agent and the Administrative Agent shall promptly give
notice to the Borrowers and the other Lenders. Thereafter, until the
Administrative Agent notifies the Borrowers that such circumstances no
longer exist (which notification shall be given as soon as practicable,
but in any event not later than thirty (30) days after the
Administrative Agent obtains actual knowledge that such circumstances no
longer exist), (i) the obligations of the Lenders to make LIBOR Rate
Loans and the right of the Borrowers to convert any Loan or continue any
Loan as a LIBOR Rate Loan shall be suspended and thereafter the
Borrowers may select only Base Rate Loans, Sterling Base Rate Loans, or
Canadian Base Rate Loans hereunder, as applicable, and (ii) if any of
the Lenders may not lawfully continue to maintain a LIBOR Rate Loan to
the end of the then current Interest Period applicable thereto as a
LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be
converted to a Base Rate Loan, Sterling Base Rate Loan or Canadian Base
Rate Loan, as applicable, for the remainder of such Interest Period.
(c) Increased Costs. If, after the date hereof, the
introduction of, or any change in, any Applicable Law, or in the
interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any of the Lenders (or any of
their respective Lending Offices) with any request or directive (whether
or not having the force of law) of such Authority, central bank or
comparable agency:
(i) shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with
respect to any LIBOR Rate Loan or any Note, Letter of Credit or
Application or shall change the basis of taxation of payments to any of
the Lenders (or any of their respective Lending Offices) of the
principal of or interest on any LIBOR Rate Loan or any Note, Letter of
Credit or Application or any other amounts due under this Agreement in
respect thereof (except for changes in the rate of tax on the overall
net income of any of the Lenders or any of their respective Lending
Offices imposed by the jurisdiction in which such Lender is organized or
is or should be qualified to do business or such Lending Office is
located); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of
the Federal Reserve System), special deposit, insurance or capital or
similar requirement against assets of, deposits with or for the account
of, or credit extended by any of the Lenders (or any of their respective
Lending Offices) or shall impose on any of the Lenders (or any of their
respective Lending Offices) or the foreign exchange and interbank
markets any other condition affecting any LIBOR Rate Loan or any Note;
and the result of any of the foregoing is to increase the costs to any
of the Lenders of maintaining any LIBOR Rate Loan or issuing or
participating in Letters of Credit or to reduce the yield or amount of
any sum received or receivable by any of the Lenders under this
Agreement or under the Notes in respect of a LIBOR Rate Loan or Letter
of Credit or Application, then such Lender shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify
the Borrowers of such fact and demand compensation therefor and, within
fifteen (15) days after such notice by the Administrative Agent, the
applicable Borrower or Borrowers shall pay to such Lender such
additional amount or amounts as will compensate such Lender or Lenders
for such increased cost or reduction. The Administrative Agent will
promptly notify the Borrowers of any event of which it has knowledge
which will entitle such Lender to compensation pursuant to this Section
4.8(c); provided, that the Administrative Agent shall incur no liability
whatsoever to the Lenders or the Borrowers in the event it fails to do
so. A certificate of the Administrative Agent setting forth the basis
for determining such additional amount or amounts necessary to
compensate such Lender or Lenders shall be conclusively presumed to be
correct save for manifest error.
SECTION 4.9. Indemnity. The applicable Borrower or Borrowers
hereby indemnify each of the Lenders against any loss or expense
(including without limitation any foreign exchange costs) which may
arise or be attributable to each Lender's obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or maintain
the Loans (a) as a consequence of any failure by any such Borrower or
Borrowers to make any payment when due of any amount due hereunder in
connection with a LIBOR Rate Loan, (b) due to any failure of any such
Borrower or Borrowers to borrow on a date specified therefor in a Notice
of Borrowing or Notice of Continuation/Conversion with respect to any
LIBOR Rate Loan or (c) due to any payment, prepayment or conversion of
any LIBOR Rate Loan on a date other than the last day of the Interest
Period therefor. Each Lender's calculations of any such loss or expense
shall be furnished to the Borrowers and shall be conclusive, absent
manifest error.
SECTION 4.10. Capital Requirements. If either (a) the
introduction of, or any change in, or in the interpretation of, any
Applicable Law or (b) compliance with any guideline or request from any
central bank or comparable agency or other Governmental Authority
(whether or not having the force of law), has or would have the effect
of reducing the rate of return on the capital of, or has affected or
would affect the amount of capital required to be maintained by, any
Lender or any corporation controlling such Lender as a consequence of,
or with reference to the Commitments and other commitments of this type,
below the rate which the Lender or such other corporation could have
achieved but for such introduction, change or compliance, then within
five (5) Business Days after written demand by any such Lender, the
Borrowers shall pay to such Lender from time to time as specified by
such Lender additional amounts sufficient to compensate such Lender or
other corporation for such reduction. A certificate as to such amounts
submitted to the Borrowers and the Administrative Agent by such Lender,
shall, in the absence of manifest error, be presumed to be correct and
binding for all purposes.
SECTION 4.11. Taxes.
(a) Payments Free and Clear. Any and all payments by the
Borrowers hereunder or under the Notes or the Letters of Credit shall be
made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholding, and
all liabilities with respect thereto (including, without limitation, all
claims, penalties, costs and expenses resulting from any failure to
withhold or pay, or any delay in withholding or paying, any of the
foregoing amounts) excluding, (i) in the case of each Lender and each
Agent, income and franchise taxes imposed by the jurisdiction under the
laws of which such Lender or Agent (as the case may be) is organized or
is or should be qualified to do business or any political subdivision of
such jurisdiction or country which includes such jurisdiction (it being
expressly acknowledged by the Borrowers that each Agent and each Lender
are not qualified, nor should they be qualified, for purposes of this
Section 4.11(a) or for any other Section of this Agreement, to do
business in Canada or any political subdivision thereof) and (ii) in the
case of each Lender, income and franchise taxes imposed by the
jurisdiction of such Lender's Lending Office or any political
subdivision of such jurisdiction or country which includes such
jurisdiction (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as
"Taxes"). If any Borrower shall be required by law to deduct or
withhold any Taxes from or in respect of any sum payable hereunder or
under any Note or Letter of Credit to any Lender or any Agent, (A) the
sum payable shall be increased as may be necessary so that after making
all required deductions or withholdings (including deductions or
withholdings applicable to additional sums payable under this Section
4.11) such Lender or Agent (as the case may be) receives an amount equal
to the amount such party would have received had no such deductions or
withholdings been made, (B) such Borrower shall make such deductions or
withholdings , (C) such Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law, and (D) such Borrower shall deliver to
the Administrative Agent evidence of such payment to the relevant taxing
authority or other authority in the manner provided in Section 4.11(d).
If, for any reason, any Borrower or Borrowers do not pay or remit such
Taxes or do not for any reason pay any additional sums payable to any
Lender or any Agent under this Section 4.11, the interest payable by
such Borrower or Borrowers under this Agreement will be increased to the
rate or rates necessary to yield and remit to such Lender or Agent the
principal sum advanced together with interest at the applicable rate or
rates specified in this Agreement after provision for payment of such
Taxes. The Borrowers shall, from time to time, execute and deliver any
and all further documents as may be necessary or advisable to give full
force and effect to such increase in the rate or rates of interest.
(b) Stamp and Other Taxes. In addition, the Borrowers shall
pay any present or future stamp, registration, recordation or
documentary taxes or any other similar fees or charges or excise or
property taxes, levies of the United States or any state or political
subdivision thereof or any applicable foreign jurisdiction which arise
from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, the
Loans, the Letters of Credit, the other Loan Documents, or the
perfection of any rights or security interest in respect thereto
(hereinafter referred to as "Other Taxes").
(c) Indemnity. The Borrowers shall indemnify each Lender and
each Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes and Other Taxes imposed by any
jurisdiction on amounts payable under this Section 4.11) paid by such
Lender or Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Such indemnification shall be made within thirty (30)
days from the date such Lender or Agent (as the case may be) makes
written demand therefor.
(d) Evidence of Payment. Within thirty (30) days after the
date of any payment of Taxes or Other Taxes, the affected Borrower shall
furnish to the Administrative Agent, at its address referred to in
Section 14.1, the original or a certified copy of a receipt evidencing
payment thereof or other evidence of payment satisfactory to the
Administrative Agent.
(e) Survival. Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of
the Borrowers contained in this Section 4.11 shall survive the payment
in full of the Obligations and the termination of the Commitments.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 5.1. Closing. The closing shall take place at the
offices of Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon
Street, Suite 4200, Charlotte, North Carolina 28202 at 10:00 a.m. on
January 14, 1997, or on such other date as the parties hereto shall
mutually agree.
SECTION 5.2. Conditions to Closing and Initial Extensions of
Credit. The obligation of the Lenders to close this Agreement and to
make the initial Loan or issue the initial Letter of Credit is subject
to the satisfaction of each of the following conditions:
(a) Executed Loan Documents. The following Loan Documents,
in form and substance satisfactory to the Managing Agents and each
Lender:
(i) this Agreement;
(ii) the Revolving Credit Notes;
(iii) the Swingline Note;
(iv) the Security Agreement;
(v) the Trademark Assignment;
(vi) the Pledge Agreements;
(vii) the Mortgages;
(viii) the Landlord Consents;
(ix) the Canadian Security Documents;
(x) the U.K. Security Documents;
(xi) the Intercompany Subordination Agreement; and
(xii) the U.K. Guaranty Agreement;
shall have been duly authorized, executed and delivered by the parties
thereto, shall be in full force and effect and no default shall exist
thereunder, and the Borrowers shall have delivered original counterparts
thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Compliance Certificate of the Borrowers. The
Administrative Agent shall have received a certificate from the chief
executive officer or chief financial officer of ACC, in form and
substance reasonably satisfactory to the Administrative Agent, to the
effect that all representations and warranties of the Borrowers
contained in this Agreement and the other Loan Documents are true,
correct and complete in all material respects; that the Borrowers are
not in violation of any of the covenants contained in this Agreement and
the other Loan Documents; that, after giving effect to the transactions
contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; that the Borrowers have satisfied each of
the closing conditions to be satisfied thereby; and that the Borrowers
have filed all required tax returns and owe no delinquent taxes.
(ii) Certificate of Secretary of each Borrower. The
Administrative Agent shall have received a certificate of the secretary
or assistant secretary (or director with respect to ACC U.K.) of each
Borrower certifying, as applicable, that attached thereto is a true and
complete copy of the articles of incorporation or other charter
documents of such Borrower and all amendments thereto, certified as of
a recent date by the appropriate Governmental Authority in its
jurisdiction of incorporation; that attached thereto is a true and
complete copy of the bylaws of such Borrower as in effect on the date of
such certification; that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of such Borrower,
authorizing the borrowings contemplated hereunder and the execution,
delivery and performance of this Agreement and the other Loan Documents
to which it is a party; and as to the incumbency and genuineness of the
signature of each officer of such Borrower executing Loan Documents to
which such Person is a party.
(iii) Certificates of Good Standing. The Administrative
Agent shall have received long-form certificates as of a recent date of
the good standing of each Borrower under the laws of their respective
jurisdictions of organization and such other jurisdictions requested by
the Managing Agents.
(iv) Opinions of Counsel. The Administrative Agent shall
have received favorable opinions of United States, Canadian and United
Kingdom counsel to the Borrowers addressed to the Managing Agents and
Lenders with respect to such Persons, the Loan Documents and regulatory
matters (including without limitation Communications Licenses and PUC
Authorizations) reasonably satisfactory in form and substance to the
Managing Agents and Lenders.
(c) Collateral.
(i) Filings and Recordings. All filings that are
necessary to perfect the Liens of the Administrative Agent and the
Lenders in the Collateral described in the Security Documents shall have
been filed in all appropriate locations and the Administrative Agent
shall have received evidence satisfactory to the Administrative Agent
that such security interests constitute valid and perfected first
priority Liens therein, subject to Liens permitted by Section 10.3.
(ii) Pledged Stock. The Administrative Agent shall have
received original stock certificates evidencing the capital stock
pledged pursuant to the Pledge Agreements and any Canadian Security
Document, together with an appropriate undated stock power for each
certificate duly executed in blank by the registered owner thereof.
(iii) Lien Searches. The Administrative Agent shall have
received the results of a Lien search of all filings made against such
Borrowers under the Uniform Commercial Code, personal property security
legislation or legislation as to registration of security on movable
property as in effect in any jurisdiction in which any of their assets
are located, indicating among other things that their assets are free
and clear of any Lien except for the Liens permitted by Section 10.3.
(iv) Mortgage Documents. The Administrative Agent shall
have received such mortgagee title and hazard insurance policies, title
searches, property surveys, appraisals and environmental assessments
with respect to each property covered by a Mortgage as it shall
reasonably request in writing from the applicable Borrower.
(v) Insurance. The Administrative Agent shall have
received certificates of insurance and copies (certified by the
applicable Borrower) of insurance policies in the form required under
Section 8.3 and the Security Documents and otherwise in form and
substance reasonably satisfactory to the Managing Agents.
(d) Consents; No Adverse Change.
(i) Governmental and Third Party Approvals. All
necessary approvals, authorizations and consents, if any are required,
of any Person and of all Governmental Authorities and courts having
jurisdiction with respect to the execution and delivery of this
Agreement and the other Loan Documents shall have been obtained and
copies thereof delivered to the Administrative Agent.
(ii) Permits and Licenses. All permits and licenses,
including permits and licenses required under Applicable Laws, necessary
to the current conduct of business by the Borrowers and their
Subsidiaries shall have been obtained.
(iii) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted,
threatened or proposed before any Governmental Authority to enjoin,
restrain, or prohibit, or to obtain substantial damages in respect of,
or which is related to or arises out of this Agreement or the other Loan
Documents or the consummation of the transactions contemplated hereby or
thereby, or which, in the Managing Agents' reasonable discretion, would
make it inadvisable to consummate the transactions contemplated by this
Agreement and such other Loan Documents.
(iv) No Material Adverse Change. There shall not have
occurred any material adverse change in the condition (financial or
otherwise), operations, properties, business or prospects of the
Borrowers and their Subsidiaries, or any event or condition that has had
or could be reasonably expected to have a Material Adverse Effect.
(v) No Event of Default. No Default or Event of Default
shall have occurred and be continuing.
(e) Financial Matters.
(i) Financial Statements. The Managing Agents shall
have received the most recent audited Consolidated financial statements
of ACC and its Subsidiaries.
(ii) Financial Condition Certificate. ACC shall have
delivered to the Administrative Agent a certificate, in form and
substance reasonably satisfactory to such Agent, and certified as
accurate in all material respects by the chief executive officer or
chief financial officer of ACC, that (A) attached thereto is a pro forma
balance sheet of ACC and its Subsidiaries setting forth on a pro forma
basis the financial condition of ACC and its Subsidiaries on a
Consolidated basis as of that date, reflecting on a pro forma basis the
effect of the transactions contemplated herein, including all material
fees and expenses in connection therewith, and evidencing compliance on
a pro forma basis with the covenants contained in Article IX hereof,
(B) the financial projections previously delivered to the Managing
Agents represent the good faith opinions of the Borrowers and senior
management thereof as to the projected results contained therein, and
(C) attached thereto is a calculation of the Applicable Margin in
accordance with Section 4.1(c) as of September 30, 1996.
(iii) Payment at Closing. (A) There shall have been paid
by the Borrowers to the Administrative Agent the outstanding portion of
the underwriting fee payable pursuant to the fee letter referred to in
Section 4.3(b); (B) there shall have been paid by the Borrowers to each
of First Union and Fleet the Contingent Interest Payment under the
Contingent Interest Agreement (the Trigger Date thereunder being hereby
deemed to be January 14, 1997 and (C) the Agents and the Lenders shall
have received any other accrued and unpaid fees or commissions due
hereunder (including, without limitation, legal fees and expenses), and
to any other Person such amount as may be due thereto in connection with
the transactions contemplated hereby, including all taxes, fees and
other charges in connection with the execution, delivery, recording,
filing and registration of any of the Loan Documents. The
Administrative Agent shall have received duly authorized and executed
copies of the fee letter referred to in Section 4.3(b).
(f) Miscellaneous.
(i) Notice of Borrowing. The Administrative Agent shall
have received a Notice of Borrowing from the Borrowers in accordance
with Section 2.3(a), and a written notice in the form attached hereto as
Exhibit F (a "Notice of Account Designation") specifying the account or
accounts to which the proceeds of any Loans made after the Closing Date
are to be disbursed.
(ii) ACC U.K. Charter Amendment. The constitutional
documents of ACC U.K. shall have been amended in a manner reasonably
satisfactory to the Administrative Agent such that the directors of ACC
U.K. shall not have the discretion to refuse to register any transfer of
the shares of capital stock of ACC U.K. in order to remove any obstacles
to the full performance of ACC under the ACC Pledge Agreement.
(iii) Proceedings and Documents. All opinions,
certificates and other instruments and all proceedings in connection
with the transactions contemplated by this Agreement shall be reasonably
satisfactory in form and substance to the Lenders. The Lenders shall
have received copies of all other instruments and other evidence as the
Lender may reasonably request, in form and substance reasonably
satisfactory to the Lenders, with respect to the transactions
contemplated by this Agreement and the taking of all actions in
connection therewith.
(iv) Due Diligence and Other Documents. The Borrowers
shall have delivered to the Administrative Agent such other documents,
certificates and opinions as the Managing Agents reasonably request,
including without limitation copies of each document evidencing or
governing the Subordinated Debt, certified by a secretary or assistant
secretary of the applicable Borrower as a true and correct copy thereof.
(v) Canadian Termination/Release Documents. The
Borrowers shall have delivered to the Administrative Agent all documents
necessary to effect the release and termination of the Canadian Note
Documents and Canadian Subsidiary Security Documents, as such terms are
defined in the Original Credit Agreement.
(vi) Canadian Amalgamation Documents. The Borrowers
shall have delivered to the Administrative Agent all documentation and
other evidence satisfactory thereto demonstrating the acquisition of all
of the shares of ACC TelEnterprises Ltd. by ACC Acquisition Corp. prior
to the first amalgamation described below; the amalgamation of ACC
TelEnterprises Ltd. and ACC Acquisition Corp., with ACC TelEnterprises
Ltd. as the survivor; and the amalgamation of Metrowide Communications
Inc., ACC Long Distance Inc., ACC TelEnterprises Ltd. and others, with
ACC TelEnterprises Ltd. as the survivor (and defined in this Agreement
as "ACC Canada").
(g) Refinancing. On the Closing Date hereunder, (i) all
loans under the Original Credit Agreement ("Existing Loans") made by any
Original Lender who is not a Lender hereunder shall be repaid in full
and the commitments and other obligations and (except as expressly set
forth in the Original Credit Agreement) rights of such Original Lender
shall be terminated, (ii) all outstanding Existing Loans shall be
Revolving Credit Loans hereunder and the Administrative Agent shall make
such transfers of funds as are necessary in order that the outstanding
balance of such Loans, together with any Loans funded on the Closing
Date, reflect the Commitments of the Lenders hereunder, (iii) all
Original Letters of Credit shall be Letters of Credit hereunder and each
Lender shall be deemed to have purchased a participation therein
pursuant to Section 3.4 in accordance with its Commitment Percentage,
(iv) there shall have been paid in cash in full all accrued but unpaid
interest due on the Existing Loans to but excluding the Closing Date,
(v) there shall have been paid in cash in full all accrued but unpaid
fees under the Original Credit Agreement due to but excluding the
Closing Date and all other amounts, costs and expenses then owing to any
of the Original Lenders and/or any Agent, as agent under the Original
Credit Agreement, in each case to the satisfaction of such Agent or
Original Lender, as the case may be, regardless of whether or not such
amounts would otherwise be due and payable at such time pursuant to the
terms of the Original Credit Agreement and (vi) all outstanding
promissory notes issued by the Borrowers to the Original Lenders under
the Original Credit Agreement shall be promptly returned to the
Administrative Agent who shall forward such notes to the Borrower.
SECTION 5.3. Conditions to All Extensions of Credit. The
obligations of the Lenders to make any Loan (subject to Section 2.2(b)
with respect to Swingline Loans) or issue or participate in any Letter
of Credit are subject to the satisfaction of the following conditions
precedent on the relevant borrowing or issue date, as applicable:
(a) Continuation of Representations and Warranties. The
representations and warranties contained in Article VI shall be true and
correct on and as of such borrowing or issuance date with the same
effect as if made on and as of such date.
(b) No Existing Default. No Default or Event of Default
shall have occurred and be continuing hereunder on (i) the borrowing
date with respect to such Loan or after giving effect to the Revolving
Credit Loans to be made on such date or (ii) the issue date with respect
to such Letter of Credit or after giving effect to such Letters of
Credit on such date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BORROWERS
SECTION 6.1. Representations and Warranties. To induce the
Agents to enter into this Agreement and the Lenders to make the Loans or
issue or participate in the Letters of Credit, the Borrowers hereby
represent and warrant to the Agents and Lenders that:
(a) Organization; Power; Qualification. Each of ACC and its
Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation,
has the power and authority to own its properties and to carry on its
business as now being conducted and is duly qualified and authorized to
do business in each jurisdiction where its business requires such
qualification and authorization, except in those jurisdictions in which
the failure to so qualify could not reasonably be expected to have a
Material Adverse Effect. The jurisdictions in which ACC and its
Subsidiaries are organized and qualified to do business are described on
Schedule 6.1(a).
(b) Ownership. Each Material Subsidiary and other Subsidiary
of ACC is listed on Schedule 6.1(b) and each Material Subsidiary is so
designated on such Schedule. The capitalization of ACC and its
Subsidiaries consists of the number of shares, authorized, issued and
outstanding, of such classes and series, with or without par value,
described on Schedule 6.1(b). All outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable. The
shareholders of the Subsidiaries of ACC and the number of shares owned
by each are described on Schedule 6.1(b). There are no outstanding
stock purchase warrants, subscriptions, options, securities, instruments
or other rights of any type or nature whatsoever, which are convertible
into, exchangeable for or otherwise provide for or permit the issuance
of capital stock of ACC or its Subsidiaries, except as described on
Schedule 6.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing.
Each of ACC and its Subsidiaries has the right, power and authority and
has taken all necessary corporate and other action to authorize the
execution, delivery and performance of this Agreement and each of the
other Loan Documents to which it is a party in accordance with their
respective terms. This Agreement and each of the other Loan Documents
have been duly executed and delivered by the duly authorized officers of
ACC and each of its Subsidiaries party thereto and each such document
constitutes the legal, valid and binding obligation of ACC or its
Subsidiary party thereto, enforceable in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state, provincial or federal
debtor relief laws from time to time in effect which affect the
enforcement of creditors' rights in general and the availability of
equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing
with Laws, Etc. The execution, delivery and performance by ACC and its
Subsidiaries of the Loan Documents to which each such Person is a party,
in accordance with their respective terms, the borrowings hereunder and
the transactions contemplated hereby do not and will not, by the passage
of time, the giving of notice or otherwise, (i) except as set forth on
Schedule 6.1(d) hereto, require any Governmental Approval, (ii) violate
any Applicable Law relating to ACC or any of its Subsidiaries, except to
the extent that any such violation could not reasonably be expected to
have a Material Adverse Effect, (iii) conflict with, result in a breach
of or constitute a default under the articles of incorporation, bylaws
or other organizational documents of ACC or any of its Subsidiaries or
any material indenture, agreement or other instrument to which such
Person is a party or by which any of its properties may be bound or any
Governmental Approval relating to such Person or (iv) result in or
require the creation or imposition of any Lien upon or with respect to
any material property now owned or hereafter acquired by such Person
other than Liens arising under the Loan Documents.
(e) Compliance with Law; Governmental Approvals. Each of ACC
and its Subsidiaries (i) has all material Governmental Approvals
required by any Applicable Law for it to conduct its business. Each
such Governmental Approval is in full force and effect, is final and not
subject to review on appeal and is not the subject of any pending or, to
the best of its knowledge, threatened attack by direct or collateral
proceeding and (ii) is in compliance with each material Governmental
Approval applicable to it and in material compliance with all other
Applicable Laws relating to it or any of its respective properties.
(f) Tax Returns and Payments. Each of ACC and its
Subsidiaries has duly filed or caused to be filed all federal, state,
provincial, local and other tax returns required by Applicable Law to be
filed, and has paid, or made adequate provision for the payment of, all
federal, state, provincial, local and other taxes, assessments and
governmental charges or levies upon it and its property, income, profits
and assets which are due and payable, except where the payment of such
tax is being disputed in good faith and adequate reserves have been
established in accordance with GAAP. No Governmental Authority has
asserted any Lien or other claim against ACC or any Subsidiary thereof
with respect to material unpaid taxes which has not been discharged or
resolved or is not being contested in good faith. The charges, accruals
and reserves on the books of ACC and any of its Subsidiaries in respect
of federal, state, provincial, local and other taxes for all Fiscal
Years and portions thereof are in the judgment of ACC adequate, and ACC
does not anticipate any additional material taxes or assessments for any
of such years.
(g) Environmental Matters. (i) To the best knowledge of the
Borrowers, the properties of ACC and its Subsidiaries do not contain,
and have not previously contained, any Hazardous Materials in amounts or
concentrations which (A) constitute or constituted a material violation
of, or (B) could give rise to material liability under, applicable
Environmental Laws;
(ii) Such properties and all operations conducted in
connection therewith are in material compliance, and have been in
material compliance, with all applicable Environmental Laws, and to the
best knowledge of the Borrowers, there is no contamination at or under
such properties or such operations in violation of applicable
Environmental Laws or which could materially interfere with the
continued operation of such properties or, if such properties are owned
by any such Person, materially impair the fair saleable value thereof;
(iii) Neither ACC nor any Subsidiary thereof has received
any notice of material violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of their
properties or the operations conducted in connection therewith, nor does
ACC or any Subsidiary thereof have knowledge or reason to believe that
any such notice will be received or is being threatened;
(iv) Hazardous Materials have not been transported or
disposed of from the properties of ACC and its Subsidiaries in violation
of, or in a manner or to a location which could give rise to material
liability under, Environmental Laws, nor to the best knowledge of the
Borrowers, have any Hazardous Materials been generated, treated, stored
or disposed of at, on or under any of such properties in material
violation of, or in a manner that could give rise to material liability
under, any applicable Environmental Laws;
(v) No judicial proceedings or governmental or
administrative action is pending, or to the best knowledge of the
Borrowers, threatened, under any Environmental Law to which ACC or any
Subsidiary thereof is or will be named as a party with respect to such
properties or operations conducted in connection therewith, nor are
there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with
respect to such properties or such operations; and
(vi) There has been no release, or to the best knowledge
of the Borrowers, threat of release, of Hazardous Materials at or from
such properties, in violation of or in amounts or in a manner that could
give rise to material liability under Environmental Laws.
(h) Employee Benefit Plans and Canadian Plans.
(i) Neither ACC nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit Plans
or Canadian Plans other than those identified on Schedule 6.1(h);
(ii) ACC and each ERISA Affiliate are in material
compliance with all applicable provisions of ERISA and the regulations
and published interpretations thereunder with respect to all Employee
Benefit Plans except for any required amendments for which the remedial
amendment period as defined in Section 401(b) of the Code has not yet
expired. Each Employee Benefit Plan that is intended to be qualified
under Section 401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified, and each trust related to such plan
has been determined to be exempt under Section 501(a) of the Code. No
liability has been incurred by ACC or any ERISA Affiliate which remains
unsatisfied for any taxes or penalties with respect to any Employee
Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code)
been incurred (without regard to any waiver granted under Section 412 of
the Code), nor has any funding waiver from the Internal Revenue Service
been received or requested with respect to any Pension Plan, nor has ACC
or any ERISA Affiliate failed to make any contributions or to pay any
amounts due and owing as required by Section 412 of the Code, Section
302 of ERISA or the terms of any Pension Plan prior to the due dates of
such contributions under Section 412 of the Code or Section 302 of
ERISA, nor has there been any event requiring any disclosure under
Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension
Plan;
(iv) Neither ACC nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section 406
of the ERISA or Section 4975 of the Code; (B) incurred any liability to
the PBGC which remains outstanding other than the payment of premiums
and there are no premium payments which are due and unpaid; (C) failed
to make a required contribution or payment to a Multiemployer Plan; or
(D) failed to make a required installment or other required payment
under Section 412 of the Code;
(v) No Termination Event or Canadian Termination Event
has occurred or is reasonably expected to occur;
(vi) No material proceeding, claim, lawsuit and/or
investigation is existing or, to the best knowledge of ACC after due
inquiry, threatened concerning or involving any (A) employee welfare
benefit plan (as defined in Section 3(1) of ERISA) currently maintained
or contributed to by ACC or any ERISA Affiliate, (B) Pension Plan (C)
Multiemployer Plan or (D) Canadian Plan;
(vii) ACC and its Subsidiaries are in material compliance
with all Canadian Law relating to employee benefit plans, pension plans
and retirement savings plans and no liability has been incurred in
respect thereof that remains unsatisfied; and
(viii) No Canadian Plan has been terminated nor is there
any funding deficiency in respect thereof that has not been remedied or
any contributions or premiums thereto that have not been paid.
(i) Margin Stock. Neither ACC nor any Subsidiary thereof is
engaged principally or as one of its activities in the business of
extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" (as each such term is defined or used in Regulations G
and U of the Board of Governors of the Federal Reserve System). No part
of the proceeds of any of the Loans or Letters of Credit will be used
for purchasing or carrying margin stock or for any purpose which
violates, or which would be inconsistent with, the provisions of
Regulation G, T, U or X of such Board of Governors.
(j) Government Regulation. Neither ACC nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an
"investment company" (as each such term is defined or used in the
Investment Company Act of 1940, as amended) and neither ACC nor any
Subsidiary thereof is, or after giving effect to any Extension of Credit
will be, a "Holding Company" or a "Subsidiary Company" of a "Holding
Company" or an "Affiliate" of a "Holding Company" within the respective
meanings of each of the quoted terms of the Public Utility Holding
Company Act of 1935 as amended, or any other Applicable Law which
materially limits its ability to incur or consummate the transactions
contemplated hereby.
(k) Patents, Copyrights and Trademarks. Each of ACC and its
Subsidiaries owns or possesses all patent, copyright and trademark
rights which are required to conduct its business, without infringing
upon any validly asserted rights of others, except where the failure to
so own or possess could not reasonably be expected to have a Material
Adverse Effect. No event has occurred which permits, or after notice or
lapse of time or both would permit, the revocation or termination of any
such rights. Neither ACC nor any of its Subsidiaries have been
threatened with any litigation regarding patents, copyrights or
trademarks that would present a material impediment to the business of
any such Person.
(l) Material Contracts. Schedule 6.1(l) sets forth a
complete and accurate list of all Material Contracts of ACC and its
Subsidiaries in effect as of the Closing Date not listed on any other
Schedule hereto; other than as set forth in Schedule 6.1(l), each of ACC
and any Subsidiary thereof party thereto has performed all of its
obligations under such Material Contracts and, to the best knowledge of
the Borrowers, each other party thereto is in compliance with each such
Material Contract, and each such Material Contract is, and after giving
effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms
thereof. ACC and its Subsidiaries have delivered to the Administrative
Agent a true and complete copy of each Material Contract required to be
listed on Schedule 6.1(m).
(m) Employee Relations. None of ACC and its Subsidiaries is,
except as set forth on Schedule 6.1(m), party to any collective
bargaining agreement nor has any labor union been recognized as the
representative of the employees of any such Person. ACC knows of no
pending, threatened or contemplated strikes, work stoppage or other
collective labor disputes involving its employees or those of its
Subsidiaries.
(n) Burdensome Provisions. Neither ACC nor any Subsidiary
thereof is a party to any indenture, agreement, lease or other
instrument, or subject to any corporate or partnership restriction,
Governmental Approval or Applicable Law which is so unusual or
burdensome as in the foreseeable future could be reasonably expected to
have a Material Adverse Effect. ACC and its Subsidiaries do not
presently anticipate that future expenditures needed to meet the
provisions of any statutes, orders, rules or regulations of a
Governmental Authority will be so burdensome as to have a Material
Adverse Effect.
(o) Financial Statements. The (i) Consolidated balance
sheets of ACC and its Subsidiaries as of December 31, 1995, and the
related statements of income and retained earnings and cash flows for
the Fiscal Year then ended and (ii) unaudited Consolidated balance sheet
of ACC and its Subsidiaries as of September 30, 1996 and related
unaudited interim statements of income and cash flows, copies of which
have been furnished to the Administrative Agent and each Lender, are
complete and correct and fairly present the assets, liabilities and
financial position of ACC and its Subsidiaries, as at such dates, and
the results of the operations and changes of financial position for the
periods then ended. All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance
with GAAP. ACC and its Subsidiaries have no material Debt, obligation
or other unusual forward or long-term commitment which is not disclosed
in the foregoing financial statements or in the notes thereto.
(p) No Material Adverse Effect. Since December 31, 1995,
there has been no event or condition that has had or is reasonably
likely to have a Material Adverse Effect.
(q) Solvency. As of the Closing Date and after giving effect
to each Extension of Credit made hereunder, ACC and its Subsidiaries
taken as a whole will be Solvent.
(r) Titles to Properties. Each of ACC and its Subsidiaries
has such title to the real property owned or leased by it as is
necessary or desirable to the conduct of its business and good and
marketable title to all of its personal property sufficient to carry on
its business as presently conducted, except such property as has been
disposed of by ACC or its Subsidiaries subsequent to such date which
dispositions have been in the ordinary course of business or as
otherwise expressly permitted hereunder. Schedule 6.1(r) hereto sets
forth the address of all real property owned or leased by a Borrower and
its Subsidiaries (and if leased, the record owner thereof).
(s) Liens. None of the properties and assets of ACC or any
Subsidiary thereof is subject to any Lien, except in each case Liens
permitted pursuant to Section 10.3. No financing statement or
application for registration under the Uniform Commercial Code of any
state or personal property security legislation or legislation as to
registration of security on movable property of any other jurisdiction
which names ACC or any Subsidiary thereof or any of their respective
trade names or divisions as debtor or grantor and which has not been
terminated, has been filed in any state or other jurisdiction and
neither ACC nor any Subsidiary thereof has signed any such financing
statement or application for registration or any security agreement
authorizing any secured party thereunder to file any such financing
statement or application for registration, except to perfect those Liens
permitted by Section 10.3 hereof.
(t) Debt and Contingent Obligations. Schedule 6.1(t) is a
complete and correct listing of all Debt and Contingent Obligations of
ACC and its Subsidiaries in excess of $250,000. ACC and its
Subsidiaries have performed and are in material compliance with all of
the terms of such Debt and Contingent Obligations and all instruments
and agreements relating thereto, and no default or event of default, or
event or condition which with notice or lapse of time or both would
constitute such a default or event of default on the part of ACC or its
Subsidiaries exists with respect to any such Debt or Contingent
Obligation.
(u) Litigation. Except as set forth on Schedule 6.1(u),
there are no actions, suits or proceedings pending nor, to the knowledge
of ACC, threatened against or in any other way relating adversely to or
affecting ACC or any Subsidiary thereof or any of their respective
properties in any court or before any arbitrator of any kind or before
or by any Governmental Authority the result of which could reasonably be
expected to have a Material Adverse Effect.
(v) Communications Regulatory Matters.
(i) Each Network Agreement has been duly executed and
delivered by the respective parties thereto, is in full force and effect
and neither the Borrowers, any Subsidiary thereof nor, to the best
knowledge of the Borrowers, any of the other parties thereto, is in
default of any of the provisions thereof in any material respect.
(ii) Schedule 6.1(v) hereto sets forth, as of the date
hereof, a true and complete list of the following information for each
Communications License or PUC Authorization issued to ACC or any its
Subsidiaries: (A) for all Communications Licenses, the name of the
licensee, the type of service and the expiration dates; and (B) for
each PUC Authorization, the geographic area covered by such PUC
Authorization, the services that may be provided thereunder and the
expiration date, if any.
(iii) The Communications Licenses and PUC Authorizations
specified on Schedule 6.1(v) hereto are valid and in full force and
effect without conditions except for such conditions as are generally
applicable to holders of such Communications Licenses and PUC
Authorizations. No event has occurred and is continuing which could
reasonably be expected to (A) result in the imposition of a material
forfeiture or the revocation, termination or adverse modification of any
such Communications License or PUC Authorization or (B) materially and
adversely affect any rights of ACC or any of its Subsidiaries
thereunder. ACC has no reason to believe and has no knowledge that
Communications Licenses and PUC Authorizations will not be renewed in
the ordinary course.
(iv) All of the material properties, equipment and
systems owned, leased or managed by ACC and its Subsidiaries are, and
(to the best knowledge of ACC) all such property, equipment and systems
to be acquired or added in connection with any contemplated system
expansion or construction will be, in good repair, working order and
condition (reasonable wear and tear excepted) and are and will be in
compliance with all terms and conditions of the Communications Licenses
and PUC Authorizations and all standards or rules imposed by any
Governmental Authority or as imposed under any agreements with telephone
companies and customers.
(v) ACC and each of its Subsidiaries have paid all
franchise, license or other fees and charges which have become due
pursuant to any Governmental Approval in respect of their business and
have made appropriate provision as is required by GAAP for any such fees
and charges which have accrued.
(w) Absence of Defaults. No event has occurred and is
continuing which constitutes a Default or an Event of Default, or which
constitutes, or which with the passage of time or giving of notice or
both would constitute, a default or event of default by ACC or any
Subsidiary thereof under any Material Contract or judgment, decree or
order to which ACC or its Subsidiaries are a party or by which ACC or
its Subsidiaries or any of their respective properties may be bound or
which would require ACC or its Subsidiaries to make any payment
thereunder prior to the scheduled maturity date therefor.
(x) Senior Debt. All of the Obligations of ACC and its
Subsidiaries under the Loan Documents are entitled to the benefits of
the subordination provisions of the documents evidencing any
Subordinated Debt. ACC acknowledges that the Agents and Lenders are
entering into this Agreement and the Lenders are making Extensions of
Credit in reliance upon such subordination provisions.
(y) Accuracy and Completeness of Information. All written
information, reports and other papers and data produced by or on behalf
of ACC or any Subsidiary thereof and furnished to the Lenders were, at
the time the same were so furnished, complete and correct in all
material respects. No document furnished or written statement made to
the Agents or the Lenders by ACC or any Subsidiary thereof in connection
with the negotiation, preparation or execution of this Agreement or any
of the Loan Documents contains or will contain any untrue statement of
a fact material to the creditworthiness of ACC or its Subsidiaries or
omits or will omit to state a material fact necessary in order to make
the statements contained therein not misleading. ACC is not aware of
any facts which it has not disclosed in writing to the Agents having a
Material Adverse Effect, or insofar as ACC can now foresee, could
reasonably be expected to have a Material Adverse Effect.
SECTION 6.2. Survival of Representations and Warranties, Etc.
All representations and warranties set forth in this Article VI and all
representations and warranties contained in any certificate, or any of
the Loan Documents (including but not limited to any such representation
or warranty made in or in connection with any amendment thereto) shall
constitute representations and warranties made under this Agreement.
All representations and warranties made under this Agreement shall be
made or deemed to be made at and as of the Closing Date, shall survive
the Closing Date and shall not be waived by the execution and delivery
of this Agreement, any investigation made by or on behalf of the Lenders
or any borrowing hereunder.
ARTICLE VII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been finally and indefeasibly
paid and satisfied in full and the Commitments terminated, unless
consent has been obtained in the manner set forth in Section 14.11
hereof, the Borrowers will furnish or cause to be furnished to the
Administrative Agent at the address set forth in Section 14.1 hereof and
to the Lenders at their respective addresses as set forth on Schedule
1.1(b), or such other office as may be designated by such Agent and
Lenders from time to time:
SECTION 7.1. Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable
and in any event within forty-five (45) days after the end of each
fiscal quarter, an unaudited Consolidated and consolidating balance
sheet of ACC and its Subsidiaries as of the close of such fiscal quarter
and unaudited Consolidated and consolidating statements of income,
retained earnings and cash flows for the fiscal quarter then ended and
that portion of the Fiscal Year then ended, including the notes thereto,
all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by ACC
in accordance with GAAP, and certified by the chief financial officer of
ACC to present fairly in all material respects the financial condition
of ACC and its Subsidiaries as of their respective dates and the results
of operations of ACC and its Subsidiaries for the respective periods
then ended, subject to normal year end adjustments.
(b) Annual Financial Statements. As soon as practicable and
in any event within one hundred and twenty (120) days after the end of
each Fiscal Year, an unaudited consolidating balance sheet and income
statement of ACC and its Subsidiaries and an audited Consolidated
balance sheet of ACC and its Subsidiaries as of the close of such Fiscal
Year and audited Consolidated statements of income, retained earnings
and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and audited by an
independent certified public accounting firm of nationally recognized
standing in accordance with GAAP, and accompanied by a report thereon by
such certified public accountants that is not qualified with respect to
scope limitations imposed by ACC or any of its Subsidiaries or with
respect to accounting principles followed by ACC or any of its
Subsidiaries not in accordance with GAAP.
(c) Annual Business Plan and Financial Projections. As soon
as practicable and in any event within thirty (30) days prior to the
beginning of each Fiscal Year, a business plan of ACC and its
Subsidiaries for the ensuing four fiscal quarters, such plan to include,
on a quarterly basis, the following: a quarterly operating and capital
budget, a projected income statement, statement of cash flows and
balance sheet, each prepared on a basis consistent with GAAP, and a
report containing management's discussion and analysis of such
projections (such business plan and projections, the "Projections"),
accompanied by a certificate from the chief financial officer of ACC to
the effect that, to the best of such officer's knowledge, the
Projections are good faith estimates of the anticipated financial
condition and operations of ACC and its Subsidiaries for such four
quarter period based on the then current business plan.
SECTION 7.2. Officer's Compliance Certificate. At each time
financial statements are delivered pursuant to Sections 7.1(a) or (b),
a certificate of any Authorized Officer of ACC in the form of Exhibit E
attached hereto (an "Officer's Compliance Certificate"):
(a) stating that such officer has reviewed such financial
statements and such statements fairly present the financial condition of
the Borrowers as of the dates indicated and the results of their
operations and cash flows for the periods indicated;
(b) stating that to such officer's knowledge, based on a
reasonable examination, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default and
its nature, when it occurred, whether it is continuing and the steps
being taken by the Borrowers with respect to such Default or Event of
Default; and
(c) setting forth as at the end of such fiscal quarter or
Fiscal Year, as the case may be, the calculations required to establish
whether or not ACC and its Subsidiaries were in compliance with the
financial covenants set forth in Article IX hereof as at the end of each
respective period and the calculation of the Applicable Margin pursuant
to Section 4.1(c) as at the end of each respective period.
SECTION 7.3. Accountants' Certificate. At each time
financial statements are delivered pursuant to Section 7.1(b), a
certificate of the independent public accountants certifying such
financial statements addressed to the Managing Agents for the benefit of
the Lenders stating that in making the examination necessary for the
certification of such financial statements, they obtained no knowledge
of any Default or Event of Default or, if such is not the case,
specifying such Default or Event of Default and its nature and period of
existence.
SECTION 7.4. Other Reports.
(a) Promptly upon receipt thereof, copies of any management
report and any management responses thereto submitted to any Borrower or
its Board of Directors by its independent public accountants in
connection with their auditing function;
(b) Within ten (10) Business Days after the receipt by ACC or
any of its Subsidiaries of notice that any Communications License or
material PUC Authorization has been lost or canceled, copies of any such
notice accompanied by a report describing the measures undertaken by ACC
or any of its Subsidiaries to prevent such loss or cancellation (and the
anticipated impact, if any, that such loss or cancellation will have
upon the business of ACC and its Subsidiaries);
(c) Promptly but in any event within ten (10) Business Days
after the filing thereof, a copy of (i) each report or other filing made
by ACC or any of its Subsidiaries with the Securities and Exchange
Commission and required by the SEC to be delivered to the shareholders
of such Borrower or any of its Subsidiaries, (ii) each report made by
ACC or any of its Subsidiaries to the SEC on Form 8-K and (iii) each
final registration statement of ACC or any of its Subsidiaries filed
with the SEC; and
(d) Such other information regarding the operations, business
affairs and financial condition of ACC or any of its Subsidiaries as the
Managing Agents or any Lender may reasonably request.
SECTION 7.5. Notice of Litigation and Other Matters. Prompt
(but in no event later than three (3) days after an officer of any
Borrower obtains knowledge thereof) telephonic and written notice of:
(a) the commencement of all material proceedings and
investigations by or before any Governmental Authority and all actions
and proceedings in any court or before any arbitrator against or
involving ACC or any Subsidiary thereof or any of their respective
properties, assets or businesses;
(b) any notice of any material violation received by ACC or
any Subsidiary thereof from any Governmental Authority including,
without limitation, any notice of a material violation of Environmental
Laws;
(c) any labor controversy that has resulted in, or could
reasonably be expected to result in, a strike or other work action
against ACC or any Subsidiary thereof;
(d) any attachment, judgment, lien, levy or order exceeding
$1,000,000 that may be assessed against or threatened against ACC or any
Subsidiary thereof;
(e) any Default or Event of Default, or any event which
constitutes or which with the passage of time or giving of notice or
both would constitute a default or event of default under any
Subordinated Debt or other Material Contract to which ACC or any of its
Subsidiaries is a party or by which ACC or any Subsidiary thereof or any
of their respective properties may be bound;
(f) (i) the failure of ACC or any ERISA Affiliate to make a
required installment or payment under Section 302 of ERISA or Section
412 of the Code by the due date, (ii) any Canadian Termination Event,
(iii) any Termination Event or "prohibited transaction", as such term is
defined in Section 406 of ERISA or Section 4975 of the Code, in
connection with any Employee Benefit Plan or any trust created
thereunder, along with a description of the nature thereof, what action
ACC has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto, (iv)
all notices received by ACC or any ERISA Affiliate of the PBGC's intent
to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (v) all notices received by ACC or any
ERISA Affiliate from a Multiemployer Plan sponsor concerning the
imposition or amount of withdrawal liability pursuant to Section 4202 of
ERISA, (vi) any Borrower obtaining knowledge or reason to know that ACC
or any ERISA Affiliate has filed or intends to file a notice of intent
to terminate any Pension Plan under a distress termination within the
meaning of Section 4041(c) of ERISA, and (vii) any notice from the
Canadian federal Superintendent of Insurance or any other Governmental
Authority advising that the Governmental Authority intends to declare a
Canadian Plan terminated or appoint a trustee or curator thereto,
(viii) becoming aware, or receiving any notice from any Governmental
Authority that (A) ACC or any Subsidiary thereof has ceased to be in
conformity with the prescribed tests and standards applicable to a
Canadian Plan, (B) any administrator of a Canadian Plan has failed to
furnish any prescribed information and reports, or (C) any contravention
of any applicable Canadian Law has occurred, which, in each case,
constitutes grounds under Canadian Law for the termination of, or the
appointment of a trustee or curator to, any Canadian Plan or for the
imposition of a fine or penalty;
(g) the enactment or promulgation after the date hereof of
any federal, state, provincial or local statute, regulation or ordinance
or judicial or administrative decision or order (or, to the extent that
any Borrower has knowledge thereof, any such proposed statute,
regulation, ordinance, decision or order, whether by the introduction of
legislation or the commencement of rulemaking or similar proceedings or
otherwise) having a material effect or relating to the operation of the
Network Facilities by ACC or any of its Subsidiaries (including, without
limitation, any statutes, decisions or orders affecting long distance
telecommunication resellers generally and not directed against ACC or
any of its Subsidiaries specifically) which have been issued or adopted
(or which have been proposed) and which could reasonably be expected to
have a Material Adverse Effect; or
(h) any event which makes any of the representations set
forth in Section 6.1 inaccurate in any material respect.
SECTION 7.6. Accuracy of Information. All written
information, reports, statements and other papers and data furnished by
or on behalf of any Borrower to any Agent or Lender whether pursuant to
this Article VII or any other provision of this Agreement, or any of the
Security Documents, shall be, at the time the same is so furnished,
complete and correct in all material respects based on the applicable
Borrower's knowledge thereof.
SECTION 7.7. Revisions or Updates to Schedules. Should any
of the information or disclosures provided on any of the Schedules
originally attached hereto become outdated or incorrect in any material
respect during any fiscal quarter, the Borrowers shall provide promptly
to the Administrative Agent (with copies for each Managing Agent) such
revisions or updates to such Schedule(s) as may be necessary or
appropriate to update or correct such Schedule(s) within forty-five (45)
days after the end of such fiscal quarter; provided that subsequent
disclosures shall not constitute a cure or waiver of any Default or
Event of Default resulting from the matters disclosed.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been finally and
indefeasibly paid and satisfied in full and the Commitments terminated,
unless consent has been obtained in the manner provided for in Section
14.11, each Borrower will, and will cause each of its Subsidiaries to:
SECTION 8.1. Preservation of Corporate Existence and Related
Matters. Except as permitted by Section 10.5, preserve and maintain its
separate corporate existence and all rights, franchises, licenses and
privileges necessary to the conduct of its business; and qualify and
remain qualified as a foreign corporation and authorized to do business
in each jurisdiction where its business requires such qualification and
authorization.
SECTION 8.2. Maintenance of Property. Protect and preserve
all properties useful in and material to its business, including
material copyrights, patents, trade names and trademarks; maintain in
good working order and condition all buildings (reasonable wear and tear
excepted), equipment and other tangible real and personal property; and
from time to time make or cause to be made all renewals, replacements
and additions to such property necessary in the reasonable judgement of
the Borrowers for the conduct of its business, so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times.
SECTION 8.3. Insurance. In addition to the requirements set
forth in the Security Documents, maintain insurance with financially
sound and reputable insurance companies against such risks and in such
amounts as are customarily maintained by similar businesses and as may
be required by Applicable Law, and on the Closing Date and from time to
time deliver to the Administrative Agent upon its request a detailed
list of the insurance then in effect, stating the names of the insurance
companies, the amounts and rates of the insurance, the dates of the
expiration thereof and the properties and risks covered thereby.
SECTION 8.4. Accounting Methods and Financial Records.
Maintain a system of accounting, and keep such books, records and
accounts (which shall be true and complete in all material respects) as
may be required or as may be necessary to permit the preparation of
financial statements in accordance with GAAP (or generally accepted
accounting principles as in effect in Canada and the United Kingdom with
respect to the Canadian Borrowers and the U.K. Borrowers, respectively)
and in compliance with the regulations of any Governmental Authority
having jurisdiction over it or any of its properties.
SECTION 8.5. Payment and Performance of Obligations. Pay and
perform all Obligations under this Agreement and the other Loan
Documents and pay or perform (a) all taxes, assessments and other
governmental charges that may be levied or assessed upon it or any of
its property, and (b) all other indebtedness, obligations and
liabilities in accordance with customary trade practices; provided, that
ACC or such Subsidiary may contest any item described in clauses (a) and
(b) hereof in good faith so long as adequate reserves are maintained
with respect thereto in accordance with GAAP.
SECTION 8.6. Compliance With Laws and Approvals. Observe and
remain in material compliance with all Applicable Laws and maintain in
full force and effect all material Governmental Approvals, in each case
applicable or necessary to the conduct of its business.
SECTION 8.7. Environmental Laws. In addition to and without
limiting the generality of Section 8.6, (a) comply in all material
respects with, and use its best efforts to ensure such compliance by all
of its tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and use its
best efforts to ensure that all of its tenants and subtenants obtain and
comply with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable
Environmental Laws; (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other
actions required under Environmental Laws, and timely comply with all
lawful orders and directives of any Governmental Authority regarding
Environmental Laws; and (c) defend, indemnify and hold harmless the
Agents and the Lenders, and their respective parents, Subsidiaries,
Affiliates, employees, agents, officers and directors, from and against
any claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental
Laws applicable to the operations of ACC or such Subsidiary, or any
orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, reasonable attorney's and
consultant's fees, investigation and laboratory fees, response costs,
court costs and litigation expenses, except to the extent that any of
the foregoing arise out of or relate to the gross negligence or willful
misconduct of the party seeking indemnification therefor.
SECTION 8.8. Employee Benefit, Pension and Retirement Laws.
If applicable thereto, in addition to and without limiting the
generality of Section 8.6, make timely payment of contributions required
to meet the minimum funding standards set forth in ERISA with respect to
any Employee Benefit Plan; not take any action or fail to take action
the result of which could be a liability to the PBGC or to a
Multiemployer Plan; not participate in any prohibited transaction that
could result in any civil penalty under ERISA or tax under the Code;
furnish to the Administrative Agent upon the Administrative Agent's
request such additional information about any Employee Benefit Plan as
may be reasonably requested by the Administrative Agent; and operate
each Employee Benefit Plan in such a manner that will not incur any tax
liability under Section 4980B of the Code or any liability to any
qualified beneficiary as defined in Section 4980B of the Code and not
operate or fail to operate any Canadian Plan of ACC or any Subsidiary
thereof in full conformity and compliance with all federal and
provincial laws and regulations relating to any Canadian Plan and, in
particular but by way of illustration only, make timely payments of all
contributions required to meet the minimum funding standards prescribed
by such laws and regulations and furnish to the Administrative Agent
upon such Agent's request such additional information about any Canadian
Plan as may be reasonably requested by the Administrative Agent.
SECTION 8.9. Compliance With Agreements. Comply in all
material respects with each term, condition and provision of all leases,
agreements and other instruments entered into in the conduct of its
business including, without limitation, any Material Contract; provided,
that ACC or such Subsidiary may contest any such lease, agreement or
other instrument in good faith so long as adequate reserves are
maintained in accordance with GAAP.
SECTION 8.10. Conduct of Business. Engage only in businesses
in substantially the same fields as the businesses conducted on the
Closing Date and, to the extent permitted by Section 10.4(c), in lines
of business reasonably related thereto.
SECTION 8.11. Visits and Inspections. Upon reasonable notice
therefrom and during normal business hours, permit representatives of
any of the Agents and Lenders, from time to time, to visit and inspect
its properties; inspect, audit and make extracts from its books, records
and files, including, but not limited to, management letters prepared by
independent accountants; and discuss with its principal officers, and
its independent accountants, its business, assets, liabilities,
financial condition, results of operations and business prospects.
SECTION 8.12. Material Subsidiaries; Additional Collateral.
(a) Upon the creation of any Material Subsidiary permitted by this
Agreement, cause to be executed and delivered to the Administrative
Agent: (i) a Joinder Agreement and the documents referred to therein,
(ii) if such subsidiary is a Domestic Subsidiary, (A) the supplement
substantially in the form attached to the Security Agreement, (B) the
supplement substantially in the form attached to the applicable Pledge
Agreement, or if the owner of such Subsidiary is not ACC or ACC
National, a pledge agreement substantially in the form of a Pledge
Agreement executed by such owner with such modifications thereto as
requested by the Required Lenders and (C) a Mortgage and Landlord
Consent with respect to any real property owned or leased by such
Subsidiary if reasonably requested by the Required Lenders, (iii) if
such Subsidiary is a Canadian Subsidiary, such joinder agreements as
reasonably requested by the Required Lenders in order that such
Subsidiary become a party to the Canadian Security Documents and (iv) if
such Subsidiary is a U.K. Subsidiary, such joinder agreements as
reasonably requested by the Required Lenders in order that such
Subsidiary become a party to the U.K. Security Documents and the U.K.
Guaranty Agreement, (v) such other documents reasonably requested by the
Required Lenders consistent with the terms of this Agreement which
provide that such Subsidiary shall become a Borrower bound by all of the
terms, covenants and agreements contained in the Loan Documents and that
the assets of such Material Subsidiary shall become Collateral for the
Obligations and (vi) such other documents as the Required Lenders shall
reasonably request, including without limitation, officers'
certificates, financial statements, opinions of counsel, board
resolutions, charter documents, certificates of existence and authority
to do business and any other closing certificates and documents
described in Section 5.2.
(b) ACC shall, and cause its Material Subsidiaries to,
promptly deliver from time to time such additional Security Documents to
the Administrative Agent upon the request of the Required Lenders with
respect to any assets of any such Person not subject to an existing Lien
in favor of the Administrative Agent for the benefit of the Lenders
(including, without limitation, Leasehold Mortgages and Landlord
Consents with respect to each leased premises at which any Material
switching equipment is located).
SECTION 8.13. Hedging Agreement. (a) Maintain at all times
Hedging Agreements with respect to interest rate exposure under the
Credit Agreement with durations of at least two years and an aggregate
notional principal amount thereunder equal to at least fifty percent
(50%) of the aggregate principal Dollar Amount of the Extensions of
Credit at interest rates not to exceed two percent (2%) over the three
month LIBOR Rate at the time of execution of such Hedging Agreements
with respect to each applicable Permitted Currency and otherwise in form
and substance reasonably satisfactory to the Managing Agents; provided,
that at any time the aggregate principal Dollar Amount of the Extensions
of Credit is less than $30,000,000, no such Hedging Agreements shall be
required and (b) maintain at all times Hedging Agreements with respect
to currency risk in form and substance reasonably satisfactory to the
Managing Agents.
SECTION 8.14. Further Assurances. Make, execute and deliver
all such additional and further acts, things, deeds and instruments as
any Agent or Lender may reasonably require to document and consummate
the transactions contemplated hereby and to vest completely in and
insure each Agent and the Lenders their respective rights under this
Agreement, the Notes, the Letters of Credit and the other Loan
Documents.
SECTION 8.15. Post-Closing Delivery. Within ninety (90) days
after the date hereof, provide a Landlord Consent executed by the
landlord (and, with respect to the leased premises located at 32 Old
Slip, the landlord's lender) with respect to the leased premises located
at (a) 32 Old Slip, New York, New York, (b) One Commerce Plaza, Albany,
New York and (c) 69 Delaware Avenue, Buffalo, New York.
ARTICLE IX
FINANCIAL COVENANTS
Until all of the Obligations have been finally and
indefeasibly paid and satisfied in full and the Commitments terminated,
unless consent has been obtained in the manner set forth in Section
14.11 hereof, ACC and its Subsidiaries on a Consolidated basis will not:
SECTION 9.1. Maximum Leverage Ratio. As of any date of
determination, permit the ratio (the "Leverage Ratio") of (a) Total Debt
as of such date to (b), for any calculation period from the Closing Date
through September 30, 1997, Operating Cash Flow for the two (2)
consecutive fiscal quarters ending on or immediately prior to such date
times two (2), and for any calculation period thereafter, Operating Cash
Flow for the period of four (4) consecutive fiscal quarters ending on or
immediately prior to such date, to exceed the corresponding ratio set
forth below:
Period Ratio
Closing Date through
March 31, 1997 3.50 to 1.00
April 1, 1997 through
September 30, 1997 3.00 to 1.00
October 1, 1997 through
March 31, 1998 2.50 to 1.00
April 1, 1998 and
thereafter 2.00 to 1.00
SECTION 9.2. Minimum Pro Forma Debt Service Coverage Ratio.
As of any date of determination, permit the ratio of (a) Operating Cash
Flow on such date to (b) Pro Forma Debt Service on such date to be less
than 2.50 to 1.00.
SECTION 9.3. Fixed Charge Coverage Ratio.
(a) As of any date of determination (i) from the Closing Date
through and including September 30, 1997, permit the ratio of (A)
Operating Cash Flow for the two (2) consecutive fiscal quarters ending
on or immediately prior to such date times two (2) to (B) Fixed Charges
for the two (2) consecutive fiscal quarters ending on or immediately
prior to such date times two (2) to be less than 0.50 to 1.00 and (ii)
from October 1, 1997 through and including December 31, 1997, permit the
ratio of (A) Operating Cash Flow for the period of four (4) consecutive
fiscal quarters ending on or immediately prior to such date to (B) Fixed
Charges for the period of four (4) consecutive fiscal quarters ending on
or immediately prior to such date to be less than 0.50 to 1.00; and
(b) as of any date of determination after December 31, 1997,
permit the ratio of (i) Operating Cash Flow for the period of four (4)
consecutive fiscal quarters ending on or immediately prior to such date
to (ii) Fixed Charges for the period of four (4) consecutive fiscal
quarters ending on or immediately prior to such date to be less than
1.15 to 1.00.
SECTION 9.4. Capital Expenditures. During Fiscal Year 1997,
make Capital Expenditures in excess of [$56,000,000].
SECTION 9.5. Minimum Net Worth. Permit Consolidated Net
Worth at any time to be less than (a) $95,000,000 plus (b) fifty percent
(50%) of Consolidated Net Income of ACC and its Subsidiaries as of each
fiscal quarter end occurring after the Closing Date plus (c) one hundred
percent (100%) of the aggregate Net Cash Proceeds of any offering of
capital stock of ACC or any of its Wholly-Owned Subsidiaries received
thereby after the Closing Date. For purposes of this Section 9.5, the
minimum required Consolidated Net Worth (i) shall be adjusted in a
manner satisfactory to the Managing Agents for any payment required
under the Contingent Interest Agreement and (ii) shall not be reduced if
Consolidated Net Income as of any fiscal quarter end is less than zero.
ARTICLE X
NEGATIVE COVENANTS
Until all of the Obligations have been finally and
indefeasibly paid and satisfied in full and the Commitments terminated,
unless consent has been obtained in the manner set forth in Section
14.11 hereof, each Borrower will not and will not permit any of its
Subsidiaries to:
SECTION 10.1. Limitations on Debt. Create, incur, assume or
suffer to exist any Debt except:
(a) the Obligations;
(b) Subordinated Debt, the Net Cash Proceeds of which are
utilized to repay the Obligations and, with respect to any such Net Cash
Proceeds utilized to reduce the Leverage Ratio to 3.00 to 1.00,
permanently reduce the Aggregate Commitment by the amount of such Net
Cash Proceeds pursuant to Section 2.6(c)(i);
(c) Debt existing on the Closing Date and not otherwise
permitted under this Section 10.1, as set forth on Schedule 6.1(t) and
the renewal and refinancing (but not the increase) thereof;
(d) Debt consisting of Contingent Obligations permitted by
Section 10.2;
(e) Debt of ACC and its Subsidiaries incurred in connection
with Capitalized Leases;
(f) purchase money Debt of ACC and its Subsidiaries; and
(g) unsecured Debt of ACC and its Subsidiaries;
provided, that the aggregate amount of the Debt permitted pursuant to
clauses (c), (e), (f) and (g) plus the aggregate amount of Debt
constituting Contingent Obligations permitted by Sections 10.2(d), and
(e) shall not at any time exceed $25,000,000.
SECTION 10.2. Limitations on Contingent Obligations. Create,
incur, assume or suffer to exist any Contingent Obligations except (a)
Contingent Obligations in favor of the Administrative Agent for the
benefit of the Agents and the Lenders, (b) Contingent Obligations
incurred as a general or joint venture partner in connection with any
investment in a partnership or joint venture permitted pursuant to
Section 10.4, (c) Contingent Obligations in respect of Network
Agreements and Network Facilities incurred in the ordinary course of
business, (d) Contingent Obligations to secure payment or performance of
customer service contracts incurred in the ordinary course of business,
(e) Contingent Obligations with respect to obligations under Hedging
Agreements permitted pursuant to Section 10.13(b) and (f) Contingent
Obligations not covered by clauses (a) through (e) of this Section;
provided, that the aggregate outstanding principal amount of all
Contingent Obligations permitted by Sections 10.2(d), (e) and (f) plus
the aggregate outstanding principal amount of all Debt outstanding under
clauses (c), (e), (f) and (g) of Section 10.1 shall not exceed
$25,000,000.
SECTION 10.3. Limitations on Liens. Create, incur, assume or
suffer to exist, any Lien on or with respect to any of its assets or
properties (including without limitation shares of capital stock or
other ownership interests), real or personal, whether now owned or
hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental
charges or levies (excluding any Lien imposed pursuant to any of the
provisions of ERISA or Environmental Laws) not yet due or as to which
the period of grace (not to exceed thirty (30) days), if any, related
thereto has not expired or which are being contested in good faith and
by appropriate proceedings if adequate reserves are maintained to the
extent required by GAAP;
(b) the claims of materialmen, mechanics, carriers,
warehousemen, processors or landlords for labor, materials, supplies or
rentals incurred in the ordinary course of business, (i) which are not
overdue for a period of more than thirty (30) days or (ii) which are
being contested in good faith and by appropriate proceedings;
(c) Liens consisting of deposits or pledges made in the
ordinary course of business in connection with, or to secure payment of,
obligations under workers' compensation, unemployment insurance or
similar legislation or obligations (not to exceed $2,000,000) under
customer service contracts;
(d) Liens constituting encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use
of real property, which in the aggregate are not substantial in amount
and which do not, in any case, materially detract from the value of such
property or impair the use thereof in the ordinary conduct of business;
(e) Liens of the Administrative Agent for the benefit of the
Agents and the Lenders;
(f) Liens not otherwise permitted by this Section 10.3 and in
existence on the Closing Date and described on Schedule 10.3;
(g) Liens evidencing the interest of lessors with respect to
Debt permitted under Section 10.1(e); and
(h) Liens securing Debt permitted under Section 10.1(f);
provided that (i) such Liens shall be created substantially
simultaneously with the acquisition of the related Capital Asset, (ii)
such Liens do not at any time encumber any property other than the
property financed by such Debt and (iii) the aggregate outstanding
principal amount of Debt secured by any such Lien shall at no time
exceed 100% of the original purchase price of such property at the time
it was acquired.
SECTION 10.4. Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly
or indirectly, any capital stock, interests in any partnership or joint
venture (including without limitation the creation or capitalization of
any Subsidiary), evidence of Debt or other obligation or security,
substantially all or a material portion of the business or assets of any
other Person or any other investment or interest whatsoever in any other
Person; or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by
delivery of property in, any Person; or enter into, directly or
indirectly, any commitment or option in respect of the foregoing except:
(a) (i) loans or advances by any Subsidiary of a Borrower to
such Borrower, (ii) advances from ACC to any Wholly-Owned Subsidiary or
Controlled Venture in an aggregate principal amount not to exceed
$500,000, (iii) intercompany loans by ACC to: (A) ACC Canada in an
aggregate principal amount not to exceed $30,000,000, (B) ACC U.K. in an
aggregate principal amount not to exceed $25,000,000 and (C) ACC LEC in
an aggregate principal amount not to exceed $15,000,000; provided, that
such intercompany loans shall be evidenced by promissory notes in form
and substance acceptable to the Lenders (each, an "Intercompany Note"),
which notes shall be pledged to the Lenders and shall be subordinated to
the Credit Facility pursuant to the Intercompany Subordination Agreement
and (iii) other existing loans, advances and investments described on
Schedule 10.4;
(b) investments by any Domestic Borrower or Domestic
Subsidiary in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one (1) year from the date of acquisition
thereof, (ii) commercial paper maturing no more than 120 days from the
date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc.,
(iii) certificates of deposit maturing no more than 120 days from the
date of creation thereof issued by commercial banks incorporated under
the laws of the United States of America, each having combined capital,
surplus and undivided profits of not less than $500,000,000 and having
a rating of "A" or better by a nationally recognized rating agency;
provided, that the aggregate amount invested in such certificates of
deposit shall not at any time exceed $5,000,000 for any one such
certificate of deposit and $10,000,000 for any one such bank, or
(iv) time deposits maturing no more than 30 days from the date of
creation thereof with commercial banks or savings banks or savings and
loan associations each having membership either in the Federal Deposit
Insurance Corporation ("FDIC") or the deposits of which are insured by
the FDIC and in amounts not exceeding the maximum amounts of insurance
thereunder, and investments by any Canadian Borrower or Canadian
Subsidiary or by any U.K. Borrower or any U.K. Subsidiary in any
corresponding government securities or cash equivalents reasonably
satisfactory to the Required Lenders;
(c) investments by ACC or any Subsidiary in the form of
acquisitions of all or substantially all of the business or a line of
business (whether by the acquisition of capital stock, assets or any
combination thereof) of any other Person, including any investment
constituting a Controlled Venture, provided that, (i) the Person to be
acquired or invested in shall be a provider of long distance telephone
service or other business reasonably related to the provision of long
distance telephone or telecommunications service, (ii) a Borrower shall
be the surviving entity and all necessary documents required to be
executed and filed to evidence that any and all assets acquired are
pledged as Collateral for the Obligations shall have been executed and
filed, (iii) at least fifteen (15) Business Days prior to the
consummation of such acquisition, an authorized officer of ACC shall
deliver to the Administrative Agent a certificate demonstrating to the
satisfaction of the Managing Agents that no Default or Event of Default
exists or shall be created by the consummation of such acquisition or
investment, (iv) a description of the acquisition and the governing
documentation shall have been delivered to the Administrative Agent at
least fifteen (15) Business Days prior to the consummation of the
acquisition, (v) any Subsidiary created pursuant hereto and organized
under the laws of Canada shall be a direct Subsidiary of ACC Canada and
(vi) if such acquisition or investment, if completed, would cause the
aggregate fair market value of the consideration of all such
acquisitions or investments completed during the period of four
consecutive fiscal quarters ending immediately prior to the date of
determination thereof to exceed $25,000,000, the Required Lenders shall
have consented in writing to such acquisition or investment prior to the
Closing Date.
(d) investments by ACC in any joint venture (other than a
Controlled Venture) not to exceed $5,000,000 with respect to any such
individual joint venture and $15,000,000 with respect to all such joint
ventures during the term of the Credit Facility without the prior
written consent of the Required Lenders;
(e) loans to employees in the ordinary course of business for
travel and other advanced expenses not to exceed $20,000 with respect to
any individual employee or $200,000 in the aggregate; and
(f) investments by ACC in any Subsidiary organized under the
laws of Germany, which Subsidiary shall engage in the long distance
reselling business and any business related thereto, not to exceed
$5,000,000 in the aggregate; provided that, prior to any such investment
ACC shall have delivered to the Managing Agents the business plan of
such Subsidiary in form and substance reasonably satisfactory to the
Managing Agents.
SECTION 10.5. Limitations on Mergers and Liquidation. Merge,
consolidate, amalgamate or enter into any similar combination with any
other Person or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution) except (a) any Wholly-Owned Subsidiary of
ACC which is not a Borrower may be liquidated, wound-up or dissolved,
(b) any Wholly-Owned Subsidiary of ACC may merge with ACC or any other
Wholly-Owned Subsidiary of ACC which is a Borrower, as long as ACC or
such Borrower, as applicable, is the survivor of such merger and assumes
all of the Obligations of the non-surviving entity and (c) any Wholly-
Owned Subsidiary may merge into the Person such Wholly-Owned Subsidiary
was formed to acquire in connection with an acquisition permitted by
Section 10.4(c).
SECTION 10.6. Limitations on Sale of Assets. Convey, sell,
lease, assign, transfer or otherwise dispose of any of its property,
business or assets (including, without limitation, the sale of any
receivables and leasehold interests and any sale-leaseback or similar
transaction), whether now owned or hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in
the business of ACC or any of its Subsidiaries;
(c) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection with
the compromise or collection thereof;
(d) the transfer of assets to any Borrower or any Wholly-
Owned Subsidiary of ACC pursuant to Section 10.5(b);
(e) the disposition by ACC of any equity ownership interest
in ACC U.K. in connection with any joint venture investments permitted
hereunder which would cause all such dispositions in the aggregate to
exceed 20% of such ownership interest as of the Closing Date, as long as
the Net Cash Proceeds thereof are used to reduce the Aggregate
Commitment in accordance with Section 2.6(c)(ii); and
(f) the sale of assets which generated less than 10% of
Operating Cash Flow in the four quarters immediately preceding such sale
so long as no Default or Event of Default is existing or would be
created by such sale of assets.
SECTION 10.7. Limitations on Dividends and Distributions.
Declare or pay any dividends upon any of its capital stock; purchase,
redeem, retire or otherwise acquire, directly or indirectly, any shares
of its capital stock, or make any distribution of cash, property or
assets among the holders of shares of its capital stock, in each case
without the prior written consent of the Required Lenders; or make any
material change in its capital structure that could reasonably be
expected to have a Material Adverse Effect; provided that (a) any
Borrower may pay dividends in shares of its own capital stock, (b) any
Subsidiary of a Borrower may pay dividends or make other distributions
in respect of its capital stock to such Borrower, (c) any Subsidiary of
a Borrower may make payments on any Debt or other obligation owed to
such Borrower which Debt or other obligation and such payment are
permitted hereunder and any other applicable Loan Document and (d) as
long as no Default or Event of Default has occurred and is continuing or
would be created thereby, ACC stock owned by an officer or employee of
ACC may be repurchased in an aggregate amount not to exceed $2,000,000
per calendar year.
SECTION 10.8. Limitations on Exchange and Issuance of Capital
Stock. Issue, sell or otherwise dispose of any class or series of
capital stock that, by its terms or by the terms of any security into
which it is convertible or exchangeable, is, or upon the happening of an
event or passage of time would be, (a) convertible or exchangeable into
Debt or (b) required to be redeemed or repurchased, including at the
option of the holder, in whole or in part, or has, or upon the happening
of an event or passage of time would have, a redemption or similar
payment due, in any such case prior to ninety (90) days after the
Revolving Credit Termination Date.
SECTION 10.9. Transactions with Affiliates. Directly or
indirectly: (a) make any loan or advance to, or purchase or assume any
note or other obligation to or from, any of its officers, directors,
shareholders or other Affiliates, or to or from any member of the
immediate family of any of its officers, directors, shareholders or
other Affiliates, or subcontract any operations to any of its
Affiliates, or (b) enter into, or be a party to, any transaction with
any of its Affiliates, except pursuant to the reasonable requirements of
its business and upon fair and reasonable terms that are fully disclosed
to the Required Lenders and are no less favorable to it than would
obtain in a comparable arm's length transaction with a Person not its
Affiliate.
SECTION 10.10. Certain Accounting Changes. Change its Fiscal
Year end, or make any material change in its accounting treatment and
reporting practices except as required by GAAP.
SECTION 10.11. Amendments; Payments and Prepayments of
Subordinated Debt. Amend or modify (or permit the modification or
amendment of) any of the terms or provisions of any Subordinated Debt;
or cancel or forgive, make any voluntary or optional payment or
prepayment on, or redeem or acquire for value (including without
limitation by way of depositing with any trustee with respect thereto
money or securities before due for the purpose of paying when due) any
Subordinated Debt.
SECTION 10.12. Restrictive Agreements. (a) Enter into any
Debt which contains any negative pledge on assets or any covenants
materially more restrictive than the provisions of Articles VIII, IX and
X hereof, or which restricts, limits or otherwise encumbers its ability
to incur Liens on or with respect to any of its assets or properties
other than the assets or properties securing such Debt, or (b) enter
into or permit to exist any agreement which impairs or limits the
ability of any Subsidiary of a Borrower to pay dividends to such
Borrower, unless the Required Lenders shall have previously consented in
writing to such agreement.
SECTION 10.13. Hedging Agreements. Enter into any Hedging
Agreements except: (a) Hedging Agreements required by Section 8.13; (b)
Hedging Agreements regarding currency risk exposure in the ordinary
course of business with aggregate notional amounts not to exceed
$75,000,000 and durations not greater than the remaining duration of the
Credit Facility; and (c) any other Hedging Agreement with a counterparty
and upon terms and conditions reasonably satisfactory to the Managing
Agents.
ARTICLE XI
UNCONDITIONAL GUARANTY
SECTION 11.1. Guaranty of Obligations. The Guarantor hereby
unconditionally guarantees to the Administrative Agent for the ratable
benefit of the Agents and the Lenders, and their respective successors,
endorsees, transferees and assigns, the prompt payment and performance
of all Obligations of the Borrowers (other than ACC), whether primary or
secondary (whether by way of endorsement or otherwise), whether now
existing or hereafter arising, whether or not from time to time reduced
or extinguished (except by payment thereof) or hereafter increased or
incurred, whether or not recovery may be or hereafter become barred by
the statute of limitations, whether enforceable or unenforceable as
against any such Borrower, whether or not discharged, stayed or
otherwise affected by any bankruptcy, insolvency or other similar law or
proceeding, whether created directly with any Agent or Lender or
acquired by any Agent or Lender through assignment, endorsement or
otherwise, whether matured or unmatured, whether joint or several, as
and when the same become due and payable (whether at maturity or
earlier, by reason of acceleration, mandatory repayment or otherwise),
in accordance with the terms of any such instruments evidencing any such
obligations, including all renewals, extensions or modifications thereof
(all Obligations of each such Borrower to any Agent or Lender, including
all of the foregoing, being hereinafter collectively referred to as the
"Guaranteed Obligations").
SECTION 11.2. Nature of Guaranty. The Guarantor agrees that
this Guaranty is a continuing, unconditional guaranty of payment and
performance and not of collection, and that its obligations under this
Guaranty shall be primary, absolute and unconditional, irrespective of,
and unaffected by (a) the genuineness, validity, regularity,
enforceability or any future amendment of, or change in, this Agreement
or any other Loan Document or any other agreement, document or
instrument to which any such Borrower is or may become a party, (b) the
absence of any action to enforce this Guaranty, this Agreement or any
other Loan Document or the waiver or consent by the Administrative Agent
or any Lender with respect to any of the provisions of this Guaranty,
this Agreement or any other Loan Document, (c) the existence, value or
condition of, or failure to perfect its Lien against, any security for
or other guaranty of the Guaranteed Obligations or any action, or the
absence of any action, by the Administrative Agent or any Lender in
respect of such security or guaranty (including, without limitation, the
release of any such security or guaranty) or (d) any other action or
circumstances which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor; it being agreed by the
Guarantor that its obligations under this Guaranty shall not be
discharged until the final and indefeasible payment and performance, in
full, of the Guaranteed Obligations and the termination of the
Commitments. The Guarantor expressly waives all rights it may now or in
the future have under any statute (including without limitation North
Carolina General Statutes Section 26-7, et seq. or similar law), or at
law or in equity, or otherwise, to compel the Administrative Agent or
any Lender to proceed in respect of the Guaranteed Obligations against
any such Borrower or any other party or against any security for or
other guaranty of the payment and performance of the Guaranteed
Obligations before proceeding against, or as a condition to proceeding
against, the Guarantor. The Guarantor further expressly waives and
agrees not to assert or take advantage of any defense based upon the
failure of the Administrative Agent or any Lender to commence an action
in respect of the Guaranteed Obligations against any such Borrower, the
Guarantor or any other party or any security for the payment and
performance of the Guaranteed Obligations. The Guarantor agrees that
any notice or directive given at any time to the Administrative Agent or
any Lender which is inconsistent with the waivers in the preceding two
sentences shall be null and void and may be ignored by the
Administrative Agent or Lender, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for
the reason that such pleading or introduction would be at variance with
the written terms of this Guaranty, unless the Administrative Agent and
the Required Lenders have specifically agreed otherwise in writing. The
foregoing waivers are of the essence of the transaction contemplated by
the Loan Documents and, but for this Guaranty and such waivers, the
Agents and Lenders would decline to enter into this Agreement.
SECTION 11.3. Demand by the Administrative Agent. In
addition to the terms set forth in Section 11.2, and in no manner
imposing any limitation on such terms, if all or any portion of the then
outstanding Guaranteed Obligations under this Agreement are declared to
be immediately due and payable, then the Guarantor shall, upon demand in
writing therefor by the Administrative Agent to the Guarantor, pay all
or such portion of the outstanding Guaranteed Obligations then declared
due and payable. Payment by the Guarantor shall be made to the
Administrative Agent, to be credited and applied upon the Guaranteed
Obligations, in immediately available funds in the Permitted Currency in
which the relevant Guaranteed Obligations are denominated to an account
designated by the Administrative Agent or at the Administrative Agent's
office or at any other address that may be specified in writing from
time to time by the Administrative Agent.
SECTION 11.4. Waivers. In addition to the waivers contained
in Section 11.2, the Guarantor waives, and agrees that it shall not at
any time insist upon, plead or in any manner whatever claim or take the
benefit or advantage of, any appraisal, valuation, stay, extension,
marshalling of assets or redemption laws, or exemption, whether now or
at any time hereafter in force, which may delay, prevent or otherwise
affect the performance by the Guarantor of its obligations under, or the
enforcement by the Administrative Agent or the Lenders of, this
Guaranty. The Guarantor further hereby waives diligence, presentment,
demand, protest and notice of whatever kind or nature with respect to
any of the Guaranteed Obligations and waives the benefit of all
provisions of law which are or might be in conflict with the terms of
this Guaranty. The Guarantor represents, warrants and agrees that its
obligations under this Guaranty are not and shall not be subject to any
counterclaims, offsets or defenses of any kind against the
Administrative Agent, the Lenders or any such Borrower whether now
existing or which may arise in the future.
SECTION 11.5. Modification of Loan Documents etc. If the
Administrative Agent or the Lenders shall at any time or from time to
time, with or without the consent of, or notice to, the Guarantor (a)
change or extend the manner, place or terms of payment of, or renew or
alter all or any portion of, the Guaranteed Obligations, (b) take any
action under or in respect of the Loan Documents in the exercise of any
remedy, power or privilege contained therein or available to it at law,
in equity or otherwise, or waive or refrain from exercising any such
remedies, powers or privileges, (c) amend or modify, in any manner
whatsoever, the Loan Documents, (d) extend or waive the time for
performance by the Guarantor, any such Borrower or any other Person of,
or compliance with, any term, covenant or agreement on its part to be
performed or observed under a Loan Document (other than this Guaranty),
or waive such performance or compliance or consent to a failure of, or
departure from, such performance or compliance, (e) take and hold
security or collateral for the payment of the Guaranteed Obligations or
sell, exchange, release, dispose of, or otherwise deal with, any
property pledged, mortgaged or conveyed, or in which the Administrative
Agent or the Lenders have been granted a Lien, to secure any Debt of the
Guarantor or any such Borrower to any Agent or the Lenders, (f) release
anyone who may be liable in any manner for the payment of any amounts
owed by the Guarantor or any such Borrower to any Agent or Lender, (g)
modify or terminate the terms of any intercreditor or subordination
agreement pursuant to which claims of other creditors of the Guarantor
or any such Borrower are subordinated to the claims of any Agent or
Lender or (h) apply any sums by whomever paid or however realized to any
amounts owing by the Guarantor or any such Borrower to any Agent or
Lender on account of the Obligations in such manner as the
Administrative Agent or any Lender shall determine in its reasonable
discretion; then neither the Administrative Agent nor any Lender shall
incur any liability to the Guarantor as a result thereof, and no such
action shall impair or release the obligations of the Guarantor under
this Guaranty.
SECTION 11.6. Reinstatement. The Guarantor agrees that, if
any payment made by any such Borrower or any other Person applied to the
Obligations is at any time annulled, set aside, rescinded, invalidated,
declared to be fraudulent or preferential or otherwise required to be
refunded or repaid, or the proceeds of Collateral are required to be
returned by any Agent or Lender to any such Borrower, its estate,
trustee, receiver or any other party, including, without limitation, the
Guarantor, under any Applicable Law or equitable cause, then, to the
extent of such payment or repayment, the Guarantor's liability hereunder
(and any Lien or Collateral securing such liability) shall be and remain
in full force and effect, as fully as if such payment had never been
made, and, if prior thereto, this Guaranty shall have been canceled or
surrendered (and if any Lien or Collateral securing the Guarantor's
liability hereunder shall have been released or terminated by virtue of
such cancellation or surrender), this Guaranty (and such Lien or
Collateral) shall be reinstated in full force and effect, and such prior
cancellation or surrender shall not diminish, release, discharge, impair
or otherwise affect the obligations of the Guarantor in respect of the
amount of such payment (or any Lien or Collateral securing such obliga-
tion).
SECTION 11.7. No Subrogation. Until all amounts owing to the
Agents and Lenders on account of the Obligations are paid in full and
the Commitments are terminated, the Guarantor hereby waives any claims
or other rights which it may now or hereafter acquire against any such
Borrower that arise from the existence or performance of the Guarantor's
obligations under this Guaranty, including, without limitation, any
right of subrogation, reimbursement, exoneration, indemnification, any
right to participate in any claim or remedy of the Administrative Agent
or the Lenders against any such Borrower or any Collateral which the
Administrative Agent or the Lenders now have or may hereafter acquire,
whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, by any payment made hereunder or
otherwise, including without limitation, the right to take or receive
from any such Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on
account of such claim or other rights. If any amount shall be paid to
the Guarantor on account of such rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held
by the Guarantor in trust for the Administrative Agent, segregated from
other funds of the Guarantor, and shall, forthwith upon receipt by the
Guarantor, be turned over to the Administrative Agent in the exact form
received by the Guarantor (duly indorsed by the Guarantor to the
Administrative Agent, if required) to be applied against the
Obligations, whether matured or unmatured, in such order as set forth
herein.
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1. Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and
whether it shall be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment or order of any court or any order,
rule or regulation of any Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans and
Reimbursement Obligations. Any Borrower shall default in any payment of
principal of any Loan, Note or Reimbursement Obligation when and as due
(whether at maturity, by reason of acceleration or otherwise);
(b) Other Payment Default. Any Borrower shall default in the
payment when and as due (whether at maturity, by reason of acceleration
or otherwise) of interest on any Loan, Note or Reimbursement Obligation
or the payment of any other Obligation, and such default shall continue
unremedied for five (5) Business Days;
(c) Misrepresentation. Any representation or warranty made
or deemed to be made by any Borrower or any of its Subsidiaries under
this Agreement, any Loan Document or any amendment hereto or thereto,
shall at any time prove to have been incorrect or misleading in any
material respect when made or deemed made;
(d) Default in Performance of Certain Covenants. Any
Borrower shall default in the performance or observance of any covenant
or agreement contained in Sections 7.5(e) or 8.12 or Articles IX or X of
this Agreement;
(e) Default in Performance of Other Covenants and Conditions.
Any Borrower or Subsidiary thereof shall default in the performance or
observance of any term, covenant, condition or agreement contained in
this Agreement (other than as specifically provided for otherwise in
this Section 12.1) or any other Loan Document and such default shall
continue for a period of thirty (30) days after written notice thereof
has been given to such Borrower by the Administrative Agent;
(f) Hedging Agreement. Any termination payment shall be due
by a Borrower under any Hedging Agreement and such amount is not paid
within ten (10) Business Days of the due date thereof;
(g) Debt Cross-Default. ACC or any of its Subsidiaries shall
(i) default in the payment of any Debt (other than the Notes or any
Reimbursement Obligation) the aggregate outstanding amount of which Debt
is in excess of $1,000,000 (or the equivalent thereof in any foreign
currency) beyond the period of grace if any, provided in the instrument
or agreement under which such Debt was created; or (ii) default in the
observance or performance of any other agreement or condition relating
to any Debt (other than the Notes or any Reimbursement Obligation) the
aggregate outstanding amount of which Debt is in excess of $1,000,000
(or the equivalent thereof in any foreign currency) or contained in any
instrument or agreement evidencing, securing or relating thereto or any
other event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder or
holders of such Debt (or a trustee or agent on behalf of such holder or
holders) to cause, with the giving of notice if required, any such Debt
to become due prior to its stated maturity (any applicable grace period
having expired);
(h) Other Cross-Defaults. ACC or any of its Subsidiaries
shall default in the payment when due, or in the performance or
observance, of any obligation or condition of any Material Contract, or
any Material Contract shall be terminated, the breach or termination of
which could reasonably be expected to have a Material Adverse Effect
unless, with respect to any such default, but only as long as, the
existence of any such default is being contested by ACC or such
Subsidiary in good faith by appropriate proceedings and adequate
reserves in respect thereof have been established on the books of ACC or
such Subsidiary to the extent required by GAAP;
(i) Change in Control. Any person or group of persons
(within the meaning of Section 13(d) of the Securities Exchange Act of
1934, as amended) other than current management thereof, shall obtain
ownership or control in one or more series of transactions of more than
twenty percent (20%) of the common stock or twenty percent (20%) of the
voting power of ACC entitled to vote in the election of members of the
board of directors of ACC or there shall have occurred under any
indenture or other instrument evidencing any Debt in excess of
$1,000,000 (or the equivalent thereof in any foreign currency) any
"change in control" (as defined in such indenture or other evidence of
Debt) obligating ACC to repurchase, redeem or repay all or any part of
the Debt or capital stock provided for therein (any such event, a
"Change in Control");
(j) Voluntary Bankruptcy Proceeding. Any Borrower or
Subsidiary thereof shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect); (ii) file a petition or
proposal or commence any other proceeding seeking to take advantage of
any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts; (iii)
consent to or fail to contest within sixty (60) days of the filing
thereof any petition filed or proceeding commenced against it in an
involuntary case under such bankruptcy laws or other laws; (iv) apply
for or consent to, or fail to contest in a timely and appropriate
manner, the appointment of, or the taking of possession by, a receiver,
administrator, custodian, trustee, or liquidator of itself or of a
substantial part of its property, domestic or foreign; (v) admit in
writing its inability to pay its debts as they become due; (vi) make a
general assignment for the benefit of creditors; or (vii) take any
corporate action for the purpose of authorizing any of the foregoing;
(k) Involuntary Bankruptcy Proceeding. A case, petition or
other proceeding shall be commenced against any Borrower or Subsidiary
thereof in any court of competent jurisdiction seeking (i) relief under
the federal bankruptcy laws (as now or hereafter in effect) or under any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts; or (ii) the
appointment of a trustee, receiver, administrator, custodian, liquidator
or the like for any Borrower or Subsidiary thereof or for all or any
substantial part of their respective assets, domestic or foreign, and
such case or proceeding shall continue, without dismissal or stay, for
a period of sixty (60) consecutive calendar days, or an order granting
the relief requested in such case, petition or proceeding (including,
but not limited to, an order for relief under such federal bankruptcy
laws or other laws) shall be entered;
(l) Failure of Agreements. Any material provision of this
Agreement or of any other Loan Document shall for any reason cease to be
valid and binding on any Borrower or Subsidiary thereof or any such
Person shall so state in writing, or this Agreement or any other Loan
Document shall for any reason cease to create a valid and perfected
first priority Lien on, or security interest in, any of the Collateral
purported to be covered thereby, in each case other than in accordance
with the express terms hereof or thereof;
(m) Termination Event. The occurrence of any of the
following events: (i) ACC or any ERISA Affiliate fails to make full
payment when due of all amounts which, under the provisions of any
Pension Plan or Section 412 of the Code, ACC or any ERISA Affiliate is
required to pay as contributions thereto; (ii) an accumulated funding
deficiency in excess of $1,000,000 occurs or exists, whether or not
waived, with respect to any Pension Plan; (iii) a Termination Event;
(iv) a Canadian Termination Event; or (v) ACC or any ERISA Affiliate as
employers under one or more Multiemployer Plan makes a complete or
partial withdrawal from any such Multiemployer Plan and the plan sponsor
of such Multiemployer Plans notifies such withdrawing employer that such
employer has incurred a withdrawal liability requiring payments in an
amount exceeding $1,000,000;
(n) Judgment. A judgment or order for the payment of money
which causes the aggregate amount of all such judgments to exceed
$1,000,000 in any Fiscal Year shall be entered against ACC or any of its
Subsidiaries by any court and such judgment or order shall continue,
without discharge or stay, for a period of thirty (30) days;
(o) Loss of License. Any Communications License, PUC
Authorization of ACC or any Subsidiary thereof shall expire, terminate,
be canceled or otherwise lost or any application therefor be rejected,
which event could reasonably be expected to have a Material Adverse
Effect;
SECTION 12.2. Remedies. Upon the occurrence of an Event of
Default, with the consent of the Required Lenders, the Administrative
Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice to the Borrowers:
(a) Acceleration; Termination of Facilities. Declare the
principal of and interest on the Loans, the Notes and the Reimbursement
Obligations at the time outstanding, and all other amounts owed to the
Lenders and to the Agents under this Agreement or any of the other Loan
Documents (including, without limitation, all L/C Obligations, whether
or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) and all other
Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest
or other notice of any kind, all of which are expressly waived, anything
in this Agreement or the other Loan Documents to the contrary
notwithstanding, and terminate the Credit Facility and any right of the
Borrowers to request borrowings or Letters of Credit thereunder;
provided, that upon the occurrence of an Event of Default specified in
Section 12.1(j) or (k), the Credit Facility shall be automatically
terminated and all Obligations shall automatically become due and
payable.
(b) Letters of Credit. With respect to all Letters of Credit
with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to the preceding paragraph, require
the Borrowers at such time to deposit in a cash collateral account
opened by the Administrative Agent an amount equal to the aggregate L/C
Obligations. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under
such Letters of Credit, and the unused portion thereof after all such
Letters of Credit shall have expired or been fully drawn upon, if any,
shall be applied to repay the other Obligations. After all such Letters
of Credit shall have expired or been fully drawn upon, the Reimbursement
Obligation shall have been satisfied and all other Obligations shall
have been paid in full, the balance, if any, in such cash collateral
account shall be returned to such Borrower or such other Person that may
be entitled thereto.
(c) Rights of Collection. Exercise on behalf of the Lenders
all of its other rights and remedies under this Agreement, the other
Loan Documents and Applicable Law, in order to satisfy all of the
Borrowers' Obligations.
SECTION 12.3. Rights and Remedies Cumulative; Non-Waiver;
etc. The enumeration of the rights and remedies of the Agents and the
Lenders set forth in this Agreement is not intended to be exhaustive and
the exercise by the Agents and the Lenders of any right or remedy shall
not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or
remedy given hereunder or under the Loan Documents or that may now or
hereafter exist in law or in equity or by suit or otherwise. No delay
or failure to take action on the part of any Agent or Lender in
exercising any right, power or privilege shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right,
power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or shall be construed to
be a waiver of any Event of Default. No course of dealing between the
Borrowers, the Agents and the Lenders or their respective agents or
employees shall be effective to change, modify or discharge any
provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default. In addition, any election
of remedies which results in the denial or impairment of the right of
the Administrative Agent to seek a deficiency judgment against any
Borrower referred to in Section 11.1 shall not impair the Guarantor's
obligation to pay the full amount of the Guaranteed Obligations.
SECTION 12.4. Consents. The Borrowers acknowledge that
certain transactions contemplated by this Agreement and the other Loan
Documents and certain actions which may be taken by the Agents or the
Lenders in the exercise of their respective rights under this Agreement
and the other Loan Documents may require the consent of a Governmental
Authority. If counsel to any Agent reasonably determines that the
consent of a Governmental Authority is required in connection with the
execution, delivery and performance of any of the aforesaid documents or
any documents delivered to the Agents or the Lenders in connection
therewith or as a result of any action which may be taken pursuant
thereto, then the Borrowers, at their sole cost and expense, agree to
use their best efforts to secure such consent and to cooperate with the
Agents and the Lenders in any action commenced by any Agent or Lender to
secure such consent.
SECTION 12.5. Judgment Currency. The obligation of the
Borrowers to make payments of the principal of and interest on the Notes
and the obligation of the Guarantor to make payments on the Guaranteed
Obligations and the obligation of any such Person to make payments of
any other amounts payable hereunder or pursuant to any other Loan
Document in the currency specified for such payment shall not be
discharged or satisfied by any tender, or any recovery pursuant to any
judgment, which is expressed in or converted into any other currency,
except to the extent that such tender or recovery shall result in the
actual receipt by each of the Administrative Agent and Lenders of the
full amount of the particular Permitted Currency expressed to be payable
pursuant to the applicable Loan Document. The Administrative Agent
shall, using all amounts obtained or received from the Borrowers
pursuant to any such tender or recovery in payment of principal of and
interest on the Obligations, promptly purchase the applicable Permitted
Currency at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it. The obligation of the
Borrowers to make payments in the applicable Permitted Currency shall be
enforceable as an alternative or additional cause of action solely for
the purpose of recovering in the applicable Permitted Currency the
amount, if any, by which such actual receipt shall fall short of the
full amount of the Permitted Currency expressed to be payable pursuant
to the applicable Loan Document.
SECTION 12.6. Adjustments. If any Lender (a "Benefitted
Lender") shall at any time receive any payment of all or part of its
Extensions of Credit, or interest thereon, or if any Lender shall at any
time receive any Collateral in respect to its Extensions of Credit
(whether voluntarily or involuntarily, by set-off or otherwise) in a
greater proportion than any such payment to and Collateral received by
any other Lender, if any, in respect of such other Lender's Loans or
other Extensions of Credit, or interest thereon, such Benefitted Lender
shall purchase for cash from the other Lenders such portion of each such
other Lender's Extensions of Credit, or shall provide such other Lenders
with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such Benefitted Lender to share the excess
payment or benefits of such Collateral or proceeds ratably with each of
the Lenders; provided, that if all or any portion of such excess payment
or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits
returned to the extent of such recovery, but without interest. The
Borrowers agree that each Lender so purchasing a portion of another
Lender's Extensions of Credit may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such
portion as fully as if such Lender were the direct holder of such
portion.
ARTICLE XIII
THE AGENTS
SECTION 13.1. Appointment. Each of the Lenders hereby
irrevocably designates and appoints First Union as Administrative Agent
and Managing Agent of such Lender and Fleet as Managing Agent and
Documentation Agent of such Lender under this Agreement and the other
Loan Documents and each such Lender irrevocably authorizes First Union
as Administrative Agent and Managing Agent and Fleet as Managing Agent
and Documentation Agent, respectively, for such Lender, to take such
action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to each such Agent by the terms of this
Agreement and such other Loan Documents, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement or such other Loan Documents,
none of the Agents shall have any duties or responsibilities, except
those expressly set forth herein and therein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or the
other Loan Documents or otherwise exist against such Agent. To the extent
any provision of this Agreement permits action by any Agent, such Agent shall,
subject to the provisions of Section 13.11 hereof and of this Article XII,
take such action if directed in writing to do so by the Required Lenders.
SECTION 13.2. Delegation of Duties. Each of the Agents may
execute any of its respective duties under this Agreement and the other
Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such
duties. No Agent shall be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by such Agent with
reasonable care.
SECTION 13.3. Exculpatory Provisions. Neither any Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
with this Agreement or the other Loan Documents (except for its or such
Person's own gross negligence or willful misconduct), or (b) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrowers or any of their
Subsidiaries or any officer thereof contained in this Agreement or the
other Loan Documents or in any certificate, report, statement or other
document referred to or provided for in, or received by such Agent under
or in connection with, this Agreement or the other Loan Documents or for
the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the other Loan Documents or for any
failure of the Borrowers or any of their Subsidiaries to perform its
obligations hereunder or thereunder. No Agent shall be under any
obligation to any Lender to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of,
this Agreement, or to inspect the properties, books or records of the
Borrowers or any of their Subsidiaries.
SECTION 13.4. Reliance by Agents. Each of the Agents shall
be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrowers), independent
accountants and other experts selected by any Agent. Each of the Agents
may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with
Section 14.10 hereof. Each of the Agents shall be fully justified in
failing or refusing to take any action under this Agreement and the
other Loan Documents unless it shall first receive such advice or
concurrence of the Required Lenders (or, when expressly required hereby
or by the relevant other Loan Document, all the Lenders) as it deems
appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take any such action except
for its own gross negligence or willful misconduct. Each of the Agents
shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes in accordance with a request
of the Required Lenders (or, when expressly required hereby, all the
Lenders), and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes.
SECTION 13.5. Notice of Default. None of the Agents shall be
deemed to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless it has received notice from a Lender
or a Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default".
In the event that any Agent receives such a notice, it shall promptly
give notice thereof to the Administrative Agent who shall promptly give
notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided that unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default
or Event of Default as it shall deem advisable in the best interests of
the Lenders.
SECTION 13.6. Non-Reliance on Such Agents and Other Lenders.
Each Lender expressly acknowledges that none of the Agents nor any of
their respective officers, directors, employees, agents, attorneys-in-
fact, Subsidiaries or Affiliates has made any representations or
warranties to it and that no act by any Agent hereinafter taken,
including any review of the affairs of the Borrowers or any of its
Subsidiaries, shall be deemed to constitute any representation or
warranty by such Agent to any Lender. Each Lender represents to the
Agents that it has, independently and without reliance upon the Agents
or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Borrowers and their Subsidiaries and made its
own decision to make its Loans and issue or participate in Letters of
Credit hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon any
Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness
of the Borrowers and their Subsidiaries. Except for notices, reports
and other documents expressly required to be furnished to the Lenders by
any Agent hereunder or by the other Loan Documents, no Agent shall have
any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property,
financial and other condition or creditworthiness of the Borrowers or
any of their Subsidiaries which may come into the possession of such
Agent or any of its respective officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates.
SECTION 13.7. Indemnification. The Lenders agree to
indemnify the Administrative Agent and the Managing Agents in their
capacities as such and (to the extent not reimbursed by the Borrowers
and without limiting the obligation of the Borrowers to do so), ratably
according to the respective amounts of the Obligations then owing them,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including, without limitation,
at any time following the payment of the Notes or any Reimbursement
Obligation) be imposed on, incurred by or asserted against any such Agent
in any way relating to or arising out of this Agreement or the other Loan
Documents, or any documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by such Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from such Agent's
bad faith, gross negligence or willful misconduct. The agreements in this
Section 13.7 shall survive the payment of the Notes, any Reimbursement
Obligation and all other amounts payable hereunder and the termination of this
Agreement.
SECTION 13.8. Each of the Agents in Its Individual Capacity.
Each Agent and its respective Subsidiaries and Affiliates may make loans
to, accept deposits from and generally engage in any kind of business
with each Borrower as though such Agent were not an Agent hereunder.
With respect to any Loans made or renewed by it and any Note issued to
it, and with respect to any Letter of Credit issued by it or
participated in by it, each Agent shall have the same rights and powers
under this Agreement and the other Loan Documents as any Lender and may
exercise the same as though it were not an Agent, and the terms "Lender"
and "Lenders" shall include the Administrative Agents and the Managing
Agents in their individual capacity.
SECTION 13.9. Resignation of Agents; Successor Agents. Each
Managing Agent may resign as such Agent at any time by giving notice
thereof to the Lenders and the Borrowers. If both Managing Agents have
resigned, the Administrative Agent shall serve as a Managing Agent
hereunder. Subject to the appointment and acceptance of a successor as
provided below, the Administrative Agent may resign at any time by
giving notice thereof to the Lenders and the Borrowers. Upon any such
resignation, the Required Lenders shall have the right to appoint a
successor Administrative Agent which successor shall have minimum
capital and surplus of at least $500,000,000 and be consented to by the
Borrowers, such consent not to be unreasonably withheld. If no
successor Administrative Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty
(30) days after the retiring Administrative Agent's giving of notice of
resignation, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which successor
shall have minimum capital and surplus of at least $500,000,000. Upon
the acceptance of any appointment as Administrative Agent hereunder by
a successor Administrative Agent such successor Administrative Agent
shall thereupon succeed to and become vested with all rights, powers,
privileges and duties of the retiring Administrative Agent, and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent the provisions
of this Section 13.9 shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
SECTION 13.10 Documentation Agent. The Documentation Agent,
in its capacity as documentation agent, shall have no duties or
responsibilities and no liabilities under this Agreement or any other
Loan Document.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. Notices.
(a) Method of Communication. Except as otherwise provided in
this Agreement, all notices and communications hereunder shall be in
writing, or by telephone subsequently confirmed in writing. Any notice
shall be effective if delivered by hand delivery or sent via telecopy,
recognized overnight courier service or certified mail, return receipt
requested, and shall be presumed to be received by a party hereto (i) on
the date of delivery if delivered by hand or sent by telecopy, (ii) on
the next Business Day if sent by recognized overnight courier service
and (iii) on the third Business Day following the date sent by certified
mail, return receipt requested. A telephonic notice to any Agent as
understood by such Agent will be deemed to be the controlling and proper
notice in the event of a discrepancy with or failure to receive a
confirming written notice.
(b) Addresses for Notices. Notices to any party shall be
sent to it at the following addresses, or any other address as to which
all the other parties are notified in writing.
If to any Borrower: ACC Corp.
400 West Avenue
Rochester, New York 14611
Attention: Michael R. Daley,
Executive Vice President
and Chief Financial Officer
Telephone No.: (716) 987-3175
Telecopy No.: (716) 987-3335
With copies to: Nixon, Hargrave, Devans & Doyle
Clinton Square
P.O. Box 1051
Rochester, New York 14603
Attention: James A. Locke III, Esq.
Telephone No.: (716) 263-1000
Telecopy No.: (716) 263-1600
If to First Union as First Union National Bank of
Administrative Agent North Carolina
or Managing Agent: One First Union Center, TW-10
301 S. College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 383-0288
If to Fleet Fleet National Bank
as Managing Agent 75 State Street MABOF10C
or Documentation Boston, Massachusetts 02109
Agent: Attention: Chris Swindell
Telephone No.: (617) 346-5579
Telecopy No.: (617) 346-3777
If to any Lender: The Address set forth on Schedule 1.1
(c) Administrative Agent's Office. The Administrative Agent
hereby designates its office located at the address set forth above, or
any subsequent office which shall have been specified for such purpose
by written notice to the Borrowers and Lenders, as the Administrative
Agent's Office referred to herein, to which payments due are to be made
and at which Revolving Credit Loans will be disbursed and Letters of
Credit issued.
SECTION 14.2. Expenses. (a) The Borrowers will pay all
reasonable out-of-pocket expenses of (i) the Managing Agents in
connection with the preparation, execution and delivery of this
Agreement and each of the other Loan Documents, whenever the same shall
be executed and delivered, including all out-of-pocket syndication and
due diligence expenses, appraiser's fees, search fees, title insurance
premiums, recording fees, taxes and reasonable fees and disbursements of
counsel, including foreign counsel, for the Managing Agents; (ii) the
Managing Agents in connection with the preparation, execution and
delivery of any waiver, amendment or consent by the Agents or the
Lenders relating to this Agreement or any of the other Loan Documents
including reasonable fees and disbursements of counsel, including
foreign counsel, for such Agents, search fees, appraiser's fees,
recording fees and taxes imposed in connection therewith; and (iii) the
Managing Agents in connection with administering and enforcing their
respective rights under the Credit Facility, including consulting with
one or more Persons, including appraisers, accountants, engineers and
attorneys, including foreign attorneys, concerning or related to the
nature, scope or value of any right or remedy of any Agent or any of the
Lenders hereunder or under any of the other Loan Documents, including
any review of factual matters in connection therewith, which expenses
shall include the reasonable fees and disbursements of such Persons.
(b) The Guarantor agrees that it will reimburse each Agent and
Lender for all expenses (including reasonable attorneys fees and
expenses) incurred by each Agent or Lender in connection with the
obligations of the Guarantor under the Guaranty and any other Loan
Documents and all expenses (including reasonable attorneys fees and
expenses) incurred by the Administrative Agent, any Agent or any Lender
in connection with the enforcement of the Guaranty.
SECTION 14.3. Set-off. In addition to any rights now or
hereafter granted under Applicable Law and not by way of limitation of
any such rights, upon and after the occurrence of any Event of Default
and during the continuance thereof, the Lenders and any assignee or
participant of a Lender in accordance with Section 14.10 are hereby
authorized by the Borrowers at any time or from time to time, without
notice to the Borrowers or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any
and all deposits (general or special, time or demand, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured, excluding government securities required by
Applicable Law to be held as security for worker's compensation and
similar claims) and any other indebtedness at any time held or owing by
the Lenders, or any such assignee or participant to or for the credit or
the account of a Borrower against and on account of the Obligations of
such Borrower irrespective of whether or not (a) the Lenders shall have
made any demand under this Agreement or any of the other Loan Documents
or (b) the Administrative Agent shall have declared any or all of the
Obligations to be due and payable as permitted by Section 12.2 and
although such Obligations shall be contingent or unmatured.
SECTION 14.4. Governing Law. This Agreement, the Notes and
the other Loan Documents, unless otherwise expressly set forth therein,
shall be governed by, construed and enforced in accordance with the
laws of the State of North Carolina, without reference to the conflicts
or choice of law principles thereof.
SECTION 14.5. Consent to Jurisdiction. The Borrowers hereby
irrevocably consent to the personal jurisdiction of the state and
federal courts located in Mecklenburg County, North Carolina, in any
action, claim or other proceeding arising out of any dispute in
connection with this Agreement, the Notes and the other Loan Documents,
any rights or obligations hereunder or thereunder, or the performance of
such rights and obligations. The Borrowers hereby irrevocably consent
to the service of a summons and complaint and other process in any
action, claim or proceeding brought by any Agent or Lender in connection
with this Agreement, the Notes or the other Loan Documents, any rights
or obligations hereunder or thereunder, or the performance of such
rights and obligations, on behalf of itself or its property, in the
manner specified in Section 14.1. Nothing in this Section 14.5 shall
affect the right of any Agent or Lender to serve legal process in any
other manner permitted by Applicable Law or affect the right of any
Agent or Lender to bring any action or proceeding against any Borrower
or its properties in the courts of any other jurisdictions.
SECTION 14.6. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. If in the reasonable determination
of the Administrative Agent and its counsel, Section 14.6(b) is
unenforceable under North Carolina law unless paired with a binding
arbitration provision, then upon demand of any party made within ninety
(90) days after institution of any judicial proceeding, any dispute,
claim or controversy between a Lender (or group of Lenders) and a
Borrower (or group of Borrowers ) (but not any dispute, claim or
controversy among any Lenders not involving any Borrower) arising out
of, connected with or relating to the Notes or any other Loan Documents
("Dispute"), between or among parties to the Notes or any other Loan
Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right
of that party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, claims brought as class
actions, claims arising from Loan Documents executed in the future, or
claims concerning any aspect of the past, present or future
relationships arising out of or connected with the Loan Documents.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association, modified to incorporate the discovery
rights contained in the Federal Rules of Civil Procedure and Title 9 of
the U.S. Code. All arbitration hearings shall be conducted in
Charlotte, North Carolina. The expedited procedures set forth in Rule
51, et seq. of the Arbitration Rules shall be applicable to claims of
less than $1,000,000. All applicable statutes of limitation shall apply
to any Dispute. A judgment upon the award may be entered in any court
having jurisdiction. The panel from which all arbitrators are selected
shall be comprised of licensed attorneys. The single arbitrator
selected for expedited procedure shall be a retired judge from the
highest court of general jurisdiction, state or federal, of the state
where the hearing will be conducted. Notwithstanding the foregoing,
this paragraph shall not apply to any Hedging Agreement that is a Loan
Document.
(b) Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW,
EACH AGENT, LENDER AND EACH BORROWER HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR
OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS
AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto and the
other Loan Documents preserve, without diminution, certain remedies that
such Persons may employ or exercise freely, either alone, in conjunction
with or during a Dispute. Each such Person shall have and hereby
reserves the right to proceed in any court of proper jurisdiction or by
self help to exercise or prosecute the following remedies: (i) all
rights to foreclose or otherwise realize against any real or personal
property or other security by exercising a power of sale or other
remedies against such property or security provided for in the Loan
Documents or under Applicable Law or by judicial foreclosure and sale,
(ii) all rights of self help including peaceful occupation of property
and collection of rents, set off, and peaceful possession of property,
(iii) obtaining provisional or ancillary remedies including injunctive
relief, sequestration, garnishment, attachment, appointment of receiver
and in filing an involuntary bankruptcy proceeding, and (iv) when
applicable, a judgment by confession of judgment. Preservation of these
remedies does not limit the power of an arbitrator to grant similar
remedies that may be requested by a party in a Dispute.
SECTION 14.7. Reversal of Payments. To the extent any
Borrower makes a payment or payments to the Administrative Agent or
other Agent for the ratable benefit of the Lenders (or the other Agents)
or the Administrative Agent or other Agent receives any payment or
proceeds of the Collateral which payments or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state, provincial
or federal law, common law or equitable cause, then, to the extent of
such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force
and effect as if such payment or proceeds had not been received by any
Agent.
SECTION 14.8. Injunctive Relief. The Borrowers recognize
that, in the event the Borrowers fail to perform, observe or discharge
any of their obligations or liabilities under this Agreement, any remedy
of law may prove to be inadequate relief to the Lenders. Therefore, the
Borrowers agree that the Lenders, at the Lenders' option, shall be
entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
SECTION 14.9. Accounting Matters. All financial and
accounting calculations, measurements and computations made for any
purpose relating to this Agreement, including, without limitation, all
computations utilized by ACC or any Subsidiary thereof to determine
compliance with any covenant contained herein, shall, except as
otherwise expressly contemplated hereby or unless there is an express
written direction by the Administrative Agent to the contrary agreed to
by the Borrowers, be performed in accordance with GAAP. In the event
that changes in GAAP shall be mandated by the Financial Accounting
Standards Board, or any similar accounting body of comparable standing,
or shall be recommended by ACC's certified public accountants, to the
extent that such changes would modify such accounting terms or the
interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Credit
and the Lenders shall have amended this Agreement to the extent
necessary to reflect any such changes in the financial covenants and
other terms and conditions of this Agreement.
SECTION 14.10. Successors and Assigns; Participations.
(a) Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of the Borrowers, each Agent and the
Lenders, all future holders of the Notes, and their respective
successors and assigns, except that no Borrower shall assign or transfer
any of its rights or obligations under this Agreement without the prior
written consent of each Lender. Nothing set forth in the Guaranty shall
impair, as between the Borrowers, the Agents and the Lenders, the
obligations of the Borrowers hereunder and under the other Loan
Documents.
(b) Assignment by Lenders. Each Lender may, with the consent
of the Administrative Agent and (unless an Event of Default has occurred
and is continuing) the Borrowers, which consents shall not be
unreasonably withheld, assign to one or more Eligible Assignees all or
a portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Extensions of
Credit at the time owing to it and the Notes held by it); provided that:
(i) each such assignment shall be of a constant, and not
a varying, percentage of all the assigning Lender's rights and
obligations under this Agreement;
(ii) the Commitment so assigned shall not be less than
the lesser of (i) $5,000,000 or (ii) an amount equal to the
entire Commitment of the assigning Lender at the time of such
assignment;
(iii) the parties to each such assignment shall execute
and deliver to the Administrative Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance in
the form of Exhibit G attached hereto (an "Assignment and
Acceptance"), together with any Note or Notes subject to such
assignment;
(iv) such assignment shall not, without the consent of
the applicable Borrower, require such Borrower to file a
registration statement with the Securities and Exchange
Commission or apply to or qualify the Revolving Credit Loans
or the Notes under the blue sky laws of any state;
(v) no consent of the Borrowers or the Administrative
Agent shall be required if the assignee of such assignment is
an Affiliate of the assigning Lender;
(vi) the assigning Lender shall pay to the Administrative
Agent an assignment fee of $2,500 upon the execution by such
Lender of the Assignment and Acceptance; provided that no such
fee shall be payable upon any assignment by a Lender to an
Affiliate thereof; and
(vii) the assignee of each such assignment shall execute
and deliver to the Administrative Agent any such supplements
to the Canadian Security Documents and/or additional Canadian
Security Documents that may be reasonably required by such
Agent in order that the assignee may become a secured party
thereunder.
Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the
execution thereof, (A) the assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereby and (B) the Lender thereunder
shall, to the extent provided in such assignment, be released from its
obligations under this Agreement.
(c) Rights and Duties Upon Assignment. By executing and
delivering an Assignment and Acceptance, the assigning Lender thereunder
and the assignee thereunder confirm to and agree with each other and the
other parties hereto as follows:
(i) other than the representation and warranty that it
is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim, such
assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with
this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished
pursuant hereto;
(ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of the Borrowers or their Subsidiaries or
the performance or observance by the Borrowers and their
Subsidiaries of any of their obligations under this Agreement
or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy
of this Agreement, together with copies of the financial
statements referred to in Section 6.1(o) and the most recent
financial statements delivered to the Assignor pursuant to
Section 7.1 and such other documents and information as it has
deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without
reliance upon any Agent, such assigning Lender or any other
Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement;
(v) such assignee confirms that it is an Eligible
Assignee;
(vi) such assignee appoints and authorizes each Agent to
take such action as agent on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as
are delegated to such Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental
thereto; and
(vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by
the terms of this Agreement are required to be performed by it
as a Lender.
(d) Register. The Administrative Agent shall maintain a copy
of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders and the amount of
the Extensions of Credit with respect to each Lender from time to time
(the "Register"). The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrowers, the Agents and the
Lenders may treat each person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by the Borrowers or Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Issuance of New Notes. Upon its receipt of an Assignment
and Acceptance executed by an assigning Lender and an Eligible Assignee
together with any Note or Notes subject to such assignment and the
written consent to such assignment, the Administrative Agent shall, if
such Assignment and Acceptance has been completed and is substantially
in the form of Exhibit G:
(i) accept such Assignment and Acceptance;
(ii) record the information contained therein in the
Register;
(iii) give prompt notice thereof to the Lenders and the
Borrowers; and
(iv) promptly deliver a copy of such Assignment and
Acceptance to ACC.
Within five (5) Business Days after receipt of notice, ACC shall execute
and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes, a new Note or Notes to the order of such Eligible
Assignee in amounts equal to the Commitment assumed by it pursuant to
such Assignment and Acceptance and a new Note or Notes to the order of
the assigning Lender in an amount equal to the Commitment retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal
amount equal to the aggregate principal amount of such surrendered Note
or Notes, shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of the
assigned Notes delivered to the assigning Lender. Each surrendered Note
or Notes shall be canceled and returned to ACC.
(f) Participations. Each Lender may sell participations to
one or more banks or other entities in all or a portion of its rights
and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment and its Extensions of Credit and the
Notes held by it); provided that:
(i) each such participation shall be in an amount not
less than $3,000,000;
(ii) such Lender's obligations under this Agreement
(including, without limitation, its Commitment) shall remain
unchanged;
(iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations;
(iv) such Lender shall remain the holder of the Notes
held by it for all purposes of this Agreement;
(v) the Borrowers, the Agents and the other Lenders
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under
this Agreement;
(vi) such Lender shall not permit such participant the
right to approve any waivers, amendments or other
modifications to this Agreement or any other Loan Document
other than waivers, amendments or modifications which would
reduce the principal of or the interest rate on any Loan or
Reimbursement Obligation, extend the term or increase the
amount of the Commitment of such participant, reduce the
amount of any fees to which such participant is entitled,
extend any scheduled payment date for principal or, except as
expressly contemplated hereby or thereby, release
substantially all of the Collateral; and
(vii) any such disposition shall not, without the consent
of the applicable Borrower, require such Borrower to file a
registration statement with the Securities and Exchange
Commission to apply to qualify the Revolving Credit Loans or
the Notes under the blue sky law of any state.
(g) Disclosure of Information; Confidentiality. The Agents
and the Lenders shall hold all non-public information obtained pursuant
to the Loan Documents in accordance with their customary procedures for
handling confidential information. Any Lender may, in connection with
any assignment, proposed assignment, participation or proposed
participation pursuant to this Section 14.10, disclose to the assignee,
participant, proposed assignee or proposed participant, any information
relating to the Borrowers furnished to such Lender by or on behalf of
the Borrowers; provided, that prior to any such disclosure, each such
assignee, proposed assignee, participant or proposed participant shall
agree with the Borrowers or such Lender (which in the case of an agree-
ment with only such Lender, the Borrowers shall be recognized as third
party beneficiaries thereof) to preserve the confidentiality of any
confidential information relating to the Borrowers received from such
Lender.
(h) Certain Pledges or Assignments. Nothing herein shall
prohibit any Lender from pledging or assigning any Note to any Federal
Reserve Bank in accordance with Applicable Law.
SECTION 14.11. Amendments, Waivers and Consents; Renewal.
(a) Except as set forth below, any term, covenant, agreement
or condition of this Agreement or any of the other Loan Documents may be
amended or waived by the Lenders, and any consent given by the Lenders,
if, but only if, such amendment, waiver or consent is in writing signed
by the Required Lenders (or by the Administrative Agent with the written
consent of the Required Lenders) and delivered to the Administrative
Agent and, in the case of an amendment, signed by the Borrowers;
provided, that no amendment, waiver or consent shall (i) release any
Borrower or the Guarantor from its Obligations hereunder, (ii) increase
the amount or extend the time of the obligation of the Lenders to make
Loans or issue or participate in Letters of Credit (including without
limitation pursuant to Section 2.7), (iii) extend the originally
scheduled time or times of payment of any fees due hereunder or the
principal of any Loan or Reimbursement Obligation or the time or times
of payment of interest on any Loan, Letter of Credit or Reimbursement
Obligation, (iv) reduce the rate of interest or fees payable on any Loan
or Reimbursement Obligation, (v) permit any subordination of the
principal or interest on any Loan or Reimbursement Obligation, (vi)
extend the expiration date of any Letter of Credit beyond the Revolving
Credit Termination Date, (vii) release any material portion of the
Collateral or release any Security Document (other than the release of
assets specifically permitted to be sold or otherwise transferred
pursuant to the terms hereof and other than as specifically permitted by
the applicable Security Document) (viii) amend the definitions of
Alternative Currency or Permitted Currency or (ix) amend the provisions
of this Section 14.11 or the definition of Required Lenders, without the
prior written consent of each Lender. In addition, no amendment, waiver
or consent to the provisions of Article XIII shall be made without the
written consent of the affected Agents.
SECTION 14.12. Performance of Duties. The Borrowers'
obligations under this Agreement and each of the Loan Documents shall be
performed by the applicable Borrower at its sole cost and expense.
SECTION 14.13. Indemnification. The Borrowers agree to
reimburse each Agent and the Lenders for all reasonable costs and
expenses, including reasonable counsel, appraisal, or other expert or
consultant fees and disbursements incurred, and to indemnify and hold
each Agent and the Lenders harmless from and against all losses suffered
by such Agent and the Lenders in connection with (a) the exercise by the
Agents or the Lenders of any right or remedy granted to them under this
Agreement or any of the other Loan Documents, (b) any claim, and the
prosecution or defense thereof, arising out of or in any way connected
with this Agreement or any of the other Loan Documents and (c) the
collection or enforcement of the Obligations or any of them; provided,
that the indemnity contained herein shall not apply to the extent that
such losses, claims, damages, liabilities or other expenses result from
the gross negligence or willful misconduct of such indemnified person;
and further provided that, promptly after the receipt by an indemnified
person of notice of any pending or threatened action with respect to
which the indemnified person may claim indemnification under this
Agreement (an "Action"), the indemnified person shall provide written
notice thereof to ACC and ACC shall then be entitled, at its sole and
reasonable discretion, to assume the defense of any such Action, with
counsel reasonably satisfactory to the indemnified person. After
written notice to the indemnified person from ACC of its election to
assume the defense of such Action, ACC shall not be liable to such
indemnified person for any legal expenses or fees of other counsel or
any other expense incurred by such indemnified person in connection with
the defense thereof after such date, except as provided below. The
indemnified person shall cooperate with all reasonable requests of ACC
regarding the defense of any such Action. Notwithstanding ACC's
election to assume the defense thereof, however, the indemnified person
shall have the right to employ separate counsel and to participate in,
but not control, the defense of such action, and ACC shall pay the
reasonable fees and expenses of such separate counsel (provided that
with respect to any single Action, ACC shall not be required to bear the
fees and expenses of more than one such counsel in any single
jurisdiction) if (a) the use of counsel chosen by ACC to represent the
indemnified person would present a conflict-of-interest in the
reasonable determination of the indemnified person or such counsel, or
(b) the defendants in or target of any such Action include both the
indemnified person and ACC, and the indemnified person reasonably
concluded that there may be legal defenses available to it that differ
from or are in addition to those available to ACC. ACC shall not be
liable for any settlement of any action effected by an indemnified
person without ACC's prior written consent (which shall not be
unreasonably withheld).
SECTION 14.14. All Powers Coupled with Interest. All powers
of attorney and other authorizations granted to the Lenders, each Agent
and any Persons designated by such Agent or Lenders pursuant to any
provisions of this Agreement or any of the other Loan Documents shall be
deemed coupled with an interest and shall be irrevocable so long as any
of the Obligations remain unpaid or unsatisfied or the Credit Facility
has not been terminated.
SECTION 14.15. Survival of Indemnities. Notwithstanding any
termination of this Agreement, the indemnities to which the Agents and
the Lenders are entitled under the provisions of this Article XIV and
any other provision of this Agreement and the Loan Documents shall
continue in full force and effect and shall protect the Agents and the
Lenders against events arising after such termination as well as before.
SECTION 14.16. Titles and Captions. Titles and captions of
Articles, Sections and subsections in this Agreement are for convenience
only, and neither limit nor amplify the provisions of this Agreement.
SECTION 14.17. Severability of Provisions. Any provision of
this Agreement or any other Loan Document which is prohibited or unen-
forceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability
without invalidating the remainder of such provision or the remaining
provisions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
SECTION 14.18. Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
be an original and shall be binding upon all parties, their successors
and assigns, and all of which taken together shall constitute one and
the same agreement.
SECTION 14.19. ACC as Agent for Other Borrowers. Each
Borrower hereby appoints and authorizes ACC (a) to provide the
Administrative Agent with all notices with respect to Extensions of
Credit for the benefit of itself and any other Borrower and to provide
the Administrative Agent with and receive therefrom all other notices
and instructions under this Agreement and (b) to take such action on
behalf of itself and such other Borrowers as ACC deems appropriate to
obtain Extensions of Credit and to exercise such other powers as are
reasonably incidental to carry out the purposes of this Agreement
(including without limitation acceptance of service of process for
itself and each other Borrower and Subsidiary under Section 14.5). This
appointment shall be irrevocable and coupled with an interest.
SECTION 14.20. Term of Agreement. This Agreement shall
remain in effect from the Closing Date through and including the date
upon which all Obligations shall have been indefeasibly and irrevocably
paid and satisfied in full. No termination of this Agreement shall
affect the rights and obligations of the parties hereto arising prior to
such termination.
SECTION 14.21. Inconsistencies with Other Documents;
Independent Effect of Covenants.
(a) In the event there is a conflict or inconsistency between
this Agreement, the Notes or the other Loan Documents, the terms of this
Agreement shall control; provided, that any provision of the Security
Documents which imposes additional burdens on any Borrower or its
Subsidiaries or further restricts the rights of any Borrower or its
Subsidiaries or gives the Lenders additional rights shall not be deemed
to be in conflict or inconsistent with this Agreement and shall be given
full force and effect.
(b) The Borrowers expressly acknowledge and agree that each
covenant contained in Articles VIII, IX or X hereof shall be given
independent effect. Accordingly, the Borrowers shall not engage in any
transaction or other act otherwise permitted under any covenant
contained in Articles VIII, IX or X if, before or after giving effect to
such transaction or act, the Borrower shall or would be in breach of any
other covenant contained in Articles VIII, IX or X.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, all as of
the day and year first written above.
[CORPORATE SEAL] ACC CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President-Finance
[CORPORATE SEAL] ACC LONG DISTANCE CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
[CORPORATE SEAL] ACC NATIONAL TELECOM CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
[CORPORATE SEAL] ACC LONG DISTANCE OF MASSACHUSETTS
CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
[CORPORATE SEAL] ACC GLOBAL CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
[CORPORATE SEAL] ACC RADIO CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
[CORPORATE SEAL] ACC NATIONAL LONG DISTANCE CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
[CORPORATE SEAL] ACC TELENTERPRISES LTD.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Assistant Controller
[CORPORATE SEAL] ACC LONG DISTANCE U.K., LTD.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Attorney
[CORPORATE SEAL] FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Administrative Agent,
Managing Agent, Swingline Lender,
Issuing Lender and Lender
By: /s/ Jim Redman
Name: Jim Redman
Title: Senior Vice President
[CORPORATE SEAL] FLEET NATIONAL BANK, as Managing
Agent, Documentation Agent and
Lender
By:_________________________________
Name:_______________________________
Title:______________________________
[CORPORATE SEAL] STATE STREET BANK AND TRUST COMPANY
By:_________________________________
Name:_______________________________
Title:______________________________
[CORPORATE SEAL] BANK OF MONTREAL
By:_________________________________
Name:_______________________________
Title:______________________________
<PAGE>
EXHIBIT A-1
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
AMENDED AND RESTATED REVOLVING CREDIT NOTE
$___________ ______ __, 1997
FOR VALUE RECEIVED, the undersigned, ACC CORP., a corporation
organized under the laws of Delaware, ACC LONG DISTANCE CORP., a
corporation organized under the laws of New York, ACC NATIONAL TELECOM
CORP., a corporation organized under the laws of Delaware, ACC LONG
DISTANCE OF MASSACHUSETTS CORP., a corporation organized under the laws
of Delaware, ACC RADIO CORP., a corporation organized under the laws of
New York, ACC NATIONAL LONG DISTANCE CORP., a corporation organized
under the laws of Delaware, ACC GLOBAL CORP., a corporation organized
under the laws of Delaware, and any other Domestic Borrower party to the
Amended and Restated Credit Agreement hereinafter referred to
(collectively, the "Borrowers"), hereby jointly and severally promise to
pay to the order of _________________________ (the "Bank"), at the
times, at the place and in the manner provided in such Amended and
Restated Credit Agreement, the principal sum of up to
______________________ Dollars ($___________), or, if less, the
aggregate unpaid principal amount of all Loans disbursed to such
Borrowers by the Lenders under such Amended and Restated Credit
Agreement, together with interest at the rates as in effect from time to
time with respect to each portion of the principal amount hereof,
determined and payable as provided in Article IV of such Amended and
Restated Credit Agreement.
This Note is a Note referred to in, and is entitled to the
benefits of, the Amended and Restated Credit Agreement dated as of
_________ __, 1997 as further amended, restated or otherwise modified
(the "Amended and Restated Credit Agreement") by and among ACC Corp. and
certain Subsidiaries thereof, as Borrowers, ACC Corp., as Guarantor,
the Lenders party thereto, First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent, and Fleet National Bank, as
Managing Agent and Documentation Agent. The Amended and Restated Credit
Agreement contains, among other things, provisions for the time, place
and manner of payment of this Note, the determination of the interest
rate borne by and fees payable in respect of this Note, acceleration of
the payment of this Note upon the happening of certain stated events and
the mandatory repayment of this Note under certain circumstances. All
capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned thereto in the Amended and Restated Credit
Agreement.
The Borrowers agree to pay on demand all costs of collection,
including reasonable attorneys' fees, if any part of this Note,
principal or interest, is collected after maturity with the aid of an
attorney.
Diligence, presentment for payment, notice of dishonor,
protest and notice of any kind (other than as explicitly required by the
Amended and Restated Credit Agreement) are hereby waived.
THIS NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH CAROLINA
AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.
The Debt evidenced by this Note is senior in right of payment
to all Subordinated Debt referred to in the Amended and Restated Credit
Agreement.
[This Note is an amendment and restatement of, and not a
prepayment of, the Revolving Credit Note payable by the Borrowers to the
order of the Bank pursuant to the Original Credit Agreement.]
/FN
Included in Notes of Original Lenders only.
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Note to be
executed under seal by a duly authorized officer as of the day and year
first above written.
ACC CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC LONG DISTANCE CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC NATIONAL TELECOM CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC LONG DISTANCE OF MASSACHUSETTS
CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC RADIO CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
<PAGE>
ACC NATIONAL LONG DISTANCE CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC GLOBAL CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT A-2
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
AMENDED AND RESTATED REVOLVING CREDIT NOTE
$___________ _____ __, 1997
(or the equivalent
thereof described
below)
FOR VALUE RECEIVED, the undersigned, ACC LONG DISTANCE U.K.,
LTD., a corporation organized under the laws of the United Kingdom, and
any other U.K. Borrower party to the Amended and Restated Credit
Agreement hereinafter referred to (collectively, the "Borrowers"),
hereby jointly and severally promise to pay to the order of
__________________________ (the "Bank"), at the times, at the place and
in the manner provided in such Amended and Restated Credit Agreement,
the principal sum of up to ______________________ Dollars
($___________), (or the applicable Alternative Currency Amount then
outstanding under this Note) or, if less, the aggregate unpaid principal
amount of all Loans disbursed to the Borrowers by the Lenders under such
Amended and Restated Credit Agreement, together with interest at the
rates as in effect from time to time with respect to each portion of the
principal amount hereof, determined and payable as provided in Article
IV of such Amended and Restated Credit Agreement.
This Note is a Note referred to in, and is entitled to the
benefits of, the Amended and Restated Credit Agreement dated as of _____
__, 1997 as further amended, restated or otherwise modified (the
"Amended and Restated Credit Agreement") by and among ACC Corp. and
certain Subsidiaries, as Borrowers, ACC Corp., as Guarantor, the
Lenders party thereto, First Union National Bank of North Carolina, as
Managing Agent and Administrative Agent, and Fleet National Bank, as
Managing Agent and Documentation Agent. The Amended and Restated Credit
Agreement contains, among other things, provisions for the time, place
and manner of payment of this Note, the determination of the interest
rate borne by and fees payable in respect of this Note, acceleration of
the payment of this Note upon the happening of certain stated events and
the mandatory repayment of this Note under certain circumstances. All
capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned thereto in the Amended and Restated Credit
Agreement.
The Borrowers agree to pay on demand all costs of collection,
including reasonable attorneys' fees, if any part of this Note,
principal or interest, is collected after maturity with the aid of an
attorney.
Diligence, presentment for payment, notice of dishonor,
protest and notice of any kind (other than as explicitly required by the
Amended and Restated Credit Agreement) are hereby waived.
THIS NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH CAROLINA
AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.
The Debt evidenced by this Note is senior in right of payment
to all Subordinated Debt referred to in the Credit Agreement.
[This Note is an amendment and restatement of, and not a
prepayment of, the Revolving Credit Note payable by the Borrowers to the
order of the Bank pursuant to the Original Credit Agreement.]
/FN
Included in Notes of Original Lenders only.
<PAGE>
IN WITNESS WHEREOF, the Borrowers have caused this Note to be
executed under seal by a duly authorized officer as of the day and year
first above written.
EXECUTION
The Borrower
THE COMMON SEAL of )
ACC LONG DISTANCE )
U.K., LTD. was )
hereunto affixed )
to this deed )
in the presence of: )
Director: ____________________________
Full Name: ___________________________
Director/
Secretary: ___________________________
Full Name: ___________________________
<PAGE>
EXHIBIT A-3
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
REVOLVING CREDIT NOTE
$___________ _____ __, 1997
(or the equivalent
thereof described
below)
FOR VALUE RECEIVED, the undersigned, ACC TELENTERPRISES LTD.,
a corporation organized under the laws of Ontario, and any other
Canadian Borrower party to the Amended and Restated Credit Agreement
hereinafter referred to (the "Borrowers"), hereby jointly and severally
(subject to Section 2.9 of the Amended and Restated Credit Agreement)
promise to pay to the order of __________________________ (the "Bank"),
at the times, at the place and in the manner provided in such Amended
and Restated Credit Agreement, the principal sum of up to
______________________ Dollars ($___________), (or the applicable
Alternative Currency Amount then outstanding under this Note) or, if
less, the aggregate unpaid principal amount of all Loans disbursed to
the Borrowers by the Lenders under such Amended and Restated Credit
Agreement, together with interest at the rates as in effect from time to
time with respect to each portion of the principal amount hereof,
determined and payable as provided in Article IV of such Amended and
Restated Credit Agreement.
This Note is a Note referred to in, and is entitled to the
benefits of, the Amended and Restated Credit Agreement dated as of _____
__, 1997 (as further amended, restated or otherwise modified (the
"Amended and Restated Credit Agreement") by and among ACC Corp. and
certain Subsidiaries, as Borrowers, ACC Corp., as Guarantor, the
Lenders party thereto, First Union National Bank of North Carolina, as
Managing Agent and Administrative Agent, and Fleet National Bank, as
Managing Agent and Documentation Agent. The Amended and Restated Credit
Agreement contains, among other things, provisions for the time, place
and manner of payment of this Note, the determination of the interest
rate borne by and fees payable in respect of this Note, acceleration of
the payment of this Note upon the happening of certain stated events and
the mandatory repayment of this Note under certain circumstances. All
capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned thereto in the Amended and Restated Credit
Agreement.
The Borrowers agree to pay on demand all costs of collection,
including reasonable attorneys' fees, if any part of this Note,
principal or interest, is collected after maturity with the aid of an
attorney.
Diligence, presentment for payment, notice of dishonor,
protest and notice of any kind (other than as explicitly required by the
Amended and Restated Credit Agreement) are hereby waived.
THIS NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH CAROLINA
AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.
The Debt evidenced by this Note is senior in right of payment
to all Subordinated Debt referred to in the Credit Agreement.
IN WITNESS WHEREOF, the Borrowers have caused this Note to be
executed under seal by a duly authorized officer as of the day and year
first above written.
ACC TELENTERPRISES LTD.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT A-4
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
SWINGLINE NOTE
$ _____________ ___, 1997
FOR VALUE RECEIVED, the undersigned, ACC CORP., a corporation
organized under the laws of Delaware, ACC LONG DISTANCE CORP., a
corporation organized under the laws of New York, ACC NATIONAL TELECOM
CORP., a corporation organized under the laws of Delaware, ACC LONG
DISTANCE OF MASSACHUSETTS CORP., a corporation organized under the laws
of Delaware, ACC RADIO CORP., a corporation organized under the laws of
New York, ACC NATIONAL LONG DISTANCE CORP., a corporation organized
under the laws of Delaware and any other Domestic Borrower party to the
Amended and Restated Credit Agreement hereinafter referred to (the
"Borrowers"), hereby jointly and severally promise to pay to the order
of _____________________ (the "Bank"), at the times, at the place and in
the manner provided in such Amended and Restated Credit Agreement, the
principal sum of up to Three Million Dollars ($3,000,000), or, if less,
the aggregate unpaid principal amount of all Swingline Loans disbursed
by the Bank under such Amended and Restated Credit Agreement, together
with interest at the rates as in effect from time to time with respect
to each portion of the principal amount hereof, determined and payable
as provided in Article IV of such Amended and Restated Credit Agreement.
This Note is the Swingline Note referred to in, and is
entitled to the benefits of, the Amended and Restated Credit Agreement
dated as of ____________, 1997 (as amended, restated or otherwise
modified, the "Amended and Restated Credit Agreement") by and among ACC
Corp. and certain Subsidiaries thereof, as Borrowers, ACC Corp., as
Guarantor, the Lenders party thereto, First Union National Bank of North
Carolina, as Managing Agent and Administrative Agent, and Fleet National
Bank, as Managing Agent and Documentation Agent. The Amended and
Restated Credit Agreement contains, among other things, provisions for
the time, place and manner of payment of this Note, the determination of
the interest rate borne by and fees payable in respect of this Note,
acceleration of the payment of this Note upon the happening of certain
stated events and the mandatory repayment of this Note under certain
circumstances. All capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned thereto in the Amended
and Restated Credit Agreement.
The Borrowers agree to pay on demand all costs of collection,
including reasonable attorneys' fees, if any part of this Note,
principal or interest, is collected after maturity with the aid of an
attorney.
Diligence, presentment for payment, notice of dishonor,
protest and notice of any kind (other than as explicitly required by the
Amended and Restated Credit Agreement) are hereby waived.
THIS NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH CAROLINA
AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.
The Debt evidenced by this Note is senior in right of payment
to all Subordinated Debt referred to in the Credit Agreement.
IN WITNESS WHEREOF, the Borrowers have caused this Note to be
executed under seal by a duly authorized officer as of the day and year
first above written.
ACC CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC LONG DISTANCE CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC NATIONAL TELECOM CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC LONG DISTANCE OF MASSACHUSETTS
CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC GLOBAL CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC RADIO CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
ACC NATIONAL LONG DISTANCE CORP.
[CORPORATE SEAL]
By: _____________________________
Name:_________________________
Title:________________________
<PAGE>
EXHIBIT B
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
NOTICE OF BORROWING
First Union National Bank
of North Carolina, as Managing Agent
and Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Borrowing is delivered to you by the
undersigned Borrower(s) under Section 2.3(a) of the Amended and Restated
Credit Agreement dated as of _____ __, 1997 (as amended, restated or
otherwise modified, the "Amended and Restated Credit Agreement"), by and
among ACC Corp. and certain Subsidiaries, as Borrowers, ACC Corp., as
Guarantor, the Lenders party thereto, First Union National Bank of North
Carolina, as Managing Agent and Administrative Agent, and Fleet National
Bank, as Managing Agent and Documentation Agent.
1. ACC Corp. on behalf of the [Domestic Borrowers] [Canadian
Borrowers] [U.K. Borrowers] hereby requests that the Lenders make a Loan
denominated in [Dollars] [Canadian Dollars] [Sterling] in the aggregate
principal amount of $___________ (the "Loan"). (Insert applicable Borrowers
and Permitted Currency therefor in accordance with Section 2.1 or 2.2(a),
as applicable, and a minimum amount in accordance with Section 2.3)
2. ACC Corp. on behalf of the applicable Borrowers hereby
requests that the Loan be made on the following Business Day:
_____________________. (Complete with a date (A) on or prior to the same
Business Day of this notice for each Swingline Loan, (B) at least one Business
Day after the date of this notice for each Base Rate Loan denominated in
Dollars, (C) at least two Business Days after the date of this notice for
each Base Rate Loan denominated in an Alternative Currency, (D) at least
three (3) Business Days after the date of this notice for each LIBOR Rate
Loan denominated in Dollars and (E) at least four (4) Business Days after the
date of this notice for each LIBOR Rate Loan to be denominated in an Alternative
Currency.)
3. ACC Corp. on behalf of the applicable Borrowers hereby
requests that the Loan be a __________________ Loan. (Complete with either
"Revolving Credit" or "Swingline" in accordance with 2.3.)
4. ACC Corp. on behalf of the applicable Borrowers hereby
requests that the Loan bear interest at the following interest rate,
plus the Applicable Margin, as set forth below:
Termination
Date for
Principal Interest Interest
Component Interest Period Period (if
of Loan Rate (LIBOR Rate only) applicable)
[Base Rate
or LIBOR
Rate] [One, two, three
or six months]
5. The principal amount of all Loans outstanding as of the date
hereof (including the requested Loan) does not exceed the maximum amount
permitted to be outstanding pursuant to the terms of the Amended and
Restated Credit Agreement.
6. All of the conditions applicable to the Loan requested herein
as set forth in the Amended and Restated Credit Agreement have been
satisfied as of the date hereof and will remain satisfied to the date of
such Loan.
7. No Default or Event of Default exists, and none will exist
upon the making of the Loan requested herein.
8. All capitalized undefined terms used herein have the meanings
assigned thereto in the Amended and Restated Credit Agreement.
/FN
Revolving Credit Loans denominated in Dollars may bear interest at
the Base Rate or LIBOR Rate; Revolving credit Loans denominated in an
Alternative Currency shall bear interest at the LIBOR Rate; and
Swingline Loans shall bear interest at the Base Rate, in each case
plus the Applicable margin in accordance with Section 4.1.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Borrowing this ____ day of _______, 19__.
ACC CORP.
By: __________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT C
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
NOTICE OF PREPAYMENT
First Union National Bank
of North Carolina, as Managing Agent
and Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Prepayment is delivered to you by
____________________________, a corporation organized under the laws of
_______________ (the "Borrower"), under Section 2.4(d) of the Amended
and Restated Credit Agreement dated as of _____________ ___, 1997 as
amended, restated or otherwise modified (the "Amended and Restated
Credit Agreement"), by and among ACC Corp. and certain Subsidiaries, as
Borrowers, ACC Corp., as Guarantor, the Lenders party thereto, First
Union National Bank of North Carolina, as Managing Agent and
Administrative Agent, and Fleet National Bank, as Managing Agent and
Documentation Agent.
1. ACC Corp. hereby provides notice to the Agent that the [Insert
Domestic Borrowers, Canadian Borrowers or U.K. Borrowers, as applicable]
shall repay the following [Base Rate Loans] and/or [LIBOR Rate Loans] :
____________________.
2. The [Insert Domestic Borrowers, Canadian Borrowers or U.K.
Borrowers, as applicable] shall repay the above referenced Loans on the
following Business Day: _______________.
3. All capitalized undefined terms used herein have the meanings
assigned thereto in the Amended and Restated Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Prepayment this ____ day of _______, 19__.
ACC CORP.
[CORPORATE SEAL]
By:_____________________________
Name:________________________
Title:_______________________
/FN
Complete with an amount in accordance with Section 2.4(d) of the
Amended and Restated Credit Agreement.
/FN
Complete with a Business Day in accordance with Section 2.4(d) of the
Amended and Restated Credit Agreement.
<PAGE>
EXHIBIT D
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
NOTICE OF CONVERSION/CONTINUATION
First Union National Bank
of North Carolina, as Managing Agent
and Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This irrevocable Notice of Conversion/Continuation is delivered to
you by ACC Corp. on behalf of [Insert Domestic Borrowers, Canadian
Borrowers or U.K. Borrowers, as applicable] under Section 4.2 of the
Amended and Restated Credit Agreement dated as of __________ , 1997
(as amended, restated or otherwise modified, the "Amended and Restated
Credit Agreement"), by and among ACC Corp. and certain Subsidiaries, as
Borrowers, ACC Corp., as Guarantor, the Lenders party thereto, First
Union National Bank of North Carolina, as Managing Agent and
Administrative Agent, and Fleet National Bank, as Managing Agent and
Documentation Agent.
/FN
This Notice is applicable only to Revolving Credit Loans.
<PAGE>
1. This Notice of Conversion/Continuation is submitted for the
purpose of: (Check one and complete applicable information in accordance with
Section 4.2.)
/ / Converting a Base Rate Loan into a LIBOR Rate Loan denominated
in Dollars
(a) The aggregate outstanding principal balance of such Loan
is $_______________.
(b) The principal amount of such Loan to be converted is
$_______________.
(c) The requested effective date of the conversion of such
Loan is _______________.
(d) The requested Interest Period applicable to the converted
Loan is _______________.
/ / Converting a LIBOR Rate Loan denominated in Dollars into a
Base Rate Loan
(a) The aggregate outstanding principal balance of such Loan
is $_______________.
(b) The last day of the current Interest Period for such Loan
is _______________.
(c) The principal amount of such Loan to be converted is
$_______________.
(d) The requested effective date of the conversion of such
Loan is _______________.
/ / Continuing a LIBOR Rate Loan as a LIBOR Rate Loan
(a) Such Loan is denominated in [Insert Permitted Currency]
and the Dollar Amount of aggregate outstanding principal
balance of such Loan is $_______________.
(b) The last day of the current Interest Period for such Loan
is _______________.
(c) The principal amount of such Loan to be continued is
$_______________.
(d) The requested effective date of the continuation of such
Loan is _______________.
(e) The requested Interest Period applicable to the continued
Loan is _______________.
2. The principal amount of all Loans outstanding as of the date
hereof does not exceed the maximum amount permitted to be outstanding
pursuant to the terms of the Amended and Restated Credit Agreement.
3. All of the conditions applicable to the conversion or
continuation of the Loan requested herein as set forth in the Amended
and Restated Credit Agreement have been satisfied as of the date hereof
and will remain satisfied to the date of such Loan.
4. No Default or Event of Default exists, and none will exist
upon the conversion or continuation of the Loan requested herein.
5. All capitalized undefined terms used herein have the meanings
assigned thereto in the Amended and Restated Credit Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Conversion/Continuation this ____ day of __________, 19__.
ACC CORP.
By: __________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT E
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
OFFICER'S COMPLIANCE CERTIFICATE
The undersigned, on behalf of ACC Corp., a corporation organized
under the laws of Delaware (the "Borrower"), hereby certifies to First
Union National Bank of North Carolina, as Managing Agent and
Administrative Agent ("First Union"), and Fleet National Bank, as
Managing Agent and Documentation Agent ("Fleet"), as follows:
1. This Certificate is delivered to you pursuant to Section 7.2
of the Amended and Restated Credit Agreement dated as of _____ , 1997
(as amended, restated or otherwise modified, the "Amended and Restated
Credit Agreement"), by and among the Borrower, and certain Subsidiaries,
as Borrowers, ACC Corp., as Guarantor ("ACC"), the Lenders party
thereto, First Union National Bank of North Carolina, as Managing Agent
and Administrative Agent, and Fleet National Bank, as Managing Agent and
Documentation Agent. Capitalized terms used herein and not defined
herein shall have the meanings assigned thereto in the Amended and
Restated Credit Agreement.
2. I have reviewed the financial statements of ACC and its
Subsidiaries dated as of _______________ and for the _______________
period[s] then ended and such statements fairly present the financial
condition of ACC and its Subsidiaries, as applicable, as of the dates
indicated and the results of their operations and cash flows for the
period[s] indicated.
3. I have reviewed the terms of the Amended and Restated Credit
Agreement, the Notes and the related Loan Documents and have made, or
caused to be made under my supervision, a review in reasonable detail of
the transactions and the condition of ACC and its Subsidiaries during
the accounting period covered by the financial statements referred to in
Paragraph 2 above. Such review has not disclosed the existence during
or at the end of such accounting period of any condition or event that
constitutes a Default or an Event of Default, nor do I have any
knowledge of the existence of any such condition or event as at the date
of this Certificate [except, [if such condition or event existed or
exists, describe the nature and period of existence thereof and what
action the Borrowers have taken, are taking and propose to take with
respect thereto]].
4. Excess Cash Flow, the Applicable Margin and calculations
determining such figures are set forth on the attached Schedule 1 and
the Borrowers and their Subsidiaries are in compliance with the
covenants contained in Article IX of the Amended and Restated Credit
Agreement as shown on such Schedule 1 and the Borrowers and their
Subsidiaries are in compliance with the other covenants and restrictions
contained in Articles VIII and X of the Amended and Restated Credit
Agreement.
WITNESS the following signature as of the _____ day of _________,
199_.
ACC CORP.
By: __________________________________
Name:______________________________
Title:_____________________________
<PAGE>
Schedule 1
A. Leverage Ratio
1. Total Debt as of the immediately
preceding fiscal quarter end 1 _______
2. Operating Cash Flow for the
period of [two (2) quarters ending
on such fiscal quarter end times
two (2)] or [four (4) consecutive
fiscal quarters ending on such
fiscal quarter end]
(a) Net Income
for such period 2(a) _______
(b) Plus: The sum of the
following for such period
to the extent deducted in
the determination of such
Net Income: (i) income
and franchise taxes, (ii)
Interest Expense, and
(iii) amortization and
depreciation and other
non-cash charges 2(b) _______
(c) Less: The sum of the
following for such period:
(i) interest income, (ii)
non-cash income, (iii)
capitalized internally
generated software costs
and expenses (provided that
capitalized software costs
relating to billing systems shall
be amortized over a period not
to exceed 7 years) and (iv) (any
items of gain (or plus any
non-cash items of loss)
included in the determi-
nation of Net Income and
not realized in the ordinary
course of business 2(c) _______
/FN
Delete brackets in Schedule 1 in accordance with Article IX of the
Amended and Restated Credit Agreement.
<PAGE>
(d) Add lines 2(a) and 2(b)
and subtract line 2(c) 2(d) _______
3. Leverage Ratio: Divide line 1
by line 2(d) 3 _______
4. Maximum Ratio Permitted by
Section 9.1 as of the date
hereof 4 _______
B. Pro Forma Debt Service Coverage Ratio
1. Operating Cash Flow for the
period of [two (2) quarters ending
on such fiscal quarter end times
two (2)] or [four (4) consecutive
fiscal quarters ending on such
fiscal quarter end](from line 2(d)
of Part A) 1 _______
2. Pro Forma Debt Service: The sum of the
following calculated without
duplication on a Consolidated pro forma
basis for the immediately succeeding
period of four (4) consecutive fiscal
quarters
(a) All payments of principal
or similar amounts required
to be paid with respect to
Total Debt 2(a) _______
(b) Plus: Interest Expense
2(b) _______
(c) Add lines 2(a) and 2(b) 2(c) _______
3. Pro Forma Debt Service Coverage Ratio:
Divide line 1 by line 2(c) 3 _______
4. Minimum Permitted Ratio per
Section 9.2 1.50 to
1.00.
/FN
Delete brackets in Schedule 1 in accordance with Article IX of the
Amended and Restated Credit Agreement.
<PAGE>
C. Fixed Charge Coverage Ratio
1. Operating Cash Flow for the
period of [two (2) quarters ending
on such fiscal quarter end times
two (2)] or [four (4) consecutive
fiscal quarters ending on such
fiscal quarter end] (from line 2(d)
of Part A) 1 _______
2. Fixed Charges for such period.
(a) All principal payments or
similar amounts required to
be paid respect to Total
Debt during such period 2(a) _______
(b) Plus: Interest Expense
required to be paid 2(b) _______
during such period
(c) Plus: Total cash dividends
or distributions
paid or payable by ACC during
such period 2(c) _______
(d) Plus: All payments in
respect of any retirement,
redemption or other acqui-
sition of the capital stock
of ACC and its Subsidiaries 2(d) _______
consummated during such period
(e) Plus: All Capital Expenditures
during such period 2(e) _______
(f) Plus: All income and franchise
taxes paid or payable in cash
during such period 2(f) _______
(g) Add lines 2(a), 2(b), 2(c),
2(d), 2(e) and 2(f) 2(g) _______
/FN
Delete brackets in Schedule 1 in accordance with Article IX of the
Amended and Restated Credit Agreement.
<PAGE>
3. Fixed Charge Coverage Ratio:
Divide line 1 by line 2(g) 3 _______
6. Maximum Permitted Ratio per
Section 9.3 1.15 to
1.00
D. Net Worth
1. Fifty percent (50%) of Consol-
idated Net Income of ACC and its
Subsidiaries
(a) Less total debits with respect to
deferred interest payments
recorded for the Fleet Venture
Investment for such period
(not to exceed $1,200,000)
as of each fiscal quarter
end occurring after the
Closing Date 1 _______
2. One hundred percent (100%) of
the aggregate net cash proceeds
of any offering of capital stock of
ACC or any of its Wholly-Owned Subsidiaries
received thereby after the Closing
Date 2 _______
3. Minimum Net Worth: Add
$95,000,000, line 1, and
line 2 3 _______
4. Actual Net Worth 4 _______
E. Excess Cash Flow
For any Fiscal Year of ACC and its
Subsidiaries, on a Consolidated basis
1. Operating Cash Flow for such period 1 __________
(a) Plus Net Working Capital
(if negative), ___________
(b) Less the sum of:
(i) Fixed Charges ___________
(ii) Net Working Capital
(if positive) ____________
(iii) Any payments to the Managing
Agents pursuant to the
Letter Agreement ____________
Total ____________
G. Applicable Margin
1. Leverage Ratio (as calculated
in Part A above) 1 _______
2. Applicable Margin per Section
4.1 2 _______
<PAGE>
EXHIBIT F
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
NOTICE OF ACCOUNT DESIGNATION
Dated _________
First Union National Bank
of North Carolina, as Managing Agent
and Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attn: Syndication Agency Services
Ladies and Gentlemen:
This Notice of Account Designation is delivered to you by ACC Corp.
on behalf of the Borrowers under Section 5.2(f)(i) of the Amended and
Restated Credit Agreement dated as of _______ ___, 1997 (as amended,
restated or otherwise modified, the "Amended and Restated Credit
Agreement") by and among ACC Corp. and certain Subsidiaries, as
Borrowers, ACC Corp., as Guarantor, the Lenders party thereto, First
Union National Bank of North Carolina, as Managing Agent and
Administrative Agent, and Fleet National Bank, as Managing Agent and
Documentation Agent.
The Agent is hereby authorized to disburse Loan proceeds to the
following Borrowers into the corresponding account(s):
Domestic Borrowers [Insert name of bank/
ABA Routing Number/
and Account Number]
Canadian Borrowers [Insert name of bank/
ABA Routing Number/
and Account Number]
U.K. Borrowers [Insert name of bank/
ABA Routing Number/
and Account Number]
IN WITNESS WHEREOF, the undersigned has executed this Notice of
Account Designation this _____ day of _______, 19__.
[CORPORATE SEAL] ACC CORP.
By: ________________________________
Name: _________________________
Title: _________________________
<PAGE>
EXHIBIT G
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
ASSIGNMENT AND ACCEPTANCE
Dated _________
Reference is made to the Amended and Restated Credit Agreement
dated as of _________ ___, 1997 (as further amended, restated or
otherwise modified, the "Amended and Restated Credit Agreement"), by and
among ACC Corp. and certain Subsidiaries, as Borrowers, ACC Corp., as
Guarantor, the Lenders party thereto, First Union National Bank of North
Carolina, as Managing Agent and Administrative Agent, and Fleet National
Bank, as Managing Agent and Documentation Agent. Capitalized terms
which are defined in the Amended and Restated Credit Agreement and which
are used herein without definition shall have the same meanings herein
as in the Amended and Restated Credit Agreement.
______________________________________ (the "Assignor") and
____________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, as of the
Effective Date (as defined below), a ____% interest (the "Assigned
Interest") in and to all of the Assignor's interests, rights and
obligations under the Amended and Restated Credit Agreement, and the
Assignor thereby retains ____% of its interest therein (the "Retained
Interest"). This Assignment and Acceptance is entered pursuant to, and
authorized by, Section 14.10 of the Amended and Restated Credit
Agreement.
2. The Assignor (a) represents that, as of the date hereof, (i)
its Commitment Percentage (without giving effect to assignments thereof
which have not yet become effective) under the Amended and Restated
Credit Agreement, (ii) the outstanding balance of its Revolving Credit
Loans (unreduced by any assignments thereof which have not yet become
effective) under the Amended and Restated Credit Agreement, (iii) the
outstanding balance of its Swingline Loans (unreduced by any assignments
thereof which have not yet become effective), and (iv) the outstanding
balance of its Commitment Percentage of the L/C Obligations (unreduced
by any assignments thereof which have not yet become effective) are each
set forth in Section 2 of Schedule I hereto; (b) makes no representation
or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with
the Amended and Restated Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Amended and Restated Credit Agreement or any
other instrument or document furnished pursuant thereto, other than that
the Assignor is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any
adverse claim; (c) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrowers
or the performance or observance by the Borrowers of any of their
obligations under the Amended and Restated Credit Agreement or any other
Loan Document; and (d) attaches the Revolving Credit Note [and/or any
Swingline Note, as applicable] delivered to it under the Amended and
Restated Credit Agreement and requests that the Borrowers exchange such
[Note][Notes] for new Notes payable to each of the Assignor and the
Assignee as follows:
Revolving Credit Note
Payable to the Order of: Principal Amount of Note:
______________________ $_________
______________________ $_________
Swingline Note
Payable to the Order of: Principal Amount of Note:
______________________ $_________
3. The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms
that it has received a copy of the Amended and Restated Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 7.1 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor or
any other Lender or the Administrative Agent and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the
Amended and Restated Credit Agreement; (d) confirms that it is an
Eligible Assignee; (e) appoints and authorizes the Administrative Agent
to take such action as agent on its behalf and to exercise such powers
under the Amended and Restated Credit Agreement and the other Loan
Documents as are delegated to the agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (f) agrees that
it will perform in accordance with their terms all the obligations which
by the terms of the Amended and Restated Credit Agreement and the other
Loan Documents are required to be performed by it as a Lender; and (g)
agrees that it will keep confidential all non-public information with
respect to the Borrowers obtained pursuant to the Loan Documents in
accordance with Section 14.10(g) of the Amended and Restated Credit
Agreement.
4. The effective date for this Assignment and Acceptance shall be
as set forth in Section 1 of Schedule I hereto (the "Effective Date").
Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for consent thereby and by the
Borrowers and acceptance and recording in the Register.
5. Upon such consents, acceptance and recording, from and after
the Effective Date, (i) the Assignee shall be a party to the Amended and
Restated Credit Agreement and the other Loan Documents to which Lenders
are parties and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender under each such
agreement, and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Amended and Restated Credit Agreement and the
other Loan Documents.
6. Upon such consents, acceptance and recording, from and after
the Effective Date, the Administrative Agent shall make all payments in
respect of the interest assigned hereby (including payments of
principal, interest, fees and other amounts) to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments
for periods prior to the Effective Date or with respect to the making of
this assignment directly between themselves.
<PAGE>
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A
CONTRACT UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NORTH CAROLINA, WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES.
ASSIGNOR
_________________________________
Commitment Percentage ____%
By:______________________________
Title:___________________________
ASSIGNEE
_________________________________
Commitment Percentage ____%
By:______________________________
Title:___________________________
Acknowledged and Consented to:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Managing Agent and Administrative Agent
By:____________________________________
Title:______________________________
[ACC CORP., on behalf of itself and the other Borrowers]
By:____________________________________
Title:______________________________
<PAGE>
Schedule I
to
Assignment and Acceptance
1. Effective Date _________________, ____
2. Assignor's Interest
Prior to Assignment
(a) Commitment Percentage
of Assignor ______%
(b) Outstanding balance
of Assignor's
Revolving Credit Loans $____________
(c) Outstanding balance of
Assignor's Swingline
Loans $____________
(d) Outstanding balance of
Assignor's Commitment
Percentage of the L/C
Obligations $____________
3. Assigned Interest
(from Section 1) ______%
4. Assignee's Extensions of Credit
After Effective Date
(a) Outstanding balance of
Assignee's Revolving
Credit Loans
(line 2(b) times line 3) $____________
(b) Outstanding balance of Assignee's
Commitment Percentage of L/C
Obligations (line 2(c) times
line 3) $____________
5. Retained Interest of Assignor after
Effective Date
(a) Retained Interest (from Section 1) ______%
(b) Outstanding balance of Assignor's
Revolving Credit Loans
(line 2(b) times line 5(a)) $_____________
(c) Outstanding balance of Assignor's
Commitment Percentage of L/C
Obligations (line 2(c) times
line 5(a)) $_____________
6. Payment Amount $_____________
7. Payment Instructions
(a) If payable to Assignor,
to the account of Assignor to:
_________________________________
_________________________________
_________________________________
Routing No.:_____________________
Account No.:_____________________
Attn:____________________________
Reference:_______________________
(b) If payable to Assignee, to the account
of Assignee to:
_________________________________
_________________________________
_________________________________
Routing No.:_____________________
Account No.:_____________________
Attn:____________________________
Reference:_______________________
<PAGE>
EXHIBIT L
to
Amended and Restated Credit Agreement
dated as of January 14, 1997
by and among
ACC Corp. and certain Subsidiaries, as Borrowers,
ACC Corp., as Guarantor,
the Lenders party thereto,
First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent,
and
Fleet National Bank,
as Managing Agent and Documentation Agent
FORM OF AMENDED AND RESTATED JOINDER AGREEMENT
THIS JOINDER AGREEMENT, dated as of the day of _________, 1997
(the "Agreement), to the Amended and Restated Credit Agreement referred
to below is entered into by and among ACC Corp. and certain
Subsidiaries, as Borrowers, ACC Corp., as Guarantor, the Lenders party
thereto, First Union National Bank of North Carolina, as Managing Agent
and Administrative Agent, and Fleet National Bank, as Managing Agent and
Documentation Agent.
Statement of Purpose
ACC Corp., ACC Long Distance Corp., ACC National Telecom Corp., ACC
Long Distance of Massachusetts Corp., ACC Global Corp., ACC Radio Corp.,
ACC National Long Distance Corp., ACC Long Distance U.K., Ltd. and ACC
TelEnterprises Ltd. are party to an Amended and Restated Credit
Agreement of even date (as amended, restated or otherwise modified, the
"Amended and Restated Credit Agreement"), among such Borrowers, the
Lenders party thereto and First Union National Bank of North Carolina,
as Managing Agent and Administrative Agent, and Fleet National Bank, as
Managing Agent and Documentation Agent.
[INSERT NAME OF ADDITIONAL BORROWER] (the "Company") has become a
direct or indirect Material Subsidiary of ACC pursuant to [DESCRIBE
ACQUISITION OR OTHER RELEVANT DOCUMENTS]. In connection with such
transaction, the Company is required to execute, among other documents,
a joinder agreement in order to become a Borrower under the Amended and
Restated Credit Agreement.
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the parties hereto hereby agree as follows:
1.01 Joinder of Company.
(a) Joinder. Pursuant to Section 8.12 of the Amended and Restated
Credit Agreement, the Company hereby agrees that it is a [____________]
Borrower under the Amended and Restated Credit Agreement as if a
signatory thereof on the Closing Date, and the Company shall comply with
and be subject to all of the terms, conditions, covenants, agreements
and obligations set forth therein. [IF THE COMPANY IS A CANADIAN
SUBSIDIARY, LANGUAGE SATISFACTORY TO THE MANAGING AGENTS SHALL BE
INSERTED PROVIDING FOR JOINT AND SEVERAL LIABILITY AMONG ALL OF THE
CANADIAN BORROWERS FOR THE OBLIGATIONS OF THE CANADIAN BORROWERS, TO THE
FULLEST EXTENT PERMITTED UNDER CANADIAN LAW.] The Company hereby agrees
that each reference to any [_____________ Borrower] or [ ___________
Borrowers] or to any "Borrower" or the "Borrowers" in the Amended and
Restated Credit Agreement shall include the Company. The Company
acknowledges that it has received a copy of the Amended and Restated
Credit Agreement and that it has read and understands the terms thereof.
(b) Schedules. Attached hereto are updated copies of each
Schedule referenced in the Amended and Restated Credit Agreement revised
to include all information required to be provided therein with respect
to the Company.
(c) Sublimit. Attached is a revised Schedule 1.2 to the Amended
and Restated Credit Agreement which includes the Sublimit of the
Company.
2.01 Effectiveness. This Agreement shall become effective upon
receipt by the Administrative Agent of (i) an originally executed
corresponding Note for each Lender jointly executed by each applicable
Borrower and the Company in exchange for the corresponding Notes issued
on the Closing Date or the date of the most recent Joinder Agreement, as
applicable, (ii) an originally executed counterpart hereof and (iii)
supplements to the applicable Security Documents and each other
agreement or document requested by the Administrative Agent in
accordance with Section 8.12.
4.01 General Provisions.
(a) Representations and Warranties. Each Borrower hereby confirms
that each representation and warranty made by it under the Loan
Documents is true and correct in all material respects as of the date
hereof and that no Default or Event of Default has occurred and is
continuing under the Amended and Restated Credit Agreement, except for
any deviations from such representations and warranties expressly
permitted by the Amended and Restated Credit Agreement and except for
any waivers of such representations and warranties granted by the
Required Lenders in writing. Each such Borrower hereby represents and
warrants that as of the date hereof there are no claims or offsets
against or defenses or counterclaims to their respective obligations
under the Amended and Restated Credit Agreement or any other Loan
Document.
(b) Limited Effect. Except as supplemented hereby, the Amended
and Restated Credit Agreement and each other Loan Document shall
continue to be, and shall remain, in full force and effect. This
Agreement shall not be deemed (i) to be a waiver of, or consent to, or
a modification or amendment of, any other term or condition of the
Amended and Restated Credit Agreement or (ii) to prejudice any right or
rights which the Agents or Lenders may now have or may have in the
future under or in connection with the Amended and Restated Credit
Agreement or the Loan Documents or any of the instruments or agreements
referred to therein, as the same may be further amended, restated or
otherwise modified.
(c) Costs and Expenses. The Borrower who is the parent of the
Company hereby agrees to pay or reimburse the Agent for all of its
reasonable and customary out-of-pocket costs and expenses incurred in
connection with the preparation, negotiation and execution of this
Agreement including, without limitation, the reasonable fees and
disbursements of counsel.
(d) Counterparts. This Agreement may be executed by one or more
of the parties hereto in any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and
the same instrument.
(e) Definitions. All capitalized terms used and not defined
herein shall have the meanings given thereto in the Amended and Restated
Credit Agreement.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW
PRINCIPLES THEREOF.
/FN
Insert Domestic, Canadian or U.K., as applicable.
<PAGE>
IN WITNESS WHEREOF the undersigned hereby causes this Agreement to
be executed and delivered as of the date first above written.
ACC LONG DISTANCE CORP.
[CORPORATE SEAL]
By: ____________________________
Name: __________________________
Title:__________________________
ACC NATIONAL TELECOM CORP.
[CORPORATE SEAL]
By: ____________________________
Name: __________________________
Title:__________________________
ACC LONG DISTANCE OF MASSACHUSETTS
CORP.
[CORPORATE SEAL]
By: ____________________________
Name: __________________________
Title:__________________________
ACC RADIO CORP.
[CORPORATE SEAL]
By: ____________________________
Name: __________________________
Title:__________________________
ACC NATIONAL LONG DISTANCE CORP.
[CORPORATE SEAL]
By: ____________________________
Name: __________________________
Title:__________________________
ACC LONG DISTANCE U.K., LTD
[CORPORATE SEAL]
By: ____________________________
Name: __________________________
Title:__________________________
ACC TELENTERPRISES LTD.
[CORPORATE SEAL]
By: ____________________________
Name: __________________________
Title:__________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Lender, Managing Agent
and Administrative Agent
By: ____________________________
Name: __________________________
Title:__________________________
FLEET NATIONAL BANK,
as Lender, Managing Agent and
Documentation Agent
By: ____________________________
Name: __________________________
Title:__________________________
<PAGE>
SCHEDULE RESPONSIBLE DEPT.
Schedule 1.1: Lenders and Commitments
Schedule 1.2: Sublimits
Schedule 1.3: Canadian Security Documents
Schedule 6.1(a): Jurisdictions of Legal/Regulatory
Organization and Qualification
Schedule 6.1(b): Subsidiaries and
Capitalization Legal/Regulatory
Schedule 6.1(d): Required Governmental
Approvals Legal/Regulatory
Schedule 6.1(h): Employee Benefit Plan Laurie Wiest-Corp.
Schedule 6.1(1): Material Contracts Legal/Regulatory
Jack Baron
Larry Dubow
Pam Chesonis
Sarah
Schedule 6.1(m): Labor and Collective
Bargaining Agreements NONE
Schedule 6.1(r): Real Property Sarah
Schedule 6.1(t): Debt and Contingent
Obligations Finance
Steve Mowers
Deb Federation
Schedule 6.1(u): Litigation Legal/Regulatory
Schedule 6.1(v): Communications Licenses
and Regulatory Approvals Legal/Regulatory
Schedule 10.3: Existing Liens Bob Roth/NHDD
Schedule 10.4: Existing Loans,
Advances and Investments Finance
Steve Mowers
Deb Federation
<PAGE>
Schedule 1.1: Lenders and Commitments
Commitment
Lender Commitment Percentage
First Union National Bank $40,000,000 40%
of North Carolina
One First Union Center, TW-10
301 S. College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency
Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 383-0288
Fleet National Bank $25,000,000 25%
75 State Street MABOF10C
Boston, Massachusetts 02109
Attention:
Telephone No.: (617) 346-3766
Telecopy No.: (617) 346-3777
Bank of Montreal $20,000,000 20%
430 Park Avenue
15th Floor
New York, New York 10022
Attention: Media/Communications
Telephone No.: (___) _____-_____
Telecopy No.: (___) _____-_____
State Street Bank and Trust $15,000,000 15%
Company
225 Franklin Street
Boston, Massachusetts 02110-2804
Attention:
Telephone No.: (___) _____-_____
Telecopy No.: (___) _____-_____
<PAGE>
Schedule 1.2: Sublimits
Borrower Sublimit*
ACC Canada and any Additional $30,000,000
Borrower who is a Canadian
Borrower
ACC U.K. and any Additional $20,000,000
Borrower which is a U.K.
Borrower
ACC LEC $15,000,000
ACC and any Additional $100,000,000 less
Borrower who is a Domestic outstandings to all
Borrower other Borrowers
* The Sublimits may be revised upon the prior written consent of the
Required Lenders.
<PAGE>
Schedule 1.3: Canadian Security Documents
(a) Quebec Security Documents
(i) Hypothec by Canadian Borrower
(ii) Landlord Agreement re: Montreal switch site
(iii) Articles of Amalgamation of Canadian Borrower certified
by appropriate Ontario governmental department
(b) Ontario Security Documents
(i) Ontario Security Agreement by Canadian Borrower
(ii) Notice of Security Interest in Fixtures (Toronto Street)
(iii) Leasehold Mortgage (Dundas Street)
(iv) Landlord Agreement (Dundas Street)
(v) Acknowledgement of Standard Charge Terms (Dundas Street)
(vi) Letter of Credit (Dundas Street)
(vii) Document General (Form 4) with an original notarial copy
of the Articles of Amalgamation of the ACC Canada
attached thereto (re: Dundas Street)
(viii) Leasehold Mortgage (Toronto Street)
(ix) Acknowledgement of Standard Charge Terms (Toronto Street)
(x) Landlord Agreement (Toronto Street)
(xi) Letter of Credit (Toronto Street)
(xii) Document General (Form 4) with an original notarial copy
of the Articles of Amalgamation of ACC Canada attached
thereto (re: Toronto Street)
(xiii) Confirmation and Consent by ACC Canada to Share pledge by
ACC
(xiv) Resolutions of directors of ACC Canada authorizing Pledge
by ACC
(c) British Columbia Security Documents
(i) British Columbia Security Agreement by Canadian Borrower
(ii) Notice of Security Interest in Fixtures
(iii) Unregistered Leasehold Mortgage (in registrable form)
(re: switch site)
(iv) Letter of Canadian Borrower authorizing insertion of
information in registrable mortgage
(v) Equitable Mortgage
(vi) Landlord Agreement
<PAGE>
Schedule 6.1(a): Jurisdictions of Organization and Qualification
<TABLE>
<S> <S> <S> <S> <S>
Trade Names And
Names of U.S. State and Date of Foreign Expiration Date,
Corporations Incorporation Qualifications if any FEIN
ACC Corp. Delaware 4/9/87 NY 12/1/87 None 16-1175232
ACC Cellular Corp. Delaware 1/15/92 None None 16-1410583
ACC Credit Corp. Delaware 1/10/94 NY 1/12/94 None 16-1477277
ACC Global Corp. Delaware 11/10/92 NY 4/19/93 None 16-1367284
ACC Local Fiber Corp. New York 6/9/89 NY 6/9/89 NY: ACC 16-1355362
ACC Long Distance
Corp. Delaware 10/25/93 None None ----------
ACC Long Distance
Corp. New York 2/4/87 MA 2/4/87 NY: ACC Long 16-1291418
Distance
ACC Long Distance of Delaware 3/24/92 CT 4/23/92 CT: ACC Long 16-1414774
Connecticut Corp. Distance
ACC Long Distance of Delaware 10/20/93 GA 11/5/93 None 16-1453420
Georgia Corp.
ACC Long Distance of Delaware 11/4/92 IL 1/31/92 IL: ACC Long 16-1410587
Illinois Corp. Distance
ACC Long Distance of Delaware 12/9/93 ME 1/4/94 ME: ACC Long 16-1456983
Maine Corp. Distance
ACC Long Distance of Delaware 1/14/92 MA 2/10/92 MA: ACC Long 16-1410586
Massachusetts Corp. Distance
ACC Long Distance of New Hampshire None NH: ACC Long 16-1454296
New Hampshire Corp. 12/16/93 Distance
ACC Long Distance of Delaware 1/29/92 OH 2/25/92 OH: ACC Long 16-1410579
Ohio Corp. Distance
ACC Long Distance of Delaware 3/24/92 PA 4/23/92 PA: ACC Long 16-1414777
Pennsylvania Corp. Distance
ACC Long Distance of Delaware 3/11/94 RI 10/6/94 RI: ACC Long 16-1459351
Rhode Island Corp. Distance
ACC Long Distance of Delaware 12/9/93 VT 1/27/94 VT: ACC Long 16-1456948
Vermont Corp. Distance
ACC Long Distance Delaware 2/25/94 NY 4/19/94 NY: ACC 16-1454370
Sales Corp. Marketing Media
ACC National Long Delaware 10/25/93 See Attached See Attached 16-1456981
Distance Corp.
ACC National Telecom Delaware 10/6/93 NY 10/8/93 None 16-1455828
Corp.
ACC Network Corp. New York 8/23/79 NY 8/23/79 None 16-1133852
ACC Radio Corp. New York 2/4/57 MA 9/30/93 None 16-0880331
NH 3/3/94
PA 9/8/87
ACC Service Corp. Delaware 12/16/92 NY 1/31/94 None 16-1456980
Cel Tel Corp. Delaware 10/24/90 None None ----------
Danbury Cellular Connecticut 2/14/85 NY 4/19/91 None 06-1167340
Telephone Co.
Teleprocessing New York 12/4/81 None None 16-1227839
Consultants, Inc.
United Bluegrass Delaware 10/24/90 None None ----------
Cellular Corp.
</TABLE>
<PAGE>
Schedule 6.1(a): Jurisdictions of Organization and Qualification (Continued)
<TABLE>
<S> <S> <S> <S>
Names of Non-U.S. Foreign
Corporations Place and Date of Qualifications Trade Names
Incorporation
ACC TelEnterprises Ltd. Ontario, CAN 1/1/97 Alberta, British British Columbia: ACC,
Columbia, Manitoba, ACC Long Distance, One
New Brunswick, Plus
Nova Scotia, Prince Ontario: ACC, ACC Long
Edward Island, Distance, One Plus, One
Quebec Plus Long Distance
Telecommunications
Quebec: ACC, Interurbains ACC,
Un Plus, Telecommunications
Interurbains Un Plus
ACC Long Distance France 11/10/94 None None
France, S.A.R.L.
ACC Long Distance England 12/11/91 None None
UK Ltd.
</TABLE>
<PAGE>
Schedule 6.1(a): Jurisdictions of Organization and Qualification
(Continued)
ACC NATIONAL LONG DISTANCE CORP.
Date of Foreign Trade Name and Expiration
State Qualification Date, if any
Alabama 12/8/94 N/A
Arizona 4/3/95 ACC Long Distance
Expires 3/31/00
Arkansas 11/8/94 ACC Long Distance
California 10/7/94 ACC Long Distance
Expires 10/12/99
Colorado 10/6/94 ACC Long Distance
Delaware N/A ACC Long Distance
District of Columbia 10/5/94 N/A
Florida 10/6/94 ACC Long Distance
Expires 12/31/99
Idaho 10/12/94 ACC Long Distance
Indiana 10/17/94 ACC Long Distance
Iowa 11/4/94 ACC Long Distance
Kansas 4/3/95 N/A
Kentucky 10/5/94 ACC Long Distance
Louisiana 10/11/94 ACC Long Distance
Maryland 10/5/94 ACC Long Distance
Expires 10/5/99
Michigan 10/6/94 ACC Long Distance
Expires 12/31/99
Minnesota 11/4/94 ACC Long Distance
Expires 11/4/04
Mississippi 10/5/94 N/A
Missouri 10/5/94 ACC Long Distance
Montana 10/7/94 ACC Long Distance
Expires 10/31/99
Nebraska 10/12/94 ACC Long Distance
Expires 10/12/04
Nevada 10/5/94 ACC Long Distance
New Jersey 12/6/94 ACC Long Distance
Expires 12/9/99
New Mexico 10/11/94 N/A
North Carolina 10/5/94 N/A
North Dakota 10/12/94 ACC Long Distance
Expires 10/12/99
Oklahoma 10/5/94 ACC Long Distance
Oregon 10/5/94 ACC Long Distance
South Carolina 11/7/94 ACC Long Distance
South Dakota 10/11/94 ACC Long Distance
Tennessee 10/5/94 ACC Long Distance
Expires 10/5/99
Texas 10/7/94 ACC Long Distance
Utah 10/5/94 ACC Long Distance
Expires 10/5/97
Virginia 10/5/94 N/A
Washington 10/6/94 ACC National Long
Distance Corp.
West Virginia 10/28/94 ACC Long Distance
Wisconsin 10/5/94 N/A
Wyoming 10/5/94 N/A
<PAGE>
Schedule 6.1(b): Subsidiaries and Capitalization
<TABLE>
<S> <S> <S> <S> <S> <S>
Shares
# Shares Par Issued &
Type Authorized Value Outstanding Shareholders
*ACC Corp. Common 50,000,000 0.015 16,594,477 Publicly Traded
ACC Service Corp. Common 3.000 0.000 1 ACC Corp.
*ACC Long Distance Common 200 0.000 200 ACC Corp.
Corp.
ACC Long Distance Common 3,000 0.000 1 ACC National Long
Sales Corp. Distance Corp.
*ACC National Long Common 3,000 0.000 5 ACC Corp.
Distance Corp.
ACC Long Distance of
Connecticut Corp. Common 3,000 0.00 1 ACC National Long
Distance Corp.
Georgia Corp. Common 3,000 0.000 1 ACC National Long
Distance Corp.
Illinois Corp. Common 3,000 0.00 1 ACC Corp.
Maine Corp. Common 3,000 0.00 1 ACC National Long Distance
Corp.
Maryland Corp. Common 3,000 0.00 1 ACC National Long Distance
Corp.
*Massachusetts
Corp. Common 3,000 0.00 1 ACC National Long Distance
Corp.
New Hampshire
Corp. Common 3,000 0.00 1 ACC National Long Distance
Corp.
Ohio Corp. Common 3,000 0.00 1 ACC Corp.
Pennsylvania Corp. Common 3,000 0.00 1 ACC Corp.
Rhode Island Corp. Common 3,000 0.00 1 ACC National Long Distance
Corp.
Vermont Corp. Common 3,000 0.00 1 ACC National Long Distance
Corp.
ACC Network Corp. Common 200 0.00 200 ACC Corp.
ACC Local Fiber
Corp. Common 200 0.00 200 ACC Corp.
*ACC Global Corp. Common 3,000 0.00 1 ACC Corp.
*ACC Radio Corp. Common 200 0.00 200 ACC Corp.
Cel Tel Corp. Common 3,000 0.00 1 ACC Corp.
United Bluegrass Common 3,000 0.00 1 Cel Tel Corp.
Cellular
Danbury Cellular Common 5,000 0.00 100 ACC Corp.
Telephone Corp.
*ACC National Common 3,000 0.00 1 ACC Corp.
Telecom Corp.
ACC Credit Corp. Common 3,000 0.00 1 ACC Corp.
FOREIGN SUBSIDIARIES:
*ACC TelEnterprises
Ltd. Common Unlimited 0.00 100 ACC Corp.
*ACC Long Distance Ordinary 9,001,000 1.000(pound) 9,000,002 ACC Corp.
UK Ltd.
ACC Long Distance Common 500 100.00 500 ACC Corp.
France, S.A.R.L.
</TABLE>
* Denotes a material subsidiary
<PAGE.
Schedule 6.1(b): Subsidiaries and Capitalization (Continued)
Options
ACC Corp.
See attached lists for Incentive Stock Options,
Non-Qualified Stock Options and Director's/Non-Employee Plan
Non-Qualified Stock Options.
ACC Long Distance Corp.
None
ACC National Telecom Corp.
None
ACC Global Corp.
None
ACC Long Distance of Massachusetts Corp.
None
ACC Radio Corp.
None
ACC TelEnterprises Ltd.
None
ACC Long Distance UK Ltd.
None
<PAGE>
Section 6.1(b): Subsidiaries and Capitalization (Continued)
Warrants
ACC Corp.
Expiration Date Recipient No. of Shares Price Per Share
10/31/99 Peter H. Meyer 11,250* 12.50
* -Warrant for 7,500 shares of ACC Corp. Common Stock was granted
before the August 8, 1996 3 for 2 stock split.
ACC Long Distance Corp.
None
ACC National Telecom Corp.
None
ACC Global Corp.
None
ACC Long Distance of Massachusetts Corp.
None
ACC Radio Corp.
None
ACC TelEnterprises Ltd.
None
ACC Long Distance UK Ltd.
None
<PAGE>
ACC CORP.
INCENTIVE STOCK OPTION PLAN
NOVEMBER 30, 1996
(listing of currently assigned options, exercise price and expiration dates)
<PAGE>
ACC CORP. & SUBSIDIARIES
NON-QUALIFIED STOCK OPTIONS
NOVEMBER 30, 1996
(listing of currently assigned options, exercise price and expiration dates)
<PAGE>
ACC CORP.
DIRECTOR'S/NON-EMPLOYEE PLAN
NON-QUALIFIED STOCK OPTIONS
NOVEMBER 30, 1996
Current Expiration
Assigned Price Date
Bennett, Hugh 7,500 15.3333 01/20/06
7,500 28.8333 06/15/06
Estey, Willard 7,500 15.3333 01/20/06
7,500 28.8333 06/15/06
Tessoni, Daniel 7,500 15.3333 01/20/06
7,500 28.8333 06/15/06
VanDegna, Robert 7,500 15.3333 01/20/06
7,500 28.8333 06/15/06
TOTAL 60,000
<PAGE>
Schedule 6.1(d): Required Governmental Approvals
Public Utility Commission approval is required for the following
Borrowers in the following states:
ACC National Long Distance Corp.
Arkansas
Delaware
Florida*
Louisiana
Maine
Nebraska
New York
North Carolina
Tennessee
Washington**
West Virginia
* In Florida, PSC approval is not required, however, a notification
letter was sent to the PSC on 12/9/96.
** ACC has filed an application with the Washington Utilities and
Transportation Commission to be classified as a competitive
telecommunications carrier, whereby ACC will be relieved of many
regulatory requirements, including requiring Commission approval
for transactions relating to securities and affiliated interests.
ACC Corp. ACC Long Distance of Massachusetts
Corp.
None None
ACC Long Distance Corp. ACC Radio Corp.
None None
ACC National Telecom Corp. ACC TelEnterprises Ltd.
None None
ACC Global Corp. ACC Long Distance UK Ltd.
None None
<PAGE>
Schedule 6.1(h): Employee Benefit Plans
The Company offers the following benefits to employees who work more
than 30 hours per week:
U.S.
Health Insurance
- Blue Cross & Blue Shield (Comprehensive)
- Blue Choice (Select)
- Preferred Care (Community)
- Independent Health
- Community Blue
- Capital District Physician's Health
- PHP (Prepaid Health Plan) [available 1/1/97]
Dental Insurance
- Self-insured (administered through Blue Cross & Blue
Shield/Smile Saver)
New York Statutory State Disability
- Covers all in and out of State (U.S.) employees (Paul
Revere)
Worker's Compensation
Long Term Disability Insurance
- Paul Revere
Optional Long Term Disability Insurance
Life Insurance
- First UNUM
Optional Life and Dependent Life Program
Accidental Death & Dismemberment
- First UNUM
ACC Long Distance Corp. - long distance credit
- $25.00 per month credit for personal long distance usage
Tuition Reimbursement
- Prorated reimbursement for tuition
Employee Stock Purchase Plan
- Purchase at 15% discount; up to 15% of salary may be
deferred
Employee Savings and Retirement Plan - 401(k)
- Six month waiting period; up to 16% of salary may be
deferred
Employee Assistance Program
- Catholic Family Center & Affiliates
Dependent Care Program - FSA (through Blue Cross and Blue
Shield)
- Medical/Dental FSA
Wage Severance Plan
Pre-tax Premium Plan
The following benefits are available only to certain key employees of
the Company:
Employment Continuation Incentive Agreements
Annual Incentive Plan
Stock Option Plan
Officer Medical Reimbursement
Auto Allowance
Cellular Phone Allowance
Canada
The Company offers the following benefits to employees who are full-
time permanent employees and have completed at least three months of
continuous employment, and are a full-time resident of Canada and
under 70 years of age:
Supplemental Health Insurance Benefit for Employees and
Dependents
- National Life of Canada
Dental Expense Benefit for Employees and Dependents
- National Life of Canada
Weekly Indemnity Benefit for Employees
- National Life of Canada
Long Term Disability Benefit for Employees
- National Life of Canada
Life Insurance Benefit for Employees
- National Life of Canada
Life Insurance Benefit for Spouse
- National Life of Canada
Accidental Death & Dismemberment Insurance for Employees
- National Life of Canada
Group Registered Retirement Savings Plan ("RRSP")
ACC long distance credit
- $30.00 per month credit for personal long distance usage
Internet Software and On-Line Benefit
Tuition Reimbursement
- Prorated reimbursement for tuition
United Kingdom
Permanent Health Insurance
Group Life Assurance
- Zurich Life Assurance Company Ltd.
Group Salary Continuance Scheme
- Zurich Life Assurance Company Ltd.
Phone Benefit - 20 pounds per month free long distance calls with
ACC
The Company provides the following benefits to key employees:
Cellular allowances
Auto allowance
Group Life Insurance
Private Health Insurance
Share Save Scheme - employee stock purchase plan
Stock options also awarded
<PAGE>
Schedule 6.1(l): Material Contracts
U.S.
- Severance Agreement between ACC Corp. and Richard T. Aab.
- Agreement for Service dated January 30, 1996 between ACC
National Telecom Corp. and Ripple Communications Inc.
- Agreement for Service dated August 26, 1996 between ACC
National Telecom Corp. and Eagle Communications Inc.
- Columbia Capital: 1% fee for consulting services
- General Agreement dated August 30, 1994 between ACC New York
Telecom Corp. and American Telephone and Telegraph Company.
- Addendum Number 1 to General Agreement dated August 30, 1994
between ACC New York Telecom Corp. and American Telephone and
Telegraph Company.
- Addendum Number Two to the General Agreement between ACC
National Telecom and Lucent Technologies Inc.
- Leased property (refer to Schedule 6.1(r)).
(listing of contracts with colleges and universitites)
<PAGE>
Schedule 6.1(l): Material Contracts (Continued)
CANADA
- - Agreement for Operations and Support Services between ACC
TelEnterprises Ltd. and E.D.S. Services of Canada Ltd. dated
June 24, 1996.
- - License between ACC TelEnterprises Ltd. and E.D.S. Services of
Canada Ltd. dated June 24, 1996.
- - Commercial Sales Agreement between ACC TelEnterprises Ltd. and
Noranda Inc. dated May 1, 1996.
- - Leased Property (refer to Schedule 6.1(r)).
(listing of contracts with colleges and universitites)
<PAGE>
Schedule 6.1(l): Material Contracts (Continued)
UNITED KINGDOM
- -Revised Standard Interconnect Agreement between ACC Long Distance UK
Limited and British Telecommunications plc dated September 27,
1996.
Includes:
Transition Agreement between BT and ACC UK dated September 27,
1996.
Side letter regarding billing from BT to ACC UK dated
September 27, 1996.
Side letter regarding pricing from BT to ACC UK dated
September 27, 1996.
Side letter regarding matters to be reviewed from BT to ACC UK
dated September 27, 1996.
Side letter regarding the transition agreement from BT to ACC
UK dated November 29, 1996.
- -License granted by the Secretary of State for Trade and Industry to
ACC Long Distance UK Limited under Section 7 of the
Telecommunications Act of 1984 dated December 18, 1996 (includes
Specification by the Secretary of State for purposes of
paragraphs 1(s) and 1(t) of Schedule 1 and paragraphs 4(j) and 4(k)
of Schedule 3 to the License).
- -Letter dated July 24, 1996 from Department of Trade and Industry
regarding the removal of the "equivalency" requirements by the UK
government and the designation of all countries and territories for
international simple resale.
- -Modifications of the Conditions of the License of ACC UK's IST
License dated December 18, 1996.
- -Lease Agreement between Ericsson IFS and ACC UK and ACC Corp.
relating to AXE10 Telecommunications equipment dated December 4,
1995.
- -Leased property (refer to Schedule 6.1(r)).
(listing of contracts with colleges and universitites)
<PAGE>
Schedule 6.1(m): Labor and Collective Bargaining Agreements
NONE
<PAGE>
Schedule 6.1(r): Real Property
U.S.
Landlord Property Address Term
The Hague Corporation 400 West Avenue 05/94 - 06/04
Rochester, NY
Corporate Headquarters
Harry Fenson 62 Chenango Street 11/93 - 10/98
Binghamton, NY
Binghamton Sales Office
Harry Fenson 62 Chenango Street 08/94 - 10/98
Binghamton, NY
Regional Sales Office
The Widewaters Group Corporate Woods I 02/92 - 07/99
1035 7th North Street
Liverpool, NY
Syracuse Sales Office
Cres, Inc. c/o Newmark & 192 Lexington Avenue 1/96 - 6/99
Company Real Estate, Inc. New York, NY
New York City Sales Office
Paramount Group, Inc. as 32 Old Slip 2/97 - 3/07
agent for Old Ship New York, NY
Associates, L.P. ANTC New York Switch
Rosetti & Associates 421 New Karner Road 2/92 - 11/98
Albany, NY
Albany Sales Office
State Tower Associates 109 S. Warren Street 04/89 - 03/99
Syracuse, NY
Syracuse Switch/Regional
69 Delaware Avenue 69 Delaware Avenue 05/83 - 12/99
Buffalo, NY
Buffalo Sales Office
The Flatley Company 1661 Worcester Road, 08/96 - 07/99
Suite 403
Framingham, MA
Framingham Sales Office
Michael Futerman One West Avenue 10/92 - 10/97
Rochester, NY
Fiber Optic Storage
DePaul Home for Adults 45 West Main Street 06/84 - 12/96
Mariner Building
Rochester, NY
Twin Tower Assoc. Ltd. One Commerce Plaza 08/94 - 07/99
Albany, NY
Regional Switch/Sales
<PAGE>
Schedule 6.1(r) Real Property (Continued)
CANADA
Landlord Property Address Term
100 James Street South 100 James Street South 06/91 - 05/01
Hamilton, Ontario
Equipment Space
Standard Life Assurance One Toronto Street 01/91 - 12/99
Toronto, Ontario
Switch Office
Lithwick Corporation 150 Metcalfe Street 05/95 - 03/20
14th Floor
Ottawa, Ontario
Midland Walwyn Leasing 1 Place Ville Marie 01/93 - 04/02
3625 Montreal, Quebec
Montreal Sales Office
Oxford Development 5343 Dundas Street 03/94 - 02/04
Etobicoke, Ontario
Canadian Headquarters
Etobicoke Sales Office
Property Trizec Rene Levesque Blvd. 04/91 - 03/96
Montreal, Quebec
Montreal Switch Site
Waterfront Centre Waterfront Centre 01/93 - 01/98
200 Burrand Street
Suite 2070
Vancouver, BC
Vancouver Sales Office
Waterfront Centre 200 Burrand Street 05/94 - 04/04
Suite 2070
Vancouver, BC
Vancouver Switch Site
Centre West Properties Calgary Office 05/95 - 04/00
First Executive Centre Suite 2000, Bankers Hall Month to Month
855 2nd Street, S.W.
Calgary, Alberta
Calgary Office
Paragon Executive Centre 326 Broadway Avenue Month to Month
5th Floor
Winnepeg, Manitoba
Winnepeg Office
<PAGE>
Schedule 6.1(r): Real Property (Continued)
UNITED KINGDOM:
Landlord Property Address Term
IBM United Kingdom Ltd. 1st, 9th, and 10th Floor 09/93 - 09/03
414 Chiswick High Road
Chiswick, London Corporate
Office
Cromwell Rd. Investments Lower Ground Floor 09/93 - 09/03
114A Cromwell Rd. London
Cromwell Rd. Investments Ground Floor 09/93 - 09/03
114A Cromwell Rd. London
Midland Bank plc Unit 1.2a Bldg. 8
Exchange Quay
Salford, Greater Manchester
University of Bath Room HH8/37 09/94 - 09/95
then 3 months
rolling
Frederick Roger Jenkins 75a Cowley Road 08/94 - 08/97
Oxford
Prudential St. Andrews House 09/94 - 09/04
Cambridge
University of Liverpool Microwave Dish 08/94 -
Midland Bank plc Suites 13a, 13b and 13c 05/95 - 05/05
Building 5
Exchange Quay
Manchester
<PAGE>
Schedule 6.1(t): Debt and Contingent Obligations
As of January 8, 1997
U.S. (U.S. Dollars)
Bank Amount
First Union National Bank $35,000,000.00 Credit Facility (will be
of North Carolina replaced by $100,000,000.00 Credit Facility)
<PAGE>
ACC CORP. AND SUBSIDIARIES
Letters of Credit
11/30/96
First Union National Bank (U.S. $'s)
CANADA Coopers and Lybrand, Ltd. $ 105,480
CANADA Properties Trizec Ltd. $ 26,018
CANADA Royal Bank of Canada $ 727,000
CANADA Waterfront Centre Leasehold $ 12,415
Total for Canada $ 870,913
US Associated Communications $ 30,000
US AT&T Credit Corp. $ 255,000
US Marine Midland Bank $1,000,000
US New York Telephone Company $ 40,000
US Standard Life Assurance Co. $ 82,000
US State University of New York $ 50,000
US Texas Commerce Bank National $ 107,000
US USL Capital Corporation $ 400,000
US USL Capital Corporation $ 353,886
Total for US $2,317,886
Grand Total $3,188,799
<PAGE>
ACC Corp. & Subsidiaries
Maturities of Long Term Debt
November 30, 1996
<TABLE>
<S> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S> <S>
Monthly
Company Note Rate Payment Term 1996 1997 1998 1999 2000 2001 Totals
ACC Corp NEC 10.42% 16,478 9/99 12,280 155,954 173,007 142,060 483,301
NEC 8.00% 468 2/98 424 5,309 927 6,660
NEC 8.00% 4,236 2/98 3,834 48,053 8,388 60,275
MFP 10.00% 22,950 12/96 22,760 22,760
MFP 10.00% 9,639 11/97 8,729 100,932 109,661
F.MacArthur 10.00% 1,725 8/97 1,483 12,318 13,801
Romax 13.00% 17,178 4/00 10,786 138,964 158,235 180,179 99,254 587,418
AT&T 12.20% 9,686 4/98 8,270 105,883 28,491 142,644
Meridian 10.13% 8,344 5/00 5,892 74,748 82,760 91,632 32,677 287,709
DSC/Sanwa 10.00% 64,255 12/98 43,716 533,900 611,901 55,100 1,264,617
Total 154,959 118,174 1,196,061 1,063,709 468,971 131,931 2,978,846
ACC Global Sprint-IRU #1 11.63% 10,969 9/97 111,569 111,569
Sprint-IRU #2 1.16% 4,219 9/97 42,909 42,909
Sprint-IRU #3 11.63% 9,342 9/98 149,464 99,643 249,107
Sprint-IRU #4 1.16% 3,737 9/98 59,784 39,856 99,640
Sprint-IRU #5 11.63% 37,366 4/99 597,856 597,856 149,464 1,345,176
Sprint-IRU #6 1.16% 18,683 4/99 298,928 298,928 74,732 672,588
Total 84,315 1,260,510 1,036,283 224,196 2,520,989
ACC National Pics Plus #1 15.00% 200 1/98 334 2,185 197 2,716
Telecom
Corp. Pics Plus #2 15.00% 250 2/98 412 2,697 490 3,599
Pics Plus #3 15.00% 209 3/98 341 2,231 612 3,184
Pics Plus #4 15.00% 239 4/98 384 2,515 925 3,824
Pics Plus #5 15.00% 345 4/98 556 3,595 1,339 5,490
Pics Plus #6 15.00% 254 4/98 409 2,679 985 4,073
Pics Plus #7 15.00% 322 4/98 518 3,397 1,250 5,165
Pics Plus #8 15.00% 287 4/98 462 3,026 1,113 4,601
Pics Plus #9 15.00% 250 6/98 393 2,574 1,438 4,405
Pics Plus #10 15.00% 705 6/98 1,106 7,245 4,048 12,399
Pics Plus #11 15.00% 1,601 6/98 2,513 16,460 9,197 28,170
Pics Plus #12 15.00% 252 7/98 391 2,562 1,680 4,633
Pics Plus #13 15.00% 258 8/98 395 2,591 1,954 4,940
Pics Plus #14 15.00% 449 8/98 687 4,501 3,396 8,584
Total 5,621 8,900 58,258 28,624 95,782
ACC UK BMW 525i 21.49% 696 12/96 7,130 9,681 16,811
BMW 320i 20.00% 448 10/96 11,350 11,350
IBM 10.80% 6,069 8/97 85,068 69,788 154,856
Pallas 11.70% 1,520 2/00 15,984 17,857 19,950 22,288 5,969 82,048
Ericcson 11.11% 6/00 295,987 458,523 649,380 725,170 393,815 2,522,875
Total (GBP) 8,732 415,519 555,849 669,330 747,458 399,784 2,787,940
Total (US $) 14,600 1.6720 694,748 929,380 1,119,119 1,249,749 668,439 4,661,435
ACC LD LTD. DSM Leasing 10.00% 36,442 8/97 291,533 291,533
GE Capital #2 5.82% 1,211 10/97 12,106 12,106
Gould Lease1 4.57% 1,259 6/97 7,552 7,552
Equilease #1 15.36% 1,635 4/99 19,626 19,626 6,542 45,794
Equilease #2 15.50% 852 4/99 10,228 10,228 3,409 23,866
Commcorp
Leasing 16.95% 663 6/99 7,955 7,955 3,978 19,888
Xerox-Copier 13.76% 194 3/01 2,333 2,333 2,333 2,333 583 9,914
Xerox-
Facsimile 16.58% 110 11/00 1,325 1,325 1,325 1,215 5,191
SAC UofT N/A 15,875 6/98 15,875 6,875 22,750
Total (CND $) 58,242 - 368,533 48,342 17,587 3,548 583 438,594
Total (US $) 43,286 0.74322 - 273,901 35,929 13,071 2,637 433 325,972
Grand Total (US $) $ 302,781 $821,822 $3,718,111 $3,283,664$1,955,987 $803,006 $433 $10,583,024
</TABLE>
<PAGE>
Schedule 6.1(u): Litigation
NONE
<PAGE>
Schedule 6.1(v): Communications Licenses and Regulatory Approvals
ACC Corp. - None
ACC Global Corp. - Refer to Attachment
ACC Long Distance Corp. - Refer to Attachment
ACC Long Distance of Connecticut Corp. - Refer to Attachment
ACC Long Distance of Georgia Corp. - Refer to Attachment
ACC Long Distance of Illinois Corp. - Refer to Attachment
ACC Long Distance of Maine Corp. - Refer to Attachment
ACC Long Distance of New Hampshire Corp. - Refer to Attachment
ACC Long Distance of Pennsylvania Corp. - Refer to Attachment
ACC Long Distance of Rhode Island Cor. - Refer to Attachment
ACC Long Distance of Vermont Corp. - Refer to Attachment
ACC Long Distance U.K., Ltd. - None
ACC National Long Distance Corp. - Refer to Attachment
ACC Radio Corp. - None
ACC Long Distance Inc. - None
ACC TelEnterprises, Ltd. - None
Metrowide Communications Inc. - None
<PAGE>
Schedule 6.1(v): Communications Licenses and Regulatory Approvals (Continued)
ACC GLOBAL CORP.
LICENSES AND AUTHORIZATION
GEOGRAPHIC TYPE OF SERVICE AUTHORIZED EXPIRATION
LOCATION DATE
International
FCC Section 214 Certification and FCC Tariff
1+, 800, WATS, OS
International Yes None
<PAGE>
Schedule 6.1(v): Communications Licenses and Regulatory Approvals (Continued)
LICENSES AND AUTHORIZATION
<TABLE>
<S> <S> <S> <S> <S> <S>
COMPANY GEOGRAPHIC TYPE OF SERVICE AUTHORIZED EXPIRATION
LOCATION DATE
Intrastate Interstate International
Certification, FCC Section
Registration or 214 Certif. and
Unregulated FCC Tariff FCC Tariff
1+, 800, WATS 1+, 800, 1+, 800, WATS,
WATS, OS OS
ACC Long Distance Corp. New York Yes Yes Yes None
ACC Long Distance of Connecticut Yes Yes Yes None
Connecticut Corp.
ACC Long Distance of Georgia Yes Yes Yes None
Georgia Corp.
ACC Long Distance of Illinois Yes Yes Yes None
Illinois Corp.
ACC Long Distance of Maine Yes Yes Yes None
Maine Corp.
ACC Long Distance of New Hampshire Yes Yes Yes None
New Hampshire
ACC Long Distance of
Pennsylvania Corp. Pennsylvania Yes Yes Yes None
ACC Long Distance of Rhode Island Yes Yes Yes None
Rhode Island Corp.
ACC Long Distance of Vermont Yes Yes Yes None
Vermont Corp.
ACC National Long Refer to Attachment
Distance Corp.
</TABLE>
<PAGE>
Schedule 6.1(v): Communications Licenses and Regulatory Approvals (Continued)
ACC NATIONAL LONG DISTANCE CORP.
LICENSES AND AUTHORIZATION
<TABLE>
<S> <S> <S> <S> <S>
GEOGRAPHIC TYPE OF SERVICE AUTHORIZED EXPIRATION
LOCATION DATE
Intrastate Interstate International
Certification, FCC Section 214
Registration or Certification and
Unregulated FCC Tariff FCC Tariff
1+, 800, WATS 1+, 800, WATS, OS 1+, 800, WATS, OS
Alabama Yes Yes Yes None
Arizona Yes Yes Yes None
Arkansas Yes Yes Yes None
California Yes Yes Yes None
Colorado Yes Yes Yes None
Delaware Yes Yes Yes None
Florida Yes Yes Yes None
Idaho Yes Yes Yes None
Indiana Yes Yes Yes None
Iowa Yes Yes Yes None
Kansas Yes Yes Yes None
Louisiana Yes Yes Yes None
Maryland Yes Yes Yes None
Michigan Yes Yes Yes None
Minnesota Yes Yes Yes None
Mississippi Yes Yes Yes None
Missouri Yes Yes Yes None
Montana Yes Yes Yes None
Nebraska Yes Yes Yes None
Nevada Yes Yes Yes None
New Jersey Yes Yes Yes None
New Mexico Yes Yes Yes None
North Carolina Yes Yes Yes None
North Dakota Yes Yes Yes None
Oklahoma Yes Yes Yes None
Oregon Yes Yes Yes None
South Carolina Yes Yes Yes None
South Dakota Yes Yes Yes None
Texas Yes Yes Yes None
Utah Yes Yes Yes None
Virginia Yes Yes Yes None
Washington Yes Yes Yes None
West Virginia Yes Yes Yes None
Wisconsin Yes Yes Yes None
Wyoming Yes Yes Yes None
</TABLE>
<PAGE>
Schedule 10.3: Existing Liens
<PAGE>
Schedule 10.4: Existing Loans, Advances and Investments
U.S. (U.S. Dollars):
Borrower Loan Amount Due Date
Mintel (Mark Miller) $103,888.33 Line of Credit
Arunas A. Chesonis 45,480.71 March 31, 1997
Arunas A. Chesonis 1,622.26 April 11, 1993
Arunas A. Chesonis 8,205.14 September 25, 1992
Christopher Bantoft 325,000.00 March 31, 1997
$484,196.44
Canadian (Canadian Dollars):
Borrower Loan Amount Due Date
1002390 Ontario Inc. $24,988.50
Seneca College 9,997.59 December 31, 1996
Thomas W. Murphy 3,408.91 December 31, 1996
Keith Taylor 1,678.42 December 31, 1996
Chuck D'Ruiter 815.93 December 31, 1996
Last Minute Club 1,559.40 December 31, 1996
Sales Rep. Advances 5,250.00 December 31, 1996
$47,698.75
Exhibit 10-20
COUNTY OF MONROE MODIFICATION TO
LEASEHOLD MORTGAGE
NEW YORK
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
This MODIFICATION TO LEASEHOLD MORTGAGE (this "Modification") is
made and entered into as of this 14th day of January, 1997, between
ACC Corp, a Delaware corporation ("Mortgagor"), and FIRST UNION
NATIONAL BANK OF NORTH CAROLINA ("First Union"), as Administrative
Agent ("Mortgagee"), for the financial institutions (the "Lenders") as
are, or may from time to time become, parties to the Amended and
Restated Credit Agreement (as defined below).
STATEMENT OF PURPOSE
The Mortgagor executed and delivered to the Mortgagee a Leasehold
Mortgage dated as of July 21, 1995 and recorded in Deed Book 1260,
Page 368, in the Monroe County, New York registry (as amended,
restated or otherwise modified, the "Leasehold Mortgage").
The Mortgagor and certain affiliates thereof, as borrowers, the
lenders party thereto (the "Original Lenders"), and First Union as
administrative agent, entered into a Credit Agreement dated as of July
21, 1995 (as amended, the "Original Credit Agreement") for the
principal sum of up to Thirty-Five Million Dollars ($35,000,000), as
evidenced by certain promissory notes dated such date executed by the
Mortgagor and such affiliates in favor of the Original Lenders, and
such other documents as may have been executed or given by Mortgagor
and such affiliates in connection with the transactions contemplated
by such Original Credit Agreement. The Mortgagor and certain
Affiliates thereof, as Borrowers, the Lenders, and First Union, as
Administrative Agent, have modified such Credit Agreement by executing
an Amended and Restated Credit Agreement of even date (as further
amended, restated or otherwise modified, the "Amended and Restated
Credit Agreement"), providing for Extensions of Credit of up to One
Hundred Million Dollars ($100,000,000) and the other modifications set
forth therein.
The Mortgagor, such Affiliates thereof, the Mortgagee and the
Lenders desire by this instrument to modify the Leasehold Mortgage to
reflect that the Original Credit Agreement has been amended and
restated in its entirety by such Amended and Restated Credit
Agreement. In furtherance thereof, the Mortgagor and the Mortgagee
have agreed to the following amendment of the Leasehold Mortgage:
MODIFICATION AGREEMENT
1. Modification.
(a) Each reference in the Leasehold Mortgage to the "Credit
Agreement" shall hereby be deemed to be a reference to the Amended and
Restated Credit Agreement.
(b) The phrase "Thirty-Five Million Dollars ($35,000,000)"
appearing in the second paragraph on the first page of the Leasehold
Mortgage is hereby deleted and is replaced by the phrase "One Hundred
Million Dollars ($100,000,000)".
(c) The phrase "Section 13.1" appearing in paragraph [11]
of the Leasehold Mortgage is hereby deleted and is replaced by the
phrase "Section 14.1".
2. Reaffirmation of Terms of Leasehold Mortgage. The Mortgagor
hereby ratifies and reaffirms to the Mortgagee that (i) each of the
representations, warranties, covenants, and agreements set forth in
the Leasehold Mortgage shall apply to the Mortgagor with the same
force and effect as if each were separately stated herein and made as
of the date of this Modification by the Mortgagor, (ii) each of the
Leasehold Mortgage and every other document and instrument which
evidences or secures payment of the Amended and Restated Credit
Agreement, represents the valid, enforceable and collectible
obligations of the Mortgagor and the Mortgagor specifically
acknowledges that validity and enforceability of all the terms and
provisions contained in such document or instrument and (iii) no
Default or Event of Default has occurred and is continuing.
2. No Other Modifications. Except as expressly modified
herein, all provisions, terms and conditions contained in the
Leasehold Mortgage shall remain in full force and effect as originally
executed and delivered.
3. No Novation. The execution and delivery of this
Modification shall not constitute a modification or novation of the
lien and encumbrance of the Leasehold Mortgage, which lien and
encumbrance shall retain its first priority position as originally
filed for record in the Monroe County Clerk's Office.
4. Binding Nature. This Modification shall be binding upon and
shall inure to the benefit of the Mortgagor, the Mortgagee, and their
respective heirs, legal representatives, successors and assigns.
5. Definitions. All capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to such terms
in the Amended and Restated Credit Agreement.
6. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
New York.
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given,
have caused this Modification to be executed under seal, delivered,
and effective as of the day and year first written above.
ACC CORP.
By: /s/ John J. Zimmer
[CORPORATE SEAL] Name: John J. Zimmer
Title: Vice President - Finance
ATTEST: /s/ Daniel J. Venuti
Name: Daniel J. Venuti
Title: Assistant Secretary
MORTGAGEE:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Administrative Agent
By: /s/ Jim Redman
By:
[CORPORATE SEAL] Name: Jim Redman
Title:Senior Vice President
<PAGE>
STATE OF NORTH CAROLINA)
)
COUNTY OF MECKLENBURG )
I, Betty G. Smith, a Notary Public of the county and state
aforesaid, certify that Daniel J. Venuti personally came before me
this day and acknowledged that he is Assistant Secretary of ACC Corp.,
a Delaware corporation, and that by authority duly given and as the
act of the corporation, the foregoing instrument was signed in its
name by its Vice President - Finance, sealed with its corporate seal
and attested by himself as its Assistant Secretary.
WITNESS my hand and official stamp, this 14th day of January,
1997.
/s/ Betty G. Smith
Notary Public
My commission expires:
August 5, 1997
<PAGE>
STATE OF NORTH CAROLINA)
)
COUNTY OF MECKLENBURG )
This 14th day of January, 1997, personally came before me Jim F.
Redman, who, being by me duly sworn, says that he is Senior Vice
President of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, that the
seal affixed to the foregoing instrument in writing is the corporate
seal of said Corporation, and that said writing was signed and sealed
by him, in behalf of said Corporation, by its authority duly given.
And the said Senior Vice President acknowledged the said writing to be
the act and deed of said Corporation.
/s/ Betty G. Smith
NOTARY PUBLIC
[NOTARIAL SEAL]
My Commission Expires:
August 5, 1997
Exhibit 10-22
COUNTY OF ONONDAGA MODIFICATION TO
LEASEHOLD MORTGAGE
NEW YORK
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
This MODIFICATION TO LEASEHOLD MORTGAGE (this "Modification") is
made and entered into as of this 14th day of January, 1997, between
ACC Corp, a Delaware corporation ("Mortgagor"), and FIRST UNION
NATIONAL BANK OF NORTH CAROLINA ("First Union"), as Administrative
Agent ("Mortgagee"), for the financial institutions (the "Lenders") as
are, or may from time to time become, parties to the Amended and
Restated Credit Agreement (as defined below).
STATEMENT OF PURPOSE
The Mortgagor executed and delivered to the Mortgagee a Leasehold
Mortgage dated as of July 21, 1995 and recorded in Deed Book 8181,
Page 0138, in the Onondaga County, New York registry (as amended,
restated or otherwise modified, the "Leasehold Mortgage").
The Mortgagor and certain affiliates thereof, as borrowers, the
lenders party thereto (the "Original Lenders"), and First Union as
administrative agent, entered into a Credit Agreement dated as of July
21, 1995 (as amended, the "Original Credit Agreement") for the
principal sum of up to Thirty-Five Million Dollars ($35,000,000), as
evidenced by certain promissory notes dated such date executed by the
Mortgagor and such affiliates in favor of the Original Lenders, and
such other documents as may have been executed or given by Mortgagor
and such affiliates in connection with the transactions contemplated
by such Original Credit Agreement. The Mortgagor and certain
Affiliates thereof, as Borrowers, the Lenders, and First Union, as
Administrative Agent, have modified such Credit Agreement by executing
an Amended and Restated Credit Agreement of even date (as further
amended, restated or otherwise modified, the "Amended and Restated
Credit Agreement"), providing for Extensions of Credit of up to One
Hundred Million Dollars ($100,000,000) and the other modifications set
forth therein.
The Mortgagor, such Affiliates thereof, the Mortgagee and the
Lenders desire by this instrument to modify the Leasehold Mortgage to
reflect that the Original Credit Agreement has been amended and
restated in its entirety by such Amended and Restated Credit
Agreement. In furtherance thereof, the Mortgagor and the Mortgagee
have agreed to the following amendment of the Leasehold Mortgage:
MODIFICATION AGREEMENT
1. Modification.
(a) Each reference in the Leasehold Mortgage to the "Credit
Agreement" shall hereby be deemed to be a reference to the Amended and
Restated Credit Agreement.
(b) The phrase "Thirty-Five Million Dollars ($35,000,000)"
appearing in the second paragraph on the first page of the Leasehold
Mortgage is hereby deleted and is replaced by the phrase "One Hundred
Million Dollars ($100,000,000)".
(c) The phrase "Section 13.1" appearing in paragraph [11]
of the Leasehold Mortgage is hereby deleted and is replaced by the
phrase "Section 14.1".
2. Reaffirmation of Terms of Leasehold Mortgage. The Mortgagor
hereby ratifies and reaffirms to the Mortgagee that (i) each of the
representations, warranties, covenants, and agreements set forth in
the Leasehold Mortgage shall apply to the Mortgagor with the same
force and effect as if each were separately stated herein and made as
of the date of this Modification by the Mortgagor, (ii) each of the
Leasehold Mortgage and every other document and instrument which
evidences or secures payment of the Amended and Restated Credit
Agreement, represents the valid, enforceable and collectible
obligations of the Mortgagor and the Mortgagor specifically
acknowledges that validity and enforceability of all the terms and
provisions contained in such document or instrument and (iii) no
Default or Event of Default has occurred and is continuing.
2. No Other Modifications. Except as expressly modified
herein, all provisions, terms and conditions contained in the
Leasehold Mortgage shall remain in full force and effect as originally
executed and delivered.
3. No Novation. The execution and delivery of this
Modification shall not constitute a modification or novation of the
lien and encumbrance of the Leasehold Mortgage, which lien and
encumbrance shall retain its first priority position as originally
filed for record in Onondaga County.
4. Binding Nature. This Modification shall be binding upon and
shall inure to the benefit of the Mortgagor, the Mortgagee, and their
respective heirs, legal representatives, successors and assigns.
5. Definitions. All capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to such terms
in the Amended and Restated Credit Agreement.
6. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
New York.
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given,
have caused this Modification to be executed under seal, delivered,
and effective as of the day and year first written above.
MORTGAGOR:
ACC CORP.
By: /s/ John J. Zimmer
[CORPORATE SEAL] Name: John J. Zimmer
Title: Vice President
ATTEST: /s/ Daniel J. Venuti
Name: Daniel J. Venuti
Title: Assistant Secretary
MORTGAGEE:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Administrative Agent
By: /s/ Jim Redman
Name: Jim Redman
Title:Senior Vice President
[CORPORATE SEAL]
<PAGE>
STATE OF NORTH CAROLINA)
COUNTY OF MECKLENBURG )
I, BETTY G. SMITH, a Notary Public of the county and state
aforesaid, certify that DANIEL J. VENUTI personally came before me
this day and acknowledged that he is Assistant Secretary of ACC Corp.,
a Delaware corporation, and that by authority duly given and as the
act of the corporation, the foregoing instrument was signed in its
name by its Vice President, sealed with its corporate seal and
attested by himself as its Assistant Secretary.
WITNESS my hand and official stamp, this 14th day of January,
1997.
/s/ Betty G. Smith
NOTARY PUBLIC
My commission expires:
August 5, 1997
<PAGE>
STATE OF NORTH CAROLINA)
COUNTY OF MECKLENBURG )
This 14th day of January, 1997, personally came before me JIM F.
REDMAN, who, being by me duly sworn, says that he is Senior Vice
President of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, that the
seal affixed to the foregoing instrument in writing is the corporate
seal of said Corporation, and that said writing was signed and sealed
by him, in behalf of said Corporation, by its authority duly given.
And the said Senior Vice President acknowledged the said writing to be
the act and deed of said Corporation.
/s/ Betty G. Smith
NOTARY PUBLIC
[NOTARIAL SEAL]
My Commission Expires:
August 5, 1997
Exhibit 10-24
COUNTY OF ONONDAGA MODIFICATION TO
LEASEHOLD MORTGAGE
NEW YORK
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
This MODIFICATION TO LEASEHOLD MORTGAGE (this "Modification") is
made and entered into as of this 14th day of January, 1997, between
ACC Corp, a Delaware corporation ("Mortgagor"), and FIRST UNION
NATIONAL BANK OF NORTH CAROLINA ("First Union"), as Administrative
Agent ("Mortgagee"), for the financial institutions (the "Lenders") as
are, or may from time to time become, parties to the Amended and
Restated Credit Agreement (as defined below).
STATEMENT OF PURPOSE
The Mortgagor executed and delivered to the Mortgagee a Leasehold
Mortgage dated as of July 21, 1995 and recorded in Deed Book 8181,
Page 0138, in the Onondaga County, New York registry (as amended,
restated or otherwise modified, the "Leasehold Mortgage").
The Mortgagor and certain affiliates thereof, as borrowers, the
lenders party thereto (the "Original Lenders"), and First Union as
administrative agent, entered into a Credit Agreement dated as of July
21, 1995 (as amended, the "Original Credit Agreement") for the
principal sum of up to Thirty-Five Million Dollars ($35,000,000), as
evidenced by certain promissory notes dated such date executed by the
Mortgagor and such affiliates in favor of the Original Lenders, and
such other documents as may have been executed or given by Mortgagor
and such affiliates in connection with the transactions contemplated
by such Original Credit Agreement. The Mortgagor and certain
Affiliates thereof, as Borrowers, the Lenders, and First Union, as
Administrative Agent, have modified such Credit Agreement by executing
an Amended and Restated Credit Agreement of even date (as further
amended, restated or otherwise modified, the "Amended and Restated
Credit Agreement"), providing for Extensions of Credit of up to One
Hundred Million Dollars ($100,000,000) and the other modifications set
forth therein.
The Mortgagor, such Affiliates thereof, the Mortgagee and the
Lenders desire by this instrument to modify the Leasehold Mortgage to
reflect that the Original Credit Agreement has been amended and
restated in its entirety by such Amended and Restated Credit
Agreement. In furtherance thereof, the Mortgagor and the Mortgagee
have agreed to the following amendment of the Leasehold Mortgage:
MODIFICATION AGREEMENT
1. Modification.
(a) Each reference in the Leasehold Mortgage to the "Credit
Agreement" shall hereby be deemed to be a reference to the Amended and
Restated Credit Agreement.
(b) The phrase "Thirty-Five Million Dollars ($35,000,000)"
appearing in the second paragraph on the first page of the Leasehold
Mortgage is hereby deleted and is replaced by the phrase "One Hundred
Million Dollars ($100,000,000)".
(c) The phrase "Section 13.1" appearing in paragraph [11]
of the Leasehold Mortgage is hereby deleted and is replaced by the
phrase "Section 14.1".
2. Reaffirmation of Terms of Leasehold Mortgage. The Mortgagor
hereby ratifies and reaffirms to the Mortgagee that (i) each of the
representations, warranties, covenants, and agreements set forth in
the Leasehold Mortgage shall apply to the Mortgagor with the same
force and effect as if each were separately stated herein and made as
of the date of this Modification by the Mortgagor, (ii) each of the
Leasehold Mortgage and every other document and instrument which
evidences or secures payment of the Amended and Restated Credit
Agreement, represents the valid, enforceable and collectible
obligations of the Mortgagor and the Mortgagor specifically
acknowledges that validity and enforceability of all the terms and
provisions contained in such document or instrument and (iii) no
Default or Event of Default has occurred and is continuing.
2. No Other Modifications. Except as expressly modified
herein, all provisions, terms and conditions contained in the
Leasehold Mortgage shall remain in full force and effect as originally
executed and delivered.
3. No Novation. The execution and delivery of this
Modification shall not constitute a modification or novation of the
lien and encumbrance of the Leasehold Mortgage, which lien and
encumbrance shall retain its first priority position as originally
filed for record in Onondaga County.
4. Binding Nature. This Modification shall be binding upon and
shall inure to the benefit of the Mortgagor, the Mortgagee, and their
respective heirs, legal representatives, successors and assigns.
5. Definitions. All capitalized terms used herein and not
otherwise defined herein shall have the meaning assigned to such terms
in the Amended and Restated Credit Agreement.
6. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
New York.
<PAGE>
IN WITNESS WHEREOF, the undersigned, by authority duly given,
have caused this Modification to be executed under seal, delivered,
and effective as of the day and year first written above.
MORTGAGOR:
ACC CORP.
By: /s/ John J. Zimmer
[CORPORATE SEAL] Name: John J. Zimmer
Title: Vice President - Finance
ATTEST: /s/ Daniel J. Venuti
Name: Daniel J. Venuti
Title: Assistant Secretary
MORTGAGEE:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Administrative Agent
By: /s/ Jim Redman
By:
[CORPORATE SEAL] Name: Jim Redman
Title:Senior Vice President
<PAGE>
STATE OF NORTH CAROLINA)
)
COUNTY OF MECKLENBURG )
I, Betty G. Smith, a Notary Public of the county and state
aforesaid, certify that Daniel J. Venuti personally came before me
this day and acknowledged that he is Assistant Secretary of ACC Corp.,
a Delaware corporation, and that by authority duly given and as the
act of the corporation, the foregoing instrument was signed in its
name by its Vice President - Finance, sealed with its corporate seal
and attested by himself as its Assistant Secretary.
WITNESS my hand and official stamp, this 14th day of January,
1997.
/s/ Betty G. Smith
Notary Public
My commission expires:
August 5, 1997
<PAGE>
STATE OF NORTH CAROLINA)
)
COUNTY OF MECKLENBURG )
This 14th day of January, 1997, personally came before me JIM F.
REDMAN, who, being by me duly sworn, says that he is Senior Vice
President of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, that the
seal affixed to the foregoing instrument in writing is the corporate
seal of said Corporation, and that said writing was signed and sealed
by him, in behalf of said Corporation, by its authority duly given.
And the said Senior Vice President acknowledged the said writing to be
the act and deed of said Corporation.
/s/ Betty G. Smith
NOTARY PUBLIC
[NOTARIAL SEAL]
My Commission Expires:
August 5, 1997
Seal of DOCUMENT GENERAL Exhibit 10-25 D
Province of Ontario Form 4 -- Land Registration Reform Act 1984
<TABLE>
<CAPTION>
<S> <C> <C> <C>
F (1)Registry / / Land Titles /x/ (2) Page 1 of 12 pages
O ------------------------------- ------------------------------------- ---------------------------
R (3) Property Block Property
Identifier(s) Additional:
O See
F Schedule / /
F ------------------------------ ------------------------------------- ---------------------------
I (4) Nature of Document
C NOTICE OF CHARGE OF LEASE (Subsection 111(6) of the Act)
E ------------------------------- ------------------------------------- ---------------------------
(5) Consideration
U TWO------------100 Dollars $2.00
S ----------------------- -------------------------------- ------------------------------------- ---------------------------
E (6) Description
O New Property Identifiers Parcel 1-3, Section AD-87
N Additional: City of Toronto
L See Municipality of Metropolitan Toronto
Y Schedule / / (Continued on Schedule A)
------------------------- ------------------------------- ------------------------------------- ---------------------------
Executions (7) This (a) Redescription (b) Schedule for:
Additional Document New Easement Additional
See Contains: Plan/Sketch // Description /x/ Parties / / Other
Schedule / /
------------------------- ------------------------------- ------------------------------------- ---------------------------
</TABLE>
(8)This Document provides as follows:
To: The Land Registrar for the Land Titles Division of Metropolitan
Toronto (No. 66)
The undersigned, ACC TelEnterprises Ltd./TelEntreprises ACC Ltee. hereby
applies for the entry of a notice of a charge of lease dated January 14,
1997 wherein ACC TelEnterprises Ltd./TelEntreprises ACC Ltee. charged to
First Union National Bank of North Carolina, as Agent its interest in the
leases of which notice is registered as No. C959862 and No. ,
in respect of part of the lands and premises registered as Parcel 1-3,
Section AD-87 (more particularly described in Box (6) hereof of which 945169
Ontario Limited is the registered owner of a 1/3 interest and Royal Trust
Corporation of Canada, as trustee, is the registerd owner of a 2/3 interest.
Continued on Schedule /x/
- ---------------------------------------------------------------------------
(9) This Document relates to instrument number(s)
Nos. C959862 and
- ---------------------------------------------------------------------------
10)Party(ies) (Set out Status or Interest)
<TABLE>
<CAPTION>
<S> <C> <C>
Name(s) Signature(s) Date of Signature
Y M D
ACC TELENTERPRISES LTD/TELENTREPRISES ACC Per: /s/ John J. Zimmer 1997 1 8
LTEE. (Tenant) (Chargor) Name: John J. Zimmer
Title: Assistant Controller
We have authority to bind the Corporation Per: /s/ Daniel J. Venuti 1997 1 8
Name: Daniel J. Venuti
Title: Authorized Signatory
</TABLE>
- -----------------------------------------------------------------------------
(11) Address
for
Service 5343 Dundas Street West, Suite 600, Etobicoke, Ontario M9B 6K5
- ------------------------------------------------------------------------------
(12) Party(ies) (Set out Status or Interest)
Name(s) Signature(s) Date of Signature
Y M D
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA AS AGENT
(Chargee)
- ------------------------------------------------------------------------------
(13) Address
for Service
1 First Union Center, TW10, 301 S. College Street,
Charlotte, North Carolina 28288
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(14) Municipal Address of Property (15)Document Prepared by: F Fees and Tax
O ----------------------------------------
One Toronto Street Fraser & Beatty R
Toronto, Ontario P.O. Box 100 Registration Fee
1 First Canadian Place O ---------------------- ----------------
Toronto, Ontario F
M5X 1B2 F
(MJW) I ---------------------- ----------------
C
E
U ---------------------- ----------------
S
E
O
N
L Total
Y ---------------------- ----------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE
BOX 6 -DESCRIPTION CON'T . . .
Parcel 1-3, Section AD-87, City of Toronto, Municipality of
Metropolitan Toronto, being parts of Lots 1, 2, 3, 4 and 5 on
the south side of Court Street, part of Lots 1, 2, 3, 4, 5, 6,
7, 8, 9, 10, 11, 12 and 13 on the north side of King Street
East, part of the Court House Lot, part of the Home District
Gaol Lot all on Plan D-87 (City of Toronto) designated as
PARTS 6, 7, 8, 9, 15, 16, 17, 18, 19, 20, 21, 22, 25, 31, 32,
33, 34, 35, 36, 37, 40, 41, 43, 44, 45, 46, 47, 48, 52, 55, 56,
57, 58, 61, 62, 64, and 65 on Plan 66R-16018.
Plan BA-2190 on a Plan under the Boundaries Act as Plan D-857
confirms the boundaries of the street limits of King Street
East, Church Street, Court Street and Toronto Street (See C-
194337).
As in Instrument No. C-898674.
<PAGE>
Seal of CHARGE/MORTGAGE OF LAND B
Province of Ontario Form 2 -- Land Registration Reform Act, 1984
<TABLE>
<CAPTION>
<S> <C> <C> <C>
F (1)Registry / / Land Titles /x/ (2) Page 3 of 12 pages
O --------------------------------- ----------------------------------- -------------
R (3) Property Block Property
Identifiers Additional
O See
F - Schedule / /
F --------------------------------- ---------------------------------- --------------
I (4) Principal Amount
C FIFTY MILLION---------00/100 Dollars ($50,000,000.00)
E
------------------------------------------------------------------------------------
U New Property Identifiers (5) Description
S Additional:
E See Parcel 1-3, Section AD-87
Schedule / / City of Toronto,
O ------------------------------------- Municipality of Metropolitan Toronto,
N Executions Land Titles Division of Metropolitan Toronto (No.66)
L Additional: (Continued on Schedule A attached)
Y See
Schedule / /
-------------------------------------- -----------------------------------------------------------------------------------
(6) This (a) Redescription (b) Schedule for: (7) Interest/Estate Charge
Document New Easement
Contains Plan/Sketch / / Additional ---------e
Description / / Parties / / Other /x/
LEASEHOLD INTEREST
-------------------------------------- ------------------------------------------------------------------------------------
</TABLE>
(8) Standard Charge Terms -- The parties agree to be bound by the provisions
in Standard Charge Terms filed as number 911 and the
Chargor(s) hereby acknowledge(s) receipt of a copy of these terms
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
(9) Payment Provisions (b) Interest Rate (c) Calculation Period
(a) Principal % per annum
Amount $ SEE SCHEDULE
------------------------------------------- ---------------------------------------------------------------------------------
Interest Y M D Payment First Y M D
(d) Adjustment (e) Date and (f) Payment
Date Period Date
------------------------------------------ ---------------------------------------------------------------------------------
Last Amount
(g) Payment (h) of Each
Date Payment Dollars $
----------------------------------------- ---------------------------------------------------------------------------------
Balance (j) Insurance Dollars $
(i) Due Date
----------------------------------------- ----------------------------------------------------------------------------
10) Additional Provisions
SEE SCHEDULE Continued on Schedule /x/
------------------------------------------ ---------------------------------------------------------------------------------
</TABLE>
(11) Chargor(s) The chargor hereby charges the land to the chargee and
certifies that the chargor is at least eighteen years old
and that the Chargor is a corporation
<TABLE>
<CAPTION>
(S> <C> <C>
The chargor(s) acknowledge(s) receipt of a true copy of this charge
Name(s) Signature(s) Date of Signature
Y M D
ACC TELENTERPRISES LTD./TELENTREPRISES ACC LTEE. Per: /s/ John J. Zimmer 1997 1 8
Name: John J. Zimmer
Title: Assistant Controller
I/We have authority to bind the Corporation. Per: /s/ Daniel J. Venuti 1997 1 8
Name: Daniel J. Venuti
Title: Authorized Signatory
- ------------------------------------------------------------------------- ------------------------------ ---------------------
(12) Spouse(s) of Chargor(s) I hereby consent to this transaction
Name(s) Signature(s) Date of Signature
Y M D
- ------------------------------------------------------------------------- ------------------------------ --------------------
(13)Chargor(s) Address
for Service
Suite 600, 5343 Dundas Street West, Etobicoke, Ontario, M9B 6K5
- ------------------------------------------------------------------------- ------------------------------ --------------------
(14) Chargee(s)
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, AS AGENT
- ------------------------------------------------------------------------- ------------------------------ --------------------
(15) Chargee(s) Address
for service
One First Union Center, TW 10, 301 S. College Street, Charlotte, North Carolina 28288
- ------------------------------------------------------------------------- ----------------------------- -------------------
(16)Assessment Roll Number of Property Cty Mun Map Sub Par
- ------------------------------------------------------------------------- ----------------------------- -------------------
(17) Municipal Address of Property (18) Document Prepared by: F Fees and Tax
O -------------------------
One Toronto Street Michael J. Wunder R
Toronto, Ontario Fraser & Beatty Registration Fee
1 First Canadian Place O
P.O. Box 100 F ------------------- ----
Toronto, Ontario M5X 1B2 F
I
C
E ------------------ ----
U
S
E ------------------ ----
O
N Total
L
Y
- ------------------------------------------------------------------------ ------------------------------ ------------------
</TABLE>
<PAGE>
MORTGAGE OF LEASEHOLD INTEREST
This agreement made as of the 14th day of January, 1997.
BETWEEN:
ACC TELENTERPRISES LTD./TELENTREPRISES ACC
LTEE., a corporation amalgamated under the laws of the
Province of Ontario
OF THE FIRST PART
-and-
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT
OF THE SECOND PART
WHEREAS ACC Long Distance Ltd./Interurbains ACC Ltee. ("ACC
Ltd.") entered into a lease dated as of November 1, 1990 between ACC Ltd.,
as tenant, and King-Toronto Development Inc. as landlord (the "Original
Lease") (945169 Ontario Limited, as to a one-third interest, and Royal
Trust Corporation of Canada, as trustee for The Standard Life Assurance
Company), as to a two-thirds interest, has subsequently become the landlord
under the Lease), relating to leased premises on the lands and premises
known as 1 Toronto Street, 70 King Street East and 92 King Street East,
Toronto, Ontario and more particularly described in Schedule "A" hereto
(which leased premises are hereinafter referred to as the "Lands");
AND WHEREAS ACC Ltd. amalgamated with ACC Long Distance
Inc./Interurbains ACC Inc., ACC Network Ltd. and 1154653 Ontario Inc. on
December 31, 1995 and continued as ACC Long Distance Inc./Interurbains ACC
Inc. ("ACC Inc.");
AND WHEREAS ACC Inc. entered into a lease of additional space
with the landlord dated October 10, 1996 (the "New Lease") (the Original
Lease and the New Lease, as the same may be hereafter amended, extended or
replaced from time to time are hereinafter collectively called the
"Lease");
AND WHEREAS ACC Inc. amalgamated with, among others ACC
TelEnterprises Ltd./TelEntreprises ACC Ltee. effective January 1, 1997 and
continued as ACC TelEnterprises Ltd./TelEntreprises ACC Ltee. (the
"Company");
AND WHEREAS the Company has agreed to mortgage, charge and assign
all of its right, title and interest in and to and all benefits arising
under or in respect of the Lease including without limitation its rights
and interests in the aforesaid storage space and the Lands (which rights,
title, interests and benefits are hereinafter collectively called the
"Leasehold Interest") to the Mortgagee (as that term is hereinafter
defined) as security for payment of the Indebtedness;
NOW WITNESS that in consideration of the sum of TWO DOLLARS
($2.00) now paid by the Mortgagee to the Company and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged by the Company), the Company hereby agrees with the Mortgagee
as follows:
1. Subject to the exception as to leasehold hereinafter
contained, the Company, as security for repayment of the sum of Fifty
Million ($50,000,000 Cdn.) Canadian Dollars and the "Obligations" (as that
term is hereinafter defined) of the Company under or pursuant to the
certain amended and restated credit agreement dated January 14, 1997
between ACC Corp. and certain subsidiaries thereof (including without
limitation the Company), as borrowers, ACC Corp. as guarantor, the lenders
referred to therein, First Union National Bank of North Carolina, as
Managing Agent and Administrative Agent and Fleet National Bank, as
Managing Agent and Documentation Agent (such amended and restated credit
agreement as may be amended, supplemented, replaced or restated from time
to time being hereinafter called the "Credit Agreement") (the term
"Obligations" shall have the same meaning ascribed thereto in
<PAGE>
-2-
the Credit Agreement) (all of the Company's foregoing indebtedness and the
Obligations being hereinafter called the "Credit Agreement Indebtedness")
together with interest thereon at the rate of twenty-five (25%) percent per
annum calculated and payable monthly not in advance, both before and after
demand and before and after default, judgment and execution from the date
hereof until payment (the Credit Agreement Indebtedness, together with
interest thereon as set out above is hereinafter collectively referred to
as the "Indebtedness"), hereby mortgages, charges and assigns to First
Union National Bank of North Carolina, as Administrative Agent for the
benefit of itself and the financial institutions as are, or may from time
to time become lenders under the Credit Agreement (the "Mortgagee"), and
grants to the Mortgagee a security interest in the Leasehold Interest.
TO HAVE AND TO HOLD the assets hereby mortgaged and charged to
the Mortgagee, its successors and assigns, forever but subject to the terms
and conditions herein set forth.
2. It is hereby declared that the last day of any term of years
reserved by any lease, verbal or written, or any agreement therefor
(including without limitation the Lease), now held or hereafter acquired by
the Company, and whether falling within the general or particular
description of the mortgaged premises hereunder or otherwise shall be
excepted out of the mortgage and charge constituted hereby or by any other
agreement, but the Company shall stand possessed of the reversion of one
day remaining in the Company in respect of any such term of years, for the
time being demised, as aforesaid, upon trust to assign and dispose of the
same as any purchaser of such term of years shall direct.
3. The Company hereby covenants and agrees that it shall at all
times, at its own cost and expense, do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged or delivered all and singular
every such further act, deed, transfer, assignment and assurance as the
Mortgagee may reasonably require for the better mortgaging, charging,
transferring, assigning and confirming unto the Mortgagee the property and
assets hereby mortgaged and charged or intended so to be or which the
Company may hereafter become bound to mortgage charge, transfer or assign
in favour of the Mortgagee and for the better accomplishing and
effectuating of this mortgage.
4. The Mortgagee shall not in any way whatsoever be obligated
to perform any covenants or obligations of the Company under the Lease.
5. The Company represents and warrants to the Mortgagee and
each Lender (as that term is defined in the Credit Agreement) party to the
Credit Agreement that as of the date hereof: (a) the Lease has not been
surrendered or forfeited; (b) the rents and covenants therein contained
have been duly paid and performed by the Company; (c) the Company has full
right, power and authority to mortgage and charge the Lease and the
Leasehold Interest as contemplated hereby; and (d) the Company has obtained
the consent of the Landlord to the mortgaging and charging of the Lease and
the Leasehold Interest (if such consent is required to be obtained from the
Landlord).
6. The Company hereby covenants and agrees to and with the
Mortgagee and each Lender party to the Credit Agreement that until the
Indebtedness has been repaid in full, the Company:
(a) shall not without the prior written consent of the Mortgagee
create any lien upon or assign or transfer as security or
pledge or hypothecate any asset subject to the mortgage and
charge hereof except to the Mortgagee and the Company will
not, in the ordinary course of business or otherwise, sell,
transfer, assign, or otherwise dispose of any such asset
without the prior written consent of the Mortgagee;
(b) shall not without the prior written consent of the Mortgagee
merge or amalgamate with any other corporation;
(c) shall insure and keep insured the buildings, erections,
fixtures, improvements, premises and all other assets hereby
charged against loss or damage by fire and other insurable
hazards which such assets are commonly insured against in
the Province of Ontario to the full insurable
<PAGE>
-3-
value thereof; the Company shall duly and promptly pay all
premiums and other sums of money payable for maintaining
such insurance and shall cause all insurance proceeds
thereunder to be payable in the case of loss to the
Mortgagee as first mortgagee and loss payee such insurance
policy(ies) to contain a standard mortgage clause and the
Company shall, upon request from the Mortgagee, provide to
the Mortgagee evidence of the payment of such premiums and
the assignment of such insurance proceeds to the Mortgagee;
and
(f) shall strictly comply with every covenant and undertaking
heretofore or hereafter given by it to the Mortgagee.
7. The Company covenants and agrees to and with the Mortgagee
and each Lender party to the Credit Agreement that:
(a) it shall at all times fully perform and comply with all
of its covenants and obligations contained in the
Lease, and imposed upon or assumed or agreed to by it
pursuant to any prior encumbrance of the Lands or any
part thereof or its Leasehold Interest therein and
that, if the Company shall fail to do so the Mortgagee
may (but shall not be obligated to) take any action the
Mortgagee deems necessary or desirable to cure any
default by the Company in the performance of or
compliance with any of the obligations of the Company
pursuant to the Lease or imposed upon, assumed by or
agreed to by the Company pursuant to any such prior
encumbrance; upon receipt by the Mortgagee from the
Landlord or from any such prior encumbrancer of any
written notice of default by the Company, the Mortgagee
may rely thereon and take any action as aforesaid to
cure such default even though the existence of such
default or the nature thereof may be questioned or
denied by the Company or by any party on behalf of the
Company; the Company hereby expressly grants to the
Mortgagee and agrees that the Mortgagee shall have the
absolute and immediate right to enter in and upon the
Lands or any part thereof to such extent and as often
as the Mortgagee, in its sole discretion, deems
necessary or desirable, in order to cure any such
default by the Company; the Mortgagee may pay and
expend such sums of money as the Mortgagee in its sole
discretion, acting reasonably, deems necessary or
desirable for any such purpose, and the Company hereby
agrees to pay to the Mortgagee, immediately upon
notification by the Mortgagee and without demand, all
such sums so paid and expended by the Mortgagee,
together with interest thereon at the rate applicable
to the Indebtedness from time to time; all such sums so
paid or expended by the Mortgagee and such interest
thereon, shall be secured hereby in addition to the
Indebtedness and in priority to all other mortgages and
charges;
(b) it shall not surrender the Lease or any rights of
renewal with respect thereto nor terminate nor cancel
the Lease without the prior written consent of the
Mortgagee and that the Company will not, without the
prior written consent of the Mortgagee, modify, revise,
alter or amend the Lease, either orally or in writing;
(c) no release or forbearance of any of the Company's
covenants and obligations contained in the Lease or
pursuant to any prior encumbrance of the Leasehold
Interest or any part thereof shall release the Company
from any of its obligations contained herein;
(d) unless the Mortgagee shall otherwise expressly consent
in writing, the title in fee simple to the Lands and
the Leasehold Interest shall not merge but shall always
remain separate and distinct,
<PAGE>
-4-
notwithstanding the union of said estates in either the
Landlord or the Company, by purchase or otherwise;
(e) if the Company shall, at any time prior to the
repayment in full of the Indebtedness, purchase or in
any way acquire the freehold title to the Lands, this
mortgage and charge shall attach, extend to and
constitute a mortgage and charge of such freehold
estate;
(f) it will indemnify and save harmless the Mortgagee and
each Lender party to the Credit Agreement from and
against any and all losses, costs, claims, actions,
damages and expenses (including without limitation
legal fees and disbursements on a solicitor and client
basis) incurred or suffered by the Mortgagee and/or any
such Lender or its agents or employees as a result of
or in connection with the presence, removal, disposal
or movement of any hazardous waste or substance on the
Lands which is not in compliance with Applicable Law;
(g) it will at any time and from time to time, upon request
from the Mortgagee, deliver to the Mortgagee a
statement in writing certifying that: the Lease is in
full force and effect; there are no defaults under the
Lease; the Lease has not been modified or amended; all
amounts required to be paid by the Company under the
Lease have been paid to the date of the certificate;
(h) upon the occurrence of a default hereunder, the
Mortgagee may peaceably and quietly enter upon and use,
occupy, possess and enjoy the Lands and the Leasehold
Interest, free from all encumbrances, liens and
charges, without hindrance, interruption or denial of
the same by the Company or any other person or persons,
save only the rights of the Landlord under the Lease;
(i) the Company hereby assigns and transfers to the
Mortgagee all of the Company's right, title and
interest in and to the benefit of any and all non-
disturbance, attornment or like agreements to which the
Company is now or may hereafter become a party (and the
Company covenants and agrees to and with the Mortgagee
that the Company shall use its best efforts at its own
cost and expense to obtain from all appropriate third
parties non-disturbance, attornment or other similar
agreements in favour of the Mortgagee in form and
substance satisfactory to the Mortgagee); and
(j) the Company shall not subordinate or postpone or agree
to subordinate or postpone the Leasehold Interest or
the Mortgagee's security interests, charges or rights
therein, to or in favour of any lien, charge or
encumbrance without the prior written consent of the
Mortgagee.
8. The Indebtedness shall become payable and the security
hereby constituted shall become enforceable in each and every of the events
following (each of such events being hereinafter referred to as an "Event
of Default"):
(a) if an Event of Default (as defined in the Credit
Agreement) occurs;
(b) if the Company defaults in the observance or
performance in any material respect of any of its
covenants, agreements or other obligations under this
mortgage, provided however that if such default is
curable, such default has not been remedied within 30
days after the Secured Party has given notice to the
Company to remedy the default;
<PAGE>
-5-
(c) if an order is made or a resolution passed for the
winding-up of the Company, or if a petition is filed
for the winding-up of the Company;
(d) if the Company ceases or threatens to cease to carry on
business or if the Company commits or threatens to
commit any act of bankruptcy or if the Company becomes
insolvent or makes an assignment or proposal in
bankruptcy or makes a bulk sale of its assets or if a
bankruptcy petition is filed or presented against the
Company;
(e) if any proceedings with respect to the Company are
commenced under the COMPANIES' CREDITORS ARRANGEMENT
ACT or the BANKRUPTCY AND INSOLVENCY ACT or if the
Company shall seek relief or consent to the filing of a
petition against it under any law which involves any
compromise of any creditor's rights against the
Company;
(f) if an execution or any other process of any court
becomes enforceable against the Company or if a
distress or analogous process is levied upon the
property of the Company or any part thereof; or
(g) if any licences, permits or approvals required by any
law, regulation or governmental policy or any
governmental agency or commission for the operation by
the Company of its business shall be withdrawn or
cancelled.
9. No waiver by the Mortgagee of any of its rights or remedies
hereunder shall be considered a waiver of any other or subsequent right or
remedy of the Mortgagee, no delay or omission in the exercise or
enforcement by the Mortgagee of any right or remedy shall be considered as
a waiver of such right or remedy of the Mortgagee and no exercise or
enforcement of such right or remedy shall exhaust or preclude the exercise
of any other right or remedy by the Mortgagee.
10. Upon the occurrence and during the continuance of an Event
of Default the Mortgagee may: (a) take possession of all or part of the
Lands and the Leasehold Interest with the power to exclude the Company, its
agents and servants therefrom; and (b) enter upon and lease or sell the
whole or any part or parts of the property and assets charged hereby and
any such sale may be made hereunder by public auction, by public tender or
by private contract, with or without notice and with or without advertising
and without any other formality, all of which are hereby waived by the
Company to the fullest extent permitted by law and such sale shall be on
such terms and conditions as to credit or otherwise and as to upset or
reserve bid or price as to the Mortgagee in its sole discretion may seem
advantageous and such sale may take place whether or not the Mortgagee has
taken possession of such property and assets.
11. Upon the occurrence of an Event of Default, the Mortgagee
may appoint by instrument in writing a receiver (including a receiver and
manager) or receivers of the Leasehold Interest or any part thereof (which
receiver or receivers may be any person or persons, whether an officer or
officers or employee or employees of the Mortgagee or not and the Mortgagee
may remove any receiver or receivers so appointed and appoint another or
others in his or their stead) and any receiver or receivers so appointed
shall have the power to:
(a) take possession of and to use the Leasehold Interest or
any part thereof;
(b) preserve and maintain the Leasehold Interest as the
receiver shall deem advisable;
(c) borrow money required for the preservation or
protection of the Leasehold Interest or any part
thereof;
<PAGE>
-6-
(d) further charge the Leasehold Interest in priority to
the security interests of this mortgage as security for
monies so borrowed; and
(e) sell, lease or otherwise dispose of the whole or any
part of the Leasehold Interest on such terms and
conditions and in such manner as the receiver shall
determine in its sole and unfettered discretion.
The Mortgagee shall not be responsible for any actions or
errors of omission by the receiver or receivers in exercising any such
powers.
12. All rights and remedies of the Mortgagee contained herein
shall be cumulative, and all such rights and remedies may be pursued
jointly and separately, successively or concurrently at the sole discretion
of the Mortgagee.
13. The Company agrees to pay to the Mortgagee forthwith on
demand all costs, charges, expenses and fees (including without limitation
all legal fees and disbursements on a solicitor and client basis) of or
incurred by the Mortgagee and by any receiver or receivers or agent or
agents appointed by the Mortgagee in connection with the enforcement of
this mortgage, whether by realization, taking possession of the Tenant's
Leasehold Interest or otherwise. All such sums, together with interest
thereon at the rate or rates applicable to the Indebtedness shall be
secured by the charges contained herein. The term "receiver" as used in
this mortgage includes a receiver and manager.
14. Upon payment by the Company, its successors or assigns, of
the Indebtedness hereby secured (including without limitation interest,
costs and expenses), the Mortgagee shall upon request in writing by the
Company, its successors or assigns, deliver up this mortgage to the
Company, its successors or assigns and, at the expense of the Company,
cancel and discharge the charge of this mortgage and execute and deliver to
the Company, its successors or assigns such deeds or other instruments as
shall be requisite to discharge the charge constituted hereby.
15. This security is in addition to and not in substitution for
any other security now or hereafter held by the Mortgagee or any Lender
party to the Credit Agreement.
16. In the event that any provision hereof is for any reason
held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not
affect any other provision hereof and this mortgage shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein.
17. This mortgage shall be governed by the laws of the Province
of Ontario and the federal laws of Canada applicable therein and all
disputes among the parties hereto shall be submitted to the courts of the
Province of Ontario provided that the Mortgagee shall be entitled to
commence actions in the courts of any other jurisdiction at its discretion
for the purpose of enforcing the provisions hereof.
18. All notices, demands, requests, consents and other
communications required or permitted or otherwise to be given for any
purpose hereunder shall be in writing and shall be communicated by personal
delivery or by facsimile transmission to the respective addresses herein
set forth, or such other addresses which the parties hereto may from time
to time designate by written notice to the other as required herein. All
notices, demands, requests, consents and other communications shall be
addressed as follows:
(a) If to the Company, to it at:
5343 Dundas Street West
Suite 600
Etobicoke, Ontario
M9B 6K5
Attention: Barry Singer
Facsimile No.: (416) 236-7392
<PAGE>
-7-
(b) If to the Mortgagee, to it at:
First Union National Bank of North Carolina
One First Union Center
TW10, 301 S. College Street
Charlotte, North Carolina 28288
Attention:Syndication Agency Services
Facsimile No.: (704) 383-0288
Each communication given by personal delivery or by facsimile transmission
shall be deemed to have been received by the party to which it is so
addressed on the date of such personal delivery or facsimile transmission,
provided that it is delivered or faxed before 5:00 p.m. (Toronto, Ontario
time) on a Business Day (failing which, receipt shall be deemed to have
occurred on the next following Business Day). For the purposes of this
mortgage, a "Business Day" means a day on which Bank of Montreal's main
Toronto, Ontario branch (at 1 First Canadian Place) is open for normal
banking business, but specifically excludes any Saturday, Sunday or any
other day which is a statutory holiday in Toronto, Ontario.
19. This mortgage shall enure to the benefit of the Mortgagee
and each Lender which is now or may hereafter become a party to the Credit
Agreement and their respective successors and assigns and it shall be
binding upon the Company and its successors and assigns. The Mortgagee and
each Lender which is now or may hereafter become a party to the Credit
Agreement shall be entitled in its sole and unfettered discretion, without
the consent of the Company, to assign the indebtedness hereunder (and any
and all security therefor or interest therein) to any assignee or assignees
and the Company shall, at the Mortgagee's request, execute or cause to be
executed all documents required by the Mortgagee to facilitate such
assignment. The Company shall not, without the Mortgagee's prior written
consent, assign any interest herein to any other person, firm, corporation
or other entity whatsoever.
20. Notwithstanding anything else herein contained, payment by
Company to the Mortgagee of the Credit Agreement Indebtedness and other
costs and expenses (and interest thereon) contemplated thereby shall
constitute satisfaction and payment of the Indebtedness owing by the
Company to the Mortgagee hereunder.
21. In the event of any of any conflict or inconsistency
between the terms
and conditions contained herein and the terms and conditions contained in
Standard Charge Terms 911, the terms and conditions contained herein shall
govern to the extent of such conflict or inconsistency and the provisions
of the Standard Charge Terms No. 911 shall be deemed to be varied
accordingly.
22. Unless otherwise stated herein, all dollar amounts referred
to herein are denominated in Canadian dollars.
IN WITNESS WHEREOF the Company has caused its corporate seal to
be affixed to this mortgage under the hands of by its proper officers duly
authorized in that behalf as of the 14th day of January, 1997.
ACC TELENTERPRISES LTD./ TELENTREPRISES ACC
LTEE.
Per: /S/ JOHN J. ZIMMER
Name: John J. Zimmer c/s
Title: Assistant Controller
Per: /S/ DANIEL J. VENUTI
Name: Daniel J. Venuti
Title: Authorized Signatory
<PAGE>
-8-
SCHEDULE "A"
LEGAL DESCRIPTION OF LANDS
Parcel 1-3, Section AD-87, City of Toronto, Municipality of Metropolitan
Toronto, being parts of Lots 1, 2, 3, 4 and 5 on the south side of Court
Street, part of Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13 on the
north side of King Street East, part of the Court House Lot, part of the
Home District Gaol Lot all on Plan D-87 (City of Toronto) designated as
PARTS 6, 7, 8, 9, 15, 16, 17, 18, 19, 20, 21, 22, 25, 31, 32, 33, 34, 35,
36, 37, 40, 41, 43, 44, 45, 46, 47, 48, 52, 55, 56, 57, 58, 61, 62, 64 and
65 on Plan 66R-16018.
Plan BA-2190 on a Plan under the Boundaries Act as Plan D-857 confirms the
boundaries of the street limits of King Street East, Church Street, Court
Street and Toronto Street (See C-194337).
As in Instrument No. C-898674.
Seal of DOCUMENT GENERAL Exhibit 10-26 D
Province of Ontario Form 4 -- Land Registration Reform Act 1984
<TABLE>
<CAPTION>
<S><C> <C> <C> <C>
F (1)Registry / / Land Titles /x/ (2) Page 1 of 11 pages
O
R (3) Property Block Property
Identifier(s) Additional:
O See
F Schedule / /
F -------------------------------- ------------------- -----------------
I (4) Nature of Document
C NOTICE OF CHARGE OF LEASE (Subsection 111(6) of the Act)
E -------------------------------- -------------------- -----------------
(5) Consideration
U TWO-----------100 Dollars $2.00
S -------------------------- -------------------------------- ------------------- -----------------
E (6) Description
New Property Identifiers Part of Lot 7, Concession 5 Colonel Smith's Tract,
O Additional: City of Etobicoke,
N See Municipality of Metropolitan Toronto,
L Schedule / / designated as Parts 3 and 5 on Plan 64R-5004
Y
Land Titles Division of Metropolitan Toronto (No. 66)
-------------------------- -------------------------------- --------------------- ----------------
Executions (7) This (a) Redescription (b) Schedule for:
Additional: Document New Easement Additional
See Contains: Plan/Sketch / / Description / / Parties Other /x/
Schedule / /
-------------------------- --------------------------------- -------------------- ------------------
(8)This Document provides as follows:
To: The Land Registrar for the Land Titles Division of Metropolitan Toronto (No. 66)
The undersigned, a ACC TelEnterprises Ltd./TelEntreprises ACC Ltee. hereby applies for the entry of a notice of a charge of lease
dated January 14, 1997 wherein ACC TelEnterprises Ltd./TelEntreprises ACC Ltee. charged to First Union National Bank of North
Carolina, as Agent its interest in the lease, notice of which is registered as No. CA357723, notice of an assignment of which
lease is registered as No. CA357724, and notice of an amendment of which lease is registered as No. , in respect of
part of the lands and premises described in Box (6) hereof of which Dundas Kipling II Inc. is a registered owner.
Continued on Schedule /x/
- ---------------------------------------------------------------------------------------------------------------------------------
(9)This Document relates to instrument number(s)
Nos. CA357723, CA357724, and
- ---------------------------------------------------------------------------------------------------------------------------------
10)Party(ies) (Set out Status or Interest)
Name(s) Signature(s) Date of Signature
Y M D
ACC TELENTERPRISES LTD./TELENTREPRISES ACC Per: /s/ John J. Zimmer 1997 1 8
LTEE. (Tenant) (Chargor) Name: John J. Zimmer
Title: Assistant Controller
We have authority to bind the Corporation Per: /s/ Daniel J. Venuti 1997 1 8
Name: Daniel J. Venuti
Title: Authorized Signatory
(11)Address
for
Service 5343 Dundas Street West, Suite 600, Etobicoke, Ontario M9B 6K5
-----------------------------------------------------------------------------------------------------------------------------
(12)Party(ies) (Set out Status or Interest)
Name(s) Signature(s) Date of Signature
Y M D
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA AS AGENT
(Chargee)
- ---------------------------------------------------------------------------------------------------------------------------------
(13)Address
for Service
1 First Union Center, TW10, 301 S. College Street, Charlotte, North Carolina 28288
- ---------------------------------------------------------------------------------------------------------------------------------
(14)Municipal Address of Property (15)Document Prepared by: F Fees and Tax
O ----------------------------------------------
5343 Dundas Street West Fraser & Beatty R Registration Fee
Etobicoke, Ontario P.O. Box 100
1 First Canadian Place O ------------------------ --------------------
Toronto, Ontario F
M5X 1B2 F
(MJW) I ------------------------ --------------------
C
E
======================== ====================
U
S Total
E
O
N
L
Y ======================== ====================
Total
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Seal of CHARGE/MORTGAGE OF LAND B
Province of Ontario Form 2 -- Land Registration Reform Act, 1984
<S> <C> <C> <C>
F (1)Registry / / Land Titles /x/ (2) Page 2 of 11 pages
O ---------------------------------- -------------------------------- -----------------------------
R (3) Property Block Property
Identifier(s) Additional:
O See
F Schedule
F ---------------------------------- ------------------------------- -----------------------------
I (4) Principal Amount
C FIFTY MILLION-----------00/100 DOLLARS ($50,000,000.00)
E ---------------------------------- ------------------------------- -----------------------------
New Property Identifiers (5) Description
U Additional:
S See Part of Lot 7, Concession 5, Colonel Smith's Tract,
E Schedule / / City of Etobicoke, in the Municipality of Metropolitan Toronto,
----------------------------- designated as Part 3 and 5 on Plan 64R-5004
O Executions
N Additional: Land Titles Division of Metropolitan Toronto (No.66)
L See
Y Schedule / /
----------------------------- -------------------------------- ------------------------------ -----------------------------
(6) This (a) Redescription (b) Schedule for: (7) Interest/Estate Charged
Document New Easement
Contains Plan/Sketch / / Additional
Description / / Parties / / Other /x/ LEASEHOLD INTEREST
- ---------------------------------------------------------------------------------------------------------------------------------
(8) Standard Charge Terms -- The parties agree to be bound by the provisions in Standard Charge Terms filed as number 911 and the
Chargor(s) ehreby acknowledge(s) receipt of a copy of these terms
- ---------------------------------------------------------------------------------------------------------------------------------
(9) Payment Provisions (b) Interest Rate (c) Calculation Period
(a) Principal % per annum
Amount $ SEE SCHEDULE
Interest Y M D Payment First Y M D
(d) Adjustment (e) Date and (f) Payment
Date Period Date
Last Amount
(g) Payment (h) of Each
Date Payment Dollars $
- ---------------------------------------------------------------------------------------------------------------------------------
Balance (j) Insurance Dollars $
(i) Due Date
- ---------------------------------------------------------------------------------------------------------------------------------
10) Additional Provisions
SEE SCHEDULE
- ---------------------------------------------------------------------------------------------------------------------------------
(11) Chargor(s) The chargor hereby charges the land to the chargee and certifies that the chargor is at least eighteen years old
and that the Chargor is a corporation.
The chargor(s) acknowledge(s) receipt of a true copy of this charge
Name(s) Signature(s) Date of Signature
Y M D
ACC TELENTERPRISES LTD./TELENTREPRISES ACC LTEE. Per: /s/ John J. Zimmer 1997 1 8
Name: John J. Zimmer
Title: Assistant Controller
I/We have authority to bind the Corporation. Per: /s/ Daniel J. Venuti 1997 1 8
Name: Daniel J. Venuti
Title: Authorized Signatory
- ----------------------------------------------------------------------------------------------------------------------------------
(12) Spouse(s) of chargor(s) I hereby consent to this transaction
Name(s) Signature(s) Date of Signature
Y M D
- ---------------------------------------------------------------------------------------------------------------------------------
(13)Chargor(s) Address
for Service
Suite 600, 5343 Dundas Street West, Etobicoke, Ontario, M9B 6K5
- ---------------------------------------------------------------------------------------------------------------------------------
(14) Chargee(s)
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, AS AGENT
- ---------------------------------------------------------------------------------------------------------------------------------
(15) Chargee(s) Address
for service One First Union Center, TW 10, 301 S. College Street, Charlotte, North Carolina 28288
- ---------------------------------------------------------------------------------------------------------------------------------
(16) Assessment Roll Number of Property Cty Mun Map Sub Par
19 19 031 020 02100
- ---------------------------------------------------------------------------------------------------------------------------------
(17)Municipal Address of Property (18)Document Prepared by: F Fees and Tax
O ------------------------------------------------
5343 Dundas Street West Michael J. Wunder R
Etobicoke, Ontario Fraser & Beatty Registration Fee
1 First Canadian Place O
P.O. Box 100 F ----------------------- -----------------------
Toronto, Ontario M5X 1B2 F
I ----------------------- -----------------------
C
E ----------------------- -----------------------
U Total
S
E
O
N
L
_______________________________________________________________________________Y _______________________ ______________________
</TABLE>
<PAGE>
MORTGAGE OF LEASEHOLD INTEREST
This agreement made as of the 14th day of January, 1997.
BETWEEN:
ACC TELENTERPRISES LTD./TELENTREPRISES ACC
LTEE., a corporation amalgamated under the laws of the
Province of Ontario
(hereinafter called the "Company")
OF THE FIRST PART
-and-
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT
OF THE SECOND PART
WHEREAS ACC Long Distance Ltd./Interurbains ACC Ltee. ("ACC
Ltd."), as lessee, entered into to an amended and restated lease dated as
of March 1, 1994 between the Company, as tenant, and Coopers & Lybrand as
receiver and manager for Dundas Kipling II Inc., as landlord (the "Original
Lease"), relating to the lands and premises municipally known as 5343
Dundas Street West, Etobicoke, Ontario and more particularly described in
Schedule "A" hereto (which leased premises are hereinafter referred to as
the "Lands");
AND WHEREAS the ACC Ltd. assigned its right, title and interest
in and to the Lease and the obligations owing thereunder to ACC Long
Distance Inc./Interurbains ACC Inc. ("ACC Inc.") pursuant to an assignment
and assumption agreement dated as of March 1, 1994;
AND WHEREAS the Original Lease was amended by a Lease Amending
Agreement (the "Amending Agreement") dated as of June 10, 1996 pursuant to
which, among other things, effective November 1, 1996, the Original Lease
was amended to expand the Premises (as that term is defined in the Original
Lease) to be an additional 17,624 square feet of Rental Area (as such term
is defined in the Original Lease) (the Original Lease, as amended by the
Amending Agreement and as may be hereafter amended, extended or further
restated from time to time is hereinafter collectively referred to as the
"Lease");
AND WHEREAS ACC Inc. amalgamated with, among others ACC
TelEnterprises Ltd./TelEntreprises ACC Ltee. effective January 1, 1997 and
continued as ACC TelEnterprises Ltd./TelEntreprises ACC Ltee. (the
"Company");
AND WHEREAS the Company has agreed to mortgage, charge and assign
all of its right, title and interest in and to and all benefits arising
under or in respect of the Lease including without limitation its rights
and interests in the Lands (which rights, title, interests and benefits are
hereinafter collectively called the "Leasehold Interest") to the Mortgagee
(as that term is hereinafter defined) as security for payment of the
Indebtedness;
NOW WITNESS that in consideration of the sum of TWO DOLLARS
($2.00) now paid by the Mortgagee to the Company and other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged by the Company), the Company hereby agrees with the Mortgagee
as follows:
1. Subject to the exception as to leasehold hereinafter
contained, the Company, as security for repayment of the sum of Fifty
Million ($50,000,000 Cdn.) Canadian Dollars and the "Obligations" (as that
term is hereinafter defined) of the Company under or pursuant to the
certain amended and restated credit agreement dated January 14, 1997
between ACC Corp. and certain subsidiaries thereof (including without
limitation the Company), as borrowers, ACC Corp. as guarantor, the lenders
referred to therein, First Union National Bank of North Carolina, as
Managing Agent and Administrative Agent and Fleet National Bank, as
Managing Agent and Documentation Agent (such amended and restated credit
agreement as may
<PAGE>
-2-
be amended, supplemented, replaced or restated from time to time being
hereinafter called the "Credit Agreement") (the term "Obligations" shall
have the same meaning ascribed thereto in the Credit Agreement) (all of the
Company's foregoing indebtedness and the Obligations being hereinafter
called the "Credit Agreement Indebtedness") together with interest thereon
at the rate of twenty-five (25%) percent per annum calculated and payable
monthly not in advance, both before and after demand and before and after
default, judgment and execution from the date hereof until payment (the
Credit Agreement Indebtedness together with interest thereon as set out
above is hereinafter collectively referred to as the "Indebtedness"),
hereby mortgages, charges and assigns to First Union National Bank of North
Carolina, as Administrative Agent for the benefit of itself and the
financial institutions as are, or may from time to time become lenders
under the Credit Agreement (the "Mortgagee"), and grants to the Mortgagee a
security interest in the Leasehold Interest.
TO HAVE AND TO HOLD the assets hereby mortgaged and charged to
the Mortgagee, its successors and assigns, forever but subject to the terms
and conditions herein set forth.
2. It is hereby declared that the last day of any term of years
reserved by any lease, verbal or written, or any agreement therefor
(including without limitation the Lease), now held or hereafter acquired by
the Company, and whether falling within the general or particular
description of the mortgaged premises hereunder or otherwise shall be
excepted out of the mortgage and charge constituted hereby or by any other
agreement, but the Company shall stand possessed of the reversion of one
day remaining in the Company in respect of any such term of years, for the
time being demised, as aforesaid, upon trust to assign and dispose of the
same as any purchaser of such term of years shall direct.
3. The Company hereby covenants and agrees that it shall at all
times, at its own cost and expense, do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged or delivered all and singular
every such further act, deed, transfer, assignment and assurance as the
Mortgagee may reasonably require for the better mortgaging, charging,
transferring, assigning and confirming unto the Mortgagee the property and
assets hereby mortgaged and charged or intended so to be or which the
Company may hereafter become bound to mortgage charge, transfer or assign
in favour of the Mortgagee and for the better accomplishing and
effectuating of this mortgage.
4. The Mortgagee shall not in any way whatsoever be obligated
to perform any covenants or obligations of the Company under the Lease.
5. The Company represents and warrants to the Mortgagee and
each Lender (as that term is defined in the Credit Agreement) party to the
Credit Agreement that as of the date hereof: (a) the Lease has not been
surrendered or forfeited; (b) the rents and covenants therein contained
have been duly paid and performed by the Company; (c) the Company has full
right, power and authority to mortgage and charge the Lease and the
Leasehold Interest as contemplated hereby; and (d) the Company has obtained
the consent of the Landlord to the mortgaging and charging of the Lease and
the Leasehold Interest (if such consent is required to be obtained from the
Landlord).
6. The Company hereby covenants and agrees to and with the
Mortgagee and each Lender party to the Credit Agreement that until the
Indebtedness has been repaid in full, the Company:
(a) shall not without the prior written consent of the Mortgagee
create any lien upon or assign or transfer as security or
pledge or hypothecate any asset subject to the mortgage and
charge hereof except to the Mortgagee and the Company will
not, in the ordinary course of business or otherwise, sell,
transfer, assign, or otherwise dispose of any such asset
without the prior written consent of the Mortgagee;
(b) shall not without the prior written consent of the Mortgagee
merge or amalgamate with any other corporation;
(c) shall insure and keep insured the buildings, erections,
fixtures, improvements, premises and all other assets hereby
charged against loss
<PAGE>
-3-
or damage by fire and other insurable hazards which such
assets are commonly insured against in the Province of
Ontario to the full insurable value thereof; the Company
shall duly and promptly pay all premiums and other sums of
money payable for maintaining such insurance and shall cause
all insurance proceeds thereunder to be payable in the case
of loss to the Mortgagee as first mortgagee and loss payee
such insurance policy(ies) to contain a standard mortgage
clause and the Company shall, upon request from the
Mortgagee, provide to the Mortgagee evidence of the payment
of such premiums and the assignment of such insurance
proceeds to the Mortgagee; and
(f) shall strictly comply with every covenant and undertaking
heretofore or hereafter given by it to the Mortgagee.
7. The Company covenants and agrees to and with the Mortgagee
and each Lender party to the Credit Agreement that:
(a) it shall at all times fully perform and comply with all
of its covenants and obligations contained in the
Lease, and imposed upon or assumed or agreed to by it
pursuant to any prior encumbrance of the Lands or any
part thereof or its Leasehold Interest therein and
that, if the Company shall fail to do so the Mortgagee
may (but shall not be obligated to) take any action the
Mortgagee deems necessary or desirable to cure any
default by the Company in the performance of or
compliance with any of the obligations of the Company
pursuant to the Lease or imposed upon, assumed by or
agreed to by the Company pursuant to any such prior
encumbrance; upon receipt by the Mortgagee from the
Landlord or from any such prior encumbrancer of any
written notice of default by the Company, the Mortgagee
may rely thereon and take any action as aforesaid to
cure such default even though the existence of such
default or the nature thereof may be questioned or
denied by the Company or by any party on behalf of the
Company; the Company hereby expressly grants to the
Mortgagee and agrees that the Mortgagee shall have the
absolute and immediate right to enter in and upon the
Lands or any part thereof to such extent and as often
as the Mortgagee, in its sole discretion, deems
necessary or desirable, in order to cure any such
default by the Company; the Mortgagee may pay and
expend such sums of money as the Mortgagee in its sole
discretion, acting reasonably, deems necessary or
desirable for any such purpose, and the Company hereby
agrees to pay to the Mortgagee, immediately upon
notification by the Mortgagee and without demand, all
such sums so paid and expended by the Mortgagee,
together with interest thereon at the rate applicable
to the Indebtedness from time to time; all such sums so
paid or expended by the Mortgagee and such interest
thereon, shall be secured hereby in addition to the
Credit Agreement Indebtedness and in priority to all
other mortgages and charges;
(b) it shall not surrender the Lease or any rights of
renewal with respect thereto nor terminate nor cancel
the Lease without the prior written consent of the
Mortgagee and that the Company will not, without the
prior written consent of the Mortgagee, modify, revise,
alter or amend the Lease, either orally or in writing;
(c) no release or forbearance of any of the Company's
covenants and obligations contained in the Lease or
pursuant to any prior encumbrance of the Leasehold
Interest or any part thereof shall release the Company
from any of its obligations contained herein;
(d) unless the Mortgagee shall otherwise expressly consent
in writing, the title in fee simple to the Lands and
the Leasehold Interest shall
<PAGE>
-4-
not merge but shall always remain separate and
distinct, notwithstanding the union of said estates in
either the Landlord or the Company, by purchase or
otherwise;
(e) if the Company shall, at any time prior to the
repayment in full of the Indebtedness, purchase or in
any way acquire the freehold title to the Lands, this
mortgage and charge shall attach, extend to and
constitute a mortgage and charge of such freehold
estate;
(f) it will indemnify and save harmless the Mortgagee and
each Lender party to the Credit Agreement from and
against any and all losses, costs, claims, actions,
damages and expenses (including without limitation
legal fees and disbursements on a solicitor and client
basis) incurred or suffered by the Mortgagee and/or any
such Lender or its agents or employees as a result of
or in connection with the presence, removal, disposal
or movement of any hazardous waste or substance on the
Lands which is not in compliance with Applicable Law;
(g) it will at any time and from time to time, upon request
from the Mortgagee, deliver to the Mortgagee a
statement in writing certifying that: the Lease is in
full force and effect; there are no defaults under the
Lease; the Lease has not been modified or amended; all
amounts required to be paid by the Company under the
Lease have been paid to the date of the certificate;
(h) upon the occurrence of a default hereunder, the
Mortgagee may peaceably and quietly enter upon and use,
occupy, possess and enjoy the Lands and the Leasehold
Interest, free from all encumbrances, liens and
charges, without hindrance, interruption or denial of
the same by the Company or any other person or persons,
save only the rights of the Landlord under the Lease;
(i) the Company hereby assigns and transfers to the
Mortgagee all of the Company's right, title and
interest in and to the benefit of any and all non-
disturbance, attornment or like agreements to which the
Company is now or may hereafter become a party (and the
Company covenants and agrees to and with the Mortgagee
that the Company shall use its best efforts at its own
cost and expense to obtain from all appropriate third
parties non-disturbance, attornment or other similar
agreements in favour of the Mortgagee in form and
substance satisfactory to the Mortgagee); and
(j) the Company shall not subordinate or postpone or agree
to subordinate or postpone the Leasehold Interest or
the Mortgagee's security interests, charges or rights
therein, to or in favour of any lien, charge or
encumbrance without the prior written consent of the
Mortgagee.
8. The Indebtedness shall become payable and the security
hereby constituted shall become enforceable in each and every of the events
following (each of such events being hereinafter referred to as an "Event
of Default"):
(a) if an Event of Default (as defined in the Credit
Agreement) occurs;
(b) if the Company defaults in the observance or
performance in any material respect of any of its
covenants, agreements or other obligations under this
mortgage, provided however that if such default is
curable, such default has not been remedied within 30
days after the Secured Party has given notice to the
Company to remedy the default;
<PAGE>
-5-
(c) if an order is made or a resolution passed for the
winding-up of the Company, or if a petition is filed
for the winding-up of the Company;
(d) if the Company ceases or threatens to cease to carry on
business or if the Company commits or threatens to
commit any act of bankruptcy or if the Company becomes
insolvent or makes an assignment or proposal in
bankruptcy or makes a bulk sale of its assets or if a
bankruptcy petition is filed or presented against the
Company;
(e) if any proceedings with respect to the Company are
commenced under the CoMPANIES' CREDITORS ARRANGEMENT
ACT or the BANKRUPTCY AND INSOLVENCY ACT or if the
Company shall seek relief or consent to the filing of a
petition against it under any law which involves any
compromise of any creditor's rights against the
Company;
(f) if an execution or any other process of any court
becomes enforceable against the Company or if a
distress or analogous process is levied upon the
property of the Company or any part thereof; or
(g) if any licences, permits or approvals required by any
law, regulation or governmental policy or any
governmental agency or commission for the operation by
the Company of its business shall be withdrawn or
cancelled.
9. No waiver by the Mortgagee of any of its rights or remedies
hereunder shall be considered a waiver of any other or subsequent right or
remedy of the Mortgagee, no delay or omission in the exercise or
enforcement by the Mortgagee of any right or remedy shall be considered as
a waiver of such right or remedy of the Mortgagee and no exercise or
enforcement of such right or remedy shall exhaust or preclude the exercise
of any other right or remedy by the Mortgagee.
10. Upon the occurrence and during the continuance of an Event
of Default the Mortgagee may: (a) take possession of all or part of the
Lands and the Leasehold Interest with the power to exclude the Company, its
agents and servants therefrom; and (b) enter upon and lease or sell the
whole or any part or parts of the property and assets charged hereby and
any such sale may be made hereunder by public auction, by public tender or
by private contract, with or without notice and with or without advertising
and without any other formality, all of which are hereby waived by the
Company to the fullest extent permitted by law and such sale shall be on
such terms and conditions as to credit or otherwise and as to upset or
reserve bid or price as to the Mortgagee in its sole discretion may seem
advantageous and such sale may take place whether or not the Mortgagee has
taken possession of such property and assets.
11. Upon the occurrence of an Event of Default, the Mortgagee
may appoint by instrument in writing a receiver (including a receiver and
manager) or receivers of the Leasehold Interest or any part thereof (which
receiver or receivers may be any person or persons, whether an officer or
officers or employee or employees of the Mortgagee or not and the Mortgagee
may remove any receiver or receivers so appointed and appoint another or
others in his or their stead) and any receiver or receivers so appointed
shall have the power to:
(a) take possession of and to use the Leasehold Interest or
any part thereof;
(b) preserve and maintain the Leasehold Interest as the
receiver shall deem advisable;
(c) borrow money required for the preservation or
protection of the Leasehold Interest or any part
thereof;
<PAGE>
-6-
(d) further charge the Leasehold Interest in priority to
the security interests of this mortgage as security for
monies so borrowed; and
(e) sell, lease or otherwise dispose of the whole or any
part of the Leasehold Interest on such terms and
conditions and in such manner as the receiver shall
determine in its sole and unfettered discretion.
The Mortgagee shall not be responsible for any actions or
errors of omission by the receiver or receivers in exercising any such
powers.
12. All rights and remedies of the Mortgagee contained herein
shall be cumulative, and all such rights and remedies may be pursued
jointly and separately, successively or concurrently at the sole discretion
of the Mortgagee.
13. The Company agrees to pay to the Mortgagee forthwith on
demand all costs, charges, expenses and fees (including without limitation
all legal fees and disbursements on a solicitor and client basis) of or
incurred by the Mortgagee and by any receiver or receivers or agent or
agents appointed by the Mortgagee in connection with the enforcement of
this mortgage, whether by realization, taking possession of the Tenant's
Leasehold Interest or otherwise. All such sums, together with interest
thereon at the rate or rates applicable to the Indebtedness shall be
secured by the charges contained herein. The term "receiver" as used in
this mortgage includes a receiver and manager.
14. Upon payment by the Company, its successors or assigns, of
the Indebtedness hereby secured (including without limitation interest,
costs and expenses), the Mortgagee shall upon request in writing by the
Company, its successors or assigns, deliver up this mortgage to the
Company, its successors or assigns and, at the expense of the Company,
cancel and discharge the charge of this mortgage and execute and deliver to
the Company, its successors or assigns such deeds or other instruments as
shall be requisite to discharge the charge constituted hereby.
15. This security is in addition to and not in substitution for
any other security now or hereafter held by the Mortgagee or any Lender
party to the Credit Agreement.
16. In the event that any provision hereof is for any reason
held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not
affect any other provision hereof and this mortgage shall be construed as
if such invalid, illegal or unenforceable provision had never been
contained herein.
17. This mortgage shall be governed by the laws of the Province
of Ontario and the federal laws of Canada applicable therein and all
disputes among the parties hereto shall be submitted to the courts of the
Province of Ontario provided that the Mortgagee shall be entitled to
commence actions in the courts of any other jurisdiction at its discretion
for the purpose of enforcing the provisions hereof.
18. All notices, demands, requests, consents and other
communications required or permitted or otherwise to be given for any
purpose hereunder shall be in writing and shall be communicated by personal
delivery or by facsimile transmission to the respective addresses herein
set forth, or such other addresses which the parties hereto may from time
to time designate by written notice to the other as required herein. All
notices, demands, requests, consents and other communications shall be
addressed as follows:
(a) If to the Company, to it at:
5343 Dundas Street West
Suite 600
Etobicoke, Ontario
M9B 6K5
Attention: Barry Singer
Facsimile No.: (416) 236-7392
<PAGE>
-7-
(b) If to the Mortgagee, to it at:
First Union National Bank of North Carolina
One First Union Center
TW10, 301 S. College Street
Charlotte, North Carolina 28288
Attention:Syndication Agency Services
Facsimile No.: (704) 383-0288
Each communication given by personal delivery or by facsimile transmission
shall be deemed to have been received by the party to which it is so
addressed on the date of such personal delivery or facsimile transmission,
provided that it is delivered or faxed before 5:00 p.m. (Toronto, Ontario
time) on a Business Day (failing which, receipt shall be deemed to have
occurred on the next following Business Day). For the purposes of this
mortgage, a "Business Day" means a day on which Bank of Montreal's main
Toronto, Ontario branch (at 1 First Canadian Place) is open for normal
banking business, but specifically excludes any Saturday, Sunday or any
other day which is a statutory holiday in Toronto, Ontario.
19. This mortgage shall enure to the benefit of the Mortgagee
and each Lender which is now or may hereafter become a party to the Credit
Agreement and their respective successors and assigns and it shall be
binding upon the Company and its successors and assigns. The Mortgagee and
each Lender which is now or may hereafter become a party to the Credit
Agreement shall be entitled in its sole and unfettered discretion, without
the consent of the Company, to assign the indebtedness hereunder (and any
and all security therefor or interest therein) to any assignee or assignees
and the Company shall, at the Mortgagee's request, execute or cause to be
executed all documents required by the Mortgagee to facilitate such
assignment. The Company shall not, without the Mortgagee's prior written
consent, assign any interest herein to any other person, firm, corporation
or other entity whatsoever.
20. Notwithstanding anything else herein contained, payment by
Company to the Mortgagee of the Credit Agreement Indebtedness and other
costs and expenses (and interest thereon) contemplated thereby shall
constitute satisfaction and payment of the Indebtedness owing by the
Company to the Mortgagee hereunder.
21. In the event of any of any conflict or inconsistency
between the terms
and conditions contained herein and the terms and conditions contained in
Standard Charge Terms 911, the terms and conditions contained herein shall
govern to the extent of such conflict or inconsistency and the provisions
of the Standard Charge Terms No. 911 shall be deemed to be varied
accordingly.
22. Unless otherwise stated herein, all dollar amounts referred
to herein are denominated in Canadian dollars.
IN WITNESS WHEREOF the Company has caused its corporate seal to
be affixed to this mortgage under the hands of by its proper officers duly
authorized in that behalf as of the 14th day of January, 1997.
ACC TELENTERPRISES LTD./ TELENTREPRISES ACC
LTEE.
Per: /S/ JOHN J. ZIMMER
Name: John J. Zimmer c/s
Title: Assistant Controller
Per: /S/ DANIEL J. VENUTI
Name: Daniel J. Venuti
Title: Authorized Signatory
<PAGE>
-8-
SCHEDULE "A"
LEGAL DESCRIPTION OF LANDS
Part of Lot 7, Concession 5, Colonel Smith's Tract, City of Etobicoke, in
the Municipality of Metropolitan Toronto, designated as Part 3 and 5 on
Plan 64R-5004.
City of Toronto, Municipality of Metropolitan Toronto.
Exhibit 10-27
AMENDED AND RESTATED PLEDGE AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AGREEMENT (the "Pledge
Agreement"), dated as of January 14, 1997 is made by ACC CORP., a
Delaware corporation (the "Pledgor"), in favor of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association (the
"Administrative Agent"), as Administrative Agent for the ratable benefit
of itself and the financial institutions (the "Lenders") as are, or may
from time to time become, parties to the Amended and Restated Credit
Agreement (as defined below).
STATEMENT OF PURPOSE
The Pledgor has previously executed and delivered to the
Administrative Agent a Pledge Agreement dated as of July 21, 1995 (the
"Original Pledge Agreement") in connection with the Original Credit
Agreement.
Pursuant to the Amended and Restated Credit Agreement, dated
as of even date herewith (as amended, restated or otherwise modified,
the "Amended and Restated Credit Agreement"), between the Pledgor and
certain Subsidiaries of the Pledgor as Borrowers thereunder
(collectively, the "Borrowers"), the Lenders and the Administrative
Agent, the Lenders will provide Extensions of Credit to the Borrowers as
more specifically described in the Amended and Restated Credit
Agreement.
The Pledgor is the legal and beneficial owner of the shares of
Pledged Stock (as hereinafter defined) issued by the Domestic
Subsidiaries and the Foreign Subsidiaries, as specified on Schedule 1
attached hereto and incorporated herein by reference (collectively, the
"Issuers").
In connection with the transactions contemplated by the
Amended and Restated Credit Agreement and as a condition precedent
thereto, the Lenders have requested that the Pledgor amend and restate
the Original Pledge Agreement, and the Pledgor has agreed to do so
pursuant to the terms of this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into and make
available Loans pursuant to the Amended and Restated Credit Agreement,
the Pledgor hereby agrees with the Administrative Agent for the ratable
benefit of itself and Lenders as follows:
1. Defined Terms. Unless otherwise defined herein, terms
which are defined in the Amended and Restated Credit Agreement and used
herein are so used as so defined, and the following terms shall have the
following meanings:
"Code" means the Uniform Commercial Code from
time to time in effect in the State of North
Carolina.
"Collateral" means the Pledged Stock and all
Proceeds.
"Pledge Agreement" means this Amended and
Restated Pledge Agreement, as further amended,
restated or otherwise modified.
"Pledged Stock" means the shares of capital
stock of each Issuer listed on Schedule 1 hereto,
together with all stock certificates, options or
rights of any nature whatsoever that may be issued
or granted by such Issuer to the Pledgor while this
Pledge Agreement is in effect.
"Proceeds" means all "proceeds" as such term
is defined in Section 9-306(1) of the Code on the
date hereof and, in any event, shall include,
without limitation, all dividends or other income
from the Pledged Stock, collections thereon,
proceeds of sale thereof or distributions with
respect thereto.
"Secured Obligations" means the Obligations as
defined in the Amended and Restated Credit
Agreement and any renewals or extensions of any of
such Obligations.
2. Pledge and Grant of Security Interests. The Pledgor
hereby delivers to the Administrative Agent, for the ratable benefit of
itself and the Lenders, all of the Pledged Stock and hereby grants to
the Administrative Agent, for the ratable benefit of itself and the
Lenders, a first priority security interest in such Pledged Stock and
all other Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations.
3. Stock Powers. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares
of Pledged Stock, the Pledgor shall deliver an undated stock power
covering such certificate, duly executed in blank by the Pledgor with,
if the Administrative Agent so requests, signature guaranteed.
4. Representations and Warranties. To induce the
Administrative Agent and the Lenders to execute the Amended and Restated
Credit Agreement, provide any Extensions of Credit and accept the
security contemplated hereby, the Pledgor hereby represents and warrants
that:
(a) the Pledgor has the corporate power, authority and
legal right to execute and deliver, to perform its obligations
under, and to grant the Lien on the Collateral pursuant to,
this Pledge Agreement and has taken all necessary corporate
action to authorize its execution, delivery and performance
of, and grant of the Lien on the Collateral pursuant to, this
Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and
binding obligation of the Pledgor enforceable against the
Pledgor in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the availability of
equitable remedies;
(c) the execution, delivery and performance of this
Pledge Agreement will not violate any provision of any
Applicable Law or contractual obligation of the Pledgor and
will not result in the creation or imposition of any Lien on
any of the properties or revenues of the Pledgor pursuant to
any Applicable Law or contractual obligation, except as
contemplated hereby;
(d) except as contemplated in Section 11 hereof, no
consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation,
any stockholder or creditor of the Pledgor or any Issuer), is
required in connection with the execution, delivery,
performance, validity or enforceability against the Pledgor of
this Pledge Agreement;
(e) no litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Pledgor, threatened by or against the
Pledgor or against any of its properties or revenues with
respect to this Pledge Agreement or any of the transactions
contemplated hereby;
(f) the shares of Pledged Stock listed on Schedule 1
constitute all the issued and outstanding shares of all
classes of the capital stock of each of the Domestic
Subsidiaries and constitute 66.66% of all the issued and
outstanding shares of all classes of capital stock of the U.K.
Subsidiaries and Canadian Subsidiaries;
(g) all the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable;
(h) the Pledgor is the record and beneficial owner of,
and has good and marketable title to, the Pledged Stock listed
on Schedule 1, free of any and all Liens or options in favor
of, or claims of, any other Person, except the Lien created by
this Pledge Agreement; and
(i) upon delivery to the Administrative Agent of the
stock certificates evidencing the Pledged Stock, the Lien
granted pursuant to this Pledge Agreement will constitute a
valid, perfected first priority Lien on the Pledged Stock and
the Proceeds related thereto, enforceable as such against all
creditors of the Pledgor and any Persons purporting to
purchase any of the Pledged Stock from the Pledgor.
5. Certain Covenants. The Pledgor covenants and agrees with
the Administrative Agent for the ratable benefit of itself and the
Lenders that, from and after the date of this Pledge Agreement until the
Secured Obligations are paid in full and the Commitments are terminated:
(a) If the Pledgor shall, as a result of its ownership
of the Pledged Stock, become entitled to receive or shall
receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase
or reduction of capital or any certificate issued in
connection with any reorganization), option or rights, whether
in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in
respect thereof, the Pledgor shall accept the same as the
agent of the Administrative Agent, hold the same in trust for
the Administrative Agent and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed
by the Pledgor to the Administrative Agent, if required,
together with an undated stock power covering such certificate
duly executed in blank by the Pledgor and with, if the
Administrative Agent so requests, signature guaranteed, to be
held by the Administrative Agent, subject to the terms hereof,
as additional collateral security for the Secured Obligations;
provided, that in no event shall more than 66.66% of all the
issued and outstanding shares of all classes of capital stock
of each of the Canadian Subsidiaries and U.K. Subsidiaries
constitute collateral security hereunder. In addition, any
sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of any Issuer shall be held by the
Administrative Agent as additional collateral security for the
Secured Obligations.
(b) Without the prior written consent of the
Administrative Agent, the Pledgor will not (i) vote to enable,
or take any other action to permit, any Issuer to issue any
stock or other equity securities of any nature or to issue any
other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities
of any nature of such Issuer, (ii) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Stock, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim
of any Person with respect to, any of the Collateral, or any
interest therein, except for the Lien provided for by this
Pledge Agreement. The Pledgor will defend the right, title
and interest of the Administrative Agent in and to the
Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense
of the Pledgor, the Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such
further actions as the Administrative Agent may reasonably
request for the purposes of obtaining or preserving the full
benefits of this Pledge Agreement and of the rights and powers
herein granted. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered to
the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and
all liabilities with respect to, or resulting from any delay
in paying, any and all stamp, excise, sales or other similar
taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of
the transactions contemplated by this Pledge Agreement.
(e) On or prior to the formation or acquisition of any
Subsidiary of the Pledgor, the Pledgor agrees to execute such
amendments and supplements to this Pledge Agreement, including
without limitation the Pledge Agreement Supplement attached
hereto, and such other documents and instruments and to take
any and all actions, all as shall be necessary, in the
reasonable judgment of the Administrative Agent, to pledge the
Pledgor's interest therein to the Administrative Agent for the
ratable benefit of itself and the Lenders.
(f) Without the prior written consent of the
Administrative Agent, the Pledgor will not sell, assign,
transfer, exchange, or otherwise dispose of, or grant any
option with respect to, or create, incur or permit to exist
any Lien or option in favor of, or any claim of any Person
with respect to, any of the shares of capital stock of the
U.K. Borrowers or Canadian Borrowers owned by the Pledgor but
not pledged hereunder, or any interest therein, except as
otherwise permitted pursuant to Section 10.3 or Section 10.4
of the Amended and Restated Credit Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of
Default shall have occurred and be continuing and the Administrative
Agent shall have given notice to the Pledgor of the Administrative
Agent's intent to exercise its rights pursuant to Section 7 below, the
Pledgor shall be permitted to receive all cash dividends paid in
accordance with the terms of the Amended and Restated Credit Agreement
in respect of the Pledged Stock and to exercise all voting and corporate
rights with respect to the Pledged Stock; provided, that no vote shall
be cast or corporate right exercised or other action taken which would
impair the Collateral or which would be inconsistent with or result in
any violation of any provision of the Amended and Restated Credit
Agreement, the Notes, any other Loan Documents or this Pledge Agreement.
7. Rights of the Administrative Agent.
(a) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise
such rights to the Pledgor, (i) the Administrative Agent shall have the
right to receive any and all cash dividends paid in respect of the
Pledged Stock and make application thereof to the Secured Obligations,
in the order set forth in Section 10 of the Security Agreement and (ii)
all shares of the Pledged Stock shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its
nominee may thereafter exercise (A) all voting, corporate and other
rights pertaining to such shares of the Pledged Stock at any meeting of
shareholders of the applicable Issuer or otherwise and (B) any and all
rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as
if it were the absolute owner thereof (including, without limitation,
the right to exchange at its discretion any and all of the Pledged Stock
upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of the applicable
Issuer, or upon the exercise by the Pledgor or the Administrative Agent
of any right, privilege or option pertaining to such shares of the
Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine), all without liability except to account
for property actually received by it, but the Administrative Agent shall
have no duty to the Pledgor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in
so doing.
(b) The rights of the Administrative Agent and the Lenders
hereunder shall not be conditioned or contingent upon the pursuit by the
Administrative Agent or any Lender of any right or remedy against the
Pledgor or against any other Person which may be or become liable in
respect of all or any part of the Secured Obligations or against any
collateral security therefor, guarantee therefor or right of offset with
respect thereto. Neither the Administrative Agent nor any Lender shall
be liable for any failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so, nor shall the
Administrative Agent be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or any other
Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be
continuing, with the consent of the Required Lenders, the Administrative
Agent may, and upon the request of the Required Lenders, the
Administrative Agent shall, exercise on behalf of itself and the
Lenders, all rights and remedies granted in this Pledge Agreement and in
any other instrument or agreement securing, evidencing or relating to
the Secured Obligations, and in addition thereto, all rights and
remedies of a secured party under the Code. Without limiting the
generality of the foregoing with regard to the scope of the
Administrative Agent's remedies, the Administrative Agent, without
demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Pledgor, any Issuer or any other
Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels
at public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Administrative Agent or
any Lender or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The
Administrative Agent or any Lender shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the
Pledgor, which right or equity is hereby waived or released. The
Administrative Agent shall apply any Proceeds from time to time held by
it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs
and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating
to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys'
fees and disbursements of counsel thereto, to the payment in whole or in
part of the Secured Obligations, in the order set forth in Section 10 of
the Security Agreement, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of
the Code, need the Administrative Agent account for the surplus, if any,
to the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them
of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale
or other disposition. The Pledgor further waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112
of the Code.
9. Registration Rights; Private Sales.
(a) If the Administrative Agent shall determine to exercise
its right to sell any or all of the Pledged Stock pursuant to Section 8
hereof, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended (the "Securities Act"), the Pledgor will cause
the applicable Issuer to (i) execute and deliver, and cause the
directors and officers of the applicable Issuer to execute and deliver,
all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Stock, or that portion
thereof to be sold, under the provisions of the Securities Act, (ii) to
use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or
that portion thereof to be sold, and (iii) to make all amendments
thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of
the Securities and Exchange Commission applicable thereto. The Pledgor
agrees to cause the applicable Issuer to comply with the provisions of
the securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its
security holders, as soon as practicable, an earnings statement (which
need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that, in the event the
Administrative Agent is unable to effect a public sale, any such private
sale shall be deemed to have been made in a commercially reasonable
manner. The Administrative Agent shall be under no obligation to delay
a sale of any of the Pledged Stock for the period of time necessary to
permit the applicable Issuer to register such securities for public sale
under the Securities Act, or under applicable state securities laws,
even if the applicable Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Collateral pursuant to this
Section 9 valid and binding and in compliance with any and all other
Applicable Laws. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 9 will cause irreparable injury to
the Administrative Agent and the Lenders not compensable in damages,
that the Administrative Agent and the Lenders have no adequate remedy at
law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 9 shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Amended and Restated Credit Agreement.
10. Amendments, etc. With Respect to the Secured Obligations.
The Pledgor shall remain obligated hereunder, and the Collateral shall
remain subject to the Lien granted hereby, notwithstanding that, without
any reservation of rights against the Pledgor, and without notice to or
further assent by the Pledgor, any demand for payment of any of the
Secured Obligations made by the Administrative Agent or any Lender may
be rescinded by the Administrative Agent or such Lender, and any of the
Secured Obligations continued, and the Secured Obligations, or the
liability of the Pledgor or any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered, or released by the Administrative Agent or any
Lender, and the Amended and Restated Credit Agreement, the Notes, any
other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or
terminated, in whole or part, as the Lenders (or the Required Lenders,
as the case may be) may deem advisable from time to time, and any
guarantee, right of offset or other collateral security at any time held
by the Administrative Agent or any Lender for the payment of the Secured
Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any other Lien at any
time held by it as security for the Secured Obligations or any property
subject thereto. The Pledgor waives any and all notice of the creation,
renewal, extension or accrual of any of the Secured Obligations and
notice of or proof of reliance by the Administrative Agent or any Lender
upon this Pledge Agreement; the Secured Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Pledge Agreement; and all dealings
between the Pledgor, on the one hand, and the Administrative Agent and
the Lenders, on the other, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Pledge Agreement.
The Pledgor waives diligence, presentment, protest, demand for payment
and notice of default or nonpayment to or upon the Pledgor with respect
to any of the Secured Obligations.
11. Regulatory Approval. The Pledgor will, at its expense,
promptly execute and deliver, or cause the execution and delivery of,
all applications, certificates, instruments, registration statements and
all other documents and papers the Administrative Agent may reasonably
request or as may be required by law in connection with the obtaining of
any consent, approval, registration, qualification or authorization of
the FCC, CRTC, DTI, OFTEL, any PUC or of any other Person necessary or
appropriate for the effective exercise of any rights under this Pledge
Agreement. Without limiting the generality of the foregoing, if an
Event of Default shall have occurred and be continuing, the Pledgor
shall take any action which the Administrative Agent may reasonably
request in order to transfer and assign to the Administrative Agent, or
to such one or more third parties as the Administrative Agent may
designate, or to a combination of the foregoing, each Communications
License and PUC Authorization. To enforce the provisions of this
Section, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent is empowered to request the
appointment of a receiver from any court of competent jurisdiction.
Such receiver shall be instructed to seek from the FCC, CRTC, DTI, OFTEL
and any applicable PUC an involuntary transfer of control of each such
Communications License and PUC Authorization for the purpose of seeking
a bona fide purchaser to whom control will ultimately be transferred.
The Pledgor hereby agrees to authorize such an involuntary transfer of
control upon the request of the receiver so appointed and, if the
Pledgor shall refuse to authorize the transfer, its approval may be
required by the court. Upon the occurrence and during the continuance
of an Event of Default, the Pledgor shall further use its best efforts
to assist in obtaining approval of the FCC, CRTC, DTI, OFTEL and any
applicable PUC, if required, for any action or transactions contemplated
by this Pledge Agreement including, without limitation, the preparation,
execution and filing with the FCC, CRTC, DTI, OFTEL and any applicable
PUC of the assignor's or transferor's portion of any application or
applications for consent to the assignment of any Communications License
and PUC Authorizations or transfer of control necessary or appropriate
under the rules and regulations of the FCC, CRTC, DTI, OFTEL or any PUC
for the approval of the transfer or assignment of any portion of the
Collateral, together with any Communications License and applicable PUC
Authorizations. The Pledgor acknowledges that the assignment or
transfer of each Communications License and applicable PUC
Authorizations is integral to the Administrative Agent's and the
Lenders' realization of the value of the Collateral, that there is no
adequate remedy at law for failure by the Pledgor to comply with the
provisions of this Section and that such failure would cause irreparable
injury not adequately compensable in damages, and therefore agrees that
each and every covenant contained in this Section may be specifically
enforced, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants.
12. Limitation on Duties Regarding Collateral. The
Administrative Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Administrative Agent deals with
similar securities and property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or otherwise.
13. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral constitute
irrevocable powers coupled with an interest.
14. Severability. Any provision of this Pledge Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
15. Paragraph Headings. The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the
Administrative Agent nor any Lender shall by any act (except by a
written instrument pursuant to Section 17 hereof) be deemed to have
waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising,
on the part of the Administrative Agent or any Lender, any right, power
or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the
Administrative Agent or such Lender would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
17. Waivers and Amendments; Successors and Assigns; Governing
Law. None of the terms or provisions of this Pledge Agreement may be
amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Administrative Agent;
provided that any consent by the Administrative Agent to any waiver,
amendment, supplement or modification hereto shall be subject to
approval thereof by the Lenders or Required Lenders, as applicable, in
accordance with Section 14.11 of the Amended and Restated Credit
Agreement. This Pledge Agreement shall be binding upon the successors
and assigns of the Pledgor and shall inure to the benefit of the
Administrative Agent and the Lenders and their respective successors and
assigns. This Pledge Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of North Carolina.
18. Notices. All notices and communications hereunder shall
be given to the addresses and otherwise in accordance with Section 14.1
of the Amended and Restated Credit Agreement.
19. Irrevocable Authorization and Instruction to Issuers.
The Pledgor hereby authorizes and instructs each Issuer to comply with
any instruction received by it from the Administrative Agent in writing
that (a) states that an Event of Default has occurred and is continuing
and (b) is otherwise in accordance with the terms of this Pledge
Agreement, without any other or further instructions from the Pledgor,
and the Pledgor agrees that such Issuer shall be fully protected in so
complying.
20. Authority of Administrative Agent. The Pledgor
acknowledges that the rights and responsibilities of the Administrative
Agent under this Pledge Agreement with respect to any action taken by
the Administrative Agent or the exercise or non-exercise by the
Administrative Agent of any option, voting right, request, judgment or
other right or remedy provided for herein or resulting or arising out of
this Pledge Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Amended and Restated Credit Agreement and by
such other agreements with respect thereto as may exist from time to
time among them, but, as between the Administrative Agent and the
Pledgor, the Administrative Agent shall be conclusively presumed to be
acting as agent for itself and the Lenders with full and valid authority
so to act or refrain from acting, and neither the Pledgor nor any Issuer
shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
21. Consent to Jurisdiction. The Pledgor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts
located in Mecklenburg County, North Carolina, in any action, claim or
other proceeding arising out of or any dispute in connection with this
Pledge Agreement, any rights or obligations hereunder, or the
performance of such rights and obligations. The Pledgor hereby
irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative
Agent or any Lender in connection with this Pledge Agreement, any rights
or obligations hereunder, or the performance of such rights and
obligations, on behalf of itself or its property, in the manner provided
in Section 14.1 of the Amended and Restated Credit Agreement. Nothing
in this Section 21 shall affect the right of the Administrative Agent or
any Lender to serve legal process in any other manner permitted by
Applicable Law or affect the right of the Administrative Agent or any
Lender to bring any action or proceeding against the Pledgor or its
properties in the courts of any other jurisdictions.
22. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. If in the reasonable determination
of the Administrative Agent and its counsel, Section 22(b) is
unenforceable under North Carolina law unless paired with a binding
arbitration provision, then upon demand of any party made within ninety
(90) days after institution of any judicial proceeding, any dispute,
claim or controversy between a Lender (or group of Lenders) and a
Borrower (or group of Borrowers) (but not any dispute, claim or
controversy among any Lenders not involving any Borrower) arising out
of, connected with or relating to this Pledge Agreement ("Disputes"),
between or among parties to this Pledge Agreement shall be resolved by
binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort
claims, counterclaims, claims brought as class actions, claims arising
from supplements to this Pledge Agreement executed in the future, or
claims concerning any aspect of the past, present or future
relationships arising out of or connected with this Pledge Agreement.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Charlotte, North Carolina.
The expedited procedures set forth in Rule 51, et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.
All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction.
The panel from which all arbitrators are selected shall be comprised of
licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted.
[CONTINUED ON THE FOLLOWING PAGE NO. 14]
<PAGE>
(b) Jury Trial. EACH AGENT, LENDER AND THE PLEDGOR HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF
SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto preserve,
without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute.
Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or
prosecute the following remedies: (i) all rights to foreclose against
any real or personal property or other security by exercising a power of
sale granted in this Pledge Agreement or under applicable law or by
judicial foreclosure and sale, (ii) all rights of self help including
peaceful occupation of property and collection of rents, set off, and
peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and in filing an
involuntary bankruptcy proceeding, and (iv) when applicable, a judgment
by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
IN WITNESS WHEREOF, the undersigned has caused this Pledge
Agreement to be duly executed and delivered as of the date first above
written.
[CORPORATE SEAL] ACC CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President-Finance
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Each Issuer of Pledged Stock referred to in the foregoing
Pledge Agreement hereby acknowledges receipt of a copy thereof and
agrees to be bound thereby and to comply with the terms thereof insofar
as such terms are applicable to it. Each Issuer agrees to notify the
Administrative Agent promptly in writing of the occurrence of any of the
events described in Section 5(a) of the Pledge Agreement. Each United
States Subsidiary further agrees that the terms of Section 9 of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to
all actions that may be required of it under or pursuant to or arising
out of Section 9 of the Pledge Agreement.
ACC LONG DISTANCE CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
ACC NATIONAL TELECOM CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
ACC RADIO CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
ACC GLOBAL CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
ACC NATIONAL LONG DISTANCE CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
ACC TELENTERPRISES LTD.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Assistant Controller
ACC LONG DISTANCE U.K. LTD.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Attorney
<PAGE>
SCHEDULE 1
To Pledge
Agreement
DESCRIPTION OF PLEDGED STOCK
Domestic Subsidiaries
Issuer Class of Stock Certificate No. No. of Shares
ACC Long
Distance
Corp. Common 1 200
ACC National
Telecom
Corp. Common 1 1
ACC Radio
Corp. Common 1 200
ACC Global
Corp. Common Q 1
ACC National
Long
Distance
Corp. Common 1 1
Common 3 4
Foreign Subsidiaries
Issuer Class of Stock Certificate No. No. of Shares
ACC Tel-
Enterprises
Ltd. Common C-1 66
ACC Long
Distance
U.K. Ltd. Common __ 5,999,401
<PAGE>
PLEDGE AGREEMENT SUPPLEMENT
PLEDGE AGREEMENT SUPPLEMENT, dated as of _______________, 199_
(the "Supplement"), made by _________, a ________________ corporation
(the "Pledgor"), in favor of First Union National Bank of North
Carolina, a national banking corporation, as Administrative Agent (in
such capacity, the "Administrative Agent"), under the Amended and
Restated Credit Agreement (as defined in the Pledge Agreement referred
to below) for the benefit of itself and the Lenders (as so defined).
1. Reference is hereby made to that Amended and Restated
Pledge Agreement, dated as of ___________ ___, 1996, made by the Pledgor
in favor of the Administrative Agent (as further amended, restated or
otherwise modified, the "Pledge Agreement"). This Supplement
supplements the Pledge Agreement, forms a part thereof and is subject to
the terms thereof. Terms defined in the Pledge Agreement are used
herein as therein defined.
2. The Pledgor hereby confirms and reaffirms the security
interest in the Collateral granted to the Administrative Agent for the
ratable benefit of itself and the Lenders under the Pledge Agreement,
and, as additional collateral security for the prompt and complete
payment when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations and in order to induce the Lenders
to make their Loans under the Amended and Restated Credit Agreement, the
Pledgor hereby delivers to the Administrative Agent, for the benefit of
the Lenders, [all of the issued and outstanding shares of capital stock
of [INSERT NAME OF NEW DOMESTIC SUBSIDIARY]] or [66.66% of the issued
and outstanding shares of capital stock of [INSERT NAME OF NEW CANADIAN
OR U.K. SUBSIDIARY]] (the "New Issuer") listed below, together with all
stock certificates, options, or rights of any nature whatsoever which
may be issued or granted by the New Issuer in respect to such stock
which the Pledge Agreement, as supplemented hereby, is in force (the
"Additional Pledged Stock"; as used in the Pledge Agreement as
supplemented by this Supplement, "Pledged Stock" shall be deemed to
include the Additional Pledged Stock) and hereby grants to the
Administrative Agent, for the ratable benefit of itself and the Lenders,
a first priority security interest in the Additional Pledged Stock and
all Proceeds thereof.
3. The Pledgor hereby represents and warrants that the
representations and warranties contained in paragraph 5 of the Pledge
Agreement are true and correct on the date of this Supplement with
references therein to the "Pledged Stock" to include the Additional
Pledged Stock, with references therein to the "Issuer" to include the
New Issuer, and with references to the "Pledge Agreement" to mean the
Pledge Agreement as supplemented by this Supplement.
4. The Pledgor shall deliver to the Administrative Agent the
Acknowledgement and Consent attached hereto duly executed by the New
Issuer. The Additional Pledged Stock pledged hereby is as follows which
Pledged Stock shall be deemed part of Schedule 1 thereto:
DESCRIPTION OF PLEDGED STOCK
Issuer Class of Stock Certificate No. No. of Shares
New Issuer
5. The Pledgor hereby agrees to deliver to the
Administrative Agent such certificates and other documents and take such
other action as shall be reasonably requested by the Administrative
Agent in order to effectuate the terms hereof and the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Supplement
to be duly executed under seal and delivered as of the date first above
written.
[CORPORATE SEAL] ____________________________________
By:_________________________________
Name:____________________________
Title:_______________________
<PAGE>
ACKNOWLEDGEMENT AND CONSENT OF NEW ISSUER
The undersigned hereby acknowledges receipt of a copy of the
foregoing Supplement and the Amended and Restated Pledge Agreement
referred to therein (the "Pledge Agreement"). The undersigned agrees
for the benefit of the Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
Section 5(a) of the Pledge Agreement.
[3. The Issuer further agrees that the terms of Section 9 of
the Pledge Agreement shall apply to it, mutatis mutandis, with respect
to all actions that may be required of it under or pursuant to or
arising out of Section 9 of the Pledge Agreement.] [ONLY INCLUDE FOR
DOMESTIC SUBSIDIARIES]
[NAME OF NEW ISSUER]
By:_________________________________
Name:____________________________
Title:___________________________
Exhibit 10-28
AMENDED AND RESTATED PLEDGE AGREEMENT
THIS AMENDED AND RESTATED PLEDGE AGREEMENT (the "Pledge
Agreement"), dated as of January 14, 1997 is made by ACC NATIONAL LONG
DISTANCE CORP., a Delaware corporation (the "Pledgor"), in favor of
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association (the "Administrative Agent"), as Administrative Agent for
the ratable benefit of itself and the financial institutions (the
"Lenders") as are, or may from time to time become, parties to the
Amended and Restated Credit Agreement (as defined below).
STATEMENT OF PURPOSE
The Pledgor has previously executed and delivered to the
Administrative Agent a Pledge Agreement dated as of July 21, 1995 (the
"Original Pledge Agreement") in connection with the Original Credit
Agreement.
Pursuant to the Amended and Restated Credit Agreement, dated
as of even date herewith (as amended, restated or otherwise modified,
the "Amended and Restated Credit Agreement"), between the Pledgor and
certain Subsidiaries of the Pledgor as Borrowers thereunder
(collectively, the "Borrowers"), the Lenders and the Administrative
Agent, the Lenders will provide Extensions of Credit to the Borrowers as
more specifically described in the Amended and Restated Credit
Agreement.
The Pledgor is the legal and beneficial owner of the shares of
Pledged Stock (as hereinafter defined) issued by the Domestic
Subsidiaries and the Foreign Subsidiaries, as specified on Schedule 1
attached hereto and incorporated herein by reference (collectively, the
"Issuers").
In connection with the transactions contemplated by the
Amended and Restated Credit Agreement and as a condition precedent
thereto, the Lenders have requested that the Pledgor amend and restate
the Original Pledge Agreement, and the Pledgor has agreed to do so
pursuant to the terms of this Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into and make
available Loans pursuant to the Amended and Restated Credit Agreement,
the Pledgor hereby agrees with the Administrative Agent for the ratable
benefit of itself and Lenders as follows:
1. Defined Terms. Unless otherwise defined herein, terms
which are defined in the Amended and Restated Credit Agreement and used
herein are so used as so defined, and the following terms shall have the
following meanings:
"Code" means the Uniform Commercial Code from
time to time in effect in the State of North
Carolina.
"Collateral" means the Pledged Stock and all
Proceeds.
"Pledge Agreement" means this Amended and
Restated Pledge Agreement, as further amended,
restated or otherwise modified.
"Pledged Stock" means the shares of capital
stock of each Issuer listed on Schedule 1 hereto,
together with all stock certificates, options or
rights of any nature whatsoever that may be issued
or granted by such Issuer to the Pledgor while this
Pledge Agreement is in effect.
"Proceeds" means all "proceeds" as such term
is defined in Section 9-306(1) of the Code on the
date hereof and, in any event, shall include,
without limitation, all dividends or other income
from the Pledged Stock, collections thereon,
proceeds of sale thereof or distributions with
respect thereto.
"Secured Obligations" means the Obligations as
defined in the Amended and Restated Credit
Agreement and any renewals or extensions of any of
such Obligations.
2. Pledge and Grant of Security Interests. The Pledgor
hereby delivers to the Administrative Agent, for the ratable benefit of
itself and the Lenders, all of the Pledged Stock and hereby grants to
the Administrative Agent, for the ratable benefit of itself and the
Lenders, a first priority security interest in such Pledged Stock and
all other Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Secured Obligations.
3. Stock Powers. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares
of Pledged Stock, the Pledgor shall deliver an undated stock power
covering such certificate, duly executed in blank by the Pledgor with,
if the Administrative Agent so requests, signature guaranteed.
4. Representations and Warranties. To induce the
Administrative Agent and the Lenders to execute the Amended and Restated
Credit Agreement, provide any Extensions of Credit and accept the
security contemplated hereby, the Pledgor hereby represents and warrants
that:
(a) the Pledgor has the corporate power, authority and
legal right to execute and deliver, to perform its obligations
under, and to grant the Lien on the Collateral pursuant to,
this Pledge Agreement and has taken all necessary corporate
action to authorize its execution, delivery and performance
of, and grant of the Lien on the Collateral pursuant to, this
Pledge Agreement;
(b) this Pledge Agreement constitutes a legal, valid and
binding obligation of the Pledgor enforceable against the
Pledgor in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the availability of
equitable remedies;
(c) the execution, delivery and performance of this
Pledge Agreement will not violate any provision of any
Applicable Law or contractual obligation of the Pledgor and
will not result in the creation or imposition of any Lien on
any of the properties or revenues of the Pledgor pursuant to
any Applicable Law or contractual obligation, except as
contemplated hereby;
(d) except as contemplated in Section 11 hereof, no
consent or authorization of, filing with, or other act by or
in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation,
any stockholder or creditor of the Pledgor or any Issuer), is
required in connection with the execution, delivery,
performance, validity or enforceability against the Pledgor of
this Pledge Agreement;
(e) no litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Pledgor, threatened by or against the
Pledgor or against any of its properties or revenues with
respect to this Pledge Agreement or any of the transactions
contemplated hereby;
(f) the shares of Pledged Stock listed on Schedule 1
constitute all the issued and outstanding shares of all
classes of the capital stock of each of the Domestic
Subsidiaries and constitute 66.66% of all the issued and
outstanding shares of all classes of capital stock of the U.K.
Subsidiaries and Canadian Subsidiaries;
(g) all the shares of the Pledged Stock have been duly
and validly issued and are fully paid and nonassessable;
(h) the Pledgor is the record and beneficial owner of,
and has good and marketable title to, the Pledged Stock listed
on Schedule 1, free of any and all Liens or options in favor
of, or claims of, any other Person, except the Lien created by
this Pledge Agreement; and
(i) upon delivery to the Administrative Agent of the
stock certificates evidencing the Pledged Stock, the Lien
granted pursuant to this Pledge Agreement will constitute a
valid, perfected first priority Lien on the Pledged Stock and
the Proceeds related thereto, enforceable as such against all
creditors of the Pledgor and any Persons purporting to
purchase any of the Pledged Stock from the Pledgor.
5. Certain Covenants. The Pledgor covenants and agrees with
the Administrative Agent for the ratable benefit of itself and the
Lenders that, from and after the date of this Pledge Agreement until the
Secured Obligations are paid in full and the Commitments are terminated:
(a) If the Pledgor shall, as a result of its ownership
of the Pledged Stock, become entitled to receive or shall
receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a
distribution in connection with any reclassification, increase
or reduction of capital or any certificate issued in
connection with any reorganization), option or rights, whether
in addition to, in substitution of, as a conversion of, or in
exchange for any shares of the Pledged Stock, or otherwise in
respect thereof, the Pledgor shall accept the same as the
agent of the Administrative Agent, hold the same in trust for
the Administrative Agent and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed
by the Pledgor to the Administrative Agent, if required,
together with an undated stock power covering such certificate
duly executed in blank by the Pledgor and with, if the
Administrative Agent so requests, signature guaranteed, to be
held by the Administrative Agent, subject to the terms hereof,
as additional collateral security for the Secured Obligations;
provided, that in no event shall more than 66.66% of all the
issued and outstanding shares of all classes of capital stock
of each of the Canadian Subsidiaries and U.K. Subsidiaries
constitute collateral security hereunder. In addition, any
sums paid upon or in respect of the Pledged Stock upon the
liquidation or dissolution of any Issuer shall be held by the
Administrative Agent as additional collateral security for the
Secured Obligations.
(b) Without the prior written consent of the
Administrative Agent, the Pledgor will not (i) vote to enable,
or take any other action to permit, any Issuer to issue any
stock or other equity securities of any nature or to issue any
other securities convertible into or granting the right to
purchase or exchange for any stock or other equity securities
of any nature of such Issuer, (ii) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Stock, or (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim
of any Person with respect to, any of the Collateral, or any
interest therein, except for the Lien provided for by this
Pledge Agreement. The Pledgor will defend the right, title
and interest of the Administrative Agent in and to the
Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense
of the Pledgor, the Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such
further actions as the Administrative Agent may reasonably
request for the purposes of obtaining or preserving the full
benefits of this Pledge Agreement and of the rights and powers
herein granted. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered to
the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Pledge Agreement.
(d) The Pledgor agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and
all liabilities with respect to, or resulting from any delay
in paying, any and all stamp, excise, sales or other similar
taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of
the transactions contemplated by this Pledge Agreement.
(e) On or prior to the formation or acquisition of any
Subsidiary of the Pledgor, the Pledgor agrees to execute such
amendments and supplements to this Pledge Agreement, including
without limitation the Pledge Agreement Supplement attached
hereto, and such other documents and instruments and to take
any and all actions, all as shall be necessary, in the
reasonable judgment of the Administrative Agent, to pledge the
Pledgor's interest therein to the Administrative Agent for the
ratable benefit of itself and the Lenders.
(f) Without the prior written consent of the
Administrative Agent, the Pledgor will not sell, assign,
transfer, exchange, or otherwise dispose of, or grant any
option with respect to, or create, incur or permit to exist
any Lien or option in favor of, or any claim of any Person
with respect to, any of the shares of capital stock of the
U.K. Borrowers or Canadian Borrowers owned by the Pledgor but
not pledged hereunder, or any interest therein, except as
otherwise permitted pursuant to Section 10.3 or Section 10.4
of the Amended and Restated Credit Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of
Default shall have occurred and be continuing and the Administrative
Agent shall have given notice to the Pledgor of the Administrative
Agent's intent to exercise its rights pursuant to Section 7 below, the
Pledgor shall be permitted to receive all cash dividends paid in
accordance with the terms of the Amended and Restated Credit Agreement
in respect of the Pledged Stock and to exercise all voting and corporate
rights with respect to the Pledged Stock; provided, that no vote shall
be cast or corporate right exercised or other action taken which would
impair the Collateral or which would be inconsistent with or result in
any violation of any provision of the Amended and Restated Credit
Agreement, the Notes, any other Loan Documents or this Pledge Agreement.
7. Rights of the Administrative Agent.
(a) If an Event of Default shall occur and be continuing and
the Administrative Agent shall give notice of its intent to exercise
such rights to the Pledgor, (i) the Administrative Agent shall have the
right to receive any and all cash dividends paid in respect of the
Pledged Stock and make application thereof to the Secured Obligations,
in the order set forth in Section 10 of the Security Agreement and (ii)
all shares of the Pledged Stock shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its
nominee may thereafter exercise (A) all voting, corporate and other
rights pertaining to such shares of the Pledged Stock at any meeting of
shareholders of the applicable Issuer or otherwise and (B) any and all
rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such shares of the Pledged Stock as
if it were the absolute owner thereof (including, without limitation,
the right to exchange at its discretion any and all of the Pledged Stock
upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of the applicable
Issuer, or upon the exercise by the Pledgor or the Administrative Agent
of any right, privilege or option pertaining to such shares of the
Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine), all without liability except to account
for property actually received by it, but the Administrative Agent shall
have no duty to the Pledgor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in
so doing.
(b) The rights of the Administrative Agent and the Lenders
hereunder shall not be conditioned or contingent upon the pursuit by the
Administrative Agent or any Lender of any right or remedy against the
Pledgor or against any other Person which may be or become liable in
respect of all or any part of the Secured Obligations or against any
collateral security therefor, guarantee therefor or right of offset with
respect thereto. Neither the Administrative Agent nor any Lender shall
be liable for any failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so, nor shall the
Administrative Agent be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor or any other
Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be
continuing, with the consent of the Required Lenders, the Administrative
Agent may, and upon the request of the Required Lenders, the
Administrative Agent shall, exercise on behalf of itself and the
Lenders, all rights and remedies granted in this Pledge Agreement and in
any other instrument or agreement securing, evidencing or relating to
the Secured Obligations, and in addition thereto, all rights and
remedies of a secured party under the Code. Without limiting the
generality of the foregoing with regard to the scope of the
Administrative Agent's remedies, the Administrative Agent, without
demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Pledgor, any Issuer or any other
Person (all and each of which demands, defenses, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give option or options to
purchase or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels
at public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Administrative Agent or
any Lender or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit
or for future delivery without assumption of any credit risk. The
Administrative Agent or any Lender shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the
Pledgor, which right or equity is hereby waived or released. The
Administrative Agent shall apply any Proceeds from time to time held by
it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs
and expenses of every kind incurred in respect thereof or incidental to
the care or safekeeping of any of the Collateral or in any way relating
to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys'
fees and disbursements of counsel thereto, to the payment in whole or in
part of the Secured Obligations, in the order set forth in Section 10 of
the Security Agreement, and only after such application and after the
payment by the Administrative Agent of any other amount required by any
provision of law, including, without limitation, Section 9-504(1)(c) of
the Code, need the Administrative Agent account for the surplus, if any,
to the Pledgor. To the extent permitted by applicable law, the Pledgor
waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them
of any rights hereunder. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be
deemed reasonable and proper if given at least 10 days before such sale
or other disposition. The Pledgor further waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112
of the Code.
9. Registration Rights; Private Sales.
(a) If the Administrative Agent shall determine to exercise
its right to sell any or all of the Pledged Stock pursuant to Section 8
hereof, and if in the opinion of the Administrative Agent it is
necessary or advisable to have the Pledged Stock, or that portion
thereof to be sold, registered under the provisions of the Securities
Act of 1933, as amended (the "Securities Act"), the Pledgor will cause
the applicable Issuer to (i) execute and deliver, and cause the
directors and officers of the applicable Issuer to execute and deliver,
all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Stock, or that portion
thereof to be sold, under the provisions of the Securities Act, (ii) to
use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of one
year from the date of the first public offering of the Pledged Stock, or
that portion thereof to be sold, and (iii) to make all amendments
thereto and/or to the related prospectus which, in the opinion of the
Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of
the Securities and Exchange Commission applicable thereto. The Pledgor
agrees to cause the applicable Issuer to comply with the provisions of
the securities or "Blue Sky" laws of any and all jurisdictions which the
Administrative Agent shall designate and to make available to its
security holders, as soon as practicable, an earnings statement (which
need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities Act and
applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to
acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that, in the event the
Administrative Agent is unable to effect a public sale, any such private
sale shall be deemed to have been made in a commercially reasonable
manner. The Administrative Agent shall be under no obligation to delay
a sale of any of the Pledged Stock for the period of time necessary to
permit the applicable Issuer to register such securities for public sale
under the Securities Act, or under applicable state securities laws,
even if the applicable Issuer would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Collateral pursuant to this
Section 9 valid and binding and in compliance with any and all other
Applicable Laws. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 9 will cause irreparable injury to
the Administrative Agent and the Lenders not compensable in damages,
that the Administrative Agent and the Lenders have no adequate remedy at
law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 9 shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Amended and Restated Credit Agreement.
10. Amendments, etc. With Respect to the Secured Obligations.
The Pledgor shall remain obligated hereunder, and the Collateral shall
remain subject to the Lien granted hereby, notwithstanding that, without
any reservation of rights against the Pledgor, and without notice to or
further assent by the Pledgor, any demand for payment of any of the
Secured Obligations made by the Administrative Agent or any Lender may
be rescinded by the Administrative Agent or such Lender, and any of the
Secured Obligations continued, and the Secured Obligations, or the
liability of the Pledgor or any other Person upon or for any part
thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised,
waived, surrendered, or released by the Administrative Agent or any
Lender, and the Amended and Restated Credit Agreement, the Notes, any
other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or
terminated, in whole or part, as the Lenders (or the Required Lenders,
as the case may be) may deem advisable from time to time, and any
guarantee, right of offset or other collateral security at any time held
by the Administrative Agent or any Lender for the payment of the Secured
Obligations may be sold, exchanged, waived, surrendered or released.
Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any other Lien at any
time held by it as security for the Secured Obligations or any property
subject thereto. The Pledgor waives any and all notice of the creation,
renewal, extension or accrual of any of the Secured Obligations and
notice of or proof of reliance by the Administrative Agent or any Lender
upon this Pledge Agreement; the Secured Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or
incurred in reliance upon this Pledge Agreement; and all dealings
between the Pledgor, on the one hand, and the Administrative Agent and
the Lenders, on the other, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Pledge Agreement.
The Pledgor waives diligence, presentment, protest, demand for payment
and notice of default or nonpayment to or upon the Pledgor with respect
to any of the Secured Obligations.
11. Regulatory Approval. The Pledgor will, at its expense,
promptly execute and deliver, or cause the execution and delivery of,
all applications, certificates, instruments, registration statements and
all other documents and papers the Administrative Agent may reasonably
request or as may be required by law in connection with the obtaining of
any consent, approval, registration, qualification or authorization of
the FCC, CRTC, DTI, OFTEL, any PUC or of any other Person necessary or
appropriate for the effective exercise of any rights under this Pledge
Agreement. Without limiting the generality of the foregoing, if an
Event of Default shall have occurred and be continuing, the Pledgor
shall take any action which the Administrative Agent may reasonably
request in order to transfer and assign to the Administrative Agent, or
to such one or more third parties as the Administrative Agent may
designate, or to a combination of the foregoing, each Communications
License and PUC Authorization. To enforce the provisions of this
Section, upon the occurrence and during the continuance of an Event of
Default, the Administrative Agent is empowered to request the
appointment of a receiver from any court of competent jurisdiction.
Such receiver shall be instructed to seek from the FCC, CRTC, DTI, OFTEL
and any applicable PUC an involuntary transfer of control of each such
Communications License and PUC Authorization for the purpose of seeking
a bona fide purchaser to whom control will ultimately be transferred.
The Pledgor hereby agrees to authorize such an involuntary transfer of
control upon the request of the receiver so appointed and, if the
Pledgor shall refuse to authorize the transfer, its approval may be
required by the court. Upon the occurrence and during the continuance
of an Event of Default, the Pledgor shall further use its best efforts
to assist in obtaining approval of the FCC, CRTC, DTI, OFTEL and any
applicable PUC, if required, for any action or transactions contemplated
by this Pledge Agreement including, without limitation, the preparation,
execution and filing with the FCC, CRTC, DTI, OFTEL and any applicable
PUC of the assignor's or transferor's portion of any application or
applications for consent to the assignment of any Communications License
and PUC Authorizations or transfer of control necessary or appropriate
under the rules and regulations of the FCC, CRTC, DTI, OFTEL or any PUC
for the approval of the transfer or assignment of any portion of the
Collateral, together with any Communications License and applicable PUC
Authorizations. The Pledgor acknowledges that the assignment or
transfer of each Communications License and applicable PUC
Authorizations is integral to the Administrative Agent's and the
Lenders' realization of the value of the Collateral, that there is no
adequate remedy at law for failure by the Pledgor to comply with the
provisions of this Section and that such failure would cause irreparable
injury not adequately compensable in damages, and therefore agrees that
each and every covenant contained in this Section may be specifically
enforced, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants.
12. Limitation on Duties Regarding Collateral. The
Administrative Agent's sole duty with respect to the custody,
safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the Code or otherwise, shall be to
deal with it in the same manner as the Administrative Agent deals with
similar securities and property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Pledgor or otherwise.
13. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral constitute
irrevocable powers coupled with an interest.
14. Severability. Any provision of this Pledge Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
15. Paragraph Headings. The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the
Administrative Agent nor any Lender shall by any act (except by a
written instrument pursuant to Section 17 hereof) be deemed to have
waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default or in any breach of any of the terms and
conditions hereof. No failure to exercise, nor any delay in exercising,
on the part of the Administrative Agent or any Lender, any right, power
or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy which the
Administrative Agent or such Lender would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
17. Waivers and Amendments; Successors and Assigns; Governing
Law. None of the terms or provisions of this Pledge Agreement may be
amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Administrative Agent;
provided that any consent by the Administrative Agent to any waiver,
amendment, supplement or modification hereto shall be subject to
approval thereof by the Lenders or Required Lenders, as applicable, in
accordance with Section 14.11 of the Amended and Restated Credit
Agreement. This Pledge Agreement shall be binding upon the successors
and assigns of the Pledgor and shall inure to the benefit of the
Administrative Agent and the Lenders and their respective successors and
assigns. This Pledge Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of North Carolina.
18. Notices. All notices and communications hereunder shall
be given to the addresses and otherwise in accordance with Section 14.1
of the Amended and Restated Credit Agreement.
19. Irrevocable Authorization and Instruction to Issuers.
The Pledgor hereby authorizes and instructs each Issuer to comply with
any instruction received by it from the Administrative Agent in writing
that (a) states that an Event of Default has occurred and is continuing
and (b) is otherwise in accordance with the terms of this Pledge
Agreement, without any other or further instructions from the Pledgor,
and the Pledgor agrees that such Issuer shall be fully protected in so
complying.
20. Authority of Administrative Agent. The Pledgor
acknowledges that the rights and responsibilities of the Administrative
Agent under this Pledge Agreement with respect to any action taken by
the Administrative Agent or the exercise or non-exercise by the
Administrative Agent of any option, voting right, request, judgment or
other right or remedy provided for herein or resulting or arising out of
this Pledge Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Amended and Restated Credit Agreement and by
such other agreements with respect thereto as may exist from time to
time among them, but, as between the Administrative Agent and the
Pledgor, the Administrative Agent shall be conclusively presumed to be
acting as agent for itself and the Lenders with full and valid authority
so to act or refrain from acting, and neither the Pledgor nor any Issuer
shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
21. Consent to Jurisdiction. The Pledgor hereby irrevocably
consents to the personal jurisdiction of the state and federal courts
located in Mecklenburg County, North Carolina, in any action, claim or
other proceeding arising out of or any dispute in connection with this
Pledge Agreement, any rights or obligations hereunder, or the
performance of such rights and obligations. The Pledgor hereby
irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative
Agent or any Lender in connection with this Pledge Agreement, any rights
or obligations hereunder, or the performance of such rights and
obligations, on behalf of itself or its property, in the manner provided
in Section 14.1 of the Amended and Restated Credit Agreement. Nothing
in this Section 21 shall affect the right of the Administrative Agent or
any Lender to serve legal process in any other manner permitted by
Applicable Law or affect the right of the Administrative Agent or any
Lender to bring any action or proceeding against the Pledgor or its
properties in the courts of any other jurisdictions.
22. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. If in the reasonable determination
of the Administrative Agent and its counsel, Section 22(b) is
unenforceable under North Carolina law unless paired with a binding
arbitration provision, then upon demand of any party made within ninety
(90) days after institution of any judicial proceeding, any dispute,
claim or controversy between a Lender (or group of Lenders) and a
Borrower (or group of Borrowers) (but not any dispute, claim or
controversy among any Lenders not involving any Borrower) arising out
of, connected with or relating to this Pledge Agreement ("Disputes"),
between or among parties to this Pledge Agreement shall be resolved by
binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort
claims, counterclaims, claims brought as class actions, claims arising
from supplements to this Pledge Agreement executed in the future, or
claims concerning any aspect of the past, present or future
relationships arising out of or connected with this Pledge Agreement.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Charlotte, North Carolina.
The expedited procedures set forth in Rule 51, et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.
All applicable statutes of limitation shall apply to any Dispute. A
judgment upon the award may be entered in any court having jurisdiction.
The panel from which all arbitrators are selected shall be comprised of
licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted.
[CONTINUES ON THE FOLLOWING PAGE NO. 14]
<PAGE>
(b) Jury Trial. EACH AGENT, LENDER AND THE PLEDGOR HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF
SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto preserve,
without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute.
Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or
prosecute the following remedies: (i) all rights to foreclose against
any real or personal property or other security by exercising a power of
sale granted in this Pledge Agreement or under applicable law or by
judicial foreclosure and sale, (ii) all rights of self help including
peaceful occupation of property and collection of rents, set off, and
peaceful possession of property, (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and in filing an
involuntary bankruptcy proceeding, and (iv) when applicable, a judgment
by confession of judgment. Preservation of these remedies does not
limit the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
IN WITNESS WHEREOF, the undersigned has caused this Pledge
Agreement to be duly executed and delivered as of the date first above
written.
[CORPORATE SEAL] ACC NATIONAL LONG DISTANCE CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Each Issuer of Pledged Stock referred to in the foregoing Pledge
Agreement hereby acknowledges receipt of a copy thereof and agrees to be
bound thereby and to comply with the terms thereof insofar as such terms
are applicable to it. Each Issuer agrees to notify the Administrative
Agent promptly in writing of the occurrence of any of the events
described in Section 5(a) of the Pledge Agreement. Each United States
Subsidiary further agrees that the terms of Section 9 of the Pledge
Agreement shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it under or pursuant to or arising out
of Section 9 of the Pledge Agreement.
ACC LONG DISTANCE OF MASSACHUSETTS CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
<PAGE>
SCHEDULE 1
To Pledge
Agreement
DESCRIPTION OF PLEDGED STOCK
[ACC NATIONAL AGREEMENT]
Issuer Class of Stock Certificate No. No. of Shares
ACC Long
Distance of
Massachusetts
Corp. Common 2 1
<PAGE>
PLEDGE AGREEMENT SUPPLEMENT, dated as of _______________, 199_
(the "Supplement"), made by _________, a ________________ corporation
(the "Pledgor"), in favor of First Union National Bank of North
Carolina, a national banking corporation, as Administrative Agent (in
such capacity, the "Administrative Agent"), under the Amended and
Restated Credit Agreement (as defined in the Pledge Agreement referred
to below) for the benefit of itself and the Lenders (as so defined).
1. Reference is hereby made to that Amended and Restated
Pledge Agreement, dated as of ___________ ___, 1996, made by the Pledgor
in favor of the Administrative Agent (as further amended, restated or
otherwise modified, the "Pledge Agreement"). This Supplement
supplements the Pledge Agreement, forms a part thereof and is subject to
the terms thereof. Terms defined in the Pledge Agreement are used
herein as therein defined.
2. The Pledgor hereby confirms and reaffirms the security
interest in the Collateral granted to the Administrative Agent for the
ratable benefit of itself and the Lenders under the Pledge Agreement,
and, as additional collateral security for the prompt and complete
payment when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations and in order to induce the Lenders
to make their Loans under the Amended and Restated Credit Agreement, the
Pledgor hereby delivers to the Administrative Agent, for the benefit of
the Lenders, [all of the issued and outstanding shares of capital stock
of [INSERT NAME OF NEW DOMESTIC SUBSIDIARY]] or [66.66% of the issued
and outstanding shares of capital stock of [INSERT NAME OF NEW CANADIAN
OR U.K. SUBSIDIARY]] (the "New Issuer") listed below, together with all
stock certificates, options, or rights of any nature whatsoever which
may be issued or granted by the New Issuer in respect to such stock
which the Pledge Agreement, as supplemented hereby, is in force (the
"Additional Pledged Stock"; as used in the Pledge Agreement as
supplemented by this Supplement, "Pledged Stock" shall be deemed to
include the Additional Pledged Stock) and hereby grants to the
Administrative Agent, for the ratable benefit of itself and the Lenders,
a first priority security interest in the Additional Pledged Stock and
all Proceeds thereof.
3. The Pledgor hereby represents and warrants that the
representations and warranties contained in paragraph 5 of the Pledge
Agreement are true and correct on the date of this Supplement with
references therein to the "Pledged Stock" to include the Additional
Pledged Stock, with references therein to the "Issuer" to include the
New Issuer, and with references to the "Pledge Agreement" to mean the
Pledge Agreement as supplemented by this Supplement.
4. The Pledgor shall deliver to the Administrative Agent the
Acknowledgement and Consent attached hereto duly executed by the New
Issuer. The Additional Pledged Stock pledged hereby is as follows which
Pledged Stock shall be deemed part of Schedule 1 thereto:
DESCRIPTION OF PLEDGED STOCK
Issuer Class of Stock Certificate No. No. of Shares
New Issuer
5. The Pledgor hereby agrees to deliver to the Administrative
Agent such certificates and other documents and take such other action
as shall be reasonably requested by the Administrative Agent in order to
effectuate the terms hereof and the Pledge Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Supplement
to be duly executed under seal and delivered as of the date first above
written.
[CORPORATE SEAL] _____________________________
By:__________________________
Name:_____________________
Title:____________________
<PAGE>
ACKNOWLEDGEMENT AND CONSENT OF NEW ISSUER
The undersigned hereby acknowledges receipt of a copy of the
foregoing Supplement and the Amended and Restated Pledge Agreement
referred to therein (the "Pledge Agreement"). The undersigned agrees
for the benefit of the Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
Section 5(a) of the Pledge Agreement.
[3. The Issuer further agrees that the terms of Section 9 of
the Pledge Agreement shall apply to it, mutatis mutandis, with respect
to all actions that may be required of it under or pursuant to or
arising out of Section 9 of the Pledge Agreement.] [ONLY INCLUDE FOR
DOMESTIC SUBSIDIARIES]
[NAME OF NEW ISSUER]
By:_________________________________
Name:____________________________
Title:___________________________
Exhibit 10-29
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT (this
"Agreement"), dated as of January 14, 1997 by and between ACC CORP., a
corporation organized under the laws of Delaware ("ACC"), certain
Domestic Subsidiaries of ACC listed on the signature pages hereto (the
"Subsidiary Grantors" and, collectively with ACC Corp., the "Grantors")
and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association organized under the laws of the United States, as
Administrative Agent (the "Administrative Agent") for the benefit of
itself, and the financial institutions (the "Lenders") as are, or may
from time to time become, parties to the Amended and Restated Credit
Agreement (as defined below).
STATEMENT OF PURPOSE
ACC and certain of its Subsidiaries have previously executed
and delivered to the Administrative Agent a Security Agreement dated as
of July 21, 1995 (the "Original Security Agreement") in connection with
the Original Credit Agreement.
Pursuant to the Amended and Restated Credit Agreement dated as
of even date herewith (together with all amendments and other
modifications, if any, from time to time hereafter made thereto, the
"Amended and Restated Credit Agreement"), between the Grantors and
certain Canadian Subsidiaries and U.K. Subsidiaries of ACC as Borrowers
thereunder (collectively, the "Borrowers"), the Lenders and the
Administrative Agent, the Lenders will provide Extensions of Credit to
the Borrowers as more specifically described in the Amended and Restated
Credit Agreement. In order to induce the Lenders and the Administrative
Agent to enter into the Amended and Restated Credit Agreement, and as a
condition to the provision of Extensions of Credit thereunder, the
Lenders require that the Grantors amend and restate the Original
Security Agreement in order to grant a continuing security interest in
and to the "Collateral" (as hereinafter defined) to secure the "Secured
Obligations" (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. Terms defined in the Amended and
Restated Credit Agreement and not otherwise defined herein, when used in
this Agreement including its preamble and recitals, shall have the
respective meanings provided for in the Amended and Restated Credit
Agreement. The following additional terms, when used in this Agreement,
shall have the following meanings:
"Account Debtor" means any Person who is or may become
obligated to any Grantor under, with respect to, or on account of, an
Account.
"Accounts" means all "accounts" (as defined in the UCC) now or
hereafter owned or acquired by any Grantor or in which any Grantor now
or hereafter has or acquires any right or interest, and, in any event,
shall also include, without limitation, all accounts receivable,
contract rights, book debts, notes, drafts and other obligations or
indebtedness owing to any Grantor arising from the sale, lease or
exchange of goods or other property by it or property to be sold, leased
or exchanged, or the performance of services by it, or to be performed
(including, without limitation, any such obligation which might be
characterized as an account, contract right or general intangible under
the Uniform Commercial Code in effect in any jurisdiction) and all of
any Grantor's rights in, to and under all purchase orders for goods,
services or other property, and all of any Grantor's rights to any
goods, services or other property represented by any of the foregoing
(including returned or repossessed goods and unpaid sellers' rights of
rescission, replevin, reclamation and rights to stoppage in transit) and
all monies due to or to become due to any Grantor under all contracts
for the sale, lease or exchange of goods or other property or the
performance of services by it (whether or not yet earned by performance
on the part of such Grantor), in each case whether now in existence or
hereafter arising or acquired, including, without limitation, the right
to receive the proceeds of said purchase orders and contracts and all
collateral security and guarantees of any kind given by any Person with
respect to any of the foregoing.
"Accounts Aging Report" means a detailed aged trial balance of
all Accounts existing as of a specified date, specifying the name,
addresses, account number, face value and dates of invoices of each
Account Debtor obligated on any Accounts so listed, which report may be
requested from time to time by the Administrative Agent.
"Collateral" means the collective reference to:
(i) Accounts;
(ii) Inventory;
(iii) Documents;
(iv) Equipment;
(v) Fixtures;
(vi) Instruments;
(vii) General Intangibles;
(viii) The Collateral Account, all cash deposited
therein from time to time, the investments made
pursuant to Section 6 and other monies and
property of any kind of any Grantor in the
possession or under the control of the
Administrative Agent or any Lender;
(ix) All books and records (including, without
limitation, customer lists, credit files,
computer programs, printouts and other computer
materials and records) of any Grantor pertaining
to any of the Collateral;
(x) All other goods and personal property of any
Grantor, whether tangible or intangible; and
(xi) All products and Proceeds of all or any of the
Collateral described in clauses (i) through (x)
hereof.
"Collateral Account" means a cash collateral account
established by the Grantors with the Administrative Agent, in the name
and under the exclusive dominion and control of the Administrative
Agent, pursuant to Section 6.
"Copyright License" means any written agreement now or
hereafter in existence granting to any Grantor any right to use any
Copyright.
"Copyrights" means, collectively, all of the following now
owned or hereafter created or acquired by any Grantor: (a) all
copyrights, rights and interests in copyrights, works protectable by
copyright, copyright registrations and copyright applications; (b) all
renewals of any of the foregoing; (c) all income, royalties, damages and
payments now or hereafter due and/or payable under any of the foregoing
or with respect to any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the
foregoing; (d) the right to sue for past, present and future
infringements of any of the foregoing; and (e) all rights corresponding
to any of the foregoing throughout the world.
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods or services,
now or hereafter owned or acquired by any Grantor or in which any
Grantor now or hereafter has or acquires any right or interest.
"Equipment" means all "equipment" (as defined in the UCC) of
any Grantor, wherever located, and all other machinery, equipment and
goods (other than Inventory) of any Grantor used or bought for use
primarily in the business of such Grantor, including all accessions,
additions, attachments, improvements, substitutions and replacements
thereto and therefor, in all such cases whether now owned or hereafter
acquired by any Grantor or in which any Grantor now has or hereafter
acquires any right or interest.
"Financing Statements" means the Uniform Commercial Code Form
UCC-1 Financing Statements executed by each Grantor with respect to the
Collateral and to be filed in the jurisdictions set forth in the
Perfection Certificate.
"Fixtures" means all "fixtures" (as defined in the UCC) of any
Grantor, whether now owned or hereafter acquired, or in which any
Grantor now has or hereafter acquires any right or interest.
"General Intangibles" means all "general intangibles" (as
defined in the UCC) now or hereafter owned or acquired by any Grantor or
in which any Grantor now or hereafter has or acquires any right or
interest, and, in any event, shall mean and include, without limitation,
all rights to indemnification, and all rights, title and interest which
any Grantor may now or hereafter have in or under all contracts (other
than contracts described in the definition of Accounts), agreements,
permits, licenses (which contracts, agreements, permits and licenses may
be pledged pursuant to the terms thereof) causes of action, franchises,
tax refund claims, customer lists, Intellectual Property, license
royalties, goodwill, trade secrets, data bases, business records and all
other intangible property of every kind and nature.
"Instruments" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC), including, without
limitation, instruments, chattel paper and letters of credit evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of
exchange and trade acceptances, now or hereafter owned or acquired by
any Grantor or in which any Grantor now or hereafter has or acquires any
right or interest.
"Intellectual Property" means, collectively, (a) all systems
software and applications software, including, but not limited to,
screen displays and formats, program structures, sequence and
organization, all documentation for such software, including, but not
limited to, user manuals, flowcharts, programmer's notes, functional
specifications, and operations manuals, all formulas, processes, ideas
and know-how embodied in any of the foregoing, and all program
materials, flowcharts, notes and outlines created in connection with any
of the foregoing, whether or not patentable or copyrightable, (b)
concepts, discoveries, improvements and ideas, (c) any useful
information relating to the items described in clause (a) or (b),
including know-how, technology, engineering drawings, reports, design
information, trade secrets, practices, laboratory notebooks,
specifications, test procedures, maintenance manuals, research,
development, manufacturing, marketing, merchandising, selling,
purchasing and accounting, (d) Patents, Patent rights and Patent
applications, Copyrights and Copyright applications, Trademarks,
Trademark rights, trade names, trade name rights, service marks, service
mark rights, applications for registration of Trademarks, trade names
and service marks, and Trademark, trade name and service mark
registrations and Patent Licenses, Trademark Licenses and Copyright
Licenses, and (e) other licenses to use any of the items described in
the foregoing clauses (a), (b), (c) and (d) or any other similar items
of any Grantor necessary for the conduct of its business.
"Inventory" means all "inventory" (as defined in the UCC) now
or hereafter owned or acquired by any Grantor or in which any Grantor
now or hereafter has or acquires any right or interest, wherever located
and, in any event, shall mean and include, without limitation, all raw
materials, inventory and other materials and supplies, work-in-process,
finished goods, all accessions thereto, documents therefor and any
products made or processed therefrom and all substances, if any,
commingled therewith or added thereto.
"Patent License" means any written agreement now or hereafter
in existence granting to any Grantor any right to use any invention on
which a Patent is in existence.
"Patents" means, collectively, all of the following now owned
or hereafter created or acquired by any Grantor: (a) all patents and
patent applications including all patentable inventions; (b) all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any of the foregoing; (c) all income,
royalties, damages or payments now or hereafter due and/or payable under
any of the foregoing or with respect to any of the foregoing, including,
without limitation, damages or payments for past or future infringements
of any of the foregoing; (d) the right to sue for past, present and
future infringements of any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.
"Perfection Certificate" means a certificate dated as of even
date herewith, setting forth the corporate names, chief executive office
or principal place of business in each state and other current locations
of Collateral of each Grantor and such other information as the
Administrative Agent deems pertinent to the perfection of security
interests, completed and supplemented with the schedules and attachments
contemplated thereby to the satisfaction of the Administrative Agent,
and duly certified by the chief executive or chief financial officer of
each Grantor so authorized to act.
"Permitted Investments" means investments described in
Section 10.4 of the Amended and Restated Credit Agreement.
"Permitted Liens" means all such Liens respecting the
Collateral permitted pursuant to Section 10.3 of the Amended and
Restated Credit Agreement.
"Proceeds" means all proceeds of, and all other profits,
rentals or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or
realization upon, Collateral, including, without limitation, all claims
of any Grantor against third parties for loss of, damage to or
destruction of, or for proceeds payable under, or unearned premiums with
respect to, policies of insurance in respect of, any Collateral, and any
condemnation or requisition payments with respect to any Collateral and
the following types of property acquired with cash proceeds: Accounts,
Inventory, Documents, Fixtures, Instruments, General Intangibles and
Equipment.
"Secured Obligations" means the Obligations as defined in the
Amended and Restated Credit Agreement and any renewals or extensions of
any of the Obligations.
"Security Interests" means the security interests granted
pursuant to Section 2, as well as all other security interests created
or assigned as additional security for the Secured Obligations pursuant
to the provisions of this Agreement.
"Trademark License" means any written agreement now or
hereafter in existence granting to any Grantor any right to use any
Trademark.
"Trademarks" means, collectively, all of the following now
owned or hereafter created or acquired by any Grantor: (a) all
Trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos, other
business identifiers, prints and labels on which any of the foregoing
have appeared or appear, all registrations and recordings thereof, and
all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any
state thereof or any other country or any political subdivision of any
thereof, including without limitation any thereof referred to on
Schedule I hereto; (b) all reissues, extensions and renewals of any of
the foregoing; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing or with respect
to any of the foregoing, including, without limitation, damages or
payments for past or future infringements of any of the foregoing; (d)
the right to sue for past, present and future infringements of any of
the foregoing; and (e) all rights corresponding to any of the foregoing
throughout the world.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of North Carolina; provided that if by reason
of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in any Collateral
is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than North Carolina, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
SECTION 2. The Security Interests.
(a) In order to secure the Amended and Restated Credit
Agreement in accordance with the terms thereof, and to secure the
payment and performance of all of the Secured Obligations, each Grantor
hereby grants to the Administrative Agent, for the ratable benefit of
itself and the Lenders, a continuing security interest in and to all of
such Grantor's estate, right, title and interest in and to all
Collateral whether now or hereafter owned or acquired by such Grantor or
in which such Grantor now has or hereafter has or acquires any rights,
and wherever located.
(b) The Security Interests are granted as security only and
shall not subject the Administrative Agent or any Lender to, or transfer
to the Administrative Agent or any Lender, or in any way affect or
modify, any obligation or liability of any Grantor with respect to any
of the Collateral or any transaction in connection therewith.
SECTION 3. Representations and Warranties. Each Grantor
represents and warrants as follows:
(a) Such Grantor has the corporate power and authority and
the legal right to execute and deliver, to perform its obligations
under, and to grant the Security Interests in the Collateral pursuant
to, this Agreement and has taken all necessary corporate action to
authorize its execution, delivery and performance of, and grant of the
Security Interests in the Collateral pursuant to, this Agreement.
(b) This Agreement constitutes a legal, valid and binding
obligation of such Grantor enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally.
(c) The execution, delivery and performance of this Agreement
will not violate any provision of any Applicable Law or contractual
obligation of such Grantor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of such
Grantor pursuant to any Applicable Law or contractual obligation of such
Grantor, except as contemplated hereby.
(d) No consent or authorization of, filing with, or other act
by or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of such Grantor), is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement.
(e) No litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority is pending or, to the knowledge
of such Grantor after due inquiry, threatened by or against such Grantor
or against any of its properties or revenues with respect to this
Agreement or any of the transactions contemplated hereby.
(f) Such Grantor has good and marketable title to all of its
respective Collateral, free and clear of any Liens other than the
Permitted Liens.
(g) Such Grantor has not performed or failed to perform any
acts that would prevent or hinder the Administrative Agent from
enforcing any of the terms of this Agreement. Other than financing
statements or other similar or equivalent documents or instruments with
respect to Permitted Liens, no financing statement, mortgage, security
agreement or similar or equivalent document or instrument covering all
or any part of the Collateral of such Grantor is on file or of record in
any jurisdiction. No Collateral of such Grantor is in the possession of
any Person (other than such Grantor) asserting any claim thereto or
security interest therein, except that the Administrative Agent or its
designee may have possession of the Collateral as contemplated hereby.
(h) All of the information set forth in the Perfection
Certificate with respect to such Grantor is true and correct as of the
date hereof.
(i) Such Grantor has, contemporaneously herewith, delivered
to the Administrative Agent possession of all originals of all
negotiable Instruments, documents and chattel paper constituting
Collateral currently owned or held by such Grantor, if any (duly
endorsed in blank, if requested by the Administrative Agent).
(j) With respect to any Intellectual Property of Grantor the
loss, impairment or infringement of which might have a Material Adverse
Effect:
(i) such Intellectual Property is subsisting and has not
been adjudged invalid or unenforceable, in whole or in part;
(ii) such Intellectual Property is valid and
enforceable;
(iii) such Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual
Property, including, without limitation, recordations of all
of its interests in the Patents and Trademarks included in
such Intellectual Property in the United States Patent and
Trademark Office and its claims to the Copyrights included in
such Intellectual Property in the United States Copyright
Office;
(iv) such Grantor is the exclusive owner of the entire
and unencumbered right, title and interest in and to such
Intellectual Property and no claim has been made that the use
of such Intellectual Property does or may violate the asserted
rights of any third party; and
(v) such Grantor has performed and will continue to
perform all acts and has paid and will continue to pay all
required fees and taxes to maintain each and every such item
of Intellectual Property in full force and effect.
(k) The Financing Statements executed by such Grantor
are in appropriate form and when filed in the offices specified in the
Perfection Certificate, the Security Interests will constitute valid and
perfected security interests in the Collateral of such Grantor, prior to
all other Liens and rights of others therein except for the Permitted
Liens (to the extent that a security interest therein may be perfected
by filing pursuant to the UCC) and all filings and other actions
necessary or desirable to perfect and protect such Security Interests
have been duly taken.
(l) The Inventory, Fixtures and Equipment of such Grantor are
insured in accordance with the requirements hereof and of the Amended
and Restated Credit Agreement.
SECTION 4. Further Assurances; Covenants.
(a) General.
(i) Each Grantor agrees not to change the location of
its chief executive office or principal place of business in
any state unless it shall have given the Administrative Agent
thirty (30) days prior written notice thereof, executed and
delivered to the Administrative Agent all financing statements
and financing statement amendments which the Administrative
Agent may request in connection therewith. Each Grantor
agrees not to change the locations where it keeps or holds any
Collateral or any records relating thereto from the applicable
location described in the Perfection Certificate unless such
Grantor shall have given the Administrative Agent thirty (30)
days prior written notice of such change of location and
executed and delivered to the Administrative Agent all
financing statements and financing statement amendments which
the Administrative Agent may request in connection therewith;
provided, that such Grantor may keep Inventory at, or in
transit to, any location described in the Perfection
Certificate. Each Grantor agrees not to, in any event, change
the location of any Collateral if such change would cause the
Security Interests in such Collateral to lapse or cease to be
perfected.
(ii) Each Grantor agrees not to change its name,
identity or corporate structure in any manner unless it shall
have given the Administrative Agent thirty (30) days prior
written notice thereof, executed and delivered to the
Administrative Agent all financing statements and financing
statement amendments which the Administrative Agent may
request in connection therewith.
(iii) Each Grantor will, from time to time, at its
expense, execute, deliver, file and record any statement,
assignment, instrument, document, agreement or other paper and
take any other action (including without limitation any
filings of financing or continuation statements under the UCC)
that from time to time may be necessary, or that the
Administrative Agent may reasonably request, in order to
create, preserve, upgrade in rank (to the extent required
hereby), perfect, confirm or validate the Security Interests
or to enable the Administrative Agent and the Lenders to
obtain the full benefits of this Agreement, or to enable the
Administrative Agent to exercise and enforce any of its
rights, powers and remedies hereunder with respect to any of
the Collateral (other than any filings with the United States
Patent and Trademark Office or the United States Copyright
Office). Prior to the irrevocable payment in full of the
Secured Obligations, each Grantor hereby authorizes the
Administrative Agent, upon the failure of such Grantor to so
do within three Business Days after receipt of notice from the
Administrative Agent, to execute and file financing
statements, financing statement amendments or continuation
statements without such Grantor's signature appearing thereon.
Each Grantor agrees that a carbon, photographic, photostatic
or other reproduction of this Agreement or of a financing
statement is sufficient as a financing statement. Each
Grantor shall pay the costs of, or incidental to, any
recording or filing of the Financing Statements and any other
financing statements, financing statement amendments or
continuation statements concerning the Collateral.
(iv) If any Collateral exceeding in value $500,000 in
the aggregate is at any time in the possession or control of
any warehouseman, bailee (other than a carrier transporting
Inventory to a purchaser in the ordinary course of business),
or any Grantor's agents or processors, such Grantor shall
notify in writing such warehouseman, bailee, agent or
processor of the Security Interests created hereby, shall
obtain such warehouseman's, bailee's, agent's or processor's
agreement in writing to hold all such Collateral for the
Administrative Agent's account subject to the Administrative
Agent's instructions, and shall cause such warehouseman,
bailee, agent or processor to issue and deliver to the
Administrative Agent warehouse receipts, bills of lading or
any similar documents relating to such Collateral in the
Administrative Agent's name and in form and substance
acceptable to the Administrative Agent.
(v) Each Grantor will cause the Administrative Agent,
for the ratable benefit of itself and the Lenders, to be named
as loss payee on each insurance policy covering risks relating
to any of its Inventory, Fixtures and Equipment, as reasonably
requested by the Administrative Agent. Each Grantor will
deliver to the Administrative Agent, upon request of the
Administrative Agent, the insurance policies for such
insurance. Each such insurance policy shall include effective
waivers by the insurer of subrogation, provide that all
insurance proceeds shall be adjusted with and payable to the
Administrative Agent and provide that no cancellation or
termination thereof shall be effective until at least thirty
(30) days have elapsed after receipt by the Administrative
Agent of written notice thereof. Each Grantor shall arrange
for appropriate certifications that the requirements of this
Section 4(a)(v) have been satisfied, to be made to the
Administrative Agent and each insured party, as soon as
practicable, by each insurer or its authorized representative
with respect thereto.
(vi) Each Grantor will, promptly upon request, provide
to the Administrative Agent all information and evidence the
Administrative Agent may reasonably request concerning the
Collateral, and in particular the Accounts, to enable the
Administrative Agent to enforce the provisions of this
Agreement.
(vii) Each Grantor will comply in all material respects
with all Applicable Laws applicable to the Collateral or any
part thereof or to the operation of such Grantor's business.
(viii) Each Grantor will pay promptly when due all
taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including,
without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral, except that no such
charge need be paid if (A) the validity thereof is being
contested in good faith by appropriate proceedings, (B) such
proceedings do not involve any danger of the sale, forfeiture
or loss of or creation of a Lien on any of the Collateral or
any interest therein and (C) such charge is adequately
reserved against on such Grantor's books in accordance with
GAAP.
(ix) No Grantor shall
(A) sell, assign (by operation of law or
otherwise) or otherwise dispose of any of the Collateral,
except as permitted by the Amended and Restated Credit
Agreement; or
(B) create or suffer to exist any Lien or other
charge or encumbrance upon or with respect to any of the
Collateral to secure indebtedness of any Person or
entity, except as permitted by the Amended and Restated
Credit Agreement.
(b) Accounts, Etc.
(i) Each Grantor shall use all reasonable efforts to
cause to be collected from its Account Debtors, as and when
due, any and all amounts owing under or on account of each
Account (including, without limitation, Accounts which are
delinquent, such Accounts to be collected in accordance with
lawful collection procedures) and to apply forthwith upon
receipt thereof all such amounts as are so collected to the
outstanding balance of such Account. The costs and expenses
(including, without limitation, attorney's fees), of
collection of Accounts incurred by such Grantor or the
Administrative Agent shall be borne by such Grantor.
(ii) Upon the occurrence and during the continuance of
any Event of Default, upon request of the Administrative Agent
or the Required Lenders, each Grantor will promptly notify
(and each Grantor hereby authorizes the Administrative Agent
so to notify) each Account Debtor in respect of any Account
that such Account has been assigned to the Administrative
Agent hereunder and that any payments due or to become due in
respect of such Account are to be made directly to the
Administrative Agent or its designee.
(iii) Each Grantor will perform and comply in all
material respects with all of its obligations in respect of
Accounts and General Intangibles and the exercise by the
Administrative Agent of any of its rights hereunder shall not
release any Grantor from any of its duties or obligations.
(iv) No Grantor will (A) amend, modify, terminate or
waive any material provision of any agreement giving rise to
an Account in any manner which could reasonably be expected to
materially adversely affect the value of such Account as
Collateral, (B) fail to exercise promptly and diligently each
and every material right which it may have under each
agreement giving rise to an Account (other than any right of
termination) or (C) fail to deliver to the Administrative
Agent a copy of each material demand, notice or document
received by it relating in any way to any agreement giving
rise to an Account.
(v) Other than in the ordinary course of business as
generally conducted by such Grantor over a period of time, no
Grantor will grant any extension of the time of payment of any
of the Accounts to any one Account Debtor with an aggregate
face amount in excess of $25,000 or compromise, compound or
settle the same for less than the full amount thereof,
release, wholly or partially, any Person liable for the
payment thereof, or allow any credit or discount whatsoever
thereon.
(c) Inventory, Etc. Each Grantor hereby represents,
warrants, covenants and agrees as follows: (i) all Inventory is, and
shall be at all times, located at places of business listed in the
Perfection Certificate or as to which such Grantor has complied with the
provisions of Section 4(a)(i) hereof, except Inventory in transit from
one such location to another such location; (ii) no Inventory is, nor
shall at any time or times be, subject to any Lien whatsoever, except
for Permitted Liens; and (iii) no Inventory in aggregate value exceeding
$500,000 at any time is, nor shall at any time or times be, kept, stored
or maintained with a bailee, warehouseman, carrier or similar party
(other than a carrier delivering Inventory to a purchaser in the
ordinary course of such Grantor's business) unless the Required Lenders
have given their prior written consent and Grantor has complied with the
provisions of Section 4(a)(iv) hereof.
(d) Equipment, Etc. Each Grantor will maintain each item of
Equipment in the same condition, repair and working order as when
acquired, ordinary wear and tear and immaterial impairments of value and
damage by the elements excepted, and in accordance with any
manufacturer's manual, and will as quickly as practicable provide all
maintenance, service and repairs necessary for such purpose and will
promptly furnish to the Administrative Agent a statement respecting any
material loss or damage to any of the Equipment.
(e) Intellectual Property.
(i) Each Grantor shall notify the Administrative Agent
promptly (A) of its acquisition after the Closing Date of any
Patent, Patent License, Trademark or Trademark License and (B)
if it knows, or has reason to know of any adverse
determination or development (including, without limitation,
the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark
Office or any court) regarding such Grantor's ownership of any
Patent or Trademark, its right to register the same, or to
keep and maintain the same. In the event that any Patent,
Patent License, Trademark or Trademark License is infringed,
misappropriated or diluted by a third party, each Grantor
shall notify the Administrative Agent promptly after it learns
thereof and shall, unless such Grantor and the Administrative
Agent shall jointly determine that any such action would be of
immaterial economic value, promptly sue for infringement,
misappropriation or dilution and to recover any and all
damages for such infringement, misappropriation or dilution,
and take such other actions as may be appropriate under the
circumstances to protect such Patent, Patent License,
Trademark or Trademark License. In no event shall any
Grantor, either itself or through any agent, employee or
licensee, file an application for the registration of any
Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other
country or any political subdivision thereof, unless
simultaneously therewith it informs the Administrative Agent,
and, upon issuance of such Patent or Trademark, executes and
delivers any and all agreements, instruments, documents and
papers the Administrative Agent may reasonably request to
evidence the Security Interests in such Patent or Trademark
and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby. Each Grantor hereby
constitutes the Administrative Agent its attorney-in-fact to
execute and file all such writings for the foregoing purposes,
all acts of such attorney being hereby ratified and confirmed,
and such power, being coupled with an interest, shall be
irrevocable until the Commitments have terminated and the
Secured Obligations are paid in full.
(ii) Each Grantor shall: (A) preserve and maintain in
all material respects rights in the Intellectual Property; and
(B) upon and after the occurrence of an Event of Default, use
its best efforts to obtain any consents, waivers or agreements
necessary to enable Administrative Agent to exercise its
remedies with respect to the Intellectual Property. No
Grantor shall abandon any right to file a Copyright, Patent or
Trademark application that is material to the business of such
Grantor nor shall any Grantor abandon any such pending
Copyright, Patent or Trademark application, or Copyright,
Copyright License, Patent, Patent License, Trademark or
Trademark License without the prior written consent of
Administrative Agent.
(iii) Each Grantor hereby assigns, transfers and conveys
to Administrative Agent, effective upon the occurrence and
during the continuance of any Event of Default, the
nonexclusive right and license to use all Intellectual
Property owned or used by such Grantor, together with any
goodwill associated therewith, all to the extent necessary to
enable Administrative Agent to realize on the Collateral
(including, without limitation, completing production of,
advertising for sale and selling the Collateral) and any
successor or assign to enjoy the benefits of the Collateral.
This right and license shall inure to the benefit of all
successors, assigns and transferees of Administrative Agent
and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. Such
right and license is granted free of charge, without
requirement that any monetary payment whatsoever be made to
any Grantor by Administrative Agent.
(f) Indemnification. Each Grantor agrees to pay, and to save
the Administrative Agent and the Lenders harmless from, any and all
liabilities, costs and expenses (including, without limitation, legal
fees and expenses) (i) with respect to, or resulting from, any and all
excise, sales or other taxes which may be payable or determined to be
payable with respect to any of the Collateral, (ii) with respect to, or
resulting from, complying with any Applicable Law applicable to any of
the Collateral or (iii) in connection with any of the transactions
contemplated by this Agreement (except to the extent any such
liabilities, costs and expenses result from the gross negligence or
willful misconduct of the Administrative Agent or Lenders). In any
suit, proceeding or action brought by the Administrative Agent under any
Account for any sum owing thereunder, or to enforce any provisions of
any Account, each Grantor will save, indemnify and keep the
Administrative Agent and the Lenders harmless from and against all
expense, loss or damage suffered by reason of any defense, setoff,
counterclaim, recoupment or reduction or liability whatsoever of the
Account Debtor or any other obligor thereunder, arising out of a breach
by such Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of
such Account Debtor or obligor or its successors from such Grantor
(except to the extent any such expense, loss or damage results from the
gross negligence or willful misconduct of the Administrative Agent or
Lenders). The obligations of each Grantor under this Section 4(f) shall
survive the termination of the other provisions of this Agreement.
Section 5. Reporting and Recordkeeping. Each Grantor
respectively covenants and agrees with the Administrative Agent and the
Lenders that from and after the date of this Agreement and until the
Commitments have terminated and all Secured Obligations have been fully
satisfied:
(a) Maintenance of Records Generally. Such Grantor will keep
and maintain at its own cost and expense complete and accurate records
of the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the Collateral
and all other dealings with the Collateral. All chattel paper given to
such Grantor with respect to any Accounts will be marked with the
following legend: "This writing and the obligations evidenced or
secured hereby are subject to the security interest of First Union
National Bank of North Carolina, as Administrative Agent". For the
Administrative Agent's and the Lenders' further security, such Grantor
agrees that upon the occurrence and during the continuation of any Event
of Default, such Grantor shall deliver and turn over any such books and
records directly to the Administrative Agent or its designee. Such
Grantor shall permit any representative of the Administrative Agent to
inspect such books and records in accordance with Section 8.11 of the
Amended and Restated Credit Agreement and will provide photocopies
thereof to the Administrative Agent upon its reasonable request.
(b) Certain Provisions Regarding Maintenance of Records and
Reporting Re: Accounts.
(i) In the event any amounts due and owing in excess of
$250,000 are in dispute between any Account Debtor and such
Grantor, such Grantor shall provide the Administrative Agent
with written notice thereof promptly after such Grantor's
learning thereof, explaining in detail the reason for the
dispute, all claims related thereto and the amount in
controversy; provided, that a report of such items provided
within ten (10) days after the end of each fiscal quarter of
ACC shall be deemed to be prompt delivery of such notice.
(ii) Such Grantor will promptly notify the
Administrative Agent in writing if any Account arises out of
a contract with the United States of America, or any
department, agency, subdivision or instrumentality thereof, or
of any state (or department, agency, subdivision or
instrumentality thereof) where such state has a state
assignment of claims act or other law comparable to the
Federal Assignment of Claims Act, and will take any action
required or requested by the Administrative Agent or give
notice of the Administrative Agent's Security Interest in such
Accounts under the provisions of the Federal Assignment of
Claims Act or any comparable law or act enacted by any state
or local governmental authority.
(c) Further Identification of Collateral. Such Grantor will,
if so requested by the Administrative Agent, furnish to the
Administrative Agent statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in
reasonable detail.
(d) Notices. In addition to the notices required by
Section 5(b) hereof, such Grantor will advise the Administrative Agent
promptly, in reasonable detail, (i) of any material Lien or claim made
or asserted against any of the Collateral, (ii) of any material adverse
change in the composition of the Collateral, and (iii) of the occurrence
of any other event which could have a material adverse effect on the
Collateral or on the validity, perfection or priority of the Security
Interests.
SECTION 6. Collateral Account.
(a) There is hereby established with the Administrative Agent
a Collateral Account in the name and under the exclusive dominion and
control of the Administrative Agent. There shall be deposited from time
to time into such account the cash proceeds of the Collateral required
to be delivered to the Administrative Agent pursuant to Section 6(b) or
any other provision of this Agreement. Any income received by the
Administrative Agent with respect to the balance from time to time
standing to the credit of the Collateral Account, including any interest
or capital gains on investments of amounts on deposit in the Collateral
Account, shall remain, or be deposited, in the Collateral Account
together with any investments from time to time made pursuant to
subsection (c) of this Section 6, shall vest in the Administrative
Agent, shall constitute part of the Collateral hereunder and shall not
constitute payment of the Secured Obligations until applied thereto as
hereinafter provided.
(b) Upon the occurrence and during the continuance of an
Event of Default, if requested by the Administrative Agent, each Grantor
shall instruct all Account Debtors and other Persons obligated in
respect of all Accounts to make all payments in respect of the Accounts
either (i) directly to the Administrative Agent (by instructing that
such payments be remitted to a post office box which shall be in the
name and under the exclusive dominion and control of the Administrative
Agent) or (ii) to one or more other banks in any state in the United
States (by instructing that such payments be remitted to a post office
box which shall be in the name and under the exclusive dominion and
control of such bank) under a Lockbox Letter substantially in the form
of Annex I hereto duly executed by each Grantor and such bank or under
other arrangements, in form and substance satisfactory to the
Administrative Agent, pursuant to which such Grantor shall have
irrevocably instructed such other bank (and such other bank shall have
agreed) to remit all proceeds of such payments directly to the
Administrative Agent for deposit into the Collateral Account or as the
Administrative Agent may otherwise instruct such bank, and thereafter if
the proceeds of any Collateral shall be received by such Grantor, such
Grantor will promptly deposit such proceeds into the Collateral Account
and until so deposited, all such proceeds shall be held in trust by such
Grantor for and as the property of the Administrative Agent, for the
benefit of itself and the Lenders and shall not be commingled with any
other funds or property of such Grantor. At any time after the
occurrence and during the continuance of an Event of Default, the
Administrative Agent may itself so instruct such Grantor's Account
Debtors and each Grantor hereby constitutes and appoints the
Administrative Agent (and the president, any vice president or any
assistant vice president of the Administrative Agent from time to time)
as its attorney-in-fact with full power and authority to so instruct
such Grantor's Account Debtors. All such payments made to the
Administrative Agent shall be deposited in the Collateral Account.
(c) The balance from time to time standing to the credit of
the Collateral Account shall, except upon the occurrence and
continuation of an Event of Default, be distributed to the Grantors upon
the order of the Grantors. If immediately available cash on deposit in
the Collateral Account is not sufficient to make any distribution to the
Grantors referred to in the previous sentence of this Section 6(c), the
Administrative Agent shall liquidate as promptly as practicable such
investments as required to obtain sufficient cash to make such
distribution and, notwithstanding any other provision of this Section 6,
such distribution shall not be made until such liquidation has taken
place. Upon the occurrence and continuation of an Event of Default, the
Administrative Agent shall, if so instructed by the Required Lenders,
apply or cause to be applied (subject to collection) any or all of the
balance from time to time standing to the credit of the Collateral
Account in the manner specified in Section 10.
(d) Amounts on deposit in the Collateral Account shall be
invested and reinvested from time to time in Permitted Investments as
the Grantors shall determine, which investments shall be held in the
name and be under the control of the Administrative Agent; provided,
that if an Event of Default has occurred and is continuing, the
Administrative Agent may and, if instructed by the Required Lenders,
shall liquidate any such investments and apply or cause to be applied
the proceeds thereof to the payment of the Secured Obligations in the
manner specified in Section 10 hereof; and provided further, that
(i) each such investment shall mature within thirty (30) days after it
is acquired by the Administrative Agent and (ii) in order to provide the
Administrative Agent, for the ratable benefit of itself and the Lenders,
with a perfected security interest therein, each such investment shall
be either:
(A) evidenced by negotiable certificates or Instruments,
or if non-negotiable then issued in the name of the
Administrative Agent, which (together with any appropriate
instruments of transfer) are delivered to, and held by, the
Administrative Agent or any agent thereof (which shall not be
any of the Grantors or any of their Affiliates) in the State
of North Carolina; or
(B) in book-entry form and issued by the United States
and subject to pledge under applicable state law and Treasury
regulations and as to which (in the opinion of counsel to the
Administrative Agent) appropriate measures shall have been
taken for perfection of the Security Interests.
(e) Upon the occurrence of any Event of Default, the
Administrative Agent is authorized at any time and from time to time,
and during the continuance thereof, without notice to the Grantors, to
set off, appropriate and apply any and all amounts on deposit in the
Collateral Account, and the proceeds thereof, against all Secured
Obligations.
SECTION 7. General Authority.
(a) Each Grantor hereby irrevocably appoints the
Administrative Agent its true and lawful attorney, with full power of
substitution, in the name of such Grantor, the Administrative Agent, the
Lenders or otherwise, for the sole use and benefit of the Administrative
Agent and the Lenders, but at such Grantor's expense, to exercise, at
any time from time to time all or any of the following powers:
(i) to file the Financing Statements and any financing
statements, financing statement amendments and continuation
statements referred to in Sections 4(a)(i), 4(a)(ii), and
4(a)(iii) hereof,
(ii) to demand, sue for, collect, receive and give
acquittance for any and all monies due or to become due with
respect to any Collateral or by virtue thereof,
(iii) to settle, compromise, compound, prosecute or
defend any action or proceeding with respect to any
Collateral,
(iv) to sell, transfer, assign or otherwise deal in or
with the Collateral and the Proceeds thereof, as fully and
effectually as if the Administrative Agent were the absolute
owner thereof, and
(v) to extend the time of payment and to make any
allowance and other adjustments with reference to the
Collateral;
provided that the Administrative Agent shall not take any of the actions
described in this Section 7 except those described in clause (i) above
unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall give such Grantor not less than ten
(10) days' prior written notice of the time and place of any sale or
other intended disposition of any of the Collateral, except any
Collateral which is perishable or threatens to decline speedily in value
or is of a type customarily sold on a recognized market. Each Grantor
agrees that any such notice constitutes "reasonable notification" within
the meaning of Section 9504(3) of the UCC (to the extent such Section is
applicable).
(b) Each Grantor hereby ratifies all that said attorney shall
lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and shall be irrevocable.
(c) Each Grantor also authorizes the Administrative Agent at
any time and from time to time, to execute, in connection with the sale
provided for in Section 8 hereof, any endorsements, assignments or other
instruments of conveyance or transfer with respect to the Collateral.
SECTION 8. Remedies Upon Event of Default.
(a) If any Event of Default has occurred and is continuing,
the Administrative Agent may exercise on behalf of itself and the
Lenders all rights of a secured party under the UCC (whether or not in
effect in the jurisdiction where such rights are exercised) and, in
addition, the Administrative Agent may (i) withdraw all cash, if any, in
the Collateral Account and investments made with amounts on deposit in
the Collateral Account, and apply such monies, investments and other
cash, if any, then held by it as Collateral as specified in Section 10
hereof and (ii) if there shall be no such monies, investments or cash or
if such monies, investments or cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale, for cash, upon credit or for future delivery,
and at such price or prices as the Administrative Agent may deem
satisfactory. The Administrative Agent or any Lender may be the
purchaser of any or all of the Collateral so sold at any public sale
(or, if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed
standard price quotations or if otherwise permitted under applicable
law, at any private sale) and thereafter hold the same, absolutely, free
from any right or claim of whatsoever kind. Each Grantor will execute
and deliver such documents and take such other action as the
Administrative Agent deems reasonably necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such
sale the Administrative Agent shall have the right to deliver, assign
and transfer to the purchaser thereof the Collateral so sold (without
warranty). Each purchaser at any such sale shall hold the Collateral so
sold to it absolutely, free from any claim or right of whatsoever kind,
including any equity or right of redemption of any Grantor. To the
extent permitted by law, each Grantor hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under
any law now existing or hereafter adopted. The notice of such sale
shall be given to the applicable Grantor ten (10) days prior to such
sale and (A) in case of a public sale, state the time and place fixed
for such sale, and (B) in the case of a private sale, state the day
after which sale may be consummated. Any such public sale shall be held
at such time or times within ordinary business hours and at such place
or places as the Administrative Agent may fix in the notice of such
sale. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Administrative Agent may
determine. The Administrative Agent shall not be obligated to make any
such sale pursuant to any such notice. The Administrative Agent may,
without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of
all or any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Administrative Agent until the
selling price is paid by the purchaser thereof, but the Administrative
Agent shall not incur any liability in case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in case of
any such failure, such Collateral may again be sold upon like notice.
The Administrative Agent, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction. The Grantors shall remain liable for any deficiency.
(b) For the purpose of enforcing any and all rights and
remedies under this Agreement, the Administrative Agent may if an Event
of Default has occurred and is continuing (i) require each Grantor to,
and each Grantor agrees that it will, at its expense and upon the
request of the Administrative Agent, forthwith assemble all or any part
of the Collateral as directed by the Administrative Agent and make it
available at a place designated by the Administrative Agent which is, in
the Administrative Agent's opinion, reasonably convenient to the
Administrative Agent and such Grantor, whether at the premises of such
Grantor or otherwise, (ii) to the extent permitted by applicable law,
enter, with or without process of law and without breach of the peace,
any premise where any of the Collateral is or may be located and,
without charge or liability to the Administrative Agent, seize and
remove such Collateral from such premises, (iii) have access to and use
such Grantor's books and records relating to the Collateral and (iv)
prior to the disposition of the Collateral, store or transfer such
Collateral without charge in or by means of any storage or
transportation facility owned or leased by such Grantor, process, repair
or recondition such Collateral or otherwise prepare it for disposition
in any manner and to the extent the Administrative Agent deems
appropriate and, in connection with such preparation and disposition,
use without charge any Trademark, trade name, Copyright, Patent or
technical process used by such Grantor.
(c) Without limiting the generality of the foregoing, if any
Event of Default has occurred and is continuing,
(i) the Administrative Agent may license, or sublicense,
whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any Patents or Trademarks
included in the Collateral throughout the world for such term
or terms, on such conditions and in such manner as the
Administrative Agent shall in its sole discretion determine;
(ii) the Administrative Agent may (without assuming any
obligations or liability thereunder), at any time and from
time to time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and
remedies of any Grantor in, to and under any Patent Licenses
or Trademark Licenses and take or refrain from taking any
action under any thereof, provided, that no such actions shall
result in the failure of such Patent Licenses or Trademark
Licenses to remain in compliance with all Applicable Law, and
each Grantor hereby releases the Administrative Agent and each
of the Lenders from and against any claims arising out of, any
lawful action so taken or omitted to be taken with respect
thereto except with respect to the gross negligence or willful
misconduct of the Administrative Agent or the Lenders; and
(iii) upon request by the Administrative Agent, each
Grantor will execute and deliver to the Administrative Agent
a power of attorney, in form and substance satisfactory to the
Administrative Agent, for the implementation of any lease,
assignment, license, sublicense, grant or option, sale or
other disposition of a Patent or Trademark. In the event of
any such disposition pursuant to this Section, each Grantor
shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing Trademarks or the
products or services made or rendered in connection with
Patents, and its customer lists and other records relating to
such Patents or Trademarks and to the distribution of said
products, to the Administrative Agent.
SECTION 9. Limitation on Duty of Administrative Agent in
Respect of Collateral. Beyond reasonable care in the custody thereof,
the Administrative Agent shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or
bailee or any income thereon or as to the preservation of rights against
prior parties or any other rights pertaining thereto. The
Administrative Agent shall be deemed to have exercised reasonable care
in the custody of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property, and the Administrative Agent shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or
bailee selected by the Administrative Agent in good faith.
SECTION 10. Application of Proceeds. Upon the occurrence and
during the continuance of an Event of Default, the proceeds of any sale
of, or other realization upon, all or any part of the Collateral shall
be applied by the Administrative Agent as follows:
first, to payment of the out-of-pocket expenses of such
sale or other realization, including all reasonable
out-of-pocket expenses, liabilities and advances incurred or
made by the Administrative Agent in connection therewith, and
any other unreimbursed expenses for which the Administrative
Agent or any Lender is to be reimbursed pursuant to
Section 14.2 of the Amended and Restated Credit Agreement, or
Section 4(f) or 13 hereof or any corresponding provision of
any of the other Loan Documents;
second, to payment of any fees owing to the
Administrative Agent or any Lender under the Amended and
Restated Credit Agreement in accordance with the provisions of
the Amended and Restated Credit Agreement;
third, to ratable payment of accrued but unpaid interest
(including post-petition interest) on the Secured Obligations
and any termination payments due in respect of any Hedging
Agreement with any Lender (pro rata in accordance with all
such amounts due);
fourth, to the ratable payment of unpaid principal of the
Secured Obligations;
fifth, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been
paid in full; and
finally, to payment to the applicable Grantors or their
respective successor or assigns, or as a court of competent
jurisdiction may direct, of any surplus then remaining from
such proceeds.
The Administrative Agent may make distribution hereunder in cash or in
kind or, on a ratable basis, in any combination thereof.
SECTION 11. Concerning the Administrative Agent. The
provisions of Article XIII of the Amended and Restated Credit Agreement
shall inure to the benefit of the Administrative Agent in respect of
this Agreement and shall be binding upon the parties to the Amended and
Restated Credit Agreement in such respect. In furtherance and not in
derogation of the rights, privileges and immunities of the
Administrative Agent therein set forth:
(a) The Administrative Agent is authorized to take all such
action as is provided to be taken by it as Administrative Agent
hereunder and all other action incidental thereto. As to any matters
not expressly provided for herein, the Administrative Agent may request
instructions from the Lenders and shall act or refrain from acting in
accordance with written instructions from the Required Lenders (or, when
expressly required by this Agreement or the Amended and Restated Credit
Agreement, all the Lenders) or, in the absence of such instructions, in
accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security
Interests, whether impaired by operation of law or by reason of any
action or omission to act on its part (other than any such action or
inaction constituting gross negligence or willful misconduct. The
Administrative Agent shall have no duty to ascertain or inquire as to
the performance or observance of any of the terms of this Agreement by
any Grantor.
SECTION 12. Appointment of Collateral Agents. At any time or
times, in order to comply with any legal requirement in any jurisdiction
or in order to effectuate any provision of the Loan Documents, the
Administrative Agent may appoint another bank or trust company or one or
more other Persons, either to act as collateral agent or agents, jointly
with the Administrative Agent or separately, on behalf of the
Administrative Agent and the Lenders with such power and authority as
may be necessary for the effectual operation of the provisions hereof
and specified in the instrument of appointment (which may, in the
discretion of the Administrative Agent, include provisions for the
protection of such collateral agent similar to the provisions of
Section 11 hereof).
SECTION 13. Expenses. In the event that any Grantor fails to
comply with the provisions of the Amended and Restated Credit Agreement,
this Agreement or any other Loan Document, such that the value of any
Collateral or the validity, perfection, rank or value of the Security
Interests are thereby diminished or potentially diminished or put at
risk, the Administrative Agent if requested by the Required Lenders may,
but shall not be required to, effect such compliance on behalf of such
Grantor, and such Grantor shall reimburse the Administrative Agent for
the reasonable costs thereof on demand. All insurance expenses and all
reasonable expenses of protecting, storing, warehousing, insuring,
handling, maintaining and shipping the Collateral, any and all excise,
stamp, intangibles, transfer, property, sales, and use taxes imposed by
any state, federal, or local authority or any other Governmental
Authority on any of the Collateral, or in respect of the sale or other
disposition thereof, shall be borne and paid by the Grantors; and if any
Grantor fails promptly to pay any portion thereof when due, the
Administrative Agent or any Lender may, at its option, but shall not be
required to, pay the same and charge such Grantor's account therefor,
and such Grantor agrees to reimburse the Administrative Agent or such
Lender therefor on demand. All sums so paid or incurred by the
Administrative Agent or any Lender for any of the foregoing and any and
all other sums for which any Grantor may become liable hereunder and all
costs and expenses (including reasonable attorneys' fees, legal expenses
and court costs) incurred by the Administrative Agent or any Lender in
enforcing or protecting the Security Interests or any of their rights or
remedies thereon shall be payable by the Grantors on demand and shall
bear interest (after as well as before judgment) until paid at the rate
then applicable to Base Rate Loans under the Amended and Restated Credit
Agreement and shall be additional Secured Obligations hereunder.
SECTION 14. Notices. All notices, communications and
distributions hereunder shall be given or made in accordance with
Section 14.1 of the Amended and Restated Credit Agreement.
SECTION 15. Waivers, Non-Exclusive Remedies. No failure on
the part of the Administrative Agent or any Lender to exercise, and no
delay in exercising and no course of dealing with respect to, any right
under the Amended and Restated Credit Agreement, this Agreement or any
other Loan Document shall operate as a waiver thereof or hereof; nor
shall any single or partial exercise by the Administrative Agent or any
Lender of any right under the Amended and Restated Credit Agreement,
this Agreement or any other Loan Document preclude any other or further
exercise thereof, and the exercise of any rights in this Agreement, the
Amended and Restated Credit Agreement and the other Loan Documents are
cumulative and are not exclusive of any other remedies provided by law.
This Agreement is a Loan Document executed pursuant to the Amended and
Restated Credit Agreement.
SECTION 16. Successors and Assigns. This Agreement is for
the benefit of the Administrative Agent and the Lenders and their
successors and assigns (as permitted by the Amended and Restated Credit
Agreement), and in the event of an assignment of all or any of the
Secured Obligations, the rights hereunder, to the extent applicable to
the indebtedness so assigned, may be transferred with such indebtedness.
This Agreement shall be binding on each Grantor and its successor and
assigns; provided, that such Grantor may not assign any of its rights or
obligations hereunder without the prior written consent of the
Administrative Agent and the Lenders.
SECTION 17. Changes in Writing. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated
orally, but only in writing signed by each Grantor and the
Administrative Agent with the consent of the Required Lenders (or, when
expressly required by this Agreement or the Amended and Restated Credit
Agreement, all of the Lenders).
SECTION 18. Powers Coupled with an Interest. All
authorizations and agencies herein contained with respect to the
Collateral are irrevocable and powers coupled with an interest.
SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW
PRINCIPLES THEREOF.
SECTION 20. Consent to Jurisdiction. Each Grantor hereby
irrevocably consents to the personal jurisdiction of the state and
federal courts located in Mecklenburg County, North Carolina, in any
action, claim or other proceeding arising out of or any dispute in
connection with this Agreement, any rights or obligations hereunder, or
the performance of such rights and obligations. Each Grantor hereby
irrevocably consents to the service of a summons and complaint and other
process in any action, claim or proceeding brought by the Administrative
Agent or any Lender in connection with this Agreement, any rights or
obligations hereunder, or the performance of such rights and
obligations, on behalf of itself or its property, in the manner provided
in Section 14.1 of the Amended and Restated Credit Agreement. Nothing
in this Section 20 shall affect the right of the Administrative Agent or
any Lender to serve legal process in any other manner permitted by
Applicable Law or affect the right of the Administrative Agent or any
Lender to bring any action or proceeding against any Grantor or its
properties in the courts of any other jurisdictions.
SECTION 21. Binding Arbitration; Waiver of Jury Trial.
(a) Binding Arbitration. If in the reasonable determination
of the Administrative Agent and its counsel, Section 21(b) is
unenforceable under North Carolina law unless paired with a binding
arbitration provision, then upon demand of any party made within ninety
(90) days after institution of any judicial proceeding, any dispute,
claim or controversy between a Lender (or group of Lenders) and a
Borrower (or group of Borrowers) (but not any dispute, claim or
controversy among any Lenders not involving any Borrower) arising out
of, connected with or relating to this Agreement ("Disputes"), between
or among parties to this Agreement shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration
hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from
supplements to this Agreement executed in the future, or claims
concerning any aspect of the past, present or future relationships
arising out of or connected with this Agreement. Arbitration shall be
conducted under and governed by the Commercial Financial Disputes
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. The expedited
procedures set forth in Rule 51, et seq. of the Arbitration Rules shall
be applicable to claims of less than $1,000,000. All applicable
statutes of limitation shall apply to any Dispute. A judgment upon the
award may be entered in any court having jurisdiction. The panel from
which all arbitrators are selected shall be comprised of licensed
attorneys. The single arbitrator selected for expedited procedure shall
be a retired judge from the highest court of general jurisdiction, state
or federal, of the state where the hearing will be conducted.
(b) Jury Trial. EACH AGENT, LENDER AND THE PLEDGOR HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT
TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF
SUCH RIGHTS AND OBLIGATIONS.
(c) Preservation of Certain Remedies. Notwithstanding the
preceding binding arbitration provisions, the parties hereto preserve,
without diminution, certain remedies that such Persons may employ or
exercise freely, either alone, in conjunction with or during a Dispute.
Each such Person shall have and hereby reserves the right to proceed in
any court of proper jurisdiction or by self help to exercise or
prosecute the following remedies: (i) all rights to foreclose against
any real or personal property or other security by exercising a power of
sale granted in this Agreement or under applicable law or by judicial
foreclosure and sale, (ii) all rights of self help including peaceful
occupation of property and collection of rents, set off, and peaceful
possession of property, (iii) obtaining provisional or ancillary
remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and in filing an involuntary
bankruptcy proceeding, and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit
the power of an arbitrator to grant similar remedies that may be
requested by a party in a Dispute.
SECTION 22. Severability. If any provision hereof is invalid
and unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (a) the other provisions hereof shall remain in full
force and effect in such jurisdiction and shall be liberally construed
in favor of the Administrative Agent and the Lenders in order to carry
out the intentions of the parties hereto as nearly as may be possible;
and (b) the invalidity or unenforceability of any provisions hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 23. Headings. The various headings of this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement or any provisions hereof.
SECTION 24. Counterparts. This Agreement may be executed by
the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but
one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed under seal by their duly authorized officers,
all as of the day and year first written above.
[CORPORATE SEAL] ACC CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President - Finance
[CORPORATE SEAL] ACC LONG DISTANCE CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
[CORPORATE SEAL] ACC NATIONAL TELECOM CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
[CORPORATE SEAL] ACC LONG DISTANCE OF MASSACHUSETTS CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
[CORPORATE SEAL] ACC RADIO CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
[CORPORATE SEAL] ACC GLOBAL CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Controller
<PAGE>
[CORPORATE SEAL] ACC NATIONAL LONG DISTANCE CORP.
By: /s/ John J. Zimmer
Name: John J. Zimmer
Title: Vice President
Administrative Agent:
[CORPORATE SEAL] FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Administrative Agent
By: /s/ Jim Redman
Name: Jim Redman
Title: SVP
<PAGE>
SCHEDULE I
to
Security Agreement
Trademark Registrations
Registration
Mark Number Date Goods
Flying ACC 1,371,741 11/19/85 Telecommunications
Services
Circular Design 1,607,689 7/24/89 Telecommunications
Services
ACC with Circular Design 1,950,804 1/23/96 Telecommunications
Services
Call America 1,407,073 8/26/86 Telecommunications
Services
Trademark Applications
Mark Serial No. Goods
Telecommunications, Just 75/124052 Telecommunications
Your Size Services
ACC, The Answer Not Assigned Yet Telecommunications
Services
Trademark Licenses
None
<PAGE>
ANNEX I
(to Security Agreement)
[FORM OF LOCKBOX LETTER]
_______________, 19___
[Name and Address of Lockbox Bank)
Re:[GRANTOR]
Ladies and Gentlemen:
We hereby notify you that effective __________, 19__, we
have transferred exclusive ownership and control of our lock-box
account(s) no[s]. _____________________ (the "Lockbox Account[s]")
maintained with you under the terms of the [Lockbox Agreement]
attached hereto as Exhibit A (the "Lockbox Agreement[s]") to First
Union National Bank of North Carolina, as Agent (the "Agent").
We hereby irrevocably instruct you to make all payments to
be made by you out of or in connection with the Lockbox Account(s)
(i) to the Agent for credit to account no. __________ maintained by it
at its office at ________________________ or (ii) as you may otherwise
be instructed by the Agent.
We also hereby notify you that the Agent shall be
irrevocably entitled to exercise any and all rights in respect of or
in connection with the Lockbox Account(s), including, without
limitation, the right to specify when payments are to be made out of
or in connection with the Lockbox Account(s).
All funds deposited into the Lockbox Account(s) will not be
subject to deduction, set-off, banker's lien or any other right in
favor of any other person than the Agent, except that you may set-off
against the Lockbox Account(s) the face amount of any check deposited
in and credited to such Lockbox Account(s) which is subsequently
returned for any reason. Your compensation for providing the service
contemplated herein shall be mutually agreed between you and us from
time to time and we will continue to pay such compensation.
<PAGE>
Please confirm your acknowledgment of and agreement to the
foregoing instructions by signing in the space provided below.
Very truly yours,
___________________________________
By:________________________________
Name:___________________________
Title:__________________________
Acknowledged and agreed
to as of this _____ day of
__________________, 19___.
[LOCKBOX BANK]
By:_______________________
Name:_____________________
Title:____________________
<PAGE>
ANNEX II
(to Security Agreement)
SECURITY AGREEMENT SUPPLEMENT
SECURITY AGREEMENT SUPPLEMENT, dated as of
_____________________, (the "Supplement"), made by [INSERT NAME OF NEW
SUBSIDIARY], a __________________ (the "New Grantor"), in favor of
First Union National Bank of North Carolina, as Administrative Agent
(in such capacity, the "Administrative Agent") under the Amended and
Restated Credit Agreement (as defined in the Security Agreement
referred to below) for the ratable benefit of itself and the Lenders
(as so defined).
1. Reference is hereby made to the Security Agreement
dated as of __________, 1995, made by ACC Corp. and certain
Subsidiaries of ACC Corp. (collectively, the "Grantors"), in favor of
the Administrative Agent (as amended, supplemented or otherwise
modified as of the date hereof, the "Security Agreement"). This
Supplement supplements the Security Agreement, forms a part thereof
and is subject to the terms thereof. Capitalized terms used and not
defined herein shall have the meanings given thereto or referenced in
the Security Agreement.
2. In order to secure the Amended and Restated Credit
Agreement, in accordance with the terms thereof, and to secure the
payment and performance of all of the Secured Obligations, the New
Grantor hereby grants to the Administrative Agent, for the ratable
benefit of itself and the Lenders, a continuing security interest in
and to all of the New Grantor's estate, right, title and interest in
and to all Collateral whether now or hereafter owned or acquired by
the New Grantor or in which the New Grantor now has or hereafter has
or acquires any rights, and wherever located (the "New Collateral").
3. The Security Interests are granted as security only and
shall not subject the Administrative Agent or any Lender to, or
transfer to the Administrative Agent or any Lender, or in any way
affect or modify, any obligation or liability of the New Grantor with
respect to any of the New Collateral or any transaction in connection
therewith.
4. The New Grantor hereby agrees that it is a party to the
Security Agreement as if a signatory thereto on the Closing Date of
the Amended and Restated Credit Agreement, and the New Grantor shall
comply with all of the terms, covenants, conditions and agreements and
hereby makes each representation and warranty, in each case set forth
therein. The New Grantor agrees that "Collateral" as used therein
shall include all New Collateral pledged pursuant hereto and the
Security Agreement and "Security Agreement" or "Agreement" as used
therein shall mean the Security Agreement as supplemented hereby.
5. Attached hereto are (i) a Perfection Certificate in the
form of the Perfection Certificate delivered to the Administrative
Agent on the Closing Date and (ii) updated Schedules to the Security
Agreement revised to include all required information with respect to
the New Grantor.
6. The New Grantor hereby acknowledges it has received a
copy of the Security Agreement and that it has read and understands
the terms thereof.
7. The New Grantor hereby agrees that it shall deliver to
the Administrative Agent such UCC Financing Statements and all other
certificates or other documents and take such action as the
Administrative Agent shall reasonably request in order to effectuate
the terms hereof and the Security Agreement.
IN WITNESS WHEREOF, the undersigned hereby causes this
Supplement to be executed and delivered as of the date first above
written.
[CORPORATE SEAL] [INSERT NAME OF NEW SUBSIDIARY]
By:________________________________
Name:___________________________
Title:__________________________
Exhibit 10-30
AMENDED AND RESTATED TRADEMARK SECURITY AGREEMENT
WHEREAS, ACC CORP., a corporation organized under the laws
of Delaware ("Company"), owns the Trademarks and the Trademark
registrations and Trademark applications listed on Schedule 1 annexed
hereto, and is a party to the Trademark Licenses listed on Schedule 1
annexed hereto; and
WHEREAS, pursuant to an Amended and Restated Credit
Agreement (as further amended, restated or otherwise modified, the
"Amended and Restated Credit Agreement") of even date herewith among
the Company and certain of its Subsidiaries as Borrowers
(collectively, the "Borrowers"), the financial institutions which are,
or may from time to time become, party thereto (collectively, the
"Lenders") and First Union National Bank of North Carolina, as
Administrative Agent for the Lenders (the "Administrative Agent"), the
Lenders have agreed to amend and restate a Credit Agreement dated as
of July 21, 1995 and to provide certain Extensions of Credit according
to the terms and conditions more particularly described in the Amended
and Restated Credit Agreement; and
WHEREAS, pursuant to the terms of the Amended and Restated
Security Agreement of even date (as further amended, restated or
otherwise modified, the "Security Agreement;" all capitalized terms
defined in the Amended and Restated Credit Agreement or the Security
Agreement and not otherwise defined herein have the respective
meanings provided for in the Amended and Restated Credit Agreement or
the Security Agreement), between the Borrowers (as grantors thereunder
the "Grantors") and the Administrative Agent, the Grantors have
granted to the Administrative Agent for the benefit of itself and the
Lenders a security interest in certain assets of each of the Grantors,
including all right, title and interest of the Company in, to and
under all now owned and hereafter acquired Trademarks, Trademark
registrations, Trademark applications and Trademark Licenses, together
with the goodwill of the business symbolized by the Company's
Trademarks, and all products and proceeds thereof, to secure the
payment of all amounts owing by the Borrowers under the Amended and
Restated Credit Agreement and the other Secured Obligations;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company
does hereby grant to the Administrative Agent for the benefit of
itself and the Lenders a continuing security interest in all of
Company's right, title and interest in, to and under the following
(all of the following items or types of property being herein
collectively referred to as the "Trademark Collateral"), whether now
existing or hereafter created or acquired in order to secure the
Secured Obligations referred to herein:
(1) each Trademark, Trademark registration and
Trademark application, together with any reissues,
continuations or extensions thereof including, without
limitation, the Trademarks, Trademark registrations
(together with any reissues, continuations or extensions
thereof) and Trademark applications referred to in
Schedule 1 annexed hereto, and all of the goodwill of the
business connected with the use of, and symbolized by, each
Trademark, Trademark registration and Trademark application;
(2) each Trademark License and all of the goodwill of
the business connected with the use of, and symbolized by,
each Trademark License; and
(3) all products and proceeds of the foregoing,
including, without limitation, any claim by the Company
against third parties for past, present or future
(a) infringement or dilution of any Trademark or Trademark
registration including, without limitation, the Trademarks
and Trademark registrations referred to in Schedule 1
annexed hereto, the Trademark registrations issued with
respect to the Trademark applications referred to in
Schedule 1 and the trademarks licensed under any Trademark
License, or (b) injury to the goodwill associated with any
Trademark, Trademark registration or trademark licensed
under any Trademark License.
This security interest is granted in conjunction with the
security interests granted to the Administrative Agent pursuant to the
Security Agreement. The Company hereby acknowledges and affirms that
the rights and remedies of the Administrative Agent with respect to
the security interest in the Trademark Collateral made and granted
hereby are more fully set forth in the Security Agreement, the terms
and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, the Company has caused this Trademark
Security Agreement to be duly executed by its duly authorized officer
thereunto as of the 14th day of January, 1997.
[CORPORATE SEAL] ACC CORP.
ATTEST:
By: /s/ Daniel J. Venuti By: /s/ John J. Zimmer
Name: Daniel J. Venuti Name: John J. Zimmer
Title: Assistant Secretary Title: Vice President - Finance
Agreed and Accepted as of the
14th day of January, 1997
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Administrative Agent
By: /s/ Jim Redman
Name: Jim Redman
Title: Senior Vice President
<PAGE>
SCHEDULE I
to
Trademark Security Agreement
Trademark Registrations
Registration
Mark Number Date Goods
Flying ACC 1,371,741 11/19/85 Telecommunications
Services
Circular Design 1,607,689 7/24/89 Telecommunications
Services
ACC with Circular Design 1,950,804 1/23/96 Telecommunications
Services
Call America 1,407,073 8/26/86 Telecommunications
Services
Trademark Applications
Mark Serial No. Goods
Telecommunications, Just 75/124052 Telecommunications Services
Your Size
ACC, The Answer Not Assigned Yet Telecommunications Services
Trademark Licenses
None
Exhibit 10-35
RULES OF THE
ACC CORP.
1996 UK SHARESAVE SCHEME
Adopted by the Board on August 5, 1996
Approved by the Inland Revenue on July 11, 1996
under Ref SRS 1768/RC
Arthur Andersen
1 Surrey Street
London WC2R 2PS
Tel: 0171 438 3000
<PAGE>
CONTENTS
Page
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. APPLICATION FOR OPTIONS. . . . . . . . . . . . . . . . . . . . . . 7
3. SCALING DOWN . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4. GRANT OF OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
5. NUMBER OF SHARES IN RESPECT OF WHICH OPTIONS
MAY BE GRANTED . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6. RIGHTS OF EXERCISE AND LAPSE OF OPTIONS. . . . . . . . . . . . . . 11
7. TAKEOVER, RECONSTRUCTIONS AND AMALGAMATION,
AND WINDING UP . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8. MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . 16
9. ISSUE OR TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . 16
10. ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12. ALTERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
13. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
RULES OF THE ACC Corp.
1996 UK SHARESAVE SCHEME
1. DEFINITIONS
1.1 In this Scheme, the following words and expressions shall have,
where the context so admits, the meanings set forth below:-
"Appropriate Period" the meaning given by Paragraph 15(2)
of Schedule 9 to the Taxes Act;
"Associated Company" in relation to the Company:-
(A) any company which has Control of
the Company;
(B) any company which is under the
Control of any company referred
to in (A) above;
"Auditors" the auditors of the Company for the
time being or in the event of there
being joint auditors such one of them
as the Board shall select;
Board" the board of directors for the time
being of the Company or a duly
authorised committee thereof;
"Bonus" any sum by way of terminal bonus
payable under a Savings Contract being
the additional payment made when
repaying contributions made under such
a Savings Contract;
"Bonus Date" where repayments under the relevant
Savings Contract are taken as
including the Maximum Bonus, the
earliest date on which the Maximum
Bonus is payable, where the repayments
under the relevant Savings Contract
are taken as including the Standard
Bonus, the earliest day on which the
Standard Bonus is payable and in any
other case the earliest day on which
the Lower Bonus is payable under the
Savings Contract;
"Close Company" a close company as defined in
section 414(1) of the Taxes Act, as
varied by Paragraph 8 of Schedule 9 to
the Taxes Act;
"the Company" ACC Corp. (a Delaware USA
corporation);
"Control" has the meaning given by section 840
of the Taxes Act;
"Date of Grant" the date on which an Option is
granted;
"Date of Invitation" the date on which the Grantor invites
applications for Options;
"Dealing Day" any day on which NASDAQ is open for
the transaction of business;
"Eligible Employee" (A) any individual who at the date of
Grant:-
(1) is an executive director or
employee of a Participating
Company; and
(2) is chargeable to tax in
respect of his office or
employment under Case I of
Schedule E of the Taxes Act;
and
(3) has been such an executive
director or employee of a
Participating Company for
such qualifying period (if
any) (being a period
commencing not earlier than
5 years prior to the Date of
Grant) as the Board may
determine; or
(B) any other individual who is
nominated by the Board as an
executive director or employee of
a Participating Company (or is
nominated as a member of a
category of such executive
directors and employees) but in
all cases excluding any person
who is prohibited from
participating by reason of the
provisions of Paragraph 8 of
Schedule 9 to the Taxes Act;
"Employees' Share Scheme" the meaning given by Section 743 of
the Companies Act 1985;
"Exercise Price" the total amount payable in relation
to the exercise of an Option, whether
in whole or in part, being an amount
equal to the relevant Option Price
multiplied by the number of Shares in
respect of which the Option is
exercised;
"Grant Period" the period of 42 days commencing on
any of the following:
(A) the day on which the Scheme is
approved by the Inland Revenue;
(B) prior to the admission of the
Shares to the Daily Official List
of the London Stock Exchange, any
day determined by the Board;
(C) the day on which any Shares are
first admitted to the Daily
Official List of the London Stock
Exchange;
(D) the day immediately following the
day on which the Company makes an
announcement of its results for
the last preceding financial
year, half-year or other period;
(E) the day on which the Board
resolves that exceptional
circumstances exist which justify
the grant of Options;
(F) any day on which any change to
the legislation affecting
savings-related share option
schemes approved by the Inland
Revenue under the Taxes Act is
proposed or made;
(G) any day on which a new Savings
Contract prospectus is announced
or takes effect;
"Grantor" either:-
(A) the Board in respect of Options
granted or to be granted by the
Company; or
(B) the Trustees in respect of
Options granted or to be granted
by the Trustees;
"London Stock Exchange" the London Stock Exchange Limited;
"Lower Bonus" the Bonus payable at the end of a
period of three years from the
commencement of a Savings Contract;
"Market Value" in relation to a Share on any day:-
(A) if and so long as the shares are
listed on the London Stock
Exchange its middle market
quotation (as derived from the
Daily Official List of the London
Stock Exchange);
(B) subject to (A) above, its market
value determined in accordance
with Part VIII of the Taxation of
Chargeable Gains Act 1992 and
agreed in advance with the Shares
Valuation Division of the Inland
Revenue;
"Material Interest" the meaning given by Section 187(3) of
the Taxes Act,
"Maximum Bonus" the Bonus payable at the end of a
period of seven years from the
commencement of a Savings Contract;
"Maximum Contribution" the lesser of:
(A) such maximum monthly contribution
as may be permitted pursuant to
Paragraph 24 of Schedule 9 to the
Taxes Act or, if less, 250 pounds
per month; or
(B) such maximum monthly contribution
as may be determined from time to
time by the Board;
"Member of a Consortium" the meaning given by Section 187(7) of
the Taxes Act;
"Monthly Contributions" monthly contributions agreed to be
paid by a Participant under his
Savings Contract;
"NASDAQ" National Association of Securities
Dealers, Inc's Automated Quotation
System;
"Option" a right to acquire Shares under the
Scheme which is either subsisting or
is proposed to be granted;
"Option Price" the price per Share, as determined by
the Grantor, at which an Eligible
Employee may acquire Shares upon the
exercise of an Option granted to him
being not less than:
(A) 85 per cent. of the Market Value
of a Share on the Dealing Day two
days prior to the Date of
Invitation (or, if the Grantor so
determines, 85 per cent. of the
average of the Market Values on
the three Dealing Days
immediately preceding the Date of
Invitation or 85 per cent. of the
Market Value at such other time
or times as may be previously
agreed in writing with the Inland
Revenue); and
(B) if the Shares are to be
subscribed, their nominal value;
expressed in US $ but subject to any
adjustment pursuant to Rule 10;
"Participant" any Eligible Employee to whom an
Option has been granted, or (where the
context so admits) the personal
representative(s) of any such person;
"Participating Company" (A) the Company; and
(B) any other company which is under
the Control of the Company, is a
Subsidiary of the Company and
which has been expressly
designated by the Board as being
a Participating Company;
"Pensionable Age" age (60) sixty;
"Savings Contract" a contract under a certified
contractual savings scheme (within the
meaning of Section 326 of the Taxes
Act) approved by the Inland Revenue
for the purpose of Schedule 9 to that
Act;
"Scheme" the ACC Corporation 1996 UK Sharesave
Scheme in its present form or as from
time to time amended in accordance
with the provisions hereof;
"Share" a share of Class A common stock of the
Company par value US $.015 per share
which satisfies paragraphs 10 to 14 of
Schedule 9 to the Taxes Act;
"Standard Bonus" the Bonus payable at the end of a
period of five years from the
commencement of a Savings Contract;
"Subsidiary" a company as defined by Section 736 of
the Companies Act 1985;
"Taxes Act" the Income and Corporation Taxes Act
1988; and
"Trustees" the trustee or trustees for the time
being of any employee benefit trust
established for the benefit of
beneficiaries including all or
substantially all of the Eligible
Employees.
1.2 Words and expressions not otherwise defined herein have the same
meaning they have in the Taxes Act.
1.3 Where the context so admits or requires words importing the
singular shall include the plural and vice versa and words
importing the masculine shall include the feminine.
1.4 References in the rules of the Scheme to any statutory provisions
are to those provisions as amended, extended or re-enacted from
time to time and shall include any regulations made thereunder.
The Interpretation Act 1978 shall apply to these rules mutatis
mutandis as if they were an Act of Parliament.
1.5 The headings in the rules of the Scheme are for the sake of
convenience only and should be ignored when construing the rules.
2. APPLICATION FOR OPTIONS
2.1 The Grantor may, with the prior written approval of the Board,
during any Grant Period, invite applications for Options at the
Option Price from Eligible Employees. Any such invitation shall
be in writing and shall include details of:
2.1.1 eligibility;
2.1.2 the Option Price expressed in US $;
2.1.3 the date by which applications made pursuant to
Rule 2.3 must be received, (being neither earlier than
14 days nor later than 25 days after the Date of
Invitation); and
2.1.4 whether, for the purposes of determining the number of
Shares over which an Option is to be granted, Eligible
Employees may elect for the repayment under the Savings
Contract to be taken:-
2.1.4.1 as including the Maximum Bonus;
2.1.4.2 as including the Standard Bonus;
2.1.4.3 as including the Lower Bonus;
2.1.4.4 as not including a Bonus; and
and the Grantor may determine and include in the
invitation details of the maximum number of Shares over
which Options are to be granted in that Grant Period.
2.2 Each application for an Option must incorporate or be accompanied
by a proposal for a Savings Contract.
2.3 An application for an Option shall be in writing in such form as
the Board may from time to time prescribe save that it shall
provide for the applicant to state:-
2.3.1 the Monthly Contribution (being a multiple of l pound and not
less than 5 pounds) which he wishes to make under the related
Savings Contract;
2.3.2 that his proposed Monthly Contributions (when taken
together with any Monthly Contribution he makes under
any other Savings Contract) will not exceed the Maximum
Contribution;
2.3.3 if (as contemplated by Rule 2.1.4) Eligible Employees
may elect for the repayment under the Savings Contract
to be taken as including the Maximum Bonus, the Standard
Bonus, the Lower Bonus or as not including a Bonus, his
election in that respect.
2.4 Each application for an Option shall provide that, in the event
of excess applications, each application shall be deemed to have
been modified or withdrawn in accordance with the steps taken by
the Grantor to scale down applications pursuant to Rule 3.
2.5 Proposals for a Savings Contract shall be limited to such bank or
building society as the Board may designate.
2.6 Each application shah be deemed to be for an Option over the
largest whole number of Shares which can be acquired at the
Option Price with the expected repayment (including any relevant
Bonus) under the related Savings Contract at the appropriate
Bonus Date.
3. SCALING DOWN
3.1 If valid applications are received for a total number of Shares
in excess of any maximum number of Shares determined by the
Grantor pursuant to Rule 2.1 or any limitation under Rule 5, the
Grantor shall (with the prior written approval of the Board)
scale down applications by taking, at its absolute discretion,
one of the following steps until the number of Shares available
equals or exceeds the number of Shares applied for (provided
always that in reducing the number of Shares applied for, any
adjustments shall ensure that an Eligible Employee's Monthly
Contribution remains a multiple of l pound):
3.1.1 by treating any elections for the Maximum Bonus as
elections for the Standard Bonus and then, so far as
necessary, by treating any elections for the Standard
Bonus as an election for no Bonus and then, so far as
necessary, by reducing the proposed Monthly
Contributions pro rata to the excess over 5 pounds and then,
so far as necessary, selecting by lot; or
3.1.2 by treating each election for a Bonus as an election for
no Bonus and then, so far as necessary, by reducing the
proposed Monthly Contributions pro rata to the excess
over 5 pounds and then, so far as necessary, selecting by lot;
or
3.1.3 by reducing the proposed Monthly Contributions pro rata
to the excess over 5 pounds and then, so far as necessary
selecting by lot.
3.2 If the number of Shares available is insufficient to enable an
Option based on Monthly Contributions of 5 pounds a month to be granted
to each Eligible Employee making a valid application, the Board
may, as an alternative to selecting by lot, determine in its
absolute discretion that no Options shall be granted.
3.3 If the Board so determines, the provisions in Rule 3.1.1, 3.1.2
and 3.1.3 may be modified or applied in any manner as may be
agreed in advance with the Inland Revenue.
3.4 If in applying the scaling down provisions contained in this
Rule 3, Options cannot be granted within the 30 day period
referred to in Rule 4.2 below, the Board may extend that period
by 12 days regardless of the expiry of the relevant Grant Period.
4. GRANT OF OPTIONS
4.1 No Option shall be granted to any person if:
4.1.1 at the Date of Grant that person shall have ceased to be
an Eligible Employee; or
4.1.2 that person has or has had at any time within the 12
month period preceding the Date of Grant a Material
Interest in the issued ordinary share capital of a Close
Company which is the Company or a company which has
Control of the Company or is a Member of a Consortium
which owns the Company.
4.2 Within 30 days of the first Dealing Day by reference to which the
Option Price was fixed (which date shall be within a Grant
Period) the Grantor with the prior consent of the Board may,
subject to Rule 3 above, grant to each Eligible Employee who has
submitted a valid application an Option in respect of the number
of Shares for which he has applied.
4.3 The Grantor shall issue to each Participant an option certificate
in such form (not inconsistent with the provisions of the Scheme)
as the Board may from time to time prescribe. Each such
certificate shall specify the Date of Grant of the Option, the
number of Shares over which the Option is granted, the Bonus Date
and the Option Price.
4.4 Except as otherwise provided in these Rules, every Option shall
be personal to the Participant to whom it is granted and shall
not be transferable.
4.5 No amount shall be paid in respect of the grant of an Option.
5. NUMBER OF SHARES IN RESPECT OF WHICH OPTIONS MAY BE GRANTED
5.1 The number of Shares which may be issued or issuable pursuant to
Options granted under the Scheme on any day shall not, when added
to the aggregate of the number of Shares which have been issued
or remain issuable in the previous 10 years pursuant to rights
obtained under the Scheme, exceed 100,000 Shares or such other
number as has been determined by the Board.
6. RIGHTS OF EXERCISE AND LAPSE OF OPTIONS
6.1 6.1.1 Save as provided in Rules 6.2,6.3 and 6.4 and Rule 7, an
Option may not be exercised earlier than the Bonus Date
under the relevant Savings Contract.
6.1.2 Save as provided in Rule 6.2, an Option shall not be
exercisable later than 6 months after the Bonus Date
under the relevant Savings Contract.
6.1.3 Save as provided in Rules 6.2 and 6.3 and Rule 7, an
Option may only be exercised by a Participant whilst he
is a director or employee of a Participating Company, an
Associated Company or a company over which the Company
has Control.
6.1.4 If, at the Bonus Date, a Participant holds an office or
over which the Company has Control, such Option may be
exercised within six months of the Bonus Date.
6.1.5 An Option may not be exercised by a Participant if he
has or has had at any time within the 12 month period
preceding the date of exercise a Material Interest in
the issued ordinary share capital of a Close Company
which is the Company or a company which has Control of
the Company or is a Member of a Consortium which owns
the Company, nor may an Option be exercised by the
personal representatives of the Participant if the
Participant had such a Material Interest at the date of
his death.
6.2 An Option may be exercised by the personal representatives of a
deceased Participant:-
6.2.1 within 12 months following the date of his death if such
death occurs before the Bonus Date; or
6.2.2 within 12 months following the Bonus Date in the event
of his death within 6 months after the Bonus Date.
6.3 Subject to Rule 6.1.2 an Option may be exercised by a Participant
within 6 months following his ceasing to hold the office or
employment by virtue of which he is eligible to participate in
the Scheme by reason of:
6.3.1 injury, disability, redundancy within the meaning of the
Employment Protection (Consolidation) Act 1978 or the
Contracts of Employment and Redundancy Payments Act
(Northern Ireland) 1965, or retirement on reaching
Pensionable Age or at any other age at which he is bound
to retire in accordance with the terms of his contract
of employment; or
6.3.2 his office or employment being in a company of which the
Company ceases to have Control; or
6.3.3 the transfer or sale of the undertaking or
part-undertaking in which he is employed to a person who
is neither an Associated Company nor a company under the
Control of the Company;
6.3.4 retirement at any age at which he is entitled to retire
in accordance with the terms of his contract of
employment (other than at Pensionable Age or any age at
which he is bound to retire), early retirement with the
agreement of his employer, or pregnancy, in each case
only if such cessation of office or employment is more
than 3 years after the Date of Grant of the Option; or
6.3.5 cessation of employment in circumstances other than
those mentioned in 6.3.1 to 6.3.4 above, after the Bonus
Date.
For the purposes of the Scheme, a woman who leaves employment due
to pregnancy will be regarded as having left the employment on
the earliest of the date she notifies her employer of her
intention not to return, the last day of the 29 week period of
confinement and any other date specified by the terms of her
office or employment with her employer.
6.4 Subject to Rule 6.1.2 an Option may be exercised by a Participant
within 6 months following the date he reaches Pensionable Age if
he continues after that date to hold the office or employment by
virtue of which he is eligible to participate in the Scheme.
6.5 No person shall be treated for the purposes of Rule 6.3 as
ceasing to hold an office or employment by virtue of which that
person is eligible to participate in the Scheme until that person
ceases to hold any office or employment in the Company, any
Associated Company or any company of which the Company has
Control.
6.6 Options shall lapse upon the occurrence of the earliest of the
following events:
6.6.1 subject to 6.6.2 below, 6 months after the Bonus Date;
6.6.2 where the Participant dies before the Bonus Date, 12
months after the date of death, and where the
Participant dies in the period of 6 months after the
Bonus Date, 12 months after the Bonus Date;
6.6.3 the expiry of any of the 6 month periods specified in
Rule 6.3.1 to 6.3.5 save that if at the time any such
applicable periods expire time is running under the 12
month periods specified in Rule 6.2, the Option shall
not lapse by reason of this sub-rule 6.6 until the
expiry of the relevant 12 month period in Rule 6.2;
6.6.4 the expiry of any of the periods specified in Rules 7.1
and 7.3 to 7.5 save where an Option is released in
consideration of the grant of a New Option over New
Shares in the Acquiring Company pursuant to Rule 7.6;
6.6.5 the Participant ceasing to hold any office or employment
with the Company or any Associated Company or any
company over which the Company has Control in any
circumstances other than those specified in Rules 6.2
and 6.3 or ceasing to hold such office or employment for
any reason during any of the periods specified in
Rule 7;
6.6.6 subject to Rule 7.5, the passing of an effective
resolution, or the making of an order by the Court, for
the winding-up of the Company;
6.6.7 the Participant being deprived of the legal or
beneficial ownership of the Option by operation of law,
or doing anything or omitting to do anything which
causes him to be so deprived or declared bankrupt; or
6.6.8 where before an Option has become capable of being
exercised, the Participant gives notice that he intends
to stop paying Monthly Contributions, or is deemed under
the terms of the Savings Contract to have given such
notice, or makes an application for repayment of the
Monthly Contributions.
7. TAKEOVER, RECONSTRUCTIONS AND WINDING UP
7.1 Subject to Rule 7.3 if any person obtains Control of the Company
as a result of making an offer to acquire Shares which is either
unconditional or is made on a condition such that if it is
satisfied the person making the offer will have Control of the
Company, an Option may be exercised within 6 months of the time
when the person making the offer has obtained Control of the
Company and any condition subject to which the offer is made has
been satisfied.
7.2 For the purpose of Rule 7.1 a person shall be deemed to have
obtained Control of the Company if he and others acting in
concert (as defined by the City Code on Takeovers and Mergers)
with him have together obtained Control of it.
7.3 If any person becomes bound or entitled to acquire Shares under
sections 428 to 430F of the Companies Act 1985 (or the
equivalent, if any, in the US) an Option may be exercised at any
time when that person remains so bound or entitled.
7.4 If under section 425 of the Companies Act 1985 (or the
equivalent, if any, in the US) it is proposed that the Court
sanctions a compromise or arrangement proposed for the purposes
of or in connection with a scheme for the reconstruction of the
Company or its amalgamation with any other company or companies
the Company shall give notice thereof to all Participants at the
same time as it sends notices to members of the Company calling
the meeting to consider such a compromise or arrangement. The
Participant may then exercise the Option subject to the terms of
this Rule before the later of the expiry of six months from the
date of such notice and the date on which the Court sanctions the
compromise or arrangement and thereafter the Option shall lapse
conditionally on such compromise or arrangement being sanctioned
by the Court and becoming effective. The exercise of an Option
under this sub-rule shall be conditional on such compromise or
arrangement being sanctioned by the Court and becoming effective.
After exercising the Option the Participant shall transfer or
otherwise deal with the Shares issued to him so as to place him
in the same position (so far as possible) as would have been the
case if such shares had been subject to such compromise or
arrangement.
7.5 If notice is duly given of a resolution for the voluntary
winding-up of the Company, the Company shall give notice thereof
to all Participants and thereafter an Option may be exercised
until the resolution is duly passed or defeated or the meeting
concluded or adjourned sine die provided that any such exercise
of an Option pursuant to this sub-rule shall be conditional upon
the said resolution being duly passed. If such resolution is
duly passed all Options shall, to the extent that they have not
been exercised, lapse immediately.
7.6 If any company ("the Acquiring Company"):-
7.6.1 obtains Control of the Company as a result of making:-
7.6.1.1 a general offer to acquire the whole of the
issued ordinary share capital of the Company
which is made on a condition such that if it is
satisfied the Acquiring Company will have
Control of the Company; or
7.6.1.2 a general offer to acquire all the shares in
the Company which are of the same class as the
Shares which may be acquired by the exercise of
Options;
in either case ignoring any Shares which are already
owned by it or a member of the same group of companies;
or
7.6.2 obtains Control of the Company in pursuance of a
compromise or arrangement sanctioned by the Court under
section 425 of the Companies Act 1985; or
7.6.3 becomes bound or entitled to acquire Shares under
sections 428 to 430F of that Act,
any Participant may at any time within the Appropriate Period, by
agreement with the Acquiring Company, release any Option which
has not lapsed ("the Old Option") in consideration of the grant
to him of an Option ("the New Option") which (for the purposes of
Paragraph 15 of Schedule 9 to the Taxes Act) is equivalent to the
Old Option but relates to shares in a different company (whether
the Acquiring Company itself or some other company falling within
Paragraph 10(b) or (c) of Schedule 9 to the Taxes Act).
7.7 The New Option shall not be regarded for the purposes of Rule 7.6
as equivalent to the Old Option unless the conditions set out in
Paragraph 15(3) of Schedule 9 to the Taxes Act are satisfied, but
so that the provisions of the Scheme shall for this purpose be
construed as if:-
7.7.1 the New Option were an option granted under the Scheme
at the same time as the Old Option;
7.7.2 except for the purpose of the definition of
"Participating Company" in Rule 1, the reference to ACC
Corp in the definition of "the Company" in Rule 1 were a
reference to the different company mentioned in
Rule 7.6; and
7.7.3 Rule 12.2 were omitted.
8. MANNER OF EXERCISE
8.1 An Option may only be exercised during the periods specified in
Rules 6 and 7 and only with monies not exceeding the amount of
repayment (including any interest and Bonus) under the Savings
Contract as at the date of such exercise. For this purpose, no
account shall be taken of such part (if any) of the repayment of
any Monthly Contribution, the due date for the payment of which
under the Savings Contract arises after the date of the repayment
8.2 Exercise shall be by the delivery to the Company Secretary as
agent for the Grantor or other duly appointed agent, of a notice
of exercise together with an option certificate or certificates
covering at least all the Shares over which the Option is then to
be exercised, together with any remittance for the Exercise Price
payable or authority to the Company as agent for the Grantor to
withdraw and apply monies from the Savings Contract to acquire
the Shares over which the Option is to be exercised. The
effective date of the exercise shall be the date of delivery of
the notice of exercise. A notice of exercise shall for the
purposes of this Scheme be deemed to be delivered when it is
received by the Company.
8.3 The remittance for the Exercise Price referred to in Rule 8.2
above may be paid at the discretion of the Participant either in
US $ or in pounds sterling PROVIDED THAT if paid in pounds
sterling the Exercise Price shall be converted into US $ at the
mid-market spot rate at the close of business published by the
Financial Times on the date immediately preceding the date of the
exercise or if this is not a Dealing Day the mid-market spot rate
at close of business published in the Financial Times on the next
preceding Dealing Day.
9. ISSUE OR TRANSFER OF SHARES
9.1 Subject to Rule 9.3, Shares to be issued pursuant to the exercise
of an Option shall be allotted to the Participant (or his
nominee) within 28 days following the date of effective exercise
of the Option.
9.2 Subject to Rule 9.4, the Grantor shall procure the transfer of
any Shares to be transferred to a Participant (or his nominee)
pursuant to the exercise of an Option within 28 days following
the date of effective exercise of the Option.
9.3 Shares issued pursuant to the Scheme shall rank pari passu in all
respects with the Shares then in issue, except that they shall
not rank for any rights attaching to Shares by reference to a
record date preceding the date of exercise.
9.4 Shares transferred pursuant to the Scheme shall not be entitled
to any rights attaching to Shares by reference to a record date
preceding the date of exercise.
9.5 If and so long as the Shares are listed on the London Stock
Exchange, the Company shall apply for a listing for any Shares
issued pursuant to the Scheme as soon as practicable after the
allotment thereof.
10. ADJUSTMENTS
10.1 The number of Shares over which an Option is granted and the
Option Price thereof (and where an Option has been exercised but
no Shares have been allotted or transferred pursuant to such
exercise, the number of Shares which may be so allotted or
transferred and the price at which they may be acquired) shall be
adjusted in such manner as the Grantor shall determine following
any capitalisation issue, any offer or invitation made by way of
rights, subdivision, consolidation, reduction or other variation
in the share capital of the Company other than as consideration
for an acquisition, which in the opinion of the Auditors
justifies such an adjustment, to the intent that (as nearly as
may be without involving fractions of a Share or an Option Price
calculated to more than two decimal places) the aggregate
Exercise Price payable in respect of an Option shall remain
unchanged provided that no adjustment made pursuant to this
Rule 10.1 shall be made without the prior approval of the Inland
Revenue (so long as the Scheme is approved by the Inland
Revenue).
10.2 Apart from pursuant to this Rule 10.2, no adjustment under
Rule 10.1 above may have the effect of reducing the Option Price
to less than the nominal value of a Share. Where an Option
subsists over both issued and unissued Shares any such adjustment
may only be made if the reduction of the Option Price of Options
over both issued and unissued Shares can be made to the same
extent. Any adjustment made to the Option Price of Options over
unissued Shares shall only be made if and to the extent that the
Board shall be authorised to capitalise from the reserves of the
Company a sum equal to the amount by which the nominal value of
the Shares in respect of which the Option is exercisable exceeds
the adjusted Exercise Price and to apply such sum in paying up
such amount on such Shares so that on exercise of any Option in
respect of which such a reduction shall have been made the Board
shall capitalise such sum (if any) and apply the same in paying
up such amount as aforesaid.
10.3 The Board may take such steps as it may consider necessary to
notify Participants of any adjustment made under this Rule 10 and
to call in, cancel, endorse, issue or reissue any option
certificate consequent upon such adjustment.
11. ADMINISTRATION
11.1 Any notice or other communication under or in connection with the
Scheme may be given by personal delivery or by sending the same
by post, in the case of a company to its registered office and in
the case of an individual to his last known address or, where he
is a director or employee of a Participating Company or an
Associated Company, either to his last known address or to the
address of the place of business at which he performs the whole
or substantially the whole of the duties of his office or
employment, and where a notice or other communication is given by
post, it shall be deemed to have been received 96 hours after it
was put into the post properly addressed and stamped.
11.2 The Company may distribute to Participants copies of any notice
or document normally sent by the Company to the holders of
Shares.
11.3 If any option certificate shall be worn out, defaced or lost, it
may be replaced on such evidence being provided as the Board may
require.
11.4 The Company shall at all times keep available for allotment
unissued Shares at least sufficient to satisfy all Options under
which Shares may be subscribed or procure that sufficient Shares
are available for transfer to satisfy all Options under which
Shares may be acquired.
11.5 The decision of the Board in any dispute relating to an Option or
the due exercise thereof or any other matter in respect of the
Scheme shall be final and conclusive subject to the certification
of the Auditors having been obtained when so required by
Rule 10.1.
11.6 The costs of introducing and administering the Scheme shall be
borne by the Company.
12. ALTERATIONS
12.1 Subject to Rule 12.2 and 12.4, the Board may at any time alter or
add to all or any of the provisions of the Scheme in any respect,
provided that if an alteration or addition is made at a time when
the Scheme is approved by the Inland Revenue under Schedule 9 to
the Taxes Act it shall not have effect until it has been approved
by the Inland Revenue.
12.2 Subject to Rule 12.3, no alteration or addition to the advantage
of Participants or employees shall be made under Rule 12.1
without the prior approval by resolution of the Board of the
Company.
12.3 Rule 12.2 shall not apply to any minor alteration or addition
which is to benefit the administration of the Scheme, is
necessary or desirable in order to obtain or maintain Inland
Revenue approval of the Scheme under Schedule 9 to the Taxes Act
or any other enactment or to take account of any change in
legislation or to obtain or maintain favourable taxation,
exchange control or regulatory treatment for the Company, any
subsidiary of the Company or any Participant.
12.4 No alteration or addition shall be made under Rule 12.1 which
would abrogate or adversely affect the subsisting rights of a
Participant, unless it is made:-
12.4.1 with the consent in writing of such number of
Participants as hold Options under the Scheme to acquire
75 per cent. of the Shares which would be issued or
transferred if all Options granted and subsisting under
the Scheme were exercised; or
12.4.2 by a resolution at a meeting of Participants passed by
not less than 75 per cent. of the Participants who
attend and vote either in person or by proxy.
For the purposes of this Rule 12.4 the provisions of the Articles
of Incorporation of the Company relating to shareholder meetings
shall apply mutatis mutandis.
12.5 Notwithstanding any other provision of the Scheme other than
Rule 12.1 the Board may, in respect of Options granted to
Eligible Employees who are or who may become subject to taxation
outside the United Kingdom on their remuneration amend or add to
the provisions of the Scheme and the terms of Options as it
considers necessary or desirable to take account of or to
mitigate or to comply with relevant overseas taxation, securities
or exchange control laws provided that the terms of Options
granted to such Eligible Employees are not overall more
favourable than the terms of Options granted to other Eligible
Employees.
12.6 As soon as reasonably practicable after making any alteration or
addition under rule 12.1 the Board shall give written notice
thereof to any Participant affected thereby.
12.7 No alteration shall be made to the Scheme if following the
alteration the Scheme would cease to be an Employees' Share
Scheme.
13. GENERAL
13.1 The Scheme shall terminate upon the 10th anniversary of its
approval by the Company or at any earlier time by the passing of
a resolution by the Board or an ordinary resolution of the
Company in general meeting. Termination of the Scheme shall be
without prejudice to the subsisting rights of Participants.
13.2 The Company and any Subsidiary of the Company may provide money
to the trustee of any trust or any other person to enable them or
him to acquire Shares to be held for the purposes of the Scheme,
or enter into any guarantee or indemnity for those purposes, to
the extent permitted by section 153 of the Companies Act 1985,
provided that any trust deed to be made for this purpose shall,
at time when the Scheme is approved by the Inland Revenue under
Schedule 9 to the Taxes Act, have previously been submitted to
the Inland Revenue. In addition, the Company may require any
Subsidiary to enter into such other agreement or agreements as it
shall deem necessary to oblige such Subsidiary to reimburse the
Company for any other amounts paid by the Company hereunder,
directly or indirectly in respect of such Subsidiary's employees.
Nothing in the Scheme shall be deemed to give any employee of any
Participating Company any right to Participate in the Scheme.
13.3 The rights and obligations of any individual under the terms of
his office or employment with a Participating Company shall not
be affected by his participation in the Scheme or any right which
he may have to participate therein, and an individual who
participates therein shall waive all and any rights to
compensation or damages in consequence of the termination of his
office or employment with any such company for any reason
whatsoever insofar as those rights arise or may arise from his
ceasing to have rights under or be entitled to exercise any
Option under the Scheme as a result of such termination or from
the loss or diminution in value of such rights or entitlements.
13.4 In the event that Shares are transferred to an Option holder
pursuant to the exercise of any Option granted under the Scheme,
the Participant shall, if so required by the person making the
transfer, join that person in making a claim for relief under
Section 165 of the Taxation of Chargeable Gains Act 1992 in
respect of the disposal made by him in effecting such transfer.
13.5 These Rules shall be governed by and construed in accordance with
the law of England.
Exhibit 10-39
LICENCE GRANTED BY
THE SECRETARY OF STATE FOR TRADE AND INDUSTRY TO
ACC LONG DISTANCE UK LTD
UNDER SECTION 7 OF THE TELECOMMUNICATIONS ACT 1984
18 December 1996
<PAGE>
TABLE OF CONTENTS
THE LICENCE
SCHEDULE 1: CONDITIONS INCLUDED UNDER SECTION 7 OF THE ACT
PART 1: Definitions and interpretation relating to the Conditions in
Schedule 1
PART 2: Special Conditions referred to in section 8 of the Act
1 Requirement to provide telecommunication services
2 Directory Information
3 Public Emergency Call Services
4 Planning and implementation of special arrangements for
Emergencies
5 Requirement to provide Connection Services and connection of
apparatus
6 Provision by others of services by means of the Applicable
Systems
7 Publication of charges, terms and conditions to be applied
8 Prohibition on undue preference and undue discrimination
PART 3: Other Conditions included under section 7 of the Act
9 Maintenance of effective competition where the licensee
operates a system or provides services overseas
10 Fair Trading
11 Essential Interfaces
12 Customer Interface Standards
13 Metering and Billing Arrangements
14 Numbering arrangements
15 Arrangements for proportionate return
16 Arrangements for parallel accounting
17 Prohibition of exclusive dealing in international services
18 Notification of changes in Shareholdings
19 Licensee's Group
20 Payment of fees
21 Requirement to furnish information to the Director
22 Requirement to submit accounts to the Director
23 Exceptions and limitations on obligations in Schedule 1
SCHEDULE 2: REVOCATION
SCHEDULE 3: AUTHORISATION TO CONNECT OTHER TELECOMMUNICATION
SYSTEMS AND APPARATUS TO THE APPLICABLE SYSTEMS AND TO
PROVIDE TELECOMMUNICATION SERVICES BY MEANS OF THE
APPLICABLE SYSTEMS
<PAGE>
LICENCE GRANTED BY
THE SECRETARY OF STATE FOR TRADE AND INDUSTRY TO
ACC LONG DISTANCE UK LTD
UNDER SECTION 7 OF THE TELECOMMUNICATIONS ACT 1984
THE LICENCE
1 The Secretary of State, in exercise of the powers conferred
on him by section 7 of the Telecommunications Act 1984 (hereinafter
referred to as "the Act") and after consulting the Director hereby
grants to ACC Long Distance UK Ltd (hereinafter referred to as "the
Licensee") a licence, for the period specified in paragraph 2, subject
to the Conditions set out in the Schedule 1 and to revocation as
provided for in paragraph 2 and in Schedule 2, to run
telecommunication systems of every description within the United
Kingdom ("the Applicable Systems") and authorises the Licensee to do
all or any of the acts specified in Schedule 3.
Duration
2 This Licence shall enter into force on the date of signature
and shall be of six months' duration in the first instance but,
without prejudice to Schedule 2 to this Licence, shall be subject to
revocation thereafter on one month's notice in writing of such
revocation.
Interpretation
3 The Interpretation Act 1978 shall apply for the purpose of
interpreting this Licence as if it were an Act of Parliament. In this
Licence, except as hereinafter provided or unless the context
otherwise requires, words or expressions shall have the meaning
assigned to them and otherwise any word or expression shall have the
same meaning as it has in the Act. For the purposes of interpreting
this Licence, headings and titles shall be disregarded.
4 In this Licence, "Licence" means a licence granted or having
effect as if granted under section 7 of the Act.
5 For the purposes of this Licence the "Applicable Systems"
means any or all of
the telecommunication systems run by the Licensee under this Licence
unless the context otherwise requires.
6 Where this Licence provides for any power of the Secretary
of State or the Director to give any direction or consent or make any
specification, designation or determination, it implies, unless the
contrary intention appears, a power, exerciseable in the same manner
and subject to the same conditions or limitations, to revoke, amend or
give or make again any such direction, consent, specification,
designation or determination.
<PAGE>
7 Any notification which is required to be given under this
Licence by the Secretary of State or the Director shall be satisfied
by serving the document by post on the Licensee at the Licensee's
registered office.
/s/ Illegible
Parliamentary Under Secretary of State
for Science and Technology
18 December 1996
<PAGE>
SCHEDULE 1: CONDITIONS INCLUDED UNDER SECTION 7 OF THE ACT
PART 1: DEFINITIONS AND INTERPRETATION RELATING TO THE CONDITIONS IN
SCHEDULE 1
1 In this Schedule unless the context otherwise requires:
(a) "Accounting Rate Service" means each telecommunications
service to each country and territory for which a
separate accounting rate has been agreed, not including
Transit Services;
(b) "Applicable Terminal Equipment" means apparatus which
is applicable terminal equipment within the meaning of
regulation 4 of the Telecommunications Terminal
Equipment Regulations 1992;
(c) "Approved Apparatus" means in relation to any system
apparatus approved under section 22 of the Act for
connection to that system;
(d) "Associated Person" means any member of the Licensee's
Group or a person with a Participating Interest in a
member of the Licensee's Group or in whom a member of
the Licensee's Group has a Participating Interest;
(e) "Authorised Overseas System" means any
telecommunication system outside the United Kingdom
which is authorised to be connected to the Applicable
Systems under Schedule 3;
(f) "Compatibility" means that between the parties
concerned there is no reasonably foreseeable risk of:
(i) duplication of any Number; or
(ii) any other related effect,
such as would introduce ambiguity or errors or impose
undue restrictions on any user or group of users;
(g) "Compliant Terminal Equipment" means Applicable
Terminal Equipment which satisfies the requirements of
regulation 8 of the Telecommunications Terminal
Equipment Regulations 1992;
(h) "Condition" means a Condition in this Schedule;
(i) "Connectable System" means a telecommunication system
which is authorised to be run under a Licence which
authorises connection of that system to the Applicable
Systems;
(j) "Connection Service" means a telecommunication service
consisting in the conveyance of any Message which has
been, or is to be, conveyed by means of the Applicable
Systems;
(k) "Dwelling-House" has the same meaning as in section 202
of the Broadcasting Act 1990;
(l) "Emergency" means an emergency of any kind, including
any circumstance whatever resulting from major
accidents, natural disasters and incidents involving
toxic or radio-active materials;
(m) "Emergency Organisations" means in respect of any
locality:
(i) the relevant public police, fire, ambulance and
coastguard services for that locality; and
(ii) any other similar organisation in respect of which
any public telecommunications operator licensed to
operate in the locality in question is providing a
Public Emergency Call Service on the day on which
this Licence enters into force;
(n) "Essential Interface" means in respect of a Point of
Connection an interface at which in the opinion of the
Director it is essential that interoperability between
the Applicable Systems and the respective Operator's
systems is available;
(o) "Group" means a parent undertaking and its subsidiary
undertaking or undertakings within the meaning of
section 258 of the Companies Act 1985 as substituted by
section 21 of the Companies Act 1989; and "Licensee's
Group" means a Group in respect of which the Licensee
is either a parent undertaking or a subsidiary
undertaking;
(p) "International Business" means the business of
providing telecommunication services including, without
limitation, any services comprised in a Relevant
International Function, which consist in the conveyance
of Messages to countries or territories outside the
United Kingdom carried on under a Licence and include
the running of such parts of the Applicable Systems as
are used for the provision of those services, and the
installation, maintenance, adjustment, repair,
alteration, moving, removal or replacement of such
Systems and any apparatus comprised therein;
(q) "International Conveyance Service" means a
telecommunication service consisting in the conveyance
of any Message which has been or is to be conveyed by
means of any telecommunication system outside the
United Kingdom the connection of which to the system by
means of which that service is provided is authorised
by a Licence;
(r) "International Private Leased Circuit" means a
communication facility which is:
(i) comprised both in a public telecommunication
system and in an equivalent telecommunication
system in a country or territory other than the
United Kingdom;
(ii) for the conveyance of Messages between points,
all of which are points of connection between
telecommunication systems referred to in
paragraph 1(r)(i) and other telecommunication
systems;
(iii) made available to a particular person or
particular persons;
(iv) such that all of the Messages transmitted at
any of the points mentioned in
paragraph 1(r)(ii) are received at every other
such point; and
(v) such that the points mentioned in
paragraph 1(r)(ii) are fixed by the way in
which the facility is installed and cannot
otherwise be selected by persons or
telecommunication apparatus sending Messages by
means of that facility;
(s) "International Simple Data Resale Services" means
telecommunication services consisting in the conveyance
of Messages which do not include two-way live speech,
but include only such switching, processing, data
storage or protocol conversion as is necessary for the
conveyance of those Messages in real time, which have
been or are to be conveyed by means of all of the
following:
(i) a Public Switched Network;
(ii) an International Private Leased Circuit; and
(iii) the equivalent of a Public Switched Network in
another country or territory;
provided that conveyance of a Message by means of a
Public Switched Network or, as the case may be, the
equivalent of a Public Switched Network in another
country or territory shall be disregarded where that
Message is so conveyed in circumstances specified for
the time being by the Secretary of State as not being
material for the purposes of paragraph 3 of Schedule 3
to this Licence and included in a list kept for the
purpose by the Director and made available by him for
inspection by the general public;
(t) "International Simple Voice Resale Services" means
telecommunication services consisting in the conveyance
of Messages which include two-way live speech which
have been or are to be conveyed by means of all of the
following:
(i) a Public Switched Network;
(ii) an International Private Leased Circuit; and
(iii) the equivalent of a Public Switched Network in
another country or territory;
provided that conveyance of a Message by means of a
Public Switched Network or, as the case may be, the
equivalent of a Public Switched Network in another
country or territory shall be disregarded where that
Message is so conveyed in circumstances specified for
the time being by the Secretary of State as not being
material for the purposes of paragraph 3 of Schedule 3
to this Licence and included in a list kept for the
purpose by the Director and made available by him for
inspection by the general public;
(u) "Long Line Public Telecommunications Operator" means a
public telecommunications operator who is authorised by
a Licence to provide telecommunication services
consisting in the conveyance of Messages by fixed links
run by that operator over distances greater than
50 linear kilometres;
(v) "Major Office" means the Licensee's registered office
and such other offices as the Director, having
consulted the Licensee, may direct;
(w) "Message" means anything falling within paragraphs (a)
to (d) of section 4(1) of the Act;
(x) "Network Connecting Apparatus" means telecommunication
apparatus comprised in the Applicable Systems which is
not Network Termination and Testing Apparatus and is
connected to another telecommunication system;
(y) "Network Termination Point" means any point:
(i) within an item of Network Connecting Apparatus
at which energy of any of the forms specified
in section 4(1) of the Act is conveyed directly
to or from apparatus comprised in a
telecommunication system other than one in
which that Network Connecting Apparatus is
comprised; or
(ii) within an item of Network Termination and
Testing Apparatus at which such energy is
conveyed directly to any Relevant Terminal
Apparatus;
(z) "Network Termination and Testing Apparatus" means an
item of telecommunication apparatus comprised in the
Applicable Systems installed in a fixed position on
Served Premises which enables:
(i) Approved Apparatus to be readily connected to,
and disconnected from, the Applicable Systems;
(ii) the conveyance of Messages between such
Apparatus and the Applicable Systems; and
(iii) the due functioning of the Applicable Systems
to be tested,
but the only other functions of which, if any, are:
(1) to supply energy between such Apparatus and the
Applicable Systems;
(2) to protect the safety or security of the
operation of the Applicable Systems; or
(3) to enable other operations exclusively related
to the naming of the Applicable Systems to be
performed or the due functioning of any system
to which the Applicable Systems are or are to
be connected to be tested (separately or
together with the Applicable Systems).
(aa) "Number" means any identifier which would need to be
used in conjunction with any public switched service
for the purposes of establishing a connection with any
Network Termination Point, user, telecommunication
apparatus connected to any Public Switched Network or
service element, but not including any identifier which
is not accessible to the generality of users of a
public switched service;
(ab) "Numbering Plan" means a plan describing the method
adopted or to be adopted for allocating and re-
allocating a Number to any Network Termination Point,
user telecommunication apparatus or service element;
(ac) "Operator" means any person who is authorised by a
Licence to run a Relevant Connectable System;
(ad) "Parent Undertaking" has the same meaning as in
section 258 of the Companies Act 1985 as substituted by
section 21 of the Companies Act 1989;
(ae) "Participating Interest" has the same meaning as in
section 260 of the Companies Act 1985 as substituted by
section 22 of the Companies Act 1989;
(af) "Point of Connection" means a point at which the
Applicable Systems and an Operator's system are
connected;
(ag) "Private Leased Circuit" means a communication facility
which is:
(i) provided by means of one or more public
telecommunication systems;
(ii) for the conveyance of Messages between points,
all of which are points of connection between
telecommunication systems referred to in
paragraph 1(ag)(i) and other telecommunication
systems;
(iii) made available to a particular person or
particular persons;
(iv) such that all of the Messages transmitted at
any of the points mentioned in
paragraph l(ag)(ii) are received at every other
such point; and
(v) such that the points mentioned in
paragraph 1(ag)(ii) are fixed by the way in
which the facility is installed and cannot
otherwise be selected by persons or
telecommunication apparatus sending Messages by
means of that facility;
(ah) "Public Emergency Call Services" means a
telecommunication service by means of which any member
of the public may, at any time and without incurring
any charge, by means of an item of telecommunication
apparatus which is lawfully connected to the Applicable
Systems and which is capable of transmitting and
receiving unrestricted two way voice telephony services
when so connected, communicate as swiftly as
practicable with any of the Emergency Organisations for
the purpose of notifying them of an Emergency;
(ai) "Public Switched Network" means a public
telecommunication system by means of which two-way
telecommunication services are provided whereby
Messages are switched incidentally to their conveyance,
and, for the avoidance of doubt, a Public Switched
Network does not include Private Leased Circuits or
International Private Leased Circuits;
(aj) "Relevant Apparatus" means any apparatus which is, or
is to be, connected to any of the switched Applicable
Systems;
(ak) "Relevant Company" means:
(i) the Licensee; or
(ii) a Parent Undertaking in relation to the
Licensee;
(al) "Relevant Connectable System" means a Connectable
System which is authorised to be run under a Licence
which authorises the provision by means of that system
of Connection Services for reward to the general
public, or any class of the general public, not being a
system:
(i) authorised to be run under a Licence granted to
all persons or persons of any class; and
(ii) for the connection of which, and for the
provision of matters necessary for such
connection, the Licensee offers terms and
conditions which satisfy the requirements of
Condition 7 of Schedule 1,
and not being a system which the Director has
determined ought not to be deemed a Relevant
Connectable System for the purposes of this Licence;
(am) "Relevant International Function" means the business of
providing any of the following telecommunication
services by means of the Applicable Systems:
(i) International Simple Voice Resale and/or
International Simple Data Resale;
(ii) provision to others of International Private
Leased Circuits;
(iii) provision of services under any agreement
falling within the description contained in
Condition 5.1 in Schedule 1;
(iv) provision of International Conveyance Services
(but not including International Simple Voice
Resale or International Simple Data Resale),
charges for which are to be settled at
accounting rates;
(v) provision of International Conveyance Services
(but not including International Simple Voice
Resale or International Simple Data Resale),
charges for which are not to be settled at
accounting rates, and where the Messages
conveyed in the provision of such service are
conveyed over a circuit which is capable of
conveying two-way live speech;
(vi) provision of International Conveyance Services
(including International Simple Voice Resale or
International Simple Date Resale), charges for
which are not to be settled at accounting
rates, and where the Messages conveyed in the
provision of such service are conveyed over a
circuit which is not capable of conveying two-
way live speech;
(vii) the installation, maintenance, adjustment,
repair, alteration, moving, removal or
replacement of any apparatus comprised or to be
comprised in the Applicable Systems; or
(viii) provision of any other services included in the
Licensee's International Business but not
included in any of (am) (i) to (vii) above.
(an) "Relevant System" means a Connectable System which is,
or is to be, connected to any of the switched
Applicable Systems;
(ao) "Relevant Terminal Apparatus" means:
(i) "Terminal Apparatus", that is to say any
telecommunication apparatus installed on Served
Premises by means of which Messages are
initially transmitted or ultimately received;
and
(ii) any other telecommunication apparatus directly
connected to Terminal Apparatus (including
apparatus which is Terminal Apparatus by virtue
of this sub-paragraph) which would, if it were
run with such Terminal Apparatus and any other
apparatus by means of which it is so connected,
constitute a system authorised to be run by the
person running that Terminal Apparatus under a
Licence;
(ap) "Served Premises" means a single set of premises in
single occupation where apparatus has been installed
for the purpose of the provision of telecommunication
services by means of the Applicable Systems at those
premises;
(aq) "Shares" has the same meaning as in section 259(2) of
the Companies Act 1985, as substituted by section 22 of
the Companies Act 1989, and the term "Shareholding" is
to be construed accordingly;
(ar) "Specified Numbering Scheme" means a scheme for the
allocation and reallocation of Numbers which is
specified by the Director for the purpose of this
Licence and described in a list kept for that purpose
by him and made available by him for inspection by the
general public.
(as) "Subscriber" means a person (other than a public
telecommunications operator) to whom there are provided
switched voice telephony services by means of the
Applicable Systems;
(at) "Subsidiary" has the meaning given to it in section 736
of the Companies Act 1985, as substituted by
section 144(1) of the Companies Act 1989;
(au) "Systems Business" means the following activities of
the Licensee or of any wholly owned Subsidiary to the
extent that they are undertaken in the United Kingdom
taken together:
(i) the running of the Applicable Systems; and
(ii) the installation, maintenance, adjustment,
repair, alteration, moving, removal or
replacement of any apparatus comprised or to be
comprised in the Applicable Systems;
(av) "Transit Service" means any telecommunications service
consisting in the conveyance of any Message which
originates outside the United Kingdom and is not to be
terminated within the United Kingdom and for which a
separate accounting rate has been agreed;
(aw) "Well Established International Operator" means an
Operator having 25% or more of what is in the opinion
of the Director the relevant market, unless the
Director determines that the Operator is not a Well
Established International Operator, or an Operator
having less than 25% of what is in the opinion of the
Director the relevant market which is determined by the
Director to be a Well Established International
Operator.
2 Any reference in any Condition in this Schedule, however
expressed, to the Director notifying the Licensee about any matter,
affording the Licensee an opportunity to make representations, taking
representations by the Licensee into account, or explaining, or giving
reasons for, any matter to the Licensee, shall be without prejudice to
any obligation of due process or similar obligation which the Director
is or may be under by virtue of any rule or principle of law or
otherwise.
3 Expressions cognate with those referred to in this Schedule
shall be construed accordingly.
<PAGE>
PART 2: SPECIAL CONDITIONS REFERRED TO IN SECTION 8 OF THE ACT
Condition 1
REQUIREMENTS TO PROVIDE TELECOMMUNICATION SERVICES
1 The Licensee shall take all reasonable steps to provide by
means of the Applicable Systems to any Operator who so requests
International Conveyance Services to
the extent necessary to satisfy all reasonable demands for such
Services by such Operator.
<PAGE>
Condition 2
DIRECTORY INFORMATION
2.1 This Condition shall only apply where the Applicable Systems
are connected to a telecommunication system not run under a Licence
issued to a particular person.
2.2 Subject to paragraph 2.5, where the Licensee provides
switched voice telephony services by means of any of the Applicable
Systems which is connected to an Authorised Overseas System by means
of which such services are provided, then, if a directory information
service is provided by means of that Authorised Overseas System in
respect of that Authorised Overseas System, the Licensee shall provide
to any person to whom it provides switched voice telephony services by
means of that Applicable System information as to how that person may
avail himself by means of that Applicable System and that Authorised
Overseas System when connected together of the directory information
service provided and shall take all reasonable steps to secure that
that can be done.
2.3 Where the Licensee provides switched voice telephony
services by means of any of the Applicable Systems which is connected
to both:
(a) an Authorised Overseas System by means of which such
services are provided; and
(b) a Connectable System in the United Kingdom by means of
which such services are provided which is run under a
Licence which does not authorise the connection of that
system to a system outside the United Kingdom so as to
convey Messages from the United Kingdom to a place
outside the United Kingdom
it shall not unreasonably refuse to provide to the operator of that
Connectable System access to such directory information services
relating to the Authorised Overseas System as the Licensee makes
available to those to whom it provides voice telephony services.
2.4 The directory information service provided by the Licensee
under paragraph 2.2 shall include a service satisfactory to the
Director whereby directory information is made available in a form
which is appropriate to meet their needs to persons who are so blind
or otherwise disabled as to be unable to use a telephone directory in
a form in which it is generally available to persons to whom the
Licensee provides services; and the service so provided to such
persons shall from the date on which this Licence enters into force be
provided free of charge or, if the Director is satisfied that that is
not practicable, the Licensee shall provide, in accordance with
arrangements agreed with the Director, appropriate reasonable
compensation in respect of charges that are paid.
2.5 The obligation in paragraph 2.2 shall not apply:
(a) when the directory information requested relates to a
person who has requested the Licensee or the operator
of the connected telecommunication system not to
provide such information in relation to him; or
(b) in respect of any person to whom switched voice
telephony services are provided by means of the
Applicable Systems if that person has notified the
Licensee in writing that he is able to obtain from
another public telecommunications operator who provides
switched voice telephony services within the United
Kingdom to that person information as to how to avail
himself of such directory information service as may be
provided in respect of any Authorised Overseas System
which is connected to the Applicable Systems.
2.6 This Condition is without prejudice to Condition 5.
<PAGE>
Condition 3
PUBLIC EMERGENCY CALL SERVICES
3.1 This Condition shall only apply where the Applicable Systems
are connected to a telecommunication system not run under a Licence
issued to a particular person.
3.2 The Licensee shall ensure, except to the extent that the
Director determines is not reasonably practicable, that both the
numbers 999 and 112 are available as emergency call numbers so that
any member of the public by dialling either the number 999 or the
number 112 on telecommunication apparatus which is lawfully connected
to the Applicable Systems at any place in the United Kingdom and which
is capable of transmitting and receiving unrestricted two way voice
telephony services when so connected is provided with a Public
Emergency Call Service.
3.3 Where the Director has made a determination in accordance
with paragraph 3.2 the Licensee shall take all reasonable steps to
ensure that persons to whom there are provided by means of the
Applicable Systems services which do not include a Public Emergency
Call Service are notified in writing that the services so provided do
not include a Public Emergency Call Service.
3.4 For the purposes of this Condition telecommunication
apparatus shall be regarded as capable of transmitting and receiving
unrestricted two way voice telephony services only if it is capable of
both:
(a) transmitting for conveyance by means of an Applicable
System specific signals designated by the Licensee for
the purpose of establishing communication with voice
telephony apparatus controlled by the Emergency
Organisations; and
(b) transmitting and receiving uninterrupted simultaneous
two way speech to be conveyed, or as the case may be
conveyed, by means of that Applicable System.
3.5 In this Condition, the United Kingdom does not include any
area to which the Act is extended under section 107.
<PAGE>
Condition 4
PLANNING AND IMPLEMENTATION OF SPECIAL ARRANGEMENTS FOR EMERGENCIES
4.1 The Licensee shall, after consultation with such authorities
responsible for Emergency Organisations and such departments of
central and local government as the Director may from time to time
determine and whose names are notified to the Licensee by him for the
purpose, make plans or other arrangements for the provision or, as the
case may be, the rapid restoration of such telecommunication services
as are practicable and may reasonably be required in Emergencies.
4.2 The Licensee shall, on request by any such person as is
designated for the purpose in the relevant plans or arrangements,
implement those plans or arrangements insofar as it is reasonable and
practicable to do so.
4.3 Nothing in this Condition precludes the Licensee from:
(a) recovering the costs which it incurs in making or
implementing any such plans or arrangements from those
on behalf of or in consultation with whom the plans or
arrangements are made; or
(b) making implementation of any plans or arrangements
conditional upon the person or persons for whom or on
whose behalf that plan or arrangement is to be
implemented indemnifying the Licensee for all costs
incurred as a consequence of the implementation.
<PAGE>
Condition 5
REQUIREMENT TO PROVIDE CONNECTION SERVICES AND CONNECTION OF APPARATUS
5.1 Subject to the following provisions of this Condition the
Licensee shall, unless it is impracticable to do so, enter into an
agreement or agree to amend such an agreement, within a reasonable
period (which shall not, unless the Director otherwise consents,
exceed 6 months), with an Operator if that Operator requires it to do
so:
(a) to connect, and keep connected, to any of the
Applicable Systems, or to permit to be so connected and
kept connected, any Relevant Connectable System run by
the Operator and any item of telecommunication
apparatus which is required for that purpose and which
is located on the same premises as the Applicable
Systems and which is approved for the time being under
section 22 of the Act or is Compliant Terminal
Equipment, and accordingly to establish and maintain
such one or more Points of Connection as are reasonably
required and are of sufficient capacity and in
sufficient number to enable Messages conveyed or to be
conveyed by means of the Operator's system to be
conveyed by means of the Applicable Systems in such a
way as conveniently to meet all reasonable demands for
the conveyance of Messages between the Relevant
Connectable System and the Applicable Systems;
(b) without prejudice to paragraph 5.1(a), where the
Operator is a Long Line Public Telecommunications
Operator, to establish and maintain such Points of
Connection as will enable persons running
telecommunication systems connected to the Operator's
system and persons running telecommunication systems
connected to the Applicable Systems to exercise freedom
of choice as to the extent to which Messages are
conveyed by means of the Applicable Systems and in
routing Messages so conveyed; and
(c) to provide such other telecommunication services
(including the conveyance of Messages which have been,
or are to be, transmitted or received at such Points of
Connection), information and other services as the
Director determines are reasonably required (but no
more than reasonably required) to secure that Points of
Connection are established and maintained and to enable
the Operator effectively to provide the Connection
Services which he provides or proposes to provide.
5.2 The Licensee shall not be obliged under paragraph 5.1 to
enter into an agreement to do anything or agree to amend such an
agreement to do anything if:
(a) in the opinion of the Licensee it would be liable to
cause the death of or personal injury to, or damage to
the property of, the Licensee or any person engaged in
the Licensee's business, or materially to impair the
quality of any telecommunication service provided by
means of the Applicable Systems or any
telecommunication system (other than the Operator's
system) connected thereto and the Director has not
expressed a contrary opinion; or
(b) in the opinion of the Licensee:
(i) it would require an adjustment to, or
modification of, the Applicable Systems whether
by incorporation of apparatus or otherwise or
the provision by the Licensee of services or
information which in any particular case would
not be reasonably required; or
(ii) it would not be reasonably practicable to
require the Licensee to do that thing, or
permit it to be done, at the time or in the
manner required by the Operator, having regard
to the state of technical development of the
Applicable Systems or any other relevant
matter,
and the Director has not expressed a contrary opinion.
5.3 The Licensee may require that an agreement under
paragraph 5.1 should be subject to such terms and conditions as are,
in the opinion of the Director, reasonable.
5.4 Apparatus shall not be regarded as approved for connection
to any system for the purposes of paragraph 5.1 unless that apparatus
is Compliant Terminal Equipment or has been so approved:
(a) by the Secretary of State; or
(b) by some other person by virtue of an authorisation
given by the Secretary of State being an authorisation
which required the person authorised, before approving
any apparatus or designating any standard to which
apparatus must conform if it is to be approved, to be
satisfied that connection of the apparatus to the
system would not be likely:
(i) to cause the death of, or personal injury to,
or damage to the property of the Licensee or
any person engaged in the running of that
system; or
(ii) materially to impair the quality of any
telecommunication service provided by means of
that system or any system connected to it
(other than the system being connected).
5.5 No apparatus or system is required under paragraph 5.1 to
be, or to be permitted to be, connected or kept connected to the
Applicable Systems if the apparatus, or any apparatus comprised in
that system, as the case may be:
(a) conformed to the relevant standard or standards at the
time when the connection to the Applicable Systems was
made but no longer does so and does not conform to the
relevant standard or standards (if any) for the time
being designated under section 22(6) of the Act; or
(b) was at the time when the connection to the Applicable
Systems was made but has since ceased to be Complaint
Terminal Equipment; or
(c) while continuing to conform to the relevant standard is
in the opinion of the Licensee liable to cause the
death of, or personal injury to, or damage to the
property of, the Licensee, or any person engaged in the
running of the Applicable Systems or materially to
impair the quality of any telecommunication service
provided by means of the Applicable Systems and the
Director has not directed otherwise.
5.6 An agreement made pursuant to this Condition shall not
contain any restrictive provision unless, before the agreement is
made, the Director has expressly consented to the inclusion of such a
provision. For the purposes of this paragraph, a provision in an
agreement is a restrictive provision if by virtue of the existence of
such a provision (taken alone or with other provisions) the agreement
is one to which the Restrictive Trade Practices Act 1976 would apply
but for paragraph 1(l) of Schedule 3 to that Act.
5.7 Where the Director so directs the Crown shall be treated for
the purposes of this Condition as a person authorised to run a
Relevant Connectable System and where he does so he may also direct
that the Crown is to be treated as a Long Line Public
Telecommunications Operator for those purposes.
<PAGE>
Condition 6
PROVISION BY OTHERS OF SERVICES BY MEANS OF THE APPLICABLE SYSTEMS
6.1 The Licensee shall permit any person, who is licensed to run
a Connectable System under a Licence which authorises it to provide
telecommunication services to others, including Connection Services,
to provide such services whilst that Connectable System is connected
to the relevant Applicable System.
6.2 The Licensee shall permit any person:
(a) using telecommunication apparatus which has been
lawfully connected to the Applicable Systems or which
is connected to another telecommunication system which
itself has been lawfully connected to the Applicable
Systems; or
(b) running a telecommunication system which is so
connected,
to provide by means of the Applicable Systems any service other than
the installation, maintenance, adjustment, repair, alteration, moving,
removal or replacement of telecommunication apparatus comprised in the
Applicable Systems.
<PAGE>
Condition 7
PUBLICATION OF CHARGES, TERMS AND CONDITIONS TO BE APPLIED
7.1 The Licensee shall, subject to paragraph 7.2, except insofar
as the Director may otherwise consent in writing and except in respect
of charges, terms and conditions in agreements made or modified to
comply with Condition 5:
(a) publish in the manner and at the times specified in
paragraph 7.4 a notice specifying, or specifying the
method that is to be adopted for determining, the
charges and other terms and conditions on which it
offers:
(i) to provide each description of
telecommunication services by means of the
Applicable Systems; or
(ii) to maintain, adjust, repair or replace any
apparatus comprised in the Applicable Systems;
or
(iii) to connect to the Applicable Systems any other
system which is not and is not to be comprised
in the Applicable Systems; or
(iv) to grant permission to connect such systems to,
or to provide services by means of, the
Applicable Systems;
where such things are done in accordance with an obligation
imposed by or under this Licence.
(b) Where the Licensee does any of the things described in
paragraphs 7.1(a)(i) to 7.1(a)(iv) it shall do those
things at the charges and on the other terms and
conditions so published and not depart therefrom.
Provided that this obligation will not be breached by
variations to the charges, terms and conditions
referred to in paragraph 7(1)(a) to the extent that the
method which is adopted for determining those
variations has been disclosed to the Director, except
insofar as those charges, terms and conditions relate
to a particular market in respect of which the Director
has made a determination that the Licensee is a Well
Established International Operator.
7.2 Where the Director has made a determination that the
Licensee is a Well Established International Operator in a particular
market the Licensee shall specify the precise amount of such charges
in accordance with paragraph 7.1(a), insofar as they relate to the
market in respect of which such a determination has been made.
7.3 The requirement to publish under paragraph 7.1 shall not
apply in respect of any service which is materially different from any
service already provided by the Licensee by means of the Applicable
Systems until such time as it is provided and a copy of the notice
shall be sent to the Director at that time.
7.4 Publication of the notice shall be effected by:
(a) sending a copy thereof to the Director to arrive not
more than 28 days after the date on which the Licensee
first provides services under the Licence and
thereafter not less than one day before any proposal to
amend any charge, term or condition or the method of
determining the same is to become effective: provided
that where the Director has made a determination that
the Licensee is a Well Established International
Operator in a particular market, this sub-paragraph
shall have effect as if the words "28 days" were
substituted for the words "one day" insofar as any such
proposal relates to the provision of services in
relation to the market in respect of which such a
determination has been made;
(b) placing as soon as practicable thereafter a copy
thereof in a publicly accessible part of every Major
Office of the Licensee in such a manner and in such a
place that it is readily available for inspection free
of charge by members of the general public during such
hours as the Secretary of State may by order prescribe
under section 19(4) of the Act that the register of
Licences and final and provisional orders is to be open
to public inspection, or in the absence of any such
order having been made by the Secretary of State,
during normal office hours; and
(c) sending a copy thereof or such part or parts thereof as
are appropriate to any person who may request such a
copy.
7.5 The obligations imposed on the Licensee by this Condition
are without prejudice to any determination which the Director may make
under Condition 9 of this Licence.
<PAGE>
Condition 8
PROHIBITION ON UNDUE PREFERENCE AND UNDUE DISCRIMINATION
8.1 The Licensee shall not (whether in respect of the charges or
other terms or conditions applied or otherwise) show undue preference
to, or exercise undue discrimination
against, particular persons or persons of any class or description as
respects:
(a) the connection to the Applicable Systems of any other
system which is not and is not to be comprised in the
Applicable Systems in accordance with an obligation
imposed by or under this Licence; or
(b) the maintenance, adjustment, repair or replacement of
any apparatus comprised in the Applicable Systems in
accordance with an obligation imposed by or under this
Licence; or
(c) the provision by means of the Applicable Systems of any
telecommunication service in accordance with an
obligation imposed by or under this Licence; or
(d) the granting of permission to connect such systems to,
or to provide services by means of the Applicable
Systems in accordance with an obligation imposed by or
under this Licence.
8.2 The Licensee may be deemed to have shown such undue
preference or to have exercised such undue discrimination if it
unfairly favours to a material extent a business carried on by it in
relation to the doing of any of the things mentioned in paragraph 8.1
so as to place at a significant competitive disadvantage persons
competing with that business.
8.3 Any question relating to whether any act done or course of
conduct pursued by the Licensee amounts to such undue preference or
such undue discrimination shall be determined by the Director, but
nothing done in any manner by the Licensee shall be regarded as undue
preference or undue discrimination if and to the extent that the
Licensee is required or permitted to do the thing in that manner by or
under any provision of this Licence.
8.4 The obligations imposed on the Licensee by this Condition
are without prejudice to any determination which the Director may make
under Condition 9 of this Licence.
<PAGE>
PART 3: OTHER CONDITIONS INCLUDED UNDER SECTION 7 OF THE ACT
Condition 9
MAINTENANCE OF EFFECTIVE COMPETITION WHERE THE LICENSEE OPERATES A
SYSTEM OR PROVIDES SERVICE OVERSEAS
9.1 This Condition shall apply where the Licensee or any
Associated Person is the operator of any telecommunication system or
provides telecommunication services in a country or territory outside
the United Kingdom
9.2 Where it appears to the Director that as a result of any act
or omission of the Licensee either by itself or with or through any
Associated Person competition in the provision of any
telecommunication service or any particular description of
telecommunication services in the United Kingdom is being or is likely
to be restricted, distorted or prevented he may make a determination
to that effect.
9.3 Where the Director makes a determination under paragraph 9.2
the Licensee shall take such steps as the Director may direct for the
purpose of remedying the situation. In particular (and without
prejudice to the generality of the foregoing) any such direction may
require compliance by the Licensee with any other Condition, as
appropriate, including in particular any Condition providing for
publication of charges, terms and conditions or prohibiting undue
discrimination and undue preference, in relation to the provision of
any telecommunication service within the United Kingdom
notwithstanding that any condition precedent to the application of
that Condition is not otherwise satisfied.
<PAGE>
Condition 10
FAIR TRADING
10.1 The Licensee shall not do any thing, whether by act or
omission, which has or is intended to have or is likely to have the
effect of preventing, restricting or distorting competition where such
act or omission is done in the course of, as a result of or in
connection with, providing telecommunication services, or any
particular description of telecommunication service, or running a
telecommunication system.
For the purpose of this Condition such an act or omission will take
the form of:-
(a) any abuse by the Licensee, either alone or with other
undertakings, of a dominant position within the United
Kingdom or a substantial part of it. Such abuse may,
in particular, consist in:
(i) directly or indirectly imposing unfair purchase
or selling prices or other unfair trading
conditions;
(ii) limiting production, markets or technical
development to the prejudice of consumers;
(iii) applying dissimilar conditions to equivalent
transactions with other parties, thereby
placing them at a competitive disadvantage; or
(iv) making the conclusion of contracts subject to
acceptance by the other parties of
supplementary obligations which, by their
nature or according to commercial usage, have
no connection with the subject of such
contracts; or
(b) the making (including the implementation) of any
agreement, the compliance with any decision of any
association of undertakings or the carrying on of any
concerted practice with any other undertaking which has
the object or effect of preventing, restricting or
distorting competition within the United Kingdom.
10.2 (a) An act or omission of a kind described in
paragraph 10.1 is not prohibited where:
(i) it has or would have no appreciable effect on
competition; or
(ii) it has or would have no effect on competition
between persons engaged in commercial
activities connected with telecommunications
and it would have no effect on users of
telecommunication services.
(b) An act or omission of a kind described in
paragraph 10.1(b) is not prohibited by this Condition
if the agreement decision or concerted practice
contributes to improving the provision of any goods or
services or to promoting technical or economic
progress, while allowing consumers a fair share of the
resulting benefit and does not:
(i) impose on the parties concerned restrictions
which are not indispensable to attaining those
objectives; and
(ii) afford such parties the possibility of
eliminating competition in respect of a
substantial part of the goods or services in
question.
(c) This Condition shall not apply to any provision of an
agreement insofar as it is a provision by virtue of
which the Restrictive Trade Practices Act 1976 applies
to that agreement.
(d) This Condition shall not apply to a merger situation
qualifying for investigation under the Fair Trading Act
1973.
10.3 Whether any act or omission is prohibited by this Condition
shall be determined:
(a) with a view to securing that there is no inconsistency
with the general principles having application to
similar questions of directly applicable competition
law, in particular those laid down by the Court of
Justice of the European Communities on the scope of the
competition rules contained in the EC Treaty and block
exemptions adopted by the European Commission under
Article 85(3); and
(b) having regard to -
(i) any decision taken, or notice issued, by the
European Commission in applying the competition
rules contained in the EC Treaty and any
relevant pronouncement of the Director General
of Fair Trading or report of the Monopolies and
Mergers Commission; and
(ii) any guidelines on the application of this
Condition issued from time to time by the
Director.
10.4 (a) If it appears to the Director that an act or omission
of the Licensee is or was prohibited by this Condition
he may make an initial determination to that effect (an
"Initial Determination").
(b) Before making an Initial Determination the Director
shall give a notice to the Licensee:
(i) stating that he is investigating a possible
contravention of this Condition;
(ii) setting out the reasons why it appears to him
that this Condition may be being, or may have
been, breached, including any matters of fact
or law which he thinks relevant;
(iii) requesting within a reasonable period laid down
by the Director such further information as he
may require from the Licensee in order to
complete his Determination; and
(iv) where appropriate, setting out the steps he
believes the Licensee would have to take in
order to remedy the alleged breach.
10.5 (a) Within 28 days of the Director -
(i) making an Initial Determination;
(ii) making a provisional order; or
(iii) giving notice of his proposal to make a final
order under section 17(1) of the Act
in respect of the contravention in question, the
Licensee may notify the Director that it -
(iv) requires him to make a final determination (a
"Final Determination") of the matter;
(v) requires that in making the Final Determination
he take into account a report of a body of
experts appointed by him to consider the matter
("the Advisory Body").
(b) Before making a Final Determination the Director shall -
(i) give a notice to the Licensee setting out the
matters referred to in paragraph 10.4(b); and
(ii) if the Licensee has given notice under sub-
paragraph (a)(v) above, take into account the
report of the Advisory Body on the matter.
(c) The Director shall then determine whether he is
satisfied that the act or omission in respect of which
the Initial Determination was made is or was prohibited
by this Condition.
10.6 (a) Before making his Initial Determination or Final
Determination the Director shall give the Licensee, and
any other person whom he considers it appropriate to
consult, such period within which to make
representations (both orally and in writing) in
response to the notice as he considers reasonable in
all the circumstances.
(b) The Director shall notify the Licensee and any other
person whom he considers it appropriate to notify of
every Initial Determination and Final Determination
made by him and of his reasons for making it; and he
shall, if so requested by the Licensee, publish any
report of the Advisory Body on the matter, subject to
such exclusions as he may consider it appropriate to
make of matters of a kind mentioned in section 48(2) of
the Act.
10.7 The Director shall publish a description of his office's
procedures for the enforcement of this Condition including the steps
taken to ensure that he has access to appropriate independent advice
in enforcing this Condition.
10.8 This Condition shall not limit or affect in any way the
Licensee's obligations arising under any other Condition of this
Licence nor limit the Director's powers of enforcement under
sections 16 to 18 of the Act.
10.9 (a) On the coming into force of any Act or subordinate
legislation which -
(i) contains a prohibition enforceable by the
Director, or gives to the Director the power to
enforce an existing prohibition, of any
behaviour prohibited under paragraph 10.1;
(ii) gives to third parties in respect of a breach
of that prohibition at least the rights they
have under section 18 of the Act in respect of
a breach of a provisional or final order; and
(iii) permits the imposition on the Licensee of
monetary penalties in respect of the breach of
that prohibition
this Condition shall cease to apply to the behaviour
prohibited by or the prohibition enforceable by such
Act or subordinate legislation.
(b) If this Condition still has effect on 31st July 2001,
it shall cease to have effect after that date.
10.10 (a) This Condition shall come into force on 31st December
1996.
(b) The prohibition in paragraph 10.1(b) shall not apply to
acts or omissions done prior to the expiry of three
months from the date of this Licence in pursuance of
agreements entered into prior to the date of this
Licence.
<PAGE>
Condition 11
ESSENTIAL INTERFACES
11.1 This Condition operates without prejudice to the provisions
of Condition 5.
11.2 The Director may, having first notified the Licensee of his
proposal and given the Licensee not less than 28 days in which to make
representations, specify an Essential Interface.
11.3 Where in pursuance of paragraph 11.2 the Director specifies
an interface as an Essential Interface, and the Licensee thereafter
makes that interface available to an Operator in relation to its
Applicable Systems, it shall do so in such a manner as it considers
appropriate, but shall ensure such availability in compliance with a
Relevant Standard if the Operator so requires.
11.4 For the purposes of paragraph 11.3 "Relevant Standard"
means:
(a) an appropriate European or other international
standard; or
(b) in the absence of such a standard, any other standard
specified by the Director after he has notified the
Licensee of his proposal to make the specifications in
question and allowed the Licensee not less than 28 days
in which to make representations, provided that the
Director shall not specify a standard if an appropriate
European or other international standard is expected to
be promulgated within a reasonable time, including, by
way of example, if the European Telecommunications
Standards Institute have published a work programme for
the development of such a standard,
to the extent that such a standard is necessary to ensure interoperability.
11.5 Where in pursuance of paragraph 11.4(b) the Director
specifies a standard as a Relevant Standard, he shall include in that
Relevant Standard a technical specification, using all reasonable
endeavours to obtain the agreement of the Licensee and other relevant
licensees to a technical specification applicable to that Relevant
Standard, being a specification defined if possible by reference to:
(a) an appropriate European or other international
specification; or
(b) in the absence of such a specification, a specification
defined by reference to any other standard having
currency within the European Community at the time.
11.6 Where after a reasonable time the Director has been unable
in accordance with paragraph 11.5 to secure the agreement of the
Licensee and other relevant licensees to a technical specification,
the Director shall adopt for inclusion in the Relevant Standard an
appropriate technical specification which has been promulgated by a
recognised standards body, including, by way of example, the European
Telecommunications Standards Institute, or the British Standards
Institution, or other such body as the Director considers to be
representative of all relevant telecommunications interests.
11.7 The Director shall specify a Relevant Standard in pursuance
of paragraph 11.4 only if the owners of relevant intellectual property
rights have agreed to grant any necessary licences in respect thereof
to the Licensee on reasonable terms.
11.8 For the avoidance of doubt this Condition shall not:
(a) without prejudice to paragraph 11.3, prevent the
Licensee using such interfaces as it considers
appropriate in relation to the Applicable Systems; or
(b) where it makes available to an Operator an interface
which the Director has specified as an Essential
Interface, require the Licensee to comply with the
Relevant Standard if the Operator does not require it
to do so.
11.9 When implementing an Essential Interface, the Licensee shall
not be obliged to conform with the Relevant Standard:
(a) if to do so would necessitate the Licensee:
(i) acquiring apparatus, software or other goods or
supplies of any kind, or implementing any
operation, incompatible with, as the case may
be, apparatus, software or such other goods or
supplies already in use at the time, or the
subject of contracts for their procurement for
use, in connection with the Applicable Systems,
or, in the case of an operation, incompatible
with any other operation being carried out at
the time in connection therewith; or
(ii) incurring any cost, or having to resolve
technical difficulties, disproportionate to the
benefits to be gained from the implementation
of the Relevant Standard,
provided that the Licensee shall take reasonable steps
to incorporate the Relevant Standard in its plans for
network development, with a view to implementation of
that Standard in connection with the Applicable
Systems, but without the Licensee incurring any
incremental expenditure which, but for the
implementation of the Relevant Standard, would not have
been incurred;
(b) if the Relevant Standard is inappropriate for the
particular application for any reason, including,
without limitation:
(i) that it does not afford the Licensee adequate
protection for the security of the Applicable
Systems;
(ii) that its implementation would be liable to
cause material impairment in the quality of any
telecommunication service provided by means of
the Applicable Systems;
(iii) that it does not cater adequately for billing,
metering or other customer administration
systems; or
(iv) that it is technically inadequate in the light
of technical developments which have taken
place since it was originally created;
(c) if the Essential Interface concerned is of a genuinely
innovative nature and accordingly the use in connection
with it of the Relevant Standard would not be
appropriate;
(d) if compliance with the Relevant Standard would involve
the infringement by the Licensee of any intellectual
property right vested in any person; or
(e) if the Director so agrees.
11.10 Where paragraph 11.9(b) or 11.9(c) applies, the Licensee
shall notify the Director thereof in writing, providing an explanation
why.
11.11 It is a precondition of any obligation on the Licensee under
this Condition that an equivalent Condition to this Condition is
included in the respective Licences of all Operators running
telecommunication systems that are connected to the Applicable
Systems.
<PAGE>
Condition 12
CUSTOMER INTERFACE STANDARDS
12.1 This Condition shall only apply where the Applicable Systems
are connected to a telecommunication system not run under a licence
issued to a particular person.
12.2 The Licensee shall ensure that on each occasion on which it
introduces an interface provided or to be provided at a Network
Termination Point on the Applicable Systems not previously so provided
a notice is published specifying the technical characteristics of the
interface introduced.
12.3 The technical characteristics to be included in such a
notice shall include:
(a) physical, electrical and other relevant
characteristics;
(b) network interworking and service management protocols;
and
(c) reference to national and international standards and
recommendations with which the interface complies,
in sufficient detail for compatible terminal apparatus to be produced,
tested and approved.
12.4 Subject to paragraph 12.5, any notice under this Condition
shall be published in a manner appropriate for bringing the matters to
which the notice relates to the attention of persons likely to be
affected by or to have an interest in them.
12.5 Where the Director following any representation or
observation made to him reasonably concludes that a notice under
paragraph 12.2 has not been published in an appropriate manner he may
direct the Licensee to carry out such further publication as he
considers reasonably necessary to meet the requirements of
paragraph 12.4.
<PAGE>
Condition 13
METERING AND BILLING ARRANGEMENTS
13.1 This Condition shall only apply where the Applicable Systems
are connected to a telecommunication system not run under a Licence
issued to a particular person.
13.2 As regards any description of Meter in use on a date
specified by the Director in connection with the Applicable Systems
and which has been specified by the Director, the Licensee shall apply
for Approval as soon as is practicable and in any case not later than
such date as the Director may determine in relation to that
description of Meter.
13.3 As regards any description of Meter specified by the
Director and not in use in connection with the Applicable Systems on
the date specified under paragraph 13.2, the Licensee shall, unless
the Director consents otherwise, apply for Approval not later than
such date as is further specified by the Director or not fewer than
six months before the date on which the Licensee intends to bring that
Meter into such use, whichever shall be the later.
13.4 The Licensee shall not after such date as the Director may
determine in relation to any description of Meter so specified by him,
keep in use or bring into use in connection with the Applicable
systems, any Meter of a description so specified which is not Approved
or for which the Licensee has not made an application for Approval.
13.5 Where Approval is not granted to or is withdrawn from a
particular description of Meter the Licensee shall, as soon as is
reasonably practicable, either;
(a) inform the Director of the action to be taken by the
Licensee to remedy the absence of Approval in relation
to that description of Meter and the anticipated date
of such Approval; or
(b) inform the Director that the Licensee intends to cease
use of that description of Meter in connection with the
Applicable Systems within a time reasonably practicable
for the Licensee whereupon, on request of the Director,
the Licensee shall provide the Director with a
timetable for the withdrawal of that description of
Meter.
13.6 The Licensee shall not render any bill in respect of any
description of telecommunication Service provided by means of the
Applicable Systems unless every amount (other than an indication of
unit charge) stated in that bill is no higher than an amount which
represents the true extent of any such Service actually provided by
the Licensee to the customer in question. In this paragraph
"customer" does not include an Operator.
13.7 Without prejudice to the generality of paragraph 13.6 the
Licensee shall at all times maintain in operation such a Billing
Process as facilitates compliance by the Licensee with, and is
calculated to prevent contravention by it of, that paragraph.
13.8 The Licensee shall not be regarded as being in contravention
of its obligation under paragraph 13.6 except where the failure is in
relation to the Billing Process and the Licensee has failed to take
all reasonable steps to prevent a contravention of that obligation.
13.9 The Licensee shall keep such records as may be necessary or
as may be determined by the Director to be necessary for the purpose
of satisfying the Director that the Billing Process has the
characteristics required by paragraph 13.7, provided that nothing in
this paragraph shall require the Licensee to retain any records for
more than 2 years from the date on which they came into being.
13.10 For the purpose of giving the Director an independent
quality assurance from time to time that the Billing Process has the
characteristics required by paragraph 13.7, the Licensee shall, where
the Director has prima facie grounds to believe the Billing Process
does not have those characteristics and has so notified the Licensee,
extend its prompt co-operation to the Director and, in particular, on
request by the Director shall;
(a) furnish the Director in accordance with the Director's
reasonable requirements any Information, document
(including any facility enabling him to read data not
held in readable form) or other thing;
(b) carry out (or cause to be carried out by such person
having such special expertise as the Director may
specify and to whom the Director has raised no
reasonable objection) in such manner as the Director
may specify an examination of the whole or of any part
of the Billing Process and as soon as practicable after
the conclusion of such examination furnish to the
Director a written report by the Licensee or that
specified person, as the case may be, of the results of
such examination;
(c) on reasonable notice by him allow at all reasonable
times the Director and, in the case of any member of
his staff, on production of his special authority in
that behalf, access to any relevant premises, plant or
equipment of the Licensee;
(d) on reasonable notice by him allow at all reasonable
times the Director and, in the case of any member of
his staff, on production of his special authority in
that behalf, to examine or test the whole or any part
of the Billing Process including any plant or equipment
whether or not forming part of the Applicable Systems;
(e) for the purpose of paragraphs 13.10(c) and 13.10(d),
allow the Director to be accompanied by any person as
the Director may specify and to whom the Licensee has
raised no reasonable objection whose assistance he
might reasonably require for the purpose described at
the beginning of this paragraph provided that the
Director shall have given the Licensee notice (save in
exceptional circumstances) of at least 5 working days
of the identity of that person; and
(f) install and keep installed any equipment (whether or
not supplied by the Director) for the purpose of
verifying;
(i) the accuracy and reliability of any equipment
or apparatus (including any Meter) of the
Licensee;
(ii) in the case of any Meter which is or is
required to be Approved and is in use in
connection with the Applicable Systems,
compliance with any conditions or other matters
which may be required as regards such use of
that Meter.
13.11 In this Condition:
(a) "Approval" and "Approved" mean approval and approved
under section 24 of the Act;
(b) "Billing Process" means Metering systems and Billing
Systems taken together, where "Billing System" means
the totality of all apparatus, data, procedures and
activities which the Licensee employs to determine the
charges to be sought for Service usage recorded by a
Metering System based on published or previously
negotiated pricing structures and to present these
charges on customers' bills and "Metering System" means
the totality of all apparatus, data, procedures and
activities which the Licensee employs to determine the
extent of any telecommunication Services provided by
means of the Applicable Systems;
(c) "Information" includes accounts, estimates and returns;
(d) "Meter" means any system or apparatus constructed or
adapted for use in ascertaining the extent of
telecommunication Services provided by means of the
Applicable Systems; and
(e) "Service" includes any service provided by any person
to whom the Licensee is bound to account for any part
of the amount charged by the Licensee.
<PAGE>
Condition 14
NUMBERING ARRANGEMENTS
14.1 This Condition shall only apply where the Applicable Systems
are connected to a telecommunication system not being run under a
Licence issued to a particular person, or where the Licensee has been
granted Numbers by the Director.
14.2 The Licensee shall from the day on which it first provides a
switched telecommunication service or any other telecommunication
service in connection with which the Licensee allocates to users
Numbers adopt a Numbering Plan and shall furnish details thereof to
the Director and on request to any other person having a reasonable
interest.
14.3 The Numbering Plan shall describe the method adopted and to
be adopted for allocating and re-allocating in respect of each Network
Termination Point such Number or Numbers as may be necessary for each
item of Relevant Apparatus or each Relevant System that is or is to be
connected by means of that Network Termination Point to any of the
switched Applicable Systems.
14.4 The Licensee shall install, maintain or adjust its switched
Applicable Systems so that those Systems convey Messages to Network
Termination Points in respect of which Numbers have been allocated in
accordance with the Numbering Plan.
14.5 The Licensee shall from time to time consult:
(a) the Director about the arrangements for the allocation
and reallocation of Numbers within the Numbering Plan;
and
(b) in one body approved by the Director for the purpose
and representative of telecommunications operators and
other persons whom the Director considers appropriate
about any developments of, additions to or replacements
of, the Numbering Plan.
14.6 The Licensee shall from time to time prepare, taking into
account the consultations mentioned in paragraph 14.5(b), and furnish
to the Director proposals for developing, adding to or replacing the
Numbering Plan and changing the switched Applicable Systems to the
extent necessary to secure that:
(a) sufficient Numbers are made available, having regard to
the anticipated growth in demand for telecommunication
services, for a Number or Numbers to be allocated
without undue delay;
(b) Numbers include as few digits as practicable and their
allocation does not confer any undue advantage on the
Licensee or undue disadvantage on persons running
Relevant Systems;
(c) the cost of changing any of the switched Applicable
Systems or any Relevant Apparatus or Relevant System in
order to accommodate the revised Numbering Plan is
reasonable; and
(d) inconvenience caused by the alteration of the Numbering
Plan to the Licensee and to persons using Relevant
Apparatus or Relevant Systems in respect of which
Numbers have previously been allocated is minimised.
14.7 If the Director determines that the Numbering Plan with any
developments, additions and replacements submitted in accordance with
paragraph 14.6 is sufficient to provide compatibility with the
numbering arrangements applied or to be applied by telecommunications
operators and to meet the objectives specified in paragraph 14.6 the
Licensee shall adopt the Numbering Plan but, if the Director
determines that it is not compatible with numbering arrangements
applied or to be applied by another public telecommunications operator
or will not be sufficient to achieve the objectives specified in
paragraph 14.6, then the Licensee shall adopt the Numbering Plan with
such developments, additions or replacements as the Director may
determine are best calculated to secure the objectives specified in
paragraph 14.6.
14.8 Before making a determination under paragraph 14.7 the
Director shall take account of:
(a) the state of technical development of the Applicable
Systems and the Licensee's plans for their commercial
development;
(b) the balance of advantage between:
(i) making developments of, additions to or
replacements of numbering arrangements applied
or to be applied, or making changes to systems
run, by others; and
(ii) making any requirement of the Licensee;
(c) the cost to the Licensee and to those to whom the
Licensee provides telecommunication services arising
from any determination;
(d) any obligations and recommendations of the
International Telecommunication Union which apply to
Her Majesty's Government and are accepted by it and any
other standard to which the Director consents for the
purpose from time to time; and
(e) the views of the Licensee and such other persons
(including operators of telecommunication systems,
those to whom telecommunication services are provided
or telecommunication apparatus is supplied and
producers of telecommunication apparatus) as appear to
the Director to have an interest in the matter.
14.9 Where the Licensee has adopted a Numbering Plan in
accordance with paragraph 14.7, or the Director has made a
determination under that paragraph (by virtue of which the Licensee
shall adopt the Numbering Plan), the Numbering Plan so adopted shall
be the Licensee's Numbering Plan until the Licensee adopts a Numbering
Plan pursuant to the following provisions of this Condition. The
Numbering Plan referred to in the following provisions of this
Condition is the Numbering Plan adopted pursuant to those provisions.
14.10 The Director may determine a Specified Numbering Scheme (the
"Scheme") in accordance with the National Numbering Conventions (the
"Conventions") published in accordance with paragraph 14.14 and he
will allocate Numbers from this Scheme to the Licensee in accordance
with the Conventions. The initial allocation of Numbers to the
Licensee shall be of those Numbers to which the Numbering Plan
referred to in paragraph 14.3 relates and of any other Numbers to
which any other Numbering Plan in force immediately before such
allocation relates, provided that, at such time of initial allocation,
those Numbers are currently in use by the Licensee, and where not so
in use, the Director shall have due regard to the Licensee's plans and
future requirements for its use and allocation of additional Numbers.
The Director shall, at the request from time to time of the Licensee,
allocate to it:
(a) such quantity of additional Numbers as it may require;
and
(b) in accordance with the Conventions, such specific
Numbers as it may request and which the Director is
satisfied are not required for other purposes.
14.11 The Licensee shall adopt a Numbering Plan for such Numbers
as the Director may allocate to it from time to time in accordance
with the Conventions. It shall within three months of being notified
of such allocation furnish details of the Numbering Plan to the
Director, and keep him informed of material changes to the Numbering
Plan as they occur. The Licensee shall also furnish details of the
Numbering Plan together with any material changes to that Numbering
Plan on request to any other person having a reasonable interest.
Except where the Director agrees otherwise, the Numbering Plan shall
be consistent with the Conventions published in accordance with
paragraph 14.14. If the Numbering Plan is not consistent with those
Conventions, the Director may direct the Licensee to adopt and furnish
him with a new Numbering Plan or to take such other reasonable
remedial action which does not cause undue inconvenience to the
Licensee's customers, as may be necessary to ensure consistency.
14.12 The Licensee shall install, maintain and adjust its switched
Applicable Systems so that those Systems route Messages and otherwise
operate in accordance with the Numbering Plan. The Licensee shall not
use Numbers other than those allocated to it from the Scheme except:
(a) with the written consent of the Director; or
(b) where the use of those Numbers is the subject of an
agreement to which Condition 5 applies.
14.13 (a) The Licensee shall provide to the Director, on request,
such information about its operations under its
Numbering Plan as he may reasonably require to
administer the Scheme and in particular on:
(i) the percentages of Numbers in significant
ranges which have already been allocated to
end-users or which for other reasons are
unavailable for further allocation;
(ii) any allocation of blocks of Numbers to any
person for purposes other than end use;
(iii) Numbers whose use has been transferred at an
end-user's request to another Operator; and
(iv) the Licensee's current forecasts of all of the
above matters.
(b) The Licensee shall not be required to provide
information about individual end-user customers.
(c) In making any such request the Director shall ensure
that no undue burden is imposed on the Licensee in
procuring and furnishing such information and, in
particular, that the Licensee is not required to
procure or furnish information which would not normally
be available to it, unless the Director is satisfied
that such information is essential to the
administration of the Scheme.
14.14 (a) The Conventions referred to in this Condition will be a
set of principles and rules published from time to time
by the Director after consultation with interested
parties who are members of the Telecommunications
Numbering and Addressing Body and, if deemed
appropriate, with end-users.
(b) In consulting the said interested parties, the Director
shall afford a reasonable period, not being less than
28 days, for them to make representations, and he shall
take the said representations into account when
publishing the Conventions. The Conventions shall
govern the specification and application of the Scheme
and the Numbering Plan of the Licensee and may also
include such other matters relating to the use and
management of Numbers as (but not limited to):
(i) criteria and procedures relating to the
application for, allocation of and withdrawal
of Numbers;
(ii) dialling plans;
(iii) access codes;
(iv) prefixes;
(v) standard ways of recording Numbers for
convenience or ease of use, such as the
grouping of digits in Numbers of particular
lengths; and
(vi) methods of enabling end-users to understand the
meaning implicit in Numbers or other dialled
digits, and in particular the rate at which a
call to a particular Number will be chargeable.
(c) The Director may from time to time amend or withdraw a
Convention already published, after consultation with
interested parties who are members of the
Telecommunications Numbering and Addressing Body. The
Licensee shall not be required to comply with any such
amendment or withdrawal unless the Licensee has been
given a reasonable period of notice, such notice not
being less than three months. Numbers allocated to the
Licensee may only be withdrawn after similar
consultation and notice, and the Director shall consult
end-users affected by such withdrawal. Subject to
overriding national interests, or where there is no
alternative solution available, the power to withdraw
Numbers shall not apply to any Numbers which the
Director has approved from time to time as part of a
specific service of the Licensee, which, as a result of
investment by the Licensee, has a recognised identity
and quality associated with that particular Number and
which the Licensee is using and plans to continue to
use.
14.15 In deciding on the details of and any subsequent changes to
the Scheme and the Conventions, and when making or changing Number
allocations within the Scheme or making determinations under this
Condition, the Director shall ensure that the Scheme complies with the
Conventions and shall have regard to:
(a) the need for sufficient Numbers to be made available,
having regard to the anticipated growth in demand for
telecommunication services, together with the need for
good husbandry of that supply at any time;
(b) the need to ensure Compatibility with the Numbering
Plans adopted or to be adopted by telecommunications
operators;
(c) the convenience and preferences of end-users;
(d) the requirements of effective competition;
(e) the practicability of implementing the Conventions in
licensed systems by the date when the Conventions are
intended to apply;
(f) any costs or inconvenience imposed on the Licensee,
other telecommunications operators, end-users and other
interested parties (including those overseas);
(g) any relevant international agreements, recommendations
or standards;
(h) the views of the Licensee and other interested parties;
and
(i) any other matters he regards as relevant.
14.16 The Licensee shall not, unless the Director consents
otherwise, charge any person for a Number which is allocated to him
(other than a coveted Number allocated to a person who is not a public
telecommunications operator at the request of such a person), but
nothing in this Condition shall preclude the Licensee from recovering
from the operator of a Relevant System the reasonable costs associated
with allocating Numbers to and routing calls to that System; save that
in the case of any dispute or difference as to those costs the
Director may determine them and the Licensee shall not be obliged so
to allocate Numbers and route calls unless such operator agrees to
bear the costs so determined.
14.17 For the purposes of this Condition, "Telecommunications
Numbering and Addressing Body" means a body approved by the Director
as representative of the Licensee and other persons whom the Director
considers it appropriate to include in consultations about the content
of the Conventions and the Scheme.
14.18 For the avoidance of doubt, it is hereby declared that this
Condition applies notwithstanding any arrangements for numbering
arising by virtue of any agreement to which Condition 5 applies. But
nothing in this paragraph shall affect the operation of any such
agreements entered into before the coming into force of this Licence.
14.19 The Numbers to which this Condition applies are Numbers:
(a) of a class described in CCITT Recommendation E.160,
E.163, E.164, E.165, E.166 or F.69 or their functional
successors; or
(b) which are of a class described in CCITT Recommendation
X.121 and which include any Data Network Identification
Code which has been:
(i) allocated before 14 November 1986 in accordance
with a Numbering Plan furnished to the
Director; or
(ii) specified by the Director for the purposes of
this Licence and described in a list kept for
that purpose by the Director and made available
by him for inspection to the general public.
<PAGE>
Condition 15
ARRANGEMENTS FOR PROPORTIONATE RETURN
15.1 This Condition shall apply in respect of the conveyance of
Messages to or from each country and territory in the world other than
as specified from time to time by the Secretary of State.
15.2 Except insofar as the Director may otherwise consent in
writing, the Licensee shall ensure (using the most up-to-date
information available) that over each quarterly period for each
Accounting Rate Service the First Ratio shall be no greater than the
Second Ratio.
15.3 Where it appears to the Director that in respect of any
country or territory the obligation imposed by paragraph 15.2 is being
breached, he may make a determination to that effect and the Licensee
shall take such steps as the Director may direct for the purpose of
remedying the situation. In particular, and without prejudice to the
generality of the foregoing, any such direction may require the
Licensee to cease to convey any Messages to
that country or territory.
15.4 In this Condition:
"First Ratio" means the volume of Messages comprised in
each Accounting Rate Service which are
conveyed by the Applicable Systems and are
delivered to the United Kingdom divided by
the volume of all Messages comprised in each
Accounting Rate Service which are delivered
to the United Kingdom; and
"Second Ratio" means the volume of all Messages comprised in
each Accounting Rate Service which are
conveyed by the Applicable Systems and are
sent from the United Kingdom divided by the
volume of all Messages comprised in each
Accounting Rate Service which are sent from
the United Kingdom.
<PAGE>
Condition 16
ARRANGEMENTS FOR ACCOUNTING IN RESPECT OF INTERNATIONAL CONVEYANCE
SERVICES
16.1 This Condition shall apply in respect of the conveyance of
Messages to or from each country and territory in the world other than
as specified from time to time by the Secretary of State.
16.2 The Licensee shall inform the Director of accounting rates
and methods of settlement and division of the accounting rates agreed
for all Accounting Rate Services, before those rates are put into
operation.
16.3 As soon as practicably possible after making any
correspondent arrangement with an overseas operator, the Licensee
shall inform the Director and all other holders of a Licence
authorising the provision of International Conveyance Services in the
United Kingdom and who are operating, or who have announced an
intention to operate on that particular route, of the terms of that
arrangement, in particular and without prejudice to the generality of
the foregoing, including details of any changes to existing accounting
rates or methods of settlement or division of the accounting rates.
16.4 Where it appears to the Director that any accounting rate or
methods of settlement or division of the accounting rates agreed by
the Licensee in respect of any Accounting Rate Service has or is
likely to have an effect to the detriment of providers and users of
International Conveyance Services in the United Kingdom, he may make a
determination to that effect and the Licensee shall take such steps as
the Director may direct for the purpose of remedying the situation.
In particular, and without prejudice to the generality of the
foregoing, any such direction may require the Licensee to cease to
convey any Messages to that country or territory.
<PAGE>
Condition 17
PROHIBITION OF EXCLUSIVE DEALING IN INTERNATIONAL SERVICES
17.1 The Licensee shall not enter into any agreement or
arrangement with any person running an Authorised Overseas System on
terms or conditions which unfairly preclude or restrict the provision
by another public telecommunications operator of International
Conveyance Services.
17.2 The Licensee shall not unreasonably exclude any other public
telecommunications operator who is authorised by a licence to connect
his system to another telecommunication system situated outside the
United Kingdom so as to convey Messages to that other system from a
reasonable opportunity to participate in any international
arrangements into which it proposes to enter after the date on which
this Licence enters into force for the installation and operation of
any submarine cable linking any of the Applicable Systems to any
telecommunication system outside the United Kingdom.
<PAGE>
Condition 18
NOTIFICATION OF CHANGES IN SHAREHOLDINGS
18.1 The Licensee shall notify the Secretary of State if an
undertaking becomes a Parent Undertaking in relation to the Licensee.
18.2 Subject to paragraph 18.3, the Licensee shall notify the
Secretary of State of:
(a) any change in the proportion of the Shares held in a
Relevant Company by any person;
(b) the acquisition of any Shares in a Relevant Company by
a person not already holding any such Shares, and the
proportion of any such Shares held by that person
immediately after that acquisition.
18.3 The Licensee shall be obliged to notify the Secretary of
State of any acquisition of Shares or change in the Shareholding of a
Relevant Company by any person only if, by reason of that acquisition
or change, the total number of Shares in that Relevant Company held by
that person otherwise than as trustee or nominee for another person
together with any Shares held by any nominee or trustee for that
person immediately after that change or acquisition:
(a) exceeds 15 per cent of the total number of Shares in
that company (where it did not exceed 15 per cent prior
to that change or acquisition);
(b) exceeds 30 per cent of the total number of Shares in
that company (where it did not exceed 30 per cent prior
to that change or acquisition); or
(c) exceeds 50 per cent of the total number of Shares in
that company (where it did not exceed 50 per cent prior
to that change or acquisition),
provided that where a Relevant Company is a public company as defined
in section 1 of the Companies Act 1985, the obligation shall be
discharged by forwarding to the Secretary of State as soon as
practicable all information in respect of that acquisition or that
change as is entered on or received for entry on the register required
to be maintained by that Relevant Company under section 211 of the
Companies Act 1985.
18.4 In any case referred to in paragraph 18.1 or 18.2,
notification shall be given by a date which is 30 days prior to the
taking effect of such change or acquisition, as the case may be, or as
soon as practicable after that date.
<PAGE>
Condition 19
LICENSEE'S GROUP
19.1 Without prejudice to the Licensee's obligations under these
Conditions in respect, in particular, of anything done on its behalf,
where:
(a) the Director determines either:
(i) that a member of the Licensee's Group has done
something which would, if it had been done by
the Licensee, be prohibited or not be
authorised under these Conditions; or
(ii) that a member of the Licensee's Group has done
something which would, if it had been done by
the Licensee, require the Licensee to take or
refrain from taking a particular action under
these Conditions and that neither the Licensee
nor the member has met that further
requirement; and
(b) the Director is not satisfied that the Licensee has
taken all reasonable steps to prevent any member acting
in that way,
then the Director may direct the Licensee to take such steps as the
Director deems appropriate for the purpose of remedying the matter,
including refraining from carrying on with that member such commercial
activities connected with telecommunications as the Director may
determine.
19.2 Where these Conditions apply in respect of the Applicable
Systems they do not apply in respect of any other telecommunication
system, whether run by the Licensee or another.
19.3 Where any person becomes a member of the Licensee's Group
then the Licensee shall not be subject to paragraph 19.1 before that
is reasonably practicable but shall be so not later than one year
after that person becomes such a member or such later date as the
Director may determine.
19.4 This Condition shall not apply to any particular member of
the Licensee's Group if and to the extent that the Director so
determines.
<PAGE>
Condition 20
PAYMENT OF FEES
20.1 The Licensee shall pay the following amounts to the
Secretary of State at the times stated:
(a) on the grant of this Licence the sum of 7,000;
(b) on 1 April 1997 a renewal fee of (at the option of the
Director) either 8,000 or such amount which shall
represent a fair proportion, to be determined each year
by the Director according to a method that has been
disclosed to the Licensee, of the estimated costs to be
incurred in that fiscal year by the Director in the
regulation and enforcement of telecommunication
licences and in the exercise of his other functions
under the Act. The first renewal fee shall be reduced
by the proportion which the period from the date of
granting of this Licence until the next following 1 April
1997 bears to the period of one year; and
(c) when the Director so determines, a special fee which
shall represent a fair proportion, to be determined by
the Director according to a method that has been
disclosed to the Licensee of the amount, if any, by
which the aggregate of:
(i) the costs estimated to have been already
incurred in that fiscal year by the Director in
the regulation and enforcement of
telecommunication licences and in the exercise
of his other functions under the Act;
(ii) the costs estimated to have been already
incurred in that fiscal year by the Monopolies
and Mergers Commission following licence
modification references under section 13 of the
Act; and
(iii) the estimated costs to be incurred in the
remainder of that fiscal year:
(A) by the Director in the regulation and
enforcement of telecommunication licences
and in the exercise of his other functions
under the Act; and
(B) by the Monopolies and Mergers Commission
following licence modification references
under section 13 of the Act,
exceeds the renewal fee for that year,
save always that the aggregate of the renewal fee and the special fee
for any fiscal year shall not exceed 0.08% of the annual turnover of
the Systems Business in the financial year before the last complete
financial year of the Licensee before the renewal fee is payable, or
35,000 (adjusted in the manner described in paragraph 20.1(b),
whichever is the greater (the "normal aggregate fee"), unless the
Director determines that the costs incurred in any fiscal year by him
and the Monopolies and Mergers Commission in respect of the Licensee's
activities exceeds the normal aggregate fee, in which case the
aggregate of the renewal fee and the special fee for the following
year shall be such amount as the Director determines is sufficient to
take account of that excess as well as of the other costs to be
incurred as mentioned in this paragraph.
<PAGE>
Condition 21
REQUIREMENT TO FURNISH INFORMATION TO THE DIRECTOR
21.1 Without prejudice to Condition 22, the Licensee shall
furnish to the Director, in such manner and at such times as the
Director may reasonably request, such documents. accounts, estimates,
returns or other information and procure and furnish to him such
reports as he may reasonably require for the purpose of exercising the
functions assigned or transferred to him by or under Parts II and III
of the Act.
21.2 In making any such request the Director shall ensure that no
undue burden is imposed on the Licensee in procuring and furnishing
such information and, in particular, that the Licensee is not required
to procure or furnish a report which would not normally be available
to it unless the Director considers the particular report essential to
enable him to exercise his functions.
<PAGE>
Condition 22
REQUIREMENT TO SUBMIT ACCOUNTS TO THE DIRECTOR
22.1 The Licensee shall maintain such accounting records dealing
separately with its International Business carried on in the United
Kingdom as will enable it to show separately and explain, in response
to any request from the Director under paragraph 22.4. all the
transactions to which paragraph 22.2 refers.
22.2 This paragraph refers to:
(a) all transactions between each Relevant International
Function run as part of the Licensee's International
Business; and
(b) all transactions between the Licensee's International
Business and:
(i) any other business carried on by the Licensee
whether in the United Kingdom or elsewhere; or
(ii) the business of any Associated Person whether
in the United Kingdom or elsewhere.
22.3 The Licensee shall update the accounting records referred to
in paragraph 22.1 no less frequently than monthly and those records
shall include in particular the costs (including capital costs),
revenue and a reasonable assessment of assets employed in and
liabilities attributable to the International Business and,
separately, the amount of any material item of revenue, cost, asset or
liability which has been either:
(a) charged from or to any other business of the Licensee
or Associated Person together with a description of the
basis of the value on which the charge was made; or
(b) determined by apportionment or attribution from an
activity common to the business and any other business
of the Licensee or any Associated Person and, if not
otherwise disclosed, the basis of the apportionment or
attribution.
22.4 The Director may at any time request from the Licensee
copies of any of the accounting records and detailed attribution
policies and procedures which the Licensee is obliged to maintain by
this Condition, covering any period between:
(a) the date on which the Licensee first carried on any
International Business in the United Kingdom or, if
later, the date of this Licence; and
(b) the date on which such records were, or should have
been, last updated in accordance with paragraph 22.3.
The Licensee shall provide any such records requested by the Director
within 28 days of receiving such a request in writing.
22.5 (i) Accounting records submitted to the Director
shall, so far as reasonably practicable, be prepared in
the formats and in accordance with the accounting
principles and rules which apply to the annual
statutory accounts of the Licensee and shall state the
attribution policies and procedures used and where the
Licensee is a body corporate incorporated outside the
United Kingdom the preparation and adoption of those
accounts shall comply with the requirements of
sections 226 and 231 to 234A of the Companies Act 1985
as if that body corporate were incorporated in the
United Kingdom.
(ii) The Licensee shall procure in respect of each
set of accounting records submitted to the Director an
audit report which shall conform to UK auditing
standards by the Auditor in which he shall state
whether in his opinion the record complies with
paragraph 22.1 and is fairly presented in accordance
with the formats, accounting principles, rules and
requirements referred to in paragraph 22.5(i).
22.6 Where it appears to the Director that to do so would be
beneficial to the promotion or maintenance of competition he may
direct the Licensee to publish the accounting statements submitted to
the Director in such way as he sees fit. In so directing the Licensee
the Director shall have regard to the need for excluding, so far as
that is practicable, any matter where publication of that matter
might, in the opinion of the Director, seriously and prejudicially
affect the interests of the Licensee or any Associated Person.
<PAGE>
Condition 23
EXCEPTIONS AND LIMITATIONS ON OBLIGATIONS IN SCHEDULE 1
23.1 Unless the context otherwise requires and subject to
paragraph 23.9, the Licensee's obligations under these Conditions have
effect subject to the following exceptions and limitations.
23.2 The Licensee is not obliged to do anything which is not
practicable.
23.3 The Licensee shall not be held to have failed to comply with
an obligation imposed upon it by or under these Conditions if and to
the extent that the Licensee is prevented from complying with that
obligation by any physical, topographical or other natural obstacle,
by the malfunction or failure of any apparatus or equipment owing to
circumstances beyond the control of the Licensee, by the act of any
national authority, local authority or international organisation or
as the result of fire, flood, explosion, accident, emergency, riot or
war.
23.4 An obligation to provide any telecommunication service shall
not apply:
(a) where there is no reasonable demand for it; or
(b) where provision of the service requested would expose
any person engaged in its provision to undue risk to
health or safety; or
(c) where the Licensee is unable to obtain (either because
it has not been developed or for some other reason
beyond the Licensee's control) anything necessary to
provide a service of the quality or standard required
by the person who requests the provision of the service
and, in the event of dispute, the Director's decision
as to whether anything is necessary shall be final; or
(d) where the person to whom the Licensee would otherwise
be under an obligation to provide any service requests
a service at a place in which the apparatus necessary
to provide that service in that area has not been
installed (or in which the installation of such
apparatus has not been completed) or as the case may be
such apparatus has not been adapted or modified to make
it capable of providing that service or the trained
manpower necessary to provide that service is not
available in that area, provided that in every case
where the Licensee declines to provide a service to
which this paragraph relates it shall have published,
or furnished to the Director, within 28 days (or such
longer period as the Director considers reasonable)
following receipt by it of the request that that
service be provided, proposals for:
(i) progressively installing, or completing the
installation, adaptation or modification of,
the apparatus; or
(ii) the allocation of the trained manpower,
necessary for the provision of that service in
that area and the Director has not determined
that those proposals are unreasonable or are
not being effectively carried out; or
(e) where the person to whom the Licensee would otherwise
be under an obligation to provide any service requests
a service at a place in an area in which the demand or
the prospective demand for the service is not
sufficient, having regard to the revenue likely to be
earned from the provision of the service in that area,
to meet all the costs reasonably to be incurred by the
Licensee in providing the service there, including:
(i) the cost of apparatus necessary for the
provision of the service there;
(ii) the cost of installing, maintaining and
operating such apparatus for the purpose of
providing the service there; and
(iii) the cost of the trained manpower necessary to
provide the service there; or
(f) where in the opinion of the Director it is not
reasonably practicable in all the circumstances for the
Licensee to provide the service requested at the time
or place demanded.
23.5 The Licensee shall not be obliged to connect or to keep
connected to the Applicable Systems or to permit to be so connected or
kept connected any telecommunication system or telecommunication
apparatus or to provide telecommunication services or to permit the
provision of any service if the person to or for whom that is or is to
be done:
(a) has not entered or will not enter into a contract for
the purpose with the Licensee for reasons other than
the unreasonable refusal of the Licensee to agree terms
for the purpose but this paragraph does not apply in a
case where the Director is satisfied that:
(i) the Licensee has not published standard terms
and conditions which it proposes to apply for
the purpose in question, or the transaction is
not fit to be governed by such terms and
conditions; and
(ii) the Licensee has unreasonably refused to agree
terms and conditions for the purpose;
(b) is, or in the Director's opinion has given reasonable
cause to believe that he may become:
(i) in breach of a contract with the Licensee for
the provision of telecommunication services by
the Licensee; or
(ii) in default in regard to any debt or liability
owed to the Licensee in respect of any such
contract;
(c) is using, or permitting the use of, apparatus so
connected or kept connected for any illegal purpose or
has done so in the past and is likely to do so again;
or
(d) has obtained, or attempted to obtain, any
telecommunication service from the Licensee by corrupt,
dishonest or illegal means at any time.
23.6 Nothing in these Conditions shall prevent the Licensee from
withdrawing from, or declining to provide to, any person any
telecommunication service which the Licensee has notified the Director
that it is providing in a limited area, or to a limited class of
customers, for the purpose of evaluating the technical feasibility of,
or the commercial prospects for, that service.
23.7 Nothing in these Conditions shall require the Licensee to
provide any telecommunication service, or to provide any
telecommunication service of any particular class or description, if
it provides instead a service, or a service of a class or description,
which satisfies the purposes of that requirement at least to the same
extent.
23.8 This Condition shall apply without prejudice to any
limitation or qualification of the requirements imposed by or under
any other Condition.
23.9 This Condition does not apply to Condition 5, 8 or 10 and:
(a) only paragraphs 23.1, 23.2, 23.3 and 23.8 apply to
Conditions 7, 13.2, 13.3, 19, 20 and 21;
(b) only paragraphs 23.1, 23.5(a) and 23.8 apply to
Condition 4.2;
(c) only paragraphs 23.1, 23.2, 23.3, 23.5 and 23.8 apply
to Condition 14;
(d) only paragraphs 23.1, 23.2, 23.3, 23.4(b), 23.5(a) and
23.8 apply to Condition 3; and
(e) only paragraphs 23.1, 23.2, 23.3, 23.4, 23.6 and 23.8
apply to Condition 4.1;
but paragraph 23.2 does not apply to Condition 9 or Condition 22.
<PAGE>
SCHEDULE 2: REVOCATION
1. Notwithstanding paragraph 3 of the Licence the Secretary of
State may at any time revoke this Licence by at least 30 days' notice
given to the Licensee in writing in any of the following
circumstances:
(a) if the Licensee agrees in writing with the Secretary of
State that this Licence should be revoked; or
(b) if either
(i) an undertaking has become a Parent Undertaking
in relation to the Licensee; or
(ii) a change or acquisition of a description
specified in paragraphs 18.2 and 18.3 of
Condition 18 of Schedule 1 to this Licence has
taken place;
and either
(iii) the Licensee has duly notified the Secretary of
State in accordance with those paragraphs; or
(iv) the Licensee has failed to notify the Secretary
of State that such event, change or acquisition
has taken place in accordance with an
obligation under that Condition;
and
(v) the Secretary of State has notified the
Licensee in writing that he is minded to revoke
this Licence on the grounds either that:
(A) the event, change or acquisition would in
his opinion be against the interests of
national security or relations with the
government of a country or territory
outside the United Kingdom; or
(B) the Licensee has committed a breach of
Condition 18 of Schedule 1; and
(vi) the event, change or acquisition has not been
reversed or remedied within 30 days of the
receipt by the Licensee of such notification;
or
(c) if, following a change or acquisition of the type
referred to in Condition 18 of Schedule 1 to this
Licence, the Secretary of State considers, or the
Director has notified the Secretary of State that the
Director considers, that the Licensee is relying, has
relied or is likely to rely on this Licence in
circumstances in which an effect of such reliance is,
was or may be that the Licensee or any member of the
Licensee's Group is or was relieved wholly or in part
of any obligation, limitation or restriction imposed by
a Licence issued to the Licensee or any member of the
Licensee's Group; or
(d) where the Licensee has failed to comply with a final
order (or a provisional order confirmed) under
section 16 of the Act and the Secretary of State has
given the Licensee not less than 30 days' notice in
writing that, if the Licensee fails to comply with the
order within that period of 30 days, he intends to
revoke the Licence, provided that no such notice of
intention shall be given where the question of the
validity of the order is the subject of any court
proceedings, and where that question becomes so subject
during the 30 day notice period, that period shall
cease to run until the final disposal of those
proceedings (including any Appeal); or
(e) if the Licensee:
(i) is deemed to be unable to pay its debts (within
the meaning of section 123 of the Insolvency
Act 1986 as applied for the purposes of this
Licence by paragraph 2(b)), convenes any
meeting with its creditors generally with a
view to the general readjustment or
rescheduling of its indebtedness or makes a
general assignment for the benefit of its
creditors generally; or
(ii) enters into administration, receivership or
liquidation; or
(iii) ceases to provide telecommunication services of
the type authorised in paragraph 3 of
Schedule 3 to this Licence; or
(f) if the Licensee or any other person takes any action
for the voluntary winding-up or dissolution of the
Licensee; or
(g) if the Licensee enters into any scheme of arrangement
under the Insolvency Act 1986 (other than in any such
case for the purpose of reconstruction or amalgamation
upon terms and within such period as may previously
have been approved in writing by the Secretary of
State); or
(h) if an administrator, receiver, trustee or similar
officer of the Licensee, or of all or any material part
of the revenues and assets of it, is appointed; or
(i) if any order is made for the compulsory winding-up or
dissolution of the Licensee; or
(j) if any amount payable under Condition 20 of Schedule 1
is unpaid 30 days after it becomes due and remains
unpaid for a period of 14 days after the Secretary of
State notifies the Licensee that the payment is
overdue.
2 For the purposes of paragraph 1(e)(i), in applying section 123
of the Insolvency Act 1986:
(a) if a written demand served on the Licensee is satisfied
prior to the expiry of the notice of revocation the
Secretary of State shall not revoke the Licence; and
(b) the figure of " 750", or such other money sum as may be
specified from time to time pursuant to sections 123(3)
and 416 of the Insolvency Act 1986, shall be deemed to
be replaced by " 250,000" or such higher figure as the
Director may from time to time determine.
3 In this Schedule:
(a) "Group" means a parent undertaking and its subsidiary
undertaking or undertakings within the meaning of
section 258 of the Companies Act 1985 as substituted by
section 21 of the Companies Act 1989; and "Licensee's
Group" means a Group in respect of which the Licensee
is either a parent undertaking or a subsidiary
undertaking; and
(b) "Parent Undertaking" has the same meaning as in
section 258 of the Companies Act 1985 as substituted by
section 21 of the Companies Act 1989.
4 For the purposes of this Schedule "Appeal" includes further
appeal and application for leave to appeal or further to appeal.
<PAGE>
SCHEDULE 3: AUTHORISATION TO CONNECT OTHER TELECOMMUNICATION
SYSTEMS AND APPARATUS TO THE APPLICABLE SYSTEMS AND TO
PROVIDE TELECOMMUNICATION SERVICES BY MEANS OF THE
APPLICABLE SYSTEMS
1 Nothing in this Licence removes any need to obtain any other
licence that may be required under any other enactment.
Connection Authorisation
2 Subject to paragraph 1, this Licence authorises the
connection to the Applicable Systems of
(a) any telecommunication system run under a Licence;
(b) any telecommunication system outside the United Kingdom
except a telecommunication system which the Secretary
of State has notified the licensee should not, or as
the case may be should cease to, be connected to the
Applicable Systems;
(c) any earth orbiting apparatus, provided that:
(i) the relevant requirements, if any, for
consultation and compliance with specified
operating parameters under the INTELSAT
Agreement, INMARSAT Convention and EUTELSAT
Convention have been and continue to be
satisfied;
(ii) the relevant rules and standards, if any,
issued under the INTELSAT Operating Agreement,
INMARSAT Operating Agreement and EUTELSAT
Operating Agreement have been and continue to
be satisfied; and
(iii) it is not earth orbiting apparatus to which the
Secretary of State has notified the Licensee
that the Licensee should not, or as the case
may be should cease to, connect the Applicable
Systems;
(d) any telecommunication system run by the Crown;
(e) telecommunication apparatus of every description which
is comprised in a telecommunication system mentioned in
paragraphs 2(a) to 2(d);
(f) any telecommunication apparatus not comprised in the
Applicable Systems which is for the time being
Compliant Terminal Equipment or approved for connection
to the Applicable Systems in accordance with section 22
of the Act; and
(g) any hearing aid.
Service Authorisation
3 Subject to paragraph 1, this Licence authorises the
provision by means of the Applicable Systems of any telecommunication
services except:
(a) International Simple Voice Resale Services;
(b) International Simple Data Resale Services;
(c) conveyance of Messages for the delivery of one or more
of the services specified in paragraphs (a) to (c) of
section 72(2) of the Broadcasting Act 1990 for
simultaneous reception in two or more Dwelling-Houses;
(d) conveyance of Messages which have originated in the
United Kingdom and are subsequently to be terminated in
the United Kingdom, unless:
i) such Messages are also to be conveyed over a
telecommunications system outside the United
Kingdom; or
ii) such Messages are conveyed in compliance with
any obligations imposed under Condition 2,
Condition 3 or Condition 4 in Schedule 1 of
this Licence; and
(e) any Mobile Radio Tails Service.
Definitions and interpretation
4 In this Schedule unless the context otherwise requires:
(a) "Applicable Terminal Equipment" means apparatus which
is applicable terminal equipment within the meaning of
regulation 4 of the Telecommunications Terminal
Equipment Regulations 1992;
(b) "Compliant Terminal Equipment" means Applicable
Terminal Equipment which satisfies the requirements of
regulation 8 of the Telecommunications Terminal
Equipment Regulations 1992,
(c) "Dwelling-House" has the same meaning as in section 202
of the Broadcasting Act 1990;
(d) "EUTELSAT Convention" means the Convention establishing
the European Telecommunications Satellite Organisation
EUTELSAT including its Preamble and its Annexes, opened
for signature by governments at Paris, France on 15
July 1982, and any subsequent amendments made to it;
(e) "EUTELSAT Operating Agreement" means the Operating
Agreement relating to the European Telecommunications
Satellite Organisation EUTELSAT, including its Preamble
and Annexes, opened for signature at Paris, France on
15 July 1982, and any subsequent amendments made to it;
(f) "INMARSAT Convention" means the Convention establishing
the International Mobile Satellite Organisation
(formerly the International Maritime Satellite
Organisation) INMARSAT including its Preamble and its
Annex, opened for signature by governments at London,
England on 3 September 1976, and any subsequent
amendments made to it;
(g) "INMARSAT Operating Agreement" means the Agreement,
including its Annex, opened for signature at London,
England on 3 September 1976 by entities designated by
governments party to the INMARSAT Convention, and any
subsequent amendments made to it;
(h) "INTELSAT Agreement" means the Agreement including its
Annexes but excluding all titles of Articles, opened
for signature by governments at Washington DC, USA, on
20 August 1971 by which the International
Telecommunications Satellite Organisation INTELSAT was
established, and any subsequent amendments made to it;
(i) "International Private Leased Circuit" means a
communication facility which is:
(i) comprised both in a public telecommunication
system and in an equivalent telecommunication
system in a country or territory other than the
United Kingdom;
(ii) for the conveyance of Messages between points,
all of which are points of connection between
telecommunication systems referred to in
paragraph 4(i)(i) and other telecommunication
systems;
(iii) made available to a particular person or
particular persons;
(iv) such that all of the Messages transmitted at
any of the points mentioned in
paragraph 4(i)(ii) are received at every other
such point; and
(v) such that the points mentioned in
paragraph 4(i)(ii) are fixed by the way in
which the facility is installed and cannot
otherwise be selected by persons or
telecommunication apparatus sending Messages by
means of that facility;
(j) "International Simple Data Resale Services" means
telecommunication services consisting in the conveyance
of Messages which do not include two-way live speech,
but include only such switching, processing, data
storage or protocol conversion as is necessary for the
conveyance of those Messages in real time, which have
been or are to be conveyed by means of all of the
following;
(i) a Public Switched Network;
(ii) an International Private Leased Circuit; and
(iii) the equivalent of a Public Switched Network in
another country or territory;
provided that conveyance of a Message by means of a
Public Switched Network or, as the case may be, the
equivalent of a Public Switched Network in another
country or territory shall be disregarded where that
Message is so conveyed in circumstances specified for
the time being by the Secretary of State as not being
material for the purposes of paragraph 3 and included
in a list kept for the purpose by the Director and made
available by him for inspection by the general public:
(k) "International Simple Voice Resale Services" means
telecommunication services consisting in the conveyance
of Messages which include two-way live speech which
have been or are to be conveyed by means of all of the
following:
(i) a Public Switched Network;
(ii) an International Private Leased Circuit; and
(iii) the equivalent of a Public Switched Network in
another country or territory;
provided that conveyance of a Message by means of a
Public Switched Network or, as the case may be, the
equivalent of a Public Switched Network in another
country or territory shall be disregarded where that
Message is so conveyed in circumstances specified for
the time being by the Secretary of State as not being
material for the purposes of paragraph 3 and included
in a list kept for the purpose by the Director and made
available by him for inspection by the general public;
(l) "Message" means anything falling within paragraphs (a)
to (d) of section 4(1) of the Act;
(m) "Mobile Radio Tails Service" means a telecommunication
service consisting in the conveyance of Messages
through the agency of Wireless Telegraphy to or from
the Applicable Systems directly from or to any
apparatus designed or adapted to be capable of being
used while in motion;
(n) "Private Leased Circuit" means a communication facility
which is:
(i) provided by means of one or more public
telecommunications systems;
(ii) for the conveyance of Messages between points,
all of which are points of connection between
telecommunication systems referred to in
paragraph 4(n)(i) and other telecommunication
systems;
(iii) made available to a particular person or
particular persons;
(iv) such that all of the Messages transmitted at
any of the points mentioned in
paragraph 4(n)(ii) are received at every other
such point; and
(v) such that the points mentioned in
paragraph 4(n)(ii) are fixed by the way in
which the facility is installed and cannot
otherwise be selected by persons or
telecommunication apparatus sending Messages by
means of that facility;
(o) "Public Switched Network" means a public
telecommunication system by means of which two-way
telecommunication services are provided whereby
Messages are switched incidentally to their conveyance,
and, for the avoidance of doubt, a Public Switched
Network does not include Private Leased Circuits or
International Private Leased Circuits; and
(p) "Wireless Telegraphy" has the same meaning as in the
Wireless Telegraphy Act 1949.
5 Expressions cognate with those referred to in this Schedule
shall be construed accordingly.
Exhibit 10-40
SATISFACTION: The indebtedness
secured by this Leasehold Mortgage
has been satisfied in full.
By:
Name:
Title:
Date:
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
LEASEHOLD MORTGAGE
[NEW YORK]
This Leasehold Mortgage is made and entered into as of this 14th
day of January, 1997, by and among ACC NATIONAL TELECOM CORP.,
Delaware corporation ("Mortgagor"), and FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("Mortgagee"), as Administrative Agent for the
financial institutions (the "Lenders") as are, or may from time to
time become, parties to the Credit Agreement (as defined below).
WHEREAS, Mortgagor and certain Affiliates thereof are indebted to
the Lenders in the principal sum of up to One Hundred Million Dollars
($100,000,000), as evidenced by the Notes of even date executed by the
Mortgagor and such Affiliates in favor of the Lenders, and such other
documents as may have been executed or given by Mortgagor in
connection with the transactions contemplated by the Credit Agreement
of even date between the Mortgagor and such Affiliates as Borrowers
thereunder (collectively, the "Borrowers"), the Lenders and the
Mortgagee, as Administrative Agent for the Lenders (as amended or
supplemented, the "Credit Agreement", and collectively with the Notes
and such other documents, the "Loan Documents"), the terms and
conditions of which are incorporated herein by reference;
NOW, THEREFORE, as security for the payment and performance of up
to $500,000 of the Obligations (as defined in the Credit Agreement),
the Mortgagor has created a security interest in, bargained, sold,
given, granted, assigned and conveyed and does by these presents
create a security interest in, bargain, sell, give, grant, assign and
convey unto the Mortgagee, its or his successors and assigns, all of
Mortgagor's right, title and interest in and to that certain leasehold
estate under a lease agreement (as amended or supplemented, the
"Lease"), dated July 1, 1994, between the Mortgagor as successor to
ACC Albany Telecom Corp. and Twin Towers Associates Limited
Partnership of Albany of the Premises commonly known as One Commerce
Plaza, Albany, New York (the "Leasehold Estate"), which is more
particularly described on Exhibit A attached hereto and incorporated
herein by reference.
TO HAVE AND TO HOLD the Leasehold Estate described herein unto
the Mortgagee, its heirs and successors in interest forever.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if the
Mortgagor shall satisfy all Obligations secured hereby, and shall
comply with all of the covenants, terms and conditions of this
Leasehold Mortgage and the Loan Documents, then this conveyance shall
be null and void and shall be canceled of record at the request and
cost of Mortgagor. But if at any time there shall be any default in
satisfaction of any Obligations or under this instrument or under the
terms and conditions of any instrument secured hereby, which default
shall not have been cured within any applicable grace period (if any)
provided therefor, then, at the option of Mortgagee, with the consent
of the Required Lenders, the entire indebtedness hereby secured shall
immediately become due, payable and collectible without further
notice, regardless of maturity, and this Mortgage may be foreclosed by
judicial proceedings, or the Mortgagee is hereby authorized and
empowered to expose to sale and to sell the Leasehold Estate described
herein at public sale for cash, in compliance with the requirements of
Article 14 of the New York Real Property Actions and Proceedings Laws,
or any subsequently enacted statute relating to nonjudicial
foreclosure sales in effect on the date foreclosure is commenced, and
at the time and place fixed for the sale to sell the Leasehold Estate
described herein to the highest bidder for cash, and Mortgagee shall
execute a conveyance of said Leasehold Estate to and deliver
possession of same to the purchaser. Mortgagee may bid and become the
purchaser at any under this Leasehold Mortgage. The proceeds of the
sale shall, after the Mortgagee retains a reasonable compensation,
together with reasonable attorneys, fees incurred by Mortgagee in such
proceeding, be applied first to the payment of the costs and expenses
of such sale; second, to the payment to the whole amount of
Obligations then owing by the Mortgagor to the Lenders and secured
hereby; and third to the payment of the surplus, if any, to the
Mortgagor or to whomever else may be lawfully entitled thereto.
This Leasehold Mortgage is made as additional collateral to
secure the payment and performance of the Obligations. Other terms
capitalized but not otherwise defined herein shall have the meanings
ascribed thereto in the Credit Agreement.
MORTGAGOR ACKNOWLEDGES, COVENANTS AND AGREES WITH MORTGAGEE AS
FOLLOWS:
1. Mortgagor represents and warrants that there have been no
prior encumbrances, conveyances or assignments of its interest in the
Lease which are still in effect, and that the Lease is a valid and
enforceable agreement, that neither Mortgagor nor, to its knowledge,
any other party, is in material default thereunder and that all
covenants, conditions and agreements have been performed as required
therein, except those not due to be performed until after the date
hereof.
2. No change in the terms of the Lease shall be valid without
the written approval of Mortgagee, with the consent of the Required
Lenders, and Mortgagor shall not assign, sell, pledge, mortgage or
otherwise transfer or encumber its interest in the Lease so long as
this Leasehold Mortgage is in effect except as permitted by the Credit
Agreement.
3. Mortgagor shall give prompt notice to Mortgagee of any
notice of default received by it under the Lease, together with a
complete copy of any such notice of default.
4. Mortgagor shall perform each and all of the covenants and
obligations of the tenant under the Lease for so long as this
Leasehold Mortgage is in effect, including, without limitation, the
obligations to maintain, rebuild and insure the improvements which
constitute a portion of the premises thereunder.
5. Should Mortgagor fail to make any payment or to do act as
herein provided, then Mortgagee may, but without obligation to do so
and without notice to or demand on Mortgagor and without releasing
Mortgagor from any Obligation, make or do the same, including, without
limitation, appearing in and defending any action purporting to affect
the security hereof or the rights or powers of Mortgagee hereunder and
performing any obligation of Mortgagor under the Lease, and in
exercising any such powers, paying all necessary costs and expenses,
including, without limitation, attorneys' fees. Mortgagor will pay
immediately upon demand all sums expended by Mortgagee under the
authority hereof, and the same shall be added to the Obligations and
shall be secured hereby and by the Loan Documents.
6. Upon the occurrence and continuation of an Event of Default,
Mortgagee may, with the consent of the Required Lenders, at its
option, without notice and without regard to the adequacy of security
for the Obligations, either in person or by agent and with or without
bringing any action or proceeding, or by a receiver to be appointed by
a court, enter upon, take possession of, and operate the premises
which are the subject of the Lease, make, enforce, modify and accept
any provision of, or surrender, the Lease, and do any other act or
acts which Mortgagee deems proper to protect the security hereof until
all Obligations have been paid or performed in full. The entering
upon and taking possession of such premises shall not cure or waive
any default or waive, modify or affect any notice of default under the
Credit Agreement or any other security instrument, nor invalidate any
act done pursuant to any such notice.
7. Mortgagor hereby irrevocably constitutes and appoints
Mortgagee as its attorney-in-fact to demand, receive, and enforce
Mortgagor's rights with respect to the Lease for and on behalf of and
in the name of Mortgagor or, with the same force and effect as
Mortgagor could do if this Leasehold Mortgage had not been made.
Mortgagee may, without affecting any of its rights or remedies against
Mortgagor under any other instrument, document or agreement, exercise
its rights under this Leasehold Mortgage as Mortgagor's attorney-in-
fact in any other manner permitted by law, and in addition Mortgagee
shall have and possess, without limitation, any and all rights and
remedies of a secured party under the Uniform Commercial Code or
otherwise as provided by
law.
8. At Mortgagor's sole cost and expense, Mortgagor will appear
in and defend any action growing out of or in any manner connected
with the Lease or the obligations or liabilities of Mortgagor
thereunder. In addition, Mortgagor shall indemnify and hold Mortgagee
harmless from and against any and all claims, demands, liabilities,
losses, lawsuits, judgments, and costs and expenses, including,
without limitation, reasonable attorneys' fees to which Mortgagee may
become exposed or which Mortgagee may incur in exercising any of its
rights under this Leasehold Mortgage.
9. This Leasehold Mortgage is for security purposes only.
Accordingly, Mortgagee shall not have the right under this Leasehold
Mortgage to enforce the provisions of said Lease or exercise rights
hereunder unless and until there shall have occurred an Event of
Default.
10. Subject to the limitation on further assignment by Mortgagor
set forth above, this Leasehold Mortgage shall be binding upon and
inure to the benefit of the legal representatives, assigns and
successors in interest of Mortgagor and Mortgagee, including any
subsequent holders of Notes.
11. All notices hereunder shall be sent to the addresses and
pursuant to the procedures set forth in Section 13.1 of the Credit
Agreement.
12. Mortgagor warrants and represents that it is the Lessee of
the Leasehold Estate under the Lease; such Leasehold Estate is free
and clear of all liens, charges and encumbrances whatsoever, except
those which have been approved by Mortgagee; and Mortgagor has full
right and power to make this conveyance.
13. In addition to the rights and remedies set forth herein,
Mortgagee shall have all rights and remedies set forth in the Loan
Documents.
IN WITNESS WHEREOF, Mortgagor has executed and sealed this
Leasehold Mortgage this 14th day of January, 1997.
ACC NATIONAL TELECOM CORP.
[CORPORATE SEAL] By: /s/ John J. Zimmer
Name: John J. Zimmer
ATTEST:/s/ Daniel J. Venuti Title: Vice President
Name: Daniel J. Venuti
Title:Assistant Secretary
<PAGE>
STATE OF NORTH CAROLINA)
)
COUNTY OF MECKLENBURG )
I, Betty G. Smith, a Notary Public of the county and state
aforesaid, certify that Daniel J. Venuti personally came before me
this day and acknowledged that he is Assistant Secretary of ACC
NATIONAL TELECOM CORP., a Delaware corporation, and that by authority
duly given and as the act of the corporation, the foregoing instrument
was signed in its name by its Vice President, sealed with its
corporate seal and attested by himself as its Assistant Secretary.
WITNESS my hand and official stamp, this 14th day of January,
1997.
/s/ Betty G. Smith
Notary Public
My commission expires:
August 5, 1997
<PAGE>
Exhibit A
to
Leasehold Mortgage
between
ACC National Telecom Corp.
and
First Union National Bank of North Carolina,
as Administrative Agent
Description of Leased Premises
One Commerce Plaza
Albany, New York
Exhibit 10-41
SATISFACTION: The indebtedness
secured by this Leasehold Mortgage
has been satisfied in full.
By:
Name:
Title:
Date:
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
LEASEHOLD MORTGAGE
[NEW YORK]
This Leasehold Mortgage is made and entered into as of this 14th
day of January, 1997, by and among ACC LONG DISTANCE CORP., Delaware
corporation ("Mortgagor"), and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA ("Mortgagee"), as Administrative Agent for the financial
institutions (the "Lenders") as are, or may from time to time become,
parties to the Credit Agreement (as defined below).
WHEREAS, Mortgagor and certain Affiliates thereof are indebted to
the Lenders in the principal sum of up to One Hundred Million Dollars
($100,000,000), as evidenced by the Notes of even date executed by the
Mortgagor and such Affiliates in favor of the Lenders, and such other
documents as may have been executed or given by Mortgagor in
connection with the transactions contemplated by the Credit Agreement
of even date between the Mortgagor and such Affiliates as Borrowers
thereunder (collectively, the "Borrowers"), the Lenders and the
Mortgagee, as Administrative Agent for the Lenders (as amended or
supplemented, the "Credit Agreement", and collectively with the Notes
and such other documents, the "Loan Documents"), the terms and
conditions of which are incorporated herein by reference;
NOW, THEREFORE, as security for the payment and performance of up
to $500,000 of the Obligations (as defined in the Credit Agreement),
the Mortgagor has created a security interest in, bargained, sold,
given, granted, assigned and conveyed and does by these presents
create a security interest in, bargain, sell, give, grant, assign and
convey unto the Mortgagee, its or his successors and assigns, all of
Mortgagor's right, title and interest in and to that certain leasehold
estate under a lease agreement (as amended or supplemented, the
"Lease"), dated April 12, 1988 and as amended on December 21, 1994,
between the Mortgagor and 69 Delaware Associates of the Premises
commonly known as 69 Delaware Avenue, Buffalo, New York (the
"Leasehold Estate"), which is more particularly described on Exhibit A
attached hereto and incorporated herein by reference.
TO HAVE AND TO HOLD the Leasehold Estate described herein unto
the Mortgagee, its heirs and successors in interest forever.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if the
Mortgagor shall satisfy all Obligations secured hereby, and shall
comply with all of the covenants, terms and conditions of this
Leasehold Mortgage and the Loan Documents, then this conveyance shall
be null and void and shall be canceled of record at the request and
cost of Mortgagor. But if at any time there shall be any default in
satisfaction of any Obligations or under this instrument or under the
terms and conditions of any instrument secured hereby, which default
shall not have been cured within any applicable grace period (if any)
provided therefor, then, at the option of Mortgagee, with the consent
of the Required Lenders, the entire indebtedness hereby secured shall
immediately become due, payable and collectible without further
notice, regardless of maturity, and this Mortgage may be foreclosed by
judicial proceedings, or the Mortgagee is hereby authorized and
empowered to expose to sale and to sell the Leasehold Estate described
herein at public sale for cash, in compliance with the requirements of
Article 14 of the New York Real Property Actions and Proceedings Laws,
or any subsequently enacted statute relating to nonjudicial
foreclosure sales in effect on the date foreclosure is commenced, and
at the time and place fixed for the sale to sell the Leasehold Estate
described herein to the highest bidder for cash, and Mortgagee shall
execute a conveyance of said Leasehold Estate to and deliver
possession of same to the purchaser. Mortgagee may bid and become the
purchaser at any under this Leasehold Mortgage. The proceeds of the
sale shall, after the Mortgagee retains a reasonable compensation,
together with reasonable attorneys, fees incurred by Mortgagee in such
proceeding, be applied first to the payment of the costs and expenses
of such sale; second, to the payment to the whole amount of
Obligations then owing by the Mortgagor to the Lenders and secured
hereby; and third to the payment of the surplus, if any, to the
Mortgagor or to whomever else may be lawfully entitled thereto.
This Leasehold Mortgage is made as additional collateral to
secure the payment and performance of the Obligations. Other terms
capitalized but not otherwise defined herein shall have the meanings
ascribed thereto in the Credit Agreement.
MORTGAGOR ACKNOWLEDGES, COVENANTS AND AGREES WITH MORTGAGEE AS
FOLLOWS:
1. Mortgagor represents and warrants that there have been no
prior encumbrances, conveyances or assignments of its interest in the
Lease which are still in effect, and that the Lease is a valid and
enforceable agreement, that neither Mortgagor nor, to its knowledge,
any other party, is in material default thereunder and that all
covenants, conditions and agreements have been performed as required
therein, except those not due to be performed until after the date
hereof.
2. No change in the terms of the Lease shall be valid without
the written approval of Mortgagee, with the consent of the Required
Lenders, and Mortgagor shall not assign, sell, pledge, mortgage or
otherwise transfer or encumber its interest in the Lease so long as
this Leasehold Mortgage is in effect except as permitted by the Credit
Agreement.
3. Mortgagor shall give prompt notice to Mortgagee of any
notice of default received by it under the Lease, together with a
complete copy of any such notice of default.
4. Mortgagor shall perform each and all of the covenants and
obligations of the tenant under the Lease for so long as this
Leasehold Mortgage is in effect, including, without limitation, the
obligations to maintain, rebuild and insure the improvements which
constitute a portion of the premises thereunder.
5. Should Mortgagor fail to make any payment or to do act as
herein provided, then Mortgagee may, but without obligation to do so
and without notice to or demand on Mortgagor and without releasing
Mortgagor from any Obligation, make or do the same, including, without
limitation, appearing in and defending any action purporting to affect
the security hereof or the rights or powers of Mortgagee hereunder and
performing any obligation of Mortgagor under the Lease, and in
exercising any such powers, paying all necessary costs and expenses,
including, without limitation, attorneys' fees. Mortgagor will pay
immediately upon demand all sums expended by Mortgagee under the
authority hereof, and the same shall be added to the Obligations and
shall be secured hereby and by the Loan Documents.
6. Upon the occurrence and continuation of an Event of Default,
Mortgagee may, with the consent of the Required Lenders, at its
option, without notice and without regard to the adequacy of security
for the Obligations, either in person or by agent and with or without
bringing any action or proceeding, or by a receiver to be appointed by
a court, enter upon, take possession of, and operate the premises
which are the subject of the Lease, make, enforce, modify and accept
any provision of, or surrender, the Lease, and do any other act or
acts which Mortgagee deems proper to protect the security hereof until
all Obligations have been paid or performed in full. The entering
upon and taking possession of such premises shall not cure or waive
any default or waive, modify or affect any notice of default under the
Credit Agreement or any other security instrument, nor invalidate any
act done pursuant to any such notice.
7. Mortgagor hereby irrevocably constitutes and appoints
Mortgagee as its attorney-in-fact to demand, receive, and enforce
Mortgagor's rights with respect to the Lease for and on behalf of and
in the name of Mortgagor or, with the same force and effect as
Mortgagor could do if this Leasehold Mortgage had not been made.
Mortgagee may, without affecting any of its rights or remedies against
Mortgagor under any other instrument, document or agreement, exercise
its rights under this Leasehold Mortgage as Mortgagor's attorney-in-
fact in any other manner permitted by law, and in addition Mortgagee
shall have and possess, without limitation, any and all rights and
remedies of a secured party under the Uniform Commercial Code or
otherwise as provided by
law.
8. At Mortgagor's sole cost and expense, Mortgagor will appear
in and defend any action growing out of or in any manner connected
with the Lease or the obligations or liabilities of Mortgagor
thereunder. In addition, Mortgagor shall indemnify and hold Mortgagee
harmless from and against any and all claims, demands, liabilities,
losses, lawsuits, judgments, and costs and expenses, including,
without limitation, reasonable attorneys' fees to which Mortgagee may
become exposed or which Mortgagee may incur in exercising any of its
rights under this Leasehold Mortgage.
9. This Leasehold Mortgage is for security purposes only.
Accordingly, Mortgagee shall not have the right under this Leasehold
Mortgage to enforce the provisions of said Lease or exercise rights
hereunder unless and until there shall have occurred an Event of
Default.
10. Subject to the limitation on further assignment by Mortgagor
set forth above, this Leasehold Mortgage shall be binding upon and
inure to the benefit of the legal representatives, assigns and
successors in interest of Mortgagor and Mortgagee, including any
subsequent holders of Notes.
11. All notices hereunder shall be sent to the addresses and
pursuant to the procedures set forth in Section 13.1 of the Credit
Agreement.
12. Mortgagor warrants and represents that it is the Lessee of
the Leasehold Estate under the Lease; such Leasehold Estate is free
and clear of all liens, charges and encumbrances whatsoever, except
those which have been approved by Mortgagee; and Mortgagor has full
right and power to make this conveyance.
13. In addition to the rights and remedies set forth herein,
Mortgagee shall have all rights and remedies set forth in the Loan
Documents.
IN WITNESS WHEREOF, Mortgagor has executed and sealed this
Leasehold Mortgage this 14th day of January, 1997.
ACC LONG DISTANCE CORP.
[CORPORATE SEAL] By: /s/ John J. Zimmer
Name: John J. Zimmer
ATTEST:/s/ Daniel J. Venuti Title: Controller
Name: Daniel J. Venuti
Title:Assistant Secretary
<PAGE>
STATE OF NORTH CAROLINA)
)
COUNTY OF MECKLENBURG )
I, Betty G. Smith, a Notary Public of the county and state
aforesaid, certify that Daniel J. Venuti personally came before me
this day and acknowledged that he is Assistant Secretary of ACC LONG
DISTANCE CORP., a Delaware corporation, and that by authority duly
given and as the act of the corporation, the foregoing instrument was
signed in its name by its Controller, sealed with its corporate seal
and attested by himself as its Assistant Secretary.
WITNESS my hand and official stamp, this 14th day of January,
1997.
/s/ Betty G. Smith
Notary Public
My commission expires:
August 5, 1997
<PAGE>
Exhibit A
to
Leasehold Mortgage
between
ACC Long Distance Corp.
and
First Union National Bank of North Carolina,
as Administrative Agent
Description of Leased Premises
69 Delaware Avenue
Buffalo, New York
Exhibit 10-42
SATISFACTION: The indebtedness
secured by this Leasehold Mortgage
has been satisfied in full.
By:
Name:
Title:
Date:
This instrument was prepared
by and when recorded please
return to:
Michael L. Flynn, Esq.
Kennedy Covington Lobdell & Hickman, L.L.P.
Suite 4200
100 North Tryon Street
Charlotte, NC 28202-4006
LEASEHOLD MORTGAGE
[NEW YORK]
This Leasehold Mortgage is made and entered into as of this 14th
day of January, 1997, by and among ACC NATIONAL TELECOM CORP.,
Delaware corporation ("Mortgagor"), and FIRST UNION NATIONAL BANK OF
NORTH CAROLINA ("Mortgagee"), as Administrative Agent for the
financial institutions (the "Lenders") as are, or may from time to
time become, parties to the Credit Agreement (as defined below).
WHEREAS, Mortgagor and certain Affiliates thereof are indebted to
the Lenders in the principal sum of up to One Hundred Million Dollars
($100,000,000), as evidenced by the Notes of even date executed by the
Mortgagor and such Affiliates in favor of the Lenders, and such other
documents as may have been executed or given by Mortgagor in
connection with the transactions contemplated by the Credit Agreement
of even date between the Mortgagor and such Affiliates as Borrowers
thereunder (collectively, the "Borrowers"), the Lenders and the
Mortgagee, as Administrative Agent for the Lenders (as amended or
supplemented, the "Credit Agreement", and collectively with the Notes
and such other documents, the "Loan Documents"), the terms and
conditions of which are incorporated herein by reference;
NOW, THEREFORE, as security for the payment and performance of up
to $500,000 of the Obligations (as defined in the Credit Agreement),
the Mortgagor has created a security interest in, bargained, sold,
given, granted, assigned and conveyed and does by these presents
create a security interest in, bargain, sell, give, grant, assign and
convey unto the Mortgagee, its or his successors and assigns, all of
Mortgagor's right, title and interest in and to that certain leasehold
estate under a lease agreement (as amended or supplemented, the
"Lease"), dated December 20, 1996, between the Mortgagor and Paramount
Group, Inc., as agent for Old Slip Associates, L.P., of the Premises
commonly known as 32 Old Slip, New York, New York (the "Leasehold
Estate"), which is more particularly described on Exhibit A attached
hereto and incorporated herein by reference.
TO HAVE AND TO HOLD the Leasehold Estate described herein unto
the Mortgagee, its heirs and successors in interest forever.
THIS CONVEYANCE IS MADE UPON THIS SPECIAL TRUST, that if the
Mortgagor shall satisfy all Obligations secured hereby, and shall
comply with all of the covenants, terms and conditions of this
Leasehold Mortgage and the Loan Documents, then this conveyance shall
be null and void and shall be canceled of record at the request and
cost of Mortgagor. But if at any time there shall be any default in
satisfaction of any Obligations or under this instrument or under the
terms and conditions of any instrument secured hereby, which default
shall not have been cured within any applicable grace period (if any)
provided therefor, then, at the option of Mortgagee, with the consent
of the Required Lenders, the entire indebtedness hereby secured shall
immediately become due, payable and collectible without further
notice, regardless of maturity, and this Mortgage may be foreclosed by
judicial proceedings, or the Mortgagee is hereby authorized and
empowered to expose to sale and to sell the Leasehold Estate described
herein at public sale for cash, in compliance with the requirements of
Article 14 of the New York Real Property Actions and Proceedings Laws,
or any subsequently enacted statute relating to nonjudicial
foreclosure sales in effect on the date foreclosure is commenced, and
at the time and place fixed for the sale to sell the Leasehold Estate
described herein to the highest bidder for cash, and Mortgagee shall
execute a conveyance of said Leasehold Estate to and deliver
possession of same to the purchaser. Mortgagee may bid and become the
purchaser at any under this Leasehold Mortgage. The proceeds of the
sale shall, after the Mortgagee retains a reasonable compensation,
together with reasonable attorneys, fees incurred by Mortgagee in such
proceeding, be applied first to the payment of the costs and expenses
of such sale; second, to the payment to the whole amount of
Obligations then owing by the Mortgagor to the Lenders and secured
hereby; and third to the payment of the surplus, if any, to the
Mortgagor or to whomever else may be lawfully entitled thereto.
This Leasehold Mortgage is made as additional collateral to
secure the payment and performance of the Obligations. Other terms
capitalized but not otherwise defined herein shall have the meanings
ascribed thereto in the Credit Agreement.
MORTGAGOR ACKNOWLEDGES, COVENANTS AND AGREES WITH MORTGAGEE AS
FOLLOWS:
1. Mortgagor represents and warrants that there have been no
prior encumbrances, conveyances or assignments of its interest in the
Lease which are still in effect, and that the Lease is a valid and
enforceable agreement, that neither Mortgagor nor, to its knowledge,
any other party, is in material default thereunder and that all
covenants, conditions and agreements have been performed as required
therein, except those not due to be performed until after the date
hereof.
2. No change in the terms of the Lease shall be valid without
the written approval of Mortgagee, with the consent of the Required
Lenders, and Mortgagor shall not assign, sell, pledge, mortgage or
otherwise transfer or encumber its interest in the Lease so long as
this Leasehold Mortgage is in effect except as permitted by the Credit
Agreement.
3. Mortgagor shall give prompt notice to Mortgagee of any
notice of default received by it under the Lease, together with a
complete copy of any such notice of default.
4. Mortgagor shall perform each and all of the covenants and
obligations of the tenant under the Lease for so long as this
Leasehold Mortgage is in effect, including, without limitation, the
obligations to maintain, rebuild and insure the improvements which
constitute a portion of the premises thereunder.
5. Should Mortgagor fail to make any payment or to do act as
herein provided, then Mortgagee may, but without obligation to do so
and without notice to or demand on Mortgagor and without releasing
Mortgagor from any Obligation, make or do the same, including, without
limitation, appearing in and defending any action purporting to affect
the security hereof or the rights or powers of Mortgagee hereunder and
performing any obligation of Mortgagor under the Lease, and in
exercising any such powers, paying all necessary costs and expenses,
including, without limitation, attorneys' fees. Mortgagor will pay
immediately upon demand all sums expended by Mortgagee under the
authority hereof, and the same shall be added to the Obligations and
shall be secured hereby and by the Loan Documents.
6. Upon the occurrence and continuation of an Event of Default,
Mortgagee may, with the consent of the Required Lenders, at its
option, without notice and without regard to the adequacy of security
for the Obligations, either in person or by agent and with or without
bringing any action or proceeding, or by a receiver to be appointed by
a court, enter upon, take possession of, and operate the premises
which are the subject of the Lease, make, enforce, modify and accept
any provision of, or surrender, the Lease, and do any other act or
acts which Mortgagee deems proper to protect the security hereof until
all Obligations have been paid or performed in full. The entering
upon and taking possession of such premises shall not cure or waive
any default or waive, modify or affect any notice of default under the
Credit Agreement or any other security instrument, nor invalidate any
act done pursuant to any such notice.
7. Mortgagor hereby irrevocably constitutes and appoints
Mortgagee as its attorney-in-fact to demand, receive, and enforce
Mortgagor's rights with respect to the Lease for and on behalf of and
in the name of Mortgagor or, with the same force and effect as
Mortgagor could do if this Leasehold Mortgage had not been made.
Mortgagee may, without affecting any of its rights or remedies against
Mortgagor under any other instrument, document or agreement, exercise
its rights under this Leasehold Mortgage as Mortgagor's attorney-in-
fact in any other manner permitted by law, and in addition Mortgagee
shall have and possess, without limitation, any and all rights and
remedies of a secured party under the Uniform Commercial Code or
otherwise as provided by
law.
8. At Mortgagor's sole cost and expense, Mortgagor will appear
in and defend any action growing out of or in any manner connected
with the Lease or the obligations or liabilities of Mortgagor
thereunder. In addition, Mortgagor shall indemnify and hold Mortgagee
harmless from and against any and all claims, demands, liabilities,
losses, lawsuits, judgments, and costs and expenses, including,
without limitation, reasonable attorneys' fees to which Mortgagee may
become exposed or which Mortgagee may incur in exercising any of its
rights under this Leasehold Mortgage.
9. This Leasehold Mortgage is for security purposes only.
Accordingly, Mortgagee shall not have the right under this Leasehold
Mortgage to enforce the provisions of said Lease or exercise rights
hereunder unless and until there shall have occurred an Event of
Default.
10. Subject to the limitation on further assignment by Mortgagor
set forth above, this Leasehold Mortgage shall be binding upon and
inure to the benefit of the legal representatives, assigns and
successors in interest of Mortgagor and Mortgagee, including any
subsequent holders of Notes.
11. All notices hereunder shall be sent to the addresses and
pursuant to the procedures set forth in Section 13.1 of the Credit
Agreement.
12. Mortgagor warrants and represents that it is the Lessee of
the Leasehold Estate under the Lease; such Leasehold Estate is free
and clear of all liens, charges and encumbrances whatsoever, except
those which have been approved by Mortgagee; and Mortgagor has full
right and power to make this conveyance.
13. In addition to the rights and remedies set forth herein,
Mortgagee shall have all rights and remedies set forth in the Loan
Documents.
IN WITNESS WHEREOF, Mortgagor has executed and sealed this
Leasehold Mortgage this 14th day of January, 1997.
ACC NATIONAL TELECOM CORP.
[CORPORATE SEAL] By: /s/ John J. Zimmer
Name: John J. Zimmer
ATTEST:/s/ Daniel J. Venuti Title: Vice President
Name: Daniel J. Venuti
Title:Assistant Secretary
<PAGE>
STATE OF NORTH CAROLINA)
)
COUNTY OF MECKLENBURG )
I, Betty G. Smith, a Notary Public of the county and state
aforesaid, certify that Daniel J. Venuti personally came before me
this day and acknowledged that he is Assistant Secretary of ACC
NATIONAL TELECOM CORP., a Delaware corporation, and that by authority
duly given and as the act of the corporation, the foregoing instrument
was signed in its name by its Vice President, sealed with its
corporate seal and attested by himself as its Assistant Secretary.
WITNESS my hand and official stamp, this 14th day of January,
1997.
/s/ Betty G. Smith
Notary Public
My commission expires:
August 5, 1997
<PAGE>
Exhibit A
to
Leasehold Mortgage
between
ACC National Telecom Corp.
and
First Union National Bank of North Carolina,
as Administrative Agent
Description of Leased Premises
32 Old Slip
New York, New York
LAND TITLE ACT Exhibit 10-43
FORM B
[Section 219.1]
Province of
British Columbia
MORTGAGE - PART 1 (THIS AREA FOR LAND TITLE OFFICE USE) PAGE 1 OF 30 pages
- --------------------------------------------------------------------------
1. APPLICATION: (Name, address, phone number and signature of applicant,
applicant's solicitor or agent)
FRASER & BEATTY
Barristers and Solicitors
1500 - 1040 West Georgia Street
Vancouver, British Columbia V6E 4H8
__________________________________
Telephone (604) 687-4460 signature of applicant, applicant's
solicitor or agent
2. (a) PARCEL IDENTIFIER(S) AND LEGAL DESCRIPTION(S) OF THE MORTGAGED LAND:*
(PID) (LEGAL DESCRIPTION)
017-759-374 Lot 1, Except Portion in Air Space Plan LMP3376 and
Plan LMP9029 and LMP10273, DL 541 and of the Public
Harbour of Burrard Inlet, Plan LMP3374
017-759-552 Air Space Parcel 1, DL 541 and of the Public Harbour of
Burrard Inlet Air Space Plan LMP3377
____________________________________________________________________________
3. BORROWER(S) [MORTGAGOR(S)]: (including postal address(es) and postal
code(s))*
ACC TELENTERPRISES LTD./TELENTREPRISES ACC LTEE. (Reg. No. )
5343 Dundas Street West, Suite 600, Etobicoke, Ontario, M9B 6K5
____________________________________________________________________________
4. LENDER(S) [MORTGAGEE(S)]: (including occupation(s), postal address(es) and
postal code(s))*
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association organized under the laws of the United States, One First Union
Center, 301 S. College Street, Charlotte, North Carolina, U.S.A. 28288
<TABLE>
<CAPTION>
5. Payment Provisions:**
<S> <C> <C> <C> <C> <C>
(a)Principal Amount: (b)Interest Rate: (c)Interest Y M D
Adjustment
$30,000,000 U.S. 25% per annum Date:
N/A
(d)Interest Calculation (e)Payment Dates: (f)First Payment Date:
Period:
Monthly See Schedule See Schedule
(g)Amount of each period (h)INTEREST ACT (Canada) (i)Last Payment Date: 2001 9 30
payment: Statement: The equivalent
rate of interest calculated
See Schedule half yearly not in advance is
n/a% per premium.
(j)Assignment of Rents which (k)Place of payment: (l)Balance Due Date: 2001 9 30
the applicant wants
registered? Postal Address in Item 4
YES NO X
If yes, page & paragraph
no.:
</TABLE>
* If space insufficient, enter "SEE SCHEDULE" and attach schedule in Form E.
** If space insufficient, continue executions on additional page(s) in Form D.
- 1 -
<PAGE>
MORTGAGE - PART 1 PAGE 2
6. MORTGAGE contains 7. MORTGAGE secures a current
floating charge on land? YES NO X or running account? YES X NO___
-- --
- -----------------------------------------------------------------------------
8. INTEREST MORTGAGED:
Freehold
Other (specify) X* Lease No.
-- ----------------
- ----------------------------------------------------------------------------
9. MORTGAGE TERMS:
Part 2 of this mortgage consists of (select one only):
(a) Prescribed Standard Mortgage Terms ___
(b) Filed Standard Mortgage Terms ___ D.F. Number:
(c) Express Mortgage Terms X (annexed to this mortgage as Part 2)
A selection of (a) or (b) includes any additional or modified terms referred
to in Item 10 or in a schedule annexed to this mortgage.
- -------------------------------------------------------------------------------
10. ADDITIONAL OR MODIFIED TERMS:*
N/A
- -----------------------------------------------------------------------------
11. PRIOR ENCUMBRANCES PERMITTED BY LENDER:*
NONE
- -----------------------------------------------------------------------------
12. EXECUTION(S):**This mortgage charges the Borrower's interest in the land
mortgaged as security for payment of all money due and performance of all
obligations in accordance with the mortgage terms referred to in Item 9 and the
Borrower(s) and every other signatory agree(s) to be bound by, and
acknowledge(s) receipt of a true copy of, those terms.
<TABLE>
<CAPTION>
Officer Signature(s) Execution Date Borrower(s) Signature(s)
<S> <C> <C>
Y M D ACC TELENTERPRISES LTD./
/S/ BETTY G. SMITH TELENTREPRISES ACC LTEE.
Print Name/Address: 97 1 8 by its authorized signatory(ies):
Betty G. Smith
Charlotte, NC /S/ JOHN J. ZIMMER
Print Name: John J. Zimmer
Notary Seal Assistant Controller
97 1 8 /S/ DANIEL J. VENUTI
Print Name: Daniel J. Venuti
Authorized Signatory
</TABLE>
OFFICER CERTIFICATION:
Your signature constitutes a representation that you are solicitor, notary
public or other person authorized by the EVIDENCE ACT, R.S.B.C. 1979, c. 116,
to take affidavits for use in British Columbia and certifies the matters set
out in Part 5 of the LAND TITLE ACT as they pertain to the execution of this
instrument.
* If space insufficient, enter "SEE SCHEDULE" and attach schedule in Form E.
** If space insufficient, continue executions on additional page(s) in Form D.
<PAGE>
LAND TITLE ACT
FORM E
SCHEDULE Page 3
- -------------------------------------------------------------------------------
Enter the Required Information the Same Order as the Information Must Appear on
the Freehold Transfer Form, Mortgage Form or General Document Form.
Unless otherwise indicated, all terms on this Form E Schedule shall have the
same meanings as contained in the Prescribed Mortgage Terms.
5. PAYMENT PROVISIONS:
(e) Payment Dates
INTEREST
Interest on each "Base Rate Loan" (as that term is defined in the
credit agreement) shall be payable in U.S. Dollars in arrears on the
last business day of each calendar quarter commencing March 31, 1997
and interest on each "LIBOR Rate Loan" (as that term is defined in the
credit agreement) shall be payable on the last day of each "Interest
Period" (as that term is defined in the credit agreement) applicable
thereto, and if such "Interest Period" extends over three (3) months,
at the end of each three month interval during such "Interest Period".
All interest rates, fees and commissions provided hereunder shall be
computed on the basis of a 365/366 day year, except that (i) interest
with respect to each "LIBOR Rate Loan" denominated in U.S. Dollars or
Canadian Dollars shall be computed on the basis of a 360 day year and
assessed for the actual number of days elapsed, and (ii) interest with
respect to each "LIBOR Rate Loan" denominated in Sterling shall be
computed on the basis of a 365 day year and assessed for the actual
number of days elapsed.
PRINCIPAL PAYMENTS
The principal payments under this mortgage shall be due and payable by
quarterly instalments on each of the following dates equal to the
amount required to reduce the "Sublimit" (as that term is defined in
the credit agreement) of the borrower to the following "Reduced
Sublimit Amounts":
DATE REDUCED SUBLIMIT AMOUNTS
(U.S. Dollars)
December 31, 1998 $27,600,000
March 31, 1999 25,200,000
June 30, 1999 22,800,000
September 30, 1999 20,400,000
December 31, 1999 18,000,000
March 31, 2000 15,600,000
June 30, 2000 13,200,000
September 30, 2000 10,800,000
December 31, 2000 8,100,000
March 31, 2001 5,400,000
June 30, 2001 2,700,000
September 30, 2001 0
<PAGE>
LAND TITLE ACT
FORM E
SCHEDULE Page 4
- ----------------------------------------------------------------------------
Enter the Required Information the Same Order as the Information Must Appear on
the Freehold Transfer Form, Mortgage Form or General Document Form.
The foregoing "Reduced Sublimit Amounts" may be revised in accordance
with the terms of the credit agreement and, in such a case, the
quarterly instalments shall be equal to the amount required to reduce
the "Sublimit" (as that term is defined in the credit agreement) of the
borrower to such revised "Reduced Sublimit Amounts."
(f) First Payment Date
INTEREST
The first payment date for interest shall be March 31, 1997.
PRINCIPAL PAYMENTS
The first payment date for the principal payments under this mortgage shall
be December 31, 1998.
(g) Amount of Each Periodic Payment
INTEREST
Interest on each "Base Rate Loan" (as that term is defined in the credit
agreement) calculated as provided in the credit agreement shall be payable
in U.S. Dollars in arrears on the last business day of each calendar
quarter commencing March 31, 1997 and interest on each "LIBOR Rate Loan"
(as that term is defined in the credit agreement) calculated as provided in
the credit agreement shall be payable on the last day of each "Interest
Period" (as that term is defined in the credit agreement) applicable
thereto, and if such "Interest Period" extends over three (3) months, at
the end of each three month interval during such "Interest Period". All
interest rates, fees and commissions provided hereunder shall be computed
on the basis of a 365/366 day year, except that (i) interest with respect
to each "LIBOR Rate Loan" denominated in U.S. Dollars or Canadian Dollars
shall be computed on the basis of a 360 day year and assessed for the
actual number of days elapsed, and (ii) interest with respect to each
"LIBOR Rate Loan" denominated in Sterling shall be computed on the basis of
a 365 day year and assessed for the actual number of days elapsed.
PRINCIPAL PAYMENTS
The principal payments under this mortgage shall be due and payable by
quarterly instalments on each of the following dates equal to the amount
required to reduce the "Sublimit" (as that term is defined in the credit
agreement) of the borrower to the following "Reduced Sublimit Amounts":
DATE REDUCED SUBLIMIT AMOUNTS
(U.S. Dollars)
December 31, 1998 $27,600,000
March 31, 1999 25,200,000
June 30, 1999 22,800,000
September 30, 1999 20,400,000
December 31, 1999 18,000,000
March 31, 2000 15,600,000
<PAGE>
LAND TITLE ACT
FORM E
SCHEDULE Page 5
- -----------------------------------------------------------------------------
Enter the Required Information the Same Order as the Information Must Appear on
the Freehold Transfer Form, Mortgage Form or General Document Form.
June 30, 2000 13,200,000
September 30, 2000 10,800,000
December 31, 2000 8,100,000
March 31, 2001 5,400,000
June 30, 2001 2,700,000
September 30, 2001 0
The foregoing "Reduced Sublimit Amounts" may be revised in accordance with
the terms of the credit agreement and, in such a case, the quarterly
instalments shall be equal to the amount required to reduce the "Sublimit"
(as that term is defined in the credit agreement) of the borrower to such
"Reduced Sublimit Amounts".
<PAGE>
Page 6
MORTGAGE TERMS - PART 2
EXPRESS MORTGAGE TERMS
THIS MORTGAGE made as of January 14, 1997
IN PURSUANCE OF THE "LAND TRANSFER FORM ACT"
BETWEEN:
ACC TELENTERPRISES LTD./TELENTREPRISES ACC LTEE, having an
address at 5343 Dundas Street West, Suite 600, Etobicoke,
Ontario, M9B 6K5
(Reg. No. )
(the "borrower")
AND:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association organized under the laws of the United
States, One First Union Center, 301 S. College Street,
Charlotte, North Carolina, U.S.A. 28288, as Administrative
Agent for the benefit of itself and the financial institutions
as are, or may from time to time become, lenders under the
"credit agreement" (as that term is hereinafter defined)
(the "lender")
NOW THEREFORE THIS MORTGAGE WITNESSES that in consideration of
the lender advancing to the borrower any portion of the principal amount
(the receipt and sufficiency of which is hereby acknowledged) and other
good and valuable consideration:
INTERPRETATION
In this mortgage:
"borrower mailing address" means the postal address of the
borrower set out above or the most recent postal address
provided in a written notice given by the borrower to the
lender under this mortgage;
"borrower's promises and agreements"means any one or more of
the borrower's obligations, promises and agreements contained
in this mortgage;
"court" means a court or judge having jurisdiction in any
matter arising out of this mortgage;
<PAGE>
Page 7
"credit agreement" means the amended and restated credit
agreement as defined in Section 2.1;
"default" includes each of the events of default listed in
Section 7.1;
"interest" means interest at the interest rate set out in
Section 2.1;
"interest adjustment date" means the interest adjustment date
set out in Section 2.1, if applicable;
"interest calculation period" means the period or periods for
the calculation of interest set out in Section 2.1;
"interest rate" means the interest rate set out in
Section 2.1;
"land" means all the borrower's present and future interest in
the land described in Section 1.1 including every incidental
right, benefit or privilege attaching to that land or running
with it and all buildings and improvements that are now or
later constructed on or made to that land;
"lease" means the leasehold interest of the borrower referred
to in Section 1.1;
"lender mailing address" means the postal address shown on
page 1 of this mortgage or the most recent postal address
provided in a written notice given by the lender to the
borrower under this mortgage;
"loan payment" means the amount of each periodic payment shown
in Section 2.2;
"maturity date" means the balance due date shown in
Section 2.2 and is the date on which all unpaid mortgage money
becomes due and payable, or such earlier date on which the
lender can lawfully require payment of the mortgage money;
"mortgage money" means the principal amount, interest and any
other money owed by the borrower under this mortgage, the
payment of which is secured by this mortgage;
"payment date" means such payment date set out in Section 2.2
of this mortgage;
"place of payment" means the lender's mailing address or any
other place specified in a written notice given by the lender
to the borrower under this mortgage;
"principal amount" means the amount of money shown as the
principal amount in Section 2.1 as reduced by payments made by
the borrower from
<PAGE>
Page 8
time to time as contemplated by Section 2.1, or increased by
the advance or readvance of money to the borrower by the
lender from time to time, and includes all money that is later
added to the principal amount under this mortgage;
"receiver" means a receiver or receiver manager appointed by
the lender under this mortgage;
"taxes" means all taxes, rates and assessments of every kind
which are payable by any person in connection with this
mortgage, the land or its use and occupation, or arising out
of any transaction between the borrower and the lender, but
does not include the income tax of the lender or any lender
party to the credit agreement.
In this mortgage, the singular includes the plural and vice
versa.
1.0 MORTGAGE OF LAND
1.1 The borrower grants, mortgages, demises, subleases and charges unto
the lender as security for the repayment of the mortgage money and for
performance of all the borrower's promises and agreements, all right, title
and interest of the borrower in and to those certain parcels or tracts of
lands and premises situate in the City of Vancouver, British Columbia and
more particularly known and described as:
Parcel Identifier: 017-759-374
Lot 1, Except Portion in Air Space Plan LMP3376 and
Plan LMP9029 and LMP10273, District Lot 541 and of the
Public Harbour of Burrard Inlet, Plan LMP3374
and
Parcel Identifier: 017-759-552
Air Space Parcel 1, District Lot 541 and of the
Public Harbour of Burrard Inlet Air Space Plan LMP3377
(the "land")
pursuant to a sublease dated as of March 1, 1994 between Waterfront Centre
Leaseholds Ltd., as sublandlord, which assigned its interest to Ontrea
Inc., and ACC Long Distance Ltd./Interurbains ACC Ltee., as tenant, which
amalgamated with ACC Long Distance Inc./Interurbains ACC Inc. to form ACC
Long Distance Inc./Interurbains ACC Inc., which is a pre-amalgamating
company of the borrower, as amended by a lease modification agreement dated
May 1, 1994, and as may be amended from time to time (the "lease") with
respect to a portion of the second floor of the building located on the
land.
2.0 PROVISO FOR REDEMPTION
2.1 Provided this mortgage shall be void upon payment as hereinafter
provided of:
<PAGE>
Page 9
(a) the borrower's "Obligations" (as that term is defined in the
"credit agreement" (as that term is hereinafter defined)) under or
pursuant to that certain amended and re-stated credit agreement
dated January 14, 1997 among ACC Corp. and certain subsidiaries
thereof (including, without limitation, the borrower), as
borrowers, ACC Corp. as guarantor, the lenders referred to therein,
First Union National Bank of North Carolina, as managing and
administrative agent, and Fleet National Bank, as managing and
documentation agent (such amended and re-stated credit agreement as
it may be amended, supplemented, replaced or re-stated from time to
time be and herein called the "credit agreement") up to the
principal sum of $30,000,000 U.S., plus interest thereon and other
costs payable under this mortgage; and
(b) interest, both before and after maturity, default and judgment, on
the principal amount outstanding from time to time, at the interest
rate of 25% per annum (the "interest rate"), payable in U.S.
dollars on each "Base Rate Loan" (as that term is defined in the
credit agreement) in arrears on the last day of each calendar
quarter commencing March 31, 1997 and on each "LIBOR Rate Loan" (as
that term is defined in the credit agreement) in arrears on the
last day of each "Interest Period" (as that term is defined in the
credit agreement) applicable thereto, and if such "Interest Period"
extends over three (3) months, at the end of each three (3) month
interval during such "Interest Period". All interest rates, fees
and commissions provided hereunder shall be computed on the basis
of a 365/366 day year, except that (i) interest with respect to
each "LIBOR Rate Loan" denominated in U.S. dollars or Cdn. dollars
shall be computed on the basis of a 360 day year and assessed for
the actual number of days elapsed, and (ii) interest with respect
to each "LIBOR Rate Loan" denominated in Sterling shall be computed
on the basis of a 365 day year and assessed for the actual number
of days elapsed (the "interest calculation period") all of which
shall be payable on the later of the maturity date and the date
that the mortgage money payable hereunder has been paid in full;
(c) payment of the mortgage money as the lender may be entitled to by
virtue of this mortgage, as and when such mortgage money shall
become due and payable; and
(d) payment of taxes; and
(e) observance and performance of all covenants, provisos and
conditions herein contained.
2.2 The principal payments under this mortgage shall be due and payable
by quarterly instalments (the "loan payment") on each of the following
dates equal to the amount required to reduce the "Sublimit" (as that term
is defined in the credit agreement) of the borrower to the following
"Reduced Sublimit Amounts":
DATE REDUCED SUBLIMIT AMOUNTS
(U.S. Dollars)
December 31, 1998 $27,600,000
March 31, 1999 25,200,000
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Page 10
June 30, 1999 22,800,000
September 30, 1999 20,400,000
December 31, 1999 18,000,000
March 31, 2000 15,600,000
June 30, 2000 13,200,000
September 30, 2000 10,800,000
December 31, 2000 8,100,000
March 31, 2001 5,400,000
June 30, 2001 2,700,000
September 30, 2001 0
The foregoing "Reduced Sublimit Amounts" may be revised in
accordance with the terms of the credit agreement and, in such a case, the
quarterly instalments shall be equal to the amount required to reduce the
"Sublimit" (as that term is defined in the credit agreement) of the
borrower to such revised "Reduced Sublimit Amounts."
2.3 If the interest mortgaged is described in Section 1.1 as a
leasehold interest, the grant in Section 1.1 shall be construed as a charge
of the unexpired term of the lease less the last month of that term,
provided that the borrower shall hold the remainder in trust for the lender
and deal with same as directed by the lender. If any of the property
charged under Section 1.1 at any time includes property which cannot be
effectively charged without consent, such a charge shall not become
effective until, but shall become effective immediately when, all consents
necessary for the validity and effectiveness of such charge have been
obtained.
2.4 This means that:
(a) this mortgage shall be a charge on the land; and
(b) the borrower releases to the lender all the borrower's claim to the
land until the borrower has paid the mortgage money to the lender
and each of the lenders party to the credit agreement, in
accordance with these mortgage terms, and has performed all of the
borrower's promises and agreements.
2.5 The borrower may continue to remain in possession of the land as
long as the borrower performs all of the borrower's promises and
agreements.
2.6 When the borrower has paid the mortgage money and performed all the
borrower's promises and agreements under this mortgage and neither the
lender nor any lender party to the credit agreement has any obligation to
make any further advances or readvances, the lender will no longer be
entitled to enforce any rights under this mortgage and the borrower will be
entitled, at the borrower's cost, to receive a discharge of this mortgage.
If this mortgage is registered in the land title office, the discharge must
be signed by the lender and must be registered by the borrower in the land
title office to cancel the registration of this mortgage against the land.
3.0 INTEREST
3.1 Interest is chargeable on the mortgage money and is payable by the
borrower.
<PAGE>
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3.2 Interest is not payable in advance. This means that interest must
be earned before it is payable.
3.3 Interest on advances or readvances of the principal amount starts
on the date and on the amount of each advance or readvance and accrues on
the principal amount until the borrower has paid all the mortgage money.
3.4 Interest payable on any part of the principal amount advanced
before the interest adjustment date is due and payable to the lender on the
interest adjustment date.
3.5 At the end of each interest calculation period, unpaid accrued
interest will be added to the principal amount and bear interest. This is
known as compound interest.
4.0 PAYMENT OF THE MORTGAGE MONEY
4.1 The borrower promises to pay the mortgage money to the lender at
the place of payment in accordance with the payment provisions set out in
Sections 2.1 and 2.2.
5.0 PROMISES OF THE BORROWER
5.1 The borrower promises:
(a) to pay all taxes when they are due and to send to the lender at the
place of payment, or at any other place the lender requires, all
notices of taxes which the borrower receives;
(b) if the lender requires the borrower to do so, to pay to the lender:
(i) on each payment date the amount of money estimated by the
lender to be sufficient to permit the lender to pay the taxes
when they are due; and
(ii) any money in addition to the money already paid towards taxes
so that the lender will be able to pay the taxes in full;
(c) to apply for all government grants, assistance and rebates in
respect of taxes;
(d) to comply with all terms and conditions of any charge or
encumbrance that ranks ahead of this mortgage;
(e) to keep all buildings and improvements which form part of the land
in good condition and to repair them as the lender reasonably
requires;
(f) to sign any other document that lender reasonably requires to
ensure that payment of the mortgage money is secured by this
mortgage or by any other document the borrower has agreed to give
as security;
(g) not to do anything that has the effect of reducing the value of the
land;
(h) not to tear down any building or part of a building which forms
part of the land;
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(i) not to make any alteration or improvement to any building which
forms part of the land without the written consent of the lender;
(j) if the borrower has rented the land to a tenant, to keep, if
required by the lender, records of all rents received and of all
expenses paid by the borrower in connection with the land and, at
least annually, have a statement of revenue and expenses for the
land prepared by a professional accountant if the lender requires
and to give a copy of the statement to the lender if the lender
requires the borrower to do so;
(k) to insure and keep insured against the risk of fire and other risks
and losses that the lender asks the borrower to insure against,
with an insurance company licensed to do business in British
Columbia, all buildings and improvements on the land to their full
insurable value on a replacement cost basis and to pay all
insurance premiums when due;
(l) to send a copy of each insurance policy and renewal certificate to
the lender at the place of payment;
(m) to pay all of the costs of the lender and each lender party to the
credit agreement, including legal fees on solicitor and own client
basis to:
(i) if this mortgage at some future date can be registered,
prepare and register this mortgage, including all necessary
steps to advance and secure the mortgage money and to report
to the lender;
(ii) collect the mortgage money;
(iii)enforce the terms of this mortgage, including efforts to
compel the borrower to perform the borrower's promises and
agreements;
(iv) do anything which the borrower has promised to do but has not
done; and
(v) prepare and give the borrower a discharge of this mortgage
when the borrower has paid all money due under this mortgage
and the borrower wants it to be discharged;
(n) if the lender requires the borrower to do so; to:
(i) give the lender in each year post-dated cheques for all loan
payments due for that year and for taxes; and
(ii) arrange for all loan payments to be made by pre-authorized
chequing;
(o) to pay any money which, if not paid, would result in a default
under any charge or encumbrance having priority over this mortgage
or which might result in the sale of the land if not paid; and
<PAGE>
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(p) to pay and cause to be discharged any charges or encumbrances
described in Section 5.2(b) which are not prior encumbrances
permitted under this mortgage.
5.2 The borrower declares to the lender and each lender party to the
credit agreement that:
(a) the borrower has an interest in the land and has the right to
mortgage the land to the lender;
(b) the borrower's title to the land is subject only to:
(i) those charges and encumbrances that are registered in the land
title office at the time the borrower signed this mortgage;
and
(ii) any unregistered charges and encumbrances that the lender,
with the consent of the required lenders, has agreed to in
writing; and
(c) subject to paragraph (b), the borrower:
(i) has not given any other charge or encumbrance against the
land; and
(ii) has no knowledge of any other claim against the land.
5.3 The insurance policy or policies required by subsection 5.1(k)
shall contain a mortgage clause approved by the lender and states that
payment of any loss shall be made to the lender at the place of payment or
any other place the lender requires.
5.4 The borrower gives up any statutory right to require the insurance
proceeds to be applied in any particular manner.
6.0 AGREEMENTS BETWEEN THE BORROWER AND THE LENDER
6.1 The lender will use the money paid to the lender under
Section 5.1(b) to pay taxes unless there is a default in which case the
lender may apply the money in payment of the mortgage money.
6.2 By this mortgage, the borrower grants and mortgages any additional
or greater interest in the land that the borrower may later acquire.
6.3 Any money paid to the lender under this mortgage shall:
(a) prior to a default, be applied first in payment of interest,
secondly in payment of the principal amount and thirdly in payment
of all other money owed by the borrower under this mortgage; and
(b) after a default, be applied in any manner the lender chooses, with
the consent of the required lenders.
<PAGE>
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6.4 The lender may at any reasonable time inspect the land and any
buildings and improvements which form part of it.
6.5 If the lender takes possession of the land, the lender shall not be
responsible for maintaining and preserving the land and need only account
to the borrower for any money which the lender actually receives in
connection with this mortgage or the land.
6.6 The lender may spend money to perform any of the borrower's
promises and agreements which the borrower has not performed and any money
so spent shall be added to the principal amount, bear interest from the
date that the money was so spent, and be immediately due and payable to the
lender.
6.7 If the borrower wants to give any notice to the lender, the
borrower must do so having it delivered to the lender personally or by
sending it by registered or certified mail to the lender mailing address or
to any other address later specified in writing by the lender to the
borrower.
6.8 If the lender wants to give any notice to the borrower, the lender
must do so by having it delivered to the borrower personally or by sending
it by registered or certified mail to the borrower mailing address or to
any other address later specified in writing by the borrower to the lender.
6.9 Any notice sent by mail is considered to have been received five
days after it is mailed.
6.10 Any notice to be given by the borrower to the lender or vice versa
during a mail strike or disruption must be delivered rather than sent by
mail.
6.11 The borrower is not released from the borrower's promises and
agreements only because the borrower sells the land.
6.12 If the borrower has mortgaged anything else to the lender better to
secure payment of the mortgage money, the lender may take all lawful
proceedings under any of the mortgages in any order that the lender
chooses.
6.13 Neither the lender nor the lenders party to the credit agreement
have to advance or readvance the principal amount or the rest or any
further part of the principal amount to the borrower unless the lender and
the lenders want to even though:
(a) the borrower has signed this mortgage;
(b) this mortgage is registered in the land title office; or
(c) the lender and the lenders have advanced to the borrower part
of the principal amount.
6.14 The lender may deduct from any advance of the principal amount:
<PAGE>
Page 15
(a) any taxes that are due;
(b) any interest that is due and payable to the date of the
advance;
(c) the legal fees and disbursements to prepare and register this
mortgage including other necessary steps to advance and secure
the mortgage money and to report to the lender; and
(d) any insurance premium.
6.15 The lender's right of consolidation applies to this mortgage and to
any other mortgages given by the borrower to the lender. This means that
if the borrower has mortgaged other property to the lender, the borrower
will not have the right, after default to pay off this mortgage or any
mortgage of other property unless the borrower pays the lender and each of
the lenders party to the credit agreement all money owed by the borrower
under this mortgage and all of the mortgages of other property.
7.0 DEFAULTS
7.1 A default occurs under this mortgage if:
(a) there is the occurrence of an "event of default" (as that term is
defined in the credit agreement);
(b) the borrower defaults in the observance or performance in any
material respect of any of its covenants, agreements or other
obligations under this mortgage, provided however that if such
default is curable, such default has not been remedied within
30 days after the lender has given notice to the borrower
specifying the default;
(c) the borrower makes an assignment for the benefit of its creditors,
is declared a bankrupt, makes a proposal or otherwise takes
advantage of provisions for relief under BANKRUPTCY AND INSOLVENCY
ACT, the COMPANIES CREDITORS' ARRANGEMENT ACT or similar
legislation in any jurisdiction, or makes an authorized assignment;
(d) the land is abandoned or is left unoccupied for 30 or more
consecutive days;
(e) the land or any part of it is expropriated;
(f) the borrower sells or agrees to sell all or any part of the land or
if the borrower leases it or any part of it without the prior
written consent of the lender;
(g) the borrower gives another mortgage of the land to someone other
than the lender without the prior written consent of the lender;
(h) the borrower does not discharge any judgment registered in the land
title office against the land within 30 days after receiving notice
of its registration; or
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(i) the borrower allows any claim of builders lien to remain
undischarged on title to the land for more than 30 days unless the
borrower:
(i) diligently disputes the validity of the claim by taking all
necessary legal steps to do so;
(ii) gives reasonable security to the lender to pay the claim in
full if it is found to be valid; and
(iii)authorizes the lender to use the security to pay the lien in
full.
7.2 If a default occurs under this mortgage, it will have the same
effect as though a default had occurred under any other mortgage or
agreement between the borrower and the lender or any lender party to the
credit agreement.
8.0 CONSEQUENCES OF A DEFAULT
8.1 If a default occurs, all the mortgage money then owing to the
lender and each of the lenders party to the credit agreement will, if the
lender chooses, with the consent of the required lenders, at once become
due and payable.
8.2 If a default occurs the lender may, in any order that the lender
chooses, do any one or more of the following:
(a) demand payment of all the mortgage money;
(b) sue the borrower for the amount of money due;
(c) take proceedings and any other legal steps to compel the borrower
to keep the borrower's promises and agreements;
(d) enter upon and take possession of the land;
(e) sell the land and other property by public auction or private sale,
or lease the land on terms decided by the lender:
(i) on 30 days notice to the borrower if the default has continued
for 30 days; or,
(ii) without notice to the borrower if the default has continued
for 60 days or more;
(f) apply to the court for an order that the land be sold on terms
approved by the court;
(g) apply to the court to foreclose the borrower's interest in the land
so that when the court makes its final order of foreclosure the
borrower's interest in the land will be absolutely vested in and
belong to the lender;
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(h) appoint a receiver of the land;
(i) enter upon and take possession of the land without the permission
of anyone and make any arrangements the lender considers necessary
to:
(i) inspect, lease, collect rents or manage the land;
(ii) complete the construction of any building on the land; or
(iii)repair any building on the land;
(j) take whatever action is necessary to take, recover and keep
possession of the land.
8.3 Nothing in Section 8.2 affects the jurisdiction of the court.
8.4 If the lender sells the land by public auction or by private sale
the lender will use the amount received from the sale to pay:
(a) any real estate agent's commission;
(b) all adjustments usually made on the sale of land;
(c) all of the lender's expenses and costs described in Section 8.2;
and
(d) the mortgage money;
and will pay any surplus
(e) according to any order of the court if the land is sold by an order
of the court; or
(f) to the borrower if the land is sold other than by an order of the
court.
8.5 If the money available to pay the mortgage money after payment of
the commission, adjustments and expenses referred to in Section 8.4(a) to
(c) is not sufficient to pay all the mortgage money, the borrower will pay
to the lender and the lenders party to the credit agreement on demand the
amount of the deficiency.
8.6 The borrower will pay to the lender and each lender party to the
credit agreement on demand all expenses and costs incurred by the lender or
such lender in enforcing this mortgage. These expenses and costs include
the lender's or such lender's cost of taking and keeping possession of the
land, the cost of the time and services of the lender or such lender or the
lender's or such lender's employees for so doing, the lender's or such
lender's legal fees and disbursements on a solicitor and own client basis,
unless the court allows legal fees and disbursements be paid on a different
basis, and all other costs and expenses incurred by the lender or such
lender to protect the lender's or such lender's interest under this
mortgage. These expenses and costs will be added to the principal amount,
be payable on demand and bear interest until they are fully paid.
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8.7 If the lender obtains judgment against the borrower as a result of
a default, the remedies described in Section 8.2 may continue to be used by
the lender to compel the borrower to perform the borrower's promises and
agreements. The lender the lenders will continue to be entitled to receive
interest on the mortgage money until the judgment is paid in full.
8.8 If the lender does not exercise any of the lender's rights on the
happening of a default or does not ask the borrower to cure it, the lender
is not prevented from later compelling the borrower to cure that default or
exercising any of those rights in connection with the default or any later
default of the same or any other kind.
9.0 CONSTRUCTION OF BUILDING OR IMPROVEMENTS
9.1 The borrower will not construct, alter or add to any buildings or
improvements on the land without the prior written consent of the lender,
and then only in accordance with accepted construction standards, building
codes and municipal or government requirements and plans and specifications
approved by the lender.
9.2 If this mortgage is intended to finance any construction,
alteration or addition, the lender may make advances of the principal
amount to the borrower based on the progress of construction. The lender
will decide whether or not any advances will be made, the amount of the
advances, and when they will be made.
10.0 LEASEHOLD MORTGAGE
10.1 This section applies if the interest mortgaged shown in the
mortgage form is or includes a leasehold interest.
10.2 The borrower represents to the lender and each of the lenders party
to the credit agreement that:
(a) the lease is owned by the borrower subject only to those charges
and encumbrances that are registered in the land title office at
the time the borrower signs the mortgage form;
(b) the lease is in good standing;
(c) the borrower has compiled with all the borrower's promises and
agreements contained in the lease;
(d) the borrower has paid all rent that is due and payable under the
lease;
(e) the lease is not in default; and
(f) the borrower has the right to mortgage the lease to the lender.
10.3 The borrower will:
(a) comply with the lease and not do anything that would cause the
lease to be terminated;
<PAGE>
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(b) immediately give to the lender a copy of any material notice or
request received from the landlord;
(c) immediately notify the lender if the landlord advises the borrower
of the landlord's intention to terminate the lease before the term
expires; and
(d) sign any other document the lender requires to ensure that any
greater interest in the land that is acquired by the borrower is
charged by this mortgage.
10.4 Any default under the lease is a default under this mortgage.
10.5 The borrower promises the lender and each lender party to the
credit agreement that the borrower will not, without first obtaining the
written consent of the lender;
(a) surrender or terminate the lease; or
(b) agree to change the terms of the lease; or
(c) assign, transfer or otherwise dispose of its leasehold interest in
the lease, or any portion thereof.
10.6 The lender may perform any promise or agreement of the borrower
under the lease.
10.7 Nothing done by the lender under this section will make the lender
a mortgagee in possession.
11.0 RECEIVER
11.1 The borrower appoints both the lender and any agent of the lender
as the borrower's attorney to appoint a receiver of the land.
11.2 The lender of the lender's agent may, if any default happens,
appoint a receiver of the land and the receiver:
(a) will be the borrower's agent and the borrower will be solely
responsible for the receiver's acts or omissions;
(b) has power, either in the borrower's name or in the name of the
lender, to demand, recover and receive income from the land and
start and carry on any action or court proceeding to collected that
income;
(c) may give receipts for income which the receiver receives;
(d) may carry on any business which the borrower conducted on the land;
(e) may lease or sublease the land or any part of it on terms and
conditions that the receiver chooses;
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(f) may complete the construction of or repair any building or
improvement on the land;
(g) may take possession of all or part of the land;
(h) may manage the land and maintain it in good condition;
(i) has the power to perform, in whole or in part, the borrower's
promises and agreements; and
(j) has the power to do anything that, in the receiver's opinion, will
maintain and preserve the land or will increase or preserve the
value or income potential of the land or the borrower's business on
the land.
11.3 From income received the receiver may do any of the following in
any order the receiver chooses:
(a) retain a commission of 5% of the gross income or any higher
commission approved by the court;
(b) retain enough money to pay or recover the cost to collect the
income and to cover other disbursements;
(c) pay all taxes and the cost of maintaining the land in good repair,
completing the construction of any building or improvement on the
land, supplying goods, utilities and services to the land and
taking steps to preserve the land from damage by weather, vandalism
or any other cause;
(d) pay any money that might, if not paid, result in a default under
any charge or encumbrance having priority over this mortgage or
that might result in the sale of the land if not paid;
(e) pay taxes in connection with anything the receiver is entitled to
do under this mortgage;
(f) pay interest to the lender that is due and payable;
(g) pay all or part of the principal amount to the lender whether or
not it is due and payable;
(h) pay any other money owed by the borrower under this mortgage;
(i) pay insurance premiums.
11.4 The receiver may borrower money for the purpose of doing anything
the receiver is authorized to do.
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11.5 Any money borrowed by the receiver, and any interest charged on
that money and all the costs of borrowing, will be added to and be part of
the mortgage money.
11.6 A receiver appointed by the lender may be removed by the lender and
the lender may appoint another in the receiver's place.
11.7 The commission and disbursements of the receiver will be a charge
on the land and will bear interest at the interest rate.
11.8 Nothing done by the receiver under this section will make the
lender a mortgagee in possession.
12.0 STRATA LOT PROVISIONS
12.1 This section applies if the land described in the mortgage form is
or becomes a strata lot created under the CONDOMINIUM ACT.
12.2 The borrower will fulfil all of the borrower's obligations as a
strata lot owner under the CONDOMINIUM ACT and the by-laws, rules and
regulations of the strata corporation and will pay all money owed by the
borrower to the strata corporation.
12.3 The borrower gives to the lender the right to vote for the borrower
under the by-laws of the strata corporation, but the lender is not required
to do so or to attend or vote at any meeting or to protect the borrower's
interest.
12.4 At the request of the lender, the borrower will give the lender
copies of all notices, financial statements and other documents given by
the strata corporation to the borrower.
12.5 The borrower appoints the lender to be the borrower's agent to
inspect or obtain copies of any records or other documents of the strata
corporation that the borrower is entitled to inspect or obtain.
12.6 If the strata corporation transfers, charges or adds to the common
property, or amends its by-laws without the consent of the lender, and if,
in the lender's opinion, the value of the land is reduced, the mortgage
money shall, at the lender's option, immediately become due and payable to
the lender on demand.
12.7 Nothing done by the lender under this section will make the lender
a mortgagee in possession.
13.0 SUBDIVISION
13.1 If the land is subdivided:
(a) this mortgage will charge each subdivided lot as security for
payment of all the mortgage money; and
(b) the lender is not required to discharge this mortgage as a charge
on any of the subdivided lots unless all the mortgage money is
paid.
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13.2 Even though the lender is not required to discharge any subdivided
lot from this mortgage, the lender may agree to do so in return for payment
of all or a part of the mortgage money. If the lender discharges a
subdivided lot, this mortgage will continue to charge the subdivided lot or
lots that have not been discharged.
14.0 CURRENT AND RUNNING ACCOUNT
14.1 This mortgage secures a current or running account and the lender
may, on one or more occasions, advance and readvance all or part of the
principal amount and this mortgage:
(a) will be security for payment of the principal amount as advanced
and readvanced and for all other money payable to the lender and
the lenders party to the credit agreement under this mortgage;
(b) will not be considered to have been redeemed only because:
(i) the advances and readvances made to the borrower have been
repaid; or
(ii) the accounts of the borrower with the lender and the lenders
party to the Credit Agreement cease to be in debit; and
(c) remains effective security for further advances and readvances
until the borrower has received a discharge of this mortgage.
15.0 GENERAL
15.1 This mortgage binds the borrower and its successors and assigns.
15.2 Each person who signs this mortgage as a borrower is jointly and
severally liable for all of the borrower's promises and agreements as
though each such borrower had been the only borrower to sign.
15.3 If any part of this mortgage is not enforceable, all other parts
will remain in effect and be enforceable against the borrower.
15.4 This mortgage shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the laws of Canada applied
to therein.
15.5 All terms, unless specifically defined herein, shall have the same
meaning as set out in the credit agreement.
16.0 CURRENCY INDEMNITY
16.1 The borrower agrees that if any monies owing hereunder are received
by the lender or any lender party to the credit agreement in a currency
(the "payment currency") other than lawful money of Canada (the "obligation
currency") whether as a result of any realization, judgment or order, or
the enforcement thereof or otherwise, and the amount produced by converting
the payment currency so received, at the time of receipt, into the
obligation currency is less than the relevant amount of the obligation
currency, then the borrower shall indemnify the lender and the lenders
party to the credit agreement for the
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deficiency and in respect of any loss sustained as a result. This
indemnity will constitute a separate covenant and obligation of the
borrower independent from the borrower's other covenants and obligations
hereunder.
END OF DOCUMENT
Selected Consolidated Financial Data
The selected data presented below for and as of the end of each of the five
years ended December 31, 1996, 1995, 1994, 1993,and 1992 are derived from
the consolidated financial statements of the company, which statements have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports thereon. This data should be read in conjunction with the
related consolidated financial statements and notes appearing in this report.
<TABLE>
CONSOLIDATED INCOME STATEMENT DATA
For the Years Ended December 31, 1996 1995 (1) 1994 1993 1992
(Amounts in 000s except per share data)
<CAPTION>
<S> <C> <C> <C> <C> <C>
Revenue $308,767 $188,866 $126,444 $105,946 $81,680
Operating expenses before asset write-down
and equal access costs 294,543 188,648 132,598 104,925 75,892
Equal access costs - - 2,160 - -
Asset write-down - - - 12,807 -
Income (loss) from continuing operations before
taxes and minority interest 10,859 (4,825) (10,244) (3,751) 5,867
Provision for (benefit from) income taxes 2,185 396 3,456 (3,743) 2,267
Minority interest in (earnings) loss of
consolidated subsidiary (909) (133) 2,371 1,661 -
Income (loss) from continuing operations 7,765 (5,354) (11,329) 1,653 3,600
Discontinued operations, net of tax - - - 10,222 (1,660)
Net income (loss) $7,765 ($5,354) ($11,329) $11,875 $1,940
Net income(loss) per common
and common equivalent share:
Continuing operations 0.34 (0.50) (1.07) 0.16 0.35
Discontinued operations 0.00 0.00 0.00 0.97 (0.16)
Net income (loss) 0.34 (0.50) (1.07) 1.13 0.19
Weighted average number of common shares 15,641,119 11,684,829 10,602,722 10,537,388 10,323,050
CONSOLIDATED BALANCE SHEET DATA (2) 1996 1995 (1) 1994 1993 1992
as of December 31,
(Amounts in 000s except per share data)
Current assets $61,933 $45,726 $28,045 $22,476 $16,251
Current liabilities 77,394 56,074 32,016 23,191 27,889
Net working capital (deficit) (15,461) (10,348) (3,971) (715) (11,638)
Accounts receivable, net 51,474 38,978 20,499 16,005 14,104
Property and equipment, net 80,452 56,691 44,081 27,077 21,951
Total assets 204,031 123,984 84,448 61,718 45,450
Short-term debt 4,251 4,885 1,613 2,424 11,525
Long-term debt 6,007 28,050 29,914 1,795 12,747
Redeemable preferred stock - 9,448 - - -
Shareholders' equity 117,863 26,407 19,086 31,506 22,711
OTHER FINANCIAL DATA 1996 1995 (1) 1994 1993 1992
as of December 31,
(Amounts in 000s except per share data)
Class A Common Stock cash dividends declared - $243 $831 $4,233 $735
Cash dividends declared per share of
Class A Common Stock - $0.02 $0.08 $0.41 $0.07
(1) Includes the results of operations of Metrowide Communications from August 1, 1995, the date of acquisition.
(2) Balance sheet data from discontinued operations is excluded
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion includes certain forward-looking
statements. For a discussion of important factors including, but
not limited to, continued development of the Company's markets,
actions of regulatory authorities and competitors, and dependence
on management information systems, which could cause actual
results to differ materially from the forward-looking statements,
see the discussion of the following "Risk Factors" in Item 1 of
the Company's Report on Form 10-K for its year ended December 31,
1996 as filed with the Securities and Exchange Commission
("SEC"): "Recent Losses; Potential Fluctuations in Operating
Results;" "Substantial Indebtedness; Need for Additional
Capital;" "Dependence on Transmission Facilities-Based Carriers
and Suppliers;" "Potential Adverse Effects of Regulation;"
"Increasing Domestic and International Competition;" "Risks of
Growth and Expansion;" "Risks Associated with International
Operations;" "Dependence on Effective Information Systems;"
"Risks Associated with Acquisitions, Investments, and Strategic
Alliances;" "Technological Changes May Adversely Affect
Competitiveness and Financial Results;" "Dependence on Key
Personnel;" "Risks Associated With Financing Arrangements;
Dividend Restrictions;" "Holding Company Structure; Reliance on
Subsidiaries for Dividends;" "Potential Volatility of Stock
Price;" and "Risks Associated with Derivative Financial
Instruments;" as well as the Company's periodic reports filed
with the SEC.
General
The Company's revenue is comprised of toll revenue (per
minute charges for long distance services) and local service and
other revenue. Toll revenue consists of revenue derived from
ACC's long distance and operator-assisted services. Local
service and other revenue consists of revenue derived from the
provision of local exchange services, including local dial tone,
direct access lines, Internet fees and monthly subscription fees,
and also from data services. Network costs consist of expenses
associated with the leasing of transmission lines, access
charges, and certain variable costs associated with the Company's
network. The following table shows the total revenue (net of
intercompany revenue) and billable minutes of use attributable to
the Company's US, Canadian, and UK operations during each of
1996, 1995, and 1994:
Year Ended December 31,
1996 1995 1994
Amount Percent Amount Percent Amount Percent
Total Revenue:
United States $99,461 32.2% $65,975 34.9% $54,599 43.2%
Canada 117,168 38.0 84,421 44.7 67,728 53.6
United Kingdom 92,138 29.8 38,470 20.4 4,117 3.2
Total $308,767 100.0% $188,866 100.0% $126,444 100.0%
Billable Minutes of Use:
United States 590,341 32.8% 486,618 41.2% 445,619 50.5%
Canada 681,200 37.9 522,764 44.2 422,149 47.8
United Kingdom 527,905 29.3 172,281 14.6 15,225 1.7
Total 1,799,446 100.0% 1,181,663 100.0% 882,993 100.0%
The following table presents certain information concerning toll
revenue per billable minute and network cost per billable minute
attributable to the Company's US, Canadian, and UK operations
during each of 1996, 1995, and 1994:
1996 1995 1994
Toll Revenue Per Billable Minute:
United States $.150 $.126 $.115
Canada .150 .146 .149
United Kingdom .174 .220 .268
Network Cost Per Billable Minute:
United States $.104 $.075 $.070
Canada .106 .100 .108
United Kingdom .114 .149 .177
The Company believes that its historic revenue growth as
well as its historic network costs and results of operations for
its Canadian and UK operations generally reflect the state of
development of the Company's operations, the Company's customer
mix, and the competitive and regulatory environment in those
markets. The Company entered the US, Canadian, and UK
telecommunications markets in 1982, 1985, and 1993, respectively.
For US operations, 1996 revenue and network cost per minute
include the effect of $9.0 million of non-recurring, lower margin
international carrier sales in the second quarter. The Company
believes that toll revenue per billable minute and network cost
per billable minute will be lower in future periods, due to
competitive pressures and due to the decreased focus on lower
margin international carrier sales.
Deregulatory influences have affected the telecommunications
industry in the US since 1984, and the US market has experienced
considerable competition for a number of years. The competitive
influences on the pricing of ACC US's services and network costs
have been stabilizing during the past few years. This may change
in the future as a result of recent US legislation that further
opens the market to competition, particularly from the regional
operating companies ("RBOCs"). The Company expects competition
based on price and service offerings to increase.
The deregulatory trend in Canada, which commenced in 1989,
has increased competition. ACC Canada experienced significant
downward pressure on the pricing of its services during 1994.
Although revenue per minute has increased from 1995 to 1996 due
to changes in customer and product mix, the Company expects such
downward pressure to return. However, it is expected that the
pricing pressure may abate over time as the market matures. The
impact of this pricing pressure on revenues of ACC Canada is
being offset by an increase in the Canadian residential and
student billable minutes of usage as a percentage of total
Canadian billable minutes of usage, and introduction of new
products and services including 800 service, local exchange
resale, internet services, and, beginning in February 1997,
paging services. Toll revenue per billable minute attributable to
residential and student customers in Canada generally exceeds the
toll revenue per billable minute attributable to commercial
customers. The Company believes that its network costs per
billable minute in Canada may decrease during periods after 1996
if there is an anticipated increase in long distance transmission
facilities available for lease from Canadian transmission
facilities-based carriers as a result of expected growth in the
number and capacity of transmission networks in that market. The
foregoing forward-looking statements are based upon expectations
of actions that may be taken by third parties, including Canadian
regulatory authorities and transmission facilities-based
carriers. If such third parties do not act as expected, the
Company's actual results may differ materially from the foregoing
discussion.
The Company believes that, because deregulatory influences
have only fairly recently begun to impact the UK
telecommunications industry, the Company will continue to
experience increases in total revenue from that market during the
next several quarters. The foregoing belief is based upon
expectations of actions that may be taken by UK regulatory
authorities and the Company's competitors; if such third parties
do not act as expected, the Company's revenues in the UK might
not increase. If ACC UK were to experience increased revenues,
the Company believes it should be able to enhance its economies
of scale and scope in the use of the fixed cost elements of its
network. Nevertheless, the deregulatory trend in that market is
expected to result in competitive pricing pressure on the
Company's UK operations, which could adversely affect revenues
and margins. Since the UK market for transmission facilities is
dominated by British Telecommunications PLC ("British Telecom")
and Mercury Communications Ltd. ("Mercury"), the downward
pressure on prices for services offered by ACC UK may not be
accompanied by a corresponding reduction in ACC UK's network
costs in the short term and, consequently, could adversely affect
the Company's business, results of operations and financial
condition, particularly in the event revenue derived from the
Company's UK operations accounts for an increasing percentage of
the Company's total revenue. Moreover, the Company's UK
operations are highly dependent upon the transmission lines
leased from British Telecom. As each of the telecommunications
markets in which it operates continues to mature, the rate of
growth in its revenue and customer base in each such market is
likely to decrease over time.
Since the commencement of the Company's operations, the
Company has undertaken a program of developing and expanding its
service offerings, geographic focus, and network. In connection
with this development and expansion, the Company has made
significant investments in telecommunications circuits, switches,
equipment, and software. These investments generally are made
significantly in advance of anticipated customer growth and
resulting revenue. The Company also has increased its sales and
marketing, customer support, network operations, and field
services commitments in anticipation of the expansion of its
customer base and targeted geographic markets. The Company
expects to continue to expand the breadth and scale of its
network and related sales and marketing, customer support, and
operations activities. These expansion efforts are likely to
cause the Company to incur significant increases in expenses from
time to time, in anticipation of potential future growth in the
Company's customer base and targeted geographic markets.
Subsequent to year-end, the Company announced the creation of two
continental operating divisions in North America and Europe. In
conjunction with this new structure, the Company plans to further
expand its European operations by preparing to enter the emerging
German telecommunications marketplace when regulatory and market
conditions warrant. While the Company has had a successful
history of entering into newly deregulated markets, there can be
no assurances that the same successes will be experienced in the
new German operation.
The Company's operating results have fluctuated in the past
and they may continue to fluctuate significantly in the future as
a result of a variety of factors, some of which are beyond the
Company's control. The Company expects to focus in the near term
on building and increasing its customer base, service offerings,
and targeted geographic markets, which will require it to
increase significantly its expenses for marketing and development
of its network and new services, and may adversely impact
operating results from time to time. The Company's sales to
other long distance carriers have been increasing due to the
Company's marketing efforts to promote its lower international
network costs. Revenues from other resellers accounted for
approximately 42%, 12%, and 24% of the revenues of ACC US, ACC
Canada, and ACC UK, respectively, in 1996. With respect to these
customers, the Company competes almost exclusively on price, does
not have long term contracts, and generates lower gross margins
as a percentage of revenue. The Company's primary interest in
carrier revenue is to utilize excess capacity on its network.
Management believes that carrier revenue will represent less than
20% of consolidated total revenue as the core businesses continue
to grow. The foregoing forward-looking statement is based upon
expectations with respect to growth in the Company's customer
base and total revenues. If such expectations are not realized,
the Company's actual results may differ materially from the
foregoing discussion.
Results of Operations
The following table presents, for the three years ended
December 31, 1996, certain statement of operations data expressed
as a percentage of total revenue:
Year Ended December 31,
1996 1995(1) 1994
Revenue:
Toll revenue 91.5% 92.8% 93.6%
Local service and other 8.5 7.2 6.4
Total revenue 100.0 100.0 100.0
Network costs 62.7 60.8 62.8
Gross profit 37.3 39.2 37.2
Other operating expenses:
Depreciation and amortization 5.3 6.1 7.1
Selling expenses 11.0 11.4 11.5
General and administrative 16.4 20.8 23.5
Management restructuring --- 0.7 --
Equal access charges -- -- 1.7
Total other operating expenses 32.7 39.0 43.8
Income (loss) from operations 4.6 0.2 (6.6)
Total other income (expense) (1.1) (2.7) (1.5)
Loss from operations before provision
for (benefit from) income taxes and
minority interest 3.5 (2.5) (8.1)
Provision for income taxes 0.7 0.2 2.7
Minority interest in (earnings)
loss of consolidated subsidiary (0.3) (0.1) 1.9
Income (loss) from operations 2.5% (2.8)% (8.9)%
(1)Includes the results of operations of Metrowide
Communications from August 1, 1995, the date of acquisition.
1996 Compared With 1995
Revenue. Total revenue for 1996 increased by 63.5% to
$308.8 million from $188.9 million in 1995, reflecting growth in
both toll revenue and local service and other revenue. Toll
revenue for 1996 increased by 61.3% to $282.5 million from $175.2
million in 1995. In the United States, toll revenue increased
44.8% as a result of a 21.3% increase in billable minutes of use,
primarily due to increased international sales to carriers.
These international sales have a higher rate per minute, also
contributing to the revenue increase. The 1996 results include
$9.0 million in non-recurring carrier revenue. Excluding this
non-recurring revenue, US toll revenue increased 30.1% over 1995.
In Canada, toll revenue increased 34.1%, as a result of a 30.3%
increase in billable minutes, and an increase in prices due to
additional residential customers which typically have a higher
revenue per minute. In the United Kingdom, toll revenue
increased 142.0%, due to significant volume increases offset by
lower prices that resulted from entering the commercial and
residential markets and from competitive pricing pressure. Since
the end of 1994, ACC's revenues per minute on a consolidated
basis have been increasing slightly as a result of the increasing
percentage of UK revenues and the Company's successful
introduction of higher price per minute products, including
international carrier revenue. Exchange rates did not have a
material impact on the Company's consolidated revenue.
For 1996, local service and other revenue increased by 93.4%
to $26.3 million from $13.6 million in 1995. This increase was
primarily due to the Metrowide Communications acquisition as of
August 1, 1995 (approximately $5.2 million), local service
revenue generated through the university program in the US
(approximately $0.4 million), and the competitive local exchange
company ("CLEC") operations in upstate New York (approximately
$5.6 million). The Company is anticipating that a significant
portion of its growth in the US operations in the future will
come from CLEC operations, and is in the process of installing
five new local exchange switching centers in the northeastern
United States.
Gross Profit. Gross profit (defined as revenue less network
costs) for 1996 increased to $115.2 million from $74.0 million in
1995, primarily due to the increases in revenue discussed above.
Expressed as a percentage of revenue, gross profit decreased to
37.3% for 1996 from 39.2% for 1995, due to an increase in lower
margin carrier traffic in the US, offset partially by improved
margins in Canada and the UK due to network efficiencies and
reductions in fixed charges from suppliers.
Other Operating Expenses. Depreciation and amortization
expense increased to $16.4 million for 1996 from $11.6 million in
1995. Expressed as a percentage of revenue, these costs
decreased to 5.3% in 1996 from 6.1% in 1995, reflecting the
increases in revenue realized during 1996. The $4.8 million
increase in depreciation and amortization expense was primarily
attributable to assets placed in service throughout 1996.
Amortization of approximately $1.1 million associated with the
customer base and goodwill recorded in the Metrowide
Communications and Internet Canada asset acquisitions also
contributed to the increase.
Selling expenses for 1996 increased by 57.9% to
$34.1 million compared with $21.6 million in 1995. Expressed as
a percentage of revenue, selling expenses were 11.0% for 1996
compared to 11.4% for 1995. The $12.5 million increase in
selling expenses was primarily attributable to increased
marketing costs and sales commissions associated with supporting
the Company's 63% growth in revenue for 1996, particularly in the
UK. General and administrative expenses for 1996 were
$50.4 million compared with $39.2 million in 1995. Expressed as
a percentage of revenue, general and administrative expenses were
16.4% for 1996, compared to 20.8% in 1995. The increase in
general and administrative expenses was primarily attributable to
the Canadian ($4.3 million increase) and the UK ($4.4 million
increase) subsidiaries. In the UK, costs were incurred to
develop an infrastructure to support the sizable revenue growth
experienced in 1996, with headcount increasing 56% over previous
year levels. In Canada, headcount increased approximately 52%,
partially as a result of the acquisition of Internet Canada, and
partially to develop an infrastructure to support the increasing
product lines and services being offered. Also included in
general and administrative expenses for 1996 was approximately
$4.4 million related to the Company's local service market sector
in New York State, compared to $1.8 million in 1995.
Other Income (Expense). Interest expense remained fairly
constant at $5.0 million for 1996 compared to $5.1 million in
1995. The 1996 expense includes the accrual of a $2.1 million
contingent interest payment due to the lenders under the
Company's credit facility. The 1995 amount includes expense
associated with the subordinated debt which was converted to
Series A Preferred Stock in September 1995, as well as expense
associated with line of credit borrowings to finance working
capital and capital expenditure needs. Interest income increased
to $1.2 million in 1996 from $0.2 million in 1995, due to the
invested proceeds from the Class A Common Stock offering in May
1996.
Foreign exchange gains and losses reflect changes in the
value of the Canadian dollar and the British pound sterling
relative to the US dollar for amounts lent to foreign
subsidiaries. Foreign exchange rate changes resulted in a net
gain of $0.5 million for 1996, compared to a $0.1 million loss
in 1995, which was primarily due to a one-time gain related to a
transaction which occurred on October 21, 1996 and was hedged 28
days later. The Canadian dollar moved favorably relative to the
US dollar during that period. The Company continues to hedge all
foreign currency transactions in an attempt to minimize the
impact of transaction gains and losses on the income statement.
The Company's policy is to not engage in speculative foreign
currency transactions.
Provision for income taxes reflects the anticipated income
tax liability of the Company's US operations based on its pretax
income for the year. The provision for income taxes increased in
1996 due to increased profitability in the US business. The
Company does not provide for income taxes nor recognize a benefit
related to income in foreign subsidiaries due to net operating
loss carryforwards generated by those subsidiaries in prior
years.
Minority interest in loss of consolidated subsidiary
reflects the portion of the Company's Canadian subsidiary's
income or loss attributable to the percentage of that
subsidiary's common stock that was publicly traded in Canada.
Prior to October 1996, approximately 30% of ACC Canada's stock
was publicly traded. Prior to December 31, 1996, the Company
repurchased approximately 24% of the outstanding shares, and the
remaining 6% was repurchased subsequent to year-end. The
purchase of the remaining shares was approved prior to year-end.
For 1996, minority interest in earnings of the consolidated
subsidiary was a loss of $0.9 million compared to a loss of
$0.1 million in 1995.
The Company's net income for 1996 was $7.8 million, compared
to a net loss of $5.4 million in 1995. The 1996 net income
resulted from the Company's operations in Canada (approximately
$2.6 million); in the United Kingdom (approximately $0.7
million); and in the United States (approximately $4.5 million).
The 1995 net loss resulted primarily from the expansion of
operations in the UK (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 US and Canadian long distance subsidiaries of
approximately $9.0 million.
1995 Compared With 1994
Revenue. Total revenue for 1995 increased by 49.4% to
$188.9 million from $126.4 million in 1994, reflecting growth in
both toll revenue and local service and other revenue. Toll
revenue for 1995 increased by 48.1% to $175.2 million from $118.3
million in 1994. In the United States, toll revenue increased
19.3% as a result of a 9.2% increase in billable minutes of use
and a more favorable mix of toll services provided, offset
slightly by a decrease in prices per minute. The volume
increases are primarily a result of increased revenue
attributable to other US carriers (approximately $5.8 million);
and commercial (approximately $33.8 million); residential
(approximately $3.6 million); and student (approximately $10.5
million) customers in the Company's service region. In Canada,
toll revenue increased 20.9%, primarily as a result of a 23.8%
increase in billable minutes, offset by a slight decline in
prices. The price declines are a result of the price competition
in 1994 which decreased rates in the middle of that year. Since
the end of 1994, ACC's revenues per minute on a consolidated
basis have been increasing slightly as a result of the increasing
percentage of UK revenues and the Company's successful
introduction of higher price per minute products. In the United
Kingdom, toll revenue increased 830.7% due to significant volume
increases, offset by lower prices that resulted from entering the
commercial and residential markets, and from competitive pricing
pressure. Exchange rates did not have a material impact on the
Company's consolidated revenue.
For 1995, local service and other revenue increased by 67.6%
to $13.6 million from $8.1 million in 1994. This increase was
due to the Metrowide Communications acquisition as of August 1,
1995 (approximately $2.9 million from the date of acquisition
through year-end), local service revenue (approximately
$1.5 million) generated through the university program in the US,
and the local exchange operations in upstate New York, which
generated nominal revenues in 1994.
Network Costs. Network costs increased to $114.8 million
for 1995, from $79.4 million in 1994, due to the increase in
billable long distance minutes. However, network costs,
expressed as a percentage of revenue, decreased to 60.8% for 1995
from 62.8% in 1994 due to reduced contribution charges in Canada
and increased volume efficiencies in the UK. Contribution
charges represented 5.2% of revenue in 1995 as compared to 10.1%
in 1994. These efficiencies were partially offset by reduced
margins in the US due to increased carrier traffic.
Other Operating Expenses. Depreciation and amortization
expense increased to $11.6 million for 1995 from $8.9 million in
1994. Expressed as a percentage of revenue, these costs
decreased to 6.1% in 1995 from 7.1% in 1994, reflecting the
increases in revenue realized during 1995. The $2.7 million
increase in depreciation and amortization expense was primarily
attributable to assets placed in service in the fourth quarter of
1994 and during 1995, particularly equipment at US university
sites, switching centers in London and Manchester in the UK, and
switch upgrades in Rochester, Syracuse, Vancouver, and Toronto.
Amortization of approximately $0.4 million associated with the
customer base and goodwill recorded in the Metrowide
Communications acquisition also contributed to the increase.
Selling expenses for 1995 increased by 49.1% to
$21.6 million compared with $14.5 million in 1994. Expressed as
a percentage of revenue, selling expenses were 11.4% for 1995
compared to 11.5% for 1994. The $7.1 million increase in selling
expenses was primarily attributable to increased marketing costs
and sales commissions associated with the rapid growth of the
Company's operations in Canada (approximately $1.7 million) and
the UK (approximately $5.6 million). General and administrative
expenses for 1995 were $39.2 million compared with $29.7 million
in 1994. Expressed as a percentage of revenue, general and
administrative expenses were 20.8% for 1995, compared to 23.5% in
1994. The increase in general and administrative expenses was
primarily attributable to a $9.5 million increase in personnel
and customer service costs associated with the growth of the
Company's customer bases and geographic expansion in each
country. Also included in general and administrative expenses
for 1995 was approximately $1.8 million related to the Company's
local service market sector in New York State.
The Company also incurred in 1995 non-recurring costs of
$1.3 million related to management restructuring. These costs
consisted of a $0.8 million payment in consideration of a non-
compete agreement with the chairman of the board which was
negotiated and agreed to in connection with his resignation as
chief executive officer. The remaining $0.5 million related to
severance expenses relating to three other members of executive
management, the terms of which were negotiated at the time of the
executives' departures based on their existing agreements with
the Company. In connection with the departure of one executive,
the vesting schedule for options to purchase 16,150 shares of
Class A Common Stock (out of the options to purchase a total of
33,600 shares which had been granted to the executive) were
accelerated to allow him to exercise the options.
During the third quarter of 1994, the Company initiated the
process of enhancing its network to prepare for equal access for
its Canadian customers. Equal access allows customers to place a
call over the Company's network simply by dialing "1" plus the
area code and telephone number. Before equal access was
available, the Company needed to install a dialer on its
customers' premises or require the customer to dial an access
code before placing a long distance call. Costs associated with
this process included maintaining duplicate network facilities
during transition, recontacting customers, and the administrative
expenses associated with accumulating the data necessary to
convert the Company's customer base to equal access. This
process was completed during the fourth quarter of 1994 at a
total cost of $2.2 million, which has been reflected as a charge
to income from operations for 1994. This network enhancement,
the costs of which are non-recurring, will enable the Company to
offer a broader range of services to Canadian customers and
increase customer convenience in using the Company's
telecommunications services.
Other Income (Expense). Net interest expense increased to
$4.9 million for 1995 compared to $1.9 million in 1994, due
primarily to the Company's increased weighted average borrowings
on revolving lines of credit related to financing of university
projects in the US, expansion of the UK and the local service
businesses during 1995 (approximately $3.1 million); write-off of
deferred financing costs related to the Company's lines of credit
which were refinanced in July 1995 (approximately $0.3 million);
debt service costs associated with 12% subordinated notes issued
in May 1995 (approximately $0.4 million); and contingent interest
associated with the Credit Facility (approximately $0.3 million).
On September 1, 1995, the subordinated notes were exchanged for
Series A Preferred Stock and, consequently, there will be no
further interest expense associated with the 12% subordinated
notes. The Series A Preferred Stock accrues dividends at the
rate of 12% per annum. Upon any conversion of Series A Preferred
Stock, the accrued and unpaid dividends thereon will be
extinguished and no longer deemed payable.
Foreign exchange gains and losses reflect changes in the
value of the Canadian dollar and the British pound sterling
relative to the US dollar for amounts lent to foreign
subsidiaries. Foreign exchange rate changes resulted in a net
loss of $0.1 million for 1995, compared to a $0.2 million gain in
1994. The Company continues to hedge all foreign currency
transactions in an attempt to minimize the impact of transaction
gains and losses on the income statement. The Company does not
engage in speculative foreign currency transactions.
During 1994, the Company increased its income tax provision
to provide for a valuation allowance equal to 100% of the amount
of the Company's foreign tax benefits which had been recorded at
December 31, 1993. No income tax benefits have been recorded for
the 1995 operating losses in Canada or the UK due to the
uncertainty of recognizing the income tax benefit of those losses
in the future.
Minority interest in loss of consolidated subsidiary
reflects the portion of the Company's Canadian subsidiary's
income or loss attributable to the approximately 30% of that
subsidiary's common stock that was publicly traded in Canada.
For 1995, minority interest in earnings of the consolidated
subsidiary was a loss of $0.1 million compared to a gain of
$2.4 million in 1994.
The Company's net loss for 1995 was $5.4 million, compared
to $11.3 million in 1994. The 1995 net loss resulted primarily
from the expansion of operations in the UK (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 US and Canadian long distance subsidiaries of
approximately $9.0 million.
Liquidity and Capital Resources
In May 1996, the Company raised net proceeds of $63.1
million through the issuance of 3,018,750 shares of its Class A
Common Stock. The proceeds from this offering were used to
reduce all indebtedness under the Company's credit facility, for
working capital needs, and capital expenditures. The Company also
expended resources in 1996 to repurchase the minority interest in
ACC Canada. Historically, the Company has satisfied its working
capital requirements through cash flow from operations, through
borrowings and financings from financial institutions, vendors
and other third parties, and through the issuance of securities.
The Company also received net proceeds of approximately $1.9
million from the exercise of options and warrants associated with
the Class A Common Stock offering on behalf of selling
shareholders in October 1996 and an additional $4.9 million from
the exercise of employee stock options at various times
throughout the year.
Net cash flows provided by operations were $24.2 million for
the year ended December 31, 1996 compared to $4.0 million for
1995. The increase of $20.2 million primarily resulted from
improved profitability in all subsidiaries. During the year, the
Company had a carrier customer which accumulated a significant
accounts receivable balance. The Company has entered into a
traffic exchange agreement with the customer, under which the
Company terminates traffic over the customer's network as payment
in kind for the accumulated receivable balance. The receivable
balance was approximately $8.3 million at the beginning of the
arrangement, but has been reduced to approximately $1.9 million
as of December 31, 1996. Although the Company expects to have
fully received the balance by the end of the first quarter of
1997, there are no assurances that the customer will be
financially viable until that time. If the customer were to
declare bankruptcy, a portion of the amount settled under the
traffic exchange agreement may have to be repaid by the Company,
and any remaining amounts receivable from the customer may not be
collected.
Net cash flows used in investing activities were $67.7
million and $15.3 million for the years ended December 31, 1996
and 1995, respectively. The increase of approximately $52.4
million in net cash flow used in investing activities during 1996
as compared to 1995 was primarily attributable to the repurchase
of the Canadian minority interest (approximately $32.1 million),
as well as an increase in capital expenditures incurred by the UK
operation for a long distance switch (approximately $4.9
million); the US operation for local service switching equipment
(approximately $6.9 million); the Canadian operation for a new
billing system (approximately $2.7 million); and for the purchase
of assets and customer base from Internet Canada.
Accounts receivable increased by 32.1% at December 31, 1996
as compared to December 31, 1995 as a result of expansion of the
Company's customer base due to sales and marketing efforts.
Accounts payable at December 31, 1996 increased by $8.0 million
over December 31, 1995 due to the inclusion of previously accrued
network bills. In 1995, the principal vendor in the UK
experienced delays in billing. These problems were corrected in
1996. Accrued expenses at December 31, 1996 increased by $19.2
million compared to December 31, 1995 due to the accrual of the
remaining $6.5 million payment for the repurchase of the ACC
Canada minority interest, a $2.1 million contingent interest
payment, a $1.0 million payment due to the former chairman of the
board, an increase in the bonus accrual, and the general increase
in the size and operations of the Company during 1996.
The Company's principal need for working capital is to meet
its selling, general, and administrative expenses, network costs
and capital expenditures as its business expands. The Company is
anticipating significant growth in its CLEC business, which is
capital-intensive. In addition, the Company's capital resources
have been used for the repurchase of the minority interest in ACC
Canada. During 1996, the Company paid approximately $32.0
million to acquire approximately 81.5% of the minority-held
shares of ACC Canada. The remaining shares were acquired in
January 1997 for approximately $6.5 million. Resources have also
been used for the Metrowide Communications and Internet Canada
acquisitions, and for capital expenditures. The Company made the
required contingent interest payment of $2.1 million to the
lenders of the credit facility in January 1997, in conjunction
with the amendment to that facility which increased the borrowing
availability to $100 million. This payment was fully accrued at
December 31, 1996. The Company had a working capital deficit of
$15.5 million at December 31, 1996 compared to a working capital
deficit of approximately $10.3 million at December 31, 1995, due
primarily to the repurchase of the minority interest in ACC
Canada.
The Company anticipates that during 1997, its capital
expenditures will be approximately $44.0 million for the
expansion of its network; the acquisition, upgrading, and
development of switches and other telecommunications equipment as
conditions warrant; the development, licensing, and integration
of its management information system and other software; the
development and expansion of its service offerings and customer
programs; and other capital expenditures. ACC expects that it
will continue to make significant capital expenditures during
future periods, particularly for the installation and related
expenses of switching equipment for the UK (located in Bristol)
and local exchange switches in New York, New York; Albany, New
York; Buffalo, New York; Boston, Massachusetts; and Springfield,
Massachusetts. The Company's actual capital expenditures and
cash requirements will depend on numerous factors, including the
nature of future expansion and acquisition opportunities,
economic conditions, competition, regulatory developments, the
availability of capital, and the ability to incur debt and make
capital expenditures under the terms of the Company's financing
arrangements. The Company has also announced that it has formed
a German subsidiary in anticipation of deregulation in that
marketplace, and anticipates that the initial capital and
operating expenditures related to this operation will approximate
$5.0 million.
As of December 31, 1996, the Company had approximately $2.0
million of cash and cash equivalents and maintained the $35.0
million credit facility, subject to availability under a
borrowing base formula and certain other conditions (including
borrowing limits based on the Company's operating cash flow, as
defined in the agreement), under which no borrowings were
outstanding and $2.6 million was reserved for letters of credit.
On January 15, 1997, the Company secured an amended $100 million
credit facility. The facility provides additional working
capital, capital for acquisitions and market expansion, and
contains generally more favorable terms and conditions than the
prior credit facility. The maximum aggregate principal amount of
the new facility is required to be reduced by $8.0 million per
quarter commencing on March 31, 1999 until December 31, 2000, and
by $9.0 million per quarter commencing on March 31, 2001 until
maturity of the loan in January 2002.
In addition, the Company has $9.5 million of capital lease
obligations which mature at various times from 1997 through 2000.
Subsequent to December 31,1996, the Company prepaid a $4.0
million capitalized lease obligation using funds borrowed under
the new credit facility. The Company's financing arrangements,
which are secured by substantially all of the Company's assets
and the stock of certain subsidiaries, require the Company to
maintain certain financial ratios and prohibit the payment of
dividends.
In the normal course of business, the Company uses various
financial instruments, including derivative financial
instruments, for purposes other than trading. These instruments
include letters of credit, guarantees of debt, interest rate swap
agreements, and foreign currency exchange contracts relating to
intercompany payables of foreign subsidiaries. The Company does
not use derivative financial instruments for speculative
purposes. Foreign currency exchange contracts are used to
mitigate foreign currency exposure and are intended to protect
the US dollar value of certain currency positions and future
foreign currency transactions. The aggregate fair value, based
on published market exchange rates, of the Company's foreign
currency contracts at December 31, 1996 was $52.8 million. When
applicable, interest rate swap agreements are used to reduce the
Company's exposure to risks associated with interest rate
fluctuations. As is customary for these types of instruments,
collateral is generally not required to support these financial
instruments.
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. However, at December 31, 1996,
in management's opinion there was no significant risk of loss in
the event of nonperformance of the counterparties to these
financial instruments. The Company controls its exposure to
counterparty credit risk through monitoring procedures and by
entering into multiple contracts, and management believes that
reserves for losses are adequate. Based upon the Company's
knowledge of the financial position of the counterparties to its
existing derivative instruments, the Company believes that it
does not have any significant exposure to any individual
counterparty or any major concentration of credit risk related to
any such financial instruments.
The Company believes that, under its present business plan,
cash from operations, together with borrowing availability under
the amended credit facility, will be sufficient to meet
anticipated working capital and capital expenditure requirements
of its existing operations. The forward-looking information
contained in the previous sentence may be affected by a number of
factors, including the matters described in this paragraph. The
Company may need to raise additional capital from public or
private equity or debt sources in order to finance its
operations, capital expenditures, and growth for future periods.
Moreover, the Company believes that continued growth and
expansion through acquisitions, investments, and strategic
alliances is important to maintain a competitive position in the
market. Consequently, a principal element of the Company's
business strategy is to develop relationships with strategic
partners and to acquire assets or make investments in businesses
that are complementary to its current operations. The Company
may need to raise additional funds in order to take advantage of
opportunities for acquisitions, investments, and strategic
alliances or more rapid international expansion, to develop new
products, or to respond to competitive pressures. If additional
funds are raised through the issuance of equity securities, the
percentage ownership of the Company's then-current shareholders
may be reduced and such equity securities may have rights,
preferences, or privileges senior to those of holders of Class A
Common Stock. There can be no assurance that the Company will be
able to raise such capital on acceptable terms or at all. In the
event that the Company is unable to obtain additional capital or
is unable to obtain additional capital on acceptable terms, the
Company may be required to reduce the scope of its presently
anticipated expansion opportunities and capital expenditures,
which could have a material adverse effect on its business,
results of operations, and financial condition and could
adversely impact its ability to compete.
The Company may seek to develop relationships with strategic
partners both domestically and internationally and to acquire
assets or make investments in businesses that are complementary
to its current operations. Such acquisitions, strategic
alliances, or investments may require that the Company obtain
additional financing and, in some cases, the approval of the
holders of debt of the Company. The Company's ability to effect
acquisitions, strategic alliances, or investments may be
dependent upon its ability to obtain such financing and, to the
extent applicable, consents from its lenders.
<TABLE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN 000s, EXCEPT PER SHARE DATA)
For the Years Ended December 31, 1996 1995 1994
<CAPTION>
REVENUE:
<S> <C> <C> <C> <C>
Toll revenue $282,497 $175,269 $118,331
Local service and other 26,270 13,597 8,113
Total revenue 308,767 188,866 126,444
Network costs 193,599 114,841 79,438
Gross profit 115,168 74,025 47,006
OTHER OPERATING EXPENSES:
Depreciation and amortization 16,433 11,614 8,932
Selling expenses 34,072 21,617 14,497
General and administrative 50,439 39,248 29,731
Management restructuring 0 1,328 0
Equal access costs 0 0 2,160
Total other operating expenses 100,944 73,807 55,320
Income (loss) from operations 14,224 218 (8,314)
OTHER INCOME (EXPENSE):
Interest income 1,151 198 124
Interest expense (5,025) (5,131) (2,023)
Terminated merger costs 0 0 (200)
Foreign exchange gain (loss) 509 (110) 169
Total other income (expense) (3,365) (5,043) (1,930)
Income (loss) from operations before provision
for income taxes
and minority interest 10,859 (4,825) (10,244)
Provision for income taxes 2,185 396 3,456
Minority interest in (earnings) loss of
consolidated subsidiary (909) (133) 2,371
NET INCOME (LOSS) 7,765 (5,354) (11,329)
Less Series A Preferred Stock dividend (972) (401) -
Less Series A Preferred Stock accretion (1,509) (139) -
Net income (loss) applicable to Common Stock $5,284 ($5,894) ($11,329)
Net income (loss) per common and common equivalent share $0.34 ($0.50) ($1.07)
The accompanying notes to consolidated financial statements
are an integral part of these statements
</TABLE>
<TABLE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
December 31, December 31,
1996 1995
<CAPTION>
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $2,035 $518
Accounts receivable, net of allowance
for doubtful accounts of $3,795 in
1996 and $2,085 in 1995 51,474 38,978
Other receivables 3,792 3,965
Prepaid expenses and other assets 4,632 2,265
TOTAL CURRENT ASSETS 61,933 45,726
PROPERTY, PLANT, AND EQUIPMENT:
At cost 119,398 83,623
Less-accumulated depreciation and
amortization (38,946) (26,932)
TOTAL PROPERTY, PLANT, AND EQUIPMENT 80,452 56,691
OTHER ASSETS:
Goodwill and customer base, net 50,629 14,072
Deferred installation costs, net 4,312 3,310
Other 6,705 4,185
TOTAL OTHER ASSETS 61,646 21,567
TOTAL ASSETS 204,031 123,984
CURRENT LIABILITIES:
Notes payable $730 $1,966
Current maturities of
long-term debt 3,521 2,919
Accounts payable 15,351 7,340
Accrued network costs 22,908 28,192
Other accrued expenses 34,884 15,657
TOTAL CURRENT LIABILITIES 77,394 56,074
Deferred income taxes 2,767 2,577
Long-term debt 6,007 28,050
Redeemable Series A Preferred Stock, $1.00
par value, $1,000 liquidation value,
cumulative, convertible, Authorized- 10,000 shares;
Issued - no shares in 1996 and 10,000 shares in 1995 0 9,448
Minority interest 0 1,428
SHAREHOLDERS' EQUITY:
Preferred Stock, $1.00 par value, Authorized -
1,990,000 shares; Issued - no shares 0 0
Class A Common Stock, $.015 par value
Authorized - 50,000,000 shares;
Issued - 17,684,361 in 1996 and
12,925,889 in 1995 265 194
Class B Common Stock, $.015 par value,
Authorized - 25,000,000 shares;
Issued - no shares 0 0
Capital in excess of par value 116,878 32,846
Cumulative translation adjustment (1,362) (950)
Retained earnings (deficit) 3,692 (4,073)
119,473 28,017
Less-
Treasury stock, at cost (1,089,884
shares) (1,610) (1,610)
TOTAL SHAREHOLDERS' EQUITY 117,863 26,407
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 204,031 123,984
The accompanying notes to consolidated financial statements are
an integral part of these balance sheets
</TABLE>
<TABLE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(Amounts in 000s, except share and per share data)
<CAPTION>
Capital in Cumulative Retained
Class A Common StockExcess of Translation Earnings Treasury
Shares Amount Par Value Adjustment (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 11,306,208 $170 $19,500 ($565) $13,684 ($1,283) $31,506
Stock options exercised 153,563 2 363 - - - 365
Employee stock purchase plan shares issued 19,131 150 - - - 150
Repurchase of shares to exercise options - - - - (327) (327)
Dividends ($.08 per common share) - - - (831) - (831)
Cumulative translation adjustment - - (448) - - (448)
Net loss - - - (11,329) - (11,329)
Balance, December 31, 1994 11,478,902 $172 $20,013 ($1,013) $1,524 ($1,610) $19,086
Stock options exercised 50,287 1 479 - - - 480
Sale of stock 1,237,500 18 11,078 - - - 11,096
Employee stock purchase plan shares issued 35,450 1 296 - - - 297
Stock warrants exercised 123,750 2 1,186 - - - 1,188
Stock warrants issued - 200 - - - 200
Accretion of Series A Preferred Stock - (139) - - - (139)
Series A Preferred Stock dividends - (401) - - - (401)
Acceleration of stock option vesting due to termination - 134 - - - 134
Dividends ($.02 per common share) - - - (243) - (243)
Cumulative translation adjustment - - 63 - - 63
Net loss - - - (5,354) - (5,354)
Balance, December 31, 1995 12,925,889 $194 $32,846 ($950) ($4,073) ($1,610) $26,407
Stock options exercised 587,881 9 4,712 - - - 4,721
Class A Common Stock offerings 3,018,750 45 62,849 - - - 62,894
Conversion of Series A Preferred Stock 937,500 14 11,915 - - - 11,929
Employee stock purchase plan shares issued 19,341 343 - - - 343
Stock warrants exercised 195,000 3 2,077 - - - 2,080
Increase in investment in Canadian subsidiary - 1,254 - - - 1,254
Disqualifying dispositions - 3,000 - - - 3,000
Accretion of Series A Preferred Stock - (1,509) - - - (1,509)
Series A Preferred Stock dividends - (972) - - - (972)
Acceleration of stock option vesting due to termination - 206 - - - 206
Stock incentive rights issued - 157 - - - 157
Cumulative translation adjustment - - (412) - - (412)
Net income - - - 7,765 - 7,765
Balance, December 31, 1996 17,684,361 $265 $116,878 ($1,362) $3,692 ($1,610)$117,863
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<TABLE>
ACC CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $7,765 ($5,354) ($11,329)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 16,433 11,614 8,932
Deferred income taxes 3,110 609 3,906
Minority interest in earnings (loss) of consolidated subsidiary 909 133 (2,371)
Unrealized foreign exchange (gain) loss (758) 180 150
Amortization of deferred financing costs 425 263 0
(INCREASE) DECREASE IN ASSETS:
Accounts receivable, net (11,212) (17,437) (5,019)
Other receivables 1,955 1,782 (3,621)
Prepaid expenses and other assets (2,282) (1,057) 1,030
Deferred installation costs (2,631) (2,983) (1,147)
Other (148) 846 (2,206)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable 7,511 (7,013) 7,784
Accrued network costs (5,837) 17,824 1,754
Other accrued expenses 9,008 4,560 3,230
Net cash provided by operating activities 24,248 3,967 1,093
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received from sale of discontinued operations 0 0 2,538
Capital expenditures, net (33,030) (12,424) (20,682)
Repurchase of minority interest (32,092) - (226)
Payment for purchase of subsidiary, net of cash acquired - (2,313) -
Acquisition of customer base (2,620) (557) (2,861)
Net cash used in investing activities (67,742) (15,294) (21,231)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under lines of credit 26,375 113,602 72,156
Repayments under lines of credit (46,680) (119,204) (47,054)
Repayment of notes payable (1,996) - -
Repayment of long-term debt, other than lines of credit (3,704) (3,078) (1,591)
Proceeds from issuance of common stock 72,669 13,261 189
Proceeds from issuance of convertible debt - 10,000 -
Financing costs (495) (2,876) -
Dividends paid - (451) (4,241)
Net cash provided by financing activities 46,169 11,254 19,459
Effect of exchange rate changes on cash (1,158) (430) 233
Net increase (decrease) in cash 1,517 (503) (446)
Cash and cash equivalents at beginning of year 518 1,021 1,467
Cash and cash equivalents at end of year $2,035 $518 $1,021
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $2,840 $4,146 $1,656
Income taxes $1,808 $203 $280
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchased through capital leases - $7,389 $3,077
Fair value of assets acquired $5,136 $10,800 -
Less - cash paid at acquisition date (3,001) (1,500) -
Less - short term notes payable - (2,966) -
Liabilities assumed $2,135 $6,334 -
Other assets purchased with long-term debt $2,775 - $540
Conversion of convertible debt to Series A Preferred Stock - $10,000 -
Conversion of Series A Preferred Stock to Class A Common
Stock, including cumulative dividends and accretion $11,929 - -
The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>
<TABLE>
Selected Quarterly Financial Data (unaudited)
The following table sets forth certain unaudited quarterly financial data for the preceding eight quarters through the quarter
ended December 31, 1996. In the opinion of management, the unaudited information set forth below has been prepared on the same
basis as the audited information set forth elsewhere herein and includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the information set forth herein. The operating results for any quarter are not
necessarily indicative of results for any future period.
<CAPTION>
(Amounts in 000s except per share data) 1995 1996
March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue $39,708 $41,633 $45,911 $61,607 $66,855 $80,089 $77,285 $84,538
Gross profit 14,963 15,319 17,806 25,929 25,247 26,709 28,470 34,742
Depreciation and
amortization 2,532 2,863 3,011 3,212 3,619 4,176 4,266 4,372
Income (loss) from
operations (446) (855) (364) 1,876 2,991 3,179 3,209 4,845
Total other income
(expense) (948) (1,473) (1,354) (1,265) (1,512) (896) (164) (793)
Net income (loss) ($1,654)( $2,250) ($1,849) $395 $856 $1,458 $2,199 $3,252
Net income (loss) per common
and common equivalent share ($0.16) ($0.19) ($0.15) $0.00 $0.03 $0.05 $0.06 $0.18
The Company's quarterly operating results have fluctuated and will continue to
fluctuate from period to period depending upon factors such as the success of
the Company's efforts to expand its geographic and customer base; changes in,
and the timing of, expenses relating to, the expansion of the Company's
network; regulatory and competitive factors; the development of new services
and sales and marketing; and changes in pricing policies by the Company or its
competitors. In view of the significant historic growth of the Company's
operations, the Company believes that period-to-period comparisons of its
financial results should not be relied upon as an indication of future
performance and that the Company may experience significant period-to-period
fluctuations in operating results in the future.
Historically, a significant percentage of the Company's revenue has been
derived from university and college administrators and students, which caused
its business to be subject to seasonal variation. To the extent that the
Company continues to derive a significant percentage of its revenues from
university and college customers, the Company's results of operations could
remain susceptible to seasonal variation.
The acquisition of Metrowide Communications and the management restructuring
charges in 1995, and the $9.0 million of non-recurring carrier revenue in the
second quarter of 1996 affect the comparability of the quarterly financial data
set forth above. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations.
</TABLE>
ACC CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
A. Principles of Consolidation:
The consolidated financial statements include all accounts
of ACC Corp. (a Delaware corporation) and its direct and indirect
subsidiaries ("the Company" or "ACC"). Principal operating
subsidiaries include: ACC Long Distance Corp. and ACC National
Telecom Corp. ("ACC US"), ACC TelEnterprises Ltd. ("ACC
Canada"), and ACC Long Distance UK Ltd. ("ACC UK"). All
operating subsidiaries are wholly-owned, with the exception of
ACC TelEnterprises Ltd. (See B below). All significant
intercompany accounts and transactions have been eliminated.
The accompanying consolidated financial statements reflect
the results of operations of acquired companies since their
respective acquisition dates.
B. Minority Interest:
On July 6, 1993, the Company's then wholly-owned Canadian
subsidiary, ACC TelEnterprises Ltd., completed an initial public
offering of 2 million common shares for Cdn. $11.00 per share.
The Company received net proceeds of approximately Cdn.
$20.7 million after underwriters' fees and before other direct
costs of the offering of Cdn. $1.3 million. As a result of the
offering, ACC Corp.'s ownership was reduced to approximately 70%.
Minority interest represents the non-Company owned
shareholder interest in ACC TelEnterprises Ltd.'s equity
primarily resulting from the 1993 public offering. In the third
quarter of 1996, the Company made a cash tender offer of Cdn.
$21.50 per share for the repurchase of the minority-held shares.
In September 1996, the tender offer was approved by the Boards of
Directors of both companies and, in the fourth quarter,
approximately 1.9 million of the outstanding shares, representing
approximately 81.5% of the minority interest, were tendered and
purchased by the Company for Cdn. $40.4 million (US $29.5
million), increasing the Company's ownership in ACC Canada to
93.9% as of December 31, 1996. As fewer than 90% of the publicly
held shares were deposited under the tender offer, the Company
formed a subsidiary for the purpose of acquiring the remaining
minority interest of ACC Canada. Prior to December 31, 1996, the
shareholders of ACC Canada approved the amalgamation of ACC
Canada and the new subsidiary. The amalgamation was effective
January 1, 1997 and the remaining minority interest shares of ACC
Canada were replaced with shares of the new subsidiary.
Subsequent to December 31, these shares were purchased by the new
subsidiary at a price of Cdn. $21.50 per share (see G below).
C. Revenue:
The Company records as long distance toll revenue the amount
of communications services rendered, as measured by the related
minutes of toll traffic processed or flat-rate services billed,
after deducting an estimate of the traffic or services which will
neither be billed nor collected. Local service and other revenue
represents revenue derived from the provision of local exchange
services, including local dial tone, direct access lines, and
monthly subscription fees, as well as data services, and is
recorded as the services are provided and billed.
D. Other Receivables:
Other receivables at December 31, 1996 consist of
receivables primarily related to taxes receivable (approximately
$1.8 million), the financing of university projects
(approximately $0.5 million), officer notes receivable
(approximately $0.4 million), and other individually nominal,
miscellaneous receivables (approximately $1.1 million). Other
receivables at December 31, 1995 consisted of receivables related
to financing of university projects (approximately $3.0 million),
taxes receivable (approximately $0.7 million), and other
individually nominal, miscellaneous receivables (approximately
$0.3 million).
E. Property, Plant, and Equipment:
The Company's property, plant, and equipment consisted of
the following at December 31, 1996 and 1995 (dollars in
thousands):
1996 1995
Equipment $90,257 $69,174
Computer software and software licenses 12,682 6,869
Other 16,459 7,580
Total $119,398 $83,623
Depreciation and amortization of property, plant, and
equipment is computed using the straight-line method over the
following estimated useful lives:
Leasehold improvements Life of lease
Equipment, including assets under capital
leases 2 to 15 years
Computer software and software licenses 5 to 7 years
Office equipment and fixtures 3 to 10 years
Vehicles 3 years
Equipment and computer software include assets financed
under capital lease obligations. A summary of these assets at
December 31, 1996 and 1995 is as follows (dollars in thousands):
1996 1995
Cost $14,336 $13,935
Less - accumulated amortization (6,194) (4,538)
Total, net $8,142 $9,397
Betterments, renewals, and extraordinary repairs that extend
the life of the asset are capitalized; other repairs and
maintenance are expensed. The cost and accumulated depreciation
applicable to assets retired are removed from the accounts and
the gain or loss on disposition is recognized in income.
During 1995, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of." The effect of adopting SFAS No. 121 was immaterial
to the consolidated financial statements. The Company reviews
long-lived assets to be held and used, including related
goodwill, for possible impairment when events or changes in
circumstances indicate that their carrying amounts may not be
recoverable. If such events or changes in circumstances are
present, a loss is recognized to the extent the carrying value of
the asset is in excess of the sum of the undiscounted cash flows
expected to result from the use of the asset and its eventual
disposition.
F. Deferred Costs:
Costs incurred for the installation of direct access lines
are amortized on a straight-line basis over the estimated useful
life of three to ten years. Accumulated amortization of deferred
installation costs totaled approximately $6.4 million and
$4.5 million at December 31, 1996 and 1995, respectively.
G. Goodwill and Customer Base:
Each of the Company's acquisitions have been accounted for
as purchases and, accordingly, the purchase prices were allocated
to the assets and liabilities of the acquired companies based on
their fair values at the acquisition date.
As of August 1, 1995, ACC TelEnterprises Ltd. acquired
Metrowide Communications ("Metrowide"). Metrowide, based in
Toronto, Canada, provides local and long distance services to
customers based in Ontario and Quebec, Canada. The results of
operations of Metrowide are included in the accompanying
financial statements since the date of acquisition. The total
cost of the acquisition was Cdn. $15.1 million (US $11.0 million)
including Cdn. $9.1 million (US $6.6 million) of liabilities
assumed. All payments related to the purchase price of the
acquisition have been made as of December 31, 1996.
In May 1996, ACC Canada purchased certain assets and assumed
certain liabilities of Internet Canada Corp., a company based in
Toronto, Canada, which is engaged in the business of providing
Internet access and website design and development. The purchase
price was Cdn. $5.2 million. All payments related to the
purchase price of the acquisition have been made as of December
31, 1996.
Goodwill of Cdn. $11.1 million (US $8.1 million) associated
with the ACC TelEnterprises Ltd. asset purchases is being
amortized over 20 years.
Also in 1996, as described above, the Company repurchased a
significant portion of the minority interest in ACC
TelEnterprises Ltd. The minority-held shares were purchased for
Cdn. $21.50 per share, which represented a premium over the book
value of the shares. The total amount paid in 1996 for this
acquisition was Cdn. $43.7 million (US $32.0 million). In 1997,
the remaining 6.1% interest was acquired for Cdn. $9.0 million
(US $6.6 million). The resulting goodwill, approximately Cdn.
$48.0 million (US $35.0 million), will be amortized over a 40
year life.
The following unaudited pro forma summary gives effect to
the acquisition of Internet Canada Corp. and the acquisition of
the minority interest of ACC Canada as if they had occurred at
the beginning of 1995, after giving effect to certain pro forma
adjustments, including elimination of the minority interest in
earnings of ACC Canada, amortization of the goodwill and customer
base acquired in the acquisitions, interest expense on the
acquisition financing, and related income tax effects. This
unaudited pro forma financial information is presented for
informational purposes only and may not be indicative of the
results of operations as they would have been if the acquisitions
had occurred at the beginning of 1995, nor is it necessarily
indicative of the results of operations which may occur in the
future. Anticipated efficiencies from the combination of
Internet Canada and ACC Canada are not fully determinable and
therefore have been excluded from the amounts included in the pro
forma summary below (in thousands, except per share data).
(Unaudited)
Years ended December 31,
1996 1995
Total revenue $308,767 $188,866
Income (loss) from operations 13,175 (1,066)
Net income(loss) 5,372 (8,659)
Share data:
Net income (loss) $0.34 $(0.74)
Net income (loss) applicable
to common stock $0.18 $(0.79)
Weighted average shares
outstanding 15,641 11,685
Accumulated amortization of all goodwill approximated US
$0.5 million and $0.1 million at December 31, 1996 and 1995,
respectively. The Company amortizes acquired customer bases on a
straight-line basis over five to seven years. Accumulated
amortization of customer base totaled approximately $5.5 million
and $3.1 million at December 31, 1996 and 1995, respectively.
H. Common and Common Equivalent Shares:
Primary earnings per common share are based on the weighted
average number of common shares outstanding during the year and
the assumed exercise of dilutive stock options and warrants, less
the number of treasury shares assumed to be purchased from the
proceeds using the average market prices of the Company's Class A
Common Stock.
The weighted average number of common shares outstanding for
the fiscal years ended December 31, 1996, 1995, and 1994 were
approximately 15.641 million shares, 11.685 million shares, and
10.603 million shares, respectively.
Primary earnings per share were computed by adjusting net
income (loss) for dividends and accretion applicable to Series A
Preferred Stock, prior to its conversion into common shares in
October 1996.
Fully diluted earnings per share are not presented for the
years ended December 31, 1996, 1995, or 1994 because the effect
on earnings per share of common stock equivalents and potentially
dilutive securities would be anti-dilutive.
All references to common and common equivalent shares have
been retroactively restated to reflect an August 8, 1996 three-
for-two stock dividend.
I. Foreign Currency Translation:
Assets and liabilities of ACC TelEnterprises Ltd. and ACC
Long Distance UK Ltd., operating in Canada and the United
Kingdom, respectively, are translated into US dollars using the
exchange rates in effect at the balance sheet date. Results of
operations are translated using the exchange rate at the date of
the transaction. The effects of exchange rate fluctuations on
translating foreign currency assets and liabilities into US
dollars are included as part of the cumulative translation
adjustment component of shareholders' equity, while gains and
losses resulting from foreign currency transactions are included
in net income.
J. Income Taxes:
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Deferred income taxes reflect the
future tax consequences of differences between the tax bases of
assets and liabilities and their financial reporting amounts at
each year-end.
K. Cash Equivalents:
The Company considers investments with a maturity of less
than three months to be cash equivalents.
L. Derivative Financial Instruments:
The Company uses derivative financial instruments to reduce
its exposure to market risks from changes in foreign exchange
rates and interest rates. The Company does not hold or issue
financial instruments for speculative trading purposes. The
derivative instruments used are currency forward contracts and
interest rate swap agreements. These derivatives are non-
leveraged and involve little complexity.
The Company monitors and controls its risk in the derivative
transactions referred to above by periodically assessing the cost
of replacing, at market rates, those contracts in the event of
default by the counterparty. The Company believes such risk to
be remote. In addition, before entering into derivative
contracts, and periodically during the life of the contracts, the
Company reviews the counterparty's financial condition.
The Company enters into contracts to buy and sell foreign
currencies in the future in order to protect the US dollar value
of certain currency positions and future foreign currency
transactions. The gains and losses on these contracts are
included in income in the period in which the exchange rates
change. The discounts and premiums on the forward contracts are
amortized over the life of the contracts.
At December 31, 1996, the Company had foreign currency
contracts outstanding to sell forward the US dollar equivalent of
Cdn. $38.4 million and 14.5 million pounds sterling. These
contracts mature throughout 1997.
At December 31, 1995, the Company had foreign currency
contracts outstanding to sell forward the US dollar equivalent of
Cdn. $37.9 million and 5.3 million pounds sterling and to buy
forward the US dollar equivalent of Cdn. $10.0 million and
2.7 million pounds sterling.
The Company has entered into a cross-currency rate swap
transaction with a financial institution which hedges a portion
of intercompany debt from the Canadian subsidiary and also
converts the variable rate of interest to a fixed rate. The
agreement, which commenced on December 31, 1996, has a two-year
term. Under the agreement, the Company pays a fixed rate of
interest on a Canadian dollar note and receives a variable rate
of interest on a US dollar receivable. The Company's obligation
is Cdn. $33.5 million, and quarterly interest payments at a rate
of 6.98% are due, commencing on March 31, 1997. The Company's
receivable under this agreement is $25.0 million, and interest is
due quarterly at a rate of US prime, commencing on March 31,
1997. The net of the receivable and the payable is reflected on
the balance sheet at December 31, 1996.
The Company may use interest rate swaps to effectively
convert variable rate obligations to a fixed rate basis. The
differentials to be received or paid under these agreements are
recognized as an adjustment to interest expense related to the
debt. Gains and losses on terminations of interest rate swaps
are recognized when terminated in conjunction with the retirement
of the associated debt. The fair value of interest rate swap
agreements is estimated based on quotes from the market makers of
these instruments and represents the estimated amounts that the
Company would expect to receive or pay to terminate these
agreements. The Company's exposure related to these interest
rate swap agreements is limited to fluctuations in the interest
rate. At December 31, 1996, the Company was not a party to any
interest rate swap agreements.
M. Financial Instruments:
The carrying amounts of cash and cash equivalents, trade
receivables, other current assets, accounts payable, and amounts
included in accruals meeting the definition of a financial
instrument approximate fair value because of the short-term
maturity of these instruments. The carrying value and related
estimated fair values for the Company's remaining financial
instruments are as follows:
<TABLE>
December 31, 1996 December 31,1995
(in 000s) Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Off balance sheet financial instruments:
Foreign exchange forward contracts - $52,800 $ - $24,500
Foreign currency swap agreement receivable 25,000 25,000 - -
Foreign currency swap agreement payable 24,516 24,516 - -
Lines of credit 730 730 20,973 20,973
Long term debt, including current portion 9,528 9,528 11,962 11,962
Series A Preferred Stock - - 9,448 10,400
</TABLE>
Based on borrowing rates currently available to the Company
for loans and lease agreements with similar terms and average
maturities, the fair value of its debt approximates its recorded
value. Foreign currency contract obligations are estimated by
obtaining quotes from brokers. Letters of credit and line of
credit amounts are based on fees currently charged for similar
arrangements.
N. Stock-Based Compensation:
In 1995, the Financial Accounting Standards Board issued
SFAS No. 123, "Accounting for Stock-Based Compensation," which
permits either recording the estimated value of stock-based
compensation over the applicable vesting period or disclosing the
unrecorded cost and the related effect on earnings per share in
the notes to the financial statements. In the current year, the
Company has elected to comply with the disclosure provisions of
the statement. The effects of SFAS 123 in the pro forma
disclosures are not indicative of future amounts. The statement
does not apply to awards prior to 1995, and additional awards are
anticipated.
O. Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
P. Reclassifications:
Certain reclassifications have been made to previously
reported balances for 1995 and 1994 to conform to the 1996
presentation.
2. Operating Information
A. Description of Business
ACC is a switch-based provider of telecommunications
services in the United States, Canada, and the United Kingdom.
The Company primarily offers long distance telecommunications
services to a diversified customer base of businesses,
residential customers, and educational institutions. ACC also
provides local telephone service as a switch-based provider of
local exchange services in upstate New York and as a reseller of
local exchange Centrex services in Ontario and Quebec, Canada.
ACC primarily targets business customers with both local service
and long distance needs, selected residential customers, and
colleges and universities. For the year ended December 31, 1996,
long distance revenues accounted for approximately 91% of total
Company revenues, while local exchange revenues and data-line
sales were 4% and 2%, respectively, of total Company revenues.
ACC operates a telecommunications network consisting of
seven long distance international and domestic switches located
in the United States, Canada, and the United Kingdom; three local
exchange switches in the United States; leased transmission
lines; and network management systems designed to optimize
traffic routing. The Company also has plans to install three
additional long distance switches in Canada, the US and the UK
and three additional local exchange switches in the northeastern
US.
At December 31, 1996, approximately $15.5 million of the
Company's telecommunications equipment was located on
55 university, college, and preparatory school campuses in the
northeastern United States and in the United Kingdom. Each of
these institutions has signed agreements, with original terms
ranging from three to eleven years, for the provision of a
variety of services by the Company.
In the United States, the Federal Communications Commission
("FCC") and relevant state Public Service Commissions ("PSCs") have
the authority to regulate interstate and intrastate rates,
respectively, ownership of transmission facilities, and the terms
and conditions under which the Company's services are provided.
Legislation that substantially revises the US Communications Act of
1934 (the "US Communications Act") was signed into law on
February 8, 1996. The legislation provides specific guidelines
under which the regional operating companies ("RBOCs") can provide
long distance services, which will permit the RBOCs to compete with
the Company in the provision of domestic and international long
distance services. Further, the legislation, among other things,
opens local service markets to competition from any entity
(including long distance carriers such as AT&T, cable television
companies, and utilities).
Because the legislation opens the Company's US markets to
additional competition, particularly from the RBOCs, the Company's
ability to compete could be adversely affected. Moreover, as a
result of and to implement the legislation, certain federal and
other governmental regulations will be amended or modified, and any
such amendment or modification could have a material adverse effect
on the Company's business, results of operations, and financial
condition.
In Canada, services provided by ACC TelEnterprises Ltd. are
subject to or affected by certain regulations of the Canadian
Radio-television and Telecommunications Commission (the "CRTC").
The CRTC is in the process of examining the barriers to
competition in the local telephone market and plans to announce
rules for local competition in 1997 for implementation in 1998.
These rules will enable ACC Canada to bundle services and provide
customers with local as well as long distance services in areas
that are not presently open to competition. The CRTC also
mandated in 1996 that local phone companies provide pay phones
with swipe access for competitors' calling cards. Implementation
of these rules will enable ACC Canada to improve its competitive
position in the calling card market.
The telecommunications services provided by ACC Long
Distance UK Ltd. are subject to and affected by regulations
introduced by The Office of Telecommunications, the UK
telecommunications regulatory authority ("Oftel"). In 1997, it
is expected that Oftel will address the issues of number
portability for 800 numbers and equal access in the UK.
In addition to regulation, the Company is subject to various
risks in connection with the operation of its business. These
risks include, among others, dependence on transmission
facilities-based carriers and suppliers, price competition, and
competition from larger industry participants.
Concentrations with respect to trade receivables are
limited, except with respect to resellers, due to the large
number of customers comprising the Company's customer base and
their dispersion across many different industries and geographic
regions. At December 31, 1996, approximately 31% of the
Company's billed accounts receivable balance was due from
resellers.
B. Equal Access Costs:
During 1994, the Company initiated the process of converting
its network to equal access for its Canadian customers. Costs
associated with this process were approximately $2.2 million and
included maintaining duplicate network facilities during
transition, recontacting customers, and the administrative
expenses associated with accumulating the data necessary to
convert the Company's customer base to equal access.
3. Debt, Lines of Credit, and Financing Arrangements
A. Debt:
<TABLE>
The Company had the following debt outstanding as of
December 31, 1996 and 1995 (dollars in thousands):
<CAPTION>
1996 1995
<S> <C> <C>
Senior credit facility $ - $20,973
Working capital lines of credit 730 -
Capitalized lease obligations payable in total monthly
installments of $369 including interest, with rates
ranging from 7.0% to 28.0%, maturing through
2000, collateralized by related equipment 9,528 9,996
Notes payable to previous Metrowide owners,
interest rates ranging from 7.5% to 9.0% - 1,966
$10,258 $32,935
Less current maturities (4,251) (4,885)
$6,007 $28,050
Year Amount
(dollars in thousands)
Maturities of debt, including capital lease obligations,
are as follows at December 31, 1996: 1997 $ 4,251
1998 3,216
1999 1,976
2000 815
Thereafter -
$10,258
</TABLE>
Subsequent to December 31, 1996, the Company made an early
repayment, using funds borrowed under the amended credit
facility, of a capitalized lease obligation which had total
future payments, included in the above schedule, of approximately
$4.0 million.
B. Senior Credit Facility and Lines of Credit:
On July 21, 1995, the Company entered into an agreement for
a $35.0 million five year senior revolving credit facility with
two financial institutions. Borrowings are limited individually
to $5.0 million for ACC Long Distance UK Ltd. and $2.0 million
for ACC National Telecom Corp., with total borrowings for the
Company limited to $35.0 million. Initial borrowings under the
agreement were used to pay down and terminate the Company's
previously existing lines of credit and to pay fees related to
the transaction. Subsequent borrowings have been, and will be,
used to finance capital expenditures and to provide working
capital. Fees associated with obtaining the financing are being
amortized over the term of the agreement.
In conjunction with the closing, the Company issued to a
financial advisor warrants to purchase 45,000 shares of the
Company's Class A Common Stock at an exercise price of $10.67 per
share. The warrants were exercised in October 1996.
The agreement limits the amount that may be borrowed against
this facility based on the Company's operating cash flow. The
agreement also contains certain covenants including restrictions
on the payment of dividends, maintenance of a maximum leverage
ratio, minimum debt service coverage ratio, maximum fixed charge
coverage ratio, and minimum net worth, all as defined under the
agreement and subjective covenants. At December 31, 1996, the
Company had available $32.4 million under this facility.
Borrowings under the facility are secured by certain of the
Company's assets and will bear interest at either the LIBOR rate
or the base rate (base rate being the greater of the prime
interest rate or the federal funds rate plus .5%), with additional
percentage points added based on a ratio of debt to operating
cash flow, as defined in the agreement. The weighted average
interest rate for borrowings during 1996 was 7.8%.
Under the agreement, the Company is obligated to pay the
financial institution an aggregate contingent interest payment
based on the minimum of $750,000 or the appreciation in value of
140,000 shares of the Company's Class A Common Stock over the 18-
month period ending January 21, 1997, but not to exceed
$2.1 million. A payment of $2.1 million was made on January 15,
1997 in conjunction with the amendment to the credit facility,
and was reflected as an accrued expense on the accompanying
balance sheet at December 31, 1996.
In connection with the agreement, the Company must enter
into hedging agreements with respect to interest rate exposure.
The agreements have certain conditions regarding the interest
rates, are subject to minimum aggregate balances of
$10.0 million, and must have durations of at least two years.
The Company entered into three interest rate swap agreements in
1995 to convert the variable interest rate charged on
$11.5 million of the outstanding credit facility to a fixed rate.
Under these agreements, the Company was required to pay a fixed
rate of interest on a notional principal balance. In return, the
Company receives a payment of an amount equal to the variable
rate calculated as of the beginning of the month. These three
interest rate swap agreements outstanding at December 31, 1995
were cancelled during 1996 when the outstanding balance on the
line of credit was repaid using proceeds from the Class A Common
Stock offering (see Note 6A). There were no interest rate swap
agreements in place at December 31, 1996.
At December 31, 1996, the Company had issued letters of
credit totaling $2.6 million which reduce the available balance
of the credit facility. The letters of credit guarantee
performance to third parties. Management does not expect any
material losses to result from these off-balance sheet
instruments because the Company will meet its obligations to the
third parties.
On January 14, 1997, the Company signed an agreement with
the same financial institution to provide a $100.0 million credit
facility to the Company which will amend and restate the current
$35.0 million facility discussed above. The amended credit
facility is syndicated among five financial institutions.
Borrowings can be made in US dollars, Canadian dollars, and
British pounds, and are limited individually to $30.0 million for
ACC Canada, $20.0 million for ACC UK, and $15.0 million for the
local exchange business of the US operation, with total
borrowings for the Company limited to $100.0 million. The amended
facility will be used to finance capital expenditures, provide
working capital, and to provide capital for acquisitions. The
amended facility provides for financial covenants which are less
restrictive than the existing facility. The maximum aggregate
principal amount of the amended facility is required to be
reduced by $8.0 million per quarter commencing on March 31, 1999
until December 31, 2000, and by $9.0 million per quarter
commencing on March 31, 2001 until maturity of the loan in
January 2002.
C. Working Capital Lines of Credit:
The Company has two working capital lines of credit for
daily cash management. The first is a US $1.0 million facility,
due on demand, with an interest rate equal to US prime.
Outstanding borrowings on this line at December 31, 1996 totaled
$730,000 and the weighted average interest expense for the year
ended December 31, 1996 was 8.25%. The second line is a Cdn.
$1.0 million facility, due on demand, with an interest rate equal
to Canadian prime plus .5%. There were no outstanding borrowings
on this line at December 31, 1996.
4. Income Taxes
The following is a summary of the US and non-US income
(loss) from operations before provision for (benefit from) income
taxes and minority interest, the components of the provision for
(benefit from) income taxes and deferred income taxes, and a
reconciliation of the US statutory income tax rate to the
effective income tax rate.
Income (loss) from operations before provision for (benefit
from) income taxes and minority interest (dollars in thousands):
1996 1995 1994
US $ 6,675 $ 1,510 $ 1,301
Non-US 4,184 (6,335) (11,545)
$ 10,859 $(4,825) $(10,244)
Provision for (benefit from) income taxes
(dollars in thousands):
1996 1995 1994
Current:
US $2,689 $581 $(867)
Non-US - - -
$2,689 $581 $(867)
Deferred:
US (504) (185) 1,298
Non-US - - 3,025
(504) (185) 4,323
$2,185 $396 $3,456
Provision for (benefit from) deferred income taxes
(dollars in thousands):
1996 1995 1994
Difference between tax and book
depreciation and amortization $526 $772 $2,178
Valuation allowance 98 2,223 6,851
Contingent interest (459) - -
Severance costs (568) - -
Software development costs - (502) 502
Other temporary differences (101) (103) 171
Net operating loss - (2,575) (5,379)
($504) ($185) $4,323
Reconciliation of US statutory income tax rate to effective
income tax rate:
1996 1995 1994
US statutory income tax rate 34.0% (34.0% ) (34.0%)
Non-deductible goodwill and customer base 2.6 2.7 1.2
Foreign income taxes, including
valuation allowance (13.1) 44.6 66.6
State tax benefit - (2.4) -
Other (3.4) (2.7) -
Effective income tax rate 20.1% 8.2% 33.8%
Deferred income tax assets and liabilities reflect the net
tax effects of temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. At December 31, 1996, the
Company had unused tax benefits of approximately $6.7 million
related to non-US net operating loss carryforwards totaling
$16.5 million for income tax purposes, of which $7.2 million have
an unlimited life, $2.8 million expire in 2000, $5.0 million
expire in 2001, $0.9 million expire in 2002, and $0.5 million
expire in 2003. In addition, the Company had $1.0 million of
deferred tax assets related to non-US temporary differences. The
valuation allowance was decreased by $3.3 million to approximately
$7.7 million to reflect tax benefits recognized during 1996. The
remaining valuation allowance reflects the uncertainty of
realizing the benefit of the non-US loss carryforwards.
The following is a summary of the significant components of
the Company's deferred tax assets and liabilities as of December
31, 1996 and 1995 (dollars in thousands):
1996 1995
Deferred tax assets:
Depreciation and amortization - non-US $967 $1,122
Contingent interest 459 -
Severance costs 568 -
Other non-deductible reserves and accruals 528 647
Non-US operating loss carryforwards 6,702 9,816
Less - valuation allowance for non-US
deferred tax assets (7,669) (10,938)
Net deferred tax assets 1,555 647
Deferred tax liabilities:
Depreciation and amortization (2,767) (2,577)
$(1,212) $(1,930)
5. Redeemable Preferred Stock
On May 22, 1995, the Company completed a $10.0 million
private placement of 12% subordinated convertible debt to a group
of investors. The notes were converted into 10,000 shares of
cumulative, convertible Series A Preferred Stock on September 1,
1995. The Series A Preferred Stock had a liquidation value of
$1,000 per share, and accrued cumulative dividends, compounded on
the accumulated and unpaid balance, as defined, at a rate of 12%
annually. The Series A Preferred Shares were converted into
937,500 shares of Class A Common Stock at a conversion price of
$10.67 per share in October 1996. Pursuant to the terms of the
Series A Preferred Stock, the cumulative dividends were forfeited,
due to conversion by the investors.
The Series A Preferred Stock contained terms of mandatory
redemption, on the seventh anniversary of the private placement,
at a price per share equal to the greater of (i) the liquidation
value of $1,000 per share plus all accrued and unpaid dividends;
or (ii) the fair market value of the underlying Class A Common
Stock into which the Series A Preferred Stock was convertible.
Concurrent with the private placement, warrants to purchase
150,000 shares of the Company's Class A Common Stock were issued
at an initial exercise price of $10.67 per share. These warrants
were exercised in October, 1996. In addition, the Company issued
warrants to purchase Class A Common Stock that were to become
exercisable upon one or more optional repayments of the Series A
Preferred Stock at an exercise price of $10.67 per share, subject
to adjustments, as defined, and permitted each holder to acquire
initially the same number of shares of Class A Common Stock into
which the Series A Preferred Stock was convertible as of the
relevant repayment date. These warrants were extinguished in
October 1996, as a result of the conversion of the Series A
Preferred shares.
The Series A Preferred Stock outstanding as of December 31,
1995 is reflected on the accompanying balance sheet as redeemable
preferred stock, and is shown inclusive of cumulative unpaid
dividends and accretion to liquidation value, and net of
unamortized issuance costs of approximately $1.1 million. Upon
conversion in October 1996, these costs were reclassified into the
appropriate equity accounts.
6. Equity
During 1995, the Company's shareholders approved an amendment
to the Company's Certificate of Incorporation that authorized the
creation of 2,000,000 shares of Series A Preferred Stock, par
value $1.00 per share; authorized the creation of 25,000,000
shares of Class B non-voting Common Stock, par value $.015 per
share; and redesignated the 50,000,000 shares of Common Stock, par
value $.015 per share, that were previously authorized, for
issuance as 50,000,000 shares of Class A Common Stock.
On June 14, 1996, the Company's Board of Directors
authorized a three-for-two stock split, in the form of a stock
dividend issued on August 8, 1996 of the Company's Class A Common
Stock to shareholders of record as of July 3, 1996. Share and
per share amounts in the accompanying financial statements and
footnotes have been adjusted for the split.
A. Public Offerings:
In May 1996, the Company completed a public offering of
3,018,750 shares of its Class A Common Stock at a price of $22.50
per share. The offering raised net proceeds of $63.1 million,
after deduction of fees and expenses of approximately $4.8
million. The net proceeds were used to reduce all indebtedness
under the Company's credit facility, for working capital needs,
and for capital expenditures.
In October 1996, the Company completed a public offering of
1,194,722 shares of its Class A Common Stock, on behalf of
selling shareholders, at a price of $45.00 per share. 937,500 of
the shares resulted from the conversion to Class A Common Stock
of all of the outstanding Series A Preferred Stock (see Note 5).
Additionally, outstanding warrants and options to purchase the
Company's Class A Common Stock were exercised by the holders and
the underlying shares of Class A Common Stock were sold. The
Company received the exercise price of the warrants and options,
approximately $2.1 million, and incurred fees and expenses of
approximately $270,000.
B. Private Placement:
During 1995, the Company made an offshore sale of 1,237,000
shares of its Class A Common Stock at an average price of $9.69
per share. The sale raised net proceeds of $11.1 million after
deduction of fees and expenses of $0.9 million. In conjunction
with this transaction, warrants to purchase 123,750 shares of
Class A Common Stock at an exercise price of $9.60 per share were
issued. These warrants were exercised in 1995.
C. Stock-Based Compensation:
The Company has four stock-based compensation plans, which
are described below. The Company accounts for these plans under
APB Opinion No. 25. Accordingly, no compensation cost has been
recognized for incentive stock options, nonqualified stock
options, and the employee stock purchase plan. Had compensation
cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards
under those plans consistent with the method of FASB Statement No.
123, the Company's net income and earnings per share would have
been reduced to the pro forma amounts indicated below ( in
thousands, except per share data):
1996 1995
Net income (loss) As reported $7,765 $(5,354)
Pro forma $4,869 $(6,251)
Net income (loss) per common and As reported $0.34 $(0.50)
common equivalent share Pro forma $0.15 $(0.58)
Fully diluted earnings per share are not presented because
the effect is anti-dilutive.
Compensation cost for stock incentive right agreements
recognized in the statement of operations for the year ended
December 31, 1996 was approximately $0.1 million. There were no
stock incentive right agreements issued in 1995 or 1994. The
Statement 123 method of accounting has not been applied to options
granted prior to January 1, 1995, so the resulting pro forma
compensation cost may not be representative of that to be expected
in future years.
Employee Long-Term Incentive Plan:
The Company has an Employee Long-Term Incentive Plan (the
"Plan"), whereby options to purchase shares of Class A Common
Stock may be granted to officers and key employees of the Company.
In October 1994, the Company's shareholders approved an amendment
to the Plan which increased shares reserved for issuance to
3,000,000 shares of Class A Common Stock. In July 1995,
shareholders of the Company approved an additional 750,000 shares
of Class A Common Stock to be reserved for issuance under this
Plan, and authorized the issuance of stock incentive rights
("SIRs") thereunder. In June 1996, the Company's shareholders
approved an additional 750,000 shares for issuance under the Plan,
bringing the total shares reserved for issuance to 4,500,000. The
exercise price of the stock options must not be less than the
market value per share at the date of grant, and no options shall
be exercisable after ten years and one day from the date of grant.
Options generally become exercisable on a pro-rata basis over a
four-year period beginning on the date of grant and 25% on each of
the three anniversary dates thereafter. SIRs represent the right
to receive shares of the Company's Class A Common Stock without
any cash payment to the Company, conditioned only on continued
employment with the Company through a specified incentive period
of at least three years. At December 31, 1996, SIRs for 30,000
shares had been awarded. 50% of the shares vest over a three-year
period which began on February 5, 1996, 25% vest over the four-
year period beginning February 5, 1996, and the remaining 25%
vest over the five-year period beginning February 5, 1996.
For purposes of the pro forma disclosure above, the fair
value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995:
1996 1995
Dividend yield 0% 0%
Expected volatility 43% 44%
Risk-free interest rate 5.6% 7.26%
Expected life 3 years 3 years
<TABLE>
Changes in the status of the Plan during 1996, 1995, and
1994 are summarized as follows:
<CAPTION>
1996 1995 1994
Shares Wtd. Avg Shares Wtd. Avg Shares Wtd.Avg.
(000s) Ex.Price (000s) Ex.Price (000s) Ex. Price
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beg. of year 1,606 $ 8.81 1,178 $ 9.02 696 $ 6.56
Granted 681 14.95 512 10.23 983 11.09
Exercised (588) 7.99 (50) 9.53 (154) 2.37
Forfeited (101) 8.72 (34) 10.42 (347) 12.73
Outstanding at end of year 1,598 13.97 1,606 8.81 1,178 9.02
Number of options at end of year:
Exercisable 637 12.65 608 7.94 290 5.89
Available for grant 895 725 453
Weighted average fair
value of options granted $7.09 $3.69 N/A
</TABLE>
The following table summarizes information about stock
options outstanding at December 31, 1996 (shares in thousands):
Options Outstanding Options Exercisable
Number Wgt-Avg. Number
Range of Outstanding Remaining Wgt. Avg. Exercisable Wgt- Avg.
Exer. Prices at 12/31/96 Cont. Life Exer. Price at 12/31/96 Exe. Price
$0 to 9.50 282 6.9 years $ 8.30 128 $ 9.18
$9.83 to 12.50 724 7.7 10.72 390 10.94
$15.37 435 9.0 15.37 80 15.37
$28.83 102 9.5 28.83 25 28.83
$45.00 to 48.19 55 9.7 47.16 14 47.16
$0 to 48.19 1,598 8.1 13.97 637 12.65
Employee Stock Purchase Plan:
In October 1994, the Company's shareholders approved an
employee stock purchase plan which allows eligible employees to
purchase shares of the Company's Class A Common Stock at 85% of
market value on the date on which the annual offering period
begins, or the last business day of each calendar quarter in which
shares are purchased during the offering period, whichever is
lower. Class A Common Stock reserved for future employee
purchases aggregated 676,087 shares at December 31, 1996. There
were 19,131 shares issued at an average price of $7.93 during the
year ended December 31, 1994; 35,450 shares issued at an average
price of $8.37 per share during the year ended December 31, 1995;
and 19,341 shares issued at an average price of $17.69 per share
during the year ended December 31, 1996. There have been no
charges to income in connection with this plan other than
incidental expenses related to the issuance of shares. The
weighted average fair value of shares offered in 1996 and 1995
were $3.80 and $1.86, respectively.
For purposes of the pro forma disclosure above, the fair
value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995:
1996 1995
Dividend yield 0% 0%
Expected volatility 19% 18%
Risk-free interest rate 5.77% 7.66%
Expected life 3 months 3 months
Non-Employee Directors' Stock Option Plan:
In June 1996, the Company's shareholders approved a Non-
Employee Directors' Stock Option Plan (the Directors' Stock Option
Plan). The Directors' Stock Option Plan provides for grants of
options to purchase 7,500 shares of Class A Common Stock at an
exercise price of 100% of the fair market value of the stock on the
date of grant, which options vest at the first anniversary of the
date of grant. The maximum number of shares with respect to which
options may be granted under the Directors' Stock Option Plan is
375,000 shares, subject to adjustment for stock splits, stock
dividends, and the like.
Each option shall be exercisable for ten years and one day
after its date of grant. Any vested option is exercisable during
the holder's term as a director (in accordance with the option's
terms) and remains exercisable for one year following the date of
termination as a director (unless the director is removed for
cause). Exercise of the options would involve payment in cash,
securities, or a combination of cash and securities.
For purposes of the pro forma disclosure above, the fair value of
each option grant is estimated on the date of the grant using the
Black-Scholes option-pricing model with the following weighted-
average assumptions used for grants in 1996 and 1995:
1996 1995
Dividend yield 0% -
Expected volatility 44% -
Risk-free interest rate 5.39% -
Expected life 3 years -
Changes in the status of the Directors' Stock Option Plan during
1996 are summarized as follows:
Shares Weighted Average
(000s) Exercise Price
Outstanding at beginning of year - -
Granted 60 $22.08
Exercised - -
Forfeited - -
Outstanding at end of year 60 $22.08
Number of options at end of year:
Exercisable 60 $22.08
Available for grant 315
Range of prices:
Granted during the year $15.33 - 28.83
Outstanding at end of year $15.33 - 28.83
Exercised during the year $ -
Weighted average fair
value of options granted $5.41
The table summarizing information about stock options outstanding,
required by SFAS 123, is not included, as the impact of the
application of this statement would not be material.
United Kingdom Sharesave Scheme:
In August 1996, the Executive Compensation Committee of the
Board of Directors approved the United Kingdom Sharesave Scheme
whereby eligible employees of ACC UK are entitled to purchase
shares of the Company's Class A Common Stock at an exercise price
equal to 85% of market value on the date that the purchase period
begins. Employees contribute the purchase price through monthly
payroll deduction of a predetermined amount, not to exceed 250
pounds sterling, over a three year period, at the end of which the
shares are purchased. A total of 150,000 shares are reserved for
issuance under this plan, of which options for 17,160 shares at an
exercise price of $32.08 were granted in 1996. The weighted
average fair value of options offered in 1996 was $14.29.
For purposes of the pro forma disclosure above, the fair
value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996 and 1995:
1996 1995
Dividend yield 0% -
Expected volatility 40.8% -
Risk-free interest rate 6.45% -
Expected life 3 years -
7. Treasury Stock
In January 1994, an officer of the Company exercised stock
options to acquire 148,500 shares of the Company's Class A Common
Stock at $2.20 per share by delivering to the Company 24,813
common shares at the then current market price of $13.17 per
share.
The average cost of all treasury stock currently held by the
Company is $1.48 per share.
8. Commitments and Contingencies
A. Operating Leases:
The Company leases office space and other items under various
agreements expiring through 2004. At December 31, 1996, the
minimum aggregate payments under non-cancelable operating leases
are summarized as follows (dollars in thousands):
Year Amount
1997 $ 3,927
1998 4,089
1999 3,970
2000 3,455
2001 3,294
Thereafter 7,970
$26,705
Rent expense for the years ending December 31, 1996, 1995,
and 1994 was approximately $4,006,000, $1,965,000, and $1,640,000,
respectively.
B. Employment and Other Agreements:
The Company has an agreement with its chairman and chief
executive officer, which has a two year term expiring in October
1997 and which provides for continuation of salary and benefits
for the term of the agreement, in the event of a change in control
of the Company. At December 31, 1996, the Company's maximum
potential liability under this agreement was approximately
$300,000.
The Company had a contract with the former chairman which
provided for an annual base salary, including an annual bonus and
other benefits during his employment term, and also for a payment
of $1.0 million, payable over a three year term, in the event that
he resigned or was terminated without cause. During 1996, the
chairman of the board resigned his position as chairman of the
Company. At December 31, 1996, under this agreement, the Company
has accrued the entire $1.0 million, and a payment of $0.3 million
was made in January 1997. In consideration for a non-compete
agreement which has a three year term beginning in January 1997,
the former chairman received a payment of $750,000, which was
expensed in 1995.
The Company has entered into employee continuation incentive
agreements with certain other key management personnel. These
agreements provide for continued compensation and continued
vesting of options previously granted under the Company's Employee
Long Term Incentive Plan for a period of up to one year in the
event of termination without cause or in the event of termination
after a change in control of the Company. At December 31, 1996,
the Company's estimated maximum potential liability under these
agreements totaled approximately $3.0 million.
C. Purchase Commitments:
At December 31, 1996, the Company had outstanding purchase
commitments totaling approximately $4.6 million related to the
purchase of local exchange switches for the US business and the
purchase of a long distance switch for the UK operation.
In 1993, ACC Long Distance Ltd., a subsidiary of ACC
TelEnterprises Ltd., entered into an agreement with one of its
vendors to lease long distance facilities totaling a minimum of
Cdn. $1.0 million per month for seven years. The Company
currently leases more than Cdn. $1.0 million per month of such
facilities from this vendor. This commitment allows the Company
to receive up to a 60% discount on certain monthly charges from
this vendor.
D. Defined Contribution Plans:
The Company provides a defined contribution 401(k) plan to
substantially all US employees. Amounts contributed to this plan
by the Company were approximately $240,000, $183,000, and $167,000
in 1996, 1995, and 1994, respectively. The Company's Canadian
subsidiary provides a registered retirement savings plan to
substantially all Canadian employees. Amounts contributed to this
plan by the Company were Cdn. $186,000, Cdn. $106,000, and Cdn.
$62,000 in 1996, 1995, and 1994, respectively.
E. Annual Incentive Plan:
During 1996 and 1995, the Company's Board of Directors
authorized incentive bonuses based upon the Company's sales, gross
margin, operating expenses, and operating income. Prior to 1995,
incentive bonuses were discretionary as determined by the
Company's management and approved by the Board of Directors. The
amounts included in operations for these incentive bonuses were
approximately $2.6 million, $1.4 million, and $0.6 million for
the years ended December 31, 1996, 1995, and 1994, respectively.
F. Legal Matters:
The Company is subject to litigation from time to time in the
ordinary course of business. Although the amount of any liability
with respect to such litigation cannot be determined, in the
opinion of management, such liability as of December 31, 1996 will
not have a material adverse effect on the Company's financial
condition or results of operations.
9. Geographic Area Information (dollars in thousands)
<TABLE>
Year ended December 31, 1996:
<CAPTION>
United United
States Canada Kingdom Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenue from unaffiliated customers $99,461 $117,168 $92,138 $ - $308,767
Intercompany revenue 35,060 2,917 3,519 (41,496) -
Total revenue $134,521 $120,085 $95,657 $(41,496) $308,767
Income from operations
before income taxes $ 6,676 $3,452 $731 $ - $10,859
Identifiable assets at
December 31, 1996 $182,435 $94,165 $49,667 $(122,236) $204,031
Year ended December 31, 1995:
United United
States Canada Kingdom Eliminations Consolidated
Revenue from unaffiliated customers $65,975 $84,421 $38,470 $ - $188,866
Intercompany revenue 15,256 4,071 1,143 (20,470) -
Total revenue $81,231 $88,492 $39,613 $(20,470) $188,866
Income (loss) from operations
before income taxes $ 1,512 $ 456 $(6,793) $ - $(4,825)
Identifiable assets
at December 31, 1995 $105,995 $43,775 $31,593 $ (57,379) $123,984
Year ended December 31, 1994:
United United
States Canada Kingdom Eliminations Consolidated
Revenue from unaffiliated customers $54,599 $67,728 $ 4,117 $ - $126,444
Intercompany revenue 6,698 2,175 1,004 (9,877) -
Total revenue $ 61,297 $69,903 $5,121 $ (9,877) $126,444
Income (loss) from operations
before income taxes $ 1,300 $ (5,742) $(5,802) $ - $(10,244)
Identifiable assets
at December 31, 1994 $119,021 $30,073 $10,422 $ (75,068) $ 84,448
</TABLE>
Intercompany revenue is recognized when calls are originated
in one country and terminated in another country over the Company's
leased network. This revenue is recognized at rates similar to
those charged by unaffiliated companies. Income from operations
before income taxes of the Canadian and United Kingdom operations
includes corporate charges for general corporate expenses and
interest.
Corporate general and administrative expenses are allocated to
subsidiaries based on time dedicated to each subsidiary by members
of corporate management and staff.
10. Related Party Transactions
The Company's headquarters is in a building owned by a
partnership in which the Company's former chairman of the board has
a 50% ownership interest. A Special Committee of the Company's
Board of Directors reviewed the lease to ensure that the terms and
conditions were commercially reasonable and fair to the Company
prior to approval of the plan in February 1994. Minimum monthly
lease payments for this space range from $44,000 to $60,000 over
the ten-year term of the lease, which began on May 1, 1994. The
Company also pays a pro-rata share of maintenance costs. Total
rent and maintenance payments under this lease were approximately
$0.8 million, $0.6 million, and $0.2 million during 1996, 1995, and
1994, respectively.
During 1994 and early 1995, the Company initiated efforts to
obtain new telecommunications software programs from a software
development company. The Company's former chairman of the board
and chief executive officer was a controlling shareholder of the
software development company during such period. In May 1995,
anticipating material agreements with the software development
company, all of the common shares owned by the Company's former
chairman of the board were placed in escrow under the direction of
a Special Committee of the Company's Board of Directors. The
Special Committee, its outside consultants, and the Company's
management then proceeded to review and evaluate the software
technology and the terms and conditions of the proposed
transactions.
In 1996, the Special Committee approved a software license
agreement between the Company and a newly formed company (the
purchaser of the software development company's intellectual
property and other assets and an affiliate of such company).
Immediately prior to entering into the agreement, the shares of the
software development company held in escrow were returned to such
company and the related party nature of the Company's relationship
with the software development company was thereby extinguished.
Total amounts accrued at December 31, 1996, 1995, and 1994 relating
to this vendor were $0, $44,000, and $0, respectively. For an
aggregate consideration of $1.8 million, paid in 1996, the Company
received a perpetual right to use the telecommunications software
programs. Approximately $0.2 million was paid to the vendor in
1996 and was expensed prior to entering into the agreement. During
1995, the Company paid the software development company
$1.2 million, of which $772,000, relating to the purchase of
certain hardware and acquisition of certain software licenses, was
capitalized and recorded on the balance sheet as a component of
property, plant, and equipment and $500,000 relating to software
development was expensed. During 1994, the Company paid the
software development company $132,000, all of which related to
software development, which was expensed.
The Company has notes receivable from two officers which total
$370,000. These notes bear interest at a rate of 6.625% and are to be
repaid in full on demand, no later than March 31, 1997.
EXHIBIT 21
SUBSIDIARIES OF ACC CORP.
State, Province or Country of
Name Incorporation
ACC Credit Corp. Delaware
ACC Global Corp. Delaware
ACC Local Fiber Corp. New York
ACC Long Distance Corp. New York
ACC Long Distance Corp.* Delaware
ACC Long Distance of Connecticut Corp.* Delaware
ACC Long Distance of Georgia Corp.* Delaware
ACC Long Distance of Illinois Corp. Delaware
ACC Long Distance of Maine Corp.* Delaware
ACC Long Distance of Massachusetts Corp. Delaware
ACC Long Distance of New Hampshire Corp. New Hampshire
ACC Long Distance of Ohio Corp. Delaware
ACC Long Distance of Pennsylvania Corp. Delaware
ACC Long Distance of Rhode Island Corp.* Delaware
ACC Long Distance of Vermont Corp.* Delaware
ACC Long Distance UK Ltd. United Kingdom
ACC Long Distance Sales Corp.* Delaware
ACC National Long Distance Corp. Delaware
ACC National Telecom Corp. Delaware
ACC Network Corp. New York
ACC Radio Corp. New York
ACC Service Corp. Delaware
ACC Telecommunikation Gmb H. Germany
ACC TelEnterprises Ltd. Ontario, Canada
Danbury Cellular Telephone Co. Connecticut
ACC Long Distance France S.A.R.L. France
ACC Long Distance of Australia PTY Ltd. Australia
ACC Cellular Corp. Delaware
ACC Denmark A/S Denmark
Cel Tel Corp. Delaware
United Bluegrass Cellular Corp. Delaware
Network Consultants New York
_______________________________
* A subsidiary of ACC National Long Distance Corp.
** A subsidiary of ACC TelEnterprises Ltd.
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the
Company's previously filed Registration Statements No. 333-01219, No.
33-30817, No. 33-36546, No. 33-52174, No. 33-87056,
No. 33-75558, No. 333-06831, No. 333-06833 and No. 333-12295.
Rochester, New York,
March 27, 1997
Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,035
<SECURITIES> 0
<RECEIVABLES> 55,269<F1>
<ALLOWANCES> 3,795
<INVENTORY> 763
<CURRENT-ASSETS> 61,933
<PP&E> 119,398<F2>
<DEPRECIATION> 38,946
<TOTAL-ASSETS> 204,031
<CURRENT-LIABILITIES> 77,394
<BONDS> 6,007<F3>
0
0
<COMMON> 265
<OTHER-SE> 117,598
<TOTAL-LIABILITY-AND-EQUITY> 204,031
<SALES> 282,497<F4>
<TOTAL-REVENUES> 308,767
<CGS> 193,599<F5>
<TOTAL-COSTS> 100,944<F6>
<OTHER-EXPENSES> 0<F7>
<LOSS-PROVISION> 5,143<F8>
<INTEREST-EXPENSE> 3,874<F9>
<INCOME-PRETAX> 10,859
<INCOME-TAX> 2,185
<INCOME-CONTINUING> 7,765
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,765
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0
<FN>
<F1>Add back allowance
<F2>Gross
<F3>Total long term debt
<F4>Toll only
<F5>Network costs
<F6>Total operating expenses
<F7>Unusual operating expenses
<F8>Bad debt expense from consolidated income statement
<F9>Net
</FN>
</TABLE>
